review of economics and development studies vol. 5, no 3, 2019 461 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads cost productivity of healthcare systems in oic’s member countries: an application of cost malmquist total productivity index 1 nabila asghar, 2 hafeez ur rehman , 3 majid ali 1 assistant professor, department of economics and business administration, university of education, bank road campus, lahore, pakistan, drnabeelakhan.eco@gmail.com 2 professor/chairman, department of economics, umt, lahore, pakistan 3 ph.d. scholar, national college of business administration and economics, gulberg lahore, pakistan article details abstract history revised format: 30 june 2019 available online: 31 july 2019 strengthening healthcare system increases the productivity of healthcare spending. to evaluate changes in cost productivity over a five year period (20112015) in 55 oic’s member states. the cost malmquist productivity index and bootstrap truncated regression are applied to estimate the dynamics of the cost productivity and its determinants in the healthcare system of oic’s member states. life expectancy and under 5 child survival rate are used as outputs while doctors, nurses, mid wives and beds per thousand population are used as inputs. public health expenditure is used as input price for measuring allocative efficiency change. the results of the study indicate that the cost productivity increases by 7.9% and the classical technical productivity grows by 8.9%. the increase in the cost productivity is mainly driven by an increase in allocative efficiency and technological change. all the determinants except population growth rate of cost productivity are found significant. literacy rate and per capita gdp have come up the main driver of cost productivity growth. the study concludes that the impact of population growth on the overall shifts in the health production frontier is not significant. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords total factor productivity, cost malmquist productivity index, health care, oic’s member countries jel classification: o40, o47, c43, c49 corresponding author’s email address: drnabeelakhan.eco@gmail.com recommended citation: asghar, n., rehman , h. u. and ali, m. (2019). cost productivity of healthcare systems in oic’s member countries: an application of cost malmquist total productivity index. review of economics and development studies, 5 (3),461-468 doi: 10.26710/reads.v5i3.696 1. introduction worldwide comparison of the performance of healthcare system provides the enormous possibility for both within and cross-country learning. the evaluation of relative performance may provide policy-makers a benchmark that identifies in which areas the performance is above or below expectations. furthermore, it provides them with an impetus to understand driving reported performance, as well as guidance for potential solutions. most of the healthcare systems have similar goals and face similar challenges, such as demographic change, limited resources, and rising costs. the developed and developing countries have used diverse strategies to address these challenges and in most the developing countries the existing structures and organizations find them in sufficient to cope with these challenges. thus, the major advantage of international comparison is to provide information http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 462 regarding different experiences or even act as an experimental laboratory for others (1). furthermore, these comparisons offer the possibility of exploring new and different options; the potential for mutual learning and even policy transfer; and the opportunity to reconsider and reformulate national policy in the light of evidences. 2. cost malmquist productivity index (cmpi) the cost malmquist productivity index was initially applied by (2) to estimate the cost productivity of 30 greek hospitals over the period 1992-1993. the major advantage of this approach was to determine the allocative efficiency change and price effect which helped to ascertain the decomposable sources of cost productivity dynamics. another application of cmpi was done by (3) who estimated the three-stage cost malmquist productivity index in the biotech and biopharmaceutical industry in taiwan for the period 2004-2007. the study concludes that cmpi is a relatively comprehensive productivity measure for firms as it includes both cost and input minimization over time. using the combined approaches of (2, 4). the cost productivity change of 200 lithuanian family farms for the period of 2004-2009 was computed by (5). another study conducted by (6) estimated the trends of technical and allocative efficiency in lithuanian family farms. these studies pointed out that higher technical productivity growth could have been a bit misleading to conclude the firm’s overall performance. therefore, the addition of cost productivity expands the outlook for the firm productivity. despite the cmpi’s ability to account for all factors of production, there are still other contextual variables or exogenous factors beyond management control that can affect the dynamic cost productivity. therefore, a second-stage analysis is relevant in exploring their influences. not many studies have considered the potential second-stage correlates of cost productivity change. the present study is an attempt to handle these issues. 3. methods the study uses cost malmquist productivity index for measuring cost productivity change and efficiency change of the individual countries for the period 2011 2015. . for this purpose data for 55 oic’s countries (excluding palestine) has been collected from world bank data set and world indicators reports. bootstrap truncated regression is also used to identify the determinants of cost productivity change over the study period. the study uses three inputs: (i) a total number of physician per 1000 population (ii) total number of hospital beds per 1000 population (iii) total number of nurses and midwives per 1000 population and two outputs: (i) life expectancy at birth (ii) under 5 survival rate. the total public health expenditure has been used as input prices for estimating cost efficiency change and allocative efficiency change. while per capita gdp, out of pocket health expenditure, the prevalence of smoking, literacy rate, and population growth rate are used to identify the determinants of the cost productivity of the healthcare system of 55 oic’s countries. the details of variables used in this study are presented in table 1. table 1: inputs, outputs, and environmental factors review of economics and development studies vol. 5, no 3, 2019 463 early estimations of dynamic technical productivity ignored the input prices and hence, allocative efficiency. the allocative efficiency has to do with how a technically efficient firm can further reduce aggregate cost of securing its output by selecting an optimal mix of inputs given their associated costs. since allocative efficiency and its change can significantly affect dynamic productivity it should be factored into cost efficiency dynamics (7,8,9) parametric stochastic frontier analysis (sfa) and decomposed total factor productivity change (tfp) into technical efficiency change, allocative efficiency change, technical change, price effect and economies of scale effect. but this technique was criticized by (10) and (2) as demanding and practically unrealistic. as noted, the classical technical malmquist productivity index of (4) was proposed when inputs and output quantities were available but their prices were not available. (2) extended the technical malmquist index to cmpi using nonparametric dea models and decomposed it into cost (overall) efficiency change and cost technical change. the cost (overall) efficiency change can further be decomposed into technical efficiency change (tec) and allocative efficiency change (aec), both capturing cost and the cost technical change can be broken down into the standard technical change (tc) and price effect. the cmpi is better defined in terms of cost rather than inputs distance functions or input efficiency scores and is useful when managers minimize costs given input price data. in stage one, the method introduced by (11) is used and cmpi is decomposed under the assumption of the variable return to scale. the cmpi measures the change over time in cost efficiency. parallel to the decomposition of production malmquist productivity index, the cmpi may be decomposed into the effects due to the improvement in production technology, production efficiency, variation in input prices and production scale. the overall decomposition of the cmpi is as follows. cmpi = δpte×δt ×δae×δpe×δcse where δpte = pure technical efficiency change; δt = technical change; δae = allocative efficiency change; δpe = price effect change; and δcse = cost scale efficiency change. values of the above five components greater than unity suggest deterioration, while values less than 1 indicate an improvement. in the second stage, the computed cmpi scores section is regressed against some environmental factors. a variety of regression techniques have been applied. following specification has been formed. cmpi j = α+ zj δ + ε j…..j = 1….n in the above equation, α is the intercept and εj is the error term and zj is a row vector of country-specific variables with j supposed to relate to country cmi score. in dea literature tobit model has been widely used for estimating the model. however, (12) pointed out that such technique is inappropriate. they suggested another technique that shows satisfactory performance during monte carlo experiments as it depends upon truncated regression with bootstrap. the present study uses it to estimate the following model. cmpii.t. = β0 + β1(oop) i.t. + β2 (lr) i.t. + β3 (sp) i.t. + β4 (pop.g) i.t. + β5 (pcgdp) i.t.+ ei.t. 4. empirical results table 2 presents on average the data of inputs, outputs and environmental factors per year for the five financial years considered under study. this indicates that there is growth in the number of hospital beds, doctors, nurses and midwives per thousand population and at the same time input cost is increased during the study period. overall, between 2011 and 2015, the growth in life expectancy at birth and under 5 child survival rate are observed. a similar trend is observed in the environmental factors during the period under consideration. review of economics and development studies vol. 5, no 3, 2019 464 table 2: descriptive statistics of inputs, outputs and environmental factors (2011-15) output inputs environmental factors le u5sr phy* n&w* beds* cost oop lr s p popg pcgdp 2 0 1 1 mean 67.88 943.74 1.06 1.68 1.56 49.87 40.56 52.81 34.1 2.57 8.6 median 70.46 956.3 0.64 0.94 1.08 48.44 41.43 45.09 31.85 2.47 6.4 s.d 9.02 957.8 1.12 1.62 1.38 18.85 18.71 23.42 16.93 1.65 6 max 80.63 850.2 3.92 6.01 7.7 92.02 73.84 99.78 63.7 7.76 29.7 min 49.64 992 0.02 0.04 0.27 19.19 7.63 0.86 9 -2.15 0.3 2 0 1 2 mean 68.21 945.89 1.34 1.98 2.14 49.72 42.59 59.29 34.71 2.49 8.82 median 70.65 958.9 1.09 1.23 1.9 48.17 45.89 50.76 32.8 2.41 7 s.d 8.88 959.39 1.18 1.73 1.5 19.72 18.84 22.72 14.89 1.63 6.01 max 80.82 854.8 3.84 7.86 7.6 91.82 83.84 99.99 62 7.06 29.6 min 50.34 992.1 0.04 0.07 0.4 2.03 6.56 5.86 11.3 -3.04 0.2 2 0 1 3 mean 68.53 947.89 1.29 2.08 2.64 49.9 40.69 63.07 36.20 2.39 8.81 median 70.84 961.4 0.98 1.64 2.4 49.62 43.69 56.98 35.3 2.38 6.9 s.d 8.74 960.87 1.14 1.9 1.5 20.02 17.9 22.26 14.15 1.47 6.03 max 80.99 859.3 3.75 8.87 8.1 92.15 71.61 99.98 68.4 6.5 29.7 min 50.96 992.2 0.03 0.17 0.9 14.63 7.17 30.34 14.4 -3.11 0.2 2 0 1 4 mean 68.84 949.78 1.29 2.11 1.89 50.55 40.63 67.33 37.09 2.3 8.81 median 71.01 963.7 1.28 1.05 1.59 51.7 40.49 63.75 39.5 2.5 6.5 s.d 8.63 962.23 1.04 1.97 1.57 20.22 18.9 23.37 14.37 1.24 5.97 max 81.14 863.3 3.49 8.37 7.7 93.86 76.03 99.98 71.8 5.86 29.7 min 51.51 992.3 0.03 0.19 0.23 16.99 6.53 26 15.9 -2.47 0.2 2 0 1 5 mean 69.15 951.53 1.37 2.33 1.68 49.84 40.38 73.82 38.68 2.2 8.81 median 71.18 965.8 1.38 1.05 1.47 47.39 39.73 79.72 40.85 2.45 7.04 s.d 8.53 963.5 1.09 2.42 1.37 18.87 19.19 24.06 15.29 1.06 5.89 max 81.29 867.5 3.87 11.65 7.7 91.82 83.9 99.79 76.2 5.22 29.8 min 51.99 992.4 0.04 0.08 0.18 17.63 5.78 19.1 16.4 -1.64 0.3 the results of the study show that for 55 countries the same number of vectors containing cost malmquist indices for each period are obtained. the cost malmquist indices were aggregated across the countries. in order to maintain the integrity of the malmquist indices the geometric average has been employed. the aggregated data are presented in table 3. table 3: the geometric mean of cost malmquist indices for 2011–2015 table 3 shows that during the study period, 7.94% growth is observed in the cost productivity of the 55 healthcare system of oic’s member countries which is associated with 9.87% allocative efficiency change, 8.98 price change and 8.95% classical technical productivity. during the period 2012-2013, 3.94% growth is observed in cost productivity while 5.81% growth is observed in 2014-2015. the malmquist index followed the same pattern of dynamics, albeit it exhibited an increase in the total factor productivity amounting to 8.95% during the study period. it is associated with 9.82% scale efficiency change and 8.88% technological change. during the whole study period except 2013-2014 classical productivity growth is observed. higher productivity growth is observed during the period 2011-2012 i.e. 9. 78%. considering the three review of economics and development studies vol. 5, no 3, 2019 465 components of the malmquist productivity index, it can be observed that the pure technical efficiency change is positive with an exception for the period of 2013–2014 and 2014-2015. , whereas the scale efficiency change and the technology change exhibit some additional features. the scale efficiency change has caused a decrease in productivity during 2011– 2012 and 2013-2014 which may be due to changes in the health system structure. the technology change also indicates that the production frontier moves outwards during the study period except 2013– 2014. finally, the two cost productivity indices, namely, change in allocative efficiency and prices, indicate a decrease in cost productivity during the 2011-2012 and 2013-2014 period. these changes are caused by both managerial decisions and rising input prices. the scores of cost malmquist index of individual county are presented in table 4 in which it can be observed that 44% of all the countries’ healthcare system have shown regression in cost productivity while 56% countries have experienced growth in their cost productivity. while, in case of classical technical productivity 80% countries have shown growth in productivity and only 20% have experienced decline in productivity during the study period. the healthcare systems of 28 countries (51%) have experienced improvement in allocative efficiency change while 8 countries (15%) have shown constant allocative efficiency change. a decline in price change has been observed in 30 healthcare systems (55%) while 5 countries (9%) have shown no price change during the study period. 5. regression analysis of efficiency determinants in order to find the determinants of cost productivity the present study uses truncated regression technique of (12). in the model cmpi is dependent variable and per capita gdp, out of pocket health expenditure as a percentage of total health expenditure, percentage of prevalence of smoking among the population, literacy rate and population growth are independent variables. the level of education, unemployment rate and per capita gdp are factors out of the control of the healthcare systems, and out-of-pocket expenditures is regarded as factor under the control of healthcare systems the results are obtained after 1000 iterations and are presented in table 5. table 5: bootstrapped truncated regression (2011-2015) the results show that the coefficient of per capita gdp is positive and statistical significant which indicates that an increase in pcgdp leads to an increase in cost productivity. generally, higher economic growth encourages the government to invest more in healthcare services for improving its quality and cost productivity of healthcare system. therefore, a higher economic growth improves cost productivity of healthcare system. out of pocket health expenditure as a percentage of total health expenditures has negative impact on the dynamic cost productivity which indicates that an increase in out-pocket expenditure in total health spending leads to the wastage of resources in public sector which in turn increases the cost of healthcare system which reduces the cost productivity. the prevalence of smoking has negative impact on the cost productivity of healthcare systems of oic’s countries. our results are in line with (13). the literacy rate has positive and statistically significant coefficient which indicates that an increase in education level leads to an increase in the cost productivity of the healthcare systems. it may be due to the reason that improvement in education level promotes awareness regarding the diseases and relevant preventive measures. it helps the people to improve their health status which enhances the efficiency of the healthcare system. the results also reveal that the population has an insignificant contribution in improving the cost productivity of healthcare systems. review of economics and development studies vol. 5, no 3, 2019 466 6. conclusions the cost malmquist index has been decomposed into technical, scale, and allocative efficiency changes which are used for the analysis of productivity dynamics in 55 oic’s member countries. the analysis indicates that the changes in allocative and scale efficiency with the technological improvement give a momentum to the growth in cost efficiency. the cost productivity increases by 7.9% associated with 9.87% allocative efficiency change, 8.9% price change, 9.82% scale efficiency change and 8.8% technological change. the increase in the total factor productivity is mainly driven by an increase in scale efficiency and technological change. the education and per capita gdp have positive relationship with the cmpi of the healthcare systems while this relationship turns up negative for smoking and out of pocket health expenditure. keeping in view the above analysis it is suggested that in order to maximize the cost productivity of health care systems in 55 oic’s countries, the policy makers and health managers should pay proper attention to the factors such as the promotion of public education level, the appropriate use of healthcare providers according to the needs of the population, proper management of the resources of healthcare systems, the allocation of adequate budget to health sector and establishing suitable referral system for providing people easy and better access to health services according to their income and healthcare needs. references baležentis, t. 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(2007). estimation and inference in two-stage, semi-parametric models of production processes. journal of econometrics, 136(1), 31-64. https://doi.org/10.1016/j.jeconom.2005.07.009 thanassoulis, e., shiraz, r. k., maniadakis, n. a. (2015). cost malmquist productivity index capturing group performance. european journal of operational research, 241(3), 796-805. tzu-chun, s., kai-ping, l., & yung-lieh, y. (2012). estimating the three-stage cost malmquist productivity index in the taiwan biotech and biopharmaceutical industry. journal of modern accounting and auditing, 8(5), 679-687. yang, y. l., & huang, c. j. (2009). estimating the malmquist productivity index in the taiwanese banking industry: a production and cost approach. taiwan economic review, 37(4), 353-378. http://dx.doi.org/10.1016/s0377-2217(03)00177-2 https://www.ncbi.nlm.nih.gov/pubmed/?term=nolte%20e%5bauthor%5d&cauthor=true&cauthor_uid=18416931 https://www.ncbi.nlm.nih.gov/pubmed/?term=ettelt%20s%5bauthor%5d&cauthor=true&cauthor_uid=18416931 https://www.ncbi.nlm.nih.gov/pubmed/?term=thomson%20s%5bauthor%5d&cauthor=true&cauthor_uid=18416931 https://www.ncbi.nlm.nih.gov/pubmed/?term=mays%20n%5bauthor%5d&cauthor=true&cauthor_uid=18416931 https://www.ncbi.nlm.nih.gov/pubmed/18416931 https://doi.org/10.1016/j.jeconom.2005.07.009 review of economics and development studies vol. 5, no 3, 2019 467 appendix table 4: cost malmquist index decomposition oic effch techch pech sech aech pch mpi cmpi afghanistan 0.907 0.848 0.918 0.988 1 1 0.769 0.769 albania 1.017 1.119 1.015 1.002 1 1.007 1.138 1.146 algeria 1.042 0.94 1.046 0.996 1.056 0.993 0.98 1.028 azerbaijan 0.978 0.854 0.978 1 1.194 1.005 0.835 1.002 bahrain 0.96 0.814 0.962 0.998 0.983 0.912 0.782 0.701 bangladesh 1.072 0.854 1.009 1.062 1.002 1.385 0.915 1.269 benin 1.009 0.914 1 1.009 1.12 1.066 0.922 1.101 brunei 1.033 0.953 0.988 1.045 0.817 1.268 0.984 1.019 burkina faso 1.039 0.945 1 1.039 0.84 1.103 0.981 0.909 cameroon 1 0.884 1 1 0.849 0.957 0.884 0.719 chad 1.005 0.856 1.153 0.871 1 1.106 0.86 0.951 comoros 1.078 0.899 1.173 0.919 1.012 1.272 0.968 1.247 cote d'ivoire 1.071 0.946 1.178 0.91 0.935 1.209 1.013 1.146 djibouti 1.025 0.893 1.172 0.875 0.926 1.254 0.916 1.063 egypt 1.018 0.87 1.148 0.887 0.892 1.302 0.885 1.028 gabon 1 0.903 1 1 1.347 0.807 0.903 0.982 gambia 1.013 0.886 1.011 1.003 0.951 0.767 0.898 0.655 guinea 1.002 0.892 1 1.002 1.145 0.759 0.893 0.776 guinea-bissau 0.949 0.888 0.973 0.976 1.043 0.778 0.843 0.684 guyana 0.943 0.866 0.963 0.979 0.929 0.955 0.817 0.725 indonesia 1.221 0.829 1.15 1.062 1.064 1.098 1.012 1.183 iran 1.16 0.931 1.11 1.045 0.865 1.275 1.08 1.191 iraq 1.124 0.912 1.103 1.019 1.012 1.265 1.026 1.313 jordan 1.207 0.948 1.146 1.053 1.024 1.247 1.144 1.461 kazakhstan 1.176 0.952 1.142 1.029 0.939 1.279 1.12 1.345 kuwait 0.911 0.905 1 0.911 0.88 1 0.825 0.726 kyrgyz 0.928 0.959 1.005 0.923 0.967 1.066 0.889 0.917 lebanon 0.918 0.955 1 0.918 1 1.063 0.877 0.932 malaysia 0.921 0.957 1 0.921 1.074 0.975 0.881 0.923 maldives 0.924 0.958 1.017 0.909 1.165 1.031 0.885 1.063 mali 1.024 0.91 1 1.024 0.997 1.125 0.933 1.047 mauritania 0.906 0.853 1 0.906 1 1.008 0.773 0.779 morocco 0.917 0.869 1.021 0.898 0.989 1.128 0.796 0.888 mozambique 0.884 0.765 1 0.884 0.938 1 0.676 0.634 niger 0.879 0.822 0.976 0.901 0.884 1 0.723 0.639 nigeria 1.185 0.817 1.084 1.093 1.162 1.427 0.967 1.604 oman 1.199 0.826 1.117 1.073 1.084 1.316 0.991 1.414 pakistan 1.192 0.805 1.135 1.051 1 1.192 0.959 1.143 qatar 1.076 0.931 0.938 1.147 0.861 1.738 1.002 1.5 saudi arabia 1.067 0.933 0.928 1.15 0.995 1.771 0.995 1.753 senegal 0.978 0.886 0.998 0.98 0.608 1.296 0.866 0.683 sierra leone 1.12 0.87 1.153 0.971 1 0.69 0.974 0.672 somalia 1.087 0.943 1.165 0.934 1 0.64 1.025 0.656 review of economics and development studies vol. 5, no 3, 2019 468 south sudan 1.024 0.829 1.113 0.92 0.944 0.933 0.849 0.748 suriname 1.097 0.784 1.143 0.96 0.953 0.913 0.86 0.749 syrian 1.039 0.979 1.038 1 0.904 0.857 1.016 0.787 tajikistan 0.829 1.008 0.849 0.976 0.821 0.926 0.836 0.636 togo 0.819 0.984 0.842 0.973 1.267 0.794 0.806 0.811 tunisia 0.849 0.907 0.853 0.995 0.959 1 0.771 0.739 turkey 1.015 0.922 1.014 1 1.119 1.002 0.936 1.05 turkmenistan 1 0.742 1 1 1.072 0.779 0.742 0.62 uganda 1 0.758 1.003 0.997 1.042 0.734 0.758 0.579 uae 0.932 0.857 0.932 1 1.006 0.699 0.799 0.562 uzbekistan 0.964 0.781 0.986 0.978 0.956 0.693 0.753 0.499 yemen 0.96 0.891 0.992 0.968 0.847 0.833 0.855 0.603 gm 1.008 0.888 1.026 0.982 0.983 1.023 0.895 0.9 medican 1.009 0.892 1 0.996 1 1.005 0.889 0.917 s.d 0.098 0.069 0.086 0.064 0.119 0.240 0.107 0.290 max 1.221 1.119 1.178 1.15 1.347 1.771 1.144 1.753 min 0.819 0.742 0.842 0.871 0.608 0.64 0.676 0.499 review of economics and development studies, vol. 6 (2) 2020, 493-500 493 impact of school management councils on teachers community relationship: an analytical study a muhammad latif javed, b muhammad nadeem javed, c misbah akhtar, d tusawar iftikhar ahmad a lecturer, department of education, the islamia university of bahawalpur, bahawalnagar campus, pakistan email: latif.javed@iub.edu.pk b phd scholar of education, aiou, islamabad, pakistan email: nadeemjaved05@gmail.com c lecturer, department of education, the islamia university of bahawalpur, bahawalnagar campus, pakistan email: misbah.akhtar@iub.edu.pk d assistant professor, department of economics, the islamia university of bahawalpur, pakistan article details abstract history: accepted 18 may 2020 available online 15 june 2020 the main objective of the study was to analytically evaluate the working of school management councils in relation to teachers/parents’ association with the results and outcomes of students at school level. this research work was carried out in the frame work of descriptive type of research planning, for which data was collected by means of conducting a survey, from the selected group of population in the targeted area. all the secondary schools of district jhelum, punjab pakistan were constituted the population of the research study. a set of questionnaires was developed and used to collect data. from the heads, teachers of schools and community representatives. the validity of these questionnaires was checked by pilot testing in two schools (not included in the sample). after analytical analysis of the collected data, the study highlighted that smc can positively influence the educational system, the study also indicated that the respondent equally agreed and disagreed with the statement that the workings of school management councils (smcs) help to bring the students in school and also assisted the school authorities to produce good results. in this way the functioning of these school councils may become effective to decrease dropout ratio and increase the number of students in these schools, and to solve many administrative and academic problems at local level. the outcomes of this research work suggested that the role of smcs may be more elaborated that they can work independently for the betterment of students in general and specially for the community. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: school management council, secondary school, teacher’s community relationship, analytical study jel classification: i23, i29, doi: 10.47067/reads.v6i2.226 corresponding author’s email address: latif.javed@iub.edu.pk http://reads.spcrd.org/website/ issn (p): 2519-9692 issn(e): 2519-9706 review of economics and development studies, vol. 6 (2) 2020, 493-500 494 1. introduction education is a lifelong process of a human being. this process formally starts when a child gets admission in a school. according to guinness encyclopedia; “the process of education always opens a new window of learning for each generation and also make them able to challenge the established facts about knowledge, skills and values of the previous group”. (1987, p. 624). pakistan has inherited a british colonized system of education which is centralized one having all authorities lying with government by head of institution without any involvement of community. as rondinelli and his colleagues described that the rapid growth and development of education sector at world level stressed the volume of administrations to uphold the level of quality. (1999). in addition, maximum number of developing countries were fronting the huge monetary issues due to declining market trends of export, crises of fuel and energy and lack of interest of foreign investors in the local market these all awaken the administration to find some feasible way out to make use of available resources in an effective way. moreover, people of the local communities become frustrated and asking questions why central authorities have control of the matters which are directly linked with them and locally can be resolved. these and other problems of the same nature bring people group together to demand the decentralization of administration and management programs in most part of the world. keeping in view the present education system of pakistan, the government has realized the immediate need of reforms in the different fields of education through devolution plan. under devolution plan the public representatives as well as local community were assigned a specific role to contribute for the cause of education. educationists are agreed on this point that the education sector cannot improve until or unless parents and community are involved in the school administrative and financial affairs. education is a multi-faced picture of society, in which many shades of life can be seen. the most important segment of society is the student. they need sense of relationship especially at early age through their parents, family and teachers. the concept of teachers and community relationship always supportive and provides sense of secure and safer environment. students need a sense of physical and psychological safety for learning to occur, since fear and anxiety undermine cognitive capacity and short circuit the learning process. a research study conducted by gonzalez, t. (2015), explained that effective and lively relationship between teachers and community significantly make the outcomes of teaching learning process efficient. students can take bold steps to go advance in their academic and professional life afterwards due to strong relationship of their teachers and parents. (osher et al., 2018). the benefits of school managements’ council and teacher parent relationships bring a positive development of behaviour during social emotional learning (sel) skills. this also serve as an intrusion on skills, attitudes, behavior, and academic performance of students (taylor, oberle, durlak, & weissberg, 2017). school management committees which were later on renamed as school management councils (smcs) were assigned the role to apply themselves in better implementation of the school activities in higher secondary school level. various studies reveal that the working of smc in the majority of the schools of punjab worked up to the marks. the working of these schools proved better than other schools, keeping in view the importance of the s m c and their productive role in education and particularly in high schools the purposed study has been designed to see effectiveness of the s m cs. the main objective of this committee is review of economics and development studies, vol. 6 (2) 2020, 493-500 495 to ensure the participation of the local people for the purchase of equipment of school and to facilitate the school administration in school affairs. the smcs are responsible for;  repair and decoration of school buildings  providing teaching aids  purchase of furniture for teachers and students the school management councils are supposed to provide an authority to education officers and teachers so that they can utilize all the resources in maximum level for the betterment and development of education system. a teacher is always interested to take along the parents and other stakeholders to their school and at workplace (classroom) to discuss and coordinate the issues related to teaching/learning process so that the relationship of these two vital groups make the education system more effective and efficient. teacher as a motivational and social leader has an important place in the society, because this is the teacher who has role of spine and backbone of the society and therefore the whole education system relies upon him. research studies in this field of education discovered that the relationship among teacher, students and community have great impact on students’ behavioral development, academic results and outcomes of the education system. in this way when students experienced a positive relationship among different segment of society, community and their teachers they become more confident and open to learn. (noguera, et al., 2017). student as a child start learning in a multifaced system of education, in which he come a across with parents, family, peers, school & class fellows, teachers and other people in the school and community. this is therefore many researchers and social scientists of the field of education as bronfenbrenner, 1994 and epstein 2011 agreed and supported that when there is a chance of overlapping of spheres of inspiration, encouragement and caring from and of the family, school and community students learning chances are brighter than before. this and other theories of the same phenomena have been reinforced from the last two decades of research (galindo & sheldon, 2011; henderson & mapp, 2002; sanders & sheldon, 2009) that both qualitative and quantitative effect the students learning through the influence of family, teachers and community relationships. the belief system of students brings them at higher levels of risk for weak results with poor upshots children from deprived families, humble background and all with learning difficulties were more harmed by negative teacher parents’ relationship and much more benefited if these relationships are positive. (roorda, koomen, spilt, & oort, 2011). according to fiore, (2016) the role of school, parents and school management councils have great importance in the education system to cater the needs of students through the collaborative efforts of all he mentioned, are the following:  the school authorities get great support from community members to run the affairs.  school management councils can provide an environment with which the culture, customs, traditions, values and heritage of the population will be safeguarded with natural flow of required education.  the requirements of the contemporary society can be met with the help of school management councils.  the school management councils have the potential to extend their support for the overall improvement of school regarding building, playground and co-curricular activities.  in the response of school management support and efforts, the school can give in return the best services of education by working together for the behavioral development and preparing more promising students for the future. the committee consists of teachers, parents and elected representatives of the locality to cooperate with the government and provide resources for education so that education should be made free for all. efforts should be made for the success of education in a spirit to strengthen the educational process only and not to criticize it. review of economics and development studies, vol. 6 (2) 2020, 493-500 496 every school management council (smc) consist of these members;  head of institution chairperson  2 nd headmaster secretary  teachers member  students studying in the same institution. (any three)  locals three public representative of that locality. the plan of this research study was to examine the process and practices of these school management councils at high school level. the objectives of the study were to evaluate the operational process of smcs in government high school, to analyze the relationship between teachers and parents to produce better results and to suggest measures for further improvement of the smcs. 2. methodology a descriptive research design was adopted for the execution of this research study. for collection of data a survey was conducted to collect information from the set of respondents of district jhelum. the following procedural steps were taken to execute the research study. 2.1 population all secondary schools of district jhelum  heads of secondary schools 97  teacher teaching at secondary school level 1465  community representatives 291 2.2 sample a convenient random sample was drawn with equal participation of boys and girls. the detail is given as under:  16 government secondary school of target area.  16 heads of secondary school  48 teachers teaching in secondary classes of secondary schools  48 community representing being the members of smcs following tools were used to collect data and set of questionnaires are;  heads of schools  secondary school teachers (ssts).  community representatives (parents, smc’s members) 2.3 preparation of questionnaire three questionnaires were prepared consisting of 10 items each in questionnaire to collect data from the head teachers, teacher teaching in secondary classes and community representatives in the school locality. 2.4 collection of data questionnaires were sent to sample selected secondary school heads, teachers teaching in secondary classes and community representatives of the smcs of sample schools in the district jhelum the validity of these questionnaires were checked by pilot testing in two schools (not included in the sample). the questionnaires were consisted of two sets in which one has 10 items with a 5-point scale and other one has only two options i.e., agree and disagree, response to analyze the effectiveness of school management councils accompanied and teacher’s relationship by an explanatory letter to each respondent. the questionnaires were sent through experiences and qualified teachers who were initially briefed about how review of economics and development studies, vol. 6 (2) 2020, 493-500 497 to administer the survey. 2.5 analysis of the data the data was tabulated and presented in tabular form by applying percentage formula for its analysis. according to gay, l.r. (2012, p.499); percentage (%) = no of responses x 100 total no. of response 3. results to analyze the relationship of teachers and community members, though the working of school management councils, the following statements were presented to the sample population of the study and feedback are given in table 1 and 2. the data items of table 1 revealed that the relationship of teachers and community through school management councils played an important role in the development of students’ future. 89% of the respondents were agreed that discipline may be maintained through the code of relationship between teachers and community and this regard 11% were found disagreed. 70% of the respondents were agreed that welfare of teachers’ community may safeguarded through this relationship, whereas 30% were not agreed with this statement. according to the results about effective planning of activities in schools, 98% were agreed and only 2% were found disagreed. the statement about improving the monitoring system of school about students’ progress indicated that 94% respondents were agreed and 6% were disagreed. results of this table about development of effective system of communication highlighted that 99% respondents were agreed that these ties of relationships show good way of communication between school authorities and community members. the process of decision making has 91% respondents in the favor that relationship of teachers and community help a lot to make sound decision in school with the help of school management council. as far as the security and safety of schools concern the results of the statement indicated that 100% were agreed that due healthy relations between school administration and community, the school remained secure from any unwanted situation. the data analysis of table 2 expressed that the use of school resources for local community also beefed up the relationships in general among students, teachers, and specifically to community members. the statement about the use of classroom after school closing indicated that 86% agreed and 14% disagreed. as far as the use of library books was asked it has equal results i.e. 48% in favor and 52% in the opposing side. the statement about the use of school hall for social and cultural events, indicated that 89% were agreed and 11% were found disagreed. 100% respondents were agreed to use the playground for local community to play and no one were found against this statement. the respondents show 100% agreement with the statement that school can be used for religious events for community and no one was found against this. flower show and fun fare can provide opportunity to local public to participate about this statement, 91% of the respondents were agreed and 9% were disagreed about this statement. table 1: effectiveness of smcs sr.# statement agree disagree f % f % 1 maintaining discipline of students at school and home 100 89 12 11 2 providing wellbeing of teachers 78 70 34 30 3 effective planning of activities in school 110 98 02 2 4 improving the monitoring system of school for students’ progress 105 94 07 6 5 developing effective system of communication 111 99 01 01 6 effective and efficient process of decision making 103 91 09 09 7 help to safeguard the school safety and security 112 100 00 00 review of economics and development studies, vol. 6 (2) 2020, 493-500 498 table 2: use of school resources sr.# statement agree disagree f % f % 1 school classrooms can be used by the community after closing hours or on holiday 96 86 16 14 2 library books of school available students’ parents for weekends 58 48 54 52 3 school halls can be used by the community for social/cultural events 100 89 12 11 4 play grounds of school can be used by the community for local/evening games 112 100 00 00 5 school masque can be used by community during religious events 112 100 00 00 6 flower show and fun fare can provide opportunity to local public to participate 103 91 09 09 in the light of the results calculated, findings of this study, conclusions were drawn and recommendations were made to evaluate and analyze the working of smc with respect to relationship between teachers & community of the schools of the district jhelum. it showed that the respondent equally agreed and disagreed with the statement that the working of school management councils have increase the population of school through the enrollment of new students. it indicated that majority of the respondent (62%) disagreed and 38% agreed student dropout in secondary school level decreased as a result of this council. it revealed the respondents (56%) agreed, 31% disagreed and 13% uncertain with the statement, i.e. presence of teacher has been improved. council. it showed majority of respondents (75%) agreed, 19% disagreed with the statement, i.e. with the help of smcs the physical facilities are being used properly now. council, it showed majority of respondents (75%) agreed and 12% disagreed that with statement, i.e. the help of smcs the illegal use of school building being avoided now. it showed majority of respondents (81%) agreed and 13% disagreed that with the help of smcs good relations are developing between government and non-government institutions. it showed majority of respondents (63%) agreed and 25% disagreed with contribution of smcs for fulfilling the school requirement at local level. it showed majority of respondents (63%) agreed and 31% disagreed with the statement, i.e. community has been motivated by council to send their children to school happily. it showed majority of respondents (44%) disagreed, 37% agreed and 19% uncertain with the statement, i.e. with smcs the compulsory education act has been implemented now. it showed majority of respondents (88%) agreed, 12% uncertain with the statement, i.e. functions and meeting held according to the annual calendar now. it showed that (89%) respondents agreed, 11% disagreed and no one uncertain with the statement, i.e. smc facilitates in developing healthy relationship between teachers and parents. it showed majority of respondents (67%) agreed, 14% disagreed and 19% uncertain with the statement, i.e. the smcs are contributing in co-curricular and extracurricular activities. it showed majority of respondents (77%) agreed, 13% disagreed and 10% uncertain with the, i.e. statement that the smcs are using the local resources for the financial requirements. it showed majority of respondents (75%) agreed, 6% disagreed and 19% uncertain with the statement, i.e. the smcs are regularizing the function to be held for prize distribution. it showed majority of respondents (92%) agreed, 6% disagreed and 2% uncertain with the statement i.e. the working of smcs enhance the using local resources for the development of school projects. it showed majority of respondents (92%) agreed, 4% disagreed and 4% uncertain with the statement, i.e. contribution of smcs for the implementation of approved project. the data analysis and conclusion of the study indicated that school management councils and teachers’ relationships are important in the entire spectrum of education. the significant element of teachers and community relationship through school management councils is that it provides feedback to authorities as well as to the stakeholders of the school. it has been the hallmark of many research studies review of economics and development studies, vol. 6 (2) 2020, 493-500 499 that the highest results and outcomes of academic achievements related to the supportive and positive relationship between teachers and community. (oakes et al., 2017). other phenomena also to be noted that the matter related to students can be solved easily and well in time in the environment school and community. the use of school resources can be shared and safeguard jointly at local level. these relationships also provide an opportunity to make sure that best possible use of public money along with collected funds from students which is called non salary budget (nsb) may carried out. 4. conclusions on the basis of the previous section of the study (findings) the given below results are captured and concluded in this section; smcs have contributed in the increase of the strength of students and also decrease the dropout. the presence of teacher has not been improved significantly. majority of school facilities are being used properly now. the illegal use of school building being avoided now. good relations are developing between government (teachers) and non-government personal (community members). smcs are fulfilling the school requirement at local level. community has been motivated by council to send their children to school happily now. on the basis of the conclusion drawn from the last section of conclusion a few commendations are suggested here. it is suggested that the school management councils may have the authority to tackle the problem of students’ strength by increasing the involvement of the local community. it is recommended that the smcs may be given training to motivate the community to decrease the student dropout from school. it is recommended that the head of the institution and teacher may coordinate with the local community for the compulsory act of education this is also suggested that the operational procedure may be more flexible and independent to effectively share the task of education at local level. as agabi and okorie (2005) explained that classrooms and halls of secondary school can be used for different educational, social and training purposes make the relationship strong between school and community and make best use of available resources. these results of this study can be concluded that the relationship between teachers and school management councils has important role to play for smooth and safe sailing of education endower in which students are our prime assets references agabi, o.g, okorosaye-orubite, ezikiel-hart, j. &egbezor. d. e. 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(2016). trade openness, external debt and growth nexus in pakistan: empirical evidence from ardl modeling approach & co-integration causality analysis. review of economics and development studies, 2 (2) 93-102 doi: https://doi.org/10.26710/reads.v2i2.127 1. introduction the external debt and trade openness has significant impact for economic growth. the trade openness leads to free exchange of goods between the regions and countries. specialization is required to achieve economic growth and significant for developing countries. the ease of trade openness is absolute and comparative advantage in which mc will remain low and obtain maximum gains.1950-98 the most of the countries gained that their average income increase about 1.5% more after trade liberalization. zakria (2013); zafar (2015); analyzed that trade openness has positive impact on economic growth. while khan and zahler (1985); bertola and forini (1991); found the mixed outcome it has positive as well as negative impact on economic growth. the developing countries initially focus on external debt for development due to the trickle down mechanism in this sense savings and capital raise that are used for purchasing more productive and advance equipments the revenue increase and economy will grow. the impact of foreign debt is to raise gdp and expected for higher returns. it has positive as well as negative impact on economic growth depending http://www.publishing.globalcsrc.org/reads mailto:hinaali@wum..edu.p mailto:hinaali@wum..edu.p mailto:hinaali@wum..edu.p mailto:hinaali@wum..edu.p https://doi.org/10.26710/reads.v2i2.127 review of economics and development studies vol.2, no 2, december 2016 94 on how debt is utilized in proper management but mostly the debt went to waste due to the lack of monitoring and corruption. korkmaz (2015) stated that the impact of external debt on the economic growth in turkey the country has lack of recourses. the countries prefer the external debt due to the lack of internal savings. the countries should raise their savings and utilized their own recourses to attain economic growth. the pakistan is developing country and the external debt in pakistan raise 74638 usd million in the third quarter of 2016 from 72978 usd million in the second quarter of 2016. external debt in pakistan averaged 51034.27 usd million from 2002 until 2016, reaching an all time high of 74638 usd million in the third quarter of 2016 and a record low of 33172 usd million in the third quarter of 2004.exports in pakistan decreased to 180899 pkr million in december from 184497 pkr million in november of 2016. exports in pakistan averaged 38619.28 pkr million from 1957 until 2016, reaching an all time high of 275483 pkr million in september of 2013 and a record low of 51 pkr million in april of 1958. imports in pakistan increased to 470038 pkr million in december from 442903 pkr million in november of 2016. imports in pakistan averaged 67818.81 pkr million from 1957 until 2016, reaching an all time high of 472228 pkr million in august of 2014 and a record low of 96 pkr million in april of 1959. 2. literature review awan et al. (2011) investigated that fiscal deficits and terms of trade had significant impact on external debt of pakistan. this review used the annual time series data from 1974-2008 to analyzed the relationship between external debt and causative factors such as nominal exchange rate, fiscal deficits and terms of trade. the stability test cusum & cusum of square test revealed that the model is sturdy and symbolic. in this study external debt was used as dependent while nominal exchange rate, fiscal deficit and terms of trade were used as explanatory variable. johnson’s cointegration approach was used to estimate long correlation between exchange rate and terms of trade. the evidence indicated that fiscal deficit has no impact on external debt. zakria (2012) suggested that the influence of trade openness on foreign debt in pakistan. this study used quarterly data from 1972-2010. this study emphasized the positive effects of trade openness on foreign trade. foreign debt as a dependent and trade openness, terms of trade. fiscal deficit, foreign exchange reserves, foreign direct investment, inflation rate, noise error as an independent variable. the evidence was taken from different models.gmm (generalized methods of moments) methodology used to overcome problems of model. the findings indicated that external debt, terms of trade, fiscal deficit, and inflation has positively on foreign debt while exchange reserves and foreign direct investment has inverse impact on foreign trade. zakria and ahmad (2013) suggested that economic growth of pakistan affected by various channel variables. quarterly data from 1981/82 – 2007/08 was used. macro-econometric analysis was followed to study trade openness growth in pakistan. gross domestic product as a dependent variable and trade openness as explanatory variable are employed. gmm and sur techniques used for estimation. the findings indicated that trade openness has positive effect on growth and various channels like physical capital, human capital, foreign investment, inflation, real exchange rate, foreign debt, corruption and foreign exchange market distortions also positively impact on economic growth. on the other hand, openness growth has negatively related with government consumption and democracy. antwi et al. (2013) investigated the significance of foreign direct investment in economic growth of ghana. the model used annual time series data from 1980-2010 to analyzed the estimation. the data is taken from international monetary fund statistics that was published. fdi as dependent and gross domestic product, gross domestic product growth rate, gross national income, manufacturing, value added, inflation, consumer prices, gross domestic product per capita industry, value added as independent variable. the results indicated that government focus on development techniques such as foreign direct investment that reduce the foreign debt. the review of economics and development studies vol.2, no 2, december 2016 95 government should be stable in this sense that country could achieve the economic growth and development. chinaemereme and anayochukwe (2013) analyzed the impact of external debt financing on economic development in nigeria. this model used the time series data collected from 19692010 for the estimation. this study includes gross domestic product as dependent variable while paris debt, london debt, multia debt and promissory as independent variables. econometric techniques such as unit root, co-integration applied for estimation. the evidence indicated that london debt has positive influence on economic growth of entrepreneurship development. moreover, paris debt, multi debt and promissory debt has inverse effect on the entrepreneurship development in nigeria. this study suggested that there has no statically significant to entrepreneurship development of the economic growth. babu et al. (2014) analyzed the study of external debt and economic growth in east africa community. the annual time series data from1970-2010 was summarized for estimation. the study depended on solow debt augmented model. the paper viewed the share of gdp and external debt. the panel fixed effect model used to estimate the effect of external debt. the llc (levin-lin-chu) estimator used to analyze the axioms of the data the husman specification test applied for the verification of the fixed effects model. in this paper gdp as dependent and investment, government expenditure, terms of trade, trade openness as independent variable. the evidence indicated external debt had inverse effect on economic growth and gdp. the policy makers suggested that debt reduction strategies adopted by east asia countries to overcome the external debt. iqbal et al. (2015) investigated that the debt affects in the growth of pakistan. the concepts of imports and exports studied in this paper related to pakistan. the time series data of debt servicing export, import, external debt and real gross domestic product growth has been taken from 41 years 1972-2010.this article used ordinary least square regression technique for the estimation. gross domestic product as a dependent variable and external debt, debt servicing, exports and imports are taken as independent variables. the evidence indicated that external debt has absolute impact on economic growth. however, debt servicing has oppositely related with growth. the study was not significant impact of imports on economic growth of pakistan. zafar et al. (2015) presented the concept of the impact of trade openness and external debt on economic growth. regression analysis was used to measure this concept. the time series data from 1980-2012.gdp indicated as dependent variable and external debt and trade openness as an independent variable. urt test was used to indicate whether it is time series and cross sectional data. the findings designated the positive relationship between trade openness and economic growth. conversely; external debt has important and inverse effect on economic growth. they presented policy proposals’ and debt policies. munzara (2015) investigated the impact of foreign debt on economic growth in zimbabwe. time series data used during the session of (1980-2013).ols (ordinary least square) regression analysis used for estimation.gdp (gross domestic product) as a dependent variable and external debt as an independent variable. while control variables such as labour force growth, capital investment and trade openness. external debt and trade openness has inverse act on economic growth. conversely, capital investment and labour force growth has positive effect. he argued that country should depend on development finance such as foreign direct investment (fdi) and depend on their huge mineral recourses’ that reduce the external debt because it can’t afford further borrowing. blake (2015) investigated that the impact of public debt on economic growth in jamacia. the quarterly data used from the period 1990-2014. the paper captured the short run as well as long run effects on economic growth. gdp as a dependent variable while debt, investment, inflation, labour review of economics and development studies vol.2, no 2, december 2016 96 and openness as an independent variable. ardl (auto-regressive distributed lagged) model used for estimation. the evidence verified that public debt has a complex impact on economic growth. siddique et al. (2015) investigated the debt level in poor countries. the paper analyzed that how external debt burden has great impact on gdp (gross domestic product) of the country and used the panel data during the period 1970-2007. 40 hipc (high indebted poor countries) included in this and paper. ardl (auto-regressive model) root test and co-integration test used for estimation.gdp as dependent variable and capital formation (cf),debt (db),trade (tr) and population (p). the findings indicated that capital formation has positively related to gdp in short run as well as in long run. however, debt has inverse effect on economic growth. the increment in population also has pragmatic effect on economic growth. jebran et al. (2016) scanned the effect of public debt on economic growth of pakistan. annual data during (1972-2012) summarized for this paper. the study included gdp and gnp in economic growth and studied the effects of public debt.gdp as dependent variable and external debt(ed), domestic debt (dd), inflation (inf) and trade openness as independent variable. the findings indicated that debt services have inverse effect on both gdp and gnp in short furthermore in long run. moreover, domestic debt has no impact on gdp and gnp in short as well as in long run analysis. 3. data and methodology in this segment we discuss of source data, expiation of variables, assessment process, co-integration method for the ingestion of data, ardl procedure, bound test show the long run association of the model. the study uses the time series data 1974 to 2016. the source of data was taken by world development indicator (wdi) and state bank of pakistan (sbp). model specification: in this section model correlation between impact of trade openness and external debt will be estimated. table 1: describe of variables variables symbols unit of measurement source gross domestic gdp annual growth of world development indicator product percentage of gdp inflation inf percentage of gdp world development indicator external debt ed percentage of gdp state bank of pakistan capital formation cf percentage of gdp world development indicator trade t percentage of gdp world development indicator • inf •t •ed •fdi •cf gdp independent variable review of economics and development studies vol.2, no 2, december 2016 97 foreign direct fdi percentage of gdp world development indicator investment description of variables gross domestic product the term gdp that is used to measure the economy’s size of output and production. gdp measured that total amount of goods and services measured by using domestic resources in different time period it may be monthly quarterly or annually.gdp enables policy makers and central bank judge whether the economy is contracting or expanding.gdp is also provide the policy implications whether it is monetary of fiscal policy. inflation inflation is the situation in which the prices of goods and services raise than value of income falls in predictable way. that leads to fall the purchasing power of consumer. the economy is affected by inflation in two ways positive and negative ways. the negative affect is that it raises the opportunity cost. the negative affect is that it reduces the real burden of public and private debt. external debt the external debt is considered as essential tool to achieve economic growth. the external debt is used to raise the productivity in the country by utilizing time domestic resource. external debt is beneficial for both developing and developed countries with suitable terms and conditions. capital formation capital formation is a span used to define the net capital accumulation during an accounting period for a specific country, and the period mentions to additions of capital stock, such as tools, transport, assets and electricity. it is a particular statist concept used in national accounts statistics, econometrics and macroeconomics. in that sense, it refers to measure the net additions to the capital stock of a country. it provides the clear picture of the investment and growth. trade exchange of goods and services between the countries with compensation payment paid by the seller and the buyer is a trade. the trade has advantage for both developed and under-developed countries. trade involves the transfer of goods and/or services from one person or region to another, some cases in exchange for money. the term fair trade that promotes the use of labour, environmental and social standards for the production of goods and services. foreign direct investment fdi means is an investment in the form of a calculate occupancy in a business in one country by an entity base in any other country. it is thus famed form foreign variety speculation by a view of direct manages. foreign direct investments can be made in a different forms, it include the associate company in a foreign country. the main characteristics of foreign direct investment are that it is an investment that establishes the decision making of a foreign business. trend of dependent & independent variable http://www.investopedia.com/terms/c/capitalaccumulation.asp http://www.investopedia.com/terms/a/accountingperiod.asp http://www.investopedia.com/terms/a/accountingperiod.asp http://www.investopedia.com/terms/c/capitalstock.asp https://en.wikipedia.org/wiki/econometrics https://en.wikipedia.org/wiki/stock_and_flow https://en.wikipedia.org/wiki/goods_and_services https://en.wikipedia.org/wiki/fair_trade https://en.wikipedia.org/wiki/manual_labour https://en.wikipedia.org/wiki/environmental_movement https://en.wikipedia.org/wiki/social_issues http://www.investopedia.com/terms/a/associate-company.asp http://www.investopedia.com/terms/a/associate-company.asp review of economics and development studies vol.2, no 2, december 2016 98 sources: microsoft word stationary of data if in time series data the mean, variance and covariance remain unaffected over the period of time than data is stationary (gujrati 1995).the stationary of data is required to check the validity. unit root test to check the stationarity of the data the unit root test is applied. this test identifies which technique is applicable for the estimation. table 1: unit root test adf variables level 1 st difference conclusion intercept trend & intercept intercept trend & intercept gdp -4.14260* -4.6985* -10.166 -10.0317 i(0) inf -4.4689* -4.3315* -6.8794 -6.806 i(0) ed -1.530 -3.236 -7.6672* -7.7014* i(1) cf -2.7394 -3.6893 -6.4372* -6.6074* i(1) t -2.6624 -2.66278 -7.1002* -7.0713* i(1) fdi 2.0365 -5.1996 -5.4802* 4.7059* i(1) sources: calculations are taken from the e views 9.5 (qualitative software). note: *, **, *** indicates the significance of 1%, 5% & 10% respectively. this table shows that gdp and inf are integrated at level i (0). so it might be included that other variables such as fdi (foreign direct investment), t(trade), ed (external debt), cf (capital formation) integrated at 1 st difference. so we can apply the ardl (auto regressive distributed lagged model) for estimation. model specification: to examine the extensive relationship between the trade openness, the external debt, on economic growth, by using the channels of variables ardl approach is used. ardl (auto-regressive-distributed lagged model) ∆𝐺𝐷𝑃 = 𝛼0 + 𝛼1 ∑(𝐺𝐷𝑃)𝑡 − 1 𝑘1 𝑖=0 + 𝛼2 ∑(𝐼𝑁𝐹)𝑡 − 1 𝑘2 𝑖=0 + 𝛼3 ∑(𝐸𝐷 𝑘3 𝑖=0 )𝑡 − 1 + 𝛼4 ∑(𝐶𝐹)𝑡 − 1 𝑘4 𝑖=0 + 𝛼5 ∑(𝑇)𝑡 − 1 𝑘5 𝑖=0 + 𝛼6 ∑(𝐹𝐷𝐼)𝑡 − 1 𝑘6 𝑖=0 + 𝑃1(𝐺𝐷𝑃) + 𝑃2(𝐼𝑁𝐹) + 𝑃3(𝐸𝐷) + 𝑃4(𝐶𝐹) + 𝑃5(𝑇) + 𝑃6(𝐹𝐷𝐼) + 𝜇 where; 0 5 10 15 20 25 0 1000 2000 3000 4000 5000 6000 7000 8000 1 9 7 4 1 9 7 8 1 9 8 2 1 9 8 6 1 9 9 0 1 9 9 4 1 9 9 8 2 0 0 2 2 0 0 6 2 0 1 0 2 0 1 4 ed fdi t inf gdp cf review of economics and development studies vol.2, no 2, december 2016 99 gdp = gross domestic product inf = inflation ed = external debt cf = capital formation t = trade fdi = foreign direct investment table:2 co integration and long run form variable coefficient t-statistics prob. d(gdp(-5)) 0.2220 1.8943 0.0776 d(inf) 0.11605 1.4436 0.1694 d(ed(-2)) 0.00149 2.4927 0.0249 d(cf(-2)) 0.3488 0.9430 0.3606 t -0.0015 -0.2161 0.8318 d(fdi) 2.2470 3.5912 0.0027 cointeq(-1) -1.2791 -6.4694 0.0000 r-squared 0.84018 prob (f-stat) 0.0037 adjusted r-squared 0.63775 durbin waston 1.8246 f-statistic 4.1504 sources: the data is taken from state bank of pakistan & world development indicator this table show that the coefficient of gdp is 0.220. the coefficient value of inf, ed, cf, and fdi is 0.116, 0.110, 0.348 and 2.247. the probability of gdp is 0.07 and inf, ed, cf and fdi is 0.016, 0.02, 0.036 and 0.002. the value of co-integration of gdp is -1.2791 and the probability is 0.000.the findings shows that there is 84% variation between the dependent and independent variables. table 3: long run coefficients variable coefficient t-statistics prob inf 0.28725 3.08258 0.0076 ed -0.00284 -4.49504 0.0004 cf -0.85273 -2.03009 0.0605 t 0.14362 0.94185 0.3612 fdi 0.12248 0.32204 0.7519 c 19.2424 3.08339 0.0076 source: calculation’s e-views9.5 this table shows that the coefficient of inf is 0.2872 and ed is -0.00248, cf is -0.00284. inflation, trade, foreign direct investment (fdi) is positive impact on the gdp. the probability is 0.007, 0.036 and 0.075. external debt and capital formation is negative impact of gdp. the probability is 0.06 and 0.004. bound test bound test is used to check the long run cointegration between the variables. null hypothesis:𝛼1 = 𝛼2 = 𝛼3 = ⋯ … . . = 𝛼8 = 0 (𝑁𝑜 𝑐𝑜𝑖𝑛𝑡𝑒𝑔𝑟𝑎𝑡𝑖𝑜𝑛) alternative hypothesis: 𝛼1 ≠ 𝛼2 ≠ 𝛼3 ≠ ⋯ … . . ≠ 𝛼8 ≠ 0 (𝑐𝑜𝑖𝑛𝑡𝑒𝑔𝑟𝑎𝑡𝑖𝑜𝑛 𝑒𝑥𝑖𝑠𝑡) table 4: bound test for co-integration t-statistic value upper bound f-statistic 5.2016 2 3.38 source: calculation’s e-views9.5 this result shows that the f-statistic value is 5.2016. f-statistic value is greater than the upper bound value. than we accept the alternative hypothesis and reject the null hypothesis. long run association between the variables furthermore integration exists in the model. test for stability review of economics and development studies vol.2, no 2, december 2016 100 the cumulative sum of recursive residuals (cusum) and cumulative sum recursive residuals squares (cusums) are used to check the stability of the model. figure1 plot cusum the cusum (cumulative sum control chart) is the successive analysis that is used for monitoring the change deduction. figure 2 cuscum square 4. conclusion this study concluded that trade openness and external debt has positive as well as negative impact. imf& wto are considered as basic tools for external debt .the external debt has inverse impact on economic growth. the summary of this paper verifies that trade openness is very important for the economic growth. the country should promote development finance like fdi in the country. developing countries must utilize their domestic recourses. so, the trade openness, foreign direct investment, inflation and external debt has basic variables for economic growth only with suitable policies. 5. policy recommendations i. we should raise the sovereign loans on the concessional term with long term maturities. ii. we should promote the domestic recourses of the country that leads to raise the capital formation. iii. the government should adopt the expansionary fiscal policy that leads to expand the money supply to encourage the economic growth. iv. we must adopt the long run trade openness that reduces the poverty and unemployment in the economy. -12 -8 -4 0 4 8 12 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 cusum 5% significance -0.4 0.0 0.4 0.8 1.2 1.6 2010 2011 2012 2013 2014 cusum of squares 5% significance review of economics and development studies vol.2, no 2, december 2016 101 v. the government should specialize in those commodities which are cheaply produced in the country. references awan, a., asghar, n., &rehman, h. u. (2011).the impact of exchange rate, fiscal deficit and terms of trade on external debt of pakistan. australian journal of business and management research, 1(3), 10. antwi, s. mills, e. f. e. a., mills, g. a., & zhao, x. (2013). impact of foreign direct investment on economic growth: empirical evidence from ghana. international journal of academic research in accounting, finance and management sciences, 3(1), 18-25. blake, t. (2015). investigating the impact of public debt on economic growth in jamaica.working paper of fiscal and economic program monitoring department bank of jamaica, jamaica. babu, j. o., kiprop, s., kalio, a. m., &gisore, m. (2014).external debt and economic growth in the east africa community. african journal of business management, 8(21), 1. chinaemerem, o. c., &anayochukwu, o. b. (2013).impact of external debt financing on economic development in nigeria. research journal of finance and accounting. jibran, k., ali, a., hayat, u., &iqbal, a. (2016).public debt and economic growth in pakistan: a reassessment. pakistan business review, 18(2), 307-324. siddique, a., selvanathan, e. a., &selvanathan, s. (2015). the impact of external debt on economic growth: empirical evidence from highly indebted poor countries. university of western australia, economics. zafar, m., sabri, p. s. u., ilyas, m., &kousar, s. (2015). theimpact of trade openness and external debt on economic growth: new evidence from south asia, east asia and middle east. science international, 27(1). zakaria, m. (2012).interlink ages between openness and foreign debt in pakistan. zakaria, m., & ahmed, e. (2013). openness-growth nexus in pakistan: a macro-econometric analysis. argumenta oeconomica, 1(30), 47-83. zafar, m., sabri, p. s. u., ilyas, m., &kousar, s. (2015). the impact of trade openness and external debt on economic growth: new evidence fromsouthasai, east asia and middle east. science international, 27(1). review of economics and development studies vol. 5, no 3, 2019 513 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads how does foreign direct investment affect economic growth in pakistan: a time series data analysis 1 hina ali, 2 fatima farooq, 3 khizra sardar, 4 zahra masood bhutta 1 assistant professor, department of economics, the women university multan, hinaali@wum.edu.pk 2 assistant professor, school of economics, bahauddin zakariya university multan, pakistan 3 m.phil scholar 1assistant professor, department of economics, the women university multan. 4 assistant professor, national university of modern languages multan. pakistan article details abstract history revised format: 30 june 2019 available online: 31 july 2019 in developing countries, the foreign sector plays an important role and a critically important one for economic stabilization. the yearly data was employed for the period 19752017 for the analysis. the variables of the study include the gross domestic product, foreign direct investment, inflation rate, industry sector growth, broad money, gross fixed capital formation, trade openness, and gross savings. an empirical analysis is done by using auto-regressive distributed lag model (ardl), and the augmented dickey fuller (adf) test is applied to analyze the unit root. in the present study, empirical findings demonstrated the negative association between economic growth and foreign direct investment in pakistan. this argument also supports the idea, where foreign direct investment will not be in favor of the growth of developing countries as the domestic industry would not compete to the foreign industry which provides the products at a low rate. secondly, foreign direct investment in pakistan is not that level which can affect the gdp of pakistan. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords gross domestic product,foreign direct investment,inflation rate,gross fixed capital formation jel classification: e24, f38, e31, g32 corresponding author’s email address: hinaali@wum.edu.pk recommended citation: ali, h., farooq, f., sardar, k. and bhutta, z. m.(2019). how does foreign direct investment affect economic growth in pakistan: a time series data analysis. review of economics and development studies, 5 (3), 513-520 doi: 10.26710/reads.v5i3.711 1. introduction foreign investment is a source of revenue for the developing countries and it is also a source of technological innovation that came with foreign investment. these, financial and technological resources are indispensible for economic growth (salacuse and sullivan, 2005). foreign direct investment demonstrates the direct investment from the foreign investors attaining a permanent interest in a project in another country (calvoand sanchez-robles, 2001). technology transfer from foreign investors to the domestic nation increases productivity in developed countries which merely not have been observed in the developing countries as a consequence of a scarcity of adequate human capital. there are three types of foreign direct investment, for example, horizontal, vertical and the platform. in first, foreign direct investment is defined by the investment that determines industrialized services, and the second http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 514 one arises when direct investment shifts upward or downward with the various unit changes and the last one deals with the purpose of trading to another country (khan, 2007). attaullah and le (2006) reported that developing countries have a big saving-investment gap. to fill the gap, is indispensable to enhance economic growth. may of the existing theories in literature elaborate on the role of foreign direct investment in the economic growth of a country as elaborated by the (adams, 2009)? technology transfer to developing economies through foreign direct investment stimulates economic growth by providing the health facilities, socio-economic development, and availability of educational facilities (calvo and sanchez-robles, 2002). most of the opponents of the theories demonstrated the negative effects of fdi on economic development as it creates competition among the domestic non-developed and the developed foreign firms (dunning and pitelis, 2008). fdi is favorable that it first one is that foreign direct investment will minimize production cost and expand economies of scale (shatz, 2003). as far as the motivation for the foreign direct investment is concerned, the diversification of the motivators can be observed as specific economic freedom in a positive way; hence economic freedom is a substantial source and the main factor of foreign investment. consequent upon the fdi inflows, two major changes in an economy happen one is the capital accumulation and the enhancement of factor productivity (haryana, 2009). dunning (2001) has elaborated the benefits of foreign direct investment as well that further leads to economic growth. 2. literature review azam and ling lukman (2005) stated various determinants of fdi i.e. market size, urbanization, economic reforms, inflation, exports, tariff, and the volume of trade. cobham (2001) elaborates on the domestic investment and concluded that the expansion of the size of the industry leads to the provision of the opportunities for employment in the host country. buckley and wang (2002) examined the contribution of foreign direct investment to growth. the research found that the foreign direct investment inflows are a consequent of the social and economic conditions of the country and concisely the environmental conditions of the recipient country. lipsey (2000) showed a positive relationship between foreign direct investment and gdp growth. foreign direct financing might have a positive association with economic growth while being the major contributor to technological innovation and skill enhancement in the country (campos and kinoshita, 2002). asiedu (2002) studied the high return on investment and improved fiscal policies are important factors to attract foreign investors. choe (2003) supported the same findings as the growth is positively related to foreign investment. atique et al, (2004) by using 1970-2001, examined as domestic capital enhance economic growth in pakistan. gross domestic product may be enhanced by the foreign investment to help in poverty reduction that enhances the income levels (nunnekamp, 2004). blonigen (2004) discussed that quality and quantity of foreign direct investment for both industrial and underdeveloped nations. javorcik (2004) concluded the significant positive association is established between foreign direct investment and productive capability. trade openness significantly influences foreign direct investment (agosin and machado, 2007). iwanow and kirkpatrick (2007) elaborated the positive association of foreign direct investment and economic growth. khan (2007), examined the relationship between growth rate and foreign direct investment. azamand luckman (2010) showed the effect of various economic factors on foreign direct investment for the economy of indonesia, pakistan, and india by using panel data for 1971–2005. log-linear regression and panel ordinary least square are employed. findings of several variables associated with pakistan and india were similar except two variables (trade openness and government consumption) while indonesia results differ from pakistan and india results. (kokand et al., 2009) showed a positive relationship among infrastructural improvement with foreign direct investment. khadaroo and seetanah (2010) proved the accumulated gains by infrastructure enhancement are associated with higher availability of transportation facilities and a reduction in transaction cost. nair‐reichert and weinhold (2001) used random and fixed effect model and permits heterogeneous in panel data. the cause and effect relationship among foreign direct investment and development is positive. falki (2009) illustrated an inverse behavior in foreign direct investment and economic growth. (ejaz and atif, 2010) critics of foreign direct investment claimed that foreign direct investment in developing countries may control resources, review of economics and development studies vol. 5, no 3, 2019 515 supplant domestic investment, use inappropriate technology. malik (2015) showed a negative association among foreign direct investment and growth using panel of saarc countries and concluded that economical execution is negativity associated with foreign direct investment. 3. data and methodology in this section, the researcher will form the empirical and theoretical models to examine the relationship between foreign direct investment and economic growth of pakistan. foreign direct investment the core regressor while gross domestic product is the dependent variable, while the other variables include inflat1eaw2ion, industry sector growth, broad money, gross fixed capital formation trade openness and gross savings. 3.1 data sources data for the eight variables gross domestic production, foreigners direct investments, inflation, industry sector growth, broad money, gross fixed capital formation, gross savings and trade openness collected for the analysis. required data is collected from wdi with annual frequency for a period of 1975-2017. 3.2 empirical methodology following contemplation have been formulated to econometrically analyze the variables of the study. equation (1) where, equation (1) above model the relationship between variables of the study has been elaborated. presented. foreign direct investment is an essential factor in economic growth (kowalski, 2000). and foreign direct investment has a significant relation with economic growth in the long run (kogid et al., 2010). 4. results and discussion this section deals with the complete details of the estimation that have been done on empirical grounds. all the parameter estimations and the descriptive details are as follows. 4.1 descriptive analysis of the data analysis is usually used to delineate the essential characteristics of the time series. in a study, the researcher has given the detailed information of the each descriptive statistic cut-down slews of data into a simple summary. table 1: descriptive estimation gdp fdi inf ind.sec m2 gfcf tr gs mean 5.0288 0.8303 9.4968 5.7240 45.6002 16.1748 11.1807 22.4723 median 4.8463 0.6129 8.5850 4.92108 44.8202 16.8371 9.9681 22.1660 maximum 10.2157 3.6683 24.8911 16.2629 58.8676 19.2354 17.6116 30.4314 minimum 1.0143 0.0616 1.8107 -5.2068 33.6679 12.5206 4.6887 14.291 std. dev 2.1504 0.8071 5.4479 3.6426 6.1961 1.6979 3.8931 3.3942 skewness 0.2059 2.1470 1.2039 0.0172 0.4317 -0.4956 0.3168 -0.1496 review of economics and development studies vol. 5, no 3, 2019 516 kurtosis 2.4241 7.3347 4.1615 4.6125 2.3065 2.2196 1.7194 3.1304 probability 0.6382 0.0000 0.0016 0.0972 0.3332 0.2402 0.1606 0.9089 source: authors’ calculations table 1 represents the mean, median and the standard deviation for the variables of the research. all the information is presented in the table. row 1 describes the variables of the research. while the mean, median, maximum, minimum, st.dev, skewness, kurtosis and probability are presented in the table in the rows. 4.2 stationary of the data dickey and fuller (1981) introduced the “augmented dickey fuller” test to test for the unit root and it is defined by a constant variance and the average of series overtime. the details of the unit root process are described in the table below. table 2: augmented dickey fuller test at level at 1st differenc conclusions variables intercept intercept and trend intercept intercept and trend gdp -3.9247* -4.0671* -10.1003* -10.0261* i (0) fdi -2.8284 -3.0963 -4.5205* -4.4850* i (1) inf -5.8676* -5.7857* -7.9903 -7.8868* i (0) ind.sec -4.7580* -4.7580* -7.6450* -7.5515* i (0) m2 -1.5028 -3.6357 -5.4734* -5.4094* i (1) gfcf -1.9228 -3.5560 -6.1994* -6.0690 * i (1) tr -1.5833 -1.8753 -7.0522* -7.3355* i (1) gs -3.5854 -3.6244 -6.7917* -6.7841* i (1) note: “*” shows 1 % level of significance for the variable. source: authors’ calculations based on software, e-views table 2 checked the stationary of the time series or not. estimates of the unit root for gross domestic product, foreign direct investment, inflation rate, industry sector growth, broad money, gross fixed capital formation, trade openness, and gross savings are presented here. among the above mentioned variables the foreign direct investment, broad money, gross fixed capital formation and , gross savings has unit root but the other variables of the study that were the gross domestic product, inflation and industry sector are stationary at level. so, a mixed order of integration is found in the variables of the study. 4.3 cointegration analysis (the bound test) as the variables are having among the series, so there is need to check the continuation of the relationship among the mentioned series. by using some of the co-integration tests, as bound test, it is tested the existence of the long run association. ardl bound test" is developed on the hypothesis that the variables are with zero order of integration and the order of integration one i.e. i (0) and i (1) (pesaran et al., 2001). table 3: co-integration results table 3 illustrates the f-statistic is 6.612 that is greater than upper bound value 4.26 in the model. the results are in favor of the existence of a long run relationship. 4.4 auto-regressive distributed lag model auto-regressive distributed lag model results are elaborated of the model here (jagadeesh, 2015). ardl has the advantage of estimation when the series is non-stationarity and there is cointegration among the variables. so the researcher has developed an important strait for checking the long run associations among the economic variables. review of economics and development studies vol. 5, no 3, 2019 517 table 4: short-run estimates of ardl variable coefficient std. error t-statistic prob. d(gdp(-1)) 0.3260 0.1582 2.0600 0.0499 d(fdi) -0.8132 0.6831 -1.1903 0.2451 d (fdi (-1)) 1.9154 0.6941 2.7593 0.0107 d(gs) 0.2039 0.1038 1.9648 0.0606 d(gfcf) 0.5074 0.2856 1.7764 0.0878 d(ind.sec) 0.3308 0.0858 3.8560 0.0007 d(ind.sec(-1)) -0.2791 0.0932 -2.9952 0.0061 d(m2) 0.0708 0.1018 0.6955 0.4931 d(m2(-1)) -0.1907 0.1078 -1.7682 0.0892 d(tr) -0.1122 0.0707 -1.5864 0.1252 d(inf) 0.0065 0.0574 0.1140 0.9101 cointeq(-1) -1.7578 0.2596 -6.7691 0.0000 cointeq = gdp (-1.3221*fdi + 0.1160*gs + 0.2887*gfcf + 0.4520 *ind.sec + 0.1598*m2 -0.0638*tr + 0.0037*inf.def -8.9846 ) source: authors’ estimations table 4 elaborated that has an insignificant effect on growth while the lagged value it shows significant (positively) association with a gross domestic product in pakistan in the short run. gross savings have a positive association with economic growth. changes in gross saving influence the investment level that helps to influence the productivity potential of the economy sequentially and plays a role in changing the economic behaviors of a country. due to expansion and in a gross fixed capital formation the other indicators like infrastructure facilities goes improved leads to enhance the employment opportunities connected with such sectors. there is a strong association between gross fixed capital formation and economic growth. as a consequence, with the development of the industrial sector, it would lead to an increase in economic productivity, raise employment, higher income level, and increase in savings and enhancement of productive capability. all other sectors also demonstrate the upward and increasing trends in case of pakistan. broad money demonstrates liquid possessions in a financial system. as there is an increase in money supply it positively affects economic growth. inflation rate showed a statistically insignificant correlation with the growth in the economy of pakistan. at last the error correction term elaborates on a long run convergence among the variables. the value for this term is -1.400333 that demonstrates not only that there’s a long-run relationship among the dependent and independent variables but also demonstrates a long run stable equilibrium. table 5: long-run estimates of ardl variable coefficient std. error t-statistic prob. fdi -1.3221 0.3318 -3.9837 0.0005 gs 0.1160 0.0632 1.8350 0.0784 gfcf 0.2887 0.1571 1.8366 0.0782 ind.sec 0.4520 0.0781 5.7825 0.0000 m2 0.1597 0.0577 2.7677 0.0105 tr -0.0638 0.0401 -1.5902 0.1244 inf 0.0037 0.0327 0.1137 0.9104 c -8.9845 5.4077 -1.6614 0.1091 source: authors’ estimations table 5 illustrate the long-run estimates of the analysis, articulate a negative relation of foreign with growth. consequently a one-unit change in foreign direct investment inflows gdp growth rate declined by “1.322100" units. the reason behind this is that when foreigners invest in recipient country market, by using monopolizing power they discourage domestic investment. so, the main problem for a society occurred in the form of declining gross domestic product growth (jagadeesh, 2015). review of economics and development studies vol. 5, no 3, 2019 518 this negative correlation in the case of pakistan is attributed to the notion that most of the foreign programs and investment bring no benefit to pakistan economy moreover; it increases the costs of production in the economy. appropriate examples for this notion are “china pakistan economic corridor” the benefits attached with these long-term projects will be achieved after a long period and require hard struggle. gross savings shows a positive relation with economic growth. due to 1 unit change in gross savings, gross domestic product increases by 0.116049 units. as pakistan’s economy saves more which in turn also encourages investment level of pakistan either foreign or domestic. the results of this study are also consistent with ellahi et al. (2011) and jagadeesh (2008) and exhibit the positive correlation of gross saving with economic growth. the one unit change in gross fixed capital formation there's “0.288705” units change gross domestic product. the objective of this strong relationship was that as infrastructure conditions changes in a country this will increase its growth rate and show a positive trend of economic growth in the long-run relationship. empirically it is revealed that there is a positive association between gross fixed capital formation and economic growth. one unit change in industrial growth with the gross domestic product will change by 0.452046 changes. 4.5 stability analysis the stability analysis illustrates that the estimated relationship is stable in the long run or not. and the results are presented in the figures below. figure 1: cusum diagram figure 2: cusum-square diagram figure 1 and 2 as by cusum illustrate that the model is statistically significant and stable. the assessment of cusum-square also elaborate illustration examiner envisages that model is statistically significant and stable. intensity or criteria for the significance decided for this cusum-square plot is 5%. 5. conclusion and policy implications there exists contradictory arguments in literature as some researcher concluded a positive association stuck among fdi and economic development while additional ones argued that the dependence hypothesis cleave underdeveloping nations. our finding also concluded the negative correlation of with . not only but international trade and inflation are also negatively associated to the in pakistan. the variables of are positively related to the growth in pakistan. findings are based on the results of the “ardl”. estimates confirm the negative correlation of foreign direct investment with an economic performance for the time series data 1975 – 2017. policies that relate to foreigners may also recheck to keep away more external financing. infrastructure improvements also develop the association of foreign direct investment with economic growth. references adams, s. 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(2004). to what extent can fdi help achieve international development goals?. the world economy, 27(5), 657-677. pradhan, jaya prakash., (2003). fdi and economic growth: the case of developing countries, unpublished m.phil dissertation submitted to jawaharlal nehru university, new delhi. quazi, r. (2005). economic freedom and fdi in east asia, college of business, prairie view aandm university, prairie view, texas 77446. in usa international academy of business and public administration disciplines (iabpad) meetings. salacuse, j. w., and sullivan, n. p. (2005). do bits really work: an evaluation of bilateral investment treaties and their grand bargain. harv. int'l lj, 46, 67. shatz, h. (2003). gravity, education, and economic development in a multinational affiliate location. j. int. trade and economic development, 12(2), 117-150. smarzynskajavorcik, b. (2004). does fdi increase the productivity of domestic firms? in search of spillovers through backward linkages. american economic review, 94(3), 605-627. review of economics and development studies vol. 2, no 2, december 2016 117 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 2: issue 2 december 2016 journal homepage: www.publishing.globalcsrc.org/reads foreign influence on pakistan's exports and imports evidence from pakistan 1 irfan hussain khan, 2 shumaila hashim, 3 muhammad rizwan yaseen 1 ph.d. scholar, govt collage university faisalabad pakistan, irfansial007@hotmail.com 2 m phil scholar, applied economics research centre, university of karachi pakistan, kshumaila07@gamil.com 3 assistant professor, govt collage university faisalabad pakistan, rizwany2001@yahoo.coom articledetails abstract history revised format: nov 2016 available online: dec 2016 the purpose of this study is to investigate the impact of the pakistani currency phase action on exports and imports. two time series data base year and quarterly basic research use. starting from the 1970 annual data for about 40 years, beginning with the beginning of 2000 to 2012 quarterly data. johnson estimates quarterly observations using common integration techniques. in the current study results show that pakistan first began trading volume for the us and developed countries, the uk and europe. as a combination of export and import time pakistan has improved. production and manufacture of semi-finished goods and primary product alternatives, while the import of consumer goods, capital goods and petroleum products expanded. due to low-cost elasticity of the export and import activity of the exchange of theoretical background reaction support. on the other hand, if the value of the rupees fell against the dollar, the import costs rose more than the export bills. in support of this study, pakistan should focus on a small number of countries to reduce trade and expand trade. similarly, on the basis of the goods may add some other goods. © 2016 the authors, under a creative commons attributionnoncommercial 4.0 keywords currency, import and export, trade, pakistan jel classification i12, i15, i18 corresponding author’s email address: irfansial007@hotmail.com recommended citation: khan, i. h., shumaila, h., and yaseen, m. r (2016). foreign influence on pakistan's exports and imports evidence from pakistan. review of economics and development studies, 2 (2) 117-128 doi: https://doi.org/10.26710/reads.v2i2.129 1. introduction exchange rate as a measure of the level of use of the global competitiveness of the tool. national currency in the national competitiveness index has played an important role in economic stability. determine the foreign exchange demand and market forces of money supply, market exchange rate. state and monetary authorities determine that the exchange rate plays a major role in the government. many economists believe that currency devaluation promotes exports and hinders the importation of a country. the exchange rate of any country is conducive to business, investment motivation, policy and planning decisions. as the exchange rate for two decades has become an important research area. march 1, 1982. http://www.publishing.globalcsrc.org/reads mailto:irfansial007@hotmail.com mailto:kshumaila07@gamil.com mailto:rizwany2001@yahoo.coom mailto:irfansial007@hotmail.com review of economics and development studies vol.2, no 2, december 2016 118 the introduction of floating exchange rates has been considerable development, especially in the postbretton woods era, after which the exchange rate has fluctuated. in the economic story of pakistan, they found two important variables, namely, there was no or weak relationship between exchange rate and trade balance, as described by some researchers such as greenwood (1984), rose and yellon), rahman mustafa (case 1996), rahman et al. (1997), saadia badal (2006). from the appreciation of the last century to the pakistani rupee devaluation against the dollar, pakistan's large current account surplus, according to the dollar value as high as the rupee. then, the central bank of pakistan decided to cut interest rates steadily, and is expected to maintain export competitiveness, from the national economy to buy the dollar level. in 1971, the currency of pakistan was linked to the disconnection in 1982 from the $ 100 rupee in july 1994. 2. objectives of the study the objection of the study is as follows: 1. observe the historical trends in the exchange rate of pakistan and the import and export. 2. observe the relationship between pakistan's imports, exports and exchange rates. 3. literature review it contains relevant materials on developed countries, underdeveloped countries and regional countries. literature is organized in chronological order, so that the development of major theories, concepts and methods can be emphasized. hasanov and samadora (2009) examined the impact of the real exchange rate on non-oil exports to azerbaijan. quarterly data for the third quarter of 2002 to the third quarter of 2009 were used. they estimate that the johnson assessment is based on a long-term relationship cointegration model, however, the short-term momentum has been estimated using the error correction model. they believe that the azerbaijani economy's gross domestic product (gdp) real exchange rate and no significant impact oil wool; both in the short and long term. the empirical results show that short-term volatility does not last forever, but it is moving towards long-term equilibrium ahmed nearby (2009) examines the impact of exchange rate fluctuations on bangladesh's international trade. the cointegration and error correction models have been developed for empirical analysis. importers must use real (in local currency terms), real bilateral exchange rates (between bangladesh and the us economy) and industrial production indices as quarterly gross domestic product (gdp) data. from may 2003 to december 2008, empirical results show that the real exchange rate will not only lead to short-term, but also have a significant impact on long-term real exports and the bangladeshi economy. although the exchange rate fluctuated significantly, exports were gradually increasing. the overall conclusion is that the devaluation of the local currency against major international currencies through bangladesh's weak import and export economy does not improve trade balance. he (2010) developed a theoretical model of the dynamic relationship between exchange rate and productivity growth. he merged into a monopolistic competition, non-tradable goods industry. his conclusion is that the currency appreciation caused by the circulation, rather than the endogenous growth of currency depreciation. this may be due to monopolistic competition to provide non-tradable commodity prices to drop its broad truth facts. currency devaluation due to non-growth, due to the distribution sector and currency depreciation, so the overall turnover exceeds the currency appreciation review of economics and development studies vol. 2, no 2, december 2016 119 ijaz (2012) studied the effectiveness of the exchange rate of pakistan's macroeconomic variables. data were collected from 1980 to 2009. in the case of annual time series data, fixed unit root test, johnson applied the long-term equilibrium relationship variable, cointegration test, and causality between variables in each model granger causality test (gct). the main finding is that there is no common longterm integration between exchange rate and inflation, trade and foreign direct investment, exchange rate and inflation. exchange rate and trade consolidation, exchange rate and foreign direct investment, but did not find casualties in each case. khan et al. (2014) analyzed the impact of exchange rate fluctuations on pakistan's business partners. monthly data from january 1970 to december 2009 collected samples of 29 trading partners in pakistan. volatility measurement obtained from the garch model family. panel unit root test data has been used to identify nonstationary problems. classify volatility as long and short term effects. the main results are summarized as follows: first, when pakistan uses the dollar as a vehicle currency transaction, the impact of trade fluctuations is significant and extremely negative. compared with these negative effects, export imports are longer. they also found that emerging markets and low-income countries in their own currencies rather than the use of vehicles can reduce the impact of foreign exchange fluctuations. the domestic currency trade avoids the uncertainty and instability of the exchange rate. import, export and exchange rate a profile of pakistan it also contains information about export to and imports from various international markets. profile of pakistan trade this section contains the history of pakistan's trade status. foreign trade trends were extensively analyzed. table 3.1 shows the balance of the payment (bop) component, from 1981 to 2012, the average of 10 years has been reported to make the analysis as simple as possible to the percentage of gdp. table 3.1 components of trade deficit (as percent of gdp) source: pakistan’s economic survey (various issues) year export import trade deficit 1981-90 10.2 17.91 7.76 1991-00 13.37 17.33 3.95 2000-10 12.04 18.34 6.3 2010-11 11.6 18.9 7.3 2011-12 10.5 20.0 9.5 review of economics and development studies vol.2, no 2, december 2016 120 4. research methodology this study examines the short-term and long-term relationships between real effective exchange rates, (million rupees), and pakistan's real value for import and export. there are many ways to analyze, but present research, kemal & kadir (2005) program. this process has several advantages. first, it isolates short-term and long-term relationships, ie it highlights the strength of shortand long-term relationships. secondly, it emphasizes the behavior of the corrective mechanism (if any), that is, in its case, providing information about the trend of balancing the impact on the system. third, this process is directly related to the theory. because of the well-known macroeconomic principles, that is, exports, imports and currency changes are interrelated. i found that the two methods are the covariance relationships between interest variables engle granger and johansen techniques. engel-granger single technology has some drawbacks. however, johnson's cointegration technology is based on equations, and more powerful bean siegel-granger technology. thus, johansen technology was used in this study. the analysis involves many steps. first, the researchers need to determine whether the data is at rest. if the data is still, you cannot use the cointegration of johansen technology. however, if the data is not fixed and is an integrated order, it can also be used. secondly, the optimal lag of the simple vector autoregressive model is the second step. the third step is to use the cointegration test to find long-term cooperative efficiency variables. finally, a representative vector error correction mechanism is configured to estimate the short-term relationship. more details of these steps are listed. the first step is to find whether the data is at rest or not. there are several variables that can be used to determine the static test. enhanced dickey fuller (1981), referred to as adf, literature is more popular test, due to its simplicity and dickey and fuller 1981. mathematically, adf can be expressed in equation (1) for a time series variable ‘y’ below: eyayay ti p i iitt t      1 1 10  (1) there are three options in equation (1)  “ a0 ” is the intercept or drift parameter of the time series.  “t” is the time trend in time series. there may be downward or upward linear trend in the data.  it is also possible that both drifts and time trend exit in the data. the augmented dickey fuller (adf) may be carried out for above three options, namely, constant or intercept or drift, time trend or trend and finally both. selection of appropriate lag length may be decided using akiak information criterion (aic). first, direction of causality among variables would be tested using granger causality test (granger, 1969) which is outlined by karlsson et al., (2002) as given in equation (2) to equation (4)  tit n i iit n i i n i itt eraaimpaaimp i 1 1 3 1 2 1 10 lnexplnlnln 1        (2)  tit n i iit n i i n i itt eraimpaaa i 2 1 3 1 2 1 10 lnlnexplnexpln 1        (3) review of economics and development studies vol. 2, no 2, december 2016 121  tit n i iit n i i n i itt eraaimpaaer i 3 1 3 1 2 1 10 lnexplnlnln 1        (4 ) lnimp log use as imports of pakistan (rs in millions). lnexp log of exports of pakistan (rs in millions) and lner log of exchange rate of rupees verses dollars equation (2) into equation (4) is a system of equations. there are two channels it is very important: the exchange rate and export, import rates and import causality. based on the theory, the exchange rate decisions the goods different country relative prices. exchange of a country is likely to import and export through in some assumptions. for example, if a country's currency devaluation, which means that the lower value of exports abroad, and the higher the value of foreign imports. it just leads to a conclusion that the other conditions remained unchanged, exports increased external demand and a decline in domestic demand for imports. the degree of exchange rate on export and import depends on many factors such as the nature of the goods, the state of global competition. 5. result and discussion exchange rate is the most important macro variables, a country's most important economic policy in promoting china's foreign trade has played a very important role. this study can extend several variables. the var model can be extended to the var type the simaltanuess equation model, which requires a larger data set for the purpose of estimation. summary the statistics are shown in december 2000 for three selected variables (rs 1 billion) in table 5.1, ie the export and import ratios (as opposed to rupees), logarithm. the average exchange rate was 66.69 rupees per dollar for $ 48 after the fourth quarter from 2000-12 table 5.1: summary statistics of selected variables exchange rate (er ) (rs versus us $) log of exports lnexp (rs million) log of imports -lnimp (rs million) mean 66.69654 12.24233 12.18058 median 60.435 12.30632 12.23563 maximum 92 12.56603 12.49833 minimum 51.65 11.6099 11.76492 std. dev. 12.3551 0.234959 0.234366 skewness 0.781148 -0.853791 -0.338577 kurtosis 2.010606 2.888114 1.583387 jarque-bera 7.409277 6.344769 5.341553 probability 0.024609 0.041904 0.069198 review of economics and development studies vol.2, no 2, december 2016 122 sum 3468.22 636.6014 633.39 sum sq. dev. 7785.076 2.815498 2.801299 observations 52 52 52 source: author’s calculation, data from state bank of pakistan the maximum exchange rate of 92%, the lowest exchange rate of 51.65% of the dollar. the standard deviation is a positive deviation of 12.3551,0.78. the average log exports and imports are given by 12.24 and 12.18. the largest export of logs is rs. 125.6 crore, with a minimum of rs 11,609,900. the standard deviation of export and import of logs is 0,234,959 and 0,234,366 rupees respectively. pakistan's skewness coefficient is negative export and import. pakistan's import quarterly standard deviation is lower than the lowest value for the quarter, and exports increase the theoretical parameter, ie, the relative price elasticity of imports. least developed countries export to primary products to other parts of the world, which is low prices and income elasticity 5.2 estimation of results the first step quantitative analysis examines the existence of each variable unit root time series variable. if the time series data unit root evidence then the ordinary least squares (ols) application is inconsistent and inefficient. if the ols estimates the fundamental proof of the unit time series data is a pseudoregression model. in this context, this chapter specifically tests the root of most data units. there are various unit root tests in the data technology, but it is important to look at the drawings and the enhanced dickey fuller (adf) test. you can build related graphs and adf tests and the first level differences in the series. there are three options for the adf test application, ie whether the intercept in the regression equation is in the regression model with or without the trend and intercept intercept and trend. in this case, all possible options for the adf are analyzed and the results are as follows. table 5.3: test of co-integration date: 11/18/14 time: 18:48 sample (adjusted): 2001q1 2012q4 included observations: 48 after adjustments trend assumption: linear deterministic trend (restricted) series: er lnexp lnimp exogenous series: @seas(1) @seas(2) @seas(3) warning: critical values assume no exogenous series lags interval (in first differences): 1 to 3 unrestricted cointegration rank test (trace) hypothesized trace 0.05 no. of ce(s) eigenvalue statistic critical value prob.** none * 0.470151 43.73070 42.91525 0.0413 at most 1 0.167848 13.24286 25.87211 0.7191 at most 2 0.088034 4.423314 12.51798 0.6803 review of economics and development studies vol. 2, no 2, december 2016 123 trace test indicates 1 cointegrating eqn(s) at the 0.05 level * denotes rejection of the hypothesis at the 0.05 level **mackinnon-haug-michelis (1999) p-values unrestricted cointegration rank test (maximum eigenvalue) hypothesized max-eigen 0.05 no. of ce(s) eigenvalue statistic critical value prob.** none * 0.470151 30.48785 25.82321 0.0112 at most 1 0.167848 8.819544 19.38704 0.7428 at most 2 0.088034 4.423314 12.51798 0.6803 max-eigenvalue test indicates 1 cointegrating eqn(s) at the 0.05 level * denotes rejection of the hypothesis at the 0.05 level **mackinnon-haug-michelis (1999) p-values unrestricted cointegrating coefficients (normalized by b'*s11*b=i): er lnexp lnimp @trend(00q2) -0.448272 -16.47367 -10.63826 0.710122 -0.005935 8.879199 -4.166453 -0.005617 0.041039 -6.118045 11.20179 -0.046603 unrestricted adjustment coefficients (alpha): d(er) 1.475326 -0.428161 0.394958 d(lnexp) -0.006340 -0.023738 -0.012162 d(lnimp) 0.017829 0.010240 -0.023136 1 cointegrating equation(s): log likelihood 10.95724 normalized cointegrating coefficients (standard error in parentheses) er lnexp lnimp @trend(00q2) 1.000000 36.74927 23.73171 -1.584133 (6.11086) (4.48276) (0.07769) adjustment coefficients (standard error in parentheses) d(er) -0.661347 (0.17727) d(lnexp) 0.002842 (0.00548) d(lnimp) -0.007992 (0.00646) review of economics and development studies vol.2, no 2, december 2016 124 source: author’s calculation using eviews, data taken from state bank of pakistan the statistical differences between the two structures are zero and the alternative hypothesis. for example, in the tracking statistics, the null hypothesis does not contain a cointegration vector with a cointegration vector and an alternative hypothesis mark greater than zero. if the alternative hypothesis is accepted in the second round, the replacement of the covariate vector is less tested than the null hypothesis. if the air is accepted, the test ends and if the substitution is accepted, the other test of the third round is performed. in the current case, the covariate vector is not rejected and accepts more than zero. in the second round, for the one end and the alternative test, accept the cointegration vector zero. in most cases – eigen value statistics, no cooperation, the integrated vector zero is only for a cointegration vector substitution test. if it is accepted, the null test is over and if the test is accepted, proceed to step 2. in the second step, there is only one public integrated carrier zero replacement test with only two. if the air is accepted, the test concludes that if the alternative is to be tested, it will continue in a similar manner until the null hypothesis is unacceptable. in this case, it can be seen that the maximum calculated statistic is inherently 8.81, resulting in more than 19.38 we accept only a cointegration vector space is low. the estimated var model, based on the covariance test markings in table 5.4, includes the acquisition of pakistani import and export dummy variables affected by seasonal factors. c (2) is the impact of pakistan's export lag on current exports. this is negative, which means significant if a year lagged exports have a negative impact on the current exports. in addition, if the current annual export growth, it will reduce exports in the next few years. one, two, four quarterly exchange rate fluctuations have c (8), c (9) and c (10). although the important factor is personal, but to a lesser extent. a unit of exchange rate changes is lagging behind, bringing logs to pakistan exports about 0.001095 units change. other similar explanations are common and effective and can be done. table 5.4: vector error correction model for log of pakistan’s imports as dependent variable using general to specific approach dependent variable: d(lnimp) 2 cointegrating equation(s): log likelihood 15.36701 normalized cointegrating coefficients (standard error in parentheses) er lnexp lnimp @trend(00q2) 1.000000 0.000000 39.99345 -1.523464 (13.9743) (0.21522) 0.000000 1.000000 -0.442505 -0.001651 (0.36830) (0.00567) adjustment coefficients (standard error in parentheses) d(er) -0.658806 -28.10576 (0.17420) (7.27195) d(lnexp) 0.002983 -0.106327 (0.00517) (0.21575) d(lnimp) -0.008053 -0.202782 (0.00641) (0.26773) review of economics and development studies vol. 2, no 2, december 2016 125 method: least squares date: 11/24/14 time: 18:20 sample (adjusted): 2001q1 2012q4 included observations: 48 after adjustments d(lnexp) = c(1)*( lnimp(-1) 0.484236805425*lnexp(-1) 0.0010834444502*er(-1) 6.29387705268 ) + c(2)*d(lnexp(-1)) + c(3)*d(lnexp(-2)) + c(4)*d(lnexp(-3)) + c(5)*d(lnimp(-1)) + c(6) *d(lnimp(-2)) + c(7)*d(lnimp(-3)) + c(8)*d(er(-1)) + c(9)*d(er(-2)) + c(10)*d(er(-3)) + c(13)*@seas(1) coefficient std. error t-statistic prob. c(1) -0.299486 0.124642 -2.402762 0.0035 c(2) 0.567935 0.204820 2.772846 0.0052 c(3) 0.298374 0.100318 2.974395 0.0096 c(4) 0.187309 0.084478 2.217244 0.0312 c(5) -0.082536 0.030606 -2.696712 0.0903 c(6) -0.227149 0.119689 -2.897823 0.0655 c(7) -0.211526 0.078382 -2.760782 0.0065 c(8) 0.021095 0.009208 2.290817 0.0728 c(9) 0.033555 0.015736 2.132355 0.0048 c(10) 0.073429 0.024928 2.945539 0.0005 c(13) 0.127362 0.031745 4.012007 0.0003 r-squared 0.690836 mean dependent var 0.010217 adjusted r-squared 0.543765 s.d. dependent var 0.116096 s.e. of regression 0.078417 akaike info criterion -2.055492 sum squared resid 0.227524 schwarz criterion -1.626675 log likelihood 60.33180 hannan-quinn criter. -1.893441 durbin-watson stat 1.878474 source: author’s calculation using eviews, data taken from state bank of pakistan pakistani imports affect exports in one, two, three aspects of backwardness. this means that if the log exports grow in wood imports surge. this may be due to the increase in exports of the country means that due to the logical connection of the popularity of pakistani foreign exchange imports. the second reason may be the impact of channel imports on export earnings. if the re-exports also increase domestic income, this could lead to more imports. one, two, affecting the level of imports currently lagging behind imports in the third quarter was negative. this means that if the import growth this quarter, imports will decline in the next quarter. these results are significant. the impact of the exchange rate lag, the secondary and tertiary import levels is positive and significant. import exchange rate impact is greater than export, summary appendix high twenty three. this means that if the foreign exchange depreciation rupee, each dollar exchange rate rises, the level of imports also rises, and vice versa. 6. conclusions and recommendations review of economics and development studies vol.2, no 2, december 2016 126 quarterly data for the period from 2000 to 2012 to measure the impact of exchange rate fluctuations on pakistan's imports and exports. i'm measuring millions of dollars, which is the dollar exchange rate and the use of data to measure the 1970 and 2013 data pkr than xiaotang trend analysis. in its main research, manufacturing and data alertness is estimated to be half of the manufacturing export and import use. analyze direct exports and imports. discussed the concentration of import and export. • exports of primary commodities have declined over a period of time. this is a positive point. • pakistan's exports are mainly concentrated in developed countries. if the developed countries economy suffered any crisis, pakistan is a direct blow to this crisis. the econometric model estimates can be summarized as follows: all time series variables have unit root problems, so using ols is invalid. • all time series variables are first-order integrals and the sample size is quite large, so it is easy to apply johanson co-integration integration techniques. • the best lag length standard test shows that the lag length can reach three thirds. • co-integration tests show that there is no co-integration vector, so there is a long-term relationship between variables. 7. recommendations pakistan's exports of primary products or raw materials can be higher in the country to reach the final product ratio. if these final products are exported, this will lead to more foreign exchange earnings than it is now. • pakistan's exports are concentrated in developed countries, not only from the perspective of a viable market for the economy. it usually leads to the instability of the national economy in the international economic recession or through political interference in pakistan. pakistan may be seeking diversification of exports, which in many markets, not a few, so if the interference of bilateral relations between countries, then the level of economic activity may not be very strong. • pakistan's share of imports from large countries and finished products, including capital goods, petroleum products and consumer goods. a country's economic development must be completed capital goods, but it may also be domestic consumer goods. import substitution and export-oriented economy are the right policy for pakistan to get out of the crisis. references hasanov fakhri ( 2009 ) “ the impact of real exchange rate on nonoil exports” an asymmetric adjustment toward the equilibrium, 6( 54 ). he, q. (2010). expanding varieties in the nontraded goods sector and the real exchange rate depreciation. journal of international and global economic studies , 19-38. keemal .m.a and qadir .u (2005) the real exchange rate, export and import movemet: 44;2 pp: 177195. khan .a. j. azam . p. syed . h. s ( 2014) “ the impact of exchange rate volatility on trade” the lahore journal of economics 19:1 pp 31-66. koray, f., and lapstrapes. w. d. (1990), “ real exchange rate volatility and u.s bilateral trade: a var approach”, the review of economics and statistics, 71, 708-712. mustafa khalid (2004), “volatility of exchange rate and export growth in pakistan”, department of economics, university of karachi, pp. 7. review of economics and development studies vol. 2, no 2, december 2016 127 rana ijaz ali khan (2012) “ effectiveness of exchange rate in pakistan” , pak. j. soc.sci.2012 6(1), 83-96. rehman and mustafa, (1996) “ the determination of pakistan trade balance relationship” the lahore journal of economic. rehman , (1997) “ the structure and behavior of pakistan imports from selected asian countries” pakistan journal 6(1), 53-66. vergil hasan (2000), “exchange rate volatility in turkey and its effect on trade flows”, journal of economic and social research 4 (1), 83-99 review of economics and development studies vol. 3, no 1, june 2017 29 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 1 june 2017 journal homepage: www.publishing.globalcsrc.org/reads impact of china-pakistan economic corridor (cpec) on pakistan’s trade: empirical evidence from gravity model 1 imran sharif chaudhry, 2 faitma gulzar, 3 hafiz gulfam ahmad, 4 saeed ur rahman 1 professor/director, school of economics, bahauddin zakariya university multan, pakistan imran@bzu.edu.pk 2 lecturer, department of economics, ghazi university, d g. khan-pakistan hahamad@gudgk.edu.pk 3 lecturer, department of computer science, ghazi university, d. g. khan-pakistan hahamad@gudgk.edu.pk 4 ghazi university, d. g. khan-pakistan srehman@gudgk.edu.pk article details abstract history revised format: may 2017 available online: june 2017 purpose: the china–pakistan economic corridor (cpec) is an enormous project for both economies. there are much potential remunerations for concerning frugalities in trade and industries of both countries. the study was specifically designed to examine the influence of cpec on fruits export of pakistan. the bilateral or regional trade was examined through gravity approach. data was taken from 2013 to 2015. since distance plays a vital role in trade, the outcomes of gravity model are estimated with ordinary least square method. pakistan china economic corridor is a mega project for both economies. it will make pakistan and china, the major economic players in the region and further enhance economic conditions of both countries. some of the basic determinations of pak-china economic corridor are to boost business opportunities, efficient transport routes and expanding regional trade. the export target of pakistan was $ us 20 billion in 2013-2015. as of april 2015, pakistan exports stand at $ us 6,178 billion. pakistan’s exports to asia was amounted to $ us 1,649 billion which was 42 percent of its overall exports and the share of fruit and nuts markets in pakistan’s export was $ us 1,017 billion. the paper analyses the cpec’s impact on exports especially exports from fruit market of pakistan using gravity approach for the evaluation of this bilateral trade. the results show that cpec reduces the distance and it will be more beneficial for perishable goods trade like fruits. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords cpec, gravity approach, pakistan export, fruit market jel classification: b27, f10, f15 corresponding author’s email address: hahamad@gudgk.edu.pk recommended citation: chaudhry, i. s., gulzar, f., ahmad. g. & rahman, s. (2017). impact of china-pakistan economic corridor (cpec) on pakistan’s trade: empirical evidence from gravity model. review of economics and development studies, 3(1) 29-38. doi: https://doi.org/10.26710/reads.v3i1.164 1. introduction analysis of regional or bilateral trade agreements is an interesting research topic as it may lead concerning countries towards progress in different sectors of their economies. many countries are experiencing trade liberalization and had made several trade agreements. a large number of countries have preferential trade agreements. the purpose of these agreements is to lead direct and indirect trade http://www.publishing.globalcsrc.org/reads mailto:imran@bzu.edu.pk mailto:hahamad@gudgk.edu.pk mailto:hahamad@gudgk.edu.pk mailto:srehman@gudgk.edu.pk mailto:hahamad@gudgk.edu.pk https://doi.org/10.26710/reads.v3i1.164 review of economics and development studies vol. 3, no 1, june 2017 30 ability (oecd, 2006). pakistan has export relations with entire world particularly with asia. the present research aims at analyzing the cpec’s impact on pakistan’s potential fruit trade between south asian region and middle east countries through gravity approach. we have analyzed the cross section data of three years from 2013 to 2015. cpec is an important economic agreement between pakistan and china. it will function as a primary gateway for trade between china, africa and the middle east. it will associate china to the central asia, south asian region and middle east and its major deep-sea port. china and pakistan has developed a strong bilateral trade over the years. china is arising partner of pakistan in both export and import terms. bilateral trade between the two countries were established in january, 1963 and long term free trade agreement (fta) was singed on november 24, 2006 (ipcs, 2006). hypothetical formulation of the study is whether cpec will improve the pakistan’s competitive position in china and south asian countries for its fruit market or not. the purpose of pak china free trade agreement was to enhance trade liberalization and create pakistan’s sensitive product (fruits) market and increase its export in china and south asian countries. for this bilateral trade analysis gravity approach is the precise tool for estimation. a bulk of research paper has used gravity approach for bilateral trade, gravity equation or method can simply determine the trade patterns and the effect of sensitive product export (otsuki et al 2000). the idea behind to use gravity model was that it can widely use data of past decades, regional trade pattern separately and also have ability to incorporate the characteristics of different countries’ units (sandberg, 2004). in bilateral trades distance is an important indicator to stimulate trade between countries. theoretically, it is also an indication that small distance can lead increasing flow of trade (keith, head, 2008). pakistan and china started its friendly relationship after 1950s but the beginning of smooth relationship among these countries was started after 1960s, pak-india war and china-india war. at first, pakistan was reluctant to accept china due to differences between communist and capitalism blocs (chaudhri, 1987). relations further enhanced after the two countries signed a trade agreement in 1953 (dixit, 1987). as the further time passed, china realized the importance of its neighbor country’s demographic and economic value. hence, trade liberalization agreement in the form of gawader port was signed in 2006 at a cost of $ us 46 billion. there is one belt, one road initiative. the importance of cpec to china is reflected by its inclusion as part of china's 13th five-year development plan. this project will increase country’s annual economic growth from 2 to 2.5 percent. all the planned projects will eventually link the gwader, a city of pakistan situated in southwestern area to china's northwestern autonomous region of xinjiang via a vast network of highways and railways (united nations economic and social commission for asia and the pacific, 2006). there are there major trade routes, central, southern and northern which connect china to other countries. pakistan is the vital partner of china because it links china with central, south asian region, and middle east (pakistan vision vol, 16). the economic part of cpec is to integrate the regional through, bilateral trade, free trade agreements, and increase trade flow between referring countries, infrastructure development, business opportunities, efficient transport routes, expanding regional trade and raising per capita income. in short cpec is a game changer or the name of economic stability for concerning units. as far as bilateral trade in agriculture sector have slow pace. pakistan is agrarian country and horticulture is an important sector of agriculture. the sustainable development program of pakistan foresees to pursue the progressive liberalization of trade in agriculture. however, selected time will be chosen for selected aim systemically and ways will be adopted gradually to achieve agrarian goals (government of pakistan, 2006). consequently, the cpec route will have preferred challenges on agrarian trade. review of economics and development studies vol. 3, no 1, june 2017 31 review of economics and development studies vol. 3, no 1, june 2017 32 2. trade between pakistan and cpec concerning countries cpec basic agenda is to promote trade liberalization through these routes. china pakistan economic corridor tends to be product specialization in bilateral trade. in fact pakistan is the major partner of this corridor so it is a region which has direct impact. in case of fruit trade or especially on export side, the regions like far east, middle east and central asian states of former soviet union are the major markets of pakistani fruits. even though a great scope is always there for export to more developed countries like japan, canada and europe. fruits are more risky to produce than other crops. the variability in yield of fruits is 2-3 times more than that in rice yield (ranaweera and de silva 2000). however, in case of perishable goods such as fruits and vegetables, regional trade appears to be quite more sensitive. pakistan produces high quality oranges and mangoes exports to usa, uk and china. pakistan is the 4th largest mangos and 11 th largest orange producer i.e. chounsa, malta and kenoes are product of pakistan. pakistan is 2nd largest exporter of rice to china and also gains sizeable share in the halal food market in china. pakistan china imports of agriculture product increased worth $430 million and pakistan exports of food such as fruits along with vegetable increased worth $320 million in 2013-14 (govt. of pakistan 2014). pakistan’s exports are estimated at about 69.2 billion rupees, which has roughly about 8 percent of agricultural value added in the year. pakistan earned 5.4 billion rupees from fruit exports during 2014-2015, representing nearly 11 percent of total amount earned from the export of all raw agricultural commodities. figure 1: sourcestate bank of pakistan. during the year 2010-15, pakistan exported 262 thousand metric tons of fruit valued at rs. 5.394 billion. the citrus, mangoes, dates, and grapes accounted for 30 percent, 23 percent, 22 percent and 01 percent respectively in terms of foreign exchange earnings (pakistan economic survey). in figure 1 describe the pakistan’s exports and imports in period 2013 -2015, which shows a slightly increasing trend in export. on the other hand import ratio has sharp increase as compared to export. it means that there is absence of attention in export sector. 0 5,000 10,000 15,000 2014-15 2013-14 exports 6,015 6,695 imports 12,519 11,177 u s $ m il li o n pakistan trade period review of economics and development studies vol. 3, no 1, june 2017 33 pakistan export is based on different subdivision of economy. the food and agro sector has the second dominating rate in total export of pakistan as shown in table 1. figure 2: region wise pakistan export share although yearly average change has low-slung respectively. but increasing trend in these sectors indicates that there are inordinate potential to enhance export. table 1: division or sector wise export rate of pakistan during 2013-2015 source: direction of trade statistics and economic survey of pakistan, 2015. pakistan’s export expands to all over the world but asia is the major export region for pakistan. as shown asia $ 1,649 million (42%) europe $ 1,294 million (31%) americas $ 802 millioin (20%) africa 218 million (6 %)) oceania & other, $ 49 million (1%) region wise pakistan export share july-sep 2014-15 total export us$ 6,178 million asia europe americas africa oceania & other review of economics and development studies vol. 3, no 1, june 2017 34 in figure 2, pakistan bilateral trade in export side linked with asia, europe, america and africa is 42 percent, 31 percent, 20 percent and 6 percent respectively. the figure 2 shows that asia is the major region for pakistan’s exports. table 3: pakistan exports share in asian countries. source: state bank of pakistan 2015. according to the state bank of pakistan (2015), asia is major export shareholder of pakistan, central and southern countries also have leading exports value. within pakistan’s agriculture, the horticulture is an important sector, production of fruits is 6.2 metric tons, production of vegetables 5.0 metric tons, production of citrus is 2.0 metric tons, mangoes’ production is 1.0 metric tons, dates’ produce is 0.63 metric tons and apples 0.4 metric tons. total values of exports of fruits and vegetables is $ us 120435000 and quantity is 471693 tons and 70 percent of pakistan’s fruits export is toward middle east and central asia (ministry of food, 2015). history shows that pakistan has a number of international trade agreements in order to boost up worldwide trade. table 3 shows the impact of free trade agreements on pakistan trade. we find that after the starting of free trade agreements with concerning countries pakistan’s export as well as trade balance has a snowballing reaction. review of economics and development studies vol. 3, no 1, june 2017 35 table 3: overview of pakistan’s free trade agreements country year implemented pakistan's exports in year of implementation pakistan's trade balance in year of implementation pakistan's exports in 2014 pakistan's trade balance in 2014 sri lanka 2005 $0.154b $0.094b $0.301b $0.217b china 2006 $0.507b $(2.408)b $2.253b $(7.336)b malaysia 2008 $0.138b $(1.556)b $0.234b $(1.046)b indonesia 2013 $0.144b $(1.064)b $0.138b $(1.969)b mauritius 2007 $0.036b $0.035b $0.028b $0.006b source: world bank of pakistan. 3. data and methodology basically gravity model of international trade, forecasts the bilateral trade. the bilateral trade is based on economic size and distance between two selected areas or units. the economic size is normally captured with gdp measures. in international trade the derivation of gravity model analysis is normally the attribute of tinbergen (1962) and pöyhönen (1963). on the other hand, the gravity model of migration in urban geography is specifically used to predict the degree of interaction between two places (rodrigue et al., 2009). such model has also been applied to other bilateral data as migration, traffic, remittances and foreign direct investment. it can also be used to test the effectiveness of trade agreements, organizations and to evaluate the impact of treaties and alliances on trade (head and mayer. 2014). the basic impression derived from this model is bilateral trade from one country to another. in this model the dependent variable is based on factors that capture the propensity of a country to import , potential of a country’s export (good and services) and also any other forces that either appeal or hinder bilateral trade. the following equation arrangement is going to express the gravity equation of international trade as; lnxijt= β0+ β1 ln (dij) + β2 ln(yit) +β3 ln(yjt) + β4 ln(yit/nit) + β5 ln(yjt/njt) + β6 ln(qit/nit) + β7 ln(qjt/njt) + γ w + uijt……………………( model developed by authors) where, xij: is the bilateral exports from country i to country j in period t. yit: is the gdp of the exporter (country i) in time t. yit/nit: is the gdp per capita of the exporter in time t yjt: is the gdp of the importer (country j) in time t. yjt/njt: is the gdp per capita of the importer in time t qit/nit: is the production per capita of the exporter in time t qjt/njt: is the production per capita of the importer in time t dij: is the bilateral distance between the two capital´s countries w: is a vector of variables capturing any resistance to trade or binary variables to control the participation in any trade agreement. uij: normally distributed error component capturing any random influence according to the model formulation, the gravity model shows relationship between two countries and movements in trade depend on several economic indicators and geographical indicators. in practical or applied form of work, the model can be extended by including some variables for justification for language relationships, tariffs, contiguity, access to sea, colonial history, and exchange rate regimes (anderson and van wincoop, 2003). for our model specification, some essential variables that encounter the required study units are included. so we are going to include production per capita as a core variable. our concern of study focuses on fruit, vegetable and citric market (horticulture trade). it is evident that traditional gravity variables (as discus above) shows statistically significant results on agricultural or horticultural trade. it is also evident that https://en.wikipedia.org/wiki/data_migration https://en.wikipedia.org/wiki/remittances https://en.wikipedia.org/wiki/foreign_direct_investment review of economics and development studies vol. 3, no 1, june 2017 36 gravity model has clear influencing impact because of associated trade agreements (baier and bergstrand, 2009). 4. theoretical frame work including variables, gdp for both exporting and importing country, gdp per capita and distance have some theoretical justifications. according to that, theoretically the effect of the distance between countries (β1) must be negative and statistically significant. the distance between the countries has great impact on trade because the countries that are closely situated will focus on more trade to each other. the coefficient of countries gdp (β2 and β3) on agriculture trade will have the statistically significant impact. mostly poor countries have the specialization on agriculture export that leads to negative sign of β4. it is also in advance that rich countries do more exports rather than poor countries because of infrastructural facilities, technical dimension and development. all this shows that the value of coefficient estimate for gdp per capita of the exporters (β4) may have negatively or positively sign depending on whether the country exports less when it is relatively rich (absorption effect) or whether a richer country may exports more than a poorer country by taking advantage of developed tools (technical, infrastructure etc.). similar reasons will approach the ambiguous signs for the coefficients of gdp per capita for the importers (β5). above justification can be particularly imposed on agricultural trade or fruits and vegetable trade. so in the simple technique we are introducing the production per capita of fruits and vegetables for the exporting and the importing countries (β6 and β7). thus expected values of per capita production show that there will be positive sign for fruit and vegetable exporter country and negative sign for importer country (martinez-zarzoso and nowak, 2003). some notes of caution must be needed when specific sectors are selected such as fruit and vegetable market, representation of gravity model and bilateral agreements. it is the beauty of gravity model that it can capture the effects of trade barriers like tariff and non-tariff. the coefficient of the binary variables and size of the trade can be reviewed to the implementation of (fta) free trade agreements it also provide statistical significance test for trade preferences on bilateral fruit and vegetable (horticulture) trade between the two countries (nilsson,2002). a bulk of research material illustrates the above theoretically specification of coefficients estimate that can be stimulations for export and import preferences. in our study we are going to elaborate the effect and influence through the variable of associated agreements, plans and organization on fruit and vegetable (citric market) trade. above mention framework was constructed to elaborate bilateral trade flows between the two countries (pakistan and china because of cpec). the trade preference flows between these countries are justified with variables that explain the potential demand of importing country (aisa, middle east) and potential supply from exporting country (pakistan). the following gravity approach model has ability to evaluate the separate trade effect on separate products (fruit) and different level of production with associated agreements (free trade agreement). our selected model referred to south and far east asia countries (china, uae, saudi arabia, singapore) as the importer country and pakistan as fruit exporter country. the bilateral trade data is obtained from state bank of pakistan in $ us million. here share of fruit export trade is separately explained as a special concern. distance between these exporter and importer countries is in kilometers (it is evident that distance will be directly impacted and minimized because of cpec).taking into account the consumption and production across the exporting and importing countries will be spared. production variables are obtained from review of economics and development studies vol. 3, no 1, june 2017 37 agricultural statistics of pakistan 2013-2015. gdp and gdp per capita data is computed from world bank data table. few dummy variables are included in our gravity model that will represent bilateral trade more precisely. these dummies are follows, table 4: ols estimated coefficient for fresh fruits finally, our gravity model has a number of dummy variables that represents: chiexp: is equal to 1 if china and afghanistan is import country, and 0 otherwise. uaeexp: is equal to 1 if uae and saudi arabia is importer country and 0 otherwise. sinexp: is equal to 1 if singapore is import country, and 0 otherwise. pakflw: is equal to 1 for flows originating at this country and 0 otherwise. cpec: is equal to 1 if importer countries are associated with “cpec” and 0 otherwise. 4. results and discussion the estimated results of gravity model are presented in table 4 (fruit export, ols result). coefficient values in the results are based on the period from 2013-2015. dummy variables are based on expected control group of importer countries, exporter trade inflow and cpec agreement. r 2 value of estimated model is good that tends to be good fit approach of explanatory variables. explanation of estimated parameters signs and values of table 4 is given below. as mentioned above in the control group is defined by cpec related asia countries, so the gravity model should capture the trade disadvantages of not being part of cpec trade flow. theoretical justification, elasticity of gdp for both exporter and importer countries are positive but parameter value of exporter is slightly greater then importer, it means trade flow is positively associated variables 2013 2014 2015 distance -1.55*** -1.83 *** -1.82*** gdp importing countries 1.06** 0.97*** 1.04*** gdp exporting countries 1.39*** 1.33** 1.15*** ib/pop import -0.46 -1.00* -0.94* pib/pop export -1.20* -1.09* -1.00 production per capita export 1.31*** 1.71** 1.41** production per capita import -0.19 -0.47* -0.35* chiexp -5.22** -5.99** -3.22** uaeexp -3.22** -2.79*** -2.63** sinexp -4.82*** 4.67*** 4.32*** pakflw -1.45*** -0.64** -0.72** cpec 2.54** 2.86*** 2.73*** r 2 0.67 0.71 0.72 note: ***, **, * denote 1%, 5% and 10% significance level review of economics and development studies vol. 3, no 1, june 2017 38 with exporting infrastructural variables. coefficients of gdp per capita are showing the non-significant negative result. in theoretical point of view, pakistan is a poor agrarian country and there is lack of interest in agricultural advancement in the sense of specialization and importer countries tends to show modernity in diet patterns. production per capita has negative parameter for importers and positive for exporter. its leads the positive production flow for that product. the negative sign of importer shows that there is less attention of domestic production as compared to the other variables that affect the demand of fruits. parameter of distance has negative sign but significant value. negative sign make a sense that unpreserved goods like fruits are related with transportation cost. as distance will be reduced through technological changes and trade agreements (cpec) it will have more significant value in trade flow. in our model including dummies are explaining importer countries group (control group), exporter trade flow (pakistan) and countries associated with china pak economic corridor. a significant result is computed in case of asia importing countries (control group) but parameter’s different expressions are for trade patterns, cultural values and taste habits. the coefficient of the dummy variable of cpec associated countries shows the positive sign. it means that any country that is connected with this corridor will lead to great potential of trade flow. it can also be justified with perishable goods trade because of lesser distance between exporter and importer. cpec has contributed to increase the horticulture export to the asia as well as other related or linked countries. results suggest that cpec will integrate the asian countries with all over the world and become the gate way for regional trade flow. 5. conclusions and policy suggestions this study is based on horticulture trade (particularly fruits) between pakistan and asian countries, with focus on possible influence of cpec on bilateral trade. we find that fruits are perishable goods and have sensitive approach toward integration of pakistan and asia countries. pakistan’s export of fruits have great significant. on the other hand, gravity approach indicates that in the presence of infrastructural instrument like cpec the regional trade flow can be enhanced. the empirical analysis carried out through the use of a gravity approach suggests that horticultural trade flows are well explained by the distance, the size of the economies, and the production per capita of the involved countries. these results are quite as expected from economic theory. it is also evident that distance plays a vital role to stimulate trade. results suggest that export with nearer regions has significant impact on gdp production and per capita rate. results shows that cpec will reduce the distance and it will be more beneficial for perishable goods trade like fruits. with the help of gravity approach present study concluded that cpec has great effect on pakistan’s fruit exports. references abid, m., & ashfaq, a. (2015). cpec: challenges and opportunities for pakistan. journal of pakistan vision, 16(2), 142-169. anderson, j. e., & van wincoop, e. (2003). gravity with gravitas: a solution to the border puzzle. the american economic review, 93(1), 170-192. baier, s. l., & bergstrand, j. h. (2007). do free trade agreements actually increase members' international trade?. journal of international economics, 71(1), 72-95. chaudhri, m. a. (1986). strategic and military dimensions in pakistan-china relations. pakistan horizon, 39(4), 15-28. dixit, a. (1987). sino-paki relations and their implications for india. strategic analysis, 11(9), 10671080. garcia-alvarez-coque, j. m., & martí-selva, m. l. (2006). a gravity approach to assess the effects of association agreements on euromediterranean trade of fruits and vegetables. indicators, o. e. c. d. (2007). education at a glance 2007. table b1. 1b, www. oecd. review of economics and development studies vol. 3, no 1, june 2017 39 org/dataoecd/36/4/40701218. pdf, 187. kayani, f., ahmed, m., shah, t. a., & kayani, u. n. (2013). china-pakistan economic relations: lessons for pakistan. martínez-zarzoso, i., & nowak-lehmann, f. (2003). augmented gravity model: an empirical application to mercosur-european union trade flows. journal of applied economics, 6(2), 291-316. nilsson, l., & matsson, n. (2009). truths and myths about the openness of eu trade policy and the use of eu trade preferences. brussels, european commission directorate general for trade working paper–2009. tinbergen, j. (1962). shaping the world economy the twentieth century fund. new york. zhao, w., van antwerp, s., lim, j., & chow, n. united nations economic and social commission for asia and the pacific. review of economics and development studies, vol. 6 (4) 2020 881 891 881 analysis of factors influencing household human capital investment behavior in conflict zones: a case study of district swat amjad amin, danish alam, nadeem iqbal a assistant professor at the department of economics university of peshawar, pakistan email: amjadamin@uop.edu.pk b lecturer at the department of economics university of peshawar, pakistan email: danish_alam@uop.edu.pk c assistant professor at the department of economics university of peshawar, pakistan email: bnadeemiqbal@uop.edu.pk article details abstract history: accepted 18 dec 2020 available online 31 dec 2020 development of human capital, as part of public policy is critical for sustainable socio-economic development of a country. this study analyzed the factors that influenced the household behavior of spending on human resources in terrorism affected region of district swat. the uniqueness of the current study is to study human capital behavior in the study area. the econometric technique (ols) was applied to analyze the data. the study found that there are direct and indirect relationship exists among the targeted variables. it was found that health and education status is negatively affected by the incidence of terrorism. the education system drastically affected and the enrolment rate at the primary, secondary and post-secondary levels have exceptionally declined because of the aftermath of terrorism episode between 2002 and 2016. health, education facilities and infrastructure are deteriorating posing a threat to long term development. the effective policies of the government (investment in human capital) and eradicating terrorism (military actions) is a demanding subject of matter for the sake of development in the area. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: human capital, investment, conflict zones, terrorism, swat jel classification: e24, d92 doi: 10.47067/reads.v6i4.287 corresponding author’s email address: amjadamin@uop.edu.pk 1. introduction physical resource are the major components of human resources, to making use of natural resources, construct socioeconomic organizations and make strengthen the economic growth and development of nation (roomer, 1998.) numerous quantitative researches have been undertaken in western countries on economic development, the studies evidenced that the development in the west did not come from the physical resources but it happened due to the provision of human resources. (lucas, 1976; schultz, 1961). in developed countries the growth is a dynamic source of human capital. review of economics and development studies, vol. 6 (4) 2020 881 891 882 qaiser, (2000) divides human capital investment into public investment and household investment in health and education related activities. in pakistan some of the researchers focused on quantitative based research on the same theme, specifically khyber pakhtunkhwa has badly influenced due to the terrorist attack. studies (like lucas 1976, and schultz 1961) went through quantitative based research and tried to examine the bivariate association between spending on human resources and household income. terrorism has severely affected the educational environment of khyber pakhtunkhwa (kp) province of pakistan. pakistan is a developing country, where kp suffered a lot due to terrorism (khan, 2019). human capital in education and health brings structural change in the economy. this structural change in the economy brings economic development in coming years. terrorists have targeted the schools and hospitals to affect the path of social development and hence economic development and to reduce the poverty. phelps & nelson (1966) explored that the advancement of a country based to investing on human capital and developed technology, which merely happened when a country has its own human capital stock. siddiqui et al (1995) examined the key factors which have influential effect on health related goods and services and found that the development is directly affected by to spending on education and health. qaisar, a (2000) did a comparative study on behavioral tendency toward investment of human capital, the two countries pakistan and india. mimoun, b. et al (2008) studied about the limited human capital stock and employed the optimal control principle. the study revealed that the short-run and long-run growth of a country will groom up along with increase in higher education. yamauchi, et al (2009) focused the impact of natural disaster on human capital stock for the countries bangladesh, ethiopian and malawi and used panel data. yang, c. h. et al (2010) applied panel data for the period of 2005-2007 and the study examined the various firms and it also explored the production capacity of the china’s electronic industry by research & and development (r&d) and human resources. the growth and development of an economy significantly depends upon the quality of its human capital -the knowledge and skills -of their workers (neilson, 2020). the objective the research is to gather empirical evidence on the determinants of human resources investment decision made by the households, based on their respective religious status, in the terrorism affected areas. the study comprises different socio-economic factors, such as family’s religious status and society. to investigate the human behavior to spending on human resources in swat district, which is affected by the terrorists, a particular framework is followed. a key implication of my research is the importance of it being a base research that could provide an insight to future researchers interested to work in this area. 2. research method to achieve for the sat objective the methodology is followed as; 2.1 sampling and data collection in this study, three union councils have been taken in swat district. the names of the union council are kaanju, nawaan kalay and charbagh cham. the selected union councils were severely affected by the terrorist attack and so these three have taken as sample for the study. from each of the union councils 50 sample have been taken and total sample taken as 150. the systematic approach is employed form the sampling technique (roomer, 1986; qaiser, 2000). secondary data is collected from district health and education departments of swat for the period 2005 to 2014. the justification of selecting this period is that terrorism was at peak level in this time period in the region. review of economics and development studies, vol. 6 (4) 2020 881 891 883 2.2 analytical technique 2.2.1 determinants of household human capital investment behaviour the multivariate regression method has been employed in the research. like (behrman and schneder, 1993; siddique, 1995 have analyzed the household behavior concerning to spending on human development and used the same technique. this study has applied some different variables based on the structure and social values of the area (family structure, and religion). behrman and schneider (1993) have done a deep-seated analysis and took the quality of good and services, household income, price, education background and return for human investment. the same technique has been used by the researcher as we used here and the allocated country is pakistan. siddiqui (1995) have analyzed the socioeconomic variables like income, education and urbanization. 3. theoretical model fig 1: theoretical model thus the model is constructed mathematically as; ---------------------------------(1) household education quality of goods availability of goods price of goods family structure rate of return religiosity household human capital investment behaviour househo ld income terrorism review of economics and development studies, vol. 6 (4) 2020 881 891 884 where, hci= investment on human capital by household, the total gross expenditure of household is used as proxy variable for hci. y= the income of the family. dfb =dummy variable for the education level of the family. it will give the values { p= used as human capital investment’s prices of goods and services. dq= used as dummy variable for quality. it has given value { drr =dummy used for return on investment. it has values as { dea= as a dummy variable showing goods and services are available. holding the values { r= the religion and society. the value holding 1 if family follow the religion and social values. fs= status of family. if the family structure is nuclear the weightage is given 1, if jointly reside then weightage is 0. dfc= used as dummy variable for family structure. the value 1 is given for the joint family structure and 0 for otherwise. dt = dummy used incidence of terrorism. if value is 1 means conflict and if 0 means no conflict dt = dummy used for religion. the value 1 means highly religious and 0 not 4. results and discussion the pre and post terrorism is explained in the following figure and it indicates the health and education status of the affected region. fig. 1 (source: health&education department, swat) (on x-axis is year from 2005 to 2014 and on y-axis is enrollment rates in thousand) 0 50 100 150 200 250 300 350 400 1 2 3 4 5 6 7 8 9 enrollment rates primary enrollment rates secondary enrollment rates higher enrollment rates madrassah review of economics and development studies, vol. 6 (4) 2020 881 891 885 due to the continual terrorist attack the enrollment rates (primary, secondary and higher) have decreased as the figure portrayed. the inhabitants of the study area are chronically religious loving people. the tendency of enrollment moved towards madrassas instead of government schools and colleges. the religious preachers played leading role in this movement. as the diagram confirmed that the strength of the movement of enrollment rates towards madrassas tends to rise during the period. 4.1 government spending on health & education services in swat fig. 2 (source: health&education department, swat) (on x-axis is year from 2005 to 2014 and on y-axis is enrollment rates in million) the government‘s institutions (schools, colleges and hospitals) badly wrecked due to the terrorist attack and to rehabilitation of the infrastructure the government spent a major part of budget. due to damages and destruction of the educational building by the terror the government has to re-build the schools and colleges and it increased the spending of the government. 4.2 family size and dependency ratio the household size is the number of family members to reside in a home. the information about the household size and dependency ratio is given in table 1. table 1: family size & dependency-ratio u.c n average family size overall family size average dependencyratio overall %age swat uc-kaanju 50 5.5 5.4 0.74 0.76 uc-charbagh cham 50 5.3 0.76 uc-nawaan kalay 50 5.4 0.78 survey results: 2010 the average household size is 5.4 as shown in table 1. this value is the average household size of all three selected district. it explained that in the study area the families are like to live jointly and more than 6 people 0 50 100 150 200 250 300 350 1 2 3 4 5 6 7 8 9 public expenditure health expenditure public expenditure education expenditure review of economics and development studies, vol. 6 (4) 2020 881 891 886 reside in a household. the results indicate that the average household size for kaanju is 5.5, charbagh 5.3 and for nawaan kalay is 5.4. the study concluded that it’s difficult to enroll all of the children in schools due to the larger family size. the variable dependency ration has a significant role in the study and it reflects the mind of household’s behavior while to spending on education and health. in the last few years the importance of the dependency ration has been followed very keenly. the household size defines as; less than age 15 + above 64 years divides by aged 15-64 years. the average dependency ratio is given as respectively 0.74 in kaanju, 0.76 in charbagh cham and 0.78 in nawaan kalay. this is may be a reason very few of the children getting access to schools in study area. 4.3 educational profile of the respondents according to the census of 1998 the literacy rate in swat is 41.79%. the male are comparatively highly literate than female, male literacy rate is 55.97% and female is 25.5%. the profile of education of the respondent is elaborated in below table: table 2 education status of the respondents education uc-kaanju (%) uc-charbagh cham (%) ucnawaan kalay (%) illiterate 8 16 9 18 15 30 primary 12 24 9 18 14 28 ssc 25 50 25 50 13 26 hssc 4 8 5 10 4 8 graduate 0 0 2 8 2 4 master 1 2 0 0 2 4 total 50 100 50 100 50 100 the above table revealing the respondents they have different level of qualifications. according to the result 24 out of the total have high school degrees and this fall in the percentage of 50%. in charbagh cham majority have qualified matriculation but in nawaan kalay most of the respondents even did not attend the school and are illiterate. 4.4 consumption patterns of the respondent the consumption patterns shows the overall spending of household on consumption goods, such as; clothing, food, rent and transportation etc. the following table reveals the consumption behavior of the respondents on various items in the study area. table 3: expenditure items (as % of income) area uc-kaanju uc-charbagh cham uc-nawaan kalay overall (%) foods 55 52 49 49 education 9 9 6 7.56 health 5 7 13 8 accomudation 0 3 0 0.76 repair&maintenance 3 1 3 2.56 utility charges 8 11 10 12 cloth & foot wear 17 9 12 11.66 transportation 7 10 7 8.23 total 100 100 100 100 the results in table 3 indicate that in union council kaanju the majority of the respondents spent a large review of economics and development studies, vol. 6 (4) 2020 881 891 887 part of their income on education, health and food which is 64%. in the remaining two union councils the respondent also spent a major part of income on education, health and food, which is 61% and same for the two union councils. the remaining part of income spent on some other necessary items such as clothing, footwear, transportation and utility bills. 4.5 type of school systems for the children in the sampled areas in the region there are two types of educational institutions, especially our interest is school. the government schools and private schools. the fee structure in government schools is affordable but the education provided by the government schools is not have quality. in other hand the private school they take high fees and facilitate the student efficiently. the following table indicates the type of the schools systems and children in all the sample areas are attending the schools. table 4: type of the schools and enrollment is the sample area education uckaanju %age uc-charbagh cham %age ucnawaan kalay %age public school 36 69 40 80 36 72 private school 14 31 10 20 14 28 total 50 100.0 50 100 50 100 the results revealed the majority of the respondents (69%) preferred to send their children to government schools. it can be a reason that the low income level of the household compelled them to send their children to the government school. the table also reveals that only 31% student access to the private schools, the tendency of enrollment towards private school is comparatively low, it is due different of reasons, e.g. the private schools charge high fee and it may have security risk. 4.6 satisfaction with government actions its regularly known from the respondents regarding the government policies whether they were satisfied from the policy measures. the objectivity of the question is to knowing about the opinion of respondent’s on policy measures of the government. the opinions of the respondents are taken, whether they are satisfied from the government necessary measures or not. in the following table the comments of the respondents are shown. table 5: satisfaction from government actions in education & health education uc-kaanju %age uc-charbagh cham %age uc-nawaan kalay %age no 42 84 40 80 44 88 yes 8 16 10 20 6 12 total 50 100 50 100 50 100 the above table expresses the government steps for betterment of education and health system. the results conclude that in kaanju district 80% respondents opinioned that they do not satisfy from the government’s measures. the majority of the respondents are also not satisfied by the government’s dealing of the two remaining district charbagh cham and nawaan kalay, respectively 84% and 80% not satisfied. especially the rural areas in selected district the people are using the government’s goods and getting education from the government’s schools and access to government hospital, the respondents think that the provision of all that commodities and goods do not have qualities to satisfy. review of economics and development studies, vol. 6 (4) 2020 881 891 888 4.7 expected returns from human capital investment in the following table 6.14 shows the household behavior and response regarding the expected return spending on human capital. table 6 expected returns from human capital investment education uckaanju %age uc-charbagh cham %age ucnawaan kalay %age highly dissatisfied 5 10 3 6 2 4 dis-satisfied 1 2 12 24 2 4 neither satisfied nor dis-satisfied 5 10 4 8 4 8 satisfied 14 28 17 34 20 40 highly-satisfied 25 50 14 28 22 44 total 50 100 50 100 50 100 table 6.14 indicates the in kaanju district large sizes of the respondents (80%) love to spend more on education and health and expecting greater return in future. accordingly the expectations of the respondents, when the children will be academically trained and mentally healthy they inducted in high position and earn more. 4.8 prices of goods and services the following table indicates the price of goods and services of the respondents they responded during the survey. table 7 prices of goods and services related to investment in human capital education uckaanju %age uc-charbagh cham %age ucnawaan kalay %age highly dissatisfied 11 22 12 24 10 20 dis-satisfied 22 44 20 40 23 46 neither satisfied nor dis-satisfied 7 14 8 16 8 16 satisfied 9 18 6 12 7 14 highlysatisfied 1 2 4 8 2 4 total 50 100 50 100 50 100 this table reveals the prices of those goods and services relating to spending on human capital including education and health in the sleeted district, district kaanju, charbagh cham and nawaan kalay and the respondents exceptionally gave positive responses respectively 63%, 64% and 66%. accordingly the results in above table the people move their children towards private schools and hospital in spite of charging high fees. as already discussed, majority of the sampled households cannot afford to educate their kids in standard education and health institutions due to high fees, which they are unable to pay. review of economics and development studies, vol. 6 (4) 2020 881 891 889 in the following table the regression’s results are given and it has employed each of the area separately. the variation in household behavior relating to spending on human resources is observed while to undertake some of the important variables. the results of the estimated model are given as follows; table 8: results of the factors affecting hci variables kaanju charbagh cham nawan kaly overall const 0.712 0.954 -5.620 4.670 family-income 0.286 (3.323) * 0.518 (7.319) * 0.329 (3.117) * 0.654 (7.491) ** family-education 0.922 (7.844) ** 0.611 (2.776) * 0.563 (8.862) * 0.380 (5.330) * price of goods&services -0.582 (-3.219) * -0.612 (-14.320) * -0.486 (-8.431) * -0.589 (-12.138) *** quality of goods&services 0.023 (3.714) * -0.670 (-1.651) 0.072 (4.973) * 0.350 (1.236) availability of goods&services 1.169 (2.496) * 0.340 (7.858) * 0.344 (2.831) * 0.458 (6.463) * expected return 0.017 (1.019) 0.547 (7.846) * 0.360 (1.340) 0.048 (1.049) religion -0.470 (-4.402) * -0.113 (-2.526) ** -0.012 (-0.743) -0.233 (-6.240) * family-structure 0.157 (2.145) ** 0.020 (0.842) 0.169 (2.810) *** 0.231 (2.833) ** dt -0.067 (-2.31) ** -0.117 (-2.92) ** -0.122 (-2.783) *** -0.603 (-5.264) * dfs 0.134 (1.31) 0.056 (1.92) *** 0.041 (0.783) 0.603 (2.264) ** dr -0.431 (-4.13) * -0.237 (-2.34) ** -0.412 (-1.983) *** -0.448 (-4.210) * r 2 0.986 0.968 0.993 0.973 f 521.358 524.522 661.334 429.630 d.w 2.1 1.9 1.9 2.2 * significance at 1% ** significance at 5% *** significance at 10% t-values in parenthesis the regression result in above table revealed for each of the union council in the study area. the association between household income and household expenditure on health and education is positive and significant. the study further shows that the relationship between family education and household behavior is positive. it is justified as; the educated families take more sophisticated measures for the education and health of their children. it also revealed that the price of goods concerning education and health inversely effect the spending on human resources in all the union council of the behavior of household. the expenditure on household behavior is inversely affected by the quality of goods and services in union council charbagh. similarly the spending on household behavior negatively influence by those goods and services which are easily available and the result is statistically significant. the results concluded that the expected return on spending on human capital has direct and significant review of economics and development studies, vol. 6 (4) 2020 881 891 890 effect on the investment’s behavior in charbagh cham union council and the remaining two districts the impact has also positive but statistically insignificant. the study resulted in all selected district the religious status impact on the human capital investment behavior. it justified as the inhabitants are religious loving people and they do not spend more of their income on education and health. the capital investment effected by family structure directly and it shows significant impact only charbagh cham union council. the results explore that the joint and nuclear families both spend not a major part of their income on education and health. the terrorism has used as dummy variable in the model and it has inverse effect on investment behavior. in the study area due fear of terrorist attack the people do not willing to invest on education and health and all the education institution were badly suffer. the study concluded that the terrorism severely discouraged the human capital development. the table below uses vif to check multicollinearity table 9: collinearity diagnostics model collinearity statistics tolerance vif 1 (constant) income .951 1.051 family background .905 1.105 prices goods&services .892 1.121 quality of goods&services .911 1.098 availability of goods&services .842 1.187 expected returns .978 1.023 religion .624 1.603 family structure .683 1.464 dt .937 1.067 the table shows that vif values are less than 5, so there is no problem of multicollinearity. 5. conclusions human development investment is playing a leading role to development of any society. most of the countries preferably spend on human resources for economic growth. the study has undertaken investment behavior of households to exploit the human resources development. the results found that the education level, health facilities, family structure, availability, quality and expected return have positive association with behavior of household spending. the study also found indirect relationship between religious status, terrorism and human capital spending. the study made some recommendations that the government should take necessary measures towards education, health and food nutrition. the effected policies should be enacted that provide awareness relating health and education. it is also suggested that basic free health and education facilitations should be provided. finally it is recommended that the top priority of the government should be to spend the major part of national income for human resource development. references abbas, q. 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(2010), r&d, human capital investment and productivity: firm-level evidence from china's electronics industry. china & world economy, 18: 72–89. review of economics and development studies, vol. 7 (1) 2021, 119-129 119 an experiment to investigate the impacts of ict-based-games on students’ interest and academic achievement mubashrah jamil a , shaziah jamil b , allay hayder urooj c , lubna rasheed d a assistant professor, department of education, bzu, multan, pakistan email: mubashrahjamil@bzu.edu.pk b assistant professor, department of education, the women university, multan, pakistan c broadcasting manger, director of outreach, university of agriculture, faisalabad, pakistan d research scholar, department of education, bzu, multan, pakistan article details abstract history: accepted 12 march 2021 available online march 2021 “mathematics is the mother of all sciences” is common phrase that we all know very well. even it is the least interesting subject among the students. teaching method is a common but known factor which makes this subject least interesting. therefore, an experiment was conducted to explore whether game-based teaching can change students’ interest and improves achievement? for this, 108 female students and 10 elementary mathematics teachers participated in this study. researchers used one group pre-test/post-test research method to measure the impacts of ict-based-games on students’ achievement and interest in the subject of mathematics. an achievement test and an interest inventory was used as tools of this study. teaching mathematics through ict-based-games and participants’ prior knowledge of playing online games were the independent variables. while participants’ interest and achievement in the subject were the dependent variables. it was concluded at the end that teaching mathematics with the help of games has no significant impact on students’ interest in the subject of mathematics but their achievement scores were improved at the end. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: game-based learning, mathematics, interest, achievement, attitude jel classification: c70, b16, c65, c69 doi: 10.47067/reads.v7i1.326 corresponding author’s email address: mubashrahjamil@bzu.edu.pk 1. introduction students are encouraged to learn through doing by-self and being involved in playing games (musselman, 2014). games motivate the learner to achieve a target in a challenging but in an interesting mode. in educational institutes games are used as an aid to involve learners actively by means of learning by doing, constructing knowledge actively participating in the classrooms and thus resulting in deeper and more persistent knowledge and engagement in the learning. game – based – learning started in late 20 th century and is now rapidly making its position in the field of education (setiadi, 2018). traditional teaching methods has been changed due to the incorporation of games in teaching-learning environment. games effectively enhance learning motivation, active participation and review of economics and development studies, vol. 7 (1) 2021, 119-129 120 concentration among students (liu and chen, 2013). chen, nurkhamid, wang, yang and chao (2014) recommended that ‘a learning environment must be designed to support physically active learning that comprises body movement’. games are effective teaching aids for students of all ages because they are highly motivating and enable the teachers to communicate difficult concepts efficiently and interestingly of many subjects including the mathematics. tokac, novak and thompson (2019) added in the same direction as: “learning mathematics presents various challenges for many children due to the difficult and often tedious nature of the subject. educational video games have the potential to address these challenges and positively impact mathematics learning and attitude”. technology has made it possible to play games through any source or medium i.e., either through desktop computers or on any mobile device (kebritchi, 2008). online game or video game is a mental contest played with a computer according to certain rules for amusement, recreation, or winning a stake (noemi & maximo, 2014). same as, setadi (2018) added as digital game-based learning integrate learning process into digital games itself’. games designed specifically for the purpose of educating children can motivate self-learning and problem-solving skills (dadheech, n.d.). dadheec further expressed that a well-designed educational game should combine the learning objectives which is a difficult task practically. increased motivation, controlled competitiveness, strategy simulator, less stress, improve memorization and class cooperation, attentiveness, friendly and funny source of learning, and source of critical learning skills are the key features of game-based learning (victoria, 2017). mathematics is mother of all sciences. mathematics facilitate individuals to understand the world and enhance social interactions skills. it also supports individual to analyse world experiences, explain and solve life problems scientifically and systematically (sayan, 2015). however, the subject is important, many students found it boring and difficult. teacher educators have tried to solve these difficulties through changing teaching strategies, teaching aids and traditional instructional strategies – even than it remains a forbidden course for many students (hung, huang, and hwang, 2014). according to hung et al. (2014), reducing mathematical anxiety, promoting mathematical selfefficacy, interest, learning motivation and learning achievement are the challenging and the critical issues. due to the advancement in educational technologies and its implications in teaching and learning process – it is expecting that the above mentioned problems in teaching and learning of mathematics could be reduced to some extent. game-based learning is an important domain of research at international level but still neglected in our country. due to its importance, researcher found this idea interested and innovative for her research thesis. therefore, this research problem was selected by keeping the aim of understanding the effects of games on students’ interest and their achievement in the subject of mathematics at elementary level. the study is aimed to measure the difference between the achievements of elementary students in the subject of mathematics taught with or without games. this study also analyses the effects of ict-based-games on interest of elementary students in the subject of mathematics. following research questions were formulated to conclude the results: q1. whether game-based learning has significant impact on students’ academic achievement? q2. whether game-based learning can improve students’ interest in the subject of mathematics? review of economics and development studies, vol. 7 (1) 2021, 119-129 121 2. research methods & instruments 2.1 research design this study used a quantitative research design method which is the most popular method of research amongst the educationists. daniel (2016) expressed that quantitative research is an approach which use statistical data as a tool for saving time and resources. in this research, researcher used one group pre-test/post-test research method to measure the impacts of ict-based-games on students’ achievement in the subject of mathematics and questionnaire was used to measure the effects of these games on their interest in the subject (creswell, 2012). gay, mills & airasian (2016) helped to understand that experimental design compares usually one of three types: comparison of two different approaches; comparison of a new approach and the existing approach; and comparison of different amounts of a single approach. in this study, researcher applied second approach of comparison in which game based teaching method (new approach) was compared by the traditional teaching method (existing approach) in the subject of mathematic to the students of class 8 th of a government public school, multan. 2.2 dependent, independent and intervening variables of the study the dependent variables of this study included:  achievement scores of the participants in the subject of mathematics – measured by the mathematics achievement test (mat) prepared by the researchers with the help of that secondary school mathematics teachers which are currently offering their services in the schools. this test was based on mcqs type test and students’ were required to mark only one option out of four.  interest of the participants in the subject of mathematics before and after the treatment. the independent variables of this study were:  computer based games – to be used by the teachers and students as treatment.  prior knowledge and/or experience of playing mathematical computer-based-games by the participants. the intervening variables of this study were the technical problems of computer system which occur during teaching and playing mathematical games in the computer laboratory. these variables were tried to control with the help of technical staff available in the computer laboratory of the selected school. moreover, only those online available games were use during treatment which was relevant to our course outlines. some more interesting games were excluded because of their irrelevance and difficulty in playing through tablets and/or cellular phones. during experiment some extraneous variables were unable to control like iq level, individual differences etc. 2.3 participants the research participants were teachers and students of an urban high school at multan city. the school was selected on the bases of following reasons:  easy to approach. personal contacts were used by the researcher to get permission from the principal of this school.  feasible to conduct the experiment of the study because a well-furnished computer laboratory was available in the school. review of economics and development studies, vol. 7 (1) 2021, 119-129 122  although the students of the school were females only but the school was well reputed and always got distinct position in the board of intermediate and secondary school examinations (bise, multan).  due to the cooperative attitude of principal and teachers, it was feasible for the researcher to develop positive relationship with students which was deemed important to conduct the experiment successfully.  again due to cooperation of school principal, all the ethical code of conducts (administrative approval, teachers’ permission and setting of time table for the experimental group, and permission of using computer laboratory for the experiment) were approved and possible to follow throughout the experiment.  the game based teaching-learning method has not been previously used by teachers or students in this school.  the participants of this study have already covered the syllabus of mathematics before conducting this study. therefore, requirements of control group was already fulfilled because the students have already been taught mathematics with traditional method of teaching and hence treatment (game based teaching-learning) was given to all students of class 8 th which were enrolled in the school at that time.  as stated above that students’ have already been covered the syllabus of mathematics; and teachers have already been start conducting school/classroom based tests after completing the courses; therefore, results of last two tests of each participant were collected and recorded as bench mark test. this result helped us to determine students’ previous knowledge of mathematics taught without any treatment or to say without any game-based learning process. the role of sampled mathematics teachers was quite important in this study. they were already teaching the relevant subject to the secondary classes and were also trained in using computer and other technological devices. so, they were informed about the objectives of the research and were requested to participate in the research to facilitate the researcher in conducting the successful experiment. therefore, total 06 teachers showed their interest in the study were included in the study as the facilitator to conduct the experiment in computer laboratory. total 06 mathematics teachers and 108 secondary school students participated in the study. 2.4 treatment computer based games were used as treatment of this experimental study. this took 3 weeks (total 18 working days) to complete the treatment and post-test was conducted after these 3 weeks. as it is mentioned in the above section that teachers were already trained in using computer and other technological devices and they were also familiar with computer based games. so, it was easy to manage in the computer laboratory to teach mathematics through computer based games to the participants of this study. each teacher took responsibility of 18 students to teach and observe while students playing mathematical games and laboratory time table was set accordingly. game delivery issues – (i.e., content based issues, time management, recording students’ progress and technical issues) were shared with teachers in advance. at this stage, the technical staff of computer laboratory supported to minimize the technical problems in accessing and playing games on the computer systems available in the computer laboratory. from the textbook of mathematics at elementary level, the portion of algebra was selected for this study. the reason of selecting the portion of algebra was the online games and their relevance with the content in the textbooks of class 8 th . in this regard, teachers cooperated with researcher in finding review of economics and development studies, vol. 7 (1) 2021, 119-129 123 and selecting the games for the experiment. following games were selected from the web site of https://www.mathgames.com/grade8: the website contains very vast data over concepts of mathematics i.e. practice sheets, work sheets and games with the related concepts. website contains every concepts of mathematics related to punjab text book board of classes one to 8 th . total 27 games were present in the website in which 9 games were paid games but researcher selected only 3 games which were easy and free to play. games names were as follows: 2.4.1 math slither it is a one player mathematical game, played by the students selected as sample of the study. game contains all the concepts of mathematics related to text book of all the classes from preschool to elementary classes. group of 36 students played the given game in the supervision of selected teachers. 2.4.2 math miner review of economics and development studies, vol. 7 (1) 2021, 119-129 124 it is also a one player mathematical game, played by the students selected as sample of the study. game contains all the concepts of mathematics related to text book of all the classes from preschool to elementary classes. group of 36 students played the given game in the supervision of selected teachers. 2.4.3 math snowball it is also a one player mathematical game, played by the students selected as sample of the study. game contains all the concepts of mathematics related to text book of all the classes from preschool to elementary classes. group of 36 students played the given game in the supervision of selected teachers. 2.5 research instruments to fulfill the objectives of the research two types of instruments are composed:  result of teacher made tests were collected as bench mark test results to compare students’ prior knowledge of mathematics with the knowledge gained after treatment. this was relevant with objective 1 of this study.  an achievement test of mcqs type items in the subject of mathematics at elementary level was constructed to achieve objective 1 of this study.  an interest inventory constructed as second tool of the research for measuring objective 2 of this study. development of the achievement tests: an achievement test was constructed to measure the impacts of games on students’ achievement. for this, a mcqs (multiple choice questions) based test was constructed with 50 items. the content was taken from their text book (punjab text book board class 8 th english medium). the researcher initially developed 50 items with the help of research supervisor and subject specialist of mathematics. this test was used as preand post-test i.e., before and after treatment test. 2.5.1 scoring one mark for each response was awarded and zero for each incorrect response negative marking was avoided. for scoring, an answer key was also prepared. total scores were recorded for item analysis. review of economics and development studies, vol. 7 (1) 2021, 119-129 125 2.5.2 development of interest inventory an interest inventory was developed by the researcher to measure the interest of the students in the subject of mathematics. interest inventory consists of two parts part a and part b. part a was having questions related to interest of the students in mathematics subject and class through lecture method. total 18 items were included in this part, every statement was provided with seven levels i.e. completely disagree (cda), strongly disagree (sda), disagree (da), slightly disagree (sda), agree (a), strongly agree (sa), completely agree (ca). the weightage of these graded-options id assigned as under. statement completely disagree strongly disagree disagree slightly disagree agree strongly agree completely agree positive 1 2 3 4 5 6 7 negative 7 6 5 4 3 2 1 part b was included questions related to student’s knowledge and skills about online games and learning through mathematical games. in this part 11 questions were asked from the students. difference between the responses of the students before treatment and after treatment was compared by statistical methods. 2.5.3 administration of tools the researchers in their presence administered achievement test and interest inventory through each teacher at the same day and time to collect pre-test results of these instruments. the nature of tools and schedule of administration was announced by the concerned teacher well in advance. all the sampled teachers were assigned 18 students equally and were responsible to control and look after the activities and problems/issues of each participant. therefore, teaching-learning environment to conduct the experiment was controlled and apparently there was no problem of discipline at all. the test was administered in absolutely quiet and peaceful conditions. seating arrangement was adequate. care was taken that students might not be helping one another in test work. the researchers explained to students about the purpose of test. they told them that their performance on these tests would not affect their individual scholastic standing on school grades. an ‘instruction sheet’ was also given before the question paper in which all the necessary instructions were written related to time, marks and answer sheet. all the teachers were responsible to take students’ to computer laboratory on the fixed allocated time to each of them for teaching algebra through online games. after a period of three weeks; post-test was conducted on the same pattern with the help of sample teachers. 2.5.4 instruments validity & reliability the research tools were developed, selected and adopted keeping in view the objectives of teaching algebra of mathematics at elementary level. the source of the selected and adopted material was also authentic (punjab text book board). this step validated the test in terms of its construction (cohen, manion and marrison, 2018). moreover, both instruments were presented to highly experienced educationist available in different public and private sector universities of multan city. the format of interest inventory and achievement test were improved and redesigned in the light of their suggestions. this step was qualifies as ‘face validity’ of the instruments (cohen, manion and marrison, 2018). to make the interest inventory more reliable – pilot study was conducted with the help of sampled teachers of the sampled school. minor changes were observed review of economics and development studies, vol. 7 (1) 2021, 119-129 126 3. data analysis and results following three research hypotheses were proposed to test the variables and reached to the conclusion:  there is no significant difference between the achievement of participants who were taught mathematics with the help of ict-based-games and those who were not.  there is no significant difference between the interest of participants who were taught mathematics with the help of ict-based-games and those who were not.  there is no significant difference between the achievements of participants who have prior knowledge and/or experience of playing computer based mathematical games and those who were playing first time. from the calculated descriptive statics in table 1 it was found that there is no significant difference exists between the average values of interest scores before and after treatment. but average scores showed a clear difference between the calculated values of pre-test and post-test marks. it is also important to note that the average marks of students in teacher made test were higher than both of pre-test and post-test marks. table 1: descriptive statistics mean std. deviation n interest scores before treatment 88.33 9.692 108 interest scores after treatment 89.23 8.785 108 teacher made test 42.09 5.782 108 pre-test marks 27.52 2.151 108 post-test marks 36.70 7.087 108 following table 2 explored the relationship between the dependent and independent values of this study. all the correlated values showed positive relationship between all the dependent and independent variables. the highest correlation was found between the values of interest scores before and after treatment at p<0.01 level of significance or ɑ=95%; the second highest correlation was found between preand post-test marks; the least correlated value was found between interest score before treatment and teacher made test. review of economics and development studies, vol. 7 (1) 2021, 119-129 127 table 2: correlation between the variables teacher made test interest scores before treatment interest scores after treatment pre-test marks post-test marks teacher made test 1.000 .166 .133 .441 ** .453 ** interest scores before treatment 1.000 .986 ** .192 * .237 * interest scores after treatment 1.000 .193 * .225 * pre-test marks 1.000 .643 ** post-test marks 1.000 **. correlation is significant at 0.01 level *. correlation is significant at 0.05 level table 3 showed descriptive statistical report between values of preand post-test scores based on the prior knowledge of playing online mathematical games. it was found from the calculated values that there is not a highly significant different exist between the average values of pre-test marks of those students who either have or not have prior knowledge of online mathematical games (i.e., 28.26 – 26.97 = 1.29) but the difference increases in case of post-test marks among the same variables (i.e., 39.17 – 34.87 = 4.3). on the other hand, if we compare values of preand post-test among those who have prior knowledge (i.e., 39.17 – 28.26 = 10.91) and those who don’t have prior knowledge (i.e., 34.87 – 26.97 = 7.9) and same as overall students’ average values (i.e., 36.70 – 27.52 = 9.18); we found significant differences amongst the calculated averages. table 3: report preand post-test scores prior knowledge pre-test marks post-test marks yes mean 28.26 39.17 n 46 46 std. deviation 1.437 5.855 no mean 26.97 34.87 n 62 62 std. deviation 2.422 7.403 total mean 27.52 36.70 n 108 108 std. deviation 2.151 7.087 table 4 showed calculated values of t-test at 95% level of significance. in the table that the sign of the mean difference corresponds to the sign of the t value. the positive t value in this example indicates that the mean values of post-test, is significantly greater than the mean values of the pre-test group. since p < .001 is less than our chosen significance level α = 0.05, we can reject the null hypothesis, and conclude that the achievement scores of those students who were taught mathematics with the help of ict-based games or online games is significantly different. review of economics and development studies, vol. 7 (1) 2021, 119-129 128 table 4: independent samples test t-test for equality of means t df sig. (2tailed) mean difference std. error difference 95% confidence interval of the difference lower upper pre-test marks equal variances assumed 3.222 106 .002 1.293 .401 .497 2.089 equal variances not assumed 3.462 101.594 .001 1.293 .374 .552 2.034 post-test marks equal variances assumed 3.257 106 .002 4.303 1.321 1.684 6.922 equal variances not assumed 3.371 105.532 .001 4.303 1.276 1.772 6.834 from the following table 5 it was depicted that total 46 participants expressed that they were already playing some sort of online mathematical games either through their mobile phones or through internet connection on desktop computers. the mean interest score of those participants who were playing online games before treatment was higher than those who were not (i.e., 91.00>86.35). same situation was sought in case of post-test mean scores after treatment but interest scores were increased a little bit in both cases (i.e., 91.89>91.00 who have prior knowledge; and 87.26>86.35 who have no experience of online mathematical games). table 5: report interest scores before and after treatment prior knowledge interest scores before treatment interest scores after treatment yes mean 91.00 91.89 n 46 46 std. deviation 8.651 7.869 no mean 86.35 87.26 n 62 62 std. deviation 10.012 8.966 total mean 88.33 89.23 n 108 108 std. deviation 9.692 8.785 4. conclusion it is concluded that the variable of treatment has not direct impact on students’ interest in the subject of mathematics. but students’ with prior knowledge of playing online mathematical games were found slightly more interested in the subject as compared to those who have no prior knowledge of playing online mathematical games. on the other hand, teaching mathematics with the help of online games has improved students’ achievement of both groups either those who have prior knowledge of playing online mathematical games or not. review of economics and development studies, vol. 7 (1) 2021, 119-129 129 acknowledgement and statement of the authors this article was taken from the unpublished thesis of lubna rasheed (roll #: 23, session: 201719) supervised by dr. mubashrah jamil, submitted to fulfill the requirements of m. phil education at the department of education, bzu multan. so, any kind of resemblance in this regard may kindly be omitted. references chen, g. –d., nurkhamid, wang, c. –y., yang, s. –h., & chao, p. -y. (2014).self-observation model employing an instinctive interface for classroom active learning. educational technology& society, 17(3), 14-26. cohen, l., manion, l. and morrison, k. (2018). research methods in education. 8th edition. new york: routledge. creswell, j. w. (2012). educational research: planning, conducting, and evaluating quantitative and qualitative research. 4th edition. new york: pearson education, inc. daniel, e. (2016). the usefulness of qualitative and quantitative approaches and methods in researching problem-solving ability in science education curriculum. journal of education and practice, 7(15), issn 2222-1735 (paper) issn 2222-288x (online) dadheec, a. (n.d.). the importance of game based learning in modern education. retrieved from https://theknowledgereview.com/importance-game-based-learning-modern-education/ hung, c. –m., huang, i. & hwang, g., -j. 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(2019). effects of game-based learning on students’ mathematics achievement: a meta-analysis. journal of computer assisted learning, 1(14). https://doi.org/10.1111/jcal.12347 https://theknowledgereview.com/importance-game-based-learning-modern-education/ https://doi.org/10.1111/jcal.12347 review of economics and development studies vol. 5, no 3, 2019 541 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads china pakistan economic corridor: a game changer project 1 muhammad naeem akbar qazi 1 phd scholar, minhaj university, lahore. qazi_br@yahoo.com article details abstract history revised format: 30 june 2019 available online: 31 july 2019 pakistan and china has a long history of bilateral relations but the period from 2002 – 2005 witnessed boosts in economic ties and leadership of both the countries carried out frequent visits in order to address various economic and strategic challenges. the location of pakistan on the world map considered as geo-strategic was now also being seen as geoeconomic through chinese perspective. china driven by market forces, development of western provinces, and its energy security concerns, started thinking to expand westwards. china pakistan economic corridor (cpec) being a subset of “one belt one road” (obor) was formally launched in 2013. this mega project has a potential to become a “game changer” for the region in general and pakistan in particular. the opportune project faces a number of challenges which needs to be tackled in a timely and effective manner. strategic location of gwadar signifies its position in cpec in many ways for pakistan-china as well as for other regional countries. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords game changer, china-pakistan economic corridor (cpec), one belt one road (obor), gawadar, kashanghar jel classification: b40, b41,b49 corresponding author‟s email address: qazi_br@yahoo.com recommended citation: qazi, m. n. a. (2019). china pakistan economic corridor: a game changer project. review of economics and development studies, 5 (3), 541-550 doi: 10.26710/reads.v5i3.733 1. introduction friendship between pakistan and china has been termed as time-tested companionship, the one which is beyond the himalayas, profound than the oceans and sweeten than honey. china has not only been a boundary sharing country for us but a bountiful and caring neighbor in our nation‟s difficult times. during investment-laden visit by mr. xi jinping, president of the people‟s republic of china to pakistan in 2013, foundation of this friendship has further been reinforced and strengthened. memorandum of understanding (mou) was signed between pakistan and china in may 2013 (known as china – pakistan economic corridor (cpec) (star, 2007). since her emergence, china has proven to be an unwavering support to pakistan, in terms of economic development, military assistance and political support on global diplomacy and international forums, especially by advocating our stance over the kashmir and terrorism issues. gwadar has been a source of connectivity between pakistan and china since decades. china agreed to investments of worth $46 billion in pakistan to upgrade the infrastructure for “china-pakistan economic corridor” from gwadar to kashghar and to fortify the energy sector by directing $35 billion in different power projects (pakistan http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 542 today, 2015). the plan, if well-executed and saved from political victimization, foreign interference, security issue and corruption, has huge potential of generating massive economic activities in the country (pakistan today, 2017). cpec, being part of beijing‟s obor initiative apart from creating opportunities also presents various challenges for pakistan to make it a success. integration of iran and afghanistan into the project on one end and depriving india any chance to spoil the broth at the other stems out to be the main challenges. another most important challenge is to create a win-win situation for major regional as well as international players in order to ensure a “bandwagoning” effect in the project. this paper will highlight all the major opportunities and challenges with regards to cpec and proffer a suitable way forward in order to get maximum out of this venture (malik, 2012). aims and objectives of this study is to analyze the strategic and economic significance of “china pakistan economic corridor”, its implications for pakistan – china and the region and to proffer suitable recommendations. 2. china-pakistan economic corridor this project aims linking the arabian sea with china through a series of 2,442 km of road networks, railways and oil and gas pipeline running from gwadar in the southwest of pakistan to kashgar in china surpassing the great himalayas on its way. chinese president in his recent visit promised a magnanimous $46 bn. for this project. in this mutual cooperation deal, 51 memorandum of understandings (mous) were signed, 8 unweveiling of plaques and inauguration of 5 power projects was carried out. it is so far, the biggest overseas investment by china which will change the fate of pakistan‟s economy. it will also improve pakistan‟s telecommunication and energy infrastructure by adding 10,400 megawatts to our national grid through coal, wind, solar and hydro power plants. a division size security force under major general of pakistan army named as the economic corridor support force has also been established for the on ground protection of chinese engineers and staff working on the projects throughout the country. few of the projects carrying significant value are as under (star, 2007). second phase up gradation of gwadar port a) up-gradation of gwadar international airport b) hazara motorway c) lahore karachi motorway d) up-gradation of karachi peshawar mainline e) havelian to khunjrab rail track f) orange line (lahore metro) g) havelian dry port h) iran pakistan gas pipeline i) gwadarnawab shah lng terminal and pipeline project j) china pakistan joint cotton bio-tech laboratory k) cross-border fiber optic data communication system project 3. pakistan china – time tested and all-weather friends since their independence, pakistan and china have remained allies. pakistan was amongst the first few nations which recognized china as an independent state in 1950 and immediately settled its border issues with china. similarly, china extended economic, militarily and technical assistance to pakistan. to refresh our knowledge few considerable assistance rendered by china to pakistan are listed below: a) china has always strongly backed pakistan by adding up to our security assets. when pakistan was in the midst of testing times during 1966 because of the sanctions imposed by the us on defence exports, china supported pakistan by equipping 2 army divisions and provided mig aircrafts to pakistan air force. b) in 1971, pakistan launched mega project of heavy industries taxila with heavy technological as well as monetary assistance from china. the weapon industry is thriving since then and its now indigenously producing a long list of sophisticated weaponry to the defence forces including al-khalid and al-zarrar tanks. review of economics and development studies vol. 5, no 3, 2019 543 c) in 1980s, china helped pakistan in establishing nuclear weapons and ballistic program and in 1989 prime minister li peng‟s visit brought the elating news of setting up of a nuclear power plant in pakistan. d) the chengdu aircraft industry and pakistan aeronautical complex jointly started manufacturing jf-17 thunder fighter plane in 2003, a deal worth $ 5 bn. tests show that it is equal in capabilities to mirage 2000 and f-7s. other contributions of china include k-8 jet trainers, f-22p frigates with helicopters, t85 tanks, f-7 aircraft and multiple other gadgetries. e) now pakistan is exporting indigenously produced weapons and equipment to many countries. 4. gwadar port significance gwadar once used to be known as sea food village at the shore of arabian sea. the hammer head shaped gwadar enclave was first regarded as a potential port in 1954, when it was still under the control of the state of oman. later, pakistan formally purchased this area for $3 million in 1958. in 2002, general pervez musharraf took the initiative to exploit this place in the economic and strategic favor of pakistan and began the construction of gwadar port. the port was planned to be constructed in two phases. in 2002 phase-i was started and successfully accomplished in 2006 (holmes, 2013). in this phase, 3 adaptable 200m wharfs were constructed with about 5 km long approach channels (wikipedia). phase 2, however, started in 2007 and blue prints of 4 container berths along with terminals for bulk cargo, grain and oil were sketched (wikipedia). initially gwadar port was functioned upon by the port of singapore authority international (psa) on certain terms and conditions. presently, the onus of responsibility of the port lies on the state-run organization called the gwadar port authority but all management and operational tasks were handed over to the chinese firm namely china overseas port holding company (cophc) in 2013. the milestone of functioning of the port was achieved when the first ship “pos glory” anchored here in march 2008 bringing wheat weighing 75,000 metric tons (dawn news). 5. strategic importance of gwadar gwadar geographical location holds an advantage to keep watch on regional and extra-regional powers (marines) of the zone and also on shipping operation from strait of hormuz (dawn news). the significance of the location is serious concern for policy designers of western countries and india. regardless that mere developed as commercial port it also beneficial to strengthen pakistans‟ nautical security. after soviet union disintegration there was abrupt haste to seize precious natural resource especially hydrocarbons. following few decades there be tussle between powers to protect resources transportation routes. there is already a visible control competition at choke-points, connecting routes, and ports which could exaggerate in future. gwadar located at distinctive position of the north arabian sea a „strategic heart‟. it at indian ocean connect to persian gulf due to which already hold geopolitical significance since there exploration of natural resources and regional power emergence. gwadar connects with imperative and resources enriched regions which included arabia, persia, china, central asia and south asia, having slight geographical connection with central asian republics (cars) and russia. this regional connectivity multiplies cultural, economic and security activities of pakistan. in 1991, the decision was taken to construct gwadar port when hydrocarbon-laden and mineral-rich cars were in process to gain independence since they were dependent on russia for goods and resources transportation. it was need of the time to opt for feasible and shortest access via north arabian sea hot waters---either through pakistan or iran. iran had hostile relationships with west and gulf countries so to get connected with cars‟gwadar was the desired choice. during post 9/11 period and afghanistan evasion the security environment of the region was not feasible due to which gwadar port construction could not emerge. for cars, gwadar port is sustainable entrance to the globe. for sea access, afghanistan is dependent on karachi port of pakistan. gwadar will emerge as more feasible approach once there bemandatory connectivity and enhanced services provision. due to security risks and political scenario afghanistan is into trading via iran which is unreliable, expensive and longer route (reuters.com). review of economics and development studies vol. 5, no 3, 2019 544 6. challenges to gwadar project the project entails a lot of challenges both for pakistan and china. some of the challenges, interests and benefits for both the nations are discussed in subsequent paragraphs. 6.1 chinese interests the colossal chinese investment on any foreign land worth billions of dollars, for getting direct access to the arabia sea, speaks volumes about the importance of gwadar and its significance for the chinese nation (times of islamabad, 2016). about 80% of the world trade to america (tribune, 2015). european union and middle east including oil and industrial raw materials transit through the arabian sea. china is the biggest exporter of variety of commodities to the world. presently she is using the trade corridor emanating from shanghai port through the china sea till the strait of malacca and then trespassing the whole indian ocean to supply to the emerging consumer market of middle east and europe which is costing her a lot of exchequer (din et al., 2009). gwadar basically curtails this route and reduces the expenditure on trade by more than half (garver, 2012). i. another aspect is that for running her industries, china depends upon the 6.3 million barrels of oil per day which is brought home after covering a route of 9,912 miles from the middle east through the above mentioned route. this very long journey costs china $ 18 million every day. after having direct access from kashgar to gwadar, the distance will be reduced to only 3,623 miles which will save china enormous opulence daily (hussain et al., 2014). ii. china desires to maintain a robust control in these warm waters to keep a continuous watch over naval activities of india and united states. in this scenario, china can play a decisive role by potentially withholding or affecting this trade route. india has shown her concern over chinese presence at gwadar, as it gives india a sense of insecurity by the multiple chinese built ports around the indian ocean. 6.2 pakistan’s interest pakistan is a multi-resource country. it provides thousands of opportunities for any kind of investment. the challenges being faced by pakistan have kept investors at the bay including power shortage, low infrastructure, deteriorating law and order situation coupled with high inflation rates. the government of pakistan is endeavoring hard to bring the confidence of foreign investors back to pakistan (khan et al., 2012). the recent chinese investment plan in the form of “cpec” project has kindled a big hope in pakistani nation which can prove to be very beneficial. this project can improve our economy to great extent (takreem, 2013). the projects can benefit pakistan in following fields:¬ 6.2.1 power and energy projects despite having many cost-effective resources for power generation in the country, pakistan could not fully exploit any major energy projects in last 10 years. this has led pakistan to face extreme power shortage directly affecting its industrial sector. however, the chinese investors have agreed to spend $33.7 billion in strengthening the power sector in our country. the agreement includes multiple power generating projects all around the country based upon wind, coal, hydro and solar energy. in total 16520 mw electricity will be generated in 7 years, out of which 10,400 mw will be made available in first 3 years. this will surely amplify the activities in the industrial sector of pakistan. 6.2.2 communication infrastructuredevelopment and its effects rail and road infrastructure is a clear indicator of the level of development in a country. it is imperative for an agricultural country where a reliable highway infrastructure allows the commodities to reach till the grass roots level. it gives a direct access to smaller farmer in reaching to the greater markets. hence, for an agricultural state like us, construction of mega road and rail network through cpec will undoubtedly bring green economic revolution in our country. 6.2.3 pakistan possesses the prospects of increasing its growth in industrial sector in addition, pakistan possesses the prospects of increasing its growth in industrial sector, where it can provide an open opportunity for foreign direct investment (fdi) in the form of cheap labor and low expense industrial zones. review of economics and development studies vol. 5, no 3, 2019 545 construction and operation of gwadar port and economic corridor will subsequently sanction the government to establish free trade zones, industrial parks and other investment friendly projects along the corridor. such incentives will ultimately attract immense fdi and pakistan will soon be brought at par with the other tycoons of the developed world. 6.2.4 national security challenges after construction of the project, china will rely on this trade route for its maximum power imports and exports and will not allow this route to be neutralized by anyone. this economic corridor will further intensify the chinese concerns over any indian adventure in pakistan. security issues will be dealt by both china and pakistan collectively. 6.2.5 opening of trade routes for cars the disintegration of former ussr has led the mineral rich cars to look out for trade routes towards south asia, middle east, turkey, europe and china. in the event of being fully functional, cpec will provide huge advantages to these countries when compared to the ports of iran. gwadar, in contrast to iran and dubai, will be a free trade port levying minimal taxes upon the vessels berthing on this port. 7. role of major regional countries various countries in the region have their roles to play with various challenges and opportunities. roles of major countries in the region are discussed hereunder: 7.1 role of pakistan in game changer project role of pakistan in game changer project pakistan is confronting manifolds challenges i.e. security issues, poverty, unemployment, shortage of infrastructure for industrial zones and rural and urban migration compounding a lot of problems in main cities. there is need to realize the changing certainties and through endeavors by adopting a composed tactic in monetary and fiscal policy to discover and capitalize all prospects so that economy progress may not get marred beneath strong powers benefits for creating job opportunities, developing industrial zone, rural and urban balance in provision of facilities. the cpec will serve as a game changer if pakistan overcomes security issues with its western and eastern neighbors which are substantial for security of pakistan. there is also a need to stabilize political situation and resolve terrorist threat and its internal differences. this will help in organizing its own economy considering numerous industrial and sectors in all the provinces, so that the corridor may be utilized in promising way for developing road network, railway connections, energy sectors, industrial zone creating job opportunities and trade with central asian countries. 7.2 role of china as a game changer the world scenario has changed after ussr‟s disintegration into various states and due to current usa policies in the world. consequently china has assumed the role of strategic power in asia that can reserve peace and power stability in asia and the globe. china can play a vibrant role to bring economic evolution of other countries of south asia, africa and middle east. cpec will be a game changer by creating collaboration between china and south asia to diffuse other powers influence which included india and u.s. which are opposing cpec and making efforts to exploit / cause damage to cpec. china will enhance trade opportunities by reducing present route due to gwadar-kashghar route and will extend oil and gas pipeline to its underdeveloped province xinjiang. it will support economic revitalization and well-being of south asian region. russian interest in the regional economic activities and improved relations with china are very beneficial for the region. 7.3 role of iran in cpec regional environment has changed the scenario consequently in the world economy, iran holds significant position and india is involved in chabahar too. it will be a sensible approach if iran get advantage and through cpec reinforce pakistan and china position. to the east of the country, iran should provide access to the east zone being part of this venture which could enhance economy across the sistan-balochistan province through business and trade connections between pakistan and china. iran could offer lucrative access to gulf region to states like india and russia.this will be an open opportunity to have iran-pakistan gas pipeline in the region including central asia. china has already engaged iran in various trade activities which is good for regional economic environment. review of economics and development studies vol. 5, no 3, 2019 546 7.4 role of uae in the world scenario uae is insignificant market. it would not acquire long term remunerations out of pretended strategic alliance with india. it is also a fact that india will not disrupt relations with key oil supplier who is partner in developing a port with iran (long-8 standing opponent of uae). the gwadar port and cpec projects would be an act mainly in chinese benefits and would have deep impacts on uae‟s relations with pakistan. uae must weigh its options of joining this mega project thereby, creating a win-win situation for both pakistan and uae. 7.5 role of central asian states central asian states had hailed the cpec, therefore pakistan and china policy makers must embrace innovative strategies to influence cars to be resilient with the idea of the future different projects. pakistan, china and cars may organize combined exhibitions to endorse business and trade by industrial linkages. moreover, pakistan and china both need to defuse the hostility for cpec from russian as it has dominance over the cars to whom it would not like to modify its position. the government of pakistan should opt for concrete steps for establishing strategic relationship with russia in order to acquire the confidence of russia for the cpec that will also assist in reducing the us hegemonic plans in the region which is evidently in contradiction of russia‟s interests. on the basis of this ground reality it can be said that cpec project is a game changer for the region and world trade/economic activity. figure 1: cpec routes source: http://www.currentaffairspk.com/detail-of-cpec-china-pakistan-economiccorridor-routes-fiber-optics/ 8. recommendations great opportunity like cpec might not be possible again in near future, hence, in order to gain maximum benefits from these projects, and also for its survivability, there are few recommendations which merit due attention: review of economics and development studies vol. 5, no 3, 2019 547 a) the government has to make concrete decisions over prevailing security situation to improve law and order in the country. in this regard, few issues having strategic implications i.e. terrorist threats, balochistan and fata must be addressed and solution sought at high priority. the representation should include government representatives, military leadership, religious scholars and local notables who after being given full liberty and executive authorities, should be tasked to negotiate with all the armed groups and parties to abandon the spread of unlawful militancy and fundamentalism. lot of work in this direction is already in process which needs to be expedited. in the same context, at foreign policy level, steps must be taken to find solution with afghanistan to reduce /neutralize terrorist threats. b) the major part of cpec lies in balochistan, therefore a stable social and security situation here requisites top priority. this would not be possible until the sense of ownership of this project is prevailed amongst the local population of balochistan. the masses need to be enlightened about the benefits this project would herald in their province. this calls for a lot of efforts sincerely on part of the government. in this regards, following recommendations are proffered:¬ i. the federal government should engage all stake holders including military and civil and keep them engaged /involved for reforms and steps being taken toaddressbalochistan issues. special developmental funds be allocated for the balochistan which should be spent in true letter and spirit. ii. political leadership must give special attention by spending appropriate time in balochistan to personally monitor the development projects and law and order situation specially talks by military /civil to resolve issues with sub nationalists groups must continue. policy must be devised to deal with the exile leaders who are promoting anti-pakistan sentiments and creating law and order situation through foreign funding must be stopped. iii. construction of schools, hospitals and water pipelines to the far flung areas of balochistan. more industries should be established to create more jobs and meet basic requirements of food, clothing and other basic products. basic needs of people must be addressed at high priority. iv. recruitment of local population for all the development projects and other economic activities. maximum people must be trained in vocational and poly technology schools and colleges to overcome unemployment and be useful part of local industry. v. to give sizeable representation in government, civil and military departments, the existing quota needs to be increased for balochistan. vi. workable solution of issues like gas royalty, missing persons etc and probable solution should be urgently sought. vii. intelligence network should be widened to counter any foreign involvement in the province. viii. border management must be made more effective and workable so that no unwanted persons succeed to visit pakistan for creating law and order situation in pakistan. ix. engagement with afghanistan and iran government must be made at highest possible to minimize the negative role of india through these countries for creating law and order situation to de-stabilize pakistan. c) a series of recently held visits by the top leadership of both afghanistan and pakistan show positive spirits in pursuits to pak-afghan relationship. pakistan with its high ambitions for economic revolution, cannot achieve desired goals till it has too many foes around. iran – pakistan pipeline projects may also add colors in the bilateral relationship between both the countries. pakistan has to reappraise its foreign policy largely based upon brotherly relations with neighboring countries, especially afghanistan and iran. review of economics and development studies vol. 5, no 3, 2019 548 d) as far as india is concerned, the government should accumulate solid evidence against indian intelligence agency raw‟s involvement in creating insurgency in balochistan, karachi and other areas and produce these evidence at all the international forums to play their part in bringing peace in the region. specially, indian in the garb of trade with afghanistan and using pakistan territory must be checked strictly.few major breakthroughs in the shape of apprehending indian spyshave already been brought in the notice of the un and rest of the world. e) construction of roads and rail alone will not change the fate of the country, but might offer temporary jobs during the construction of said infrastructure. it calls for a full commitment and involvement by the government to reimburse full benefits from these endeavors, such as: i. rising of multiple export processing zones in gwadar especially and many economic zones in different parts of the country. ii. linking of regional highways with the economic corridor /motorways. iii. creation of business friendly environment for small / local investors. iv. projection of positive image of the country in term of security to attract more fdi. iv. people of balochistan‟s interaction on long term basis must be increased with rest of the country for better understanding and good working relations 9. conclusion pakistan has been struggling to improve its economy since long, but due to law and order / security situation and many allied issues like political instability barred the advancement ventures and kept the foreign direct investments away from our soil. cpec has provided us great opportunity to get optimum benefits. indeed pakistan was in dire need of any such investment/ business opportunity, which could service in heightening the country‟s economy. nevertheless, opportunity in hands must be used to optimum and now responsibility lies on our shoulder how to fully expedite this great break to make a firm base for acceleration of its struggling economy. the success of this project may turn our geo-strategic dimension into a geo-economic dimension and may provide a suitable platform to settle our disputes with our regional neighbours. it will trigger a wave of self reliance, spreading a domino effect in uprooting all obstacles in formulation of independent policy making. with nation determined to strive for better bright future, economy will improve and cpec will be a “game changer” and a “destiny changer” for pakistan and the region. references china-pakistan economic corridor really a game changer? pakistan today, searched on, 13th june, 2015, available at: http://www.pakistantoday.com.pk/comment/is-china-pakistan din, m. u., ghani, e., & qadir, u. (2009). recent experience and future prospects of pakistan's trade with china. the lahore journal of economics, 14, 87. economic corridor really a game china-pakistan changer? pakistan today, searched on april 25, 2017, available at:http://www.pakistantoday.com.pk/comments/is-china-pakistan-economic¬corridor-really-a-gamechanger/. garver, j. w. (2012). the diplomacy of a rising china in south asia. orbis, 56(3), 391-411. holmes, j. r. (2013). gwadar and the „string of pearls‟. the diplomat, 9. http://en.wikipedia.org/wiki/china%e2%80%93pakistan-relations http://en.wikipedia.org/wiki/gwadarport http://www.dawn.com/news/1177129/details-of-agreements-signed-during-xis-visit¬to-pakistan http://www.dawn.com/news/1177129/details-of-agreements-signed-during-xis-visit¬to-pakistan http://www.reuters.com/article/2014/11/21/pakistan-china-idusl3notb44k2014121 https://timesofislamabad.com/cpec-list-of-early-harvest-projects-to-be-completed¬by-201 (:searched on october,16,2016) https://tribune.com.pk/story/880259/pakistan-china-economic-corridor-a-cost¬benefit-analysis/s, published in the express tribune, may 3rdh, 2015 hussain, s. s., abid, m., ullahsabri, p. s., & batool, i. (2014). pakistan china strategic engagements in the review of economics and development studies vol. 5, no 3, 2019 549 regional stability syndrome of south asia. journal of the research society of pakistan, 51(2). khan, s. a., & khan, z. a. (2012). pakistan-kazakhstan relations: future prospects. putaj-humanities and social sciences, 19(1). malik, h. y. (2012). strategic importance of gwadar port. journal of political studies, 19(2). starr, s. f. (2007). the new silk roads: transport and trade in greater central asia. johns hopkins university press. takreem, k. (2013). chinese trade through gwadar port: benefits to pakistan (doctoral dissertation, university of peshawar). review of economics and development studies, vol. 6 (4) 2020, 811 820 811 perceptions of special education teachers on the internal efficacy of their institutions: a comparative study muhammad zahid a , samina ashraf b a ph. d scholar, department of special education, university of the punjab, lahore, pakistan email: mohzahidch@gmail.com b ph. d &post doc., department of special education, university of the punjab, lahore, pakistan email: samina.dse@pu.edu.pk article details abstract history: accepted 28 nov 2020 available online 31 dec 2020 special education institutions are providing services to meet the unique needs of special students. internal efficacy of any institution determines its effectiveness in terms of its outcomes. the current study was designed to explore the internal efficacy of special education institutions. the population of the study comprised of teachers teaching in the special education institution of the lahore city. sample of the study consisted of 200 teachers randomly selected from public and private sector special education institutions, currently performing their duties in the lahore city. the study was quantitative in its nature conducting with descriptive research design. a standardized questionnaire was used to collect the data from the teachers after getting permission from its author. initially, the questionnaire was piloted on a small number of participants to ensure its reliability. that was confirmed through cronbach alpha (.750). after ensuring ethical considerations, researchers collected data by themselves from the teachers. the data were analyzed using spss. results of independent sample t-test show the statistically significant difference between the public and private sector institutions’ internal efficacy. the internal efficacy of public sector special education institutions was better as compared to private sector special education institutions. majority of the special education teachers serving in public sector institutes ranked the institutional communication, working environment, quality of education and professional support as major determined of internal efficacy of their institutions. the study has recommended that the private sector special education institutions need to enhance their internal efficacy. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: educational institutions, internal efficacy, teachers’ perception jel classification: i23, a20 doi: 10.47067/reads.v6i4.280 corresponding author’s email address: mohzahidch@gmail.com 1. introduction the internal efficacy of educational institutions is determined through their maximum use of resources in producing its output. it is actually putting all efforts to strengthen the school review of economics and development studies, vol. 6 (4) 2020, 811 820 812 effectiveness(yunus, 2014).this processes that take place in any educational institution matters for students’ academic and social outcomes (ramberg, laftman, almquist, & modin, 2019) and helps in determining that institution’s internal efficacy. teachers and students self-efficacy influence the internal efficacy of academic institutions too. as according to galos and aldridge (2020) the institutional environment is connected with students’ efficacy that is also related with school efficacy and effectiveness. institutions are facing problems to tradeoff between the institutional efficacy and enhancement of education at all levels. particularly ensuring the availability of maximum resources focusing on institutional demands, teachers’ professional development, institutions’ better and vibrant environment, students’ reward system and better learning outcomes by the government (hassan, 2019; ahmad, rauf, imdadullah, & zeb, 2012; faize, 2011; iqbal & mahmood, 2000,). according to adeyemi (2012) internal efficacy is an association between input and output of education system. input of institutions consist of teachers, schools’ buildings, classrooms, furniture, chairs, whiteboard, students’ yearly cost and the entire resources available in institutions to obtained required objectives (olubor, 2004) whereas output means number of students that become graduates from prescribed institution after investment. dwaikat (2020) has elaborated this association as an indicator of quality and effectiveness of academic institution. the schools principals play main role in shaping the learning environment in school, which is important for students learning and teachers’ performance (skaalvik, 2020). they have the potential to assign task and responsibilities focusing their regular needs. they are responsible to shape their institutional environment while focusing present day schools’ reforms. learning environment of schools make students more dynamic in the achievement of their educational goals. students remained indulged in learning activities, understanding knowledge and catch teachers’ strategies (akinloye & adu, 2015). it enhances students better achievements, teaching manner of teachers and improves the administration style of school heads as well (dansey, 2004). students’ learning environment should be obstacles free to enhance their concentrations and enable them to focus on their conceptual understanding. focusing the internal efficacy of institutions, the enrollment of students and class size is considered as an important factor. standardized class size and number of students attracts teachers towards imparting more knowledge and better working of institutions (adeyemi, 2008). globally in turkey, norway, netherland and new zealand the number of students in one class is 20, whereas the student teacher ratio in japan, us, usa, canada and ireland are 1-15/20 students. same is in the case of france, australia, sweden, italy and belgium is 15 students in single class (adeyemi, 2008). the literature on internal efficacy has reported internal efficacy of educational institutions as key aspect that helps stakeholders including students, teachers, parents and head teachers towards better growth (yunus, 2014).some previous researches have elaborated the perceptions of teachers for instance the study conducted by davis and ellison (1997) in uk to find out perceptions of teaches on the internal efficacy of different schools. they collected the data from respondents by using self-developed questionnaire consisted of 5-factors including communications, work environment, professional environment, quality of education, professional support and administrator/governor mode. the respondents were provided 3-point likert scale to respond on each item. results of descriptive analysis shows that participants’ perception on professional environment was 58.92%, professional support 54.59%, communication 49.19%, working environment 48.65%, governors 37.84%, and quality of education 35.14% and have fewer perceptions on general items that 32.43%. adeyemi (2014) found the influence of schools’ variables like locality, formation year and class size on institutional internal efficacy i.e., number of pass, fail and repeater graduate students. he administered self-constructed questionnaire among respondents after ensuring content validity and reliability. results of pearson review of economics and development studies, vol. 6 (4) 2020, 811 820 813 product moment correlation (r) showed significant moderate correlation between schools’ variables and internal efficacy (r = .461, n = 482, p < .05). furthermore, results of regression analysis declared that teachers’ qualification affect 62.78%, teaching experience 61.43%, class size 25.94%, student-teacher ratio 46.27%, schools’ locality 35.74% and school size affect 25.94% on institutional internal efficacy. pakistan is running its public sector education since independence that are divided in general and special institutions. concern of current research deals with the special education institutions working in district lahore. in the era of 1958, national education commission, recommended to train teachers to fulfill needs of handicapped students (government of pakistan, 1959). necessary arrangements were made for special students through inaugurating special institutions. the prominent institutions of lahore were bound to admit students without references regarding their social, financial, educational and special backgrounds. meanwhile the united nations announced 1983-1992 as “decade of the disabled” which driven pakistani stakeholders minds to formulate and implement policies for the special students (government of pakistan, 1986a). in this connection, first policy for disable persons was structured and given the name of “national policy for rehabilitation of the disabled” in december, 1986(government of pakistan, 1986). policies makers classify special students in categories visually impaired, hearing impaired, physically disabled and multiple disabled after conducting survey in federal territory. furthermore, stakeholders came to know that the number of students with special needs is gradually increasing. finally it was reported in policy to proposed financial allowances for disable students through legislative support (government of pakistan, 1999). later on national policy for persons with disabilities, 2002 was put forwarded for public and private special educational institutions (government of pakistan, 2002). special emphasis has been given on infrastructure, physical facilities, teachers’ training and remedies for special students without any discrimination on the basis of gender, class, faith etc. as the above discussion has shown that institutions’ internal efficacy plays significant role in students’ learning and in acquiring better educational performance. being one of the important component of internal efficacy, the purpose of this study was to explore the perceptions of special education teachers serving in the public and private sector institutions on the internal efficacy of their respective institutions. the objectives of the research were to  know the perceptions of special education teachers regarding the determinants of internal efficacy of public and private sector special education institution in lahore.  find out difference between the internal efficacy of public and private sector special education institutions. following research questions were addressed in this study 1. what are the perceptions of special education teachers serving in public and private sector institutions regarding the determinants of their schools’ internal efficacy? 2. is there any difference between the internal efficacy of public and private sector special education institutions? 3. do the differences between internal efficacy of public and private sector schools exists in all determining factors of special education institutions’ internal efficacy? 2. research methodology research methodology deals with systematic procedures applied in research to reach the conclusion. application of good research methodology provides scientific and sound findings (bless & review of economics and development studies, vol. 6 (4) 2020, 811 820 814 higson-smith, 2000; bryman, 2012). the study conducted by applying descriptive research design. in descriptive research nothing is manipulated and without changing the environment information is collected. the information is obtained concerning the current status (what exists) of the problem. the survey method was used to collect the data from the teachers (yasmin, nadeem, siddique & ali, 2020). 2.1 population and sample of the study population refers to entire respondents targeted for collect information including participants’ geographical location, profession, gender and educational concerns (cohen & duun, 2011; hassan & akbar, 2020). population of current study consisted of all teachers working in 15 public and 40 private sector special education institutions of district lahore of the punjab. sample is representative part that is being selected from entire population (peat et al., 2002) that has complete properties of populations (creswell, 2014). the sample of current study consisted of 200 teachers; randomly selected from public and private special institutions. figure.no.1: demographics of the teachers taken as sample of this study the above table showing the demographics of the teachers taken for this study. table shows that majority of the teachers belongs to private sector schools. the qualification of majority teachers was m.a. /m. sc. and having job experience from 10 to 20 years. the age of the majority teachers was from 21 to 30 years. 2.2 instrumentations questionnaire is an important tool that help the researchers to obtain required information on the study (khan, hussain, hussain, & khan, 2020). instrument of this study was a questionnaire review of economics and development studies, vol. 6 (4) 2020, 811 820 815 adopted from davies and ellison (1997) after getting their permission. the questionnaire consisted of two parts: part a having 30-items based on three points likert type options i.e., yes, no and not sure whereas part b consisted of 5-factors including communication (5 items), working environment (5 items), professional environment (5 items), quality of education (6 items), professional support (5 items), governors (3 items) and general consist of 1-item. 2.3 pilot testing questionnaire was piloted on small number of the teachers. pilot studies inform advance warning on instrument’s success / failure (mcmillan & schumacher, 2001). table 1: factor wise reliability statistics 2.4 data analysis and interpretations the data were analyzed to answer the research questions one by one. the first question of the research was concerned with the perceptions of special education teachers regarding factors responsible for internal efficacy of their institution. the mean and slandered deviation of teachers’ responses has calculated and presented in the figure no.1. figure no.2: mean and standard deviation of teachers’ perceptions on determinents of internal efficacy in their institutions. figure no.2 shows the descreptive statistics(mean & sd) applied to measure teachers’ perceptions working in public and private special education institutions of lahore. interpretation sr. no factors’ names n of items cronbach’s alpha 1 communication 5 .801 2 working environment 5 .769 3 professional environment 5 .719 4 quality of education 6 .761 5 professional support 5 .794 6 governors 3 .707 7 general 1 .699 review of economics and development studies, vol. 6 (4) 2020, 811 820 816 reveals that teachers’ working in public and private special educational institutions perceieved communicative (m = 8.2, sd = 3.85), working environment (m = 8.2, sd = 3.85) professional environment (m = 8.7, sd = 3.91), quality of education (m = 8.7, sd = 3.91), professional support (m = 8.4, sd = 3.76) as strong determinents of internal efficacy as compared to institutionals’ governors (m = 5.1, sd = 1.70) and general aspects of the institutions(m = 2.2, sd = 0.98) as determinents of special education institutions internal efficacy. to answer the second question of the study, the data were analyzed through applying independent samples t-test. there were 30-items based on 3-point likert type options. data were analyzed in spss for the smooth analysis. table. no.2: independent samples t-test on schools’ type and teachers’ perception on internal efficacy. school type n m sd f df t p public 93 66.430 15.696 48.49 198 16.521 .05 private 107 34.7851 11.276 table. no.2 shows the results of independent samples t-test applied to compare the perceptions of the teachers serving in public and private sector special education institutions on the internal efficacy of their respective institutions in district lahore. interpretation of the analyses reveals a statistically significant difference between the efficacy of public and private sector special education institutions as perceived by their teachers( t = 16.521, p < .05. it is can be stated that public sector special education institutions have better internal efficacy (m = 66.430, sd = 15.696) as compared to the private sector special education institutions (m = 34.785, sd = 11.276). to answer the third question of the study the independent sample t-test was applied on each factor related to internal efficacy as perceived by the teachers to see that either difference is existing and significant in all determinants of internal efficacy. table no. 2: independent samples t-test on overall factors of schools’ internal efficacy by schools’ type no factors’ names type n m sd f df t p 1 communication public 93 10.968 3.552 84.442 198 12.756 .05 private 107 5.794 2.082 2 working environment public 93 10.968 3.552 84.442 198 12.756 .05 private 107 5.794 2.082 3 professional environment public 93 11.968 2.708 35.080 198 17.605 .05 private 107 5.860 2.195 4 quality of education public 93 11.968 2.708 35.080 198 17.605 .05 private 107 5.860 2.195 5 professional support public 93 10.968 3.552 68.049 198 11.686 .05 private 107 6.168 2.174 6 governors public 93 6.591 0.797 6.159 198 20.002 .05 private 107 3.804 1.120 7 general public 93 3.000 0.000 283.191 198 16.517 .05 private 107 1.505 0.873 review of economics and development studies, vol. 6 (4) 2020, 811 820 817 table no.2 reflects that independent samples t-test was applied to compare the factors determines public and private special institutions’ internal efficacy. results of independent sample ttest showed significant difference between public and private special education teachers perceptions regarding the determinants factors of internal efficacy including communication, t = 12.756, p < .05; working environment, t = 12.756, p < .05; professional environment, t = 17.605, p < .05; quality of education, t = 17.605, p < .05; professional support, t = 11.686, p < .05; governors, t = 20.002, p < .05; general, t = 16.517, p < .05. it is found that according to the teachers working in public sector special educational institutions, existing determinants of internal efficacy are better in their institutions as compared to the private sector institutions. the mean of communication is (m = 10.968, sd = 3.552), working environment (m = 10.968, sd = 3.552), professional environment (m = 11.968, sd = 2.708), quality of education (m = 11.968, sd = 2.708), professional support (m = 10.968, sd = 3.552), governors (m = 6.591, sd = 0.797), general (m = 3.000, sd = 0.01) are higher as compared to the mean of teachers’ working in private special education institutions on factors of communication (m = 5.794, sd = 2.082), working environment (m = 5.794, sd = 2.082), professional environment (m = 5.860, sd = 2.195), quality of education (m = 5.860, sd = 2.195), professional support (m = 6.168, sd = 2.174), governors (m = 3.804, sd = 1.120) and the mean of general factors is (m = 1.505, sd = 0.873). 3. discussion the perceptions of special education teachers on the internal efficacy of institutions are keenly measured through taking their response. according to many research studies teachers are an effective source to know the internal efficacy of academic institutions teaching experience (adeyemi, 2007; ayodele, 2005). pakistani public sector educational institutions are categorized in general and special institutions (awan & zia, 2015; imran, 2008). focusing the results of current study, teachers’ teaching in public sectors special education institutions’ rated the internal efficacy in their institutions higher as compared to the teachers serving in private sector special education institutions working in lahore city. government of punjab has taking great interest in the special education institution since last two decades (imran, 2008). whereas, private institutions are self-funded, and in certain cases they lacks resources and hire less qualified staff due to job insecurity. results of present study established that public sector schools are internally more efficient in terms of communication, working and professional environment and professional support. these findings are in line with the findings of the study conducted by the (akinwumiju, 1995; babalola, 2005). institutional internal efficacy demands teachers’ higher qualification, heads visionary attitudes and better infrastructure and physical facilities (weingarten, 2012) which is mostly present in public sector special education institutions. furthermore results of current study have revealed that teachers of public sector special education institutions were more qualified due to better job securities, vibrant environment and schools infrastructure that congruent with the results of other studies (adeyemi & adu, 2012). the study also highlighted better performance of students in public sector special education institution. the students’ better performance are due to teachers’ pedagogical skill. many other studies have highlighted the same points regarding the internal efficacy of academic institutions (jaffer, 2000; kerr, 2009; ncube, 2004; olatoun, 2012; seiler et al., 2007). 4. conclusions internal efficacy of special education institutions is an important element for the smooth running of schools. the study has tried to investigate the perceptions of special education teachers regarding the internal efficacy of public and private sector special education institutions. due to the increased attention of the government to the field of special education, the scenario of special education review of economics and development studies, vol. 6 (4) 2020, 811 820 818 institutions has changed and reflected in the findings of this study. it is concluded that the internal efficacy of public sector special education institutions is much better as compared to the private sector special education institutions. provision of funds, scholarships, job security and qualified teachers have increased the internal efficacy of the special education institutions. while, on the other hand, except few cases, private sector schools are deficient in highly qualified staff, job securities, teachers training and infrastructure. 5. recommendations of the study following recommendations have made on the basis of research findings.  government should continue its efforts to strengthen the system of special education to further improve the internal efficacy of the special education institutions for the long run benefits of special students.  there should be some support mechanism for the private sector special education institutions to uplift their internal efficacy for the larger interest of the persons with different disabilities living in this territory.  the private sector special education institutions should improve their internal efficacy.  the study may be conducted with the larger sample and adding some other stake holders of special education institutions in other districts to come up with more accurate findings. 6. limitations of the study following were the limitations of the study.  due to the time and financial constraints, the special education institutions efficacy is estimated only by exploring the perceptions of 200 teachers. the other stake holders have not participated in the study.  the data is collected only from one district. references adeleke, f. f. 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(2014). developing a framework for promoting internal efficiency of secondary schools, unpublished doctoral dissertation, faculty of arts, social sciences and education, sarhad university of science and information technology, peshawar-pakistan. review of economics and development studies, vol. 6 (3) 2020, 727-738 727 gender responsive and child sensitive disaster management in pakistan aliya khalid a , syed salman hassan b , syeda mahnaz hassan c , muhammad adnan d a assistant professor, department of social work, university of the punjab, pakistan. b deputy director oric, virtual university of pakistan. c chairperson, department of social work, university of the punjab, lahore, pakistan. email: drsyedamahnazhassan@gmail.com d mphil scholar, department of social work, university of the punjab, lahore, pakistan. article details abstract history: accepted 18 july 2020 available online 30 september 2020 half of the world’s population, i.e. women, and one third population of world, i.e. children, are vulnerable in biological sense. women and children become the most neglected segments of population during natural disasters. this conceptual paper provides an insight about the specific needs and problems of children and women before, during and after a disaster. social vulnerabilities are more complex and critical to understand, which enhance the intensity of exploitation, vulnerability and risk for women and children. considering special needs and provision of equal services are main concerns in rehabilitation. primary emergencies always bring secondary emergencies if they are not properly managed and administered. effects of disasters can be minimized by enhancing the coping capacities of vulnerable segments and by equipping them with all necessary preparedness and rescue skills and privileges. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: disasters, pakistan, women, children, needs, vulnerability, gender jel classification: q54, n15, j16 doi: 10.47067/reads.v6i3.262 corresponding author’s email address: drsyedamahnazhassan@gmail.com 1. introduction according to the international federation of red cross and red crescent societies disasters are hasty, catastrophic, and destructive occurrences that disturb the normal functioning of a community and society and bring more people to vulnerability. disasters are caused by natural as well as human causes and result in havoc in personal as well as in public life and great loss of lives, property and infrastructure turn the life on a new track (random house kernerman webster's college dictionary). a disaster can be understood as a natural or man-made calamity which brings sudden destruction of infrastructure, loss of lives and environmental, social and economic problems. figure-1 and figure-2 in the appendix showed the time trend of reported natural disasters from 1975 to 2007 and the percentage of people killed by natural disaster. review of economics and development studies, vol. 6 (3) 2020, 727-738 728 figure-1: (source: em-dat: the ofda/cred international data base-2008) figure-2: (source: em-dat: the ofda/cred international data base-2008) a series of repeated large-scale disasters were experienced in pakistan during the last decade. floods have become yearly phenomenon due to hot climate of the country, while a number of earthquake shocks have been observed during 2015 and 2016. our geography & climatic conditions make us quite vulnerable to disasters. review of economics and development studies, vol. 6 (3) 2020, 727-738 729 effects of disasters are more pronounced on vulnerable groups i.e. women, children, old and people with disabilities. women and children are always at weak position by access, opportunities, movement, decision making, power relations and benefits even in normal circumstances. 2. vulnerabilities are socially constructed: the social, physical and economic factors which enhance the susceptibility of individuals or groups of individuals regarding the impacts of hazards and disasters are called vulnerabilities. most of vulnerabilities that people face in natural disasters are related with social and cultural realities i.e. power relationship, opportunities, benefits, resources, location, capacities, wealth, health, knowledge, freedom to get information and movement and gender and class differences. vulnerabilities are now viewed as contextually driven i.e. socially constructed situations by which some segments of population are discouraged or restricted to participate in empowering activities by utilizing their capacities. vulnerabilities are of different kinds ranging from economic, social, religious, physical and environmental factors. the most deeply rooted and neglected once are social vulnerabilities, which have become part of our cultural system now. poor, marginalized people and women due to gender differences always have less access to resources and opportunities resulting in their weak coping capacity against disasters. this socially constructed vulnerability hinders their participation in information seeking, movement, preparedness, training and coping skills. these susceptibilities enhance their vulnerabilities in disasters. 3. historical perspective of inclusion of women & children in policy: vulnerable groups were identified as “response focused” for the first time with the emergence of hyogo framework of action 2005-15; (building the resilience of nations and communities to disasters, is a 10 years global pact, agreed in 2005 by nearly 170 governments, including pakistan) which outlines the steps to reduce disaster impacts and improve country’s ability to respond and recover from disasters. vulnerable segments of population are more vulnerable to disasters, having their special needs and limitations. inadequate preparation with no consideration of the needs of vulnerable population often leads to disastrous consequences i.e. large death toll as in hurricane katrine, tsunami and 2010 and 2014 floods of pakistan. vulnerable people, also called “special needs” people or “at-risk” people, can be distinguished as those that are particularly at menace of weak economic, physical or social health, during and after a disaster. they have excessive needs of food, mobility, survival, medical aid and supervisory care in overall spectrum of disaster. 4. women’s vulnerability: total female population in pakistan was reported at 48.54 % in 2019 (world bank, 2020). women are known to be affected adversely by disasters. their vulnerability and risk are not only on account of their biological make up and specific needs, but are also on account of their disadvantaged position within the society and their limited access to information and resources that result in restricted capacities and coping strategies. they are often poorer than men and are less aware and mobile due to cultural reasons. their role as caregivers and protectors during disasters increases as an additional burden on their personal coping capacities. besides, they are prone to physical violence, sexual assaults, trafficking, and exploitation. women are also disregarded in planning of disaster risk reduction policy and their opinion and needs remain overlooked. they need special attention in evacuation, in services provided, review of economics and development studies, vol. 6 (3) 2020, 727-738 730 in shelters homes, in food requirements and in overall living atmosphere in relief camps after disaster. 5. children’s vulnerability: according to the report of un economic and social affairs department and country meters, there are 35.4% people under the age of 15 years in pakistan. children form a large part of the affected population and therefore, special measures are sought to protect them from harm and ensure their access to basic services. this refers to both boys and girls. children tend to suffer on account of malnutrition, exploitation, kidnapping, and sexual violence in disasters amongst other factors that are psychological fears, food needs and basic requirement of health environment. their position becomes further vulnerable due to their inability to share their experiences and to participate in decision making affecting their lives. specific needs and growth patterns make them vulnerable to others. some women remain restricted in evacuation process because of their socially constructed responsibility of caregivers to elderly, children, disabled and sick persons of their family. women have practically no information or practice of climbing and swimming. social and cultural system and norms of society dictate that these are not ‘womanly’ activities. therefore, during all major disasters i.e. floods and earthquake, women were unable to evacuate from the situation that always resulted in huge number of women deaths. who report indicates that in indian ocean tsunami of 2004, 80% deaths were of women. who report also indicates that women and children are 75% more vulnerable in disasters as compared to male population. beside the direct effects of disaster, women are also prone to health issues, sexual health, reproductive health and violence problems. according to enarson (2000), “women’s work is heavily impacted by disasters, and their economic losses can be extensive. for those whose income is based on homework, the loss of housing often means the loss of workspace, tools, equipment, inventory, supplies and markets. domestic violence appears to increase when men’s sense of control is diminished in disasters.” akcar, gopalan and yonder (2012) stated, “disasters upsurge women’s domestic and care-giving work intensely. it also discounts the women needs which are not from male headed households. their economic role and recovery is also ignored. these prejudices damage the overall recovery cycle of any community. gender sensitive recovery is crucial during emergencies”. on another place, akcar, gopalan and yonder (2012) also stated: “disasters increase women’s household and care-giving work dramatically for an extended period of time as housing and social infrastructure once destroyed is slowly replaced. they require women to manage displaced households and restore family livelihoods. yet post-disaster aid efforts generally ignore this reality and target male-headed households as the primary claimants for government and other support. not only does this approach to aid ignore women’s joint claim on family assets, it also ignores the needs of women living apart from male-headed households and is largely indifferent to the incomegenerating roles that women do and must play. these biases substantially undermine prospects for household and community recovery. gender-sensitive programming is essential during emergency relief. the central aim of disaster relief is to support and rebuild communities; what women do to keep their families and communities together in the critical moments after disaster occurs often is taken for granted. protocols must be developed that value women’s priorities and contributions appropriately.” review of economics and development studies, vol. 6 (3) 2020, 727-738 731 women are described as the sufferers of disaster, and their contributive role in disaster relief work is often unnoticed. pre-disaster activities are always restricted due to less access to information, resources, and mobility but they play a central role during and after a disaster by rendering relief and care-giving services to the victims. house luggage, children and even animals handling during evacuation is also the responsibility of woman beside the care of old age and disabled. plümper and neumayer (2007) investigated in disasters in 141 countries and explored that deaths in disasters are directly linked with gender differences, power relations and women’s social and economic rights provision. societies where equal rights provision exists, the number of deaths remain same by both sexes. existing social inequalities bring great causalities i.e. in disasters boys are more preferred for evacuation, food and medicine provision. studies demonstrate that women and children are 14 times more susceptible towards life threats than men during a disaster. during the cyclone in bangladesh in 1991, 90 % were women from total number of 140,000 people who died. more women than men died in heat wave of europe in 2003. number of women victims was on increase in france and during the emergency of hurricane katrina in america. due to having knowledge of climbing and swimming, it was easier for men to evacuate during disasters in sri lanka. due to the social prejudices and cultural restraints, girls have no access to life saving skills and activities which will increase their susceptibility towards threats. in droughts, women are most suffered population who are responsible for water search and carrying but their water intake ratio goes too less (iucn fact sheet, 2016). in 2015, the first australian 'gender and disaster taskforce' was established. scientists of macquarie university, sydney, australia, conducted a research in 2007 to find out the effects of including native people of communities as participants in planning of how to deal with natural disasters. they found that techniques to cope with natural disasters used by community people were highly effective. they investigated that involvement of community and especially the involvement of women is highly significant in disaster planning activities. participatory approaches create a sense of ownership, sense of empowerment, sense of cooperation and responsibility in people of community. people themselves are better planner of their situations. by inclusion of female participants in emergency planning, a sense of encouragement discovered the powerful problem solving and needbased mechanism to deal with disasters. former director of the united nations international strategy for disaster reduction, salvano briceno said that community suppleness against disasters cannot be achieved without the full participation of women in leadership, planning and decision making. still there are communities, where female participation is not encouraged and results in great number of deaths in disasters. fothergill in 1996 wrote that due to the inequality in social structure, in many developing countries women and children are most vulnerable population in natural disasters as compared to men review of economics and development studies, vol. 6 (3) 2020, 727-738 732 figure-3 this slower recovery has been attributed to the fact that women have a tendency to have minus access to assets provided during emergency and recovery periods (khondker,1996). other societal factors used to explain women’s greater vulnerability to disasters are their role as caregivers and their lack of mobility (fothergill, 1996). the women were facing issues / challenges during the disaster situation such as non-availability of sex disaggregated data, cultural restrictions on mobility, children and luggage dependency, protection issues in relief camps, unequal service delivery, access to microfinance, limited access to information & knowledge / preparedness, non-availability of female doctors in relief camps, no participation in decision making and planning, non-availability of recreational / educational activities for girls in relief camps, absence of code of conduct during evacuation, no separate relief services points, inadequate / separate washrooms and feeding areas, no re-organization of women headed households, evacuation challenges, inadequate provision of washing services, no sops and policy inclusion. the issues / challenges faced by the children during the disaster were absence of sops on children needs and concerns, children need’s inclusion in national and provincial plans, abuse, exploitation and kidnapping, no access to information and knowledge/preparedness, not in a position of decision making and mobility, non-availability of high energy food, absence of child protection mechanism, non-availability of educational and psychological services, non-availability of recreational services, non-inclusion of children’s needs in national plans, policy and legislation, health, nutritional, sanitation and hygiene issues, communication issues, and issue of registration of lost/shifted children. 6. international legislation on women & children based disaster risk management: the following international legislations ensure the rights of women and children in disaster situation:  cedaw  uncrc  declaration on the protection of women and children in emergency and armed conflict-1974 (general assembly resolution 3318 (xxix) of 14 december 1974) review of economics and development studies, vol. 6 (3) 2020, 727-738 733  the new sustainable development goals (sdgs), and the comprehensive sustainability agenda, go much further than the millennium development goals, addressing the worldwide need for progress for all people.  5 th goal is gender equality  10 th is reduced inequalities  13 th climate action  hyogo framework for action 2005-2015: building the resilience of nations and communities to disasters  sendai framework for disaster risk reduction 2015-2030  unisdr (united nation office for disaster risk reduction)  yokohama strategy and plan of action for a safer world-1994-(un guidelines for natural disaster prevention, preparedness and mitigation)  beijing declaration and platform for action-1995 7. gender & children based legislation on disaster risk management in pakistan: the following all policy documents and laws in pakistan emphasize on disaster risk management by community participation and reveal that vulnerabilities can be reduced by focusing on vulnerable groups of people. the needs and concerns of vulnerable groups are prioritized on equal basis in preparedness and community inclusion level and at rescue, relief and recovery level.  national disaster risk management framework of pakistan-2007  social protection strategy of erra  gender policy for earthquake affected areas  national disaster management plan -2012-2022  national disaster risk reduction policy  national gender & children cell framework 2013-16  the national calamities (prevention and relief) act 1958  emergencies services ordinance 2002  child protection welfare act 2010-kpk  pdma policy  national disaster management act-2010 makes specific references to special provisions for vulnerable groups:  section 11: guidelines for minimum standards of relief,  sub-section (b): special provisions to be made for vulnerable groups.  section 37: prohibition against discrimination: while providing recompense and relief to victims of the disasters, there should be no discrimination on the grounds of sex, caste, community, descent, or religion. unicef has established gender & child cell (gcc) in ndma, pdmas and ddmas to provide strategies and line of action to all concerned stakeholders to minimize the vulnerability of women and children in disasters. 8. women & children based disaster management services in developed countries: the following organizations and agencies are providing their services for crisis and disaster review of economics and development studies, vol. 6 (3) 2020, 727-738 734 management:  red cross and federal emergency management agency (fema), usa  emergency management australia.  public safety canada  national crisis management centre (ncmc) (newzealand)  federal agency for technical relief, thw (germany)  agency for support and coordination of russian participation in international humanitarian operations” (emercom agency) of the ministry of civil defense and emergencies of the russian federation.  civil contingencies secretariat (uk) usa has developed online system of searching lost children/persons, searching shelter and to volunteer yourself, flood insurance is provided, gender & child-based doctors, food, planning, policy and training is provided, gender based equality in movement, access to information and knowledge is ensured, focus on wash services, women protection & priority in evacuation, gender disaggregated database management and registration of women headed households is provided. 9. women & child based disaster management services in pakistan: after 2015, the government has specifically ensured in disaster stricken areas the provision of child & women sensitive food hampers, priority to women & child in evacuation/rescue, separate temporary toilets for women, high energy biscuits, diets and milk for children, availability of female doctors, recreational activities/sports, toys and playing item for children and dresses for women, temporary schools in relief camps, district administration and officer’s presence for child and women protection and availability of hygiene kits. 10. gender based disaster management needs: there is a dire need to consider gender-based specific needs in the whole cycle of disaster management. gender-based disaster risk reduction (drr) and disaster risk management (drm) trainings shall be conducted at provincial (pdma) as well as district (ddma) level. women should be equipped with emergency services, skills and proper awareness about life saving skills at local level. proper early preparedness and training is tool which can reduce the magnitude and vulnerability of hazards at any level. beside the suppressed socio-economic status of women, emergency preparedness, evacuation training and life safety knowledge must be communicated to women at local level by involving lady teachers, lady health workers (lhv) and other community key professional women. policy and planning should be based on empirical evidence of research. there is need to use gender lens while reporting the situation and status of vulnerability of any area. women special needs and issues be considered in physical research and that research can prove a base for further policy and planning while including gender sensitivity. restoration is not only physical but also socio-economic. many working women become deprived of their outdoor jobs i.e. daily wages, fields work, teaching, nursing etc. or indoor jobs of crafting, sewing & stitching, and arts. due to disasters all their productivity and ways of earning come to an end and make them more vulnerable. alternative economic activities may be extended in relief camps for the best use of their skills and fearful mind. women should be priority in evacuation in rescue teams as they are physically sensitive and weak then man. women are more sensitive to exploitation, harassment and sexual abuse during the calamities. during evacuation and in relief camps, safety and security of women should be a top priority by emphasizing on separate women relief camps with adequate security and protection against wanderers. review of economics and development studies, vol. 6 (3) 2020, 727-738 735 trustworthy camp’s administration is hired. it is usually seen that in emergencies either there are no toilets or toilets with common use of both sexes. it can be dangerous in results. gender based separate toilets be arranged in relief camps by analyzing the special needs and sensitive position of women. relief camps may be preferred to be organized where separate bathroom facility is available. organization of gender based separate service centers, so women can also get relief items at equal level, not on the basis of power or dominance. micro finance services may be initiated by govt., ingos and ngos to alleviate the sufferings of working women, who were engaged in micro domestic economic activities i.e. carpet making, stitching, arts and design, handicrafts, livestock. women headed household must be included in provision of all services and provisions. in relief camps after disasters, temporary school camps may be organized so that girl’s education may remain continued. lady doctors may be appointed in relief camps for injured woman, in order to control diseases as disasters bring diseases and especially for pregnant women. private areas shall be provided for lactating mothers. all records must be managed for girls who were rescued, evacuated or injured and who were sent to different hospitals by ngos, ingos, government departments or volunteers. girl’s lost ratio and misuse can be minimized in this way. post disaster response and recovery information may be provided to women regarding how to manage things, from where to get relief services and how to get compensation services. in evacuation and rescue operation women and girls should be given priority to be evacuated. under newly established local government system, counsellors, nazims and lady workers of community including nurses, teachers and lhws should be utilized for awareness, disaster preparedness and evacuation related information sharing purpose. women headed household should be registered for compensation services. sops and policies should be formulated covering all above-mentioned points while having support with legislation. annual contingency plans may address the specific needs of women in context of gender. 11. child based disaster management needs: children are more vulnerable to violence, neglect, abuse and exploitation so their specific needs must be addressed in drr, drm and contingency plans. children headed household must be included for humanitarian services. children may be trained for disaster preparedness and response by girls guide and boys scout services. children need more balanced and healthy food for their growth in early stages so high energy biscuits, diets and sufficient milk packets may be included in relief services. child’s mind is more sensitive to bear any shock. all disasters, especially earthquakes lead toward emotional instability, psychological stress and fear. psychological relief by counseling and game therapies must be provided to children. child protection is an important issue during and after disasters as they are weak and have not sufficient knowledge of world (cognitive development). kidnapped, abused and misplaced children in disasters are much common phenomenon. a special focus should be poured on child protection and security. social welfare department in collaboration with child protection bureau should establish child protection centers in disaster areas to find and register lost children, also to protect them from evil minded persons and to search and handover them to their parents. otherwise, they should be kept in social welfare institutions of children welfare. temporary educational camps may be organized in relief camps so that children’s education may remain continued and also they can turn their minds from destruction. healthy recreational activities and sports may also be organized in camps so that children can get relief from shock of disasters. review of economics and development studies, vol. 6 (3) 2020, 727-738 736 according to international legislations, child sensitive disaster laws may be formulated in policy context. children are more sensitive to diseases as disasters bring polluted environment and children have weak defense system against diseases. child specialist may be there for regular check-ups. wash service’s (water, sanitation and hygiene) focus should be on children, who are more vulnerable to diseases. minimum one chapter regarding disaster awareness shall be included in primary and secondary level curriculum. hygiene conditions may be considered as disasters bring diseases due to damaged infrastructure, dust, no sanitation, infected water and food. in evacuation process, children may be evacuated on priority as they have low capacity in decision making and movement. all transported children to hospitals or other relief camps and places may be registered to avoid kidnapping, misplacement and abuse. communication assistance may be provided to children whoever requires it. incorporate childhood psychosocial recovery by school recovery programs. moreover, provide healthy environment and perform interventions to minimize pediatric psychological trauma. practical gender needs and strategic gender needs must be considered in all plans and policies. without these precautions & measures, it is understood that primary emergency brings the secondary emergency (figure-4). figure-4 12. application of fields of social work in disaster management: the figure-5 shows the roles and services can be provided by the social workers for disaster management at micro and macro levels, as social work education equip the professional social workers with all the requisite skills and knowledge that how they can support and rehabilitate disaster stricken communities, specially women and children. review of economics and development studies, vol. 6 (3) 2020, 727-738 737 figure-5 13. conclusion our plans and policies must aim at prioritizing and mainstreaming gender and integrating the concerns and needs of children and socially marginalized segments of society in humanitarian response and crises management. all interventions and policy initiatives must be gender & child sensitive. in whole cycle of disaster management, gender lens may be used in access, opportunities, resources, utilization and benefits. sensitization is required at individual, institutional and system level. references american red cross. (2009). "preparedness fast facts: emergency-specific preparedness information". america. anderson a.william. (2000). women and children facing disaster. world bank: new york. baig, fatima.(2014), “national policy guidelines on vulnerable groups in disasters”,bestlink international, ndma, islamabad, pakistan. ben wisner et al., (2004). at risk: natural hazards, people's vulnerability, and disasters, 2d ed. london: routledge. brenda phillips, maureen fordham (2010). introduction in social vulnerability to disasters, new york: crc press. bullock a. jane, haddow d. george, coppola p. damon (2011). managing children in disasters, new york: crc taylor & franics group. elaine enarson, betty hearn morrow. (1998). the gendered terrain of disaster. santa barbara: praeger/greenwood. enarson, e. (1998). through women’s eyes: a gendered research agenda for disaster social science.22 (2):157-73. fothergill, a.(1996). “gender risk and disasters”. international journal of emergencies and disasters. 14 (1):33-56. khondker, h.(1996). women and floods in bangladesh. international journal of mass emergencies and disasters. 14(3) 281-92. “national policy guidelines on vulnerable groups in disasters, ndma pakistan. retrieved fromhttp://www.ndma.gov.pk/new/documents/gcc_policy.pdf review of economics and development studies, vol. 6 (3) 2020, 727-738 738 ole larsen, julien oliver and erickson casiles lauza.(2014), “developing a disaster risk insurance framework for vulnerable communities in pakistan”. united nations. 16-05-2014un). oxfam gb.(2004) gender standards for humanitarian responses. london: oxford. russell r. dynes. (1994). community emergency planning: false assumptions and inappropriate analogies. international journal of mass emergencies and disasters. vol. 12. pp. 142. review of economics and development studies, vol. 6 (3) 2020, 639-650 639 role of training & development on employee retention and organizational commitment in the banking sector of pakistan muhammad aleem a , zulfiqar ahmad bowra b a hailey college of commerce, university of the punjab, lahore, pakistan email; aleem12884@yahoo.com b hailey college of commerce, university of the punjab, lahore, pakistan email; zulfiqar.hcc@pu.edu.pk article details abstract history: accepted 27 august 2020 available online 30 september 2020 the value of human capital can easily be increased with the help of training & development because investment made on personnel is very helpful for the success of the firms in the current competitive era to increase retention and commitment level of staff. the major objective of this study is to examine the role of training & development on employee retention and organizational commitment in the banking sector of pakistan. the population of the study consists of major eight banks of pakistan including islamic, foreign, public and private banks. the sequential exploratory design was followed where qualitative and quantitative data collection methods were used. purposive sampling was used for the interview while for questionnaire multistage sampling was used. the finding of the study clearly indicates that training & developments have significant affiliation and effect on employee retention and commitment. the training & development play a very vital role in employee career growth, compensation, skills enhancement and capacity building to provide quality services to the clients to achieve organizational objectives. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: retention, training, human capital, commitment, banks jel classification: j31, j24, e58, e59 doi: 10.47067/reads.v6i3.252 corresponding author’s email address: zulfiqar.hcc@pu.edu.pk 1. introduction employee retention is a mixture of different procedures, arrangement and policies which can retain the staff for a longer period (nasir et al., 2019). it is helpful to improve competitive advantages and increased the intellectual capabilities of the organization by reducing unnecessary expenditures on staffing and training. the retention of employees is the greatest challenge for the 21 st century which should be addressed properly (iqbal et al., 2017). in the developing countries, lower retention level is common due to many pull and push factors (najib et al., 2019), thus there is a need to focus on retention practices in these countries. the issue regarding retention of staff is also faced by pakistan being a developing country (ghulam et al., 2019). there is an acute shortage of skilled staff in every review of economics and development studies, vol. 6 (3) 2020, 639-650 640 field, thus this country is unable to achieve economic prosperity and sustainable development goals. the retention of staff is helpful for the organization in many ways i.e. loss of the relationship, reputation, monetary and talent (aman-ullah, aziz, et al. 2020). in the current era, every organization is pugnacious stiff to design such type of appropriate strategy that is helpful to reduce turnover and increase retention rate. the organizations have released that employee skills are the most important element for competitive advantages. many retention strategies are available which includes compensation, training, promotion etc. organizations have realized that competitive advantage could be attained with the help of a skilled workforce. some organizations focus on specialized training instead of general training so that the employees are unfit for competitors, while some other organizations cogitate that employee's skills and training are an investment that will provide a return in the shape of employee retention and commitment (sani 2012). employee retention and commitment are based on the proper planning of training by considering their needs and requirement (anvari et al., 2010). kyndt et al (2009) stated that training is a very important factor that is helpful to change the thought process of turnover. training & development has been greeted as a fundamental organizational strategy to influence human capital growth and employee retention (chen, 2014). human capital includes imperceptible resource time, efforts and ability that staff invests for the success of the organization. gratton and ghoshal (2003) stated that human capital includes emotional, social and intellectual capital. there are 4 m’s in the organization which are very important for the organization i.e. material, machines, money and men. nothing can be done efficiently and effectively without the involvement of manpower. organizations invest in training to increase organizational and individual performance. training whether mentally, intellectually, socially, physically are very important to facilitate the process to increase productivity as well as the development of staff in any organization. training & development is one of the major areas of hrm. training and development activities are a systematic effort by organizations to maintain and improve the quality of their workforce. training & development is a continuous process and take place in the organization on or off the job and increase the productivity and quality services to the clients. training is one of the major elements to improve and maintain the current job performance and development focus to increase employee skills for future or higher job (duah & danso, 2017). training of staff is an organized development of skills, attitudes and knowledge to perform the specific task efficiently and effectively (oluoch, 2013). it is a generally accepted principle for all types of organizations that training of staff is very important to prepare them to meet the current era challenges and to achieve the desired objectives of the organization with the help of relevant skills, experience and knowledge. training & development is very important and crucial factors to retain the employees in the organization for the long term. (oluoch, 2013; gupta, bostrom, & huber, 2010; aguinis, & kraiger, 2009). the training reduces the supervision cost and it also improves the quality, initiative and drives the movement of staff to complete the tasks to achieve organizational goals and competitiveness. for the success of the organization re-training and training of all staff should be compulsory in the form of seminars, conferences and workshops (duah & danso, 2017). the successful retention strategy is that which is helpful to the realm the knowledge within the organization. when an employee is leaving the organization, the knowledge gap is created. moreover, the organization also faces the issue regarding the reduction in productivity of the organization (chen, 2014). thus it is in the best interest of the organization to analyze the situation why employees are review of economics and development studies, vol. 6 (3) 2020, 639-650 641 leaving the organization. the benefits of the training are well documented in the literature which includes enhancing skill, productivity, decrease absenteeism accidents and wastage (chen, 2014). instead, to focus on empowerment there is a need to focus on training to improve employee performance. the most important benefit of training & development is the retention of an employee in the organization for the long term particularly for those employees who are ambitious and motivated for career growth in the specific sector (chen, 2014). in the current dynamic environment, mostly employees are interested to learn new things to take responsibility for career growth and earning. training plays a very important role to increase employee loyalty and commitment towards the organization because it is helpful for career growth. the current study is based on this fact that the banking sector growth is dependent on the growth and development of their hr. for sustainable development of the organization, there is a dire need to satisfy the customers and employee’s needs and demands. training & development of staff taking the organizations toward its destination to compete in the current era. there is a dire need for the organization to train its employees to enhance productivity and efficiency. thus the current study explores the intricacies of training & development of the staff working under fervent competition in the banking sector for staff retention to compete in the modern era. the major objective of the study is to explore the training practices and their role in employee retention and organizational commitment in the banking sector of pakistan. 2. literature review some years ago, many organizations were not interested to invest in the training due to involvement of high cost but due to recent competitive development, the alternative job opportunities are available in the market and that is the reason the organization focusing the need of training in the current era (kraimer et al. 2011). if the organization desired that the organizational income should not reduce then there is to need to reduce the turnover of staff. (omoikhudu, 2017). the retention of staff is better than the hiring of staff in the organization because it is the most appropriate strategy to encourage all employees to work in the organization for the long term ( ratna and chawla, 2012). the retention of an employee is a great challenge for the employees in the current era and many organizations lose their best employees due to poor management (kavittha et, al., 2011). it is a major loss for any organization when trained employees leave the organization and it also affects the loyalty and commitment of other staff. the employees who leave the organization also take away the secret and knowledge belonging to the current organization for the benefit of another organization (jaseel 2019). 3. training & development training & development is one of the most important retention strategies and it is very useful for companies working in the modern era (govaerts et al., 2011). the new employees feel comfortable in the new environment due to training and not frustrated at the start of a job which is helpful to perform his duties efficiently and effectively. the organization can increase retention and productivity level by using ample training programs in the current global competitive world (ngethe, 2013). this can be achieved only by spending huge money to enhance employee experiences, information, skills, competence which are harmonious with the swift and compound mutable environment. the continuous training programs in the firms give a message to the staff that the organization is giving weightage to them for increase their skills which ultimately enhances commitment and retention level toward the current organization (dockel, 2003). it is an investment for development review of economics and development studies, vol. 6 (3) 2020, 639-650 642 and enhancement of employee’s skills which have a significant impact on employee retention (el sagheir nm 2014; mishra s 2013; nirmala n 2015; thite & russel, 2010; sinha r, 2012). the suitable training practices increase the retention of staff because it strengthens them. (kyndt, et al., 2009; visser, 2001). the employee feels motivated and cherished because of additional skills and the researcher stated there is a strong association between employee retention and training & development(neog and barua 2015; gul, akbar et al. 2012; perera, 2019, wijesiri et al., 2019). the following hypothesis is developed to find out the role of training & development. h1: training & development has a significant role on employee retention in the banking sector of pakistan. training & development is one of the major factors effecting organizational commitment and there is a strong association between these variables (ab, rahman, et al., 2012). the training practices of the organization create a good image and repute of the firms to fascinate the preeminent applicants to join it (mcelroy, 2001). when the organization is investing in the employee in the shape of training, it gives a message to the staff that the organization is committed to enhancing employee skills for competition. in reciprocal of this investment, the staff is also committed to the firms for the long term (arlond, 2005; bernsen et al., 2009). ghazanfar, chuanmin et al. (2012) conducted a study on the banking sector and concluded that there is a strong association between commitment and training. when the organizations make spending on the organization it will attract the employees emotionally, which increases their level of commitment (jeet and sayeed 2014). many researchers argued that there is a strong and significant effect of training on organizational commitment (eunice, 2014; piyasena, 2016; hassan and mahmood, 2016; coffie et al., 2018). the following hypothesis is developed to find out the role of training & development. h2: training & development has a significant role on organizational commitment in the banking sector of pakistan. 4. theoretical framework based on literature the following theoretical framework is developed. 5. methodology the mixed-method approach was used for data collection to validate the research findings through quantitative and qualitative methods. the population of the current study is human resource organization al commitment employee retention training & development review of economics and development studies, vol. 6 (3) 2020, 639-650 643 managers and managerial level employees working in the banking sector of pakistan. the data was collected from the major eight banks of pakistan including foreign, islamic, private and public sector. 24 interviews were carried out form the hr managers through purposive sampling techniques by selecting three managers from each category of the bank. the quantitative data was collected with the help of adapted questionnaires by using multistage sampling techniques. the sample size was 480 which were calculated based on the model provided by krejcie & morgan (1970). 60 participants were selected from each bank based on stratified random sampling which was based on gender, level of management and job status for a true representation of the population. the cronbach alpha value of the questionnaire was more than 0.70 which indicated that the instrument was reliable for data collection. the response rate was 79 % which was considered very good for analysis. the qualitative analysis was made by nvivo software by developing themes and nodes. the quantitative analysis was made by spss using descriptive, correlation, reliabilities and regression equation. 6. findings of the study the qualitative and quantitative findings of the study are discussed below briefly. 6.1 qualitative analysis the question was asked from the respondents whether the bank is making an investment in the shape of training & development and what is its role for retention and commitment of staff in banks. the managers responded that training plays a very vital role to retain the employees long term in the banking sector because staff required as per the requirement of the market and industry to gain competitive advantages. the response from one of the manager regarding importance of training is as under. “the training is being conducted regularly and quarterly training is being provided as per instructions of state bank of pakistan. in case of any new system, latest version, it software the training is being arranged in the lahore. after getting new skills and training, the employee feels motivated because he considers that the management has trusted him to enhance his skills to increase his performance. due to training his commitment and loyalty also increase because they feel that the bank gives them a priority by giving them training”. the training practices are the regular feature of each bank. the response of another participant is as under. “there is a proper training mechanism in this bank. the training is being arranged at local, regional and head office level as per the requirement of the employees. the training also plays an important role in employee retention and commitment”. the response from one of the interview participants is as under. "the bank is spending a lot of money on employee training. the banks also ensured that in case of leaving the employee he will bear the training expenditures. the training plays a very important role to increase employee loyalty, satisfaction, motivation and commitment because training has a direct link with the monetary benefits in terms of promotion and career growth. during the interview from the hr manager, it is perceived that fresh employees are more review of economics and development studies, vol. 6 (3) 2020, 639-650 644 motivated and committed with the training programs as compare to experienced persons. the manager of the foreign bank stated their bank is giving due importance to the training to enhance employee commitment and retention. "the training & development facilities are helpful to provide guidelines, policies, product knowledge, grooming, rules & regulation. the training session is being arranged regularly based on need assessment. the training programs are based on the performance appraisal of the employees. after completion of training the test is also being arranged whether the participant gets knowledge from the training or not and its results are shared online with the entire staff member to see the progress of the particular individual in the training. thus employees give due attention to the training. at the start of the year, the schedule of training is being issued in the public sector. the training is being arranged to enhance capacity building and specialized training on different issues i.e. general sale tax matters, income tax, revenue matters and any new scheme provided by the govt. the following figure 1 indicates the factors which have a direct and indirect effect to increase the retention level of employees in the banking sector of pakistan. figure 1: role of training & development the training is not only necessary to enhance skills and knowledge but it is more important for the new workforce to provide information and rules about banking products and services. if an employee has poor knowledge about products and services then it is very difficult for him to satisfy and review of economics and development studies, vol. 6 (3) 2020, 639-650 645 retain the customer with the bank for a long time. in view of the above discussion, it is clear that training plays a very vital role to retain the employees in the bank for a longer period. 6.2 descriptive statistics the following table provides the descriptive statistics of variables. table1: descriptive statistics the average mean score of training, commitment and retention is equal to 4 which mean that the respondents are satisfied with these variables. the median value also indicates the 4 scores and as per the questionnaire, it is on the agreed point of likert scale. 6.3 correlation the correlation analysis has been carried out to find the relationship between training & development and employee retention. the range of the correlation falls between -1 to 1 from perfect negative to a positive correlation. table 2: correlations between t&d and retention retention training & dev. retention 1 .163 ** training & dev. .163 ** 1 the value of correlation is 0.163** in above table 2 indicate that there is a significant association between these two variables in the banking sector of pakistan. there is a direct association between these variables which means that change in training will effect directly on employee retention. the results are in line with the previous finding of neog & barua (2015). 6.4 regression analysis the regression analysis is made to find out the evidence of linear effect and association between retention and training & development. the following table provides the results of the regression equation. review of economics and development studies, vol. 6 (3) 2020, 639-650 646 table 3: regression analysis of retention r r square standard error f sig. .455 a .225 .726498 98.909 . 000a independent variable beta t-value sig. (constant) training & development .455 15.989 9.945 .000 .001 the above regression table 3 shows that one unit change in training will change the retention level by 0.455 in the banking sector of pakistan. r square indicates the explanatory power of the model which illuminates that 23% variation in the dependent variable is explained by the training & development and the remaining change may be explained by other practices and policies. f ratio is 98.909 which indicate that the regression equation is significant statistically. the p-value is significant at less than 0.01 which clearly indicates that training & development has a significant role to increase employee retention and we accept the alternative hypothesis. the finding of the study is also matched with the results found by hussain & rehman (2013) wherein t value is significant at 5% level of significance. 6.5 correlations analysis between training & development and organization commitment the following table displays the correlation matrix of organizational commitment and training & development. table 4: correlations between t&d and organizational commitment org.commit training & dev org.commit 1 .123 * training & dev. .123 * 1 the above table shows the significant association between these two variables because the value of r is .0123*, p<0.5. the results of this study are also matched with the previous study conducted by t.mangaleswaran & p.t srinivasan (2015). 6.6 regression analysis the following table provides the results of the regression equation to identify the role of training & development on organizational commitment. review of economics and development studies, vol. 6 (3) 2020, 639-650 647 table 5: regression analysis of organizational commitment r r square standard error f sig. .411 .206 .79143 76.903 . 000a independent variable beta t-value sig. (constant) training & dev .411 16.273 18.769 .000 .016 the results of the regression table also endorse the finding of the correlation matrix and it is concluded that training & development has a significant role and effect on organizational commitment. the beta value is 0.411 which is significant at 5% and the results of this study are also supported by the previous study conducted by meyer et al., 2004. the f value is also significant at 1% which is an indication of a good model fit. 7. discussion in the banking sector of pakistan, the training & development practices are the regular exercise to enhance employee knowledge, skills and experiences. the qualitative and quantitative results clearly indicate that training & developments have a significant effect on employee retention and commitment and these variables have a strong association. however, there is a need of proper assessment before arranging training programs instead to repeat the training programs again and again. the finding of the study is also matched with the previous authors (liang, 2015; cloutier and felusiak 2015; ghazanfar et al., 2012). the staff feels motivated, committed and secured when they get training on the expenses of the banks which give a clear indication of their importance for the bank, which ultimately has a significant effect on their retention and commitment. the competitors are willing and attract the trained employee to get a competitive advantage to achieve organizational objectives, therefore organization focus on training to reduce turnover of staff. 8. implication training & development practices have a substantive effect and association on commitment and employee retention, thus there is a dire need to invest in the training to increase commitment and retention in the banking sector of pakistan. there should be continuous and consistent training programs as per the local needs and requirements of the employees to provide efficient and quality services to the customer based on skills and expertise. the foreign banks decide on the basis of performance appraisal regarding training which should be adopted to other banks. it should also be linked with the promotion and career growth of the staff. the survey should also be conducted after the training whether it improves the employees’ skills and capabilities and if there are no changes then there is a need to revise the training schedule as per proper need assessment. training is helpful to provided quality services as per the expectation of the management and customers. 9. conclusions it is concluded from the above discussion the human capital is one of the most important review of economics and development studies, vol. 6 (3) 2020, 639-650 648 elements for the organization's success in the current knowledge economy because it is irreplaceable resource equipped with skills, experience and knowledge skill to make valuable virtues. training develops a feeling of obligation in the employees and reciprocally employees make committed to the organization. when employees are obliged and committed they will stay in the organization for the long term. due to training, the staff feels that the organization has trust and supports them which decrease employee turnover intention. the training is an investment that ultimately provides the return to the organization. the training & development also play important role in promotion, compensation, motivation, loyalty, product knowledge, grooming, skills, job requirement, motivation and understanding the rules & regulations of the bank. 10. future direction in the current study we have considered only one hr practices and in future other practices i.e. job security, leadership, working environment, compensation etc. should also be considered to identify its role on retention and commitment. the demographical variables are also important in commitment and retention which have been ignored in the current study. the comparative study of different sector regarding training & development should also be made and this factor can also be study in any other sector to generalize the finding. references ab rahman, r. 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(2001). succesvol verander management door appreciative inquiry retrieved 2011, january 1, from http://m-cc.nl/succesvolverandermanagement.pdf wijesiri nrass, paranagama gs, sirirwardhana mmas, thilakarathna dlnc, weerarathna rs, pathirana upgy (2019). the impact of hr practices on employee retention; a case of bpo sector, sri lanka international journal of human resource studies issn 2162-3058 2019, vol. 9, no. 1. http://ijhrs.macrothink.org http://m-cc.nl/succesvolverandermanagement.pdf review of economics and development studies vol. 5, no 1, march 2019 197 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads the paradox of managerial dividend policy in corporate malaysia 1 muhammad farhan basheer, 2 muhammad haroon hafeez , 3 raza ali, 4 shahzad akhtar 1 school of economics, finance & banking,college of business (cob), university utara malaysia, malaysia 2 lecturer, institute of management sciences ,bahauddin zakariya university, multan, pakistan, haroonhafeez@bzu.edu.pk 3 assistant professor, institute of management sciences, bahauddin zakariya university, multan, pakistan 4 lecturer, institute of management sciences, bahauddin zakariya university, multan, pakistan article details abstract history revised format: february 2019 available online: march 2019 the prime objective of this paper is to survey the managers of bursa malaysia listed non-financial firms and to divulge their views regarding the significance of various potential factors that may affect dividend decisions. in addition to that, we are also interested in highlighting that how managerial perception about the importance of these factors varies from country to country. our next objective is to know the level of importance, malaysian managers give to dividend processes and pattern, firm value. dividend policy (dp) and residual dividend policy (rdp). finally, we are interested in measuring the level of support that malaysian managers provide for different justifications for the payment of dividends. survey instrument including a cover letter was mailed to chief finance officers (cfo) and finance managers of 493 bursa malaysia listed firms in october 2017. in the cover letter, a request was made to all respondents that in case of their non-involvement in dividend decision the letter must be forwarded to concerned authority involved in dividend decisions. the response rate of the current study is 40.09 percent (202 out of 493 firms). the study has used a mail survey of bursa malaysia listed non-financial firms that have paid at least one cash dividend during the period of 2013-2016 as a primary means of collecting data. no single pattern in rankings of factors among different countries has emerged. however, like their american, canadian and indonesian counterparts, according to malaysian managers, dividend decisions have a significant effect on firm value. although, a great deal of support has already been established with all dividend theories, however clientele and agency theory has proven to be the strongest one. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords devolution dividend policy, firm value, malaysia. jel classification: d20, d21, d22 corresponding author’s email address: haroonhafeez@bzu.edu.pk recommended citation: basheer, m. f., hafeez , m. h., ali, r., and akhtar, s., (2019). women the paradox of managerial dividend policy in corporate malaysia, review of economics and development studies, 5(1), 197-204 doi: 10.26710/reads.v5i1.394 1. introduction the dividend payment, leverage, and cash holding decisions are at the heart of agency theory. throughout the previous century the corporate finance has been confronting the issues related to principle-agent conflicts and the possibilities regarding alignment of interest, however scientists have failed to work out any single solution so far. dividend policy (dp) is one of the most important issues in modern financial literature. it has turned out to be one of the most interesting and extensively researched topics among all. dp is regarded as one of the most debated http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 198 subjects in finance among researchers. this situation has led to the emergence of a number of researchers who focused their attention to explicate different theoretical explanations about dividend policy. in previous studies, the majority of the empirical work did not have sufficient explanations regarding the dp matters and corporate values in firms (baker, kilincarslan & arsal, 2017). dp can be defined as a company’s policy which determines the amount of dividend payment and also the amount of retained earnings, a firm wants to invest back in a new business project. though researchers have used a variety of theoretical models such as bird in hand theory, signaling theory, tax and clientele effect, and agency theory and employed different normative and idiosyncratic approaches to determine the factors which affect the dividend policy. however, still, they are unable to answer how firms decide between highly taxed capital gains and cash distributions. linter (1956) carried out a survey research and concluded that the managers of the companies considered three factors to be most crucial while making dividend decisions. firstly, they decided a target payout ratio by agreeing upon the distribution of the portion of their income after tax. secondly, the dividend pattern and payout ratio had to be dynamic and adjustable to change in income. lastly, mangers in linter surveys were more concerned about the changes in divided rather than leveraging the dividends. recently, felimban, floros, & nguyen (2018) argued that the dpof the company should be formulated by keeping in mind the following criterion a) investment opportunities, b) degree of financial leverage, c) stability in earning, d) the alternative sources of capital and the stakeholders’ characteristics. the current study is founded on the counter arguments broached by the miller and modigliani (1961), in which they claimed that the dp has no effect on the market value of the firm. in an effort to explore the managerial views for dividend policy, the current study has employed a survey method and has visited the mangers of malaysian nonfinancial firms listed on bursa malaysia. previous studies on the issues of dividend policies have already covered many aspects of dividends such as the effects of dividend payout on firm value, reasons for firms paying dividends, the determinants of dp and dividend trends and many other aspects. in addition, there were various characteristics in firms and markets that have been used in earlier research and have become important factors which have high potential in determining the dp of a firm. the current research is carried out to achieve the following research objectives. level of importance by malaysian non-financial firms to different factors that explain a firm’s dividend decisions. secondly, we have also compared the level of agreement to these factors by malaysian managers with those of their occupational community members from other countries. in addition to that, this study highlights the perspective of malaysian manufacturing firm’s managers regarding dividend process, pattern, firm value and rdp. finally, we are interested in measuring the level of support that malaysian managers give to various explanations for paying dividends. 2. literature review the issue came on the surface, after the proposition of irrelevance hypothesis by mm in 1958, in which it was proposed that in a perforce market with no cost, the dividend decisions are irrelevant to firm value. later many researchers (lasfer, 1995; woolridge & ghosh, 1985; soter et al., 1996; bell & jenkinson, 2002; basheer et al., 2014; shi et al., 2017; basheer et al., 2019) have shown a disagreement with mm, and argued that in real world, because of opportunity cost, transaction cost, agency cost, and other costs the corporate financial decisions including dividend has a significant impact on the firm value. in line with the conclusion of fama and french (2001), baker and wurgler (2004b) found that firms now have a tendency to pay fewer dividends. baker and ridder (2004) further clarify the nature of the dividend disappearance supported by fama and french (2001). they showed that although the number of dividend payers was reduced by 50%, total dividend payout by industrial firms has in fact increased between 1978 and 2000. they pointed out that dividends have become more concentrated among a few players where 81.8% of dividends are distributed by the first 100 dividend paying firms. the authors conclude that dividend patterns are changing but not disappearing. they argued that the decreasing trend of dividend-paying firms is primarily caused by the firms distributing small dividends. therefore, the impact of nonpayment by such firms is not felt by the 'dividend supply'. the finding shows that the dividend payout by the large firms continued to increase and it was argued further that this increase even nullified the effect of nonpayment by the small firms. deangelo et al. (2004) also provide strong evidence for lintner's model as findings revealed that dividend increase comes from earnings’ increase; therefore, dividend concentration also follows earnings concentration. unlike the previous studies which have excluded financial and utility firms due to their unique regulatory structure, deangelo et al. (2004) demonstrate that the number of dividend payers in these firms review of economics and development studies vol. 5, no 1, march 2019 199 has increased by 9.5% over the period studied. this implies that reduced propensity to pay dividends is limited to industrial firms. lintner (1956) documents that earnings and previous dividends are the most important determinants of dividend payout decisions. empirical studies have provided further evidence on the importance of these variables. earnings are positively and significantly related to dividends (ameer, 2007). chemmanur, he, hu, and liu (2010) argued that firms are reluctant to reduce dividend levels even when there are insufficient internal funds to finance good investment opportunities. they documented that past dividend is positively and significantly related to current dividend policy. this finding was confirmed by bradford et al. (2013). the relationship between past dividend and the current dividend has been used to explain the concept of dividend smoothing by lintner (1956). thus, dividend smoothing involves maintaining a relatively constant rate of dividend from one period to another. studies have shown that there are costs associated with dividend smoothing as some managers forego profitable investments or even seek external financing in order to maintain stable dividend levels (zurigat & gharaibeh, 2011). cash flow is another determinant of the dividend. on one hand, prior studies have confirmed the free cash flow hypothesis by showing that failure to pay out free cash flow as dividends results in its diversion or misuse . thus, dividend payout increases with higher levels of free cash flow. from another perspective, adelegan (2003) argued that cash flow is superior to earnings in explaining dividends due to two reasons: the possibility of manipulating the accruals component of earnings. therefore, cash flow is reported to be positively related to dividends. in answer to the question, which factors affect the dividend policy, the corporate finance literature has developed and used different theories. the detail of these theories is given in the next section. 2.1 dividend theories as previous studies have established that the researchers have been using different theoretical models in identifying different factors which explain the firm dividend decisions. notwithstanding, there are many theoretical models used to answer these questions. however, we have discussed the four widely used theories which are bird in hand theory, agency theory, signaling theory, and tax preference theory. 2.1.1 bird-in-hand theory the bird hand explanation of dividend supports an investor’s preference regarding continuous dividend and in contradiction to the tax theory it argues that the cash in hand through the dividend is better than the capital gains through re-investing (baker et al., 2017). the theory was given by gordon (1962) and is based on a famous proverb that a bird in hand is better than the two in bushes. 2.1.2 the signaling explanation signaling theory was pioneered by akerlof (1970) and generalized by spencer (1973). their work forms the basis for models later developed on signaling theory of dividend (also referred to as the signaling hypothesis). the prominent signaling models were developed by bhattacharya (1979). the signaling theory of dividend proposed that dividend announcement relay information to investors regarding the firm's future prospects (baker et al., 2017). 2.1.3 tax and clientele effects dividend clientele refers to a group of investors with a preference for a particular dpthat best suits their interests (qammar et al., 2017). this theory explains the fact that the different groups of investors have preferences for the varying policies of a company and the tax policies of countries. as a result, investors alter their shareholdings in response to changes in company policies and this has an effect on the share prices (renneboog & szilagyi, 2015). 2.1.4 agency theory agency theory of dividends is a theory that is concerned with resolving problems that emerge from agency relationships (basheer, 2014). jensen and meckling (1976) in their pioneering work of agency theory of dividends showed that agency costs arise from the differing objectives of the managers and the shareholders. easterbrook (1984) and jensen’s (1986) models theorize that dividends play an important role in mitigating the agency issues between managers and the shareholders. review of economics and development studies vol. 5, no 1, march 2019 200 2.1.5 maturity hypothesis mueller (1972) propounded the life-cycle theory of the firm. the life cycle theory of dividend explains that the corporate payout policy of a firm varies over the different stages of its financial life cycle ( fama & french, 2001). the theory extends the explanation jensen (1986), who propsed the free cash flow hypothesi. based on the life cycle theory, availability of free cash flow for onward disbursement to shareholders as dividends depends on the stage a firm has attained in its financial life cycle. 2.1.6 catering theory this theory gave momentum to the behavioral arguments used to explain dividend decisions by shefrin and statman (1984). according to shefrin and statman (1984) investor's preference for dividends by putting up reasons why dividend and capital gains cannot be regarded as perfect substitutes. baker and wurgler (2004a) hypothesized that payment of dividend is influenced by investor's demand for the dividend. 2.1.7 linter model this hypothesis which establishes the importance of dividend stability derives from the survey evidence provided in the seminal work of lintner (1956). lintner's (1956) findings revealed that firms are largely concerned about maintaining stable dividend levels. 3. research design 3.1 survey instrument the study is among the pioneering studies carried out to explore the managerial perspective of malaysian firms. to achieve the research objectives the study has employed the survey questionnaire developed and used by baker et al., (2012) recently confirmed by baker et al., (2017). the third section is examining the level of agreement is amended by adding three more explanation and amended is followed by the recent work of baker et al., (2017). the instrument is composed of three sections in the first section the managers are asked to present their views on the significance (which is measured from 0=none to 3=very high ) of 22 factors which affect the formulation of dividend policy. the second section is managers of malaysian firms are requested to presents their level of agreement on issues such as dividend process, dividend pattern, dividend, and firm value and residual dp involving dividend policy. in the third and final section, the managers of malaysian manufacturing firms have shown their level of agreement with the different theoretical explanation given for dividend payment policy. for the sake of collection of data, we have used the mail survey. 3.2 sample and response rate initially, all manufacturing firms listed on the bursa malaysia were chosen as a sample of the study. however, a later firm with at least two dividends in the last three years are selected as the final sample of the study, so the final sample is comprised of 493 firms. the data of dividend payment is collected from the firm’s annual reports. survey instrument including a cover letter was mailed to chief finance officers (cfo) and finance managers of 493 kse listed firms in october 2017. the response rate of the current study is 40.09 percent (202 out of 493 firms). 4. results and discussion 4.1 respondents and firm profile to know the profile of respondents and their firms six background questions were asked. when asked about the most influential personality in firm’s dp formulation, 89 percent replied he is ceo .78 percent of the firms are paying dividend annually.53 percent firms has an explicit payout ratio.94 percent of the respondent are actively involved in dp development and 66 percent respondent are finance managers. 4.2 determinants of dp the prime objective of the current study is to identify the level of importance given by the malaysian managers to the factors which determine the dp in the malaysian firms. we have employed the t-test to measure the mean difference in the responses of managers. the result of the study is reported in table 1. it is evident from the findings of the study that, the malaysian managers have considered the stability of earning as topmost consideration while the liquidity constraints of the firms and the predictability of future cash flow as second most important. these results are in line with propositions that the liquidity and uncertainty in cash flows arising because of economic turbulence are the most important factors which affect the dividend decisions of malaysian managers.these findings of the study are consistent with previous findings baker et al. (2017), baker et al (2012), and baker et al. (2010) basheer (2019). review of economics and development studies vol. 5, no 1, march 2019 201 the second objective of the current study is to compare the importance of these factors given by malaysian managers with the manager of other countries. the result of the current study is compared with the studies carried out on the sample of turkish, usa, canadian and indonesian firms. though malaysian managers have shown a great deal of agreement with their occupational community members working in turkish, usa, canadian and indonesian firms. however, there is no single pattern emerges. malaysian managers ranked f1, f14, f11, f3, f2, and f10 consecutively at the top. but the ranking of f4, f8, and f5, f9 is lower i.e malaysian manager consider expected future earning and target capital structure less important in determining dividend policy. moreover, ranking of f14, f11, and f10 is significantly higher than other financial markets which indicates that for malaysian manufacturing firms factors such as needs of current shareholders, availability of cash and the future state of the economy. table 1: the level of importance given by malaysian manufacturing firms mangers to the factors affecting the dividend policy in corporate malaysia (dp) 4.3 managerial issues related to dividend the current study is to examine the malaysian manager's views regarding dividend policy, dividend patterns, rdp, and firm value. the findings are reported in table 2. the result reported in table 2 highlights that the malaysian managers are agreeing with the explanation provided by linter’s (1956) behavioral model, as majority investors agreed on the fact that a stable investor will rate stable dividends more than the stable payout. similarly, it is evident from the results that a stream of the dividend is preferable in the eyes of investors and managers consider it most important while deciding about the dividend. the 87 percent of respondents are agreed on the fact that the firms should go for a stable dividend if there is no major shift in earning, and for this firm must have a target payout ratio. in panel 2, results related to dividend pattern are discussed, the results are positive and significant, which indicates that the dividend pattern has a significant impact on the dividend decisions of the managers of the malaysian listed non-financial firms. in panel 3 the results related to the impact of dp on firm value are reported. the result of the study has shown a great deal of agreement with the fact that in the real market the dividend decisions have a level of importance none low moderate high mean rank no 0 1 2 3 bm idx nyse nasdaq tsx bist 1 0 10 40 150 2.70 1 1 6 2 2 2 14 2 6 84 108 2.49 2 6 10 9 9 14 11 2 8 90 100 2.44 3 4 8 14 5 3 3 0 8 52 140 2.66 4 2 15 3 4 1 2 2 10 52 136 2.61 5 7 3 1 3 5 10 6 10 80 104 2.41 6 8 18 18 17 8 4 4 20 72 104 2.38 7 3 1.5 4 1 4 8 0 20 96 84 2.32 8 18 13 11 10 na 5 2 18 102 78 2.27 9 5 4 5 7 12 6 2 18 102 74 2.24 9 13.5 na 10 8 10 13 4 22 104 70 2.23 9 10 9 7 6 7 17 2 38 90 70 2.14 12 21.5 5 8 12 15 16 2 48 88 62 2.05 13 13.5 19 20 21 19 9 8 50 84 58 1.96 14 19 11 6 13 6 12 8 60 80 52 1.88 15 17 14 13 18 20 18 6 68 76 50 1.85 16 20 16 12 19 na 7 22 64 70 44 1.68 17 12 na 17 15 13 20 4 96 66 36 1.50 18 9 7 15 11 9 15 32 94 60 34 1.41 19 15 15 21 20 na 21 20 96 48 36 1.32 19 11 na 16 16 17 22 24 100 44 32 1.26 19 21.5 17 22 22 na 19 42 98 40 20 0.99 22 16 12 19 14 16 review of economics and development studies vol. 5, no 1, march 2019 202 significant impact on the firm value of malaysian listed non-financial firms. in panel 4 the result related to residual dp are reported. the findings of the study highlight the fact that according to the malaysian mangers the investment opportunities, is significantly linked with the financing decisions and ultimately affect the firm dividend decision. table 2: level of agreement shown by the malaysian manufacturing firms mangers on issues related to dividend policy 4.4 the reasons for paying dividends the endmost objective of the current study is to explore, the agreement of malaysian managers with the theoretical exploitation. the results are reported in table 3. the results of the panel a are indicating that malaysian managers consider bird in hand explanation as for the logical explanation behind dividend decisions. whereas the results of the second section provide support to signaling theory. according to the signaling theory, the investors consider dividend as a signals to distinguish a performing, underperforming and non-performing firms. meanwhile, according to malasyain managers, the dividend payment are key determinants of the stock price. the investor uses these signals to distinguish between a performing and non-performing firm. malaysian managers consider dividend as an important determinant of stock price (i19, i20). malaysian firm managers consider dividend decisions as a signal of firm future decisions (i18, i17). the results of i22 and i21 indicate that malaysian managers have placed moderate importance on information asymmetry. responses of i24 show that malaysian managers consider a tax on cash dividend as important determents of dividend policy. malaysian managers have placed a moderate agreement with i25 which means that malaysian investors generally prefer to invest in the firm who’s dp supports their tax preferences. overall results (i24, i25) reveal the fact that managers of kse firms are aware of clientele effect, and the significant results are consistent with kester et al. (1995-1996). the results reported in panel d (i27) showing the agreement with agency. however, disagreement has been shown with the notion that dividend payments force managers to increase external financing (debt or equity). the results of the panel e are providing support to the intermodal which argues that the investors put a high premium on firms that have a stable dividend policy, and this is reflected in the higher valuation of the firm by the market. similarly, the result of section f is showing consistency with the maturity hypothesis which is based on the life cycle theory. based on the life cycle theory, availability of free cash flow for onward disbursement to shareholders as dividends depend on the stage a firm has attained in its financial life cycle. there are different indicators of the stage of a firm in its financial lifecycle. finally, the malaysian managers seem agreed with the explanation of the catering theory. table 3: level of support that malaysian manufacturing firms mangers provide to various theoretical justification for paying dividends sr. no. t-value mean sr. no. t-value mean panel a bird in hand theory panel d agency theory i16 4.998*** 1.1900 i27 4.208*** 1.2400 panel b signaling theory i26 -0.840*** -0.200 i20 5.712*** 1.3600 panel e linter partial adjustment model i19 5.250*** 1.2500 i30 4.023*** 1.143 122 3.864*** 0.9200 i28 4.001*** 1.123 sr. no t-value mean sr. no t-value mean panel 1 dividend process panel 3 dpand firm value i8 4.568*** 1.5400 i9 4.964*** 1.4200 i7 4.332*** 1.4600 i10 4.376*** 1.2800 i6 3.394*** 1.0700 i13 3.326*** 1.0300 i5 2.402*** 0.8100 i15 2.486*** 0.8300 i4 2.026*** 0.5300 i11 1.312*** 0.3600 panel 2 dividend pattern panel 4 rdp i1 4.628*** 1.3400 i14 4.090*** 1.4500 i2 4.292*** 1.2600 i12 2.142*** 0.5100 review of economics and development studies vol. 5, no 1, march 2019 203 121 5.944*** 0.6900 i29 3.765*** 1.023 i18 2.898*** 0.4000 i32 3.105*** 0.985 i17 0.462*** 0.1100 i31 2.765*** 0.754 panel c tax and cliental affect panel f substitute model of dividend i24 4.662*** 1.1100 i33 3.978*** 1.123 125 2.100*** 0.5000 panel g catering theory i36 4.234*** 1.456 5. conclusion the current research is carried out to achieve the following research objectives. firstly, the level of importance by malaysian non-financial firms to different factors that explain a firm’s dividend decisions. secondly, we have also compared the level of agreement to these factors by malaysian managers with those of their occupational community members from other countries. in addition to that, how the manager of malaysian manufacturing firm views the dividend process, pattern, firm value and rdp. lastly, we are also keen in knowing how the managers of non-financial malaysian firms view the theoretical explanation of paying dividend. in author knowledge, this is the first study to explore the managerial view of dividend policy. the first objective of this study deals with the identification of factors, which for malaysian managers are most important in formulation firm’s dividend policy. this study has provided support to the real market hypothesis (baker et al., 2017), and argued that the real market the dividend decisions have a significant impact on the firm value of malaysian listed non-financial firms. the malaysian mangers has provided support to the hypothesized result and confirmed that the investment opportunities, are significantly linked with the financing decisions and ultimately affect the firm dividend decision and firm value. according to malaysian managers, bird in hand and signaling theory are most viable explanation of deterring a dividend policy. the malaysian mangers are agreed that there are different indicators of the stage of a firm in its financial lifecycle and provided support to catering theory. the study has employed a survey-based method and visited the managers of malaysian non-financial firms listed on bursa malaysia. the results are shown in table 1, 2 and. results indicate that malaysian manager has shown a great deal of agreement with the academic community. references baker, h. k., & weigand, r. 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(1973). agromyzidae (diptera) of economic importance (vol. 9). springer science & business media. review of economics and development studies, vol. 6 (2) 2020, 461-470 461 the lucas paradox and institutional quality: evidence from emerging markets a muhammad atiq-ur-rehman, b allah ditta, c muhammad atif nawaz, d furrukh bashir a assistant professor of economics, higher education department, government of the punjab lahore, pakistan email: atiq164@live.com b assistant professor of economics, higher education department, government of the punjab lahore, pakistan c lecturer, department of economics, the islamia university of bahawalpur, pakistan email: atif.nawaz.baloch@gmail.com d assistant professor, school of economics, bahauddin zakariya university, multan, pakistan email: furrukh@bzu.edu.pk article details abstract history: accepted 23 may 2020 available online 15 june 2020 the neoclassical theory illustrates that the capital will flow from the capital-rich economies towards the capital-poor states. however, it is generally observed that the capital does not move from high-income to low-income economies. this contradictory behavior of global capital flows is called the lucas paradox. according to alfaro, kalemli-ozcan, & volosovych (akv) model, the lucas paradox can be entirely explained by the institutional quality. in the light of akv notion, this paper examines the role of institutional quality in explaining the lucas paradox. the empirical analysis involves 17 major emerging economies of the world by using panel data for the period 1999-2018. the gmm estimation reveals that the lucas paradox is explained by the institutional quality in case of fdi flows only. however, institutional quality indicators generally remain unable to explain the paradox in case of portfolio equity capital flows. moreover, financial development is found to be a significant determinant of portfolio equity flows in the emerging markets. finally, we suggest that the financial flows to the emerging markets are sensitive to the nature of the capital flows. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: lucas paradox; institutions, capital flows; foreign direct investment jel classification: f21, f34, f41, f2 doi: 10.47067/reads.v6i2.223 corresponding author’s email address: furrukh@bzu.edu.pk 1. introduction there are two different schools of thought explaining the impact of capital account openness on capital flows across countries, first neoclassical theory and second the lucas paradox. according to the neoclassical view, liberalization of capital flows should cause capital to move from the rich nations to the poor ones. the marginal product of capital (mpk) tends to be higher in low-income countries due to lack of capital. the differences in the mpk should incentivize the investors to invest in low-income review of economics and development studies, vol. 6 (2) 2020, 461-470 462 economies. in this regard, robert lucas (1990) tested the neoclassical theory by using the data of the us and india for the period 1909-1958. although mpk in india was found to be 58 times greater than that of the usa, the capital was not allocated accordingly. based on his findings, lucas questioned the validity of the neoclassical model, explaining the beneficial impacts of financial globalization. many researchers tried to explain these contradictory findings, namely lucas paradox. the explanations of the paradox can be divided into two categories. the first category is based on the differences in the production structures of the economies. these can be production technology, government policies and institutional quality. the second category includes global capital market imperfections comprising sovereign credit risk and information asymmetry. the empirical research suggests that the most imperative factor in the explanation of the lucas paradox is the quality of institutions. the literature on the nexus between institutional quality and economic performance asserts that states with better institutions, non-corrupt governments and civil liberties attract more foreign capital and achieve higher levels of development (north, 1990; rodrik, 2000; acemoglu et al., 2005). the quality of a country’s institutions is the primary determinant of capital flows (alfaro et al., 2008; akhtaruzzaman, 2017). the institutional quality influences investor’s sentiment and promotes portfolio and direct investment inflows. likewise, faria and mauro (2009) explain that equity capital is more attracted to countries with better institutions. the poor institutional quality with bad law and order situation leave the productive potentials unexploited (parente & prescott, 1994). the poor law enforcement and weak property rights with other uncertain socio-economic conditions deter foreign investors and hinder the capital flows. in this regard, ju and wei (2014) assert that the bureaucratic corruption and miserable state of property rights discourage inflows of fdi. moreover, acemoglu et al. (2005) and alfaro et al. (2007) explain that the major cause of differences in capital flows across nations is the differences in property rights protection. most prominently, a seminal study by alfaro, kalemli-ozcan, & volosovych (akv) suggests that the contradictory behavior of global capital flows can be entirely explained by institutional quality. this paper aims at evaluating the akv notion by empirically examining the role of institutional quality in explaining the lucas paradox. 2. literature review the theoretical literature points out some major factors responsible for the cross border capital movements. these factors include the quality of human capital (lucas, 1990), differences in technology (eichengreen & park, 2003), and functioning of the institutional system (alfaro et al., 2008). other studies suggest some additional factors, including the risk of sovereign default (reinhart & rogoff, 2004), state regulations and organizational structures (hall & jones, 1999). these determinants of capital flows can influence economic performance through changes in investment and total factor productivity. alfero et al. (2007) use cross-country regressions to examine a data set spanning from 1971 to 1998. the researchers find that institutional quality is the pivotal feature in the explanation of the lucas paradox. the authors are of the view that the differences in human capital and asymmetric information can also influence capital flows, but these factors cannot fully explain the paradox. similarly, goldin and reinert (2007) explain that the lower global interest rates, the degree of openness and institutional quality are the significant determinants of financial flows. also, caselli and feyrer (2007) identify some measurement hitches responsible for the lucas paradox. moreover, alfaro et al. (2008) empirically analyze the data and elucidate that the institutional quality is the core variable in resolving the lucas paradox. likewise, gourinchas and jeanne (2009) notice that the capital flows have a tendency to flow review of economics and development studies, vol. 6 (2) 2020, 461-470 463 more towards the countries which are at the initial stages of development. the wobbly policies in the industrial countries are a vital determinant of capital flows to the emes (imf, 2011). byrne and fiess (2011) explain that the us interest rates are an important factor affecting the global capital flows to the emerging economies. ghosh et al. (2014) point out different factors supporting a capital surge to the emes, including global risk appetite returns to investment and the us interest rates. according to restucia and rogerson (2008) hsieh and klenow (2009), and monge-naranjo, sanchez and llopis (2019), the differences in mpk are a major determinant of capital flows. several other studies declare the institutional quality as a major factor affecting the cross border capital flows, including faria and mauro (2009), and daude and fratzscher (2008). edison and warnock (2008) find no significant association between the international country risk guide (icrg) composite index and the us purchases of portfolio equity securities of emerging asia and latin america. also, azemar and desbordes (2013) find that the quality of institutions is important but cannot completely explain the lucas puzzle. further, ahmed and zalate (2014) point out that the global risk appetite and differences in growth rates and interest rates significantly affect private capital flows between advanced and emerging economies. likewise, göktan (2015) uses quantile regression analysis to explore that the institutional system can better explain the lucas paradox after controlling for the country heterogeneity. martin (2018) examines the new classical view of capital flows in asian economies during 1980-2016. using the fixed-effects estimation method, he finds that the poor countries experience more capital inflows while the rich economies experience more capital outflows. the empirical results confirm the new classical theory of capital flows. 3. empirical estimation and data this study focuses on the explanation of the lucas paradox mainly by incorporating the quality of institutions in the regression analysis. the empirical literature has declared that institutions are the significant determinants of capital flows across nations. in the spirit of akv model, we estimate the following modified econometric specification: ititittiit iqxyf   5, loglog where log symbolizes natural logarithm, f is the foreign capital flows categorized as net inflows of portfolio equity capital and fdi inflows interchangeably. the alphabet y is the initial gdp per capita, referring to the year 1999. the notation x embodies control variables, including average years of secondary schooling, a capital account openness index, and private credit as a proxy for financial development. we, especially incorporate financial development as a control variable in the model to examine the role of a developed banking sector in enticing foreign capital. the average institutional quality (iq) is represented by the worldwide governance indicators (wgi). the error term is denoted by it  and the alphabets i and t indicate country and time, respectively. the akv model and some other empirical findings suggest that institutions play a pivotal role in boosting capital inflows. we slightly modify the general akv specification to incorporate the financial development as a control variable to examine whether a developed banking sector can explain the lucas paradox or not. the data on net inflows of portfolio equity capital, net inflows of fdi as a percentage of gdp and average schooling years at secondary level comes from the world bank’s world development indicators (wdi). the kaopen index represents capital account openness, and the data is provided by chinn and review of economics and development studies, vol. 6 (2) 2020, 461-470 464 ito (2006). private credit by deposit money banks as a percentage of gdp is obtained from the financial structure database of the world bank. the data on institutional quality is obtained from the worldwide governance indicators provided by the world bank. following daude and stein (2007), we adopt the method of combining the wgi variables by summing them up. capturing the variables into one composite index enables us to get one aggregate component having various dimensions. wgi-6 is the sum of all the governance indicators, including voice and accountability, political stability, government effectiveness, regulatory quality, the rule of law, and control of corruption. wgi-3 is the sum of three important indicators involving regulatory quality (rq), the rule of law (rl), and control of corruption (cc). in addition, we have individually incorporated the three aforementioned indicators of institutional quality in the regressions to examine the consistency of empirical estimation. all wgi indicators have a range of estimated values between +2.5 and -2.5. the value +2.5 indicates a strong position of governance, and the value -2.5 implies weak governance. the role of institutions and banking sector development in explaining the lucas paradox is empirically examined for the seventeen major emerging economies of the world including argentina, brazil, chile, china, hungary, india, indonesia, malaysia, mexico, pakistan, philippines, poland, russia, thailand, turkey, ukraine, and venezuela. a panel data sample for the period 1999-2018 is used for the empirical analysis. the data is transformed in 5-year averages to minimize the cyclical fluctuations. generalized method of moments (gmm) seems to be a suitable method for estimation as it has the advantage of controlling the endogeneity problem. we use modified and more sophisticated estimation technique namely, system gmm introduced by arellano and bover (1995) and blundell and bond (1997). according to bond et al. (2001), the system gmm has a feature of combining the previous set of equations in first differences with appropriately lagged levels as instrumental variables with additional equations set in the level form with proper lagged first differences as instrumental variables. the validity of instruments is evaluated by the hansen test of over-identifying restrictions. the serial correlation problem is detected by using the arellano & bond test for second-order serial correlation (abm2). if gmm system estimates are not subject to second-order serial correlation, then the validity of instruments is confirmed, and the estimates ensure efficiency and consistency. the application of robust system gmm controls the empirical estimation for heteroscedasticity by providing robust or adjusted standard errors. 3.1 empirical results the system gmm estimation results are presented below in table 3.1-a and table 3.1-b, respectively. review of economics and development studies, vol. 6 (2) 2020, 461-470 465 table: 3.1-a portfolio equity capital flows and the lucas paradox dependent variable: portfolio equity, net inflows regression (1) (2) (3) (4) (5) initial gdp per capita 1.1396** (0.5496) 1.1149** (0.5242) 1.2364** (0.5178) 1.0432** (0.5040) 1.0996** (0.5088) schooling 2.3276 (2.8749) 2.334 (2.7834) 1.7984 (2.6117) 2.7108 (2.786) 2.5002 (2.6896) kaopen -0.5823 (0.3702) -0.5601 (0.3735) -0.4069 (0.3451) -0.6363*** (0.3830) -0.6475*** (0.3765) credit 1.8879* (0.3796) 1.9449* (0.3876) 2.0163* (0.3639) 1.9073* (0.3956) 1.8659* (0.4058) institutional quality wgi-6 -0.1062 (0.0820) institutional quality wgi-3 -0.3287 (0.2235) regulatory quality (rq) -1.4114** (0.5067) rule of law (rl) -0.7280 (0.7355) control of corruption (cc) -0.7361 (0.5724) hansen test [pvalue] 1.000 0.999 1.000 0.999 1.000 abm2 [p-value] 0.070 0.079 0.084 0.069 0.062 observations 51 51 51 51 51 note: the data sample ranges from 1999 to 2018 with 5-year non-overlapping averages. all variables are in log form except the kaopen index and institutional quality indicators. one-step robust system gmm dynamic panel estimator of arellano and bond (1991) is used for estimation. robust standard errors are presented in parentheses; *, ** and *** indicate significance at 1%, 5%, and 10% levels, respectively. review of economics and development studies, vol. 6 (2) 2020, 461-470 466 table: 3.1-b fdi flows and the lucas paradox dependent variable: fdi inflows regression (1) (2) (3) (4) (5) initial gdp per capita -0.0256 (0.0895) -0.0007 (0.0945) -0.0148 (0.0946) -0.0334 (0.1019) -0.01885 (0.0966) schooling 0.3790 (0.4412) 0.3006 (0.4673) 0.3083 (0.4212) 0.1540 (0.5135) 0.3599 (0.5102) kaopen 0.0262 (0.0626) 0.0270 (0.0735) 0.0270 (0.0729) 0.0376 (0.801) 0.0196 (0.0836) credit 0.1422*** (0.0800) 1.1213 (0.0927) 0.1209 (0.0984) 0.1223 (0.1030) 0.1518** (0.0765) institutional quality wgi-6 0.0753* (0.0118) institutional quality wgi-3 0.2040* (0.0401) regulatory quality (rq) 0.6107* (0.0996) rule of law (rl) 0.5331* (0.1369) control of corruption (cc) 0.5999* (0.1348) hansen test [pvalue] 1.000 0.999 1.000 0.999 1.000 abm2 [p-value] 0.157 0.137 0.188 0.159 0.099 observations 65 65 65 65 65 note: the data sample ranges from 1999 to 2018 with 5-year non-overlapping averages. all variables are in log form except the kaopen index and institutional quality indicators. one-step robust system gmm dynamic panel estimator of arellano and bond (1991) is used for estimation. robust standard errors are presented in parentheses; *, ** and *** indicate significance at 1%, 5%, and 10% levels, respectively. 3.2 interpretations of empirical results table 3.1-a shows the system gmm estimates with portfolio equity capital flows as a dependent variable. the coefficient on initial gdp per capita is statistically significant at 5% level with a positive sign in all regressions. the worldwide governance indicators, including wgi-6, wgi-3, rl, and cc, are all found to be generally insignificant. however, rq is statistically significant with a negative review of economics and development studies, vol. 6 (2) 2020, 461-470 467 coefficient, which means that the strict regulatory framework discourages cross border capital flows. the credit variable is statistically significant at 1% level, with a positive coefficient in all the regressions. the coefficient of credit ranges from 1.88 to 2.02 indicates that a one percent upsurge in financial sector development will lead to increase portfolio equity capital flows by 1.88 to 2.02 percent or vice versa. it implies that portfolio investment flows are affected by the level of financial sector development in a state. the institutional quality cannot explain the lucas paradox adequately in case of portfolio equity capital flows. portfolio flows are usually short-term investment inflows to earn quick returns in the stock markets. so, only the well-functioning stock markets and the established banking sector are considered important by the foreign investors. in other words, short-term investors only consider financial sector development and overlook the institutional quality of the host country. the reason for the insignificant impact of institutions may be the weaker institutional structures in the developing countries (peres et al. 2018). the kaopen index is weakly significant only in the last two regressions, while schooling remains statistically insignificant throughout. the p-value of the hansen test is almost one in each regression, which shows that the null hypothesis about the validity of the instruments cannot be rejected. the p-value of abm2 test indicates that we fail to reject the null hypothesis of no second-order serial correlation at a 5% level in all the regressions. the absence of second-order serial correlation illustrates that the estimators are efficient and consistent. the robust standard errors are computed, so there is no heteroscedasticity problem in the empirical analysis. table 3.1-b shows the system gmm estimates with fdi inflows as a dependent variable. all the wgi institutional quality measures are positive and significant at 1% level, reflecting the strong positive influence of institutions on fdi inflows. the individual wgi indicators comprising rl, rq, and cc are also found to be significant at one percent level. it means that better governance with better law enforcement, reasonable regulatory quality, and a minimum level of corruption attracts fdi flows from abroad. fdi inflows are the long-term capital inflows in which investors evaluate the institutional quality of the host economy. the influx of foreign direct investment is affected by institutional quality because non-corrupt and transparent institutional structures incentivize foreign direct investors. dunning (1988), azam, nawaz and riaz (2019), and shittu, hassan, and nawaz (2018) declare that the institutions are one of the important factors affecting fdi inflows. a poor institutional system impedes fdi and acts as a tax by raising the costs of fdi (buchanan et al. 2012). foreign investors are unwilling to bring fdi to the countries with fragile institutional structures encouraging red-tapism, corruption, and nepotism because these factors raise the cost of doing business (mengistu & adhikary, 2011). the control variables, including initial gdp per capita, schooling, and kaopen, are found to be insignificant in all the regressions. the hansen test p-value is almost one in each regression, which reveals the validity of instruments. the absence of second-order serial correlation is depicted by the statistically insignificant p-values of the abm2 test in all the regressions. the absence of second-order serial correlation elucidates that the estimators are efficient and consistent. the robust gmm estimates give standard errors adjusted for heteroscedasticity. hence, the estimates are not the victim of heteroscedasticity problem in our empirical analysis. 4. conclusion and policy according to the neoclassical theory of capital flows, capital should flow from the rich countries towards poor countries. however, in reality, capital does not flow from the high income to low-income nations. this contradiction is named as the lucas paradox. according to alfaro, kalemli-ozcan, & volosovych, the lucas paradox can be completely explained by institutional quality. this study empirically evaluates the role of institutional quality in explaining the lucas paradox. a panel data set review of economics and development studies, vol. 6 (2) 2020, 461-470 468 for 17 emes is utilized for the period 1999-2018. the system gmm estimation results suggest that the lucas paradox is explained by the institutional quality in case of fdi flows. but contrary to the akv findings, our estimates suggest that the institutions do not explain the portfolio equity capital flows. the portfolio equity flows in the emerging markets are determined by the financial sector development. considering our empirical findings, we cast doubts on akv’s findings and partially agree with the notion that the institutions can explain the lucas paradox. our findings also suggest that the financial flows to the emerging markets are sensitive to the nature of capital flows. the portfolio capital inflows are influenced by financial sector development, while foreign direct investment inflows are affected by institutional quality. the short-term nature of portfolio inflows also incentivizes foreign investors to gain quick returns by focusing on the financial sector and ignoring the quality of institutions in the host country. the long-term nature of fdi inflows induces investors to think about law enforcement, government stability, corruption, regulatory ability, and property rights protection. hence fdi is affected by the institutional quality in the host economy. the policymakers should consider the nature of capital inflows. the short-term portfolio equity inflows cause macroeconomic volatility but also help to remove the scarcity of capital for the immediate projects. the financial system should be developed and modernized to a cautious influx of portfolio investment. the sophisticated banking structure with vibrant stock markets can help to attract foreign capital, especially portfolio equity flows. fdi inflows are expedient, stable, and the least volatile type of inflows by nature, which can provide long-term benefits, including economies of scale, innovations, and technological diffusion. so, the long-term and less volatile capital flows like fdi are the most advantageous for emes. the policies should be designed to entice long-term foreign capital flows through better institutions, modern infrastructure, tax rebates and free trade industrial zones in the wake of financial globalization. references acemoglu, d., johnson, s., & robinson, j. a. 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(1988). on the roles of international financial markets and their relevance for economic policy. journal of money, credit and banking, 20(3), 531-549. review of economics and development studies, vol. 6 (3) 2020, 703-713 703 identification of causes of student’ low academic achievements at higher secondary level: a qualitative study musarrat jahan a , akthar ali b a phd scholar, department of education, the islamia university of bahawalpur, punjab pakistan email: jahan.gscwu@gmail.com b dean, faculty of education, the islamia university of bahawalpur, punjab, pakistan article details abstract history: accepted 25 july 2020 available online 30 september 2020 the present qualitative study was aimed to investigate the causes of low academic achievements of higher secondary students. thirty participants were individually interviewed by a semi-structured schedule interview by purposive sampling techniques. all the interviews were audio-recorded. the data was analyzed by ‘thematic analysis’ technique, results showed that lack of parental involvement and support, lack of teachers involvement and support, lack of help and support from friends, excessive and negative use of social media, lack of students involvement and interaction in class, lack of interest in english, lack of learning facilities and teaching methodology, academic stress and anxiety, examination stress and anxiety, social stress and anxiety, environmental stress and anxiety, physical stress and anxiety, and poor health issues were the reasons causing low academic achievements among students. this study is helpful for educationists, psychologists, parents, teachers, and students to identify particular causes, creating biasness in students’ academic grades. they should make efforts to eradicate the identified causes having negative effects on the academic achievements of students who are our future leaders. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: social support, social media, academic, psychological, stress, anxiety, low academic achievement jel classification: l82, l89, m14, m19 doi: 10.47067/reads.v6i3.257 corresponding author’s email address: jahan.gscwu@gmail.com 1. introduction the current study has empirical, theoretical, and practical suggestions for the decision and action for the investigation of the causes of students’ low academic achievement and to cope with the situation. from a theoretical viewpoint, this refers to contribute to the higher secondary students’ literature. as it highlights the causes of the students’ low academic grades at the higher secondary level and provides suggestions to cope with this situation. thus the present study is one of the efforts to identify the causes of low academic achievements and provide suggestions to improve the situation at the higher secondary level. the findings of the study will be helpful for the school education department, parents, teachers, and students to follow the suggestion to cope with this situation. the objectives of this study are to investigate the social causes of low academic achievements of students, to determine the psychological causes of low academic review of economics and development studies, vol. 6 (3) 2020, 703-713 704 achievements of students and to find out the suggestions for the improvement of students academic achievements. students’ low academic achievement is one of the most challenging dilemmas faced by students, teachers, and parents. students are indispensable assets for educational institutes (llie & ciocoiu, 2010). achievements have a pivotal role in their academic life. academic achievements determine the students’ progress, attainment, and level of success. various factors play an integral part in the students’ learning process. students have to go through the process of learning and then evaluation; evaluation is the yardstick indicator for student’s academic performance and achievement. students are awarded certificates with different grades from "a to f" based on their marks percentages and framed standards. low or poor achievements in the students’ academics is ‘adjudged by the examinee and some other important aspects as falling below an expected standard’ for grant of the level of their academic achievement by grading (aremu, 2000). the last six results of the “board of intermediate and secondary education bahawalpur” are evidence that more than half (above 50%) of the students pass their exam with grade “d” and below. the students pass with grade d, and below are low academic achievers. therefore, the number of students having low grades was larger than the number of passed students in the external examinations of higher secondary students in the district bahawalpur. the tendency to make an association between the intelligence level and the achievement of the students’ academics may whilst true but it is too simplistic, at hand many are the contributing causes that influence the students’ achievements. they face difficulty in getting admission either in higher education or securing employment. students' life at the higher secondary level is a time of tremendous transition phase for most of the students. students have to make multiple decisions; they may be under pressure and are affected by the environment which encompasses multiple causes. the causes influence and vary from one student/nation to another nation including the variables inside and outside the educational institutes affecting students’ academic achievements (mushtaq & khan, 2012). therefore, the need was emerged to examine the underline factors. several studies found academic achievements in the literature with different aspects. adane (2013) identifies and traces out the social factors affecting the academic achievements of junior high school students. the researcher felt the need to contribute and fill the gap in knowledge by adding psychological aspects related to stress and anxiety along with social aspects causing students low academic grades. “the support received as love, care, involvement, and help from the individuals in the life span of an individual is regarded as social support” (gurung, 2006). “social media sites employ, mobile and technology based on web to create vastly interactive platforms by the use of which individuals and community share, co-create, discuss and modifies contents generated by users” (kietzmannn, 2012). an academic factor of learning is related to education, including student-teacher interaction, teaching pedagogy, and students’ interest. “the psychological factors of learning are those which are necessarily concerned with the mind and behavior of the learner towards learning. it is sometimes associated with the physical makeup, environmental setting, individual differences, and life-approach of the learner i-e sense of perception, fatigue, environmental conditions” (ahmed, 2016). stress is described as emotions that are negative and have a significant influence on the learning process, cognition, and physical health of an individual. (schwabe, 2010). anxiety is associated with displeasing feelings related to fear that characterized the behavioral, cognitive, somatic, and emotional components of an organism (davison, 2008; seligman, 1996). review of economics and development studies, vol. 6 (3) 2020, 703-713 705 few studies, adane (2013); almuammria (2015); omari (2002), and wilson (2011) have investigated the reasons for the low/poor academic achievement of elementary and secondary school students. these conducted studies were in places with diversity in social settings and geographic. work-related to academic achievements found in the literature however, the literature reviewed does not address the questions raised by this research in the study. moreover, there is hardly any study found related to the causes of low academic achievements at the level of higher secondary students. moreover, to date, no study from pakistan has qualitatively explored the causes of students' low academic achievements. the qualitative design of this study not only provides depth and detail in obtained data by recording, encourages, and expands the ideas initially based on responses. therefore, the main aim of the study was to investigate the causes based on the social and psychological causes of students’ low academic achievements at the higher secondary level. 2. methodology 2.1 study design and settings this qualitative study design was conducted in the public higher secondary institutions in the district bahawalpur affiliated to the board of intermediate and secondary education, bahawalpur. according to the education department (2018), there were public (27) higher secondary schools and (25) colleges in district bahawalpur. the study was qualitative; therefore, by using a semi-structured interview schema, an in-depth face to face interview was conducted with thirty teachers of schools/colleges. 2.2 study instrument a semi-structured interview comprised five questions. before the conduct of interviews, piloting of the first draft undertaken to test and ensure uniformity of questions. it was conducted with two teachers from higher secondary school and two from college. the purpose was to make sure that questions were understood by the participants as posed to be. 2.3 recruitment and data collection a purposive sampling technique was utilized to enlist the participants of the study. they were approached to get consent for interviews. based on their consent, the researcher then contacted them for the administration of the research instrument. for interviews, the researcher personally visited and took the teachers’ interviews by semi-structured interview protocol to get detailed information for further exploration from them. the researcher intended to analyze the facts and features wherever comprehensive data regarding this matter was requisite from each teacher on the basis of their teaching experiences. before the conduct of the interview study participants were assured about the information provided by them will be kept confidential and the provided information by them would be kept confidential and is used only for research purposes. further, keeping an ethics permit was taken for the recording. the participants did not allow video recording. but participants did not have objection for their audio recording. an audio recorder was used for recording. the recorded interviews were saved with the name of the institute. 3. data analysis thematic analysis was used to analyze qualitative data. ms word was used to transcribe interview files. after reading the transcripts several times, codes were coded to the text accordingly. the themes were developed and analyzed step by step. codes were amalgamated /merged into sub-categories and categories with the purpose to explore the themes. major themes review of economics and development studies, vol. 6 (3) 2020, 703-713 706 with several subscale themes were consequently obtained; analysis was carried out on the origin of data. the reliability of the data was checked for valid and reliable results by studied repeatedly to confirm that it reflects the objectives of the study. to confirm data credibility crosschecking of themes was undertaken. the following themes were drawn from the data. 3.1 social causes the following themes were categorized under social causes. 3.1.1 lack of parental involvement & support being uneducated parents the majority (25) of the study participants supported the idea that parents have the least concern. they are busy earning, they did not support and involve in their child's educational activities after their admission, and parents are not in contact with institutions for their children's progress in studies. “parents are mostly illiterate, and they do not give attention to their children by involving and supporting them in their study matters, contrary they ask them for help to complete all the household chores instead of studying first”. “they have no clear aim in life, the parents force and pressure their children to choose the subject of parent’s interest and that’s why they have a lack of interest in the subjects as it does not match with their interest that results in non-seriousness, lack of self-motivation to tackle tasks that are more difficult on their own and absent-mindedness in the class, results in nothing but low grades”. “society pressures students to take the wrong subject which results in low grades”. the participants suggested the need for counseling for the subject choice, “nothing but counseling for subject choice is very important”. further many added, no doubt, at the time of admission the wish from child beyond his/her mental capabilities. some students have to earn and learn to fulfill their expenses. “sometimes student takes tuition and a part-time job to fulfill their educational requirements”. 3.1.2 lack of teachers involvement &support the majority (26) study participants viewed about over-crowded classroom’s learning environment creates trouble in interaction with students. further, there is a lack of teaching aids to engage huge classes properly. “teachers are supportive, they try to interact but a large number of student strengths in the class becomes a hurdle to interact with every student”. social issues are with a child if he/she is not comfortable with peers. “learning how to interact properly with fellows does not always come naturally to a student, and often they need the involvement and support of a good teacher to learn how to overcome their shyness and engage themselves properly”. review of economics and development studies, vol. 6 (3) 2020, 703-713 707 3.1.3 lack of help and support from friends/peers many (19) study participants opined that peer group support is lacking as peers treat negatively and use degrading comments. hence, the environment of the classroom has a pivotal role. “peer influence having negative attitudes never let the students focus on any positive work like study. in-class test some friends help in cheating but in exams they don’t, the result becomes diverse”. 3.1.4 excessive & negative use of social media almost all (27) the participants viewed students' misuse of electronic gadgets namely smart mobiles, laptops/computers have a negative impact on students’ academic grades. “students develop habits of using social sites which are destructive for their study career because they spent most of their time on the electronic devices by indulging in different social sites”. parents provide smart gadgets as a facility to get the most current knowledge but, the young generation cheats their parents by their misuse. “parents provide electronic tools as a gift at a very young age like laptops, smart mobile phones, but there is a lack of check and balance by them, i feel bad to acknowledge that we are decaying our future leaders. we are giving a dark future by facilitating such devices at an innocent age”. the situation is very pathetic; in the classrooms students used internet sites. overcrowded classes made it easy for students to cheat teachers by using mobile during lectures. “80% of students excessively use negative internet and social media sites that divert them from studies, i even observe the teacher who is a guide also indulge in its usage”. “mobile should be strictly banned for students”. the majority (25) participants express negative use of social media sites is practiced, “free packages are available overnight”. they suggested to stop such packages to pin down our future generation “please, it is a humble request, save our future stop, stop we don’t want to move in a blind alley”. many (24) participants support for awareness program to use technology positively. they should be guided not to waste time by miss using technology/the internet, “provide technology to students on need base with awareness only”. 3.1.5 lack of student involvement and interaction in class the majority (25) study participants opined that there is a lack of students’ involvement and interaction in the class, “there is a lack of student-teacher interaction, and students are least concerned whereas the teacher is not flexible in terms of class size and time management”. participants said teachers support by using available recourses but large classes create hurdles in the interaction between student-teacher. so, this situation is pathetic. besides, class sizes are not standardized. review of economics and development studies, vol. 6 (3) 2020, 703-713 708 “a huge number of students’ results in the least student-teacher interaction among all students in the class, class size is pathetic”. so, the main reason is a “un standardized class size results in poor interaction in the classrooms”. 3.1.6 lack of interest in english many (23) participants agreed with and viewed, the english language is a great problem. there is a need for proper planning to teach english as a compulsory subject. study participants suggested deliver a lecture in understandable dialect, to clear concepts and reduce english phobia. moreover, “there should be an interaction between the students and teacher so that they remain active and participate in the teaching-learning process and english phobia can be overcome”. teachers must have a helpful and encouraging attitude towards students. “students are least motivated about studying subjects in english”. 3.1.7 lack of teaching learning facilities and teaching methodology the participants believed that the teaching profession should be by choice. moreover, lack of facilities, improper teaching methodology results in poor understanding and results in students' low academic grades. “teaching should be by choice not by chance”. there is a lack of devotion and passion in the teaching-learning process in some cases. there is a need to revise subjects’ combinations and reduction of subjects. the english language is a difficult subject for content understanding so, “the system needs revisions for it for the improvement in teaching and learning process”. participants viewed that in some cases teaching methodologies are not up to date as, “sometimes the teachers teaching methodologies do not match with the learning styles”. many (18) participants suggested that “creativity” is needed of time for good academics as there is a lack of it, and rote learning is encouraged as good marks awarded to good comprehension. they requested the policymaker that, “curriculum should be based on conceptual learning instead of rote memorization”. 3.2 psychological causes following themes were categorized under psychological causes. 3.2.1 academic stress and anxiety the study participants highlighted that psychological reasons affect students’ performance during an examination. they point out that, review of economics and development studies, vol. 6 (3) 2020, 703-713 709 “lack of self-desire to study because of overburden, disliking and fatigue leads to low academic achievements” results in students’ low academic grades. moreover, stress and anxiety have a negative effect on students’ health. many (15) respondents suggested that first-year students come with a fear of english. it is our dilemma that students’ snubbing is there instead of their encouragement, as teachers are bossy. 3.2.2 examination stress and anxiety the majority (25) participants explained that student worries for examination and parents' expectations and long distances create nervousness. “exam phobia disturbs those students who get nervous and who don’t study properly...and apart from those whose parents have more expectations from their children’s good grades and they pressurize their kind all the time”. “long distances and reached tired in the examination center and sometimes late too”. as a result, “students get nervous". 3.2.3 social stress and anxiety participants (25) opined that parents’ high expectation creates elements of stress and anxiety in a social context. “high expectation of parents is surely contrary to students’ abilities”. students belong to diverse backgrounds felt uncomfortable in the class, “some don’t feel comfortable interact in class”. 3.2.4 environmental stress and anxiety almost all (26) study participants that the learning environment is not conducive as classes are overcrowded there is no proper ventilation. “even teachers are not comfortable teaching, we feel pathetic for students who come daily from long distances, but the voice can’t reach them. beyond capacity, we have to make the placement of more than a hundred”. “overcrowded classrooms without proper ventilation and other facilities, unhealthy environmental conditions for both teacher-students, lights are not available. moreover, students avoid sitting in uncomfortable situations for long in the examination center.” 3.2.5 physical stress and anxiety many (23) participants viewed the physiological issues created for both students-teachers while the teaching-learning process as classes are huge in number. moreover, “classroom and institutions’ environment plays a positive role in teaching and learning process, airy classroom, proper heating, lighting, and cooling arrangements are not available according to the weather”. review of economics and development studies, vol. 6 (3) 2020, 703-713 710 the students face physical problems such as, “hearing and vision problem of sitting too far, classes are overcrowded”. 3.2.6 poor health issues the majority (25) participants viewed health issues creates a hindrance to students. “there are some students who face health problems and cannot come regularly to college”. further, “health issues lead students not to come and attend their lectures regularly so that they would be unfamiliar with the contents of exams and score low grades”. 4. discussion the study was an effort with a prime aim to find out the social and psychological causes of students’ low academic achievements and to give suggestions to cope with the situation. the results supported that the lack of social support from parents, teachers, and friends has negative effects on academic grades. these results are aligned with previous studies ratelle, larose, guay, and acenecal (2005) who reported that parental support is the predictor of better academic achievements. students perform academically better positive support influences positively, whereas lack of support affects negatively. the findings of the study are consistent with previous study yasin & dzulkifli (2011) who have supported the facts and evidence about the high level of social support and involvement specify the higher level of academic grades/achievements or vice versa. it means that the students who have a better academic environment have high levels of social support. it means social support and involvement leads to positive output with high levels of academic achievements or vice versa. the results supported the due to the excessive and negative use of social media sites students spent most of their time to engage in useless online activities, and they spent less time on their studies. the current study finds that students’ negative and excessive exposure to social media networks has a significant negative influence on the academic achievements of students. these results aligned with findings of previous researches (olubiyi's ,2012 ; nicole ellison, 2007) who found that nowadays students are much engrossed in using social media sites. thus most of the students’ academics are hindered because of diversion towards social media (peter, 2015). the results supported that gap between student-teacher interactions, huge class size, difficulty in english, a lack of teaching-learning facilities and teaching methodology, there was a lack of creativity were the reason for students’ low academic grades at higher secondary levels. these results are aligned with previous studies found that there is a negative but significant effect on students’ interactions, communication, and involvement with anxiety situations. the results of this study are consistent with past studies (elliot & joyce, 2005) who reported that the majority of the students are having anxiety while speaking in public. english language and medium of instruction affect the students’ learning outcomes. during the transition change in academic life, first-year students have to face this challenging situation. the findings of the current study are consistent with other studies (andrade, 2006; husain, 2005; jacob et al., 2012; versaevel, 2014) they reported the students’ english is not good. it creates trouble in their learning; as a result, they are unable to express their views and ideas in english. further, inadequate teaching and learning resources affect students’ academic performance. the results are consistent with previous studies (agolla, 2009; misra, mckean, west, & russo, 2000) who reported that stress is review of economics and development studies, vol. 6 (3) 2020, 703-713 711 created if the students face a lack of physical resources for an ideal learning environment. the results of murugesan’s (2005) study are inconsistent with the results of this study. he reported that practice and preparations reduce anxiety at the adequate levels for communication and interaction is beneficial in decreasing elements of fear among students. the psychological reasons findings of the study indicated that academic stress and anxiety created hurdles in the learning being overburdened and high expectations, environmental stress and anxiety, and poor health issues as a stressor among students. these findings are aligned and consistent with past studies (agolla, 2009; ongori & agolla, 2008; stevenson & harper, 2006) who reported that academic overload creates stress that leads to stress and anxiety among students. this study finds the aligned outcomes about the examination or test stress and anxiety with previous research (sweetnam, 2002) as they found exam/test anxiety is negatively correlated with academic achievement of students. the present study supported the same results. the studies of andrews and wilding, (2004) and cheraghian et al. (2008) contradicted with the results as they reported test anxiety and academic achievements have no significant association or relationship. students supported the notion that social stress and anxiety, like high expectations and difficulty to face classmates, were causative of their low academic achievements. the results are aligned with sanders et al. (2002) as they found stress and students’ academic achievements have no relationship. the same findings contradicted the previous studies (sandler; 2001; gabre & kumar, 2012; talib & zia-ur-rehman, 2012) who found that there was an association between academic achievements and stress but negative. the results suggested that high levels of stress and anxiety result in lower academic grades or vice versa. the results related to physical stress and anxiety contradict the previous researches (agolia, 2009; topper, 2007) who reported that the majority of students experience stress in routine activities of life especially when they reported about the headache. 5. conclusions this study concludes among social causes the lack of support, involvement and help from parent, teachers and friends, excessive and negative use of social media sites, lack of involvement in studies and interaction in the classroom, lack of interest in english, nonavailability of teaching and learning facilities, and methodology of teaching results students' low academic grades. examination, social and academic stress and anxiety, environmental and physical stress and anxiety, and poor health issues were among psychological causes for students’ low academic marks. this study concludes among social causes the lack of support, the data suggested following measures by authorities to coped with the situation, the need of career counseling centers in educational institutions, need to standardized teacher-student ratio and class size 1-40 in a government institution, ban on overnight cheap internet packages, increase in the duration of the academic session along with the academic calendar, concepts are taught in national dialect, as the english language as a learning barrier, re-visit curriculum, it should be based on practical skills instead of rote learning, and the skill-oriented subject must be included, revise the evaluation system in both the examination system and the process of evaluation, to hence time management skills. following are the recommendation based on the results of the current study.  counseling experts should guide students for the choice of subjects according to the students’ abilities and interests.  for a better career of such students, skill-oriented subjects must be introduced to secure the certainty of students’ future who are our future leaders. review of economics and development studies, vol. 6 (3) 2020, 703-713 712  the teenage students spend most of their time with their parents, teachers, and peers, so the importance of parents cannot be overlooked.  parents should psychologically support the children by helping them with the problems they faced.  policymakers should work on to making possible efforts to provide an ideal teaching and learning environment.  government and policymakers may review the curriculum along with the medium of instructional material at a higher secondary level. references adane, l. o. 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(2011). english language proficiency and academic achievement in tanzanian secondary schools. unpublished m.a thesis, university of dar es salaam. yasin, m. a. s. m., &dzulkifli, m. a. (2011). differences in depression, anxiety and stress between low-and high-achieving students. journal of sustainability science and management, 6(1), 169-178. http://bluepringng.com/2012/12/social-media-and-nigerian-youth-burdenretrieved http://bluepringng.com/2012/12/social-media-and-nigerian-youth-burdenretrieved review of economics and development studies vol. 5, no 3, 2019 487 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads impact of human capital on employment and economic growth in developing countries 1 ruhma khan, 2 imran sharif chaudhry 1 assistant professor, institute of management sciences, bahauddin zakariya university multan, pakistan, ruhmakhan@bzu.edu.pk 2 professor of economics, school of economics, bahauddin zakariya university multan, pakistan, imran@bzu.edu.pk article details abstract history revised format: 30 june 2019 available online: 31 july 2019 human capital plays a vital role in increasing gdp growth and creating more employment opportunities. the major objective of this research paper is to analyze the impact of human capital on gdp growth and employment in developing countries using panel data for the period of 1996-2018. to measure the human capital, we have employed two proxy variables i.e. life expectancy and education expenditure. the variables of labour force, capital formation, inflation, agriculture and manufacturing value added are used as controlled variables in the study. the fixed effect and random effect models are used in this study. the empirical results show that human capital variables (life expectancy and education expenditures) are found significant and hence contribute as an engine of growth and employment opportunities in developing countries. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords human capital, gdp growth rate; employment, developing countries jel classification: j24, j21, o40, o5 corresponding author’s email address: ruhmakhan@bzu.edu.pk recommended citation: khan, r. and chaudhry, i. s. (2019). impact of human capital on employment and economic growth in developing countries. review of economics and development studies, 5 (3), 487-496 doi: 10.26710/reads.v5i3.701 1. introduction process of development is always based on key variables namely, human capital, physical capital, natural and power resources which determine the pace of economic growth. almost all classical economists believed in economic growth (pelinescu, 2015). they attempted to explain theories of growth in different ways and developed various growth models. with the passage of time, the economists realized that diminishing marginal return in factor of production is not necessary. one can manage and increase production with the help of new technology and, of course, skilled training and education of a person (becker, 1990). presently, world can be distributed into categories such as developed, developing and underdeveloped countries. the division is based on the level of economic growth achieved by each country. factors of production are very important for increased level of economic growth. these are labour, natural resources and capital goods. in most of the developed countries goods are produced with minimum cost and most efficient ways of production (teixeira et al., 2016). human capital development means systematic and planned activity for human capital to learn necessary skills to meet current and future job demands. learning is the cure to all human resource development (hrd) efforts. therefore, major focus of researchers is on a work force’s learning and performance. presently, hrd http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 488 mainly focuses to develop people’s knowledge, expertise, productivity and satisfaction for development of his own personality, community and nation widely for whole humanity (berg, 2016). human capital as an independent/explanatory variable of instant study is essential for self-reliant and selfsustaining growth. according to theodore schultz human capital is like other types of capitals. production can be improved through investment in human capital. the classical economists described human capital as skill and knowledge and not as labour force (su and liu, 2016: dinda, 2016). 2. literature review there is considerable literature available about the relationship between human capital, employment and economic growth. some significant studies have been reviewed for the purpose to look in the gap of the research. laitner (1993) examined an economic growth model vis-e-vis human and physical capital and believed that increments to education of single individual raises minimal productive capacity as a person having limited life span, hence the capital fully depreciates on his retirement. caballe and santos (1993) found that economics with lesser ratios of physical to human capital resulted into increased physical capital by placing human capital as a key factor for growth. mincer (1995) had explained the sources of human capital growth for economic development. human capital plays a major role in labor economics. iqbal and zahid (1998) examined the impact of primary education on the economic growth of pakistan and concluded with quantitative evidence during 1959-60 to 1996-97 that if we wanted rapid growth we must improve primary education. blundell et al. (1999) viewed human capital complemented with research & development as an indirect contribution of education to macro-economic growth. abbas (2000) empirically analysed the comparative study of pakistan and india and concluded that human capital stock was positively co-related with physical capital having a great impact. nasir and nazli (2000) provided an analysis for “education and earnings in pakistan”. it was observed that due to availability of completed school years the authors had estimated the earning functions with continuous school years while assuming uniform rate of returns for all school years. abbas (2001) concluded that for these two countries human capital plays a crucial role in the economic growth. monteils (2002) concluded that possibly the economic growth could contribute towards knowledge development but not otherwise. hendricks (2002) took into account a data analysis that resulted into a corollary that human and physical capital did not account for the bulk of cross country income differences. schutt (2003) explained that human capital plays a major role in economic growth. educated people increase the growth of economy. islam (2004) discussed that increase in employment level lead to increase in the economic growth that ultimately reduced poverty. kumar (2006) had observed no significant and positive effects of human capital which he attributed to certain factors like inappropriate specification of human capital production function, inappropriate estimation methodologies and non-controlling of variables relating to governance and instructions. cohen and soto (2007) observed that human capital was an exponential function of the years of schooling. it was found that gap in human capital of rich and poor countries had remained constant over the last forty year. siddiqui (2009) concluded that if we wanted to precede human development we should adopt growth oriented policies for capabilities development. chaudhry et al. (2010) observed both the education and health were found to have great impact on female earnings. rena (2010) concluded that quality of education was more important due to international market of human capital. he pointed out that some developing countries got more benefits from the new opportunity. ranis (2011) concluded that economic growth and human capital development were necessary to each other especially education plays a very important role in economic growth. blanco and grier (2012) provided for effects of natural resources on economic development catering for physical and human capital particularly in latin america and generally across regions. review of economics and development studies vol. 5, no 3, 2019 489 siddiqui and rehman (2017) tested the human capital-growth nexus in selected asian countries. they applied empirical bayesian methodology. the study found that primary and secondary education was more prominent in fluctuations of economic growth in east asia, while vocational and tertiary education had a positive impact on economic growth in south asia. ogundari and awokuse (2018) analyzed the impact of human capital on economic growth in sub-saharan africa (ssa). they considered human capital and health as a measure of human capital. the results of system gmm indicated positive impact of both health and education on economic growth, and the impact of health was relatively larger than education. the reviewed literature reflects focus on human capital and economic growth. besides other factors of higher education, research and technology the relationship between primary education and economic growth is also discussed. the studies have also shown comparison between human capital and physical capital. contribution of natural resources, education and training also appear to increase the economic growth. reduction in poverty and increase in employment has a great impact on economic growth. researchers are also found to have discussed population growth, human capital and economic growth of developed and developing countries. it is found from reviewed literature that previous literature has not focussed on the developing countries as a group of middle income and low income developing countries while estimating the impact of human capital on employment and economic growth. therefore, the present study will fill this gap in the empirical literature. 3. data and methodology the major purpose of present research is to analyse the linkage between human capital, employment and economic growth in 48 developing countries whose data were available during the period of 1996-2018. the study is based on panel data analysis to evaluate interaction between human capital, employment rate and economic growth in developing countries. the data is taken from world development indicators (wdi) by world bank. three categories of countries are made; low income developing countries, middle income developing countries and all developing countries (list is given in the appendix at the end of paper). based on panel data, random effect and fixed effect method is applied for this research. hausman test is also conducted to decide the appropriate method between fixed and random effect for different groups of developing countries. now we specify the model for the present study based upon the above theory. that will be: model 1: the functional form of model 1 is given as follows: ( ) the econometric form is given as follows: whereas: gdp= gross domestic product growth rate l= labour force growth rate edu= education expenditure as a percentage of gdp le= life expectance kf= gross capital formation as a percentage of gdp ag = agriculture value added as a percentage of gdp mu = manufacturing value added as a percentage of gdp inf= inflation rate. review of economics and development studies vol. 5, no 3, 2019 490 in this study labour force growth rate, life expectancy and health expenditures are used a proxy variable for human capital. agriculture value added and manufacturing value added are used proxy variables for development and research in production sector and inflation is used as a control variable for policy effectiveness. model 2: the functional form of model 2 is given as follows: ( ) the econometric form is given as follows: whereas: er= employment rate l= labour force participation rate edu= education expenditure as a percentage of gdp le= life expectance kf= capital formation as a percentage of gdp ag = agriculture value added as a percentage of gdp mu = manufacturing value added as a percentage of gdp inf= inflation rate. in this study labour force, life expectancy and health expenditure are used a proxy variable for human capital. agriculture value added and manufacturing value added are used proxy variables for development and research in production sector and inflation is used as a control variable for policy effectiveness. the present study will estimate model 1 and 2 in order to examine the interaction between human capital, employment rate and economic growth. model 1 will examine the link between human capital and gdp growth rate while model 2 will find the link between human capital and employment level in developing countries. 4. panel data analysis in order to analyse the impact of human capital on economic growth and employment, for developing countries, we have applied fixed and random effect techniques. the results are displayed in table 1 and table 2. table 1 shows the impact of human capital on economic growth and table 2 shows the impact of human capital on employment in developing countries. table 1: panel results of impact of human capital on economic growth in developing countries explanatory variables fixed effect model – dependent variable: gdp growth rate all developing countries low income developing countries middle income developing countries labour force growth rate 0.0771 [0.0837] 4.8594 [0.8450] -0.3813 [0.8943] capital formation (% of gdp) 0.1158 [0.0000] 0.0749 [0.019] 0.1936 [0.0000] life expectancy 0.0109 [0.8575] 0.0617 [0.0547] 0.1141 [0.2860] education expenditure (% of gdp) 0.0858 [0.0913] 0.0359 [0.5804] 0.0079 [0.0064] inflation -0.0011 [0.0968] -0.0705 [0.0571] -0.0732 [0.0457] agriculture, value added (% of gdp) 0.11344 [0.0038] 0.0462 [0.4593] 0.1375 [0.0223] manufacturing, value added (% of gdp) 0.0864 [0.2698] 0.5579 [0.0000] 0.2735 [0.0001] constant 8.0573 12.3869 17.329 review of economics and development studies vol. 5, no 3, 2019 491 [0.0874] [0.0262] [0.0298] f – statistics (probability) 0.0000 [0.0000] [0.0000] random effect model – dependent variable: gdp growth rate labour force growth rate 0.0743 [0.0500] 5.4312 [0.8132] 0.9597 [0.7155] capital formation (% of gdp) 0.0769 [0.0000] 0.0740 [0.0101] 0.0956 [0.0000] life expectancy 0.0623 [0.0115] 0.0717 [0.0347] 0.1215 [0.0012] education expenditure (% of gdp) 0.0057 [0.0543] 0.0897 [0.1206] 0.1317 [0.0858] inflation -0.0121 [0.5739] -0.0497 [0.1476] -0.0076 [0.7854] agriculture, value added (% of gdp) 0.1532 [0.000] 0.1744 [0.0006] 0.1358 [0.0000] manufacturing, value added (% of gdp) 0.1178 [0.0000] 0.4793 [0.0000] 0.0580 [0.0488] constant 8.0416 [0.0002] 16.8626 [0.0008] 8.2188 [0.0026] f – statistics (probability) [0.0000] [0.0000] [0.0000] hausman test (probability)* [0.0201] [0.2472] [0.0366] note: probability values are given in square brackets [ ], *hausman test (h0: random effect model is preferred to fixed effect model). to decide which model is appropriate (fixed effect or random effect), hausman test is employed. the null hypothesis states that random effect is appropriate. we accept null hypothesis if probability value of hausman comes greater than 5%). so based on the above table, we can accept null hypothesis that random effect model is appropriate in case of low income developing countries, while fixed effect model is appropriate for overall developing countries and middle income developing countries. in the table 1 we have shown relationship between human capital and economic growth with respect to developing countries. there are four columns in the table. first column shows the explanatory variables and other three columns exhibits segregation of developing countries into low income and middle income countries. the dependent variable is gdp growth rate. the first explanatory variable is labour force growth rate. the value of parameter is positive suggesting that labour force is growth promoting in overall developing countries. in fact labour is primary factor of production that contributes to economic growth. various studies have confirmed the view that labour is growth promoting see for example (islam (2004), rosenzweig (1987), daly and regev (2007). the labour force growth rate is positive and insignificant in low and middle developing countries. the second variable capital formation as a percentage of gdp, the parameter is positive and highly significant in all countries specification. the results are in accordance with investment multiplier theory which explains that there is positive relationship between investment and economic growth. the result confirms that capital along with labour force play an important role in the growth process of developing countries. our results are in line with the studies of hamid and pichler (2009); siddiqui (2009); khan (2005) and abramowitz (1955). the parameter of life expectancy is positive and insignificant except low income developing countries where parameter is significant. the life expectancy or longevity enhances the economic growth in low income developing countries. many studies also supported this view (behrman and schneider (1993); chaudhary et al. (2010); akram et al. (2006). educational expenditures also contribute in human capital formation and economic growth. coefficient of educational expenditure is positive and significant in overall developing countries except the low income developing countries where it is insignificant. so, educational expenditure increases the human capital formation review of economics and development studies vol. 5, no 3, 2019 492 that will further increase economic growth. our results are compatible with the studies of abbas 2001; schutt (2003); nasir and nazli (2000) and tsai et al. (2010). the last two regressors i.e. agriculture value added and manufacturing value added are related with the commodity producing sector (cps). in fact, commodity producing sector is the mainstay of the economy comprising two vital sectors: agriculture and industry. almost both the variables show the positive relationship with the gdp growth except the low income developing countries. the result reveals that both agricultural and manufacturing output are enhancing that economic growth in these countries due to powerful backward and forward linkage with other sectors of the economy. our results are in accordance with the studies (wennekers and thurik (1999); soneta et al. (2006); hussin and ching (2013). table 2: panel results of impact of human capital on employment in developing countries explanatory variables fixed effect model – dependent variable: employment rate all developing countries low income developing countries middle income developing countries labour force participation rate 0.3077 [0.0000] 1.2936 [0.0000] 0.9539 [0.0000] capital formation (% of gdp) 0.0116 [0.3277] -0.0220 [0.1150] 0.0452 [0.0269] life expectancy 0.0680 [0.0109] 0.2199 [0.0000] 0.4194 [0.0000] education expenditures (% of gdp) 0.1649 [0.0597] 0.2287 [0.0030] 0.0403 [0.7268] inflation -0.0093 [0.4643] -0.0290 [0.0492] -0.0019 [0.9269] agriculture, value added (% of gdp) 0.0570 [0.0016] 0.0507 [0.0490] -0.2416 [0.0000] manufacturing, value added (% of gdp) 0.0882 [0.0179] 0.0427 [0.4259] 0.1582 [0.0000] constant 65.037 [0.0000] 33.0212 [0.0000] 40.9025 [0.0000] f – statistics (probability) 0.000000 [0.0000] [0.0000] random effect model – dependent variable: employment rate labour force participation rate 0.3402 [0.0000] 1.2849 [0.0000] 0.9927 [0.0000] capital formation (% of gdp) 0.0128 [0.2807] -0.021 [0.1293] 0.0502 [0.0127] life expectancy 0.0722 [0.0066] 0.2179 [0.0000] 0.2984 [0.0000] education expenditure (% of gdp) 0.1730 [0.0472] 0.2190 [0.0000] 0.1605 [0.1502] inflation -0.0082 [0.5176] -0.0292 [0.0468] 0.0016 [0.9386] agriculture, value added (% of gdp) 0.0613 [0.0007] 0.0491 [0.0550] -0.2325 [0.0000] manufacturing, value added (% of gdp) 0.0796 [0.0312] 0.0469 [0.3784] -0.1801 [0.0000] constant 64.5077 [0.0000] 32.5305 [0.0000] 31.9110 [0.0000] f – statistics (probability) [0.0000] [0.0000] [0.0000] hausman test (probability)* [0.0812] [0.2484] [0.5444] note: probability values are given in square brackets [ ], *hausman test (h0: random effect model is preferred to fixed effect model) to decide which model is appropriate (fixed effect or random effect), hausman test is considered. the null hypothesis states that random effect is appropriate. we accept null hypothesis if probability value of hausman review of economics and development studies vol. 5, no 3, 2019 493 comes greater than 5%). so based on the above table, we can accept null hypothesis that random effect model is appropriate in case of low and middle income developing countries, while fixed effect model is appropriate for overall developing countries. now we discuss the results of impact of human capital on employment in developing countries. the results have been displayed in table 2. we have discovered the positive correlation between labour, capital and employment rate. the results of our study are consistent with the studies of faridi et al., 2012; daly and regev (2007) and ali et al. (2012). turning towards the variables in which we are more interested i.e. life expectancy and education expenditure that we are using as a proxy of human capital. again both the variables appear with positive sign in all the specification. the results proposed that due to an increase in human capital employment rate of the developing countries accelerate. our results are compatible with the studies of mushtaq et al. (2013); idrees and siddiqi(2013) and sabir (2002) . the parameter of inflation is found to be negative with the employment rate in fixed effect model. the possible interpretation of this negative relationship may be that when the price level increases, aggregate demand falls leading to reduction in demand for labour and results in low employment. our results are matched with the study of rangarajan (2011). in random effect model, the inflation has positive impact on employment in middle income developing countries. the final two regressors are agriculture value added and manufacture value added which are the bases of the economies of developing countries. thus our results show that agricultural and manufacturing output augments the employment opportunities in these countries. our results are similar to the studies of baer and herve (1966); khan and iqbal (2008) and diao et al.(2007). 5. policy implications based on our findings we can suggest some policies in favour of human capital to enhance the employment and economic growth in developing countries. governments of developing countries should enhance the education expenditures to increase the human capital in these countries. for this purpose, governments should improve education by developing and constructing schools in rural areas of the country. education system in primary schools should be strengthening. a policy of “no child out of school” should be ensured. infrastructure of schools should be improved. there should be a check and balance on punctuality and regularity of teachers. technical and vocational education should be promoted. government should start different training programs. e-libraries should be established for higher and technical education. universities should give facilities to faculty and students to access the international journals by providing internet access to them. advanced computer labs and modern technology should be provided in education institutes. promotion of teaching staff should be linked with the performance of a teacher. access to education should also be improved by reducing the cost of education which can be achieved through providing free books, providing scholarships to talented students and by providing special quota in higher education for remote areas. to enhance the life expectancy (another variable to measure the human capital) the government should focus on the health sector because a healthy person can contribute more efficiently in economic activities. basic health centres should be provided and free medicines should be provided to poor people. government should also provide childmother health care centres, clean water and better sanitation facilities. governments of developing countries should also focus on the agriculture growth and development. key industries should be promoted to provide job opportunities for technical and poor people and different youth employment schemes should be started. the recommendations made hereinabove are in consonance with the results of the research carried out in view of the hypothesis thereby made. the results are practicable and worth implementation as a policy matter. review of economics and development studies vol. 5, no 3, 2019 494 references abbas, q. 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(2016). economic growth and development. world scientific publishing company. review of economics and development studies, vol. 6 (4) 2020, 845 856 845 major barriers to manufacturing smes growth and survival: evidence from emerging economy pakistan sher ali a , hazrat bilal b , ashfaq ahmad c , jawad hussain d a phd scholar, college of economics and management, china three gorges university, 443000 yichang, china e-mail: sherali9404@gmail.com b assistant professor, centre for management and commerce, university of swat, pakistan e.mail: hbilal@uswat.edu.pk c assistant professor, centre for management and commerce, university of swat, pakistan e.mail: ashfaqahmad79@outlook.com d associate professor, department of commerce and management sciences, university of malakand, pakistan e.mail: jawadhussain79@gmail.com article details abstract history: accepted 09 dec 2020 available online 31 dec 2020 smes play a tremendous role in increased national economic development and consider the backbone of the economy around the world. it contributes a great share in the gdp of pakistan and a huge number of the workforce involved. however, despite such great importance, the smes growth in pakistan faces numerous challenges for access to financial resources, market information, and procurement contract. hence the main aim behind this study is to investigate the influence of these barriers on manufacturing smes' growth and survival. a structured questionnaire was distributed among 172 managerial level employees of manufacturing smes to explore the influence of financial resources, market information, and procurement contract on the growth of smes by incorporating the structural equation model (sem). the study shows that the lack of access to financial resources, market information, and procurement contract negatively influence the growth and survival of smes. therefore, it needs a certain action to eliminate such barriers for smes' sustainable growth and survival. this study suggestion will help to contribute to policymakers and industry players to overcome such barriers. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: manufacturing smes, financial resources, market information, procurement jel classification: o14, p43 doi: 10.47067/reads.v6i4.284 corresponding author’s email address: hbilal@uswat.edu.pk 1. introduction smes has several definitions around the world and even numerous institutions in the same country have a unique definition (cardoza et al., 2015). in the context of pakistan smes distinct on the review of economics and development studies, vol. 6 (4) 2020, 845 856 846 number of employees up to-250 or paid-up capital of rs. 25 million (khan, qureshi, & abbas, 2010; kureshi, qureshi, & sajid, 2010). although smes have limited resources and internal house-based knowledge (brenes, camacho, ciravegna, & pichardo, 2016; felzensztein, ciravegna, robson, & amorós, 2015; viljamaa, 2011). in this era of globalization, national economies renovate into a single economy (ali, bilal, & ullah) hence for survival and growth smes need effectively deploy resources (brouthers, nakos, & dimitratos, 2015). over the last decades, research on smes has gained a tremendous increase. numerous scholars concentrated on various factors that influence sme growth (audretsch, 2004; constantinides, 2010; wiklund, patzelt, & shepherd, 2009). although literature indicated that most of the smes thought out the world faces same problems in survival and growth like a) lace access to financial resources b) insufficient market information and c) procurement of contract (cardoza, fornes, farber, duarte, & gutierrez, 2016; hollender, 2017; zhou & de wit, 2009) in the case of the emerging economy, pakistan smes constitute about 90% of overall enterprises and approximately 40% share in gdp. smes have a great contribution to pakistan's economic development and a large work-force involvement. but smes face abundant challenges for their survival and growth. hence this study will focus on the major barriers to manufacturing smes growth in the context of pakistan. 2. literature review manufacturing smes have been considering one of the most important sectors for the development of economies around the world (halabí & lussier, 2014; hessels & parker, 2013; makhmadshoev, ibeh, & crone, 2015; oparaocha, 2015). many scholars were cited that almost in many developed as well in developing countries of the world smes responsible for more than 60% of the economic growth (alonso & bressan, 2015; brouthers et al., 2015; timm, 2012; viljamaa, 2011). smes are limited house-base knowledge and resource-constrained (prange & pinho, 2017)and have faced a lot of challenges for their growth and market survival. several authors have carried out substantial research on numerous barriers that influence the growth of smes (fillis, johannson, & wagner, 2004). these scholars analyze the major barriers in contrast to developed as well from emerging economies(buzavaite & korsakiene, 2019). the literature indicates that most of the barriers from the developed and emerging economy are similar to scholars cited earlier(tschetschonig, 2012). although the major barriers that smes faced for their growth are market information (child & hsieh, 2014; kmieciak & michna, 2018) and an unfavorable regulatory environment (mogos et al., 2010) lack of access to financial resources(lee, 2014; virglerová, homolka, smrčka, lazányi, & klieštik, 2017) procurement contract and unfavorable regulatory environment(williams & horodnic, 2016). in the case of the emerging economy, many scholars recognized lack of access to financial resources, lack of access to market information, and procurement of contracts are the major barriers to the growth and survival of smes (huett, baum, schwens, & kabst, 2014). in fact, literature clarifying that these major barriers hider the capability of smes growth and survival. (cardoza et al., 2016) cited that besides the financial barriers market information and procurement of contracts influence the smes' growth. consequently, it needs to design and implement the strategies, policies, and programs that turn enhance sustainable smes' growth, survival, and competitiveness in developed as well in emerging economics(cardoza et al., 2016). it has been identified that numerous countries have developed and implements varied policies and programs to ensure the growth and survival of smes(cenamor, parida, & wincent, 2019; taschner, 2012) and to overcome the major barriers and challenges. the causes are likely to originate from the numerous barriers which persist the smes' growth (halabí & lussier, 2014) the major barriers are the financial resources access, lack of market information, internal limited house-base knowledge, and procurement of contract (bianchi & wickramasekera, 2016). hence this paper will empirically explore the nature of the major barriers such as a) lack of access to financial review of economics and development studies, vol. 6 (4) 2020, 845 856 847 resources b) lack of enough market information and c) procurement contract. in the context of this research, the smes' growth was measured by the increase of sales and innovation in existence and new products(mathews, bianchi, perks, healy, & wickramasekera, 2016). smes' growth has a positive influence on short as well on long-term sustainability (coad et al., 2012). although, the smes growth can be attained by the innovation of new product or expanding into the new geographic market at local and/or abroad (eggers, o’dwyer, kraus, vallaster, & güldenberg, 2013)also the introduction of new services. besides that, the growth of smes can also be indicated both in terms of employment or sales of goods and providing services(hessels & parker, 2013). smes' growth can ensure the product quality, increase the market share, competitive edge over others, long-run sustainable benefit, and increase in socioeconomic and poverty alleviation (javalgi & todd, 2011). initially, the growth rate of smes is faster because it is uncertain about their cost and less market efficient scale and managerial cost. however, smes are less flexible to the adaptability of new market trends and technology for innovation, growth, and market survival. this implies that to overcome such difficulties smes need an energetic enterprise policy mechanism to get out of such with easier access to financial resources, market information, and procurement contract. it argues, that to ensure the smes' growth and survival in industrial policy the smes should be a central plank of the private and government sector (kolodko, 2000)but in an emerging economy, especially in pakistan the growth and survival of smes are not satisfactory. while manufacturing smes has a huge portion in the national gdp of pakistan and mitigation a remarkable number of unemployment. 3. research model and hypothesis development this study will determine the influence of major barriers on smes' growth and survival like a) financial barriers b) market information barrier c) procurement of contract barriers. pakistan is a densely populated country of about 212.2 million (2018) and smes have 90% of overall enterprises and approximately 40% share in gdp. due to the financial crisis and high unemployment rate in manufacturing smes, survival and growth are very important to overcome such a worse economic situation. but the growth and survival of smes face major barriers of financial resources, market information, and procurement of contracts. therefore, this study will empirically identify the influence of these barriers on smes growth in the context of pakistan. h1: lack of access to financial resources negatively influence the smes growth and survival. lack access of financial resources is one of the major barriers to smes growth and survival. it has been cited by many scholars from developed and emerging economies that financial barriers are the most significant obstacle to smes' growth and survival(arora & ceccagnoli, 2006; zhu, wittmann, & peng, 2012). financial access is the most controversial issue in the sme sector. most of the studies identified that access to financial resources is a major barrier for new as well for already functional smes(krasniqi, 2007).the lack of financial resources especially in the case of emerging economies is a significant barrier which many constraints the growth and survival of smes(lee, sameen, & cowling, 2015). many studies identify that after globalization, worldwide financial crises and economic disabilities have increased the importance of financial resources for their growth and survival of smes(daskalakis, jarvis, & schizas, 2013). access to financial resources significantly increases the internal and external capability of smes, like invest in production units, r&d initiatives, entrance to the local and international market, and increase in house-based knowledge (lee & drever, 2014). financial barriers are the lack of financial resources like credit constraints, subsidies, and loans, lack of external debts, and equity capital to smes' growth(coad & tamvada, 2012; huett et al., 2014). the most substantial reason for smes access to financial resources includes the high-interest rate, information asymmetry, poor and complex application process government and private sectors mechanisms, high review of economics and development studies, vol. 6 (4) 2020, 845 856 848 fee, and poor performance of smes (doh & kim, 2014). furthermore see (fredriksson, maresch, & moro, 2017; hanedar & hanedar, 2016). h2: lack of access to procurement or supplier development negatively influence the smes growth and survival. lack of access to procurement or supplier development is a significant barrier(cardoza, fornes, farber, gonzalez duarte, & ruiz-gutierrez, 2015) and it negatively influences the growth and survival of smes in emerging as well in developed economies (cardoza et al., 2016). the procurement contract provides a favorable and potential competitive edge in national as well beyond the boundaries (bianchi & saleh, 2020)the procurement of contract significantly promote commercial relationship among suppliers, promote the sale, employment, and their ability to growth and survival(sibiya & kele, 2019b).the lack of procurement contract in smes growth and survival is debatable and gains the marvelous attention of scholars since research indicates mixed evidence(blattman, dercon, & franklin, 2019; sibiya & kele, 2019b). supplier development or procurement contracts influence more positively the smes performance is a value chain process. the access to procurement contract benefits smes in terms of access to resources such as human skills, technology access, competencies gain, and reduce the risk and cost of doing business. recently research highlighted the significance of the procurement contract and identified is a major barrier to the growth and survival of smes' expansion. hence it needs for smes to create flexibility in their structure and adopted public/private procurement contracts in their policies and practices for sustainable growth and market survival(bartlett & bukvič, 2002). therefore, the government and private sector would be required to design policies and regulations, where different players encourage to take initiatives for the development of smes procurement contracts. consequently, such initiatives will make smes capable of sustainable growth and overcome procurement barriers(sibiya & kele, 2019a). h3: lack of access to market information negatively influence the smes growth and survival. lack of access to market information negatively influences smes' growth and survival (hamisi, 2011; huett et al., 2014; siringoringo, prihandoko, & kowanda, 2009; tambunan, 2009). market information reduces the risks and can significantly improve the capabilities of smes to cope with challenges(joensuu-salo, sorama, viljamaa, & varamäki, 2018; sibiya & kele, 2019a). many scholars are cited that the lack of information is a major barrier to smes' growth and survival(irjayanti & azis, 2012; sibiya & kele, 2019a). weak or lack of market information decreased the chance of smes to exploit the growth and survival opportunities more favorable (al-mubarak, 2016). smes have a constrained housebase knowledge and limited resources thus the lack of market information is a major barrier to smes' growth and survival. the lack of access to market information negatively impacts knowledge limitation about the business in local and well beyond the boundaries and caused poor product standard and quality. several scholars identify the lack of market information as one of the major barriers to smes' growth and survival(child & hsieh, 2014) and from social and business networks (mogos descotes & walliser, 2013). but the market information depends on the quality of the information source. however, smes need domestic and foreign alliances, formal and informal networks, and cooperation with export intermediaries to overwhelmed the barriers of market information (cardoza & fornes, 2011; jin & jung, 2016) 4. research methodology in these study quantities method has been used and data were collected through a structured questionnaire from 172 managerial level employees of the manufacturing smes from the malakand review of economics and development studies, vol. 6 (4) 2020, 845 856 849 region of kpk, pakistan by random sampling method. the data was incorporated by the structural equation model (sem). the independent variable of the study is consisting of three major barriers a). lack access to financial barriers b). lack access to market information c). lack access to procurement contract while on other hand dependent variable is the smes growth and survival. bartlett, kotrilk and higgins (2001) formula was used to obtain the required sample size of the study and the sample size was 172 managerial level employees of the manufacturing smes. 4. results and analysis of the study 4.1 demographic picture of the respondent the table 1 below shows the demographic characteristics of the respondent by age, family income and education status table: 1 demographic characteristic of the respondent the evidence from below table 2 shows that there is strong negative relationship between the growth and survival of smes and major barriers (lack access to financial resources, lack access to market information, lack access to procurement contract). the proposed hypothesis of the study was that there is a negative relationship between smes financial barriers (r = 0.294 ** ) at significant level of p< 0.05, thus support the first hypothesis of the study. the negative relationship between market information (r = 0.355 ** ) and smes growth is significant (p< 0.05) which support the second hypothesis of the study. the result of the study also supports the third hypothesis that procurement contract (.404 ** ) negatively and significantly affect the growth and survival of smes age frequency percent 18-30 40 23.3% 31-40 55 32.0% 41-50 47 27.3% >50 30 17.4% total 172 100.0% family income 30000andless 1 .6% 31000-60000 21 12.2% 61000-80000 62 36.0% >91000 88 51.2% total 172 100.0% education illiterate 3 1.7% primary 37 21.5% secondary 93 54.1% diploma or higher 39 22.7% total 172 100.0% review of economics and development studies, vol. 6 (4) 2020, 845 856 850 table: 2 correlations the below table: 3 shows the variation characteristic between the lack of financial resources on the smes growth and survival. the r square for the give relation between lack of financial resources and smes growth and survival is .086 which mean 8.6% variation in smes growth and survival occur due to lack of financial resources ( p<0.001 with f= 16.043). hence support the first hypothesis of the study that lack access of financial resources is negatively association with firm growth and survival. table: 3 model summary model r r square adjusted r square std. error of the estimate change statistics r square change f change df1 df2 sig. f change 1 .294 a .086 .081 .84947 .086 16.043 1 170 .000 a. predictors: (constant), financial barriers below table 4 explore the strength of the negative relationships revealed by the value of slope and intercept for smes growth and survival. the constant value in table 3 for the given relationship is 2.037 and a slop of 0.502 regression line shows that one-unit change in lack of financial barriers can significantly predict 0.502 units change in smes growth and survival table 4: coefficients a model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 2.037 .453 4.495 .000 financial barriers .502 .125 .294 4.005 .000 a. dependent variable: growth the table 5 explores the variation characteristic between the lack of market information on the smes growth and survival. the r square value for the relationship between lack access to market information smes growth and survival is 0.126 which mean 12.6% of variation in smes growth and survival occur due to lack of market information (p<0.001 with f= 24.5564). thus, support the second hypothesis of the study that lack access to market information resource is negatively associate with the growth and market survival. growth financial market procurement growth and survival 1 . financial barriers .294 ** 1 market information barriers .355 ** .556 ** 1 procurement contract barriers .404 ** .674 ** .692 ** 1 **. correlation is significant at the 0.01 level (2-tailed). review of economics and development studies, vol. 6 (4) 2020, 845 856 851 table: 5 model summary model r r square adjusted r square std. error of the estimate change statistics r square change f change df1 df2 sig. f change 1 .355 a .126 .121 .83066 .126 24.564 1 170 .000 a. predictors: (constant), market information the table 6 below shows the strength of the negative relation revealed by the value of slope and intercept for the growth and survival of smes. in table 5 the constant value of give relationships is 2.037 and slop of 0.481 on regression line which indicate that one unite change in lack access of market information significant predict 0.481 unite change in the growth and survival of smes. table: 6 coefficients a model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 2.073 .361 5.747 .000 market information .481 .097 .355 4.956 .000 a. dependent variable: growth table 7 below shows the variation characteristic between the lack access to procurement contract on the smes growth and survival. the r square value for the given relationships between lack access to procurement contract and smes growth and survival is 0.163 which mean 16.3% of variation in smes growth and survival occur due to the lack access of procurement contract (p<0.001 with f= 33.170). therefore, support the third hypothesis of the study that lack access to procurement contract negatively influences the growth and survival of smes. table: 7 model summary model r r square adjusted r square std. error of the estimate change statistics r square change f change df1 df2 sig. f change 1 .404 a .163 .158 .81287 .163 33.170 1 170 .000 a. predictors: (constant), procurement barriers the below table 8 explore the strength of the negative relationships revealed by the value of slop and intercept for the growth and survival of smes. in table 7 the constant value of the relationship is 2.073 and the slop of 0.48 on regression line which shows that one unite change in lack access to procurement contract significant predict 0.481 unite change in the growth and survival of smes review of economics and development studies, vol. 6 (4) 2020, 845 856 852 table: 8 coefficients a model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 2.073 .361 5.747 .000 market information .481 .097 .355 4.956 .000 a. dependent variable: growth 5. discussion and conclusion the current study was carried to determine the influence of major barriers a) lack access to financial resources b) lack access to market information and c) lack access to procurement contracts on the growth of smes in the context of the emerging economy of pakistan. the results of the analysis suggest that smes in pakistan are still facing challenges for their growth and survival regarding the lack of financial resources, lack of access to market information, and procurement contracts. as from the previous finding of the researcher from developed as well developing economies the lack access to financial resources, lack of market information and lack access to procurement contract negatively influence the smes growth and survival acs, carlsson, &karlsson, 1999; oecd, 2008; arora, 2009 zhou, and wit, 2009; arráiz et al., 2012; cardoza et al., 2015; tambunan 2009; siringoringo et al., 2009; hamisi., 2011; huett et al., 2014). the result also identified that in the context of the emerging economy of pakistan for manufacturing smes is critical to growth and survival with these barriers. hence, given these fact government need to design and implement policies and framework for the growth and survival of smes. its need to facilitate and ensure the smes access to market information sufficient financial resources and procurement of contract with governmental organizations and as well as a private organization. furthermore, the government can establish a favorable environment with market players of all necessary legislation which encouraged smes' growth and survival. the result indicates that lack of access to financial resources, lack of procurement contract, and lack of market information are the most significant barriers in the context of the emerging economy of pakistan. therefore, it needs to do more for smes to make it easier and decreased the high collateral requirements, high-interest rate of return, high 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(2012). institution-based barriers to innovation in smes in review of economics and development studies, vol. 6 (4) 2020, 845 856 856 china. asia pacific journal of management, 29(4), 1131-1142. review of economics and development studies vol. 5, no 3, 2019 571 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads financial inclusion for smes: role of digital micro-financial services 1 rabia rasheed, 2 sulaman hafeez siddiqui, 3 iqbal mahmood, 4 sajjad nawaz khan 1 iqra university karachi pakistan, rabia7862009@gmail.com 2 the islamia university of bahawalpur pakistan, sulman.siddiqui@iub.edu.pk 3 associate professor, higher education department, punjab pakistan, iqbal.phdfin14@iiu.edu.pk 4 university of central punjab bahawalpur, pakistan article details abstract history revised format: 30 june 2019 available online: 31 july 2019 smes paly major role in poverty reduction and employment generation, therefore experts considered this sector as engine of economic growth. however, access to finance in developing countries is one of major issue in development of sme sector as well as hurdle in economic growth. financial institutions banking and non-banking shows reluctant behaviour in providing financing to smes and the issue is more severe in emerging economies. bank financing has been found as main source of funds for smes in pakistan, however, to obtain these funds not easy for small and medium firms. recently digital micro financial services have been introduced by a number of micro finance banks. current study looks into the role of digital micro financial services in enhancing smes’ access to finance and thereby enabling a more inclusive financial market for smes especially in context of emerging and developing economies. by digging out the existing literature and secondary data, the study discusses that digital financial services have greatly helped owner managers of smes in smooth management of their transactions and finances. the study concludes that to strengthen sme sector for economic growth, it is important to further reduce the cost of using digital financial services and increase the financial product portfolio on digital platforms. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords digitization, smes, financial inclusion, pakistan, inclusive jel classification: g10. g15, n10, n15 corresponding author’s email address: sulman.siddiqui@iub.edu.pk recommended citation: rasheed, r., siddiqui, s. h., mahmood, i. and khan, s. n. (2019). financial inclusion for smes: role of digital micro-financial services. review of economics and development studies, 5 (3), 571-580 doi: 10.26710/reads.v5i3.686 1. introduction for inclusive growth in countries experts and practitioners consider financial inclusion as powerful tool. it empowers individuals, groups and businesses to easily access financial services or system which is prerequisite for the achievement of policy inclusiveness. moreover, it allows to cultivate opportunities for greater socio-economic outcomes along with better integration into the economy and improvement in their livelihoods. small and medium enterprises contribution towards employment generation and economic development has already been accepted and discussed thoroughly (shofawati, 2019). despite pivotal role of smes in economic development still researchers and policy makers emphasizing on financial inclusion of smes. in developing countries the issue is more severe as various internal and external hurdles such as corruption, technological constraints, poor infrastructure etc. slow down the inclusion process. in addition, supply and demand side barriers also have greater impact on financial http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 572 inclusion of smes (blancher et al., 2019). to achieve the goal of inclusive finance system no doubt challenging for developing economies, however, governments, financial institutes and related national/international institutes are remain committed towards financial inclusion of underserved individuals and firms in order to build strong economy. besides various constraints developing countries are trying to pave their weaknesses by focusing on adoption of modern ways of financing for individuals and firms. as in this era of technology to compete globally it’s essential for economies to learn and shift their systems towards digitization for rapid growth (bansal, 2014). globally internet penetration growth bringing revolution in businesses and in individuals’ life as the way of information sharing, transaction execution and other day to day operations changing quickly. increase in digital connectivity reshaped consumer behavior as sloping in favor of cost saving, convenience and customized retail experiences. additionally, firms’ also grabbing opportunities emerging from digitization e.g. efficiency in supply chain, enhanced flexibility to address consumer needs and lower costs of transaction. a greater impact of digitization can also be seen on production of commodity-producing sectors through processes such as automation and data handling (badruddin, 2017). digitization in financial industry is beneficial not only for users but also for the providers, government and economy. world bank and g-20 in emerging economies initiated the project to increase financial inclusion by adopting modern financing systems for sake of reduction in poverty. digitization of financial services not only provide convenience and affordability to users but also it enable low-income individuals or small and micro firms to access financial services easily. along with convenience it also provide security as compare to keeping paper money and travelling with it (peterson k ozili, 2018). digital financial services includes mobile banking, internet banking, e-wallets, credit and debit cards etc. although digitization greatly impacting the life globally but challenges are also there for both developed and developing economies. to compete in market governments and policy makers stressing on adoption of digitization, however, negative perceptions preventing nations to enter in technological era where systems are not so strong. particularly, developing countries who are facing numerous challenges and going through the phase of development not able to provide that level of security and convenience to users which actually required and mandatory for use of digital financial services. therefore, these countries majorly facing issue of cyber-attacks and poor security systems avert people to adopt digital financial services. also the issues of poor network coverage, higher cost of transactions and lack of awareness slow down the adoption of technology in financial industry (rasheed, siddiqui & rahman, 2018). pakistan also among those struggling countries who are while developing their industries focusing on the implementation and adoption of modern systems. current paper aims to highlight that how policy makers and institutions in pakistan trying to achieve the goal of financial inclusion specifically for smes and how micro-digital financial services boosting this inclusion process. the paper has primarily discussed how digital financial services helping and improving smes financial status which ultimately benefiting country economic condition. moreover, with the help of secondary data and prior research effect of micro-financial services on smes and economy in pakistan has also been discussed in this paper. 2. financial inclusion economists and policy makers concerned about bottom of pyramid (bop) nations who are not capable to take advantage of expansion and growth occurred in developing economies. its’ unfortunate in emerging economies that in spite of greater economic growth the income inequality and unacceptable poverty levels remain at the bop. researchers discussed about the “financial nomads” the citizens at bop who are excluded from many sources of financial services and suffer from financial insecurity, simply no access to financial products and services (realini & mehta, 2015). practitioners and policy makers therefore emphasized on financial inclusion as they consider it as main element towards inclusive growth. for the reduction of poverty and increase in economic development financial inclusion importance cannot be denied as it enable households to invest in education, durable goods, health and to expand the consumption (thomas & hedrick-wong, 2019). various researchers defined financial inclusion which highlight it as broader concept. sarma, (2008) defines financial inclusion in multi-dimensional terms “process that ensures ease of access, availability, and active usage of the formal financial system” for the people of an entire society and economy. according to world bank, (2017) where the citizens of a society who are excluded from access and use of financial products and services need of financial inclusion implies. additionally, accion a leading financial investment organization suggested five dimension of financial inclusion; full access, provision with quality, client financial capability, services for all, diverse and competitive marketplace. review of economics and development studies vol. 5, no 3, 2019 573 according to world bank global findex survey (2017), 50 percent of world adult population which is approximately 1.7 billion individual are not included in formal financial system. moreover, because of rare account usage or no access to credit around 1-1.5 billion are under-banked. in emerging economies, india and china have the largest share of individuals who are unbanked as globally 24% unbanked adults live in india and china. moreover, survey of world bank global findex, (2018) revealed individuals with no account in any financial institute or mobile money account in south east asian countries 52% of total population, out of these financial excluded adults 20% are in china and 20% in india. to shed light on this situation is essential for inclusive growth as the citizens at bop do not have enough and reliable sources of finance, therefore, ultimately thy rely on expensive financial sources. similar situation facing by the millions of small and medium firms who want to take formal finance to fulfil their business financial needs but not able to obtain from financial institutes because of various demand and supply side factors (rasheed & siddiqui, 2018). a study of park and mercado, (2015) focused on financial inclusion assessment specifically in asian economies, for 37 asian countries they have produced the financial inclusion indicator for each and highlighted the factors which impact financial inclusion. study revealed that population size, per capita income and rule of law increased while age dependency and associated demographic factors lowered financial inclusion. similarly, thomas and hedrick –wong, (2019) identified that mobile access and saving priorities are important factors and emphasized more on mobile access because of modern and easy driver of financial transactions. world bank’s global findex database mentioned around 100 factors such as household income, gender and age. 2.1 financial inclusion in pakistan as a national priority pakistan has adopted financial inclusion and left many countries behind. in 1990 the support for the establishment of microfinance banks has been started which ultimately began in 2001 after allowed by the government. pakistan was the first among other countries who adopted branchless banking in 2008. it was first step taken by the institutes towards digital financial services, however, the support further strengthened in 2015 with approval of national financial inclusion strategy. at the time of approval the level of financial inclusion was one of the lowest in the world as the account holders was only 16 percent of adult population and only 11 percent women had bank accounts (rusmussen, 2018). moreover, the provision of formal finance to smes, housing and agriculture was also on the lowest level. therefore, national financial inclusion strategy has been developed by state bank of pakistan with consultation of stakeholders, banks, federal, provincial government departments, associations and donor agencies. under the strategy central bank sbp has decided to achieve the target of financial inclusion ensuring 50 percent of adult population financial inclusion by 2020. moreover, promotion of digital financial services to achieve universal financial inclusion and increase in lending to priority sectors such as smes and agriculture sectors are the main objective of national financial inclusion strategy (nfis, 2017). according to world bank group – global findex report 2017 over period of two years account holders have grown from 13 to 21 percent as various initiatives under national financial inclusion strategy have been taken by sbp such as asaan (easy) mobile account scheme and opening of asaan accounts. moreover, to facilitate micro, small and medium firms pakistan financial inclusion and infrastructure project has been launched by sbp specifically for smes and women entrepreneurs. in 2016, sbp assigned the targets of finance to banks and development financial institutes (dfis) which achieved by the institutes efficiently, however, the target of rs 1 trillion yet to be achieved by financial institutes till 2020. research revealed that demand of islamic finance among smes is quite high around 25 percent of sme population not obtaining any finance facility because they want islamic financing as per shariah principles (rasheed and siddiqui, 2018). sbp has assigned financing targets to islamic banks for uplift the level of financial inclusion, though, it has been observed that islamic banks shows more reluctance towards lending to smes. the financing target for smes was rs 65 billion which islamic banks have to achieve by dec, 2017, however, only rs 42 billion portfolio has been reported. similarly, the target for the year 2018 was rs 88 billion and reported rs 31 billion as outstanding islamic sme finance. the increase of rs 199 billion expected from islamic banks in sme finance portfolio by dec, 2020 (sbp, 2018). despite various projects data shows financial inclusion progress is not up to the mark. world bank 2017 findex shows (figure 1) slow progress of financial inclusion as from 2014 to 2017 the percentage only rose 8 percent in pakistan as compare to neighbour countries such as india and bangladesh. the situation not much improved as the latest blancher et al., (2019) imf report on financial inclusion in middle east and central asia highlighting pakistan still at the bottom in percentage of male and female using financial accounts among other developing countries. review of economics and development studies vol. 5, no 3, 2019 574 figure 1 – percentage of adults accounts 2014-2017 figure 2 – adults population using world bank findex, (2017) financial account imf, (2019) however, figure 2 showing the dominance of male account holders which is common in almost all developing countries. similarly, sme sector still suffering from lack of finance as in pakistan average share of smes in total bank lending is only about 7 percent, which is lowest in the world. although, sbp has announced various schemes and projects under national financial inclusion strategy for provision of formal finance to smes, however, the performance of financial institutes not remarkable. according to blancher et al. (2019) report on financial inclusion of smes globally figure 3 shows status of pakistan in facilitating smes financially. imf report further stated that developing countries can increase their economic growth by 1 percent by closing this financing gap for smes. moreover, financial inclusion of smes can help to increase the rate of employment, potentially creating about 16 million jobs by 2025. it is recommended that larger extension to smes in credit allows banks to better diversify their credit portfolios and risk exposure which ultimately contribute towards financial stability. figure 3 – sme lending by region (lac= latin america and caribbean; ssa= sub-saharan africa; menap=middle east, north africa, afghanistan and pakistan; cca= caucasus and central asia) source: blancher et al., (2019) rasheed and siddiqui (2018) in their study found that financial institutes in pakistan not paying much attention on sme sector, therefore, smes fulfil their business financial needs by using informal finance. despite various disadvantages they consider informal finance more suitable because of less requirements, documentation, quick and easy access. furthermore, rasheed, siddiqui and chaudhry, (2019) discussed that how islamic banks can help sme sector to grow by facilitating them financially, study revealed that a large population of smes interested in shariah review of economics and development studies vol. 5, no 3, 2019 575 compliance products and services for their business financial needs. along with this national and international institutes specifically working on financial inclusion emphasizing on digitization and claiming that provision of digital financial services powering inclusive growth in emerging economies. 3. role of digitization in financial inclusion today, digital finance and financial inclusion relevance is under detailed discussion of policy makers and academicians for economic growth. digital finance means financial services delivered by banks and non-banking financial institutes to their customers through linkage of digital mediums like mobile phones, internet and cards with secure digital payment systems gomber, koch, and siering (2017). digital finance adoption can overcome the issues that persist for individuals, businesses, governments and economies. digitization impacting and rising the level of financial inclusion along with several benefits like reduction in financial cost for financial institutes and fintech providers, convenient and secure financial services, improvement in gross domestic product (gdp) and long-term positive impact for banking performance (scott, van reenen & zachariadis, 2017). similarly, ifc, (2018) report on financial inclusion and importance of digital finance mentioned three key benefits of digital financial services, easy access, product market fit and affordability. further, discussed that availability of financial services limited if distributing only through branches, regulations which only can fill by specific portion of population, moreover access is hampered by complicating the terms and conditions, poor usability and limited transparency. in the second key point report addressed the issue of available products and services which are not as per needs of customers, it can be because of design or the way products and service sold by the institutes. for example, requirements of minimum balance and credit scores and similar other thresholds usually not met by a large population. along with it strict terms and conditions of prices set by institutes which are mostly too high, inflexible and various hidden charges that makes difficult for customer to afford. thus, for expansion of financial services it’s compulsory to keep prices low and affordable for users. unfortunately the policies are not changed for smes as they are not able to find products and services as per their needs and business requirements (rasheed & siddiqui, 2018; rasmussen, 2018). financial institutes characterized their needs high in complexity and low in scale, moreover, offering financial services to smes tends to have higher cost while often also offering lower revenue streams to the provider. it can be observed that if government and policy makers are lacking one side with implementation of various policies and regulations improved on the other side. pakistan moving towards digitization quickly and among those developing countries where digitization creating change in some components of the service sectors. the changes can be observed in e-government, e-commerce and fintech where new approaches to facilitate users rising day by day. particularly, the significant growth can be seen in e-commerce industry over the last few years (figure 3) showing changed purchasing behavior of consumer in pakistan (sbp. 2018). figure 3 – number of e-commerce merchants accepting digital payments in pakistan source – state bank of pakistan, (2018) fintech by devising innovative solutions tackling the imperfections in credit market which ultimately benefitting financial sector largely. moreover, around 10 banks offering digital financial services the largest of these owned by review of economics and development studies vol. 5, no 3, 2019 576 mobile telephone companies. inclusive growth initiatives enable private sector investment in microfinance institutions and digital financial services providers, which has helped to fuel the growth of the financial sector. moreover, government also taking initiatives to facilitate citizens efficiently through modern systems along with cutting the costs and leakages incurred by implementing authorities. the government payments have also been digitize early as compare to other developing countries, such as benazir income support programme started in 2010 by government of pakistan people party (rasmussen, 2018). in 2014, pakistan became member of the united nations’ better than cash alliance, which encourages governments around the world to use digital payments. similarly, current government of pakistan tehreek-e-insaf has launched their national digital policy and set the target of $10 billion increase in pakistan’s it exports over the next 5 years. under the policy the main focused areas are; national digital transformation initiative and e-government, human capital development, exports and market access, infrastructure and connectivity, innovation ecosystem and entrepreneurship and policies and regulations. additionally, to support financial inclusion pakistan has better market infrastructure as compare to other countries. for example, national identification authority’s (nadra’s) database of biometric id which covers most adults, and a privately owned switching and clearing company, 1link, which includes almost all banks (sbp, 2017; muhammad, 2018). the current focus on digitization no doubt will enhance the growth from a macroeconomic perspective. according to report of mckinsey global institute (mgi) by manyika et al. (2016) pakistan will be able to increase the gdp by 7 percent points cumulative and can create around 4 million job opportunities during the tenure of 2016-2025 because of increase in digital financial services. figure 4 expected gain in gdp growth due to digital financial services 2016-2025 source: mckinsey global institute (2016) mckinsey report further explained that the impact of digital financing services will be huge on financial industry as well as economy. financial institutes can increase credit to individuals and smes to shift saving from informal to formal digital accounts. currently, lending to smes percentage is quite low in the country the investment channel may represent the biggest untapped opportunity from which digital financial services gains can be identified in next few years. the digital technologies are being deployed for mobile accounts opening, introducing electronic payment systems and carrying out funds etc. the improvement in penetration and access to financial services can be observed. in future, this may accelerate the shift in savings to digital accounts, and have further implications for policy goals like financial inclusion (manyika et al., 2016; rasheed et al., 2018). 3.1 digital financial services in pakistan in developed and developing countries mobile phone usage increased with invention of smartphones which is affordable for consumers. similarly, in pakistan, the rise in mobile phone adoption maturing 3g/4g and newly launched 5g telecoms services as currently in pakistan, 145 million nadra verified cell phone connections have been recorded where more than 48 million with 3g/4g/lte connectivity. along with this speedy growth of mobile money solutions, extensive wireless coverage, qr codes and mobile wallets, while cellular density remarkably stands at 71.4 percent of growth as compare to 2008 54.6 percent which shows that institutes and fintech companies review of economics and development studies vol. 5, no 3, 2019 577 are ready to change the digital landscape in pakistan. micro digital financial services within branchless banking framework, over the counter (otc) model such as omni, easypaisa, jazzcash, upaisa and mobicash etc. are reliable and provide convenience, however, by limiting customers’ access to facilitated transactions it slowing down the pace of promotion of financial inclusion. the shift from otc to mobile wallet is actual a reason behind this barrier, however, otc still on the top in terms of volume and value of customers. though, state bank of pakistan approval through biometric system for opening of mobile wallet accounts only takes five minutes, enough to attract customers towards mobile wallet accounts in pakistan (sbp, 2017; 2018; muhammad, 2018). the branchless banking harness by microfinance industry successfully as pakistan among few countries where microfinance banks have some specific license. moreover, telecom companies and even courier companies have invested in microfinance banks such as telenor bank, u-microfinance bank, tcs bank, waseela mf bank by mobilink etc. the same is following by few other countries along with pakistan (muhammad, 2018). the main benefit of these micro-financing banks is “one minute account”, moreover, the telecom microfinance banks also offer the zero level mobile account opening which is as easy as receiving of single sms. the zero level mobile wallet bank account enable customer for transaction of rs. 50,000 and which can be accessed through mobile phone as the quick response (qr) code technology made it possible for companies to offer such services and customers for easy and speedy transactions. furthermore, other innovations such as masterpass, simsim and fone pay also expanding by the companies for quick transactions. master pass also a digital payment service which allows customer to checkout after storing all shipping information and payment in one secure location, similarly, fone pay facilitate consumer for making secure and simple digital payments as powered by qr mobile payments and masterpass. the fonepay combines mobile wallets, bank accounts and payment cards like credit/debit cards and prepaid products on one platform. in pakistan, currently, around 30 million users getting benefits with fonepay in collaboration of various banking and non-banking financial institutes to link accounts from soneri, meezan bank, easy paisa and jazz cash etc. consumer can link their debit, credit and prepaid cards and can use the application to make transactions in seconds. finally, the simsim is a joint effort of finja (pvt) limted and finca microfinance bank limited, it’s a unique collaboration where a bank and fintech created digital financial product. simsim has completed their beta pilot successfully prior to formal approval from state bank of pakistan, moreover, under simsim rs. 600 million transactions have been recorded, where 30,000 in self-registered mobile wallet accounts and a retail network of 500 participating merchants. the expansion of digital financial services growing rapidly, however, pakistan still lags behind among other developing countries (nisar, 2018). 4. digitization and challenges the most important growth factor of any economic activity is finance. therefore, developed countries focused on financial inclusion for fuller participation of segments which are financial excluded, however, developing countries still under process to strengthen their systems through they can progress in financial inclusion. similarly, pakistan also going through this process and in this regard, recently, revised and enhanced national financial inclusion strategy (nfis) has been approved by the prime minister of pakistan. the improvement in nfis pre-requisite because currently, pakistan standing in terms of financial inclusion is at the bottom among other developing countries list. it’s a great step towards development of financial inclusion as government key stakeholders paying attention on achievement of inclusive finance (nfis, 2017). according to g20 financial inclusion indicators, pakistan has the lowest percentage in formal bank account holders as compare to other developing economies, however, the highest percentage of accounts has been recorded in malaysia. subsequently, the adoption level of digital financial services also not remarkable as consumer in pakistan has lack of confidence on digital payment, therefore, only 9 percent of population above age of 15 years using digital financial services (rasmussen, 2018). world bank global findex, (2017) recorded that share of adults accounts with financial institutes or mobile money service increased from 62 to 69 percent globally between the tenure of 2014 to 2017. however, in developing countries the percentage increased from 54 to 63 percent, though, women account holders percentage on the lowest level and its common almost in all developing countries. 5. digitization and smes in pakistan, currently not enough evidences available to analyze the impact of digitization of smes growth and development, however, a study of india has estimated that by adoption of technology gdp can be raised by 10 percent till 2020. furthermore, study revealed that smes who are shifting towards digitization achieving double growth as compare to those still using traditional systems. smes with leveraged digital technologies showing review of economics and development studies vol. 5, no 3, 2019 578 yearly growth of almost 19 percent as compare to offline limited to 10 percent only. the report reflected that smes being inseparable part of economy can grow rapidly with adoption of digitization. for example, digitally enables smes can increase their production and profits with larger customer base and enhanced revenues, moreover, digitization can greatly impact everyday process of smes by reducing lead times, attract better talent and conduct efficient management of human resource. further, technology usage can enhance the access to resources, internal and external communication and can expand outreach to their customers (). as sme sector suffering the most in pakistan as only 54 percent have account at formal financial institute in pakistan as compare to other neighboring countries like india and bangladesh where the percentage is 85 and 82 percent respectively (figure 5). it also reflects that significant portion of sme population using informal financial services sbp, (2018). according to rasheed and siddiqui, (2018), only 7 percent of smes in pakistan using formal finance obtained from banks or other financial institutes. rasheed, rahman and siddiqui, (2017) explained various demand and supply side challenges facing country towards development of sme sector and economic growth. figure 5 – smes with formal accounts source: sbp, (2018) therefore, the efficient implementation of technology in sme sector is pre-requisite for sector and economic growth because digitization can resolve various issues of smes such as firms bear higher costs for cash management and cash flows as well as increased risk of theft and leakages. however, by employing digital payment systems and undertaking digital transactions, smes can play secure and freely in financial market as the modern systems can significantly reduce leakages and better manage their cash flows. in addition, these smes will automatically be included in the formal financial economy, which in addition to aiding the financial inclusion target of 50 percent financially include by 2020, will enable smes to access credit from formal financial institutions. furthermore, it will be helpful to reduce the credit demand gap of around rs. 277 billion (blacher et al., 2019; sbp, 2018). although, digitization can bring tremendous change in sme sector and can boost economy of pakistan on expected level, however, various challenges hindering the growth and development of sme sector and economy. for example in pakistan, the literacy level of smes owner-managers is very low as they do not have sufficient financial knowledge and technology. thus, the adoption level of digital financial services not appreciateable within their processes and payments. similarly, smes also lacking in skills related to technology as they are not able to adopt and work through digital systems. in addition, cost of digital techniques also a big hurdle towards adoption the lack of supporting infrastructure and technology are also major deterrents in keeping smes online (rasheed et al., 2016). however, despite these challenges trade development authority of pakistan (tdap) a government institute and ministry of information technology (it) have undertaken the initiatives for the digitization of smes in pakistan. for example, tdap recently signed a memorandum of understanding (mou) with a global giant in e-commerce alibaba. the initiative has been taken for promoting exports by smes in pakistan through e-commerce channel like alibaba. moreover, as part of mou alibaba will take the responsibility of online and offline training programmes to smes in pakistan which help smes to learn the skills for adoption and use of digitization. besides, ministry of http://www.sbp.org.pk/acmfd/national-financial-inclusion-strategy-pakistan.pdf http://siteresources.worldbank.org/pakistanextn/resources/293051-1241610364594/6097548-1242706658430/ch4bringingfinancepakistanpoormay192009.pdf review of economics and development studies vol. 5, no 3, 2019 579 it emphasized in its digital pakistan policy 2017 for creation of infrastructure which can enable smes easy use and adoption of financial digital services (sbp, 2017; khan & ehsan, 2019). 6. conclusion globally, financial inclusion is one of the key issue for economies and towards achievement of inclusive growth in both developed and developing countries. furthermore, prior research highlighted that because of various challenges emerging and developing economies still struggling towards financial inclusion. moreover, sme sector suffering the most as developing countries not paying attention on financial exclusion of smes. digitalization of financial services has opened a window of opportunity for the financial sector to serve the huge yet dispersed target market of smes. digitalization of financial services allow banks to reach and serve their target market at low cost and with greater customization. digital financial services are also an opportunity for smes to enhance their performance and outreach using these services at low cost. however, secondary data shows that developing countries have been moving slowly in contrast to developed countries towards digital technology in financial sector. similarly, pakistan also going through the same situation, though, among developing countries pakistan not achieving the desired results towards financial inclusion. references badruddin, a. 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(2019). what is “financial inclusion”?', inclusive growth. published online, 13-26. https://www.cgap.org/blog/pakistan-enigma-why-financial-inclusion-happening-so-slowly review of economics and development studies, vol. 6 (2) 2020, 531-543 531 war against terror impacts on pakistan’s economy: a critical discourse analysis of pakistani newspapers a sarwat jabeen, b tazanfal tehseem, c samia naz a assistant professor, department of english, bahauddin zakariya university multan, pakistan b lecturer, department of english, university of sargodha, punjab, pakistan c course coordinator at quaid-eazam academy for educational development lahore, punjab pakistan article details abstract history: accepted 04 may 2020 available online 15 june 2020 the present research is an attempt to explore the discourses of political cartoons published in pakistani urdu and english newspapers representing the war against terror impacts on pakistan’s economy. newspapers’ linguistic and semiotic representations of war against terror impacts on pakistan’s economy are ideologically loaded and employed in the construction and deconstruction of the realities of post 9/11 scenario in a desired way. the research uses multimodal critical discourse approach (machin, 2007) along with van leeuwen’s framework for recontextualisation (2008) and fairclough’s (2003) framework for visual and linguistic analyses of the political cartoons to explore the hidden ideologies. the visual and linguistic analyses of the political cartoons pay careful attention to how discourses are chosen and then represented visually and linguistically to promote particular interests and ideologies that shape public perception of the reality. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: critical discourse analysis, newspaper, political cartoon, ideology, war on terror, pakistan’s economy jel classification: l86, c61, c69 doi: 10.47067/reads.v6i2.229 corresponding author’s email address: sarwat.awan4@gmail.com 1. introduction the tragic events of september11, 2001, were shocking abrupt and horrifyingly dramatic had great impacts on the whole world. the consequence of this surprise was greater global activism by the us. it led the us to form a global coalition against the menace of international terrorism. the 9/11 tremors were felt throughout the world but nowhere more strongly than in pakistan. pakistan’s role as a frontline state in the war against terror has exposed it to much graver crises. the post 9/11 events got extensive coverage in pakistani urdu and english newspapers. the research paper investigates the ideological representations of pakistan’s economic condition in political cartoons with reference to pakistani english and urdu newspapers in the post 9/11 scenario. the analysis raises an awareness of the broader context within which the economic condition of pakistan is constructed and represented in political cartoons. the discourse of political cartoons includes representations of participants, settings, poses and objects along with linguistic captions. this analysis allows us to see how political cartoons represent and recontextualise the developments took place after pakistan’s participation in war against review of economics and development studies, vol. 6 (2) 2020, 531-543 532 terror. 2. literature review media is the primary crucible for representation in the world today. it is an arena where ideologies are both produced and transformed. a critical perspective is instrumental to examine how media articulates the dominant values and the socio political ideologies in a society. such examination is vital to understand how groups exercise their power to maintain their ideologies. ideology being the system of beliefs organizes the way in which we view the world and the events that take place in it. ideologies are proposition that generally figure as implicit assumptions in texts, which contribute to producing or reproducing unequal relations of domination (fairclough, 1995). he further says that discourse is “a particular way of constructing a particular (domain of) social practice” (1995: 76). the analysis of any type of discourse helps us understand the use of language in context as meanings are embedded in their contextual use. critical discourse analysis systematically considers the issue of control, power and dominance in the production of texts and pays attention to gaining of knowledge how this shapes discourse (van dijk, 2001). the study draws upon cda and mcda for depicting, interpreting and analyzing the ideological discourses of pakistani leading english and urdu newspapers. weiss and wodak (2003) remind the reader the underlying premise of cda which is that discourse shapes social events and is shaped by them. cda of the political cartoons in the present study discloses the explicit and implicit meanings used ideologically in these cartoons to shape the perception of the people. multimodal critical discourse analysis shows how images, graphs, diagrams, and photographs work to create meanings. choices are made by the authors to communicate the idea in desired ways. by using the tools carefully within this framework, we can identify these choices as described by machin and mayr ‘texts will use linguistics and visual strategies that appear normal or neutral on the surface, but which may in fact be ideological and seek to shape the representation of events and persons for particular ends’ (2012: 9). the insights which the mcda brings to the critical reader can assist in understanding how ideology operates through language deployed for particular ends by powerful groups in society. 3-methodology the present research aims at decoding the linguistic and semiotics discourses of political cartoons published in the pakistani urdu (ausaf, jang) and english (dawn, the nation) newspapers. at the time of data collection, political cartoons were published daily in these newspapers. the researcher has collected data from following pakistani english and urdu newspapers:  english newspapers: dawn (english, daily) the nation (english, daily)  urdu newspapers: jang (urdu, daily) ausaf (urdu, daily) these newspapers selected on the basis of following criteria: 1. wide circulation of these newspapers 2. maximum readership 3. old and well-reputed 4. daily newspapers review of economics and development studies, vol. 6 (2) 2020, 531-543 533 5. publish political cartoon daily  dawn it is pakistan’s oldest and internationally best acknowledged english newspapers. it was founded by quaid-azam muhammad ali jinnah before the formation of pakistan on 26 october 1941.  the nation the nation is another largest and oldest english-language daily newspaper in pakistan. it was founded in 1986.  jang jang is the oldest urdu newspaper in pakistan in continuous publication since its foundation in 1939. it is very well reputed and widely circulated.  ausaf daily ausaf was inaugurated in islamabad on 25 december 1997. it is daily urdu newspaper which is being published simultaneously from different cities of pakistan and from london and frankfurt. it is one of the leading urdu newspapers in pakistan. 3.1 selection of data for analysis the researcher has selected political cartoons from the above mentioned newspapers appearing during 10 september 2001 to 31 december 2001. it is important to note that political activity was at its peak when political cartoons were extracted prior to us attack on afghanistan. 3.2 reasons for the selection of urdu/ english newspapers urdu and english newspapers are selected in order to see their representations of post 9/11 scenario. urdu newspapers are generally considered the representatives of the common people of pakistan. these are published in urdu language so a common person with less education can read the urdu newspapers easily. urdu newspapers represent the maximum readership because in pakistan readers of urdu newspapers are more than those of english newspapers. english newspapers are read by elites or highly educated people who understand english language well. these are also considered pro-western in policies. urdu and english newspapers are selected to see the differences in ideological representation of post 9/11 scenario. how both types of newspapers represent ideology regarding the issue as their readership differs. 3.3 research questions  what key themes recur in the political cartoons published in the selected newspapers on the issue of economy?  how do the political cartoons characterize the figures, their actions and the themes that make up the message of war on terror’s impact on pakistan’s economy?  what ideologies underlay these themes and how are they legitimized?  is there any ideological similarity or difference represented in urdu/english political cartoons over the issue? 3.4 framework for the present study in order to explore the research questions, multimodal critical discourse analysis is used to analyse the data. the researcher follows multimodal critical discourse approach (machin, 2007) along with van leeuwen’s framework for recontextualisation (2008) and fairclough’s (2003) framework for visual and linguistic analyses of the political cartoons regarding the ideological representations of war review of economics and development studies, vol. 6 (2) 2020, 531-543 534 on terror in post september 11 scenario. the analysis also draws on leeuwen’s (1996, 2008) framework for the representation of social actors, which offers a category of overdetermination to read how participants are presented physically overdetermined in order to communicate particular ideology and also for recontextualisation of social practice. machin’s (2007) multimodal critical discourse modal provides a toolkit to analyse the semiotic resources such as persons, settings, objects and poses. what meanings the particular signs carry? how signs are used in combination to achieve set aims? the purpose is to reveal what kinds of representations are present in political cartoons both explicitly and implicitly. a toolkit for analysis from machin’s (2007) modal for multimodal critical discourse analysis: 3.4.1 participants here, the researcher focuses on the depiction of people in visual communication. also important is what people are depicted as doing. machin (2007, p. 109-123) says ‘analyzing the precise details of actions in written or speech can reveal more subtle messages about the way people are represented as having power or as being passive….applying this to images gives us a more precise tool kit for thinking about action and agency’. it allows us to think about who has agency, who has the ability to act upon the world. 3.4.2 settings settings are important carrier of connotations. according to mcahin (2007) settings are used to connote discourses and their values, identities and actions. settings, kinds of people and place can each connote whole sequences of activity. 3.4.3 poses poses play their part in connoting meaning from particular discourse. ‘poses are a semiotic resource that can be used for their meaning potential. we must pay careful attention to these when we wish to understand what kinds of people are depicted in the image’ (machin, 2007: 31). 3.4.4 objects here, we are concerned with the ideas and values communicated by objects and how they are represented. what discourse do they communicate? according to machin (2007) objects being the important carrier of connotation transport meanings that connote the particular context and work in combination with other semiotic resources to clear the meanings. the researcher follows (machin, 2007) framework for all aspects of analysis of social actors except where she inserts van leeuwen’s (1996) more specific category for the analysis of the overdetermined features of the social actors. we see in the cartoons that the images do not appear natural or real rather they are modified or overdetermined in terms of appearance, look and physique, in order to analyze this we have used van leeuwen representation of social actors (1996) includes a category, overdetermination. according to him overdetermination is done in representation to express views that cannot be said straightforwardly because of political or other censorship. van leeuwen (1996) refers to the exaggeration of certain features as overdetermination. my second methodological tool is recontextualisation. the term refers to semiotic resources for indicating as how political cartoons reconstruct discourse from the events that draw on them. we know that discourses are multi-layered and embedded in social practices which they recontextualise. political cartoons recontextualise the political situations or events took place after 9/11. ‘recontextualisation can exclude some of the participants of the practice they recontextualise’ (leeuwen, 2008: 8). they therefore act in the interest of those who want to disseminate particular review of economics and development studies, vol. 6 (2) 2020, 531-543 535 ideologies and viewpoints to seek benefits. in this view, therefore, semiotic resources are vehicle of communication, or even of persuasion, but are mean of social construction (machin and abousnnouga, 2010: 29). leeuwen (2008, p. 12) says ‘recontextualisation makes the social practices explicit to a greater or lesser degree; it makes them pass through the filter of the practices in which they are inserted’. we have used these categories of recontextualisation to access the ways the participants and events are characterized in political cartoons which leeuwen (2008) identified as substitutions, deletions, rearrangement and evaluation. 4. discourses of war against terror impacts on pakistan’s economy in political cartoons the discourses of pakistan’s economic condition emphasize different issues such as war’s effects on pakistan, crumbling economy of pakistan, american aid, foreign investment in the form of terrorism, local industry in worst slump, rescheduling of pak-us loan and disappointment of pakistani leaders, high inflation, sharp fall and crashes in stock exchange, insecure environment for the foreign investors and people’s resentment against government decision etc. the settings foreground the adversity and misfortunes of the common people, break downs in the local industry, unfavourable environment for foreign investment and leaders’ helplessness in front of the superpowers. these are designed to escalate public anger against the government and projecting the ideologies to challenge the western and american intervention into local politics. political cartoons represent social actors in particular context like musharraf is always shown begging and beseeching for aid and feature western representatives giving cold shoulder to him. the objects also bring the sense of humiliation for pakistani high officials carrying begging bowl and receiving small gift hampers from america in the form of aid. the primary focus and culprit is america and its high officials and this image is intensified through exaggerations and negative portrayal. 4.1 the analysis of visual representations of war against terror impacts on pakistan’s economy in political cartoons the analysis of the theme is done to see how the semiotic resources like settings, actions, objects and poses are used and arranged to create and communicate particular meanings and ideologies and how the recontextualisation is taking place. the four selected cartoons address these issues: american aid to pakistan, cloud of mercy, major economic relief from bush and condition of pakistan’s economy. 4.1.1 participants the frequent social actors in these cartoons are the high officials of pakistan and the us government. figure 1 contains three participants pakistani finance minister shoukat aziz, american ambassador wendy j. chamberlin and a small child representing pakistan’s economy. the participants are involved in material and behavioral processes. it can be seen that aziz is carrying a small child in his hands and chamberlin is dropping drops in his mouth. review of economics and development studies, vol. 6 (2) 2020, 531-543 536 figure 1 taken from daily ‘dawn’ dated: 17-11-2001 the action connotes the injection of pakistan’s economy by the us dollar to improve its health. the smiling faces of both aziz and chamberlin suggest their pleasure while performing this act. the child seems very weak and feeble and needs to be properly fed in order to gain good health. aziz and chamberlin are wearing formal suits and represented as professionals. their hair are well styled and combed. this look helps to reinforce professionalism, formality and seriousness of the mission. it implies that the dollar deal is done and they are agreed upon the plan. the size of participants’ heads is bigger than body and chamberlin looks taller than aziz. her size draws our attention to the power and significance. aziz is bent and seems obedient and compliant. their big heads and tiny bodies’ connote egoism, cockiness and most importantly their foolishness. this also signifies that they are self-assertive; pursuing their own interests relentlessly and negligent about the condition of the economy that is breathing last sigh. figure 3 contains one human figure president musharraf in a state of being covered with different currencies. a cloud of mercy is producing wads of money in the form of numerous currencies that has covered the whole body of president musharraf. the small stature of musharraf symbolizes his meanness and his wide spread big nose suggests his greediness for money as wide big nose carries associations with money. the face of the actor indicates mental processes of satisfaction and gratification. this means that he is depicted in such a way that brings a sense of fulfilment of his needs or wants. musharraf is drowned in the heaps of money and feeling relaxed, uplifted and honoured. musharraf’s body is not visible except his face which suggests how badly he was captured by the powerful partners to their game. whereas, figure 2 presents president musharraf half lying on the floor and seems dejected and broken. he looks down and losing. the reason for his dejection and disappointment is portrayed through the empty shown ‘begging bowl’ written on it ‘major economic relief from bush with love’. this is used to symbolize the us small calibrated doses of comfort not satisfying musharaf who made a review of economics and development studies, vol. 6 (2) 2020, 531-543 537 strong bid for writing off debts. musharraf’s closed eyes, folded arms; slouched shoulders and lazy posture all show his pain, grief and mental distress. figure 4 represents three participants; the doctor, the patient and the attendant. the man in walking position is the us secretary of state colin powell, in lying position is the person represents pakistan’s economy and the third is the attendant serving the ill. the doctor is leaving the place carrying bag in one hand and waving left hand to say good bye to the patient. the person who lies on the bed seems injured and his whole body is covered with strip of fabric used to heel up the wounds. that shows his critical condition. he looks critical and crying while holding bouquet in his hand. as the injured person represents pakistan’s economy, his worst condition symbolizes the worst condition of pakistan’s economy. figure 2 taken from daily ‘ausaf’ dated: 5-10-2001 4.1.2 settings figure 1 represents no settings as the participants stand against the plain background but the use of white and dark shadows is meaning potential. the disjointed line at the bottom that provides space to the participants to put their feet is highly symbolic. the participants are shown in the same frame but the gap actually separates them and indicates that they are different and the strength of the connection between them is poor. according to machin (2007) where the elements are separated by empty space it indicates the distance between them. this is ideological and suggests that the gap is bridged by being together to form a single unit. though, aziz seems more in trouble striving hard to cement the relation. the dark shadows at the top of both sides connote gloom and worry but the bright white that surrounds the participants connotes hope and wish being expected out of the activity. similarly, in figure 3, the dark and white shadows are employed. the white bright light that encircled the bowl shows hope and optimism whereas the dark shadows surrounding the white bright review of economics and development studies, vol. 6 (2) 2020, 531-543 538 show despair, pessimism, defeatism and hopelessness. musharraf’s face is more in dark and less in light. in this cartoon, musharraf, is seen to be dreaming of the economic relief that would be given by bush, he is sleeping while a little portion of his tongue is out to show his desire for getting the aid from america. this connotes the dark mood of him and communicates his despondency. the whole setting brings an atmosphere of despondency and a gloom fell over musharraf. important in both of these figures is the use of dark and white lightening, which suggests optimism as well as pessimism. in figure 2, settings include people and objects set against plain background. the setting that is denoted shows a cloud and currencies. what is connoted is the rain of currencies. here, the salience is given to the cloud producing abundant money that fades the participant into the loads of money. the cloud is very important here for its association. it serves to foreground the ecstasy of the participant fully covered with numerous falling currencies. in terms of semiotic choices, the participant’s concern is represented through rain which is the sign of blessings. so, in the image the rain of money is the greatest blessing for him. the empty setting evokes the idea depicted more through the actor and objects. the abstraction reveals that ideological work is being done. as fairclough (2003) explains, whenever abstractions replace actual places, actions and persons, it indicates about the ideological work. figure 3 taken from daily ‘the nation’ dated: 16-11-2001 figure 4 represents settings only in terms of abstracted space. apart from the props which indicate a type of person and a kind of professional activity, there is no setting. there is just a blank space, whiteness. only props allude to the concept. it could be a room in the hospital. the iconography review of economics and development studies, vol. 6 (2) 2020, 531-543 539 that connotes hospital is the stethoscope around the neck of the man at the front of the cartoon and also important is the person wrapped in bandages lying on the bed to the right of the cartoon. this is to signify that the medical treatment is being given to the injured person. the setting is plain and symbolizes the treatment of sick economy of pakistan by the american doctor. apart from the props, which indicate a type of person and a kind of professional activity, there is no setting to speak off. 4.1.3 poses machin (2007, p. 31) says ‘poses are a semiotic resource that can be used for their meaning potential’. in figure 1 we find participants in standing posture and their poses suggest some activity. chamberline stands straight and relaxed but at the same time emphasizing power, authority and control. in contrast, aziz’s bending and leaning posture connotes submissiveness and subjugation to the authority. the curve minimizes his physical size to remain inferior in status to the woman. he stoops down to present the child to the authority for drops. here, his posture lowers his status relationship. the image invokes the stereotyped role of pakistan and the us officials in the cartoons. both participants wear a big smile that suggests outward pleasure and hides the inner scorn. chamberline also stands with arms bit open, taking up space but is not looking at the viewers. figure 2 contains a very striking pose. the participant has drowned in the heaps of money. he might be standing as his lower body completely covered with money. but the posture connotes no physical regimentation or control. it is a lose pose and suggests he is at ‘their’ mercy. this dull and sluggish posture connotes his insensibility, poor vision and lack of physical power. the closed eyes’ look makes him appear defensive and idiot. here, the connotation is one of ‘wariness’ and ‘cautiousness’ rather than happiness or cheerfulness. we see musharraf in half lying posture on the floor in figure 3. his arms are folded, legs are bent and eyes are closed. here, with folding arms and bent knees he takes less space and his facial expressions denote some misery. these actually reflect his defeatism, failure and desperation. he is lying but doesn’t seem at ease. the posture connotes discomfort, misery, angst and a sense of utter desolation. dismayed and upset musharraf doesn’t want to face the viewers so he closes his eyes and not encouraging them for any relationship. we see, the representation of the participant in particular pose is the connotators of particular identities. the typical negative portrayal of musharraf shapes the readers’ thinking and behaviour towards him. in figure 4, the participant at front is shown in walking position leaving the room and at the same time waving hand to say good bye to other participants. the pose suggests that some activity has been done as the pose of other participant seems reactional. the bodily response of the injured person connotes pain, wonder and amazement. the walking person seems confident and authoritative. he is looking backward and his facial expression connotes slight frown that is unwelcoming and maintains a social distance. in the cartoon, we find powell appearing to be quite serious and unemotional. he expresses no feelings and is represented as being cold, formal and indifferent to the situation. whereas, the injured person’s open mouth suggests his surprise as well as seems screaming on receiving the treatment from the doctor. the attendant plays a role of a sympathizer as he seems down looking at the crying one. the poses of the injured person connote acute pain and disappointment. this image is depicted in the cartoon to represent pakistan’s economy as it is declining due to heavy foreign loans. so, the poses and the facial expression of the person lack sobriety and grace. his pose encourages the viewers to see him as threatened and struggling. the image connotes the values of the looser and the needy. the physical review of economics and development studies, vol. 6 (2) 2020, 531-543 540 control and discipline in the case of doctor metaphorically connotes power and control whereas, the loose and scared poses of the patient signify the lack of integrity, honour and selfrespect. figure 4 taken from daily ‘jang’ dated: 18-10-2001 4.1.4 objects objects are very important carrier of connotation. in the cartoon, objects such as the dropper, bottle, bowl, currencies, bed, stethoscope, bouquet and the bag can be seen as the connotors of particular meanings. machin (2004, p. 322) says: “props are used to connote not only the setting but identities of the actors and the nature of the activities”. figure 1 represents a woman holding a bottle in the left hand and a dropper in the right hand, whose clothing is formal and wearing high heels. it is important to note that the woman is holding a particular kind of bottle as the dollar sign is printed on it. this suggests that she is dropping the us dollar juice into the flimsy child’s mouth for energy and strength. it has particular connotation the way it combines with other meanings in the cartoon. here, it connotes that what a handsome sum of money is being paid to pakistan on sullying national honour and by behaving in too supine a manner. are few drops of aid sufficient to pay cost of our battered pride as a nation? theses few drops of aid therefore can’t help pakistan’s dying economy, there is the need to provide huge support to the economy of pakistan so that it could attain some stability. in figure 2, the numerous currencies and cloud are shown as the objects. these connote prosperity, mercy and blessings. in order to understand the associative meanings of the objects, it is review of economics and development studies, vol. 6 (2) 2020, 531-543 541 important to see how they combine with other elements in the cartoon. the props foreground musharraf’s vision of abundant economic aid coming from the top most powerful countries to ease pakistan’s economy. it suggests musharraf’s state of trance and ecstasy. he lives in fancy and conceptualizing all this happening. his eyes are closed watching the daydream. the cloud is the sign of an impeding heavy downpour. the heavy rain of money implies the chaos that has resulted in the massive loss of national interest. figure 3 contains the object ‘bowl’ and the bubbles surrounding it. the printed line on the bowl is making it meaning potential and connotes that it is a special bowl. the white bubbles surrounding the bowl are linking it with the participant. infact, the whiteness encircling the bowl represents the wretchedness of musharraf who seems deplorably distressing after seeing the gift from bush. this indicates that the little amount of relief from bush has shattered musharraf’s hopes and aspirations for the huge economic relief or aid. finally, in figure 4, one could find objects like, a stethoscope, a bag, a bouquet and a bed. these are associated with hospital settings. the stethoscope around the neck of the man at front suggests him doctor though he is not wearing a white coat. the man becomes a doctor because of the attribute stethoscope. take off the stethoscope, he could become a businessman as the clothes too suggest. he carries a particular kind of bag that connotes money not medicine. if the meanings of these props are combined with others in the cartoon, then, a particular context develops. the bed, the bouquet and the man wrapped in strips together connote a particular kind of person and a particular kind of activity. the pose of the man on the bed suggests extreme pain and he cries with wonder looking questionably at the attendant. as he represents pakistan’s economy, so, the props hereby suggest that the dying economy of pakistan needs medication in the form of the us dollar for the survival. but the us doctor who is holding a dollar bag gives the bouquet to the injured person and leaves. the wounded person gets hurt by this and cries with pain pain as he was expecting some kind of treatment or the medicine but was provided with the bouquet just like a lollipop is given to the children to divert their attention. 5linguistic analysis figure 1 only contains visuals and there is no text. in figure 2, the urdu noun phrase ‘abre-erehmet is used. the cloud is labeled as “abre-e-rehmet” means the ‘cloud of mercy’. it is important to note that meaning is not a monolithic construct; it is a multidimensional and having meaning in context. the noun phrase “abre-e-rahmet” is used for raining that allah has blessed us with his mercy. here, the cloudburst of dominant currencies on musharraf is meaning potential. it signifies that president musharraf is being blessed by the superpowers’ heavy downpour of currencies. it is certainly not told why he is receiving this. but the suppression of the information signals buried ideologies and broader discourses. there is the suppression of the interests, motives and reasons behind the rain. meanings are hidden behind the rain. the lexis is used in the cartoon to symbolize those events happened after 9/11. here, irony is used though not shown in the linguistic form directly. to some extent, irony belongs to the realm of contextual meaning rather than the formal meaning that we find in the lexis. as here it alludes to musharraf’s unstinted cooperation on global war against terrorism. this blessing is the result of his divine favour. it reflects the compassionate treatment from the superpowers to acknowledge his services. musharraf is receiving reward in the form of economic relief. the visual and written discourse is indeed an ideological loaded discourse as fairclough (1995) underlines the fact that the ideological nature of media language entails specific constructions of the world and the social identities. in figure 3, the linguistic caption ‘major economic relief from bush with love’ is used. the use of the adjective major implies that pakistan has already been awarded with the economic relief but this is review of economics and development studies, vol. 6 (2) 2020, 531-543 542 greater in quantity. pakistan is getting this relief on its services during the war against terror. the visual representation suggests that it is a begging bowl and musharraf is disappointed seeing the amount of relief issued by bush. it is an ideological loaded text. as van dijk (1993, p. 250) says that language ‘constitutes a particular way of talking about and understanding the world (or an aspect of the world)’. in figure 4, the linguistic text is ‘ khayal tha colin powell briefcase dein gein ye to tasaleoon k phool de ker chaly gae’ means ‘we hoped for major economic relief but got words of sympathy only’. the phrase tasaleon k phool (words of sympathy) connotes that pakistan was expecting a huge economic relief but got nothing other than the verbal sympathy so it was just opposite to what pakistan was expecting. the use of metaphor ‘briefcase’ for money (economic relief) indicates pakistan’s hopes for the financial relief. the use of this linguistic device makes the language attractive as well as the process of ideology investment is facilitated. in this line, money is described in terms of the briefcase. no actual money is shown but the metaphor brings the connotations of the economic relief. fairclough (1995) points out that metaphors have hidden ideologies due to the way that they can conceal and shape understandings while at the same time giving the impression that they reveal them. 6. conclusion the analysis of the political cartoons on the economic issue reveals the underlying discourses and buried ideologies. the researcher examined how cartoons represent particular social practices in order to understand the issue in the given context. when we look how the actors are represented visually as doing we find that there is a much more negative evaluation of the actors. the choice of attributes, poses and actions to represent musharraf in the cartoons suggests a greater indignation against him and disseminates a specific representation of the event. all other factors and aspects leading to the crisis are put out of sight. the cartoonists have invested considerable semiotic resources in promotion of the issue of economic crisis in pakistan after coalition with america and allies to combat war on terror. depiction selects and links elements to specific actions and provides moral evaluation, the use of value-laden concept such as begging, beseeching, requesting and pleading trigger moral concepts and then evaluates social practice and actor in that context. the visual and linguistic representations being the powerful ideological tools manipulate readers’ perception and interpretation of people and events. musharraf’s identity as the beggar and america’s as the benefactor is consolidated by foregrounding the images represent the former as the pauper and later as the donor. this establishes the belief that the cartoons possess the power to make a choice over whose image (negative, positive) is foregrounded or backgrounded. the representations effectively reinforce the images of pakistan fighting war for the economic benefits being the crony of america. the recontextualisation of the event manifests the ideological construction of identity and role of two states, pakistan as the compliant and the us as the master. the economic game is being played between the social players whose representations referring complexity of the situation and indicates who betrays, creates, controls and leaves. the evaluation of the events works with desirability and undesirability of the producer and also in terms of usefulness and in line with public interest. references fairclough, n. (1995). critical discourse analysis: the critical study of language. london: longman. fairclough, n. (2003). analysing discourse: textual analysis for social research. london: routledge. machin, d. (2004). branding the world’s visual language: the increasing global importance of image banks in corporate media. visual communication 3: 316. review of economics and development studies, vol. 6 (2) 2020, 531-543 543 machin, d. (2007). introduction to multimodal analysis. bloombury: london machin, d. mayr, a. (2012). how to do critical discourse analysis. london: sage. van dijk, a. t. (2001). critical discourse analysis in the handbook of discourse analysis. (eds) deborah schiffrin, deborah tannen, and heidi e. hamilton. massachusetts blackwell publishers ltd. van dijk, t. a. (1993). principles of critical discourse analysis. discourse and society, 4 (2), 249-283. van, leeuwen, t. (1996). the representation of social actors in discourse. in c.r. caldas-coulthard & m. coulthard (eds.) text and practice: reading in critical discourse analysis. pp 32-70. london: routledge. van, leeuwen. t. (2008). discourse and practice. new tools for critical discourse analysis. oxford university press. weiss, g. & wodak, r. (2003). critical discourse analysis: theory and interdisciplinarity. london: palgrave macmillan. review of economics and development studies, vol. 7 (1) 2021, 13-24 13 impact of private investment, economic growth and financial development on environmental degradation: evidence from pakistan shabana parveen a, bibi aisha sadiqa b, sher ali c, farrah yasmin d a assistant professor, department of economics, hazara university mansehra, pakistan email: shabana_economist@yahoo.com b assistant professor, department of economics, hazara university mansehra, pakistan email: agrieco24@yahoo.com c assistant professor, department of economics, islamia college peshawar, pakistan email: drali@icp.edu.pk d assistant professor of economics, govt. emerson college multan, pakistan email: farraheconomist@gmail.com article details abstract history: accepted 25 feb 2021 available online march 2021 private investment plays an important role in the process of economic growth and also impact natural environment of a country. the main purpose of the present study is to empirically analyze the impact of private investment and other macro economic variables on environmental degradation of pakistan. for the purpose, time series data is collected for the years 1975 to 2017. the study used linear regression model for analyzing the impact of private investment, energy consumption, financial development and economic growth on environmental degradation. augmented dickey fuller (adf) test and phillips perron (pp) test is used for identifying the unit root of the variables; first with an intercept then, with an intercept and a linear deterministic trend. akaike information criterion (aic) is used for selection of optimum lag whereas johansen cointegration test is adopted for analyzing long run association in the variables. the results of linear regression model show that energy consumption and economic growth have a positive and statistically significant impact on co2 emissions whereas the impact of private investment on co2 emissions is negative. it means that in pakistan, private investment is environment friendly. based on study results, it is recommended that when formulating policies for economic growth and development, motivation should be given to private inverters in order to increase private investment. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: private investment; financial development; energy consumption; economic growth: co2 emissions jel classification: r42, r49, d92, o13 doi: 10.47067/reads.v7i1.313 corresponding author’s email address: shabana_economist@yahoo.com 1. introduction economic health of a country is reflected by its economic growth which is indicated by an review of economics and development studies, vol. 7 (1) 2021, 13-24 14 increase in gross domestic product (gdp). gdp is defined as the total market value of all final goods and services produced by an economy during one financial year. a general agreement in all countries is that, economic growth and investment are closely inter connected as investment/capital formation leads to gdp growth. economists such as new classical and marxist suggested capital formation for gdp growth and consider investment as an engine for economic growth of a country. due to investment, an increase occurs in capital goods that in turn leads to the production of other goods and boost the growth and income (anwar and sampath,1999). all growth models consider capital as one of the two central components for determining economic growth. increase in capital is must for increasing production as gdp is higher in those countries that have high investment to gdp ratio. likewise, endogenous growth theory suggests that investment is a key component for long run economic growth. similarly, empirical studies confirmed the role of investment for better economic performance as investment promotes employment opportunities, improve technical progress, brings new techniques of production that helps in economic growth. investment maintains long run economic growth through capital accumulation as suggested by tadele (2014). investment in any country consists of public and private investment. public investment means investment done by government on services like education and health etc. private investment is investment done by private investers for the sake of profit. to answer whether public or private investment is better for robust economic growth, empirical studies presented that private sector investment is better as it increases economic growth by bringing more innovation, job creation, high revenue and improve the performance of human resources. majid and khan (2008) concluded that economic growth is higher in the countries that have more private investment. tadele (2014) added that private investment brings robust economic growth due to less corruption and other such factors. similarly, muhammad and shaheen (2016) proved that the effect of private investment is stronger on economic growth as private investment is more transparent and efficient as compare to public investment. so it plays a crucial role for uplifting economic growth. attention has been given to increase private investment especially in developing economies in order to reduce unemployment and increase economic growth. private investment accelerates economic growth but economic growth is the cause of environmental problem as increase in production contributes to more pollution. some of the studies considered it as a greatest challenge for all economies (cederbary and snobohn, 2016). yousaf et al. (2016) showed that in pakistan, gdp per capita, energy consumption, and foreign direct investment (fdi) are positive determinants of environmental degradation. the study suggests that attention should be given to reduce carbon dioxide (co2) emissions with improvement in gdp and fdi. as co2 emissions contributes about 60% of global warming (sinha and bhatt,2017). as pakistan is a victim of global warming and environmental degradation so attention is needed to look at the impact of economic growth and private investment on environmental quality. although in pakistan, a lot of research work has been done on many other determinants of co2 emissions such as gdp growth, energy use, urbanization, industrialization, trade openness as well as fdi, but it is dicorvered that private investment is a missing variable. the main purpose of the present study is trying to fill this research gap. this research work is a good contribution to the literature in general and in case of pakistan in particular for analyzing the impact of private investment on degradation of environment in pakistan. the rest of the study is organized as follows. section 2 represents the previous literature. section 3 comprises the data and methodology. section 4 is about the results and in section 5, the research review of economics and development studies, vol. 7 (1) 2021, 13-24 15 work is concluded along with some policy implications. 2. literature review from the famous study of grossman and krueger (1991), the environmental kuznets curve (ekc) hypothesis has been empirically analyzed by researchers in different countries, by employing various indicators of environmental quality. results provided by different researchers are not the same. some studies grossman and krueger (1991) and selden and song (1994) support ekc hypothesis whereas some like, saboori et al. (2012) contradict it. the ekc presents that degradation of environment first rises with the increasing level of income, then stabilize but after a turning point, it starts declining. rich literature is available that empirically worked on the association of financial development and emissions of co2 on the basis of ekc hypothesis and presented mixed results. studies like sadosky (2011),shahban and lean (2012), islam et al. (2013) and tang and tan (2014) presented a positive association of financial development and energy usage and emissions of co2 whereas other studies like jalil and feridun ( 2011), and shahbaz et al. (2013) confirmed negative association of financial development ,energy usage and emissions of co2. likewise, other researchers reported that financial development effects co2 emissions in many ways like, zhang (2011) argued that financial intermediaries help in increasing loan availabilities to consumers that contribute to increase demand for houses and home appliances that is automobiles, refrigerators, air conditioners. all the things make life comfortable but also increase co2 emissions. sehrawat et al. (2015) provided that investment is the second reason of positive contribution of financial development on co2 emissions. when more credit facility is provided to people by financial intermediaries, they invest money in new projects and business and directly contributes to co2 emissions. third, tamazian and rao (2010) presented that financial development has important role in increasing foreign direct investment (fdi) inflows, accelerates economic growth as well as co2 emissions. fourth, tamazian et al. (2009), and kivyiro and arminen (2014) showed that industrialization as well as economic growth accelerates due to financial development which contributes to pollution. in most of the empirical studies, researchers modeled the relationship of co2 emissions and financial development by ekc and found a unidirectional relationship between the two, based on gdp growth and energy use ( albiman et al., 2015). in addition, tamazian and rao (2010) in twenty four transition countries, sadorsky (2011) for nine central and eastern european countries; al-mulali et al. (2013) for middle east and north america (mena) countries, and mohapatra and giri (2015) for india, found a positive cointegration between financial development and co2 emissions. on the other hand, jalil and feridun (2011) in china presented a negative association between the two. the assocaition between gdp growth and emissions of co2 has been analyzed by researchers like, yang et al. (2007), song et al. (2008), dhakal (2009), jalil and muhammad (2009), fodha and zaghdoud (2010), wolde (2015). all the studies accepted the ekc hypothesis meaning that environmental degradation reduces due to economic growth, in long run. on the contrary, akbostanci et al. (2009) not accepted the presence of ekc hypothesis between emissions of co2 and income for turkey. researchers also found mixed result for the association of energy use and co2 emissions. studies such as, hummami and saidi (2015), jamel and derbeli (2016), siddique et al. (2016) and, pata (2017) presented a positive cointegration between energy use and co2 emissions i.e. negative impact on environment. on the other hand, zue et al. (2011) and gokmenoglu and sadeghieh (2019) suggest negative impact of energy consumption on emissions of co2 i.e. positive impact of environment. review of economics and development studies, vol. 7 (1) 2021, 13-24 16 similarly, literature regarding energy consumption, gdp growth and their impact on emissions of co2 provides mixed results. studies such as smyth and lean (2010), munir and khan (2010), borhan et al. (2012) and kizilkaya (2017) presented a positive impact of gdp growth and energy use on co2 emissions. likewise, ali et al. (2016) studied the impact of energy usage and gdp growth for nigeria and presented a significant positive impact of both the variables on emissions of co2. on the contrary, thao and chon (2015) found a negative impact of gdp growth and energy use on co2 emissions. azam et al. (2016) conducted a study for the association between energy consumption, trade and emissions of co2. the study found a significant cointegration among the variables for usa, japan, china and india. similarly, poumanyvong and kaneko (2010) also confirmed a statistically significant cointegration between energy consumption and emissions of co2 for usa, china, india and japan. moreover, studies are conducted to analyze empirically the effect of many other macro economic variables like fdi, trade openness, industrialization, urbanization with association of energy consumption on emissions of co2 yet, it is discovered that private investment is a missing variable in the literature. to mention just few studies like, talukdar and meisner (2001) for developing countries, fu et al.(2014) for china and hassan (2018) for malaysia, studied the impact of private investment on environmental degradation. talukdar and meisner (2001) found that increase in private investment reduces environmental degradation in developing economies however, the impact of financial development and gdp growth was found insignificant in case of malaysia. the summary of the literature regarding the association between co2 emissions with the macroeconomic variables (financial development, economc growth, energy consumption, private investment is presented below in table 1. table-1: summary of earlier studies authors sample and time period variables methodology results talukdar and meisner (2001) 44 developing countries(19871995) private investment, energy consumption, co2 emissioons random-effects model increase in private investment in developing economies reduces co2 emissions. tamazian et al. (2010) 24 transition economies (1993-2004) financial development, economic development, co2 emissions beneralized method of movement(gmm approach) financial development and economic development increases co2 emissions/ negative impact on environmental quality. poumanyvon g and kaneko china, usa, india, japan(1971-2013) energy consumption, trade, co2 panel-fully modified ordinary least all the variables are significantly associated. review of economics and development studies, vol. 7 (1) 2021, 13-24 17 (2010) emissions squares (fmols) method fodha and zaghdoud (2010) tunisia(19612004) gdp per capita, sulfur dioxide (so2), carbon dioxide co2 emissions. cointegration test long run cointegration was presented between per capita gdp with emissions of both both co2 and so2. inverted u shaped relationship had identified between per capita gdp and emissions of so2 . hye et al (2013) indonesia(1975q1 2011q4) financial development, energy use, gdp growth, autoregressive distributed lag model(ardl) bound test financial development contribution is inverse on co2 emissions. sehrawat(20 15) india (1971-2011) emissions of co2 , financial development, gdp, and energy consumption. ardl and error correction model (ecm) positive contribution of the variables towards the emissions of co2 in india. siddique et al (2016) south asia (19832013) energy consumption, gdp,co2 emissions panel cointegration positive contribution of the variables towards the emissions of co2. ali et al.(2016) nigeria (19712011) gdp,co2 emissions, trade openness. ardl positive contribution of the variables towards the emissions of co2 both in short and long period. pata uk (2017) turkey (19742013) per capita gdp, energy use, emissions of ardl positive contribution of the variables towards the emissions of co2 both in review of economics and development studies, vol. 7 (1) 2021, 13-24 18 co2, and financial development short and long term. hassan (2018) malaysia(19762013) co2, emissions, private investment, economic growth, financial development, energy use. ardl, ecm private investment, energy consumption shows positive contribution on emissions of co2. financial development, gdp growth shows negative impact on co2 emissions. 3. data and empirical method 3.1 data source and variables explanation the present study used time series data for the span of 1975 to 2017. the variables included in the study are co2 emissions (metric tons per capita) which is used to represent environmental degradation, real private investment (used as a % of real gdp), economic growth (real gdp growth rate), real financial development (real commercial bank credit provided to private sector, % of real gdp), energy consumption (kg of oil equivalent per capita. for all these variables, d ata is derived from world bank development indicators (wdi). 3.2 model specifications researchers used different methods for analyzing the association between carbon dioxide (co2) emissions with other variables including energy consumption and gdp growth. the analytical techniques used by azam et al. (2019) in his recent study are adopted for this study. first the augmented dickey and fuller (1979) and phillips and perron (1988) tests have been adopted for cheking the stationarity of the data. once it is confirmed that the variables are stationary at the same level, then johansen’s (1991, 1995) cointegration test is undertaken to analyze long-term cointegration among the variables. linear regression model is adopted for the evaluation of the coefficients. the approach used by jayanthakumaran et al. (2012) and halicioglu (2009) is adopted for this research work to identify the association between co 2 emissions, private investment and other macroeconomic variables. the model used is as follows. 𝐶𝑂2 = 𝑊0 + 𝑊1𝑃𝑅𝐼 + 𝑊2𝐸𝐺 + 𝑊3𝐹𝐷 + 𝑊4𝐾𝑇 + 1 (1) where co2 is used for carbon dioxide emissions (metric tons per capita), pri represents private investment, eg stands for economic growth (real gdp annual growth in percentage), fd stands for financial development, kt represents energy consumption (energy use, kg of oil equivalent per capita) https://link.springer.com/article/10.1007%2fs11356-019-04497-4#cr11 https://link.springer.com/article/10.1007%2fs11356-019-04497-4#cr20 https://link.springer.com/article/10.1007%2fs11356-019-04497-4#cr46 https://link.springer.com/article/10.1007%2fs11356-019-04497-4#cr30 https://link.springer.com/article/10.1007%2fs11356-019-04497-4#cr31 https://link.springer.com/article/10.1007%2fs11356-019-04497-4#cr25 https://link.springer.com/article/10.1007%2fs11356-019-04497-4#cr32 review of economics and development studies, vol. 7 (1) 2021, 13-24 19 and 1represents error term. the expection for the direction of the slope coefficients is w1 ˃0;w2>0;w3>0;w4>0 4. empirical results 4.1 result of adf and pp unit root tests for identifying stationarity in the data, augmented dickey-fuller (adf) (1979) as well as phillips and perron (1988) tests are used. augmented dickey-fuller test in mathetical form can be presented as ∆𝑧𝑡 = 𝜎𝑧𝑡−1 + �́� 𝛿 + 𝜖𝑡 (2) where 𝜎 = ρ-1 -1 ≤ ρ ≤ 1 and the model is hypothesized as: 𝐻0: 𝜎 = 0 𝑜𝑟 𝜌 = 1 𝐻1: 𝜎 < 0 𝑜𝑟 − 1 ≤ 𝜌 ≤ 0 the t-ratio of the 𝜎 -coefficient of adf test, when test statistic distribution is affected by serial correlation, is adjusted by phillips-perron (pp) test as follows: 𝑡�́� = 𝑡𝜎 ( 𝛾0 𝑓0 ) 1/2 − 𝑇(𝑓0−𝛾0)(𝑠𝑒(�̂�)) 2𝑓0 1 2𝑠 (3) where f0 is the zero occurrence of residual and γ0 is the evaluation of error variance. the results of adf and pp tests are presented in table 2. it shows all the variables; economic growth, private investment, financial development, energy use and carbon dioxide emissions are non stationary at level at both trend, and with a trend and intercept. the variables are converted into stationary by taking first difference in adf as well as pp test. table 2 unit root test results variables adf test result pp-test result intercept intercept and trend intercept intercept and trend real gdp -2.265 -0.046 -1.593 1.223 -4.011* -4.351* -4.011* -3.852* real private investment (pri) -0.470 -1.341 -0.501 -1.341 -6.258* -6.449* -6.258* -6.459* financial development (fd) -0.069 -0.382 0.980 0.674 -4.926* -5.311* -4.926* -4.907* energy consumption (kt) -2.056 0.152 -1.952 0.151 -5.404* -6.332* -5.471* -6.349* environmental degradation (co2 emissions) -2.235 -2.149 -4.043 -1.741 -7.727* -8.260* -7.627* -17.126* *significant at 5% significance level https://link.springer.com/article/10.1007%2fs11356-019-04497-4#cr20 https://link.springer.com/article/10.1007%2fs11356-019-04497-4#cr46 review of economics and development studies, vol. 7 (1) 2021, 13-24 20 4.2 cointegration test results johansen (1988) suggested likelihood ratio tests to identify the presence of a long-term association among the variables. the tests can be presented in two different equations given below: 𝐽𝑚𝑎𝑥 = −𝑇𝑙𝑛(1 − 𝜆𝑟+1̂) (4) 𝐽𝑡𝑟𝑎𝑐𝑒 = −𝑇 ∑ ln (1 − 𝜆�̂� 𝑛 𝑖=𝑟+1 ) (5) where λˆi is the ith largest known association. the t presents the size of the sample in the above two equations. table 3 represents the results of cointegration test. it indicates, for all five variables, the null hypothesis of no cointegration is not accepted meaning that longrun cointegration is confirmed in all variables. table 3 cointegration test results n. hypothesis a. hypothesis trace test statistics statistics critical value r = 0 r = 1 106.35* 69.82 r ≤ 1 r = 2 71.51* 47.86 r ≤ 2 r = 3 40.65* 29.80 r ≤ 3 r = 4 23.10* 15.49 r ≤ 4 r = 5 6.48* 3.84 levels of significance: *p < 0.05; 4.3 regression results table 4 represents the estimates of linear regression model. the results reveal that energy consumption and gdp growth have positive significant impact on emissions of co2. the effect of financial development is also positive but insignificant. interestingly, the impact of private investment on emissions of co2 is negative meaning that, with more private investment, environmental degradation got reduces in case of pakistan. the results further show that 1% rise in energy consumption and gdp degrades environment by 1.88% and 0.033% respectively. these empirical results are like the results of munir and khan (2010), hitam et al. (2012), siddique et al (2016), pata (2017), pan et al. (2019). similarly, 1% improvement in financial development leads to contaminate environment by 0.012%. the result is supported by sadosky (2001), shahban and lean (2012), islam et al. (2013) and tang and tan (2014). the researchers argued that due to financial development, demand of consumers’ goods i.e. home appliances like air conditioner, refregirator etc and producers’ goods; investment, increase in vehicle, machinery etc. increases thus contributing to co2 emissions. in addition, 1% increase in private investment brings 0.005% decrease in co2 emissions. likewise, talukdar and meisner (2001) also confirmed negative cointegration between private investment and emissions of co2 in developing countries whereas, hassan (2018) found positive association of private investment with co2 emissions in malaysia. review of economics and development studies, vol. 7 (1) 2021, 13-24 21 table 4 regression results dv is co2 variables coefficients c -11.906 (0.000) pri -0.005 (0.356) eg 0.033* (0.011) fd 0.012 (0.625) kt 1.879* (0.000) r2 0.965 dv dependent variable *significant at 5% significant level 5. concluding remarks private investment has an important role in the growth process of an economy but its impact on environmental degradation is ignored by researchers. the main purpose of this study was to analyse the relationship of private investment with environmental degradation in pakistan. the estimates of linear regression model confirmed a negative impact of private investment on co2 emissions in pakistan. it means that private investment is in favour of environment in case of pakistan however, the impact of energy consumption, financial development and gdp growth on emissions of co2 is positive meaning that all the variables are degrading environment in pakistan. on the basis of the results, it is recommended that in pakistan, policies regarding gdp growth and financial development should be revised and more attention should be given to private investment to reduce emissions of co2 in the country. references akbostanci, e., turut-asik, s., & ipek, t. g. 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(2011). the impact of financial development on carbon emissions: an empirical analysis in china, energy policy, 39(4): pp. 2197-2203. review of economics and development studies, vol. 6 (2) 2020, 425-438 425 socio-economic and demographic factors of poverty alleviation in pakistan: a case study of southern punjab a rashid ahmad, b muhammad zahir faridi a assistant professor/ phd scholar, school of economics, bahauddin zakriya university multan, pakistan email: rashidahmad@bzu.edu.pk b professor, school of economics, bahauddin zakariya university multan, pakistan email: zahirfaridi@bzu.edu.pk article details abstract history: accepted 29 may 2020 available online 15 june 2020 this study aims to explore the socio-economic and demographic determinants of poverty in southern punjab by using the cross sectional data consisting of 785 household heads. binary logistic regression and ordinary least square method are used for estimation. the findings exhibit that the variables like family system, household size, presence of disease and status of employment of household head are positively and significantly related to poverty whereas household head age, rural-tourban migration, years of schooling, number of earners, women status of work, remittances, the physical assets value and ownership of house significantly and negatively influence the likelihood of poverty and positively influence the per capita income of the households in southern punjab. the study also provides the comparison of regional and division level. it is concluded that dg khan division is the poorest among all the divisions of the southern punjab. in dg khan division, the households have less education, high dependency ratio. in rural areas of southern punjab, there is more poverty as compare to urban areas. the rural poverty is due to many factors like high dependency rate, lower level of education, adoption of profession, lower per capita income, dissaving. it is suggested that education should be promoted, employment opportunity should be provided so that dependency rate may be reduced, rural areas should be restructured by provision of basic necessities of life. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: poverty, households, logistic regression, pakistan jel classification: a13, c13, i32 doi: 10.47067/reads.v6i2.220 corresponding author’s email address: zahirfaridi@bzu.edu.pk 1. introduction poverty has many dimensions which have been discussed by many economists and social scientists. these dimensions may be no shelter, malnourishment, not having capabilities to visit a review of economics and development studies, vol. 6 (2) 2020, 425-438 426 doctor for medical checkup, being ill, unemployment, not able to pay school fee, lack of representation, powerlessness, illness due to the dirty water, having little assets such as land and others, high expenditure shares on staple food and many interconnecting obstacles which lead to develop human beings. poverty is the "incapability to maintain a minimum living standard anticipated concerning basic consumption needs or some amount of income required for satisfying them [world bank (2006)]. sen (1976) is among the pioneers to conceptualize the concept of multidimensional poverty as it is an alternative and direct way to use the concept of capability and functioning to define poverty. multidimensional poverty is a relatively stable measure as it does not fluctuate due to inflation because there are difficulties in adjusting data for prices and inflation. as definition and response of poverty have constantly being changed as a result of developments in knowledge and results of events over the period, so it is not a new phenomenon for the developing counties. united nations (un) member countries signed the series of eight targets as a part of the millennium development goals (mdgs). one of them was to alleviate poverty by 2015. not only is this, but the subsequent sustainable development goals (sdgs) (un, 2012) also targeting on ending poverty. on the other side, there has been a great debate on the extent of poverty either it is psychological, social, physical, or political as a largely economic interpretation of poverty is embraced in the agenda of sdgs and the mdgs. for the development of a nation, poverty reduction should be the state foremost obligation as its part of the objective of millennium development goals (mdgs). there is a persistent decrease in household poverty since the last decade in pakistan. it is estimated that 24%population of pakistan's lives below the national poverty line; out of which 31% live in rural areas and 13% belong to urban areas. when poverty is measured on the basis is of the multidimensional poverty index, 38.8% of the population live under the poverty line, is poor, out of which 9.4% live in urban areas and 54.6% reside in rural areas. having aim at poverty reduction, poverty can drive the choice of policies (chambers 1995; wratten 1995; kanbur and squire 1999). at different times and different places, poverty can be compared which gives insight into poverty in the community (ravallion 1992). measuring poverty can help policymakers to focus efforts to reduce poverty or to direct resources or as if it is not measured properly then it does not reflect reality and will lead to misinformation to the policymakers. this research empirically investigates the determinant of household poverty of households belongs to southern punjab (pakistan). this study focuses on the following objectives.  to investigate the socio-economic and demographic determinants of household poverty through the poverty line approach of southern punjab (pakistan)  to investigate the socio-economic and demographic determinants of household poverty through per capita income approach of southern punjab (pakistan)  to recommend policies which are based on the micro-level findings of the study 2. literature review this section highlights the studies available in literature that explore the factors of poverty at national and international levels. sandefur and sakamoto (1988) highlighted the structure of household and income as well for america and india. the estimation was done through primary data by using a questionnaire for the year 1980. the authors concluded that during this estimation period, indians preferred to live in a family; household having coupled with children, as compared to the black or white in the united states. the greater frequency of the family household, specifically couples having children among indians and americans would be considered to design social policies. ahmed (1995) analyzed income inequality in different occupations and worked on pakistan's pci (per capita income) based on review of economics and development studies, vol. 6 (2) 2020, 425-438 427 1992-1993. the results showed that in the various occupations or professions, the lowest level of inequality was observed in baluchistan, and the highest inequality in nwfp province. lanjouw and ravallion (1995) elaborated on the association between poverty and the size of the household by taking into consideration the case study of pakistan. primary data were used for the year 1991 through a survey. the results showed the existence of a strong negative relationship between the consumption and the size of the household. azhar and ahmad (2001) studied the basic shortcomings of different poverty reduction methods and focused on the role of the political economy and the shift from the wealthy to the poor. the results showed that poverty alleviation policies and programs were a real concern for the political economy. the basic premise of poverty alleviation policy was to focus on how information and incentives were integrated into the program design. the technical poverty alleviation method ignored the background of policy design. these two different approaches could be bridged by best utilizing two interdependent elements. datt and jolliffe (2005) analyzed the influence of poverty in egypt. primary data were collected through a questionnaire for the year 1997 and were used to estimate the results. findings revealed that the household size had a negative impact on the dependent variable living; the standard of the people. while other independent variables including education, intergenerational effects, and owned land had a positive relationship with the dependent variable. furthermore, education was considered a crucial factor for the living standard. khalid et al (2005) examined the determinants of food poverty in pakistan. the study decomposed the estimates on the urban or rural levels. the microdata used in this study from 1998 to 1999 was taken from hies (household integrated economic survey and pihs (pakistan integrated household survey). multivariate analysis was used to determine food poverty in pakistan. the results indicated that on average 40 percent of households were poor at the national level. in rural areas, poverty was comparatively higher with 46 percent of the households falling below the poverty line, while in urban areas 41 percent of households were poor. cheema et al. (2008) estimated changes in the intensity, severity, and incidence of poverty in the punjab region below the provincial level. foster, greer, and thorbecke were used to measure poverty. it was estimated that there was a highly impoverished enclave in the southern and western parts of punjab. with very few exceptions, the incidence and severity of poverty in most areas of the enclave were extremely high and there was average poverty in every two families. the enclave also performed poorly at the district level development indicators. choudhry et al. (2009) analyzed the impact of the social and economic factors of tehsil jatoi (muzaffargarh district). poverty profile and econometric methods were used for empirical analysis. it was suggested that dependency on family, household size, land ownership, participation, and livestock quantity had a significant impact on the incidence of poverty. jamal (2011) estimated the poverty through non-income deprivation indicators for pakistan. the estimation period was from 2008 to 2009. findings showed that fifty-seven percent of people in the year 2008-09 living in pakistan were in the state of the multiple deprivations. the rural incidence was high, however, twenty-six percent of the urban population was facing poverty in terms of the indicators that had been used in the multidimensional construction. nisar et al. (2013) investigated pakistani issues such as income inequality and poverty and their impact on the family. using multiple logit models, the 2008-09 dataset was used for estimation. the review of economics and development studies, vol. 6 (2) 2020, 425-438 428 results showed that land and livestock as an asset, male as a head of household, secondary education, employment, and women's empowerment greatly reduced the chances of short-term poverty. during this period, income distribution deteriorated due to the gap between low-income and high-income families. jayamohan and kitesa (2014) used cross-sectional data from 1999 to 2000 and 2004 to 2005 to investigate the relationship between poverty and gender in ethiopia. the results showed that the number of poor households, in both the male-headed households and the female-headed households, declined during the period 1999-2000 to 2004-2005, with a lower the reduction of the female-headed household rate. the feminization of poverty was, therefore, a weak theory of the ethiopian city. haq et al. (2015) measured the causes of family poverty affecting rural areas in vehari (pakistan). the data were collected from 350 selected households through multi-level random sampling and for analysis binary logistic regression models were used. it was analyzed that nearly 34.8% of the respondents in the region were poor. socio-economic empowerment, dependency ratio, family size, household economic activity, access to finance, marital status, and head of household age had a positive impact on the incidence of poverty in vehari. 3. data and methodology this section presents the data sources, sampling technique, poverty line recruited in this study, model specification, and description of variables. 3.1 data sources and sampling technique about 785 household heads were interviewed from southern punjab. from the formula, the sample size of 785 was calculated which is as given below.             ne ppz e ppz ss 2 2 2 2 )1(* 1 )1(* the total household of southern punjab is almost 4930998 (pakistan bureau of statistics, 2019). the sample size of 785 was calculated at a 95 % confidence interval and a 3.5 % margin of error. to calculate the sample size from each district out of 785, propionate sampling is used. there are three divisions of southern punjab such as multan, bahawalpur, and dg khan division and each division consists of four districts. the division with a higher number of households has a higher proportion to be included in the sample. in the second stage, convenience sampling is used to collect information from the household head. 3.2 poverty line in the current study, the poverty line is drawn on the basis is of the world bank definition. the world bank defines poverty in absolute terms. the household is living in extreme poverty if it falls below the poverty line of us$1.90 per person per day. while calculating the poverty line based on the current dollar rate, it is estimated that the household having income 8664 rupees per month or more than 8664 rupees are classified as non-poor and the household having income less than 8664 rupees are classified as poor. 3.3 model specification and variable1 description: review of economics and development studies, vol. 6 (2) 2020, 425-438 429 determinants of households poverty of overall southern punjab and divisions of southern punjab like bahawalpur, multan and dg khan based on the poverty line are explored by using binary logistic regression. the operational model is specified as follows:        ownhlnsatsrimiwsos noernsoempyoshhpodmigagehhhhsizefsys fpov ,,, ,,,,,,,, in order to explore socio-economic and demographic determinants household poverty based on per capita income in the three divisions and southern punjab by using the same variables. we have used ordinary least square method in the log linear form. the functional form of operational model is as follows:        ownhlnsatsrimiwsos noernsoempyoshhpodmigagehhhhsizefsys fpci ,,, ,,,,,,,, table 1: description of variables variables variables description dependent variable lnpci natural log of per capita income it is calculated by dividing the total household income on total household size pov poverty =1 if the household head per capita income is lesser than 8664 rupees per month. =0 if household head per capita income is more than 8664 rupees per month explanatory variables agehh household head age household head age expressed in years hhsize household size total number of peoples residing in a household area area of residence it describes the region of residence i.e rural or urban if the household lives in urban areas = 1 otherwise = 0 mig migration rural to urban migration =1 if household migrated from the rural area to urban areas = 0 if not yoshh years of schooling of the household head it describes the educational level or schooling of household head in years fsys family system the family system is estimated as nuclear or joint =1 if joint = 0 if nuclear rimi remittances = 1 if receives remittances =0 if not noern number of earners a total number of earner sin households. it including own, spouse and other members ownh ownership of house either house is owned or rented = 1 if own house review of economics and development studies, vol. 6 (2) 2020, 425-438 430 =0 if not wsos working status of spouse =1 if the spouse is participating in the labor force =0 if otherwise lnasts natural log of the value of assets it includes all the assets of the household like land, car, house, property, television, tractor, etc. soemp sector of employment it discusses the sector of employment of household either it is formal or informal = 1 if informal sector employee = 0 if formal sector employee pod presence of diseases either the person has a disease or not. = 1 if presence of diseases = 0 if not 3.4 data analysis data is analyzed through descriptive and econometric technique. descriptive statistics shows maximum, minimum, mean, median and standard deviation. correlation matrix shows degree of association among variables. econometric technique measures the relationship between the dependent and independent variables by log-linear regression and lohgisti9c regression technique. 3.4.1 descriptive analysis: descriptive analysis may be done through descriptive statistic, poverty trends and correlation analysis which is as follows. 3.4.1.1 descriptive statistics the descriptive statistics of variables that are used in this analysis are presented in table 2 that consists of a minimum, maximum, mean, and standard deviation of variables. table 2: descriptive statistics variables minimum maximum mean std. deviation agehh 20 90 48.12 11.546 yoshh 0 20 9.85 4.723 hhsize 2 19 6.19 2.162 noern 1 7 2.02 1.152 wsos 0 1 0.22 0.417 mig 0 1 0.13 0.339 rimi 0 1 0.12 0.322 soemp 0 1 0.45 0.497 pod 0 1 0.22 0.412 ownh 0 1 0.89 0.316 fsys 0 1 0.47 0.500 pi 0 1 0.39 0.487 lnasts 20000 77550000 4382464.46 7909851.730 inome 6000 506000 71745.94 59431.120 review of economics and development studies, vol. 6 (2) 2020, 425-438 431 source: author’s calculations based on household survey data, 2019 3.4.1.2 poverty trends table 3 explains the poverty trends based on the international poverty line which is estimated in pakistani rupees at 8664 in 2019. the household is poor if the income of the household has less than 8664 rupees per month and is non-poor if the income of the household having more than 8664 rupees per month. it is found that 38.59 percent of residents of the southern punjab living below the poverty line the incidence of poverty is higher in rural areas (46.13) than in urban areas (29.05). among the divisions, the incidence of poverty is higher in the dg khan division it is estimated at 43.14 percent. table 3: poverty incidence (poverty line 8664) division area poor non-poor total households poverty incidence southern punjab total 303 482 785 38.59 rural 201 233 434 46.13 urba n 102 249 351 29.05 multan total 89 166 255 34.90 rural 59 72 131 45.03 urba n 30 94 124 24.19 dg khan total 107 141 248 43.14 rural 72 101 143 50.34 urba n 35 70 105 33.34 bahawalpu r total 107 175 282 37.94 rural 70 90 160 43.75 urba n 37 85 122 30.32 source: author’s calculation from the survey data, 2019 note: national poverty line as estimated at rs. 8664.0 per person per month 3.4.1.3 correlation analysis correlation analysis is used to check the multicollinearity problem and degree of association among each set of variables. the results of the correlation analysis of south punjab are presented in table 4. to evaluate the multicollinearity issue, it is suggested that if the value of the coefficient of correlation between two independent variables in a model is greater than 0.80 there exists a problem of multicollinearity otherwise there is no multicollinearity in between two independent variables in a model. finding show that there is no issue of multicollinearity among the variables. review of economics and development studies, vol. 6 (2) 2020, 425-438 432 table 4: correlation matrix pi agehh yoshh hhsize rimi mig soemp pod fsys ownh noern lnasts wsos pi 1.000 agehh -0.06 1.00 yoshh -0.49 -0.04 1.00 hhsize 0.22 0.28 -0.14 1.000 rimi -0.23 0.10 0.08 0.001 1.000 mig -0.22 -0.012 0.21 -0.04 0.10 1.000 soemp 0.41 0.004** -0.47 0.05 -0.09 -0.12 1.000 pod 0.25 0.052 -0.24 0.12 -0.03 -0.06 0.15 1.000 fsys 0.22 0.13 -0.08 0.44 -0.03 -0.05 0.05 0.12 1.00 ownh -0.22 0.12 0.14 -0.06 0.05 -0.02 -0.13 -0.12 -0.003 1.00 noern -0.18 0.24 0.07 0.45 0.11 0.07 -0.10 -0.01 0.20 0.06 1.00 lnasts -0.30 0.08 0.16 0.000** 0.12 0.12 -0.14 -0.05 -0.01 0.11 0.09 1.00 wsos -0.26 0.08 0.16 0.15 0.01 0.12 -0.13 -0.038 0.06 0.07 0.47 0.13 1.000 **. correlation is significant at the 0.01 level (2-tailed). *. correlation is significant at the 0.05 level (2-tailed). review of economics and development studies, vol. 6 (2) 2020, 425-438 433 3.4.2 econometric analysis this section provides the estimation of both specifies models. binary logistic regression model that uses a dummy variable to determine the factors of occurrence or non-occurrence of poverty in a household. a household is poor if the per capita income of the household falls below the poverty line otherwise non-poor. ordinary least square (ols) method is employed for determining the poverty level of household by using household per capita income. 3.4.2.1 determinants of household poverty in southern punjab binary logistic table 5 demonstrates the binary logistic estimates of household poverty. the household poverty is used as a dependent variable, measured by a dummy variable is equal to “one” when household falls below the poverty line and equal to “zero” when household falls above the poverty line, while explanatory variables consist of the family system (fsys), size of the household (hhsize), household head age (agehh), rural-to-urban migration (mig), presence of disease (pod), household head schooling years (yoshh), head of the household’s working sector (soemp), total earners in a household (noern), women status of work (wsos), remittances (rimi), value of physical assets value (asts), and ownership of the house (ownh). the mcfadden r-squared indicates the goodness of fit of the model and it means that the variation in dependent variable due to the explanatory variables is 0.46 percent while the remaining 0.54 percent is random variation. the lr-statistic (482.72) shows the overall significance of the model. likewise, the mcfadden r-square and lr-statistic of other divisions of southern punjab can be observed from table 5. we have observed that the variables like family system, household size, presence of disease, and sector of employment of household head positively and significantly affect the likelihood of poverty whereas the variables household head age, rural-to-urban migration, the household head years of schooling, a household having several earners, women status of work, remittances, the physical assets value and ownership of house significantly and negatively influences the possibility of poverty of household in southern punjab. in bahawalpur division, the demographic variables household size and status of employment of the household head originated to be positive and significant determinant while household head schooling years, a household having several earners, women status of work, remittances, and physical assets value are the factors that statistically significant and negatively influences the poverty in bahawalpur division. considering the multan division it is found that the variables household size, presence of disease, and sector of employment of household head are significant and encouraging factors of the likelihood of household poverty while the variables household head age, rural-to-urban migration, household head years of schooling, household having number of earners, spouse participation and physical assets value are the discouraging and significant factors of the likelihood of household poverty in multan division. in the dg khan division, it is originated that the variables, family system, household size, and sector of employment of household head are the factors that positively and significantly impacted the likelihood of household poverty while the variables rural-to-urban migration, household head years of schooling, a household having many earners, remittances, physical assets value and ownership of house negatively and significantly contributing aspects of the likelihood of household poverty in dg khan division. review of economics and development studies, vol. 6 (2) 2020, 425-438 434 table 5: binary logistic estimates of of household poverty in southern punjab dependent variable: poverty status of household = 1 if household lies under a poverty threshold, = 0 otherwise explanatory variables southern punjab bahawalpur division multan division dg khan division constant 7.444** (6.249) 11.246** (4.783) 9.360** (3.458) 4.097* (2.277) demographic variables fsys 0.850** [0.201] (3.628) 0.344 [0.081] (0.897) 0.707 [0.161] (1.320) 1.313** [0.322] (2.958) hhsize 0.403** [0.095] (5.546) 0.477** [0.112] (4.057) 0.441** [0.100] (2.608) 0.493** [0.121] (3.571) agehh -0.026** [-0.006] (-2.547) -0.009 [-0.002] (-0.549) -0.076** [-0.017] (-3.360) -0.002 [0.000] (-0.145) mig -1.289** [-0.305] (-2.999) -1.019 [-0.240] (-1.300) -1.347*** [-0.306] (-1.771) -1.356*** [-0.333] (-1.682) pod 0.844** [0.200] (3.130) 0.654 [0.154] (1.436) 1.073*** [0.244] (1.783) 0.750 [0.184] (1.629) socio-economic variables yoshh -0.188** [-0.045] (-6.923) -0.144** [-0.034] (-3.005) -0.237** [-0.054] (-3.351) -0.201** [-0.049] (-4.559) soemp 1.243** [0.294] (5.519) 0.925* [0.218] (2.381) 1.506** [0.342] (2.725) 1.885** [0.462] (4.550) noern -0.531** [-0.126] (-4.100) -0.534* [-0.126] (-2.250) -0.905** [-0.206] (-2.895) -0.478* [-0.117] (-2.342) wsos -0.961** [-0.228] (-2.986) -1.113*** [-0.262] (-1.650) -1.613*** [-0.366] (-1.881) -0.789 [-0.193] (-1.604) rimi -1.954** [-0.463] (-3.651) -1.483*** [-0.349] (-1.870) -2.389 [-0.543] (-1.617) -1.844*** [-0.452] (-1.849) pasts -0.428** [-0.101] (-5.880) -0.811** [-0.191] (-5.213) -0.348** [-0.079] (-2.151) -0.278** [-0.068] (-2.722) ownh -1.121** [-0.265] (-3.101) 0.807 [0.190] (1.406) -1.129 [-0.257] (-1.265) -1.981** [-0.486] (-2.747) mcfadden r 2 0.461 0.471 0.478 0.440 lr statistic 482.72 176.33 190.71 149.36 p-value (lr-stat) 0.000 0.000 0.000 0.000 sample size (n) 785 282 255 248 source: author’s calculations by using e-views (statistical software). review of economics and development studies, vol. 6 (2) 2020, 425-438 435 note: the values in the brackets and parenthesis are marginal effects and z-statistic values respectively. *5 percent level of significance, **1 percent level of significance, ***10 percent level of significance 3.4.2.2 ols estimates of determinants of household poverty based on per capita income table 6 portrays estimation of the factors that affect the per capita income and in turn household poverty status in southern punjab. the dependent variable used in a model is the log of household’s per capita income while the explanatory variables comprised of the family system (fsys), size of the household (hhsize), household head age (agehh), rural-to-urban migration (mig), presence of disease (pod), household head schooling years (yoshh), household head employment status (soemp), number of earners in a household (noern), women status of work (wsos), remittances (rimi), physical assets value (pasts), and ownership of the house (ownh). the r-squared is 0.455 it reveals that explained variation in the dependent variable is 45.5 percent while the remaining 54.5 percent is due to the other variables that are not added in a model. the value of f-statistic (53.722) and it shows that the model is highly significant statistically overall. likewise, the value of r-squared and f-statistic of various divisions of southern punjab are 0.53,0.46 and 0.47 respectively. the results show that family system, size of the household and status of employment of household head are the factors that reduces the household income per capita and enhance poverty. the variables household head age, rural-to-urban migration, the household head schooling years, a household having several earners, women status of work, remittances, physical assets value and ownership of house are the aspects that positively and significantly influences the household welfare. these factors reduces the poverty level in southern punjab. in the bahawalpur division, the household size and employment status of the household is negatively linked to the income per capita and directly related to the household poverty while the age of the household head, household head schooling, total employed members, women status of work, remittances, and physical assets value are the factors that positively and significantly influenced the household per capita income and inversely linked to the poverty probability in the bahawalpur division. in the multan division, it is found that the variables like household size and employment status of household head negatively and significantly impact the household per capita income and positively influences poverty whereas the household head age, household head schooling, total employed members, spouse participation and remittances positively and significantly affects the per capita income. as a result, poverty in multan division has declining trend. in the dg khan division, it is originated that size of the household and employment status of the household are the factors that negatively and significantly influence the household income per capita and directly impact the household poverty whereas the age of the household head, years of schooling of the head of the household, household having many earners, remittances, physical assets value and ownership of house increase the per capita income of the household. when per capita income increases, poverty level reduces in dera ghazi khan division. review of economics and development studies, vol. 6 (2) 2020, 425-438 436 table 6: ols estimates of household poverty based on per capita income dependent variable: household per capita income explanatory variables southern punjab bahawalpur division multan division dg khan division constant 7.861** (36.069) 7.473** (22.422) 7.840** (16.671) 7.932** (22.386) demographic variables fsys -0.083*** (-1.853) -0.060 (-1.035) -0.135 (-1.290) -0.102 (-1.201) hhsize -0.110** (-9.332) -0.102** (-6.668) -0.085** (-3.151) -0.141** (-6.539) agehh 0.008** (4.695) 0.004*** (1.935) 0.009* (2.326) 0.010** (3.039) mig 0.156** (2.562) 0.140* (1.641) 0.168 (1.460) 0.192 (1.560) pod -0.002 (-0.056) -0.028 (0.425) -0.065 (-0.584) -0.058 (-0.664) socio-economic variables yoshh 0.036** (7.267) 0.034** (4.991) 0.038** (3.048) 0.037** (4.441) soemp -0.338** (-7.368) -0.227** (-3.743) -0.293** (-2.613) -0.465** (-5.886) noern 0.138** (6.104) 0.088** (2.849) 0.159** (3.380) 0.172** (4.307) wsos 0.169** (3.001) 0.190* (2.301) 0.271* (2.360) 0.007 (0.079) rimi 0.244** (3.838) 0.168*** (1.950) 0.415** (3.481) 0.051 (0.389) lnasts 0.062** (4.698) 0.114** (5.300) 0.040 (1.429) 0.055** (2.619) ownh 0.136* (2.076) 0.002 (0.030) 0.168 (1.158) 0.342** (2.731) r 2 0.455 0.526 0.461 0.474 adjusted r 2 0.446 0.505 0.434 0.447 f-statistic 53.722 24.932 17.256 17.689 p-value (f-stat) 0.000 0.000 0.000 0.000 sample size (n) 785 282 255 248 source: author’s calculations by using e-views (statistical software). note: the values in the parenthesis are t-statistic values. *5 percent level of significance, **1 percent level of significance, ***10 percent level of significance review of economics and development studies, vol. 6 (2) 2020, 425-438 437 4. conclusions the main purpose of study is to investigate the factors that alleviate poverty in southern punjab. the study is based on survey. the study concludes that family system, household size, presence of disease and employment status of household have become the cause of poverty whereas the household head age, rural-to-urban migration, the household head years of schooling, household having number of earners , women status of work, worker remittances, the physical assets value and ownership of house significantly reduce the poverty in southern punjab. in bahawalpur division household size and occupation of the household head escalates poverty significally. the variables like household head, schooling years, a household having number of earners, women status of work, remittances, and physical assets value are the factors that significantly decreases poverty level. similarly in multan and d.g khan division, the same situation is found. the poverty is caused by household size an occupation of the household. the rest of the variables have decreasing impact of the poverty. but the more intensity is observed in d.g khan division. it is recommended that household size should be reduced by taking action on birth control program. moreover health and education facilities should be provided at the nearest distance of household residence. in rural areas of southern punjab, the government should provide basic facilities so that the economic status of the household may be improved and poverty intensity may reduce. there should be provision of employment opportunities in formal as well as informal sector especially in d.g khan division because it is poorer as compared to other divisions of southern punjab. references: ahmad, m. a. i. (2001). poverty alleviation and the third world. pakistan economic and social review, 39(1), 49-56. chambers, r. (1995). poverty and livelihoods: whose reality counts?. environment and urbanization, 7(1), 173-204. chaudhry, i. s., & malik, s. (2009). the impact of socioeconomic and demographic variables on poverty: a village study. lahore journal of economics, 14(1), 39-68. cheema, a., khalid, l., & patnam, m. (2008). the geography of poverty: evidence from the punjab. the lahore journal of economics, 13(2008), 163-188. datt, g., & jolliffe, d. (2005). poverty in egypt: modeling and policy simulations. economic development and cultural change, 53(2), 327-346. jamal, h. (2011). assessing poverty with non-income deprivation indicators: pakistan, 2008-09. the pakistan development review, 50(4), 913-926. jayamohan, m. k., & kitesa, a. t. (2014). gender and poverty–an analysis of urban poverty in ethiopia. development studies research. an open access journal, 1(1), 233-243. kanbur, r., & squire, l. (2001). the evolution of thinking about poverty: exploring the interactions. frontiers of development economics-the future perspective., 183-226. khalid, u., shahnaz, l., & bibi, h. (2005). determinants of poverty in pakistan: a multinomial logit approach. the lahore journal of economics, 10(1), 65-81. lanjouw, p. and m. ravallion. 1995. "poverty and household size." the economic journal, 105, november: 1415-1434.45. nisar, r., anwar, s., hussain, z., & akram, w. (2013). an investigation of poverty, income inequality and their shifters at household level in pakistan. journal of finance and economics, 1(4), 90-94. rahman, r. i., & islam, r. (2013). female labour force participation in bangladesh: trends, drivers and barriers. international labour organization, dwt for south asia and country office for india. sandefur, g. d., & sakamoto, a. (1988). american indian household structure and review of economics and development studies, vol. 6 (2) 2020, 425-438 438 income. demography, 25(1), 71-80. sen, a. k. (1976): "poverty: an ordinal approach to measurement," econometrica, 44, 219-231. ul haq, r., jahangeer, a., & ahmad, a. (2015). out-migration in rural pakistan: does household poverty status matter?. the pakistan development review, 54 (4), 315-329. wratten, e. (1995). conceptualizing urban poverty. environment and urbanization, 7(1), 11-38. review of economics and development studies, vol. 6 (3) 2020, 675-686 675 testing the validity of keynesian military model of fiscal side in case of pakistan ahmed gulzar a , allah ditta b , hafeez ur rehman c , naghmana ghafoor d a phd scholar in economics, department of economics, university of management and technology, lahore, pakistan, email: ahmedgulzar2011@gmail.com b assistant professor of economics, govt. college township, lahore, higher education department, govt. of the punjab, pakistan email: ad.tahir77@gmail.com c chairman department of economics , university of management and technology, lahore, pakistan, email: drhrehmankhan@gmail.com d lecturer, department of economics, lahore college for women university, lahore, pakistan email: naghmana.ghafoor@lcwu.edu.pk article details abstract history: accepted 28 july 2020 available online 30 september 2020 the objective of the study was to determine the impact of national security expenditures (military expenditures) on economic growth. time series data from 1981 to 2018 on annual frequency on gdp growth rate, military expenditures as percentage of gdp, imports as percentage of gdp, unemployment rate, fdi as percentage of gdp and percentage of population living in agglomeration cities taken from online world development indicators. johansen co-integration and vecm methodology are applied to check the long run relationship and to get the long run and short run coefficient values. the major findings of this study explain that there is found the positive and significant relationship between military expenditures and economic growth of pakistan both in long run and in short run. it explains that military expenditures are the key driver of economic growth both in short run and in the long run. the impact of imports on gdp growth was also found to be positive and significant both in long run and in short run. the impact of fdi is found positive and significant both in the long run and in the short run. the impact of migration of population to agglomeration cities have huge impact on growth were observed. the impact of unemployment was found to be negative on economic growth in short run. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: military expenditure, imports, unemployment, fdi, population, pakistan’s economy jel classification: e24, f21, h56, o24, p3 doi: 10.47067/reads.v6i3.255 corresponding author’s email address: ahmedgulzar2011@gmail.com 1. introduction there has been an extensive debate on the nature of relationship between national security and socio-economic development among policy makers, academicians and practitioners with special reference to developing countries. they are of the view that strategic security concerns and socioeconomic developments are two separate domains and must be treated accordingly and more weightage review of economics and development studies, vol. 6 (3) 2020, 675-686 676 should be given to socio-economic development in the public policy framework and action plans. in an article "prospects of south asian cooperation in the transformed world post-11 september", j. n. dixit strongly asserts the separation of strategic-security concerns and socio-economic developmental needs in south asia1. defence expenditures are widely debated as undesirable on any economy. this argument is built on the hypothesis that defence expenditures divert the resources of an economy from development projects. the other argument is that defence expenditures cater to the territorial sovereignty of the state, thereby providing a secure and enabling environment to the citizens to pursue their means of livelihood. this way, it contributes towards socio-economic prosperity in the country. according to sipri, world defence expenditures reached $ 1.63 trillion in 2010 which was 50 percent increase since 2001. under this argument, defence expenditure is considered as the most important component of government expenditures which is used to correct short-run socio-economic fluctuations explained by military keynesianism. it is taken as the responsibility of the state to pursue the objective of national security and socio-economic development. pakistan falls under the category of low income countries with a ranking of 156 th in world per capita (according to purchasing power parity, ppp methodology2) adjusted gross national income (gni) of $ 2, 600, while peace ranking is145 and it is 35 th in national security spending ranking. national security expenditures of pakistan stand relatively high as it stands at 4.5 % of gdp3 on average from 1995 to 2010. the reasons for such high defence and national security budget allocations include chronic issues with india, internal security challenges and geopolitical position in the afghan war. there are socio-economic impacts of these national security expenditures which explain the relationship between national defence expenditure and socio-economic dynamics of growth and development. however, there is declining trend in national security expenditures as percentage of gdp from 1995 (i.e. 6.4% of gdp) to date (i.e. less than 3 % of gdp). 1.1 an analysis of pakistan’s national security expenditures national security expenditures were on an increasing trajectory till 1999 (on average 6.62 percent of gdp). afterwards, a declining trend was observed till 2001 and again rose till 2003 and then gave a declining trend. the reasons for these trends include the induction of defence pension in civil budget and foreign military aid after war on terror. the justification of these high national security spendings has been made by the policy makers on the basis of potential and active internal and external threats to national security of pakistan. immediately after pakistan came into existence, it faced multi-farious problems ranging from influx of refugees, boundary disputes, lack of financial resource to division of assets. these problems exacerbated rivalry cum enmity between pakistan and india which still continues due to unresolved issues between the two states. these issues include kashmir dispute, water issue and cross-border terrorism etc. for example, in 1980s, general zia-ul-haq the then president of pakistan refused to even consider any cut in national security expenditures and observed that no one could fight against jets and 1 j n dixit is of the view that the defence expenditures in the name of national security are a burden on national exchequer. these expenditures curtail socio-economic development by leaving less resources for other sectors 2 purchasing power parity, (ppp) methodology basically explains the rate at which equal basket of goods may be purchased in two different countries with same value of respective countries’ currency. 3 here gross domestic product (gdp) is taken in constant terms. it does not include any effect of inflation in its value. review of economics and development studies, vol. 6 (3) 2020, 675-686 677 nuclear submarines with sticks and so pakistan had to match its arsenal capacity with its adversaries. the security concerns on both sides have resulted in an arms race between india and pakistan. the action-retaliation approach led to an escalation in the race for stockpiling of arsenals which resulted in high budgetary allocation for national security. the soviet invasion of afghanistan in 1979 left grave imprints on pakistan’s security strategy paradigm as the country emerged as a front line state in the proxy war against communism. this placed pakistan in a two pronged threat scenario such as no other south asian state has ever experienced. more recently, the war on terror in afghanistan also placed pakistan as the number one ally of nato. pakistan is also fighting against insurgency in balochistan. expenditures on national security are a sine qua non for effectively responding to the internal and external threats being faced by the country. this study will explore the socio-economic dynamics of national security expenditures in terms of military and non-military threats from within the country and across the borders. the scale of these impacts will also be examined. the impact of these factors will be examined primarily on the patterns of consumption, distribution of wealth and incomes, differential improvements in metrics such as gdp per capita, literacy rates, level of employment generation, life expectancy, health indicators and overall quality of life. the relationship between national security expenditures and socio-economic factors will be assessed by using the keynesian military model of fiscal side. keynesian military model of fiscal side explains that the expenditures on national defence in the name of national security may be taken as public good and their contribution towards the socio-economic activity of a society may be reckoned. 2. literature review joerding (1986) analyzed the relationship between military expenditure, external and internal security and economic growth. in this perspective, he basically discussed the fundamental questions: does economic growth initiate defence spending? does defence spending initiate economic growth? or do structural changes in an economy affect defence spending? (joerding (1986) used partial equilibrium analysis to study the relationship among military expenditures, internal and external threats and economic growth in continuous timeframe). looney (1989) analyzed the determinants of defence spending. he found national income as one of the most significant factor of military spending. tahir et’ al (1999) analyzed the relationship between economic growth and defence expenditure for pakistan and other least developed countries. granger causality test technique was used on data series of real output and defence expenditure on quarterly frequency from 1961 to 1997. they found a mixed relationship in case of pakistan, iran and india. lai et’ al (2002) analyzed the defence expenditures as one of the factors of balanced economic growth by using endogenous growth model. they found that defence expenditures lead to socio-economic growth and development. khan (2004) tested the defence (military) keynesian hypothesis for pakistan. he used johansen’s co-integration technique to find long run causal relationship and vec model to capture short run effects. he used data from 1951 to 2003 on annual frequency. he found that defence expenditures do not block significantly the economic growth in pakistan. he also found that military keynesian hypothesis does not hold true. hou (2009) analyzed the causal relationship between defence expenditure and socioeconomic growth in thirty six developing countries by using cross sectional panel data and found that there is negative effect of defence expenditure on economic growth. review of economics and development studies, vol. 6 (3) 2020, 675-686 678 ando 4(2009) divided the economy into two sectors i.e. private and defence and then analyzed the relationship between defence spending and socio-economic dynamics with the sample of 109 countries including 30 oecd countries. he used panel data from 1995 to 2003. he found that growth of defence spending affect positively on socio-economic factors. it is hypothesized that national security spending and economic growth are positively co-related. national security spending increases with the increasing size of an economy to maintain internal security and to protect itself from external aggression. 3. analytical framework for national security and socioeconomic development (keynesian military model of fiscal side) after creation of pakistan, the majority of areas constituting the new state were without adequate public institutions and physical infrastructure. the reason for these inadequacies was the british mistrust towards muslims during the colonial rule and their policy of ‘divide and rule’. hence, the muslim majority areas were deliberately left backward to suppress any form of revolt from the muslims to regain their past glory. resultantly, after independence, due to weak infrastructure, all the governments in pakistan had to consistently strive for coping with the basic issues such as rural poverty, supply of basic needs for the majority of the population including health, education, shelter alongwith issues related to economic development and national security. it is argued extensively in the literature of ‘international political economy’ that the increase in expenditures on national security contributes towards economic growth and social harmony by providing peaceful and friendly environment for investment and for pursuing other business ventures. however some political economists have a divergent view from the aforesaid argument and claim that the opportunity cost of diversion of national resources into expenditures of national security agenda is so high that it hinders the socio-economic growth from potential level. to substantiate the former argument, it is observed that the growth rates in the eras of gen zia ul haq and gen pervez musharraf have been impressive as compared to other regimes during the last four decades, although the expenditures on national security were high in these periods. this reflects a positive relationship between peace and economic activity. one school of thought propounds that an increase in national security expenditures negatively affects job opportunities in other sectors because less financial resources are left for investment purposes in these sectors. this trend negatively impacts the socio-economic fabric of the society. however, this argument does not hold true especially in the case of developing countries where endemic law & order and security situation like sri-lanka, pakistan and afghanistan. in case of pakistan, since the last many decades, the internal and external threats to national security have been manifold. terrorist attacks including suicide bombings at public places and government premises have substantially increased. these incidents have disrupted socioeconomic activities across the country in all the major sectors of the economy including the industrial sector, agriculture sector, tourism and other areas of economic investment. in view of the prevailing security situation, the government has to focus on strengthening the capacities and capabilities of the law enforcement agencies and the defence institutions to fight the menace of terrorism in all its forms and manifestations. this investment in national security apparatus is critical for establishing the writ of law in the country and for creating a peaceful and enabling 4 ando (2009) divided the economy into two sectors in terms of allocation of resources i.e. private and defence rather than private and public. in his analysis he treats all the government resources as to provide the business environment to the private sector. in this regard, he considers defence expenditures as public good. review of economics and development studies, vol. 6 (3) 2020, 675-686 679 environment for the economic development and prosperity of its citizens. the literature available on ‘economics of national security’5 reveals an inconsistency in explaining the strong relationship between national defence and socio-economic development. this has been true with respect to cross country analysis as well as an individual country. prevalent ambiguity relating to the subject matter is highlighted by chan, who contends that the overall studies in the literature have ignored the theoretical basis and focused on empirical aspects only of the relationship between national defence and economic growth. thus national security as a service has not been considered as a public good but rather as an expenditure item. therefore, it is treated as a burden instead of being recognized as a contribution to the socio-economic development of a state. in the domain of government sector production both services and goods are the part and parcel of the national production. the worth of the government production is very difficult to be estimated because of the clear issues of externalities and indirect benefits of public goods. under such conditions, the value of public goods is estimated on the basis of the hypothesis that expenditure is equal to the value. according to this type of definition, the worth of national security service as a public good is equal to its expenditures. thus in analyzing national security and socio-economic development, national security must be evaluated as an intermediate good and must be treated as a major contributor to the national economy. keeping in view the perspective propounded above, an analytical framework has been developed to understand the types of contributions made by national security considerations in the socio-economic domain. in this framework, national security is assumed as a public good. national security encompasses a broad gamut of areas including protection of lives and property of citizens from internal and external threats. within this framework, the role of national security in socio-economic development can be seen with special reference to input-output analysis (input-output analysis in standard practice is used to determine and quantify the scale of effects of inputs on output) while adding up all the externalities6 of national security which can happen in the short run as well as in the long run. the current literature has only treated the indirect benefits of national security and has made up the models to test the nature of relationship between national security expenditures and socio-economic growth. the main cause of not considering the direct benefits of national security is that there is difficulty of separating the direct benefits such as the additional production for the additional increase in effective national security. the assumptions of the model are as under;  the direct benefits of national security and its positive externalities are taken with reference to all stakeholders.  employment is considered as a basic indicator of social development while the income (gdp) is considered as a basic indicator of economic activity.  there is direct relationship between employment and income.  employment and income are taken as basic indicators of socio-economic development. the country has not reached its potential employment level. 5 in the subject, ‘economics of national security’, the financial, economic and cost-benefit analyses are made from different aspects of national security expenditures and their contribution towards socio-economic activity within a limited time frame given a set of pre-conditions. 6 externalities are defined as the effects of one’s actions on others. externalities can both be positive and negative. for example, smoking has negative externalities. review of economics and development studies, vol. 6 (3) 2020, 675-686 680  the national security of a given country operates efficiently and effectively, there are no hindrances for the national security to operate.  national security takes the minimum value that goes to gross national product rather it expresses the government expenditures. both macro and micro analyses will be made in the final construct of the empirical model. micro analysis entails the externality effects of an improvement in the national security situation at individual level, whereas, macro analysis explains the effects of an improvement in the national security situation on employment and income at national level. in the empirical model, national security expenditures which are equal to the amount of expenses incurred on armed forces, military equipment, and other national security agencies of the country are taken as inputs. the national security stratagem includes military forces, paramilitary forces, police and other mechanisms of national security etc. under national security, the paramilitary forces, police and the private security mechanisms are not usually taken into consideration. however, in this model, the national security includes ministry of defence, paramilitary forces, armed forces, pakistan police and other security agencies. the reason to include these forces in the national security stratagem is that the paramilitary forces and police are playing crucial role in the counter terrorism strategies to save the social fabric of the society. national security expenditures are taken as input and the deterrence which is the result of national security expenditures and its impact on employment, income, social transformation and economic development is taken as output. the stoppage of the violence that has linkages with development as indirect effects under input-output relationship will be examined and secondly, the linkage between national security and economic growth and development will be re-assessed. to wrap up the debate, the keynesian military model of fiscal side explaining the role of national security in the development of a country is shown below in the form of input-output transmission mechanism. here, national security expenditures are supposed to be used in way to establish internal as well as external security. at the second stage, the internal and external security provides a peaceful, stable and investment friendly environment. at third stage, the investors’ confidence is restored and they start economic activities which generate employment and induce high economic growth. at fourth stage, high employment generation and economic growth leads towards inclusive growth, self esteem, social transformation and economic development. review of economics and development studies, vol. 6 (3) 2020, 675-686 681 figure 1: role of national security in economic development, (keynesian military model of fiscal side) 4. methodology and data sources the relationship between national security expenditures and socio-economic factors are assessed by using the keynesian military model of fiscal side. this model explains the spillover effects of national security expenditures on socio-economic development in the context of pakistan. time series data from 1981 to 2018 on annual frequency on gdp growth rate, military expenditures as percentage of gdp, imports as percentage of gdp, unemployment rate, fdi as percentage of gdp and percentage of population living in agglomeration cities taken from online wdi7,. johansen co-integration and vecm methodology are applied to check the long run relationship and to get the long run and short run coefficient values. the data is taken on annual frequency where one point of data is considered as average over one year. the simplistic functional form of the keynesian military model of fiscal side is as under: gdp = f (imports,fdi, military expenditures, population, unemployment) log-linear models were used to get more reliable and robust results for achieving the objective of the study. lngdp = f (lnx, lnm, lnfdi, lnme, lnpac,lnum) where, gdp = growth rate of gross domestic product, um= % of unemployment, m = total imports % of gdp, fdi = foreign direct investment as % of gdp, me = military expenditure % of gdp as proxy of national security expenditures, pac = population living in agglomeration cities. the growth rate of gdp is calculated on constant prices. it does not include any inflationary impact. it explains the direction of socio-economic development. this indicator also explains the macro-economic stability of a country showing a strong relationship between public policy and economic growth. 7 wdi stands for world development indicator. this data set is published by the world bank. review of economics and development studies, vol. 6 (3) 2020, 675-686 682 the data set on defense spending takes the complete range of capital and current spending on military ventures and men like paramilitary forces, ministry of defense, operations, maintenance, procurement and military and security research & development. it does not include the civil defense spending, conversion or destruction of weapons and expenditures on previous military activities. defense expenditures share a large portion of total income consumption of an economy therefore, it is argued on the usefulness and wasteful tendencies of such expenditures in terms of socio-economic development by many research scholars. the amount of defence spending entirely depends upon the geo-strategic and regional condition of a country. a country which has more internal and external security threats will spend more on national security and defence and vice-versa. the data set on imports are taken from wdi. it includes the imports of goods and does not include the transfer payments and factor services. imports of final goods and services are considered as burden on an economy. however, the imports of goods which help in developing the technology of local industry in terms of making them competitive on international level are considered favorable. the imports in some sectors also help in developing human resources by increasing the professionalism and cognitive skill of local labourforce. the recommendations of the study are made on the basis of empirical estimates and their interpretations 5. results and discussion first of all, the descriptive statistics of variables were estimated, which are shown in table 1 below. the p-values of jarque-bera explain that the data on all variables are normally distributed. the coefficient of correlation and variance inflation factor (vif) were calculated and shown in tables 2 and 3 respectively. the values of vif for all variables are under 10 and hence explain that there is no issue of multicollinearity. table 1: descriptive statistics lngdp lnfdi lnm lnme lnpac lnum mean 1.454073 -0.330413 2.979035 1.594156 2.865265 1.112881 median 1.57822 -0.389944 2.98446 1.68919 2.856953 1.406881 maximum 2.069488 1.299735 3.151504 1.944717 2.999319 2.057963 minimum 0.014293 -2.276267 2.683295 1.183328 2.805068 -0.922057 std. dev. 0.516384 0.766673 0.136102 0.282595 0.054746 0.881011 skewness -1.010368 -0.022197 -0.714551 -0.137517 0.716782 -1.162511 kurtosis 3.361135 3.489718 2.549169 1.313244 2.559184 3.132899 jarque-bera 6.145115 0.352618 3.274801 4.259485 3.280407 7.909115 probability 0.046303 0.838359 0.194485 0.118868 0.193941 0.019167 sum 50.89257 -11.56445 104.2662 55.79545 100.2843 38.95084 sum sq. dev. 9.066172 19.98478 0.629808 2.715247 0.101902 26.39016 table 2: coefficient of correlation lnfdi lnm lnme lnpac lnum lnfdi 1 lnm -0.170553 1 lnme -0.562047 0.490254 1 lnpac 0.484248 -0.372667 -0.881652 1 lnum -0.442602 -0.370746 0.435402 -0.357532 1 review of economics and development studies, vol. 6 (3) 2020, 675-686 683 table 3: vif lnfdi lnm lnme lnpac lnum lnfdi lnm 1.029959806 lnme 1.461767821 1.316393949 lnpac 1.306329116 1.16127927 4.490552421 lnum 1.243621049 1.159356571 1.233920324 1.146564321 the times series were tested to check the stationarity through unit root test with the hypothesis (h0) that the time series is stationary in the econometric model. otherwise, the whole analysis goes in vain and all the results of regression become spurious because a non-stationary time series is not mean reverting and has infinite memory. this study used adf (augmented dickey-fuller, 1979) test and phillip perron test to find out the stationarity of the series. table 4 below explains that all the variables are i (1) in their levels and i (0) in their first differences at five percent level of significance. table 4: unit root test (p-values) variables i(0) i(1) adf test pp test adf test pp test lngdp 0.15 0.57 ∆lngdp 0.00 0.00 lnfdi 0.11 0.29 ∆lnfdi 0.00 0.00 lnm 0.23 0.11 ∆lnm 0.00 0.00 lnme 0.7 0.82 ∆lnme 0.01 0.00 lnpac 0.99 0.99 ∆lnpac 0.01 0.00 lnum 0.45 0.49 ∆lnum 0.014 0.00 it explains the stationarity by using adf and concluded that all the variables are stationary at first difference. the johansen maximum likelihood method is generally used to analyze the long-run relationship among variables when all variables are i(1) at their levels and i(0) at their first difference. if the critical values are less than max eigen values and trace statistics (based on likelihood ratio) then the null hypothesis h0 is rejected. here r=0 which shows that there is no co-integration is seen at r=0 because there is no cointegrating vector is found. now at r < 1, the critical values are lower than the estimated values which refer to the rejection of null hypothesis that there is co-integrating factor. it explains that even at r < 1 there is no long run relationship found among the variables. at r < 2, the critical values i.e. the trace values and the eigen values are greater than the tabulated values which explain that there is two cointegrating vectors. it explains that there is stable long run relationship among the variables, which is shown in the table 5 and 6. table 5: unrestricted cointegration rank test (trace) hypothesized no. of ce(s) eigenvalue trace statistic 0.05 critical value prob.** none * 0.947113 164.4704 95.75366 0 at most 1 * 0.676044 76.28247 69.81889 0.0139 at most 2 0.485069 42.46804 47.85613 0.146 trace test indicates 2 cointegrating eqn(s) at the 0.05 level, * denotes rejection of the hypothesis at the 0.05 level, **mackinnon-haug-michelis (1999) p-values review of economics and development studies, vol. 6 (3) 2020, 675-686 684 table 6: unrestricted cointegration rank test (maximum eigenvalue) hypothesized no. of ce(s) eigenvalue max-eigen statistic 0.05 critical value prob.** none * 0.947113 88.18789 40.07757 0 at most 1 0.676044 33.81443 33.87687 0.0509 at most 2 0.485069 19.91164 27.58434 0.3473 at most 3 0.342859 12.59569 21.13162 0.4901 max-eigenvalue test indicates 1 cointegrating eqn(s) at the 0.05 level in the next step, var lag length criteria were used to determine the optimal lag order of the variables. table 6: var lag length criteria lag logl lr fpe aic sc hq 0 29.18086 na 8.59e-09 -1.545391 -1.265151 -1.45574 1 214.0986 283.5405 4.42e-13 -11.47324 -9.511564 -10.84568 2 304.0157 101.9060* 1.66e-14* -15.06771* -11.42460* -13.90225* * indicates lag order selected by the criterion at the next step johansson cointegration was used to determine long run coefficient values and ecm method was used to determine the short run coefficient values, which are shown in table 7. there is found the positive and significant relationship between military expenditures and economic growth of pakistan both in long run and in short run. it explains that military expenditures are the key driver of economic growth both in short run and in the long run. the results show that 1 increase in military expenditures causes increase in growth rate of gdp by 2.43 percent in long run and 0.026 percent in the short run. the impact of imports on gdp growth was also found to be positive and significant both in long run and in short run. 1 percent increase in imports cause increase in gdp growth by 5.7 percent in long run and 0.07 percent in short run. the impact of fdi is found positive and significant both in the long run and in the short run. one percent increase in fdi causes increase in gdp by 0.733 in the long run and 0.2 percent in short run. the impact of migration of population to agglomeration cities have huge impact on growth were observed. one percent increase in pac causes 26.27 percent increase in gdp growth in the long run while in short run it impact is minimal. the impact of unemployment was found to be negative on economic growth in short run. the values of was calculated of about .39. this explains that long run equilibrium will be restored in about 2.56 years. table 7: results long run johansen cointegration test short run ecm methodology varible coefficient value t-statics variable coefficient value t-statics lnfdi 0.733 8.32 ∆lnfdi 0.2 2 lnm 5.7 6.65 ∆lnm 0.07 3.34 lnme 2.43 3.72 ∆lnme 0.026 1.99 lnpac 26.27 7.08 ∆lnpac 0.001 4.55 lnum 0.84 7.66 ∆lnum -0.003 -0.025 ecm(t-1) -0.39 -3.68 the diagnostic tests for examining the serial correlation, functional form, normality and heteroscedasticity among the variables are presented in the tables 8, 9, 10 and 11 below. the p-values of all diagnostics are greater than .1, which accepts the null hypotheses that there is no issue of any of the diagnostics in the estimation. review of economics and development studies, vol. 6 (3) 2020, 675-686 685 table 8: vec residual serial correlation lm tests lags lm-stat prob 1 37.52881 0.3989 2 28.35155 0.8144 probs from chi-square with 36 df. table 9: vec residual heteroskedasticity tests joint test: chi-sq df prob. 288.0143 294 0.5875 table 10: vec residual normality tests component skewness chi-sq df prob. joint 9.335712 6 0.1556 table 11 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 inverse roots of ar characteristic polynomial 6. conclusion the major findings of this study explain that there is found the positive and significant relationship between military expenditures and economic growth of pakistan both in long run and in short run. it explains that military expenditures are the key driver of economic growth both in short run and in the long run. the results show that 1 increase in military expenditures causes increase in growth rate of gdp by 2.43 percent in long run and 0.026 percent in the short run. the impact of imports on gdp growth was also found to be positive and significant both in long run and in short run. 1 percent increase in imports cause increase in gdp growth by 5.7 percent in long run and 0.07 percent in short run. the impact of fdi is found positive and significant both in the long run and in the short run. one percent increase in fdi causes increase in gdp by 0.733 in the long run and 0.2 percent in short run. the impact of migration of population to agglomeration cities have huge impact on growth were observed. one percent increase in pac causes 26.27 percent increase in gdp growth in the long run while in short run it impact is minimal. the impact of unemployment was found to be negative on economic growth in short run. the values of was calculated of about .39. this explains that review of economics and development studies, vol. 6 (3) 2020, 675-686 686 long run equilibrium will be restored in about 2.56 years. national security expenditures have increased due to rise in non-traditional warfare and the emergence of non-state actors. these expenditures are essential to ensure peace and business friendly environment in the country so that the targeted levels of gdp growth are attained. the policy makers should develop a comprehensive national security strategy to address all kinds of issues and challenges to national security like insurgency in baluchistan, militancy in tribal areas and khyber pakhtun khawa, bhatta issue and law and order situation in karachi. primarily, the security problem arises from the issues of ethnicity, identity, tribalism and segmentation of the society. the national security strategy must entail these aspects in depth in its phase-wise implementation plans. the comprehensive national security must focus on all dimensions of socio-economic and socio-political life of the society. on political front, it must have such a framework in which all ethnic groups may be entertained in power equation. on economic front, it must have comprehensive plan to address structural issues in the system so that the participation from all segments of the society in the socio-economic development may be made possible. in this way the peace of the country and the security of the life and property of the people of pakistan may be guaranteed. this is the pre-condition of business friendly environment and socio-economic development. references ando, shio (2009), the impact of defense expenditure on economic growth: panel data analysis based on the feder model. the international journal of economic policy studies, volume 4(8), pp. 141-154. aslam, rabia (2007), measuring the peace dividend: evidence from developing economies. defence and peace economics, volume 18(1), pp. 39-52. batchelor, p., p. dunne and g. lam (2002), the demand for military spending in south africa. journal of peace research, volume 39(3), pp. 339-354. joerding, w. (1986), economic growth and defense spending: granger causality. journal of development economics, volume 21(1), pp. 35-40. hou, na (2009), arms race, military expenditure and economic growth in india. ph.d. thesis, department of economics, the university of birmingham. khan, mahmood-ul-hasan (2004), defense expenditure and macroeconomic stabilization: causality evidence from pakistan. sbp working paper series, no. 6. lai, ching-chong, jhy-yuan shieh and wen-ya chang (2002), endogenous growth and defense expenditures: a new explanation of the benoit hypothesis. defence and peace economics, volume 13(3), pp. 179-186. looney, robert (1989), impact of arms production on income distribution and growth in the third world. journal of economic development and cultural change, volume 38(1), pp. 145-153. tahir, rizwan and g. m. sajid (1999), defence spending and economic growth in less developed countries: re-examining the issue of causality. government college economic journal, vol 32(1&2), pp. 27-39. review of economics and development studies, vol. 8 (1) 2022, 13-24 13 historical perspective of external debt in pakistan: identifying key determinants / strategies nabila asghar a, muhammad asif amjad b, hafeez-ur-rehman c a associate professor department of economics, division of management and administrative science, university of education lahore, pakistan email: nabeela.asghar@ue.edu.pk b ph.d. scholar department of economics and statistics, university of management and technology, lahore, pakistan email: m.asifamjad22@gmail.com c professor of economics department of economics and statistics, university of management and technology, lahore, pakistan email: hafeez.rehman@umt.edu.pk article details abstract history: accepted 23 february 2022 available online march 2022 the non-developmental use of external debt creates macroeconomic instability which results in massive unemployment, poverty, inflation, and political instability in any country. the present study is focused on historical perspective of external debt in pakistan. this study found that the leadership of pakistan has heavily borrowed external debt without considering its sustainability and repayment capacity. on the basis of the systematic literature review of past studies, the key policy variables are highlighted to reduce the burden of external debt. the study indicated that external debt burden of pakistan can be managed by lowering the consumption oriented imports, focusing targeted inflation, exchange rate and by promoting sustainable inclusive economic growth. the policy mix based on efficient management of macro-economic indicators are helpful in addressing external debt in pakistan. © 2022 the authors. published by spcrd global publishing. this is an open-access article under the creative commons attributionnoncommercial 4.0 keywords: external debts, pakistan, historical perspective, debt servicing, key determinants jel classification: h63, n35 doi: 10.47067/reads.v8i1.427 corresponding author’s email address: hafeez.rehman@umt.edu.pk 1. introduction in 21st century, developing countries face two major interconnected problems i.e., heavy external debt and poverty. in economic growth perspective, both of these factors have significant implications. the general theoretical models failed to explain the possible transmission mechanisms between incidences of poverty with high external debts (ashraf et al. 2020). external debt is the key source to finance the budget deficit and balance of payment deficit in the developing countries. it has been playing both a positive and negative role in the process of economic development, particularly review of economics and development studies, vol. 8 (1) 2022, 13-24 14 in developing countries. it is very helpful for a country, when a country utilizes it on investmentoriented projects, like on power, infrastructure, and agriculture sectors. it affects harmfully when it is used for unproductive activities, which does not give any output and ultimately increases poverty. the present study explored the historical perspective of external debt in pakistan. pakistan is considered as big costumer of international lending institutions. it has implemented various stabilization and structural adjustment programs (sap) of the imf and the world bank since 1987 but only a few have been fully implemented. malik and siddiqui (2002) pointed out that pakistan faced a higher debt ratio as compared to south asian and many other developing countries. while anwar and chaudhary (2002) indicated that pakistan has huge potentials to repay its debt. for the repayments of external debt, the government has to increase taxes. usually, the government of pakistan imposes taxes on less elastic goods to enhance tax collection. it reduces the real income of the poor as well as the public expenditures especially the development and social sector expenditures. due to these reasons, in pakistan large population is sleeve behind the availability of basic needs. people are not self-sufficient in nutrition, education, and health facilities and their productivity is declining sharply. pakistan borrowed loans from three ways. firstly, the central borrowing (government contracted loans), second is the guaranteed loans (loans contracted by the regional and provincial government autonomous bodies and corporations; financial institutions, credit agencies, industrial concerns, etc., in the private sector guaranteed by the government) and the third is private nonguaranteed (external obligation of a private debtor). there are two types of loans i.e., project loans and non-project loans. project loan is used to finance the cost of technical equipment, machinery, and services. while non-project loans are used to finance the import of raw materials and necessary consumer goods. on the basis of the above discussion, following three objectives of the present research study are considered: 1. to highlight the historical perspective of external debt in pakistan. 2. to conduct desk / literature review of developing countries to identify key strategies / determinants of external debt. 3. to suggest policy options on the basis of literature / desk review to address external debt of pakistan. the methodology of the paper is discussed in second section. in third section of this study, the historical perspective of external debt is presented and key strategies/determinants of external debt in developing countries are discussed in fourth section of this research study. the conclusions and recommendations are portrayed in last section of the study. 2. methodology of the study the descriptive research methodology is used in this study which includes the review of different documents and systematic literature review to envisage the key determinants / strategies for addressing external debt burden in pakistan. in this study, the historical perspective of external debt is highlighted by reviewing different documents. then a systematic literature / desk review of relevant studies are conducted to identify the key strategies of managing external debt burden especially in developing countries. on the basis of this desk review, specific key determinants / review of economics and development studies, vol. 8 (1) 2022, 13-24 15 strategies are highlighted with perspective of pakistan to manage external debt burden. 3. historical perspective of external debt at the time of independence, pakistan was a poor and undeveloped country. at that time, the main problem was provision of basic shelter and basic necessities of life. today, pakistan is not the most indebted country in the world, but its high debt to gdp ratio indicates poor economic management of the country. sensible utilization of debt helps to higher economic growth and assists the government to achieve its social and economic goals. an unattainable level of debt may slow down the economic growth and social sector growth. appropriate debt administration is necessary for the reasonable development of a country. there should be a balance in the external debt for the limited requirements for the shortfall in the monetary and fiscal deficit (akram, 2011). sadly, the persistent increase in external debt is the key issue to the downfall of pakistan's economy. unfortunately, pakistan is considered as fourth largest debt recipient economy in this region. its external debt has reached about 45 % of the gnp as compared to india 21 %, nepal is about 23 % and bangladesh is 19%. it is a common observation that usually pakistan borrowed debt for pleasure and pride and primarily to repay the debt obligations. figure 1: external debt stocks (% of gnp) in south asian countries most of the researchers have examined that the need for external debt had been started after the independence (ali & mustafa, 2012). pakistan first time received 121 million dollars in 1951-55. in the next five years, it became triple, when pakistan played a vital role in the cold war. by the end of 1969, the external debt reached about 2.7 billion dollars including bangladesh (iqbal & iqbal, 1972). figure 2 shows the total external debts stocks from 1970 to 2020. afghanistan bangladesh bhutan india maldives nepal pakistan sri lanka external debt stocks (% of gni) review of economics and development studies, vol. 8 (1) 2022, 13-24 16 figure 2 detail of the total external debt ($ billion) source: wdi pakistan database 2022 in figure 2, it is marked that from 1970-77, slowdown in the growth of domestic product was one of the key factors causing a large deficit in balance of payment which required a large amount of external debt. in 1973 there was a massive increase in the oil prices which caused high inflation, unemployment, and recession in the domestic economy (smith, 1996). these factors forced the nonoil exporting countries to borrow external loans or reduce their reserves. at that time pakistan was also facing these problems like the other non-oil exporting countries face. to overcome this problem of external payments, pakistan borrowed a huge amount of external debt from foreign lending institutions. at that time, the volume of international debt and debt servicing liabilities increased rapidly (qadri & khan, 2017). in december 1971, pakistan’s external debt reached $3.62 billion. at that time east pakistan tragically separated from pakistan. after the separation of east pakistan, external debt increased subsequently $6.78 billion in 1977(mahmood et al. 2009). while in this era, dollar rate was an average of 5 pakistani rupees. from 1978 to 1981, pakistan devaluated its currency. at that time, pakistan received hard loans and short-term loans to support the balance of payments (bop). at the end of 1980, total external debt stock reached $8.52 billion while dollar price doubled the pakistani rupees and reached to10 pak rupees. in the era of 1981-90, the external debt doubled from 1981 and reached $16.64 billion. over 1980, in cold war era, pakistan had accessed a lot of foreign aid which coupled with a large volume of remittances from the expatriate. at that time, pakistan became the tenth-largest recipient country of the imf and world bank. it was the time when imf initiated the structural adjustment program (sap). the general zia-ul-haq for first time received loans under the sap in 1982 to establish the military regulation. after receiving the first installment of the loans from the sap, the economic managers of zia-ul-haq decided not to proceed with the rest (naeem & sherbaz, 2016). however, in the 1990s situation was reversed. in this era, pakistan spent more or less 80 percent of the foreign assistance on non-development expenditures and defense. all of this foreign assistance and loans were at a very high-interest rate. in 1990-92 debt situation was at horrible stage 0 20 40 60 80 100 120 140 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 t o ta l e x tr n a l d e b t (b il li o n s) years total external debts review of economics and development studies, vol. 8 (1) 2022, 13-24 17 in the history of pakistan. the crunch of the sap by the general zia regime came back in the era of benazir bhutto and nawaz sharif regimes. in this era of civil government, the external debt of the economy doubled than zia's period which reached $16.64 billion in 1990-91. in this era, most of the external debt was taken from the sap of imf (zaidi, 2006). when nawaz replaced the first government of pakistan people party (ppp) of benazir bhutto, launched the first significant package of the sap to maintain the economy. prime minister nawaz sharif lifted the control on the foreign exchange. the first batch of the assets of the state privatized, many businesses and industries also privatized and expenditure of the public on social programs was reduced. after observing the extraordinary performance of the pakistani government, imf and world bank released another installment of $400 million in sap loans over 3 years in nawaz sharif's first government (fatima, 1997). in the era of 1993-1997, moen qureshi the representative of the world bank became the advisor to the prime minister. the advisor of the prime minister implemented another round of the sap, including 10% of the devaluation of currency, increased the prices of electricity and petroleum goods which increased the prices of flour, cooking oil, and reduction in tariffs. after moen qureshi government, benazir bhutto's government came back. another round of the imf and world bank of sap agreed and grant these institutions loans of $1.5 billion. to fulfill the condition of these loans by the sap, the privatization of the government institution took place in pakistan. the new regressive sale tax was imposed on 268 commodities. the import duties were reduced and another 7% devaluation of the rupees took place. from 1990 to 2000 all the foreign loans were spent on debt servicing. in 1993, total external debt reached $21.48 billion and within the next 5 years, this external debt reached $30.42 billion (bilquees, 2003). in 1998, prime minister, mian muhammad nawaz sharif ordered to conduct 1st nuclear test in response to indian nuclear test. the nuclear test of nawaz sharif met great hostility and anger of the united states after president clinton placed an economic ban on pakistan. from 1998 to 2002, no new loan was given whereas only continued projects received loans. incidentally, the number of foreign loans stayed low during this period (shah, 2002). in 1999 the total external debt was $30.43 billion and it declined in 2000 and reached about $29.82 billion. in 2001 the debt further decreased gradually by $28.69 billion. in 2002-07, in the musharraf regime 9/11 happened and the united states of america once again shook hands with pakistan government. in 2003, musharraf borrowed a huge amount of over $15 billion (uppal, 2017). once again in the era of 2003-04, the external debt reached $33.15 billion. on october 8, 2005, the earthquake was the most devastating natural disaster in pakistan's history. the government of japan gave emergency grant assistance to pakistan along with yen loan assistance. with other assistance the japan’s assistance related to earthquakes amounts to just about more than us $200 million. on october 8, 2005, the world bank and other aid packages having total $850 million aid package announced for the relief of earthquake. in 2006, the international foundation for electoral system (ifes) implemented a $9 million contract through usaid to install the computerized electoral system for pakistan. the external debt had reached up to $43.82 billion in 2008 from $30.43 billion in 1999. in 2007-09, the foreign debt liabilities increased in rupee value by more than rs.705 billion in less than six months 2008-09, simply due to rs. 15 per dollar decline in currency value. the overall review of economics and development studies, vol. 8 (1) 2022, 13-24 18 external debt of pakistan had been raised almost $5.41 billion to $43.81 billion since 2008 (economic survey, 2010). in 2010-11, the flood occurred in pakistan; the federal flood commission received 87.8 billion rupees ($900 million). federal flood commission record showed that a lot of projects started and were completed but subsequent reports indicated that little progress was done due to ineffective administration and corruption (epstein & kronstadt, 2011). in 1970 to 2012, external debt increased 2354% in terms of percentage. while in monetary terms $2.7 billion to $66.23 billion. between 1999 and 2012, pakistan's foreign external debt increased 120%, from $30.2 billion to $66.2 billion. these external debts increased $55.9 billion by the end of 2010, and $59.5 billion by march 2011. during the regime of the pakistan people party government 2008-2012, the government received a big amount of debt of rs. 8136 billion from the external and internal sources to finance the budget deficit. it should be noted that during the ppp government between march 2008 and march 2012, the country's public debt increased by 6,924 billion rupees, in which the worst data reached 11,726 billion rupees reached. in the era of the first sixty years of the constitution, the economy's general debt was only rs.4802 billion. since the us dollar and rupees parity had fallen from 51.77 rupees in the financial year 1999-2000, it is more than rs 100 in the fiscal year of 200812. as a result of the general election 2013, the pmln government came into power. in the first year of the pmln government, the total external debt slightly declined from $63.06 billion to $60.06 billion in 2013 (economic survey, 2014). during 2013-2017, pakistan's total debt stock grew an average of 34% from $60.05 billion to $91.67 billion (world bank). in the entire history of pakistan, this debt ratio was considered the highest. it faced also alike issues as the ppp government faced power shortage, the balance of payment deficit, higher oil prices above $100 per barrel till 2015. after 2015 dramatically international oil prices declined below $50 per barrel. it proved to be a good sign of the pakistan government to establish the economy. this pmln government got another good opportunity of international low-interest rates for borrowing. this was a good opportunity for the pmln government to formulate policies that focus to decline external debts. but this government failed to deal with the debt crisis. in the era of 2009-2015, the pakistani democratic government received $ 27.483 billion of foreign loan, but $ 22.111 billion was paid as loan service, while $16.436 billion as a principal return and 5.675 billions of dollars included as a refund (debt policy statement 2008-09). during the regime of ppp and pmln, the domestic debt stocks also increased very rapidly as labeled in figure 3. review of economics and development studies, vol. 8 (1) 2022, 13-24 19 figure 3: total domestic debt stock of pakistan during 2008-2018 in the 2018 general election, pakistan tehreek-e-insaf (pti) came into power. the former government left dangerous issues for the new government. the major issue faced pti of huge current account deficit. it is quite difficult to finance this deficit with internal resources. so, within the first 10th month pti government moved to the imf doorstep (amjad et al. 2021). in 2018, the total debt stock increased and reached $99.23 billion. figure 4 shows the current account deficit during 2018-2022. figure 4: pakistan current account deficit (source: adb september 2021) in 2018 the higher current account deficit was financed by the imf 13th loan program. it is noted in figure 4 that this deficit declined in the coming years due to a decline in oil prices (zaidi, 2021). pti government faced catastrophic and dangerous effects of the covid-19 pandemic. this pandemic paralyzed the world economy. in 2020 the volume of external debt stock reached $116.52 billion. one good sign is to check the size of total debt to the economy is the debt to gnp ratio. the calculation of the debt to gnp ratio is the ratio of total debt and gnp of an economy. suppose nation a has total debt is $2.5 million and gnp is $2million. if it is calculated the debt to gnp ratio is $2.5/$2×100=125 percent. this shows that economy a has a debt gnp ratio is 125 percent; it means that debt is 25 percent is greater than gnp. 2018 2019 2020 2021f 2022f current account balance (% of gdp) years cu rre nt ac co un t b ala nc e (% of g dp ) -6 -5 -4 -3 -2 -1 0 review of economics and development studies, vol. 8 (1) 2022, 13-24 20 figure 5: external debt as % of gnp source: wdi pakistan database 2022 figure 5 shows the debt to gnp ratio of pakistan from 1971 to 2020. it can be observed that after 1970 the debt services ratio gradually declined till 1985. after 1985 the debt to gnp ratio increased till 1999, after 1999 the debt to gnp ratio showed downward trends. the era of 2006 shows a low debt to gnp ratio era. after this external debt to gnp consistently increased. 4. key determinants / strategies of managing external debt in this section key determinants / strategies to mange the external debt are discussed. awan et al., (2015) conducted research for pakistan and identified that fiscal deficit, nominal exchange rate and terms of trade are the main reasons of trade deficit in pakistan. chiminya and nicolaidou (2015) explored that economic factors and political institutions have their impact on external debt for sub sahara african countries. the research further explores that economic growth has the impact in reducing the burden of external debt across these countries. murwirapachena and kapingura (2015) identified that slow economic growth and higher expenditures on infrastructure are the core reasons for increasing external debt in south african countries. bittencourt (2015) identified that economic growth, inflation and income inequality are the main factors impacting external debt. al-fawwaz (2016) envisaged for the case of jordan that the economic growth has the tendency to lower the external debt, while, the expansion of trade increases the burden of external debt. lau and lee (2016) identified for the case of thailand that the inflation rate and real exchange rate increases the burden of external debt. waheed et al. (2017) conducted research to ascertain the key determinants of external debt for the case of oil exporting countries and found that different macroeconomic indicators are impacting external debt of sample countries. gokmenoglu and rafik (2018) conducted research to ascertain the key factors impacting external debt for the case of malaysia. the study findings suggest that economic growth and capital expenditure increases external debt. dunne et al., (2019) identified that military expenditures and war conflicts are the key determinants of external debt for most of the sub saharan african countries. ibhagui (2018) identified that trade openness increases external debt by creating imbalance of current account for the case of sub saharan african countries. it is further highlighted that in developing countries, the trade openness promotes consumption oriented imports which creates trade deficit and external debt from international institutions is used to bridge 0 10 20 30 40 50 60 70 80 e x te r n a l d e b t st o c k s (% o f g n i) years external debt stocks (% of gni) review of economics and development studies, vol. 8 (1) 2022, 13-24 21 the trade deficit. zaghdoudi (2018) conducted research for large sample of developing countries and identified the non-linear relationship between external debt and human resource development. the study results indicated that investment on human resource development promotes economic activity which is very helpful in reducing reliance on external debt. abbas and wizarat (2018) conducted research for south asian countries to determine the major causes of external debt. the results of study revealed that military expenditures are directly increasing the external debt, while the local investment promotes economic growth and reduces external debt in south asian countries. agyapong and bedjabeng (2019) conducted research for african economies and identified that foreign direct investment is highly important for economic growth which implicitly reduces the burden of external debt. it was further highlighted that the external debt for development expenditures have more positive impact in promoting economic growth. kharusi and ada (2018) conducted research for jordan and found that the rising external debt is reducing economic growth and only the productive use of external debt can improve the investment status in the country which directly accelerates the process of economic growth. diana et al. (2019) ascertained that productive use of external debt promoted investment in ghana, which was very helpful in increasing economic growth. gövdeli̇ (2019) analysed the data of economic growth and external debt of turkey and found that the developmental use of external debt is very helpful in increasing the economic growth. furthermore, the inflation and exchange rate must be kept in targeted limits by the central bank to reap the fruitful benefits of external debt for promotion of investment. didia and ayokunle (2020) conducted research for nigeria and identified that domestic debt is relatively more appropriate approach to reduce debt burden of external loans. navarro-ortiz and sapena (2020) conducted research to assess the sustainability of external debt for developing countries. the study results suggested that deviations from targeted growth rates and projected interest rates creates sustainability issues of external debt. turan and yanıkkaya (2021) explored that high level of external debt reduces economic growth by impacting the channels of investment. the study highlighted that the rising burden of external debt reduces economic growth for inefficient governments. furthermore, rising external debt and high volume of interest payments reduces the opportunities of investment within the country, which ultimately lowers economic growth. the literature indicates that external debt has remained as significant problem for developing countries (ibhagui, 2018; navarro-ortiz & sapena, 2020). the researchers have engaged different variables to explain the variations in external debt of different countries (chiminya & nicolaidou, 2015; waheed et al., 2017; didia & ayokunle, 2020). the most of the analysis indicate that productive use of external debt increases economic growth which is very helpful in sustainability of external debt (waheed et al., 2017; agyapong & bedjabeng, 2019; navarro-ortiz & sapena, 2020). it was also observed that efficient political governments having good governance practices for implementation of monetary policies are very helpful to manage external debt (kharusi & ada, 2018; gövdeli̇, 2019; turan & yanıkkaya, 2021). the management of inflation, interest rate and exchange rate is highly important in curtailing the external debt burden (murwirapachena & kapingura, 2015; lau & lee, 2016; zaghdoudi, 2018). the external debt is highly vulnerable to trade openness of developing countries (kharusi & ada, 2018; abbas & wizarat, 2018; turan & yanıkkaya, 2021). the rising import bill having non capital goods increases the burden of external debt to unsustainable levels (chiminya & nicolaidou, 2015; zaghdoudi, 2018). review of economics and development studies, vol. 8 (1) 2022, 13-24 22 the desk review for strategies of managing external debt for different countries indicates some policy options for pakistan. the management of external debt of pakistan is a dynamic phenomenon and is interlinked with number of variables / indicators. the imports in pakistan must be preferred for capital goods rather consumption oriented goods. the sustainable targets of economic growth be settled and aligned with expected inflation, real interest rate and effective exchange rate. the improved governance for implementation of fiscal and monetary policy are very helpful in reducing burden of external debt. the government of pakistan should prefer to spend the foreign debt on developmental infrastructure and productive resources. there should be fair monitoring of foreign investment. before taking the additional loan, the government should consider the ability to repay capacity. the government of pakistan should negotiate with the international financial institutions that it should change policy from hard term loans to soft term loans. repayment of debts should be done from other resources, not to impose a tax on necessities of life. 5. conclusion this study explored the historical perspective of external debt in pakistan. furthermore, the literature / desk review is conducted for international practices regarding the management of external debt in developing countries. on the basis of this desk review, the policy options / strategies for managing the external debt of pakistan is advocated. the present study found that pakistan's external debt is growing rapidly. the political / military leadership has continuously borrowed the external debts without considering repayment plans / capacity. it is alarming situation that pakistan's total external debts crossed $116.51 billion. there is evidence that a persistent increase in external debts increases the poverty rate in pakistan (sheikh & alam, 2013; naeem & sherbaz, 2016; ashraf et al. 2020). the researchers have verified that when the borrowing money was not spent on the productive projects then the burden of taxes increases with every passing day which adversely affect the process of economic development. the desk review for strategies of managing external debt for different countries indicates some policy options for pakistan. the imports in pakistan must be preferred for capital goods rather consumption oriented goods. the sustainable targets of economic growth be settled and aligned with expected inflation, interest rate and exchange rate. the improved governance for implementation of fiscal and monetary policy are very helpful in reducing burden of external debt. the government of pakistan should prefer to spend the foreign debt on developmental infrastructure and productive resources. the better negotiations of pakistan should negotiate with international financial institutions can ensure the provision of loans on soft terms and conditions. repayment of debts should be scheduled on sustainability principle rather by imposing indirect taxes on basic necessities or taking new loans for payment of interest. references abbas, s., & wizarat, s. 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(2021). a forgettable year for pakistan’s economy. east asia forum economics, politics and public policy in east asia and the pacific. https://reliefweb.int/sites/reliefweb.int/files/resources/poverty-and-welfare-impacts-of-covid-19-and-mitigation-policies-in-georgia.pdf https://reliefweb.int/sites/reliefweb.int/files/resources/poverty-and-welfare-impacts-of-covid-19-and-mitigation-policies-in-georgia.pdf review of economics and development studies vol. 5, no 3, 2019 531 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads uncovering the myths of tqm in readymade garment sector of pakistan: an interpretive structural modeling approach 1 abdul aziz khan niazi, 2 tehmina fiaz qazi , 3 kamran yousef sandhu 1 university of engineering and technology, lahore, pakistan, azizniazi@uet.edu.pk 2 university of engineering and technology, lahore, pakistan, tehmina.qazi@gmail.com 3 university of engineering and technology, lahore, pakistan, dr.k.sandhu@hotmail.com article details abstract history revised format: 30 june 2019 available online: 31 july 2019 quality has always been center of gravity for superior competitive advantage. tqm has captured attention of both practitioners and academicians because it is an important management practice for improving performance. this research is aimed to provide insight of the challenges faced by readymade garment industry of pakistan for implementation of tqm principles. in depth literature, interpretive structural modeling (ism) and matriced' impacts croise's multiplication appliquée a un classement (micmac) analyses have been employed to investigate the phenomena under study. discourse of literature revealed that there are twenty challenges in implementation of tqm. lack of employee trust in senior management is the most critical challenge to be addressed that occupies bottom of the model. lack of formalized strategic plan for change and lack of leadership occupy highest position in the model hence attracts least attention. micmac analysis revealed that lack of consistency of purposes autonomous, lack of evaluation procedures and benchmark indices and obsolete technology are independent and all other challenges fall in linking quadrant. whereas no such challenge is exclusively categorized as dependent, however, most of the linking factors have high degree of dependence as well. this study is useful for the organizations which are in process of implementing tqm practices. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords total quality management (tqm), garment industry, pakistan jel classification: m11, l15 corresponding author‟s email address: azizniazi@uet.edu.pk recommended citation: niazi, a. a. k., qazi, t. f. and sandhu, k. y. (2019). uncovering the myths of tqm in readymade garment sector of pakistan: an interpretive structural modeling approach. review of economics and development studies, 5 (3), 531-540 doi: 10.26710/reads.v5i3.717 1. introduction in the era of generalized system of preferences (gsp) plus regime, quality of product and services is the most important aspect for the growth of an organization. total quality management (tqm) is one of the most important and popular management concepts, invented by americans for quality control in production but ultimate results were witnessed in japan. this term has passed through various phases since 1920s from quality control to modern term tqm. it is a quest for continuous improvement and from its inception, quality control managers are struggling to adopt quality management practices to reap its benefits (fundin et al. 2018). pakistan is lagged behind as far as tqm implementation is concerned. pakistan is now trying to embark on implementation of modern tqm regime. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 532 anecdotal evidences can be found for implementation of tqm in pakistan haphazardly. despite of abundant resources being utilized in readymade garments sector, implementation of tqm to get maximum benefits are far below from the international standards. change of mindset and change of culture if not conducive, implantation of tqm principles becomes difficult in this regard (haffar et al. 2016). emerging digital economy and globalization urge organizations to adopt various methods to enhance organizational performance. tqm is an important tool, which is widely used by both manufacturing and service industry to expedite not only performance of organization (anil & satish, 2016; bajaj et al. 2018) but also performance of employees (psomas & jaca, 2016). most of the organizations are not fully aware of advantages of tqm as it supports wider range that includes leadership, customer satisfaction, and employee engagement, continuous process improvement, supplier partnership and performance measures (jaeger & adair, 2016). their focus towards implementation of tqm to get desired standards is required. hence, lack of awareness of system up-gradation results into low productivity and reworks following-on into high cost of products and services. keeping in view importance of tqm, companies are required to get full benefit out of it by implementing tqm practices in true spirit. there is a consensus that implementation of tqm process is central to long-term success of organization. having said that, less attention has been devoted to examining the challenges faces to implement tqm in readymade garments. this research is aimed to explore literature on readymade garments rather rigorously and provide insight of challenges faced by readymade garment industry of pakistan for implementation of tqm principles. 2. literature review industries in pakistan are facing major pressures of incorporating quality practices in their systems. following relevant studies have been carried out in different sectors of pakistan: fatima and ahmad (2005) have emphasized that pakistan readymade garment industry needs to pay attention in adopting advanced quality management practices if they want to remain viable. though quality is a critical success factor, pakistan‟s knitwear industry has yet to be traversed to incorporate quality philosophy as a part of business strategy (fatima & ahmad, 2006). aswan et al. (2009) explored that top management is not committed in implementing tqm; they have further concluded that process design is the most critical success factor in implementation of tqm in pharmaceutical companies of pakistan. kurehsi et al. (2010) have found a significant gap between knowledge of current quality management techniques and their usage by entrepreneurs of service sector smes of pakistan. in connection to service sector, khan (2011) study has identified barriers in implementing tqm in service organization in pakistan. mahmood et al. (2014) have conceived a model by taking nine factors (i.e. top management support, quality information availability, quality information usage, employee training, employee involvement, product/process design, supplier quality, customer orientation and factual approach to decision making) wherein the performance of pakistani aviation manufacturing industry has been measured through tqm. arshad and su (2015) have identified significant positive impact of tqm implementation on service quality and service innovation in the pakistan‟s financial service firms. both public and private sector hospitals of pakistan provide good service quality that ensures patients loyalty but private sector hospitals are more efficient than public sector hospitals because of good management and financial policies (shabbir et al. 2016). fahim et al. (2017) have concluded that construction industry of pakistan is struggling to implement six-sigma as it is functioning in traditional way. iqbal and asrar-ul-haq (2017) have concluded that knowledge sharing plays a mediating role between tqm practices and employee performance of pakistani software houses. similarly, iqbal and asrar-ul-haq (2018) found the positive significant relationship between tqm practices and performance of employees of software houses of pakistan. without top management commitment, implementation of tqm practices and desired results can never be achieved. using ism, a six-level model has been conceived by veltmeyer and mohamed (2017) and among sixteen tqm variables, top management commitment was found to be the most influential variable. along with top management commitment, empirical study has also found leadership as the most important factor in implementing tqm philosophy in healthcare sector of palestine. among various factors, the highest level of tqm implementation is realized with the leadership factor (baidoun et al., 2018). joiner (2007) argued that competitive advantage of an organization is based on fulfilling the need of a customer. tqm has emerged as a management approach focused on customer satisfaction and geared toward the improved organization performance. banuro et al. (2017) proposed a framework that guides the companies to imply the quality of product and service in order to achieve competitive advantage and exceed customers‟ expectation. guiding framework requires awareness among the complete workforce of an organization. there are different models available like juan (1993) etc. that can be taken to develop and implement the framework. a formal strategic planning requires clear vision with explicit review of economics and development studies vol. 5, no 3, 2019 533 process and rules for generating alternative strategies to monitor and control mechanism of all the activities that will bring a positive change for future growth and development. in connection to the findings presented aforementioned, baidoun et al. (2018) also provided the evidence of strategic planning gains 64.4% of weightage in successful implementation of tqm. rules of behavior are being supported by an organizational culture and composed of collective believes, norms and values. it is evident that the business performance is positively correlated with tqm organizational culture (fu et al. 2015). supportive culture for quality management is always the key element for continuous improvement of business performance (panuwatwanich & nguyen, 2017). inadequate knowledge of tqm practices leads towards improper planning, confusion among management, and inadequate support to management, lack of full implementation, etc. based on the findings of honarpour et al. (2017), knowledge management and tqm are positively associated with each other, improvement in one construct leads to improvement in other construct finding of ooi (2014) revealed that tqm practices such as hrm and strategic planning have significant impact on knowledge management like knowledge acquiring, sharing and its application. company resources are combination of tangible and intangible resources and absence or weak support results into low quality and low productivity. with respect to financial resources, it has its own importance and without proper support and availability of financial resources, tangible and intangible assets both are being affected by the same. mosadeghrad (2014) paper reports the findings that inadequate resources are one of the major reasons of failure of implementation of temin, the era of fast growing technology, biggest challenge to organizations is change management. commitment and will of the leader to change the culture and mind set of people by providing them guidelines is the need of the present era. the change can be welcomed by employees through development of culture of accepting change from the leadership (van rossum et al. 2016) and communicating the benefits this change will bring along with it. silva et al. (2014) asserted that tqm culture has direct influence on process improvement. jaeger and adair (2016) study reveals the perceived benefits of tqm when deploy in true spirit. iqbal and asrar-ul-haq (2018) measured the mediating role of change readiness of employees between tqm and employees‟ performances. tqm is a vision and that can only be achieved by developing and implementing qualitative long and short-term plans that finally meet the company objectives. successful implementation of quality management systems demand clarity in vision followed by plans in a consistent manner till the objectives are accomplished (kumar et al. 2018). confrontational environment of an organization results into the lack of trust among management and workers of an organization. prevailing distrust deteriorates any system to perform. in this regard, bugdol (2013) has proposed three methods of trust development in tqm context namely: applying the key elements of tqm, consider the value systems of the organization and applying trust. training and education with respect to the tqm is actually different from traditional types of trainings. traditional types of trainings are based on specific topics. on the other hand, trainings required for tqm are based on philosophy of continual improvement. empirical evidence provides the evidence of a decline in tqm because of many tools; methods and practices are not incorporated into the automated tqm systems (bernardino et al., 2016). it further probes the reasons that adequate trainings are no longer prevalent which has stopped circulating the tqm practices. for implementation of tqm, there is need to engage the entire workforce supported with organizational operations to achieve high process quality. proper system to initiate the tqm activities ensures the engagement of workforce which begets the quality results. to speed up the performance and to establish transparency, benchmarking has been proved to be a strategic tool to find gaps for an organization (braadbaart, 2007). to achieve this purpose a performance quality management system must be developed which ensures the quality performance is measured against the set standard and take further necessary action if deviates. sweis et al. (2016) reveal that leadership and top management commitment play a pivotal role towards performance improvement by benchmarking of tqm practices. to get supreme advantages from tqm, there is need to allocate reasonable and required budget for up gradation of system as well as human resource. investing in staff to develop their skills and hands on with the requirements of tqm system is indispensable to get explicit benefits of tqm implementation. jaeger and adair (2016) based on their study of perception of tqm benefits, practices and obstacles in kuwait, derived the result that lack of resources is the most important obstacle in tqm implementation. without specific and targeted objectives, training designed for tqm or any other area results into wastage of time and money. similarly, in developing countries, consultancies and trainings for some advanced tqm practices cost very high. khanna and gupta (2014) have developed a competency-based training module that comprises of 15 competencies for the success of 5„s‟ and tqm implementation. fair performance measurement criteria, reward and recognition have always been proved a strong tool to motivate company employees for better performance. reward system enhances the effectiveness of tqm (allen and kilmann, 2001). in connection to this, it is also evident that perceiving fair incentive and reward system encourages employees to put extra effort in success of implementing review of economics and development studies vol. 5, no 3, 2019 534 tqm practices (haffar et al., 2016). barriers between departments result into the slowing down of sharing of information and finally delays in production process. in this context, team plays a pivotal role and teamwork is the most influential tqm practice and it has a significant impact on organization performance (qasrawi et al. 2017). they have also found that, comparing any other tqm practices, teamwork more positively influenced knowledge acquisition and knowledge sharing. in addition to this there is strong relationship among knowledge sharing and quality management (hamdounet et al. 2018). tqm practices can only be successful, if the organization is able to develop an initial impression of perceived worth in the mind of its employees. therefore, tqm should perceive the practices of continuous improvement and learning that fosters the development which requires accumulation of organizational capabilities through its employees (garcia-sabater et al. (2016) is also pertinent to mention here that csr should be embedded in the mind of the employees as it is significantly connected with the quality management and in turn it has a positive relationship with the business performance. same constructs have also been investigated and the findings revealed that the implementation of tqm and csr influence the hotel industry in spain (benavides-velasco et al. 2014). flexible environment gives the opportunity of discussion and sharing of ideas which leads to clarity in organization vision and strategic goals. on the other hand, organizations having bureaucratic management style and tight control of management over employees, suppresses the creative abilities of employee resulting into tough environment. enhancing employees‟ autonomy and encourage them to share their opinion is extremely important for innovation and improved quality performance (hung et al. 2011). tqm leaders believe that value addition in process is everyone‟s responsibility which cannot be achieved in screwed environment (kumar & sharma, 2017). modern technology has brought robust change in the manufacturing process resulting into robust increase in production process. even latest technology has become the competitive advantage of 21st century organizations. ferdousi et al. (2018) have found a positive relationship of information technology (it) with tqm adoption. study further reveals that developing it infrastructure ensures the quality products and services which leads to competitive advantage of the organization. new technology deployment reduces the cost of production with better quality product (junior et al. 2014). another findings revealed that technology transfer alone cannot improve the quality performance unless the deployment of tqm (bolatan et al. 2016). above representation of literature clearly underpins twenty challenges are critical to tqm (table 1). table 1: list of tqm challenges influencing factors 1 inadequate knowledge of tqm 2 lack of guiding framework for tqm 3 inability to change organizational culture 4 lack of formalized strategic plan for change 5 lack of continuous training and education 6 resistance to change 7 lack of evaluation procedures and benchmark indices 8 lack of reward and recognition 9 lack of support 10 bureaucratic organizational structure 11 obsolete technology 12 coordination barriers among departments 13 lack of top management commitment 14 lack of effective measurement criteria 15 lack of leadership 16 lack of employee trust in senior management 17 lack of consistency of purpose 18 training with no purpose 19 lack of customer focus 20 lack of resources review of economics and development studies vol. 5, no 3, 2019 535 3. methodology it is an exploratory study that follows qualitative paradigm of research. it used classical methodology of interpretive structural modeling (ism) in combination with matriced' impacts croise's multiplication appliquée a un classement (micmac) analysis as methodological choice. primary data has been collected from a homogeneous medium sized panel of experts from readymade garments industry of pakistan. the panel comprised of sixteen experts having experience of more than ten years concerning the implementation of tqm practices. the data was collected according to classical procedure used in ism studies. standard procedure of ism and micmac was applied and ism model (figure 1) and driving-dependence diagram (figure 2) have been prepared. figure 1: ism model ism model (figure 1) shows that lack of employee trust in senior management is the most significant factor since it occupies bottom level. it should attract maximum attention of the management to implement tqm practices. this is a challenge that has powerful effect on other counterparts. lack of guiding framework for tqm, lack of support and coordination barriers among departments have lesser severity than that of level-1 but still have moderate severe effect on other levels. challenges like: lack of effective measurement criteria, lack of consistency of purpose, resistance to change, obsolete technology, lack of evaluation procedures and benchmark indices and lack of resources have fairly moderate linking role. whereas all other factors fall on top level and are necessarily less severe as compare to lower levels. 3.1 micmac analysis micmac is analysis of driving and dependence power of the factors. driving power has been plotted on the continuum of y-axis (i.e. weak to strong) whereas dependence is plotted on x-axis (i.e. weak to strong). micmac analysis has been divided into four quadrants (i.e. autonomous, independent, linkage and dependent). the factors have therefore been shown on the co-ordinates of driving and dependence to strike classification and relevant quadrant. review of economics and development studies vol. 5, no 3, 2019 536 figure 2: driving-dependence diagram autonomous: these factors are relatively disconnected from the system. barrier 17 falls in the first quadrant representing autonomous which has weak dependence and weak driving power. independent: these factors have high driving power and weak dependence. there are two factors i.e. 7 and 11 fall in second quadrant representing independent. linkage: these factors are linking factors in the model. they have high dependence and high driving power and they are relatively unstable and change in these factors causes corresponding change in other factors as well as a feedback change in them-selves. this quadrant contains: 1, 2, 3, 4, 5, 6 8, 9, 10, 12, 13, 14, 15, 16, 18, 19 and 20. dependent: these factors have high dependence but low driving power. in figure 2 there is no such factor appearing in quadrant namely dependent. that necessarily means, there is no clear cut dependent factor, however, factors 5, 9, 14 and 20 have high dependence power but since they also have high driving power as well therefore appear in linkage quadrant. 4. discussion and conclusion ism model provides the hierarchy of the factors which need to be analyzed. lot of research has been surpassed on identification and hierarchicalization of barriers in implementation of tqm practices using ism. the barriers which have not been addressed previously and incorporated in this study are: inadequate knowledge of tqm, lack of continuous training and education, lack of support, bureaucratic organizational structure, obsolete technology, lack of employee trust in senior management, lack of consistency of purpose and training with no purpose. previous studies (table 2) conclude that lack of top management commitment is the most critical barrier in implementation of tqm practices in diverse organizations that urges much attention of the tqm practitioners to underpin this issue. however, in this study, the ism model ranks lack of employees trust in senior management as the most crucial factor in implementation of tqm practices in readymade garment industry of pakistan. table 2: comparison of results with previous studies research studies focus of study technique applied number of factors findings of the study study in hand challenges faced by tqm practitioners in readymade garment industry of pakistan to implement tqm practices ism 20 lack of employee trust in senior management muruganantham et al. (2018) barriers to implement tqm practices in automotive sector of india ism 21 lack of top management commitment review of economics and development studies vol. 5, no 3, 2019 537 veltmeyer & mohamed (2015) structural inter-relationships among tqm variables ism 16 top management commitment mehta et al. (2014) tqm implementation in engineering education in india ism 13 quality mission and vision statement talib et al. (2011a) tqm practices in service sector in india ism 17 top management commitment talib et al. (2011b) barriers to tqm implementation ism 12 lack of top management commitment tqm has become very important factor which can dictate the fate of the organizations in today‟s complex world. the aim of this study is to investigate the challenges faced by implementers of tqm practices in real world particularly that of readymade garment industry of pakistan. the study is envisaged on thorough review of literature and ism method in combination with micmac analysis. findings of the study revealed that lack of employee trust in senior management is the most critical challenge to be addressed that occupies bottom of the model. lack of formalized strategic plan for change and lack of leadership occupy highest position in the model hence attracts least attention. all other factors lie in between bottom and the top having different vitality on the continuum of preference. micmac analysis revealed that lack of consistency of purpose is autonomous, lack of evaluation procedures and benchmark indices and obsolete technology are independent and all other challenges fall in linking quadrant. whereas no such challenge is exclusively categorized as dependent, however, most of the linking factors have high degree of dependence as well. results of the study are very much aligned to the results of the previous studies including: talib et al. (2011b) wherein the focus of study was barriers of tqm implementation and muruganantham et al. (2018) wherein focus of study was barriers of tqm practice in the automotive sector. the study has contributed an ism model towards the body of knowledge. it also contributed valuable insight by way of uncovering the direct and indirect relations among different factors of tqm and classifying them on the basis of driving and dependence power. it is useful for management of the companies, tqm managers and policy makers of quality management. this empirical investigation will help individuals and firms associated with readymade garments and textile industry to set priorities in tqm. as a way forward, if tqm challenges are addressed and properly implemented can ensure management to successfully implement tqm practices. moreover, tqm implementation will bring a sound contribution to the readymade garment industry of pakistan. this study is subject to limitation like data collection from one city of pakistan that represented a particular segment. therefore, it would be worth examining to the other sectors with the same setting to strengthen the generalizability of the findings. the study can act as a catalyst for future researchers and future research could employ longitudinal design to comprehend the change in perceived challenging factors in implementation of successful tqm practices in readymade garment industry. references allen, r. s., & kilmann, r. h. 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(2017). investigation into the hierarchical nature of tqm variables using structural modeling. international journal of quality & reliability management, 34(4), 462-477. review of economics and development studies, vol. 7 (1) 2021, 77-90 77 employment diversification patterns in pakistan: empirical assessment revisited nazia nasir a , fouzia yasmin b , noreen safdar c a research scholar, department of economics, the women university multan, pakistan email: nazianasir38@gmail.com b lecturer, department of economics, university of sahiwal, pakistan email: fouziayasmin@uosahiwal.edu.pk c assistant professor, department of economics, the women university multan, pakistan email: noreen.safdar@wum.edu.pk article details abstract history: accepted 15 march 2021 available online 31 march 2021 employment diversification depicts a dynamic socio-economic process where domestic workers widen the range of employment sources. whereas, the prospect is usually based on a mix of part-time and fulltime employment. employment decisions significantly derive from the economic incentives such as wage differentials and the growth rates in different sub-sectors of economic activity. research at hand summarizes and analyses employment diversification patterns in pakistan and the motives behind the labor shift. time series data has been collected from various sources for 1990-2018. the seemingly unrelated regression model has been applied for empirical estimations. the current analysis of employment pattern diversification concluded that part-time and fulltime wages rates have a significant impact on the part and full-time employment in different sub-sectors of economic growth. variation in wage rates in one sub-sector varies the employment level in different sectors. the estimates elaborated the significant rise in part-time employment these sub-sectors. moreover, the dynamic interrelation between part-time and full-time employment is examined in the agriculture, construction, electricity, manufacturing, wholesale and retail trade, transport, storage and communication. these estimates show the quick adjustment of part-time employment within and across the sectors. policies are needed to enhance labor mobility as one wants to diversify the employment one can do it to enhance the economic productivity. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: employment diversification, seemingly unrelated model, fulltime, part-time, sub-sectors jel classification: j01, j18 doi: 10.47067/reads.v7i1.323 corresponding author’s email address: fouziayasmin@uosahiwal.edu.pk 1. introduction the arrangement of employment in any economy involves many social and economic aspects. these employment patterns are expected to transfer relatively towards the industry and service away review of economics and development studies, vol. 7 (1) 2021, 77-90 78 from the basic agriculture economy. previous decades illustrate some diversification of employment towards the non-agricultural sector in pakistan (mottaleb & ali, 2018). both macro and micro-level indicators and the proportion of non-agricultural employment influence the decision of adopting a particular kind of employment (unay-gailhard & bojnec, 2019). the diversification of economic activities can occur from a process of investment and the surplus generated from agriculture and nonagriculture employment. the occupational choice consists of several inter-related decisions (su et al., 2018). the choice to participate in economic activity may involve many activities to undertake and the nature of the economic activities, e.g. agricultural/non-agricultural, self/wage employment, fulltime/part-time employment (shaheen et al., 2015). to elaborate, the basic choice of whether to participate in economic activity consists of two additional dimensions. the individual chooses the nature of the economic activity agricultural or non-agricultural. further, he chooses whether to specialize in one economic activity or diversify intomore than one economic activity (khan et & chaudhry, 2019 & wang & sun ,2017). when an agriculture economy diversifies, the workers may rise in status either as self-employed workers when the worker shifting from one lower-paid occupation to another high paid occupation while vice versa indicates the distress. moreover, occupational choice and employment diversification are complex to identify (buchenrieder and mollers, 2006). economic growth is highly determined by the employment level meaning that the economy is producing more valuable products and services that was not the case before the industrial revolution where the workers had no diversification choices and mainly contribute to meat, textile, and grains (elewa & ezzat, 2019). labour allocation decisions are driven by economic incentives such as wage differentials, but also non-economic motives may play a decisive role. research at hand summarizes theoretical insight along with presents incorporated conceptual constructions reflecting the working activities diversification, and labor shift (chaplin et al. 2007). möllers (2006) employment diversification is described as a dynamic socio-economic process in which domestic workers widen the range of employment sources in their portfolio. such diversified prospect is usually based on a mix of farm and non-farm employment. working activities diversification leads to an augmentation in the number and mix of employment sources. thus, working activities diversification rise with the number of employment source, the equity of their allocation, and their differences. mishra and goodwin (1997) deal specifically with this feature that motivates domestics to become accustomed to their paid work strategies. more commonly, the suffering and demand-pull move toward allocation, with distinguishing two major inspirations of employment diversification; depends on the precise mechanism that, people may be short of diversification by adverse circumstances or pulled by the opportunity in the market of labor and high wage rate in non-farming sectors. the labor market institutions and the policies are considered as the desired mechanism to stimulate employment generation (westerhuis and henrekson, 2016). whereas the low level of employment indicates the underutilization of the economic resources and it illustrates the space for labor absorption (dorn & hanson, 2019). furthermore, the high standard of living is associated with the stable employment level that comes from the opportunities that exist in the country and from the diversification of the employment opportunities (nelen et al., 2013). hence, the flexibility in the labor market results in growth led the diversification of employment pattern in the workforce (garcia, 2016; anxo et al.,2007). tansel & acar (2017) examined the impact of labor mobility and economic globalization that is also investigated for pakistan by (shah & soomro, 2017) as well including inclusive growth. this research reconsiders the employment diversification pattern in different sub-sectors contributing to the growth of pakistan (anwer, 2017). in the agricultural sector modification of crops review of economics and development studies, vol. 7 (1) 2021, 77-90 79 from low to high value and labor-intensive crops can provide a better source of income to the farmers (abro et al., 2010). the trade sector showed that export diversification switching from low-value-added products to high-value products increased pakistan's growth performance (khan et al., 2018). similarly, the service sector contributes around 54 percent to national output as being the major employment-providing sector (amir, 2015; siddiqui et al., 2010). the labor demand can generate increased geographic and industrial mobility of the labor force (lilien, 1982; solon, 1982) coupled with significant costs of information and mobility, these shifts can generate fluctuations in equilibrium employment that are not directly related to fluctuations in aggregate demand. furthermore, the geographic distribution of employment may be an indication of more fundamental, permanent changes in the composition of labor demand within areas (imran & arshad, 2017). several recent studies have noted that the maintenance and continuous adaptation to diverse employment activities (ellis, 1998, 2000; barrett et al, 2001; reardon et al, 2001; lanjouw and lanjouw, 2001; bhaumik, 2007). various theories are describing the behavior of employment diversification during cyclical variations (treadway, 1969). the specific industrial employment diversification is claimed by (buchenrieder et al. 2004). jouili and khemissi (2019) estimates the impact of graduated employment on the economic diversification in saudi arabia and come up with the conclusion that employment diversification had a positive impact on graduated students for their job creation. (xiao et al., 2018; batool & jamil, 2019) examined the drivers of industrial diversification. dey (2018) explained that employment diversification reduces the poverty among the small and marginal landholders that further explained by mukhtar et al., (2018) by accommodating the impact of rural-urban migration on employment quality and household welfare. jan et al., (2012) explained the drivers of rural employment diversification in the north region of pakistan and the globalization was concluded as the significant factor for economic growth, provides equal opportunities to all the nation and the basis to diversify the choice of work for inclusive growth of a country. borah (2018) elaborated on the structure of non-farm employment and identify the trend of workers moved from farm to non-farm sector and increased workforce of women due to rise in education moved them to work from primary to other sectors. the impact of education on employment diversification was studied by reddy (2016) that showed education, employment, and expected wages affect the employment pattern in india and the similar findings are elaborated in pakistan by (rahman et al., 2018). senadza (2012) had analyzed the effect of non-farm employment diversification on the income of rural people of ghana and come up with that wage employment and non-farm employment positively affect the income. many empirical studies elaborated the employment diversification pattern from the primary sector to the non-farm secondary sector and lead to the growth-led diversification. therefore, the employment diversification depicts a dynamic socio-economic practice where native workers are provided with the diverse range of employment opportunities. employment decisions significantly derive from the economic incentives such as wage differentials and the growth rates in different sub-sectors of economic activity. so, the analysis ahead will focus on the prospects of labor shift as a mix of part-time and full-time employment and employment diversification patterns in pakistan. 2. data and methodology research at hand used annual time series data of 1990-2018 for employment rate, real wage rate, gdp growth rate, and labor participation rate of six sub-sectors e.g. agriculture, construction, manufacturing, trade, and wholesale, electricity and gas distribution, and transport, storage and communication. the analysis has been done by using the most appropriate approaches ols and sur (seemingly unrelated regression) model that also bridges the gap of the previous methodologies used in review of economics and development studies, vol. 7 (1) 2021, 77-90 80 literature. the current analysis of the employment diversification pattern in pakistan used the sectoral employment (full-time and part-time employment) as the regressand that is followed by the list of control variables e.g. wage rate and sectoral growth. 3. model specification 3.1 theoretical model specification this section incorporates the key details of the theoretical and the empirical model specification. sur (seemingly unrelated regression) or sure (seemingly unrelated regression equation) proposed by (zellner, 1962) consists of various linear regression equations having their dependent variable and different sets of explanatory variables. the linear regression model for observation can be expressed as: in matrix form, the sur model is expressed as: the above model shows that the error term has a zero mean and homoscedastic relation among the variables. but across equations, it correlates as follows: in this scenario, the error term assumes the following conditions: i. mean of : ii. variance of iii. co-variance of across equations iv. overall variance-covariance matrix: however, the estimation of the sur model consists of two stages: in the first stage, each equation of the system is estimated by regressing using ols. this obtains the estimator with a separate residual term. these terms are used to compute which operates in the next stage: in the second stage, the computed value of is substituted into of the gls estimator , which considers an optimal estimator from that estimator, yield by ols consistent estimators of each equation. the gls estimator and its variance can be expressed as: by putting values, we get review of economics and development studies, vol. 7 (1) 2021, 77-90 81 from the above gls estimator, we acquire a sur estimator for the model, which is given below: the sur model proceeds when linear equations are correlated only through their error terms. its parametric estimate differs from one equation to another, but the fluctuation in repressors depends on the nature of the model. 3.2 empirical model specification the empirical model of employment pattern diversification incorporates the following details: wage rate and share of gdp of each sub-sector are the control variables and employment (the dependent variable of each sub-sector) has two-dimension i.e. part-time and full-time employment. this model used the two time-lagged wage rates and one lagged employment rate. full-time employment is denoted by and part-time employment by where the parttime and full-time wages, the share of gdp are donated by , , respectively. model 1: employment in the agriculture sector = + + + + (1) = + + + + + (2) model 2: employment in the manufacturing sector = + + + + + (3) = + + + + + (4) model 3: employment in construction sector + + + + + (5) + + + + + (6) model 4: employment in wholesale and retail trade sector + + + + + (7) + + + + + (8) model 5: employment in electricity and gas distribution sector = + + + + + (9) = + + + + + (10) model 6: employment in transport, storage and communication sector = + + + + + (11) = + + + + + (12) review of economics and development studies, vol. 7 (1) 2021, 77-90 82 table 1: descriptive analysis of the data by sectors agriculture electricity and gas distribution manufacturing construction wholesale and retail trade transport, storage and communication mean std. dev. mean std.dev. mean std.dev mean std.dev mean std.dev mean std.dev 3.547 3.660 2.829 0.918 15.686 2.121 2.859 0.767 17.353 1.100 11.145 1.397 22.907 2.294 4.305 20.141 5.300 3.980 3.632 8.311 4.070 2.859 4.111 1.977 807.083 606.644 7.452 6.128 180.488 160.243 54.428 49.044 47.246 40.366 1.011 0.695 4.912 0.309 0.053 0.103 79454.35 0 54916.39 0 69892.40 0 53655.51 0 65883.62 0 44196.16 0 93465.06 0 63858.43 0 46083.10 0 29723.10 0 147658.90 0 117967.20 0 0.579 0.113 0.349 0.075 0.322 0.133 0.090 0.039 9.267 1.147 0.416 0.120 4.828 0.339 3.282 0.389 2.979 0.254 1.197 0.472 source: estimation by the author using stata 14.1 review of economics and development studies, vol. 7 (1) 2021, 77-90 83 table 2: correlation of employment by sectors (full time and part-time) source: estimation by the author using stata 14.1 agriculture agr ash ftae ptae ftaw ash 0.233 ftae 0.093 0.752 ptae 0.185 0.180 -0.032 ftaw -0.237 -0.831 -0.494 -0.287 ptaw -0.237 -0.810 -0.594 -0.281 0.906 construction cgr csh ftce ptce ftcw csh -0.014 ftce 0.022 0.203 ptce 0.236 0.205 -0.344 ftcw 0.031 -0.317 0.717 -0.454 ptcw -0.017 -0.403 0.604 -0.435 0.972 electricity and gas egr esh ftele ptele ftelw esh 0.246 ftele 0.129 0.644 ptele -0.050 -0.188 -0.468 ftelw 0.027 -0.795 -0.663 0.230 ptelw 0.037 -0.793 -0.658 0.240 0.997 manufacturing mgr msh ftme ptme ftmw msh 0.466 ftme 0.281 -0.255 ptme 0.225 -0.112 0.720 ftmw -0.364 -0.760 0.345 0.082 ptmw -0.335 -0.771 0.362 0.124 0.975 transport tgr tsh ftte ptte fttw tsh -0.029 ftte 0.358 -0.337 ptte 0.368 -0.384 0.581 fttw -0.175 0.794 -0.560 -0.654 pttw -0.173 0.652 -0.071 -0.315 0.722 wholesale and retail trade wgr wsh ftwe ptwe ftww wsh 0.359 ftwe -0.051 0.008 ptwe 0.055 -0.478 -0.106 ftww 0.026 0.606 0.257 -0.638 ptww -0.033 0.429 0.329 -0.577 0.844 review of economics and development studies, vol. 7 (1) 2021, 77-90 84 4. empirical analysis table 3 shows that the first lag of wage has a negative and significant impact on full-time employment in the agricultural sector. as it is observed that wages play the most significant role in determining employment. if one is paid more he will be more motivated towards work and it enhances the productivity level (jan et al., 2012). the second lag of wages has a positive and significant impact on full-time employment in the agricultural sector with the probability of 0.0001 units. as most of the studies reveal that if the wages rise the workers who are sitting idle at home will prefer to do jobs (qureshi & ghani, 1989; card & krueger, 1992). part-time wages both the included lags have not a significant impact on agricultural employment due to the limited resources of rural areas. it is observed that most of the people especially women participation in rural employment gives them too much low reward in the form of pay (jan et al., 2012). full-time and part-time agricultural employment changes when wages changes (ghilarducci, 2018). lack of infrastructure, modern technology, and low level of education are the main factors for the low productivity and employment diversification (batool & jamil, 2019). review of economics and development studies, vol. 7 (1) 2021, 77-90 85 table 3: empirical estimates using sur of full time employment diversification variables agriculture construction electricity manufacturi ng wholesale and retail trade transport, storage, and communicatio n coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) full time wage (-1) -39.336 (0.008) 0.308 (0.073) 0.002 (0.009) 0.532 (0.025) 0.722 (0.005) 0.001 (0.013) full time wage (-2) 40.493 (0.000) -0.217 (0.006) -4.2137 (0.018) 1.16e-06 (0.736) -1.165 (0.000) -0.000 (0.029) part time wage (-1) 2.12e-05 (0.970) -0.003 (0.566) 12.064 (0.001) 1.76e-06 (0.488) 0.755 (0.029) 0.001 (0.037) part time wage (-2) -0.000 (0.722) 0.003 (0.551) -8.255 (0.000) -0.967 (0.000) -1.303 (0.001) -0.001 (0.020) full time employment (-1) 0.742 (0.000) 0.503 (0.053) 0.000 (0.267) 0.001 (0.007) 0.000 (0.895) 0.000 (0.183) part time employment (-1) 0.132 (0.773) -0.302 (0.703) 0.001 (0.017) -0.001 (0.000) -0.225 (0.728) 5.786 (0.054) growth rate -0.428 (0.004) 0.002 (0.754) -0.003 (0.005) 0.527 (0.027) -0.000 (0.972) 0.008 (0.877) c 1.683 (0.624) 1.531 (0.059) 0.221 (0.077) -0.000 (0.884) 1.746 (0.008) 0.225 (0.619) source: estimation by the author using stata 14.1. review of economics and development studies, vol. 7 (1) 2021, 77-90 86 table 4: empirical estimates using sur of part-time employment diversification variables agriculture construction electricity manufacturing wholesale and retail trade transport, storage, and communication coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) full time wage (-1) 0.308 (0.073) -5.19e-07 (0.055) -5.19e-07 (0.055) 0.107 (0.246) 0.203 (0.053) 0.002 (0.074) full time wage (-2) -0.217 (0.006) 5.459 (0.000) 5.459 (0.000) -5.32e-06 (0.045) -7.44e-07 (0.798) -0.002 (0.022) part time wage (-1) 0.603 (0.087) -0.000 (0.857) -0.000 (0.857) 1.59e-06 (0.475) -7.89e-07 (0.817) -4.732 (0.028) part time wage (-2) -0.341 (0.077) -0.000 (0.566) -0.000 (0.566) 0.001 (0.095) -14.054 (0.183) 8.832 (0.013) full time employment (-1) -0.306 (0.096) 0.115 (0.068) 0.115 (0.068) 0.764 (0.000) -0.662 (0.081) -7.219 (0.019) part time employment (-1) 0.315 (0.080) 27.194 (0.000) 27.194 (0.000) -0.879 (0.000) 0.304 (0.244) 4.820 (0.034) growth rate 0.009 (0.640) 0.001 (0.250) 0.001 (0.250) -0.000 (0.861) -9.53e-05 (0.988) -2.727 (0.085) c 3.871747 (0.035) 0.505 (0.011) 0.505 (0.011) -0.006 (0.985) -0.244 (0.309) -0.005 (0.974) source: estimation by the author using stata 14.1 review of economics and development studies, vol. 7 (1) 2021, 77-90 87 the first lag wages have a positive and significant impact on full-time employment in the construction sector. the construction sector and construction activities are considered as one of the major sources of income (qureshi & ghani, 1989 ; ghilarducci, 2018 ; philips, 1958). part-time one and two time-lagged wages have a significant impact on construction employment because people prefer part-time jobs due to the high wage rate per hour which results in decline in parttime labor demand (houseman & osawa, 1995). construction plays an important role in uplift economic development and growth it is regarded as a mechanism to generate employment opportunities for millions of unskilled, semi-skilled, and skilled labor forces. therefore, the impact of construction employment on growth is not significant due to economic and political disturbance. in the electricity and gas distribution sector the wages have a positive and significant impact on previous full and part-time electricity employment. electricity reform programs included privatization of state-owned enterprises played a very important role in economic development. the labor force working in electricity sectors especially in private companies get more employment benefit. therefore, electricity sectors play a vital role in economic development (qudrat-ullah, 2015 ; joskow, 2006). one lag wages have a positive and statistically significant impact on part-time and full-time employment in the manufacturing sector. manufacturing is the third-largest sector of pakistan most of the labor force got employment in this sector. one time lag wages have not significant impact while the second lag of wages has a significant impact on employment in the manufacturing sector. on the other hand, part-time second lag of wages has a positive and statically significant impact on employment (sheikh et al.,1992). the lag wages have a positive and significant impact on full-time and parttime employment in the wholesale and retail sector. two-time period lagged wages have not significant of the part-time employees in the wholesale and retail sector as found by (ahmed et al., 2012). the transport, storage, and communication sector of pakistan play an important role in economic development and it is also important for improving the competitiveness of the country’s export. full-time and part-time transport sector employment has a positive and significant impact. both the one and two-time lag wages of full time and part-time have also a positive impact on employment. sustainable economic development is dependent on the low-cost transport and logistic sector. modernizing the transport sector through the continuous process of reform supported by focused investment in all of its sub-sectors. but due to political instability and disturbance in internal economic affairs transport sector becomes stagnant toward economic growth (ahmed & ahsan, 2011). 5. conclusion and policy recommendation the current analysis of employment pattern diversification concluded that part-time and full-time wages rates have a significant impact on the part and full-time employment in different sub-sectors of economic growth. variation in wage rates in one sub-sector varies the employment level in different sectors. workers switch from one employment sector to another sector. parttime employment switching reduces the cost involved as well for employer’s searches for seasonal demand of labor. it forecasts the quick adjustment for part-time labor instead of full-time labor, which notices fewer wages and discards from social assistance. this low-income labor helps sectors to maximize their profits as well as minimize their production costs. the estimates are relative to overall employment elaborate the significant rise in part-time work like construction, wholesale and retail trade, transport sectors. these estimates show the quick adjustment of parttime employment within and across the sectors. moreover, the dynamic interrelation between part-time and full-time employment is examined in the construction, manufacturing wholesale and retail trade, and transport divisions. based on these estimates, the outcome is that part-time employment acts as a challenging variable concerning full-time employment, due to its availability review of economics and development studies, vol. 7 (1) 2021, 77-90 88 on simple and manageable conditions in sectors. employment needs to enhance the percentage of employment ratio with the growth ratio of the workforce. policies are needed to lower the cost associated with the employment switch. policies are needed to enhance labor mobility as one wants to diversify the employment one can do it to enhance the economic productivity. the government may revise the policies for part-time workers by introducing the minimum wage based on work hours that may protect the rights of the workforce as per their production activity. references abro, a., & sadaqat, m. 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(1962). an efficient method of estimating seemingly unrelated regressions and tests for aggregation bias. journal of the american statistical association, 57(298), 348-368. review of economics and development studies, vol. 7 (1) 2021, 37-50 37 fiscal impacts of demographic transition in pakistan taqi raza a , nabila asghar b , farhat rasul c a phd scholar, pakistan institute of development economics (pide), islamabad, pakistan email: taqi.pide@gmail.com b assistant professor, department of economics and business administration, division of arts and social sciences, university of education lahore, pakistan email: nabeela.asghar@ue.edu.pk c assistant professor, school of business and economics, university of management and technology, lahore, pakistan email: fahat.rasul@umt.edu.pk article details abstract history: accepted 05 march 2021 available online 31 march 2021 this study has examined the fiscal impacts of the demographic transition. declining fertility rate and increasing life expectancy rate are expected to cause ageing in pakistan. the population projections of united nation’s world population prospects were used, for projecting the labour force, which uses different scenarios to project population namely low variant, medium variant and high variant scenario. the study found that projected labour force is expected to decline under the medium variant scenario. the study examined the impact of expected decline in labour force on output growth of pakistan using growth accounting technique, and found that under medium variant scenario, pakistan is expected to face a loss of 4% of gdp at the end of this century. on the expenditure side, this study attempted to measure the impact of demographic transition on pension expenditures. due to the increase in the proportion of the dependent population pension expenditures are expected to rise from 1.2% of gdp in 2015 to 3.5% of gdp by the end of the century. due to the increase in old-age dependency ratio and hike in pension expenditures of pakistan pay-asyou-go pension system is expected to become fiscally unsustainable as fewer workers would be bearing the burden of aged population. this fact advocates transition from pay-as-you-go pension system to fully funded pension system. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: demographic transition, labour force, pension expenditures, and growth accounting jel classification: j11, j21, h55, r11 doi: 10.47067/reads.v7i1.320 corresponding author’s email address: taqi.pide@gmail.com 1. introduction research based on the issues related to demographic transition gained importance in developed countries, such as japan, korea and most of the european union countries, when they started facing the transition (pestieau, et al., 2008; galasso & profeta, 2004). learning from their experience developing review of economics and development studies, vol. 7 (1) 2021, 37-50 38 countries should also start putting efforts to tackle the issues relating to demographic transition before it becomes very difficult to manage effectively. like most of the developing countries pakistan too has a youth bulge also known as the potential demographic dividend, which refers to a process where rate of population growth in working ages is higher than the growth rate of total population. due to higher life expectancy rates, after a certain period of time, this bulge is going to enter into unproductive ages, which will put added economic burden on the society if not managed properly (durr-e-nayab, 2008). demographic structure changes due to mainly two reasons; low fertility rate and increasing life expectancy rate. due to lower fertility rates, the number of children born each year decreases and in the long run this ultimately reduces the workforce. two of the main reasons of lower fertility rates are women’s involvement in education and their increasing participation in the workforce (orubuloye, 1991). as the policy makers would like to increase both factors in future so fertility rates are expected to decrease. lower fertility rates are also due to success of the family planning schemes. according to the united nation’s world population prospects (nations, 2015) average fertility rate for pakistan in 20102015 decreased to 3.72 from 6.60 in 1950-1955 and is projected to reduce further to 1.83 in 2095-2100. the second reason for population ageing is rising life expectancy rates due to better health facilities. and as we all want to improve it further, the population is going to get older. according to nations (2015) average life expectancy rate for pakistan in 2010-2015 increased to 65.88 from 37.07 in 1950-1955 and is projected to rise further to 79.04 in 2095-2100. these statistics indicate the forthcoming transition in the population structure of pakistan. ageing population causes increase in old-age dependency ratio i.e. ratio between population aged 60+ and population between 15 & 60. increase in this ratio means that share of dependent population (aged 60+) increases i.e. there are fewer people who will have to take responsibility of the aged population. according to the nations (2015) old-age dependency ratio for pakistan is expected to increase in 2095-2100 to 31.8 from 7.4 in 2010-2015. this increase will test policymaking and put pressure on the government resource bodies regarding financing of social security schemes for these elderly people. financing pension expenditures comes directly under fiscal policy heads. fiscal expenditures such as pension expenditures are directly affected by demographic changes. this study will try to quantify the implications of population ageing on these pension expenditures. other than old-age dependency ratio, another way of showing the demographic structure is through population pyramid, also known as age-sex pyramid. dividing population into different age segments can give us a clear picture of country’s population entering and exiting the working force (kitao, 2015). review of economics and development studies, vol. 7 (1) 2021, 37-50 39 figure 1: population pyramids of pakistan; age-sex structure in 2015 source: un’s world population prospect 2015 figure 2: population pyramids of pakistan; expected age-sex structure in 2100 source: un’s world population prospect 2015 figure 1 shows the age-sex structure of population of pakistan. from figure 1 we can see that working age population is in higher proportion than the non-working age population in 2015. this represents a positive sign for the pakistan’s economy to utilize this potential youth bulge for the betterment of future. if this opportunity is not utilized properly we will face a different situation as presented in figure 2. the figure explains that in 2100 we will have higher proportion of population in non-working age which will burden the economy and put fiscal pressure on the government. as demographic transition is expected to happen, it is important to study and investigate its possible economic consequences ageing of population can cause fiscal imbalances from both revenue and expenditure sides (yoon, et al., 2014). the loss in revenues can be examined through measuring loss in the gdp. there are theories that regard increasing population as a burden, while there are also theories that regard shrinking population as a threat to economic growth. a more moderate view, 15% 10% 5% 0% 5% 10% 15% 0-4 10-14 20-24 30-34 40-44 50-54 60-64 70-74 80-84 90-94 100+ male% female% 8% 6% 4% 2% 0% 2% 4% 6% 8% 0-4 10-14 20-24 30-34 40-44 50-54 60-64 70-74 80-84 90-94 100+ female % male % review of economics and development studies, vol. 7 (1) 2021, 37-50 40 however, is that it is not the number but the structure of population that really matters. ageing of population means more people will enter into non-working class compared to working class. gdp may not be directly affected by ageing but the size of working class in a country is a determinant of its gdp. it affects the national output according to the solow growth model (solow, 1956). in the solow growth model, at steady state, long term output is directly proportional to population or labour-force growth rate. so it becomes important to quantify the long term cost in terms of loss in gdp due to ageing. on the expenditure side, this study focuses on the pension expenditures of pakistan as these expenditures are more likely to be affected when the transition takes place. in most of the countries, including pakistan, pension system is controlled by the government in which currently working population is taxed to pay for the pensions of retirees. this system is known as pay-as-you-go (payg) pension system. but as the demographic transition is going to take place, fewer workers will have to bear the burden of larger old population due to increasing old age dependency ratio. therefore, there is a need to reassess this pension system. also pension system and formal social security system benefit workers employed in formal sector mostly and specifically employed in the government sector. this calls for reassessment of the social security and pension systems. an alternative to this system is fully funded pension system in which the workers are taxed a particular amount from their income which is invested by government. returns from that investment are then given to the same workers when they retire according to their invested amount. our objective is to try to quantify the fiscal cost of pension expenditures under the payg system, which is currently the pension system in pakistan. under this system, pension expenditures are expected to rise given the ageing of population takes place (amaglobeli & shi, 2016). with the demographic transition, ratio between pension receivers and workers is rising and in future workers will be taxed more than today in order to provide the same standard of living to the dependent population hence in coming decade’s payas-you-go system will become fiscally unsustainable due to the demographic transition (arif & ahmad, 2010). the expected population rebalancing and accompanying surge in age-related spending, which lower economic growth will likely place considerable pressure on public finances going forward. while the near-term fiscal effects of these demographic developments are likely to be small, their long-term fiscal implications are significant. therefore, researchers and policymakers, in countries affected by adverse demographic dynamics, need to quantify fiscal risks from demographic developments ahead of time. objective of this study is to quantify fiscal implications of the ageing population. this includes measuring impacts of the following (a) demographic transition on the gdp growth rate and (b) changes in old-age dependency ratio on pension expenditures. 2. literature review at the start of the 20 th century, transition in birth, fertility and mortality rates started and hence the term demographic transition was coined for the first time by warren s. thompson and explored by frank w. notestein. reasons associated with high fertility rates were religious and moral and customs prevailing in societies, like early marriages. with decline in mortality rates and increasing educated proportion in population, social norms that supported high fertility rates were no longer required (orubuloye, 1991; sanderson & scherbov (2007). caldwell (1976) has dictated two main factors that strengthen the transition from high to low fertility rates, which are education and urbanization. he is of the view that these two factors have impact on family relations and thus on fertility rate too. lee & edwards (2002) stated that lower fertility is one of the two main reasons attributed to ageing of population. review of economics and development studies, vol. 7 (1) 2021, 37-50 41 in asia, the importance of research based on ageing gained attention in 1980s when countries like malaysia, taiwan, japan and singapore started facing it. it is expected that, by and large, the ratio of aged population in asia is going to rise to 21% in 2030 (chan, 1999). pakistan is also on the way to ageing of population as its mortality and fertility rates have started to decline and increase in mean and median life of population is an indicator of ongoing transition (mahmood & nasir, 2008). demographic transition causes old-age dependency ratio to rise due to decline in fertility rate and surge in life expectancy rate. pampel (1994) investigated the political pressure of ageing using data of 18 advanced economies for the period from 1959 to 1986. he argued that ageing puts pressure on public spending because of certain demographic and political reasons, which gives rise to age-based inequality in public spending. auerbach & kotlikoff (1992) found that changing population structure affects political power of elderly population. in 2040 usa will have 42% of its population above 55 years of age so elderly population is going to have powerful political voice. analyzing the effects of ageing on macroeconomic variables, yoon, et al., (2014) found that inflation is affected by changes in aggregate demand due to change in age structure while output changes due to changes in labour-force participation rate which again is dependent on population size and structure at a particular time. harvard school economists argue that what really matters is age structure rather than its size (hugh, 2009). impact of ageing on economic growth through changes in labour force participation is discussed in literature (clements, 2015). kudrna, et al., (2015) developed an over-lapping generation model for investigating the effects of demographic shift in australia. expected results showed demographic transition caused 6.2% decline in gdp per capita, surge in capitaloutflows and less investment opportunities in the future. di matteo (2010) stated that ageing is viewed as a variable responsible for rising wellbeing expenditures, though in canada its effect is comparatively smaller than other variables. palacios (1996) investigated the variables on which pension expenditures depend. they found that ageing has a significant impact on pension expenditures and this effect is stronger than income per capita, which means that increase in per capita income also causes an increase in pension expenditures but not as much as ageing does. pampel, et al., (1990) argued that data shows, that these expenditures have surged even when countries were facing fiscal problems. lee & edwards (2002) in their analysis found that expenses on elderly population are going to increase from 8 % of gdp today to 21% of gdp in future. kitao (2015) stated that japan’s economy may restrain as it is going to face an expansion in public expenditure with less working force in the future and less revenue. in wake of these fiscal imbalances methods of funding the expenses on pension and health care and policies related to retirement decisions are required to be modernized (fogel, 1997). the ageing of population in pakistan is bound to put pressure on policymakers to reform the social security system. it also questions the quality of life of poor and elderly in wake of present system which covers only government employees and a very minor proportion of private employees in formal sector whereas informal sector remains out of reach. mahmood & nasir (2008) stated that in pakistan, social security and pension schemes sponsored by the government benefit a small proportion of the population in the formal sector. pakistan needs to redefine the budget priorities keeping in view the proportion of population engaged in the informal sector. according to arif & ahmed (2010) current resources allocated to pensions are not only small in numbers but are inadequate to fulfill the need of rising proportion of older population. it is estimated that if proper measures are not taken than pension expenditure can increase to three percent of gdp (mahmood & nasir, 2008). this section concludes that ageing has significant impact on gdp through changes in labour-force participation and it alters review of economics and development studies, vol. 7 (1) 2021, 37-50 42 political power of elders and causes surge in spending related to older population. 3. methodology and data demographic transition has a two-way effect on fiscal balances, i.e. effect on revenues as well as on expenditures. the revenue effect is quantified through changes in gdp (national income) due to demographic transition. expenditure side is affected by changes in pension expenditure because of ageing population. 3.1 growth accounting demographic transition alters the structure of population which affects labor force due to which the economic environment changes. effect of the demographic transition, specifically the effect of ageing population, on growth is quantified using the cobb-douglas production function. accounting framework is used because we can apply appropriate restrictions/assumptions, based on economic theory, on other variables and then change the variable in question to assess its impact on output (barro, 1991). also we can calculate tfp by separating it from other inputs of growth using accounting framework (griliches and jorgenson, 1967). moreover, solow model of economic growth has highest explanatory power (mankiw et al, 1992). assumption of constant returns to scale in production function is applied as there is no empirical evidence of increasing returns to scale and in decreasing returns to scale, one has to explain the increasing share of wages in total income (solow, 1956, mankiw et al, 1992). the cobb-douglas production function is specified as follows: ( ) where, yt is gdp over time. is labour’s share in total income. following khan (2006) we assume values for factor income shares to be 0.56 for labour and 0.44 for capital. 3.1.1 capital stock kt is capital stock. capital stock is calculated using perpetual inventory method (berlemann and wesselhoft, 2014) using the following equation, ( ) ( ) according to equation 3.2 capital stock in any year is the sum of previous year’s capital and net investment. but for this we need to calculate initial value of capital stock to be able to generate a time series for capital stock based on that initial value, new investment and depreciation rate. the issue of how to calculate initial value of capital stock has been debated long in literature. there are many approaches to calculate capital stock, but we have used the unified approach, as used by berlemann and wesselhoft (2014). other methodologies like steady state approach, the disequilibrium approach and the synthetic approach have their peculiar requirements and related shortcomings which made them unviable for the present study. the unified approach combines the positive points of different methodologies (berlemann and wesselhoft, 2014). it follows de la fuente & domenech (2006) for measuring initial value of capital stock. review of economics and development studies, vol. 7 (1) 2021, 37-50 43 but this approach deviates in measuring the value of for t=1. they used investment data from t=2 to t and regressed it on time trend to measure initial value of investment. equation for the regression can be written as, by using the parameters α and β we can calculate the fitted value of investment for t=1. then this value is used to measure the initial value of capital stock. berlemann and wesselhoft (2014) deviate in another way in that they used time series of depreciation rate instead of assuming constant rate of depreciation. because of the relative benefits of berlemann and wesselhoft (2014) we opted for their methodology for measuring initial value of capital stock. we calculated values for 3 years instead of 1 and then took average of the three to get initial value for capital stock following berlemann and wesselhoft (2014). once this value was obtained we generated capital series using equation 3.2. 3.1.2 aggregate labour to estimate aggregate labor, historical labor force participation rates and employment rates are used. also the size of each age-gender specific cohort and actual hours worked by labor are used to calculate aggregate labour force. the aggregate labour force is estimated using equation 3.3, following clements (2015), given below. ∑ ( ) where, j represents age-gender cohort, n and lfp are number of people and labor force participation rate in a specific cohort, respectively, e is employment rate, and w is weight factor for the adjustment between number of employees and effective units of labor. when we multiply this weight factor, we get labour force in number of work hours supplied instead of number people currently working. this is a better measure of labour force as it explains gdp in a better way according to the standard definition of contribution of labour force in gdp (clements 2015). final labour force is calculated by adding labour hours provided by different age groups. taking logarithm of equation 3.1 and substituting the value of and lt it becomes, ( ) ∑ ( ) 3.1.3 total factor productivity equation 3.4 is used to measure historical tfp, which is given by: ( ) ∑ ( ) after this step we arrive at historical tfp, labor and capital data. following clements (2015), to capture the output effect due to changes in labour force through ageing of population, we use the assumption that total factor productivity is expected to grow at its historical level while capital is expected to follow balanced growth condition (amaglobeli and shi, 2016). these assumptions are used so that we can check the impact of change in labor force only, keeping other factors constant. using review of economics and development studies, vol. 7 (1) 2021, 37-50 44 these assumptions on tfp and capital, different demographic transition scenarios give rise to different labor force and hence different gdp projections. 3.2 pension expenditures following clements (2015), pension expenditures to gdp ratio is derived by multiplying four factors, which are replacement rate, coverage ratio, inverse of labor force participation rate and old-age dependency ratio. mathematically, ( ) where pe is pension expenditures; r.r is replacement rate defined as ratio between average pension and average output, c.r is coverage ratio defined as share of pensioners in total population above 60; odr is old-age dependency ratio defined as ratio between dependent population above 60 and working age population (15-60); and lp is labor participation rate defined as share of workers in working age population. mathematically, each term is defined as: 3.3 data and variable description time series data for pakistan is gathered from 1981 to 2015. data for gdp (in constant pak rupees) and gross fixed capital formation (in constant pak rupees) have been collected from the world development indicators (wdi). time series data on depreciation rate (in percentage terms) of capital is taken from penn world tables 9.0. data on labour is aggregated using population, employment rate (in percentage terms), labor force participation rate (in percentage) and a weight factor to adjust for productivity of labour. data on population is collected from the united nation’s world population prospects (nations, 2015) while labour force participation rate, employment rate, and work hours (number of hours per week) are available from the labour force survey (lfs). for expenditure analyses, data on the pension expenditures (in constant pak rupees) and number of pensioners is collected from the accountant general pakistan revenue (agpr), ministry of finance. 4. results and discussions 4.1 impact on the labour force: different demographic scenarios will produce different levels of population and hence different labour force trends. based on the projections made, using high, medium, low and status quo scenarios, figure 3 explains the trend in labour force under medium variant scenario. as can be seen from figure 3, there is an increasing trend in labour force for the next two decades or so under both scenarios (status quo and medium variant). after 2040, the labour force, under medium variant scenario, deviates from the labour force under status scenario due to demographic transition. under medium variant scenario, it reaches its maximum value around 2080 and declines thereafter. reason for increase in labour force in the projection period from 2015 to around 2060 is increasing population in that period under both the scenarios. review of economics and development studies, vol. 7 (1) 2021, 37-50 45 figure 3: projected labour force (million work hours) source: authors’ own calculations the fertility rate of pakistan is expected to be above the replacement level, which is 2.1 children per woman, which means until 2060 people entering the population will be greater than the people exiting the population. this leads to rising population. also, improvement in life expectancy rate will raise the median year of age. these factors will raise population and hence the labour force. around 2060 fertility rate touches replacement level so people entering the population and exiting from it will be equal at this point and hence population will touch its maximum value and so does labour force as depicted in the above figure. decline in labour force starts afterwards due to decline in population. the other factor, life expectancy rate, improves as time passes and population starts ageing. as aged population has lower labour force participation rate, lower employment rate and fewer work hours so, these factors will play part in lesser labour force under medium variant scenario compared to the status quo scenario. the status quo scenario (solid line) shows labour force in case when there is no change in fertility rate and life expectancy rate from the 2015 level. it means that under status quo scenario population will continue to grow at constant rate. although this scenario is highly unlikely to occur but it provides us a reference point with which we can compare the projected labour force under medium variant scenario. given the projections under medium variant scenario labour force will initially affect output positively as increasing labour force will lead to higher output. but after reaching its maximum point, i.e. after 2060, and its decline will start to harm the output, other factors like total factor productivity and capital remaining the same. projections under other scenarios (low variant, and high variant) are presented in figure 4. review of economics and development studies, vol. 7 (1) 2021, 37-50 46 figure 4: projected labour force (million work hours) source: authors’ own calculations 4.2 impact on output this section explains the impact of demographic transition on the output (gdp) of pakistan. given the expected trend in the labour force, explained in the previous section, this section quantifies the effect of labour force trend on output. labour force does change due to change in the age structure of population. so, keeping other factors constant, demographic variables are affecting the labour force which in turn is changing the level of output. these changes are explained with the help of figure 5. figure 5: projected gdp growth rate source: authors’ own calculations figure 5 shows that the annual output growth rate is expected to decline to as low as -3.1% under medium variant whereas economy grows at 1% growth rate under status quo scenario. it means around 4.1% loss in gdp is expected only because of the demographic transition. demographic factors will be dampening the positive affect of other factors, such as improvement in productivity. figure 6 presents difference in growth rates from status quo scenario under other scenarios. review of economics and development studies, vol. 7 (1) 2021, 37-50 47 figure 6: output comparison under different scenarios source: authors’ own calculations 4.3 impact on pension expenditures this section explains the impact of demographic transition on pension expenditures of pakistan. given the recent trend of pension expenditures we can say that pension expenditures are rising over time. one of the two reasons of this rise is that number of pensioners is increasing and the other reason is increase in pension expenditures per person due to inflation. as the growth rate of pension expenditure (12.9%) is greater than growth rate of gdp (4.2%)1, the ratio of pension expenditures to gdp (pension expenditures/gdp) is expected to increase anyway. but what this study is trying to capture is the effect of demographic transition on pension expenditures. due to increasing pension expenditures per-pensioner, replacement rate (r.r) is expected to rise, so is the coverage ratio (c.r) as the number of pensioners is rising. now this increase in replacement rate and coverage ratio will put pressure on pension expenditures and an upward trend in pension expenditures is expected. to capture the demographic effects only, following clements (2015), we are assuming it to be constant at the 2015 level throughout the projection period. table 1: replacement rate and coverage ratio of pakistan year 2008 2009 2010 2011 2012 2013 2014 2015 r.r 0.0342 0.0464 0.0563 0.0599 0.0825 0.0981 0.1026 0.1062 c.r 0.1386 0.1395 0.1438 0.1453 0.1455 0.1449 0.1622 0.1751 source: authors’ own calculations table 1 exhibits the replacement rate (r.r) and coverage ratio (c.r) in different years. both ratios are increasing with time. in 2015 replacement rate (r.r) was 0.11, which means that, on average, 11% of young workers’ share in gdp goes to a pensioner if pakistan is running pay-as-you-go pension system (a system in which pension expenditures are borne by currently working population). coverage ratio (c.r) in 2015 was 0.17. it means that 17% of total population above 60 is receiving pension benefits from the government. the other two variables of our interest included in the definition of pension expenditures, are old-age dependency ratio (odr) and labour participation (lp). the demographic transition will affect 1 figures are taken from economic survey of pakistan (2015) review of economics and development studies, vol. 7 (1) 2021, 37-50 48 both these variables. in turn, these variables will affect pension expenditures. old-age dependency ratio is expected to increase as the population above 60 is expected to last longer due to better health facilities and population between ages 14 and 60 is expected to shrink due to declining fertility rate. given these two transitions in the demographic structure of pakistan, the old-age dependency ratio will rise and in turn it will increase pension expenditures according to equation 3.6. given these changes in the demography of pakistan, pension expenditures are expected to rise. projections regarding pension expenditures are shown in figure 7. we can see that pension expenditures to gdp ratio shows a rising trend throughout the projection period. starting from just 1.2% of gdp in 2015, pension expenditures are expected to rise to 3.5% of gdp by the end of century (under medium variant scenario). figure 7: projected pension expenditures (% of gdp) source: authors’ own calculations up till 2040-45 the increase in pension expenditures is mainly because of increase in old-age dependency ratio. decline in labour force starts after 2045 so after that old-age dependency ratio would play its part in increasing pension expenditures as share of gdp. due to this pension expenditures are expected to rise to 3.5% of gdp at the end of the projection period. these rising expenditures advocate for fully funded pension system instead of pay-as-you-go pension system. when pension expenditures increase due to increase in old-age dependency ratio conventional pay-as-you-go pension system becomes fiscally unsustainable as there would be fewer workers bearing the burden of a larger aged population. to finance the rising expenditures, under pay-as-you-go pension system, either government will have to allocate more resources on pension expenditures or high payroll taxes would be required from working population for covering the expenditures. while switching to fully funded pension system will not only save a fortune to government, but workers will also contribute happily as the contribution would be invested on their behalf for their safe future. 5. conclusion the present study has tried to quantify the fiscal impacts of the demographic transition in pakistan. population projections by nations (2015) have been used to project the labour force in pakistan from 2015 to 2100. due to declining fertility rate and increasing life expectancy rate old-age dependency ratio is expected to increase, which means aged population – which has lower labour force participation rate, employment rate and work hours – would increase more than the working age population. this study found that pakistan is expected to face a decline in its work force in the long run. based on the nations (2015) fertility rate is expected to be above replacement level until 2060 which means population will continue to grow at a slower pace but then population as well as labour force is review of economics and development studies, vol. 7 (1) 2021, 37-50 49 expected to shrink. this study has also attempted to quantify the effect of expected decline in the labour force on gdp growth rate, which was done using the growth accounting technique, based on the cobb-douglas production function. output was also measured under both status quo and medium variant scenarios. according to the findings of the study, under the medium variant scenario pakistan is expected to face a 4% loss in gdp by the end of century only because of the demographic transition. on the expenditure side, this study has tried to measure the impact of demographic transition on pension expenditures. due to increase in old-age dependency ratio the proportion of dependent population is increasing more than younger population. this study found that if pakistan continues to follow pay-as-you-go pension system then the pension system would become fiscally unsustainable due to expected ageing of population. pension expenditures are expected to rise from 1.2% of the gdp in 2015 to 3.5% of the gdp in 2100. and if these expenditures are to be borne by the future working age population then it will be fiscally unsustainable as there would be fewer workers who will bear the burden. so, the study suggests a transition from pay-as-you-go pension system to a fully funded pension system based on its findings. on the basis of above discussion the study concludes that if proper measures are not taken demographic transition is expected to harm the economy by lowering output as well as by increasing pension expenditures. 6. policy recommendations according to the findings of the present study pakistan is expected to face a decline in labour force. but the situation can be different if women’s involvement in labour force is encouraged. due to low female labour force participation rate in pakistan the situation is looking not too bright. similarly special attention must be paid on improving the total factor productivity as this will also help to weaken the negative impacts of demographic transition on output. based on findings of this study it is suggested that a comprehensive study needs to be done to explore the transition from pay-as-you-go to fully funded pension system following the multi pillar pension reform provided by world bank. costs associated with transition also need to be explored. references amaglobeli, m. d., & shi, w. 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(1999). the social and economic consequences of ageing in asia: an introduction. southeast asian journal of social science, 27(2), 1-7. clements, m. b. j. (2015). the fiscal consequences of shrinking populations. international review of economics and development studies, vol. 7 (1) 2021, 37-50 50 monetary fund. de la fuente, a., & doménech, r. (2006). human capital in growth regressions: how much difference does data quality make?. journal of the european economic association, 4(1), 136. di matteo, l. (2010). the sustainability of public health expenditures: evidence from the canadian federation. the european journal of health economics, 11(6), 569-584. fogel, r. w. (1997). economic and social structure for an ageing population, philosophical transactions of the royal society of london b: biological sciences, 352(1363), 1905-1917. galasso, v., & profeta, p. 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(2014). impact of demographic changes on inflation and the macroeconomy (no. 14-210). international monetary fund. review of economics and development studies, vol. 6 (3) 2020, 575-589 575 industrial production and monetary shocks: empirical evidence from pakistan sadaf shahab a , muhammad tariq mahmood b , azmat fatima c a assistant professor, department of economics, federal urdu university, islamabad, pakistan email: shahab.sadaf@gmail.com assistant professor and head, department of commerce, federal urdu university, islamabad, pakistan email: tm76pk@gmail.com m. phil scholar, department of economics, federal urdu university, islamabad, pakistan email: azmatfatima10@yahoo.com article details abstract history: accepted 29 august 2020 available online 30 september 2020 this study focuses on long run relationship between industrial production and financial markets through a restricted structural model. conditional upon arbitrage between short and long term money market rates, we find an evidence of cointegration between output and the stock market. statistical results indicate that positive long-run relation between the stock market and real output allows the identification of a demand shock as permanently affecting stock market. similarly money supply and short-term interest rate shock permanently affect stock market while inflation affects negatively in long run. the results also indicate that the monetary reaction function is less responsive to inflation and the policy maker put more weight to output. our results imply that due to cost-push nature of inflation, policy makers have some flexibility to target other sectors of the economy, such as investments in asset markets. a prudent central bank can use interest rate smoothing approach using arbitrage conditions. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: industrial production, arbitrage, restricted cointegration, financial markets, money market, impulse responses jel classification: c58, e43, e44, e52, g29 doi: 10.47067/reads.v6i3.248 corresponding author’s email address: shahab.sadaf@gmail.com 1. introduction the industrial production and its impact on the economies has been an interest of academic literature for centuries now.1 however, the idea of its link to financial innovation of a country has emerged more recently. during 1990’s a number of econometric instruments were employed to investigate the possibly ambiguous association between financial activities and economic growth. many analyses of financial sector segregated all financial markets into two categories: the market for money and the market for everything else. with reference to its structure, the symmetry in 1 in his poem the fable of the bees bernard mandeville (1670-1733) took an early account of industrial revolution. review of economics and development studies, vol. 6 (3) 2020, 575-589 576 information is vital to increase participants’ confidence and efficiency of a financial market. however, the only real force that ultimately makes a financial market (for example stock market) rise or fall over the long run is simply changes in money resulting an increase in stocks due to monetary inflation. in short, the key link between financial market and output is primarily driven by money or credit. thus, such a hypotheses needs to be studied broadly. in a business cycle context, during expansion, economy of scale holds which increases real wealth, offsetting the effect of nominal money. however, if the production of goods is faster than the growth of money, prices decline. on the other hand, if prices rise because of increase in money supply faster than goods, yet the prices fall in real terms, because the wages increase faster than prices. hence, if there were constant amount of money in economy, it is harder to increase sum of all shares of all stock taken together. correspondingly, if firms’ profit, on an aggregate level does not increase, there would not be any addition in per share earnings accredited into prices of the stocks. nevertheless, it may move slightly lower depending upon rate of change of issued shares. this situation would generate recession in the economy: the aggregate economic activity will show downturn. as a consequence, the price of leading firms’ stocks increase leaving others to lose (gauthier & liu, 2003). the prime objective of this study is to find out the linkage between real economy and stock market for an emerging economy. we employ king et.al. (1987) and gauthier & li (2005) approach in a modified way and empirically test for pakistan. thus specifically this study aims at; firstly, to analyze the modeled linkage between real economy and stock market; secondly, to empirically investigate the arbitrage between shortand long-term money market equilibrium; and thirdly, to find out relative response among variables of the model in a vector autoregressive process. the study is organized as follows: after this brief introduction, section two reviews the existing literature, section three is based on model and methodology of the study, section four analyses the empirical results, and section five concludes. 2. literature review to foresee turning points in aggregate economic activity, there are two potential implications that can elaborate the role of financial variables. first, tighter financial and credit position limits potential for firm’s decisions to expand and borrow. second, asset prices are determined in a forward looking market and rely on anticipated profitability of firms (espinoza, fornari, & lombardi, 2012). gauthier & liu (2003) took a detailed account of the financial conditions index (fci) through different methodological options and show that equity prices, short and long term yield rates, bond risk premier and exchange rates do significantly affect output. for such effect first differenced data are generally used as useful tool for both policy makers and financial market participants. however, possible asymmetries are observed for euro area (angelopoulou, balfoussia, & gibson, 2014). prices play a significant and decisive role to utilize information by economic agents to monitor the market, being an aggregate piece of information and eventually imitate a precise estimate of firm’s value. the real decision makers; financial capital providers, regulators, managers, employees and customers learn from to practicing it to direct their decisions (baumol, 1965). the excessive money supply by central bank to run the country involves a higher inflation if indicators such as interest rate, consumer prices are not controlled within the given limits. among others, (eichenbaum, 1997) confirms a stable long run relationship among output, prices and money supply and this stability supports an economic agent in decision making. in short run monetary stance review of economics and development studies, vol. 6 (3) 2020, 575-589 577 is more operative relatively by causing some significant movement in price level. an upsurge in liquidity may raise economic activity, which sequentially increases demand for money (soejima, 1996). in long-run, inflation has negative effect on stock prices whereas industrial production index (ipi), liquidity and real affective exchange rate (reer) affect positively on stock returns (see for example sohail & zakir, 2009 for pakistan) and correct monetary measures are necessarily to be adopted by monetary authorities to curb and control inflation to minimize the volatility of the stock markets, little but enduring inflation is "lubing the wheels of trade." the structuralism contend that inflation is pivotal for lubing the wheels of the economy while the monetarists place that expansion is destructive to financial growth (doguwa, 2012). some studies affirm that low and stable expansion advances monetary development and the other way around (mubarik, 2005; ahmed and mortaza, 2005). blanchard and quah (1989) found that inflation does not affect real yield over the long run but rather in the short. the empirical findings like herando and martínez-carrascal (2008) reveal that financial position is significant to explain corporate decisions on fixed investment and employment and the influence is more powerful when financial pressure outstrips a certain threshold. the extrapolative capability of financial variables for euro area growth reveal that financial variables are prominent indicators for euro zone growth at a collective level, although at diverse horizons during one to six quarters (guichard, et al., 2009). however, in mid of 1980, financial innovation influenced consumer spending, housing investment and business fixed investment in many of the oecd economies (dynan et al., 2006). ahmed and mortaza (2005) propose an optimum level of inflation above which, expansion is negative for financial development and found the existence of critical long term negative relationship. ayyoub, et.al. (2011) noted negative relationship between economic development and inflation. chaudhry, et. al., (2012) explore the long and short run connections of fiscal arrangement, inflation and financial development, showing that private credit and shortfall of spending plan are discovered as flexible and critical variables to impact real output. to inquire the direction and nature of the relationship between economic growth and stock market volatility, it is argued that development of the financial sector stimulates economic activity and for this reason increases economic growth in the longer span of time (puah and jayaraman, 2007) and there is a significant impact of these variables in long run (liu and shrestha, 2008). for countries like brics no statistically significant relationship is observed among stock indices, exchange rate and other variables as used by adam and george (2008). their results confirm positive and significant relation between gdp, stocks and the consumption. earlier, fama (1981) found that there has been a strong relationship between stock prices and gross domestic product. similalry, humpe and macmillan (2009) discover positive and significant long-run relationship between us stock prices and industrial production. on the other hand, comincioli and wesleyan (1996) show that stock market is helpless for forecasting the economy. in the recent literature, some studies reported positive effect of interest rate on stock returns whereas; some studies pointed negative. for example, ratanapakorn, & sharma (2007) report positive relationship and humpe and macmillan, (2009) showed negative effect of t-bill rate. so, this review suggests that there exists a long run cointegration between the output, money, stock market, inflation and interest rate. likewise financial sector development stimulates economics activity in both long and short run; and that shocks in stock market do help in predicting the economic fluctuations. however, the lack of consensus is observed on the role of interest rate and ambiguity holds review of economics and development studies, vol. 6 (3) 2020, 575-589 578 in general. so, in this study we look issue of financial market and the monetary response function in the presence of arbitrage under restrictions imposed by macroeconomic conditions. 3. model and methodology in this part, long run relations are described as the building block of our model which is based on blanchard (1981) and gauthier and li (2005), who developed the model to link between the real economic activity and stock market, using the arbitrage between short & long term bonds. the base of the model is formed by the relationship in the output and the financial markets, and then moved towards the money market equilibrium and arbitrage between short & long run bonds than finally the reduced-form solution is drawn. from a perspective of asset prices transmissions, through the channel of wealth effects, as money supply increases, the stock price increase indicates a hike in financial wealth; the consumption should eventually increase causing output to expand. a rise in real income (per capita) provides them greater financial resources for spending or saving at a rate of respective marginal propensities. 3.1 linkages between real economy and asset market the traditional theories forward two main determinants of consumption/spending: (i) current disposable income; and (ii) value of shares in a stock market. the effect of later may be direct through the wealth effect on consumers, or indirect through the “borrowing capacity of consumers and investors” (the credit channel effect). consumption spending is expressed as: (1) α1 > 0; α2 > 0 where cs denotes consumption, sm denotes stock market, and y is income; and all variables are real. equation (1) is forward looking aggregate consumption spending where sm represents a function that comprises the present value of expected future profits and y showing function of expected future output. output adjusts to consumption overtime. putting value of cs in above equation we get, ( ) ( ( ) ) we put β= ( ), and get; ( ) (2) >0 where dot (˙) symbolizes a time derivative. equation (2) can be considered as error correction procedure linking the short-run dynamics of output positively to deviations of the stock market from real economy. 3.2 money market equilibrium it is based on demand and supply forces for money as: where, ms= m/p, and md = l (y, i) or md= l (y, r+π e ) http://catalog.flatworldknowledge.com/bookhub/reader/23?e=rittenmacro-ch10_s02#rittenmacro-ch10_s02_s03_f01 review of economics and development studies, vol. 6 (3) 2020, 575-589 579 however, we can assume π =π e because we are assuming static inflation, and equating md and ms we get ( ) where m stands for nominal money, p for prices, y, r, π denote output, real interest rate and inflation respectively. taking logs; ( ) [ ( )] by solving, we get ( ) (3) α1 >0, α2<0, α3<0 where, we have used inflation as proxy for log of prices. in long-run portfolio balance is characterized by relation between money, output, interest rate and inflation. 3.3 arbitrage between shortand long-term financial asset the most instinctive theory about term structure of returns is the expectations hypothesis. if lrt is the nominal yield to maturity of a discount bond and it is one-period rate, expectations hypothesis in nonexistence of uncertainty implies that, ( ) ∑ ( ) (4) this is an “arbitrage condition” ensuring that the yield of holding-period for an n-period bond is equivalent to a yield of holding a chain of one-period bonds. applying logs and considering that ln(1 + x) ∼x for small x, yields a familiar approximation: ( ) ∑ ∑ (5) the long-term yield equals an average of single-period yields. hence, a permanent shock to a shortterm yield will be reflected one for one in the long-term yield, until the shock is suitably perceived to be permanent by markets. 3.4 core model the three main long-run equilibria can be written as: (6) (7) review of economics and development studies, vol. 6 (3) 2020, 575-589 580 (8) the three long run equation can be written as, (9) where zt = (πt, yt, it, mt, smt, irt). equation 9 can be written a [ ] [ ] -[ ] = [ ] (10) after applying the restriction, it become [ ] [ ] -[ ] =[ ] (11) equation 11 is the reduced form of core model with all six variables, form a restricted var. in this equation as compared to equation 9, β is vector of error correction coefficients, ɀ is vector representing the six endogenous variables, c0 is a vector of fixed intercepts and is a definite matrix. those variables which have time variant relationship in a vector autoregressive (var) process are to be expected to have some degree of contemporaneous connection. we here presume that the model is with a set of identifying restrictions because the identification of structured shocks is somehow required in a surge to estimate the effect of an endogenous variable on dynamic pathways of all variables of system which we call impulse response function (lin 2006). 3.5 data and estimation techniques for this empirical model, output is characterized by industries production index; while stock exchange volume is used to proximate financial market. the market equilibrium is investigated by computing equilibrium in monetary markets that is between supply and demand of money. inflation, interest rate and output are attributed to calculate money demand in the market. the said analysis has been made on quarterly data ranging from 1991q:3 – 2015q:2. the data are taken from different sources; imf (ifs), pse, and sbp and is manipulated according to the requirement of the study. for example; in a quarterly time series, the seasonal adjustment process is based on the removal of the seasonal movements from a data series and extracting relevant/underlying trend component. so, one of main tasks we faced is to solve the problem of seasonality in a time series. review of economics and development studies, vol. 6 (3) 2020, 575-589 581 table 1: variables description s. no variable notation and source descriptive stats mean sd skew. j.bera sum sq.dev. 1 money supply: m2 m: ifs, sbp 14.52 0.96 7 0.052 9 5.3635 88.831 2 output: industrial production index y: ifs 4.32 0.39 6 0.088 7 9.2587 14.857 3 financial market: *kse 100 index sm: pbs, sbp 8.34 0.97 6 0.1741 4.248 2 90.433 4 interest rate: t-bill rate i for short run nominal rate while lr for long run rate: sbp 10.33 3.47 0 0.836 0 12.473 0 1143.928 5 inflation: cpi based π: sbp (own calculation) 4.52 0.53 2 0.060 7 4.026 3 26.914 note: log of variables 1-3 is also applied.*now it is knows as pakistan stock exchange (pse) since january, 2016. 4. results and discussion to analyze the model discussed above we first test the series for stationarity and found that three main stock variables of the model are integrated of order 1 (table 2) and exhibit a unit root. thus it is worthy to conclude that there are chances of cointegration between money supply, industrial production and stock market volume. however, the unit root test indicates the interest rate series is to be stationary at level, but as we are using arbitrage condition, the interest rate is converted into a long run rate, thus it is presumed to be cointegrated with the other variables of the model. secondly we employ king et al. (1987) and gauthier and li (2005) approach in our methodological framework to allowing an identification of permanent shocks the system. thus the vec restrictions according to equation 11 are applied to confirm the long run stability among the variables. table 2: summery of unit root test of all series serie s coefficients trend/ intercept adf stat critical value order of integration m2 -0.51 none -5.61 -1.94 1st difference y -0.46 both -5.3 -3.45 1st difference sm -1.55 none -5.1 -3.45 1st difference i -0.25 intercept -3.61 -2.89 level π -0.26 intercept -3.69 -2.89 level review of economics and development studies, vol. 6 (3) 2020, 575-589 582 4.1 the long run analysis on the basis of the above mentioned theoretical foundation, it is expected to find three cointegrating relations in the vector error correction model. the model (results in table 3) shows that trace test indicate three co-integrating equations at 5% level of significance and max-eigen value test indicate the presence of two co-integrating equations at the same 5% level of significance. to distinguish between the two co-integration tests, the t-values of α coefficients (of eq. 11) are looked through, as recommended by hendry and juselius (2001); when these are very small, (if e.g., less than 3), then one would not lose greatly by excluding that vector as a co-integration relation in the model. as the t-values are significant for more than three (see table 4 below) for all the vectors and theoretical foundations also suggest the existence of three co-integrating vectors so we move forward with the assumption that model has three vectors. as the cointegration test indicates the existence of cointegration we have applied cointegration on restricted core model to identify the validity of our assumptions. table 3: co-integration tests max-eigen statistics trace statistics null hypothesis r=0 max-eigen 0.05 (with prob) trace 0.05 (with prob) 75.79 160.29 0 36.63 (0.00) 83.84 (0.00) 42.07 84.50 1 30.44 (0.001) 60.06 (0.00) 20.51 42.43 2 24.16 (0.145) 40.17 (0.029) 11.39 21.91 3 17.79 (0.35) 24.27 (0.096) 6.62 10.52 4 11.22 (0.28) 12.32 (0.098) 3.90 3.91 5 4.12 (0.057) 4.13 (0.572) table 4: restrictions test on co-integrating vectors the lr test, χ2 (10) = 1.799, p-value0.41 π y i m sm lr 0.33 (0.04) -7.09 (0.14) 0.43 (0.05) 1 0 0 0 1 0 0 1 0 0 0 1 0 0 1 note: standard errors in parentheses below each coefficient. the null for lr test is that restricted model holds. the restricted core/main model is robustly accepted and these results are consistent with the economic and econometric theory. the first co-integrating relation consists on money market review of economics and development studies, vol. 6 (3) 2020, 575-589 583 equilibrium, second relates real economic activity with a stock market, and the third relates to an “approximation of the pure expectations hypothesis” based on the arbitrage relation between short term and long term bonds. in this regard we applied johansen cointegration method for the estimated coefficients of first two equations but for arbitrage equations we present ols because both variables are integrated of order zero and ols can provide robust results. table 5: estimated model for long run dependent variable m sm lr intercept 9.3 (1.41) -1.34 (1.70) 2.18 (0.35) y 1.78 (0.28) 1.87 (0.39) sm i 0.021 (0.02) 0.78 (032) π -0.056(0.03) r 2 = 0.87 note: (i) standard errors in parentheses (ii) *indicates statistically significant at 5% whereas ** indicates at 10% there exists a positive and significant relation between stock market and industrial production. the output elasticity of stock market is greater than one i.e., one percentage point rise in industrial production brings 1.87 percentage point rise in the stock market. this is however, concluded that forecasting stock market returns is quite heavily dependent on changes that occur in manufacturing production, the best indicator for predicting the country’s economic environment. in a nutshell, industrial production is directly proportional to the stock price (nishat, and shaheen 2004). the similar relationship was found by lee (1992), chen et al (1986), fama (1990) and geske and roll (1983) in u.s.a., and by darratt (1990) in canada. the results of this equation indicates the practice of pakistan stock market, i.e., many large scale industry hold the share in stock volume and the industrial health of the economy increases the stock market performance showing increase of predictability and trust of the rational economic agent. table 5 also verifies the assumptions of the model. the sign of output money relationship is positive indicating that the output elasticity of money is greater than one. the coefficient of interest rate show that short term t-bill rate does not affect money supply, statistically. this indicates zero interest elasticity of money supply thus indicating a vertical money supply curve. the relationship between money supply and inflation is according to theory and the low magnitude indicates low responsiveness of central bank towards inflationary expectations through money supply.2 this indicates absence of any rule for the inflationary dynamics. however, the more weight is given to the output. the given results depict that long term financial asset prices are positively and significantly explained by short term rate. that is the short term elasticity of call money rate is negative which means that a 1 percentage point increase in short term money market rate will bring about 0.83 percentage point decrease in long term rate. the first group of hypotheses consists of a quantitative term of perception that the long rate responds too much to the contemporaneous short rate. this hypothesis of excess-sensitivity is suggested by unpredictability of long-term rate of interest. according to shiller (1992) “…in this smoothing property of the expectations hypothesis the long rates are too volatile to be consistent with the theory.” 2 earlier similar inferences were drawn by malik & ahmed (2010), mehmood & shahab (2012). review of economics and development studies, vol. 6 (3) 2020, 575-589 584 4.2 shocks’ analysis in econometrics the impulse response is to be defined as the response of the system as a result of the external shocks. we used restricted var model to obtain the irfs of all the variables of the model. 4.3 impulse responses to an inflation shock the response of output to inflation shock is negative (as in balnchard & quah, 1989) and diverges from the equilibrium point to a minimum of 0.1% in 18 th quarter. after that outputs starts converging but remain negative. it can be explained with inflation shock. the rise in price level provide an opportunity to produce more to the manufacturers while decreases demand which in long run lead to reduction in output due to excess in supply. figure 1: impulse response to an inflation shock the effect of inflation on interest rate can be explained through so-called mundell effect that is an unexpected increase in inflation decreases real wealth, increasing savings; causing a fall in real interest rate to regain goods market equilibrium. both long and short term interest rate diverge in the initial twenty quarters. on the other hand, the stock market is initially depressed from zero initial response or by a shock to inflation rate; however it starts converging after 10 quarters but ultimately remained negative. according to the monetarists, monetary authorities exogenously set the long run money growth and inflation rate. with a positive inflation shock the money supply reduces and will diverge and remain negative. 4.4 impulse response to money supply shock as money supply increases price increases proportionally. the output level in pakistan rises with a positive shock of money supply. according to monetarist, any sudden increase in the money supply usually causes output level to upsurge above its natural level but in only long run it causes proportional increase in the inflation. it is specified by the keynesians that “any change in liquidity will directly influence stock prices if and only if the changes in the it develop probability regarding future monetary stance.” -1 0 1 2 3 10 20 30 40 50 60 response of inflation to inflation -.03 -.02 -.01 .00 .01 .02 10 20 30 40 50 60 response of output to inflation -0.8 -0.4 0.0 0.4 0.8 1.2 10 20 30 40 50 60 response of overnight rate to inflation -.06 -.04 -.02 .00 .02 .04 10 20 30 40 50 60 response of ms to inflation -.15 -.10 -.05 .00 .05 .10 10 20 30 40 50 60 response of stock market to infs -0.8 -0.4 0.0 0.4 0.8 1.2 10 20 30 40 50 60 response of long rate to inflation response to cholesky one s.d. innovations ± 2 s.e. review of economics and development studies, vol. 6 (3) 2020, 575-589 585 figure 2 impulse responses to money supply shock so a positive money supply shock faced by the economy will usher the economic agents to foresee the tightening monetary policy in near future. they ask for more funds in prediction of tight policy stance in near future and resultantly will push the existing rate of interest upwards. the money supply shock makes long term rate to diverge. after third quarter long term rate starts converging. 4.5 impulse response to output shock a positive shock to aggregate supply generally has negative outcome in the form of money inflation. an increase in money generates real benefits for those economic agents who receive this additional portion of liquidity instantaneously. during this period prices do not adjust (in short run). these private benefits to economic agents, however, are drawn at the cost of the benefits of other members of that economy, who with their initial money holding lost purchasing power with less quantity of goods availability at the same time. in the next period (dynamically) the output becomes less efficient. thus the the economic agents who are responsible for growth generation process are left with relatively fewer resources than they would have had otherwise. figure 3: impulse response to supply shock -.6 -.4 -.2 .0 .2 .4 .6 10 20 30 40 50 60 response of inflation to mss -.010 -.005 .000 .005 .010 .015 .020 10 20 30 40 50 60 response of output to mss -.6 -.4 -.2 .0 .2 .4 .6 10 20 30 40 50 60 response of overnight rate to mss -.02 -.01 .00 .01 .02 .03 .04 10 20 30 40 50 60 response of money to mss -.050 -.025 .000 .025 .050 .075 .100 10 20 30 40 50 60 response of stock market to mss -.4 -.2 .0 .2 .4 .6 10 20 30 40 50 60 response of long rate to mss response to cholesky one s.d. mss shock (± 2 s.e.) -1.0 -0.5 0.0 0.5 1.0 1.5 10 20 30 40 50 60 response of inflation to supply -.04 -.02 .00 .02 .04 .06 10 20 30 40 50 60 response of output to supply -1.0 -0.5 0.0 0.5 1.0 10 20 30 40 50 60 response of overnight rate to supply -.08 -.04 .00 .04 10 20 30 40 50 60 response of ms to supply -.2 -.1 .0 .1 .2 10 20 30 40 50 60 response of stock market to supply -0.50 -0.25 0.00 0.25 0.50 0.75 1.00 10 20 30 40 50 60 response of long rate to supply response to cholesky one s.d. supply shock (± 2 s.e.) review of economics and development studies, vol. 6 (3) 2020, 575-589 586 the typical supply shock increases the production capacity of the economy that diverges to in first quarter. but later in the next quarter it starts converging and remains same from twenty second to onward quarters. with supply shock, short term interest rate raises to a maximum of in tenth quarter and afterwards interest rate starts converging. the central bank accommodates the shock by decreasing interest rate to eliminate ‘excess supply’ of the goods in market and bring inflation back to target. money supply response to supply shocks is minimal because of its weak relationship. likewise stock market leads output and overshoots rather. long term rate is higher in the short run because of accommodating role of central bank. it reaches to a maximum in 12 th quarter but from the very next quarter it starts converging. 4.6 impulse response to short run rate shock simply, a shock in interest rates implies that consumers and firms have to pay more to finance consumption and other projects.3 a shock to short-term interest rate leads to lower inflation, i.e., the cost of borrowing rises, which reduces the level of investment and in turn reduces output and let it diverge from equilibrium. but in the long run output start converging. money and stock markets show minimal response to interest rate. the response of one point increase in long rate changes the perception about future interest rate and lead “short-term interest rate” to rise. figure 4: impulse response to short run rate shock 4.7 impulse response to long run rate shock long-term interest rates are determined by market. here a shock to long rate is connected with higher inflation which starts diverging back to equilibrium point. the short run interest rate is initially depressed by a shock to long term rate and converges after eighteenth quarter. stock market get minimal explained by a shock to long run interest rate, overall its response is converging. same is the response of money supply. the output level is initially depressing by a shock to long term rate, 3 numerous households buy long-lasting goods such as cars on credit. higher payments deject the consumers in trading these goods and hence, reduce their consumption. in same manner, for the investments that can happen to the firms for their financial needs. at the time of increase in interest rates, investments drop down, since it becomes more costly to make use of money and more attractive to do saving. thus, consumption decreases, that leads to a reduced demand. this keeps prices of the commodities down and inflation decreases. -6 -4 -2 0 2 4 10 20 30 40 50 60 response of inflation to sr rate -.15 -.10 -.05 .00 .05 .10 10 20 30 40 50 60 response of output to sr rate -3 -2 -1 0 1 2 10 20 30 40 50 60 response of overnight rate to sr rate -.12 -.08 -.04 .00 .04 .08 .12 .16 10 20 30 40 50 60 response of mss to sr rate -.4 -.2 .0 .2 .4 .6 10 20 30 40 50 60 response of stock market to sr rate -2 -1 0 1 2 10 20 30 40 50 60 response of long rate to sr rate response to cholesky one s.d. shortrun rate innovations (± 2 s.e.) review of economics and development studies, vol. 6 (3) 2020, 575-589 587 however, it converge in thirtieth quarter. figure 5: impulse response to long term interest rate shock 5. conclusions and policy implications the role of the stock market in the economy is to raise its capital and also to ensure that the funds mobilized are utilized in the most profitable opportunities. this study performed the basic analysis of linkages between asset markets (used stock market as proxy) and monetary policy process to answer whether changes in the identified macroeconomic variables affect stock market of pakistan. our analysis has been based on univariate and multivariate analysis. the novel feature of the study is to test the restrictions of cointegration vectors, which help to find out the sequence of macroeconomic and policy variables in a model. to determine the money market equilibrium, interaction between real economy and asset market equilibrium and arbitrage between long and short term rates in the pakistan economy for the period 1991q3 to 2015q2 is tested. the results indicate that positive long-run relation between the stock market and real output allows the identification of a demand shock as the shock permanently affecting the stock market. similarly money supply shock and short term rate shock permanently affect stock market while inflation shock has negative long run impact on stock market. the results also indicate that the money supply reaction function is less responsive to inflation and the policy maker put more weight to output. our results imply that due to cost-push nature of inflation policy maker has some flexibility to target other sectors of the economy, e.g., investments in the asset markets. our results also imply the sbp can use interest rate smoothing approach by targeting long run interest rate through arbitrage conditions. since our results indicate that the stock/other financial markets and money markets are inter-related, the institutional collaboration between the security and exchange commission (sec) and the central bank is significant. their policies should be in line with the quality analyses of the markets. to incorporate international dynamics, this analysis can be further extended by including exchange rate and the macroeconomic indicators of anyone of the major trading partners. -0.8 -0.4 0.0 0.4 0.8 1.2 10 20 30 40 50 60 response of inflation to long rate -.02 -.01 .00 .01 10 20 30 40 50 60 response of output to long rate -.6 -.4 -.2 .0 .2 .4 .6 10 20 30 40 50 60 response of overnight rate to long rate -.04 -.02 .00 .02 .04 10 20 30 40 50 60 response of mss to long rate -.08 -.04 .00 .04 .08 .12 10 20 30 40 50 60 response of stock market to 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(2009). long-run and short-run relationship between macroeconomic variables and stock prices in pakistan. pakistan economic and social review, 47(2), 183-198. review of economics and development studies, vol. 6 (4) 2020, 759 772 759 the role of job stress on employee motivation and performance in the electric power organization of pakistan awais afzal a , khyzer bin dost b , syed adnan ali c , ehsan bhutta d a department of business and management sciences, the superior colleges lahore, pakistan email: awais.afzal968@gmail.com b department of business and management sciences, the superior colleges lahore, pakistan email: khyzer_bin_dost@hotmail.com c department of business and management sciences, the superior colleges lahore, pakistan email: adnanali90001@gmail.com d department of business and management sciences, the superior colleges lahore, pakistan email: ehsanbhutta69@gmail.com article details abstract history: accepted 22 nov 2020 available online 31 dec 2020 the aim of this study to decrease the stress factors and improves the motivational level and performance of the organization. job stress create the role conflict, lake of feedback, unregularly, disordering, psychological and physical effect. in this study we minimize the stress level and improve the motivational level and performance. the questioners were distributed among employee contribution the information of the seniors, graduate employee, including customer’s service and manager of well reputed rising organization in pakistan. the 300 questioners distributed response of questioner was 255 the information was got through close ended questionnaire. the statically test of regression, correlation, reliability were also measured. the significances are remarkable with negative correlation between job stress and motivation and disclose that job stress prominently shortens the motivation of a specific. the consequences propose to the organization that they have maintained a very healthy cooperative and amiable atmosphere with in the group for best motivation. the value of this study is to disclose stress full and motivational elements for the workers in the organization. so to complete this purpose further sub objective are maintained to find out element that can cause job stress and elements that can motivate the workers institution and highlight influence of job stress and availability of motivational elements on the performance of the workers in the organization. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: effect of stress, job motivation, job stress, organization, employee jel classification: c39, j28, j29 doi: 10.47067/reads.v6i4.276 corresponding author’s email address: khyzer_bin_dost@hotmail.com 1. introduction the world is making progress by leaps and bounds at a constant ratio. to tackle with this heart review of economics and development studies, vol. 6 (4) 2020, 759 772 760 core contest organization adopts divergent skills and planning. in spite of these policy and tricks on element that i am being able to perform its essential part to develop organization in gaining valuable profit is its employees. the workmen are the compulsory, hot and soul of every business organization and institution. to handle all the operational activity of successfully adventurous, it is reasonable that work man must do great struggle in scouring institutional motives. there are institutions that try their hard to achieve success and invent impressive policy to keep the mood of their employees comfort and stress less. the directors are try to do hard work to motivate work men to do their best effort. by developing stress less elements from the work life and by meaning the provision of motivational elements manager supervisor and the director can enable the workmen consoled by the improve the capability of the laborers the main motive of this research is to find painful and motivational elements for the workmen. now a day in universe stress is determined as a world recommended hard core issue which presents in everywhere in different forms of work. today we are talking about work life the workmen are normally working for a longer time as improving the scale of responsibility which are responsible to make them more hard working to meet proposed desires about their work performance. omolara (2008) defined professional emphasis to the opposite mental and bodily responses which happens in a personal the outcome of their unable to handle the requirement ready for them. in the opinion of swanepoel (1998) performance associated emphasis which is subject matter which have taken a growing focus in the field of professional better physical condition for previous thirty years. these writers had the ideas the universe particularly the universe of information and trade has made improvingly inclined to swift moving factors such as much more contest, the stress of standard creation and improvement in the realm of running trade. the requirement on the workers develops as same swiftly and in this way emphasis develops among the workers. besides, emphasis which develops from the performance condition the means of emphasis might associate to individual elements like linkage with the any one and apply of the spare time. emphasis may be narrated the opposite mental and bodily responses which happens in the personal the outcomes of male and female unskilled to handle the requirement which are prepared for male and female (moorhead and griffen, 1998). it is complicated which is develop from useless requirement from the personal. it is copy down that emphasis is not essentially wrong; this is a chance when his provide energetic achievement. but everything its behavior commonly starts when persons are put in a performance atmosphere which is unsuitable the way in which they perform their work technique and tempo. this makes embarrassed when the personal search for that they have and may do a slight grip on it. there are number of institution in the cosmoses are viewing a dangerous enhancement of the wrong impacts of emphasis on the workers encouragement. traditional instances are institutional in america, in the united states, the caribbean, the east and central africa, west africa and in the different portion of the universe. an american academy of family doctor’s viewed the information about two third of the consultant pay a visit to a family doctors are the consequence of emphasis associated symbols. a lots of organization with the purpose of achieving greater creativity since frustrated workers a with extra output to handled dangerous line and this must be mental and bodily impacts on the worker review of economics and development studies, vol. 6 (4) 2020, 759 772 761 which cause outcomes which is totally oppose to the what these institution wish to gain. yet institution focusing deep attention then in the previous time the result of the trauma their workers spend when they put useless requirements on them. there is still more time for achievement. again to develop enough money to be self-maintain and to be able to collect the fund in the taking of latest tools meant able service provision and optimal opportunity of the means. in the opinion of lazarus (2003) stress is a scenario that is multi-dimensional. this scenario can be accepted a serious thing for any institution as it make the reasons of overwork employee septum over (villanueva and jukovic, 2009) the element of stress consider greatly a vital issue for organization and industry that are employee created. this is because work man has to handle quarreling requirement of company, clients and supervisor. these confusion between the employees and the supervisor may speak out the dissonance for employee. previous investigations clear it is very common settlement the institution asking the problems of emphasis and institution are getting busy to try to decrease the emphasis it is a worldly and famous motive, but it can be possible in decreasing the consumption of the worker (cooper and dew, 2008). investigation procedure associated to emphasis for institution it is kind of subject which is under discussed but it has sufficient energy to influence the life of the people in a right full method by improving useful for the main core elements of emphasis assisting tools may be offered to the employees in the institution to highlights their outputs. it is due to this cause, it is comparable to held investigation in the institution to find out the kinds of elements that develop stress for the workers. stress is natural part of life that invents whenever they are greater change in our life if right and wrong. it is seriously impacted that human being handled various type of stressor in case of their understanding. stressors are associated to the work environment and the people. stress is the reaction of the psychical body owing to inter contacting with any instigative in the atmosphere. job stress reasons various psychological issue such as anger, depression, irritability and tension; this impact the motivation of worker wrongly. stress and motivation have opposite linkage; when the stress promote the motivation is going to come down. significance of the study the main motive of the theory is to search for influence of stress on the workers encouragement. the investigator trust that this theory is very vital and would run for long time to copy all the institution very unique those in the service field at the requirement to enable the positive administration of stress for their workers. the theory will also increase to maintain the vocabulary of information. so people in the various part of the homeland try to handle the issue this will also offer views how to decrease the impact of stress at production. once again this will be a mean for more investigation and totally associated to shareholders. the basic purpose of this philosophy is to disclose stress full and motivational elements for the workers in the institution. so to complete this purpose further sub objective are maintained these are as under: 1. to investigate element that can cause job stress. 2. to investigate influence of job stress and availability of motivational elements on the performance of the workers in the organization. 3. to investigate the elements that causes the job stress and recommendation to the director of organization to apply motivational elements and to point out elements that minimize the stress and improve the performance. review of economics and development studies, vol. 6 (4) 2020, 759 772 762 2. literature review the heading literature review means revised and highlighting of presents theories and provides sources data associated to the heading of an investigation. spector (2007) revises that literature review is the motive of highlighting of the current structure of knowledge and information. when an investigator starts the journey to disclose hidden facts and modern approaches in the field of knowledge it is an essential at task review in the literature at the same time handling the procedure is also comparable to the theory. due to the swift changing world in the financial scenario people have to serve under huge pressure at their designation. a large and various areas in literature point out maximum winning element like work, situation, administration, help, work pressure, and recognize the stressful work can be influenced and its impact on the psychological and physical health of the workers. work position be presented in every institution big and small at work areas and institution have develop, therefor greatly complicated owing to occur at the work area and institution have develop so must difficult due to which it exists work place has stressed important impact above the worker job ability and the institution by way of well. job related stress in specific is the failure to holder with the stress in a job for the reason that of a poor suitable between somebody’s skills and his work necessities and situations (rytkon and strandvik, 2005). it is a psychological and physical situation which has emotional impact an individual's production, efficiency, individual strength and value of work. it is also experimental that work-related stress has been related with fatigue, which is well thought-out, a produce of long period contact to stress (burke and green glass, 1994; mearns and cain, 2003). it is formally linked with for the time being and chronic diseases, like headache, hypertension, reduce immune response, stomach complaints, depression, and stock (ashcraft, 1992; burke and green glass, 1994; kahn and byosiere, 1992; kyriacou and sutcliffe, 1977). 2.1 stress the theme of the topic stress makes a dimensional important as the application of the words enhances. the latest introduction which are propounded by the men of letters researcher and investigator relevance that it may be explained as the individual knowledge of an individual which is reasons by the develop pressure extra and useless and suitable requirement. emphasis impact the competency of a personal to handled or this would be accurate to give in the right way which impacts the conception of a personal about the individual capabilities that male and female owns (ricardo, amy and rohit, 2007). 2.1.1 job stress stress associated to task happen when the requirements of job the means and efficiency of personal employees are totally various. in few matters may be right full and impact market place in the very fruitful way by enabling the workers to find out traits of the worker and by highlighting the carefulness of the worker (ricardo et al., 2007). it is unique scale of emphasis which can enhance energetic benefits in the capability of the institution. the emphasis makes extra and over the scale increase that it become unsecure. in these matters it is not only impact the motivation of the workers but this enhances the rate of institution like medical treatments and develops outputs (hassan, et al., 2020). review of economics and development studies, vol. 6 (4) 2020, 759 772 763 2.1.2 job stress and employees presenting to dyck (2001) the standard of life of worker may be badly impacted to job emphasis. in the advanced a progressing country the very vital issue which is health danger in which workers are highlighted is job emphasis. spector (2007) moreover highlight that there are lots of elements which are the cause of job emphasizer. the job emphasizer may handle the given work and the emphasized for the workers no issue if they are the employees of the productive business. to this in the enhancement of the issue their emphasizers like interpersonal association at market place like there is objection against the term and conditions of the administration opposite view against the conduct of the superior authority, and disagree with the assistant with the coworkers (deng et al., 2019). 2.1.3 factors that cause stress conception of people in the uk employees associated to emphasis illness is may be correct at the foundation of only clarity of emphasis associated sickness. in the last century nineteen ninety at the beginning of the twenty century the scale of emphases was checked out to be its highest level in the uk employees. in the back of his scale of emphasis the next causes were right down (ricardo et al., 2007).  the very vital elements in the back of the highest scale of emphasis was countless work load pressure.  instead of extra work load there are lots of elements like sexual are cultural blackmailing reducing the members of staff, working in the shifts, at once changing threatening working extra and long hours are the root cause of emphasis which totally associated to the work load pressure. in the meantime 2000, a slight happening in the related value of any of the associated to emphasis of task is maintained (ricardo et al., 2007). task, emphasis may happen due to various elements like as personal, socio-economic and family affairs (swanson, 1998). 2.1.4 job stress and employees in organization in the institution like that it demands the worker to encounter unhappy practices enable the worker try their hard an enquiry the workers to perform the job in difficult hours. working hours in an institution may be various from institution to institution. working hours also insist progresses of the job (kokoroko and sanda, 2019). in the institution, major changing is happened. the scale of contras has also developed for this enhances the load of task and requirements. so emphasis of workers is one of most centered issue in the institution the staff output proportion is the upgraded in the institution and the main cause behind this is the emphasis and task pressure (pulak, 2012). 2.2 motivation the view of motivation is not modern in the sphere of human means administration. there are numbers of men of letter have explained and suggested it is the term in many spheres and they have offer various translation to motivation of the workers. so many explanations have clear views. at the main point of mental study human knowledge and money motivation consulted to one cause or many which make a person to get indulged in a certain conduct (bratton and gold, 2007). from this point a man may be many point and basic demands like meal and wish for a condition being or a thing can be involved in this cause for motivating a person to behave in a particular methods or to do unique performances. review of economics and development studies, vol. 6 (4) 2020, 759 772 764 2.2.1 motivation and employees this is clarify that chon (2012) the dedication of work man outcomes and retaining of creative work potential it is very vital for administration to develop working situation and motivate the worker reasonably. they are demanded to understand the encouraging procedure requirement of human means in different societies (han et a., 2019). 2.2.2 employee motivation in organization on behalf of the previous many years, motivation among workers in institution is a fascinating subject for a many of investigators and researchers. the workers incentive in administrations can be examined with their attentiveness, pleasantness, exterior and their conduct. besides, the methods they perform their job duties and do their subjective tasks fix their motivation scale in their job (st-onge et al., 2009). in other way, the workers ‘presentation in institution and inns should make greater consolation so as to make continual business with them. therefore, the achievement of an institution certainly extremely needy on how well the front-runners and administration manage their work in this kind of institution. this clears that more important benefit of the administrations in the labor force counting institution and non-management workers (st-onge et al., 2009). 3. theoretical model and hypothesis this study present the main model by which to determine the role of job stress (variable workload pressure, performance pressure) on employee motivation(intrinsic, extrinsic) and performance. the work load pressure and performance pressure are used to measure the motivation and performance. furthermore the independent variable work load pressure and performance pressure the mediation variable intrinsic motivation extrinsic motivation and the dependent variable performance. job stress motivation h1: there is positive relationship between work load pressure and intrinsic motivation. h2: there is positive relationship between work load pressure and extrinsic motivation. h3: there is positive relationship between performance pressure and intrinsic motivation. h4: there is positive relationship between performance pressure and extrinsic motivation. h5: intrinsic motivation mediates the relationship between workload pressure and performance h6: extrinsic motivation mediates the relationship between workload pressure and performance. workload pressure performance pressure intrinsic motivation extrinsic motivation performance review of economics and development studies, vol. 6 (4) 2020, 759 772 765 h7: intrinsic motivation mediates the relationship between performance pressure and performance. h8: extrinsic motivation mediates the relationship between performance pressure and performance. 4. research methodology 4.1 research paradigm and approach the research approach is based on a real problem that requires a solution. for this study positvision has been selected as it based on objective reality, existing theories, acceptable and unbiased knowledge, quantifiable variable and statistical analysis (creswell, 2013). furthermore, deductive inquiry approach is used and it is an associational study that aims to examine the relationship among proposed hypotheses (fraenkel, wallen, and hyun, 1993). the positivist’s paradigms and the deductive approach are appropriate to test the theoretical research model and to examine effects (franenkel et al., 1993). 4.2 sample the population included power organization interested in improving the quality of employee. data regarding job stress variable workload pressure, performance pressure motivation and performance from power organization. questionnaire was distributed 300 hundred responded 255. 4.3 statistical analysis techniques there are various statistical techniques that were used to find out the results. for the example, reliability and validity test were performed to measure the internal consistency and construct validity of scale. where liner regression, mediation, and aguinis (2004) multiple moderation regression test were used to examine the relationships in proposed hypothesis. 4.3 instrumentations sekaran (2006) explained selfadministered questioner as the best data collation tools as selfadministered questioners can be helpful in collection data at low cost, required less effort, pose minimum travelling cost, and do not require the physical presence of the researcher (babbie,2015). a twenty five item questioner was adapted to evaluate job stress employee motivation and performance. this study used a five-point likert scale that ranged from 1=strong disagree to 5=strong agree. exploratory factor analysis is used to examine the construct validity of adapted scales as well as to evaluate the structure of association between variables used and respondents. in this instance, factor analysis was conducted using pca with a varimax approach. in table 1, bartlett’s test of spharicity has found significant e for collected data for factor analysis. furthermore, a sampling adequacy test shows a significant sample and good relationship among variables. kmo sampling adequacy has indicated the appropriateness of these factors. moreover, bartlett’s test and p-values are also significant; therefore, factor analysis was performed. table 1: kmo and bartlett’s tests variable description scale items kmo measure of sample adequacy bartlett’s test of sphericity& chisquare bartlett’s test of sphericity sig. intrinsic motivation 5 .862 1753.12 .000 extrinsic motivation 5 .753 1230.75 .000 performance pressure 5 .782 1012.90 .000 exploratory factor analysis and confirmatory factor analysis were, used on initial responses for review of economics and development studies, vol. 6 (4) 2020, 759 772 766 measuring the construct’s validity for those scales which were adapted to fulfill the aims for this study. by using exploratory factor analysis, the five-item of intrinsic motivation and methods has retained that loaded on its original factor. furthermore, five items of performance were retained on its original factor. finally, all three items of extrinsic motivation scale have loaded on its original factor. in table 2, only those values are presented that have eigen-value> 1. furthermore, three components were selected based on higher eigen-values. these components are called principle components. intrinsic motivation has five-items and is demonstrated 66.49% variance, and extrinsic motivation was measured based on five-item which indicated 77.79% variation. finally, the performance scale consisted of five items and indicated 68.20% variation. table 2: eigen-values and total variance explained constructs components eigen-values total var. % of variance explained cumulative % of variance explained intrinsic motivation 1 st comp. 3.32 66.49 66.49 extrinsic motivation 2 nd comp. 2.55 77.79 77.79 performance pressure 3 rd comp. 2.35 68.20 68.20 confirmatory factor analysis (cfa) was conducted to measure the model fit for proposed hypothesis testing. for measuring the model validity, there are different standards, namely the “tucker-lewis index (tfi), comparative fit index (cfi), root-mean square error of approximation (rmsea), goodness of fit index (gfi), and adjusted goodness of fit index (agfi)”. following the same, rmsea standard benchmark was 0.08 or below, cfi, gfi, afgi, tli standard was 0.90 or above, whereas cmin/df standard for acceptance was <3. initially, there was weak model fit statistics. however, modification indicates were extracted to get good model fit statistics (see table 3) table 3: cfa results descriptions cmin/df cfi tli rmsea gfi agfi weak model fit 4.271 .731 .71 0.78 .723 .809 good model fit 3.01 0.890 0.874 .085 .911 .901 threshold-model fit <3 ≥0.91 ≥0.90 ≤0.81 ≥0.93 ≥0.92 5. results and analysis 5.1 reliability measurement table 4: reliability measurement variables descriptions total items cronbach alpha intrinsic motivation 5 .877 extrinsic motivation 5 .825 performance pressure 5 .850 reliability analysis has conducted to examine the cornbach’s alpha values to measure internal consistency of each construct. the results have revealed that all cornbach’s alpha values vary from .877, .825 and .850 respectively of the above variables table 04 that are significant and align with the review of economics and development studies, vol. 6 (4) 2020, 759 772 767 acceptable standards. 5.2 descriptive analysis table 5: descriptive statistics results variables description valit-n mean std. d min. v. max. v. workload pressure 255 3.31 0.549 1 5 performance pressure 255 3.09 0.844 1 5 intrinsic motivation 255 3.11 0.737 1 5 extrinsic motivation 255 3.97 0.367 1 5 performance pressure 255 2.97 0.436 1 5 descriptive analysis has performed to find the valid-n for each item, average values, standard deviation, minimum range and maximum range values. in table 5, all the extracted means values vary from neutral to strongly agree. 5.3 linear regression analysis table 6: linear regression (workload pressure and performance pressure) variables description performance r 2 f-value un. std. ß t-value p-value workload pressure .312 83.55 .384 3.45 0.000 performance pressure .422 127.54 .509 5.64 0.000 a linear regression test was applied to determine whether or not there was a relationship between job stress and performance. in table 6, the r 2 -value (0.312) means performance changed significantly with workload performance. furthermore, un-standardized ß coefficients and p-values indicated a statistically significant relationship between workload pressure and performance (ß = 0.312, p<0.005). in the same way, the r 2 -value (0.422) showed that performance was influenced significantly by performance pressure. moreover, un-standardized coefficients and p-values demonstrated strong and statistically valid relationship between performance pressure and performance (ß = 0.422, p<0.005). 5.4 mediation analysis preacher and hayes (2004) test has been used to examine the mediation effects of job stress variable and extrinsic motivation among workload pressure and performance. table 7: mediation test ((workload pressure, intrinsic motivation and performance) statistical description a-path 1 x-m b-path 1 m(x)y c-path 1 x-y c-path 1 x(m)y un-standardized ß .581 .401 .507 .311 p-value .000 .000 .000 .000 t-value 10.14 6.19 5.11 4.01 r 2 .501 adjust r 2 .492 significance value .000 f-value 85.14 review of economics and development studies, vol. 6 (4) 2020, 759 772 768 a-path 1 revealed a significant and positive relationship between workload and performance (ß = 0.581, t = 10.14 at 99% confidence level). all four steps of the mediation effects were significant (see table 7). c and c’-path 1 indicated the direct and indirect association shows that, intrinsic motivation partially mediated the relationship between workload and performance. the overall results of mediation were statistically significant (r 2 = 0.501 and f-value = 85.14). table 8: mediation test ((workload pressure, extrinsic motivation and performance) statistical description a-path 1 x-m b-path 1 m(x)y c-path 1 x-y c-path 1 x(m)y un-standardized ß .533 .378 .486 .313 p-value .001 .003 .010 .009 t-value 10.19 5.88 9.51 4.95 r 2 .453 adjust r 2 .449 significance value .002 f-value 65.19 a-path1 reported a significant and positive relationship between workload and performance (ß = 0.533, t = 10.19 at 99% confidence level). all four steps of the mediation effects were significant (see table 8). c and c’-path 1 indicated the direct and indirect relationship between workload and performance. the overall outcomes were statistically significant (r 2 = 0.453 and f-value = 65.19). table 9: mediation test ((performance pressure, intrinsic motivation and performance) statistical description a-path 1 x-m b-path 1 m(x)y c-path 1 x-y c-path 1 x(m)y un-standardized ß .388 .403 .387 .298 p-value .000 .000 .000 .001 t-value 5.94 6.03 5.81 4.51 r 2 .401 adjust r 2 .393 significance value .001 f-value 55.49 a-path 1 showed a significant and positive relationship between performance pressure and performance (ß = 0.388, t = 5.94 at 99% confidence level). c and c’-path 1 showed direct and indirect association’s that, intrinsic partially mediated the relationship between performance pressure and performance (see table 9). the overall statistics were statistically significant (r 2 = 0.401 and f-value = 55.49) review of economics and development studies, vol. 6 (4) 2020, 759 772 769 table 10: mediation test ((performance pressure, extrinsic motivation andperformance) statistical description a-path 1 x-m b-path 1 m(x)y c-path 1 x-y c-path 1 x(m)y un-standardized ß .388 .403 .387 .298 p-value .000 .000 .000 .001 t-value 5.94 6.03 5.81 4.51 r 2 .401 adjust r 2 .393 significance value .001 f-value 55.49 a-path 1 revealed positive link between performance pressure and performance (ß = 0.388, t = 5.94 at 99% confidence level). it is evident that extrinsic motivation partially mediates the relationship between performance pressure and performance. the overall values were statistically significant (r 2 = 0.401 and f-value = 55.49) table 10. 6. conclusion it is the purpose of this philosophy was to maintain how the workers job encouragement in an organization may be develop by the decreasing of job associated stress and by encouraging the worker. for the development and the promotion of the institution this is essential that workers are contented with their work only this is the way they may be capable to do their task in a very impressive way while an institution administration of difficult work and it may develop this contentment with in the worker if it does not mange or handle positively and wholly. the human means specifically in the institution trade perform a very significant part in the improvement of the business in any kind of institution commerce peoples are answerable for rendering the output to the other there for the complete output of the commerce is relied on the output of the worker. in this sense believing the worker output is extra ordinary can be viewed the very vital element to pounder over. at the current market condition where there is a chain of contras so to sustain in the contestant market is essentially for institutional trade to offer the highest capability and skills. it is the motive of this philosophy was to maintain how the workers job encouragement in an institution may be develop by the decreasing of job associated stress and by encouraging the worker. for the development and the promotion of the institution this is essential that workers are contented with their work only this is the way they may be capable to do their task in a very impressive way while an institution administration of difficult work and it may develop this contentment with in the worker if it does not mange or handle positively and wholly. the human means specifically in the institution trade perform a very significant part in the improvement of the business in any kind of institution commerce peoples are answerable for rendering the output to the other there for the complete output of the commerce is relied on the output of the worker. in this sense believing the worker output is extra ordinary can be viewed the very vital element to pounder over. at the current market condition where there is a chain of contras so to sustain in the contestant market is essentially for institutional trade to offer the highest capability and skills. 7. theoretical and practical implications the consequences are remarkable with negative correlation between job stress and motivation and disclose that job stress prominently shortens the motivation of a specific. the consequences propose to the institution that they have maintained a very healthy cooperative and amiable atmosphere with in the group for best motivation. review of economics and development studies, vol. 6 (4) 2020, 759 772 770 8. limitations ad future directions shortage of time which has been defined to deal this study is very limited for the collection of lots of data and this is the limitation which have to be parted with the central academic task which concluded and getting ready in confronted discussion and trials. it is a main issue in offering the requirements efforts for the investigated information. few answerable people did not help the investigator in the time information data and knowledge collection and assembling. this study has conducted only electric power organization. references aguinis, h. 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(2009). occupational stress and intention to leave among employees in small and medium enterprises. international journal of stress management, 16(2), 124. review of economics and development studies, vol. 7 (2) 2021, 131-145 131 natural resources, institutional quality and financial development in gcc member countries: visiting ‘resource curse hypothesis’ by dcce estimation muhammad faheem a , imran sharif chaudhry b , sadam hussain c a assistant professor, school of economics bahauddin zakariya university, multan, pakistan email: faheem@bzu.edu.pk b professor, school of economics bahauddin zakariya university, multan, pakistan email: imran@bzu.edu.pk c phd scholar, dongbei university of finance and economics, china email: sadam_2iqbal@yahoo.com article details abstract history: accepted 25 april 2021 available online june 2021 the main purpose of the study is to check whether natural resource rent affects the financial development or supporting the resource curse hypothesis by employing a recently developed estimation technique by chudik and pesaran (2015) from 1985 to 2017 in gcc member countries. the novelty of this methodology is to consider structural breaks and the heterogeneity issues that are common in panel data. the results of dcce estimates are in support of the resource hypothesis that natural resource rent hurt financial development. additionally, this study takes moderation of institutional quality to check the threshold point or turning point where the natural resource rent effect becomes positive. our results of interaction term postulate that a higher level of institutional quality mitigates the adverse effect of natural resource rent on financial development. the study results recommend the policy of natural resource rent in the presence of high institutional quality should continue because it improves the financial development in gcc member countries. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: financial development, natural resource rent, institutional quality, dcce approach, gcc countries jel classification: a19, c58, g00, q34 doi: 10.47067/reads.v7i2.343 corresponding author’s email address: imran@bzu.edu.pk 1. introduction the financial development role is central for greater prosperity achievement, and an efficient financial system is needed to encourage natural resources efficient for the growth of any economy (pradhan et al., 2016; nawaz et al., 2019). financial development also improves financial intermediary services' quality and quantity (muhammad et al. 2016). stabilization and commercial banking assets, net interest margins, and creation of creating credit circulation are the source of financial indicators stability (dwumfour and ntow-gyamfi, 2018) that contribute to economic growth but in low strength in resource abundance countries (sachs and warner, 2001; gelb, 2010). the development of any economy's natural resources plays a crucial role for the countries as it is an asset of a country (guan et review of economics and development studies, vol. 7 (2) 2021, 131-145 132 al., 2020), and that is in discussion since smith (1776) and ricardo (1917). it helps to generate economic activities and recorrect trade balance through institutional performance, good governance indicators, and financial development (asif et al., 2020). on the contrary, under certain conditions, resource abundance creates an exigent environment for financial sector development. nevertheless, in recent times several economies have high natural resources but lagging in economic growth from countries that have fewer resources (badeeb et al., 2017). in theory, the resource curse concept assumes the cause of the economic collapse of assets plentiful nations, and experimentally, it was shown that in the mainstream of surveys (sachs and warner, 2001). the investigation described numerous reasons that trigger the resource curse hypothesis, for example, dishonesty, rental pursuing actions, fallback industrial sector financing, and inferior organizational quality and goods price shocks in assets-rich nations (mlachila and quedraogo, 2019). economic growth is supposed to be a foundation for moving capital curse into capital benediction in the existence of higher organizational superiority, high-level trade, and great value of human capital (rajan and zinglaes, 2013). previous literature has shown that institutional quality important determinant of financial development (law et al., 2014; kirch and terra, 2012; law and habibullah, 2006; tamazian and rao, 2010). many researchers reported a positive relation (khan et al., 2020; bhattacharyya and hodle, 2014). in contrast, others found a negative relation (hunjra et al., 2020). the literature revealed a damaging linkage of sources with economic advancement (cardon and neary, 1982; zoega and gylfascon, 2001; guan et al., 2020; sun et al., 2020). on the other side, there is a work in the paradox of the research and revealed a positive relationship (auty, 2001; gokmenoglu and rustamov, 2019; nawaz et al., 2019). so, our investigation provides policy direction for the accomplishment of financial expansion along with efficient natural assets use in the gcc countries. this remaining is organized in the following sections: part 2 reviews previous studies. part 3 detail the methodology. part 4 expresses the results and the final section draw concluding remarks and suggestions. 2. literature review a glut of empirical literature investigated the association of natural resource with macroeconomic indicators, like natural resource and economic growth (fum and hodler, 2010; alexeev and chernyavskiy, 2015; erum and hussain, 2019; atil et al.,2020); inflation (ouoba, 2016; kim and lin, 2017; henri, 2019; freeman et al., 2020; chaudhry et al., 2021) unemployment ( sjöberg et al., 2010; kayode et al., 2014; bagchi and paul, 2018; mukoka, 2020) trade balance (vallejo, 2010; gill et al., 2014; harding and venables, 2016; tran et al., 2020); poverty (barbier, 2010; timilsina and zilberman, 2016; marchand and weber, 2018); environment (simon, 2010; panayotou, 2016; ding and peng, 2018; badeeb et al., 2020). however, limited studies revealed the link of natural resources with the financial sector (shahbaz et al., 2013; bhattacharyya and hodler, 2014; hattendorff, 2014; suliman and elian, 2014). the overwhelming part of the literature demonstrates a positive association of natural resources with financial development like, (nwani, 2016; zaidi et al., 2019; ibrahim, 2019; faisal et al., 2019; yıldırım et al., 2020) and other negatives (khan et al., 2020). many studies reported a positive association link of natural resources with the financial development of countries (nwani, 2016; ibrahim, 2019; zaidi et al., 2019; khan et al., 2020). khan et al. review of economics and development studies, vol. 7 (2) 2021, 131-145 133 (2020) indicate a linkage between financial development and natural resources by employing maki cointegration and multiple structural break approach evidence from china positively. recently, yıldırım et al. (2020) reported the positive influence of natural resources on financial development evidence from 16 countries. in contrast, asif et al. (2020) used the ardl approach and empirical results reported that natural resources harm financial development in the long run in pakistan. evidence from china, guan et al. (2020) reported the negative effect of natural resources on financial development overused time-series data from 1971-2017 by employing the ardl approach. similarly, bhattacharyya and hodler (2014) argued that if the political-institutional quality is poor, so the result reported with statistical evidence that found a negative association. in china, yuxiang and chen (2011) tested how natural resources affected financial development overtime the period 1996 to 2006 by employing the gmm model. the result indicates that natural resources hurt financial development. in eight asian countries, law et al. (2014) tested the relation between institutional quality and financial development over time from 1984 to 2006 by employing an econometric heterogeneous panel cointegration test. the empirical result reported a positive influence of institutional quality on financial development. in ninety developed and developing countries, huang (2010) revealed the association of financial development and political intuition by employing the gmm model overusing panel data from 1960 to 1999. the result statistically indicates a positive association. in contrast, girma and shortland (2008) investigated the influence of political intuition on financial development by employing the gmm model. the statistical result indicates that political institution has positively affected to financial development. law et al. (2015) tested the influence of real gdp with other variables like institutional quality and globalization on financial development over the time from 1984 to 2008 in east asian countries. the empirical analysis result indicates that real gdp affected positively. atil et al. (2020) explores the association of real gdp, oil price, natural resource, and globalization with financial development in pakistan over 1972-2017 and found real gdp associated positively with financial development. similarly, satti et al. (2014) found the granger causality relationship. in the case of gcc panel countries, grassa and gazdar (2014) by employing ols, and gls approaches, and result indicates the negative and significant impact of financial development on economic growth. in contrast, bist (2018) analyzed the association of financial development on economic growth in the long run by employing the ols approach over using panel data of 20 years. from the previous literature, it can be wrap up those ambiguous findings exists in literature and there is a need to address this issue in the context of oil-exporting countries like gcc member countries that are highly resource-abundant. 3. data and methodology for the testing of the resource curse hypothesis, our study uses financial development (proxied by broad money to gdp) as a dependent variable. the regressors are natural resource rent, gross domestic product (gdp), institutional quality (insq), and the interaction term of institutional quality and natural resource (nrr*insq) and all variables are taken in logarithmic form, and description reported in table a1 (see appendix). the study covers the period 1985-2017 for gcc member countries. different methodologies have been used in previous studies to prove the resource curse hypothesis. some are on time series data like ardl, nardl, var and others are on a panel like gmm, fixed and random effect, panel ardl. these methods are traditional methods and unable to cover review of economics and development studies, vol. 7 (2) 2021, 131-145 134 severe issues related to heterogeneity, cross-sectional dependence, and structural breaks. the study uses the recently developed methodology that covers this issue and provides reliable estimates. 3.1 dcce estimation methodology a recently developed dynamic common correlated effects (dcce) method by chudik and pesaran (2015) solves the previous studies' issues that make them inefficient and unreliable for estimation. this method solves the issue of cross-sectional dependence (csd) which was not entertained in previous studies by taking cross-sectional averages and lagged cs averages of the dependent variable with regressors. this method also entertains the heterogeneity issue in the parameters with the assistance of the mean group method and suitable, even small sample size. the beauty of this methodology is that it gives reliable estimates to even have unbalanced data and structural breaks (kapetanios et al. 2011; ditzen, 2016; ditzen, 2019). the study empirically tested the resource curse hypothesis in the specification dcce estimation by taking financial development as the dependent variable and natural resource rent, real gdp, institutional quality, an interaction term of institutional quality, and natural resource rent as independent variables. the concerned model is composed in the following equation: 1 0 0 t tp p it i it i it xip t p yip t p it p p y y x x x                (1) in the above equation yit, yit-1 and xit represent the dependent variable, lag of dependent variable, and independent variable, respectively. the cross-sectional time and dimension are denoted by i and t. and pt and it denotes the lag of cross-sectional averages and the error term. xip and yip denotes the unobserved factors. for testing the resource curse hypothesis, we extend this in our variable formulation: itpt pt p yippt pt p xipitiitiit xxxlfdlfd         00 1 (2) in the above equation, lfd is the log of financial development that is used as the dependent variable, and other lnrr, lgdp, linsq, and (lnrr*linsq) are explanatory variables reported by xit. it  is the error term. 3.2 test of cross-sectional dependence (csd) it can happen cd in the panel estimation because of interaction among countries, space effects, and unobserved factors, and estimation will provide unreliable results if these issues do not address properly (chudik and pesaran, 2013; dong et al., 2018b). the widely used method to tackle this cd issue is the lagrange multiplier (lm) test grounded in breush and pagan (1980) and expressed as follows: it i i it it y x     i and i denotes countries individual slope coefficients and intercept. review of economics and development studies, vol. 7 (2) 2021, 131-145 135 breush and pagan (1980) lm test standard form is the following: 1 2 1 1 n n ijbp i j i lm t         notwithstanding, there are some shortcomings in this test like it is suitable only for the large period and the small number of countries (pesaran, 2004). therefore, the scaled version is given by pesaran (2004) which tackles the previous test issues.   1 2 1 1 1 lm test = 1 ( 1) n n ij i j i scaled t n n                  for the small sample and large n, pesaran (2004) introduced the cross-sectional dependence (cd) test which is also suitable. 1 1 1 2 cd = ( 1) n n ij i j i t n n                  the latest modified version of the lm test is given by baltagi et al. (2012) for accurate mean and variance of the lm statistics: 3.3 unit root tests (first generation and second generation) there are frequently adopted traditional first-generation unit root tests in the literature like llc, ips, adf, and pp that guides variables’ stationarity. but the issue is that in the case of cd, these test results are not more reliable (pesaran, 2007). in contrast, the second-generation unit root test like cips introduced by pesaran (2007) tackle these issue that first-generation unit root ignored. 3.4 cointegration test (pedroni and westerlund) in the case of csd, the results not more reliable by traditional unit root tests like pedroni (1999). consequently, we apply a recently developed cointegration technique developed by westerlund (2007) that provides reliable results and cope with the issues. the specialty of this test is it considers the cointegration in panel series whether ecm present for individual or the whole panel (persyn and westerlund, 2008). 4. results and discussion the summary of features of data expresses in the form of descriptive statistics and correlation shows the association, results are reported in the following table 1 of lfd, lnrr, lgdp, linsq, and (lnrr*linsq), respectively. review of economics and development studies, vol. 7 (2) 2021, 131-145 136 table 1: descriptive statistics and correlation lfd lnrr lgdp linsq (lnrr*linsq) mean 3.9619 3.4665 25.2838 1.8387 6.3944 median 3.9529 3.5063 25.286 1.9284 6.5066 maximum 5.2587 4.1278 27.2233 2.1691 8.6051 minimum 3.2614 2.1613 23.4531 2.00e-06 4.32e-06 std. dev. 0.3715 0.3599 1.0452 0.3007 1.2638 skewness 0.2693 -0.7789 0.1026 -2.1118 -1.0582 kurtosis 2.8053 3.7047 1.8582 10.7401 5.8312 jarque-bera 2.2550 20.0971 9.2519 534.5270 85.9024 probability 0.3238 0.0000 0.0098 0.0000 0.0000 sum 653.7071 571.9790 4171.821 303.3864 1055.083 sum sq. dev. 22.6310 21.2537 179.1699 14.8284 261.9439 observations 165 165 165 165 165 lfd 1 -0.1189** 0.1131 -0.0814 -0.1002 lnrr 1 -0.1775** 0.1905** 0.6529*** lgdp 1 0.3085*** 0.1434* linsq 1 0.8544*** (lnrr*linsq) 1 to test the cross-sectional dependence is very crucial for choosing the econometric method. different types of tests are applied like biased-corrected scaled lm test, cd test, and scaled lm test which is given by baltagi et al. (2012), (pesaran et al. 2004), and pesaran (2004) to check the csd and provides us guidance about methodology. the results of these tests report in the following table 2. table 2 : panel unit root tests for cross-sectional dependence pesaran cd pesaran scaled lm breusch-pagan lm lfd 8.68*** 24.14*** 122.99*** lnrr 12.37*** 34.01*** 167.09*** lgdp 17.14*** 62.44*** 294.24*** linsq 14.31*** 44.55*** 214.22*** (lnrr*linsq) 14.71*** 46.28*** 221.96*** *** show to the levels of significance at 1 percent. unit root tests are two types namely first and second generations unit root tests and most studies only rely on first-generation unit root tests like levin et al. (2002), im et al. (2003), and some other traditional unit root tests. some issues are not covered by these unit root tests like these tests ignore the csd, which is the most major problem in panel data. to tackle this issue and for reliable results, we use the second-generation unit root test (cips-test), which is introduced by pesaran (2007) and is useful for guidance of econometric methodology. the following table 3 of unit root test results express that variables are mixed order of integration. review of economics and development studies, vol. 7 (2) 2021, 131-145 137 table 3: unit root (first & second generation) tests results unit root tests (llc & ips) levin, lin, and chu im, pesaran, and shin w-stat level first difference level first difference lfd 2.57 -5.76*** 2.04 -7.61*** lnrr -2.36*** -2.96*** -3.03*** -9.44*** lgdp 2.08 -3.24*** 4.39 -4.59*** linsq -2.82*** -7.33*** -1.56* -6.85*** (lnrr*linsq) -1.87** -3.95*** -1.34* -7.19*** unit root test (cips) level first difference lfd -1.52 -5.39*** lnrr -3.13*** -5.46*** lgdp -2.23 -4.56*** linsq -1.99 -4.19*** (lnrr*linsq) -2.62** -4.98*** note: *** , **and * show the levels of significance at 1 percent, 5 percent, and 10 percent, respectively. the next step is to check the cointegration among the variables. for this, we applied two types of unit root tests for reliable results. first, we applied the traditional cointegration test that is introduced by pedroni (1999), and table 4 expresses the results. the outcome of the traditional cointegration test shows there is no cointegration. the results of the traditional cointegration test are not sufficient and reliable because it ignores the various issues like csd, structural breaks. while the second-generation cointegration test that was introduced by westerlund (2007) is suitable because it copes up these issues regarding structural breaks, csd, serial correlation, and heteroskedasticity. table 4: pedroni residual (traditional) cointegration test t-stat probability w. stat probability v-stat 0.48 0.31 0.32 0.37 rho-stat -0.53 0.29 -0.16 0.43 pp-stat -1.85** 0.03 -1.32 0.09 adf-stat -1.34* 0.08 -0.92 0.17 stat probability group rho-stat 0.23 0.59 group pp-stat -1.63** 0.04 group adf-stat -1.16 0.12 note: **and * refer to 5% and 10% levels of significance, respectively. the following table 5 reports the results of westerlund (2007) cointegration test that show the existence of cointegration in the long run. review of economics and development studies, vol. 7 (2) 2021, 131-145 138 table 5: panel cointegration test (westerlund ecm) h0: no cointegration value probability gt -3.63** 0.02 ga -11.01** 0.01 pt -7.96*** 0.00 pa -13.36** 0.03 note: *** and ** refer to 1% and 5% significance level, respectively. the findings of the dcce model are reported in table 6. the results show our main independent variable nrr is associated with financial development negatively, which means a one percent increase in lnrr will decrease financial development by 0.28%. these results support the resource curse hypothesis in gcc member economies. other control variables affect significantly financial development. the variable lfdi shows a positive association with the ecological footprint. however, the result of our interaction term is positively significant that explains this resource curse effect minimizes and converts to a positive effect in the presence of strong institutional quality. table 6: results dynamic common correlated effects (dcce) estimation regressors coefficient p-value lfd (-1) -0.79** (0.06) lnrr -0.28** (0.03) lgdp 0.37* (0.07) linsq 0.88** (0.02) (lnrr*linsq) 0.23*** (0.00) constant 0.44 (0.90) note: ***, ** and * shows 1%, 5% and 10% significance level, respectively furthermore, the study finds the marginal effect at various institutional quality levels like minimum, mean and maximum level, and following table 7 and the graph presents the results. table 7: marginal effect minimum average maximum gcc member countries institutional quality 2.00e-06 1.8387 2.1691 marginal effect -0.208 0.2149 0.2908 titit linsqlnrrlfd 23.0208.0/  the marginal effect of natural resource rent on financial development is calculated at minimum, the mean and maximum level of institutional quality is -0.208, 0.2149, and 0.2908, respectively. review of economics and development studies, vol. 7 (2) 2021, 131-145 139 figure 1: marginal effect graph the study further checks the robustness by using new proxy financial development, and the results are given in table 8. the findings are consistent with the previous results reported in table 6. natural resource abundance hurts financial development while real gdp, institutional quality, and interaction term increase the financial development for gcc member countries. table 8: robustness check using financial development index as measure for financial development regressors coefficient probability-value lfd (-1) -0.56*** (0.00) lnrr -0.57*** (0.00) lgdp 0.15** (0.04) linsq 0.45*** (0.00) (lnrr*linsq) 0.17** (0.02) constant 0.77 (0.81) our results are in line with the empirical studies of asif et al. (2020) that sow the adverse association of resources with financial development. the control variables real gdp, and institutional quality affect positively significant. the interaction term of natural resource rent and institutional quality is positive that postulates, resource curse hypothesis mitigated by a high level of institutional quality. 5. conclusion and recommendations the explores the relation of natural resource rent with financial development in visiting the resource curse hypothesis in gcc member countries over 1985-2017. we employ the novel method mean of linsq 0 .5 1 1. 5 2 2. 5 k er ne l d en si ty e st im at e of l in s q -1 0 -5 0 5 10 m ar gi na l e ffe ct o f l n r r on l b m 0 .5 1 1.5 2 linsq thick dashed lines give 95% confidence interval. thin dashed line is a kernel density estimate of linsq. review of economics and development studies, vol. 7 (2) 2021, 131-145 140 dcce approach developed by chudik and pesaran (2015) that have an advantage over the traditional method to cope with the cross-sectional dependence and structural breaks problem in the panel data. the results of dcce estimates are in support of the resource hypothesis that natural resource rent harms financial development. additionally, we take moderation of institutional quality to check the threshold point or turning point where the natural resource rent effect becomes positive. our results of interaction term postulate that a higher level of institutional quality mitigates the adverse effect of natural resource rent on financial development. the study results recommend the policy of natural resource rent in the presence of high institutional quality should continue because it improves the financial development in gcc member countries. references albuquerque, u. p., soldati, g. t., ramos, m. a., de melo, j. g., de medeiros, p. m., nascimento, a. l. b., & júnior, w. s. f. 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(2017). china's regional natural resource allocation and utilization: a dea-based approach in a big data environment. journal of cleaner production, 142, 809-818. zoega, g., gylfason, t., 2001. natural resources and economic growth: the role of investment (no. 2743). cepr discussion paper. review of economics and development studies, vol. 7 (2) 2021, 131-145 145 appendix table a1: variable description and data sources variables description measurement (unit) source lfd log of financial development broad money to gdp wdi lnrr log of natural resource rent total natural resource rent (% of gdp) wdi lgdp log of gdp constant 2015 us$ wdi linsq log of institutional quality calculated through panel principal component analysis (pca) international country risk guide (icrg) review of economics and development studies vol. 3, no 2, december 2017 167 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 2 december 2017 journal homepage: www.publishing.globalcsrc.org/reads impact of urban agglomeration on economic growth of cities 1 zahid ullah khan, 2 masood sarwar awan 1 lecturer, department of economics, university of sargodha, pakistan, ask2khattak@hotmail.com 2 chairman, department of economics, university of sargodha, pakistan, awan811@hotmail.com article details abstract history revised format: nov 2017 available online: dec 2017 purpose: current study attempts to identify the impact of urban agglomerations on economic growth of cities in punjab, pakistan. additionally the study attempted to identify the non-linearity of urban system in punjab. the study utilized the district level data collected from secondary sources. for the purpose of estimations the study utilized recursive econometric technique. the results of the study showed that market size, district land area and govt. policy for agglomeration has a positive and significant impact on urban agglomeration. while district vehicle density and district urbanization level negatively and significantly affect urban agglomeration. results for urban economic growth regression showed that urban agglomeration positively and significantly affect urban economic growth. the study also supported the shaped non-linearity of the core-periphery (cp) model in punjab’s urban system. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords economic growth, urban jel classification: p25, o4 corresponding author’s email address: ask2khattak@hotmail.com recommended citation: khan, z. & awan, m. s., (2017). impact of urban agglomeration on economic growth of cities. review of economics and development studies, 3(2) 167-181 doi: https://doi.org/10.26710/reads.v3i2.193 1. introduction in the words of theodore parker “cities have always been the fireplaces of civilization, whence light and heat radiated into the dark” (o’sullivan & irwin, 2007 p.1). some cities are more developed than others despite of their same initial levels. some cities become successful while others fail to develop. henderson et al. (2007) argued that most of the success of cities development is devoted to the factors that are either out of the immediate control of the cities (such as location, being a port in a period of national trade growth, growth in market potential, national level decentralization and improved governance) or policies and politics of individual cities. a significant but less well known is the urban transition in which countries shift from chiefly rural and agriculture to urban. in developing countries such transition is achieved in much shorter time as compared with the case of industrialized countries, despite having much greater population volumes than industrialized nations. it took few decades for many latin american countries to achieve this transition, even though they were experiencing their fastest population growth ever (martine, 2008). in past mostly highly developed countries were the host of large cities however this trend is now changing and most of the large cities of the world are found in developing countries (tripathi, 2013). there were two (one) urban agglomerations having population of one to five million in japan (pakistan) in 1950. the http://www.publishing.globalcsrc.org/reads mailto:ask2khattak@hotmail.com mailto:awan811@hotmail.com mailto:ask2khattak@hotmail.com https://doi.org/10.26710/reads.v3i2.193 review of economics and development studies vol. 3, no 2, december 2017 168 number of urban agglomerations having million plus population increased to six (six) in japan (pakistan) in 2010 (world urbanization prospects, 2011 revision). according to united nations (un) projections the number of cities that have million plus population will remain at six in japan while it will increase to 10 in pakistan by 2025. similarly in 1950 12 (16) percent of the urban population of japan (pakistan) was residing in the size class of urban settlements of one to five million population while percentage of urban population residing in the size class of urban settlements of one to five million population increased to 13 (19) percent of the urban population of japan (pakistan) in 2010. cities and towns are the engines of economic development and they maintain development and growth in their closest surrounding areas. they are an important part of the national spatial economic system. according to coetzee (2008) “cities and towns thus do matter because it is where economic activity occurs, i.e., production and consumption and the allocation of resources predominantly takes place in towns and cities”. it can also be argued that most innovations and technological progress are made in cities. towns and cities are thus very important in the modern economy and therefore the factors that determine the economic growth of a city are equivalently important (coetzee, 2008). just to work in a city would be no reason behind individuals to pay high rents without the opportunities, to learn from others and enhance one’s own productivity, that are made by urban areas (glaeser et al., 1992). glaeser et al. (1992) suggested that the survival of cities, despite the high rents, might be best explained by the easy flow of ideas in cities. krugman (1991) and fujita et al. (1999) studied the urban agglomeration, economic growth and the relationship between these two so that the relevant factors that are thought to be the reason for concentrated economic activities in cities could be found. tripathi (2013) used new economic geography (neg) framework in his study which showed that resources were shifted from rural agriculture areas or surrounding regions to core region or urban areas because of the difference in productivity. determinants of city growth can be divided into two types of factors (krugman, 1991). krugman (1991) noted that factors which are mainly related with the geography (climate, costal location or access to natural resources), are termed as first nature and they use to influence city growth in the early stages. and on the other hand the factors which are associated to agglomeration economies and the increasing returns of scale are termed as second nature ones. major urban agglomerations in pakistan include faisalabad, gujranwala, hyderabad, islamabad, karachi, lahore, multan, peshawar, quetta and rawalpindi. in pakistan agglomerations having ten million or more population is only one, agglomerations having population between five to ten million are two, agglomerations having population between one to five million are eight, there are approximately 75 cities with population between 100,000 and a million and agglomerations having population fewer than 50,000 are numerous (world urbanization prospects, 2011 revision). from the discussion above it is evident that urbanization and urban agglomerations are very much important and play very significant role in the development and growth of economies all around the world. so there is a need to look this scenario in pakistan. following graph shows the distribution of urban and rural population as well as urban population as percentage of total population in pakistan. review of economics and development studies vol. 3, no 2, december 2017 169 figure 2 distribution of urban and rural population source: un, world urbanization prospects: 2011 revision it can be seen very clearly that from 1949-50 to 2010-11 the share of urban population in total population is growing very rapidly. it grew from only 18 per cent in 1949-50 to 36 per cent in 2010-11, doubling only in 61 years and it is likely to pass 50 per cent by the year 2040. figure 3 urban and rural percentages of population in pakistan source: source: un, world urbanization prospects: 2011 revision we can see that urbanization is fast in pakistan so there is a need to study the effects of urban population on economic growth of the cities. 1.1 objectives of the study  to identify the determinants of city population growth in the punjab (pakistan)  to identify the determinants of city economic growth (output) in the punjab (pakistan)  to capture the impact of urban agglomeration on urban economic growth  to suggest some suitable policy options 2. methodology following basic model is used in the study for estimating the determinants of urban agglomeration. ua = a1x1+a2x2+a3x3+a4x4+a5x5+a6x6+a7x7+a8x8+u1 (1) where ua stands for urban agglomeration, x1 for market size effect, x2 for distance from a bigger city, x3 for city vehicle density, x4 refers to district urbanization level, x5 refers to government policy for urban agglomeration, x6 for environmental effect, x7 refers to political instability, x8 refers to size of a district and u1 refers to stochastic error term. the above equation (1) is a linear regression model and estimated through ols. market size effect>0 distance<0 review of economics and development studies vol. 3, no 2, december 2017 170 vehicle density <0 urbanization level >0 government policy for urban agglomeration>0 environmental effect>0 political instability<0 size of district<0 district environmental effect is considered for the positive impact of first nature geography (fng). because the population may be attracted towards a district due to the encouraging climatic circumstances of the district concerned leading to concentration of population in that district. related positive and negative factors are considered that are included in the new economic geography (neg), also called second nature geography (sng), to explain urban agglomerations. size of the market is among the encouraging factors because larger market provides labor pool (that can be utilized by firms) and also because firms enjoy economies of scales at factory level. firms can produce a variety of consumer products that can be enjoyed by the residents of the area. availability of variety of products attracts the population towards that urban residency. whereas negative factors in sng include following variables:  distance from divisional headquarters: longer distance to headquarter decrease market potential as headquarters and larger cities become key magnet centers for economic activities.  higher vehicle density: it detains the external diseconomies.  other variables that were expected to affect the urban agglomeration positively are following:  road length constructed in a district which shows government expenditure for the development of agglomeration because the more government spend on the provision of public amenities the more firms and workers will be attracted towards that district.  urbanization level of the district because higher level of population concentration is revealed in the higher level of urbanization of the district. while on the other side negative factors affecting urban agglomeration consist of following variables:  political instability: it is assumed that it creates aloof environment for the city residents resulting in repelling the population from the district.  size of the district: it is believed that as the land area of district increases urban population concentration will be stretched over several smaller residencies instead of creating an agglomeration because resources are dispersed over the whole area of the district. after estimation of the above equation (1), following equation is used to estimate the urban economic growth. ug = b0 + b1 ͞u͞a+ b2z1+ b3z2+ b4z3+ u2 (2) where ug stands for urban economic growth, u͠a refers to predicted values of the dependent variable (i.e., urban agglomeration) of equation (1), z1 stands for minimum distance from another district, z2 refers to literacy rate of the district and z3 refers to city density. ols technique is used for the estimation of equation (2), which is a linear regression model for cross sectional data. predicted ua>0 city density >0 literacy>0 minimum distance from another district<0 following the neg models, the study expected that urban agglomeration will positively affect urban economic growth, because larger cities have higher wages, productivity and capital per worker (i.e., higher economies of agglomeration) and greater efficiency benefits. among the other variables the study expected city density to have a positive impact on urban economic growth. literacy rate of a district is expected to affect the urban economic growth positively. as literacy rate captures human capital accumulation effect and human capital accumulation can create a skilled labor force pool by attracting production units and residents. distance from another district is expected to have review of economics and development studies vol. 3, no 2, december 2017 171 negative effect on the urban economic growth while square and cube of the minimum distance from another district are expected to have positive and negative effect on urban economic growth respectively. model (1) and (2) together form the recursive equation system for the estimation of determinants of urban economic growth particularly for capturing the impact of urban agglomeration on urban economic growth. 2.1 data sources unit of observation in the study is district and data on 36 districts of punjab is utilized in the study. data used in the study is taken mainly from punjab development statistics 2006-07, 2011-12 published by bureau of statistics government of punjab, district census reports 1981, 1998 published by pakistan bureau of statistics and regional meteorological centre lahore. data used in the study is comprised of weak proxies of the variables as exact variables were not available. most of the variables are generated from the information available at hand. 3. results and discussion table 1 and table 2 shows the means, standard deviations, minimum and maximum values of the sample used in the study regressions. more importantly standard deviation measures the fickleness of the variables which is found higher for distance from the nearest district, size of the district and for vehicle density. data on these variables constitute values that are spread over a wider range of values. table 1 descriptive statistics of model 1 variables obs. mean std. dev. minimum maximum percentage share of total urban population in each district urban population 36 2.77 4.26 0.52 24.01 distance to nearest district 36 66.60 32.06 36.4 201 district vehicle density 36 131.37 355.44 5.95 2160.04 percentage share of district wise urban population to total population 36 24.83 2.40 12.18 82.05 district wise road length per 1000 population 36 4.85 2.91 0.17 15.74 district temperature differences 36 33.06 4.58 14 38 district wise crime rate 36 0.37 0.13 0.20 0.92 district land area 36 5704.02 4303.25 1772 24830 mean distance from the nearest district is 66.60 kilo meters while minimum and maximum distances from the nearest districts are 36.4 and 201 kilo meters respectively. rahim yar khan has the maximum distance from another nearest district while toba take singh has the minimum distance from other district that is present nearest to it. vehicle density is smallest in district chiniot while it is largest in the district lahore. urbanization level is lowest in the district chakwal whereas it is highest in the district lahore. however on the other hand road length constructed per thousand populations in a district is lowest in lahore while highest in the district chakwal. muzafargarh, hafizabad and khanewal are the districts where temperature variations are largest while in district toba take singh its variations are lowest. khushab is the district where crime rate is lowest on the other hand crime rate is highest in the district lahore. size wise district bahawalpur is the largest district while lahore is the smallest district. the study used following key proxy variables. distance to the divisional headquarter is used to capture the market size effect. crime rate is used to consider the political instability in the district because it is related to law and order situation. temperature differences are used to capture the environmental effect on urban agglomerations. vehicle density in the district is used to capture external diseconomies in terms of transfer congestion. review of economics and development studies vol. 3, no 2, december 2017 172 table 2 descriptive statistics of model 2 variables obs. mean std. dev. minimum maximum distance to nearest district 36 66.60 32.06 36.4 201 distance to division headquarter 36 74.19 56.93 0 199 district population density 36 672.53 818.94 125.35 5087.47 district wise literacy rate 36 44 11.635 20.7 70.5 district labour force growth rate 36 1.23 2.067 -5.41 6.47 3.1 determinants of urban agglomeration in table 3 results of ols regressions are presented that are estimated to find the major determinants of urban agglomeration. a number of different regressions are used due to insufficiency of data so that best results can be obtained. different dependent variables were used however most satisfactory results are obtained only with the use of log of urban population agglomeration as dependent variable. results are presented with respect to best fitted model in reference to the forecasted signs, statistical significance of the variables and overall goodness of fit of the model. all the regressions results are presented with standard errors in parentheses. regression (1) includes all the variables for which data was available and it captures 83 per cent of the total variation in the dependent variable. proxy variable for market size effect shows that a 10 per cent increase in market size leads to almost one per cent increase in the size of urban agglomeration. this finding is in line with our a priori expectation and statistically significant, because larger market size provides more opportunities for the firms established there to sell their output in an expanded market. this will lead to growth of the firms and population will be fascinated by established firms. district vehicle density which shows external diseconomies negatively affect urban agglomeration as expected however its coefficient revealed that it has smaller effect on urban agglomeration. proxy variable of government policy for urban agglomeration i.e. district wise road length per 1000 population shows positive effect on the size of urban agglomeration as its coefficient is statistically significant at 10 per cent level. to be specific every 10 per cent rise in district wise road length per 1000 population leads to 2.5 per cent increase in the size of urban agglomeration. this result is according to our expectations because it is obvious that when government pays more attention to the amenities available for people in a district, population will be attracted towards that locality. results of regression (1) shows that urbanization level is negatively linked with urban agglomeration possibly because higher urbanization levels are associated with greater dispersion forces and they dominate the agglomeration forces propelling the population and discouraging the agglomeration. however the coefficient of the variable is insignificant showing that it may have no strong relationship with the urban agglomeration. district crime rate a proxy variable for political instability in the district shows positive effect on agglomeration which is against our priori expectation. however its coefficient is very small and also statistically insignificant showing that it has no important role as determinant of urban agglomeration in punjab. environmental effect which is proxies by temperature differences in the districts shows negative relationship with urban agglomeration and this result is in accordance to our expectation, indicating that extreme weather conditions discourage urban agglomeration. however this relationship is statistically insignificant indicating that environmental effect may not be that much important determinant of agglomeration. among other variables in regression (1) coefficients of distance to nearest district and district land area both shows positive relationship with the urban agglomeration. however this relationship is not strong as coefficients are statistically insignificant revealing that they may have no role as determinants of urban agglomeration. in regression (2) district crime rate variable is dropped as its coefficient was statistically insignificant in regression (1) and very small showing very weak relationship with urban agglomeration. here in review of economics and development studies vol. 3, no 2, december 2017 173 regression (2) all the explanatory variables together explain 82 per cent of the deviation in dependent variable which is a good estimate for a cross sectional regression. results in regression (2) shows that “percentage share of district wise urban population to total population” a proxy for urbanization level has negative relationship with the urban agglomeration which means that higher urbanization level in a district is accompanied by centrifugal forces that dominate the centripetal forces. centrifugal forces are the factors that repel the population from the core while centripetal forces are the factors that attract the population to the core region. market size effect which is presented by percentage share of total urban population in each district urban population shows positive relationship with urban agglomeration again in the results of regression (2). it means that as the market size for an agglomeration increases size of the agglomeration will also increase because larger market size provides more consumers for the firms and businesses in the district and they will grow. when firms and businesses will grow more jobs opportunities will be created which will attract population towards the district leading to increase the size of the agglomeration. every ten percent increase in the market size for an agglomeration leads to increase the size of agglomeration by 0.93 percent. results of regression (2) again shows positive relationship of distance to nearest district with urban agglomeration which means farther the district lies from another district the more will urban agglomeration grows. it can possibly be explained as when a district is at larger distance from another large district it might attract the population from nearby areas and form a separate larger agglomeration. on the other hand when a district is located near to another larger district then it is quite possible that the larger district might attract population from the other district leaving that agglomeration smaller in size. table 3 determinants of urban agglomeration dependent variables: log of district population in 2011 1 2 3 4 5 intercept 6.69*** (0.185) 6.61*** (0.165) 6.62*** (0.168) 6.48*** (0.098) 6.52*** (0.091) percentage share of total urban population in each district urban population 0.099*** (0.022) 0.093*** (0.021) 0.099*** (0.021) 0.092*** (0.021) 0.096*** (0.021) distance to nearest district 0.001 (0.001) 0.001 (0.001) 0.001 (0.001) 0.001 (0.001) district vehicle density -0.001*** (0.000) -0.001*** (0.000) -0.001*** (0.000) -0.001*** (0.000) -0.001*** (0.000) district temperature differences -0.003 (0.004) -0.004 (0.004) -0.004 (0.004) district land area 0.0058 (0.000) 0.007 (0.000) 0.065 (0.000) 0.0798* (0.000) percentage share of district wise urban population to total population -0.007 (0.004) -0.007* (0.004) -0.008* (0.004) -0.007** (0.004) -0.008* (0.004) district wise crime rate 0.009 (0.000) review of economics and development studies vol. 3, no 2, december 2017 174 district wise road length per 1000 population 0.254*** (0.064) 0.24*** (0.064) 0.24*** (0.065) 0.24*** (0.063) 0.23*** (0.061) r 2 0.83 adj.r 2 0.775 r 2 0.821 adj. r 2 0.776 r 2 0.807 adj. r 2 0.767 r2 0.814 adj. r 2 0.776 r 2 0.808 adj. r 2 0.776 no. of observatios36 no. of observatios36 no. of observatios36 no. of observatios36 no. of observatios36 note: figures in parentheses represent robust standard errors. ***, ** and * indicate statistical significance at one %, five %, and ten % level, respectively. however coefficient of spatial interaction variable is very small and also statistically insignificant meaning that it may have no important role in the determination of urban agglomeration. district environmental severity (measured by temperature differences between mean maximum and mean minimum) results in regression (2) shows negative relationship with urban agglomeration. this negative relationship implies that extreme weather conditions in a district discourage population concentration in that district and negatively affect the urban agglomeration. but the coefficient of this variable is statistically insignificant therefore it may not be considered as important determinant of urban agglomeration in punjab pakistan. results of regression (2) showed that district vehicle density is negatively related to urban agglomeration. specifically every ten percent increase in district vehicle density agglomeration size will decrease by 0.01 percent. this result shows that when number of vehicles in a district will increase without additional road construction, more external diseconomies will be generated in the form of congestion and pollution. this congestion and pollution effect will dominate centripetal forces and agglomeration will be discouraged by repelling population from it. it is statistically significant showing that it is an important determinant of urban agglomeration. government policy for urban agglomeration captured by district wise road length per 1000 population showed strong positive relationship with urban agglomeration as its coefficient is significant at 1 percent level of significance. to be specific every ten percent increase in the road length per 1000 population will lead to an increase of 2.44 percent in the size of urban agglomeration. district land area showed positive relationship with the urban agglomeration in the second regression results. it may have positive relationship with the agglomeration because when more space is available, larger population can be the part of agglomeration. however its effect on urban agglomeration is statistically insignificant showing that it may not be an important determinant of the urban agglomeration. regression (3) reports the estimates with a thrifty set of controls. cross section regression again performs well as results show that it explains 80 percent of the variation in the population agglomeration of districts. here the results are almost similar to results in the regression (2). similarly regression (4) and regression (5) also performs well explaining 81 percent and 80 percent of the total variation in dependent variable respectively. cross section regression (5) is the best fitted regression for determinants of urban agglomeration as all the variables contained in it are statistically significant. urban agglomeration predicted through regression (5) gives best fitted values which are used as dependent variable to capture the positive effect of urban agglomeration on urban economic growth in the second model. 3.2 determinants of urban economic growth table 4 summarizes the results of the regressions (6) to (10) based on equation 2. in regression (6), results are presented of the model (2) using all the available independent variables. all the variables, including agglomeration variable (estimated values of agglomeration variable of regression 5), are controlled and results are presented in regression (6). effects of agglomeration on economic growth of cities are found to be positive and significant but majority of the coefficients of other variables came out against our review of economics and development studies vol. 3, no 2, december 2017 175 expectations and portrayed lower level of statistical significance (or statistically insignificant effect). therefore the study used estimations of regression (7) to (10) where controls were excluded that do not match with the expected signs or showed insignificant statistical effect of the variables. in regression (7) only urban agglomeration effect on urban economic growth is captured without controlling any of the other variables. while in regression (8) effect of distance variable (in linear form only) on economic growth is measured along with controlling some of the other variables. then a regression is run for two proxy measurement of the distance variables in the form, which is predicted in the cp model of neg theory. and finally regression (10) is presented which shows most satisfactory results in terms of expected signs and level of significance of the variables. the result of regression (7) shows that urban economic growth is positively and significantly affected by agglomeration variable while controlling it endogenously. this positive effect of agglomeration on urban economic growth is in line with our main hypothesis that agglomeration has a positive impact on urban economic growth. specifically every 10 percent increase in agglomeration will lead to an increase of 33 per cent in the urban economic growth. in regression (8) where distance variable is included (in the linear form only) along with some other explanatory variables depicted that as minimum distance from another district increases, urban economic growth moves along with it. but low coefficient value and statistical insignificance of the distance variable suggest that it might have no important role in the determination of urban economic growth. among other variables district density positively affect the urban economic growth. specifically every 10 per cent increase in the district density increases the urban economic growth by 0.01 per cent. district literacy variable which is included to capture human capital effect on urban economic growth does not show expected sign however its coefficient is statistically insignificant suggesting that it might have no important role in urban economic growth performance. table 4 determinants of urban economic growth dependent variables: district labour force growth rate 6 7 8 9 10 intercept -23.54 (15.224) -20.04 (12.377) -18.44 (11.496) -35.94 (13.398) -19.45 (13.535) predicted values of the dependent variable ( ǖ) of model 5 2.97* (1.997) 3.37* (1.963) 3.31* (1.849) 6.29*** (1.918) 4.36** (1.936) minimum distance to another district -0.167 (0.196) 0.009 (0.010) -0.205 (0.163) -0.031* (0.191) square of minimum distance to other district 0.002 (0.002) 0.003 (0.002) 0.001* (0.002) cube of minimum distance to other district -0.008 (0.000) -0.0008 (0.000) -0.002* (0.000) distance to divisional headquarter district 0.061 (0.042) 0.077** (0.038) square of distance to divisional headquarter district -0.001 (0.000) -0.001 (0.001) cube of distance to divisional headquarter district 0.00105 (0.000) 0.00014 (0.000) review of economics and development studies vol. 3, no 2, december 2017 176 district density 0.000 (0.000) -0.001*** (0.000) 0.002* (0.001) district literacy -0.007 (0.031) -0.018 (0.031) 0.019* (0.031) log of district density 3.120 (4.540) r 2 0.546 adj.r 2 0.338 r 2 0.080 adj.r 2 0.053 r 2 0.38 adj.r 2 0.28 r 2 0.453 adj.r 2 0.317 r 2 0.493 adj.r 2 0.397 no. of observation s 36 no. of observatio ns 36 no. of observations 36 no. of observations 36 no. of observations 36 note: figures in parentheses represent robust standard errors. ***, ** and * indicate statistical significance at one %, five %, and ten % level, respectively. result of regression (9) shows that distance variable, which is included in the form as predicted in the cp model of the neg theory, has the expected signs in case when proxies by minimum distance from another district which partially prove the non-linearity in the urban system of punjab because the results are statistically insignificant. regression (10) presents evidence of the non-linearity pattern of punjab’s urban system because coefficients of the distance, distance square and distance cube show expected signs and are statistically significant. figure 4 distances to nearest largest city and urban economic growth source: author’s own estimation fig 4 shows that as the distance from a nearby larger city increases urban economic growth first decreases then it increases and afterwards when the distance is increased sufficiently larger urban economic growth decreases again. however, among the other variables district density and district literacy rate showed positive effect on the urban economic growth. most importantly every 10 per cent improvement in the district literacy rate will result in a 0.19 per cent increase in the urban economic growth. this result is in accordance to our review of economics and development studies vol. 3, no 2, december 2017 177 expectations and statistically significant. coefficient of the district density variable is also in line with our priori expectation and statistically significant. specifically every 10 per cent rise in the district density will lead to an increase of 0.02 per cent in the urban economic growth. the positive effect of distance from another nearest district on urban agglomeration is in line with and supports the findings of mills and becker (1986) and differs from the results of sridhar (2010) and tripathi (2013). positive effect of market size variable on urban agglomeration supports krugman (1991) and tripathi (2013). results of positive relationship between district land area and district population concentration match with the leichenko (2001) while differs from the findings of gans and bradley (1998), henderson (2003) and tripathi (2013). the negative effect of difference in district temperature on urban population concentration matches with the results of haurin (1980) while differs from the findings of sridhar (2010) and tripathi (2013). positive effect of road length per 1000 population on urban agglomeration supports the results of sridhar (2010) and tripathi (2013). result of the negative impact of external diseconomies on urban agglomeration supports the findings of krugman (1991) and tripathi (2013). human capital accumulation positive effect on urban economic growth is in line with the results of gans and bradley (1998), sheng (2006), sridhar (2010) and tripathi (2013). the results of the cp model resemble the findings of fujita and mori (1997), fujita et al. (1999), chen et al. (2010) and tripathi (2013). finally, the positive impact of urban agglomeration on urban economic growth is in line with the prediction of krugman (1991), ades and glaeser (1995), fujita and thisse (2002), henderson (2003, 2005), brülhart and sbergami (2009) and tripathi (2013). 4. conclusion and policy recommendations aim of the study was to identify the determinants of urban agglomeration at sub-national level (i.e., district level) across the 36 districts of punjab, pakistan. and also measure the effect of urban agglomeration (considering urban agglomeration exogenously and endogenously) on urban economic growth, following tripathi (2013) by using neg approach originally developed by krugman (1991). for the identification of relevant determinants of urban agglomeration, factors included in the first nature geography and second nature geography is focused in the study. the study also included some other important factors that might have some contribution towards urban agglomeration for which several proxy variables are constructed. the results of the study showed that the government policy for urban agglomeration, the market size control variable and district land area positively and significantly affect the urban population agglomeration which is measured by district urban population and log of district urban population. while on the other side the percentage share of urban population to total population in each district and district vehicle density negatively and significantly affect the district population agglomeration. however, among the variables that do not show strong effect on population agglomeration includes district wise crime rates, district wise temperature differences and minimum distance to nearest district. urban economic growth regression results of the study showed that urban agglomeration positively and significantly affect urban economic growth when agglomeration variable endogenously (or exogenously) considered to the basic recursive econometrics model used in the study. the study is also a little beginning towards the verification of the spatial distribution of the urban system of punjab province in pakistan using the basics of cp model. the study results verified “ ” shaped non-linear correlation between geographical distance from another district (or division headquarter) to the sample district and urban economic growth of the sample district. this result is in line with the cp model prediction of urban system in the neg theory. the study additionally finds that the initial growth factors (like initial level of human capital accumulation measured by literacy rate) play an important role in the punjab’s urban economic growth. these results of the study show that urban growth in punjab is policy induced (for example road review of economics and development studies vol. 3, no 2, december 2017 178 constructed per 1000 population) and market determined. the study attempted to shed light on the phenomenon of slower growth of class i cities (with a population above 100,000) as compared to other cities by determining relevant factors that negatively (or positively) affect urban agglomeration. the study results suggest that neg predictions about the urban agglomeration and its impact on urban economic growth are much more successful than any other predictions made by the existing theories (including first nature geography predictions). in the light of the results of the current study govt. may give attention towards the urban agglomerations as they contribute positively in the city economic growth. instead of focusing on already established agglomerations govt. should provide amenities to the less developed urban areas so that these areas could grow and play their role in development of the country. by developing the smaller areas, it would be quite helpful for the government to tackle the problem of poverty as well. additionally the pressure on the large urban centers could also be released if other areas become attractive for the population to move. political stability should be brought which will increase the agglomeration leading to economic growth of cities. furthermore it will open the doors for other researches to analyze the different aspects of urban agglomerations and urbanization. finally the study suggests that government should take serious steps towards the collection of improved data regarding cities for a better analysis and appropriate policy suggestions. govt. should estimate district level gdp because income estimates across districts can be helpful in recognizing industries/sectors that are driving or retarding economic growth at the district level. also, these estimates can be very much useful in facilitating better resource management for policy implementation at micro and macro levels and to remove the constraints imposed by lack of reliable data on latest situation at the district level. last but not the least, this can provide valuable background 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(2001). determinants of agglomeration economies and diseconomies:: empirical evidence from tokyo. socio-economic planning sciences,35(2):131-144. review of economics and development studies, vol. 8 (1) 2022, 73 87 73 an empirical study on the relationship of financial sector development, remittances inflows, and income inequality in south asian countries nayab karim a, muhammad tariq b, muhammad azam khan c a department of economics, abdul wali khan university mardan, pakistan. email: nayabkarim111@gmail.com b department of economics, abdul wali khan university mardan, pakistan. email: tariq_noor@awkum.edu.pk c department of economics, abdul wali khan university mardan, pakistan. email: drazam75@yahoo.com article details abstract history: accepted 08 march 2022 available online march 2022 the study explores the moderating role of financial sector development in the remittances-income inequality nexus in the six highest remittances-recipient “south-asian economies”, “namely “afghanistan, bangladesh, india, nepal, sri lanka, and pakistan”” for the period 2006 to 2019. the direct channel of remittances-income inequality and the financial sector development & income-inequality have been greatly explored in the literature, but the indirect channel, i.e. the moderating role of the financial sector in the remittancesincome inequality nexus, is still lacking; this study tries to fill this literature gap. the study explores the indirect link of the financial sector based on financial access, financial stability, financial depth, and financial efficiency in remittances-income inequality nexus in highest remittances-recipient south-asian economies. the study applied fixed effects and pooled ordinary least squares (pols) econometric techniques in order to examine the role of financial sector development in the relationship between international remittances and income inequality. the empirical findings of the study show that the financial sector development mitigates the income-inequality effects in the selected remittancerecipient south-asian economies. the interaction term of financial sector development and remittances mitigate the negative influence of income inequality in the selected economies. remittances abridge income inequality in the presence of a well-functioning and sound financial sector in the selected south-asian remittance-recipient economies © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: economic growth, financial sector, income-inequality, remittances, south asia jel classification: d63; f24; g2; o4; o53 doi: 10.47067/reads.v8i1.435 corresponding author’s email address: nayabkarim111@gmail.com review of economics and development studies, vol. 8 (1) 2022, 73 87 74 1. introduction international migration has a great impact on economic growth, income inequality, and poverty alleviation in both regional & destination economies. according to the world bank report (2019), people living outside of their home country are more than 247 million. people migrate for better job opportunities, living standards, and better education. these international migrants, when settled outside of their birth country, sent money home (in the form of remittances) to help out and support their families. in many developing nations, after foreign direct investement, foreign remittances are the primary source of external capital. the world bank (2019) reports that the international remittances flow to the low and middle-income economies has crossed us$550 billion. india is the top remittances recipient economy in south asia, according to the world bank report (2020), which is presented in fig. 1a. fig.1a presents the remittances received in a million us $ of all remittance-recipient economies in “south asia, i.e. india, pakistan, bangladesh, sri lanka, nepal, and afghanistan”, covering the duration from 1976 to 2020. figure 1a depicts a steady increase in foreign remittance inflows in selected south asian nations. fig. 1b presents the remittances receiving countries by region. the world bank report (2020), south asia is the largest foreign remittance-receiving region in the world. therefore, we have focused on south-asian remittance-recipient economies for the analysis. figure 1a: remittances inflows in south asian economies source: author's compilation using the world development indicators (2020) figure 1b: remittances receiving countries by region "source: author's compilation using world bank report (2019)" remittances directly impact household income, contributing to the economy by increasing consumption, saving, and investment levels. many erstwhile studies have highlighted the vital role of remittances inflow in human development, poverty reduction, and income inequality, and thereby 0 1e+10 2e+10 3e+10 4e+10 5e+10 6e+10 7e+10 8e+10 9e+10 1 9 7 6 1 9 7 7 1 9 7 8 1 9 7 9 1 9 8 0 1 9 8 1 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 bangladesh afghanistan india nepal pakistan sri lanka sub-saharan africa (2.9) europe & central asia (1.6) latin america & caribbean (1.7) east asia & pacific (0.5) middle east & north africa (2.2) south asia (3.8) review of economics and development studies, vol. 8 (1) 2022, 73 87 75 socio-economic development of developing countries (“mckenzie & rapport, 2007; azam; 2015; azam & raza, 2016; azam et al. 2016ab; vacaflores; 2018; bang et al., 2020”). however, the literature studies give ambiguous results about remittances and income inequality. some of the literature studies found that foreign remittances have an increasing influence on income inequality (knowles & anker, 1981; rodriguez, 1998; “oberai & singh, 1980”). other academic studies found a non-monotonic relationship, an inversted u-shaped curved have shown in the literature to depict the relationship between remittances and income inequality (“stark et al.,1986; koechlin & leon, 2007”). on the contrary, remittances have been found in studies to help narrow the income gap. they found that international migration greatly impacts income inequality, and there is a strong connection. furthermore, remittances lessen the gap of income inequality when the migrant belongs to a lowincome family (mckenzie & rapport, 2007; acosta et al., 2008; vacaflores, 2018; bang et al., 2020; mallick et al., 2020), but remittances confront high transaction cost, the world bank report (2019). the transaction cost of sending us$ 200 remained almost 7% and about 9% in subsaharan african region, extremely high than the sustainable development goals target (10. c) of 3% by 2030. financial institutions-banks are the most expensive channels to transfer remittances, at an average transferring cost of 10%. therefore, migrants prefer to follow informal channels like hawala and hundi to remit home. however, the financial sector can foster economic growth through different channels, i.e., channel household savings into the most productive investment projects. moreover, checking out investment activities, ensuring investment funds available to investors, diversifying risk, especially credit risk, and increasing the economy's liquidity level (levine 2005). when it reduces its transaction cost on the flow of remittances from both sending and receiving countries, a good financial infrastructure increases the flow of remittances through the formal channel, contributing to the economy through financial inclusion in the economy. as a result, it mitigates the poverty levels and reduces the income-inequality gap in the economy. in economic literature, some studies “(kuznets, 1955; demirgüç-kunt and levine, 2009; cecchetti and kharroubi, 2012; arcand, berkes, and panizza, 2015)” concluded that at a certain threshold level, the financial sector improves the economy, reduces poverty levels and narrows down the income inequality gap, but after that level, the financial sector worsens economic growth by widening the income inequality gap. the literature studies heavily explored the linear relationship and non-linear relationship between income inequality and the developed financial sector with different methodologies, time-period, and different economies. however, the financial sector as a moderator in the foreign remittancesincome inequality relationship is still to be explored. this research study tries to fill the literature gap mentioned above. the core of the study is to focus on the main question would remittances and an efficient financial sector prove to be potent in mitigating the income inequality gap? would it ensure to take off the economy and lead to a better egalitarian distribution of economic resources? this study is among the few studies which focus on the moderating effects of the developed financial sector on remittances income-inequality nexus in the selected south-asian countries. first, the paper aims to investigate the unconditional or direct impact of remittances on income inequality and, secondly, to investigate the conditional or indirect influence of remittances on income inequality in selected remittance-receiving south asian nations through banking sector growth. this research adds to the body of knowledge in the following ways. first, create an overall financial sector development index covering the financial institutions' size, depth, efficiency, and stability. second, the financial sector and remittances interaction term represents the financial sector's indirect marginal impacts in the remittances-inequality nexus. third, the study exclusively focuses on review of economics and development studies, vol. 8 (1) 2022, 73 87 76 south asia's highest remittance-recipient emerging economies, wherein the study uses the latest facts and figures for analysis. finally, this appears to be the rare paper that provides empirical research to reflect the significance of financial sector development in the link between remittances and inequality in remittance-recipient south asian nations the structure of the paper is organized as follows: in the upcoming part, a brief literature review related to remittances, the financial sector, and income inequality. then, in section-3, the methods and materials used are discussed, section-4 presents empirical results and discussion, and finally, the study conclusion and some of the policy recommendations wrap up the paper. 2. review of literature 2.1 studies on remittances and income inequality the literature studies showed that remittances and income inequality greatly connect with migration. for example, suppose a migrant belongs to a low-income family. in that case, remittances may help decrease the income inequality gap, but if the migrant is from a rich background, then the remittances may increase the income inequality gap. this impact highlights two strands. remittances have a rising effect on the income inequality gap, according to one strand, while remittances narrows down the income-inequality gap, according to the other. for example, the study of mckenzie and rapport (2007) in the case of mexico, it supports the diminishing impact of remittances on income inequality. likewise, acosta et al. (2008) concluded that remittances negatively affect income inequality in latin american nations. on the contrary, in earlier studies, oberai and singh (1980) documented that foreign remittances widen the gap of income-inequality in india. similarly, the studies of knowles and anker (1981), and rodriguez (1998) found similar results. they concluded that international remittances tends to increase the income inequality. furthermore, remittances and income inequality documented an inverted u-shaped structure, according to certain studies. in other words, a non-monotonic relationship; this idea was first introduced by stark et al. (1986) based on an endogenous migration cost model. koechlin and leon (2007) found that income inequality increases by remittances in the initial stage of migration history due to the cost of migration incurred and later on has a decreasing effect of remittances on income inequality, as the migration cost is reduced. they also discovered that financial sector and education sectors development also help to reduce the income inequality gap in the selected 78 economies. vacaflores (2018) concluded that international remittances negatively impact the poverty level and income inequality in the selected economies of latin america. furthermore, the regional difference also greatly affects the remittances and well-being of the economies. in nigeria, bang et al. (2020) looked at the impact of remittances on poverty and income inequality. they analyzed the microlevel household survey and analyzed the data with the help of the instrumental variable quantile regression technique in nigeria and concluded that remittances reduced the poverty level and income inequality when it increased household expenditure level in nigeria. mallick et al. (2020) explored the effects of globalization on income inequality by taking the external financial inflows in the form of foreign direct investment (fdi) and international remittances and other macroeconomic indicators as endogenous variables in the model like sectoral output, human capital formation, government size, development of infrastructure, urbanization and economic growth in two largest emerging economies namely china and india. the study considered the time-period from 1980 to 2013. they concluded that both fdi and international remittances reduced the income inequality gap in china; however, it widened the income inequality gap in india. review of economics and development studies, vol. 8 (1) 2022, 73 87 77 2.2 studies based on financial sector development, and income inequality the developmental impact of the financial sector development on the growth of the economic is highly debated topic in the literature, although some analyses establish two linear hypotheses that link of the financial sector expansion and income inequality. the first hypothesis related to the widening income-inequality, states that the financial sector excludes the poor sector and focuses only on the rich sector. in addition, the financial industry allocates more credit to the rich ones, as they have fewer chances of defaults and can offer more collaterals for the credit than the poor, even if the economy has a well-developed financial sector. as a result, it widens incomeinequality gap in the economy (rajan and zingales, 2003). de haan and sturm (2017) discovered that from 1975 to 2005, financial liberalisation, financial sector expansion, and the banking crisis all had a growing influence on income inequality in 121 nations. bittencourt et al. (2019) investigated 50 us states from 1976-to 2011. they concluded that financial sector development has an increasing effect and a linear impact on income inequality when all the 50 us states have analyzed collectively. still, when segregated into two groups, i.e. above-average and below-average, the financial sector development showed a non-linear behaviour towards income-inequality, an inverted u-shaped curve. they concluded that income-inequality increases in the above-average us state when the financial sector gets developed and decreases in the below-average us state. contrary to these studies, the second hypothesis is related to narrowing income inequality. it states that as the financial sector gets developed, the previously neglected poor sector might access credit; hence it narrows down the income-inequality gap (jalil and feridun, 2011; mookerjee and kalipioni, 2010; beck et al., 2007; clarke et al., 2006). law et al. (2014) investigated the impact of financial sector development on income inequality in the presence of institutional quality in 81 emerging economies from 1985 to 2010. they concluded that financial sector development narrows the income inequality gap by reaching a certain threshold level of institutional quality in selected 81 economies. furthermore, the study discovered that, in the presence of good institutions, financial sector development has a considerable negative influence on income inequality in the selected emerging economies. akobeng (2016) found that remittances mitigate poverty in the economy and have incomeequalizing effects in sub-saharan african economies. besides, a well-functioning financial sector highlighted the impact of remittances in sub-saharan countries. park and shin (2017) explored the influence of income inequality on economic growth, as well as the link between income inequality and the development of the financial industry. they found a non-linear relationship between the financial sector development and income-inequality. as the financial sector gets developed it mitigates the income-inequlaity effects to certain levels, and after that further development in the financial sector worsen the situation by widen the gap in income inequality. meniago and asongu (2018) investigated that between 1996 and 2014, the financial industry had a critical role in narrowing the income inequality gap in 48 african nations in terms of access to credit and efficiency. danou-adonsou et al. (2020) empirically investigated the link between remittances and financial development in the highest remittance-recipient countries in sub-saharan african region. the study used a panel cointegration technique for estimation. they found that remittances inflows strengthen the financial sector in the long run and found strong evidence of bi-directional causality between remittances and financial sector development in the selected economies. from the above literature studies, the direct links between remittances on income inequality and financial sector development and economic growth are widely explored. furthermore, the direct link between financial sector development on remittance, income inequality, and economic growth has also review of economics and development studies, vol. 8 (1) 2022, 73 87 78 been investigated. however, the indirect channel of financial sector development in the income inequality nexus is still less explored. this study tries to fill this gap in the academic literature. 3. data and methodology "figure 2: the financial sector moderating role in remittances and income inequality relationship "source: author's construction." fig. 2 presented the remittances as an independent variable, income inequality as the dependent variable, and financial sector development as a moderator. the moderating variable can be defined as a variable that has a contingent (or conditional) impact on the relationship between the dependent and independent variables. the moderating variable greatly affects the strength of the connection; it either mitigates or enhances the strength between the independent and dependent variables. in figure 3, the financial sector acts as a mediator, enhancing or dampening the impact of remittances on income disparity. figure 3: different channels of financial sector affecting remittances and income inequality "source: author's construction" review of economics and development studies, vol. 8 (1) 2022, 73 87 79 fig. 3 presents how the financial sector contributes to economic growth via different channels. first, the financial sector mobilises savings from the household into productive investments. furthermore, it efficiently allocates financial resources to the economy. moreover, it stabilises the financial system and reduces transaction costs of remittances to encourage migrants to send remittances through formal channels. more specifically, the impact of the financial sector on economic growth is depicted on the left side of fig. 3, as well as how economic growth decreases poverty by reducing income disparity in the economy through financial inclusion. the genuine image of the economy is depicted in the center section of fig. 3 by the remittances channel and the financial sector. when the financial sector reduces the transaction cost of sending remittances, it will encourage remittance flows through proper channels and promote financial inclusion in the economy, which directly impacts the economy. and finally, the right side of fig. 3 depicts that as the financial sector improves in terms of its efficiency, stability, size, and depth will greatly impact economic growth and sustainable livelihood and ultimately equalise the income inequality effects on the economy. 4. empirical model the model has incorporated the financial sector development into the remittances-income inequality nexus followed by stark et al. (1986); rodriguez (1998); clarke et al. (2006); and akobeng (2016). the first step in the estimation process is to find the direct impact of remittances on income inequality, as presented in equation (1) below. 𝐺𝑖𝑛𝑖𝑖𝑡 = ∝𝑖 + ∝1 𝑅𝑒𝑚𝑖𝑡 + ∝2 𝑋𝑖𝑡 + 𝜖𝑖𝑡 (1) in equation (1), the subscript “i” denotes cross-sectional units while the subscript “t” indicates time-specific units among countries. the gini coefficient is used to measure the dependent variable income inequality denoted by 𝐺𝑖𝑛𝑖𝑖𝑡, 𝑅𝑒𝑚𝑖𝑡is the main independent variable that represents remittances. the ∝1 is the parameter of interest, determines how remittances affect income inequality directly. 𝑋𝑖𝑡represents the direct impact of control variables on the gini coefficient in the model. we include the inflation rate and population growth as control variables in the model. 𝜖𝑖𝑡is an error term in the model. 𝐺𝑖𝑛𝑖𝑖𝑡 = ∝𝑖 + 𝛽1𝑅𝑒𝑚𝑖𝑡 + 𝛽2𝐹𝐷𝑖𝑡 + 𝛽3(𝑅𝑒𝑚𝑖𝑡 ∗ 𝐹𝐷𝑖𝑡 ) + 𝛽4𝑋𝑖𝑡 +𝜖𝑖𝑡 (2) by differentiating eq(2) with.respect.to remittances, we get eq (3) 𝜕 (𝐺𝑖𝑛𝑖𝑖𝑡) 𝜕(𝑅𝑒𝑚𝑖𝑡) = 𝛽1 + 𝛽3(𝐹𝐷𝑖𝑡 ) (3) where, equation (3) represents the marginal effects, 𝐹𝐷𝑖𝑡 represents the financial sector development index combines the information in terms of the overall size, depth, efficiency, and stability of the financial institutions. the interaction term (𝑅𝑒𝑚𝑖𝑡 ∗ 𝐹𝐷𝑖𝑡 ) represents the role of the financial sector to mitigate or enhance the effects of remittances on income inequality. in other words, by estimating the above model, we capture the impact of remittances on income-inequality, given the size, depth, efficiency, and stability of the overall financial sector. review of economics and development studies, vol. 8 (1) 2022, 73 87 80 4.1 measurement of variables, data sources, and time-period the selected time-period is from 2006 to 2019, the selected remittance recipient “south asian” countries are “afghanistan, bangladesh, india, nepal, sri lanka, and pakistan”. the details of the selected variables, unit of measurement, and their respective data sources are summarized and presented in table 1.1 “1the data that support the findings of this study are openly available in [the world bank data base, (2021); world bank’s global financial development database, (2021); standardized world income inequality database (swiid), (2021)] at [https://data.worldbank.org/ ; https://www.worldbank.org/en/publication/gfdr/data/global-financialdevelopment-database; https://dataverse.harvard.edu/dataset.xhtml?persistentid=doi:10.7910/dvn/lm4owf]” table.1 selected variables description, measurements, and data sources selected variables description (proxy used) "data sources" foreign remittances (independent variable) the proxy used as personal remittances received (current us$). the world bank data base, (2021). population growth rate (control variable) "the used proxy is the population growth rate (annual %) the population is based on all residents of the country regardless of citizenship or legal status " inflation rate (control variable) "the proxy used for the inflation rate is the consumer price index (cpi). the cpi can be elaborate as the percent change annually in the cost to the average consumer of acquiring a basket of goods and services that may be fixed or changed at specified intervals, such as yearly. generally, for computation, the formula of the laspeyres formula is used." moderator (financial sector development) financial development(depth) "domestic credit to the private sectors by banks (% of gdp) used as a proxy for financial depth. broadly speaking it includes loans, trade credits, purchases of nonequity securities, and other account receivables." "the world bank’s global financial development database, (2021)" financial development (size) "broad money (% of gdp)is used as a proxy for financial sector size." financial development (efficiency) "the proxy for efficiency is used as profitability (return on assets, roa) can be defined as the after-tax net income of all selected countries’ commercial banks divided by yearly averaged total assets of the selected countries’ commercial banks." financial development "the proxy used for stability is z-score, which captures the probability of default of https://data.worldbank.org/ https://www.worldbank.org/en/publication/gfdr/data/global-financial-development-database https://www.worldbank.org/en/publication/gfdr/data/global-financial-development-database https://dataverse.harvard.edu/dataset.xhtml?persistentid=doi:10.7910/dvn/lm4owf review of economics and development studies, vol. 8 (1) 2022, 73 87 81 using principal component analysis, the study created a financial sector development index (pca) by considering the size of the financial sector as “broad money (percent of gdp)”, the depth of financial institutions as “domestic credit to the private sector by banks (percent of gdp)”, the efficiency of financial development in terms of profitability as “return on assets (roa)”, and the financial sector's stability as z-score. 4.2 estimation techniques generally, the panel data model can be estimated using three main different techniques, the first technique is pooled ols based on a common constant, the second technique is fixed effects and the last technique allows for random effects. 4.2.1 pooled ols estimation the pooled ols technique also called the common constant technique under the basic assumption that there are no differences among the cross-sectional units “i”, in other words, the pooled ols estimation estimates common constants for all cross-sectional units, implying that the predicted cross-sections are identical. the intercept of the constant term has no subscripts, indicating that it is a common constant for all the selected countries, treating them as a homogenous panel. the following is the general form of an econometric model with a single independent variable: 𝑌𝑖𝑡 = 𝛼 + 𝛽𝑋𝑖𝑡 + µ𝑖𝑡 it is useful only in the case of homogeneity among countries like high-income countries or eu economies, etc. but when it comes to the heterogeneous panel then the fixed and random effects tackle the situation to deal with the heterogeneity and individuality issues. 4.2.2 the random-effects estimation the random effects handle the constant term not as a fixed but as a random parameter. in other words, the parameter of the model behaves randomly. the constant term for cross-sectional units is variable due to the following factors: α𝑖 = α+ v𝑖 the generalized random variable with a single independent variable will takes the form below 𝑌𝑖𝑡 = (𝛼 + v𝑖 ) + 𝛽𝑋𝑖𝑡 + µ𝑖𝑡 (stability) all selected countries' commercial banks. the formula used for z-score in the analysis is the sum of return on assets and equity or assets of the selected countries’ commercial banks to the standard deviation of the return on assets i.e. (return on assets(roa) + equity/ assets)/ standard deviation of roa". income-inequality (dependentvariable) "for incomeinequality gini coefficients used as a proxy and is the measure of the lorenz curve. lorenz curve, graphically indicates the share of income received. the range of the gini coefficient lies between 0-1, zero indicates perfect equality, and near 1 indicates perfect inequality." "standardized world income inequality database (swiid), (2021)." review of economics and development studies, vol. 8 (1) 2022, 73 87 82 𝑌𝑖𝑡 = 𝛼 + 𝛽𝑋𝑖𝑡 + (v𝑖 + µ𝑖𝑡) the main difference between random and fixed effects model is the former is differ in the error term and the latter is differ in the intercept term. one of the main advantage of the random-effects over fixed effects is that it works well if a model has fewer parameters, and it also allows additional observations and dummies. but the disadvantage of the random-effects model needs specific assumptions about the distribution of the error term. the second problem of using this model is if there is a correlation among group-specific effects and explanatory variables then it leads to inconsistent and biased results. 4.2.3 the fixed-effects estimation in the fixed effects model every unit have its specific intercept which differs cross-sectionally, however, it is constant over time. the fixed effects model second name is the least squares dummy variable (lsdv) model because the cross-sectional effects can be captured by introducing dummies in the model. the generalized model of the fixed-effects model with a single independent variable is given below: 𝑌𝑖𝑡 = 𝛼𝑖 + 𝛽𝑋𝑖𝑡 + µ𝑖𝑡 4.2.4 the hausman test the hausman test, devised by hausman (1978), was designed to opt the best model. ho: the appropriate model for estimation is random-effects model. h1: the best model for estimation is fixed-effects model. the p-value of less than 5 percent of the hausman test proposes rejection of the null and acceptance of the alternate hypothesis. 5. results and discussion the estimation process is carried out in two main steps. firstly, to check the order of integration, the stationarity check of all the selected variables is assessed to analyze whether all the selected variables are stationary at level or have a unit root process. afterward, an appropriate methodology has been applied based on the panel unit root estimation results. 5.1 the panel unit root test in the below table 2 shows the estimated results of “panel unit root showed that all the specified variables are level i(0) stationary. at 1 percent & 5 percent, the selected variables are extremely significant. table 2 panel-based unit root test variables llc statistics ips statistics adf statistics pp statistics gini co-efficient -32.2748*** -23.1478*** 53.0729*** 56.9391*** remittances -5.6589*** -2.3823*** 27.6261*** 87.5647*** financial development -2.9739*** -1.8551** 22.7343** 25.2542*** inflation -3.5126*** -2.1066*** 22.9428** 22.9073** population growth -5.7699*** -7.5187*** 62.5504*** 14.4232 "note: ***,**,* denotes p-value<0.01, p-value<0.05, p-value < 0.10 respectively" review of economics and development studies, vol. 8 (1) 2022, 73 87 83 5.2 pooled ols estimation the table 3 presented the pooled ols estimates. table 3 presented the pooled ols technique, pooling all the data and ignoring the heterogeneity and individuality issues in the model. the estimated results depicted those remittances are highly positively significant at 1% with the income inequality in both direct and indirect effects model presented in column (1) and column (2) in table 3. it indicates that as remittances increases in the economy, it also enhances the effects of income inequality. it supports the income-widening hypothesis. the financial sector development index (column 2), demonstrates that a unit change in the development of the financial infrastructure will bring a change by decreasing the income inequality gap by 0.0043 units. the financial sector development supports the hypothesis of income narrowing effects of income inequality. the interaction term is insignificant in the case of pooled ols, showing that the banking sector plays no role as a moderator in the remittances and income inequality nexus. the pooled ols technique is inefficient in capturing the cross-sectional effects of the selected countries due to the same intercept for all the countries. therefore, to capture the cross-sectional impact and tackle the heterogeneity and individuality of the economies, the random and fixed effects models are applied. the best technique for estimation is opted based on the hausman test results. table 3 direct/unconditional pooled ols and indirect/ conditional pooled ols model gini co-efficient (dv) direct/unconditional pooled ols (1) indirect/ conditional pooled ols (2) remittances 0.0154*** (0.0013) [11.7692] 0.0154*** (0.0013) [11.6074] financial development -0.0043*** (0.0015) [-2.8232] inflation 0.0005 (0.0004) [1.0830] 0.0004 (0.0004) [1.0785] population growth 0.0064** (0.0026) [2.4141] 0.0039 (0.0033) [1.2047] financial development * remittances -0.0016 (0.0010) [-1.6345] constant 0.0522 (0.032) [1.6298] 0.0589* (0.03149) [1.8730] r2 adj-r2 0.6745 0.6613 0.7192 0.6997 number of obs 78 78 countries included 6 6 "note: ***,**,* denotes p-value<0.01, p-value<0.05, p-value < 0.10 respectively. the values in ( ) standard error in parenthesis, and [ ]t-values in square bracket." table: 4 correlated random effectshausman test test summarycross-section random direct/unconditional model indirect/ conditional model chi-sq. statistic 71.0236 155.6415 degree of freedom 3 5 prob. 0.0000 0.0000 review of economics and development studies, vol. 8 (1) 2022, 73 87 84 5.3 the fixed-effects estimation table 5 below presented the fixed-effects model of the direct/unconditional and indirect/ conditional models. column (1) in table 5 presented the direct/unconditional fixedeffects of remittances on income inequality in the selected economies without financial sector development. the chi-square value (i.e., 71.0236) of the hausman test for cross-section random is highly significant at 1%, therefore, the fixedeffects model is best as it rejects the null hypothesis of the selection of random effect model. as a result, the paper concluded that foreign remittances have a significantly negative influence on the gini coefficient at 1%. more precisely, a 0.01 (1%) increase in remittances inflow in the selected economies decreases income inequality by 0.011(1.1%). furthermore, the control variables' inflation rate and the population growth rate are also significant at 10% and 5%, respectively. the r-square is 0.8814. the indirect/conditional fixed-effects are presented in column (2), demonstrating the importance of remittances and income disparity in the financial sector's rise. the chi-square cross-section random term's p-value is significant at 1 percent; therefore, the study rejects the null hypothesis based on the hausman test result. according to the null hypothesis statement random effect model is preferable over fixed effects. the fixed-effects estimates demonstrate that financial sector has a significant negative effect on income disparity, meaning that as the financial sector get develops, it will narrow down the gap of the income inequality in the selected locations. more specifically, a 0.01 (1 percent) rise in financial/banking sector development reduces income disparity and lessen the income gap in the chosen nations by 0.008 (0.8 percent). the interaction term (remittance* financial sector) coefficient is negative and significant at 5% in the fixed-effects model. as a result, the financial sector has a moderating impact on remittances and income inequality as follows: table 5 direct/unconditional fixed-effects and indirect/ conditional fixed-effects model gini co-efficient (dv) direct/unconditional fixed-effects (1) indirect/ conditional fixed-effects (2) remittances -0.011*** (0.0027) [-3.8242] -0.0058** (0.0026) [-2.2625] financial development -0.0082*** (0.0019) [-4.4473] inflation -0.0054* (0.0039) [-1.8902] -0.0003 (0.0003) [-1.1574] population growth 0.0098** (0.0037) [2.4169] 0.01273*** (0.0033) [3.8099] financial development * remittances -0.0025** (0.0012) [-2.1704] constant 0.6396*** (0.0641) [9.9809] 0.5297*** (0.0601) [8.8126] r2 0.8842 0.9155 adjr2 0.8718 0.9029 number of obs 78 78 countries included 6 6 "note: ***,**,* denotes p-value<0.01, p-value<0.05, p-value < 0.10 respectively. the values in () standard error in paranthesis, and [ ]t-values in square bracket." review of economics and development studies, vol. 8 (1) 2022, 73 87 85 𝜕 (𝐺𝑖𝑛𝑖𝑖𝑡) 𝜕(𝑅𝑒𝑚𝑖𝑡) = 𝛽1 + 𝛽3(𝐹𝐷𝑖𝑡 )= -0.005825-0.002502(𝐹𝐷𝑖𝑡) where, 0 <𝐹𝐷𝑖𝑡 < 1 thus, when the 𝐹𝐷𝑖𝑡 =1 i.e. the presence of the financial sector, the marginal effect is 0.0083(0.8 %), and when the 𝐹𝐷𝑖𝑡 = 0 i.e. absence of the financial sector, the marginal effect is equal to -0.0058 (0.5%). hence, from the interaction term, the remittances mitigate the effects of income inequality when the economy has developed the financial sector. in other words, with the wellfunctioning and developed financial sector, remittances decrease the income inequality gap. our estimated results support the studies of “(mookerjee & kalipioni 2010; akobeng 2016; beck et al. 2007; clarke et al. 2006; jalil & feridun 2011; meniago & asongu 2018)” and contradict the studies “(rajan and zingales 2003; de haan & sturm 2017; bittencourt et al. 2019)”. 6. conclusion in the literature, the developmental impact of foreign remittances and the financial sector on the economic growth has been comprehensively examined using various estimating methodologies and sample data. however, the banking sector's indirect or moderating impact on remittance-income inequality is been minimally examined. although a few studies have found that financial/ banking sector has exacerbating effects on the remittances-income disparity relationship. economic theory provides solid ground for how the financial sector lessens income inequality and how remittances narrow the income inequality gap with a sound financial/banking sector. those findings conclude that the financial/banking industry has a crucial role in enhancing remittances and minimizing the income inequality gap and poverty levels heavily relied on the aspect of financial sector deepening, summing up that it significantly affects the remittances-income inequality nexus linearly. this study has broaden the spectrum from financial sector depth to the other aspects of the financial sector based on size, depth, efficiency, and stability by exclusively focusing on the highest remittance-recipient south asian economies. in the six most remittance-receiving nations of south asia, namely “afghanistan, bangladesh, india, nepal, sri lanka, and pakistan”, this study shows how banking sector growth moderates the link between foreign remittances and income inequality from 2006 to 2019. the fixed effects and pooled least square econometric techniques used for analysis. the unconditional and conditional effects of remittances, and the income inequality relationship, were addressed in this paper. international remittances have a highly negative substantial influence on income inequality, according to the empirical findings. in other words, remittances have a narrowing down effect on the income inequality gap when embedded in a well-developed financial sector. the highly significant interaction term assures the moderating role of the financial sector, and its negative sign demonstrates that remittances mitigate the income inequality effects when the economy has a sound financial sector. assume that the financial industry reduces the cost of remitting foreign remittances & fulfill the the sustainable development target by reducing it to 3%. in that case, it will encourage migrants to send remittances through the proper channel, further reducing remittances' data measuring issues—moreover, the wellfunctioning financial sector channels funds from rich sectors to the poor sector. in addition, financial sector development means the government announces investment-friendly strategies and provides loans to small and medium enterprises to create more businesses and employment opportunities. therefore, providing loans to the poor sector at low-interest rates will reduce the 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(washington, dc: international bank for reconstruction and development, world bank). review of economics and development studies vol. 3, no 1, june 2017 13 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 1 june 2017 journal homepage: www.publishing.globalcsrc.org/reads electricity generation and real output in asia: a panel co-integration approach 1 furrukh bashir, 2 tusawar iftikhar ahmad, 3 ismat nasim, 4 kishwar parveen 1 assistant professor, department of economics, the islamia university of bahawalpur, bahawalnagar campus, pakistan. farrukh.bashir@iub.edu.pk 2 assistant professor, department of economics, the islamia university of bahawalpur, pakistan. 3 lecturer, department of economics, the government sadiq college women university, bahawalpur, pakistan. ismat.nasim@gscwu.edu.pk 4 mphil scholar, school of economics, bahauddin zakariya university, multan, pakistan. article details abstract history revised format: may 2017 available online: june 2017 purpose: the present study concentrates on the relationship of electricity with real output in asia. the paper analyzes this connection individually among all regions of asia. some countries are selected from central asia, east asia, south asia and south east asia. time period of 1990 – 2015 has been chosen for the analysis. we have considered solow growth model and have taken labor and capital as necessary variables for growth. after confirmation of integration of order as 1 for all variables, kao cointegration test infers presence of long run relationship in all models. fmols suggests that labor and capital are positively significant factors for the development of real output in all the regions of asia. electricity production is positively influencing real output in central asia, south asia and south east asia; for east asia, it has been stated as negative. on the basis of results, study suggests that government should develop more skilled labor, cheap investment opportunities, efficient and cheap electricity production. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords electricity production, kao panel co-integration test, labor, fm-ols, central asia, east asia, south asia, south east asia. jel classification: c23, c58, e22, e24, f43, l94, n15, n75, o13, p48, q48, q41 corresponding author’s email address: farrukh.bashir@iub.edu.pk recommended citation: bashir, f., ahmad, t.i., nasim, i. & parveen, k., (2017). electricity generation and real output in asia: a panel co-integration approach. review of economics and development studies, 3(1) 13-28 doi: https://doi.org/10.26710/reads.v3i1.163 1. introduction energy including electricity plays pivotal role in generation of real output, employment generation, price stability etc. economic activity is also a source of increased consumption of energy remarkably in commercial energy like electricity (jumbe, 2004). industrial outputs are dependent upon available efficient energy resources and electricity production. energy also promotes the productivity of labor, capital and real output as well. cheaper supply of electric power may encourage the establishment of small industries and hence lead to higher economic growth. the relationship between real output and electricity production in central asia, east asia, south asia and south east asia are presented in table 1. it is evident from the table that the average growth rate of central asia is very low as compared to other regions during the time period of study (1990 – 2015). while south asian region is enjoying the highest growth rate and south east asian region is at second number and east asia is at 3rd. in the asian block, east asia is having the highest real gdp i.e. 1400 billion dollar during the study period. central asia is again at the last number in this respect. the mean of real gdp is http://www.publishing.globalcsrc.org/reads mailto:farrukh.bashir@iub.edu.pk mailto:ismat.nasim@gscwu.edu.pk mailto:farrukh.bashir@iub.edu.pk https://doi.org/10.26710/reads.v3i1.163 review of economics and development studies vol. 3, no 1, june 2017 14 very low in central asia that is 10 billion dollars. same situation of asian regions is in case of electricity production east asia is producing 652 billion kwh on the average while central asia is producing 32.2 billion kwh on the average in a year. an asian region having higher electricity production is having higher real gdp but growth rate is not higher in specific region (central asia). growth rate is higher for the regions (south asia and south east asia) where electricity production is just near to real gdp. the large difference between electricity production and real gdp may not lead to higher growth rate as in east asia. table-1: some indicators of asian regions indicators central asia east asia south asia south east asia growth rate (percentage) 2.56 4.84 5.19 5.00 real gdp (billion dollars) 10 1400 140 92.9 electricity production (billion kwh) 32.2 652 138 55.6 total labor force (millions) 4.74 165 108 31.47 gross capital formation (billion dollars) 4.59 452 52.1 32.7 electricity consumption (billion kwh) 28.5 618 107 50.9 note: the above values are mean of variables from 1990 – 2015. table 1 also discusses the situation of total labor force, gross capital formation and electricity consumption. central asia is having lower growth rate also due to lower labor force and capital formation. east asia has a huge amount of total labor force as well as gross capital formation on the average between the time periods of 1990 – 2015. electricity consumption is also not much different from electricity production in east asia. south asia comprises with moderate situation in terms of electricity consumption, electricity production, total labor force, gross fixed capital formation and real gdp but still having higher gdp growth rate. on the other side, south east asia contains total labor force of 31.47 million, gross capital formation of 32.7 billion dollars and electricity consumption of 50.9 billion kwh on the average during 1990 2015. table 2 explains about excess electricity production in central asia, east asia, south asia and south east asia during the study period. we can recognize that electricity excess production is having an upward trend in all the regions of asia from 1990 to 2015. the highest excess production is correlated with higher real gdp and electricity production in east asian region but with moderate growth rate. these values may explain that higher growth rate is not necessary to be achieved by higher production of electricity. as excess electricity production and average electricity production is the highest for east asia but growth rate is not highest. this evidence may conclude negative relationship among growth rate and electricity production for east asian region. with the lower excess production of electricity in central asia and lower real output, it is having lower growth rate and it shows direct association of real gdp with electricity output. discussing south asia and south east asia, positive association can be also predicted among electricity production and growth rate. table 2: excess electricity production (in billion kwh) regions 1990 – 1995 1996 – 2000 2001 – 2005 2006 2015 central asia 2.6 3.50 4.42 4.61 east asia 19.78 26.51 36.98 51.88 south asia 15.56 27.56 38.97 42.69 south east asia 2.78 4.43 5.66 5.76 note: the values are averages in the specific years. review of economics and development studies vol. 3, no 1, june 2017 15 by considering the view solow growth theories, the study is aimed to investigate the influence of electricity on real output separately for all regions of asia continent like central asia, east asia, south asia and south east asia during 1990 to 2015. apart from introduction in section 1, the study is composed of following sections. section 2 presents summary of some past studies, section 3 is dealing with panel data and estimation issues. in section 4, panel results are discussed based upon panel cointegration technique and fm-ols method. last section 5 finally concludes the whole research work and also gives some policy implications based upon estimated results. 2. literature review electricity, energy and growth relationships are investigated previously by several economists. these economists are belonging to either from pakistan or from other nations. this section summarizes few of those studies comprehensively. asafu-adjaye (2000) has examined the energy income relationship for four energy-dependent asian developing countries: india, indonesia, the philippines and thailand. the series for india and indonesia cover the period of 1973-1995, while those for thailand and the philippines cover the period of 19711995. the data has been obtained from world development indicators (wdi) 1998, published by the world bank. the study utilizes johansen maximum likelihood method and temporal granger causality tests and concludes the positive association among energy consumption, prices and economic growth. soytas et al. (2001) investigate the causal relationship between energy consumption and gdp in turkey. the results indicate a unidirectional causality running from energy consumption to gdp. this suggests that energy conservation may harm economic growth in the long run. stern and cleveland (2004) have reviewed the links between energy and growth. time series analysis shows that energy and gdp is cointegrated and energy use granger causes gdp when additional variables such as energy prices or other production inputs are included. as a result, prospects for further large reductions in energy intensity seem limited. abdulnasser and manuchehr (2005) examine the energy – income relationship for sweden during the time period 1965 – 2000. the estimation results reveal that energy consumption does not cause economic activity but rather it is caused by economic activity. mehrara (2007) examines the causality issue between energy consumption and economic growth for three typical oil-exporting countries: iran, kuwait and saudi arabia. the results are based on causality analysis consistently show a unidirectional long-run causality from economic growth to energy consumption for iran and kuwait and unidirectional strong causality from energy consumption to economic growth for saudi arabia. aktas and yilmaz (2008) investigate empirically the existence and direction of causal relationship between electricity consumption and economic growth in turkey. by taking time series data for 1970 – 2004, co-integration results suggest positive association between gdp and electricity consumption. chebbi (2009) has understood long and short-run linkages between economic growth, energy consumption and carbon emission using tunisian data based on time series data of 1971 – 2004. the results reveal a positive linkage between output and energy use. other result indicates that carbon emission and energy consumption are positively related in the long-run. pradhan (2010) explores the nexus between energy consumption (oil and electricity) and economic growth in the five saarc countries over the period 1970-2006. based on co-integration and error correction model, the paper finds a unidirectional short run and long run causality from oil consumption to economic growth in bangladesh and nepal. a unidirectional short run and long run causality from electricity consumption to economic growth in pakistan and sri lanka is evident. a unidirectional short run and long run causality from economic growth to oil consumption in india and sri lanka is examined. it is analyzed that a unidirectional causality moves from economic growth to electricity consumption in india and nepal. the bidirectional causality between electricity consumption and economic growth is also found in bangladesh and between oil consumption and economic growth in pakistan. review of economics and development studies vol. 3, no 1, june 2017 16 noor and siddiqi (2010) examine causal link between energy use and economic growth for five south asian countries over period 1971-2006. panel co-integration, ecm and fmols are applied for short and long run estimates. in short run unidirectional causality from per capita gdp to per capita energy consumption is found, but not vice versa. in long run one percent increase in per capita energy consumption tend to decrease 0.13 percent per capita gdp i.e. energy use discourages economic growth. payne and taylor (2010) examine the relationship between nuclear energy consumption growth and real gross domestic product (gdp) growth within a neoclassical production function framework for the us using annual data from 1957 to 2006. the toda-yamamoto (1995) test for long-run granger-causality reveals the absence of granger-causality between nuclear energy consumption growth and real gdp growth which supports the neutrality hypothesis within the energy consumption economic growth literature. binh (2011) investigates the energy consumption-growth nexus in vietnam using time series data for the period 1976 – 2010. it is seen that per capital gdp is inversely affected by per capita energy consumption. magazzino (2011) has assessed the empirical evidence of the nexus between aggregate income and energy consumption for italy during the period 1970-2009, using a time-series approach. the short-run dynamics of the variables show that the flow of causality runs from energy use to gdp, and there is a long-run bidirectional causal relationship (or feedback effect) between the two series. consequently, we conclude that energy is a limiting factor to gdp growth in italy. adom (2011) seeks to investigate the direction of causality between electricity consumption and economic growth using the toda and yomamoto granger causality test from 1971 to 2008. the author reveals that there exists a unidirectional causality running from economic growth to electricity consumption. thus, data on ghana supports the growth-led-energy hypothesis. hossain and saeki (2011) empirically examine the dynamic causal relationships between electricity consumption and economic growth for the panel of south asian countries using time series data from 1971 to 2007. the granger causality test results support the existence of unidirectional causality from economic growth to electricity consumption in india, nepal and pakistan; and from electricity consumption to economic growth in bangladesh. no causal relationship is found in iran and sri-lanka. qazi et al. (2012) concentrate on the relationship between industrial output and disaggregate energy consumption in pakistan. utilizing time series data from 1972 to 2010 and johansen maximum likelihood econometric technique, the study finalizes employment, oil consumption, electricity consumption, consumer price index and gas consumption as positively influencing industrial and real output in pakistan. amiri and zibae (2012) have introduced a new way for investigating linear and nonlinear granger causality between energy use and economic growth in france over the period 1960 to 2005 using geostatistical models. existence of long run unidirectional causality from energy consumption to economic growth is seen in the analysis. shahbaz and ozturk (2012) reconsider the relationship between electricity consumption and economic growth by incorporating financial development, capital and labor as important factors of production using augmented production function in turkey for the period of 1971-2009. the study reveals positive association of gdp per capita with electricity consumption per capita, real capital stock per capita, real domestic credit to private sector per capita and labor force participation using ardl bound testing approach. review of economics and development studies vol. 3, no 1, june 2017 17 jakovac (2013) indicated bi-directional short run causality and uni-directional long run causality running from total energy consumption to economic growth using annual data covering the period 1952 – 2010 for croatian economy. kusuma and muqorrobin (2013) indicated that granger causality was not running in both directions between output growth and energy consumption and confirmed the presence of neutral hypothesis theory. it implied that economic growth of malaysia was not highly dependent upon energy consumption. nelson et al. (2013) indicated one way granger causality from electricity and petroleum consumption to manufacturing in the short run and long run and bi-directional causality between manufacturing and electricity consumption using time series data of kenya from 1970 to 2010. saatci and dumrul (2013) took a structural breaks modeling approach to investigate the role of energy consumption in economic growth for turkish economy from 1960 to 2008. the study concluded positive association of energy consumption concerning economic growth. muse (2014) employed the cointegration, ordinary least square analysis, error correction model and pairwise granger causality tests to examine causal relationships between economic growth and energy consumption in nigeria. using time series data from 1980 to 2012, the study indicated energy consumption as enhancing factor for energy growth. jebran (2014) revealed uni-directional causality flowing from electricity consumption to economic growth using time series data from 1971 to 2010 for pakistan by applying granger causality test. chaudhry et al. (2015) discerned total labor force, capital formation, industrial output, government expenditure and energy consumption as rising factors for real gross domestic product in south asia while real gross domestic product was decreased by gdp deflator in the long run. rehman and bashir (2015) highlighted the involvement of energy consumption concerning agricultural output. the study used panel autoregressive and distributed lag model over panel data of middle income developing countries from 1990 to 2014. the long run results found energy consumption as significant and positive feature for agricultural output. gdp deflator, broad money and government expenditure were also improving agricultural output while capital formation and labor force were negative in the long run. ali et al. (2016) preferred biomass as a source of energy because it was more suitable for environmental protection as compared to fossil fuel as energy consumption. on the other side, biomass energy consumption was also revealed to be significant cause of higher growth in sub – saharan african countries. the findings of the study were based on pooled mean group (pmg), dynamic ols (dols), mean group (mg) and fully modified ols (fmols) techniques. yap and bekhet (2016) advocated that energy security had been highly required for rapid growth in malaysia and energy security issues may be resolve by effective pricing policies. the authors analyzed that income, fdi, population and electricity prices were involved in affecting residential electricity consumption in the long run. the above studies present the research conducted before this paper. some studies have practiced time series data as well as panel data in their analysis. and most of them have utilized granger causality approach for analyzing the causality. few of them have made use of ardl technique to examine the connection between electricity consumption and growth. some panel studies are old enough and no one has analyzed the association with reference to asia. the present study is different from previous studies and adds some additional points that are; i). existence of solow growth model ii). latest data range (1990 2015) review of economics and development studies vol. 3, no 1, june 2017 18 iii). estimation technique (panel co-integration) iv). segregated analysis of all regions of asia continent (central asia, east asia, south asia and south east asia) v). no. of countries (22) vi). analysis of estimates (fully modified ordinary least square method) vii). one additional variable that is electricity production. 3. panel data, models and estimation issues the collection of data, specification of models and estimation of results need serious attention to be taken. this section deals with the issues related to estimation of results, model specification and data collection. 3.1 model specification the objective of the study is to examine the influence of electricity on real output for all regions of asia i.e. central asia, east asia, south asia and south east asia. the research follows solow growth model that’s why labor force and capital formation are included as proxy of labor and capital respectively. considering linear form of equations, the study determines the following models independently for all regions. 3.1.1 central asia 𝑅𝐺𝐷𝑃𝐶𝐴 = 𝛼0 + 𝛼1𝑇𝐿𝐹𝐶𝐴 + 𝛼2𝐺𝐶𝐹𝐶𝐴 + 𝛼3𝐸𝐿𝑃𝑅𝑂𝐷𝐶𝐴 + 𝐶𝐴 3.1.2 east asia 𝑅𝐺𝐷𝑃𝐸𝐴 = 𝛽0 + 𝛽1𝑇𝐿𝐹𝐸𝐴 + 𝛽2𝐺𝐶𝐹𝐸𝐴 + 𝛽3𝐸𝐿𝑃𝑅𝑂𝐷𝐸𝐴 + 𝐸𝐴 3.1.2 south asia 𝑅𝐺𝐷𝑃𝑆𝐴 = 𝛾0 + 𝛾1𝑇𝐿𝐹𝑆𝐴 + 𝛾2𝐺𝐶𝐹𝑆𝐴 + 𝛾3𝐸𝐿𝑃𝑅𝑂𝐷𝑆𝐴 + 𝑆𝐴 3.1.4 south east asia 𝑅𝐺𝐷𝑃𝑆𝐸𝐴 = 𝛿0 + 𝛿1𝑇𝐿𝐹𝑆𝐸𝐴 + 𝛿2𝐺𝐶𝐹𝑆𝐸𝐴 + 𝛿3𝐸𝐿𝑃𝑅𝑂𝐷𝑆𝐸𝐴 + 𝑆𝐸𝐴 where subscripts ca, ea, sa, and sea respectively denote central asia, east asia, south asia and south east asia; 𝛼′𝑠, 𝛽′𝑠, 𝛾 ′𝑠 𝑎𝑛𝑑 𝛿 ′𝑠 show values of coefficients for central asia, east asia, south asia and south east asia; and ′𝑠 indicate error terms of regression models. 3.2 definition of variables in the above specified models, following variables are used as explained below. 3.2.1 real gross domestic product (rgdp) the dependent variable, real gross domestic product is defined as total goods and services produced within the economy evaluated at constant market prices. we have taken the prices of year 2000 to calculate real gdp. rgdp is taken in u.s. dollars for central asia, east asia, south asia and south east asia. 3.2.2 total labor force (tlf) tlf denotes total labor force in these asian regions i.e. central asia, east asia, south asia, south east asia. in total labor force, all males and female are considered who fall in age group of 15 – 65. it is taken as a proxy of labor. labor force is expected to be positively related to real output in these regions. 3.2.3 gross capital formation (gcf) gcf explains gross capital formation for all the regions of asia. gcf is taken as a proxy of capital. the unit of gross capital formation is current u.s dollars. capital is hypothesized as positively influencing real review of economics and development studies vol. 3, no 1, june 2017 19 gross domestic product of asia continent. 3.2.4 electricity production (elprod) for energy production, we are including electricity production in kwh because electricity is considered as the major source of energy for producing goods and services in an economy. we suppose that more electricity production may lead to higher real output in asia. but excess production above the limits may decline real output as well due to unnecessary utilization. 3.3 data sources to investigate the dimensions of electricity for real gross domestic product in asia continent, the research incorporates all regions of asia like central asia, east asia, south asia and south east asia. moreover, the study is based upon segregated analysis of all the regions of the continent. the research chooses some selected countries from each region according to availability of data. from central asia, the paper considers kazakhstan, kyrgyz, tajikistan, turkmenistan, and uzbekistan. in east asia, we have taken china, hong kong, japan, korea and mongolia. among south asia region, the study includes bangladesh, india, nepal, pakistan, and sri lanka. some countries are selected from south east asia region those are brunei, indonesia, malaysia, philippines, singapore, thailand and vietnam. the analysis selects time period from 1990 to 2015 for all countries regarding selected variables. data is collected from website of world bank, world development indicators, international financial statistics and global development finance. 3.4 estimation issues the current study analyses the influence of electricity on real output in asia continent. it is based upon segregated evaluation of all the regions of asia (central asia, east asia, south asia and south east asia) by forming panel of all regions individually. whenever, we try to inspect panel of countries, we need to pay attention on several issues of panel data those are described step by step as follows; 1. to explore stationary of the panel variables. 2. to decide about an appropriate estimation approach (fixed & random effects or panel cointegration or generalized method of moments). 3. apply panel co-integration test (pedroni or kao or fisher) to investigate long run relationship (if panel co-integration is decided to apply on the basis of unit root test). 4. to evaluate coefficients for general specified model using fully modified ordinary least square method (fm-ols). 5. then use the results for economic interpretation and policy making. based upon the above steps, econometric methodology is described in detail. 3.4.1 im, pesaran and shin w-stat (unit root test) the im, pesaran and shin test (1997) provides separate estimation for each ‘i' section, allowing different specifications of the parameter values, the residual variance and the lag lengths. their model is given by; itti n k ktiktiiiti tyyay      1 ,1,, (a) the null hypothesis of this test is that all series are non-stationary processes under the alternative that a fraction of the series in the panel are assumed to be stationary. 3.4.2 kao (engle – granger based) co-integration test the kao test (1999) follows the same basic approach as the pedroni tests, but specifies cross section specific intercepts and homogenous coefficients on the first stage regressors. under the null of no cointegration, kao shows that following the statistics; 𝐴𝐷𝐹 = 𝑡�̅�+√6𝑁�̂�𝑣/(2�̂�0𝑣) √ �̂�0𝑣 2 2�̂�0 2+ 3�̂�𝑣 2 10�̂�0𝑣 2 (b) review of economics and development studies vol. 3, no 1, june 2017 20 3.4.3 fully modified ordinary least square method (fm-ols) after establishing panel co integration, the analysis requires estimates for macroeconomic variables to get the intensity of long run relationships. kao and chen (1995) notice that ordinary least square method gives asymptotically normal but asymptotically biased results in panel co-integrated models. chen, mccoskey and kao (1999) have investigated that generally, the bias – corrected ordinary least square coefficients do not improve over the ols estimators. they suggest fully modified least square (fmols) estimators or dynamic least square (dols) may be more appropriate for panel co-integrated regressors. phillips and moon (1999) and pedroni (1996) also have proposed fully modified least square (fm-ols) method for co-integrated panel results. fm – ols is a generalization of phillips and hansen (1990). kao and chang (2000) propose another approach that is based on a panel dynamic least squares (dols). on the basis of above discussion, the research has made use of fully modified least squares (fm-ols) technique. 4. panel results and discussions this section describes panel results on the basis of graphical analysis and econometric analysis explained below. 4.1 graphical analysis figure 1 exhibits picture of central asia about real growth rate of gdp and electricity production growth. there is decline in electricity production growth and growth rate up to 1993, after this year both have started increasing up to 2000. after 2000, a mixed behavior is seen among growth rate and energy growth but in all cases both are moving in same direction. so for central asia, we can conclude positive relationship between real gdp and electricity production. interestingly, in initial years of analysis from 1990 – 1998 and from 2007 – 2008, growth rate and electricity growth has remained negative as well. figure-1: growth and electricity relationship in central asia association among electricity growth and real growth rate of gdp is displayed in figure 2 for east asia. for 1997, electricity production growth is negative, leading to lowest growth rate in east asia; in 2008, it is near to 0 in east asia. electricity production growth is remained higher during 2001 – 2007. despite lower excess production of electricity in east asia on the average as compared to real gdp as it is remained higher i.e. 1400 billion dollars (table 2). on the other side, most of the times, growth rate and electricity production growth rate were moving side by side or may be in same direction. this evidence gives us confused direction of relationship among electricity production and economic real output. the relationship may be positive or negative among electricity production and real gdp. -20 -15 -10 -5 0 5 10 15 growth rate electricity growth review of economics and development studies vol. 3, no 1, june 2017 21 -2 0 2 4 6 8 10 12 years 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 growth rate electricity growth figure 2: energy and growth relationship in east asia relationship of economic growth with electricity growth is presented in figure 3 in south asia for 1990 to 2011. the association among these variables is seem to be confused because the relationship may be explored as positive during 1990 to 1994. but these variables are oppositely related to each other during 1995 to 2000. again positive connection between growth rate and electricity production growth is analyzed from 2002 to 2008. in 2009-2011, the correlation among them is again negative. we may not conclude that whether the link is positive or negative among them. figure 3: economic growth and electricity growth in south asia 0 1 2 3 4 5 6 7 8 9 10 years 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 growth rate electricity growth review of economics and development studies vol. 3, no 1, june 2017 22 figure 4: gdp growth rate and electricity production growth in south east asia to interpret the correlation among real gdp growth rate and electricity production growth in south east asia, we have drawn figure 4. this figure clearly presents that electricity growth is negative or low from 1996 to 1998; in the same years growth rate of gdp is also remained very low. but surprisingly, other than these years, growth rate and electricity growth are moving in same direction. we can conclude direct correlation among growth rate of gdp and electricity production growth. 4.2 econometric analysis this section confers the panel results considering unit root test (im, pesaran and shin w-stat), cointegration test (kao panel co-integration test) and fully modified ordinary least square methods. table 3 displays the levels of stationary regarding dependent and explanatory variables included in the models with reference to all regions of asia (central asia, east asia, south asia and south east asia). the study incorporates only final conclusions concerning to all variables. we may successfully reject null hypothesis (variable is non-stationary) of unit root test on the basis of probability value (should be less than 0.05) and may deduce that all the concerned variables (rgdp, gcf, elprod and tlf) are integrated of order 1. fulfilling basic condition of co-integration, we can apply kao panel co-integration test on specified models. -6 -4 -2 0 2 4 6 8 10 12 14 16 growth rate electricity growth review of economics and development studies vol. 3, no 1, june 2017 23 table 3: im, pesaran and shin w-stat variables test in by including statistics prob. lag result central asia rgdp 1 st difference trend and intercept -2.23 0.01 auto i(1) gcf 1 st difference intercept -2.25 0.01 auto i(1) elprod 1 st difference intercept -4.89 0.00 auto i(1) tlf 1 st difference trend and intercept -4.52 0.00 auto i(1) east asia rgdp 1 st difference intercept -3.80 0.00 auto i(1) gcf 1 st difference trend and intercept -2.77 0.00 1 i(1) elprod 1 st difference intercept -4.53 0.00 auto i(1) tlf 1 st difference intercept -5.48 0.00 auto i(1) south asia rgdp 1 st difference trend and intercept -2.44 0.00 auto i(1) gcf 1 st difference trend and intercept -2.52 0.00 auto i(1) elprod 1 st difference intercept -3.73 0.00 auto i(1) tlf 1 st difference intercept -6.16 0.00 auto i(1) south east asia rgdp 1 st difference intercept -5.65 0.00 auto i(1) gcf 1 st difference intercept -7.61 0.00 auto i(1) elprod 1 st difference intercept -6.86 0.00 auto i(1) tlf 1 st difference intercept -5.12 0.00 auto i(1) in table 4, results of kao residual panel co-integration test are provided. null hypothesis (no cointegration) may be rejected for panel co-integration test on the basis of probability values and presence of panel co-integration is inferred. by selecting bandwidth as newey west automatic at 1 st lag, panel co-integration is found for central asia, east asia and south asia. panel co-integration also exists in south east asian model by selecting bandwidth as newey west fixed at 1 st lag. after tracing out panel co-integration, we can apply fully modified ordinary least square test for values of coefficients. table 4: kao residual panel co-integration test region t – statistic prob. lag bandwidth selection cointegration central asia -3.61 0.00 1 newey west automatic yes east asia -3.32 0.00 1 newey west automatic yes south asia -6.27 0.00 1 newey west automatic yes south east asia 1.68 0.04 1 newey west fixed yes note: null hypothesis: no co-integration among variables table 5 portrays the panel estimates provided by the fully modified ordinary least square method. first column shows the information about variables while second column displays the values of coefficients and probability values for asia continent. in 2 nd column, estimates of all asian regions are reported in relation to their individual columns. the significance of variables may be examined by probability value that should be less than 0.05. considering gross capital formation that is representative of capital in solow growth model, the study analyzes it most important variable for real output. the sign for the concerned variable is significantly positive for all regions of asia continent (central asia, east asia, south asia and south east asia). in east asia, gross capital formation has much stronger and more elastic influence on real output as compared to other regions of asia. one dollar increase in gross capital formation is a cause of increasing 5.07 dollars in real output of east asia on the average in the long run. the progress of china, japan, korea and hong kong are evident due to optimally utilized capital in east asia region. in central asia, south asia and south east asia; capital has less elastic influence means capital is less efficiently utilized here in these regions. the values of coefficient suggest that 1 dollar rise in gross capital formation leads to real output by 0.61, 0.57 and 0.76 dollars on the average in the long run. positive relationship of capital is in line with the economic theory. more capital formation and investment offers the economy and review of economics and development studies vol. 3, no 1, june 2017 24 industrial sector to expand more to produce goods and services within the geographical location of country or to enhance gdp in real sense that is one of the macroeconomic goals. out results are consistent with the study of shahbaz and ozturk (2012). coming towards the total labor force (proxy of labor), it is therefore concluded that labor force is a source of higher real output. in the short run as well as in the long run, labor plays its significant role in producing more goods and services. normally, under developed countries are more dependent upon labor force participation due to less availability of new technology. skilled labor is also a blessing for any economy. in comparison with south asia and south east asia, the labor force of central asia seems to be extremely productive and skilled. although kazakhstan, turkmenistan, uzbekistan, and tajikistan are less populated areas, the mean value of total labor force is 4.74 million for central asia; but labor force proves to be extremely productive in this region. it is also clear from the value of coefficient that is 1.21. for south asia and south east asia, values of labor force are correspondingly 0.19 and 0.12. labor force of east asia also looks extensively improved but it is associated with insignificant coefficient value. real output will increase by 1.21, 0.19 and 0.12 thousand dollars on the average due to an additional unit of labor force in central asia, south asia and south east asia respectively in the long run. the analysis is in line with the shahbaz and ozturk (2012) and qazi et al. (2012). table 5: panel estimates of fully modified ordinary least square variables asia central asia east asia south asia south east asia coefficient (probability) coefficient (probability) coefficient (probability) coefficient (probability) gross capital formation 0.61 (0.00) 5.07 (0.00) 0.57 (0.00) 0.76 (0.00) total labor force 1.21 (0.00) 0.76 (0.58) 0.19 (0.00) 0.12 (0.07) electricity production 0.13 (0.00) -2.01 (0.01) 0.55 (0.00) 0.76 (0.00) constant -2.59 (0.00) 3.23 (0.09) 1.25 (0.00) 2.17 (0.00) adj. r – square 0.96 0.66 0.99 0.81 with regards to electricity production in asia continent, it is not incorrect to express that it is the major source of energy. agriculture sector, services sector, manufacturing sector, government sector as well as all sectors are dependent upon this important source of energy. the study notices significant relationships for central asia, east asia, south asia and south east asia. the relationship of electricity production is positive with real output. the negative relationship is observed in case of only east asia (china, hong kong, japan, korea, and mongolia). it shows that real gdp is significantly expanded by efficient use of capital and labor force but electricity production is not essential for real output in east asia. may be in this region, there is no shortage of electricity, real gdp is at maximum level as compared to all other regions having much sustained growth rate, labor force and capital are available in excess in contrast with other regions so electricity keeps no value among all these. discussing electricity production for central asia, south asia and south east asia, outcome that is matched with the economic theory as energy production is playing vital role in real output expansion significantly. more electricity production enables the industrial sector to produce more at least cost and ultimately it will lead to higher real output. on the average, respectively in central asia, south asia and south east asia, one kwh more production of electricity raises real output by 0.13, 0.55 and 0.76 dollars in the long run. 5. concluding remarks and policy implications the intension of the current paper is to investigate the influence of electricity on real output of asia continent containing data from 1990 – 2015. following solow growth model, separate effect is traced out for each region of asia. graphical analysis suggests the positive association of real growth rate and review of economics and development studies vol. 3, no 1, june 2017 25 electricity production growth rate in all the regions. in some years, we get the negative relationship of real growth rate with electricity production growth rate in south asia region, south east asia region and central asia. this is happened either due to lag effect of electricity production growth rate on real growth rate or due to any inefficiency in electricity production. for econometric analysis; im, pesaran and shin w – test (unit root test) is pertained to analyze stationarity of panel variables. it implies that dependent and explanatory variables are integrated of order 1 that allows proceeding further for co-integration analysis. kao panel co-integration test is utilized to examine long run relationship among variables, and it infers the presence of co-integration. fully modified ordinary least square test is employed for values of long run coefficients. it advocates that in all regions of asia continent, real gdp is highly dependent upon total labor force in the long run. on the other side, regarding gross capital formation, the study indicates the same results. gross capital formation is playing vital role in enhancing real output in all regions of asia. the findings of this paper investigate mixed results in terms of electricity generation. electricity production is accomplished to significantly increase real output in various regions of asia like central asia, south asia and south east asia. in east asia, outcome is conflicting probably as a result of no dependence on electricity production of this region. there is no concept of electricity shortage there and their dependence is on skilled labor force and efficient capital investment. on the basis of above findings, following policies may be recommended. i. as labor force plays essential role in real output enhancement, still attention should be given for provision of skill development plans to the young labor specifically in underdeveloped countries of asia. ii. gross capital formation has always active part in amplifying real output for any economy. in asia continent, it is also behaving like that but there should be cheap delivery of such finances in all the regions equally. iii. on the basis of electricity production, it may be suggested that there should be keen emphasis on cheap electricity production through cheap resources in all the regions so that it may be supplied at lower rates. references abdulnasser, h. j. and manuchehr, i. 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(2013). empirical analysis on economic growth and energy consumption relationship in croatia. ekonomska istrazivanja economic research, 26(4), 21 – 42. review of economics and development studies vol. 3, no 1, june 2017 28 review of economics and development studies, vol. 6 (3) 2020, 651-659 651 the impact of workplace ostracism on job performance with the mediating role of emotional exhaustion: evidence from public sector universities of pakistan nada saleem mirza a , aftab haider b , tanveer taj c , hazrat bilal d a mphil scholar, bahria university, islamabad, pakistan email: nadabarlas23@gmail.com b assistant professor, bahria university, islamabad, pakistan email: aftabhaider@bahria.edu.pk c assistant professor, bahria university, islamabad, pakistan email: tanveertaj@bahria.edu.pk d assistant professor, center for management and commerce, university of swat, pakistan email: hbilal@uswat.edu.pk article details abstract history: accepted 18 august 2020 available online 30 september 2020 this study was conducted with an intention to investigate the influence of workplace ostracism on job performance with mediating effect of emotional exhaustion in higher educational institutions. data was collected using a quantitative technique through questionnaire form a sample of 317 workers serving at state universities located in twin cities of islamabad/ rawalpindi. simple random sampling technique was adopted. data was analyzed through spss and amos software. results of the study shown that workplace ostracism is significantly associated with job performance. the present study also revealed the mediating effect of emotional exhaustion in the relationship between workplace ostracism and job performance. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: workplace ostracism, emotional exhaustion, job performance jel classification: j62, j69 doi: 10.47067/reads.v6i3.253 corresponding author’s email address: hbilal@uswat.edu.pk 1. introduction because of the exceptional amount of time organizational individuals give with each other, the social setting has become a huge organizational perspective that can hugely impact job performance. positive social relations with organization individuals have been begun to forcefully impact job performance, organizational commitment, and job satisfaction (chung, 2018). however, the workplace has become a social setting where ostracism exists (de clercq et al., 2019), thusly unfavorably impacting social associations among organizational individuals. workplace ostracism is "where a person or groups prohibits to yield exercises that interface with other organizational members when it’s socially fitting to do so" (chung, 2018). studies have dependably found workplace ostracism to achieve unfavorable organizational outcomes, for instance, diminished degrees of job satisfaction, association duty, work execution, and organizational citizenship behavior (chung, 2018) and extended degrees of review of economics and development studies, vol. 6 (3) 2020, 651-659 652 hostility, counterproductive direct, badgering, and struggle (chung, 2018). various investigations underline the standing of optimistic work includes that indicator structural help to drive work results (de clercq et al., 2019), anyway a persuading essential additionally occurs to recognize the "clouded side" of the structural lifecycle, counting members' introduction to the mischief exercises which make weight besides destitution by way to endeavor they grasp their everyday work responsibilities (de clercq et al., 2019). occurrences of such misconduct incorporate broken organizational politics, social conflicts, and mental agreement (de clercq et al., 2019) factors that talk by and large to workers' mistakes done in what way they are preserved through their members or else their boss. alternative exceptional wellspring of the administrative mischief stays societal avoidance otherwise the absenteeism of sufficient companion consideration, otherwise called working workplace ostracism (hsieh & karatepe, 2019). anyway, paying little heed that workplace ostracism is harmful to employees it is the universal intellect, previous exploration suggestions simply uncertain assistance meant for the aforementioned harmful ramifications for companies' capability toward encounter their normal job performance. equivocalness force is situated as a direct result of workers changed replies in the direction of being detested, bestowing on the way to their features ((de clercq et al., 2019), for instance, how much their confidence is reliant upon their job performance (chung, 2018). problem statement higher education sector plays a vital role in building the society within the country. higher education institution's execution relies upon the academic staff and the managerial staff of the universities (noordin & jusoff, 2009), recently, ostracism has been analyzed in the academic community when zimmerman, carter-sowell & xu (2016) saw female staff as more ostracized in university settings regarding social alienation. additionally, there is a considerable gap in the literature to inspect those factors that decide different worker responses to segregation that is, in which cases employees carry on prosocial, hostile to social or pull back? the circumstance subordinate nature of working environment ostracism (williams, 2009) makes inside and out quantitative examination worth endeavor to increase complete comprehension of this marvel (liu and xia, 2016; waldeck, tyndall & chmiel, 2015) in explicit settings of heis (zimmerman et al., 2016) explicitly in pakistan (fatima et al., 2017). emotional exhaustion happens on account of overwork mandate at exertion which is similarly an influence of workplace ostracism furthermore, low social help additionally predicts emotional exhaustion (jackson, 2014). expanding this origination this study intended to investigate the issue of workplace ostracism in heis of pakistan through quantitative experiences by researching the results of workplace ostracism and its influence on job performance of the managerial workforces. this investigation additionally deciding the effective role of emotional exhaustion which declines the job result in light of the depleted administrative staff in the higher education sector of pakistan. (taimur & khan, 2017) workers who are confronting strain at work environment are unequivocally associated with undesirable negative outcomes alike lifetime misfortune (jahanzeb & fatima, 2018). research objectives:  to investigate the influence of workplace ostracism on job performance within the state universities of islamabad/rawalpindi.  to investigate the influence of workplace ostracism on emotional exhaustion within the state universities of islamabad/rawalpindi.  to determine whether emotional exhaustion mediates the connection of workplace ostracism on job performance. review of economics and development studies, vol. 6 (3) 2020, 651-659 653 research question:  what is the relationship between workplace ostracism and job performance in state universities of islamabad/ rawalpindi?  what is the connection between workplace ostracism and emotional exhaustion in state universities of islamabad/rawalpindi?  what is the mediating effect of emotional exhaustion in the connection between workplace ostracism and job performance? 2. literature review 2.1 workplace ostracism working exclusion is a mutual marvel that various employee’s knowledge with the workplace (o'reilly et al., 2015). nearby stand numerous problems these days in every organization rounded the world that essentially is inclined to and also grips that issue to duck such undesirable conditions to impact when all is supposed in a done association. workplace bullying (bedi, 2019), workplace incivility (cortina, magley, williams & langhout, 2001), workplace mobbing (zhang et al., 2017), and working place ostracism (ferris, brown, berry & lian, 2008b) are some of them. tracy also partners in 2006 described workplace bulling as it is the idea of such does that can be forceful communication besides performs frequently (taimur & khan, 2017). in the late decade, ostracism caught the huge eye as per diverse examination researchers, and it has in like means a harmful impact on organizational performance and employees. in 500 b.c the word ostracism was utilized by athenians toward ostracize somebody for a long time. regardless, after it arises on the way to the administrative point of view, it became extra thought once the idea of workplace ostracism besides developed instrument for it, it is formally presented by ferris, berry, brown, and lian (2008a). organizational ostracism is the deliberate, according to anderson (2009), administrative refusal of a person, that person in the previous was the quantity of that association's enrollment. in case someone is set into an express state of affairs trendy which that person is being left without a group of friends is societal escaping (o'reilly et al., 2015). the rejection or reprimanding of a person by additional being or social event that vulnerable person's ability to preserve active or develop incredible association by others, great notoriety on exertion ground (bedi, 2019). an individual is kept away from or neglected by different representatives in the work environment (taimur & khan, 2017). o'reilly and robinson (2009) referenced examination of workplace ostracism is extremely incredible marvels to reduce responsibility toward the workplace. 2.2 job performance performance is the most important element of organizations and its workers (keijzers, 2010). performance of an organization is reliant upon the performance of employees (job performance) and various elements, for instance, the environment of the association. highly performed employees are more creative and they show more commitment in achieving the goals of organization (keijzers, 2010). job performance and productivity advancement are additionally critical in offsetting our economy; by methods for improved norms, higher wages, an expansion in merchandise open for use. 2.3 emotional exhaustion (ee) ee is alluded to as emotion of genuinely over-strained and exhausted to achieve task & the individual will all in all show physical tiredness alongside sincerely depleted emotions (cole and bedeian, 2007). burnout or exhaustion is actuated by relevant factors or individual factors (wright & cropanzano, 1998). emotional exhaustion for the most part happens due to over employment requests in organizations which is in like manner a factor of bullying at work; besides, low social help furthermore predicts emotional exhaustion (jackson, 2014). the nearness of bulling and watching review of economics and development studies, vol. 6 (3) 2020, 651-659 654 bullying behaviors is identified with psychological responses which are additionally identified with pressure and result in a decrease in emotional stability (siddique, 2018). ee is likewise known as a delayed state of physical and psychological (cropanzano et al., 2003). the concept of ee is characterized as feelings of being genuinely overstretched and depleted by individual tasks (jahanzeb & fatima, 2018). it shows when employees accept that they need reasonable emotional stores to oversee unremitting stressors (hsieh & karatepe, 2019) emotionally exhausted workers have decreased intellectual, mental, and emotional resources, which makes it difficult for them to oversee relationally and work requests. emotional exhaustion was viewed as the most noteworthy indicator of job performance in the wake of controlling for positive and negative affectivity (singh et al.’ 1994). wright and bonett (1997) found that emotional exhaustion has a positive effect on work performance. the present study has been built up on cor theory. 3. theoretical frame work h2 h3 h1. workplace ostracism is negative associated with job performance. h2. workplace ostracism is positively associated with emotional exhaustion. h3. ee mediates the connection of workplace ostracism & job performance. 4. research methodology the philosophical establishment of the current study is positivism and the methodology that this examination has embraced is that of deductive thinking. the nature of study is causal and based on cross-sectional time horizon. 4.1 population of study: the present study has taken managerial staff as population who is employed in higher educational institutions of twin cities i.e., islamabad and rawalpindi. the current paper targeted three renowned universities of twin cities as a population which is quaid-e-azam university islamabad, nust islamabad, comsats university islamabad. the reason for choosing these three institutions was that they have been providing quality education for the previous several years in different disciplines and teaching values in the young group of pakistan. workplace ostracism job performance h1 emotional exhaustion review of economics and development studies, vol. 6 (3) 2020, 651-659 655 table 4.1 4.2 sample 317 managerial staff working at three universities was taken as sample size. the sample size was calculated through morgan table. this study utilized simple random sampling technique. similarly, managerial staff has been taken as unit of analysis. 5. data analysis & results 5.1 instruments the present study utilized adopted questionnaires from various sources. in order to measure workplace ostracism, the researcher used ten items, tested and proposed by ferris et al., (2008). the items were measured by five-point likert scale ranging from 1“strongly disagree” to 5 “strongly agree. on the other hand, job performance items adopted from scale of (williams and anderson, 1991). emotional exhaustion survey composed of eight items, a sample item for ee used in research is as (i feel emotionally drained from my work). table 5.1 correlations two tee tjp two pearson correlation 1 .000 -.264 ** sig. (2-tailed) .000 .000 n 317 317 317 tee pearson correlation .000 1 -.442 ** sig. (2-tailed) .000 .000 n 317 317 317 tjp pearson correlation -.264 ** -.442 ** 1 sig. (2-tailed) .000 .000 n 317 317 317 **. correlation is significant at the 0.01 level (2-tailed). correlation communicates the association among variables, it likewise analyzes that the two variables move the inverse or same way. s.no public universities academic staff managerial staff total population 1. quaid-e-azam university islamabad 6306 118 2. national university of sciences and technology (nust) islamabad 1465 1006 3. comsats university islamabad 2026 678 =1802 review of economics and development studies, vol. 6 (3) 2020, 651-659 656 table 5.2 coefficients model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 2.958 .127 23.202 .000 two -.174 .036 -.264 -4.858 .000 a. dependent variable: jp here the above table indicates the connection workplace ostracism with jp as negative and significant at 0.000. table 5.3 coefficients model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 3.447 .119 28.882 .000 two .056 .034 .094 1.679 .000 a. dependent variable: ee here the above table indicates the influence workplace ostracism on emotional exhaustion which is positive and significant at 0.000. table 5.4 coefficients model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) 4.124 .204 20.223 .000 tee -.488 .056 -.442 -8.752 .000 a. dependent variable: tjp here the above table reveals that in emotional exhaustion, when there is a beta value of -.442. as the beta coefficient sign is negative it implies that when there is a decrease in one unit of emotional exhaustion, there will be one unit decrease in the beta coefficient of jp. similarly, the influence of emotional exhaustion on jp came negative & significant at 0.000. for more explanation concerning the test whether the mediation that occurred was partial mediation or full mediation, the researcher used the preacher and hayes mediation test for mediation since numerous researchers had referenced (preacher & hayes, 2008). model table 5.5 coeff se t p llci ulci constant 4.5589 .2197 20.7542 .0000 .1270 . 2911 two -.1478 .0324 -4.5563 .0000 -.2116 -.1840 tee -.4644 .0543 -8.5529 .0000 . 2712 .3576 review of economics and development studies, vol. 6 (3) 2020, 651-659 657 table 5.6: the direct effect of x on y effect se t p llci ulci .1478 .0324 -4.5563 .0000 -.3116 -.2840 table 5.7 indirect effect(s) of x on y effect bootse bootllci bootulci tee .0261 .0177 .3250 .4080 the above tables show the mediating role of emotional exhaustion. with the table for the outcome variable, emotional exhaustion, the “a” path from workplace ostracism to emotional exhaustion was checked. it is significant with following values: llci: -0.2097 ulci: -0.1222 the “b” path from emotional exhaustion to job performance in a table for outcome variable of job performance was checked. it is significant with following values: llci: -0.2116 ulci: -0.1840 the c’ path, the direct path from workplace ostracism to job performance in the table for outcome variable of job performance was checked. it is significant with following values: llci: 0.2712 ulci: 0.3576 moreover, the direct influence of workplace ostracism (x) on jp (y) is also given in the table in which the value of llci is -0.3116 and the value of ulci is -0.2840 and the relationship is significant. 6. discussion and conclusion in the light results obtained after the analysis, especially from the correlation and regression tests, the current study has proved that workplace ostracism has a negative but substantial connection with job performance. with the value of 0.264** and is significant at 0.000 which is two-tailed. this outcome has been discovered comparatively in the past study too based on which we built up our first hypothesis in the wake of leading a critical literature review. (de clercq et al., 2019) workplace ostracism and job performance in their study association at value (r = -.384∗∗ also it was a significant relationship. furthermore also, (liwei feng et al., 2019) initiate out that workplace ostracism had mainly a negative relationship with job performance which was significant as well. h1. workplace ostracism is negatively associated to job performance. in the light of the results obtained after the analysis, especially from the correlation and regression tests, it has been proved that ostracism has a positive & significant connection to ee. results postulated that ostracism significantly effect emotional exhaustion at the value of r = 0.000. (sadia jahanzeb, 2017) in her study found out positive association among workplace ostracism & emotional review of economics and development studies, vol. 6 (3) 2020, 651-659 658 exhaustion. h2. workplace ostracism is positively associated to emotional exhaustion. in the light of the results we obtained after the analysis, especially from the correlation and regression tests, it has been proved that ee has a negative & significant connection with job performance. the mediating variable which is emotional exhaustion there exists a negative and significant relationship with job performance with the value of -.442** which is significant at twotailed. this result has been found similar in the previous studies too based on which we developed our third hypothesis after conducting a critical literature review. (zinta s. byrne, 2015) also found a negative and significant connection with job performance at the value of r = 0.03. h3. there is a negative association between emotional exhaustion & job performance. here findings for hypothesis 4 revealed partial mediation of emotional exhaustion in the relationship between workplace ostracism and jp and the direct effect is significant. these results can be explained as the influence of emotional exhaustion has a partial mediating effect in the association between workplace ostracism and jp. workplace ostracism and emotional exhaustion both are negatively related to jp the effects of workplace ostracism on jp are mediated by employee emotional exhaustion. h4. ee mediates the connection of workplace ostracism and jp. 6.1 conclusion the present research unloaded the effect workplace ostracism on job performance through undermining roles of emotional exhaustion exclusion, with a specific concentrate arranged the conditions cutting-edge which workers' presentation toward workplace ostracism fewer prone towards decrease capacity near encounter presentation prerequisites. the probability that existence ostracized remains connected with inferior job performance lessens to the degree that workers are progressively positive about their capacities. thusly, this examination gives basic bits of knowledge addicted to when members' experience hierarchical misconduct, as social avoidance, is pretty much prone to destabilize their recital. 6.2 limitation of the study the present study was conducted by focusing on only two cities; future research should focus on much larger area and should expand research to other big cities of pakistan. similarly, the current study focused on only three universities, future research may be conducted by comparing public and private universities. future research may also focus on qualitative method instead of quantitative. references banki, s. 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(2016). examining workplace ostracism experiences in academia: understanding how differences in the faculty ranks influence inclusive climates on campus. frontiers in psychology, 7(may), 1–9. review of economics and development studies vol. 3, no 2, december 2017 159 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 2 december 2017 journal homepage: www.publishing.globalcsrc.org/reads interlinkage between democracy and sustainable development 1 shahina imran, 2 farwa javaid 1 assistant professor of economics, government s.e. college bahawalpur, pakistan, shahinaimran3408@yahoo.com 2 farwaj60@gmail.com article details abstract history revised format: nov 2017 available online: dec 2017 purpose: this research project examines the directional relationship between democracy and sustainable development. panel studies over 31 cross countries from 1990 to 2016 finds that improvements in sustainable development predict increase in democracy. democracy has been measured by the subjective indicators such as civil liberties and political rights. the data has been collected from world development indicator and world governmental indicator. unit root test has been performed to check for stationarity. two stage least square methods have been used to explain the dependency of each variable. this study explains that tendency for rise in democracy urbanization tends to fall. the propensity for democracy rises with development, a smaller gap between female and male primary and secondary education accomplishment. the results suggest that gross domestic product have negative impact on democracy. it also attempts the effect of political stability and democracy on sustainable development. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords sustainable development, democracy, co2 emissions, panel data jel classification: c33, c36, o44, p14, q01 corresponding author’s email address: shahinaimran3408@yahoo.com recommended citation: imran,s., & javaid,f. (2017). interlinkage between democracy and sustainable development. review of economics and development studies, 3(2) 159-166 doi: https://doi.org/10.26710/reads.v3i2.175 1. introduction the word democracy originates from the greek word democratic, which means rule of the people. modern definition of democracy associates it with the procedure of elections. for joseph schumpeter (1947), “the democratic method is that institutional arrangement for arriving at political decision in which individuals acquire the power to decide by means of a competitive struggle for the people’s vote. however, it was deliberated that that without protection of civil liberties evens the electoral process is vitiated. hence, a comprehensive definition of democracy is fictitious as a political system which sponsors free and fair competitive elections for the government and administrative; allows for inclusive adult citizenship; defends civil liberties and political rights; and in which the elected governments really govern and military is under civilian control. sustainable development is the organized principle for meeting human development goals while at the same time sustaining the ability of natural systems to provide the natural resources and ecosystem services upon which the economy and society depends. the desirable end result is a state of society where http://www.publishing.globalcsrc.org/reads mailto:shahinaimran3408@yahoo.com mailto:farwaj60@gmail.com mailto:shahinaimran3408@yahoo.com https://doi.org/10.26710/reads.v3i2.175 review of economics and development studies vol. 3, no 2, december 2017 160 living conditions and resource use continue to meet human needs without undermining the integrity and stability of the natural systems. the concept of sustainable development came from the brutland report 1987; it is also concern with initial ideas about sustainable forest management. the modern concept has shifted to focus more on economic development, social development and environmental protection for future generations. common to both sustainable development and democracy is contribution – the ability of all people to come together and be involved in decisions about how we live and the goals we want to achieve as societies. 2. objectives the principal aim of this study is to obtain the exact relationship between democracy and sustainable development. there are following objectives of the study for investigating inter linkages between democracy and sustainable development.  to investigate whether democracy effect sustainable development.  to analyses the impact of economic growth on the propensity to experience democracy and vice versa. 3. literature review the review of literature showed that there had been extensive works, both theoretical and empirical, on the issue relating to interlink age between sustainable development and democracy. joseh and romain (2000) surveyed the empirical relationship between democracy and economic growth. the simple correlation between an index of democracy and economic growth was positive but weak over the period 1970 to 1989. the democracy equation was estimated along with the channel and growth equations, using three stage least squares. the model consists of a cross-country growth equation and seven channels which were physical capital accumulation, trade openness, human capital, income inequality, government size, distortions and political instability. democratic institutions were assumed to affect growth through a series of channels. this study estimated a full system of equations determining growth and the channel variables. results suggested that democracy fosters growth by improving the accumulation of human capital and, less robustly, by lowering income inequality. on the other hand, democracy hinders growth by reducing the rate of physical capital accumulation and, less robustly, by raising the ratio of government consumption to gdp. once all of these indirect effects were accounted for, the overall effect of democracy on economic growth was moderately negative. these results indicated that democratic institutions were responsive to the demands of the poor by expanding access to education and lowering income inequality, but do so at the expense of physical capital accumulation. this may prevent us from making statements about the effects of democracy in any country. helliwell (1994) also estimated the effect of democracy on physical capital accumulation, but found instead a positive and significant coefficient. perotti (1996). in his study of income inequality and growth, he found that democracy does not significantly affect political instability. halil and yunus (2011) examined the association between economic growth and democracy in turkey between 1980 and 2010 by using the johansen co-integration model and vector error-correction model (vecm). the data used in this study are obtained from turk stat for gdp growth and polity iv project for democracy index. the main objective of this study was to see if there was a significant relationship between economic growth and democracy in turkey. by using the models, we find that there was a significant relationship between these variables. prospect research on turkey can observed causality effects as well. co-integrating coefficients indicated the positive relationship between growth and democracy. this paper suggested that one should take the important determinants such as inflation, political institutions, economic institutions, social structures, and even education into account in order to analyze the causality. inglehart said that economic structure of a society had a positive effect on its democratization. barro found that the countries at low level of economic development did not sustain review of economics and development studies vol. 3, no 2, december 2017 161 democracy, but if a poor country can establish liberal economy, then this country would tend to become more democratic on it’s on. minier (1998) analyzed the democracy and growth: alternative approach. the objective of the study was to focuses on two previously unexamined aspects of the relationship between economic growth and democracy. secondary data was used in this study. the dependent variable in this model was gdp per capita. the independent variable in this model was investment, education, and democracy levels. cobb douglas model was used. the result showed that the democracy, along with initial income and literacy, contributes pto the identification of regimes of countries facing similar aggregate production functions. mahmood et. al (2010) analyzed democracy and economic growth in pakistan. the objective of the study was revealed that association between economic growth and democracy is much composite and disordered. secondary data was used in the study. the dependent variable in this model was gross domestic product volume (gdpv). the independent variable in this model was democracy index. cointegration and long run elasticity model was used. the result showed that democracy had significant direct connection with gdpv during study period. positive correlation between democracy and national income is not unpredicted. subhani et. al (2009) analyzed the structure and performance of economy of pakistan (comparative study between democratic and non-democratic governments). the objective of the study was to investigate the impact of democratic government or autocratic (non-democratic) government on economic growth of pakistan by examining the factors that help in measuring the countries performance in different governmental regime. secondary data was used in the study. the dependent variable in this model was gdp market price, gdp per capita. the independent variable in this model was exchange rate, unemployment rates, exports and imports, fdi and government expenditures on health. linear regression model was used. the result showed that there was a need for relentless efforts on the part of authorities and people to start and/or accelerate a method of setting up preconditions for the emergence of good governance. sharma (2007) analyzed the democracy, good governance, and economic development. the objective of this study was that what types of policies and institutions have the most positive and measurable effects on improving governance? what kinds of institutional arrangements are associated with economic growth and poverty reduction? secondary data was used. the dependent variable in this model was democracy and independent variables were good governance and economic growth. the result showed that good governance was not only the key to the promotion of human rights and protection of civil liberties, but also good governance was highly correlated with economic development and the potential to deliver significant improvements in living standards. although a number of countries had improved the quality of their governance, much still needs to be done. dani (1997) described the democracy and economic performance. the data collected from unido, via the world bank’s labor market data base. democracy cured as an endogenous variable. this paper concluded five-year averages of the data lid a maximum of five sub-periods for each country, namely 1970-74, 1975-79, 1980-84, 1985-89, and 1990-94. that consider total of 388 observations. unit labor cost is dependent variable. democracy, trade openness, price level and gross domestic product used as independent variables. two stage least square methods were applied. that show four results, democracies yield long-run growth rates that were more expectable.it create greater stability in economic performance.it controlled adverse shocks much better and it paid higher wages. these results provided a clear message: risk-averse not consecrated with lot of capital. democracy was negative and statistically significant in all cases. democracies had more difficulty without the losers in political competition from economic rewards. this decreases the inducements for social groups to participate in non-cooperative and disruptive behavior extant. review of economics and development studies vol. 3, no 2, december 2017 162 4. data and methodology for this study, the time horizon of the study covers a period of 27 years commencing from 1990 to 2016 which uses annually data comprising 31 cross country observations about some macro-economic variables chosen, namely: democracy index, sustainable development index, urbanization, gender parity index, gross domestic product growth rate, and political stability and co2 emissions. o description of study variables  democracy index (dem) is constructed using political rights (pr) and civil liberties (cl). freedom house defines political rights (pr) as rights that empower people to contribute freely in political process, including the right to vote, compete for the public office and elect representatives who have influential impact on public policies and are accountable to the electorate. civil liberties (cl) permit for the freedom of expression and organizational rights, rule of law, and personal autonomy without interference from the state. both political rights and civil liberties indices range from 1 to 7, with higher values indicating more authoritarian regimes and lower values reflecting stronger democratic institutions. dmc = (14 – (pr + cl))/12 = 0 for pure dictatorship (no pr and cl freedoms) = 1 for pure democracy (full pr and cl freedoms)  sustainable development is measured as sd = (ans * wr) – pg where ans = growth in genuine wealth per capita i.e. adjusted net saving, excluding particulate emission damage, % of gni wr = wealth ratio (0.125 for low income countries, 0.15 for lower middle income countries, 0.175 for upper middle income countries and 0.2 for high income countries) pg = population growth (in %)  gender parity index is the ratio of gap between male and female primary schooling.  political stability is measured by absence of violence & terrorism estimate  urbanization is measures as urban population growth rate in percentage  co2 omission is measured as kt per meter. a heavy colorless gas co2 that does not support combustion, dissolves in water to form carbonic acid, is formed especially in animal respiration and in the decay or combustion of animal and vegetable matter, is absorbed from the air by plants in photosynthesis, and is used in the carbonation of beverages. o model selection by applying the unit root test we estimate that ordinary least square method is applied. but most of the variables have endogeneity and dependency between them. so, the two stage least square method has been selected for regression. o model description two models have been designed here. 1) dmc = β1 + β2 sd+ β3gdp+ β4lngpi+ β5 urb+ up ------------- dmc = democracy sd= sustainable development gdp= gross domestic product gpi= gender parity index review of economics and development studies vol. 3, no 2, december 2017 163 urb= urbanization up= error term 2) sd = β1+ β2 dmc+ β3gdp+ β4pst+ β5co2 +up --------------- sd= sustainable development dmc= democracy gdp= gross domestic product pst= political stability co2= co2 emissions up= error term o estimation techniques since our study involves time series data. we will have to enter into panel econometric techniques for estimation. o econometric equation of 2sls diet=α1+ α2isdit+ α3igdpit+ α4igpiit+ α5iurbit+εit sit=α1+ α2idmcit+ α3igdpit+ α4ico2it+ α5ipstit+εit o unit root test before the econometric analysis on panel data, first we have to consider the nature of the data and check the stationary properties of the variables. the basic property for the stationarity is the series oscillate over the constant mean and variance. it does not be determined by on the time variations, on the other hand non stationary series influence the random shocks and the series keeps on the random walk. o two stage least square the three-stage least-squares method generalizes the two-stage least-squares method to take account of the correlations between equations in the same way that sur generalizes ols. threestage least squares require three steps: first-stage regressions to get predicted values for the endogenous repressors; a two-stage least-squares step to get residuals to estimate the crossequation correlation matrix; and the final 3sls estimation step. 5. result and discussion the econometric analysis starts by checking the stationarity of the data to find the directional relationship between democracies, sustainable development. unit root has been applied. although all variables are stationary at level, endogeneity are contemporaneous between the variables, so 2sls has been applied. o unit root tests to test the stationarity of panel data from 1990 to 2016 lm , pesaran and shin w-stat test are performed and table 1 shows the results of all variables at level. the results of lm , pesaran and shin w-stat test indicate that are stationary at level. table 1 unit root test (llc & ips) variables lm , pesaran and shin w-stat levin , lin & chu test democracy index -8.73786 (0.000) -2.65667 (0.000) sustainable development -0.57241 (0.002) -0.28441 (0.029) political stability -1.5867 (0.000) -3.2885 (0.000) gdp growth -8.56717 (0.000) -4.18504 (0.000) urbanization -3.84841 (0.006) -2.45679 (0.070) co2 emissions -6.74328 (0.000) -2.40629 (0.000) review of economics and development studies vol. 3, no 2, december 2017 164 all the variables stationary at level so we apply 2sls model. table 2 two stage least square method dependent variable: democracy & sustainable development regressor co-efficient t-values p-values c(1) 0.023475 3.179960 0.0015 c(2) -1.16e-05 -3.830769 0.0001 c(3) 0.575602 40.07159 0.0000 c(4) -0.009393 -5.132541 0.0000 c(5) 3.264861 8.931212 0.0000 c(6) 0.000155 3.567070 0.0004 c(7) 0.776259 7.541248 0.0000 c(8) -0.024267 -5.148697 0.0000 democracy = (c(1)sustainable development c(2)gdp growth + c(3)gpi c(4) urbanization sustainable development=c(5)democracy + c(6)gdp growth + c(7)political stability c(8)co2 emissions the table 2 shows that democracy and sustainable development has a positive and significant relationship. we find that sustainable development have positive effect on democracy. for every one percent increase in sustainable development, democracy increases by 0.023475 percent. this shows that as wealth ratio increase, political rights and civil liberties are affected positively. these results are consistant with (borner, et al. (1995) and inconsistent with brunetti (1997). gdp growth has negative and significant relationship with democracy. as gdp growth increase in a society, democracy falls. for every one percent increase in gdp growth, democracy falls by 1.16e-05. growth is initially increasing in an index of electoral rights, but the relation turns negative once a moderate amount of rights has been attained. one way to interpret these results is that, in the worst dictatorships, an increase in democracy tends to stimulate growth because the benefit from limitations on governmental power is the key matter. these results are consistant with barro (1997) and incosistant with borner (1995) . gender parity index have positive and significant effect on democracy that shows the female education is more effective for democracy. for every one percent increase in gender parity index, democracy would increase by 0.575602 percent. as gender parity index increase that shows the female to male education ratio increase. when female education increases, awareness increase among women about voting . these results are consistent with lipset (1959). urbanization have negative and significant effect on democracy. for every one percent increase in urbanization leads to 0.009393 percent fall in democracy . the urbanization rate is often mentioned as a determinant of democracy, although the sign of this influence is not clear on theoretical grounds. some observers argue that the rural population has limited ability to organize and is therefore easy for a dictator to suppress. this result means that, for a given standard of living, it is not true that more rural places are less likely to be democratic. ourresults are consistant with barro(1999) . we find that democracy index have positive effect on sustainable development. as democracy turns good the development of an economy must turns to good. if there is one percent increase in democracy, sustainable development would increases by 3.264861 percent. our results are inconsistent with keech (1995) and comeau (2003) and consistent with przeworski and limongi (1993). gross domestic product growth has positive and significant effect on sustainable development. as gdp growth rate increase in the economy development must sustain. one percent increase in gdp growth, review of economics and development studies vol. 3, no 2, december 2017 165 will lead sustainable development to increase by 0.000155 percent. it shows the 100 percent significant results for sustainable development. political stability has positive and significant effect on sustainable development. as government is more stable in the economy, it will concentrate more on development. if there is one percent increase in political stability, sustainable development would increases by 0.776259 percent co2 emission has negative relationship with sustainable development .for every one percent increases in co2 emission; sustainable development would fall by 0.024267 respectively due to negative relation. this result shows the 100 percent significant results for sustainable development. our results are consistent with world commission on environment (wced) in 1987. 6. conclusion this study attempts to test the directional relationship between democracies, sustainable development including the 31 observations of cross country analysis over the period, 1990 to 2016. this paper therefore employs unit root test in order to judge stationarity of the series. all the variables are stationary at level but endogeneity are present between the variables. so we apply the two stage least square econometric model. we find that democracy is positively related to sustainable development and gender parity index and negatively related to gross domestic product and urbanization. sustainable development is positively related to democracy, political stability, gross domestic product and co2 emissions is negatively linked. this study suggested that it is necessary to maintain persistent level of sustainable development for the improvement of democracy. government should control co2 omission to improve human resource. government should take steps to increase the education of male and female for enhancing democracy. references barro, r., 1999, “determinants of democracy”, journal of political economy, 107(6): 158183. barro, robert j. "democracy and growth" journal of economic growth 1(1), 1996, 1-27 bilecen, h., & kibis, e. y. (2012). economic growth and democracy in turkey. çanakkale onsekiz mart üniversitesi yönetim bilimleri dergisi, 10(20), 137. comeau, l. (2003). democracy and growth: a relationship revisited. eastern economic journal, 29(1), 1-21. helliwell, john f. (1994). empirical linkages between democracy and economic growth. british journal of political science, 42(2), 225-248. mehmood at.al (2010) democracy and economic growth in pakistan. research journal of internatıonal studıes issue 15: 77-85 mehmood at.al (2010) democracy and economic growth in pakistan. research journal of internatıonal studıes issue 15: 77-85 minier, j. a., 2001. “is democracy a normal good? evidence from democratic minier, j.a. (1998) democracy and growth: alternative approaches. journal of economic growth, 3: 241–266. helliwell, john f. (1994). empirical linkages between democracy and economic growth. british journal of political science, 42(2), 225-248. review of economics and development studies vol. 3, no 2, december 2017 166 keech, w. r. (1995). economic politics: the costs of democracy. cambridge university press. lipset, s. m. (1959). some social requisites of democracy: economic development and political legitimacy. american political science review, 53(01), 69-105. przeworski a. and limongi f. "political regimes and economic growth" journal of economic quinn, d. p., & woolley, j. t. (2001). democracy and national economic performance: the preference for stability. american journal of political science, 634-657. rodrik, d. (1998). globalisation, social conflict and economic growth. the world economy, 21(2), 143158. rudolph, j. (2000). the political causes of the asian crisis. the political dimensions of the asian crisis, singapore: select books, 13-93. sharma,s.d (2007) democracy, good governance, and economic development. taiwan journal of democracy,3,1: 29-62 subhani i, m.(2009) structure and performance of economy of pakistan. international journal of business and social science: 2-1. wced, u. (1987). our common future. world commission on environment and developmentoxford university press. review of economics and development studies vol. i, no 1, june 2015 11 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 1: issue 1 june 2015 journal homepage: www.publishing.globalcsrc.org/reads inter-industry comparative advantage of sudan 1 macleans mzumara 1 bindura university of science education, bindura zimbabwe. macmzumara@yahoo.com articledetails abstract history revised format: may 2015 available online: june 2015 the author has investigated inter-industry comparative advantage of sudan. inter-industry comparative advantage in sudan is lacking. industries have insignificant number of product codes in which they have comparative advantage. exports earnings are not linked to the number of product codes in which comparative advantage exists. sudan mainly exports crude oil without value addition. it is recommended that sudan diversifies its economy. it is further recommended that it adds value to its oil by refining it. there is a need of investing in exploration of new endowments to boost comparative advantage. sudan should work towards attracting foreign direct investment so it can be able to expand its narrow base of comparative advantage © 2015 the authors, under a creative commons attributionnoncommercial 4.0 keywords comparative advantage in international trade exports sudan jel classification p23, z21, n67 corresponding author’s email address: macmzumara@yahoo.com recommended citation: mzumara, m. (2015). inter-industry comparative advantage of sudan. review of economics and development studies, 1 (1) 11-19 doi: https://doi.org/10.26710/reads.v1i1.112 1. introduction generally the studies on sudan have concentrated on comparative advantage at product level. an example of such studies is damiyano and mzumara (2013). in that study the authors identified products in which sudan has comparative advantage. however, their analysis did not reveal the industries in which the products belong. the objective of this paper is to investigate inter-industry comparative advantage of sudan. this paper relies on the theory of comparative advantage. the theory of comparative advantage was first proposed by david ricardo as the determinant of international trade. in his famous proposition, ricardo gave an example of portugal producing wine and britain producing cloth in a 2×2 model. this theory has been accepted as the global law of economics (goldin, 1990). according to bender and li (2000) the classical theory of comparative advantage explains that the gains from external trade improve welfare and that trade exhibits no barriers to promote prosperity of the global economy. in the neo-classical theory, production for the global economy is determined by costs. in the global http://www.publishing.globalcsrc.org/reads mailto:macmzumara@yahoo.com mailto:macmzumara@yahoo.com https://doi.org/10.26710/reads.v1i1.112 review of economics and development studies vol. i, no 1, june 2015 12 economy, prices and costs are used interchangeably in this process exchange is determined by comparative advantage. it is therefore a given fact that the factors of production namely labour, land and capital especially in developing nations do not account their opportunity costs due to distortions inherent in the market (goldin, 1990). comparative advantage specifically involves countries exporting goods which they are in a position to produce at their best giving them an advantage over other producers in the world. this implies that, a nation should channel its endowment to production of a particular good (serin and civan, 2008). comparative advantage is attributed to various sources depending on a particular theory used. the ricardian theory attributes comparative advantage for costs and technological advantages of nations over others. the neo-factor-proportion theory attributes comparative advantage from factor productivity among countries. the hecksher-ohlin-samuelson theory attributes comparative advantage from differences in factor endowments. the technological gap and product cycle theory attributes comparative advantage from the technological innovations for example soft technological changes. some authors such as medovic (1994) attributes comparative advantage from government actions such as policies, administrative capacity and how the process of intervention in the economy is carried out. historical and political dynamics also influence comparative advantage (krugman, 1989: barry and hannan, 2001). widgren (2005) has said that heckscher-ohlin theorem factor endowments in nations determine comparative advantage. these views are almost the same as mzumara (2006) who attributes comparative advantage from differences in factor endowment. according to mzumara (2006), a nation with an abundant factor will use this factor most intensively to produce the good that it will export to other countries. it will then import a good that uses its scarce factor less intensively. the result of this process is that specialization will emerge. nations will therefore specialize in the products in which they have abundant endowment and give up the products in which they are not gifted through factor abundance. khatibi (2008) emphasizes on factor scarcity as the major determinant of comparative disadvantage. in order to measure comparative advantage, a revealed comparative advantage (rca) is used. the index is helpful in demonstrating a country’s capabilities to produce. the rca technique utilizes observable trade balance to conclude the relative industrial advantage. a particular industry has comparative advantage when it is able to produce at lower costs. the rca is basically a ratio of ratio that shows trade shares (ferto and habbard, 2000: richardson and zhang, 2001). the rca measure utilizes the trend of trade balances to show relative industrial comparative advantage end up producing for the external markets whereas industries which lack comparative advantage end up importing. rca is definitely an acceptable technique that is not influenced by limitations of assumptions that lack validity in practice (mutambatsere, 2007). after having discussed the theory of comparative advantage and the measurement used to determine comparative advantage, the question is whether empirical evidence exists? a number of studies have been done which show empirical evidence in support of the theory. in a study done by mirzaei et al (2001) the objective was to investigate whether iran’s chicken meat which is exported to the middle east possess comparative advantage. the study concluded that iran lacked comparative advantage. the implication of this lack of comparative advantage is that iran should in fact be importing the chickens itself instead of producing them and that should channel its resources elsewhere where it possess comparative advantage. the other implication of the results is that the middle east countries are importing from a less efficient producer instead of importing from efficient producer with comparative advantage. review of economics and development studies vol. i, no 1, june 2015 13 khatibi (2008) investigated whether kazakhstan’s exports to the european union possess comparative advantage. the study revealed that kazakhstan has comparative advantage and it is evident in all sectors. krugell and matthee (2009) investigated the performance of south african regions. they were able to identify the regions which have comparative advantage and demonstrate export capabilities. shinyekwa and otieno (2011) investigated whether uganda has comparative advantage. their findings revealed that uganda has comparative advantage in limited products. the results are similar to chingarande et al (2013) in which they investigated the comparative advantage of the east african community (eac) member states. in respect for uganda, they found that it has comparative advantage although in limited products. they also found kenya to have comparative advantage and various levels of comparative advantage in tanzania burundi and rwanda. however, one shocking finding was that they specialized or have comparative advantage in similar primary products such as coffee making the prospect of trade amongst themselves slim. mzumara (2011a) investigated whether zimbabwe had competitive advantage between 2000-2009. the study concluded that zimbabwe had comparative advantage. mzumara (2011b) also investigated the performance of mozambique and concluded that mozambique has comparative advantage. mzumara et al (2012) investigated whether the members of the north america free trade agreement (nafta) have comparative advantage. the study concluded that the united states, canada and mexico have comparative advantage. 2. methodology the technique used here is balassa (1965) index, the revealed comparative advantage (rca). according to wu and chen (2004) a higher rca is evidence that a nation posses a greater revealed comparative advantage and competitiveness in the production of the product. krugell and matthee used balassa (1965) technique in comparing the export capabilities of the south african regions. balassa (1965) formula is as follows;                  totw toti jw ji x x x x rca , , , , / where: xi,j denoting country i’s exports of product j; xi,tot denoting country i’s total exports; xw,j denoting the world’s (all countries) export of product j; and xw,tot denoting total exports in the world. an rca≥1 demonstrates that a nation has revealed comparative advantage in the production of the same product. an rca < 1 shows that a country has no revealed comparative advantage in the production of the same product. the author obtained data from the international trade centre’s trademap. both sudan’s export data and the world export data was secured on 6-digit level. this is the product classification accepted globally as the most disaggregative. separate computation of rcas was done for 2008, 2009 and 2010 and then the average rca was obtained. 3. results discussion table 1 shows the results for each industry. review of economics and development studies vol. i, no 1, june 2015 14 table 1: results for each industry rank industry code industry description number of products in the industry with rca≥1 1 06-15 vegetable products 11 1 41-43 raw hides, skins, leather and furs 11 2 01-05 animal and animal products 8 3 16-24 foodstuffs 6 3 25-27 mineral products 6 3 72-83 metals 6 4 84-85 machinery/electric 3 5 28-38 chemicals and allied industries 2 5 90-97 miscellaneous 2 6 44-49 wood and wood products 1 6 50-63 textiles 1 6 68-71 stone/glass 1 7 39-40 plastic/rubber 0 7 64-67 foot wear /head gear 0 8 86-89 transportation 0 source: from the results. column 1 in table 1 is the rank of the industry. column 2 is the industry code. it is derived from the first two digits of the product code. column 3 is the industry description and column 4 is the number of the product codes with rca≥1. sudan demonstrates that it has insignificant inter-industry comparative advantage. vegetable products industry has 11 product codes. it is ranked number 1. the same rank is shared by raw hides, skins, leather and fur industry. although the two industries are ranked number 1 in this analysis, the number of products in them is very insignificant. wood and wood products, textiles and stone/glass all have a single product code each. plastic/rubber, foot wear/head gear and transportation industries all do not have a product code in them. sudan relies so much on oil that it has not managed to diversify its economy. so at industry level in terms of the number of products, sudan inter-industry comparative advantage is insignificant. table 2 shows top 3 product codes in the vegetable products industry in which sudan has comparative advantage. table 2: top 3 product codes in the vegetable products industry in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 130120 gum arabic 348.7649 204.233 243.4348 265.4776 2 120740 sesamum seeds 177.2951 124.9577 137.4088 146.5539 3 121299 vegetable products for human consumption 55.66296 39.77092 25.26885 40.23424 source: from the results gum arabic in table 2 in the vegetable products industry has the highest rca in this industry with an index of 265.5. sesamum seeds are ranked the second with an index of 146.6. vegetable products for human consumption are ranked the third with an index of 40. table 2 shows top 3 product codes in the raw hides, skins, leather and furs industry in which sudan has comparative advantage. review of economics and development studies vol. i, no 1, june 2015 15 table 3: top 3 product codes in the raw hides, skins, leather and furs industry in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 410510 tanned/crust skins of sheep/lambs, without wool on in the wet state 77.29592 68.51966 49.78037 65.19865 2 410621 tanned/crust hides and skins of goats/kids, without wool/hair on, in the wet state 43.32304 12.29105 38.14735 31.25401 3 410229 sheep or lamb skins, raw except pickled, no wool 1.715847 11.09164 0.715471 4.50765 source: from the results. tanned/crust skins of sheep/lambs, without wool on in the wet state in table 3 n the raw hides, skins, leather and furs industry have the highest rca index in this industry with an index of 65.2. tanned/crust hides and skins of goats/kids, without wool/hair on, in the wet state are ranked second with an index of 31.3. sheep or lamb skins, raw except pickled, no wool are in the third rank with an index of 4.5. table 4 shows top 3 product codes in the animal and animal products industry in which sudan has comparative advantage. table 4: top 3 product codes in the raw animal and animal products industry in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 010410 sheep, live 80.2322 290.7259 386.0372 252.3318 2 010420 goats, live 3.61723 37.92994 222.1886 87.91193 3 010690 live animals 104.9739 82.63462 0.116349 62.57495 source: from the results. sheep, live in table 4 in the animal and animal products industry has the highest rca in this industry with an index of 252. goats, live are ranked second with an index of 88. live animals rank third with an index of 62.6. table 5 shows top 3 product codes in the foodstuffs industry in which sudan has comparative advantage. table 5: top 3 product codes in the foodstuffs industry in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 170310 cane molasses 13.41597 3.553057 11.83281 9.600612 2 220710 undernatured ethyl alcohol >80% by volume 0 0 5.414471 1.804824 3 230230 wheat bran, sharps, other residues 2.385099 0 2.713473 1.699524 source: from the results. cane molasses in table 5 in the foodstuffs industry have the highest rca in this industry with an index of 9.6. undernatured ethyl alcohol >80% by volume is raked second with an index of 1.7. wheat bran, sharps, other residues are ranked the third with an index of 1.7. table 6 shows top 3 product codes in the review of economics and development studies vol. i, no 1, june 2015 16 mineral products industry in which sudan has comparative advantage. table 6: top 3 product codes in the mineral products industry in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 270900 petroleum oil, oil from bituminous minerals, crude 9.782954 10.67944 12.22897 10.89712 2 261000 chromium ores and concentrates 4.587556 3.270766 10.9646 6.274309 3 271311 petroleum coke, not calcined 0 0 10.47092 3.490307 source: from the results. petroleum oil, oil from bituminous minerals, crude in table 6 in mineral products industry has the highest rca in this industry with an index of 10.9. chromium ores and concentrates are in the second rank with an index of 6.3. petroleum coke, not calcined in the third rank with an index of 3.5. this is the industry that brings in most of the revenue of sudan. however, sudan exports crude oil without value addition. it is therefore deprived revenue by exporting crude oil. table 7 shows top 3 product codes in the metals industry in which sudan has comparative advantage. table 7: top 3 product code in the metals industry in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 780200 lead waste or scrap 4.480923 5.183406 2.316308 3.993545 2 720430 waste or scrap, of tinned iron steel 7.764182 0.57313 0.689301 3.008873 3 720410 waste or scrap, of cast iron 2.517828 0.262217 0.39117 1.057072 source: from the results. lead waste or scrap in table 7 in the metals industry has he highest rca in this industry with an index of 4. waste or scrap, of tinned iron steel is in the second rank with an index of 3. waste or scrap, of cast iron is in the third rank with an index of 1. table 8 shows top 3 product codes in the machinery/electric industry in which sudan has comparative advantage. table 8: top 3 product codes in the machinery/electric industry in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 850690 parts of primary cells and primary batteries 17.48173 2.451331 0 6.644354 2 854810 waste and scrap of primary cell 0 0.163476 14.14031 4.767929 3 842630 portal or pedestal jib cranes 5.127741 0 0.378311 1.835351 source: from the results. parts of primary cells and primary batteries in table 8 in the machinery/electric industry have the highest rca in this industry of 6.6. waste and scrap of primary cell is in the second rank with an index of 4.8. portal or pedestal jib cranes are in the third rank with an index of 1.8. table 9 shows 2 product codes in the chemicals and allied industries in which sudan has comparative advantage. review of economics and development studies vol. i, no 1, june 2015 17 table 9: 2 product codes in the chemicals and allied industries in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 284450 spent fuel elements of nuclear reactors 5.625838 0 0 1.875279 2 291250 cyclic polymers of aldehydes 4.881612 0 0 1.627204 source: from the results. spent fuel elements of nuclear reactors in table 9 in chemicals and allied industries have the highest rca in this industry with an index of 1.9. cyclic polymers of aldehydes are in the second rank with an index of 1.6. table 10 shows 2 product codes in the miscellaneous industry in which sudan has comparative advantage. table 10: 2 product codes in the miscellaneous industry in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 930610 cartridges for rivet etc tools, humane 3.185844 4070.336 212.2929 1364.917 2 950310 electric trains, train sets 2.951097 75.36659 13.3459 30.55786 source: from the results cartridges for rivet etc tools, humane in table 10 in miscellaneous industry have the highest rca in this industry with an index of 1365. electric trains, train sets are in the second rank with an index of 30.6. table 10 shows 1 product code in the wood and wood products industry in which sudan has comparative advantage. table 11: 1 product code in the wood and wood products industry in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 440349 logs, tropical woods 0 0 10.65446 3.551487 source: from the results. logs, tropical woods in table 10 in the wood and wood products industry is the only product code in this industry with rca≥1. table 11 shows 1 product code in the textiles industry in which sudan has comparative advantage. table 12: 1 product code in the textiles industry in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 520100 cotton, not carded or combed 8.936779 6.663224 4.352662 6.798862 source: from the results. cotton, not carded or combed in table 11 in the textile industry is the only product code in this industry review of economics and development studies vol. i, no 1, june 2015 18 with rca≥1. table 12 shows 1 product code in the stone/glass industry in which sudan has comparative advantage. table 13: 1 product code in the stone/glass industry in which sudan has comparative advantage rank product code product description 2008 rca 2009 rca 2010 rca average rca 1 710812 gold in unwrought forms non-monetary 0 11.63722 1.42077 4.352662 source: from the results. gold in unwrought forms non-monetary in table 12 in the stone/glass industry is the only product code with an rca≥1. although sudan shows no real evidence of inter-industry comparative advantage, the mineral products industry provides relatively sufficient earnings for sudan. sudan which has only comparative advantage in only 60 product codes has a higher earnings from its exports than some other african countries which some of them have even more than 400 product codes in which they have comparative advantage in. 4. conclusions and recommendations inter-industry comparative advantage in sudan is lacking. industries have insignificant number of product codes in which they have comparative advantage. exports earnings are not linked to the number of product codes in which comparative advantage exists. sudan mainly exports crude oil without value addition. it is recommended that sudan diversifies its economy. it is further recommended that it adds value to its oil by refining it. there is a need of investing in exploration of new endowments to boost comparative advantage. sudan should work towards attracting foreign direct investment so it can be able to expand its narrow base of comparative advantage. references balassa, b. 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(1990). comparative advantage: theory and application to developing country agriculture. oecddeelopment centre, working paper no. 16. insight conflict (2013). sudan conflict. from www.insightconflict.org/conflicts/sudan (retrieved april 1, 2013). khatibi, a. (2008). kazakhstan’s revealed comparative advantage vis-à-vis the eu-27. ecipe review of economics and development studies vol. i, no 1, june 2015 19 working paper no. 03/2008 krugell, w. & matthee, m. (2009). measuring the export capability of south african regions. development southern africa, 26(3), 459-476 krugman, p. 1989. geograph and trade, cambridge, mit press. memedovic (1994). on the theory and measuremenet of comparative advantage, timbergen, institute research series.n.65, amsterdam, thesis publishers. mirzaei f, yazidani s, motsafavi m, gharadaghi aa 2004.the survey on comparative advantage of iran’schicken meat export in the middle east. animalscience research institute. mutambatsere, e. (2007). competiveness and revealed comparative advantage in the sadc maize industry. aaae conference proceedings, 57-62 mzumara, m. (2006). the theory of money and banking in modern times. mustang : tate publishing lcc mzumara, m. (2011a). was zimbabwe competitive in international trade 200 – 2009? international journal of economics and research, 2(6), 200-221 mzumara, m. (2011b). mozambique from marxist – leninist to capitalism: has the country performed well economically? international journal of business management and economic research, 2(6), 359-370 mzumara, m. chingarande, a & karambakuwa, r. (2013). an analysis of comparative advantage and intra-north american free trade agreement (nafta) trade performance. journal of sustainable development, 5(11):1-15 richardson, d. j., &zhang, c. (1999).revealing comparative advantage: chaotic or coherent pattern across time and sector and the us trading partner? national bureau of economic research, working paper 7212 serin, v. & civan, a. (2008). revealed comparative advantage and competitiveness : a case study for turkey towards the eu. journal of economic and social research, 10(2), 25-41 shinyakwa, i., & othieno, l. (2011). uganda’s revealed comparative advantage: the evidence with eac and china. retrieved july 30, 2012, from http//www.eprc.or.ug/pdf_files/ugcomparativeadvantage.pdf widgren, m. (2005).revealed comparative advantage in the market. turku school of economics, the research institute of finish economy (etla), cepr and cesifo wu, h.l., & chen, c. h. (2004).changes in the foreign market competitiveness of east asian export. journal of contemporary asia, 34(4), 505-522 review of economics and development studies, vol. 6 (2) 2020, 439-445 439 the problem of institutionalization of political power in pakistan: an appraisal of the zia period (1977-1988) a kausar shafiq, b abdul basit khan, c bilal bin liaqat, d ali shan shah a visiting faculty member, department of political science, bahauddin zakariya university (bzu), multan, pakistan. email:kausar9185@gmail.com b assistant professor, department of political science & ir, government college university, faisalabad, pakistan c lecturer, department of political science & ir, government college university, faisalabad, pakistan d assistant professor, department of political science & ir, government college university, faisalabad, pakistan, email: ali_shan49@yahoo.com article details abstract history: accepted 17 may 2020 available online 15 june 2020 since its establishment in 1947, pakistan has repeatedly been on starting point or even somewhat beyond the starting point, because of the malfunctioning or non-existence of the state institutions; on such occasions, instead of correcting or rectifying the malfunctioning, the basic infrastructure was altogether demolished while the institutions were abolished thus placing the country on a restart from zero point. perhaps the zero point in islamabad indicates the psychological dimensions of the establishment that they place the country repeatedly at zero point to start another exercise of trial and error. the military rule by general ziaul haq (1977-1988) provides an interesting insight of the above notion since the start of authoritative rather autocratic islamization during the said regime turned the country back into late 1940s when the proposed islamization under the objectives resolution of 1949 was criticized by the non-muslim and neutral foreign observers alike. the instant study aims to evaluate whether the state institutions were empowered or strengthened by the zia regime. it will also evaluate how general zia’s arbitrary use of power affected the performance of government functionaries and public departments. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: zia ul haq, islamization, institutionalization of power, politics in pakistan jel classification: d72, d79, n15 doi: 10.47067/reads.v6i2.221 corresponding author’s email address: ali_shan49@yahoo.com 1. introduction after 1971, the situation was quite conducive rather ideal for evolving a viable civil society and establishing self-sustaining/preserving institutions in the country; because bhutto was in power at the federal and the provincial level in the punjab and sindh, whereas the national awami party and review of economics and development studies, vol. 6 (2) 2020, 439-445 440 jamiatul-ulama-e-islam coalition was governing the provinces of the north western frontier and baluchistan. had bhutto allowed the system to take its shape these three political parties combined together could have performed the processes of nation building and state building in a very adequate and proper manner; because the political parties are formed by the people speaking different languages, professing different religions, belonging to different ethnic and racial stocks, while the membership of a political party ensure that their conflicting interests are articulated and aggregated through minimum consensus, thus making the tasks of nation and state building relatively smooth, less complicated and accessible. bhutto’s autocratic rule during 1971-1977 and his disregard towards democratic norms required the improvisation of the functioning of the institutions instead of their abolition along with suspension of the first ever almost agreed upon constitution. the politicians should have realized that a government by and among themselves, no matter how much undesirable and unfavourable, was certainly better than a government of the non-political element; because there is always a room for negotiations, dialogue, compromise and improvement, which under the army rule cannot be even hoped for. no doubt that some prominent opposition leaders had met a very distasteful treatment at the hands of bhutto, but that was not the way to correct the situation which they opted for; moreover some of the opposition leaders had even a longer standing in the field of politics and were more seasoned parliamentarians than he was; hence were expected to have even better appreciation and understanding of the system. surprising enough, this martial law was unique, because it was demanded and asked for by some of the opposition leaders, for instance air marshall asghar khan wrote a letter to the chief of the army staff urging him to take over, while a political leader even that of the status of wali khan welcomed martial law expressing that he had a sigh of relief because the martial law had put the suffocated atmosphere to an end. the opposition leaders for reason best known to them played in the hands of the agencies while bhutto further mishandling the situation brought the country to the verge of a civil war which provided the armed forces once again the opportunity to demolish the entire institutional infrastructure and impose martial law in the country ( hussain, 1989). on july 5, 1977, zia claimed that he had stepped in only to end the chaos which had been created by the political leaders, hence would hold fresh elections and restore the normal political order in the country within 90 days, which were to be held in october instant, but during the election campaign he was informed that bhutto’s party was still the most popular one while the opposition alliance would do a little better than before; hence he put the demand for postponement in their mouth which they readily accepted and demanded that before the elections there must be a process of accountability and those who had misused the power should be taken to task; in the meanwhile a murder case was registered against bhutto, who was arrested, put on trial and later sentenced to death. after the elections were postponed, zia formed a national government comprising all except bhutto and his party; particularly jamaat-i-lslami, being most vocal and instrumental in bringing down bhutto government, had provided zia much strength to consolidate and retain his power base. at that juncture, the higher judiciary played a very crucial role in undermining the constitution, notwithstanding, it owed its existence and oath to the same; the supreme court not only validated the army takeover, but without any precedent overstepped to the extent of authorizing the chief martial law administrator to amend the constitution of 1973; nevertheless reserving the power of ratification on case to case basis for itself, which was unprecedented and in contravention of the provisions of the review of economics and development studies, vol. 6 (2) 2020, 439-445 441 constitution because under the same, only the parliament was empowered to amend the constitution, hence neither the supreme court nor the chief martial law administrator had any lawful authority whatsoever to amend the constitution. the relevant portion of the judgment reads: “the chief martial law administrator having validly assumed power by means of an extra constitutional step in the interest of the state and for the welfare of the people, is entitled to perform all such acts and promulgate all legislative measures, which have been consistently recognized by judicial authorities as falling within the scope of the law of necessity, namely, all acts of legislative measures which are in accordance with, or could have been made under the 1973 constitution, including the power to amend it”( pakistan legal decisions.1977. p.716). to start with, zia accepted the supremacy of the court because before he could deal with the judiciary he had to clear the mess,( ziring, 1998) consolidate his power until the expiry of the tenure of the president choudhry fazal illahi and the conclusion of the murder trial of bhutto; hence to avoid the situation that bhutto must not be pardoned, final judgment of the case was delayed till president illahi had outlived his tenure and he assumed the office of the president of pakistan along with the office of the chief martial law administrator. after dealing with bhutto, he declared that the constitution of l973was held in abeyance, hence no more operative, moreover was nothing more than a few pages which he could tear away any time; he issued the provisional constitutional order which substantially circumscribed the writ jurisdiction of the courts while the judges of the superior courts were required to take fresh oath under the said order. once he had tamed the courts of law turned to the political leaders who by then had outlived their utility as his allies. he sacked them from their positions, banned all the political parties and placed a ban on all types of political activities. now he was in his full bloom; hence showing complete disregard for the constitution, the political process, institutions, the political leaders and the political parties. zia did not only demolish the state institutions and subjugated the judiciary, he also destroyed the very fabrics of the political parties, which no matter how weak and in-disciplined, are the manifestation of the political will of the people. instead of evolving an issue-oriented approach to politics, he imposed elections on non-party basis, which was a retrogressive act pushing the people back to the politics, based on the racial, cultural, linguistic and religious bonds. in 1977 the demolition of the institutions was quite uncalled for because the 1973 constitution and the institutions working under the same had everything to provide, hence the performance and functioning of the institutions could be improvised and corrected through the replacement of the individuals. the demolition and abolition of the institutions never provides any remedy rather puts the clock back to start afresh. individuals are born to differ and they seldom agree; especially in a pluralistic society like pakistan where the people are divided and cross divided on vertical as well as horizontal levels owning to conflicting interests, culture, language and ethnicity, a minimum consensus to evolve a polity and a civil society is hard to be achieved and once achieved must be maintained and enhanced and not be done away with to restart again from the ashes. zia did not only demolish the state institutions and subjugated the judiciary, he also destroyed the fabrics of the political parties, which no matter how weak and in-disciplined, are the manifestation of the political will of the people. political parties are the institutions which evolve minimum consensus among the fragmented people and their conflicting interest. in 1982-83 an alliance of various political parties launched a movement for the restoration of democracy (mrd), which was much stronger in sindh than the other provinces because the sindh his review of economics and development studies, vol. 6 (2) 2020, 439-445 442 felt more frustrated, as they believed that the sindhi prime minister was killed by a punjabi general. the movement picked such a momentum which was given coverage by local and foreign media; zia realized that he had lost ground, hence conceded to the demand for restoration of democracy, (hussain, the gurdian:1985) because by that time, the u.s had started looking for the revival of somewhat representative government. he realized that to continue in power he had to seek some kind of mandate which might provide legitimacy howsoever weak to his autocratic rule; hence as the first step he planned to get elected as the president no matter with less or no genuine mandate. in december 1984 zia through a referendum, widely boycotted by the people at large, declared himself to be elected as president for five years from march 1985 while simultaneously serving as the army chief as a special case. in february 1985 he held elections to the national and provincial assemblies on the non-party basis. meanwhile, when the national assembly had already been elected, he, claiming his authority to amend the constitution as per judgment in nusrat bhutto case, extensively amended the constitution of 1973 under the constitutional amendment order called the eight amendment; which as per his assertion did not require any authentication by the national assembly. through this amendment, zia made the constitution of 1973 a presidential constitution, which originally was framed according to the principles of the parliamentary form of government. zia reserved for himself the power to appoint the prime minister, dismiss him when he was pleased to do the same and dissolve the national assembly. he, in his own discretion, could appoint the chiefs of different forces, the judges of the superior courts and the provincial governors who acting under his directions could exercise substantial powers. in march 1985 justice anwarul haq, the former chief justice of pakistan and the author of the judgment in the nusrat bhutto case, released a statement that the provisional constitutional order of 1981[and the revival of the constitution order of 1985] were in contravention of the judgment of the court and had no legal or constitutional validity. he advised the martial law authorities to leave the task of amending the constitution to the parliament. in our analysis, leaving alone the validity of the authority to amend the constitution granted by the supreme court, it was more than absurd that when the national assembly had been elected, zia unilaterally amended the constitution because logically the authority given by the supreme court was conditioned with the non-existence of the national assembly, hence thereafter, he had no grounds whatsoever to amend the constitution on his own. as a reaction to the said amendment leaders like asghar khan, ghulam mustafa jatoi, wali khan, bizenjo, nasrullah khan and others declared that the constitution of 1973 no longer existed, hence a new constitution based on the lahore resolution of 1940, was to be framed. jatoi issued a fourteen point formula, which if not accepted would lead to a popular movement for the restoration of democracy against the martial law. moreover as a reaction to these amendments, a sindhi baluch pashtoon front was established in london by hafeez pirzada, mumtaz bhutto, attaullah mengal and others which demanded that the four provinces of pakistan must form a confederation which in their opinion was the only way pakistan could be saved from further disintegration. the confederation formula was a substantial departure from the federal constitutional arrangement which was agreed upon by the members of the elected parliament in 1973. it can be well said that when the institutions fail to perform their specifically prescribed function or perform extra constitutional functions, the system has to face such problems; moreover if the decisions and policies are not made by the institutions or the decisions and policies made by the institutions are altered by the individuals in arbitrary manner, the agreement and consensus, achieved earlier, on the fundamental issues also ceases to exist and the conflicting interests and differences crop review of economics and development studies, vol. 6 (2) 2020, 439-445 443 up again and fresh efforts to settle already settled issues have to be made. in march 1985 when zia unilaterally amended the constitution, pakistan ever since 1971 had to face a constitutional chaos of an unmatchable intensity. in the light of the above discussion it can be analyzed that the said amendments had damaged the minimum consensus among the political elite over the basic and fundamental constitutional issues and once again had opened a hot debate involving controversial constitutional issues which were settled by the constitution of 1973 notwithstanding the fact that the bhutto regime had misused power to the resentment of the leaders of the opposition parties who believed that the constitution of the 1973 could be improved to guarantee more provincial autonomy and less interference by the federal government in the provincial affairs. after the elections had been held and the 8th amendment inserted, zia in exercise of the powers under his-self-amended constitution, appointed muhammad khan junejo as the prime minister who with his support and blessing obtained the vote of confidence from the assembly. after installing the governments at islamabad and the provincial levels, he realized that to legitimize and politicize his army rule he needed a political party; hence, to do the needful, junejo formed muslim league in a house which was inherently non-partisan. when challenged by some opposition leaders, the speaker syed fakhar imam was obliged to admit the motion and ruled that no political party could be formed in a house which was elected on non-party basis; hence those who formed such political party had lost their membership of the national assembly. zia, to save the situation, inserted the provision having retrospective effect, which made fakhar imam to leave his job and not those who in spite of being elected on nonparty basis had formed a political party in the house. although junejo was just an average man, nevertheless, to cope with the situation, he exhibited far higher level of ability than expected; his foremost job was to get the martial law lifted at the earliest and convince zia better get his self-styled eighth amendment ratified by the national assembly; he told zia that if he promised a deadline to lift the martial law, the house might ratify the eighth amendment albeit with some minor modifications. taking his suggestions, zia got his self-styled amendment validated along with all other actions taken by him under martial law since july 1977, moreover he also secured a pre-facto approval of his actions which he would take in the period between such approval and the lifting of martial law. junejo remained the prime minister for about three years, nevertheless during this period substantial powers were exercised by the president and the governors in the province and not by the prime minister or national and provincial assemblies; in spite of lifting the martial law zia continued to hold the office of the army chief until march 1990,which was a presidential system, with a national assembly having the status of an advisory body and the cabinet as a team of persons implementing the policies and decisions of the government which meant the president. it was again a replication of the vice-regal system in which the institutions were allowed to play a very limited role under a system of controlled and diluted “democracy”. although the1973 constitution, provided a parliamentary federal form of government, but the institutions had neither substantial power nor any role to play which they usually performed in such a system. zia claimed to bridge the gap between the army and political institutions asserting that the army could share the power but could not transfer the same; the supremacy of the armed forces was manifested through the national security council, which was overwhelmingly dominated by the chiefs of forces and the chairman joint chiefs of staff committee, while the prime minister and the chief ministers were the review of economics and development studies, vol. 6 (2) 2020, 439-445 444 members but without any effective real role to play in the policymaking. under such an arrangement the institutions like the parliament and the provincial assemblies were no more than a showpiece in the power structure. the daily telegraph in an editorial “benazir homecoming” illustrated: “the problem for general zia can be stated quite simply. although, he has brought to pakistan a greater degree of stability than most people thought likely, general zia’s regime remains what it has always been a rather lackluster dictatorship which is tolerated by many pakistanis but is wholly unloved. however, after much vacillation and hesitation, general “zia has recently committed himself to moving towards a form of democracy. the general seems to be hoping that people will be satisfied with sanitized elections from which most of country’s genuine politicians will be excluded. that was never very likely and seems even less so now. general zia will probably have to choose between holding proper elections which might well result in victory for the pakistan people’s party or the continuation of the unhappy and illegitimate authoritarian rule”( hussain, the daily telegram london,1985, august 22). during this period, it was reported that a substantial part of the political elite in baluchistan, sindh and the north western frontier province had resorted to a violent reaction and people were gathering weapons and ammunitions for armed struggle. eminent political leaders like wali khan, bizenjo, khar, pirzada, asghar khan, bugti and many others expressed the opinion that the martial law regime of zia had widened the gulf between the punjab and the smaller provinces aggravating the suspicion, distrust and fear of domination among them. these leaders believed that the apprehensions of the smaller provinces about their exploitation and domination by the punjabi dominated civil and military bureaucracy were no more unfounded and had been confirmed by the successive martial law regimes in pakistan. they believed that in such a situation, as far as the process of nation building was concerned, the four provinces of pakistan were standing somewhat behind the starting point 1947. in the light of these views, it appears that the zia regime though being successful in retaining power by its sheer force for more than ten years (in1988) had not only utterly failed to accomplish the task of nation building rather had reversed it. by 1988 the relationship between the prime minister junejo and president zia had become uncomfortable because of junejo’s consistent attempts to exercise the authority of the prime minister in same manner as the prime minister in a parliamentary form of government usually does, whereas zia had time and again categorically declared that the army could only share the power with a subordinate and monitored civilian government and had no intention to part with it and transfer it to the civilian government in total. the last straw which broke the camel’s back was the secrete sale deed of weapons to iran by some influential generals of the pakistan army with the blessing of zia himself. these weapons belonged to the us and were stored in a camp known as ojri camp near rawalpindi to be supplied to the afghan militants fighting a guerilla war against the soviet forces in afghanistan through good offices of the pakistan government. these weapons were reportedly used by iran against iraq and a us team was sent to visit pakistan and check the said weapons stored in ojri camp. before the needful could be done, on 10 april 1988, the said depot was blown up and the weapons destroyed causing many deaths and casualties in rawalpindi. junejo took the matter very seriously and decided to take action against those army generals who were involved in the said sale of arms to iran. zia had two options, either to let junejo proceed against his army generals or in case of saving them, had to sack junejo from the prime minister ship; he exercised the second option sacking junejo on the charges that he was creating unrest within the ranks of the most sensitive organization i. e the pakistan army and was creating a bad will between the army and the people of pakistan. he dissolved the national and provincial assemblies and promised to hold fresh general elections for the same”(ziring, 1998). 2. conclusion it can be concluded by that time zia had outlived his utility for the us government which had review of economics and development studies, vol. 6 (2) 2020, 439-445 445 reportedly lost confidence in him as a care-taker of their strategic interests in the region; moreover, the soviet forces in afghanistan had become ineffective to continue their occupation hence rendering pakistan as redundant to play the role of a front line state in the region. the us states department saw no further reason and utility to patronize an army general to rule pakistan, therefore planned to replace him with somewhat representative government; hence zia along with many other generals was killed in an accident when a plane carrying him and 29 others including the us ambassador to pakistan was blown up in the air as a result of a conspiracy which brought his eleven years rule to a dramatic end. general muhammad aslam baig succeeded zia as the chief of the army staff and ghulam ishaq khan, the chairman of the senate took over as the acting president in accordance with the provisions of the constitution of 1973. the dissolution of the assemblies had already been challenged in the court and it was reported that general aslam baig pressurized the judges of the supreme court not to revive the assemblies and let the fresh general elections be held on party basis. the military’s decision to stay on the sidelines and support the democratic process was a departure from the policies of zia-ul-haq who had strongly favoured the institutionalization of an expanded role of the military. this was a tactical withdrawal based on a realistic assessment of the political situation and did not represent their exit from the political domain or their inability to play a salient role. before assuming power, benazir bhutto had to assure the army chief that her government would respect the military’s interests and concerns and ensures effective political and economic management (rizvi, 2013). to be finally concluded in the words of an eminent historian of pakistan: zia attempted to resolve the pakistan’s long-standing quest for stability by means of islamization and depoliticization. the result was mounting sectarian violence and increased ethnic conflict, both of which were to assume major proportions in the decade following his death (talbot, 2014). references hussain, fayyaz ahmad. (1989).the problem of federalism and regional autonomy in pakistan. an unpublished m. phil thesis, london: london school of economics & political science. pakistan legal decisions. (1977).the supreme court of pakistan. ziring, lawrence. (1998). pakistan in the twentieth century. a political history. karachi: oxford university press. hussain, fayyaz ahmad. (1985 march 4) view: the guardian london. hussain, fayyaz ahmad. (1985 august 22). view: the daily telegram london. ziring, lawrence. (1998). pakistan in the twentieth century. a political history. karachi: oxford university pres. rizvi, hasan askari. (2013).the military and politics in pakistan 1947-1997. lahore: sang-e-meel publications. talbot, ian. (2014). pakistan: a new history. karachi: oxford university press. review of economics and development studies, vol. 6 (3) 2020, 715-725 715 a confirmatory factor analysis of interpersonal teacher behaviour scale: validation of the urdu translation of secondary school students’ perspectives rabia bahoo a , ismat nasim b , ruqia shaheen c , muhammad latif javed d a lecturer, department of education, government sadiq college women university, bahawalpur, pakistan email: rabia.bahoo@gscwu.edu.pk b lecturer, department of economics, government sadiq college women university bahawalpur, pakistan email: ismat.nasim@gscwu.edu.pk c lecturer, department of economics, national university of modern languages, multan campus, pakistan email: rismail@numl.edu.pk d lecturer, department of education, the islamia university of bahawalpur, bahawalnagar campus, pakistan, email: latif.javed@iub.edu.pk article details abstract history: accepted 18 july 2020 available online 30 september 2020 the interpersonal teacher behavior’ model has been used in various countries. the validity of this instrument has been shown in different languages except in pakistan. therefore, this study aimed to validate students’ perceptions of teachers’ classroom interaction (qti) in the urdu version. to attain the purpose of the current investigation the secondary school students in pakistan were taken as a sample, out of which 52% were boys and 48% girls. the urdu translation of the qti was used to accumulate the data. the confirmatory factor analysis has been run to calculate the accuracy of the qti structural model. results confirm the fitness of the qti structural model and support that urdu translation of the qti also applies to pakistani secondary school students. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: students, validity, urdu translation, reliability, secondary school jel classification: i20, i29, p36, p39 doi: 10.47067/reads.v6i3.258 corresponding author’s email address: ismat.nasim@gscwu.edu.pk 1. introduction the interpersonal teacher behavior model (also known as mitb) offers a broader and hailed framework to study the interactions between students and teachers. conversely, the instruments, that are designed to evaluate mitb in an educational context, are based on the weak properties of psychometric. mitb initially developed to point out the need for examined crosscultural adaption methods. this piece of study aims to examine the cross-culture empirical verification of mitb within the secondary school educational context in pakistan. the observed results of the current investigation will support the validity of the mitb. mailto:rabia.bahoo@gscwu.edu.pk mailto:ismat.nasim@gscwu.edu.pk mailto:rismail@numl.edu.pk mailto:ismat.nasim@gscwu.edu.pk review of economics and development studies, vol. 6 (3) 2020, 715-725 716 the literature is full of longstanding efforts to probe out the interactions of teachers and students within the domain of the classroom, mainly by chavez and david in 1984 and 2003 respectively. in 1985, wubbels developed the model of interpersonal teacher behavior (mitb) after inspiring by the general interpersonal relations model of leary presented in 1957. the general interpersonal relations provided a map about students’ perceptions of the interpersonal behavior of their teachers. since the emergence of mitb, it received international and national attention and recognition. it was because of the extensive application of the instrument that is designed for measuring the behavior of the mitb within the classrooms. this extensive instrument is called “questionnaire on teacher interaction” also known as qti according to fraser and walberg in 2005. although mtib and qti are widely used in different educational domains but translated versions of qti possess weak psychometric properties along with some inability and shortcomings to depict the circumflex configuration of mitb. therefore, such findings might be revealed the incompetency regarding the procedures applied in the validation of mitb in a cross-cultural context. the procedural investigations of the s-t (teacher-student) interactions within classrooms had followed many different paradigms and empirical methodologies including qualitative and quantitative according to lewin et al. in 1939, withall, in 1949, amidon & hough, in 1967, chavez, in 1984, pianta in 1999, and davis in 2003. during 1985, wubbels et al. provided a fertile concept of s-t interactions by considering it as a means of the communication process. within the framework domain, wubbles developed a basic model after inspiring by the general interpersonal relations model of leary presented in 1957 represented as a circle of two intersecting dimensions. wubbles categorized the first dimension of influence as dominance and submission, whereas the other dimension of proximity with opposition and cooperation. dominance and submission are representing the control over the communication process and hostility and affection representing the degree of cooperation as a resultant of communicators. in figure 1, a schematic representation of the mitb is given. figure 1: two-dimensional coordinate system of the leary model from the combination of four distinct poles, the mitb comprises an emergence of eight indicators of behaviors. leadership is the first pole of behavior along with helping/friendly behavior and understanding. the fourth and fifth poles are student's responsibility or freedom and uncertain. dissatisfied behavior, admonishing and strict behavior are the last three poles of review of economics and development studies, vol. 6 (3) 2020, 715-725 717 attitudes of mitb. the mitb is a base for the qti development, being an instrument that measures the perceptions of teachers’ interpersonal behavior according to wubbles et al. in 1985. out of all eight scales of behavior with respect to communication style with teachers. this technique captured international attention and recognition and translated into 15 and more languages (fraser & walberg, 2005; wubbels & brekelmans, 2005). adaptation of qti in the context of elementary schools, the eight indicators of behavior are consistently testified as challenging and problematic so far. the quantitative studies had been reviewed and revealed the fulfillment of basic expectations of the model under study (goh & fraser,1996 &1998; koul, & fisher, 2004; scott & fisher, 2004; den brok, fisher et al., 2005; kyriakides, 2005; kokkinos et al., 2009). precisely, head-to-head scale cases showed a high degree of correlation in the same direction whereas absolutely opposite scales showing high negative correlation coefficient values. several patterns emerged with specific behavior groups in such a way that the resultant patterns were failed to justify and explain the quantitative nature of aforesaid studies. there were various studies based on the classic methodology of mtib in the different contexts of education, and among all, there is of telli et al. version developed in 2007 that is a turkish version of qti. the research design developed by telli et al included interviews base study from teachers and students and these results indicating some teacher behaviors that were a part of the original mtib. in the discussion of the outcomes of the study, the researchers concluded as scales can be appeared as reliable if only translation and back-translation used, but unable to compare with dutch and american translations. (wubbels, & levy,1991). this piece of study aims to examine the cross-culture empirical verification of mitb within the secondary school educational context in pakistan. 2. variables the empirical results of the study will support the validity of the mitb. specifically, to make plausible statements about the validity of mitb. there is a need for evidence for the existence of all eight interpersonal behaviors of teachers within the urdu context and place eight scales in the classrooms in a circumflex similar to mitb along with the setup of a map of potential deviations within original descriptions. the major concern or objective of this study is to define the quality of translation of the qti in urdu. the qti comprises of 48 statements with 8 subscales. every subscale has six items. factors of the qti are explained by chiew, (1994) as follows: 2.1 leadership (dc) it is measurement of degree by which the teacher delivers leadership to class and grasps the concentration of the students. 2.2 helping/friendly (cd) it is measurement of the degree by which any teacher is behaving favorably and looks to be accommodating towards pupils. 2.3 understanding (cs) it is measurement of the degree that shows how a teacher understands to students and having concerns and cares. 2.4 student responsibility/ freedom (sc) it is measurement of the degree that pupils are provided possibilities and obligations to review of economics and development studies, vol. 6 (3) 2020, 715-725 718 consider the sense of accountability towards their own actions. 2.5 uncertain (so) it measures the degree that the teachers try to unveil his/her uncertainty. 2.6 dissatisfied (os) it measures the degree that teacher expresses unhappiness and dissatisfaction with students. 2.7 admonishing (od) it measures the degree that is showing how teacher spectacle his/her anger, temper or impatience in class. 2.8 strict (do) it measures the degree that reflects how teacher is strict with their students and their demanding. 3. research method the quantitative analysis approach has been used to meet the goals of the current investigation. “confirmatory factor analysis” cfa has been performed in amos for testing the practicability of the proposed four dimensions under 8 subfactors. the purposive sampling method has been used to treat the sample. overall average age of the chosen students was between 13-17 years in girls and 15 to 19 years in boys. the following considerations were considered when choosing the respondents;  only those school of government and private schools were approached where same curricula were thought.  the students studying in 9 th and 10 th classes were approached and invited to take part in the study.  permission, along with consent, was also obtained from contestants former to the collection of data including information of the study aims, the data collection technique and its process. respondents were acquainted with the potential usefulness of data along with their confidentiality. collected data has been filmed in the spss-amos. “confirmatory factor analysis” was run to estimate the suitability of the structural model. the value of composite reliability, cronbach alpha, and rho_a was also found to check the consistency of results. average variance extracted (ave) and discriminate validity were also found to check the accuracy of results. 4. findings 4.1 descriptive statistics the above table 1 presents demographics illustration about the sample. table 1 depicts statistics relating to city, residence, gender, institution, class, and about the subject. from 1800 sample, 1780 returned the filled questionnaire with a response rate of 98%. city wise presentation of the respondent was: 26.7% belongs to bahawalpur, 13.5% sargodha, 21% islamabad 13.4% gujranwala, and 25.5% lahore whereas, the area-wise distribution of the sample was the second demographic in which 71.4% of respondents were from an urban area and 28.6% were from the rural area of punjab. there were 52% of boys’, and 48% of girls participate review of economics and development studies, vol. 6 (3) 2020, 715-725 719 in the study. in all respondents of the study, 58.8% belong to class 9th and 41.1% from the 10th. institution wise representation of the sample remains 75.6% belong to the government sector and 24.4% from the private institutions. subject wise representation of the respondents was: science (30.2%), arts (28.9%), and compulsory subjects (40.9 %). table 1: demographics of sample demographics f % graph 1city bahawalpur 474 26.7 sargodha 240 13.5 islamabad 372 21 gujranwala 239 13.4 lahore 445 25.5 2residence urban 1271 71.4 rural 509 28.6 3gender male 925 52 female 855 48 4-institution government 1345 75.6 private 435 24.4 5class 9th 1047 58.8 10th 733 41.1 6subjects compulsory 728 40.9 arts 514 28.9 science 538 30.2 4.2 validity 4.2.1 convergent validity (cv) convergent validity is connected to a high relationship among items within a particular factor, which is evident by factor loadings (gaskin, 2016a; urbach & ahlemann, 2010); lehmann, 1988). in 1981 fornell and larcker introduced two measures for assessing convergent validity, the first one is known as average variance extracted (ave), while the other one is values of factor loading/item inter reliability, ascertaining the importance of loadings which dependents on the size of the sample. furthermore, in 2016(b) gaskin provided a threshold of significant loading along with their sample size. the factor loading of each item within its dimension is given in table 2. all the loading on plagiaristic factors were above .50, which demonstrates the acceptable limit of convergent validity. if the value of ave for a construct is greater than 0.5, then it will fall in the category of acceptance. 26.7 13.5 21 13.4 25.5 bahawalpur sargodha islamabad gujrawala lahore 71.4 28.6 urban rural 52 48 male female 75.6 24.4 government private 58.8 41.1 9th 10th 40.9 28.9 30.2 compulsory arts science review of economics and development studies, vol. 6 (3) 2020, 715-725 720 table 2: standardized regression weights / factor loadings on the sample dc(1-6) cs(1-6) os(1-6) od(1-6) cd(1-6) do(1-6) so(1-6) sc(1-6) dc-1 .644 dc-2 .667 dc-3 .614 dc-4 .719 dc-5 .673 dc-6 .738 cs-1 .711 cs-2 .777 cs-3 .755 cs-4 .713 cs-5 .724 cs-6 .692 os-1 .774 os-2 .741 os-3 .870 os-4 .783 os-5 .866 os-6 .850 od-1 .722 od-2 .621 od-3 .883 od-4 .776 od-5 .788 od-6 .949 cd-1 .645 cd-2 .660 cd-3 .711 cd-4 .734 cd-5 .590 cd-6 .679 do-1 .753 do-2 .664 do-3 .694 do-4 .674 do-5 .740 do-6 .733 so-1 .731 so-2 .658 so-3 .719 so-4 .610 so-5 .811 so-6 .767 sc-1 .601 sc-2 .753 sc-3 .751 sc-4 .699 sc-5 .814 sc-6 .794 the above table illustrates that all the factors of qti remain greater than 0.5 value, which shows adequate limit of convergent validity. the factor loadings of leadership (dc) factor ranges from .614 to .738, helping/friendly factor ranges from (cd) .590 to .734, understanding (cs) review of economics and development studies, vol. 6 (3) 2020, 715-725 721 factor ranges from .692 to .777, student responsibility/ freedom (sc) factor ranges from .601 to .814, uncertain (so) .610 to .811, dissatisfied (os) factor ranges from .774 to .870, admonishing (od) factor ranges from .621 to .949, and strict (do) factor ranges from .664 to .753. 4.2.2 average variance extracted the value of average variance extracted (ave) was between 0.51 – 0.69, which was also acceptable. values ave against each factor of the scale are given in figure 2. figure 2 : ave of qti factors the above figure illustrates that all the factors of qti have greater than 0.5 value of ave, which shows an acceptable degree for convergent validity. the ave value of admonishing (od) remained (.675) highest in all qti factors, whereas helping/friendly (cd) remained (.511) at the least level in ave. reaming factors of qti were leadership (dc) .556, understanding (cs) .601, student responsibility/ freedom (sc) .633, uncertain (so) .557, dissatisfied (os) .559, and strict (do) .552. 4.2.3 discriminant validity discriminant validity is specified about what degree factors are not associated with other factor items. it is essentially a principle that items should contribute more to their own component than to other factors. (urbach & ahlemann, 2010; gaskin, 2016a). discriminant validity verifies whether or not some construct is still evaluated by a criterion of a given construct. in 1998 chin mentioned that discriminant validity can be assessed by examining the factor loading and the cross-loading of all indicators to their analogous latent variables(lvs). to achieve cross-loading, the value of separately construct is associated with all other measures. discriminant validity can be tested and assumed because the loading values of the indicator are higher against its calculated construct than for every other construct and each construct has the highest values of its given indicator. discriminant validity against each factor of the scale are given in table 3. table 3: discriminant validity of qti factors 1 2 3 4 5 6 7 8 1 os 0.816 2 cs -0.393 0.710 3 dc -0.436 0.551 0.668 4 so 0.723 -0.341 -0.370 0.731 5 sc 0.364 0.040 0.038 0.320 0.741 6 cd -0.045 0.534 0.407 -0.035 0.423 0.597 7 do 0.436 -0.055 0.013 0.385 0.361 0.174 0.681 8 od 0.347 0.260 0.128 0.377 0.539 0.484 0.481 0.698 review of economics and development studies, vol. 6 (3) 2020, 715-725 722 in table 3, the values in the diagonals table are higher than the values in the parallel columns and rows. discriminant validity further demonstrates that all the factors of qti are highly unlinked with other factors. 4.3 reliability reliability is an accuracy of measurement determined by the degree to which a test is consistent over time and will give comparable results when applied to the same group or individual on various events. internal consistency reliability is generally represented by composite reliability. in 1994, nunnally and bernstein depicted that for confirmatory research the values of cr must be greater than 0.8. however, less than 0.6 values imply a lack of icr. figure 2,3, and 4 gives the values of cronbach alpha, composite reliability, and rho_a for the measurement model in this study. figure 3: values of cronbach alpha figure 3 depict that the value of cronbach alpha remained between 0.90 to 0.89 illustrates that reliability was significant. the cronbach alpha value of admonishing (od) remained highest in all qti factors, whereas helping/friendly (cd) remained at the least level in reliability of cronbach alpha. figure 4: values of composite reliability figure 4 depict that the value of composite reliability between .90 to .88 shows that construct reliability was good and acceptable. the composite reliability value of admonishing style of teacher remained highest in all qti sub-factors, whereas helping/friendly (cd) remained at the least level in reliability of composite reliability. the values of composite reliability against each factor of the scale were significant. review of economics and development studies, vol. 6 (3) 2020, 715-725 723 figure 5 depict that the value of rho_a between .91 to .85 shows that construct reliability was acceptable and significant. the rho_a value of admonishing style of teacher remained highest in all qti sub-factors, whereas helping/friendly (cd), leadership and strict style of teachers remained at the least level in reliability of rho_a. the values of rho_a reliability against each factor of the scale were significant. figure 5: values of rho_a 4.4 goodness of fit of qti goodness of fit indices for the developed model of qti are presented in table 4. model reflected absolute fitness by following the threshold specified by hair et. al. (2010). results demonstrated that the values of absolute fit measures were good enough. the value of the goodness of fit index remained .933 (threshold >.90), and the root mean square error of approximation remained .059 (threshold <0.08) that was between the low and high 90% confidence interval. table 4: basic statistics from cfa testing the fitness of the structural model of the qti variables (afm) (ifm) (pfm) gfi rmse agfi cfi ifi pcfi pnfi student .933 0.059 .876 .955 .916 .783 .769 note: absolute fit measures (afm), gfi=goodness-of-fit index, rmsea=root mean square error of approximation, incremental fit measures (ifm), agfi=adjusted goodness-of-fit index, cfi=comparative fit index, parsimony fit measures (pfm) results verified that the values of incremental fit measures were excellent and significant. value of adjusted goodness-of-fit index remained .876 (threshold >0.80), comparative fit index remained .955 (threshold >.90), and incremental fit index remained .916. (threshold >.90). results confirmed that the values of parsimony fit measures were also significant. the value of the parsimony comparative fit index remained .783 (threshold >.50), and parsimony normed fit index remained .769 (threshold >.50). the values validate a suitable fitness of the model. 5. conclusions the current investigation validates the adequacy of the structural model of the qti in the punjab province of pakistani. the qti comprises 48 items long with 8 sub-factors. every sub factor consists on 6items. all statements confirm adequate factor loadings. moreover, the fitness of the model including gfi, rmse, agfi, cfi, ifi, pcfi, and pnfi are admissible on secondary school students. the cfa results of the qti explains that all factors and sub-factors contained adequate values of cronbach alpha, composite reliability, and rho_a. furthermore, values of ave review of economics and development studies, vol. 6 (3) 2020, 715-725 724 are higher than 0.5, which highlights an acceptable degree for convergent validity. discriminant validity is highly unlinked with other factors. the value of cronbach alpha, composite reliability between and rho_a confirms that reliability was appropriate and acceptable. hence, the results of cfa prove that the urdu translation of the qti is valid and acceptable in pakistani secondary schools. references amidon, e. & hough, j. 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(1991) a comparison of interpersonal behaviour of dutch and american teachers, international journal of intercultural relations, 15, 1–18. review of economics and development studies vol.2, no 2, december 2016 129 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 2: issue 2 december 2016 journal homepage: www.publishing.globalcsrc.org/reads the role of human capital formation in poverty mitigation: a co-integration analysis from pakistan 1 romaisa arif, 2 muhammad zahir faridi, 3 fatima farooq 1 m.phil scholar, school of economics, bahauddin zakariya university, multan pakistan, romaisa_pasha@yahoo.com 2 professor, department of economics, bhauddin zakariya university multan, pakistan, zahirfaridi@bzu.edu.pk 3 assistant professor, school of economics, bahauddin zakariya university multan, pakistan, fatimafarooq@bzu.edu.pk article details abstract history revised format: nov 2016 available online: dec 2016 the present study tries to explore the dynamic relationship between human capital formation and poverty mitigation by adopting the course of investment in education and health substances. for this sake, study takes heath expenditure and infant mortality rate as health indicators while status of education is captured with literacy rate and enrollment in higher education. time series data is employed ranges from 1973-2013. the properties of time series data are inspected with the adf test whilst pp test is employed for the robustness of unit root results. mixed order of integration of data compels us to make use of ardl technique for the estimation. similarly, one unit change in health expenditures lead to reduce 0.251 units of poverty and one unit change in infant mortality cause to reduce poverty by 0.04 units. in last, one unit increase in literacy rate changes 1.03 units in poverty and one unit change in higher education results in 0.003 unit’s change in poverty. the results of the study leave us with a clear finale for an optimal policy formulation that, pakistan is in sturdy need of investment in health and education substances for a noteworthy accumulation of human capital for a right way poverty mitigation policy. © 2016 the authors, under a creative commons attributionnoncommercial 4.0 keywords health and education, human capital, poverty, ardl, co-integration, pakistan jel classification c23, h75, j24, p36 corresponding author’s email address: romaisa_pasha@yahoo.com recommended citation: arif, r., faridi, m. z. and farooq, f. (2016). the role of human capital formation in poverty mitigation: a co-integration analysis from pakistan. review of economics and development studies, 2 (2) 129-138 doi: https://doi.org/10.26710/reads.v2i2.130 http://www.publishing.globalcsrc.org/reads mailto:romaisa_pasha@yahoo.com mailto:zahirfaridi@bzu.edu.pk mailto:fatimafarooq@bzu.edu.pk mailto:romaisa_pasha@yahoo.com https://doi.org/10.26710/reads.v2i2.130 review of economics and development studies vol.2, no 2, december 2016 130 1. introduction the notion of human capital formation has attained a lot of entice in the recent years as it involves efficiency in the manufacturing mechanism that leads to high economic growth and turns into the outgrowth in term of boosting up the living standard of people. among others, studies like romer (1986) and lucus (1988) provided the significance of investment in human capital as it is a key contributor to economic development and poverty mitigation, schultz (1999); sen(1999). on the same argument the new millennium development goals (mdgs) focus on human capital accumulation as the majority of mdgs merely rely on the health and education substances. different quantitative studies on economic growth in the west show that the growth of human capital plays a significant role in economic growth, todaro (10 th edition). sturdy linkages are observed between economic growth and poverty mitigation when growth is channeled from investment in education and health as it goes for trickledown effect that remove inequality, scheikman (2002). among the pioneers, schultz (1993) was the first in defining the human capital who narrated that human capital formation includes; primary and high education; training and learning activities for the development of skills; and, investment in children education. the activities like education, training, health, wisdom, intelligence, attitude and tendencies may also be an indicator or criteria of human resources. a strong causality is observed between the household income and their children’s schooling and educational attainment. in particular, in the developing countries, parents with high income are more like to take children education as a normal commodity and increase its demand with every level of their income, schultz (1993). while it is most common among poor that risk aversion or the credit constraint is the factor that compels parents to the under invest for children education, even when returns on investment are fairly good, parish and willis (1993). the impact human capital in eradicating poverty is also observed from the good health and nutrition conditions by narrowing the income divide—sourced from the improved education attainments, eastwood and lipton (1999); girma and kedir (2005). with reference to pakistan, present study is aimed to answer some fundamental question that are; does education attainment a starting place from where poverty is initiated to trim down? does heath status a factual pathway through which poverty diminishes? the study uses ardl technique to quantify the brief and deep impact of health and education substances in eliminating poverty through the course of human capital concentration. one of the crux objectives of the study is to strive for providing an extensive review of the studies aimed at exploring the linkages between human capital formation and poverty elimination through the course of development process. the literature on the concerned issue is in surfeit. yet study makes a healthy endeavor to integrate worthy empirical findings that will leads to point out some important dimensions on that issue, gundlach, (1996); abbas (2000); khan (2005); qadri et al. (2011); oluwatoyin (2011); hanushek (2013).the above narratives identify the importance of the human capital formation and poverty mitigation nexus for p akistan. the termination of segment draws a conclusion that for long term economic performance and social well being is strongly tied with the education and health status. for that reason, this study attempts to estimate deep and brief impact of human capital formation for pakistan through dynamic analysis. after the brief introduction, section two is consisted on the trends and patterns about how the human capital evolves over the period of time against poverty. description of data and methodology is given in review of economics and development studies vol.2, no 2, december 2016 131 section three, while results and discussions are presented in section four. six section is based on concludes and policy recommendations. 2. human capital and poverty in pakistan: trends and size trends are the most important part of all studies. the present segment has presented the human capital and poverty scenario in pakistan. therefore, literacy rate is used as a proxy of education and total health expenditures (million rupees) as a proxy of health. the head count ratio is used as a measurement of poverty (in percentage). figure 1: human capital and poverty trends in pakistan source: pakistan economic survey (various issues) figure 1 shows the ten years trends of human capital and poverty in pakistan. according to economic survey of pakistan and jamal (2006), in 2000, pakistan has found 27.61 percent poverty rate and in 2005 it has declined to 23.9 percent. pakistan has reached 20.7 percent poverty rate in 2010 and 12.45 percent in 2013. now, the scenario of human capital proxies by literacy rate and total health expenditures in pakistan is presented. according to economic survey of pakistan, in 2000, pakistan has found 49 percent literacy rate and it has increased to 54 percent in 2005. subsequently, in 2010, the literacy rate reached at 57.68 percent in pakistan and 60 percent in 2013. in pakistan the total health expenditures are 21475.47 million rupees in 2000 and it has increased to 38000 million rupees in 2005. the total health expenditures have increased day by day— in 2010, these were 79000 million rupees and, in 2013, reached to 32000 million rupees in pakistan according to the information of economic survey of pakistan. 3. data and methodology this section is based on data source and methodology. at first, we briefly explained the description of variables and present statistical analysis. further, we have used adf and pp for unit root results, and ardl approach for the estimation of the results and the wald test (f-stat) is used for bound of cointegration. 0 5 10 15 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013poverty education health review of economics and development studies vol.2, no 2, december 2016 132 a) data in this article, we have used annual time series data from 1973 to 2013. the data is collected from different sources, economic survey of pakistan (various issues), world development indicator, handbook of statistics, jamal (2006) and some data has not available that’s why we interpolating by econometrics software, eviews 9. in the analysis, poverty has estimated in percentage with head count ratio. independent variables included per capita gdp is measured in terms of million rupees, inflation rate is taken in percentage. while health expenditures are measured in million rupees and infant mortality rate is measured in term of per 1000 population. however, trade openness is calculated as the ratio of imports and exports to gdp in terms of percentage; literacy rate is measuring in 10 year and above population (percentage), in last, the enrollment in higher education is measured in numbers. table: description of variables description of variables measuring units sources of data pov poverty, head count ratio percentage jamal, h., (2006), the pdr 45(3), pp. 439–459 and economic survey of pakistan 2014 gdp gross domestic product per capita million rupees economic survey of pakistan (various issues) inf inflation rate percentage economic survey of pakistan (various issues) hex total health expenditures million rupees handbook of statistics mor infant mortality rate per 1000 population economics survey of pakistan top trade openness imports + exports / gdp economic survey of pakistan litr literacy rate percentage economic survey of pakistan hed enrollment in higher education numbers economic survey of pakistan b) properties of time series data we examines the properties of time series data by using adf (1979) as well as pp (1988) unit root test to analyze the stationarity of data. now the following specification of adf test where the optimal lag length is based on schwarz information criteria (sic); 1 t-1 t 1 = c + x + + + k t t j j d d l         where, dt is representing all time series variables i.e., pov, gdp, inf, hex, mor, top, litr, hed and l represents the time trend. in short, ∆ shows the first difference operator and µ is the disturbance term. the null hypothesis (ɸ = 0) means that the unit root exist in equation and alternative hypothesis (ɸ ≠ 0) means that the stationary exist in our model. the following equation is adf test statistics for non parametric adjustment. review of economics and development studies vol.2, no 2, december 2016 133 t-1 t = c + l + d + 2 t c d t         where, dt is representing all the time series variables i.e., pov, gdp, inf, hex, mor, top, litr, hed and c is the sample size while {t-c/2} is the time trend and µ is the disturbance term. c) econometric methodology the ardl co-integration approach is diverged from the other engle and granger (1987) and johansen (1990) co integration approaches. the ardl co-integration model is newly developed but it’s popular in recent years, jayaraman and choong (2009). there are many positive edge of ardl co integration approach. firstly, ardl approach has used in small sample size of time series variables, ghatak and siddiki (2001). however, johansen co integration mechanism has used in large sample size. secondly, ardl approach has examined the diverge order of integration i.e., i(0) and i(1) but johansen co integration examined the same order of integration i.e., i(1), it means that all variables have integrated in first difference stationarity, pesaran et al. (2001). thirdly, the ardl approach has different optimal lags of all time series variables, ozturk and acaravci (2011). according to these properties of ardl model, we prepared the specified equations of ardl bound testing approach as follow; 0 1 2 3 1 0 0 4 5 6 7 0 0 0 0 8 ( ) = + ( ) + ( ) + ( ) + ( ) + ( ) + ( ) + ( ) + ( a b c t i t i i t i i t i i i i f gd e i t i i t i i t i i t i i i i i i pov pov gdp inf hex mor top litr hed                                        9 t-1 10 t-1 11 t-1 12 t-1 13 t-1 0 14 t-1 15 t-1 16 t-1 t ) + (pov) + (gdp) + (inf) + (hex) + (mor) + (top) + (litr) + (hed) + h t i i             where, ∆ is showed the short time period and α9 to α16 showed the long time period while µt is the disturbance term in ardl equation. we have selected the different lags length based on schwarz bayesian criterion (sbc). the next step is to check the co integration exist in our variables through wald test for bound statistics, if co integration exist in our analysis so we are distinguished the short run and long run equations of ardl modeling as follow; 1 2 3 4 5 6 7 0 1 2 3 1 0 0 4 5 6 7 0 0 0 0 8 ( ) = + ( ) + ( ) + ( ) + ( ) + ( ) + ( ) + ( ) + ( g g g t i t i i t i i t i i i i g g g g i t i i t i i t i i t i i i i i i pov pov gdp inf hex mor top litr h                                   8 9 t-1 t 0 ) + (pov) + g t i i ed     and review of economics and development studies vol.2, no 2, december 2016 134 1 2 3 4 5 6 7 0 1 2 3 1 0 0 4 5 6 7 0 0 0 0 ( ) = + ( ) + ( ) + ( ) + ( ) + ( ) + ( ) + ( ) + m m m t i t i i t i i t i i i i m m m m i t i i t i i t i i t i i i i i pov pov gdp inf hex mor top litr                                       8 8 t-1 t 0 ( ) + (ecm) + m i t i i hed     the term λ shows the error correction model. ecm represents the speed of convergence from disequilibrium to equilibrium, and it is always negative, and highly significant, pesaran et al. (2001); narayan (2005); haliciogul and anno (2009); arif et al. (2013). 4. results and discussions 5. the results of the study are based on ardl co-integration. first, we have discussed the descriptive analysis, and then we have discussed the adf (1979) as well as pp (1988). furthermore we have estimated the deep and brief nexus between human capital and poverty. table: descriptive statistics variables mean st. dev. observations probability pov 25.54 7.61 41 0.14 gdp 512.26 314.49 41 0.01 inf 9.57 5.35 41 0.00 hex 17977.6 20004.2 41 0.00 mor 92.11 16.69 41 0.32 top 33.59 2.90 41 0.64 litr 38.92 13.60 41 0.14 hed 1331.37 759.10 41 0.16 source: authors calculation (eviews 9) in this analysis, there are 41 observations and have based on average value of mean and standard deviation, to find out the direct effect of human capital on poverty in pakistan. we have calculated the human capital through education and health. however, literacy rate and enlistment in higher education are used as a proxy of education and health expenditures and infant mortality rate are used as a proxy of health, both health and education are representing the human capital. table: tests for stationarity at level at 1st difference order of integration variables adf pp adf pp inter. inter. & trend inter. inter. & trend inter. inter. & trend inter. inter. & trend pov -2.24 -2.11 -2.16 -2.22 -4.80 -4.87 i(1) gdp 2.75 0.84 2.75 0.73 -4.55 -4.61 i(1) inf -3.20 -3.37 i(0) hex 2.89 0.55 -1.43 -2.65 -5.01 -5.98 i(1) mor -0.73 -3.26 -0.66 -2.36 -6.27 -6.28 i(1) review of economics and development studies vol.2, no 2, december 2016 135 top -3.31 -3.31 i(0) litr 0.38 -1.99 0.33 -2.08 -5.96 -5.97 i(1) hed 1.69 -1.54 1.69 -1.54 -4.67 -4.67 i(1) source: authors calculations (eviews 9) according to this table, some variables are integrated at level and some time series variables are integrated at first difference. however, inflation (inf) and trade openness (top) have integrated at level and all other variables such as poverty (pov), gdp per capita (gdp), total health expenditures (hex), infant mortality rate (mor), literacy rate (litr) and enrollment of higher education (hed) have integrated at first difference. no one variable has integrated at second difference that’s why we can apply the autoregressive distributed lag techniques (ardl) of co integration. table: bound testing for co integration equation f-statistic upper bound critical value conclusion pov/gdp, inf, hex, mor, top, litr, hed 13.73 [0.00] 5.96 (1%) integration exists source: authors calculations. note: f-statistic: 13.73 (significant at 1% marginal values). critical values at k =8-1=7 is cited from narayan (2005), case v: unrestricted intercept and unrestricted trend. the numbers in parenthesis shows the probabilities of f-statistic. we checked the existence of co integration in this analysis through wald bound testing. the value of f-statistic is greater than the upper bound critical value; it’s mean to show that the co integration exists. we follows the narayan (2005) to compare the critical value of co integration exists. finally the long run relationships exist in this analysis. table: the effect of human capital on poverty samples 1973-2013 variables coefficient t-statistics ardl estimate intercept 45.438 4.768 gdp -.017 -2.795 inf .563 4.062 hex -.251 -.592 mor -.040 -.619 top -.932 -3.839 litr 1.030 2.972 hed -.003 -.665 error correction coefficient ecmt-1 -0.596 -6.115 diagnostic test (p-values) χ2sc .567 na χ2ff .487 na x2nor .985 na x2het .554 na source: authors calculations using microfit 4.1. table shows the effect of human capital on poverty in pakistan, the time period is 1973 to 2013. we have estimated the human capital through education and health while literacy rate and enlistment in higher education is used as a proxy of education, health expenditures and infant mortality rate is used as review of economics and development studies vol.2, no 2, december 2016 136 a proxy of health. however, gdp per capita, inflation rate and trade openness are controlled time series variables. the statistically significant variable gdp per capita is negative shows that economic growth increasing edge to decline poverty in pakistan, amjad & kemal (1997); forgha (2006); ahmad & riaz (2010). in addition, the inflation coefficient (0.563) shows the positive relationship between inflation and poverty, it is highly statistically significant at 1%. this implies that increase in inflation leads to increases poverty in pakistan because the value of money declines that’s why poverty increases, amjad & kemal (1997); forgha (2006). now we have interpreted the results of education and health— proxies for human capital. one unit change in health expenditures lead to reduces 0.251 units of poverty but it is statistically insignificant. it’s mean that people have a good health and high will power to compete the economic problems that’s why total health expenditures reduce poverty. similarly, the one unit change in infant mortality cause to reduce poverty by to 0.04 and it is insignificant. furthermore we have discussed about trade openness and poverty relationship. the one unit change in trade openness leads to 0.93 units reduce in poverty and it is statistically significant at 1% level. trade openness may stimulate poverty in the presence of high imbalance in income distribution. it is evident that mostly rich people are the major investor in pakistan; big businesses are in the hands of few people who are involved in export business. any increase in the level of business activity at open economy level benefits high investing business community leaving major portion of poor people i.e. workers at their marginalized condition. now we have explained the relationship between literacy rate and poverty; one unit increase in literacy rate changes 1.03 units in poverty. literacy rate means that people are just read or write, if people have low educated and have a low level of working knowledge that’s why poverty rises. in last, the one unit change in higher education results in 0.003 unit’s change in poverty. reason is that the poverty is reduced with higher education increase and higher education is negatively related to poverty, it is insignificant. the coefficient of ecm is 0.59 and has a statistically significant with negative sign. it is implies that, the 59% of the short run disequilibrium in poverty to the long run equilibrium in present year. the diagnostic test results are presented in the lower part of table. the evidence shows that there is no serial correlation, functional form specification, normality or heteroscedasticity. in last step of ardl model is to analyze the stability of data and this graph is here in appendix. the graph of cusum is within the boundaries but the graph of cusumsq is little bit without the boundaries. many studies have unstable data means cusum and cusumsq are without the boundaries, dritsakis (2010); ahmad and riaz (2010); ozturk and acaravci (2011). 5. conclusions the study has presented strong connections of human capital accumulation with poverty mitigation policies in pakistan. we measured the human capital through education and health; while, education is measured through literacy rate and enrolment in higher education and, health is measured with health expenditures and infant mortality rate. the connections between human capital and poverty have checked through ardl co integration approach by employing data ranges from 1973 to 2013. study also uses many other supporting variables such as per capita gdp, inflation rate, and trade openness. the results show that per capita gdp is negatively and significantly related to poverty while inflation rate is positively and highly significantly associated to poverty. when growth increases in pakistan, the poverty starts to decline. likewise, health expenditures, infant mortality rate, trade openness and enlistment in higher education are negatively associated to poverty while the literacy rate is positively review of economics and development studies vol.2, no 2, december 2016 137 associated to poverty. the results of the study leave us with a clear finale for an optimal policy formulation that is— pakistan is in sturdy need of investment in health and education substances for a noteworthy accumulation of human capital as a right way poverty mitigation policy. references bils, m., &amp; 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university, islamabad, pakistan b multan post graduate college, multan, pakistan article details abstract history: accepted 16 august 2020 available online 30 september 2020 job demand resource model and self-determination theory is widely used for understanding procrastination, mindfulness, job performance and gender in organizational settings. the job demand resource model has been further used to understand gender as moderator among employee’s with mindfulness, procrastination and job performance. the present study focuses on gender as moderator in mindfulness, procrastination and job performance among male and female employees. the purposive sampling technique with cross-sectional approach was applied. mindfulness attention awareness scale (maas; brown & ryan, 2003), tuckman’s procrastination scale (tps; tuckman, 1991), and job performance scale (jp-s; wright, kacmar, mcmahan, &deleeuw, 1995) were used to collect data from 400 employees working in telecom organizations in rawalpindi and islamabad city. the t-test and hayes process were used to study correlation and moderation among study variables. it has been found female employees have mindfulness and procrastination tendencies then male employees whereas male employees were higher on job performance then female employees. additionally, gender has non-significant effect on mindfulness, procrastination and job performance among employees. the results support the job resource demand model and self-determination theory. according to jdr model, job demands, and resources play important role in job performance of an employee in organizations and selfdetermination theory supports that mindfulness inhibit procrastination behavior and improve job performance of employees in organizations. these findings also suggest that procrastination could inhibit job performance among employees. therefore, job performance could be stimulated by individual mindfulness in male and female employees. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: mindfulness, procrastination, job performance, job demand resource (jdr), gender jel classification: j28, j29 doi: 10.47067/reads.v6i3.246 corresponding author’s email address: 1. introduction job performance has become the core issue globally no matter what sector of employment and organization is the stakeholder. rapid technological advancements are constantly shadowing the review of economics and development studies, vol. 6 (3) 2020, 557-566 558 manpower and work-force is in debilitating apprehension for this. despite of organizational and industrial developments, human factor is not completely irreplaceable. however, a larger focus is on enabling and enhancing the performance ratio and cutting the losses in organizations. for this, role of employees is always in limelight. how employees are sustaining interpersonal and intrapersonal stressors, acquiring resources and capacitating to yield outcomes is always a million-dollar question when it comes to reviewing the job performance. performance is behavior and is closely related to productivity in an organization. although job performance have several determinants where cognitive or mental ability is one of the determinants of job performance (schmitt & hunter, 2004). organizations’ face significant loss due to distraction effecting job performances of employees. this poses a question to explore the role of procrastination and how is it counter-dealt by mindfulness. delaying and alternating the task without any cause, accumulating a burden, deferring work meaninglessly and is a safe regular failure act of doing gratifying things rather less enjoyable ones (nguyen, steel, & ferrari, 2013). as a result it causes stress and productivity issues at personal level whereas social dissatisfaction on deadlines, responsibilities and commitments. such failures may combine to create more procrastination. according to pirson (2014) an incomplete task is one of the most adverse determinants of job performance as its incompletion drains energy and mentally hangs up an individual. pirson (2014) stated that temporary escape from responsibilities is a hindrance for good job performance whereas conscious alertness for the elimination of delay leads to at least an optimal level of the performance. that conscious alertness is mindfulness, which is cognitive construct, involves a person’s mental processing of the multitude of event in the work environment (dane & brummel, 2013). mindfulness helps to perform routine task more attentively in efficient and effective manner, regarded as consciously paying attention which indicate attentiveness of mind (bodhi, 2000) had constructive effect on the job performance in organization. dane and brummel (2014) revealed mindfulness and job performance are positively associated which means that the more mindful the employee were at workplace, more highly their managers rated their job performance. organizations like google, adobe, roll royee, general mill and genetech are offering mindfulness programs to their employees to improve their job performance. procrastination is the intentional choice of a behavior or task on other option. procrastinator focus on short term pleasure, sensation seeker in the moment instead of concentrating on task completion steel (2007), lack emotional stability and exhibits high energy levels (dewitte and schouwenburg; 2002) and are also aware of significance of task failure, having weak self-control, lack work related discipline, unable to work systematically and face trouble in time management (dewitte & schouwenburg, 2002; nan earde, 2003; milgram & tenne, 2000, steel; 2007) gender has its own role on mindfulness and procrastination (shao & skarlicki;2009, sturgess; 2012,) and found females as more mindful then males whereas male can overcome the emotional experience. gender have no-significant effect on mindfulness (short & mezo;2010). males were significantly higher on mindfulness than females because females were face more difficulty to be attentive to positive and negative stimuli as mindfulness demands both stimuli (slonim, kienhuis, di benedetto, & reece; 2015). review of economics and development studies, vol. 6 (3) 2020, 557-566 559 women were found lower on procrastination which helps them to get more employment then men (nguyen, steel & ferrari; 2013). male were found higher on procrastination then female (ozer, demir & ferrari; 2009) whereas females were also found higher procrastination tendencies (washington, 2004; rodarte-luna & sherry; 2008) higher procrastination found in male students (prohaska, morrill, atiles & perez, 2000). significant differences on procrastination where men were higher than women (balkis & duru; 2009) whereas some studies found no relevance of gender on procrastination behaviour (ozer & ferrari; 2011) 2. literature review this research is based on theoretical perspective that link procrastination, mindfulness, and job performance at workplace where gender moderates the relationship of these variables. this idea purposed based on job demand resource model, which considers job resources play an important role at workplace and effects employees’ performance, wellbeing and procrastination issues. the job demandsresources (jd-r) model (bakker & demerouti, 2007; demerouti et al., 2001) emphasized to predict employee burnout and engagement, and consequently organizational performance. research has suggested that job resources help to enhance performance at workplace even with high job demands. when an employee gets support from others or has ability to do own work and others help for timely completion of official (wrzesniewski & dutton, 2001) whereas the workplaces with less job resources badly affect employee performance. however, mindfulness effect job performance and job stress in organizational settings (teasdale, segal, & williams, 1995; brown, ryan, & creswell, 2007). according to interacting cognitive subsystem model (teasdale, segal & williams; 1995) difficult chores create disapproving thoughts and affect consciousness, increase impulsivity and self-criticism whereas mindfulness helps to overcome selfcritical, pessimistic feelings which ultimately lead to task commitment and achievement. mindfulness, well-being and performance of employees at workplace are directly linked with each other (schultz, ryan, niemiec, legate, and williams; 2015). workers possessing higher mindfulness don’t frustrate in uncooperative environments as it act as defensive factor in such type of organizational work environments. such findings support mindfulness as a latent way to wellness in organizations, also support autonomy to promote employee well-being and job performance. the conservation of resources theory (cor) was proposed by (kroon, menting, and woerkom; 2015) which focuses on mindfulness, work motivation and performance in an organizational perspective and explained mindfulness in dynamic contexts as believes to provides personal resources to the employees, enable resilience in employees. procrastination heavily cost to the companies, as per research it charge about $10,000 for a single employee annually (d’abate & eddy, 2007; steel, 2011). procrastination and economical gains of at individual levels are negatively associated (mehrabian, 2000) symptoms of attention deficit hyperactivity disorder (adhd), showed issues like distraction and disorganization at work (re snick, 2005) whereas adhd reduced earnings by approximately 30% (fletcher, 2013). procrastination leads to hypertension, cardiovascular diseases and maladaptive coping sirois (2014). badly effect mental, physical health and performance in the workplace. people with procrastination tendencies earn less, spend less time in job. it is also found that unemployed people procrastinate more, may lead to unemployment, enhance the likelihood of switching existing position, review of economics and development studies, vol. 6 (3) 2020, 557-566 560 job-lock. enabling individuals to switch job even have slight progress in existing job, connected to poor financial decision making (value; 2016). depending upon available literature the present study conceptualized to understand the gender as moderator between mindfulness, procrastination and job performance of employee in pakistani culture. 3. methodology 3.1 objectives 1. to study the relationship among mindfulness, procrastination and job performance in telecom sector employees. 2. to investigate the moderating role of gender in relation between mindfulness, procrastination and job performance. 3.2 hypotheses to following hypotheses were formulated to study mindfulness, procrastination and job performance. 1. male employees will be higher on procrastination and mindfulness than female employees. 2. the gender will affect the relationship between mindfulness, procrastination and job performance. 3.3 sample the data was collected from 150 (109 male, 41 females) employees of telecommunication sector of islamabad and rawalpindi. the data was collected from all departments of an organization. the data were collected through purposive convenient sampling technique by keeping in view the all ethical consideration. their participation was totally on voluntarily basis without any pressure or coercion, all the research related information including data collection, analysis and scope were clearly discussed. the use of offensive, discriminatory or unacceptable languages was avoided while giving briefing about questionnaire and data collection. participants were shared the purpose of study and they were assured about the confidentiality and anonymity of their responses. since job performance was taken from employees and their managers/officers as well, especially care was taken to keep the process blind to avoid any stigmatization or labeling. 3.4 instruments the following instruments with demographic sheet were used for measurement. 3.4.1 demographic sheet: for the purpose of information gathering a demographic sheet was developed mentioning age, gender and other study related demographics. 3.4.2 mindfulness attention awareness scale (maas): the mindfulness attention awareness scale (brown & ryan, 2003) was a 15-item scale having 6pointlikert such as (1 = almost always, 2 =very frequently, 3 = somewhat frequently, 4 = somewhat infrequently, 5 = very infrequently, 6 = almost never) used. maas has highest 90 and the lowest 15 score which shows higher and lower levels of mindfulness. according to brown and ryan (2003) the cronbach’s alpha reliability of this scale was found to be .87. review of economics and development studies, vol. 6 (3) 2020, 557-566 561 3.4.3 tuckman’s procrastination scale (tps): the scale used to measure procrastination behavior, comprised of 16 items, likert type scale categories; (4 = that’s me for sure; 3 = that’s my tendency; 2 = that’s not my tendency and 1 = that’s not me for sure). the cronbach alpha of the scale is .85 3.4.4 job performance scale (jp-s): the scale was used to measure the job performance of the employees (wright, kacmar, mcmahan & deleeuw; 1995). the scale has 8 with 5 point likert scale; strongly disagree (1) to strongly agree (5). procedure for the purpose of data collection, the organizations were contacted. in most of the organizations the human resource department helped in data collection. the complete details regarding research, data collection, confidentiality and usage of the data were shared with the concerned representative of the department. they asked for the questionnaires in first meeting and take some time to review and permission from the head of the department. after clearing their all research related queries, they allowed to collect the data and further guide to the departments and their employees. now the employees were informed about the research and its scope, they are very keen about the confidentiality of data, they were assured that the data will be kept confidential and will only use for university research purpose. their names, designations, salary etc will not be shared with anyone else. they were also informed that it’s voluntary participation so if anyone wants to leave then they have right to leave. they were explained about mindfulness attention awareness scale (maas), tuckman procrastination scale (tps) and job performance scale (jp-s). some of them took 15-20 minutes to fill the questionnaires and return back whereas some employees took few days. the data were collected as per their convenience. since job performance was taken from employees and their managers/officers as well, especially care was taken to keep the process blind to avoid any stigmatization or labeling. 4. results table 1: mean differences between male and female employees on mindfulness, procrastination and job performance (n=400) variables male (n=305) female (n=95) t(df) p 95cl% cohen’s d m sd m sd ul ll tps 36.82 8.54 37.60 7.76 -0.78 0.43 -2.71 1.16 0.09 jp 56.03 8.03 55.45 7.79 0.62 0.53 -1.26 2.43 0.07 mass 58.54 13.42 60.37 11.11 -1.20 0.23 -4.81 1.16 0.15 note. maas = mindfulness attention awareness scale, tps = tuckman procrastination scale, jp = job performance table 1 shows non-significant differences among employees on mindfulness, procrastination and job performance where female employees were higher on mindfulness and procrastination then male employees. although male employees were higher job performance then female employees. review of economics and development studies, vol. 6 (3) 2020, 557-566 562 4.1 moderation analysis moderation shows the influence of another variable between the relationships of two variables. andrew f. hayes process macros software (hayes, 2013) was used between two mindfulness and procrastination and their impact in outcome variable i.e. job performance in interaction with gender to check about existence of interaction. moderation effect of gender between mindfulness and job performance table 2: moderation impact of the gender between mindfulness and job performance among employees (n = 400) r r2 r2 change / δr f job performance t p coefficient se model summary .5644 .3185 69.4917 .0000 constant 32.2499 2.3630 13.6479 .0000 gender -.0116 3.0892 -.0037 .9970 maas .4249 .0469 9.0567 .0000 interaction maas x gender .0213 .0616 .3466 .7290 .0002 .1201 .7290 note. maas = mindfulness attention awareness scale the table 2 shows the moderation results of gender with mindfulness and job performance and found non-significant moderation of gender on mindfulness and job performance of employees. moderation effect of gender between procrastination and job performance table 3: moderation impact of the gender between procrastination and job performance among employees (n = 400) r r2 r2 change / δ r f job performance t p coefficient se model summary .0582 .0034 .5060 .6783 constant 55.3305 2.8978 19.0942 .0000 gender -.6560 3.8968 -.1683 .8664 procrastination job performance gender mindfulness job performance gender review of economics and development studies, vol. 6 (3) 2020, 557-566 563 tps -.0585 .0764 -.7651 .4446 interaction tps x gender .0383 .1021 .3747 .7081 .0003 .1404 .7081 note. tps = tuckman procrastination scale the table 3 shows the moderation results of gender with procrastination and job performance and found non-significant moderation of gender on procrastination and job performance of employees. 5. discussion job demand resource theory/model is widely used concept to understand job demands and job resources whereas self-determination theory is helpful to understand procrastination, mindfulness and job performance. previous researches help to understand the relationship of mindfulness and job performance but can’t develop consensus (judge, thoresen, bono, & patton, 2001). researches have been conducted with different moderators as rewards, salary, job complexity or self-esteem with diverse findings, some reached on results (judge et al., 2001; petty, mcgee, & cavender, 1984) with gender role as moderator in mindfulness, procrastination and job performance. in present study it was proposed that gender effect the relationship of study variables among employees. researches on mindfulness contributes that it enable peoples to their surroundings that supports vibrant thought, behavior, stress reduction and decision making, individual draw distinction in routine experiences and become more interested in tasks and performance will improve even if an individual will make small effort to be mindful whereas alternative perspective allows an individual for clearer picture of situation, help to better understanding of things (langer 2004). researchers have found mindfulness as psychological state that varies within an individual (allen & kiburz, 2012; bishop et al., 2004; brown & ryan, 2003; dane, 2011; glomb et al., 2011; heppner et al., 2008; lau et al., 2006; robins, keng, ekblad, & brantley, 2012). employees confront variety of demands and challenges which affect at emotional and cognitive level (baumeister, bratslavsky, muraven, & tice, 1998). whereas mindfulness enhances self-regulation independently (brown & ryan, 2003), which conserves liveliness and vigor (ryan & deci, 2008). mindfulness as state explains behavior in specific situation while as attribute is a inclination to reason and act mind fully (langer, 2004). mindfulness as state and precisely as trait help to generate substitute perspective with open mindset to improve better decision, overcome cognitive dissonance which causes stress and exhaustion. circumstantial awareness and societal evaluation related with performance are associated with mindfulness (langer, pirson & delizonna, 2010), self-acceptance and stress (carson & langer, 2006; demick, 2000). mindfulness has suggested task performance at workplace (dane, 2011; glomb, duffy, bono, & yang, 2011) and physiological and psychological health related tasks at work (glomb et al., 2011). it was hypothesized that male employees will be more inclined toward procrastination and mindfulness then females employees. to test this differentiation t-test applied to explore gender differences among these variables of study. however, in present study non-significance differentiation was found among gender on procrastination and mindfulness of employees. these findings are in line with the findings of short and mezo (2010) reporting non-significant gender differences amongst males and females in their levels of mindfulness. also, these findings are consistent with the findings of balkis and duru (2009) which suggests that procrastination is gender neutral. similar pattern of nonsignificant findings was also reported by ozer and ferrari (2011) who did not found any support for gender difference on procrastination. review of economics and development studies, vol. 6 (3) 2020, 557-566 564 however, findings of present study reported that females score higher on mindfulness and procrastination then male employees whereas male employees score higher on job performance as compare to female’s employees (slonim, kienhuis, di benedetto, & reece 2015). it was hypothesized that gender will affect the relationship of mindfulness, procrastination and job performance. moderations analysis was performed, with the help of hayes software macro package (hayes, 2013) to see the interactive effect of different demographic variables and mindfulness or procrastination on overall job performance of employees. gender differentiation was found neutral (non-significant) for relationship between mindfulness and job performance (p = .729), for relationship between procrastination and job performance (p = .708) showing that gender is not moderation effect, to explain any possible interaction with mindfulness or procrastination on job performance. sabina’s (2017) work reflected a strive to review the impact of gender as potential moderator, paving line for present study to re-run similar evidences on this sample. however, for present sample and study is confirming the finding of (kappen, g; 2019). it is generally believed that women are mindful and give better performance than men (shao, r., & skarlicki, d. p; 2009) the non-significant differences were found among study variables. although female were found more on mindfulness and procrastination then male employees whereas male employee were found higher on job performance then female. 6. conclusion these findings suggest that gender is not inhibiting any role in the relationship of mindfulness, procrastination and job performance in male and female employees. therefore, on the basis of available data and analysis it has been found that mindfulness, procrastination are not the tendencies which are gender based as no significant differences reported among male and female employees. although there are differences on job performance. limitations could be research design, sample size and self-report measures. in order to conduct further research, it is important to focus on other contextual factors of the organization which are affecting employee mindfulness, developing procrastination behaviors at workplace and results poor job performance at workplace. future researches should be conducted with personality and different personal attributes. 7. implications one of the challenges to employees in any workplace setting is related to consistency in job performance despite of all technological advancement. this study is one such effort to establish a correlational dynamic across mindfulness, procrastination and job performance and how variables like gender can play its role. professional trainings in these both areas are relatively untouched zones and results elaborated that procrastination is a significant factor impact performance negatively thus employees’ engagement 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(2000). procrastination: self-regulation in initiating aversive goals. applied psychology, 49(3), 372–389. https://doi.org/10.1111/1464-0597.00021. review of economics and development studies vol. 5, no 3, 2019 469 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads intellectual property rights and creative economy; way forward for pakistan 1 muhammad danyal khan, 2 rao imran habib, 3 attaullah mehmood, 4 abdul-basit 1 phd candidate, brunel university london, muhammad.khan4@brunel.ac.uk 2 assistant professor, gillani law college bahauddin zakariya university multan, pakistan, raoimran@bzu.edu.pk 3 assistant professor, international islamic university islamabad, pakistan, wattoo888@gmail.com 4 llm candidate, international islamic university islamabad, pakistan, abdulbasit78622@gmail.com article details abstract history revised format: 30 june 2019 available online: 31 july 2019 this paper examines the relationship between enforcement of intellectual property rights and growth of the creative economy. intellectual property based creative industries highly contribute towards national economy through trade, value addition, and tax revenues. size of the global creative economy has almost doubled during 2015 leading it to the figure of $509 billion that was $205 billion during year 2002. it is worth noting that major player in global volume of creative economy are south asian countries such as china, hong kong, malaysia, india, and taiwan. major creative industries include software, pharmaceutical, music, cinema, fashion, design, art, culture, photography, publishing, and other related creative works. creative industries need support of effective enforcement from intellectual property rights to pay incentive to a creator for its investment of expertise, labour, and finances. in absence of effective intellectual property enforcement and violation of intellectual property rights, innovation may go slow that affects growth of the creative economy. this research highlights potentials of growth of the creative economies in pakistan in terms of intellectual property rights. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords intellectual property rights, creative economy, copyrights, patents, trade and development, trips agreement 1994 jel classification: o34, f10, e24, f35, k11 corresponding author‟s email address: muhammad.khan4@brunel.ac.uk recommended citation: khan, m. d., habib, r. i., mehmood, a. and basit, a. (2019). intellectual property rights and creative economy; way forward for pakistan. review of economics and development studies, 5 (3), 469-478 doi: 10.26710/reads.v5i3.697 1. introduction after adoption of trips agreement in 1994, the dynamics of global creative economy have gone very competitive. it is good omen form pakistan that south-asia, especially china and india, have won a major share of creative economy that helps them grow with enormous pace. pakistan shares almost same cultural and social trends and that is why it is very likable that economy of pakistan grows at the identical pace by focusing on its creative economy through facilitating its creative industries. pakistan has been focusing on various creative industries such as software industry that has grown with moderate pace rising its volume to the level of from $2.2 billion during to $5.1 billion in 2002. this shows that pakistan got potential of growing its creative economy at least as equal pace with the world (shamsi, nasir, 2016). as it is stated earlier that global markets effected by creative economy growth went double from 2002 to 2015. the same trends would be demonstrated by using the data of growing software industry in pakistan. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 470 post-trips agreement standards of intellectual property rights have raised the standards of protecting intellectual property rights from national to international treatment. before adoption of trips agreement, a development happened during uruguay round of trade negotiation (1986-94), intellectual property rights were regulated by paris agreement in 1863. moreover, berne convention, rome convention, paris convention, and other international agreements were prominent. trips agreement has provided the world with a unified comprehensive document that includes ethos of major intellectual property developments in the past (bagchi, 2007). trips agreement includes almost all prominent aspects of intellectual property rights such as copyrights, patents, geographical indications, trademarks, and industrial designs (trips agreement, 1994). apart from substantive structure of intellectual property rights, world intellectual property rights organisation (wipo) globally looks after the trends of these rights. intellectual property rights are conferred for innovative and creative acts in fields like literature, theatrical work, industrial innovation, music, videos, television programs, software, databases, graphic arts, trademarks, trade secrets, geographical indications, engineering, design, and other innovative aspects. united nations conference on trade and development (unctd) has published its report in 2018 that shows positive trends of growth in creative industries of pakistan. moreover, pakistan has evolvingly obtained better scores regarding the protection of intellectual property rights. figure 1 demonstrates the profile of pakistan towards creative economy (unctd, 2018): aforementioned diagram reveals that performance of pakistan towards growth of the creative economy and a comparative analysis of its growth with neighbouring countries reveals that this growth, although satisfactory, falls behind average growth in south-asia. trends of the creative economy have remained constant and no prominent growth happened between 2005 and 2011. a short boost was witnessed throughout 2011-14 and a steep decline has shown in coming years. although, pakistan has seen an evolutionary growth in macrocosmic and microcosmics activities, this growth is less as compare to other regional players. this may be optimised by facilitating innovation through enforcing intellectual property rights. international intellectual property rights alliance (iipa) propounds its concerns for the standards of enforcing intellectual property rights in pakistan. moreover, the alliance has filed a petition questioning pakistan‟s status for duty free preferential treatment under generalised system of preferences gsp program of world trade organisation (wto) concerning software and book piracy in pakistan (ahmed, et al. 2010). pakistan‟s status on global intellectual property compliance list is gradually lowering that may slow down import of innovative ideas and products which will ultimately affect the creative economy of pakistan. the business software alliance (bsa) reported that control over software piracy could help pakistan worth $160 million in revenue and an additional $23 million in tax revenue (samad et, al., 2018) this paper will analyse various creative industries with respect to intellectual property rights categories. first part will highlight pakistan performance in copyright related industries. second part will focus on patents related innovation in industry of pakistan. third part will highlight pakistan‟s growth in software industry. fourth part will highlight, situation of intellectual property rights enforcement and way forwards to help growth of the creative economy in pakistan. 2. research question fundamental question in this research is to what extent intellectual property rights relate to growth of creative economy in pakistan. the question is significant and global as well as regional economy is growing enormously with the support of the creative economy. this question will be analysed through data available via various national and international organisation. 3. research method based on nature of question and its scope, the approach will be deductive that tests existing theory of relationship between innovation and economic growth. research design will be qualitative with special focus on doctrinal research methodology. nature of work is interdisciplinary a doctrinal research methodology will appropriately help us deducing results of relationship between enforcement of intellectual property rights and growth of creative economy in pakistan. the research used primary legislative and judicial sources along with secondary data collected by united nations conference on trade and development, national bureau of statistics, state bank of pakistan, and national institute of cultural studies. review of economics and development studies vol. 5, no 3, 2019 471 figure 1 4. literature review 4.1 creativity and its impact on economy creativity is directly proportional to economic growth of state. for instance, artistic production, inventing new engineering process, starting new business method, inventing a design with financial and economic impact directly leads towards economic activity in a state. united states of america takes of major part of its economic might from creative industries such as software, pharmaceutical, performing arts, music, and other innovative aspects of innovation. according to shumpeter (shumpeter, 1934), modern day entrepreneurship is product of forming new business or firm supported by new idea and a process to execute it for social or cultural activity that produces economic benefits. it is estimated that uber, a transportation facility that does not own a single car, will turn to $100 billion dollar company after its listing to stock exchange. the same aspect of creativity is highlighted as formation of private kingdom that supports joy of creating (audretsch, keilbach 2005). creating a new idea turns in not only facilitating culture and society grow to new levels of ease and comfort but it also helps economy sustain (carree, thurik 2008). review of economics and development studies vol. 5, no 3, 2019 472 schultz was the first to highlight significance of innovation in growth of creative economy. moreover, becker highlighted the same aspect during 1964 (glaeser et al. 1992). world industrial investment has been shifted form investment of hard input to human capital and it is human intellectual capital that creates a big difference in making companies top earning in the world (berry and glaeser 2005). creative industries, in now a day, are the major source of revenue for world economies. audretsch has highlighted the same relationship between intellectual innovation and economic growth. along with intellectual innovation by human capital, technological growth is major factor in economic growth and is based on innovation in various methods. saxenian (1994) explains the growth of creative industries and stresses that creative industry may grow with cooperation of universities, industries, and entrepreneurs by uniting human capital to market that will ultimately help growth of not only innovation but also creative economy. florida (2002) mentions various aspects of creativity in arts, engineering, science, culture, and entertainment that can help creative industry grow effectively in a state. lucas (2009) highlights identical trends my mentioning that new ideas stain economic growth of a state and role of ideas solve social problems related to business and industries (howkins 2001). creating new business and production in current times requires a good deal of innovation of ideas that make it distinct from other existing business ideas (audretsch et al. 2010). capital of investment has been divided in two parts; funds and human capital that turns these funds perform maximum towards financial return (putnam 1995). top creative organisation are mainly generating their profits from their innovative ideas and list ranges from apple, amazon, microsoft, facebook, music and film industry, to many other creative businesses around the world. it is worth mentioning that creativity requires a great deal of expertise, intellectual ability, persistent quest for innovation supported by hard work, and financial capita. in case innovation is not respected and is left prone to piracy, theft, and unauthorised use, it will discourage inventors from investing their time and efforts. in result, the world will lose its sustainable development. 4.2 role of copyrights related industries in the creative economy copyrights related industries are diverse. they range from poetry to composing a complex business or software model. to highlight the role of copyrights in various industries, wipo framework can act as a guidance and various writers have tried to define the domain of copyrights related industries. copyrights may bear relevance to publishing, writing, data processing, social and cultural heritage, radio and television broadcasts, musical manufacturing and instruments, arts and craft, textile, garments, leather products, jewellery, transport, and other services that use model of copyrights. copyrights inspired industries have served pakistan‟s creative economy in a very positive manner by enhancing exports. during 2018, research published by samad et, al highlights a good estimation of contribution of copyrights related industries in enhancing creative economy of pakistan. the research concludes that copyrights industries got potential to contribute towards adding value, taxes, trade and foreign exchange, attaining balance between import and exports. the study recommends that it is very important that industries grow with the help of enforcement of copyrights and this enforcement will enhance innovation that will lead towards economic activity. moreover, the study reveals that copyrights related industries are underrated for their contribution in developing economy of pakistan. for understanding contribution of copyrights related industries, table 1 is significant: aforementioned table demonstrates the contribution of various copyrights related industries towards export during 2003-2008. the table demonstrates that various industries have been progressing with a moderate pace. it is pertinent to mention that this pace may be enhanced by including copyrights protection and effective enforcement of innovation in these industries. copyrights enforcement will help growth of creative industries in two way. first, it will create competition among national industries to invest in research and development and second it will attract international investors to invest in creative industries of pakistan. law of copyrights in pakistan is know as copyrights ordinance 1962. it was latest amended in year 2000 to make it compliant with international standards of copyrights standards provided in trips agreement 1994. pakistan is member of berne convention as well as universal copyrights convention. copyright protection in pakistan is available for literary, artistic, musical, dramatic, cinematographic, architectural work, photographs, books, newspaper writings, lectures, engravings, all forms of records such as tape, disc, wire, or other sound recording. copyright generally connotes right to author or creator. according to black‟s law dictionary, copyrights means (bashir, khan, 2015): review of economics and development studies vol. 5, no 3, 2019 473 table 1 “the right of literary property as recognized and sanctioned by positive law. a right granted by statute to the author or originator of certain literary or artistic productions, whereby he is invested, for a limited period, with the sole and exclusive privilege of multiplying copies of the same and publishing and selling them”. violation of copyrights may attract various remedies for right holder such as civil, criminal, and administrative (copyrights ordinance, 1962). a person involved in violating copyright may face injection, compensation, and forfeiture if pirated products (copyrights ordinance, 1962). under criminal jurisdiction, the violation may attract imprisonment, fine, or both. moreover, a police officer is authorised to inspect the property under suspension of copyrights violation (copyrights ordinance, 1962). copyrights law provides administrative remedies by authorising customs officers to inspect any suspected baggage that may contain any copyrights violation material and withhold the material (copyrights ordinance, 1962). moreover, this may also lead towards invocation of criminal action against copyright violator. it is worth mentioning that registering copyright in pakistan is not compulsory under the law but is recommended. section 39 of copyrights ordinance states (copyrights ordinance, 1962): “the author, publisher, owner or other person interested in copyright of any work may make an application in the prescribed fee to the registrar for entering particulars of the work in the register of copyrights, after it registrar may issue certificate of such registration ,unless, he considers that such entry should not be made in respect of any work.” it is commonly misunderstood that scope of copyrights extends to only published material. this paper try highlighted and connected copyrights aspect to industry and creative innovation that leads towards strengthening economy of pakistan. as stated earlier, copyrights related industries has performed very well to available capacity and capabilities. this performance can be optimised by enforcement of copyrights laws in effective manner. review of economics and development studies vol. 5, no 3, 2019 474 incentive and appreciation leads human nature towards creation. while discouraging trends of piracy affects innovation. impact on innovation ultimately leaves weaker economy. ignoring copyrights law as less important is not right approach towards economy and strengthen copyrights law will facilitate related industries grow (mehmood, ilyas, 2005). moreover, it will attract international investments to develop atmosphere of competition as well as foreign direct investment. 4.3 patents-related creative industries during year 2000, us patent related industries contributed $19 billion dollars to economy and the rising with every year. patent related industries include pharmaceutical, engineering, manufacturing, technology, and in some cases software and mobile applications. patent ordinance 2000 defines patent as right that provides inventor a monopoly over its invention for 20 years to exclude others from unauthorised use of the invention. patent rights may be granted to any patentable invention and patentability criteria is defined in section 7 of patent ordinance 2000. patent mainly is innovation that is novel and is product of inventive steps. moreover, an invention is eligible for grant of patent if it has some industrial application. patent protection to innovations are granted for two main reasons. first if encouraging innovation to inventor that has invested efforts and money in inventing a new product, process, or solution. secondly, patent protection enhances competition in society to get reward for contribution towards society. moreover, patent require inventor to disclose its inventive steps and secret information behind idea that further helps growth in knowledge and industry. greenhalgh and longland (2001) found that patent and creative industries have a strong relationship as the patent ignites industrial development that further facilitates growth of economy. patent related industries can only grow with sufficient investment in research and development of new ideas. table 2 demonstrates that investment in research and development has been very marginal (unctd, 2018): abovementioned table clearly demonstrates that share of research and development in both import and export has been very marginal. it is fact that innovation in industry is hard without equitable investment in research and development. patent related industries in pakistan are pharmaceutical, industrial engineering, car manufacturing, agriculture, software, and other industry related innovations. with special focus on pharmaceutical industry, the statistic show very positive trends in growth of pharmaceutical industry of pakistan. estimates from 2017 demonstrate that volume of pakistan pharmaceutical industry has gone to $3.1 billion with the growth rate of 12 percent annually. although this figure is satisfactory but is lower than india whose industry will reach $55 billion in 2020 with annual growth rate of 22.4 percent. one may argue that india is bigger country in comparison with pakistan but the review of economics and development studies vol. 5, no 3, 2019 475 gap in growth rate reveals that pharmaceutical sector of pakistan is growing with half pace than india. moreover, software industry of india has also achieved a figure of $181 billion that is much higher than that of pakistan. with reference to performance on patent related industries, pakistan falls behind regional players such as india, china, and honk kong. india has been declared a country who has dealt with challenges of patent issues in very effective manner. indian patent law balances between international patent grants and growth of its domestic industry to look after public interest. in the field of pharmaceuticals, india has taken position of pharmacy of the developing world. india is one of the major exporter of generic low cost medicines to developing countries. indian pharmaceutical industry, with the facilitation of legislative and judicial framework, has been effective on helping developing and least developed countries to solve issue of high cost of essential medicines. by doing so, indian pharmaceutical industry will flourish to the level as high as $55billion during 2020. it is the case of indian software industry where india used both intellectual property laws as well as cost effective skilled labour class to help information technology contribute towards creative economy. indian patent law codes a provision known as section 3(d). this section allows administrative authorities as well as court to watch any grant of patent, especially in pharmaceuticals, that can possibly effect indian interest on the basis of „public interest‟. trips agreement 1994 allows protection of public interest by the state (trips agreement, 1994). contrary to this provision, patent law in pakistan is not equally effective to watch public interest and issues of accessibility, availability, and affordability resulting from protection of patents on various innovations. in order to help patent related creative industries, it is need of the time to invest in research and development of innovative ideas at universities and industries levels. moreover, industries should start investing in university led research to help them optimise their production and innovate new ideas to grow at global pace. moreover, protection and enforcement of patent laws should be made in balance way that it appreciates innovation as well as protects public interest in the shape of availability, accessibility, and affordability of products under patent protection. 4.4 trademarks and creative economy trademarks are one of the big source of creative economy. amazon brand value of its trademark is $150.8 billion during year 2019. apple stands second as high as $146.3 billion and google wins third place by its value $120.9 billion. indian total brand value of all trademarks during year 2018 in total was $2159 billion. all this is result of creative economic activity. trademark is a sign, name, mark, sound or smell that distinguishes services or goods of one business from other. trademark should be distinctive and owner should be vigilant on any violation as law helps vigilant not indolent (adeni, 2015). trademarks are enforces in various manners such as civil, administrative, border management, criminal procedure, and other ways. trademarks in pakistan fall under trademarks ordinance 2001, trademarks rules 2004, pakistan penal code 1860, intellectual property organisation act 2012, custom act 1969, and specific relief act 1877. moreover, pakistan is member of trips agreement 1994 and need to make laws relating to trademarks more effective at par with international standards. trademarks laws in pakistan are evolving. they are not enforced at their full efficiency. moreover, enforcement of trademarks is affected by various hindrances such as corruption, lack of understanding trademarks, insufficient legal experts, and new enforcement laws (arain, 2015). trademarks registration offices are established at only karachi and lahore while trademark business is going on all across the world. it makes it hard for trademark holder to register their trademarks and enforce them effectively. as quoted earlier, non-opposition of trademark loses right of trademark holder. limitation for raising objection against trademark violation is two months that makes it hard for right holder to arrange legal counsel and other necessary arrangements for opposing the violation of trademarks. moreover, multiple forums for remedying violation of trademarks make it complex for the right holder (zaheer, 2016). to improve trademark enforcement in pakistan, the standards of trips agreement should not move to next step where their legal realisation is sought in effective manner. moreover, the process of registration and enforcement should be made convenient to public needs where it is available in various big cities. pakistan need improving its trademark infrastructure at almost all levels such as legislative, judicial, and administrative. this will not only review of economics and development studies vol. 5, no 3, 2019 476 appreciate innovation in business along with competition but will also attract global business players‟ entry in local market (mukhtar, jusoh, 2018). 5. suggestions and recommendation aforementioned discussion, supported by data, demonstrate that creative economy in pakistan is underestimated. if measures are taken at policy and operation levels to facilitate creative economy to play its part, it may revolutionise economic activity in pakistan by making it a prominent global player of creative economy. following suggestions and recommendation are significant: i. creative industries may be appreciated by state of pakistan at legislative, judicial, and administrative levels. ii. intellectual property laws related to creative industries must be enforced in their letter and spirit. iii. the state must patronise creative ideas related to industrial and economic activity in pakistan. iv. private industrial sector may form liaison with universities to boost research and development activity that will ultimately help them find new and effective ways to increase their business and profit. v. a consolidated intellectual property toolkit must be made available to public that will help awareness and protection of these rights. moreover, protection of intellectual property rights will create competitive environment for innovation. vi. for judicial matter, a special court must be established that will help speedy and low cost remedial forum. vii. at university level, education syllabus should include awareness about violation of intellectual property rights and discouraging their violation as ordinary theft. 6. conclusion the creative economy would catalyse the economy by encouraging societies forming more inclusive, collaborative and prosperous landscape. the creative economy, supported by effective enforcement of intellectual property rights, may also help establishing the formation of competitive environment in a state like pakistan where population is young with potential to work in certain direction to change its economic destiny. it is likely to be misunderstood that creative arts, innovation, research and development, innovation and business fall behind law and order, poverty, and other issues faced by society. reality check is that these creative ventures may help pakistan by not only improving its economy but will also help strengthening social fabric of the society. trade and commerce in creative goods and services are encompassing traditional trends of business. contribution of creative economic activities such as copyrights, patent, and trademark related industries, which are much higher than exporting oil, minerals, and other tangible products. intangible ideas are capturing more space in economic activates of developing and developed states. the creative economy of pakistan has the potential to influence present and future economic activities to help its economy as well as its global status among international community of the states. references adeni, k. 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(2016). registration process of trademark in pakistan: a complete guide. karachi, pakistan, qzadeer & zaheer law firm. retrieved from http://www.zaheeradvocate.com/registration-process-of-trademark-inpakistan-a-complete-guide/ https://unctad.org/en/publicationslibrary/ditcted2018d3_en.pdf http://www.zaheeradvocate.com/registration-process-of-trademark-in-pakistan-a-complete-guide/ http://www.zaheeradvocate.com/registration-process-of-trademark-in-pakistan-a-complete-guide/ review of economics and development studies vol. 5, no 4, 2019 581 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads fintech and islamic finance-challenges and opportunities 1 irum saba, 2 rehana kouser, 3 imran sharif chaudhry 1 assistant professor in department of economics and finance at institute of business administration (iba), karachi, pakistan. isaba@iba.edu.pk 2 chairperson, department of commerce, bahauddin zakariya university, multan, pakistan. rehanakousar@bzu.edu.pk 3 director, school of economics, bahauddin zakariya university, multan, pakistan. imran@bzu.edu.pk article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 fintech is the merger of two terms: finance and technology. islamic finance provides financial services to the customers in accordance to the rules and regulations prescribed by shariah. as islamic finance is growing by leaps and bounds since the last two decades, and so is fintech, in the last decade. the main objective of islamic finance is to enhance the economic growth in the society with the use of shariah compliant financial solutions. likewise, fintech provides cost effective solutions for the companies and especially startups that help in the reduction of their costs and improvement in business processes. financial industry is a very elusive yet important sector in the society, and hence heavily regulated by the regulators. the introduction of fintech in countries, especially developing countries like pakistan can help to boost economic growth but this will increase the workload of regulators as they must ensure stability of the financial system and to protect it from frauds/crises. hence, proper monitoring by the regulatory authorities is crucial to avoid cyber-attack, data leakages and data theft as it can lead to misuse of the information. for the good results of fintech, not only the users but the regulators have to be aware with the structure and functioning of the system and the regulations should be in place proactively. this paper focuses on the three main aspects namely: explaining the fintech, opportunities for islamic financial institutions and the challenges/issues faced by the institutions in implementing fintech solutions. the paper also provides the current status of fintech application globally and the potential in it to serve the poorer segments of society. the review of literature approach is used for the paper. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords fintech, finance, shariah, branchless banking, shariah compliance, islamic financial institutions (ifis), islamic banking jel classification: g23, g29 corresponding author‟s email address: rehanakousar@bzu.edu.pk recommended citation: saba, i., kouser, r. and chaudhry, i.s. (2019). fintech and islamic finance-challenges and opportunities. review of economics and development studies, 5 (4), 581-590 doi: 10.26710/reads.v5i4.887 1. introduction today financial technology (fintech) is introduced as a game changer. the idea of how fintech is bridging the gap between finance and technology and bringing them much closer to each other such that they are the integral part of each other evokes a sense of change, with the uncharted and uncertain outlook http://www.publishing.globalcsrc.org/reads mailto:isaba@iba.edu.pk mailto:rehanakousar@bzu.edu.pk mailto:imran@bzu.edu.pk mailto:rehanakousar@bzu.edu.pk review of economics and development studies vol. 5, no 4, 2019 582 and outcome (world economic forum, 2017) fintech is devoted to companies or their representatives that combine financial services with recent, advanced technologies (navaretti, calzolari, & pozzolo, 2017) fintech is a term flipped in the recent past for technological innovation in financial services. regulators are working towards developing a standardized definition of this broad term. currently there is no globally recognized definition for the term “fintech.” (schueffel, 2016) however, according to the financial stability board (fsb), of the bis1, “fintech is technologically enabled financial innovation that could result in new business models, applications, processes, or products with an associated material effect on financial markets and institutions and the provision of financial services” (reserve bank of india, 2017) the aim of this definition is to bring wide variety of innovations in financial services under one umbrella using technologies, regardless of their type, size and regulatory status. this broadness in definition is beneficial while forecasting and evaluating the developing financial industry with its challenges and opportunities. as per law, new entrants in the market offer internet-based and application-oriented products. fintech is also the second name for attracting customers with more user-friendly products and services which are more effective, efficient, translucent, and computerized than those presently exist (european banking federation, 2015) and (london business school review, 2015). according to pwc (pricewaterhouse coopers, 2017), more than 83% of financial intuitions are of the view that their business will have problems/risks due to the fintech startups. hence, the companies need to invest in capacity building and projects related to fintech in order to stay in the market. 1.1 current status of fintech the financial service industry has gone through several stages of development from bookkeeping, to forming of central national banks and payment systems and later introduction of complex asset markets and other financial products (arthur, 2017). innovative payment systems like advanced wallets have been developed and the internet, retail and telecom industry have started offering financial services. with increasing digitalization, specialization and decentralization, the financial service industry has established more effective and improved methods of utilizing a wide variety of information (cuesta, ruesta, tuesta, & urbiola, 2015). in the past decade many technological developments have taken place which are being applied innovatively in all functions of finance from payments to savings, borrowing, risk management and financial advisory (forbes, 2018). “flexgen advisor” the fintech ecosystem includes, fintech startups, technology developers, governments, financial customers, traditional financial institutions, regulators, and in the case of islamic fintech role of shariah board/shariah scholars is also very important. the role of business partners with the fintech ecosystem is another important segment (lee & shin, 2018) 1 report of working group on fintech and digital banking by reserve bank of india. review of economics and development studies vol. 5, no 4, 2019 583 2 the technological advancements like artificial intelligence (ai), big data, distributed computing, cryptography and internet or mobile based products lead to predictive analytics, machine learning, smart contracts, digital wallets, etc (lochy, 2019). financial industry can make payments, borrow, invest and manage their risk by using innovative technology. with the prevalent growth of fintech there is need for the change in the regulations (bofondi & gobbi, 2017) hence, the concept of regtech is picking up too (arner, barberis, & buckley, 2016) . similarly, the role of insurtech is also rising (mc kinsey and co, 2017). following the insight-based business model, most firms have remained small but investments in them have increased. according to the imf report, global investment in fintech rose from usd 9bn in 2010 to usd 25bn in 2016. venture capital investments have also expanded from usd 0.8bn in 2010 to usd 13.6bn in 2016. value of public fintech firms have quadrupled since the global financial crises, out passing other sectors. public sector for the segment appears to have developed exponentially in the meantime (international monetary fund, 2016) according to pwc report of 2016 (pwc, global fintech report 2016, 2016), 59% of the financial institutions are currently dealing with fintech . globally, the digital revolution brought by fintech companies is changing the industry‟s structure. in 2016-2018, commerz bank, a giant german bank, proclaimed that by 2020 their aim is to digitalize and automate 80% of its processes (commerzbank, 2018) . in southeast asia, us$345 million which is 11% of total venture capital was the portion of fintech (techcrunch, 2016). the huge number of unbanked population and emerging economies were 2 fintech and financial services: initial considerations by imf staff team review of economics and development studies vol. 5, no 4, 2019 584 other factors that attracted the new entrants (pwc, catching the fintech wave, 2016)3. collaborating with fintech companies is the most commonly used form of alliance among fintech companies and financial services; according to one report, 35% of the fis are likely to have joint ventures with fintech companies. partnerships between fintech and financial service permit simple, adaptable and generally minimal risk arrangements for the two players to play off each other's strength. on one hand, occupants can saddle the newcomers‟ solutions and technologies, while restricting potential aftermath from inability to what is stipulated in the association assentation. then again, the technology organizations take advantage from the firm‟s financing, and conceivably from their current client connections and brand. in the meantime, these partnerships offer profitable opportunities for the financial services and fintech organizations to distinguish and identify difficulties and work on enhancing their organizations supplement each other (kelly, ferenzy, & mcgrath, 2017). in march, an agreement was signed between the monetary authority of singapore, the central bank and singapore‟s financial center to jointly undertake fintech projects like mobile payments and block chain. the first fintech accelerator in gulf region in dubai has started accepting applications ( startupbootcamp, 2018). wamda, a website focusing on regional entrepreneurship reported that there were less than 20 fintech startups in the middle east and north africa in 2010 but the number had risen to 105 by 2015 (the economist, 2017) the gulf region has a concentration of migrant employees who require remittance services. chris skinner commented on the region saying, “it also encompasses the region’s many expatriates accustomed to highquality services, and the local ultra-rich”. fintech can cater well to this population‟s needs. it can bring cost effective services to the four-fifths of the unbanked population, the largest percentage in the world. (the economist, 2017) 2. status of fintech in islamic finance jarmo kotilaine, the chief economist at the bahrain economic development board (edb) famously summarized: “when it comes to technology, what applies in conventional banking also applies in islamic banking.” he added: “using financial technology improves the quality of the banking experience among clients. it influences the speed and accuracy of the experience. technology makes products more reachable to clients. we’re transitioning toward a situation where growth for companies and economies will have to depend more on productivity than before, to achieve that, you will need better management, better innovations, new distribution channels and new capital” {1} fintech for islamic finance must observe shariah guidelines. in general, technology is neutral from shariah perspective, unless it is used in a instance directly conflicts with any rulings or requirements of the shariah (oseni & ali, 2019). but, how do we determine which fintech application that requires sensitivity to shariah requirements? prof. akram laldin, executive director isra answers this in the following words. “in order to address these concerns, it is important to note that, in general, shariah principle with regards to a business transactions (muamalat) is governed by the notion that every transaction is permissible, except when there is a clear text which prohibits it. the permissible principle provides flexibility in innovation and new practices in business and financial transactions. all innovations in muamalat, are considered as permissible and welcomed. in this regard, innovations in fintech become review of economics and development studies vol. 5, no 4, 2019 585 impermissible only if there is clear evidence that they are in conflict (against) the basic rules of the shariah. therefore, fintech application and practices, as in traditional islamic finance, should follow the principles of the shariah by avoiding the prohibited elements in the transactions such as interest (riba), gambling (maysir), uncertainty (gharar), harms (darar), cheating (tadlis), etc. it must be transparent with no hidden cost, irresponsible or unethical financing”. this gives us the fundamental guideline of what „shariah compliance‟ means in fintech. the use of fintech in a particular islamic finance product should not be such as to create harm, deception/ cheating, hidden costs, nor should it inculcate any riba, gambling, gharar, or other prohibited elements such as those that make the sale invalid. he continued: “likewise, the practice of transactions in fintech application should follow the rules of contract (aqd) used in the transaction by observing the pillars (rukn) and conditions (shart) in the contract. in addition, fintech application should aim at achieving the objectives of the shariah (maqāsid al shariah), namely, to realize the benefits (maslahah) and to avoid the harms and difficulties (mafsadah and mashaqqah)” even though fintech was not especially well-known within the islamic finance industry until late 2015, the progress of 2016 and 2017 demonstrate some wonderful accomplishments. an attempt by fintech entrepreneurs in start of 2016 turned out to be more deliberate (raghu, 2017). the accompanying features from the globe are among those which deserve acknowledgment. dib branchless banking: on february 8, 2018 a mou was signed between dubai islamic bank pakistan (dibp) and zing digital commerce for establishing branchless banking platform for dibp. this move has the potential to pave the way for digitalization of islamic banking services enabling them to serve the unbanked population in the country. in this arrangement dibp will partner with zing digital commerce who have worked on a similar project with shanghai f-road. this step is an important advancement towards achieving dibp‟s vision of offering quality financial services with convenience and reliability at every customer‟s doorstep, starting from the grass root level to the top (the express tribune, 2018) meezan upaisa: as a result of a strategic partnership between ufone and meezan bank, meezan upaisa was launched in 2016 as the first islamic branchless banking solution. it enabled customers from around pakistan to send and receive money, pay utility bills and get mobile top ups without having to visit a brick and mortar establishment4 (the express tribune, 2015). electronic commodity murabaha: pakistan mercantile exchange limited (pmex) and meezan bank ltd. facilitated the country‟s electronic murabaha transaction, an important advancement in the field of fintech. it aimed to develop the islamic money and capital markets. meezan bank provided shariah technical services to pmex in the development of this shariah compliant trading platform. earlier, state bank of pakistan (sbp) allowed this platform to operate for a pilot period of three months. meezan bank limited (mbl) and dubai islamic bank pakistan limited (dibpl) conducted the first electronic commodity murabaha transaction on december 26, 2017 (the news international, 2017). this is a progressive and revolutionary accomplishment in history of pakistan, which has the capability of providing level playing field to islamic banks with conventional counterparts in the management of liquidity in a simple, convenient and shariah compliant manner. this platform can be used by ifis to cater to liquidity problems of every potential segment, including government. dr. mufti muhammad imran usmani, the shariah advisor of pmex has given assurance on the shariah compliance of this product. the sharia board of sbp is chaired by renowned scholar justice (r) mufti muhammad taqi 4 note: the strategic partnership between meezan and upaisa was later suspended. review of economics and development studies vol. 5, no 4, 2019 586 usmani. additionally, the securities and exchange commission of pakistan (secp) and islamic banking sub committee of pakistan banks' association has also verified the very product. some of the checks that have to be made in a commodity murabaha transaction, for them to be shariah compliance: shariah compliance checks for commodity murabaha 1 is there a real non-consumable asset involved? 2 was the asset changing hands? did the buyer receive physical or constructive possession of the asset? 3 is there bai inah involved? is the product being re-sold back to the original seller? 4 was the commodity clearly specified, e.g. in quality, specification, amount? investment account platform (iap): on 17th february 2016 the first multi bank platform in islamic financial system was launched in malaysia with an initial fund of rm 150 million. it aimed to become a central marketplace for financing smes. {4}. it was the first islamic banking, internet-based platform that combined the skills of islamic banks along with the efficiency of technology for channelizing the investors‟ money for feasible commercial projects (reuters, 2016). islamic fintech alliance (ift alliance): islamic fintech alliance was launched on the first april, 2016 by 8 islamic crowdfunding platforms operators from all over the world in kuala lumpur, malaysia. blossomfinance (usa/indonesia), easiup (france), ethiscrowd (singapore), narwi (qatar), fundinglab (scotland/palestine), kapitalboost (singapore), launchgood (usa) and skolafund (malaysia) are among the founding members of ift alliance. the objective of this alliance is to enhance the growth of fintech among ifis with the hope that it would have very significant positive impact in the world (mcspadden, 2016). bursa suq al sila: being the financial hub for islamic finance, malaysia made its position much stronger by initiation of trade on the world‟s first completely shariah compliant, electronic commodity trading platform, called bursa suq al sila. it is a global commodity platform for facilitating asset-based islamic financing and investment transactions under the shariah guiding principles of murabahah, tawarruq and musawwamah. the underlying commodity in bursa suq al sila is crude palm oil (cpo). it is an initiative by the malaysia international islamic finance center (mifc). the trading platform is operated by bursa malaysia via its fully shariah-compliant wholly owned subsidiary, bursa malaysia islamic services sdn. bhd (islamic finance news, 2013). wahed-islamic investment platform: the world‟s first automated islamic investment platform was launched by new york-based wahed invest inc. with the aim of delivering halal portfolio management for more than 2 billion people especially muslims across the globe. parallel to be the first automated ethical investment platform in the world, wahed offers lower minimum investment amount of usd 7,500. wahed, at the time of its start, was only available in the united states but had a vision of being trolled out to more than 100 countries worldwide by 2019 (business wire, 2019). the first global islamic fintech hub: finocracy reported “the first global islamic fintech hub” in “future finance 2030”, which would be the point of convergence of the fast developing islamic fintech space. this fintech hub will be at ch9, the main aim is to boost the entrepreneurship ecosystem in bahrain and gcc. the plan includes a virtual network that connect various businesses, executive educational programs and a global hackathon series which will help encouraging fintech development in ifis across all emerging markets (corporate hub, 2016). 3. challenges and opportunities of fintech perhaps future of fintech is a dark cloud with silver linings, the major threats or the challenges arising from the revolution of fintech includes regulatory risks, downward pressure on margins and information security. if the regulatory aspect is ignored, it can lead to missed opportunities in fintech investments. ifis and review of economics and development studies vol. 5, no 4, 2019 587 technology players could be seeking regulators as heading for direction towards fintech for investment. currently the regulatory development for fintech is at its very early stage, there is a requirement for profound discussions and continuous engagement between regulators, ifis and fintech partnership for building trust over the new fintech environment is very necessary. in the meantime, the vast variety of fintech and its diversified business plans make it challenging for regulators to build up a one-size fits-all regulatory framework. for this reason, deep conversations and regular meetings and engagement between regulators, ifis and fintech partners in the current early stage of regulatory development is very crucial and necessary for building clarity and trustful environment. since most fintech companies have an asset-light, digital focus business model, they have a competitive edge over traditional ifis in terms of costs and scale. there is no requirement to own information technology themselves; they can hire or outsource the cloud for operational infrastructures. thus, these new market players challenge the industry by capturing business opportunities and empowering competitors by offering their services to them. ______________________________________________________________________________ threat to information security and private is another challenge. currently, this issue is very important. the adequacy of current security standards and protocols is questioned considering high number of cyber security events in recent years. pwc‟s global state of information security survey 2016 reported a 38% rise in security incidents detected globally in 2015 than in 2014. decreased market share and increased customer churn rate is another big challenge. fintech allows customized and online solutions like robo-advisors and peer-to-peer lending platforms that are cheap, easy to use and conveniently available. this results in a loss of market share. however, despite all these considerations, many ifis believe that customers are not ready for completely substituting their services with fintech innovations, which is the major reason why increased customer churn is not a big concern. but flipping the coin, there is a high level of trust in fintech. the recognition that fintech just represents a generally low risk of increased client churn for ifis might be because of the time it takes for startups to develop clients' trust and build their reputation and brand image. in any case, new arrivals in fintech can collaborate with ifis, technology and telecommunication companies to benefit from their image and fasten the process toward building trust. the above situation features the dynamic idea of the fintech environment. the perception of customer can move and fintech players can approach third party brands and influencers for creating trust. differentiation is perhaps the most sought-after opportunity arising from fintech, as selected by 87% of malaysian respondents in pwc‟s survey. this advantage is specifically valuable in a well matured, competitive and developed ifis. as fintech is relatively new, the ifs and fintech companies, by joining hands together, can easily distinguish, discriminate and differentiate themselves from the rivals. they have a chance of being the premier ones, especially in developing countries‟ markets like pakistan to provide new innovative product offerings. therefore, differentiation due to fintech is important to ifis. the reduced costs is another major opportunity for adoption of fintech. these efficient and costeffective service solutions like software as-a-service (saas) are shifting the structure from physical channels digital and mobile delivery. ifis‟ partnerships with fintech companies can improve, rationalize, and streamline ifis‟ operations with less operational costs. moreover, the “asset-light” models that fintech companies use, can be looked by ifis to reap the fruits of cost reduction. improved customer retention: the fintech solutions for ifis can offer healthier customer engagement, with more touchpoints and better relations through more frequent interactions. this would directly hit customer loyalty in a positive way. review of economics and development studies vol. 5, no 4, 2019 588 4. references startupbootcamp. 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(2017). beyond fintech: a pragmatic assessment of disruptive potential in financial services. retrieved from http://www3.weforum.org/docs/beyond_fintech__a_pragmatic_assessment_of_disruptive_potential_in_financial_services.pdf review of economics and development studies vol. 5, no 4, 2019 590 review of economics and development studies, vol. 6 (2) 2020, 501-511 501 enhancing the academic performance of students: a real-life application of quality function deployment a zafar iqbal, b lubna shoukat, c muhammad waheed, d laraib zafar a assistant professor, department of statistics, the islamia university of bahawalpur b assistant professor, department of educational training, the islamia university of bahawalpur c assistant professor, department of educational training,the islamia university of bahawalpur d (m.phil student) department of statistics, the islamia university of bahawalpur article details abstract history: accepted 14 may 2020 available online 15 june 2020 quality function deployment (qfd) is a fastidious method to acclimatize what the customers wish to achieve and how their desiderata should be incorporated into final technical solutions. qfd as a structured approach is widely acknowledged; and has been adopted successfully in almost every field of knowledge and services like engineering, service quality, education quality, planning, decision making, etc. students, through education, internalize high level qualities of social and cultural importance, intellectual well-beings, emotionally stable and physically improved skills. quality education refers to the level of accomplishment of these qualities. this paper addresses the voices of students (voss) (student’s needs and demands) regarding their educational requirements at secondary school level. the objective is accomplished by recognizing significant voss; and then determining their technical solution called solution of voss, (svoss) to resolve voss. finally, the guideline for the svoss is provided addressing which svoss is most important and which one is least. the recommended methodology also provides a guideline for secondary schools to identify problems and their solution for improved standard and improved quality of education. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: secondary schools, quality education, quality function deployment (qfd), house of quality (hoq), voices of students, technical solutions, relationship matrix jel classification: p36, i31 doi: 10.47067/reads.v6i2.227 corresponding author’s email address: mwlubna@hotmail.com 1. introduction education is believed to be the right of a person. in islam, this right is emphasized in the first revelation received by the last prophet muhammad (pbuh) which starts from the word ‘read’. the verse says “recite in the name of your lord who created man from a clinging substance. recite, and your lord is the most generous who taught by the pen taught man that which he knew not!” (quran 96:1-5 translated by dr. asad). later, the mankind also learned that education was essential for everyone to bring about prosperity for every person in life, and in society on the whole. review of economics and development studies, vol. 6 (2) 2020, 501-511 502 the right to education of human being has been accepted and declared as an obligation by a number of international conventions including the international covenant on economic, social and cultural rights (icescr). the articles 13 of icescr emphasizes that “the states parties to the present covenant recognize the right of everyone to education” ("ohchr | international covenant on economic, social and cultural rights," n.d.). the 14 of icescr states that the parties which are not been able to provide free compulsory primary education require “to work out and adopt a detailed plan of action for the progressive implementation” within two years ("ohchr | international covenant on economic, social and cultural rights," n.d.). the article 26 of the universal declaration of human rights adopted by united nations states that "everyone has the right to education ("universal declaration of human rights," n.d.). education shall be free, at least in the elementary and fundamental stages”. the 18th constitutional amendments in pakistan adopted §25a which ensures ‘right to education’ “for all children of the age of five to sixteen years” ("chapter 1: "fundamental rights", n.d.). keeping in view the vital need of education, every country develop plans and systems for imparting quality education to its people so that their personalities may be developed in a way that they may be harmonized with the value system of the society. the formal education system of pakistan consists of elementary education (primary up to 5 th grade and middle up to 8 th grade), secondary education (9 th and 10 th grade), higher secondary education or intermediate (11 and 12 levels), and then higher education. (blood, 1994; nordic recognition information centres, 2006) education in pakistan has various problems. how these problems can be resolved requires extensive research? one of these problems that how to enhance the academic performance of students is the main concern of every stakeholder of the education in pakistan; and this is main focus of this research. a scientific way to resolve these problems is that if we know the problem from the right person. in the research under study, right persons are the student. qfd, as an extensive research methodology, helps us to know potential needs and demands of the students and also helps finding their solutions in a systematic way. in next sections, we provide literature review, description of the objectives of this study, methodology of to achieve these objectives and also, illustrate how each qfd methodology helps by explaining its various sections. 2. literature review quality function deployment (qfd), initially developed for a specific orientation, has now become a frequently used a methodology in a variety of fields that provides an extensive procedure of examining the problems of customers/users and leads to a systematic way in determining technical solutions for the improvement of quality of the product or services with less time and effort. educational practitioners and researchers have employed qfd to enhance the quality of teachinglearning process in educational institutions, quality of syllabus, management and administration of every level of the course of imparting education. for example, abuzid (2017) conducted a research study by applying qfd methodology for the improvement of quality in curriculum design and teaching strategies to meet the learners’ needs by considering the point of views of relevant teachers, staff, and students for achieving the program’s final goals. he concluded that the actual learning needs of students and related teaching policies indicated a perceptual gap with the eventual learning consequences. he suggested the need to reduce the gap between the educational services and actual learning needs of students. sahney et al. (2004) pointed out that educational institutes like other establishments also took into account the importance of consumers’ expectations by adopting methodologies like total quality review of economics and development studies, vol. 6 (2) 2020, 501-511 503 management (tqm) to achieve their goals of businesses. they (sahney et al., 2004) used the qfd procedure to uncover the set of minimal layout of quality constituents that could fulfill the requirements of learners as consumers of the learning organization. lee and ko (2000) described the strategy formulated by the vocational training council of hong kong institute of vocational education; and suggested the structure that assimilated three extensively utilized deliberated implements of business administration collectively with the education. hwarng and teo (2001) demonstrated how an organization in higher education can apply the three-phased, service-based qfd methodology to translate the voc. these steps included service planning in which the stakeholders’ requirements (srs) are related to service features; process planning that related with key processes (kp); and activity planning that is concerned with and translates to key activities, i.e., what is required to be done for the satisfaction of stakeholders’ requirements (srs). karanjekar (2019) used the comprehensive quality function deployment (cqfd) model that provides definite and systematic procedure of decision making to the management of the institutes which enables them to fulfill the expectations of the stakeholders and also facilitate them and, therefore, acts as good model to enhance the quality of the technical institutions. chan et al. (2002) described how the qfd technique was used to progress a distance-learning program of government training organization in hong kong for junior staff in the clothing manufacturing industry. they (chan et al., 2002 classified twelve suitable modules for amending the course content; and also categorizes help-offerings that assisted the learners to study the course. the assessment of the elements and helpofferings proved to be efficacious. raharjo et al. (2007) conducted a research by using qfd and analytical hierarchy process (ahp) to progress higher education quality. their research described that it was imperative to know the nature of consumers and their interests in formulating the customerdriven strategies. the preceding discussion proves that qfd along with some other suitable techniques have been used in the context of education. therefore, this technique is applied to study the various aspects of education in pakistan because it provides practical solution of the problems. the present study is one of those and is relevant to the academic performance of the secondary school students. 3. objectives the following are the objectives of this research work. i. to investigate the voices of students (voss) (students needs and demands) that they think contribute in enhancing their academic performance at secondary school level. ii. to determine the solutions of the explored voice of students (svos) or technical solutions (tss) with the help of teachers, head of schools, owners of schools and educational experts. iii. to prioritize these svoss by determining the order among these through a procedure specified by qfd. iv. to make recommendations about svoss those come out as the most important ones and those which are of least consideration. 4. methodology in this article, quality function deployment (qfd) method is adopted to address the issues related to the academic performance of secondary school students. qfd provides a technique that systematically analyses the voice of customers (voc) and process those towards finding the svoss in order to improve the phenomenon under investigation. chan & wu (2002) explains that “qfd was originally proposed, through collecting and analyzing the voice of the customer, to develop products with higher quality to meet or surpass customer’s needs” (p.467). the product development, review of economics and development studies, vol. 6 (2) 2020, 501-511 504 improvement and quality management are the fundamental concerns of qfd. however, its use has been expanded to almost every field of knowledge (chan and wu, 2002). qfd provides a statistical mechanism employed to transform attributes into quantitative values that can be easily applicable to improve any aspect under study like manufacturing (tidwell & sutterfield, 2012). now, in the following section, we see various factors of qfd and their explanation as a methodology to achieve the objective of this research. 5. quality function deployment (qfd) factors and house of quality (hoq) as a structured method, qfd uses techniques to identify customers’ needs and expectations, and then prioritizes these needs and expectation effectively. house of quality that resembles the structure of a house, shown in figure-1, is the central planning matrix of qfd methodology built to represent the customers’ requirement and how these requirement be achieved (bergquist and abeysekera, 1996). qfd leads to establish a “hoq” that represents the reflection of customers’ desires and wows which ultimately help producing improved products and services accordingly (temponi et al., 1999). the different segments of qfd and their inter-relationships is diagrammed in the following figure 1. figure 1: showing various sections of the most commonly used qfd-hoq. each segment of hoq has a specific role but also relates with the next segment or section and so gives a holistic picture for the development of the product and process of services as per needs and requirements of the respondents (customers). 6. voice of customers (vocs) section: voice of students, (voss) voice of customer, here the voice of students (voss), is the initial step in developing the hoq under the format of qfd. the identification of customers’ (secondary school students) needs, their structuring and then prioritization refer to as voice of the customer (griffin and hauser, 1991). hoq comprises of voice of customers (vocs)their importance ratings (i) and the associations between review of economics and development studies, vol. 6 (2) 2020, 501-511 505 them. vocs (here voss) is the significant variable in hoq. customer needs are determined by asking them what they want to see in a product or service. the customer needs are evaluated by the relevant professionals of that specific field of the product or services, and then the technical solutions are developed trying to meet the customer demands or requirement developed from the voc. interviews and the focus groups are mainly used to collect the voc on the basis of which questionnaire is developed that is used to conduct survey from relevant customers (dias júnior et al., 2020). 20-30 customers from a homogeneous population may be enough to search out customers’ needs of 90% or more customers (griffin & hauser, 1991). in course of conducting survey, the participants rate various aspects of the product or any service to be evaluated. the participants are also requested to weight each of the customer’s consequences. from this data, a weighted rating can be calculated that help prioritizing the customers’ consequences. (sivaloganathan and evbuomwan, 1997). literature review shows that the use of either three, five, seven, nine or ten points scales (majid & david, 1994; bouchereau & rowlands, 2000 ). however, the scale of one to five point is thought more suitable because it discriminates evenly, where 1 represents very low importance and 5 represents very high importance (sivaloganathan & evbuomwan, 1997). 7. technical solutions (tss) section: solution of voice of students (svos) after figuring out the voss and establishing their importance ratings, the next process is to work out the solution of the voice of students (svoss) that is the technical requirement to satisfy the vocs. the svoss is the step towards achieving the satisfaction of customers (here the students) (bouchereau & rowlands, 2000). each sovs should satisfy at least one vos (hauser & clausing, 1988). voss are considered a significant aspect of the qfd approach (govers, 1996). 8. relationship matrix (rm), section both voss and svoss are used to develop the relationship matrix (rm) consisting of a table of rows (voss) and columns (svoss). the rm indicates, the strength of relationship between every voss and the svoss and how this matrix contributes towards final decision (han et al., 2001) 9. determination of the weighted matrix the following formula was used to compute the relative weight of each svos with its respective voss. (1) 10. determination of the final weights of svoss there is no single method mentioned in the literature to determine the final weights of svoss. the final weights in this study were calculated by using the following equation (jeong & oh, 1998; iqbal, et al., 2014) ∑ (2) here ‘fw’ represents the final weight of svoss, ‘r’ represents relationship matrix, ‘i’ represents the customer priority rating, ‘i’ is the number of voice of student and ‘j’ is the number of svoss. 11. procedure following the above organized step of qfd methodology, the procedure of this study is explained in the review of economics and development studies, vol. 6 (2) 2020, 501-511 506 following.  identification of the quality (on the basis of needs and expectations) required by consumers as voice of students (voss).  the importance for each vos is scaled from 1 to 5. 1 means very low importance and 5 means highly important.  the degree of importance and verification of each vos is calculated.  deciding upon the solution (svos) for each vos by teachers, stakeholder, education experts etc.  developing the relationship matrix by determining the strength of relationship of every svos with vos.  the weighted-matrix was found by multiplying each of vos importance rating with each of rm ratings by using equation 1.  final weights and ranking svos were determined by using equation 2. the population of this study was secondary school students taken from the secondary schools of bahawalpur city. out of 38 schools, 8 schools were selected randomly. a sample of 400 students was taken on the basis of availability of students and their consent of being the part of this study as respondent. in this way, their personal willingness was thought to be valuable in collecting valid data. 12. data and its explanation: application of the developed methodology a preliminary survey was conducted to collect all possible needs and demands of the secondary school students as respondents (or typically the customers). the following voss were finalized along with their importance ratings. importance ratings were determined on ordinal rating scales from one to five. table 1: shows the voice of students, (voss) and their ratings voice of students (voss) importance ratings fix timing for studies 4.65 teachers' role in academic performance 4.54 excursion tour/picnic 3.55 special place for studies 4.18 extra-curricular activities 3.71 limited students’ strength in class 3.96 punctuality of teachers in class 4.69 qualification and skills of teachers 4.73 all students treated equally by teachers 4.73 interest developed in studies by teachers 4.54 practical implementation by models 4.07 monthly parents teacher meeting 4.08 after finalizing the voss, and then holding the meetings with teachers, head of institutes, owners of institutes and parents of students as stakeholders, following svos were finally determined. review of economics and development studies, vol. 6 (2) 2020, 501-511 507 table 2: shows solution of the voice of students, (svoss). followed proper time table by teachers teachers inspiration arranged tours/picnics by institutes library/ computer labs teachers arranged extra-curricular activities students more than 20 then make section checked through technical devices hired qualified teachers conduct trainings for teachers by institute teacher equally treat all students teachers behavior conducted weekly or monthly test conducted practical practice of subjects meeting hours provided to parents in the next phase, rm was developed by considering each of the svos and its degree to resolve each of the vos on a rating scale of zero to seven. zero expresses no role or involvement to resolve while seven mean highest involvement to resolve the vos. the following table-3 explains the strength of each of the svos relative to each of voss. table 3: shows the strength of voss with each of the svoss. review of economics and development studies, vol. 6 (2) 2020, 501-511 508 now using voss, importance ratings and svos relationship matrix strength rating, the weighted matrix by using equation 1 was determined. this weighted matrix (table: 4) represents total strength of the each vos with respect to each of the svos. table 4: shows the house of quality with final weights of svos review of economics and development studies, vol. 6 (2) 2020, 501-511 509 table 5: shows the final weights of solution of the voice of students, (svoss). s o lu ti o n s o f s tu d e n ts r e q u ir e m e n ts f o ll o w ed p ro p e r ti m e ta b le b y te a ch e rs t e a ch e rs i n sp ir a ti o n a rr a n g ed t o u rs /p ic n ic s b y i n st it u te s l ib ra ry / c o m p u te r la b s t e a ch e rs a rr a n g e d e x tr a -c u rr ic u la r a ct iv it ie s s tu d en ts m o re t h a n 2 0 t h e n m a k e se ct io n c h e ck ed t h ro u g h t e ch n ic a l d ev ic e s h ir e d q u a li fi ed t e a ch e rs c o n d u ct t ra in in g s fo r te a ch e rs b y in st it u te t e a ch e r e q u a ll y t re a t a ll s tu d en ts t e a ch e rs b e h a v io r c o n d u ct e d w e e k ly o r m o n th ly t e st c o n d u ct e d p ra ct ic a l p ra ct ic e o f su b je ct s m ee ti n g h o u rs p ro v id ed t o p a re n ts final weights 55 22 22 23 41 20 57 33 39 30 71 26 34 21 table 6: shows the final weights of svoss with their respective ranking. s o lu ti o n s o f s tu d e n ts r e q u ir e m e n ts f o ll o w ed p ro p er t im e ta b le b y t e a ch e rs t e a ch e rs i n sp ir a ti o n a rr a n g ed t o u rs /p ic n ic s b y i n st it u te s l ib ra ry / c o m p u te r la b s t e a ch e rs a rr a n g ed e x tr a -c u rr ic u la r a ct iv it ie s s tu d en ts m o re t h a n 2 0 t h e n m a k e se ct io n c h e ck ed t h ro u g h t ec h n ic a l d ev ic es h ir ed q u a li fi ed t e a ch er s c o n d u ct t ra in in g s fo r te a ch er s b y in st it u te t e a ch e r eq u a ll y t re a t a ll s tu d en ts t e a ch e rs b eh a v io r c o n d u ct ed w ee k ly o r m o n th ly t e st c o n d u ct ed p ra ct ic a l p ra ct ic e o f su b je ct s m ee ti n g h o u rs p ro v id ed t o p a re n ts final weights 55 22 22 23 41 20 57 33 39 30 71 26 34 21 ranking 3 11 11 10 4 13 2 7 5 8 1 9 6 12 13. discussions and conclusion the final results show that ‘teaching behavior’ is most important svoss with final weight of 71 while ‘checked through technical devices’ is the second most important svoss with final weight 57. on the other hand, ‘students more than 20 then make section’ is the least important svos (table-6). in the vos section (table-1), we see both ‘qualification and skills of teachers’ and ‘all students treated equally by teachers’ has the highest importance rating, of 4.73, and ‘punctuality of teachers in class ‘ is the second highest important vos with importance rating of 4.69. on the other hand ‘excursion tour/picnic’ and ‘extra-curricular activities’ is the least important voss with importance ratings, 3.55 review of economics and development studies, vol. 6 (2) 2020, 501-511 510 and 3.71 respectively. in this article, how needs and demands of customers (students) related to a problem can be defined analytically, and then how these complications can be resolved by substantiating their technical solutions. this case study to improve the performance of students of secondary level of government is a model study and provides way to improve other dimensions of educational institutes. implementation of the findings of this research may contribute to improve the academic performance of secondary school students because the findings are based on the views of students who are the real and direct stakeholder-a real-life application references abuzid, h. f. t. 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(n.d.). https://www.ohchr.org/en/udhr/documents/udhr_translations/eng.pdf https://norric.org/files/education-systems/pakistan-2006.pdf https://www.ohchr.org/en/professionalinterest/pages/cescr.aspx https://www.ohchr.org/en/udhr/documents/udhr_translations/eng.pdf review of economics and development studies, vol. 6 (4) 2020, 821-832 821 impact of karakoram highway on the education and health development of gilgitbaltistan, pakistan salman anwar a , nouman khan b , muhammad mumtaz c a assistant professor, government superior science college, peshawar, pakistan b lecturer, department of history and politics, university of haripur, pakistan c assistant professor, department of management sciences, the university of haripur, pakistan, email: mumtaz86@hotmail.com article details abstract history: accepted 30 nov 2020 available online 31 dec 2020 education is the soul of a society. it is a long term investment by a state to develop its human capital. those countries which invested heavily in human development are reaping the benefits. education and health as indicators of human development are of utmost importance. gilgitbaltistan (gb) in the extreme north of pakistan is a mountainous area. before the construction of karakoram highway (kkh), their status of education and health was extremely miserable. only 3 middle and 80 primary schools were available in the entire area of gilgit-baltistan. similarly, 2 hospitals and 10 small dispensaries were available in the health sector. therefore, this study is an effort to evaluate the impact of kkh on education and health development of gilgit-baltistan. results show a significant change and development, especially in the education sector. however, in the health sector, there is an intense need for more investment. as the area of gilgit-baltistan is vast and scattered, the people face difficulties in reaching the health care centers. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: kkh, gilgit-baltistan, education, heath, human development, schools and hospitals jel classification: n15, i21, i18 doi: 10.47067/reads.v6i4.281 corresponding author’s email address: mumtaz86@hotmail.com 1. introduction this paper attempts to assess the impacts of karakoram highway (kkh) on education and health sectors of gilgit-baltistan. the study was undertaken in gilgit-baltistan area of pakistan. gilgitbaltistan covers an area about 72,496 km 2 with three divisions and ten districts namely, gilgit, diamer, hunza, nagar, ghanche, ghizer, skardu, shiger, kharmang and astore. the area holds great importance due to its geographical location, as it connects central asia and china to pakistan. the people of this area found it difficult to travel to the other provinces of pakistan until the construction of kkh. review of economics and development studies, vol. 6 (4) 2020, 821-832 822 during the pre-independence era, no attention was given towards the educational need of the area. there were only few schools only for males, until 1947 (dani, 2001). the students who were willing to carry on their studies had to go to kashmir, deoband or aligarh. the government of pakistan paid much attention to provide educational facilities to this area, however due to lake of means of communication, absence of approach road and other impediments, the task was become extremely hard. at that time because of acute deficiency of literate persons, the gilgitbaltistan administration was bound to hire educated persons from other provinces by giving them extra benefits (benz, 2013). in the beginning public education was directly under control of the political agent. during the years 1976-78 directorate of education was established. in 1979 the powers of running the education department of gb were given to the ministry of kashmir affairs (hussain, 2016). from 2009 onward, gilgit-baltistan has its own, directorate of education. the british indian authorities took no interest in providing basic health facilities to the people of these remote areas. at the time of independence there were only two hospitals and 10 small dispensaries for the whole area (ali, 2010). the government of pakistan tried its level best to provide basic health facilities to the area, but the absence of a smooth highway was a main hurdle. the construction of karakoram highway not only linked this gorgeous area to other provinces but also gave a sigh of relief to the people, as for as health facilities are concerned (sokefeld, 2014). the objective of this study was to analyse the change in education and health sector of the study area after the construction of kkh. the analysis revealed that a positive change has been occurred as for education is concerned. however health sector lags behind due to harsh mountainous terrain, scattered population and limited resources. figure 1, location map of kkh & gilgit-baltistan modified after said, 2005 2. methods and material 2.1 study area gilgit-baltistan spreads over 72,496 square kilometers. the population is estimated as 1.48 million according to census 2017. people live in small settlements scattered in mountains and valleys. review of economics and development studies, vol. 6 (4) 2020, 821-832 823 villages consist of limited households with an average family size of nine members. the density of population is 8 persons /sq. km. the literacy rate is 33 % (44% male, 21 % female) (gogb & akesp, 2008). 2.2 methodology mix methodology approach was used because the data presented in this paper is both quantitative and qualitative in nature. theoretical framework was derived from the growth pole theory presented by francois perroux. he explains that socio-economic growth is not even, but it has different level of intensity in different places, points or poles. the development spreads from these poles and the outcome is different in every region. the data was collected during three field visits of gilgit-baltistan in 2016, 2017 and 2018. the authors’ conducted interviews with officials, students, teachers, and principals of different schools and colleges of gilgit-baltistan. the education and health departments of gilgit-baltistan also provided some valuable statistical data. research papers mentioned in the reference section also helped to create an insight for this study. 3. results and discussions 3.1 educational progress of gilgit-baltistan the analysis reveals that harsh mountainous terrain and long distances in the study area has directly affected the educational development. small villages with no link roads make it difficult for government to build schools in every village with adequate facilities (cook & butz, 2011). the private sector also has no attraction in such areas. the socio-cultural environment is also one of a hurdle in promoting education especially for females. the federal government, agha khan education services of pakistan, national education foundation and private sector has contributed a lot in education sector (gop, 2008). at primary, middle and high levels every two to three villages is having a public sector schools, while the number of colleges are also increasing. before the construction of kkh the people of study area were totally ignored regarding education. all the development in education sector we and the inhabitants of the area is witnessing was only possible in the last 30 to 35 years after the inauguration of kkh. education is a long term investment for socio-economic development of a society. institutions require a lot of time to build up, strengthen and deliver up to the mark. the world famous education institutions delivered after centuries of services in educating their youth and research activities. expecting high quality and deliverance at this stage from a transitional society is not good (benz, 2016). as mentioned above a lot has been achieved during the last 35 years but still the sector requires more attention to strengthen and deliver for socio-economic development of the area. now it’s high time for the authorities to facilitate the society with qualified staff and quality education after infrastructural development. a big responsibility also lies on the shoulders of teachers, parents and students to take the responsibility and develop their society. the analysis reveals that development of education sector in the study area requires three main initiatives. to insure education access for all the people, this objective have almost been achieved almost at primary to high levels. although there are hurdles regarding walks from home schools but it is obvious due to the geography of the area. to insure the quality of education in the study area, it will take some time as the institutions are relatively new and not fully equipped. quality education also requires high qualified teachers, trainers and inducements. and last but not the least to produce skillful labor which requires technical education (sokefeld, 2005). the progress of educational development of the study area is discussed in detail in this chapter. review of economics and development studies, vol. 6 (4) 2020, 821-832 824 figure 2, number of government, semi-government and private schools till 2016 gilgit-baltistan has shown better results during the last thirty five years. the literacy rate of the study area in 1981 was only 14 percent which is now 52 percent (gogb, 2005). it is pertinent to note here that literacy rate of females have risen up to 38 percent which is a very encouraging sign (akrsp, 2012). the gains in literacy rate is attributed to accessibility, specially kkh which has transformed the whole region of gilgit-baltistan from a remote, primitive, deprived and ignored society to a socioeconomic developed society. the role of some non-governmental organizations like agha khan cannot be ignored as well but anecdotal evidences proves that this development occurred only after the inception of kkh. the data shows that during 2012-2013 almost 60% percent students of gilgit-baltistan were enrolled in government run institutions, whereas enrollment in private schools were 22% and only 18% students were enrolled in schools run by national education foundation (akrsp, 2011). this clearly show the dominant share of government schools. the analysis further reveals that the number of boys schools are more than the girls that is why the ratio of male literacy is more than the female, also shown in figure 3. figure 3, gilgit baltistan, ratio of male and female schools, source, directorate of education, gilgit-baltistan, 2016-17. review of economics and development studies, vol. 6 (4) 2020, 821-832 825 in the study area, more than fifty percent of the educational institutions are constructed and run by the government. figure 4 shows a greater share of government recruited teachers in schools and colleges. it clearly indicates that the share of public sector investment is very high. figure 4, gilgit-baltistan, share of government, national education foundation and private sector, 2015-16. source; directorate of education, gilgit-baltistan, 2016. in the study area ratio of female education has rapidly increased during the last thirty five years shown in figure 5. it is a very encouraging sign because educating a girl is educating a family. that is why not only in gilgit-baltistan but throughout pakistan female literacy rate is increasing day by day. looking towards the interest of females in education sector it is hoped that the gap between male and female literacy would be overcome in the near future. figure 5, gilgit-baltistan, gender wise literacy ratio as compare to other provinces, 2012-2013. source; directorate of education, gilgit-baltistan, 2016. 3.1.1 enrollment ratio in high school and college level the analysis reveals that the ratio of enrollment of students at intermediate and degree level is review of economics and development studies, vol. 6 (4) 2020, 821-832 826 low as compared to schools. the details given below in the (figure 6) shows a full picture of the student’s enrollments. if we look at the number of colleges it is twenty one in the whole region with only four colleges for girls. when i asked one of a student of government degree college for boys, gilgit why he quit his education at degree level he answered, there is only one college in our district and i could not afford to go to college daily from my village far away from the college. likewise there is only one university in the study area which cannot absorb the students from the whole region (world bank, 2011). figure 6 gilgit-baltistan, numbers of government colleges, teaching staff, student’s enrollment and students-teachers ratio, 2012-13, after gogb, 2013 the federal government of pakistan in 2002 established karakoram international university at gilgit. establishment of this university was a blessing for the pupils of gilgit-baltistan. the enrollment ration in the university is high and encouraging the authorities to invest more in its development. kiu offers bs 4 years programme in various fields; master, m.phil and phd level programme have also been initiated with the help of higher education commission of pakistan. more than three thousand students both male and female are enrolled currently in different departments in this university (kiu, 2012). however like all other departments kiu is also facing some infrastructural deficiencies i.e students’ hostel for (male). there is only one female hostel on the university campus. it is a positive step towards higher education in the study area as it was observed during the field survey during the focused group discussion with the students. another campus of kiu is founded at skardu facilitating the students for higher education at their doorstep. the kiu is moving in right direction according to the needs and requirements of the local population. in the future more campuses will be built in other districts of gilgit-baltistan. 4. impact of karakoram highway on health the populace of gilgit-baltistan is scattered in the rocky landscape. the difficulty of infrastructure development and access for the poor people are the main hurdles which is a challenge for the government. again the significance of accessibility for the study area is evident. before the inception review of economics and development studies, vol. 6 (4) 2020, 821-832 827 of kkh there was no hospital in the whole area and the inhabitants of gilgit-baltistan were at the mercy of allah. centuries old traditional health care methods were in practice. in most of the villages of the study area the traditional way of dealing the birth delivery cases is still in practice which is risky and leads to high mortality rates. in the study area providing basic and advanced health facilities to the whole population is a challenge for the government. this is not only the issue of gilgit-baltistan but almost all provinces are facing the same problems. the problems are further deteriorated by the rocky terrain and inhospitable environment. in these circumstances it is very difficult for the poor people to reach the health care units or the hospital. although the government is striving hard to provide health facilities to every single person but limited resources is an obstacle. in health sector infrastructure development is not a big issue but its operation is a daunting task. deficiency of doctors, nurses, medical practitioners and equipment’s is another challenge. the following table and figure shows a detail picture of health facilities in the study area. the total number of health facilities units is about five hundred but most of them are small units or non-governmental dispensaries (halvorson, 2003). only five district hospitals with limited capacity is not a positive sign. the number of basic health units (bhu) and regional health centers (rhc) is also very low. but the comparative data of the health facilities before and after kkh period shows completely a different picture which is obvious in the figure 7 below. figure 7, gilgit-baltistan, health institutions 4.1 mother and children health facilities in the study area mother and child health care situation is alarming. it is a very important segment of our society. the future of society depends upon a good health of both mother and child. a healthy mother would give birth to a healthy child and a healthy child is the future asset of the society. more efforts are needed to strengthen the health facilities for mother and children in the study area shown in table 4. the following table shows a detail of mother and child care facilities. review of economics and development studies, vol. 6 (4) 2020, 821-832 828 table 4 mch outputs at health facilities indicators gilgit-baltistan (%) pakistan (%) delivery record 26 monitoring child health 5 25 women’s visiting gynecology clinics 43 24 births at hospitals or units 22 25 family planning facilities 19 48 average visitors to family planning 26 22 source: directorate of health, gilgit-baltistan, 2013 the analysis reveals that infant mortality rate in the study area is high as compare to other provinces of pakistan. inhospitable and tough environment on one side lack of basic health facilities and poverty also contribute to this great loss. one hundred twenty five per one thousand in 1998 and seventy eight per one thousand in 2012 is not a positive sign (gop, 2005). most of the deaths occur during the first two months after birth. it is very high as compare to the developing nations in the world i.e. fifteen per one thousand. as mentioned above this issue should be addressed on war footings. again it is pertinent to note here the significance of accessibility that how much it is important for the development of a society. infant mortality is directly related to mother mortality rates because most of the mothers dies during delivery cases. in the study area the ratio is much high then the other parts of the country. according to 1998 census six hundred per one lakh mothers dies during delivery (gop, 2001). it can be decreased by giving more facilities to the poor people of gilgit-baltistan at their doorstep. lack of education and awareness about the complications of pregnancy, poverty and non-availability of basic health facilities all contribute to this heavy loss. again preventing this is a challenge not only for the government of gilgit-baltistan but for the federal government too. more attention is needed to prevent this heavy losses which is also leading to affect the sex ratio of the study area i.e. one hundred and ten males for hundred females. the family planning program in the study area was initiated in 2001 to facilitate the local community of gilgit-baltistan. the number of family planning centers has now reached to fifty. in remote villages the same work is done by the lady health visitors (lhv) and lady health workers (lhw). although these lhv and lhw are working across the country and doing a good job but it requires a proper planning and monitoring system to further enhance their capacity. the government can provide more basic health facilities especially during and after pregnancy period with the help of these mobile workers. the analysis further reveals that more than seventy five percent family’s needs family planning services but only twenty five percent are getting until now. the remaining fifty percent are deprived due to non-availability of the medicines or in accessibility (halvorson, 2003). in the study area the fertility ratio is higher than the national level i.e. 4.6 ratio 4.1. the ratio of fertility was recorded as 5.4 during 1998 census but due to the initiatives and facilitation of family planning it has shown a little bit declines in the recent surveys (gop, 2001). the geography of the study area and its population have inverse proportion as only 1.3 million people living in the vast area of 72, 496 sq. km. the family planning programme does not means to stop the ratio of population but it has multiple objectives, primarily to save the life of both the mother and child and to create awareness among the families to have a gap between births. review of economics and development studies, vol. 6 (4) 2020, 821-832 829 4.2 starvation and nutrient deficiency the analysis reveals that before the construction of kkh most of the poor population was facing starvation in the winter season. it was only after the inception of kkh that people of the area took a sigh of relief and they are now getting every kind of food items at their door step. the deficiency of iodine is also reduced by promoting iodized salt in the area. these nutrient deficiencies lead to different kind of diseases in the children. the following figure show a detail picture of the study area with comparison to the other provinces of pakistan. it is essential not only for government but also for the society to provide good food to their children’s because they are the future asset of the society. figure 8, child malnutrition ratio in gilgit-baltistan as compare to other provinces, 2012-13. 4.3 restraints in health sector it was observed that the local people are still facing a lot of difficulties in health sector. although a positive change is observed after the inception of kkh but still link roads connecting the remote areas to kkh are not good enough for smooth driving (akhsp, 2000). the people have to cover a lot of distances to reach district headquarter hospitals within the region. in many cases the patients could not reach to the hospital alive and die on the way. the constraints in health sector are discussed in detail in the following paragraphs. 4.4 accessibility and health facilities accessibility has a direct relationship with the socio-economic development of any society. without accessibility any kind of development is useless. kkh was a blessing for the closed and primitive society of gilgit-baltistan. providing health facilities in the harsh mountainous society is a gigantic task. the accessibility problems in the villages also make it difficult for the administration, health workers and even the patients to reach and take benefits. the study area has a dispersed population mostly in villages making it difficult for government and doctors to reach to each nuke and corner. a small project like polio vaccination is also costing very high for government in the remote villages (sokefeld, 2014). in order to get medical facilities like surgeries, deliveries and chronic cases the people of far flung area have to travel and take appointments in advance. it is a challenging situation for both the government of gilgit-baltistan and the inhabitants of the area. this problem can only be review of economics and development studies, vol. 6 (4) 2020, 821-832 830 solved either by providing the facilities at the doorstep which is not impossible but difficult in the current situation or by improving the quality of link roads it was also observed during a field survey that even the government has tried its best to build a small dispensary or health unit the problem of recruiting a doctor or dispenser arises. people prefer to serve in urban areas as it is the case all over the country. a strict policy is needed in this regard to hire the services and compel them to serve at their appointed places with some incentives like extra payment and providing home facilities. table 5, hospitals, regional and basic health centers type of health institution gilgit skardu diamer ghizer ghanche astore total district hospitals 3 2 1 1 1 1 9 rhc/civil hospitals 6 5 2 4 4 2 23 bhus/dispensaries 390 70 46 42 60 20 628 sources: directorate of health, 2012-13 as discussed above the accessibility to health centers is the main problem. covering area of these health centers is very vast as compare to other provinces of pakistan. in other provinces the covering area is twenty two square kilometers while in the study area it is hundreds and thousands of kilometers making it difficult for the people to reach in time. one of the benefits of the kkh is the growing buildup areas in the districts along this gigantic highway (gogb, 2009 ). gilgit has the largest density and more health centers in public as well as private sector. it is therefore, necessary to focus more on quality and providing facilities at every center because health is a primary objective of every welfare state. 4.1.5.2 limited availability of skilled staff the study area has also limited skilled man power. the reason for this deficiency is obvious as all professionals and skilled labor prefer to work in cities. in health sector this deficiency is more evident because of the limited availability of doctors as well as nurses. an average of two doctors per ten thousand people is a very big difference including all the hospitals and dispensaries. for more than three hundred and fifty health centers only one hundred and thirty eight doctors are available (akrsp, 2012). this issue needs serious consideration on behalf of provincial as well as federal government to recruit more doctors on priority basis by giving them special salary packages. it was also observed during the field survey and interviews that the local qualified people prefer to work in other provinces of pakistan. as they deem it necessary for their future career because there was no attraction until inception of china pakistan economic corridor. lying on the border of china the future of the study area is very bright and now the educated people are coming back to their native region for better opportunities. still the area is severely lacking skillful female workers, to some extent agha khan rural support programme has recruited female workers in every sector but not sufficient enough to fill the gap of required workers (akrsp, 2011). female doctors are very few in number, only lady health visitors are working more efficiently everywhere in gilgit-baltistan. review of economics and development studies, vol. 6 (4) 2020, 821-832 831 5. conclusion to conclude the paper, it was found that the construction of karakoram highway has left very positive impacts on both education and health sectors in gilgit-baltistan. the local people took a sigh of relief as their children are now going to schools, colleges and universities. the construction of kkh has brought them in contact with other cities of the country. they are now traveling easily not only for education and health facilities but for other socio-economic activities as well. the analysis reveals that the study area has enormous potential of development in education sector. the statistics mentioned in this paper shows a very positive picture of educational development in the area. in a very short period much has been achieved but still requires more efforts as education is an endless journey. during the last three decades focus was on infrastructural development which is done quite remarkably. now the circumstances suggest that human resource should be developed in the area to provide social services. for this purpose it is necessary to give more trainings and employments to the local educated people. after 2009 gilgit-baltistan self-governance act a positive change was observed in all sectors. establishment of new departments has opened the doors of a lot of opportunities for the qualified local young generation. however the health sector needs much attention, as it lags behind as for as basic health facilities are concerned. human resource development is the key issue of heath sector as the ratio of doctors is very low and only lhv are working efficiently also filling the gap of doctors. human resource development can only be improved in health sector by giving more incentives and job securities to doctors as well nurses. the ratio of big hospitals is also very low which needs to be at least two in every district in the current situation. acknowledgments this research paper is part of phd thesis of principal author submitted to the area study centre, university of peshawar. references akrsp. 2011. six-monthly progress report, june-december 2010. emergency field office gulmit: aga khan foundation akrsp. akrsp. 2012. monitoring, evaluation, and research section annual report 2010. gilgit: aga khan foundation akrsp. ali, nosheen. 2010. books vs bombs? humanitarian development and the narrative of terror in northern pakistan. third world quarterly 31 (4):541-559 benz, andreas. 2013. education and development in the karakorum: educational expansion and its impacts in gilgit-baltistan, pakistan. erdkunde, 67(2). benz, andreas.2016. framing modernization interventions: reassessing the role of migration and translocality in sustainable mountain development in gilgit-baltistan, pakistan. mountain research and development 36(2): 141-152 cook, nancy and butz, david. 2011. narratives of accessibility and social change in shimshal, northern pakistan. mountain research and development, 31(1). dani, a.h. 2001. history of northern areas of pakistan (upto 2000 ad). lahore: sang-e-meel publishers.pp.283. gogb and akesp.2008. northern areas education strategy 2008-2025. department of education, gilgit: aga khan foundation. gogb. 2009. annual school statistical report (2008-09). department of education, gilgit. gogb.2005. medium-term development framework (2005-10) for the northern areas. planning review of economics and development studies, vol. 6 (4) 2020, 821-832 832 and development department, northern areas, gilgit. gop. 2001. district census report of baltistan 1998. population census organization, statistics division, islamabad. gop. 2005. pakistan social and living standard measurement survey (pslm) 2004-05, federal bureau of statistics. gop. 2008. pakistan demographic and health survey (pdhs) 2007, national institute of population studies, islamabad. halvorson, sarah. j. 2003. a geography of children’s vulnerability: gender, household resources, and water-related disease hazard in northern pakistan. the professional geographer, 55(2). halvorson,sarah j.2003. ‘placing’ health risks in the karakoram: local perceptions of disease, dependency, and social change in northern pakistan. mountain research and development 23 (3):271-277 hussain,shafqat.2016. remoteness and modernity. transformation and continuity in northern pakistan. new haven: yale university press. karakorum international university. about karakoram international university: gilgit. http://www.kiu.edu.pk/about_kiu.html ,18.09.2012. sokefeld, martin.2005. from colonialism to postcolonial colonialism. changing modes of domination in the northern areas of pakistan. the journal of asian studies 64 (4): 939-973 sokefeld, martin. 2014. anthropology of gilgit-baltistan: introduction. ethnoscripts, 16(1). world bank. 2011. gilgit baltistan economic report, broadening the transformation, gilgitbaltistan. http://www.kiu.edu.pk/about_kiu.html review of economics and development studies, vol. 7 (1) 2021, 91-99 91 determinants of intergenerational transmission of poverty in pakistan: a case study a furrukh bashir, b hafeez-ur-rehman, c muhammad ashraf, d tayyaba naveed a assistant professor, school of economics, bahauddin zakariya university, multan, pakistan email: furrukh@bzu.edu.pk b chairman, school of business and economics, university of management and technology,lahore, pakistan email: hafeez.rehman@umt.edu.pk c m.phil. scholar, school of economics, bahauddin zakariya university, multan, pakistan d m.phil. scholar, school of economics, bahauddin zakariya university, multan, pakistan article details abstract history: accepted 07 march 2021 available online march 2021 the present study examines the determinants of intergenerational transmission of poverty in pakistan. for this, primary data from 301 respondents has been collected from urban and rural areas of muzaffargarh district using simple random sampling technique. logistic regression method is applied to see the relationship between the variables. the results of logistic regression show that there is no intergenerational transmission of poverty due to urban area residence, experience, education, value of assets, married marital status and joint family system in pakistan. there is intergenerational transmission of poverty due to large household size and high dependency ratio in pakistan. on the basis of results, it may be suggested that there should be promotion of free education throughout the pakistan especially in rural areas. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: poverty, area, education, age, household size, marital status, joint family jel classification: c80, d19, j12, j21, p36, p46 doi: 10.47067/reads.v7i1.324 corresponding author’s email address: furrukh@bzu.edu.pk 1. introduction the world is dual in nature on one side there is poor population, which are not having sufficient money for basic needs and on the other side is rich or mediocre which are well organized with abundant facilities. a large part of the poor population lives in the developing countries while rich or mediocre population lives in developed countries. the rate of improvement from poor to rich is higher in developed countries due to having advanced technological infrastructure relatively. a large proportion of labor force is dependent upon agriculture, manufacturing and services sector. the poverty lives for long duration into the less developed nations. review of economics and development studies, vol. 7 (1) 2021, 91-99 92 mostly poverty moves from one generation to other generation to their offspring, this phenomena is termed as intergenerational transmission of poverty (igtp). the intergenerational transmission of poverty in developing countries is relatively greater than that of developed nations. a vast literature of intergenerational transmission of poverty is available at national and international level. shlonsky (1984) concluded that education, permanent income, social welfare and housing were found to be a cause of low intergenerational transmission of poverty in jerusalem. primary data was collected from 282 adults, in which 171 were men and 111 were women. corcoran (1995) investigated that parental economic resources are the main causes of intergenerational transmission of poverty. family structure affected children risks of dropping out of school. parental schooling was also positively associated with children schooling even income and family structures are controlled. castaneda et al. (1999) pointed out family size, family income, parental education, parent’s number of schooling, education, health and nutrition as the major causes of intergenerational transmission of poverty in latin america. moore et al. (2001) indicated that hiv/aids, migration patterns, labor market structure and social services affected to intergenerational transmission of poverty. the study concluded that capital such as human, social-cultural, financial/material, socio-political, environmental/natural capital, debt, contagious diseases, violence, fostering, laziness, lack of intelligence and stigma had direct relation with intergenerational transmission of poverty. baulch et al. (2002) concluded the variables that reduced the intergenerational transmission of poverty were education, livestock, assets and land in rural pakistan. on the other side, household size, residency area and dependency ratio increased intergenerational transmission of poverty. bhargava (2003) collected primary data of 5600 households from seven districts of rajasthan. by using logistic regression, the results highlighted that child labor may be cause of more intergenerational transmission of poverty while education had negative impact on intergenerational transmission of poverty. harper et al. (2003) identified the conditions of childhood that can show the way of poverty throughout the whole life. social and economic factors like as stress, indebtedness, cultural norms, unemployment and conflict are harmful in childhood that led to intergenerational transmission of poverty. land, livelihoods, livestock, equipments, cash, human capital and education may reduce intergenerational transmission of poverty. bezemer (2006) analyzed that insufficient food, insufficient clothing, poor housing, limited access to utilities, poor health and less access to healthcare may be causes of intergenerational transmission of poverty. lawson et al. (2006) revealed low level of education and fewer physical assets and livestock as the causes of intergenerational transmission of poverty by using panel data of 1103 respondents in uganda. the demographic factors such as dependency ratio on household head and family size were also the factors of intergenerational transmission of poverty. ludwig et al. (2006) emphasized that marriage in well-off family and parent’s work participation may reduce intergenerational transmission of poverty in us. sato et al. (2008) noticed low level of education, low level of employment status and low wage occupation as a factor of intergenerational transmission of poverty in japan using ordinal logistic regression. review of economics and development studies, vol. 7 (1) 2021, 91-99 93 papanastasiou et al. (2010) conducted the critical evolution that father’s occupation, number of siblings, children age, children education, citizenship, family type and degree of urbanization were the sources of intergenerational transmission of poverty. bird et al. (2010) examined the positive relationship between human capital investment like education and intergenerational transmission of poverty in north uganda. korankye (2014) elaborated the roots of intergenerational transmission of poverty in africa (igtp). the results concluded that intergenerational transmission of poverty could be due to few employment opportunities, poor governance, poor resource usage, corruption and poor infrastructure. education and personal development, relevant skills and knowledge could improve the status of poor people from poor to mediocre or rich. davia et al. (2017) traced out education and marriage as the determinants of intergenerational transmission of poverty in spain. wu et al. (2019) sorted out the problems of intergenerational transmission of poverty in rural china. the study concluded that in terms of liquidity, the lower-income generation showed the strongest upward mobility trend, while highincome generation and capital had downward mobility in intergenerational transmission of poverty. after reviewing the previous studies, it is observed that previous studies were explaining the intergenerational transmission of poverty on theoretical ground for various foreign economies. hardly any study is found which has empirically analyzed the determinants of intergenerational transmission of poverty in pakistan. this is a dynamic study in terms of generations. poverty of two generations is considered, one is poverty of forefathers and one is poverty of heirs. this is actually the research gap of this study. keeping in view the importance, this study is aimed at analyzing the determinants of intergenerational transmission of poverty in pakistan. apart from introduction in first, section, data and methodology is given in second section, third section explains the results and concluding remarks are given in section four. 2. data and methodology 2.1 data and methods considering the objectives of this study, primary source of data has been chosen from muzaffargarh (ُمظفّرگڑھ) district. using, simple random sampling technique, the data is collected purposively by personal interviews and questionnaire. total 301 respondents were included in the sample in which 150 respondents were evident of intergenerational transmission of poverty (whose forefathers were poor and heirs are also poor). 151 respondents are not evident of intergenerational transmission of poverty (whose forefathers were poor but heirs are not poor). poverty is measured through per capita income method based on national poverty line of pakistan 2020. analysis of the study is done by descriptive statistics and correlation at intermediate level and logistic regression method is applied to see the relationship between the variables. the following formula is used to estimate the marginal effects in dependent variable due to change in independent variables. ( ) review of economics and development studies, vol. 7 (1) 2021, 91-99 94 2.2 model specification the objective of the study is to find the factors causing intergenerational transmission of poverty in pakistan. keeping in view the following model is specified; igtp = f (area, age, edu, ms, jf, hsiz, dprat, ast) the above functional form may be written as; igtp = a0 + a1 area + a2 age + a3 edu + a4 ms + a5 jf + a6 hsiz + a7 dprat + a7 ast + ui the detailed description of the above mentioned variables is given in table 1. table 1: list of the variables used in the study variables description of the variables expected relationship igtp intergenerational transmission of poverty 1= if poverty is transmitted from one generation to another generation 0= if poverty is not transmitted from one generation to another generation dependent variables explanatory variables area area of living 1= respondent belongs to urban area 0= otherwise negative age age of respondent a continuous variable negative edu education of respondent in completed years a continuous variable negative ms marital status of respondent 1= married 0= otherwise negative jf family structure of respondent 1= joint family 0= nuclear family negative hsize size of the family a continuous variable positive dprat dependency ratio on earners of the family a continuous variable positive ast total assets of respondent a continuous variable negative 3. results and discussions the results of the study are measured by using descriptive statistics, correlation and logistic regression analysis. the results of descriptive statistics are given in table 2. the results show that 50 percent sample was taken from the respondents in which there exists the transmission of poverty from one generation to next generation. 30 percent sample was collected from urban area. average age of respondents is 44 years approximately and they are hardly middle pass. 53 percent respondents were married while 40 percent were living in joint family system. average household size was 7 members and the value of dependency ratio is 0.6. average asset holding is 4.6 million rupees in the selected area. review of economics and development studies, vol. 7 (1) 2021, 91-99 95 table 2: descriptive statistics for checking multicollinearity, correlation matrix is formed which is given in table 3. it suggests that there is no multicollinearity between the explanatory variables as the value of correlation coefficient is less than 0.90. table 3: correlation matrix variables ms area age edu hsize jf ast dprat ms 1.00 area -0.11 1.00 age 0.03 -0.10 1.00 edu 0.47 0.13 -0.15 1.00 hsize -0.01 -0.04 0.39 -0.20 1.00 jf -0.10 -0.02 0.27 -0.05 0.49 1.00 ast 0.24 -0.10 0.16 0.24 0.20 0.12 1.00 dprat -0.39 -0.07 -0.14 -0.32 -0.10 -0.14 -0.33 1.00 source: estimated using e-views 9 statistical software. the results of logistic regression analysis are reported in table 4. in which, first column shows the names of variables, second column is marginal effects, third column is about coefficients, fourth, fifth and sixth are respectively standard errors, z-statistics and probability values. the results portray that the people living in urban area may be able to improve its economic status and they will not remain poor as their forefathers were poor. it is evident with the negative sign associated with area variable with statistically significant probability value. on the average, respondents of urban area may be 1.34 percent more capable of improving its economic status through struggle & hard work and they will not allow the poverty to transmit to their heirs. the similar findings have been captured by baulch et al. (2002), papanastasiou et al. (2010), castaneda et al. (1999), harper et al. (2003). as the people are becoming young so they may be able to get good earning opportunities, they can be more experienced, skilled so they can earn higher level of income. in this scenario, age is to reduce intergenerational transmission of poverty as negative sign associated with age of the respondent variable. there is 5 percent likelihood that poverty will not be transmitted into next generation as the respondent is becoming one year old on the average. the same conclusion has also been found by papanastasiou et al. (2010), bellani et al. (2013), sato et al. (2008). variables mean maximum minimum intergenerational transmission of poverty 0.5 1 0 area 0.3 1 0 age 44.11 72 23 education 6.27 16 1 marital status 0.53 1 0 joint family 0.4 1 0 household size 6.74 22 2 dependency ratio 0.6 1 0 assets 4664827 72200000 0 review of economics and development studies, vol. 7 (1) 2021, 91-99 96 concerning to education which is the most important variable of the current debate, it postulates that education is one of the major tool of getting higher level of economic status in the society. due to higher education level, the respondent may become self-sufficient and educated person can stop the poverty to be transmitted into the next generation. on the average, there are 45 percent chances that poverty will not be transmitted into next generation if respondent is one year highly qualified. these findings are associated with the findings of castaneda et al. (1999) and lam-duryea (1998). a married couple can have good economic status in the society if both are working professionally in the job market. their earning may reduce their poverty level and there are 60 percent chances that poverty will not be transmitted into the next generation. they both can give good future to their children and heirs. these results are similar to pakpahan et al. (2009), davia et al. (2017), ludwig et al. (2006). if families are living in joint family setup, so they can have good economic status. people living in joint family setup may be able to reduce their poverty and there are 97 percent chances that poverty will not be transmitted into the next generation. they both can give good future to their children and heirs. these findings are consistent with the sato et al. (2008), bellani et al. (2008), moore et al. (2001), papanastasiou et al. (2010). on the other side, families with large family size need to struggle hard and if they can’t meet the required expenditure for their economic needs will be poorly affected. people having large family size may not be able to reduce their poverty and there are 19 percent chances that poverty will be transmitted into the next generation if household size increases by one number [wolfe et al. (1982)]. table 4: binary logistic estimation dependent variable: intergenerational transmission of poverty method: ml binary logit econometric analysis variable marginal effects coefficient standard error z-statistic probability constant 13.05 5.54 2.36 0.02 area -1.34 -5.38 1.99 -2.70 0.01 age -0.05 -0.18 0.09 -1.96 0.05 educ -0.45 -1.79 0.48 -3.70 0.00 ms -0.60 -2.39 1.17 -2.04 0.04 jf -0.97 -3.90 1.82 -2.14 0.03 housize 0.19 0.75 0.35 2.18 0.03 depratio 2.46 9.83 3.58 2.74 0.01 assets -0.75 -2.99 1.08 -2.76 0.01 mcfadden r-squared 0.93 mean dependent var. 0.50 lr statistic 389.17 prob. (lr statistic) 0.00 source: estimated using e-views 9 statistical software dependency ratio is having similar effect like household size with positive coefficient value. this variable is statistically significant denoting that there are high chances of transmitting poverty from one generation to next generation due to high dependency ratio. during high dependency ratio, people can’t save their resources. [baulch et al. (2002), lawson et al. (2006) papanastasiou et al. (2010), corcoran et al. (1985), mckay et al. (2003), khawaja (2003)]. assets are also statistically significant with negative coefficient value showing that there are 75 percent review of economics and development studies, vol. 7 (1) 2021, 91-99 97 more chances that poverty will not be transmitted into next generation if assets increase by 1 million. respondents who have more assets, they can give a better life to their heirs [kabeer et al. (2009), cooper et al. (2012), bhargava (2003), harper et al. (2003), khawaja (2003), corcoran (1995), mckay et al. (2003)]. 4. conclusion & policy recommendation the objective of this study is to examine the factors which are possible causes of intergenerational transmission of poverty in pakistan. considering the objectives, primary data has been taken from urban and rural areas of muzaffargarh (ُمظفّرگڑھ) district. simple random sampling technique is utilized for the collection of data through interviews and questionnaire. total 301 respondents were included in the sample in which 150 respondents were evident of intergenerational transmission of poverty (whose forefathers were poor and heirs are also poor). 151 respondents are not evident of intergenerational transmission of poverty (whose forefathers were poor but heirs are not poor). poverty is measured through per capita income method based on national poverty line of pakistan 2020. analysis of the study is done by descriptive statistics and correlation at intermediate level and logistic regression method is applied to see the relationship between the variables. in this study, the dependent variable is intergenerational transmission of poverty while area, age, education, household size, dependency ratio, assets, marital status and joint family are taken as explanatory variables. the results of logistic regression show that there will be no intergenerational transmission of poverty (poverty will not transmit from one generation to another generation) as people are living in urban area, they are becoming more experienced, they are becoming educated, they are having good assets value, they are married and they are living in joint family system. there will be transmission of poverty from one generation to another generation if household size increases and dependency ratio increases in pakistan. on the basis of results, it may be suggested that there should be promotion of free education throughout the pakistan especially in rural areas. in rural areas there are few earning opportunities due to this poverty transmits from generation to generation in rural areas. it is suggested that earning opportunities should be introduced in rural areas of pakistan. references addae-korankye, a. 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(2019). research on the intergenerational transmission of poverty in rural china based on sustainable livelihood analysis framework: a case study of six poverty‐stricken counties. sustainability, 11(8), 23-41. review of economics and development studies vol. 5, no 3, 2019 551 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads emotional instability, employees work outcomes among academia: compulsory citizenship behavior and leadership style as moderators 1 zara hayat, 2 iram batool, 3 sahar hayat, 4 uzma amin 1 department of applied psychology, bahauddin zakariya university multan, pakistan 2 department of applied psychology, bahauddin zakariya university multan, pakistan: i.batool@bzu.edu.pk 3 department of business administration, nfc-iet multan, pakistan 4 department of applied psychology, bahauddin zakariya university multan, pakistan article details abstract history revised format: 30 june 2019 available online: 31 july 2019 nowadays employees work outcomes is the primary concern of academia of higher education. hence, to understand this perspective the current study has examined the impact of emotional instability on employees work outcomes (workaholism, organizational citizenship behavior and burnout). this study also examined the moderating role of compulsory citizenship behavior and transactional and transformational leadership styles. sample of the study was faculty members of public and private universities. finding of the study showed that there was negative and significant relationship between emotional instability, workaholism and organizational citizenship behavior whereas, there was positive and significant relationship between emotional instability and burnout. further results demonstrated that transactional and transformational leadership play moderating role in relation to emotional instability and workaholism. nevertheless, this study will provide insight to develop policies to lowers the level of burnout, and will also help administrators to implement such leadership style that decrease emotional instability and raise performance. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords emotional instability, burnout, transformational leadership, transactional leadership, compulsory citizenship behavior jel classification: m12, m54 corresponding author’s email address: i.batool@bzu.edu.pk recommended citation: hayat, z., batool, i., hayat, s. and amin, u. (2019). emotional instability, employees work outcomes among academia: compulsory citizenship behavior and leadership style as moderators. review of economics and development studies, 5 (3), 551-562 doi: 10.26710/reads.v5i3.573 1. introduction work is determined and worthwhile action, which people perform to accomplish and achieve psychological and physical demands. however, different feelings and emotions generated by work varies, as some perceive work as compulsion (morin, 2004) and some view work as a positive feelings (rothmann, 2003). hence, work has both negative and positive impact on employees (berg, 2006). over few decades, working environment has been changed remarkably (rothmann, mostert and strydom, 2006; worrall, mather and cooper, 2016). in this era of growing global economy the workers are demanded to invest more energy and time in work, which in return has decreased career opportunity and job security (cooper, dewe and o’ driscoll, 2001). the educational and academic territory is considered as one of the service providing area. many researches have indicated that instructors experience high level of burnout, emotional shakiness and those http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 552 who are neurotics, have less interpersonal relations and positive association with burnout (cano gracia et al., 2005; zimmerman 2008). burnout is three-dimensional syndrome comprising mental, physical and emotional dimension as well as negative attitude towards career, people and life (akbaba, 2014). burnout comprises feelings of hopelessness, chronic fatigue, low self-esteem, low productivity and exhaustion (salvagioni et al., 2017). according to mathison (2015), the load and stress of working in teaching domain has been progressively increased in recent years which in turn has put continuous pressure on instructors. anderson (2006) concluded that instructors during probation period experiences increased burnout due to their concerns about career building and heavy workloads. the term “workaholism” is used with different synonyms such as heavy investment at work (golden, 2014), work craving (wojdylo et al., 2017) and excessive working (andreassen, 2013). initially this concept was thought to have correspondence with alcoholism as in both there are pattern of inappropriate obsession or reliance. however, the concept of workaholism grow with passage of time, some researchers perceived workaholism from individual characteristics wise and mentioned them as depressed unhappy, neurotic catastrophic figure who do not fulfil their job obligation, and creates trials from idea of co-workers (naughton, 1987). according to kinman (1998), workaholism is a result of nature and policies of organization and one’s zest to do work. broadly, the academic staff of universities face high work demands and low support. it is important to optimize workplace for optimizing the wellbeing of employees and their families. due to intensive competition and globalization education sector are encountering the consequences of burnout (mujtaba and cartney, 2008). professional burnout and stress has been examined in this sector and strategies to generate healthier work environment for successful job performance has been suggested (sanford kaila, 2017; king and haar (2017). an organizational environment reinforces workaholic behavior and promotes work-addicts (johnstone and johnston, 2005). universities seem to have various conditions linked with both poor psychological health and workaholic behavior (winefield et al., 2014; samad et al., 2015). the changes in education sector have intense impact on working environment and organizational culture in modern decades (shattock, 2013). emotional instability (neuroticism) is defined an enduring and distinctive pattern, a tendency to view world as an alarming place, to experience unpleasant emotions such as anxiety, depression, anger, impulsivity, high susceptibility to stress and impulsivity (djurkovic,2006; levine, 2018) and to put oneself in a situation that foster negative effect (spurk et al., 2016). the term “emotional instability” is a part of ffm and is generally termed as “big five” (costa and mccrae, 2017). emotionally unstable personalities experienced less life satisfaction and poor subjective wellbeing (olesen, thomsen and o’ toole, 2015). literature support about relationship between workaholism and emotional instability (shkoler, rabenu, and tziner, 2017; clark et al., 2010; schaufeli, 2016). over the past few decades, the issue of leadership has been matter of concern. however, the debate of effective leader and leadership has been a hot topic in today’s world (bolden, 2004). leadership is broadly discussed concept based on the success of any institution, organization and nation (nei et al., 2014; harper et al., 2015). no single definition of leadership exists in the literature, chemers (2014), described leadership as a process in which leaders influence group of followers to achieve objectives and to provide coherent or cohesive direction. similarly, nei et al (2014), viewed leadership as an attempt of leaders to influence others for achieving specific goals. the leadership concept is still in process of refinement (goleman, boyatzis and mckee, 2013) and this refinement had led towards the development of transformational and transactional leadership style (bass and avolio, 1994). robert (2014), states that transformational leadership triggers, a positive change in worker’s attitude towards the goals and strategies of the organization. bass (1995), outline four features of transformational leaders that enable them to trigger motivation in others and these features are im (inspirational motivation), is (intellectual stimulation), if (idealized influence) and ic (individualized consideration). whereas, transactional leadership is a process of exchange in which leader and followers engage to attain goals (hunter et al., 2013). zhang (2015) proposed that transactional leadership is pivotal for the effective management as the effectiveness ultimately leads towards the success of any institution. indeed, leadership style is the attitude of the leaders towards their subordinates and the behavior they exhibit on daily basis through interaction (naseer et al., 2016). a leader plays important in both positive and negative behavior. organizational citizenship behavior (ocb) has been considered, as beneficial and valuable for organization (knippenberg et al., 2015). since its conception, it has been area of research and interest for many researchers and scholars (chiang et al., 2012). initially ocb was considered as an employee’s extra-role behavior at the workplace review of economics and development studies vol. 5, no 3, 2019 553 (smith et al., 1983). later researchers redefined the idea, referring organizational citizenship behavior as a discretionary workplace behavior that is a part of the routine duties and which assist individuals psychological and social setting (cem ersoy et al., 2011; zeinabadi and salehi, 2011). alfonso et al. (2016) outline two categories of ocb that are ocb-i (in which behavior is directed towards people) and ocb-b (in which behavior is directed towards organization). ocb-i comprises individuals who help their colleagues who are habitually absent from work and take personal interest in other employees. ocb-b comprises individuals who work for the betterment of the organization. (alfonso, zenasni, hodzic and ripoll, 2016). some researchers have found that organizational citizenship behavior occurs with the supervisor and organizational support (chiang et al., 2012; van knippenberg et al., 2015). indeed, employees ocb have been recognized as a valuable behavior for organizations and societies (dai et al., 2013; podsakoff, 2013; somech et al., 2013). research conducted by kumar et al. (2009) indicates that neuroticism (emotional instability) has no effect on organizational citizenship behavior. the term “compulsory citizenship behavior” originates from the reexamination of ocb (organizational citizenship behavior). it represents the more negative side of the extra-role behavior at the workplace (porpara, 1989). vigoda gadot (2006), coined the term “citizenship behavior”. compulsory citizenship behavior has been described as workers violation of their readiness to display extra-roles that are conducted due to some organizational pressure or occupational factors (vigoda-gadot, 2007; bolino et al., 2010; zhao et al., 2014). vigoda examines that expectation to display extra-role may put pressure on employee’s and make employee’s believe that they have to display organizational citizenship behavior to create a positive image in the workplace (yam et al., 2017). compulsory citizenship behavior is an enforced behavior in which workers take situational factor such as implicit oppression and suppression from authorities unwillingly and are vulnerable to it (vigodagadot, 2007; bolino et al., 2015). compulsory citizenship behavior may deteriorate the employee’s psychological resources cause a person to encounter negative feelings and leads toward negative attitude and behavior at work. (peng et al., 2012). therefore, compulsory citizenship behavior reflects an instability between workers behavior and attitude. bergeron (2007), noted that compulsory citizenship behavior markedly reduced job satisfaction, increased one’s intention of leaving the organization and cause work-family conflict (bolino, turnely and nichoff, 2004). when destructive leadership signals stress (wong et al., 2018; liu and wang, 2013), the subordinates feel pressure of insufficient resources, therefore exhibit negative behavior such as ccb at workplace (zang et al., 2014). some studies have found that compulsory citizenship behavior reduce organizational performance and organizational effectiveness and increase workers intention to leave the organization, organizational politics and job stress (vigoda-gadot, 2007). the purpose of the present study was to examine emotional instability, employees’ work outcomes (i.e. workaholism, organizational citizenship behavior and burnout) among academia. furthermore it was aimed to explore the moderating effects of compulsory citizenship behavior and leadership styles (transformational and transactional). 2. objectives of the study a) to access the association between emotional instability, workaholism, organizational citizenship behavior and burnout b) to inspect the moderating role of leadership style and compulsory citizenship in relationship of emotional instability, organizational citizenship behavior and workaholism and in relationship of emotional instability and burnout review of economics and development studies vol. 5, no 3, 2019 554 3. conceptual framework model 1 (a) model 1 (b) 3.1 method 3.1.1 participants teachers working in public and private sectors have been taken for the current study. data has been collected from different cities of pakistan (i-e multan, pakpattan, lahore, faisalabad and islamabad). convenient sampling technique was utilized in the current study which means to select those respondents that are easily accessible in order to reach sample size. participants who have omitted any response were not included in the study. the aim of the study was to recruit at least 400 participants. five-hundred self-report questionnaires were distributed out of which 472 were returned. due to missing values, 72 questionnaires have been dropped out. 3.1.2 instruments instruments are being used in the current study, are as follow a) big five-personality inventory b) organizational citizenship behavior scale c) short-version burnout questionnaire d) workaholism battery (work-bat) e) compulsory citizenship behavior scale f) leadership style questionnaire 3.1.3 big five-personality inventory scale devised by john and srivastave (1999) has been applied to measure emotional instability. the inventory comprises forty-four items. however, emotional instability has been measure using eight items from the inventory (i-e 4, 14, 19, 29, 29, 39) and three-items are reversed coded (i-e 9, 24, 34). each participants were supposed to review of economics and development studies vol. 5, no 3, 2019 555 specify the degree of disagreement and agreement for every statement. likert-type scale has been used (strongly disagree “5” to strongly agree “1”). 3.1.4 organizational citizenship behavior to measure organizational citizenship behavior scale of smith et al (1983) has been used. eight items have been adopted from their scale of which three item were reversed-scored (i-e 3, 4 and 7). 3.1.5 shorter-version burnout questionnaire burnout scale by ayala malach pines (2005) has been used by using ten items. this scale access the individual’s level of mental and physical exhaustion. 3.1.6 workaholism battery (work-bat) workaholism battery proposed by spence and robbins (1992) has been used to access participant’s degree of workaholism. this battery consist of twenty five items which is divided into 3 sub-scales a) work drive (3, 5, 14, 18, 20, 22 and 25) b) work enjoyment (2, 4, 7, 9, 10, 11, 16, 17) c) work involvement (1, 6, 8, 12, 13, 15, 21 and 24) items no. 1, 6, 8 and 11 are reversed coded . 3.1.7 compulsory citizenship behavior scale compulsory citizenship behavior was assessed by vigoda-gadot (2007) scale. it is five likert-type item scale. “the management in my organization put pressure on employees to engage in extra-role work activities beyond their formal job tasks” is an example of item measuring compulsory citizenship behavior. 3.1.8 leadership style questionnaire transformational and transactional leadership style has been measured by oterkiil and ertesvag (2012). the questionnaire consists of eight likert-type items distributed along two sub-scales: transactional style (1, 2, 3, 4) and transformational style (5, 6, 7, 8). 3.1.9 procedure participants selected for the current study were given questionnaires at their work place. instructions were being communicated to teachers on how to fill the survey questionnaire. demographic sheet and informed consent were being attached with the booklet. questions in other section were being coded to analyze data using spss and smart-pls version 3. 3.2 data analysis 3.2.1 reliability analysis of the construct scale firstly, the internal consistency among the items was measured. internal consistency was measured by cronbach alpha having value 0 to 1. result of the study demonstrates high internal consistency of the instrument. table 1: cronbach alpha reliability of scales scales items sample cronbach alpha emotional instability 08 400 0.722 organizational citizenship behavior burnout workaholism leadership compulsory citizenship behavior 08 10 25 08 05 400 400 400 400 400 0.750 0.914 0.824 0.885 0.811 review of economics and development studies vol. 5, no 3, 2019 556 3.2.2 descriptive information of the participants the descriptive information of the respondent demographic characteristics showed that about 60% of the respondent were males. mostly participant’s age was between 24 to 32 years. majority of the participants were holding m.phil degree. out of 400 respondents, approximately 58% were having work experience between one to nine years, 52% respondents were lecturer and 88% were permanent employees. approximately 60% respondents in this survey were government employees. table 2: two-tailed correlation among variables variables ei ocb bo wd we wi ts tf ccb ei ocb -.135** bo .519** -.464 wd -.114* .499** .076 we -.441 .511** -.130** .573** wi -.265** .503** -.032 .597** .497** ts .085 .271** -.056 .254** .243** .219** tf .052 .322** -.094 .263** .307** .209** .658** ccb .334** -.117* .459** .072 .007 .048 .128* .057 *p<0.05, **p<0.01, ***p<0.001 3.2.3 hypothesis testing and direct effect in order to test hypothesis and to determine direct association between the variables including t-value and path coefficient structure model of smart (pls) has been utilized. this study utilized bootstrapping resampling for 400 observation. the t-value should be > than 1.64 for significant relationship. the central theme of the present study was to determine model evaluation by analyzing the direct association and to verify the proposed assumed relationship of the variable with the help of structural model. however in the current study (05) hypothesis have direct relationship were analyzed, out of which (04) were supported and only (1) was not supported. moreover, figure (1) demonstrates direct effect. figure 1: structure model of relationship figure (1) fully explains and highlight the direct effect of each variable on the dependent variable. review of economics and development studies vol. 5, no 3, 2019 557 table 3: summary of direct hypothesis testing direct hypothesis beta sd t stats p values interpretation ei→wh -0.390 0.050 8.100 0.000 supported ei→wd -0.442 0.121 3.615 0.000 supported ei→we -0.483 0.121 3.921 0.000 supported ei→wi -0.426 0.112 3.823 0.000 supported ei→ocb -0.263 0.084 3.145 0.002 supported ei→bo 0.386 0.289 2.991 0.022 supported wh→ocb 0.412 0.050 8.495 0.000 supported wd→ocb 0.125 0.070 1.786 0.074 supported we→ocb 0.242 0.058 4.140 0.000 supported we→ocb 0.221 0.053 4.186 0.000 supported wh→bo -0.100 0.119 0.911 0.036 not supported wd→bo 0.053 0.097 0.551 0.582 not supported we→bo -0.165 0.097 1.697 0.090 supported wi→bo -0.241 0.088 1.605 0.030 not supported in order to test hypothesis and to determine the significance of path coefficient, this study utilized bootstrapping resampling method. in the table (3), the results demonstrated that there is negative relationship between emotional instability and workaholism and its dimension (work drive, enjoyment, involvement). the result came out to be significant because the level of significance is 0.000. the result revealed that there is a negative relationship between emotional instability and organizational citizenship behavior and it has been found that there is positive association between emotional instability and burnout. whereas, dimension of workaholism is also negatively associated with organizational citizenship behavior and work drive and involvement has no direct relationship with burnout. 3.2.4 moderation analysis ramaya et al. (2011), demonstrate that the analysis of moderation explains that how the variable of moderation effect the strength of relation between dependent and independent variable. moreover, the moderator variable is added if there is a weak link between independent and dependent variable. in this study smart pls (3.0) has been utilized by adding interaction term in the model. moreover, before adding interaction term r-square will also be examined. additionally product indicator approach has been also employed. lastly, this study examine moderating effect of transactional and transformation leadership style on the association between emotional instability and workaholism. the moderating role of compulsory citizenship behavior has been also examined among relation of workaholism and organizational citizenship behavior and in relationship of workaholism and burnout. moderation result moderation hypothesis mean sd t-value p-value interpretation ts moderator→ wh 0.181 0.037 4.850 0.000 moderation tf moderator→ wh -0.144 0.038 3.730 0.002 moderation ccb moderator→ ocb 0.218 0.063 0.341 0.732 no moderation ccb moderator → bo 0.087 0.095 0.093 0.351 no moderation the result indicated that transactional leadership strengthen the relationship of emotional instability and workaholism whereas, transformational leadership style weaken the relation of emotional instability which defend the hypothesis. the result indicated that compulsory citizenship behavior has no moderating role in relationship of workaholism and organizational citizenship behavior and it does not effects the strength of relationship of workaholism and burnout. review of economics and development studies vol. 5, no 3, 2019 558 4. discussion firstly, it was hypothesized that emotional instability is associated with workaholism and its dimension (drive, enjoyment and involvement). the results of our study indicated that emotional instability is negatively associated with workaholism and its dimension. the emotional unstable personalities usually experience negative emotion, less enjoyment and are less engaged in their work. so many researchers have concluded that emotional instability is positively associated with all dimension of workaholism (or shkoler et al., 2017; souckova et al., 2014). as it revealed by many researchers work has the potential to elevate negative emotion (ng et al., 2007). therefore, working can be considered as mood modifier. workaholism is discover as a personality trait by many researchers. so the higher score on traits such as neuroticism, leads to workaholic behavior (andreassen et al., 2012; burke et al., 2006; clark et al., 2010) according to shkoler et al. (2017), the individuals who are more emotional instable are more work driven. secondly, it was assumed that emotional instability is associated with organizational citizenship behavior. results indicated that emotional instability is negatively associated with organizational citizenship behavior. it means that academics who are emotional unstable lacks voluntarily commitment. the finding of our study are in line with study conducted by jabbar et al. (2012) and youngkeun et al. (2013). all these researchers found significant and negative relationship between emotional instability and organizational citizenship behavior thirdly, it was hypothesized that emotional instability and burnout is associated with burnout. results revealed that emotional instability is positively associated with burnout. it means individuals who are emotionally unstable are easily frustrated at the workplace. the finding of our study is supported by study of kokkinoss (2007), who found that neuroticism is positive predictor of burnout. the perfectionist workaholics are less adaptive and display more maladaptive behavior. many studies of work domains support, this supposition that emotional instability is associated with all the dimension of burnout (hill and curran, 2016). fourthly, it was assumed that workaholism and its dimension are associated with organization citizenship behavior. the result unveiled that workaholism and its dimension are positively associated with organizational citizenship behavior. this indicates that employees, who are highly driven, full involve in their work and enjoy their work shows high level of organizational citizenship behavior. this supposition is supported by the study of ali et al. (2012) who found meaningful and positive relationship between organizational citizenship behavior and dimensions of workaholism. another assumption was that workaholism and its dimension are associated with burnout. findings showed that workaholism and its dimensions have no relationship with burnout except work enjoyment has negative relationship with burnout. these findings were not consistent with many researches, which examined the association between workaholism and burnout. according to marcello, workaholism is a predictor of burnout. (marcello et al., 2018) out of three dimension of workaholism, work drive is considered as strongest predictor of burnout (goncalves, 2017). as in pakistani perspective, employees work only for their job security and the fulfillment of essential needs. they are less committed and disorganized individuals who only work to achieve power (oates, 1970). therefore, work drive and involvement has no relationship with burnout. transformational and transactional leadership styles moderate the relation of emotional instability and workaholism. results suggested that when transformation leadership is high it will reduce negative relation of emotional instability and workaholism. present study also hypothesized that compulsory citizenship behavior moderate the relation of workaholism and organizational citizenship behavior and the relation of workaholism and burnout. findings does not support this assumption and suggested that compulsory citizenship behavior has no moderating role in relation of workaholism and organizational citizenship behavior and in relation of workaholism and burnout nevertheless, all workers are not passionate to display voluntarily commitment and may feel pressure to conduct organizational citizenship behavior. according to bolino et al. (2010), citizenship pressure is particular job requirement due to which employees feel pressure to perform ocbs. vigoda-gadot (2006; 2007) states that the voluntary nature of organizational citizenship behavior may change when employees face external pressure and ocb become a requirement. the individual who are highly driven enjoy their work and involved in their work review of economics and development studies vol. 5, no 3, 2019 559 display voluntarily commitment to their organization so external pressure does not affect their committed behavior (ali et al., 2012). 5. practical implication the individual differences have ample influence on work (the amount of time and energy invested at work). therefore, employees’ related decision should be accounted. the management should give more attention to impact and interaction of external and internal aspects as these highly influence organizational practices. at macro level, organization promotes long working hours and expect their employees to spend time at work than formal job obligation for the enhancement of their organization. the appreciation can be shown by organization in numerous ways. for example according to shimazu et al. (2015), employees who work for longer hours are considered as role models or heros. such working environment may activates work drive, therefore organization should consider some intervention. so, employees get more involved, extracting pleasure from their work and overcoming negative consequences. in order to maintain and build inter-personal relation with worker, management plays a crucial role. inter-personal relationship with worker aid to exalt employee’s enjoyment and to elevate their job performance. the results of the current study support the contention and stressed on the importance of the management (transformational leadership style) in contributing towards workers experience at the workplace. in fact, managerial skills lead to the development of good interpersonal relations between the boss and workers. 6. conclusion this study investigates the relationship between variables such as emotional instability, workaholism, organizational citizenship behavior, burnout, leadership style and compulsory citizenship behavior. the result of the study indicates that emotional instability has direct relationship with organizational citizenship behavior and burnout. moreover, the study also reveals that workaholism play mediating role in relation of emotional instability and organizational citizenship behavior. further, the study also shows that transformational and transactional leadership style plays a moderating in relation of workaholism and organizational citizenship behavior. references akbaba, s. 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(2008). understanding the impact of personality traits on individuals' turnover decisions: a meta‐analytic path model. personnel psychology, 61(2), 309-348. review of economics and development studies, vol. 6 (2) 2020, 471-484 471 an empirical analysis of organizational performance of construction companies in pakistan through mediating role of conflict management effectiveness a haleema tariq, b muqqadas rehman a department phd scholar, superior university, lahore, pakistan email:haleematariq78@gmail.com b associate professor, hailey college of commerce, university of the punjab, lahore article details abstract history: accepted 27 may 2020 available online 15 june 2020 this paper aims to examine the impact of organizational factors and verify mediating role of conflict management effectiveness on perceived performance of registered construction companies in pakistan. the study adopts a survey research design using a well-structured questionnaire of 450 employees from construction companies located in lahore and karachi. the construction industry is characterized by performance setbacks for decades. descriptive statistics and mediation analysis were employed to analyze the conceptual model. the research paper concludes that distortions in reduced workforce productivity and relationship conflicts should be overcome by capable professional & administrative services. the analysis depicts that socio-economic and political factors play a significant role to maintain the quality in local construction industry. the findings reveal that performance of construction companies is significantly related to internal factors i.e. workforce productivity, decentralization, perceived organizational politics and relationship conflict. the study provides guidelines to organizational decision-makers and government policy-makers for public reforms in infrastructure to improve their output. the present study was undertaken to provide new horizons and advance understanding on organizational performance (op) of construction companies in pakistan. the most significant part of this study is the comprehensive five-factor organizational performance model designed to test mediation among variables using partial least square structural equation modelling (sem). © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: conflict management, organizational performance, construction, relationship conflict, workforce productivity jel classification: d74, d23, d29 doi: 10.47067/reads.v6i2.224 corresponding author’s email address: haleematariq78@gmail.com 1. introduction economic globalization is embarked with an interdependent market which allows companies to transcend traditional national boundaries for conducting business overseas. the economy of developed review of economics and development studies, vol. 6 (2) 2020, 471-484 472 and developing country consists of diverse sectors such as trade, industry, commerce and infrastructure i.e. construction. in international construction market, companies often adopt diversification as a strategy for risk management and growth. it is noted that research is scarce on the reasons of failure of performance of this sector. although some of the projects in the construction industry are in pipeline or have failed. even then, the construction companies are struggling to achieve desired results (schwartz & deber, 2016). the volume of construction projects including roads, bridges and buildings and the complexities are expanding day by day (yesil & kaya, 2013). there is a rising demand by the clients to enhance quality construction in projects. the construction companies are keen to adopt quality standards to be competitive and to minimize the relative project costs and increase overall performance (yang, 2017). in today’s world, to address regular developmental challenges, infrastructure plays a key role as transformational path. environmental changes, swift urbanization, social stability and natural disasters are biggest issues today (spano, 2014). suitable standards are yet to achieve in construction industry because countries will not be able to meet fundamental needs without an infrastructure facilitating inclusive and green expansion (hawke, 2012). the construction sector keeps a vital position due to employment opportunities, infrastructure, shelter i.e. socio-economic objectives and its productivity. being multifaceted in nature, the construction industry is executed by consultants, stakeholders, contractors, regulators, clients, builders and professionals (szentes, 2018). the construction industry is among the highly unbalanced sectors due to uncertainty, project-specific demand and unpredictable demand cycles. contractors are the significant part of project success. the construction industry is contemplated to be a supportive and significant pillar of the business environment in pakistan. there are deficiencies in performance mechanisms of construction firms which lead to instruction of hostile working environment and adopting sanctioning orientation which is detrimental to performance of construction sector (das & kapil, 2015). due to involvement of numerous parties in construction firms, the conflict management has been discussed a lot in recent literature (yang, brennan & wilkinson, 2014). in delivery of services by public and private administration in a country like pakistan, conflict is a constant especially in this sector. the conflicts arise in various forms such as conflicting interests, diverse views, varying opinions (spekle & verbeteen, 2014). conflicts arise among companies’ top administration, professionals, employees, labor unions and clients. the company employees have disagreements, different attitudes, opinions and views on service delivery. to be able to efficiently response to conflicts, the administration and management need to learn conflict management effectiveness. there is a misconception that conflicts are always negative but the proper handling of conflicts can give positive outcomes. so conflicts are both positive and negative (kossova & sheluntcova, 2016). hence it is pragmatic to examine the sustainability in organizational performance of construction companies due to internal organizational factors (opute, 2014). recent few years have witnessed a growing interest by scholars to consider workforce productivity and internal politics to manage construction sector in contrast with traditional focus on relationship conflict and conflict management. 2. statement of the problem the study intends to examine the impact of internal organizational factors and mediating role of conflict management effectiveness on the perceived performance of construction companies in pakistan. the growth and development of a country is led by infrastructure development of that country (harty & leiringer, 2017). 3. purpose of study http://www.emeraldinsight.com/action/dosearch?contribstored=hawke%2c+l http://www.emeraldinsight.com/action/dosearch?contribstored=yang%2c+y http://www.emeraldinsight.com/action/dosearch?contribstored=brennan%2c+i http://www.emeraldinsight.com/action/dosearch?contribstored=wilkinson%2c+m review of economics and development studies, vol. 6 (2) 2020, 471-484 473 the main purpose of this study is to investigate the impact of critical organizational factors on the perceived performance of construction companies in pakistan and to determine the role of mediating variable of conflict management effectiveness. 4. research objectives this paper is to investigate the impact of factors of organizational performance of construction companies in pakistan by developing a conceptual model, to verify the mediating role of conflict management effectiveness and hence to establish the understanding on perceived performance of construction companies. 5. research questions  what is the relationship of organizational factors with organizational performance?  what is the impact of mediating variable of conflict management effectiveness in organizational performance of construction companies?  to what extent the critical factors play successful role in performance of construction companies? 6. significance of the study the study contributes in research and practice by identifying reasons behind underperformance of construction companies in pakistan. this study bridges gap identified and adds knowledge in realm of conflict management by examining mediating role of conflict management effectiveness (angogo, 2016). this research is a value-addition for practitioners, academicians, policy-makers and researchers in formulating policies for infrastructure. 7. limitations of the study the study is limited only to selected sample due to lack of time and resources. the study might be expanded to other industries by taking macro-economic and country-specific characteristics for more meaningful implications. 8. literature review extensive literature review was deployed to generate critical factors believed to be influencers of organizational performance of construction companies. there is paucity of research and empirical work in construction field on the causes and effects of conflict (haas & yorio, 2016). maiti and choi (2018) explained ‘conflict’ and ‘dispute’ are two distinct notions. intragroup conflicts have three distinct types: relationship, process and task conflicts. conflict is pandemic as it exists due to incompatibility of interests. sweet (2018) compared uk-based construction industry and chemical process industry. construction industry can have success due to considerable impact of conflicts. perrenoud (2018) explored the existence and management of types of intragroup conflicts in construction firms in sri lanka. semi-structured interviews were conducted with three distinct participants out of each team. results revealed that task conflicts put positive effect while both process and relationship conflicts tend to give disruptive influence on construction teams. szentes (2018) uncovered inconsistent results for effect of perceptions of organizational politics on job performance. the theoretical model was tested with data gathered from 505 supervisors and builders. the findings demonstrated that pop had a negative effect on job performance. harty and leiringer (2017) found that workforce diversification of global construction companies (gccs) are vivid in both geographical dispersal and business sectors. data were review of economics and development studies, vol. 6 (2) 2020, 471-484 474 gleaned from capital and bloomberg. global companies tend to diversify to geographical markets with institutional environment. larger gccs prefer to diversify workforce than their smaller counterparts. companies are more prudential in venturing into new business sectors and market demands drive companies to diversify to various geographical markets. the researches provide a solid point of departure for future theoretical and empirical studies and valuable insights into diversification patterns of gccs. lomore and lim, (2017) examined the elements of organizational culture of international contractors through questionnaire survey and showed that malaysian contractors are tenderfoot in international markets. it was found that the most dominant element of organizational culture is decentralization and client orientation. this implies that there is lack of competitive advantage in international trade for international contractors. maling (2017) found in construction industry, the term organizational performance is rapidly under debate as clients, employee and communities expect companies to demonstrate good performance financially and socially in new zealand and australia. bournakis and tsoukis (2016) depicted that the internal organizational politics as a destructive element. during last five years, performance of construction companies as a discipline is growing in depth. millar and doherty (2016) investigated that in context of private construction firms, empirical researches regarding the effects of planning had covered the financial measures of performance like sales growth and profits. the other dimensions cover corporate social responsibility and employee welfare (sole, 2009). kossova and sheluntcova (2016) determined that private construction companies are more finance-driven than public construction firms which are politically driven. bobekova (2015) investigated that managers have to spend time to manage conflicts. conflict management secures equal importance to budgeting, strategic planning and decision makings. managers need to choose styles of conflict management (buschor, 2013). das and kapil (2015) scrutinized that often the statistics of local construction firms were unable for measuring performance regarding road and building projects. maximum workforce productivity levels were attained by commitment and satisfaction which ultimately lead to organizational performance. mehrad (2015) assessed that conflicts are mutual disagreements regarding task completion and relationship conflicts. the administrative strategies and decision-making bring about conflicts and power use. the organizational technology, deficient resources and heterogeneous goals provoke organizational conflicts. villmer (2015) verified that construction firms may outperform by involvement of stakeholders, executives, contractors, builders and workforce. the internal politics act as a barrier to stop the workforce productivity and creating a gap between top administration and lower management. evidences have proved that performance measurement models are required to estimate projects, delays, loopholes in performance, delaying tactics in public projects to gain financial benefits is common to observe. pang (2014) verified that project performance is directly associated to performance of construction companies. sulle (2014) elaborated that healthy employee relationships are one of the prerequisite for success of construction firms. construction firms are facing challenges regarding market focus, technology and size. evidences show that the decentralized organizational cultural is significantly vital for the betterment and restructuring of construction firms within government sector, successful development comes from opting for such measures (ogbeidi, 2012). piening (2013) verified performance of construction industry and found that various dimensions like technical efficiency are partially financial. this research mainly focuses to identify and scrutinize the factors affecting performance of construction companies in pakistan. http://www.emeraldinsight.com/action/dosearch?contribstored=sole%2c+f review of economics and development studies, vol. 6 (2) 2020, 471-484 475 9. hypotheses of the study: h1a: workforce productivity has significant positive relationship with perceptual conflict management effectiveness h1b: workforce productivity has significant positive relationship with perceived organizational performance h2a: decentralization has significant positive relationship with perceptual conflict management effectiveness. h2b: decentralization has significant positive relationship with perceived organizational performance. h3a: perceived organizational politics has significant negative relationship with perceptual conflict management effectiveness. h3b: perceived organizational politics has significant negative relationship with perceived organizational performance. h4a: relationship conflict has significant negative relationship with perceptual conflict management effectiveness. h4b: relationship conflict has significant negative relationship with perceived organizational performance. h5: conflict management effectiveness has significant positive relationship with perceived organizational performance. 10. research methodology 10.1 research design: this section draws attention on how research problem was examined based on hypotheses. this paper is quantitative in nature (bryman, 2012). this research has been conducted from construction companies registered with pakistan engineering council in pakistan specifically located in lahore and karachi having majority of companies. the quantitative approach was adopted by using survey questionnaire and primary data were gathered from professionals and employees of construction companies. initially a pilot study was carried out using a sample of 45 respondents. 10.2 sample & data collection procedure: a structured questionnaire is pre-existing measuring tool and suitably valid for study purpose. random sampling technique was employed for data collection. total 465 survey questionnaires were administered in, out of which 450 were duly filled in. the items of questionnaire were adopted by the studies of (rahim, 2002; mehrad, 2015). the questionnaires comprises of 36 items of measures of constructs with demographic profile of respondents on 5-point likert scale. review of economics and development studies, vol. 6 (2) 2020, 471-484 476 theoretical performance framework of the study 10.3 analyses & results table 4.1 : reliability analysis variables cronbach’s alpha no. of items workforce productivity 0.895 3 decentralization 0.880 3 perceived organizational politics 0.919 6 relationship conflict 0.906 4 conflict management effectiveness 0.861 15 perceived organizational performance 0.920 5 the cronbach alpha values of constructs are higher for the current sample showing the measures are internally consistent and reliable. table 4.2: descriptive statistics for the variables variables n minimum maximum mean std. dev workforce productivity 450 1.00 5.00 3.2141 1.3843 decentralization 450 1.00 5.00 3.4141 1.3505 perceived organizational politics 450 1.00 5.00 3.2152 1.2804 relationship conflict 450 1.00 5.00 3.0689 1.3579 conflict management effectiveness 450 1.00 5.00 3.2596 1.3789 organizational 450 1.00 5.00 3.4462 1.2784 review of economics and development studies, vol. 6 (2) 2020, 471-484 477 performance the descriptive statistics of mean values are overall average responses of majority of respondents. standard deviation values indicate dispersal of values from their respective average central point. data depicts lesser dispersions from their central point. table 4.3: confirmatory factor analysis (cfa) variables kmo & bartlett’s test sig. workforce productivity 0.750 .000 decentralization 0.745 .000 perceived organizational politics 0.910 .000 relationship conflict 0.847 .000 conflict management effectiveness 0.827 .000 organizational performance 0.894 .000 the factor analysis show kmo values are good being greater than 0.6. bartlett’s test has a null hypothesis of no correlation. above table proves the p-values are less than the 0.001 confirm the significant relationships among variables. table 4.4: correlation matrix wp dct rc pop cme op workforce productivity 1 decentralization 0.317** 1 .000 relationship conflict 0.224** 0.265** 1 .000 .000 perceived organizational politics 0.143** 0.348** 0.357** 1 .002 .000 .000 conflict management effectiveness 0.336** 0.435** 0.393** 0.431** 1 .000 .000 .000 .000 organizational performance 0.402** 0.366** 0.147** 0.302** 0.495** 1 .000 .000 .002 .000 .000 **correlation is significant at the 0.01 level (2-tailed) this matrix addresses research questions and depicts that all variables have highly significant and positive relationships with each other. review of economics and development studies, vol. 6 (2) 2020, 471-484 478 10.4 graphical output of conceptual model of study 10.5 structural assessment model assessment for theory building, this multivariate data analysis method is an optimal statistical tool which does not assume normality of data. on the basis of principal component, pls-sem is suitable statistical method (hair, hult, ringle, & sarstedt, 2017). the path coefficients and significance of estimated values is tested through this method (henseler, ringle, & sarstedt, 2012). table 4.5: construct reliabilty and convergent validity constructs composite reliability (cr) average variance explained (ave) cme 0.885 0.543 dct 0.926 0.806 op 0.940 0.758 pop 0937 0.714 rc 0.934 0.781 wp 0.935 0.827 the constructs supposed to be related, are actually related shown by values good enough for the data set. review of economics and development studies, vol. 6 (2) 2020, 471-484 479 table 4.6: collinearity statisitcs (vif) inner vif values constructs conflict management effectiveness perceived organizational performance conflict management effectiveness 1.549 decentralization 1.257 1.359 perceived organizational politics 1.245 1.338 relationship conflict 1.203 1.252 workforce productivity 1.137 1.195 vif values are below than cut off value 5 indicating a good sign of data free from multicollinearity issue. table 4.7 : discriminant validity heterotrait-monotrait ratio (htmt) latent variables cme dct op pop rc wp conflict management effectiveness 0.586 decentralization 0.450 0.898 perceived organizational performance 0.506 0.365 0.871 perceived organizational politics 0.426 0.348 0.302 0.845 relationship conflict 0.377 0.266 0.147 0.358 0.883 workforce productivity 0.349 0.316 0.404 0.143 0.222 0.909 the discriminant validity values are satisfactory. the table shows that the constructs which should haven’t relationship with each other, have no relationship. the values of discriminant validity also support reliability and internal consistency of measurement model. table 4.8: model fit summary fit summary saturated model estimated/default model srmr 0.048 0.048 nfi 0.701 0.701 the values of both default model and saturated model are equal. standardized root mean square residual (srmr) is an absolute measure of fit = 0.048. for a good fit model, it is suggested that srmr value of residual and error should be less than cut off value 0.05. for normed fit index (nfi), nfi value should be equal to or greater than 0.90 i.e. between 0-1. the value of normed fit index in default model = 0.701 is a good fit. 10.6 assessment of structural model/inner model in pls-sem, assessment of structural model includes path coefficients to verify the significance and relevance of relationships of structural model (hair, hult, ringle, & sarstedt, 2017). review of economics and development studies, vol. 6 (2) 2020, 471-484 480 graphical output of path coefficients of variable table 4.9: path coefficients for direct effects of variables relationships between constructs estimate or original sample mean (o) std. dev t-stat p values cme -> perceived op 0.363 0.052 6.949 0.000 wp-> cme 0.193 0.043 4.452 0.000 wp -> perceived op 0.251 0.045 5.626 0.000 dct -> cme 0.256 0.044 5.859 0.000 dct -> perceived op 0.114 0.054 2.103 0.036 pop-> cme 0.245 0.042 5.906 0.000 pop -> perceived op -0.113 0.051 2.231 0.026 rc -> cme 0.178 0.047 3.818 0.000 rc -> perceived op -0.116 0.046 2.493 0.013 bootstrapping is a non-parametric approach used to assess path coefficients and their direct effects. the workforce productivity and decentralization are significantly related to conflict management effectiveness and organizational performance whereas the remaining two variables of perceived organizational politics and relationship conflicts were negatively associated with organizational performance but due to the mediating variable, these two variables become positively and significantly related to perceived organizational performance. table 4.10: indirect effects of variables relationships between constructs estimate/original sample mean (o) std. dev t-stat p values wp -> perceived op 0.070 0.018 3.812 0.000 dct -> perceived op 0.093 0.022 4.249 0.000 pop -> perceived op 0.089 0.022 4.061 0.000 rc -> perceived op 0.065 0.019 3.425 0.001 here all the estimate values are statistically significant indicated by p-values. the standard deviation values show the measures used to quantify the amount of dispersion of data set values. the t review of economics and development studies, vol. 6 (2) 2020, 471-484 481 values are also good for the model. table 4.11: mediation analyses & hypotheses testing direct effect p value indirect effect p value mediation type workforce productivity -> organizational performance 0.251 0.000 0.070 0.000 partial mediation decentralization -> organizational performance 0.114 0.036 0.093 0.000 partial mediation perceived organizational politics -> organizational performance -0.113 0.026 0.089 0.000 full mediation relationship conflict -> organizational performance -0.116 0.013 0.065 0.001 full mediation the wp has directly positive and significant impact on op while this impact decreases due to mediator cme. thus, cme partially mediates between the relationship of wp and op as direct effect is greater than the indirect effect. the dct has directly positive and significant impact on op while this impact decreases due to cme. thus cme partially mediates between dct and op. the pop has negatively significant impact on op but due to mediator cme, pop puts a positively significant influence on op. thus cme fully mediates between pop and op. likewise, cme fully mediates between rc and op. there is a partial mediation in case of workforce productivity and decentralization whereas full mediation exists in case of perceived organizational politics and relationship conflicts. table 4.12: results summary hypotheses of the study result-based decision h1a wp has significant positive relationship with perceptual cme. supported h1b wp has significant positive relationship with perceived op. supported h2a dct has significant positive relationship with perceptual cme. supported h2b dct has significant positive relationship with op. supported h3a pop has significant negative relationship with perceptual cme. not supported h3b pop has significant negative relationship with op. supported h4a rc has significant negative relationship with perceptual cme. not supported h4b rc has significant negative relationship with op. supported h5 cme has significant positive relationship with perceived op. supported 11. discussion the ultimate goal of this research is to derive some useful implications to help executives of construction companies (jung & kim, 2014). the empirical analysis of organizational performance in construction is undertaken through an integrative conceptual framework. the findings demonstrate potential value of all theoretical concepts in moving this phenomenon forward. the results enlighten the potential impact of organizational theory on demographic and organizational variables (mensah, 2013). the objectives of this study are now well-answered through these analyses of data sample. the review of economics and development studies, vol. 6 (2) 2020, 471-484 482 impact of five core factors has been assessed through mediation to verify impact of factors of organizational performance of construction companies in pakistan. the paradoxical tension of relationship conflict and internal politics with perceived performance is recognized which becomes a blessing in disguise when mediator mediates in between them (yang, 2017). the decentralization is another momentous measure in analyzing organizational performance. the relationship conflict is revealed as major type of conflict. the mediating role of conflict management effectiveness has been examined that in case of workforce productivity and decentralization, conflict management effectiveness partially mediates the mutual relationships whereas conflict management effectiveness fully meditates in case of remaining two variables i.e. perceived organizational politics and relationship conflicts in determining the organizational performance of construction companies. a conceptual model was also developed for set of critical factors of organizational performance and the understanding on overall quality performance of construction companies were established (sweet, 2018). it is pertinent that value-addition point is about mediating role of conflict management effectiveness. because before mediation, the perceived organizational politics and relationship conflicts were negatively affecting the performance of construction companies but after the mediation of conflict management effectiveness, both the variables put a positively significant impact on the organizational performance (harty & leiringer 2017; schwartz & deber, 2016). 12. conclusion conflicts prove to be an unavoidable part of organization. this study focuses to verify effectiveness of conflict management in the construction industry. although professional quality management in construction projects is being practiced however due negligence and unavoidable flaws are still existent in local practices on the basis of mutual relationships among the stakeholders (villmer, 2015). all identified factors have high significance in conceptual model. the study provides insights on comprehending the critical challenges being faced by construction companies which inhibit the organizational performance in a developing country like pakistan. conflict is intrinsic to organizations, teams and individuals. conflicts are inevitable in construction companies as they have complex and unique nature with various parties (szentes, 2018). the construction business environment has become more intense and competitive. the competitive advantage in construction field is created by higher workforce productivity, more decentralized organizational environment, lesser perceived organizational politics, less relationship conflicts and more conflict management effectiveness. it is worthy to mention here that perceived organizational politics and relationship conflicts turn their negative impact on organizational performance into positive effect in presence of mediator conflict management effectiveness (chen, 2015). the construction companies cannot overlook workforce productivity, decentralized working environment, conflicts and internal politics. the findings revealed that the performance of construction companies is influenced by critical factors. the conclusion is to systematically reintegrate tackle the conflicts by introducing the mediation as flexible and informal method to reach a settlement which is mutually acceptable (harty & leiringer, 2017). in today’s global construction market, sustainable business models can improve performance in terms of market competitiveness, growth and profitability. consequently, the study provides helpful guidelines to assist decision-making of executives to design a business model enabling construction firms to thrive in global marketplace (manning, 2017; arogundade, 2016). the study makes useful contributions in research and practice. the body of knowledge is extended by conceptual model which offers potential sources to achieve competitive advantage in construction sector. this study contributes to literature of conflict and construction management. the taxonomy for upcoming researches may be advanced to investigate quality management systems for ensuring safety and security in construction projects. a comparison might be made with other growing sectors of an economy to view broader picture of the phenomenon. review of economics and development studies, vol. 6 (2) 2020, 471-484 483 references amayah, a. t. 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(2013). the effect of organizational culture on firm financial performance: evidence from a developing country. procedia-social and behavioral sciences, 81, 428-437. https://doi.org/10.1080/15578771.2018.1544950 http://www.emeraldinsight.com/action/dosearch?contribstored=sole%2c+f https://doi.org/10.1080/20450249.2018.1447062 https://doi.org/10.1080/01446193.2017.1315826 https://doi.org/10.1080/1359432x.2016.1251417 review of economics and development studies, vol. 6 (4) 2020, 857 866 857 an overview of women entrepreneurship from islamic perspective said muhammad a , kong ximei b , ilyas sharif c , zahoor ul haq d a ph.d scholar, school of business, zhengzhou university, p.r. china email: said100487@gmail.com b associate professor, school of business, zhengzhou university, p.r. china email: kongximei@126.com c lecturer quaid-e-azam college of commerce, university of peshawar, pakistan email: ilyasqacc@uop.edu.pk d associate professor, government college of management sciences mardan ii, pakistan email: zahoorulhaq177@gmail.com article details abstract history: accepted 10 dec 2020 available online 31 dec 2020 islam has encouraged women to participate in entrepreneurial activities for economic prosperity and social growth. nevertheless, their participation in economic activities is very lesser than men globally. previously, the field of entrepreneurship has been regarded as a male dominant sector. entrepreneurship flourishes due to economic, social, ethical, and environmental factors while the practice of sharia principles works as a catalyst in this process. women entrepreneurship helps in alleviating poverty and unemployment that leads to socio-economic prosperity in a country. the motivation of starting women businesses varies in different cultures and geographic regions. women engagements in different business activities can not only empower them socially and financially but can also share the household economic burden with men. furthermore, it will also help them to make their decisions independently. their entrepreneurial income can be used for their children’s education, health, and the betterment of society. they can also use the option of partnership within the family for the financial and social network. the challenges faced by these women entrepreneurs can be handled with their family support. this review provides a general overview of concepts, motives, challenges, and the prospects of women entrepreneurship from an islamic perspective. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: women entrepreneurship, women empowerment, push and pull factors, socio-economic development, poverty, motivation, work-life balance, financial independence jel classification: m54, o24, d71 doi: 10.47067/reads.v6i4.285 corresponding author’s email address: said100487@gmail.com 1. introduction half of the world population consists of women (khalid et al., 2020) but, their economic participation is very low as compared to men. man and woman are like two wheels of a vehicle of society where both play a critical and undeniable role in every walk of life. if both take part in business review of economics and development studies, vol. 6 (4) 2020, 857 866 858 activities then economic prosperity will sustain in society. statutorily, women may start any legal economic activity for earning their livelihood. in recent decades, women's business has globally got the attention of researchers as an emerging field (henry et al., 2016; jamali, 2009; jennings & brush, 2013). that’s why it has been considered an active ingredient for development in the leading nations of the world. it not only creates jobs but also stimulates the economic growth of the country (vladasel et al., 2020). it is a crucial element for reducing the extreme poverty of the masses (jones christensen et al., 2015; kimbu & ngoasong, 2016; nasir et al., 2019; sutter et al., 2019). religion has been considered as an actor to influence entrepreneurial activities. it teaches, allows, and promotes the cultural values system in the community (ribeiro et al., 2012). within different religious and cultural contexts, entrepreneurial culture varies among people. one of the studies (kantor, 2005) narrated that muslim women entrepreneurs showed greater equality than hindu women to control their income. this may be due to less dependence of men on women's income due to patriarchal norms. islamic economic system promotes entrepreneurial activities, social well-being, and economic justice (shinkafi akilu & ali nor, 2018). history is full of shreds of evidence that women can do business as per the teachings of islam. in the holy quran allah saw, says that “trade has been permitted and interest has been forbidden” (quran 2:275). moreover, one of the well-known examples of muslim businesswomen is hazrat khadeeja (r.a), the 1 st wife of the prophet muhammad (peace be upon him) who recognized herself as a successful trader of her time which shows there is nothing wrong if women get involved in entrepreneurial activities. islam has issued some guidelines for their daily economic engagements. women are underutilized in the majority of muslim countries due to low literacy and poverty (anggadwita et al., 2015). muslim women are supposed to follow the holy quran and the sayings of the beloved prophet (pbuh) in their business activities. doing business in this way is considered as worship and raises their spirituality. these guidelines remind the masses to believe and act within the circle of sharia (shinkafi akilu & ali nor, 2018). women can engage themselves in businesses like manufacturing, trade, services, and other commercial activities permitted by the sharia and restrict themselves from interest-based activities, smuggling, dancing, pork breeding, wine business, and gambling. women entrepreneurship can take any modalities like musharikah, mudarabah, ijarah, etc. permitted by sharia. they may easily start different small-scale businesses at their homes or such business centers where only females can come for shopping. moreover, in today modern technological and digitalization era, they can take part in online business activities as well. online business activities are easier and more doable than installing machinery, renting space, however it depends on education and access to technology and services. 2. motives of women entrepreneurs female entrepreneurs may have different motives and goals for starting a business (anggadwita et al., 2015). one of the goals in literature is to improve control over the entrepreneurial income. furthermore, a large body of evidence (benería & roldan, 1987; mencher & world, 1988; schultz, 1993) showed that the women controlled income has been spent more on family than men’s controlled income. some needs for starting entrepreneurship may be the same for women but the basic needs may be different due to religious belief. furthermore, a study (hashmi, 2018) showed that high-income countries don’t promote a high rate of entrepreneurship and it was realized that low-income countries have good prospects for women entrepreneurship. different studies recognized that lack of resources is the primary cause of poverty (field et al., 2013; fischer, 2013). the motivational factors can be divided into push and pull factors. push factors are related to necessities, guided by the external factors that are more important for women than men. (aidis et al., 2007) reported unemployment and economic review of economics and development studies, vol. 6 (4) 2020, 857 866 859 reasons as a push factor. gender inequality has been referred by the authors as a push factor in the developed and underdeveloped world (aidis et al., 2007; baughn et al., 2006). due to restriction and discrimination of women to participate in the formal labor force, self-employment is considered as a survival strategy and can easily be managed with work-life balance (baughn et al., 2006). pull factors motivate women entrepreneurs to attain status in society. it includes opportunities for independence, success, and satisfaction derived from entrepreneurship. the researchers explored many entrepreneurial motives over the years and classified them into a necessity and opportunities-driven motives (hilson et al., 2018). in light of the literature, these motivational factors of women entrepreneurs have been grouped into push and pull factors as shown in fig.1. (aparicio et al., 2016; block & wagner, 2010; eijdenberg et al., 2015; fairlie, 2013; gonzález-pernía et al., 2018; mcmullen et al., 2008; parker, 2018; rey-martí et al., 2015; sadeghi et al., 2019; c. c. williams, 2008; n. williams & williams, 2014). fig.1. motivational factors of women entrepreneurs 3. the bright side of women entrepreneurship females can independently work for their business. by nature, women are punctual and hardworking. women have the talent and potential, but it is considered as untapped in many countries (d. kelley et al., 2011; marlow et al., 2012). they can easily adapt themselves according to the situation. they can effectively balance the domestic and business affairs and can ensure the active utilization of their time. women entrepreneurs can add value to societies in different ways. as self-employ, it becomes a source of income for their children and family members. it has the strength to create employment, promote economic growth, and social welfare (özsungur, 2019). 3.1 domestic merits women can support their families (leung et al., 2020) by successfully running their businesses. they can successfully run their businesses and domestic activities simultaneously (jensen et al., 2017; sun et al., 2020). they can engage other family members if they are free and don’t have work. women entrepreneurs do not become a financial burden for their families and society rather, they become a player in financial matters. with the help of financial independence, they can effectively meet their domestic needs and attains financial freedom. they can easily afford the cost of quality education for their kids and can give a helping hand to their parents, husband, and other family members to support them financially. motivational factors push factors  poverty  low family income  recession  family pressure  unemployment  dissatisfied from job  redundancy pull factors  independence  satisfaction & success  desire for status  selfexpression  managing work-life balance  be a role model  improved financial opportunities review of economics and development studies, vol. 6 (4) 2020, 857 866 860 3.2 economic merits islam gives freedom to women to be engaged in economic activities. due to inflation and epidemic outbreak covid-19, men cannot exclusively meet the financial needs of their households that compelled them to search for additional sources of revenue (oukil, 2013). if businesswomen can earn more profit as their customers (females) naturally like more shopping. many researcher claims at the economic level that women engagements in entrepreneurial activities have a contribution to gdp growth and economic development (zeb & ihsan, 2020). women entrepreneurship is a very emerging sector, running and operational cost of women businesses is usually very low due to small scale business but can enhance the financial position of their family. 3.3 societal merits societies grow when there is financial independence. islam gives equal rights to men and women to actively run their own business within boundaries for the shared prosperity of the society (oukil, 2013). there is no place for gender discrimination in islam which cannot be a hurdle for women entrepreneurship. in areas where society does not like jobs of females, then women may start their home-based businesses where they would not require either to go out of their homes or interact with male members. pashtun society in most of the cases does not allow women to visit the market for shopping, then home-based women businesses provide them opportunities for shopping at their convenience and choice. the entrepreneurial opportunity will empower marginalized women and on the other hand from the reform perspective it leads to reduce poverty by identifying opportunities for social change (calton et al., 2013; de clercq & honig, 2011; mair et al., 2016). the institutional and social changes are dynamic and cannot be predicted due to uncertainty. such women can financially support their families and help in solving financial problems at the micro and macro level in an economy. many domestic, social, economic, problems will resolve if females take an active part in running and managing their own business. 4. multifaceted challenges faced by muslim entrepreneurs the challenges faced by women entrepreneurs differ around the globe. some classified it into three groups the individual, institutional and socio-cultural factors (shmailan, 2014), while other categorized these constraints in the form of personal, family and environmental factors. in some cases, women hesitate to play their roles due to socio-cultural norms (roomi et al., 2018). these ventures are smaller, slower growth, and have less profit potential than their male counterparts (greene et al., 2003). the performance and growth of their economic activities are also affected by family support, family and household responsibility, and societal expectations role. these challenges have been highlighted in the following three major points, social and cultural, religious, and financial challenges. 4.1 social and cultural factors keeping the work-life balance is one of the greatest tasks for the majority of businesswomen around the globe. it is a very challenging task for female entrepreneurs to run and manage such businesses in a male-dominant society (anna et al., 2000). the societal attitude does not support working women and sometimes has a chance of a lack of access to a social network. they run their businesses in such places and ways, where they have no interaction, with males outside their close relatives. women entrepreneurship is influenced by the patriarchal culture where they perform family responsibilities. external social factors also lead to inequalities and discrimination (de vita et al., 2014; rosa & dawson, 2006). they have been considered as housewives to perform the primary responsibilities of the household work inside pakistan. societal and cultural discrimination influences women's choices and career progress throughout their lives. review of economics and development studies, vol. 6 (4) 2020, 857 866 861 4.2 religious factors in a religious society where people follow religious instructions, religion cannot be separated into individual and economic life. women businesses will thrive only if they run their business within religious boundaries (oukil, 2013). islam is a religion of peace and harmony when women can enjoy every aspect of life within the permissible circle. islam permits such women businesses where they exclusively serve, deal, and interact with females of the society. islamic teachings do not allow women to run such businesses where products of the business are prohibited in islam. similarly, they cannot interact with men outside their families and our society thinks bad about women who earn money in a mixed-gender environment (zeb & ihsan, 2020). islam does not allow women to go out of their homes and participate in mixed-gender programs (kantor, 2005). 4.3 financial factors islamic economics have their sources of financing which is different from the conventional financial system (salman & nawaz, 2018). women entrepreneurs are using lower debts and have low access to capital than their male counterparts (chinomona & maziriri, 2015; roomi & parrott, 2008). they have controlled access to formal credit financing (shaw et al., 2001). it needs to utilize their savings and requires overall family support (cosh et al., 2000). they take a start with a small capital due to complicated formalities and lack of access to financial support. these ventures need financial support and micro-credit loans from financial institutions (jamali, 2009). the financial support from conventional formal institutions often charges high interest which is considered null and void in islam. the required loans are treated as qard e hasana in the islamic financial system. qard e hasana is an agreement where the borrower will pay only the principal amount to the lender or financial institutions (zafar & sulaiman, 2020). there will be no gain in the form of interest while financing these ventures. interest is the main challenge while financing their activities from financial institutions. the other challenges being faced by women entrepreneurs include registration of these ventures, lack of government support, political instability, complicated business start-up, lack of kids care facility (jahanshahi et al., 2010). lack of entrepreneurial knowledge and experience is also a major issue for expansion and makes the activities less attractive (carter et al., 2001; watson & robinson, 2003). 5. demerits of women entrepreneurship women entrepreneurs may avoid islamic teachings in their businesses as there is no regulatory body for regulating their entrepreneurial activities. due to providing the goods at the doorstep or local area, they often charge more amount than the market especially the goods which have no fixed price. businesswomen spend most of their time in their entrepreneurial activities and cannot spare enough time for their family life and upbringing of their kids (jamali, 2009; oukil, 2013). the findings of a study (kim & ling, 2001) showed work-family conflict arises due to factors of work and family domain. furthermore, the case becomes severe for married women. they have to play the role of a daughter, wife, and mother. the time devoted to one role becomes a hurdle to perform another role. this could be possible with family support otherwise the matter sometimes leads to conflict (lee siew kim & seow ling, 2001). these women find it difficult to attend social events due to their business activities. these businesses promote extravagance among females, as they buy things in bulk for their personal use regardless of the level of their needs and income. these businesses are normally run on a small scale and promote regional development (baumgartner et al., 2013) but from the tax point of view, they avoid tax due to non-registration with the tax authorities. review of economics and development studies, vol. 6 (4) 2020, 857 866 862 6. prospects of women entrepreneurship we are living in a male-dominant society having power control inside the family and women is socially and financially dependent on men (zeb & ihsan, 2020). to reduce the dependency on men, new trends have been set and women are trying their best to engage themselves in economic activities and can successfully run many ventures. global entrepreneurship monitor (d. j. kelley et al., 2017) reported that women are heeding in the business world and an estimated 163 million individuals in 2016 have started or running new ventures in 74 states. women engaged and support their families in different fields of life facing a lot of challenges (nasir et al., 2019). by balancing these challenges with their personal and family life they could not focus on their health. some of the sectors in which women entrepreneurs are engaged, require more effort, and traveling outside the home to perform those tasks. there are also entrepreneurial activities that can be done very easily and required minimal traveling from home. they may initiate a beauty parlor where they provide beautician services to their female customers. educated ladies can opt for starting a coaching/tuition academy where female students from the surrounding area can get a quality education at a low cost. similarly, they may provide tailoring services to female clients. they can establish a handicraft center for the training of local females or they may prepare different crafts like sweaters, caps, cloth, sheets and handmade cloth, carpet, etc. when they have free time it could be utilized in-home business. starting and running boutiques is an emerging market for females especially in urban areas. those male family members who don’t allow their females to go and buy from the shops owned by males can easily use the services offered by women-owned businesses. they may prepare pickles, jam, and squashes, etc., and sell to their customers in the local market. women can easily start making hand fans for the summer season on a commercial basis. in gujarat-pakistan, which is known for fan and other electric appliances, many women making fan instruments, etc. while in in sialkot they are very experienced in the production of sports accessories. these kinds of activities can also get financial and religious support from family members which creates a social network/capital. these activities will not harm their religious and cultural norms as they are not working with other men. they can maintain their cultural and religious values and on the other hand, can get some money which can be used to educate and feed their kids and other family members. this money can also be used to fulfill their own financial needs and make them financially empowered. furthermore, the other advantage of financial independence and participation in decision making can also be attained to balance family ties. these individual businesses can also be converted into partnerships in the future. the men can bring raw materials and women can process these materials into finished goods which can be further offered by males in the markets for sale. they can offer their services in the form of dairy products, grocery shops, cloth merchants, hand embroidery products, tailoring, writing, etc. 7. conclusion and future research direction women entrepreneurs can play a crucial role to maintain and promote social and economic development in the rural and urban areas of the countries. the way forward for the encouragement of women entrepreneurship in the islamic context needs a conducive political, economic, and educational environment (wahid et al., 2020). more women entrepreneurial schemes should be launched where women trainers can train these women entrepreneurs in a socio-cultural and religious context to enhance their knowledge and skills. interest-free financing schemes are the need of the day and the governments need to improve the regulatory environment to protect private-sector employment. policies should be framed to provide tax incentives and subsidies to make it more attractive for women review of economics and development studies, vol. 6 (4) 2020, 857 866 863 entrepreneurs. for sustainable growth, the government should design to direct these women entrepreneurs towards the high technology sector. this attempt was made to explore the research gap and highlight new avenues based on available literature. the need and motives of male and female entrepreneurs can be different and especially in the islamic society which could be a gap to be explored in the future. references: aidis, r., welter, f., smallbone, d., & isakova, n. 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(2020). innovation and the entrepreneurial performance in women-owned small and medium-sized enterprises in pakistan. women's studies international forum, 79, 102342. doi:https://doi.org/10.1016/j.wsif.2020.102342 https://doi.org/10.1016/j.ijhm.2019.102359 https://doi.org/10.1016/j.jbusvent.2018.06.003 https://doi.org/10.1016/j.jbusvent.2020.106017 https://doi.org/10.1016/j.wsif.2020.102342 review of economics and development studies vol. 3, no 1, june 2017 57 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 1 june 2017 journal homepage: www.publishing.globalcsrc.org/reads impact of trade openness on economic growth: a case study of pakistan 1 rashid ahmad, 2 kashif raza, 3 sobia saher 1 assistant professor , department of economics, the islamia university of bahawalpur, pakistan.bahawalnagar campus. pakistan. rashid.ahmad@iub.edu.pk 2 lecturer, department of economics, the islamia university of bahawalpur, pakistan. bahawalnagar campus. pakistan. kashif.raza@iub.edu.pk 3 m. sc. scholar of economics, the islamia university of bahawalpur, pakistan. bahawalnagar campus. pakistan article details abstract history revised format: may 2017 available online: june 2017 purpose: this paper estimates the impact of trade openness and economic growth in pakistan by using time series data from period of 1975-2014. econometric method was applied to estimate the impact of trade openness on economic growth. gross fixed capital formation (proxy of investment), foreign direct investment, imports, exports & trade openness (proxy of trade openness to check the volume of trade of a country) is used as explanatory variables while gross domestic product is treated as dependent variable in this study. johansson co. integration approach developed by johannes & jeslius (1988) is used to evaluate the long run relationship among variables in this study. the results suggest that trade openness, imports, exports and foreign direct investment cast have positive impact on economic growth while on the other hand; gross fixed capital formation &labor force has negative impact on economic growth. © 2017 the authors, under a creative commons attributionnoncommercial-sharealike 4.0 keywords trade openness, exports, imports, gross domestic product, foreign direct investment, labour force jel codes: e24, q37, f43, p45 corresponding author’s email address: rashid.ahmad@iub.edu.pk recommended citation: ahmad, r., raza, k.& saher, s., (2017). impact of trade openness on economic growth: a case study of pakistan. review of economics and development studies, 3(1) 57-68 doi: https://doi.org/10.26710/reads.v3i1.165 1. introduction every country determined the sources of development in the light of recent literature. trade is the most important and core source of development. the traditional approach regarding trade suggests that “trade is the engine of growth”. since last three to four decades, the many countries of the world have used and apply instruments of protection (i.e tariff, import & export quota & export tax) and in this way, they have restricted trade policies. the motive behind trade policies is to protect their infant and newly born industries and this trend is mostly common in developing nations. mercantilists were pioneer who gave the concept of international trade and their entire philosophy was based on accumulation of wealth through the surplus of gold and precious metals. adam smith (1776) gave the concept of absolute advantage for both nations who are specialized in the production of those goods which are cheaper to produce. david ricardo gave the concept of comparative advantage. according to him, trade must be possible without comparative advantage. factor endowment and hecksherohlin theory took one step more by investigating the international trade (salvatore, 2011).furthermore neo classical and endowment growth theories predict that trade openness http://www.publishing.globalcsrc.org/reads mailto:rashid.ahmad@iub.edu.pk mailto:kashif.raza@iub.edu.pk mailto:rashid.ahmad@iub.edu.pk https://doi.org/10.26710/reads.v3i1.165 review of economics and development studies vol. 3, no 1, june 2017 58 positively affect on gdp growth. for the protection of infant industries, the first time a report on manufactures is written by the first u.s secretary of the treasury, alexander hamilton”. after this in 1860, the first free trade agreement was signed between united kingdom and france which is known as “cobden-chevalier”. all the developing countries (asia, latin america & africa) adopted trade openness policies for last four decades. pakistan has also adopted trade openness policies since mid-1980s under the series of sap developed by international monitory fund & world bank while on the other hand, in 1980s, the developed nations enjoy the boom of trade and in usa 25% trade growth is only due to the trade liberalization. as earlier discussed that tariff barriers (tb) and non-tariff barriers (ntb) plays a great and successful role in country’s trade. so in 1980s tariff liberalization accounts for 45% and non-tariff liberalization accounts for 44% of extra growth & decline in transportation cast contributed only 11% of extra trade growth since 1980s (hufbawer& adler,2009). the world bank started research on trade liberalization and market reform in 1987 and it was suggested that for trade openness, the countries must started de industrialization. after 1995, when pakistan joined wto trade agreement, the policies of its trade agreement compel pakistan to decreases on international trade different subsidies and import duties (siddique & iqbal ,2005).trade openness is not only exchange of goods but also it enhance productivity , efficiency, experiences, skill and knowledge among countries. therefore, the mostly literature on trade openness in recent decades concluded that trade openness has positive impact on economic growth. for this purpose the sufficient allocation of resources, policies according to the circumstances, privatizing foreign trade, removing exchange rate distortions, tariff barriers to imports, improved political stability & increased job opportunities in all developed and developing countries should be enhanced.[(siddique et al. 2003) ,(spanu,2003) , (stribu& parikh,2004) , (siddique , 2005) ,(chaudhary et al , 2006) , (gulzar,2007) , (zakira , 2008) , (ahmed et al ,2009) ,(zaman et al, 2012),(ahmed &arif ,2012) , (kauser et .al ,2013)]. the objective of this research study is to examine the impact of other macro-economic variables which have a great impact on the size of trade such as imports, exports, gross fixed capital formation, gross domestic product and trade openness (imports + exports/gdp). 2. literature review a number of researchers have already been conducted to generate the link between economic progress and trade liberalization. following is an immediate review of some recent studies about growth and trade openness. siddique et al. (2001) examined the relationship between trade openness and economic growth. real imports, real exports and real gdp were used as explanatory variables for the period of 1960-2001.the study suggested that exports had a positive and significant impact and import had negative impact on economic growth. the result explored that in the long run, there exist bidirectional causality and in the short run, there exist no causality and variations occur due to business cycle fluctuations with no casual’s clear pattern between trade openness and economic growth spanue (2003) explored the impact of openness on trade & its relation to the economic growth with respect to the developed and developing nations. this study used gdp growth as dependent and capital, labour force ,exports and imports were treated as explanatory variables and results of the study explored that the portion of absolute poverty was increased in the developing countries those who promoted the globalization & free trade .this study further suggested that trade liberalization promotes economic growth but wrong policies made them ineffective and on the other side, imf also proved this situation review of economics and development studies vol. 3, no 1, june 2017 59 that low level of trade make countries more volatile to debt crisis. he believed that openness of markets could generate an additional increase of 1.15% of growth per year. chaudhary et al. (2006) investigated the relationship between trade openness and economic development. for this purpose, this study was based on four major measure of economic development which are: per capita gdp, income inequality, poverty & unemployment over the period of 1960-2003. he suggested that trade liberalization only effect employment positively but other three remaining indicator had negative impact on economic development. the study suggested that trade openness focus on labour intensive product. for the long time, in the light of international economics literature remain dark on service sector because they consider services non-tradable items but in recent literature they denied this fact that services had a great contributions on economic development because through services the movements of technology, skills and experience enhance and now a day’s these indicator (technology, skills and experience) play a key role and these factor had proved a back bone for country. the related article through this topic is regressed below: gulzar (2007) investigated the impact of trade liberalization on service sector & this study was carried by using panel data (from un online database) for the period of 1981 to 2010. real exchange rate, foreign price, foreign per capita income was used as independent variables this study was carried by taking the panel data of 92 countries. ols, pooled least square was used for analysis. the findings of the study revealed that services had positive impact on trade liberalization but they followed decreasing and increasing trend & service sector promotion depends on trade policy implications. it was more suggested that aim of the trade policy should be to promote domestic market, with maximum benefits in terms of per capita income and employment with following upwards trend. salman &javaid (2011) studied the impact of trade openness on wage inequality. the study was conducted by using three explanatory variables i.e import penetration ratio, export penetration ratio & relative prices. the data was taken for the years 1996 to 2005. the econometric model predicted that wage inequality decreased when the exports with respect to the value added increases & on the other hand ,skilled labor had positive impact on wage equality. ahmad &arif (2012) examined the long run relationship between output growth and trade openness. the study was carried by taking time series data from 1972 to 2010. co-integration & error correction was used for econometric estimation to establish relationship between output growth and trade openness. output growth & trade openness had positive relationship and the result indicated the long run relationship between two variables and there exist bi-directional significant causality between trade openness and output growth. kauser et al (2013) examined the impact of trade liberalization on economic growth in pakistan. the study was carried by taking time series data from 1975to 2010. real gdp was taken as dependent variables and: gross fixed capital formation, foreign direct investment & inflation were taken as explanatory variables. the results concluded that capital formation had positive and significant impact while on other side fdi and inflation had negative impact on economic growth of pakistan. 3. trade liberalization in pakistan after the independence of 1947, pakistan economy faced a lot of problem such as political instability, mismanagement, lack of infrastructure, lack of industries & illiteracy and after two year in 1949 pakistan faced devolution crisis. in 1960s pakistan started adoption of development strategies so in consequences during this age large scale of manufacturing industries were launched and to protect infant and newly born industries, pakistan review of economics and development studies vol. 3, no 1, june 2017 60 applied direct (tariff and export tax) and indirect obstacles (exchange rate & long term investment assistance) in the economy. for the protection of infant industry, in 60’s some additional policies introduced which were as follows.  an overvalued exchange rate  export bonuses  low interest rate for putting the control on exports  esb (export bonus scheme) was introduced through bonus vouchers in 1970s the govt. introduced nationalization policies and reduced the anti-export bias but on the other hand, pakistan faced serious problems such as east pakistan war 1971 and deficit balance of payment due to oil price shocks. in this decade to support economy the govt. of pakistan took following steps.  devaluation of pakistan rupee by 57% in 1972  elimination of export bonus scheme in the age of 80s, the govt. of pakistan thought about economic development policies. for this purpose,e the economy of pakistan started to remove obstacle on trade because in the presence of restricted trade , efficiency, advancement in technology, variety of goods and services, competitive environment & skilled labour were remained closed. for the purpose of creating competitive environment the govt. of pakistan encouraged private investment and took different initiative steps which are as follows:  tax holiday  tariff cut  reduction in custom duties 13% to 5%  flexible exchange rate through these initiatives, the poverty declined from 46% to 18% in the late of 1980s. in 1950,60s 70s & 80s pakistani grew at 6% per year in spite of increasing trend in population growth ( haq’s musings). in 1990s, due to the political instability, mismanagement, corruption and increasing trend in foreign debt the unemployment followed upwards trend and poverty rosé 33% & inflation in double digit. in these decade benazir bhutto and nawaz sharif played musical chair due to these reason trade to gdp ratio of pakistan remained 0.4 per annum which is less than other developing countries such as, india (0.8 per annum) & korea (1% per annum). in the regime of general perveez musharaf, the economy had better position& gdp rose in double digit. the era of 2000-2003 the govt. took following steps to promote industrialization.  deregulation  reduction the cost of doing business in current decade the industrialization sector of pakistan economy is less liberalized than other developing countries .pakistan could not produce in competitive environment for industrial sector due to energy crisis, corruption, high exchange rate, unemployment, lack of infrastructure, high import duties on raw material & machinery. this scenario is described as below: “pakistan export fell to usd23.64 billion in 2011-12 from usd 24.82 billion in 2010-11, showing decline of 4.75%. contrary to this, world trade expanded by 5% in 2011compared to 13.8% growth in 2010.pakistan exported to asian countries slightly fell to usd11.709 billion in 2010-11 from usd 11.556 billion in 2011-12.” 4. theoretical and conceptual framework the economics is said an organized science after 1776 the publications of the “wealth of nations” by adam smith. during the seventeenth and eighteenth centuries a group of men in which bankers, government official and government and private servants are also included they wrote a pamphlets on international trade and present their arguments that in prance of trade a country become more progressive review of economics and development studies vol. 3, no 1, june 2017 61 if they promoted its export especially in the form of surplus gold and prohibited its imports especially in the form of luxury item & their arguments are called mercantilisms. in 16th and 17th centuries the brutish economist (adam smith and david ricardo) are also the advocates of mercantilism. after that the concept of absolute advantage emerged that a nation rely on domestic product and the supplier produced until when demand =supply. this situation is described below through diagram. diagram 1: equilibrium in isolation: x-axis shows quantity and y-axis price .the negative slope determined demand and positive slope shows supply when the supply and demand forces intersect to each other where the price determined pe and equilibrium exist in a point a. this is point where qs=qd. after this, in 19th century the david ricardo stated the concept of comparative advantage also known as “comparative cost theory the gain from trade emerged. this theory putted arguments that both nations gain from trade by producing those goods which are cheaper in their own country through this way the nations utilized their local resources more efficient way and specialization occur in those commodities which produced cheaper in the country. some qualifications of comparative advantage theory are given below:  this theory considered that there is full employment.  there is no hindrance in the allocation of resources.  only commodities can moved investment resources are not internationally mobile.  comparative advantage is the basis of investment decision. the critics on the qualifications of comparative cost theory are that: if the country having the condition of full employment there is no labour force resources are perfectly allocated and they produced whole goods efficiently than there is no need to decrease the quantity of one good. after that in the mid of 1980s, the developing nations asia, europe & pakistan etc. adopted trade openness policies ‘under the series of sap developed by international monitor fund and world bank’ because rapid economic growth is not possible without trade openness . economic growth is directly correlated with efficiency, skilled labour, experiences, variety of goods, investment ,capital formation & human capital and those are all do not possible without trade and on the other hand, the topic of globalization is not emerged in the absence of international trade and globalization played a vital role in economic growth because it promoted investment in human capital, capital formation ,social safety nets, reduced poverty by creating job opportunities, technological advancement, enhancement in standard of living ,raised investment through the attraction of foreign investor, access to new market & made easy foreign lending for developing countries. review of economics and development studies vol. 3, no 1, june 2017 62 these advantages of globalization through diagram no: 2 are described below: diagram 2: in current studies and arguments globalization is defined as: “globalization is the forces of liberalization of investment & trade regimes, financial integration, international labour flows & technological change which are sweeping the world today with fierce velocity”. but in the light of recent literature and arguments of development economist globalization cast both positive and negative impact on economic growth. they putted arguments that before being a part of globalization the developing nations must outlook their circumstances and situation of the economy because in the presence of globalization income inequality & environmental degradation followed increasing trend and on the other hand highly skilled and educated person moved to the developed nation for the sake of highest earning through this way efficiency reduced in the specific country. 4.1 data sources the basic and core objective of study is to examine the impact trade openness on economic growth. the data of variables for pakistan is collected of the years from 1975 to 2013 from the world development indicator cd-rom (2003) and hand book of statistics (2010) and for the year of 2014, the data is forecasted through moving average. for example: moving average= (v2009) + (v2010) + (v2011) + (v2012) + (v2013)/5 (values of above forecasted year (2009……..2013) divided by the number of years) 4.2 model specification in this research study, for avoiding the problem of multicollinearity construction of model is done in two equations because in upper equation we used top (trade openness) to check the volume of the country trade which is the sum of imports and exports while on the other hand, imports & exports partially are partially used. for checking the impact of trade on economic growth the basic two econometric models are defined as: model no. 1 𝐆𝐃𝐏𝐭 = 𝛃𝐨 + 𝛃𝟏𝐆𝐅𝐂𝐅𝐭 + 𝛃𝟐𝐅𝐃𝐈 + 𝛃𝟑𝐓𝐎𝐏 + 𝛃𝟒𝐋𝐅 + 𝐔𝐭……………… .(a) model no. 2 𝐆𝐃𝐏𝐭 = 𝛃𝐨 + 𝛃𝟏𝐗𝐭+𝛃𝟐𝐌𝐭+𝛃𝟑𝐆𝐅𝐂𝐅𝐭 + 𝛃𝟒𝐅𝐃𝐈 + 𝛃𝟓𝐋𝐅 + 𝐔𝐭 … … … . (𝐛) here, gdpt= gross domestic product at a time period t xt=exports of goods and services at a time period t review of economics and development studies vol. 3, no 1, june 2017 63 mt=imports of goods and services at a time period t gfcft=gross fixed capital formation at a time period t tfdit=foreign direct investment at a time period t. topt= trade openness at a time period t. lft= labor force participation at a time period t. ut= white noise error term here β’s represents the parameters of variable which we consider constant for obtaining results but in real life these variables showed trend. for this research study, gdp is used as dependent variable and other variables which have significant impact on trade such as imports, exports ,gross fixed capital formation and trade openness (used proxy of trade liberalization for the volume of country) are used as explanatory variables. 4.3 definition of variables 4.4.1 gross domestic product (gdp) “the total value of goods and services which produced in a country in a given time period is called gdp”.gdp is a core, basic indicator, benchmark for competing other countries and initial value for checking the progress of the economy. 4.4.2 exports (xt ) “exports are the oldest form of economic transfer the developed nation who endowed with capital intensive technology mostly revenue earned from exports and those nations whose impose fewer restriction on trade such as tariff and quota”. 4.4.3 imports (mt) “the word import is derived from the word “port” since goods are often via boat to the foreign countries. imports are the back bone of international trade. mostly the countries import those goods, services and raw material which within country not produce cheaply & efficiently. when the value of imports exceeds the value of exports then we say that the trade balance is negative and when the situation is opposite to this scenario then we say that trade balance is positive”. 4.4.4 gross fixed capital formation (gfcf) “gross fixed capital formation is a major and core components of gdp expenditure & it include entire expenditure bear on fixed assets & replacement cost of fixed capital such as: land, building, machinery, transport equipment and engineering work”. gross fixed capital formation is used as a proxy of investment. 4.4.5. trade openness (top) trade openness is used as a proxy variable to check the volume of the country. we compute trade openness top = imports + exports gdp ∗ 100 4.4.6. foreign direct investment (fdi) it is a major source of capital inflow. fdi is an investment made by a company or entity based in one country, into a company or entity based in another company. fdi includes all capital transaction between two units or between joined enterprises which may be incorporated or not incorporated. review of economics and development studies vol. 3, no 1, june 2017 64 4.4.7. labor force (lf) all the member of a particular organization or country whose are able to work, employed or seeking employment in a country or region. 5. results and discussion to obtain econometric model of study we take log on both sides. so, model is rewritten as model no. 1 𝐥𝐧𝐆𝐃𝐏𝐭 = 𝛃𝐨 + 𝛃𝟏𝒍𝒏𝐆𝐅𝐂𝐅𝐭 + 𝐥𝐧𝛃𝟐𝐅𝐃𝐈 + 𝛃𝟑𝐥𝐧𝐓𝐎𝐏 + 𝛃𝟒𝐥𝐧𝐋𝐅 + 𝐔𝐭……………… .(c) model no. 2 𝐥𝐧𝐆𝐃𝐏𝐭 = 𝛃𝐨 + 𝛃𝟏𝐥𝐧𝐗𝐭+𝛃𝟐𝐥𝐧𝐌𝐭+𝛃𝟑𝐥𝐧𝐆𝐅𝐂𝐅𝐭 + 𝛃𝟒𝐥𝐧𝐅𝐃𝐈 + 𝛃𝟓𝐥𝐧𝐋𝐅 + 𝐔𝐭 … … . (𝒅) 5.1. unit root test in this study co-integration is used to explore the long run association between human capital and economic growth of pakistan. first of all stationarity of the variables is checked before applying cointegration. table-2 adf test results variable names level 1st difference conclusion gross domestic product -0.5651 (0.8668) -7.1843 (0.0000) i(1) imports -0.4753 (0.8853) -6.872107 (0.0000) i(1) exports -0.49795 (0.8809) -6.4618 (0.0000) i(1) gross fixed capital formation -1.7994 (0.3753) -8.3816 (0.0000) i(1) foreign direct investment -2.9428 (0.0496) -7.0898 (0.0000) i(1) trade openness -0.4753 (0.8853) -6.872107 (0.0000) i(1) labour force -0.39685 (0.8749) -9.1764 (0.0000) i(1) (parenthesis shows probabilistic values) after applying unit root test we conclude that all variables are stationary at i (1).so for showing results its first requirements that to decide the optimum lag length criteria. for this purpose, akiake & schwarz information criteria is used and in lr test, the optimum lag length is one. after deciding the lag length, johansson co. integration test is used johansson co. integration test executes two steps.  trace statistics  maximum eigen value statistics review of economics and development studies vol. 3, no 1, june 2017 65 table-3 unrestricted co. integration rank test (trace) hypothesized no. of ce.(s) eigen value trace statistics critical value (0.05) prob.** conclusion none* 0.660853 96.98430 76.97277 0.0007 exist long run relationship at most 1* 0.478421 55.89405 54.07904 0.0341 exist long run relationship at most 2 0.372494 31.16005 35.19275 0.1277 at most 3 0.231019 13.45200 20.26184 0.3288 at most 4 0.087267 3.469842 9.164546 0.4968 table-4unrestricted co. integration rank test (maximum eigen value) hypothesized no. of ce(s) eigen value max eigen statistics critical value prob.** conclusion none* 0.660853 41.09025 34.80587 0.0000 long run relationship exist at most 1* 0.478421 28.73399 24.58808 0.0002 long run relationship exist at most 2 0.372494 17.70805 22.29962 0.4382 at most 3 0.231019 9.982160 15.89210 0.3896 at most 4 0.087267 3.469842 9.164546 0.8247 table-3 &4, represent the results of johansson co. integration test. the table-3 of trace values show that there exist long run co. integrated relationship among variables [gdp= imports, exports, gfcf & trade openness] at 2 levels because on two levels we reject the null hypothesis that trace value > critical value table-4 shows the maximum eigen values and there exist 2 co. integrating vector because we reject null hypothesis on two levels that maximum eigen value statistics> critical value such as 41.099025 are greater than 34.80587 and 28.73399 is greater than 24.58808. model-1 table-5 cointegrating coefficient of normalized equation variables coefficients standard error tstatistics l imports 5.59541 -1.25946 4.4427 l exports 9.925253 -1.04695 9.4801 l gfcf -0.026236 0.00867 3.0260 l fdi 1.033667 0.3934475 2.6270 l labour force -0194710 0.003365 5.7863 c 0.184265 0.049705 3.7072 review of economics and development studies vol. 3, no 1, june 2017 66 model-2 table-6 cointegrating coefficient of normalized equation variables coefficients standard error tstatistics l trade openness 9.925253 -1.04695 9.4801 l gfcf -.026236 0.00867 3.0260 l fdi 1.033667 0.3934475 2.6270 l labour force -0.0194710 0.003365 5.7863 c 0.184265 0.049705 3.7072 these results suggests that foreign direct investment, imports & exports have positive impact on gdp growth while on the other hand; gross fixed capital formation& labour force has negative impact on economic growth. the reason behind these results are as follows: a. in the light of recent literature, it is a common argument that in global world, trade is the core and major element of economic growth & the expansion of trade is only possible through imports and exports and exports are the basic indicator of economic development so, for the expansion and diversification of exports the govt. often took initiative step such as “export subsidies” because exports of pakistan is often based on primary agricultural commodities (wheat, rice & cotton),manufacturing leather, textile and sports goods. according to the fiscal year of 2008 72% of total gdp is based on mentioned above commodities and on the other hand, it is insufficient condition for the country to produce everything in the situation of isolation so, imported goods enhanced the living standard of the people through removing poverty because people enjoy more opportunities of business, technology advancement and services and latest knowledge. b. liberalized economies enjoy foreign direct investment & through this way market expand, cost per unit decreases, specialization occur & technological transmission become a reason to attain the attention of foreign investors. trade openness top = imports+exports gdp ∗ 100 is used as proxy variables to check the volume of the country and volume of the country is determined through imports and exports so, these indicators impose positive relationship on gdp growth. so, these results suggested that trade openness enhanced the volume of country when the economy is liberalized they enjoy competitive environment and the topic of specialization occur. through this way, we concluded that imports, exports and trade openness cast positive impact on economic growth. these significant impacts described through many channel. c. trade openness may create incentives for policy makers to pursue many macroeconomic policies, either because the threat of capital flight or because international arguments, implicit or explicit, that act as a check on policy and technological transmission. in turn, macroeconomic stability became reasons of many advantages such as: reducing prices uncertainty, moderating public deficit and it became a reason of increasing future tax. d. on the other hand, liberalized economies enjoy laissezfair environment and public demanded goods provided in these economies. openness economies will tend to specialization according to their comparative advantages so it became a cause of market expansion and attention of foreign investors. trade openness simply allow domestic agents to import capital goods that are unavailable in the country or available at higher cost so these importable commodities became a reason to expand market size and raised the portion of export in the foreign market and create competitive environment for country. liberalized economies enjoyed foreign direct investment and it capture the incident of a certain type of technological transmission & proves a substitute for trade because foreign investment is used to set up plants producing goods that cannot be imported because of trade restrictions. so, with the help of described above channel we can say that trade review of economics and development studies vol. 3, no 1, june 2017 67 openness became a reason of expanding imports and exports and through this way it cast positive impact on economic growth. production function is determined through labour and capital. y=f(k,l) e. every commodity is manufactured goods through those factor of production. pakistan is one of them in developing countries and in 1994-95 it is a common argument that labour cast a positive impact on growth while on the other hand, by applying growth accounting approach to measure the contribution of labour tells us that in pakistan economy labour cast a negative impact on economic growth the main reason of this phenomenon is illiteracy, low wages, unskilled labour, child labour, unemployment & increasing trend in population. pakistan is a labour abundant economy but the utilization of labour is not in uniform manner. the labour group of pakistan having no sufficient knowledge about the work they have done so the topic of specialization is not occur and on the other hand, food material is having insufficient quality because their wages are very low so in consequences their productivity follows decreasing trend. in this way, labour cast negative impact on the economic growth of pakistan. f. gfcf (gross fixed capital formation) is used here as a proxy of investment. in a common sense investment cast positive impact on gdp growth but in developing countries because the people having no sufficient employment opportunities and they having a low amount for saving so, mostly investment are take place in loans and then mostly the ratio of profit is low then the amount of loans and then mostly these loans is used for unproductive necessities and therefore, the burden of debt .follow increasing trend in pakistan. 6. conclusion this research study empirically analyse the impact of trade openness on economic growth. for this purpose, imports, exports, trade openness & gross fixed capital formation used as explanatory variables while real gdp treated as dependent variable for the time period of 1975-2014.after applying johansson co. integration approach, the result suggested that imports, exports & trade openness cast positive & significant impact on economic growth while gross fixed capital formation& labour force cast negative impact on economic growth. for improving this situation the policy recommendations are as follows:  according to the report of american business corporation of pakistan, in a present situation import duties are applicable on raw material, machinery & equipment and those goods are not locally available in the country & on the other hand, custom duties also follows increasing trend in 2008-09 so, reduction in these duties is very necessary for achieving the low cost of products.  for increasing the portion of exports, the govt. trade policies must be according to the circumstances of pakistan. for this purpose, it’s necessary that the pakistan development authority conduct a questionnaire for knowing the condition of big and small unit industries.  improvement in infrastructure is very necessary to increase the volume of trade. for this purpose, it’s necessary that chairman of relevant major public sector organizations meet to relevant ministries.  environmental change is very important for increased the productions in industries and raised the portion of services. for this, pakistan environmental agency should be opened.  because pakistan is a developing country and unemployment is going to be increased day by day so, pakistan must introduced labour intensive products & also raised the portion of services.  pakistan should liberalize its exports & imports in such a manner that balance of trade achieved through imports and exports for achieving this target the pakistan should pay more attention on technological advancement & capital goods. references arif, a. , ahmad, h. (2013). impact of trade openness on output growth.a skeptic ‘s guide to the rodriguez f. &rodrik d, 1999(1), 299-310. review of economics and development studies vol. 3, no 1, june 2017 68 atif, m. r. , shah, a. i. ,zaman, k. (2012). aggregate exports response to trade openness bound testing aapproach for pakistan. world applied science journal, 17(1), 91-100. chaudhry, i. s., malik, a., & faridi, m. z. (2010). exploring the causality relationship between trade liberalization, human capital and economic growth: empirical evidence from pakistan. journal of economics and international finance, 2(9), 175. din, u.m. ,ghani, e. , siddique, o. (2003). openness & economic growth in pakistan.the pakistan development review, 42(1), 795-807. ellahi, n. , mehmod, z. h. ,zahid, h. , d. , ahmad, z. d. (2009).analyzing empirical relationship between trade openness, industrial value added & economic growth.empirical evidence on pakistan trade, 1(1), 1-16. farrok, k. , (2013). does market size matter for how trade openness affects economic growth? international business research, 4(46).13-48. gulzar, a. , (2007). a strategic framework of liberalizing trade in services of pakistan.potential of trade services in pakistan, 2(24), 1-49. hufbauer, g. c., & adler, m. b. (2009). policy liberalization and us merchandise trade growth, 19802006. kahnamoui, (2012). do trade restriction or openness affected economic growth differently in the presence of export credit. business & economic journal, 2013 (bej-69), 1-12. kahnamoui, f. (2013). does market size matter for how trade openess affects economic growth?. international business research, 6(6), 10. muhammad, t. , binti, n. h. , (2014). trade openness & economic growth. a review of literature asain social sciences, 9(5), 599-612. mustaq, s. , bakkish, k. , hassan, s. , (2012). estimating impact of trade liberalization on tax revenue in pakistan.the pakistan development review, 1(3), 1-39. parikh, a. , stribu, c. , (2004). relationship between trade liberalization, economic growth & trade balance.hwwa discussion paper, 282(1), 1-42 . siddiqui, r., & malik, a. (2001). debt and economic growth in south asia. the pakistan development review, 677-688. spanu, v. (2003). liberalization of the international trade and economic growth: implications for both developed and developing countries. harvard’s kennedy school of government, cambridge, unpublished. review of economics and development studies, vol. 7 (1) 2021, 25-36 25 the role of language style, perceived services and medical qualities on the tourism development in malaysia: mediating role of customer satisfaction muhammad azeem ahmad a , arshia hashmi b , kiran shehzadi c , muhammad atif nawaz d a assistant professor, barani institute of sciences, pakistan email: azeem@baraniinstitute.edu.pk b assistant professor, the university of faisalabad, pakistan email: arshia.hashmi@tuf.edu.pk c visiting faculty, department of english, government sadiq college women university, bahawalpur, pakistan email: kiranshehzadilodhi@gmail.com d department of economics, the islamia university of bahawalpur, pakistan email: atif.nawaz.baloch@gmail.com article details abstract history: accepted 07 march 2021 available online 31 march 2021 recently, tourism development is considered a significant factor to enhance the economic growth of the country and has gained the attention of upcoming studies and regulators. thus, the present research examines the impact of perceived service quality, perceived medical quality, and language style on the perceived tourism development in malaysia. the current research also investigated the mediating impact of customer satisfaction among the nexus of perceived services quality, perceived medical quality, language style, and perceived tourism development in malaysia. this study has used the quantitative method of data collection and also used the smart-pls to examines the relationships among the variables. the results revealed that perceived service quality, perceived medical quality, and language style has a positive association with perceived tourism development in malaysia. the findings also indicated that customer satisfaction positively mediated among the relationships of perceived services quality, perceived medical quality, language style, and perceived tourism development in malaysia. this study has guided to policymakers while formulating the policies related to tourism development that enhance economic development. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: perceived services quality, perceived medical quality, language style, perceived tourism development, customer satisfaction jel classification: l16, l19, m59 doi: 10.47067/reads.v7i1.316 corresponding author’s email address: azeem@baraniinstitute.edu.pk 1. introduction in many businesses, the role of culture prevails with dominant importance. it helps to uplift the perceived requirements mandatory for the industry of tourism. although, many malaysian tourism review of economics and development studies, vol. 7 (1) 2021, 25-36 26 companies have inserted various measures to enable the perceived tourism development. but the certainty of various factors related to qualities and services are asserting a significant role in the development of tourism in malaysia. among the cultural elements, the style of language asserts dominating role for the perceived development of tourism with the collaboration of other corresponding factors. those corresponding elements are discussed with the perceived medical and service qualities inducing a significant impact on the development of tourism in malaysia. mostly, the culture prevails in the service environment but the customer satisfaction also states its importance with the perceived approach. with the judgment of customers, it could be easier to analyze the quality of service that is perceived among the general public. the views of people have been ascertained in the context of service providers which are dominating due to quality and perceived service (shabbir, malik shahab, & janjua saquib, 2017). language style extends the effectiveness and efficiency of communication facilities to be provided to the public for enhancing the perceived tourism development in malaysia. it is upon the experiences which have been availed by the activities of language process for uplifting tourism development. various opportunities have been explored while emphasizing the improvement of local languages in different tourism activities (whitney-squire, wright, & alsop, 2018). people in most countries like malaysia are more curious about their health. therefore, the perceived quality is the most dominating element emphasized by many countries. this states the importance of perceived medical quality inserting an impact on perceived tourism development. in modeling the structures of perceived medical quality, the industry of tourism has achieved considerable rise (sadeh & garkaz, 2019). generally, the satisfaction of customers is the primary aim of every company to enhance their performance as well as profits. therefore, the perceived tourism development has attained a competitive advantage by the insertion of certain elements which could contribute toward industry in malaysia. it is dependent on the men and women for better customer satisfaction and hospitality and tourism are the main prospects to be analyzed (koc, 2020). it is dependent on the facilities of tourism which are introduced in the country or outside. it is also obvious that enhancing tourism development could also be perceived by the approach of contribution to the economy. this states the vital role of sustainability which prevails among the development of tourism as well as the other factors like perceived medical and service quality with language style. there is a dominance of subjective happiness and perception of tourism development (ganji, johnson, & sadeghian, 2020). therefore, it could better analyze the perception of tourism development which helps in maintaining the resident happiness. the tourism industry in malaysia started to grow in the late 1960s. up to 1970, the tourism industry was not considered a significant economic activity since the contribution of primary resources such as rubber and tin was much greater. the malaysian government started developing the tourism industry in 1970 with the aim of growing foreign exchange sales, increasing job opportunities and wages, promoting regional growth, diversifying the economy, and rising government revenue. tdc (tourism development corporation of malaysia) was established in 1972 and is responsible for the development of tourism in malaysia. tdc was not a priority at the time due to financial constraints. in 1987, the ministry of culture, arts, and tourism was created. this ministry helps to support the sector by offering benefits, enhancing the standard of basic amenities, and developing a more detailed policy. the ministry was later moved to the malaysian ministry of tourism, where it remains today. after manufacturing and commodities, tourism is the third-largest contributor to malaysia's gdp. in 2018, this industry contributed around 5.9% of the overall gdp. the tourism industry in southeast asia has grown significantly in recent years, and malaysia was eager to take advantage of this development. the “visit genuinely asia malaysia 2020” initiative was initiated with the aim of meeting the optimistic 2020 goals of 30 million visitors and 100 billion malaysian ringgit in tourism receipts. however, due to review of economics and development studies, vol. 7 (1) 2021, 25-36 27 the outbreak of covid-19, this campaign has been canceled. the number of tourists who visit from 2007 to 2020 is given in figure 1. figure 1: number of tourists who visited malaysia from 2007 to 2020 numerous studies have been conducted on malaysian tourism with several factors but the literature gap does exist regarding the combination of factors like services, language, and most important medical facilities in a single study in order to develop the malaysian tourism industry. this study will address this gap. this investigation will help both the tourist as well as policymakers in different ways. for instance, tourists will understand malaysian tourism in a better way like language barriers, etc. other the other hand will also help the policymakers to understand the issues associated with this industry and also to design tourism-friendly policies. finally will also shine the spotlight on the importance of the tourism industry's contribution to the malaysian economy. 2. literature review in the competitive environment, most of the tourism companies of malaysia are working with numerous efforts to succeed for perceived quality. this could be possible by the way of inducing proper measurement which is placing a significant impact on the perceived tourism development of malaysia. in the malaysian tourism industry, the perceived tourism development has attained considerable rise by the introduction of perceived service quality. the present views of different industries have ascertained the service qualities and have revealed significant facets for customer satisfaction and perceived development (kant & jaiswal, 2017). this is a clear indication of various contributions which are positive for the development of perceived tourism among developed countries. in malaysia, most of the service providers of the tourism industry, customer attraction is considered as a primary objective. this elaborates the importance of customer satisfaction among other competitors which strives for better performance. therefore, the quality of services, as well as perceived service quality, are better tools to measure the level of perceived tourism development. different roles are analyzed with a competent view of perceived service quality. this stated the building of customer satisfaction which induces roles of justice perception and customer trust (cheng, chen, yen, & teng, 2017). there is a significant relationship between cooperation, customer satisfaction, and customer trust. h1: perceived service quality significantly influences the perceived tourism development. the language style is a denomination of facilities that are essential for the upbringing of tourism 20.9 22 23.6 24.5 24.7 25.3 25.7 27.4 25.7 26.8 25.9 25.8 26.1 4.23 0 5 10 15 20 25 30 35 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 tourists vist malaysia (in million) tourist (in million) linear (tourist (in million)) review of economics and development studies, vol. 7 (1) 2021, 25-36 28 development (shehzadi, 2018). this states the compulsory requirement of perceived tourism development which attracts more tourists. the familiarity of foreign people due to the effectiveness of language style cover most of the areas which are countered as a barrier to the tourism development (shehzadi & krishnasamy, 2018). tourism is an essential need of every business for exploring new innovative ideas through the choices of language and opportunity (schneider, 2018). tourism activities are linked with various economic conditions and therefore have a significant impact on the development of tourism. with the familiarity of language style, the perceived tourism development could also be enumerated by the prevalence of other corresponding elements. these elements are contributing a significant portion toward the perceived tourism development usually in malaysia. most of the malaysian tourism industries have attained significant growth by implementing an effective language style. there is a variation of products that usually enhances the perceived tourism development. the impacts of customer engagement and halal tourism are directly linked with the effects of religiosity (abror, wardi, trinanda, & patrisia, 2019). although, many perceived supports have been availed by the tourism development extended by the customer satisfaction. h2: language style significantly influences the perceived tourism development. the satisfaction of patients is the primary aim of every country due to the high level of tourism activities. this is positive devotion to tourism development because of the significant response of customers toward health facilities in other countries like malaysia. it is the future choices of tourism countries like malaysia which enhances the capable measures to develop perceived tourism. different programs have been introduced that could enhance the customary level or toward the qualitative implementation (redlener et al., 2018). many countries like malaysia have adapted improvement procedures for the growth of perceived tourism development. the importance of perceived tourism development is considerably increased by the development of perceived medical quality. many countries like malaysia are found of capabilities for perceived tourism development (chaudhry, nazar, ali, meo, & faheem, 2021). therefore, the effective strategic implementation of perceived medical quality is induced as an important measure to raise tourism development in developing countries. the impacts are ascertained by the behaviors of customer engagement and customer satisfaction which induces a positive impact on industries (vo, chovancová, & tri, 2020). these industries are more crucial about the engagement of people and behaviors of people which increases the tourism development. h3: perceived medical quality significantly influences the perceived tourism development. with the indulging factors of customer satisfaction, a significant mediating role is played among the perceived service quality and perceived tourism development. it is only possible due to the effective inducement of customer satisfaction measures which could bring positive change among the related factors of the tourism industry (sun et al., 2020). the impacts of perceived tourism development and perceptions of tourism desires have been dominant in residential people (wu, kim, & wong, 2020). some dimensions of perceived service quality have endorsed a significant impact on malaysian tourism development. this states the gross effects which are rendered by the satisfaction and quality measures. joint efforts place a positive influence upon the perceived tourism development in malaysia with the considerable dominance of perceived service quality. while revisiting the efforts of perceived service quality, many dimensions have been uncovered for a variety of people (el alfy & abukari, 2020). while understanding the tourism development, the perceived approach has been increased among the tourism businesses. these are the main contributing role of customer satisfaction which have been endorsed by the perceived tourism development and perceived service quality. cultural differences are related to tourist satisfaction and attitudes of languages in malaysia tourism sectors (de carlos, alén, pérezgonzález, & figueroa, 2019). h4: customer satisfaction significantly and positively mediates among perceived service quality and review of economics and development studies, vol. 7 (1) 2021, 25-36 29 perceived tourism development. businesses of the tourism industry have achieved considerable gain after the inducement of language style which has raised the customer satisfaction level. this also widely contributed toward the perceived tourism development usually in malaysia. after the placement of attachment and images, the support and value of tourism development significantly enhance (oh & kim, 2017). within this, the language style positively illustrates its impact on the perceived tourism development because the ultimate response of customers is prevalent on language style. the orientation of activities is endorsed by the ways of language style which is rendered by the level of customer satisfaction. there is an importance of literacy in knowledge to get familiar with the places of tourism in a literary manner (jiang & yu, 2020). perceived tourism development is widely related to customer satisfaction because of the interfered role of language style (nawaz et al., 2020). this devoted significant measures upon the tourism development which is prevalent on the customer satisfaction and proper budgeting. while indulging the loyalty and complaints, the customer satisfaction could be enhanced by the attachments of the exhibition which are rendered by language styles (zhan, luo, & luo, 2020). h5: customer satisfaction significantly and positively mediates among language style and perceived tourism development. significant linkage has been elaborated among the perceived medical quality and perceived tourism development. therefore, many countries like malaysia have introduced medical qualities for the stability of perceived tourism development. the establishment of casinos in tourism development impacts the sustainability of tourism measures (d. lee, kim, han, & wong, 2020). with the enhancement of perceived medical quality, the impact on perceived tourism development is certain. therefore, effective policies are required to be induced in the tourism industry to counter the aftershocks of medical quality which could impact the development of perceived tourism (nawaz et al., 2021). the value of medical quality is certain in many tourism industries due to variation of risks and fees (habibi & ariffin, 2019). this is an indication of quality experience as well as the negative and positive implications. while countering the aftershocks, the prevalence of customer satisfaction is significantly linked with perceived tourism development and perceived medical quality. it is stated by the implementation of health care facilities which are prominent for the rising temperature of tourism all around the world. numerous attributes are certain with the relevance of customer satisfaction usually in businesses (w. s. lee, moon, & song, 2018). h6: customer satisfaction significantly and positively mediates among perceived medical quality and perceived tourism development. 3. research methods the research examines the impact of perceived services quality, perceived medical quality, and language style on the perceived tourism development and also investigates the mediating impact of customer satisfaction among the nexus of perceived services quality, perceived medical quality, language style, and perceived tourism development in malaysia. this study has used the quantitative method of data collection and used the questionnaires for this purpose. the data has been gathered from the tourist from different countries by using questionnaires. these respondent has been selected randomly and forwarded the surveys by personal visit to the high tourism locations in pakistan. out of total 550 distributed questionnaires, about 410 were used for the analysis purpose with 74.55 percent rate of response. this research has used the smart-pls to examine the relationships among the variables and investigate the discriminant and convergent validity. the complexity of the framework and hypotheses review of economics and development studies, vol. 7 (1) 2021, 25-36 30 testing purpose of the study is the basic reasons to adopt the smart-pls for the analysis. the present study has taken perceived tourism development (ptd) as a dependent variable with six items, while customer satisfaction (cs) has been adopted as the mediating variable with ten items. finally, this study has adopted three independent variables such as perceived services quality (psq) with six items, perceived medical quality (pmq) with three items, and language style (ls) with five items. these links and variables are shown in figure 2. figure 2: theoretical model 4. findings this study has examined the relationships between the items and known as convergent validity and the part of measurement model assessment. the figures have shown that the cr and alpha values are not lower than 0.70, and the loadings and ave values are not smaller than 0.50. these values have exposed that the relationships among items are very high and valid convergent validity. these values are highlighted in table 1. table 1: convergent validity constructs items loadings alpha cr ave customer satisfaction cs1 0.877 0.917 0.932 0.635 cs10 0.735 cs2 0.657 cs3 0.806 cs5 0.781 cs6 0.905 cs7 0.718 cs9 0.862 language style ls1 0.858 0.838 0.889 0.621 ls2 0.657 ls3 0.890 ls4 0.902 ls5 0.578 perceived medical qualities pmq1 0.906 0.710 0.790 0.563 pmq2 0.671 pmq3 0.646 perceived services qualities psq1 0.840 0.911 0.930 0.689 language style perceived services quality perceived medical quality customer satisfaction perceived tourism developmen t review of economics and development studies, vol. 7 (1) 2021, 25-36 31 psq2 0.892 psq3 0.794 psq4 0.720 psq5 0.835 psq6 0.888 perceived tourism development ptd1 0.732 0.807 0.865 0.564 ptd2 0.683 ptd4 0.746 ptd5 0.838 ptd6 0.746 this study has also examined the relationships between the variables that are known as discriminant validity and also the part of measurement model assessment. the figures have shown that the heterotrait and monotrait (htmt) ratios are not larger than 0.85. these values have exposed that the relationships among variables are very low and valid discriminant validity. these values are highlighted in table 2. table 2: discriminant validity cs ls pmq psq ptd cs ls 0.763 pmq 0.600 0.711 psq 0.278 0.456 0.461 ptd 0.653 0.697 0.779 0.444 figure 3: measurement model assessment review of economics and development studies, vol. 7 (1) 2021, 25-36 32 finally, the relationships among the constructs have been examined that are part of structural model assessment. the results revealed that perceived service quality perceived medical quality, and language style have a positive association with perceived tourism development in malaysia and accept h1, h2, and h3. in addition, the findings also indicated that customer satisfaction positively mediated among the relationships of perceived services quality, perceived medical quality, language style, and perceived tourism development in malaysia and accept h4, h5 and h6. these relationships are highlighted in table 3. table 3: path analysis relationships beta s.d. t statistics p values l.l. u.l. cs -> ptd 0.099 0.056 1.767 0.040 0.016 0.198 ls -> ptd 0.487 0.097 5.002 0.000 0.332 0.627 pmq -> ptd 0.261 0.059 4.454 0.000 0.171 0.361 psq -> ptd 0.107 0.051 2.089 0.020 0.192 0.531 ls -> cs -> ptd 0.062 0.034 1.790 0.038 0.009 0.124 pmq -> cs -> ptd 0.026 0.011 2.364 0.024 0.003 1.035 psq -> cs -> ptd 0.022 0.006 3.667 0.014 0.011 1.012 figure 4: structural model assessment 5. discussions and implications the study results have revealed that perceived service quality has a positive relationship with perceived tourism development. the success of tourism is dependent on the satisfaction of tourists towards the quality of services provided by the concerned tourism company. if the tourists find the review of economics and development studies, vol. 7 (1) 2021, 25-36 33 service quality of tourism according to their requirements, all the matters relevant to tourism are managed in a better way, and the perceived company's development is high. these results are in line with the past study of suess, baloglu, and busser (2018). this industry examines tourism management and tourism service quality (tourism performance). this study states when the tourists are satisfied with the services provided by tourism, the company promotes, and management gets more serious about its functions to improve the service quality. the study results have also revealed that language style has a positive relationship with perceived tourism development. tourism is an industry that provides its services both at the national and international level, and it includes many activities almost related to all social, economic, cultural, and geographical areas. as language is essential to communication, the language style affects the perceived tourism development. these results are in line with the past study of liu, dou, li, and cai (2020), which indicates that the tourism company where the management adopts the convenient and respectful language style, it becomes easy for the management to carry its functions, as in this way it finds a positive response from the stakeholders and industry develops. the results have indicated that the perceived medical quality has a positive relationship with the perceived tourism development. the stakeholders' perception of the high quality of medical services provided by the tourism companies motivates all the stakeholders to cooperate with the management in its different functions, and it develops tourism. these results are supported by the past study of park, lee, yoo, and nam (2016), which shows that the tourism company which takes care of the health of the stakeholders gives a better medical facility to its workers and tourists. it benefits tourism in two ways. first, the company personnel takes an active part in their functions, and the tourists who are satisfied with the medical services of tourism-company promotes it. moreover, the study results have revealed that the customers' satisfaction plays a mediating role between the customers' perception of service quality and perceived tourism development. these results are approved by the past study of lin, chen, and filieri (2017), which indicates that emotive satisfaction is developed in the customers when the customers perceive that the tourism company takes care of their facility and give them good quality services. this emotive satisfaction results in a high rise in marketing and high financial position. the results have also indicated that the customers' satisfaction is a significant mediator between the language style and perceived tourism development. these results are approved by the past of moghavvemi, woosnam, hamzah, and hassani (2020), which indicates that the customers' satisfaction is developed by the adoption of convenient and respective language style adopted and this high customers' satisfaction results in the high rate of tourism development. in addition, the study results have shown that the customers' satisfaction is a considerable mediator between the perceived medical quality and the perceived tourism development. this study is approved by the previous study of abror et al. (2019). this study has a remarkable theoretical significance. it contributes a lot to the literature on the economy as it deals with the perceived tourism development. the study throws ample light on the influences of three social factors like perceived service quality, language style, and perceived medical service on the perceived development of tourism-company. this study also makes a great contribution to the existing literature with the introduction of customers' satisfaction as a mediator between perceived service quality, language style, and perceived medical service and the perceived tourism development. the study also has an empirical implication along with the theoretical implication. this literary work out is a guideline to the tourism management in an emerging economy and the government as it leads to ways how to accelerate the rate of tourism development and how to improve the image of the local tourism industry. it guides that the perceived tourism development can be accelerated through the high perception of service quality, easy-to-understand and respectful language style, and the customer's perception of medical quality. review of economics and development studies, vol. 7 (1) 2021, 25-36 34 6. conclusion and limitations our study analyses that the customers' perception of high-quality services from the tourismcompany accelerates the perceived tourism development. the tourism company makes rapid development when the customers have much satisfaction towards the services provided by the company. the study also implies that the language style adopted by the tourism representatives influences the perceived tourism development. tourism is a large industry encompassing a wide range of activities, and it provides services both to local people and foreigners. the language, which is essential of communication between company representatives and outsiders, must be easy to perceive and respective so that the overall performance of the tourism industry is high. the customers (tourists) who depend on the survival and development of the tourism, when having the perception that the tourism company is providing them good medical services, they prefer the tourism services of this company. thus, the tourism company's perceived development is high. the customers' perception of better general services and medical services from the tourism-company and the use of easily perceived and respective language for communication with the customers' enhance the customers' satisfaction and thereby accelerate the perceived tourism development. the current study has a number of limitations that must be filled by scholars in the future at the time, replicating the proposition of this study. the scope of this study is limited because the author has addressed a number of factors like perceived services, language style, and perceived medical services, which may affect the perceived tourism development. whereas there are a number of economic and geographical elements which have deep impacts on the perceived tourism development, but all these elements have no place in this study. it is recommended to the scholars in the future to enhance the scope of the study with the introduction of some other drivers of perceived tourism development. this study examines the perceived tourism development in malaysia which have geographical characteristics, economic conditions, and social standard different countries. in this way, this study is equally suitable for other countries. future authors must also talk about the tourism industry of some other countries to overcome this problem. references abror, a., wardi, y., trinanda, o., & patrisia, d. 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(2020). exhibition attachment: effects on customer satisfaction, complaints and loyalty. asia pacific journal of tourism research, 25(6), 678-691. doi:10.1080/10941665.2020.175426 review of economics and development studies, vol. 6 (4) 2020, 893 904 893 analysing the demand for islamic financial products: the role of religiosity and financial literacy (a case study of district peshawar, khyber pakhtunkhwa) nabila khan a , nadeem iqbal b , asfandyar c a assistant professor in economics, higher education department, khyber pakhtunkhwa, pakistan email: khanbaila@ymail.com b assistant professor at the department of economics university of peshawar, pakistan email: nadeemiqbal@uop.edu.pk c assistant professor in economics, higher education department, khyber pakhtunkhwa, pakistan email: asfandyar1980@gmail.com article details abstract history: accepted 22 dec 2020 available online 31 dec 2020 theory of demand is one of the core areas in micro economics. various price and non-price factors exists to determine consumer demand for a particular good or service, but the modern economists, mainly behavioral economists gradually suggests that psychological factors may also affect the individual decisions regarding demand for a good and service. therefore, the present study seeks to analyze personal religiosity together with financial literacy as a determinant of consumer demand for islamic financial products. fieldwork was carried out for the study in three public sector universities of district peshawar, khyber pakhtunkhwa. the data was collected from a sample of 679 muslim male and female through structured questionnaire. the econometric technique used to test the data includes ordered logistic regression. the key findings of the study suggests that religiosity and financial literacy has a significant impact on consumer demand through directly influencing their buying attitude and purchase intention towards islamic financial goods and services, concluding them as an important determinant of demand for islamic financial products within an islamic society. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: religiosity, financial literacy, consumer behavior, buying attitude, purchase intention jel classification: d11, z12, z19 doi: 10.47067/reads.v6i4.288 corresponding author’s email address: khanbaila@ymail.com 1. introduction one of the non-price factors affecting individual and market demand of a product is the taste and preferences of the consumer. these preferences are influenced due to various economic, social, psychological and cultural factors. religion is an important element of culture having great influence on the individual’s life. though cultural dimensions are very vibrant and dynamic, but religion forms a static pillar in the society, considered as an important construct in understanding consumer behavior. therefore, it is essential to study the review of economics and development studies, vol. 6 (4) 2020, 893 904 894 impact of religion on consumer choices. personal religiosity influences the preferences of the consumer when buying different products that ultimately affects his buying decision (y. choi et al., 2013; muhamad & mizerski, 2013; swimberghe et al., 2011; y. choi, 2010). religiosity is one of the key concepts in shaping consumer behavior and influencing his preferences. it has not only impact on people’s attitudes and values but has also influence on their behavior (kim, 2004; chamberlain and zika, 1992; mcdaniel and burnett, 1990; taylor, 1979). theory of consumer behavior provides a base for understanding the demand for a product. the conventional consumer under micro economic theory is always rational, would choose to consume a good or service that maximizes his utility. the person with a higher religiosity derives a higher satisfaction or utility from the consumption of the goods and services that comply with his religion. therefore religiosity plays an important role in determining consumer demand by influencing their behavior towards consumption of a certain product. numerous studies are available on the relationship between religiosity and consumer buying behavior, with the common conclusion that the relationship is true. though different aspects of the consumer buying behavior are being studied with the influence of religiosity by many researchers, yet it is felt that such a complex behavior cannot be properly understand with merely the study of the consumption of perishable or durable goods. in fact, religiosity is the internal belief and a feeling that reflects in the acts of the consumer, therefore, such an impact on consumer behavior can best be captured by the consumer personal financial decisions. muslims consumers with high religiosity refer to their religion while making consumption decisions, expected to buy products that are comply with shariah (hanzaee & ramezani, 2011; shah alam et al, 2011). muslim consumers value the products not contradictory to their religious faith; they have a positive influence of halal brand logo on their purchase intention (ali et al, 2018; aziz & chok, 2013). the muslim consumers of sweden highly prefer and consume halal products which show the impact of religiosity on their consumption choices (campanella, 2016). the highly religious people are more inclined towards the purchase of non-alcoholic soft drinks as compared to the less religious people in burkina faso (nasse et.al. 2019). consumers having strong religious belief have a positive approach towards religious products (agarwala, 2019). religiosity has a considerable impact on consumption decisions of the consumer (andria et al, 2012; alam et al, 2011; taks & shreim, 2009). it is an important factor that forms people’s insight about life, including issues related to safety and security of life. religious people believe that a dependence on life insurance is just similar to challenge god’s will. conventional insurance is not in accordance with the islamic faith because of the essentials of riba (interest) and uncertainty (gharar) (rahaman, 1979). the impact of islamic belief on the demand for life insurance policies in nigeria was examined, resulted as islamic belief have a strong impact on demand for life insurance policies. it was found that more religious muslims have less demand for conventional insurance policies as compared to less religious muslims (samson and bamidele, 2013). further work was done by different researchers to examine the importance of islamic issues in bank selection criteria. it was found that 70 percent of the muslims in jordan give value to religious attributes when they choose an islamic bank. more than 60 percent of the people interviewed in a financial survey prefer islamic products over conventional products, regardless of the price (naser, jamal, and al-khatib, 1999). similarly, in turkey, the majority the customers interviewed of the islamic banks gave a response that religion was the prime motive for them to use islamic products and services (okumkus, 2005; metwally, 1996). the construct of religiosity have a considerable impact on the bank selection criteria of the customers. religiosity has appeared to have a significant impact for islamic banking services in pakistan on the purchase intention of the customers (bakar et.al. 2019). similarly, religious motivation was found to be one of the factors affecting costumer’s decision making regarding islamic bank services in malaysia. (zainuddin et al, 2004). the influence of religiosity on buying behavior of muslims in bangladesh in selecting islamic financial products was found to plays a significant role in the purchase intension to select islamic financial products (farhana, 2014). the buying behaviors of muslim consumers towards financial goods are greatly affected by religiosity (ashraf, 2016). religiosity is said to have a great influence on the demand for islamic financial instrument as religious people are more attracted towards it but, an important construct is derived from the literature that is also having an influence on financial decision making. that is, financial literacy. it is the ability of an individual to understand financial instruments and terms to plan his finance in an effective way. it is the individual’s knowledge and skill that allows him to make well informed and effective financial decisions (thilakam, 2012). review of economics and development studies, vol. 6 (4) 2020, 893 904 895 financial literacy is one of the most researched areas more than the last few decades (agnew et al. 2015: bhushan et al, 2013). numerous studies indicates that male execute financially better as compared to females (arrondel et al, 2013; kharchenko & olga, 2011; koenen and lusardi, 2011; al-tamimi & hussain, 2009; lusardi and mitchell, 2008). financial literacy increases the management abilities regarding day to day financial matters and hence reduces the undesirable consequences of bad financial decisions (delafrooz and paim, 2011). it is showed that financially illiterate people may end up with low accumulation of wealth; further such people are also less likely to utilize the amount after retirement (lusardi et.al, 2010). the low financial literacy ultimately increases the likelihood of poor decisions regarding financial matters, while the improved financial literacy carries about higher involvement in financial planning (shafii et. al, 2009). financial literacy helps in taking sound financial decisions by the consumer. it is the ability to plan individuals finance in an effective way. oecd conducted a relevant study in 14 countries around the world, concluding that financial illiteracy is widespread in countries, irrespective of their development or under development (atkinson and messy (2012). fig. 1 below shows the summary of the different dynamics on the literature conducted on the link with religiosity and financial literacy with consumption behavior of an individual towards the financial products. literature review: fig 1. 2. problem statement and research question: the islamic religion has a strong impact on the purchase decisions of muslim consumers (alam et. al, 2011). the notion of religiosity can best clarify the differences in behavior among various consumer groups. it is an important factor influencing consumer buying behavior (delener, 1990). religiosity is the commitment of a person to his or her religion which may be reflected in his attitudes and behaviors (johnson, et. al, 2001). literature shows that people having financial understanding and knowledge are expected to take sound financial decision. lacking the knowledge regarding islamic financial products may lead to affect the consumption decision of the individual. therefore, a higher degree of religiosity requires a greater financial knowledge of the attributes of the product as well so as to exhibits their true impact on the demand regarding islamic financial instruments. this may put the research question that:  what is the impact of personal religiosity on consumers demand for islamic financial products in an islamic society? (captured through the purchase of islamic insurance policy, shares, leasing automobile and opening a bank account).  does financially literacy have an impact on consumer demand for islamic financial products? 3. objectives: the main objectives of the study are: consumer behaviour fnancial literacy retirement plan credit score purchasing policies savimg certificates property purchse decesion religiosity bank selection criteria insurance policies leasing an automobile house financing interst free account investment decesion overall fp review of economics and development studies, vol. 6 (4) 2020, 893 904 896  to find out whether personal religiosity influence behavior of the consumers (buying attitude and purchase intention as proxy) towards demand for islamic financial products in a positive manner.  to investigate whether financial literacy of the consumers has influence on their buying attitude and purchase intention towards islamic financial products. 4. hypothesis the null hypotheses to be tested are presented as below: ho1: the higher degree of religiosity has no impact on the purchase intention of muslim consumers towards islamic financial products. ho2: the higher degree of religiosity has no impact on the buying attitude of muslim consumers towards islamic financial products. ho3: the higher financial literacy has no impact on the purchase intention of muslim consumers towards islamic financial products. ho4: the higher financial literacy has no impact the buying attitude of muslim consumers towards islamic financial products. 5. research method: data was collected through purposive random sampling from 679 faculty members of the three major government sector universities of district peshawar namely, university of peshawar, university of agriculture, peshawar and islamia college university peshawar. the primary data was collected through structured questionnaires that contain number of items to test consumer behavior, financial literacy, personal religiosity and other demographics. 6. composition of the questionnaire: a five section questionnaire was developed comprising questions regarding religiosity, buying attitude, purchase intention, financial literacy and demographic. the first section brings out information that how different dimensions of religious belief, religious practice and knowledge about religion, religious experience and consequence make a contribution to the muslims religiosity. the next section shows attitudes and interest of the people towards buying the islamic financial products. the third section depicts information on consumer intentions behind purchasing the islamic financial products. the next section of the questionnaire provided information on consumer financial literacy level, which may contribute to the choice of financial products and the last part shows age, marital status, qualification and monthly income of the respondents. the participants were requested to rate majority of the questions on an ordered 7-point likert scale to measure the strength of their response. it is to note that 1 show strongly disagreement where 7 indicate a strong agreement. a likert scale with 7 ranking is more reliable as it allows more differentiation of responses as compared with a 5-point likert scale (lietz, 2010; munshi, 1990). the structure of the questionnaire is shown in table: 1 below. table: 1. composition of the questionnaire section of the questionnaire variables no. of questions rating scale a religiosity 9 categorical b buying attitude 6 7-point likert scale c purchase intention 4 7-point likert scale d financial literacy 11 7-point likert scale e demographics 5 categorical 7. econometric model: the dependent variable of the study is the consumption behavior of the individual towards demand for islamic financial instruments, proxies by buying attitude and purchase intention while the independent variable is religiosity and financial literacy including a set of control variables. the ordered logistic regression is applied review of economics and development studies, vol. 6 (4) 2020, 893 904 897 to show the consumer preference for the islamic financial products. the dependent variable is ranked at 7 point likert scale ordered from strongly disagree to strongly agree. y = β0 + β1rel + β2 finlit + β3 age + β4 gen + β5 marst + β6 qual+ β7 inc +ui where, y= consumer demand for islamic financial instruments rel = religiosity finlit=financial literacy age= age gen = gender mart= marital status qual= qualification inc= income µi= error term 8. measurement of variables: 8.1 religiosity religiosity is a multidimensional concept therefore; the use of a multi-item model of religiosity provides a good understanding of its nature and provides a high validity (wilkes et al. 1986). religiosity is divided into five dimensions that are belief, practice, knowledge, experience and consequence (ilyas, 1992). these dimensions of religiosity are measured through glock and stark model (1968) with some modifications according to the need of the study. the dimension of practice comprises questions relating to actions set by religion. the first dimension is prayer (nimaz). the next is reciting quran (tilawat), performing nawaafil and giving obligatory financial payments, i.e zakat. the religious dimension of knowledge contains questions regarding basic knowledge of an individual about religion. the experience of religion depicts the practice of the religion that is the good and bad feelings while doing something according or against faith, being afraid of allah, the faith of punishment and reward by allah for doing something against or according to the will of him. the fifth dimension of religiosity that is consequence refers to the significance of religion in one’s life and how religion influence an individual decisions about different aspects of life including economic and financial decisions. 8.2 buying attitude consumer buying attitude is the favorable and unfavorable feeling of a person towards a good. the dependent variables of the study to signify consumer demand for islamic financial products are saving certificates, insurance policy, saving accounts and leasing of automobiles. each of these instruments is a proxy for financial decision making of individuals. in order to measure the influence of religiosity on consumer demand for islamic financial products, two aspects of consumer behavior are used, the buying attitude and the purchase intention (farhana, 2014). it is measured through consumer’s assessment, feelings and inclination towards islamic financial products. 8.3 purchase intention purchase intention demonstrates the individual decision to execute an action. it indicates the choice of an individual while carrying out a specific course of action. it is the willingness to buy a product. purchase intention of consumer regarding islamic financial products is measured through an individual’s plan to perform some action in definite period of time. 8.4 financial literacy financial literacy is measured through items modified accordingly (taqadus, 2013) about basic financial knowledge and terms along with each person's use of standard financial services. basic literacy items were designed to measure basic financial knowledge of an individual. the financial literacy is calculated by asking questions related to basic financial knowledge, financial behavior and attitude of the individual. they were asked to provide information on their understanding regarding financial knowledge. difficult and complicated terms review of economics and development studies, vol. 6 (4) 2020, 893 904 898 and questions were avoided to ask as the purpose of the measurement of financial literacy was to assess the basic knowledge about the use of financial product rather than checking scores for accounting and numerical concepts. 8.5 demographic variables the degree of religiosity, consumer buying behavior and the significance of selection criteria vary among consumers of diverse demographic. the consumers with different age, marital status, gender, qualification and income level may exhibit difference in their selection criteria towards different goods. hence, in the present study, to examine the moderate influence of religiosity on consumer buying behavior, these demographic factors are taken into consideration. the consumer demographic profiles included in the questionnaire consist of consumer’s age, his gender, marital status, qualifications and monthly income. 9. results and discussion: with ordered logistic regression, the econometric model is estimated. the dependent variable of the study is consumer demand for islamic financial product captured through the consumer buying attitude and purchase intention. consequently, we have two ologit regression models. starting with the purchase intention as dependent variable, the coefficients and their associated probabilities may be seen at table 2. the coefficient of religiosity is estimated as 1.66. it may be said that for a one unit increase in religiosity (i.e., going from lower to high), there is 1.6% increase in the log odds of higher purchase intention towards ifp with all other variables in the model held constant. similarly, for a one unit increase in financial literacy (i.e., from lower to high), we would expect a 0.86% increase in the log odds of higher purchase intention towards ifp, assuming all other variables of the model as constant. a positive sign of coefficient indicates an increase in the predictor enhance the predicted probability. it may be seen that, religiosity and financial literacy are statistically significant in the model. this shows their strong influence on consumer purchase intention towards islamic financial products. table: 2. ordered logistic regression: ------------------------------------------------------------------------------------------------------------------------- purchase int.| coef. std. err. z p>|z| [95% conf. interval] -------------+------------------------------------------------------------------------------------------------- religi~y 1.663796 .442265 3.76 0.000 .7969716 2.53062 financ~y .3.524048 .896238 3.93 0.000 .767452 5.28064 age .6897486 .1587115 4.35 0.000 .3786797 1.00081 gender* -.2184323 .2676157 -0.82 0.414 -.7429495 .306084 marita~s* .6290914 .4798 1.31 0.190 -.3112994 1.56948 qualif~n 1.3415 .330928 4.05 0.000 .6928918 1.990108 income 1.04646 .2723919 3.84 0.000 .3786797 1.00818 -----------+-------------------------------------------------------------------------------------------------------------- table: 3. ordered logistic regression --------------------------------------------------------------------------------------------------------------------------- buying at..| coef. std. err. z p>|z| [95% conf. interval -------------------------------------------------------------------------------------------------------------------------- religi~y .9516368 .194900 4.88 0.000 .569638 1.33363 financ~y .8644631 .281637 3.07 0.002 .3124631 1.416463 age .419299 .145139 2.89 0.004 .1348315 .703766 gender* -.2936285 .357184 1.81 0.457 -1.0682 .480943 marita~s* .6478909 .837265 2.17 0.070 -.052178 1.34796 qualif~n 1.815722 .145749 4.88 0.030 3.45673 .1747115 income . 7111498 .395196 -0.74 0.000 .4254854 .9986142 ---------------------------------------------------------------------------------------------------------------------------- regressing for buying attitude, table 3 summarizes the results of ologit. in a very similar way, we may interpret the value of coefficients as, a one unit increase in religiosity; a 0.95% increase in the log odds of more favorable buying attitude towards ifp with other variables as constant. in a same manner, when the individual review of economics and development studies, vol. 6 (4) 2020, 893 904 899 moves from lower to higher financial literacy, the likelihood of choosing islamic financial goods and services increased by 0.86%. it is important to mention that the sign of coefficient from estimation of the ordered logistic regression cannot exactly determine the path of the relationship between the predictor variable and the likelihood of choosing an alternative; the predicted probabilities (marginal effect) needs to be computed for true understanding. table 4 shows that the probability of a religious consumer of being higher purchase intention towards islamic financial product is 0.36. for buying attitude, it is likely to say that the probability of a religious consumer of being more favorable buying attitude towards islamic financial product is 0.017. the probability of a higher financially literate consumer towards purchasing ifp is 0.48 while the likelihood of his being more favorable attitude towards buying ifp is 0.034. table: 4. marginal effects: --------------------------------------------------------------------------------------------------------------------------------------- purchase int.| dy/dx std. err. z p>|z| buying at..| dy/dx std. err. z p>|z| ------------+------------------------------------------------------------------------------------------------------------------------- religi~y .3612563 .09182 3.93 0.00 religi~y .017195 .0083 2.11 0.035 financ~y .4875986 .12035 4.05 0.000 financ~y .091259 .0346 2.63 0.009 age .0090796 .00496 -1.83 0.067 age .006288 .00365 1.72 0.085 gender* .0028754 .00379 0.76 0.448 gender* .005917 .0091 0.65 0.515 marita~s* -.0093898 .00938 -1.00 0.317 marita~s* -0.9378 .01036 -1.33 0.183 qualif~n .6478909 .01812 1.67 0.095 qualif~n .282027 .16013 1.76 0.078 income .0140363 .00788 1.75 0.081 income .013838 .00593 2.33 0.020 ----------+-------------------------------------------------------------------------------------------------------------------------- table: 5. summary of the results predictor variable response variable purchase intention buying attitude religiosity *** ** financial literacy *** *** age * * gender -------- marital status ---------- qualification * * income * ** *** indicates significance at p ≤ 1%; ** indicates significance at p≤ 5%; * indicates significance at p≤ 10%. the dashed line indicates insignificance. the results suggest that consumers with difference in religiosity exhibit substantial differences in their intention towards purchase of islamic financial products. consumers with higher degree of religiosity have tended to have more interest in financial products compliant with shariah (omer, 1992). the existent research related to religiosity with that of purchase intention offered diverse results about the influence of religiosity on consumer purchase intention towards islamic financial goods. most of the studies have found religiosity as the central cause for muslims consumers to purchase islamic financial goods. the findings of the present study support the previous researches and declared that religiosity plays a vital part in the determination of consumer purchase intention of islamic financial products. the study reveals that religiosity affects muslim consumers buying attitude and purchase intention. it is recommended that muslims consumers with higher level of religiosity tend to purchase islamic financial goods, as it is comply with their financial desires and do not challenge their religious values (yun, et al., 2008). it is found that consumers with higher level of religiosity give greater importance to islamic financial products then consumers with low level of religiosity. this contemporary finding of the present study can be supported by previous similar studies where it was found that religiosity is an important construct in influencing consumers buying attitudes towards islamic financial products (farhana, review of economics and development studies, vol. 6 (4) 2020, 893 904 900 2014). this finding indicates that consumers with higher religiosity place momentous importance on product characteristics and are more conscious about its qualities while purchasing financial goods or services. this study clearly reveals that religiosity is an important determinant that enhances the likelihood of consumer buying attitude to be more favorable towards islamic financial products in muslim consumers. the findings of the study clearly indicate that financial literacy has considerable effects on consumer buying attitude and purchase intention. this is the direct effect of the financial literacy on dependent variable; however, we may examine its indirect effect on religiosity as well. previous literature is available on the similar relationship, e.g. smith, (2007) studied the relationship of religiosity and financial decision making, showing that more religious people tend to have more conscious about making financial decisions that is quite line up with findings of this study, as it is found that consumers with higher financial literacy tend to have more influence of religiosity on their buying behaviour, but the same finding is not supported by murphy, (2013). another study by renneboog & spaenjers, (2009) studied the relationship of religion and consumer financial decision making, it is found that, people having religious believes are more tend to save and invest less in risky assets, this finding also supports the results of this study and proves that religiosity have an impact on financial decisions. similar results are given by hilary et al, (2008) who found that positive relationship exists between ones religiosity and risk taking or aversion. shu et al, (2010) also examined that religious people are more risk averse and religious beliefs influence the investment decisions and risk taking behaviour. hess, (2010) studied the impact of religiosity on consumers financial decisions and found that more religious people have considerably higher credit scores indicating religion have strong impact on their financial decisions. 10. conclusion religiosity has becoming a key factor in determining consumer behavior, it as an important determinant of consumer demand towards islamic financial products. this study used the construct of religiosity in explaining consumer buying behavior towards islamic financial products and has provided empirical evidence of the overall influence of religiosity in an islamic background. the study arrived with the conclusions that religiosity is a strong predictor of consumer behavior that may have significant impact on the consumer demand for islamic financial products through influencing their attitude towards buying and intention towards purchasing them. this study also concludes that financial literacy has affirmative effect on consumer buying behavior with a partial effect of qualification and income. the effect of other demographic variables like gender and marital status on buying behavior is nil. the study provides evidence that religiosity plays a crucial role in influencing buying behavior of muslim consumers regarding islamic financial products and provide vital suggestions for policy making. 11. significance and contribution: the empirical testing of the construct of religiosity in determining consumer demand is a major contribution of this study. the construct of religiosity has not been examined for its influence on consumer behavior to assess their demand for financial instruments in pakistan. the research is unique in investigating empirically the influence of religiosity on consumer demand for financial instruments in the context of pakistani muslim culture, which has not been tested so far. the results of the study reveals that religiosity may considerably influence the consumer behavior by influencing his buying attitude and purchase intention, signifying that religiosity is a key determinant in influencing consumer behavior. thus, to convert or divert the consumer behavior in favor of their products, the marketers and policymakers may benefit from the construct of religiosity. utility is an important concept in consumer behavior literature, defined as the degree of satisfaction derived from the consumption of a product or service. if we relate the concept of utility with religiosity, it interestingly gives a new dimension. the consumer, who is getting higher utility from islamic financial goods and services, or from other conventional goods like food items, clothing, cosmetics, medicine etc depending on his religiosity, might not consider price as an important determinant to influence his demand. thus, the firms may have benefit from this less elastic demand based on different degrees of consumer’s religiosity. the consumer financial understanding plays a crucial role in affecting the demand for financial products; therefore, the promotion of new financial products must be executed with providing the consumer with an awareness and understanding of the attributes of the product so as to achieve the desired result. review of economics and development studies, vol. 6 (4) 2020, 893 904 901 references agarwala, r., 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(1992). on the relation between meaning in life and psychological well‐being. british journal of psychology, 83(1), 133-145 review of economics and development studies, vol. 6 (4) 2020, 893 904 904 appendix “a” theoretical framework: fig 2. table 6: descriptive statistics of the overall sample size: gender male 509 75% female 170 25% marital status unmarried 217 32% married 462 68% qualification master’s degree 115 17% m.phil. degree 285 42% p.h.d degree 204 30% post p.h.d degree 75 11% monthly income less than rs.60000 0 0% rs.60001–70000 190 28% rs.70001–80000 136 20% rs.80001–90000 156 23% rs.90000 and above 197 29% categories no. of sample %age of total sample age 24-30 75 11% 31-37 170 25% 38-44 190 28% 45-51 122 18% 52above 122 18% demand ability to pay (income of consumer) willingness to pay (his prefrence + desire to purchase) purchase intention (willingness) buying attitude' (prefrences) review of economics and development studies, vol. 7 (1) 2021, 1-12 1 dynamic impact of gold prices, oil prices and exchange rate on stock market performance: a case of pakistan’s stock exchange (kse 100 index) asif ali a, muhammad kamran khan b, hamid ullah c a islamia college peshawar, pakistan email: asifalisafi53@gmail.com b bacha khan university, pakistan email: drkamrankhan@bkuc.edu.pk c islamia college peshawar, pakistan email: hamidullah@icp.edu.pk article details abstract history: accepted 25 feb 2021 available online march 2021 currently emerging markets are passing through economic turmoil due to considerable increases in the prices of oil and gold with significant variation in the foreign exchange market. all the macroeconomic variables are touching the highest value which was never occurred in the history of pakistan. taking advantages of the current situation the study has examined the impact of gold prices, oil prices and exchange rate on stock market performance. for this purpose, the study has used daily data of these macroeconomic variables for the period of 2003 to 2018. by using time series data analysis, it reveals that there is no cointegration or long-term relation among these variables; however, the vector autoregressive model showed significant short-term relation among the securities market performance, foreign exchange rate, prices of oil and gold. the analysis also suggests that significant changes in the prices of oil, foreign exchange rates and the prices of gold have a negative lagged effect on the performance of the stock market. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: gold prices, oi prices, securities market performance, foreign exchange rate jel classification: e31, e64, f31 doi: 10.47067/reads.v7i1.309 corresponding author’s email address: drkamrankhan@bkuc.edu.pk 1. introduction investors are interested in that sections of the economy, which give them high return with little volatility. they are also interested in that sectors where a consistent upward trend is found in the prices of securities market. by this way, they can exploit the upward trends in prices for profit and wealth maximization through several available opportunities for investment. it includes investment in the equity market, commodity market, and debt market. for equity and debt markets, the main financial instruments are shares and bonds respectively. while in commodity markets gold and crude oil futures are the most valuable commodities. globally trade-in foreign exchange market is deemed to be the biggest financial market. the mentioned markets contribute substantially in country’s economic review of economics and development studies, vol. 7 (1) 2021, 1-12 2 development process. therefore, the association between prices of gold, oil, foreign exchange rates and stock returns (kse100 psx) has been analyzed. the central idea of the study is to analyze securities market and how the volatility of these macro-economic variables affect securities market behaviour and vice versa. the securities market is considered as a key instrument for both economic and industrial development of a country. the market is very sensitive, so it is necessary to consider all the factors influencing securities market. the securities market index indicates economic strength of a country. variation in the market index is a serious concern for both the government and investors. pakistan stock exchange is one of the leading stock markets in the world. 1therefore, it has attracted investors from worldwide. gold is a valuable commodity, contributes significantly to the economic development of a country. vitality of gold for an economy has several reasons (bhunia, 2013)). it is kept as a reserve on the back of currency; used as a medium of exchange; a secure source of investment and many more. the value of gold is determined in the international market, which has been traded at the same price globally. that is why investors considered gold as a safe haven in the period of recession bhunia and das (2012). economic theory suggests that during a crisis, the prices of equity falls while the price of gold rises. so, the investors tend to invest in gold in order to hedge the risk of inflation. by this way there is a downward trend the stock market even in some cases the market has been crushed. several studies suggest that at the time crisis stock market return is low so investors buy gold, while in prosperity the stock market return is high, they sell gold and buy stocks baur and lucey (2010). currently, pakistan economic indicators are unpredictable, gold touches the highest value which was never occurred in history. along with this due to poor economic policies, the stock market return is in a downward spiral. therefore, investors feel reluctant to invest in stocks. as a result, the demand for gold has been increased.2 today’s world economy largely depends on oil. due to industrialization and expansion of the transportation industry, the demand for oil is multiplying. since the operation of industries largely depends on oil, therefore, a little variation in oil price may affect stock market returns (ciner, gurdgiev & lucey, 2013)). however, this fluctuation depends upon the nature of the economy that either the country is importer or exporter of oil. currently, in pakistan, the prices of oil are on the rise, which has adversely affected industries returns kilian and park (2009). it is because the prices of factors of production largely depend on oil prices. a small increase in prices of oil brings a hike in the prices of goods and services. that is why it may affect the performance of industries and securities market at large. foreign exchange rate is one of the key macro-economic variables. it is extremely important for foreign trade and overall economic development. fluctuation in the foreign exchange rate can alter both securities market returns and its trade volume (kakhani, 2012; & rahman, 2011). currently, in pakistan, fluctuation in exchange rate is a serious concern for the government, policymakers, and investors as well. in this situation forecasting of exchange rate seems difficult. government is trying to adopt certain measures to bring stability in exchange rate in order to boost economic activities. studies indicate a positive relationship in securities market return and exchange rate which has been reflected 1 karachi stock exchange ranked third in the world and first in asia in 2014 as per daily times pakistan (2015). 2 according to the express tribune (2016) the country falls in the list of top ten consumers of gold. review of economics and development studies, vol. 7 (1) 2021, 1-12 3 from investors’ behavior (abbas, 2010). they use exchange rate information for investing in stock market. when securities returns are maximum, they dispose their assets in foreign market and acquire home assets. the exchange of assets increases demand for home currency in foreign exchange market by exerting upward pressure on its prices. apart from these, there are several other reasons as well which give impetuous to determination of the foreign exchange. the current study has posed various questions that is there any long term and short run effect of the oil prices, gold prices and exchange rate on stock market performance? the main objective of the study is to examine the long term and short run effect of the oil prices, gold prices and exchange rate on the stock market performance. this study will contribute significantly to policy makers and investors. it is due to the fact that from the last few years pakistan’s macro-economic variables show high volatility which creates chaos in the country. in this situation, it is difficult to make a rational economic decision. now it is high time to study the interdependent association among these variables. this study is mainly motivated by the current variation in prices of gold, oil and foreign exchange rate associated with volatility and downturn in the securities market. the paper contains five sections. section two is about review of literature, section three contains data and methodology, section four covers findings and interpretation and the last section is about conclusion and references. 2. literature review earlier studies had focused on analyzing the association in-between foreign exchange market and securities market. their results revealed that in the presence of these two approaches that are ‘good market approach’ and portfolio balance approach’ (dornbusch & fischer, 1980) could better explain the relationship between the markets. the former approach suggests that variation in exchange rate brings variation in firm’s earnings. it is happened either by foreign trade or borrowing from international market which affects the prices of stock market. therefore, while considering exchange rate is a leading variable, an inverse linkage has been existed in between the two markets. the latter approach tells that a progressive market can attract foreign investors which rise the demand for domestic currency. thus, while considering stock market as a leading variable, there is a positive relation between the above-mentioned markets. in addition, the study of kakhani (2012) and rahman (2011) revealed that rather than a causal relationship, there exists a positive connection in foreign exchange market and securities market. the study of abbas (2010) showed the non-existence of long-run relation in-between foreign exchange market and securities market. however, short-term causal relationship exists between the markets found by murinde (1997) and samanta (2003). olugbenga (2012) also conducted a study on nigeria securities market and found a significant relationship between exchange rate and securities market. he further stated that changes in foreign exchange market would be predicted for securities market. similarly, kang and yoon (2013) also studied the marriage between foreign exchange market and securities markets for the period of 1990 to 2009 in south korea. their study revealed a causal relationship between the two markets. according to the findings of apte (2001) and morales (2008) a dynamic association exists in the markets by using generalized autoregressive conditionally heteroskedastic (garch) models. it also confirms that the variation is spread over the markets. besides the exchange rate, stock market is also sensitive to variation in oil and gold prices. few studies were conducted on showing the relation in security market and oil prices. normally these variables are taking collectively with other variables such as gold, interest rate and foreign exchange rate, etc. it is evident that the prices of oil affect both cost review of economics and development studies, vol. 7 (1) 2021, 1-12 4 and profit of a company which brings volatility in security prices. faff and brailsford (1999) studied that the impact of prices of oil on the security oil prices, gas and other revised industries is positive, while its impact become negative on transportation and paper and packaging industries. previous studies on the same topic reflect an inter-dependent relation might exist between the two variables (prices of oil and prices of securities). for example, basher and sadorsky (2006) found the influence of prices of oil on securities return. kilian et al., (2009) also analyzed the relationship between prices of oil and securities market and found that an increase in the prices of oil negatively affect securities market. likewise, oberndorfer (2009) examined the effect of oil prices on securities return for the era of 2002-07 by applying both the models i.e. arch and garch. he expressed that increase in the prices of oil has an adverse effect on european securities market returns. all of these studies acknowledge the impact of oil prices on securities market returns. further, gaur and bansal (2010) concluded that, during crisis as securities market falls it tends to increase prices of gold. same result has been explored by le and chang (2012) that securities market is act as an agent for rising prices of gold. the work of chohan (2011) also suggested a negative association in prices of gold and securities prices. bhunia (2013) studied the linkage between domestic prices of gold and security return, by applying granger test. his study showed a bidirectional causality between the of prices of gold and security price return. however, kaliyamoorthy and parithi (2010) found no linkage in security market indices and gold prices. as the indices of security market increases, gold price also increases, but the increase in prices of gold is not as result of securities market. however, gold is providing protection in the time of financial crisis as suggested by dirk and baur (2010). study of arouri (2015) also revealed that the impact of the volatility of gold prices on china’s securities market return is significant by using var-garch model. gilmore et al., (2009) concluded that both gold and securities effect each other in short term. it is evident from the above studies that during financial crisis the prices of securities fall and the prices of gold rises, thus gold provides protection to investors during crisis. multiple studies had been conducted in order to explore the relationship between oil and gold. for instance, melvin and sultan (1990) found that fluctuation in prices of oil and detrimental political condition determine prices of gold. zhang and wei (2010) examined cointegration and causality for oil and gold prices for the period of 2000-08. they found significantly positive relation between the variables. the finding of wang and chueh (2013) is consistent with them. in addition, the study of simakova (2011) showed a long-term association in the prices of oil and gold. the exchange of gold for crude oil was first emerged in middle east. both oil and gold have an association with exchange rate. fluctuation in exchange rate may bring changes in the prices of internationally traded goods. sadorsky (2000) and akram (2009) analyzed the impact of foreign exchange rate on oil and other commodities. similarly, fratzscher et al., (2014) investigated a bidirectional causal relation between the variables. likewise, the study of sjaastad (2008) suggested the influence of exchange rate on gold prices. mishra and debasish (2016) examined a study in india by using the garch model. they found that the rise in prices of oil might decrease the value of indian rupee presenting an interdependent relationship between them. researchers like harri, nalley, and hudson (2009) analyzed that foreign exchange rate brings changes in the prices of oil and other commodities. hammoudeh, chen, and fattouh (2010) also suggested a long-run association in-between prices of gold and crude oil. beckmann and czudaj (2013) analyzed the long-term and short-term connection in gold and crude oil and found that the long-run relationship is visible and gold price has significant impact on the economy of usa. same result is also review of economics and development studies, vol. 7 (1) 2021, 1-12 5 found by lee, huang, and yang (2012) that the relation between gold and prices of crude oil is significant. reboredo (2013) used copula approach and analyzed significantly positive link between the variables. he suggested that gold could not be hedged against the volatility of oil price. similarly, wang and chueh (2013) also showed positive connection in gold and oil prices. from these studies it can be stated that a linkage is exist between the variables. numerous studies have also been conducted to further explain the relationship between all the four variables like oil, gold, foreign exchange rate, and securities market. ciner, gurdgiev, and lucey (2013) analyzed the association of return with bonds, gold, oil, stocks and foreign exchange rate. they concluded that gold is considered as a safe haven against foreign exchange rates. moreover, the causal association among oil, gold, foreign exchange rate and stock is also investigated by christner and dicle (2012), kumar (2011) and basher and sadorsky (2006) and found that the prices of oil had an adverse effect on both security market and foreign exchange rate. changes in other variables lead to changes in foreign exchange rate to a great extent while the securities market has the least impact on foreign exchange rate. mu-lan, ching-ping, and tzu-ying (2010) and samanta and zadeh (2012) also examined the co-movement among gold, oil, exchange rate, and stock markets and found a long-run relation among the above-mentioned markets. the work of joshi (2012) indicated that the relation of gold with crude oil, foreign exchange rate, and securities market return is significant while, in some cases the relation become inverse. kim and dilts (2011) also found same result. numerous studies have been conducted in the same field showing mixed result among the mentioned variables. there are various reasons for the mixed result. so, by using the granger causality test can validate the linkage between the above-mentioned variables. 3. methodology this section includes data collection, sample size and different types of statistical tests used for the analysis of data. 3.1 nature of study this study has examined the relationship of the gold price, exchange rate and oil prices on the stock market performance. the study is applied in nature as it has tested the relationship empirically by following a research design of the explanatory study and provide implications for the policy makers and managers. 3.2 data collection secondary data has been collected from different sources. the data includes a daily record of use kse100 returns, gold prices, oil prices and foreign exchange rate for a period of 2003 to 2018. the data of oil prices exchange rate and gold prices data is collected from the website of macrotrends.net, whereas, kse-100 index data is collected from the ksestock.com.3 in this study, descriptive statistics have been applied to find out the mean, median, standard deviation and skewness of data. augmented dickey-fuller test has been used for data stationarity. johansen co-integration test is used for long-run association among the variables. granger causality test is used for the relationship of lead and lag. the main variables of the study are kse100 returns, prices of oil, prices of gold, and foreign exchange rate. 4. analysis and findings there are various statistical tools are used for testing the dynamic relationship among the stock 3 www.macrotrends.net and www. ksestock.com http://www.macrotrends.net/ review of economics and development studies, vol. 7 (1) 2021, 1-12 6 prices, oil prices, gold prices and foreign exchange rate. the empirical results of the different tests used in this study are mentioned below. the results of table-1 show that kse has a higher return than gold, exchange rate, and oil. kse also reflects high variation (high standard deviation) in returns as compared to other variables. the nature of all these variables are asymmetrical except one variable (gold) which is negatively skewed, and remaining variables are positively skewed. table 1 : descriptive statistics variables exrate gold kse oil mean 84.995 1029.754 19389.01 68.321 std. dev. 20.876 407.406 13739.73 24.112 skewness 0.112 -0.229 0.750 0.333 kurtosis 2.012 1.961 2.151 2.332 jarque-bera 163.46 205.34 473.48 141.96 probability 0.000 0.000 0.000 0.000 before further process first these four-time series i.e. crude oil, gold price, foreign exchange rate, and kse should be tested for the stationarity and non-stationarity. the augmented dickey-fuller test has been used for this purpose. the results are shown in table-2. it shows that at level the taucalculated values of the tests are less than tau-tabulated values so the null hypothesis (ho) is accepted i.e. the data of all the variables is non stationary, while at level of first difference the tau calculated values are greater than the tau-tabulated values so the data is stationary at 5% level of significance. in addition, as the data of all the variables are stationary at first difference, thus it fulfills the basic requirement of further testing of cointegration, therefore johansen’s co-integration test has been used to analyze the data. table 2: augmented dickey fuller tests sn time series augmented dickey fuller tests at level first difference 1 crude oil -2.125 -65.486* 2 gold price -1.599 -61.888* 3 exchange rate 2.262 -60.181* 4 kse 0.319 -52.192* * significance at 5% level of significance 4.1 selection of optimal lag in order to use the var model, the selection of optimal lagged term is the most important aspect of var model. therefore, the current study has used the five basic criteria identified by the lutkepohl (1993) for the selection of lag; i.e. sequential modified lr test statistics (lr), final prediction error (fpe), akaike information criterion (aic), schwarz criterion (sc) and hannan-quinn information criterion (hq). the smallest value of these five criteria shows the optimal lag length. so, on the basis of results, seven lags have been selected for the model. the whole results are given in table-3. review of economics and development studies, vol. 7 (1) 2021, 1-12 7 table 3 var lag order selection criteria endogenous variables: kse oil gold exrate included observations: 3816 lag log l lr fpe aic sc hq 0 -99150.096 na 4.36 51.967 51.974 51.969 1 -49535.717 99098.74 2237993. 25.972 26.005 25.984 2 -49414.339 242.182 2117741. 25.917 25.976* 25.938* 3 -49404.29 20.140 2124295. 25.920 26.005 25.950 4 -49389.507 29.324 2125712. 25.921 26.032 25.960 5 -49357.173 64.310 2107593. 25.912 26.050 25.961 6 -49345.980 22.243 2112910. 25.915 26.078 25.973 7 -49325.012 41.614* 2107416.* 25.912* 26.102 25.979 8 -49312.578 24.654 2111360. 25.914 26.130 25.991 * indicates lag order selected by the criterion lr: sequential modified lr test statistic (each test at 5% level) fpe: final prediction error aic: akaike information criterion sc: schwarz information criterion hq: hannan-quinn information criterion the result of the unrestricted cointegration rank test (trace) is given in table-4. johansen’s cointegration test is used for analyzing long term relation among different variables. it show the trace value is less than the critical values (i.e. 5%) so we accept the null hypothesis i.e. that there exists no co-integration or long-run relation among the variables. table 4 unrestricted cointegration rank test (trace) table-5 shows the results of unrestricted cointegration rank test (maximum eigenvalue). here the max-eigen values are less than the 0.05 critical values, so the null hypothesis is accepted. it means that there is no co-integration or long-run relation among the variables. hence it is evident from both of the tests that there is no long-run relationship among the variables. a short run relationship is expected among the variables. table 5 unrestricted cointegration rank test (maximum eigenvalue) table-6 shows the results of the var. the first model shows that at first lag of kse is a significant effect on kse, while the second lag has a negative significant effect on kse. further, in case time series trace statistic critical value prob.** remarks crude oil, gold price, kse, exchange rate 36.046 47.856 0.394 no cointegration time series max eigenvalue critical value prob.** remarks crude oil, gold price, exchange rate, kse 25.846 27.584 0.082 no cointegration review of economics and development studies, vol. 7 (1) 2021, 1-12 8 of oil at first lag, it has a positive significant effect but at second lag the effect becomes negative thus increase in oil prices will negatively affect the stock market after two days’ change in oil prices. however, gold has a negative insignificant effect on kse at first lag, while in the second lag the effect becomes positively insignificant. in case of exchange rate, it has a positive insignificant effect on kse at first lag, while the effect becomes negatively insignificant at a second lag. however, co-integration test does not show the lead-lag of the data. therefore, granger causality test is applied to find the lead-lag relationship among the variables. hence, granger causality actually measures whether current and past values of ‘yt’ help to forecast future values of ‘zt’. results of granger causality test are given in table-7. it highlight that oil does not granger cause kse and exchange rate; kse does not granger cause oil and gold; gold does not granger cause oil, kse and exchange rate and exchange rate does not granger cause oil, kse and gold as well, because the value of calculated f-statistic is less than the value of tabulated f-statistic, therefore the null hypothesis is table 6 vector auto regression estimates included observations: 3822 after adjustments standard errors in ( ) & t-statistics in [ ] variables kse oil gold exrate kse(-1) 1.165 4.906 0.0004 -0.001 (0.015) (0.0001) (0.0008) (2.061) [ 73.024] [ 0.047] [ 0.515] [-6.035] kse(-2) -0.166 -1.775 -0.0004 0.001 (0.017) (0.0001) (0.0008) (2.061) [-10.441] [-0.017] [-0.556] [ 6.041] oil(-1) 6.085 0.935 1.047 0.002 (2.525) (0.016) (0.132) (0.003) [ 2.407] [ 57.007] [ 7.881] [ 0.640] oil(-2) -6.281 0.059 -1.050 -0.059 (2.523) (0.016) (0.132) (0.007) [-2.485] [ 3.657] [-7.905] [-0.418] gold(-1) -0.235 0.002 0.976 -0.006 (0.3098) (0.002) (0.016) (0.004) [-0.797] [ 1.079] [ 59.853] [-1.517] gold(-2) 0.245 -0.001 0.022 0.005 (0.309) (0.000) (0.016) (0.004) [ 0.793] [-0.889] [ 1.380] [ 1.391] exrate(-1) 2.844 0.012 0.468 1.020 (12.485) (0.081) (0.657) (0.016) [ 0.227] [ 0.154] [ 0.719] [ 63.279] exrate(-2) -2.309 -0.021 -0.438 -0.019 (12.511) (0.081) (0.658) (0.016) [-0.184] [-0.260] [-0.665] [-1.183] c -14.213 0.583 -0.139 -0.071 (27.314) (0.177) (1.462) (0.035) [-0.520] [ 3.283] [-0.097] [-2.128] review of economics and development studies, vol. 7 (1) 2021, 1-12 9 accepted. however, kse does granger cause exchange rate and, oil does granger cause gold, therefore the null hypothesis is rejected. table 7. pairwise granger causality tests null hypothesis no of observations f-statistic prob. oil does not granger cause kse 3822 2.685 0.068 kse does not granger cause oil 0.422 0.655 gold does not granger cause kse 3822 0.689 0.501 kse does not granger cause gold 0.291 0.746 exchange rate does not granger cause kse 3822 1.333 0.263 kse does not granger cause exchange rate 18.308 1.220 gold does not granger cause oil 3822 0.620 0.537 oil does not granger cause gold 31.048 4.209 exchange rate does not granger cause oil 3822 0.714 0.498 oil does not granger cause exchange rate 1.919 0.149 exchange rate does not granger cause gold 3822 0.219 0.808 gold does not granger cause exchange rate 0.978 0.378 5. discussion globally various studies had been conducted on this topic. our study is different from the prior studies in terms of context and period of time. however, the results of current study are consistent with the prior studies up to a greater extend. like the results of joshi (2012) and sujit and kumar (2011) are allied with this study. they found long run relation among the mentioned variables. similarly, monjazeb and shakerian (2014) and phoong, ismaid and sek (2013) also revealed that there is a mutual link between securities market, gold and crude oil. same results have also been found in current study. moreover, toraman, basarir and bayramoglu (2011); malliaris and malliaris (2013) and kim and dilts (2011) also found the long run relationship between these variables which are also consistent with current study. in addition, lee, huang and yang (2012); beckmann and czudaj (2013); tully and lucey (2007) and choudhary et al (2014) also found the long-run association between these variables. hence it has been confirmed that the findings of this article are alike with prior research work on this topic though the span of time and market were different. 6. conclusions and future directions currently, the economy of pakistan is telling a new story. there is a considerable hike in the prices of oil and gold with significant variation in the exchange rate which was never occurred in the history of pakistan. this unexpected variation in the prices of oil, gold, and foreign exchange make it difficult for the analysis to forecast. as a result, these variables may affect one another which make the business environment more turbulent for investors. therefore, it is required to address the issue and analyze the interdependent relationship among these variables. for this purpose, this study considered daily time-series data from january 2003 to december 2018. the study used time series data analysis and found that there is no co-integration or long-run relationship among these variables, however, the vector autoregressive model showed significant short-run relationship among the securities market performance, foreign exchange rate, prices of oil and gold. the results showed that significant changes in prices of oil, exchange rates, and prices of gold have a negative lagged effect on the securities market performance. granger casualty test shows that oil does not granger cause kse and exchange rate; kse does not granger cause oil and gold; gold does not granger cause oil, kse and foreign exchange rate and review of economics and development studies, vol. 7 (1) 2021, 1-12 10 the exchange rate does not granger cause oil, kse and gold as well. however, kse does granger cause foreign exchange rate and oil do granger cause gold. this study is very much helpful for investors either to invest in financial assets or real assets. it also provides a guideline to the policymakers and analyst to consider these macroeconomic variables for the best interest of all stakeholders. in the future, this study will also be conducted by using 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(2013). dynamic transmission effects between the interest rate, the us dollar, and gold and crude oil prices. economic modelling 30, 792–79 zhang, y., & wei, y. (2010). the crude oil market and the gold market: evidence for cointegration, causality and price discovery. resources policy, 35, 168–177. web sites: https://www.psx.com.pk. https://www.dailyfx.com/crude-oil https://goldprice.org/gold-price-pakistan.html https://datacatalog.worldbank.org/dataset/world-development-indicators http://nse-india.com/content/press/feb2003c.pdf http://www.opf.slu.cz/kfi/icfb/proc2011/pdf/58_simakova.pdf https://www.psx.com.pk/ https://www.dailyfx.com/crude-oil https://goldprice.org/gold-price-pakistan.html https://datacatalog.worldbank.org/dataset/world-development-indicators review of economics and development studies vol. 5, no 3, 2019 497 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads a sociolinguistic investigation of the code switching practices of students outside classroom in khyber pakhtunkhwa, pakistan 1 mujahid shah, 2 ali furqan, 3 khalid mehmood zaman 1 assistant assistant professor, department of english, awkum, mujahidshah@awum.edu.pk 2 university of lahore. 3 university of lahore. article details abstract history revised format: 30 june 2019 available online: 31 july 2019 code switching is a common phenomenon, generally observed in multilingual communities across the globe. a critical look at codes witching literature reveals that mostly code switching has been studied in classroom in learning and teaching context while code switching outside classroom in settings such as café, hostel and so on have been the least explored areas. in view of the above the current research investigated the reasons for code switching in the interactive practices of students and their perceptions regarding the same in outside classroom settings. data were collected by means of audio recording 90 minutes student’s interactions in café and hostel and serving an open-ended questionnaire to the participants. the findings showed that the student’s code switched on account of socio-cultural, socio-psychological and communicative reasons. the study is important in the sense that it will further students understanding about cs in outside classroom settings. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords code swithing, classroom, multilingual, socio-cultural, socio-psychological jel classification: z13 corresponding author’s email address: mujahidshah@awum.edu.pk recommended citation: shah, m., furqan, a. and zaman, k. m. (2019). a sociolinguistic investigation of the code switching practices of students outside classroom in khyber pakhtunkhwa, pakistan. review of economics and development studies, 5 (3), 497-504 doi: 10.26710/reads.v5i3.709 1. introduction during the last decade code-switching (cs) has gained impetus, which can be gauged from the fact that since 2005, the linguistics and language behavioral abstracts (llba) electronic databases identified nearly 1800 matches to cs (nilep, 2006). most of the studies on cs fall into main two categories: grammatical and sociolinguistics. researchers who approached cs from grammatical perspective focused different structural/grammatical issues such as morphological, syntactic and morpho-syntactic constrains, nature of grammar governing cs. (macswan, 1999; chomsky, 1995; joshi, 1985; poplack, 1980). on the other hand, the sociolinguistic approach focuses on the functions and meanings of cs. 1. macro-sociolinguistic studies of cs, 2. micro-sociolinguistic studies of cs. the macro approach takes cs as collective bilingual phenomenon governed by the norms and regulations of the community concerned. studies in this category view cs as orderly and stable phenomenon (heller, 1988; blom & gumperz, 1972; fisherman, 1972). fishman (1972) elaborated that in bilingual/multilingual communities mostly each variety has a specific domain of use. the uses of these varieties are predetermined. therefore, the speakers have very little choice of their own. their choices are determined by the social and cultural norms of their communities. he added that the topic of interaction is of great importance. different varieties are associated with http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 498 different topics. some topics are handled better in one variety than the others. for examples, most of the formal topics are tackled by the formal/standard varieties, while non-formal situations demand for non-formal varieties. in this sense, the use of a language/variety can be predicted if one knows the situation/topic ahead of its actual use. so far the domain of sociolinguistic investigations of cs is concerned; research studies have mainly explored cs in classroom settings but cs in other context such as cs outside the classroom, café, hostel, and other co-relevant settings appears to be neglected. further, mostly cs studies have looked at either the perceptions of students or teachers or their practices but very limited numbers of them have examined the perceptions of teachers or students with their practices in one and the same study. besides, cs is explored mostly in the context of english and some other main languages of a particular state or country but cs in the context of english and other local and regional languages have been the least investigated area. in view of the above, the current research have socio-linguistically examined the students code switching practices and their perceptions in outside classroom settings in the context of english and a local language, pashto. the study is important in the sense that it helps in reviving interest in conducting research in local languages such as pashto. in addition, the study will create awareness among the students regarding the prevalence of cs and its utility for communication in general. keeping in view the aim of the research, to create awareness among the students about the emergence, reasons and utility of multilingual practices particularly cs for communication in general, the following questions were designed: 1. why do the students get engaged in cs outside classroom? 2. what are the common perceptions of students about cs outside classroom? 2. literature review cs has a vast domain. it could not be restricted to classrooms only. it can be observed in different spheres of life. however, it is to be noted that in most of the cases whenever cs is discussed in informal settings, along with micro aspect, the macrosocial dimension of the functions/reasons for cs has also been touched. for instance, zakaria and kalong (2010) explored the reasons and types of cs in an informal interaction among a group of tesl students in malaysia. data were gathered by means of recording the informal conversation of the students in their rooms. the results showed that students code switch for solidarity, elaboration of certain points, emphasis, specification of addressee and for local identification. similarly, nishimura (1995) examined the functions of cs in the context of japanese-english languages in canada. the interaction of three individual were recorded and transcribed. the study showed that cs has been used for interactional purposes, organization of discourse, stylistics effect and functional motivation. finally, cs has also served as ethnic identity markers. in both these studies, it has been observed that the focus is made on the social and communicative functions of cs. in addition, the macro dimension the broader social and cultural aspect have also been touched and elaborated upon. again, these studies have a limited range, restricted to the investigation of cs in the interactions outside the classroom, which can partly inform the analysis and discussion of the current research study in its exploration of the functions and reasons for cs outside the classroom. moreover, there are also some studies, which have made focus on cs as communicative strategy. in other words, cs has been used as tool for achieving certain objectives. chung (2006) explored the purposes and reasons for cs in the conversation of korean-english bilinguals and showed that here cs functions as communicative strategy by facilitating family communication, reducing language barriers and consolidating cultural identity of the interactants. in addition, the study also showed that cs could be brought about and shaped by the dynamics of the relationship of the speaker-addressee. therefore, while exploring cs one has also to keep in mind the relationships of the interactants with each other. the most noteworthy point about the study is that here again, the social and linguistic aspects of cs have been highlighted. in other words, the study will help in exploring the reasons for cs outside the classroom from social and linguistic perspectives. likewise, ariffin (2009) explored cs as communicative strategy in the context of bhasa milayu-english bilingual conversation. data for the study was collected during organizational training session. the findings revealed that the speakers employed cs to enhance, organise, add and increase their communicative potential. the study emphasise on the communicative aspect of cs. he further added that cs in most of the cases is a conscious process used by the speakers for achieving various communicative goals. das (2012) again investigated cs as communicative strategy and showed that cs reduces language barriers and manifest cultural identity. the study further highlighted that cs can be used to signal social relationship, language preferences, resolve communicative difficulties, framing discourse, conveying cultural expressive message, giving review of economics and development studies vol. 5, no 3, 2019 499 special effects, lowering language barriers, reiterating messages, etc. both, ariffin (2009) and das (2012) mainly emphasis on the fact that mostly cs is used for communicative purposes. lowi (2005) turned to the analysis and examination of the functions of cs in naturally occurring conversation between spanish-english bilinguals. the study showed that cs is used as features of discourse for emphasis and change of topic, which will help in exploring cs outside the classroom from discourse-oriented perspective. alam (2011) while exploring the functions of cs in punjabi, urdu and english languages among the multilingual community of pakistani staying in uk, has taken a different direction and approached cs from micro and macro perspectives. data for the study was gathered by recording the interaction in a natural environment in kitchen and dining table through an ethnographic case study approach, which were then qualitatively analysed from both micro and macro perspectives. the study showed that cs is used for a variety of purposes including attaining conversational goals, discourse strategies, highlighting speakers' identities and bringing forth their cultural and social background. then there are some studies which have focused on the atitudes of the speaker towards cs. some of these studies considered cs as something negative and recommended that it should be avoided (chaudron, 1988; ellis, 1984). there did exist studies which recommended the use of multilingual resources in the classroom in particular and outside classroom in general. most of the studies, favouring codeswitching are in line with flexible bilingualism and the language ecology approaches. they consider that codeswitching is a positive practice and it facilitates the teachers, learners and the overall teaching process (creese & blackledge, 2010; garcia, 2007.). most of the above mentoned studies are guided by gumperz (1980). gumperz (1982) being one of the poinner studies in interactional sociolingistic, is considered to be one among the most influential sociocultural linguistic theoretical framework which has contributed a great deal to the development of cs from sociolinguistic perspective. the current research study is guided by gumperz (1982) for categorisation and analysis of data. before gumperz (1982), blom and gumperz (1972) tried to approach the functions of cs by combining both: the micro and macro sociolinguistics perspectives. they introduced the concepts of situational and metaphorical cs. in situational cs, the change of situation causes change in code. for example in pakistan, the teachers and students stay very formal in their interaction and mostly use a specific variety inside the classroom but when they move out of classroom, their formality changes into informality. metaphorical cs relies on the use of two language varieties within a single social setting. for example, most of the greeting in classroom between teachers and students take place in the native language of the students and teachers but when the teachers start delivering lectures, the native language changes into the official medium of instruction, which in most of the cases remain english language. however, this classification is criticised on the ground that definition of the terms (e.g. situational, metaphorical etc.) are not clear. besides, the model is not based on real data but rather driven by idealised categorisation. realising the shortcomings in the previous study, gumperz (1982) came up with conversational cs. he elaborated that it is difficult for the analysts to identify particular choices of language as metaphorical or situational. therefore, it is deemed appropriate to conduct a close analysis of the interaction and then describes its functions. in simple words, he preferred the micro perspective to macro perspective for analysis of interaction. on the basis of his close analysis of several speech communities, he suggested a list of six functions of cs which have been observed in different situations. these functions are quotation, addressee specification, interjection, reiteration, message qualification and personalisation versus objectivization. quotation is used when the speaker while speaking in one language quotes something from another language. the function of using quotation is to emphasise the authenticity of the argument and enhance the communicative effect of the statement. secondly, cs can be used to specify addressee by directing his/her message to a specific person. it means that by specifying addressee the speaker is accommodating the person concerned. on the other hand, it can be used as a strategy for excluding other speakers from interaction. thirdly, cs can be used to mark an interjection (serving as sentence fillers). fourthly, cs can be used as reiteration for reinforcing one's statement/message. this occurs when a message is repeated in another language to emphasise a particular point. fifthly, cs can be used for message qualification. the speaker can say something in one language, which is then explained by cs to another language. finally, cs can be used for personalization and objectivization purposes. this shows the speaker’s involvement or distancing from a message. in other words, it indicates that whether the statement is a personal opinion or knowledge or a general statement or known fact. thus keeping in view the potential of the theoretical framework the current research is informed by gumperz (1982). review of economics and development studies vol. 5, no 3, 2019 500 3. methodology the research study aimed to explore the perceptions of students and their interactive practices outside the classroom for determining its functions and reasons in khyber pakhtunhwa, pakistan. in view of the nature of the nature of current study and its research questions a qualitative reseach design was opted. data were collected by means of recording students' interactive practices outside the classroom and serving an open ended questionnaire to all the 25 participants of the study. data were transcribed and an observational analysis of the data informed by gumperz (1982) was conducted. 3.1 background and location the study was conducted in abdul wali khan university mardan, a public sector university in pakistan. the university is located in khyber pakhtunkhwa, a province situated in the north west of pakistan. there are more than 26 languages spoken in khyber pakhtunkhwa pashto language is the dominant and native language of majority of the people in the province. broadly speaking pashto is mostly in the domestic and social settings while english is mainly used as the medium of instruction in higher educational institutes. in addition , urdu being national language of the country is also used at times. in such multilingual environment the emergence of cs is a natural phenomenon. 3.2 participants a total of 25 graduate students were purposively selected. the students were selected from 5 different departments, abdul wali khan university mardan. in order to anonymize the identity of the participants, they were named as 's1', 's2', 's3', 's4', 's5' and s6. the age range of the students was from 19-21 year. before proceeding with data collection, all the ethical procedures/formalities were fulfilled. 3.3 data collection data were collected by audio taping the interactions of the students for a period of 90 minutes; 40 and 50 minutes in café and hostel respectively. then in order to document the perceptions of the students, a questionnaire with open ended questions were designed and distributed among the students. afterwards, the interactions were transcribed informed by seedhouse's (2004). consequently, an observation analysis of the data guided by gumperz (1980) were conducted. as some of the questions in the questionnaire were overlapping at certain points, therefore, the participants left it either blank or repeated the same responses on the same questions. morover, for the sake of convenience, responses on the following questions (as given below) were combined and analysed together. 1 . why do students do cs outside the classroom? 2. why do you use cs outside the classroom? 3. what are the reasons of students cs outside the classroom? 4. analysis and findings students' perceptions and their interactions outside the classroom q: (1) in ysssour opinion, why do students outside the classroom change languages or use more than one language? 4.1 cs for social status regarding questions (1, 2& 3), the students give similar responses. 20 out of 25 students believe that the students code switch outside the classroom for social status. s7: to show that they are educated and belong to higher class. s8: to give an impression that he /she is educated. s9: they think that by speaking english language the people will take him to be modern the analysis of students' interactive data outside the room reveals that at certain point the students, as suggested by their tone and manner, deliberately code switch to english for social status. for instance, in the following lines it can be noted that s1 code switches from pashto to english in a deliberate manner for social status. this is indicated by the way and manner that s1 inserts english words such as colour, purple and white combination in a pashto matrix. s1: bus sa okum da ma hagha wruz aghashty wo nu s2 aow sta da colour (i can’t say anything? i purchased it (colour) the other day, thought to wear it today) s1: s2 dir khukaly lagi staso da purple and white combination (s2 review of economics and development studies vol. 5, no 3, 2019 501 your purple and white colour shirt is very attractive) staso chioce aow selection zama dir khwakh shu (i like your choice and selection) the reason for using cs for social status may be found in the socio-psychological and sociocultural background of the speakers. in pakistan english is considered to be a language of elite and upper class. 4.2 cs unconsciously 15 out of 25 students consider that the students code switch outside the classroom habitually and unconsciously. s1.the students being bilingual cannot help it and thus do cs naturally and habitually. it is an unconscious process and the students are not aware of. s2. they code switch unconsciously s4. well this is natural and may be due to our association with english. the analysis of students' interaction outside the classroom also shows that the students quite frequently in a very effortless and fluent manner, employ cs in their interaction. it seems like that the cs in their interactions emerge naturally and unconsciously. for example, in line 5, 's3', in response to 's1' appreciation of her dressing, thanks her and then inquires about her dressing that if there is something special that she is dressed so well. the line begins with thank you so much then followed by code switching to pashto using words nun sa (today) and again falling back on english, by using words special occasion, and then moves to pashto chi taso dasy (that you) and then yet again to use an english word dressing. here 's1' utters the entire sentence in a fluent manner with no gap and hesitation, which is indicative of the fact that she code switches unconsciously with no deliberate efforts on her part. again, the same unconscious code switching has been observed in line 9, where 's3' in a very fluent manner accommodates the english words deceive and farewell in a pashto matrix. s3: thank you so much s1 nun sa special occasion wo chi taso dasy (thank you so much. s1 is there anything special today that you dressed and prepared very well) s3: s1 taso mong deceive kralu mong va parun farewell di nu ma aow (s1 you deceived us. we thought that the farewell party was the other day, which we missed). 4.3 cs for ease and comfort besides, 11 out of twenty five students also consider that students’ code switching (english to pashto) outside the classroom is triggered by the relaxed and informal environment, where the speakers can freely code switch to native language (pashto). for instance s4 in her interview explains that in outside classroom they feel relax and find a kind of comfort to use their native language. s4. i use pashto as i am feeling ease and relax to talk in pashto which is my native language. in the university we feel bound to use english mostly. i also feel a kind of pleasure to talk in my other tongue s9: they feel free and feel comfortable to talk in pashto, as pashto is their native language. the students believe that inside the classroom, the students feel restricted and are mostly bounded to use english language, while outside the classroom, there is no such restriction and so they are free to interact in any language. therefore, students, on account of ease and comfort due to their social and cultural attachment with pashto, turn to use it in their interactions outside the classroom. this is supported by the interactive data in the sense that mostly they used pashto in their interactions in café and hostels. 4.4 reiteration for emphasis the interaction of the students outside the classroom also brings forward some additional |reasons, including students’ use of cs for emphasis, clarification and explanation of concepts and ideas, which are referred by the students in their interviews. s7 argues that sometimes they code switch to english or vice versa even at their homes to highlight a particular point. s7. i would say code switching is a good technique we use it for different purposes. sometimes we code switch to emphasize a particular point. review of economics and development studies vol. 5, no 3, 2019 502 the interactive data also endorses the same point. for example, s7, while talking about the attitudes of the parents towards new fashion in dressing, explains that parents mostly dislike their children's orientation towards new fashion. 's7' repeats the word mother in both the languages: first in pashto moor (mother) and then switches to english mother. here, 's7' repeats the concept in both the languages to emphasis on the fact that it is mother who takes care of all these issues. s7: aow short chi b mong achol zamung da moor mother zamung aunts ba (when we used short shirt our mothers did not feel happy with that) again, in the following lines, 's6' resorts to the use of reiteration. 's6', while contributing her share to the ongonging discussion, states that you people have praised each other too much with the purpose that you may get praise in return and now nothing is left for me to discuss. here, the speaker repeats the concept praising in both the languages: pashto and english. first, she states in pashto tareefona means praise and then she switches to english by using the word praise. here, the student reiterates for emphasis. s6. na yara da asy tush praising da tareefona di nor sa nishta da sincere friend pata lagi (this is just empty praising which lack in depth) 4.5 cs for explanation similarly, the students in their interviews while discussing the reasons for cs outside the classroom elaborate that they also code switch for explanation. the interactive data also show that the students code switch outside the classroom to explain certain ideas and concepts. for example, s1, in response to a query by 's2' that if there was any function that you had come so well dressed and prepared, replies yes, we had our last farewell, a kind of internal get together in the class. here, the speaker first mentions last farewell and then, switches to pashto to explain what she means by last farewell. s1:aow nun zamung chi kom da last farewell wo class k dasy hapalu ke raghund shavi wu mung wail ghup shup b olagao (yes, today we had an internal farewell a kind of friendly get together in our class ). s 5. discussion the findings of students interactions and their perceptions reveals that the students codeswitch outside the classroom for communicative and socio-cultural reasons. the analysis shows that mostly the students outside the classroom codeswitch for social status. codeswitching for social status may be attributed to the sociocultural and socio psychological background of the speakers and socio-economic status of the target language. in pakistan, english language is considered a symbol of prestige, education and social standing. most of the educated and socially and economically advanced classes of the community use english language for their communication. besides, english language has occupied the status of official language and most of the examinations for high profile jobs are held in english (rehman, 2006). in view of the above, english is considered to be highly prestigious language. it is generally assumed to be ladder for upward economic and social mobility. this is one of the reasons that the students are oriented towards english. they codeswitch to english from their native language to give an impression that they belong to a higher social and educated class. as social status is something related to social psychological and sociocultural background of the community concerned, which get reflection in their interactions in café and hostel. besides, the findings also showed that the student code switched unconsiousy. speaking generally, one of the reasons for the emergence of unconscious codeswitching might be the speakers' socialization in a multilingual environment. in pakistan, mostly the speakers use native language in their domestic settings while english is used in educational settings and this situation may be one among the possible reasons of the emergence of unconscious code switching in students’ interactions outside the classroom. the findings of the cureent study on this point is in harmony with studies, supporting and endorsing translanguaging and flexible bilingualism. in other words, the speakers freely move back and forth between the two languages. it takes one close to translanguaging and language ecology approaches where the boundaries between the languages permeate and remain elusive and the speakers use codeswitching for different purposes, specifically in pedagogic context (e.g. creese and blackledge 2010; garcia, 2007). creese and blackledge (2010:104) explains that language ecology is the study of language diversity within a specific setting, where the process of language use reflect, challenge and create particular hierarchies and hegemonies. approaching the findings of the current study from an ecological perspective, the existent socio review of economics and development studies vol. 5, no 3, 2019 503 political position on the use of languages in pakistan is challenged. because from a socio-political perspective, english language is the official language and medium of instructions in most of the educational institutions, while the other local languages are used in domestic and other informal settings. but in the current research study, the students going against by codeswitching between pashto and english, outside the classroom. rehman (2003) while discussing the status of english in pakistan explains that english is the official language is mostly used in educational institutes of higher learning in pakistan, while the other local languages are relegated to the lower classes, mostly used in the domestic and other informal settings. it means that in the current research study, the speakers violate the rule /norm and freely back and forth between pashto and english outside the classroom. finally the findings also revealed that the student code switched outside the cassrooms for communicative purposes including cs for explanation and reiteration for emphasis and clarification. these are the common functions highlighted by a number of other studies as well (ariffin, 2009; das, 2012; lowi, 2005). 6. conclusion the current study aimed to find out the reasons for cs in the interactive practices of the students outside the classroom. the findings showed that the students code switching outside the classroom are triggered by sociocultural, sociopsychological and communicative reasons. the study was conducted on a smaller scale restricted to mardan one of the seven divisions of khyber pakhtunkhwa (kp), pakistan. in order to explore in depth the reasons for cs in the interactive practices of the students outside classrom and then their perceptions about the same, the range of the study has to be extended to other regions of khyber pakhtunkhwa, which will enable the readers to get a broader and comprehensive picture of the nature of cs outside the classroom. references alam, s. 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(unpublished) review of economics and development studies vol.2, no 2, december 2016 81 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 2: issue 2 december 2016 journal homepage: www.publishing.globalcsrc.org/reads workers’ remittances and growth linkages in pakistan 1 fouzia yasmin, 2 muhammad zahir faridi, 3 hina ali, 4 adnan yasin 1 lecturer, department of economics, the women university multan, pakistan, fouziayasmin786@yahoo.com 2 professor, department of economics, bhauddin zakariya university multan, pakistan, zahirfaridi@bzu.edu.pk 3 assistant professor, department of economics, the women university multan, pakistan, hinaali@wum.edu.pk 4 bs economics, bahauddin zakariya university multan, pakistan, adnan.yasin2608@yahoo.com article details abstract history revised format: nov 2016 available online: dec 2016 remittances are considered as the cash inflows to the economy and are imperative international source of revenue for most of the less developed countries (ldcs). for data analysis, the ordinary least square estimation technique was employed to the time series data for the years 1981 to 2010. this research comes with the conclusion that level of gdp is positively associated with the worker’s remittances and the findings also support the optimistic view of remittances. it is suggested that govt. should take serious steps and proper measures to utilize the workers’ remittances so, that the economy will be on the right track towards the development. © 2016 the authors, under a creative commons attributionnoncommercial 4.0 keywords worker remittances, gross domestic product, govt. expenditure, health expenditure, private saving jel classification j24, e01, h5, h76, e2 corresponding author’s email address: fouziayasmin786@yahoo.com recommended citation: yasmin, f., faridi, m. z., ali, h. and yasin, a. (2016). workers’ remittances and growth linkages in pakistan. review of economics and development studies, 2 (2) 81-92 doi: https://doi.org/10.26710/reads.v2i2.126 1. introduction in the light of existing global economic downward spiral, growing consideration has been positioned on remittances that are an important international source of revenue for most of the less developed countries (ldcs). these remittances are considered as the cash inflows to the economy. remittances consist of goods or financial instruments transferred by migrants living and working abroad to residents of the home economies of the migrants. it is limited to transfers made by workers that had stayed in foreign economies for at least one year while transfers from migrants that are selfemployed are excluded. mostly many individuals migrate from the less developed countries (domestic nation) to the developed countries. in the developed economies an individual can have better employment opportunities that best suits to the skills of the particular person where they can better utilize their potential skills. http://www.publishing.globalcsrc.org/reads mailto:fouziayasmin786@yahoo.com mailto:zahirfaridi@bzu.edu.pk mailto:hinaali@wum.edu.pk mailto:adnan.yasin2608@yahoo.com mailto:fouziayasmin786@yahoo.com https://doi.org/10.26710/reads.v2i2.126 review of economics and development studies vol.2, no 2, december 2016 82 remittances obtained by the immigrants helps them to fulfill their basic needs and send back the remaining amount to their homes in the domestic nations so that the siblings can meet all the necessities of life like, food, cloth, better health care and shelter. remittances not only make better the individual income but also assist them to enhance the level of living. at the same time, remittances comprise as a main source of income that can give a hand to develop the economy and upshot in lowering information obstacle and stimulate trade and investment flows. (imf, 2015). after meeting all the basic needs and the facilities of life the remaining portion of the remittances have been utilized and being invested for the thriving of the economy which later increase the overall wealth and welfare of the economy. the increase in investment will lead to manifold increase in the national income. some time there is a smaller amount cash inflows in the form of foreign direct investment but we may not considered it as the only reason to send back the remittances to the domestic nation. host country’s economic circumstances seem to be the mainly significant aspect in driving remittances. if there is economic crisis than not any of the home country economic issue was establish to have a momentous consequence on remittances (vargas-silva and huage, 2006). mostly the migrants are illiterate and unable to follow procedures of banks for transfer. so, this is big challenge for central or state banks of remittance recipient countries in order to boost remittances and promote financial sector of their country. in most of the developing countries flow of workers’ remittances increased from past two or more decades. it would not only reduce the poverty condition of economy but also boost the economic growth of developing countries. remittances inflows increased day by day. in case of developing countries mostly people live below the poverty line so they go to foreign countries for curbing their families from this poorest condition and also become a source of earning for them. many skilled and unskilled individuals which are residing in foreign countries send money back to their countries. when skilled worker cannot get an appropriate job in their own country so, it lead to make a decision to migrate to foreign countries for gaining more perquisites according to their skill level. the optimistic view of worker’s remittances considered that remittance has a positive impact on receiving households/economies; it helps to lessen poverty and encourage economic expansion and relieve pressure on govt. the alternate view is the pessimistic view that does not encourages the remittances inflows and considers it as harmful for the growth of the recipient economy. it promotes dependency as family members do not have a productive paid work in the home country and remittances can create income inequalities. so, the unnecessary consumption, import dependency are outcomes of remittances. (englama, 2009). there are many other factors causative towards the growth of a country. remittances cannot only reduce poverty in a country but also a key component of boosting economic growth. the earning profit not only help them to curb out poverty in the country but also constructive tools to diminish the income disparities in the country and boost up the financial sectors as well as the economic growth of the country. many others scholars also explained(…..) the relationship between economic growth and workers’ remittances that they positively related to each other. if workers’ remittances goes up the growth of the developing countries also boost by this. due to the growth of worker remittances inflows the policy makers, analysts and researchers in developing countries have a point of view that these inflows can contribute in developing the market for credit. different studies have scrutinized the relationship between remittance by workers and economic growth in developing countries and other regions of the developing countries. also workers’ remittances can be used for consumption and a major source of capital at different household levels. review of economics and development studies vol.2, no 2, december 2016 83 globalization and industrialization is a part of economic growth for a country this would not only fabricate the relationship between trading countries but also increase the flow of labor across various nations. there is a huge flow of labor force from developing countries skewed towards the ever advance and developed countries. flow of workers’ remittances helped the families and friends when they suffer in hard time. private capital flows is known to be a cyclically which means that rise during the period of boom and decrease during the period of recession. (ratha, 2003). 2. worker remittances worldwide trends the 2015 remittance expansion rates are the lowest since the worldwide financial crisis in year 2008/09. however, the quantity of international migrants is predictable to go above 250 mn in 2015, and their savings and remittances are expected to continue to grow. the slowdown in the growth of remittances this year will affect most developing regions, in particular europe and central asia where flows are expected to decline by 12.7 percent in 2015. the positive impact of an economic recovery in the u.s. will be partially offset by continued weakness in the euro area, the impact of lower oil prices on the russian economy, the strengthening of the us dollar, and tighter immigration controls in many remittance source countries. (world bank, 2016) table: 1 world’s largest source and receiving countries for remittances source country remittances receiving country remittances united states of america $56 billion india $72 billion saudi arabia $37 billion china ($64 billion russia $33 billion philippines $30 billion source: world fact book (2016) the table 1 shows the world’s largest source country of remittances and the three largest receiving countries for remittances in which united states is placed on no. 1and is followed by the saudi arab and russia respectively. emigration  stock of emigrants, 2013: 6,170.4 𝑡ℎ𝑜𝑢𝑠𝑎𝑛𝑑𝑠  stock of emigrants as percentage of population, 2013: 3.4 𝑝𝑒𝑟𝑐𝑒𝑛𝑡  top destination countries, 2013: the united states, saudi arabia, india, the united kingdom, , the united arab emirates, canada, kuwait, oman, qatar, singapore  tertiary-educated as a percentage of total emigrants in oecd countries, 2011: 36.1 𝑝𝑒𝑟𝑐𝑒𝑛𝑡  tertiary-educated women as a percentage of total women emigrants in oecd countries, 2011: 33.3 𝑝𝑒𝑟𝑐𝑒𝑛𝑡  second generation diaspora in australia, europe, and the usa, 2012: 410.5 𝑡ℎ𝑜𝑢𝑠𝑎𝑛𝑑𝑠 immigration  stock of immigrants, 2013: 4,080.8 𝑡ℎ𝑜𝑢𝑠𝑎𝑛𝑑𝑠  stock of immigrants as percentage of population, 2013: 2.3 𝑝𝑒𝑟𝑐𝑒𝑛𝑡  top source countries, 2013: bangladesh, afghanistan, algeria, myanmar, india, iraq, somalia, the islamic republic of iran,  women as percentage of immigrants, 2013: 43.5 𝑝𝑒𝑟𝑐𝑒𝑛𝑡 (world fact book, 2016) review of economics and development studies vol.2, no 2, december 2016 84 cattaneo (2005) has explored that part of remittances which are save and invest in different projects cannot only increase the earnings but also improve the economic growth of the country. as results of increase in the growth of the economy the other sectors like health and education would improve by this. better health means that better chance of doing a productive work. it is also suggested that flow of workers’ remittances have a significant impact on macro-economic variables such as consumption, investment and imports. table: 2 worker remittances trends in pakistan years remittances in $us (mn) remittances as a % of gdp 2004 3945 4.0264 2005 4280 3.9086 2006 5121 3.7308 2007 5998 3.9361 2008 7039 4.1387 2009 8717 5.1840 2010 9690 5.4620 2011 12263 5.7369 2012 14007 6.2351 2013 14629 6.3305 2014 17066 7.0048 source: data from world bank. workers’ remittances is a backbone for sustainable economic growth. the economy recently is eventually hurried through the most challenging phase in the history of pakistan, when countless external and internal incitements, including security threats, poor law and order situation, inflation, energy crises, food insecurity, accumulated debt crises and lawlessness are administer instability and make a trust of deficit. in the table no. 2 we have showed the volume of worker remittances for the last decade. worker’s remittances showed an increasing trend throughout the year while the remittances to gdp ratio showed fluctuation for the similar period. economy of pakistan was anticipated to increase on a moderate base and the overall growth increase by this. workers’ remittances cannot only boost the economic growth but also reduce poverty and unemployment. 3. literature review gillani (1981) explored that about 60% of overall remittances consumed on basic necessities whereas the remaining portion was save and invest in new businesses and building new homes. he conducted a field survey for judging how workers’ remittance divides in consumption and investment by collecting data at different household levels. he also suggested that after facts of workers’ remittances assessed macro, households and different levels. stahl (1982) showed that workers’ remittances were pivotal tool for recipient countries’ families’ improvement in the level of living, education level and better health facilities. in case of pakistan, mostly people belongs to backward areas were lived below poverty line. workers’ remittances cannot only help for recipients but also the proper channeling of remittances increase the growth and the welfare of the developing nations as well. there was a strong and direct relationship between the income of the recipient and flow of workers’ remittances, which also increase the economic growth. workers’ remittances smoothens the consumption pattern of recipient and also helpful for elimination of poverty. amjad (1986) studied the major sectors of developing nations like small and large scale manufacturing sector, wholesale and retail sector, commercial and construction sector and concluded that workers’ remittances cause to increase and push the growth rate of an economy. it also become review of economics and development studies vol.2, no 2, december 2016 85 aware of that labor market and balance of payment at aggregate or macro level influenced by flow of workers’ remittances. he also brought out with the results that poverty and income distribution also affected by the flow of workers’ remittances. burney (1987) by using time series data suggested that there was direct relationship between the flow of remittances and growth of gdp. he was also concluded that workers’ remittances inversely related to poverty and unemployment whereas it positively related to economic growth. it also reduce deficit in current account and improve the ability of debt servicing. workers’ remittances used to improve the health and education facilities, release inefficiencies, facilitate the constraint on credit market, give rose to entrepreneurial activities, finance the fund needed for various projects and improve economic growth. workers’ remittances positively affect investment activities ignored hardly by the linkage of forward and backward. overall creditworthiness increase and easily access to international market for capital goods can also be increased by proper use of workers’ remittances. adam (1998) explored the impact of workers’ remittances on economic growth and found that proper use of workers’ remittances can lead toward growth. socio-economic variables such as poverty and unemployment were over-come by properly utilizing the flow of workers’ remittances. smooth flow of workers’ remittances enhances the consumption pattern and increase saving and investment rate which cannot only increase their personal income but also improve the economic growth of a country. chami, et al. (2003) delineated the relationship of workers’ remittances and growth of a country by conducting a research on 113 cross-countries. the study proposed that there was a strong and direct relationship between the income of the recipient and flow of workers’ remittances, which also increase the economic growth. he also brought out with the results that poverty and income distribution also affected by smooth flow of workers’ remittances. major works on remittances in literature concentrate on other dimensions like economic growth, poverty, income inequality, education and health. but the intention of this study is to investigate the relations all these theories claims that the remittances were either consumed or invested in business can ultimate leads to economic growth in the recipient countries. lucas (2004) evidenced that a strong direct relationship exist between workers’ remittances and economic growth. it not only improve the living standards of recipient but also helpful to increase the foreign exchange earnings and the sever condition of balance of payment. there was a need that government took serious steps and measures for proper use of workers’ remittances so that the deficit condition was improved. in case of developing nations, like pakistan, he also found that workers’ remittances improve economic growth and contribute to enhance the financial sector of the economy. amuedo and pazo (2004) reported in his study that exchange rate appreciate when a country experiences inflow of workers’ remittances. he also described that tradable good’s produced by minimum cont when a smooth pattern continues. the remittances, which were sent by the migrant to their parent country, enhance their consumption, health, education and personal expenditures. the remaining portion of remittances was directly or indirectly invested by the recipient who caused to capital formation and hence increases economic growth in the country. burgess and haksar (2005) explored in his study that economic activity greatly affected by the different channels of inflow of workers’ remittances. there was an ambiguous effect of long term but a clear effect of short term on sustainable consumption. the main reason behind this was sometime the migrants were not work longer and came back to their home countries. he also noticed that the workers’ remittances were not only effect poverty by reducing it but also boost the economic growth. the fluctuations in short term were seems easily at macro, household and community levels. review of economics and development studies vol.2, no 2, december 2016 86 iqbal et al. (2005) showed that growth in real gdp was positively related to workers’ remittances. it was also noticed that workers’ remittances evolutes third major source of foreign exchange earnings and economic growth in pakistan. since 1970, workers’ remittance was considered to be a major source of foreign exchange earnings. a large amount of workers’ remittance were received in pakistan from past few years, also significant fluctuation were seen in flow of workers’ remittances. those fluctuations were exhibited an inverse relationship between deficit in current account and the flow of workers’ remittances and a direct relationship with growth of gdp. a significant flow of workers’ remittances were not only diminished the external debt burden but also improved the overall balance of payment of pakistan. catrinescu et al. (2006) scrutinized that macroeconomic growth can be achieved by exerting remittances in developing countries in the long run. furthermore, proper policies and institutional changes were supported by workers’ remittance which also had a developed effect not only in remittance but also on growth of the economy of recipient developing countries. lopez et al. (2007) concluded in his study that personal income of recipients was increased by enhanced workers’ remittances, leads to pick up economic growth and reduced the burden of external debt and current account deficit by conducting a survey at different house hold levels. he also showed that there exists a huge difference in the income of pakistani overseas when comparing parent country and country of stay. the opportunity cost which was paid by immigrants in shape of leaving their home country also compared at different levels. jongwanich (2007) analyzed the flow of remittances that had an effect on the growth of developing nations. evidence which was obtained by empirical testing in this study also revealed that flow of workers’ remittances significantly affects the growth of developing regions. it was also noticed that a difficult situation exist when a developing country generalized the impact and consequences of socio-economic as well as workers’ remittances on growth of a country. there exists a vexing condition when empirical evidence collected. raza (2008) brought out with the results that entrepreneurial activities were strongly improved by the continuous inflow of workers’ remittances. it was also contributed in improving the health, education and financial sectors which later increase the growth of the economy. economy of pakistan experienced a blasting disaster in the shape of earthquake of 2008 and the victims stood at different levels for receiving workers’ remittance which cannot curbed the averse condition but also support them. calero (2008) concluded with the results that enrollment rate in developing countries was increase and a significant decline in child labor. moreover working activities increased when the recipients were experienced the income shocks. remittances also played a vital role in finances the education, health and households needs. workers’ remittances were performed a significant role in eliminating poverty and inequality constraints. it was also showed that poverty and income disparities decrease and hence higher the economic growth. when a significant increase in the flow of workers’ remittances. workers’ remittances were also useful tools for eliminating external debt burden, increasing human development and enhancing investment opportunities through financing. irfan (2011) was the view that workers’ remittances increase recipient’s income and then smoothens consumption pattern. it was also suggested that growth in humane capital facilitate investment opportunities. asad and hashmi (2016) inspected the connection among workers’ remittances and economic growth along with labor migration in pakistan. the association between workers’ remittances and unemployment also been captured in the study. time series data for the period 1975 to 2010 have been used and johansen and juselius co-integration method and recursive simultaneous equations model have been used for the analysis. bivariate co-integration demonstrated that economic growth review of economics and development studies vol.2, no 2, december 2016 87 has long run connection with labour migration and unemployment. there is long run relationship between workers’ remittances and unemployment and human capital has long run association with workers’ remittances. 4. data sources and data methodology present study uses the time series data for the years 1981 to 2010 to investigate the impact of all the variables on economic growth. data have been collected from the hand book of statistics on pakistan economy (2005) and fifty years of statistics and pakistan economic survey (various issues). table 3: variables and their expected sign variables (expected sign) worker remittances positive (+) govt. expenditure positive (+) service sectors growth positive (+) industry sector growth positive (+) health expenditure positive (+) private saving positive (+) i. methodology a) general specification of the model in our present study we have obtained ordinary least square (ols) estimation technique for the purpose of obtaining required results of our model. the multiple regression model is as following in its general form: 𝑌 = 𝑓 (𝑋1, 𝑋2, … … … 𝑋𝑛) in our above mention regression function, y is dependent variable whereas x1, x2 and xn are regressors. the regression function of multiple variables is stated below as: 𝑌 = 𝛼0 + 𝛼1𝑋1 + 𝛼2𝑋2 + … … … + 𝛼𝑛𝑋𝑛 + 𝑢𝑖 where α0= intercept term, α1, α2, …… αn are the parameters and µi is the residual term which follows all the assumptions of ordinary least square method. b) empirical specification of the model based the selected variables our model can be specified as follows: 𝐺𝐷𝑃 = 𝑓 (𝑊𝑅𝐸𝑀, 𝐺𝐸𝑋𝑃, 𝐻𝐸𝑋𝑃, 𝑃𝑆𝐴𝑉, 𝑆𝐺𝑅, 𝐼𝐺𝑅, ) mathematical model specification 𝐺𝐷𝑃 = 𝛽𝑜 + 𝛽1𝑊𝑅𝐸𝑀 + 𝛽2𝐺𝐸𝑋𝑃 + 𝛽3𝐻𝐸𝑋𝑃 + 𝛽4𝑃𝑆𝐴𝑉 + 𝛽5𝑆𝐺𝑅 + 𝛽6𝐼𝐺𝑅 econometrics model specification 𝐺𝐷𝑃 = 𝛽𝑜 + 𝛽1𝑊𝑅𝐸𝑀 + 𝛽2𝐺𝐸𝑋𝑃 + 𝛽3𝐻𝐸𝑋𝑃 + 𝛽4𝑃𝑆𝐴𝑉 + 𝛽5𝑆𝐺𝑅 + 𝛽6𝐼𝐺𝑅 + 𝑢 𝑊ℎ𝑒𝑟𝑒, 𝑊𝑅𝐸𝑀: 𝑊𝑜𝑟𝑘𝑒𝑟𝑠’ 𝑅𝑒𝑚𝑖𝑡𝑡𝑎𝑛𝑐𝑒(𝑠) 𝐺𝐸𝑋𝑃: 𝐺𝑜𝑣𝑡. 𝐸𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒𝑠 𝐻𝐸𝑋𝑃: ℎ𝑒𝑎𝑙𝑡ℎ 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒𝑠 𝑃𝑆𝐴𝑉: 𝑃𝑟𝑖𝑣𝑎𝑡𝑒 𝑆𝑎𝑣𝑖𝑛𝑔 𝑆𝐺𝑅: 𝑆𝑒𝑟𝑣𝑖𝑐𝑒 𝑆𝑒𝑐𝑡𝑜𝑟 𝐺𝑟𝑜𝑤𝑡ℎ 𝑅𝑎𝑡𝑒 𝐼𝐺𝑅: 𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑦 𝑆𝑒𝑐𝑡𝑜𝑟 𝐺𝑟𝑜𝑤𝑡ℎ 𝑅𝑎𝑡𝑒 𝐺𝐷𝑃: 𝐺𝑟𝑜𝑠𝑠 𝐷𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑃𝑟𝑜𝑑𝑢𝑐𝑡 𝑈 ∶ 𝑡ℎ𝑒 𝑟𝑒𝑠𝑖𝑑𝑢𝑎𝑙 𝑜𝑟 𝑒𝑟𝑟𝑜𝑟 𝑡𝑒𝑟𝑚. in our present study, gdp is dependent variable whereas workers’ remittances, govt. expenditures, health expenditures, private saving, growth in service sector and growth in industrial sectors are independent variables. ii. stationarity analysis review of economics and development studies vol.2, no 2, december 2016 88 before estimation, we will check the stationarity of the data. that is essential for applying any statistical technique to the data. on the basis of stationarity of the time series we have the variables which we include our model. for a stationary series we have to see that: a) mean is constant over time. b) variance is constant over time. all the variables which are included in present model are stationary at level. following table is exhibiting the results; table: 3 adf test results variables intercept trend and intercept gdp -2.850718 -3.2239 wrem -3.643520 -3.988176 gexp -3.890559 -3.819311 hexp -2.6242 -3.837428 psav -5.259424 -5.211698 sgr -2.985262 -3.391225 igr -3.388266 -3.444605 iii. preliminary analysis of data analysis of the data this section will present the introductory analysis of the data in which we present the correlation and the descriptive analysis of the data. table:4 correlation matrix gdp gexp hexp igr psav sgr wremer gdp 1 gexp 0.38 1 hexp 0.30 0.19 1 igr 0.69 0.06 0.29 1 psav -0.05 -0.23 -0.19 -0.23 1 sgr 0.71 0.22 0.25 0.61 0.00 1 wrem 0.02 -0.03 -0.05 -0.03 0.25 0.27 1 note: calculated by using e.views 3.1 in our present study, variables which we include in our model exhibit positive relationship between gdp and gexp with the value of 0.38. govt. expenditures, industrial sector growth, service sector growth is positively related to gdp. sometime declining flow of worker remittances will not help the government to spend more on public spending as well as subsidizing the service and industrial sector. table: 5 descriptive statistics mean median std. dev. skewness kurtosis jarque-bera gdp 0.05 0.05 0.02 -0.02 2.22 0.77 gexp 0.17 0.15 0.29 0.42 3.43 1.13 hexp 0.15 0.12 0.11 0.66 2.43 2.61 igr 5.92 5.04 3.93 -0.11 4.69 3.63 psav 0.17 0.15 0.24 0.91 4.48 6.88 sgr 5.34 5.10 1.89 0.041 2.84 0.03 wremer 0.005 0.002 0.009 1.52 5.07 17.00 review of economics and development studies vol.2, no 2, december 2016 89 note: calculated by using e-views 3.1 in the above table we have calculated the descriptive statistics of the data. the selected variables of the study have been taken and the mean for each variable is presented in the 2 nd column that is followed by the median in the 3 rd column. the standard deviation, skewness, kurtosis an jarque-bera are presented in the 4 th ,5 th , 6 th and the 7 th column respectively so you know the facial look of the data utilized for the study. iv. econometric analysis of data after the descriptive analysis of the data and analyzing the stationarity of the data set , we have conducted the econometrics analysis of the data in the present section. the econometric analysis of the data will help us to analyze the impact of the remittances and the all other variables on the economic growth in pakistan. table: 6 econometric analyses of data variable coefficient t-statistic prob. c 0.032425 4.94595 0.0001 wrem 0.264537 2.065884 0.0544 gexp 0.008027 2.30603 0.034 igr 0.002282 3.768411 0.0015 pcexp -0.005658 -0.869097 0.3969 psav 0.003337 0.769458 0.4522 sgr -0.000187 -5.540825 0.0000 note: calculated by using e-views 3. model summary r-squared 0.97311 adjusted r-squared 0.95413 durbin-watson stat 1.85507 f-statistic 51.2628 prob(f-statistic) 0.0000 in above mentioned estimated model, the value of the intercept is 0.032425 that shows the value of gdp when the all variables are kept constant. the coefficient of wrem is 0.264537. this shows that the level of gdp is positively related to worker’s remittances. as worker’s remittances increases this encourages the growth and this argument support the above mentioned optimistic view of remittances. it is due to when workers’ remittances rise more of the household members are now in a position of increasing the level of living and lessen the poverty. increase economic growth is also positively associated with the govt. expenditures. our results also acknowledge that as we have come up with the findings that about 1% rise in govt. expenditures increase economic growth by 0.008027 (0.8%). government expenditure, no doubt, is a major ingredient of aggregate expenditure. developed countries of the world do not worry about balancing their budgets rather try hard to get rid of socio-economic problems. government expenditures in investment activities give rise to entrepreneurial activities, boost consumption level and help to increase economic growth. private saving also enhances the level of remittances but the relationship is not significant. countries devoting highest portion of their gdp towards investment in industrial sector so it will lead to boost the remittances. industrial growth also supports findings that industrial growth boosts the economic growth. the results also shows that the service sector growth also significantly restrict remittances flows. if there is an employment opportunity in the home country so they no need to go abroad. 5. conclusion and policy recommendation review of economics and development studies vol.2, no 2, december 2016 90 a huge flow of workers’ remittances have been utilized to stabilize the financial position of the country and reduce the burden of foreign or external debt. it is estimated that, workers’ remittances is major source of external flow as compared to internal sources. this shows that the level of gdp is positively related to worker’s remittances. as worker’s remittances increases this boosts the growth and this argument support the above mentioned optimistic view of remittances. economic growth is also positively associated with the govt. expenditures. the present study recommends that there should be a serious need to facilitate adequate and advance infrastructure in order to boost up economic growth. it would not only encourage the migrants to send more money to their home country but also leads to a substantial increase in their profit by investing in different new business. this study also recommends that govt. should take serious steps and proper measures to utilize the workers’ remittances so that the burden of external debt and the deterioration in balance of payment reduced. references adams, r. h. 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(1982) labour emigration and economic development. international migration review. world fact book (migration and remittances factbook 2016). review of economics and development studies, vol. 6 (4) 2020, 773 785 773 factors influencing bankers’ intention to adopt green finance in pakistan owais shafique a , arslan majeed b a assistant professor, department of islamic and conventional banking, school of business, management and administrative sciences, the islamia university of bahawalpur, pakistan. email: dr.owais.shafique@gmail.com, owais.shafique@iub.edu.pk b ms scholar, school of business, management and administrative sciences, the islamia university of bahawalpur, pakistan. email: arsalsaeen51@gmail.com article details abstract history: accepted 18 nov 2020 available online 31 dec 2020 the purpose of this study is to investigate factors that influence bankers’ intention to adopt green banking in pakistan. green banking refers to providing environment-friendly banking services and financial products through environment-friendly banking operations and infrastructure. it can be referred to as sustainable lending and depository products and bank’s services through sustainable banking operations and infrastructure. the data for this study was collected from 250 respondents through a structured questionnaire. data analysis was performed using the partial least squares (pls) approach. the study’s findings indicate that policy guidelines, attitude towards usage, central bank regulations, and management commitment and support influence bankers’ intention to adopt a green banking in pakistan. this research will help the state bank of pakistan and bank’s senior management to identify the key factors influencing the adoption of green banking in pakistan. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: green banking, policy guidelines, attitude towards usage, central bank regulations, management commitment and support, pakistan. jel classification: g24, g32, h63, h69 doi: 10.47067/reads.v6i4.277 corresponding author’s email address: owais.shafique@iub.edu.pk 1. introduction many developing countries have introduced the perception of green banking has been introduced by many developing countries in recent years to obtain economic growth and development because ecofriendly protection conditions are traded off. to bear losses due to the 2008 global financial crisis, developing countries felt a need to modernize their financial systems. many researchers emphasize the significance of green finance. they say green finance encourages ecological practices and reduces the carbon footprint of banking activities. review of economics and development studies, vol. 6 (4) 2020, 773 785 774 pakistan, india, and bangladesh are surrounded by the most vulnerable countries in front of the impacts of climate transform. therefore, these countries have distress about eco-friendly deprivation. pakistan being a developing country is agony from vast eco-friendly, economic, political, and social problems, and these factors needed to be painstaking for the growth of this country. various developing countries have adopted the notion of green banking residential into the western world. it means the ecosystem –receptive banking and it also states to the modest banking or sustainable banking. green bank gives many useful solutions for many surrounding problems like weather change, deforestation, excretion of carbon dioxide, and biodiversity loss. it also points out and produces many options for the benefits of the customer and also for surrounding survival. it also needs to give finance to those parts that emphasize many protection activities of the environment. there are many obstacles to the acceptance of green banking in developing countries. for its acceptance in 25 developing countries, ifc surveyed spectrum of green banking. there are a series of obstacles to adopting green banking by ifc, which stems from the similarity of most of the countries studied, including the lack of specific measurement standards for green banking. this is particular for a country in its individual context, because there is a lack of awareness regarding the acceptance of green banking in operations of banks and among the stakeholders in the bakery sector. there are also some weaknesses in developing countries like a lack of support from the government, the problem of attraction of clients to energy projects or exercise of emission reduction, the problem of stoppage of immediate lending to the typical high pollutants and emission sectors like the oil sector and coal power stations, not enough leaders in green banking, lack of knowledge of business cases and high acceptance of the cost of some specific green initiatives like green building and green information technology. in recent times there is limited research available in the field of green banking with the current value of the banking sector in any country’s betterment relating to the environment (ahmad et al., 2013). there is very limited research available in academic literature for the adoption of green banking. so, there is a need to explore the determinants of adoption or acceptance of green banking from a theoretical perspective in developing countries. much knowledge is available related to green banking, particularly in the emerging countries, foremost to unproductive controlling mechanism and measurement structure within the banking industry. due to limited literature, it is challenging for policymakers and industry to understand the concept that individual banks can play a role in qualifying climate change and facilitating the transition to a low-carbon economy. for the facility of green banking, banks have insufficient data and information. this becomes managed to evidence of a research contribution and demand for improved research on green banking adoption in the developing countries (ahmad et al., 2013). the primary focus of this research is to find the relevant factors or variables that are required to adopt green banking. to understand, create, and explain why people accept or reject green banking, investigator have developed and used too many models to understand the behavioral intension of taking on (alshibly, 2011). here, this study attempts to analyze the factors influencing the behavioral intension of a prospective user to adopt green banking in the pakistan banking industry. review of economics and development studies, vol. 6 (4) 2020, 773 785 775 2. literature review environmental concerns are gaining momentum globally. human activities are now proven to be the prime cause of environmental degradation, which is extremely harmful for all living beings (masood et al., 2015). a key determinant in gdp growth of a nation is private investment, but its role in the process of environmental degradation has been vastly ignored (parveen et al., 2020). fdi, energy consumption and population significantly increase co2 emissions (chaudhry et al., 2020). macroeconomic variables such as economic growth, urbanization and industrialization are linked with co2 emissions (parveen et al., 2019). hygenic and healthy environment is necessary for all living beings and society as it enriches their quality of life (m. z. u. khan et al., 2019). the banking sector’s solution to these environmental concerns is green banking. the term green is used for a financial institute like green banking, which mainly expresses the liability of banks towards the external conditions of surroundings and the function of the environment in the process of business (bai, 2011). the green bank grants all banks permission to manage their money according to their principles; they have the right to use their assets and capital per the requirement. green banking allows the banks to use their money the best way and generates maximum profit through their activities without reducing the level of material comfort of people and the wellbeing of the environment. it promotes successful performance, reduces the difficulties in a way to achieve success, and helps for the advancement and development of the banking sector (goyal & joahi, 2011). bhardwaj and malhotra (2013) declared the fact that operations of the banks might not cause the decaying of the environment, but the customers who dealt with the bank may be involved in such activities that are not suitable for the environment and damaged the environment in the future. at the time of making an investment or financing any project and lending the money to the client, banks assure their liability towards the environment and realize their responsibility regarding the society (thombre, 2011). banks can control the situation from an industrial side with which they cause damage to the environment by providing official requirements of funds on the condition that their administrative activities contribute to the environment directly. the use of suitable technologies to handle particular situations and administrations direct them to realize their responsibility towards the environment and society (masukujjaman & aktar, 2014). in this way, banks can treat their moral duties by paying out their money to those institutions that relate their operations with favorable conditions of the environment (goyal & joahi, 2011). banks can also do this by modifying the internal conditions of their systems as they can replenish their energy supplies, automatic process, and significant minimal usage of carbon (millat et al., 2012). nowadays, banks must be sure regarding their responsibility toward the environment for the sustainable financial reward and success because a recent study of javelin strategy and research estimates that about 53% of customers want to belong to the banks that have the power to originate the positive actions for the environment and society (green wiki, 2015). the top five romanian banks confirm this attention by citing them as a better-rated bank because they invest their assets in projects that are both socially and environmentally responsible. review of economics and development studies, vol. 6 (4) 2020, 773 785 776 now due to awareness, customers require such types of financial products and investment opportunities that may have positive effects on the environment because everyone has an adequate knowledge about right actions with a positive impact on the environment to become a responsible citizen. due to customer preference, banks move toward green banking as no bank wants to lose any client (munchow, 2011). it is also interesting that the investor of the stock market also resists to anti-eco-friendly activities from the parent company. the investor stands in opposition for those companies which show no concern toward the environment and the society. this shows the level of feelings and excitement of the market and demand for financial sustainability of institutions (rehman, 2015). these days, it is necessary to disclose the facts that are necessary for the maintenances of improvement and advancement in economies that are coming to mature in the future; they need to stimulate the discussion of the fundamental rules regarding the environment (raluca, 2013). banks can take the initiative through preliminary steps toward the concern about the environment and make their institutes trustworthy. in the earth summit 1992, the united nations environment program (unep) moved towards positive development of the environment and maintaining this development by confirming the slandered of influence of society. banks can achieve this by maintaining the contact of banks with unep, and with the help of each other, they can achieve a noticeable achievement. to create more stability, another unit was introduced by ifc in 1991. this unit reviewed all the projects and checked their effects on the environment and society. the ifc launched the equator principle with the collaboration of a group of banks in 2003, some 46 financial institutions from 16 countries consider it to be rules, and now more than 100 countries are interconnected with the ifc. ifc, along with the financial times, also initiated sustainable banking award since 2006. the number of banks joining the ifc is increasing day by day. in the previous year, 48 banks from 28 countries were collaborating. the international organization is taking another initiative for standardization 14000, which includes a large number of standards relating to the environment and associated enterprises acting following these standards. in this race, european banks are moving quickly and are behaving as leaders in the international market to maintain the concept of green banking concerning all other continents and are rapidly developing towards a leading environment as a rare philosophy. rosenfeld and tchapi (2007) referred to two central banks in sweden and found that they had a clear understanding of the progress of global green banking and were attentive to all environmentally friendly actions. in the united states, socially responsible investment (sri) funds have been very well received, with sri assets amounting to $2.29 trillion in 2005 (starogiannis, 2006). going further, the dutch government requested banks to maintain such plans and operations that have a positive impact on the environment towards achieving long-lasting development. recent research shows that indian banks also focus on the importance of eco-friendly factors and pay special attention to those projects which have positively contributed to helping the environment. the first initiative was taken by the state bank of india (sbi), it is going to finance in the windmills that generate green power with zero harmful review of economics and development studies, vol. 6 (4) 2020, 773 785 777 factors on the environment and some other banks also perform their duties toward green banking by proving different environment as friendly products (nath et al., 2014). the purpose of green banking in the market of india along with a large number of difficulties faced by the bank just like a loss to peers, lack of central banks’ mandate, lack of interest of customers and investors, complicated reporting structure, inadequate funds for training, and lack of skilled force of available workers, etc. it is importent to note here that, human capital is an irreplaceable resource for the modern organizations because they posess skills, experience and knowledge skill, making it a key factor for the firm's success in the knowledge economy of this era (aleem & bowra, 2020). less developed countries like bangladesh can achieve financial sustainability through the occurrence of strong rebounding with the essential factor of surrounding that is environment development. in the banks of bangladesh, with the basic operation of banking, they also pay attention toto other internal processes in which a considerable quantity of carbon is discharged like massive use of electricity due to the usage of lights, air-conditioning, and other electrical equipment (rahman et al., 2013). bangladesh bank takes preventive measures and follow the direction toward a positive behavior regarding the environment and considering the importance and value of circumstances without damaging the social elements (m. t. a. khan, 2012). from time to time, the central bank of bangladesh addressed to other conventional banks to adopt the strategies as per instruction of green strategic planning for 2013 and beyond. banks are liable to their activities. therefore, they try to convert their system into a green banking system and do practice green financing. as millat et al. (2012) reported that all the banks in bangladesh had received regular directions to make efforts toward green banking, and their policies have the power to convey the importance of green banking in all investment and lending operations. in this way, they resolve the eco-friendly problems and combine them with national eco-friendly rules and acts. according to a recent study (ullah, 2013), with the collaboration of gbg, banks of bangladesh spread their technical assistance at a broad scale. four banks are included in this study. this study has proven that state-owned banks have zero compliance with the gbg, continue to finance harmful projects, introduced no advancement in the field of paperless banking. on the other hand, private banks show more progress in this field. pakistan was late for green financial activities, among other issues, in 2017. banks and dfis are already in the process of establishing an sbp strategy platform. the green banking cycle is long, but it will pay to address eco-friendly issues in the country. india and china undergo improvement in developing and implementing these measures under the green finance policies. although the rest of the countries are a long way in improving and implementing the green economic exercises as they have many concerns in applying these measures, e.g., banks have limited resources to assess the borrower under welcoming ecological conditions, lack of accountability, banking people are not trained, borrowers are unaware of adapting measures necessary to perceive eco-friendly measures. 3. hypothesis development 3.1 policy guidelines (pg) the extent with which a character assumes that a program will assist in achieving job performance enhancements. human resources of banks have realized that executing green banking will review of economics and development studies, vol. 6 (4) 2020, 773 785 778 help them in realizing success and efficacy in their errands. pieces of evidence in the past show that performance expectancy is the strongest analyst and more applicable in implementing any technologyrelated service (alwahaishi & snášel, 2013). reliability of green banking technologies can only be expressed in how far it can satisfy the needs of customers. if employees think that it can be , more accessible,more comfortable and faster to operate with electronic banking systems, they are more inclined to do so. hence, the suggestion is the following. h1: policy guidelines significantly affects bankers’ intention to use green banking technologies. 3.2 attitude towards usage (atu) management commitment and support (mcs) refers to the involvement, passion, inspiration, and back-up provided by management towards the receipt of green banking. top management claims to be one of the best predictors of the adoption of green banking by the secretariats. in order to persuade other directorial leaders to embrace the latest technology revolution or to employ it in operation, senior managers in any company are likely to have a critical role to play. additionally, they also commit resources to its adoption (ifinedo, 2011). h2: attitude towards usage (atu) will have a significant influence on users’ intention to adopt green banking (iagb). 3.3 central bank regulations (cbr) the approval of the national central bank is now one of the principal factors behind the growth of green banks in bangladesh. the shortage of voluntary inclusion in this project faced a constructive fight from the leaders and the trained bank workers. indeed, green banking affects the operating climate, and the provision of alternative financial facilities within the framework of green finance contributes to damages such as structure, rapid implementation of banking policies and initiatives, discrepancies between management and banks and banking operators, etc. (hossain et al., 2016). green banking arrangement may also entail specific tasks for the bankers as they are expected to send weekly reports describing the green banking tricks of their banks (rehman, 2015). as such, the central bank strategy can sway bankers’ perception of green banking in this study. hence, the next suggestion is the following: h3: central bank regulations significantly affect bankers’ intention to use green banking technologies. 3.4 management commitment and support (mcs) management commitment and support (mcs) refers to taking part, interest, impetus, and backup provided by management towards the taking of green banking. in detail, top management claims to be one of the best predictors of organizational implementation of green banking. if top managers in a company recognize the value of innovative technology or the usage of business innovations, they continue to play a crucial role in convincing other organization leaders to adopt them(ifinedo, 2011). past studies have shown that mcs is a significant factor impacting green banking intentions; for example, ramdani et al. (2009) on endeavor system and ifinedo (2011) on internet getting here, it has been anticipated that: h4: management commitment and support will have a significant influence on the intension to adopt green banking (iagb). review of economics and development studies, vol. 6 (4) 2020, 773 785 779 figure 1: conceptual framework 4. research methodology due to the relatively small sample size, structural equation modeling (sem) based on partial least squares (pls) was adopted for the psychiatric therapy of the data. pls was used for the reason that it makes nominal demands on the statistical distributions, sample size, and quantity balances, and as this study was groping in nature, it is a superior tool to explain the data. the survey instrument, the questionnaire, has been developed based on various previous studies (ifinedo, 2011; martín et al., 2012). a total of 57 questions were used to prepare the interviewers. the variable was measured on a fivepoint likert scale, where "1" means "strongly disagree" and "5" means "strongly agree." in total, 250 questionnaires were distributed among the employees of pakistan’s bank. this study, adopts the twostep draw near advocated by anderson (1998). a detailed measurement of the measurement model at the item level and higher-order level were done in the first step. a psychotherapy of the posited structural relationships was taken to the next stage. the pls path approach model was adopted to examine both the quantity and the structural model. part least square (pls) is an ingenious statistical dropping technique that is ideally suited to the psychiatry of genomic and proteomic data. version 2.0 of intelligent pls was used for the analysis. the model has been veteran for convergent force and discriminant weight for assessing measurement mock-up. the examination of convergent validity includes item consistency and internal consistency by measuring merged reliability (cr) and normal variance extracted (ave). at the level of brands and articles, tartan has been the converging force. to test the structural model, the path coefficient, the value of the t-statistics, and the explanatory power of the independent variables were tested. policy guidelines attitude towards usage central bank regulations management commitment and support intention to adopt green finance review of economics and development studies, vol. 6 (4) 2020, 773 785 780 5. data analysis and interpretation 5.1 results of the model tests using (pls-sem) the measurement model for this study was at first put through confirmatory factor analysis and later it was tested for convergent, and discriminant validity and reliability. moreover, sem model built in smartpls with the pls algorithem results is presented in figure 2. figure 2: sem model with all latent constructs and respective measurement items 5.2 evaluation of the structured model in the model, the items representing the reflective constructs must exhibit convergent, and discriminant validity and internal/composite reliability (hair et al., 2014). these tests were performed by executing the pls pls algorithm using default settings as suggested by hair et al. (2014) – i.e. 300 interactions, a stop criterion of 7 and case-wise deletion of missing values. table 1 presents the internal/composite reliability for the measurement model: table 1: internal/composite reliability items cronbach's alpha rho_a composite reliability average variance extracted (ave) atu 0.752 1.108 0.714 0.586 cbr 0.810 1.640 0.752 0.523 iagb 0.753 1.517 0.742 0.592 mcs 0.710 1.558 0.752 0.509 pg 0.805 1.379 0.787 0.539 review of economics and development studies, vol. 6 (4) 2020, 773 785 781 5.3 discriminant validity the degree to which a constructed variable is changed from the other hypotheses in the model is called discriminant validity (chin et al., 2003). it examines the inimitability of every hypothesis to confirm that it is not simultaneous with another construct (hair et al., 2014). hair et al. (2014) claims that there are 2 different gauges to access discriminant validity:  item cross-loadings: it examines the outer loadings of indicators on their theoretically intended constructs.  the fornell-larcker criterion: it is viewed conventional measure of evaluating discriminant legitimacy. 5.4 cross-loadings to establish discriminant rationality, the piling of each dimension item on its agreeing construct must be more substantial as of its loading within one construct (hair et al., 2014). the dimensional items of a hypothesis only measure their concept and not any others. table 2: cross-loadings atu cbr iagb mcs pg atu1 0.962 0.315 0.380 0.244 0.242 atu2 0.622 0.301 0.135 0.196 0.034 atu3 0.379 0.188 0.031 0.353 -0.054 cbr2 0.253 0.849 0.307 0.330 0.262 cbr3 0.415 0.823 0.273 0.391 0.159 cbr4 0.010 0.413 0.118 0.254 0.048 iagb1 0.172 0.163 0.647 0.248 0.141 iagb2 0.322 0.304 0.800 0.265 0.252 iagb3 0.227 0.230 0.647 0.199 0.162 mcs3 0.272 0.421 0.167 0.554 0.146 mcs4 0.217 0.299 0.289 0.815 0.170 mcs5 0.147 0.289 0.249 0.745 0.055 pg1 0.089 0.036 0.169 0.005 0.654 pg4 0.123 0.268 0.222 0.175 0.739 pg5 0.221 0.150 0.140 0.149 0.587 table 2 presents the cross-loadings for each item in the model. table 2 shows that every item is highly loaded on its construct but not on the other construct therefore cross-loading criteria is satisfied. therefore, there are no discriminant validity issues. review of economics and development studies, vol. 6 (4) 2020, 773 785 782 5.5 the fornell-larcker criterion alternative way to establish discriminant validity is the fornell-larker criterion which implicates condition where the square root of the average variance extracted (ave) of every construct associates its correlation score with the other latent variable correlations (fornell & larcker, 1981; hair et al., 2014). table 3 indicates that discriminant validity through the fornell-larcker criterion is also achieved. table 3: fornell-larker criterion atu cbr iagb mcs pg atu cbr 0.671 iagb 0.588 0.604 mcs 0.718 0.913 0.656 pg 0.412 0.626 0.586 0.517 as a consequence of establishing discriminant validity, the exploration of the measurement model is completed (hair et al., 2014). the results of the study reveal that reliability and validity are not only achieved, rather they exceed the set standards for reliability and validity. figure 3: sem model results the current study has 4 direct hypotheses, as shown in table 4. all direct hypotheses (h1, h2, h3, h4) were accepted as the t-value was more than 1.96. hair et al. (2014) explained that pls is the appropriate techniques to analyse data from a small sample. review of economics and development studies, vol. 6 (4) 2020, 773 785 783 table 4: pls results original sample (o) sample mean (m) standard deviation (stdev) t statistics (o/stdev) p values atu -> iagb 0.218 0.226 0.059 3.693 0.000 cbr -> iagb 0.141 0.140 0.060 2.355 0.019 mcs -> iagb 0.186 0.193 0.065 2.849 0.005 pg -> iagb 0.162 0.173 0.054 2.997 0.003 6. discussion and conclusion the global investment sector has gradually realized its role and responsibility towards environmental degradation. besides, now a day there is an increase in stakeholders’ pressure to adopt environmentally friendly practices on banks. consequently, a control and remedial strategy was developed in the format of green banking. the green banking concept was established as a model shift for the banking industry. based on the present literature, the study proposes that diverse stakeholder pressures can have a positive influence on the adoption of green banking. this study also fills the breach in the current green banking study by proposing a theoretical context for appraising the determinants for the adoption of green banking. the study’s findings indicate that policy guidelines, attitude towards usage, central bank regulations, and management commitment and support influence bankers’ intention to adopt green banking in pakistan. this research will help the state bank of pakistan and bank’s senior management to identify the key factors influencing the adoption of green banking in pakistan. references ahmad, f., zayed, n. m., & harun, a. 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(2013). world review of business research green banking in bangladesha comparative analysis ullah. world review of business research, 3(4), 74–83. review of economics and development studies, vol. 6 (4) 2020, 799 809 799 how do population and urbanization cause environmental degradation in south asian countries? a panel data analysis noreen safdar a , shezza ashraf b , fatima farooq c , junaid qadir d a assistant professor, department of economics, the women university multan, pakistan e-mail: noreen.safdar@wum.edu.pk b m.phil. scholar department of economics, the women university multan, pakistan c assistant professor, school of economics, bahauddin zakariya university multan, pakistan e-mail: fatimafarooq@bzu.edu.pk d visiting lecturer, school of economics, bahauddin zakariya university multan, pakistan email: junaidkhan.alizai20@yahoo.com article details abstract history: accepted 18 nov 2020 available online 31 dec 2020 the following study shows the economic consequences of population and environmental degradation in selected south asian countries for the time period 20002018. panel cointegration shows the long-run association among population, urbanization, environment and economic growth. by using pmg estimation technique, the results show that environmental degradation has a negative influence on economic growth while the urban population has a progressive impact on economic growth while the total population has a negative impact on economic growth. the results of causality analysis show that there is bidirectional causality among all variables which indicates that population, urbanization, environment and economic growth are causing each other. it is also noticed by the causality analysis that population, urbanization and economic growth are causing environmental degradation in south asian countries. further the results show that there is cross-sectional dependency among all variables in selected countries which reveals that all these countries should make collaborative strategies to increase economic growth and to cope up the problem of environmental degradation. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: economic growth, population, environmental degradation, pmg, co2 emissions jel classification: o47, o49, p23 doi: 10.47067/reads.v6i4.279 corresponding author’s email address: fatimafarooq@bzu.edu.pk 1. introduction economic growth, population and environmental degradation are economically interrelated. economic growth is the foundation of development of any country. economic growth refers to rise in the manufacturing of capital goods, human capital, technology and labor force with in a country from a different time period spam. economic progress is also affected by the population. if the population is increasing day by day then economy may be affected because population have positive as well as review of economics and development studies, vol. 6 (4) 2020, 799 809 800 negative influence on growth. the population of south asian countries rises exponentially but the food supply for the population is going to increase by arithmetically. therefore, these countries are remains poor. population faces shortage of fundamental necessities for example: clean water, food, sufficient protection, health care and education in south asian countries. the south asian countries may also be varied in size, density of population and development. there are many factors which affect the level of growth such as increase in the production, demographic change (increase in the population), change in the technologies and environmental changes etc. in the south asian countries such as bangladesh and nepal are lies in category of lowincome countries while india, pakistan and sri lanka are lies in the lower middle-income countries. there are different ways to rise economic growth i.e., efficient use of advanced technologies and rise in the physical capital products such as equipment, vehicles, buildings, tools and machinery etc. similarly, another way to boost up the economy is to expand the labor force i.e., more labor will produce more output. finally, human capital is necessary for the growth of economy. because well aware labor force can produce goods and services by using factors of production effectively although they can use technologies efficiently. the productivity skill of labor is upgraded through training sessions and some practices. increase in economic growth may cause of the environmental degradation. environmental deterioration may be described as the probability of the unprotected surroundings for the entire world. the destruction of the environment usually based on the pollution like water pollution, air pollution and land pollution etc. these issues are harmful for individual’s health and for the natural resources. there are many reasons of the environmental degradation such as: global warming, bad agricultural policies, deforestation, climate change, resource depletion, transportation, unplanned construction, exhaust gases from factories and auto emissions, technological change and chemical effluents. it is clearly identified that any modification and disturbance in the environment is observed as unfavorable and undesirable. environmental deterioration is sometime due to natural resources and sometime rise by human’s activities. now a days the environmental degradation is caused by the human’s extra ordinary behavior towards the natural resources. the continuous growth of technologies and excessive use of natural resources for manufacturing of goods and services are main reasons of environmental degradation. environmental distortions is caused by economic activities and in return it had unfavorable effects on economy the present study finds the cause and effect of urbanization, total population and environmental degradation and economic growth. the study differentiates with other studies in existing literature by employing pmg autoregressive distributed lag model (ardl) to find out short run and long run impact of population and urbanization on environmental degradation in south asian countries this research work would be important for policy makers concerning these developing countries as it focusses on importance of collaborative development strategy for all developing countries. the existing literature reveals that limited empirical studies were conducted on this issue. 2. literature review alam et al. (2016) studied association amongst co2 emission, energy use, growth and population growth during 1970-2012. co2 emission was dependent variable while gdp per capita, energy use and population growth were adopted as independent variables of this study. the analysis used ardl bound review of economics and development studies, vol. 6 (4) 2020, 799 809 801 test approach to explain the empirical results. these results displayed that energy use and income consumption had a positive impact on the co2 emission. with the increase in the population growth, the co2 emission was increased in some countries although decline in some other countries. ahmad and du (2017) investigated that the energy production and co2 emission had a major impact on the economy of iran by taking data from 1971 to 2011. to analyze the relationship between variables, (ardl) model was adopted. this analysis concluded that there exist the long run association amongst the co2, gdp per capita, foreign and domestic investment, inflation, population density and agriculture land. this had been shown that co2 emission, energy production and domestic investment had a positive and significant influence on economy although foreign investment had positive but insignificant effect on economy in long run comparably inflation and population had negative impact on the gdp per capita. belaid and youssef (2017) explored the association between the environment and the economic growth. time series data during the year 1980-2012 was used to see the influence of growth, renewable and non-renewable electricity use on the economic degradation. the unit root test, (ardl) model and granger causality test were used to evaluate this study. the empirical consequences of this analysis declared that long run association existed among the carbon dioxide emission, renewable electricity use (rec), non-renewable electricity use (nrec) and economic growth. the study concluded that, the renewable electricity use had a beneficial effect on environment while the non-renewable electricity consumption had an injurious influence on environment. bakhsh et al. (2017) found the association among fdi, economic growth, co2 emissions, and renewable waste in pakistan. time series data from 1980-2014 was used in this study. fdi, gdp per capita, human capital, labor, pollutants and capital were the variables of this study. simultaneous equation model was applied to analyze association among variables. the study concluded that fdi had a negative influence on carbon dioxide emissions, capital and labor had positive impact on gdp, pollution had negative effect on gdp and fdi had positive impact on capital stock for growth. hanif and santos (2017) explained that the reduction of environmental deterioration and control of population have much importance for the economic stability. the unbalanced panel data during the period 1972-2011 was used in this study. the variables of this study were environmental degradation, economic development, population size and economic stability. this study provided an evidence about environmental kuznets curve hypothesis. the study concluded that the economic development had negative effect on environmental deterioration while population had a positive consequence on environmental degradation. miao (2017) examined effective factors of energy use and carbon emissions by urban residential in china. the data for 216 chinese cities for year 2013 was used for the empirical estimation. the variables of this study were carbon emission, gdp per capita, energy and urban population. the study concluded that population and income level had positive effect on carbon emissions and energy consumption. transportation had positive impact on vehicle ownership, but fuel price had a negative impact on vehicle ownership. this was suggested that urban strategy and urban design were developed to lessen the co2 emissions and energy consumption. moutinho et al. (2017) explained that the co2 emissions affected by growth in spanish and portuguese. the panel data for 1975-2012 was used in this study. co2 emission was the dependent variable while energy consumption and gross value added were the independent variables of this study. review of economics and development studies, vol. 6 (4) 2020, 799 809 802 the study provided the evidence about the ekc hypothesis. the panel corrected standard errors (pcse) was used to estimate the ekc. it’s concluded that the increase in gross value added would increase the co2 emission until it reached at gdp level, it showed the positive relationship among the gva and co2 emissions. yeh and liao (2017) examined association among carbon emission, population size and the economic development in taiwan from 1990-2014. the (stirpat) model was used to study the consequences of both population and economic expansion. the study concluded that the gdp had the negative impact on the co2 and population had positive impact on co2. acheampong (2018) found the association among gdp per capita, energy usage and carbon dioxide emission. the panel data from 1990-2014 was applied in this study. economic growth, energy use and carbon dioxide emission were variables assumed in this article. the panel vector auto regressive methodology was used to see the impact of variables. the study has shown no effect of gdp on carbon dioxide emissions at regional level, negative impact of gdp on co2 emission at worldwide and caribbean-latin america, energy use had a positive influence on gdp at sub-saharan africa, use had a negative influence on gdp at international level and energy use had a positive effect on carbon dioxide emissions at mena (middle, east, north and africa). botetzagias et al. (2018) investigated that the economic crises ruined the environmental performance. the data from the year 2000-2015 was used to see the troika 1 effect on environment at the time of economic depression and the formal time. in this study hierarchical linear multilevel (hlm) was used to check the link between environmental performance and the economic crises. the variables of this study were gdp per capita, ghg emission, environmental taxes, troika effect and renewable energy share and energy intensity. this concluded that the economic downturn had harmful effect on the eu country’s environment. similarly, troika effect had insignificant and positive impact on the environment. charfedine et al. (2018) explored the linkage amongst environmental quality and economic growth of qatar’s economy. the time series data against 1970-2014 was used. the variables of this study were gdp per capita, capital per capita, labor force, energy use per capita, electric power consumption per capita, urbanization rate and trade openness. unit root test, vecm granger causality test and (ardl) bound test were used to analyze the relationship among variables. the study concluded that the labor was positively correlated with real gdp while energy use had negative and unfavorable influence on the economic growth. electricity power, urbanization and trade openness had an optimistic impact on gdp per capita. chenn et al. (2018) studied that the energy consumption, growth, energy intensity and urbanization had the influence on the pm2.5 concentrations in different nations internationally. the balanced panel data was used against 1998-2018 for 141 countries which was different on their income level. the granger causality test, vecm model, balanced co-integration and panel unit root test were adopted to empirically analyze relationship between pm2.5 concentration and gdp per capita etc. this study resolved that gdp per capita, energy consumption structure and urbanization had unpropitious impact on the pm2.5 concentration. while energy intensity had a negative impact on pm2.5 concentration. 1 a small grouping of three persons functioning together, particularly in an administrative or managerial capacity. review of economics and development studies, vol. 6 (4) 2020, 799 809 803 gilmont et al. (2018) examined association amongst rainfall and economic expansion in india. time series data of 1961 -2012 was used to see the impact of rainfall on the gdp per capita. the variables were rainfall, gdp per capita, underground water, irrigation, agricultural land and water security. ols regression methodology was adopted to analyze influence of rainfall on economic growth. this study concluded that rainfall variation had a negative impact on environmental progress while continually correlated economic growth and rainfall deviation through the entire accessible record. wang et al. (2018) found that the urbanization and industrialization played a vital part in economic growth in india and china for years 1980-2014. the variables of this analysis were gdp per capita, urbanization, co2 emission and industrialization. the tapio decoupling model used to check the decoupling status while the co integration test and unit root test was used to estimate effects of variables. the study concluded that china performed weak decoupling of gdp per capita. in china the biggest driver of decoupling was urbanization, gdp and urbanization but in india the main driver of decoupling was carbon emission intensity. adzawla et al. (2019) examined that the emission of greenhouse gases affected the economic growth of sub-sahara africa. the panel data over the period 1970 – 2012 was used to examine relationship among ghg emission and economic growth. a vector auto regressive model and ols regression model were used to estimate the association among variables. the link among co2 emission and gdp per capita were explained by environmental kuznets curve. this study concluded that a monotonic decreasing association among environmental quality and growth in long run. this study revealed that co2 radiation decreased with increase in gdp per capita. awad (2019) investigated that the economic integration had a beneficial or harmful impact on environment in africa. the panel data during the period of 1990-2017 was used. environmental quality, gdp per capita, trade openness, income per capita, technology and co2 emission were the variables of this study. panel co-integration test and panel unit root were used to estimate the effects of economic integration. this analysis concluded that energy usage had a worsen effect on environment. thus, overall environmental quality and inter regional trade were collaborative encouraged in africa. safdar et al. (2019) found the influence of energy consumption and environmental degradation on growth in 50 developing countries which are categorized into three income groups, low income, and lower middle income countries for years 1990-2016. by means of pmg-ardl, the study came to conclusion that energy consumption had positive impact on economic growth in lower middle income and upper middle income countries while in low income countries it had negative impact while environmental degradation had negative impact on economic activities in all three income groups. aurangzaib et al., (2020) investigated that how rural and urban population causes co2 emission in developing countries over the years 1990-2015. by using fully modified ols method, the results showed that growth and urban population has positive impact on co2 emission while rural population has negative impact on co2 emission. panel causality analysis also identified that economic growth and urbanization are causing environmental degradation in developing countries. most of studies concluded that increasing population is burden on economy and causing environmental degradation. economic growth also causes harmful effect on environment. cause and effect relationship between growth, population, urbanization and environmental degradation is identified by large number of studies. review of economics and development studies, vol. 6 (4) 2020, 799 809 804 3. data and methodology in this part, data and methodological issues are discussed. the variables are explained which are preferable to recognize the influence of environment and population and urbanization on the economic growth. 3.1 time period in this analysis the panel data of south asian developing countries during 2000-2018 is used to check the influence of environment urbanization, and population, on economic growth. 3.2 sources of data to see influence of environment, urbanization and population on the economic growth of south asian countries, panel data is collected from “world development indicators” (wdi). 3.3 selection of countries to analyze the effect of environment, urbanization and population on growth of south asian countries which belongs to the low middle income level? the selected south asian countries are bangladesh, india, nepal, pakistan and sri lanka. 3.4 model specification the present study finds the cause and effect of urbanization, total population and environmental degradation and economic growth. economic growth=f (population, urbanization, co2 and capital) in the model economic growth used as dependent variable while population urbanization, co2 emission and capital are used as explanatory variables. log (gdp) =α0+ α1 log pop it+ α2 log k it+ α3 log co2 it+ α4 log ubn it+ μ it where: log gdp= log of economic growth log pop = log of total population. log k = log of gross capital formation. log co2 = log of carbon dioxide emission as proxy of environmental degradation. log ur = log of urbanization population. 4. results and discussion 4.1 cross-sectional dependence tests to avoid the regional distortions in panel data, cross sectional dependence test is performed firstly on our panel data analysis. table 1: cross-sectional dependence test results test gdp pop k urpop co2 breusch-pagan lm 179.98 *** 182.04 *** 168.93 *** 186.78 *** 36.77 *** pesran scaled lm 36.89 *** 37.35 *** 34.42 *** 38.41 *** 4.87 *** bias adjusted lm 36.75 *** 37.21 *** 34.28 *** 38.27 *** 4.73 *** review of economics and development studies, vol. 6 (4) 2020, 799 809 805 pesaran cd 13.41 *** 13.49 *** 12.99 *** 13.67 *** 4.78 *** {notes: *, **, and *** represent the 10%, 5%, and 1% significance levels, correspondingly.} the above table displays cross sectional dependence among the variables. all the variables are significant at 1%. it postulates that variation in one country will be transferred to other countries which reveal importance of joint development policy for these countries. 4.2 panel co-integration the panel co-integration test is used in study to examine long run association amongst urbanization, population, economic growth and environmental degradation. this test is beneficial to describe simultaneously long run association among selected variables. table 2: panel co-integration results of dependent and independent variables assumption w/o trend with trend panel v-statistic -1.03 (0.79) -1.58 (0.93) panel rho-statistic 0.14 (0.63) 1.89 ( 0.98) panel pp-statistic -1.75 * (0.07) -0.85 ( 0.16) panel adf-statistic -0.76 ** ( 0.05) -0.88 *** (0.00) group rho-statistic 1.81 * ( 0.06) 2.89 (0.99) group pp-statistic -1.06 (0.15) -3.07 *** ( 0.00) group adf-statistic -1.88 ** (0.03) -2.47 *** (0.00) {notes: figures in parentheses are probability values. *, **, and *** represent 10%, 5%, and 1% significance level, correspondingly. number of countries (n) = 5 and eras (t) = 20. the maximum numbers of lags were automatically nominated using akaike information criterion (aic).} the table 2 shows consequences of panel co-integration test. the first column shows the estimated results without trend while the second column results are included trend. the co-integration results showed that three to four out of the seven null hypotheses of no co-integration have been rejected at 1%, 5% and 10% significance levels. so, model is co-integrated both within the dimension and between dimensions. so, there is indication of long-term association among dependent variable and independent variables in some selected south asian states. 4.3 long run and short run pmg estimates to observe consequence of environmental degradation, urbanization and population on economic growth of south asian countries, pmg technique is applied which established long run and short run association amongst all chosen variables. the results are specified in table 3 review of economics and development studies, vol. 6 (4) 2020, 799 809 806 table:3 long run and short run pmg estimates table 3: pmg estimates of model long run results variable coefficient std. error t-statistic prob.* log co2 -0.317 0.086 -3.679 0.000 log k 0.608 0.033 18.159 0.000 log ur-pop 1.361 0.369 3.686 0.000 log pop -2.948 0.705 -4.184 0.000 short run results variable coefficient std. error t-statistic prob.* cointeq01 -0.691 0.228 -3.026 0.004 gdp (-1) 0.124 0.159 0.779 0.440 co2 0.326 0.101 3.231 0.002 k 0.092 0.096 0.958 0.344 k(-1) -0.116 0.106 -1.095 0.280 ur-pop -104.533 76.019 -1.375 0.177 ur-pop (-1) -206.707 213.318 -0.969 0.338 pop -26.661 112.497 -0.237 0.814 pop (-1) 293.154 249.717 1.174 0.247 c 20.676 7.462 2.771 0.008 above table explains long run association among dependent and independent variables through pmg approach. the independent variable environmental degradation as co2 emission have -0.317 as coefficient value and the probability value is 0.000 which reveals negative and significant association with growth (gdp). this result indicates that one percent increase in the co2 emission will cause of 0.317 percent decrease in growth. this result preview in some previous studies such as yeh & liao (2016), charfeddine et al. (2018), adzawala et al. (2016), bastola & sapkota (2015) and acheampong (2018). gross capital formation (k) has 0.608 as coefficient value and the probability value is 0.000 which reveals positive and significant association with growth (gdp). the positive and significant result reveals that one percent rise in gross capital formation will cause of 0.608 percent rise in economic growth (gdp). the positive and significant association has been also discussed in past studies as like golley & wei (2015), saidi & hammami (2018), bakhsh (2017) and omri (2013). the next independent variable is urban population and its coefficient value is 1.360 while probability value is 0.000 which shows the positive and significant relationship with dependent variable economic growth (gdp). this result reveals that one percent increase in population will cause of 1.360 rises in economic growth (gdp). in general, population has positive as well as negative impact on economic growth but according to our analysis, urban population has positive and significant impact on growth. this result also discussed in the previous reviews such as wang et al. (2018) and arvin et al. review of economics and development studies, vol. 6 (4) 2020, 799 809 807 (2015). finally, total population as an independent variable have -2.947 as coefficient value and the probability value is 0.000 which indicates negative and substantial relationship among economic growth (gdp) and total population. this result exposes that one percent increase in population will cause of 2.947 percent decrease in economic growth. so, all the long run consequences of pmg explain the significant effect of environmental degradation and population on the economic growth of south asian countries. from all selected variables gross capital formation and urban population have positive and significant association with economic growth while total population and co2 emission have negative but significant association with economic growth. in the short run analysis, results the value of co-integration is -0.691 and value which negative and significant and shows 69 percent adjustment from short run to long run in each year 4.4 causality analysis dumitrescu and hurlin panel causality test is used to explore the causality amongst different variables. the results of causality analysis are given in following tables: table 4: causality analysis results south asian countries k ↔ gdp pop ↔ gdp urpop → gdp co2 ↔ gdp pop ↔ k urpop ↔ k co2 → k urpop ↔ pop co2 ↔ pop co2 ↔ urpop ↔ shows the bi-direction causality, → shows the uni-direction causality,  shows no causality. in the above table, it is indicated there is bidirectional causality between all selected variables which shows that all these variables are causing each other. 5. policy implication and conclusion the basic intention of this research is to observe influence of environmental degradation, urbanization and population on economic growth of selected south asian countries. the objectives of the study are to observe influence of environmental degradation as co2 emission on growth of economy and effect of urban and total population on growth of selected countries. the main object is to attain the hypothesis i.e., population and environmental degradation are affecting growth in some selecting south asian states. the dependent variable of this analysis is economic growth (gdp) while independent variables are co2 emissions as proxy of environmental degradation, total population (pop), urbanization (urpop) and gross capital formation (k). the selecting south asian countries consists on bangladesh, india, nepal, pakistan and sri lanka. it is indicated that all the long run consequences of pmg explain the significant effect of environmental degradation and population on the growth of south asian countries. from all selected review of economics and development studies, vol. 6 (4) 2020, 799 809 808 variables gross capital formation and urban population have positive and significant association with economic growth while total population and co2 emission have negative but significant association with economic growth. in the short run analysis, results the value of co-integration is -0.691 and value which negative and significant and shows 69 percent adjustment from short run to long run in each year. the secondary objective of study was to find out cause and effect relationship among selected variables. it is noted by results of panel causality analysis that bidirectional casualty exists among environmental degradation, urbanization, total population and economic growth in selected south asian countries. the policies suggested by study are as follow:  the results show that the carbon dioxide emissions is main reason of environmental deterioration and harmful for the economic growth (gdp), therefore, government of south asian countries should take steps for reduction in co2 emission.  it is necessary to control the population growth and to enhance the economic growth of south asian developing countries, there should be effective population.  it is necessary that government should make policies which enhance the gross capital formation (k) for the rapid growth of economy in the south asian countries.  increase in the urban population cause rise in the economic growth but continuously increase in population may be harmful for the economy. government should make policies for the betterment of the south asian countries.  bestowing to cross sectional dependency of variables, government of south asian countries should make policies through mutually agreement for enhancement of economic growth and reduction in the environmental degradation and population. references acheampong, a. o. 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(2017). impact of population and economic growth on carbon emissions in taiwan using an analytic tool stirpat. sustainable environment research, 27(1), 41-48. review of economics and development studies, vol. 7 (1) 2021, 51-61 51 turnover intentions and its drivers: a study of banking sector malka liaquat a , mohsin ali b , aisha khursheed c , qurat ul ain d a assistant professor, institute of management science, the women university, multan, pakistan email: malka.liaquat@wum.edu.pk b lecturer, management sciences, national university of modern languages, multan, pakistan email: mohsin.ali@numl.edu.pk c lecturer, business administration, university of education, multan, pakistan d lecturer, business administration, foundation university rawalpindi, pakistan article details abstract history: accepted 07 march 2021 available online march 2021 the current study aims to explore factors which influence perceptions of employees and shape their intentions to leave the organization. it utilizes psychological factors that serve as baseline for turnover intentions. data of 404 employees were taken from banking sector and evaluated through structural equation modeling in amos. results reveal interesting insights identifying intrinsic rewards as significant factor in countering the turnover intentions whereas, justice perception and organizational support do not play direct role in shaping employees perceptions. results carry managerial and practical guidelines that can be useful for organizations for creating a strategic taskforce. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: intrinsic rewards, psychological contract, informational justice, perceived organizational support, turnover intentions jel classification: j32, j39, d63, d23, d29 doi: 10.47067/reads.v7i1.321 corresponding author’s email address: malka.liaquat@wum.edu.pk 1. introduction (devi and pojitha, 2012) state that organizations use its human resource as an important tool to compete and win from its competitors. according to becker & gerhart (1996), organization is about not only technology, infrastructure or machinery rather it is about its people, such strategic assets are not easily tradeable, and organizations should be conscious towards these resources as they limited and not conveniently accessible. (budhwar & debrah, 2009) identified that remarkable progress has been made in the realm of human resource; however, it still faces different challenges in different economies and needs to be explored. (santhanam, kamalanabhan, dyaram, & ziegler, 2017) state how employees attitude is reflected towards its organizations comes through its subjective assessment of its organization. if an employee perceive the organization is not supporting not being fair in its processes can built a negative feeling review of economics and development studies, vol. 7 (1) 2021, 51-61 52 towards it organization and might built intentions to quit. turnover casts huge impacts on organizations both in terms of money and knowledge resource. (hinkin & tracey, 2000) claim “ turnover is costly” , further (holtom, mitchell, lee, & eberly, 2008) quote that irrespective of economic situation the shortages or labor is a critical factor for industries all over the globe, therefore retaining knowledge taskforce or key employees is critical for organizational success. in an recent study conducted by (khan, khan, mohmand, & misbah, 2020) affirm that turnover can influence firm’s performance and productivity status. rewards especially internal rewards is one of such factor, which contours employees thinking patterns. employees evaluates the way its organization acts/reacts, based on which their perceptions are shaped. how much organization care about its people or support them is covered in reign of perceived organization support (pos). (kurtessis et al., 2017) proposes that organizational support lends to multiples outcomes that can be both productive and counterproductive in nature such organizational citizenship behavior, performance. another factor, which contributes in shaping employees perceptions and attitudes, is how fairly employees are being treated in the organization, a phenomena often known as organization justice. it is professed as fairness perception (byrne and cropanzano, 2001) that categorizes employee’s behavior in organization. it has been labeled as a multidimensional phenomenon with four sub-types as distributive, procedural and interactional where these all are related with employee’s perceived perception about fairness in terms of resources allocation, decision process and behaviors of peers and supervisor in the organization (yadav & rangnekar, 2015). (stumpf, tymon, favorito, & smith, 2013) points out that by creating and giving value to employees, organizations can achieve greater goals of engagement and retention, thus keeps its strategic resources to itself. studies (liaquat & zahra, 2015; restubog, zagenczyk, bordia, bordia, & chapman, 2015) advocate that organizational factors such as breach of psychological contract (pc) plays a substantial role in influencing and shaping employees behaviors and reaction towards organizational processes and phenomenon and has received less attention in literature. (santhanam et al., 2017) also endorse, to study psychological breach and its influence on turnover intentions in other context and industries. all these perspectives are important in predicting employee intention to leave the organization. studies (james, 2020; nawaz, siddiqui, rasheed, & iqbal, 2019) conducted in service sector i.e. higher education and hotel industry on turnover advises to further explore factors that contributes towards involving different geographic boundaries and aspects. the current study explores the psychological and organizational perspectives, which can influence an employee’s attitude towards its organization. thus, it aims to address how inter-organizational factors influence employee turnover intentions via psychological contract breach as a mediator in pakistani banking sector, exploring new avenues from both academic and managerial perspectives. 2. literature review and hypothesis 2.1 intrinsic rewards and turnover intentions rewards play an imperative role in an organization shaping the mental make-up of an individual. barnard (1938) proposed that various forms of rewards that employees receives serves as a base for evaluation its work’s contextual aspects. on the premises of set, if employees are rewarded by its organization, they reciprocate it favorably through their positive attitudinal outcomes and responses (blau, 1964; haar & spell, 2004). rewards are categorized as social, extrinsic and intrinsic in nature review of economics and development studies, vol. 7 (1) 2021, 51-61 53 (elizur, 1984) where social is about interpersonal, extrinsic is tangible benefits such as money whereas autonomy in task comes in intangible benefits summed up intrinsic rewards. previous studies (pfeffer, 1994; smith and tyler, 1997; hallock, 2002) emphasize the notion to develop and promote intrinsic rewards as it lends a sense of identification and belonging of an employee with its organization, it can promote and maximize the knowledge sharing ability and would lead to development of professional and ethical workplace. so employee’s perception not only the cognitive patterns rather emotional side is influenced how organizations rewards him/her intrinsically. therefore, it is stated that: h1: intrinsic rewards have a relationship with turnover intentions. 2.2 perceived organizational support and turnover intentions: pos is the , “overall extent to which employees believe that their organization values their contribution and cares about their well-being” (eisenberger, huntington, hutchison, & sowa, 1986). employees always look at its organizations for support in terms of information, fair procedures, and emotional aspects and do evaluate how organizations assess its hard work and contributions. according to (levinson, 2009) by building exchange relationship of cordial nature between employee and its employers, organizations can get desired and favorable results. (eisenberger et al., 1986) quotes organization’s treatment with its employees can profound effects on building cognitive and emotional interpretations. they further state that organizations support in form of appreciation and recognition also lends a supporting role for its employees. (maertz, griffeth, campbell, & allen, 2007) state that when employees perceptions is strongly influenced through pos it creates a stance of obligation in employees to reciprocate through remaining in the organization. thereby, it can be stated that: h2: pos has relation with toi 2.2.1 pos, psychological breach of contract and turnover intentions: another term, which comes in mind on basis of employee’s interpretations of exchanges with its organization, is of psychological contract. rousseau (1989) state it as “an individual’s beliefs regarding the terms of conditions of a reciprocal exchange agreement between the focal person and another party”. in another work (rousseau, 2001) explains that pc is multi-stage phenomenon, first it is a preconceived cognitive conceptualization which is general in its nature such as professional norms. however, at later stage it becomes an ingrained notion that stabilizes and shapes psychological makeup of employees. (armeli, eisenberger, fasolo, & lynch, 1998; pohl, bertrand, & ergen, 2016) quote that how organizations support its employees helps employees to build up its confidence in the organization and it helps to strengthen its obligation towards its organizations. the later state that in context of social exchange theory, it is the reciprocity principles according which employees finds himself/herself more prone and liable to organization if it look after his/her interests. it is thus hypothesized that: h2a: pos has relation with breach of pc employees evaluates organizational policies in comparison with tasks and activities carried out by him/her and when it finds a failure it is termed as psychological contract breach (eckerd, hill, boyer, donohue, & ward, 2013) who further state that it is very important to understand the consequences these failure would have on employee’s behavior. (pohl et al., 2016) state that both pos and pc are measures of attitude states and breach of psychological contract can lead to negative outcomes. thus, if organizations upkeeps with its people, it forms an unexplained binding, which can help to, give review of economics and development studies, vol. 7 (1) 2021, 51-61 54 negatives intentions such as turnover. therefore, it can be hypothesized that: h2b: breach of psychological contract mediates between pos and toi 2.3 informational justice and turnover intentions: according to miller (2001), sense of respect and dignity is created when employees see being treated fairly. (lepine et al., 2002: colquitt et al., 2001) further stated that unfair treatment can leads to counterproductive behaviors and distort the inherent belief of rightness. halbesleben and demerouti (2005), linked unfair treatment with developing of involuntary withdrawal that can worsen into turnover. further (murphy and vives, 2013) in their work also observed that if employees feel being treated unfairly on continuous basis, they would replicate these behaviors on their subordinates thus creating a multiplying effect which eventually reaches to organization’s lower level. in another study (hussain & khan, 2019) state that it is even plausible to state that this influence is not limited to employees rather it would customers as well. adding more he stated that when organizations are in phase of change such downsizing or making profit it often hides information from its employees which generates negative feelings towards the organization. so if employees are perceive that they are not provided accurate information or details it can make them leave their organization. on basis of this, it can be stated that: h3: informational justice has relation with turnover intention. 2.3.1 informational justice, psychological breach and turnover intentions justice perception carry strong psychological effects on employee behaviors, according to (rosen, chang, johnson, & levy, 2009) psychological contract yield out as a possible outcome of justice perception, as it is result of cognitive analysis and evaluations of employee about its workplace. thus if an employee perceive that organization is violating his/her rights it leading towards breach of pc. thus, h2a: informational justices has a relationship with breach of pc many scholars i.e. (estreder, rigotti, tomás, & ramos, 2020) tried to describe psychological contract and several of those descriptions repeated common principles, including goals, values, reciprocity, and responsibilities. the definition used for this study states psychological contract as a belief of personnel about a joint responsibility amongst the personnel and their organization (rousseau, 1989). scholars concluded that it has an arbitrary nature; because being of contingent on the opinion of individual as to what responsibilities, the company will meet (bellou, 2009; rousseau, 1989; rousseau, 1995). personnel, who face violation of their psychological contract, may experience various responses that may range from attitudinal responses to responses towards organization. (kickul & lester, 2001). suazo (2009) was amongst first amongst researchers who discovered an inverse association amongst the breach of psychological contract and perceived support for the organization. h3b: breach of pc mediates between toi and ij 2.4 breach of psychological contract and turnover intention numerous institutions now recognize the bottom-line impact on quality employee retention. when the workers are happy at work, they do not consider quitting it. holding quality workers actually adds to efficiency and morale, thus reducing the direct and related attrition costs. employee retention can be increased on by using these steps: 1) job analysis audit, 2) job-designed assessments, 3) professional development, 4) relationship between manager and employee, 5) competitive & equitable pay system, and 6) succession planning. employee development raises a positive contribution to an organization's performance. in reality, well-qualified employees can attain the goals in time, which extend their expertise and knowledge. akanbi (2005) emphasized that an employee is required to review of economics and development studies, vol. 7 (1) 2021, 51-61 55 receive a reward once task is complete. h4: breach of psychological contract has a relationship with turnover intentions h figure 1: framework for conceptualization 3. methodology 3.1 sampling and data collection this research is targeting commercial bank’s employees form southern region of punjab. commercial banking organizations include, hbl, askari bank ltd., mcb bank ltd., soneri bank ltd, abl, ubl, zarai tarakiyati bank, bank al habib ltd, silk and islamic bank ltd. for the purpose of data collection officers from grade ogiii to ogi were touched. non-probability purposive sampling technique has been used for the purpose of data sampling. lunchtime was selected to contact officers of banks to ensure their productive response. officers were informed about the scope as well as significance of the present study and guaranteed that their confidentiality will be ensured in order to ensure that they may become able to respond authentically while filling items of questionnaire. size of the sample is quantity of units of sample which are selected from the nominated area. sample based on 404 respondents were acquired from the nominated area. 3.2 variables operationalization scales for current study is adopted from prior studies and measured on 5-point likert scale from strongly disagree to strongly agree range. 3.2.1 intrinsic reward: present study used minnesota satisfaction questionnaire (msq) short form documented by eisenberger et al., (1986) consisting of 12-items. 3.2.2 perceived organizational support: a condensed scale of eight items designed by eisenberger et al., (1986) is employed to quantify this construct , which gauged participant’s believe about their organization that whether it value contributions made by them and care for their well-being. 3.2.3 informational justice the study under consideration used the 3-item questioner designed by niehoff and moorman (1993) for measuring informational justice’s construct. 3.2.4 psychological contract breach psychological breach of contract h2a intrinsic rewards employee’s turnover intention perceived organizational support informational justice h1 h2 h3a h4 h3b h2b review of economics and development studies, vol. 7 (1) 2021, 51-61 56 it refers to perception of an employee that one or more responsibilities of the company are not met (morrison & robinson, 1997). this has been operationalized by using the scale of 9-items designed by by morrison & robinson (1997). 3.2.5 turnover intentions this study has used fifteen item scale designed by steers & porter (1982) for measuring turnover intentions. 4. results 4.1 demographics within sample age, gender, educational qualification and, experience has been used to measure the demographic component for each respondent. the larger part of the study's respondents hold postgraduate qualifications i.e. 94.3%. the demographic profile acquired further confirms that the majority of the sample i.e. 61.8% belongs to mature aged group of employees ranging age from 31 years and above. however, a relatively smaller age group i.e. 38.2% also works and their ages range between 20 years to 30 years. in addition to that table 4.1 also reports experience at work of workers working in the sample banks. results demonstrate that astonishingly major portion about 85.9% of the sample comprised of people having lesser experience i.e. one year to ten years, whereas merely 14.1% of employees have service experience above 16years. 4.2 measurement of normality before moving towards sem, a basic check to continue with is the speculation of ordinariness. both kurtosis and skewness with high nature are systematic of non-ordinariness of data. following tables exhibits that data is typical as the estimations of kurtosis and skewness the two lies in as far as possible regard which is <3 and <0 and which gave a chime formed outline showing that data isn't encountering any issue of ordinariness. table 1: descriptive statistics of perceived organizational support, psychological breach and turnover intentions n mean skewness kurtosis statistic statistic statistic std. error statistic std. error comp_pos 404 3.7101 -.111 .121 -.144 .242 comp_pcb 404 3.5492 -.186 .121 -.618 .242 comp_ij 404 3.9497 -.303 .121 .431 .242 comp_toi 404 3.6734 -.329 .121 -.242 .242 valid n (listwise) 404 4.3 bivariate correlation: results of correlations among the constructs are show in table 2 showing that a positive connection of ward constructs (turnover intention) with every single diverse variable both autonomous and go between. moreover, there also exists positive relationship among every single distinctive variable as well. review of economics and development studies, vol. 7 (1) 2021, 51-61 57 table 2: correlations analysis comp_ir comp_pos comp_pcb comp_ij comp_toi comp_ir pearson correlation .467 ** .391 ** .264 ** .455 ** sig. (2-tailed) .000 .000 .000 .000 n 404 404 404 404 404 comp_pos pearson correlation .467 ** 1 .477 ** .307 ** .405 ** sig. (2-tailed) .000 .000 .000 .000 n 404 404 404 404 404 comp_pcb pearson correlation .391 ** .477 ** 0.704 .355 ** .421 ** sig. (2-tailed) .000 .000 .000 .000 n 404 404 404 404 404 comp_ij pearson correlation .264 ** .307 ** .355 ** 1 .226 ** sig. (2-tailed) .000 .000 .000 .000 n 404 404 404 404 404 comp_toi pearson correlation .455 ** .405 ** .421 ** .226 ** 1 sig. (2-tailed) .000 .000 .000 .000 n 404 404 404 404 404 **. correlation is significant at the 0.01 level (2-tailed). 4.4 analysis of hypothesis: table shows the immediate and round about relationship among the autonomous just as reliant factors with and without mediator. table 3: hypothesis results relationship r.w / p – value result h1 -ir-toi r.w = 0 .249 p-value = 0.000 accepted h2 -pos-toi h2a --pos-pcb h2b --pos-pcb-toi h3 -ij---toi h3a---ij--pcb h3b---ij--pcb-toi r.w = 0.240 p-value = 0.126 r.w = 0.213 p-value = 0.000 r.w = 0.213 p-value = 0.000 r.w = -0.213 p-value = 0.124 r.w = 0.251 p – value = 0.001 r.w = 0.157 p – value = 0.001 rejected rejected accepted rejected accepted accepted h4--pcb-toi r.w = 0.254 p . value = 0.000 accepted rw== regression weight review of economics and development studies, vol. 7 (1) 2021, 51-61 58 5. discussion this part focuses upon the results of analysis and studies which align with these results. estimation of regression weight 0.0249 and p value of 0.000 demonstrated that positive relationship exists between ir-toi. the results supports h1, stating that rewards especially intrinsic ones successfully molds employee’s behaviors and expectations to leave an occupation or remain in the activity. thus an employee’s will to exist or stay in an organization is determined through rewards being given (yukl, 2002; walumbwa and chad, 2011). in case of pos and toi, analysis reports that there is no significant relationship as regression weight is 0.24 and p-value is 0.126. it can be inferred that employees while making intention to leave do not take organizational support as a significant factor in influencing there decision. one of the reason of this insignificant relationship can be that in banking sector more less support provided is of similar nature thus that cannot be contribute to perceive any differential effect on employees and lies in line with study of (mathieu & zajac, 1990) stating employee mental model is not influenced by organizational support. in case of mediational relationship, the result of regression weight 0.213 and p-value 0.000 affirms h2a, showing pcb fully mediates between pos and toi. this lies in reference with previous studies (bass 1985; judge et al, 2001) stating that if support provided by organization is violated it breaks the psychological bonding of employee with its organization, therefore, leading to toi. results reveal that there is significant but negative relationship between ij and toi with a p value of 0.000 and regression weight -0.213, which indicates that if there employees are perceive that they are being treated fairly it will reduce their intentions to leave the organizations. in case of ij and breach of pc (r.w = 0.251, p – value = 0.001) shows positive and significant relationship thus, if employees perceive lack of fair information it reciprocates towards breaking of their psychological bondage with the organization which lies in endorsement of study of (de ruiter, schalk, schaveling, & van gelder, 2017) claiming that if employees observes lack of supervisory ij it can strengthen one’s breach of pc. with reference to mediation, breach of pc also plays significant role with p-value of 0.001, between ij and toi, thus a partial mediation occurs showing that psychological contract breach incorporates all achievements that a representative accepts to be granted by the firm leading to acceptance of h3b. analysis reveal that a relationship exist between pcb and toi with p-estimation of 0.000 and regression weight of 0.254, thus if employees perceive that psychological contract is violated than employees will be prone to turnover intentions thereby will leave organization which aligns with h4 proposed. 6. managerial implications the investigation is fascinating in its type as it focuses on constructs that classify an individual’s obligations and connections with each other and with one’s organization. this investigation provides accommodating encounters for administrative ramifications to be carried out in an organization. the study entails following implications for the managers:  management can design attractive financial frameworks which ensure the smooth functioning of employees.  management should provide fair information to its people, which can be beneficial for gaining employee’s trust and function more effectively.  another sound administrative commitment is that, if organization can give its employees legitimate prizes and recognition it would lead to fruitful result. 7. limitations & future directions the current study has attempted to explore the effects carefully; however still there are areas review of economics and development studies, vol. 7 (1) 2021, 51-61 59 that can be worked upon:  purposive sampling has been used in this study which is non-probability technique, by applying probability technique, results can be more generalizable.  the research has been carried out with cross-sectional data, whereas longitudinal data can provide better insight.  the current work has focused upon banking sector, the results can be further validated by taking in view from other financial institutions or ngo. despite the fact that the investigation inadequacies in above zones, still it displays and regarded and effective energetic about relationship among the factors alongside which the examination additionally approves the structure created by giving record of how to improve the representative profitability. 7. conclusion the study attempted to explore the psychological perspective of employees that makes them built up intentions to leave. the model is subjected to testing through structural equation modelling through amos taking data form banking sector. results provide useful baseline that employees do get influenced with how much value, reward and fair treatment is provided, which if not fulfilled leads to negative feelings towards the organization. as per notion of social exchange theory (blau, 1964), employees would reciprocate with what they get from organization. employees would feel themselves to be liable towards its organization. however, if there is lack of recognition, justice and support, an employee will choose to leave the organization. references adams, j. s. 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(2007). the impact of psychological contract breach on work-related outcomes: a meta-analysis. personnel psychology, 60, 647-680. review of economics and development studies, vol. 7 (2) 2021, 147-161 147 structural changes in employment diversification in pakistan: assessing the role of sectoral employment elasticities in employment generation fouzia yasmin a , nazia nasir b , noreen safdar c , sidra iqbal d a lecturer, department of economics, university of sahiwal, pakistan email: fouziayasmin@uosahiwal.edu.pk b research scholar, department of economics, the women university multan, pakistan email: nazianasir38@gmail.com c assistant professor, department of economics, the women university multan, pakistan email: noreen.safdar@wum.edu.pk d lecturer, school of economics, bahauddin zakariya university, multan, pakistan email: sidrach@bzu.edu.pk article details abstract history: accepted 20 april 2021 available online june 2021 employment growth (part-time and full-time) in sub-sectors of economic activity is not only determined by the output growth in this sector but the time lag is also involved, in addition to this the wage elasticity of employment is also critical in determining employment diversification and labor mobility between sectors, varied widely in different sectors of the economy. this paper endeavors to illustrate the role of part-time and full-time employment elasticity among sectors along with employment diversification. furthermore, the empirical analysis is carried out on time series data for 1990 to 2019. by utilizing seemingly unrelated regression and by estimating wage elasticity of employment with modified two factor cobb-douglas function for full time and part-time employment, the results have been illustrated, by carefully considering the reliability, consistency, and accuracy of the findings, this study demonstrates an increased sectoral output tends to enhance employment in respective sectors. for the manufacturing sector and construction sector, both sectoral output and total output were found to have comparable responses that suggest employment for both sectors tends to increase in line with the output. therefore, the conclusions of the study establish that an effective way to enhance employment is to create flexibility in the wages as an efficient approach to enhance sectoral employment. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: employment elasticity, employment diversification, full-time, part-time jel classification: j01, j18, j21, j21 doi: 10.47067/reads.v7i2.347 corresponding author’s email address: fouziayasmin@uosahiwal.edu.pk 1. introduction pakistan has made notable progress in employment generation over decades, the share review of economics and development studies, vol. 7 (2) 2021, 147-161 148 employed labor force was increased from 37.22 to 61.71 from 2000 t0 2018 (pakistan economic survey 2019-20), consequently, more than 30 million individuals indicated an uplift from poverty. to sustain this inclusive rise in employment, the utilization of the labor force in income-generating activities is critical for economic growth as being the most valuable and abundant asset of the country (nasir et al., 2021). though, many indicators elaborate underutilization of the country’s human resource, with the reason that 208 million people are dependent on the earnings of 46 million wage earners only (pakistan labor force survey, 2017) as supported by the demographic structure of the population. furthermore, many other factors are also responsible e.g., low rate of female participation, nonpaid or low-paying jobs (shaheen, et al., 2015) amid the present recovery stage of the economy calls for urgent policy efforts to address the absorption of the labor force in economic activity in all sub-sectors (alimova, 2021) for both full time and part-time employment in pakistan. full-time and part-time employment can differ because workers increase leisure with low real wages and decrease leisure with relatively high real wage rates (lucas and rapping, 1969). an elastic labor supply serves as a core component of the labor market (kimmel & kniesner, 1998; christiano & eichenbaum, 1992). the estimation of wage elasticities for both part-time and full-time labor. this elasticity of employment is of great policy interest since it limits the impact of policies in various subsectors in different aspects. estimating the magnitude of employment elasticities as being a significant subject matter of empirical literature, it focuses on employing a maximum number of individuals in local labor markets (full-time and part-time) in all sectors of the economy. furthermore, employment diversification and sectoral employment elasticities are also important as both are interrelated to each other (evangelista & savona, 2003). figure 1 illustrated the characteristics of pakistan’s labor market in 2017, only 57 million individuals are employed out of the total population of 208 million in the country, in addition, there is only one wage earner provide the living to s for 3.6 people in pakistan as approximately half of the population is not in the labor force. the country has a working-age population of 116 million with a non-working age population of 92 million, furthermore, the total labor force is 59 million, moreover, employed males are 45 million and employed females are 12 million with only 1 million unemployed labor force, in addition to these, the ratio of paid males are far more than paid females 40 and 6 million respectively. figure 1: an overview of pakistan’s labor market in 2017 (millions) source: pakistan labor force survey, 2017 208 116 92 59 45 12 1 40 6 0 50 100 150 200 250 total population working age population non-working age population labour force employed male employed female unemployed paid male paid female review of economics and development studies, vol. 7 (2) 2021, 147-161 149 figure 2: male and female employment by sector 2017 (percentage) figure 2 illustrates the ratio of male and female share in employment in percentage. various sectors are disaggregated showing the employment percentages, for instance, agriculture the percentage contribution of males is 31 and for females, it is 77.5 percent, further, it is 17.9 and 19.3 for males and females respectively in the manufacturing sector, similarly, it is 12.3 and 0.3 for other industry, furthermore, wholesale and related trade comprise 23.3 for males and 2 percent for females, the transport and communications employ 9 percent males and 0.2 percent females, that is 1.4 and 0.2, 3.8 and 0.4, 0.1 and 1.3 for males and females in finance, insurance, and real estate and government services and other private services respectively. 2. literature review in the neoclassical model of labor markets, real wage growth is first determined by the labor trend and employment growth in diversified environments responds to the functional relationship. the scope of the trade-off of labor mobility with employment diversification is indispensable to accommodate the labor in the working of the economy. therefore, work-cause runs more than other means, consequently, public policy and macro-climate determine how employment growth is beneficial for the overall economy. jouili and khemissi (2019) estimate the impact of graduated employment on the economic diversification in saudi arabia and concluded that employment diversification had a positive impact on graduated students for their job creation. xiao et al. (2018) examined the drivers of industrial diversification, the showed about the entry of new industry that how it become more productive for the economy through breaking the past and introduced highly innovative product line. dey (2018) explained the role of employment diversification to reduce the poverty among the small and marginal landholders in india and showed that employment diversification towards the non-farm sector brought the small landholder into a positive path to curtail. borah (2018) focused on the structure of the non-farm sector of north east india and explore the range of different things that had an impact on the economic development of the economy. as the economy moved on a high-capacity innovation level, the trend of workers moved from farm to nonfarm sector and increased workforce of women due to rise in education moved them to work from primary to other sectors. reddy (2016) examined the impact of education on employment diversification among the tribal youth showing education, employment, and expected wages of rural youth affects the employment pattern in india. the conclusion reveals that despite all education 31 17.9 12.3 23.3 9 1.4 3.8 0.1 77.5 19.3 0.3 2 0.2 0.2 0.4 1.3 0 10 20 30 40 50 60 70 80 90 agriculture manufacturing other industry wholesale and related trade transport and communications finance, insurance, and real estate government services other private services female male review of economics and development studies, vol. 7 (2) 2021, 147-161 150 promoting programs most youth still depends on agriculture livelihood. oluwasola (2015) estimates the enhancement of employment diversification through given vegetable production in nigeria. the vegetable farmers are educated and skilled. the passion for work among vegetable farmers not only raised the employment level but also income sources increased. this proposed that education, experience, and access to credit all were the important factors that derived income and employment. ruhat et al. (2014) evaluated rural livelihood diversification strategies. education, ethnicity, and location for employment diversification were explored for nepal. to bring the work diversified labor force should be educated and the location of opportunities area must be easy to access for people. the complete conclusion stated that education had a major factor for employment diversification as the literacy rate. senadza (2012) discusses the effect of non-farm employme nt diversification on the income of rural people of ghana. the finding predicts the determinant of non-farm diversification employment pattern. wage employment and non-farm employment positively affect income. nelen et al. (2013) examined the part-time employment of firm productivity under the production function with the gmm method of estimation to evaluate the productivity with panel data for heterogeneous employment. the conclusion illustrated that firms have a huge share of part-time employment forecast and high productivity levels, as compared to full-time employment due to their effectiveness. deker (2002) elaborated the importance of two major types of atypical employment consist of part-time and temporary workers and concluded a higher probability of gender and lower probability of intermediate skills are responsible for part-time work. arif (2012) estimated the relationship between labor reallocation and sectoral productivity in pakistan and illustrated that economic growth depends on sectoral structure, in addition, the manufacturing sector absorbs more labor force than the workers move from the agricultural sector to the service sector. hou (2010) examined the pattern and challenge of youth employment in pakistan and analyzed that the youth unemployment rate is higher, the labor market had not smooth and most of the young person working without paid as family workers. nasir (2000) examined the earning differential between the private and public sectors that are divided into two categories formal and informal and concluded that earnings of public sectors had more than the private sector due to their personal human capital qualities. informal private sectors suffered more due to their poor wage structure than the formal private and public sectors. islam & nazara (2000) have demonstrated that employment resilience represents a measure of the labor market's response to changes in macroeconomic conditions, and also measures the impact of economic growth on model job creation. wage rate resilience measures the percentage change in employment when there is a percentage change in the wage rate. (montalvo & ravallion, 2011) stated that employment diversification contributes to overall economic development while making it clear that overall gdp growth and growth in certain sectors, such as the agricultural sector, by the reason that many of the poor are working in the agricultural sector, therefore, the results of employment elasticity are different for regional development and overall economic growth. (suryadarma et al., 2013) showed that economic growth increases employment opportunities in the labor market and that growth in labor market employment further promotes economic growth. increased employment diversification helps to achieve development, as labor demand increases, workers' incomes and real wages increase, and then their living standards and purchasing power increase. since the late 1990s, a large number of empirical studies have indicated that the rural nonagricultural sector and income diversification have been focused on development research review of economics and development studies, vol. 7 (2) 2021, 147-161 151 (canagarajah et al., 2001; ellis and mdoe, 2003). numerous case studies and preliminary data sets indicate that income from the non-agricultural sector is increasing (haggblade et al., 2007). these studies assess the implications of the growing non-agricultural sector on agricultural policy and see it as a strategy for rural families to deal with natural upheavals and policy shocks. rural families have different assets in the study of poverty and employment strategies and they specialize in the same activities or choose to earn from agricultural and non-agricultural activities. (mcelwee and bosworth, 2010). several case studies and primary data sets suggested that the income from the nonfarm sector is increasing. these studies evaluate the implication of the rising non-farm sector on agricultural policy and find it a strategy of the rural household to cope with natural upheavals and policy shocks. studies on poverty and employment strategies in the rural households have different asset endowments and they either specialize in a single activity or choose to earn both from farm and nonfarm activities. some studies examined the relationship between participation in rural nonfarm employment using individual and household characteristics such as gender, education, road access, access to electricity and water, landholding, etc (adams and alderman, 1992; yang, 1997; arif et al., 2000; kaur, 2010; bezu et al, 2013). 3. data methodology the study at hand endeavors to investigate the structural changes in employment diversification and the role of wage elasticity of employment in pakistan, in addition to this, the study investigated the impact of changes in gdp of sub-sectors in determining sectoral employment. it used annual data of 1990 t 2019 for the analysis. the data comprise of time series data for total employment in each sector, wage employment, total gross domestic product (gdp) by sectors, and lags of employment and wages that have been collected from various sources. 4. empirical and theoretical methodology this section converses on the cautious measures that have been taken to minimize its shortcomings of other estimation of the employment elasticity which will, later on, contributes to employment elevation and compares models (liew, 2007). in this study, the main method use in the estimation is the seemingly unrelated regression (sur) method. sur regression is the best estimation strategy by using this data set. now, we proceed to the discussions concerning models that are used in this study to explain the relationship between employment elasticity and employment diversification in pakistan. as mentioned earlier, employment elasticity is calculating the impact of wages on part-time and full-time employment. 4.1 theoretical model specification key details of empirical and theoretical model specification. the proposed model is the (sur), (zellner, 1962). the basic form of equations with the dependent variable and various control variables. the basic formations with number of observations are as follows: that can be explained in matrix form as follows: [ ] = ⌈ ⌉ ⌈ ⌉ + ⌈ ⌉ review of economics and development studies, vol. 7 (2) 2021, 147-161 152 in the above model it is assumed that the error term has a zero mean and homoscedastic variance, as under: in this scenario, the error term satisfy three conditions: first, the mean is : ; the second is the variance is ; third, co-variance of across equations is . nevertheless, the approximation of sur model comprises two points: in the first stage, respectively all equations under the regression system are predictable by ols. while the second phase, the calculated value of is replaced into a sum of gls estimator , which contemplates an optimal estimator from the list of estimators. sur model can be applied when linear equations are connected only done by their residual terms. 4.2 empirical model specification the practical model of employment diversification patterns includes, wage rate, the share of gdp of each sub-sector are the control variables and employment (the dependent variable of each sub-sector) has two-measurement i.e. full-time and part-time employment. this model utilized lagged wage of two times and lagged employment of one time. full-time employment is denoted by and part-time employment by where the part-time and full-time wages, the share of gdp are donated by , , respectively. model 1: employment in the agriculture sector = + + + + (1a) = + + + + + (1b) model 2: employment in the manufacturing sector = + + + + + (2a) = + + + + + (2b) model 3: employment in construction sector + + + + + (3a) + + + + + (3b) model 4: employment in wholesale and retail trade sector + + + + + (4a) + + + + + (4b) model 5: employment in electricity and gas distribution sector = + + + + + (5a) = + + + + + (5b) model 6: employment in transport, storage and communication sector = + + + + + (6a) = + + + + + (6b) review of economics and development studies, vol. 7 (2) 2021, 147-161 153 table 1: descriptive analysis of the data by sectors agriculture electricity and gas distribution manufacturing construction wholesale and retail trade transport, storage and communication min max min max min max min max min max min max growth rate -5.29 11.72 1.5 4.1 13 18.9 2 4.2 15.2 18.9 9.5 13.4 share in growt 18.5 26.1 -26.6 59 -4.2 15.5 -11.2 24.3 -2.4 12 .84 10.46 part-time wages 151.68 2375.7 6 2.52 20.28 45.84 591.12 9.72 184.44 2.04 143.64 .21 3.01 part-time employment 4.36 5.49 .01 .35 31398.72 206773.4 10438.68 196824 28092 183985.2 40650.72 231600 full time wages 10438.68 115740 55201.08 370464 .4 .83 .24 .52 .02 .51 .01 .17 full time employment 8.1 11.86 .23 .63 4.3 5.33 2.69 3.86 2.34 3.29 .17 1.87 total employment 38.5 50.04 .43 .87 10.12 17.21 5.38 8.12 5.42 7.90 4.89 6.22 source: estimation by the author using stata 14.1 review of economics and development studies, vol. 7 (2) 2021, 147-161 154 5. empirical analysis empirical analysis consists of two stages, first the elasticity estimates using two factor cobbdouglas function and the estimation of the parameters by using the seemingly unrelated regression. 5.1 employment elasticity analysis of wages by sectors of full time and part-time employment employment elasticity of wages is the measurement of responsiveness of employment to the changes of the wage rate. this study examines the elasticities at the level of each sector individually for both part-time and full-time employment. several approaches were employed to quantify the employment elasticity of wages, such as the cobb-douglas method of measuring elasticity. this study utilizes data from 1990 to 2019 involving annual time series data. still there exists limitations in involving model and data, therefore the study used careful measures to confirm that these inadequacies of the previous methodologies have been taken into account that ensures the consistency, reliability, and accuracy of the findings. a most simple approach to investigate the wage elasticity of marginal is to quantify the response and sensitivity of employment to change in the wage rate. this can be accomplished by conniving the simple wage-employment elasticity, as the percentage change in employment (e) due to percentage change in wages (w), this can be expressed as follows: ( ) ( ) this can be interpreted as changes in the percentage of employment when there is a one percent increase in the wage rate. however, this elasticity measure the elasticity of full-time and part-time employment to the change in wages cetris peribus (islam & nazara, 2000). it is an estimation technique that uses ordinary least square (ols) regression, which produces reliable and stable statistics in the measurement of employment elasticity. by using a double-log linear form of the model follows the form as under: and the double log-linear model, the coefficient measure the wage elasticity of employment expressed as follows: variable and are employment and wages respectively with , the residual term of the model and the subscript denote the sectors. this equation indicates that sectoral employment is determined by wage rate. review of economics and development studies, vol. 7 (2) 2021, 147-161 155 table 2: wage elasticity of employment analysis by sectors and by employment type (full time and part-time) part-time full-time own price cross price own price cross price agricultural -0.1964 (0.000) 0.2699 (0.000) 0.4807 (0.000) -0.4450 (0.000) manufacturing 0.1495 (0.016) -0.1164 (0.000) 0.1762 (0.000) -0.0789 (0.006) electricity and gas 0.4318 (0.170) -0.3894 (0.000) -0.0433 (0.000) -0.2448 (0.000) construction -0.0759 (0.167) -0.07333 (0.000) 0.1195 (0.000) -0.0324 (0.197) wholesale and retail trade -0.2617 (0.077) -0.0455 (0.333) 0.1038 (0.000) -0.0140 (0.374) transport 0.0322 (0.8329) -0.2252 (0.0000) -0.0012 (0.9245) -.2387 (0.0002) source: estimation by the author using stata 14.1 note: values in the parenthesis indicate p-value. review of economics and development studies, vol. 7 (2) 2021, 147-161 156 table 2 illustrates the wage elasticity of employment analysis by sectors and by employment type for full-time and part-time. a negative value of wage employment elasticity indicates a negative impact of a rise in wages on employment, while, a positive value of wage employment elasticity indicates a positive impact of a rise in wages on the respective employment type. furthermore, own wage elasticity illustrates the impact of change in full-time wages on full-time employment, whereas, the cross-price elasticity explains the impact of change in full-time wages on part-time employment vice era. own and cross wage elasticity for 6 sub-sectors (agriculture, manufacturing, electricity and gas, construction, wholesale and retail trade, transport) has been illustrated in table 2. 5.2 seemingly unrelated regression analysis as stated above, the investigation not only describes the elasticity estimates of pat time and full time to change in wages, nonetheless, it also suggests a description of the sectoral employment responsiveness to changes in the sectoral wage rate. consequently, an equation from islam and nazara (2000) stated that economic development helps in providing adequate employment. for countries with abundant labor, rapid economic growth is still needed to focus on improving labor productivity and providing more employment opportunities. review of economics and development studies, vol. 7 (2) 2021, 147-161 157 table 3: empirical estimates using sur of full time employment diversification variables agriculture construction electricity manufacturing wholesale and retail trade transport, storage, and communication coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) full time wage (-1) 0.000 (0.51) 0.0030 (0.02) -0.073 (0.03) 0.256 (0.07) 0.549 (0.00) 0.331 (0.01) full time wage (-2) -0.000 (0.35) 0.572 (0.00) -0.048 (0.26) -0.000 (0.00) -1.52e-06 (0.6) 0.819 (0.04) part-time wage (-1) -0.053 (0.8) -0.483 (0.2) -0.937 (0.06) -0.000 (0.00) 3.57e-06 (0.2) 2.37e-06 (0.2) part-time wage (-2) 1.290 (0.00) 0.491 (0.00) 0.047 (0.03) -0.003 (0.00) 0.003 (0.01) 5.327 (0.003) full time employment (-1) -0.278 (0.00) -0.000 (0.09) 0.005 (0.06) 0.001 (0.06) 0.608 (0.00) 0.002 (0.03) part-time employment (-1) 0.575 (0.00) 0.346 (0.01) -0.307 (0.06) 0.509 (0.2) -0.296 (0.000) 5.327 (0.03) growth rate -0.009 (0.7) 0.005 (0.14) 0.001 (0.003) 0.009 (0.2) 0.0156 (0.05) -0.019 (0.4) c 4.427 (0.03) 2.024 (0.000) 0.471 (0.000) 3.213 (0.000) 1.301 (0.000) 0.607 (0.025) source: estimation by the author using stata 14.1. note: values in the parenthesis indicate p-value. review of economics and development studies, vol. 7 (2) 2021, 147-161 158 table 4: empirical estimates using sur of part-time employment diversification variables agriculture construction electricity manufacturing wholesale and retail trade transport, storage, and communication coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) coefficients (p-value) full time wage (-1) -0.000 (0.000) 4.385 (0.008) 0.300 (0.02) -3.32e-06 (0.01) 0.172 (0.00) 0.001 (0.9) full time wage (-2) -0.000 (0.000) 0.676 (0.01) -0.051 (0.01) -5.37e-06 (0.00) 5.34e-07 (0.6) -3.00e-07 (0.07) part-time wage (-1) 0.016 (0.100) 0.238 (0.06) 2.138 (0.00) -0.000 (0.004) -3.55e-06 (0.007) 0.001 (0.3) part-time wage (-2) -0.000 (0.000) -2.15e-07 (0.08) 0.078 (0.07) 0.001 (0.00) -0.001 (0.02) 0.552 (0.00) fulltime employment (-1) 1.57e-06 (0.7) 1.36e-06 (0.2) -0.000 (0.4) 0.000 (0.003) -0.000 (0.14) 0.589 (0.00) part-time employment (-1) 0.006 (0.008) -0.0825 (0.03) 0.005 (0.6) -0.000 (0.09) 0.082 (0.00) 3.792 (0.03) growth rate -0.011 (0.002) 0.001 (0.09) -0.000 (0.6) 0.000 (0.005) -0.000 (0.9) -0.000 (0.83) c 4.17 (0.000) 0.508 (0.000) 0.421 (0.164) -0.030 (0.8) -0.025 (0.8) 0.0486 (0.03) source: estimation by the author using stata 14.1 note: values in the pranthesis indicates p-value. review of economics and development studies, vol. 7 (2) 2021, 147-161 159 table estimated the parameters by using sur model, represents the estimated values of parttime and full-time employment of six sub-sectors i.e. agricultural, construction and electricity, manufacturing, wholesale, and transport sectors. for full-time estimates of the first three sectors, the coefficients of growth rate are positive for electricity while agriculture and construction have illustrated an insignificant impact on employment. one unit change in the 1st lag of agriculture and construction sectors has a positive impact on sectoral employment exhibiting a rise in full-time employment in the electricity sector (ali, 2005). in the construction sector lag of part-time wages having a positive and significant impact on part-time construction employment (sheikh et al.,1992). in manufacturing, wholesale, and transport, full-time estimations of one lag of manufacturing, wholesale, and transport have a positive impact on sectoral employment. transport sector lag of wages has a positive impact on sectoral employment (card and krueger, (1992). 6. conclusion and policy recommendations since sustainable employment creation is one way to adjust the workforce and to gain the fruits of high economic activity, furthermore, it helps to design and implement policies and strategies for employment creation and employment creation circumstances in these sub-sectors. in addition to this, it contributes to the goal of achieving high economic growth. therefore, special consideration is required to be paid to the emerging sectors from a variety of crises. employment growth (part-time and full-time) in sub-sectors of economic activity is not only determined by the output growth in this sector but the time lag is also involved in employment generation as concluded in the analysis. in addition to this wage elasticity of employment is also critical in determining employment diversification and labor mobility between sectors varied widely in different sectors of the economy. consequently, the recommendation is advised as sector-based gdp may be enhanced to generate employment and for inclusive and sustainable economic growth with employment diversification of part-time and full-time employment. references alimova, g. a. 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(2018). industrial diversification in europe: the differentiated role of relatedness. economic geography, 94(5), 514-549. review of economics and development studies, vol. 8 (1) 2022, 41 53 41 the women empowerment in agriculture sector of pakistan rakia nasir a a phd scholar, department of economics, university of management and technology lahore, pakistan email: rakianasir1@gmail.com article details abstract history: accepted 28 february 2022 available online march 2022 the study interviewed 100 households in the sargodha district of pakistan's punjab province, which is the largest and most populated province. the study used a multistage sample process for sampling and interviewed male and female residents of the sargodha district. the weai was calculated using alkire and foster's (2011) technique. the women empowerment agricultural index is used to assess women's empowerment. these five factors 5de identifies the important areas where empowerment must be strengthened, whereas gender parity depicts the relative discrepancy between male and female members of the same family. for the sargodha district, the women empowerment in agriculture index value is 0.61. it is calculated by taking 90% of the 5de sub index value of 0.66 and adding 10% of the gpi value of 0. 68. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: women empowerment, poverty, agriculture sector growth jel classification: i32, q16, q19 doi: 10.47067/reads.v8i1.433 corresponding author’s email address: rakianasir1@gmail.com 1. introduction women's empowerment increases their freedom of choice in order to change their lives. the term "empowerment" is used to describe both a process and a result of empowering organizations or individuals. women's empowerment is often seen as critical for sustainable economic growth and poverty reduction in developing nations (klasen, 1999). women's empowerment and gender equality have become a major emphasis of several international development organizations as a result of the existence of millennium development goals (mdgs) and sustainable development goals. women's economic and social empowerment has been a priority on numerous countries' agendas. given the positive logic association between poverty and disempowerment, this trend is gaining traction, as failure to meet fundamental requirements typically precludes inability to make crucial decisions (malhotra et al. 2002; mowla, 2009). women make up around 43 percent of the agricultural work force in emerging nations (fao, 2010). agriculture employs 40 percent of males and 70 percent of women in south asia. 60 percent of women in sub-saharan africa work in agriculture, both directly and indirectly (ilo, 2010). women's empowerment is promoted by international organizations such as usaid, un women, unifem, care, wgef, ifad, bill & melinda gates foundation, ifpri, and ophi. these groups advocate for women's review of economics and development studies, vol. 8 (1) 2022, 41 53 42 rights and raise awareness of gender-related issues in order to increase women's empowerment at household, in communities, and globally. development goals cannot be met without reducing gender inequities and increasing women's empowerment, according to feminist and developmental literature. the importance of women's empowerment in international development is obvious from the 17 sustainable development goals (sdgs) established by world leaders in the 2030 agenda. women's empowerment has been defined as the dissemination of a society's ideals and knowledge. money, income, employment, pleasant working environment, freedom to speak, social and economic resources, political expression, freedom of mobility to access numerous services, control over one's body, reproductive options, and sexuality are some of the key focuses (kabeer, 2005). women's empowerment entails establishing conditions that allow women to make decisions, implying that while women may have different preferences than men, they also have different ability to make decisions due to gender differences in bargaining power and access to resources. women's empowerment is expected to lead to female self-equity, rights, and fulfilment, despite the popular belief that women's support leads to better family, society, country, and economy. in pakistan, the agriculture sector, which is one of the most important, contributes 21.4 percent to gdp and 45 percent to the overall growth of the country. the agriculture sector is critical in decreasing poverty since it is the poor's primary source of income (fao, 2011; cervantes-godoy & dewbre, 2010). it is divided into four sub-sectors: livestock, forestry, agricultural production, and fisheries (gop, 2014-15). rural women actively participate in the primary fields, agricultural production, and livestock in pakistan's agriculture sector, which cannot be overlooked. women carry out their tasks as workers when planting, reaping, and nurturing crops (fao, 2015). rural women make a significant contribution to agriculture, but their contribution is rarely appreciated in monetary terms because they labour as unpaid household workers. they face several hurdles as urban women in terms of sociocultural, socioeconomic, traditional, authorised, and emotional constraints that prevent them from asserting their rights in agriculture. due to a lack of land ownership, rural women are unable to make decisions about several aspects of agriculture. women have a lot of responsibilities and a strong presence, yet their economic engagement goes undetected. some cultural traditions and social regulations exist in underdeveloped nations that prohibit society from handing up rights to women as authorised, limiting their empowerment. land rights for women are one of the most important tools for promoting development and household welfare (allendorf, 2007). women rarely own land since they "give something for free" and have little control over their earnings. women are excluded from decisions about manufacturing processes, management, and input choices. they perform as covert labour, and their modest contributions go unacknowledged, which is the primary source of women's powerlessness (quisumbing, behrman, & peterman, 2011). rural women are compelled to work because of uneven access to assets, services, and infrastructure. rural women's constraints impose significant social, economic, and environmental costs on society and rural growth, resulting in distinct gaps in agricultural productivity (ghana, 2011). women's efforts and participation are sometimes overlooked, especially in emerging and disadvantaged nations (khan, 2007). women have an important part in agricultural and rural non-farm economies in practically every country on the planet. rural women manage a complicated home system and employ a review of economics and development studies, vol. 8 (1) 2022, 41 53 43 variety of living techniques, including agricultural cultivation, livestock management, food preparation, and family care. women's roles and responsibilities vary depending on their location, customs, and traditions. because pakistan is a predominantly male-dominated country, female authorisation is quite limited. aside from societal norms and limitations that rural women confront, lack of access to resources and credit limits are among the most significant obstacles. rural women labour for a living, yet often receive less in exchange for their efforts. women, too, confront challenges in achieving empowerment owing to a lack of educational attainment, work skills, and mobility. the pakistani government, political circles, and non-governmental organisations (ngo's) are all working hard to ensure that policies and programmes that support rural women are implemented. the major goal is to provide women with equal opportunities, which will lead to increased female empowerment and, in turn, a higher social status. gender reform action plans (graps) and the benazir income support program (2012) are the two primary national and provincial initiatives of the ministry of women development department (wdd). care, wgef, usaid, ifad, ifpri, and ophi are just a few of the international organizations aiming to improve female empowerment. the study aims to measure the women empowerment index in agriculture section in case of sargodha district of punjab province of pakistan. 2. literature review in pakistan, malik and courtney (2012) investigated women's participation in higher education and its influence on empowerment. this study employed questionnaire data from eleven public institutions in pakistan, as well as semi-structured interviews, to demonstrate women's participation in higher education. the findings of this study revealed that women's participation in higher education allows them to have an impact on inequitable behaviours and affect positive change. it was found that higher education has been an essential weapon for women's empowerment in terms of societal transformation. bushra and wajiha (2013) examined many elements that have an impact on women's empowerment in pakistan. it also explored the obstacles that women face in achieving their full potential. data was gathered from two prestigious lahore colleges. the elements that impede women's empowerment were investigated using the multiple regression approach in this study. the findings demonstrated that educational content had a positive link with factors of women's empowerment, however economic engagement and economic opportunity for women had a negative relationship with determinants of women's empowerment. in pakistan, fatima (2013) looked at the link between education, employment, and female family autonomy. women's decisions on family planning and expenditure on food, clothes, and medical care have been highlighted as indicators of household empowerment. the pakistan social and living standard measurement survey (pslm) data from 2007-2008 were used in this study. the linear probability model (lpm) was used. the findings demonstrated that education and work boosted women's decision-making autonomy in the home. it has been determined that employment empowers women in decision-making expenditures but not in family planning decisions. sharma, rao, and sharma (2013) investigated women's engagement in agricultural, family, and animal management decision-making in the jammu district. it was discovered that women's participation in decision-making was critical to the country's rapid economic progress. this research included a sample of 200 rural women from three villages in jammu district. the interview approach was chosen, as well as cross-questioning strategies. men made the decisions about purchasing and review of economics and development studies, vol. 8 (1) 2022, 41 53 44 selling property and other agricultural operations, according to the findings. heads of families or spouses oversaw livestock management. in ethiopia, tafera (2013) explored the influence of land ownership reform on women's empowerment in land management decision-making at the household level. in ethiopia, data was collected from three districts, with 394 households chosen as a sample. the women empowerment index (wei) was utilised in this study to illustrate the impact of reform in "with" and "without" conditions. the findings demonstrated that males still dominated land-related choices. with land tenure reforms, however, small changes have occurred in favour of women. in brazil, agenor & canuto (2013) investigated the growth benefits of gender-based long-term strategies in developing nations. to examine the link between economic growth and gender inequality, this study used an overlapping generation model that included topographies such as women's time allocation, health externalities, female bargaining power, and human capital accumulation. the goal was to improve infrastructure and reduce gender bias. the data for this study came from the 2012 national household sample survey (pnad) in brazil. due to lesser income gaps in some places, the results indicated gender discrepancies. the greatest gaps, however, were seen in the northeast. it was established that long-term gender-based inequality policies in brazil had a major influence on women's time allocation, child raising, and negotiating strength. badar et al. (2014) looked at the influence of education and marriage time on female empowerment at the household level in pakistan. the data for this study came from the bhawalpur region. to determine the impact of education and marriage on women's empowerment, the questionnare technique was used. according to the findings, 8% of illiterate women had a high degree of empowerment, whereas 33% of women in primary or middle school had a high level of empowerment. it was established that there was a strong link between education, marriage, and women's empowerment in the home. saraboni et al. (2014) investigated female autonomy in agriculture and their significance in rural bangladeshi food security. at the home level, there is an empowerment gap in terms of per capita calorie availability and dietary diversity. the data for this study came from the 2012 bangladesh integrated household survey (bihs). the women empowerment agriculture index (weai) and the body mass index (bmi) were used to investigate the relationship between women's empowerment and calorie availability. the study's findings revealed that enhanced female empowerment had a beneficial impact on calorie availability at the family level. it was also discovered that women's empowerment had a detrimental influence on household decision-making and credit related to male bmi. ghosh and ghosh (2014) inspected the tendency of women involvement in agriculture under/ across different indian regions. this study also clustered women’s economical participation in india. this study used secondary data source based on previous studies from 1961-2001 to check growth trend of agriculture worker. compound growth rate (cgr) has been recognized to show growth trend in india. this paper concluded that female involvement had increased with time and these women got the status of “agricultural worker”. assaad, nazier, and ramadan (2014) investigated the impact of several individual and sociodemographic variables on women's empowerment in egypt. this study focused on two aspects of women's empowerment: mobility and household decision-making authority. the data for this study came from the egyptian labor market (elmps) in 2012. for the estimate of women's intervention at review of economics and development studies, vol. 8 (1) 2022, 41 53 45 the home level in egyptian society, the decision making index (di) and mobility index (mi) were utilised. the study's findings revealed that female empowerment climbed with age and subsequently began to decline. furthermore, factors such as age, occupation, poverty, and the number of children had distinct effects on women's empowerment. masood and jamil (2015) studied the role of women in pakistan's agricultural and dairy industries. it has been explored how women have improved their social status. the qualitative data in this sociological research was utilised to demonstrate female engagement in agriculture. the findings revealed that variables such as training programmes, hurdles to women's involvement, and discriminatory attitudes have an impact on women's health in rural regions, limiting their ability to participate effectively in agriculture and the dairy business. pervin, khan, and shah (2015) investigate the female power behaviours and their effect in ancient dhaka . it has been stated that the family is the most important source of female power to enable and practise as an active part of female empowerment. primary data was gathered from densely inhabited residential areas in old dhaka. the women power index (wpi) was utilised in this study to highlight the female power practises in this city. the findings showed that women's engagement in income-generating activities had a greater impact on the wpi than the degree of outcome. it was established that female practise power in dhaka city is moderate, not high. chughtai, zaheer, and taj (2015) evaluated the influence of micro financing on women's income, savings, and empowerment in pakistan. over 250 people from the tehsil hassan abdal (attock district) were recruited for this study. this was accomplished using multiple regression. women from less developed countries were found to be feeble and weaker than women from developed countries. according to the study m microcredit has a beneficial influence on women's empowerment. hassan and uddin (2016) explored the patterns of female empowerment in bangladesh in terms of health seeking performance. this research looked at whether female empowerment is crucial for long-term growth. the data for this study came from the 2011 bangladesh demographic and health survey (bdhs). the relationship between female empowerment in terms of health seeking behaviour and socioeconomic variables was demonstrated using logistic regression. according to the findings, 63 percent of women felt empowered to choose their own health-seeking behaviour, and 66 percent were active in their children's health care. women's empowerment was shown to be a more essential component since they are financially self-sufficient and can readily participate in decision-making. in pakistan, ishaq and memon (2016) researched the huge involvement of rural women and the reasons for their participation in agricultural operations. it also demonstrated the limitations that women experience in terms of empowerment. the data for this study came from three locations in pakistan's lahore province. to demonstrate female autonomy in agriculture, a questionnaire approach and focus group discussions (fgd) were used. the findings of this study revealed that women were mostly involved in agriculture and livestock production. it was discovered that women faced socioeconomic barriers and were not as active in agricultural marketing as males. kim, lee, and shin (2016) investigated the effect of gender disparity on long-term economic growth to build a model. the model that predicted female labour participation and human capital accumulation was also explored in this study. to demonstrate the performance of economic growth, micro-level data from asia's economies was used, as well as policy experiments. the results revealed that by removing gender, the yearly growth rate of per capita income increased by 1% and 0.2 percent, review of economics and development studies, vol. 8 (1) 2022, 41 53 46 respectively. pavanello et al. (2016) investigated the relationship between social protection and female autonomy in rural areas. it has concentrated on the job component of rawanda's vision umurenge programme (vup) 2020, which aims to alleviate poverty by providing statewide social safety. data was obtained in rawanda using a mixed technique approach that included qualitative and quantitative questionnaires. according to the findings, vup only promotes female economic growth, because women have less agricultural assets than males. there is no link between vup public works activity and empowerment, according to the findings. shakya (2016) investigated the effects of microcredit on nepalese women. microcredit has been suggested as a tool for reducing poverty and improving economic standards. primary and secondary data sources were utilised in this investigation. the questionnaire approach was used to demonstrate the impact of microcredit on women in this city and community. the findings demonstrated a favourable relationship between income and savings at various interest rates. according to the survey, impoverished villagers had a higher interest rate and had less access to money than nepalese women. temba (2016) investigated how women's economic empowerment has influenced microfinance at tanzania's akiba commercial bank. the variables that affected women's economic empowerment have been examined. this study examined primary and secondary data sources and included clients and loan department employees from a commercial bank, totaling over 660 people. the approach of interview and questionnaire was used. the study's findings revealed that women were greatly impacted by microfinance loans and savings services. it was discovered that microfinance organisations charged high interest rates. spriggs et al. (2017) investigated rural pakistani women's empowerment and economic partnership. it was shown that empowering women enhanced their household's chance of participating in various activities by utilising their abilities. the data for this study came from 750 rural pakistani households. as part of the agriculture sector linkages program, a personal interview survey was undertaken (aslp). the findings revealed that women's empowerment in home decision-making increased their chances. it was shown that women's participation in home decision-making was negatively related to household income but positively related to husband's education and age. akter et al. (2017) presented empirical information from four southeast asian nations, namely mayanmer, thailand, indonesia, and the philippines, to analyse the inclusive landscape of gender imbalance. it looked at geographical disparities in women's empowerment. data was obtained from 290 women from the nations listed above. the women empowerment agriculture index (weai) and 37 focus group discussions were employed in this study (fgd). the study found that women had equal access to productive resources including land and inputs, as well as more influence over their households. it was established that women play an important part in agricultural organisations in thailand and the philippines, but that their function is less successful in indonesia and mayanmer because to male dominance. kleven and landais (2017) investigated gender attitudes along the developmental path and attitudes toward working women with children. it shown that when gdp per capita grew, so did people's attitudes. this study drew on a database of 248 micro surveys conducted in 53 countries between 1967 and 2014. gender convergence was discovered at all levels of development, according to the findings. it also concluded that children had a significant impact on gender disparities at both the low and high review of economics and development studies, vol. 8 (1) 2022, 41 53 47 levels of development. 3. data and methodology the study selected sargodha district of punjab province of pakistan for data collection. for sampling purpose, the study followed multi-stage sampling methods, as sargodha is divided into seven tehsils. the study selected sargodha tehsil among seven tehsils by using random sampling technique. further, one rural and one urban settlement has been selected by random sampling. furthermore, 100 households were interviewed from these settlements. 3.1 questionnaire design the household questionnaire is being employed in order to meet the study goals. ophi's questionnaire design was employed in the study. there are six sections to the questionnaire. the roaster file was included in ophi's questionnaire to investigate the household's family structure. the second section contains several questions that gathered data on decision-making in farm production activities, as well as their autonomy or motive in decision-making. the third portion contains questions about asset purchases, sales, and transfers. the fourth component consists of questions concerning how they spend their money. the fifth component contains questions regarding group membership and public speaking comfort, while the last piece includes questions about how much time they spend on work or leisure. table 1: the domains, indicators, and weights in the weai 3.2 empirical methodology the study used alkire and foster's (2011) technique for for estimation purposes, . there are two sub-indices in the women empowerment agriculture index (weai): the first is the 5de, which measures women's empowerment, and the second is the gender parity index, which measures women's empowerment in the home. 5de has a weight of 90%, whereas gpi has a weight of 10%. weai is the weighted sum of 5de and gpi. any improvement in either of these two areas will benefit the whole weai. review of economics and development studies, vol. 8 (1) 2022, 41 53 48 4. results and discussion we estimated two indices for the estimation of women empowerment in case sargodha district of punjab province of pakistan i.e. 5de and gpi. firstly, we assessed the women disempowerment index (mₒ) and decomposed it into contributions by dimensions and indicators for women. we also represent the decomposition of (mₒ) for the sample of male because the alignment of male deprivations in empowerment is extremely different from women’s. weai revealed the basic areas that added most to female disempowerment. below table shows that women empowerment in agriculture index value is 0.61 for punjab province. it is estimated that by taking 90 percent of 5de sub index value 0.66 and adding 10 percent of gpi value 0.68. table 2: the 5de at k=0.2 5de = 1 m0 women men regional total observations 100 100 200 ratio of disempowered headcount (hd) 77.0% 62.1% 71.0% score of average inadequacy (ad) 33.1% 34.1% 35.9% (m0 = hd× ad) index of disempowered 0.311 0.189 0.279 (5de= 1m0) five domains of empowerment 0.660 0.628 0.610 percentage of parity in dual hhs gpindex = 1 (hgpi × igpi) women in percentage with gender disparity (hgpi) 59.9 % average gap of empowerment (igpi) 44.8 % gender parity index (gpindex) 0.689 weaindex 0.610 source: author’s computations note: weai = women empowerment in agriculture index; 5de = five domains of empowerment first sub index 5de for sample region shows that 21% of women are empowered and 77% of women are disempowered. on average inadequacy score of women is equal to 33.1%. it means that these women have 33.1% inadequate achievements in domains. likewise, 62.1% of men are disempowered and they have on average inadequate attainment in 34.1% of dimensions. 4.1 women disempowerment decomposed by domains results reveal that the domain which contributes most to women’s disempowerment is weak in leadership 27%, income 26%. malapit et al. (2014) finds the similar results in case of bangladesh review of economics and development studies, vol. 8 (1) 2022, 41 53 49 where community leadership and control over use of income domains as main contributing factors of disempowerment index. women have little bit disempowerment in production (i.e. 12%) and the same trend have been found in the study by alkire et al. (2013). figure 1: percentage contributions by dimension into disempowerment of female 4.2 women disempowerment decomposed by indicator our indicator wise results show that 4% of women disempowerment contribution in autonomy in production and their contribution to control over use of income is 46%. contribution of women in group membership is 4% and 7% in public speaking. indicator of workload shows 9% contribution of women and leisure has 7% female contribution to disempowerment index. figure 2: contributions of indicators to disempowerment of women 4.3 man, disempowerment decomposed by domain the arrangements of male’s inadequate achievement are vary from females in sample area. leadership adds more to male disempowerment 24% followed by having time allocation 28%. whereas control over income contributes small portion to disempowerment of male that is 26% than female. however, male have equal disempowerment over autonomy in production and lack of access over resources as compared to female. time 13% production 13% leadreship 27% income 26% resources 21% 9 7 1 2 4 7 14 6 46 4 workload leisure input in production autonomy in production ownership public speaking purchase, sale access to credit control over income group membership review of economics and development studies, vol. 8 (1) 2022, 41 53 50 figure 3: percentage contributions by dimension into disempowerment of male 4.4 man disempowerment decomposed by indicator according to our results, male contribution to input in productive decision is 9% while 9% in autonomy in production. 2% of men contribute to ownership of assets, 4% to purchase, sale and 10% to credit access & control. men contribution to disempowerment index to group membership is 15% and 14% to public speaking. workload contribution of male in index is 11% and to leisure contribution of disempowerment index is 9%. figure 4: contributions of indicators to disempowerment of men 5. conclusion & policy recommendations women's empowerment is examined in this study using the women empowerment agriculture index. this indicator compares rural women to their male counterparts in terms of five domains of empowerment (5de) and gender parity index gpi. these five parameters 5de identifies the important areas where empowerment must be strengthened, whereas gender parity depicts the relative discrepancy between male and female members of the same family. the weai was calculated using alkire and foster's (2011) technique. weai's findings highlighted the main areas that contributed the most to female disempowerment. weak leadership (27%) and income (26%) are the domains that 28% 24% 26% 2% 20% time production leadreship income resources 11 9 3 9 2 14 4 10 23 15 workload leisure input in production autonomy in production ownership public speaking purchase, sale access to credit control over income group membership review of economics and development studies, vol. 8 (1) 2022, 41 53 51 contribute the most to women's disempowerment. malapit and colleagues (2014). our result conclude that 4 percent of women's disempowerment contributes to production autonomy, whereas 46 percent contributes to income control. women make approximately 4% of organisation membership and 7% of public speaking participation. workload has a 9 percent female contribution, whereas leisure has a 7 percent female contribution to the disempowerment index. equal micro credit facilities should be offered to women since it is the primary platform through which women may share their experiences and knowledge about all parts of life, and women have been empowered via microfinance loans and savings services. references agenor, p., & canuto, o. 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(2011). out of the dark but not out of the cage: women's empowerment and gender relations in the dangme west district of ghana. gender, place & culture, 1–20. review of economics and development studies, vol. 8 (2) 2022, 85 96 85 impact of health infrastructure on child health in punjab, pakistan seemab gillani a, muhammad azhar bhatti b, anum ali c, tusawar iftikhar ahmad d a phd scholar, school of economics and finance, xi’an jiaotong university, xi'an, shaanxi province, china email: seemabgillani@yahoo.com b associate lecturer, the islamia university of bahawalpur, pakistan email: azhar.bhatti219@gmail.com c m.phil. scholar, department of economics, the islamia university of bahawalpur pakistan d assistant professor, department of economics, the islamia university of bahawalpur pakistan email: tusawar.iftikhar@iub.edu.pk article details abstract history: accepted 25 april 2022 available online june 2022 the objective of the study is to find the impact of health infrastructure on child health in punjab, pakistan. the study used the panel data collected from punjab development statistics (pds) between 2010 and 2016 for 35 districts of punjab, pakistan. the generalized method of moments (gmm) is used for the current analysis. child health in terms of infant mortality and underweight is used as dependent variable and health infrastructures, ownership of house, receiving remittances, physical access to safe drinking water, improved sanitation are independent variables. health infrastructure is the index of four variables number of hospitals, number of dispensaries, number of mother and child health center and number of rural health centers. results of the study conclude that health infrastructure is an important determinant of child health. there is a strong positive influence of health infrastructure in terms of different type of hospitals, dispensaries, rural health centers and mother and child health care centers is found on child health. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: health infrastructure, infant mortality, underweight, remittances jel classification: h54, i10, i1, f24 doi: 10.47067/reads.v8i2.437 corresponding author’s email address: rashidahmad@bzu.edu.pk 1. introduction health is an important part of human capital (schultz, 2010). in poor countries, child health is a major public policy concern. development of a country also becomes the source of better health because increasing income level will affect the health status positively. in less developed countries, child health is a major symbol of quality of life. the health status of children in the pdhs (pakistan demographic and health survey) depends on the level of children's vaccination, birth weight, common childhood illnesses and fever, and the prevalence and treatment of respiratory tract infections and diarrhea. low review of economics and development studies, vol. 8 (2) 2022, 85 96 86 birth weight infants not only have a lower chance of survival, but also have higher morbidity and mortality. child health is seen as a key indication of socioeconomic progress (mahmud et al., 2011). infant mortality and underweight are powerful determinants of a country's population's health. it is considered a major aspect in analyzing a country's well-being because it is part of the sustainable development goals 2030(jacobs, newland, & green, 1982). the infant mortality rate is considered to be a highly significant indicator of a country's economic performance, according to the world development report (1993). various countries around the world have witnessed various rates of child and newborn mortality during the last few decades. because of income development, advancements in medical and technology public health facilities, and the diffusion of information, these health outcomes varied among countries and regions (shehzad, 2006). the fourth millennium development goal (mdg-iv) called for a two-thirds reduction in infant mortality rates by 2015, however developing countries are still falling far behind (stuckler, basu, & mckee, 2010). nonetheless, there has been no considerable development in pakistan (unicef, 2013). among 2013, the incidence of underweight in children under the age of five years in pakistan was 31 percent, according to the child nutrition report (unicef, 2013). according to studies, pakistan's underweight rate has risen to 43.7 percent (who, 2015). in pakistan, approximately 26% of infants weigh less than 2.5 kg at birth, while 47% of children received all bcg, dpt, polio, and measles vaccinations. 60 percent of children under the age of one have been immunized against measles(datar, mukherji, & sood, 2007). nutritional status is a significant consideration in improving child health (chowdhury et al., 2013). there are numerous elements that can influence a child's health. these determinants include anything from maternal literacy, household income, and health-care utilization (larrea & kawachi, 2005; mashal et al., 2008) to economic equality, effective decision-making, and migration (larrea & kawachi, 2005; mashal et al., 2008). micronutrient consumption has been identified as one of the most important variables in improving child health, among other things (black et al., 2008). in impoverished nations like pakistan, iron deficiency anemia and vitamin a deficiency are major dietary issues that lead to underweight (fao, 2015). in developing countries like pakistan, where a large segment of the population lives in poverty and is afflicted by various ailments, healthcare infrastructure and services are critical. budget constraints limit healthcare spending. a significant portion of the load is passed on to governmentprovided healthcare infrastructure and services. the government must spend a significant amount of money to acquire and maintain healthcare infrastructure and services. roemer's law states that "a bed created is a bed full” (roemer, 1961). the utilization of a bed grows as the availability of beds increases, resulting in an increase in hce. healthcare infrastructure and services, according to abbas and hiemenz (2013) and ang (2010), determine the quality of healthcare services. when the ratio of health care workers to the total population goes up, public health care costs may go up because more people need health care infrastructure and services. poor health of children illustrates poor government policies of health and lack of health infrastructure. like others developing countries, pakistan is also facing increased child mortality rate. child health status in developing countries is poor due to lack of health infrastructure and poor condition of other socio-economic determinants. the health infrastructure contains different type of hospitals, dispensaries, rural health centers and mother and child health care centers and other different institutions which are used for the wellbeing of child review of economics and development studies, vol. 8 (2) 2022, 85 96 87 health. in order to analyze the impact of health infrastructure in punjab, pakistan, on child's health. the study objective is to evaluate the impact of health infrastructure on child health. moreover, to find the impact of family wealth status, improved sanitation, safe drinking water, ownership of house and remittances on and child health. the statement of this issue may be pointed out as: how does the health use of children relate to the health infrastructure in punjab? what is the role of improving health facilities in affecting children's health services? the structure of the study is as follows: second section is about the literature review of previous studies on child health and health infrastructure. fourth section is about the formulation of the model, the data sources and methods of this study. fifth section consist of result and the discussion. the sixth section provides conclusion and the policy suggestions. 2. literature review the link between health infrastructure and child health has received a lot of attention in recent years. the literature describes several processes through which health infrastructure affects child health. d'souza and bryant (1999) analyzed the determinants of child mortality in slums in karachi, pakistan. that study was designed to determine the risk factors for under-five mortality. the paper attempts to reveal the role of behavioral problems, such as the mode of limiting mothers' autonomy and the search for healthy behaviors, and the more traditional, socio demographic factors that predict mortality among children less than five years of age. the investigation started in january 1993 in the six ghettos of karachi and the department of community health sciences (chs) at the university of akakan (aku) has been doing essential social insurance (phc) programs since 1985. the hypothetical system chip away at mosley and chen’s structure work was utilized. calculated relapse display was utilized for examination. the information was optional. their decision is that the fundamental determinant of undertaking achievement lies in the introduction of relevant social and behavioral changes in these similar rural environments, not just the bioavailability of the technology itself. gokhale, rao, and garole (2002) investigated child mortality in india: utilization of maternal and child health administrations as far as proficiency rates. the researchers found that the slow decline in infant mortality in the past decades was a major problem in india. the author’s main goal was that the female literacy rate was closely identified with all factors identified with maternal care and infant mortality. on the basis of female illiteracy, identities are divided into the best medium and worst. the infant mortality rate in the worst group was significantly higher than that in the medium group and the best group. the data comes from the national family health survey. the national family health survey (nfhs) was a household survey of the overall sample size. two-stage stratified sampling designs are used in rural areas. urban areas use a three-stage sampling design. interview details of the collection of live women. the data was primary and cross-sectional. using spss, data was analyzed using multiple regressions and clustering methods. the authors conclude that the impact of female illiteracy rates on infant mortality and maternal and child health services was much detrimental in village areas than in city areas. male literacy rates are high, male literacy rates are low, maternal and child health services are better utilized, and infant mortality rates are significantly reduced. fay, leipziger, wodon, and yepes (2005) studied the part of infrastructure in accomplishing the review of economics and development studies, vol. 8 (2) 2022, 85 96 88 related millennium development goal related to child health. the primary reason for the paper was to experimentally break down the determinants of the three child health results identified with the related millennium development goals, specifically the infant death rate and the pervasiveness of lack of healthy sustenance. the investigation utilized infant mortality, unhealthiness, foundation, access to pipelines for water supply, enhanced private floors, enhanced cleanliness, birth conveyance, inoculation and pre-birth mind factors. in view of information utilized as a part of statistic and health studies, the report rises above customary cross-country relapses by abusing the inconstancy of results and logical factors saw inside nations between resource quintiles. the consequences of the investigation demonstrate that notwithstanding customary variable salary, resources, training, and direct health intercessions, better access to fundamental framework administrations assumes a vital part in enhancing child's health results(ravallion, 2007). omariba, beaujot, and rajulton (2007) showed the determinants of child and child mortality in kenya by utilizing weibull's imperceptibly heterogeneity (shortcoming) survival display. contrast the after effects of these models and the consequences of the standard weibull survival demonstrate. the investigation particularly considered the degree to which child survival dangers kept on changing, notwithstanding the watched factors and the degree to which the unintended examples were one-sided because of infringement of the freedom factual suspicions. information gathered from the 1998 demographic and health survey of kenya.the consequences of the standard health survival demonstrate unmistakably demonstrate that natural populace factors are more vital in clarifying child mortality, and financial, socio cultural and health factors are more imperative in clarifying infants mortality. early stages and youth, the impacts of shortcoming are extremely huge and exceptionally critical; however, the conclusions are steady with the conclusions in the no-insufficiency display. huq and tasnim (2008) investigated mother education and child care in bangladesh. in that study examined the effect of maternal instruction on the health status of bangladesh and the utilization of child health care services. studies had demonstrated that maternal instruction was an essential determinant of the health status of infants in bangladesh. information examination depends on the 2000 family income expenditure survey. the review was directed by the bangladesh bureau of statistics in 1999-2000. multivariate logistic regression models were utilized for examination. their decision was that child's health and mother instruction are considered as imperative determinants of childcare administrations. with a specific end goal to enhance the health status of child in bangladesh, it is prescribed to enhance the instruction of the populace and mothers. miller and rodgers (2009) focused on the mother's education and child nutrition, new evidence from cambodia. he used information from the 2005 demographic and health survey of cambodia to investigate that the three children's nutritional status measurement standards vary according to the level of mother education. in order to determine the mechanism of this association, he analyzed the size of birth weight, which depends on the factors during pregnancy, as well as the short stature (developmental delay) and the stature (embroidery) affected by postnatal influence factors. in multivariate norms that control socioeconomic status, maternal education intensity is closely related to stunting, but not a small number of births or weight loss. adding family composition and environmental factors to the model only slightly reduces the correlation between maternal education and child nutrition outcomes. kosec (2014) examined the effect of privatization of water supply in african urban communities review of economics and development studies, vol. 8 (2) 2022, 85 96 89 on child health. the fundamental motivation behind the investigation was to comprehend the effect of private segment interest in the water part on child' health. the report utilizes childhealth, water, privatization, and health framework and instruction factors. this archive utilizes child level information from 39 african nations in the vicinity of 1986 and 2010. the information was examined utilizing common minimum squares. accordingly, it was discovered that the private part was engaged with diminishing urban living, 2.6 rate purposes of diarrhea in child under five, or 16% of the normal frequency rate. child from the poorest families advantages the most. the investment of the private division is additionally identified with the 7.8 rate focuses increment in the school participation rate in the vicinity of 7 and 17 years of age. vitally, the investment of the private segment has expanded the utilization of faucet water by 9.7 rate focuses, showing a conceivable causal channel for clarifying health change. to be approved to causality, it is important to exploit changes in the private water piece of the overall industry controlled by previous provincial african nations. fake treatment investigation demonstrated that interest of the private part did not influence respiratory infections, nor did it influence control bunches in rustic children. rieger and wagner (2015) found that child malnutrition was far reaching in developing nations, and anthropometric estimations, for example, stature, weight, and tallness have been turned out to be dependable indicators of here and now lack of healthy sustenance and hindering. rather than concentrate these indicators independently, we take a gander at their associations and build up child health progression. considering that child's health stock and the tallness of stature and weight are the surrogate indicators of nourishing venture, we have built up a child health creation work that has selfprofitability of past sound stocks and synchronous dietary sources of info. in this study utilized the dynamic board strategy to test 271 senegalese boards of 0to 5-year-old child to control the endogeneity of the generation work. in view of past confirmation, found that child can mostly get up to speed with lack of healthy sustenance spells. be that as it may, child's health stocks are immediately drained and should be continually refreshed. this demonstrates the significance of solid memory; lack of healthy sustenance can't battle with preview intercessions. in this manner, manageable sustenance mediations must be long haul and create higher returns at a very early stage in their introduction to children. maniruzzaman et al. (2018) examined child mortality and neonatal mortality rates in bangladesh. the reason for that paper was to analyze the interregional changes in infant child mortality related with specific parts of financial and nourishing status; access to health and the utilization of health administrations. the paper recognized probably the latest determinants of infant mortality. the data was collected from the registrar’s general development, family health bureau and the medical statistics unit of ministry of health. secondary data was used in that study. multiple regression models were used for analysis. the three components analyzed here (birth weight, pregnant women with access to safe drinking water) straightforwardly influence neonatal mortality, of which infant death rates in bangladesh are near seventy five percent. study gap: according to the literature on "health infrastructure and child health," health infrastructure has a positive impact on child health. however, the vast majority of studies have relied on subjective measurements of the variables of interest. despite this, most studies do not estimate panel data for punjab district by including infant mortality and underweight. furthermore, there is an endogeneity problem in the existing empirical literature on health infrastructure and child health. previous studies have used many proxies for child health and health infrastructure. that study is used the index of health infrastructure (number of hospitals, number of dispensaries, number of rural health review of economics and development studies, vol. 8 (2) 2022, 85 96 90 centers, number of mother and child health centers), infant mortality and underweight to capture the child health. 3. data and methodology current section explains the measurement of variables and data collection resources by using grossman (1972) model. grossman studied how individuals allocate resources to generate health. this model is very important in health economics. he treats people with a dual role, that is, consumers and producers. the idea of investigating human capital (health and education) to increase productivity and efficiency was introduced in the model. the following two elements include health needs (1) consumption effects (direct effects of health), and (2) investment effects (more likely to participate in market and non-market activities). for the current analysis, different social, economic and environmental factors are used by following the studies of ahmad, shafiq, and gillani (2019) and majeed and gillani (2017). in order to explore the effect of health infrastructure on child health in 35 districts of punjab, pakistan. the data comprises 35 districts of punjab is collected from punjab development statistics (pds) and range from 2010 to 2016. child health is measured in terms of infant mortality (im) and underweight (uw). for current study, infant mortality and underweight child are the dependent variables whereas health infrastructure (hi), improved sanitation (ims), physical access to safe drinking water (patd), homeownership (oh), and receiving foreign remittances (rr) are taken as independent variables. the functional form is as follows. 𝑰𝑴 = 𝒇 (𝑯𝑰, 𝑰𝑴𝑺, 𝑷𝑨𝑻𝑫, 𝑶𝑯, 𝑹𝑹) … … … . (𝟏) 𝑼𝑾 = 𝒇 (𝑯𝑰, 𝑰𝑴𝑺, 𝑷𝑨𝑻𝑫, 𝑶𝑯, 𝑹𝑹) … … … . (𝟐) above mentioned relationship of child health and health infrastructure with other control variables can be written in econometric form as: 𝑰𝑴 = 𝜶𝟎 + 𝜶𝟏𝑯𝑰𝒊𝒕 + 𝜶𝟐𝑰𝑴𝑺𝒊𝒕 + 𝜶𝟑𝑷𝑨𝑻𝑫𝒊𝒕 + 𝜶𝟒𝑶𝑯𝒊𝒕 + 𝜶𝟓𝑹𝑹𝒊𝒕 + ɛit . . . (𝟑) 𝑼𝑾 = 𝜷𝟎 + 𝜷𝟏𝑯𝑰𝒊𝒕 + 𝜷𝟐𝑰𝑴𝑺𝒊𝒕 + 𝜷𝟑𝑷𝑨𝑻𝑫𝒊𝒕 + 𝜷𝟒𝑶𝑯𝒊𝒕 + 𝜷𝟓𝑹𝑹𝒊𝒕 + ɛit . . . (𝟒) in equation 3 and 4, α1α5 and β1 – β5 indicate the impact of health infrastructure, improved sanitation, physical access to safe drinking water, homeownership, and receiving foreign remittances on infant mortality and underweight respectively. moreover, α0 and β0 indicates the intercepts, i represents individual district (panel of 35 districts of punjab pakistan), t represents the time period (the period from 2010 -2016). table 1: variables of the models and description of variables review of economics and development studies, vol. 8 (2) 2022, 85 96 91 indicators numerators expected sign infant mortality rate “possibility of dying between delivery and the first birthday” underweight “number of children under age 5 who fall below (a) minus two standard deviations (moderate and severe) (b) minus three standard deviations (severe)” health infrastructure index of (no of hospitals, dispensaries, rhc and mchs) “a hospital is defined as a facility with ten or more beds. a dispensary is a medical facility with fewer than ten beds.” negative use of improved sanitation (%) “the number of individuals of a household who use enhanced sanitary facilities that are not shared” negative use of improved drinking water sources (%) “number of household members that use upgraded drinking water sources” negative receiving remittances from abroad (%) “the number of members of a household that received remittances from abroad during the year before to the survey” negative ownership of house (%) “number of household members living in a household that own a house” negative 4. result and discussion in order to estimate the impact of health infrastructure on child health, gmm technique is used for the current analysis. this investigation covers the period 2010-2016 and utilizes districts level panel data.table 2 presents the summary statistics of the variables used for the current analysis which indicate the mean, maximum and minimum observations. table 2: descriptive statistics variables mean max min std. dev obs. health infrastructure (index numbers) 14.594 64.413 3.516 3.049 245 infant mortality (numbers) 70.429 113.571 46.286 9.8126 245 underweight (numbers) 33.114 47.243 21.686 1.739 245 improved sanitation (%) 66.812 94.286 33.714 3.069 245 physical access to safe drinking water (%) 89.947 99.714 74.571 2.421 245 ownership of house (%) 86.900 94.257 74 2.535 245 receiving remittances (%) 5.3678 24.757 0.686 2.267 245 to check the stationary of a mentioned variables, levin lin chu panel unit root test is applied. if the probability value is less than 1% and 5%, we accept h1 and reject h0, which means the series is not stationary. all variables are stationary at level i(0). table 3: result of panel unit root test review of economics and development studies, vol. 8 (2) 2022, 85 96 92 variable statistics value levin lin chu (p value) level health infrastructure -1.3e+02 0.0000 i (0) infant mortality -4.8932 0.0000 i (0) underweight -7.9010 0.0000 i (0) improved sanitation -2.0620 0.0196 i (0) physical access to safe drinking water -1.5839 0.0566 i (0) ownership of house -13.4270 0.0000 i (0) receiving remittances -2.45 0.0070 i (0) table 4 indicates the estimated results of gmm in order to capture the impact of health infrastructure on child health; infant mortality and underweight. according to column (1), the lag value of infant mortality has a positive effect on the current level of infant mortality. it can be interpreted as previous year infant mortality rate increases current year infant mortality rate. estimates indicate that health infrastructure is significant and negatively correlated with infant mortality. the results show that a reduction in one unit of health infrastructure reduces infant mortality by 0.24 units. it shows improvements in rural medical centers and hospitals play vital role in reduction of infant mortality. moreover, expanded medical facilities has a positive effect on child’s health (valdivia, 2004). table 4: results of gmm (1) (2) variables infant mortality underweight lag of infant mortality 0.514***(0.094) lag of underweight 0.746***(0.102) health infrastructure -0.2442***(0.106) -2.256**(0. 940) improved sanitation -0.246***(0.070) -0.045**(0.023) physical access to safe drinking water -0.275***(0.016) -0.174***(0.060) ownership of house -0.401***(0.131) -0.057(0.083) receiving remittances -0.184(0.143) -0.136**(0.072) observations 245 245 r-square 0.674 0.757 ar1 (pr > z) 0.085 0.087 ar2 (pr > z) 0.653 0.724 hansen test prob > chi2 0.245 0.273 note: () indicates standard errors and “*** p<0.01, ** p<0.05, * p<0.1” one unit increase in improved sanitation reduces 0.25and 0.04-units’ infant mortality and underweight of child respectively. for instance, improvement of sanitary conditions has a slightly higher impact on children's health. improved sanitation has a major impact on health as it can lead to reduction in large number of disorders of the gastrointestinal tract and other inflectional diseases which cause infant mortality and underweight child (montgomery & elimelech, 2007).about 10% of the review of economics and development studies, vol. 8 (2) 2022, 85 96 93 world's infection is related to the lack of adequate sanitation facilities and diarrhea, resulting in approximately 2.5 million children less than 5 years of age each year (unicef, 2012). in case of safe drinking water, one percent increase in improved water caused 0.275and 0.17units’ reduction in infant mortality and underweight respectively. findings are consistent with the previous researches (esrey, potash, roberts, & shiff, 1991; fewtrell et al., 2005; mamoon, raza, & arshed, 2014). with regard the impact of ownership of house on infant mortality and underweight, our results indicate that there is a negative impact of ownership of home on infant mortality and underweight child. the results were supported by a number of studies. health difficulties and other health and welfare risks are more prevalent in rental neighborhoods and among low-income households. this is focused on the needs of these families. housing problems have a long-term impact on physical conditions(chamberlain & johnson, 2001). children with poorer living conditions are more likely to suffer respiratory and mental health problems(fuller-thomson, noack, & george, 2011). impact of remittances in case of infant mortality is found insignificant. however, there is a negative correlation between the remittances received from abroad and underweight. the results are in line with a number of studies(de & ratha, 2012; hildebrandt, mckenzie, esquivel, & schargrodsky, 2005; ratha, 2013).remittances improve the family’s financial situation and increase purchasing power to spend on health, education and clothing(acosta, calderon, fajnzylber, & lopez, 2008; amuedodorantes & pozo, 2006; amuedo‐dorantes & de la rica, 2007; shafiq & gillani, 2018; vladicescu, cantarji, & jigau, 2008).moreover, remittances play vital role in reducing child health issues including underweight. remittance is an anti-poverty tool (ratha, 2013) that allows people to access fundamental necessities like health care. the main factor of child health is individual income (wood & de carvalho, 1988). the hansen test verifies the accuracy of the instruments used for the analysis. 5. conclusion as a child's health improves, he becomes a part of a potentially productive labor force later in life, contributing favorably to the economy (schultz, 2010). in this sense, the availability and condition of basic health infrastructure affect the provision of health services (health establishment and health personnel). the objective of the investigation is to find the impact of health infrastructure on child health in punjab, pakistan. the study used panel data from 35 districts in pakistan punjab between 2010 and 2016. the generalized method of moments (gmm) is used in order to avoid the interlinkage between health infrastructure and child health. recent study includes two child’s health indicators i.e., infant mortality and underweight. health infrastructure has a negative and critical effect on infant mortality and underweight. if the health infrastructure is good and more facilities are provided, the infant mortality and underweight rate in the punjab districts of pakistan will certainly decline. all control variables including improved sanitation, safe drinking water, ownership of house and remittances are helpful in reducing infant mortality and underweight. health foundations are considered a vital role in improvement of child health. in this regard, government should formulate policies that are conducive to health infrastructures. the government should expand health infrastructure by increasing the number of hospitals, and the number of pharmacies. moreover, different types of programs should be launched in which the awareness about child health should be created. in order to improve the lives of children, different type of infrastructure such as clean drinking water, improved sanitation, and various health centers should be maintained mostly in in backward areas. references review of economics and development studies, vol. 8 (2) 2022, 85 96 94 abbas, f., & hiemenz, u. 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(1988). the demography of inequality in brazil. london: cambridge university press. review of economics and development studies, vol. 6 (3) 2020, 591-605 591 achieving bilateral, regional and global peace and sustainability through common grounds mumtaz m. khan a , sobia khurram b , asma tahir c a imperial college of business studies, lahore, pakistan email:mumtazmkpk1@gmail.com b institute of administrative sciences, university of the punjab, lahore, pakistan email: sobia.ias@pu.edu.pk c national college of business administration & economics, lahore, pakistan email:asmatahirstats@gmail.com article details abstract history: accepted 23 august 2020 available online 30 september 2020 the opening of kartarpur corridor brings forward common ground between the two countries for bilateral, regional and global peace and sustainability. the gains of one are considered losses to the other with incidents like, lock down in indian kashmir, indian citizenship law, atrocities along the line of control (loc), pulwama incident, and surgical strike. we propose that peace and sustainability process between the two countries with its roots in kartarpur corridor as a common ground may help in developing future global directions. spatial, social, spiritual, economics and strategic (ssses) tourism dynamics of kartarpur corridor is our active area of focus in this study. expanding common grounds is a formula for regional and global peace. the data from (384 pakistanis and 384 non-pakistani sikh yatrees) is collected. the analysis and the results support the hypotheses of the study and the recommendations help working in line for development of tourism for ssses. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: kartarpur corridor, spatial, social, spiritual, economics and strategic tourism dynamics jel classification: n10, n15 doi: 10.47067/reads.v6i3.249 corresponding author’s email address: mumtazmkpk1@gmail.com 1. introduction the history of india-pakistan relationship is mainly based on mistrust, broken promises, unresolved issues, and unending conflicts due to impact of various factors such as ideology, a violent legacy of partition, images of the neighbor as an enemy, with unresolved issues including kashmir (blinkenberg, 1998). this led to the prevalence of lose-lose situation whereas, the globalization, technology orientation, democracy, prevailing of better sense demand a better solution for multi ethnic and multi sectarian co-existence with tolerance. this can be furthered through facilitation, motivation and warmth that local interpretation of law should be generalized towards secular stream of application that promotes material and religious empowerment without discrimination. opening of kartarpur review of economics and development studies, vol. 6 (3) 2020, 591-605 592 corridor on nov. 9, 2019 to facilitate millions of sikh community residing within and outside pakistan, especially in india and abroad is a common ground towards development of peace between the two punjab provinces, sikh and muslim communities in the world (kamboh, et al. 2018).. this common ground is a landmark to sikh community to visit their most of holy shrines placed in pakistan. in the past, indian sikh pilgrims had to undergo a 125 kilometer journey via bus from lahore to kartarpur whereas gurdwara darbar sahib kartarpur was made visible to the people of india by constructing a raised observation platform. the need is to explore and expand such common grounds and expand them in the world for global peace (dányi, & spencer, 2019). sikhs men and women from all over the world are now part of the design to visit the holy shrines located at kartarpur throughout the year in general and in september, to celebrate the death anniversary and in april, the birthday of guru nanak, in particular. sikh yatrees may spend more time visiting nankana sahib, lahore and other places where these holy shrines exist. these sikh yatrees combine different factors of ethnicity, nationality, sect, and gender that split them in real life and uphold a common identity by carrying out the same rituals and similar dressing stressing their equality. 2. spatial dimension the impact of kartarpur corridor on spatial, social, spiritual, economics and strategic (ssses) tourism dynamics seems to be more interesting and valid for de-escalating the tension, mistrust, warfare etc. and may serve as a common ground and a part of the peace and sustainability process (psp) between the two communities, two countries and the region. spatial dimensions of ssses of kartarpur corridor refer to the development of a dedicated corridor from dera baba nanak in gurdaspur district to the international border to facilitate sikh pilgrims visiting kartarpur sahib throughout the year including all modern amenities and facilities to be developed by india and to develop a similar 4 km corridor from international border to kartarpur on the historic site where guru nanak settled after his missionary travels. the areas along the borders of the two countries based on agricultural landscape is further developed into beautiful landscapes with the need based buildings and markets emerging around kartarpur ranging from development of hotels, roads, food resorts, markets representing both the cultures to development of kartarpur darbar and dera baba nanak, bringing about incarnation of new spatial dimensions of the area not known so far. this spatial dimension with the kartarpur corridor is important to understand as it includes in it the changes of landmarks, the changes in understanding the physical features of the communities and the changes in bringing about a better harmony among ethnic cultures. spatial dimension is important for pakistani and sikh yatrees in order to understand the niche, physical features, gestures of the group members, the buildings, roads, rituals etc (asmussen, et al. 2019). this spatial dimension has been part of the ssses dimension in the emergence of this landscape. this paper, contributes towards highlighting a gap regarding ssses dimensions in which group members are to be accepting of physical bearings of individual in groups, their religious pursuits, their tourism experiences, their knowledge of the niche etc. this understanding is not restricted to individual group members’ knowledge of the space rather a shared understanding. this shared understanding may help in enhancing peace and sustainability process (psp) between india and pakistan. on the basis of our understanding of the concept of spatial dimension, we hypothesize that: h1: spatial dimension of kartarpur corridor has positive impact on psp between india and pakistan. https://en.wikipedia.org/wiki/gurdwara_darbar_sahib_kartarpur review of economics and development studies, vol. 6 (3) 2020, 591-605 593 3. social dimension understanding the effect of participation in the holy rituals by the pilgrims highlights not only sikhism and its institutions, but more generally the development of beliefs and identity. also of special interest is how this experience shapes views of fellow sikhs as well as non-sikhs towards. theories of social interaction have highlighted how exposure to other groups might promote empathy or antipathy towards recipients depending upon the nature of the interaction (pettigrew and tropp, 2006). also social identity literature suggests that strong attachment to a group through interaction may be combined with negative feelings toward members of out-group (tajfel and turner, 1986). this study however, takes the theory of social integration with understanding of the diversity by iterative interactions. it is vital to develop an understanding of how groups interact with each other including their likings/dislikings, beliefs and attitudes. understanding this social dimension enables to understand group dynamics and aids towards their coordination (khan, lodhi & makki, 2011). also understanding of this social dimension is not only enabled to gauge likings/dislikings of individual group members but it is also extended to the overall likings/dislikings, ultimately contributing towards determining overall synergy of the group. hence, this paper contributes towards highlighting group dimensions where group members are supposed to understand emergence of social interactions patterns among individuals and to enhance synergy of patterns of social interactions due to constant formal and informal interaction. we extend the above argument by synergizing not only the comprehension of the social interaction processes regarding social dimension but also integration of social dimension with ssses dimension. on the basis of this argument. social dimensions of kartarpur corridor refer to the interaction of the sikh community with the rest of communities living across the borders with a collaborative approach. sikh pilgrims are going to visit kartarpur with their religious zeal and spiritual approach which in turn is expected to bring about emotions more associated to think positively of the rest of the communities across the borders facilitating them. this can give rise to an understanding of civil-society in both countries to focus their attention on discussing and finding ways to better interaction, coordination and cooperation. we know that the movement of sikh community from around the globe with a view to pay tribute to the holy shrines throughout the year and a collective movement in september to celebrate his death anniversary and in april to celebrate his birthday will become a regular phenomenon. they share a common socio-cultural heritage and, it is thought that a workable relationship can certainly be developed based on peaceful co-existence. in shakargarh, punjab, literate peaceful residents with the traditions of hospitality can help in improving such social interactions where chances to win-win social interaction emerging in psp between india and pakistan may prevail. on the basis of above, we hypothesize that: h2: social dimension of kartarpur corridor has positive impact on impact on psp between india and pakistan. 4. spiritual dimension spiritual dimension of ssses in kartarpur corridor refers to the impact of movement of sikh yatrees with a zeal and devotion aimed at development of feelings of unity with fellow sikhs. numerous sikh yatree’s accounts suggest that the visit to holy shrines inspires feelings of unity with the worldwide sikh community. the specific landscapes in the way assume the shape of therapeutic landscapes whereby the physical and built environment, social conditions and human perceptions yield an atmosphere encouraging spiritual healing (lopez, gonzález, & fernández, 2017). we propose that participation in the religious activities such as these while also reduced participation in localized practices and beliefs increases belief in equality and harmony among ethnic groups and may lead to more favorable review of economics and development studies, vol. 6 (3) 2020, 591-605 594 attitudes toward the rest of them. increased unity within the sikh world is not accompanied by antipathy toward non-sikhs. instead, yatrees display increased belief in peace, and in equality and harmony among adherents of different religions. the evidence suggests that these changes are more a result of exposure to and interaction with sikhs from around the world, rather than religious instruction or a changed social role of yatrees upon return. this spiritual interaction with their community, towards their shrines and with other communities of ssses in kartarpur corridor is of vital importance for developing psp between india and pakistan, which may further lead to global peace and sustainability. on the basis of above, we hypothesize that: h3 spiritual dimension of kartarpur corridor has impact on psp between india and pakistan. 5. economic dimension pakistan-india face the problems of inequitable income distribution, high unemployment levels, and development of distortions due to defense threat perceptions to adequately address the economics needs of their people, both countries require stability in their relationship. pakistan government/marketers may work with the customers via representatives of sikh community to satisfy their needs / demand, to set parameters/ methodologies; to attract the attention of the market/international community and interest of the customer/sikh community towards pakistani services. pakistan also might develop internal processes facilitating the service marketers for delivering to its customers/ sikh community; involve the relevant institutions / departments; training relevant employees of institutions, keeping them motivated through teamwork programs, etc.; pakistan’s emphasis should be towards ensuring satisfaction of the sikh community and as sikh community exist worldwide, it will help creating positive goodwill through word of mouth for pakistan. in order to accomplish all efforts in a successful way, good ambience for the former neighbors with similar culture should be enabled and promoted by pakistan. the personnel of relevant institutions including foreign office, police, rangers and army might be very good towards performing their tasks through knowledge, skills and empowerment. good service delivery should be ensured. this will help in determining the need to improve trade links between india and pakistan in general, and the two punjabs in particular. trade has played a significant role towards reducing poverty all around the world. it is the success of the strong trade relations with their neighbors which has been instrumental for the most successful nations of the east asia, europe, and north america. conversely, countries of the south asian origin have been unable to fully utilize the value offered by proximity. south asia’s total trade represents less than 6 percent of the total intraregional trade whereas the figure is about 50 percent for east asia and the pacific and for sub-saharan africa the figure stands at about 22 percent. these trade figures highlight the difference between the actual versus potential trade in south asian region. as per an estimation of the gravity model, potentially total goods trade within south asia could be increased from current level of $23 billion to an estimated value of $67 billion (kathuria, & mathur, 2019). as an example, current trade levels between both neighbors india and pakistan could be increased around 15 times. the level of trade attraction between both countries, also labelled as the force of gravity is also evident in the high levels of informal trade between both countries. this informal trade represents about 50 percent of the formal trade in south asia. this trade could be enhanced and duplicated at other regional land borders specifically at the india-pakistan border, where most of the trade is done informally. recent reform initiatives including people-to-people initiatives and focusing technical engagement between both governments may enable prioritization of economics over politics. economic dimension of ssses in kartarpur corridor refer to economic activity that circles around such initiative which include the construction of roads, logistics, hotels, food markets, local handicrafts, new sky rising review of economics and development studies, vol. 6 (3) 2020, 591-605 595 buildings, spending of yatrees, banks, exchange of goods, services, currency, etc., create continuous economic circle difficult to capture.. on the basis of these arguments, we hypothesize that: h4: economic dimension of kartarpur corridor has positive impact on impact on psp between india and pakistan. 6. strategic dimension strategic dimension of ssses in kartarpur corridor refer to development of a peaceful region to ensure economic stability of the two provinces and the economies through wellbeing of the people; moving from conflicting nations to more coordinative and cooperative with a collaborative approach. strategic dimension here is associated to mobility and travel, which have constantly been vital characteristics of human societies, having numerous cultural, social, religious aims and purposes. it is significant to comprehend the operation of regional small tourism business, for developing strategies for their sustained success into the future. tourism shapes societies, bring closer the societies, provides opportunities for societies to understand themselves, helps them in modifying their view of life and finally results in an important strategy for evolution of societies and global phenomenon. they become means of socialization and identity development through transmission of socio-cultural spatial knowledge, values and attitudes across ethnicities. strategic dimension is a process of engagement and transformation of the relationships, interests, discourses and, if necessary, the very constitution of society that encourages the continuance of violent conflict. this strategic dimension may include instituting security, establishing confidence in political process, providing initial peace dividends and increasing core national capacity. these priorities comprise of delivery of basic services such as water, sanitation, health and overall wellbeing. the societies that promote multiculturism and give rights to individuals based on various ethnicities and religious identities also promote peaceful behaviors within their populations that then becomes a national discourse for a peaceful behavior beyond national borders (hagg and kagwanja, 2007). it is thus a right conjecture that democracies do not fight with each other and focus on economic, political and social empowerment of their populations by practicing schema of economic development that may also mean trading with neighbors and peacefully competing in international markets through harnessing and developing such good governance practices that improve local and national competitiveness (mousseau, 2000). this strategic dimension helps in developing tolerant behavior among people for opposing point of views and provides rational for objective analysis of historic grievances that may always be resolved by working for common interests that may include important economic concepts like poverty alleviation. this strategic dimension may collectively enable societies to reach rational conclusions and solutions that may include a discourse that promotes peace within the society and outside its national borders, which may subsequently lead to a debate on issues that can see through multiple religious, ethnic and national identities to form a common understanding that drives its motivation from common good for humanity. rationality of common interest arising out of such interaction that can be reflective of other point of view may take economic and political biases not as a matter of grievance but as a source of healthy competition working as an incentive to implement reforms in economy or society within and outside the confine of national borders. the reforms within national border of developing countries like india and pakistan may mean improving rule of law; better facilitation through strong regulatory authorities; improved access to international markets to trade with rest of the world; and bringing inclusive economic policies with better democratic precedence for the domestic polity (mamoon and murshed, 2017). the strategic dimension also focuses on socio-psychological skills that constitute self-awareness, empathy and critical judgment, which provide an important basis for the transformation based on one’s own and prevailing attitudes for sustainable strategy (khan, lodhi & makki, 2011). based on the above, we hypothesize: review of economics and development studies, vol. 6 (3) 2020, 591-605 596 h5: strategic dimension of kartarpur cooridor has positive impact impact on psp between india and pakistan. on the basis of preceding discussion, ssses has impact on psp between india and pakistan (h1h5); psp between india and pakistan has positive impact on peace and sustainability in the globe (h6) and the moderating role of psp in the region has positive effect between psp between india and pakistan and global peace and sustainability (h7). in this approach each member’s knowledge at spatial, social, spiritual, economics and strategic level is measured through self-report survey items on five points likert scale ranging from “strongly disagree (1)” to “strongly agree (5).” this approach requires specifying the relevant content described in survey items constructed to measure the variables. accordingly, to test the hypotheses developed on the basis of our understanding and literature review, a survey is designed for 384 pakistanis and 384 sikh yatrees. 7. development of construct the questionnaire is developed by going through a four phase process. in the first phase, preliminary observation of the area, communities’ interaction is made to bring the study in line with the living realities. in the second phase, conduct of interviews of both the communities is conducted. in the third phase, questionnaire is pilot tested on 30 pakistanis and 30 sikh yatrees; and in the final phase, it is finalized by following a cyclical process of matching notes of each phase carrying out a rigorous exercise in the light of literature review. a great amount of time and energy is invested to review the items before finalizing the questionnaire divided into nine sections. 8. observation on manifest and latent variables manifest variable, which is the opposite of the latent variable, is the one which is directly measurable or observable. latent variable, however, cannot be directly observed. manifest variables are utilized in statistical models of latent variables testing the relationships between a set of manifest variables and a set of latent variables. manifest variables in this construct are measured on liker scale ranging from strongly disagree 1 to strongly agree 5. review of economics and development studies, vol. 6 (3) 2020, 591-605 597 table 1: manifest and latent variables sr. no. latent variables manifest variables used for measuring 1. spatial dimension pakistanis construction of road to darbar, development of landscapes in kartarpur, development of kartarpur area, emergence of hotels, the emergence of new markets, development of darbar. spatial dimension sikh yatrees the landmark when i have already seen the place, the landmark when someone gives me its details, the physical appearance of the hosts, the location of hosts and holy shrines. 2. social dimension pakistanis i feel comfortable with sikh yatrees, make sikh yatrees feel comfortable, like their visit to holy shrines, they are interesting people, they love peace. social dimension sikh yatrees i feel comfortable with pakistanis, i make pakistanis feel comfortable with me, i like them, i would like to revisit the area, i like their behavior. 3. spiritual dimension pakistanis i respect other religions, i know that sikhs visit here for holy purposes, i respect sikhs for their faith, i feel that sikhs are a good religious community spiritual dimension sikh yatrees i am devoted to sikhism and have respect for other religions, i visit darbar for my religious devotion, i know, it helps in strengthening my spiritual being, visiting holy shrines is my central areas of interest. 4. economics dimension pakistani i know that darbar has increased economic activity, we can open shops and construct markets for them, we can go for food restaurants, we know that jobs are available in police, army and other departments for this tourism. economics dimension sikh yatrees the jobs in indian dera are more available now, we can open shops and construct markets for them, we can increase employability in dera area, we can take our products to darbar area. 5. strategic dimension pakistani i always have objective of sikh yatrees in mind, i give regard to their religion, i help them with alternative strategies to achieve their object, i select the best strategy for them, i help them in possible unexpected situations. strategic dimension sikh yatrees i already know the objective of my visit, i have my own understanding of the visit, i understands my benefits. 6. peace and sustainability process b/w the corridor will help in development of common grounds, the corridor will help in development of peace between the two countries, the corridor will help in development of review of economics and development studies, vol. 6 (3) 2020, 591-605 598 india and pakistan sustainability between the two countries, we achieve more targets when we are more communicating targets. 7. regional peace and sustainability process the peace and sustainability process will help in development of common grounds in the region, the peace and sustainability process will help in development of peace in the region, the peace and sustainability process will help in development of sustainability in the region, we achieve more targets when we are more communicating targets. 8. global peace and sustainability the regional peace and sustainability process will help in development of common grounds for global peace and sustainability, the regional peace and sustainability process will help in development of global peace and sustainability, the regional peace and sustainability process will help in development of global peace and sustainability, we achieve more targets when we are more communicating targets. 9. population and sample population size in the study is fairly large as we understand that pakistanis and sikh yatrees can be the best judge to express their views on the study variables, as they have accurate and better understanding thereof. the sample size (384 non-pakistani sikh yatrees and 384 pakistanis on 95% confidence level on convenient sampling basis is equally useful for generalization of the results (raosoft, 2020). 10. model testing through data analysis of survey the empirical validation of the model is done through ex-post facto research design. which is useful to see the effects of independent variable or when a treatment is naturally occurring and the researcher is not interested to control the degree of its use. the researcher begins by proposing a dependent variable and then trying to find probable reasons for its occurrence as well as different explanations. considering these observations, the data for this study is collected from the sample after conducting a survey on the basis of a developed questionnaire. 11. analytical strategies – structural equation modeling sem is a confirmatory technique and the effectiveness of this technique requires that the model must be specified correctly based on the type of analysis that the modeler is attempting to confirm. a researcher specifies a set of theoretically plausible models to ascertain whether the proposed model is the best one out of possible models. the modeler must not only account for the theoretical reasons behind building the model as such, but they must also take into account the number of data points and the number of parameters that the model must estimate for identifying the said model. the structural equations are useful in finding out the various structures and paths in the model. relying on the benefits associated to sem, we decided to generate structural equations to find out the link between spatial, social and spiritual, economics and strategic dimension to peace and sustainability process. the first five (5) hypotheses (h1) to (h5)impact of spatial dimension ( ), social dimension ( 1), spiritual dimension ( 2), economics dimension ( 3) and strategic dimension ( 4) on peace and sustainability process between india and pakistan ( 1 ), in seriatim are measured through: review of economics and development studies, vol. 6 (3) 2020, 591-605 599 1.   11 (h1) 2.   11 1 (h2) 3.   21 1 (h3) 4.   311 (h4) 5.   411 (h5) the 6th hypothesis predicts the impact of peace and sustainability process between india and pakistan ( 1 ) on global peace and sustainability ( 3 ) and the final 7th hypothesis predicts the moderating role of regional peace and sustainability process ( 2 ) between peace and sustainability process between india and pakistan ( 1 ) and global peace ( 3 ). 6.   113 (h6) 7.    2113 (h7) 12. exogenous and endogenous variables within sem modeling, the exogenous variable regresses on another variable. exogenous variables could be identified in a graphical model as the variables pointing out arrowheads towards the variable they are predicting. whereas a variable that regresses on another variable always represents an endogenous variable, even if this same variable is utilized as a one to be regressed upon. endogenous variables represent those variables towards which arrowheads are pointing in the models. the idea that a variable can be both independent and dependent in a sem model makes it more robust than linear regression, as only one sem model could be used in place of performing two regressions. proxy measures for exogenous and endogenous variables are given in table 1. table 2: description of symbols no. symbol description 1  latent exogenous variable, spatial dimension 2  1 latent exogenous variable, social dimension 3  2 latent exogenous variable, spiritual dimension 4  3 latent exogenous variable, economic dimension review of economics and development studies, vol. 6 (3) 2020, 591-605 600 5  4 latent exogenous variable, strategic dimension 6 1 latent endogenous variable 1, peace and sustainability process between india and pakistan 7 2 latent endogenous variable 2, peace and sustainability process in the region. 8 3 latent endogenous variable 3, global peace and sustainability. 9  random disturbance term 13. confirmatory factor analysis of the construct the data for the study consists of 384 pakistanis and 384 sikh yatrees visiting holy shrines of kartarpur darbar. confirmatory factor analysis (cfa) is utilized to ascertain if used measures of a construct are in line with the researcher's comprehension of the construct (or factor) nature. in contrary to exploratory factor analysis whereby all loadings are free to vary, cfa enables the clear constraint of some loadings to be equal to zero. cfa is frequently utilized in social science research (kline, 2010). cfa is commonly utilized as a first step to ascertain the suggested measurement model in a structural equation model. in cfa factors are not assumed to be directly causing each other, whereas sem frequently specify specific factors and variables to be causing one another. in sem models, the cfa is frequently labelled as 'the measurement model', whereas the relationships between latent variables (signified with directed arrows) are classed as 'the structural model'. accordingly, cfa is conducted on spatial, social, spiritual, economics and strategic dimensions from sikh yatrees and pakistanis on peace and sustainability process (psp) between india and pakistan. psp impact on global peace and mediating effect of psp in the region between psp between india and pakistan, and global peace and sustainability. 14. assessment of fit utilizing the sem program, the estimated matrices which represent the relationships between variables in the model can be compared to the actual matrices. for this purpose, formal statistical tests and fit indices have been developed. also individual parameters of the models can be analyzed within the estimated model to gauge how well the proposed model fits the proposed theory. for goodness of fit index, this study used measures of fit reported in table 3: table 3: goodness of fit index for global peace model index value criterion joreskog gfi 0.730 ≥.90 [hu, et al. (1999)] joreskog agfi 0.704 ≥.80 steiger-lind rmsea index 0.074 ≤0.08 [hu and bentler (1999); thompson (2004)] review of economics and development studies, vol. 6 (3) 2020, 591-605 601 ml chi-square 2716.070 degrees of freedom 1029.000 p-level 0.000 the results of cfa for the confirmation of spatial dimension of psp between india and pakistan with pakistanis and sikh yatrees confirm that the construct fulfills the criterion of cfa. accordingly, this construct is in conformity with the use of structural equation modeling. 15. path analysis for global peace the impact of spatial, social, spiritual, economics and strategic dimension on psp between india and pakistan is seen as the first path. psp between india and pakistan impact on global peace is the second path and the moderation of regional peace and sustainability process between psp between india and pakistan and global peace is the third path. table 4: model estimates for global peace parameter estimates standard error t-statistics prob. level (sp)-95->(psp) 0.308 0.902 4.056 0.000 (so)-96->(psp) 0.474 0.106 4.483 0.000 (spir)-97->(psp) 0.405 0.106 4.483 0.000 (eco)-99->(psp) 0.589 0.042 14.171 0.000 (str)-100->(psp) 0.624 0.05 12.47 0.000 (psp)-101->(gp) 0.658 0.135 4.875 0.000 (rpsp)-102->(gp) 0.667 0.107 6.227 0.000 the structural path of spatial, social, spiritual, economics and strategic dimension on psp between india and pakistan can be seen through their coefficients (fig-2): review of economics and development studies, vol. 6 (3) 2020, 591-605 602 the structure of spatial, social, spiritual, economics and strategic dimension on psp between india and pakistan on the basis of global peace model is seen on all the three levels (fig. 2). the following direct path of spatial, social, spiritual, economics and strategic dimension to psp between india and pakistan shows significant direct impact: spatial dimension psp between india and pakistan = 0.308, social dimension psp between india and pakistan = 0.474, spiritual dimension psp between india and pakistan = 0.405, economics dimension psp between india and pakistan = 0.589, strategic dimension psp between india and pakistan = 0.624 the direct impact of strategic dimension is higher than the rest of the variables, which emphasizes the importance of strategic dimension in psp between india and pakistan. surprisingly, spatial dimension (0.308) and spiritual dimension (0.405) have relatively less significant impact on psp between india and pakistan, as per data collected for this study. this needs to be further confirmed through future studies. the variance of impact can be viewed with reference to the relations of all these variables with psp between india and pakistan. the more weightage of economics and strategic is in line with our thought processes and are more significant dimensions of the model. the path to global peace through psp between india and pakistan shows a significant impact of 0.658 whereas moderating role of regional peace and sustainability process between psp between india and pakistan and global peace shows a significant impact of 0.667, psp between india and pakistan  global peace = (0.658), and moderating role of regional peace and sustainability process between psp between india and pakistan global peace = (0.667) 16. results of hypotheses testing the study tests the hypotheses on the basis of strength of path coefficients by calculating multiple path values through statistica-7. the standardized path coefficient (  ) displays the significance of relations between latent constructs and allow the analysis of the proposed hypotheses. chin (1998) has suggested value of path coefficient to be at least 0.20 and ideally exceeding 0.30 to meaningfully analyze the hypothesis. all  values of the impact of social dimension on psp between india and pakistan (h2) have been significant and fall between 0.308 and 0.667. relationship between strategic dimension and psp between india and pakistan (h3) also shows significant  values and remained 0.624. while, link between spatial dimension and psp between india and pakistan (h2) shows relatively weaker  values (0.308).. in this way, it can be concluded that spatial dimension review of economics and development studies, vol. 6 (3) 2020, 591-605 603 relatively exerts less significant, less consistent and weaker impact on psp between india and pakistan directly. the study also tested the 6th and 7th hypotheses developed in the model. the  value (0.658) of the impact of psp between india and pakistan (h6) on global peace and sustainability is significant and higher than 0.30. the  value (0.667) representing moderating role of regional peace and sustainability process in between the relationship of psp between india and pakistan and global peace and sustainability (h7) is the highest significant value of the model. although in sem, spatial dimension on psp between india and pakistan is relatively less significant but rest of all independent variables’ impact on psp between india and pakistan is significant. overall findings suggest that psp between india and pakistan can be predicted successfully through spatial, social, spiritual, economics and strategic dimension. 17. conclusion the study concludes that the global peace model conceptualized on the strong theoretical background of exploring and expanding common ground to meet the need of the global peace challenges. the understanding of development of “global peace” in the study, is another conclusion, wherein understanding of the pakistanis and sikh yatrees from spatial, social, spiritual, economics and strategic dimension is an advantage to achieve a desired level with its roots in common grounds. the study advocates the advantage of the developed construct for ex-post facto research design. thus, empirically validates this causation in real life situation, helping in providing a significant proof of the usefulness of the construct. the study further analyzed the direct structural paths between spatial, social, spiritual, economics and strategic dimension and psp between india and pakistan. psp between india and pakistan may develop global peace and the regional peace and sustainability may moderate this relation. 18. contribution of the study the study aimed to highlight a recent phenomenon emerging between the two atomic powers with a common ground of kartarpur corridor. we worked on certain factors ssses contributing towards a common ground model bilaterally, regionally and even extended it for global peace. this study focuses on holistic approach and gives an understanding that global peace requires an understanding of the mental models of the pakistanis and sikh yatrees from ssses dimensions. the research reveals that the performance of ssses on psp between pakistan and india is predicted and has been empirically tested and validated. this study has also proposed guidelines for measuring global peace and suggests the usage of expost facto research for determining the causal relationship and to answer the observation. this study offers empirical support of relationship between spatial, social, spiritual, economics and strategic dimensions and psp between india and pakistan. it might serve as a valuable resource for peace and sustainability in the globe in future. the study uses second generation multivariate technique; statistica based structural equation modeling particularly appropriate in causal relationship in complex situation in the area of dimension. the contribution of this research is important for both academic researchers and anthropologists. understanding the role of ssses dimensions in developing psp between india and pakistan is beneficial for deciding on finding such common grounds. review of economics and development studies, vol. 6 (3) 2020, 591-605 604 the study supports better understanding of spatial, social, spiritual, economics and strategic dimension can enhance the likelihood of psp between india and pakistan. it further, identifies the impact of psp between india and pakistan on global peace and finally, it validates the moderating role of regional peace and sustainability process between the relationship of psp between india and pakistan and global peace in line with the teams’ perspective (khan, lodhi & makki, 2011). 19. practical implications owing to important role of ssses towards psp between india and pakistan, the study highlights the need to suggest guidelines for measuring spatial, social, spiritual, economics and strategic dimension and make it part of the practices for reaping the fruits of common grounds leading to global peace. in today’s global world, if information regarding dimension is recognized by the policy makers, then they might be able to take effective steps towards enhancing global peace and facing the challenges present today. the study may be useful for anthropologists to pay attention to use this model for peace and sustainability process by finding such common grounds in the globe. the study provides a proof of importance of ssses dimensions for psp between india and pakistan and ultimately, global peace. 20. limitations and future research directions this study is based on data collected from pakistanis and sikh yatrees at kartarppur darbar. the bilateral, regional and global peace requirements may vary in different regions. such variance needs to be accommodated. the longitudinal study in this direction is another limitation of the study. the analysis of social networks for the global peace is another limitation of the study. the study’s contribution to recent literature can be maximized in various ways. one area for future research might involve analyzing he difficulty and effectiveness of various approaches towards speedily increasing global peace. rapid development of global peace would be of considerable importance for all ethnic groups for creating bilateral and multilateral impact on global peace. exploring and expanding the scope of common grounds seems to be winning formulae. research in global peace may highlight relevant features including groups requiring understanding of physical features, social interactions, spiritual integration, economics avenues and strategic decision making separately or the degree to which they can be made part of the group functioning from a collaborative approach. the construct may need to be tested on the basis of different cultures, contexts and environments. the different combinations of explanatory variables independently and collectively can be seen for their impact on bilateral peace. another area where future research might focus for this framework of global peace includes development of global and specific construct. finally, this theoretical model might also be empirically analyzed by utilizing the use of social network analysis, neural network analysis, experimental design, for its measurement, analysis and further validation. references 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(2004). exploratory and confirmatory factor analysis: understanding concepts and applications. washington, dc, 10694-000. http://www.raosoft.com/samplesize.html review of economics and development studies, vol. 6 (3) 2020, 607-624 607 impact of hr practices on employee turnover and job satisfaction: evidence from pakistani universities shakeel khan a , muhammad hashim khan b , ali muhammad mohmand c , syeda misbah d a lecturer institute of management studies, university of peshawar, pakistan email: shakeel.ims@uop.edu.pk b lecturer institute of management studies, university of peshawar, pakistan email: hashim@uop.edu.pk c assistant professor institute of management studies university of peshawar, pakistan email: alimohmand@uop.edu.pk d mba (graduated) institute of management studies university of peshawar, pakistan email: syedamisbah@hotmail.com article details abstract history: accepted 21 july 2020 available online 30 september 2020 this research examines the impact of pertinent hr practices/policies upon a person’s job contentment and turnover in higher educational institutes. a special context of universities of kp have been chosen where numerous employees have developed job dissatisfaction and increased turnover because of deteriorating security conditions including but not limited to terrorism attacks, civil unrest, widespread diseases and conducive working environment. this has ultimately compelled them to leave their jobs and flee to other cities such as islamabad and karachi. more specifically, three hr policies i.e. employee participation, training and performance appraisal are analyzed to affect job satisfaction and turnover. a quantitative survey was conducted to assess job outcomes of university teachers in multiple cities especially where living conditions have deteriorated in the recent past. respondents were segregated on the basis of age, income per month, designation and gender basis. frequency analysis and mean average scores are reported for each construct. the regression results suggest a positive significant relation of employee participation and performance appraisal with that of job satisfaction while a significant negative relation is found with turnover ratio. the study concludes that universities should focus on implementing hr policies and practices effectively in workplace which will help retain employees and keep them motivated. this can be one of the many effective strategies to retain workforce and discourage brain-drain out of the country. the study ends with acknowledging limitations and offering future research directions. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: hr practices, job satisfaction, turnover, performance appraisal, employee participation jel classification: o15, j28, i25 doi: 10.47067/reads.v6i3.250 corresponding author’s email address: shakeel.ims@uop.edu.pk review of economics and development studies, vol. 6 (3) 2020, 607-624 608 1. introduction today’s organizations are generally engaged in seeking more effective ways to increase productivity and to keep abreast with the enhanced competition to uphold its unique identity in the market. to achieve this very purpose they try to practically imply various tools and techniques including but not limited to accounting, financing and human resource decisions. among all those techniques and practices, the human resource (hr) practices hold a supreme position that can play a vital role in the overall effectiveness and efficiency of an organization. the association between hr practices and job satisfaction is researched extensively in contemporary management world. following other researchers in europe and america, belzen (2009) examines this association in a dutch sample. another study put forward by brown and hewood (2005) assert that employees’ productivity can also be increased rapidly by providing them better opportunities for their career development. the literature also shows the importance of supervisor in organization in some emerging economies (ma et al., 2016; shaffer et al., 1999) furthermore, selmer (2001) state that the role of a supervisor is like a bridge that links the workers with the upper management of an organization. the overall progress of the organization is one way or the other, influenced by prevalent hr practices (stavrou, 2005). the key to success for an organization is to implement or adopt the ways and means how to satisfy the current employees. existing research offers theoretical foundations and frameworks which can be the bases for bringing more holistic solution to a local personnel problem. (arumugam and mojtahedzadeh, 2011). the personal satisfaction of the employees will lead to a strong commitment towards organization and eventually will lead to lesser levels of turnover. the concept of remuneration is vital because according to aswathappa, (2008) it constrain the employees to stick to the job that yields more organizational productivity and less turn over. remuneration is also another foundation building element that includes all the monetary and non monetary incentives a worker receives in return of catering the services to an organization (gary, 2008, p. 390). it may be concluded that the organizational endmost success is more or less dependent on the hr practices in use by the firm. the human resource management if done effectively can ultimately lead to higher employee contentment and reduced turnover. the focal point of research is to examine the impact of various hr practices and policies on employee turnover and to determine and suggest an appropriate mix of strategies that can be put into practice in order to reduce turnover in organizations. job satisfaction is a vivid concept and is the foundation of any organization’s success and prosperity. an organization flourishes only because of its employees. therefore keeping employees satisfied is of prime importance to the success of organisations. the proposed research inspects the impact of unmatchable complementary hr practices that act as basis to employee’s satisfaction and lead to a progressive organizational output. to put the concept into practice the study takes into account the teacher’s satisfaction in the context of renowned universities in khyber pakhtunkhwa pakistan. narrowing the discussion into specific outlines, the research strives to achieve the following objectives.  to find out an association between the different hr practices, policies and work outcomes such as job satisfaction and turnover ratios in higher education institutions (hei’s) of pakistan. review of economics and development studies, vol. 6 (3) 2020, 607-624 609  to examine as to what extent the levels of contentment and turnover ratios are determined by underlying factors in the human resource policies of training, employee participation and performance appraisal system.  to draw suggestive measures to accomplish an enhanced levels of job satisfaction and reduced turnover ratio amongst university employees in an environment of chaos and conflict, such as the one in prevalent kp pakistan. 2. review of literature and hypothesis job satisfaction is a crucial element in general organizational behaviour and its impact on the employee’s overall performance is unavoidable. there are many contributors which plays their part actively to achieve the target including employee contribution, job specification, reimbursement, career management system, performance appraisements and selection criterion. a comprehensive research model is therefore formulated which encapsulates the general workforce practices and influence of job satisfaction on the productivity and outcome of malaysian industries in particular (arumugam & mojtahedzadeh, 2011). job satisfaction has also been extensively used as a mediating variable in promoting hr practices (kundu & gahlawat, 2015). an investigation conducted by olusegun, (2013) in south west nigeria on the university employees revealed that there is an obvious distinctiveness in the linear combination effect of employee satisfaction and turnover intents. a research study carried out by khan et al. (2012) took university instructors and considered the three distinctive sectors of pakistan including the government, semi government and private sectors, revealed a gender bifurcated results. it was observed that female instructors are more likely to get influenced by the hr practices, whereas male teachers are more interested in their work and usually get satisfaction out of it. another study done by huselid, (1995) suggested on the bases of sample gathered from around 1000 firms, exhibiting the significance of economical and statistical impression over transitional employee’s outgrowth and the corporate financial growth in both short and long run respectively. the investigation regarding hr contribution reveals that the employee’s approach and overall conduct is the outcome of hr practices and the way workers acknowledge the administration (nishi, lepak & schneider, 2008). a constructive association can be observed in between salary strategies and work enhancement with job satisfaction/contentment, worker’s devotion with job improvement strategies and strategies related with work balancing (roberto & jaoquin, 2007). the research also revealed the inverse relationship between worker’s commitment and planned turnover. the influence of hrm practices with respect to hr outcomes targeting the government banks operating in sri lanka was investigated by rathanweera (2010). the collection of data was done with the use of structured questionnaires in which the worker’s approaches towards hr practices was analyzed. sample based on 209 workers was gathered from various departments of two sri lankan government banks. the conclusion reflected that hr practices are the foreseeing instruments of worker’s contentment, commitment and withholding rathanweera (2010). belzen, (2009) also studied the relationship between job satisfaction and hr practices , according to him the improved hr practices powerfully influence the worker’s built in relevant job contentment. the research indicates that the organizations with higher and more advanced hr practices finally yields to greater job satisfaction. an investigation done by hussain and rehman (2013) suggested that the association between hr practices and job security, training and inductions are strongly participating in the retention process and influences employees to retain their services with review of economics and development studies, vol. 6 (3) 2020, 607-624 610 the organization. according to mahmud and idrish, (2011) the job related imbursements and in depth analysis of work are strong indicators predicting the intention of an employee to quit. another study carried out in bangladesh by absar, azim, balasundaram (2010) revealed a significant relationship between improved hr strategies and the number of satisfied and dedicated employees. a study done by mumtaz, aslam and ahmad, (2011) to find out the influence of hr practices on job satisfaction of university instructors. the findings revealed that the mentioned set of hr practices did not influence the teacher’s contentment which thus indicates that the other factors are still to get unveiled impacting teacher’s satisfaction in general. success of the firm is highly motivated by the effective implementation of hr practices (stavrou, 2005). the concept proposed by locke in 1976 was used by haque and taher, (2000) they proposed that job satisfaction is an optimistic emotional feeling which can be attained from a comprehensive interpretation of the person’s work. the major determinants of job satisfaction includes worker’s necessities and wants, social affiliations, management practices, job structure and design, reimbursement, long term chances (moorhead and griffin, 2001). huselid, jackson and schular (1995) proposed in their studies that high-progressive work practices yields to lower turnover rate. turnover is generally regarded as the number of employees leaving the job. hrm practices and policies also increase appraisements, for instance provision of financial incentives and opportunities of formal trainings enhances organizational output (brown & hewood, 2005). mobley (1978) suggested that the intentions can fluctuate from the influence of an affiliation between job satisfaction and turnover. majority of investigators accepts the fact that turnover intent is the last step of intentional turnover mahmud and idrish (2011). 2.1 theory and conceptual framework while there are several theories relating job satisfaction and hr practices, we chose human capital theory and efficiency wage theory. human capital theory (blaug, 1976) suggests that organizations invest in human capital to retain talented employees. they develop internal resources to justify employee skills for future productivity. employments opportunities can be internalized or externalized accordingly based on the hr practices operating to achieve better productivity. therefore important practices such as training, and employee participation may affect job satisfaction and turnover ratios. in line with this, efficiency wage theory (akerlof, 1984) suggests that turnover ratio may be strongly related to pay practices and performance appraisal system in order to maintain efficiency in organizations. based on the literature, our research framework is shown in figure 1. the model depicts a relationship between hrm practices, turnover and job satisfaction. the hrm practices acts as an independent variable (idv) whereas turnover and job satisfaction reflects dependency on hrm practices. hence they are dependent variables (dv). review of economics and development studies, vol. 6 (3) 2020, 607-624 611 personnel practices (ind. variables) dependent variables figure 1: an association of hrm practices, job satisfaction and turnover the variables that are considered in this research include hrm practices (performance appraisal system, training and employee participation), job satisfaction and turnover. 2.2 hypothesis on the bases of the above literature the following hypothesis are developed for investigation. h1: there will be a compelling association between employee participation and turnover. h2: there will be a compelling association between training and turnover. h3: there will be a significant association between performance appraisal system and turnover. h4: there will be a compelling relationship between employee participation and job satisfaction. h5: there will be a significant relationship between training and job satisfaction. h6: there will be a compelling relationship between performance appraisal system and job satisfaction. 3. research methodology 3.1 sample and data collection the research is based on taking into account all major sector universities operating in the province of kp. hence all universities are taken as the universe of study. there were 6 participant universities namely sarhad university, iqra national university (inu), peshawar university, malakand university, kohat university and bannu university. these universities were selected to constitute a relatively representative sample of cities where there were increased incidences of terrorism and unrest in the recent past. the sample consisted of 125 teachers of the above mentioned reputable institutions. this sample size was achieved with the help of physically administered survey in each participating university. the process of data collection was performed with the support of colleagues in sister universities. 3.2 statistical model and conceptual framework the representation is on the basis of ratios and percentages because the variables used were of employee participation job satisfaction training turnover performance appraisal system review of economics and development studies, vol. 6 (3) 2020, 607-624 612 subjective nature. the statistical package for social sciences (spss) has been used for interpretation of the collected data. for establishment of relativity in between defined variables which include employee participation, performance appraisal system, job satisfaction, training and turnover, the statistical techniques of correlation and regression are used. regression analysis incorporates methods for modelling and analysing different dependent and independent variables. it can mathematically be expressed as y=bo + b1x +...................+e the equation showing relationship between job satisfaction, employee participation, training and performance appraisal. job satisfaction= bo +b1(ep) +b2(t) + b3(pa)+........................e where, ep represents employee participation t represents training pa represents performance appraisal e represents the error term and b1 , b2 and b3 represents the coefficients of regression. the equation defining the relationship between turnover, employee participation, training and performance appraisal. turnover= bo +b1 (ep) +b2 (t) + b3 (pa) +........................e ep represents employee participation t represents training pa represents performance appraisal e represents the error term and b1 , b2 and b3 represents the coefficients of regression 3.3 constructs and measures all of related constructs along with their measuring techniques are discussed below: 3.3.1 hr practices: the hrm practices reflect a positive relationship between organizational innovation, product innovation, process innovation and administrative innovation. hrm practices were measured using 5items likert scale ranging from 1 to 5 and representing two extreme ends of ‘strongly agree’ and ‘strongly disagree’ respectively. 3.3.2 job satisfaction: job satisfaction is an integral part of hr practices as it influences and motivates employee to contribute to the fullest in the productivity and effectiveness of an organization. job satisfaction was measured on 6-item scale formulated by agho, price and mueller (1992). each individual component was measured on 5-item likert scale ranging from 1 (strongly agree) to 5 (strongly disagree). review of economics and development studies, vol. 6 (3) 2020, 607-624 613 3.3.3 employee turnover: the term refers to the ratio of workers left and replaced by the new workers. this construct has been measured by a 3-items scale invented by vigoda in 1990. the scale ranging from 1 (strongly disagree) to 5 (strongly agree) has been used. 4. analysis and results 4.1 correlation analysis between hrm practices, job satisfaction and turnover table 1:pearson correlation with respect to age, designation, job experience and income gender. age. design. experience. income. gender. 1. age. o.o52 1 design. o.o44 o.495** 1. experience. o.oo3 o.667** o.443** 1. income. o.o56 o.557** o.548** o.396** 1. table 2:pearson correlation with respect to dependent and independent variables employee contribution training& induction performance appraisal system job satisfaction employee turnover employee contribution 1 training& induction o.496** 1 per. app system o.6o4** o.6o1** 1 work satisfaction o.713** o.554** o.679** 1 emp. turnover -o.422** -o.218* -0.412** -o.526** 1 * significance at o.o5 level (two-tailed) **significance at o.o1 level (two-tailed) pearson coefficient is a statistical tool for measuring the linear correlation between two variables x and y, giving a value between +1 and −1 inclusive, where 1 is total positive correlation, 0 is no correlation, and −1 is total negative correlation. table 1 and 2 demonstrates the pearson correlation coefficient for the researched variables and is utilized to compare the mean in accordance with the designated demographic variables and all the other key factors with the confidence interval of (p<0.01). the assumptions made about the variables correlation were stand significant having value less than 0.01 except one counted as –0.218*. the negative sign is an indication of diminished turnover if the worker is provided with significant appraisal system, is cooperative, well equipped with his skills and is happy with the working environment. in the research paper the stark on the figure symbolizes the significance of correlation w.r.t the achieved confidence interval which in our case is (p<0.05). https://en.wikipedia.org/wiki/correlation review of economics and development studies, vol. 6 (3) 2020, 607-624 614 4.2 inspecting reliability: to understanding the reliability factor of this investigation, we performed reliability analysis technique using spss. table. 3 present the results of each dependent/independent variable. table 3: results of reliability analysis of variables variable cronbach’s alpha remarks worker’s contribution o.794 reliable training & induction o.839 reliable performance appraisal system o.822 reliable job satisfaction o.811 reliable turnover o.854 reliable the interpretation considers five distinguished variables including employee contribution, training& induction, performance appraisal criteria, job satisfaction and employee’s turnover in accordance to a cut-off value of cronbach’s alpha of 0.7 as suggested by week (2000), and cronbach (1951). from above depicted table it is clear that employee participation is interpreted as the least reliable variable by possessing the cronbach’s alpha of 0.794. whereas all the other consecutive variables including training, performance appraisal system, job satisfaction and employee turnover possess reliability in the order of 0.839, o.822, 0.811 and o.854 respectively. thus all variables qualify in the acceptable range of cronbach’s alpha which makes the authenticity of data quite reliable and assures provision of exhibitive and helpful framework. 4.3 distributing respondents with respect to employee contribution, training, performance appraisal, job satisfaction and turnover the respondents are distributed with respect to the factors including employee contribution, training, performance appraisal system, job contentment/satisfaction and turnover. all of them are studied individually along with the tabular analysis to get a clearer picture. table 4: distribution of respondents with respect to employee contribution s.no item employee perception mas 1. 2. 3. 4. 5. 1 you are a good contributor in your institution’s affairs 6. (4.9) 5. (4.1) 17. (13.7) 66. (52.9) 31. (24.9 ) 3.8881 2 you are zealous regarding employment at your present institution. 1 (0.8) 10 (8.0) 28 (22.4 ) 62 (49.6) 24 (19.2) 3.7840 3 you show concern in making decisions/policies at your institution. 26 (20.8 ) 49 (39.2 ) 18 (14.4) 25 (20.0) 7 (5.6) 2.5040 4 your institution provides you an opportunity to contribute in the formulation of academic policy. 30 (24.0 ) 34 (27.2 ) 17 (13.6) 38 (30.4) 6 (4.8) 2.6480 review of economics and development studies, vol. 6 (3) 2020, 607-624 615 5 your university gives you an opportunity to practice leadership skills. 27 (21.6) 35 (28.0 ) 29 (23.2 ) 23 (18.4) 11 (8.8) 2.6480 6 your university work place supports team oriented working practices. 11 (8.8) 18 (14.4) 25 (20.0 ) 56 (44.8) 15 (12.0) 3.3680 7 your institution welcomes creative feedback and suggestions of instructors. 27 (21.6) 34 (27.2 ) 24 (19.2) 31 (24.8) 9 (7.2) 2.6880 aggregate mean 3.0755 1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree; mas = mean average score table 4 shows that majority of the respondents lie in the 4 th part of the likert scale. the result directs that the respondents from the universities of kp are in favour of employee contribution. the perception reflects a positive behaviour of employees which can finally be seen in the self-fulfilment and turnover. these findings are based on mas (mean average scores) calculated by taking statistical averages of all items involved. on the other hand a substantial number of respondents with neutral perception can also be seen along with some having negative perceptions. the evaluation of items 2, 6 and 1 reflects the approval of the relevant perception as the mas for that particular category is greater than 3. however items 3, 4, 5, and 7 with mas<3 reflects a negative perception indicating a disagreement of employees about positive employee’s participation. the greatest mas (3.8881) have been observed for item stating respondents’ contribution towards their job which results in greater satisfaction and diminished employee turnover. item 2 on the other hand depicts mas (3.7840) which enlightens the zeal of employees towards their workplace resulting in greater satisfaction and fewer intentions to leave the job. followed by the category 6 with mas (3.3680) which demonstrates the agreeableness of respondents towards their work and working environment in general. mas (2.6880), mas (2.5040), mas (2.6480) highlights the idea of innovative feedback acceptance, involvement in strategic decision making, chance to show leadership qualities and involvement in general policy formulation. all of them are responsible for noticeable employee satisfaction and turnover. items 7, 3, 4 and 5 however represents negative recording of perception. the overall mas value (3.075) though represents a positive feedback given by respondents in accordance with their participation, satisfaction and turnover. in addition, generally it is observed that greater empowerment, and involvement usually acts as motivational factors. a person will show greater enthusiasm towards work or will act more participative if he will get a chance to think good/bad for the organizations and a free hand to make decisions accordingly. 4.3.1 with respect to training: training plays a crucial part in employee’s growth and satisfaction as it opens uncountable doors of success and polish work with unmatchable skills. table 5 illustrates the distribution criteria w.r.t training. review of economics and development studies, vol. 6 (3) 2020, 607-624 616 table 5: distribution of respondents with respect to training s.n0 item employee perception mas 1. 2. 3. 4. 5. 1 you can avail beforeservice assistance at your university 43 (34.4) 41 (32.8) 18 (14.4) 17 (13.6) 6 (4.8) 2.2160 2 lecturers can benefit from innovative training at your university 38 (30.4) 46 (36.8) 16 (12.8) 16 (12.8) 9 (7.2) 2.2960 3 fresh lecturers can benefit from on-job training at your university 26 (20.8) 39 (31.2) 19 (15.2) 25 (20.0) 16 (12.8) 2.7280 4 your university gives inter-personal improvement assistance for instructors. 36 (28.8) 52 (41.6) 16 (12.8) 19 (15.2) 2 (1.6) 2.1920 5 your university provides imperative guidance to the instructors. 41 (32.8) 50 (40.0) 12 (9.6) 19 (15.2) 3 (2.4) 2.1440 aggregate mean 2.3152 1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree; mas = mean average score the findings inferred in table 5 indicate respondents’ perception w.r.t training whereby most of the asked queries regarding training lie in the second category of likert scale. the conclusions depicts that the teachers from the selected universities are against the process of giving training by their relevant organizations. this negative perception will ultimately affect employees overall satisfaction and turnover. in the same way, there are employees with positive perception towards the concept too while teachers with neutral perception may also be seen. if we analyze in detail, it is obvious that item 4 having maximum percentage of 41.6% lies within second category of likert scale representing majority of teachers taking up the inter-personal guidance at their relevant universities. item 5 again with 40% reveals the absence of strategic training at their working place. on the other hand items 2, 3 and 4 indicates negative perception regarding pre-service, innovative and on-job training. the aggregate mas reflect negativity in perception regarding training and guidance manuals of the educational institutions. the negative perception thus reflects disappointment in teacher’s behavior with regard to provision of training methodologies. in short the lack of training opportunities will raise the feeling of discouragement and demotivation amongst employees. they will see no ways via which they can enhance their current skills. the final impact can be seen in their job satisfaction feedback which for sure will reflect this lacking and increased employee turnover. 4.3.2 with respect to performance appraisal system it is associated with human nature that he/she must be influenced by the encouragement and compensation they receive in return of services they offer. the perceptions may differ though. some prefer monetary appraisals while some shows more attraction if provided with non-monetary benefits including promotions and more working empowerment. review of economics and development studies, vol. 6 (3) 2020, 607-624 617 from table 6, the negative perception regarding appraisals can be seen. the feedback from the second category of likert scale apparently reveals that the average number of universities operating in kp is not efficient enough with their employee compensation plans. the impact can be observed by job satisfaction and employee’s turnover criterion. item number 4 though indicates an exception with percentage yield of 36.0 and shows positive perception as it is within the fourth category of likert scale. the maximum percentage is the proof that evaluation is thoroughly done in all the institutes of kps. surprisingly the second highest figure 32.8 with items 2 and 5 indicates negative perception and lies in the second category of likert scale. this percentage asserts the investigated institutions seem productive in their response and appraisals given to the lecturers. the percentages 32.0 and 30.5 are in particular for items 1 and 3 which again assert lacking in reward and promotion systems. hence the aggregate mas relative to the figure 2.7964 confirm the absence of proactive appraisal systems based on merit and concrete performance. conclusively, in order to attain reduction in turnover and to enhance teacher’s output it is mandatory to remunerate them according to their skills and performance. table 6: distribution of respondents with respect to performance appraisal s.no item employee perception mas 1. 2. 3. 4. 5. 1 your university provides planned returns to you. 27 (21.6) 40 (32.0) 25 (20.0) 28 (22.4) 5 (4.0) 2.5520 2 the management uplifts you on achieving the set targets and rewards you accordingly. 21 (16.8) 41 (32.8) 28 (22.4) 31 (24.8) 4 (3.2) 2.6460 3 promotions are given on pure merit. 20 (16.0) 38 (30.4) 30 (24.0) 30 (24.0) 7 (5.6) 2.7280 4 performance evaluation is the regular part of the process. 9 (7.2) 17 (13.6) 33 (26.4) 45 (36.0) 21 (16.8) 3.4160 5 lecturers are given appraisals according to their output. 27 (21.6) 41 (32.8) 21 (16.8) 22 (17.6) 14 (11.2) 2.6400 aggregate mean 2.7964 1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree; mas = mean average score 4.3.3 with respect to job satisfaction: job satisfaction plays a crucial role in employee’s satisfaction, productivity and employees turnover. a worker satisfied with his/her working conditions, satisfied with the received financial/nonfinancial appraisals and the overall response of an organization towards his/her work will impact strongly on the outcome of an organization. review of economics and development studies, vol. 6 (3) 2020, 607-624 618 table 7: distribution of respondents with respect to job satisfaction s.no item employee perception mas 1. 2. 3. 4. 5. 1 you are contented with your work at your workplace. 6 (4.8) 20 (16.0) 22 (17.6) 58 (46.4) 19 (15.2) 3.5120 2 you are contented with your management. 14 (11.2) 35 (28.0) 25 (20.0) 40 (32.0) 11 (8.8) 2.9920 3 you are contented with your affiliation with your subordinates at your workplace. 4 (3.2) 6 (4.8) 12 (9.6) 69 (55.2) 34 (27.2) 3.9840 4 you are contented with your remuneration at university. 21 (16.8) 34 (27.2) 26 (20.8) 34 (27.2) 10 (8.0) 2.8240 5 you are contented with the available career development opportunities at your workplace. 20 (16.0) 48 (38.4) 17 (13.6) 34 (27.2) 6 (4.8) 2.6640 6 all-inclusive there is contentment on your part at university. 15 (12.0) 24 (19.2) 28 (22.4) 46 (36.8) 12 (9.6) 3.1280 aggregate mean 3.1840 1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree; mas = mean average score table 7 demonstrates the affirmative feedback of respondents in accordance of their job contentment. the maximum percentage (55.2%) is observed for third number item which is visible in likert scale’s fourth category, this elaborates that the relational aspect of an employee towards other subordinates is satisfactory. 46.4 is the second highest percentage observed which is for number 1 item, visible in the likert scale’s fourth category that indicates that majority of respondents are actually contented with their organization. the aggregate mas (3.18) depicts a positive feedback of workers which shows that they are happy with their working environment and the reimbursements. other relevant queries including interpersonal relations, overall contentment and work opportunities also reflected the efficiency of management towards their goals. hence, if dealt with consistency and wisdom, the motive of increased satisfaction and reduced turnover can be successfully attained. 4.3.4 with respect of turnover: turnover also plays an important role in organization’s overall success and productivity. a firm showing rising trend towards turnover reflects inefficient hr practices. table 8 demonstrates the concept with respect of the study taken into account. review of economics and development studies, vol. 6 (3) 2020, 607-624 619 table 8: distribution of respondents with respect to turnover s.n0 item employee perception mas 1. 2. 3. 4. 5. 1. you often consider leaving current job. 8. (6.5) 31. (24.9) 31. (24.9) 32. (25.7.) 23. (18.5) 3.2481 2. next year you will join some other place to work. 9 (7.2) 19 (15.2) 26 (20.8) 45 (36.0) 26 (20.8) 3.4800 3. recently, you are interested in various job offers in newspapers. 11 (8.8) 20 (16.0) 20 (16.0) 39 (31.2) 35 (28.0) 3.5360 aggregate mean 3.4214 1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree, 5 = strongly agree; mas = mean average score table 8 again demonstrates positive feedback of respondents with respect to the turnover. the maximum percentage can be seen for item number 2 which is 36.0% and visible in likert scale’s fourth category, indicates that workers are looking for new opportunities around them. the second highest percentage seen so far is 31.2% representing item number 3 and lies in the fourth category of likert scale indicating that workers are referring to the newspapers to search the new opportunities. 25.6% represents item number 1 and can be seen in the fourth category of likert scale indicating the increased willingness of employees to change their workplace. in general the analysis depicts the positive perception and intention of employees to leave/change their current jobs with mas of 3.421. the aggregate mas of turnover though illustrated the positive feedback, but the negativity in responses indicates that instructors would love to change their jobs if they get a chance. the organizations thus need to revise their hr policies which are influencing their employees to get motivated towards other more attractive offerings. in short if universities make sure to take an initiative of improvement and tries to retain their teachers with more rewards/promotions, , there would be fewer chances that instructors will change their workplaces. 4.3.5 overall mass of variables: table 9 demonstrates aggregate mas of hr practices including employee participation, training and induction and appraisal system along with employee turnover and job satisfaction. as mentioned above, some of the asked queries were replied negatively. mas reflecting these queries thus represents the ‘strongly agree’ or ‘strongly disagree’ approaches of employees. the overall mas as can be seen are slightly below 3. the overall perception of respondents was quite satisfactory except for two variables i.e. performance appraisal systems and training and induction. table 9: mas of variables attributes. mean average score (mas) worker’s contribution. 3.o754 training & induction. 2.3153 performance appraisal system. 2.7965 work contentment. 3.1841 turnover. 3.4214 review of economics and development studies, vol. 6 (3) 2020, 607-624 620 5. regression results and discussion the software of regression analysis spss v. 20 was used for assessment of causal regression between dependent and independent variables. in particular, the influences of hr practices such as employee contribution, job contentment and turnover were thoroughly analyzed. it is perceptible as data investigated was largely cross sectional in nature therefore the value of coefficient is anticipated to come low. due to this reason the basic dependency is on f-value, and p-value. table 10. regression analysis between dependent and independent variables ind. variables dependent variables job satisfaction turnover intention β r² δr² f β r² δr² f emp. contribution .713 *** .507 ** .407 49.56* -.422 ** .178 *** .124 6.33** training & c. dev. .553 ** .305 ** .417 54.04*** -.219 *** .048 ** .033 6.168 * per. appraisal system .679 ** .461 * .382 104.9** -.412** .168* .094 24.9 * *p < .05 **p<.01 ***p<.001 table 10 shows regression analysis for the effects of employee contribution, training & development, and performance appraisal system upon job satisfaction and turnover intention. hypotheses were tested by employing standard multiple regression using spss version 20. this research did not take demographics as control variables in our study as they have not proven to substantially affect the selected dependent variables. the regression measures the degree of variation in dependent variable brought about by independent variable. the result for the first independent variable i.e. employee contribution shows that the β value for jobs satisfaction is .713 while the total variance in job satisfaction explained by employee contribution is 50 %, f (4, 125) = 49.56. on the other hand, employee contribution showed an inverse relation with job turnover. in this case, the β value is -.422 while the total variance in turnover intention explained by employee contribution is 17 %, f (4, 125) = 26.42. these calculations provide sufficient evidence regarding employee contribution that has significant negative causation toward turnover. this implies that if workers are empowered to contribute in university affair they will be more satisfied and would least look at other options such as to quit.. in other words, lesser employee participation will encourage employees to quit their jobs and turnover ratio might increase drastically. this evaluation clearly illustrates that the employee participation is a key contributor in enhancement of workers satisfaction. contribution of workers increases workers motivation and faithfulness, which ultimately influences organization to achieve its goals successfully (khan et al., 2012). in similar vein, scott, bishop and chen (2003) also assert that work satisfaction plays the role of intermediary between the ingredients of contributory and conducive working environment and worker’s initiative to work professionally with other colleagues. the second set of independent variable i.e. training & career development shows that the β value for jobs satisfaction is .553 while the total variance in job satisfaction explained by employee contribution is 30%, f (4, 125) = 54.04. the affiliation between employee’s satisfaction and training review of economics and development studies, vol. 6 (3) 2020, 607-624 621 were discussed several times in previous researches too. bradley, petrescu and simmons (2004) assert that training and induction has quite significant influences on overall hr practices. their investigation also reveals that training enhances working abilities of an individual that ultimately affect the overall productivity of an organization. similarly, our analysis finds an inverse relation of training & development with turnover intention. the β value is -.219 while the total variance in turnover intetnion explained by employee contribution is 4%, f (4, 125) = 6.16. the rsquare for turnover is 0.48 that indicates a very less training impact on turnover intention. the inferences drawn thus depict that if provided with progressive career development options and trainings, employees will intent less to leave their current jobs. in a similar vein, batt and valcour (2003) investigated that high-participative practices including collaboration, anatomy and training and inductions would lead to less turnover and increased output. the third independent variable is performance appraisal system. table 10 shows that the β value for jobs satisfaction is .679 while the total variance in job satisfaction explained by employee contribution is 46%, f (4, 125) = 104.9. this high yield of percentage depicts that if workers are provided with a rigorous appraisal system, they will be expected to display greater motivation and job satisfaction levels. this finding is in line with contemporary research where for instance, karimi et al. (2011) examined affiliation of worker’s performance appraisal with satisfaction of employees and found a positive affiliation between the two. lastly, performance appraisal system shows an inverse relation with that of turnover intention. the corresponding figure shows that the β value for turnover intention is -.412 while the total variance in turnover intention explained by employee contribution is 16%, f (4, 125) = 24.9. from the above interpreted calculations, sufficient base is allocated to performance appraisal directing employee turnover that is negative and significant. the calculated rsquare is 0.168 which shows that there is around 17% change brought about by appraisal system in employee’s turnover. this result infers that a stronger appraisal system will tend to lower the turnover rates among university employees. it should be noted here that these findings are based on presumption of fair, nepotism-free appraisal system which is expected to enhance employee’s productivity and overall satisfaction. 6. implications, limitations and conclusion in line with previous research on job satisfaction, this research too finds existence of significant relationship between employees’ job satisfaction and employee turnover with that of several hrm practices. nevertheless, this relationship is found in a unique context of kp where a number of factors such as terrorism, disasters, and deadly diseases have worsened security conditions thus exacerbating employees’ satisfaction among universities in general. the results revealed that an average of 70% increase in job satisfaction and turnover is brought about by selected hr strategies like employee contribution, skill refinement, and performance appraisement system. this on the other hand confirmed the dependability of the data collection. the conclusion drawn after the statistical analysis of facts and figures is that there is an affirmative strong relation between hr strategies and contentment of employees in pakistan (ahmed et al., 2017) yet an adverse effect of hr strategies was found over the financial yield of professors of private and public sector universities of peshawar and neighbouring cities. the results reveal that the professors of universities of kp are passionate and enthusiastic to contribute in the university at their level best. they would only be able to contribute strongly if the prevalent hr practices are favourable and employee-friendly. nevertheless in practice, most review of economics and development studies, vol. 6 (3) 2020, 607-624 622 universities fail to provide proper skills refinement, opportunities and performance appraisal system to the teaching community. this kind of misconduct from the university side is bearing a negative impact on contentment of their employees and consequently, they are being pushed towards quitting the jobs or alternate job opportunities. it is observed that several foreign qualified professors of universities in kp have tried to move to national institutions in islamabad, lahore and karachi. in order to achieve optimum performance, universities must adopt specific hr strategies adequately and competently. it is also concluded from the figures that to make your employees contended and devoted towards universities, performance appraisal and hr strategies (such as employee contribution and employee training) must be applied efficiently and effectively. the current research therefore bears widespread implications for hr strategies and policies in a special and troublesome context of higher educational institutions of kp. first, the kp universities should make best possible use of hrm strategies and policies in order to derive maximum performance and retain employee turnover. second, the stakeholders should focus on enhancing job satisfaction and reducing turnover to combat the negative perceptions in prevailing situations of terrorism and chaos in kp. it has been observed that faculty members in kp and pakistan in general try to settle in any possible foreign universities in middle-east, europe and north-america in an escape from terrorism and insecurity. this research offers a viable strategy, amongst many other effective ones to overcome the problem of brain-drain from important academic positions in the region. third, the theoretical association of hr practices and job outcomes has shown diverging results to those of prior research. finally, this study has had several limitations too which are to be overcome by future researchers. for instance, the sample size needs to be increased manifold so that wider generalizations can be offered. it will be better to include non-teaching staff to examine their levels of satisfaction and turnover. other important variables relating to hr practices might need be incorporated in future. finally, future research may also consider comparing the results across other cities of pakistan and international borders. references abassi, sm & hollman, kw. 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(2009). the effects of hrm practices on business performance among private companies in malaysia. international journal of business and management, 4 (6), 65-72. review of economics and development studies, vol. 8 (1) 2022, 25-39 25 appraising environmental beauty of northern areas of pakistan through rhetoric expressions in uzma aslam khan’s thinner than skin: an ecolinguistic perspective hafiza muarifa masood mirza a, tazanfal tehseem b, tarim masood c, naima tassadiq d a postgraduate research scholar at the department of english, university of sargodha, sargodha, pakistan email: muarifamasood@gmail.com b assistant professor at the department of english, university of sargodha, sargodha, pakistan email: tazanfal.tehseem@uos.edu.pk c research scholar at the department of english, university of sargodha, sargodha, pakistan email: tarimmasood42@gmail.com d research scholar at the department of english, university of sargodha, sargodha, pakistan email: naimatassadiq01@gmail.com article details abstract history: accepted 28 february 2022 available online march 2022 environmental study is rising as a hot topic nowadays and there is a striking awareness of sustaining asymmetry between man and nature. how individuals ponder human relationships with the earth and other living creatures have changed deliberately. ecolinguistics is a sub-field of sociolinguistics that studies the role of language in connecting human beings and their natural environment. therefore, this research investigates the use of rhetorical expressions by anglophone author uzma aslam khan and her characters nadir, farhana, and maryam and their attitudes, graduation, and engagement with the natural environment. for this purpose, the "appraisal model" (martin and white, 2000) has been used as a theoretical framework that sheds light on arran stibbe's (2015) ecolinguistic model of evaluation. it highlights several rhetorical devices through which the narrators expressed their positive attitude towards "the stories they lived by." they rhetorically bespeak the readers to appreciate the environmental beauty of the northern areas of pakistan as it is surrounded by beauty and provides a therapeutic potency to build a strong relationship between man and his motherland. the study is limited as it only attempts to praise the beauty of northern areas by appraisal patterns and does not include the other counterparts of pakistan. however, the study is significant as it endeavors to appreciate the environmental beauty of pakistan and provides new avenues for scholars to bridge a gap between ecolinguistics and other areas of linguistics, such as critical discourse analysis, pragmatics, and semantics. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: ecolinguistics, rhetoric expressions, evaluation, appraisal patterns, stories we live by jel classification: p27 doi: 10.47067/reads.v8i1.428 corresponding author’s email address: muarifamasood@gmail.com review of economics and development studies, vol. 8 (1) 2022, 25-39 26 1. introduction the story, expressed through language, seems positive or negative to an individual. individuals cannot live in a world with a negative attitude and devastating stories in their brains. he shares life with living and non-living organisms, forests, mountains, oceans, glaciers, plants, rivers, species, and other environmental elements of the natural world. the positive attitude of the individuals toward nature precludes them from developing withering stories around them and detaching themselves from nature. for this purpose, ecolinguistics, as a sub-field of sociolinguistics, innovated a supporting framework (presented in the methodological section) for the researchers to examine language as a tool to create a balance between individuals and the natural environment. "ecolinguistics," sometimes also known as "language and ecology," is a moderately new discipline of language which considers the physical and social environmental setting in which language works. its focuses on "how language and discourse affect the environment and ecology" (stanlaw, 2020). according to the international ecolinguistics association, “ecolinguistics as a field investigates the job of language in the life-sustaining interactions of humans, other species, and the physical environment" (home, n.d.). the association's objective is both theoretical and applied. the first aim is the need “to develop linguistic theories which perceive humans not only as part of society but also as part of the larger ecosystems that life depends on.” the next aim is to show “how linguistics can be used to address key ecological issues, from climate change and biodiversity loss to environmental justice” (stanlaw, 2020). in 1985, the word "ecolinguistic," not recorded in the oed (2005), was first utilized by a french linguist named claude hagege in his book "l' homme de parlore" as a french expression "ecolinguistique." according to him, ecolinguistics is the inquiry into the etymological articulation of natural peculiarities. his meaning of ecolinguistics covers only a piece of the whole review (steffensen& fill, 2014). in its existing consciousness, "ecolinguistics" was utilized interestingly by a group of scholars. in 1990, frans verhagen coordinated a few encounters on environmental features of linguistics at the aila meeting in thessaloniki. the word "ecolinguistics," comprehended in a sense, confronts a twofold challenge. the first challenge is to explore the relationship between language in the social group and the human mind and investigate the causes and etymologically various conditions, focusing on the safety of endangered languages. the second challenge is to investigate environmental and nonenvironmental components of the language by concentrating on the linguistic portrayal of the ecology. moreover, there is a need to emphasize texts concerning man's role in the environment. the predication of the components of human civilization regarding linguistic peculiarities to ecological issues was first proposed by edward sapir (1912) about one hundred years ago in an article named "language and environment." he outstretched the delineation of language by associating it with the natural atmosphere as a collection of linguistic segments to access the physical milieu. the other factors ascribe the linguistic diversity that is additionally liable to speculate. sapir (1912) defined environment as it can act straightforwardly on an individual, and where purely natural impacts are viewed as answerable for a communal trademark which ought to be perceived as a combination of distinct cycles of environmental impacts on people. in today's society, even the least difficult ecological sways are either assisted or modified by social powers (alwin fill &mühlhäusler, 2001). sapir (1912) indicated that the language of environmental problems extends beyondgeographical matters to achieve societal practices. such theory is sincerely appealing for the relationship between review of economics and development studies, vol. 8 (1) 2022, 25-39 27 topography and sociology to make sense of linguistic phenomena. sapir's actual environment alludes to the geographical configuration of an area. agriculture, campos, glaciers, ice, mountains, seas, winds, rivers, rainfall, and other natural components impose on a specific area various lifestyle that fit these geological measures authentically. therefore, these natural surroundings are ample for living as an individual's behavior relies upon these factors that are important for his physical environment and geographic measures and have incredible worth in linguistic studies. however, social powers are more fundamental because language is a social phenomenon. sapir (1912) evaluates this significance as a group's trademark physical surroundings are generally reflected in their language. their social climate is significantly more evident (alwin fill & mühlhäusler, 2001). in comparison, the physical circumstances incorporate geographical elements, including earthy and non-earthy parameters. the social climate comprises social powers that are viewed as ecological (alwin fill & mühlhäusler, 2001). nowadays, the increase in ecological problems in terms of climate, global warming, ice melting, polar ice covers, unusual temperature, and the weather is a hot topic in environmental debates. as mentioned in pakistan daily times, jamal (2016) says that "pakistan may not be the easiest place to be these days, but this bracing narrative manages to forge a connection with the land's inimitable spirit with a few precision strokes. while it may not be easy to comprehend the land's many moods, a fusion of proud traditions and fickle desires, it takes a good listener to bring its inherent contradictions to life. thinner than skin acts as a beacon to these inhospitable shores” (off the beaten track, 2016). the study aims to analyze the stories presented by khan (2019) and her central characters, farhana, maryam, and nadir. the author and her characters present their experiences in the form of a story while living in the nothern areas of pakistan. it evaluates their attitude, graduation, and engagement while living within the particular environmental surrounding. for this purpose, the ecolinguistic perspective of "evaluation" as proposed by stibbe (2015) has been applied. the theory of evaluation includes rhetorical expressions such as simile, metaphor, hyperbole, personification, onomatopoeia, sensory imagery, etc., to unveil the tales of the narrators through language. the study is subjected to applying martin and white "the appraisal model" (2005). the study highlights that the attitude of the narrators is highly positive and as they are showing their true feelings of appreciation. pakistan has been blessed with the unmatched natural beauty of high mountains, attractive lakes, plushy green valleys, icy depths, sublime rivers, and glaciers, especially in the northern counterpart. through the rhetorical expressions of their language, the narrators want the reader to appreciate the beauty of pakistan as a lively place. in this age of environmental crisis, they motivate the readers to engage, live, and maintain harmony between nature and themselves. to attain the objective of the present study, the two research questions are as follows: • how are the rhetorical expressions evaluated within the selected text? • what is the function of attitudinal, graduation, and engagement pattern of each rhetoric expression towards appreciating the natural beauty of northern areas of pakistan? by evaluating the role of rhetorical expressions in the story, the appreciative attitude has been shown by grading up the focus and monoglossic and heteroglossic engagement of the characters towards the environmental surroundings of northern areas of pakistan. to make this study valuable, the researcher has granted the applied implications of the appraisal model concerning the rhetoric expressions about the appreciation of pakistan's environmental and topographical beauty. the study fosters its contribution by fleshing out the idea of "stories we live by" using rhetorical expressions, which not only function in terms of appraisal and ecolinguistics review of economics and development studies, vol. 8 (1) 2022, 25-39 28 perspective but also motivate the generation of pakistan to maintain a life-sustaining connection with their earthly surroundings. the research attempts to convey and appreciate pakistan’s natural environment. the work may help future researchers to bridge a gap between the domain of ecolinguistics and other areas of linguistics such as critical discourse analysis, pragmatics, and semantics. the researcher hopes to contribute to the advancement of this field by studying the other regions of pakistan, as only a little or no research has been conducted within the orbit of ecolinguistics in pakistan. the present study is limited to evaluating only a few rhetorical expressions to praise the glorious beauty of natural surroundings in the northern regions of pakistan. after reading the writer's stories and her characters, one can focus, engage, appreciate, and want to live in those surroundings. the collection of such events is excessive to be studied in this research. however, the researcher has selected the data from a pakistani-english fictional narrative, thinner than skin, written by uzma aslam khan (2012), to achieve objectivity and transparency in the present study's findings. 2. about the novel thinner than skin uzma aslam khan, a forthcoming pakistani-american novelist probes into nature through the powerful portrayal of breeze, ice-lands, hills, lakes, winds, and rivers that reverberates her emphatic voice and feelings of the characters. the firmly constructed series of events in the text exhibits her manifestations of the homeland, which is the central attention of most travelers. the writer's perspective addresses the landscapes of the pakistan scene as a heaven of magnificence, enriched with lush green trees that are significant and ought to be valued when culture, nature, and geographical scenery have been misunderstood in most anglophonic articles. this study throws light upon the influence of natural landscapes and environmental beauty on the lives of foreigners and local and nomadic people. it induces the readers to idolize nature, making the environmental elements amenable. similarly, it lays out the significance of the himalayas and the kaghan valley with their impressiveness which has animated the artists, performers, painters, and photographic artists for centuries. 3. review of the related literature this portion is structured into two parts. the first part begins with a critical review of the role of ecolinguistics in the relationship between language and human beings in the sense of stibbe's (2015) "stories" and associating it with the environmental study of thinner than skin (khan, 2012). the second part discusses the research gap. 3.1. ecolinguistics and thinner than skin ecolinguistics has its roots in various approaches and concerns as the term is applied in multicultural schools to educate and portray a study of combinations of languages. it further investigates foreign languages and local dialects that will vanish, concentrate on discourses of rustic signboards and synthesize texts regarding climate change, environment, or associated with the environment, including advertisements, living organisms, media, natural resources, and raw materials, and tourism. muhammad, sobia, and shahzeb (2020) suggested that thinner than skin (khan, 2012) is an “ecopedagogical” novel. in their article, towards ecopedagogy: a fiction-based approach to the teaching and learning of the environment, the scholars advanced an educational doctrine that “by employing literary models and by using the classroom as a forum, strives to give birth to an environmental consciousness that can provoke in the students a better understanding of the issues plaguing the review of economics and development studies, vol. 8 (1) 2022, 25-39 29 physical and the living environment, paving the way for environmental praxis” (shoaib et al., 2020). there is diversification with various apprehensions of the word "ecology" (stibbe, 2015). he contended that the etymology of ecolinguistics, principally the utilization of semantic investigation methods, uncovers remarkable stories and frees the individuals to questions and difficulties according to a natural point of view (wu, 2018). khan's (2012) thinner than skin highlights the environmental views that modify “a diversity of concepts.” the writer “revisits indigenous and nomadic cultures of himalayas and reflects upon a complex entanglement between grazing rights, concern over vanishing forest and articulates a sense of place which is conscious of environmental sensitivity” (makhdoom & yaqoob, 2019). lakoff and johnson's (1980) "metaphors we live by" defines an alteration in the domain of linguistics. they inspired stibbe's (2015) theory of ecolinguistics in his book "stories we live b." as lakoff and johnson (198) indicated, human beings "live by" their mental structures that direct their way of behaving. it implies that human beings should accept, perceive and value the world in which they live, inseparable from their viewpoints, words, and cognitive system. the ideas that supervise our thoughts are not merely the subject of the insight. they, in addition, supervise our day-to-day functions, down to the most unremarkable significance. the mental framework structures "what we see, how we get around in the world and how we connect with others. our conceptual system thus plays a central role in defining our everyday realities" (lakoff & johnson, 1980, p. 3). khan, in his books trespassing (2003) and thinner than skin (2012), provides an elective mood of conveying the idea of "environmental justice" using "metaphors, tropes, and images." such utilization of linguistic properties allows the readers to be broad the domain of environmentalism in the scholarly fields (makhdoom & yaqoob, 2019). the primary role of lakoff's (1980) "conceptual metaphor theory" is integrated into a human brain as a perception to make an illustration (metaphor) that joins one "conceptual" domain to another. this association is organized in the metaphorical cycle to make the "source domain and target domain." one can figure out the target area through the root of the source domain. the principal method for empowering this significance is by uncovering the mental designs of discourse as they are evident in linguistic texts. consequently, ecolinguistics delineates a "socio-cognitive" methodology or an "ecocognitive" approach. teun van dijk describes that “socio-cognitive discourse not only makes explicit the fundamental role of mental representations but also shows that many structures of discourse itself can only (completely) be described in terms of various cognitive notions, especially those of information, beliefs or knowledge of participants” (van dijk, 2018, p. 28). van dijk recorded numerous discourse structures which can be represented in mental terms like "appraisals," "frames," and "metaphors." the "story," as utilized by stibbe (2015), is the structure of a discourse that lives in the brain of language users. therefore, the researchers can evaluate the hidden stories because of the linguistic properties in the discourse and contend whether it advances a biologically disastrous, conflicted, or beneficial discussion. in this way, the mental point of interaction from an ecolinguistic perspective is to include discourse and environment instead of an exclusive talk on discourse and society (stibbe, 2015). according to sanober (2019), "the novel which can be truly labeled as an environmentalist text isuzma aslam khan’s oeuvre is thinner than skin (2012)” (hussaini, 2019). review of economics and development studies, vol. 8 (1) 2022, 25-39 30 3.2 research gap various research studies indicate that the environmental surroundings may negatively influence the ecosystem. still, this study focuses only on those images that praise pakistan's environmental beauty and develop harmony between man and nature. 4. research methodology 4.1. data collection this study is predominantly qualitative. the data for the current research has been collected from the english novel thinner than skin. khan’s fourth novel, which is published in 2012, is granted the maiden french fiction prize at the karachi literature festival in 2014 (shah, 2014). the novel is written in english and is divided into five parts. the selected textbook can be an appropriate data because one can get a wide range of rhetorical expressions. the second step is the selection and critical analysis of the lines from each part. fourteen excerpts s of rhetoric properties have been selected from the novel. these fourteen excerpt s were further subjected to stibbe’s (2015) ecolinguistic theoretical implications of “evaluation” and martin and white’s (2000) "appraisal model," which suggests that every rhetoric device encompasses three appraisal patterns, namely "attitude," "graduation," and "engagement" towards a positive attitude. the research brought forth an array of positive attitudes which the characters have portrayed in their stories. 4.2 criteria for the selected data the present study tends to appraise the environmental beauty of northern areas of pakistan by applying stibbe's (2015) theory of evaluation, utilizing the appraisal model as a tool for analysis. later on, the chosen lines from khan's thinner than skin are connected with the environment and the portrayal of various parts of the environmental framework to uncover the writer's story and her characters as the principal focus of an ecolinguistic investigation. 4.3 methodology in his book, "the stories we live by," stibbe (2015) proposed an ecolinguistic model chosen to enhance the researcher's contention. it informs specific stories (mental models or structures) familiar to the human beings, presented to them without deliberately choosing them or becoming conscious of the reality that they are simple stories. these tales are assimilated into our day-to-day routines and have become "stories we live by." the "stories-we-live-by" are available around us in ads, books, news, political talks, law, and even in our day-to-day communication. it influences an individual's way of behaving and their decisions in life. 4.4. stibbe’s theory of ecolinguistics “the stories we live by” stibbe (2015) portrayed nine speculations concerning humans' connection with their environmental surroundings. he believed that the primary duty is to produce an equal society by considering the function of language in an enlivening relationship between individuals, living organisms and species, and their physical milieu. he says that these stories cannot be examined straightforwardly. however, one can get signs about them by analyzing the familiar ways that individuals use various linguistic expressions and choosing whether these are valuable stories or not as per the actions they stimulate. the list of nine stories is as follows: review of economics and development studies, vol. 8 (1) 2022, 25-39 31 table 1 sr.# story type explanation linguistic expression 1 ideology stibbe (2015) believes that "ideology is a tale about how the world is and ought to be shared by group members." ideology implies discourses, especially a unit of linguistic patterns a community uses. 2 framing stibbe (2015) illustrates framing as “a story utilizing a frame, a pack of knowledge about an area of life, to structure another area of life." framing implies triggering words that impart a frame to the brain. 3 metaphor according to stibbe (2015), “metaphor is a story that uses a frame to structure a distinct and different area of life." the metaphor implies trigger words that convey a well-defined frame to the brain. 4 evaluation stibbe (2015) defines evaluation as a story about whether an area of life is good or bad. evaluation implies appraisal structures such as structures of language which address a subject of life in a positive or negative way. 5 identity stibbe (2015) elaborates on identity as "a story about what it means to be a particular kind of person." identity implies language forms which characterize attributes of specific individuals 6 conviction a tale about whether a specific depiction of the world is valid, dubious or incorrect. conviction implies facticity structures. for excerpt linguistic properties which portray descriptions of the world as valid, dubious, or incorrect. 7 erasure stibe (2015) defines erasure as "a story in that an area of life is unimportant or unworthy of consideration." linguistic features fail to address a specific domain of life or, on the other hand, mutilate it. 8 salience according to stibbe (2015), salience is "a story that an area of life is important or unworthy of consideration." language features render importance to the subject of life. 9 narrative stibbe (2015) defines narrative as “a structure which involves a sequence of logically connected events." narratives in the form of a text, for example, an oral or written story-telling, or other types of temporals or logically associated recounted series of events. 4.5 the appraisal model martin (2000) proposed the "appraisal model," which organizes evaluation in three main domains: engagement, attitude, and graduation. this three-dimensional theoretical account presents “a systematic organization of the semantic resources used to negotiate emotions, judgments, and valuation, alongside resources for amplifying and engaging with these evaluations” (hunston & geoff thompson, 2003, p. 145). munday (2012) provided an overview of the appraisal patterns as follows: review of economics and development studies, vol. 8 (1) 2022, 25-39 32 table 2 4.6 appraisal model (munday 2012, p. 24) this overview is familiarized with the "meanings in context and towards rhetorical effects, rather than grammatical forms” (martin & white, 2005, p. 94). it suggests the central focus on the "the meanings or functions of the resources for the expression of evaluation than on the formation of given linguistic indicators. lexico-grammatical devices are treated to encode evaluation and stance meanings and not as an end in themselves” (naeem et al., n.d.). the present study contributes to the ecolinguistic idea of evaluation by stibbe (2015) in the appraisal model by martin and white (2000) to explore rhetoric expressions in thinner than skin by various patterns of attitude towards the environmental surroundings of northern areas of pakistan. the story told by khan (2012) and her characters can be called the writer's plan to make ecological cognizance among the readers to appreciate the attention-seeking environmental beauty in pakistan. the writer developed a magnificent story to create a positive impact on individuals and the nature around them. 5. analysis and discussion the present study explores how rhetoric devices are represented in the light of ecolinguistics as an evaluation in confirming the narrators' appraisal structures (mental attitudes). 5.1 part i 5.1.1 excerpt 1 “now the wind carried a similar foreboding not in the shape of a scent but of a wingbeat, and the lake froze in anticipation” (khan, 2012, p. 1). table 3 sr. # appraisal type parameter and evaluation 1 attitude appreciation: the attitude is concerned with the appreciation of the wind in northern areas. 2 graduation focus: the grading phenomena increase the beauty of the wind by using kinesthetic imagery such as "wingbeat" and "lake froze." 3 engagement hetrogloss: the engagement is hetrogloss as has been represented from the voice of maryam. the appraisal of the word wind creates a positive impact on the readers. maryam's story reflects a favorable attitude wind of the northern lands. the character used the kinesthetic imagery review of economics and development studies, vol. 8 (1) 2022, 25-39 33 of nature as "wingbeat" and "lake froze" the character's intention has been graded up to establish a deep and wanted relation with nature. it suggests the up-to-down motion of wind in nothern areas of pakistan in an attractive manner which makes an individual breath comfortable in the natural environment. the "frozen lakes" are ideal and impressive during winters. such positive description will influence the readers to start believing in this tale and appreciate their environmental surroundings. 5.1.2 excerpt 2 "it was the snowmelt of the two peaks that created the lake"(khan, 2012, p. 2). table 4 sr.# appraisal type parameter and evaluation 1 attitude appreciation: the natural imagery of the lakes and mountains has been praised. 2 graduation focus: the rhetorical expression of kinesthetic imagery softens the image of the lakes and mountains of the northern areas of pakistan. 3 engagement heterogloss: the illustration is from the viewpoint of the narrator and the central character. the appraisal conveys a positive attitude by rating up the natural imagery of the hilly areas and lakes of northern pakistan. the story of the narrators depicts the kinesthetic imagery of nature which is performing its role as a facilitator to clear the way for travelers as a thick sheet of snow melts and creates the lake. the softness of the snow displays its reflection in the water, which is soothing to the eyes. 5.1.3 excerpt 3 “the air began to ring with bells as faint yet bright as stars” (khan, 2012, p. 3). table 5 sr.# appraisal type parameter and evaluation 1 attitude appreciation: the aesthetics of the sound “ring with bells” and vision “as faint yet bright as stars” of the air of northern areas has been presented in the story. 2 graduation focus: by using the rhetorical expression of euphony such as "ring with bells” and the simile "as faint yet bright as stars," the focus on the breeze of northern areas of pakistan has been raised. 3 engagement hetrogloss: the illustration has been expanded through the voice of maryam, a central character of the story. the appraisal of air in the northern areas shows a positive attitude. the rhetorical expression of the euphony "ring with bells" indicates that the sound of the air is pleasing to the ears as it addresses the beginning of the winter season. in addition, the sensory perception of vision of the breeze in the form of the simile "as faint yet bright as stars" informs that though the color of the air is not clear yet, it is visible and associated with the shining of the stars in the darkness. maryam's engagement in the story is raising a voice providing an experience of her feelings while living in the particular environment so that the reader could start believing in her story and delicate their natural surroundings. review of economics and development studies, vol. 8 (1) 2022, 25-39 34 5.1.4 excerpt 4 “the current of the swishing water, and shady trees like sheltering huts. it provided a perfect atmosphere to take sunbathe in the morning” (khan, 2012, p. 11). table 6 sr.# appraisal type parameter and evaluation 1 attitude appreciation: there is an appreciation of the active environment near river kunhar, where the characters feel independent about their actions, dealings, and relationship. 2 graduation focus: the rhetorical expression of onomatopoeia such as "swishing water” and visual imagery such as "shady trees," and personification such as "sheltering huts"have been focused. 3 engagement monogloss: the demonstration has been expanded through the voice of the author. the appraisal of the natural surroundings at kunhar river. in pakistan, the river is located in the province of khyber pakhtunkhwa. the river is famous for boating, camping, and other aquatic occupations. it provides tactile healing. the sound of the water of river kunhar has been illustrated by utilizing onomatopoeia, "swishing water". this rushing of water sounds soft and pleasant to the ears. the shady trees provide the natural conditioning air, improve breathing, control air pollution, etc. moreover, the huts play their role in providing shelter during caustic weather situations. by elaborating on the story of the kunhar river, the author chooses to maintain a balance between man and nature. 5.1.5 excerpt 5 “the mountain that borders the lake. ‘and malika parbat means?’ ‘queen of the mountains’” (khan, 2012, p. 49). table 7 sr.# appraisal type parameter and evaluation 1 attitude appreciation: an appreciation of the mountain's highest peak, named malika parbhat in kaghan valley. 2 graduation focus: the rhetorical expression of antonomasia, such as "queen of mountains," has been used for malika parbhat after deep consideration. 3 engagement hetr0gloss: the demonstration has been expanded through the voice of the central characters, nadir and farhana. the appraisal attitude exposits the role of characters' imagination and their aesthetic appreciation of the natural surroundings of kaghan valley. the story-telling of the fairy princess badar jamal at "malika parbhat" portrays the powerful creative thinking of the characters. through their imagination, the characters allow the readers to take an interest and praise the beauty of pakistan. 5.1.6 excerpt 6 “malika parbat’s reflection was being admired and broken by a stream of exhausted pilgrims and a dozen boats” (khan, 2012, p. 66). review of economics and development studies, vol. 8 (1) 2022, 25-39 35 table 8 sr.# appraisal type parameter and evaluation 1 attitude judgment: a significant judgment about the reflection of the peak of himalayan hills, "malika parbhat," has been made. 2 graduation focus: the author focused on the symbolic imagery of malika parbhat, such as "a stream of exhausted pilgrims" and "to sharp the judgment. 3 engagement hetrogloss: the engagement has been expanded through the voice of the central nadir. pakistan is a mountaineer's eden. the appraisal of the judgment of the beauty of malika parbhat has been illustrated. the mountain is one of the topographic tourist points in pakistan. nadir has made a profound and sharp focus by portraying the symbolic imagery of the hill. he says that although it has a bone-tired journey for the travelers, they love sailing boats and stick around the shore of the lake by kicking their heels and devoting their precious time to the objects of crowning beauty of nature. 5.1.7 excerpt 7 “if you let your imagination soar, far in the distance to the northwest of the queen appeared a tiny fragment of what might have been the most photographed and feared peak in the himalayan chain: nanga parbat. naked mountain” (khan, 2012, pp. 66-67). table 9 sr.# appraisal type parameter and evaluation 1 attitude judgment: there is the judgment of aesthetic pleasure using gustatory imagery such as "soar imagination" and tactile imagery such as " a tiny fragment." 2 graduation focus: the rhetorical expression of antonomasia, such as "naked mountain," has been used to sharpen the judgment. 3 engagement hetr0gloss: the engagement has been expanded through the voice of the central nadir. pakistan is blessed with heavenly environmental beauty. with a master judgment, nadir expands his story to give each and every detail about the beautiful high mountains that unite man and nature. he wants the readers to throw away their soar imaginations about pakistan. the expression "naked mountain" depicts the mountains' steep corners, allowing the magnificent white snow to cover it completely. the dry and brownish lands with an exquisite touch of white snow is an organic therapy of fear and visual therapy for the eyes. foreign and local tourists have cosmetically apprehended these ranges of pakistan. 5.1.8 excerpt 8 "in the icy depths below, the queen's twin peaks fanned into triangular wings, enclosing us in a jagged cape of blessings" (khan, 2012, p. 68). review of economics and development studies, vol. 8 (1) 2022, 25-39 36 table 10 sr.# appraisal type parameter and evaluation 1 attitude appreciation: the feelings of nadir as a traveler have been illustrated beautifully. 2 graduation focus: the focus has been softened with the help of rhetorical expressions of tactile imagery such as "icy depths," visual imagery such as "twin peaks," "triangular wings," and hyperbole such as " a jagged cape of blessings." 3 engagement hetrogloss: it has been engaged through the comments of nadir about malika parbhat. the appraisal "attitude" creates an admiring effect on the reader. the beauty of the northern areas of pakistan can be traced out through the story of an experienced tourist, nadir. the focus on these areas has been ranked up by using the exaggerated statement about the glorious jagged surfaces of the sleeveless twinned peaks of malika parbhat, which is the great blessing of allah almighty. many tourists come to visit these impressive and sublime mountains enriched with ice. the narrator believes that the individuals should engage themselves in traveling these places to admire the visual appearance of the environment they live in. 5.2 part ii 5.2.1 excerpt 1 “high above the clouds, the mystery mountain was now entirely free of clouds and glistened a silvery amethyst so pure it belonged to another world, a world of princes and princesses, jinns and fairies” (khan, 2012, p. 103). table 11 sr.# appraisal type parameter and evaluation 1 attitude appreciation: the beauty of saif-ul-malook has been portrayed in an appreciative mode. 2 graduation focus: the concentration has been modulated with the help of hyperbole such as "a world full of princes and princesses, jinns and fairies." visual imagery in the form of colors has been used, such as "silvery amethyst." moreover, there is a use of metaphor such as "the mystery mountain has glistened a silvery amethyst." 3 engagement hetrogloss: it has been engaged through the remarks of nadir about the beauty of saif-ul-malook. the highly exaggerated story-telling of the narrator not only pursues the visual sense of the reader but also renders a chance to view and consider these environmental beauties of pakistan as a supreme blessing and gift of allah almighty. 5.2.2 excerpt 2 "a spray of stars winked in her place and thin wisps of cloud smeared by the violet sky" (khan, 2012, p. 122). review of economics and development studies, vol. 8 (1) 2022, 25-39 37 table 12 sr.# appraisal type parameter and evaluation 1 attitude appreciation: the visual aspect of malika parbat has been portrayed gratefully. 2 graduation focus: the concentration has been modulated with the help of hyperbole, " a spray of stars," and visual imagery in the form of the shape "thin wisps" and the color "violet sky." 3 engagement hetrogloss: the voice of the central character nadir has been engaged. the attitude pattern portrays alluring visual imagery. it is also mentioned that " the nomads rose very early, to pray. they might already be awake, waiting for the sun to break behind malika parbat." (khan, 2012, p. 122). however, nadir modulates an exaggerated statement of the sky as filled with "a spray of stars," which means a vast coating of the sparkling stars shines bright and clear in the sky. then he uses visual imagery that the clouds appear in the shape of the flat twisted crew in the sky, which appears in purple shade due to a great mass of snow existing at the top region of the earth. as a passionate observer, nadir conceptualizes beauty as an immense unified whole accomplishing religious responsibility by the nomadic people by reconsidering their connection with the earth. 5.3 part iii 5.3.1 excerpt 1 “a butterfly flit between all three of them, a yellow swallowtail with a shimmer of purple spots at the edge of two serrated wings” (khan, 2012, p. 150). table 13 sr.# appraisal type parameter and evaluation 1 attitude appreciation: the visual aspect of the insects of nanga parbat. 2 graduation focus: the concentration has been modulated with the help of hyperbole, " a spray of stars," and visual imagery in the form of the shape "thin wisps" and color "violet sky." 3 engagement hetrogloss: the voice of the central character nadir has been engaged. 5.4 part iv 5.4.1 excerpt 1 “river laughed, the river was pleased with waterfall because it was leaving one valley to meet the next. queen once washed her tired eyes in this water, and it was called nain sukh” (khan, 2012, p. 250). table 13 sr.# appraisal type parameter and evaluation 1 attitude appreciation: the appreciation is dynamic and highly optimistic. 2 graduation focus: the focus has been softened through the personification" river laughed," and antonomasia "nain sukh" has been used for kunhar river. 3 engagement monogloss: the voice of the author. in these lines, the author's attitude in appreciating nature is optimistic. using antonomasia "nain sukh," she tells the story of a queen of the mughal empire, noor jahan, who has an infection in review of economics and development studies, vol. 8 (1) 2022, 25-39 38 her eyes while traveling to kashmir. the queen washed her eyes with the pure cool water of river kunhar, which healed her infection and provided comfort to her eyes. the writer intends to raise awareness among the readers that the rivers of pakistan also provide a visual therapy and it can create a healthy interaction with human beings. 5.5 part v 5.5.1 excerpt 1 "now she inhaled the scent of filly-a fresh manure scent-with hints of wood and incense-and wondered if she could cure a mother too" (khan, 2012, p. 303). table 14 sr.# appraisal type parameter and evaluation 1 attitude appreciation: the attitude is positive. 2 graduation focus: the concentration has been modulated with the help of olfactory imagery such as " inhaled the scent" and "fresh manure scent." 3 engagement hetrogloss: the voice of the central character, maryam, has been engaged. the attitude of maryam is highly positive. by using certain expressions of the sense of smell, she says that nature is performing its role to provide an olfactory therapy that is helpful for human beings. it is a good sour of oxygen. the visitors can feel relaxed and fresh and breathe easily under the trees of northern pakistan. maryam also thinks that the leaves of these trees could also be beneficial to curing her mother's health. as "over the years, she had cured the coughs of all children with the tissues of pistachio bark" (khan, 2012, p. 303). this information can develop the readers' interest in pakistan's trees acting as a physical therapist for human beings. 5.5.2 excerpt 2 “i could see stars so close that i felt i could grasp them in my nail” (khan, 2012, p. 316). table 15 sr.# appraisal type parameter and evaluation 1 attitude appreciation: the appreciation reveals a positive attitude toward nature 2 graduation focus: the concentration has been modulated with the help of hyperbole, "grasping the stars in the nail." 3 engagement hetrogloss: the voice of the central character nadir has been engaged. the attitude of nadir is highly positive. his wish of sighting the stars has been evoked by the ability of his sense of sight. nadir has used hyperbole of "grasping the sars into his nails" as the top of the mountain provides the view of the sky closer so that he and the tourists can easily talk to the sky. in the light of rhetoric expressions evaluated through the appraisal model in this study, a recurring theme of appreciation, engagement, and acceptance of the natural environment appears in the foreground. the characters and the writer engaged in telling the stories want to pass away their feelings to the readers to evoke a positive valuation of the beauty of their homeland, pakistan. review of economics and development studies, vol. 8 (1) 2022, 25-39 39 6. conclusion the research proposes an instructive way of thinking that the application of ecolinguistic models and appraisals attempt to give birth to ecological cognizance. the ecolinguistic perspective of the elected stories through the language used by khan (2012) and her central characters, nadir, farhana, and maryam, who inform that pakistan is a not only a place of tour and dedication, but a root providing mental, physical, and spiritual therapy to human beings. it is gearing up the readers for ecological practicality. the readers are more mindful of their own creating or parting the relationship with their environment. the rhetoric expressions are investigated for the appreciation of pakistan in terms of its beauty. this natural beauty is remarkably found in the northern regions of pakistan. the data depicts that the rhetorical use of language is a source of creating a positive engagement between humans and nature. one can find ample instances of the appreciation of pakistani beauty found in the research. they are documented as capable of loving and respecting nature and valuating it positively as we all are involved in the world's ecosystem. references alwin fill, &mühlhäusler p. 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(2018). ecological discourse analysis. www.atlantis-press.com; atlantis press. https://doi.org/10.2991/icsshe-18.2018.163 https://www.ecolinguistics-association.org/ https://dailytimes.com.pk/86782/off-the-beaten-track/ https://dailytimes.com.pk/86782/off-the-beaten-track/ https://thefeministani.wordpress.com/2014/03/25/thinner-than-skin/ https://doi.org/10.1002/9781118786093.iela0110 review of economics and development studies, vol. 6 (4) 2020, 919 929 919 corona-19 pandemic and the altering dynamics of human resource management: a multifarious approach mohammad akmal pasha a , muhammad zia-ur-rehman b , maria kamran c a phd scholar, dept. of leadership & management studies, national defence university, islamabad, pakistan b associate professor, national defence university (dept. of leadership and management studies), islamabad pakistan email: drziaofficial@gmail.com c mphil scholar, school of economics, bahauddin zakariya university multan, pakistan email: mariaziaofficial@gmail.com article details abstract history: accepted 15 dec 2020 available online 31 dec 2020 this study is an attempt to bring forth some of the human resource predicaments which will be ushered by the ubiquitous venom of the corona virus. regardless of the deliberation operating at the back of corona and the availability of the requisite vaccine, the executives need to adapt themselves with the new paradigm and contemplate on the enactment of novel and apposite ways of managing human capital. the global economy is feared to sink such that the world might be coerced to relive the 1930’s global recession; thus each economy is entwined in the cruel jaws of havoc. the study presents various dimensions of the pandemic and then after the analytic discussion, puts forth some important suggestions for the reader that the resort lays in self-reliance, caution and adaptability. since the business activity is by and large a function of superior human capital, the hrm interventions need to be the most commensurate ones. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: corona pandemic, hrm, pakistan, global economy, requisite vaccine jel classification: i18,f01 doi: 10.47067/reads.v6i4.290 corresponding author’s email address: drziaofficial@gmail.com 1. introduction the hrm seems messed up in the event that the world economy has been jeopardized, like contracts related to shipping, transportation, construction, tourism, textiles, chemicals, automobiles, energy, and other industrial sectors maybe impacted. some international law firms are also worried about the performance of belt and road projects. in pakistan, the infected population comprises of 64 percent males and 36 percent females. unemployment may plunge devastatingly. according to international labor organization (ilo), there are 8.5 million domestic workers in pakistan and this pool forms one of the biggest source of employment in the informal economy, a majority of whom are women and children and this renders hrm even more complicated. review of economics and development studies, vol. 6 (4) 2020, 919 929 920 the commercial repercussions of corona are typical for a developing country like pakistan. the growth in pakistan's gross domestic product (gdp) is expected to drop from 3.2% to 2.4% due to covid-19 outbreak, and growth in world's gdp drop is expected around 3.1% to 2.8%. likewise, for g20 developed and emerging countries gdp growth in 2020 has been projected at 1.9% and 4.8% respectively, however after the covid-19 break it is expected to drop to 1.3% and 3.7% respectively. similarly, revenue shortfall is also in the looming, direct income taxation, value added tax collections, and indirect taxes; in addition, by the same token decreasing trust among private and international investors will also contribute to widen the funding deficits. at factory level, there would crop up threats regarding wellbeing and life of the labor-class. travel trends have dropped by 60-70% in pakistan due to the fear of coronavirus, further in worst case scenario pakistan tourism industry would face a us$ 5.8 million losses. if luckily the world has recovered from coronavirus in coming months, the world might face disrupted global supply chains and this is feared that concentration of industries would develop in one country like in our neighborhood; china. similarly china, is supposed to create opportunities of relocation of some of its industries to developing countries like pakistan. the hrm concerning global supply chain (gsc) would also be in hot waters. so far in the hands of insufficient measures, the accommodation and food sectors have undergone a 10% drop in production; more ghastly the entertainment and recreation sector production got dropped 60%, and publishing, communication and information sectors are expected to drop by 20.3%. the transportation and storage sector would drop to 70%, at the same time wholesale and retail would drop by 28.6%, and electricity and air conditioning by 60.9%. likewise industries marked with high proportion of temporary jobs (e.g. restaurant, accommodation, and recreation sectors), would be though disproportionately affected by outbreaks, yet would lead to labor losses cutting on hr. in the context of trade, according to evansa (2020), in pakistan the import duties have been waived on some 16 medical products for the period of 3 months (20/3 to 20/6). exports of anti-malaria medicines and personal protection equipment have been banned, however exports of masks (except n95 & ppe) and sanitizers have been authorized. around us$ 290 million cash subsidies have been given to export sectors in order to compensate for lost revenue. as a quick measure, more than 237 export units have been allowed to operate under preventive sops as imposed by the government. also that three months waiver on electricity bills for smes when they open up, cash assistance has been announced by government for the skilled labour losing their jobs due to lockdown. pakistan has applied for debt relief offered by the g20 which will defer a payment of around $1.8 billion for pakistan for one year. a us$ 305 million loan has been finalized with the adb of which 200 million for social sector and 105 million has been earmarked for healthcare infrastructure support; for the month of april 2020. pakistani exports registered a downward turn by us$ 1 billion (-54%) and imports down by us$ 3.1 billion (-34.4%). agriculture is expected to see slow growth as the worst locust infestation in over 2 decades damages harvests of cotton, wheat, and other major crops. the government has declared a national emergency to combat the infestation. modest growth is expected in some export-oriented industries such as textiles and leather. pakistan has received commitment from multinational donors; like adb – us$ 2 billion; imf – us$ 1.38 billion; islamic development bank – us$ 650 million; european union; us$ 12.5 million. as industrial production and revenues have declined, the us$ 6.7 billion support programme has been launched by the government to assist the poorest sections of the country (mainly unskilled labour). fdi inflow has soared by 62.5% year on year in the first half of review of economics and development studies, vol. 6 (4) 2020, 919 929 921 fy2020. short-term capital has also poured in rapidly to buy government securities denominated in pakistan rupees that offer attractive returns. supported by these flows, international reserves are expected to improve to 2.2 months of import coverage at the end of fy2020. collaboration between pakistani and belgian companies in the development of pharma products, hospital and medical equipment (diagnostics, electro-medicals, support products, etc.) is also underway. as put by ahmad (2020), with an exception of food manufacturing, export-oriented industries and those connected with the construction sector, all other types of enterprises would face mass dismissals, and job disruptions to the tune of 21 million workers. the paradoxical would be the situation characterized by cheap and redundant hr but squeezed business opportunity for the firms acutely engaged in hrm. while government has initiated social transfers paying pkr 12,000 to more than 18 million households, employment retention has been ensured only through administrative orders and a refinancing scheme to enterprises (for wage payment). a relief package has earmarked amount of pkr 200 billion to provide relief to daily wage workers. the covid-19 impact on the pakistani economy is estimated to range between 0.8-1.3% of the gdp and 1% in 2021. imports are estimated to decrease by 50-60%, and exports by 10-20% while the employment loss is estimated at 20%. all of the macroeconomic targets stand the risk of being missed out. the economy is expected to shrink to negative 1 – 1.5% against an expected growth rate of 2.4% during the current fiscal year. the tax revenue target has also to be revised to us$ 24.5 billion, down by 19%. this is also being projected that pakistan’s economy will experience negative gdp growth of 1.3% in 2019-20, followed by only 1% growth in the coming year 2020-2021. in other words this implies that our gdp growth in the last quarter of 2019-2020 will be a big negative 10%. the other sign of the coin could be a decline in exports, private investment and household consumption spending. the ongoing lockdown and the subsequent fall in the economic activity could lead to unemployment of over 5 million more workers. this will push the unemployment rate to an unprecedented degree of 4%, which will suppress the poor below the poverty line to the tune of million, finally the overall pool of poor would extend to100 million, hence the hrm would become excessively ticklish. the total external debt of pakistan as of first quarter of 2019 stood at $105 billion coupled with rupee depleting drastically against dollar. by may 2019, the pakistani rupee had drooped to a year-onyear manifesting depreciation of 30% vis-a-vis the us dollar. on the whole, the year 2019 along had added the debt of over $13 billion, which is over 40% of the total debt added in last 10 years. the inflation rate in pakistan has surged to 12.93 % which is highly alarming and it is indicative of even gruesome degree to which it will plunge. the fbr estimates that the lockdown of only karachi would cause tax losses up to rs. 380 billion. the daily wagers which cover 47 percent workforce in service sector (such as marriage halls, hotel industry and others belonged to this sector) will be severely struck. the tourism industry would bear loss of at least rs. 40 billion, merely in the wake of the disrupted global value chain (gvc). so the hr managers concerned with such sectors will face hard circumstances. regarding microfinancing, the research findings of malik, meki and morduch (2020) are based on ‘rapid response’ phone surveys of about 1,000 microenterprise owners, a survey of about 200 microfinance loan officers, and interviews with regulators and senior representatives of microfinance institutions. the covid-19 pandemic jeopardizes local microfinance institutions in pakistan, a country which is studded with mature microfinance sector serving a large number of households. they find that review of economics and development studies, vol. 6 (4) 2020, 919 929 922 on average, week-on-week sales and household income both fell by about 90%. households’ primary immediate concern in early april, 2020 happened to be how to secure food, 70% of the sample of current microfinance borrowers were not able to repay their loans; while the loan officers anticipated a repayment rate merely 34%. the hr managers operating on the school-education front, the lockdown has cast varied effect on schools, for example some of the elite english-medium schools are in the process of developing virtual school and chrome-books, while public sector and low-income private schools seem oblivious. one option could be the cellular phones, where according to the 2018-19 economic survey, 89 % of pakistanis have access this facility whereas connectivity remains a predicament. hassan and attique (2020) pakistan’s students in the face of poor access to tv and the internet further compound these difficulties. a straightforward option is provision of widespread internet. at the middle, high and higher secondary level, the out of school children amount to respectively 6.5 million, 5 million and 6.3 million. the drop outs rarely go back to school, especially girls. female students of age-group 10 to 14 years, spend more time on learning during weekends than boys do, the age group 15 to 19 years, the relationship reverses. further about 50% of girls of both age-groups consume between 0 to 3.5 hours on studies per day, with a median of 1.75 hours. in contrast, boys in the age-group 10-14 years, 50% spend 0 to 3 hours per day studying, age group 15-19, 0 to 4 hours per day, but the median value is much lower at 1.5 hours. work-at-home option is too oblique for a developing country like pakistan. hassan and attique (2020) benefitted from the 2018–19 pakistan social and living standards measurement (pslm), a nationally representative household survey and found that only 10% of jobs in pakistan had a nature that allowed individuals to carry on from home. rates further dwindle in case of rural inhabitants as they happen to be low-skilled-low-paid, similar is the issue of service industries. 2. literature review hassan and attique (2020) the novel covid 19 corona virus has been less fatal compared with the pandemic of 1918 spanish flu. researchers believe that president wilson’s (effected by spanish flu virus in 1918) impairment rendered treaty of versailles harsher which caused the world war ii, the corona pandemic carries a couple of symptoms of repeating the history. in the words of khalil, ali, tanveer, ovais, idrees, shinwari, and hollenbeck (2017), over the past few decades, pakistan has suffered a great deal from infectious diseases such as dengue, crimean-congo fever, hepatitis, measles, and polio. changing climate conditions, environmental degradation, global warming, loss of biodiversity, and other ecological determinants have cast a direct effect on these diseases and have resulted in the emergence and reemergence of infectious entities. below is a brief description of different viral disease which have proved problematic in pakistan during last couple of decades. 2.1 dengue virus dengue virus, which is now characterized as an emerging infection, affects from 50 million to 100 million people globally, causing an estimated 24,000 deaths per year. dengue virus first appeared during world war ii and was reported to have expanded in asia after the 1980s. it is classified into 4 serotypes: den-1, den-2, den-3, and den-4. viral transmission is brought about by the vector aedes aegypti mosquito. although a tetravalent dengue vaccine has recently been registered, the diagnosis time will still remain critical for patient management. dengue fever may be characterized as classical dengue fever, dengue hemorrhagic fever (dhf), or dengue shock syndrome (dss). pakistan has had a history of recurrent dengue fever outbreaks since the 1980s. however, it was first documented in 1994 and considered endemic to pakistan and other neighboring countries. outbreaks are reported review of economics and development studies, vol. 6 (4) 2020, 919 929 923 frequently in the monsoon season—that is, the season of heavy rainfalls, which provide an environment conducive to the virus to propagate, causing hemorrhagic fever. 2.2 measles virus measles is a contagious but vaccine-preventable viral disease that mostly affects the respiratory tract (febrile respiratory prodrome); the most general symptoms include maculopapular rashes, cough, and fever, which may lead to death. after global initiatives in the previous decade (20002011) to combat measles, the disease prevalence dropped significantly (up to 71%), and mortality rates dropped to just 1 per 1,000. about 95% of measles deaths occur in low-income countries. measles eradication programs like the global measles and rubella strategic plan (2012-2020) represent a success story, but specific circumstances in pakistan make measles eradication challenging. in different outbreaks of measles, there were 4,000 and 14,000 (*1,000 cases/million population) confirmed cases in 2011 and 2012, respectively, resulting in deaths of 238 people. in 2013, a total of 321 people were reported to have lost their lives to measles in pakistan. 2.3 crimean-congo virus crimean-congo hemorrhagic fever (cchf) or simply congo virus is another deadly pathogen that is prevalent in certain parts of africa, europe, asia, and the middle east; it has a mortality rate ranging between 3% to 30%. crimean hemorrhagic fever (chf) first became evident in 1944 in the former soviet union. the disease mostly affects farmers and people living in close proximity to livestock. in a recent outbreak in turkey, 90% of the infected individuals were farmers. congo virus is associated with ixodid ticks (genus hyalomma), its natural vector. it was first reported in pakistan in 1976. sporadic cases and mini-outbreaks of cchf have been reported in certain parts of pakistan, including rawalpindi, abbottabad, kashmir, peshawar, karachi, and some parts of baluchistan. however, about 40 to 60 cases have been reported annually since 2000. data from the disease early warning system (dews) reported 49 confirmed cases of congo hemorrhagic fever in 2012; 60 infected individuals were reported in 2013. increased awareness, rapid diagnosis, proper training of healthcare workers, and community-based infection control measures can be effective tools to prevent congo virus outbreaks. 2.4 polio virus although polio virus has been eradicated from the rest of the world, the disease continues to be reported in pakistan, nigeria, and afghanistan. the virus is mainly transmitted by oral-fecal and sometimes by oral-oral route. it invades the nervous system and can lead to paralysis in the infected individual within a few days. polio virus can be found in sewage water from the affected area and can be transmitted through infected respiratory secretions and sneezing. pakistan is still struggling to eradicate polio infections due in part to political instability and to some social and religious misconceptions. until 2005, the incidences of polio infection were declining, and the vaccination campaigns were quite effective. however, in 2009, 89 poliomyelitis cases were reported in pakistan. the number increased to 144 and 198 in 2010 and 2011, respectively. the highest number of poliomyelitis cases was 306 in 2014 in 44 districts of the country. extensive vaccination and environmental sampling, accompanied by massive awareness campaigns in these target areas, resulted in a decreased number of cases (a total of 22) in 2015. it is hoped that these polio eradication programs will soon eradicate the disease from the country. 2.5 hiv-aids human immunodeficiency virus (hiv, a lentivirus from the retroviridae family of viruses) is the causative agent for acquired immune deficiency syndrome (aids), which attacks the immune cells of review of economics and development studies, vol. 6 (4) 2020, 919 929 924 the infected patient, resulting in a decline in cd4 t cells. it is estimated that <0.1% of the pakistani population has been reported to be infected with hiv; however, the incidence is high among sex workers, especially when they interact sexually with injection drug users. overall, these data indicate that hiv infection in the general population has remained constant (0.01%) over the past 2 decades. awareness programs and stringent surveillance targeting high-risk groups will be helpful in controlling infection in the future. 2.6 hepatitis c virus according to who, about 130 to 150 million people are affected by hepatitis c virus. a significant number of those people develop chronic liver disease, and an estimated 500,000 die each year globally. hepatitis c virus (hcv) has wide genetic diversity and variations from region to region based on prevalence of its different genotypes. globally, genotypes 1 and 3 are most common. hepatitis viral infections are highly endemic in pakistan, with hepatitis b and c being a major disease burden with maximum mortality. prevalence of hcv is around 5%, with an estimated 10 million infected individuals in pakistan. six genotypes have been identified, with genotype 3 (74%) as the most prevalent. phylogenetic analysis based on the full-length hcv genome revealed that the hcv-a prevalent in pakistan is genetically distinct from those prevalent in the rest of the world. 2.7 avian influenza virus avian influenza virus represents a major threat to the country’s economy, as it can cause infection in humans, birds including poultry, horses, and pigs. the poultry industry constitutes a major portion of the country’s economy. since 1995, there have been 5 epidemics of avian influenza reported in pakistan, including subtypes h7, h9, and h5. an epidemic of h7n3, a highly pathogenic avian influenza (hpai), emerged in scattered areas across the country and lasted for about 4 months. in 1998, an outbreak of h5n2, a low pathogenicity avian influenza (lpai), appeared in broiled chickens and poultry. similar outbreak of h7n3 emerged in 2000. in 2003-04, the epidemic of h7n3 resulted in severe economic devastation. during the same epidemic, h9n2 was also found in some of the flocks, resulting in a mortality of 70% to 80% in the affected flocks. avian influenza viruses isolated from poultry in pakistan (in 1998-99) were found to be closely related to h9n2 viruses that caused human infections in hong kong. constant surveillance and vaccination programs are recommended for preventing future bird flu influenza infections in the country. 2.7 swine flu virus influenza viruses have been emerging and reemerging over the past 3 decades, with novel strains of pandemic potential circulating globally. the first outbreak of h1n1 (swine flu) occurred in 2009 in mexico and spread to several other countries. in pakistan, the first case of swine flu was confirmed on june 18, 2009. there were a total of 1,242 suspected cases, with 262 laboratory-confirmed cases and 29 deaths reported. but the 2009 swine flu pandemic appeared to be of lesser concern in pakistan compared to other affected countries. however, an epidemic of swine flu in india (december 2014 to early 2015) was followed by another one in central pakistan, resulting in an estimated 16 deaths by january 2016. continued surveillance and mass awareness are important to overcome the disease. 2.8 ebola virus, zika virus and mers besides the endemic entities, there is a global threat of ebola virus that demands serious and dedicated efforts to be undertaken at federal and provincial levels, with effective participation from civil society and religious scholars. zika virus is among the heavily debated issues across the world. recent statements by the health ministry and who indicated that the risk of a zika virus outbreak is insignificant. even if there is a low risk, there is a great need to monitor the virus globally and respond review of economics and development studies, vol. 6 (4) 2020, 919 929 925 immediately if a suspected zika case is found in the country. an outbreak response and implementation strategy should be immediately developed against pathogens like ebola, zika, and mers (middle east respiratory syndrome). according to waris, atta, ali, asmat and baset (2020), covid-19 outbreak was first time experienced in the wuhan city of china at the end of december 2019, which spread rapidly in china and then fanned out world-wide embracing 209 countries of regions like america, europe, australia and asia; undoubtedly including pakistan. the life is resembling the plight that was once ubiquitous one hundred year ago. like a poem was written by kathleen o’mara during spanish flu in 1919 (bakhtiar, 2020) a few line are reproduced below: “and people stay at home; and read books; and made art and played, and learned new ways of being, someone mediated, someone prayed, and in the absence of people who; lived in ignorant ways, dangerous, meaningless and heartless, the earth also began to heal, just as they were healed” the havoc could be global, which will ultimately converge to hrm predicaments cascading its effect the respective stakeholders. in view of raja (2020), cuba, venezuela and iran under harsh sanctions from usa, and pakistan as undergoing a plight this is feared the great depression of 1930’s repeats itself. what bred corona virus is still riddle, as raja (2020) put it, the conspiracy theories are tinkering in between, moving along the pendulum where china and usa seem self-consumed in blamesharing, iran accusing usa for foul play plotted against iran, the corona affected nations lamenting that it is linked with 5g technology, since to them where ever the 5g technology has been installed the virus has spread comparatively at a burgeoning pace. as a reaction, the anti-dajjalis are catapulting infrastructure where 5g technology has been fanned out in the world. to move forward, on one hand while israel claims that it has invented vaccine for corona, bill gates declares that social life around the globe can never become normal until each individual of the world is not vaccined, especially then human capital that is the human resources. according to raja (2020), corona virus can be viewed through the lens of bio-weapon as well. he maintains that though soviet union and european countries had abandoned creation of bio-weapons during 1960s and 1970s and then signed the pact called bioweapon & toxin convention (bwtc) in 1972, yet clandestine production kept on lingering. for example sarin bio-gas was deployed by iraq against the iraqi kurds and also against iran, then by israel in syria and by india in j&k. still, it is estimated that over 800 us military bases are yet secretly engaged in research on bringing novelty in bio-weapons. as put forth by javed (2020), covid-19 crisis would leave some 25 million unemployed in pakistan and would push millions towards hunger and poverty that would resultantly degenerate human resources. the global economy projection is 2.9% to 2.4% while china’s economic forecast has been downgraded from 6.1% to 4.9%. the european union will be hugely affected incurring a trade loss of $ 15,597 million. the first comes united states with trade impact of $ 5,779 million. india falls among top 15 affected countries with trade impact of $ 348 million. the slowdown in chinese economy through transcended effect of global value chain will affect review of economics and development studies, vol. 6 (4) 2020, 919 929 926 pakistan and the most impacted sectors would be textile and apparel facing a loss of $ 44 million. calculated on the basis of decrease in gdp growth contraction in services sector, would cause revenue loss and decrease in trade and remittances, the initial loss to pakistan’s economy would surge to rs. 1.3 trillion. the loss to agriculture and mining sector would range between $ 1.5 billion and $ 16.23 million, business trade, personal and public services between $ 1.94 billion and $ 5.54 million, light and heavy manufacturing between $ 671 million and $ 3.6 million, transport services between $ 565.6 million and $ 0.92 million, hotels and restaurants between $ 253.7 million and $ 0.67 million, total between $ 5 billion and $ 16.23 million. the job losses would be around 9,46,000 whereas gdp would drop by around 1.57% and would frustrate human resource pool. live animals export declined from $68,9982 thousand in january 2020, to $60,938 thousand in february 2020, tourism receipts increased from $79 million in 2016 to $85 million in 2017 and would steep further. pakistan’s travel services based on business and personal travel increased from $247.1 million in fy 19 to $320.3 million in fy 20 showing growth of 29.6%. the remittances increased from $14,355.8 million in fy 19 to $ 15,126.6 million in fy 20 showing growth of 5.4%, still 10% to 20% decline will take place in remittances in coming months. according to the sentimental analysis undertaken by asma, (2020), globally, the elements of anticipation, and trust and both could be correlated with religiosity. the enhanced menace of domestic abuse and violence is another potential consequence as sensed by the united kingdom, china, france and other countries. 3. analytical explanation and construal according to hec covid-19 policy guidance no.5 (online readiness), the hrm should focus vectored towards the standards related with measuring universities’ online readiness cover 8 major areas, for example the university, the course, the faculty, the library, the technology, the examination, the laboratory, and the student. the university’s hr management and general management looking after educational materials and personnel should be professional. three components like existence of an explicit policy and sops for approval of courses, a learning management system (lms) to take care of information, track progress, and coordinate activities, and governance system for the purpose of decision-making and more specifically adjudication of complaints. the governing system like online academic council (oac) has to be in place. for course, the following areas must be taken care of: the course introduction, the learning objectives, the evaluation/ grading policy, course prerequisites, course requirement or rules, the textbooks or other required readings, the key dates, the time and venue (physical or virtual) of class meetings, the lesson plan and ppts or handouts. in terms of faculty special attention needs to be paid to challenges, opportunities, techniques, and supportive resources with respect to online classes. for library: all the required readings and associated materials (optional readings, audiovisual materials, or literature or data needed for course-related research) should be made available through. in terms of technology, the technological packages including the software for classroom meetings (e.g., microsoft teams, zoom, google classroom, etc.) are needed. students should be facilitated with great internet connectivity. the imperatives for evaluation and assessment include exams, assignments, in-class activities, self-assessments, evaluations, for laboratory and practical instructions an imperative system is the prerequisite. hec has also delineated six factors that may determine if a particular course is ready for online delivery which include university's management system (including hrm), the course itself, the faculty member, the library or resource bank, the technological infrastructure, and the readiness of the students. the hrm in the field of real estate needs to engage itself in multifarious interventions. the constructors for example would need to construct small houses instead of big ones and add gardens. at the same time they will have to maintain additional cleanliness. internet companies have tremendous business ahead, they need to go for 4g-adaptation at a faster pace, develop new packages, offer free review of economics and development studies, vol. 6 (4) 2020, 919 929 927 bundles of internet and apps develop mechanism to make sure that homedelivery of goods and services is made possible. this implies that the small shopkeepers need to attach themselves with internet companies. there will emerge huge business opportunities for wholesalers & distributors, the new era would cause elimination of middlemen or even wholesalers while retailers will take up the role of middlemen. especially the high tech companies will have huge business chances. the hrm at cargo companies will have to change their way of business. for hrm at banks, a greater need for more efficient atm system and other online business methods would emerge. the professionals like drivers and mechanics have great chance, businesses will need their services to enhance their trade. managers will lag behind and the real deliverers will surpass. as new types of businesses will emerge, the nature and functioning of international economy will change that will insinuate dynamism in local economies as well. the hrm at hotels will need to develop separate rooms with hygienic maintenance instead of the sharing rooms or dormitories. the households would have to establish enhanced solidarity, compassion, love, respect and dignity, and will notice that only true and real relations will go a long way. they at the same time will avail of huge opportunities, like digital marketing, teaching online etc. masses will need to turn their hobbies into earnable skillsenhance earn ability. people will have only option to live with good and trustworthy persons; will be careful in finding new friends which could be contagious. the hrm engaged in developing recreational equipment will have to focus on home-based exercise machines, games, recreations, and exercise kits. similarly, home cleaning operatus will be more common, so the manufacturers have great opportunity. similarly, the hrm engaged with massrelated recreational activities and running like clubs, cinemas, swimming pools, and gyms etc. will have to shrink, and would redirect these services to be usable at household level. the companies will have to develop such equipment and apps which are helpful in offering repair work at home for electronic appliances, cars and bikes and etc. the households will become more adept in furnishing homemade embroidery items, bakery confectionaries, tailoring, and will use own vehicles for offering home delivery to customers. the hrm busy with security systems will face new threats. there could be assault on human health, life may not seem safe even in drawing room, the governments will be too busy in safeguarding their thinkers, scientists, and professors. there would be great tussle when it comes to be issue of obtaining, retaining and maintaining human resource, simply the states will vie for superior human resources, which is the intellectual capital. hence the nations that are poor at this frontier will be left behind. the hrm concerned with spiritual and religious organizations, will face that masses not have lesser trust on religious healers, especially the fake enterprises or spiritual healers will vanish. people will be more practical, superstitions will be wiped away, greater faith in god will get promoted. thus the emerging philosophy will be ‘caring self and save others’ hence the spiritual practices will be common at individual level. 4. discussion the deteriorating human capital marred by destitution and resource-starvation would leave the society with nothing but a demoralized human resource, dropping thereby the hrm at an alien island surrounded with turmoil laden with varied challenges. corona might plunge around 11m people in asia to dip into poverty, and one may deduce that societies in this region might face rising crime, political review of economics and development studies, vol. 6 (4) 2020, 919 929 928 instability and social unrest more emphatically so when seen in the backdrop of the fact that 33 % of workers earn us $ 2 per day from an informal work. massan, sheikh and dahri (2020) report that the 177 universities of pakistan have more than 12,000 faculty holding phd degrees and on an average about 1500 phd scholars are added per annum. for one faculty at the sampled university out of 18 research faculty, almost 16% supervisors had developed contact with research candidate. on the other hand, out of 17 students registered to these supervisors, 41% had kept the project on track and meeting time-lines. again 89% of the established online meetings could be conducted through whatsapp, and calls, whereas the remaining were used for zoom meetings to be used for detailed discussion and analysis of results. massan et. al. suggest that universities ought to appointment a focal person to look after all research related activities, all people entering the university premises must put on masks, apply sanitizers and must be screened for body temperature, minimize academic loss to student through superior co-ordination, furnish requisite integrated software, formulate sop’s and formats help establishment of clear chain of command, grade visibility to the student at different levels, effectuate availability of standardized templates for assessment of various theses, announce of marks distribution, initiate online presentations for creating industry exposure and linkages, present up dated research on the coronavirus pandemic through forward looking office of industrial liaison, online training on software packages such as reference managers and spss, smart-pls, matlab, minitab etc. thus the professionally trained hr will be an uphill task for the managers. mahmood (2020) suggests that government should increase social spending, lower interest rates, stabilize exchange rate, provide credit lines for the timely payment of company payrolls and seek international and regional cooperation in all aspects of the economy. pakistan should immediately arrange and avail imf-world bank facility to postponement of debt payment. government has reportedly reached imf for $1.4 billion new loan. focus more on trading with china as it has started its rehabilitating phase more vigorously, income loss in china should provide an opportunity for pakistani exporters to sell their low quality products that will be more in demand in china. china is now back to business and has taken certain policy measures. for instance, it has increased export tax rebates for its exporters that have started putting out pakistan’s export orders at risk, some have already been cancelled. our government needs to take new and effective measures to counter such moves by china and others, the enterprises nevertheless desperately need professional hrm. european union has relaxed certification rules for the import of fruits, vegetables and other food items to ensure good supplies of such items in their domestic markets. pakistani exporters of food items, vegetables and fruits need to benefit from this rules relaxation and rising prices in eu. pakistani exporters should also capitalize the opportunity that is coming from increased demand for medical instruments, health clothing, pharmaceutical products, bed linen, towels, and simple garments and clothing. all of these are normally produced by the pakistan industry. but all of these require that supply chains domestically and globally be kept intact. javed (2020) observed the possible projections estimated 20,000 to 456,000 positive cases within 80 days of disease spread in pakistan. not sparing hrm even at hospitals, the corona predicament has changed the complexion of the functionality of all elements pervading the globe. 5. conclusion with corona virus playing havoc at an ever increasing rate, the world is simply at the mercy of review of economics and development studies, vol. 6 (4) 2020, 919 929 929 nature or the scientists who may develop vaccine for it. the conspiracy theory scares individuals regarding the deliberation of this virus and at the same time with a greater degree that the vaccine had been developed beforehand or at least it exists right-now and the blood-suckers business enterprises are just eyeing at the opportune moment to encash the agony of the bewildered and perplexed humans. pakistan being a poor country needs to take commensurate measures and the masses at the same time must take corona seriously internalizing thereby the theme that prevention is the best cure. the new dynamics have dictated adjustments at all levels should each one of us aspire to spend a happy, prosperous and secure life. references ahmad. iftikhar. (2020). covid-19 and labour law: pakistan, italian labour law e-journal, special issue 1, vol. 13 (2020), issn 1561-8048 bakhtiar. h. (2020). better morrow, sector c, phase 1, dha, islamabad, issue 57, p. 6 chohan, usman, dr. (2020). forecasting the economic impact of coronavirus on developing countriescase of pakistan, working paper id: ec016uc march 28th, 2020 available on the social science research network (ssrn) evans o. (2020). socio-economic impacts of novel coronavirus: the policy solutions, bizecons quarterly, 7, 3–12. hasan, rehman & zhang. (2020). disparate impacts of covid-19 lockdowns in pakistan, affecting girls and rural residents. working paper number 20010, lahore university of management sciences, downloaded from: https://lib.dr.iastate.edu/econ_workingpapers/105 how the necessary economic support measures can cushion the corona crisis and accelerate the ecological transition. (2020), policy brief (03/2020), on behalf of greenpeace germany hyder, a. (2020). short notes on the economy during the covid-19 crisis, vol. iii, april 5, 2020 javed, asif. (2020). policy review: economic impact of coronavirus and revival measures: way forward for pakistan, sdpi khalil, a. t., ali., m., tanveer, f., ovais, m., idrees, m., shinwari, z.,a., & hellenbeck, j., e. (2017). emerging viral infections in pakistan: issues, concerns, and future prospects, health security, volume 15, number 3, 2017 ª mary ann liebert, inc. mahmood, zafar, dr. (2020). covid-19 and pakistan’s trade prospects, school of social sciences and humanities national university of sciences and technology, islamabad malik, s.a.; javed, a. (2020). forecasting unusual trend of covid-19 progression in pakistan. preprints 2020, 2020040504 (doi: 10.20944/preprints202004.0504.v1) malik. kashif, meki. muhammad & morduch. jonathan. (2020). covid-19 and the future of microfinance: evidence and insights from pakistan. timothy ogden, issn: 2695-2246 massan, shafiqur rehman, sheikh, muhammad mujtaba & dahri, abdul samad. (2020). effect of covid-19 epidemic on research activity of researcher in pakistan engineering university and its solution via technology raja, brig., asif, haroon. (2020). better morrow, sector c, phase 1, dha, islamabad, issue 57, pp. 7, 10-14 the covid-19 pandemic in the middle east and north africa, (2020). the project on middle east political science (pomeps), institute for middle east studies, george washington university waris. a., atta. u,k., ali, m., asmat, a., & baset, a. (2017). covid-19 outbreak: current scenario of pakistan, health security, volume 15, number 3, 2017 review of economics and development studies, vol. 6 (3) 2020, 567573 567 role of non-government organizations in escalation of educational projects and community development in balochistan: a case of balochistan rural development & research society saif-ur-rehman saif abbasi a , ihtram kakar b , hassan raza c , nazneen habib d a, b & c department of sociology, international islamic university, islamabad, pakistan d department of sociology, university of azad jammu and kashmir, muzafarabad, pakistan article details abstract history: accepted 20 august 2020 available online 30 september 2020 non-government organizations (ngos) have been considered as the key player in the provision of services to address the economic, environmental and socio-cultural developmental issues. united nations global sustainable development goals (sdgs) focused the role of partnerships between different sectors in addressing sustainable development issues. the study focuses on the role of ngos especially the local organization called as balochistan rural development & research society (brdrs) in empowering community in balochistan. we conducted a cross-sectional survey in two districts of balochistan province to investigate role of ngos among beneficiaries of brdrs education projects and programs in focused communities by following the quantitative research approach. by using proportionate random sampling technique, 400 respondents were selected out of the total beneficiaries. the results indicated significant associations between brdrs educational projects (i.e. arranging students exposure visits, conducted speech competitions, arranging enrollment campaigns, renovation of the schools, and follow-up mechanism to schools) and level of satisfaction among the beneficiaries. the study recommends that government should also be involved to improve the policy and make a supportive and conducive environment through partnerships in the education sector with ngos for the sustainable community development. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: community development, education, ngos, sustainable development jel classification: r11, r19, i21 doi: 10.47067/reads.v6i3.247 corresponding author’s email address: 1. introduction despite the rapid transformation of social development during the last few decades, complex socio-cultural issues have emphasized increased attention across different sectors to facilitate social change (yan, lin, & clarke, 2018). though previous scholarships on the role of ngos have been significantly instigated the process of socio-cultural development, there is still needed nuanced review of economics and development studies, vol. 6 (3) 2020, 567573 568 explanations regarding the roles of ngos in the process of community development (chowdhury, islam, & abd-wahab, 2020) ngos have been considered as the key player in the provision of services to address the economic, environmental and socio-cultural developmental issues (bostrom and hallstrom, 2010). nevertheless, the significance could be realized from the united national global sustainable development goal (goal no. 17) which focused the role of partnerships between different sectors in addressing sustainable development issues (macdonald et al., 2018). lin (2012) emphasized ngo involvement by making cross-sector social partnership (cssps) that may cause more proactive outcome while keeping less understanding regarding the numerous roles of ngos in collaborative settings. researcher highlighted two methods of community development which includes the government that provides basic and social facilities in the community, and ngos that ensures community participation to mobilize and coordinate resources (ehigiamusoe, 1998). ngos perform two main types of activities which include service delivery to the individuals in time of need and organizations of policy advocacy for the ultimate purpose of change (lewis and kanji, 2009).the development interventions in the ngo sector have been consistently becoming a popular area in the research due to its wide expansion in various developmental activities. this is the reason that ngos have become a part of various interdisciplinary academic fields including sociology, political science, anthropology and economics within the domains of exploring developmental issues (lewis and kanji, 2009). pakistan as one of the low-income countries in south asia, is characterized by moderate economic growth, and major human development deficiencies include basic health care, education and gender equality (kurosaki, 2006). in this context, the study focused on the role of ngos in balochistan, especially the local organization called as balochistan rural development & research society (brdrs). the organization was registered with a registration no. dsw-1188 under voluntary social welfare agencies (registration and control) ordinance 1961 (xl vi of 1961) in 2002. the fundamental aim of the organization was to provide social services for the poor people in the area. major working areas include health, education, agriculture, energy, gender, vocational training, capacity building and development trainings in balochistan province since 2002 (arif, 2013). in the field of education, there are numerous projects implemented by the said organization which include the provision of information and communication technology materials, scholarship awards, renovations of the schools, construction of the schools buildings, the provision of school furniture, trainings of teachers, and tutoring support among the students of rural communities. keeping in view of various plans with respect to the community development in baluchistan, it is necessary to conduct an empirical study to understand the impact of brdrs working on education sector in the local community. the brdrs is working currently in the targeted districts that included, zhob, sherani, killa saifullah, ziarat and harnai. in the field of education. brdrs with the financial assistance of government education department implemented the project namely, global partnership for education baluchistan education project (gpe -bep) that was a two and half (2.5) years project totally focused on social mobilization, larger community meetings (lcm), parent teacher school management committees (ptsmcs) formation, capacity building of ptsmcs, regular monitoring of project activities in coordination with relevant stakeholders, ensure and supervise the construction and up-gradation of project schools through the relevant firm(s)/consultants of the project as per the guidelines of project management unit. the project targets include community mobilization on 185 land mutations for review of economics and development studies, vol. 6 (3) 2020, 567573 569 schools, conducting 185 larger community meetings (lcms), 185 ptsmc formation and notification. material development includes training material, monitoring formats etc. and capacity building of the 185 ptsmcs, all the selected teachers and education department officials on various topics; disaster risk reduction, ptsmc trainings on roles and responsibilities with refreshers training of teachers and ptsmcs child protection, shn and school development plans. 2. methodology the principal question in the study addresses that what are the contributions of ngo in education sector for the community development? the main objective was to explore the associations of brdrs interventions and educational services in the process of community development in balochistan. significant ingredients were studied with respect to the role of brdrs in community development that are, partnership with the government to improve the education structures, capacity building trainings to the educational professionals, and the organization of seminars and workshops for the awareness of the general public on education related issues. quantitative research approach has been applied to study the role of non-governmental organization (i.e balochistan rural development & research society, brdrs) by employing education schemes and programs in focused communities at balochistan province. the respondents of the study consisted on the beneficiaries of brdrs education projects. a cross-sectional survey was performed in two districts of balochistan province, that includes, killa saifullah and pishin. district killa saifullah has three tehsils and pishin has four tehsils respectively. for the collection of information in the study, two union councils were randomly selected from killa saifullah district and three union councils from pishin district were randomly selected respectively. by using proportionate random sampling technique, 400 respondents were selected out of the total beneficieries who were benefiting from the health and education activities of brdrs educational projects in the project area. from the proportionate selection of the beneficiries in killa saifullah, uc kan mehterzai sample consits of 38 male and 42 female respondents while 33 male and 34 female from uc kanchoghi. in district pishin, there were 36 male and 50 female were selected from uc bostanand and uc murgha consists of 39 male and 35 female while 60 male and 33 female were selected from uc khanozai for the study. table 1: proportionate random distribution of respondents in union councils of district killa saifullah and district pishin name of union council male female total kan mehterzai 38 42 80 kanchoghi 33 34 67 bostan 36 50 86 murgha 39 35 74 khanozai 60 33 93 total 206 194 400 keeping in view the goals and objectives of the study, a questionnaire as a tool for the collection of data was designed which include socio-demographic profile and the questions on the provision of brdrs education delivery services in the respondents’ area and types of education initiatives implemented by the said organization in their respective villages. the same was approved later from the departmental doctoral advisory committee, international islamic university after minor review of economics and development studies, vol. 6 (3) 2020, 567573 570 corrections. the data was analyzed by employing univariate and bivariate statistical techniques through statistical package for social sciences (spss). 4. results table 1 reports the socio-demographic characteristics of the respondents. the result shows that 206 (52%) respondents were male while 194 (48%) of the respondents were female. additionally, a significant majority of the respondents 325 (83%) were married and 50 (12%) of the respondents were unmarried followed by 11(3%) were divorced, 14 (4%) were widowed respectively. the result illustrated that overwhelming majority 382 (95%) of the respondents were living in joint family system. furthermore, there were 34 % of the respondents who fall within the category of “no education” and 34% who were in the category of 6th-10th level of educational qualification while a significant minority (5%) of the total sampled population was remained in the categories of 15-16 and 13-14 level of education respectively. the table indicates that 29% of the respondents were reported their profession as housewives and slightly more than one fourth of the sampled population were farmers. additionally, more than two thirds (62%) of the sample had monthly family income within the range of rs. 10001 to rs. 30000, and 24.3 % of the respondent’s family income was rs. 30001 to rs. 50000. table 2: socio-demographic characteristics of beneficiaries selected variables category frequency percent (%) gender male 206 52 female 194 48 marital status un-married 50 12 married 325 81 divorce 11 3 widowed 14 4 family type joint 382 95 nuclear 14 4 extended 4 1 level of education no education 137 34 1-5 47 12 6-10 137 34 11-12 41 11 13-14 17 4 15-16 21 5 profession govt servant 48 12 private service 32 8 business 36 9 farmer 104 26 review of economics and development studies, vol. 6 (3) 2020, 567573 571 table 3 states the bi-variate associations between brdrs projects in the education sector and level of satisfaction among the respondents. in response to arrange students exposure visits by brdrs in the area, 63% of the sample were reported as ‘always’ while 59.1% marked ‘sometimes’ and they were highly satisfied with the statement. moreover, 48.9 % in area were highly satisfied and 12.8 % of them were not satisfied at all with statement. the association between arranging students’ exposure visits and level of satisfaction with educational projects was statistically significant (χ²= 9.570, p.value= 0.048). the table further illustrates that 32 (82.1%) of the respondent were marked as ‘always’ while keeping them highly satisfied to conduct the speech competitions. moreover, slightly more than half (51.6%) of the respondents were marked as sometimes while highly satisfied with the statement and 39% were marked as sometimes and they were satisfied with the statement. the association between conducted speech competition and level of satisfaction with educational projects was statistically significant (χ²= 13.827, p.value =0.008). the results illustrate that majority of the respondents (62.2 %) were reported as ‘always’ with marking of highly satisfaction with the statement, while slightly less than one third (31.8 %) were reported as never and satisfied regarding the statement. additionally, 57 % of the respondents reported as sometimes with highly satisfaction with the arrangements of enrollment campaigns while 63.9% were reported as satisfied within marking of sometimes category. additionally, there were 46.5% of the respondents were marked ‘never’ within the response category of highly satisfied and 38.1% satisfied while 15.5% were having no satisfaction respectively. the association between arranging enrollment campaigns and level of satisfaction with educational projects was statistically significant (19.990, p.value =0.001). the results describes that significant majority (72.1%) of the respondents were reported as ‘always’ with highly satisfaction with the service delivery as renovations of the schools. moreover, 56.3% were marked as sometimes with highly satisfaction with the deliver services while 45% of the respondents were reported as ‘never’ with highly satisfied category. the association between renovations of schools and level of satisfaction with educational projects was statistically significant (χ²= 21.666, p.value =0.001).the results highlighted that majority of the respondents (72.9 %) were reported as ‘always’ and highly satisfied with the statement of having great follow up mechanism in brdrs. in addition, 55% of the respondents were reported as sometimes with highly satisfaction category while 39.8% and 5.2% marked as satisfied and not satisfied category respectively. furthermore, 45.3 % of the respondents reported as ‘always’ with highly satisfied category while 37.4 % were marked as ‘satisfied’. the association between follow up mechanism to schools and level of satisfaction with educational projects was statistically significant (χ²= 27.784, p.value=0.001). skilled worker 32 8 un-skilled worker 12 3 livestock rearing 18 5 house wife 118 29 family income rs. up to 10000 8 2 rs. 10001-30000 248 62 rs. 30001-50000 97 24 rs. 50001-70000 22 6 > rs. 70000 25 6 review of economics and development studies, vol. 6 (3) 2020, 567573 572 5. conclusion and discussion the aim of the study was to explore the role of brdrs (ngo) through educational projects to empower the community in balochistan. in this study, it was found that the association in education and community development projects which play a vital role in community development. the results of the study were in line with mora et al. (2020), where education seems to have an important role for contributing and developing suitable and appropriate competencies for the sustainable development in the community at large. another study (brude, 2004) focusing the ingo’s best practices in educational projects were aligned with current research, where non-governmental organization could potentially serve in the education sector to promote or develop the community at large at national and international level. however, the role of ngo’s may not be negated in empowering community for the sustainable development process in the society (nikkhah and redzuan, 2010; hibbard and tang, 2004). the paper illustrated the significance of various brdrs educational projects in achieving community development. these projects ultimately trigger to develop the capacities of the individuals to improve the level of the quality of their lives. philosophical notions of community development lies on the community itself with assistance from ngo’s such as in the case of brdrs to discover the potentials and mobilization of the community through educational projects. brdrs through these programs and functions help to empower the community at large and finally contribute towards sustainable community development. the study recommends that government should also be involved to improve the policy and make a supportive and conducive environment through partnerships in the education sector with ngos for the sustainable community development. references arif. s.d, (2013). annual report balochistan rural development & research society (7). boström, m., & hallström, k. t. (2010). ngo power in global social and environmental standardsetting. global environmental politics, 10(4), 36-59. burde, d. (2004). international ngos and best practices: the art of educational lending. the global politics of educational borrowing and lending, 173-187. chowdhury, s. r., islam, m. r., & abd wahab, h. (2020). challenges of faith-based ngo intervention in community development: a case study in bangladesh. global social welfare, 1-13. ehigiamusoe, g. (1998). understanding ngos. lapo development centre. hibbard, m., & chun tang, c. (2004). sustainable community development: a social approach from vietnam. community development, 35(2), 87-104. khan, s. r. (1999). government, communities and non-governmental organizations in social sector delivery: collective action in rural drinking water supply. ashgate publishing ltd. kurosaki, t. (2006). community and economic development in pakistan: the case of citizen community boards in hafizabad and a japanese perspectives. the pakistan development review, 575-585. lewis, d., & kanji, n. (2009). non-governmental organizations and development. routledge. lin, h. cross-sector alliances for corporate social responsibility: partner heterogeneity moderates environmental strategy outcomes. j. bus. ethics 2012, 12, 13–25. macdonald, a., clarke, a., huang, l., roseland, m., & seitanidi, m. m. (2018). multi stakeholder partnerships (sdg# 17) as a means of achieving sustainable communities and cities (sdg# 11). in handbook of sustainability science and research (pp. 193-209). springer, cham. mora, h., pujol-lópez, f. a., mendoza-tello, j. c., & morales-morales, m. r. (2020). an education-based approach for enabling the sustainable development gear. computers in human behavior, 107, 105775. review of economics and development studies, vol. 6 (3) 2020, 567573 573 nikkhah, h. a., & redzuan, m. r. (2010). the role of ngos in promoting empowerment for sustainable community development. journal of human ecology, 30(2), 85-92. yan, x., lin, h., & clarke, a. (2018). cross-sector social partnerships for social change: the roles of non-governmental organizations. sustainability, 10(2), 558. review of economics and development studies, vol. 6 (3) 2020, 661674 661 energy use and human health nexus in pakistan noreen safdar a , hala asif b , fatima farooq c a assistant professor, department of economics, the women university multan, pakistan e-mail: noreen.safdar@wum.edu.pk b m.phil. scholar department of economics, the women university multan, pakistan c assistant professor, school of economics, bahauddin zakariya university multan, pakistan e-mail: fatimafarooq@bzu.edu.pk article details abstract history: accepted 18 july 2020 available online 30 september 2020 this study finds the impact of coal energy (a kind of non-renewable energy), renewable energy, greenhouse gases, industrialization, population growth and environmental degradation and on the health of human beings, with the key emphasis on tuberculosis incidence in pakistan for the time span 1986 to 2017. for a deep practical insight, the study develops a system auto-regressive distributed lag (ardl) model. the results report that with an increase in the usage of coal energy, the incidence of tuberculosis also increases. in addition, the results also highlight that by turning to the renewable energy (energy by sun, wind and air) the health could be improved as the renewable energy is environment friendly and it does not generate greenhouse gases and it also does not cause environmental degradation. so, renewable energy serves as helping factor to reduce the occurrence of tuberculosis in pakistan. moreover, the renewable energy is serving to lessen the greenhouse gas emission and it also serves to lessen the environmental degradation in pakistan. on the contrast, the coal energy is causing environmental degradation by increasing the amount of greenhouse gas emissions in the atmosphere which in turn causes tuberculosis in islamic republic of pakistan. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: energy use, renewable energy, coal energy, human health, tuberculosis jel classification: o13, p36 doi: 10.47067/reads.v6i3.254 corresponding author’s email address: fatimafarooq@bzu.edu.pk 1. introduction energy use is vital for the development of any country as it provides the base for development in all sectors of economy. yet the benefits of using energy in all economies may differ because there is difference in usage of energy and types of energy that are used also may differ among countries. mostly developed and well-developed countries use environment friendly energy sources, these are; renewable energy sources and thus they generate very low air pollution as compared to developing as well as poor countries where cheap and non-renewable energy sources are used for production of energy. review of economics and development studies, vol. 6 (3) 2020, 661674 662 increase in energy generation is beneficial for development of an economy as it guarantees economic growth and its effect on well-being of residents of a country, on environment and on the health of people is positive. but the non-renewable energy sources like coal, animal dung, wood, fossil fuels and some others may have positive relation with economic growth but has negative health impacts. although it is seen that more developed countries used environment friendly energy sources as compared to developing or less developed countries. greenhouse gas is the combination of carbon dioxide gas (co2), nitrous oxide (no2), sulphur dioxide (so2) and other energy related emissions like methane etc. the non-renewable energy sources generate the greenhouse gas (ghg) emissions which are the main cause of environmental degradation and air pollution which in turns causes mortality from respiratory, heart and other serious diseases like cancer and tuberculosis etc. as the use of energy is increasing day by day because the population is increasing so the demand for energy has increased almost 10 folds in previous some decades. and as pakistan is a developing country, there is also an increase in industrialization so, the demand for energy can never be avoided. demand for energy is snowballing at the increasing rate so, with the intention of meet the increasing demand of energy the supply of energy is also growing. the renewable energy use is growing in industrial sector, but the use of non-renewable energy is also growing at the increasing rate. the air pollution is a great challenge for developed as well as developing world now a-days. the textile mills also contribute to air pollution as presence of particulate matters air pollutants are observed in textile mills areas. as the who health report, the particulate matters air pollutants in air has increased 5 percent from the year 2008 to 2015 in host country due to increase in traffic on roads and due to industrialization. because of small size of these particles they entered easily in to lungs through air and causes respiratory diseases like asthma, lung cancer and other chronic and heart diseases (niaz 2016). in host country both kind of energy is used. renewable energy comprises of high share in energy generation and in energy consumption also, but the share of non-renewable energy can also not be avoided. in our rural areas most of population is still engaged in conventional methods to get energy, they use biomass to get energy for heating and cooking. the harmful gases and substances that emits from biomass combustion are damaging environment and hence they have clearly negative health outcomes in the form of respiratory illness. in host country industrialization is increasing so, the use of energy is also increasing in this regard. the population is also increasing and mostly the population in rural areas is increasing at high rate so, the use of non-renewable energy specially use of wood and coal is swelling which in turn causes an increase in greenhouse gas emissions in host country and it contributes to air pollution and causes lung and respiratory illness. 2. literature review kim et al. (2011) investigated the correlation between diseases and air pollution due to the usage of biomass fuels to get energy. at that time early one-third of total population in the world was using biomass to get energy domestically. the dependent variables like carbon monoxides, nitrogen dioxides, particulate matters etc. and independent variables like tuberculosis, pneumonia, respiratory diseases, chronic pulmonary obstructive disease, lung cancer, asthma and low birth weights etc. were review of economics and development studies, vol. 6 (3) 2020, 661674 663 used in this study. the results of study demonstrated that usage of biomass as a fuel was proved dangerous to human health of not only for children but also for adults and it was the cause of mortality and morbidity. janjua et al. (2012) examined the use of biomass fuel and acute respiratory illness among children less than 5 years in rural pakistan for the year 2007. poisson regression model was used to access the connotation between the usage of biomass fuel and acute respiratory infection among children. the results indicated that the acute respiratory infection was presented among children who accompanied their mothers during cooking and where the biomass such as fossil fuels was used as cooking fuel. vieux et al. (2012) investigated the correlation between the greenhouse gas emissions and selfselected individual’s diet. they took the data of france for analysis in this study. the linear regression model was being used for analysis. the results showed that if food items were substituted like the meat was replaced with vegetables and fruits, the health benefits could be gained but it is not necessary that food associated greenhouse gas emission would be decreased. scarborogh et al. (2012) investigated the health consequence of energy that was used as cooking fuel for cooking mostly meat and dairy products in united kingdom. the main reason of greenhouse emissions in united kingdom was cooking system as it contributed one-fifth of greenhouse gas emissions, these emissions in turn caused environmental pollution and caused serious ill health effects. the results predicted that there was positive impact of these emissions on human health and these were the cause of mortality from cardiovascular disease and cancer. pop and dockery (2012) explored the impact of fine particulate air pollution on human health. auto regressive distributed lag model ardl was being used in this analysis to evaluate longer scale time series data. the results revealed that the adverse health effects were caused by the exposure concentration of air pollutants and also on exposure length of these pollutants. there were also some suggestions to improve air quality like there should be a reduction in energy use. macdiarmid et al. (2012) estimated the relationship between the greenhouse gas and healthy diet for united kingdom. the purpose of this study was to estimate the improvement in food choices by reducing the greenhouse gases, and the food must be balanced according to diet requirements of health. the linear programming optimization model was being used for estimation. the results showed that the sustainable diet could be attained by lowering greenhouse gas emissions and by not eliminating meat and dairy products and by not increasing the cost of consumers on these products. rao et al. (2013) investigated the relation between the better air and health. the study addressed the policies on clean fuels, air pollution and climate change and impacts of these policies on human health. this review derived much of information from the global energy assessment. the results showed that air pollution was the main cause of burden of disease. there are some policy measures that suggested that there should be reduction in both indoor and outdoor air pollution and if there will be reduction in the outdoor as well as indoor air pollution, so the health level will be improved. jensen et al. (2013) estimated the health co-benefits of decreases in greenhouse gas emissions strategies and the study suggested some targets to lessen greenhouse gas emissions till 2030. the results revealed that if there were reductions in greenhouse gas emissions there were improvement in review of economics and development studies, vol. 6 (3) 2020, 661674 664 health standard. the results also suggested that the urban transport strategy and food and agriculture strategies must be adopted to lessen greenhouse gas emissions and to bring health benefits worldwide. smith et al. (2014) investigated the reduction strategies of short-lived greenhouse pollutants and their impacts on public health. black carbon, ozone and sulfates are known as short-lived greenhouse pollutants and they emitted widely from fuel. the results revealed that, all greenhouse short-lived pollutants had negative health effects either they were used for warming or cooling, and other long-lived pollutants had little direct effects on human health. so, the policy measures suggested that there should be some strategies to minimize the use of short-lived greenhouse pollutants so that the health benefits could be gain. amanat et al. (2015) estimated the rising level of particulate matter2.5 from different cooking fuels in rural areas of punjab, pakistan. this study used the data of a small rural area allah abad of kasur district, there three residential houses were selected with different types of solid fuels usage. the results showed that using wood as a fuel for cooking emitted 34 times more particulate matters as recommended by world health organization who. it is recommended that cleaner fuel should be used because they generated less particulate matters as compared to biomass fuels. niaz et al. (2016) investigated the particulate matters pm10 and pm2.5 and they compared both by taking the data of two different countries china and pakistan. both the cities were known as hub to textile so there the energy consumption was very high, particulate matters in air increased as the development in textile. the results revealed that both the pm1.0 and pm2.5 were high in winter season as compared to summer season, and the variations in pm level were higher in dalian as compared to faisalabad due to more energy use. hanif (2018) estimated the habits of energy usage by humans and its impacts on human health in sub-saharan africa for the time span from 1995 to 2015. the generalized method of moments (gmm) was used by author for analysis of data. the results of this study declared that the use of both solid fuels and fossil fuels for cooking, heating and lightening etc. in sub-saharan africa caused tuberculosis among human beings and also these fuels reduced life expectancy as these caused mortality. on the other hand, the results showed that by using renewable energy sources like wind, air and water the positive health outcomes was gained as the renewable energy sources was not the cause of carbon and another greenhouse gas emission. nguyen et al. (2018) discovered the effect of carbon dioxide emissions on economic growth in the case of vietnam from the period of 1986 to 2015. autoregressive distributed lag model was used to estimate carbon dioxide emissions, gross domestic product per capita growth and net official development assistance. whereas, carbon dioxide emission was used as a dependent and gross domestic product was used as an independent variable. the finding showed that air pollution and growth level had a significant relationship in vietnam. furthermore, this study also concluded that carbon dioxide emissions had a negative effect on economic growth in the long run. safdar et al. (2019) investigated the impact of energy consumption, environmental degradation on employment in 50 developing countries over the period of 1990 to 2016. by using pmg method, the study came to conclusion that energy use and environmental degradation is great threat to human health and quality of life. the study suggested that these countries should adopt renewable energy sources to meet their energy demand. the dependence on renewable energy sources will enhance growth and other economic opportunities without affecting human health and environment. review of economics and development studies, vol. 6 (3) 2020, 661674 665 3. data and methodological issues this section describes the variables that are being used to find out the impacts of energy use on human health in pakistan. on the basis of theoretical and empirical significance, the variables are chosen. the tuberculosis is used as dependent variable and renewable energy, coal consumption, greenhouse gas, industrialization, population and environmental degradation are the explanatory variables. a) time period: the time series data of pakistan for the time period 1975-2017 is used to check the connection among dependent and explanatory variables. b) data sources: this study is based on the secondary type of data and the data is gathered from wdi (world development indicator 2017), who (world health organization) and economic survey of pakistan. c) model specification: the study shows the impacts of energy use on human health. model specification is as follows. tb = f (eng, clc, ghg, ind, pop, env) here, tuberculosis is the function of renewable energy use, coal consumption, greenhouse gas, industrialization, population and environmental degradation. ltb = β0 + β1 (leng) + β2 (lclc) +β3 (lghg) + β4 (lind) + β5 (lpop) + β6 (lenv) + ε whereas, ltb= log of tuberculosis leng= log of renewable energy use lclc= log of coal consumption lghg= log of greenhouse gas lind: log of industrialization lpop: log of population lenv: log of environmental degradation here β’s are the elasticities. keeping in view of above model we evaluated the model to satisfy the hypothesis of study that is; the coal energy use is positively related to tuberculosis and renewable energy use is negatively related to tuberculosis incidence. industrialization, greenhouse gas, industrialization and environmental degradation are positively related to tuberculosis incidence and negatively or positively related to tuberculosis. 4. results and discussion this section gives the unit root and ardl estimates of the model. the results are as follows: 4.1 unit root test: to check the data is stationary or not we use panel unit root test presented by dickey and fuller. the result obtained by this test is as follows. review of economics and development studies, vol. 6 (3) 2020, 661674 666 table 1: unit root results: variables level 1 st difference results intercept trend and intercept intercept trend and intercept conclusion tb --------2.960 (0.0001) ----i (1) eng -------2.960 (0.002) ----i (1) clc --------2.992 (0.0001) ----i (1) env -2.9604 (0.0002) ------------i (0) ind ---------2.9678 (0.0000) ----i (1) ghg ---------2.9639 (0.0000) ----i (1) pop ---------2.9639 (0.0000) ----i (1) source: estimated by author using e-views 9. the results show the mixed order of integration so we used auto regressive lag model ardl to find the relationship among variables we used in our model. 4.2 ardl estimates of model: the results of unit root showed the mix order of integration, so ardl is suitable proposed technique to estimate long run and short association among variables. before going to discuss the ardl results, it is necessary to find the long run assessment of association between series of variables, the bound test estimation is demonstrated for this purpose. table 2: bound testing 4.2.1 ardl long run & short run estimates: table 3 gives the long run and short run estimates of ardl are given in f-statistics 3.922196 at 5% significance level at 10% significance level lower bound upper bound lower bound upper bound 2.45 3.61 2.12 3.23 review of economics and development studies, vol. 6 (3) 2020, 661674 667 table 3: ardl estimates of model: ardl long run results variables coefficient standard error t-statistics probability eng -1.624645 0.816680 0.912637 0.07 clc 0.109996 0.049348 0.912637 0.04 ghg 1.068780 0.378509 2.823662 0.01 ind 0.582122 0.264541 2.200499 0.05 pop 2.201759 0.912637 -2.412525 0.03 env 0.219598 0.912637 0.451768 0.06 short run results variables coefficients std-error t-statistics probability d(tb(-1)) -1.013373 0.299638 -3.381995 0.00 d(tb(-2)) -0.537085 0.213343 -2.517473 0.02 d(eng) -0.120812 0.304756 -0.396424 0.69 d(clc) -0.054587 0.021322 -2.560082 0.02 d(ghg) -0.893455 0.249706 -3.578027 0.00 d(ind) -0.032171 0.053762 -0.598402 0.56 d(ind(-1)) 0.044297 0.046694 0.948646 0.36 d(pop) 4.918000 1.420144 3.463029 0.00 d(pop(-1)) 1.524614 1.564190 0.974698 0.35 d(env) 0.227364 0.179348 1.267727 0.23 d(env(-1)) 0.486843 0.093286 5.218817 0.00 cointeq(-1) -0.496263 0.217480 2.281883 0.04 we take tuberculosis as a dependent variable that we used for the proxy of human health. renewable energy use has positive and significant relationship with tuberculosis; a respiratory disease. the coefficient value of renewable energy is positive and significant with tuberculosis at 10% level of significance. 1% increase in renewable energy consumption causes -1.62% reduction in tuberculosis incidence rate. our results accomplish that by using renewable energy like energy generated from wind, sun air etc. the health of human beings improves and respiratory illness like tuberculosis is reduced. our result is supported by the work of hanif (2018). the coal energy consumption has positive and significant relation with tuberculosis at 5% level of significance. the results show that 1% increase in the consumption of coal energy causes 0.11% increase in respiratory illness. our result indicates that biomass fuel like coal energy use is the cause of respiratory diseases. our result is supported by the studies for [hendryx et al. (2008); janjua et al (2012) and hanif (2018)]. according to the world health organization’s report, the tuberculosis s caused by using biomass fuel who (2006). greenhouse gas has positive and significant relation with tuberculosis which indicates that 1% increase in greenhouse gas causes 1.07% increase in tuberculosis. our result shows review of economics and development studies, vol. 6 (3) 2020, 661674 668 that by the increase in non-renewable energy consumption the greenhouse gas’s quantity in air also increase and greenhouse gas causes respiratory illness among humans. our results are supported by the contribution of [vieux et al. (2012) and scarborough et al. (2012)]. industrialization has positive and significant relation with tuberculosis. the coefficient value of industrialization is 0.58 so it has statistically significant relationship with tuberculosis which means that 1% increase in industrialization causes of 0.58% increase in respiratory illness. our result shows that as the industrialization is increasing so, the use of energy in industry is also increasing which is the cause of air pollution and causes respiratory illness. our result is supported by the work of many studies. [yousufzai et al (2000); bang (2005); babalik (2011) and niaz et al. (2016)]. population has positive and significant relation with tuberculosis. the coefficient value of population has statistically significant relationship with tuberculosis which shows that 1% increase in population causes 2.20% increase in respiratory illness. as population of host country cause increase in the tuberculosis because it is a communicable disease which is causes by interaction of humans with each other. another reason is that as the population increases, the energy use also increases by same or more ratio, which is the cause of air pollution and environmental degradation which in turn causes respiratory diseases among human beings. our results are supported by numerous studies. [dowdy et al. (2013); hanif (2018)]. the environmental degradation has positive and significant relationship with tuberculosis. the coefficient value of environmental degradation is 0.21 which shows that environmental degradation has statistically significant relationship with tuberculosis and 1% increase in environmental degradation causes 0.21% increase in tuberculosis. our results states that as the energy use increases the environmental degradation increases which causes serious respiratory illness specially it is the cause of tuberculosis. our results are supported by the work of samet et al. (2000) and hanif (2018). the short run estimates of this model show that some variables like clc, ghg, pop and evd at lag are significant but signs are mixed. the coefficient value of coint-eq(-1) is -0.49 that which is negative and statistically significant which shows long run adjustment. 4.2.2 diagnostic analysis of the model: we estimate the serial correlation and heteroskedasticity of model. different methods are applied to check the heteroskedasticity and auto-correlation in the model; most widely hired methods are breushgodfrey correlation lm test and heteroskedasticity diagnostic test. table 4: auto correlation and heteroskedasticity diagnostics source: estimated by author using e-views 9. in this model, the f-statistics value of serial correlation is 1.8947 and the probability is 0.2057 which is statistically insignificant so, we reject our null hypothesis that there is serial correlation exists and we accept our alternative hypothesis that there no serial correlation in this model. the f-statistics name of test f-statistics value probability breush-godfrey correlation lm test 1.894737 0.2057 heteroskedasticity 0.907657 0.5847 review of economics and development studies, vol. 6 (3) 2020, 661674 669 value of heteroskedasticity is 0.907657 and probability is 0.5847 which is insignificant, we reject our null hypothesis and accept our alternative hypothesis that is there is no heteroskedasticity exists in our model. 4.3 causality test: granger causality test is used to explain the casual link among tuberculosis incidence and selected independent variables. the causality results identify that there is no causality between tb and renewable energy use, clc, ind and pop while there is unidirectional causality between tb and ghg, according to our results the unidirectional causality between tb and ghg is noticed. according to our results, there is unidirectional causality between tb and evd. there exits unidirectional causality between pop and eng, ind and clc and pop and clc. there is bidirectional causality relation among pop and ind. the unidirectional causality between env and pop, and between env and ind is also found. (see table a.1 in appendix). 5. conclusion and policy implications: the principle aim of the given research is to notice the influence of energy use on the human health. for this purpose, the secondary data of pakistan is taken from different sources e.g. wdi, who and economic survey of pakistan from the time span 1996-2017. this study documented renewable and non-renewable energy usage by both industrial and household sector and it also discussed the effects of both kinds of energy on the health of humans. energy gained by renewable energy sources like sun, wind and air provides no harms to human health as it does not contribute to greenhouse gas emissions. but the energy gained by non-renewable energy sources especially by using coal, is harmful for the environment as well as for the health of residents of host country. in host country, most of the population resides in rural areas and they fulfill most of their energy need by burning of coal. it is true that in host country both kinds of energy sources are being employed to fulfill the need of energy so both kinds of energy are analyzed in this study. and it is evident by many studies that coal generated pollutants can travel very quickly as compared to other air pollutants. tuberculosis is one of the respiratory diseases; it is proved from previous studies that coal use is the cause of respiratory diseases. coal energy that is used by households or industrial sector both generates the greenhouse gases and it causes the huge amount of air pollutants that is the cause of tuberculosis among residents of that areas. our results are supported by (janjua et al., 2008). in host country the renewable energy is also used by residents and it is also consumed by industrial sector. in the analysis we found that there is a negative relation between renewable energy use and tuberculosis, by the usage of renewable energy sources to get energy the respiratory health of people could not be damaged. our result is supported by the contributions of hanif (2018). 6. policy recommendations: here are some predictions that we made after analyzing the current situation of the host country. some of these prophecies are as follows.  analyzing the last year’s estimates, the coal use will be increase in host country, as in host country the coal power plant is also constructed in sahiwal in 2017.  although the cheapest source of energy in host country is coal. so, the coal use will also increase as mostly the population is poor and there is also no close substitute that is also as cheap as coal. review of economics and development studies, vol. 6 (3) 2020, 661674 670  there is a very huge increase in the amount of greenhouse gas emissions in host country from 1990 to onwards. now the greatest source of greenhouse gas emissions is the energy sector. so as the population is increasing at a rapid rate so that the energy use will also increase, greenhouse gas emissions will also increase.  as the demand for coal energy will increase the greenhouse gas emissions will also generates to large quantity that will damage the environment and these emissions will cause the respiratory illness like tuberculosis now here are some policy measures that should be beneficial for policy makers to make policies that may prove helpful to reduce the health damage caused by energy usage. some of these recommendations are as follows.  we should turn to renewable energy sources from non-renewable energy sources as the health cost of non-renewable energy is very high.  the environment friendly energy generation techniques must be adopted to reduce the air pollution and greenhouse gas emissions.  to improve the health conditions of people living in rural areas the govt. should provide cheap and renewable energy to them, this step will be beneficial for rural population if they turn to renewable energy from biomass combustion.  in industrial sector the access to renewable energy should be cheaper so that this sector could move to renewable energy and the greenhouse gas emissions could be decreased.  it is endorsed that the best understanding or fuel selection to get energy should be developed among all energy consuming sectors, so that they could move to environment friendly energy sources and the burden of disease could be minimized.  it is recommended that the access to renewable energy should be cheaper than any nonrenewable energy source so that urban as well as rural population could gain its benefits and the burden of disease could be lessened.  it is suggested to improve the ventilation quality, it will be beneficial for the improvement of indoor air quality. references bui, x. t., nguyen, t. t., nguyen, d. d., & dao, t. s. (2018). effects of nutrient ratios and carbon dioxide bio-sequestration on biomass growth of chlorella sp. in bubble column photobioreactor. journal of environmental management, 219, 1-8. hanif, i. (2018). energy consumption habits and human health nexus in sub-saharan africa. environmental science and pollution research, 25(22), 21701-21712. janjua, n. z., mahmood, b., dharma, v. k., sathiakumar, n., & khan, m. i. (2012). use of biomass fuel and acute respiratory infections in rural pakistan. public health, 126(10), 855-862. jensen, h. t., keogh-brown, m. r., smith, r. d., chalabi, z., dangour, a. d., davies, m., ... & hamilton, i. (2013). the importance of health co-benefits in macroeconomic assessments of uk greenhouse gas emission reduction strategies. climatic change, 121(2), 223-237. macdiarmid, j. i., kyle, j., horgan, g. w., loe, j., fyfe, c., johnstone, a., & mcneill, g. (2012). sustainable diets for the future: can we contribute to reducing greenhouse gas emissions by eating a healthy diet? the american journal of clinical nutrition, 96(3), 632-639. nasar, z. a., amant, h., ali, z., sidra, s., & colbeck, i. (2015, june). pm2. 5 arising from different cooking fuels in rural residential houses. pakistan agricultural scientists forum. niaz, y., zhou, j., nasir, a., iqbal, m., & dong, b. (2016). comparative study of particulate matter (pm 10 and pm 2.5) in dalian-china and faisalabad-pakistan. pakistan journal of agricultural sciences, 53(1). review of economics and development studies, vol. 6 (3) 2020, 661674 671 pope iii, c. a., & dockery, d. w. (2012). health effects of fine particulate air pollution: lines that connect. journal of the air & waste management association, 56(6), 709-742. rao, s., pachauri, s., dentener, f., kinney, p., klimont, z., riahi, k., & schoepp, w. (2013). better air for better health: forging synergies in policies for energy access, climate change and air pollution. global environmental change, 23(5), 1122-1130. safdar, n., chaudhry, i. s., & chaudhry, m. o. (2019). energy consumption, environmental degradation and economic growth in developing countries. pakistan journal of social sciences (pjss), 39(2). scarborough, p., allender, s., clarke, d., wickramasinghe, k., & rayner, m. (2012). modelling the health impact of environmentally sustainable dietary scenarios in the uk. european journal of clinical nutrition, 66(6), 710. smith, k. r., jerrett, m., anderson, h. r., burnett, r. t., stone, v., derwent, r., ... & pope iii, c. a. (2014). public health benefits of strategies to reduce greenhouse-gas emissions: health implications of short-lived greenhouse pollutants. the lancet, 374(9707), 2091-2103. vieux, f., darmon, n., touazi, d., & soler, l. g. (2012). greenhouse gas emissions of self-selected individual diets in france: changing the diet structure or consuming less? ecological economics, 75, 91-101. review of economics and development studies, vol. 6 (3) 2020, 661674 672 appendix a.1 granger causality results null hypothesis: obs f-statistic prob. eng does not granger cause tb 30 2.12872 0.1401 tb does not granger cause eng 0.74227 0.4862 clc does not granger cause tb 30 0.01111 0.9890 tb does not granger cause clc 1.33539 0.2812 ind does not granger cause tb 30 0.00039 0.9996 tb does not granger cause ind 1.72962 0.1979 pop does not granger cause tb 30 0.41507 0.6648 tb does not granger cause pop 0.44477 0.6459 ghg does not granger cause tb 30 1.09928 0.3487 tb does not granger cause ghg 2.76850 0.0820 env does not granger cause tb 30 1.53149 0.2358 tb does not granger cause env 2.58731 0.0952 clc does not granger cause eng 30 0.57627 0.5693 eng does not granger cause clc 1.87103 0.1749 ind does not granger cause eng 30 0.13767 0.8720 eng does not granger cause ind 3.66298 0.0403 pop does not granger cause eng 30 0.02154 0.9787 eng does not granger cause pop 3.80675 0.0360 ghg does not granger cause eng 30 23.3468 2.e-06 eng does not granger cause ghg 2.06832 0.1475 env does not granger cause eng 30 0.68889 0.5114 eng does not granger cause env 0.17064 0.8441 ind does not granger cause clc 30 4.92809 0.0157 clc does not granger cause ind 0.41992 0.6616 pop does not granger cause clc 30 2.73744 0.0841 review of economics and development studies, vol. 6 (3) 2020, 661674 673 clc does not granger cause pop 0.33919 0.7156 ghg does not granger cause clc 30 2.30695 0.1204 clc does not granger cause ghg 1.24653 0.3048 env does not granger cause clc 30 0.07030 0.9323 clc does not granger cause env 0.34358 0.7125 pop does not granger cause ind 30 2.65359 0.0901 ind does not granger cause pop 3.17206 0.0592 ghg does not granger cause ind 30 1.92888 0.1663 ind does not granger cause ghg 1.10014 0.3484 env does not granger cause ind 30 4.48062 0.0217 ind does not granger cause env 1.63063 0.2160 ghg does not granger cause pop 30 1.36827 0.2730 pop does not granger cause ghg 0.30596 0.7391 env does not granger cause pop 30 7.70537 0.0025 pop does not granger cause env 0.44930 0.6431 env does not granger cause ghg 30 2.24650 0.1267 ghg does not granger cause env 2.20827 0.1309 stability test: -10.0 -7.5 -5.0 -2.5 0.0 2.5 5.0 7.5 10.0 07 08 09 10 11 12 13 14 15 16 17 cusum 5% significance figure 1. plot of cumulative sum of recursive and residuals review of economics and development studies, vol. 6 (3) 2020, 661674 674 -0.4 0.0 0.4 0.8 1.2 1.6 07 08 09 10 11 12 13 14 15 16 17 cusum of squares 5% significance figure 2. plot of cumulative sum of recursive and residuals source: estimated by author using e-views 9. review of economics and development studies vol. 3, no 1, june 2017 39 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 1 june 2017 journal homepage: www.publishing.globalcsrc.org/reads foreign lending dilemma and poverty in pakistan, india and bhutan: a panel data analysis 1 mariam abbas soharwardi, 2 hina ali, 3 mujahid ali 1 the islamia university of bahawalpur, pakistan, mariam.abbas@iub.edu.pk 2 women university multan, pakistan, hinaali@wum.edu.pk 3 pakistan institute of development economics (pide), pakistan, mujahidali_16@pide.edu.pk article details abstract his tory revised format: may 2017 available online: june 2017 purpose: in developing countries foreign lending becomes a problem now a day instead of spend this lending for the development purposes. ultimately this problem causes poverty in these countries where usage of foreign lending is not in proper ways. the purpose of this study is to investigate the impact of imf and world bank lending on poverty in pakistan, india and bhutan. in this study corruption, gdp, unemployment, secondary enrolment, and external debt are used as independent variables and poverty headcount ratio as dependent variable. study finds out the relationship of corruption, unemployment and external debts with poverty and showing the positive relationship while secondary enrolment and gdp showing negative relation with poverty. moreover study finds out that lending of imf and world bank mostly causes poverty in these developing countries instead of reducing poverty because of corrupt government’s weak policies for the distribution of loans. it is examined that the countries with strong policies and non-corrupt government can take full advantage of these lending for poverty reduction. but it is noticed that the countries which are the members of imf structural adjustment programs are facing more poverty problems as compare to those countries which are not involved in these programs or even have less numbers of lending. those countries are much better than the countries involve in structural adjustment programs. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords poverty headcount ratio, imf, world bank, sap, dilemma. jel classification: c23, j64,p46 corresponding author’s email address: mariam.abbas@iub.edu.pk recommended citation: abbas, m. s., ali, h. & ali, m., (2017). foreign lending dilemma and poverty in pakistan, india and bhutan (panel data analysis). review of economics and development studies, 3(1) 39-46. doi: https://doi.org/10.26710/reads.v3i1.39 1. introduction there are different definition of poverty but usually poverty is defines as the condition of having insufficient resources or income. extreme form of poverty is a lack of basic human needs to sustain as useful and working efficiency such as adequate and nutritious food, clothing, and housing, clean water and health services. poverty is considering very serious disease in developing countries which is very dangerous like hiv/aids. due to poverty many deaths are occurs in poor countries every year. poverty actually caused by different reasons like in pakistan illiteracy is a main issue. a series of studies have demonstrated that people who live in regions where there are disparities in income have poorer average health status than people who live in more economically homogeneous regions. all standard http://www.publishing.globalcsrc.org/reads mailto:mariam.abbas@iub.edu.pk mailto:hinaali@wum.edu.pk mailto:mujahidali_16@pide.edu.pk mailto:mariam.abbas@iub.edu.pk https://doi.org/10.26710/reads.v3i1.39 review of economics and development studies vol. 3, no 1, june 2017 40 indicators of social and economic exclusion and differential shows that poverty is quite sever in pakistan. yet such definition are extremely insufficient to capture broader mean of poverty, which could include social justice , right, participation and equality, essentially all forms of social and economic exclusion, usually based on unequal material relation and their manifestation of inequality power. dilemma of imf and world bank lending in developing countries is concerned with the poverty reduction. the association between imf and world bank programs and poverty is a relatively new area of study. structural adjustment programs are programs which make it possible for countries to get a loan from the imf or the world bank. but these loans are related with some serious types of conditionality’s like some significant policy reforms which have to be complied with before getting the loan. in many developing countries such types of conditionality’s raised the issue to find out either the link between these lending’s and poverty is positive or negative. because in the beginning of the century, the international monetary fund (imf) had proclaimed that one of the purposes of its lending activities was to help low-income debtors achieve poverty reduction. now the question is what role does the imf play in exacerbating poverty and inequality in poor countries? the imf tried to justify its preferred creditor status and advance the idea that lowincome debtors had a temporary liquidity problem that could be solved through their financing arrangement that low-income debtors were not actually ruined. imf thinking on poverty and inequality, particularly among management, has evolved over the past twenty years. according to easterly (2001) number of adjustment loans from imf reduces the growth elasticity of poverty reduction. so that growth does reduce poverty but the study found no evidence for direct effect of these adjustment loans on growth. fischer (2000)found that adjustment lending’s are also associated with currency devaluation in developing countries there is negative association. using heckman regression this study found evidence that participating in imf lending programs is connected to higher poverty rates and more unequal distribution. and these results stayed strong after controlling for other economic variables. easterly (2003) attempted to overlook the repetition of adjustment lending to the same country study said that repetition changes the nature of the selection problem. radelet (2006) analyzed the role of imf in well performing low-income countries. according to him imf began to play very important role from 1970,s when many countries were facing many types of problems like high inflation low reserves and overvalued exchange rates but with the passage of time some well performing countries not much longer needed imf program. it argued that imf should use more non-funding programs in those countries and its role should be less dominant in overall conditionality so that those countries should be able to achieve their development goals that are outside the know-how of imf like private sector and agriculture bird (2004) attempted to provide more fundamental analysis of the imf funds involvement in growth and poverty reduction. although the imf presents itself as a monetary institution it plays an important role in providing support to the poor countries via its poverty reduction facility. granville and mallick (2005) attempted to analyze the link between the poverty reduction and the debt sustainability in imf and world bank in context of developing countries this study was based on uk development studies association annual conference. this study build a model on the basis of policy frameworks of imf to show how demand growth effect the potential rate of growth and the study also linked the consumption deprivation to the key variables of the structural adjustment programs. holden (2002) attempted to analyze the repositioning of imf during the 1970 – 2002 one integral part of the institution was the ‘international financial structure’ the main motive of that integral part was to insure the sustainable growth of underdeveloped countries by reducing the poverty in those countries which had applied for the loans of imf. korankye (2014) attempted to analyze the causes of poverty in africa .and study found the number of factors which were responsible for the poverty in africa for example limited employment, poor infrastructure, poor usage of resources, wars and unending conflicts, and major reason was the poor policies of world bank and imf. because of those poor policies the funds for africa were always remained in the hands of corrupt people which caused unequal distribution of resources and money. momani (2008) attempted to analyze the artificiality of imf in reducing poverty and inequality. study said that imf had claimed that one of its motives of its lending review of economics and development studies vol. 3, no 1, june 2017 41 programs was to reduce poverty and inequality. annand and kumar (2014) attempted to analyze the inclusive growth and poverty reduction in india. this study was based on the imf working paper. waqas and sarwar (2011) attempted to analyze the impact of education on poverty reduction. this study was based on the data of (hies) survey from 1998-1999.and study used the logistic regression technique to analyze the impact of education. study found that education and health endowments of the individuals were the necessary and important components of human capital which make them productive and raise their standard of living. 1.1 objective  to find out relationship between imf and world bank lending and poverty in developing countries  to find out imf and world bank lending dilemma related to poverty in developing countries  to suggest some policy recommendations 1.2 hypothesis h0: there is no association between poverty and imf and world bank lending in developing countries h1: there is association between poverty and imf and world bank lending in developing countries 1.3 significance of study this study is based on the panel analysis, before it single country studies have been done to find out the relationship of poverty and foreign lending. but in this study it is tried to find out the panel analysis. it’s a dilemma for developing countries to come out from the conditionality’s of borrowers. due to this strict conditionality it becomes harder for developing countries to reduce poverty according to there on desire. this study will contribute to know about the relationship between lending and poverty in pakistan, india and bhutan. on the basis of findings some policy recommendations are suggested. 2. data and methodology the study is based on the panel data and the data has been collected from “world bank”, “economic survey” and “imf” and data has been used since (1995-2014). 2.1 selection of variables study will complete different variables external debts, unemployment, secondary enrolment, gdp (per capita), and corruption as independent variables and poverty as dependent variable. 2.2 model specification to find out the relationship between imf and world bank lending and poverty reduction “poverty is taken as dependent variable and unemployment corruption, external debts, gdp, and secondary enrolment are as independent variables. for the regression “random effect model” is selected. empirical study is performed by using pc software of statistics e-view7.0 and stata. in this study the panel data of at least 15 years from 1995 to 2014 has been used. the model is. model poverty = f(gdp ,unemployment, secondary enrolment, corruption, external debt) dependent variable pov = poverty independent variable se= secondary enrolment gdp= gross domestic product (per capita) unemp= unemployment lending = external debts corruption= corruption index review of economics and development studies vol. 3, no 1, june 2017 42 2.3 random effect model the random effects model is a generalized linear model; if i is a group specific random disturbance with zero conditional mean and constant conditional variance,  2 , then cov[it,is| xi1,xi2,...,xit(i)] =  2 + 1(t = s) 2  t,s | i and  i. cov[it,js| xi1,xi2,...,xit(i)] = 0  t,s | i  j and  i and j. the random effects linear model can be estimated by two step, feasible gls. different combinations of the residual variances from the linear model with no effects, the group means regression and the dummy variables produce a variety of consistent estimators of the variance components. [see baltagi (1995).] thereafter, feasible gls is carried out by using the variance estimators to mimic the generalized linear regression of (yit i .iy ) on the same transformation of xit where i = 1 { 2 /[t(i) 2 +  2 ]} 1/2 . once again, the literature contains vast discussion of alternative estimation approaches and extensions of this model, including dynamic models [see, e.g., judson and owen (1999)], instrumental variables [arellano and bover (1995)], and gmm estimation [ahn and schmidt (1995). the primary virtue of the random effects model is its parsimony; it adds only a single parameter to the model. its major shortcoming is its failure to allow for the likely correlation of the latent effects with the included variables a fact which motivated the fixed effects approach in the first place. 2.4 random equation 𝑝𝑜𝑣 = 𝛼𝑖 + 𝛽1𝑙𝑒𝑛𝑑𝑖𝑛𝑔 + 𝛽2𝑆𝐸 + 𝛽3𝑢𝑛𝑒𝑚𝑝 + 𝛽4𝑐𝑜𝑟𝑟𝑢𝑝𝑡𝑖𝑜𝑛 + 𝛽5𝐺𝐷𝑃 + uit + εit where as β is the coefficient for the independent variables, pov=poverty head count ratio lending=external debt unemp=unemployment rate corruption=corruption index se=secondary school enrolment gdp=gross domestic product 2.5 panel unit root test checking stationary is necessary because during building models for time series the underlying stochastic process that generates the series must be invariant with respect to time. so the stationary of dependent variable poverty and independent variables, gdp, secondary enrolment, lending, unemployment, corruption are checked by applying the unit root test. testing for this in data conventionally precedes cointegration analysis. augmented dickey fller (adf) test is often used to determine degree of integration of variables. following table shows the results of adf test. stationery of all variables has been achieved at 1 st difference, this means all variables are integrated of order one (1) and stationary is achieved at none. review of economics and development studies vol. 3, no 1, june 2017 43 table 1: unit root test 3. results and discussion poverty headcount ratio is used as dependent variable. gdp, unemployment, secondary enrolment, external debt, and corruption are used as independent variable in this study the results of fixed random effect are given table 2. headcount ratio is use for the measurement of poverty which is dependent variable gdp, unemployment; secondary enrolment, external debt, and corruption are independent variable. the independent variables are affecting the dependent variable poverty headcount ratio. gdp and secondary enrolment are showing negative relationship with poverty .while other corruption; lending and unemployment are showing positive relationship. all variables are significant. validity of random effect model is checked by breusch and pagan lagrangian multiplier test and p value showed that random effect model is fit for this data. serial correlation is checked by pesaran's test of cross sectional independence and p value indicate that there is no serial correlation in this model. table 2: method: panel gls (period random effects) 4. conclusion poverty is the depressive topic in the developing economies. many of the institutions ngo’s and the government institutions are working for the elimination or decreasing the rate of the poverty the situation is getting worse and worse in developing countries behind this many reasons are involve. like week policies related to the use of loans by imf and world bank due to which whole money stays only in the hands of corrupt politician. and the loans becomes useless instead of welfare and development these loans become a burden at the countries and the people of that country these loans cause poverty variables t-statics at level prob value at levellevel t-statics at 1 st difference prob at first differecnce pov gdp corruption lending s.e unemp 3.52612 4.35999 0.77354 -1.62334 3.53364 -0.70338 0.9998 1.0000 0.7486 0.623 0.9998 0.2409 -2.36628 -1.68540 -7.66658 -3.92122 -2.41151 -4.18397 0.0090 0.0460 0.0000 0.0000 0.0075 0.0000 variables coefficient t-statistics prob value gdp se unemp lending corruption c 46.84761 -9.889908 2.437818 0.206920 2.113950 140.4042 -11.67588 -8.642901 3.226449 3.528211 1.498601 9.422812 0.0000 0.0000 0.0024 0.0010 0.0015 0.0000 pesaran's test of cross sectional independence 0.2271 breusch and pagan lagrangian multiplier test for random effects 0.000 review of economics and development studies vol. 3, no 1, june 2017 44 because when these loans got wasted and when the time comes of repayment of the loans then the government get another loan to reimburse the previous loan and this process keep on repeating itself every year and the loans which were taken for the development and prosperity of the country cause poverty problems in that country. moreover study concludes that poverty is the depressive topic in the developing economies. any of the ngo’s and the government institutions are working for the elimination or decreasing the rate of the poverty. imf always used to play a rhetoric role in poverty reduction many studies shows that the role imf is just artificial it actually does not play a prominent role in poverty reduction. while due to its lending many developing countries condition has become much worse due to week policies of both governments and the imf and world bank. but there is always an other side of the picture and the other side of the picture is that the lending’s by imf and world bank could be prove helpful in the development and poverty reduction of the country but only at one condition that the government should not be corrupt, policies for the consumption of loans should be better .so that the amount of loans may not stay in the hands of corrupt individuals. in this study unemployment, corruption, gdp, secondary enrolment and lending are taken as independent variables, gdp and secondary enrolment shows negative effect with poverty which means when gdp will increase poverty will decrease and same case is with the enrolment. while others unemployment, corruption, and lending have positive impact at poverty when any of these increase poverty will increase and when decrease poverty will decrease. because poverty rates are much lesser in those countries which are not involved in any program of imf or which have better policies and a non-corrupt government as compared to the countries which are involved in imf programs with week policies and corrupt government. 5. policy recommendation  policies of world bank and imf regarding to the loans must be improved.  individual and political corruption must be reduce so that amount of loans not stays in few hands.  enrolment of schools must be increase it will help a lot to reduce poverty.  with fare distribution of income employment opportunities will increase and unemployment will decrease and as well as poverty.  these loans should be used in development projects so that government repays the loan by the revenue of those projects instead of taking other loan for the repayment of first one. 6. limitation of study the developing countries which have been chosen for this study are belong to those group who are regular lenders of world bank and imf programs. pakistan india and bhutan. these three developing countries have almost same income group and similar social and economic conditions. and all these three countries are the lenders of world bank and imf. references easterly (2001) “the effect of imf and world bank programmers on poverty”. world institute for development economics research, united nation university, discussion paper 2001/102 doris. a “the effects of structural program on poverty and income distribution” easterly (2003) “what did structural adjustment adjust”. journal of development economics volume 76 . radlet.s (2006) “role of imf in well-performing low-income countries”. institute of international economics, washington, dc, working paper no 83 bird.g (2004) “growth poverty and the imf”. journal of development economics, wiley interscience, university of survey, guildford mubarak. a “role of foreign assistance in economic development of pakistan”. international conference of applied economics (2008). granville & mallic (2005)”how to link poverty reduction and debt sustainability in imf world bank review of economics and development studies vol. 3, no 1, june 2017 45 models”. center of business management, university of london, department of economics, burnside & dollar (1998)”aid, incentive regime and poverty reduction”. the world bank development research group macroeconomics and growth. holden.c (2002)”imf initiatives to reduce poverty: social marketing to make globalization work better for all”. cjbe 5th annual conference (2002), saint joseph university. korankye.a”causes of poverty in africa: a review literature”. american international journal of social science vol 3 (2014). momani .b” imf rhetoric on reducing poverty and inequality”. world poverty institute and cigi workshop on global governance, poverty, and inequality‘ 6-8 june 2008. annad and kumar (2014)”india: defining and explaining the inclusive growth and poverty reduction”. imf working paper, asia and pacific department 2014. waqas and sarwar(2011)”impact of education on poverty reduction”. mpra paper no 31826 2011. review of economics and development studies vol. 3, no 1, june 2017 46 review of economics and development studies, vol. 6 (2) 2020, 447-459 447 covid-19 pandemic and pakistan economy: a preliminary survey a nabila asghar, b maryam batool, c fatima farooq, d hafeez ur rehman a assistant professor, department of economics and business administration, division of arts and social sciences, university of education lahore (pakistan). email: nabeela.asghar@ue.edu.pk. b phd scholar, department of economics university of the punjab lahore (pakistan). email: maryam.pu16@gmail.com. c assistant professor, school of economics bzu multan (pakistan). email: fartimafarooq@bzu.edu.pk. d professor/chairman, department of economics (sbe) university of management and technology lahore (pakistan). email: hafeez.rehman@umt.edu.pk. article details abstract history: accepted 22 may 2020 available online 15 june 2020 the impact of pandemic covid-19 appears to be quite uncertain across globe. the nations are trying to overcome its impact on their economies. it has affected the production, distribution and life style. coronavirus pandemic has taken more than 5 lacs lives globally and paralysed the global economy. the developing countries like pakistan expect to face substantial economic set back from this situation. this study analyses the impact of covid-19 pandemic on pakistan economy through observing the relationship between incidence of cases and number of tests conducted. furthermore, it examines the impact of the demand-side and supply-side shocks due to covid-19 pandemic on pakistan economy. on supply side, this pandemic has halted the domestic and international supply chain, causing a shortage of inputs and necessities. on demandside, decreased domestic and international demand have resulted in massive layoffs and poverty scares. government and state bank of pakistan have announced different relief packages for controlling the situation but due to poor health infrastructure and lack of social protection, the people remain vulnerable to medical and financial misery. these unprecedented circumstances call for immediate policy changes for saving millions of people from virus and poverty. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: covid-19, pandemic, pakistan economy jel classification: i19; e71 doi: 10.47067/reads.v6i2.222 corresponding author’s email address: nabeela.asghar@ue.edu.pk 1. introduction on 4 th january 2020, world health organization (who) first publicised the information about spread of a new pneumonia like disease in wuhan, china. after almost two months on 11 th march 2020, who declared this disease a global pandemic and named it as covid-19 pandemic. now the worldwide cases of covid-19 pandemic have crossed more than 10 million along with the death toll higher than 5 review of economics and development studies, vol. 6 (2) 2020, 447-459 448 lac. this widespread is due to the highly contagious nature of the virus. who estimates that the r0 (basic reproduction number) of coronavirus is between 2 to 2.5 which means that on average one infected person can infect 2 to 2.5 other persons. another reason behind this global widespread is the asymptomatic people. according to iceland’s lab testing, 50% of positive cases showed no symptom (john, 2020). currently, u.s. and european countries are most effected in terms of cases and deaths. usa alone has reported more than 125,000 deaths so far. all the countries of the world have been deploying different policy tools to control the outbreak and ‘flatten the curve’. these strategies to control virus includes social distancing, lockdown, the suspension of air travel and closure of boarders (thunström et al., 2020). however, the economic repercussions of such measures are not ordinary. it is estimated that the magnitude of the coming recession may be worst since the great depression of 1930s. the situation is even worse for the emerging and developing economies due to decrease in exports, remittances and international credit (hevia and neumeyer, 2020). pakistan is currently 12 th most affected nation according to the coronavirus tracker of johns hopkins university. pakistan has witnessed more than 213,000 cases so far, along with 4,395 deaths (government of pakistan coronavirus tracker). while the loss of precious lives is a tragedy but there is a massive financial fallout of this pandemic. in 2019, the gdp growth rate of pakistan was 3.3% and according to the projections of state bank of pakistan, even without coronavirus, it was expected to decline further in 2020. in the beginning of 2020, the economic indicators began showed favourable trends but the outbreak of covid-19 pandemic affected pakistan economy adversely. the government of pakistan took several measures like suspension of international travel, closure of educational institutions and province-wide lockdowns to mitigate the outbreak that affected the process of economic development adversely. the initial estimates show that there is a $1.3 trillion loss to the economy. one-third of the population was already living below poverty line before the outbreak and this number is expected to increase over 40% by june 2020. pakistan is also facing negative spillover from the global economy. as exporters face cancellation of orders as textile demand around the world has plunged. the spillover from chinese economy on the textile sector alone has been estimated to be $44 million which caused a massive layoff in textile sector (unctad, 2020). the government of pakistan has announced rs. 1.3 trillion economic package relief for reducing financial burden. the biggest initiative introduced by the government through the ehsas program in which $900 million were allocated to be distributed among the poor household. pakistan workers federation reported that till 28th march 2020, 5 lac workers belonging to the textile industry have become unemployed. the government has announced a ‘green stimulus’ project, in which the recently unemployed workers can work in 10 billion tree tsunami programme. exporters and small-scale industries are also given financial aid. furthermore, state bank of pakistan (sbp) has come up with cutting the policy rate from 13.25% in march to 8% in may, 2020 (monetary policy statement, 2020). all these measures have proved insufficient to compensate for the economic losses as all the sectors of economy have been tumbling under the massive financial losses. poverty and unemployment rates are at all-time high. many industrial units have been closed either due to unavailability of inputs or low demand. textile sector of pakistan have lost billions in domestic and foreign sales and also millions of workers associated with this sector have lost their jobs. large scale manufacturing (lsm) sector has shown massive growth shrinkage. furthermore, the small business owners and daily wage review of economics and development studies, vol. 6 (2) 2020, 447-459 449 earners are on the verge of poverty. the main objective of this study is to review the impact of covid-19 pandemic on pakistan’s economy. the study intends to reveal the impact of demand side and supply side shocks faced by pakistan economy due to pandemic. furthermore, it will identify the sectors that require urgent assistance of government for speedy recovery from the sever damages of covid-19 pandemic. the rest of the paper is organized as follows. section ii presents review of literature. section iii provides the intensity of covid-19 pandemic in pakistan. section iv presents supply and demand shocks in pakistan due to covid-19 pandemic. the last section concludes. 2. review of literature: pandemics are rare but highly destructive marvels of nature that destroy the lives and livelihood of people in its wake. humanity has gone through many global pandemics and somehow it has managed to come out stronger. jordà et al. (2020) attempt to check the long run economic consequences of pandemics. the results of the study reveal that pandemics are followed by decade long periods of sustained natural rate of interest that helps easing the fiscal burnout during pandemic. pandemics are known for not only killing millions but also for glooming the economies. recent global pandemics such as mers and sars are known for their economic disruption (for details, see chou et al., 2003; siu and wong, 2003; hanna and huang, 2004; joo et al, 2019). although the economic impact of these outbreaks was not as severe as the covid-19 pandemic (fernandes, 2020). estrada et al. (2020) fears that economic impact of covid-19 pandemic can be 3-fold than that of sars. the current covid-19 pandemic is feared to be scathing pandemic as compared to 1918 spanish flu pandemic (ferguson et al., 2020). asian development bank (adb) reveals that the global cost of this outbreak could reach to 8.8 trillion or 9.7% of global gdp. these estimates are higher than the previous estimates of the impact on global gdp by world bank (2% to 4%) and imf (6.3%). this drastic difference occurs because the rampant nature of this pandemic has made it impossible to credibly predict the economic costs. however, all researchers and policymakers are agreed on the effectiveness of the restriction measures in curtailing losses. world health organization (who) pointed out that lockdown and social distancing are the best strategies to halt the spread of coronavirus in all the countries of the world. barnett-howell and mobarak (2020) suggest that we should look for alternative options as lockdown policy might be ineffective in the poor countries. they argue that these countries have a larger informal sector and the people are more susceptible to poverty. pakistan is among those countries where informal sector is a very large. according to international labour organization (ilo), more than 73% of the total employment in pakistan is in the informal sector. this puts pakistan into a very difficult position as the country face a dual edge sword of hunger and coronavirus. the medical structure of country is not very strong as the current number of hospitals and quarantine centres are not sufficient to tackle the medical emergency (waris et al., 2020). in the absence of restrictive measures the system may collapse and if the lockdown persists longer then millions of workers may lose their jobs. this calls for rigorous research on these aspects for balancing between saving lives and saving economy so that the losses from covid-19 pandemic may be minimized. 3. intensity of covid-19 pandemic in pakistan pakistan confirmed its first case of coronavirus on 29, february and this number reached to 10,000 on 22 april. the next 10,000 cases came in just 11 days and the next one took only 8 days. review of economics and development studies, vol. 6 (2) 2020, 447-459 450 figure: 1 shows the log incidence curve of cases from day one to one hundred days. the graph reveals an upward trajectory. the rate of growth of cases was very high in early days which indicates that the virus has been spread rapidly and the country was unable to contain it due to lack of information about virus and proper controlling strategies. however, after 50 days the graph indicates a decline in the rate of confirmed cases. from day 75 to 100 it can be observed that the curve has started bending and which means in coming weeks pakistan may be successful in flatten the curve. figure 2 shows that an increase in the testing capacity and simultaneous increase in the incidence go hand to hand in pakistan. it helped the country in capturing the hot spots of virus and reduce its spread. review of economics and development studies, vol. 6 (2) 2020, 447-459 451 figure 3 deals with the comparison of recovery and mortality rates. recovery is measured by the ratio of recovered with respect to confirmed cases and mortality shows deaths w.r.t. confirmed cases. it can be observed that in the beginning, the mortality rate was higher than recovery rate but over time, the mortality rate became lesser than recovery rate due to success of plasma and other treatment strategies. this wedge between mortality and recovery rate is a hopeful indicator but this difference needs to increase in order to reduce the strain on medical system of country figure 4 reveals that in the starting days, country witnessed a high mortality rate as shown by the spike in the above graph where the mortality rate was well over 6%. however, later on, the mortality rate is hovering around 2% to 3%. but it is feared that this number is grossly under reported as many infected people prefer to stay home rather than seeking medical help. it means they are not in the radar of government and this number may not reflect the true picture (tanzeem, 2020). review of economics and development studies, vol. 6 (2) 2020, 447-459 452 figure 5 shows that in pakistan in first 20 days the recovery rate was low which increased steadily due to success of plasma therapy and availability of better medical facilities. as of 4 th july, more than 1 lac patients have recovered from covid-19 pandemic which makes the recovery rate almost 55.53%. review of economics and development studies, vol. 6 (2) 2020, 447-459 453 4. supply and demand shocks in pakistan economy due to covid-19 pandemic before pandemic, the gdp growth rate of pakistan economy was forecasted at 2.4% by imf whereas the inflation rate was in double digits. this indicates that the pakistan economy was trapped by various economic problems related to twin deficit. the government of pakistan had taken several measures in past few years to come out of the trap of these economic problems. the lockdown and global spill over of negative economic shocks worsened the economic situations. the country’s growth rate for fy2020 is expected to go into negative digits in between -2.2 to -1.3% (world bank). the economic impact of covid-19 pandemic is devastating as it hits severely both the supply side and the demand side of the economy. the supply side shocks are related to the production process. the covid-19 pandemic affected both production and distribution of goods. being an open economy, pakistan was affected badly as its major trade partners were influenced severely by covid-19 pandemic. as the pandemic expanded, most of the countries enforced lockdown, suspended international travel and cancelled export orders which result in the disruption of global supply chains. pakistan’s imports of almost all the sectors have declined that halted the production process in the country. table: 1 presents comparison of imports of selected commodities in april 2019 and april 2020. non-availability of necessary inputs such as machinery, raw material, metal and fertilizers has adversely affected production of all the sectors of the economy. table 1: comparison of imports of selected commodities (in rs. million) import commodity group imports (april 2019) import (april 2020) percentage change food 62,266 85,306 37.00 machinery 110,620 80,646 -27.10 transport 28,882 19,937 -30.97 petroleum 188,488 95,429 -47.42 textile 50,643 38,257 -24.46 agriculture and other chemical 112,063 101,933 -9.04 metal 54,396 49,827 -8.40 miscellaneous 12,169 10,020 -17.66 all other 52,891 45,524 -13.93 grand total 665,418 526,880 -20.82 data source: pakistan bureau of statistics lockdown and transportation suspension have resulted in the absence of labour from their workplaces. in this situation, some professions have adopted the policy of ‘working from home’. however, pakistan economy was not digitalized and all types of work cannot be performed from home. industries and manufacturing sectors were highly affected by lockdown which resulted in the closure of factories and industrial plants in the country. furthermore, the restriction on interprovincial movements caused distortions in the supply chain of the country. one and probably the only positive impact of covid-19 pandemic on pakistan’s economy was a decline in the oil prices due to low demand of petroleum products which reduced imports bill of the country and mitigate some of the trade deficit. a sudden increase in the demand for consumer goods in some urban areas created a shortage of necessary items. although no acute shortage of necessities has occurred so far in pakistan but it is review of economics and development studies, vol. 6 (2) 2020, 447-459 454 feared that a prolonged viral outbreak may create food shortage in the country. the impact of covid-19 pandemic on pakistan economy has resulted in a decline in consumption expenditures as millions of low-income workers who lost their jobs, are forced to struggle to meet their both ends. middle income groups have also curtailed their discretionary spending for enhancing their savings and assurance of financial security. furthermore, people were unable to spend due to closure of shopping centres, restaurants and ban on transportation and travel. the figure 6 reveals that in pakistan consumption accounts for 82% of the total gdp and any change in consumption expenditures may have drastic implications for the gdp growth rate. lockdown and fears of prolonged recession have made people to reduce spending on nonessential items. figure 6: author’s own calculations based on data from pakistan bureau of statistics. the table 2 given below shows a comparison of the volume of exports of different commodity groups in april 2019 and in april 2020. it can be observed that exports value has shrunk to half and no commodity group is safe from decline. textile sector has been hit hard and faced a 59% decline. around $1.3 billion worth of textile orders have been cancelled or suspended so far due to decrease in global demand. it puts millions of workers associated with textile industry at risk of losing their jobs. table 2: comparison of exports of selected commodities (in rs. million) data source: pakistan bureau of statistics 81.8 12.2 13.5 1.6 10.3 [value] consumption expenditures government expenditures gross capital formation change in inventories exports imports expenditure on real gdp 2018-19 export commodity group export (april 2019) export (april 2020) percentage change food 64,796 55,822 -13.85 textile 160,694 66,405 -58.68 petroleum & coal 8,046 1,780 -77.88 other manufactures 44,426 24,108 -45.74 all other items 16,921 9,297 -45.06 grand total 294,883 157,412 -46.62 review of economics and development studies, vol. 6 (2) 2020, 447-459 455 figure 7 shows that since the outbreak in january, the remittances have been declining over time which may disrupt the external balance of country. it creates an adverse demand shock as many families depend on the foreign remittances to finance their expenditures. figure 7 source: state bank of pakistan the downward trend of growth of remittances can be short lived due to the fact that global production is halted right now and once it resumed the remittances flow will start. pakistan has been facing severe budget deficit for years and the tax-to-gdp ratio of country is yet to meet international standard. figure 8 depicts a comparison of government expenditures and revenue from 2015 to 2020. it can be observed that government revenues have always been lower than the expenditures that resulted in budget deficit. this gap is expected to expand for fy20 due to massive increase in government spending for several relief packages and decrease in revenue collection due to smart lockdown. figure 8 source: ministry of finance govt. of pakistan 2.72 -19.30 17.35 -2.52 9.85 20.50 9.90 15.97 9.28 1.12 -25 -20 -15 -10 -5 0 5 10 15 20 25 growth of remittences 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 fy15 fy16 fy17 fy18 fy19 jul-dec fy20 total revenue vs total expenditures ( b i l l i o n r u p e e s ) total revenue total expenditure review of economics and development studies, vol. 6 (2) 2020, 447-459 456 currently the government expenditures are on rise in order to provide relief programs to masses affected by the lethal pandemic and on the other hand, federal board of revenue (fbr) has witnessed a colossal decline in revenue collections. in march 2020, fbr faced a 31% decline in sales tax revenue from local manufactures due to low production. according to the press release by fbr, tax collection in april 2020 was almost 40 billion less than the tax collection in april 2019. the latest regional economic outlook report released by imf projects that budget deficit of fy2020 can reach to all time high of 9.2% of gdp. this massive budget deficit may open a pandora box of problems to the country. the relief packages introduced by the government of pakistan are financed by external debt for protecting its citizens from hunger and poverty. it exerts huge burden of debt on pakistan economy which may lead to an alarming situation to the already debt-riddled economy of pakistan. table 3 presents a comparison of government’s debt in march 2019 and march 2020 which indicates a 23% increase in government debt. it means that in coming months the amount of debt servicing is expected to increase sharply. table 3: government debt (in rs. billion) march 2019 march 2020 percentage change 18,170.6 22,477.7 23.70 7,900.0 16,706.2 111.47 10,270.6 5,771.4 -43.81 9,625.7 11,658.1 21.11 9,469.4 11,210.6 18.39 156.4 447.5 186.17 27,796.3 34,135.8 22.81 source: ministry of finance budget wing state bank of pakistan has also slashed the policy rate by 525 basis points in 2 months. this expansionary monetary policy provided relief to the households and businesses with much needed liquidity and credit flow. furthermore, sbp has announced a relief package for easing the conditions of borrowers and lenders. a. federal government domestic debt (a+b) a. long term b. short term b. federal government external debt 7 a. long term b. short term federal government debt (a+b) review of economics and development studies, vol. 6 (2) 2020, 447-459 457 5. conclusion and recommendations the researchers, policy makers and practitioners are of opinion that an active role of government is indispensable in balancing between the conflicting objectives of saving lives and saving economy. for this purpose the government needs to enforce smart lock down and allocate more resources to provide better medical facilities to the masses. furthermore, the responsibility lies with the government to assure the continuous supply of essential services, provision of financial aid to those who lost their jobs, prevent the disruption of economy and directs sbp to ensure the liquidity through using its tools. the developing countries like pakistan are prone to demand and supply shocks and these shocks have exerted adverse impact on the development process of the economy. the major objective of this study is to explain the impact of covid-19 pandemic on pakistan’s economy using current available data. the analysis reveals that country is on the verge of recession and millions of workers may become unemployed. this indicates that recession seems to be inevitable but proper implementation of effective policies may reduce its duration, intensity and effects on pakistan economy. the important step of returning towards normality is controlling the infection rate. the government of pakistan has to pay proper attention to the health sector and allocate more resources for the provision of continuous and better medical facilities to the masses. in the beginning the top priority of government of pakistan was to save the lives through nationwide lockdown. but later on, government realized the danger of poverty and hunger and moved to “smart lockdown” allowing economic activities partially. the prevailing situation in pakistan calls for the need of implementing appropriate and consistent policies which ensure balancing in saving lives and saving economy. for the revival of economic activities the government should take steps for promoting exports which was badly hit by the covid-19 pandemic. these circumstances bring up the significance of product diversification and capturing of new markets. the future export strategies should protect the interest of exporters through a sufficient stimulus package. the formulation and implementation of bold, consistent and proper government policies is the key to take pakistan economy away from the future losses of covid-19 pandemic. the proper utilization of existing resources may assist the revival of service sector of the country. references andersen, a. l., hansen, e. t., 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(2020). covid-19 outbreak: current scenario of pakistan. new microbes and new infections, 35(20), 100681. https://doi.org/10.1016/j.nmni.2020.100681 review of economics and development studies, vol. 6 (2) 2020, 485-492 485 secondary school teachers’ perception on stem integrated education: a analysis a abida khan, b najam-ul-kashif a ph. d. (education) scholar, department of education, the islamia university of bahawalpur email: akhan3030@yahoo.com b ph.d / assistant professor, department of education, the islamia university bahawalpur, pakistan email: drnajam.ulkashif@iub.edu.pk article details abstract history: accepted 22 may 2020 available online 15 june 2020 american president barak obama said on third annual white house science fair in april 2013 that “one of the things that i’ve been focused on as president is how we create an all-hands-on-deck approach to science, technology, engineering, and math… we need to make this a priority to train an army of new teachers in these subject areas and to make sure that all of us as a country are lifting up these subjects for the respect that they deserve”. this single part of the speech pinpoint the importance of stem education and backbone of it “teachers”. cross disciplinary appeals have manifold appeals. same is in the field of school education. once it’s a time, science has a leading role at elementary and secondary school level. then engineering becomes the prominent figure but when technology comes, all other fields merged in it. mathematics remains the mother of all subjects. now, it’s a time of stem integrated education where stem is the acronym of science, technology, engineering and mathematics. stem is not only confined to an acronym but also leads to the change of education system or approach from the root level. presented study aimed at to highlight the secondary school teachers’ perception regarding stem education. as it’s a new and novel concept, so not a big deal of work has done on it. so, existing literature was analyzed systematically to highlight the importance, challenges and future of stem education which surely helpful to introduce in the developing countries like pakistan. presented study just focused on the perception and viewpoints of teachers who are working at elementary or secondary school level. study concluded that teachers are highly motivated and confident for the stem integrated education but there is a dire need to give suitable policy for this new trend of education which ultimately addresses the issues of curriculum, pedagogy, learning environment, career developers and future of the learners. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: stem education, secondary school teachers, systematic literature, documental analysis jel classification: i21, i23 doi: 10.47067/reads.v6i2.225 corresponding author’s email address: drnajam.ulkashif@iub.edu.pk review of economics and development studies, vol. 6 (2) 2020, 485-492 486 1. introduction stem (science. technology, engineering and mathematics) is a growing area of study and research world widely. it was a time, when nations have the policy and mind to focus on the science education. later it comes a time of engineering but it’s a very short span. meanwhile, technology shows its strength and everywhere there is a strong functioning and operation observe. life is the name of change and especially in the field of education and research. now, the new era is of stem and there is a dire need to work on it. developed countries are changing their mode of education and they are focusing on stem based education. the major focus of stem education is at elementary and secondary level. these countries work on the stem in different domains: stem based education and stem integrated education. for such purposes, literate workers of stem are produced or trying to produce. literate workers of stem can be defined in the following terms: i. a stem literate should have the mindfulness on the different domains and characters of stem subjects, according to need of the present and future society needs. ii. should have the adequate basic and fundamental knowledge and concepts on each subject of stem based education. iii. should have the necessary application smoothness level for stem subjects (i.e. s/he have the capacity and ability to analytically assess the content and news reports based on engineering and science works; can handle and have the sense to resolve the troubleshooting of the technology; as well as have the analytical power to perform and solve the different basic and advance level mathematical operations. it is estimation that there are 2.4 million unfilled jobs for stem graduates only in usa (national science board, 2012). the word stem is derived from the word “stem” which means “root”. according to gulgan (2017), stem is not merely an acronym; it is an approach towards the transformation of theoretical knowledge of learners into practice based on stem integrated knowledge. it is an application of academic knowledge which is targeted by a degree on the prosperous way of innovation and discoveries. sadaive in 2018 opined that keep in mind, stem basically is an attitude towards the constructive maintenance of continuous education system; it’s never ever be considered as something new teaching method, or technique or even a model. it is easier to write and implement different activities for different disciplines in the constructive education approach whereas every activity is not used in stem. there are some differences as well as similarities in teacher’s profiles using the stem and constructive education approach. stem education approach has aimed at individual learners’ learning that s/he have to know the basic usage of the information and communication technology (ict) as well as have the interests and keen to integrate the ict with science, engineering and mathematics. here, the role of the stem teachers enhanced many times and they should generally represent the role model for transferring and providing appropriate concepts and skills. wong further added in 2018 that stem literate workers can be very helpful at elementary and secondary school level, as they with the help of stem teachers, integrate the stem based curriculum in the regular curriculum and teachers with their pedagogy make this difficult task an easy opportunity. chamberlin and pereira in 2017 strongly talked about the importance of stem education and said that stem is not the joining of four different fields i.e. science, technology, engineering and mathematics but it is more to it. it is prime focus is on bringing the theoretical knowledge of the learners towards the practical knowledge of the real world. it has the applications of inter and intra curriculum as well as pedagogy. as a result, stem can change the concept that a learner of elementary or secondary certificate holder don’t have only theoretical knowledge but also have practical knowledge and have the practical power to help the economy of the nation through his/her innovations or review of economics and development studies, vol. 6 (2) 2020, 485-492 487 discoveries (gomes and albret, 2013). christenson (2011) summarized that stem education fundamentally based on following six (06) standards of constructive and continuous education approach: i. science and mathematics based content inclusion in education system ii. pedagogy should be learner centered iii. lesson planning focus on the encouraging and interesting contexts iv. inclusion of fundamental designing of engineering and its challenges. v. trial and error based learning vi. inclusion of real world challenges in focus with cross-curricular integration man is the greatest creation of allah almighty. he has manifold appealing mind and heart which can be observed in the form of talent. each and every man where have some specific characteristics which are known as talent, at the same time, man has many common characteristics which are known as potential of man. with the help of potential man can leads towards the talent too. in 2011, ganges said that man with the help of his abilities can perform wonders. but these wonders need some practice. theory provides to students till secondary school level education and this theory comes to practice after secondary school certification. but now it’s the need that learners should practice the theory while learning the theory. ganges further added that shifting of knowledge from theory to practice; there is a dire need of catalyst. this catalyst, here, may know as school where learners put the theory in practice and give results in the shape of inventions and discoveries. interpersonal skills may also be considered as catalyst, as it works in the form of confidence or perfection. learning environment may also be taken as catalyst as it changes the man genetically. in learning environment, the key role is of teachers as their role as catalyst, firstly identify the hidden talent among learners, in second stage, they polish the hidden talent of students and in the next stage they motivate and guide the learner who produces the results in the form of invention or discovery. lessing et al (2016) mentioned that there is a perception among teachers that while shifting to stem education; they need to change their pedagogy. this perception is not totally wrong as well as it is also not fully right. teaching profession is the name to adopt continuous change in their pedagogy as curriculum changes very rapidly as per the needs and requirements of the present and future real world needs. so, it can be said that yes teachers has to change their pedagogy but it does not required fundamentals changes. teachers’ role and pedagogy will be more easiest in stem integrated education. as practical work can lessen the workload of the teachers and instructional work take more time and energy of the teachers. mcmullin and reeve (2014), further classify it that teachers’ has many responsibilities while they are in the school or class. one of them is designing of instructions to achieve the set goals for the learners. delivery of lectures is another responsibility with an objective that students’ interest and motivation level don’t break. then, there come the number of positive attitude of the teachers. with the help of only this characteristic, wonders were happened, wonders are happening and wonders can happen. with the help of stem integrated education, teachers can produce scientists, engineers, technologists, mathematicians, educationists and researchers at early stage like elementary or secondary school level. asghar et al (2012) told that some teachers have concerns about stem pedagogy as different practical work by varied learners can diversified the objective of the subject or content. there is another group of teachers who take as a challenge the stem integrated curriculum as well as perceive the stem integrated curriculum as heraclius task for the curriculum developers and setters as well as for policy makers. review of economics and development studies, vol. 6 (2) 2020, 485-492 488 scot (2012) explained that stem integrated education was firstly introduced at school level by korea. but study shows that teachers were not properly trained as they didn’t have manuals. school administration and management were not satisfied as they don’t have enough resources. assessment and evaluation was difficult as curriculum objectives were not matching the overall objectives of the program. policy makers failed to create the interest if the parents as stem program weaken to highlight the job area for the learners. there are also some issues on the learners’ level too as they are not fully motivated and interested in the program. now the question rises, how stem education or stem integrated education can impart at elementary and secondary level and especially in the developing countries like pakistan? is there any major change in pedagogy? how learners can be motivated and their interest created in the stem education program? there are many questions on curriculum, management, administration, policy makers, teachers, learners, and career developers too. but the presented study was only aimed at to focus on teachers and learners. following research objectives were set and try to answer them in this study to achieve the aim of the study to review existing literature on stem education in context of teachers’ views and to highlight perspective of teachers regarding the stem education through using existing literature. 2. research design in order to review of literature researcher applied second source of data collection. researcher searched, located and summarized the existing literature on the teachers’ perception on stem education and analyzed the exiting literature on thematic analysis basis in specific reference to achieve the aim of the study. as the field of the study if not novel, then surely being a new. existing literature is very limited, especially in the context of developing countries and pinned at pakistan level. overall, seventy (74) different research articles and research studies were collected after the search online. later they are categorized at according to the themes. action research and survey research were the basic focus of the study. study further filtered while analyzing the methodologies of the existing literate. 3. data analysis and presentation under the light of information obtained from articles, reports and papers purely based on action research and survey research. systematically, themes were investigated according to qualitative findings which were formed and order to provide easy interpretations. themes were set as per the aim and need of the study. table 1 shows the selected publications by type for the underlying study: table 1: selected publications by type type no. of studies percentage hec, pakistan recognized international journals 7 9.5% hec, pakistan recognized national journals 6 8.1% impact factor journals 2 2.7% ieee, journals 3 4.05% scopus index journals 11 14.86% isi index journals 5 7.1% conference papers 9 12% thomson reuters index journals 2 2.7% web science index journals 2 2.7% review of economics and development studies, vol. 6 (2) 2020, 485-492 489 doaj index journals 1 1.35% pubmed index journals 1 1.35% esci index journals 1 1.35% document lexis index journals 1 1.35% copernicus index journals 1 1.35% plus index journals 1 1.35% nature index journals 1 1.35% social sciences index journals 2 2.7% sciences index journals 2 2.7% ssci index journals 1 1.35% oaji index journals 1 1.35% other 8 10.8% web sources 6 8.1% collected literature was taken into scope of this study was sorted according to features and their publication years. interpretations and analyses were made in tabulated form. table 2: teachers’ perception on stem education study research design findings author/s study was quantitative by nature. teachers’ motivation and confidence level were measured by pre and post professional development tests. observable difference in the form of positive change in the confidence level from pre to post professional development tests. at the same motivation level was consistently enhance. teachers’ self-efficacy remains constant. a strong relationship was observed between learning instructions and stem based curriculum. nadelson et al. (2012) a survey study was conducted to analyze the pedagogy of stem integrated education. study was quantitative by nature and correlations were measured of different variables. teachers’ pedagogy is average and their level of satisfaction and motivation is at comfort level at institutions. stem education is in transition age and needs more work to reach at a justifiable stage, according to a big group of teachers. park et al. (2016) a mix method research by nature and survey approach was adopted to identify the beliefs and perceptions regarding stem program. ols regression was found. majority of teachers’ belief that stem education program is the need of the hour but time management and financial issues are big hurdles. teachers’ percept that need support from government and policy makers for the stem graduates. park et al. (2017) another quantitative study which descriptive by nature and aimed at to highlight the different pedagogical issues. manova was applied to found the results. all four components (science, engineering, technology and mathematics) are equally important. but technology is the core need and engineering is at the far end. a strong relationship was found between technology and science as well as between engineering and mathematics. smith et al. (2015 a mix method approach based study was designed. a big group of teachers are not aware of the program and even not know about stem program. teachers’ srikoom et al. review of economics and development studies, vol. 6 (2) 2020, 485-492 490 descriptive statistics and anova was applied on quantitative data and interpretive technique was applied on qualitative data. perception on the stem education has not shown significant level of interest by the teachers. qualitative data shows that teachers have the enthusiasm for the new started program of stem and have a good confidence level. (2017) table 2 shows that learning standard and perception about stem is improved. link between stem and education standard has been increased. observable difference is found in the form of positive change in the confidence level from pre to post professional development tests. at the same motivation level was consistently enhance. teachers’ self-efficacy remains constant. a strong relationship was observed between learning instructions and stem based curriculum (nedelson et al, 2012). teachers’ pedagogy is average and their level of satisfaction and motivation is at comfort level at institutions. stem education is in transition age and needs more work to reach at a justifiable stage, according to a big group of teachers (part et al, 2016). majority of teachers have belief that stem education program is the need of the hour but time management and financial issues are big hurdles. teachers’ percept that need support from government and policy makers for the stem graduates (park et al, 2017). all four components (science, engineering, technology and mathematics) are equally important. but technology is the core need and engineering is at the far end. a strong relationship was found between technology and science as well as between engineering and mathematics (smoth et al, 2015). a big group of teachers are not aware of the program and even not know about stem program. teachers’ perception on the stem education has not shown significant level of interest by the teachers. qualitative data shows that teachers have the enthusiasm for the new started program of stem and have a good confidence level (srikoom et al, 2017). table 3: challenges in stem teaching study research design findings authors a survey based study of teacher about challenges in stem education teaching was conducted. study was quantitative by nature. teachers believe they have the challenges in different ways like sources and resources, lack of manuals of the program, no or very few professional development programs for this new program. such things decrease the level of confidence and motivation among teachers which results as lack of learners’ positive change. even a group of teachers shows lack of confidence to cope with the program. van haneghan et al. (2015) a case study based on the qualitative research design was set. stem teachers’ perception was determined. collected data was analyzed by applying constant comparative method. engineering appears as the most challenging subject. technology and science proves its worth with the help of technology and mathematics is considered as basic of all subjects and mother of stem education. teachers’ belief is that stem program is time and resource consuming. students are at their early age and at this age practical without one to one correspondence and guidance is not possible. wang et al (2011) table 3 shows that teachers believe they faced many challenges in stem education. they face challenges in teaching methods and curriculum activities about stem. teachers believe they have the challenges in different ways like sources and resources, lack of manuals of the program, no or very few professional development programs for this new program. such things decrease the level of confidence and motivation among teachers which results as lack of learners’ positive change. even a group of teachers shows lack of confidence to cope with the program (haneghan, et al. 2015). engineering appears as the most challenging subject. technology and science proves its worth with the help of review of economics and development studies, vol. 6 (2) 2020, 485-492 491 technology and mathematics is considered as basic of all subjects and mother of stem education. teachers’ belief is that stem program is time and resource consuming. students are at their early age and at this age practical without one to one correspondence and guidance is not possible (wang et al. 2011). 4. conclusion and discussion stem education is a growing concept of teaching. not too much but much work has done so far. the presented study was based on systematic existing literature review based. thematic analysis based results can be concluded in the form that over all learning standard of stem education are improved as well as the perceptions on it are positive. the link between stem and education standard has been increased. at the same, motivation level was consistently enhanced among teachers. teachers’ selfefficacy remains constant. a strong relationship was observed between learning instructions and stem based curriculum. as for as the pedagogy is concerned, teachers’ pedagogy is at average level as well as satisfaction and motivation level is at comfort level at institutions. stem education is in transition age and needs more work to reach at a justifiable stage, according to a big group of teachers. majority of teachers have belief that stem education program is the need of the hour but time management and financial issues are big hurdles. teachers’ percept that they need support from government and policy makers for the stem graduates. all four components (science, engineering, technology and mathematics) are equally important. but technology is the core need and engineering is at the far end. a strong relationship was found between technology and science as well as between engineering and mathematics. but there is also a big group of teachers, who are not aware of the program and even not know about stem program. at the same time, teachers have the enthusiasm for the new started program of stem and have a good confidence level. as for as the challenges of stem education program are concerned, teachers believe they faced many challenges in stem education. they face challenges in teaching methods and curriculum activities about stem. teachers believe they have the challenges in different ways like sources and resources, lack of manuals of the program, no or very few professional development programs for this new program. such things decrease the level of confidence and motivation among teachers which results as lack of learners’ positive change. even a group of teachers shows lack of confidence to cope with the program. engineering appears as the most challenging subject. technology and science proves its worth with the help of technology and mathematics is considered as basic of all subjects and mother of stem education. teachers’ belief is that stem program is time and resource consuming. students are at their early age and at this age practical without one to one correspondence and guidance is not possible. references asghar, a., ellington, r., rice, e., johnson, f., & prime, g. m. 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(2018). teachers' perceptions of professional development in integrated stem education in primary schools. published in global engineering education conference. http://ieee global engineering education conference (educon) https://www.iteea.org/39191.aspx https://doi.org/10.1111/ssm.12172 https://doi.org/10 http://www.jstem.org/ https://ieeexplore.ieee.org/xpl/conhome/8360187/proceeding https://ieeexplore.ieee.org/xpl/conhome/8360187/proceeding review of economics and development studies, vol. 8 (1) 2022, 01 12 1 exploring the individual and interpersonal obstructive factors affecting contraceptive usage among married fertile women in rural vicinities of multan district, pakistan uzma ishfaq a , tehmina sattar b , gulshan ara c a lecturer, m. phil scholar, department of sociology bahauddin zakariya university, multan, pakistan ph.d. scholar /assistant professor, department of sociology, bahauddin zakariya university, multan, pakistan email: tehminasattar@bzu.edu.pk m. phil scholar, department of sociology bahauddin zakariya university, multan, pakistan article details abstract history: accepted 25 february 2022 available online march 2021 family planning is the most effective tool to reduce maternal morbidity and mortality during pregnancy. contraceptive usage is the widely accepted method for birth spacing among married women in reproductive age span. in pakistan, contraceptive prevalence is low in rural areas as compared to urban milieus. for exploring the present research phenomenon, the ethnographic research design was used to determine the subjective meaning-making of participants about the study phenomenon. informal discussions (ids), n=20 in-depth interviews (idis), and n=6 focus group discussions (fgds) were conducted in two adjacent villages x and y of multan, pakistan. interview guide and discussion guide were used to explore the responses of the participants through thematic analysis. the present research results illustrated that the causes behind disinclination for contraceptive usage prevailed at two major levels, i.e. individual and interpersonal. the individual-level obstructive factors comprised of age of the married women, education level of husband, the economic cost of contraceptive usage, and adverse effects of contraceptives on the health of married females. furthermore, the inter-personal level factors comprehended of husband opposition towards contraception usage, and discussion about contraception usage with husband as an anti-normative act. in conclusion, the orthodox, misogynistic, and gender-biased normative structure snatched the reproductive autonomy of married women. resultantly, the women changed their fertility preferences and avoided birth spacing through contraceptive usage. government intervention through social media awareness campaigns, provision of monthly incentives, and facilitation of “health card” could be used to ensure high prevalence of contraceptive usage among married women in the study locale. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: exploring, individual, interpersonal, obstructive, factors, contraceptive, married, rural, vicinities jel classification: j12 doi: 10.47067/reads.v8i1.421 corresponding author’s email address: tehminasattar@bzu.edu.pk review of economics and development studies, vol. 8 (1) 2022, 01 12 2 1. introduction family planning (fp) ensures a wide range of health benefits to women and community members (goodkind et al., 2018). it can also reduce maternal morbidity and mortality by controlling the complications during pregnancy (alspaugh et al., 2021; hawkins et al., 2020). fp can be guaranteed through contraceptive usage which emancipates the women from the unwanted burden of menstrual cycles, labour pains, breastfeeding, and childcare (ataullahjan et al., 2019; jain & hardee, 2018). feminist perspectives declared that contraceptive usage is a tool to deliver equality-based marital rights for women. in developed countries of the world, couples frequently used fp methods for birth spacing and family size restriction (alspaugh et al., 2020). conversely, underdeveloped countries have high levels of unmet need of family planning (umnfp). umnfp refers to the large proportion of the married women of reproductive age span who were not using contraceptives. the married couples who have higher proportions of umnfp remained at a higher risk of physical abuse, unsafe abortions, and poor maternal health (imran & yasmeen, 2021; ontiri et al., 2021). pakistan is the sixth most populous country in the world where more than 65% population lived in rural areas. according to one estimate, almost 28,000 married women died from birth complications annually. the major underlying cause of the high maternal mortality rate was attributed to lack of access and adoption of fp methods. the contraceptive prevalence rate in urban areas is high i.e. 45% as compared to rural areas i.e. 31% (bhutta et al., 2003; nausheeen et al., 2021). the commonly used contraceptive methods in pakistan are oral pills, condoms, injections, tubal ligation, and intrauterine devices. although it is widely accepted that modern methods of contraceptives are more effective in birth control as compared to traditional methods, but still rural women believed in religious, traditional, and orthodox methods of child spacing. in pakistan, the underlying socio-cultural causes behind low adoption of contraceptive usage were poverty, illiteracy, and societal pressures on women to reproduce more children. moreover, the fertility preferences of mother-in-law and husband mostly inclined towards the birth of sons (asif & pervaiz, 2019; islam et al., 2016; kadir et al., 2003; omer et al., 2021; pasha et al., 2001). as evident, there is a growing literature about contraceptives usage in pakistan but still, there is a dearth of studies about subjective responses of the married women about fp in the study locale. to address this theoretical and methodological gap, the present study was designed to explore the subjective meaning-making of married women about the study phenomenon. moreover, the contextual influences of birth spacing on participants in their natural settings were investigated to interpret and sensitize the meanings of “obstructive factors towards contraceptive usage” in rural locales of multan. 2. methodology the present study was conducted in two adjacent villages x and y of multan district, pakistan. women were usually engaged in farming, livestock rearing, and household chores in the study locale. data was collected in three sequential phases in the fieldwork during march 2019-july 2019. one anthropologist and one sociologist were appointed in the fieldwork with the first author. to address the uniqueness and insufficient literature in pakistan, the current study focused on the subjective meaning-making of women about their basic marital right i.e. contraceptive usage. the first author presented this research proposal to the ethical review committee (erc) of social sciences in bahauddin zakariya university, multan. a group of research experts analyzed the proposal and approved it with some minor changes. in order to explore the study phenomenon, we used an ethnographic fieldwork approach to review of economics and development studies, vol. 8 (1) 2022, 01 12 3 investigate the holistic viewpoint of people in their specified cultural context (mohajan, 2018). for this purpose, three unified approaches were used i.e. ids, idis, and fgds. in acquiescence, ids were conducted from old-age women (after the menopausal stage) about married females' general attitude and practices towards contraceptive usage. later on, n1=20 idis (village x=10, village y=10) were conducted from married female participants who were in earlier reproductive age span i.e. onset of puberty-30 years. alongside, 6 fgds (village x=03, village y=03) were conducted from n2=52 married women in late reproductive age span (i.e. 30 years-onset of the menopausal stage). the socio-cultural context of the study site was patriarchal, orthodox, and misogynistic. women were expected to be sublime in front of their marital partners in every household decision. the contextual settings considered contraceptive usage as “sin” because it was the major hurdle in accomplishing the goals of recurrent births (especially sons). due to the sensitivity of this topic, direct usage of one qualitative approach was not appropriate to gather the native viewpoint of study participants (sawatsky et al., 2019). for this purpose, three above said interconnected qualitative approaches were used for data collection. ids were conducted without any formal data collection tool. an interview guide and discussion guide were used to gather individual and group viewpoints of the married women during idis and fgds respectively (hennink et al., 2020). the major gatekeepers were lhws who provided us access to the native village setting for data collection. they had close integration with women and their families in rural areas. the major reason for choosing them as gatekeepers was that lhw program is the key part of the pakistan national strategy to increase health services provision for women at their doorsteps (jalal, 2011). these health care services were related to i) reproductive health of women ii) usage of contraceptives iii) maternal health issues, and iv) spacing of children. the list of lhws was obtained from the health department of the concerned district. afterward, we moved towards participants for idis and fgds. the first author conducted idis while the second author conducted fgds as moderator. after the data collection, we transcribed interviews from native saraiki language to the english language. the verbatim transcription was also conducted so that native words should be transcribed in their original form. data was analyzed manually using thematic analysis. all initial codes related to research questions were categorized and conceptualized under a theme (bendassolli, 2013; hennink et al., 2020). 3. results 3.1 descriptive analysis as indicated in table-i, n=72 married fertile females were targeted for data collection. the total sample size represented the female respondents in idis (n1=20), and fgds (n2=52). ids were randomly held with the women who crossed the menopausal age span, therefore the demographic data of these women was not mentioned in demographic profile of the respondents. aligning this, the narrative arguments of old-age women in ids were recorded and mentioned in the thematic analysis. in synchronization, n=08 (11.1%) participants were in ˂20 years age span while n=42 (58.3%) married women belonged to age bracket of 31-40 years. the education level divulged that n=37 (51.4%) married women were illiterate while n=28 (38.9%) participants were literate up to the primary level. the demographic information also illustrated that n=39 (54.2%) participants were having 3-6 children in their family size. the monthly income showed that n=26 (36.1%) married women had a family income of ˂15,000 pkr while n=39 (54.2%) participants had a family income of 15,000-30,000 pkr. therefore, the descriptive analysis divulged that majority of women in the study vicinity were less educated, had low socioeconomic status, and had 3-6 average number of children at the time of data review of economics and development studies, vol. 8 (1) 2022, 01 12 4 collection. table-i demographic profile of the study participants (n=72) # demographic variables categories frequency percentage age ˂20 years 08 11.1 20-30 years 12 16.7 31-40 years 42 58.3 ˃40 years 10 13.9 education level illiterate 37 51.4 up to primary level 28 38.9 up to secondary level 07 9.7 number of children ˂3 children 14 19.4 3-6 children 39 54.2 ˃6 children 19 26.4 family type nuclear 12 16.7 extended 26 36.1 joint 34 47.2 family income ˂15,000pkr* 26 36.1 15,000-30,000pkr 39 54.2 ˃30,000pkr 07 9.7 # 20 idis and 52 fgds (fgd-1=7, fgd-2=6, fgd-3=10, fgd-4=8, fgd-5=11, fgd-6=10) *pkr refers to income in pakistani currency 3.2 thematic analysis in the below-mentioned section, the responses of the participants were codified and segregated into themes. after an in-depth analysis of the data at two major levels i.e. individual and interpersonal, six subsequent themes emerged i) age of the married female ii) education level of husband iii) the economic cost of contraceptive usage iv) perceived reproductive health problems v) husband opposition towards contraceptive usage, and vi) discussion about contraceptive usage with husband as antinormative act. 3.2.1 individual-level obstructive factors towards contraceptive usage 3.2.1.1 age of the married female the study context considered the commencement of girls’ puberty [kurri jawan thi gai] as the pertinent age for her marriage. it was contemplated by the community members that getting married at this age ensured the women fruitful reproductive years. during ids, the old age women revealed that younger married brides were strictly prohibited to use contraceptives as it would restrict their chances for recurrent births. it was also believed that frequent childbirths also upsurge the chances of sons’ birth. therefore, the first 10 reproductive years of married females were considered to be propitious. aligning this, a 63 years old woman said “if a married bride (kunwar) started using contraceptives, then her chances to reproduce sons will decrease.” a young married bride in idi-15 revealed that; “my mother strictly advised me to never use contraceptives for at least first 10 years of my marriage as it will produce infertility among the younger brides.” review of economics and development studies, vol. 8 (1) 2022, 01 12 5 it was evident through fgds that the bride should be at least 7-10 years younger than her husband. even the age difference of more than 15 years was also appreciated by the caste fellows (baradari). the group members in fgd-2 and fgd-3 gave a consensual argument that women avoided using contraceptives due to its perceptional side effects such as vaginal diseases or impaired fecundity. a group member in fgd-2 argued that “if a woman started using contraceptives and got infertile, then she will be divorced.” in extending this argument, group members in fgd-4 revealed that the social security of women was attributed to the presence of her husband and sons. 3.2.1.2 education level of husband the present data unveiled that the education of wife was not directly related to contraceptive usage. as the study context was male-dominated (mardan da raaj), therefore husband was involved in making decisions about birth spacing. during ids, the participants reported that illiterate and less educated husbands were in opposition to contraceptive usage. these participants argued that illiteracy desolated their husbands’ minds (sathyaya damagh/koor maghaz) and snatched their ability to think right. this fact was also endorsed by idi-4 who shared her views in the following manner; “my husband is very stubborn (ziddi) and adhered to an ideology that contraceptive usage is paralleled with denial of almighty blessings (allah saien di naimat) of children.” during case studies, it was revealed that women were not given any decision-making regarding contraceptive usage. sometimes they were just “called for a hearing” and accepted the imposed reproductive restrictions from their husband. these seemingly “joint decisions of couples” were actually “imposed restrictions” for avoiding the birth spacing methods for married females. the participants argued that these restrictions were the outcomes of husbands’ illiteracy and conservative mindset. in extension, the empirical data from group discussions proclaimed that illiterate husbands believed in false myths related to contraceptive usage such as i) artificial way to destroy human population ii) produces infertility iii) damages the reproductive ability of women iv) cause of multiple types of cancers v) snatches the old age security of couples through birth control, and vi) western planning to lessen muslim population. in fgd-4, a mother of three children disclosed that; “my husband (payya) told me that educated husbands who allow their wives to use contraceptive methods will go to hell on the day of judgment. the reason is that they are negating the divine blessings of children by using birth control pills.” 3.2.1.3 the economic cost of contraceptive usage during ids, it was revealed that village dwellers were underprivileged and economically deprived. they lived from hand to mouth for their basic necessities of life (bhooke nange thae). in this situation, the preference of the people was not inclined towards contraceptive usage. married women mostly preferred the lactation of their babies as the natural contraceptive method. it was perceived that breastfeeding the newborn child can avoid the next pregnancy for at least 2 years. therefore, the people did not want to spend their economic resources on artificial methods of contraceptives. endorsing these arguments, idi-11 revealed that; “the cost of modern pills and injections of contraceptives are very high. my mother advised me to perform the religious ritual of breastfeeding to save the economic cost of artificial contraceptive methods.” during group arguments in fgd-3 and fgd-5, it was evident that a large number of children review of economics and development studies, vol. 8 (1) 2022, 01 12 6 could increase the income level of the household to manifolds. a participant in fgd-5 aged 37 years said that the calculation is simple. if one child would earn 5000 rupees per month, then of course 5 children would multiply this calculation by five times. during the discussion, participants also mentioned that the doctors mostly recommended an intra-uterine device (iud) which was not affordable for married couples. additionally, the usage of low-cost birth control injections and pills were mostly ineffective. a participant in fgd-5 disclosed that; “we would like to spend our money on food, clothes, and permanent residence (apna makaan) for our children. thinking about the cost of contraceptives seems to be a nightmare (drawna khawab).” 3.2.1.4 perceived reproductive health problems as evident from the data in ids, the participants disclosed that contraceptive usage created various health problems such as excessive bleeding during periods, spotting between periods, vaginal dryness, foul-smelling vaginal discharge, and uterine infections. during ids, a 63 years old woman having 07 children argued that “the reproductive health ailments created problems for women to conceive next baby (baal nai thenda).” the findings from idis proclaimed that newly married brides were expected to reproduce more children, therefore they were strictly prohibited to use contraceptives. a 23 years old woman having 3 children described that; “after my second child, i thought about using contraceptives to space future births for 3 years. but my husband strictly prohibited me to use birth spacing medicines due to fear of permanent infertility.” the case studies also unveiled that contraceptive usage depends upon the previous sex order of children. if there were 3-4 male births to a woman in past, then she was allowed to use contraceptives. idi-16 reported that if a woman gave birth to a male child then sometimes she was allowed to use contraceptives without considering the myths related to reproductive diseases. elsewise, the arguments in idis were supporting the negative health effects of contraceptive usage on married women. during fgd-1, fgd-3, and fgd-5, the participants overlapped the economic cost and reproductive health issues related to contraceptive usage. a participant in fgd-3 raised a question, “if we develop some reproductive or general health issue then who will pay the huge fees of gynecologists?” the discussions also revealed that the chances of adverse reproductive problems among married women lessened to 50% after the reproduction of 4-5 children (at least). moreover, the respondents had a strong belief that after the age of 30 years, married females could use contraceptives to limit their family size. the reported reason in fgds was that with the increasing age of married females, the body became immune to fight reproductive health diseases. contrasting this, the participants during fgd-2, and fgd-6 also reported that the married females in their late reproductive age span (after 30 years) also faced side effects of contraceptive usage such as loss of sexual desire, early menopause, headaches, weight gain, skin problems, irregular periods, and vaginal sores and ulcers. during fgd-2, a 35 years old divorced woman reported that; “i reproduced four girls. then i started using oral contraceptives. resultantly, i got anemic (khoon di kami thi gai), and suffered from permanent infertility which ruined my marital life.” review of economics and development studies, vol. 8 (1) 2022, 01 12 7 3.2.2 inter-personal level obstructive factors towards contraceptive usage 3.2.2.1 husband opposition towards contraceptive usage during data collection, the participants reported that husband was the most influential stakeholder who opposed contraceptive usage of his wife. during ids, the women disclosed that the fertility expectation of husband was mostly inclined towards the birth of sons. in accomplishing this aspiration, the husband forced his wife to reproduce more children as it would increase the chances of male childbirth. the evidence from idis also unveiled that husband was considered to be influential on all reproductive decisions of his wife. a 22 years old participant having one son and one daughter designated that “my husband told me to never think about child spacing because he expected five sons from my body (jism toon paanj pooter jammo).” study participants also unveiled that husbands opposed the contraceptive usage of wives to dominate and overshadowed themselves in baradari through the birth of sons. this masculine domination was considered to be a sign of “husband power over his wife” (payye da roob thiya ran te). during a case study, 26 years old woman revealed that; “the major reason behind husband opposition towards contraceptive usage was to satisfy the mannish aspiration of a large number of sons.” the findings from fgd-4 and fgd-5 divulged that husbands had the “powers” and “supremacy authority” over contraceptive decisions. the discussions further elaborated that wife sublimation in front of her husbands’ decisions was actually a validation of his momentousness (shan) and masculine domination (mardana tasalut) in four walls of the house. these decisions were related to snatching the reproductive autonomy of the wife by “controlling her birth spacing strategies.” the study context also considered that children provide old age security to their parents. hence, husband opposition to contraceptive usage is paralleled with the socio-economic security of the couple. 3.2.2.2 discussion about contraceptive usage of wife with husband as an anti-normative act the study area divulged that wife should be sublime, muted, and value-oriented in front of her husband. during ids, the participants reported that these normative patterns also expected a wife's “distancing of reproductive discussions” with her husband. a 52 years old woman in general discussion argued that a married female was expected to discuss her birth spacing and fertility aspirations with mother-in-law and married sisters-in-law. in continuation, idis also divulged that husband was the most intimate and sacred relationship. the participants used the words of heads crown (sir da taaj), almighty allah’s blessing (allah saen di naimat), humanly god (majazi khuda), and women paradise (orat di jannat) for demonstrating the importance of husbands’ status for his wife. despite this intimacy, the married women were not allowed to discuss their reproductive issues and usage of contraceptive methods with their husbands. a 28 years old participant revealed that; “after the birth of four daughters and one son, my dai advised me to use some contraceptives due to reproductive problems. but i knew that if i will share it with my husband openly then i was labeled as blatant, barefaced, and sharpen women (tezz orat).” during fgds, the participants blamed that the marital norms were constructed by mother-in-law to detach (doorian paan lai) the intimation and sharing between husband and wife. a participant in the age group of 41 years reported that “these normative patterns are only for us. our married sisters-inlaw are considered to be out of this so-called normative circle.” during fgd-2, three participants gave a consensual argument that their mother-in-law wanted to make them a “reproductive machine.” during data transcription, it was also evident that these reproductive impositions were also attributed to review of economics and development studies, vol. 8 (1) 2022, 01 12 8 snatching the reproductive autonomy of married women. 4. discussion the present empirical data showed that the major obstructive factors towards contraceptive usage were segregated across two divisions i.e. individual and interpersonal level factors. in agreement with these themes, studies from pakistani context endorsed that women age at the time of marriage, husband education, couple residence, orthodox religious ideologies of husband, lack of husband education, and husband opposition towards contraceptive usage of wife were the major obstructing factors towards fp strategies (casterline et al., 2001; fikree et al., 2001; islam et al., 2016; mahmood & ringheim, 1996). as evident, the present research findings showed that newly married girls were strictly prohibited to use contraceptives to ensure their large family size. moreover, low education level of women, rural residence, and knowledge about future reproductive cycles were the major factors that directly affect contraceptive usage among the study participants. in agreement, empirical evidence from malawi also endorsed that the young married females living in rural households were less aware of using contraceptive methods. moreover, the knowledge of ovulatory cycle also determined the birth spacing methods and fp techniques among married women (mandiwa et al., 2018). signifying the interpersonal obstructive factors, the present study divulged that husband opposition towards contraceptive usage was the major reflection of his “power” and “supremacy” over wife. moreover, the misogynistic socialization and orthodox normative patterns provoked the husbands to increase their family size through a large number of children, especially sons. validating these findings, a previous study from the pakistani context divulged that husband was an imperative stakeholder that restricted the contraceptive usage of his wife. moreover, the study also highlights that contraceptive usage is the sole decision of husband instead of both spouses (asif et al., 2021; bajwa et al., 2012). the present empirical evidence revealed that husband education level and fertility preferences were the major influential factors of contraceptive usage among study participants. these fertility intentions of husbands were mainly inclined towards the birth of sons as they will provide future social and economic security to the married couple. in compliance with this study finding, previous evidence in global and local context depicted that the fertility intentions of the husband were inclined towards the sons’ preference and daughters’ devaluation. in order to fulfil these fertility aspirations, husbands opposed wives for contraception usage (khan & khan, 2010; sensoy et al., 2018, tiruneh et al., 2016; sattar et al., 2020, sattar et al., 2021). in the present study, the major individual-level theme was economic restrictions towards contraceptive usage. authenticating this finding, a previous study conducted in ethiopia also divulged that the economic cost of contraceptive usage was the major obstructing factor for the couple to restrict their family size (mohammad et al., 2014). another economic aspect was that the participants avoided birth spacing techniques because a large number of children could bring more income levels. the aforementioned study conducted by arif & kamran (2007) also endorsed this finding. contrariwise, the study conducted by tarar et al. (2019) divulged that with the passage of time, these couples realized that increased family size was not of monetary benefits but a burden on family income. the results also indicated that usage of contraceptives was perceived to be associated with adverse reproductive health problems such as impaired fertility and permanent infertility. in review of economics and development studies, vol. 8 (1) 2022, 01 12 9 compliance with the present study findings, previous empirical facts also proclaimed that the fertility intentions of the married women in pakistan were mostly inclined towards gods will, husband right to decide about contraceptive usage, and misperceptions about the adverse health effects of contraceptives usage on future births (agha, 2010; asif et al., 2021; sattar et al., 2019). 5. conclusion in conclusion, the study locality was based on orthodox, misogynistic, and gender-biased norms. these norms expected the women to be sublime for their reproductive rights in front of husbands. these reproductive rights comprised of obeying the orders of their marital partner about the number and sex ratio of their children. as evident, it was common practice in study locale that women should get married after the onset of puberty to be more fruitful in reproducing children. moreover, the social security of married women was dependent on their number of children (especially sons). therefore, women faced many personal and interpersonal level impediments towards contraceptive usage in the study context. based on contextualization of the data, the article proclaimed that personal level obstructive factors towards fp were age of the married women, education level of husband, the economic cost of contraceptive usage, and adverse effects of contraceptives on the health of married females. furthermore, the inter-personal level factors comprehended of husband opposition towards contraception usage, and discussion about contraception usage with husband as an anti-normative act. 5.1 strengths, limitations, and future research directions the present research comprised of many strengths such as i) usage of three exploratory research techniques i.e. ids, idis, and fgds to explore the individual and group perspectives of the study participants ii) usage of three major age groups for data collection i.e. early reproductive age span (14-30 years), late reproductive age span (31-45 years), and crossing the menopausal stage (more than 50 years) accompanied by iii) large sample size for exploring the individual and group viewpoint of participants. diverging the above-said strengths, the major limitations of the present empirical research were subsequently mentioned i) usage of subjective exploratory method from married women and absence of common people opinion about obstructions in contraceptive usage. therefore, future researches must include a triangulation method in which both exploratory and explanatory approaches of data collection must be used ii) the present research focused on individual and interpersonal level obstructive factors towards contraceptive usage. but the future studies must include the structural level obstructions towards the adoption of birth spacing techniques. moreover, the women’s own misogynistic socialization that restricts them to use contraceptives should be the major focus in future researches, and iii) the present research put forth women’s viewpoint about obstructing factors for contraceptive usage. future researchers must be enriched by including the perspective of husbands, inlaws, and natal family as the major stakeholders for contraceptive usage in the study locale. 6. policy implications in light of the present study findings, we put forth the following policy implications for improving contraceptive usage among married females in the study locale. 1. government should launch awareness campaigns about the benefits of child spacing and its positive effects on maternal health. 2. government should launch media awareness campaigns for married couples and their families about the false myths related to contraceptive usage. 3. government should provide monthly incentives to married couples for contraceptive usage. review of economics and development studies, vol. 8 (1) 2022, 01 12 10 4. government should implement strict laws and punishments about child marriages (less than 18 years) for delaying the reproductive age span of married females. 5. government should appoint educated religious scholars from all sects of islam who can spread accurate religious teachings about birth spacing through the usage of contraceptive methods. 6. government should provide free contraceptive availability for married women to save its economic cost. 7. government should provide a “health card for women” to ensure their free-of-cost laboratory tests, ultrasounds, operations, and regular checkups from qualified gynecologists. references agha, s. 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(2016). factors associated with contraceptive use and intention to use contraceptives among married women in ethiopia. women & health, 56(1), 1-22. review of economics and development studies, vol. 6 (3) 2020, 687-702 687 analysis of alignment between national curriculum of education and textbooks at higher secondary level in punjab-pakistan sobia saher a , najam-ul-kashif b a ph.d. scholar, department of education, the islamia university bahawalpur, pakistan email: qamarmisbah99@gmail.com b assistant professor, department of education, the islamia university bahawalpur, pakistan email: drnajam.ulkashif@iub.edu.pk article details abstract history: accepted 18 july 2020 available online 30 september 2020 this study was conducted to identify the degree to which the objectives of higher secondary level national curriculum of education were aligned with the textbooks in punjabpakistan. the study was done by reviewing the national curriculum of education and textbooks for grade xi and xii so as to find the degree of alignment. the quantitative analysis was done by using surveys of enacted curriculum (sec) method. in quantitative analysis the content of the textbook was analyzed with respect to student learning outcomes [slos] given in the curriculum. it was found that content in the education-xi and xii textbook were not aligned to a desired level. alignment index (ai) of education xi and xii textbook were 0.61 and 0.50 respectively. this misalignment was not same for all the categories of cognitive domain. the outcomes of the study revealed that there were some gap between curriculum and textbooks. the study lays great implications in the sense that it provides feedback to curriculum developers and textbook writers to consider alignment between curriculum objectives and textbook content. the study suggests adequate training for the curriculum and textbook developers to ensure alignment between national curriculum and textbooks. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: national curriculum, education textbooks, alignment, higher secondary level jel classification: i23, i29, p36, p46 doi: 10.47067/reads.v6i3.256 corresponding author’s email address: drnajam.ulkashif@iub.edu.pk 1. introduction pakistan is a developing country and for making it develops and prospers, we need quality education, international standards meeting educational institutes and quality teachers. curriculum is considered as a vehicle to transfer the societal values and norms through the teaching learning process in the educational institutions (banks, 2015). curriculum is a crux of education. education is transfer of knowledge, attitudes and skills from one generation to the next, whereas curriculum “reflects forms of knowledge, habits of thinking, and cultural practices that a society considers important enough to pass on to succeeding generations” (triche, 2002). curriculum is revamping of child’s experience to “the review of economics and development studies, vol. 6 (3) 2020, 687-702 688 organized body of truth” (dewey, 1902) and sum of “all the learning experiences planned and directed by the school” (tylor, 1957). curriculum is the product of mutual consensus among all the stakeholders such as curriculum specialists, educational managers, parents, students and teachers. it specifies the learning outcomes to be achieved after classroom instruction. it guides a teacher, educational manager, textbook/instructional material developer, and examiner. however, instructions given in curriculum are mostly not followed (leithwood et al., 2004). therefore, the curriculum specialists stress on curriculum alignment. they define curriculum alignment as the degree of coordination among curriculum, instructions, and assessment to facilitate students’ learning (martone & sireci, 2009). curriculum alignment is the method of “educational quality control” where the “process of teaching and learning is predetermined, pre-paced, and pre-structured” (rubin & kazanjian, 2011). what societies envisage as important to learn constitutes the “official “or “intended “curriculum. what is delivered in the classroom constitutes the “implemented” or “enacted” curriculum. what students learn constitutes the “achieved” or “assessed” curriculum (porter, 2002). later, roach, niebling, and kurz (2008) defined alignment “as the extent to which curricular expectations and assessments are in agreement and work together to provide guidance to educators’ efforts to facilitate students’ progress towards desired academic outcomes”. the enacted curriculum provides an explanation for the presence or lack of presence of alignment between learner expectations and assessment (anderson, 2002; elliott et al, 2001; pellegrino, 2006; webb, 1997). the enacted curriculum represents collective and comprehensive output of all the educational stakeholders who have a role to play in any form for curriculum development. it represents the agreement after discussion of the educational experts, managers, and the teachers. however, it is vital for the teachers to plan their teaching in such a way that the objectives outlined in the intended curriculum are achieved (kuhn & rundle, 2009). recently, the educationists have placed significant emphasis upon curriculum alignment (porter, smithson, blank, & zeidner, 2007). gagnon et al., 2009 proposed that the degree of co-relation among curriculum, instruction & assessment is called as curriculum alignment. teachers and learners are necessary pillars of instructions. these resources are necessary for the good alignment of curriculum. the written curriculum adopts shape when the agencies follow the standards to outline what content and procedures should be communicated in the schools. in theory, text-books are devised on the basis of written curriculum. the curriculum also guides the text-book evaluation. the term “potentially implemented curriculum” to describe the role of te introduced. this role of textbooks made an intermediate stage between the written and the implemented curriculum. increased attention is being paid to quality of textbooks across the globe (tornroos, 2004). in pakistan “textbooks are considered as the sole and legitimate source of knowledge both for students and teachers”. given the importance of published curriculum materials in teaching and learning which is mainly in the form of textbooks in many developing countries including pakistan, the establishment of an effective method of evaluation of these materials by their potential users and experts is an important goal. there are factors that make the textbook a quality textbook by ensuring the presence of those factors through adopting critical and rigorous evaluation processes (bano, 2005). the arguments in favor of critical evaluation of textbooks and associated materials, but acknowledge that time, particularly in relation to textbook adoption, can be a challenge (ladnier-hicks., et al. 2010 and jitendra et al., 2010). in pakistan, curriculum formulation for higher secondary school level is the main responsibility of the curriculum wing, ministry of education. the curriculum wing develops and notifies curricula for all subjects from early childhood education to higher secondary level (grade xii) by involving subject and pedagogical experts from all provinces and other administrative parts of the country. curriculum wing is empowered through the federal supervision of curricula, textbooks and maintenance of standards of education review of economics and development studies, vol. 6 (3) 2020, 687-702 689 act, 1976 to supervise curricula, textbooks and other learning materials as well as to maintain standards of education in the country (government of pakistan, 1976). all textbooks those are recommended for use in public sector institutes of the country should have been approved after their careful evaluation by curriculum wing. therefore, it is usually recognized in educational fields in pakistan that there are some deficiencies seen in textbooks, approved by curriculum wing and also in textbooks. these deficiencies have been reported with respect to different characteristics of quality textbooks including, but not limited to, content coverage, scope of developing understanding, horizontal and vertical alignment in the text, and approaches to the delivery of textbooks (mahmood, 2006 and tasneem, 2008). textbook deficiencies have provoked much debate about the procedures used to gain textbook approval from cw and the textbooks themselves. although there are many factors to account for deficiencies in the textbook selection procedures being used, two appear prominent: a) appropriate criteria against which to judge textbook characteristics; and b) the factors through which to identify the textbook characteristics to be judge against the curriculum criteria. by overcoming these deficiencies the quality of textbooks could be improved (mahmood, 2011). the alignment of textbooks with the curriculum ensures alignment of instruction, assessment and evaluation with the curriculum. however, development of text-books aligned with the curriculum is considered one of the initial aspects for implementing of curriculum (hu et al., 2014). the curriculum document is considered to be the road map for the attainment of the national goals. for this purpose, the textbooks are developed in such a way that the contents presented in the textbooks are aligned with curriculum document. if there is no alignment in the textbooks and curriculum document, it is tough to achieve the desired objectives. therefore, bernard et al., (2014) adduced that researches do not validate the publishers’ claim for devising text-books with reference to curriculum. resultantly, textbooks in the punjab-pakistan can’t be certainly aligned with the curriculum. in 2004, human development foundation declared that textbooks in all over pakistan have language, presentation issues as well as diverge from the national curriculum. in addition to this, misaligned text-books with curriculum have circulated in punjab (rassool et al., 2007). mahmood (2011) examined the standard of prevailing text-books with internationally accepted yardstick. he concluded that it might be due to the least approach of the teachers to the national curriculum, in pakistan. pctb has developed quality standard for developing textbooks. the first standard to establish a quality text-book is the knowledge and awareness of the writer about curriculum of the specific subject (punjab textbook board, 2014). it shows that compatibility level of textbooks to the curriculum is important yardstick for assessment of textbook. doyle and rosemartin (2012) explained that curriculum was misaligned where curriculum developers and implementers were not compatible. it is also revealed from different researches. mahmood (2011) found that the textbooks were incompatible to the curriculum with reference to the ‘basic components of curriculum’. furthermore, also observed that textbook developers in pakistan were not familiar with the curriculum. nayyar (2013) also unfolded that in pakistan, textbooks are actually ‘misinterpretation or misrepresentation’ of the prevailing curriculum. analysis of studies conducted on textbooks in punjab shows that (a) quality of textbooks has been examined independently, (b) few studies have analyzed textbook in relation to the curriculum and even these studies have not employed the recent alignment measurement methods, and (c) textbook content may not be compatible to the content suggested in the present curriculum. previous research identifies that there was little alignment between the curriculum contents and textbooks (sqires, 2005). because of the inclination of the understanding that the deficiency of the alignment between the curriculum document and the textbooks is one basic reason for the letdown of students that eventually cause for the higher dropout rate (brown & niemi, 2007). additionally, the alignment of text-books to review of economics and development studies, vol. 6 (3) 2020, 687-702 690 the prevailing curriculum is in line with the curriculum implementation frame-work punjab’ developed by punjab curriculum and textbook board (2014). however, gap in literature exists about the studies giving the degree of alignment of the education textbooks content to the content in national curricula of pakistan. the current study was carried out for probing that how much the content of education textbooks at higher secondary level are compatible or aligned to the curriculum by applying the recent mechanism for the measurement of curriculum alignment. to recognize the significance of this area of research, some researchers have been done in pakistan as well (mahmood, iqbal and saeed, 2009; mahmood, 2011 and shah, 2012), but focus of all these researches was the elementary school subjects. to identify alignment between curriculum and textbooks, no sufficient research has been met at higher secondary level for the education subject in punjab. the subject education is offered at secondary and higher school level to the students of humanities group. the basic aim to offer this subject at higher secondary level is to prepare the students for the future teachers with basic or fundamental needs and objectives. now, how much this aim is achieved with the offered curriculum through textbooks is the basic aim of the study. so the study based on investigation that to what extent is the content of education textbooks at higher secondary level aligned with national curriculum of pakistan? 2. research design the study was quantitative in nature. for quantitative analysis surveys of enacted curriculum [sec] method was used. this method has been used across the globe, particularly in united states of america, for measuring the level of alignment instruction and instructional materials with curriculum, [studies conducted by (a) liu, zhang, liang, fulmer, kim, & yuan, (2009) in china, usa & singapore, (b) ndlovu & mji (2012) in south africa, and (c) bhatti, jumani, & bilal (2015) in pakistan, (d) kurz, elliott, wehby, & smithson (2010) in usa]. the (sec) model was developed by andrew porter and john smithson from wisconsin center for education research. an important quality of sec method for measurement of curriculum alignment is that it can be used for measurement of degree of alignment between content in textbooks with the objectives and content of curriculum. therefore, sec method of curriculum alignment was employed to find out quantitative measurement of alignment of content in education textbooks at higher secondary level with that of curriculum. for this, sec protocol was developed for curriculum and the textbooks. the researcher analyzed the curriculum and then the textbooks. the contents given in the textbooks were analyzed. the basis of analysis was the number and nature of students learning outcomes [slos]. although slos were given in the curriculum for every chapter. the number and nature of slos were analyzed at chapter level. the research instrument (sec protocol) for education textbook grade-xi was consisted of eight rows for the eight chapters and six columns for the six categories of cognitive domain (remember, understand, apply, analyze, evaluate, and create). in this way a matrix of 8x6 (48 cells) was obtained for the curriculum. the same 8x6 matrix (48 cells) was obtained for the textbook grade-xi and 5x6 matrix (30 cells) for the curriculum and textbook gradexii. then value in each cell was divided by the sum of values for every column. then ratio difference was found by subtracting the values of every cell of one matrix (for curriculum) from the corresponding cell of the other matrix (for textbook). quantitative measure of alignment was calculated by using porter’s (2002) formula of alignment index. moreover, to calculate the strength of alignment, fulmer’s (2011) table of critical values was employed. this made possible to compare and contrast quantitatively the content in textbooks with that of curriculum. quantitative analysis was done through following documents: review of economics and development studies, vol. 6 (3) 2020, 687-702 691  national curriculum of education for grade xi-xii , ministry of education (curriculum wing) government of pakistan, islamabad.  textbook for gradexi published by punjab curriculum and textbook board, lahore.  textbook for gradexii published by punjab curriculum and textbook board, lahore. 3. results table 1 exhibits alignment of education-xi textbook with curriculum. it is clear from the table that alignment index value is 0.61 which indicates that education-xi textbook is considerable misaligned with the curriculum. the content in the textbook is also misaligned individually with respect to all categories of cognitive domain. individually the calculated ai values for remember, understand, apply, analyze, evaluate and create categories of cognitive domain are 0.86, 0.80, 0.50, 0.50, 0.50 and 0.50, respectively. the misalignment is not same relating to different levels of cognitive domain. the content in textbook for the remember category is significant aligned (ai=0.86) and for understand category is considerable aligned (ai= 0.80) with the curriculum. the content in textbook for the apply, analyze, evaluate and create categories is critically misaligned (ai=0.50) with the curriculum. following results revealed from the quantitative analysis of data. table 1: alignment of education grade-xi textbook with curriculum ratio difference of slos with respect to chapter nos remember understand apply analyze evaluate create 1 0.08 0.05 0.11 0.18 0.08 0.00 2 0.01 0.03 0.05 0.18 0.08 0.00 3 0.01 0.09 0.05 0.27 0.25 0.00 4 0.09 0.01 0.84 0.00 0.29 0.00 5 0.03 0.01 0.00 0.00 0.08 0.00 6 0.01 0.07 0.16 0.00 0.04 0.00 7 0.04 0.13 0.11 0.00 0.12 0.00 8 0.01 0.01 0.33 0.36 0.04 1.00 total 0.28 0.40 1.00 1.00 0.98 1.00 alignment index 0.86 0.80 0.50 0.50 0.50 0.50 average alignment index (ai) = 0.61 figure 1 indicates comparison of content in education-xi textbook with curriculum relating to remember level of cognitive domain. it is obvious from the graph that except chapter 6 and 7, the textbook provides more content about learning outcomes relating to remember level with that in curriculum. figure 1: alignment between content in textbook and curriculum: remember level 1 2 3 4 5 6 7 8 0 5 10 15 20 curriculum (remember) textbook (remember) chapter nos n o o f s l o s review of economics and development studies, vol. 6 (3) 2020, 687-702 692 figure 2: alignment between content in textbook and curriculum: understand level figure 2 indicates comparison of content in education-xi textbook with curriculum relating to understand level of cognitive domain. it is obvious from the graph that in chapter 1, 2, 3, 4 and 5 the textbook provides more content about learning outcomes relating to understand level with that in curriculum. in chapter 6, 7 and 8 curriculum provides more content about learning outcomes relating to understand level with respect to textbook. figure 3 exhibits comparison of content in education-xi textbook with curriculum relating to apply level of cognitive domain. it is obvious from the graph that in chapter 1, 2, 3, 4 6, 7 and 8 the curriculum provides more content about learning outcomes relating to apply level as compared to textbook. in chapter 5 curriculum and textbook provide no content about learning outcomes relating to apply level. figure 3: alignment between content in textbook and curriculum: apply level 1 2 3 4 5 6 7 8 0 10 20 30 curriculum (understanding) textbook (understanding) chapter nos n o o f s l o s 1 2 3 4 5 6 7 8 0 10 20 30 40 curriculum (apply) textbook (apply) chapter nos n o o f s l o s review of economics and development studies, vol. 6 (3) 2020, 687-702 693 figure 4: alignment between content in textbook and curriculum: analyze level figure 4 indicates comparison of content in education-xi textbook with curriculum relating to analyze level of cognitive domain. it is evident from the graph that the textbook provides no content about learning outcomes relating to analyze level of cognitive domain as opposed to the curriculum which suggests learning outcomes in chapter 1, 2, 3 and 8. figure 5 indicates comparison of content in education-xi textbook with curriculum relating to evaluate level of cognitive domain. it is evident from the graph that the textbook provides no content about learning outcomes relating to evaluate level of cognitive domain as opposed to the curriculum which suggests learning outcomes in chapter 1, 2, 3, 4, 5 and 6. figure 5: alignment between content in textbook and curriculum: evaluate level figure 6 indicates comparison of content in education-xi textbook with curriculum relating to create level of cognitive domain. it is evident from the graph that the textbook provides no content about learning outcomes relating to create level of cognitive domain as opposed to the curriculum 1 2 3 4 5 6 7 8 0 10 20 30 40 curriculum (analyze) textbook (analyze) chapter nos n o o f s l o s 1 2 3 4 5 6 7 8 0 5 10 15 20 25 curriculum (evaluate) textbook (evaluate) chapter nos n o o f s l o s review of economics and development studies, vol. 6 (3) 2020, 687-702 694 which suggests learning outcomes in chapter 6 and 8. figure 6: alignment between content in textbook and curriculum: create level table 2 exhibits alignment of education-xii textbook with curriculum. it is clear from the table that alignment index value is 0.50 which indicates that education-xii textbook is not aligned with the curriculum. the content in the textbook is also misaligned individually with respect to all categories of cognitive domain. individually the calculated ai values for remember, understand, apply, analyze, evaluate and create categories of cognitive domain are 0.50, 0.50, 0.50, 0.50, 0.50 and 0.50, respectively. the misalignment is same relating to different levels of cognitive domain. the content in textbook is critically misaligned (ai=0.50) with the curriculum. table 2: alignment of education grade-xii textbook with curriculum ratio difference of slos with respect to chapter nos remember understanding apply analyze evaluate create 1 0.24 0.29 0.20 0.00 0.13 0.00 2 0.14 0.14 0.13 0.12 0.13 0.00 3 0.20 0.14 0.20 0.37 0.20 1.00 4 0.19 0.21 0.20 0.00 0.13 0.00 5 0.33 0.22 0.47 0.51 0.41 0.00 total 1.00 1.00 1.00 1.00 1.00 1.00 alignment index 0.50 0.50 0.50 0.50 0.50 0.50 average alignment index = 0.50 1 2 3 4 5 6 7 8 0 10 20 30 40 50 60 curriculum (create) textbook (create) chapter nos n o o f s l o s review of economics and development studies, vol. 6 (3) 2020, 687-702 695 figure 7: alignment between content in textbook and curriculum: remember level figure 7 indicates comparison of content in education-xii textbook with curriculum relating to remember level of cognitive domain. it is obvious from the graph that except chapter 1 and 5, the textbook provides no content about learning outcomes relating to remember level with that in curriculum. figure 8: alignment between content in textbook and curriculum: understand level figure 8 indicates comparison of content in education-xii textbook with curriculum relating to understand level of cognitive domain. it is obvious from the graph that except chapter 1 and 5 the textbook provides no content about learning outcomes relating to understand level with that in curriculum. 1 2 3 4 5 0 20 40 60 curriculum (understanding) textbook (understanding) chapter nos n o o f s l o s 1 2 3 4 5 0 20 40 60 curriculum (remember) textbook (remember) chapter nos n o o f s l o s review of economics and development studies, vol. 6 (3) 2020, 687-702 696 figure 9: alignment between content in textbook and curriculum: apply level figure 9 exhibits comparison of content in education-xii textbook with curriculum relating to apply level of cognitive domain. it is obvious from the graph that except chapter 5 the textbook provides no content about learning outcomes relating to apply level as compared to curriculum. figure 10 indicates comparison of content in education-xii textbook with curriculum relating to analyze level of cognitive domain. it is evident from the graph that the textbook provides no content about learning outcomes relating to analyze level of cognitive domain as opposed to the curriculum which suggests learning outcomes in chapters 2, 3 and 5. figure 10: alignment between content in textbook and curriculum: analyze level figure 11 indicates comparison of content in education-xii textbook with curriculum relating to evaluate level of cognitive domain. it is evident from the graph that the textbook provides no content about learning outcomes relating to evaluate level of cognitive domain as opposed to the curriculum which suggests learning outcomes in chapter 1, 2, 3, 4, and 5. 1 2 3 4 5 0 20 40 60 curriculum (apply) textbook (apply) chapter nos n o o f s l o s 1 2 3 4 5 0 20 40 60 curriculum (analyze) textbook (analyze) chapter nos n o o f s l o s review of economics and development studies, vol. 6 (3) 2020, 687-702 697 graph 11: alignment between content in textbook and curriculum: evaluate level figure 12: alignment between content in textbook and curriculum: create level figure 12 indicates comparison of content in education-xii textbook with curriculum relating to create level of cognitive domain. it is evident from the graph that the textbook provides no content about learning outcomes relating to create level of cognitive domain as opposed to the curriculum which suggests learning outcomes in chapter 3 only. 4. discussion on the basis of quantitative analysis, the findings are as, after completing the content analysis of the textbooks with respect to the slos proposed in the curriculum, the degree of alignment was found. the textbooks are not aligned with curriculum document. the degree of textbooks alignment fluctuates and there is an inverse relationship between textbook and curriculum alignment. textbooks are not written specifically to align with learning standards, so given in the curriculum document. the main objectives were proposed in the light of curriculum document used by the curriculum development agency (ministry of education, curriculum wing, islamabad). the main aim of introducing education as a subject at higher secondary level was an innovative way to increase the number of teachers but the 1 2 3 4 5 0 20 40 60 curriculum (evaluate) textbook (evaluate) chapter nos n o o f s l o s 1 2 3 4 5 0 20 40 60 curriculum (create) textbook (create) chapter nos n o o f s l o s review of economics and development studies, vol. 6 (3) 2020, 687-702 698 curriculum was not designed to meet this need (national curriculum of education, 2011). some content relating to professional skills was included in the curriculum but textbooks were not developed to achieve the desired objectives. there were three main standards given in the said curriculum document; a) knowledge; b) skills; c) dispositions. as for as knowledge standard is concerned, textbooks are overloaded but skill standard is completely ignored. the textbooks are not designed to develop professional skills in students. the alignment between the curriculum objectives and the textbooks was ignored. the content in the education grade-xi and xii textbooks was misaligned with the curriculum. alignment index (ai) of education gradexi and xii textbooks were 0.61 and 0.50 respectively it was found that alignment index value 0.61 indicates that education grade-xi textbook was considerably misaligned with the curriculum. the content in the textbook was also misaligned individually with respect to all categories of cognitive domain. individually the calculated ai values for remember, understand, apply, analyze, evaluate and create categories of cognitive domain were 0.86, 0.80, 0.50, 0.50, 0.50 and 0.50, respectively. the misalignment was not same relating to different levels of cognitive demand. the content in the textbook for the remember category was significant aligned (ai=0.86) and for understand category was considerable aligned (ai= 0.80) with the curriculum. the content in textbook for the apply, analyze, evaluate and create categories was critically misaligned (ai=0.50) with the curriculum. however, it was concluded that the textbook failed to provide the content with respect to higher order of cognitive demand viz. apply, analyze, evaluate and create. it was also found that content in the textbook grade-xi was unable to achieve the main aim of curriculum, which was due to over emphasis on remember level and neglecting the skills. the analysis of education grade-xii textbook revealed misalignment with curriculum. it was concluded that alignment index value was 0.50 that was critically misaligned with the curriculum. individually the calculated ai values for remember, understand, apply, analyze, evaluate and create categories of cognitive domain was 0.50. the misalignment was same relating to different levels of cognitive domain. the content in textbook was critically misaligned (ai=0.50) with the curriculum. it was concluded that education textbook grade -xii was unable to develop the desired professional skills in students. previous researches (akhtar (2004), rehman (2004) and faize (2011) showed that the textbooks in pakistan consisted of irrelevant content which could not ensure realization of outcomes proposed in the curriculum. present research showed that the education textbooks grade-xi and xii were overloaded with respect to only remember level of cognitive domain. the higher levels of cognitive domain may ignored completely. mostly teachers and students consider that textbooks are genuine and authentic source of knowledge (jong et al., 2005). government of pakistan (2006) acknowledges that at present, the text-books are unique and exclusive source for teachers and learners in pakistan. mahmood (2011), revealed that textbooks in pakistan do not fulfill the globally accepted quality standard of textbook. for harmonizing the content in the education textbooks grade-xi and xii with the curriculum, it is necessary that emphasis of content may be changed from lower level to higher level. there should be less content related to remember category of cognitive domain. more content is needed for understand category of cognitive domain. in the curriculum, there are a few slos with respect to higher order of cognitive domain viz. apply, analyze, evaluate and create. however, these slos are very significant and content should be provided in the textbook to achieve these slos. it shows that textbooks do not treat topics deeply contrary to demand of curriculum. curriculum suggests achieving higher order review of economics and development studies, vol. 6 (3) 2020, 687-702 699 learning outcomes for some topics, but textbook content is limited to lower order learning outcomes of knowledge category and to some comprehension category. the main objective of the curriculum was to develop teaching skills in students but textbooks are failed to provide content to achieve the objectives. however, a gap was found in the textbooks for providing any activity for the development of skills like teaching skills, critical thinking, problem solving, creativity and productivity in higher secondary school students. the gap between the textbooks and the curriculum reflects lack of coordination between curriculum developers and the textbook writers. textbook writers should follow the guidelines for developing textbooks as prescribed in the national curriculum. proper mechanism should be adopted to devise and publish textbooks so that the content in the textbooks is genuine, authentic, flawless and critically aligned with the proposed objectives in the curriculum. there should be at least one common person in the development of curriculum and writing textbook to enhance the alignment between curriculum and the textbook. curriculum alignment can provide a framework for examining the extent to which the learner expectations, instructions and assessments were aligned. the findings of this study contribute towards improving the learning of students with its call to explicitly identify cognitive processes at all levels to be learned, and to determine if the enacted curriculum and the assessed curriculum, both revised to take account of the cognitive processes, are properly aligned. 5. conclusions and recommendations keeping in view the results and discussions, it was concluded that the textbooks of education for higher secondary level do not meet the criteria necessary for skills development among higher secondary school students in present era. the outcomes of the study revealed that there were some gap between objectives of curriculum and textbooks. the study suggests adequate training for the curriculum and textbook developers to ensure alignment between national curriculum and textbooks. when a new curriculum is put together or when a major revision is done at any level, several learning trajectories need to be incorporated in the curriculum. it is essential to discuss the learning trajectory that leads to the expected outcomes. national curriculum of education should aim at encouraging students to: (a) develop a sense for teaching profession, (b) use of technology to acquire new knowledge and (c) engage in research related activities appropriate to their interests and abilities. textbook content should congruent with the curriculum with respect to accuracy of content and being related to the aims of curriculum. however, the textbook writers should follow the guidelines given in the curriculum. since teachers in public sector in pakistan have almost no access to the national curriculum document, provided only to textbook writers for their guidance (bano, 2005), it is imperative that the textbook writers have an additional responsibility to ensure that the textbook reflects all the objectives of curriculum and all characteristics proposed in the curriculum document. in order to meet this requirement and overcome above mentioned deficiencies, it is recommended that cw must devise explicit criteria that content in textbook do not deviate from the objectives of the curriculum. a well planned education curriculum is needed to achieve the desired objectives. if the students are provided with an organized and systematic curriculum then they can excel in professional field. teachers should also be included in the pool to identify issues related to the effectiveness and make necessary changes in the curriculum. teachers of the respective level of textbook must be part of textbook writer’s team. teaching education at higher secondary level should support beginner students, 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(1997). determining alignment of expectations and assessments in mathematics and science education. nise brief, 1(2). review of economics and development studies vol. 5, no 3, 2019 505 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads an empirical investigation of consumer satisfaction from private transport services in district peshawar 1 khairullah jan, 2 sher ali , 3 abid ali, 4 muhammad shabir jan 1 ms scholars, department of economics islamia college, peshawar 2 assistant professor and lecturer, department of economics, islamia college, peshawar. 3 assistant professor and lecturer, department of economics, islamia college, peshawar 4 department of economics, bacha khan university, charsadda article details abstract history revised format: 30 june 2019 available online: 31 july 2019 this study aimed to find out the consumer satisfaction from private transport services in peshawar, khyber pakhtunkhwa, pakistan. for this purpose primary data was collected through structured questioner. questioners were distributed to 450 targeted samples in the study area. four hundred and twenty-nine questioners were successful filled from respondents. different fifteen variables were identified from literatures which determine consumer satisfaction. as the nature of the dependent variable i.e. satisfaction is binary (categorical variable: yes/no). therefore, all the information’s collected analyzed through probitregression technique. four different models were estimated to investigate different factors affecting consumer satisfaction individually and collectively. out of fifteen variables nine variables are founded statistically significant. significant variables were quality of vehicles, cleanness of vehicles, availability of seats, driver skills, rout characteristic, waiting time, time taken to reach destination, regulatory services and frequency of vehicle. all these variables contributed positively with consumer satisfaction. sub factors of the timeliness were strongly relation with satisfaction level compare to other factors. mean value of servqual dimensions showed that customers are dissatisfied from transport services. consumers are dissatisfied at a large extent in district peshawar and feel hesitation during traveling. such tension and frustration during traveling affect adversely efficiency of the consumer. to avoid such dis-comport and increase in social welfare of the society which is the foremost objective of every government. therefore, government should intervene in private sector transport and ensure suitable policy for the future perspective. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords consumer satisfaction, transport sector, peshawar, pakistan jel classification: d11, l91 corresponding author’s email address: recommended citation: jan, k., ali, s., ali., a and jan, m. s. (2019). an empirical investigation of consumer satisfaction from private transport services in district peshawar. review of economics and development studies, 5 (3), 505-512 doi: 10.26710/reads.v5i3.710 http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 506 1. introduction it is the matter of fact that transportation plays a vital role in determination of economic status of the world economies. best transportation system means developed societies or economies. proper transportation help in different ways to fuel up economic growth and development in transition economies. it may help growth and development in the following ways: by increasing efficiency in production, provides jobs opportunity and make easier access to labor market, creates new business activities and fuel supply chain efficiency. however, all transport sector projects not generate the above mentioned opportunities, but it may play a driving role to improve investments. job creation, trade facilitation, quick and easy access to market and raw material will definitely help economic status of the economy. urbanization occurs mainly because people move from rural areas to urban areas. due to such persistent and continuous movement urbanization increases and scatters. though, urbanization caused by rapid and unplanned urban growth resulting in poor infrastructures such as inadequate housing, water and sanitation, transport and health care services (undesa, 2014). poor and inadequate planning regarding population settlement in most of the metropolitan cities in developing countries makes worse the situation. pakistan is one of the developing countries which face the problem of high population growth and incompatible policy coordination. in this connection peshawar city is taken an example that faced the problem of high burden on infrastructure and existing resources. according to the bureau of statistics (gop, 2017) approximately 4,269,079 peoples are living in district peshawar with a population density of 3,400/km2 (8,800/sq mi). peshawar city is the capital city of the province khyber pakhtunkhwa (kp). it is an important city is respect of administration, business activities, education, health services and other services because it the hub of kp. due to its importance and most populous city for the different purposes consumers used the private transport services. passengers demand is rapidly raises with the local transportation services. despite, rapid population growth and urbanization caused the increase in transportation means which results in intensification for demand of transportation services, the rise in transportation demand also affect the growth in private transport means in the urban areas (kudokeder, 2003). the changes of the structure and system governing of the private transport services over the last decade overall the transport sector remains highly criticized in term of the quality services. the main issues are frequency of vehicles, timeliness factors and availability of seats. an augmented in consumer satisfaction causes an increase the welfare level of the individuals who use that services (johnson et al., 2001). the problem associated with the waiting time, vehicles’ delay, while on the other side, no information disk to deliver correct information about the services (demoulin, 2007). security is also a big issue of the transport sector for consumers’ satisfaction, which mostly consumers face the pick pocketing problem during journey time (iles, 2005). transportation problem faces by all cities throughout the world, particularly in developing countries such problems rapidly increase the urbanization because people use their own cars instead of public transport. such problems are harmful impact on social and economic condition (talba & saad, 2008). developing cities consist of weak quality services of the public transport which shifted passengers from public to private transport (dhingra, 2011). with the passage of time, increase in travel demand and preference is a challenge for the transportation sector which raises the use of private vehicles throughout the world (ellaway et al., 2003). previous studies regarding consumers satisfaction from private transport sector. literature reported that challenges faced by the consumers are comfortability, cleanliness, time loss poor status of vehicles, over crowdedness etc. which definitely creates discomfort for consumer. these problems associated with traveling affect the physical and psychological aspects of human lives. moreover, such discomforts also augment the demand for self-motorization which further worsen the private sector transport by increasing the number of vehicles. private sector transport failed to provide comfortable travel to consumers. therefore, it is very important to identify those factors, which determine consumer satisfaction in the study area in order to increase social welfare of the society by augmenting private transport according to the consumer needs. 2. literature review obioma et al. (2013) studied transport system and its problems in abuja, nigeria. the study was based on primary data. with the help of survey method, data for 350 respondents were collected. they measured the satisfaction level by applying chi-square and percentage techniques. the outcomes of the study showed that there were differences review of economics and development studies vol. 5, no 3, 2019 507 between consumers and other factors like safety, departure and arrival time, affordability, comfort and regularity which causes dissatisfaction. the recommendation of the study was that government intervention is needed to avoid discomfort of the consumer. rohani et al. (2013) explained that in malaysia consumer satisfaction was affected by drivers’ skills and the quality of vehicles. primary data from 220 respondents were gathered through questionnaire. the research was descriptive and data were analyzed through diagrams and tables. this study showed that comforts, cleanness, reliability and safety were the factors which influenced satisfaction of consumers. another study conducted by rozmi et al., (2013) revealed the same results for malaysian transport sector. borhan et al. (2014) compared malaysian private and public transport services. this paper was based on primary data, in which data were collected through structure questionnaire from 290 respondents. they applied structural equation model for the measurements of different factors. this study determined that there is a positive relation of environmental factors and services quality with consumers’ satisfaction of public transport sector. this paper recommended the intervention of transport management promote those factors which significantly affected the satisfaction of consumers. chandrakumara (2014) studied analyzed factors affecting consumer satisfaction from transport sector of colombia, sri lanka. the study was based on primary and was gathered through questionnaire. for estimation of the impact box-plot and principle components analyses techniques were applied. out of 33 elements 17 showed significant relation with the satisfaction of consumers. the factors which showed satisfaction are behavior of staff, information time, and safety, on the other hand dissatisfaction were caused by the factors of delivery. the recommendations of the study were that proper utilization and reallocation of resources should be made to improve transport sector. fatma et al. (2014) explained the quality of services for consumer satisfaction. the study was conducted for turkey. the study was based upon primary and 285 samples were gathered. they applied servqual model and mean techniques. this study resulted that the satisfaction level of consumers and employees are significantly related with transport sector. the study recommended that the skills and practice will overcome the mechanical needs and will improve consumer satisfaction. islam et al. (2014) investigated the satisfaction of consumer for kedah, malaysia. they gathered primary data of 300 samples. they used multiple regression models for estimation of data. the outcomes of the study showed that the factors like availability of time, services and environment are significantly related with consumer satisfaction. they recommended the government intervention for further improving the factors which show significant relation. noor et al. (2014) conducted a study for kota, malaysia and analyzed public bus services. primary data of 987 samples were collected through survey method. the estimation techniques used were mean, standard deviation and factor components analyses. the study showed that accessibility, comforts, and safety were the factors of consumer satisfaction while overcrowding and security were the factors of dissatisfaction. the government intervention is suggested in order to improve the factors of satisfaction and to avoid the negative factors. sabir et al. (2014) investigated the transport sector of pakistan and the level of consumer satisfaction. primary data of 200 samples were collected through questionnaire. regression and correlation techniques were applied. the outcomes indicated that all the factors have positive correlation with consumer satisfaction. they recommended that government should intervene in order to improve public transport system. abenoza et al. (2015) analyzed the factors of consumer satisfaction from transport services for sweden. they gathered primary data through survey for three years i.e. from 2011-2013. both analytical and descriptive techniques were applied for measurement. the results revealed that the factors like safety, security, staff and time affect consumers’ satisfaction negatively. they suggested that government should intervene to avoid these negative factors. hassan (2015) investigated the quality of services to estimate the level of satisfaction of consumers of dhaka, bangladesh. the primary data of 250 samples through survey were accumulated. the percentage techniques were review of economics and development studies vol. 5, no 3, 2019 508 used. the outcomes of the study indicated that arrangement and seat comfortability shows consumers satisfaction while smoking in travelling and security shows dissatisfaction. the study recommended the government intervention to encourage the positive factors as well as to hamper the negative factors for consumers’ satisfaction. poliakova (2015) conducted a study in slovakia and investigated the elements which affect the satisfaction level of consumer. the data is primary and quantitative in nature. data of 30000 respondents were accumulated. he concluded that comforts, safety prices and time are significantly related with consumer satisfaction. he recommended that the government intervention is required to boost the factors which show positive correlation and to avoid all those factors which shows negative correlation. yeboah (2015) conducted the study in ghana to attain consumer satisfaction and its relation with quality of services. this study was obtained for year 2014 based on cross-sectional and primary data. multiple regression tools were applied for estimation. the outcomes of the study identified that factors like affordability, continues services, comfort, reliability and safety, whereas the behavior of driver shows negative effects on consumer satisfaction. the study recommended that government intervention is required to encourage the positive factors and to dissemble the factors which create dissatisfaction. dana et al. (2016) explored consumer satisfaction from quality of services in ethiopia in 2011. primary data were gathered from different respondents while secondary data is drawn from different sources. the result showed that time, cafeteria and toilets services caused consumers dissatisfaction. they recommended that government and concerned authority intervention should keep in consideration to avoid and fix all these negative factors. morton et al. (2016) conducted a study on consumer satisfaction with regards to quality of services. this study was performed in ireland. the study was based on primary and a 3797 samples were accumulated by survey method. they applied factor analyses tools to estimate the data. the outcomes of the study stated that all the elements like availability, frequency, reliability and stability significantly affecting the level of satisfaction of consumer. they suggested that transport authority should intervene to encourage transport sector. jumbo (2016) conducted a study in dubai. this study explored the quality of services and the satisfaction level of consumer with regards to these services. primary data were collected from study area. by survey method he accumulated samples from 257 respondents. diagrams, tables and other simple statistical tools were applied for estimation of data. the study resulted that all the considered factors like assurance, empathy, reliability, responsiveness and tangibility has negative effects on consumers’ satisfaction level. the study recommended government intervention in order to promote the positive factors and to hinder the mentioned factors which have caused consumers’ dissatisfaction. a plethora of literature related to consumer satisfaction from transport sector in different economies located in different regions. huge number of variables are discussed affecting consumer satisfaction from transport sector depends on socio-economic conditions of the countries and regions. some of the factors discussed in literature are cleanliness, driver skill, rout or stream used by the vehicles, fare, frequency, time taken during travel, seats conditions, safety and security etc. some studies are of descriptive nature, while many studies have been used analytical techniques. primary data are used in most of the studies. both public and transport sectors are of more importance, but private transport sector transport is ignored in most of the developing countries, while private sector transport is the most common source of communication. therefore this study aimed to examine consumer satisfaction from private transport services. khyber pakhtunkhwa is the most growing province of the country regarding population and peshawar is the congested city of the province. according to a report about three million vehicles used the 180 kilo meters road of peshawar city daily. therefore it is important to investigate the factors affecting consumer satisfaction from such a huge transport used daily in the city of peshawar. this may be the first ever study regarding transport sector and consumer satisfaction in the province and city peshawar. this study is a contribution to literature in the case of consumer satisfaction from transport sector in peshawar. review of economics and development studies vol. 5, no 3, 2019 509 3. materials and methods this study was conducted to peshawar city of kp. here used those variables have significant impact on consumer satisfaction in the study area. 3.1 data collection to analyzed consumer satisfaction level by using servqual dimension of the transport services in peshawar city. consumer used different local services that targeted for this study. four hundred and fifty samples were targeted but there are 429 valid responded were collected through stratified random sampling and simple random sampling within the same strata. the present study adopted the comprehensive questionnaire on the base of the previous studies which used fivepoint likert-scale like highly satisfied to highly dissatisfied. there are fifteen variables are used in questionnaire. all variables have included in questionnaire that significant impact on consumer satisfaction. questionnaire contained on two sections. the first section include on demographic section and second one tangibility, reliability and assurance dimension of servqual. the present study have used descriptive statistics and as well as probit regression analyses. table-1: variable expression from designed questionnaire _________________________________________________________________________ s/n expression _________________________________________________________________________ x1 comfort-ability of seats x2 shelter & benches x3 vehicles cleanness x4 availability of seats x5 quality of vehicles x6 fare charge x7 behavior of conductors x8 driver have sufficient skills x9 route characteristic x10 safety & security x11 waiting time x12 journey time x13 destination time x14 frequency of services x15 regular of services _________________________________________________________________________ 3.2 factor extraction fifteen factors were analyzed by using questionnaire. every factor were recognized of code base on the whole form of the variable designed than analyzed . 3.3 tangibility tangibility factors concerned with physical appearance that relevant the services of transport sector. it was investigated by five factors, x1, x2, x3, x4 and x5. 3.4 assurance according to buttle., (1996) assurance refers to knowledge and politeness of workers and the ability to stimulate and confidence. this variable is crucial impact on consumer satisfaction. here it was analyzed by x5, x6, x7, x8, x9 and x10. 3.5 timeliness to achieve the reasonable result the average time should be range of 10-15minutes and maximum time should not exceed from 20 minutes (world bank, 1993). timeliness variable to how much time are was to satisfy the consumer satisfaction. this is represented of the factor by x11, x12, x13, x14, and x15. review of economics and development studies vol. 5, no 3, 2019 510 3.6 consumer satisfaction satisfaction is the consumer fulfillment, desire, utility. a consumer is satisfied whenever his needs and expectation are exceeded (garson, 1993). this variable is notified by yes and no code. 3.7 estimation techniques statistical packages for social science (spss) version 16.0 was used to interpret the data. first, the data were containing the fifteen variables which are represented of all variables of the questionnaire, further the data was extract factor. the data set obtained and factored analyses approach that involving a statistical (spss) and excel spreadsheet. 3.8 probit regression analyses probit regression technique was employed to measure the consumer satisfaction. the probit regression used to determine the degree of influence the independent variables on the dependent variable. functional relation between the consumer satisfaction and the set of variables that expressed here cs= f (x1, x2,,,,,,,, xn) where x1, x2, ,,,, xn that several variables are considered. the probit model was first introduced by chester bilssin, (1934). according to (bilssin, (1934), & ronald fisher, (1935) a probit model is a standard specification for the ordinal and binary responses model. probit models are applicable for those models of the study which are based on e.g. yes/no, agree/disagree, satisfied/ dissatisfied and like/dislike. here for the research purposes probit model is used for estimation and derives the suitable model under the consideration. suppose a response variable y is binary. it can be only two possible outcomes which denoted by 1 and 0. probit model is used in removing the problems of ordinary least square by fitting a nonlinear function to the data. probit model is generalized to justification for non-constant error variance in more advanced econometric setting (known hetroskedastic probit models (monkah, 2013, & cyganski, 2011). taj muhammad (2016) also put the data and used the probit model for the estimation. rosati., (2007) using probit estimation techniques for the study of ethiopia in 2001 data survey. 4. results and discussions the result of analyses is obtained through the application of statistical package for social science and excel spreadsheet to the variables are discussed here. 4.1 probit regression analyses using the probit regression model to measure the variables of consumer satisfaction, the models are considered for those variables which have significant relation with satisfaction. there are nine significant variables out fifteen variables. table 2: tangibility factors dependent variable: consumer satisfaction, marginal effect variables dy/dx std. err z p comfortability of seats 0.0653 0.854 0.07 0.445 shelter and benches 0.1635 0.1186 1.38 0.168 vehicles cleanness 0.4691 0.1248 3.76 0.000 availability of seats 0.3380 0.0772 4.38 0.000 quality of vehicles 0.3033 0.0976 3.11 0.002 source: field survey, 2018 table 3: assurance factors dependent variable: consumer satisfaction, marginal effect variables dy/dx std. err z p fare charge 0.1113 0.069 1.60 0.11 behavior of conductor 0.0371 0.074 0.50 0.61 driver have sufficient skills 0.2517 0.082 3.07 0.02 review of economics and development studies vol. 5, no 3, 2019 511 rout characteristics 0.2260 0.092 2.43 0.01 safety and security 0.1502 0.092 1.62 0.10 source: field survey, 2018 table 4: timeliness factors dependent variable: consumer satisfaction, marginal effect variables dy/dx std. err z p waiting time 0.2340 0.0743 3.14 0.02 journey time 0.0607 0.0954 0.64 0.52 destination time 0.2118 0.0938 2.26 0.02 frequency of services 0.6954 0.1307 5.32 0.00 regulatory of services 0.2516 0.0721 3.49 0.00 sources: field survey, 2018 table 5: whole model dependent variable: consumer satisfaction, marginal effect variables dy/dx std. err z p tangibility 0.693 0.17 4.01 0.000 assurance 0.341 0.90 0.38 0.153 timeliness 0.383 0.13 2.84 0.004 sources: field survey, 2018 as the evidence of table-2, on bases of beta coefficient, the result of the paper highlighted that consumer satisfaction and tangibility factors have positive direction. the vehicles of cleanness x3 worth is 0.4691 unit and pvalue are less than 0.05, which have significant impact on satisfaction. furthermore, x4 define the availability of seats has value is 0.3380 unit positive relation with satisfaction at significant at 0.00 level. the x5 variable denoted by quality of vehicles that positive impact on the satisfaction level. table 3 indicated that driver skills (ds) have positive relation with satisfaction level. the x8 implies that 1 unit change occur in independent variable while the other side 0.2517 unit change occur in satisfaction level. the rout characteristic variable denote by x9 were significance relation with satisfaction level. the worth of rout characteristic is 0.2260 units and p-value is less than 0.05. in table 4 shows that x11, x13 waiting and destination time were significant impact on consumer satisfaction level. the value of x11, x13 is 0.2340 unit and 0.2118 are respectively and less than 0.05. the x14 and x15 variable are important variables or frequency and regularly of services having both the positive impact on satisfaction level. the value of x14 and x15 is 0.6954 and 0.2516 unit brings in satisfaction level and p-value is significant of 0.00 and 0.00 level. the table 5 indicated the whole model of the study of the tangibility and timeliness have positive and significance relation to satisfaction level, have worth is 0.363 and 0.383 and pvalue is less than 0.05 level. 5. conclusions and policy recommendations this paper is to highlight the consumer’s satisfaction from private transport services in peshawar city (kp). the nature of the data is cross sectional data, while structural questionnaire has been designed for data collection. approximately three hundred & twenty nine out of three hundred & fifty samples were collected through survey method with outcomes 94 percent. probit regression technique is used for the estimation purposes. the tangibility, assurance and timeliness are considered in questionnaire. separately, four models were used for the estimation. timeliness factors were highly statistically significant and effectively. nine variables out of fifteen were statistically significant. overall the result output is consumers are dissatisfied from private transport services. 6. recommendations  this study recommended some policies to government to encourage the private transport sector regarding the consumers’ satisfaction level.  transport sector should provide enough seats for consumers.  provide proper vehicles to improve the quality of vehicles and cleanness of vehicles.  there should be an increase in the number of vehicles to minimize the waste of time of the consumers. review of economics and development studies vol. 5, no 3, 2019 512 references cats, o., abenoza, r. f., liu, c., & susilo, y. o. 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(2013). factors influencing customer’s satisfaction in urban public transport in tanzania,“a case study of public transport in kigoma-ujiji urban (doctoral dissertation, the open university of tanzania) 6 (4), 6783. tolba, m, k. and saab, n. w. (2008). arab environment future challenges. report of the arab forum for environment and development (afed), 9 (1), 23-42. voss, b. g., parasuraman, a., & grewal, d. (1998). the role of price, performance and expectations in determining satisfaction in service exchanges. journal of marketing, 62(1), 46-61. review of economics and development studies vol. 5, no 3, 2019 563 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads an analysis of pak-us relations after pentagon 2011 attacks 1 ghulam muhammad nagra, 2 ghulam mustafa, 3 muhammad imran 1 phd scholar (political science) department of political science & international relations, government college university faisalabad. 2 assistant professor, department of political science & international relations, government college university faisalabad. 3 visiting lecturer, department of political science & international relations, government college university faisalabad. article details abstract history revised format: 30 june 2019 available online: 31 july 2019 islamabad‟s relations with the washington have had a chequered history. socio-economic, political differences and national interests exacerbated by diplomatic ineptitude, as well as the obstacles inherent in relations between a developing country and a superpower, have all united to make it so, while strategic compulsions and geo-political relations on both sides have forced to bring the two countries closer. this should be emphasized that the chequered history of pak-us relations, the shifting emphasis and the changing proclivities of the us administration and public, the nature and the constraints of the us commitment to pakistan‟s security, all make it absolutely imperative for pakistan to take every step with the utmost care. pakistan should realize that washington policy on security issues could probably rebound to islamabad‟s benefit currently, but definitely not on all times in the future, as there are difficult options ahead for both islamabad and washington on basic strategic interests. however 9/11 incident and war on terror took back the warmth relationship of 1950s decades. again pakistan is playing the role of front line state to eradicate the menace of terrorism from the world and restore peace and stability in the region with the collaboration of usa and its allied forces, even pakistan is enjoying the status of non-nato ally. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords pakistan, usa, foreign policy, front line state jel classification: n10, n15, e62, e69 corresponding author‟s email address: ghulammustafa@gcuf.edu.pk recommended citation: nagra, g. m., mustafa, g. and imran, m. (2019). an analysis of pak-us relations after pentagon 2011 attacks. review of economics and development studies, 5 (3), 563-570 doi: 10.26710/reads.v5i3.734 1. historical background of pak-us relations usa was least interested in south asian affairs till world war 2. after world war 2 it started to enhance its influence in the region. the only motive behind this was to make a wall against communist bloc. at that time south asian region is influenced much by america, russia and china (alamgir, 2011). usa remained adamant towards sub-continent till 1949 when communist reign established in china. now usa feared that others asians countries might not come under communism. to counter china and contain communism usa turned its eyes towards india. for usa it was india who could balance china in asia due to its size and http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 564 estimated potential. keeping in view this invitation was extended to prime minister jawaharlal nehru to make an official visit to the united states. at first united states completely ignored pakistan and no similar invitation was extended to liaquat ali khan. it was only after russia had invited the pakistani prime minister that the united states extended the same courtesy to him. liaquat ali khan‟s visit in may 1950 provided an opportunity to explain the objectives and motives of the newly born state to the leaders and people of the world‟s most powerful state. contrary to nehru‟s policy he said that the motive behind his visit was to assist america to discover pakistan (burk, 1973). to modernize armed forces and infrastructure development pakistan needed financial support which forced it to develop its relationship with united states. however it is not known when pakistan asked for military aid from the united states (muqeem, 1963). he demanded arms for the pakistani forces to make the entire world safe and fight against communism. although liaquat ali khan made pakistan more close to america ideologically but india was still america‟s number one choice in america (burke, 1973). actually pakistan has no historic and traditional basis of its foreign policy. an important aspect of pakistan‟s foreign policy is that its attitude towards others nations is determined by its relation with india. pakistan adopted prowest policy due to various reasons including: fear of insecurity against india, elite class belonging to feudal and military classes had western orientation and political instability in pakistan. keeping in view all these aspects pakistan entered into alliance policy with united states. first agreement in this regard took place in 1954 which is known as mutual defense assistance agreement. later in the same year both the countries signed south east asia treaty organization and in 1955 baghdad pact later known as cento cemented both the countries in cordial relationship. pakistan got economic and military aid from us government after signing of these alliances. pakistan‟s relationship with united states in 50 decades illustrated: american guidance and interference in pakistan‟s internal affairs, to use pakistan as a market for its own finished goods, keep influence in the region and running of its industries. moreover united states wanted to maneuver pakistan‟s strategic location for the attainment of its objectives in the region. these were to keep check on communist states of china and soviet union as well as safeguarding its oil interests in the persian gulf. repercussions of pakistan‟s policy of alignment were heinous: public turned against this policy, pakistan‟s relations with muslim countries affected like afghanistan, saudi arabia and egypt and it also antagonized the two communist giants-china and the soviet union. moreover questions were raised against sovereignty and freedom of pakistan. kashmir issue was also influenced under these circumstances. 2. relationship during ayub era till 1958 pakistan had realized that it had lost much due to its policy military alliance. now pakistan contrary to its policy of alignments moved towards policy of partial alignment and cultivated friendship with china. also kennedy‟s ambition of making india to be a free and thriving leader of asia made pakistan suspicions against us. pakistan opposed us aid to india in sino-indian war of 1962. according to pakistan india would use this aid to fulfil its „‟long cherished dream of asian leadership”. this would also disturb balance of power in south asia and ultimately this aid would be used against pakistan (arif, 1984). when ayub khan assumed power as president “pakistan had become america‟s most allied ally in asia” (khan, 1967). the relations between the two countries cemented into strong bond during the second term of president eisenhower. moreover president ayub khan was in a position to develop strong relations with the united states. “the us surveillance flights over the soviet union from peshawar (bada ber) airport are a case in point (marchchi, 1975). what change occurred during president ayub regime was not to break away from the alliance but at the same time to maintain a balance of cordiality with the other big powers. formation of regional cooperation for development (rcd) on 22 july 1964 at istanbul was also the aftermath of its policy of partial alignment. indo-pak war of 1965 forced ayub khan to resist its policy towards united states (arif, 1984). review of economics and development studies vol. 5, no 3, 2019 565 pakistan was not happy with the united states over its attitude on pak-india war of 1965 despite being an ally, “those (nations) who do not pass (the) test of friendship must forever be regarded by the present and future generations of pakistanis as hypocrites and time-servers for whom a nation like pakistan can have no use. we also must warn the perfidious in our midst because we know the there are some who are trying to keep as under the spell of various delusions” (dawn, 1965). 3. relations during 1970s at this stage president johnson of america imposed ban on all aid to pakistan and india and assumed neutral stand. all this created an anti-west furor in pakistan and demanded for a withdrawal from the alliance. in 1969 nixon became the president of us who had soft corner for pakistan. ban on pakistani aid was lifted but 1971 indo-pak war changed the scenario in the region and us officially cancelled its aid to pakistan. us government pretended to adopt neutral policy during 1971 indo-pak war. but the presence of seventh fleet in the bay of bengal diverted the indian ships away from pakistani troops and exerted psychological pressure on india. in 1971 bhutto threatened if us did not provide arms aid pakistan would start quest for nuclear. this threat proved fruitful and us resumed arms supply to pakistan (arif, 1984). prime minister bhutto‟s government faced a challenge in may, 1974 when india made an underground nuclear explosion at pokhran. to counter india‟s nuclear capabilities pakistan started to seek a nuclear weapons program. that was an alarming situation for the us administration (dasgupta, 2004). from 1976 pakistan decided to make progress in nuclear program and entered in deal with france on nuclear reprocessing plant. us made all its efforts to halt pakistan nuclear program and threatened to stop aid and supply of a-7 bombers to pakistan. when pakistan remained adamant president carter, the next american president cancelled all aid to pakistan (arif, 1984).sanctions were imposed on pakistan during administration of president ford and later jimmy carter (dasgupta, 2004). pakistan threatened to withdraw from cento and developed cordial relationship with soviet union. thus this period showed erosion in pakistan‟s tie-up with the us. 4. relationship during soviet invasion of afghanistan soviet invasion of afghanistan in 1979 endangered the strategic interests of the us in the region and president carter lifted ban on aid to pakistan. us declared pakistan a front line state to check soviet expansion in the region (arif, 1984). us president jimmy carter approved a broader covert action program on december 29, 1979 in which cia was asked to provide military weapons and ammunition for the afghan mujahideen (kissinger, 1979). in january 1980 president carter approved a package of $ 400 million in military and economic sectors for pakistan. however president zia rejected this offer calling it “peanuts”. he demanded $ 2 billion aid to rebuild the pakistan armed forces. when reagan became the president of usa pak-us relationship went back to fifties. president reagan adopting the policy of „‟deterrence‟‟ restored all aid to pakistan. pakistan was provided with f-16 aircrafts, superior variety of tanks, anti-tank weaponry, armored helicopters and advanced radar systems (arif, 1984). during afghan war pakistan acted as reliable ally for us and washington helped pakistan also in the nuclear field. islamabad gained different aid packages from the us administration in different fields (jalil, 2017). all this showed us, s self-interest and it was motivated by its own strategic compulsions and global perceptions of international policies. it foremost motive was to establish its own superiority in south west asia through pakistan as pakistan was the back-door to the gulf and by its standing in the islamic conference could influence the muslim world (arif, 1984). 5. a new phase of relationship after geneva accords 1988 after geneva accord of 1988 pakistan and usa had not cordial relations. in south asia india was number one choice of america to safeguard its interests in the region. after afghan war usa imposed sanctions on pakistan review of economics and development studies vol. 5, no 3, 2019 566 under symington, pressler and glenn amendments. usa was also unhappy with pakistan due to dictatorship and absence of democracy. pakistan was under a severe kind of economic crisis and world bank had warned that pakistan was in extreme vulnerability. extremism in pakistan had flourished due to: low literacy rate, high rate of debt and the bad economic condition (akhtar, 2012). pakistanis felt betrayed and isolated by their “old friend” and “ally” when sanctions were imposed on pakistan by us. after soviet union expulsion from afghanistan us had a tilt towards india and the pakistanis at that time deemed the pressler amendment specifically imposed on pakistan and the sanctions were unjustified (kroastodt, 2004). 6. incident of 9/11 and pak-us relationship during president general pervaiz musharraf‟s period “pakistan was moving closer to a “failed state” case and its nuclear and missile programs were a constant concern for policy makers in washington. “9/11 changed the nature of us-pakistan relations once again the us president george bush asked the world to make a clear choice to side with the us with the slogan you are either with us or against us” (mustafa, 2016). indo-us strategic relationship worried pakistan after the collapse of the soviet union which increased steadily despite india‟s nuclear explosions in 1998 and especially in the aftermath of 9/11. this relationship raised many questions in the mind of policy makers in islamabad and there was a feeling how to combat with the external security environment. the new us security strategy paper of september 2002 also showed a strategy shift in us foreign and security policy. islamabad expressed its reservations and emphasized on international community to adopt a cautious policy regarding: post 9/11, the policy about arch rivals pakistan and india, the parameters dividing south asia and the presence of external military forces not only in the indian ocean also in central asia. “the indo-us agreement to jointly patrol the indian ocean from the red sea to the malacca straits reflects the redefinition of india‟s strategic milieu to effectively include the whole of asia. drawing the central and west asian regions more directly into the south asian strategic milieu have been the various schemes/proposals for oil and gas pipelines. and now there is india‟s direct military presence in central asia with the setting up of an air base in tajikistan at farkhor” (scot, 2008). after 9/11 us adopted such security policy towards india that made pakistan suspicions against united states. indo-us military cooperation worried pakistan that it would disturb balance of power in south asia and it would tilt towards india. us approval of israel‟s arms deal with india also roused to many questions in the mind of pakistan (nayak, 2005). us always gives much importance to pakistan in south asia due to its strategic location. after 9/11 war on terrorism brought both the countries close to each other ever before in the past. in pak-us relationship many ups and down occurred. pakistan decided to side us in war against terrorism despite public agitation against this decision. pakistan‟s geostrategic location makes it more important to usa. after 9/11 us interests towards south asia of wide range. these were: to combat terrorism threat, restore peace in afghanistan, to check the nuclear weapons proliferation, stability in south asia by normalizing the relations between india and pakistan and to promote democratization and human rights (akhtar, 2012). washington‟s policy interests towards islamabad included a wide range of issues like: religious extremism, counterterrorism and missile proliferation. apart from this other us interests in south asia encompassed democratization, regional stability, economic reforms, fundamental rights and endeavors to counter narcotics trafficking. these were affected by several key developments in recent years including the september 2001 terrorist attacks against the united states, democracy-related sanctions, a continuing bilateral nuclear standoff and pakistanindia conflict over kashmir (aamir, 2004). war on terrorism proved catastrophic for pakistan yet pakistan is continuing to fight against this war with us military and economic help. pak-us relationship was good till 2011 despite american demand of „‟do more‟‟. after 2011 certain incidents occurred which put cracks in the relationship of two countries like: killing of osama in abbottabad, salala check post incident, raymond devis and the vacation of shamsi air base by usa. although such incidents have proved fatal for the good relationship but both the countries are seemed to be committed enough to root out terrorism from the region by collaborating with each other. review of economics and development studies vol. 5, no 3, 2019 567 usa was well aware of the fact that taliban were not responsible of 9 /11 incident. it was their decision to provide asylum to osama bin laden who have started jihad against america forced usa under nato forces to launch attack against afghanistan. again pakistan‟s same status of 1979 of ‟‟front line state‟‟ was emerged due to its geo strategic importance. usa needed air space basis and logistic support to which more suitable country was pakistan. at this juncture pakistan‟s economy was not stable and it needed help to make it better. various channels were utilized to make pakistan ally in this war on terror. despite public pressure of not joining this war president pervez musharraf in his address to nation on september 19, 2001 expressed various concerned like: pakistan‟s security and stability, nuclear and missile program, kashmir issue and revival of economy are vital for national interests, while president bush used harsh words and threatened pakistan „‟are you with us or join the terrorist?‟‟. when pakistan joined the allied forces all sanction imposed on pakistan were lifted under brown back ii. although pakistan was provided with million dollars lieu of its services rendered against war on terror but also paid heavily in shape of massacre of innocent citizens due to suicide attacks, rising of questions about its sovereignty and downfall several institutions (akhtar, 2012). before 9/11 usa completely ignored pakistan and preferred india in asia but after the occurrence of 9/11 incident pakistan has become staunch ally of allied forces against war on terror (jabeen et al., 2010). 7. pakistan strategic supports to usa its impacts on pakistan economy islamabad became a reliable ally for us in the war on terror after 9/11 terrorists attack on us. islamabad banned many groups like lashkar-e-jhangvi and lashkar-e-taiba involved in terrorism and even used power against them due to their anti-state activities. in pakistan al qaeda-related arrests were made which included khalid mohammad, abu zubaydah and ramzi bin al-shibh (joseph, 2004). pakistan provided all kind of logistic support to allied forces. pakistan handed over jacobabad, shamsi, dalbandin, and pasni military basis under us control. also pakistan deployed 35000 troops on border line and captured 420 terrorists belonging to taliban and al-qaida. technical and human intelligence assistance services were also given to coalition forces. usa responded immediately and provided $ 1 billion in shape of grant, wrote off $ 1 billion debt and gave $ 1.2 billion for arms. to strengthen pakistan military force $ 3 billion in economic aid and military training was given by usa. but the repercussions of war were horrible as many soldiers and innocent citizens were killed. suicide attacks and bomb blasts took place on daily basis. about 200,000 soldiers were deployed at frontline and 90,000 were taking part in fighting (fair, 2004). since 2001 in war against terrorism pakistan had to face heavy economic loss resulting in $ 68 billion. “according to statics record till april 2011, the country suffered 8,141 incidents of terrorism-many more have occurred since then. in return, the country has received only $ 15 billion to $ 17 billion in assistance, at an average of some $ 374 million a year.” the whole country was engulfed with the incidents of terrorism from north and south waziristan, to settle areas of kpk and capital. public opinion turned against united states. since 2002 us aid to pakistan was $ 8.5 billion while economic loss was $ 43 billion. for usa peace and stability in south asia region is very important. in south asia war on terror brought both the countries close to each other for restoration of peace and stability. both india and pakistan possess nuclear weapons with ballistic missile system in south asia. after 9/11 united states deems it necessary to bring these countries close without any confrontation which is necessary for the stability and security of south asia. therefore with the collaboration of pakistan usa is making all its efforts to restore peace in afghanistan. as south asian states are also very significant from manpower and economic point of view. united states also wants to get maximum benefits from this aspect as well (akhtar, 2012). indian officials expressed deep concerns over united states growing relationship with pakistan and providing billion dollar aid in certain sectors. after 9/11 us policy towards pakistan was as it existed during cold war. us lifted all sanctions imposed on pakistan and provided billion dollar aid to pakistan for its economic revival aid to combat war against terrorism (riaz, 2011). pakistan gained much importance in world politics due to its geo-strategic location. any country while making its relations with other in the region can‟t underestimate pakistan due to its importance in the comity of south asian states. china, iran, afghanistan and india are its neighbors (amedeo, n.d). review of economics and development studies vol. 5, no 3, 2019 568 pakistan‟s geo-strategic importance is explicated from the fact that even india relies on pakistan for energy route. all the regional states rich in natural resources like china, india, russia and cars are neighboring states of pakistan (malik, 2012). after 9/11 afghanistan became the central point of regional as well as world politics. it has become center of opium production and terrorism. united states is quite aware of the fact that restoration of peace in afghanistan is possible only with the help of pakistan. pakistan has already played an effective role in the expulsion of soviet forces from afghanistan and conclusion of geneva accord of 1988. with pakistan support taliban government was abolished in afghanistan and pakistan is providing all kind of assistance to usa in washing out terrorism in afghanistan. nato forces could reach to afghanistan through, turkmenistan, tajikistan and iran but the easiest route belongs to pakistan. usa gives much importance to india in south asia to counter china. china, on the other hand, gives same status to pakistan. china for its trade route to middle east and central asian states also attaches much importance to pakistan. chinese interest in gwadar port is also due this factor. pakistan‟s easy access to central asia and middle eastern states and nuclear capability enhances its geo-strategic importance (akhtar, 2012). 8. trust deficit in pak-us relationship between pakistan and united states there is found a long history of trust deficit. strategic partnership is visible between the two after 9/11 but killing of osama bin laden on 2nd may, 2011 in abbottabad created mistrust between the two. pakistan‟s relations with neighbor countries also led to distrust between united states and pakistan. us relationship with china is not friendly. it dislikes pakistan‟s relationship with china. also washington has cordial relationship with kabul and new delhi to whom pakistan is not friendly. other cause of distrust is the clash of interests between the two in the region. civil nuclear deal between india and usa is disliked by pakistan. gawadar port project is against american interest. usa opposed iran, pakistan and india gas pipe line project. however pakistan concluded an agreement with iran on gas pipe line despite usa opposition (islam, 2011). nuclear issue also put hurdles in good relatioship between us and pakistan. pakistan‟s quest in nuclear program has always been remained very important in pak-us relationship. united states fully opposed it when pakistan started this program. us pressurized pakistan not to make atomic explosion when india made atomic explosion in may 1998. pakistan while keeping aside global and us pressure made nuclear explosion on may 28, 1998. after nuclear explosion american president imposed sanctions on pakistan. however us lifted all these sanctions after the incident of 9/11. both the countries were however under us pressure to sign ctbt and npt. in 2002 pakistan has to face severe criticism of transferring uranium to north korea. in 2003 allegations were leveled against pakistan to provide nuclear assistance to iran and libya. a scandal came out in 2004 in which dr. a.q. khan was alleged to be involved in nuclear proliferation activities to north korea, iran, and libya. all these events made us more suspicions about pakistan‟s nuclear program. usa sought chinese offer of building nuclear reactors in pakistan with reservations and asked china for international justification (akhtar, 2012). drone attacks by usa are also one of the main causes of bad relationship between islamabad and washington. these attacks have caused massacre of innocent people and many pakistanis take these attacks as violation of their country‟s sovereignty when this matter was highlighted on global level and world public opinion, opposition and civil society in pakistan turned against usa; a clearance was given by united states that an understanding regarding drone attacks had been taken place between president musharraf and us officials in 2008 (husain 2007). islamic identity in pakistan has always been the cause of weary in the us circles. that issue was boiled within pakistan during zia era however it proved fruitful for american interest at that time. nevertheless washington attached religious extremism in pakistan with the spread of terrorism around the world. americans sought talibanization in pakistan in that context (zehra, 2004). 9. conclusion the study of pak-us relations shows that the relations between two countries were determined by the changing international situation and their domestic compulsions usa strived for its national interest in accordance with its global strategy whereas pakistan made efforts for its national interests in the context of regional perspective. review of economics and development studies vol. 5, no 3, 2019 569 the main concern in pakistan‟s policy towards us was “security against india and support of the kashmir issue,‟‟ whereas the us was interested in to check soviet expansion in asia and to expand its influence in west asia, the persian gulf, the indian ocean and getting base facilities for spy purpose. it also wanted markets to dump its surplus food, outmoded equipment and to feed its arms industries and pakistan fulfilled also this purpose to some extent. „‟another factor which dominated their relations was the india and which was used as an instrument of political influence and power. the us increased or decreased it to show its approval or disapproval over a certain policy adopted by pakistan. pakistan opportunity gained from this alliance but had to pay heavily as it relations with the muslim countries particularly egypt, saudi arabia and afghanistan became tense. it also antagonized the soviet union, for it made pakistan an american stooge in asia. therefore, after 1962 pakistan adopted the small power strategy of balancing the interests of the superpowers by moving towards a policy of partial alignment. by 1978 it had freed itself of the shackle of the us alliance and was able to exertitself. it also succeeded in forcing the united states of america to reconcile itself to a nuclear pakistan rather the us found pakistan a hard bargainer because of the help that it was getting grown saudi arabia and its wish to improve relations with the soviet union. but again in 1980s pakistan seems to be going back to relationship the existed with the us in the 1950s, again trying to check the alleged soviet ambitions of moving into the persian gulf, and pakistan demanding aid on the pretext of threat to its “security” from india and afghanistan” (arif, 1984). 9. options to improve relationship by taking various steps the relations between islamabad and washington could be improved. people are very important in developing cordial and durable relationship. pakistanis have faced many hardships in shape of suicide attacks and drone attacks in their war against terror. anti-american sentiments were created among pakistani masses due to this. to bring people of both the countries close to each other the need of the hour is to washout distrust and misunderstandings found between the two countries. both the countries must enter into long term strategic partnership. united states should make efforts to improve pakistan‟s health and educational system, creating employment and development of economy. us must take more steps to make infrastructure better in pakistan. all debt due on pakistan should be right off. both the countries should make endeavors in establish modern educational institutions. to eliminate extremism dialogue process must be opted. united states should cooperate with pakistan in curbing drug trafficking from pakistani society. to combat with terrorists and militants us should provide modern weapon to pakistan. all efforts should make to enhance people to people contacts. for this purpose us should lift visa restrictions imposed after 9/11. us-india nuclear deal disturbed balance of power in south asia. us should also make such deals with pakistan. a policy leading to disturb balance of power in south asia must be avoided by united states. references aamir, u. (2004, june 1). sword quer pakistan. the nation. akhtar, s. (2012). dynamics of usa-pakistan relations in the post 9/11 period: hurdles and future prospects. international journal of humanities and social science, 2(11), 205-213. alamgir, m. (2011). america‟s interests in south asia. international relations. retrieved july 1, 2019 from, https://muhammadalamgir.wordpress.com/2011/08/19/america%e2%80%99s-interests-in-south-asia/ amadeo, k. (2019). how the 9/11 attacks still affect the economy today. retrieved july 1, 2019 from, https://www.thebalance.com/how-the-9-11-attacks-still-affect-the-economy-today-3305536 arif, k. (1984). pakistan‟s foreign policy-indian perspectives. lahore: vanguard books. burk, s.m. (1973). pakistan‟s foreign policy-an historical analysis. london: university press. dasgupta, c. (2004). pakistan and the global strategic environment. new delhi: knowledge world. dawn. (1965, september 12). editorial-who is friend who is not. fair, c. (2004). the counter terror coalitions: cooperation with pakistan and india. washington: rand corporation. hussain, n. (2012). pak-russia relations: lost opportunities and future options. journal of political studies, 19(1), 79-89. islam, n. (2011). nato „regrets‟ pakistan strike. newsweek. jabeen, m., mazhar, m. s., & goraya, n. s. (2010). trends and challenges in pak-us relations: post september https://muhammadalamgir.wordpress.com/2011/08/19/america%e2%80%99s-interests-in-south-asia/ https://www.thebalance.com/how-the-9-11-attacks-still-affect-the-economy-today-3305536 review of economics and development studies vol. 5, no 3, 2019 570 11. south asian studies, 25(2), 185. jalil, g. y. (2017). nuclear arms race in south asia: pakistan‟s quest for security. strategic studies, 37(1), 18–41. joseph, m. (2004). pakistan in changing strategic contest. new delhi: knowledge world. khan, m.a. (1967). friends not masters. london: oxford university press. kissinger, h. (1979). white house years. boston: little brown and company. kroastodt, k.a. (2004). pakistan-us relations. washington d.c: congressional research service. malik, h. y. (2012). strategic importance of gwadar port. journal of political studies, 19(2), 14-29. marchchi, v.a. (1975). the cia and the curt of intelligence. new york: dell. muqeem, m.g. (1963). the story of pakistan army. lahore: oxford university press. mustafa, m. q. (2016). us and strategic stability in south asia: a pakistani perspective. strategic studies, 36(4), 38–60. nayak, p. (2005). u.s. security policy in south asia since 9/11-challenges and implications for the future. honolulu: asia-pacific center for security studies. riaz, a. (2011). indo-us nexus after 9/11 and security perception of pakistan. berkeley journal of social sciences, 1(8), 1-14 scott, d. (2008). the great power „great game‟ between india and china: „the logic of geography‟, geopolitics,13(1), 1-26. review of economics and development studies vol. i, no 1, june 2015 45 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 1: issue 1 june 2015 journal homepage: www.publishing.globalcsrc.org/reads efficiency analysis of public and private sector schools of multan district: a nonparametric approach 1 sumaira batool, 2 fatima farooq, 3 imran abbas, 4 muhammad abbas 1 lecturer, department of economics, the women university multan, pakistan, sumairaimran@hotmail.com 2 assistant professor, school of economics, bahauddin zakariya university, multan, pakistan, fatimafarooq@bzu.edu.pk 3 ph.d. student, school of economics, bahauddin zakariya university, multan, pakistan, imran_thaheem@hotmail.com 4 assistant professor, air university multan campus articledetails abstract history revised format: may 2015 available online: june 2015 the purpose of this paper is to evaluate the efficiency of public and private sector secondary and higher secondary schools in multan district. we use output oriented data envelopment analysis to measure technical and scale efficiency of a sample of 100 public and private sector schools, using data for the year 2014. dea is employed to compare efficiency of both types of schools because it is the most popular technique used to measure the relative efficiency of non-profit organizations due to the absence of prices or relative values of educational outputs. moreover, it can handle multiple inputs and outputs with great ease. as public and private schools are working under similar environmental conditions, we have used a single frontier, incorporating four educational inputs and four outputs. the results of the data demonstrate that public schools lag behind private schools in terms of crs and vrs technical efficiency scores and scale efficiency scores. our study of schools validates the dominant paradigm that private schools outperform the state-run institutes. © 2015 the authors, under a creative commons attributionnoncommercial 4.0 keywords dea, efficiency, technical efficiency, scale efficiency, public schools, private schools jel classification i12, i15, i18 corresponding author’s email address: sumairaimran@hotmail.com recommended citation: batool, s., farooq, f., abbas, i. and abbas, m. (2015). efficiency analysis of public and private sector schools of multan district: a non-parametric approach. review of economics and development studies, 1 (1) 45-56 doi: https://doi.org/10.26710/reads.v1i1.115 http://www.publishing.globalcsrc.org/reads mailto:sumairaimran@hotmail.com mailto:fatimafarooq@bzu.edu.pk mailto:imran_thaheem@hotmail.com mailto:sumairaimran@hotmail.com review of economics and development studies vol. i, no 1, june 2015 46 1. introduction education, a basic human need as well as right, plays an important role in all spheres of human life. the importance of education in development process of any nation is quite evident and all economists have acknowledged it. education is a vital component of human capital as it enhances labour productivity. this productive and skilled labour force plays key role in poverty alleviation and development process of a country. during last three decades or so, privatization has become a dominant paradigm in education sector. like other parts of the world, pakistan has witnessed mushroom growth of private educational institutions. the general perception is that private educational institutions are superior to public educational institutions for a number of reasons including better management, accountability to parents, greater scope for innovation by teachers and school management. literature relating to south asia almost is in favor of private educational institutions. the concept of privatization of the educational institutes is closely linked to the classical and neoclassical theory of free market economy to provide education (the service) to the students (the customer) in the most efficient way (rutkowshi & rutkowshi, 2009). like all over the world, educational system in pakistan consists of two types of institutions namely public sector educational institutes and private sector educational institutes. even when pakistan came into being in 1947, both types of institutes were engaged in the provision of education as public sector alone cannot fulfill the growing demand of education. in developing countries, particularly in pakistan, government education sector is hampered by a number of problems such as poor management, non-accountability, political instability, ill qualified teachers, lack of professional competencies, shortage of funds, absence of monitoring mechanism and lack of capital investment in educational sector. the paper attempts to analyze efficiency of public and private sector schools of multan district. the efficiency of public and private sector schools will be calculated through data envelopment analysis (dea) indexes of both types of schools. these indexes will be further decomposed to compute technical efficiency of boys and girls schools of both sectors separately. the paper comprises of five sections. the review of previous studies on the issue will be presented in section two, followed by data and methodology. empirical results will be presented in section four, followed by conclusion. 2. literature review using pisa 2000 data, dronkers and robert (2008) measured the differences in scholastic achievement of private and public schools in 22 comparable countries and showed that the higher gross educational outcomes are for private government dependent schools. again in the same year 2008 dronkers and robert analyzed the effectiveness of various types of public and private schools in 19 oecd countries and concluded that performance of private governmentdependent schools’ students was higher than the students from public schools. in 2001, dronkers concluded that privately administered schools performed better in flemish belgium, france, germany, hungary, the netherlands, and scotland. jimenez, lockheed and paqueo (1991) suggested a positive relationship between attending private schools and students’ performance in colombia, the philippines, dominican republic, thailand and tanzania. research conducted by asadullah (2009) concluded that pakistan private schools appeared to be more effective than public schools in boosting students’ achievements. kingdon (1996) found conducive to greater superiority as such schools were technologically efficient as well as cost-efficient as compared to other types of schools in utter pradesh. like other studies, chudgar and quin (2012) also pointed dissatisfaction of parents with the performance of public schools. using the timss 2003 data, rutkowski and rutkowski (2009) concluded that private schools showed significantly higher review of economics and development studies vol. i, no 1, june 2015 47 achievements. coulson (2009) reviewed the research conducted all over the world in the past several decades and concluded that the private sector outperformed the public sector. braun, jenkins & grigg (2006) also came to the same conclusion, when they used naep 8 th grade mathematics achievement. they had controlled the data for selected student and school variables. 3. data and methodology 3.1. data source: data have been collected through a field survey, with stratified random sampling technique. 3.2. sampling size: in our research plan, only those secondary and higher secondary schools of multan district were included, which are affiliated with board of intermediate and secondary education, multan due to time and resource constraints. the reason for this was as bise provides the results of only affiliated institutions by name while the students of remaining institutions, appearing in the examinations, are treated as private students. finally, sample from schools was selected as follows: table 1: total number of schools in multan district schools govt. pvt. total male 115 97 212 female 58 111 169 total 173 208 381 out of 381 total schools, 100 schools were selected as sample. table 2: sample sizes of schools in multan district schools govt. pvt. total male 30 26 56 female 15 29 44 total 45 55 100 3.3. data collection procedure: for the collection of data, a survey was conducted in randomly selected schools of multan district. these institution were selected from all three tehsils and keeping in view the rural-urban divide. a questionnaire was prepared for this self-administered survey. matriculation examination results were collected from the bise and the record of cm extra-curricular activities and some other information were collected from different education and administrative offices. 3.4. variables of the study: in dea model, two types of variables i.e. input and output variables are used. 3.4.1. input variables: review of economics and development studies vol. i, no 1, june 2015 48 we have taken following four input variables. table 3: input variables abbreviation variable nt number of teachers nc number of class-rooms atet average teaching experience of teachers te total expenditures output variables: we have used following four output variables. table 4: output variables abbreviation variable ns number of students pr percentage result wappm weighted average of passing students’ percentage marks seca score of extra-curricular activities out of above-mentioned eight variables, six have been used in a number of previous studies. we have included two output variables in our model, which have not been used previously. wappm is weighted average of passing students’ percentage marks. this variable is constructed on the basis of the marks of the passing students of the institutes. the variable was developed to capture the percentage marks of all students in an institute. wappm was developed by taking the weighted average of the all grades, obtained by the students of the institute. grades’ minimum marks were taken as the weights and they were multiplied with the number of students of the institution, falling in that grade. seca is the score of extra-curricular activities, which is constructed with 3 extra-curricular activities including oral (speech), written (essay-writing etc.) and sports, each category having maximum 1 score. if any institution had participated in any level of cm punjab’s last year competition, it was assigned 0.5 score and for wining a competition, 1 score was awarded to the institution and for nonparticipation no score was awarded. the references of the remaining variables are given in table 5. table 5: input & output variables: variable name reference nt johnes (2005), abbot & doucouliagos (2003), martin (2003), avkiran(2001) nc johnes & yu (2008), bedi & garg (2000), dronkers & robert (2008) atet johnes & yu (2008), lassibille & tan (2010), oliver, belluzzo & pazello (2013) te castano & cabanda (2007), cuenca (2011), johnes (2006), martin(2003) ns avkiran (2001), dills & mulholland (2010), lassibille & tan (2010), johnes & yu (2008), bedi & garg (2000), johnes (2006) pr chudgar & quin (2012), perelman & santin (2011), review of economics and development studies vol. i, no 1, june 2015 49 dronker & robert (2008), horowitz & spector (2005), rutkowski & rutkowski (2009), cavalcanti, guimaraes &sampaio (2010). 3.5. analytical tool: data envelopment analysis has been used for analysis in the study. the linear programming method of dea is based on frontier approach. for relative performance, dea is most suitable frontier method. dyson, et al. (1998) suggested that sample size of dmus should be greater than the product of number of inputs and outputs while stern, et al. (1994) recommended that number of dmus should be greater than thrice the sum of inputs and outputs. max [2(m×n),3(m+n)] 3.6. area profile: multan district, with an area of 3,721 square kilometres, has three tehsils including multan, shujabad and jalapur pirwala. according to 1998 census, multan district’s population was 3,116,851, with 42 percent urban population. now the population is estimated around 7 million. literacy rate in multan district is estimated to be 66 percent (bos 2013). in multan district, there are a total number of 1,397 public sector educational institutions. out of which, 1,012 are located in urban areas and the remaining 385 are in rural areas. the total enrolment of students in these institutions is 350,101 (153,350 in urban area institutes and 196,751 in rural area institutions. as many as 10,227 teachers are serving in these institutions. out of these, 5,395 are teaching in urban area institutions and 4,832 are teaching in rural area institutions. 3.7. descriptive analysis: table 6: summary statistics of schools’ data descriptive statistics of schools n minimum maximum mean std. deviation nt 100 12 104 43.51 20.79165 nc 100 10 88 29.73 13.29301 atet 100 5 22 11.96 4.02748 te 100 6900000 78000000 24734831 14407124.55 ns 100 386 3862 1317.6 727.33279 wappm 100 54.55 100 83.1502 10.94726 pr 100 51.47 75.53 59.9409 5.63311 seca 100 0 3 1.25 0.8056 correlation matrix schools’ data: table 7: correlation matrix of schools’ data correlation matrix of schools data nt nc atet te ns pr wappm seca nt 1 0.746027 0.282874 0.942934 0.921178 -0.15052 -0.02949 0.330323 nc 0.746027 1 -0.16624 0.741798 0.763479 0.030713 0.333782 -0.0573 atet 0.282874 -0.16624 1 0.320228 0.241282 0.106399 -0.2899 0.75029 te 0.942934 0.741798 0.320228 1 0.895777 -0.10834 0.042298 0.350212 ns 0.921178 0.763479 0.241282 0.895777 1 -0.11891 -0.0211 0.314621 pr -0.15052 0.030713 0.106399 -0.10834 -0.11891 1 0.634734 0.123538 review of economics and development studies vol. i, no 1, june 2015 50 wappm -0.02949 0.333782 -0.2899 0.042298 -0.0211 0.634734 1 -0.10606 seca 0.330323 -0.0573 0.75029 0.350212 0.314621 0.123538 -0.10606 1 4. public and private schools’ efficiency: an empirical analysis the ability to produce the output with the minimum inputs required is called efficiency (sherman, 1988). abbot (2003) explains that “technical efficiency investigates how well the production process converts inputs into outputs while scale efficiency shows the extent by which an institution can take the advantage of return to scale by altering its size towards the optimal size”. an institution can be technically efficient even if with too much or too little output. scale efficiency provides the information about the scale of production. the results are computed using solver and deap software. crs technical efficiency represents overall efficiency and vrs technical efficiency shows pure technical efficiency while scale efficiency is measured as a ratio of crs to vrs technical efficiency scores. for the segregation of pure technical efficiency from scale efficiency, technical efficiency is measured on both crs and vrs models. deap software has been used to compute results. table 8: dea results for efficiency comparison (public & private schools) institutions effeciency crs technical efficiency vrs technical efficeincy scale efficiency public mean 0.849 0.949 0.892 median 0.865 0.98 0.886 private mean 0.897 0.958 0.936 median 0.931 0.986 0.972 all mean 0.876 0.954 0.916 median 0.886 0.983 0.943 t test pvalue 0.035 0.471 0.012 source: author’s estimations figure 1: dea (crs) results for efficiency comparison (public & private schools) review of economics and development studies vol. i, no 1, june 2015 51 figure 2: dea (vrs) results for efficiency comparison (public & private schools) figure 3: dea (scale) results for efficiency comparison (public & private schools) 0.8 0.82 0.84 0.86 0.88 0.9 0.92 0.94 mean median mean median mean median public private all crs (technical efficiency) 0.849 0.865 0.897 0.931 0.876 0.886 0.93 0.94 0.95 0.96 0.97 0.98 0.99 mean median mean median mean median public private all vrs (technical efficiency) 0.949 0.98 0.958 0.986 0.954 0.983 review of economics and development studies vol. i, no 1, june 2015 52 results of the data demonstrate that public schools lack behind private schools in terms of crs and vrs technical efficiency scores, and scale efficiency score. there exists significant difference in crs technical efficiency score and scale efficiency score. table 9: dea results for efficiency comparison (public & private boys’ schools) institutions effeciency crs technical efficiency vrs technical efficeincy scale efficiency public mean 0.817 0.934 0.871 median 0.794 0.947 0.859 private mean 0.884 0.945 0.935 median 0.906 0.978 0.963 all mean 0.848 0.939 0.901 median 0.85 0.967 0.901 t test pvalue 0.04 0.001 0.404 source: author’s estimations results of the data demonstrate that public boys schools lack behind private boys schools in terms of crs and vrs technical efficiency scores, and scale efficiency score. significant difference exist in crs technical efficiency score and scale efficiency score. table 10: dea results for efficiency comparison (public & private girls’ schools) institutions effeciency 0.84 0.86 0.88 0.9 0.92 0.94 0.96 0.98 mean median mean median mean median public private all scale efficiency 0.892 0.886 0.936 0.972 0.916 0.943 review of economics and development studies vol. i, no 1, june 2015 53 crs technical efficiency vrs technical efficeincy scale efficiency public mean 0.909 0.954 0.916 median 0.942 1 0.942 private mean 0.915 0.979 0.934 median 0.943 0.998 0.972 all mean 0.911 0.972 0.936 median 0.943 1 0.971 t test pvalue 0.04 0.001 0.404 source: author’s estimations significant difference exist in vrs technical efficiency score and scale efficiency score as the results of the data demonstrate that private girls schools are performing better in comparison with the public girls schools in terms of crs and vrs technical efficiency scores, and scale efficiency score. table 11: dea results for efficiency comparison (boys & girls government schools) institutions effeciency crs technical efficiency vrs technical efficeincy scale efficiency boys mean 0.817 0.934 0.871 median 0.794 0.947 0.859 girls mean 0.915 0.979 0.934 median 0.942 1 0.942 all mean 0.849 0.949 0.892 median 0.865 0.98 0.886 t test pvalue 0.04 0.001 0.404 source: author’s estimations results of the data demonstrate that public girls schools have performed better as compared to public boys schools in terms of crs and vrs technical efficiency scores, and scale efficiency score. significant difference exist in crs and vrs technical efficiency score and scale efficiency score. table 12: dea results for efficiency comparison (boys & girls private schools) institutions effeciency review of economics and development studies vol. i, no 1, june 2015 54 crs technical efficiency vrs technical efficeincy scale efficiency boys mean 0.884 0.945 0.916 median 0.906 0.978 0.963 girls mean 0.909 0.954 0.935 median 0.943 0.998 0.972 all mean 0.897 0.958 0.936 median 0.931 0.986 0.972 t test pvalue 0.04 0.001 0.404 source: author’s estimations results of the data demonstrate that private girls schools’ performance is better than private boys schools in terms of crs and vrs technical efficiency scores, and scale efficiency score and the difference is significant. 5. conclusion and policy implications using dea, crs input oriented model, our findings conclude that private schools are performing better as compared to government owned schools and colleges. our study validates the dominant paradigm that private schools outperform the state run institutes. the efficiency of private schools is attributed to a number of school and student related factors. school related factors include better educated teachers, a huge stock of physical resources and infrastructure at the disposal of private schools, their accountability to the parents of students as well as their better management practices. other factors affecting the efficiency of private schools are related to students’ rich and educated family background. in private schools, teacher absenteeism/skipping classes is almost zero because management is accountable to the parents who pay huge amounts of fee. private schools have low student–teacher ratio as compare to public schools which is also helpful to increase their efficiency. on the other hand, the efficiency of public schools is hampered by a number of problems such as extra duties of teachers, poor management, non-accountability, political instability, shortage of funds, absence of monitoring mechanism and lack of capital investment in educational sector. keeping in view the results of the study, it is suggested that the government should give incentives to private sector but lower and middle classes should not be left at the mercy of private sector, which considers education as a business. better infrastructure should be provided and strict monitoring system should be introduced to enhance public sector schools’ performance and school teachers should be exempted from all extra duties. policy of public private partnership should be implemented. references abbot, m., & doucouliagos, c. (2003). the efficiency of australian universities: a data envelopement analysis. economics of education, 22, 89-97. asadullah, m. n. (2009). returns to private and public education in bangladesh and pakistan. journal of asian economics, 20, 77-86. review of economics and development studies vol. i, no 1, june 2015 55 avkiran, n. k. (2001). investigating technical and scale efficiencies of australian universities through data envelopment analysis. socio-economic planning sciences, 35(1), 57-80. bedi, a. s., & garg, a. (2000). the effectiveness of private vs. public schools: the case of indonesia. journal of development economics, 61, 463-494. castano, m. c. n., & cabanda, e. (2007). sources of efficiency and productivity growth in the philippine state universities and colleges: a non-parametric approach. international business & economics research journal, 6(6), 79-90. cavalcanti, t., guimaraes, j., & sampaio, b. 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(2004). evaluating the effectiveness of private education across countries: a comparison of methods. labour economics, 11(4), 487-506. review of economics and development studies vol.2, no 2, december 2016 103 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 2: issue 2 december 2016 journal homepage: www.publishing.globalcsrc.org/reads public spending and macroeconomic performance in pakistan: an empirical analysis 1 imran sharif chaudhry, 2 gulshan ameer, 3 syed ali akbar rizvi 1 director, school of economics, bahauddin zakariya university multan, pakistan, imran@bzu.edu.pk 2 m.phil scholar bahauddin zakariya university multan, pakistan, gulshan-ameer1@hotmail.com 3 former m. sc. scholar, school of economics, bahauddin zakariya university multan, pakistan syedali_akbar@hotmail.com article details abstract history revised format: may 2016 available online: jun 2016 public spending management is the base of stable macroeconomic environment .this empirical study has explored the relation between public spending and economic performance, in the context of pakistan. an attempt is made to examine the growth effects of public spending for the economy of pakistan. to observe the public spending and pakistan’s macroeconomic performance, time series data has been used for the period of 1972-2012. gdp growth has taken as the dependent variable. by applying the auto regressive distributive lag (ardl) technology macroeconomics performance of pakistan has been analyzed. our results indicate that government expenditure has positive and significant effects but excessive government expenditure have negative effects on the economy’s performance. this study may suggest that provision of more incentives to the main sectors of the economy will lead to the sound economic conditions. © 2016 the authors, under a creative commons attributionnoncommercial 4.0 keywords public spending, economic growth, ardl, ecm, pakistan jel classification h50, h52, f43, c30, c32 corresponding author’s email address: imran@bzu.edu.pk recommended citation: chaudhry, i. s., ameer, g. and rizvi, s.a.a. (2016). public spending and macroeconomic performance in pakistan: an empirical analysis. review of economics and development studies, 2 (2) 103-116 doi: https://doi.org/10.26710/reads.v2i2.128 1. introduction prudent public spending management is the base of stable macroeconomic environment. public spending also effects the private sector’s investment and its contribution to economic growth. fiscal variables have direct as well as indirect effect on the economic performance of an economy through taxation and government spending. public spending theory explains that increasing state activity promotes efficient allocating resources, rapid economic development, technological development and social welfare. government expenditures involve economic benefits and costs (grossman, 1988). as a result of efficient resource allocation, economic and social conditions of the country are positively affected. public sector of an economy is considered as an administrative for the productive functions and this sector owns the large fraction of economy’s resources. by utilizing the economy’s resources, government activities provide the beneficial services for the well being of the society and thus effect the economic growth. so wagner’s law has established the link between government activities and economic development. http://www.publishing.globalcsrc.org/reads mailto:gulshan-ameer1@hotmail.com mailto:syedali_akbar@hotmail.com review of economics and development studies vol.2, no 2, december 2016 104 public investment which comprises the more than half of total investment also promotes the developmental process. economists argue that capital investment promotes the technological innovations and specialization and thus leads to economic development. public investment is a major tool which not only efficiently utilizes the productive resources but also increases the gdp to enhance the economic performance. government expenditures are used for number of purposes. the basic and important task accomplished by public expenditure is to maintain the law and order, provision of defense to the country and infrastructural development and betterment. a large share of revenue collected by the government is utilized to build roads, hospitals, dams, schools and in the provision of some other basic necessities to people. public expenditure also improves the distribution of income. it leads to the better access to the total resources of the people and hence improving the living standards. public spending plays vital role to achieve the sustainable growth of the economy but allocation of public expenditure is another crucial phenomenon. an economy can gain more significant and positive impact by allocating the public expenditure on productive activities. however excessive public spending on unproductive tasks might lead towards creating worse economic conditions. as pakistan is facing low gdp growth rate so it is very necessary to analyze that relation between public spending and macroeconomic performance of pakistan. the rest of the article is prearranged as follows. section 2 presents literature review. data and methodology is given in section 3 while section 4 is reserved for empirical results and their discussion. at the end, conclusion and recommendations are given regarding public spending. 2. literature review the previous economic literature in particular confirms the importance of public spending in economy’s performance. (landau,1986, barro, 1990, aschauer, 1996). some significant studies are reviewed. lucas (1988) in his study focused on the focal features of economic growth by considering neo classical growth theory. in his study three models presents the diversity of conclusion. the study concludes that same pattern of growth cannot be useful for developed and developing countries. barro (1990) observed the negative relation between economic growth and tax financed public services by extending a simple endogenous growth model. the difference in preferring public and private services causes the variation in consumption and expenditure share. the study shows the negative link of this variation to economic growth rate. munnell and cook (1990) explored the positive link between public spending productivity and economic growth by using the data for the period of 1970-1988 for us states. the exercises of their work prove that public investment has statistically significant and positive effect on productivity. barro (1996) presented the empirical framework based on new version of neoclassical growth model for the panel of 100 countries over a period of 30 years. the positive link is described between public capital and economic growth while public capital is explaining the broader aspect of government policies. devarajan et al. (1996) have studied the relation between public expenditure and economic growth. they took the annual data of 43 developing countries. they derived that by changing the composition of public spending economy could get the steady state growth. by interpreting the results of the model, they obtained the surprising results. productive expenditure has negative relation with economic growth. while current expenditure contributes the higher economic growth. they showed that an excessive amount of productive expenditure become mostly unproductive. they declared that government of developing countries is misallocating the public expenditure. developing countries utilize the more resources for capital expenditure than current expenditure. while developed countries have proper allocation of resources. they concluded that proper allocation of government resources and proper composition of public capital can lead the economy to steady state growth rate. review of economics and development studies vol.2, no 2, december 2016 105 iqbal and zahid (1998) adopted the multiple regression frame work to study the impact of basic macroeconomic variables on the economic growth of pakistan over the period of 1960-1997. this study explores the positive impact of properly allocated infrastructure on the economic growth. bose et al. (2003) analyzed the strong difference in the composition of government expenditure between developed countries by examining 30 countries data for the period of 1970s and 1980s. the conclusion of their results is the strong positive relationship between capital expenditure and economic growth while current expenditure have insignificant impact. bukhari, ali and et al. (2007) investigated the relation among macroeconomic variables for three east asian countries for the period of 1970-2000 the result of various econometric techniques show the positive impact of public investment on economic growth. agenor (2011) exposed the complementary and significant relationship between education, health and infrastructure by designing the macroeconomic models for developing countries. the impact of investment on infrastructure is dependent on the productiveness of the technology. ellahi and kiani (2011) analyzed the link between public investment and economic growth for pakistan economy. the study shows short run as well as long run relationship between public investment and economic growth. however public sector has small impact due to its inefficiency. nworji et al. (2012) analyzed the impact of public expenditure on economic growth of nigeria by using the ols multiple regression technique. time series data has been taken of the relevant variables for the period of 1970-2009 in nigeria. their study focused on the empirical measure of the relation between economic growth and public expenditures. the study showed that recurrent expenditures on economic services and capital area disaggregated components of economic growth. these disaggregated components have negative effect on growth. while statistically these have significant impact. however, economic growth is positively affected by using the recurrent expenditure on social and community services. they concluded that to obtain the economic growth in nigeria, the use of fiscal policy instruments must be continued. they recommended that more attention must be paid on allocating the government expenditures. the government expenditures should mainly be utilized on productive economic activities to obtain sustained economic growth. for pakistan economy, ahmad, abass et al. (2013) explored the role of public infrastructure on economic growth. by using cge model and micro simulation model, results show the negative impact of tax financed public investment on economic growth. onakoya et al. (2013) have examined the effects of public expenditure on economic growth in nigeria. they adopted the methodology of 3sls by using the data of nigeria from 1970 to 2010. results obtained by applying durbin watson statistics. the results declared the positive link between government capital expenditure and output of infrastructural sector. by utilizing the idea of keynesian school of thought, they attempted to capture the enhanced growth even in the time of depression by increasing government expenditures. the study shows the positive impact of public spending on economic growth as well as enhancing the private sector investments. government can achieve the more significant and positive results by restructuring its public administration sector in nigeria. a number of investigations of former work give us the better understanding on the related issue but a little attention has been given to public spending and economy’s performance in long run relationship. the current study provides an analysis of public spending and macroeconomic performance regarding pakistan economy. this study has used appropriate methodological techniques and model specification to fulfill the deficiencies and flaws of the prior studies. 3. objectives of the study i) analysis of the macroeconomic performance of pakistan with reference to public spending ii) analysis of link between government spending and economic growth. iii) analysis of impact of public investment, in industrial and agricultural sector, on growth rate. review of economics and development studies vol.2, no 2, december 2016 106 iv) exploration of some policy implications regarding public spending and economic performance of pakistan for further investigation. data and methodology the proper selection and building of variables and authenticated sources of data are mandatory to achieve the valid and reliable results from the research work. the purpose of this study is to empirically analyze the public spending and macro economic performance in pakistan. this research work is based on the secondary data for the year 1972-2012. to analyze the relationships, auto regressive distributed lag (ardl) approach has been used. data sources the compilation and generation of data must be done very cautiously to obtain the accurate and efficient results. the main sources used for the data collection in this study are various issues of pakistan economic survey, hand book of statistics 2011-12 issued by state bank of pakistan and world bank indicators. the variables, about which data are collected are gdp growth (gdpg) taken as the dependent variables while agriculture value added as percent of gdp (agri), industry value as percent of gdp (inds), inflation (cpi), government fixed investment (gfcf), government expense (ge) and public investment (ig) as independent variables. the empirical methodology after the selection of data on specific variables the next step is to check the stationarity of data and then choose the appropriate econometric technique through which we can obtain some results. stationary of data to analyze the nature of time series data, to check the stationary properties, a number of techniques can be applied. generally, adf test is used to check the stationary of variables. if the variables are integrated at same degree then ols technique can be used. however the combination of variables stationary at i (0) and i (1) in the time series equation shows that variables are not in the same order of integration. to resolve this issue in a better way, econometric theory suggests employing the ardl approach. auto regressive distributed lag approach the ardl approach estimates the long run and short run parameters in a single equation model. by comparing with the other techniques, ardl approach is the most appropriate technique to apply after checking data stationarity. after estimation of model through ardl approach the model results will be unbiased and efficient. auto regressive distributed lag approach has a drawback in its application, when the variables are on high order i (1) stationary then ardl technique cannot be applied. model building the model (1 & 2) describe the impact of public spending on growth rate in pakistan review of economics and development studies vol.2, no 2, december 2016 107 1 2 3 54 6 k k t 0 1 t-i 2 t-i i=1 i=0 k kk 3 t-i 4 t-i 5 t-i i=0 i=0 i=0 k 6 t-i 1 t-1 2 ti=0 = + (gdpg) + (ge) + (gfcf) + (ig) + (inds) + (cpi) + (gdpg) + (ge) i i i i i i gdpg                       1 6 3 t-1 4 t-1 5 t-1 t-1 t + ( gfcf) + (ig) + (inds) + (cpi) + (1)     here the first difference operator is denoted by δ. for the short run we used lagged value of first difference independent and dependent variable. in the long run for the dependent and independent variables first lagged values are used. in first model short run and long run coefficients of all the variables are included as well. in first model α1, α2, α3, α4 and α5 are the short run coefficients while β1, β2, β3, β4 and β5 are the long run coefficients. here the intercept term is α0. however t showed the residual of the model. 1 2 3 54 6 k k t 0 1 t-i 2 t-i i=1 i=0 k kk 3 t-i 4 t-i 5 t-i i=0 i=0 i=0 k 6 t-i 1 t-1 2 ti=0 = + (gdpg) + (ge) + (gfcf) + (ig) + (agri) + (cpi) + (gdpg) + (ge) i i i i i i gdpg                       1 3 t-1 6 4 t-1 5 t-1 t-1 t + ( gfcf) + (ig) + (agri) + (cpi) + (2)     similarly, in model (2) the first difference operator is denoted by δ. for the short run we used lagged value of first difference independent and dependent variable. in the long run for the dependent and independent variables first lagged values are used. in first two models short run and long run coefficients of all the variables are included as well. in second model γ1, γ 2, γ 3, γ 4, γ 5 and γ 6 are the short run coefficients while φ1, φ 2, φ 3, φ 4, φ 5 and φ 6 are the long run coefficients. here the intercept term is γ0. however, the μt showed the residual of the model. wald test by taking the lagged level variables we will apply joint f-test or wald coefficient approach. by conducting wald test the fstatistics will be computed. then the estimated fstatistics will be compared with the tabulated fstatistics developed by pesaran et al. (2001). the tabulated f statistics has two critical bounds. these two bounds are called lower bound and upper bound. the lower bound is denoted by i (0), while the upper bound is denoted by i (1). the long run relationship between the variables exists if estimated fstatistics is greater than upper bound otherwise long run relation does not exist. then the wald test will be applied on the lagged variables of the equations 1 and 2. for model-i null hypothesis: β1= β2= β3= β4= β5=0 (no co-integration exists) alternative hypothesis: β1≠ β2≠ β3≠ β4≠β5≠0 (co-integration exists) review of economics and development studies vol.2, no 2, december 2016 108 for model-ii null hypothesis: φ1= φ2= φ3= φ4= φ5=0 (no co-integration exists) alternative hypothesis: φ1≠ φ2≠ φ3≠ φ4≠ φ5≠0 (co-integration exists) 5. results and discussion a)descriptive analysis for better analysis and to produce the quality results, it is very essential to conduct the descriptive analysis. descriptive analysis is illustrated in table 1. the descriptive analysis includes mean, median, minimum, maximum, standard deviation, kurtosis, skewness and jarque berra test. table 1: result of descriptive statistics for model – i&ii. variables/ statistical measurement gdp g govt. expen se govt. fixed inves tmen t indu stry agric ultur e public invest ment infla tion mean 16.03 11.02 17.83 24.23 26.72 172794 9.78 median 15.23 10.86 18.2 24 26.2 106482 8.83 maximum 30.5 16.78 22.5 27.7 36.4 674240 26.6 minimum 5.76 7.78 12.4 21.7 20.1 3714 2.91 std. dev. 2.21 2.28. 1.58 4.43 197269 5.54 skewness 0.44 -0.326 0.468 0.32 1.42 1.24 kurtosis 2.84 3.41 2.48 2.43 3.79 4.24 jarquebera 1.42 1.025 1.95 1.27 4.87 13.2 probability 0.49 0.59 0.37 0.527 0.00059 0.0013 2 source: author’s estimation using e-views software b) adf test of stationarity the results of adf test are presented in table 2. the results indicate that some variables are stationary at level while some are stationary at first difference. table 2: estimations of augmented dickey fuller (adf) test variables level 1 st difference conclusion agriculture -3.442 i(0) industry -4.943 i(1) gdpg -3.30 i(0) inflation -3.82 i(0) govt.fixed investment -5.382 i(0) govt.expense -4.048 i(1) public investment -2.833 i(1) source: author’s estimation by applying e-views software bound test approach to co-integration: to obtain pragmatic analysis of long run interaction among the variables, we apply the bound test. table presents the results of f-statistics for the long run relationship. table 3: bound test approach to co-integration review of economics and development studies vol.2, no 2, december 2016 109 bound test models f-stats lag prob. bound critical conclusion i (0) i (1) cpiindsiggfcfgegdpg ,,,, 4.21** 2 0.05 2.45 3.61 co integration exists cpiagriiggfcfgegdpg ,,,, 3.89** 2 0.05 2.45 3.61 co integration exists note: bound critical values are taken from the article of pesaran et al. (2001), table c1. iii: case iii: unrestricted intercept and no trend. *, ** and *** certify that co-integration exists at 1, 5 and 10 percent level of significance respectively having k (no of regressors) equal to 5. f-stats are calculated using e-views. the calculated fstatistics is presented in table 2. fstatistics value is measured for the two models. the estimated value of fstatistics for the model-i is 4.21.it shows that the estimated values of fstatistics are greater than the upper bound value. so it indicates the presence of long run interaction between the variables in both models. long run and short run estimation for model-i the long run coefficients of model-i of this study are given below. here dependent variable is gdpg which shows the gdp growth, while govt. expense, govt. fixed investment, public investment, industry, inflation are the independent variables. table 4: estimated long run coefficients of model-i using ardl approach ardl (2, 0, 1, 2, 0, 1) selected based on schwarz bayesian criterion (sbc) dependent variable: gdpg variables co-efficient standard error t-ratio probability ge -1.831 0.177 -1.033 0.311 gfcf -0.441 0.239 -1.845 0.076 ig -0.709 0.287 -2.46 0.20 inds -0.117 0.256 -.457 0.651 cpi 0.545 0.070 7.78 0.000 c 23.63 7.062 3.346 0.002 source: author’s estimation by applying micro-fit4.1software the results show that gross fixed capital formation and government expenditures have negative impact on gdp growth. government expenditure on unproductive items has no significant impact on economic growth (gdpg). these results are alike to results of devarjan(1996) and noworji (2010). the proper allocation of public expenditure is required for the betterment of the macroeconomic condition of the economy. public investment is found to be negative in long run. the negative sign relates to the economic theory as excessive public investment crowd out the private investment. economic growth rate has negative and insignificant effects of public investment on unproductive items. our results are harmonized with ghani and din (2006). they concluded that economic growth is motivated by the private investment. the effects of public sector are very small due to inefficiency of the sector. table 5: short run coefficients estimation for model -i ardl (2,0,1,2,0,1)selected based on schwarz bayesian criterion (sbc) review of economics and development studies vol.2, no 2, december 2016 110 explained variable: gdpg variables co-efficient standard error t-ratio probability dgdpg1 0.34984 0.131 2.665 .012 dge -0.34863 0.337 -1.032 .310 dgfcf 0.21432 0.5952 0.3600 .72 dig -0.1067 0.320 -0.333 .74 dig1 0.12237 0.332 3.718 .001 dinds -0.22338 0.491 -0.454 .653 dcpi 0.17081 0.192 0.888 .382 dc 44.9894 14.23 3.1616 .004 ecm(-1) -1.9034 0.216 -8.779 .000 r-squared 0.836 rbar-squared 0.770 aic -107.79 sbc -117.77 durbin-watson statistics 2.262 f-statistics 17.311(0.000) the results show that r-square and adjusted r-square for model-i are 83 percent and 77 percent respectively. the r-square and adjusted r-square values express the variations explained by explanatory variables. the results showed that inflation has positive and significant effect on economic growth. these results are theoretically sound. the more profits are gained by the investors with the rise in prices. however, d-w value is 2.26 shows no sign of auto correlation. fstatistics is significant so the model is good. interpretation of error correction term (ecmt-1) the result of error correction term for model-1 is 1.90 which shows that 190% of disequilibrium will be adjusted. the parameter of adjustment is highly significant and shows the fast speed of adjustment. so 190% disequilibrium is corrected over each year at 1% level of significance. long run and short run estimation for model-ii table 6: estimated long run coefficients of model-ii using ardl approach ardl (2, 0, 1, 2, 0, 1) selected based on schwarz bayesian criterion (sbc) dependent variable: gdpg variables co-efficient standard error t-ratio probability ge -0.121 0.1645 -0.7389 0.466 gfcf -0.316 0.227 -1.39 0.176 ig -0.352 0.485 -0.725 0.943 agri 0.311 0.1870 1.665 0.107 cpi 0.462 0.801 5.767 0.000 c 9.450 7.722 1.223 0.232 source: author’s estimation by applying micro-fit4.1software the results indicate that agriculture sector has positive and significant impact on gdp growth. the increase in public spending on agriculture sector increases the total productivity might increase the 3.0 percent of total productivity. these results are alike to results of aschauer (1989). armey maintains that low government expenditures can increase economic growth until it reaches a critical review of economics and development studies vol.2, no 2, december 2016 111 level. the proper allocation of public expenditure is required for the betterment of the macroeconomic condition of the economy. the negative sign of government expenditure relates to the economic theory. government expenditure has different preferences of public and private investment. so, government expenditure has negative impact on economic growth. our study results are harmonized the results of barro (1990) table 7 error correction representation for the selected ardl model ardl (2, 0, 1, 2, 0, 1) selected based on schwarz bayesian criterion (sbc) explained variable: gdpg variables co-efficient standard error t-ratio probability dgdpg1 0.417 0.132 3.14 0.004 dge -0.245 0.331 -0.7422 0.464 dgfcf 0.593 0.6247 0.949 0.35 dig -0.166 0.298 -0.557 0.58 dig1 0.125 0.317 3,945 0.000 dagri 0.630 0.399 1.576 0.125 dcpi 0.099 0.190 0.519 0.607 dc 19.1 15.13 1.263 0.216 ecm(-1) -2.02 0.222 -9.080 0.000 r-squared 0.849 rbar-squared 0.788 aic -106.22 sbc -116.20 durbin-watson statistics 2.262 f-statistics 19.0446(0.000) source: author’s estimation by applying micro-fit4.1software the results of table 7 indicate that r-square and adjusted r-square for model-ii are 84 percent and 78 percent respectively. the r-square and adjusted r-square values show the variations explained by explanatory variables. the results showed that value of the coefficient of govt. fixed investment is 0.593 which shows that one unit increase in govt. fixed investment (gfcf) increases the economic growth (gdpg) by 0.593 percent. this is significant and strong effect as the productive activities are directly affected by the expansion of productive infrastructure. however, d-w value is 2.26 shows no sign of auto correlation. fstatistics is significant so the model is good. interpretation of error correction term (ecmt-1) the result of error correction term for model-ii is (-2.02) which shows short run variables approach to long run variables by 202% each year. the value of error correction term is significant and negative. it confirms the presence of unidirectional and long term relationship. stability test: to check stability, cusum and cusums tests are measured. the cumulative sum of recursive residuals (cusum) and the cusum of square (cusumsq) tests are applied to assess the parameter stability (pesaran and pesaran (1997). stability means the cusum and cusums statistics lie within the critical boundaries of 5 % confidence interval. graphs 1 and 2 for model-i are plotted which show the results for cusum and cusumsq tests. these graphs show the stability of the coefficients of both estimated models. the cusum and cusums statistics falls in the critical bounds of 5% confidence interval. it shows that long run and short run estimations are stable. the verification of stable short run and long run estimations are confirmed by the lack of divergence in cusum and cusums graphs. stability test cusum and cusums for model-i review of economics and development studies vol.2, no 2, december 2016 112 stability test cusum and cusums for model-ii plot of cumulative sum of recursive residuals the straight lines represent critical bounds at 5% significance level -5 -10 -15 0 5 10 15 1974 1979 1984 1989 1994 1999 2004 2009 2012 plot of cumulative sum of squares of recursive residuals the straight lines stand for critical bounds at 5% significance level -0.5 0.0 1984 0.5 1.0 1.5 1974 1979 1984 1989 1994 1999 2004 2009 2012 plot of cumulative sum of recursive residuals the straight lines stand for critical bounds at 5% significance level -5 -10 -15 0 5 10 15 1974 1979 1984 1989 1994 1999 2004 2009 2012 review of economics and development studies vol.2, no 2, december 2016 113 3. conclusion this study has been attempted to empirically analyze the impact of public spending and macroeconomic performance in pakistan. public spending is considered as the counter piece of government actions or policies which are regarded mandatory for the economic growth. in this study the various components of government spending, their directions and effects are analyzed to facilitate the government policies to attain the economic growth. in this study, the time series annual data for the last 40 years has been analyzed for pakistan economy. in this study the pakistan’s economic performance has been analyzed by investigating the public spending of the economy. the economic performance of pakistan has shown sharp trends from the day of independence to date. these ups and downs are due the increase in population, adverse economic policies and instability of economic and political conditions. all these economic factors caused to the decline in growth rate. in short run economic growth rate (gdp) is found positive. gdp shows the gross domestic product of a country in a year. in short run the gross fixed capital formation showed the positive and significant impact on gdp. as the gross fixed investment (gfcf) increases in an economy, the economy grows. while in long run the gross fixed investment (gfcf) has negative value. this shows the excessive capital formation leads to the decline in economic growth (gdp). these results are harmonized by the results of devarajan1996. this study explained the impact of public spending and macroeconomic performance of pakistan. policies should be made by the government for the proper allocation of resources between the current and capital expenditure. more incentives must be provided to main sectors of the economy so that their share in gdp will increase and this will lead to the sound economic conditions. public policies must be directed towards proper control check of government spending especially on productive tasks as compared to unproductive. references agénor, p. r. (2011). schooling and public capital in a model of endogenous growth. economica, 78(309), 108-132. ahmed, v., abbas, a., & ahmed, s. (2013). public infrastructure and economic growth in pakistan: a dynamic cge-microsimulation analysis. in infrastructure and economic growth in asia (pp. 117143). springer international publishing. aschauer, d. a. (1989). is public expenditure productive?. journal of monetary economics, 23(2), 177-200. barro, r. j. (1990). government spending in a simple model of endogenous growth. journal of political economy 98(5), part 2: the problem of development. barro, r. j. (1996). determinants of economic growth: a cross-country empirical study (no. w5698). national bureau of economic research. plot of cumulative sum of squares of recursive residuals the straight lines stand for critical bounds at 5% significance level -0.5 0.0 0.5 1.0 1.5 1974 1979 1984 1989 1994 1999 2004 2009 2012 review of economics and development studies vol.2, no 2, december 2016 114 bose, n., haque, m. e., & osborn, d. r. (2003). public expenditure and economic growth: a disaggregated analysis for developing countries*. the manchester school, 75(5), 533-556. bukhari, s. a. h. a. s., ali, l., & saddaqat, m. (2007). public investment and economic growth in the three little dragons: evidence from heterogeneous dynamic panel data. international journal of business and information, 2(1), 57-79. devarajan, s., swaroop, v., & zou, h. f. (1996). the composition of public expenditure and economic growth. journal of monetary economics, 37(2), 313-344. ellahi, n., & kiani, a. (2011). investigating public investment-growth nexus for pakistan. international proceedings of economics development & research,25. ghani, e., & din, m. u. (2006). the impact of public investment on economic growth in pakistan. the pakistan development review, 87-98. grossman, s. j. (1988). program trading and market volatility: a report on interday relationships. financial analysts journal, 18-28. gujarati, d. n. (1995). basic econometrics. new york: mc. graw hill, inc. 3rd edition. holtz-eakin, d., & lovely, m. e. (1996). scale economies, returns to variety, and the productivity of public infrastructure. regional science and urban economics, 26(2), 105-123. iqbal, z., & zahid, g. m. (1998). macroeconomic determinants of economic growth in pakistan. the pakistan development review, 125-148. landau, d. l. (1986). government expenditure and economic growth in the developed countries: 1952–76. public choice, 47(3), 459-477. lucas jr, r. e. (1988). on the mechanics of economic development. journal of monetary economics, 22(1), 3-42. munnell, a. h., & cook, l. m. (1990). how does public infrastructure affect regional economic performance?. in is there a shortfall in public capital investment? proceedings of a conference. nworji, i. d., okwu, a. t., & nworji, l. o. (2012). effects of public expenditure on economic growth in nigeria: a disaggregated time series analysis.bussiness research, 1(7). onakoya, a.b. somoye, & christopher, r.o. (2013) global journal of economics and finance vol. 2(1) pp. 1-11, february 2013 pakistan, government of (2010) pakistan economic survey 2010-2011. islamabad: federal bureau of statistics. pesaran, m. h., & shin, y. (1999) an autoregressive distributed lag modelling approach to cointegration analysis, in strom s., econometrics and economic theory in the 20th century: the ragnar frisch centennial symposium. cambridge, cambridge university press pesaran, m. h., shin, y., & smith, r. j. (2001). bounds testing approaches to the analysis of level relationships. journal of applied econometrics, 16(3), 289-326. review of economics and development studies vol. 5, no 3, 2019 479 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads does corruption affect foreign direct investment: evidence from east asian countries 1 muhammad shabir jan, 2 sher ali , 3 abid ali 1 department of economics, bacha khan university, charsadda, pakistan, shabir@bkuc.edu.pk 2 assistant professor, department of economics, islamia college, peshawar, pakistan, dr.ali@icp.edu.pk 3 lecturer, department of economics, islamia college, peshawar, pakistan article details abstract history revised format: 30 june 2019 available online: 31 july 2019 globalization has resulted in a significant increase in the fdi inflows. the impact of corruption on fdi inflow has been extensively studied in previous research. however, this topic has received scarce attention in asians economies countries. asian economies is different from other europe, africa, north america and south america as rapid growth have seen in recent years. to fill the research gap, we collected data for seven south asians countries. based on the collected data, we first find out the effect of corruption on fdi. the results showed a positive and significant effect of corruption on fdi and supporting the helping hand theories of corruption which suggesting that south asian countries should bring political stability and good governance, peace to attract more mnc, make strong law and its implementation to make corruption lessen. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords fdi, pooled ols, east asian countries jel classification: d73, n15, p33 corresponding author‟s email address: shabir@bkuc.edu.pk recommended citation: jan, m. s., ali, s. and ali, a. (2019). does corruption affect foreign direct investment: evidence from east asian countries. review of economics and development studies, 5 (3), 479-486 doi: 10.26710/reads.v5i3.700 1. introduction direct investment (fdi) plays an important role in the growth and development of a country, particularly in developing countries. developing countries face shortage of capital to invest and they need additional capital to invest in the country to get higher growth and generate employment opportunities. moreover, fdi caused technological diffusion and augmentation in technical skill of labour by establishing a firm or industry in the host country. both the technological diffusion and transfer of technical skill raised productivity in production of the developing country. on the other hand developed countries have the opportunities of access to cheap resources of the developing countries. capital is generally abundant in developed countries and the investors of the developed countries can generate high returns from the resources in developing countries. hence there exist a mutual opportunity to get from flow of fdi. fdi is an important instrument for the developing countries through which developing countries can get access to the benefits of globalization (azam &uddin, 2001). stern (2002) argued that multinational organization gives importance to the investment climate of the country thus sound climate of a country can attract more fdi inflow. the climate includes political, economic and social cultural aspects of country. anjum and nishat (1998) argued that political stability, law and order situation (peace), mineral resources, technical labor force and economic policies of the government has attracted foreign investors. dunning (2002) stated that fdi depends on government policies, supportive infrastructure and transparent governance of the host country. asiedu (2002) has focused on policy reforms as the determinants of the developing countries for fdi http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 480 inflows and found that the degree of openness to fdi and corporate tax rates are the determinants of fdi. zhang (2001) argued that the fdi has a significant positive impact on those countries where infrastructure has developed and trade policies are more liberal. kinoshita and campos (2002) found significant positive impact of fdi on growth if there is a transfer of technology to the host the country. lensink and hermes (2003) found that fdi has a negative impact on the host country and similar results were found by sylwester (2005). zaidi (2004) stated that in pakistan the level of saving and investment is less than the desired level, so the gap can be filled from the transfer of outside resources in the form of fdi. further zaidi (2004) stated that increases in the foreign capital inflow can be improved through the government policies that can gave incentives such as tariff reduction and tax concessions to the investors. the world bank states that it “has identified corruption as among the greatest obstacles to economic and social development. it under mines development by distorting the rule of law and weakening the institutional foundation on which economic growth depends. foreign direct investment is indispensable for the economic development of the host countries. every country is trying hard to attract more and more foreign direct investment by providing the exemption and incentive as well as facilities to foreign investors. especially the developing countries like pakistan and some asian countries need more fdi to boot the economy and generate employment for locals. the ongoing process of world economy integration, which has been gaining momentum since the beginning of the 1990s, has led to a significant change in the attitudes of host countries with respect to inward fdi inflow. fdi is no longer regarded with suspicion by developing countries. controls and restrictions over the entry and operations of foreign firms are now being replaced by policies that aim to encourage fdi inflows .modernization theorists argue that fdi provides host economies with capital, promotes technology transfer,and modernizes their management skills and corporate governance. these in turn raise labor productivity and accelerate economic growth (blomstromand kokko 1996; choi 1998 & markusenand venables1999). they also argue that fdi reduces income inequality via the kuznets effect in which income inequality increases at first as per capita income grows but declines later once acertain level of development has been attained (jin 2009). along with this, an extensive network of bilateraland regional investment agreements, which seeks to promote and protect fdi from partner countries, has also emerged. until recently, various literature strongly agreed that multinational corporations (mncs) invest in specific locations mainly because of the host countries‟ strong economic fundamentals, such as a large market size, stable macroeconomic environment, availability of skilled labor, and infrastructure, that influence the attractiveness of the country to fdi inflows (dunning 1993; globerman & shapiro 1999; shapiro and globerman2001). however, the host country‟s economic fundamentalists may not be sufficient for inward fdi. therefore, studying a new which factors determine fdi inflow has become necessary. in this regard, one of the most damaging risks that mncs must consider when entering emerging market economies is the threat of corruption, which undermines economic reform and, ultimately, national economic stability. moreover, corruption raises the costs of business operations, distorts the allocations of resources and prices of goods and services for consumers, and discourages fdis (zhao, et al. 2003). for instance, surveys of private firms in latin america found that corruption negatively affects sales, investments, and employment growth, thereby reducing firm competitiveness without producing any positive effects (gaviria2002). according to myint (2000), corruption is defined as the use of public office for private gain, or the use of official position, rank, or status by an office bearer for his/her own personal benefit. from this definition, examples of corrupt behaviour would include: (a) bribery, (b) extortion, (c) fraud, (d) embezzlement, (e) nepotism, (f) cronyism, (g) appropriation of public assets and property for private use, and (h) influence peddling. in this list of corrupt behaviour activities such as fraud and embezzlement can be undertaken by a single official without the involvement of a second party. other activities, such as bribery, extortion, and influence peddling, involve two parties, namely, the giver and taker in a corrupt deal. political corruption by public officials can assume many forms, including bribery, embezzlement, extortion, nepotism, and graft in which public officials either directly steal public funds or illegitimately benefit from public funds. freedom indexes an indicator of the degree to which an economy is free of such forms of corruption. similarly, the world bank focuses on the abuse of public power for private benefits in defining corruption (tanzi1998). this study also good for those countries to see their level of corruption and how much it effects these countries. this study will also contribute to the current literature. this study is also helpful for foreign investor to check the level of concern asian countries for their investment and to choose the best countries for their future investment. this study is also helpful for those scholars and researchers who want to work in the relevant field with regard to corruption and foreign direct investment. review of economics and development studies vol. 5, no 3, 2019 481 numerous studies have been done on various countries of the world. in some study, they have taken group as a sample country but in some they are taken few countries from asia. this study is limited to 39 asian countries due to lack of time and non-availability of data. thirty-seven countries are enough for our study because it will accomplish our objective conveniently 2. review of literature most of the study have been conducted to examine the level of corruption in fdi inflow in the host country and could not reach the commonly expected conclusion that the term corruption deters fdi. there are mixed results of the research studies conducted on the relationship of corruption in fdi. for example, the study of king (2003), jonhnson dahal strom (2004), mathur and singh (2011) and domokos (2011) find out that there is negative relationship between corruption and fdi. on the other hand, a study highlighted that african corruption encourage chinese investment in the said place (classen et all.,2011). the government officials may use their authority for personal gains while formulating and implementing policies. corruption has been criticized for the failure of certain developing countries to develop and the studies confirm a link between higher perceived corruption in lower growth and investment (mauro, 1995; tanzi, 1995 and world bank,1997), corruption is a serious economic, political, social and moral blight especially in the developing countries which is effecting the companies particularly the international commerce, technology transfer and finance. 3. material and methiodes this study has mainly focused on the impact of corruption on the foreign direct investment based inflow on the literature review, corruption has vital role in the determination of fdi inflow. therefore, this research study will try to answer that whether corruption affect fdi inflow in asian countries or play their part in the determination of fdi inflow? most results are bases on large sample size. greater the sample size the most will be the accurate results. in this study a sample of comprise on panel data set on annual basis from thirty-nine countries of asia for a period of 1995 to 2014.there were 48 countries in asia and we have selected 39 countries for analysis due to missing and lack of data this study is in nature in quantitative and the data which will be used in this study is secondary as it is readily available on the official site of imf and world bank. we will be taken the data from the imf and world bank official sites. the data will be arranged in excel through panel data format for analysis purpose 3.1 conceptual frame work 3.2 the model in light of the current literature the following regression equation is used as following the studies of (rehman and naveed, 2007; sadig (2009) and alemu (2012). fdi ti , = α + β 1 cpi ti , + β 2 infl ti , + β 3 gdpg ti , + β 4 gdpp ti , + β 5 prisk ti , +β6 riri,t+ ԑi,t in the given model, the subscript i represent to the unit of observation, example countries whereas subscript t is referring to the time and € is the error term. gdppc economic growth political stability foreign direct investment corruption perception index inflations interest rate corruption perception index review of economics and development studies vol. 5, no 3, 2019 482 4. results and discussions to examine the effect of independent variables on dependent variable and to analyze the change because of the independent variable in dependent variable pooled ols regression were used and through chow test pooled ols effect model was selected for analysis. the following table narrated the results of regression analysis. table-1: pooled ols regression variables coefficient std. error t-ratio p-value cost 140.328 4201.04 0.0334 0.97344 cpi 2822.24 1418.81 1.9892 0.05019 infl -205.937 141.195 -1.4585 0.14871 gdpg -92.061 144.947 -0.6351 0.52720 pcgdp_ -0.326323 0.178715 -1.8259 0.07169 prisk 2.93892 34.1896 0.0860 0.93172 rir -327.813 180.988 -1.8112 0.07395 mean dependent var 5314.807 s.d. dependent var 5005.057 sum squared resid 1.75 s.e. of regression 4740.975 r-squared 0.166832 adjusted r-squared 0.102742 f(6, 78) 2.603091 p-value(f) 0.023670 log-likelihood -836.3971 akaike criterion 1686.794 schwarz criterion 1703.893 hannan-quinn 1693.672 rho 0.266619 durban-watson 1.79 table-1 presents the results of the pooled ols effects regression by using fdi of gdp us as a dependent variable. the first column consists of independent variables for the study. in additions, second colum consist of coefficient of the variables. similarly, the standard error, z and p-values are shown in third, fourth and fifth coulomb respectively etc the f-value is 2.603091 with p-value is 0.0236 that shows that overall model fits the data. moreover, the value of r2 is 0.2938 which represents that there is 0.166832 variations in dependent variable (fdi) are due to the independent variables in the study. the result of pooled ols regression shows that the coefficient of cpi (corruption perception index) is 2822.24 and significant, suggesting that meddle east country corruption positively affect amount of inflow of fdi, which is supporting the “helping hand theory of corruption” i.e. there is positive relationship between corruption and inflow of fdi. this shows that the corruption increase by 2822.24 unit‟s dollar when there is one unit positive increase in the level of fdi inflow (goes down the cpi score) in middle east. according to transparency international organization (2014) cpi score range is (0 to 10), 0 means the most corrupt economy and 10 means most clean economy. therefore, when the level of corruption increases the cpi score decreases or moving down toward 0 lead to worst governance of the economy. if the level of corruption decreases the cpi score increases or goes up toward 10 tend to improvement in governance. if the countries in middle east would be able to reduce the perceived uncertainty of corruption to the same level as japan mean cpi score 7.112 highest score in asian economies, would attract more fdi and israel is the second countries which attract more fdi. in opposite, some of the countries like india and china having high level of corruption but at the same time attracting fdi, could even double their fdi inflow, if the existing level of corruption can have decreased(alemu, 2012). in case a country like angola with high level of corruption managed to decline its corruption to the level, of the country bostwana an intermediately corrupt country its inflow of fdi would roughly double (dahlström and johnson, 2007). the earlier empirical research studies such as wei (2000a), habib and zurawicki (2002), voyer and beamish (2004), dahlström and johnson (2007), rehman and naveed (2007), mathur & singh (2013) and quazi (2014) confirmed that in fact the host country corruption reduce the inflow of fdi. the variable inflation (infl) is negative but significant effect on dependent variables. the coefficient of infl is 205.937 with p-value is 0.14871 is significant at 10% level meaning that infl has found effect on dependent variable. it indicates that if there is one unit change or decrease in independent variables that is (infla) there will review of economics and development studies vol. 5, no 3, 2019 483 be -205.937 increase in fdi. these finding are alignedwith busse and hefeker (2007) and drabek and payne (2002) as they examined that inflation has negative but insignificant effect on incoming fdi. the coefficient of (gdpg) is negative and statistically insignificant. the empirical results explain that one unit increase and improvement in gdp growth (gdpg) brings -92.061 units increase in the inflow of fdi in middle east but in this case the p-value is insignificant which show no contribution. gdp growth is the significant determinant of the ability of host country, to attract more fdi. the sustainable economic growth of the host country is one of the most important and positive attributing factors and has a vital role to encourage and boost up foreign investors‟ confidence, and a symbol of stable government hence promote inward of fdi (alemu, 2012). the same results also found by the previous research studies i.e. gdpg has positive significant effect on fdi (al-sadig, 2009; alemu, 2012 and mathur & singh, 2013). the political risk (prisk) has expected positive sign and insignificant contributor in the regression model in the current study. which means the coefficient i.e. 2.93892 of (prisk) is different from zero as the p-value is 0.93172 which is greater than 0.05 shows no effect response variable.it indicates that if prisk is increases by 0.93172, it will dereases the fdi inflow to meddle east. the current study results are consistent with the existing literature quazi (2014) and al-sadig (2009) who found that political stability has negative significant effect on fdi which means that the stable political environment of the host country can boost up the foreign investors‟ confidence hence attracting more fdi.this study find out that variable pcgdp insignificant contributor in regression model as its coefficient is -0.326323 (where opposite coefficient sign obtained, to the existing literature) with p-value is 0.071meaning that pcgdp is affecting the response variable. it indicates that if one unit decrease in pcgdp there will be -0.326323 decrease in fdi inflow. pcgdp play important role in the economy of the countries and can bring fdi inflow to the countries. gdp inflow is strongly based on pcgdp and its effect is found is positive and these results are support by many literature of various research paper. the real interest rate has negative sign but insignificant which show no contribution in response variables. the coefficient is -327.813 with p-value 0.07395 which indicates that there is one unit increase in real interest rate, there will be -327.813 decreases in fdi inflow. the real interest rate is most important determines because if the interest rate of the countries decrease investor will take more debt to support their investment and as a result the economy will boost up. if the interest rate of a countries increase the investor shall try to do less investment and take low debt because of more interest charges, as a results the fdi inflow will decrease and countries economy shall go down. in this case the results is insignificant which indicates that real interest rate has no effect on response variables and not a good contributor. these results are not supported by the various literature of different papers such as quazi (2014) and al-sadig (2009) who found that real interest rate has negative significant effect on fdi which means that the low interest rate of the host country can boost up the foreign investors‟ confidence hence attracting more fdi. in a conclusion results in the table are support by helping hand theory and encourage corruption. 4.1 diagnostic tests the chow test is used to describe whether fixed effect model or simple pooled ols regression is fit for analysis of the data. null hypothesis: pooled ols regression model is fit (no structural break) alternative hypothesis: fixed effects model is fit (structural break) f statistic = 1.69533 with p-value = 0.1240 as the p-value is greater than 5%, so the alternative hypothesis rejected in favour of null hypothesis and concluded that there is no structural break in the data and suggesting pooled ols model is fit for data analysis. for heteroscedasticity detection the brusch-pagan/cool-weisberg test is used in this study and checks the linear form of heteroscedasticity in the data. in the data the hypothesis is tested are; null hypothesis: error variances are all equal alternative hypothesis: error variances are a multiplicative function of one or more variables review of economics and development studies vol. 5, no 3, 2019 484 chi-square = 37.697800 with p-value = 0.082761 which means heteroscedasticity is not present in the data. the alternative hypothesis shows that when there is increase or decrease in the error variance as the predicated value of y increase i.e. the bigger the predicted value of „y‟ having the bigger error variance and the large chisquare value shows that heteroscedasticity is existing in the data. in the panel data, the heteroscedasticity is present because of the different units i.e. in the current study has the asian economies. as the above chow tests describing that pooled ols model are fit as well as the absence of heteroscedasticity in data which is detected by breusch-pagan / cool-weisberg, test leading that the pooled regression model can be used for analysis. to examine the effect of independent variables on dependent variable and to analyze the change because of the independent variable in dependent variable pooled ols regression were used and through chow test pooled ols effect model was selected for analysis. the results of the f-value are 2.603091 with p-value is 0.0236 that shows that overall model fits the data. moreover, the value of r2 is 0.2938 which represents that there is 0.166832 variation in dependent variable (fdi) is due to the independent variables in the study.the result of pooled ols regression suggesting that meddle east country corruption positively affect amount of inflow of fdi, which is supporting the “helping hand theory of corruption” .it concluded that east asian countries is facing of corruption and corruption considered for fdi inflow. the variable inflation (infl) is negative but significant effect on dependent variables. it indicates that if there is one unit change or decrease in independent variables that is (infla) there will be positive increase in fdi. these finding are aligned with busse and hefeker (2007). if east asian countries controls on infl will attract more fdi inflow. the coefficient of (gdpg) is negative and statistically insignificant. it contributes no contribution and has no effect on fdi but in reality, gdp play important role to attract fdi inflow. this results may be due to data problem.the political risk (prisk) has expected positive sign and insignificant contributor in the regression model in the current study. the variable pcgdp insignificant contributor in regression model as its coefficient is 0.326323 (where opposite coefficient sign obtained, to the existing literature) with p-value is 0.071 meaning that pcgdp is affecting the response variable. the real interest rate has negative sign but insignificant which show no contribution in response. the real interest rate is most important determines because if the interest rate of the countries decrease investor will take more debt to support their investment and thus the economy will boost up. if the interest rate of a countries increase the investor shall try to do less investment and take low debt because of more interest charges, as a results the fdi inflow will decrease and countries economy shall go down. in this case the results is insignificant which indicates that real interest rate has no effect on response variables and not a good contributor. in a conclusion results are support by helping hand theory and encourage corruption. 5. conclusion and policy recommendations this study is to find out the effect of corruption on fdi in six east asians countries. to analyze this objective, we have taken the 6 countries data based on convenient sampling technique for central asia for the year 1995 to 2014. we have applied the pooled ols model techniques to check the relationship of all independent variables with fdi. the panel data is not having the issue of heteroscedasticity and multicollinearity which was tested and not found these issues. the result of pooled ols regression reveal that east country corruption positively affect amount of inflow of fdi, which is supporting the “helping hand theory of corruption” .it concluded that east asian countries is facing of corruption and corruption considered good for fdi inflow. the variable inflation (infl) is negative but significant effect on dependent variables which reveals that inflation rate is also controls in central asian countries. the political risk (prisk) has expected positive sign and insignificant contributor in the regression model in the current study. the variable pcgdp insignificant contributor in regression model is not statistically significant. the real interest rate has negative sign but insignificant which show no contribution in response. in a conclusion, the overall results are mixed and supporting the helping hand theories of corruption states that central asia countries governance is not good with compare with whole asia countries. in a conclusion, the overall results is mixed but most of the results is supporting the helping hand theories of corruption and encourage corruption and only central asia results support the grabbing hand theories which states that corruption is considered ill for countries economy. the pakistan is considering most corrupt countries in asia because out of 39 nine countries, pakistan is ranked 23 countries which is not good symbol. so, these countries need to improve their governance, political stability and concentrate nepotism and follow merit as well as should attention on peace to attract more fdi inflow. review of economics and development studies vol. 5, no 3, 2019 485 references akcay, s., 2006. is corruption an obstacle for foreign investors in developing countries? a cross-country evidence. yapi kredi economic review, 12(2): 27-34. alam, i., quazi, r. 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(1981), public utilities in egalitarian ldc‟s: the role of bribery in achieving paretoefficiency. kyklos, 34, 448-460. rose-ackerman, s. (1996) “the political consequences of corruption. causes and consequences”. world bank, note 74. rose-ackerman, s., 1997. the political economy of corruption. in k. a. elliot (ed.) corruption and the global economy, 31-0 washington: institute for international economics. schneider, f., frey, b. (1985), economic and political determinants of foreign direct investment. wei, s-j, (2000b), local corruption and global capital flows, brooking papers on economic activity, 2000 (2). wheeler, d. and a. mody, 1992. international investment location decisions: the case of u.s. firms. journal of international economics, 33(1-2): 57-76. zhang, k.h., 2001. does foreign direct investment promote economic growth? evidence from east asia and latina america. contemporary economic policy, 9(2):175-185. http://www.prsgroup.com/ review of economics and development studies, vol. 6 (4) 2020, 833 843 833 energy consumption and four growth hypotheses: an evidence from saarc nations shafqut ullah a , tahir mahmood b a assistant lecturer, department of economics, national university of modern languages, islamabad, pakistan email: hshafqut@numl.edu.pk b assistant professor, school of economics, quaid-i-azam university, islamabad ,pakistan email: tahirraja2000@yahoo.com article details abstract history: accepted 05 dec 2020 available online 31 dec 2020 the contemporaneous study investigates the directional relationship between economic growth and energy consumption for four selected saarc nations from 1990 to 2018 within a panel-data framework. in the empirical literature, conservation, growth, feedback, and neutral hypotheses exist between energy and economic growth. first, study implies a granger causality test to find the short-run directional relationship. secondly, it checks the order of panel unit root that is a prerequisite condition for cointegration particularly when we have a long panel. in the end, based on panel unit root, the study estimates the model with the help of fmols to find a long-run relationship. the present study explores the conservation hypothesis in the short run at the regional level for bangladesh and pakistan. while the feedback hypothesis and neutral hypothesis exist in case of india and sri-lanka respectively. on the other hand, in the long run, there is cointegration between economic growth and energy use, while the direction conforms to the feedback hypothesis in our panel after allowing heterogeneous cross-sectional effect. thus, energy and economic growth are coupled with each other in the long run at a regional level whereas, energy as a factor of the production process does not contribute significantly in the short run. it is because this region is labour abundant, therefore, the share of energy is significantly low in the final output as compared to developed nations. consequently, the availability of energy at affordable prices truly matters for developing nations of saarc. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: growth hypotheses, saarc, panel cointegration jel classification: o47, c33 doi: 10.47067/reads.v6i4.282 corresponding author’s email address: hshafqut@numl.edu.pk 1. introduction availability of energy at affordable prices is an important factor of the production process (warr & ayres, 2010). there are substantial empirical evidences about healthy relationship review of economics and development studies, vol. 6 (4) 2020, 833 843 834 between energy and economic growth (al-mulali & binti che sab, 2012; alam, begum, buysse, rahman, & van huylenbroeck, 2011; alper & oguz, 2016; bhattacharya, paramati, ozturk, & bhattacharya, 2016; dogan, sebri, & turkekul, 2016; koçak & şarkgüneşi, 2017; safdar, asif, & farooq, 2020). this relationship is further categorized into four growth hypotheses and each hypothesis can be tested (apergis & payne, 2009). the importance of energy consumption motivates this study to empirically estimate these hypotheses in case of selected south asian association for regional cooperation (saarc) nations. this region is home to 23% of the world’s population. from the last few decades, good economic performance of this region causes more energy consumption. in saarc energy demand is growing with 5% growth rate while gdp per-capita growth rate is near to 5.2% (isgf, 2018). consistent and balanced economic growth is a prerequisite condition for poverty reduction in this region. almost the whole block depends upon imported energy in the form of oil. it acquires more consensus on the directional relationship between these two. kraft & kraft, (1978) are the pioneers of the empirical work on energy and economic growth and then various studies try to find this directional relationship (apergis & payne, 2009; belloumi, 2009; hondroyiannis, lolos, & papapetrou, 2002; huang, hwang, & yang, 2008; imran & siddiqi, 2010; c.-c. c. lee, 2005; masih & masih, 1996). however, there are discrepancies in empirical literature in form of causal relation between these two which convert it into a nexus. the literature about growth nexus is divided into steady state effects and transitional impacts. in the transitional phase, there is debate among the researchers regarding the direction of causality. there are four growth hypotheses in literature. the first one is conservation hypothesis and it is basically one-sided causality that runs from economic growth to energy consumption (y→ ec). in simple words it is national income (economic growth) that causes more energy consumption (mozumder & marathe, 2007). the second hypothesis is growth -hypothesis (y←ec). growth hypothesis means more energy consumption causes more economic growth. in this connection, the causal relationship is unidirectional but opposite in direction of conservation hypothesis. the third hypothesis is the feedback. it is bidirectional causal relationship that means energy use at national and economic growth cause each other (y↔ ec) (belloumi, 2009). when there is no causality between these two it is called neutral hypothesis. present study contributes to existing literature in two unique ways: first, to our knowledge, it is foremost an attempt to empirically analyze the relationship between energy and economic growth in terms of four growth hypotheses for selected saarc nations. second, study also contributes to growth theory by introducing energy consumption into neoclassical growth theory along with capital and labor stocks, especially for saarc nations. the structure of study will covere the different aspects in the form of sections. in following section 2 discuss the precise review of existing literature about energy-income nexus.. in section 3, describes the data and its source, model and different methods to estimate the model in the long and short run. results and discussion along with some economic reasons are present in section 4. at the end, section 5 concludes this study and suggests some possible policy recommendations. 2. literature review first time kraft & kraft (1978) empirically finds conservation hypothesis in case of the united states. then a stream of empirical attempts is taken in this regard. like, oh & lee, (2004) find neutral hypothesis in short run and conservation hypothesis in the long run in case study of korea. furthermore, the same hypothesis is also found by paul & bhattacharya, (2004) for india by using time series data. likewise, lee, (2005) investigates the same causal relationship for eighteen asian countries and finds conservation hypotheses in short run as well as in long run. in this connection, lee & chang, (2008) re-investigates the same relationship for sixteen asian nations and finds cointegration. review of economics and development studies, vol. 6 (4) 2020, 833 843 835 additionally, khan & qayyum, (2007) investigate the impact of energy use on economic growth in selected countries of saarc and find conservation hypothesis in this region. likewise, jamil & ahmad, (2011) analyze the impact of energy price and real gdp on energy consumption in case of pakistan and also examine causality from gdp to energy consumption (conservation hypothesis). there are many other empirical attempts that support the conservative hypothesis (huang et al., 2008; kasman & duman, 2015; narayan, narayan, & popp, 2010; shahbaz & feridun, 2012). empirical literature also supports the growth hypothesis (apergis & payne, 2009; aslan, apergis, & yildirim, 2014; ouedraogo, 2013; ozturk et al., 2010). there is positive and bidirectional and cointegration between energy consumption and output of cement industry india (mandal & madheswaran, 2010). similarly, some studies support the feedback hypothesis that means bidirectional causal relationship exists between growth-energy (belke et al., 2011; coers & sanders, 2013). zhang et al., (2011) find feedback hypothesis at industrial level of beijing province of china. the feedback hypothesis explores for belgium (dogan et al., 2016). menegaki & tugcu, (2016) support the neutral hypothesis for a panel of forty two subsaharan states. streimikiene & kasperowicz, (2016) find the growth hypothesis in panel data analysis of 38 renewable energy consumer states. at last, few researchers discuss neutral impact and argue in favor of the neutrality hypothesis (kahsai et al., 2012; śmiech & papież, 2014; wolde-rufael, 2009). there are two types of growth theories in literature, endogenous and exogenous growth theory (romer, 2018). both theories try to explain factors of growth of the real world. once their focus on the aggregate level of savings as well as technology. in this connection, the both schools totally ignore the importance of energy in the production process (c.-c. lee & chang, 2008). however, after the oil crisis of the 70s, there is a healthy debate among economists about the value of energy. because this oil shock harmed the growth process of oil imported nations. it was stern, (1993) who introduced energy as an additional factor in production process. according to stern, productivity of energy matters for growth rather than energy consumption. additionally, energy augmented labor introduced as a factor of production by a physicist economist (pokrovski, 2003). the economy wide output is determined by its labor force and available energy resources (pokrovski, 2003). from literature; we can conclude that strength and directions of relationship between energy and economic growth vary over society and over period of time. overall, the literature of energy and economic growth shows some similar results by covering the time span of 19070-2014. therefore, the possible reason for this kind of results can introduce some biases by adopting the same methodology. therefore, this innovative work extended this debate by introducing new variables and new econometric models because these variables are important for saarc nations. 3. data, model and method to estimate growth hypotheses to check the impact of energy on economic growth, this study is using panel data of four selected countries over the period of 1990 to 2018. unfortunately, the data of total labor force is started from 1990 to onward for each cross section. the annual data are obtained from the world development indicators (wdi 2018) for bangladesh, india, pakistan and sri lanka. the following multivariate model is used for analysis purposes. (1) equation(1) states that energy consumption (ec), gross capital formation (gfc), and labor force (lf) are the main factors to derive gdp (y) (omri, 2013). both y and gfc are in constant 2010 u.s. dollars. gfc is a proxy of capital stock (apergis & payne, 2009). while ec is total energy consumption review of economics and development studies, vol. 6 (4) 2020, 833 843 836 in ton oil equivalent (toe). evaluating the impacts of energy will help in redesigning the energy sector and introducing the new environmental strategies and policy tools. energy production and energy consumption are playing a critical role to meet the environmental challenges. usually, capital is categorised into physical and human capital. governments play a key role in providing physical or public capital, like telecommunications and electricity. therefore, the availability of physical capital affects the economic growth since it is assumed that public capital is an essential component of the production process. additionally, the labor force is affecting growth positively in production. it means labor, capital, and energy consumption are considered critical inputs for the production process. we have long panel data sets, so the real issue of such type of data is heterogeneity. 3.1 unit root first of all, we have to check the integrated level of all variables of our model that is a prerequisite for estimating the long run and short run relationships. we have to check the order of integration of each variable. for this purpose, in literature, many tests of panel unit root have been developed to check the order of integration. when we deal with long panel, generally it suffers from autocorrelation. according to engle & granger, (1987), ols provides spurious results in nature when estimating the model of non-stationary variables. on the same token, this spuriousness may also appear in the long-panel. in this study, we compute five different types of panel unit root tests levin-lin-chu (llc), im, pesaran and shin (ips), bu, augmented dickey fuller (adf) and phillips parron (pp) (breitung, 2005; im, pesaran, & shin, 2003; levin, lin, & chu, 2002; maddala & wu, 1999). each test assumes that every cross section of panel follows the same unit root process except ips. ips treats each cross sectional as a separate entity and estimates separate regression for each cross section. the equation of ips test is replication adf test of time series data. however the following equation (2) is to be estimated for the ips panel unit root (apergis & payne, 2009). ∑ (2) here, i and t represent cross section and time series. we test the null hypothesis is for all cross sections in case of llc and ub unit root tests and the alternative hypothesis is ρ < 0. on the other hand, the null is against the alternative < 0 for each cross section in case of ips, fisher-adf, and fisher-pp tests (c.-c. c. lee, 2005). 3.2 granger causality granger causality is a useful test for forecasting the dependent variable on the basis of available information of independent variable (peng et al., 2016). according to liu, (2018) the granger causality test can be used to find the causal relationship in short run between two or more than two variables. engle and granger causality test for our panel as well as for each cross section is applied to check unidirectional and bidirectional relationship of energy and income. let, we have total energy consumption and economic growth and both series are integrated at level i (1). it means both series are nonstationary at level but stationary at first difference. if the linear combination of two series is stationary at level i (0) then it implies there is cointegration (or long run relationship between two series). at least there would be one sided or unidirectional causal relationship between the two series (engle & granger, 1987). if this causal relationship is just running from energy to economic growth, then it is a growth hypothesis. if this causal relationship is reversed, then it is a conservation hypothesis. if both cause each other then it is a feedback-hypothesis. review of economics and development studies, vol. 6 (4) 2020, 833 843 837 3.3 cointegration analysis (3) above equation (03) is heterogeneous panel cointegration and it allows different cross section effects (pedroni, 2000). it is an extension of engle granger framework in panel setup (liddle, 2012). there is “no cointegration” between and is null hypothesis of cointegration test. it means the predicted value of residual ( ̂ ) is also non-stationary at level like and . if ̂ is stationary at level, then there is cointegration or long run relationship between and . in the above equation, and are parameters to capture cross-section fixed effects and deterministic trends of each cross section respectively. in other words, these parameters capture the heterogeneity among the cross sections and time specific heterogeneity (apergis & payne, 2009; pedroni, 2000). 3.4 fully modified ordinary least square after confirmation of the short run directional and long run deterministic relationship by granger causality and pedroni tests, the next step is to find consistent and unbiased estimators of model. for this purpose, study uses the group mean panel fully modified ordinary least square (fmols). this method was developed by phillips and hansen (1990). fmols is modified version of ols that can asymptotically provide consistent, efficient (free from serial correlation) and free from endogeneity parameters of cointegration equation when we have non-stationary as well small data (liddle, 2012; pedroni, 2000; ramirez, 2007). 4. results and discussion 4.1 panel unit root the following table 1 summarizes the results of five panel unit root tests that are discussed in the previous section. all tests fail to reject the null hypothesis of unit root at level with no time effects and with fixed time effects. however, all tests reject the null hypothesis of unit root at first difference. it implies that all variables are non-stationary at level. the basic framework llc and ub test are the same while ips, fisher-adf, and fisher-pp follow different frameworks that allow cross section heterogeneity. while all tests treat each time series separately and allow heterogeneity then to combine the p-values for an overall test. if we apply conventional panel estimation techniques on such data (like pooled least square etc.) then outcomes will be inconsistent as well as biased. so, it is recommended whenever two or more series are no stationary then it is necessary to move towards the test of cointegration (liu, 2018). table 1 panel unit root level no time effects fixed time effects gdp ec gfc lf gdp ec gfc lf llc 6.31 3.69 3.74 -1.03 2.53 0.19 1.34 -3.74 ub 8.51 4.51 4.03 1.64 1.88 2.78 0.55 -0.85 ips 9.25 6.63 3.73 1.73 6.05 4.31 -0.51 0.49 fisher-adf 4.96 1.12 4.08 1.96 3.28 2.49 2.18 0.62 fisher-pp 5.35 0.77 4.76 0.20 3.71 2.33 2.83 1.34 no time effects fixed time effects δllc -1.41 -6.01 -8.01* -4.2** -6.06** -8.85* -8.67* -4.57* δub 0.96 -3.74* -2.67* -2.62* -0.265 -3.53* -4.04* -1.79** δips -0.99 -3.81* -5.04* 2.53* -2.76** -5.16* -4.38* -1.2*** δfisher-adf -5.33* -4.06* -1.30*** -2.73* -6.32* -5.45* -1.32 *** -1.3*** δfisher-pp -3.54* -7.64* -2.85* -4.34* -6.319* -9.16* -3.17** -2.63* notes: *, ** and *** represents significance at the 1%, 5% and 10% levels, respectively. review of economics and development studies, vol. 6 (4) 2020, 833 843 838 4.2 granger causality it is necessary that series should be stationary to apply the granger-causality test for short run analysis. therefore, we are using the first difference of all variables because at first difference they are stationary. in the following table 2, the results of granger-causality test for the overall panel and for each country are presented. at regional level, study finds unidirectional causality running from economic growth to energy consumption and it is classified as conservation hypothesis. the conservation hypothesis is a serious threat for environmental sustainability if this relation prevails in the long run. at cross sectional level, study finds conservation hypothesis in the case of bangladesh and pakistan. while in the case of india, there is a growth hypothesis at two percent level of significance, however, feedback hypothesis exists at 12% level of significance. in case of sri lanka, there is neutral hypothesis (see also: lee & chiu, 2011). the main reason for neutral hypothesis in sri-lanka is terrorism activities in our selected time span. table 2 granger causlity test dependent variable (↓) gdp eu gfc lf remarks gdp 0.66 (0.52) 1.05 (0.35) 0.77 (0.47) conservation hypothesis eu 2.46*(0.08) 4.55**(0.012) 0.38 (0.68) gfc 0.31 (0.73) 1.27 (0.28) 17.32** (0.00) lf 0.27 (0.76) 0.24 (0.79) 0.50 (0.61) bangladesh conservation hypothesis gdp 0.23 (0.80) eu 6.33**(0.005) india feedback hypothesis at 12% gdp 4.47** (0.021) eu 2.30 ***(0.12) pakistan conservation hypothesis gdp 1.05 (0.37) eu 3.62* (0.039) sri lanka neutral hypothesis gdp 1.22 (0.32) eu 0.81 (0.46) notes: *, ** and *** represent significance at the 5%, 10% and 12% levels, respectively. 4.3 panel cointegration test to examine the long run relationship or cointegration, present study employs the pedroni cointegration test (pedroni, 2000). the results of the pedroni test have three columns. the second column is labeled with panel statistics that further four test values. in panel statistics, it is assumed that autoregressive term ar (1) is identical across the cross sections. this first-order autoregressive term can be varying in case of group statistics. if the null hypothesis is rejected, then it implies that variables are cointegrated for all cross sections. on the same token, if the null hypothesis is rejected in case of group statistics then it implies that there is cointegration among variables at least in case of one cross section. the pp and adf statistics confirm the cointegration in the panel. the null hypothesis is rejected in both cases at five percent level of significance. it means there is a long run relationship between energy consumption and economic growth in panel as well as in each cross section. review of economics and development studies, vol. 6 (4) 2020, 833 843 839 table 3 cointegration test 4.4 fully modified ordinary least square (fmols) for long run, we estimate two separate equations with the help of fmols. in following table 4 the long run coefficients along with t-values for each estimated equation are presented. there is significant role of energy use, capital stock and labor in shaping the growth path of saarc region. this situation also confirms the neoclassical or exogenous growth theory. energy as a factor of production plays a significant role to achieve goal of economic convergence. on the other hand, the second equation confirms that economic growth, capital stock and labor force have also statistically significant impact on regional level energy use. it is implying that there is feedback hypothesis exist. moreover, capital stock causes more energy consumption in the long run that further deteriorate the regional environmental situation. our long run results confirm the feedback hypothesis. it means the promotion of energy consumption policies are effective in terms of economic growth, which in reward further expands the energy demand through dynamic process in the long run. table 4 fmols gdp ec t-value gdp t-value gfc tvalue lft t-value 5.02 * 2.79 151.36* 4.21 0.017* 3.68 ec 0.02 7 2.21 36.56 2.61 0.001 2.85 gross fix capital (gfc) and labor force (ft) are in natural log form. *indicates coefficients are significance at the 1% level. 5. conclusion and policy recommendations analyzing the income-energy nexus is necessary for effective energy and environment related policies. after the 70s oil shock researchers realized the importance of energy and a stream of research endeavored to investigate this nexus. however, the present study tries to investigate this relationship in form of four growth hypotheses (conservation, feedback, growth, and neutral hypothesis). for this analysis, study selects pakistan, india, bangladesh, and sri-lanka from the saarc region. in the panel, there are four developing economies and data are collected from wdi from 1990 to 2018. first, the study checks the unit root level of each variable as it is a prerequisite for panel dynamic analysis. then for short run analysis, the study used the granger causality test and finds conservation hypothesis for the panel. the same hypothesis exists in the case of bangladesh and pakistan and feedback hypothesis for india. neutral hypothesis holds in case of sri lanka. the short run results reveal a variation across the cross sections in terms of energy-income. the study finds a balanced state relationship between energy consumption and economic growth in this region by using the heterogeneous panel cointegration technique. moreover, to check the cointegration in panel, the study has used pedroni cointegration test and found the feedback hypothesis in our panel the long run. therefore, energy and economic growth have strong relationship in the long run. this effective relation boosts the demand for labor and increases the productivity of labor and capital of this region. the intra-regional energy trade panel statistics weighted statistics group statistics variance ratio -0.06 (0.52) 0.57 (0.28) ---- rho statistic 0.15 (0.55) -0.48 (0.32) 0.39 (0.65) pp statistics -1.87*(0.03) -2.17*(0.02) -1.90* (0.029) adf statistics -1.88*(0.03) -2.31*(0.01) -1.58* (0.057) review of economics and development studies, vol. 6 (4) 2020, 833 843 840 is about five percent of total regional trade among the saarc nations. however, there are several hidden opportunities for member states to promote regional energy trade and cooperation for better future of this region and humanity. 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(2011). causality between energy consumption and economic growth in beijing: evidence from cross-industry panel data. in communications in computer and information science (vol. 217 ccis, pp. 233–237). springer, berlin, heidelberg. https://doi.org/10.1007/978-3-642-23339-5_42 review of economics and development studies vol. i, no 2, december 2015 73 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 1: issue 2 december 2015 journal homepage: www.publishing.globalcsrc.org/reads increasing supply of tradable goods in the common market for eastern and southern africa (comesa) macleans mzumara department of economics, bindura university of science education, 1020, bindura, zimbabwe. macmzumara@yahoo.com article details abstract history revised format: nov 2015 available online: dec 2015 the author investigated the nature of institutional quality in the common market for eastern and southern africa (comesa) on the basis of voice and accountability political stability, government effectiveness, regulatory quality, rule of law and control of corruption. the author further investigated the existence of a link between institutional quality and factors of production. the results show that capital, entrepreneurship and foreign direct investment are the major determinants of production of tradable goods in comesa. in exception of mauritius and namibia (currently no longer a member) the rest of comesa member states have very poor institutional quality. this affects their ability to attract foreign direct investment hence production of tradable goods. voice and accountability, government effectiveness, rule of law and political stability play a major role in increasing production of tradable goods in comesa. foreign direct investment is affected by voice and accountability, rule of law and political stability than any other factors. availability of raw material is affected by government effectiveness, regulatory quality, political stability, voice and accountability and control of corruption. capital is very sensitive to issues of voice and accountability and control of corruption and regulatory quality. © 2015 the authors, under a creative commons attributionnoncommercial 4.0 keywords governance indicators, foreign direct investment, institutional quality, production, business jel classification g30, g20, l23, m10 corresponding author’s email address: macmzumara@yahoo.com recommended citation: mzumara, m. (2015). increasing supply of tradable goods in the common market for eastern and southern africa (comesa). review of economics and development studies, 1 (2) 73-117 doi: https://doi.org/10.26710/reads.v1i2.117 1. introduction it is essential that supply of tradable goods in the common market for eastern and southern africa (comesa) increases so that it can become a significant player in the global trading arena. increasing supply of tradable goods is one of the solutions of increasing intra-regional trade in comesa. the current state of affairs shows that the volume of intra-comesa trade is 7% of total trade. this means http://www.publishing.globalcsrc.org/reads mailto:macmzumara@yahoo.com mailto:macmzumara@yahoo.com 74 74 that extra-regional trade is substantial compared to intra-regional trade. the fact that member countries trade more with non-member countries than other partners simply means tradable goods are in short supply in member countries and can only be sought outside the grouping. however, increasing the production of tradable goods requires that an investment be made for their production. sometimes domestic investment alone cannot help a country to succeed in increasing production. that then calls for the assistance of external investors. foreign direct investment (fdi) through the transnational firms have the ability to transfer technology, superior management techniques to developing countries which can lead to increased production at a low cost and then boost exports thereby altering the terms of trade (lipsey 1995). however, for external investors to invest in a particular country, they analyse governance indicators of a particular country before making their decision. this paper intends to investigate the nature of institutional quality on the basis of voice and accountability, political stability, government effectiveness, regulatory quality, rule of law and control of corruption. the paper further investigates any existence of a link between institutional quality and factors of production. 2. background the comesa was previously known as the preferential trade area for eastern and southern african states (pta). the preferential trade area was established in 1984. in the 1990s the pta was transformed to the common market for eastern and southern africa. the following countries are members of comesa: burundi, comoros, dr congo, djibouti, egypt, eritrea, ethiopia, kenya, libya, madagascar, malawi, mauritius, rwanda, seychelles, sudan, swaziland, uganda, zambia and zimbabwe. comesa region has a population of 430 million people (comesa 2011, mzumara 2013). comesa launched a customs union (cu) on 7-8 june 2009. the member states agreed to the establishment of a common external tariff (cet) and a three year transitional period before the implementation was also agreed upon (zimtrade 2010, mzumara 2013). due to multiple membership by comesa member states in two or three sub-regional organizations and duplicity of the activities of the comesa, the east african community (eac) and the southern african development community (sadc) a tripartite agreement was reached by the heads of state of the three sub-regional groupings. on 12 june 2011, the comesa-eac-sadc free trade area was launched (trade marks of southern africa 2013, mzumara 2013). table 1.1: intra-comesa total trade 1997-2003 in us$ (million) member states 1997 1998 1999 2000 2001 2002 2003 angola 57 65 57 70 98 197 337 burundi 26 31 23 25 59 33 52 comoros 6 5 4 5 4 3 5 congo dr 106 113 99 141 113 349 321 djibouti 71 74 64 78 83 85 129 egypt 175 156 179 238 305 620 321 eritrea 3 9 5 8 2 2 8 ethiopia 317 338 273 263 222 247 186 kenya 697 658 612 673 817 945 943 madagascar 57 52 69 83 50 48 120 malawi 154 123 132 94 137 115 154 mauritius 130 150 140 156 186 189 209 review of economics and development studies vol. i, no 2, december 2015 75 namibia* 65 157 59 75 99 200 348 rwanda 129 90 80 64 172 31 37 seychelles 15 12 16 15 15 27 14 sudan 24 42 25 277 312 346 494 swaziland 34 36 34 71 52 103 121 uganda 364 334 222 230 394 381 425 zambia 174 272 189 240 227 211 380 zimbabwe 341 327 258 256 153 365 186 total 2,945 3,044 2,540 3,061 3,499 4,498 4,790 source: comesa (2004) * namibia is no longer a member of comesa table 1.2 extra-comesa imports 1997-2003 in us $(millions) member states 1997 1998 1999 2000 2001 2002 2003 angola 2,542 2,020 3,054 2972 3082 3603 3983 burundi 112 170 122 180 133 86 126 comoros 50 43 31 31 31 34 34 congo dr 1036 1119 1013 813 1016 1271 1355 djibouti 145 173 192 197 181 209 232 egypt 13099 16777 15878 13873 11615 17880 10749 eritrea 524 503 506 463 535 531 598 ethiopia 965 1329 1262 1154 1685 1450 2583 kenya 3637 3706 3106 3342 3815 3273 3450 madagascar 571 583 707 905 566 386 1008 malawi 690 490 530 479 505 590 621 mauritius 2021 2202 2008 2058 1955 2092 2229 namibia* 1582 1954 1292 1398 1481 1287 1386 rwanda 270 280 199 112 107 64 91 seychelles 326 372 419 254 424 395 341 sudan 142 259 161 1735 1535 1994 2374 swaziland 1164 1144 1008 1045 836 912 1391 uganda 529 647 646 546 613 649 919 zambia 784 880 888 1056 1687 1129 1314 zimbabwe 2508 2294 1948 1741 1471 2268 2069 total 32,697 36,545 34,972 34,357 33,311 40,104 36,854 source: comesa(2004). table 1.1 above shows intra-comesa total trade from 1997 to 2003. total intra-comesa trade was 76 76 us$2.9 billion in 1997, us$3 billion in 1998, us$2.5 million in 1999, us$3 billion in 2000, us$3.5 billion in 2001, us$4.5 billion in 2002 and us$4.7 billion in 2003. during the same period extracomesa imports only (table 1.2) were us$32.7 billion in 1997, us$36.5 billion in 1998, us$35 billion in 1999, us$34.3 billion in 2000, us$33.3 billion in 2001, us$40 billion in 2002 and us$39.9 billion in 2003. this implies that if the goods were available in the region all the above amounts could have been spent within the region. taking one country such as egypt, her total trade was us$17.2 billion in 1997, us$19.7 billion in 1998, us$19.6 million in 1999, us$18.8 billion in 2000, us$15.7 billion in 2001 and us$22.6 billion in 2002. during the same period her total intra-comesa trade was us$175 million in 1997, $156 million in 1998, us$179 million in 1999, us$238 million in 2000, us$305 million in 2001, us$620 million in 2002. this gives egypt total extra-comesa as us$17 billion in 1997, us$19.6 billion in 1998, us$19.4 billion in 1999, us$18.5 billion in 2000, us$15.4 billion in 2001 and us$22 billion in 2002. it can be seen from the above statistics that trade is heavily titled towards extra-comesa. since extracomesa imports are substantial, it would appear that member countries would have imported the same goods from partner countries where tariffs have been eliminated or are extremely low. businesspersons would definitely import from member countries so as to enjoy the advantages of free trade. however, they are not doing so instead they are importing from countries whose goods are subject to higher tariffs. it is clear judging from the statistics that much sought imports are not available in partner countries in comesa. this shows a serious picture of supply constrain in production of tradable goods in comesa. unless capacity to produce tradable goods is improved intra-comesa trade will continue to remain low while member countries continue to source their requirements elsewhere. 3. literature on institutional economics this paper is an effort to address the issue of supply of tradable goods in comesa. the increasingly importance of new institutional economics with its dynamism becomes the most appropriate framework to address the issue of supply of tradable goods in comesa. according to nomvete (1992), majority african states face unstable political conditions as well as regional tensions and instability. effective and successful cooperation framework can only occur if there is an existence of health and democratic conditions in which economic management is both transparent and accountable. apart from political and economic prerequisites the availability of indigenous institutional capacity is also important. a viable institutional mechanism at regional and national levels is essential. however, very little attention has been given to the institutional framework for regional integration and interface levels. muntharika (1990) acknowledged that the primary responsibility for effective regional integration cooperation depends on governments and their people of the countries concerned. however taking in account problems and the meager resources of the majority african states, substantial international support is required to augment national efforts. bach (1993) and barad (1990) both agree that despite continuing verbal commitments to regional integration in africa, in reality very little has been done. the reasons advanced for no action are: historic, political, economic and institutional. seghor (1990) put forward the same views that the problem of many african states in regional integration is lack of participation by their people in discussion on regional agendas. bach (1993) posed a question how africa can bridge the implementation gap and move from away from rhetoric to action without neglecting important decisions to be taken regionally, policies and institutional needs for cooperation must and foremost be addressed at a national level. a national initiative should include strengthening institutional capacities. adedeji (2002) points out that many africans states carried out import substitution strategy. to manufacture goods for example, they imported capital goods, the skills and the professional labor. one would therefore on the onset assume that the raw materials would come from african states themselves but in many cases they had to be imported too. so really the manufacturing review of economics and development studies vol. i, no 2, december 2015 77 plants became just locations of assembly. they were vulnerable and bound to fail. most of the shortcomings are institutional. linn (2003) supports better local policies, governance and institutional building. in the absence of such measures regional integration will not be successful in the long term. the new partnership for africa’s development (nepad) articulate the need to promote democracy, good governance and respect for human rights through appropriate security sector policy and institutional reform. increasing physical integration through infrastructure development, implementation of nepad programs need to be done through establishing of a workable policy, regulatory and institutional framework especially creating a suitable conditions for investment, capacity building program to empower particularly the implementing agencies. nepad further states that the critical need is to achieve a purposeful programming and effective implementation of development oriented investment flow and effective intervention in the agencies of global governance. according to the world bank (2000), market cannot operate without effective and efficient institutional framework. the needed institutional infrastructure includes the rules and regulations of market economy such as property rights, contract enforcements and regulatory mechanisms for anti competitive behavior. it also includes social and political systems that reduce risk and manage social conflict through proper governance. it further states that a key factor that has constrained africa’s integration process is the continent’s small markets which do not permit the economies of scale that allow an economy to function effectively. governments must monitor and enforce rules and regulations effectively and equitably. regional integration has an advantage of promoting diversification and export to the regional market helps the countries concern gain confidence before entering the global market. mattli (1999) came up with a model of a rational approach to behavior. he argued that two types of requirements need to be satisfied if integration is to succeed. first, there must be demand by market players for greater integration. market players must anticipate a significant potential for economic gains, perhaps because regional economics lack complement or because a small size of the regional market does not offer important economies of scale, the process of integration will eventually wither away. the author emphasizes on commitment to improve compliance with the rules of cooperation. rodlaver (2004) shows empirical evidence that points to clear link between the quality of institutions on one hand and economic growth on the other. he further points out that continued progress in building governance, transparency and the rule of law is essential in attracting private investment and sustaining citizens confidence in the government and the regional coordination can make a major contribution on this. functioning judicial systems, secure property rights, fighting corruption are important issues for a region to emerge as a strong competitor in the globalized market place. 4. conceptual development: factors of production in comesa mainstream economics single out the following factors of production, land, labor capital and entrepreneurship. in order to produce goods resources are needed. these can be called factor inputs, which are normally available in the production of products. land is an endowment that mankind can use to produce products. dale (1997) comments that of the three factors of production that are said to underpin the creation of goods – capital, labor and land – it is the land that is least well understood and defined. labor is human input that is also needed in the production process. it is not just the statistics of people; it refers to human capital that is the quality of labor inputs. these resources can be improved through investment in education, training and health. the third resource of capital simply means to investment in goods which can be used to produce other goods such as machines. capital goods can further be divided into fixed and working capital. fixed capital may include things like plant and equipment. working capital includes stock of finished or semi-finished goods. the presence of the above factors may mean nothing if there are no risk takers to organize such other productive resources. these are referred to as entrepreneurs. a french economist cantillna (1725) described entrepreneur as the agent who purchase the means of production for combination into 78 78 marketable products and takes the risk. in order to produce tradable goods in the common market for eastern and southern africa (comesa) the four factors of production namely, land, labor, capital and entrepreneurship must exist. this is a necessary condition to produce goods but not sufficient as we will observer in the later part of this paper. for the purpose of this paper the author has expanded the factors of production to include; foreign direct investment (fdi), capital, raw materials, utilities, infrastructure, land, human capital and entrepreneurship. theory reveals that in order to increase supply of tradable goods in a regional grouping the above factors should be abundant and available. however, according to muntharika (1990) governments and the people in all regional groupings in africa and other developing world need international support to augment their meager resources. foreign direct investment can be seen as an international community response in this regard. this means that the common market for eastern and southern africa can augment its limited resources by tapping on fdi in its effort to increase production of tradable goods. fdi is non-resident investment in a domestic such as branch plant. such an investment can increase the capacity to produce tradable goods in comesa and other regional settings. if the flow of fdi is good in the region, it may also be an indicative that there is conducive macroeconomic environment that encourages investment. since domestic resources are limited in comesa countries, fdi becomes crucial in determining the capacity to produce tradable goods. foreign direct investment also transfers technology to the recipient country. technology is key in reducing the cost of production and enabling a country to enjoy economies of scale (lipsey 1995). comesa needs technology in order to increase production of tradable goods. this can be achieved through attracting fdi. fdi offers much more. foreign direct investment involves much more than just transfer of capital or the establishment of a local factory in a developing country. they carry with them technologies of production, tastes and styles of living, managerial service and various business practices including cooperative arrangements (todaro 1997). fdi generates rents to transnational corporation by virtue of their possession of superior technology, management and/or access to global markets. according to economic theory, host communities get ‘spillovers’ benefit of the superior assets. indeed ‘effective spillovers’, which occur through the transfers of technologies and management practices, are increasingly seen as the primary benefit of fdi. these are dubbed a ‘contagion’ effect knowledge is diffuses to domestic firms and workers, thereby raising their efficiency and productivity (gallanger & zarsky 2005). the variables which influence fdi are domestic policies, capacities and institutions (zarsky 2005). in this section, the author discusses capital in general. capital is required in comesa if production and capacity to produce tradable goods is to be improved. this supported by (muntharika 1990, cook and sach 1999). here emphasis is given to domestic capital. to increase production in comesa countries, domestic capital is required. investment is the function of savings. research has shown that countries with high rates of savings have high rates of investments (lipsey 1995). those countries with low rates of savings have low investments. the question that can be posed is how can a comesa country increase the rate of savings? this question can be answered by looking at tax structures of individual comesa countries. most of comesa countries have very high tax structures. these leave the residents of these countries with less disposable income. generally the major portion of disposable income is spent on consumption while little is converted into savings. so if the disposable income is very little it is likely that there will be little or no savings at all. some of comesa countries such as zimbabwe have experienced unusual high rates of inflation. in such countries it is hard to save with a severely eroded purchasing power. in such countries people live hand to mouth with nothing in the bank. there are also very high interest rates which discourage borrowings in some comesa countries. this review of economics and development studies vol. i, no 2, december 2015 79 means those who want to expand production and those who want to start to produce are discouraged by high costs of borrowing. in the process of capital formation there is also the issue of intermediaries and these are lacking in comesa countries to harness savings and their allocation to productive sector. in order for comesa to produce tradable goods the above issues have to be addressed by individual countries. the issue of investment has to seriously be looked into by each comesa country. investment is of particular importance to the marginalized people. through investment in the productive capacities – knowledge, skills technology and institutions for collective action – stagnant patterns of poverty and marginalisation can be changed into robust patterns of economic development and social inclusion (zarsky 2005). whilst most of developing countries are gifted with natural resources such as minerals and others, they need capital to exploit such resources. comesa is no exception. it has a lot of natural resources but incapable of fully exploiting them because of lack of capital. capital is also required to add value so that comesa countries do not just export primary products. primary products are vulnerable to commodity price falls. this could also substitute the importation of capital goods from outside the region. supply of tradable goods can also be increased in comesa if there is availability of raw material. production in the manufacturing requires raw materials. if there is no raw material, no product can be produced. raw materials can be sourced within a country or within partner countries or outside the region itself. to produce and acquire raw materials requires land, infrastructure, labor, transport and funding. in some comesa countries production is now below capacity due to lack of foreign currency to import raw materials. comesa could reconsider promoting the clearing house once again. that meant that comesa countries could use their domestic currencies to purchase goods from other comesa countries. during the trading period, accounts were settled in the united states dollar. however, when most of the countries embarked on trade liberalization it was felt that they would generate sufficient foreign currency hence there was no need of using the clearing house. as it is now, countries such as malawi, which is experiencing severe shortage of foreign currency could benefit through the revival of the clearing house to remain and increase its productive capacity. utilities such as water, electricity, gas, and so on are essential to produce a product in a factory or on a farm. to increase its production of tradable goods, comesa member countries need to have adequate resources of water, power supply and gas. if electricity power is not constantly available it may interfere with the production. to increase production of tradable goods it requires constant supply o electricity. countries such as uganda and zimbabwe face constant shortages of electricity. in the case of zimbabwe it imports electricity from south africa, mozambique and democratic republic of congo to augment its domestic supplies. however, sever shortage of foreign currency frequently affects the importation. a number of comesa countries therefore, electricity supply limits their capacity to produce. this means they need to find long-term solutions of expanding generation of electricity for them to expand production. infrastructure is also required to support production of tradable goods in comesa. roads, railway, ports and so on are required to transport raw materials or finished goods. if there is no adequate infrastructure it may affect the production of tradable goods. cook and sach (1999) recognize the importance of infrastructure in the supply of tradable goods. they lament that transitional cost in creating institutions to manage regional public goods are under funded and frequently incapacitated and concluded that there is an important role for international donors to support their provision. this is in agreement with muntharika (1990). business environment risk intelligence (beri) indicators used by knack and keefer (1995) include infrastructure quality. a strong index of infrastructure is associated with higher investments. investors tend to invest in countries with infrastructure. human capital is the next, which is referred to as knowledge and skills embodied in an individual are required in the 80 80 production process. comesa can increase the production of the tradable goods if it has adequate human capital not just the big size of human population. this requires provision of education and skills and substantial investments in tertiary and vocational systems. comesa may have land and other resources but if it doesn't have high quality human resource, production of tradable goods may just be a dream. in comesa to increase production of tradable goods land is required. land is required where to farm or where to build a factory. if there is constraint in either of the two uses of land, production of tradable goods cannot be increased. firms and individuals in comesa should have access to land where they can produce crops that can be exported or used as inputs in further production and also used as a factory or a warehouse. it is not just land but good quality land that can lead to higher productivity. comesa needs those who can take risks to organize other productive resources in order to increase tradable goods. they cannot increase themselves unless there are individuals in the region or outside investing in comesa. entrepreneurs are required to initiate projects in comesa. ireland (2001) defines entrepreneurship in the context-dependent social process through which individuals create value by bringing together a peculiar package of endowments to exploit an opportunity in the market place. two important entrepreneurial skills are ability to gain access to a variety of endowments and knowing how to leverage them effectively. covin and stevin (2001) describe entrepreneurship as the prosperity of a firm to take calculated risks, to be innovative and to demonstrate pro-activeness. to establish whether the above factors are perceived to be determinant of increasing supply and capability of tradable goods in the common market for eastern and southern africa (comesa) statistically, the following hypothesis is developed. hi there is no relationship between foreign direct investment (fdi) raw materials, utilities, infrastructure, land, human capital, entrepreneurship and production of tradable goods in comesa. 5. institutional framework the mere presence of factors of production may not lead to increased production of tradable goods. this calls for institutional framework set of institutions or rules of the game. these are the formal or informal rules governing individual’s behavior or rules of the game may severely constraint the proper functioning and the availability of factors of production in regional grouping. north (1993) describes institutions as humanly devised constraints that structure human interaction. they are made of formal constraints (rules, laws, constitution) informal constraints (norms of behavior, conventions and self imposed codes of conducts) and their enforcement characteristic. their combination defines the initiative structure of societies and specifically economic activities. institutions and the technology used influences the transaction and transformation costs which add up to the costs of production. when it is costly to transact then institution matters and it becomes increasingly costly to transact. a viable institutional mechanism at regional and national levels is needed (nomvete 1992). the most significant decisions to be taken regionally are policies and institutional needs for cooperation must and the key to be addressed at national level (batch 1993). regional integration can accomplish its objectives only if there is commitment of concerned governments and their people (muntharika 1990). groot, linders, rietveld and subramana (2003) emphasized that a better quality of institutional framework decreases uncertainty about contract enforcement and general economic governance. it in turn reduces transactional costs associated with uncertainty by increasing confidence in the process of economic transactions both at national and regional levels. comesa countries can be in a serious trouble if within the group or outside the group perceives that to do review of economics and development studies vol. i, no 2, december 2015 81 business with a particular comesa country requires bribes to get a license, land is not available and at the same time there is no rule of law to protect investment. it may negatively affect such a country. investors would be calculating on additional transactional costs and find that it may not be profitable to invest or do business with that particular comesa country. they may go to the countries where here are no additional transactional costs arising out of poor policies. even though the factors of production may be abundant the institutional environment may not permit the increased supply of tradable goods. this may call for the regional grouping strengthening its member countries capability to produce tradable goods by changing their behavior of doing business and policies, which may be, referred as institutional change as advocated by north (1990). institutional quality and governance matter if trade and production can be increased both at national and regional levels. the bank: gives the following as component of institutional quality [constructed from kaufman, kraay and zoida lobaton (1999) and other sources] voice and accountability, political stability, government effectiveness, regulatory quality / burden, rule of law and control of corruption. these affect institutional environment and arrangements (world bank 2000). kaufman, kraay and zoida lobaton (1999) constructed six aggregate indexes from numerous indicators collected from 14 different sources including icrg, beri, freedom house and others. the aggregate indexes are rule of law "graft", voice and accountability, government effectiveness, political instability and violence and regulatory burden affect institutional quality. if the people in a particular comesa country do not have a voice they may not actively participate in the regional integration. they may not become entrepreneurs. the issue of accountability on the part of a particular comesa government may be crucial in increasing production of tradable goods. outside investors are keen to see whether a particular comesa government is accountable and transparent. if these attributes exist they may find it safer to put their money in that country. investors tend weigh the decision to invest with the performance of a particular government on attributes of voice and accountability. konnend and meiguire (1985) used civil liberties index as a proxy for economic rights, such as freedom from expropriation or the enforceability of property rights and private contracts. they found that civil liberties were positively associated with investment rates through increasing investment growth rates. where there is no political stability, land and raw material may be available but no one can produce because of the risk associated with political instability. there is a lot of uncertainty in dealing with a country that is politically unstable. how do you deal with the issue of property protection and others such as enforcement of agreements? an example on point of time was somalia where could an investor go with a dispute when there was no government? investors and business people will shun away a country highly volatile politically even though it may have abundant natural resources hence it may not be expected to increase production of tradable goods. wars destroy infrastructure, production concerns and so on. this has been the case in democratic republic of congo (drc) where civil war in that country has destroyed infrastructure. although drc is endowed with natural resources production has gone down due to political instability. angola was also affected for a very long time until recently when peace returned so was mozambique. a country politically stable can expect to attract investors holding other factors constant. it can therefore contribute to increase in production of tradable goods in the region hence contribute to increased intra-regional trade. government effectiveness is crucial in the institutional framework. it ensures that there is no corruption in issuing licenses, land and other things. it also has the ability to regulate the rules and policies how business is done. it enforces the agreements between business people and between itself and business people. if a particular comesa government is effective it may raise the institutional quality by making the rules of the game better. in contrast, if the government is ineffective it may impact the institutional quality and this may affect foreign direct investment, proper production of raw material provision of 82 82 utilities, infrastructure, human capital, land, capital and entrepreneurship. this would drastically affect the production of the tradable goods. with an ineffective government there is great uncertainty among investors and business. trading at the stock exchange becomes volatile due to uncertainty. this makes it hard neither to raise capital nor to venture in production. effective government gives an assurance to investors and others. regulatory quality is an important as other factors governing the institutional quality. in developing countries many regulatory entities have been established. there are available in member countries of a particular regional integration grouping. how they perform their duties is considerable importance to business people both investors and traders. if the rules or regulations are not clear they may impact on business people. if they regard policies to be unrealistic it may also impact their decision to invest or trade with a particular country. if there are favoritisms in granting licenses this may also have a negative impact. if competition is suppressed it may also impact on the proper functioning of the economy. if the regulatory quality is credible other things being equal may create a conducive atmosphere to do business hence remove uncertainty and transactional costs. production of tradable goods can increase. comesa member countries need to adhere to the rule of law. rule of law includes where there is a dispute between the government and a private company and then the government does not follow legal procedure to settle the dispute. it may also include the general decline in exercising rule of law in protection of property and their owners. if the rule of law does not exists in a particular comesa country investors and traders may not be keen to enter agreements and contracts with other business people if they perceive that there is no rule of law. this has a tendency of increasing transactional costs associated with uncertainty in dealing with the concerned country. this can therefore affect negatively the production of the tradable goods through investment being not forth coming. generally in countries where a policy of nationalization of production concerns have been exercised, such countries have seen drastic reduction of private investment due to fear that if they establish in such countries they could lose the investment altogether. knack and keefer (1995) include nationalization risk in their indicators that investors are concerned with. according to collier and pattilo (2000) in their research have shown that investment behavior in the in total depends on measurements of country’s risk. member countries will have to enforce rule of law to create the environment for both investment and trade. consequently, where there is rule of law, it is not risky to invest in such a country. there are minimal transactional costs due to absence of uncertainty. investors and traders would feel safe to trade with counter parts in comesa countries knowing that the agreements and contracts entered would be honored in the court of law in that country. the rule of law hence affects the provision of factors of production. the quality of institutions in comesa is affected if there is rule of law or no rule of law. the quality of institutions depends also on how a particular country controls corruption. since comesa is made up of member countries, its success in having high quality institutions depends heavily on the ability to deal with corruption. corruption renders policies, procedures, regulations a mockery. corruption brings disorders in the system thereby affecting the institutional costs. it is hard to deal with countries, which are corrupt because there are a lot of uncertainties in dealing with such countries. world bank (1997) showed the following as main indicators that inhibit investment, production and trade both at national and regional levels. these are policy unpredictability, quality of government service, corruption and red tape and judicial unpredictability. the survey was conducted in 67 countries involving actual investors. world competitive year book (wcy) has used bribing and corruption as part of its indicators that investors look at. international country risk guide (icrg) knack and keefer (1995) have used icrg indicators corruption in government enforceability of contract, the rule of law, expropriation risk, and repudiation of contracts by governments and quality of review of economics and development studies vol. i, no 2, december 2015 83 bureaucracy as significance to the determination of institutional quality. in looking at the quality of institutions in the common market for eastern and southern africa (comesa) on the basis of voice and accountability, political stability, government effectiveness, regulatory quality, rule of law and control of corruption a specific research question is developed. 1: what is the nature of institutional quality in comesa member countries with respect to the following variables; voice and accountability, political stability, government effectiveness, regulatory quality, rule of law and control of corruption? 6. the link between institutional quality and factors of production in comesa in this section the author intends to establish the link between institutional quality and factors of production in comesa. the mere existence of natural resources may not lead to increased production of tradable goods. in order for comesa to increase the supply of tradable goods requires that there should not be high transactional costs arising from institutional quality, uncertainty in contract enforcement in the use and provision of factors of production. world bank (2000) institutional quality and governance matter if trade and production can be improved both at national and regional levels. low trade and investment affect nations and regions with poor institutional quality. investment for example is highly sensitive to corruption, accountability, transparency, regulatory quality and rule of law. investors will tend to invest in countries that show no corruption, high accountability and transparency regulatory quality that is fair and not corrupt and existence of rule of law. when a bribe is demanded before the approval of the project, the project costs increase by the amount of the bribe yet such money simply goes to an official associated with the process. if the money had gone into the project it would have increased production. according to beri indicators as used by knack and keefer (1995) contract enforceability, nationalization risk, bureaucratic delays and infrastructure quality have effect on investment. a strong index is associated with higher investments. human resources may be poor if there are no regulatory measures that improve standards. corruption may also affect the quality of human resources. corruption in providing training and also in recruitment. both anomalies lead to poor human resources. political instability may lead to exodus of skilled people out of a particular country. the rule of law may also affect human resources as skilled manpower feel insecure and may seek to move to other countries where they perceive to have the rule of law. land is critical to production of tradable goods. the institutional quality may affect its accessibility. if corruption exists in the provision of land it may affect the production of tradable goods. regulatory quality may also affect land available for production. the delays in land allocation may affect production of tradable goods. poor land policies may affect production. utilities are needed in the process of creating a product. to establish a business you need water, electricity, phone and so on. if corruption exists in member countries the provision of these utilities may affect production. they may be available to those who have paid the bribe but are not producing or may increase transactional costs to those who are producing and that would lead to the limit of their capacity. in contrast if utilities are facilitated by a high institutional quality they may facilitate production. a high institutional quality can lead to a better provision of raw material. rule of law that guarantees contract enforcement may encourage suppliers from one country to supply to another without facing a risk of uncertainty arising from the transaction. this can lead to the increase in production in the recipient country. political stability may also affect the provision of raw material outside or within that country. generally where there is political instability production of both final goods and intermediate goods are affected. countries and regions with low institutional quality have poor infrastructure. infrastructure supports 84 84 production of tradable goods. to address the issue of tradable goods in comesa requires that there be adequate infrastructure. where there is no transparency and where there is corruption provision of infrastructure may be negatively affected. corrupt officials may build a substandard infrastructure and pocket the remaining funds. since infrastructure supports production, it may be affected with such an act. private individuals may not invest in infrastructure development if property rights are not respected. high quality institutions are positively associated with high quality infrastructure. high quality institutions may encourage and facilitate the development of entrepreneurship through which comesa can increase tradable goods. entrepreneurs are frustrated if there is a problem with licensing their ventures due to corruption bureaucratic delays, no support from government and policies that make their operations difficult. entrepreneurs may not find confidence if there is political instability in a particular country. the absence of rule of law may discourage them also. to establish whether in the common market for eastern and southern africa (comesa) there is a link between institutional quality and factors of production, the following hypothesis is tested. h2 there is no relationship between voice and accountability, political stability, government effectiveness, rule of law, control of corruption, regulatory quality and production of tradable goods in comesa. h3 there is no relationship between voice and accountability, political stability, government effectiveness, rule of law, control of corruption, regulatory quality and individual dependent variables individually fdi, raw material, utilities, infrastructure, capital, labor, entrepreneurship. h4 there is no differences in the views of stakeholders on the influence of voice and accountability, political stability, government effectiveness, rule of law, control of corruption, regulatory quality and production of tradable goods. 7. methodology the paper used stepwise regression analysis to treat the data. the data was collected using a self administered questionnaire to 61 actual exporters, importers, investors, chambers of industries and commerce and others in zimbabwe by random sampling. due to constraints in resources the author did not administer in other member states. . in total there were eighty-one questions under the heads; voice and accountability political stability, government effectiveness, rule of law, control of corruption and regulatory quality. another section of the questionnaire asked the respondents how they perceived; foreign direct investment, raw material, utilities, infrastructure, human capital, land, capital and entrepreneurship as determinants of supply of tradable goods in comesa. further data was collected and develop from the world bank index on institutional quality indicators related to each comesa country in respect of the following variables; voice and accountability, political stability, government effectiveness, rule of law, control of corruption and regulatory quality. the following were measurements on the scale 1-5 in respects of the data collected in the questionnaire. evaluation of scoring of the questionnaire on voice and accountability, political stability, government effectiveness, rule of law, control of corruption and regulatory quality. table 1.3: scale for evaluation for governance indicators scale response mean interval verbal interpretation review of economics and development studies vol. i, no 2, december 2015 85 5 strongly agree 4.50 -5.00 very high 4 agree 3.50 4.49 high 3 neutral 2.50 3.49 undecided 2 disagree 1.50 2.49 low 1 strongly agree 1.00 1.49 very low source: authors’ own table. evaluation of scoring of the questionnaire on supply constraints table 1.4 scale for supply constraints scale response mean interval verbal interpretation 5 strongly agree 4.50 -5.00 very high 4 agree 3.50 4.49 high 3 neutral 2.50 3.49 undecided 2 disagree 1.50 2.49 low 1 strongly agree 1.00 – 1.49 very low source: authors’ own table results and analysis hi there is no relationship between foreign direct investment (fdi), raw material, utilities, infrastructures, land, human capital, entrepreneurship, and production of tradable goods in comesa. regressing by stepwise regression production of tradable goods on foreign direct investment, raw material, capital, entrepreneurship, labor, land, utility and infrastructure. stepwise regression returned capital as the most significant contributor to production of tradable goods in comesa. production of tradable goods = 6.79 + 1.62 capital table1.5 predictor coef stdev t ratio p constant -6.794 3.546 -1.92 0.151 capital 1.62182 0.0561 28.91 0.000 source: results of stepwise regression analysis s= 4.979 r-sq = 99.6% r-sq (adj) = 99.5% table 1.5 shows that capital is related to the production of tradable goods in comesa. with t ratio = 28.91 and p value = 0.000 both are significant at 5% level of significance. r-sq = 99.6% and r-sq (adj) == 99.5% are both high and there is no variation between the two. with r-sq = 99.6%, capital alone explains 99.6% of variations in tradable goods in comesa .this gives capital as 86 86 major determinant of tradable goods in comesa. table 1.6: the regression equation is production of tradable goods = -20.2 + 1.28 entrpre table 1.6 predictor coef stdev t-ratio p constant -20.21 12.56 -1.61 0.206 enterpre 1.2804 0.1427 8.97 0.003 source: results of stepwise regression analysis table 1.6 shows stepwise regression showing entrepreneurship to be second most significant in the production of tradable goods in comesa. both t-ratio = 8.97 and p-value = 0.003 are significant showing a strong relationship between entrepreneurship and production of tradable goods in comesa with r-sq = 96.4 it indicates that entrepreneurship explains 96.4% of variations in tradable goods in comesa. table 1.7 production of tradable goods in comesa = -24.2+0.575 fdi table 1.7 predictor coef stdev t-ratio p constant -24.23 22.24 -1.09 0.356 fdi 0.5753 0.114 5.16 0.014 source: results of stepwise regression analysis s= 26.47 r-sq = 89.9% r-sq (adj) = 86.5% table 1.7 shows that fdi is related to the production of tradable goods in comesa. it becomes third from capital and entrepreneurship. with r-sq =89.9%, fdi explains 89.9% of the variations. table 1.8 production of tradable goods in comesa = -30.5 + 1.42 labor table 1.8 predicto coeff stdev t-ratio p constant -30.52 24.13 -1.26 0.295 labour 1.4181 .2848 4.98 0.016 source: results of stepwise regression analysis s= 27.36 r-sq = 89.2% r-sq (adj) = 85.6% in table 1.8, t = 4.98. this is above 2 showing a significant relationship between labor and production of tradable goods in comesa. table 1.9 production of tradable goods in comesa (p/goods) = -8.417 + 1. 4 7 capital +0.127 entrepreneur table 1.9 review of economics and development studies vol. i, no 2, december 2015 87 predictor coef stdev t-ratio p constant -8.417 5.273 -1.6 0.252 capital 1.4663 0.3238 4.53 0.045 source: results of stepwise regression analysis in table 1.9, t-ratio of 0.49 in respect of entrepreneurship is very low. capital t-ratio of 4.53 is very significant but p-value is medium significant. table 1.10 production of tradable goods in comesa (pi goods) = 14.7+3.31 capital -2.12 enterpre + 1.08 raw material. table 1.10 predictor coef stdev t-ratio p constant -14.739 4.761 -3.1 0.199 capital 3.3104 0.9824 3.37 0.184 enterpre -2.122 1.182 -1.79 0.324 raw material 1. 0809 0.5623 1.92 0.305 source: results of stepwise regression analysis table 1.10 shows that capital is highly correlated with other predictor variables. entrepreneurship is also correlated with other predictor variables. raw material is highly correlated with other predictor variables. there was presence of multicollinearity. it may explain also why raw material was left out of stepwise regression. generally there was multicollinearity among the predictor variables. the other variables such as land, utility and infrastructures labor were also left out due to multicollinearity of predictor variables hi is therefore rejected. there is relationship between foreign direct investment (fdi), raw material, utilities, infrastructure, land, human capital (labor), entrepreneurship and production of tradable goods in comesa. of all the above variables, capital is the most important factor that influences production of tradable goods in comesa followed by entrepreneurship and then fdi. research question 1 what is the nature of institutional quality in comesa member countries with respect to the following variables~ voice and accountability, political stability, government effectiveness, regulatory quality, rule of law and control of corruption? table 1.11 relating to 2004 table 1.11 country voice and political government regulatory rule control of accountability stability effectiveness quality of law corruptio n 88 88 angola -1.02 -0.95 -1.14 -1.40 -1.33 -1.12 comoros -0.14 -0.3 -1.45 -1. 06 -1.04 -1.14 drc -1. 64 -2.27 -1.41 -1.80 -1.74 -1.31 djibouti -0.85 -0.44 -0.76 -0.76 -0.61 -0.94 egypt -1. 04 -0.72 0.20 -0.58 -0.02 -0.21 eritrea -1.96 -0.14 -1.05 -1.29 -0.78 -0.64 ethiopia -1.11 -0.98 -0.96 -1.19 -1.00 -0.85 madagascar +0.07 -0.02 -0.43 +0.10 -0.30 -0.83 mauritius +0.94 +0.91 +0.60 +0.33 0.84 +0.33 namibia +0.47 +0.46 +0.29 +0.45 0.22 +0.18 rwanda -1. 09 0.92 0.56 0.42 0.90 -0.36 seychelles -0.04 +0.84 -0.31 -1.21 -0.1,7 +0.01 sudan -1.81 -2.08 -1.28 -1. 04 -1.59 -1.30 swaziland -1.45 +0.23 -0.60 -0.36 -0.95 -0.95 uganda -0.64 -1.27 -0.43 +0.07 -0.79 -0.71 zambia -0.36 -0.16 -0.84 -0.49 -0.54 -0.74 zimbabwe -1.48 -1.86 -1.20 -2.15 -1.53 -1.01 source: world bank the results presented in table 1.11 have been extracted from world bank (2000): index on institutional quality indicators. these were computed and constructed from kaufman kraay and zoidalobaton (1999). the world bank: survey was conducted in 67 countries. actual investors were surveyed. these have been refined with the inclusion of kaufmann, kray and zoido lobation using the six aggregate indexes from numerous indicators collected from 14 different sources including; international country risk guide (icrg) business environment risk intelligence (beri), freedom house and others. the indicators of institutional quality as presented in table 1.11 are negative in most of comesa countries except mauritius and namibia (which is no longer comesa member) the negativity of the results indicates poor institutional quality while positivity indicat6that the institutional quality is good. although mauritius and namibia are positive the positivity is very low. madagascar scored positive on voice and accountability (+0.07) and regulatory quality (+0.10) and scored negative on political stability (-0.02), government effectiveness (-0.43») rule of law (-0.30) and control of corruption (-0.83). egypt review of economics and development studies vol. i, no 2, december 2015 89 scored positive on government effectiveness (0.20) and negative on voice and accountability (-1.04), political stability (-0.72), regulatory quality (-0.58), rule of law (-0.02) and control of corruption (-0.21). rwanda scored a positive on political stability (+0.92), government effectiveness (-0.56), regulatory quality (+0.42), and rule of law (+0.90) but negative on voice and accountability (-1.09) and control of corruption (-0.36). seychelles has a positive on political stability (+0.84) and control of corruption (+0.01). swaziland has a positive on political stability (+0.23) and negative scores on voice and accountability (1.45), government effectiveness (-0.60), regulatory quality (-0.36), rule of law (-0.95) and control of corruption (-0.95). uganda has a positive on regulatory quality (+0.07) and negative scores on voice and accountability (-0.64) political stability (-1.27), government effectiveness (-0.43), rule of law (-0.79) and control of corruption (-0.71). malawi scored positive on regulatory quality (+0.57) and negative on voice and accountability (-0.50), political stability (-0.53), government effectiveness (-0.81), rule of law (-0.29) and control of corruption (-0.83). the civil war tom country drc scored all negative such as voice and accountability (-1.64), political stability (-2.27), government effectiveness (-1.41), regulatory quality (-1.80), rule of law (-1.74) and control of corruption (-1.31). angola, comoros, djibouti, eritrea, ethiopia, kenya, sudan, zambia and zimbabwe have negative scores in all indicators. the nature of institutional quality in comesa is therefore very poor. h2 there is no relationship between voice and accountability, political stability, government effectiveness, rule of law, control of corruption, regulatory quality and production of tradable goods in comesa. stepwise supply 'voice ac ' 'politic' 'gvt effe' 'r-of-iaw' 'c-corrup' 'r-qualit' table 1.12 step 1 2 constant 0.09977 43.24222 gvt-effe 0.8 2.8 t-ratio 5.6 3.23 voice ac -2.12 t-ratio -2.32 source: results of stepwise regression analysis r-sq = 91.27% r-sq (adj) =97.63 when stepwise regression was used voice and accountability and government effectiveness were the best in influencing production of tradable goods in comesa. the two accounted for 91.27% of variation in tradable goods in comesa. the best alternative was voice and accountability and rule of law with t-ratio = 4.17 and -2.00 respectively. another alternative was rule of law and political stability with t-ratio = 3.99 and 1.60 respectively. 90 90 table 1.13 the regression equation was supply of tradable goods = -21.4 + 1.88 r-oflaw 1.01 politic table 1.13 predicator coef stdev t-ratio p constant -21.38 24.13 -0.89 0.469 r-of-law 1.8781 0.5714 3.29 0.081 politic -1.0104 0.5218 -1.94 0.192 source: results of stepwise regression analysis s = 28.56 r-sq = 94.5% r-sq (adj) = 89.0% table 1.13 shows that r-sq = 94.5. this is very high. rule of law and in political stability. political stability has a role to play. it also shows that rule of law has a role to play. h2 is rejected in respect of voice and accountability, government effectiveness, rule of law and political stability and accepted in respect of control of corruption and regulatory quality. voice and accountability, government effectiveness, rule of law and political stability have a role to play in the production of tradable goods in comesa. control of corruption and regulatory quality has no significant role in the production of tradable goods in comesa. h3 there is no relationship between voice and accountability, political stability, government effectiveness, rule of law, control of corruption, regulatory quality and the following dependant variables individually, fdi, raw material, utilities, infrastructure, capital, labor, land and entrepreneurship. table 1.14 fdi =32.1 + 1.14 gvt-eff table 1.14 predicto coef stdev tp constant 32.12 20.12 1.60 0.209 gvt – eff 1.1368 0.1330 8.55 0.003 source: results of stepwise regression analysis s =27.25 r-sq = 96.1% r-sq (adj)=94.7% in table 1.14, government effectiveness has significant relationship with fdi judging from t -ratio of 8.55 and significant p value (0.003) government effectiveness explains 96.1 % of variations. table 1.15 fdi = 8.6 + 1.20 voice and accountability table 1.15 predicto coef stdev tp constant 8.60 22.73 0.38 0.730 voice ac 1.1970 0.1423 8.41 0.004 source: results of stepwise regression analysis s =27.66 r-sq = 95.9% r-sq (adj)=94.6% in table 1.15 voice and accountability's t-ratio is significant (8.41) and p-value (0.004) is significant showing relationship exists between voice and accountability and fdi. table 1.16 fdi = 24.5 + 1.18 r-of-law table 1.16 review of economics and development studies vol. i, no 2, december 2015 91 predictor coef stdev t-ratio p constant 24.49 24.85 0.99 0.397 r-of-iaw 1.1845 0.1657 7.15 0.006 source: results of stepwise regression analysis s =32.31 r-sq = 94.5% r-sq (adj)=92.6% in table 1.16, rule of law affects fdi as evidenced by high t-ratio (7.15) and a significant p-value (0.006) relationship exists between rule of law and fdi. this is also strengthened by r 2 = (94.5%). table 1.17 fdi = 56.6 + 1.02 politic table 1.17 predictor coef stdev t-ratio p constant 56.62 37.13 1.152 0.225 politic 1.0216 0.2549 4.01 0.028 s = 54.43 r-sq = 84.3% r-sq (adj)=79.0% political stability is related to fdi. the p – value is significant and t-ratio (4.01) is also significant. fdi is affected by political stability. h3 is rejected in respect of government effectiveness and accountability, rule of law and political stability. h3 is however accepted in respect of control of corruption and regulatory quality. there is significant relationship between government effectiveness voice and accountability, rule of law, political stability and fdi. there is no significant relationship between control of corruption, regulatory quality and fdi. table 1.18 raw material = 4.20 +0.368 gvt-effe +0.149 r-quality table 1.18 predic coef stdev t-ratio p consta 44.200 3.043 1.38 0 gvt-eff 0.3676 0.0146 25.04 0 r 0.1487 0.0157 9.45 0 source: results of stepwise regression analysis in table 1.18 both the government effectiveness and regulatory quality have significant relationship with raw material with p-values of 0.002 and 0.011 respectively. the two explain 99.8% of variations in raw material. table 1.19 raw material = 13.2 + 0.976 r-of-iaw -0.535 politic table 1.19 predictor coef stdev t-ratio p constant 13.17 12.12 1.09 0.391 92 92 r-of law 0.9765 0.2871 3.40 0.077 politic -0.5354 0.2622 -2.04 0.178 source: results of stepwise regression analysis s =14.35 r-sq = 94.6% r-sq (adj)=89.2% analysis of variance table 1.20 source df ss ms f p regression 2 7241.4 3620.7 17.59 0.054 error 2 411.8 205.9 total 4 7653.2 source: results of stepwise regression analysis the p – value (0.054) is marginal significant. political stability and rule of law affect raw materials. political stability has an inverse relationship with raw material, which means that political stability has a negative effect on raw material. table 1.21 raw material = 17.7 + 0.416 voice and accountability table 1.21 predictor coef stdev t-ratio p constant 17.67 15.81 1.12 0.345 voice ac 0.41591 0.09897 4.20 0.025 source: results of stepwise regression analysis s = 19.25 r – sq = 85.5 r – sq(adj) = 80.6 table 1.22 raw material = 5.5 + 0.380 voice acc + 0.139 c – corrup table 1.22 predictor coef stdev t-ratio p constant -5.51 14.44 -0.38 0.739 voice acc 0.37984 0.06595 5.76 0.029 c – corrup 0.13936 0.06129 2.27 0.151 source: results of stepwise regression analysis review of economics and development studies vol. i, no 2, december 2015 93 s = 12.45 r – sq = 95.9% r – sq (adj) = 91.9% analysis of variance table 1.23 source df ss ms f p regression 2 7343.2 3671.6 2369 0.041 error 2 310.0 155.0 total 4 7653.2 source: results of stepwise regression analysis table 1.23 indicates that there is marginal significant relationship between raw material and voice accountability and control of corruption. h3 was rejected in respect of government effectiveness, regulatory quality, political stability, and rule of law, voices and accountability and control of corruption. rule of law was accepted. there is significant relationship between effectiveness, regulatory quality, political stability, voice accountability, rule of law, control of corruption and raw material. regressing capital on 6 predictors table 1.24 step 1 2 3 constant 3.8965 0.7490 29.2242 politic 0.412 0.287 0.614 t-ratio 12.72 5.99 5.44 gvt-effe 0.140 1.046 t-ratio 2.81 3.40 voice ac -1.29 t-ratio -2.95 source: results of stepwise regression analysis voice and accountability is highly correlated with other predictor variables. political stability was highly correlated with other predictor variables. government effective was highly correlated with other predictor variable. there was an existence of multicollinearity. table 1.25 capital = 29.2 – 1.29 voice & acc + 0.614 politic + 1.05 gvt – effe table 1.25 94 94 predictor coef stdev t-ratio p constant 29.224 9.723 3.01 0.204 voice & acc -1.2948 0.4383 -2.95 0.208 politic 0.6140 0.1128 5.44 0.116 gvt-effe 1. 0460 0.3074 3.40 0.182 source: results of stepwise regression analysis s = 1.727 r – sq = 100.0% r – sq(adj) = 99.8% analysis of variance table 1.26 source df ss ms f p regression 3 7875.8 2625.3 880.45 0.025 error 1 3.0 3.0 total 4 7878.8 source: results of stepwise regression analysis table 1.25 shows that voice and accountability, political stability and government effectiveness explain very well capital with r 2 = 100 %. however voice and accountability has negative relationship with capital. the regression equation is capital = -2.00+0.463 voice accountability -0.0542 c-corrup table 1.27 predictor coef stdev t-ratio p constant -2.000 9.026 -0.22 0.845 voice&acc 0.46339 0.04123 11.24 0.008 c-corrup -0.05420 0.03831 -1.41 0.293 source: results of stepwise regression analysis s = 7.782 r –sq = 98.5% r – sq (adj) = 96.6% analysis of variance review of economics and development studies vol. i, no 2, december 2015 95 table 1.28 source df ss ms f p regression 2 7757.7 3878.8 64.05 0.015 error 2 121.1 60.6 total 4 7878.8 source: results of stepwise regression analysis table 1.27 shows that voice and accountability and control of corruption have a lot to explain about capital. a significant relationship exists between them and capital. control of corruption has inverse relationship with capital. the regression equation is capital = 2.47 + 0.460 r-of-law –0.0560 r-quality table 1.29 predictor coef stdev t-ratio p constant 2.474 7.076 0.35 0.760 r-of-iaw 0.45989 0.03389 13.57 0.0005 r-quality -0.05597 0.03459 -1.62 0.247 source: results of stepwise regression analysis s =6.489 r-sq = 98.9% r-sq (adj)=97.9% analysis of variance table 1.30 source df ss ms f p regression 2 7794.6 3897.3 92.56 0.011 error 2 84.2 42.1 source: results of stepwise regression analysis table 1.29 shows that rule of law and regulatory quality explained 98.9% of the variation in capital. regulatory quality has negative relationship with capital. h3 is rejected. there is significant relationship between voice and accountability, political stability, rule of law government effectiveness, control of corruption, regulatory quality and capital. regressing entrepreneurship with voice and accountability, political stability, governmental effectiveness, rule of law, control of corruption, regulatory quality. 96 96 table 1.31 predictor coef stdev t-ratio p constant -8.047 2.603 -3.09 0.091 voice &acc 0.56023 0.01189 47.13 0.000 c-corup 0.02874 0.01105 2.60 0.121 source: results of stepwise regression analysis s =2.244 r-sq = 99.9% r-sq (adj) =99.8% analysis of variance table 1.32 source df ss ms f p regression 2 12220.7 6110.4 1213.58 0.001 error 2 10.1 5.0 total 4 12230.8 source: results of stepwise regression analysis in table 1.31 voice and accountability and corruption show significant relationship with entrepreneurship accounting 99.9% of variation when the two independent variables are regressed with the dependent variable. entrepre = 3.89 + 0.565 r-of-law table 1.32 predictor coef stdev t-ratio p constant 3.891 4.429 0.88 0.444 r-of-iaw 0.56482 0.02953 19.12 0.000 source: results of stepwise regression analysis s = 5.759 r – sq = 99.2% r – sq (adj) = 98.9% table 1.32 indicates that there is significant relationship between entrepreneurship and rule of law this was confirmed by a very high t – ration (19.12) and p – value (0.000) was significant. rule of law explained 99.2% of variation on entrepreneurship, when regressed with it. this would mean that in a comesa country without rule of law entrepreneurship may be suppressed and this can also lead to exodus of entrepreneurs to other countries, which have rule of law. review of economics and development studies vol. i, no 2, december 2015 97 table 1.33 entrepre = 8.8 + 0.536 gvt – effe – 0.0031 r – quality table 1.33 predictor coef stdev t-ratio p constant 8.77 10 .44 0.84 0.490 gvt -effe 0.53615 0.05041 10.64 0.009 r-quality -0.00311 0.05407 -0.06 0.959 source: results of stepwise regression analysis s =9.946 r-sq = 98.4% r-sq (adj)=96.8% table 1.34 source df ss ms f p regression 2 12032.9 6016.5 60.82 0.016 error 2 197.9 98.9 total 4 12230.8 source: results of stepwise regression analysis table 1.33 indicates that there is a significant relationship between government effectiveness, regulatory quality and entrepreneurship. regulatory quality has an inverse relationship with entrepreneurship. entrepreneur = 9.25 + 0.399 gvt-effe + 0.141 politic table 1.34 predictor coef stdev t-ratio p constant 9.255 4.454 2.08 0.173 gvt -effe 0.39867 0.07857 5.07 0.037 politic 0.141432 0.07538 1.87 0.202 source: results of stepwise regression analysis s =5.995 r-sq = 99.4% r-sq(adj) =98.8% table 1.35 source df ss ms f p 98 98 regression 2 12158.9 6079.5 169.17 0.006 error 2 71.9 35.9 total 4 12230.8 source: results of stepwise regression analysis in table 1.34, government effectiveness and political stability have significant relationship with entrepreneurship. they explain 99.4% of the variation in entrepreneurship when the two are regressed with entrepreneurship. h3 is rejected. there is a significant relationship between voice and accountability, government effectiveness, rule of law, regulatory quality, control of corruption and entrepreneurship. regressing labor with voice and accountability, political stability, government effectiveness, rule of law, control of corruption, regulatory quality. table 1.36 predictor coef stdev t-ratio p constant 14.255 1.343 10.61 0.060 gvt -effe 0.67266 0.04615 14.58 0.044 r-of-iaw -0.22782 0.04755 -4.79 0.131 r-quality 0.033113 0.006364 5.20 0.121 source: results of stepwise regression analysis s =0.8939 r-sq = 100.0% r-sq(adj) =100.0% table 1.37 source df ss ms f p regression 3 9225.2 3075.1 3848.58 0.012 error 1 0.8 0.8 total 4 9226.0 source: results of stepwise regression analysis in table 1.36, government effectiveness, rule of law and regulatory quality have significant relationship with labor. rule of law has negative relationship with labor, government effectiveness, rule of law and regulatory quality explain 100% of variation. this is very high. review of economics and development studies vol. i, no 2, december 2015 99 labor = 8.92 + 1.46 voice & acc –0.686 r-of-law –0.276 politic table 1.38 predictor coef stdev t-ratio p constant -8.916 2.447 -3.64 0.171 voice & acc 1.4621 0.1996 7.33 0.086 r-of-law -0.6858 0.2137 -3.21 0.192 politic -0.27581 0.02515 -10.97 0.058 source: results of stepwise regression analysis s = 1.186 r-sq = 100.0% r-sq(adj) = 99.9% analysis of variance table 1.39 source df ss ms f p regression 3 9225.2 3075.1 3848.58 0.012 error 1 0.8 0.8 total 4 9226.0 source: results of stepwise regression analysis table 1.38 indicates that voice and accountability, rule of law and political stability have significant relationship with labor. they account 100% variation in labor when regressed with it. rule of law and political stability have negative relationship with labor. h3 is rejected in respect of government effectiveness, rule of law, regulatory quality, voice and accountability and political stability but accepted in respect of control of corruption. there is therefore significant relationship between government effectiveness and rule of law, regulatory quality, and voice and accountability political stability with labor. there is no significant relationship between control of corruption and labor. regression utility on voice and accountability, political stability, government effectiveness, rule of law, control of corruption and regulatory quality. utility = -2.83 + 0.436 c – corrup –0.0994 r-of-law table 1.40 predictor coef stdev t-ratio p constant -2.831 1.367 -2.07 0.174 100 100 c-corrupt 0.435614 0.005842 74.57 0.000 r-of-law -0.099408 0.006269 -15.56 0.004 source: results of stepwise regression analysis s =1.195 r-sq = 100.0% r-sq (adj) =99.9% table 1.41 source df ss ms f p regression 2 7938.3 3969.2 2779.99 0.000 error 2 2.9 1.4 total 4 7941.2 source: results of stepwise regression analysis control of corruption and rule of law affect the provision of utilities significantly than any other factor. rule of law has a negative relationship with provision of utilities. this means that if there is no control of corruption the provision of utilities will be very poor. similarly where there is no rule of law private investment in utilities may be affected negatively. utility = 6.7 + 0.462 r-quality –0.0861 voice & acc table 1.42 predictor coef stdev t-ratio p constant 6.71 17.89 0.38 0.744 r-quality 0.46194 0.08656 5.34 0.033 voice -0.08606 0.8503 -1.01 0.418 source: results of stepwise regression analysis s = 16.13 r-sq = 93.4% r-sq (adj) = 86.9% table 1.43 source df ss ms f p regression 2 7420.6 3710.3 14.25 0.066 error 2 520.6 260.3 total 4 7941.2 source: results of stepwise regression analysis table 1.43 above p – value (0.066) is marginally significant. there is also a big difference between r 2 and adjusted r 2 showing this marginally significant relationship. review of economics and development studies vol. i, no 2, december 2015 101 h3 is rejected in respect of control of corruption, rule of law, regulatory quality and voice and accountability. there is a significant relationship between control of corruption and rule of law, regulatory quality, voice and accountability and utility. utility has no significant relationship with government effectiveness and political stability. regressing infrastructure on voice and accountability, political stability, government effectiveness, rule of law, control of corruption and regulatory quality. table 1.44 predictor coef stdev t-ratio p constant -6.865 4.343 -1.58 0.25 gvt-effe 0.37337 0.02096 17.81 0.00 r-quality 0.17131 0.02248 7.62 0.01 source: results of stepwise regression analysis s = 4.135 r-sq = 99.6% r-sq (adj) = 99.2% analysis of variance table 1.45 source df ss ms f p regression 2 8272.6 4136.3 241. 87 0.004 error 2 34.2 17.1 total 4 8306.8 source: results of stepwise regression analysis government effectiveness and regulatory quality show significant relationship with infrastructure. they affect both quality and availability of infrastructure. p-vale (0.004) and t-ratios are significant. table 1.46 infrastr = 18.2 + 0.386 voice & acc + 0.016 c-corrup table 1.46 predictor coef stdev t-ratio p constant -18.25 12.08 -1.51 0.270 voice&acc 0.38592 0.05519 6.99 0.020 c-corrup 0.16584 0.05129 3.23 0.084 source: results of stepwise regression analysis s = 10.42 r – sq = 97.4 r – sq (adj) = 94.8% analysis of variance 102 102 table 1.47 source df ss ms f p regression 2 8272.6 4136.3 241.87 0.004 error 2 34.2 17.1 total 4 8306.8 source: results of stepwise regression analysis voice and accountability and control of corruption show that they contribute to infrastructure development. they explain about 97.4% of variation in infrastructure when they are regressed with it. infrastructure = 15.4 + 0.421 r-of-law table 1.48 predictor coef stdev t-ratio p constant 15.42 17.54 0.88 0.444 r-of-iaw 0.4212 0.1170 3.60 0.037 source: results of stepwise regression analysis s = 22.81% r – sq = 81.2% r – sq(adj) = 74.9% p – value (0.037) is marginally significant. there is marginally significant relationship between rule of law and infrastructure. h3 is rejected in respect of government effectiveness, regulatory quality, voice and accountability, control of corruption and rule of law. h3 is accepted in respect of political stability. there is a significant relationship between government effectiveness, regulatory quality and accountability, control of corruption, rule of law and infrastructure. there is no significant relationship between political stability and infrastructure probably due to multicollinearity. regressing land on voice and accountability, political stability, government effectiveness, rule of law, control of corruption and regulatory quality. land = -47.8 + 5.72 voice & acc –0.657 politic –4.41 r-of-law table 1.49 predictor coef stdev t-ratio p constant -47.769 8.812 -5.42 0.116 voice & acc 5.7215 0.7186 7.96 0.080 review of economics and development studies vol. i, no 2, december 2015 103 politic -0.65703 0.09055 -7.26 0.087 r-of-iaw -4.4053 0.7696 -5.72 0.0110 source: results of stepwise regression analysis s = 4.271 r – sq = 99.9% r – sq (adj) = 99.9% voice and accountability, political stability and rule of law explain 99.9% of the variations in land when they are regressed with it. land = 20.0 + 1.48 government – effe + 0.178 r-quality – 0.975 r-o-law table 1.50 predictor coef stdev t-ratio p constant 19.984 7.852 2.55 0.238 gvt-effe 1.4806 0.2698 5.49 0.115 r-quality 0.17819 0.03721 4.79 0.131 .. r-of-iaw -0.9747 0.2780 -3.57 0.177 source: results of stepwise regression analysis s = 5.226 r – sq = 99.8% r – sq = 99.4% government effectiveness, regulatory quality and rule of law explain 99.8% of variation in land. rule of law is negatively associated with land. h3 is accepted in respect of control of corruption, but rejected in all others. there is a significant relationship between voice and accountability, political stability, rule of law, government effectiveness, regulatory quality and land. there is no significant relationship between control of corruption and land. h4 there are no differences in the views of shareholders on the influence of voice and accountability, political stability, government effectiveness, rule of law, control of corruption, regulatory quality and production of tradable goods. table 1.51 analysis of variance for control of corruption one-way analysis of variant table 1.51 source df ss ms f p regression 60 5557.56 9.29 8.97 0.000 error 1408 1459.18 1.04 104 104 total 1468 2016.74 source: results of stepwise regression analysis individual 95% cis for mean based on pooled stdev table 1.52 level n mean stdev cl 24 4.292 1.083 c2 25 4.52 0.714 c3 24 4.75 0.532 c4 25 3.28 0.936 c5 24 2.75 1.894 c6 24 2.083 0.776 c7 25 4.16 0.688 c8 24 4.083 0.881 c9 25 4.64 0.569 clo 25 3.4 0.957 c11 9 3.333 1. 000 c12 25 3.4 1.258 c13 25 3.182 1. 097 c14 25 3.6 0.816 c15 24 3.417 0.929 c16 24 3.458 1.103 c17 25 3.04 1.399 c18 25 3.56 0.821 c19 25 3.44 0.507 c20 25 3.08 0.277 c21 25 2.6 1.555 c22 24 3.458 1.414 c23 25 3.2 0.816 c24 25 3.64 0.81 c25 25 4.44 0.507 c26 25 4.52 0.51 c27 25 4.08 0.702 c28 25 3.2 0.737 c29 24 2.667 1.341 c30 25 1.56 0.961 c31 24 3.458 1.103 c32 24 2.792 0.833 c33 24 3.5 1.063 c34 24 3.25 0.737 c35 24 4.042 0.624 c36 24 3.292 1.429 c37 24 2.542 1.793 c38 25 3.16 0.987 c39 24 3.417 1.139 c40 24 3.75 0.794 c41 24 3.917 0.974 c42 24 3.833 0.565 c43 24 3.333 1.167 c44 25 3.8 0.816 c45 24 4.292 1.042 review of economics and development studies vol. i, no 2, december 2015 105 c46 25 3.88 0.971 c47 24 2.833 0.963 c48 24 3.5 1.18 c49 24 3.458 0.588 c50 24 3.375 0.875 c51 24 3.417 0.881 c52 24 3.708 1.628 c53 24 3.125 0.947 c54 24 4.25 0.737 c55 24 3.5 0.511 c56 24 3.375 1.135 c57 23 2.348 1.434 c58 24 3.958 1.301 c59 24 4.208 1.141 c60 24 3.792 1.25 c61 25 3.92 0.759 source: results of stepwise regression analysis h4 is rejected in respect of control of corruption. there are differences in the views of stakeholders. majority was in agreement. our decision to trade and invest in a particular comesa country is based on whether that country controls corruption. analysis of variance for government effectiveness one-way analysis of variance table 1.53 source df ss ms f p regression 59 340.457 5.770 9.78 0.000 error 537 317.000 0.590 total 596 657.457 source: results of stepwise regression analysis individual 95% cis for mean based on pool stdev table 1.54 level n mean stdev cl 10 2.9 1.3703 c2 10 4.1 000 0.9944 c3 10 4.9 0.3162 c4 10 3.7 0.8233 c5 10 2.6 0.5164 c6 10 1. 9000 0.8756 c7 10 4.3 0.6749 c8 9 4.4444 0.527 106 106 c9 10 5 0 c1o 10 4.3 0.6749 c11 9 3.5556 1.236 c12 10 4.6 0.5164 c13 10 2.4 1.1738 c14 10 3.4 1.075 c15 10 4.1 0.3162 c16 10 4.4 0.5164 c17 9 4.2222 1.0929 c18 10 4.7 0.483 c19 10 4 0 c20 10 3.1 0.3162 c21 10 4.1 1.1005 c22 10 4.5 0.7071 c23 10 3.4 0.6992 c24 10 4 0 c25 10 4.8 0.4216 c26 10 4.5 0.527 c27 10 4.6 0.5164 c28 10 4.5 0.527 c29 10 4.2 0.9189 c30 10 150000 0.7071 c31 10 4.6 0.5164 c32 10 3.4 0.8433 c33 10 4.8 0.4216 c34 10 4.2 0.6325 c35 10 4 0.8165 c36 10 4.8 0.4216 c37 10 4.3 0.483 c38 10 4.4 0.8433 c39 10 3.6 1.075 c40 10 4.3 0.8233 c41 10 4.2 0.7888 c42 10 3.9 0.7379 c43 10 4.5 0.9718 c44 10 3.9 0.8756 c45 10 4.5 1.2693 c46 10 4 0.6667 c47 10 3.8 0.6325 c48 10 4.8 0.4216 c49 10 3.4 0.6992 c50 10 5 0 c51 10 3.6 0.8433 review of economics and development studies vol. i, no 2, december 2015 107 c52 10 c53 10 3.7 0.6749 c54 10 4 1.1547 c55 10 3.9 0.7379 c56 10 4.9 0.3162 c57 10 3.6 1.3499 c58 10 2.5 1.354 c59 10 5 0 c60 10 4.5 0.9718 c61 10 5 0 source: results of stepwise regression analysis h4 is rejected in respect of government effectiveness. there are differences in the views of stakeholders. overall mean was above 4. majority was in agreement. questions on government effectiveness 22. government effectiveness affects foreign direct investment in comesa countries 23. our decision to invest and trade with a comesa country is based on whether the government is effective. 24. the provision of raw material for producing goods is constrained by government effectiveness. 25. the availability and quality of infrastructure is affected by government effectiveness. analysis of variance for political stability one-way analysis of variance table 1.55 source df ss ms f p regression 60 359.276 5.688 8.21 0.000 error 485 353.750 0.729 total 545 713.026 source: results of stepwise regression analysis individual 95% cis for mean based on pool stdev table 1.56 level n mean stdev c1 9 3.3333 1.3229 c2 9 4.6667 0.7071 c3 9 4.2222 0.8333 c4 9 4.375 0.5175 c5 9 2.1111 1.0541 c6 9 1.3333 0.5 c7 9 3.6667 1.6583 108 108 c8 9 4.5556 0.527 c9 9 4.7778 0.6667 c10 9 4.4444 0.8819 c11 9 3.625 1.4079 c12 9 4.7778 0.441 c13 9 3.5556 1.424 c14 9 3.8889 1.1667 c15 9 4.5 0.5345 c16 9 4.3333 0.5 c17 9 4 1.3229 c18 9 4.3333 0.866 c19 9 4 0 c20 9 3.2222 0.441 c21 9 3.4444 1.0138 c22 9 5 0 c23 9 3.1111 0.928 c24 9 4.1111 0.7817 c25 9 4.7778 0.441 c26 9 4.4444 527 c27 9 4.8889 0.03333 c28 9 4.4444 0.527 c29 9 3.8889 1.453 c30 9 1.2222 0.441 c31 9 4.5556 0.441 c32 9 4.2222 0.9718 c33 9 4.1111 1.2693 c34 9 4.1111 0.06009 c35 9 4.6667 0.7071 c36 9 4.8889 0.3333 c37 9 4.4444 0.527 c38 9 3.6667 1 c39 9 3.8889 1.2693 c40 9 4.4444 0.7265 c41 9 4.4444 7265 c42 9 3.7778 0.6667 c43 9 4.4444 0.7265 c44 9 4.4444 0.7265 c45 9 4.5556 1.3333 c46 9 4.6667 0.7071 c47 9 3.7778 0.6667 c48 9 4.4444 0.8819 c49 9 4.7778 0.441 review of economics and development studies vol. i, no 2, december 2015 109 c50 9 5 0 c51 9 4.5556 0.527 c52 9 1.8889 1.0541 c53 9 4.3333 0.7071 c54 9 4.2222 1.3017 c55 9 4.7778 0.441 c56 9 5 0 c57 9 4.111 1.453 c58 9 3.889 1.453 c59 9 5 0 c60 9 4.7778 0.441 c61 9 4.889 0.3333 source: results of stepwise regression analysis h4 is rejected in respect of political stability. there are differences in the views of stakeholders. the majority was strongly in agreement. questions 13. political stability affects the supply of tradable goods in comesa. 14. our decision to trade and invest in comesa country is based on political stability of that country table 1.57 source df ss ms f p regression 59 315.385 5.346 5.90 0.000 error 766 693.714 0.906 total 825 1009.099 source: results of stepwise regression analysis individual 95% cis for mean based on pool stdev table 1.58 level n mean stdev c1 14 3.8571 1.1673 c2 14 4.0006 0.8771 c3 14 4.7143 0.4688 c4 14 3.1429 0.7703 c5 14 1.7857 1.3114 c6 14 1.9286 0.73 c7 14 3.6429 0.9288 c8 14 3.8571 0.8644 110 110 c9 14 4.6429 0.7449 cio 14 3.3571 0.4972 c11 14 c12 14 3.7857 0.6993 c13 14 2.9286 0.4746 c14 14 3.5714 0.8516 c15 14 2.8571 0.8644 c16 14 3.1429 0.663 c17 14 3 0.8771 c18 14 3.6429 0.9288 c19 14 3.5 0.6504 c20 14 3 0 c21 14 2.7143 1.1387 c22 14 2.7143 0.9139 c23 14 3.5714 0.6462 c24 14 3.4286 0.6462 c25 14 4.1429 0.663 c26 14 3.8571 0.9493 c27 14 4.1429 0.7703 c28 14 3.2143 0.8018 c29 14 2.7143 1.069 c30 14 1.3571 0.9288 c31 14 3.5 0.7071 c32 14 2.92286 0.6157 c33 14 3.5714 0.8516 c34 14 2.7143 1.069 c35 14 3.5714 0.7559 c36 14 3.7143 1.1387 c37 14 3 1.9612 c38 14 2.2857 0.4688 c39 14 3.1429 1.0995 c40 14 3.7143 0.6112 c41 14 3.2143 1.1217 c42 14 3.1429 1.0271 c43 14 3.2857 1.4373 c44 14 3.6429 0.4972 c45 14 3.3571 1.2774 c46 14 4 0.7845 c47 14 3 0.7845 c48 14 3.6429 1.0082 c49 14 2.6429 0.6333 c50 14 3.5 0.7596 c51 14 3.9286 0.8287 review of economics and development studies vol. i, no 2, december 2015 111 c52 14 3.0714 1.2067 c53 14 2.9286 0.9972 c54 14 3.2857 0.9945 c55 14 3.1429 0.3631 c56 14 2.7857 0.8018 c57 14 2.4286 1.2225 c58 14 3.2857 1.7289 c59 14 3.7857 1.3688 c60 14 3.871 1.4064 c61 12 3.5 1.0871 pooled stdev = 0.9516 source: results of stepwise regression analysis h4 is rejected in respect of regulatory quality. there are differences between the views of the stakeholders. stakeholders responded between neutral and agreement. questions 68. our decision to trade and invest in a comesa country is based on the regulatory quality of that country. 69. there are delays in receiving a license in comesa. 70. regulatory provisions are unclear in comesa analysis of variance for rule of law one-way analysis of variance table 1.59 source df ss ms f p regression 60 398.729 6.645 9.89 0.000 error 539 362.256 0.672 total 599 760.985 source: results of stepwise regression analysis individual 95% cis for mean based on pool stdev table 1.60 level n mean stdev cl 10 4.1 1.1005 c2 10 3.8 1.0328 c3 10 4.3 0.6749 c4 10 3.1 1.1972 c5 10 2.2 0.6325 c6 10 1.9 0.9944 c7 10 3.8 1.3984 112 112 c8 10 4.4 0.5164 c9 10 5 0 cio 10 4.2 0.6325 c11 9 2.7778 1.3017 c12 10 4.8 0.4216 c13 2 4.5 0.7071 c14 10 3.7 1.0593 c15 10 4.1 0.5676 c16 10 4.3 0.483 c17 10 3.7 1.7029 c18 10 4.7 0.483 c19 10 4 0 c20 9 3 0 c21 10 3.2 1.3166 c22 10 4.7 0.6749 c23 10 3.4 0.8433 c24 10 4.4 0.5164 c25 10 5 0 c26 10 4.5 0.527 c27 10 4.5 0.527 c28 10 4.7 0.483 c29 10 4.1 0.5676 c30 10 1.2 0.4216 c31 10 4.8 0.4216 c32 10 3.6 1.075 c33 10 4.8 0.4216 c34 10 3.6 0.9487 c35 10 4.8 0.527 c36 10 3.3 0.7071 c37 10 4.7 0.483 c38 10 4.1 0.8756 c39 10 4.1 0.8756 c40 10 4.7 0.483 c41 10 4.2 0.9189 c42 10 3.6 0.8433 c43 10 4.4 0.6992 c44 10 4.6 0.5164 c45 10 4.7 0.483 c46 10 4.7 0.483 c47 10 3.8 0.4216 c48 10 4.4 1.2649 c49 10 3.5 0.7071 c50 10 5 0 review of economics and development studies vol. i, no 2, december 2015 113 c51 10 3.7 1.2517 c52 10 3.3 1.7029 c53 10 3.9 0.8756 c54 10 4.6 0.5164 c55 10 4.2 0.4216 c56 10 4.6 0.5164 c57 10 3.3 0.9487 c58 10 1.9 1.4491 c59 10 5 0 c60 10 3.9 1.3703 c61 10 5 0 pooled stdev = 0.8198 source: results of stepwise regression analysis h4 is rejected in respect of rule of law. there are differences in the view of stakeholders. their views were between agreements and strongly in agreement questions 32. our decisions to trade and invest in a comesa country are based on whether that particular country has a rule of law to protect property and agreements. 33. foreign direct investment is affected by rule of law. analysis of variance for voice and account ability one-way analysis of variance table 1.61 source df ss ms f p regression 60 332.198 5.537 5.73 0.000 error 603 582.164 0.965 total 663 914.361 individual 95% cis for mean based on pool stdev table 1.62 level n mean sidev cl 11 3.6364 1.2863 c2 11 4.2727 0.9045 c3 11 4.5455 0.6876 c4 10 4 0.9428 c5 11 1.2727 0.4671 c6 10 1.5 1.0801 c7 11 4.3636 1.0269 114 114 c8 11 4.5455 0.5222 c9 11 5 0 clo 10 4 0.8165 c11 10 4 0.8165 c12 11 4 0.6325 c13 11 3.1818 1.4013 c14 11 3.9091 0.8312 c15 10 4.4 0.5164 c16 11 4.1818 0.7508 c17 11 3.3636 1.2863 c18 11 4.4545 0.5222 c19 11 2.7273 1.0091 c20 11 3.3636 0.5045 c21 10 3.9 1.1005 c22 11 4.6364 0.6742 c23 11 3.8182 0.603 c24 11 4 0.7746 c25 11 4.2727 0.6467 c26 11 3.9091 0.8312 c27 11 4.5455 0.5222 c28 11 3.9091 0.5394 c29 11 4.0909 0.9439 c30 11 2.7273 1.7373 c31 11 3.6364 1.5015 c32 11 4 1.1832 c33 11 4.2727 0.9045 c34 11 4.3636 0.5045 c35 11 4.0909 0.6742 c36 11 4.6364 1.1362 c37 11 4.0909 0.5045 c38 11 4.6364 1.2721 c39 11 3.7273 1.4206 c40 11 3.7273 0.6742 c41 11 4.0909 1.1362 c42 11 2.5455 1.2136 c43 11 2.9091 0.9439 c44 11 4.3636 0.5045 c45 11 3.4545 1.0357 c46 11 4.2727 1.2721 c47 11 3.8182 0.603 c48 11 3.9091 1.5783 c49 11 3.9091 0.7006 c50 11 3.3636 1.4334 review of economics and development studies vol. i, no 2, december 2015 115 #c51 10 4 0.8165 c52 11 2.4545 1.3685 c53 11 4 0.7746 c54 11 3.6364 1.0269 c55 11 4 1. 0000 c56 11 4.4545 0.5222 c57 11 4.0909 1.6404 c58 11 3.5455 1.5076 c59 11 5 0 c60 11 4.0909 1.221 c61 11 4.6364 0.9244 pooled stdev = 0.9826 source: results of stepwise regression analysis h4 is rejected in respect of voice and accountability. there are differences between the views of stakeholders. the majority was in agreement. questions 2. voice and accountability is important in increasing supply of tradable goods in comesa 3. our decision to invest in comesa is largely based on voice and accountability of a particular comesa country. 5. foreign direct investment is very sensitive to the issue of voice and accountability of a particular country. views provided by respondents in an additional open question stakeholders were asked in their opinion what was needed to increase supply of tradable goods in comesa. the following were their responses. 1. favorable macroeconomics environment and curtailment of corruption. 2. political and economic stability, governments driven economics. 3. raw materials, skills and capital. 4. availability of raw material, skilled manpower coupled with working capital supply at moderate rate. 5. honesty good business practice. 6. political stability, zero corruption, free trade and low taxes. 7. removal of trade barriers and unnecessary bureaucracy. 8. loan capital from world bank. 9. very clever people. 10. political unity. 11. enterprises. 12. entrepreneurship. 13. skilled manpower. 14. capital. 15. affordable tariffs 16. free trade zone. 17. infrastructure. 18. capital 19. capital and raw material 20. rule of law. 21. infrastructure and transparency 116 116 22. maximum utilization of available resources including land 23. stable political environment 24. protection and tariffs. 25. raw material and infrastructure 26. free trade (barriers to entry and political stability) 27. capital formation 28. favorable trade conditions 29. removal of all trade barriers 8. conclusions and recommendations the results are indicative of perception of investors and others. the quality of institution indicators index is applicable to all comesa countries show poor performance by individual member states. capital, entrepreneurship and foreign direct investment are the major determinants of production of tradable goods in comesa. institutional quality in comesa countries is very poor. except mauritius and namibia (now no longer a member) the rest of comesa member states have poor institutional quality. this affects their ability to attract foreign investment hence production of tradable goods. voice and accountability, government effectiveness, rule of law and political stability play a very important role in increasing production of tradable goods in comesa. foreign direct investment is affected by voice and accountability, rule of law and political stability than any other factors. availability of raw material is affected by government effectiveness, regulatory quality, political stability, voice and accountability and control of corruption. capital is very sensitive to issues of voice and accountability, political stability, government effectiveness, control of corruption and regulatory quality. it is recommended that comesa should urge its member states to improve on governance indicators in their respective countries. references adedeji a 2002. create the conditions for integration. africa recovery,16:2-3. bach d 1993. la crise des oig et l’imp’ratif d’une desc’ narios et modsles d’int’gration : le cas oust african. pr’sentation … la conference internationale sur i’ int’gration dei’afrique de i’quest centre d’ etude d’ afrique, dakar, janvier 11 to 15, 1993. comesa 2011. membership common market for eastern and southern african states. from http://www.comesa.int (retrieved june 8, 2011). cook ld, sach j 1999. regional public goods in international assistance. in kaul i, gounberg i, stern ma eds. global public goods: international cooperation in the 21 st century. new york: oxford university press pp. 436-449. knack s, anderson g 1999. is good governance progressive? world bank working paper. knack s, 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–along term perspective study. world bank. world bank 1997. private sector survey. world bank. world bank 2000. development agenda. world bank. zim trade 2010. a guide to zimbabwe trade agreements: bilateral, regional and multilateral. from www.zimtrade.co.zw (retrieved october 10, 2010). http://128.118.178.162/eps/eh/papers/9309/9309002.ps.gz http://www.trademarks.org/publications/trade-facilitation-comesa-eac-sadc-tripartite-free-trade-area http://www.trademarks.org/publications/trade-facilitation-comesa-eac-sadc-tripartite-free-trade-area http://www.zimtrade.co.zw/ review of economics and development studies, vol. 6 (4) 2020, 787 798 787 nexus between total quality management practices and construction firms’ performance in pakistan muhammad wasim jan khan a , muhammad bilal alam b , gohar sulaiman c , zujaj ahmed d a assistant professor, department of management sciences, university college of zhob, buitems (buitems sub-campus zhob) balochistan, pakistan email: wasimjanpk@yahoo.com b ms engineering management, cecos university of it & emerging sciences peshawar, pakistan. email: bilal_kakar2@ymail.com c phd scholar: department of management sciences, iqra national university peshawar, pakistan email: goharsulaiman4@gmail.com d department of business administration & commerce, institute of southern punjab, multan, pakistan email: zujaj.ahmed@gmail.com article details abstract history: accepted 18 nov 2020 available online 31 dec 2020 construction industry of any country plays a dynamic role in the prosperity and development of that country. it contributes more than any other industry in the economy growth and stability. continual improvement firm performance can be measured through quality of work and services they provide to customers. however, for companies to compete with each other as well as in global markets they must need to adopt such techniques which are applied in the developed countries. one of the techniques is the application and evaluation of total quality management practices. as, this technique is already applied in other sectors such as manufacturing, services, health and development in the developed countries. so, this study and its findings are based on measuring the effects of total quality management practices i.e., organizational leadership, policy, and strategy, customer focus and process management on firm performance based on employee satisfaction and timely completion of projects. to check and measure the impact of tqm practices 100 construction companies were taken as sample/ these tqm practices were implemented on c-2 category construction companies of khyber-pakhtunkhwa, pakistan registered with pakistan engineering council. the findings of this study concluded that all the listed practices have direct and indirect effects on the enhancement of form’s performance. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: total quality management, firm’s performance, construction, pakistan jel classification: l15, l19, l25 doi: 10.47067/reads.v6i4.278 corresponding author’s email address: wasimjanpk@yahoo.com 1. introduction quality gurus focused and worked on different quality management techniques for the review of economics and development studies, vol. 6 (4) 2020, 787 798 788 enhancement of quality performance of firms. the globalization of the market places and need of continual improvements have increased the competition worldwide. so, to compete in the market most of the companies worked on revolution in quality and in 1990’s quality revolution spread from manufacturing to public and private services industries. total quality management was considered one of the best techniques used for continues improvement, to meet quality standards, internal and external customers’ needs and expectations in developed countries (lascelles, & dale, 1989; ooi et al., 2011; yazdani et al., 2016). tqm is a management philosophy that tends companies to do things right first and to guide the companies to improve and enhance its competitiveness, effectiveness, quality planning, quality productions and services, reduced costs, increasing customer satisfaction and loyalty (dotchin & oakland, 1992). total quality management is an integrated program of business management which consists of three principles i.e., total leads to employee/workforce total involvement; quality – meeting standards and customers’ needs and expectations; and management providing total quality atmosphere and surroundings (witcher, 1994). furthermore, ten (10) different total quality management practices were identified by (sureshchandar & rajendran, 2010) in their study that are; top management commitment and involvement, employee’s management, continuous quality improvement techniques, improved technical systems and processes, quality information and data analysis, social authorities, employee satisfaction, customer satisfaction, quality culture of services and quality services cape. so, considering the conceptual relation between competitive advantages and firm performance, it may not be too shocking to claim that total quality management or other similar quality management practices can be used to generate a competitive advantage. competitive advantage is a result of a policy that creates higher value for a business relative to its competitors, whereas sustainability is present if the enhanced value persists as rivals avoid trying to imitate the advantage (reed et al., 2000). total quality management was first experimented by manufacturing industries and then by services industries but for construction industry it is relatively new but it had significantly good impact on companies performnace and competitive business environment (heravi, & faeghi, 2014). as far as construction sector concern, the construction industry consists of a very wide range different types of projects having distinct professional natures, complexities and uncertainties, and to deal with such challenges total quality management provide construction industry to plan practical schedules which will support to manage all the interrelated activities, processes, workforce, tasks and resources for the benefit of the companies’ performance. for all parties in the construction industry, the tqm philosophy is beneficial. it will continue to appreciate long term relationships, strengthen interactions and convey knowledge and competence throughout the construction sector; and help to achieve the goals, objective and benefits of the company (alhasanat & altayeb, 2014). today’s leadership perspective of tqm practices is becoming a fundamental need of today’s world in the construction industry in the emerging as well as developed economies to ensure the completion of the project on schedule, within approved and accepted budgets, to improve performance and productivity as well as to mitigate and minimize losses. construction industries play a vital role in the development and growth of any nation and country, but it has been a problem to achieve quality standards and international specifications in the construction industries. significant amounts of money, time and resources are lost each year by the construction industry in projects due to inefficient and ineffective quality management systems and processes in companies which led to numerous problems and issues such as project delays, cost overruns, reworks, changes, conflicts and customer and owner dissatisfaction. most of the corporate leadership and top management relate quality to cost and the resists to introduce tqm culture in the companies but this mindset must be changed and modified by implementing soft tqm practices to economically improve quality culture in businesses. this study will contribute more to understanding and implementing tqm practices in khyber pakhtunkhwa, pakistan's construction industries in the sense of the performance of the company. therefore, this study consists review of economics and development studies, vol. 6 (4) 2020, 787 798 789 of four total quality management practices i.e., organizational leadership, customer focus, policy and strategy and process management as independent variables. whereas, dependent variable firm performance can be measured through employee satisfaction and timely completion of projects. 2. research objectives this study focused on below objectives.  to examine the firm performance on basis of organizational leadership.  to examine the firm performance on basis of customer focus  to examine the firm performance on basis of policy and strategy.  to examine the firm performance on basis of process management. 3. research questions this study adds to literature the knowledge of following answers to below questions.  what is the relation/connection between organizational leadership and firm performance?  what is the relation/connection between customer focus and firm performance?  what is the relation/connection between policy & strategy and firm performance?  what is the relation/connection between process management and firm performance? 4. conceptual framework 5. literature review during last 4 decades’ total quality management and its practices have been focused, accepted and implemented in different sectors like manufacturing, services, health care, public and private sectors, education and banking (fotopoulos & psomas, 2009). seven quality practices of total quality management suggested by sila and ebrahimpour (2005) in their study that are top management assistance, human resource management, product design, process management, customer oriented, supplier relationships and quality information. time and other concern resources will be required for the implementation of total quality management and this will be initiated and managed with the commitment by the upper management of the companies (jamali, 2010). some of the critical success factors of total quality management proposed and recommended in an empirical study that are; top leadership/management involvement, clear organizational vision, quality policies and strategies, proper and realistic planning and scheduling (baidoun, 2004). total quality management techniques and practices have been proven one of the basic and beneficial approach to quality management in manufacturing industries and services industries for quality enhancement, firm performance and business profitability in developed countries (qureshi, & sharif, organizational leadership customer focus employee satisfaction policy & strategy timely completion process management review of economics and development studies, vol. 6 (4) 2020, 787 798 790 2012). tqm tools is an unified management philosophy that emphasize with other things, such as employee involvement, work as team, fulfilling customer need and requirements, continual improvement, long term quality policies and startegies, minimizing re-work, authentic and valid data and information, restructuring processes and a closer relationship with quality suppliers. and its impact on business performance (hendricks & singhal, 2001). 5.1 organizational leadership organizational leadership is one of the primary techniques of total quality management consisting top leadership, upper management and managing directors which is reponsible for the execution of all managerial elements. organizational leadership and top management of total quality management practices plays a role of a bridge between organizational vision and missions whereas acts as a facilitator for end users and workforce towards the same organizational vision for quality improvement (lakshman, 2011). however, there is very less work done in the implementation of total quality management practices in construction industry.furthermore, the responsibility of organizational leadership/top management is to provide such a quality atmosphere and culture in the company where employees have a clear understanding of company policies and its execution for achieving productive business objectives (rahman, 2002). 5.2 customer focus customer focus is one of the salient features of total quality management in which customeroriented policies are made and formulated by management of companies. the success of all businesses is driven by customers and end users, and for this, companies must consider customers focused policies, suggestions, ideas, needs and requirements into account for customer satisfaction and business success (powell, 2014). customer focus as a total quality management practice has a potential to lift the companies and its businesses; if think tanks management of the company make customer-oriented policies and strategies to optimize firm performance. for accomplishing and keeping up quality models, customer criticisms and client grievances must be recorded. further, its investigation and evaluations must be done at standard interim of time for further improvement (verhoef, 2013). 5.3 policy and strategy policy and strategy element of total quality management consist of organizational and company’s strategic policies and planning directing quality development and outputs. strategic planning is the ability of the company to consider and evaluate its positivity and negativity by identifying and predicting its internal strengths, weaknesses, external threats and future opportunities. moreover, on this base, to make decisions, policies and plans that will enable the companies to move in the right direction in line with its vision. further stated that for a company to get competitive advantage and edge over rivals they must make effective plans, policies and strategies regarding quality works and outputs (castaner & ketokivi, 2004). quality decision making is associated and related with effective policies and strategies and that every company must have policy making department where critical policy makers will help in making clearer policies regarding company quality development, its goals and objectives. strategic planning is a structured way to devise, execute, and manage plans and policies that systematically document company’s expectations (arasa, 2012). 5.4 process management process management is also one of the essential elements of total quality management. process management of tqm practices is considered a fundamental approach for continual quality achieving, as it not only deals with developing and implementing process with ease but also provide facilitation to manage, evaluate and optimize all the processes in the system of the company (palmberg, 2010). review of economics and development studies, vol. 6 (4) 2020, 787 798 791 construction industry is one of the vigorous sector which consists of services quality, processes quality and product quality. all these must be managed for the better performance as the process quality will lead to development process with less wastage of resources and product quality will lead to quality and advanced tecnologies, equipments, machineries and materials (chou, & yang, 2012). 6. research hypotheses main hypotheses of the study are as under; h1: organizational leadership has impacts on construction firm performance. h2: customer focus has impacts on construction firm performance. h3: policy and strategy have impacts on construction firm performance. h4: process management has impacts on construction firm performance. 7. impact of tqm on sustainability of firms sustainability is one of the tough challenges for company/organization. sustainability is comprised of meeting both present and future needs of any business and supported by three piers i.e., social, economic and environmental. total quality management practices are used in organizations to achieve and attain business excellence in which many of the practices and factors succeed but some of them still need conformance for long term sustainability (aquilani et al., 2016). sustaining long term competitiveness and profitability of a business is one of the major issues but with the implementation of total quality management practices in companies. nowadays this concept has been under serious considerations because quality enhancement and sustainability of economy have changed business nature, culture and perspectives to social, economic, financial and environmental strategies (tasleem et al., 2015). for achieving sustained favorable results of organization, long term objectives must be set first and then maintained for keeping business environment upgraded on continual improvement basis (zairi, 2005). for sustainable organizational development, there is enough literature available on social and environmental piers but there is hardly any detailed information available on economic sustainability (mishra, & napier, 2015). however, economic performance and sustainability are fundamental aspects of sustainable business development. so, according to tqm practices, variables such as information and analysis can be helpful in understanding the financial and economic status and this information could be found through annual business reports and financial accounts of companies which will help in maintaining the long-term performance policies (busu & nedelcu, 2018). economic sustainability of company can be measured with permanently maintaining the need of income for the betterment of humanity taken from the progressive capital stocks and this can be easily managed with the implementation of tqm practices under the leadership and top management in the light of quality policies and strategies made (spangenberg, 2005). whereas, for organizational sustainability and some highlighted drivers for economic sustainability were identified which can improve as well as deteriorate business performance, these were cost and risk, innovation, work satisfaction, turnover, price and profit and company’s reputation (intangible and brand values) (nawaz & koc, 2018). khan et al. (2020) and khalid et al (2020) purported that practices such as hr, tqm and training & development etc. enables organizations to cope effectively in the market and thus efficiently compete in the market. 8. research methodology in our research, a detailed questionnaire is used adopted from works of honarpour et al. (2018), review of economics and development studies, vol. 6 (4) 2020, 787 798 792 miyagawa and yoshida (2010) and nouban and ghaboun (2017). a sample of 100 construction companies of uniform size and category and the questionnaires were on likert scale ranges from 1 to 5 i.e., (1-very low, 2-low, 3-medium, 4-high, 5-very high). 90 out of 100 companies responded and gave answers to all questions. after the completion of data collection, the data was then screened through spss. 8.1 data analysis for field work and studies, the internal consistency method works quite well and productive as it refers to the degree to which items in the sets are homogeneous. the cronbach’s alpha values of all variables are analyzed and shown in table below; table 1.1: cronbach’s alpha values variables cronbach’s alpha no. of items independent variables organizational leadership 0.736 5 customer focus 0.823 5 policy and strategy 0.737 5 process management 0.733 5 dependent variables employees satisfaction 0.816 8 timely completion 0.870 11 8.2 factor analysis factor analysis, also known as dimension reduction is a technique carried out to summarize data and to reduce data by identifying and then eliminating the underlying factors present in variables that are small in size than the measured variables because these underlying factors causes covariance among the measured variables. the factor loadings of items with values equal to 0.5 or above were considered for further analysis (hair, et al., 2010; pallant & manual, 2007). similarly, sample adequacy for each variable is also checked with the help of kaiser-meyer-olkin (k.m.o) as the values closer to 1.0 specify the more effectiveness of factor analysis with the data but less than 0.5 specify unproductive factors. bartlett’s test of sphericity is also checked for significance level, i.e., 0.000 to 0.05 (seber & lee, 2012). all the above assumptions of factor analysis are checked for all variables and the findings are shown in table 1.2 as under; review of economics and development studies, vol. 6 (4) 2020, 787 798 793 table 1.2 factor analysis summary variables k.m.o bartlett’s test communalities table values deleted items independent variables organizational leadership 0.778 p =0.000 0.423 (minimum value found) 2 items customer focus 0.795 p =0.000 0.473 (minimum value found) 1 item policy and strategy 0.729 p =0.000 0.590 (minimum value found) no items process management 0.724 p =0.000 0.241 (minimum value found) 2 items dependent variables employees satisfaction 0.864 p =0.000 0.355 (minimum value found) 6 items timely completion 0.817 p =0.000 0.279 (minimum value found) 2 items 8.3 multicollinearity the multicollinearity was checked and no issue of multicollinearity was found as all the values were in acceptable ranges for tolerance and vif values. tolerance values greater than 0.1 and vif values less than 10 shows that there is no issue of multicollinearity. table 1.3 multicollinearity model collinearity statistics 1 tolerance vif policy and strategy .445 2.247 customer focus .590 1.696 process management .412 2.426 table 1.4 organizational leadership model collinearity statistics 1 tolerance vif process management .435 2.297 organizational leadership .655 1.527 policy and strategy .355 2.814 review of economics and development studies, vol. 6 (4) 2020, 787 798 794 table 1.5 customer focus model collinearity statistics 1 tolerance vif customer focus .609 1.643 process management .581 1.721 organizational leadership .846 1.182 table 1.6 policy and strategy model collinearity statistics 1 tolerance vif organizational leadership .669 1.495 policy and strategy .496 2.017 customer focus .636 1.572 8.4 regression analysis table 1.7 regression analysis of ivs with employee satisfaction model summary model r r-square adjusted r-square 1 0.803 0.645 0.630 table 1.8 anova model sum of squares df mean squares f sig. regression 40.042 4 10.011 43.193 0.000 residual 22.018 95 .232 total 62.060 99 review of economics and development studies, vol. 6 (4) 2020, 787 798 795 table 1.8 coefficients unstandardized coefficients sig. model b std. error 1 constant .492 .362 .178 organizational leadership 0.389 .095 .000 customer focus -.285 .082 .001 policy & strategy 1.042 .129 .000 process management .264 .097 .008 table 1.9 regression analysis of ivs timely completion model summary model r r-square adjusted r-square 1 0.828 0.686 0.673 table 1.10 anova model sum of squares df mean squares f sig. 1 regression 29.904 4 7.476 51.983 0.000 residual 13.663 95 .232 total 43.567 99 .144 table 1.11 coefficients unstandardized coefficients sig. model b std. error 1 constant .159 .285 .579 organizational leadership .261 .074 .001 customer focus .054 .065 .405 policy & strategy .342 .102 .001 process management .316 .076 .000 9. discussion and conclusion in the above tables 1.3 and 1.4, the values of r show that all the independent variables i.e., organizational leadership, customer focus, policy and strategy and process management and the dependent variables i.e., employee satisfaction and timely completion of projects varies together with 80% and 82.8% of the time respectively. similarly, values of r-square shows that 64.5% of total variation in employee satisfaction is due to the listed variables and 68.6% of total variation in timely review of economics and development studies, vol. 6 (4) 2020, 787 798 796 completion of projects is due to the listed variables of the current study. in anova f-test tells us the overall relationship of variables in the model, consisting f-values of 43.193 of employee satisfaction and 51.983 of timely completion. coefficients consisting of un-standardized coefficient (b) representing the variation of dependent variables caused individually by independent variables are found significant at p<0.05, except customer focus relation with timely completion at p=0.405. firm performance is strongly associated with the quality management of the firm so the current study investigated and contributed the effects of total quality management practices on construction firm performances of kpk, pakistan. based on relevant literature review and after data analysis and findings, we concluded a no. of conclusions which are discussed variable wise as under; organizational leadership/top management of the firms was found positively and significantly related to employee satisfaction and timely completion of the projects in such a manner that it will increase employee satisfaction and chances of timely completion of projects to 38.9% and 26.1% respectively which will result in enhancing the construction firm performance. policy and strategy of the firms was also found most significant and positively related to employee satisfaction and timely completion of the projects and will increase employee satisfaction and chances of timely completion of the projects to 104.2 % and 34.2 % respectively which will increase construction firm performance. customer focus or customer-oriented practice of tqm was found significant to employee satisfaction but had negative impact on employee satisfaction while on the other hand customer focus has weak significance relation but positive impact up to 5.4% on timely completion of projects which will intensify construction firm performance. process management practice of tqm was found significant to employee satisfaction and timely completion of projects and had a positive impact up to 26.4% on employee satisfaction and 31.6% on timely completion of projects which will definitely intensify construction firm performance. 10. research limitations this study is limited to a specific category of construction companies, i.e., c-2 kpk, pakistan and hence the findings cannot be generalized to the entire construction industry. this study is restricted to public sector companies only. in current study we target only 100 construction companies due to time and other resources limitations. 11. future research directions current research work can be extended by other researchers to a wide range area in the future. pakistan engineering council should direct registered public companies to establish research and development departments and then they should allow researchers to thoroughly examine and analyze their companies for better performance. current research work is restricted to public sectors but for future research work should include private sectors so that to magnify scope of work and performance. some other variables may be included in total quality management practices such as human resource management, knowledge management, quality culture, project management, scheduling projects and quality innovation. final recommendation is the implementation of current research work in other sectors like manufacturing, services, design and development etc. which will boost their businesses in the market. review of economics and development studies, vol. 6 (4) 2020, 787 798 797 references alhasanat, m. b., & altayeb, m. m. 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(2005). tqm sustainability: how to maintain its gains through transformational change. asq world conference on quality and improvements proceedings; milwaukee, 59(2), 175188. https://www.emerald.com/insight/search?q=keng%e2%80%90boon%20ooi https://www.emerald.com/insight/search?q=binshan%20lin https://www.emerald.com/insight/search?q=alain%20yee%e2%80%90loong%20chong https://www.emerald.com/insight/publication/issn/0887-6045 https://www.ingentaconnect.com/content/mcb/106;jsessionid=3g8dfst1geqf4.x-ic-live-02 https://www.emerald.com/insight/search?q=ali%20attafar https://www.emerald.com/insight/search?q=ali%20attafar https://www.emerald.com/insight/search?q=manouchehr%20kheradmandnia https://www.emerald.com/insight/publication/issn/0265-671x review of economics and development studies, vol. 6 (2) 2020, 545-555 545 a comparison of students’ academic achievement in english in single-sex and coeducational schools a safdar hussain a phd scholar, department of english, bahauddin zakariya university multan, pakistan article details abstract history: accepted 18 may 2020 available online 15 june 2020 in this ex post facto research, the difference in students’ academic achievement in english has been examined in single-sex and coeducational schools on the bases of data obtained from 576 students from 03 boys’ only, 04 girls’ only, and 07 co-educational secondary schools from multan. students’ score in achievement test and gain in grades obtained in the subject of english from 2001 to 2005 were analysed using t-test of independent samples against grouping variable type of school students attended. statistical control was also applied in the analyses of co-variance over confounding variables associated with students’ family and school. both boys and girls from single-sex schools obtained better score in achievement test and gained better grades than students from co-educational schools and this difference remained statistically significant even after applying statistical control. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: academic achievement, english language, gender, single-sex schools, co-educational schools jel classification: i23, p36, p39 doi: 10.47067/reads.v6i2.230 corresponding author’s email address: 1. introduction the educational benefits of single-sex and co-educational schooling for boys and girls have become controversial after the rapid growth of co-educational schools in pakistan. even in the developed countries where co-education has become a norm, the question of relative benefits of singlesex and co-educational schooling is still under discussion. recent studies (jackson, 2002; warrington and younger, 2002) have examined the benefits of single-sex classes for different subjects in coeducational schools in order to address the gap in performance of boys and girls. western countries adopted co-educational schooling because of its promise of gender equality. that is why along with educational perspective, this subject is also discussed from economic, medical and moral point of view (arnot, m., 1983, 1984, 1994, 2002; sax, l., 2005). 2. literature review in any study related to the comparison of single-sex and co-educational schooling, the work of r. r. dale (dale, 1969, 1971, 1974) is given special consideration. it has been accepted as a classic work on this subject (a. e. p. 1988). during his 26 years long research in united kingdom, he conducted surveys review of economics and development studies, vol. 6 (2) 2020, 545-555 546 with students and teachers and did action research in both co-educational and single-sex schools to understand their relative merits. he reviewed the research already done on this subject and published findings of his own research in mixed or single-sex school? (dale, 1969, 1971, 1974). he concluded that co-education provided a better environment for students and staff and the question of co-educational and single-sex schooling should not be raised again (dale, 1974). however, his findings regarding the advantages of co-education for girls are not supported by strong evidence (caspi, 1995; riordan, 1990, 1985; carpenter and hayden, 1987). moreover, the work of dale has now become out dated as values, policies and even laws have changed. the earlier studies (dale, 1969, 1971, 1974; davies, 1950; valentine, 1950; moreton, 1939; clark, 1937; walton, 1935; tyson, 1928) found co-educational schooling better for academic and emotional development of students. whereas, contemporary longitudinal studies confirm that single-sex schooling can produce better results (grace, 2012; spielhofer, o’donnell, schagen, benton and schagen, 2002; harker, 2000; lepore and warren, 1997; lee and marks, 1990; lee and bryk, 1986; riordan, 1985). however, the results of these studies become insignificant when statistical control on extraneous variables is applied (marsh 1989). some of the studies conclude that single-sex schools produce higher academic achievement, self-esteem, self-concept, career and educational aspirations and locus of control (watson, quatman, and edler, 2002; woodward, fergusson and horwood, 1999; lepore and warren, 1997; riordan, 1994, 1990, 1985; brutsaert and bracke, 1994; lee and bryk, 1986). whereas, remaining studies indicate no effect of co-educational / single-sex schooling on these variables (harker, 2000; harker and nash, 1997; conway, 1996; daly and shuttleworth, 1996; daly, 1996; young and fraser, 1992; marsh, 1991, 1989; lee and marks, 1990; marsh, smith, marsh, and owens, 1988). which mode of schooling produces better results is still debatable. existing research on this subject does not provide final solution. however, it can be seen that in the contemporary studies there is no proof in favour of co-educational schooling. it confirms that earlier supporters of co-educational schooling were fascinated by this idea. most of this research on this subject was conducted in developed countries where co-educational schools have established as a norm and they are run by state whereas single-sex education is available only in private schools. however in pakistan, situation is different as most of the government schools are single-sex while private schools are both single-sex and co-educational. therefore, a comparative study of befits of single-sex and co-educational schooling was much needed in pakistan. 3. research methodology the decision about research methodology and sampling techniques was made on the bases of literature review and nature of target population. in the experimental research it is required to manipulate independent variable in order to see its effect on dependent variable(s). however, it was not possible to manipulate independent variable type of school students attended in the present study. therefore, the ex post facto approach was found to be the most appropriate one for the present study because the main objective was to “explore possible causal relationships among variables that cannot be manipulated by the researcher” (mcmillan and schumacher, 1997). its literal meanings are in retrospect or after the fact and it refers to a research which investigates possible cause of an effect in retrospect (gay, mills and airasian, 2006). the ex post facto approach was also found useful as the development of students in these schools could also be examined by using their data from previous years. in an ex post facto research, it is required to statistically control any possible effects of background variables from the effect of independent variable which was type of school students attended in the present study. whereas, background variables were related to students’ family and school such as strength of english language class, medium of instruction, education level of parents, economic status review of economics and development studies, vol. 6 (2) 2020, 545-555 547 of the family etc. it was tried to include maximum number of family and school related factors to ensure that reliable results were obtained. only after statistical control over these background variables, the results could predict the effect of the independent variable precisely. some of these variables were eliminated during sampling but others which could not be eliminated were statistically controlled in the analysis of co-variance. 3.1 data collection to minimize the background variables related to geographical location, the data was collected from 14 english medium schools situated in multan. out of these 14 schools, 03 were boys’ only, 04 were girls’ only and 07 were co-educational schools. moreover, the data was collected from students of 10 th year only. an achievement test and students’ grades in the subject of english in the previous exams were used to determine students’ academic achievement in english. data related to grades from 2001 to 2005 was collected from school record. for that purpose, a data sheet was prepared to collect data regarding percentage of their marks obtained in the subject of english in the previous years. the same data sheet was also used to collect data related to background variables. the data related to mother tongue of students was also considered but it was not included in the statistical analysis as no student selected english language as mother tongue. 3.2 achievement test as data for this research was collected from large number of students with limited resources, it was not feasible to conduct separate tests of reading, writing, listening and speaking skills to measure students’ academic achievement in english. therefore, an objective type grammar test of 100 marks was prepared from oxford placement test (allan, 1992) to measure academic achievement in english. it is used all over the world in the educational institutions as a valid and reliable instrument for the assessment of students’ proficiency in english (eckes & grotjahn, 2006). it consists of two parts; grammar test and listening test of 100 marks each. only grammar test of 100 marks was used for data collection in the present research. it consists of 100 multiple choice questions related to grammar of english. these multiple choice questions are based on the grammatical structures used frequently in the course books of english. validity and reliability statistics of this test are not given in the manual but its cronbach’s alpha reliability coefficient was 0.888 during piloting in one of the schools in the present study. 4. data analyses for data analysis, a master table was prepared on the bases of data collected from schools. table 1 given below shows the total number of students included in the present study. table 1: school type ss* coed** total sex girls 140 122 262 boys 156 158 314 total 296 280 576 *ss = single sex / **coed=co-educational t-test of independent samples, regression analysis and analysis of co-variance were used in data analyses to determine whether students’ achievement in english is different in single-sex and coreview of economics and development studies, vol. 6 (2) 2020, 545-555 548 educational schools. 4.1 t-test of independent samples t-test of independent samples is used in the comparison of means of two groups. it is used for continuous variables to determine whether the difference in the mean values is statistically significant (gay, mills and airasian, 2006; mertens, 1998). 4.1.1 dependent variable achievement test score t-test of independent samples was used to compare students’ achievement test scores taking type of school as a grouping variable for boys only, girls only and combine samples separately. results of these analyses are given below in table 2. table 2: achievement test boys-only girls-only combined ss coed t ss coed t ss coed t n 296 280 5.492* 140 122 3.700* 156 158 6.609* mean 50.45 45.40 52.83 49.02 51.57 46.98 s.d. 8.279 8.025 8.348 8.251 8.382 8.307 *p<.001 (2-tailed) results from t-test of independent samples indicate that students from single-sex schools have performed better as compared to students from co-educational schools in achievement test as their mean difference is 4.598. this difference is statistically significant as probability of error is less than .001 (p<.001). just like combined samples in separate samples for girls-only, mean difference is 3.805 in favour of single-sex schools (p<.001) and in separate samples for boys-only, mean difference is 5.053 in favour of single-sex (p<.001). it has also been observed that girls had performed better than boys in both single-sex and co-educational schools, that raises another question whether students’ performance in certain subjects is connected to their sex. 4.1.2 dependent variable gain in grades t-test of independent samples was also used to compare gain in grades taking type of school as a grouping variable. gain in grades were calculated by subtracting grade obtained in 2001 from grade obtained in 2005. results of these analyses are given below in table 3. table 3: gain = grade 05 – grade 01 gain boys-only girls-only combined ss coed t ss coed gain ss coed gain n 156 158 4.584** 140 122 2.966* 296 280 5.372** mean 1.0641 .7975 .9643 .7869 1.0169 .7929 s.d. .50391 .52649 .43927 .51793 .47627 .52187 * p<.005,** p<.001 (2-tailed) results from t-test of independent samples indicate that students from single-sex schools have gained more in grades from year 2001 to 2005 than students from co-educational schools as the mean difference of gain in grades is .22403 in favour of single-sex schools and this mean difference is review of economics and development studies, vol. 6 (2) 2020, 545-555 549 statistically significant as probability of error is less than .001 (p<.001). just like combined sample in separate samples for girls-only, mean difference is .17740 in favour of single-sex schools (p<.005) and in separate samples for boys-only, mean difference is .26663 in favour of single-sex schools (p<.001). these differences can be considered a result of students’ lack of concentration on the studies in coeducational environment. 4.2 background variables because the present study is an ex post facto research, it is a possible that the differences found significant in t-test are a result of individual, family or school related confounding variables. therefore, the data related to confounding variables were analysed against type of school students attended. for the strength of class and age of student, t-test of independent samples was used because these variables are continues variables. for economic status of family, education level of father and mother and sex of the teacher, chi-square test of independence was applied because they are categorical and ordinal variables. along with combined sample, separate analyses were also conducted for both the sexes, taking boys-only sample and girls-only samples. in the analyses of background variables, results of t-test of independent samples indicated significant differences in average strength of the class for separate samples for both the sexes as well as for combined sample. single-sex schools had a relatively higher strength of a class than co-educational schools. the different in the age of students was not statistically significant in all the comparisons. whereas, results of chi-square test indicated that the difference in the economic status of the family was statistically significant in all the comparisons. in the variable of economic status of family both singlesex and co-educational schools had a relatively low percentage of students from working class and in co-educational schools a relatively high percentage of students from the upper class. this indicated that economic status of the family is a good predictor of choice of school. only upper and upper-middle class families can afford private english medium schools. among them the upper class families comparatively prefer co-educational schools and the middle class families prefer single-sex english medium schools. whereas, working class families have to depend upon government schools which are usually urdu medium schools. the difference in the education level of father was statistically significant for girls-only and combined samples whereas the difference in the education level of mother was statistically significant for boys-only and combined samples. difference in sex of the teacher was statistically significant only for boys-only sample and girls-only sample because teachers of the same sex according to the type of school are appointed in single-sex schools i.e. female teachers in girls-only schools and male teachers in boys-only schools. review of economics and development studies, vol. 6 (2) 2020, 545-555 550 table 4: ∆ = mean difference * p<.05,** p<.005,*** p<.001 these differences of background variables highlight their importance in the data analysis. therefore all the background variables whose differences were statistically significant in these comparisons were selected for further analyses for better explanation of the difference in the students’ academic achievement in english in single-sex and co-educational schools. 4.3 data analysis using linear regression in ex post facto research, linear regression is a useful test because it can determine the coefficients of linear equation in which one or more independent variables can predict the value of a dependent variable (mertens, 1998; gay, mills and airasian, 2006). in this study, it was used to compare independent and background variables for their effects on dependent variables. in a regression analysis all dependent and independent variables need to be entered in quantitative form. therefore, categorical variables; type of school, sex of the student and sex of the teacher were converted to binary variables. independent variables: type of school and sex of the student were entered along background variables: number of students in the class, education level of father and mother, economic status of family and sex of the teacher, against each dependent variable. separate regression analyses were conducted for boys-only, girls-only and combined data. analysis of background variables boys-only girls-only combined ss coed ∆ ss coed ∆ ss coed ∆ students mean 31.22 21.68 9.541 *** 30.61 22.17 8.43 5 *** 30.93 21.89 9.036 *** s.d. 8.12 3.368 5.921 3.461 7.159 3.411 age mean 15.42 15.44 0.026 15.4 15.32 0.08 15.41 15.39 0.019 s.d. 0.78 7 0.786 0.632 0.836 0.717 0.80 9 % within school type economic status low 3.2 0.6 *** 5 0 *** 4 0.3 *** middle 31.2 21 34.7 15.3 32.8 18.4 high 15.3 28.7 13.7 31.3 14.6 29.9 education of father low 21.4 20.8 19.7 18.1 * 20.6 19.6 ** middle 26 28.9 26.6 26.6 26.3 27.9 high 2.6 0.3 6.9 1.9 4.6 1.1 education of mother low 18.3 25.1 * 22.8 20.5 20.4 23 ** middle 25.4 21.9 22 22.4 23.9 22.1 high 6.4 2.9 8.9 3.5 7.5 3.2 sex of the teacher female 0 23.6 *** 53.4 20.6 *** 24.3 22.2 male 49.7 26.8 0 26 27.1 26.4 review of economics and development studies, vol. 6 (2) 2020, 545-555 551 4.3.1 dependent variable achievement test score table 5: β = standardized beta coefficients boys-only girls-only combined sample β β β (constant) type of school .314* .268* .294* sex of student .126* students -0.028 0.014 -0.026 education of father .467* .603* .525* education of mother .401* .462* .423* economic status .390* .299* .339* sex of teacher .012* .042* 0.021 * p<.001 in the regression analysis of achievement test score,  type of school emerged as an important predictor (β = .294, p<.001) with covariates education of father, education of mother, economic status and sex of the student in combined sample.  in girls-only data type of school appeared as an important predictor (β = .268, p<.001) with covariates education of father, education of mother, economic status and sex of teacher.  in boys-only data type of school again appeared as an important predictor (β = .314, p<.001) with covariates education of father, education of mother, economic status and sex of teacher. it can be seen in the regression analysis that the type of school students attended is comparatively an important predictor of students’ academic achievement in english but the effect of education level of father and mother, economic status of the family, gender of the students and teacher cannot be ignored. 4.3.2 dependent variable grains table 6: boys-only girls-only combined sample β β β (constant) type of school .236*** -0.119 .210**** sex of student 0.077 students 0.033 0.085 0.054 education of father .162*** .164* .157**** education of mother .127* .136* .129*** economic status .169** 0.115 .159**** sex of teacher 0.007 -0.049 0.004 * p<.05, ** p<.01, *** p<.005, **** p<.001 in the regression analysis for gains in grades,  type of school emerged as the most important predictor (β = .210, p<.001) with covariates review of economics and development studies, vol. 6 (2) 2020, 545-555 552 economic status, education of father and education of mother in combined sample.  in girls-only data, type of school did not appear as important predictor.  in boys-only data type of school appeared as the most important predictor (β = .236, p<.001) with covariates education of father, economic status and education of mother. as far as students’ academic progress is concerned, type of school proved to be one of the most important predictors along with economic status of family and education level of father and mother. 4.4 univariate analysis of co-variance t-test of independent samples is suitable to compare mean values when the subjects are randomly assigned to control and experimental groups in an experimental study and it is confirm that any difference in the mean values is due to effect of independent variable only. whereas in an ex post facto research like present study, students are not randomly distributed in co-educational or single-sex schools. therefore, it is compulsory to confirm that differences in other predictors were not improving or hiding a significant difference in means. therefore, analyses of co-variance were conducted to statistically control confounding variables and to calculate covariate adjusted or estimated marginal means for single-sex and co-educational schools. statistical control is a technique through which the effects of confounding variables are eliminated from the effect of one independent variable on dependent variables (mertens, 1998; gay, mills and airasian, 2006). in a quantitative analysis for making a valid inference, it is necessary to keep confounding variables constant to ensure that an effect is due to only one independent variable. 4.4.1 dependent variable achievement test score in order to calculate covariate adjusted mean of achievement test score, analysis of co-variance was performed twice; first controlling only grade obtained in 2001 then controlling both grade obtained in 2001 and covariates identified in the analyses of background variables and linear regression analysis. table 7: estimated marginal means type of school unadjusted adjusted for grade 01 adjusted for grade 01 and covariates boys-only ss 50.35 52.150 49.813 coed 46.01 47.763 46.552 girls-only ss 52.68 54.594 52.534 coed 49.34 53.670 49.500 combined ss 51.44 53.310 51.075 coed 47.48 50.726 47.874 4.4.2 dependent variable gain in grades in order to calculate covariate adjusted mean of dependent variable gain in grades, analysis of co-variance was performed controlling only grade obtained in 2001. other covariates identified in the analyses of background variables and linear regression analysis were not included because univariate analysis of variance confirmed that they had interactions with independent variable type of school. review of economics and development studies, vol. 6 (2) 2020, 545-555 553 table 8: estimated marginal means type of school unadjusted adjusted for grade 01 boys-only ss 1.0641 1.172 coed .7975 .765 girls-only ss .9643 1.039 coed .7869 .818 combined ss 1.0169 1.122 coed .7929 .784 it can be seen in the analyses of co-variance that even after controlling confounding variables and students’ previous performance, students in single-sex schools have achieved better grades and score on achievement test in english. this difference in their performance can be associated with social and gender environment of these institutions. students’ lower scores in co-educational schools indicates that they are distracted in the presence of members from opposite sex. it can be explained on the bases of gender-segregated society in pakistan. here, boys and girls remain separate in almost all the domains of life. when they get a chance to study together in co-educational schools, they find it difficult to concentrate on their studies. consequently, they achieve less as compared to 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(1992, april). sex differences in science achievement: a multilevel analysis. paper presented at the annual meeting of the american research association, san francisco, calif. review of economics and development studies vol. 3, no 1, june 2017 47 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 1 june 2017 journal homepage: www.publishing.globalcsrc.org/reads credibility of the philippine central bank: evidenced by the interest rate passthrough 1 chu v. nguyen 1 davies college of business, university of houston-downtown, usa. nguyenchu@uhd.edu article details abstract history revised format: may 2017 available online: june 2017 purpose: this study investigates the philippine interest rate pass-through over the december 2001 through january 2016 period. the empirical findings suggest that the philippine central bank has not been very effective in formulating and implementing its countercyclical monetary policy. specifically, the empirical results reveal very low short-run and longrun interest rate pass-through. the bounds test results indicate no long-term relationship between countercyclical monetary policy and market rates. notwithstanding the banking system’s remarkable performance in the recent years, amid lingering uncertainties in global financial markets, the philippine central bank lacked the credibility in conducting its countercyclical monetary policy. this empirical finding may not be desirable but it forewarns the monetary policy makers of challenges in formulating and implementing their monetary policy. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords monetary policy, commercial banks, lending rate, interest pass through, central bank discount rate jel classification: e40, e43, e52, e60 corresponding author’s email address: nguyenchu@uhd.edu recommended citation: nguyen, c.v., (2017). credibility of the philippine central bank: evidenced by the interest rate pass-through. review of economics and development studies, 3(1) 47-56 doi: https://doi.org/10.26710/reads.v3i1.8 1. introduction as reported by the bangko sentral ng pilipinas (bsp), the central bank of the philippines (2016), the banking system performed remarkably well in 2016 amid lingering uncertainties in global financial markets. key statistics showed that commercial banks experienced double-digit growths in assets, loans, deposits and capital. commercial banks maintained sufficient liquidity to meet their operational requirements and related funding needs. there was also notable rebalancing of banks' portfolios particularly in cash and credit related accounts as banks shored up liquidity to manage potential market volatilities at the onset of rising interest rates. the emerging landscape of the banking sector also became more streamlined, technologically responsive and inclusive in 2016 as it expanded client reach to cater to the diverse needs of modern filipino banking clients. the industry consolidation and digital transformation have banking services. the commercial banking system strived to provide efficient, reliable and affordable delivery of banking products and services to banking clients. the bsp's promotion of merger and consolidation in the industry resulted in reduction of the number of operating banks down from 996 in 1998 to 602 banks at the end of 2016. there were five recorded cases http://www.publishing.globalcsrc.org/reads mailto:nguyenchu@uhd.edu mailto:nguyenchu@uhd.edu https://doi.org/10.26710/reads.v3i1.8 review of economics and development studies vol. 3, no 1, june 2017 48 of mergers, acquisitions, and consolidations in 2016. main features of industry consolidation include the strategic partnership between foreign and domestic banks. additionally, some large domestic banks acquired smaller banks in frontier areas to allow the former to explore growth opportunities and business synergies. in addition, the most common feature of industry consolidation is the merger of rural banks to improve their viability and leverage on each other's branch network to reach a wider base of clientele. overall, these types of industry consolidation activities influenced the structure of the banking system. the bsp maintains its policy thrust on merger and consolidation by gradually lifting the moratorium on the grant of new banking licenses or establishment of new domestic banks. this is to provide parallel opportunities for domestic banks following the liberalization of foreign bank entry in 2014. consequently, the overall branch network expanded by almost 1.6 times to 10,576 branches since 1998. these branches and offices are normally within shopping malls and other commercial places with heavy foot traffic. the growth was supported by the bsp’s rationalization of branching guidelines, which provide banks with more flexibility in expanding their network to strategic locations. the rapid evolution of digital technology particularly the proliferation of smart phones at the turn of the new millennium revolutionized the way banking and financial products and services are delivered. digital technology provides unprecedented financial services access to customers, allowing them to perform banking transactions and make payments at their own convenience. from a policy standpoint, these electronic service delivery channels provide a faster and more efficient alternative means to reach a wider base of clientele particularly those in rural communities. recognizing the upside from electronic banking in terms of expanding client reach and in improving financial access, the bsp allowed banks to engage in electronic banking as early as 2000. since then, banks engaged in electronic banking grew from nine banks as of the end of the 2000 calendar year to one hundred and nineteen banks as of yearend 2016. moreover, the banking system had 19,084 automated teller machines by the end of 2016. additionally, in 2009 the bsp’s rationalization of branching guidelines allowed electronic money as an instrument of efficient and affordable delivery of financial services to low-income households in nonurbanized and underbanked areas of the country. electronic money issuers are encouraged to develop business models and explore outsourcing arrangements with qualified electronic money network service providers to support the growth of e-banking and e-money. two of the most popular forms of e-money today are smart money and globe's g-cash. bsp (2016) reported that as of end-december 2016, net inflow of e-money transactions reached 1.1 trillion pesos and 78.2 percent or 870.1 billion pesos of these transactions were e-money transactions coursed through banks. financial intermediation is a critical facilitator of investment and economic growth (schumpeter 1912; patrick 1966; mckinnon 1973). commercial banks are an integral part of the monetary policy transmission mechanism since through their interest rate pass-though, commercial banks change the lending rates in the economy, which in turn transmit the countercyclical monetary policy measures to consumption and investment activities of the economy. changes in these two macroeconomic variables will change the macroeconomic policy target variables: unemployment, inflation and gdp. illes and lombardi (2013) further argued that over the last few decades, setting policy rates has been viewed as the standard tool of monetary policy. the implementation of the monetary policy stance via open market operations ensures that policy rates transmit to the interest rates at which financial institutions refinance themselves. in turn, competition in lending and funding markets should ensure that changes in the policy stance are also passed on to other interest rates. a reduction in the policy rate is thus expected to translate into a decline in lending rates for firms and households, which should stimulate consumption and investment. this is the interest rate channel of monetary policy transmission. review of economics and development studies vol. 3, no 1, june 2017 49 given what has transpired since the early years of 2000s, it is very interesting to learn the nature of the interest rate pass-through. more specifically, the objective of this study is to investigate how commercial banks passed changes in their cost of funds due to countercyclical monetary policy, as reflected in changes in the central bank’s discount rate, to their customers through the shortand long-run interest rate pass-through processes in the post u.s. subprime mortgage crisis. the remainder of the paper is structured as follows: section 2 briefly reviews the literature. section 3 describes the data and specifies an empirical model for the investigation and the estimation method to calculate the short and long-run pass-through. section 4 presents estimation results. section 5 briefly discusses the empirical findings. finally, section 6 summarizes and concludes the paper. 2. review of literature as summarized by nguyen (2017-a), many theoretical approaches and methodologies have been used to study interest rate setting behaviors of lending institutions around the globe. espinosa-vega and rebucci (2003) applied a standard error correction model to consider whether interest rate pass-through in chile's experience was atypical compared to ten other countries, including the united states. these authors found that the adjustment in the chilean banking sector was incomplete – like in other countries – but generally faster than those in the rest of their sample. in addition, espinosa-vega and rebucci (2003) reported that the adjustment process was affected by institutional changes in the exchange rate regime and chile's monetary policy targeting. hofmann and mizen (2004) used seventeen years of monthly data for rates on thirteen deposit and mortgage products offered by u.k. financial institutions to empirically investigate the potential nonlinearity in adjustment of retail rates to base rates, due to menu costs. they reported that the speed of adjustment responded nonlinearly to the expected size of the gap between the base rate and retail rate in the near future. in other words, the perceived (expected) " aggressiveness" in base rate management was a significant factor in explaining the speed of pass-through effects. sørensen and werner (2006) performed euro-area cross-country comparisons and reported empirical evidence of high-degree heterogeneity in pass-through of base rates to bank interest rates. among other cyclical and structural factors, sørensen and werner (2006) found different degrees of competition in the national banking sector to be the most significant determinants of pass-through speed. tonooka and koyama (2003) searched for but found no relationship between interest rates on loans and market concentration in the brazilian banking sector. alencar (2003) estimated the speed of passthrough effects from changes in benchmark interest rates and compared them to those observed in retail banking. the revelation that the time lag for monthly-average retail rates to fully adjust to changes in the opportunity cost of money is less than 12 months was pointed out as evidence of a significant degree of competition, driving banks to operate efficiently. bernanke and blinder (1992) investigated the response of credit aggregates to monetary policy shocks. borio and fritz (1995) and cottarelli and kourelis (1994) focused more specifically on the pass-through of policy rates to lending rates, which is also the focus of this investigation. studies on the heterogeneity in the pass-through at the individual bank level are limited to a few country studies (weth 2002; gambacorta 2008). the bulk of the empirical literature has resorted to cointegrated time series models developed by engle and granger (1987) to account for co-movements of policy and lending rates. european central bank (2003) focuses on major euro area countries, reporting evidence of heterogeneity between core and peripheral countries. additionally, coelho, de mello, and garcia (2010) found that the pass-through is higher for larger banks using a sample from june 2000 to december 2006. moreover, the monetary policy regime can affect adjustments and volatility of retail rates. for example, one would expect nominal prices to adjust faster or the pass-through to be larger when inflation is higher (mojon, 2000). the important factors of the country's financial structure are bank competition, development of financial markets and banking system ownership. if financial markets are review of economics and development studies vol. 3, no 1, june 2017 50 well developed, financially solid businesses tend to opt for alternative sources of financing when retail rates rise, increasing the overall risk to bank loan portfolios. in that case, banks increase lending rates to compensate for t h e higher risk instead of rationing credit (sander and kleimeier, 2004). 3. methodology and model specification it is expected that long time series data and their relationships will experience structural breaks. failure to account for structural break my result in model misspecification. to discern this possibility, this investigation utilizes the perron’s (1997) endogenous unit root test to search endogenously for the possibility of any structural break in the relationship between the two time series. if the structural break is found, a dummy independent variable t d , with the value of 1 from the structural break date onward and 0 elsewhere, will be included in the model. the objective of this study investigates the reactions to or how the commercial banks responded to changes in countercyclical monetary policy measures by the central bank reflected in changes in the discount rate. to this end, this investigation follows wickens and breusch (1988) and pereira and maiafilho (2013) to specify and estimate an autoregressive distributed lag [ardl(n,m,s)] model hypothesizing the relationship between the endogenous variable t i , the independent variables t r , and t d (if the aforementioned structural break exists). tlt s l lkt m k k n j jtjt drii         001 (1) where “ t i ” is the lending interest rate and “ t r ” is the central bank’s discount rate at time t. as defined above, t d is a dummy independent variable an independent variable accounting for the structural break in the relationship between the lending rate and central bank’s discount rate. 00   is the short-run effect within the month after the central bank changes the discount rate. it is a priori expectation that 0 < 00   ≤ 1. 00   < 1 indicates sluggish adjustment, also known as lending rate stickiness. 00   = 1 represents a complete pass-through in the short run. theoretically, the ardl method proposed by pesaran et al. (1997) has been a valuable tool for testing for the presence of long-run relationships between economic time-series. the advantage of the ardl model is its ability to estimate both the longand short-term model parameters without requiring a pre-testing to determine the order of the cointegration of the variables; thus, avoiding the problems posed by non-stationary time series. this pretesting is particularly problematic in the unit-rootcointegration literature where the power of the unitroot tests is typically very low, and there is a switch in the distribution function of the test statistics as one or more roots of the right hand side variables process approach unity. furthermore, the ardl procedure is robust to small samples, allowing different optimal lags of variables. as to the empirical estimation, enders (2015) suggested that the process to estimate the coefficients for equation (1) is to utilize the akaike information criterion to select the largest values of n, m and s, deemed feasible; cusum test is used to test for model stability. breusch-pagan-godfrey heteroskedasticity test and breusch-godfrey serial correlation lagrange multiplier (lm) test are then used as diagnostics to test the hypotheses that the residuals }{ t  are white noise and there is no correlation among independent variables. as articulated by pereira and maia-filho (2013), given the estimation results for equation (1), the longrun effect is calculated as:          n j j m k s l lk 1 0 0 1   (2) as articulated by berstein and fuentes ( 2003),  should be positive and close to 1.  =1 implies a review of economics and development studies vol. 3, no 1, june 2017 51 complete pass-through in the long run, which can be considered evidence of significant competition in the banking system. if  < 1 or  > 1, it implies either stickiness ( l e s s t h a n p e r f e c t p a s s t h r o u g h ) or overshooting, respectively, of retail rates with respect to changes in the policy rate. explanatory factors include monetary policy regime and the country’s financial structure (sørensen and werner, 2006). it is therefore important to study the long-run relationship between countercyclical monetary policy and market rates. to this end, this investigation follows pereira and maia-filho (2013) to use the bounds testing approach (pesaran, shin, and smith, 2001) for the following error correction representation of the autoregressive distributed lag model: ttttlt s l lkt m k k n j jtjt dridrii         131211 001 (3) where  is difference operator and the null hypothesis of “non-existing of the long-run relationship” is stated as 0321   . the relevant f-statistics for the joint significance of the s' are calculated and compared with the critical values tabulated by pesaran, shin, and smith (2001). if the estimated fstatistic is greater than the upper bound critical value, the variables are cointegrated. if it is below the lower bound, the null hypothesis cannot be rejected, i.e., there is no support evidence for long-run relationship between countercyclical monetary policy and market rates. 3.1 data and empirical results the sample of the time series data for the commercial banks’ lending rate on the credit market and the central bank’s discount rate for this empirical estimation were collected from the international financial statistics, maintained by the international monetary fund. the sample period was from december 2001 through january 2016, where the data is available. the perron’s (1997) endogenous unit root test was used to search endogenously for the possibility of any structural break in the relationship between the commercial banks’ lending rate in the credit market and the central bank’s discount rate. the searching process strongly suggested a structural break on october 2006. therefore, a dummy independent variable t d , with the value of one from october 2006 onward and zero elsewhere in the sample period, was included in the model to be estimated. as discussed in the methodology section and based on the akaike information criterion, the estimation process indicates that the optimal values are n = 5, m = 4, and s = 0 as the reported values for aic in exhibit 4 suggests, the ardl (5, 4, 0) model has the lowest aic value, therefore, it will be used for this investigation. the estimation results and diagnostic statistics for the autoregressive model, ardl (5, 4, 0), are summarized in the following exhibits 1, 2 and figure 1. review of economics and development studies vol. 3, no 1, june 2017 52 exhibit 1: estimation results for ardl (5, 4, 0) model and bounds test, 2001:12 – 2016:01 ardl (5, 4, 0): t i is a dependent variable ardl bounds test: t i is a dependent variable variables coefficient t-statistic variables coefficient t-statistic 1 i 0.266066* 3.730412 1i -0.694257* -8.587526 2 i 0.270936* 2.653710 2i -0.422670* -4.484424 3 i 0.212207* 2.870687 3i -0.211633** -2.431208 4 i 0.120013 1.363689 4i -0.091179 -1.296905 5 i 0.090389 1.162643 0r 0.332230* 3.429888 0 r 0.333644* 3.394934 1r 0.338666* 3.447400 1 r 0.059219 0.551707 2r 0.200485** 2.030409 2 r -0.135068 -0.702827 3r 0.266831* 2.660222 3 r 0.063595 0.383978 1i -0.037449 -1.243411 4 r -0.267300* -2.783011 1r 0.057165 1.200947 0 d -0.018586 -0.738956 1d -0.012266 -0.521583 constant 0.071977 0.268120 constant 0.017218 0.063904 2 r = 0.946163 and 2r = 0.942292 2 r = 0.403532 and 2r = 0.360649 f -value = 244.4458* and aic = 1.202518 f -value = 9.410004* and bounds test f = 1.146796, k = 2 note: “*”, “*” and “***” indicate the 1 percent and the 5 percent significance levels, respectively. for the sample of 165, critical values for bounds tests at 10 percent: i(0) = 2.713, i(1) = 3.453; 5 percent: i(0) = 3.3235, i(1) = 4.053; 1percent: i(0) = 4.358, i(1) = 5.393. the left panel of exhibit 2 reports the diagnostic testing for the correlation among the independent variables and the possibility for the variance of the error term to depend on regressors included in the estimated the model. the right panel of exhibit 2 reveals the aic-values of the five best estimated models. exhibit 2: diagnostic tests and five best models according to aic criteria diagnostic tests model selection criteria breusch-godfrey serial correlation lm test: 0 h : there is no serial correlation in the residuals. f(2,151) = 0.118583, p-value = 0.8883 five best models aic ardl (5, 4, 0) 1.175 ardl (5, 4, 1) 1.183 ardl (5, 5, 0) 1.186 ardl (6, 4, 0) 1.187 ardl (12, 4, 0) 1.188 breusch-pagan-godfrey heteroskedasticity test: 0 h : the residual’s variance is constant. f(11,153) = 1.656782, p-value = 0.0884 note: data are from calculations by author. review of economics and development studies vol. 3, no 1, june 2017 53 figure 1: illustrates the graph of the cusum test over the sample period. -40 -30 -20 -10 0 10 20 30 40 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 cusum 5% significance graphic illustration of cusum test to test for stability of model’s estimated parameters. an analysis of the overall estimation results indicates that there exists no serial correlation and that the model exhibits strong predictive power, as evidenced by the strength of the breusch-godfrey serial correlation lagrange multiplier test f(2,151) = 0.118583 with the p-value being 0.8883. this finding in turn suggests failure to reject the null hypothesis that there is no is no serial correlation in the residuals. also, breusch-pagan-godfrey heteroskedasticity test, f(11,153) = 1.656782 with the p-value being 0.0884 which fails to reject the null hypothesis that the variance of the residual is constant or no heteroscedasticity at the 5 percent level of significance. figure 1 illustrates, the cusum test statistic falls in the band of the 5 percent level of significance, except for the 2011-2012 period when it oscillated slightly outside of the band. this empirical finding indicates the relative stabilities of the estimated parameters of the model over the sample period. overall, the diagnostic analysis indicates that the estimated ardl(5,4,0) model is very reliable. as reported in exhibit 1, the e s t i m a t e d s u m o f 00   is 0.315058 (0.333644 0.018586 = 0.315058). in addition, using the estimated coefficients of equation (1), the following calculation indicates that the estimated long-run interest rate pass-through rate in the philippine banking system is  = 0.879051. 879051.0 0.9596111 0.018586 -0.05409 1 1 0 0             n j j m k s l lk   finally, to test the null hypothesis of “non-existing of the long-run relationship0: 3210  h ”, the calculated value of the relevant f-statistic being 1.46796 for the joint significance of the hypothesis is compared to the critical upper values bounds at 5 percent level of significance. comparing the value of the f-statistic of 1.146796 to the critical value of the lower bound i(0) = 3.235 indicates that the null hypothesis of “non-existing of the long-run relationship” in the banking sector could not be rejected at the five percent level of significance. failure to reject the null hypothesis suggests that there is no longtern relationship between the central bank’s discount rate and that the lending rate in the commercial banks’ lending market. 3.2 discussions of the empirical results the endogenous search process for breaks in the interest rate structure using perron’s (1997) endogenous unit root test found that the relationship between central bank’s discount rate and commercial bank’s lending rate experienced a structural break in october 2006. to account for this structural break, this investigation introduced a dummy variable and assigned the value of 1 from october 2006 onward and 0 elsewhere over the sample period. an analysis of the overall estimation results indicates that there exists no serial correlation and that the model exhibits strong predictive power and confirms that the estimated residuals are white noise. review of economics and development studies vol. 3, no 1, june 2017 54 the estimation results of the autoregressive distributed lag, ardl(5,4,0) model are represented by equation (1). an analysis of the derived long-run rates of pass-through reveals that the short-run rates of pass-through, 00   = 0.315058 are very low as compared to empirical magnitudes reported in the literature in the emerging and advanced economies (alencar, 2011, 2003; pereira and maia-filho, 2013, nguyen 2017-a and 2017-b; wickens and breusch, 1988). based on the akaike information criterion, the longest lag retained by the estimation process for the commercial lending rate is five ( 5 i ) and for the central bank’s discount rate is four ( 4r ). these findings suggest that the commercial banks considered their lending rate five months prior in determining their current lending rate, while these lending institutions took up to four months to respond to the monetary policies completely. the calculated long-run pass-through rate in the banking industry is  = 0.879051. finally, one way to measure the credibility of the central bank is the existence of the long-run relationship between the its countercyclical monetary policy, as reflected in changes in the central bank’s discount rate, and the commercial banks’ lending rate in the lending markets. in this investigation, this issue is addressed by testing the above stated null hypothesis 0: 3210  h . the testing procedure indicated that this hypothesis cannot be rejected at five percent level of significance, suggesting there is no long-run relationship between the its countercyclical monetary policy and the commercial banks’ lending rate in the lending markets. 3.3 concluding remark the landscape of the filipino banking services has been transformed by industry consolidation and digital transformation. it strives to provide efficient, reliable and affordable delivery of banking products and services to banking clients. the merger and consolidation in the industry resulted in reduction of the number of operating banks down to 602 banks at the end of the 2016 calendar year. the prominent features of industry consolidation include the strategic partnership between foreign banks and domestic banks. additionally, the most common feature of industry consolidation is the merger of rural banks to improve their viability and leverage on each other's branch network to reach a wider base of clientele. overall, these types of industry consolidation activities helped shape the landscape of the banking system. financial intermediation is a critical facilitator of investment and economic growth. commercial banks are an integral part of the monetary policy transmission mechanism since through their interest rate passthough, commercial banks change the lending rates in the economy which in turn transmit the countercyclical monetary policy measures to consumption and investment activities of the economy. changes in these two macroeconomic variables will change the macroeconomic policy target variables: unemployment, inflation and gdp. these aforementioned lifestyle factors of the banking sector motivated this investigation to learn the nature of the interest rate pass-through. to achieve the above objective, this study utilizes an autoregressive distributed lag model to empirically investigate the nature of interest rate pass-through in the economy. estimation results suggest that, based on the akaike information criterion, the ardl(5,4,0) model best fits the data. estimation results of the ardl(5,4,0) model reveal that the short-run rates of pass-through ( 00   is 0.315058) is very low as compared to empirical magnitudes reported in the literature in the emerging and advanced economies. the empirical results also indicate that the commercial banks considered their lending rate five months prior in determining their current lending rate, while these lending institutions took up to four months to review of economics and development studies vol. 3, no 1, june 2017 55 respond to the monetary policies completely. the calculated long-run pass-through rate in the banking industry is  = 0.879051 which indicates relatively incomplete pass-through in the banking industry. the procedure testing the null hypothesis 0: 3210  h indicated that this hypothesis cannot be rejected at the five percent level of significance, suggesting no long-run relationship between the countercyclical monetary policy and the commercial banks’ lending rate in the lending markets. one way to measure the credibility of the central bank is the existence of the long-run relationship between its countercyclical monetary policy, as reflected in changes to the central bank’s discount rate, and the commercial banks’ lending rate in the lending markets. the failure to reject the above null hypothesis of no long-run relationship is an indicative of the lack of 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research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 2: issue 1 june 2016 journal homepage: www.publishing.globalcsrc.org/reads comparative efficiency analysis of public and private colleges of multan district: data envelope approach analysis 1 sumaira batool, 2 imran abbas, 3 ishtiaq ahmad 1 lecturer, department of economics, the women university multan, pakistan, sumairaimran@hotmail.com 2 ph.d. student, school of economics, bahauddin zakariya university, multan, pakistan 3 assistant professor, department of economics, the islamia university, bahawalpur, pakistan article details abstract history revised format: may 2016 available online: jun 2016 the purpose of this paper is to evaluate the efficiency of public and private sector colleges in multan district. we use output oriented data envelopment analysis to measure technical and scale efficiency of a sample of 40 colleges, using data for the year 2014. dea, which is the most popular technique used to measure the relative efficiency of non-profit organizations due to the absence of prices or relative values of educational outputs, is employed to compare efficiency of both types of colleges. moreover, it can handle multiple inputs and outputs with great ease. as public and private colleges are working under similar environmental conditions, we have used a single frontier, incorporating four educational inputs and four outputs. the results of the data demonstrate that private colleges lag behind public colleges in terms of crs and vrs technical efficiency scores and scale efficiency scores. our study of colleges is in contrast with the dominant paradigm that private colleges outperform the state-run colleges. ©2016 center for sustainability research and consultancy pakistan under a creative commons attribution-non commercial-share alike 4.0 keywords dea, efficiency, technical efficiency, scale efficiency, public colleges, private colleges jel classification a23, a20, d60, d61 corresponding author’s email address: sumairaimran@hotmail.com recommended citation: batool, s., abbas, i. and ahmad, i. (2016). comparative efficiency analysis of public and private colleges of multan district: data envelope approach analysis. review of economics and development studies, 2 (1) 69-80 doi: https://doi.org/10.26710/reads.v2i1.125 1. introduction education is a production process which creates productive and informed populace. education is the most important factor which plays vital role in human resource development as it produces opportunities for the socially and economically deprived sections of society. according to haunshek (1986) “education is a service that transforms fixed quantities of inputs (that is individual) into individuals with different qualities”. educational institutions are of great importance because the production process takes place in such institutions. in these institutions students are treated as input as well as output. in recent years, a range of policy actions have created a space for the promotion of private educational system throughout the world. privatization has become a dominant paradigm in economic based educational research. http://www.publishing.globalcsrc.org/reads mailto:sumairaimran@hotmail.com mailto:sumairaimran@hotmail.com https://doi.org/10.26710/reads.v2i1.125 review of economics and development studies vol.2, no 1, june 2016 70 according to this paradigm private educational institutions are superior to public educational institutions. the world bank (wb) has strong conviction that privately organized educational institutes are far better than the government owned institutes. the arguments given by the proponents of privatization include better management, accountability to parents, greater scope for innovation by teachers and school management. the notion of privatization of educational institutes is in line with the basic economic concepts of demand and supply. the privatization spurs competition, which eventually improve quality. friedman (1955) was the first economist who clearly advocated the privatization of education for superior quality educational institutes. chubb and moe (1990) argued the promotion of private colleges to improve school choice. coleman (1997) concluded that school choice would improve educational markets. like all over the world, educational system in pakistan consists of two types of institutions namely public sector educational institutes and private sector educational institutes as public sector alone cannot fulfill the growing demand of education. both types of educational institutions exited even when pakistan came into being in 1947. keeping in view the fundamental role of education in economic development of a nation, the researchers have been probing the efficiency and performance of schools, colleges and universities since 1970s worldwide. data envelopment analysis (dea) technique and regression analysis have been utilized for this purpose. this paper attempts to compare efficiency of public and private sector colleges of multan district through data envelopment analysis (dea) indexes. the efficiency of public and private sector colleges will be compared on the basis of dea efficiency scores. technical efficiency of boys and girls colleges of both sectors will be computed separately for comparison. primary data have been used for the analysis in this study. data have been collected through a survey from randomly selected public and private colleges of three tehsils of multan district. 2. literature review extensive literature is available about the efficiency and effectiveness of public and private sector educational institutes. the literature shows mixed results. cavalcanti, et al. (2010) found a very interesting result that once student got admission into the university, students belonging to public schools performed better than students from private schools in brazil. research conducted by asadullah (2009) regarding two countries of south asia gave opposite results relative to each other. labour market earnings were used as measure of effectiveness between private and public school graduates in bangladesh and pakistan. regarding bangladesh, results were in favor of public schools. whereas, in case of pakistan private schools appeared to be more effective than public schools in boosting students’ achievements. komatsu (2009) pointed out a number of obstacles that hampered the effective and efficient delivery of education through a qualitative field study at north west frontier province of pakistan. with the help of longitudinal data for 150 schools, lassibille and tan (2001) compared the efficiency of private & public school in tanzania. the results were in contrast to the results given by earlier studies as two types of public schools were more efficient than both types of private schools. chudgar and quin (2012) pointed dissatisfaction of parents with the performance of public schools. the regression analysis resulted in a positive relationship between attending private schools and better performance of students. by using four-year panel data (2006-2009), cuenca (2011) estimated the efficiency of 78 philippine state universities and colleges and observed that majority of under observed institutions were inefficient. using entrance test exam of the major public university located in brazil northeast area, cavalcanti, et al. (2010) assessed the difference in performance of public and private school students. the authors found that private school students got 4.2-17% (on average) high score than their public counterparts. review of economics and development studies vol.2, no 1, june 2016 71 coulson (2009) reviewed the research conducted all over the world in the past several decades about public, private and market schools and concluded that the private sector outperformed the public sector. dronkers and robert (2008) measured the differences in scholastic achievement of private and public schools in 22 comparable countries using pisa data. their analysis showed that the higher gross educational outcomes are for private government dependent institutions. using the timss (trends in international mathematics and science study) 2003 data rutkowski and rutkowski (2009) concluded that private schools showed significantly higher achievements. using naep data, lubienski & lubienski (2006) found no statistically significant differences between private and public education in usa. braun, et al. (2006) also came to the same conclusion, when they used naep 8 th grade mathematics achievement. they had controlled the data for selected student and school variables. dronkers (2001) concluded that privately administered schools performed better in these countries. bedi and grag (2000) used labor market earnings and concluded that private secondary school graduates performed better in labor market as compared to public secondary school graduates. 3. data and methodology 3.1. data source a field survey, with stratified random sampling technique, is conducted for data collection. 3.2. sampling size: bise multan provides institution-wise results of only affiliated institutions while the students of nonaffiliated institutions, appearing in the examinations, are treated as private students. as it is impossible to find authentic result of non-affiliated colleges, only affiliated colleges of bise from multan district were included in our research plan. finally, sample from colleges was selected as follows: table 1: total number of colleges in multan district colleges govt. pvt. total male 10 26 36 female 12 19 31 total 22 19 67 40 colleges were selected out of total 67 colleges. table 2: sample sizes of colleges in multan district colleges govt. pvt. total male 06 16 22 female 07 11 18 total 13 27 40 3.3. data collection procedure: for data collection, randomly selected colleges of multan district were surveyed. these institutions were selected from all three tehsils and keeping in view the rural-urban divide. for this self-administered survey, a questionnaire was prepared. intermediate examination results of the selected institutions were review of economics and development studies vol.2, no 1, june 2016 72 collected from the bise. the record of cm punjab extra-curricular activities and some other information were collected from directorate of colleges. 3.4. variables of the study: we have taken following four input and four output variables. table 3: input variables abbreviation variable nt number of teachers nc number of class-rooms atet average teaching experience of teachers te total expenditures table 4: output variables abbreviation variable ns number of students pr percentage result wappm weighted average of passing students’ percentage marks seca score of extra-curricular activities in a number of previous studies, six, out of above-mentioned eight variables have been used. two new output variables, weighted average of passing students’ percentage marks (wappm) and score of extra-curricular activities (seca), have been included in our model. wappm is constructed on the basis of the grades of the passing students of the institutes to capture the percentage marks of all students in an institute. wappm is constructed by taking the weighted average of the all grades, obtained by the students of the institute, with grades’ minimum limits of marks, taken as the weights. they are multiplied with the number of students of the institution, falling in that grade. seca is the variable for extra-curricular activities and it is constructed on the basis of 3 extra-curricular activities including oral (speech), written (essay-writing etc.) and sports, each category having maximum 1 score and minimum zero. 0.5 score is awarded to the institution for participation in any level of cm punjab’s speech, essaywriting and sports competition, and 1 score is awarded to the institution for wining a competition, and zero score for nonparticipation in any competition. the references of the remaining variables are given in table 5. table 5: input & output variables: variable name reference nt johnes (2006) abbot & doucouliagos (2003), martin (2003), avkiran (2001) nc johnes & yu (2008), bedi & garg (2000), dronkers & robert (2008) atet johnes & yu (2008), lassibille & tan (2001), oliver, belluzzo & pazello (2013) te castano & cabanda (2007), cuenca (2011), johnes (2006), martin (2003) ns avkiran (2001), dills & mulholland (2010), lassibille & tan (2001), johnes & yu (2008), bedi & garg (2000), johnes (2006) pr chudgar & quin (2012), perelman & santin (2011), dronker & robert (2008), horowitz & spector (2005), review of economics and development studies vol.2, no 1, june 2016 73 rutkowski & rutkowski (2009), cavalcanti, guimaraes & sampaio (2010). 3.5. area profile: according to 1998 census, multan district’s population was 3,116,851, with 42 percent urban population. now the population is estimated around 7 million. multan is a city district and has three tehsils including multan, shujabad and jalapur pirwala. multan district has an area of 3,721 square kilometres. according to bureau of statistics 2013, literacy rate in multan district is estimated at 66 percent. 3.6. analytical tool: data envelopment analysis is the analytical tool for the study. the linear programming method of dea is based on frontier approach and it is the most suitable frontier method for relative performance. dyson, et al. (1998) suggested that sample size of dmus should be greater than the product of number of inputs and outputs while stern, et al. (1994) recommended that number of dmus should be greater than thrice the sum of inputs and outputs. max [2(m×n),3(m+n)] 3.7. descriptive analysis table 6: summary statistics of colleges’ data descriptive statistics of colleges n minimum maximum mean std. deviation nt 40 7 143 26.075 21.95262 nc 40 5 91 18.225 15.1005 atet 40 6 20 13.075 3.73746 te 40 4100000 248192000 34440468 40833805.38 ns 40 98 7053 962.475 1155.03757 wappm 40 31.4 98.96 67.77 17.65826 pr 40 46.8 70.24 57.3575 6.00464 seca 40 0 3 1.35 0.89299 3.8. correlation matrix colleges’ data: table 7: correlation matrix of colleges’ data correlation matrix of colleges data nt nc atet te ns pr wappm seca nt 1 0.914142 0.435578 0.980997 0.954189 -0.27816 -0.1179 0.473424 nc 0.914142 1 0.34589 0.886833 0.895012 -0.07632 0.11331 0.365753 atet 0.435578 0.34589 1 0.441066 0.419927 -0.05644 0.037895 0.376066 te 0.980997 0.886833 0.441066 1 0.953348 -0.32312 -0.15625 0.469644 ns 0.954189 0.895012 0.419927 0.953348 1 -0.29788 -0.15952 0.54228 pr -0.27816 -0.07632 -0.05644 -0.32312 -0.29788 1 0.781203 -0.29937 wappm -0.1179 0.11331 0.037895 -0.15625 -0.15952 0.781203 1 -0.28491 seca 0.473424 0.365753 0.376066 0.469644 0.54228 -0.29937 -0.28491 1 4. empirical analysis of public and private colleges’ efficiency review of economics and development studies vol.2, no 1, june 2016 74 according to sherman (1998), the ability to produce the output with the minimum inputs required is called efficiency. an institution can be technically efficient even with too much or too little output because “technical efficiency investigates how well the production process converts inputs into outputs” (abbot 2003). scale efficiency provides the information about the scale of production. “scale efficiency shows the extent by which an institution can take the advantage of return to scale by altering its size towards the optimal size” (abbot 2003). vrs technical efficiency shows pure technical efficiency and crs technical efficiency represents overall efficiency while scale efficiency is measured as a ratio of crs to vrs technical efficiency scores. for the segregation of pure technical efficiency from scale efficiency, technical efficiency is measured on both crs and vrs models. solver software has been used to compute results. efficiency results are given in table 8 for public and private sector colleges. table 8: dea results for efficiency comparison (public & private colleges) institutions effeciency crs technical efficiency vrs technical efficeincy scale efficiency public mean 0.898 0.948 0.943 median 0.928 0.985 0.998 private mean 0.884 0.969 0.911 median 0.926 0.983 0.963 all mean 0.888 0.962 0.921 median 0.927 0.984 0.990 t test pvalue 0.35 0.15 0.190 source: author’s estimations figure 1: dea (crs) results for efficiency comparison (public & private colleges) 0.86 0.87 0.88 0.89 0.9 0.91 0.92 0.93 mean median mean median mean median public private all crs (technical efficiency) 0.898 0.928 0.884 0.926 0.888 0.927 review of economics and development studies vol.2, no 1, june 2016 75 figure 2: dea (vrs) results for efficiency comparison (public & private colleges) figure 3: dea (scale) results for efficiency comparison (public & private colleges) results of the data demonstrate that crs score of public colleges is higher than that of private colleges. however, vrs score is higher for private colleges as compared to public colleges. crs for public colleges is 0.898 and private colleges 0.884. vrs score for public colleges is 0.948 and 0.969 for private colleges. nevertheless, public sector colleges have higher scale efficiency score i.e. 0.943 as compared to 0.911 of private colleges. p-value shows that the difference between the efficiency of two types of colleges is insignificant. table 9: dea results for efficiency comparison (public & private boys’ colleges) institutions effeciency 0.92 0.93 0.94 0.95 0.96 0.97 0.98 0.99 mean median mean median mean median public private all vrs (technical efficiency) 0.948 0.985 0.969 0.983 0.962 0.984 0.86 0.88 0.9 0.92 0.94 0.96 0.98 1 mean median mean median mean median public private all scale efficiency 0.943 0.998 0.911 0.963 0.921 0.990 review of economics and development studies vol.2, no 1, june 2016 76 crs technical efficiency vrs technical efficeincy scale efficiency public mean 0.825 0.912 0.897 median 0.858 0.954 0.928 private mean 0.878 0.959 0.914 median 0.919 0.961 0.953 all mean 0.864 0.946 0.909 median 0.909 0.958 0.950 t test pvalue 0.232 0.86 0.351 source: author’s estimations results show that crs score of public boys’ colleges is higher than that of private boys’ colleges. however, vrs score is higher for private boys’ colleges as compared to public boys’ colleges. crs for public boys’ colleges is 0.825 and private boys’ colleges 0.878. vrs score for public boys’ colleges is 0.912 and 0.959 for private boys’ colleges. nevertheless, public sector boys’ colleges have low scale efficiency score i.e. 0.897 as compared to 0.914 of private boys’ colleges. p-value shows that the difference between the efficiency of two types of colleges is insignificant. table 10: dea results for efficiency comparison (public & private girls’ colleges) institutions effeciency crs technical efficiency vrs technical efficeincy scale efficiency public mean 0.961 0.998 0.982 median 1 1 1 private mean 0.891 0.982 0.905 median 0.993 0.995 0.998 all mean 0.918 0.981 0.935 median 0.997 0.997 0.999 t test pvalue 0.143 0.161 0.05 source: author’s estimations crs, vrs and scale efficiency scores of public girls’ colleges are higher than that of private girls’ colleges. crs for public girls’ colleges is 0.961 and private girls’ colleges 0.891. vrs score for public girls’ colleges is 0.998 and 0.982 for private girls’ colleges. public sector girls’ colleges also have higher scale efficiency score i.e. 0.982 as compared to 0.905 of private girls’ colleges. p-value shows that the difference between the efficiency of two types of colleges is significant. review of economics and development studies vol.2, no 1, june 2016 77 table 11: dea results for efficiency comparison (boys & girls government colleges) institutions effeciency crs technical efficiency vrs technical efficeincy scale efficiency boys mean 0.825 0.912 0.897 median 0.858 0.954 0.928 girls mean 0.961 0.978 0.982 median 1 1 1 all mean 0.898 0.948 0.943 median 0.928 0.985 0.998 t test pvalue 0.049 0.074 0.068 source: author’s estimations results of the data demonstrate that crs, vrs and scale efficiency scores of public girls’ colleges are higher than that of public boys’ colleges. crs for public girls’ colleges is 0.961 and public boys’ colleges is 0.825. vrs score for public girls’ colleges is 0.978 and 0.912 for public boys’ colleges while scale efficiency score for public girls’ colleges is 0.982 as compared to 0.897 of public boys’ colleges. p-value shows that the difference between the efficiency of two types of colleges is significant. table 12: dea results for efficiency comparison (boys & girls private colleges) institutions effeciency crs technical efficiency vrs technical efficeincy scale efficiency boys mean 0.868 0.959 0.914 median 0.919 0.961 0.953 girls mean 0.891 0.982 0.905 median 0.993 0.995 0.998 all mean 0.883 0.969 0.910 median 0.926 0.983 0.963 t test pvalue 0.407 0.073 0.437 source: author’s estimations the above table shows that that private girls’ colleges outshine private boys’ colleges in crs and vrs. crs for private girls’ colleges is 0.891 and private boys’ colleges is 0.868. vrs score for private girls’ review of economics and development studies vol.2, no 1, june 2016 78 colleges is 0.982 and 0.959 for private boys’ colleges while scale efficiency score for private girls’ colleges is 0.905 as compared to 0.914 of private boys’ colleges. p-value shows that the difference between the efficiency of two types of colleges is insignificant. 5. conclusion and policy implications using dea, crs input oriented model, we have got mixed results. our overall result shows that public sector colleges are more efficient in case of crs and scale efficiency scores while private colleges are more efficient in case of vrs score. further detailed analysis shows that public sector girls’ colleges are more efficient than private girls’ colleges while private boys’ colleges are performing better as compared to government owned boys’ colleges. these results are somewhat contradicting with the dominant paradigm that private colleges outperform the state run institutes. our findings reveal that due to the inclusion of two variables wappm and seca, public colleges show high efficiency than private colleges. in private colleges students are divided into different sections according to their educational achievements. classes in private colleges comprise on few extra-ordinary/intelligent students along with a number of week students. no doubt, students belonging to private colleges show higher achievements in annual exams but the number of such achievers is very low was compared to their loser/lowerachieving classmates. extra-curricular activities are also conducive to greater efficiency of public colleges as public college students also show high achievements in extra-curricular activities as compared to public college that place more emphasis on academic excellence. the study concludes that there is need to alter the popular notion that private institutions are always better than government institutions. improving quality in government institutions, and regulating and setting standards for the private sector is the need of the hour. 6. policy implications the results have proved that public sector has the potential to outperform the private sector if the government takes some positive steps. as the public sector provides education mostly to the lower and middle classes of the society, therefore, the government should take steps to improve it further. following policy recommendations are suggested: i. the government should make education its priority and take steps to restore public confidence in state-run institutions. ii. budgetary allocation for education sector should be increased. the government should improve infrastructure and management of public sector institutes. iii. strict monitoring system should be adopted to restore public trust on government institutions. iv. skill development programmes should be launched to improve the capabilities of teachers. references abbot, m., & doucouliagos, c. 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(2011). measuring educational efficiency at student level with parametric stochastic distance functions: an application to spanish pisa results. education economics, 19(1), 29-49. review of economics and development studies vol.2, no 1, june 2016 80 oliver, p. r., belluzzo. w., & pazello. e. t. (2013). the public-private test score gap in brazil. economics of education, 35, 120-133. sherman, h. d. (1998). service organization productivity management. the society of management accountants of canada, hamilton, ontario. statistical pocket book of the punjab 2012, (2013) bureau of statistics, government of punjab stern, z. s., mehrez, a. and barboy, a. (1994). academic departments efficiency via dea. computers and operations research 21(5), 543-556. review of economics and development studies, vol. 6 (4) 2020, 867 879 867 mediating role of affective organizational commitment on the relationship between training and employee’s performance: a case of civil society organizations ayesha abbas a , nargis abbas b , uzma ashiq c , farhat abbas d a leads business school, lahore leads university, lahore, pakistan b department of education, university of sargodha, pakistan email: nargis.abbas@uos.edu.pk c department of social work, university of sargodha, pakistan email: uzma.ashiq@uos.ed.pk d department of education, university of sargodha, pakistan article details abstract history: accepted 12 dec 2020 available online 31 dec 2020 in a competitive business environment, organizational performance depends upon employees’ performance and their capabilities, which can be enhanced through effectual tools like, trainings to boost knowledge, behaviour and skills of employees etc. this research aimed to investigate the effect of training on employees’ performance directly and indirectly mediated through affective organizational commitment in the civil society organizations of pakistan. the convenient sampling technique was used and the sample of 219 employees was selected out of 569 total employees from different csos offices of the punjab with the help of krejcie and morgan table. descriptive statistics, correlation and confirmatory factor analysis were used to the data. the results demonstrated that training had a positive and significant impact on employees’ performance. further, affective organizational commitment was found to have a significant mediation in the relationship between employees’ performance and training. thus, the study suggested that training should be the part of civil society organization to boost the organizational commitment which will affect the employee performance. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: training, employees performance, affective organizational commitment, cfa-sem, civil society organizations jel classification: j31, j23, p27, p29 doi: 10.47067/reads.v6i4.286 corresponding author’s email address: nargis.abbas@uos.edu.pk 1. introduction currently business environment is promptly varying. in advance business world, activities of the organizations are aimed to the planned goals and to accomplish them by increasing their resources including human resource, money and material. human resource is the most essential asset of an organization (liu, 2006). organization is a place where a group of people gather to achieve the combined/ review of economics and development studies, vol. 6 (4) 2020, 867 879 868 common objectives. organizations have main infrastructure and human resource which may contribute a lot to the performance, productivity or output of a particular organization. for excellent effectiveness, organizations require to build the capacities of manpower and increase their potential. capacity is the ability to achieve desired goals effectively and efficiently by individuals, groups or at organizational level by performing specific tasks (krishnavani & sujatha, 2012) and training is the most appropriate practice used to build the capabilities of employees. to enhance the employee’s working skills, abilities, and behaviour, training has been considered one of the main factors (farooq & khan, 2011). thus, organizations encourage their employees for continuous training programs according to the need of the working environment and tasks. it is argued that an organization can sustain at top ranking among the organizations through the selection of quality human resource and boosting professional training to the employees. organizations used several human resource strategies and approaches to achieve their desired goals and one of the best approaches is the commitment strategy, attempt to build up the psychosomatic associations between the employees and company as a mean of achieving goals (brum, 2007). organizational commitment strengthens the individual’s recognition and participation in a specific organization (imran, 2012). thus, the work outcomes can be improved by increasing the employee’s commitment. according to yeh and hong (2012), organizational commitment can enhance overall the organizational competitiveness and performance of an employee. therefore, when the employees share the sense of belongingness and hold identification, they become more associated with the organization and more passionate to achieve the organizational goals (shahid & ali, 2019). csos are those nongovernmental organizations, which deal the project on national level. the csos employees are engaged with different kind of projects that are required to be completed within the specified time period. these diverse projects call for specific skills and know how to perform the project related tasks. the employees thus need training if the project requires a different skill set or know how. consequently, training is a strategic tool to build employees required skills and make them more committed and strongly associated with the organizations. as noted above, training is the most effectual tool for the improvement of interpersonal skills of employees. in human resource practices, training is the best approach which has the strongest impact on organizational profitability, therefore organization’s performance and productivity is increased by increasing the training programs (aragon & valle, 2013). all employees focus to improve their present skills and learn new skills to do the tasks in adequate manner and for this sake they obtain more and more training in their career (giangreco et al., 2009). training is most essential practice for new employees because employees are the indispensable asset for the organizations and for this sake organizations spend huge amount of money on employees’ need base training to enhance their performance and increase their commitment level with the organization (falola et al., 2014). moreover, training is systematic and formal technique to modify the behaviour of employees during learning which may occur in the form of planned experiences, instruction, improvement and education (jager, 2012). in the past decades it has been admitted that human resource is the main key of an organizational success. every organization has many departments, which comprise of a large number of workers having different temperament, attitude, behaviour, experience, thoughts, habits and even cultures. with these individual differences, they all are indulged to achieve the specific task efficiencies keeping in view their own limitations to handle the said objective. in addition, not every worker can tackle the verity of task until they have much knowledge, ability and expertise about various kinds of tasks (farooq & khan, 2011). performance of a skilled employee plays a big role in the productivity of an organization by accomplishing the organization’s expectations, needs and requirements (folorunso et al., 2014). review of economics and development studies, vol. 6 (4) 2020, 867 879 869 however, employee’s productivity and performance can be enhanced through an effectual training activity. its’ only purpose is not to enhance the performance of an employee but also provide the new opportunity to show their competencies and their ability to achieve the desired goals. thus, it is a useful technique to build the teamwork, enhance decision making power and problem-solving capabilities in employees and thus have a strong impact on organizational performance (nda & fard, 2013). employees’ performance enhances if the suitable training programs are conducted. william and anderson (1991) worked on task performance, which is defined as behaviour related to satisfying and examining the specified task of an organization. therefore, job training is necessary for employees and it reduces cost and save time. during the training session, junior employees attached to their seniors to learn new competencies and skills which eventually help them to perform better for assigned tasks (ahmad et al., 2014). the commitment is an internal state of feelings, wishes and behaviour of a person, which refers to a state of genuineness to do something. therefore, organizational commitment can be understood as the association between organizations and individuals (khan et al., 2014). several researchers contributed in developing the concept of organizational commitment. it is the psychosomatic attachment with the organizations which determine the affection toward the organization relying on the rate of an individual’s commitment (akhtar, 2014; imran, 2012; gardner et al., 2011). organizational commitment can be categorized in three factors such as (a) a strong belief, and acceptance of the organizational goals and norms, (b) a willingness to apply great effort on behalf of the organization, and (c) a strong wish to remain a part of the organization (jaros, 2007; conway, 2003; chen, 2004). various researchers revealed that affective commitment is the most common type of organizational commitment in which employees emotionally attached to the organization and strongly committed to achieve the organizational goal and also enjoys the membership with the organization (lamba & choudhary, 2013; allen & meyer, 1990). organizational commitment is just like a bond between employee and the organization therefore, employees emotionally attached to the organization where they work, and researcher focused on the affective commitment (restubog et al., 2006). chen (2004) and lamba & choudhary (2013) researched on affective commitment and found its positive correlation with the job performance. similarly, koc et al. (2014) worked on hrm practices like training and development, selection, rewards, performance assessment, job satisfaction and organizational commitment. they examined that employees who were aware of the organizational goals and competitiveness were more committed to the organization and performed their duties with loyalty and liability. on contrary, those employees who were not satisfied with their jobs couldn’t perform their duties well and remained engaged in negative behaviour, like absenteeism, which showed their lower commitment towards the organization. mahmood (2012) investigated the mediation role, as organizational commitment and employee retention mediate between the training and employee’s performance. author selected 400 samples from service sector and used correlation and regression to analyze the data and concluded that organizational commitment played partially mediate between training and employee performance. most of researchers conducted the research to examine the impact of training on employees’ performance in various sectors like education sector, service sector, hotel industry etc. (imran, 2012; ameeq & hanif, 2013), however, there is a scarcity of research that has been conducted in civil society organizations. therefore, the purpose of this paper was to investigate the impact of training on the performance of employees in the presence of affective organizational commitment. the central research question was, whether training influences significantly the employees’ performance in csos context. moreover, does organizational commitment mediates the relationship between training and employees’ performance. review of economics and development studies, vol. 6 (4) 2020, 867 879 870 2. hypothetical model and research hypotheses the proposed diagram describes the relationship of training with employees’ performance and affective organizational commitment. the conceptual framework was adopted mahmood (2012) used the organizational commitment as mediator in training and employee performance. hence, the proposed conceptual framework is given below. figure 1: hypothetical model of the study according to the aforementioned research question in literature review, following hypotheses were formulated. h1: there is a significant direct effect of the training on the employee’s performance in csos. h2: affective organizational commitment significantly mediates the relationship between training and employee’s performance. 3. research methodology a quantitative survey research design was adopted. the convenient sampling technique was used and the sample of 236 employees was selected out of 569 total employees from different csos offices of the punjab by using krejcie and morgan table. the inclusion criterion for selecting the employee was their training in last one year. the data were collected through well-structured questionnaire. out of 236 questionnaires obtained from respondents, 17 questionnaires were dropped due to incomplete information or non-filled questionnaires. thus, the final sample size was 219. research instrument was comprised of two sections, the first section was comprised of the demographic profile of the respondents and the second section was consisted of the scales to measure the variables of the study. all the items were rated on 5-points likert scale ranging from “1” (strongly disagree) to “5” (strongly agree). to measure the variable “training”, a 12 items scale was adopted from abbad et al. (2004). examples of the scale are “the quality of the work i do have improved” and “i do my work faster” etc. further, the variable “employees’ performance” was measured through 8 items scale, developed by william and anderson (1991), was adopted. examples of the scale are “complete the tasks assigned to me within the allotted time” and “always complete all aspects of my own basic duties” etc. the third variable “affective organizational commitment” was measured through 8 items scale constructed by allen & meyer, (1990). examples of the scale are “i enjoy discussing about my organization with people outside it” and “i would be very happy to spend the rest of my career with this organization”. a pilot test was conducted on 30 respondents to measure the reliability of this research instrument (hertzog, 2008; hill, 1998; isaac & michael, 1995). cronbach’ alpha was used to measure the internal consistency and reliability of the instrument. alpha value ranges from 0 to 1 but most satisfactory value considered more than 0.6 for scale to be reliable (alzalabani & modi, 2014). the reliability of the scale of training affective org. commitment. employee’s performance review of economics and development studies, vol. 6 (4) 2020, 867 879 871 the variable “training” at α=0.768, for the outcome/dependent variable “employee’s performance’ was measured at α=0.802 and for mediating variable “affective organizational commitment” was found at α=0.931. 3.1 data analysis to analyse the data, frequencies, descriptive statistics and cfa-sem were performed to examine the mediating effect of affective organizational commitment on the relationship between training and employee performance. 3.1.1 demographic information of the respondents in this section, we explored demographic information. according to the first part regarding demographic information, five major questions were asked to the respondent (age, gender, education level and working experience of the respondent in current organization). the percentage and frequencies of these variables are given in following table 1. table 1. demographic information of the respondents demographic variables frequency (%) gender female 106 (48.4%) male 113 (51.6%) age less than 25 years 41 (18.7%) 25-35 years 116 (53%) 35-45 years 50 (22.8%) more than 45 years 12 (5.5%) highest level of education? higher secondary school 15 (6.8%) graduation 97 (44.3%) masters 82 (37.4%) ms/phd 25 (11.5%) how long have you been in current organization? less than one year 45 (20.5%) 2-4 years 120 (54.8%) 5-7 years 45 (20.5%) more than 7 years 09 (4.1%) trainings attended by the respondents one training 48 (21.9%) 2-4 trainings 133 (60.7%) more than 4 trainings 38 (17.4%) table 1 show the distribution of respondents with respect to gender, with 113 males (51.6%) and 106 females (48.4%), is a gender balanced sample. next level shows the age distribution of the sample. age distribution shows that 18.7% respondents were less than 25 years and the largest percentage 53% respondents were in the age group of 2535 furthermore 22.8% having age between 3545 and the lowest percentage of respondents that is 5.5% belongs to more than 45 years. in the next level, table 1 shows the distribution of the sample relating to educational qualification. only 6.8% respondents fall in the first category. 44.3% respondents were having a bachelor’s degree and 37.4% and 11.5% have a masters’ degree and ms/phd degree respectively. it showed that the respondents of the study having a higher review of economics and development studies, vol. 6 (4) 2020, 867 879 872 secondary school education were smallest group, whereas, the largest percentage group was master degree holders. in order to study the working experience as well as their affiliation with the current organization, a question “for how long you are working in the current organization?” was asked. table 1 show that 20.5% had less than one-year experience and 54.8% of the respondents were having 2-4 years of experience, whereas 25% of the respondents were having more than 5 years of experience which showed that the respondents of the study were experienced in their field. last question was about the number of training to highlight their training experience. results described that 21.9% had only one training and 60.7% mentioned 2 to 4 trainings which is largest group. while, 17.4% mentioned to have more than 4 trainings in their career, which is the smallest group of the respondents. the main objective of this paper was to investigate the mediation of organizational commitment, therefore correlation among the variables were measured. table 2: means, sd and correlation coefficients among the variables variables n mean sd 1 2 3 training of employee 219 3.98 0.4531 1 organizational commitment 219 3.47 0.5355 0.410*** 1 employee’s performance 219 3.91 0.577 0.572*** 0.407*** 1 *** p < 0.001 table 2 shows the simple means, standard deviation and correlation coefficient of all variables under analysis. the mean values of the variables were ranging from 3.4 to 3.98 on a 5-points likert scale. all the means are fairly high which indicated that respondents have shown positive level of agreement towards the variables. in addition, the small values of standard deviation against each variable indicated that there was no so much variation in the data. further, the correlation values among the independent, dependent variable and mediator were calculated. the p values indicated that all the variables were significant and positively correlated (p= .000). it was found that “training” was significantly positive correlated with the “employee’s performance” (r = 0.572, p < 0.001). further, the correlation coefficient of “training” with mediator “organizational commitment” was also found significant and positive (r = 0.410, p < 0.001). similarly, the “organizational commitment” and “employee’s performance’ were found to have significant positive correlation between them (r = 0.407, p < 0.001). the next step was to perform the confirmatory factor analysis (cfa), for this, amos v.20 was used. to investigate the capacity of the measurement model for predicting the regression coefficients of the causal relationships, the significance of the loading for each item of the scales was investigated in the table 3. review of economics and development studies, vol. 6 (4) 2020, 867 879 873 table 3: loadings of the measurement model variables items r 2 factor loadings t-values training tr1 .25 .502*** 5.482 tr2 .27 .519*** 5.579 tr3 .41 .634*** 6.268 tr4 .41 .643*** 6.309 tr5 .04 .186* 2.418 tr6 .17 .406*** 4.698 tr7 .27 .518*** 5.574 tr8 .11 .311*** 3.824 tr9 .31 .556*** 5.819 tr10 .22 .472*** 5.245 tr11 .19 .434*** 4.951 tr12 .24 .492*** 5.390 organizational commitment oc1 .55 .744*** 8.401 oc2 .60 .775*** 10.698 oc3 .54 .738*** 10.227 oc4 .01 .118 1.615 oc5 .03 .160* 2.198 oc6 .13 .349*** 4.804 oc7 .47 .689*** 9.561 oc8 .09 .299*** 4.101 employee’s performance ep1 .38 .613*** 6.842 ep2 .40 .633*** 7.528 ep3 .23 .483*** 6.064 ep4 .40 .632*** 7.518 ep5 .56 .747*** 8.460 ep6 .30 .546*** 6.712 ep7 .31 .553*** 6.778 three latent variables were fitted in the conceptual model along with their items to perform the cfa. the regression coefficients (which are the loadings of the items) of each item measuring its respective latent variable were analysed on 95% confidence interval. the results in table 3 showed that all factor loadings of the items with respect to their latent variables were significant at α = 0.05 except for oc4 which was found non-significant. this item was deleted from the model and rerun the cfa to improve the model. r 2 measures the variance of the items explained by the latent variables also considered as a "traditional non-sem path model-fit index” (schumacker & lomax, 2004, p.159). 3.2 model testing in the model testing process, data is verified for the structural model. how well the data fit in the model means to check whether the hypothesized structural model is consistent with the data collected following the respective theory or conceptual framework (abbas et al., 2020). the overall goodness of the fit is measured by chi-square. however, due to its sensitivity to the sample size there are varieties of goodness-of-fitness indices which aid the chi-square statistic. these two classes of indices i.e incremental and absolute indices (bollen, 1989; byrne, 2006). absolute fit indices measure the extent to which specified model reproduces the sample covariance matrix (lei & wu, 2007, p.37). it includes chi-square, normed review of economics and development studies, vol. 6 (4) 2020, 867 879 874 chi square (cmin/df) and root mean square error of approximation (rmsea) (bahoo et al., 2020; steiger & lind, 1980). whereas, the incremental fit indices, for example cfi, measure the increase in fit relative to a baseline model (bentler, 1990; bollen, 1990). therefore, before studying the mediating role of affective organizational commitment on the relationship between training and employee’s performance, it is pertinent to test the model for goodness-offit. the normed chi-square (cmin/df) χ2 (normed) = 2.319, was found within the range. the acceptable range for normed chi-square is between 1 and 3 (abbas, 2011; hair et al., 2009; kline, 2005), sometimes less than 5 is also accepted (schumacker & lomax, 2004). the calculated value of the normed chi square for the structural model of the study ensured that the model fits the data well. the root mean square error of approximation (rmsea) value was measured at 0.081, which was less than 0.1, found in acceptable range (sanei & poursalimi, 2018; loehlin, 2004). further, the important incremental statistics of the model is comparative fit index (cfi). the standard range of the values for the incremental fit indices is “0 to 1”, the value closer to 1 is considered as good fit (byrne, 2006). the cfi was found at 0.89 which is approaches to 1 thus considered as acceptable. lastly, the parsimony normed fit index (pnfi), which ranges between 0 and 1, value closer to 1 is a good fit, here its value was found 0.748. figure 2. structural model with path coefficients in order to test the hypotheses of the study, path coefficients of the direct relation of training and employee’s performance were measured in table 4. to check the significance of direct, indirect and total effect, in analysis properties, bootstrap analyses with the default of 200 samples were measured and to calculate bias-corrected confidence intervals (cis), level was set at 95 (bollen & stine, 1992). review of economics and development studies, vol. 6 (4) 2020, 867 879 875 table 4: path estimates of cfa structural model parameter unstandardized (β) se t-value standardized (b) h1: tr  ep .59*** .145 4.029 .46 h2-i: tr  oc 1.25*** .225 5.65 .64 h2-ii: oc  ep .29*** .065 4.503 .45 *** p < 0.001 regarding the first hypothesis, h1, to investigate the direct effect of training on the employee’s performance, the regression coefficient (β) of “training” was found 0.59. by studying the t-value against this regression coefficient, it was found that there was a significant direct effect of training on the employee’s performance (b = .462, p < 0.001). it means that 1-unit increase in training increases 0.462 units (46.2%) performance of employee. further, to study the mediating role of affective organizational commitment, there were two sub hypotheses, i.e, h2-i & h2-ii. the first part of the mediation was to investigate the direct effect of training on the organization commitment. the significant β value (1.25***) showed that training had significantly direct effect on the organizational commitment (b = .641, p < 0.001). moreover, the effect of affective organizational commitment on the employee’s performance, as hypothesized in the h2-ii, the regression coefficient β (0.29***) was found significant. the significant path coefficeint (b = .452, p < 0.001) indicated that to 1-unit increase in affective organizational commitment, 0.452 units of the employee’s performance increases (45.2%). in order order to verify the second hypothesis of the study, i.e., mediation of affective organization commitment in the relationship of training and employee’s performance (i.e., h2: trocep), the direct, indirect and total effects were measured in table 5. table 5: direct, indirect and total effects of training on employee’s performance variables causal variables employee’s performance org. commitment training unstd. st. unstd. st. direct effect 0.59* 0.46 1.25** 0.64 indirect effect 0.36* 0.29 0.00 0.00 total effect 0.95* 0.75 1.25** 0.64 org. commitment direct effect 0.29** 0.45 indirect effect 0.00 0.00 total effect 0.29** 0.45 *p < 0.05; **p < 0.01. the β value (0.36*) measuring indirect effect of training mediated through affective organizational commitment was found significant at 5% level of significance (β1 x β2 = 1.25 x 0.29 = 0.362). hence, h2: trocep was accepted, that is, the affective organizational commitment significantly mediates the relationship between training and employee’s performance (b = 0.29). therefore, it can be concluded that though training significantly increase the employee’s performance, however this effect further increases if mediated through the affective organizational commitment. 4. discussion the study was focused on investigating the mediating role of affective organizational commitment on the relationship between training of the employee and their performance. the demographic information showed that both male and female participants of the study were approximately equal in number and further their bifurcation according to their experience and training were also found gender balanced. review of economics and development studies, vol. 6 (4) 2020, 867 879 876 moreover, in the measurement model, the absolute and the incremental indices ensured the goodness-of-fit. however, the goodness-of-fit indices may further be improved, if the items of lower loadings would be removed from the model and rerun the model again. but as the loadings were significantly measuring their respective latent variables therefore, the structural model was proceeded. in this research two hypotheses were formulated based on empirical evidence. statistical tests cfasem were used to test two main hypotheses of the study. the first hypothesis in the current research was to investigate the effect of training on the employee’s performance in civil society organizations. the result illustrates that the training has significant and positive effect on the performance of the employees, especially in the case of civil society organizations. this finding of the current study is supported by the previous research study’s findings (hussain et al., 2020; falola et al., 2014; ahmed et al., 2014; amin et al., 2013; bulut & culha, 2010). the second hypothesis of the study was to investigate the mediating effect of the affective organizational commitment on the relationship between training and employee’s performance. the results supported the significant mediation of the affective organizational commitment on this relationship. moreover, it was also revealed that in the presence of the mediation direct effect of training remained significant on the employee’s performance. the results are aligned with the previous researches of mahmood (2012) and dhar (2015). at the threshold of this discussion, the findings revealed that the training effect positively the employee’s performance, whereas this positive effect even become strong if mediated through the affective organizational commitment in civil society organizations of pakistan. 5. conclusion and recommendations the present study was conducted to analyze the impact of training on the employee’s performance with mediating role of affective organizational commitment in civil society organizations of pakistan. this direct and indirect impact was found significant. hence the results of the current study present that the training is a valuable strategic tool to enhance employee performance in civil society organizations of pakistan. in csos, employees are mostly engaged in short term and multidimensional projects which need a specific skill set. thus, to facilitate employees to perform their job-related tasks in an amicable way, employees should be provided with proper guidance through training. to overcome the gap between the assigned tasks and employee’s qualification, the organization should arrange the training program according to the task specification. this would help to develop and maintain the sense of association and belongingness with the organization. moreover, from the theoretical point of view, current research findings contribute and broaden the earlier work conducted on training, employee performance and affective organizational commitment in the context of csos of pakistan. for example, the fit indices of the measurement model of this study indicated that this model fit the data however, it may be further ameliorated by adding another variable supported by the theory and literature to improve it more, however it was not the main objective of the study, therefore, it may be taken as the recommendation for the future study. moreover, this study highlighted that the human resource practices are more beneficial for the organization and human resource as well. in the light of these results, rules and regulations can be developed and new policies may be formulated to make the training programs more effective and task oriented. for instance, conceptual trainings may increase the intellectual level of the employees which will enhance their performance. however, for the operative outcomes of training, content of training should be prepared effectively according to the need and the timings of training should be flexible. thus, it is recommended that in order to build new abilities 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article details abstract history revised format: may 2017 available online: june 2017 purpose: public physical infrastructure development has fairly large impacts on private sector investment decisions and through this; it can affect economic performance (growth). the current study intends to explore the course in which public infrastructure affects private sector investment in pakistan and whether there exist long run equilibrium between them or not. time series annual data from 1972 to 2015 has been employed. instead of using a single infrastructure indicator, the study has constructed a multidimensional composite index through principal component analysis (pca). real gross fixed capital formation is used as the proxy of private sector investment. the long run relationship is determined by johansen’s co-integration technique after checking for the order of integration. the empirical evidence shows that physical infrastructure availability is positively and significantly affecting private sector investment decisions. in addition, credit to private sector, per capita gdp, work force and inflation rate are positively and significantly affecting private investment. further, private investment is sensitive to public physical infrastructure availability not only in long run but also in short run. a statistically significant and negative ect (-1) term confirms the long run relationship and convergence towards equilibrium in case of pakistan. findings of the study show that public physical infrastructure services endorse the private investment both in the long run and the short run. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords public infrastructure, private investment, domestic credit, pca, pakistan jel classification: e620, h75, h76, r4 corresponding author’s email address: ayzashouket@gmail.com recommended citation: shoukat, a., ahmad, k. & abdullah, m., (2017). enigma of public assistance to private investment through infrastructure: evidence from pakistan. review of economics and development studies, 3(1) 1-12. doi: https://doi.org/10.26710/reads.v3i1.162 1. introduction achieving sustainable growth and development through public capital stock is a popular approach in economic literature. lately, economists and policy makers are more concerned about inputs of growth rather than outputs. public infrastructure is one of these inputs and considered as fixed investment for the economy. besides, the importance of private sector towards growth is undeniable. a reasonable rate of both public (physical infrastructure) and private investment keep an economy on the track of sustained growth. these indicators of growth are somewhat interrelated and their relationship is yet to unveil in case http://www.publishing.globalcsrc.org/reads mailto:ayzashouket@gmail.com mailto:ayzashouket@gmail.com https://doi.org/10.26710/reads.v3i1.162 review of economics and development studies vol. 3, no 1, june 2017 2 of pakistan. public physical infrastructure affects the private sector both directly and indirectly. the direct affect is significant as firms consume physical infrastructure as an intermediate unit of consumption. that is, marginal product of the physical infrastructure in private sector is positive (prud’homme, 2005; fay and morrison, 2007 and li and li, 2009). the indirect effect suggests that public physical infrastructure and private investments are complimentary goods that are why, public physical infrastructure services must be provided to boost the private investment (asante, 2000). provision of public physical infrastructure raises rate of return of private capital, at one hand and on the other hand, it acts as a substitute that crowds out private investment. empirical evidence support both ends but public infrastructure supports private investments on equilibrium (delgado and alvarez, 2001). pakistan’s economy is characterized as a developing economy due to lower growth rates, high poverty levels, insufficient infrastructure, and low literacy rate, deficiency of capital inflow and capital formation and poor governance. internal as well as external circumstances played crucial role over the short history of economy of pakistan. korean war in 1950s and bulk of foreign aid in 1960s helped pakistan’s economy to grow faster. however, the decade of 1970s came up with the shock of separation of east pakistan, followed by nationalization policy and an adverse oil price shock. not only the growth rate of the economy but the private sector was also affected due to nationalization scheme. during this period, private investment contracted and public investment expended. the era of 1980s was contrary in polices. in this decade, private investment boosted due to policy of decentralization. further, foreign inflows due to afghan war also helped economy to grow on an average growth rate of 6.8 percent. total investment as well as private investment also increased. the decade of 1990s was distinguished in history of economy of pakistan because of the choice of rightful growth promoting polices. most important were export led growth and import liberalization policies. a significant amount of foreign inflows was also attracted. but the result of these polices was not very urging. instead, growth rates (export, investment and gdp) were low even negative. many internal as well as external factors were responsible for it like, heterogeneity of interests, political imbalance, absence of necessary infrastructure, unstable exchange rate and global inflation. in addition, emergence of pakistan as nuclear power was also responsible for falling investment (khan, 2007). as a result, growth rate fell to 4 percent. private investment also dropped to 3.8 percent. table-1: shows the situation of private and public investment over the years in pakistan. average growth ratestime period gdp growth rate (percentage) public investment (percentage of gdp) private investment (percentage of gdp) total investment (percentage of gdp) 1971-80 4.78 9.44 5.32 14.76 1981-90 6.25 9.17 7.79 16.96 1991-2000 3.99 7.34 9.14 16.48 2001-12 4.70 20.28 10.0 30.28 source: various issues of pakistan economic survey last decade, 2000 has introduced the economy of pakistan as an open economy in global market. since, trade promoting polices as well as foreign investment especially in physical infrastructure (telecommunication and energy) helped to build a new image of pakistan in community of foreign investors. the outcome of such growth friendly policies could be fairly large but adverse circumstances (like military takeover, incident of 9/11, food inflation and oil price shock) had left economy underdeveloped. currently, pakistan is facing the problems like food price escalation, poor law and order, inappropriate health and education facilities, high inflation rate, deficiency of capital investment, inadequate policies and poor infrastructure services. one of the major reasons of the lower growth rates in pakistan was the inadequate supply of public physical infrastructure services (faiz, 1992 and jan et al., 2012). review of economics and development studies vol. 3, no 1, june 2017 3 the contribution of investment and physical infrastructure towards growth is discussed by numerous researches. it is evident that both of above mentioned entities are growth promoting in both developing and developed countries. in empirical research, computing public physical infrastructure is very difficult because it is a multidimensional phenomenon. the conventional economic literature either consider a single infrastructure service as a measure of all or take the monetary measure like how much cost has been born to construct a road or a power house. in either case, situation is misleading (easterly, 2001 and loayza et al., 2005). in reality, physical infrastructure is a multidimensional approach which in aggregate is provision of different services (like transportation, power or energy and telecommunication). by considering these features of infrastructure, we have constructed a composite index of public physical infrastructure with multiple dimensions. these dimensions are measured with different variables and combined to a single indicator through principal component analysis (pca). the causal relationship of infrastructure provision and flow of private investment is not much explored. particularly, the case of pakistan is not yet unfolded. the current study seeks the dynamic and complex relation of how public infrastructure pertains to private investment and resolves the bottle necks. the data set used is 1972-2015 for pakistan’s economy. the study is consisting of four sections. section two briefly represents the literature review. model specifications and empirical results are discussed in section three. section four summarizes the concluding remarks with policy implications. 2. review of literature many researchers including aschauer (1987 and 1989), looney (1997), asante (2000) and prud’homme (2005) have concluded that public infrastructure is an efficient input for output growth. others (mankiw et al., 1992; benhabib and spiegel, 1994 and dutt and ravaillon, 1998) have included human capital as a productive input too. where the importance and contribution of private investment towards economic growth needs no introduction in economic literature (long and summers, 1991; nelson and phelps, 1996 and alfaro et al., 2006). this study aims to explore the complex relationship that how public capital (infrastructure) assists the private sector to grow and flourish. reinikka and sevensson (1999) has examined the relationship of public infrastructure services provision and private investment for the economy of uganda. they have found that the poor infrastructure services leads to lower productivity in private sector. further, inappropriate public services also tend to increase the cost of private investment. they have called the basic public infrastructure services (roads, railways, telephones, sanitation and power) ‘complimentary capital’ as a necessity for higher returns of private investment in developing countries. the discussion of public investment vs private investment often comes up with crowding in or crowding out effect. in former case, private investment is boosted as a result of raised government expenditure by encouraging demand for goods. as the demand for a good is high, private spending rises. later is opposite. crowding out causes the private spending to fall as a result of increased government spending. aschauer (1988) has analyzed the enigma of crowding in and crowding out in case of public capital stock. the results suggested that increased public capital drives down the private investment. besides, public capital raises the rate of return of private investment leads to private capital formation. the net effect of these forces is positive on private investment. erenburg (1993) conducted an analysis to check the effects of public capital on private investment. the main concern of the study is that whether public capital drives down or drives up the private investment by improved supply of public infrastructure services. also, this study investigates the consequences of previous government investment along with the government deficit expenditures on private sector investment behavior. this has been done by taking into account the method of maximum likelihood. the results reveals a positive and statistically significant relationship between public capital and private investment behavior. the results further showed that government deficit expenditures are statically review of economics and development studies vol. 3, no 1, june 2017 4 insignificant and have no impact on private investment spending. sakr (1993) seeks for the determinants of investment in private sector for the economy of pakistan with particular stress on public investment. public investment is divided into expenditures on infrastructural investment and expenditures on non-infrastructural investment. the results of the study indicates that private investment is significantly and positively affected by gdp growth and infrastructural investment. however, the effect of non-infrastructural investment is found negative on private investment. looney (1997) has conducted an analysis of public physical infrastructure provision on private investment for economy of pakistan. the study focuses to explore the existence of long run equilibrium between infrastructure facilities, private investment and gdp growth. the findings of this study suggest that at first it appears improved infrastructure has not contributed much towards the growth of pakistan’s economy. but at the same time, infrastructure services has supported the private investment to grow faster by accomplishing the needs of private sector at one hand, on the other hand, infrastructure has taken out the economy from sever bottlenecks. the study concludes that overall impact of public physical infrastructure on private investment is positive in case of pakistan’s economy. delgado and alvarez (2001) have analyzed the effects of public infrastructure services on private investment in 17 different regions of spain. they have used multiple indicators for infrastructure by using each indicator as a regressor. also, they have investigated the process that how infrastructure services act as an input in production process. they have used a modified production function with the data set from 1980 to 1995. the empirical results supported the view that provision of public infrastructure is positively affecting private investment. everhart and sumlinski (2001) has analyzed the public private investment nexus. their study has focused the key issues like the quality of public investment, corruption in public investment and the impact of both on investment by private sector. the study has confirmed the long run relationship between public capital and private investment. further, it concludes that corruption in public sector investments reduces the quality of public capital and this poor quality causes the returns of private sector to fall. that is, provision of lower quality public capital leads to reduction in private investment. erden and holcombe (2005) have used a panel of developing countries from 1980-97 to check whether public infrastructure spending crowds in or crowds out private investment. the study also investigates the credit facilities to private sector by banks the empirical results of the study states that on average, ten percent increase in public infrastructure spending leads to two percent increase in private investment in developing economies. the study also checked the same for developed economies and finds that public spendings on infrastructure crowds out the private investment in developed economies and supports private sector in developing economies. dash (2016) has investigated for the relationship of public infrastructure and private investment for indian economy. the data has been used from 1970 to 2013 and ardl procedures have been adopted. the empirical result finds that public infrastructure investment which is measured by length of roads is negatively related to private investment in the long run. whereas, in the short run, the effects of public infrastructure on private investment are positive. the critical analysis of existing literature shows that impact of infrastructure provision on private investment is not much explored in case of pakistan. the present study focuses to resolve the enigma of whether public investment through infrastructure supports private investment in pakistan or not. some studies are there which are using either a single indicator as a summary measure of all infrastructure services. others are measuring the infrastructure by the extent of public expenditures in an economy. in both cases, the conclusions can be deceptive. for instance, in an economy, there can be an excellent review of economics and development studies vol. 3, no 1, june 2017 5 transportation infrastructure but inefficient energy sector or considering how many dollars has been spent on infrastructure development instead of considering how many bridges, kilometers of roads or power houses has been constructed. the present study focuses to resolve these issues by developing a composite infrastructure indicator, index of public physical infrastructure. this has been done by incorporating different indicators of public infrastructure which are measured by different variables. these variables are then combined through pca. 3. model specification and empirical analysis there are numerous factors that are affecting private investment in pakistan’s economy. based on previous studies (greene and villanueva, 1991 and sakr, 1993), we have constructed our model as follows: gfcfpvt = f (z, dcpvt, elf, gdp, inf) where gfcfpvt is real gross fixed capital formation in private sector as proxy of private investment. z is indicator of index of public physical infrastructure. dcpvt is domestic credit extended to private sector by banks as percentage of gdp measures the financing constraints in private sector. gdp is per capita gdp represents the accelerator component determining private investment. inf is inflation rate as a measure of investment environment in the economy (beaudry et al., 2001). time series annual data from 1972 to 2015 has been used for the empirical analysis. data has been collected from various issues of pakistan economic survey and world development indicators (wdi) (2016). 3.1 principal component analysis (pca) principal component analysis (pca) is a suitable method while dealing with multivariate procedures. the common name for pca is data reduction method. in a certain study, if for instance, ten or more variables indicate an economic measure, then there are more chances of correlation among these variables. in such a case, pca helps us by providing us uncorrelated principal components from these multiple variables which are supposed to be correlated before. a composite indicator of public physical infrastructure z has been constructed. it is based on multiple indicators of infrastructure like transportation measured by length of roads (rds), communication measured by number of post offices (post) and number of telephone lines (tele) and energy by oil (oil) and electricity consumption (elc). the correlation matrix shows that above mentioned indictors of infrastructure are highly correlated as reported in table-2. table-2: correlations matrix of infrastructure indicators indicators rds post tele oil ec rds 1.000000 post 0.714858 1.000000 tele 0.933784 0.532187 1.000000 oil 0.977749 0.734198 0.875796 1.000000 elc 0.956529 0.612493 0.924769 0.922103 1.000000 since, the infrastructure indicators are highly correlated, to overcome the problem of multi-collinearity and to reduce the number of explanatory variables we have employed principal component analysis (pca). because correlation matrix instead of the covariance matrix is utilized in the pca (chatfield and collins, 1980), therefore, eigenvalues and eigenvectors are reported in table-3. eigenvalues and eigenvectors are computed by using ordinary correlations. review of economics and development studies vol. 3, no 1, june 2017 6 table-3: eigenvalues and eigenvectors of infrastructure indicators principle component eigenvalue values proportion cumulative proportion 1 4.306485 0.8613 0.8613 2 0.539357 0.1079 0.9692 3 0.084947 0.0170 0.9862 4 0.060253 0.0121 0.9982 5 0.008956 0.0018 1.0000 eigenvectors (loadings) variable pc 1 pc 2 pc 3 pc 4 pc 5 rds 0.478823 -0.074036 -0.127200 -0.176840 -0.847227 post 0.365943 0.878041 0.282386 0.105199 0.065735 tele 0.448274 -0.400624 0.711440 -0.274514 0.238843 oil 0.470688 0.020392 -0.610136 -0.450902 0.449954 elc 0.462944 -0.250293 -0.160207 0.824009 0.135571 the first principal component (pc1) explains the maximum variance (86%) in all the individual indicators (eigenvalue of 4.3). the scree plot of order eigenvalues and eigenvalue difference against principle component are shown in figure-1 and figure-2, respectively. figure-1: scree plot of order eigenvalues 0 1 2 3 4 5 1 2 3 4 5 scree plot (ordered eigenvalues) figure-2: scree plot of eigenvalue difference 0 1 2 3 4 1 2 3 4 5 eigenvalue difference in figure-1 and figure-2, scree plots of ordered eigenvalues and eigenvalue difference, against principle component, showed a sharp decline from first principle component (pc1) to second principle component (pc2) which indicates the suitable use of pca for constructing a composite indicator. then data of infrastructure indicators is normalized by subtracting the minimum value and dividing by the range of the indicator values. these normalized values are weighted by multiplying with their respective pc1 and finally aggregated into single composite index of public physical infrastructure (zt). review of economics and development studies vol. 3, no 1, june 2017 7 3.2 long run and short run analysis the problem of non-stationarity or unit root exists in time series data. if series are non-stationary then regression would be spurious. to avoid this, we have conducted the test for unit root by employing adf test. the results are reported in table-4. the results reported in table-4 shows that all variables are non-stationary at level. however, these variables are stationary at first difference. as the level of integration is same we can apply johansen cointegration to determine the existence of long run relationship. but before moving towards long run relationship, it is important to determine the optimal lag length first. the results of multiple lag selection criteria have been presented in table-5. table-4: test for unit root (adf test statistics) at level variables without trend prob. values trend and intercept prob. values lngfcfpvtt -1.002488 0.7438 -2.252656 0.4494 lnzt -2.157297 0.2248 -2.034355 0.5623 lnelft -0.641123 0.8502 -1.899698 0.6370 dcpvtt -2.410525 0.1452 -2.367530 0.3902 pcgdpgt -2.544670 0.1134 -2.855709 0.1876 inft -2.180714 0.2163 -2.145264 0.5047 first difference variables without trend prob. values trend and intercept prob. values ∆lngfcfpvtt -6.789297* ** 0.0000 -6.777345* ** 0.0000 ∆lnzt -4.690897* ** 0.0006 -4.203823* 0.0108 ∆lnelft -5.973156* ** 0.0000 -5.911166* ** 0.0001 ∆dcpvtt -4.903509* ** 0.0003 -4.891361* ** 0.0016 ∆pcgdpgt -4.191647* ** 0.0022 -4.776524* ** 0.0023 ∆inft -5.216983* ** 0.0001 -5.338049* ** 0.0005 note: * denotes 1% significance level and ** stands for 5% significance level table-5: criteria for var lag order lag log l sc aic hq 0 -309.0096 16.00381 15.75048 15.84208 1 -109.0830 9.327475* 7.554152* 8.195329* 2 -75.21728 10.95418 7.660864 8.851623 * indicates lag order selected by the criterion, sc: schwarz information criterion, aic: akaike information criterion, hq: hannan-quinn information criterion review of economics and development studies vol. 3, no 1, june 2017 8 according to the results reported in table-5, optimal lag length by different criterion is 1. after determining the lag length, we can go for the co-integration to determine the long run relationship among the variables. the results of trace statistics and maximum eigen statistics have been reported in table-6 and table-7 respectively. table-6: unrestricted co-integration rank test (trace) h0 h1 trace statistics critical value at 5% level probability ** r = 0* r ≥ 1 140.8386 95.75366 0.0000 r ≤ 1* r ≥ 2 80.40633 69.81889 0.0056 r ≤ 2 r ≥ 3 45.07757 47.85613 0.0891 r ≤ 3 r ≥ 4 21.48529 29.79707 0.3281 r ≤ 4 r ≥ 5 11.06753 15.49471 0.2074 * denotes rejection of the hypothesis at the 0.05 level. ** p-values. table-7: unrestricted co-integration rank test (maximum eigen value) h0 h1 max-eigen statistics critical value at 5% level probability ** r = 0* r ≥ 1 60.43224 40.07757 0.0001 r ≤ 1* r ≥ 2 35.32877 33.87687 0.0333 r ≤ 2 r ≥ 3 23.59227 27.58434 0.1496 r ≤ 3 r ≥ 4 10.41776 21.13162 0.7048 r ≤ 4 r ≥ 5 9.533331 14.26460 0.2444 * rejection of the hypothesis at the 5% level. ** p-values. a close insight of the table-6 and table-7 has disclosed that there are two co-integrating vectors in each of them or there is co-integration among the variables. in other words, existence of long run relationship between public physical infrastructure and private investment is confirmed. this long run relationship is further supported by the normalized values presented in table-8. table-8: normalized co-integrating coefficients variables coefficients t-statistics dependent variable: lrgfcf lz 0.766695 (0.05548) -12.8 lelf 1.211244 (0.16748) -7.06 dcpvt 0.037356 (0.01078) -3.36 pcgdpg 0.048796 (0.01870) -2.47 inf 0.046723 (0.00668) -6.7 *(standard error in parentheses) the results reported in table-8 shows that all variables bare positive sign including index of public review of economics and development studies vol. 3, no 1, june 2017 9 physical infrastructure (z). also, all variables are significantly affecting the private investment. one percent increase in public physical infrastructure services (represented by physical infrastructure index z) leads to 0.76 percent increase in private investment. since the co-integration among our concerned variables has been confirmed we would now check for the short run relationship. for short run analysis, we have employed vecm. according to (egert et al., 2009), the short-run ect must be significant and negative to assure the long run relationship as well as equilibrium reversion. results for short run have been accounted in table-9. table-9: short-run relationships variable coefficient t-statistic dlzt 0.043371 0.486664 dlelf 1.701340 2.074893 ddcpvt 0.028742 2.629858 dpcgdpg 0.005405 0.535713 dinflation 0.007136 1.209261 ect(-1) -0.516409 -3.623510 r 2 0.495138 f-statistic 5.557531 durbin-watson 1.822886 the short run analysis shows that except work force and credit to private sector, all variables are statistically insignificant. as reported in table-7, a negative as well as statistically significant ect term supports the view that there is a long run relationship between z and private investment. where its coefficient shows the speed of convergence towards equilibrium. the speed of convergence is significantly high. our results have confirmed that public physical infrastructure certainly improves the conditions for private investment in pakistan economy. some important diagnostic tests have been applied and results are reported in the table-10. table-10: diagnostic tests (short-run model) diagnostic tests f-statistics probability breush-godfrey lm test for serial correlation 0.727974 0.3997 arch test forautoregressive heteroskedasticity 0.191982 0.6638 ramsey reset test for model specification 0.407733 0.5275 the results reported in table-10 shows that our model is free from the problem of serial correlation. also, there is no issue of heteroscedasticity. the ramsey reset test statistics shows that our model is correctly specified. review of economics and development studies vol. 3, no 1, june 2017 10 4. conclusion and policy implications the empirical results of the present study suggest that public physical infrastructure and private investment are highly correlated. increased level of public infrastructure would enhance the level of private investment in pakistan. differing from other studies, the present study has constructed an index of public physical infrastructure by using multiple indicators (transportation, telecommunication and energy) combined through pca. private investment is measured by real gross fixed capital formation in private sector. after checking for stationarity, we have incorporated co-integration and ecm for long run and short run dynamics respectively. the existence of long run relationship has been confirmed through cointegration as well as through negative and significant ecm term. the provision of basic physical infrastructure in pakistan remained low in past 20 years. according to world bank (2013), there is undersupply of infrastructure availability in pakistan. in order to bridge the gap, pakistan needs to spend 5.5 percent of gdp on electricity generation, 0.71 percent of gdp on telecommunication and 1.23 percent of gdp on transportation every year. on the other hand, private investment is not that much high in pakistan. according to the white (2005), for sustainable development, the level of private investment should be 25 percent of gdp in developed economies and in transitional economies, it should not be less than 20 percent of gdp. where according to pakistan economic survey (2014-15), private investment in pakistan is only 9.66 percent of gdp. that is, less than half of required level. by investing in productive physical capital, the level of private investment can be raised along with higher growth rates. in 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(1993). determinants of private investment in pakistan. wp/93/30 international monetary fund, imf working paper. white, s., (2005). enhancing private investment for development policy guidance for development agencies. southern african ideas world development indicators (wdi) online database by world bank (2016). review of economics and development studies, vol. 6 (2) 2020, 513-530 513 impact of re-enactment based crime shows of pakistani private channels on youth a muhammad ahsan bhatti, b urwah iftikhar, c tahir mahmood a department assistant professor, department of communication studies bahauddin zakariya university multan. email: muhammadahsan@bzu.edu.pk b lecturer, department of mass communication, lahore college for women university(lcwu), lahore, pakistan email arwah.iftikhar@hotmail.com c assistant professor, department of communication studies bahauddin zakariya university multan. email: tahirmahmood@bzu.edu.pk article details abstract history: accepted 04 march 2020 available online 15 march 2020 this is a survey based study that investigates the impact of reenactment based crime shows on youth. the study is conducted in educational institutions of south punjab (pakistan). a sample of 100 respondent was collected through distribution of the questionnaire and their response was analyzed. the results were analyzed by using five variables namely: violence, language, seduction, instigation and fear. it was interesting to find that many of the youth consider some sort of violence and foul language justified in the given situation of the reenactment show. a significant number of youth found the use of alcohol and smoking inappropriate and use of lie in given situation unacceptable. there was a significant number of youth respondents who found the display of love, romance, flirt, prostitution, physical relations and rape seducing, in different scenes of reenactment crime shows. there were some youth viewers who felt the society unsafe for them or others after watching violence and crimes in the reenactment shows. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: crime, violence, television, reenactment shows, impact on youth, seduction on tv. jel classification: k14, k19 doi: 10.47067/reads.v6i2.228 corresponding author’s email address: tahirmahmood@bzu.edu.pk 1. introduction gerbner (1994) forwarded the “cultivation hypothesis,” asserting that heavy television viewing engenders fear, mistrust, and perceptions that the world is a dangerous place. similarly, smith and donnerstein (1998) found that the report of national institute of mental health is in conformity with the findings of surgeon general’s study. literature is evident that exposure to television violence contributes to aggressive behavior in children. apparently, based upon prior studies violence shown on media contributes to aggression, desensitization, and fear among the viewers. seddon (2006) and young (2003) found that media presents the threat of crime with exaggeration and then advocate the need of policing to counter the threat. media depicts that only review of economics and development studies, vol. 6 (2) 2020, 513-530 514 punishment of the criminal is the solution. on the other hand media do not highlight the need to tackle poverty, unemployment and marginalization to reduce the crime. reiner (2007) observed that news channels use to feature the crime and violence in very disproportionately manner. the channels focus on crime as the product of individual choice and ‘freefloating evil’, and they divert the attention from any link of this crime and violence to culture or society. valier (2004) and wardle (2007) found that news channels emphasis is on ‘evil others’ & sex crimes and on strangers who carry them out. heath & gilbert (1996) observed that recent developments in mass media, such as the rise in popularity of crime reenactment television programs has increased the exposure to violence and in the real-world increase in the occurrence of stranger crimes. this increasing number of crimes by strangers can be because of the prevalence of random or random-appearing crimes reported by the media. clifford (1976) observed that for the prevention of violence there have to be a long term planning and all the stakeholders have to be synchronized. beullens, roe & bulck (2012) conducted research relating to alcohol consumption in music videos. the research revealed that high exposure to music videos develops an unrealistic perception of alcohol consumption. musicians in these videos endorse alcohol in their songs and create a false reality about alcohol and its effects. netzley (2010) found that the sexual activities were more high than the number of gays that appeared on the television. gerbner and gross (1076) stated that television exposure has more effect on people`s judgement,attitudes, thoughts and perception about the world than on their behavior in the society. people see what they believe and people believe what they see. the content that media is exposing leads the youth towards destruction. pakistan is in a very critical situation regarding politics, social and economics. the bad economic condition has leaded the nation towards unemployment for youth. from this exposure from tv (only source of entertainment for youth members), they find new and short ways to earn money and satisfies their needs. mass media oxford english dictionary online (2008) defines the mass media are diversified media technologies that are intended to reach a large number of audiences by mass communication. the communication technologies includes print media and electronic media as newspapers, pamphlets, book or comic, radio, recorded music, films and tv. it also includes both mobile and internet. electronic media xie-connell (2015) defined electronic media are media that uses electronics to access the content. these electronics include radio, tv, computers, mobiles and likes. i've selected tv channel that is news channels for my study. significance of the study the reenactment program narrates the whole story with real life situations and locations.. the cast, makeover, plots, sound effects makes these crime shows attractive and instigating. lippman (1946) found that media has the power to influence the viewer and opinion of viewer. it can bring significant change in the society that can develop and demolish the society. the reenactment shows are consist of display of cruelty, intolerance, revenge, lust, vulgarity, abusive language and violence. gregoriou (2011) said "crime news is always prime news". what is observed in these tales of the review of economics and development studies, vol. 6 (2) 2020, 513-530 515 program was astonishing for me that what they really want to show to the people? are these programs to aware our generation or leading towards destruction? there are many intolerable telecasted in the prime time television shows that have very serious and damaging impact on the society. raza et al (2019) found that television content can persuade the audience of television. jamhouri & winiarz (2009) observed that the people are influenced by the tv channels and these channels cultivate their perception. the only entertainment left in this world is tv but media giants are using it badly. it changes the very perceptions of the viewer and leads them to act like shown in these tales. gerbner and gross (1976) explained cultivation theory as the use of television to cultivate thoughts of people, over time. they pointed out that a viewer`s perception can be cultivated and molded by the television exposure. it has the power to build up certain behaviors in the society. objectives the objectives of the study are as follows:  to know the reason behind watching the reenactment crime shows.  to know the role of the reenactment crime shows in developing criminal ideas.  to know about the contents of the reenactment crime shows.  to know about the influence of the reenactment crime shows to get involved in crime or criminal activities.  to know about the psychological effects of the reenactment crime shows on society. 2. literature review yasmin, sohail & mangrio (2015) analyzes that during the last two or three years the electronic media in pakistan has gone far away to expose explicit coverage and presentation of crime and sex in both fiction and reporting formats including graphic, even suggestive enactments. the media thus expected viewership to suddenly increase when such programs were aired. their expectations were justified as advertisers began to sponsor during these broadcast of these programs and big money began to be raked in. pan (2003) stated that media works for its profit only. in this way, it projects only entertainment through its shows. sometimes, violent shows are displayed vividly on television. these types of negative portrayal also have a negative impact on its viewers but some people in media industry claimed that such programs do not affect people at all. raza, bakar & mohamad (2018) found that television contents including programs and advertising have persuasive impact on the viewers. coffin & tuchman (1972) found that the network television association issued some standards against the display of violence. according to those standards, violence against children and the use of weapons against them could not be displayed on the television. however, these standard laws were made but if we look at the present situation of media industry, it is evident that there is little or no implementation. american academy of pediatrics (2001) described violence, projected through media in the form of movies, dramas, programs and games, as a harmful effect on children and adults. the research was carried out in detail and the results were devastating. it was proved that violence on television can cause aggressive behavior, unnecessary fear and nightmares during sleep. hence, the effects are on the review of economics and development studies, vol. 6 (2) 2020, 513-530 516 health of whole human body and mind. watkins et al (1980) found that presentation of children’s program are bot up to the standard and they are not properly labeled. laplante & phenicie (2010) elaborated that media portrays the truth because it earns them profit. since,violence is the bitter truth so, we can not blame media at the same time, it is not their responsibility to display only the wishes of consumers. media should be aware of the fact that power to mold the behavior of society is itself. this task is not only different and difficult in nature but least profitable as well. raza et al (2020) found that media has the television viewers watch tv as if they are consumer and content of the media are product. cavender, maupin & jurik (1999) concluded in their research that the non-fictional programs were similar to crime dramas in their over dramatization of crime and their exaggeration of uncertainty and lack of safety. the nonfictional documentary style crime programming facilitated people to gather more information about crime. these programs made the distant issues more proximal towards the viewer. the use of dramatic reenactments, such shows intertwines factual reports with “rumor and speculation,” blurring the distinction between news and entertainment, what some call “infotainment”. they generally elaborate one or two stories because they go in depth the very story for 30-60 minutes. some docudramas leave a question for the viewer or leave the viewer to draw conclusion their selves. gruber & grube (2000) reviewed that there is growing concern about young people's exposure to sexual content through television and other electronic media and about its potential effects on their sexual attitudes, beliefs, and behaviors. researchers have documented the growing prevalence of sexual talk and portrayals of sexual behavior in televised media, as well as associations between adolescent viewing patterns and their sexual activities. masi et al (2003) indicates that decreased from the 1990s, violence continues to be a major cause of death and disability for american children. exposure to television violence is an important and virtually ubiquitous risk factor for youth violence. pediatric care providers and parents can work together to decrease the exposure of children to media violence (primary prevention) and, if exposed, to mitigate the effects (secondary prevention). huesmann & taylor (2006) elaborated that media violence posse a great threat towards public health inasmuch as it leads towards aggression and violence within them. study shows that fictional television and film violence contribute in increasing aggression and violence among the viewer. television news violence also contribute in increasing violence in the form of imitate suicide and act of aggression. the relationship between the media violence and world violence is based on the content of the media exposed to the individuals. but the results and its effects have concluded that media violence is a threat to public health. ward & friedman (2006) states that numerous studies have demonstrated the effects of media on various behaviors, including violence and aggression, social stereotyping, and pro-social behaviors, the systematic process of examining sexual content on television and its impact on adolescent sexual behaviors is in its infancy. this study have demonstrated clearly that sexual content is pervasive in tv programming, movies, music videos, and magazines; however, much less is known about sexual content on the radio (including remarks by presenters) and the sexual content of video and computer games. studies on the effects of television on teenagers’ sexual behavior have found that prime-time programs and music videos, focusing on sex outside marriage, promote more justifiable attitudes about premarital sex. review of economics and development studies, vol. 6 (2) 2020, 513-530 517 reuband (1996) discusses about the fact, that what the media report about crime does not necessarily reflect the reality of crime. trends in crime might go in quite a different direction. the average crime is much less violent than the media like to portray it. what kind of consequences this situation has for the media’s audience is an open question. one has to take into consideration the respective media, their content and perceived trustworthiness, as well as one 1has to take into consideration the readers and viewers, their social backgrounds and orientation. huesmann (2007) studies concluded that exposure to media violence immediately increases the likelihood of aggressive behavior for children and adults in the short run. the most important underlying process for this effect is probably priming though mimicry and increased arousal also play important roles. the evidence from longitudinal field studies is also compelling that children’s exposure to violent electronic media including violent games leads to long-term increases in their risk for behaving aggressively and violently. these long-term effects are a consequence of the powerful observational learning and desensitization processes that neuro-scientists and psychologists now understand occur automatically in the human child. goranson (1970) studied on media violence and aggressive behavior. he limited his study on the basic issues such as effects of learning, emotional effects, the question of catharsis and effects of aggressive behavior. his issue of concern was that young people may learn new techniques, way or strategies of aggressive behavior through violent media content or exposure. this adoption of aggressive behavior can be done through learning and retention of aggressive acts of the media exposure. frequent exposure to media violence can not actually engage someone in aggressive behavior but can be increased gradually and continuously. his hypothesis of catharsis through aggressive behavior was not proven tenably. observed violence of media serves as expression of aggression. this media violence heightens the intensity of aggressive attacks on the very person targeted. hypothesis h1: it is more likely that crime re-enactment shows can motivate the youth towards violent activities. h2: it is more likely that youth is using abusive and slang language after watching crime re-enactment shows. h3: it is more likely that content of re-enactment programs instigate the youth to participate in antisocial activities. h4: it is more likely that content of re-enactment programs promote seductive behavior among youth. h5: it is more likely that crime re-enactment shows are not spreading fear among viewers. 3. methodology survey method was adopted for this study to get response from the youth. a questionnaire was devised in accordance with the objectives of the study. university and college students from the educational institutions of south punjab, were accessed for survey. likert scale was used in questionnaire to get the appropriate response from the respondents. 3.1 sampling technique purposive sampling technique was used for the survey. only those young students and teachers were taken as sample, who used to watch crime based re-enactment shows, to give response on the topic. 3.2 sample size 100 youth members were distributed this questionnaire including girls, boys and young teachers review of economics and development studies, vol. 6 (2) 2020, 513-530 518 from age group of 17 to 28. 3.3 variables the following variables are evaluated in the light of following categories. 1. violence 2. language 3. seduction 4. instigation 5. fear 3.3.1 violence the behavior involving physical force intended to hurt damage or kill something or someone. for my study, every act of slap, punch, push backs, fight and verbal violence is termed as violence. 3.3.2 language abusive language contains impolite and offensive words. if slang, vulgar or street language is used in selected programs for study will fall in the category of abusive language. 3.3.3 seduction the act of attraction through sexual exposure results in arousal of one's emotions. 3.3.4 instigation incite someone to do something especially bad. e.g. lie, smoking, late night calls, date, physical relation, extra marital relationships, hidden marriages, public place meetings, money, suicide, deceiving etc w.r.t this study. 3.3.5 fear that content which deals with emotions of people as fear or threat towards their lives. 4. results 4.1 voilence 4.1.1 display of "slap" in re-enactment crime shows is acceptable. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree review of economics and development studies, vol. 6 (2) 2020, 513-530 519 graph 1: shows the response of slap scenes in crime re-enactment shows 41% strongly disagreed on this and 27% disagreed for its acceptance. these shows contain violent content especially "slap" that is on the women as wife or sisters in these tales and it is portrayed as a solution of any problem which is against our norms. they show weaker sex to be the target of the violence by men. 8% of the respondents answered as strongly agreed that the slap is acceptable and 9% just agreed, 15% were neutral on this question. 4.1.2 fighting scenes of crime shows are more violent w.r.t our society. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 2: shows the response of violent scenes in crime re-enactment shows 29% of the respondents were strongly agreed that the fighting scenes are violent in these shows and 27% just agreed on it. our norms of the society based on the teachings of islam and islam is a peaceful religion and fighting is not acceptable in any society. these shows contain fighting as gunshots, murders, punching, encounter, poison killing and all the new techniques of killing and hurting. 24% remain neutral on this. 13% disagreed that the scenes are violent and 7% answered as strongly disagreed that it does not contain any violent content. 4.1.3 language of re-enactment shows contains abusive words. 8 9 15 27 41 0 5 10 15 20 25 30 35 40 45 strogly agree agree neutral disagree strongly disagree display od slap scenes 29 27 24 13 7 0 5 10 15 20 25 30 35 strogly agree agree neutral disagree strongly disagree fight scenes in crime shows review of economics and development studies, vol. 6 (2) 2020, 513-530 520 a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 3: shows the response on abusive words in language of crime re-enactment shows 28% of the respondents were strongly agreed that the content contains abusive words and 32% were agreed that it contains abusive words. these words contain all the slang and vulgar words. the perpetrator use abusive in these episodes in extent. only 9% were of neutral perception about the abusive language, 15% disagreed on it and 16% strongly disagreed that it did not contain abusive words. 4.1.4 violent scenes and abusive language are justified in the given situation. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 4: shows the response of omitted words by beep in scenes of crime re-enactment shows most of the respondents (27% )strongly agreed that use of violence and abusive language is justified in re-enacted situation, and 26% were agreed that the use is justified. 16% of the respondents were neutral about the use of violence or foul language. 15% disagreed and 6% strongly disagreed that use of violence and foul language is justifiable. 4.2 language 4.2.1 language of these crime shows can be considered as slang, vulgar or foul. 28 32 9 15 16 0 5 10 15 20 25 30 35 strogly agree agree neutral disagree strongly disagree use of abusive language 26 27 16 15 6 0 5 10 15 20 25 30 strogly agree agree neutral disagree strongly disagree violence and abusive language is justified? review of economics and development studies, vol. 6 (2) 2020, 513-530 521 a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 5: shows the response of slang language in scenes of crime re-enactment shows 34% respondents answered to be strongly agreed that the language is slang and 31% agreed on it. as these are crime tales they expose abusive language of the criminals. the language is slang and loose because our society has rejected this language and termed those who use these words as "tramps". every episode of these tales contains loose language and it is now spreading in youth. 9% were neutral on this question. 13% disagreed that it is not slang or loose language whereas 13% strongly disagreed. 4.3 seduction 4.3.1 scenes of crime shows that use touching or molesting are bearable. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 6: shows the response of physical connection scenes in crime re-enactment shows 33% of the respondents were strongly agreed that the touching scenes are unbearable and 27% were agreed. because it provokes ones emotion and the material becomes seductive for the viewer. they said that these scenes arouses their emotions and want to have one. 13% were having neutral perception. 14% disagreed with the statement and 13% strongly disagreed. 34 34 9 13 13 0 5 10 15 20 25 30 35 40 strogly agree agree neutral disagree strongly disagree use of slang and foul language 33 27 13 14 13 0 5 10 15 20 25 30 35 strogly agree agree neutral disagree strongly disagree touching and molesting scenes are bearable? review of economics and development studies, vol. 6 (2) 2020, 513-530 522 4.3.2 rape scenes of these re-enactment crime shows attract the attention of viewer. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 7: shows the response of rape scenes in crime re-enactment shows 31% respondents from youth strongly agreed on the rape scene attraction in these tales and 28% were agreed that it attracts the viewer. the media has distracted the audience towards lust and desires. every young one is searching for this sort of program which shows seduction and such bold scenes. the "pg" sign indicates that it has to be viewed under parents' guidance or can not be watched by underage. but the youth considered its obligation to watch it. so these rape scenes attract the viewer very much. 16% remain neutral whereas 12% answered with disagree and 13% strongly disagreed. 4.3.3 scenes of prostitution shown in these crime shows attract the youth. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 8: shows response of prostitution scenes in crime re-enactment shows 31% respondents from youth strongly agreed that the prostitution attracts them and 22% agreed on it. the western world showed sexual activities path to the youth of asian countries. so the viewer attracts towards the prostitution of these tales. and they used to enjoy these tales at that late hour. 20% chose to be neutral. 16% disagreed with this and 11% strongly disagreed with this statement. 4.3.4 successful "love scenes" are seducing. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree 31 28 16 12 12 0 10 20 30 40 strogly agree agree neutral disagree strongly disagree rape scenes attracts the viewers 31 22 20 16 11 0 5 10 15 20 25 30 35 strogly agree agree neutral disagree strongly disagree scenes of prostitution are attractive review of economics and development studies, vol. 6 (2) 2020, 513-530 523 graph 9: shows response of successful love scenes in crime re-enactment shows 25% strongly agreed that the successful love stories and love scenes seduce them and 28% just agreed on this fact. presently, our media only exposes one thing on the screen i.e. "the relation of girlfriend & boyfriend". our advertisements are on the same track. the youth in collages and universities make relations and admire the successful love stories from these programs. but when they fail in doing so, they follow the same situation shown in these tales as suicide or path of sins. 21% were of neutral perception. 14% disagreed on it and 12% strongly disagreed. 4.4 instigation 4.4.1 use of lies shown in re-enactment programs justify the situation. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 10: shows response on use of lies in crime re-enactment shows 38% of the youth were strongly disagreed that the lies in these programs does not justifies the situation and 22% disagreed on this. the lies are the actual crime of any bad activity it never justifies the situation but rather pollute the situation. 23% remain neutral. 16% agreed on this statement and 1% strongly disagreed. 4.4.2 smoking and drinking scenes of crime shows acceptable. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree 25 28 21 14 12 0 5 10 15 20 25 30 strogly agree agree neutral disagree strongly disagree love scenes are seducing 1 16 23 38 22 0 5 10 15 20 25 30 35 40 strogly agree agree neutral disagree strongly disagree use of lie in re-enactment programs review of economics and development studies, vol. 6 (2) 2020, 513-530 524 graph 11: shows response of smoking & drinking scenes in crime re-enactment shows 28% answered to be strongly disagreed that the smoking and drinking scenes are acceptable and 23% disagreed on it. these scenes instigate the audience to try the very act. it is not acceptable as these tales are viewed by the whole society specially youth members, they are easy target for instigation. 21% were neutral. 19% agreed on this statement and 11% strongly agreed. 4.4.3 scenes of late night calls in crime re-enactment shows are instigating. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 12: shows response of late night calls scenes in crime re-enactment shows 28% agreed that late night calls instigate them and 19% strongly agreed that it instigates them to do so. these programs encourages the viewer that it is the art of society one should also do it because majority is doing it. so it instigates the youth members. 17% were neutral. 19% disagreed on this statement and 17% strongly disagreed. 4.4.4 scenes of physical relation in crime shows are seducing. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree 11 19 23 21 28 0 5 10 15 20 25 30 strogly agree agree neutral disagree strongly disagree display of smoking and drinking is acceptable 19 28 17 19 17 0 5 10 15 20 25 30 strogly agree agree neutral disagree strongly disagree display of late night calls is instigating review of economics and development studies, vol. 6 (2) 2020, 513-530 525 graph 13: shows response of physical relations scenes in crime re-enactment shows 32% respondents from youth strongly agreed that the physical relation shown in these programs instigates them to have one and 21% agreed on it. the media opened up the path way of lust, sex and desires. it not only exposes it but make these materials accessible. the youth members are amused by these tales and want to have physical relationships. 19% remain neutral. 20% disagreed on this statement and 8% strongly disagreed. 4.4.5 extramarital affairs shown in the re-enactment programs are seductive. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 14: shows response of extramarital relation scenes in crime re-enactment shows 34% agreed that the extra marital relation justifies the situation in these crime tales and 19% strongly agreed on it. the media has detracted these members as much that they don't feel ashamed of saying or thinking that extramarital relations are right. they consider these affairs to justify the situation as shown in these tales. 26% were neutral. 6% disagreed on this and 15% strongly disagreed. 4.4.6 scenes showing suicides are justified according to situation. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree 32 21 19 20 8 0 5 10 15 20 25 30 35 strogly agree agree neutral disagree strongly disagree show of physical relation is seducing 19 34 26 6 15 0 5 10 15 20 25 30 35 40 strogly agree agree neutral disagree strongly disagree show of extramerital affairs id seductive review of economics and development studies, vol. 6 (2) 2020, 513-530 526 graph 15: shows response on suicide justification scenes in crime re-enactment shows 29% disagreed on the justification of these suicides and 24% strongly disagreed. it does not justify the situation because death is not the solution of any problem. 17% were of neutral perception. 13%agreed that it justifies the story and 17% strongly disagreed. 4.4.7 scenes showing flirting or cheating are instigating. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 16: shows instigation to cheat or flirt by crime re-enactment shows 34% respondents from youth answered to be agreed that these shows instigates them to cheat or flirt as well whereas 27% strongly agreed on it. yes, it instigates youth towards cheating and flirting from parents and peers. it encourages them to dodge their parents, play with girls and innocent lives, put themselves in danger satisfies their desires. 18% remain neutral. 8% disagree on this statement and 13% strongly disagree. 4.5 fear 17 13 17 29 24 0 5 10 15 20 25 30 35 strogly agree agree neutral disagree strongly disagree display of suicide is justified 17 13 17 29 24 0 5 10 15 20 25 30 35 strogly agree agree neutral disagree strongly disagree scenes of flirt or cheating are instigating review of economics and development studies, vol. 6 (2) 2020, 513-530 527 4.5.1 crime and violence shown in re-enactment shows spread fear and insecurity among viewers. a. strongly agree b. agree c. neutral d. disagree e. strongly disagree graph 17: shows feeling of insecurity after watching crime re-enactment shows 34% respondents from youth answered to be strongly agreed that they feel unsecure in their environment after watching these shows and 19% just agreed. these shows have made the environment insecure for everybody because they show criminal activities are being done within ourselves and our surroundings. 9% remain neutral. 21% disagree with this statement and 17% strongly disagree. 5. conclusion and discussion 5.1 test of hypothesis h1: it is more likely that crime re-enactment shows can motivate the youth towards violent activities. it was found that the viewers of re-enactment shows are being exposed to violence and abusive language.the important phenomenon is that they consider the use of violence and abusive language justified in many situations. total of 53% respondents consider it justified (see graph 1 & 4). only 21% percent respondents consider the criminal activities and violence not justified. they members of youth who have responded that violent scenes are "ok" to watch or they are violent at all contain violent behavior. they are desensitized towards violence and this exposure will lead them towards aggression and violent behavior. hence the hypothesis h1 is proved. h2: it is more likely that crime re-enactment shows are promoting abusive and slang language among youth. the youth members can understand the words of the re-enactment crime based programs which are eliminated by a sound called "beep". if they understand those abusive words than for sure they can use it. as 60% respondents have mentioned that they found the use of abusive language in the reenactment shows (see graph 6) and 53% of respondents have declared the use of abusive language justified in given situation (see graph 4). hence the hypothesis h2 is proved. h3: it is more likely that content of re-enactment programs instigate the youth to participate in antisocial activities. the youth has responded that by watching these crime based tales they want to experience the very situation as they watch on tv. they want to drink, dance, take drugs, to have extra marital relations and even commit suicide when they are in problem (see graph 10-16). 51 % of the respondents have not considered the smoking and use of alcohol as a justified content for the re-enactment shows (see graph 34 19 9 24 17 0 10 20 30 40 strogly agree agree neutral disagree strongly disagree crime and violence in crime shows spread insecurity review of economics and development studies, vol. 6 (2) 2020, 513-530 528 11). use of lie in was not approved by 60% of the respondents (see graph 10). on the other hand 61% respondent found the display of flirting and cheating as instigating (see graph 16). in case of show of suicide, 53% respondents consider it not justifiable (see graph 15). sum of 53% respondents believed that show of extramarital affair or physical relation are seducing in nature (see graph 13 & 14). hence the hypothesis h3 is proved. h4: it is more likely that content of re-enactment programs promote seductive behavior among youth. 53% respondents believed that show of extramarital affair or physical relation are seducing in nature (see graph 13 & 14). 60% of the respondents believed that scenes of these crime shows that use touching or molesting are unbearable (see graph 6). total of 59% respondents found that rape scenes of these re-enactment crime shows attract the attention of viewer (see graph 7). from the respondents 53% consider the scenes of prostitution and love are seducing in nature (see graph 8 & 9). the results clearly show that re-enactment shows are promoting seductive behaviors among the viewers, hence the hypothesis h4 is proved. h5: it is more likely that crime re-enactment shows are not spreading fear among viewers. it was found that different crimes, antisocial activities and violent behaviors shown in the crime shows create different fears among the viewers. sum of 53% respondents agreed that they have developed fear after watching the shows. on the other hand 38% respondents revealed that these re-enactment shows have not developed the fears in them (see graph 17). the result shows that the exposure of violence and crime develops some fear among the young viewers. hence the hypothesis is not proved and it is a null hypothesis. 5.2 discussion the study found that these shows are being watched by every age at the late hours i.e. 11p.m or so. youth members used to watch different crime based tales not only on regular hours but on repeat hours also. these programs expose the viewers from violence, bad language, vulgarity, boldness, seduction and instigation towards crime and fear or emotional appeal for the attraction. these programs have create uncertainty in the society and everybody feels insecure and threaten towards their peers and even family. they are destroying our family values and respect for relations. there is a feeling of insecurity within the youth members that they are scared to be a victim or victimizer. moreover, these programs have left a psychological effect on the viewer that they should not trust any relation whether parents, marital relation, and sibling and likes because they have exposed in the very tales that these relations always betrayed, deceives and break trust. so only trust yourself and fulfill your all desires by force. the language of the program is too bold and vulgar. it contains such abusive and slang words that are excluded by "beep". is it necessary to say those words in the scenes which are to be omitted? the youth members can understand the very abusive words and the makers of the programs are continuously reinforcing this content. what will happen through this reinforcement that youth will adopt the language? and in my opinion, the makers of the program have succeeded above average. the tales contain such exposures which have illicit scenes in it that includes physical relation or extra marital relation, rape scenes, seduction, prostitution, sexual harassment, drinking, drugs and likes. these scenes are vulgar and bold with respect to our very society. the channel warn the viewers through "pg or 18+" sign which indicates that it contains material which is to be watched under parental guidance or not to be watched. but the "curiosity" lead them watch it and the young ones are review of economics and development studies, vol. 6 (2) 2020, 513-530 529 affected by the content. these effects are of short term and long term depends on the time of exposure consumed by them. they are seduced and instigated by the exposure of these crime tales and are currently involved in the very crimes. the youth members have leisure time and mind. they are instigated towards the crime or unethical activities. these type of exposure lead the youth towards destruction that they forget their studies or aims to be a good guy but rather they are instigation towards crime. the stories contains criminal acts and performance and they telecast that how a crime can be done by perfection. they give precautions that through this the one can be caught. they give fresh criminal ideas to do any crime or unethical act with precautions. it gives a save passage for the one going to commit crime or unethical act. the crime shows contains violence and violent act through which the youth is becoming violent and impatient. their tolerance level is decreasing day by day. the programs exposes that street crime i.e. violently snatch money, cell phones and likes are easy and give money. they show the criminals as "hero" that they get everything by stepping into the crime world. the programs have made the surrounding of the society insecure and uncertain that anyone can be a victim of crime at any time by his family or peers. this fear appeal is the main cause of the rating of the programs in 30+ people. the emotional touch in these shows made them attractive and exclusive. references american academy of pediatrics. 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(1971). the role of the police as amplifiers of deviancy. in s. cohen (ed.), images of deviance (pp. 27 –61). harmondsworth: penguin. https://doi.org/10.1177/2158244020929301 https://www.skillmaker.edu.au/what-is-electronic-media/ https://www.skillmaker.edu.au/ review of economics and development studies, vol. 7 (2) 2021, 163-175 163 the covid-19 outbreak, a failure of social protection system: a policy perspective of energy and economic recovery farhana nosheen a , umar suffian ahmad b , sadia anjum c , robina kouser d a department of economics, government associate college for women, muzafrabad, multan, pakistan email: farhananosheen786@gmail.com b visiting lecturer, department of economics, ghazi university, dgkhan, pakistan email: umarsuffianahmad@gmail.com c department of economics, bahauddin zakariya university, bahadur campus layyah, pakistan email: sadia.anjum@bzu.edu.pk d department of economics, university of sahiwal, pakistan email: madamrubina@hotmail.com article details abstract history: accepted 28 april 2021 available online june 2021 covid-19 has proliferated personage suffering around the world. the virus is contagious medically and economically as well. the study's main aim is to examine the failure of the social protection system caused by the covid-19 pandemic. three major dimensions of the social protection system have been addressed in this research—a shock to the labor market, health emergency, and massive change in energy usage. covid pandemic had cost the world economy more than $2 trillion. the labor market is badly affected significantly; workers engaged in the informal economy. the director-general (who) has declared the covid-19 pandemic as a public health emergency of international concern. it is one of the highest levels of alarm by who in history. global energy review 2020 shows that those complete lockdowns have a 25% decline in the energy demand per week. as economic activity slowdown due to the closure of the industry, banned transportation, and lockdown. conclusively, it is examined that the coronavirus pandemic has brought a worldwide failure of social protection system required a comprehensive policy and a firmed leadership to stand against the outbreak. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: social protection system, global economy, labor market, health, the energy sector jel classification: o17,q54, r23 doi: 10.47067/reads.v7i2.348 corresponding author’s email address: umarsuffianahmad@gmail.com 1. introduction the covid-19 outbreak is one of the most significant public health crises and economic shocks worldwide (ahani and nilashi 2020; cascella et al. 2020). the covid-19 shock will prompt the recession in most parts of the world and decelerate the annual global growth rate below 2.5%. the growth rate is taken as a recessionary threshold for the world economy. it would worse the global review of economics and development studies, vol. 7 (2) 2021, 163-175 164 economy and cost trillions of dollars (international monetary fund 2020). three factors can determine the duration and depth of crisis: (a) how far and fast the virus spread; (b) how long before the vaccine is found and (c) how effective policy is designed to reduce to cost to health, economy, and well-being. one other major factor is panic, uncertainty, and fear, which will shape the crisis outcomes. the covid-19 outbreak has two possible economic consequences: firstly, the shock has a great potential to upset the economies, but a sound policy at hand can mitigate the original threat to a renewed economic confidence. bring an optimistic growth forecast for the following year. if the outbreak is short-lived, then a combination of both monetary policy and the automatic fiscal stabilizer would be practical to mitigate the economic shock of covid-19. reduction in central banks rate will give “v” shape recovery as observed in the sars virus shock of 2003. contrary to that, if the crisis is prolonged, it will probably distract the economy's supply side. squeezing the profit margins, crippling the production networks, and hope of recovery will have vanished. coordinated liquidity preference by central banks and more active fiscal policy would be an effective tool in boosting free trade and foreign investment. secondly, the economic crisis linked with the pandemic crisis is the most paramount concern of time and confidence but a more significant concern of (political) leadership and (policy) coordination. the crisis is crashing fragile economies as well as highly financialized world economies. there is a more significant policy challenge as consumers and investors lose confidence because of this contagion spread. assets prices are deflating, aggregated demand is puny, debt distress is high, and income distribution is worsening. during the last six months of 2020 and before the covid-19 outbreak, the global economy faced slower growth across all the regions. it was expecting that world will gradually improve by 2020 by leading world economies to achieve the potential growth rate by 2021. however, there is still room for policy maneuvers to fill the gap between reality and offer a bold policy suggestion on joint monetary tweaking and structural reforms. it is a matter of fact that various reports on covid-19 impact on the economy and health fail to present a robust policy explicitly addressing how to mitigate the harmful effect of the pandemic to strengthen the development. in order to fulfill the said purpose, states, international stakeholders, and other agencies instituted various contemporary pandemic policies. the implementation of such policies has provoked some progress in the economy, health, and energy sector. many factors and immediate responses can ascribe the recovery of the shock of coronavirus. however, developing countries lack a sound infrastructure, supportive machinery, and skilled workforce, which plays a vital role in developing these projects effectively. moreover, lockdown/quarantines and uncertainty and fear also hinder the success rate of policies to cope with the pandemic. to give this world economies a solid and hopeful economic and health recoveries and efficient use of energies, the states need to take more mature and long-lasting policy decisions, which could pave the way forward for sustainable development globally. although this coronavirus pandemic's numerous challenges are facing today, it must be firmly addressed and thoroughly recognized. this study intends to contribute to the descriptive analysis of the energy and economic depression and health crises due to covid-19. we measure the country and sector-wise analysis of economic loss due to covid-19. furthermore, we provide a way forward for economic recovery caused by implementing robust policies during pandemic. the rest of the paper is organized as follows; section 2 contains world/regional gdp analysis and projections about growth. section 3 includes labor market conditions and the status of the social protection system after a massive shock of coronavirus outbreak. section 4 describes the health crisis review of economics and development studies, vol. 7 (2) 2021, 163-175 165 caused by this pandemic. the last section is the comprehensive study of the perspective of the energy sector in response to coronavirus. 2. how far the economic disruption channelizes? it is a persistent worry for policymakers when stiffly pecuniary, and profoundly independent global economies are contagion from shocks, particularly the developing economies for whom the only protective measure of choice is the reserve accumulation. on the other hand, the most vulnerable economies are infrequently the source of the financial virus. considering the 2 nd half of 2019 and earlier the pandemic of the covid-19 crisis, it is progressively clear that the world economy is facing more troubles water. it includes the slower growth beyond all regions and economic activity contracted in the final quarter. there is limited room for policy maneuver based on widely shared expectations about the improvement and intensity of the global economy by 2020, led by the cosmic emerging economies, with a bridge to stagnant global growth by 2021. source: unctad calculations based on imf, weo, october 2019 figure 1: world gdp growth 1995-2020 it will cost almost $900 billion in the loss in productivity by a percentage drop-in growth rate. forecast for a 1.7% growth rate because of the pandemic virus will cost approximately $2 trillion. the pandemic virus disrupts the economic scenario by three channels: demand; supply, and finance. three sectors of the economy were at high risk: the service sector, tourism, entertainment, public events, and catering services at the demand side. the manufacturing activity has been halted in most affected regions, and the reduced production caused the global supply chain. in the 2019 october outlook of imf, it was forecasted that commodity-exporting countries would help to push global growth up to 2.7% by 2020. however, the covid-19 has altered the scenario of all forecast for 2020 are being revised downward. review of economics and development studies, vol. 7 (2) 2021, 163-175 166 table1: real gdp growth (year-on-year % change) 2019 2020 2021 interim eo projections difference from november eo interim eo projections difference from november eo world 2.9 2.4 -0.5 3.3 0.3 g20 3.1 2.7 -0.5 3.5 0.2 australia 1.7 1.8 -0.5 2.6 0.3 canada 1.6 1.3 -0.3 1.9 0.2 euro area 1.2 0.8 -0.3 1.2 0 germany 0.6 0.3 -0.1 0.9 0 france 1.3 0.9 -0.3 1.4 0.2 italy 0.2 0 -0.4 0.5 0 japan 0.7 0.2 -0.4 0.7 0 korea 2 2 -0.3 2.3 0 mexico -0.1 0.7 -0.5 1.4 -0.2 turkey 0.9 2.7 -0.3 3.3 0.1 united kingdom 1.4 0.8 -0.2 0.8 -0.4 united states 2.3 1.9 -0.1 2.1 0.1 argentina -2.7 -2 -0.3 0.7 0 brazil 1.1 1.7 0 1.8 0 china 6.1 4.9 -0.8 6.4 0.9 india 4.9 5.1 -1.1 5.6 -0.8 indonesia 5 4.8 -0.2 5.1 0 russia 1 1.2 -0.4 1.3 -0.1 saudi arabia 0 1.4 0 1.9 0.5 south africa 0.3 0.6 -0.6 1 -0.3 figure 2: interim growth projections based on different countries. -10 -5 0 5 10 15 20 gdp growth interim eo projections difference from november eo interim eo projections difference from november eo review of economics and development studies, vol. 7 (2) 2021, 163-175 167 2.1 highly uncertain growth aspects based on the epidemic peak in the first quarter of 2020 in china, it was expected that the intercontinental growth rate would be bottom by around ½ percentage during the year. as a whole, world gdp is gauged to drop by 2.4% in 2020. the growth rate was already weak by 2.9% in 2019. before improving the growth rate by 6% in 2021, china will experience a growth rate below 5%. due to panic and uncertain situations, a lost confidence supply chain will face downward revision in all g20 economies in 2020, primarily related to china, japan, korea, and australia. the virus outbreak would weaken the prospects considerably as it spread widely in the asia-pacific region, europe and america. 2.2 the labor market shock and social protection system the covid-19 widespread has a significant probability of accessing the greater proportion of global natives. this pandemic has already infected almost 3,110,702, with 215,231 casualties in more than 190 countries up to 28-04-2020 (webmeter 2020). because of its colossal spread, it is forecasted that 40 to 70% of world’s natives could be infected. this health crisis would negatively affect supply (production of goods and services) and demand-side (consumption and investment). already the supply chain is affected because of constrained production. this pandemic has adversely affected businesses nonetheless of their size. businesses are countering momentous challenges, especially in tourism industries, with a real threat of decline in revenue and job security. small and medium enterprises (sme) are at risk as they cannot sustain their business operation (ilo 2020a). borders are sealed, traveling is banned, lockdown and curfew, and many other quarantine measures restrict the movement of people from one place to another place. they are leading to a contagion effect on the incomes of casually employed workers. import and export are halted even consumer in many countries are reluctant to buy goods and services. this contemporary phenomenon brings uncertainty and fear in public which is most likely to interrupt investment, production of goods and recruitment of workforce. 2.3 covid-19 effect on the world of work the collision of covid-19 on the labor market will be far-reaching. the virus is affecting workers' health, leading to reduced labor productivity, but also cause shock in the world of work, especially for daily wages labor force and those relating to the service sector. there are three critical dimensions of the impact of covid-19 on the labor market. the dimension defines the scenario of employment and underemployment caused by covid-19. the virus outbreak caused a rise in the unemployment rate globally. in the baseline scenario, it is preliminarily estimated that global unemployment will rise by 5.3 million. it is estimated that in the middle scenario, the figure of unemployment will be 13 million (ilo 2020a). table 2: global losses in working hours and employment nature of employment percentage change nature of change equivalence working hours 6.7% decline =195 million full-time workers businesses (tourism, food services, retail trade, manufacturing, business, and administrative activities 37.5% at-risk a large proportion of part/full-time workers employed in countries with workplace closures 81% mandatory closure 3.3 billion workers of the global workforce sources: (ilo 2020b) review of economics and development studies, vol. 7 (2) 2021, 163-175 168 full or partial closure of the workplace has affected almost 81% of the global workforce. taking it as more than four people out of five lost their jobs. in different parts of the world, the nature and proportion of job loss were noticed, like the arab states (8.1 percent, equivalent to 5 million full-time workers) and europe (7.8 percent, or 12 million full-time workers). meanwhile, asia and the pacific lost 125 million full-time workers, comprising 7.2% of the labor force. it is expected to have massive losses in different income groups, especially in upper-middle-income countries where 100 million laborers lost their full-time work (7.0 percent). this crisis has surpassed the outcomes of the 2008-9 financial crisis. table.3 region wise covid-19 causes devastating losses in working hours and employment worldwide and regional change a decline in working hours (%) full-time equivalent (40 hours, millions) full-time equivalent (48 hours, millions) world 6.7 230 195 high income countries 6.5 36 30 upper-middle income countries 7 100 85 lower-middle income countries 6.5 80 70 low income countries 5.3 14 12 africa 4.9 22 19 americans 6.3 29 24 arab states 8.1 6 5 asia and the pacific 7.2 150 125 europe and central asia 6 24 20 sources: (ilo 2020b) the covid-19 pandemic is “the worst universal crisis since world war ii” (ilo 2020b). quarantine measures casing decline in the supply of labor, posing a real threat to universal economic activity. up to a point, according to pilot estimate (up to 10 th march) argued that workers being affected by the virus had already bygone nearly 30,000 work months leading to the successive loss of income (for unprotected workers). having a lousy impact on employment infer significant income losses for workers. overall the expected losses in labor income due to pandemic are expected in between $860 and $3,440 billion. lower consumption of goods and servies followed by the lower income, which is harmful to the progression of businesses and ensuring that economies are resilient. review of economics and development studies, vol. 7 (2) 2021, 163-175 169 2.4 social protection system during the covid-19 pandemic,the social protection responses were very scattered around the globe. the affected countries response differently for this purpose; however, there was a severe issue to maintain a balance between health crises, economic crises, and social crises at the same time. figures 3 and 4 indicate the region-wise and sector-wise responses in this regard. figure 3: world and different regions social protection responses in response to covid-19. figure 4: responses of various functions of the social protection system during covid-19 worldwide. 2.5 health care in pandemics the current covid-9 crisis augmented the risk of a long-lasting health care system. there is a collapse of global health infrastructure under the extreme pressure of the dramatic spike of the pandemic. testing is the only and foremost tool to examine the extent of covid-19 transmission in any geographical region. developing countries have a low ratio of testing compared to developed countries which may disguise the coronavirus cases. this low capacity for testing coronavirus is an alarming and life-threatening situation globally. still, in most developing countries, the testing strategy of the special allowance/grants income/job protection several functions unemployment health housing/basic services food and nutrition childern and family pension sickness access to education maternity/paternal employment injury review of economics and development studies, vol. 7 (2) 2021, 163-175 170 government is based on the assumption that there is no community transmission. testing only those people reaching from infected areas abroad may bring unintended consequences. at the same time, inter-city and inter sates movements may also a significant threat to the spread of the epidemic. there is a chance of potential explosion of cases and transmission of the virus if testing on the massive level will be neglected. on 1st january 2020 who set up the imst (incident management support team) in order to deal with the outbreak on emergency basis. it was the first step by who for handling the global health crisis. on 5 th january 2020, who published its first ‘disease outbreak news’ on the novel coronavirus. it was a top publication and public health response of its types containing risk assessment and advice on the contagion spread of the virus. on 30 th january, the emergency committee was reconvened by who. the committee recommended and declared the novel coronavirus outbreak a pheic (public health emergency of international concern). since international health regulations (ihr) succeed in 2005, a pheic was declared 6 th time by who. another milestone activity by who is the global outbreak alert and response network (goarn). goarn partners raise public awareness through collaborative models, mainly when every single country facing identical health threats at the same time. figure 5: growth of coronavirus cases worldwide 2.6 impact on energy sector the energy sector is more predominantly affected due to this pandemic resulting from the slowing of trade operations, transport, and economic activity. the report of global energy review 2020 exhibits that those economies that are incomplete lockdown have a 25% decline in the energy demand per week, while on the other side, the partially lockdown countries are experiencing an 18% decline in energy. the moral implications of covid-19 for the clean energy systems are still evolving, but the three areas have much significance regarding this pandemic. the first one is the energy security that remains the central part of the global economy during the most challenging times. the second one is the electric security and resilient energy system that is more crucial for the economy. the third one is the clean energy transition that is the cornerstone of economic recovery. here, there is a need to cope with all these challenges to build up a sustainable economic system. clean energy can dispense affordable solutions in line with climate targets and help reduce the effects of the covid-19 crisis on people’s livelihoods and local economies. the energy for 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 america europe eastern mediterranean south east asia western pacific africa review of economics and development studies, vol. 7 (2) 2021, 163-175 171 household and health centers are critical at the forefront of the battle against covid -19. however, 840 million people have limited access to electricity, out of which about 570 million live in sub saharan africa. this remote area has one in four clinics with no energy at all, and 28% don’t have consistent access. coping this adverse situation solar for health program has been capitalizing principally by the global fund to counter aids, tb, and malaria. undp and its partners look for expertise to underpin countries to promote clean energy investments. clean energy can furthermore address several health risks that might make people too vulnerable to respiratory diseases such as covid-19. approachable energy also generates social distancing policies applicable by powering the technologies and devices that assist people to stay in touch with each other. this unrestricted access to energy and technology engages the public in online education and work from home. it can also provide definitive access to clean energy, a crucial element in times of covid -19. table 4: statistical description of various commodities during covid-19 average value median max min s.d skewness kurtosis j-bera all commod 136.761*** 127.193 202.798 85.322 28.997 0.414 1.894 13.606 energy 171.594** 163.580 312.413 74.375 50.570 0.334 2.248 7.206 food 105.2274* 102.126 132.802 75.853 13.089 0.143 2.206 5.074 metals 144.5114** 141.336 234.688 85.259 33.061 0.453 2.800 6.127 ***, **, * shows the ≤ 1%, ≤ 5%, and 10% level of significance. 3. need of monetary policy in virus outbreak the monetarists give a supportive monetary policy to deal with flurry and variability related to the pandemic coronavirus. it is suggested that interest rates remain low on a long-term basis (baker 2010; blanchard 2019). withal, in fiscal and structural policy support absenteeism, a low-interest rate on a long-term basis has a modest impact on demand and inflation. there is a partial prerequisite to additional reduction in policy interest rate depending on the current growth projection. (anon 2007; blanchard, furceri, and pescatori 2014; buera and nicolini 2014; li 2013). japan and many european countries may need to contrivance extra unconventional measures because there is less substantial affluence monetary policy. meanwhile, other emerging-market economies like brazil, india, and mexico better choose to extend relaxed monetary policy and flexible exchange rate framework, and pliable exposure to foreign currency-dominated debt. there is room for opportunity to enhance investor confidence by undertaking fiscal and structural measures(oedc 2020). fiscal policy needs to be considered exceptionally to strengthen demand when interest rates are low. it contains a separate portion of momentary expenditures to mitigate the impact of pandemic coronavirus on vulnerable social groups and commercials. there are some macroeconomic measures on which the coronavirus outbreak starts to fade. these are cyclical development, debt sustainability measures, the volume of fiscal stabilizers, and the requirement to rebalance the policy mix. various advanced economies, i.e., canada, germany, japan, kore a and the united kingdom, had already undertaken flexible fiscal policy before the covid-19 outbreak. extra stimulus measures are expected to be taken without endangering debt sustainability by a panel country. still, there is a limitation on the scope of sizeable discretionary fiscal easing. still, the government can privilege the public by changing the spending structure and tax burden to support economic growth that the effects of virus outbreaks will hinder. the objective to safeguard social transfers to low-income groups and sustenance of publicreview of economics and development studies, vol. 7 (2) 2021, 163-175 172 private investment is essential in most emerging-market economies, including brazil and india. the implication of tight fiscal policy with substantial constrictions on the quasi-fiscal measures practices is indispensable. in the long term and short term, the government should support the households to reduce the energy demand to achieve an efficient setup. governments need to promote energy efficiency appliances directly. it is the prime necessity of the governments to fraternize with the public and give them recommendations on how in the short and long run, the energy reduction measures will benefit. during this pandemic, it is observed that government measures are implemented in a convalescent way with the help of public participation, and issues are well understood. thus, as countries look to resume their economies, the stakeholders (government,, health department, policymakers) must continue to provide details on preventing the spread of covid-19 and discover various approaches on how the public can diminish their energy outline and become more perceptive about the climate change. 4. conclusion the pandemic affected worldwide, not only specific regions, mainly china, france, italy, germany, the united states, the united kingdom, iran, and third world, namely pakistan, india, bangladesh, sri lanka, and afghanistan, some african countries. the social and economic impacts of some countries have been severely affected. in contrast, some countries have been moderately affected due to the timely implementation of preventive measures by following the guidelines that are issued by the world health organization and national health ministries. the market has been closed indefinitely, the stock market has collapsed, and the unemployment rate has promptly jumped to the historical pinnacle due to the covid-19 pandemic. this pandemic resembles the financial crisis that was happened in 2007-2008.  ensuring well-resourced health plans to thwart infection and contagion. during this outbreak, execute well-targeted policies to subsidize the health care system.  supportive monetary and fiscal policy can assist the confidence of stakeholders and recover the demand as the outbreak is comforts. however, all the disruption, shutdown, and travel restrictions caused by the outbreak can’t be offset immediately.  for the more extended period, if growth remained weaker then health policies with coordination of multilateral actions, funding developing economies, supportive fiscal policy, and containment and mitigation would help as an effective means of destabilizing confidence and supporting incomes. 4.1 proposed policy response of imf for covid-19 quarantine, lockdown, shutdown, and self-isolation strategies inferred reducing economic activity. these strategies have both economic and human costs likely to higher in developing countries. developing countries are already surviving on reduced health care capacity, less fiscal space, superficial financial markets, most economic activities based on the large informal sector, and poor governance. in order to avoid unintended consequences, a vigilant response to epidemiological evidence of virus spread is inevitable, and policymakers will necessitate weighing prudent effectiveness and socioeconomic consequences to containment and mitigation policies. the short-term economic policy required emergency relief to the most vulnerable proportion of the population and affected businesses. shortterm economic policy during this epidemic does not stimulate the economy –which is impossible, but mass layoffs and bankruptcies can be avoided somewhat—ease of lockdown restriction and retaining restriction on movement on massive gathering like australia has adopted three steps plan to relax covid-19 restrictions. educational institutions, i.e., schools/colleges, are reopened and restaurants and review of economics and development studies, vol. 7 (2) 2021, 163-175 173 entertainment venues have opened for the public with restrictions to support education and the food and hospitality industry. indian has relaxed geographical areas designated as non-hotspot areas. pakistan has introduced newly developed standard operating procedures (sops) to reopen 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of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 1 june 2017 journal homepage: www.publishing.globalcsrc.org/reads impact of microfinance on income and employment in pakistan: a primary data analysis 1 shahina imran, 2 rana m. imran arshad 1 assistant professor of economics, govermemt s. e. college bahawalpur, pakistan, shahinaimran3408@yahoo.com 2 assistant professor of statistics, secretary b.i.s.e. bahawalpur, pakistan, imranarshad.stat@gmail.com article details abstract history revised format: may 2017 available online: june 2017 purpose: this paper investigates impact of microfinance on household income and employment. it is a primary data research conducted in the bahawalpur division, pakistan. the study employed the tool developed by assessing the impact of microenterprise services (aims) and small enterprise, education and promotion (seep). the tool has been modified in local context. the sample consists of 1524 respondents, out of which 773 are established clients (treatment group) and 751 are incoming ones (control group), belonging to different microfinance providers of pakistan. independent sample t-test and multiple regressions have been used for analysis. the regression analysis shows that participation to microfinance program has strong positive impact on household income while very minute positive impact on employment. other independent variables such as prior access to any other loan, micro saving, household assets, age of respondent, gender, education and household size have positive impact on household income but a mixed impact on income generating activities. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords household economics, small enterprises, household welfare, small loans jel classification: g21, i38, c21, o31 corresponding author’s email address: shahinaimran3408@yahoo.com recommended citation: imran, s., imran, m. r., (2017). impact of microfinance on income and employment in pakistan: a primary data analysis. review of economics and development studies, 3(1) 69-82 doi: https://doi.org/10.26710/reads.v3i1.166 1. introduction microfinance is not a new development. its origin can be traced back to 1976, when muhammad yunus set up the grameen bank, as experiment, on the outskirts of chittagong university campus in the village of jobra, bangladesh. since then several microfinance institutions came up and have succeeded in reaching the poorest of the poor, and have devised new ground-breaking strategies with time for the fulfilment of their vision. these included the provision of collateral free loans to poor people, especially in rural areas, at full-cost interest rates that are repayable in frequent instalments. borrowers are organized into groups and peer pressure among them, which reduced the risk of default. microfinance is such a concept that gives the masses and underprivileged section of the society an access to business opportunities and the power to overcome ossified social structures. apart from the benefit of creating social equality in business arena, finance (particularly microfinance) acts as an extraordinarily effective in eradicating poverty. microfinance is defined as an entire range of financial and non-financial services including skill up gradation and entrepreneurial development, rendering to the poor for enabling them to overcome poverty. financial assistance is provided in the form of small loans, acceptance of http://www.publishing.globalcsrc.org/reads mailto:shahinaimran3408@yahoo.com mailto:imranarshad.stat@gmail.com mailto:shahinaimran3408@yahoo.com https://doi.org/10.26710/reads.v3i1.166 review of economics and development studies vol. 3, no 1, june 2017 70 small savings and provision of other financial products and services to the poor. it provides the financial services not accessible through the traditional financial system, needed by many people to increase and diversify their economic activities. it boosts self confidence among the poor. microfinance is now being considered as one of the most important and an effective mechanism for poverty alleviation. these are also effective mechanisms through which to disseminate precious information on ways to improve the health, education, legal rights, sanitation and other living standards, which are of relevant concerns for the poor. above all, many micro-credit programs have targeted one of the most vulnerable groups in society – women, who live in households with little or almost no assets. by providing opportunities for self-employment, many studies have concluded that these programs have significantly improved women's security, autonomy, self-confidence and status within the household. what do we mean by “impact of microfinance”? impact is about understanding how financial services affect the lives of poor people. impact indicators extend beyond enterprise measures (assets, employment, revenues) to include multiple dimensions of poverty, including overall household income, social improvements in health and education, and empowerment (in terms of increased self-esteem and control of household resources among women). participation in microfinance programme can reduce vulnerability: through three main pathways incomesmoothing, building assets and empowering women. it is commonly suggested that micro loans are often used to increase household income not only by increasing the number and diversity of sources of income but also by including increased participation of household members in income-generating activities (igas). it is often observed that borrowers utilize microloans for offering a greater variety of goods and services within the same enterprise or for starting a new enterprise that runs together with their existing igas by selling into different markets at different times of year. for example, farmers sell farm products after harvesting, while they trade non-farm products during the pre-harvesting periods. sometimes the microfinance beneficiaries invest their microcredit, as a side business, in craft-making for a brief tourist season. it is often observed that the poor, instead of growing one income generating activity into a highly profitable business, are much more likely to develop two or more small businesses. they take it as more risky to invest all eggs in one basket. this diversification strategy, in return, causes to smooth income generation and therefore consumption through the year. microfinance leads to increase participation in igas by more members of the household. the main contributing factor in this connection is the increased economic activity by women. especially, when they avail loans and start some igas because majority of them had not been much engaged in such activities before having access to loans. the evidence indicates that women spend more time on income-generating work than before. however it is also observed in some other cases that they spend comparatively less time at work but bring in the same or more amount of money because their loan-supported igas or investment in labour and time saving technology use their time more productively. self-employment also often allows women to combine igas with child and home care, unlike labour away from home. on the other hand, there has been concern that family-run igas are more likely to engage children in labour when they could be in school. the hypothesized mechanisms, through which microfinance is considered to reduce poverty are diversification of income sources and increased engagement in igas. microfinance is supposed to bring a change in the lives of poor borrowers though these two factors. while describing different ‘makers of change’ sebstad et al (1995) strongly recommend the household review of economics and development studies vol. 3, no 1, june 2017 71 income measured by two factors: changes in the amount of income earned by all household members from all igas( income generating activities) and changes in the amount of income earned by the household from the iga in which microfinance has been invested . there is awe-inspiring evidence to validate that households that participate in microfinance programs enjoy an increase in household’s income (murdoch and haley, 2002). they also benefit from consumption smoothing and the ability to sustain gains overtime (khandker, 1998). the important contribution of microfinance is its ability to raise the living standard of low income people. studying the impact of microfinance on employment is very important as it provides the base for economic growth. all the studies dealing with theoretical issues of impact of microfinance strongly recommended the inclusion of employment (nelson et al 2000; sebstad et al 1995; schafer, 2001).the earlier impact assessment studies present a very substantial evidence of this impact domain and demonstrate mix result about the impact in this paper, we try to present evidence of the important contributions made by microfinance in the eradication of poverty by increasing the household income, per capita household income, the income generating activities and the persons involved in igas. 2. literature review saboor et al (2009) analyzed how micro-credit affect the farm income and agricultural production in rawalpindi and drew some fruitful policy lessons. an important finding was that availing microcredit has significant positive impact on average farm income of farmers with credit from crops which was pkr 32708 as compared to pkr 30115 for without credit. average farm income from livestock was recorded pkr 42000 for credit category and pkr 44385 for without credit category. to attract maximum farmers, he study recommended a fool proof system for acquiring credit and recovering it. waqas et al (2015) studied the role of the microfinance institutions in alleviating poverty. primary data was collected through questionnaires from the clients of tameer microfinance bank. multiple linear regression and paired t-test were applied for analysing the data. it has been found that the income of the microcredit beneficiaries increases after availing microfinance. beta coefficient of credit is 0.690 which indicates that 1 percent increase in credit will bring 69 percent increase in the income of the borrowers. moreover results show that microfinance has a strong positive impact on children education and enterprise financial performance. however, there is mixed evidence found on food security, household expenditures and household assets. abbas et al (2005) designed a study to explore the correlation not only between participation in microfinance programme and increase in income but also between increased income and consumption. the study conducted in faisalabad district obtained the primary data from a sample of seventy microfinance borrowers of three branches of national bank of pakistan through questionnaire. the overall impact of micro financing on per capita income was highly significant and also positive with an increase of 33 percent, from pkr 1221 to pkr 1628. the results indicate that micro credit and change in income are positively and highly correlated with a value of correlation 0.859. the value of correlation (0.7024) between increased income and consumption implied that greater part of changed income is consumed by respondents. regression analysis showed positive coefficient for change in income against availing microcredit (0.13) and change in consumption against change in income (0.14). akram and hussain (2011) studied the contribution of microfinance in raising the living standard of low income people of district okara pakistan. it is a primary data research. the main concern is with the impact of microfinance on income level which is observed positive as 85.40% of respondent reported that their income level has increased after getting microfinance facilities. however as the limitations are concerned, the sample size is too short to generalized the result. waheed (2001) defines microcredit and studies the micro financing of prsp (punjab rural support programme) in terms of impact of microfinance on income. the results of survey show that 43 percent review of economics and development studies vol. 3, no 1, june 2017 72 loans were taken for livestock with 118.7percent change in income.25percent loans for micro enterprises with 118percent change in income and 25percent loans for agriculture inputs with 27.7percent change in income naureen (2010) surveyed four microfinance institutions to study the role of microfinance in poverty alleviation. it was a primary data research. impact of microfinance has been analyzed both on household and enterprise level by comparing new clients to establish ones, using chi sequence test. results presented a mix picture of impact, showing significant impact on children education and financial performance of enterprise, mixed evidence on food security and assets and no impact on housing and income smoothing of enterprise. brannen (2010) tried to expand and improve upon the earlier studies and to re-examine the impact of village saving and loan association (vlsa). he presented a general profile of the tanzania and also highlighted the historical, economic and social context of the study. the study had a rich discussion about selection bias. the study focused on social and economic impacts which are assessed at both the individual and household level. the study observed the positive impact of vlsa participation on income generation activities akhtar (2014) assessed the impact of microfinance on the welfare of microfinance bebeficiaries. the sample size for the study is sixty-two respondents and danyore union council is focus area. the results show improvement in health, education and income level after availing microfinance.it has been found that microfinance loan affects the household level of income as it increases by rs 4165.34. the value of the coefficient of β1 is 0.056350; it shows a one unit of microfinance loan taken leads to increase in household income of clients by rs 0.056350. it shows that a microfinance loan affects the income level of clients but in minor terms. barnes et al (2001) investigate the impact of three microfinance programs in uganda i.e. finca, foccas and pride on profits of the enterprises of borrowers and non-borrowers. by comparing the both groups, the study found out strong positive impact of microfinance on profits. almost 43 percent of the borrowers experienced increase in the profit from their enterprises as compared to only 31 percent of non-borrowers experienced the increased profit. arjmand (2004) investigates the impact of kashf microfinance on eradicating poverty. it is a longitude study based on before after approach providing a comprehensive comparison between control and treatment groups. initially their monthly incomes were approximately same (pkr 5158 for comparison group and pkr 5376 for treatment group).one year later, the members of kashf foundation reported a significant increase of 30.9 percent in their monthly average income; while the members of control group reported only 20.3 percent increase. the monthly average incomes of kashf beneficiaries and comparison group have increased to pkr 7039 and pkr 6206 respectively. 3. objectives of the study the objectives of the study are:  to evaluate the impact of microfinance on household income  to assess the impact of microfinance on employment 4. data and methodology the present study has been conducted in the area of bahawalpur division which was princely state. it is situated along the southern bank of the sutlej and indus rivers. to study impact of microfinance on household income and employment level, the comparison between mature clients and incoming clients has been analysed. the use of incoming clients as a control group has two pluses. first, there is no need to identify and survey nonparticipating members to generate a control review of economics and development studies vol. 3, no 1, june 2017 73 group. inclusion of such members causes selection bias and it becomes difficult to motivate them to participate in a time-consuming survey. second, another advantage is that there is no need to follow clients over time, as in a longitudinal survey (karlan, 2001). however the problem of experiencing the differences in the entrepreneurial spirit, decision power, health quality can be tackled by the crosssectional approach, as both its control and treatment group consist of such members who have decided to participate in the microfinance programme the incoming clients are the control group, whereas the clients with a membership of microfinance programme for more years are the treatment group (karlan, 2001) the sample for the present study consists of 1524 respondents, out of which 773 are established clients (treatment group) and 751 are incoming ones (control group). they all are clients, either mature or incoming, of the following mfps which are the leading supplier of microfinance services in the area of study: national rural support programme(nrsp), akhuwat (akhu), the first microfinance bank ltd.( fmfb), kashf foundation (kashf), khushhali bank (kb), national rural support programme bank ltd. (nrsp-b), tameer microfinance bank ltd. (tmfb). with respect to infra-structure, financing structure and outreach, these microfinance providers (mfps) are the prominent institutions of pakistan microfinance sector. 4.1 formulation of hypotheses and operationalization of variables based on the literature review presented above, we formulate the hypotheses and operationally define the variables. purpose of operationalization is to translate the variables into measurable elements. to analyse the impact of microfinance on income and employment, we test the following hypotheses: h1 a: participation in microfinance programme leads to increase monthly household income h1 b: participation in microfinance programme leads to increase per capita monthly household income h1 c: participation in microfinance programme leads to increase income from igas where microcredit invested moreover to investigate the impact on employment, we formulate the following hypotheses: h2 a: participation in microfinance programme leads to increase the household income generating activities (igas). h2 b: participation in microfinance programme leads to increase the number of persons involved in igas. the impact domain of income can be analysed in detail by three impact dimensions: (i) monthly household income (ii) per capita monthly household income (iii) monthly income from igas where microcredit invested. to investigate the impact dimension of household employment, two impact indicators have been designed: number of igas, persons involved in igas. table 1: operationalization of dependent variables impact dimension impact indicators source income incm 1 = monthly household income nelson et al. (2000), sebstad et al. (1995) waheed (2001) 1ncm 2 = per capita monthly household income hossain (1998), abbas et al. (2005) incm 3= monthly income from igas where microcredit invested sebstad et al. (1995) household employment empl1 =number of igas nelson et al. (2000), brannen (2010) empl 2= persons involved in igas schafer (2001), brannen (2010) model specification for impact of microfinance on income and employment in the present study, regression analysis measures the impact of program participation and some other important socio-economic variables on a specific set of dependent (outcome) variables, as the following review of economics and development studies vol. 3, no 1, june 2017 74 expression explicates; yi= f (mmfp, paol, msav, noep, igas, imfi, hhas, age, gndr, edu, hhsz) where yi= dependent/ outcome variables which are household income and employment independent variables: as the independent variables are concerned, they are:  ‘membership to microfinance programme’(mmfp) which is a binary variable. as all the members of treatment group with membership for more than three years take the value ‘1’ while all the members of control group with membership for less than three months take the value ‘0’.  prior access to any other loan (paol)  micro saving (msav)  number of employed persons (noep)  number of income generating activities (igas)  household assets (hhas)  age of respondent (age)  gender (gndr)  education (edu)  household size (hhsz) age has been measured by number of years of age, while gender is a binary variable with value 1 for female and 0 for male. 4.2 multiple linear regression model for monthly income and employment to investigate the impact of microfinance on household income and employment, five models have been designed incm 1= β0 +β1 mmfp + β2paol+β3 msav + β4noep + β5 hhas + β6 age+ β7 gndr+ β8edu+ β9 hhsz +ui incm 2= β0 +β1 mmfp + β2paol+β3 msav + β4noep+β5 hhas + β6 age+β7 gndr+ β8edu+ β9 hhsz +ui incm 3= β0 + β1 mmfp + β2 paol + β3 msav + β4 noep + β5 hhas + β6 age+β7 gndr+ β8edu+ β9 hhsz +ui empl 1= β0 +β1 mmfp + β2 paol + β3 msav + β4 noep + β5 hhas + β6 age + β7 gndr+ β8edu+ β9 hhsz + ui empl 2= β0 +β1 mmfp + β2paol+β3 msav + β4igas+β5 hhas + β6 age+β7 gndr+ β8edu+ β9 hhsz + ui 5. result and discussion the earlier evidence from literature presents a notable positive relation between household income and participation in microfinance programme (murdoch and haley, 2002; khandker, 1998). the table 2 presents the central tendency, minimum and maximum values and standard deviation of each of five variables mentioned above for both groups: treatment and control group. the data analysis shows that the average monthly household income of treatment group is pkr 20061 which is greater than that of control group that is pkr 14387. so it can be concluded that participation in microfinance programmes contributes to increase in income but with a notable variations as the standard deviation is 7394. review of economics and development studies vol. 3, no 1, june 2017 75 table 2: descriptive analysis of comparison between treatment and control group with respect to monthly income (incm) and employment (empl) variable treatment group control group mean min max s.d. mean min max s.d. incm 1 20061 5000 50000 7394 14387 4000 45000 5443 incm 2 4197 800 20000 2265 3090 444 24000 1937 incm 3 11831 2000 30000 5551 6673 0 22000 4509 empl 1 1.94 1 5 0.68 1.87 1 4 0.64 empl 2 2.11 1 6 0.92 1.89 1 6 0.89 about the per capita monthly income (incm 2) and income from igas where microcredit has been invested (incm 3) it is found that the treatment group enjoyed a higher level of income as compared to control group. this indicates a better living standard on the part of treatment group. the per capita monthly income for treatment group is pkr 4197 as compared to only pkr 3090 for control group. the average income from igas where microcredit invested is pkr 11831 and pkr 6673 for treatment and control groups respectively. as the number of income generating activities (empl 1) is concerned, no substantial difference has been found between the two groups. on average, among the treatment group the household members are involved in 1.94 igas as compared to 1.87 igas involved by household members of control group. about the number of persons involved in igas (empl 2), the treatment group appears to be marginally better with the average of 2.11 than control group with the average of 1.89. table-3: independent sample t-test for income and employment variable levene's test for equality variances t-test for equality of means f sig t df sig. (2-tailed) mean difference incm 1 49.09 0.00 -17.02 1522 0.00 -5674.63 incm 2 27.21 0.00 -10.24 1522 0.00 -1106.86 incm 3 36.09 0.00 -19.22 1459 0.00 -5116.49 empl 1 0.07 0.79 -1.950 1522 0.27 -0.06 empl 2 0.06 0.81 -4.796 1522 0.00 -0.22 with respect to incm 1, incm 2 and incm 3, the table 3 shows that the significance value of the levene test statistic is lesser than 0.05, we do not accept the null hypothesis at 95 percent confidence interval and have no confirmation to claim that the variances are equal and the difference between the means of both samples, treatment and control groups is equal to 0 against the alternative hypotheses that the difference between the means of both samples are not equal to 0. the income more earned by treatment group is not due to chance alone. so we do not reject the alternative hypotheses (h1 a, h1 b, h1 c) that participation in microfinance programme leads to increase household income. the table 3 shows that the no significant difference has been found between treatment and control groups in terms of income generating activities and number of employed persons. (empl 1 and empl 2 ). the levene's test for equality variances for employment (empl) showed that the significance values for all the both variables is remarkably greater than 0.05, indicating that there is adequate evidence to claim that variances are equal. so, we do not reject the null hypothesis that the both groups are different with respect to sample means. regression analysis is used to explore further the impact of microfinance. in the present study, regression analysis measures the impact of program participation and some other important socio-economic variables on a specific set of dependent (outcome) variables. as we aim not only at assessing the relationship between dependent and independent variables but also at identifying the independent variables which review of economics and development studies vol. 3, no 1, june 2017 76 comparatively have a greater effect on the dependent variable, so the present study relies on both standardized and unstandardized coefficients for analysis. following table 4 provides summary of regression results for monthly household income (incm 1), per member household monthly income (incm 2), monthly household income from igas where microcredit was invested (incm 3). the level of significance is 95% for all data analysis in the present study as it is a rule of thumb for social science studies. the results for incm 1 show that all the independent variables except msav and gndr effect monthly household income positively and significantly. the contribution of msav and gndr is also positive but insignificant at 95 percent level of confidence. membership of microfinance programme (mmfp) leads to increase the monthly household income. table 4: regression analysis for monthly household income (incm 1), per member household monthly income (incm 2), monthly household income from igas where microcredit invested (incm 3) a) coefficients model incm 1 incm 2 incm 3 variables beta standardized beta beta standardized beta beta standardized beta constant mmfp paol msav noep hhas age gndr edu hhsz 3345.597 3086.140* 734.088* 216.617 1227.093* 830.226* 37.9040* 265.639 359.355* 212.109* 0.217 0.061 0.013 0.157 0.407 0.050 0.018 0.223 0.070 4086.698 594.621* 87.271 137.234 16.012 160.324* 8.3300* 38.874 88.950* -518.004* 0.14 0.023 0.027 0.007 0.260 0.035 0.005 0.180 -0.56 6929.059 4565.654* -7.3680 511.262 1797.816* 301.335* 5.0030 -1209.330* 82.233* 246.642* 0.401 0.000 0.039 0.288 0.182 0.008 -0.104 0.064 0.100 b) model summary and anova results model summary anova results model r r square adjusted r square f sig. incm 1 0.687 0.472 0.468 135.089 0.00 incm 2 0.648 0.420 0.417 121.12 0.00 incm 3 0.590 0.348 0.344 85.89 0.00 although paol (prior access to any other loan) also has a significant positive impact on incm1, yet it is lower in terms of both standardized and unstandardized coefficients which imply the supremacy of microfinance to any other loan. the table 4 shows that noep and hhas affect incm1 significantly and positively. higher the number of employed persons in household, the higher would be monthly household income. the variable, hhas, is a comprehensive index for household assets containing several livestock, transportation and electric appliances. contribution of hhas to the model is significant and positive one.the positive contribution to the model by noep and hhas indicates the indirect positive impact of participation in microfinance programme on incm1, as the both are directly affected by membership to microfinance programme. the positive coefficient associated with age implies that more aged people earn more. similarly the positive contribution of gndr to the model suggests that female respondents have higher monthly household income as compared the male ones. the significant positive beta attached with edu indicates that the educated people have higher potential to earn more. moreover the results of table show that the http://en.wikipedia.org/wiki/dependent_variable review of economics and development studies vol. 3, no 1, june 2017 77 greater the household members, the higher the household income level as more members are available for income generating activities. as the standardized coefficients are concerned, it has been found that the variable which has greater effect on dependent variable is hhas with standardized beta equal to 0.40. the other more significant variables are edu and mmfp with standardizes beta 0.223 and 0.217 respectively. the standardizes beta for mmfp shows that monthly household income would change 0.217standard deviation, due to per standard deviation change in membership to microfinance programme (mmfp). the results for incm 2 show that all the independent variables expect hhsz effect per member monthly household income positively. among these variables, mmfp, hhas, edu have significant impact while paol, msav, noep, age, gndr have insignificant one at 95 percent level of confidence. however hhsz affect the incm 2 negatively and this effect is statistically significant. as the standardized coefficients are concerned,it has been concluded that the most influential and effect determining variable is hhsz with a higher standardized beta that is 0.56. the other influential variables are hhas,edu and mmfp with high standardized betas that are 0.26, 0.18 and 0.14 respectively. the regression analysis for monthly income from igas where microcredit invested has been presented in column 3. the independent variables such as mmfp, noep, hhas, edu, hhsz have strong and significant effect on dependent variable, incm 3. simply participation to microfinance programme would lead to increase incm 3. on the other hand, the msav, age have a positive but insignificant effect. paol and gndr affect the dependent variable negatively; however the coefficient of paol is insignificant one.. paol has an insignificant negative effect on incm 3, implying that access to any other loan instead of microloan, just creates a financial burden and does not lead to increase income. the proponents of micro saving take it as a substitute for microloan but the regression analysis in the present study depicts a lesser positive impact of micro saving on income as compared to microcredit. gndr has been found to be negatively correlated with incm 3, implying that male respondent have a higher level of monthly income from the project where microfinance has been invested than female ones. with respect to the standardized coefficients, it has been found that the most influential and effect determining variable is mmfp with a higher standardized beta that is 0.401. the other influential variables are noep, hhas with high standardized betas that are 0.288 and 0.182 respectively. according to model summary, the multiple correlation coefficients, r, are 0.687, 0.648 and 0.59 for incm 1, incm 2, incm 3 respectively showing high linear correlation between predicted and observed values of all the three variables. values of rsquare, are 0.472, 0.420 and 0.348 for incm 1, incm 2, incm 3 respectively indicating variations have been explained by the model. the significance value of the f statistic is less than 0.05 for all the three models, which means that the variation explained by the model is not due to chance. review of economics and development studies vol. 3, no 1, june 2017 78 table 5: regression analysis for number of igas (empl1) and persons involved in igas (empl 2) a) coefficients model empl1 empl2 variables beta standardized beta beta standardized beta constant mmfp paol msav noep/igas hhas age gndr edu hhsz 0.979 0.090* 0.033 0.055 0.470* 0.007* 0.002 -0.021 -0.003 0.017* 0.068 0.029 0.037 0.649 0.038 0.025 -0.015 -0.021 0.060 0.601* 0.163* 0.004 -0.172* 0.689* 0.041* 0.009* 0.364* -0.019* 0.086** 0.090 0.003 -0.083 0.499 0.156 0.088 0.195 -0.090 0.221 b) model summary and anova results model summary anova results model r r square adjusted r square df f sig. empl1 0.642 0.412 0.408 1522 117.67 0.00 empl2 0.740 0.548 0.545 1522 203.51 0.00 the table 5 presents the regression analysis for number of igas (empl1) and persons involved in igas (empl 2). mmfp, noep, hhas and hhsz have positive and significant effect on the dependent variable (empl1). paol, msav and age have positive but insignificant effect on empl1.while the gndr and edu impose a negative but insignificant effect on empl1.with respect to unstandardized coefficients, it has been found that the small value of coefficient for mmfp indicates that participation to microfinance programme effect the number of income generating activities very minutely. the established clients have been expected to have only 0.09 more igas than incoming ones. the positive effect of noep on empl1 is a remarked one while that of hhas and age are very minute. the negative coefficient for gndr implies that male respondents have more igas as compared to female ones. female respondents have to confine themselves to some specific economic activities due to some social constraints. the effect of edu on empl1 is negative but insignificant one, implying no strong relation between the both variables. with respect to the relative importance, explained by standardized coefficients, noep has been found the sole dominant and the most impactful variable with standardized beta 0.649 while a comparatively very small standardized beta for mmfp has been found. the summary of regression results for persons involved in igas (empl 2) have been presented in column 2. all the predictors except msav and edu have positive effect on dependent variable (empl 2). however the effect of msav and edu is negative and significant one. the positive and significant coefficient for mmfp implies that due to one unit change in mmfp, the expected change in empl 2 would be 0.163. the effect is positive but minute one. the members of treatment group would be slightly better than those of control group with respect empl 2. the negative coefficient for msav demonstrates that higher microsaving provides financial stability against shocks and thus involves less participating members in igas. the significantly negative coefficient for edu implies that an educated respondent prefers more to send his/her children to college /school than to involve in igas as compared to illiterate ones. the variable gndr has a significant positive coefficient showing that all the households of female respondents have higher number of employed persons than those of male respondents because of the female participation in economic activities. review of economics and development studies vol. 3, no 1, june 2017 79 using the standardized coefficients, to investigate the relative effectiveness of independent variables for the dependent one, empl2, it has been found the most impactful variable for empl2 is igas with standardized coefficients, 0.499, followed by hhsz and gndr with standardized coefficients, 0.221 and 0.195 respectively. mmfp has a comparatively very small effect with standardized coefficient, 0.09. according to model summary, the multiple correlation coefficients, r, are 0.642 and 0.74 for empl1 and empl 2 respectively showing high linear correlation between predicted and observed values of both variables. values of rsquare, are 0.412 and 0.548 for empl1 and empl 2 respectively indicating the variations explained by the model. the significance value of the f statistic is less than 0.05 for both models, which means that the variation explained by the model is not due to chance. 6. conclusions the present study measures the impact of program participation on a specific set of dependent (outcome) variables. the household monthly income has been found to be positively correlated with all the independent variables including membership to microfinance programme (mmfp). mmfp leads to increase the monthly household income. however the most impactful variable is hhas with standardized beta equal to 0.40 followed by edu and mmfp with standardizes beta 0.223 and 0.217 respectively. similarly all the variables effect the household monthly income from the igas where microfinance has been invested(incm 3) positively except gndr. the most influential and effect determining variable in this connection is mmfp with a higher standardized beta that is 0.401. the other influential variables are noep, hhas with high standardized betas that are 0.288 and 0.182 respectively. participation to microfinance programme effect the number of income generating activities very minutely. the mature clients have been expected to have only 0.09 more igas than incoming ones. the positive effect of noep on empl1 is a remarked one while that of hhas and age are very minute. the negative coefficient for gndr implies that male respondents have more igas as compared to female ones. female respondents have to confine themselves to some specific economic activities due to some social constraints. the effect of edu on empl1 is negative but insignificant one, implying no strong relation between the both variables. all the predictors except msav and edu have positive effect on the number of persons involved in igas. the negative coefficient for msav demonstrates that higher microsaving provides financial stability against shocks and thus involves less participating members in igas. the significantly negative coefficient for edu implies that an educated respondent prefers more to send his/her children to college /school than to involve in igas as compared to illiterate ones. 6.1 policy implications from the study, the following suggestions are devised to make micro-credit more effective as a tool for poverty alleviation.  microcredit schemes should have broader target group, including the ones in extreme poverty. the solution for providing microfinance services to the very poor is to design programs that suit the needs of destitute families.  while designing an effective microfinance programme, mfis should integrate microfinance scheme to the life style of an area by using knowledge of the specific culture and traditions of that area.  for better utilization of microfinance, the provision of basic education and relevant business training should be coupled with the financial support provided by microcredit programme.  micro-credit programs should also focus on women. focus on female entrepreneurs allows marginalized women to gain access to the economic opportunities that they need to empower themselves. references abbas, f. and et al. (2005). microfinance route to income generation and poverty reduction: evidence from district faisalabad, pakistan. journal of agriculture and social sciences, vol.01, review of economics and development studies vol. 3, no 1, june 2017 80 no.2, pp144–147 akhtar, n. k. (2014). the impact of micro finance on the household income and consumption level in danyore, gilgit-baltistan pakistan. international journal of academic research in economics and management sciences january 2014, vol. 3, no. 1, pp. 181-195 akram m. and hussain i.(2011). the role of microfinance in uplifting income level: a study of district okara, pakistan. interdisciplinary journal of contemporary research in business, institute of interdisciplinary business, vol. 2, no.11, pp. 83-94 arjumand (2004). impact assessment of kashf’s microfinance and karvaan enterprise development programme. prepared for dfid, 2004. barnes, c., gaile, g.and kimbombo, r. (2001) .impact of three microfinance programs in uganda. washington, d.c. aims, 2001. barnes, c. (2001). microfinance program clients and impact: an assessment of zambuko trust, zimbabwe. washington, d.c. aims, 2001. brannen,c. (2010). the impact study of the village saving and loan association (vlsa) programme in zanzibar , tanzania. a thesis submitted to the faculty of wesleyan university for bachelors of arts degree, department honors in economics. brüntrup, michael, alauddin, s.m., huda, afroz, and rahman, mizanur. (1997). impact assessment of asa. dhaka, bangladesh: the association for social advancement,1997. chen, m. a., and snodgrass, d. (2001). managing resources, activities, and risk in urban india: the impact of sewa bank. washington, d.c. aims, 2001. eda rural systems.(2004) the maturing of indian microfinance.” new delhi, 2004 hossain, m. (1988). credit for the alleviation of rural poverty: the grameen bank in bangladesh. washington, d.c. ifpri, research report no. 65. karlan, d. ( 2001) microfinance impact assessments: the perils of using new members as a control group. journal of microfinance, vol. 3, no. 2, pp. 76-85. khandker, s. r. (1998). fighting poverty with microcredit. university press limited, dhaka, bangladesh. khandker, s. r. (2005). micro-finance and poverty: evidence using panel data from bangladesh.” world bank economic review 2005. morduch, j. (1998). does microfinance really help the poor? new evidence from flagship programs in bangladesh. princeton university working paper, 1998. morduch, j., & haley, b. (2002). analysis of the effects of microfinance on poverty reduction. working paper no.1014, nyu wagner. naureen ,u.(2010)). impact of microfinance on poverty. a ph.d thesis submitted to the faculty of management sciences , foundation university islamabad. review of economics and development studies vol. 3, no 1, june 2017 81 nelson, c., mknelly, b., garber, c., edgcomb, e., horn, n., gaile, g., lippold, k.,& beard, b. (2000).learning from clients: assessment tools for microfinance practitioners. washington, dc 2009: small enterprise education and promotion (seep) network. pitt, m. and khandker, s. r.(1998). the impact of group-based credit programs on poor households in bangladesh: does the gender of participants matter? journal of political economy 106 no. 5, pp. 958-996. pitt, m. (1999). reply to jonathan morduch's "does microfinance really help the poor?” new evidence from flagship programs in bangladesh.” working paper, brown university,1999. outcome of a bids research survey. dhaka, bangladesh: grameen trust, 1986. saboor , a., maqsood h. and, madiha m.(2009). impact of micro credit in alleviating poverty: an insight from rural rawalpindi, pakistan. pakistan. journal of agriculture & social sciences, (2009), 7(1), pp. 90-97 schafer, b. (2001). guidelines for impact monitoring and assessment in microfinance programme. division-41, economic development and economic promotion, universum verlagsansalt 65175 wiebsadem. sebstad, j., catherine neill, carolyn barnes, and gregory chen. (1995). assessing the impacts of microenterprise interventions: a framework for analysis. usaid managing for results working paper no. 7. washington, dc: usaid/cdie. waheed, s. (2001). analysis of issue on micro credit: a case of two villages in punjab. the pakistan development review 40:4 part ii pp.723-750 waqas, m. c. , fazal, m. z., taj, s. (2015). effectiveness of micro financing for poverty alleviation: a case study of tameer microfinance bank rearch journal of economics and business studies , volume: 04, number: 05, pp. 92-99 review of economics and development studies vol. 3, no 1, june 2017 82 review of economics and development studies vol. 5, no 4, 2019 591 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads price levels and poverty nexus: a case study of pakistan 1 muhammad aleem arshad, 2 muhammad ramzan sheikh, 3 muhammad hanif akhtar, 4 muhammad imran mushtaq 1 lecturer in economics, government college of science, multan pakistan: aleemchuadary@gmail.com 2 associate professor, school of economics bahauddin zakariya university, multan pakistan: ramzansheikh@bzu.edu.pk 3 professor, department of commerce bahauddin zakariya university multan, pakistan: haneefakhtar@gmail.com 4 phd scholar, department of statistics bahauddin zakariya university multan-pakistan: imranstat99@gmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 the study has examined the relationship between price levels and poverty over the period of 1982-2015 in pakistan by employing auto regressive distributed lag model (ardl). it is the pioneer empirical study on the topic in pakistan. the study has revealed mixed findings between the price levels and poverty both at aggregated and disaggregated levels. the study has also suggested policies to reduce poverty according to the various price levels investigated in the assorted models. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords price levels, poverty, pakistan, ardl jel classification: e31, i32 corresponding author‟s email address: ramzansheikh@bzu.edu.pk recommended citation: arshad, m. a., sheikh, m. r., akhtar, m. h. and mushtaq, m. i., (2019). price levels and poverty nexus: a case study of pakistan. review of economics and development studies, 5 (4), 591-606 doi: 10.26710/reads.v5i4.915 1. introduction poverty is a state where an individual survives below the poverty line 1 . the individual hardly satisfy or cannot get daily needs such as shelter, food, education, and health care. economically, the poor are trapped in the vicious circle of poverty he does not has enough money to fulfill his essential wants. the vicious circle of poverty can be explained by the quotes „a person is poor because he is poor‟ which implies that the poor do not even have enough money to fulfill their basic needs, so, they are unable to avail opportunities such as education and business to break poverty trap. if poor country is hit by inflation, the poor are losers rather the rich ones. in reality, the case becomes worse when we talk about the food inflation. the theory of development economics highlighted the distributional effects of increasing price level in the economy and its potentially disturbing results for the poor. unanticipated price rise has been worse than expected which erodes the real incomes of the poor making them to avail the fewer goods and services than before. the unanticipated increase in price level in the economy also affects various social security benefits such as time lags in adjustment of unemployment benefits, old-age benefits and pensions. third world countries present picture in this regard world bank (2004) stated that 1.2 billion (20%) of world population is consuming 1% of total world production. poverty is crucial issue worldwide but stands as a rural phenomenon in developing countries like pakistan. pakistan like other developing countries, is striving with high poverty rate and inflation has increased it further in pakistan 1 us $ 1.90 income per day is poverty line defined by world bank. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 592 (chani et al., 2011). the government of pakistan has not been successful in addressing the issue of poverty while the growth-oriented policies have inspired the economists of pakistan without distribution intent. the present research is an attempt to explore the relationship between price level changes and poverty in pakistan. the study not only measures the impact of changes in aggregate price level but also disaggregates the consumer price index (cpi) and wholesale price index (wpi) to observe their influence on pakistan‟s poverty. this decomposition of the price levels is expected to provide us an additional insight about the components of price levels along with their influence on pakistan‟s poverty. the study is novel on two grounds. firstly, to the best of authors „knowledge, the disaggregation of both cpi and wpi in terms of their components is used for the first time in pakistan. secondly, different base years have been converted into a common base year using the splicing 2 method. rest of the discussion is structured as under section 2 presents the review of assorted literature while section 3 is devoted to methodology and model specification employed in this study. section 4 elaborates models used in the analysis along with description of variables. section 5 presents results of unit root test, bounds test, while section 6 consists of the long run analysis with error correction analysis. the final part concludes with policy implications and an agenda for future research. 2. review of assorted literature inflation has been the cruelest tax of all time, people have been influenced by it more than anything else because for the poor finance is the life blood. the burden of high prices, especially of basic food items, has become intolerable for poor households while poverty is consequently on the rise again. whatever decline was achieved in poverty, appears to have been wiped out. prices have risen sharply around the world in the past few decades, with data suggesting acceleration in the trend over the recent past. a bird‟s eye view of previous works unveiled that there exist positive and negative relationships among inflation, poverty around the world. positive correlation implies that with an increase in price level, there is decrease purchasing power of the people, skyrocketing prices hurt poor the most by reducing their real income that caused more poverty among them. the careful examination of the literature revealed the positive linkage between inflation and poverty which implies increasing level of income increase the rift between the poor and the rich. the rich has more facilities as it was availed by their forefathers and the poor has more deprivations as compared to their forefathers. the literature also revealed negative correlation between inflation and poverty which implies an increase in price level decreased the poverty. the paradox of results is based on distribution structure of the economy. the negative relations hip between inflation and the poverty was seen because of the strong government protection against inflation in form of subsidies, strong workers union, pre-trade cycle era and politically bulged fiscal policy. the impact of the poverty has always been more adverse in case of galloping inflation. the rise in the price levels at one side reduces the real wages of the poor while on the other hand, it makes the basket of goods inapproachable for the poor. resultantly, the deprivations of the poor have intensified further. a snapshot of some of the studies in context of the issue is presented in table 1 below. table 1: review of selected studies on price levels and poverty reference(s) time period country model specification methodology main results belongia (1985) 1954-85 u.s.a fpr=f(m1um1) nfpr=f(m1um1) ols the findings pointed out accepted the hypothesis inflation was positively correlated with m1 growth. cardoso (1992) 19741984 cross country pov=f(inf) ols the relationship between inflation and poverty proved significant. amble and stewart (1994) 19871993 united states pov = f (inf) cpi-urban cpi-elderly and cpi-wage earners the study identified that the inflation affected households with respect to their consumption pattern. 2 the conversion of two different base years into one base year is called data splicing. (asteriou and hall, 2007). review of economics and development studies vol. 5, no 4, 2019 593 chaudhary and ahmed (1996) 19721992 pakistan pov=f(ms, expected, inf(e),ds 2sls the study basically supported the hypothesis that inflation increases the cost of living in pakistan garner et al. (1996)a 1982-84, 1992-94 united pov=f(inf) laspeyre‟s index , paasche index and fisher ideal index the study demonstrated the result that poor subgroups faced the higher inflation and inflation cost than the overall population. ravellion (2000) 1958-94 india pov=f(inf,w) head count ratio, squared poverty gap the positive relationship between poverty and inflation was significant. easterly and fisher (2001) 1995 cross country pov=f(inf,hy, edu, reg ext, cyc un) dummy variable , ols the result pointed out that very poor was more concern among developed countries. the very poor were 14% more concern about inflation as compared to 9% in case of developing and transitional economies deaton. (2003) national sample survey 43th , 50th and 55th india pov=f(inf) laspeyre‟s index, paasche index , tornquist index , poverty line deflator and head count ratio the study unveiled the result that all the indian states affected by the inflation but the states with low income group provinces such as assam and bihar the condition turned more worse. wodon et al. (2008) 20032007 cross country pov=f(food inf) fgt ( 1984) the result of the study clarified that the galloping price increase the poverty in the 12 selected countries. lyssiotou (2008) 2003 cyprus pov = f (inf) cpi and oecd deflator of world bank the report revealed that the impact of inflation diffused among poor hastily. henriksen and kydland (2010) 1954 and 1994 united states pov=f(inf, tra tec,seignorage, sobs. ols the study revealed that inflation affected the poor class of consumers because they had modicum access to transaction technologies. coleman (2012) 20062012 ghana pov = f (inf) the modified log periodogram regression the study identified the fact that nine out of regions of ghana poverty was aggravating due to inflation. wood et al. (2012) 20062009 mexico pov=f(food inf) cross price elasticities the study manifested that a 24%-25% price spike leads to the 45%-65% income loss among poor mexicans. estrades and terra (2012 ) 2006-08 uruguay pov=f(food inf, fuel inf) computable general equilibrium model, micromutation approach the inference showed positive impact of inflation on poverty with “dutch disease” that the output increased in export sector only while in other sectors of economy inflation dragged the poor into poverty. review of economics and development studies vol. 5, no 4, 2019 594 fujii (2013) 2006-08 philippines pov = f(inf) nonparametric regression the study strongly supported the hypothesis that the inflation was correlated with poverty. arndt et al. (2015) 20072009 mozambique pov= f(fop, fup) cpi inflation gdp deflator inflation the skyrocketing prices forced the poor to consume less food and fuel that increased the level of poverty in mozambique. wood et al. (2016) 20082010 mexico pon=f(fop, pedu, pot, pohl, poh) ols the study concluded that with the increased in the prices of food, housing, health, transportation and housing the poverty increased in mexico. loayza and rigolini (2016) 19902012 peru pov= f( inf) ineq= f( inf) ols the study explored that in nonproducing districts the impact of inflation was positive on poverty and inequality and the vice versa in case of producing districts due to better system of distribution. moncarz et al. (2016) 20032010 argentina pov= f( inf) prices elasticities the results manifested that rising prices reduced the real wages in argentina that enhance the poverty in the region. the results were reversed in case of subsidies. moser and schnetzer (2017) 19852015 austria pov= f( inf) spatial regression analysis the inferences showed that increase in inflation increased poverty. source: authors’ calculations 3. methodology to analyze the long-run and short-run correlation of variables the study has applied an auto regressive distributed lag model (ardl). the reason to apply of the ardl approach is due to mixed results of stationarity and non stationarity of variables. 3.1 data handling and sources the disaggregated data of consumer price index and wholesale price index employed in this study are collected from pakistan economic survey from 1982-2015. the comprising variables of consumer price index was subject to change over time that‟s why the study set 1982-1999 components of cpi and wpi and added the relevant variables of further periods such as from 1992-2007 data of education are added in recreation entertainment and education, data of health is added is added cleaning laundry and personal appearance. data of fuel and lightning are added in energy. data of 2008-2015 were also arranged, transportation and communication both are averaged to make one slot as per standard. data of fuel and lightning are added in energy. similarly, for the wpi six components variables were added relevant variables such as from 2008-2015 agricultural forestry and fishery products are added in raw material, ores and minerals, electricity and gas is added in the fuel lightning and lubricants and metal products, machinery and equipment added in the manufacturing. the data of price levels were not at same base, so, data splicing method was utilized to create same base series of data. the base year is 2001. head count ratio (hcr) and poverty gap (pg) used as proxies of poverty as independent variable. the data of hcr are availed from world development indicators (wdi). the data of hcr for pakistan is available on web source of trading economics 3 and quandle 4 . the data of poverty gap are gathered from wdi, however, the data were missing and completed by using linear interpolation and extrapolation techniques. the data of price levels were also gathered from pakistan economic survey. this study applied linear extrapolation for year 1982-86 and 2015-15, while data completed by 3 http://www.tradingeconomics.com/pakistan/hcr-index-wb-data.html 4 https://www.quandl.com/collections/demography/hcr-index-by-country https://www.quandl.com/collections/demography/hcr-index-by-country review of economics and development studies vol. 5, no 4, 2019 595 interpolation are of years 1988-89, 1991-95, 1997, 1999-2000, 2002-03, 2008-09 and 2012. the data of all variables are standardized as well. the study is based the estimating the impact of price level on poverty in pakistan. in the study, the dependent variable is poverty. for poverty measurement the head count ratio and poverty gap are employed. the study included the disaggregate price levels, consumer price index (cpi) and wholesale price index (wpi) to analysis their impact on poverty in pakistan. the consumer price index is decomposed in ten components and wholesale price index is decomposed in six components as per composition of pakistan standard set by ministry of finance and state bank of pakistan. poverty scenario also analyzed by aggregate model of consumer price index, wholesale price index, gdp deflator and sensitive price index (spi). the study has developed six models 1 and 2 consist of cpi components. the models 3 and 4 are comprised on wpi components and model 5 and 6 consists on aggregate price levels. the functional form, econometric models with expected signs of variables are as discussed below. 3.2 model specification and description of variables following models are used to explore the nexus between price levels and poverty. we have specified two types of models to estimate the nexus between price levels and poverty. the reason behind disaggregation of price levels is that it provides additional insight of impact on poverty of components of price levels. the variables used in the study are taken from the extant literature with the explanation in table 2 below. table 2: description of variables name of variable description name of variable description hcr head count ratio ($1.90 per day (2011 ppp)) gdpdi gross domestic product deflator inflation pg poverty gap ($1.90 a day (2011 ppp) fbti inflation on food, beverages and tobacco products atfi apparel textiles and foot ware inflation hfei house furniture and equipment inflation hri house rent inflation tci transportation and communication inflation ei energy inflation fi food inflation reei recreation entertainment and education inflation rmi raw material inflation clpai cleaning laundry and personal appearance inflation flli fuel lightning and lubricants inflation mi miscellaneous inflation bmi building material inflation gi general inflation cpii consumer price index inflation wpii wholesale price index inflation spii sensitive price index inflation note: all the variables are in annual percentage form. 3.3 disaggregated models the disaggregate models are based on disaggregation of cpi and wpi components to explore their relationship with poverty. model 1: head count ratio (hcr) with disaggregated cpi the model explains the relationship between the poverty and disaggregated cpi. for poverty measurement the model used the headcount ratio. the functional form is as under: review of economics and development studies vol. 5, no 4, 2019 596 (atfi, hri, ei, reei, clpai, mi, gi, fbti, hfei, tci)hcr f (1) the econometric form is as under: 1 2 3 4 5 6 7 8 9 10 11 t hcr atfi hri ei reei clpai mi gi fbti hfei tci                       (2) , , , , 01, 2 3 4 5, 6, 7, 8, 9, 10 11            model 2: poverty gap (pg) with disaggregated cpi the model explores the correlation between poverty and disaggregated cpi. for poverty measurement, the model used the poverty gap index. the functional form of the model is given: ( , , , , , , , , , )pg f atfi hri ei reei clapi mi gi fbti hfei tci (3) the econometric equation of the model is as under: 1 2 3 4 5 6 7 8 9 10 11 pg atfi hri ei reei clpai mi gi fbti hfei tci                       (4) 1, 2 3 4 5, 6, 7, 8, 9, 10 11 , , , , 0            model 3: head count ratio (hcr) with disaggregated wpi the model explicates the correlation between the poverty and disaggregated wpi. for poverty measurement, the model uses the headcount ratio. the functional form of the model is given: (gi, fi, rmi, flli, mi, bmi)hcr f (5) the econometric model is given below: 1 2 3 4 5 6o t hcr gi fi rmi flli mi bmi               (6) 1, 2 3 4 5, 6, , , , 0       model 4: poverty gap (pg) with disaggregated wpi the model estimates the relationship between the poverty and disaggregated wpi. for poverty measurement the model used the poverty gap index. the functional form of the model is given: (gi, fi, rmi, flli, mi, bmi)pg f (7) the econometric model takes the following form: 1 2 3 4 5 6o t pg gi fi rmi flli mi bmi               (8) 1, 2 3 4 5, 6, , , , 0       3.4 aggregate models the aggregate models make use of the aggregate price levels to compute the inflation rates such as cpii wpii spii and gdpdi. model 5: head count ratio (hcr) with aggregate price levels the model illustrates the relationship between poverty and disaggregated wpi. for poverty measurement, the model has used the hcr index. the functional form is as under: (cpii, wpii, spii, gdpdi)hcr f (9) the econometric form is as follows: 1 2 3 4 hcr cpii wpii spii gdpdi o t            (10) 1, 2 3 4 , , 0     model 6: poverty gap (pg) with aggregate price levels the model explicates the linkage between poverty and aggregate price levels. for poverty measurement, the model has used the poverty gap index. the functional form of the model is given as under: (cpii, wpii, spii, gdpdi)pg f (11) the econometric form of the model is presented below: 1 2 3 4 pg cpii wpii spii gdpdi o t            (12) 1, 2 3 4 , , 0     review of economics and development studies vol. 5, no 4, 2019 597 4. results and discussions the results of disaggregated and aggregated models are in following. 4.1 unit root analysis stationarity and non stationarity of variables in the model is checked by the unit root test. stationarity condition revealed constant mean and variance of the variable and vice versa for non stationarity. the test that is involved to check the stationarity and non stationarity of variables is called augmented dicky fuller (adf) test. i(0) and i(1) showed that variable is stationarity and stationarity at first difference, respectively. table 3: results of unit root test of cpi disaggregated model (1982-2015) variables intercept lags trend and intercept lags none lags conclusion hcr -1.1426 (0.6864) 0 -1.3020 (0.8693) 0 -1.0678 (0.2521) 0 i(1) pg -1.9098 (0.556) 0 -1.5813 (0.499) 1 -0.9541 (0.2963) 0 i(1) gi -6.0184 (0.000) 0 -6.9961 (0.001) 0 -6.3719 (0.000) 0 i(0) fbti -6.0433 (0.000) 0 -6.06981 (0.000) 0 -6.2864 (0.000) 0 i(0) atfi -6.4383 (0.002) 0 -6.6198 (0.000) 0 -6.6380 (0.000) 0 i(0) hri -6.8482 (0.000) 0 -6.8363 (0.003) 0 -6.3430 (0.001) 0 i(0) ei -6.6328 (0.000) 0 -6.6786 (0.000) 0 -6.1096 (0.000) 0 i(0) hfei -6.2068 (0.000) 0 -6.2672 (0.007) 0 -6.6067 (0.000) 0 i(0) tci -6.2679 (0.000) 0 -6.1836 (0.000) 0 -6.6438 (0.000) 0 i(0) reei 6.8166 (0.000) 0 -6.7611 (0.005) 0 -6.6331 (0.000) 0 i(0) clpai -6.1268 (0.000) 0 -6.077 (0.000) 0 -6.0063 (0.000) 0 i(0) mi -6.8719 (0.000) 0 -6.9064 (0.000) 0 -6.4030 (0.000) 0 i(0) source: authors‟ calculations note: mackinnon p-values at 5% level are -2.967110, -3.66776 and -1.961687 for intercept, trend and intercept and none respectively. table 3 shows the adf unit root test for the cpi components for pakistan. the hcr and pg are stationary at first difference i(1) and remaining variables are stationary at i(0). table 4: results of unit root test of wpi disaggregated model (1982-2015) variables intercept lags trend and intercept lags none lags conclusion hcr -1.1426 (0.6864) 0 -1.3020 (0.8693) 0 -1.0678 (0.2521) 0 i(1) pg -1.9098 (0.556) 0 -1.5813 (0.499) 1 -0.9541 (0.2963) 0 i(1) gi -6.0968 (0.000) 0 -6.0740 (0.000) 0 -6.3166 (0.000) 0 i(0) fi -6.0962 (0.000) 0 -6.0770 (0.000) 0 -6.3498 (0.004) 0 i(0) rmi -6.3407 (0.000) 0 -6.3316 (0.000) 0 -6.6367 (0.000) 0 i(0) review of economics and development studies vol. 5, no 4, 2019 598 source: authors‟ calculations the above table reveals that hcr and pg are stationary at i(1) while all other variables are stationary at i(0). table 5: results of unit root test of aggregate price levels model (1982-2015) variables intercept lags trend and intercept lags none lags conclusion hcr -1.1426 (0.6864) 0 -1.3020 (0.8693) 0 -1.0678 (0.2521) 0 i(1) pg -1.9098 (0.556) 0 -1.5813 (0.499) 1 -0.9541 (0.2963) 0 i(1) gdpdi -6.1439 (0.000) 0 -6.0736 (0.000) 0 -4.6702 (0.000) 0 i(0) wpii -6.4637 (0.000) 0 -6.8981 (0.006) 8 -4.8346 (0.000) 0 i(0) cpii -3.0296 (0.424) 1 -3.0704 (0.569) 0 -1.2417 (0.009) 1 i(1) spii -6.8061 (0.000) 0 -7.2183 (0.000) 1 -6.1139 (0.000) 0 i(0) source: authors‟ calculations note: mackinnon p-values at 5% level are -2.967110, -3.66776 and -1.961687 for intercept, trend and intercept and none, respectively. table 5 shows the adf unit root test for the aggregate price levels for pakistan. the table 5 reveals that hcr and pg are stationary at i (1) while all other variables are stationary at i (0). 4.2 bounds test analysis in this section, table 6 shows the bounds test of cpi, wpi components and aggregate price level with the poverty models which are model one to six. the bounds test is applied to check whether ardl is applicable or not. to apply the ardl f-statistics of the model must be between upper and lower bounds value. table 6 illustrates the bound values of cpi, wpi disaggregate and aggregate models with hcr and pg. the results represent that all the values of f-statistics are between the bounds extreme values that means the long run correlation exist. table 6: bounds test results of model 1 2 3 4 5 and 6 models f-statistic at 5 % level of significance at 10 % level of significance io bound i1 bound io bound i1 bound model 1 6.97 2.33 3.46 2.07 3.16 model 2 37.0 2.33 3.46 2.07 3.16 model 3 26 2.86 4.01 2.46 3.62 model 4 4.83 2.86 4.01 2.46 3.62 model 5 26.4 2.86 4.01 2.46 3.62 model 6 4.38 2.86 4.01 2.46 3.62 source: authors‟ calculation 4.3 results of the models: long run analysis this section illustrates the long run results of the model one and two.. the models in table 5 use the headcount ratio and the poverty gap index to estimate the incidence of the poverty and depth of the poverty due to the change in the prices of the cpi components. table 6 reveals the long run results of the model three and four. the model flli -6.6243 (0.000) 0 -6.6464 (0.000) 1 -6.0838 (0.000) 0 i(0) mi -6.6349 (0.000) 0 -6.1948 (0.002) 1 -6.1468 (0.000) 0 i(0) bmi -6.3409 (0.000) 0 -6.3310 (0.000) 0 -6.6364 (0.000) 0 i(0) review of economics and development studies vol. 5, no 4, 2019 599 three and four in table 6 estimate the incidence of the poverty and depth of the poverty due to the change in the prices of the wpi components. table 7 explicate the long run results of the model five and six, the models estimate the incidence of the poverty and depth of the poverty due to the change in aggregate price levels. 4.3.1 long run results of poverty models (cpi disaggregated analysis) the long run results of the cpi components with poverty are shown in the table 7. table 7 manifests the impact of price levels on hcr and pg in pakistan. the significant positive impact of price levels on hcr and pg in pakistan is revealed. the positive relationship is justified by following the reasons. firstly, when price level increases the real income of the poor decreases which causes the reduced number of goods and services available for consumption of the poor that ultimately increases the poverty in pakistan. ravellion (2000) also explained that an increase in the prices was associated with the decrease in the real wages which dwindle the amount of goods purchased by the poor and increases the incidence and depth of poverty. son and kakwani (2006) explored that the poverty increased due increase in price level and decrease in real wages. so, through the increase in price levels the poverty increases in pakistan. our results are supported by the son and kakwani (2006) and coleman (2012). table 7: long run results of poverty models (disaggregated analysis, 1982-2015) source: authors‟ calculations note: the parenthesis values are probability values secondly, in the political economy of pakistan the political competition among the political parties to win the voters and the for the justification of the dictatorship the public expenditures increased, in absence of strong tax base the tax rate increased to meet escalated public expenditures. the amplifying tax burden only increases the price levels and increases the poverty as well. sachs (1989) highlights that weak political structure, instability and pressure groups laid burden on the inflationary financing of government that leads to the hyperinflation, increase in variable poverty models (disaggregated) model 1 model 2 dv: (hcr) dv:( pg) atfi 1.172776 (0.4442) 2.971306 (0.1248) hri -6.661729 (0.0341) -3.664677 (0.0806) ei 2.214144 (0.0646) 3.129616 (0.0842) reei -4.841262 (0.0182) 4.478097 (0.0763) clpai -2.076163 (0.0096) 0.668390 (0.1462) mi 4.613011 (0.0381) 0.808379 (0.3114) gi 8.226677 (0.0486) -8.344036 (0.0663) fbti 1.798669 (0.0767) 2.218618 (0.1641) hfei -0.976716 (0.6443) -7.446642 (0.0769) tci -0.224122 (0.8087) 0.143048 (0.8683) c 0.846381 (0.0123) -0.062170 (0.6216) review of economics and development studies vol. 5, no 4, 2019 600 poverty. our results are supported by edwards (1994), desai et al. (2003), al-marhubi (2000) and desai et al. (2006). thirdly, the weak bargaining power of the workers union also increases poverty, as the price level increases in the economy the weak bargaining power of workers union is unable to negotiate the wages, so, at same monetary wages the increased price level reduces real wages which make the workers to cut consumption of goods and services that increases the poverty. albanesi (2006) reveals that the price shocks reduces the real wages of the workers with weak bargaining power and enhances the level of poverty. the author further highlighted that the monetary and fiscal policies, income tax and wage rate determination are the bargaining game between governments and the pressure groups. our results are also advocated by (jacoby, 2016). fourthly, the poor system of indexation contributes to the amplifying the hcr and pg in our results. when the price level increases in the economy the poor system of indexation cannot compensate the people influenced severely because the indexation has not properly established or managed, so, it contributes to the increase in hcr and pg. boskin et al. (1998) elucidates that reduction in the poverty and income in equality based on the proper information of the poor and to establish efficient system of indexation to compensate the poor in cases of price spike. the results our study are backed by amble and stewart (1994) and easterly and fisher (2001). fifthly, shopping time approach explains the positive impact of price level on hcr and pg. the unavailability or poor access to the delayed transaction instruments for spending money increases poverty. the households with fewer access to delayed transaction methods inflamed more by the price level spike. cysne et al. (2006) explains that inadequate access to the modern delayed transaction technologies cause households „welfare loss. the results are consistent with the henriksen and kydland (2010). table 5 also reveals the negative association among price levels, hcr and pg. the paradox results explain that with increase in price level the hcr and pg reduce. the reasons for the paradox association are as under, firstly, in the presence of subsidies and social security benefits reduces the hcr and pg despite price spike. when price level increases in the economy the subsidies and social security benefits provided by the government increases the monetary income of the people and the people become more immune to the price hike. achdut and bigman (1991) elaborates the phenomenon that despite skyrocketing prices the provision of subsidies and social security benefits abolish the inflationary influence on poverty. secondly, the lucrative opportunity cost of holding liquid assets by people reduces the hcr and pg. the more the opportunity cost of holding liquid assets the fewer the poverty will be. the people utilized the delayed payment instrument to purchase goods and services and put liquid assets for productive use. freeman and huffman (1991) illustrates that people face with transaction cost of money while make purchase of goods and services, so. if interest rate is high and transaction cost is low than the people turn liquid assets to the interest bearing bonds and securities and avail delayed transaction tools for purchase of goods and services, this increases monetary income and reduces poverty. our results are supported by the freeman and kydland (2000) and simonsen and cysne (2001). thirdly, the dutch disease is a situation where a specific sector of economy grows more than the others, in this case the wages in that particular sector also increase that reduces the poverty in that particular sector along with inflation. estrades and terre (2012) reports that due to the dutch disease the wages shoots and the incidence and depth of poverty level dwindles. our results are according to the valensisi (2008). fourthly, the philips curve clarifies the negative correlation with price levels and hcr, and pg. an increase in the price levels reduces the unemployment rate which implies that the income of households increases and the poverty decrease. mocan (1995) explains that price hike in the economy reduces the structural unemployment amplifying the household income. out results are in line with the cutler and katz (1991). fifthly, trickledown effect demonstrates the positive relationship among hcr and pg. it implies that the consistent growth of a country trickles the benefits of growth to the poor and the incomes of the poor starts increasing that reduces poverty. the phenomenon was also illustrated by kuznet in his inverted u-hypothesis. khattak (2014) clarifies that the high rate of gdp growth reduces poverty in pakistan. our results are supported by lahiri (2010) and namini (2016). review of economics and development studies vol. 5, no 4, 2019 601 sixthly, the strong bargaining power or workers union reveals the positive association among hcr and pg. an increase in the price level in the economy with strong bargaining power of workers union negotiate for high wages and reverse the impact on price level on poverty. albanesi (2006) elucidates that strong bargaining power of the worker set higher monetary wages and reduces poverty. 4.3.2 long run results of poverty models (wpi disaggregated) the long run results of the wpi components with poverty and income inequality are shown in the table 8. this table explains reveals hcr is positively associated with the gi and bmi while negatively associated with the fi, rmi, flli and mi. the pg is positively associated with the fi, rmi and mi while negatively associated with the gi, flli and mi. the justifications of both the positive and negative signs of variables are already discussed in the illustration of table 7. table 8: long run results of poverty models (wpi disaggregated analysis, 1982-2015) variable poverty models disaggregated model 3 model 4 dv: (hcr) dv:( pg) gi -23.016336 (0.0866) -17.66923 (0.1033) fi 12.622346 (0.1767) 7.697302 (0.1066) rmi -6.308424 (0.0381) 9.160873 (0.0786) flli -6.914371 (0.0368) -7.713327 (0.0622) mi -7.404816 (0.0926) 4.014363 (0.0608) bmi 1.446906 (0.3679) 2.044836 (0.0670) c 0.968617 (0.1611) 4.388961 (0.0624) t 0.017168 (0.1046) --- source: authors‟ calculations 4.3.3 long run results of poverty models (aggregate price levels) the long run results of model 5 and 6, the aggregate price levels with poverty are shown in the table 9. table 9: long run results of poverty models (aggregate analysis, 1982-2015) variable poverty models aggregated model 5 model 6 dv: (hcr) dv:(pg) cpii 23.097769 (0.4347) 4.433348 (0.6164) wpii -10.176636 (0.0937) 3.207001 (0.0913) spii 8.773611 (0.0488) 8.470184 (0.0626) gdpdi -1.430872 (0.0087) 2.763136 (0.1161) c 0.642490 (0.2729) 0.301712 (0.8912) review of economics and development studies vol. 5, no 4, 2019 602 the table 9 manifests the positive correlation of hcr with the cpii and spii while negative correlation wpii and gdpdi. the pg is positively correlated with the cpii, wpii, spii and gdpdi. the reasons of both positive and negative signs of variables has discussed in the illustration of table 7. 4.4 results of the error correction models having examined the long run relationship among the variables employed in the model, error correction model (ecm) is used to investigate these short run variations. table 10 shows the short run error correction results of the poverty models 1 and 2 with the cpi components. table 10 reveals the short run error correction results of the model three and four. table 11 shows the short run error correction results of the models five and six. 4.4.1 error correction results of poverty models (cpi disaggregate analysis) the error correction results of the cpi components with poverty are shown in the table 10. table 10: error correction results of poverty models (cpi disaggregate analysis) variable poverty models (disaggregate) model 1 model 2 dv: (hcr) dv: pg d(hcr(-1)) -0.612946 (0.3616) --- d(hcr(-2)) -0.600676 (0.3762) --- d(hcr (-3)) 0.413734 (0.4466) --- d(pg(-1)) --- -0.30076 (0.2088) d(pg(-2)) --- 0.261118 (0.2470) d(pg(-3)) --- 1.037396 (0.0686) d(atfi) -1.018921 (0.0831) -1.369063 (0.0766) d(hri) 2.766124 (0.0128) -1.682270 (0.1097) d(ei) 0.277932 (0.4630) 1.682270 (0.1194) d(reei) 0.716231 (0.3712) 0.806067 (0.1621) d(clpai) 0.667200 (0.0066) 1.486874 (0.4306) d(mi) -1.779367 (0.0067) -0.026271 (0.6704) d(gi) -2.019884 (0.1928) -1.962839 (0.1062) d(fbti) -1.164678 (0.0361) -0.067166 (0.7611) d(hfei) 2.822662 (0.1821) -0.472810 (0.6442) d(tci) -0.146124 (0.8121) 0.636476 (0.1847) t 0.003326 (0.1664) -0.009297 (0.0687) cointeq(-1) -0.6476 (0.0284) -0.4979 (0.0612) source: authors‟ calculations review of economics and development studies vol. 5, no 4, 2019 603 the dependent variables in model 1 and 2 are the poverty head count ratio and poverty gap respectively. in table 10 values of error correction coefficients of model 1 and model 2 are -0.6476 and -0.4979 respectively. negative signs show the short run convergence to the equilibrium. model 1 shows the long run dispersion from equilibrium due to short run jolt will be corrected in six months while in model 2 the convergence will occur in approximately five months. 4.4.2 error correction results of poverty models (wpi disaggregate analysis) the error correction results of the wpi components with poverty are shown in the table 11. table 11: error correction results of poverty models (wpi disaggregate analysis, 1982-2015) variable poverty models disaggregated model 3 model 4 dv: (hcr) dv:(pg) d(hri(-1)) 0.437467 (0.0024) --- d(pg(-1)) 0.797636 (0.2986) 1.772381 (0.0009) d(gi) 0.3671 (0.0340) 1.637494 (0.0146) d(gi(-1) --- 2.094177 (0.0684) d(gi(-2) ------ 3.649062 (0.0141) d(fi) -0.179814 (0.7768) 0.084184 (0.0907) d(fi(-1)) 1.678969 (0.0109) -0.976332 (0.1690) d(fi(-2)) --- -2.704626 (0.0124) d(rmi) -0.610436 (0.0076) -0.604808 (0.0141) d(rmi(-1)) --- -1.487823 (0.0010) d(rmi(-2)) --- -1.049883 (0.0010) d(flli) -0.923688 (0.0146) -2.036222 (0.0018) d(flli(-1)) --- 0.702686 (0.0233) d(flli(-2)) --- -0.290660 (0.1162) d(mi) 0.188670 (0.4812) 1.861331 (0.0039) d(mi(-1) 1.212361 (0.000) --- d(bmi) 0.226793 (0.0374) -0.868691 (0.0360) d(t) 0.002679 (0.439) --- cointeq(-1) -0.1661 (0.0183) -0.0670 (0.0638) source: authors‟ calculations the dependent variable in model 3 is poverty head count ratio, in model 4 the dependent variable is poverty gap. in table 11 values of error correction coefficients of model 3 and model 4 are -0.1661 and -0.0670 respectively. review of economics and development studies vol. 5, no 4, 2019 604 negative sign shows the short run convergence to the equilibrium. model 3 shows long run dispersion from equilibrium due to short run jolt will be corrected in more than one month. in model 4 the convergence will occur in approximately one month. 4.4.3 error correction results of poverty models (aggregate analysis) the error correction results of model 5 and 6 are shown below in the table 12. table 12: error correction results of poverty models (aggregated analysis, 1982-2015) variable poverty models aggregated model 5 model 6 dv: (hcr) dv:(pg) d(hcr (-1)) 1.00626 (0.0360) --- d(hcr (-2)) -0.442087 (0.2499) --- d(hcr (-3)) 1.633760 (0.0229) --- d(pg(-1)) ---0.844199 (0.0466) d(pg(-2)) ---0.706177 (0.1882) d(pg(-3)) ----0.687127 (0.1717) d(cpii) 27.046161 (0.4976) 6.699817 (0.6720) d(cpii(-1)) -0.164337 (0.1829) -0.067706 (0.3027) d(cpii(-2)) 0.122214 (0.3396) -0.169082 (0.0770) d(cpii(-3)) 0.216074 (0.1661) --- d(wpii) -3.860342 (0.2466) 0.692922 (0.3616) d(wpii(-1)) -0.783861 (0.6012) -0.093798 (0.8184) d(wpii(-2)) 2.876729 (0.2196) -1.681468 (0.1708) d(wpii(-3)) 1.39489 (0.3423) -2.291066 (0.0616) d(spii) 1.696764 (0.1970) -1.16890 (0.1021) d(spii(-1)) 0.666070 (0.6696) 0.184967 (0.6868) d(spii(-2)) -2.701223 (0.2269) 1.766746 (0.1730) d(spii(-3)) -1.666949 (0.1970) 2.368992 (0.0694) d(gdpdi) -0.043842 (0.6879) 0.224396 (0.1364) d(gdpdi (-1)) 0.236607 (0.0693) 0.06360 (0.4107) d(gdpdi (-2)) 0.346118 (0.0766) -0.116216 (0.1710) d(gdpdi (-3)) 0.802096 (0.1037) 0.077161 (0.3639) cointeq(-1) -1.1820 (0.0360) -0.1426 (0.1460) source: authors‟ calculations review of economics and development studies vol. 5, no 4, 2019 605 the dependent variable in model 5 is poverty head count ratio while in model 6, the dependent variable is poverty gap. in table 12 values of error correction coefficients of model 5 and model 6 are -1.1820 and -0.1426 respectively. negative sign shows the short run convergence to the equilibrium. in model 5 the convergence to longrun equilibrium will occur two months approximately. in model 6 the convergence will occur in more than one month. it is also observed that in all ecm models the speed of adjustment is different. it might be due to the different dependent variables in different models. 5. conclusions, policy implications and future research agenda price level is a crucial factor in our routine lives while the individuals are diverse in terms of their wants, pattern of income and consumption. hence, the impact of price levels on the individuals is different. the study examined the impact of change in prices of components of the price levels and the change in the aggregate price levels on the poverty in pakistan. the study collected data of aggregate and disaggregate price levels, and poverty in pakistan from world development indicators (wdi) and the handbook of statistics of the state bank of pakistan (sbp) for the years 1982-2015. heterogeneity of the base of data of the price levels and their components was removed by using linear data splicing method and all the data converted to same base. the ardl method is used to access the correlation among variables. the results of the study are diverse in some cases, while are according to the theory in other cases, leading to a paradoxical situation. the results reveal that poverty has positive relationship with price level components and the aggregate price levels which increase the incidence and depth of the poverty in pakistan. the increase in poverty is not merely associated with the deprivation of food only but is also linked to essentials of life such as food, clothing, education, health, freedom of speech, richer cultural life, justice, self-esteem etc. the development economists of our time reveal that the poor are more insecure and defenceless and victim of crimes as compared to the rich while the phenomenon becomes worse for the poorest sections of the society. the reason for positive association is the reduced real income of individuals, weak bargain power and poor system of indexation. the paradoxical results explain a positive association between components of the price levels, aggregate price levels, poverty manifested that increase in the prices of the components of the price levels, and aggregate price level reduced the poverty in pakistan. these results are due to the negative relationship between inflation and unemployment, trickle down and strong workers bargaining power. however, due to large number of population, living in the rural areas where average income of household is very low, the inflation hurts them adversely. the government of pakistan needs to consider policies for retail and wholesale prices as well. the following are some of the policy recommendations:  the government of pakistan may focus on components of the cpi that are causing poverty such as atfi, ei, fbti etc. the inflation rates may be checked properly and their effect may be compensated by proper policies to reduce the poverty.  the economic managers of pakistan may consider components of the cpi that are reducing poverty such as hri and hefi etc. these components may be properly regulated.  the government of pakistan may consider the components of wpi that are increasing the poverty such as. fi, bmi etc. hence, inflation rates may be controlled.  the policy makers may properly check the components of wpi that are decreasing the poverty such as. gi, rmi etc. these inflation rates must be properly managed for better gains in the economy. the present study explores the association of aggregate and disaggregated price levels and poverty in pakistan. however, there is a need for future research to explore the relationship between consumption poverty and price levels. references achdut, a. and bigman, d.(1991). the anatomy of changes in poverty and income inequality under rapid inflation: israel 1979-1984.structural change and economic dynamics.2 (1), 229-243. belongia, m.t. 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(2017). the income–inequality nexus in a developed country: small-scale regional evidence from austria. regional studies. issn: 0034-3404 muhammad, a. a., amir, m., & amin, w. (2018). the relationship between poverty, income inequality and unemployment: evidence from ardl and bound testing approach. european online journal of natural and social sciences, 7(1),42. newbery, d.m.(1995). the distributional impact of price changes in hungary and united kingdom. the economic journal. 105(431), 847-869. parkin. (2014). macroeconomics. pearson publishers. powers, e. t. (1978). inflation, unemployment and poverty revisited. 2-13. ravallion, m.2000. price, wages, and poverty in rural india: what lesson do the time series data hold for policy? food policy. 25, 351-364. son, h.h. and kakwani, n. (2006). measuring the impact of prices on poverty. united nation development program working paper no 33. son, h.h. and kakwani, n.(2009). measuring the impact of price changes on poverty. journal of economic inequality. 7, 395-410. wodon, q., tsimpo, c., yetna, c., joseph, g., adobo, f. and coulombe, h. (2008).potential impact of higher food prices on poverty. world bank working paper no. 4745. wood, b.d.k., nelson, c.f. and nogueira, l. (2012). poverty effects of food price escalation: the importance of substitution effects in mexican households. food policy.37, 77-85. review of economics and development studies, vol. 7 (1) 2021, 63-76 63 depreciation of pak rupee and its effects on tax collection by fbr farzana munir a , muhammad athar ishaq b , shees khalid c , hina ali d a assistant professor at school of economics, bahauddin zakariya university, multan, pakistan email: farzanamunir@bzu.edu.pk b phd scholar, school of economics, bahauddin zakariya university, multan, pakistan & additional commissioner inland revenue / federal board of revenue, multan, pakistan email: dratharishaq76@gmail.com c a-level scholar, beaconhouse college programme, multan, pakistan email: sheeskhalid11@gmail.com d assistant professor, department of economics, the women university multan, pakistan email: hinaali@wum.edu.pk article details abstract history: accepted 05 march 2021 available online march 2021 this research paper is an attempt to analyze the effect of rupee depreciation on total tax col-lection and on types of tax collection. this study employed ardl methodology on empirical data of pakistan for the period of 1990 to 2018 and found that depreciation of pak rupee negatively affects overall tax collection both in short term and long term. its effect is particularly detrimental in case of income tax and custom duty. in case of income tax it deteriorates tax collection by reducing real income of persons and businesses and in case of customs it reduces tax collection by making imports costly. it is also found that depreciation of currency negatively effects tax collection from agriculture, industry, services and imports whereas it positively effects tax collection from consumption, cpi, remittances and interest rates. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: rupee depreciation, tax collection, withholding taxes, fbr, ardl methodology, pakistan jel classification: h20, e6, c22 doi: 10.47067/reads.v7i1.322 corresponding author’s email address: farzanamunir@bzu.edu.pk 1. introduction since depreciation of a local currency affects the price of goods and services and consequently affects very important economic variables e.g. consumption, investment, real income, disposable income, interest rates, and government revenues; so this has been a topic of study for many researchers and most of them have studied this phenomenon in context of above mentioned variables. as proportion of cross border goods and services is increasing in the consumption mix of every economy, so impact of depreciation of local currency on prices of goods and services has increased tremendously. review of economics and development studies, vol. 7 (1) 2021, 63-76 64 however the effect of currency depreciation on local tax collection have remained an understudied phenomenon and seldom been a focus of the researchers. pakistan's revenue growth is impressive but its proportion in relation to economic growth and its tax to gdp ratio is stagnant. depreciation of pak rupee effect has been the achilles heel of pakistan economy and it in turn affects many economic variables including tax collection. depreciation of rupee affects other macroeconomic variables including imports, exports, industry, consumption, cpi, interest rate and resultantly total tax collection and tax wise collection. fbr is the premier government agency for collection of tax revenues and it collects more than 90% of the total government revenues. since 1990, pakistan is shifting swiftly to withholding mode of taxation which is also referred as tax deduction at source. through withholding, the government of pakistan is able to generate tax on transactions rather than on true income or consumption and that’s why many economic indicators in pakistan have hidden component of taxation in it. although tax is a fundamental economic variable but it is governed by fiscal laws which differ from country to country. tax laws are amongst the most rapidly changing laws of any country and any study on taxation shows huge variation from country to country as it depends upon the time period of study and taxation system adopted. each country has unique economic problems and objectives therefore it adopts different strategies to fulfill its economic requirements. majority of the studies done only refer to the figures of tax collection and use dummy variables for referring socio-economic conditions like transparency, corruption, compliance to tax laws etc. these studies are normally done by the economists who are not very well aware of change in the tax laws and tax administration. change in tax laws is a very important factor which affects tax collection. the studies done earlier in pakistan regarding taxation were limited to total tax collection which was usually taken as a dependent variable and determinants of tax collection were taken as independent variables. these studies were lacking various aspects as they did not studied effects of variables on types of taxes i.e. direct taxes or indirect taxes. the studies also did not properly identified effects of withholding mode of collection on various variables. for example, rural sector is usually not studied in the tax research based on the assumption that agriculture income is not under tax net. however due to withholding mode of taxation the fbr is able to tax its consumption in income tax and sales tax. the studies done earlier looked at tax collection in terms of nominal values only and tax collection in real terms was not studied. this research has also studied the changes in constitution and tax laws which could result in abnormal behavior of the variables. the studies done earlier have looked at agricultural sector behavior in total tax collection. this study has studied impact of agriculture sector in total tax collection through impact of consumption of taxable supplies and tax collection through withholding mode of collection. this research tries to fulfill the shortcomings of previous research and find out the relationship between depreciation of pak rupee and its effect on total tax collection by the fbr as well as on different types of taxes collected by fbr. this research has also studied the set of variables which affect particular types of taxation. this study has tried to answer the following questions in case of pakistan for the period of 1990 to 2018. • how depreciation of pak rupee affects total tax collection in aggregate? • how depreciation of pak rupee affects tax collection by categories /types of taxes? • to find out the possible variables that affect total tax collection and its categories, specifically in pakistan. review of economics and development studies, vol. 7 (1) 2021, 63-76 65 different categories of literature are available that discuss the effect of depreciation of local currency on tax collection. these categories are made on the basis of the researcher’s findings as discussed below: sargent & wallace (1973), frenkel (1977) and jacobs (1977) in their research found that there is a no correlation between inflation and tax collection. olivera (1967), dutton (1971) and aghevli & khan (1978) in their studies based on the fiscal deficit and inflation, found no relationship between depreciation and tax collection. ghura (1998) in his study on developing countries, patinkin (2001) in his study on france, khattry & mohan (2002) in their study on 80 countries and ayodele & obafemi (2003) in their study on nigeria could not find any relationship between currency depreciation and tax collection specially in case of international trade taxes . bird, r.m.(1976) and krueger (1978) in his study on turkey, gulhati (1986) in her study on israel, ebrill (1999) in his study on 105 developing countries and tayyaba (2012) in her study found that there is a positive relation between currency depreciation and tax collection through the channel of inflation. they found that depreciation promotes inflation and higher inflation in effect increases tax collection. costantino (1948) in his study on germany after i and ii world war, found that that in case of hyperinflation the real government revenue decreases. bird, r.m. (1976) observed that currency devaluation can affect tax collection on both sides (increase or decrease).the behavior depends upon the impact of tax on supply chain and value chain and velocity of circulation of money. aghevli and khan (1978), gulhati et al. (1986) studied this phenomenon in india , roca and priale (1987) in their study on peru, hossain (1987) in his study on bangladesh found similar results. liam p. ebrill and janet gale stotsky (1999) found that deprecation of local currency leads to decrease in taxes on trade. turley (2005) and baunsgaard and keen (2005) studied this phenomenon in a cluster of developing countries and found similar relationship. tanzi, vito (2007) studied this phenomenon in case of argentina and observed consistent results. roca and priale (1987) studied this phenomenon in context of structural adjustment programme for peru, zambia and ghana and found that depreciation effects tax collection in either way but it depends upon the economic system of the country. imf in its government finance statistics yearbook (1989) observed that developed countries rely more on the trade taxes whereas the developing countries rely more on the income tax and sales tax and as a result currency value of most developed countries is not volatile and therefore the effect of currency depreciation on revenue in developed countries is not significant whereas it is significant in case of developing countries. craig s. hakkio (1991) observed that evidence on relationship between budget deficits and the exchange rate varies from countries to countries and it in turn depends upon the economic and taxation system adopted by the country. adam, bevan, and chambas (2001) examined the relationship between tax revenue, exchange rate, and trade openness in sub-saharan africa using a difference generalized method of moments (gmm) dynamic panel estimation and their results varied from country to country. eichengreen and choudhry (2005) in their study found that the relationship depends upon the taxation system adopted by a country. teresa ter-minassian (2007) in imf papers found that depreciation effects tax collection but it depends upon the exchange rate system of that country. bilquees (2004) in her study on pakistan found that gdp growth has positive and significant relationship with sales tax collection in pakistan. chaudhry and munir (2010) in their study on pakistan took data of 37 years and found that manufacturing sector, external debt, tax base, foreign https://en.wikipedia.org/wiki/costantino_bresciani_turroni review of economics and development studies, vol. 7 (1) 2021, 63-76 66 remittances and openness of economy has positive whereas service sector, agriculture sector, devaluation, foreign aid and low literacy rate have negative relationship with tax collection. the paper is further divided into different parts. part 2 deals with conceptual framework, part 3 is related to data and estimation methodology. part 4 deals the effect of different variables on total taxes and types of taxes. the last part is related to conclusion and policy recommendations. 2. conceptual framework effects of currency depreciation on tax collection depends on a number of factors including extent and coverage of tariff and taxes, price elasticity of demand, income elasticity of demand, rate of tariff, velocity and circulation of money, inventory level, balance of payments, trade regulations, local value addition, business response to change in tax laws and depreciation, substitute development and effect on real and disposable income. 2.1. effects of currency depreciation on tax collected at import and export stage with currency depreciation the price of imported goods increases and thus the revenue from import duties may either decreases or increase depending on price elasticity of demand. however depreciation of local currency also boosts up exports and custom duties on exports increases. the net effect depends upon the structure of the imports and exports, their elasticities and tax system of the country. increase in prices of imported goods increases profit margin of the persons engaged as importers but it happens only in the short term. increase in prices of imported goods is a good incentive to local production of indigenous products and the government revenue may increase in terms of local taxes. on the contrary reductions in tariff leads to lower prices for imported goods and services, which lead to increase in profit/margins and thus higher collection of taxes on income and profits. 2.2 effects of currency depreciation on income (tax), profits and capital gains throughout the world, taxes on income and profit are collected directly at the end of financial year or it is collected on periodic basis on the principle of withholding tax regime. as per doctrines of classical economics, depreciation of the local currency does not have any effect on profit and income of business and individual in the long runs as all the variables are adjustable in the long run. however in the short run, increase in price negatively affects income and profits of business and thus tax collection decreases. the profitability is also dependent upon the inventory levels, and their management style. depreciation results in inflation and inflation can enhance tax burden under the income tax laws on individuals. the income tax laws are usually designed on the canon of ability to pay principle and there are higher tax rates for persons in the higher tax income bracket. in case if the nominal income increases then it is affected by the higher tax bracket and this phenomenon is known as “bracket creep”. if the government does not allow revision of income tax brackets then the tax revenues increases and in cases when government allow them to vary with advent of inflation then the revenue falls. currency devaluation also decreases nominal value of tax exemptions, credits and deductible allowances. in case if they are allowed as a percentage of profit then the amount of tax may increase or decrease but in case if they are given in fixed currency terms then its effects on the revenue is positive. however, if inflation results in decline in the personal income then the effect of devaluation on tax revenue collection is always negative. devaluation usually results in an increase in interest rates because inflation risk premium is charged at time of calculation of interest, as a result of it income of those person receiving interest increase and income of persons who are paying interest decreases and thus the government revenues are affected proportionately. those businesses who have borrowed capital on interest observes a review of economics and development studies, vol. 7 (1) 2021, 63-76 67 decrease in their income in the short run but in long run the effect gets subside. as in tax laws of most of countries the interest expense is allowed as a deductible allowance from the gross profit therefore the net profit decreases and the income tax decreases. 2.3 effects of currency depreciation on sales tax/vat the effect on sales tax and value added tax depends upon the method of taxation and firm’s management decisions. in case of fast-moving consumer goods and where the tax is collected on the basis of sales, the devaluation results in the higher revenue. however, this phenomenon is also largely dependent upon the price elasticity of demand and in case of goods having high price elasticity the revenue declines. the effect of devaluation also depends upon the firm’s decisions. in some cases, the firms decide not to transfer the hike in price to the consumers for taking market share and in such scenario revenue collection remains unaffected. but this phenomenon is temporary and in the long run this decision is not feasible. 3. data and methodology in the light of literature review and on basis of tax collection relationship, following variable were selected for our study that are shown in table 1. their expected signs and sources of data are also mentioned in this table. table1: variable, their expected signs and source of data variable abbreviation used data source expected sign (+ve or -ve) total tax (dependent variable) (taxt) fbr year books exchange rate (dollar) state bank of pakistan reports + consumption (consum) economic survey of pakistan + imports (import) economic survey of pakistan + interest rates (ir) state bank of pakistan reports agriculture output (agr) economic survey of pakistan + services out put (serv) economic survey of pakistan + rural population (ruralp) world bank development index + industrial output (ind) economic survey of pakistan + consumer price index (cpi) world bank development index + remittances (remit) economic survey of pakistan + review of economics and development studies, vol. 7 (1) 2021, 63-76 68 3.1 descriptive analysis descriptive analysis of the data is analyzed, and the results are reported as under: table: basic statistics for the whole sample, 1990-2018 mean median maximum minimu m std. dev. skewnes s kurtosis observation s agr 2494.77 0 1164.751 7764.218 197.400 2481.38 2 0.903 2.322 29 consum 9755.78 5 4647.179 32499.75 0 760.912 9915.06 8 0.967 2.561 29 cpi 8.368 7.921 20.286 2.529 4.163 0.637 3.418 29 dollar 63.700 60.022 109.857 21.707 27.914 0.126 1.788 29 import 17731.57 0 4749.95 5 73457.52 0 434.244 21236.17 0 1.116 3.019 29 ind 2145.87 0 1416.986 6251.345 191.400 1971.837 0.789 2.148 29 remit 58462.2 40 13514.99 0 253706.0 00 877.304 80548.2 80 1.245 3.060 29 ruralp 103.921 103.742 134.404 74.733 18.225 0.032 1.794 29 serv 5565.162 2668.79 0 18391.390 371.051 5652.47 0 0.949 2.541 29 source: authors’ calculations based on data. majority of data is spread within spread of two standard deviations, so the data is acceptable up to confidence of 66 %. on checking for skewness most of variables are in acceptable range from -1 to +1. credit, remittances and imports are exceptions which are highly skewed and the reasons for them are explainable. the credit with skewness of 1.200 is skewed because after 9/11 terrorist attacks in united states a large amount of money was transferred to pakistan by pakistanis living abroad and this caused real interest rate to be negative and commercial banks reserves increased to the extent of bubble. same applied to the remittances with skewness of 1.245. skewness in imports valuing at 1.116 is related to the government policies which witnessed a high bill of imports during 2009 to 2013 due to increase in bill of oil due to skyrocketing prices of oil and they again witnessed an increase after 2015 due to import of industrial machinery for installation of power plants and development of cpec projects. for kurtosis the variables are in acceptable range, with exceptions of credit having kurtosis of 3.285, remittance having kurtosis value of 3.060 and imports having kurtosis value of 3.019. these variables also have skewness and are also in normal range, and reasons are the same as discussed above. review of economics and development studies, vol. 7 (1) 2021, 63-76 69 3.2 estimation methodology after checking the variables for stationarity (results are not shown due to length of the article), this study uses auto regressive distributive lag (ardl) technique. fmols and ecm techniques with hannan quinin criteria are used for cross checking of results. the values are taken at 1st difference with trend and intercept level, with one lag for dependent variable and no lag for independent variables. one lag for dependent variable is used because the independent variable are determined on the basis of fiscal policy which are announced at time of budget and it takes time to get momentum and produce result. so, taking one lag for dependent variable will adjust the difference of time lag involved. 4. results and discussion 4.1 determinants of total taxation the regression equation & econometric form including all variables is as under taxt = α + β1dollart + β2 servt + β3indt + β4 agrt + β5 consumt + β6 irt + β7cpit + β8remitt + β9 importt + β10ruralpt table 3: comparative results of model specification on ardl, fmols and ecm adrl fmols ecm c -825.650 -478.927 -783.897 (426.561) (249.998) (-525.835) [-1.936]* [249.998]* [-1.491] d(dollar) -10.201 -6.639 -8.445 (5.084) (2.939) -6.310 [-2.007]* [-2.259] [-1.338]* d(serv) -0.253 -0.091 -0.168 (0.191) (0.106) (-0.239) [-1.323] [-0.859] [-0.705] d(ind) -0.171 -0.183 -0.088 (0.172) (0.101) (-0.224) [-0.991] [-1.802]* [-0.391] d(agr) -0.337 -0.483 -0.332 (0.148) (0.079) (-0.156) [-2.277]** [-6.131]*** [-2.124]* d(consum) 0.250 0.272 0.203 (0.120) (0.070) (-0.145) [2.078]* [3.868]*** [ 1.403]* review of economics and development studies, vol. 7 (1) 2021, 63-76 70 d(ir) 20.244 9.928 18.344 (10.288) (5.735) (-11.175) [1.968]* [1.731]* [ 1.642] d(cpi) 6.858 5.785 7.275 (5.114) (3.010) (-5.596) [1.341] [1.922]* [ 1.300] d(remit) 0.010 0.007 0.008 (0.002) (0.001) (-0.004) [4.271]*** [5.993]*** [ 2.073]*** d(import) -0.018 -0.015 -0.022 (0.008) (0.005) (-0.010) [-2.227]** [-3.264]*** [-2.058]** d(ruralp) 427.641 249.337 399.409 (211.367) (123.729) (-261.856) [2.023]* [2.015]* [ 1.525]* r-squared 0.875 0.838 0.877 adjusted r-squared 0.784 0.736 0.764 s.e. of regression 67.648 74.735 71.284 mean dependent variable 138.130 138.130 142.316 s.d. dependent variable 145.478 145.478 146.691 log likelihood -144.163 -138.815 f-statistic 9.568 7.739 note : standard errors are shown in parenthesis ( ) while tstatistics are shown in brackets [ ], where* shows the probability at 10 % i.e. < 0 .1, ** shows the probability at 5 % i.e. < 0 .05 and *** shows the probability at 1 % i.e. < 0 .01 the results are nearly the same as given in the literature findings except the differences due to behavior of industrial and service sector. r 2 by ardl methodology is 0.8753 which means that this model explains 87.5% of variation in tax collection is explained by the set of explanatory variables taken. the results show that the dollar which represents depreciation and devaluation of rupee has negative effect on tax revenue. this relationship is also statistically significant at 5% level of review of economics and development studies, vol. 7 (1) 2021, 63-76 71 significance. these findings are in accordance with theoretical framework and findings of chaudhry & munir (2010). similarly, service, industry, agriculture and import have negative correlation with the tax revenue. the agriculture usually has a negative correlation with tax growth as pointed out by wolde mariam (1997) ghura (1998), leothold (1991), and gupta (2007) and by chaudhry & munir, (2010). it is obvious in case of pakistan because the income tax collection on agriculture is a provincial subject as per constitution, and is collected by the provincial land revenue authorities and its collection is minimal i.e. about rs. 2 billion per year for whole of pakistan and is not reported in the tax collection by the fbr. the fmols also verifies it with coefficient value of -0.4825. the services sector has a positive impact on tax collection as pointed out by bahl (2003), alm et al(2004) bilqees (2004), ahmad and mohammad (2010). however in this study a negative relationship is noted. on ardl the coefficient value is -0.2531, it is -0.914 on fmols and -1.1681 on ecm and is insignificant. chaudhry & munir (2010) in their study also found a negative correlation between tax collection and service growth and they attributed it to the growth of informal and untaxed sub-sectors in service sector. however, consumption, interest rate, cpi, remittances and rural population have positive correlation with tax revenue. since consumption is subject to tax at each stage of economic activity, the tax on consumption is first charged at import stage and then collected by other type of taxes i.e. customs, sales tax, income tax and federal excise. positive interest rate impact is due the fact that interest payments are subject to the deduction of withholding tax under section 151 of income tax ordinance, 2001, and an increase in interest rates also increase the tax collection. positive association of cpi is in consonance with literature review because consumptions is subject to income tax, sales tax, customs and federal excise at various stages as discussed earlier. moreover, due to extractive power of withholding taxes it can even tax previous and past savings which is brought into economy by consumers during period of inflation just to meet the necessary expenses. moreover, higher cpi increases velocity and circulation of money which is taxed at time of every transaction. although the remittances are exempt from income tax and have no direct relationship with the tax collection. their relationship is due to the facts that remittances are half of pakistan's total foreign exchange earnings and helps in maintaining the value of rupee stable. they are the source of living for a substantial part of both rural and urban population and due to consumption generated from the remittances, tax is collected indirectly through consumption. since the living standards of rural areas is converging towards the urban style and through the process of withholding the government is receiving the tax from the rural population as well. the government is also receiving the tax through the electricity and mobile phone services as well. imports have a negative relation with the tax revenue with coefficient of -0.0179 using ardl and -0.0154 through fmols which is highly significant at 5% level. as discussed, depreciation of local currency makes import costly and their purchases decline consequently the tax on the imports decline. 4.2 type wise determinants of taxation in order to find out that how the above considered variables effect different types of taxes the study is repeated on different types of taxes and ardl model was used. the mathematical models are as under: review of economics and development studies, vol. 7 (1) 2021, 63-76 72 1. income tax = α + β1dollar + β2 agr + β3 serv + β4 import + β5remit + β6 consum 2. sales tax = α + β1dollar + β2 agr + β3 import + β4remit + β5 consum + β6 cred 3. customs = α + β1dollar + β2import + β3ind + β4 serv + β5 consum + β6 cred + β7ir 4. federal excise = α + β1dollar + β2 agr + β3ind+ β4serv + β5import + β6remit + β7cred+ β8ir econometric results are tabulated as under: table 4: effect of variables on different types of taxes income tax sales tax customs federal excise d(dollar) -1.800 1.388 -0.203 0.255 (1.713) (1.650) (0.795) (0.388) [-1.051] [0.841] [-1.872]* [0.659] d(agr) -0.209 -0.221 0.039 (0.055) (0.056) (0.014) [-3.831]*** [-3.936]*** [2.842]*** d(import) -0.008 -0.017 -0.002 -0.002 (0.003) (0.004) (0.002) (0.001) [-2.287]** [-4.736]*** [-1.366] [-2.857]*** d(remit) 0.002 0.003 0.0004 (0.001) (0.001) (0.0002) [3.021]*** [3.278]**** [2.120]** d(serv) -0.062 -0.139 -0.018 (0.055) (0.041) (0.009) [-1.137] [-3.384]**** [-2.043]* d(consum) 0.116 0.109 0.084 (0.036) (0.024) (0.027) [3.206]*** [4.539]*** [3.128]*** d(cred) 0.043 0.065 0.012 (0.019) (0.011) (0.004) review of economics and development studies, vol. 7 (1) 2021, 63-76 73 [2.346]** [6.025]*** [2.853]** d(ir) 1.900 1.465 (1.506) (0.723) [1.260] [2.028]* d(ind) -0.120 -0.019 (0.039) (0.012) [-3.077] [-1.656] variable coefficient std. error t-statistic prob.* d(incomt(-1)) 0.381 0.177 2.157 0.044 c 7.609 10.857 0.701 0.492 r-squared 0.832 adjusted rsquared 0.770 d(st(-1)) -0.489 0.152 -3.211 0.005 c -1.656 10.339 -0.160 0.874 r-squared 0.859 adjusted rsquared 0.807 d(customs(-1)) -0.203 0.229 -0.889 0.386 c 8.133 5.282 1.540 0.141 r-squared 0.890 adjusted rsquared 0.842 d(fed(-1)) 0.472 0.159 2.980 0.009 c 1.822 2.615 0.697 0.495 r-squared 0.748 adjusted rsquared 0.615 note : standard errors are shown in parenthesis ( ) while tstatistics are shown in brackets [ ] where * shows the probability at 10 % i.e. < 0 .1, ** shows the probability at 5 % i.e. < 0 .05 and *** shows the probability at 1 % i.e. < 0 .01 exchange rate represented as ‘dollar’ has a positive relationship with sales tax and federal excise duty having coefficient of 1.387 and 0.255 respectively. however it has negative relationship with income tax and customs. the positive relationship with sales tax is due to fact that sales tax is charged on all types of imports with exception of a few items, and major portion of sales tax is derived from petroleum products whose demand is inelastic. so increase in imports increases nominal prices of goods and thus increases sales tax collection. similarly import of tobacco and beverages are most important source of federal excise at import stage. as demand of these items is less elastic, so federal excise collection increase in relation to increase in nominal price of goods. decrease in customs and review of economics and development studies, vol. 7 (1) 2021, 63-76 74 income tax is due to fact that higher amount of custom duties are levied on luxury items. as demand for luxury goods is elastic therefore depreciation of rupee increases prices and thus reduces demand and consequently decreases customs duties. similarly increase in price of goods increases price of final goods and so the demand of them decreases and the producers have to sell them at low profit thus contributing low to income tax. this finding is in consonance to the literature which suggests that price elasticities of demand determine the tax revenue. the results on other variables are also in line with the findings of literature review. 5. conclusions and policy recommendations this paper studies the effect of depreciation of pak rupee on tax collection by fbr over the period of 1990-2018 and distinguishing this effect between overall tax collection and types of taxes. ardl methodology has been adopted and the results were cross checked with fmols and ecm and the model is found correct both for long term and short term. depreciation of pak rupee negatively affects overall tax collection both in short run and long run. its effect is particularly detrimental in case of income tax and customs. in case of income tax it deteriorates tax collection by reducing real income of person and business and in case of customs it reduces demand through price elasticity of demand as imports become more costly. although depreciation of rupee effects sales tax collection positively as it quickly promotes inflationary trends but as income tax and sales tax are two major taxes in pakistan with income tax having biggest share, therefore the overall tax collection is negatively affected due to depreciation of pak rupee. agriculture growth has a negative relationship with overall tax collection and its effect is very significant in short run and long run. industrial growth has a negative relationship with depreciation and tax collection. service sector growth has negative relationship with depreciation and it negatively affects overall tax collection. consumption has a positive relationship with tax collection in general and with all taxes in particular and negative relationship with depreciation. rupee depreciation has a positive relationship with interest rate and tax collection and is significant both in the short term and long term. this relationship is also present with customs and excise. depreciation of rupee has a positive relation with inflation/cpi. remittances has a positive and strong relationship with rupee depreciation and tax collection and affects all types of taxes. import has negative relationship with rupee depreciation and tax collection. increase in rural population has positive relationship with depreciation of rupee and positive and strong relationship with total tax collection. withholding tax regime is the engine of pakistan’s growth but it is regressive in nature and its burden is falling more upon the poor persons of pakistan and even on those people who are not liable to be taxed. consumption is very important determinant of tax revenue in pakistan, but withholding is effecting it through increase in prices of goods and services. the optimization of withholding tax rates with respect to tax collection needs to be done in fiscal policy formulation. since the industrial growth is not contributing significantly in the growth of tax revenues therefore the government should needs to review its policy of granting generous exemptions to the industrial sector. although agriculture growth has no positive relation with tax collection but on the contrary as majority of pakistani population still live-in villages so increase in the income and expenditure of the rural population can have a significant and positive impact on tax collection indirectly through withholding taxes. the government should try to raise living standards of the villages. since tax collection is highly affected by the remittances and the indigenization process in gulf and decline in oil prices can severely affect this, therefore the government should take forestalling steps to mitigate this problem. review of economics and development studies, vol. 7 (1) 2021, 63-76 75 pakistan tax collection is highly susceptible to external shocks and any major local or international events cause’s fluctuations in tax collection. this is an inherent flaw of withholding taxes. as government has shifted entirely towards indirect taxes in the form of withholding taxes, there is need to increase its proportion of direct taxes so that in case of any volatility in the domestic or international environment the government programs should not get affected. depreciation of pak rupee is highly integrated and correlated negatively with almost all the major tax determinants of pakistan. it is one of the most decisive factors which effect the behavior of other variables so it is recommended that the value of dollar should not be allowed to increase. reference(s) aghevli, b. b., & khan, m. s. 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(2000). fiscal adjustment to currency devaluation in selected african countries: an empirical analysis. african development review, 12(1), 1-23. review of economics and development studies, vol. 7 (1) 2021, 101-117 101 financial development and natural resources dynamics in saudi arabia: visiting ‘resource curse hypothesis’ by nardl and wavelet-based quantile-on-quantile approach imran sharif chaudhry a , muhammad faheem b , fatima farooq c , sajid ali d a dean of social sciences and director, school of economics bahauddin zakariya university, multan, pakistan email: imran@bzu.edu.pk b assistant professor, school of economics bahauddin zakariya university, multan, pakistan; email: faheem@bzu.edu.pk c associate professor school of economics bahauddin zakariya university, multan pakistan email: fatimafarooq@bzu.edu.pk d phd scholar, school of business and economics, universiti putra, malaysia email: sajidali1136@gmail.com article details abstract history: accepted 12 march 2021 available online march 2021 this study analyses the impact of natural resource rent on financial development to test the resource curse hypothesis in saudi arabia on quarterly data span from 1985q1 to 2017q4. we employ two novel methodologies at same time such as nonlinear autoregressive model (nardl) and wavelet-based quantile-on-quantile estimation to check the asymmetric behaviour of natural resource rent on financial development. the findings of nardl confirm the nonlinear behaviour of natural resource rent with financial development. the results also show real gdp, gross capital formation and institutional quality affect financial development positively. the empirical results of wavelet-based quantile-on-quantile estimation method also reveal the heterogeneous response of natural resource rent effect when decomposes into different quantiles that become positive to negative. the results further explain that the natural resource rent has a positive effect in short-run, but it exerts an adverse effect on financial development after attaining stability. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: natural resource rent, financial development, nardl, waveletbased quantile-on-quantile, saudi arabia jel classification: a19, c58, g00, q34 doi: 10.47067/reads.v7i1.325 corresponding author’s email address: imran@bzu.edu.pk 1. introduction the resource scarcity risk is always involved in resource and financial market. natural resources are beneficial in the development and an asset of a country (asif et al., 2020). still, under certain conditions, natural resources create an exigent environment for development in the financial sector (guan et al., 2020). the mostly highly resource-rich economies are facing the reduction in financial review of economics and development studies, vol. 7 (1) 2021, 101-117 102 development level and empirically have shown in literature such as (sachs and warner, 2001; hooshmand et al., 2013; elbadawi and soto, 2016; zhang and brouwer, 2020; khan et al., 2020). the resource-rich countries financial sector may be flushed with liquidity from different sources like government tax receipts, companies (state or private owned) that are working in the resource sector. therefore, it may expect in resource-rich economies more bank credits to household or firms and more developed financial markets. to understand the association of resource and financial development is much essential due to several reasons. natural resources affect financial development, which influences long-run economic growth through a sound mechanism. it helps policymakers to address the resource curse through new advanced strategies and provides a further explanation on a different level of financial development. theoretically, the resource curse theory postulates about the reason of the economic failure of resource abundance countries, and empirically, it is proved in the majority of the studies (sachs and warner, 2001; zhang et al., 2018). the studies explained several factors that cause resource curse hypothesis such as corruption, rent-seeking behaviour, lagged manufacturing sector investment and low level of institutional quality and commodity price shocks in resource-rich countries (mlachila and ouedraogo, 2019). financial development is assumed to be a base for converting resource curse into resource blessing in the presence of high institutional quality, high trade and high quality of human capital (rajan and zingales, 2003). existing studies shows the harmful connection of resources with financial development (cordon and neary, 1982; zoega and gylfason, 2001; guan et al., 2020; sun et al., 2020). on the other hand, there is a literature in the contradiction of these studies that shows the positive link (balassa, 1980; sachs and warner, 1995; auty, 2001; shahbaz et al., 2018; nawaz et al., 2019). thus, our study gives policy guidelines for the achievement of financial development with effective natural resource utilization in an economy and also a lesson for the global world. oil rent is the major source to stimulate resource abundance economies growth through the mechanism of good governance (niknamian, 2019). saudi arabia’s fiscal revenue mostly covers oil revenue, which consists of 80% and non-oil revenue, only 20% of the total revenue from 1970 to 2018 (sama, 2018). there is limited progress toward diversification, and still, saudi arabia heavily depends on oil exports in merchandise exports that accounted for 84% between 2005 to 2018 (al-torkistani et al., 2016; sama, 2018). however, saudi arabia launched a strategic plan ‘vision 2030’, in april 2016, to concentrate on other sectors rather than oil sector, sustainable and balanced the economy ended the next decade and a half (bah and saari, 2020). furthermore, the saudi arabia government gave priority to the financial sector in the implementation of the fourth development plan (samargandi et al., 2014). and saudi arabia has a comprehensive financial infrastructure, islamic bank accounts for 49 % of the total banking sector (islamic financial services board, 2016). however, there is a need to give more focus on the financial sector on a priority basis. considerable research has been done in the abovementioned, but still, there is a need to test the resource curse theory in saudi arabia, which highly resources abundance country. therefore, the contribution of the study in several ways: (i) this paper explores the resource curse hypothesis validation in saudi arabia, and the outcome of this study helps the policymakers and government officials. (ii), the existing studies used the traditional econometric methods to estimate the relation of resource abundance and financial development, but this study uses a recently developed two estimation methods at the same time such as nonlinear autoregressive method and wavelet-based quantile-onquantile estimation method that incorporating issues of time-frequency and nonlinearities. due to several factors, this method attracts and appeals to the researchers over traditional methods like gives more efficient estimators, outlier free and more robust and avoids heteroscedasticity. (ii) furthermore, review of economics and development studies, vol. 7 (1) 2021, 101-117 103 the study uses quarterly data to prove the resource curse hypothesis over 1985q1-2017q4 because this longitudinal data gives the meaningful outcome of two variables in the analysis. the study is proceeding as following: section-ii outlines a succinct theoretical and empirical literature about resource abundance-financial development. section-iii gives adopt methodology and data, and section-iv reports the discussion of the results. section-v evaluates the policy implication and conclusion. 2. literature review the existing literature initially rigorous natural resources as a blessing that is the positive association of natural resources with growth until the 1980s. however, that may convert into a curse as chances of unfavourable political and economic scenarios may increase in resource abundance countries. then it was challenged in the early 1990s, and sachs and warner (1995) gave the concept of the “resource curse hypothesis” that showed the negative association. this is because resourcedependent economies increase natural resources export rather than the production of goods by these resources, and some other factors are responsible for negative economic growth like unstable political and financial institutions, dependence on rent, dutch disease, failure in education (auty and warhurst, 1993; sachs and warner, 2001; van der ploeg and venables, 2009). the resource blessing to resource curse is not true for all countries because countries convert into prosperity due to natural resource and financial development relation with the strong institutional quality background. however, the literature shows an unclear picture to policymakers about this relationship that natural resource is the source of stimulation of economic growth and especially financial growth. the plethora of existing studies show the overall negative tie of natural resources with financial development, especially in developing economies, but this relation is positive in high-income economies. for example, shahbaz et al. (2018) revealed a positive involvement of natural resources and financial development by the argument that enhances due to the diffusion of knowledge and the incessant growth in the united states. nawaz et al. (2019) also support the positive effect on a natural resource on financial development. furthermore, other findings support in positive effect and suggest that more credit available to households and firms in resource-rich economies that contribute to financial development (bhattacharyya and hodler 2014). the other side of the coin in existing literature shows the contradicting results in different resource-rich countries over a different time period. for example, zoega and gylfason (2001) analyzed the resource abundance and financial development relation by employing a seemingly unrelated regression (sur) over 1965-1998 in 85 economies and found a negative association. yuxiang and chen (2011) explore the association of resource and financial development by employing the gmm method over 1996 to 2006. the study concludes that the areas with highly depend on the natural resource are slower in financial development as compared to poor natural resources areas. sun et al. (2020) analyze in emerging seven (e7) countries about the natural resource and financial development link over 19902017. the study concludes that the negative influence of natural resource rent on financial development. in support of this argument, another study explained the connection of resources with other control variables with financial development over 1987-2017 and confirms the resource curse hypothesis for china (khan et al., 2020). similarly, guan et al. (2020) revealed natural resources impact on financial development within multiframework over 1971-20-17 in china and found natural resources and financial development adversely affect. asif et al. (2020) study findings are similar in favour of resource curse hypothesis that is a negative alliance of natural resource with financial development over 1987-2017 in china. the study of shahbaz et al. (2019) explore resource dependence and resource abundance effect on growth in the presence of financial development variables with some others and revealed that resource abundance encourages growth while natural resource dependence slowdown it. hooshmand et al. (2013) explore the outcome of natural resource rent for oil-dependent review of economics and development studies, vol. 7 (1) 2021, 101-117 104 economies in the presence of institutions on financial development. the finding reveals that natural resource deteriorates the financial development process that ultimately declines the growth from 2002 to 2010. other studies like dwumfour and ntow-gyamfi (2018) explored the unclear effect of a natural resource on financial development in 38 african economies over 2000-2012. some other factors trigger financial development like economic growth, gross capital formation and institutional quality. the economic growth of an economy is considered a crucial element or determinant of financial development. the study of song et al. (2020) documents the relationship of economic growth, corruption and financial development in developing countries by employing panel data techniques. the finding supports that economic growth affects positively while corruption associated negatively from the period of 2002 to 2016. ghirmay (2004) explored the relation of economic growth with financial development in african economies by employing vector autoregression and found that economic growth trigger financial development. erdoğan et al. (2020) explored the cointegration between a natural resource, economic growth and financial development for the period of 1996-2016 in selected next-11 countries and findings supports the long-run association between a natural resource, economic growth and financial development. omri et al. (2015) findings are in support of the same result in mena countries. the role of capital formation is considered as one of the most important element that contributes in economic growth as well as financial development which is recently proved in literature in different countries and different regions (khan et al., 2020; ). the study of khan et al. (2020) explored the association of natural resource with the gross capital formation with other control variables for proving the resource curse hypothesis in pakistan. the study employs ardl estimation to test the theory from 1975 to 2017 and found gross capital formation contributed positively to financial development. similarly, in oecd economies, the study of zaidi et al. (2019) results is in favor of the association of natural resource, globalization, human capital and financial development. however, the literature on resource and financial development tends to be inconsistent, and there is a need to investigate more on this issue in most resource dependence country like saudi arabia by hypothesizing effect of a natural resource on financial development or testing the resource curse phenomenon. and the outcome of this study will helpful for other resource-rich countries around the globe. 3. material and methods this paper uses financial development as the dependent variable and total natural resource rent as the main independent variable in saudi arabia. the study also uses some control variables like real gdp, gross capital formation and institutional quality. the data is sourced from wdi for mostly variables and from icrg for institutional quality data, and data range is 1975q1 to 2017q4. for the transformation of the data, the quadratic match sum method is employed that can handle the complications of transforming of data (cheng et al., 2012; shahbaz et al., 2018). 3.1 nonlinear autoregressive model (nardl) financial development is determined by natural resource, economic growth, gross capital formation and institutional quality. ),,,( inqgcfgdpnrrffd  (1) tttttt inqgcfgdpnrrfd   54321 (2) review of economics and development studies, vol. 7 (1) 2021, 101-117 105 in the above econometric model, the coefficients β2, β3, β4, and β5 are the elasticities of financial development concerning the natural resource rent, gross domestic product, gross capital formation and institutional quality. to estimate the above model, firstly we formulate this model in the ardl bounds approach: tttttt it s i i r i itiit q i iit p i it l i it inqgcfgdpnrrfd inqgcfgdpnrrfdafd               1514131211 0 5 0 4 0 3 0 21 1 10 (3) the following equation expresses the estimation of unrestricted error correction model (ecm): t it s i r i itit q i it p iit l i t vtect inqgcfgdpnrrfdafd          1 0 5 0 4 0 3 0 2 1 10   (4) the speed of adjustment parameter denoted by λ and ect denotes the residuals from the estimated model. our main purpose is to check the asymmetric or nonlinear behaviour of natural resource rent with financial development and model can be formulated by breaking the natural resource rent variable into positive and negative parts in the formulation of shin, yu and greenwood-nimmo (2014) as follows: ttttttt it s i i r i itiit q i i it p i iit p i it l i it inqgcfgdpnrrnrrfd inqgcfgdpnrrnrrfdafd                         151413121211 0 5 0 4 0 3 2 0 2 1 0 21 1 10 (5) β2 + and β2 , α2 + and α2 measures the long-run and short-run asymmetry, respectively by taking following hypotheses: h0: β2 + = β2 = 0       2 0 2 1 0 20 : p i i p i ih  for all i=0,….,p. review of economics and development studies, vol. 7 (1) 2021, 101-117 106 3.2 wavelet multiscale decomposition the second part of the methodology is wavelet analysis. the wavelet analysis is the time and frequency domain combination of any time series and decomposes it into different wavelet scales. it generates data decomposition in the orthogonal time scale and conserves the time data during frequency distribution (ramsey, 1999). this method has ability to capture complete information in the time series related to location and time horizon (gencay et al., 2002), and it deals with time series nonstationary properties (mishra et al., 2019). any function of time can be expressed as the father (ϕ) and mother (ψ) wavelets and integrate into one and represent very long scale smooth components of the signal and zero and are used to stand for deviations occurring in the smooth components, respectively (ramsey, 2002). the scaling coefficient is given by father wavelets and generation of differencing coefficients through mother wavelets. the representation of father wavelet and mother wavelet is as following: (6) (7) the basic function that is constituted by father and mother that describes the order of coefficients. the smooth and detail coefficients that are an offshoot from father and mother wavelets express as follows: (8) (9) the multi-resolution breakdown of f(t) expresses as {sj, dj-1,….,d1} and dj measure the jth level wavelet details that is connected with series variation at scale λj….sj. that shows each level cumulative sum of alteration and sj becomes smooth and smoother as j increase (gencay et al., 2002). to estimate the scaling and wavelet coefficients, the study apply maximal overlap discrete wavelet transform (modwt) as it has novel property that not suffer any limitation like level of sample size is multiple of 2 j 0 as in discrete wavelet transform (dwt) (percival and walden, 2000) and coefficients are more efficient over dwt (percival, 1995; gencay et al., 2002). the study decomposes the series d1 to d6 wavelet coefficients and the resolution of the data is given by detail coefficient dj at scale 2 j to 2 j+1 and the s6 shows the movements in the long-run. 3.3 quantile-on-quantile regression (qqr) the existing literature showed initially linear methodology to check the two variable associations in time series data after then move to quantile regression developed by koenker and bassett’s (1978), later becomes preferred econometric tool in time series data. apart from the above,      1)() 2 2 (2 2/ , dttwith kt j j j kj       1)() 2 2 (2 2/ , dttwith kt j j j kj   kjkj tfs ,, )(  jwithjtfd kjkj ...1)( ,,    review of economics and development studies, vol. 7 (1) 2021, 101-117 107 quantile regression is incapable of confining the entire dependency due to uncertain facts that may affect the association of the dependent and independent variables. sim and zhou (2015) developed the quantile on quantile (qq) method that considers the lacuna of quantile regression. the essence of this method is that combine the two methods quantile regression and nonparametric estimations, which allow estimating the impact of a quantile variable over the other quantile variable (mishra et al., 2019). the quantile methods have some advantages over linear methods like, (i) it provides outlier free, robust and efficient estimator; (ii) it is free from other issues heteroscedasticity and also reduces the multicollinearity by increasing the data availability; (ii) estimated parameters are more reliable because of the higher degree of freedom. basically, there are two approaches involves in quantile on quantile regression that are (i) triangular system of equation and (ii) single equation regression and that are introduced by ma and koenker (2006) and sim and zhou (2015), respectively. at this moment, the single equation regression approach applied for analysis, and it explained as to present our variables: (10) where fdt indicates financial in a country in time t; nrrt denotes natural resource rents during this period. and the quantile error term, the conditional θth quantile, is denoted by ut ɵ which is equal to zero. furthermore, β ɵ (nrrt) that is unknown because of no prior information about the relationship. furthermore, for the determination of the relation between qth quantile of fd and the tth quantile of natural resource rent denoted by nrrt, in the neighbourhood of nrrt, the logical, linear regression applied to equation (10). β θ (.) is known, and this function is solved through first-order taylor expansion around a quantile nrrt, as follows: (11) the above equation (11) presents the θ and t both as double indexed which is the basic property of that equation, and β θ (nrrt) and β θ’ (nrrt) are revealed as parameters. given that β θ (nrrt) and β θ’ (nrrt) is the function of t, these are also the function of θ which are equal and function of both θ and t. β θ (nrrt) and β θ’ (nrrt) can be reported as β0(θ, t) and β1(θ, t) accordingly. the presentation of equation (11) as follows: (12) the equation (4) is obtained after the substitution of equation (12) is as follows: ( ) ( )( )⏟ (13) and this (*) in equation (13) refers to the qth quantile of financial development. though, in converse to the standard conditional quantile function, this shows as mirrors the association between the θth quantile of the financial development and the τth quantile of natural resource rent. the change of quantile value of fd and nrr theses parameters also affected, and not   tnrrfd tt  )( ))(()()( / t t tt t nrrnrrnrrnrrnrr    ))(,(),()( 10 t tt nrrnrrnrr    review of economics and development studies, vol. 7 (1) 2021, 101-117 108 support of linear link is considered between these variables. therefore, the overall association between fd and nrr is expressed in equation (13) by their distribution. through the solution of the below minimization problem gives the local linear regression estimates of the parameters b0 and b1, that are the estimates of β0 and β1: ∑ * ( ̂̅̅̅̅̅̅ ̅̅̅ ( ̂)+ ( (( ̂̅̅̅̅ ̅̅ ̅̅ ̅̅ ) ) ( 14) in equation (14), the quantile loss functionis , which is precise as (u) = u(θ – i (u < 0)), and the common indicator function represented by i. k (·) express the kernel function and h shows the bandwidth. the gaussian kernel method that is simple in computation and efficient is applied to weight the observations in the neighbour of nrrτ. in this study, we use a bandwidth parameter h = 0.05 by following sim and zhou (2015) and shahzad et al. (2018). 3.4 the validity of quantile-on-quantile regression (qqr) approach as stated earlier, the quantile-on-quantile estimation is analyzed to get and allocates the traditional quantile coefficients. it gives independent variable coefficients at different quantiles (arain et al., 2019). in simple, the quantile regression created on σ quantile of natural resource rent on financial development and this coefficient of quantile regression independently index by σ. on the other hand, the quantile on quantile method takes πth quantile effect of natural resource rent on σ quantile of financial development (natural resource rent) at different values of σ and π. that is why this approach provides a clear picture by its unique specification that connects the natural resource rent and financial development that linked to quantile regression. 4. results and discussion 4.1 nardl results the prerequisite requirement for time series modelling is to check the order integration by using unit root tests. in the application of both ardl and nardl order of integration must be mixed or either level or first difference. no, any variable should be stationary at i(2). our study used augmented dickyfuller (1979) and phillips and perron (1990) unit root test to check the order of integration. table 1 presents the results that denote that all variables are stationary at first difference. table 1 unit root table fd nrr gdp gcf inq adf test at level -1.549 -2.389 0.265 0.106 -1.071 at first difference -5.923*** -5.924*** -5.201*** -4.427*** -5.983*** pp test at level -1.551 -2.389 0.256 -0.084 -2.043 at first difference -6.615*** -6.156*** -5.201*** -4.426*** -4.355*** note:*** shows the significance level at 1%. the condition for long-run association exists if calculated f-stat will be greater than the upper bound. the bound test table 2 reports that there is no cointegration among variables in case ardl model. whereas the results of nonlinear ardl model shows, cointegration exists among variables. review of economics and development studies, vol. 7 (1) 2021, 101-117 109 table 2 ardl & nardl bound test lower bound i(0) upper bound i(1) decision 1% 4.093 5.532 no cointegration 5% 2.947 4.088 10% 2.460 3.460 f-stat (ardl) 1.444 1% 3.900 5.419 cointegration 5% 2.804 4.013 10% 2.331 3.417 f-stat (nardl) 4.290 table 3 reports the results. the positive change in natural resource rent affects the financial development negatively that supports the resource curse hypothesis in long-run and short-run. both findings reveal interesting findings and show asymmetry in the behaviour of natural resource rent with financial development. the results also show real gdp, gross capital formation and institutional quality affect financial development positively. the error correction mechanism provides the long-run equilibrium adjustment. our result of ect depicts significant with a negative sign that shows the surety of long-run equilibrium adjustment. our results reveal that nardl model passes all diagnostic tests that ensure the model is free from hetero, serial correlation, specification problem and normally distributed. table 3 nardl results variables long run coefficients short run coefficient nrr + -0.18*** [0.06] -0.17*** [0.05] nrr -0.44*** [0.05] -0.41*** [0.05] gdp 0.66*** [0.16] 0.62*** [0.14] gcf 0.21*** [0.06] 0.19*** [0.05] inq 0.02*** [0.01] 0.03*** [0.01] c 16.09*** [3.46] r 2 : 0.91 ect(-1) -0.93*** [0.11] adj. r 2 : 0.89 lm test 1.24 (0.30) reset: 0.04 (0.84) bpg test 1.26 (0.31) j.b test: 0.15(0.93) asymmetry test wlr:5.64 (0.01) wsr: 3.70 (0.04) note:*** shows the significance level at 1% and values in () and [] represents p-value and standard deviation. review of economics and development studies, vol. 7 (1) 2021, 101-117 110 the stability of the model is tested through cusum and cusumsq test, and findings in fig.1 presents that model is highly stable. -15 -10 -5 0 5 10 15 94 96 98 00 02 04 06 08 10 12 14 16 cusum 5% significance -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 98 00 02 04 06 08 10 12 14 16 cusum of squares 5% significance fig. 1 cusum and cusumsq the asymmetries between nrr and fd are checked through the wald test, and results in table 3 confirm the asymmetry. graphically dynamic multiplier graph represents the asymmetric relation of natural resource rent with financial development, as shown below. -1.2 -0.8 -0.4 0.0 0.4 0.8 1.2 lnrr +1% lnrr -1% difference fig. 2 dynamic multiplier graph for nrr review of economics and development studies, vol. 7 (1) 2021, 101-117 111 4.2 quantile-on-quantile approach results the following figure 3 expresses the plot of estimates of qq analysis and its different decomposed series of financial development and natural resource rent. the following figure 3 expresses the slope estimates b1(σ, π) that have πth quantile effect of natural resource rent and its decomposed series on σth quantile of financial development. the effect is positive of nrr and fd for groups of quantiles that suggest the direct relationship between these two variables. the significance is detected in the upper quantiles of nrr (i.e., 0.70–0.95) that linked to the upper quantiles of fd (i.e., 0.70–0.95) region. this positive impact is also detected in that region, which combines lower quantiles of both variables nrr and financial development. the influence of nrr on fd becomes weak in middle quantiles and becomes strong on lower to high quantiles of both variables. findings show that these variables are strongly associated and are complements to each other for long run financial development in saudi arabia. the next is to check the decomposed series influence nrr.d1 on financial development and found a significant effect of nrr.di on fd in the higher quantiles of nrr and lower quantiles of financial development. in the middle quantiles of both variables, the effect in different that is a lower effect. the effect is converging to negative on higher quantiles of both variables. next, check the impact of second decomposed time series nrr.d2 on financial development that shows the positive effect on higher quantiles of nrr and lower quantiles of fd. but on lower quantiles of both nrr.d2 and fd, the effect becomes lower and converging to negative association. and in the middle quantiles of nrr.d2 and financial development, the positive impact is enormously weak. the influence of decomposed series nrr.d3 on financial development than found a weak effect at lower quantiles of both nrr.d3 and financial development. but on middle and higher quantiles, the effect remained significant. furthermore, the positive effect of nrr becomes weaker, and the negative effect is increased when we see the decomposed effect of nrr.d4 and nrr.d5 on financial development. this effect is either zero or becomes negative at the middle or lower quantiles of both variables. when we see more series of nrr.d6, then we find the same sign of decreasing the positive effect of nrr on fd. in the last, the scenario becomes change when we see nrr.d6s effect on financial development. in almost all regions find the influence of nrr on fd is negative. the above analysis concludes the effect of original time-series changes in nrr positively affected fd. but as we decomposed the series, the positive effect going to decrease becomes zero and then becomes negative with the stability of series increase. natural resource rent effect on financial development nrr nrr.d1 review of economics and development studies, vol. 7 (1) 2021, 101-117 112 nrr.d2 nrr.d3 nrr.d4 nrr.d5 nrr.d6 nrr.s6 fig. 3 the graphs demonstrate the slope coefficient estimates of β1 on the z-axis and the quantiles of financial development on the y-axis and the quantiles of decomposing natural resource rent (d1, d2,…d6 and s6) on the x-axis. review of economics and development studies, vol. 7 (1) 2021, 101-117 113 4.3 the qq method validity the next step is to check the validity of and comparison of qr and qqr estimates. the following figure 4 shows the plot of the qr estimates and average of qqr estimates that show the effect of natural resource and its decomposes series on financial development. this plot shows the overall effect and decomposed time series influence of nrr that shows the variation and converging to a negative effect on fd. from the analysis, when natural resource rent decomposed time series, nrr.d1 then observed the effect on financial development becoming weak from positive to zero then negative across quantiles of both variables. the effect is similar when we check it with other decomposed time series nrr.d2, nrr.d4, nrr.d5, nrr.d6, and nrr.d6s. our results are similar to the studies of sun et al. (2020) and khan et al. (2020) that revealed the association of a natural resource with financial development and confirms negative association in emerging seven (e7) and china, respectively. natural resource rent effect on financial development nrr nrr.d1 nrr.d2 nrr.d3 nrr.d4 nrr.d5 -4 -3.5 -3 -2.5 -2 -1.5 -1 -0.5 0 0.05 0.15 0.25 0.35 0.45 0.55 0.65 0.75 0.85 0.95 quantiles of financial development θ qqr qr -4.5 -4 -3.5 -3 -2.5 -2 -1.5 -1 -0.5 0 0.5 1 0.05 0.15 0.25 0.35 0.45 0.55 0.65 0.75 0.85 0.95 quantiles of financial development θ qqr qr -1.2 -1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 quantiles of financial development qqr qr -3.5 -3 -2.5 -2 -1.5 -1 -0.5 0 quantiles of financial development θ qqr qr review of economics and development studies, vol. 7 (1) 2021, 101-117 114 nrr.d6 nrr.s6 fig. 4 quantile regression (qr) and qqr estimate comparison. 5. conclusion and recommendations our study analyzes the association of natural resource rent and financial development in saudi arabia by using quarterly data from 1985q1 to 2017q4. we employ two novel methodologies at the same time, such as nonlinear autoregressive model (nardl) and wavelet-based quantile-on-quantile estimation method to check the asymmetric behaviour of natural resource rent on financial development. the findings of nardl confirm the nonlinear behaviour of nrr with fd. the results also show real gdp, gross capital formation and institutional quality affect fd positively. the study outcome of wavelet-based quantile-on-quantile estimation method reveals the heterogeneous response of nrr effect on fd when decomposes into different quantiles that become positive to negative. however, our results are beneficial for policymakers and policy analysts because results are exciting that help them in conducting policy analyses. funding: no funding was received to conduct this research. contribution: all authors contributed equally. acknowledgment: we would like to acknowledge the contributions of research participants to this research paper. conflict of interest: on behalf of all authors, the corresponding author states that there is no conflict of interest associated with this manuscript. -0.4 -0.2 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 0.05 0.15 0.25 0.35 0.45 0.55 0.65 0.75 0.85 0.95 quantiles of financial development θ qqr qr -1 -0.5 0 0.5 1 1.5 0 .0 5 0 .1 5 0 .2 5 0 .3 5 0 .4 5 0 .5 5 0 .6 5 0 .7 5 0 .8 5 0 .9 5 quantiles of financial development θ qqr qr -2 -1.5 -1 -0.5 0 0.5 1 1.5 2 2.5 0 .0 5 0 .1 5 0 .2 5 0 .3 5 0 .4 5 0 .5 5 0 .6 5 0 .7 5 0 .8 5 0 .9 5 quantiles of financial development θ qqr qr -8 -6 -4 -2 0 2 4 0 .0 5 0 .1 5 0 .2 5 0 .3 5 0 .4 5 0 .5 5 0 .6 5 0 .7 5 0 .8 5 0 .9 5 quantiles of financial development θ qqr qr review of economics and development studies, vol. 7 (1) 2021, 101-117 115 references al-torkistani, h. m., salisu, m. a., & maimany, k. a. 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(2020). is china affected by the resource curse? a critical review of the chinese literature. journal of policy modeling, 42(1), 133-152. zoega, g., gylfason, t., 2001. natural resources and economic growth: the role of investment (no. 2743). cepr discussion paper. review of economics and development studies, vol. 6 (3) 2020, 625-637 625 economic analysis of fish farming in punjab, pakistan muhammad umair aslam a, nasir nadeem b, irfan ahmed baig c, umer ijaz ahmed d a student of m.sc.(hons.) agriculture economics, deptt. of agribusiness and applied economics, mns university of agriculture, multan, pakistan email: engrmuaslam89@gmail.com b associate professor, department of agribusiness and applied economics, mns university of agriculture, multan, pakistan email: nasir.nadeem@mnsuam.edu.pk c professor, department of agribusiness and applied economics, mns university of agriculture, multan, pakistan email: irfan.baig@ mnsuam.edu.pk. d assistant professor, deptt. of agribusiness and applied economics, mns university of agriculture, multan, pakistan email: umar.ijaz@mnsuam.edu.pk article details abstract history: accepted 18 july 2020 available online 30 september 2020 fish consumption is very less in pakistan as compared to the world. the study was designed to conduct the economic analysis of the fish farming. two districts were selected with the highest number of fish farms, i.e. muzaffargarh and khanewal. a total of 50 fish farms from both study areas were selected randomly for the study. economic analysis was carried out from the collected data to estimate the profitability of fish farming. in order to make a comparison of profitability of fish farming with crop cultivation on per acre basis, data from 50 farmers from crop sector were also collected. the results revealed that fish farming was more profitable as compared to crop farming in the study area. net income per acre was estimated at rs. 252426 from fish farming as compared to net income per acre of rs. 58612 from wheat-cotton, rs. 72662 from cotton-rice and rs. 53290 from sugarcane cultivation. the benefit cost ratio (bcr) of fish farming was calculated 1:1.52 and 1: 1.74 with and without land rent respectively. it illustrates that the enterprise yields 1.52 rupees and 1.74 rupees for every rupee invested. on the basis of results, it is suggested that fish farming should be promoted, especially in the areas of saline soils to enhance food security and uplifting the socioeconomic conditions of small farmers. keywords: fish farms, profitability, net income, bcr, food security jel classification: o10, o13 doi: 10.47067/reads.v6i3.251 © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attribution noncommercial 4.0 corresponding author’s email address: nasir.nadeem@mnsuam.edu.pk 1. introduction in pakistan, the majority of the population takes maximum calories form staple food i.e. wheat mailto:engrmuaslam89@gmail.com mailto:nasir.nadeem@mnsuam.edu.pk mailto:umar.ijaz@mnsuam.edu.pk mailto:nasir.nadeem@mnsuam.edu.pk review of economics and development studies, vol. 6 (3) 2020, 625-637 626 and rice. fifty-two percent of women having age between 15-49 years were anaemic and this percentage was higher than the world average of about 33% (fao, 2019). brown (2017) stated that animal proteins are better and contain a good balance of all the amino acids that we need. wasim (2007) also explored that fish is an outstanding source of animal protein. fao and who in a study highlighted that animal protein intake should not fall below one gram per kg body weight for adults. while, per capita availability of protein is far below the minimum daily requirement in pakistan. the coastline of pakistan is approximately 990 km long which comprises of 270 km and 720 km of sindh coast and makran coast respectively. the exclusive economic zone (eez) of pakistan covers an area of about 240,000 sq. km (mff pakistan, 2016). the contribution of fisheries sector is vital to pakistan’s economy in terms of livelihood for the population of pakistan especially population of coastal areas. pakistan has a diverse sources of water comprises of sea, rivers, dams, lakes, ponds etc., where fish can be produced (gop, 2019). aquaculture is being done in almost all the provinces of pakistan. total area of fish ponds in pakistan is about 60.47 thousand hectares. the province wise distribution of the area is 49.17, 10.5, 0.560 and 0.240 thousand hectares in sindh, punjab, kpk and other provinces (balochistan, azad jammun kashmir, northern areas) respectively. the highest potential of aquaculture exists in the province of sindh and punjab. the total number of fish farms is approximately 13000 in all parts of the country. the farms are of different sizes, however, average farm size ranges between 5-10 hectares. although no exact estimates are available about employment in the sector, however, the estimates show that about 50000 peoples are employed in the sector either directly or indirectly (fao, 2020). although, the fish has been considered as an important source of protein, yet in pakistan, due to high price and limited availability, fish consumption could not gain mass acceptance in the major urban and rural areas. however, fish trade has remained one of the promising area for fish producers as pakistan is already exporting around 19 percent of its total production. however, more than 70 percent of the total fish production comes from the marine sites while the rest comes from inland fish farming (haq, 2015). since, the last few years there has been an increasing trend of fish farming (gop, 2015). literature shows that fish productivity in pakistan is low as compared to other countries of the world due to several reasons, including the socioeconomic characteristics of fish farmers, which include education, land holdings, age, ownership of capital, old technologies (meena et al., 2002). 2. review of literature one of the problems of agriculture sector is soil salinity in pakistan. according to an estimate, more than 6 million hectares soils are affected by salinity in pakistan. moreover, more than 70 percent tube wells are pumping brackish water for irrigating soils. the problem is immense in the province of sindh and punjab, especially in southern punjab (niab, 2020). one of the advantages of aquaculture is that it can be adopted on the land which is not suitable for crop cultivation i.e. saline land. this problem can be turned into an opportunity by turning the area into fish cultivation without opportunity cost (bashir et al.,2018). since the last few years there has been an increasing trend of fish farming (gop, 2015). literature shows that fish productivity in pakistan is low as compared to other countries of the world due to several reasons including socioeconomic characteristics of fish farmers which include education, land holdings, age, ownership of capital, old technologies (meena et al., 2002). shah et al.(2017) review of economics and development studies, vol. 6 (3) 2020, 625-637 627 concluded that despite of gradually increase in growth of inland fish production and exports, it is low as compared to other developing countries. the study explained that aquaculture has developed as the potential way to meet fish demand, food security, livelihood, employment and national income. moreover, they suggested that government should develop and expand this sector as it has the potential to offer various opportunities to support livelihood in pakistan. qasim et al. (2004) studied the economics of fish production and marketing in saline areas of the central punjab by taking sample of 33 farmers randomly. they calculated that per acre fish production was 1524 kgs. sale price was rs. 55 per kg. total variable cost per hectare estimated was rs. 45513 and total revenue was rs. 127531 for those fish farmers who made their farms at non saline soils while total variable cost and total revenue per hectare of saline soils fish farms was rs. 45513 and rs. 73219 respectively. profit (rs. 40488 per hectare) of fish farms of non saline soils was high as compared to that of saline soil (rs 30029). bashir et al. (2018) also estimated the profitability of fish farming in hafizabad district and concluded that per acre cost of production was rs. 199310.70 on large farms as compared with medium and small farms. the net earnings per acre was calculated at rs. 59298. the benefit cost ratio was estimated 1.0:1.3, indicating earning of rs. 1.3 on every rupee spent in the enterprises. fish farming plays vital role in improving the socioeconomic conditions of rural people (mazid, 2002). fish farming creates miscellaneous income opportunities for a number of people, especially those who live below the poverty line (ahmed et al., 2005). pond fish farming was proved to be more profitable as compared to rice cultivation, therefore, in the rural areas so many farmers have changed their rice field into pond fish farming (islam et al.,2002). olawumi et al., (2010) found fish farming as a profitable enterprise. they concluded that fish seed stocked, labour, the size of the pond and waste feed of poultry were the dominant factors of the income which increased the small holding production of fish in nigeria. olaoye et al. (2013) assessed the socioeconomic analysis of pond farming in nigeria and found that total cost, total revenue, gross margins, which were n 2, 883515, n 4873521 and n 2,376,616.36 respectively. the estimated benefit cost ratio was 1: 1.69 which shows that fish farming has the potential to alleviate poverty of farmers. okpeke and akarue (2015) appraised the profitability by calculating total cost, total revenue and net revenue. the total cost per farming season was estimated at n976, 622 while total revenue was n976, 622. the net farm income was estimated at n 384, 306 per farmer per annum, which reflects that fish farming is a profitable enterprise. adewuyi et al. (2010) estimated average total cost of n394,380 per annum and gross revenue of n 715030. the estimated profit was 320650 nigerian naira. the estimated rate of return was 0.55 nigerian naira. the results of regression analysis showed that variables pond size, labour, cost of lime, cost of feeds and fingerlings have significant impact on output. the elasticity of pond size, labor, feeds, fertilizer, lime, fixed input and fingerlings was found 0.029%, 0.057%, 0.005%, 0.534%,0.007, 0.79% and 0.001% respectively. the study suggested the fish production as profitable business activity in the study area. namonje kapembwa and samboko (2020) estimated the profitability of small-scale aquaculture production in zambia by employing primary data collected through individual interview and focus group discussion. they found that benefit-cost ratio was greater than one, implying that an investment in aquaculture was a profitable over the useful life of 10 years. they further estimated net present value(npv), and internal rate of return and established that it was 17524 zmw and 42.38 percent at 15 percent discount rate respectively. the positive npv indicated that aquaculture business was a profitable business in zambia. irz and mchenzie (2003) they evaluated the profitability and technical efficiency of aquaculture in philippines by comparing the two production systems, i.e. intensive monoculture of tilapia in freshwater ponds and an extensive poly culture of shrimps in brackish water ponds and concluded that aquaculture in both systems was very profitable. however, higher profitability was achieved in review of economics and development studies, vol. 6 (3) 2020, 625-637 628 brackish water ponds. as for technical efficiency is concerned, it was concluded that technical efficiency was higher in freshwater aquaculture as compared to brackish water aquaculture. olagunju et at. (2007) they estimated gross margin and profitability ratio of catfish in ibadan metropolis, oyo state, nigeria and found that the average total cost per kg of fish was n 204 and average total revenue per kg of fish was n 308. the estimated gross margin was n 194.60 per kg of fish produced. they also found a significant relationship between total revenue and cost of feed, years of farming experience, size of pond and labor. 3. research methodology to estimate the economics of fish farming, primary data were collected from 50 fish farms through random sampling technique from top 2 farm fish producing districts i.e. mazaffargarh and khanewal in punjab. similarly, data from 50 non fish farmers was also collected from the same vicinity to compare the profitability of fish farming. detailed data on cost of production of fish farming and crop farming was taken through well designed questionnaire. in addition to that benefit cost ratio (bcr) was also calculated for calculating the profitability of fish farming per rupee invested. 3.1 economic analysis 3.1.1 budgetary techniques in this technique, cost and return were estimated to estimate the economic analysis of fish farming. following formula for estimation of cost, revenue, economic profit, business profit, gross margins and benefit cost ratio were employed and are given as: total revenue (tr) = total fish produced * average price of fish. gross margin (gm) =trtotal variable cost (tvc) for producing fish economic profit = tr – [explicit cost + implicit cost] business profit = tr – [explicit cost] benefit cost ratio (bcr) = business profit/tvc (when imputed cost is not taken) 3.2 results and discussion education status of fish farmers is given in table 1. the table shows that 78% farmers have their education upto martirc and 22% fall under the range of intermediate to master level education. table 1: education status of fish farmers schooling years frequency percent 1-10 39 78.0 12-18 11 22.0 total 50 100.0 classification of fish farmers with respect to age illustrated that 30% farmers were having age between 18 to 30 years and 44% were below the range of 31-40% and limited number of 26% were those who were above 40 years of age. it explains that the majority of the farmers are young and energetic. studies such as (khatun et al. 2013; peter and susan, 2014) also concluded that the majority of the fish farmers were young. table 3 displays the information of experience of fish farming. it was found that 40% had experienced between 1 to 5 years while 60% were doing since last 6 to 10 years. since this enterprise was not popular among the farmers, however the demonstration impact of profitability had attracted the other farmers especially small farmers to adopt the enterprise. review of economics and development studies, vol. 6 (3) 2020, 625-637 629 table 2 : classification of fish farmers with respect to age age range frequency percent 18-30 15 30.0 31-40 22 44.0 above 40 13 26.0 total 50 100.0 table 3: experience of fish farming years frequency percent 1.00-5.00 20 40.0 6.00-10.0 30 60.0 total 50 100.0 table 4 demonstrates that only 4% farmers had taken loan while 96% had not taken loan for fish farming. one of the inhabiting factors was the complexity involved in the procedure of loan taking. studies like bashir and azeem (2008) indicated a lot of problems for getting formal loan. table 4: loan taken by fish farmers farmers frequency percentage loan taken 2 4 loan not taken 48 96 total 50 100 the marketing of a product is one of the important areas of any enterprise. table 5 displays that the majority of the farmers sold their produce to big cities (i.e. 40%) while 30% sold at local markets and 30% took their produce both at local and big cities markets. the main reason for selling in big markets was to fetch high income from the sale of their produce. as for the distance of the market from their farm is concerned, table 6 depicted that the maximum distance of big markets was 300 to 400 km and the minimum distance of market ranged from 9 to 20 km. table 5: sale of fish with respect to market sale of fish frequency percent local 15 30.0 big city 20 40.0 both 15 30.0 total 50 100.0 review of economics and development studies, vol. 6 (3) 2020, 625-637 630 table 6: distance from market where they sell their produce distance frequency percentage 9 to 20 km 15 30 35 to 100 km 15 30 300 to 400 km 20 40 total 50 100 use of feed is an important ingredient for better production. the results given in table 7 show that the majority of farmers used the formulated fish feed while 24% were using self-prepared feed. those who were found using both type of feed were 32%. formulated feed was popular among the fish farmers, however, there is still enough room to increase the production of fish feed. moreover, the quality standards are also required to be monitored. as regards the number of fingerlings put in the fish farm of one acre size, table 8 discloses that 90% farmers put 600 to 800 fingerlings in one acre farm and only 10% release 800 to 900 fingerlings in one acre pond. table.7: source of fish feed source of fish feed frequency percent formulated 22 44.0 self-prepared 12 24.0 both 16 32.0 total 50 100.0 table 8: number of fingerlings per acre no. of fingerlings per acre frequency percent 600-800 45 90.0 800-900 5 10.0 total 50 100.0 the ownership status of fish farms indicates that 46% fish farmers were owner, 42% were found tenants while 12% were owner cum tenants. it means that most of the farmers had their own farms (table 9). the classification of farmers discloses that 36% farmers were small, 34% were found medium while 30% were estimated to be owner cum tenants as shown in table 10. review of economics and development studies, vol. 6 (3) 2020, 625-637 631 table 9: land ownership status ownership status frequency percentage owners 23 46 tenants 21 42 owner cum tenants 6 12 total 50 100 table 10: classification of farmers categories farm type frequency percentage samll farms (1-7 acres) 18 36.0 medium farms (8-25 acres) 17 34.0 large farmers (> 25 acres) 15 30.0 total 50 100 note: categories based on discussion with fisheries officer table 12: types of fish cultured type of fish frequency rahu 50 thaila 48 grass carp 15 mori 5 malli 4 singhari 4 tilapia 1 gulfam 1 silver carp 1 review of economics and development studies, vol. 6 (3) 2020, 625-637 632 3.3 analysis of non fish farmers table 12: types of fish cultured n minimu maximu mean std. education 50 0 16 4.90 5.148 age 50 17 75 42.60 16.284 experience 50 2 50 21.72 14.995 farm distance from main road (km) 50 1 7 3.01 2.057 family size 50 2 26 8.42 4.682 d_market 50 1.00 300.00 15.2600 41.84986 valid n (listwise) 50 the experience of non-fish farmers discloses that they had experience ranges from one year to more than 40 years. 34% farmers had experience ranging from 1to 10 years, followed by 30% farmers had 11 to 20 years of experience. 36% farmers were those having experience ranging from 21 to more than 40 years as presented in table 13. age classification of the farmers reveals that 32% farmers were those having age between 18 to 30 years and 22% were comprised of the farmers having age between 31 to 40 years as shown in table 14. while the rest 46% have experienced more than 40 years. one thing which is clear from the comparison of age between fish farms and non-fish farmers is that fish farmers are relatively more younger as compared to non-fish farmers (farmers growing crops). table 13: farming experience years frequency percentage 1_10 17.0 34 11_20 15.0 30 21_30 6.0 12 31_40 6.0 12 >40 6.0 12 total 50.0 review of economics and development studies, vol. 6 (3) 2020, 625-637 633 table 14: age distribution of crop farmers age frequency percentage 18_30 16 32 31-40 11 22 41-50 10 20 >50 13 26 total 50 the distribution of non-fish farmers with respect to education illustrates that a big proportion of farmers were illiterate (i.e. 40%) and the second significant segment of the classification comprises of holding primary education. twenty percent farmers were having education upto matriculation, followed by 6% bachelor and another 6% got mater degree (table 15). table 15: educational status of non-fish farmers s.no. education frequency (n=50) percentage 1 illiterate 20 40 2 primary 14 28 3 matriculation 10 20 4 bachelor 3 6 5 master 3 6 total: 50 one of the main objectives of the study was to compare the profitability of fish farming and crop cultivation in the study area. table 16 demonstrates per acre cost of production of fish farming. average gross cost per acre was estimated at rs. 96624 and average gross income per acre was estimated at rs. 349050. the calculated net income per acre was rs. 252426. the benefit cost ratio had been estimated at 1: 3.61 which illustrates that the enterprise yields 3.61 rupees for every rupee invested. the results of our study also find support from the studies of (bashir et al., 2018; qasim et al., 2004). table 16: per acre cost of production of pond fish s.no. income and cost items rupees. 1 average fertilizer cost/ acre 2656 2 average feed cost per acre 158760 1 average disease cure cost per acre 678 2 average electricity and fuel cost per acre 21298 3 average labour cost per acre 17340 4 average cost of fingerling per acre 449 5 average rent of farm per acre 27828 6 average gross cost per acre 229009 review of economics and development studies, vol. 6 (3) 2020, 625-637 634 7 average gross income per acre 349050 average net income 120041 bcr 1.52 the profitability estimates of crop cultivation in the study area discloses that per acre cost of production (with land rent) for wheat, rice, cotton, s/cane and fodder cultivation was rs. 41079, rs. 50825, rs. 64158, rs. 79513 and rs. 426465 respectively. similarly, per acre cost of production (without land rent) for wheat, rice, cotton, s/cane and fodder cultivation was calculated at rs. 22443, rs. 32189, rs. 45522, rs.60877 and rs.24010 respectively. the net income with land rent for the same crops was estimated at rs.11756, 25806, 9584, 34654 and rs. 437 respectively, while the estimates of net income without land rent was estimated at rs.30392, 44442, 28220, 53290 and rs. 19073 respectively, for the same crop. the estimated bcr shows that all crops have bcr above 1, however, it is highest for rice crop followed by s/cane and wheat. the bcr for cotton crop is the lowest due to the high cost of production and effect of climatic change. moreover, prices of cotton were not encouraging, therefore, the farmers were found reluctant to grow the crop (table 17). table 17: per acre cost of production of crops crops wheat rice cotton s/cane fodder land preparation cost 2606 4814 4833 7500 2073 seed bed prep. cost 2301 2527 2000 3500 1980 seed cost 2125 1503 3138 9000 6400 fertilizer cost 7835 7765 11168 7200 6500 plant protection cost 1222 4326 13706 3667 2100 irrigation cost 1970 7462 6210 8135 2100 harvesting cost 3317 2725 3400 12500 2357 land rent (6 months) 18636 18636 18636 18636 18636 labor cost 1067 1067 1067 1500 500 marketing cost 0 0 0 7875 0 production cost (with land rent) 41079 50825 64158 79513 42646 production cost (without land 22443 32189 45522 60877 24010 gross income per acre 52835 76631 73742 114167 43083 net income (with land rent) 11756 25806 9584 34654 437 net income (without land rent) 30392 44442 28220 53290 19073 bcr 1.29 1.51 1.15 1.44 1.01 since fish farming takes a year to harvest, therefore, comparison of both the enterprises is required to be made on the basis of net income received annually. table 18 explains per acre per year net income earned from crop cultivation with and without land rent. review of economics and development studies, vol. 6 (3) 2020, 625-637 635 net income from a wheat-cotton combination was estimated at rs. 21340 with land rent and rs. 58612 had been calculated without land rent. the cotton rice combination reveals that net income obtained by the farmers was calculated at rs. 35390 with land rent and rs. 72662 without land rent. the net income earned by sugarcane farmers was estimated at rs. 34654 including land rent while it was rs. 53290 excluding land rent (table 18). table 19 reveals that net income from fish farming is rs. 120041 and rs. 147869 with land rent and without land rent respectively. the comparison of the estimates of income earned per acre from crop sector and income earned per acre from fish farming concludes that fish farming is a more profitable enterprise as compared to crop cultivation. the results of gachucha et al. (2014) also showed that fish farming was a profitable business compared to maize crop farming in kenya. table 18: per year per acre net income from different combinations of crop cultivation net income from crop cultivation per year net income (with land rent) (rs.) per year net income (without land rent) (rs.) wheat-cotton 21340 58612 cotton-rice 35390 72662 s/cane 34654 53290 table 19: per year per acre net income from fish farming income from fish farming per year net income (with land rent) (rs.) per year net income (without land rent) (rs.) fish farming 120041 147869 4. conclusions the study has been designed to conduct the economic analysis of the fish farming in the study area. two districts were selected with the highest number of fish farms, i.e. muzaffargarh and khanewal. a total of 100 farms, (50 fish farms and 50 non fish farms) from both study areas was selected randomly for the study. economic analysis was carried out from the collected data to estimate the profitability of fish farming. moreover, for comparison purpose, data from 50 crop growing farmers were also collected. the results revealed that fish farming was more profitable as compared to crop farming in the study area. net income per acre was estimated at rs. 252426 from fish farming as compared to net income per acre of rs. 58612 from wheat-cotton combination of crops, rs. 72662 from cotton-rice combination of crops and rs. 53290 from sugarcane cultivation. the benefit cost ratio (bcr) of fish farming was calculated 1:3.61 which illustrates that the enterprise yields 3.61 rupees for every rupee invested. review of economics and development studies, vol. 6 (3) 2020, 625-637 636 5. recommendations on the basis of results, it is suggested that fish farming is a profitable business and it could help to the farmers especially small land holders to adopt the fish farming, which will not only improve their socioeconomic conditions, but also shall be helpful for combating the issue of food security at the household, community and at national level. at the same time it could earn foreign exchange for the country also. it is more suitable for those who have severe issues of salinity as crops are difficult to grow well in saline soils. fish farming instead of traditional agriculture has been seen as a way to increase agricultural profits from saline affected land acknowledgement this study has been supported by higher education commission (hec) of pakistan under nrpu project no. 10426. i acknowledge the support of hec in accomplishing the work on the project. references adewuyi, s.a., b.b. phillip, i. a. ayinde and d. akerele.2010. analysis of profitability of fish farming in ogun state, nigeria. j hum ecol, 31(3): 179-184 ahmed, n., m.m. rahman and m.m. rahman.2005. a study on fish marketing system in gazipur, bangladesh, pakistan j. biol. sci., vol. 8, no. 2, pp. 287-292. bashir, a., s. ambren, i.mahmood and s.a. tariq. 2018. prospects of fish farming in saline areaq of rice wheat cropping system of the punjab. j agric. res., 2018, vol. 56(1): 57-62. bashir, m.k. and m.m. azeem.2008. agricultural credit in pakistan: constraints and options. pak. j. life soc. sci. 6(1): 47-49 brown, m.j. (2017) animal vs. plan protein-what is the difference. accessed on 15-10-2017 from https://www.healthline.com/nutrition/animal-vs-plant-protein#section1. faoa. 2019. aquaculture growth potential in pakistan. wapi fact sheet to facilitate evidence-based policy-making and sector management in aquaculture. faob.2019. global fishery and aquaculture production statistics v2019.1.0, published through fishstatj. food and agriculture organization of united nation. www.fao.org/fishery/statistics/software/fishstatj/en). fao.2020. national aquaculture sector overview. food and agriculture organization, e-bulletin. gachucha,m., b. njehia and p.mshenga.2014. opportunities in adoption of commercial fish farming as a new enterprise for small scale farmers in kisii county, kenya. 1(1):1-5 gop. 2015. agric. statistics of pakistan, statistic div. islamabad. gop. 2019. economic survey of pakistan. ministry of finance, government of pakistan. haq, s. (2015). fishing for investment and growth in sector. the express tribune. https://epaper.tribune.com.pk/main.aspx irz, x., v. mckenzie. 2003. profitability and technical efficiency of aquaculture systems in pampaanga, philippines. aquac. econ. manag. 2003, 7, 195–211, doi:10.1080/13657300309380340 islam, m.s., s.m. murshed, m. moniruzzaman and m.a. baree. 2002. rice-cum fish farming in selected areas of mymensingh district, online j. biol. sci. 2(10):715-718. khatun, s., r k adhikary, m rahman, m nurul azim sikder and m belal hossain. 2013. socioeconomic status of pond fish farmers of charbata, noakhali, bangladesh. int. j. lifesc. bt & pharm. 2(1):356-365 mazid, m.a. 2002. development of fisheries in bangladesh, plan and strategies for income generation and poverty alleviation. middle-east j. of sci. res.,129(3): 301-306 http://www.healthline.com/nutrition/animal-vs-plant-protein#section1 http://www.fao.org/fishery/statistics/software/fishstatj/en) review of economics and development studies, vol. 6 (3) 2020, 625-637 637 meena, s.b., t.n. kirway, n.m. lema, n. itolela. 2002. farming system approach to technology development and dissemination. guide for training at certificate and diploma levels. color print limited, ministry of agriculture and food security, dares salaam, pp. 228. mff pakistan. 2016. a handbook on pakistan’s coastal and marine resources. mff pakistan, pakistan. 78 pp. namonje-kapembwa, t and p.samboko. 2020. is aquaculture production by small-scale farmers profitable in zambia. international journal of fisheries and aquaculture.12(1):6-20 niab.2020. nuclear institute for agriculture and biology, faisalabad, pakistan. website accessed on 8 01-2020 http://www.niab.org.pk/soil.htm/ okpeke, m. y., & b.o. akarue. 2015. analysis of the profitability of fish farming in warri south local government area of delta state, nigeria. iosr journal of agriculture and veterinary science (iosr-javs), 8(12): 45-51. olagunju, f. i., i.o. adesiyan, and a. a. ezekiel. 2007. economic viability of cat fish production in oyo state, nigeria j. human ecology 21(2): 121 – 124. olaoye, o. j, s.s. ashley-dejo, e.o. fakoya, n.b. ikeweinwe, w. o.alegbeleye, f.o. ashaolu, and o.a. adelaja. 2013. assessment of socio-economic analysis of fish farming in oyo state, nigeria. global journal of science frontier research agriculture and veterinary volume 13(9):1-13 olawumi, a.t., a.o. dipeoluand o.m. bamiro.2010. economic analysis of homestead fish production in ogun state nigeria, journal of human ecology, 31(1):13-17 peter, m., and s.susan. 2014. determinants of adoption of pond fish farming innovations in salamaua of morobe province in papua new guinea. south pacific studies, 35 (1):21-36 qasim, m., a.d.sheikh, m.abbas and m.kashif. 2004. economics o fish production and marketing in saline areas of the central punjab. pak. j agri. sci., vol. 41(3-4):91-94 wang f, zhang j, mu w, fu z, zhang x .2009. consumers‟ perception toward quality and safety of fishery products, beijing, china. food control 20: 918-922. wasim, m.p. 2007. issues, growth and instability of inland fish production in sindh (pakistan) spatial – temporal analysis. pakistan economic and social review. 45(2); 203-230. http://www.niab.org.pk/soil.htm/ review of economics and development studies, vol. 6 (4) 2020, 905 918 905 voluntary tax-compliance behavior in smes; evidence from pakistan and turkey muhammad shaukat malik a , sabah younus b a dean faculty of law, commerce and business administration, director institute of banking and finance, bahauddin zakariya university, multan, pakistan e-mail: shoukatmalik@bzu.edu.pk b phd scholar, institute of banking and finance, bahauddin zakariya university, multan, pakistan e-mail: sabahfawad@gmail.com article details abstract history: accepted 16 dec 2020 available online 31 dec 2020 this research article aims at exploring the voluntary tax-compliance behaviour of the small and medium size business enterprises for two countries, pakistan and turkey. voluntary tax-compliance from sme’s is considered as major risk area by the tax-collection authorities of both developing and developed countries, authorities from both desire to bring individuals belonging to sme’s to pay taxes on voluntary basis, in order to generate higher revenues for their governments. thus, data was collected from the owners of sme’s of both countries through questionnaire, data thus collected was analysed using spss and plssmart. the results suggested that voluntary tax-compliance can be achieved by building a mutual trust relation and by exercising legitimate use of power by the tax authorities, results also signifies that subjective norms, perceived behavioural control, attitude towards taxes and moral obligation are also key factors in determining the voluntary taxcompliance behaviour as suggested by kirchler, hoelzl and wahl, (2008). also, this article tests the mediating role of the intention in building positive voluntary tax-compliance behaviour as suggested by ajzen (1991). this study is important contribution in literature as it incorporates data from two countries, pakistan (a developing nation) and turkey (that is making its mark in the list of developed countries). this research work can be further extended by incorporating comparative analysis among the business owners belonging to developed, semi-developed and developing countries. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: voluntary tax-compliance behaviour, trust in authorities, legitimate power and coercive power exercised by authorities, subjective norms, moral obligation, perceived behavioural control, attitude, small and medium enterprises jel classification: h26, h29 doi: 10.47067/reads.v6i4.289 corresponding author’s email address: sabahfawad@gmail.com 1. introduction taxes are inevitable drive to run government, as it can gear money into economic system to foster revenue generation and hence growth (slemrod, rehman and waseem, 2020). tax-compliance can be seen as an important field of study as for developing nation, it is primly important to turn review of economics and development studies, vol. 6 (4) 2020, 905 918 906 “ghost” tax-payers inclined towards paying taxes, as they have potential income to become tax-payer but do not pay taxes because they lack trust on government officials, which ultimately becomes reason for their non-compliance (gangl, hofmann and kirchler, 2015). though it is utmost desire of the authorities of the developing and developed countries to bring individuals to pay taxes (ali, fjeldstad and sjursen, 2014; bornman and ramutumbu, 2019). small and medium size enterprise (smes) are considered as utmost desire of every country to be added in tax-system as they possess major portion of the economic fabric from size and income prospective (bornman and ramutumbu, 2019). compliance can be foster by analysing and in-depth research on behavioural aspect of individuals (batrancea et al., 2019). one of the major cause of non-compliance is trust issue among the authorities and individuals, individuals in developing countries perceive their authorities corrupt (waris, 2013), thus they don’t believe that their hard-earned money will be utilised in good faith of nation building (waris and abdul, 2014).. mutual trust can be developed among taxpayers and authorities only by good governance (oecd, 2010). kirchler et al., (2008) narrated that by building mutual trust relationship government and authorities can foster better compliance from taxpayers. another factor that has been identified by the researchers is use of power by the governments. power by the government can be exercised in two ways, legitimate or coercive (kastlunger, lozza, kirchler, and schabmann, 2013). using legitimate power government can improve voluntary compliance behaviour. pakistan a developing nation is faced by the same dilemma of voluntary non-compliance behaviour (malik, and younus, 2019). same issue has been discussed by the researchers belonging to turkey (olsen, 2015; batrancea et al., 2019; al-ttaffi, 2020). sometimes government use enforced power for better compliance towards taxes (batrancea et al., 2019), but some researchers have also suggested that power enforcement does not result in building confidence of individuals on the government (batrancea et al., 2019). thus, it has been suggested by the researchers such as (malik, and younus, 2019) for pakistani government and (al-ttaffi, 2020) for turkish government, to adopt different strategies to make individuals more obedient taxpayers. the role of trust and power has also been emphasized by the slippery slope framework formulised by kirchler et al., (2008). to ascertain any behaviour, intention plays a very important role ajzen (1991). therefore, this article explains the role of tax-compliance intention in fostering tax-compliance behaviour. theory of planned behaviour narrated that every action/behaviour of individual is based on intention, and intentions are formulated by attitude, perceived behavioural control, moral obligation and subjective norms (ju, qin and spector, 2018). these variables will be further discussed in literature review section. 2. literature review tax-compliance behaviour has been narrated by the researchers from multiple perspectives, studies related to tax-compliance behaviour were firstly identified by the economics scholars, but with the passage of time phenomenon of tax-compliance become famous among the researchers belonging to the field of sociology, psychology and business studies (k. devos, 2014). greater reinforcement efforts by the authorities can result in building better tax-compliance behaviour (malik, and younus, 2019). this, study based on slippery slope framework kirchler et al., (2008) and theory of planned behaviour proposed by ajzen (1991), studies the mediating role intention among trust, legitimate power, coercive power, attitude, subjective norms, perceived behavioural control, moral obligation and voluntary taxcompliance behaviour. these variables are discussed below. review of economics and development studies, vol. 6 (4) 2020, 905 918 907 an individual contribution of money for tax is always a serious concerning matter in their sight; it is perceived that their intention to compliance can only be obtained on their past experiences of exchange that will definitely help them to develop their positive attitudes towards tax paying (halim, ahmad, katmun and jaafar, h, 2015). an individual’s intention towards paying taxes is influenced by his attitude, which can be linked with an incident of satisfaction that one has perceived from paying taxes (onu, 2016). an individual attitude for financial contribution is the most difficult to be achieved and same is the reason for the lack of intention to pay tax because taxpayers don’t have a complying attitude towards taxation system (akram, malik, shareef and goraya, 2019). thus, it can be hypothesized that h1: attitude towards has positive significant relationship towards voluntary tax-compliance behaviour h1a: attitude towards tax-compliance has positive significant relationship towards tax-compliance behaviour with the mediating effect of tax-compliance intention. authorities by using coercive power can guarantee compliance but it will be forced one, trust of the citizens is negatively associated with coercive power if exercised by the authorities which ultimately results in tax-theft rather than compliance behaviour (kastlunger et al., 2013). however, by utilizing legitimate power authorities can foster voluntary compliance and a long run relation based on trust (kastlunger et al., 2013). compliance behaviour for paying taxes is more effectively seen during exertion of power of government authority as compare to the state of trust; as when government exerts influence of powers then the individual payers cannot show deviation of behaviours because they know the consequences that they have to bear in result of showing reluctance in behaviours (tjondro, setiabudi and joyo, 2019). enforced power is the obligatory influence of government exerted on the individuals so that they will show willingness for paying taxes and in future their behaviour towards compliance would never deviate (tjondro, et.al, 2019). based on these facts it can be conceptualised: h2: coercive power has negative significant relationship towards voluntary tax compliance behaviour. h2a: coercive power has negative significant relationship towards voluntary tax compliance behaviour with the mediating effect of tax-compliance intention. h3: legitimate power has positive significant relationship towards voluntary tax-compliance behaviour h3a: legitimate power has positive significant relationship towards voluntary tax-compliance behaviour with the mediating effect of tax-compliance intention. individual considering tax compliance a moral duty for them has helped to increase the level of their positive intentions to pay tax; as reluctance to pay taxes will be considered by them violation of their morals (akram et al., 2019). it is always difficult to create an environment where tax authorities can achieve tax payer’s volunteer intention to pay tax but if paying taxes is considered as a moral obligation in sight of individual payers then there will be high intentions perceived for tax compliance (alasfour, 2019). thus, it can be extracted; h4: moral obligation has positive significant relationship towards voluntary tax-compliance behaviour h4a: moral obligation has positive significant relationship towards voluntary tax-compliance behaviour with the mediating effect of tax-compliance intention. behaviours have a great impact on the individual intentions to pay taxes; intentions to compliance are reflected through the behavioural actions (akram et al., 2019). behaviours influence the intentions in such a way that they control negative and positive all type of associations with the tax environment; if exchange for tax is good the then behaviours influence positive intentions but when behaviours are developed negatively towards government actions then intentions will be negatively review of economics and development studies, vol. 6 (4) 2020, 905 918 908 influenced (sadress, bananuka, orobia and opiso, 2019). behavioural controls create a great wall of hindrance for tax authorities in collecting higher tax revenues as they fail to achieve individual intentions due to lack of balanced behaviours (musimenta, naigaga, bananuka and najjuma, 2019). thus, it can be inferred that; h5: perceived behavioural control has positive significant relationship towards voluntary taxcompliance behaviour h5a: perceived behavioural control has positive significant relationship towards voluntary taxcompliance behaviour with the mediating effect of tax-compliance intention. norms are developed through societal followed actions and it does influence intentions to perform a certain action because it is performed by all other is a society or community; so it can be concluded that intention of tax compliance in a society can be measured through their norms developed for tax compliance (inasius, 2019). if the measure of expected level of tax non-compliance intention is seen increasing in the taxpayers of a community then it means there is an influence of norms of other citizens or taxpayers of strong resistance towards taxation (horodnic, 2018). subjective norms develop the intentions as these norms for tax compliance are considered to be rules and regulations that are considered must to be followed (iqbal and sholihin, 2019). thus, it can be conceptualized that; h6: subjective norms has positive significant relationship towards voluntary tax-compliance behaviour h6a: subjective norms has positive significant relationship towards voluntary tax-compliance behaviour with the mediating effect of tax-compliance intention. in a study conducted by hwang, baloglu and tanford (2019) it was claimed that when tax collectors develop a sense of trust among tax payers that there money will be used by justified means and distributed equally they develop their strong trust and show their positive tax compliance behaviours. attribute of trust of taxpayers on tax authorities for exchange of services shows the measure of compliance behaviour of taxpayers (tang, repetti and raab, 2019). thus, it can be hypothesized that: h7: trust in authorities has positive significant relationship towards voluntary tax-compliance behaviour h7a: trust in authorities has positive significant relationship towards voluntary tax-compliance behaviour with the mediating effect of tax-compliance intention. a study conducted by akram et al., (2019) formed a strong link between intention and behaviour for tax compliance by stating that taxpayer’s intention to pay taxes can be measured through observing their compliance behaviours. individual taxpayers’ intention for tax compliance will be high enough when the taxation system has developed taxpayers required behaviours accordingly (musimenta et al., 2019). the behaviour for tax compliance is an activity performed with slow and strong development of intentions of individuals under the influence of control pattern of certain behavioural elements such as norms, moral obligations, attitudes and perceived behavioural control (taing and chang, 2020). therefore, it can be extracted h8; intention towards tax-compliance has positive significant relationship towards voluntary taxcompliance behaviour. 3. data & methodology target population of this study is the small and medium enterprises owner’s belonging to two countries, pakistan and turkey. data was collected from both the countries using non-probability sampling technique known as purposive sampling. data was collected by a questionnaire based on 43 items, consisting of adopted scales. originally data was collected from 160 respondents from pakistan review of economics and development studies, vol. 6 (4) 2020, 905 918 909 and 150 respondents from turkey. sample size was selected using g-power. to measure the dependent variable voluntary tax-compliance behaviour a scale developed wahl, kastlunger and kirchler, (2010) is utilized. this scale is a unidimensional scale with 5 items. the mediating variable is tax-compliance intention. tax-compliance intention was adopted from the study of zainol, kamil and faridahwati, (2008). its also a unidimensional scale with 4 items. the scale of subjective norms was adopted from the study of wu and chen, (2005), whixh consists of 5 items, perceived behavioural control is adopted from damayanti, subekti, & baridwan (2015), this scale consists of 3 items. moral obligation scale was adopted from bobek and hatfield (2003) containing 4 items. legitimate power and coercive power scale were adopted from the study of kastlunger et al., (2013) both consisting of 5 items each. trust in authorities taken from the study of van and verboon, (2010) having 7 items. attitude scale was adopted from the study of bobek and hatfield (2003) consisting of 5 items. thus, all the scales used in this study were unidimensional. after collection of data, it was checked for any missing values. after screening of data 121 questionnaires from pakistan and 137 questionnaires from turkey were found useful. data was further analysed utilising spss and pls-smart. pls-sem is considered most appropriate for predictive applications and theory building (ringle, sarstedt, mitchell, & gudergan, 2018), same has been suggested by (sarstedt, ringle, & hair, 2017). this study used the reflective measurement model because this kind of model can best fit in measuring perceptions, attitudes, and behaviours as proposed by jarvis, mackenzie and podsakoff, (2003). thus, in this way, this study viability of using the specified software for behavioural finance perspective. before conducting pls path modelling, the first step of data analysis is to validate the data in measurement model, and the second step is to estimate path coefficients and their significance in the structural model. rules for mediation are applied as suggested by baron and kenny (1986). 4. results and discussion this study followed hair et al. (2014) for evaluating measurement model by applying the reliability and validity criteria: internal consistency reliability, convergent validity, and discriminant validity. as recommended by hair et al. (2016), kaiser-meyer-olkin measure of sampling adequacy, bartlett's test of sphericity, missing value analysis was performed. missing value analysis was performed using spss by applying both approaches known as item-wise as well as case-wise missing value analysis. the cases with missing values were deleted and the resulting data of 180 respondents from pakistan and 138 respondents from turkey were than extracted for imminent data analysis. complete cases were omitted from the analysis because of missing values. to access sample adequacy the measure of kaiser–meyer–olkin was employed. the kmo thus resulted showed value of .753, which has been characterised as ‘good ‘by field, (2009) for all 43 items. the analysis also reflected that kmo’s of respective items were also greater than .5, that is considered as good health of data to conduct more sophisticated data analysis techniques (field, 2009) for pakistan dataset. whereas, for turkey dataset kmo value appears to be .873 for 43 items, also respective kmo’s of all the items were above the minimum threshold of .5, which as per field, (2009) reflected that dataset is in good shape for conduct of analysis. these results are reflected in table 1. in next phase of analysis reliability of the constructs were determined using pls-smart. table 2 summarises the cronbach’s alpha, composite reliability (cr), and average variance extracted (ave) for the variables under study. the value that is considered minimum threshold for cronbach’s alpha is .7, review of economics and development studies, vol. 6 (4) 2020, 905 918 910 as shown by the table all the reliability statistics provide satisfactory results. the value of ave, that determines the convergent validity of the data (hair et al., 2014, p. 102) should also be greater than .50, the values in table 2 also confirms that the values from both the countries are above the minimum threshold. to improve the reliability statistics value as suggested by hair et al., (2014) few items were deleted. items (a1, a3, a5 from attitude, sn5 from subjective norms, pbc1 and pbc2 from perceived behavioural control, pl1, pl3, pl5 from legitimate power, mo4 and mo5 from moral obligation, vtc1, vtc3, vtc5 from voluntary tax compliance) with loadings less than .40 were deleted to increase the validity (hair et al., 2014), for pakistan data. whereas, for turkey data there were very few items were dropped based on reliability, these items include such as (a4 and a5 from attitude, sn1 and sn5 from subjective norms, mo4 and mo5 from moral obligation, pc5 and pc5 from coercive power, pl1 and pl3 from legitimate power tci 4 and tvc 5 were deleted), deleting of items does not conclude change in meaningfulness of the latent construct, originality of the construct remains the same as long the reliability and validity constructs provide sufficient results (hair et al., 2014; jarvis et al., 2003). table 2 displays that values of all the constructs are within acceptable range. last step in accessing the goodness of fit of the measurement model is to check discriminant validity, which satisfy the claim that each construct is different from each other, two measure are known to determine the discriminant validly, outmoded method known as fornell and larcker’s (1981) and relatively advance method known heterotrait–monotrait (htmt) that was familiarized by henseler, ringle and sarstedt (2015). haider, jabeen and ahmad. (2018) defined “htmt, in fact, estimates the correlation between constructs. if two constructs’ indicators have an htmt value clearly smaller than 1, it shows that these constructs are different from each other because their true correlation is different from 1” (p. 33). value of htmt if less than one, is considered necessary and sufficient condition for the constructs to be has discriminant validity. table 3a and table 3b reflects the values of discriminant validity computed using pls shows that discriminant validity criterion is met for both the dataset. the direct and indirect results of analysis for both turkey and pakistan are presented in below in table 4 (a) and table 4 (b) the results of these two tables provide and very interesting outcomes. results discloses that attitude towards tax-compliance has non-significant impact on tax-compliance behaviour with path coefficient=0.017 0.and p-value=0.136, for pakistan whereas, for turkey the relation is significant with path coefficient=.536 and p-value=.004, however after incorporation of the mediator the relationship become significant between attitude and tax-compliance behaviour with path coefficient=.0.337 and p-value=0.005. the result suggests full mediation as per baron and kenny (1986). whereas, results for turkey showed partial mediation with path coefficient= 0.256 and pvalue= 0.001. the results of h2 revealed that coercive power has significant relation with voluntary taxcompliance for both the countries with path coefficient= -0.287, p-value= 0.006 and path coefficient= 0.437, p-value= 0.003 respectively, whereas with the admission of mediator the values are path coefficient=-0.340, p-value= 0.048 and path coefficient=-0.397, p-value= 0.000. these results recommend a partial mediation for both countries. for h3, the relation among the variable legitimate power and voluntary tax-compliance is significant with path coefficient =0.214 p-value= 0.008 for pakistan and for indirect path the value of path coefficient= 0.301 and p-value= 0.005 suggestive of partial mediation, same is the case for turkey the path coefficient= 0.512 with p-value= 0.000 referring to partial mediation with path coefficient= 0.324 and p-value= 0.011. the results of h4 were not review of economics and development studies, vol. 6 (4) 2020, 905 918 911 significant for pakistan but interestingly they appear significant for turkey with path coefficient= 0.137, p-value=0.136 and path coefficient= 0.329, p-value=0.000, respectively. whereas, when intention towards tax-compliance was introduced as mediator among moral obligation and voluntary taxcompliance the results were significant for both countries with path coefficient= 0.227, p-value=0.011 and path coefficient= 0.412, p-value= 0.008. the results of h5 showed significant relation for pakistan among perceived behavioural control and voluntary tax-compliance with path coefficient= 0.230 and pvalue=0.000 and for turkey path-coefficient= 0.348 and p-value=0.004. moreover, the indirect results for both countries were also significant with path-coefficient= 0.310, p-value=0.006, path coefficient=0.372, p-value=0.002 representing partial mediation for both countries. the relation between subjective norms and voluntary tax-compliance, depicted by h6 appears to be not significant with path coefficient= 0.008, p-value=0.071 for pakistan but for turkey results were not supported with pathcoefficient= 0.159, path value= 0.068, however the indirect path reflect that with the introduction of the mediator the relation become significant for pakistan as well with path coefficient= 0.272, p-value= 0.007, thus consequential in full mediation pakistan as well as turkey indirect path showed path coefficient= 0.295,p-value= 0.009, representing full mediation. the results of h7 showed that both direct and indirect relationship were significant for variables trust and voluntary tax-compliance behaviour with path coefficient= 0.334 p-value=0.000 for pakistan, path coefficient=0.395, p-value= 0.001 for turkey, for indirect relation path coefficient= 0.302, p-value= 0.000 for pakistan and for turkey path coefficient=0.435 with p-value= 0.013 pronouncing partial mediation. another important and interesting outcome of analysis thus performed is that the beta coefficient value for turkey are higher as compared to pakistan. 5. conclusion and recommendations the analysis section suggested that tax-compliance intention fully mediates the relation between attitude and voluntary tax-compliance behaviour for pakistan. whereas, partial mediation was resulted in case of turkey. these results were also echoed by the research work done by onu, (2016) and akram et al., (2019). also, it was determined that intention towards tax-compliance partially meditates the relation among coercive power and voluntary tax-compliance behaviour for both countries. however, the estimate value for turkey was higher for pakistan as compared to turkey. these findings are consistent with the esteemed work done by tjondro, et.al, (2019). it was established trough analysis that too, intention partially mediate the relation legitimate power and voluntary taxcompliance behaviour for both countries, but the effect was stronger for turkey as compared to pakistan. these findings are coherent with valued work done by kastlunger et al., (2013). moral obligation and subjective norms as per the results of this study suggests that individuals in pakistan does not consider it their moral obligation to pay taxes nor does they find social pressure of paying taxes but after the incorporation of mediator they feel more inclined towards paying voluntary taxes, whereas, for turkey the individual outcome were vice versa. these outcomes were resonated by alasfour, (2019) and iqbal and sholihin, (2019). trust was analysed to be very important determinant of the voluntary tax-compliance behaviour for both the countries, with higher estimate value for turkey rather than that of pakistan. these results were also confirmed by tang et al., (2019). thereafter, it can be concluded that intention towards tax-compliance plays a very pivotal role in explaining taxcompliance behaviour. moreover, as it can be viewed that beta value are lower for pakistan as compared to turkey that reflect that individual’s belonging to the countries having weak economies have lower tendency towards voluntary compliance as compared to the individuals belonging to the strong economies. further research can be conducted by examining the tax-compliance behavior from cultural biases. also, by incorporating more countries and higher sample size. review of economics and development studies, vol. 6 (4) 2020, 905 918 912 references ajzen, i. 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(2009). predicting compliance intention on zakah on employment income in malaysia: an application of reasoned action theory, jurnal pengurusan, 28(julai), 85-102. https://psycnet.apa.org/doi/10.1016/j.joep.2009.10.005 review of economics and development studies, vol. 6 (4) 2020, 905 918 915 appendix tables table 1: sample adequacy test kmo and bartlett's test pakistan turkey kaiser-meyer-olkin measure of sampling adequacy. .739 .873 bartlett's test of sphericity approx. chisquare 11570.099 2985.002 df 1540 173 sig. .000 .000 table 2: convergent validity sampling country pakistan turkey variables convergent validity cronbach's alpha composite reliability average variance extracted (ave) cronbach's alpha composite reliability average variance extracted (ave) a 0.723 0.738 0.586 0.723 0.809 0.529 cp 0.711 0.724 0.501 0.701 0.787 0.553 mo 0.759 0.859 0.541 0.739 0.844 0.646 pbc 0.732 0.723 0.543 0.685 0.691 0.583 sn 0.705 0.806 0.513 0.814 0.873 0.632 t 0.865 0.897 0.560 0.710 0.810 0.592 i 0.763 0.816 0.597 0.737 0.773 0.550 lp 0.704 0.736 0.586 0.912 0.933 0.577 vtc 0.709 0.713 0.557 0.737 0.762 0.521 table 3a: discriminant validity (pakistan) a cp mo pbc sn t i lp vtc a cp -0.354 mo 0.037 -0.199 pbc 0.062 -0.037 0.445 sn 0.076 -0.201 0.059 0.038 t 0.195 -0.282 0.012 0.079 -0.181 i 0.270 -0.226 0.352 0.318 0.983 0.185 lp 0.019 0.027 0.011 0.033 0.232 0.039 0.241 vtc 0.310 -0.286 0.231 0.226 0.378 0.352 0.356 0.229 review of economics and development studies, vol. 6 (4) 2020, 905 918 916 table 3b: discriminant validity (turkey) a cp mo pbc sn t i lp vtc a cp 0.375 mo 0.398 -0.383 pbc 0.175 -0.103 0.176 sn 0.243 -0.125 0.231 0.155 t 0.339 -0.176 0.032 0.237 0.251 i 0.490 -0.312 0.505 0.395 0.387 0.398 lp 0.266 0.083 0.271 0.043 0.087 0.476 0.345 vtc 0.426 -0.452 0.417 0.262 0.144 0.264 0.252 0.350 review of economics and development studies, vol. 6 (4) 2020, 905 918 917 table 4a: direct and indirect effects using partial least square sem (pakistan vs. turkey) pakistan turkey pakistan turkey path estimate (b) p values results estimate (b) p values results path estimate (b) p values results estimate (b) p values results avtc 0.017 0.136 not supported 0.536 0.004 support aiv tc 0.337 0.005 supported full mediation 0.256 0.001 supported partial mediation cpvtc -0.287 0.006 supported -0.437 0.003 supported cpi vtc -0.320 0.048 supported partial mediation -0.397 0.000 supported partial mediation lpvtc 0.214 0.008 supported 0.512 0.000 supported lpi vtc 0.301 0.005 supported partial mediation 0.324 0.011 supported partial mediation movt c 0.137 0.136 not supported 0.329 0.000 supported moi vtc 0.227 0.011 supported full mediation 0.412 0.008 supported partial mediation pbcvt c 0.230 0.000 supported 0.348 0.004 supported pbci vtc 0.310 0.006 supported partial mediation 0.372 0.002 supported partial mediation snvt c 0.008 0.071 not supported 0.159 0.067 not supported sni vtc 0.272 0.007 supported full mediation 0.295 0.009 supported full mediation tvtc 0.334 0.000 supported 0.395 0.001 supported tiv tc 0.302 0.000 supported partial mediation 0.435 0.013 supported partial mediation ivtc 0.507 0.000 supported 0.537 0.000 supported review of economics and development studies, vol. 6 (4) 2020, 905 918 918 figure 1: path analysis of data from pakistan and turkey review of economics and development studies, vol. 6 (4) 2020, 739-758 739 does islamic banking augment financial inclusion in pakistan? a reinforcement analysis muhammad hanif akhtar a , imran sharif chaudhry b , muhammad ramzan sheikh c a professor, department of commerce, bahauddin zakariya university multan, pakistan email: haneefakhtar@gmail.com b professor, school of economics, bahauddin zakariya university, multan pakistan. email: imran@bzu.edu.pk c associate professor, school of economics, bahauddin zakariya university, multan pakistan email: ramzansheikh@bzu.edu.pk article details abstract history: accepted 18 nov 2020 available online 31 dec 2020 this study spells out the role of financial inclusion (fi) to accelerate the efficiency of islamic banks in pakistan for the period of 2007 to 2016. it examines the effect of a specially developed broad-based fi index on technical efficiency of islamic banks through panel ardl approach along with to explore the macroeconomic as well as bank-specific factors of efficiency. the findings exhibit the possible connection between islamic banking and financial inclusion in pakistan. the study offers a variety of useful policy implications for public policy towards effective progress on the national financial inclusion strategy in the country. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: financial inclusion, efficiency, islamic banking jel classification: g17, g21 doi: 10.47067/reads.v6i4.275 corresponding author’s email address: imran@bzu.edu.pk 1. introduction the axiom of financial inclusion (fi) has attracted the attention of research scholars, policy makers and economists across the globe. an augmentation in financial inclusion is expected to ensure fuller participation by economically vulnerable and weaker segments and low-income groups in the economy. fi is defined as a process that ensures the ease of access, availability and usage of the formal financial system for all members of an economy (sarma and pais, 2011). the financial inclusion process is carried out through the formal as well as informal sources of finance; commercial banks in general and islamic banks in particular are equally important in this drive both being contributory as well as beneficiary. there stands an immense contribution by the banks towards development of financial inclusion activity. financial markets have gone through significant changes largely due to positive developments in technological and innovative products. these factors have contributed towards financial inclusion development vis-à-vis improvement in efficiency of banks. given the dearth of literature on the role of islamic banks towards financial inclusion, empirical research on the role of islamic banks and their contribution towards financial inclusion becomes inexorable. review of economics and development studies, vol. 6 (4) 2020, 739-758 740 the present study intends to investigate the role of islamic banks towards financial inclusion as well as the contribution of latter towards performance of islamic banks in pakistan. the relationship is an important issue to be explored since islamic banks generate deposits and then turn these into advances taking the form of murabaha, ijarah, istisna’a and salam etc. overtime. to what extent these products have been useful in augmenting financial inclusion in the country and what has been the effect of fi towards improvement in performance of these banks. the study intends to explore this issue at three stages where the financial inclusion index (fii) is developed at first stage. the bank performance is estimated through the lens of technical efficiency (te) by using the data envelopment analysis (dea) at the second stage while the contribution of islamic banking towards promotion of financial inclusion along with the effect of financial inclusion across bank efficiency is evaluated at the third stage. the third stage analysis is conducted through the use of autoregressive distributed lag (ardl) model. since the number of islamic banks is too small in pakistan, the study adopts a panel data approach for estimation. hence, the present research, being the first of its type on development of financial index in pakistan, is an attempt to fill the gap and make a valuable contribution both for policy makers and bank executives in the country. this is also anticipated in expanding the role of islamic banks towards fi in line with the recent national financial inclusion strategy (nfis) launched by the government of pakistan vis-à-vis role of the latter towards improving performance of the formers. rest of the paper is organized as under. the next section reviews the literature on financial inclusion and bank efficiency around the globe. section 3 takes care of the developing the index of financial inclusion. section 4 draws upon the research methodology adopted towards reaching the ultimate goal of testing the contribution of islamic banks towards financial inclusion. section 5 presents major findings through the lens of technical efficiency of banks as well as the role of islamic banks towards augmenting financial inclusion in pakistan. the final part concludes with policy implications. 2. review of assorted literature the measurement of financial institutions’ efficiency using non-parametric frontier models has received considerable attention over the past two decades. there exists a great amount of literature on bank efficiency across the globe. among the various approaches used, the use of data envelopment analysis (dea) approach has been frequent. however, there exists a difference of choice among various studies across variables being used as inputs or outputs. the following discussion refers to some of the studies that have been conducted in context of the issue under consideration. there exist only a few studies on the determinants of financial inclusion as well as on the development of financial inclusion index worldwide. this is not the case for efficiency analysis of banks where plenty of literature is visible in an immense volume across the world. however, it is difficult to trace a significant amount of literature on the role of islamic banks towards financial inclusion. thus, a brief review of literature in these perspectives is presented in table 1. it can be observed that the literature on financial inclusion is limited but growing overtime. one can hardly find a study on the role of islamic banks towards financial inclusion except for the one by naceur et. al (2015). hence, the present study is an attempt to extend the literature in various dimensions that have not been addressed by the extant studies. in terms of financial inclusion index, the study has extended the inclusion of more dimensions that have not been considered before in construction of the index. the fii is expected to be useful measure of financial inclusion for understanding the changes at a given time vis-à-vis over a period of time. having developed the index, the study attempts to determine the influence of islamic banks on financial inclusion and subsequently the effect of financial inclusion towards efficiency of banks through the use of ardl approach. review of economics and development studies, vol. 6 (4) 2020, 739-758 741 table 1: assorted studies on bank efficiency, fii and determinants of financial inclusion reference (s) time period covered country methodology main results a) studies on technical efficiency analysis jackson and fethi (2000) 1998 turkey dea and tobit analysis they discovered the larger and profitable banks were to perform at higher levels of technical efficiency while the capital adequacy ratio had a statistically significant negative effect on performance of turkish banks. al-muharrami (2008) 1993-2002 dea gcc smaller banks exhibited a better performance in terms of overall te than did their large counterparts. the study found the big banks were more successful in adopting the best available technology, while medium banks proved good for optimal levels of output. islamic banks in the gcc area were seen as more successful in both adoption of best available technology and choosing optimal output levels. finally, in terms of te, the banks from bahrain emerged as the top performers in the region followed by peers from qatar. sufian and noor (2009) 2001-2006 mena dea the technical inefficiency appeared larger than the scale inefficiency. the banks from the mena region dominated the highest part of the efficiency frontier over the period of analysis. a positive relationship was discovered across bank efficiency and variables like loans intensity, size, capitalization, and profitability through the use of tobit regression. sufian and noor (2009) 2001-2006 mena dea the technical inefficiency appeared larger than the scale inefficiency. the banks from the mena region dominated the highest part of the efficiency frontier over the period of analysis. a positive relationship was discovered across bank efficiency and variables like loans intensity, size, capitalization, and profitability through the use of tobit regression. akhtar (2013) 2000-2009 saudi arabia dea the banks in ksa stood as least affected by the crisis of 2007 and 2008. the average levels of inefficiency remained high suggesting that ksa banks were laggards. results of the tobit regression did reveal that the impact of financial crisis remained weak and inconclusive. review of economics and development studies, vol. 6 (4) 2020, 739-758 742 yayar and karaca (2014) 2009-11 turkey dea and tobit regression the total assets and profitability variables were seen to have a positive effect upon total efficiency scores. variables like capital adequacy ratio and number of branches had a negative effect. hafez and halim (2019) 2003-2017 egypt dea the study has compared the efficiency scores of islamic versus conventional banks and found that islamic banks are more efficient. b) studies on financial inclusion index and determinants honohan (2007) 2007 160 countries econometric methodology the study has constructed estimates of fraction of households with access to formal financial institutions. he used the ratio of microfinance accounts and bank accounts to the total population, household survey-based access and the average deposit size and the per capita gdp. ardic et al. (2011) 2008-09 46 selected countries ordinary least squares method an important panel data study to find out the link between access to financial services and fi in the world. the study infers that there are 56% of adults who do not have bank accounts. anzoategui et al. (2011) 1996, 1998, 2000, and 2002. el salvador probit estimation the results indicate variables like remittances, income/wealth levels, education, returned migrants; other household features (agriculture and electricity) have a positive impact on financial inclusion. laha and kuri (2011) 1999-2005 west bengal, india binary probit regression analysis this study has developed a composite index of fi and probed the link between access to finance and fi in various states of west bengal. using the binary probit regression model, the study has pointed out various factors as obstacles related to fi. akudugu (2013) 2012 ghana (western africa) logit estimation gender (male), age, literacy, cost, and family influence has positive while distance, lack of documentation, lack of trust and lack of money have negative association with financial inclusion. review of economics and development studies, vol. 6 (4) 2020, 739-758 743 chithra and selvam (2013) 1992-2012 28 indian states ordinary least squares method this paper has investigated the determinants of fi for the various states of india. the study has incorporated various socio-economic factors as the factors determining fi. kumar (2013) 1995 -2008 india ordinary least squares method this study has also explored the factors of fi for different indian states. the study stresses more on economic determinants for fi. the authors have suggested policies to improve fi in india. tuesta et al. (2015) 2012 argentina probit estimation this study explores the three aspects of fi for argentina. the study has analyzed fi from the micro economic point of view by including access, use and barriers. clamara et al. (2014) 2012 peru probit estimation the authors have used micro data to find out the factors of fi in peru with a focus on barriers to fi. tuesta (2014) 2012 mexico multiple correspondence analysis the findings of the study show that age, position in the household, marital status, education, household behavior in terms of savings, receipt of remittances, wage or salary, financial infrastructure have positive relationship while locality with less than 15,000 inhabitants has negative relationship with financial inclusion. marr et al. (2014) 1981-2009 peru ordinary least squares method the dummy variable of financial inclusion is total number of newly-banked clients (totpers), dummy variables of mfi characteristics are level of mfi maturity (antiguo) which based on number of years of operation of the mfi since 2008, number of mfi branches (nsuc), total assets in millions of nuevos soles (assets) and dummy variable of mfi strategic relations is connection with banco nación (rbn9). totpers has positive relationship with nsus, assets and rbn9 while it has negative association with antiguo. review of economics and development studies, vol. 6 (4) 2020, 739-758 744 park et al. (2015) 2004-2012 37 asian developing countries ordinary least squares method the results of the study show that rule of law, pci and demographic variables have significant effect on fi. the negative relationship between fi and poverty has been observed. further the study has pointed out a positive association between demographic variables and fi. naceur et. al (2015) 2004–13 oic countries regression analysis the authors discovered that even though the physical access to financial services has grown more rapidly in the oic countries, the use of such services has not grown at that speed. results of the regression analysis reveal the existence of a positive link on credit to households and to firms for financing their investments. however, the empirical link remains uncertain and relatively weak. zins and weill (2016) 2014 37 africa countries probit estimation the study has computed determinants of financial inclusion indicators i.e., female, age, income and education. female and income have negative association while age and education have positive relationship with fi. moreover, the authors have also calculated the factors related to barriers to financial inclusion and mobile money banking. abdu et al. (2018) 2014 sub-sahara africa probit, tobit and juhn-murphypierce decomposition the study supports the fact that islamic banking has spurred the financial inclusion. akhtera et al. (2019) 2005-2014 28 countries of asia and africa panel regression this study has focused on role of islamic banking by considering demand and supply side factors of financial inclusion. the findings suggest that islamic banking is playing a vital role in enhancing financial inclusion through the demand side dimension. kabiru & ibrahim (2020) 2013-2018 oic countries gmm, secondgeneration cointegration and causality test the authors have pointed out that islamic banking is promoting financial inclusion in oic countries. however, no bi-directional causality has been found between islamic banking and financial inclusion. review of economics and development studies, vol. 6 (4) 2020, 739-758 745 3. construction of financial inclusion index the financial inclusion index as reflected in table 2 has emerged as a result of detailed process starting from the identification of three dimensions of financial inclusion. these dimensions were based on the usage of financial services (d1), access to these services (d2) and quality of products and services delivery (d3). each dimension was further explained through some indicators where d1 is represented by four, d2 by eight and d3 by two indicators. the descriptive statistics for indicators of three dimensions are produced in table a1 in the appendix. the construction of fii with three dimensions and their indicators are elaborated through figure 1. figure 1: components of financial inclusion index source: authors’ own elaborations for each dimension of financial inclusion, a dimension index di, is calculated as shown in table-a2, through the formula below. min max min x d ad d i d d x x x    (1) financial inclusion index (fii) usage of financial services (d1) borrowers at commercial banks per 1,000 adults (d11) deposit accounts with commercial banks per 1,000 adults (d12) loan accounts with commercial banks per 1,000 adults (d13) mobile money accounts: active per 1,000 adults (d14) access to financial services (d2) automated teller machines (atms) per 1,000 km2 (d21) automated teller machines (atms) per 100,000 adults (d22) branches of commercial banks per 1,000 km2 (d23) branches of commercial banks per 100,000 adults (d24) institutions of commercial banks (d25) institutions of insurance corporations (d26) mobile money agent outlets: active per 100,000 adults (d27) mobile money agent outlets: active per 1,000 km2 (d28) quality of products and service delivery (d3) business extent of disclosure index (0=less disclosure to 10=more disclosure) (d31) credit barriers (d32) review of economics and development studies, vol. 6 (4) 2020, 739-758 746 where: min min d dimenssions of financial inclusion d. x actual value of dimenssion d minimum value of dimenssion d maximum value of dimenssion d i ad d d x x     on the next step, the values of x1 and x2 are derived with the formulae given in equations 2 and 3. x1 represents the average of the euclidian distance between 0 and x where a higher value of 1 x stands for high level of financial inclusion and vice versa while the x2 inverse euclidian distance between x and w, indicated by the equation 3 for fii. 2 2 2 2 1 2 3 n 1 2 2 2 2 1 2 3 n d d d ..... d x w w w ..... w          (2) 2 2 2 2 1 2 3 n 2 2 2 2 2 1 2 3 n (1d ) (1d ) (1d ) ..... (1d ) x 1 w w w ..... w               (3)  1 2 1 fii= x x 2  (4) equation 4 computes the mean of and given the values of fii, the levels of financial inclusion are reflected by the ranges given below (goel and sharma, 2017):  0 ≤ fii ≤ 0.4; (low financial inclusion)  0.4 < fii ≤ 0.6; (medium financial inclusion)  0.6 < fii ≤ 1; (high financial inclusion) table 2: values of financial inclusion index years x1 x2 fii fii range conclusion 2007 0.5443 0.1703 0.3573 0 ≤ fii ≤ 0.4 lfi 2008 0.5128 0.2298 0.3713 2009 0.5029 0.2794 0.3911 2010 0.4736 0.2962 0.3849 2011 0.4657 0.3115 0.3886 2012 0.3665 0.2891 0.3278 2013 0.5181 0.3953 0.4567 0.4 < fii ≤ 0.6 mfi 2014 0.5706 0.3940 0.4823 2015 0.7185 0.4449 0.5817 2016 0.7905 0.4641 0.6273 0.6 < fii ≤ 1 hfi note: lfi, mfi and hfi stands for low financial inclusion, medium financial inclusion and high financial inclusion respectively. source: authors’ calculations review of economics and development studies, vol. 6 (4) 2020, 739-758 747 the results of table 2 reveal that financial inclusion in pakistan has increased gradually over the period from 2007 to 2016. from 2007 to 2012, pakistan can be seen in low level of financial inclusion as the index ranges from 0 to 0.4. however, the level of fii stands at 0.5 to 0.6 showing the medium level of fi during the years 2013 to 2015. in the year 2016, pakistan seems to have entered the club of high financial inclusion as the index has gone up to 0.63. this might have been the result of national financial inclusion strategy launched by the government of pakistan during the recent years. 4. technical efficiency analysis the study is based on a population analysis of all the commercial banks 1 operating in pakistan during the period of 2007 to 2016. data for the study was extracted through the banking statistics of pakistan provided by the state bank of pakistan (sbp). the model used in the study is based on two inputs and two outputs where the inputs are: (i) deposits and (ii) administrative expenses while the outputs are: (i) loans & advances and (ii) investments. hence, the model estimates the efficiency of commercial banks in transforming input quantities into amounts of output. the 2×2 model fulfills the dea concord as the minimum number of decision-making units (dmus) is greater than three times the number of inputs plus outputs (dyson et al., 2001). the flow of services provided by banks can be measured through either the production approach or the intermediation approach. the intermediary role tends to be a by-product of the production function of banks. by the same notion, the study assumes intermediation approach where financial institutions are considered as the entities that could convert inputs like deposits into outputs such as advances and investments. the input and output variables were mainly selected in context of the existing theoretical strands and the extant literature. banks tend to generate their input resources mainly through deposits which enable them to carry on their lending and investment in the economy. unlike other businesses, bank expenditures determine to what extent banks are cost efficient. for this reason, administrative expenses are used as the second input. table-a3 exhibits descriptive statistics for variables used as inputs and outputs in the study. studies on the efficiency analysis of commercial banks have mainly used frontier methodologies e.g. econometric frontier analysis and the data envelopment analysis (dea), both with their own merits and demerits2. the dea allows the use of multiple inputs and outputs without inflicting any functional form on the data and making any distributional assumptions on the inefficiency term. technical efficiency (te) is essential in measuring the bank performance. it reflects the degree of production efficiency and innovation. based on the dea model, technical efficiency scores of each bank in terms of constant returns to scale (crs) and variable returns to scale (vrs) are reflected in table 3 for the period 2007-2016. the efficiency scores presented in table 3 reveal that only one of the islamic banks appeared to be vrs efficient during the period of analysis. among the conventional banks, only four of the banks appear to be technically efficient both on crs and vrs grounds during the whole period with four others being vrs efficient only. four of the banks that have emerged as both technically crs and vrs efficient are smaller banks. this refers to the fact that small size banks are better to achieve high technical efficiency levels rather than the larger banks which do not seem to be managing well in terms of their production efficiency due to their large size. 1 as on 31st december 2016, there stood 35 commercial banks in pakistan (sbp, 2016). however, four of the commercial banks were specialized banks while out of the remaining 31 banks, consistent data could only be found for 24 banks for the period of analysis. 2 for details on the advantages and disadvantages of dea, see akhtar (2010). review of economics and development studies, vol. 6 (4) 2020, 739-758 748 table 3: technical efficiency scores of banks under crs & vrs and scale efficiency (2007-2016) dmu banks crs technical efficiency vrs technical efficiency scale efficiency remarks islamic bank 1 dubai islamic bank pakistan ltd. 0.823 0.828 0.994 irs 2 meezan bank ltd. 0.74 0.741 0.999 irs 3 bank islami pakistan ltd. 0.681 0.757 0.899 irs 4 albaraka bank (pakistan) ltd. 0.874 1 0.874 irs average scores 0.7795 0.8315 0.9415 conventional banks 5 allied bank ltd. 0.801 0.834 0.96 drs 6 askari bank ltd. 0.824 0.849 0.971 drs 7 bank alfalah ltd. 0.752 0.827 0.909 drs 8 bank al-habib ltd. 0.825 0.837 0.985 drs 9 faysal bank ltd. 1 1 1 10 first women bank ltd. 0.731 1 0.731 irs 11 habib bank ltd. 0.843 1 0.843 drs 12 habib metropolitan bank ltd. 1 1 1 13 js bank ltd. 0.807 0.822 0.981 drs 14 mcb bank ltd. 0.986 1 0.986 drs 15 national bank of pakistan 0.736 1 0.736 drs 16 nib bank ltd. 0.923 0.926 0.998 irs 17 silk bank limited 0.778 0.806 0.966 drs 18 soneri bank ltd. 0.848 0.86 0.986 irs 19 standard chartered bank (pakistan) ltd. 0.788 0.831 0.949 drs 20 summit bank ltd. 1 1 1 21 the bank of khyber 0.79 0.917 0.862 irs 22 the bank of punjab 1 1 1 23 united bank ltd. 0.876 1 0.876 drs 24 samba bank ltd. 0.546 0.567 0.963 irs average scores 0.8427 0.9038 0.9351 source: authors’ calculations looking at the performance of islamic vis-à-vis conventional banks, it can be observed that the average efficiency scores of islamic banks are lower than those of their conventional counterparts both on crs and vrs terms but are nearly identical in terms of scale efficiency. however, islamic banks tend to be operating under the increasing returns to scale (irs) where doubling of inputs more than doubles the output. on the contrary, majority of the conventional banks appear to be operating under the drs where doubling of inputs less than doubles the output. this reveals that islamic banks have the potential to perform better than their conventional peers. review of economics and development studies, vol. 6 (4) 2020, 739-758 749 5. econometric analysis having calculated the fii and te, our next task is to link these by formulating two econometric models. the first model explains the impact of islamic banks on financial inclusion while the second model points out the link between financial inclusion and technical efficiency. this is to confirm the fact whether fi and bank efficiency reinforce each other or not? following are the econometric forms of the both the models: model 1: islamic banks and financial inclusion 0 1 2 3 fii gdppc urbg dg         (5) model 2: financial inclusion and technical efficiency 0 1 2 3 te fii roe trade         (6) where: fii = financial inclusion index gdppc= gdp per capita growth (annual %) urbg = urban population (% of total population) growth rate dg = deposits growth rate of islamic banks te = technical efficiency roe = returns on equity trade= trade (% of gdp) an annual time series data from 2007 to 2016 have been selected for this study. the data on various dimensions of fii have been taken from wb global findex, imf financial access surveys, wb global consumer protection survey and wbg doing business while data on macroeconomic variables i.e. gdppc, urbg, trade have been acquired from world development indicators (wdi). the bankspecific data on roe, investments, advances, administrative expenditures, and deposits have been attained from handbook of statistics on pakistan economy, a flagship publication of state bank of pakistan. the methodology applied is autoregressive distributed lag (ardl) technique. the ardl specification of the equations 5 and 6 are given as: 1 2 1 1 2 1 3 1 1 2 1 0 ( ) ( ) ( ) ( ) ( ) ( ) z z t t t t t i t i i i fii gdppc urbg dg fii gdppc                       3 4 3 4 0 0 ( ) ( ) z z t i t i t i i urbg dg             (7) 1 2 1 1 2 1 3 1 1 2 1 0 ( ) ( ) ( ) ( ) ( ) ( ) z z t t t t t i t i i i te fii roe trade te fii                       3 4 3 4 0 0 ( ) ( ) z z t i t i t i i roe trade             (8) it is imperative to test for the stationarity of data to avoid the spurious regression. to reach this end, adf unit root test of stationarity has been applied. review of economics and development studies, vol. 6 (4) 2020, 739-758 750 table 4: results of adf unit root test adf test at level variables intercept lags intercept and trend lags none lags conclusion fii 0.292650 (0.9617) 0 -1.061389 (0.8738) 0 1.634769 (0.9625) 0 i(1) te -1.463281 (0.5049) 0 -1.212644 ( 0.8383) 0 -0.437193 (0.4956) 0 i(1) gdppc 1.216918 (0.9936) 1 3.410902 (0.1240) 1 3.084109 ( 0.9960) 1 i(1) roe -2.249411 ( 0.2055) 1 4.023576 (0.0635) 1 0.524308 (0.4610) 0 i(1) urbg 0.677364 ( 0.7969) 1 -13.28737 (0.0001) 0 5.620590 ( 0.0002) 1 i(0) dg 1.659327 (0.4166) 0 3.502680 (0.1020) 0 1.603348 ( 0.0993) 1 i(0) trade -27.15092 (0.0001) 1 -251.8337 (0.0001) 1 -1.258012 ( 0.1751) 1 i(0) source: authors’ calculations table 4 demonstrates results of adf test at level. the two dependent variables i.e. fii and te are non-stationary (having unit root) at level. the explanatory variables namely gdppc and roe have unit root (non-stationary) and urbg and trade are stationary (no unit root). it can be deduced from table 6 that all the variables have mixed order of integration so the appropriate technique to estimate the equations 7 and 8 would be autoregressive distributed lag (ardl) approach to cointegration. the first step of the ardl is to detect the existence of cointegration based on values of fstatistics. the values of f-statistics are compared to the critical values of the bounds. the results of ftest are displayed in table 5. table 5: f-test for cointegration 5% critical value bounds 10% critical value bounds f-statistic i(0) i(1) i(0) i(1) model 1 7.59 3.23 4.35 2.72 3.77 model 2 4.85 3.23 4.35 2.72 3.77 source: authors’ calculations the results of the f test allude towards rejection of the null hypothesis of no cointegration in both the models since the calculated f-statistics are more than the upper bounds at 5percent and 10 review of economics and development studies, vol. 6 (4) 2020, 739-758 751 percent levels of significance. the calculated f-statistics are 7.59 and 4.85 that are more than upper bounds values of 4.35 and 3.77 in model 1 and model 2 respectively. bounds test reveals that cointegration exists which allows us to proceed to the next step by computing the long-run estimates of both the models. table 6 presents the long-run estimates of both the models. in the first model of islamic banks and financial inclusion, the regressand is financial inclusion index (fii) and regressors are gdp per capita growth rate (gdppc), urban population growth rate (urbg), and deposits growth rate of islamic banks (dg). table 6: long-run estimates of model 1 & 2 model 1 model 2 dependent variable: fii dependent variable: te selected model: ardl (1, 1, 1, 1) selected model: ardl (1, 1, 1, 0) variables coefficient prob. variables coefficient prob. gdppc 0.095663 0.0224 fii 3.569597 0.0203 urbg 0.942307 0.0833 roe -0.822794 0.0264 dg 0.260075 0.0354 trade 0.160179 0.0869 c -2.643771 0.0860 c -4.985900 0.0975 source: author’s calculations the gdp per capita is a proxy for economic growth. there are two views about the financial development3 and economic growth: supply side4 and demand side. the demand-pulling hypothesis suggests that economic growth spurs the financial development (robinson,1952; friedman and schwartz,1963). the sign of the parameter of gdppc is positive and statistically highly significant. the positive sign can be validated towards the demand-pulling hypothesis which explains that as an economy grows, the demand for financial products increases. in other words, usage of financial services; access to financial services; the quality of the financial products and the service delivery recuperate due to the economic growth and advancement. thus, the financial system would be more inclusive as economy achieves higher economic growth (evans, 2015). our results are consistent with those by halicioglu, 2007, sarma and pais, 2011, chithra and selvam, 2013, camara et al., 2014, fungáčová and weill, 2015, tuesta et al., 2015 and oyelami, et al. 2017. financial system stands as alpha and omega in an economy which mobilizes the resources from surplus to deficit units. economic theory suggests that urbanization and fi are positively associated as the people in urban areas have greater access and usage of financial services delivery; it results in high level of financial inclusion. the parameter of urbanization appears with the positive sign in our model as expected5. it suggests that urbanization is fostering financial inclusion in pakistan. urbanization in pakistan has increased from 37 percent to almost 40 percent in 2016 (gop, 2016). the positive association between urbanization and financial inclusion may be supported by the fact that an 3 financial inclusion is a part of financial development. 4 the seminal study by patrick (1966) has proposed two competing hypotheses: i) the supply-leading hypothesis and ii) demand-pulling hypothesis. we have not investigated supply leading hypothesis that explains the impact of financial development and economic growth meaning that as financial development occurs in the economy, it escalates savings, capital accumulation, and investment results in economic growth. goldsmith (1969), mckinnon (1973) and shaw (1973) also proved the supply-leading hypothesis. 5 the study by lyons, et al., (2017) supports the negative link between urbanization and financial inclusion. review of economics and development studies, vol. 6 (4) 2020, 739-758 752 increasing number of people tend to migrate from rural areas to urban areas for various reasons including high earnings, employment, education, health and various infrastructural facilities. having moving to urban areas, they can use more financial products through the channels of education, confidence, and banking habits. the finding are supported by marr et al., 2014; naceur et al.,2015. the last regressor in the model is deposits growth rate of islamic banks (dg). this stands as the core variable in our reinforcement analysis. we have used the proxy of deposits growth rate of islamic banks to probe the impact of islamic banks on financial inclusion. the parameter is positively significant confirming role of islamic banks towards financial inclusion. as an islamic country, people are more inclined towards the islamic financial institutions. hence, religiosity factor seems to be dominant and contributing to escalating the financial inclusion as the muslims feel tilted towards the use of shariah-compliant products. they have no fear of ‘riba’ as all the islamic modes of finance are according to ‘shariah’. our findings are compatible with those by demirguc-kunt, et al., 2014; naceur, et al., 2015 and shaikh et al., 2017. moving forward to model 2 where the responding variable is technical efficiency (te) while the explanatory variables are financial inclusion index (fii), returns on equity (roe), and trade as a percentage of gdp (trade). the first parameter is financial inclusion index which shows the positive association with the technical efficiency of the banks in pakistan. this result can be justified on the following grounds. financial inclusion is a multidimensional phenomenon that accelerates the efficiency of banks as the financial inclusion ensues in any economy; it enhances the provision of formal financial products to community at large regardless of their financial status. at higher levels of fi taking the form of financial literacy and capability, numbers of borrowers, deposit accounts, loan accounts, branches, automated teller machines (atms), insurance corporations, mobile money accounts, mobile money agent outlets, the efficiency of financial sector particularly commercial banks escalates. this in turn boosts the technical efficiency along with the quality of financial products and service delivery. the results are consistent with the findings by jemric and vujcic, 2002 and chauvet and jacolin, 2017. return on equity (roe) is a bank-specific variable. this as a measure of profitability appears with a significantly negative relationship with the te. the result reveals that profitability and efficiency do not go in tandem. this reinforces that the efficiency and profitability are independent of each other by the banks in pakistan. these results are in line with the findings by akhtar (2013) and abbasoglu et al. (2007) but are contrary to the findings of jackson and fethi (2000), hassan (2006) and sufian and mohamad noor (2009). trade, being a macroeconomic variable is used as the proxy for trade liberalization and globalization. the sign of trade is positive and statistically significant. the financial sector is an important contributory and beneficiary of international trade. both financial and trade sectors stimulate each other, reinforcing the importance of fi. due to fewer restrictions on international trade and with more globalization of goods and services, the volume of trade has increased where the monetary and financial transactions would take place through the financial sector. therefore, the banks would improve themselves at par with the other international financial institutions and resultantly, the efficiency of the banking sector would also escalate. the results of error correction estimates of model 1 and 2 are displayed in table 7. the error correction terms in both the models are negative and statistically significant. the error correction term shows the speed of adjustment towards equilibrium. the values of error correction terms in both the models are -1.37 and -1.34 respectively implying that almost one and half years are required to restore the equilibrium. review of economics and development studies, vol. 6 (4) 2020, 739-758 753 table 7: error correction estimates of models 1 & 2. model 1 model 2 selected model: ardl (1, 1, 1, 1) selected model: ardl (1, 1, 1, 0) variables coefficient prob. variables coefficient prob. d(gdppc) 0.093167 0.0191 d(fii) 2.478185 0.0949 d(urbg) -2.674766 0.0315 d(roe) -0.052270 0.1153 d(dg) 0.113216 0.0727 d(trade) 0.214797 0.1153 cointeq(-1) -1.377408 0.0145 cointeq(-1) -1.340983 0.0320 source: authors’ calculations 6. conclusions and policy implications the study emerges as forerunner towards estimating the role of whole population of banks including islamic banks in pakistan towards financial inclusion for a significant period. the empirical findings allude towards a possible relationship between islamic banking and financial inclusion, measured through various dimensions with different indicators for each. hence, the study stands as novel in terms of developing a broad-based index of financial inclusion for pakistan over a period of 10 years. this facilitates to track the developments on fi front in pakistan over the period. by entering the high financial inclusion range, pakistan might enjoy the fruits of inclusive growth along with an improvement in living styles and investment behavior of the masses. the data analysis for a period of 10 years can be considered as fully representative of population of banks in pakistan along with their islamic counterparts. the study offers a variety of useful policy implications for public policy towards effective progress on the nfis in the country as well as bank managers of islamic banks. firstly, although islamic banks appear to be operating under the irs yet only one of the banks appears to be efficient. this needs to be improved by utilizing their inputs optimally. secondly, the banks need to pursue actions that might enable them to become efficient by taking advantage of their specialized shariah-compliant products. thirdly, as per growth trajectory of fi in pakistan, there is a need to improve further by taking measures that could reduce the degree of financial exclusion in the country. this can take place through the growth in per capita gdp, urbanization as well as growth in islamic banking across the country. fourthly, since the islamic banking does contribute towards fi, the latter also is seen as contributing towards making banks efficient. hence, it supports the notion that islamic banks and financial inclusion reinforce each other. fifthly, the operational modalities of islamic banking need to be strengthened in a way that could create awareness about various products of islamic banks like murabaha, ijarah, istisna’a and salam etc. in this regard, the islamic banks could establish loan units that could finance the needs of small businesses on shariah-compliant basis. sixthly, there is a dire need to magnify both the credit base and client base to promote fi in pakistan. this can be achieved by reducing the information asymmetries prevalent in the market as these tend to reduce the expected benefits from the development of banking systems (chauvet and jacolin, 2017). lastly, there stands a need to strengthen financial infrastructure and regulatory frameworks in the country to augment financial inclusion. in context of the implications and results discussed above, it can be inferred that the study provides a starting point about financial inclusion status of pakistan as reflected through the index of fi. future research can be conducted on the determinants of fi in pakistan and to evaluate the impact review of economics and development studies, vol. 6 (4) 2020, 739-758 754 of national financial inclusion 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(2017). role of islamic banking in financial inclusion: prospects and performance. in islamic banking (pp. 33-49). palgrave macmillan, cham. sufian, f. and mohamad noor, m.a.n, (2009). the determinants of islamic banks’ efficiency changes: empirical evidence from the mena and asian banking sectors, international review of economics and development studies, vol. 6 (4) 2020, 739-758 756 journal of islamic and middle eastern finance and management 2(2), 120-138. tuesta, d. sorensen, g. haring, a. & camara, n, (2015). financial inclusion and its determinants: the case of argentina (no. 1503). yayar, r.,& karaca, s. s, (2014). efficiency analysis in turkish banking sector, niğde üniversitesi i̇i̇bf dergisi 7(2), 1-15. zins, a. & weill, l, (2016). the determinants of financial inclusion in africa, review of development finance 6(1), 46-57. review of economics and development studies, vol. 6 (4) 2020, 739-758 757 appendices table a1: descriptive statistics of three dimensions of financial inclusion (2007-2016) d1 d2 d3 d11 d12 d13 d14 d21 d22 d23 d24 d25 d26 d27 d28 d31 d32 mean 25.25 310.44 30.51 22.67 9.82 6.42 14.03 9.30 37.50 53.25 81.92 129.04 5.50 53.31 median 25.25 309.34 28.55 11.93 9.00 5.98 13.82 9.20 38.00 52.50 57.27 86.61 5.50 53.66 maximum 29.30 380.10 39.96 77.90 16.05 9.83 16.90 10.36 40.00 56.00 189.04 301.78 6.00 55.96 minimum 21.75 233.25 26.13 2.00 5.50 4.00 11.79 8.57 34.00 51.00 16.01 24.64 5.00 50.04 std. dev. 2.60 51.27 4.83 27.33 3.82 2.13 1.84 0.66 2.14 2.38 72.48 117.22 0.53 2.36 skewness 0.07 -0.09 1.06 1.24 0.46 0.43 0.29 0.39 -0.42 0.30 0.41 0.44 0.00 -0.38 kurtosis 1.91 1.82 2.76 3.04 1.84 1.80 1.76 1.77 2.09 1.29 1.49 1.52 1.00 1.67 jarque-bera 0.40 0.47 1.53 2.04 0.73 0.73 0.63 0.70 0.51 1.10 0.98 0.99 1.33 0.78 probability 0.82 0.79 0.47 0.36 0.69 0.69 0.73 0.70 0.77 0.58 0.61 0.61 0.51 0.68 observations 8 8 8 8 8 8 8 8 8 8 8 8 8 8 source: authors’ calculations review of economics and development studies, vol. 6 (4) 2020, 739-758 758 table a2: dimension index of three dimensions of financial inclusion years d1 d2 d3 d11 d12 d13 d14 d21 d22 d23 d24 d25 d26 d27 d28 d31 d32 2007 0.99 0.02 0.95 -0.03 0.00 0.00 0.00 0.00 1.00 1.00 -0.09 -0.09 0.00 0.50 2008 1.00 0.03 1.00 -0.03 0.08 0.10 0.12 0.16 0.86 0.33 -0.09 -0.09 0.50 0.72 2009 0.74 0.00 0.57 0.00 0.15 0.18 0.18 0.19 0.86 0.83 0.00 0.00 0.50 0.93 2010 0.56 0.17 0.38 0.01 0.21 0.23 0.24 0.21 0.86 0.83 0.01 0.00 0.50 0.88 2011 0.49 0.35 0.20 0.03 0.28 0.30 0.33 0.29 0.57 0.83 0.01 0.01 0.50 1.00 2012 0.41 0.46 0.13 0.11 0.36 0.38 0.44 0.40 0.57 0.00 0.07 0.06 0.50 0.50 2013 0.28 0.57 0.07 0.15 0.51 0.53 0.58 0.55 0.57 0.00 0.40 0.38 1.00 0.72 2014 0.22 0.74 0.05 0.23 0.65 0.67 0.70 0.67 0.43 0.00 0.67 0.66 1.00 0.00 2015 0.05 0.90 0.00 0.64 0.84 0.85 0.85 0.85 0.14 0.33 1.00 1.00 1.00 0.00 2016 0.00 1.00 0.04 1.00 1.00 1.00 1.00 1.00 0.00 0.17 0.87 0.90 1.00 0.39 source: authors’ calculations. review of economics and development studies, vol. 6 (4) 2020, 739-758 759 table a3: descriptive statistics of key input and output variables (2007-2016) variables mean standard deviation max min 2007 deposits 137,998,534 162521165.3 591,907,435 1879587 admin expenses 4,080,435 5010387.306 18,297,279 165999 advances 93,792,241 108971410.5 382,172,734 2118347 investments 46,155,904 55064439 211,146,038 1318657 2008 deposits 151167482 179766920.6 624939016 1892018 admin expenses 5221954.85 5843319.157 21348016 367798 advances 111124508 130695603.2 456355507 2526322 investments 39043187.8 45784223.24 170822491 2045146 2009 deposits 171154037 196902040.6 726464825 2203152 admin expenses 5860863.88 6229720.761 22571470 451930 advances 112896645 132270999.7 475243431 2500916 investments 62167641.8 63644218.97 217642822 2822723 2010 deposits 197808125 223126845.6 832151888 2225822 admin expenses 6626376.04 7071170.392 26202577 533679 advances 119875165 133305770.4 477506564 2510780 investments 77833922.6 83702158.09 301323804 2892131 2011 deposits 232863522 257671742.5 933631525 2647157 admin expenses 8066601.92 8319288.915 30945203 561436 advances 115962143 131616566.9 595630955 26243 investments 85758449.2 90002518.24 319353392 1484124 2012 deposits 244583673 274665467.3 1214963700 3328001 admin expenses 8973154.96 9239587.127 35921902 595700 advances 132216086 157308389.7 734349374 56596 investments 102934991 105543197.5 381245903 7263885 2013 deposits 303795617 354518045.1 1401229814 3713111 admin expenses 9701553.38 10147607.62 37677868 605052 advances 151424980 185146557.8 713042502 3894413 investments 144312522 194522189.5 826062308 2653388 2014 deposits 350303093 384026715 1524644784 3342155 admin expenses 11106713.2 11332383.08 41518462 634381 advances 183578032 190919508 731980299 4692044 investments 196972765 224890812.9 922691101 1379486 2015 deposits 396365297 430485112.2 1634944470 4768752 admin expenses 12160274.6 12885481.01 48400384 682821 advances 198844948 193206721.1 702561836 8585373 investments 249378963 304596717 1244887008 48240 2016 deposits 477261692 484192783.5 1885959026 5228716 admin expenses 13931647.2 13553803.29 54416640 740332 advances 217126048 197108763 748466297 2771720 investments 296706290 325161208.4 1344404771 4869535 note: the values are thousands of rupees. review of economics and development studies, vol. 8 (1) 2022, 55 71 55 on the nonlinear impact of tourism on environment quality in south asia: evidence from the nardl approach waheed ahmad a, zubair tanveer b, muhammad tariq majeed c a phd scholar, department of economics and statistics (hsm) umt lahore, pakistan. email: f2021330006@umt.edu.pk b phd scholar, department of economics and statistics (hsm) umt lahore, pakistan. email: f2021330003@umt.edu.pk c professor, department of economics, quaid i azam university, islamabad, pakistan. email: m.tarq.majeed@gmail.com article details abstract history: accepted 05 march 2022 available online march 2022 the current study inspects the nonlinear effects of tourism (tor), energy use, and output growth on carbon emissions in the selected south asian (sa) countries, namely pakistan, nepal, sri lanka, and india. the empirical results are obtained by implementing the recently developed nonlinear autoregressive distributive lag (nardl) technique covering the data spanning from 1990 to 2019. the empirical findings suggest the nonlinear effect of tor on carbon emissions in the long run. further, the results revealed that positive shocks in tor have a positive and significant effect on carbon emissions in the sa region. in contrast, negative shocks in tor mitigate carbon emissions in all sa economies except nepal. moreover, the results demonstrate that energy use and output growth also have a meaningful impact on carbon emissions. based on the findings, the directions for future research and policy implications are proposed. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: carbon emissions, tourism, energy use, output growth, south asian economies jel classification: k32, l83, o13 doi: 10.47067/reads.v8i1.434 corresponding author’s email address: f2021330006@umt.edu.pk 1. introduction in the contemporary world, creating and managing a sustainable travel and tourism industry has become a critical challenge for policymakers around the globe. on the one hand, the tourism sector serves as an important element of inclusive growth and economic development by establishing a link between each sector of an economy and supporting economic broadening. besides, the tourism industry contributes to economic growth by generating employment, enhancing income, improving ways of life, offsetting trade deficit by improving export function, and evolving the overall financial system (chon et al. 2013; unwto 2017; balsalobre-lorente et al. 2018; sinha et al. 2017). furthermore, the influx of international tourists raises income levels and improves the electricity and transportation industries by expanding social, and economic goods and services (akadiri et al. 2020). review of economics and development studies, vol. 8 (1) 2022, 55 71 56 on the other hand, the expansion of tourist activities has been closely connected to energy use and carbon dioxide emissions, having environmental repercussions (sharif et al., 2020; ozturk and acaravci 2010; khan et al., 2020). the remarkable rise in global tourist activities has fueled public debate about tourism's meaningful impact on global warming through carbon emissions (𝐶𝑂2 𝑒𝑚). although tourism is highly vulnerable to environmental alteration, it contributed 5 percent of total greenhouse gas (ghg) emissions in 2008. in contrast, transportation accounts for nearly 75 percent of total ghg emissions (united nations world tourism organization). furthermore, the tourism hospitality industry consumes a substantial amount of energy and accounts for approximately 20 percent of 𝐶𝑂2 𝑒𝑚. the unwto symposium proclaimed that carbon dioxide emissions from the hospitality industry can be lowered up to 30–40 percent by introducing innovative technologies and techniques in the tourism industry. in an earlier study, bach and gößling (1996) investigated the empirical relationship between tourism development and environmental quality for the first time. they demonstrated that the tourism industry contributed substantially to environmental deterioration by escalating 𝐶𝑂2 𝑒𝑚 growth. goudie and viles (2013) also concluded the same outcome. furthermore, with increasing tourism activities, water is excessively used, natural resources are overexploited, and the volume of wastage material at natural sites is swelling. in this respect, chan et al. (2018) and latif et al. (2018) reported that an increased tourist flow may lead to soil erosion, the polluted area of land pollution, water contamination, air pollution, and eventually demolishing the world's natural beauty. tourism boosts the ratio of 𝐶𝑂2 𝑒𝑚 because of the increase in the consumption of electricity and transportation and building of relatively more houses (nepal et al. 2019). contrary to this, some researchers advocate the proposition that the tourism industry has a positive impact on environmental quality. they argue that the tourism industry provides essential services and encourages innovation and energy proficiency for the sustainable development of a nation. as a result, touristry is considered favorable for environmental protection (akadiri et al. 2020; imran et al. 2014; dogan and aslan 2017; gössling and hall 2006; paramati et al. 2018). moreover, if the leaders of the world's economies adopt eco-friendly policies, the tourism industry may positively impact environmental quality (ahmad et al., 2019). however, the existing empirical literature has not yet thoroughly investigated whether the tourist industry has an asymmetric/non-linear relationship with environmental quality. particularly, in the south asian region, there is still a paucity of literature on the relationship between tourism development and environmental deterioration. as a result, the purpose of this research is to bridge that gap by concentrating on the non-linear/asymmetric and moderating influence of tourism on the ecological system in terms of environmental quality. the particular goals of the study to investigate the non-linear/asymmetric relation between tourism and environmental quality in south asian (sa) economies. in the recent decades, south asian economies have emerged as an attractive tourist place owing to its natural beauty, cultural diversity, rich historical background, and price competitiveness. this region is home to tourism-based countries like bhutan, maldives, nepal, and sri lanka that attract tourists from all over the world. according to, the world economic forum’s travel and tourism competitiveness index (2019) this region has been ranked as “the most improved region since 2017.” the present study explores the nonlinear hidden effects of tourism on carbon emissions in the selected countries over the period 1990-2019 by employing the recently developed nonlinear autoregressive distributive lag (nardl) technique. review of economics and development studies, vol. 8 (1) 2022, 55 71 57 the present study contributes to the existing literature in the following ways: first, it investigates a novel concept namely the non-linear/asymmetric relationship between tourism and environmental quality instead of preceding literature that exclusively investigated linear relationships between these two variables. second, this study provides an asymmetric analysis of each south asia economy in a comparative setting. that is, the present research portrays a comparative picture across south asian economies by providing a comprehensive and updated analysis about individual economies using a fresh data. in this manner, the present study fills the existing research gap on this subject matter in the south asian region as well as at the individual country level. third, to unveil the causal associations between the series, this study utilizes the asymmetric causal relationship. this framework helps to explore the nonlinear hidden causal effects of the selected variables. fourth, the nardl application is used to get the short-and-long-run empirical results for the relevant policy implications. the empirical outcome suggests that the partial sum of positive shocks in tourism adversely affects the environmental quality. these empirical findings highlight the importance of ecotourism or sustainable tourism in achieving long-term development. the remaining study is structured as follows: next section provides the literature review. the discussion on the methodological framework is provided in section 3 and the description of the data is provided in section 4. section 5 provides the discussion on empirical findings and finally, section 6 concludes the study and offers some suitable policy implications. 2. literature review finding environmentally friendly explanations for economic growth is at the heart of sustainable development. in this context, the well-known environmental kuznets hypothesis states that economic growth hurts ecological quality during an initial stage of economic development. however, once a country reaches a certain level of income, the quality of the environment strengthens (dasgupta et al., 2002). several studies investigated the impact of various industries on the ecological system like plainspoken, olasehinde-williams, & alao (2019) analyzed the role of agriculture in africa, raza, shah, & sharif (2019) examined the time-frequency relationship of transport-based energy consumption in america, haiti, (2015) studied industrial growth in developing world. sharif, afshar, & nisha (2017) inspected the role of tourism on co2 emission in pakistan. travel for pleasure is considered one of the key aspects of ecological deprivation since it involves massive energy levels for different events such as “food supplying, transportation, housing, and the management of trip-related attractions” (saenz-de-miera, & rosselló,2014). saenz-de-miera and rossello (2014) also identified that a rise in tourist stock added the greenhouse gas emissions in spain and adversely affected the air concentration level with a 0.45% magnitude in pm10 concentration levels through the entrance of each vacationer. solarin (2014) examined the cointegration and causality of the macroeconomic factors using a multivariate framework that included gdp, energy utilization, financial inclusion, and urbanization. remarkably, their findings revealed that tourist inflows increased pollution but did not adequately improve the gdp. moreover, katircioglu (2014) found that tourist entrances had a substantial negative impact on co2 emission both in the short term and long-term and also confirmed the environmental kuznets curve hypothesis in singapore taking the data of energy resources, urbanization, co2 emission, and industrialization with the help of granger causality test. a similar investigation was carried out by lee and brahmasrene (2013) in european union countries to analyze long-run equilibrium relationship through panel cointegration techniques and fixed-effects models and found a negatively significant impact of fdi and tourism on co2 emissions from 1988 to 2009. furthermore, ozturk, al-mulali, and saboori (2016) used panel data of 144 countries over review of economics and development studies, vol. 8 (1) 2022, 55 71 58 twenty years and employed the system panel generalized method of moments (gmm) and time series gmm to investigate the environmental kuznets curve (ekc) hypothesis. the researchers took the data on ecological footprint, trade openness, energy consumption, gdp growth from tourism, and urbanization and found an indirect link between tourism growth and the ecological footprint among upper-middle and high-income countries. another study conducted by habibullah et al. (2016) took the data of international tourist arrivals in 141 countries and investigated their impact on biodiversity using numbers of threatened mammals, fishes, birds, and plants species as the proxy of biodiversity damage and population growth, per capita income, crop production, and protected areas as control variables. the results of the robust standard error estimator discovered biodiversity was negatively affected by tourist arrival and positively affect by the gdp per capita with the suggestions to protect the biodiversity to sustain the businesses of tourism. moreover, france, america, spain, italy, the united kingdom, mexico, germany, thailand, austria, and china being top tourist nations were selected by katircioglu, gokmenoglu, & eren (2018) taking panel data from 1995–2014 to analyze the tourisminduced environmental kuznets curve. the panel regression analysis supported that tourism development exerted an adverse impact on the levels of ecological footprints and improved impact on the levels of environmental quality confirming the inverted u-shape of the environmental kuznets curve. various econometric models of panel and time-series data have been used to investigate the dynamic relationship between trade openness and carbon dioxide emissions. shahbaz et al. (2018) investigated the variables that contribute to co2 emission in japan from 1970 to 2014 employing the ardl model and identified that energy consumption, economic growth, and globalization significantly contributed to carbon emissions. similarly, a panel data analysis for 36 sub-saharan african countries from 1990 to 2013 was conducted by twerefou et al. (2017) using the system general method of moments estimation technique and found that the effects of globalization were outweighed by the positive effects of income on environmental quality and sustainability. however, some studies identified that globalization deteriorated the harmful effects of greenhouse emissions like lv and xu (218) did a panel data analysis in 15 developing countries over the period from 1970 to 2012 to examine the influence of economic globalization on co2 emissions and found improvements in environmental situations by reducing co2 emissions in results of globalization. similarly, a spatial panel data econometric model for 83 countries was estimated by you and lv (2018) to investigate the spatial impacts of economic globalization on co2 emissions. the results supported an inverted-u shaped environmental kuznets curve for co2 emissions and concluded that a relatively high globalized country had a relatively encouraging impact on co2 emissions. shakouri et al. (2017) examined the long-run relationship between co2 emission, energy utilization, economic growth, and tourism by estimating environmental kuznets curve hypothesis in twelve asia-pacific countries from 1995 to 2013. the results indicate an increase in the foreign tourist enduring the climate degradation in these countries. another study (dogan & aslan 2017) estimated cross-sectional dependence through a heterogeneous panel model on the data of real income, tourism, energy utilization, and greenhouse gas emissions of european union nations. the long-run relationship among these variables was confirmed by the lm bootstrap panel cointegration test and although tourism and real income diminished the level of co2 emission the energy consumption contributed to climate degradation. similarly, the influence of the expenditure on foreign tourist transport, foreign direct investment, urban population, energy consumption, and trade openness on per capita income and co2 emission from 1995 to 2013 in eleven emerging economies was investigated by zaman, moemen, and review of economics and development studies, vol. 8 (1) 2022, 55 71 59 islam (2017) employing panel econometric techniques and variance decomposition analysis. their results indicated that co2 emission had a significant positive relationship with income and tourism. moreover, a new approach called wavelet transform framework that decomposes data into different time frequencies used by raza et al. (2017) and calculated covariance, correlation, continuous power spectrum, granger causality, and coherence spectrum to empirically study the impact of tourism development on the degradation of the environment in america taking monthly data between 1996 and 2015. the results revealed that co2 emissions increased both in the short run and long run due to the development of the tourism industry. likewise, sharif, afshar, & nisha (2017) employed three cointegration methods to examine the time series data of tourist inflows growth and carbon dioxide (co2) emission over 40 years and found a statistically significant impact of tourism on co2 emission through unidirectional causality running from tourist inflows towards climate degradation. 3. methodology this study investigates the asymmetric effect of tourism on carbon pollution for the period 19902019 in the context of pakistan, india, nepal, and sri lanka by employing the nardl estimation technique and incorporating other control variables such as energy and gdp. this technique is the extended version of the ardl model, which is helpful to inspect the asymmetric and nonlinear linkage between tourism and carbon pollution. the model for this analysis is as follows, 𝐶𝑂2,𝑡 = 𝛽𝑜 + 𝛽1 𝑇𝑂𝑅𝑡 + 𝛽2 𝐸𝑁𝑡 + 𝛽3 𝐺𝐷𝑃𝑡 + є𝑡 (1) here, the equation one states that carbon dioxide emissions (𝐶𝑂2) is dependent on international tourism (tor), energy use kilowatt-hour (kwh) per capita (en), gross domestic product growth annual (gdp), and the error term. thus, the equation (1) shows a long-run model irrespective of using estimation technique, it offers a long-run estimate. to find the short-run and long-run estimates this study restructured the equation (1) into a framework of error correction is as follows below equation (2) 𝛥𝐶𝑂2,𝑡 = 𝛽𝑜 + ∑ ɵ𝑘 𝑝 𝑘=1 𝛥𝐶02,𝑡−𝑘 + ∑ 𝜋𝑘 𝑝 𝑘=0 𝛥𝑇𝑂𝑅𝑡−𝑘 + ∑ 𝛿𝑘 𝑝 𝑘=0 𝛥𝐸𝑁𝑡−𝑘 + ∑ 𝜆𝑘 𝑝 𝑘=0 𝛥𝐺𝐷𝑃𝑡−𝑘 + ɑ1𝐶𝑂2,𝑡−1+ ɑ2𝑇𝑂𝑅𝑡−1 + ɑ3𝐸𝑁𝑡−1 + ɑ4𝐺𝐷𝑃𝑡−1 + є𝑡 (2) the equation shows the ardl model developed by pesaran et al. (2001). besides, the coefficients with symbols δ inspects the short-run turns out while the coefficients attached with -, have been normalized on demonstrating the long-run outcomes. this estimation technique has been very suitable because it inspects both long-run and short-run findings only in one equation. further, this technique is also used whether the order of integration i (1), i (0) or mixed order as this technique may take care of the integration variable properties. next, the primary aim of the investigation is to examine the asymmetric effect of tor on carbon emissions for selected south asian economies such as pakistan, india, nepal, and sri lanka. to achieve this objective, shin et al. (2014) proposed method is used it disaggregates the variables into the positive or negative components. thus, the study follows the same procedure and disaggregates the variable into a positive ( 𝑇𝑂𝑅+) part and negative ( 𝑇𝑂𝑅−) part. 𝑇𝑂𝑅𝑡 + = ∑ 𝛥𝑇𝑂𝑅𝑡 +𝑡 𝑛=1 = ∑ 𝑚𝑎𝑥 𝑡 𝑛=1 (𝛥𝑇𝑂𝑅𝑡 +,0)= (3) 𝑇𝑂𝑅𝑡 − = ∑ 𝛥𝑇𝑂𝑅𝑡 −𝑡 𝑛=1 = ∑ 𝑚𝑖𝑛 𝑡 𝑛=1 (𝛥𝑇𝑂𝑅𝑡 −,0)= (4) review of economics and development studies, vol. 8 (1) 2022, 55 71 60 after disaggregating the variables into positive or negative dynamics then this shock put in equation (2) is placed with the standard variables and this equation has taken as a nonlinear form of the ardl model is represented as follows in equation (5) 𝛥𝐶𝑂2,𝑡 = 𝛽𝑜 + ∑ ɵ𝑘 𝑝 𝑘=1 𝛥𝐶02,𝑡−𝑘 + ∑ 𝜋𝑘 𝑝 𝑘=0 𝛥𝑇𝑂𝑅𝑡−𝑘 + + ∑ ꝭ 𝑘 𝑝 𝑘=0 𝛥𝑇𝑂𝑅𝑡−𝑘 − + ∑ 𝛿𝑘 𝑝 𝑘=0 𝛥𝐸𝑁𝑡−𝑘 + ∑ 𝜆𝑘 𝑝 𝑘=0 𝛥𝐺𝐷𝑃𝑡−𝑘 + ɑ1𝐶𝑂2,𝑡−1+ ɑ2𝑇𝑂𝑅𝑡−𝑘 + + ɑ3𝑇𝑂𝑅𝑡−𝑘 − + ɑ4𝐸𝑁𝑡−1 + ɑ5𝐺𝐷𝑃𝑡−1 + є𝑡 (5) here, equation (5) demonstrates the non-linear ardl model developed by shin et al. (2014). it is similar to the traditional ardl. besides, non-linear ardl has various advantages over the outdated cointegration estimation models: for instance, firstly, it gives efficient and reliable results even in the case the sample size is small. secondly, the stationarity test is optional because it is applicable whether the order of integration is i (1), i (0), or both except i (2). lastly, its finding is effective even in the case of the concerned variable order is i (1), 1(0), or both. after the estimation of equation (5), this study applied various diagnostic tests, for instance, the wald test to examine the presence of asymmetric impact of variables both in the short-run and long-run. besides. in the short tun, the wald test validates the existence of asymmetric impact as ∑ ≠𝑘 ∑ 𝜋𝑘 while the long-run asymmetric effect has been confirmed by the wald test in the case of ɑ2 + ɑ1 ⁄ ≠ ɑ3 − ɑ1 ⁄ . 4. data for empirical analysis, this study used annual data set over the period 1990-2019 in the context of concerned south asian economies, for instance, pakistan, india, nepal, and, sri lanka. these south asian economies have been selected based on the reason for a well-organized and experienced tourism sector and revealed a substantial positive effect on carbon dioxide emissions. moreover, data of the selected variables have been taken from world development indicators. in our analysis, carbon dioxide emissions are a dependent variable while tourism is an independent variable. we also incorporate two control variables namely energy use and gdp. besides, the variables description details and symbols are offered in table 1. the descriptive statistics demonstrate that india has the highest mean value of carbon emissions per capita 1.211 annually on the contrary nepal has the lowest carbon emissions value is 0.152. however, has the top rank in emitting carbon polluting in the south asian region. further, the tourism and energy consumption average values for india are 6.639, and 2.662 while the average values lowest for nepal are 5.696, and 1.873. the mean value of gdp growth per capita is 1.661 lowest for pakistan and the highest in the case of india is 4.621. table 1. explanation and definition of the selected variables variables symbol definition data source international tourism rem international tourism, number of arrival person wdi electric power consumption en electric power consumption (kwh per capita) wdi gross domestic product gdp gdp per capita growth (annual %) wdi carbon dioxide emissions 𝐶𝑂2 𝐶𝑂2 emissions (metric tons per capita) wdi review of economics and development studies, vol. 8 (1) 2022, 55 71 61 table 2. descriptive statistics co2 tor en gdp pakistan mean 0.829 5.815 2.601 1.661 std. dev. o.128 0.195 0.069 1.799 india mean 1.211 6.639 2.662 4.621 std. dev. 0.374 0.312 0.152 1.984 nepal mean 0.152 5.697 1.873 3.083 std. dev. 0.077 0.161 0.208 1.865 sri lanka mean 0.602 5.801 2.506 4.327 std. dev. 0.241 0.277 0.193 2.115 5. empirical results 5.1 outcomes of unit root analysis the first step toward the empirical analysis is to check the order of integration of the selected variables. therefore, to examine the stationarity of the variables, the study used the adf test and phillip-perron test. the results obtained from these tests are presented in table 3. as described earlier, four variables have been taken for the empirical analysis of four countries. according to the results of both tests, co2 emissions and the number of arrivals of international tourists to pakistan are stationary at first difference while energy consumption and gdp per capita are stationary at level. in the case of india, the variable of co2 emissions and energy consumption have integration order one whereas gdp per capita is stationary at order zero. however, the adf test advocates that the number of international tourists’ arrival series is i (0) but the phillip-perron test is in favor of i(1). all selected variables of nepal are stationary at first difference except gdp per capita which has i(0). similar to pakistan’s data, co2 emissions and the number of arrivals of international tourists in sri lanka are stationary at first difference while energy consumption and gdp per capita are stationary at level. table 3. results of the unit root tests country variables adf test phillip-perron test i (0) i (1) decision i (0) i (1) decision pakistan co2 -0.015 -1.178*** i (1) -0.015 -0.094** i (1) tot -0.018 -1.092*** i (1) -0.018 -1.092*** i (1) en -0.093** i (0) -0.093* i (0) gdp -0.0.643*** i (0) -1.256*** i (0) india co2 0.005 -0.959*** i (1) 0.007 -0.959*** i (1) tor -0.182** i (0) -0.009 -1.006*** i (1) en -0.019 -0.810*** i (1) -0.019 -0.810*** i (1) gdp -0.739*** i (0) -0.739*** i (0) nepal co2 -0.041 -1.578*** i (1) -0.100 -1.578*** i (1) tor -0.094 -1007*** i (1) -0.094 -1.007*** i (1) en -0.017 -1.074*** i (1) -0.017 -1.074*** i (1) gdp -0.957*** i (0) -0.957*** i (0) review of economics and development studies, vol. 8 (1) 2022, 55 71 62 sri lanka co2 0.028 -1.228*** i (1) -0.028 -1.225*** i (1) tor -0.046 -0.695*** i (1) -0.002 -0.695*** i (1) en -0.090*** i (0) -0.032** i (0) gdp -0.759*** i (0) -0.759*** i (0) note: *, **, and *** show 10%, 5%, and 1% level of significance. 4.2 asymmetric effect of tourism on co2 emissions based on nardl outcomes of nardl for pakistan the asymmetric effects of tourism on co2 emissions are examined with the help of the nonlinear ardl technique. for pakistan, the results of nardl are given in table 4. the short-run estimates of nardl depict that an increase in the number of international tourists raises co2 emissions. similarly, energy consumption and gdp per capita also have a direct relationship with co2 emissions. moreover, a positive shock in the number of tourists arrival has statistically insignificant positive effects on carbon emissions whereas a negative shock has a statistically significant positive effect on co2 emission which reveals that tourism considerably contributes to greenhouse gas emissions in pakistan. panel b of table 4 shows the long-run estimation of nardl for pakistan. a positive shock in tourist arrival has a substantial positive effect on co2 emissions and a partial sum of negative change in international travelers in pakistan declines co2 emissions. in other words, a one percent increase (decrease) in international tourists in pakistan 0.077 percent (-0.130) increase in carbon emission. the diagnostics of nardl given in panel c show that the overall model is statistically significant as f-stats are highly significant and adjusted r-square about 98 percent. moreover, the wald tests for short-run and long-run coefficients of tourism variables are also statistically significant. furthermore, the value of the error correction term is not only negative but also statistically reliable states that a shock in the short run will annually converge to its long-run equilibrium with the speed of 0.73 percent. table 4: nardl coefficient estimates in pakistan variables coefficient std. error t-statistic panel a: short-run estimates δtort 0.091*** 0.020 -4.550 δtor𝑡 + 0.136 0.088 -1.539 δtor𝑡 − 0.095*** 0.030 -3.166 δtort−1 δent 0.348*** 0.082 4.243 δgdpt 0.006*** 0.001 4.800 δgdpt-1 0.002 0.002 0.975 panel b: long-run estimates tor𝑡 + 0.077*** 0.026 2.961 𝑇𝑂𝑅𝑡 − -0.130*** 0.060 -2.167 𝐸𝑁t 1.826*** 0.404 4.518 𝐺𝐷𝑃t 0.009*** 0.003 2.812 c -3.917*** 1.022 -3.830 panel c: diagnostic tests f-test 10.803*** ecm -0.730*** 0.143 -5.094 lm test 0.0762 reset 1.505 review of economics and development studies, vol. 8 (1) 2022, 55 71 63 adj-r2 0.986 cusum s cusum squares s wald sr-tor 2.876** wald lr-tor 3.984*** note: *, **, and *** show 10%, 5%, and 1% level of significant, respectively. 4.3 outcomes of nardl for india the estimates for the asymmetric impact of the tourism industry on environmental degradation in india based on nardl are presented in table 5. similar to the estimates of pakistan, co2 emissions increase with an increase in international tourists in the country in the short run. as for as the long run results are concerned, a partial sum of positive shocks raises, and a partial sum of negative shocks reduces the co2 emission. moreover, the magnitude of positive shock is greater than negative shock revealing that a one percent increase (decrease) in international travelers in india would cause to surge of 0.458 percent (-0.283) fatal gas. similarly, a one percent increase in energy consumption and gdp per capita also rise co2 emissions by 0.035 and 0.011 percent respectively. f-stat of the model advocates the significance of the model with a high value of adjusted rsquare. furthermore, the wald test describes that short-run and long-run estimations for tourism are statistically reliable. besides, the estimated value of ecm is also statistically negative and significant with 0.232 magnitude of the speed of convergence towards long-run equilibrium. table 5: nardl coefficient estimates in india coefficient std. error t-statistic panel a: short-run estimates δtort 0.106*** 0.141 -2.439 δtor𝑡 + δtor𝑡 − 0.077 0.061 1.256 δtort δtort−1 δent 0.002 0.001 1.532 δgdpt -0.001 0.001 -1.332 δgdpt-1 0.002 0.002 0.975 panel b: long-run estimates 𝑇𝑂𝑅t 0.458*** 0.190 2.410 𝑇𝑂𝑅𝑡 − -0.283*** -0.032 -8.611 𝐸𝑁t 0.035** 0.019 1.856 𝐺𝐷𝑃t 0.011* 0.006 1.833 c -0.196 0.220 -0.891 panel c: diagnostic tests f-test 6.205*** ecm -0.232*** -0.093 -2.475 lm test 1.350 reset 0.085 adj-r2 0.992 cusum s cusum squares s review of economics and development studies, vol. 8 (1) 2022, 55 71 64 wald sr-tor 3.384** wald lr-tor 7.386*** note: *, **, and *** show 10%, 5%, and 1% level of significant, respectively. 4.4 outcomes of nardl for nepal estimates of the nardl model for nepal are given in table 6. international tourists and degradation of the environment are directly related in the short run with a magnitude of 0.093. moreover, a negative shock in tourism causes to increase in carbon emissions in the short run. furthermore, gdp per capita and energy consumption are significant sources of greenhouse gas emissions in the short-run as well as in long run. similarly, a partial sum of both positive and negative shocks contributes to polluting the environment in long run. as for as the significance of the model is concerned f-test is highly significant and wald tests for short-run and long-run tourism coefficients are acknowledged that the estimates coefficients are different from zero. besides, the value of the adjusted r-square is very high. moreover, the estimated value of the error correction term is not only negative but also statistically significant depicting the model converges towards its long-run equilibrium with the annual speed of 0.44 percent if any shock occurs during the short run. table 6: nardl coefficient estimates in nepal variables coefficient std. error t-statistic panel a: short-run estimates δtort 0.093*** 0.029 3.206 δtor𝑡 + δtor𝑡 − 0.357*** 0.093 3.09 δtort−1 -0.528*** 0.176 -2.991 δent 0.036*** 0.013 2.769 δgdpt 0.008*** 0.003 2.34 δgdpt-1 0.008*** 0.002 2.849 panel b: long-run estimates δtor𝑡 + 0.212* 0.110 1.927 tor𝑡 − 0.370* 0.194 1.909 𝐸𝑁t 0.081*** 0.017 4.764 𝐺𝐷𝑃t 0.060* 0.033 1.793 c -0.196 0.220 -0.891 panel c: diagnostic tests f-test 7.169*** ecm -.0.440*** 0.183 -2.400 lm test 1.374 reset 0.724 adj-r2 0.943 cusum s cusum squares s wald sr-urb 10.890** wald lr-urb 15.032*** note: *, **, and *** show 10%, 5%, and 1% level of significant, respectively. review of economics and development studies, vol. 8 (1) 2022, 55 71 65 4.5 outcomes of nardl for sri lanka almost all estimated coefficients are statistically insignificant except for positive and negative shock in short-run results presented in panel a of table 7. positive shock and negative shock in tourism demonstrate a direct impact on co2 emissions with 0.513 and 0.093 magnitudes respectively in the short-run in sri lanka. a similar trend of these shocks could be observed from panel b in long run. nevertheless, energy consumption and gdp per capita are significant elements of environmental degradation in long run. similar to the results of previous countries, the f-stats of the model and wald tests of short-run and long-run coefficients of tourism are statistically meaningful. besides, adjusted r-square states that around 94 percent of the variation in co2 emission is explained by regressors. moreover, estimated ecm is negative and significant advocates the convergence model. table 7: nardl coefficient estimates in sri lanka variables coefficient std. error t-statistic panel a: short-run estimates δtort 0.020 0.266 0.077 δtor𝑡 + 0.513* 0.286 1.792 δtor𝑡 − -0.093*** 0.016 -5.812 δtort−1 δent 0.358 0.394 0.909 δgdpt 0.005 0.002 2.380 δgdpt-1 panel b: long-run estimates tor𝑡 + 0.306*** 0.121 2.522 tor𝑡 − -0.283** 0.061 -1.934 𝐸𝑁t 0.455*** 0.211 2.156 𝐺𝐷𝑃t 0.021** 0.009 2.131 c -0.614 1.044 -0.588 panel c: diagnostic tests f-test 7.809*** ecm -0.787*** 0.211 -3.730 lm test 1.358 reset 0.857 adj-r2 0.942 cusum s cusum squares s wald sr-urb 2.987** wald lr-urb 12.409*** note: *, **, and *** show 10%, 5%, and 1% level of significant, respectively. 4.6 asymmetric causality among four selected variables in pakistan, unidirectional ono-linear causality exists from tourists’ arrival to co2 emission and from tourism to gdp per capita. moreover, bidirectional asymmetric causality also exists between energy consumption and tourism. from energy consumption to co2 emission, from gdp per capita to co2 emission, and from gdp per capita to energy consumption non-linear causality exist in india as review of economics and development studies, vol. 8 (1) 2022, 55 71 66 estimated from the test. furthermore, bidirectional asymmetric causality exists between tourism and co2 emission, and energy consumption and tourism. non-linear causality is observed from energy consumption to tourism and energy consumption to gdp per capita in nepal. similarly, tourism and co2 emission, gdp and co2 emission, and gdp per capita and tourism have significant bidirectional causality. results of asymmetric causality among the variables of sri lanka demonstrate that unidirectional non-linear causality exists from energy consumption to co2 emission, gdp per capita to co2 emission, and gdp per capita to energy consumption. besides, bidirectional asymmetric exists between tourism and co2 emission, and energy consumption and tourism in sri lanka. table 8: results of symmetric causality test null hypothesis: pakistan india nepal sri lanka 𝑇𝑂𝑅t + ➔co2 yes yes yes yes co2➔𝑇𝑂𝑅t + no yes yes yes 𝑇𝑂𝐸t − ➔co2 no yes no yes co2➔𝑇𝑂𝑅t − no yes yes yes en ➔co2 no yes no yes co2 ➔en no no no no gdp➔co2 no yes yes yes co2➔gdp no no yes no en➔𝑇𝑂𝑅t + yes yes yes yes tor+➔en yes yes no yes gdp➔ 𝑇𝑂𝑅t + no no yes no 𝑇𝑂𝑅t + ➔gdp yes no yes no 𝐸𝑁 ➔𝑇𝑂𝑅t − yes yes yes yes 𝑇𝑂𝑅t − ➔𝐸𝑁 yes yes no yes 𝐺𝐷𝑃➔𝑇𝑂𝑅t − no no yes no 𝑇𝑂𝑅t − ➔𝐺𝐷𝑃 no no no no gdp➔𝐸𝑁 no yes no yes en➔gdp no no yes no review of economics and development studies, vol. 8 (1) 2022, 55 71 67 5. results’ discussion the asymmetric effect of tourism on co2 emissions in pakistan, india, nepal, and sri lanka is investigated in the study employing a non-linear ardl model. the short-run estimated coefficients of the models show that number of international tourist arrival has a direct proportion to co2 emissions in pakistan, india, nepal, and sri lanka with the magnitude of 0.091, 0.106, 0.093, and 0.020 respectively. moreover, long-run results reveal that partial sum of positive shock in tourist’ arrival contributes positively and partial sum of negative shock in tourist’ arrival contributes negatively to co2 emission in pakistan, india, and sri lanka whereas in nepal both shocks contribute positively to co2 emissions. apart from that examination of the causality revealed two-way causality between tourism and environmental degradation exists in india, nepal, and sri lanka while unidirectional causality exists from tourism to co2 emission in pakistan. the outcome of the study is supported by saenz-demiera and rossello (2014) who identified that a rise in tourist stock added the greenhouse gas emissions in spain and adversely affected the air concentration level and katircioglu (2014) found that tourist entrances had a substantial negative impact on co2 emission both in the short term and longterm in singapore. furthermore, a study in european union countries identified a negatively significant impact of tourism on co2 emissions (lee & brahmasrene 2013). energy consumption also contributes to polluting the environment. for pakistan and nepal, the estimated coefficients of energy consumption are positive in sign and statistically significant both in the short-run and long-run, however, this coefficient is only significant in long run for india and sri lanka, revealing that increase in energy consumption considerably reduced environment quality of the selected countries. moreover, energy consumption has bidirectional causality with tourism in pakistan and india pakistan india nepal sri lanka figure 1: asymmetric plots review of economics and development studies, vol. 8 (1) 2022, 55 71 68 whereas it has unidirectional causality from energy consumption to co2 emission in india. in nepal, energy consumption has a unidirectional relationship from energy consumption to tourism and gdp per capita. similarly, in sri lanka, energy consumption depicts two-way causality with tourism and unidirectional causality with co2 emission and gdp per capita. these outcomes are consistent with shahbaz et al. (2018) identified that energy consumption significantly contributed to carbon emissions using the ardl approach in japan. moreover, dogan and aslan (2017) employed the lm bootstrap panel cointegration test and confirmed that although tourism and real income diminished the level of co2 emission, the energy consumption contributed to climate degradation. as eck illustrates that being a developing country co2 emission/environmental degradation increases with the increase in national income. because pakistan, india, nepal, and sri lanka are developing nations, most of the estimated coefficients of gdp per are positive and statistically significant advocating the ekc phenomenon. 6. conclusion and policy implications the primary objective of this study is to inspect the effect of tor on carbon emissions for the period 1990-2019 by employing nonlinear ardl for the five sa economies. the empirical finding depicts that tor infers a nonlinear relationship with carbon emissions. the nardl results revealed that positive shock in tor has a statistically significant and considerable impact on carbon emissions in the considered sa nations, i.e., pak, sl, nep, and ind. at the same time, negative shocks in tor show a substantial and negative influence on carbon emissions in sa economies in the long run. thus, it highlights a 1% increase (decrease) in tor could be 0.077% (0.130%) emissions in pak, approximately 0.458% (0.283%) in ind, 0.212% (0.370%) in nep, and 0.306% (0.283%) in sl, respectively. also, the short-run nonlinear turnout shows a significant effect of tor on carbon emissions. the results demonstrate that positive fluctuations in tor positively impact carbon emissions in pak, ind, and nep except for sl. on the contrary, negative fluctuations in tor also badly affect environmental pollution in the short run in pak and nep. this paper concludes that sa countries need to use clean production technologies in their economic growth strategy. to mitigate environmental degradation, they should increase the percentage of renewable energy in their fuel mix relative to non-renewable energy. because tourism harms environmental degradation, sa countries may need to exercise sustainable tourism to reap the benefits without jeopardizing environmental quality. according to our findings, the governments of pak, ind, nep, and sl should encourage and persuade foreign investors the investment in green and clean energy schemes to upsurge environmental quality through invention and innovation. moreover, policymakers of these nations may improve the long-term quality of ecological health by implementing environmental laws. moreover, these countries should take advantage of developed countries' transportation and construction incentives. long-term transportation and infrastructure policies in nepal and sri lanka should be redesigned. in addition, well-defined transportation and construction rules in tourism regions may be adopted to improve environmental quality. there are significant differences between developed and south asian countries regarding social, economic, institutional, infrastructure, human capital, technological, and ecological awareness (chan et al., 2018). as a result, the tourism industry in south asia and other developing countries should formulate a comprehensive plan to develop environmentfriendly touristry products based on the innovation produced by the developed economies. review of economics and development studies, vol. 8 (1) 2022, 55 71 69 furthermore, the most effective strategy to prevent pollution in tourist zones is to use green energy. by reducing environmental pollution, sa economies could improve their tourism sectors. the south asian region has the potential to import and use environment-friendly tourist products currently being practiced in developed countries to contain greenhouse emissions. this study generated a potential conclusion based on various quantiles that could be studied further in the future. future studies can focus on environmental contamination asymmetries and discrepancies in south asian countries, which may be assessed using macroeconomic indicators. reference ahmad, f., draz, m. u., su, l., & rauf, a. 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(2017). dynamic linkages between tourism transportation expenditures, carbon dioxide emission, energy consumption and growth factors: evidence from the transition economies. current issues in tourism, 20(16), 17201735. review of economics and development studies, vol. 6 (4) 2020, 941 954 941 achieving sustainable supply chain performance through sustainable production and sustainable supplier management: a case of food manufacturing sector of pakistan nadir munir hassan a , muhammad nauman abbasi b , zeeshan ahmed c a lecturer, department of business administration, air university, multan, pakistan email: nadir.magsi@aumc.edu.pk b professor, institute of management sciences, bahauddin zakaraiya university, multan, pakistan email: abbasimna@bzu.edu.pk c asst. prof, department of business administration, air university, multan, pakistan email: zeeshan.ahmad@aumc.edu.pk article details abstract history: accepted 05 dec 2020 available online 31 dec 2020 this paper aims to investigate the impact of sustainable practices especially sustainable production and sustainable supplier management on supply chain performance. this empirical study demonstrates the contextual examination of sustainable practices especially with reference to an emerging economy like pakistan. survey was employed to collect data from 100 food manufacturing firms. exploratory factor analysis and structure equation modeling were used through amos to test hypothesis. the results reveal that sustainable production and sustainable supplier management both significantly impact triple bottom line. however, sustainable production generate stronger impact on social performance, while, sustainable supplier management significantly effects environmental performance. additionally, the findings provide valuable insights regarding the use of sustainable production and sustainable supplier management and their impact on supply chain performance. finally, it propagates utility of ecological value chain management mentioning the impact of couple of sustainable practices on tipple bottom line. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: sustainable production, sustainable supplier management, sustainable performance, supply chain performance jel classification: q01, p27 doi: 10.47067/reads.v6i4.293 corresponding author’s email address: abbasimna@bzu.edu.pk 1. introduction there has been an ever rising trend among manufacturing firms to adopt sustainable practices across the globe (afum et al., 2020). accordingly, manufacturing organization have developed a reasonable understanding on need for being mindful of environment along with the economics outcomes through use of sustainable supply chain management initiatives (chin et al., 2015). it is argued that manufacturing sector can play key role in attaining sustainable development either by creating employment opportunities, enhancing societal well-being and/or minimizing environmental review of economics and development studies, vol. 6 (4) 2020, 941 954 942 impact. in literature, the term “sustainability” has been defined as a corporate responsibility to the individuals of diverse groups, where responsibility states the need to abolish harmful effects of business (baumgartner, 2014). likewise, the essence of sustainability need not to be limited within the scope of organizations rather to be extended within and across the supply chains. sustainable supply chain helps in managing physical resources, fluctuation of information, and fund flows within and across the companies (seuring & müller, 2008) and resultantly help in achieving sustainable goals (i.e. economic, environmental, and social) (halisçelik & soytas, 2019). along with apparent challenges, sustainable development surely presents certain business opportunities. for example, firms working in an ecological manner, stand a fair chance of improving both status and financial/environmental performance which results in a sustainable competitive advantage (longoni & cagliano, 2015). honestly speaking, the significance of sustainability kept on rising since the inception of sustainable development goals. thenceforth, the united nations suggest industries to record and share their role and impact on the sdgs (compact, 2017). a growing percentage of firms are recognizing the significance of environmental sustainability as a business necessities (blome et al., 2014). organizations need to be mindful of emerging changes and to be ahead of unique development needs. further, they need to be responsive and proactively vigilant to both expected and unexpected development needs (lu et al., 2018). in prior studies, the focus remained on green practices associated with purchasing and supply chain management (schmidt et al., 2017), while, it’s applicability with respect to social practices (marshall et al., 2015) remained almost negligible. earlier studies measured the relationship between sustainable supply chain collaboration with sustainability performance and suggested that future studies must investigate the impact of sustainable supplier management and sustainable production on sustainable performance (pakdeechoho & sukhotu, 2018a). one can find number of such gaps, wherein, similar contexts have been insisted for future investigations. for instance, (hong et al., 2018) suggested investigation on how buyers exert sustainable practices on a supply chain. furthermore, hong et al. (2018) asserted that there is no consensus on how sustainable supply chain management (sscm) practices can be measured. in line with the gaps highlighted in the most recent literature, the given study investigates the relationship between sustainable practices i.e. sustainable production & sustainable supplier management and sustainable performance across the chain. it is believed that the outcomes will assist manufacturing sector especially pakistani manufacturing firms in attaining sustainable performance through sustainable production and supplier management. 2. literature review according to fortune 2020, 94% of the top 1000 firms, have been exposed to covid-19 related supply chain hindrances. the pandemic has reshaped the rules of game for almost every walk of life especially manufacturing sector worldwide (kumar et al., 2020). it is critical to keep an eye on the overall impact of covid-19 on sustainable production and consumption patterns, as notable variations are likely to emerge over the months and years (cohen, 2020). number of research streams have recently been worked on, to counter the adversities of pandemic, with ecological manufacturing seen as one of the emerging remedy (haleem & javaid, 2020). firms need to be managed in such a manner, which will help reducing the wastes, apparently toxic and hazardous elements, ill-assorted by products, and also aspects which ultimately will help saving energy (abdul-rashid et al., 2017). perhaps, firms review of economics and development studies, vol. 6 (4) 2020, 941 954 943 within and across their supply chains have left with no choice except to adopt sustainable practices. among sustainable practices, supplier selection and sustainable production can generate significant impact on overall supply chain performance. 2.1 sustainable supplier management (ssm) lately, sustainable practices assumed to be an integral component of the firm’s competencies (pullman, maloni, & carter, 2009). like many others, sustainable supplier management practices, have also been declared as firm’s dynamic capabilities (dabhilkar et al., 2016). earlier, supplier selection was limited to the selection of vendor on traditional criteria’s like, cost, price, quality, etc. later on, as the research in the given stream gained importance and became even complicated then the research output became even more sophisticated (khoshfetrat et al., 2020). firms, ssm actions are the product of how they manage to achieve and utilize the concept of sustainability in their procurement across supply chains. the idea of sustainable supplier selection and management is regarded as an acknowledged approach having connections with environmental, economic and social benefits (khoshfetrat et al., 2020). tate et al. (2012) pointed out that organization’s engagement in environmental actions is on a continuous rise because its helps in both minimizing the cost and increasing the revenue. comparatively firms utilizing ssm practices are labeled as value oriented and comply by sustainable polices with focus on increasing both ecological and economic positive outcomes (schaltegger et al., 2014). in recent times, environmental considerations have gained momentum in procurement and scm (galankashi et al., 2015). studies have shown that choosing suppliers, considering environmental, economic and social priorities leads to attain sustainable development (büyüközkan & çifçi, 2012). so, proper shortlisting of suppliers is critical, as it sets the tone for firm’s environmental ambitions (zhu & geng, 2001). appropriate assessment of suppliers on ecological grounds further guarantees that sustainable actions are in line with firms goals. in comparison to traditional selection process for suppliers, supplier selected using sustainable lens not only considers, their economics achievements, (i.e. after sales services, product quality, transportation and prices etc.), rather also stresses on energy conserving performance, environmental protection and social responsibility (peng et al., 2020). thus appropriate selection of suppliers can help firms in establishing inter firm communication routines, which helps exchange of capabilities, knowledge and resources among channel members. such collaborative systems possibly helps firms in enhancing ecological effect of their given products and also helps reducing waste across the chain (klassen & vachon, 2003). additionally, as stated by resource advantage theory, the coordinated relations with suppliers, assist in designing socially acknowledge product, while altering the existing processes in desire of seeking overall operational performances (pagell et al., 2010). hence it can be said, that ssm is intended as a high order concept that concurrently deliberates the whole process evaluation of the supply function, selection and collaborative management and helps firms in reaching their sustainable goals. it is believed that performance of suppliers hold the power of not only affecting manufacturers performance but to influence the performance goals of downstream channel members (mou et al., 2018). consequently, it needs to be observed that sustainable supplier selection is a main part of sscm (peng et al., 2020). likewise, montabon et al. (2016) have propagated to conduct researches even beyond the basic logic of seeking economic performance. resultantly, considering resource advantage and relational views, ssm surfaces for environmentally conditioned supply wide operation that can eventually confirm lasting competitive advantages to the firms. therefore we propose that: review of economics and development studies, vol. 6 (4) 2020, 941 954 944 h1: sustainable supplier management has a significant effect on economic performance. h2: sustainable supplier management has a significant effect on environmental performance. h3: sustainable supplier management has a significant effect on social performance. 2.2 sustainable production (sp) the philosophy of green (sustainable) production has its roots since 1990’s (sezen & cankaya, 2013), yet it gained major limelight, in couple of recent decades (rehman et al., 2016). according to us department of commerce, sustainable production is an environmental friendly initiative, and defined as “manufacturing the products which ensures the minimization of harmful environmental impacts, preserving energy and natural resource, for consumers and communities, while being economically sound” (tate et al., 2012). additionally, garetti and taisch (2012) referred sustainable production as a skilled utilization of natural resources across production process, in pursuit of meeting economic, social and environmental requirements. it helps to protect environment and uplift the quality of life. sustainable production must include diverse elements of sustainability into production activities, like, ecological, financial and societal aspects. several initiatives have taken around the globe to lessen the negative impact of production on environment. for this purpose most of such efforts look to reduce unwanted waste, energy consumption, effective use of material and to recover resources (pajunen et al., 2012). it is a process of aligning firm’s processes and systems, with the ability to create quality products, by making use of fewer and ecofriendly resources which are safe for customers, employees and communities around. further, it may holds the ability to harmonize the socio-environment impacts across its life cycle (machado et al., 2020). similarly, yoshikawa (2008), states that use of sustainable manufacturing tools not only adds value to firms rather positively effects the overall ecosystem and natural resources. handfield et al. (2001) mentioned that environmental impact caused by manufacturing, usage and disposal is a byproduct of firm’s priorities and choices across the design phase. in simple words, production practices with the aim of sustainable energy utilization through effective management of co2 emissions, wastes and pollutants will definitely generate a positive impact on ecological performance (evans et al., 2009). this study, considers the effect of sustainable manufacturing practices on financial performance (i.e. economics and operational outcomes). while, economic outcomes are the product of productivity, profitability and market share (rao & holt, 2005) and have been operationalized as improved order delivery, improved product quality, reduced cost and flexibility (vachon & klassen, 2006). similarly, multiple attributes can cause positive sustainable manufacturing strategy, most prominent ones include, developing ecological policies, kpi’s, procedures, firms culture, favorable environment and channel members commitment and collaboration for sustainability and technology usage (bogle, 2017). further, there is a considerable evidences between sustainable management of value chains, innovation and value creation (yoshikawa, 2008). additionally, sound working environment which increases both motivation and productivity, resource efficiency, regulatory compliance, improved firms reputation, better access to market, reduced employee turnover, and causing financial opportunities have also been attributed to sustainable production (stark et al., 2017). hence, it is need of the hour that firms must adopt sustainable production practices in order to manage cost and meet the ever rising desire for efficient production process. from the above discussion we can suggest that: review of economics and development studies, vol. 6 (4) 2020, 941 954 945 sustainable production (sp) sustainable supplier management (ssm) economic performance environmental performance social performance sustainable scm practices sustainable sc performance h1 h2 h3 h4 h5 h6 h4: sustainable production has a significant effect on economic performance. h5: sustainable production has a significant effect on environmental performance. h6: sustainable production has a significant effect on social performance. figure – 1: theoretical framework 3. methodology the data was obtained by survey based on the questionnaire. total 350 companies majorly representing food industry of pakistan were targeted for data collection. the study consists of large food corporations who could be facing more scrutiny from their multinational consumers, rivals and the federal organizations than smaller companies (ali et al., 2017). purposive sampling was used to select appropriate firm and respondent. the data were collected through structured questionnaires, while, managers those who have reasonable knowledge of sustainability and/or representing a department, like, purchase, material management, supply chain, warehousing, production, etc. who are practicing sustainable measures were requested for responses. three responses from each organization were managed for data validation. after careful screening of 350 responses, 295 (i.e. 84%) were selected for analysis. 55 responses (i.e. 16%) were dropped either because of incomplete responses or factual difference were reported within the same organization. the profile of the companies are attached as annexure – a. the questionnaire was mainly based on extensive literature review, however, an initial draft were shared with officials working with international standard of industrial classification (isic) codes in food industry for their valuable input on each construct. based on their feedback, necessary amendments were incorporated. the final questionnaire includes questions related to demographic, employees, number of years in the business, items pertaining to sustainability performance, sustainable supply chain practices, performances measures like, outcomes and rewards, etc. fifteen items were taken to measure the firm’s performance based on three sub-dimensions of sustainability, i.e. economic performance as suggested by (mitra & datta, 2014), environmental performance as used by (zailani et al., 2012) and the measure for social performance were adapted from (paulraj, 2011). the respondents were requested to determine their firm’s performance on a sevenpoint likert-type scale, wherein, 1 stands for “decreased significantly” and 7 stands for “increased significantly”. nine items were adapted from (veleva & ellenbecker, 2001) to determine the extent of sustainable production. finally, ssm was measured using three dimensions, i.e. supplier selection as suggested by (min & galle, 2001; zhu & geng, 2001; zhu & sarkis, 2004) , environmental collaboration as proposed by (zhu & sarkis, 2004) , and supplier evaluation as suggested by (zhu & sarkis, 2004). review of economics and development studies, vol. 6 (4) 2020, 941 954 946 firm size and major customer types were considered as dummy variables to control the effects on firm’s performance such as the customer’s where about (0 = domestic only, 1 = others) and firm size, considering the number of permanent workers (0 = less than 200, 1 = equal to or more than 200). 4. analysis and findings the survey results were checked and variance of the models was minimized by using exploratory factor analysis (efa). next, structural equation model (sem) was applied using amos to test the measurement model and the hypotheses. cronbach's alpha was applied to test the inner accuracy, while, discriminatory and convergent validity was checked to determine the construct validity of the scale. the values remained appropriate for all constructs. further, kaiser–meyer–olkin (kmo) results remained higher than the threshold level of 0.7, thus authenticate the sample size for analysis. moreover, the results also met the criteria of bartlett’s test of sphericity (p< 0.001). the factor loadings of all items on the assigned parameter displayed values above than 0.6 (chin et al., 1997) and the average variance extracted (ave) values varied between 0.769 to 0.872 and hence accepted as suggested by (fornell & larcker, 1981). finally, it was evident for the results that all postulated measures unveiled adequate convergent validity. table – i: constructs, scale items and descriptive statistics constructs and scale items item mean (s.d) factor loading cronbach’s alpha ave sustainable production (sp) 0.981 0.776 products and packaging are designed to be safe and ecologically sound throughout their life cycles; services are designed to be safe and ecologically sound. 4.85 0.878 wastes and ecologically incompatible byproducts are continuously reduced, eliminated, or recycled. 4.85 0.856 energy and materials are conserved, and the forms of energy and materials used are most appropriate for the desired ends. 4.84 0.818 chemical substances, physical agents, technologies, and work practices that present hazards to human health or the environment are continuously reduced or eliminated. 4.92 0.823 workplaces are designed to minimize or eliminate physical, chemical, biological, and ergonomic hazards. 4.82 0.813 management is committed to an open, participatory process of continuous evaluation and improvement, focused on the long-term economic performance of the firm. 4.84 0.867 work is organized to conserve and enhance the efficiency and creativity of employees. 4.84 0.853 the security and well-being of all employees is a priority, as is the continuous development of their talents and capacities. 4.85 0.825 the communities around workplaces are respected and enhanced economically, socially, culturally and physically; equity and fairness are promoted. 4.92 0.826 sustainable supplier selection (ss) 0.959 0.826 ss1: we check whether the candidate suppliers meet our 4.76 0.761 review of economics and development studies, vol. 6 (4) 2020, 941 954 947 predetermined product-based criteria. ss2: we visit candidate suppliers’ factories to assess their facilities and technology levels. 4.85 0.708 ss3: we check whether the candidate suppliers meet our predetermined environmental criteria. 4.77 0.731 ss4: we check whether the candidate suppliers meet our predetermined social criteria. 4.74 0.732 ss5: a formal supplier selection evaluation process is performed. 4.8 0.721 environmental collaboration (ec) 0.962 0.784 ec1: we cooperate with our suppliers to achieve environmental objectives. 4.88 0.781 ec2: we provide our suppliers with design specification that include environmental requirements for purchased items. 4.88 0.793 ec3: we encourage our suppliers to develop new source reduction strategies. 5.01 0.854 ec4: we cooperate with our suppliers to improve their waste reduction initiatives. 5.01 0.771 ec5: we work with our suppliers for cleaner production. 5.03 0.783 ec6: we collaborate with our suppliers to provide materials, equipment, parts and/or services that support our environmental goals. 4.99 0.833 supplier evaluation 0.964 0.872 se1: we conduct regular environmental audits into our suppliers’ internal. 5.08 0.754 se2: we periodically evaluate our suppliers’ environmentally friendly practices. 5.07 0.754 se3: we make site visits to suppliers’ premises to help them improve their eco. 5.11 0.753 se4: we encourage our suppliers to get their iso14000 certification. 5.12 0.748 economic performance 0.969 0.864 en.p1: decrease in cost of materials purchased. 5.29 0.821 en.p2: decrease in cost of energy consumption. 5.4 0.806 en.p3: decrease in fee for waste discharge. 5.33 0.812 en.p4: improvement in return on investment. 5.37 0.823 en.p5: improvement in earnings per share. 5.26 0.836 social performance 0.949 0.769 sp1: improvement in overall stakeholder welfare or betterment. 4.96 0.757 sp2: improvement in community health and safety. 4.99 0.689 sp3: reduction in environmental impacts and risks to general public. 4.94 0.778 sp4: improvement in occupational health and safety of employees. 4.93 0.776 sp5: improved awareness and protection of the claims and rights of people in community served. 5.01 0.730 review of economics and development studies, vol. 6 (4) 2020, 941 954 948 environment performance 0.955 0.809 ep1: reduction in air emission. 5.31 0.762 ep2: reduction in waste (water and/or solid). 5.3 0.727 ep3: decrease in consumption of hazardous/harmful/toxic materials. 5.35 0.759 ep4: decrease in frequency for environmental accidents. 5.41 0.797 ep5: increase in energy saved due to conservation and efficiency improvements. 5.35 0.779 the square root effects of the ave values were compared with the respective correlation of each item to ensure the discriminant validity of the structures. in table ii, the square roots of ave surpass the correlation values for each building such that unequal validity is guaranteed (chin et al., 1997). table – ii: correlations matrix cr ave msv maxr (h) 1 2 3 4 5 6 7 sp 0.972 0.776 0.366 0.994 0.881 ec 0.956 0.784 0.384 0.987 0.463*** 0.886 ecp 0.97 0.864 0.382 0.972 0.534*** 0.513*** 0.93 enp 0.955 0.809 0.388 0.955 0.520*** 0.619*** 0.572*** 0.9 sp 0.943 0.769 0.449 0.977 0.547*** 0.552*** 0.585*** 0.619*** 0.877 ss 0.96 0.826 0.534 0.961 0.605*** 0.546*** 0.618*** 0.623*** 0.670*** 0.909 se 0.965 0.872 0.534 0.965 0.583*** 0.536*** 0.602*** 0.611*** 0.621*** 0.731*** 0.934 in our research we opted seven of the model fitness indices (bagozzi et al., 1991) their corresponding threshold values and observed values have been presented in table iii. the results indicate the good model fitness values for all the statistics. table iii: goodness-of-fit test statistics χ2/df rmsea gfi cfi ifi tli nfi suggested values <3 <0.08 >0.8 >0.9 >0.9 >0.9 >0.9 observed values 1.914 0.056 0.804 0.966 0.966 0.963 0.931 conclusion accepted accepted good fit good fit good fit good fit good fit the structural model demonstrates the causal relation between the variables and the calculation of the path coefficients and value of the r 2 . the r 2 value also tests the model's forecast capacity (hair et al., 2014). the test findings of the hypothesis are summarized in table iv. table iv: structural model regression weights estimate s.e. a c.r. b pvalue decision ecp <--sp 0.137*** 0.068 2.43 0.015 supported sop <--sp 0.143*** 0.058 2.686 0.007 supported enp <--sp 0.114*** 0.052 2.215 0.027 supported ecp <--ssmmean2 0.585*** 0.075 10.332 *** supported sop <--ssmmean2 0.625*** 0.064 11.754 *** supported enp <--ssmmean2 0.666*** 0.057 12.904 *** supported note: *p-value≤0.1, **p-value≤0.05, *** p-value≤0.001 review of economics and development studies, vol. 6 (4) 2020, 941 954 949 a s.e. is an estimate of the standard error of the covariance; b cr is obtained by dividing the covariance estimate by its standard error the five first order latent variables were used in the framework i.e. (sp, ssm, sp, ecp and enp), consisting of 50 observable items. kline (2015) proposed three alternative trajectory parameters (gamma=α) (beta= β) and (lambda = β). the line between dv & idv is represented by (γ). the lines between all dependent variables are represented by (β). the link between the latent variables and the indicators is represented by (λ). promisingly, the results (γ = .803, p<0.05) & (t = 18.928) revealed substantial positive relation between ecological/environmental performance and sustainable production. further, the values (γ = .751, p<0.05) & (t = 18.151) authenticate considerable positive relationship between sustainable production and social performance. lastly, the outcomes (γ = .766, p<0.05) & (t = 20.792) exhibit meaningful positive relation between sustainable production and economic performance. from the results, it is can inferred that sustainable production trigger 75.1% changes in environmental performance, 80.3% changes in social performance and 76.6% in economic performance. unexpectedly, the results (γ = .127, p<0.05) & (t = 3.002) demonstrate somewhat weak relationship between sustainable supplier management and environmental performance and it causes only 12.7% change in environmental performance. in similar manner, the results, (γ = .191, p<0.05) & (t = 4.61) explain weak, however, positive correlation between sustainable supplier management and social performance. finally, the values (γ = .194, p<0.05) & (t = 5.275) indicate somewhat positive relationship between sustainable supplier selection and economic performance. sustainable supplier management can generate 19.1% difference in social performance and 19.4% change in economic performance. 5. discussion and conclusion the outcomes of this study provide sufficient empirical evidences that sustainable practices in manufacturing can generate notable effects on overall supply chain performance. results of this study strengthened the existing perceptions regarding sustainable production as a technique to generate environmental positives. considered the effect of sustainable production practices, on competitive production outputs, it was found, that pollution prevention actions, also cause operational efficiency and reduced production cost. in the existing literature, (porter & van der linde, 1995) expressed that environmentally vigilant practices has the potential to generate benefits, which is in line with the outcomes of many studies like, (ramayah & rahbar, 2013) who also stressed that the firms can secure competitive market positions, by making use of sustainable technologies and business practices. whereas, ramayah & rahbar (2013), observed that there is an identifiable relationship between green manufacturing and production performance (i.e. product quality, cost reduction and delivery performance), which means firms interested in ecological performance, need to adopt sustainable production practices. similar to outcomes of the above mentioned studies, the given study found that enhanced sustainable performance will not only cause environmental performance, improves the economic feasibility, rather will also be the source of social performance for the manufacturers. this research emphasizes more for sustainable productions and social performance in comparison to ecological and financial performance in context of pakistan. it also concludes that by adopting strategy, firms cannot only reduces the damages caused through industrial actions rather also helps in sustaining the natural resources from depletion, enhances the quality of life, and protects the future generations from health hazards. review of economics and development studies, vol. 6 (4) 2020, 941 954 950 lastly, results also authenticate that with better sustainable supplier management, organization will end up causing improved sustainable performance, which add to the body of knowledge, as most of the previous studies focused only on ecological and financial dimension of triple bottom line. it also complements the idea that professional and trust worthy buyer-supplier relationship, which is the prime source of information sharing regarding procurement, production and product design etc. helps improving environmental and social aspects of performance, reduces waste, and makes workplace safe and conducive for worker, which complements the findings of the previous studies, that firms sustainable intensity is a product of its suppliers ecology (krause et al., 2009). in the end, this study focuses on three aspects of sustainable performance, and results show that sscmp have more significant impact on social performance, as compared to environmental and financial outcomes. mainly it reflects that with increase sustainable supplier and production management, there will be a positive increase in firms sustainable, overall performance. for practitioners, the results of the study are of great importance. especially in post covid era, there is an ever increased pressure on firms to adopt sustainable practices, in order to not only reduce financial costs, but also to be socially responsible. as this study reflected an identifiable impact of sustainable practices on sustainable performance, so firms need to adopt these outcomes and must go green and productive. in line with resource based view, sustainable practices serve the role of unique resources, which ultimately prove profitable for firms of present times. along with extending the body of knowledge on sustainable practices, through statistical analysis and empirical procedure, this study adds to the scope of prior studies in the field of sustainable supply chain collaboration, within the emerging economies (pakdeechoho & sukhotu, 2018b). findings might also be of operational guidance for practitioners to enhance their firm’s sustainable performance through sustainable sc practices (sp, & ssm to be specific). producers in the developing economies might consider and acknowledge the significance of environmental supremacy within firm, which will further uplift the cooperative efforts, and enhances the three dimensional sustainable performance. finally, this research guides decision makers to provide stakeholders with holistic, transparent and explicit incentives in order to make sscm and its implementation even viable (dam & petkova, 2014). although, the study tried to comprehensively address the issue at hand, still it like other researches isn’t free of limitations, some of those may serve the purpose of future directions for upcoming studies. first, future studies may make use of other sustainable supply chain practices, and could measure its impact on overall scp. secondly, to further strengthen the proposed hypothesis, future studies may consider some mediating and moderating variables, as in present day’s scenario the relation between proposed independent and dependent construct, aren’t free of contingent variables and aspects. likewise, sustainable supply chain integration can be considered as an intervening 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(2004). relationships between operational practices and performance among early adopters of green supply chain management practices in chinese manufacturing enterprises. journal of operations management, 22(3), 265-289. review of economics and development studies, vol. 6 (4) 2020, 941 954 954 annexure – a. profile of the responding companies characteristics of respondents (sample size, n=295) frequency % number of employees less than 200 157 53% equal to or more than 200 138 47% annual sales volume less than $10 million 116 39% $10-$49 million 93 32% $50-$99 million 38 13% $100-$499 million 41 14% equal to or more than $500 million 7 2% type of industry (isic code) production, processing and preserving of meat and meat products (classification code: 404010100) 20 7% processing and preserving of fish and fish products (classification code: 404010200) 21 7% processing and preserving of fruit and vegetables (jam, jellies, fruit) (classification code: 404010300) 30 10% manufacture of edible oil and ghee (classification code: 404010400) 19 6% manufacture of dairy products (classification code: 404010500) 7 2% manufacture of grain mills products (classification code: 404010600) 34 12% a. rice processing (husking, semi-wholly milled etc.) (classification code: 404010610) 14 5% b. manufacture of other grain mills products (classification code: 404010620) 24 8% manufacture of starches and starch products (classification code: 404010700) 7 2% manufacture of other food products (classification code: 404010100) 14 5% manufacture of feeding stuff for animals (classification code: 404010800) 20 7% processing/blending of spices, tea, coffee etc. and manufacturing (classification code: 404010900) 13 4% manufacture of sugar (classification code: 404011000) 24 8% manufacture of bakery other food products n.e.c. (classification code: 404011100) 25 8% manufacture of beverages (classification code: 404011200) 5 2% a. production of mineral and drinking water (classification code: 404011210) 13 4% b. manufacture of soft drinks and other beverages (classification code: 404011220) 5 2% target market domestic 138 47% overseas 39 13% both 118 40% review of economics and development studies, vol. 8 (3) 2022, 259-276 259 the outlook of economic development of pakistan during covid-19 pandemic and its potential effects on different regions maryam a a bahria university karachi campus, pakistan email: maryamkhokhar60@gmail.com article details abstract history: accepted 25 august 2022 available online september 2022 in this article, we have known about the outbreak of the corona virus and how the corona virus affects the global economy. further, we have discussed the economic development of pakistan in the year 2019 to 2020. how did these countries stabilize their economy at the time of the pandemic? what were the policies they have for their country and business? how small sizes and large businesses affected during the pandemic what was the growth of gdp we have discussed in this article the data were analyzed through descriptive statistics. pakistan's economic system, just like the outer world, has been significantly affected mostly by covid-19 pandemic through a range of mechanisms, including several downturns in national and international consumption, a reduction in international visitor’s transportation, trade and manufacturing interconnections, and logistic shortages. from february 2020, the explosive growth of the covid-19 virus has fostered the national economy to a standstill. the magnitude of monetary damages, on the other contrary, will be related to the occurrence and frequency of covid-19. we have used exploratory techniques, which will include a detailed examination of the relevant research, which would include governmental statements, research articles, and evaluations in the sector. the finding demonstrate that the overwhelming of the collaborating enterprises has been severely influenced, and they are struggling with something like a range of problems involving financial management, supply chain interruption, reduced prices, sales, and revenue. we have also seen how online businesses operate during coved 19. further, we have researched how the education sector was affected by the covid-19 pandemic. what was the strategic plan implemented to stabilize the education system during an outbreak. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: economic development of pakistan; covid 19; economic sectors; economic growth, online business; education system jel classification: o11, o12, p36 doi: 10.47067/reads.v8i3.429 corresponding author’s email address: maryamkhokhar60@gmail.com review of economics and development studies, vol. 8 (3) 2022, 259-276 260 1. introduction corona virus disease 2019 (covid-19 pandemic) pandemic is a contagious disease caused by severe acute respiratory syndrome corona virus 2. the first known case of the covid 19 pandemic was identified in wuhan, china, in december 2019. after that, the disease has since spread worldwide (ilyas, azuine, and tamiz 2020). this has led to an ongoing pandemic. covid 19 pandemic symptoms often include fever, cough, headaches, fatigue, difficulties in breathing, and loss of smell and taste. symptoms of covid 19 pandemic may begin one to fourteen days after exposure to the virus (ahmed 2020). at least one-third of those who are contaminated do not demonstrate any visible and obvious symptoms (chien et al. 2022). of those people who develop symptoms noticeable enough to be classed as patients, most developed 81% mild to moderate symptoms (up to mild pneumonia), while 14% develop severe symptoms, dyspnea, hypoxia, or more than 50% lung involvement on imaging and 5% suffer critical symptoms of respiratory failure, shock or multi-organ dysfunction. older people are at a higher risk of developing severe symptoms. some people continue to experience a range of effects (long covid) for months after recovery, and damages to organs have been observed. multiyear studies are underway to further investigate the long-term effect of the covid 19 pandemic disease (susilo et al. 2022). while the researchers still are bound to investigate covid 19 pandemic disease, they have also worked on the greater side; several covid 19 pandemic vaccines have been approved and distributed in various countries. which have initiated mass vaccination campaigns? the usage of face marks and coverings has been recommended in public settings to minimize the risk of transmissions (azmat hayat et al. 2021). while research is underway to develop drugs that inhibit the virus, the primary treatment is symptomatic. the corona virus disease (covid-19) pandemic has had quite a substantial impact on domestic and international trade theory. numerous companies are struggling with a multitude of challenges and problems, all of which culminate throughout many extent of destruction (hawkins, charles, and mehaffey 2020). companies, in particular, are contending with several complications, including one with a downturn in the economy, distribution network shutdowns, and abandonment of global demand, input materials shortfalls, and logistics difficulties, to highlight some. furthermore, it is painfully evident that the covid-19 pandemic is having a significant impact on businesses all over the world (yoosefi lebni et al. 2021). as the economic system progressively improves, the adverse consequences of covid-19 are anticipated to disappear and decrease (blustein et al. 2020). the methodology for restoration, on either extreme, will be affected by a combination of circumstances, together with the intensity of the unfavorable effects on multiple segments, the frequency and duration of the detentions and shut downs, and the consequences that come with operations. as a consequence of the unpredictability, the forecast is potentially very dangerous (javed et al. 2020). meanwhile, the country's economic budget proposal, along with a resilience scale by the state bank of pakistan to supply additional liquidity to companies and consumers, will help to mitigate the ongoing economic contraction and provide somewhat assistance to the desperate (tisdell 2020). the eruption and spread of virus in china attempted to drive organizations to cease operations, decreasing reliance on oil, raw materials, semi finished goods, and the distribution of single and multiple products from china to the rest of the nation. a comparable scenario happened in european democracies (chen et al. 2021). as a consequence, the global financial system has seen a drop in demand. occurrences in the manufacturing and services sectors adversely targeted developed nations, specifically someone with an elongated perspective. due to the decrease in output of goods and services from pakistan and certain other emerging economies, the processing industry, especially manufacturers, has found it difficult (nundy et al. 2021). several fabrics deliveries were thrown overboard and eventually returned even though, in the context of the disease outbreak, no jurisdiction review of economics and development studies, vol. 8 (3) 2022, 259-276 261 attempted to spread them back to the home country until circumstances were back to business as usual. management of working capital was indeed a major challenge for exporting countries. additionally, small and medium enterprises, specifically contract workers, have suffered as proper management network have started to dry up, abandoning them without commodities or supplies (abdullah et al. 2021a). the study's main objective was to evaluate the financial consequences of the covid-19 influenza pandemic in pakistan. the purpose of the study is to explore the effectiveness of producers and consumers sector disturbances on pakistan's economy and contributing to the outbreak (waris et al. 2020). this would also ultimately decide whichever enterprises demand immediate help from the government's aid in order to mitigate expeditiously from the catastrophic consequences of the covid-19 scourge (wang et al. 2021). 2. literature review wellbeing of humans, as determined by living standards, perinatal incidence rates, and high maternal mortality occurrence, has already been associated with behavioral mostly well and advancement, based on the most recent assessments. numerous interconnections have been encountered where such a contagious cholera epidemic influences business development, based on the most recent studies (chien et al. 2022). to guesstimate expenditures, prior literature leveraged conventional statistical additional operations to morbidity and metabolic disorders. furthermore, numerous researchers have investigated information on sufferers' wasted opportunities and revenue, while also federal expenditures on treatment and rehabilitation structures, to determine the infection's financial consequences (şengel et al. 2022). these conventional approaches may fail to appreciate the economic consequences of catastrophic events. immediately preceding epidemics, including aids, influenza, and catastrophic influenza, offered understanding about how to evaluate the repercussions of covid-19. the severe acute respiratory virus has an enormous capital accumulation and environmental consequence including both industrialized and developing economies, based on the most recent analyses. throughout many nations, some analysts also reported a significant reduction in personal finances, an uptick in commercial recurrent expenditure, and heightened incidence (ahmed 2020). only a few more publications concerned with the economic repercussions and consequences of the plague, as shown in a review of relevant literature. they conducted a comparative assessment into the pandemic disease's economic consequences in advanced economies (silva et al. 2020). a systematic analysis of the infectious diseases recession in the united states had also been researched by an investigator, whose documented economic damage. the oxford budgetary prediction algorithm was used in their research to assess the anticipated possible influence of infectious disease and predicted consumption constriction in asia, and therefore a significant drop in aggregate asian economic growth. consequently, the investigation suggests that global gdp and international trade and commerce together have dropped significantly (hawkins, charles, and mehaffey 2020). aids, which has been shown to have a severe economic and social consequence on people's personal well-being in assessments of studies, published investigations has already shown that whooping cough is substantially more highly infectious than hiv disease, and investigators anticipate that covid-19 could very well propagate more quickly and unexpectedly than hiv (latip et al. 2021). covid-19's unpleasant feature has had massive repercussions for individuals around the world. it has actually caused hundreds of new behavioral and economic ramifications that start raising factors that increase the risk for socioeconomic and commercial for the well-being and health of humans (mustafa review of economics and development studies, vol. 8 (3) 2022, 259-276 262 et al. 2021) 2. covid-19 pandemic effect on global economy why did the spread of the covid 19 pandemic bring the global economy down to its knees? the answer to this question lies in the two methods by which corona virus stifled economic activities (haleem, javaid, and vaishya 2020). first, the spread of the corona virus encouraged social distancing which led to the shutdown of financial markets, industries, factories, corporate offices, businesses, and social events like charities and small business gatherings (ramanan et al. 2020). second, the exponential rate at which the virus was spreading, and the heightened uncertainty about how bad the situation could get, led to a flight to safety in consumption and investment among the consumers, the investors, and international trade partners. on 30 january 2020, the world health organization (who) acknowledged the seriousness and complexity of the circumstances and officially declared a "life threatening condition threat of international outrage". the prevalence of the disease escalated tremendously everywhere across the worldwide and globe in a short amount of time, compelling the who to pronounce covid-19 a "disease outbreak" on march 11, 2020 (song et al. 2020). sometimes after upwards of seven months, the population of the town and potentially lethal occurrences continues to increase significantly around all over the globe as shown in figure 1. we focus on the period from the start of 2020 through march when the corona virus began spreading into other countries as well as their markets (mccauley et al. 2022). we draw on real-world observations in assessing the restrictive measures, monetary policy measures, fiscal policy measures, and public health measures that are adopted during the pandemic period. we examine the impact of social distancing policies on economic activity and shock markets. the findings reveal that the increasing number of lockdown days, policy decisions, and international travel restrictions affected the level of economic activities like import and exports of pakistan (ioannidis 2022). figure 1: output and economic growth 3. methodology we applied and conducted an exploratory methodology, including comprised a comprehensive examination of the established publications, which included legislative materials, scholarly publications, statistics and analyses in the domain. according to diverse of considerations, particularly schedule and expenditure considerations, and also the covid-19 outbreaks and confinement, the material and information was gathered via an online survey. several other investigators had been using an identical methodology and indicated it to be beneficial as well as quality and expense economical. review of economics and development studies, vol. 8 (3) 2022, 259-276 263 to enhance participation estimates, analysts expressed a preference to engage into their private and social associations. we approached possible respondents through a range of social media sites, such as whatsapp, facebook, and linkedin, along with e-mail, and encouraged them to indulge in the opinion survey poll. all participants, applicants and respondents were guaranteed of absolute anonymity and privacy, encouraging a considerable number of companies and peoples to participate in the assessment. the survey asked about basic information about corona and its effects on people's daily lives, business effects, different economic sectors and their characteristics (such as size and industry), impact of covid-19 outbreak on small and medium businesses, sales and profit declines, survival period, industrial sector formalization period, and an appeal to the government to ease the burden of lockdown. the survey was absolutely and entirely voluntary, and no pecuniary remuneration was promised for commencing it. prior the opinion poll was actually and officially launched, the series of questions components were checked and validated with a limited group of successful business owners to analyze their coherence and applicability, as well as to recognize and prevent any prospective shortcomings. the relevant data was gathered through using snowball convenient sampling, which really is widespread due to its economic and particular time saving benefits. the 5-month incidence rate of covid-19 was computed by dividing the total confirmed cases by the total population. the incidence rate was computed for individual states/countries to assess crossstate/cross-country variations in the pandemic. total covid-19 cases and total gdps were plotted first to provide a visual representation of the relationship between the two variables. the plot was made using dual logarithmic scales for both xand y-axes. informed by the plots, the relationship between gdp and covid-19 was quantified using the following regression model: (𝑌𝑖) = 𝛽0 + 𝛽1log (𝐺𝐷𝑃𝑖) + 𝑒𝑖, where yi represents total confirmed covid-19 cases in an individual u.s. state or european country during the study period, gdp represents total 2019 gdp of an individual u.s. state or an individual european country, and ea. = residuals; i represent individual u.s. state/european countries. data processing and statistical analysis were conducted with commercial software sas 9.4 (sas institute inc., cary, nc); plotting was completed using ms powerpoint. statistical inference was made at p < 0.05 (two-sided) for all modeling analyses. 4. the effect of covid-19 on pakistan's economy in the wake of the rising covid 19 pandemic positive cases throughout the country, the government has limited transportation activities across international, provincial, and municipal borders which have led to the suspension of transportation mediums such as flights and rides hailing services (usman et al. 2020). most commercial organizations have shifted to a work-from-home structure with only essential staff being allowed on site. it has compounded the issue of bullish domestic economic activity and reduced consumer-side demand. the impending covid-19 contagion may very well have repercussions for emphasis on low ethnic communities, regardless of the length of the confinement and the outbreak's long-term consequences if it is suppressed in a short proportion of time in table 1. in some of the worst circumstances, a protracted infestation is forecasted. pakistan's aggregate demographic of 127 million inhabitants could therefore potentially fall underneath the income threshold (perveen et al. 2022) in figure 2. table 1: effected economy and residents of pakistan during covid-19 number of effective individuals (in millions) poverty rate (predicted percentage) low 78 32.6 medium 99 45.3 high 129 57.5 review of economics and development studies, vol. 8 (3) 2022, 259-276 264 0 20 40 60 80 100 120 140 low medium high number of effective individuals (in millions) poverty rate (predicted percentage) figure 2: graphical representation of effected economy and residents of pakistan during covid19 due to the shortfall in the agricultural sector’s output and insufficient growth in exports from the large-scale manufacturing sector, the real gdp growth target of 4 percent was likely to be achieved in the face of lagging domestic markets (a. ali, ahmed, and hassan 2021). as of the latest projections by the state bank of pakistan, the gdp growth rate for fy20 has been revised to 3.0 percent, down from 3.3 percent in fy19 in figure 3. figure 3: real developmental growth 5. current and potential effects of covid-19 on different sectors of pakistan 5.1 agriculture sector there is improbable to be a shortage of food resources at this period since the predicament had yet undetermined. furthermore, if the confinement is protracted attributable to the persistent dissemination of covid-19, the food production predicament can somehow exacerbate substantially. the highly perishable elements will be the first to be endangered, accompanied by convenience foods. inadequate agricultural production and resource depletion, along with incipient environmental degradation, potentially affect the sector (ceballos, kannan, and kramer 2020). subsequent adventurous activities of reduced contract management expenditures on the role of management and postponement in the routine reaping of farm products have generated protectionist pressures within the home market, aggravating the unpredictability generated by covid-19 (workie et al. 2020). review of economics and development studies, vol. 8 (3) 2022, 259-276 265 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 fy2015 fy2016 fy2017 fy2018 fy2019 fy2020 agriculture agriculture agricultural laborers may be moderately protected from the occupational upheavals triggered by covid-19 because they want less on human engagement to carry out their responsibilities and hence are less hampered by socioeconomic alienation restrictions in table 2. in figure 4 with the continuous covid-19 outbreak, another additional challenge has popped up: wild locusts and insect pests plagues have commenced to escalate in density on cultivation territory undergoing crops in pakistan, devastating 24 % of crops and representing a substantial economic drop as well as a hazard to domestic food sovereignty (barrett 2020). table 2: growth in agriculture sector sector fy2015 fy2016 fy2017 fy2018 fy2019 fy2020 agriculture 2.23 0.18 2.21 4.01 0.51 3.28 figure 4: graphical representation of the growth in agriculture sector of pakistan 5.2 automotive sector numerous concerns, such as high lending charges, weakening and depreciation of the pakistani rupee versus the us dollar, and the implementation of increased taxes, had already hindered the automobile industry in terms of performance, growth and profitability expectations in both the nationally and internationally sectors for pakistani vehicles. the covid-19 suppression has rendered the pakistani automobile manufacturing company's overall catastrophic plight of growth tougher (saleem butt and khaimah n.d.). the fraction of different vehicles and parts suppliers have remained forced to shut down as a consequence of federal government instructions mandating a general strike to prevent further spread of covid-19. additionally, as per the pakistan automotive manufacturers association (pama), the covid-19 shutdown seems to have had a major impact on commercial automakers, with zero vehicle sales confirmed and reported as shown in figure 5. review of economics and development studies, vol. 8 (3) 2022, 259-276 266 two/three wheelers cars tractors other 86.20% 10.50% 2.20% 1.80% figure 5: total vehicles of automobile industry sold during covid-19 pandemic 5.3 construction sector covid-19 casualties have become much more prevalent by the day, which is exerting a consequence on the building sector. authorities’ security measures are interrupting the distribution network; skills shortages are happening; factors have caused and undergone a downturn in the economy; and they are experiencing problem maintaining their commitments. major construction undertakings require a huge amount of specialized equipment. with the international economy contracting as a consequence of the covid-19 outbreak, expansion in long-term lending and investment demand has underperformed (iqbal et al. 2021). however, with the administration's optimistic initiatives and the positive impact of immunizations, funding for investment spending is quick to take up again in table 3. the covid-19 outbreak has thrown construction, infrastructure and architectural activities everywhere throughout the globe, including those in pakistan, in precarious positions in diverse manners, and many have been abandoned (azeem et al. 2022). as a result, the constructions industry in pakistan has experienced a macroeconomic recession, culminating and leading in high unemployment. consequently, the construction sector is apprehensive, anxious, and deeply uncomfortable about the scenario as shown in figure 6. table 3: overall gdp growth in the construction sector of pakistan from fiscal year 2016 to 2020 fy16 fy17 fy18 fy19 fy20 construction sector (pkr bln) 603 669 799 694 776 construction sector% of gdp 2.20% 2.32% 2.55% 2.01% 2.14% review of economics and development studies, vol. 8 (3) 2022, 259-276 267 17% 19% 22% 20% 22% 19% 21% 23% 18% 19% fy16 fy17 fy18 fy19 fy20 figure 6: gdp growth and recession in culminating unemployed labor 5.4 education sector covid-19 has caused the closure of schools around the world. more than 1.2 billion children worldwide are out of school. therefore, with the unique rise of e-learning, education has undergone tremendous changes, teaching through distance and digital platforms (dwivedi et al. 2020). studies have shown that online learning has been shown to increase the retention of information and take less time, which means that the changes caused by the corona virus may continue to exist. although the covid-19 infection rate in various countries is at different stages, more than 1.2 billion children in 186 countries are currently affected by school closures due to the pandemic (edem adzovie and jibril 2022). in denmark, children under the age of 11 have returned to nurseries and schools after the initial closure on march 12, but in south korea, students are responding to teacher rollovers online. with many parts of the world suddenly moving away from the classroom, some people wonder whether the adoption of online learning has continued after the pandemic, and how this shift has affected the global education market. even before covid-19, educational technology has experienced rapid growth and adoption (s. ali et al. 2021). in 2019, global investment in educational technology reached 18.66 billion u.s. dollars, and it is estimated that by 2025, the overall online education market will reach 350 billion u.s. dollars. whether it is language applications, virtual tutoring, video conferencing tools, or online learning software, usage has increased significantly since covid-19. 5.5 healthcare sector as the majority of instances of covid-19 escalated in pakistan, organizations have begun to whimper under the pressure. due to the obvious wider public lack of engagement in regulatory changes, they have faltered (sarfraz et al. 2022). the authorities completely ignored general populace government ministers' recommendations and lightened the confinement. this situation results in a disturbing consequence. physicians, caregivers and doctors were under pressure, clinical laboratories equipment’s were overcrowded, and emergency departments were falling apart at the seams with patients infected. apparently basic healthcare apparatus was malfunctioning, and there were no specialists, experts, physicians or ambulances on sight. healthcare practitioners had almost no professional knowledge regarding the outbreak. for years, costly healthcare apparatus remained completely unusable. the privileged were made to promote, while the poor were left behind. even the preservation, recovery and rehabilitation of healthcare facilities were underestimated (cárdenas et al. 2022). occurrence of covid-19 the public health care system in pakistan could eventually become review of economics and development studies, vol. 8 (3) 2022, 259-276 268 distraught. this contagion seemed to stay in figure 7. there existed a deficiency of healthcare machines and equipment, along with antiquated structures and facilities, in the nation (abbas 2021). figure 7: impact of covid-19 on different healthcare centers of pakistan 5.6 oil and gas sector the oil and gas sector has been one of the pakistan's major essential socioeconomic sectors. in 2019, the overarching electric power availability was anticipated to be approximately 86 million tons of oil counterparts. covid-19 prompted global crude oil prices to tumble from $70 to $780 per chamber to $16 per chamber in a bunch of days, diminishing requirement tremendously as various sectors, including air transport, happened to come to a stoppage (sajid, yu, and rehman 2022). consequently, gas extraction was lowered from around 50% to 60%, while oil reserves were confiscated, most of which have a contribution to domestic manufacturing in figure 8. international exchange rate holdings were presumed adequate by traditional benchmarks at the commencement of the covid-19 catastrophe, although they are anticipated to be unsustainable to address the wide and varied requirements that emerging economies are now encountering (muhammad et al. 2022). on the consumption perspective, rapidly increasing customer expenditures and diminished economic operations have constrained investment on oil-derived commodities, specifically in the situation of slightly elevated petroleum diesel and fuel. figure 8: impact of covid-19 on oil and gas sector in the form of adverse, non-significant and favorable percentage 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% favorable no significant affect adverse im p a ct o f c o v id -1 9 o n o il & g a s s e ct o r % 75.7% 20.2% 4.1% review of economics and development studies, vol. 8 (3) 2022, 259-276 269 5.7 power sector there was tremendous improvement in the electrical industry everywhere across the globe just before the eruption of covid-19, even though this is valid in pakistan though. as a consequence of the epidemic, the international consumer electronic enterprise and power sector have had simultaneous repercussions, the first of which is impacts on power production and the other of which is an impact on power distribution: electrical components manufacturing plants have been suspended due to practical difficulties and a shrinking of workforce. on the other extreme, numerous e-commerce sites have stopped delivering consumable goods, including electrical equipment, machines and devices (raza and lin 2022). this apparently started to even have an impression on the power industry. the postponement of new power production unit schedules, and that would have significant economic potential consequences for pakistan, is a major adverse effect due to networking equipment limitations and unexpected postponements in shipments (karim et al. 2022). 5.8 textiles sector pakistan's textile manufacturing sector saw an upswing in foreign demand whenever the outbreak reportedly clobbered china in december 2019. pakistan's garment industry was functioning at full potential and strength by january 2020, partly in response to the avoidance of administrative regulations and restrictions but predominantly to an upsurge in contracts from worldwide textile and clothing purchasers or customers. according to exchange confederate representatives, more than a million clothing and garment industrial workers in pakistan are destined to lose their positions as a direct consequence of the corona virus catastrophe, and most will obtain no income support to manage (abbass et al. 2022). due to declining patterns of consumption and the closure of industries that used intermediate goods or imported commodities for manufacturing, pakistan's consumption for imports has also diminished substantially as shown in figure 9. exports and imports of goods knock down in the first month of covid-19, and the severity of the decline worsened and intensified with each subsequent month until may 2020 (mohsin, ammara, and qamar 2022). figure 9: overall exports of textile sector in pakistan on different types garments 5.9 transportation sector states across the whole worldwide have had to implement enormous prohibitions on local and public mass transit or transportation since the commencement of the covid-19 outbreak in order to minimize highly contagious dissemination and sustainable the secure transit of essential personnel during the case of emergency operations (abdullah et al. 2021b). several other countries, particularly pakistan, have resorted on socioeconomic consultation and work-from-home systems to retain inhabitants' lives and employment afloat when they are unavailable to move and relocate. due to the 21% 19% 17% 16% 9% 18% textile products exports knit wear ready made garmentrs bed wear cotton cloth cotton yarn others review of economics and development studies, vol. 8 (3) 2022, 259-276 270 widespread prohibition of both national and foreign flights operations, airline service services such as pakistan international airlines (pia) and the pakistan civil aviation authority (caa) have experienced great losses in the billions of dollars throughout the preceding two months (leach et al. 2021). pakistan railways has also prohibited and restricted all travelers’ movement until additional notice as a prophylactic step to avoid the virus from replicating throughout the nationwide railway system platform's affiliated areas in figure 10. figure 10: services of transportation in pre-pandemic era and governmental policies in postpandemic era 5.10 tourism sector pakistan is renowned for a multitude, diversity and range of natural and environmental attractions and ancient and religious tourist destinations that capture a tremendous proportion of national and foreign travelers each and every year (alonso et al. 2022). in 2020, meanwhile, the covid-19 epidemic inflicted destruction on pakistan's tourism industry. considering the amazing inflow of international visitors attributable to global pandemic immigration restrictions, leisure travelers have helped in strengthened the local tourism economy this year, with millions of national visitors gravitating to the country's picturesque north and northwest this summertime. regardless of the extraordinary confinement, tour service companies are struggling due to withdrawals of group registrations (armutlu et al. 2021). tourist amenities and civil locations (playgrounds, cinemas, and retail stores) throughout the nation were suspended in mid-march. pakistan's civil aviation authority (caa) announced an estimated loss of approximately $18 million in march 2020, and pakistan international airlines (pia) may very well be obligated to dispatch its workforce on compensated sabbatical on a transitional basis. apparently the only unpredicted consequence of the outbreak is that countryside and wildlife creatures will be permitted to decompress from the constraints of tourism destinations (foo et al. 2021). 6. covid-19 and the current situation in pakistan covid-19 could very well become an endemic chronic condition, with the propensity for further and newer versions to originate. the epidemiological mechanism is exacerbated by the fact that infection-preventive resistance generated from immunizations and infectious diseases would progressively deteriorate. later in 2022, steadily declining resistance and winter seasonality would review of economics and development studies, vol. 8 (3) 2022, 259-276 271 culminate in at least a winter increment. furthermore, the billions of viruses and infections that occur throughout the globe will allow for the formation of new varieties of virus. to begin preparing for upcoming covid-19 different versions, regions should preserve snooping and evaluate for the occurrence of new different versions, proceed to endorse vaccination, which would include third concentrations, enlarge access to appropriate antimicrobial drugs, and to provide assistance to slightly elevated communities about how to use the moderate face mask and sustain social spacing if and when a revamped version quite catastrophic than omicron persists. perhaps the occurrence of a latest deformation with increased virulence than omicron should not necessitate a recovery to pandemic-era legislation with these precautions in position. • everyday infectious diseases surged from 2,371,700 to 3,922,110 each day on general. the highest hourly intensive care occupancy has expanded from 5,120 to 12,120. • nearly every day documented incidences surged from 1,410 to 4,200 each day on aggregate. • covid-19-related mortality soared to 5 per day on general, slightly higher compared from 4. • covid-19-related fatalities escalated to 86 per day on total, up from 75 the preceding day. covid-19 has now become pakistan's 13th greatest reason of illness and death. 7. key challenges faced by smes in pakistan business expansion, including sme operations, is associated with an increased risk of covid-19 transmission. moreover, the growth of the industry can lead to the spread of infectious diseases, most smes cannot meet their financial needs, which is a warning because smes are the key to business growth, innovation, revenue generation, and employment for modern employees in a wide range of areas of business development, including manufacturing, service, and marketing. one of the problems that many smes face is inability to. as covid-19 spread, smes in pakistan were facing more financial and institutional challenges. those they have already dealt with including the lack of new products, high investment in government security, high prices fluctuate, no market interest planning, accounting, and other documents, insufficient resources to use based on security, lack of funds knowledge, limited new ones or new ways to speak of consumerism, political instability, power violence, lack of infrastructure, rising unemployment and lack of new technology in figure 11. figure 11: problems and challenges of small medium enterprises in pakistan the problem of poverty is one of the biggest problems in pakistan as many people are low income and while covid-19 is ubiquitous, they cannot afford the long closing time, which is dangerous for their personal life and for their families. in pakistan, it is a wonderful thing that someone gives to 0 78% 41% 33% 82% 98% 0 0.2 0.4 0.6 0.8 1 1.2 problems of sme's financial issues laid off loss of export orders disruption in supply chain reduction in operations review of economics and development studies, vol. 8 (3) 2022, 259-276 272 9% 91% fully or partially paid employees asked not to work not paid employees asked not to work the whole family, which is why it is often not possible to close the business for even one day. therefore, these small entrepreneurs are facing the biggest threat due to covid-19. in addition to government measures to have a transmission, such as a special opening hospital, clinic, isolation facility or any knowledge of race support and closure meant to ensure, health check of passengers by abroad, it is important that measures should be taken to support smes. figure 12: percentage of paid and not paid employees who were asked not to work in covid-19 outbreak the economic downturn is defined by a slowdown in the economy, which lowers the stock market and measures by all. gross domestic product (gdp) and unemployment are the prices of each country in figure 12. every change in the mic cycles industry leads to a change in gdp as well as the unemployment rate. do you want more followers? confirm that the damage is lower gdp and rising unemployment in the country and vice versa. unemployment as well the increase in unemployment has a huge impact on the human heart and some studies show the relationship between financial loss and suicide rates. 8. conclusion the international repercussions of the epidemic covid-19 continues to be somewhat unpredictable. the nations are endeavoring to alleviate the repercussions on their sectors of the economy. it has had an imprint on industrial production, transportation, and quality of daily existence. the widespread catastrophe of the corona virus has devastated approximately 5 million fatalities and immobilized the world's economy. this predicament is anticipated to have a substantial economic repercussion on emerging nations. it analyzes the economic implications of producer and consumer fluctuation caused by the covid-19 plague in pakistan. on the supply side, the outbreak has thrown the regional and multinational distribution networks to a pause, culminating in a complete absence of resources and commodities. decreasing native and foreign consumption has culminated in humongous redundancies and starvation predictions on the supplier side. the authorities and the state bank of pakistan have released numerous compensation arrangements and schemes to help stabilize the circumstance, but the people will remain susceptible to healthcare and monetary adversity and struggles due to poor health systems facilities and a lack of social assistance. in these extraordinary economic circumstances, administrative interventions must be undertaken promptly in order protect hundreds of thousands of people from the infection and impoverishment. in this talk, we have learned how the corona virus outbreak is affecting the global economy. also, we have discussed the economic development of pakistan in 2019-2020. how these countries have stabilized their economies during the pandemic, and what policies have they enacted about their review of economics and development studies, vol. 8 (3) 2022, 259-276 273 countries and businesses. how small and large businesses affect gdp growth during the pandemic, the data we have discussed in this article is analyzed through descriptive statistics. the results showed that the majority of participating businesses were severely affected, facing financial, supply chain disruptions, declining demand, and declining sales and profits. we'll also learn how online businesses are working during covid 19. additionally, we have examined how the education sector has been impacted by the covid 19 pandemic, and what are the strategic plans implemented to stabilize the education system during the outbreak. pakistan should transform the calamitous covid-19 dilemma into a possible chance to strengthen its economic system, democracy, and international and defense strategies. if something doesn't eventuate, the growth of the economy would rapidly deteriorate. enhanced disparities and deprivation will heighten governmental and socioeconomic dissatisfaction, eventually undermining the administration and compromising pakistan's representative democracy achievements. although desperation is the mother of innovative ideas, the adaptation to covid-19 utilizing technological media would be nothing short of outstanding. as a direct consequence, organizations throughout the country are transforming their product, procedures, and marketing strategies. while social and institutional disruptions pose a threat to our current position, they also hold enormous potential and present a plethora of opportunities. due to socioeconomic limitations, valuation conflicts, confinement, closings and blackouts, fdi is anticipated to collapse in tangible tourist sector, leisure, trade, aviation, agriculture, transportation, oil & gas, and automotive. food manufacturing, household commodities, transportation & telecommunications, monetary operations, internet marketing, textiles, and tourism, on the contrary extreme, represent development possibilities. pakistan demands an intervention policies and practices in addition to avoiding some of the detrimental consequences of covid-19 on development and communications. references abbas, jaffar. 2021. “crisis management, transnational healthcare challenges and opportunities: the intersection of covid-19 pandemic and global mental health.” research in globalization 3: 100037. abbass, kashif et al. 2022. “fresh insight through a keynesian theory approach to investigate the economic impact of the covid-19 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may 2020 available online 15 june 2020 organizational commitment is considered as an important variable in the reduction of turnover of employees. it is well documented that those employees who are more committed with their respective organizations are less likely to quit those organizations. this study is aimed to examine the relationship of organizational commitment with turnover intention of academic staff as it has been less focused in academic sector of pakistan. we collected data from 320 respondents of seven public universities located at peshawar division, pakistan. we used structural equation modeling (sem) in order to analyze the collected data. findings of our study also reported significant negative relationship between the two variables. such results further revealed that if academic staffs are psychologically, emotionally and morally attached with their respective universities, they are less intended to quit those universities. results also validate social exchange theory. theoretical and practical implications are discussed in the study. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: organizational, turnover, academic sector, sem jel classification: o11, o19, doi: 10.47067/reads.v6i2.218 corresponding author’s email address: altafhussain@uom.edu.pk 1. introduction today’s competitive world believes in the retention of highly performing employees in the organization. employees retain with the organization when they are psychologically attached with it. researchers (e.g., bentein & meyer, 2004; hafiz, 2017) believe that competitiveness and success is subject to strong organizational commitment and weak turnover intention among employees. bartlett (2001) contends that employees’ positive attitudinal and behavioral outcomes are the touchstones of effective organizational commitment. there is a vast amount of literature available which has review of economics and development studies, vol. 6 (2) 2020, 401-412 402 discussion on the various dimensions of this organizational commitment as an attitude and a behavior. and because of this awareness organizations have seriously been taking interest in it through formulating various policies and procedures to affect it (nehmeh, 2009). every organization wants to retain committed employees as their loss would incur a great loss to it. when employee leaves an organization, it bears a great loss to organization both in terms of money and time (puangyoykeaw & nishide, 2015). the scholars suggested organizational commitment categorization as: “(a) a strong belief in and acceptance of the organization’s goals and values; (b) a willingness to exert considerable effort on behalf of the organization; (c) a definite desire to maintain organizational membership”(luthans, 1995; mowday, porter, & steers, 1982). if the bond of an individual with organization is strong it helps an individual retention with organization and in reduction his/her intention to quit (allen & meyer, 1996). research on organizational commitment is increasing day by day and is continued for last 50 years (ghosh & swamy, 2014; kipkebut, 2010). some researchers such as steers, mowday, porter and boulian have made place as icons and pioneers for studying relationship of organizational commitment with turnover intention. this study focuses on the three component model of commitment because the model has empirically been tested and investigated and has widely been acclaimed (keskes, 2014; pool & pool, 2007). 2. turnover intention turnover is defined as “the degree of individual movement across the membership boundary of a social system” (price, 1977, p. 4). it is also defined as movement of employee changing jobs and occupations in the job market (abbasi & hollman, 2000). researchers categorize turnover mainly into two types i.e. voluntary and involuntary but most studies mainly focus voluntary instead of involuntary turnover. voluntary turnover is controllable and is significant for managers and practitioners (price, 1977). numbers of studies have documented that turnover intention is strongly associated with organizational commitment and job satisfaction (mohamed, taylor, & hassan, 2006; tett & meyer, 1993). research on turnover concept traces back almost fifty years (holtom, mitchell, lee, & eberly, 2008). researchers propose that organizational commitment is an important element which affect the decision of an individual to quit or stay in the organization (steers and mowday, 1981). taking turnover intention as a part of human behavior, it affects the organization both positively and negatively. voluntary turnover positively affect organization when low performers quit the organization and affect negatively when high performers quit the organization by resigning from their jobs and indeed it becomes a great loss for organization (kaye & jordan-evans, 2005; park & shaw, 2013). thus, turnover costs are very important from financial perspective but these costs are often hidden from the managers. the cost of voluntary turnover has not been recorded in any profit or loss statements. rather costs are either hidden or unmeasured. hidden costs of voluntary turnover include new recruitment and selection of employees, temporal staffing and training of new recruits while unmeasured costs include loss of customers and human capital knowledge which does not come under calculation (alzubi, 2018; holtom et al., 2008). estimation of such losses is varied for every organization. the value of losses ranges from few dollars to higher salary of an individual depending on type of job, industry and replacement availability of an individual and other related factors (hinkin & tracey, 2000; kaye & jordan-evans, 2005). review of economics and development studies, vol. 6 (2) 2020, 401-412 403 organizations invest greatly to attract and retain talented people. hence, it is certainly unfortunate and costly when people leave organizations willingly or voluntarily. this practice has made academics and managers more conscious about employee turnover issue, specifically the voluntary nature of turnover (major, 2016; ton & huckman, 2008). high turnover carries high costs and great loss in higher education system especially after turnover of good academicians. the loss is big because it is the loss of skilled human resource. turnover of such skilled human resource damages the organization in terms of loss of teaching and research skills and also experience (bester, 2008; chughtai & zafar, 2006). diverse reasons have been reported for turnover of academicians but one of the important one could be lack of organizational commitment (ng’ethe, iravo, & namusonge, 2012). extensive research has been carried out on the relationship of organizational commitment with turnover intention (puangyoykeaw & nishide, 2015) but research on such relationship is scant in academic sector of pakistan. therefore, this study is aimed to find out such relationship in academic sector. 3. organizational commitment and turnover intention organizational commitment is an important variable that predicts turnover intention of individuals working in organization. several scholars have focused this relationship in their studies so far. most studies have concluded strong negative relationship between these two variables (ling, yusof, & rahman, 2016; ölçer, 2015). the logic behind this negative relationship is that when employees are psychologically attached with an organization, they would be less likely to quit the organizations. mostly studies have investigated this relationship in industrial organizational settings and research on relationship of these two variables is scant in academic sector. keeping in the view the previous cited literature this study also assumes negative relationship between these two variables. 4. problem statement employee turnover is considered a serious and persistent problem within pakistan and outside (ahmad & umar, 2010; bong, 2013; shah, fakhr, ahmad, & zaman, 2010). it is detrimental for organizational performance when high performing employees leave the organization. this has made employers more sensitive towards retention of high performing employees (ovadje, 2009; samuel & chipunza, 2009; pittino, visintin, lenger, & sternad, 2016 ). if an employer fails in retaining the high performers, the only option left is to hire, select and then train the new ones (chughtai & zafar, 2006; onah & anikwe, 2016; owence, pinagase, & mercy, 2014). the study conducted in public sector universities reveals that academic staff retention is a huge and crucial problem for the management of these universities and observed 9 percent of turnover which is a considerable percentage in public sector universities of pakistan (akhtar, aamir, khurshid, abro, & hussain, 2015). 5. theoretical framework the framework of this study is based on two main variables i.e. organizational commitment along with its three components and turnover intention. the theoretical foundation of this study is supported by social exchange theory. reciprocity and exchange is the foundation and mutual inclusive and interdependent element of this theory. investment of one party affects the behavior of another party. in this study context, organizations prioritize investment in order to improve organizational review of economics and development studies, vol. 6 (2) 2020, 401-412 404 commitment of academic staff and such enhancement of organizational commitment leads to reduced turnover intention of academic staff. a number of studies have documented negative relationship between organizational commitment and turnover intention and supports the social exchange theory. the relationship assumed between these two variables has been depicted in figure 1. figure 1: conceptual framework 6. methodology of the study survey based quantitative research design was employed in the study. we distributed questionnaires among faculty members of seven public universities of peshawar division. among 1922 target population, we collected data from 320 respondents recording a response rate of 65 percent. proportionate stratified sampling technique was employed in the study. we used valid and reliable questionnaires in order to collect data. validity and reliability of the instruments used in the study were confirmed by previous researchers. we used allen and meyer 1997’s study for measuring organizational commitment while lee study’s was employed for measuring turnover intention. we used amos-23 in order to analyze data of the study. 7. results and data analysis the reason of preference of sem over first generation multiple regressions is application of technique several times separately while sem executes mediation with single calculation of a model results. all the effects, that is, direct, indirect and total effects are assessed simultaneously and could be interpreted accordingly. review of economics and development studies, vol. 6 (2) 2020, 401-412 405 table 1: factor loadings, composite reliability and average variance extracted dimensions items factor loadings r-square composite reliability (above 0.60) average variance extracted (above 0.50) continuance commitment cc-1 .61 .37 .86 .51 cc-2 .67 .46 cc-4 .67 .45 cc-5 .67 .45 cc-6 .83 .69 cc-7 .80 .64 review of economics and development studies, vol. 6 (2) 2020, 401-412 406 sem can be elaborated using two-stage process, that is, measurement model and structural model. in the first stage, confirmatory factor analysis (cfa) was performed in order to validate the measurement model and to achieve the best fit measurement model for the study. the measurement model identifies the relationship between the latent variables and their observed measures or indicators. in other words, measurement model shows the linkage between the unobserved latent variables and their scores on measuring indicators (observed indictor variables). in order to validate the measurement model a number of goodness of fit statistics like, chi-square/df, normed fit index (nfi) goodness of fit index (gfi), comparative fit index (cfi), root mean square residual (rmr) and root mean square error of approximation (rmsea) are employed in the study. once the “best fitting” measurement model is achieved in the first stage, the researcher then validates the structural model in the second stage. table 2: sic and ave values affective commitment ac-1 .55 .30 .82 .50 ac-2 .74 .54 ac-3 .61 .37 ac-4 .69 .47 ac-5 .60 .36 ac-6 .75 .56 normative commitment nc-1 .77 .59 .89 .57 nc-2 .72 .52 nc-3 .76 .57 nc-4 .81 .66 nc-5 .73 .54 nc-6 .75 .56 turnover intention ti-1 .72 .52 .92 .62 ti-2 .67 .44 ti-3 .88 .77 ti-4 .89 .79 ti-5 .83 .69 ti-6 .88 .69 ti-7 .73 .53 ti-8 .64 .41 review of economics and development studies, vol. 6 (2) 2020, 401-412 407 in the second stage, structural models of the study were assessed through sem using cfa. the structural model identifies the causal relationship between the latent variables (constructs). in order to test the validity of the structural model a number of fit statistics like, chi-square/df, normed fit index (nfi), goodness of fit index (gfi), comparative fit index (cfi), root mean square residual (rmr) and root mean square error of approximation (rmsea) are employed in the study. the values calculated by the analysis of moment structure (amos) are compared with the cut off values for each of the above mentioned statistics as provided by (hair et al., 2010) and the “best fitting” structural model is attained. for detailed results refer table 3. the use of sem as a statistical technique in this study for analysis of hypothesized relationships seems logical as characteristics of sem and purpose of this study has interconnection with each other. table 3: statistics of model fitness ac cc nc ti affective commitment .707 continuance commitment .547 .714 normative commitment .537 .599 .754 turnover intention -.263 -.277 -.321 .787 review of economics and development studies, vol. 6 (2) 2020, 401-412 408 figure 2: amos output showing standardized regression weights between constructs the researcher examined in this study the relationship of organizational commitment with turnover intention. this relationship was found significant (p<0.001) and negative carrying standardized path coefficient of -0.65 (refer figure 2). thus, the hypothesis formulated in the study on relationship of two variables is strongly supported by the empirical data. 8. discussion the objective of the study was to determine the relationship of organizational commitment with turnover intention in the target population. the hypothesis made on the relationship between these two variables was tested in the study. the relationship of organizational commitment with turnover intention of academic staff was found negative and significant. here, again the empirical evidences supported the prediction of the study. the significant and negative effect of organizational commitment on turnover intention supports the findings of previous studies regarding such relationship. the review of economics and development studies, vol. 6 (2) 2020, 401-412 409 previous studies also reported negative relationship between these two variables (alzubi, 2018; jehanzeb et al., 2013; ling et al., 2016; newman et al., 2011; sow, 2015). the results reported that more committed academic staff would be less intended for quitting their respective universities in comparison to non-committed academic staff. such commitment in the academic staff with the organizations would be engendered through various tools and techniques. one such technique used by management of universities is the creation of organizational commitment among academic staff. more loyalty and commitment towards organizations creates an impression of value and importance of academic staff and also reduce intention to quit. 9. implications as, the success of organizations is not only dependent on human resource utilization, it is also dependent on the organizational ability to stimulate employees’ commitment towards organization. therefore, these results would further suggest that high level organizational commitment could be engendered in the academic staff of universities using various tools and techniques. one such tool and technique could be provision of training and development. it also clarifies to universities’ management that if they wish and intend reduction of academic staff, enhancement of organizational commitment of these academic staff would be needed on priority basis. turnover negatively affects the working environment and also results in negative implications (rizwan, arshad, munir, iqbal, & hussain, 2014; surji, 2013). findings of current study cautioned all stakeholders and other interested parties pertaining negative effect of turnover and advice the management to consider negative and ill effects of turnover during formulation of polices for universities. 10. recommendations and future research first, the findings of the study provide an insight that policy maker in higher education sector of pakistan should give larger attention towards the turnover issue of academic staff which also affects the performance of the universities. it is recommended that there should be practical policy initiatives for enhancement of academic staffs’ organizational commitment on priority and regular basis so that the issue of turnover could be reduced. second, the management of public sector universities needs to focus on the issue of turnover of academic staff. because, if this issue is not addressed on time, then it may cause several financial hidden loss and costs in terms of recruitment and selection of new employees that would further put more financial burden on the universities. third, this study has presented a conceptual framework of work related attitudes and behaviors to the body of literature by combining constructs of organizational commitment and turnover intention into one research framework. future research should consider examining organizational commitment along with its components using another comprehensive research framework combining different behavioral outcomes for which theoretical foundation is also available. fourth, the current study is quantitative in nature; it is recommended that future research should examine the same variables using qualitative mode of study or use mix mode of study for getting subtle findings. 11. conclusion this study contributes to the body of knowledge and literature because it proposes a model review of economics and development studies, vol. 6 (2) 2020, 401-412 410 which identifies the relationship of organizational commitment with turnover intention of academic staff. this study further concludes that academic staff in universities faces two major problems i.e. turnover and less organizational 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(2008). managing the impact of employee turnover on performance: the role of process conformance. organization science, 19(1), 56-68. review of economics and development studies vol. i, no 2, december 2015 119 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 1: issue 2 december 2015 journal homepage: www.publishing.globalcsrc.org/reads stock prices and macroeconomic performance in pakistan: an analysis 1 saima mukhtar, 2 imran sharif chaudhary, 3 furrukh bashir 1 m. phil. scholar, school of economics, bahauddin zakariya university multan 2 professor and director, school of economics, bahauddin zakariya university multan, imran@bzu.edu.pk 3 lecturer, school of economics, bahauddin zakariya university multan article details abstract history revised format: nov 2015 available online: dec 2015 this paper analyzes long-term equilibrium relationships between the karachi stock exchange index and a group of macroeconomic variables. the macroeconomic variables are represented by the gross domestic product, the consumer price index, m2 and the exchange rate. we employ a multiple regression model to explore such relationships during 1991 to 2012. our results indicated a "causal" relationship between the stock market and the economy analysis of our results indicates that kse 100 index has a strong positive impact on gdp and m2 in pakistan. whereas it has a negative and significant impact on cpi and exchange rate in pakistan. granger causality test shows that kse 100 index granger causes gdp, cpi, m2, exrt, agri, fdi and bot and the direction of causality runs from kse 100 index to these variables. © 2015 the authors, under a creative commons attributionnoncommercial 4.0 keywords, long run equilibrium macroeconomic, time series models, karachi stock exchange ,foreign exchange, asset pricing jel classification b22,c22,c32,f31 g12 corresponding author’s email address: imran@bzu.edu.pk recommended citation: mukhtar, s., chaudhry, i. s. and bashir, f. (2015). stock prices and macroeconomic performance in pakistan: an analysis. review of economics and development studies, 1 (2) 119-128 doi: https://doi.org/10.26710/reads.v1i2.118 1: introduction pakistani stock market and macroeconomic variables over the past few decades, the interaction of share returns and the macroeconomic variables has been a subject of interest among academics and practitioners. it is often argued that stock prices are determined by some fundamental macroeconomic variables such as the interest rate, the exchange rate and the inflation. anecdotal evidence from the financial press indicates that investors generally believe that monetary policy and macroeconomic events have a large impact on the volatility of stock price. this implies that macroeconomic variables can influence investors’ investment decision and motivates many researchers to investigate the relationships between share returns and macroeconomic variables. but it does not mean that stock prices cannot affect macroeconomic variables. to prove this phenomenon we have conducted this research. http://www.publishing.globalcsrc.org/reads mailto:imran@bzu.edu.pk mailto:imran@bzu.edu.pk review of economics and development studies vol. i, no 2, december 2015 120 stock exchange performance has attained major role in global economics and financial markets, due to their impact on corporate finance and economic activity. for instance adjasi and biekpe (2006) stated that stock exchanges allow firms to attain capital quickly, due to the ease with which securities are traded. stock exchange activity, thus, plays an important role in helping to determine the effects of macroeconomic activities. 2. pakistan’s equity market . karachi stock exchange (kse) is the biggest and most liquid exchange of pakistan. for the year 2002, it was declared the best performing stock market of the world. a total of 654 companies were listed on december 8, 2009 with a market capitalization of rs. 8.561 trillion (us$ 120.5 billion). pakistan’s industrial export and foreign investment has grown rapidly. pakistan’s foreign exchange reserves reached 12,425.2 million us$ in the year 2008-2009. now days our all stock markets traded on international markets. the kse 100 index reached at 7760.69 in 2009. an international magazine ‘business week’ ranked kse as one of the best performing markets of the world for three years. .many studies have been conducted on the impact of macroeconomic variables on stock prices such as: wongbangpo and sharma (2002), dickinson (2010), mishra (2005), naik and padhi (2012), akmal (2007), aurangzeb (2012), menike (2006), nishat and shaheen (2004), hasan and nasir (2008), kwon and shin (1999) and many. but no study was conducted to know the impact of stock prices on macroeconomic variables. that is why, our study seeks to examine the impact of stock prices on macroeconomic variables and for this purpose we have selected kse 100 index and some macroeconomic variables (gdp, cpi, m2, and exrt). karachi stock exchange 100 index is used to represent the pakistani stock market index, because it provides an easy way to inspect the performance of capital market and the economy as a whole. 2.1 the asset valuation model and pricing of macroeconomic factors the capital assets pricing model was introduced as a model of risk and return by sharpe (1964), linter (1965), treynor (1962) and mossin (1966). it has become the most significant theory of the link between risk and return in asset pricing. this was renowned by the works of black, etc. al., (1972) and fama and macbeth (1973). the basis of capital asset pricing model is the making of an efficient market portfolio that maximizes return, at a certain level of risk. the expected return of an individual security is based on its risk covariance with the market. 2.2 stock prices and macroeconomic variables we will take in our study kse 100 index as a measure for stock prices and five macroeconomic variables, namely gross domestic product(gdp), agriculture production(value added), cpi(as a proxy for inflation rate), exchange rate and m2(as a measure of money supply) and balance of trade(bot). we will suppose following relationships between stock prices and macroeconomic variables: stock prices and gdp we will suppose here a positive relationship between stock prices and gdp. stock prices and cpi we are taking here cpi as a proxy for inflation and we are going to propose a negative relationship between stock prices and cpi here. stock prices and exchange rate review of economics and development studies vol. i, no 2, december 2015 121 we are going to propose a negative relationship between stock prices and exchange rate in our study. stock prices and money supply we are going to propose a positive relationship between stock prices and money supply. 3. methodology and data data the variables which we use to represent pakistan’s stock market and its output, inflation, money stock and exchange rate are respectively the kse 100 index, the gross domestic product (gdp), the consumer price index (cpi) , a broad money supply (m2), and the exchange rate (exrt). in our study we sourced data from the world bank and from the financial database website. data on gdp, agriculture value added, cpi, broad money (m2), and exchange rate were taken from the world bank’s world development indicators while the data for kse 100 index was gotten from the financial database website. therefore all the data used is secondary in nature. empirical methodology because in our research we have used time series data, so regression analysis was employed to be able to examine if any significant relationship exists between kse 100 index and macroeconomic variables(gdp, cpi, m2, exrt, bot and fdi). the models in our study are estimated using the coefficient of independent variables and their level of significance. these tests present an empirical podium for simplification in this study. in our model we have used four models of the form: y = αo + α1x1 + α2x2 + α3x3 + α4 x4 + et where: y = dependent or unexplained variable α0 = constant of the model α1, α2, α3, α4 = coefficients of the model x1, x2, x3, x4, = independent or explanatory variables. et = error term. we will use following four models model 1: gdp = α0 + α1 kse + α2 cpi + α3 agri + et where: gdp = gross domestic product kse = karachi stock exchange 100 index cpi = consumer price index (a proxy for inflation) agri = agriculture value added model 2: cpi = α0 + α1 kse + α2 m2 + α3 gdp +α4agri+ et where: cpi = consumer price index kse = karachi stock exchange 100 index m2 = broad money gdp = gross domestic product agri= agriculture value added model 3: m2 = α0 + α1 kse + α2 cpi + α3 exrt + α4 gdp + et where: review of economics and development studies vol. i, no 2, december 2015 122 m2 = broad money kse= karachi stock exchange cpi= consumer price index exrt = exchange rate gdp = gross domestic product model 4: exrt = α0+ α1kse + α2m2 + α3fdi +α4bot+ et where: exrt = exchange rate kse = karachi stock exchange 100 index m2 = broad money fdi = foreign direct investment bot = balance of trade 4. analysis of results augmented dickey fuller test adf with intercept: table 1 presents the results of adf test with intercept. the critical t-value at 10% level is -2.65. the results show that kse series is not stationary at levels, because adf < t-value here. so we have taken its first difference and after differencing once, it became stationary. so its order of integration is i (1). series of gdp is stationary at levels. so its order of integration is i (0). series of agri is also stationary at levels. so its order of integration is i (0). series of cpi became stationary after differencing two times and its order of integration is i (2). series of m2 and fdi are also stationary at levels and their order of integration is i (0). series of exrt became stationary after differencing once and its order of integration is i (1). series of bot became stationary after differencing two times and its order of integration is i (2). adf with intercept and trend table 2 presents the results of adf test with trend and intercept. the t critical value at 10% level is 3.2856. the results indicate that kse is stationary at first difference and its order of integration is i (1). gdp, cpi, m2 and exrt are stationary at second difference and their order of integration is i (2). only two series, agri and bot are not stationary. multiple regression analysis we have four models to analyze in our study. the results of each model are presented below regression results of model 1 our first model is gdp = α0 + α1 kse + α2 cpi + α3 agri + et in first model, we have focused on the impact of kse 100 index on gdp. in this model gdp is the dependent variable and kse 100 index along with cpi and agriculture value added are the independent variables. the regression estimates show that, the coefficient of kse 100 index is positive and significant. it means when kse 100 index price increases gdp also increases. this is so because, when kse 100 index price increases, wealth of investors increases. so, investment and consumption also increases and in this way gdp also increases. the results also indicate that cpi has a negative but less significant impact on gdp and agri (agriculture value added) has a positive and significant impact on gdp. this is so because pakistan is basically an agrarian country and agriculture production plays an important role in enhancing its gdp. review of economics and development studies vol. i, no 2, december 2015 123 r-squared and adjusted r-squared are 0.99. its mean 99% variation in gdp is due to these variables. dw statistics is 1.84 which shows there is no multicollinerity. so, our estimated model becomes gdp = -178756.7 +83.67487 kse +-9813.813 cpi + 5.379802 agri regression results of model 2 table 5.7 presents the regression results of model 2. the model is cpi = α0 + α1 kse + α2 m2 + α3 gdp +α4αgri +et in this model we emphasize on the relationship of kse 100 index and cpi. cpi is our dependent variable and the explanatory variables are kse, m2 and exchange rate. the results indicate that, the coefficient of kse is negative and significant at 6%. its mean kse 100 index has a less powerful negative impact on cpi in pakistan. the second explanatory variable is m2. its coefficient is positive and significant. money supply has a powerful positive impact on cpi in pakistan because when money in circulation increases prices of goods will increase. results indicate that gdp also has a positive and significant impact on cpi in pakistan. this is so because when production will stronger prices would automatically move downward. the same reason is true for agri having a positive significant impact on cpi in pakistan. r-squared and adjusted r-squared are 0.99; its means 99% of the total variation in cpi is due to these variables. d.w. statistics is 1.75 which shows there is no multicollenerity in our model. so our model becomes cpi = 30.53 -0.002 kse + 0.0000195m2 -0.00000704 gdp + 0.0000503αgri regression results of model 3 our third model is m2 = α0 + α1 kse + α2 cpi + α3 exrt + α4 gdp + et in this model our aim is to identify the impact of kse 100 index on money supply (m2) in pakistan. dependent variable is m2 and the explanatory variables are kse 100 index, cpi, exrt and gdp. according to the results, constant is -330064.4. the results indicate that kse 100 index has a strong positive impact on m2 in pakistan. cpi has a positive but less significant impact on m2. exrt has also a positive and significant impact on m2. gdp has also a positive and powerful significant impact on m2. r-squared and adjusted r-squared are 0.99; it shows that 99% of the total variation in m2 is just because of these variables. d.w. statistics is 2.08 which indicate no multicollinerity in this model. so, after estimation model becomes m2 = -330064.4 +109.7765 kse +3204.924 cpi + 10842.46 exrt + 0.252592 gdp regression results of model 4 our fourth and last model is exrt = α0 + α1 kse + α2 m2 + α3 fdi + α4bot + et in this model, our emphasis is on the impact of kse 100 index on exchange rate in pakistan. in this model our dependent variable is exchange rate and the explanatory variables are kse 100 index, m2, fdi and bot. the results indicate that kse 100 index has a strong negative impact on exchange rate in pakistan. m2, fdi and bot have a strong positive impact on exchange rate in pakistan. adjusted rsquared is 0.94, which indicates that 94% of the variation in exchange rate is due to these variables. d.w. statistics is 1.787 which shows there is no problem of multicollinerity in this model. so, our estimated model becomes exrt =26.576960.003441 kse + 1.90e-05m2 + 0.006712fdi +0.002381bot granger causality test granger causality test shows the strength and direction of the relationship between variables. granger causality test shows that kse 100 index granger causes gdp, cpi, m2, exrt and fdi and the direction of causality runs from kse 100 index to these variables. cpi granger causes gdp as well as m2, exrt, fdi and bot. m2, exrt and bot granger cause agri. m2, fdi and bot granger cause cpi. m2 granger causes exrt. a two way causality runs from fdi to m2 and m2 to fdi. m2 granger review of economics and development studies vol. i, no 2, december 2015 124 causes bot. fdi granger causes exrt. a two way causality runs from bot to exrt and from exrt to bot. fdi granger causes bot. table 1 correlation matrix column1 kse gdp agri cpi m2 exrt fdi bot kse 1 0.859 0.842 0.851 0.909 0.785 0.747 -0.914 gdp 0.859 1 0.998 0.994 0.992 0.923 0.432 -0.888 agri 0.842 0.998 1 0.996 0.987 0.933 0.419 -0.874 cpi 0.851 0.994 0.996 1 0.989 0.950 0.450 -0.881 m2 0.909 0.992 0.987 0.989 1 0.931 0.523 -0.912 exrt 0.785 0.923 0.933 0.950 0.931 1 0.454 -0.778 fdi 0.747 0.432 0.419 0.450 0.523 0.454 1 -0.728 bot -0.914 -0.888 -0.874 -0.881 -0.912 -0.778 -0.728 1 table 2 adf with intercept column1 level 1st.diff. 2nd.diff order kse -0.596719 -3.409493 i(1) gdp 4.241393 i(0) agri 3.014931 i(0) cpi 1.482619 -0.294403 -3.14724 i(2) m2 5.02223 i(0) exrt 0.099095 -3.136907 i(1) fdi -2.828408 i(0) bot 0.111821 -2.263768 3.057492 i(2) table 3 adf with intercept and trend column1 level 1st.diff. 2nd.diff. order kse -2.423479 -3.370494 i(1) gdp 3.05793 -0.440299 -3.935145 i(2) agri 1.323431 -1.117215 -2.655097 cpi -0.133954 -1.387748 -3.307875 i(2) m2 2.927076 -1.378478 -5.626014 i(2) exrt -2.118426 -3.213241 -4.839824 i(2) fdi -3.699406 i(0) bot -1.49575 -2.566863 -2.930172 regression results of model 1 dependent variable: gdp review of economics and development studies vol. i, no 2, december 2015 125 method: least squares sample: 1991 2012 included observations: 22 variable coefficien t std. error t-statistic prob. c -178756.7 555157.2 -0.321993 0.7512 kse 83.67487 30.98167 2.700787 0.0146 cpi -9813.813 15993.60 -0.613609 0.5472 agri 5.379802 0.753326 7.141399 0.0000 r-squared 0.997003 mean dependent var 6336571. adjusted r-squared 0.996503 s.d. dependent var 5665763. s.e. of regression 335039.9 akaike info criterion 28.44485 sum squared resid 2.02e+12 schwarz criterion 28.64322 log likelihood -308.8934 f-statistic 1995.806 durbin-watson stat 1.841323 prob(f-statistic) 0.000000 regression results of model 2 dependent variable: cpi method: least squares sample: 1991 2012 included observations: 22 variable coefficien t std. error t-statistic prob. c 30.52593 2.068534 14.75727 0.0000 kse -0.001525 0.000784 -1.946426 0.0683 m2 1.95e-05 5.93e-06 3.290343 0.0043 gdp -7.04e-06 3.12e-06 -2.254403 0.0377 agri 5.03e-05 1.37e-05 3.673634 0.0019 r-squared 0.995487 mean dependent var 97.37651 adjusted r-squared 0.994425 s.d. dependent var 52.63995 s.e. of regression 3.930308 akaike info criterion 5.772029 sum squared resid 262.6045 schwarz criterion 6.019993 log likelihood -58.49232 f-statistic 937.5028 durbin-watson stat 1.752945 prob(f-statistic) 0.000000 regression results of model 3 dependent variable: m2 method: least squares sample: 1991 2012 included observations: 22 variable coefficien t std. error t-statistic prob. c -330064.4 181099.5 -1.822559 0.0860 kse 109.7765 11.07935 9.908209 0.0000 review of economics and development studies vol. i, no 2, december 2015 126 cpi 3204.924 6843.699 0.468303 0.6455 exrt 10842.46 5001.870 2.167680 0.0447 gdp 0.252592 0.052517 4.809679 0.0002 r-squared 0.997782 mean dependent var 2727026. adjusted r-squared 0.997260 s.d. dependent var 2250941. s.e. of regression 117827.8 akaike info criterion 26.38855 sum squared resid 2.36e+11 schwarz criterion 26.63652 log likelihood -285.2741 f-statistic 1911.732 durbin-watson stat 2.083293 prob(f-statistic) 0.000000 regression results of model 4 dependent variable: exrt method: least squares date: 11/10/13 time: 11:10 sample: 1991 2012 included observations: 22 variable coefficien t std. error t-statistic prob. c 26.57696 1.963845 13.53313 0.0000 kse -0.003441 0.000893 -3.854817 0.0013 m2 1.90e-05 1.95e-06 9.735691 0.0000 fdi 0.006712 0.001557 4.309855 0.0005 bot 0.002381 0.000551 4.322954 0.0005 r-squared 0.952689 mean dependent var 54.53746 adjusted r-squared 0.941557 s.d. dependent var 20.58708 s.e. of regression 4.976909 akaike info criterion 6.244211 sum squared resid 421.0836 schwarz criterion 6.492176 log likelihood -63.68633 f-statistic 85.58165 durbin-watson stat 1.787284 prob(f-statistic) 0.000000 granger causality test pair wise granger causality tests sample: 1991 2012 lags: 2 null hypothesis: obs f-statistic probability gdp does not granger cause kse 20 1.31898 0.29670 kse does not granger cause gdp 1.34184 0.29100 agri does not granger cause kse 20 1.35294 0.28827 kse does not granger cause agri 4.76361 0.02502 cpi does not granger cause kse 20 2.37887 0.12666 kse does not granger cause cpi 5.80262 0.01360 m2 does not granger cause kse 20 6.04567 0.01187 kse does not granger cause m2 0.74476 0.49162 exrt does not granger cause kse 20 2.50948 0.11478 kse does not granger cause exrt 3.82514 0.04546 fdi does not granger cause kse 20 1.04725 0.37520 review of economics and development studies vol. i, no 2, december 2015 127 kse does not granger cause fdi 2.74552 0.09637 bot does not granger cause kse 20 1.15348 0.34200 kse does not granger cause bot 32.6135 3.5e-06 agri does not granger cause gdp 20 0.74977 0.48938 gdp does not granger cause agri 2.23225 0.14170 cpi does not granger cause gdp 20 10.4821 0.00142 gdp does not granger cause cpi 2.03060 0.16579 m2 does not granger cause gdp 20 2.71481 0.09857 gdp does not granger cause m2 1.04648 0.37545 exrt does not granger cause gdp 20 3.73329 0.04832 gdp does not granger cause exrt 1.98323 0.17210 fdi does not granger cause gdp 20 4.89595 0.02309 gdp does not granger cause fdi 1.22884 0.32047 bot does not granger cause gdp 20 4.00733 0.04033 gdp does not granger cause bot 2.76136 0.09526 cpi does not granger cause agri 20 18.7802 8.2e-05 agri does not granger cause cpi 0.09113 0.91340 m2 does not granger cause agri 20 4.52090 0.02907 agri does not granger cause m2 0.56306 0.58105 4. conclusion our study focused on the impact of kse 100 index on four macroeconomic variables; gdp, cpi, m2 and exrt in pakistan. the study can be concluded in few lines as follows. in model one we have concluded that kse 100 index has a positive and significant impact on gdp in pakistan. in model two, we have concluded that kse 100 index has a negative impact on cpi in pakistan. it means that stock prices should remain high in order to cut down inflation. in model three, we have concluded that kse 100 index has a positive significant impact on supply of money. finally, in model four, we have concluded that kse 100 index has a negative significant impact on exchange rate in pakistan. 5. policy implications and recommendations the policy implication state that the macroeconomic factors are not responsive to changes in pakistani stock exchange prices in spite of the sizable proportion of stock market capitalization as a share of the country’s gdp. hence, predicting stock prices and returns via changes in stock prices becomes precarious and this affects economic forecast, planning and growth. it thus becomes obvious that the macroeconomic factors might be very sensitive to global stock markets or other salient issues in the pakistani environment which of course warrants further investigation. under the light of above results it is highlighted that there is a need of well managed macroeconomic policies in order to obtain the benefits from the capital market. in order to take the full advantage of stock market and carry on with the international markets well managed macroeconomic policies are necessary in which interest rates and inflation rate are thoroughly monitor and try to reduce the value as much possible. review of economics and development studies vol. i, no 2, december 2015 128 references wongbangpo, p., 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(2001). selecting macroeconomic variables as explanatory factors of emerging stock market returns. pacific-basin finance journal, 9, 401-426. review of economics and development studies, vol. 6 (1) 2020, 147-152 147 involvement of social and cognitive factors in reading skills of boys and girls: a comparative study a ammara farukh, b masroor sibtain, c hafiz muhammad qasim, d asma kashif shahzad a assistant professor, department of english, university of education, lahore, vehari campus email:ammara.farukh@ue.edu.pk b assistant professor of english, govt. college of science, multan, email: masroorsibtain@gmail.com c assistant professor, department of applied linguistics, gc university, faisalabad email: muhammadqasim@gcuf.edu.pk) d assistant professor, comsats university islamabad, vehari campus, email: asmashahzad@cuivehari.edu.pk article details abstract history: accepted 29 march 2020 available online 31 march 2020 it has been a controversial issue to ascertain whether girls have an advantage in literacy skills over boys or not. there are studies showing a minor or no lead of girls in literacy skills (white, 2007). on the other hand, several studies described better literacy skills in girls than boys (ready, logerfo, burkam& lee, 2005; coley, 2001). reasons like differences in biology,cognitive and physical maturation (leinhardt, seewald & engel, 1979) are given to explain these differences. in this study, 8-9 years 66 grade 3 children were tested on loud reading tasks in both urdu and english.the children were extracted from a bigger sample which participated in a previous study. in the present study, we used 3-word lists (words of mixed difficulty, pseudo-words, and easy frequent words) in both urdu and english (3+3). a t-test was run to see the difference of performance on all word reading tasks by girls, and boys. the girls scored higher than boys on all urdu and english tasks, except pseudo-words in urdu where the difference was not significant whereas a tendency towards significance could be seen. the results presented evidence in favour of the advantage (cognitive or social) of girls over boys of the same age and grade. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: gender differences; literacy skills; l1 reading; l2 reading; word reading jel classification: j16, p36, p46 doi: 10.47067/reads.v6i1.192 corresponding author’s email address: ammara.farukh@ue.edu.pk 1. introduction it has been a controversial issue to determine the role of differences in gender in the literacy skills of older and young children. for, a large number of children observed no gender differences in the early grades (entwisle, alexander & olson, 1997; davies & brember, 1999).these observations were also confirmed even for secondary level (waber, 1979). in these studies, girls showed either no lead or a minor advantage in literacy skills (e.g. below, skinner, fearrington, & sorrell, 2010). on the other hand, several studies e.g. coley (2001), gambell and hunter (1999), phillips, norris, osmond and mailto:ammara.farukh@ue.edu.pk mailto:masroorsibtain@gmail.com mailto:muhammadqasim@gcuf.edu.pk mailto:asmashahzad@cuivehari.edu.pk mailto:ammara.farukh@ue.edu.pk review of economics and development studies, vol. 6 (1) 2020, 147-152 148 maynard (2002), ready, logerfo, burkam and lee, (2005) described better literacy skills in girls than boys. to investigate the idea that girls come to schools with better literacy skills than boys, below, skinner, fearringtonand sorrell (2010) used repeated measures analyses of multiple preliteracy skills across 5 grades (1 -5).they observed that the girls score higher than the boys on four pre-literacy skills, but the differences were not significant. they did not find any significant gender difference on the selected literacy tasks until in the fourth-grade sample where the female students were observed to benefit significantly. again, in the 5th-grade sample, these differences were insignificant. in grade 5 sample boys presented greater upturns in oral reading fluency, and when the academic year ended, oral reading fluency scores of both boys and girls were almost similar. similarly, seven graders (gates, 1961) were investigatedand it was observed that the female students were better on 18 from 21 comparisons of reading measures. great differences were reported in comprehension, speed and vocabulary skills. in another study (chatterji, 2006), it was also observed that male-students scored below than that of the female ones on different tests i.e. beginning and ending sounds, letter recognition, listening comprehension, print familiarity, receptive vocabulary, rhyming sounds, word recognition, and word comprehension in the context. the difference was observed to increase as the literacy training of a year was over until the end of grade 1. explanations like differences in biology, cognitive and physical development (leinhardt, seewald, &engel, 1979) have been presented to support the observed better performance of girls on literacy tasks. the difference of learning approaches (ready, logerfo, burkam, & lee, 2005) to the dissimilar cultural expectations reserved for males and females are also considered as important factors for the observed difference (sommers, 2001). ayers (1909) also showed concern over a deficit in males in reading success. the results were confirmed later by different researchers with different populations, and measures, across different age/grade ranges. it was also emphasized that physiological developmental and cultural or societal aspects might affect the deficits of male students in reading skills (see alloway & gilbert, 19970; holbrook, 1988). researchers of physiological-maturational theories like das, kirby and jarman(1979), geschwind and behan (1982), mills (2003), naour (2001), waber (1979) and witelson (1976) investigated the processing variances. sequential-processing was referred to as the ability to process information in the sequence. similarly, synchronized-processing was described as the ability to unite different parts of the information to form meaningful products. studies by geschwind and behan (1982), and waber (1979) reported the presence of bigger levels delay in the fetal-testosterone maturation process of the left-brain hemisphere, causing the boys to lag behind in the activities which involve left hemisphere like sequential processing.therefore, the male students are most likely to perform better on synchronized-processing tasks (i.e. visual) and inferior on sequential-processing tasks (i.e. auditory) (mills, 2003; witelson, 1976). although both of these types of processing (i.e. auditory and visual), in the view of das, kirby and jarman (1979), naour (2001) and witelson (1976) are related to development of reading skill yet, the problems related with the sequential-processing may directly be related to early literacy skill development. another factor discussed is environmental factors. it has been suggested that the gender differences affecting the reading skills are caused due to the cultural, environmental,or societal factors. in this context, a theory has also been presented i.e. differential response theory. it embarked on the notion that the behaviour of a teacher toward his/her students is subjective to the students’ behaviour and his/her (teacher's) perception about what those learners areexpected to do. itentails, as perceived by bank, biddle and good (1980) that the teacher may hold greater expectations for the female students that turn into self-fulfilling predictions. a study (maccoby, 1990) found evidence for this assumption by review of economics and development studies, vol. 6 (1) 2020, 147-152 149 recording theteacher’s interactions with the students of grade-2 in mathematics and reading lessons. it was observed that the teachers spent moreinstructional-time as well as interact more with the female students in reading lessons. on the other hand, the teachers spent more instructional-time and interacted more with male students in math lessons. although the differences in achievement were small initially in reading and math, yet the differences favouring females in reading achievement scores were evident in the end of the year. large-scale reading assessments, constantly observed that girls, overall, exceed boys in reading abilities e.g. studies from 8 to 16 years boys and girls sustained reporting this gender difference at both national and international levels (cmec, 1999; elley, 1992;eqao, 2003; naep, 2005; naour, 2001). yet, contrary to all such findings, a study by witelson(1976), suggested that there are no practical consequences of this difference and that the idea of boys’ under-achievement has been exaggerated. the data for this study were taken from the reading component of ontario secondary school literacy test (i.e. n=113050). the gender effects could explain no effect of gender in reading achievement. in this study, 8-9 years grade 3 children, with varied reading abilities (both typical, and poor readers) were tested on loud reading tasks in both urdu and english.we used 3-word lists (words of mixed difficulty, pseudo-words, and easy frequent words) in both urdu and english. each list consisted of 10 items. the objective of this research was to explore if there lay any effect of gender on the performance of the participants on the said reading tasks. 2. participants and procedure of the study for this study, 66 school children chosen as the participants from a sample of 150 grade-3 children (54 girls and 96 boys) from a previous study by farukh & vulchanova(2014) . the participants were studying at both public and private sector schools of a developing district in the punjab, pakistan. they were previously evaluated for reading skills on a classical ran battery and a non-word repetition task (denckla & rudel, 1976) after the addition of a ran task designed in urdu (farukh &vulchanova, 2014). scores for the rapid automatised naming of colours, letters, objects, numbers, and reading speed, and errors in the repetition process of four-syllable non-words, facilitated the further distribution of the students into different groups i.e. a) control group and b) reading deficit (rd) group. the former comprised of the students scoring between the 25th and 75th percentile whereas, the later comprised of the students scoring below the 25th percentile on three or more tasks. hence, avoiding the inclusion of the top performers, the study considered the control group children from urdu public and english private schools (n=32), and children with a reading deficit, rd group from the same schools (n=34). 2.1 testing procedure to ensure that the groups did not differ on non-verbal intelligence, and to rule out the possibility of any cognitive deficit, prior to the actual testing, the participants were tested on the selected standard non-verbal iq tasks adapted and performed in urdu. 2.2 word reading tasks and scoring thechildrenweretestedonabatteryoftasks designed for the study, including three lists of words (in english and in urdu). the1stlist included words of mixed difficulty, the 2nd list included pseudowords, and the 3rd list included easy frequent words. each list included 10 words to read aloud. 1 point was given for each correct response meaning that for each list of 10 words the maximum score was 10. 3. results a t-test was run to see the difference of performance on all word reading tasks by girls, and boys. the girls scored higher than boys on all urdu and english tasks. the results were as follows: for review of economics and development studies, vol. 6 (1) 2020, 147-152 150 mixed words english, ; t-value =2.48, df = 64, p < .001; for pseudo-words english; t-value =2.66, df = 64, p < .001; and for easy frequent words english, ; t-value =3.12, df = 64, p < .001. the betweensubject effects for reading lists in urdu were as follows: for mixed words urdu, ; t-value = 2.71, df =64, p =.002; for pseudo-words urdu, ; t-value = 1.75, df= 64, p = .02; and for easy frequent words urdu, ; t-value =2.35, df = 64, p < .001. a descriptive statistics table is given in appendix a. to explain the scores. bonferroni correction method, for 6 independent comparisons, was applied and, the significance level was set as .008. there seems to exist a significant difference in the word reading scores of the male and female participants on all word lists (both in english and urdu) except on pseudo-words in urdu where the difference is not significant, whereas we can observe a trend towards significance. 4. discussion the results of the study show a significant difference in loud word reading scores in both english and urdu. these results(see also appendix. 1) support the claim of the studies,performed on an international scale,by coley (2001), gambell and hunter (1999), phillips et al., (2002) and ready et al. (2005) that girls are better in literacy skills than boys.they enjoy an advantage over the boys in being literate. biological differences in cognitive development and physical maturationare considered responsible for such differences(leinhardt et al.,1979). the girls are also thought to adopt different learning approaches (ready et al.,2005) to meet with the dissimilar cultural expectations reserved for males and females (sommers, 2001). although there is a small number of studies that do not conform to such results (entwisle, alexander & olson, 1997; davies & brember, 1999; white, 2007), such studies report a minor or no difference between the literacy outcomes of boys versus girls. if we have a look at the studies that presented a significant difference in literacy perception and academic achievements, we find literature assigning the feminized educational practices as well as structures being responsible for it (sommers, 2001). some of the strategies have also been suggested for classroom use to mediate this gender gap i.e. a) the use of materialswhich are more boy-friendly, b) introduction to more male teachers and male role-models, c) adoption of technology-based educational programmes, and d) experimentation with single-gender schooling (alloway & gilbert, 1997; gurian, henley & trueman, 2001; mills, 2003; noble & bradford, 2000). all of this literature suggests changed teaching and professional practices. most of the educational systems on the international level are supposed to suit more to girls than boys (mills, 2003). therefore, some practical steps might be takento adapt the curricula taking biological, cognitive, psychological, and social differences between boys and girls. the present study presented girls advantage in loud word reading over boys but, the reason for this difference still needs to be investigated to reach the factors thateither this is the curriculum or social and cognitive factors which are responsible for the difference in this particular age group. the sample of the present study is too small to be decisive about the suitability of curriculum of the pakistani education system. there might be a study conducted on a large scale to support the idea if the difference observed really exists or not. there is also another limitation of the study that it did not control the participants for their cognitive abilities. any future study should take the cognitive ability measures into account. the study could include other literacy skills like text reading, writing, etc. in both urdu and english. references alloway, n., & gilbert, p. (1997). boys and literacy: lessons from australia. gender and education, 9(1), 49-60. ayers, l. (1909). laggards in our schools. new york: russell sage foundation. review of economics and development studies, vol. 6 (1) 2020, 147-152 151 bank, b. j., biddle, b. j., & good, t. l. (1980). sex roles, classroom instruction, and reading achievement. journal of educational psychology, 72, 119-132. below, j. l., skinner, c. h., fearrington, j. y., & sorrell, c. a. (2010). gender differences in early literacy: analysis of kindergarten through fifth-grade dynamic indicators of basic early literacy skills probes. school psychology review, 39(2), 240. chatterji, m. (2006). reading achievement gaps, correlates, and moderators of early reading achievement: evidence from the early childhood longitudinal study (ecls) kindergarten to first-grade sample. journal of educational psychology, 98, 489-507. coley, r. j. (2001). differences in the gender gap: comparisons across racial/ethnic groups in education and work. princeton, nj: educational testing service. council of ministers of education, canada [cmec]. (1999). das, j. p., kirby, j. r., & jarman, r. f. (1979). simultaneous and successive cognitive processes. new york: academic press. davies, j., &brember, i. (1999). boys outperforming girls: an 8‐year cross‐sectional study of attainment and self‐esteem in year 6. educational psychology,19 (1), 5–13. denckla,m.b.,&rudel,r.g.(1976).rapidautomatizednaming(r.a.n.):dyslexiadifferentiatedfromotherlear ningdisabilities.neuropsychologia,vol.14,471-479. education and quality and accountability office [eqao]. (2003). ontario english language schools. retrieved july 16, 2007, from http://www.eqao.com/pdf_e/03/03p006e.pdf elley, w. (1992). how in the world do students read? the hague: international association for the evaluation of educational achievement. entwisle, d. r., alexander, k. l., & olson, l. s. (1997). children, schools, and inequality. boulder, co: westview. farukh,a.,&vulchanova,m.(2014).predictorsofreadinginurdu:doesdeeporthographyhaveanimpact?.dy slexia,20(2),146-166. gambell, t. j., & hunter, d. m. (1999). rethinking gender differences in literacy. canadian journal of education,24 (1), 1–16. gates, a. i. (1961). sex differences in reading ability. the elementary school journal, 61, 431-444. geschwind, n., & behan, p. (1982). left-handedness: association with immune disease, migraine, and developmental learning disorder. proceedings of the national academy of science, 79, 50975100. gurian, m., henley, p., &trueman, t. (2001). boys and girls learn differently. hoboken. holbrook, h. t. (1988). sex differences in reading: nature or nurture? journal of reading, 31, 574-577. maccoby, e. e. (1990). gender and relationships: a developmental account. american psychologist,45 (4), 513–520. leinhardt, g., seewald, a., & engel, m. (1979). learning what's taught: sex differences in instruction. journal of educational psychology, 71, 432-439. mills, m. (2003). shaping the boys' agenda: the backlash blockbusters. international journal of inclusive education, 7(1), 57-73. naglieri, j. a., & rojahn, j. (2001). gender differences in planning, attention, simultaneous, and successive (pass) cognitive processes and achievement. journal of educational psychology, 93, 430-437. naour, p. j. (2001). brain/behaviour relationships, gender differences, and the learning disabled. theory into practice, 24, 100-104. national assessment of educational progress [naep]. (2005). naep 2004 trends in academic progress: three decades of student performance in reading and mathematics. noble, c., & bradford, w. (2000). getting it right for boys--and girls. psychology press. organisation for economic co-operation and development [oecd] pisa (2001).knowledge and skills. http://www.eqao.com/pdf_e/03/03p006e.pdf review of economics and development studies, vol. 6 (1) 2020, 147-152 152 first results from pisa, paris: oecd publications. phillips, l. m., norris, s. p., osmond, w. c., & maynard, a. m. (2002). relative reading achievement: a longitudinal study of 187 children from first through sixth grades. journal of educational psychology,94 (1), 3–13. ready, d. d., logerfo, l. f., burkam, d. t., & lee, v. e. (2005). explaining girls’ advantage in kindergarten literacy learning: do classroom behaviours make a difference?. the elementary school journal, 106(1), 21-38. sommers, c. h. (2001). the war against boys: how misguided feminism is harming our young men. new york: simon & schuster. waber, d. p. (1979). cognitive abilities and sex-related variations in the maturation of cerebral cortical functions. in m. a. wittig & a. c. peterson (eds.), sex-related differences in cognitive functioning (pp. 161186). new york: academic press. white, b. (2007). are girls better readers than boys? which boys? which girls?.canadian journal of education/revue canadienne de l'éducation, 554-581. witelson, s. f. (1976). sex and the single hemisphere: specialization of the right hemisphere for spatial processing. science, 193, 425-427. appendix appendix 1.group statistics gender n mean std. deviation std. errormean mixedwordseng girls 22 6.18 1.71 .364 boys 44 4.41 3.12 .470 pseudo-wordseng girls 22 7.23 1.57 .335 boys 44 5.20 3.38 .510 easyfrequenteng girls 22 9.32 .95 .202 boys 44 6.93 3.51 .530 mixedwordsurdu girls 22 8.55 2.20 .469 boys 44 6.27 3.60 .542 pseudo-wordsurdu girls 22 7.32 2.38 .507 boys 44 5.89 3.43 .517 easywordsurdu girls 22 8.95 1.84 .392 boys 44 7.00 3.66 .552 review of economics and development studies, vol. 6 (2) 2020, 351-361 351 human development, political stability and economic growth: the way forward a areeba khan, b sulaman hafeez siddiqui, c shahid hussain bukhari, d syed muhammad hashim iqbal a department of management sciences, the islamia university of bahawalpur, pakistan email : areeba.khan@iub.edu.pk b department of management sciences, the islamia university of bahawalpur, pakistan email : sulman.siddiqui@iub.edu.pk c department of international relations, bahauddin zakariya university, multan, pakistan email : shahidbukhari@bzu.edu.pk d the islamia university of bahawalpur, pakistan email : hashimiqbal221@gmail.com article details abstract history: accepted 26 april 2020 available online 15 june 2020 economic growth has been known to foster human development for long term economic stability. the evidence of bi-causality in the human development and economic growth nexus is however limited. this paper builds on the reverse causality between human development and economic growth in context of pakistan, with the moderating impact of political stability. the study applies ols and vecm on the data collected from world bank database from year 2006 to 2018. our findings exhibit empirical evidence related to endogenous growth models and a significant causal relationship between human development and economic growth, moderated by political stability. the relationship is further explained by trajectories of happiness, health and income redistribution. our findings suggest efficient reallocation of resources towards human development to address post pandemic growth concerns. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: economic growth, human development, happiness, income redistribution, health jel classification: o47, o15, d31 doi: 10.47067/reads.v6i2.213 corresponding author’s email address: areeba.khan@iub.edu.pk 1. introduction pakistan is facing a huge economic crisis in form of upcoming post pandemic recession. as a developing country its primary concern is to develop assets that may propel it out of economic recession and foster growth in the country to deal with the havoc wrought by covid-19 and resultant economic, political and social vulnerabilities. economic growth may be considered a direct trigger for human development for the nature and magnitude of investments in the social economy. the economic productivity contributes towards mailto:areeba.khan@iub.edu.pk review of economics and development studies, vol. 6 (2) 2020, 351-361 352 fulfillment of individual and institutional needs for sustaining general well-being. empirical evidence confirms that high economic growth sustained for a longer period of time may result in higher per capita income and better living standard addressing basic needs to health and education (sen, 2000; butler & kern, 2016). where economic growth cannot be considered the sole contributor towards human development, its role is undeniable. in absence of economic growth, human capital cannot be expected to flourish and expound. there may however be other factors that can strengthen or weaken that relationship. political stability, happiness and health are such factors which may create social capital of an economy (easterlin, 2005). political sponsorship of human development may play role of a catalyst in strengthening the growth and development nexus, as general well-being of masses is not only a public objective but also an imperative for sustainable political prowess. the nature of causal antecedent relevant to economic growth has been addressed through empirical literature on economics; however, bi-causality or reverse causality of the situation has only been referred to in a perfunctory manner. this study seeks to analyze the reverse causality of the relationship between economic growth and human development theoretically and empirically. 2. brief review of literature historically, gross domestic product (gdp) has been used as an indicator of general well-being of a population (sen, 1990). there may definitely be a positive correlation of productivity and wealth generation leading to personal comfort and development, however, distribution of income and the way it impacts general well being are the more conclusive factors. where it cannot be denied that rich countries may have a better education and health system, it is also true that some states may prioritize growth than development (solow, 1958). gdp falls short as a measure of wellness owing to its inability to reflect the cost of subjective well-being, freedom of thought and cost of living (jolly, emmerij & weiss, 2009). few alternatives of gdp as a measure of well being have been proposed over time, including genuine progress indicator (gpi) based on expenditure patterns (larsen, 2009), human development index (hdi) focusing on human life longevity, literacy and productivity (cummins et al., 2003) and the millennium ecosystem assessment (mea) focusing on human ecosystem (carpenter et al., 2009). none of these measures captures all aspects of social and physical well-being. easterlin (2003) argues that inadequacy of any singe measure may be attributed to hedonic adaptation of humans to different set of choices available in life. the social evaluation of peers compels them to accede to different decisions having a long-lasting impact of life, thereby refuting the established set of theories. eckersley (1999) postulated a multivariate model of well-being which may account for social and personal life satisfactory as discount factors. 3. human development and growth linkage the theoretical foundations human development could be traced back to sen’s capability strategy theory in 1985 where it was postulated that a person’s well being and development depends upon number of vectors performing together in harmony. all developments in human capital formation theories can be attributed to the vectors of income health, happiness, education but is not limited to the same (sen, 2000). human development report was the first attempt at classifying not individuals but nations with respect to well-being (undp, 1990). literacy rate, average life expectancy and gdp were few of the vectors used among others, in the undp report. with the passage of time, there has been an increase in the vectors, however, crucial elements for economic development like political stability and review of economics and development studies, vol. 6 (2) 2020, 351-361 353 income inequality have not been added to the criteria, which may have compromised the accuracy of the index (schultz, 2000). the nature of relationship of growth with human development has been discussed in the perspective of growth as a determinant of human development, identifying vicious circle in low growth and low human development as well limitations in high growth and staggered human development (mcallister, 2005). the staggered development in high growth economies indicates the fact that growth and human development relationship may not be direct and there could be other factors mediating the nexus. 3.1 happiness, well-being and health comprehensive review of literature on happiness shows its origin as a way of life from buddhist doctrine. life satisfaction, well-being and happiness are used interchangeably as a manifestation of inner peace and happiness in the buddhist religion (mcallister, 2005). self-evaluated happiness has been the major assessment tool in literature of well-being (diener et al., 2009). the gnh framework however uses health as the major evaluator of well-being. diener et al. (1985) developed a multiscale assessment of happiness using overall satisfaction from life, based on factor analysis driven from cultural aspects. 3.2 income redistribution and growth income redistribution and growth relationship is not as straight forward as the linkage between income inequality and economic development. sharp in 2004 studied the nexus between income redistribution and production efficiency and concluded that income inequality results in decreased productivity as growth gets discounted. some popular means of calculating income inequality through redistribution include atkinson index, squared coefficient of variation (scv), and mean-log deviation (mld) (cardoso, 1993). the link between income redistribution, growth and happiness may also be significantly affected by expenditure on health (bhargava et al., 2001; mayer, 2001). variable proxy description source economic growth e.g growth may have a strongly positive impact on human development as per literature. it is mentioned as a viable indicator in competency variables (solow, 1958). word bank human development h.d the impact of growth on human development has been discussed, but the bi-causality of the relationship is yet to be determined. human development is the primary and perhaps terminal objective of economic growth but can it trigger growth in return must also be explored (alkire, 2010). word bank income redistribution i.r income inequality may hinder growth prospects since it decreases productivity by compromising incentives to productivity (anand, sudhir & sen, 2000). word bank happiness index h.i happiness index considers general well being and happiness of individuals as well as nations. it is a robust indicator of social productivity (adler & seligman, 2016). word bank review of economics and development studies, vol. 6 (2) 2020, 351-361 354 health hl health as a function of income and social privilege may impact the gross national well being of nations in a strategic way. it is vital towards determining happiness, average age and mortality (butler & kern, 2016). word bank political stability p.st political stability may prove vital in mediating the effect of human development on economic growth through changing public expenditure patterns and fiscal policy (paul, 1979 sen, 2000). word bank 4. method data were collected from the world bank database over the period of 13 years from 2006-2018. pakistan has always experienced negative ratings on political stability and low rankings on happiness index (rank 66) as compared to other emerging economies (see table ). the data collected for happiness index reflects on social support and perceived corruption. the differentiating factor between high rank and low rank countries seem to be the social harmony between individuals and institutions (world happiness report, 2020). pakistan’s rank in 2018 seems to improve owing to regime change and perception of lower corruption, scoring an average 5.38 and a maximum of 5.69 points in the year 2020. in the same time span pakistan’s health spending per capita increased to $44.59 from an average of $21. health spending as percentage of gdp however saw a steep decline from year 2007-2012 and then regained to maintain average of 2.9%, whereas comparative average for the world economies is 6.55%. the stark difference in health expenditure may account for decline in general well-being and happiness. figure 1: descriptives review of economics and development studies, vol. 6 (2) 2020, 351-361 355 source: world bank databaseundp, 2020 for income inequality and redistribution, the value of gini income inequality index is 33.5, hovering around an average of 31 points. the top 10 % income share of earners is 29.5 %. the world average for income of top 10 earners based on n74 countries is 28%. the ratio shows minimum or no improvement from an average of 27% in most years. pakistan has seen a drastic decline in gdp growth rate from an 5.83 % to a staggering 3 % in the year 2020. the long-term growth forecasts for the country look dismal in context of covid-19 pandemic and increased pressures for debt servicing. political stability has always seen negative values for pakistan. pakistan score 94.2 at a 120 points index for a fragile state. the latest score at political stability index of pakistan is -2.27, which exhibits a weak political scenario. human development like other indicators is at a decline from year 2018 onwards. basic reason for this decline is attributed to decrease in expenditure on health and education. the hdi value for 2018 is 0.560 for pakistan which indicates state of medium development. economic growth is taken as the dependent variable, whereas human development, income redistribution, happiness index and health as independent variables representing gross national wellbeing. political stability is taken as a moderator variable. descriptive statistics were taken, correlation and ols estimated and vector error correction model was run on the data for cointegration. 0.52 0.524 0.528 0.533 0.537 0.546 0.55 0.566 0.558 0.56 0.48 0.5 0.52 0.54 0.56 0.58 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 p o in t year humman developement of pak 2009-2018 review of economics and development studies, vol. 6 (2) 2020, 351-361 356 4. findings and discussion descriptive statistics were run on the data and the results are mentioned in table 1. table 1: descriptives descriptives eg-pak hd-pak hi-pak hl-pak ir-pak ps-pak mean 4.11 0.54 5.24 2.62 31.79 -2.55 median 4.53 0.54 5.24 2.65 31.85 -2.54 maximum 5.70 0.56 5.47 2.80 34.20 -2.39 minimum 1.61 0.52 5.13 2.34 27.30 -2.81 std. deviation 1.38 0.01 0.09 0.16 2.26 0.14 skewness -0.49 0.07 1.18 -0.79 -0.61 -0.29 kurtosis 2.01 1.61 4.31 2.38 2.40 1.81 jarque-bera 0.81 0.80 3.05 1.21 0.78 0.72 probability 0.66 0.66 0.21 0.54 0.67 0.69 sum 41.16 5.42 52.47 26.26 317.90 -25.56 sum sq. dev. 17.16 0.00 0.08 0.23 46.16 0.19 ols regression (table 2) was run on the data with economic growth as dependent variable and human development, income redistribution, happiness index and health as predictors. the results show human development significant at the level of 10%, with overall predictive power of the model as exhibited by adjusted r 2 at 87.80 %. the results show a strong causal relationship between human development and economic growth. table 2: ols results variable coefficient std. error t-statistic c -51.20 20.72 -2.47 (0.05) hd-pak 109.29 49.52 2.20 (0.07) hi-pak 0.68 2.33 0.29 (0.78) hl-pak -0.31 2.07 -0.15 (0.88) ir-pak -0.21 0.30 -0.69 (0.51) r-squared 0.87 mean dependent var 4.11 adjustedr squared 0.78 s.d. dependent var 1.38 s.e of regression 0.64 akaike info criterion 2.27 sum squared resid 2.09 schwarz criterion 2.42 log likelihood -6.36 hannan-quinn criterion 2.10 f-statistic 9.00 durbin-watson stat 2.08 prob (f-statistic) 0.01 review of economics and development studies, vol. 6 (2) 2020, 351-361 357 ols regression was run again with the moderator political stability to gauge the effect of moderating variable on the relationship between human development and economic growth. the results not only show a higher predictive capacity of the model with adjusted r 2 of 93.48% but also turn human development significant at the level of 5%. the durbin watson stat for first order serial correlation is 3.31, which is a good sign since it is above 2. table 3: var variable coefficient std. error t-statistic c -16.54 25.14 -2.47 (0.54) hd-pak 107.49 40.49 2.20 (0.05) hi-pak 0.75 1.91 0.29 (0.71) hl-pak -4.77 2.93 -0.15 (0.17) ir-pak -0.34 0.25 -0.69 (0.24) ps-pak 7.10 3.75 1.86 (0.13) r-squared 0.93 mean dependent var 4.11 adjustedr squared 0.85 s.d. dependent var 1.38 s.e of regression 0.52 akaike info criterion 1.84 sum squared resid 1.11 schwarz criterion 2.02 log likelihood -3.23 hannan-quinn criterion 1.64 f-statistic 11.47 durbin-watson stat 3.31 prob (fstatistic) 0.01 table 4: correlation correlation t-statistic probability eg-pak hd-pak hi-pak hl-pak ir-pak pspak eg-pak 1 hd-pak 0.93 1 7.15 -- 0.00 -- hi-pak 0.07 0.05 1 0.22 0.15 -- 0.83 0.88 -- hl-pak 0.68 0.71 0.09 1 review of economics and development studies, vol. 6 (2) 2020, 351-361 358 2.64 2.89 0.28 -- 0.02 0.01 0.78 -- ir-pak 0.83 0.93 0.09 0.57 1 4.30 7.62 0.27 1.99 -- 0.00 0.00 0.79 0.08 -- ps-pak 0.84 0.82 0.09 0.90 0.74 1 4.46 4.13 0.26 6.12 3.14 -- 0.00 0.00 0.79 0.00 0.01 -- hi_pak (0.07) has a weak correlation with eg_pak but hd_pak (0.68) has a strong correlation with eg_pak. similarly, ir_pak (0.83) has a strong correlation with eg_pak. ps_pak (0.84) has a strong correlation with eg_pak. the presence of these afore mentioned correlations exhibit a sturdy covariance among variables, as mentioned in table 4. vector error correction analysis is carried out on the data, and the results are explained in able. this output includes the analysis of pakistan in which the eg_pak as a dependent variable and the independent variables are (hl_pak, ir_pak, hd_pak, hi_pak) and ps_pak as moderator. the vector error correction equation is as: vecm: + ∑ + ∑ + from results the cointegrating equation coefficient is -1.5319 for the error correction term lag zero period and coefficient values of x for this lag are ps_pak= 4.718, ir_pak =0.282625, hi_pak=1.609658, hd_pak=73.23038 and the constant c is -45.1584. the cointegrating equation for the long run model is as follows: = = table 5; vecm vector error correction standard error () t-statistic [] eg-pak (-1) 1 hl-pak(-1) 1.43 -0.81 [1.75] c -7.70 d(eg-pak) d(hl-pak) coint eq.1 -1.53 -0.05 -0.59 -0.06 [-2.56] [-0.84] c -45.15 1.80 -23.80 -2.73 [-1.89] [0.66] ps-pak 4.71 1.60 -4.49 -0.51 review of economics and development studies, vol. 6 (2) 2020, 351-361 359 [1.05] [3.10] ir-pak 0.28 -0.19 -0.41 -0.04 [0.68] [-4.15] hi-pak 1.60 0.01 -2.20 -0.25 [0.72] [0.07] hd-pak 73.23 15.72 -45.90 -5.27 [1.59] [2.98] r squared 0.79 0.91 adjusted r squared 0.45 0.78 sum sq.resids 0.86 0.01 s.e. equation 0.53 0.06 f-statistic 2.32 6.86 log likelihood -2.24 17.23 akaike aic 1.83 -2.49 schwarz sc 1.96 -2.36 mean dependent 0.28 0.02 sd dependent 0.72 0.13 determinant resid covariance (dof adj.) 0.00 2.43 e05 22.26 -1.83 -1.53 determinant resid covariance log likelihood akaike aic schwarz sc the results in table 6 show value of eg_pak (-1) =1.00, hl_pak (-1) =1.43 for the lag period zero and constant ( for the cointegrating equation is -7.70131. the r-squared for this lag period is 0.79 and adj. r-squared is 0.45. this variance is obtaining by testing different combination of endogenous and exogenous variables, f-statistic for this analysis is 2.32. 5. conclusion this study tests the hypothesis of reverse causality between human development and economic growth, with the moderating impact of political stability. the results show a high degree of causal relationship between human development and economic growth and a significant impact of political stability as a moderator. the effects of health, income redistribution and happiness index were also checked on economic growth and the former were found to be insignificant. the empirical results of the study suggest that the level of human development would affect economic progress of a country over the long term. the results are significant for pakistan as an emerging economy relying heavily on the services sector. efforts to formulate and develop human capital may result in greater economic progress provided the country experiences political stability over time. the policy implications drawn from the study could be intricate with respect to execution in times of staggering growth. fiscal allocation of resources to the prioritized sectors may make review of economics and development studies, vol. 6 (2) 2020, 351-361 360 substantial difference in human and physical capital formation. the government needs to formulate policies for efficient allocation to health and education, incentivize private sector for investments in human 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(2020). key to hdi countries and ranks. united nations development programme. http://www.prb.org/source/hdr04_backmatter_1.pdf review of economics and development studies, vol. 6 (2) 2020, 381-390 381 energy security: a national security paradigm shift for us in post 9/11 epoch a quratulain abbas, b khawaja alqama a phd scholar, department of political science, bahaudin zakriya university, multan / lecturer, gpp department, national defense university islamabad, pakistan b dean social sciences and humanities, minhaj university, lahore, pakistan article details abstract history: accepted 17 may 2020 available online 15 june 2020 "energy security" is a safe and abrupt means of getting a secure supply of energy sources. in order to function smoothly, the modern economies need to have a secure and uninterrupted supply of energy resource. this importance has linked energy security with the national security of nation-states thus making energy primarily a significant resource for the powers around the globe. however, an uneven distribution of the resource has led to susceptibility amongst states thus leading to a situation of anxiety around the globe. roots of this anxiety can be traced back in 1973, the oil embargo, which forced the giant economies to think seriously about the concept of energy security. this study thus aimed to explain that there exists a link between energy, economy and national security. this linkage of energy with economy and national security has paved way for the national security paradigm shift. the study explains the factors related to political as well as economic global scenario that have ignited the concept of "energy security" and its link with "national security". © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: cars, energy security, national security, dollar hegemony, energy security trio jel classification: p28, p29, f52 doi: 10.47067/reads.v6i2.216 corresponding author’s email address: dralqama@hotmail.com 1. introduction for an efficient performance of the global economies, a rapid and incessant supply of energy resource is important, this rapid and relentless supply is called as energy security. it can further be explained as, "enjoying supplies at sufficient and acceptable cost". an energy expert daniel yergin is of the view: ''the chief objective of this phenomenon is to promise acceptable, unswerving supplies at evenhanded costs that may not be considered a threat to the state, her values and her desired aims''. in other words, it is a term defined to describe a link between access to natural resources and political and economic security of nation-states in the name of secure supplies and price stability (yergin, 1990). review of economics and development studies, vol. 6 (2) 2020, 381-390 382 the expression "energy security" can be traced back to 70s when the all arab states cut off the oil supply to the western states in order to punish them on their support to arab-israel cause. this catastrophe hiked the oil prices three times in the international market. later the prices were doubled in 1979-1980 as a consequence of the shah's downfall. these series of episodes have placed energy at a fundamental position at global level. the growing economic interdependence has further intensified the significance of energy and has raised the concept as a global issue. today, the concept has not been limited to supply and demand it has crossed the limitations of market, trade, economy and politics. oil being the most significant source of energy is a non-renewable and it is the life line of economies and societies. the significance of energy in economics has been well portrayed by hennery kissinger in april 1986, "understanding the relation between economy as well as energy is vital otherwise one cannot be a great politician or statesmen. only knowledge related to foreign policy as well as security is not enough" (mahdi, 2010). similarly, obama says, "in a time of such great challenge for america, our future has no single concern as fundamental as energy is. america's dependence on oil is one of the most serious threats that have been seen by our country. it bankrolls dictators, pays for the spread of nuclear weapons, and funds both sides of our fight against terrorism. it puts the american people at the mercy of shifting oil prices, stifles innovation and sets back our ability to compete" (lansford, 2007). a u.s marine corps, gen. james johns explained, "our whole economy depends on the expectation that the energy will be abundant, available and will be payable. nations such as venezuela and iran could use oil and gas as political and economic weapons by manipulating the market. half of our trade deficit goes toward buying oil from abroad, and some of that money ends up in the hands of terrorists" (gendzier, 2003). this significance of oil as a chief source of energy provides a link between energy, economy and security thus giving rise to an "energy security trio". this trio has thus paved way to a paradigm shift in the existing concept of "national security". "energy security trio" unfolding the relation between energy, economy and security in order to maintain her position as a hagemon united states of america must free herself from the sway of this "energy security trio". this link between "trio" and national security paradigm shift for usa has been further explained by president bush, "states and usa can achieve real security when they will get rid of dependence on energy" (siddiqui, 2003). in past a lot of research has been done on energy and its importance, in this respect daniel yergin in his book, "the quest" describes significance of control over resources, "whoever controls the world’s oil assets controls the world in a way that mere occupation of the territory cannot be harmonized." he auxiliary added, "oil is scrupulously tangled with the tactful planning of the states and energy sources secuirty energy security economy review of economics and development studies, vol. 6 (2) 2020, 381-390 383 politics, it is not just a commodity but a converging point for global economic policies and security of national and trade interests" (yergin, 2011). a similar relation of economy with the resources has been provided by william, "expansion in economy has now turned out to be a means and an end for the policy-makers of us. the economic expansion has been defined as an objective, as it is of vital significance for the efficient working of the domestic economic system; it was also regarded as a means to construct the empire of peace as well as prosperity which would make the world safe for constant expansion in the coming years and this is only possible with accessibility to economic resources"(williams, 2005). in this respect america's growing dependence on imports of raw materials like oil, has been well defined by kolko, the capacity of us to get hold of such essential raw materials and stability in its costs has been "one of the keystones of its economic supremacy", furthermore, in order to uphold her dominance in the international market structure these supplies has to be secured (gabriel, 1971). same view has been positively agreed upon by two political economists naomi klein along with stephen kinzer however they purposed a vicious change work as a brawny instrument for the promotion of trade and industrial interests of united states. well suited examples in this respect are us invasions in afghan territory in 2003, 1973 in chile and iraq (zahid, 2010). similarly, svante karlsson's view in one of his publications, "oil and the world order: american foreign oil policy"," be in charge of oil is the chief principle of us dominating economic order, this principle gave her power over the international market and this domination has led her towards a closely interrelated domination of international economic order". in order to maintain her national security and her position as a sole hegemon it is important for her to be in charge of oil around the globe as mentioned by noam chomsky that in order to dominate the economies of whole eu and other economic giants it is necessary to be in charge of oil (barsamian, 2005). similarly another scholar ian rutledge portrays his view that "flitching oil" is not the only us target however "controlling oil" is the second part of his motive (rutledge, 2005). a lot of research has already been done on issues like security, defense and military use in energy sector however focus over relation between military, defense, economy and energy has been least worked on. the theorists in past have worked over the economic motive as one of the main reason behind the us engagements in the energy rich regions around the globe however less focus has been given on other economic and political factors that has engaged us in energy game. even so, the main purpose of the current research is not to fill the theoretical slit missed by scholars regarding the investigation of energy resources and its precincts. however it's an effort to find a link between the various components of the trio developed as a consequence of energy, economy and national security. the purpose of the current research is to stumble on the energy factors responsible for the paradigm shift in the traditional concept of national security. although the transformation of the concept is a global issue however, the main focus will be united states of america. keeping in view the gap left in the previous literature economically, the research further aims to put an effort to find out how securing energy trade can be significant for us "dollar hegemony" or "dollar imperialism". previously, much less focus has been given to the post 9/11 era as the scholar's center of attention have been post wwii and post cold war era however, the present study has been framed with in the post 9/11 era. review of economics and development studies, vol. 6 (2) 2020, 381-390 384 in contemplation to reach the ambition of the study the descriptive study research has been followed as it aimed at casting light on challenges posed for the relationship between energy and national security. qualitative and interpretative research methods have been used to find out the various political and economic factors and their contribution in linking economy, energy security and national security. for this purpose secondary data collection techniques have been used. books, scholarly articles, archival data and other internet resources along with the reports published by different related institutions have been used. the soundness of the concept is tested by scrutiny of data by implementing the hegemonic stability theory. the theory explains that existence of a hagemon is critical for the smooth running of the global system. us being a hagemon is putting an effort to restore its political as well as economic stability in order to remain as the sole dominant player of the globe. in this respect the most vital for her is to secure her energy supplies that will directly make her existence safe as a hagemon. moreover the theory further helps to explain the stability of "dollar hegemony" or "dollar imperialism" in the global energy market. the approach further helps to understand the transformation of "power struggle" to "energy struggle". the paradigm shift has altered the term "power struggle" to "energy struggle". the theory thus helps to analyze the "energy struggle" and its implications on national security. similarly, the link between different forms of security like national, economic and political and energy will be better understood by keeping in view the realist concept of security (waltz, 1979, pp. 102-128). in this respect, it can be considered that the struggle for resources and power play related to energy security can be well understood through the structural frame work of hst and its realist counterpart. 2. importance of energy for us since its discovery oil has been a significant component in the global politics and economics. the significance of this component is also seen noteworthy in the us course of actions during her 3 episodes of political and economic supremacy. "the cold war era", "post cold war" and "post 9/11 era". although the global scenario changed in post 9/11 era, yet the main ingredient of the state interest is the secure supply of energy. the us engagements in various regions from time to time, like "operation desert storm" to "operation liberation iraq", "the rebellion movements in middle east", "the syrian issue", "the yemen issue", "internal strife" "political instability", the armed incursion in afghanistan, it is not less than the "energy security" purpose behind it. 3. national security energy feeds the conflict and fierceness, it gives strength to the means of warfare and it lay down power play in politics and economy. henry j in 2002 has well defined the same concept," us is highly dependent on energy sources and in case of any accident or any other reason disruption in supply line may cause a major threat to national security and if such interruption is caused by any unlikely group or state it can be rightly called as " caucus belli". hence this issue is not just limited to economy it is a concern of national security"(hyde, 2003). "pentagon" is a huge consumer of oil as explained by michael klare, "the pentagon is itself one of the environment's largest oil consumers, overshadowing 134 million barrels of oil in 2005, and this consumption is equal to as much as the whole swedish nation consumes. the middle east and the gulf have dominated the oil supplies, more and more dependence on oil is making the us more and more vulnerable to multiple hazards" (klare, 2008). us oil consumption pattern along with the cis and middle east reserve position is explained through the given graphs: review of economics and development studies, vol. 6 (2) 2020, 381-390 385 us oil consumption pattern thousand barrels per day source: bp statistical review 2019 proven oil reserves (thousand million barrels) source: bp statistical review 2019 keeping in view the above mentioned demand and supply pattern, the usa is meeting more then 1/4 of her energy requirements from middle east. this demand and supply pattern has placed her national and economic security under threat. by obsessing for oil she is sustaining states massing up "weapons of mass destruction", funding rogue states and making terrorist organizations more strength full (tyler, 2010). in other words this obsession of oil is a major bursary to the extremists, who can use this funding to buy weapons that can be used against the western states particularly usa. the condition is thus declared as a concern for national security of states (luomi, 2011). likewise, oil trade with the pro authoritarian unfriendly regimes shall also place the national security of state at stake. this link between energy and security has been openly admitted by bush management in 2001, "in our current course, after 20years america will import nearly two or three barrels of oil, thus increasing dependence on foreign authorities that do not always are interests of america at heart, this can only direct us to increased military involvement in zones that delivers petroleum to usa" (yergin, 2006). it can be said that energy security and national security are linked directly with each other. any annoyance in energy security may lead to obliteration of national security. north america 0 10000 20000 30000 2010 2011 2012 2013 2014 2015 2016 2017 2018 north america south+central america 0 200 400 600 800 1000 1998 2008 2017 2018 middle east proven oil reserves cis proven oil reserves review of economics and development studies, vol. 6 (2) 2020, 381-390 386 4. the oil weapon during arab israel conflict (yom-kipper) west supported the israel cause; repulsively in order to penalize the west the arab oil producing states stopped the flow of oil to all the western states particularly in 1973. although there was a political motive behind this embargo however it resulted in a price hike of oil (rutledge, 1999). the devastating results of embargo were enough to prove the political as well as economic power of the natural resource they had in their hands. in 1973, the scenario gave birth to the idea that this natural resource is a dangerous "weapon" that has the ability to shake the international market. these oil impediments are painstaking issue as they produce over lapping impact; this phenomenon is well explained by the given stacked venn. staked venn explaining over lapping impacts of embargo the availability of "oil" is not an issue but its presence in unfriendly hands is a matter of unease for the states. the scenarios has acquired the shape of a haunting night mare for usa, the given venn describes the factors behind this. venn describes the nightmare factors 5. the price outburst energy security national secuirty extremists can use oil embargo to black mail west and usa use of oil by the terrorist or extremist organisations . price explosion supply cut off oil embargo non availability of any suitable alternative extreme dependace on oil from rogue states oil obsession has given rise to something equivalent to economic atomic bomb review of economics and development studies, vol. 6 (2) 2020, 381-390 387 another impact of the oil embargo was a sudden price hike. since the first price hike the international oil market failed to achieve in stability in price conservation. the impact of this instability in price is equally disastrous for global economies. the severity of such price hike episodes have resulted in economic death and even the vanishing of some states from the global map. given figure explains yearly price instability in international market (schneider, 2004). graph indicating price hyke over years these uncertainties and price instability led to the accumulation of dollars from around the globe to the oil producing states making them more powerful and others more vulnerable (tatom, 1993). the rising political instability in middle east, fear of iranian nuclear program was thought to be a cause of international market oil supply disruption (lee, 2002). the rise of fear of oil shortage in global market led to a concept of "fear premium" that consequently transferred further 3 trillion dollars to oil producer's banks. this scenario decreased the dollar's purchasing power. this situation slowed down the global trade and clients uphold their money in the global economic markets. it also led to increased prices in goods and services thus leading to a low growth rate in economy. economically, when oil is the chief input of international market any sudden price amplification may lead to a disturbance in supply and demand of goods and services. secondly elevated prices may show the way towards a cheaper business activity as soaring prices may lessen the retail ability of the buyer resulting in an induced suspicion regarding the future (fernald, 2005). 6. shielding dollar dominance in global energy market the asian times presents henry lieu's view, "world trade business is now a game in which the america is printing dollars and the remaining world is manufacturing stuff that dollars can pay for" (liu, yeung, 2008). ww2 led to a shaggy economic situation for europe and japan while on the other hand united states of america had a stable economy with highest manufacturing capacity. this rapidly mounting economy augmented her energy consumption that reached to its peak during 1970s and 80s that further resulted in a threefold increase during 2000s. as mentioned earlier most of her oil imports were coming from the gulf states, amongst these oil producing states saudi-arabia was dominating the energy trade. she was the only state amongst opec nations who is not answerable for her production percentage. she can be called as "swing producer" means she has the ability to elevate or cut the oil production any time thus resulting in trembling of international oil market. the import pattern forced usa to secure her currency's position in international market. in this 0 100 200 2003 2004 2006 2008 oil price $ per barrels oil price $ per barrels https://www.frbsf.org/economic-research/publications/economic-letter/2005/november/why-the-jump-in-oil-prices-has-not-led-to-a-recession/ review of economics and development studies, vol. 6 (2) 2020, 381-390 388 context, a furtive agreement was penned between these two states, the agreement states that saudiarabia will trade oil in dollars and in return usa will protect her regime (tracy, kumar, 2004). this situation enhanced the significance of dollar in the international market consequencely states have to buy dollars first and then buy oil. in case if any state fails to earn desired amount of dollars they have to look to international institutions like imf plus world bank. whereas the scenario for usa will be different she just has to produce $ and purchase oil. this state of affairs resulted in dollar's increased stipulation in the global market thus making it a "fiat currency" (vasudevan, 2009). all these dollars are deposited in us banks, till 2012 around 8 trillion of assets in usa were held by foreigners. moreover all loans and grants by international institutions are released in dollars. this situation gave strength to the dollar resulting in domination of international politics and economics by usa (tracy, kumar, 2004). it can be said that dollar is more an "oil-backed" than being "gold-backed". this state of affairs is known as "dollar hegemony", "dollar imperialism"(chinn, 2008). although the "dollar hegemony" seems unchallenged however the trade of oil in any other currency may result in serious threats and challenges for usa. in last few decades such efforts have been seen in the oil market as few states have decided to transfer their currency reserves to "euros". iraq is the first drop of rain in this respect followed by iran, russia, libya, venezuela and china. in iraq "oil for food program" has also been dealt in euros that is followed by conversion of 10,000,000,000 $ funds to euros. the same step has been taken by iran and china in 2003 and they started converting their forex reserves either to local currency, gold or euros. according to a report of business weak, "the tale is similar across the globe. money traders say that institutes as diverse as bank of canada, people's bank of china, and central bank of taiwan are giving more weight to the european currency. they forecast, by the end of this year, the euro could account for 20% of universal foreign currency reserves, which today amount to a $2.4 trillion. currency specialists say the wide u.s existing account deficit and the euro still higher, in the coming two to four years" (kirshner, 2008). other factors that have contributed to the declining role of dollar is the "usa patriot act" and the blame of financing the terrorist states and groups, muslim financer states are transferring their reserves to europe due to fear of seizure of their accounts. similarly the us hostile policies towards iran have also abandoned oil trade in dollars at the regional level. europe and opec states own around 45% of global trade with each other as compared to us thus leading to a current account deficit for her (kirshner, 2008). this high percentage of trade between eu and opec will definitely be preferred in euros, iran and russia is the examples in this respect. (kumar, tracy 2004). any shift of petro-trade from dollars to euro may lead to death knell of us economic and political supremacy. in order to continue her existence as an economic and political hagemon it is significant for her to secure "dollar hagemony" over global energy trade. for this purpose domination over energy resources is considerable otherwise us economic and national security will be under siege. 7. conclusion the article has sketched the significance of energy for the modern economies and its link with the national security around the globe. from author's own perception the notion of energy security has altered the concept of national security particularly for united states being a hagemon. the emergence review of economics and development studies, vol. 6 (2) 2020, 381-390 389 of concepts like price explosion, oil as a weapon and the existence of dollar imperialism in the international energy market has developed a global energy trio that can be considered as a major cause of paradigm shift in national security. the trio is not only limited to economies or energy sources, it thus involves many transnational and national actors like multinationals linked with the energy sectors, terrorist groups, rogue or authoritarian states of persian gulf and other energy rich areas, disruptions in global energy markets, weapons of mass destruction, development of nuclear weapons by the alleged states like iran, rivalry in persian gulf and the apprehensions of marine energy trade routes. this trio is thus capable of exerting a direct influence on the economic growth thus capable of directly threatening the national security. through the lens of "hegemonic stability theory" it is analyzed that in order to maintain her position as a global economic and political hagemon it is important for united states to accept this national security paradigm shift and its link with the energy security. although she has already engaged herself in middle east and central asia however, she still has challenges to face like origin of thirsty dragon china as an economic giant, the instability in the gulf, domestic issues in central asia and the domination of russia on major energy routes in central asia. under this situation it is recommended for us that the national security council must administer in association with other us departments like foreign affairs, defense, and energy in order to achieve the desired objectives in the regions. she must try to maintain friendly relations with states like china in order to get rid of russian oil passage sway. soft policy will be more appreciable in the regional scenario, while on the other hand tackling cars with the hard policy can create a mess for us. similarly, she must need to show improvement in relations related to anti-terrorism and intelligence with the states in the area of concern. law enforcement agencies have to be restructured and their performance has to be revised. likewise, in order to maintain her "dollar hegemony" in the energy market she has to revise her sanction policy specifically against states like iran. such bans usually lead to secret trade with the rivals like russia and china. usually this secret trade of oil and other commodities is done in local currency or gold, a recent trio of india, china and russia in this respect has already been seen. in order to secure her dominance she has to overcome her conflict and must uplift sanctions towards iran as this new relation will be helpful in accessing the energy transportation routes that are not under russian influence. although the current research has touched upon few most important factors responsible for the national security paradigm shift however few areas still needs further research like the episode of 9/11 has given rise to many new concepts for example, origin of new ideological wars, it is a general conception that the notion of ideologies has vanished however the 9/11 episode has bought it back, the world is again moving towards jihad and crusades however these are not over spread of religious ideologies its over economic resources. secondly, another term has been originated following the 9/11 episode, "imperial crusades" as mentioned by alexander cockburn and jeffrey st. clair. 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(2008). dollar primacy and american power: what's at stake?. review of international political economy, 15(3), 418-438. review of economics and development studies vol. 5, no 4, 2019 623 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads mediating impact of emotional intelligence competencies on the relationship of conflict management styles and service quality of higher education: a pakistan based study 1 umair asghar, 2 khalid pervaiz 1 ph.d. scholar (management sciences) at hajvery university lahore. umairscholar@gmail.com 2 dean, faculty of management sciences, hajvery university lahore. khalidpervaiz@hu.edu.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 this quantitative, investigation was to explore mediating impact of emotional intelligence competencies on the relationship between conflict management styles and service quality of higher education. in this study, multi-stage cluster sampling technique was applied for the selection of sample whereas spss was used for testing the hypothesis which measures the direct and indirect effect. structured questionnaires were used for data collection which comprised of 5 points likert scale. the findings proved partial mediation to emotional intelligence competencies between the relationship of conflict management styles and service quality of higher education which indicates higher the emotional intelligence competency the staff has, would have the higher the ability to resolve day to day conflicts. the research suggests that faculty and staff training programs, workshops to improve service quality would help to narrow the gap between customer’s perceptions and expectations. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords conflict management styles; emotional intelligence competencies; service quality of higher education jel classification: d74, d79, l15, l19 corresponding author’s email address: umairscholar@gmail.com recommended citation: asghar, u. and pervaiz, k., (2019). fragility mediating impact of emotional intelligence competencies on the relationship of conflict management styles and service quality of higher education: a pakistan based study. review of economics and development studies, 5 (4), 623-636 doi: 10.26710/reads.v5i4.879 1. introduction the educational system in pakistan is not very encouraging (rasool, 2007). we cannot change the education system to change the quality of educational services. this persistent low quality problem has made the institutional environment more hostile and violent. the causes of poor quality differ greatly in services and products. the main causes of service failure are lack of leadership, care or kindness, lack of training or anxiety (sallis, 2014). higher education institutions (heis) are therefore crucial to meeting the challenges of a rapidly changing world (haider, 2008). according to luan (2011), the higher education sector has not responded to the needs of society and the economy for two decades because it is growing rapidly, neglecting and neglecting the quality assurance mechanisms cited (hilman et al., 2017). another group of scholars argue that educational services are generally intangible and measurable because outcomes translate into student transformation, characteristics, knowledge and behavior (tsinidou et al., 2010). due to the consistency of the product, the quality of services is a major concern for education. education has been shown to play a key role in the creation of human capital. this will increase people's http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 624 productivity and strength by creating talented employees who can steer the economy toward sustainable economic development. a team of social scientists supports the idea of "client", ie. they clearly agree with the ambiguous idea of "customers" in education, but that does not diminish the power to provide the simplest services offered to buyers. in this way, there is a change in the paradigm from 'student' to 'client' in universities and public services to corporate or managerial approaches (wong, 2008). to understand the concept of quality of service in educational institutions, it is divided into two parts; 1) academic quality and 2) non-academic quality. this study deals only with the non-academic quality of university services. the process of improving the quality (quality of service) of the higher education subsector can provide us with a rational strategy for what affects the quality of service in higher education. the main objective of the study is to identify the mediating effect of emotional intelligence on the relationship between conflict management styles and the quality of higher education services, in order to understand the importance of emotional intelligence in higher education. this study bridges the customer perception gap of service quality in education which distinctively sought to improve the service quality of higher education in the light of emotional intelligence competencies to handle day to day conflicts among faculty to improve service quality. this study is a unique pursuit to find a mediating impact of emotional intelligence competencies evaluated by faculty as internal customers. this investigation answers the following research question:  whether conflict management styles have a significant positive impact on the service quality of higher education institutions of pakistan?  whether emotional intelligence competencies mediate between the relationship of conflict management styles and service quality of higher education institutions of pakistan? 2. literature review 2.1 conflict management styles (cm) conflict is inevitable in individuals, it is the natural result of human interaction, relationships between individuals or organizations become incompatible or inconsistent when two or many of them crave a similar resource, which is rare when they do not share behavioral preferences about their joint actions or with completely different attitudes, values, beliefs and skills (rahim, 2017). some scholars believe that conflict management is better than avoiding it (algert & watson, 2002), as reported in (din et al., 2011). conflict, if managed well, will cause growth and development. people have one dominant style when dealing with conflict, although different conflicts require different methods (din et al., 2011). academic administrators must address all structural issues, increase employee frustration, which would have negative consequences (galtung, 1964), as outlined in (kriesberg, 2007). universities have unclear lines of authority, role, and communication. structural problems and limited resources are key sources of conflict in the identified university context (holton, 1998). rahim and bonoma (1979) and rahim (2002) categorize conflict management into two main dimensions; i.e. concerns for oneself and concerns for others. these five completely different types of conflict management avoid, threaten, dominate, integrate, and engage. it is a proven fact that conflict can have positive or negative consequences. if the impact of a conflict is positive, then it is known as a deliberate conflict, and if the impact is negative, then it is known as a negative conflict. similarly, methods of conflict management have negative or positive consequences. many of these methods are also non-functional, while some are also effective (afzalur rahim, 2002). 2.2 conflict management and service quality of higher education the academic institution is ripe for conflict (hartman & crume, 2014; kantek & gezer, 2009). because these institutions value free thinking, they are academic autonomy, conflict is inevitable and therefore can arise in any combination of students, teachers, and administrators (bess & dee, 2014). in particular, if educational institutions do not give their leaders sufficient time to resolve conflicts, this will take up to review of economics and development studies vol. 5, no 4, 2019 625 25% of the time of the manager suffering from a significant human resources outflow. conflict must vary depending on the environment. factors such as location, campus, authority, student population, and unions will all influence the conflict. conflict resolution methods are as complex as the conflict itself (garcia, 2015). social conflicts increase diversity, friendliness and complexity. the current context of the university is much more difficult than before and so many conflict and governance forums are longer than before (fatile & adejuwon, 2011). another researcher also added, as others, conflict is inevitable and considered a standard phenomenon. there are total human relationships in all styles of organizations (ahamefula, 2014). educational institutions are experiencing quite different styles of conflict, despite the recent advances in conflict management theory, if the conflict is managed properly, it will become a positive experience (khamkhong & tayco, 2018). the researcher thus uses a tool previously developed by rahim (1995) roci-ii in the following areas. these are:  integration (high concern for self and high concern for others);  domination (high concern for self and low concern for others);  obligation (low concern for self and high concern for others);  avoidance (low concern for self and low concern for others), and  compromise (intermediate levels of concern for both self and others) 2.3 emotional intelligence competencies (ei) according to gardner's theory of intelligence (1983), the emotional person is an important measure of organizational behavior. there are seven different forms of intelligence. five of them consist of cognitive knowledge that can be functional for scientists. the practice of two of them interpersonal and intrapersonal confirms the high chance of success. the first type of intelligence describes the ability of someone to define their criteria and use them throughout their lives. gardner's theory plays an important role in psychology and health care. in addition to gardner, there are three key theories in the field of emotional intelligence: bar-on, salovey, mayer, and goleman. however, with the decline in emotional intelligence, academic success and stimulating communication seem to be diminishing. people with greater emotional intelligence are more interested in their own and other emotions. coates and anderson's (2007) study concludes that self-confidence, commitment, sensitivity, tenacity and inspiration are the most important indicators of emotional intelligence among successful higher education leaders. after an in-depth review of the literature, it was concluded that a range developed (sala, 2002a) could be used that could address the need to assess the emotional intelligence competencies of four clusters;  self-awareness  self-management  social awareness  relationship management 2.4 relationship of conflict management styles and emotional intelligence confidence, creative ideas and behavior and adaptability are the emotional skills needed to effectively manage conflicts. according to barry (1999), efficiency, creativity, and productivity are, in themselves and not supported by emotional control detrimental to conflict management. this is because negotiation and conflict resolution require emotional interactions (barry, 1999). successful conflict managers must therefore be able to evaluate the emotions of all stakeholders in order to achieve maximum success. the different dimensions of emotional intelligence are critical aspects of successful decision making, leadership, transparent communication, teamwork, relationships, loyalty and innovation within jobs and companies (cooper & sawaf, 1997). by adding intent and emotion to rational assumptions, thomas (1992) builds on his model of conflict. he explained this: "i tried to integrate emotions into the conflict process and to show how emotions respond to both types of thinking and how they add more force to conflict episodes" (thomas, 1992). as emotional expression is the key to individual and organizational growth, conflict management procedures need to recognize the impact of emotional conflict outcomes review of economics and development studies vol. 5, no 4, 2019 626 (bar-on, 1997). the link between emotions and emotional intelligence and conflict resolution is a popular course. 2.5 the concept of service quality of higher education institutions (sqhe) "quality is difficult to outline and is an elusive concept" (sallis, 2014). another group of scholars even describe quality as a "slippery concept" (pfeffer & coote, 1991). according to crosby (1994), “quality meets the requirements; poor quality is a disagreement". according to juran (1988) quality is suitable for use. deming (1982) argues that higher quality leads to higher productivity, which in turn leads to longterm competitiveness. the purpose of the organization is to optimize the whole system, not to optimize the individual subsystems. in the context of higher education, the exact concept of quality is not an easy job. the term quality education is considered infamous (pounder, 1999, 2001) and is a very vague and tainted term (cheong cheng and ming tam, 1997). the definition of quality, adopted by most analysts and policy makers in the classroom, is a definition of proportionality for the goals of pro-rectors and more. (1989) further cited (sahney et al., 2006). exhibitors of this approach claim that quality is intelligent because it looks at the purpose of the product or service. quality is judged by the extent to which the product or service meets its goals (green, 1994; tight, 2012a). according to deming (1982), deviations or discrepancies in customer service are disappointing and affect the reputation of companies. this is one of the main causes of poor quality. according to aldridge and rowley ( 2001), interest in the organization becomes clear when students recognize the quality of the institution's services and the standardized learning environment provided by intellectual educators, appropriate training and infrastructure services, their interest will be reserved explicitly. students are motivated by both the academic ability and the administrative effectiveness of the institution (aldridge & rowley, 2001). maintaining other important quality services in education, such as well-maintained libraries, security systems, medical equipment, multimedia classes and equipment, conference arrangements and collaboration among administrative staff, assumes a significant job in of help for training and development (dick & basu, 1994; oliver, 2014). service organizations have achieved the need to treat their employees as internal customers and deliver them with high quality services to each external customer. as per juran (1988), internal customers are directly involved in the production of a product or service. the task of management is therefore to systematically improve the system with the input of employees and management. according to the literature, education mainly affects the services sector. after reviewing the literature researcher hypothesizes; h1: there is a significant positive relationship between conflict management styles and service quality of higher education. h2: there is a significant positive relationship between conflict management styles and emotional intelligence competencies. h3: there is a significant positive relationship between emotional intelligence competencies and service quality of higher education. h4: emotional intelligence competencies mediate between the relationship of conflict management styles and service quality of higher education. 3. conceptual framework of the research in the light of the above discussions, the researcher infers the accompanying conceptual framework for the investigation. review of economics and development studies vol. 5, no 4, 2019 627 figure: 1 conceptual framework of the research 4. methodology quantitative method was used for this investigation; only 18 universities gave positive response from 62 universities / institutes of punjab province. the analytical unit in this study was all faculty members either full-time or visiting were considered of the punjab province of pakistan. the instruments were composed of a 5-point likert scale. for this empirical study, "spss" was used for the analysis and it was found the best to know the direct and indirect effects to achieve the objectives of the study. in addition, the taro yamani (1967) formula was used to calculate the sample size as shown in (singh and masuku, 2014). formula to calculate sample size, n=n/1+n (e) ² n= sample size, n=population size, 5876 faculty members of 18 universities e = sampling error 5% or margin of error sample size = 375 by keeping 20% (expected nonresponse rate) suggested by expert we added 20% of 375, so it became 450 faculty members. 5. results and discussion 5.1 demographic statistics the descriptive statistics data part of the questionnaire comprises five questionnaires. in this study 460 questionnaires were sent to the faculty members of randomly selected universities in punjab, pakistan, only 12 questionnaires were misplaced and could not be delivered to the faculty members. finally, 448 questionnaires were returned after continues and massive follow-ups due to doubt of frivolous responses and missing information, 29 responses were discarded. a total of 419 useful questionnaires were utilized for data analysis with a response rate of 91%. the table of demographic information received regarding the gender, age, education, experience and marital status from the respondents is as under. table 1: gender wise response rate frequency percent valid percent cumulative percent male 313 74.7 74.7 74.7 female 106 25.3 25.3 100.0 total 419 100.0 100.0 20-25 years 10 2.4 2.4 2.4 26-31 years 36 8.6 8.6 11.0 32-37 years 133 31.7 31.7 42.7 review of economics and development studies vol. 5, no 4, 2019 628 38-43 years 105 25.1 25.1 67.8 44-49 years 82 19.6 19.6 87.4 50 & above 53 12.6 12.6 100.0 total 419 100.0 100.0 graduation 81 19.3 19.3 19.3 masters 150 35.8 35.8 55.1 ms/m.phil. 172 41.1 41.1 96.2 ph. d 16 3.8 3.8 100.0 total 419 100.0 100.0 1-5 years 270 64.4 64.4 64.4 6-10 years 140 33.4 33.4 97.9 11-15 years 8 1.9 1.9 99.8 16 & above 1 .2 .2 100.0 total 419 100.0 100.0 married 382 91.2 91.2 91.2 un-married 37 8.8 8.8 100.0 total 419 100.0 100.0 5.2 mean, min, max, and standard deviation of cm styles, ei competencies and sqhe table: 2 shows highe rscore, means greater usage of cm styles. the avoiding style is the largest (m = 3.25), followed by the compromising and dominating style (m = 3.24). as per the analysis relationship mgt. (m= 3.94) is the frequently used emotional intelligence competency among all followed by social awareness (m =3.88), and, lastly tangibility remained highest (m = 3.36) followed by responsiveness and assurance (m =3.28) as the most responded items among all. table: 2 descriptive statistics constructs n item min max mean sd integrating 419 7 1 5 3.18 1.119 obliging 419 6 1 5 3.17 1.133 dominating 419 5 1 5 3.24 1.134 avoiding 419 6 1 5 3.25 1.076 compromising 419 4 1 5 3.24 1.099 self awareness 419 17 1 5 3.84 1.052 self mgt 419 22 1 5 3.78 1.042 social awareness 419 8 1 5 3.88 1.055 relationship mgt 419 4 1 5 3.94 1.037 tangibility 419 4 1 5 3.36 1.141 reliability 419 5 1 5 3.22 1.163 responsiveness 419 4 1 5 3.28 1.170 assurance 419 4 1 5 3.28 1.225 empathy 419 5 1 5 3.22 1.175 valid n (listwise) 419 review of economics and development studies vol. 5, no 4, 2019 629 5.3 composite reliability and cronbach’s alpha the value of composite reliability and cronbach’s alpha should be greater than 0.7(hair et al., 2014). table: 3 reliability analysis cronbach's alpha composite reliability conflict management 0.937 0.952 emotional intelligence 0.927 0.948 service quality of higher education 0.946 0.958 in our research value of all variables are meeting the threshold value except and composite reliability also showing reliable results for all the variables as shown in table: 3. 5.4 collinearity statistics/ variation inflation factor (vif) there is criterion value for the values of vif according to which if the value is less than 5 i.e. (vif <5), and a value if close to 1 indicates that there is no collinearity (joseph, 2014). table: 4 multicollinearity test variables collinearity statistics tolerance vif conflict mgt. styles emotional intelligence competencies .952 .952 1.050 1.050 dependent variable: service quality of higher education table: 4 shows the inner vif values of all the variables except the dependent variable because it doesn’t show the value of the dependent variable. the values of cm, ei are less than 5 and near to 1 which shows that these values lie within the threshold value thus showing that there is no multicollinearity and showing the goodness to fit. 5.5 test of the hypotheses in order to test the hypotheses, multiple regressions and the correlation method were utilized. multiple regressions were used in order to identify the relationship between two or more independent variables whereas the pearson correlation was used to test the relationship between one dependent and one independent variable. 5.6 pearson correlation test the results of the relationship between the independent variables and the dependent variable are shown in table:5 below. the result indicates that there is a significant relationship between is a significant positive relationship between conflict management styles and service quality of higher education, the result is r = .559** while p < .01. there is significant relationship between conflict management styles and emotional intelligence competencies, the result is r = .219** while p < .01 and, lastly significant positive relationship found between emotional intelligence competencies and service quality of higher education, r = .309** while p < .01. review of economics and development studies vol. 5, no 4, 2019 630 table : 5 correlations cm ei sqhe cm pearson correlation 1 .219** .559** sig. (2-tailed) .000 .000 n 419 419 419 ei pearson correlation .219** 1 .309** sig. (2-tailed) .000 .000 n 419 419 419 sqhe pearson correlation .559** .309** 1 sig. (2-tailed) .000 .000 n 419 419 419 **. correlation is significant at the 0.01 level (2-tailed). 5.7 mediator regression analysis multiple regressions were performed to assess the direct and indirect relationships within the proposed model and the stated hypotheses. testing of the stated hypothesis was done so in accordance with baron and kenny’s (1986) was given preference over (preacher & hayes, 2004) mediation technique because baron and kenny’s approach fulfills the need of investigation and hypothesis testing. a variable functions as a mediator when it meets the following conditions: (a) variations in levels of the independent variable significantly account for variations in the presumed medication (i.e., path a), (b) variations in the mediator significantly account for variations in the dependent variable (i.e., path b), and (c) when paths a and b are controlled, a previously significant relation between the independent and dependent variables is no longer significant, with the strongest demonstration of mediation occurring when path c is zero. h1: there is a significant positive relationship between conflict management styles and service quality of higher education. in order to assess this relationship, a regression analysis was conducted and provided an r2 = .312, p < .05. there is a significant positive relationship between conflict management styles and service quality of higher education (β = .586*, t = 13.757, p < .05). as per the criteria t-statistics value must be above than 1.96, and p-value needs to be lesser than 0.05 (hair, hult, ringle, & sarstedt, 2014), therefore hypothesis: 1 was not rejected because it is meeting the threshold criteria. review of economics and development studies vol. 5, no 4, 2019 631 figure: 3 depicts the direct relationship (note: bold represents a significant finding). h2: there is a significant positive relationship between conflict management styles and emotional intelligence competencies. in order to assess this relationship, a regression analysis was conducted and provided an r2 = .048, p < .05. there is a significant positive relationship between conflict management styles and emotional intelligence competencies (β = .204*, t = 4.581, p < .05). as per the criteria t-statistics value must be above than 1.96, and p-value needs to be lesser than 0.05 (j. f. hair et al., 2014), therefore hypothesis: 2 was not rejected because it is meeting the threshold criteria. figure:4 depicts the direct relationship (note: bold represents a significant finding). h3: there is a significant positive relationship between emotional intelligence competencies and service quality of higher education. in order to assess this relationship, a regression analysis was conducted and provided an r2 = .095, p < .05. there is a significant positive relationship between emotional intelligence competencies and service quality of higher education (β = .348*, t = 6.642, p < .05). as per the criteria t-statistics value must be above than 1.96, and p-value needs to be lesser than 0.05 (j. f. hair et al., 2014), therefore hypothesis: 3 review of economics and development studies vol. 5, no 4, 2019 632 was not rejected because it is meeting the threshold criteria. figure: 5 depicts the direct relationship (note: bold represents a significant finding). h4: emotional intelligence competencies mediate between the relationship of conflict management styles and service quality of higher education. in order to assess this hypothesis baron and kenny’s (1986) criteria for mediation was followed. path a (conflict management styles and emotional intelligence competencies) was assessed through a regression analysis and revealed an r2 = .048, p < .01. the first requirement, a significant path a was supported (β = .204**, t = 4.581, p < .01). next, the second requirement for mediation, path b (emotional intelligence competencies and service quality of higher education) was assessed through a regression analysis and revealed a significant relationship (β = .348**, t = 6.642, p < .01). finally, the third criterion for mediation, path c (when paths a, and b are controlled for, a previously significant, path c [as supported in hypothesis 1] will be non-significant) was assessed through a regression analysis and revealed significant relationship path c (β = .541, t = 12.72, p < .01). as per the criteria t-statistics value must be above than 1.96, and p-value needs to be lesser than 0.05 (j. f. hair et al., 2014), therefore it was concluded that hypothesis 4 was not rejected as the data supported which means emotional intelligence competencies partially mediates the relationship between conflict management styles and service quality of higher education. figure:6 depicts the significant indirect relationship (note: bold represents a significant finding), review of economics and development studies vol. 5, no 4, 2019 633 emotional intelligence competencies mediate between the relationship of conflict management styles and service quality of higher education. table: 9 coefficients model unstandardized coefficients standardized coefficients t sig. b std. error beta 1 (constant) .683 .202 3.378 .001 cm .541 .043 .516 12.720 .000 ei .221 .046 .196 4.845 .000 a. dependent variable: sqhe 6. scope and limitations the survey instruments applied in the current research study contained multiple-choice items and did not include open-ended questions. as a result, the argument of the study findings is limited to a reliable source of the chosen research instruments. consequently, in this research study, only student perception was considered to gauge service quality of higher education when rating provided by faculty as internal customer particularly to nonacademic departments and the demographics remain restricted to one province (punjab). 7. recommendations researchers can replicate current research at other larger private and state universities, institutes in different provinces of pakistan. an additional consideration for future research would be to carry out a qualitative approach, and future researchers could consider the extended role of environmental or cultural factors on the relationship between faculty and students. and furthermore, there is a requisite to replicate this research model to the faculty’s perception of academic and nonacademic quality of higher education institutions of pakistan. 8. conclusion the fallouts of this study seem most probable agreeing to the culture or norms of pakistan as faculty, most often chosen avoiding style, followed by dominating and compromising style for handling conflicts and commonly used relationship management followed by social awareness among emotional intelligence competencies, while repeatedly chosen tangibility followed by assurance among all dimensions of service quality. it would be relatively practical for higher education institutions to offer policies, practices, and procedures, clearly formulated, understood well, humane and fair to provide quality services and support to all departments to improve the satisfaction of internal and external customers. the institutions would respond to customers’ perceptions by narrowing the gap between expectations and perceptions through training of faculty and staff. the research also suggests that higher the emotional intelligence competency would increase the capability to resolve day to day conflicts to improve the service quality of higher education in pakistan. references afzalur rahim, m. 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(2008). entrepreneurialism from the ground up: entrepreneurialism, innovation, and responsiveness in a start upuniversity. doctoral dissertation. review of economics and development studies vol. 5, no 4, 2019 636 review of economics and development studies, vol. 6 (2) 2020, 257-266 257 economic empowerment of women in socio-cultural perspectives in federally administrative tribal area (pakistan): a case study of kurram agency a fazal e wahid, b mehnaz jaffri, c hamid ullah, d muhammad irshad khan mohmand a assistant professor, department of economics, islamia college peshawar, pakistan email: eco_wahid@yahoo.com b m. phil. scholar, department of economics, islamia college peshawar, pakistan email: jaffri313@gmail.com c assistant professor, department of management sciences, islamia college peshawar email: hamidullah@icp.edu.pk d ph.d. scholar, management sciences, quartaba university of science & information technology, pakistan email: irshadmohmand@gmail.com article details abstract history: accepted: 11 may 2020 available online: 15 june 2020 the study investigates the indicators that effect women’s economic empowerment. the data collected through questionnaires, with 350 sample dimension. pragmatic results expose that enrolment of female in education, decision making power, decision concerning household asset and economic opportunities have positive effected on wee and significant. participation in economy & educational retrieve hold positive and insignificant effect on wee due to limited access to educationalists, masculinity basis, male dominancy etc. problems of socio-cultural, poverty have negative and insignificant effect on wee because of cultural restrictions; female workers are bounded to teaching field & functioning in their own lands. finally, the recommendations of the study are that free access should be given to women for education regardless of ethnicity, sexual partialities and may be allowed to work along their male equivalents in order to raise the level of economic empowerment of women. the same will subsequently enhance their potential for elimination of poverty, illiteracy and self-reliance in the society. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attribution-noncommercial 4.0 keywords: economic empowerment of women, enrolment of female in education, decision making power, decision concerning household asset, economic opportunities, socio-cultural issues, gender partialities, poverty and male dominancy jel classification: m54, m59, p36,p39 doi: 10.47067/reads.v6i2.201 corresponding author’s email address: eco_wahid@yahoo.com 1. introduction in social, economic, and political views, empowerment has a huge deal of varieties. generally, it is used to trace association indoors families between orphaned clusters and other societies globally (miraj, 2k16). women’s empowerment as a state in which females dominate equivalent rights of household strength, educational facilities, and political rights. empowerment of women have basic center of magnetism and antedate huge entrée to information, economic facilities and decision making according to economy and politics (kabir, 2005). the main determinant for empowerment is education review of economics and development studies, vol. 6 (2) 2020, 257-266 258 which is dynamic for improvement of human awareness, giving equal opportunities and status to achieve their objectives and anticipated aims (bushra, 2k13). education make women empower more effectively which would eradicate sexual difference, increase social and economic returns, advance their potentials, change their life style, produce healthy and educated children, shrink fertility and mortality rate, increase participation of women in labour market which decrease the deficiency of resources. education is the key to participation of females in decision, active revolution and significant vocation of upcoming generation. institutional expansion and socialization of women show important role in women economic participation and their decision making. poverty is the factor that avoid women from education, consuming nutrition foods, retrieving multiplicative healthcare facilities. decreasing gender inequality and encouraging women education are amid the crucial approaches to reduce material and infant mortality (abase, 2k15). if female is educated, take rational decision and well knowledgeable, then empowerment would become supplementary significant. the basic feature of women progress is women economic empowerment which can lead female to several economic resources and springs mental relaxation from being poor women. it makes free from condition like food crises, scarcity, accidents in the household and deaths etc. economic empowerment increases the participation of females in labour market, reduces poverty and increases production in all segments. when women are empowered then they can support their family & can preserve their living standard through access of education and other basic needs (sohail, 2k14). the reasons behind disempowerment of women are deficiency of control of productive resources, insufficient access to institutional causes of credit due to lack of ability to provide security, sexual discrimination, male dominancy and deficiency of skills which affects the right of females in economic participation and political activities. in general, lack of public responsiveness, inadequate control over family earnings and elimination in family’s decision, education of girls & sale or purchase of assets. in the study area, the reason behind disempowerment is male dominancy and socio-cultural issues i.e religious system, civilization and the most challenged is that women cannot share their feelings and wishes to express themselves. 2. literature review there are numerous studies which discussed women empowerment but only few examine the true concept of women empowerment. the pragmatic research showed that women education, participation of women in economic, social justice, economic opportunities, gender inequality, women having bank account and labour force participation increases empowerment of women. noreen and khalid (2k12) discussed women empowerment by explaining the effect of women education, decision of parents and women having any assets or property. the main factor for women’s empowerment is female education but early age marriage and poverty are the factors which reduces girl’s education. sandhys (2k15) also discussed women empowerment by female’s education with special focus on rural areas according their decision and women’s empowerment. meraj (2k16) discussed women empowerment by focusing political and socio-economic factors of women empowerment. the report presented female’s age, schooling’s level, status of working, monthly income, resources to economic credit, female bank account, educational and health resources, investment in different saving organizations, residence’s area and positive and statistically significant. bushra (2k15) studied factors on women empowerment. the study found the content of women’s education, women’s participation in economic, economic opportunities, poverty & women review of economics and development studies, vol. 6 (2) 2020, 257-266 259 having personal bank account increases women’s empowerment. awan and iqbal (2k15) studied that empowerment of women means self-dependent, freedom and their resources to opportunities. women’s empowerment is improving their situation in authority structure of the society. butt (2k14) discussed females at indigenous frames’ level and women’s role in indigenous representation. indigenous representation is one of the valuable instruments to empower women. in pakistan, females are empowered but they are not empowered in actual standings. females at common level are usually blocked, consequent and seen minimum concerned about their rights, role in political affairs. for real women’s empowerment, resident illustration should be reinforced by expressive contribution and greater percentage of women. this stage can be used as a nursery to train them for rational level of politics and to have their due rights. akinsanya (2k11) create that females are followers in the growth of economy, but there are some determinants which disturb the contribution of women in economy. the report presented that women’s education conveying empowerment to females which can face challenges that are encountered in working & realizing other societal roles and occasions. 3. methodological framework there are several approaches to women empowerment, but no one equally select categories, however only express the reasons of disempowerment of females. all these approaches are conscious raising approach, integrated approach, economic empowerment approach which discussed batlewala (1985). increasing women’s educational institutions and having universal acceptance of female’s education frequently indicate to growth of economics, which absolutely affected on women’s contribution in all level of professional & reducing household’s responsibility and family strength. this theory was presented by heckman et al. 1980 and theory says that innovation procedure demand on behalf of labour which providing superior chances in all fields for women. lewis theory of surplus labour in 1954 says that rapidly transferring of labour from agricultural sectors to manufacturing sectors indicate to obtain survival earnings, revenue of modern sectors exceeds & additional produces economic growth. the overall process of moving of labour and modern sectors economic growth leads to generate the development of country’s economy. mostly females are working in agricultural sectors, uncertainty they will be authorizing then they transfer to other sectors and rate of female workers will be increase. the transferring of women from agricultural sectors to further divisions will not affect the efficiency of agricultural sectors but will increase the productivity of all other sectors where organize females from agricultural sectors (todaro and smith 2009). 3.1 model wee = women economic empowerment a = area (control variables) ag = age (control variables) ea = educational access (control variables) me = mother’s education (control variables) fes = female enrolment in schools sci – socio-cultural issues dmp = decision making power review of economics and development studies, vol. 6 (2) 2020, 257-266 260 p = poverty drfs = decision regarding family strength eo = economic opportunities ep = economic participation ßₒ is the intercept and β1, β2, β3, β4, β5, β6, β7, β8, β9, β10, and β11 representing slopes of regression equation and ε is error term. 3.2 data sources: primary data has been collected through random cluster sampling. the sample size is 350 which has been selected based on educational & population level. the data has been composed through questionnaires by interview schedule, females of the age 20-45 have been interviewed. all married/unmarried, working/non-working, educated/uneducated females have been included which compare their values of empowerment index in kurram agency. 3.3 econometric models data examined through different statistical methods. main variables in this study have contain sub variables due to the lack of robust data available at district level for a number of indicators which are significant to evaluate economic empowerment of women. selected the sub-variables of each main variable and then find independently. different tests have applied on data which is correlation, histogram, q-q plot, multi-collinearity, durban-watson, heteroscedasticity and then used linear regression analysis on different variables on economic empowerment of women in kurram agency. 4. empirical results results of linear regression analysis in table showed that some variables have significant impact on women economic empowerment. the analysis showed that educational access, fes & me have positive effect on economic empowerment of women according to economic theory. coefficient of ea showed that 1 unit increase in ea has improved women economic empowerment by 0.034 units and statistically insignificant because limited ea are irrespective of ethnicity, sexual biases etc. in the research zone. the coefficient of mother education showed that 1 unit increase in me has increased women economic empowerment by 0.037 units but statistically insignificant due to male dominancy in the study area. coefficient of fes showed that 1 unit increase in fes has increased women economic empowerment by 0.13 units and statistically significant. sci negatively have effects on women economic empowerment which showed inverse connection among them and significant at 5%. its coefficient showed that 1 unit increase in sci have reduced women economic empowerment by 0.169 units. it showed that the research area will be as deeply rigid. dmp has positively effects on women economic empowerment and significant at 5%. coefficient of decision making showed 1 unit increase in dmp will get 0.119 units increase women economic empowerment. poverty has negative effect on women economic empowerment and its coefficient showed that 1 unit increase in p has reduced economic empowerment of women by 0.73 which is according to economic theory but insignificant because poor families have financial limitations which results in reduction of female’s education, other basic requirements. drfs has positive effects on women economic empowerment & statistically significant. coefficient of drfs showed that 1 unit increase in decision has improved women economic empowerment by 0.136 units. economic opportunities have positive effects on wee and statistically significant. coefficient of eo showed that 1 unit increase in opportunity has increased women economic empowerment by 0.11 units. ep has positive effects on women economic empowerment and statistically insignificant due to limited access to education regardless of ethnicity, sexual biases etc. coefficient of ep showed that 1 unit increase in ep has increased women economic empowerment by 0.012 units. review of economics and development studies, vol. 6 (2) 2020, 257-266 261 r 2 is 0.414 showed that 41% of variation in women economic empowerment is due to descriptive variables. f-statistic showed that model is significant at 5% level. value of durban-watson test 1.610 which showed that there is no series autocorrelation issues. table 4.1: results of linear regression model i unstandardized coefficients standardize d coefficients t sig. std. error const 2.328 .421 5.534 .000 a -.100 .051 -.093 -1.970 .050 ag -.061 .027 -.100 -2.258 .025 ea .034 .049 .042 .690 .491 me .037 .033 .053 1.124 .262 fes .130 .042 .199 3.085 .002 sci -.169 .045 -.167 -3.728 .000 dmp .119 .050 .135 2.390 .017 p -.073 .048 -.078 -1.518 .130 drfs .136 .035 .179 3.890 .000 eo .110 .042 .153 2.646 .009 ep .012 .043 .014 .286 .775 r 2 = 0.433 adjusted r 2 = 0.414 f-statistics = 23.442 pro(f-stat) = 0.000 durbin-watson = 1.610 4.1 correlation correlation test has used to check the correlation among the dependent and independent variables of primary data. the result of correlation test showed that fes, sci, p, dmp, eo and ep have highly correlated with women economic empowerment. table 4.2: correlation test wee fes sci dmp p drfs eo ep wee 1 .461 ** -.330 ** .482 ** -.370 ** .387 ** .501 ** .349 ** fes .461 ** 1 -.242 ** .420 ** -.382 ** .228 ** .500 ** .392 ** sci -.330 ** -.242 ** 1 -.289 ** .206 ** -.130 * -.291 ** -.200 ** dmp .482 ** .420 ** -.289 ** 1 -.433 ** .324 ** .562 ** .360 ** p -.370 ** -.382 ** .206 ** -.433 ** 1 -.310 ** -.452 ** -.449 ** drfs .387 ** .228 ** -.130 * .324 ** -.310 ** 1 .300 ** .350 ** eo .501 ** .500 ** -.291 ** .562 ** -.452 ** .300 ** 1 .451 ** ep .349 ** .392 ** -.200 ** .360 ** -.449 ** .350 ** .451 ** 1 4.2 normal q-q plot this test has been used to check the normality of descriptive variables. when dots of data are near to diagonal line its mean data are normally distributed but when points are away to diagonal it means review of economics and development studies, vol. 6 (2) 2020, 257-266 262 data are not normally distributed. in this graph, mostly dots are near to diagonal line it means present data are normally distributed. 4.3 histogram histogram also used to check the normality of data but here we check the standard deviation value, because there is no value of p in primary data. in this graph the standard deviation value is 0.984 which is greater than 5%. when the value of standard deviation is greater than 5% its mean that we cannot reject our null hypothesis that residuals are in a normal distribution. this graph also showed normal distribution its mean we accept our null hypothesis. 4.4 linearity in this test we check the linearity of model. in the below graph, the blank boxes showed the review of economics and development studies, vol. 6 (2) 2020, 257-266 263 linear relationship between economic empowerment of women and fes, sci, p, dmp, eo. ep. 4.5 durban-watson test in table 4.3, value of durban-watson test is 1.610 which is approximately equal to 2, it means that there is no autocorrelation. table 4.3: durban-watson test model r r 2 adjusted r 2 std. error of the estimate durbinwatson i 0.658 0.433 0.414 0.69867 1.610 4.6 multi-collinearity the variance inflation factor has been used for finding the multi-collinearity problems. if the value of vif is greater than 5 its mean there is multi=-collinearity problems between explanatory variables, but if its value is less than 5 means there is no multi-collinearity problem. in table 4.4, the value of vif of each variable is less than 5, showed that there is no multi-collinearity among explanatory variables. table 4.4: vif ar ag ea me fes sci dmp p drfs eo ep 1.340 1.162 2.245 1.335 2.467 1.202 1.903 1.578 1.256 1.990 1.520 4.7 heteroscedasticity in regression model, the residuals have a constant variance. to check the residuals we used heteroscedasdicity. in below graph, random scattered points are all around zero. vertical width is being constant throughout values showed that the residuals have a constant variance. review of economics and development studies, vol. 6 (2) 2020, 257-266 264 4.8 residuals residual has zero means is also the assumption of regression model. in table 4.5, the mean of the residual is equal to zero, so it satisfied the assumption of linear regression model. table 4.5: residuals statistic min max mean std. dev n predicted value 1.5427 4.3860 2.8549 .60056 350 residual -2.17074 2.10512 .00000 .68758 350 std. p-v -2.185 2.549 .000 1.000 350 std. residual -3.107 3.013 .000 .984 350 5. conclusion women empowerment is totally dependent on female’s education. other determinants like economic opportunities, economic participation, decision making power have major contribution to empowerment of women. but sci and p have adversely affected on empowerment of women. the study concluded that educated women can take their decision regarding career, marriage, number of children health care etc., it means that educated females are more empowered as compared to uneducated women. the analysis concluded that females have very less decision power in the study zone. economic empowerment improves with increase in freedom to decision regarding their career, family strength, marriage etc. in the study area, the main reason of disempowerment of women are socio-cultural issues. 6. recommendation review of economics and development studies, vol. 6 (2) 2020, 257-266 265  education is the right of women and it is very important for women’s empowerment. equal opportunities could be provided to females of fata. public strategies with respect to females education as well as technical education may be applied and increased number of seats for women in other educational institutions outside fata and same standard of institutions may be made available in the study area.  mother’s education has direct bearing on economic empowerment of women, which can subsequently educate their children and can participate in economic growth of the family as well.  society should implement strategies for conductive working environment of females. should be encourage to work along their male counterparts in every field of life.  all women specially educated females should be accessed taken into confidence in any decision regarding their career, marriage, family planning etc. therefore women should be made part of all decision making process.  in the study area, government should open girls schools in every village, so as even poor family may easily send their children to school. thereby when girls get education then they will be able to take decision about their career and can achieve economic self-confidence and can take part in uplifting the economic statues of their family. references awan, a.g. & iqbal, (2015). role of 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unu-wider, united nations university (unu). todaro, m., & smith, s, (2009). economic development (10th ed.). boston: addison wesley. undp (1996). human development report. new york: united nations development programme. review of economics and development studies, vol. 6 (1) 2020, 97-106 97 analysis of trade competitiveness of pakistan cereal products in global perspective a muhammad shahid maqbool, b tahir mahmood, c saddam hussain, c muhammad ashraf a lecturer department of economics, government post graduate college gojra, pakistan b associate professor, department of economics and business management, university of veterinary & animal sciences, lahore c m. phil. scholar of economics, bahauddin zakariya university, multan article details abstract history: accepted 24 march 2020 available online 31 march 2020 the present study has measured the cereal export competitiveness of pakistan in global economy by utilizing different indices of revealed comparative advantage (rca): balassa index (rca), vollrath index (rca#), revealed symmetric comparative advantage index (rsca), revealed import advantage index (rma), revealed trade advantage index (rta) and net export index (nei). the data have been obtained from the international trade center un-comtrade statistics for cereal exports of pakistan from 2003-2018. the findings of the analysis illustrate that pakistan had a comparative and competitive advantage in the cereal sector. further, the findings of the rta index show that pakistan’s cereal exports had also a net comparative advantage. based on current findings, pakistan needs to concentrate on production and exports of cereals. the brand name marketing of pakistani rice with a special focus on better quality and improved market access can enhance the country’s share of the cereal sector in the global market. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: competitiveness, cereal exports, revealed comparative advantage, revealed trade advantage jel classification: f10, f19, p33, p45, q17, q27 doi: 10.47067/reads.v6i1.187 corresponding author’s email address: shahidmakbool@gmail.com 1. introduction cereals are the most important food grains and a rich source of minerals, vitamins carbohydrates and protein. wheat, rice, maize, barley, oats, and sorghum are the most grown cereal crops in the world. these crops are grown in larger quantities to meet the food requirements of a huge share of the world population. the cereal foods provide 50 percent of calories and 46 percent protein in an average diet as reported by agricultural and food organization. wheat and rice are the most vital crops covering over nearly 52 percent of the world cereal production. fao estimates that wheat, rice and maize account for more than 75 percent of all grain production in the world. in some developing economies, the grains in the form of rice, wheat or maize constitute the livelihood of the majority. in developed countries, cereal consumption is moderate and varied but still considerable. in addition, onethird population of the world takes food from wheat (zhou, 2009 and janvry, 2010). the total annual review of economics and development studies, vol. 6 (1) 2020, 97-106 98 cereal production is about 2500 million tons in the world (tonini and cabrera, 2011).fao’s forecast for 2019 world cereal production is pegged at an alltime high of 2714 million tons and it is almost 57 million tons higher than the reduced outturn in 2018. world cereal utilization in 2019-20 is forecast at 2709 million tons and it is recorded of around 21 million tons higher than in 2018-19 utilization. on the other hand, world trade in cereal in 2019-20 is forecast at 416 million tons as compared to 411.6 million tons in 2018-19 level and it is 4.5 million tons higher. in developed economies, cereal crops are machine harvested while in developing economies, a variety of harvesting methods are used in cereal cultivation depending on the labor cost, from small combines to hand tools such as cradle (harwood, 2019). crop production systems have changed rapidly over the past century and have resulted in considerable increased crop yields, but have also produced undesirable environmental side effects (hobbs et al., 2007). factors such as the green revolution have led to impressive progress in increasing cereal yield over the last few decades. the progress is not equal across all regions. the continued progress depends on maintaining agriculture and education. the cultivation of cereals varies widely in different countries and depends partly on the development of the economy. the production of cereals also heavily depends on the quality of soil along with rainfall, irrigation and production techniques (rockstrom et al., 2007). table 1 export and import growth of cereal products of pakistan in the world from 2003-18 (billions us$) years creop percentage change creow percentage change tep percentage change crip percentage change 2003 0.67 39.24 16.05 0.01 2004 0.63 -5.02 45.30 15.43 12.59 -21.59 0.03 141.62 2005 1.10 73.72 44.42 -1.93 16.05 27.53 0.16 361.56 2006 1.15 4.70 50.00 12.56 16.93 5.50 0.13 -18.13 2007 1.24 7.97 72.56 45.10 17.84 5.35 0.11 -16.02 2008 2.51 101.58 104.68 44.27 20.28 13.68 1.69 1423.45 2009 1.82 -27.30 78.49 -25.01 17.55 -13.43 0.33 -80.43 2010 2.28 25.03 84.69 7.89 21.41 21.98 0.07 -77.87 2011 2.81 23.15 117.49 38.74 25.34 18.36 0.10 31.67 2012 2.06 -26.59 120.51 2.56 24.61 -2.88 0.09 -4.76 2013 2.18 5.83 123.77 2.71 25.12 2.06 0.23 153.93 2014 2.21 1.39 120.42 -2.71 24.72 -1.59 0.29 22.80 2015 1.94 -12.17 104.15 -13.51 22.09 -10.65 0.10 -63.90 2016 1.72 -11.59 96.67 -7.19 20.53 -7.04 0.15 42.02 2017 1.75 2.01 103.79 7.37 21.88 6.55 0.09 -37.02 2018 2.33 32.78 110.13 6.10 23.63 8.01 0.13 39.87 sources; authors own calculations, where creop= cereal export of pakistan, creow= cereal export of world, tep= total export of pakistan, crip= cereal import of pakistan table 1 explains the import and export growth in the cereal sector of pakistan from 2003-2018 to the world economies. an increasing and decreasing trend of export and import was seen during the selected time period. the growth of cereal export, in 2008, increased by 101.58 % due to the increase in the production of rice, while in the same year the wheat import witnessed a massive increase from argentina. major cereals produced in pakistan include wheat, rice, maize, and barley. the aggregate cereal output is estimated at approximately average level of 42 million metric tons in 2018 that is 6 percent below the record level in 2017. the cereal production for pakistan was 44.1 million metric tons in 2017. the cereal production grew significantly from 10.8 million to 44.1 million metric tons increased review of economics and development studies, vol. 6 (1) 2020, 97-106 99 at a rate that reached a maximum of 17.9 percent in 1986 and decreased to 3.63 percent in 2017. the cereal production remained in the range of 10.8 44.1(million metric tons) and showing fluctuation in the production during the period. the cereal exports consist mostly of rice and wheat. in 2019, rice export is forecast at 3.9 million tons close to the previous five year average, while wheat exports in 2019 are forecast to increase from last year’s average level reflect strong sale in recent period. between may and october 2018 cumulative wheat export from pakistan were estimated at 850000 tons considerably higher than previous five year average the wto agreement on agriculture (aoa) is the first step toward establishing the “fair and market oriented agriculture trading system and rules regarding market access, domestic support and export subsidies. all the domestic support to the farmers is subject to the specific rules of wto defined in aoa. it was implemented over a six year period for developed countries and for developing economies within a ten year period.this agreement was launched in doha in 1995 and is ongoing. pakistan has a great potential to produce and exports its agriculture products. the government of pakistan initiated the strategic trade policy framework (stpf) 2015-18 aiming at export promotion by enhancing global trade competitiveness and innovations (gop, 2016). the effective utilization of natural and financial resources can help pakistan to reap the benefits of comparative and competitive advantage (sultana et al., 2009). pakistan always not in a position to give subsidies to its farmers in any shape but in exceptional circumstance, provide subsidies. pakistan has comparative advantage in the important crops like wheat, rice, cotton and sugarcane crops but due to lack of infrastructure and modern facilities, pakistan is not in a position to export these crops. in this context, pakistan local farmers are unable to export their agricultural product because the government of pakistan does not give any subsidies to its local farmers. on the other hand, the developed countries are giving subsidies to their farmers to enhance their exports. it has created artificial competitive edge to developed countries which hurts the export prospects for pakistan economy. a favorable environment with suitable climatic conditions can increase the comparative advantage of pakistan in cereal production and exports. pakistan needs to redesign its agricultural strategy and trade policy in the wake of wto agreements. the effective utilization of natural and financial resources can help pakistan to reap the benefits of comparative and competitive advantage (sultana et al., 2009). the aims of the present study is to measure the export competitiveness of the cereal sector of pakistan in the global market by using a set of revealed comparative advantage indices. these indices proffer valuable measures to analyze ca on the bases of actual trade performance. the present study also utilized relative import advantage index to measure the comparative advantage in the cereal imports as pakistan also import cereal from other economies. moreover, this study employed relative trade advantage index to measure net trade advantage in the cereal sector. the current analysis will be beneficial to boost the export competitiveness of cereal as the global markets have transformed into far more competitive than ever before. as no valuable research employing these indices has been carried out yet to measure the cereal export competitiveness of pakistan, and it will be highly valuable and dynamic for the future prospective also. 2. review of literature the method of revealed comparative advantage has been utilized by a number of studies to measure the competitiveness of the economies, and balassa and marcus (1989) also employed the rca index to examine the competitiveness of usa and japan during 1967-1983. haddad (2000) employed intra-industry index and rca to measure the export competitiveness of the middle east and north africa in the global market from 1985-1997. the findings of the analysis illustrated that the diversifications in the selected exports were nominal and export competitiveness was not observed in review of economics and development studies, vol. 6 (1) 2020, 97-106 100 the absence of these diversifications. the rca index was also employed by mehmood (2000) to examine the competitiveness and specialization in the exports of malaysia. the results of the study illustrate that competition among the asean countries was affected by free trade agreements and new producers. the method of rca was utilized by benders and li (2002) to measure the export competitiveness of latin american and asian economies from 1981-1997. the findings of the analysis illustrated that the ca of east asian economies decreased as compared to selected countries. thorne (2005) measured the export competitiveness of cereal production in the eu member countries by utilizing the data from farm accountancy data network (fadn) for the period 1996-2000. the study applied profitability as a measure of competitive performance while the value of output, cost of production and partial productivity indicators was investigated as sources of competitive performance. the competitiveness of the uk cereal sector was examined by thelwell and ritson (2006) and concluded that the supply chains in the economy of the uk generally have a better size structure providing opportunities for economies. blazejczyk-majka and boczar (2011) investigated the space between oil crops and cereals in terms of significance in the world from 1961-2007. the findings illustrate no competition for space between both groups of crops in the selected period. voicilas (2014) analyzed the cereal market of romania at the regional and national levels during 1990-2012. the results indicated that romania is less developed and incompetent in the cereal sector. the export competitiveness of ex-yugoslavian countries including bosnia and herzegovina, croatia, macedonia, montenegro, serbia and sloveniawas examined by muamer and snjezana (2015) by employing michaely index, rca index and herfindahl-hirschman concentration indices. the findings illustrated that the export competitiveness of selected economies is generally unsatisfactory during 2006-2013. xu et al. (2018) examined the role of china and india in textile competition in the us market from 2000-16 by utilizing competition index. the results showed that both india and china had a high comparative advantage in the import trade of clothing and textile raw materials in the usa. the relationship between comparative advantage and increasing return to scale was examined by pflüger and tabuchi (2019) by utilizing a simple integrated ricardo–marshall framework. different indices of revealed comparative advantage were employed by kim (2019) to measure the competitiveness of indian clothing and textile sector in the usa. the results highlighted that india had a ca in the clothing and textile sector during 1991-2017. as far as pakistan is concerned sharif et al. (2015) employed the rca method to measure the export performance of cereals from pakistan during the period 2007-2013. the findings of the analysis indicate that pakistan had a ca in the cereal sector. a study conducted by akhtar et al. (2013) to examine the export competitiveness by employing a set of rca indices and concluded that pakistan had a ca and competitive advantage in the horticultural exports. the method of rca and johansen cointegration test were employed by ahmad and kalim (2014) to gauge the export performance of the clothing and textile sector of pakistan. the results indicated that the textile sector is significantly contributing to the export performance of pakistan while these two sectors did not get the advantage of quota elimination policy. rehman et al. (2015) employed ols and johansen’s co-integration test to measure the impact of major field crops of pakistan on the growth of agricultural gdp during 19502015.the findings showed that the output of rice, wheat and cotton has a significant impact on the share of agriculture in gdp. the rca index was utilized by abbas and muhammad (2016) to examine the export competitiveness over europe and asia from 2003-2013. the findings illustrated that pakistan had a higher ca in the low value-added commodities. waheed and abbas (2017) investigated the trade competitiveness of pakistan by employing rca from 2003-14 and concluded that the agricultural sector had a high ca in cereals, raw cotton, fruits and raw leather. the export potential and competitiveness of pakistani rice in the international market were examined by irshad et al. (2018) by utilizing a panel gravity method during 2003-2016. the results elucidated that pakistan had a high competitive advantage and ca in the rice export in the world. another study carried out by javed et al. (2018) to review of economics and development studies, vol. 6 (1) 2020, 97-106 101 measure the competitiveness in the agricultural exports of pakistan by using the nominal protection coefficient (npc). the study concluded that pakistan had a ca in cotton, beef, and vegetables, while competitive disadvantage in basmati, mutton, dairy products and sugar. lateef et al. (2018) conducted a study to measure the export competitiveness of the agricultural sector of pakistan by employing rca method during 2003-2013 and discovered a strong ca of pakistan in the cotton, rice and tangerines. 3. methods and material the study collected the data from the international trade center un-comtrade statistics for cereal exports of pakistan from 2003-18. it utilized such indices of revealed comparative advantage namely balassa index (1965), revealed symmetric comparative advantage index (rsca) (larsen 1998), net export index (nei), revealed import advantage index (rma), vollrath index(rca#) (1991) and revealed trade advantage index (rta) to measure the cereal export competitiveness of pakistan in the global market. 3.1 revealed comparative advantage index liesner (1958) was the first who introduced the rca index which was utilized by balassa (1965) to measure the competitiveness (balassa, 1965). the rca of exports is described as the ratio of exports of a country in a specific product group to its share in total merchandise exports (balassa and noland, 1989). rca ∑ ⁄ ∑ ⁄ source; erkan and sarıçoban, 2014 where, = pakistan’s cereal exports, ∑ =pakistan’s total exports, = world’s cereal exports, ∑ total exports of world. to check the power of ca, balassa index of rca classified into four classifications. the study also utilized lnrca to check the comparative advantage of cereal and lnrca > 0 illustrates ca, while lnrca < 0 indicates comparative disadvantage (faustino, 2008). table 2: classifications of rca sr. no classifications of rca interpretations 1 0 < rca ≤ 1 indicating no ca 2 1 < rca ≤ 2 highlights weak ca 3 2 < rca ≤ 4 describing moderate ca 4 rca > 4 showing strong ca source; hinloopen, 2001 3.2 net export index balassa (1965) employed net export index (nei) for measuring the competitiveness of the export commodities. this study has also employed this method explained as net exports divided by the sum of exports and imports for a specific manufacturing industry or economy (balassa and noland, 1989). nei method is used to scrutinize whether a country has got specialization in the exports for a specific product group (as net-exporter) or in imports (as net-importer) (erkan and sarıcoban, 2014). the absolute value of |nei| reveals the share of inter-industry trade relative to the total global trade of the specific product group, and (1-|nei|) therefore shows intra-industry trade (vixathep, 2011). nei= x-m/x+m source; erkan and sarıcoban, 2014 review of economics and development studies, vol. 6 (1) 2020, 97-106 102 3.3 vollrath index vollrath (1991) introduced his index to measure the comparative advantage and competitiveness. further, it eliminates the problem of double-counting in global trade, and vollrath index is explained as; rca# = { (∑ ) } { (∑ ) *(∑ ∑ ) (∑ )+ (∑ ) } source; khai et al., 2016 where, pakistan’s cereal exports, ∑ = pakistan’s total exports, ∑ = world’s cereal exports, ∑ ∑ = world’s total exports. 3.4 revealed symmetric comparative advantage the current study solves the dilemma of upward biased values of the rca utilized larsen index (1998) which adjusted the values of the rca index in symmetric values. the position of these adjusted rca values lies between +1 and -1. larsen (1998) described his index as rsca, which is expressed as; rsca = source; erkan and sarıcoban, 2014 3.5 revealed import advantage index the revealed import advantage index (rma) is described in the same way as the revealed export advantage index (rca) but involves imports of the economy. the value of rma less than 1 indicates a competitive advantage, while higher than 1 shows competitive disadvantage in imports. rma= ∑ ⁄ ∑ ⁄ source; akhtar et al., 2013 where, = imports of cereal of pakistan, ∑ = total imports of pakistan, = cereal imports of world, ∑ = total imports of the world 3.6 relative trade advantage index the relative trade advantage index (rta) highlights the net trade advantage or a trade disadvantage of an economy. it is measured by taking the difference between the revealed export advantage index (rca) and revealed import advantage (rma) index. rta = rca – rma = ∑ ⁄ ∑ ⁄ ∑ ⁄ ∑ ⁄ source; akhtar et al., 2013 review of economics and development studies, vol. 6 (1) 2020, 97-106 103 3.7 product mapping the study developed “products mapping” by utilizing the nei and rsca indices (widodo, 2009). the cereal sector of pakistan can be classified into four groups a, b, c and d as described in table 3. table 3 group; a ca net-exporter country (rsca >0 and nei >0) group; b ca net-importer country (rsca >0 and nei <0) group ; c comparative disadvantage net-exporter country (rsca <0 and nei >0) group; d comparative disadvantage net-importer country (rsca <0 and nei <0) source: widodo, 2009 4. results and discussion the present study employed different indices of comparative advantage to measure the competitive and comparative advantage in the cereal sector of pakistan during 2003-18. figure 1 highlights the trend of different revealed comparative advantage indices of pakistan’s cereal sector from 2003-18. in table 4, the findings of the analysis reveal that pakistan had a ca in the cereal sector having the rca values greater than 1 during 2003-18 (sharif et al.,2015). the findings also illustrate that pakistan achieved and maintained the higher ca in this sector having rca index greater than 4 from 2003-18. in addition, the inrca indicates the ca in above-mentioned sector up to 2018 (abbas and waheed, 2017). the results showed that cereal revealed comparative advantage has both an increasing and decreasing trend under analysis. the factors responsible for the decline in the competitiveness are high tax rate, high prices, production cost and shortage of electricity. the deficiency of research and development (r&d) was also one of the major determinants behind the decline in the cereal competitiveness of pakistan(irshad et al., 2018). table 4 revealed competitive advantage indicators for cereals in pakistan from 2003-2018 years rca rsca lnrca rca# rma rta │nei│ 1│nei│ 2003 7.9275 0.776 2.070 8.35 0.190 7.73 0.958 0.042 2004 10.112 0.820 2.314 10.73 0.402 9.71 0.895 0.105 2005 15.962 0.882 2.770 17.47 1.336 14.63 0.744 0.256 2006 16.272 0.884 2.789 17.77 0.972 15.30 0.794 0.206 2007 13.296 0.860 2.587 14.45 0.576 12.72 0.836 0.164 2008 18.878 0.899 2.938 21.9 5.351 13.53 0.195 0.805 2009 16.339 0.885 2.794 18.52 1.509 14.83 0.693 0.307 2010 18.97 0.900 2.943 21.67 0.324 18.65 0.938 0.062 2011 17.044 0.889 2.836 19.48 0.319 16.73 0.934 0.066 2012 12.773 0.855 2.547 14.07 0.298 12.47 0.915 0.085 2013 13.318 0.860 2.589 14.73 0.780 12.54 0.807 0.193 2014 14.099 0.868 2.646 15.65 0.887 13.21 0.771 0.229 2015 13.934 0.866 2.634 15.45 0.343 13.59 0.899 0.101 2016 13.852 0.865 2.628 15.28 0.492 13.36 0.843 0.157 2017 13.437 0.861 2.598 14.75 0.255 13.18 0.900 0.100 2018 17.182 0.890 2.844 19.34 0.355 16.83 0.895 0.105 review of economics and development studies, vol. 6 (1) 2020, 97-106 104 source; author’s calculations by utilizing itc data the rsca index trend described that pakistan raised specialization in the export of cereal. the positive values of rsca highlight the ca in the cereal during the selected period. the vollrath index (1991) was also employed to measure the competitive advantage in the cereal sector. the vollrath index (rca#) illustrates the competitive advantage in the cereal sector during the above mentioned period (irshad et al.,2018). the revealed import advantage (rma) shows that pakistan had a competitive advantage in the years 2003, 2004, 2006, 2007 and 2010-18, while the competitive disadvantage in the years 2005, 2008 and 2009. the positive rta index describes that pakistan had a net ca in this sector (riaz and jansen, 2012 and javed et al., 2018). pakistan is the net-exporter of cereal sector during analysis. also, the absolute values of nei indicate that pakistan remained the net exporter of the cereal sector throughout the selected period. the absolute values of the net export index │nei│ highlight the portion of inter-industry trade in the cereal sector of pakistan, while 1-│nei│ depicts the portion of intraindustry trade. according to the ‘product mapping’ cereal sector of pakistan lies in the group a. figure 1 revealed comparative advantage indices drawn against selected years 5. conclusion the current study aims at investigating the cereal export competitiveness of pakistan in the global market from 2003-2018. the study employed several indices of revealed comparative advantage such as balassa index (rca), rca#, rsca, rma, rta and net export index to measure the export competitiveness. the data have been calculated from the international trade center for cereal exports of pakistan. the results of the study highlight that pakistan had a competitive and comparative advantage in the export of cereal throughout the selected time period. moreover, the study also observed that pakistan has a net comparative advantage in this sector. the brand name marketing of pakistani rice with a special focus on better quality and improved market access can enhance the country’s share of the cereal sector in the global market. references abbas, s., & mohammad, s. d. 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(2009). barley production and consumption. in genetics and improvement of barley malt quality (pp. 1-17). springer, berlin, heidelberg. review of economics and development studies vol. 5, no 3, 2019 521 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads role of cinema in identity construction in india and pakistan after partition 1947 1 ausima sultan malik, 2 raja nasim akhtar 1 phd scholar, foundation university rawalpindi, pakistan, ausima12@gmail.com 2 dean, english department, foundation university rawalpindi, pakistan, rnakhtarraja@fui.edu.pk article details abstract history revised format: 30 june 2019 available online: 31 july 2019 this paper reflects only part of a broader research project in which narratives between india and pakistan have been analyzed as propagated through the medium of film. existing literature highlights that events from 1947 partition between india and pakistan, have been used methodically by establishments on both side to recontextualize the realities of partition and violence associated with that, blaming each other for being the cause, suppressing much of what actually transpired, evading any clear position, while promoting triumphant discourses of nation, sacrifice and socioeconomic insinuations. the focus of this paper is to examine how visual modality as explained by machin and mayr (2012), plays a part in shaping opinions and narrating events. employing multimodal critical discourse analysis (mcda) to analyze the discourses realized by a partition based movie, this paper highlights that the way „other‟ is depicted to experience partition, and has been represented to suit the „self‟s‟ account. the representation is a vital part of the legitimization of one particular discourse of partition, used to marginalize other likely discourses in both countries. the study has implications for understanding post-colonial and post-separation socio-cultural development in pakistan and india. the outcomes of the study can be utilized to identify the ways both countries can use media and narratives to enhance socio-cultural ties and policies; thereby welfare of people on both sides. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords legitimization, narrative, multimodal critical discourse analysis jel classification: z1, i3 corresponding author‟s email address: ausima12@gmail.com recommended citation: malik, a. s. and akhtar, r. n. (2019). role of cinema in identity construction in india and pakistan after partition 1947. review of economics and development studies, 5 (3), 521-530 doi: 10.26710/reads.v5i3.660 1. introduction this paper explores how modality is pivotal in carving opinions and narrating events (machin, d. and mayr, a., 2012). the presupposition that „nonverbal semiotic phenomenon‟ (hodge and kress,1988) is marked by modality system including „realistic‟ and „nonrealistic‟ type of representations, contributes towards narrating a version of history that suits the „self‟s version of the events in the indian movie pinjar(2003) which is based on partition. discourses of conflict and separation are circulated and legitimized not only through verbal and written texts, but also through visual semiotic resources. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 522 this paper highlights the way „other‟ is portrayed to experience partition, employing multimodal critical discourse analysis (mcda). the representation in this context is pivotal for the legitimization of one particular discourse of partition, while marginalizing other possible discourses in both countries. this paper analyses visual modality in the movie pinjar. the examination employs machin and mayr (2012) model. the analysis revealed that the visual modality markers contribute towards the overall meaning potential and are significant in exposing the underlying structures and ideologies within a text. sidra karamat, muhammad muzaffar, and alishan shah (2019) argue that the „politico-religious nationalism‟ by “extremist” description deliberates “cultural or spiritual identity to be different from those of most, presumptively unfamiliar and cheating” and argue that it “led to the formation of a tiered perception of citizenship.” (karamt, s.; muzaffar, m.; shan, a., 2019) in pakistan; india is not very different from pakistan. the construction of identity is therefore, vital for this research. the movie depicts both sides i.e. india and pakistan, neutrally on the surface; however, a close analysis reveals the binaries between „self‟ and „other‟, created through the visual modality legitimizing the „self‟s account and creating discourses which propagate the „self‟s ideology, and signifying a specific identity of the „other‟. 2. visual communication and modality hodge and kress (1988) distinguished between 'reasonable' and „unrealistic‟ types of portrayal, as modality framework which is set apart by signs that can be moved to “nonverbal semiotic marvel”. it works as a “directing capacity for the recipients'‟ provenance of exact portrayal (pollak, a., 2008). eight modality markers for static visual portrayals, have been listed by kress and leeuwen (1996) which incorporate, colour saturation, colour cadence, colour variation, brightness; „contextualization' which is on the scale from a detailed one to a blank background; 'portrayal' on a scale from vague and abstractions to a detailed one; 'depth' is on a scale from maximum in-depth view to exclusion; and 'lighting' on a scale from high key lighting to no light. kress and van leeuwen (1996) describe modality as reliability of the image, which is a critical part of multimodal cda. modality is characterized by kress and van leeuwen as “the truth value or credibility of (linguistically realized) statements about the world” (1996). regardless of the way that starting points of the word are linked with semantics, kress and van leeuwen explain modality (for example exactly how near a picture resembles the real) as an imperative element of visual communication. when the modality is high, a visual is viewed as real as well as genuine. figure 1: coherence of image, language and typography into single communicative act (leeuwen, 2004) van leeuwen (2004) gives ten reasons why visual communication should be given more significance by the linguists. one of the reasons that he gives is that a new name should be given to the speech acts, and they should be called „communicative acts‟ which should be comprehended as “multimodal micro-events” where all existing symbols come together to define their „communicative intent‟ (leeuwen, 2004). he gives example of a kitchener recruitment poster (1914) and explains in detail how image, language and typography, combine to create a single communicative act. (see figure 1) review of economics and development studies vol. 5, no 3, 2019 523 modality described by machin and mayr (2012) via examination of a cosmopolitan commercial highlights that via staged nature and the iconography of the visual, it can be identified by the analysts that whether or not, components have been put intentionally with the visual and to portray any specific identity, that stacks the picture with specific qualities instead of depicting the subtleties (p. 201). hodge and kress (1979) explaining language argue that it is not the only tool through which modality can be articulated. where language relies on modality markers such as „will be‟, “is”, and might be‟; likewise, visual communication also contains modality markers. modality markers, in visual communication, have been listed by kress and leeuwen (1996), to indicate various underlying structures embedded within a text. machin and mayr (2012) also prepared a list of five visual modality markers that are taken into consideration for this paper and are explained in the following paragraphs. the degree of articulation of background by machin and mayr (2012) ranges between extremely sketchy or blurred to the highly defined and detailed background. they argue that the low modality in any image recontextualizes the visual and transfers them to a context where they indicate certain values and ideas (machin, d. and mayr, a., 2012); it is used as a tool and moves the „text‟ towards abstraction away from real. the careful selection of the background and the details accompanying the foreground, signify certain ideologies while concealing others; however, the details are also given to make the image appear real and by doing so making the text producer‟s narrative plausible. the degree of articulation detail, oscillating between “simplest to the sharpest and the most finely grained” visual (machin, d. and mayr, a., 2012). machin and mayr (2012) explain that lower modality or higher modality both have symbolic significance, through cosmopolitan magazine where a model is shown in diffused light so as not highlight her „flaws‟; while a soldier is depicted in detail, to have an allusion of reality while the destruction is again shown in defused light to soften the chaos that is caused by the presence of the soldier. the degree of articulation of tone ranges between the gradation of black and white to the 'greatest tonal degree' (machin, d. and mayr, a., 2012). machin and mayr (2012) contend that the level of tonal gradation symbolizes emotive dissipations, ambiguity and reality. they clarify through the case of western culture where diffused tone is identified with uncertainty, secretiveness and concealed, whereas highlighting signifies optimism and positivity (p. 205). the degree of articulation of light and shadow is on the scale of maximum degrees of depth of shades to zero articulation (machin, d. and mayr, a., 2012). the use of unrealistic lights and shadows, move the visual away from real and towards abstraction. the idea is explained through the example of a soldier shown in realistic lighting; however, what has been covered is the violence that is linked with the soldier and war. this strategy helps legitimize the visual and what it represents by showing it as real through divert the attention from what appears on the surface to what is perceived. (machin, d. and mayr, a., 2012) the degree of colour saturation ranges between maximum saturation to black and white (machin, d. and mayr, a., 2012). modality would be low with higher shading immersion, likewise, less or no colour would mean low modality. the modality is considered high when it lies someplace in the mid on the scale. machin and mayr (2012) contend that saturation of colour signifies „intensity of emotions whereas, reduced colours indicate calculated and elusive implications (p. 205). researchers can look at the visuals and study the modality through such signs and recognize where the images move from the real to the conceptual, this can assist the analysts to concentrate on the “sorts of personalities, qualities and arrangements that are being conveyed" (machin, d. and mayr, a., 2012, p. 206). 3. methodology the methodological approach engaged in this paper is multimodal critical discourse analysis (mcda) given by machin and myer (2012). a multimodal analysis of any text allows researcher to do a semantic analysis of the visuals through describing structures and features of the images. therefore, a multimodal analysis includes, review of economics and development studies vol. 5, no 3, 2019 524 modality low medium high 50 40 30 20 10 0 visual modality analysis of the text (including images, films, advertisements, tv shows, news etc.) and their meaning potential. however, visuals do not convey the entire meaning and in order to comprehend the complete context the analysts also have to take into account modality markers which accompanies the visuals. the movie analyzed in this paper includes the modality markers grounded in the categories given by machin and mayr (2012). the focus on mcda is not to give a final interpretation for meaning but to examine meaning potential and its function in a specific context. mcda contends that images convey meaning not only through exclusion and manipulation of the representation of various signs or features and these have to be understood not just representations also shaping, creating, reproducing sustaining and legitimizing hegemonic social practices and ideologies. mcda is employed for this research to explore a partition movie pinjar (indian) which is widely acclaimed as a story of female‟s suffering during partition in 1947, depicted neutrally. significant scenes were methodically analyzed for connotations of visual semeiotic choices, focusing mainly on modality markers, on five levels outlined by machin and mayr (2012). 4. results and analysis in the movie visual modality plays a significant role. it decides how closer to or removed from real, are the representations of the characters and events. the examination of the data highlights that the scenes have been shot with extreme care so that they become plausible for real. the strategy serves well in authenticating the „self‟s‟ version of the events and aids in legitimizing the fundamental philosophies, narratives and ideas. keeping this argument in mind, and to make inferences, visual modality markers have been examined. figure 2: modality markers careful examination of the movie reveals that the events are depicted in, close to real, settings as well as the portrayal of characters which appear real except for the minute details which indicate a covert endeavor for presenting things as realistic and by doing so, legitimizing a conflicting ideology that may otherwise shock and evoke an opposing response from the audience and challenge the reliability. examination of visual expression shown in figure 2, assists in defining what is shown and what is being communicated through visuals. the visual modality, is high in the selected scenes. the text maker has covertly attempted to validate an ideology that otherwise with low modality would have chances to be challenged and the ideology represented is in a realistic manner through performance of the actors, and depiction of the events. in spite of the fact, that the indian cinema commonly uses low modality as it generally uses diffused lighting and colour saturation for the rich music, dances and sparkly attires in the films; however, the movie uses high modality for depiction of the events close to reality. the modality of the film articulates “identities, values and sequences” which are voiced through the visuals, and in turn create a world view for the viewers by conveying only the self‟s‟ version of the „other‟ in a realistic manner helps extract agreement from the viewers. review of economics and development studies vol. 5, no 3, 2019 525 the „other‟ in the movie is depicted in realistic settings for example riots and migration scenes; which is a strategy used by the text makers to legitimize the „self‟s‟ version of what actually happened during partition. the visual modality shows stereotyping and labelling of the „other‟ as brutal murderer, who mercilessly kills women and children thus showing the „other‟ as fixed in his ideas. demonization is done through representing the „other‟ as the „self‟s‟ version of the „other‟ and is legitimized by portraying it close to the reality. several modality markers depict the „self‟ superior than the „other‟. the movie displays the „self‟ in the mellow lights which makes the „degree of articulation of detail‟ low. the degree is considered „high‟ when the „other‟ is presented via the intricacies of attires and location in a way as they would be in real; indicates that the „other‟ represents a type/group through their attires, facial-expressions, headdresses and actions, having specific notions and morals. the visual modality is high for example in degree of articulation of detail to show the other as real through the details of attire, arms, facial expressions and actions, while the self is also shown with such details but as a „victim‟ to seek emotional support. riot and migration scenes where people are being killed, the victim and the assassin are presented with high modality to create panic and urgency in the audience which evokes hatred for the „other and empathy for „self‟. the details of the poses of the „other‟ are shown to be antagonistic with vicious facial expressions except for the one of the central characters rasheed who abducts „self‟ (represented by puro); has opposing views and becomes the „other‟ of the „other‟. over all the „other‟ is hostile, conceited, having a condescending behaviour indicating an arrogant identity and shaping a particular persona for the audience which in turn shapes their views about the „other‟; stereotypical and potentially damaging. 4.1 the articulation of background investigation shows that the movie has higher degree of articulation of the background. portrayal of the migration of the hindus to india, the convoy being attacked by muslims and the homes of both hindus and muslims are mostly represented in realistic settings with quite limited studio settings. another significant observation was that although the degree of articulation of the background is higher; yet, the realistic setting is a move in the direction of abstraction. though the conflict among the two communities and the resulting violence is recontextualized/reenacted; yet, depicted in a realistic manner. the background shows congress flags, when a speaker addressing a congregation aligning the congress‟s agenda of unity among hindus and muslims with that of a muslim character addressing a gathering where all ethnicities are represented. this representation is also through the characters‟ attires. the minarets of a mosque are also shown clearly in the background with the congress flags helps balance the attention given to both sides and the unity between the two communities. however, this closer to reality depiction, clarity and details in the background create/constructs a version of reality which is „self‟s‟, while excluding the „other‟s‟ version completely. figure 3: burqa-clad females and jinnah's picture. shot no. 2:32:39 review of economics and development studies vol. 5, no 3, 2019 526 the movie shows posters on the walls with muhammad ali jinnah‟s picture in pakistan after partition in the background throughout. nevertheless, the visual modality is low as the image appears more like a blurred distortion instead of a photograph. the number of occurrence of this picture is 11 and has “pakistan zindabaad” (long-live pakistan) in roman urdu while „long-live jinnah” in english. the presence in the background accentuates for the „other‟ a specific identity and highlights the ideology through recurrence of the image it in the background, though blurred but imminent presence. the low modality of the image shows how the „other‟ is treated insignificantly. a framed picture of vladmir lenin is displayed in the background behind tirlok (puro‟s brother) (1:24:40/3:08:50), is an indication of the philosophy of the “self” that signposts the humanitarian ideology, in contrast to the „other‟s‟ philosophy. the frame is placed strategically in the background and contains certain implications. it appears to implicitly connect, congress‟s and gandhi‟s philosophy of democratic social order, which transcends religious conflicts. the „self‟ in the foreground, aligns the ideology of the „self‟ with that of lenin. the book tirlok is reading and the frame hint at the ideology that the „self‟ holds, represents the „self‟ as a scholarly group who has more democratic ideas vis-a-vis the „other‟ highlights the binary that shows the „other‟ as the opposite. figure 4: vladimir lenin's frame. shot no. 1:24:40/3:08:50 figure 5: articulation of background overall, the movie displays realistic settings and backgrounds with a few exceptions where studio settings have been used. the realistic setting makes the events more real and contextualized. the riot scenes are picturized in realistic settings and backgrounds which helps endorse a constructed narrative but is presented as true depiction of the real. therefore, the modality becomes low, despite being high in the portrayal of the real-like events; hence, the over-all argument of legitimizing the self‟s narrative that sanctions the ideology through realistic portrayal, fails. modalit y lo w mediu m hig h 5 0 4 0 3 0 2 0 1 0 0 articulation of background review of economics and development studies vol. 5, no 3, 2019 527 modalit y lo w mediu m hig h 5 0 4 0 3 0 2 0 1 0 0 articulation of detail modalit y lo w mediu m hig h 6 0 5 0 4 0 3 0 2 0 1 0 0 degree of tonal articulation 4.2 degree of articulation of detail the degree of articulation of details, with emphasis on the specific attires of the „other‟ and the „self‟, signifies the difference between the two through dissimilarity in their clothes, the facial expressions, postures and headdresses presented in detail almost near realistic modality. a specific identity is indicated through deliberate features e.g. muslims wearing shalwar qameez, gharara, turbans, and amulet. the strategy represents a group of people following that life style. the movie shapes a specific image for the audience through such elements. nevertheless, it overlooks the regional diversity existing amid muslims of the region which in turn brings the degree of articulation of details lower. the „self‟ is also presented through a particular headgear and the tilak on his forehead however, the „self‟ has a general agreeable temperament presented in detail. outlining the particulars of the attires, households, and facial expressions etc. ensures the ideological effort and creates for the audience, a specific identity of the „self‟, in contrast to the „other‟. the details given, are tools used to create real; however, close investigation reveals that it is a strategy to legitimize the „self‟s‟ version. figure 6: articulation of detail 4.3 degrees of tonal articulation realistic, balanced and high tones have been used to depict an image closer to reality which ensures that the reality which is presented throughout in the movie, plausible as truth. the overall analysis shows that the tonal modality is high. it signifies that it has been used as a tool to validate the „self‟s‟ version of reality so that the audience would not challenge its truth. throughout the movie natural light has been used and the tonal variations are carefully done to do a certain ideological work via portrayal of the narrative closer to the real. figure 7: degree of tonal articulation review of economics and development studies vol. 5, no 3, 2019 528 modality low mediu m hig h 60 50 40 30 20 10 0 degree of articulation of shadow and light 4.4 degree of articulation of light and shadow in the movie a vital role is played by the degree of articulation of light and darkness which forms abstraction and depicts, through realistic lighting an image of real. the film uses sunlight as lighting which sets the background in real environment and gives an impression of the real e.g. the migrating scene and the attack by the muslim rioters and chaos that they create. employing natural light indicates the strategic maneuvering of the text to move the focus from the „obvious‟ to the „perceived‟ in such a way that it validates the visual and presents it as real. in the movie though the use of natural light authenticates the actual narration of the events that transpired; the migration and riots scenes, filmed in outdoor, using natural lighting, represent closer to real modality which authenticates their being plausible for the real depiction of the events of partition. the modality may be closer to real, which portrays the events as real; however, the exclusion of the „other‟s‟ version of reality makes the arguments weak. figure 8. degree of articulation of light and shadow 4.5 degree of colour saturation the modality in the middle is considered high while it is low towards maximum saturation and black and white. colour maximization or absence shifts the scene away from real and the modality becomes low. visual modality, tilts towards higher side as the scale leans towards the medium saturation. this modality marker has been used as a tool to depict the events as real and naturalistic except for the picturization of the musical ballads. the scenes mostly are filmed in a way that they appear in real e.g. migration and riot scenes; which is a contrast with the songs with maximum colour saturation. it is not only used as a marketing strategy but also to intensify the emotional impact on the audience legitimizing the narrative of the „self‟. figure 9. degree of colour saturation modality low mediu m hig h 90 80 70 60 50 40 30 20 10 0 degree of colour saturation review of economics and development studies vol. 5, no 3, 2019 529 5. socio-economic implications creativity is pivotal for a successful economy, and also has policy insinuations (see, pratt 1997, and scott 2000). anderson (1983) explaining cultural policy talks about, „creative‟ fields like art, film and music have always been used as a vehicle through which specific national identities are propagated by the institutions. films are considered expression of the cultural norms and values; films also reflect how a certain regime views and presents itself as well as the nation and in turn how a nation sees itself (see grossberg 1997) in its socio-cultural and economic perspective. the importance of commercial benefit of cultural productions like films and advertisements has caught the attention of the institutions/governments through which certain ideologies and ideas can be instilled in the mind of the viewers which is termed as „cultural economy‟. the analysis shows that the subject movie in creating a world view for the audience succeeds with its agenda and also has socio-economic implications. the „communicative acts‟ in the movie work with a purposeful „communicative intent‟ (leeuwen, 2004), and highlight “multimodal micro-events” having broader socio-economic implications. moreover, semiotics stresses that a text has dynamic interpretations and no „universal‟ meaning of sign exists. though, no definite meaning can be ascribed to a text; yet, it also does not imply that a text would always be interpreted in different ways. a text may also create controversy with its meaning and new meanings may emerge in a different context. semiotics of the present „text‟ exposed a myriad of interpretations through analysis of the visual modality. most human expressions are commodified products of industry with corporate objectives, and a commercial scope. the „text‟ was found to be a rich blend of national, socio-economic and politico-military norms propagated through the medium of film. conflict between the two countries is linked with the insecurities on both sides. self-glorification and demonization of the „other‟, along with the depiction of the events as reality, have socio-economic insinuations. trade, backdoor diplomacy and other economic factors get effected by propagation of such narratives; for example, south asian free trade area (safta) agreement in 2004, at saarc summit in islamabad, which was established to promote trade and economic development of the member countries; however, did not prove to be helpful for the advocacy of socio-economic agenda. the underlying issue is embedded in the animosity between india and pakistan. the movie subtly highlights the narrative which effects the socio-economic ties between the two nations. such narratives not only legitimize the economic policies and sanctions made against each other but also work for the benefit of the third party which seizes the opportunity and manipulates the situation for economic gains; as the continuing animosity would lead to the war between the countries which in turn would open door for weapon industry and economic gains for the powerful. the propagation of such narratives through the medium of films, legitimizes actions taken against the „other‟. 6. conclusion machin and mayr‟s (2012) visual modality comprising of five degrees, tilts towards higher side in the movie; even the middle ranges also overlap towards the high, which is near-real. visual modality is considered a valuable tool in shifting the focus of the audience towards the meaning potential of the numerous features of the images along with linguistic modality, support the examination of the underlying edifices and making inferences from those, which was the focus of this research paper. higher modality of the background, details, and realistic lighting in the movie, are employed as a tactic to highlight that the depiction of the events as factual and real. the movie artfully employs such modality markers to portray a version of history and events that suits the „self‟s‟ version and glorifies the image. on the other hand, closer to reality scenes, portraying the „other‟ as a ferocious and evil, also serves the purpose of „selfglorification‟ through creating contrasts between the „moral self‟ and an „evil other‟. modality markers are skillfully used to shape an opinion about the „other‟ and create a narrative which highlights the „self‟s‟ ideologies and legitimizes the „self‟s‟ account, also has socio-economic implications and gains for the powerful. review of economics and development studies vol. 5, no 3, 2019 530 references anderson, b. 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(2000) the cultural economy of cities, sage, london review of economics and development studies vol.2, no 1, june 2016 55 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 2: issue 1 june 2016 journal homepage: www.publishing.globalcsrc.org/reads socioeconomic and demographic factors affecting individual’s life satisfaction in selected saarc countries: a micro data analysis 1 sofia anwar, 2 aisha asif 1 professor and chairperson, department of economics, government college university faisalabad, pakistan, sofia_eco@gcuf.edu.pk 2 phd scholar, department of economics, government college university faisalabad, pakistan aieshasif@gmail.com article details abstract history revised format: may 2016 available online: jun 2016 life satisfaction is increasingly recognized as a significant dimension of wellbeing. thus the main b of the objective study will be to explore the association among income, family composition, health, and religion over life satisfaction. in this effort, correlates of the life satisfaction for the saarc countries pakistan, india, and bangladesh analyzed. micro data from the world values survey (wvs) fourth wave (1999 to 2004) for pakistan, india and bangladesh was utilized comprising a wide range of information on political, social and cultural values of countries. the multinomial logistic regression was employed to examine the effects of various socioeconomic and demographic factors on life satisfaction. health, income, shows significant positive factor in determining life satisfaction, however financial satisfaction is overpowered by religious faith especially in india and pakistan. employment had a positive impact on individual’s satisfaction in pakistan and india. gender, education has insignificant impact on life satisfaction in three countries. age has insignificant effect on life satisfaction in pakistan, while shows insignificant impact in india and bangladesh. preferences for democracy are associated with life satisfaction in india and bangladesh. © 2016 the authors, under a creative commons attributionnoncommercial 4.0 keywords determinants of life satisfaction, world values survey, pakistan, india, bangladesh jel classification do3; d60; i31 corresponding author’s email address: sofia_eco@gcuf.edu.pk recommended citation: anwar, s. and aisha, a. (2016). socioeconomic and demographic factors affecting individual’s life satisfaction in selected saarc countries: a micro data analysis. review of economics and development studies, 2 (1) 55-68 doi: https://doi.org/10.26710/reads.v2i1.124 1. introduction life satisfaction is increasingly recognized as a significant dimension of wellbeing (stiglitz et al., 2009). the expressions ‘happiness’ and ‘life satisfaction’ are no explicit conceptions. in the social sciences happiness usually centered on the theme of subjective wellbeing of one’s life as a whole (veenhoven, 1988). in this demarcation ‘life satisfaction’ is synonymous with ‘happiness’. though some researchers suggested that these terms do tap diverse characteristics of subjective http://www.publishing.globalcsrc.org/reads mailto:sofia_eco@gcuf.edu.pk mailto:aieshasif@gmail.com mailto:sofia_eco@gcuf.edu.pk review of economics and development studies vol.2, no 1, june 2016 56 wellbeing. 1 we however, don’t anticipate to enhance contribution to this debate in this research but assumed it might be supportive to mention some references to papers that do confer the explanation of both concepts 2 . this research will emphasis on micro level causes and will not evaluate macro level variables such as economic growth, income inequality, unemployment, inflation, political regime, welfare system, urbanization, safety, climate, and other factors that are generally considered in subjective wellbeing studies (dolan et al., 2008). thus the main purpose of the study will be to investigate about the association between family composition, income, health, and religion over life satisfaction. in this effort, correlates of the life satisfaction for the saarc countries pakistan, india, and bangladesh analyzed. this research is based on the cross sectional world value survey (wvs) data for the fourth wave (1999-2004). chapter 1 provides a concise and comprehensive introduction of life satisfaction in pakistan, bangladesh, and india. chapter 2 discusses previous studies related to the concepts and topic. chapter 3 explains the econometric techniques and methods used for the analysis. chapter 4 evaluates the descriptive statistics and results of the study and then finally chapter 5 holds conclusions and policy recommendations for the problems addressed in the study. 2. review of literature what can we acquire from the prior literature? evidently, there is a wide literature gap on the significance of country-level dynamics of life satisfaction, as many researchers do not exhibit adequate attention in observing the susceptibility of their empirical conclusions regarding the presence of additional factors to their regressions. that’s why, it is hard to conclude whether the described significances in a specific regression are really dependable and the factors are significantly associated to life satisfaction. previous studies recommend a ushaped curve among life satisfaction and age. younger and older age group respondents tend to be satisfied than middle aged respondents (ferrer-i-carbonell & gowdy, 2007). other studies find a different shape of relation (baird et al., 2010), but nevertheless, agree, that age is an important determinant of life satisfaction. there is no agreement among scientist whether gender is an important variable in life satisfaction and happiness studies. some scientists find a significant relation (alesina et al., 2004). most of studies also consistently showed a strong impact of health on subjective wellbeing. both physical and mental health has a strong positive effect on life satisfaction (dolan et al., 2008). marriage or close relations usually were associated with more life satisfaction. many studies found positive relation between being in close relation and higher life satisfaction scores (helliwell, 2003). according to several studies separation with a partner due to divorce or death causes the lowest level of life satisfaction. studies find that impact of having children may vary depending on other factors. if other factors are negative (low income, no partner, poor health), children may further lower the life satisfaction (alesina et al., 2004; frey and stutzer, 2000). haller and hadler (2006) concluded that children’s influence is insignificant. still other authors observed a positive relation between having children and life satisfaction (angeles, 2010). there was no general consent on the influence of education on life satisfaction. some studies revealed positive impact with increasing life satisfaction in higher education groups (blanchflower & oswald, 2004; ferrante, 2009), others debated that education effect is associated to income and 1 among them are diener et al. (2010); fischer (2009), mckennel and andrews (1980) and saris and andreenkova (2001), 2 life satisfaction is hypothesized by certain researchers as a subgroup of happiness (davis and fine-davis 1991). some others see happiness and life satisfaction as two distinct sections of subjective well-being (zapf et al. 1987). in the latter perspective, happiness is a psychological state formed by negative and positive experiences and events in life. life satisfaction, on the other hand, is abstracted as more of a cognitive assessment that is rather reliant on social evaluations with compare to groups as well as on the individual’s expectations, hopes and desires . review of economics and development studies vol.2, no 1, june 2016 57 health and therefore the latter should be controlled in order to determine the sole power of education (bukenya et al., 2003; degutis & urbonavicius, 2013). there was no reasonable answer whether type of work is significant in determining life satisfaction. few studies proposed that self-employed respondents have a tendency to be satisfied with life (blanchflower & oswald, 2008), however this connection clearly needs more examination. there was a consistent agreement that unemployment negatively affects life satisfaction (brereton et al., 2008; luechinger, 2010; winkelmann & winkelmann, 2004). financial situation, income of the household is one of the most often used variables, which impact on life satisfaction is measured. most of the studies found that there is a positive correlation among individual income and life satisfaction (clark et al., 2007; dorn et al., 2007; jagodzinski, 2010; malesevic & perovic, 2010; verbic & stanovnik, 2006). while others conclude that perception of financial status (or valuation of financial situation) has more predictive influence than actual income per se even if it is highly related to the latter (haller & hadler, 2006; wildman & jones, 2002). still, there was a common agreement that income is a significant determinant and even if it is not used in analysis directly, it is used as a control variable when measuring effects of other factors. trust in other people is related to higher life satisfaction by majority of studies. helliwell (2003), helliwell and putnam (2004) analyzing world values survey data concluded that life satisfaction positively associated to trust level. though the direction of relation is not always clear. furthermore, even trust in public institutions such as government, police and legal system is also positively associated with higher life satisfaction (helliwell & putnam, 2004; hudson, 2006). in this case it is also not clear whether trust is a predictor of life satisfaction or vice versa. confirmation from numerous researches also supports the notion that greater life satisfaction is related to religiousness. this relation between life satisfaction and religion is found irrespective of their confession (helliwell, 2006; heliwell & putnam, 2004). 3. data and methodology 3.1. data micro data from the world values survey (wvs) fourth wave (1999 to 2004) for pakistan, india and bangladesh was utilized comprising a wide range of information on political, social and cultural values of countries. the total sample size for three countries is 5502 observations (pakistan (2000), india (2002), bangladesh (1500). 3.2. definition of variables as there is an absence of detailed applied studies on life satisfaction in pakistan, india and bangladesh, thus the opted explanatory variables in the existing model are established on the prior research in other economies. life satisfaction measured using the world values survey question; “all things considered, how satisfied are you with your life as a whole these days? please use this card to help with your answer”. answers are recorded on a 10-point scale (1= dissatisfied, 10 = satisfied), for the purposes of this analysis it has been re-scaled 1= highly satisfied, 2 = quite satisfied and 3 = dissatisfied. independent variables & their description used in the study for life satisfaction model are depicted in table 1. 3.3. methodology the multinomial logistic regression was employed to examine the effects of various socioeconomic and demographic factors on life satisfaction. review of economics and development studies vol.2, no 1, june 2016 58  jpr (y =a,b) y = ln = α + β (z)(a, b)j(a, b)i a, b ijpr (y =c) j=1 .……………………………… (1) where; y= dependent variable while n= a, b, c are the three different categories of life satisfaction. multinomial logit model estimates the log odd ratio like the logit model. pr(life satisfaction = highly satisfied) ln = β + β x + β x .......+ β x 0 1 1 2 2 k kpr(life satisfaction = dissatisfaction) ………………… (2) pr(life satisfaction =quite satisfaction) ln = β + β x + β x .......+ β x 0 1 1 2 2 k kpr(life satisfaction = dissatisfaction) ………………….. (3) the coefficients of logistic regression show, for a unit change (i>0 increase and i<0 decrease) in explanatory variable; changes in the log odds of dependent variable keeping all other variables constant (hoffmann, 2004). the exponential coefficient of beta presents changes in the odd ratio of the dependent variable in a particular category of the reference category, related to one unit change of the subsequent explanatory variable. a positive sign of the coefficient indicates that the chances of that category are more than the reference category. table1: variables & their description used in the study variables (abbreviation s) description shs self-reported satisfaction level of individual with health status gen gender age age in years (( divided in three different age groups in wvs) edu education in years ( divided into different education groups in wvs) emp employment status inc income level ( divided in three income groups in wvs) itmc interaction term married not having, having child tmpl thinking about meaning and purpose of life ptp perception about trust on other people itfsr interaction terms between financial satisfactions and religiousness of a person sdemo self-reported level of satisfaction with democracy rpca-10 respondent ‘first choice national aspects (aims of the country in the coming ten years) achieving economic growth as the "country's first priority in the next ten years” if a person agree with statement = 1, otherwise = 0 achieving economic stability as the "country's first priority in the next ten years": fighting against rising prices "country's first priority in the next ten years" fight against crime: "country's first priority in the next ten years" 4. results and discussions review of economics and development studies vol.2, no 1, june 2016 59 tables 2 and 3 present overall results of multinomial regression model. as estimated, health shows important positive factor in determining life satisfaction. those who reported very good health and average health have a higher level of life satisfaction contrast to those who reports a poor health status. previous researches showed a strong correlation between life satisfaction and psychological and physical health (veenhoven, 1991). results are consistent with the studies of (blanchflower, 2008; cid et al., 2007; frey & stutzer, 2002; graham, 2008; hussien & heshmat, 2009). gender has insignificant impact on life satisfaction in three countries. in the study of life satisfaction, gender considered as an insignificant factor (easterlin, 2003; cheah & tang, 2013). age has insignificant effect on life satisfaction in pakistan and bangladesh, while shows significant impact in india. prior studies pointed out that age was insignificant in determining life satisfaction as individuals would amend their goals and purposes as they matured (diener et al., 1993; cheah & tang, 2013). as compere to both age has significant effect on dissatisfaction in india. if a person belongs to 30-49 mid-age group then he has .486 times chances to report unsatisfied. some studies claimed that the relationship between age and satisfaction was u-shape, where individuals tended to feel happier in their very young age and old age compared to when they were in their mid-age (blanchflower & oswald 2007; clark & oswald, 1996; clark, 2002; helliwell, 2003; frey & stutzer, 2002). review of economics and development studies vol.2, no 1, june 2016 60 table 2: socioeconomic and demographic variables affecting the probability of highly satisfied in selected saarc countries (dissatisfied= reference category) independent variables pakistan india bangladesh b odd ratios b odd ratios b odd ratio s intercept 0.47 4 1.041 shs very good health=1 2.60 7* 13.55 7 1.674 * 5.333 1.41 9* 4.13 1 good health =2 1.55 2* 4.721 0.64^ 1.897 0.78 4* 2.19 poor/fair health=3 reference category gen male=1 0.31 7 0.728 0.131 0.877 0.06 7 1.06 9 female=0 reference category age 15-29 years=1 0.16 1 0.851 0.722 ^ 0.486 0.29 9 0.74 2 30-49 years =2 -0.14 0.869 0.676 ^ 0.509 -0.16 0.85 2 above 50 years = 3 edu lower educated =1 1.41 9* 0.242 0.426 0.653 0.37 5 1.45 5 educated =2 0.68 2 t 0.506 0.101 1.106 0.58 6 t 1.79 6 highly educated =3 reference category emp unemployed=1 0.19 1 0.826 1.096 * 0.334 0.10 9 0.89 6 retired/student housewife=2 0.36 1 1.435 0.195 1.215 0.49 6 t 1.64 2 employed=3 reference category inc lower income group =1 1.16 7 t 0.311 0.033 1.034 1.50 5 0.22 2 middle income group =2 0.11 8 1.125 0.279 0.756 0.83 7^ 0.43 3 high income group =3 reference category itmc married having no child=1 0.09 2 0.912 0.241 1.273 0.70 5 0.49 4 married with 1-2 kids =2 0.20 8 1.232 0.709 t 2.032 0.66 0.51 3 review of economics and development studies vol.2, no 1, june 2016 61 7 t married with 3-4 kids=3 0.75 4^ 0.47 0.527 1.694 0.50 5 0.60 4 married & above 4 kids=4 0.74 9 0.473 0.355 0.701 0.36 4 0.69 5 single =5 reference category tmpl thinking about meaning & purpose of life=1 0.59 4^ 1.812 0.75* 2.117 1.25 7 3.51 6 never think about it =2 reference category ptp can be trusted=1 0.69 4* 2.002 0.061 1.063 0.28 2 0.75 5 can’t be trusted =2 reference category itfsr financially dissatisfied and religious =1 2.09 5* 0.123 2.101 * 0.122 3.09 7 0.04 5 financially quite satisfied and religious =2 1.58 7* 0.205 0.913 * 2.492 0.40 3 0.66 8 financially highly satisfied and religious =3 0.98 ^ 0.375 3.671 * 39.29 9 3.16 2 23.6 17 financially satisfied and not religious = 4 reference category sdemo satisfied=1 0.03 7 0.963 1.131 * 3.1 0.67 9^ 1.97 2 not satisfied =2 reference category rpca10 a stable economy 0.13 5 0.874 0.138 1.148 0.28 8^ 1.33 4 achieving high level of economic growth 0.15 7 1.17 0.066 0.936 0.24 2 t 1.27 4 fight against rising prices 0.22 5 1.252 0.173 0.841 0.07 8 1.08 2 fight against crime 0.05 7 0.944 0.226 ^ 0.798 0.07 7 1.08 source: author’s own calculation from world value survey (1999-2004). ^, *, t indicate coefficients are significant at 1, 5 and 10 percent level respectively education increases the chance to being satisfied with life in pakistan and india. if a person lower educated he has .242 and .62 times chances to being dissatisfied as compare to highly educated person in pakistan and india respectively. if a person was middle educated then he had .50 times chances to being dissatisfied with life in pakistan. in bangladesh a person who fall in middle educated group has more chances to being highly satisfied than dissatisfied person. some studies found a positive relationship between each additional level of education and life satisfaction and life satisfaction (blanchflower & oswald, 2004); while others found that middle level education is related to the highest life satisfaction (stutzer, 2004). however, there is some evidence that education has more of a positive impact on low-income countries (clark & oswald, 1994; clark et review of economics and development studies vol.2, no 1, june 2016 62 al., 1996; fahey & smyth, 2004; ferrer-i-carbonell, 2005). result is consistent with (clark & oswald, 1996; frey & stutzer 2002; helliwell, 2003). people with higher income were more-happy in pakistan, india and bangladesh. individuals with lower income levels had .31times and .56 times probability of being satisfied with life in pakistan and bangladesh respectively. individuals with middle-income group had .75 times and .433 times chances to being dissatisfied with life in pakistan and india respectively. results were consistent with (blanchflower & oswald, 2004; clark & oswald, 1996; easterlin 2001; headey et al., 2008; hussien & heshmat, 2009; stevenson & wolfers, 2008). studies conclude that changes in real incomes correlated with changes in life satisfaction (clark et al., 2005; ferrer-i-carbonell, 2005; ravallion & lokshin, 2002; senik, 2004; winkelmann & winkelmann, 1998). the models revealed that employment had a positive impact on individual’s satisfaction in pakistan and india. housewives, retired individuals or students appeared to be happier in bangladesh. unemployed person .51 times and 0.75 times chances to being in the group of dissatisfied from life than an employed person in pakistan and india respectively. if a person is housewives, retired individuals or students then he had 1.64 times likelihood towards highly satisfaction with life in bangladesh. results were consistent with (clark & oswald, 1994; hussien & heshmat, 2009; winkelmann & winkelmann, 1998). marital status and presence of children were also correlates of life satisfaction. couples reported significantly higher satisfaction level than those who are not currently married or single (blanchflower & oswald, 2008; di tella et al., 2001; frey & stutzer, 2006). parental satisfaction increases with the life satisfaction of their adult children also suggests that parents have selfless feelings towards children (francesconi, 2002; schwarze & winklemann, 2005). married couples having 1-2 children has more chances to dissatisfy with life rather a single person. these results are reliable with previous findings that having children reduces satisfaction. simply adding the number of children in the household to the list of explanatory variables of life satisfaction will typically show negative or null effects (di tella et al. 2003; alesina et al. 2004; clark 2006). this wellknown result has encouraged authors to conclude that having children makes people less happy. if married couples have more than three children then they have 2.42 times chances to dissatisfy with life. clark & oswald (2002) found a negative effect of third or higher order children on satisfaction. it was evident that a person who was ponder about meaning and purpose of life has 1.8 and 2.17 times chances to being satisfied rather who often or not thinking about it in pakistan and india. people who often think about the meaning and purpose of life would be more satisfied with life (duff and ivlevs, 2012; haller and hadler, 2006). likewise the people who trust on others, they were more satisfy in pakistan and bangladesh than a person who cannot trust on others and more likely to befall in the group of unsatisfied individuals. these results are contrary with previous findings (helliwell, 2003; helliwell & putnam, 2004). financial satisfaction and religiosity are important determinants of life satisfaction status of an individual. faith on god or some super power positively influenced satisfaction. it is observed that as the financial satisfaction of a religious person increases the chances of being satisfy increases or vice versa. if a religious person was financially dissatisfied, then he was more satisfy than financially satisfied but not religious person in both india and pakistan. some studies concluded that religion ensures life satisfaction in stressful events like unemployment and divorce. religious persons of all religious sects undergo less psychological destruction and harm from unemployment than the nonreligious (clark & lelkes, 2005). table 3: socioeconomic and demographic variables affecting the probability of quite satisfaction in selected saarc countries review of economics and development studies vol.2, no 1, june 2016 63 (dissatisfied= reference category) independent variables pakistan india bangladesh b odd ratio s b odd ratios b odd ratios intercept 0.55 -0.18 -1.17 shs very good health=1 1.60* 4.99 0.81 * 2.24 -0.15 0.86 good health =2 0.91* 2.47 0.79 * 2.20 -0.01 0.99 poor/fair health=3 reference category gen male=1 0.049 0.95 2 0.21 4 1.239 0.295 0.744 female=0 reference category age 15-29 years=1 0.39 1.47 -0.61 0.54 0.61 1.84 30-49 years =2 0.056 1.05 7 0.55 2 0.576 0.352 1.422 above 50 years = 3 edu lower educated =1 0.67^ 0.51 0.47 1^ 0.624 0.395 0.674 educated =2 0.446 0.64 0.14 5 0.865 0.101 0.904 highly educated =3 reference category emp unemployed=1 0.355 t 0.70 1 -0.24 0.787 0.165 0.848 retired/student housewife=2 0.191 0.82 6 0.02 9 0.971 0.418 t 1.519 employed=3 reference category inc lower income group =1 0.098 1.10 3 0.20 2 0.817 0.564 ^ 0.569 middle income group =2 0.213 1.23 7 0.17 4 0.841 -0.31 0.733 high income group =3 reference category itmc married having no child=1 0.413 1.51 1 0.03 3 1.033 0.178 1.195 married with 1-2 kids =2 0.335 t 1.39 7 0.26 4 1.302 -0.23 0.795 married with 3-4 kids=3 0.068 1.07 0.13 3 1.142 0.158 0.854 married & above 4 kids=4 0.226 1.25 4 0.60 4 0.547 0.155 0.856 single =5 reference category tmpl thinking about meaning & purpose of life=1 0.183 1.20 1 0.57 9* 1.784 0.081 0.922 review of economics and development studies vol.2, no 1, june 2016 64 never think about it =2 reference category ptp can be trusted=1 0.302 ^ 1.35 2 0.11 4 1.121 0.805 * 2.237 can’t be trusted =2 reference category itfsr financially dissatisfied and religious =1 1.27* 0.28 0.68 6* 0.504 1.629 * 0.196 financially quite satisfied and religious =2 0.918 ^ 0.39 9 2.06 8* 7.909 1.837 * 6.276 financially highly satisfied and religious =3 0.211 0.80 9 1.18 4^ 3.266 0.736 2.087 financially satisfied and not religious = 4 reference category sdemo satisfied=1 0.091 1.09 6 0.54 6* 1.726 0.407 ^ 1.502 not satisfied =2 reference category rpca10 a stable economy 0.322 ^ 1.38 0.22 4* 1.251 0.165 1.18 achieving high level of economic growth 0.15^ 0.86 2 0.03 1.031 0.207 t 1.23 fight against rising prices 0.112 0.89 4 0.12 7 0.881 0.024 0.976 fight against crime 0.022 0.97 8 0.17 ^ 0.839 0.042 1.043 source: author’s own calculation from world value survey (1999-2004). ^, *, t indicate coefficients are significant at 1, 5 and 10 percent level respectively the widespread reviews on life satisfaction depicts that religiosity is a key aspect that influence life satisfaction of an individual. there is a positive association among life satisfaction and religiosity (ellison, 1991; robbins & francis, 1996; ferriss, 2002; lelkes, 2006; elliott & hayward, 2009). results indicate that satisfaction in financial conditions coupled with religious faith express profound results in attaining life satisfaction and peace of mind. but financial satisfaction is overpowered by religious faith especially in india and pakistan. few studies have explored the direct effect of holding a particular political view (frey & stutzer, 2000; graham & pettinato, 2001; inglehart & klingemann, 2000). it found that preferences for democracy are associated with life satisfaction in india and bangladesh. frey and stutzer (2000) reported that direct democratic institutions in switzerland (one of the wealthiest countries in the world) contribute positively to the life satisfaction. regarding the plan of the country in the coming ten year, the model results show that those who choose high level of economic growth, fighting against high prices, achieving economic stability, fight against crime as first and second choice were not satisfied. this might be explain by the fact that many people in sample tend to feel dissatisfied with the government performance and they did not feel that there is any progress in the economy or growth in gdp. results are consistent with (hussien & heshmat, 2009). v. conclusion and recommendations review of economics and development studies vol.2, no 1, june 2016 65 the study revealed that life satisfaction not much influenced by demographic and socioeconomic factors such as age, gender and employment status found to have trivial effect on the life satisfaction level. the satisfaction with health status, satisfaction with life, satisfaction with financial situations, income level, satisfaction with democracy, had a substantial positive influence life satisfaction level. as the satisfaction with the health status had a positive effect on individual’s life satisfaction this suggests expansion and more investment in healthcare facilities in these developing countries. marriage contributed positively to happiness, while separation and divorced did the opposite. this gives insight towards the power of family institution and its crucial role in psychological development of family members and social development of society. the results related to the education level showed that life satisfaction was not associated with high level of education. therefore, programs that emphasis on causing improved education structure alone might not be very effective in conveying more life satisfaction to the public rather awareness related to social ethics, methods of reducing the stresses should also be focused a positive association was found between income level and life satisfaction. individuals with higher income levels were contented with their economic situations had more likelihood of being happy. but at the same time employed were dissatisfy .this suggests that policies to increase the job opportunities, encourage business environment are highly required but at the same time focus should be there to reduce work stress of employed persons. increasing the income level is one of the first priorities on the government agenda. the development in infrastructure will increase public satisfaction with living conditions, quality of life and financial satisfaction and as a result, their life satisfaction. review of economics and development studies vol.2, no 1, june 2016 66 reference alesina, a., di tella, r., & macculloch, r. 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(2006). analysis of subjective economic well-being in slovenia. eastern european economics, 44(2), 60-70. winkelmann, l., & r. winkelmann, (1998). why are the unemployed so unhappy? evidence from panel data, economica, review of economics and development studies, vol. 6 (2) 2020, 229-244 229 long-run relationship between economic development and international tourism in pakistan a muhammad asif khan, b ghulam mujtaba chaudhary, c khalid latif, d naveed ahmed a faculty of management sciences, university of kotli azad jammu and kashmir, kotli, pakistan email: khanasif82@uokajk.edu.pk b faculty of management sciences, university of kotli azad jammu and kashmir, kotli, pakistan email: adfuajk@yahoo.com c college of commerce, government college university faisalabad, pakistan email: khalidlatif@gcuf.edu.pk d lecturer ims, university of agriculture, sub campus toba tek singh, pakistan; email: n.ahmed@uaf.edu.pk article details abstract history: accepted: 12 april 2020 available online: 15 june 2020 this article examines the link between economic development and international tourism in the context of pakistan. the study uses autoregressive distributed lag tests (ardl) for the long-term relationship; the short-term relationship is examined with error correction model, and the vecm-granger causality to determine the direction of the causal flow. the study uses annual data from the ceic and world bank databases for the period 1990-2017. the novelty stems from the perspective that there is no formal evidence on long-run dynamics between economic development indicators and international tourism from pakistan. it contributes to the existing literature on this vital phenomenon. the empirical results document the long-term and short-term association between the variables. we also find a two-way causal flow between economic development and tourism. in addition, it offers policy implications for focusing on three economic dimensions, e.g. economic development, financial development, and stock market development, which subsequently attracts international tourism. intuitively, promulgates national culture and image across borders and strengthens the national treasury as well. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attribution-noncommercial 4.0 keywords: economic development, financial development, stock market development, tourism, cointegration jel classification: o1, z32, z33, z38, l83 doi: 10.47067/reads.v6i2.199 corresponding author’s email address: khalidlatif@gcuf.edu.pk 1. introduction the consideration of tourism and its economic consequences have been concentrated in the last decades all over the world. pakistan is one of the few blessed countries with diverse geographic and ethnic diversity and offers adventure tourism, ecotourism, spiritual tourism, heritage tourism, and sports tourism. adventure tourism includes unique mountains, valleys, and glaciers. silk road. review of economics and development studies, vol. 6 (2) 2020, 229-244 230 trucking jeep safari, helicopter safari, flight safari, and train safari. ecological tourism consists of the ayubia national park. whitewater sports, historic sites of wetlands and salt marshes, a forest of sea turtles and mangroves, bird watching along the karakoram highway. brown is a level of the blind dolphin of deosai and indus. mental tourism reflects islam. sikhism buddhism and hinduism. the sightseeing tour included the tomb of tunkdi makris (thatta), sha ji han mosque. strong rawat, fort lotus, civilization of the indus valley. mehrgara, the civilization of gandhara, the treasure of mughal and uch sharif. meanwhile, sports tourism counts to white water rafting. climbing, shandor polo festival, golf, boar hunting, buzkashi, mountain biking, and fishing. according to travel and tourism competitiveness report (wef, 2017) “the direct contribution of travel and tourism to pakistan's gdp in 2015 was $ 3.1 million, constituting 2.8% of total gdp, and by 2025, the government predicts tourism will contribute $ 9.5 billion to the pakistani economy." economic expansion is essential for tourism development in pakistan and tourism and drives economic growth in the short term (khalil, kakar, & malik, 2007). malik, chaudhry, sheikh, and farooqi (2010), signify a unidirectional casual and long-run association of tourism and economic growth. figure 1 graphically presents the natural logarithm of revenue received from the international tourists in pakistan from 1990 to 2017. the climax was observed in 2011, and the lowest point was 1999. the overall pattern shows a positive trend in tourism receipts. a surge is noticed from 2001 to 2008; however, after 2011 the revenue has surprisingly declined. this may be due to the terrorism and unstable economic conditions prevailing in the country. source: world bank development indicators, and ceic similarly, figure 2 depicts the number of tourists arrived in pakistan from 1990 to 2017 on a yearly basis. the pattern somehow resembles that shown in figure 1. the higher tourists arrive in 2011 and the lowest in 1996. since 2003, the arrivals have greatly increased until 2006, followed by a slight decline in a coming couple of years. the overall arrivals have shown positive trends, which is lucrative for pakistan. 19.8 20.0 20.2 20.4 20.6 20.8 21.0 0 5 10 15 20 25 30 n a tu ra l l o g o f to u ri sm r e ci p ts end of year figure 1. tourism receipts 1990-2017 review of economics and development studies, vol. 6 (2) 2020, 229-244 231 source: world bank development indicators, and ceic tourism plays a significant role in economic development, particularly with regard to monetary policy and the promotion of national culture around the world. tourism raises the standard of living of the citizens of the respective country hrubcova, loster, and obergruber (2016). the contribution of tourism to the economic development of pakistan is remarkable. therefore, this study is rationally directed to investigate cointegration between economic development and international tourism using the robust ardl-bounds approach and the vector error correction granger causality estimators. the study contributes to the existing knowledge about this important phenomenon of combining economic development and international tourism in the context of pakistan. we witness the contribution of economic development indicators as useful determinants of in attracting tourists to the country. the empirical findings suggest policymakers and concerned authorities consider a wide range of economic development indicators, rather focusing only on per capita gdp, for the effective and efficient contribution of tourism in the national economy. rest of work is organized as follows; section, 2 reviews the literature. the methodology is explained in section 3. empirical results are discussed in section 4, and section 5 concludes the study. 2. literature review this section provides the empirical literature relevant to the nexus of economic development and tourism. 2.1 tourism and economic development according to hrubcova et al. (2016), tourism has become a relevant sector of the national economy with viable and sustainable economic development options. the authors argue that although there are numerous obstacles in the way, nevertheless, tourism raises the standards of living and negative impacts of tourism such as redistribution of tourism income must be rationalized. sinclair (1998), highlights tourism supply as key to success, these factors include tour operators, transportation, travel agents, accommodation and cross country integration. kennell (2016), claims tourism is a key factor in economic growth. the empirical results of impact of tourism in explaining economic growth of spain, confirm the economic growth of the country determined by tourism (balaguer & cantavellajorda, 2002). the study infers that tourism revenue if positively used, promotes economic activities and tourists activities in particular. milne and ateljevic (2001), rather emphasize the need to develop a more 12.6 12.8 13.0 13.2 13.4 13.6 13.8 14.0 14.2 0 5 10 15 20 25 30 n a tu ra l l o g o f n u m b e r o f a rr iv a l end of year figure 2. arrival of number of tourists to pakistan 1990-2017 review of economics and development studies, vol. 6 (2) 2020, 229-244 232 rigorous understanding of the evolving tourism industry and the way it influences the economic development, this also advocates the role of expanding the network of information and communication technologies. liu (2003), critically reviews the tourism literature and its nexus with sustainable economic development and argues that it has become indispensable to incorporate an interdisciplinary approach to have more scientific tourism research. he identifies following six issues to be addressed that are often overlooked: i) the role of tourism demand, ii) the nature of tourism resources, iii) the need of intra-generational equity, iv) the role of tourism in promoting socio-cultural progress, v) measuring sustainability, and vi) shaping sustainable development. akama and kieti (2007), study the sustainable tourism as a tool for socio-economic development in kenya, finds that administration of tourism industry is crucial and with greater external control, the tourism industry appears to be least effective in assuring socio-economic development. the evidence of tourism and economic growth from rich and poor countries, documents that in both type of countries economic consequences of tourism inflow are notable (sequeira & macas nunes, 2008). faber and gaubert (2016), find tourism contributes significantly and largely in economic gains in the case of mexico. however, this contribution is more obvious in high tourist region. du, lew, and ng (2016) argue that the role of tourism for long-term economic growth is built on its role as an integral part of wider development. zhang and gao (2016) examine the power of international tourism in driving chinese economic progress, and show find a long-run causal flow. qian, sasaki, shivakoti, and zhang (2016), identify that in china tourism’s contribution in economic development is sensitive to governance system, community-based tourism yields greater economic, ecological and social benefits compared with lease operational tourism. there exists a bidirectional relationship between tourism and economic growth, both in short and medium term, however long-run association depends on economic conditions (antonakakis, dragouni, eeckels, & filis, 2016). srinivasan and kalaivani (2016) use panel cointegration and generalized methods of moments method for estimation, and state that there is no long-term relationship between tourism and economic growth in the asia-pacific. nevertheless, the study reports a short-term relationship between the two. khalil et al. (2007) indicate that tourism's short-term impact on pakistan's economic development through an error correction model and a causality analysis shows that there is a short-term link between tourism retention and economic expansion. malik et al. (2010) examine the cointegration and causal link between tourism and economic growth in pakistan in the period 1972-2007. the results show a long-term unidirectional causal composition of tourists on gdp. hye and khan (2013) employ johansen jeselius along with ardl approach and observe a long-term relationship between tourism income and economic growth in pakistan from 1971 to 2008. conclusion of empirical literature reviewed in above section reveals that firstly, there is handsome literate available on nexus among tourism and economic development that is unidirectional in nature explored the impact of tourism on economic development and growth, see for example (akama & kieti, 2007; antonakakis et al., 2016; balaguer & cantavella-jorda, 2002; faber & gaubert, 2016). secondly, in the context of pakistan, this association is least focused so far. we find that some studies use the data until 2008 to investigate the impact of tourism on pakistan's economic growth (hye & khan, 2013; khalil et al., 2007) and a lot more has happened since after 2005 devastating earthquake in the northern region of pakistan and kashmir. similarly, khalil et al. (2007), use the 1972-2007 data to investigate this connection. thirdly, past literature shows that tourism’s contribution review of economics and development studies, vol. 6 (2) 2020, 229-244 233 is significant and positive relatively in developed countries and least in underdeveloped (sequeira & macas nunes, 2008). therefore, this study seeks to answer this question to examine the long and shortrun connection within economic development and international tourism and the direction of causality in the context of pakistan. 3. methodology data sources, measurement of variables, selection of research model and concurrent tests are elementary parts of this section. 3.1 data and measurement of variables this study utilizes annual data from ceic and world bank for 1990-2017. the dependent variable international tourism is measured as the natural logarithm of receipts from tourists, and the number of arrival on a yearly basis (culiuc, 2014). economic development is captured by three indicators i) domestic credit to privates sector as ratio to gdp (azeem, aziz, & jadoon, 2015), i) per capita gdp jebran, abdullah, iqbal, and ullah (2016), iii) market capitalization as to gdp (azeem et al., 2015; ullah & wizarat, 2016). consistent with the stream of literature we include the real effective exchange rate (pkr to usd) as an important control for tourism because fluctuations in the real exchange rate of destination country greatly influence the tourism inflows culiuc (2014). 3.2 stationarity testing prior to test integration order, we determine optimal lag using akaike information criteria, which suggests two lags are appropriate for estimation. then we apply dickey and fuller (1979), and dickey and fuller (1981) adf tests to determine integration order using equation (1). ∑ where, is cha ange in variable over time t. is lagged value of variable , are the coefficients of estimations, and is error-term, p represents maximum lag length. the null hypothesis assumes a unit root in a particular series against the alternative that assumes otherwise. while comparing t-statistics against typical df critical values, null hypothesis is accepted when captured t-stat exceeds df critical value, otherwise, it will be rejected and alternative hypotheses accepted. 3.3 ardl bounds test of cointegration cointegration is referred as a linear stationary grouping between two or more non-stationary variables, which is we interpret as the variables are having long-run equilibrium bonding (engle & granger, 1987). some scholars argue that it is vital to determine cointegration in time series analysis in response to policy reforms, whether reforms account for what was anticipated (breitung, 2001; dritsakis, 2004; johansen, 1991; mackinnon, haug, & michelis, 1999). the seminal autoregressive distributed lag model, denoted as ardl (pesaran & shin, 1998) with extended bounds testing (pesaran, shin, & smith, 2001) attribute for cointegration has achieved tremendous momentum particularly due to embedded features of producing efficient estimation in case of mixed integration order [i(1) and i(0)]. further, this methodology delivers best estimates when the sample size is relatively small (haug, 2002; pesaran & shin, 1998). nisha (2017), sharif and raza (2016), ullah and wizarat (2016), jebran et al. (2016) and many others have applied this robust model to investigate long-run equilibrium relationship among focused variables of respective studies. review of economics and development studies, vol. 6 (2) 2020, 229-244 234 the ardl regression equation for theoretical relationship among the indicators can be expressed as; ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ here, tr1 and tr2 signify the natural log of international tourism − number of arrivals, and receipts in us dollar respectively. fd, financial development, ed, economic development, sm, stock market development, er, real effective exchange rate as to us dollar, is the difference operator, q is optimum number of lags, are respective coefficients. assumes that no long-run relationship holds among variables. implies that long-run relationship holds. 3.4 error correction model the study uses the error correction model (ecm) in addition to the ardl bound test to examine cointegration between variables. the long-term relationship applies only if the ect coefficient carries negarivley significatn sign. the ect coefficient measures the rate at which the system corrects the disequilibrium of the previous period. we use the following equation: ∑ ∑ ∑ ∑ where “ectt-1” denotes the error correction term and coefficients to yield the short-run speed of adjustment for respective indicators and captures the speed of adjustment towards long-run equilibrium relationship. 3.5 multicollinearity detection to guarantee reliable estimation and alleviate the chances of spurious regression, the study employed a variance inflation factor (vif). the vif measures the individual value subject to the interdependence with others with the help of the following equation; if vif value outstrips five (vif > 5), this demonstrates an intolerable level of interdependence of that independent variable, if continued, may yield spurious estimation. review of economics and development studies, vol. 6 (2) 2020, 229-244 235 3.6 vector error correction granger causality the ardl approach only suggests the existence of long-run association between given variables, hence does not provide the direction. therefore, we need to test the direction of causality between the indicators of economic development, the exchange rate, and international tourism. engle and granger (1987) state that at least one unidirectional causality should exist between the variables that are integrated with the unique order of integration. hence, we use vecm-granger causality to identify the short and long-term causal flow between variables, which serves as an important input in the comprehensive policy formulation process. the vecm granger causality is modeled using the following equation: [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] where is difference operator, is the lagged error correction-term obtained from the long-term equation. the statistically significant value with a negative coefficient confirms the existence of a long-term causality. the short-term causal relationship depends on the first differences in the variables when relevant test statistics are significant. 4. results and discussion this section the empirical results are discussed. table 1 shows the descriptive characteristics of the variables regarding a number of observations, mean, maximum, and minimum value. standard deviation indicates the deviation from the central value, while jarque-bera captures the normality of the series. the series fulfills the normality condition when the corresponding probability value exceeds 5% benchmark. overall, descriptive properties are satisfactory for further estimation. table 1: descriptive properties of data observations mean max. min. sd jarque-bera p-value lntr1 28 13.335 13.965 12.819 0.410 3.336 0.189 lntr2 28 20.407 20.843 20.014 0.260 3.213 0.201 fd 28 22.637 28.736 15.386 4.139 1.603 0.449 ed 28 941.234 1222.524 741.801 140.412 2.156 0.340 sm 28 22.679 46.537 6.781 10.434 2.674 0.263 er 28 62.045 105.455 21.707 27.371 1.787 0.409 determination of integration order is an essential requirement for reliable estimation. table 2 reports adf results for the stationary condition. other than ed, and er rest of all variables are nonstationary at level [i(0)], as corresponding t-statistics is less than dickey-fuller critical value at 5% significance level, however, refer to 1 st difference [i(1)] tr1, tr2, fd, and sm satisfy the stationarity review of economics and development studies, vol. 6 (2) 2020, 229-244 236 condition as t-statistics is greater than df critical value. therefore, the choice is ardl is suitable for estimation particularly for this mixed integration order. table 2: augmented dickey-fuller test statistic for stationary table 3 shows the ardl bounds test output for model-1 and 2. according to the ardl bounds test, a long-run relationship exists among variables, when the f-stat value exceeds the upper bound value for a chosen level of significance. in this table, at 5% confidence interval f-stat value for model-1 (3.92) is greater than critical upper bound value at 5% and 1% level of significance, and for model-2 at all three levels of significance that reveals a long run relationship among tr and set of predictors (fd, ed, sm, and er). therefore, we reject the null hypothesis of no cointegration and accept the alternative, which holds the existence of cointegration. this implies that economic development, exchange rate, and international tourism are having a long-run association. table 3: ardl bounds test for long run relationship table 4 presents some important attributes of ardl bounds testing model and long-run dynamics concerning both models. in the first portion demonstrates the long-run coefficients adjusted r-square and f-statistics, while the second portion of this table shows the diagnostic properties of the estimators. adjusted r-square for both models are reasonable in explaining the prediction power that shows that model-1 predicts 96% variation in tourism, and model-2 explains 93%. the individual coefficients of all indicators of ed show a positive and significant association with tr. this implies that at level at 1 st difference variable t-stat c.v (5%) t-stat c.v (5%) tr1 -2.128 -3.587 -4.903*** -3.595 tr2 -2.121 -3.468 -3.468** -3.120 fd -2.565 -2.898 -3.467** -3.465 ed -2.898** -2.540 -3.463** -3.277 sm -1.832 -2.902 -2.902** -2.877 er -3.719** -3.622 -3.539** -3.223 (*) and (**) indicates p-value significant at 5% and 1%. null hypothesis: “variable has unit root / data in not stationary”. criteria: if p-value (< 0.05  t-stat > critical value at 5% significance level) the hypothesis is rejected, otherwise accepted. f-statistic value critical value bounds model-1(tr1) 3.92** significance i0 bound i1 bound 10% 2.20 3.09 5% 2.56 3.49 model-1(tr2) 4.65*** 1% 3.29 4.37 (*), (**) denotes significance at 5% and 1% level respectively. null hypothesis: no long-run relationships exist. the long-run relationship holds when f-stat exceeds upper bound at the chosen significance level. review of economics and development studies, vol. 6 (2) 2020, 229-244 237 ed is a long-run source that attracts the international tourists to visit memorial places of pakistan. interestingly we find that exchange rate is vital in attracting the inward tourism in pakistan over long-run. significant f-statistics advocates that the relevant variables are considered for estimation. the second part of table 4 illustrates the diagnostics and stability features of the estimators such as serial correlation, heteroscedasticity, ramsey reset, and cusum statistics respectively. all diagnostics testing reveals that the estimators are free from serial correlation, and heteroscedasticity, and ramsey reset and cusum statistics confirm the stability condition of the estimators. the cusum and cusum square for stability are tested based on the following hypothesis. null hypothesis: parameters are stable. criteria: if blue lines lie between two red lines, we accept the null hypothesis, otherwise accept the alternative. therefore, the graphical depiction in figures 1-4 (appendix), shows that the blue line moves between two red lines for both cusum test and cusum square tests, ensures the stable and systematic movement of predictors over the study period. thus, our parameters fulfill stability conditions. table 4: ardl long-run dynamics and diagnostics ardl long-run model (1) model (2) variable tr1 tr2 fd 0.199*** 0.108*** (3.21) (2.50) ed 0.299*** 0.297*** (3.19) (3.49) sm 0.117** 0.074 (2.15) (0.42) er 0.179*** 0.372*** (4.39) (4.38) c 3.587*** 2.298*** (7.38) (5.34) adjusted r-squared 0.959 0.934 f-statistics 66.253 40.361 [0.000] [0.000] diagnostic and stability testing lm test of the breusch-godfrey series correlation: 0.941 0.970 [0.415] [0.403] heteroscedasticity test: breusch-pagangodfrey 0.693 1.045 [0.718] [0.449] ramsey reset test 0.820 0.670 [0.426] [0.513] cusum test stable cusum square test stable note: (***) (**) and (*) indicate significance at 1%, 5% and 10% respectively. robust t-stat is in parenthesis. numbers in quads are pvalues with respect to related statistics. review of economics and development studies, vol. 6 (2) 2020, 229-244 238 the ecm confirms the long-term association between variables identified by the ardl bounds test. for a long-term equilibrium relationship, it is essential that the sign of the error correction term be negative and statically significant. table 5 shows that the coefficient for ecm is negative and predicts that the system corrects the imbalance of the previous period with an annual adjustment rate of 42% and 32%, respectively, for each model. similarly, economic development indicators have proven to be positive in the short term and are a major contributor to tourism in pakistan. the exchange rate has a negative impact on tourism in the country; this is likely due to the devaluation of the local currency against the us dollar. table 5: short-run dynamics and speed of adjustment model-1 model-2 δfdt 0.229*** 0.189*** (3.26) (2.50) δedt 0.120* 0.170*** (1.82) (4.36) δsmt 0.145*** 0.056*** (2.52) (3.78) δert -0.134*** -0.103*** (-2.85) (-2.88) ecmt-1 0.424*** 0.323*** (-5.60) (-3.11) note: (***) (**) and (*) indicate the significance at 1%, 5%, and 10%, respectively. robust t-stat is in parentheses. the sign of ecm coefficients should be negative and statistically significant to ensure long-term association between variables. table 6 portrays the collinearity results captured through the variance inflation factor (vif). if the calculated value of vif is less than 5, the concerned predictor is considered to be free from collinearity problem. vif for fd (3.590), ed (2.706), sm (3.003) and er (3.1) is less than five. thus consequent estimation is not suffering from collinearity problem. table 6: variance inflation factor variable variance vif fd 0.009 3.590 ed 0.004 2.706 sm 0.002 3.004 er 0.005 3.100 note: vif value should be less than 5, and if holds, the predictors are not having multicollinearity problem. table 7 reports the vecm granger causality results of the reference variables. the sources of causation are divided into short-run and long-run. a left designated portion of the table shows the short-run causal flow for each pair of variables, and the rightmost column shows the long-run attribute. we find that there exists a bidirectional causal flow between; fd − tr, ed− tr, er− tr, fd−sm, review of economics and development studies, vol. 6 (2) 2020, 229-244 239 fd−ed, ed−er, sm−er and a unidirectional causal flow from er−fd. this implies that the parameters estimated in this study are worthwhile for immediate policy actions. about the long-run vecm granger causality affirms the findings of ardl bounds test and ecm as to the cointegration between tr, fd, ed, sd, and er. the findings suggest that these variables are equally important in short-run and longrun. the policymakers need to understand the dynamic nature of this association for effective policy formulation. table 7: vecm granger causality results sources of causation dependent variable short-run long-run δtrt δfdt δedt δsm t δert ecmt-1 δtrt 2.71** 6.16** * 0.34 2.934** -8.15** 0.042 0.001 0.84 4 0.023 0.023 δfdt 7.09** 2.85** 0.77 2.695 -22.56*** 0.029 0.024 0.67 9 0.260 0.004 δedt 6.86** 1.38 3.81 5.382* -16.55** 0.032 0.503 0.14 9 0.068 0.035 δsmt 1.72 5.35* 5.64** 5.515* -7.60** 0.424 0.069 0.044 0.064 0.042 δert 4.42* 7.57* * 6.94** 4.69 * -14.21* 0.092 0.023 0.031 0.09 6 0.077 note: (***) (**) and (*) indicate the significance at 1%, 5%, and 10%, respectively, at which null hypothesis for no causation is rejected, while numbers in parenthesis are corresponding p-values. 5. conclusion this study examines how economic development is attracts the international tourism in the context of pakistan. the study uses ardl testing for long-term relationship, the ecm for a short-term relationship, and vecm granger causality to determine the direction of causal flow. the study uses annual time-series data from the ceic and world bank databases for the period 1990-2017. we find that the ardl model used is free of serial correlation and heteroscedasticity and satisfies the stability condition. empirical evidence documents that there is a long-run connection between economic development and international tourism in pakistan. in particular, the revenues received from international tourists can be used for the economic well-being of a country in general and the tourism department in particular. according to khalil et al. (2007), there is a strong relationship among tourist receipts, the number of arrivals and economic expansion. at the other edge of the spectrum, ed of a country attracts international tourists, facilitated by the widespread financial sector, and inspired by a wide range of well-developed parks, viewpoints and more importantly natural beauty in north belt of review of economics and development studies, vol. 6 (2) 2020, 229-244 240 pakistan, and kashmir. a reasonable amount of literature is found on the impact of tourism revenues on ed – yet the studies are rare in context of emerging markets such as pakistan. this paper examines cointegration between ed and tr, using the robust bounds testing approach and vecm granger causality. novelty stems from the perspective that there is no formal evidence found on cointegration between ed and tr from pakistan. this research is a pioneering effort that examines the cointegration between ed measures such as domestic credit, per capita gdp, market capitalization and their long-run association with tourism revenue and a number of arrivals in pakistan. the study takes into account only pakistan to test the long-run relationship of ed and tr. nevertheless, it contributes to the existing literature on this vital phenomenon. in addition, it offers policy implications to focus on three economic dimensions; economic development, financial development, and stock market development, which subsequently attracts international tourism. moreover, an intuitive sense, it promulgates national culture and image across national borders and strengthens the national treasury as well. tourism improves the standard of living (hrubcova et al., 2016). pakistan tourism department needs to revisit the policies to offer a more lucrative and amiable environment to international tourists. in line with the findings of milne and ateljevic (2001), media should play its pivotal role more effectively to promotion national culture and core tourists’ hubs that will in turn lead towards economic development and sound image of pakistan worldwide. references akama, j. s., & kieti, d. (2007). tourism and socio-economic development in developing countries: a case study of mombasa resort in kenya. journal of sustainable tourism, 15(6), 735-748. antonakakis, n., dragouni, m., eeckels, b., & filis, g. (2016). tourism and economic growth: does democracy matter? annals of tourism research, 61(c), 258-264. azeem, a., aziz, b., & jadoon, a. k. (2015). financial development: a contributing agent of economic growth-study of selected asian countries. pakistan business review, 17(2), 397-415. balaguer, j., & cantavella-jorda, m. (2002). tourism as a long-run economic growth factor: the spanish case. applied economics, 34(7), 877-884. breitung, j. (2001). the local power of some unit root tests for panel data nonstationary panels, panel cointegration, and dynamic panels (pp. 161-177): emerald group publishing limited. culiuc, m. a. (2014). determinants of international tourism: international monetary fund. dickey, d. a., & fuller, w. a. (1979). distribution of the estimators for autoregressive time series with a unit root. journal of the american statistical association, 74(366a), 427-431. doi: 10.1080/01621459.1979.10482531 dickey, d. a., & fuller, w. a. (1981). likelihood ratio statistics for autoregressive time series with a unit root. econometrica, 49(4), 1057-1072. doi: 10.2307/1912517 dritsakis, n. (2004). cointegration analysis of german and british tourism demand for greece. tourism management, 25(1), 111-119. du, d., lew, a. a., & ng, p. t. (2016). tourism and economic growth. journal of travel research, 55(4), 454-464. engle, r. f., & granger, c. w. (1987). co-integration and error correction: representation, estimation, and testing. econometrica: journal of the econometric society, 251-276. faber, b., & gaubert, c. 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(1991). estimation and hypothesis testing of cointegration vectors in gaussian vector autoregressive models. econometrica: journal of the econometric society, 1551-1580. kennell, j. (2016). tourism and economic development in suffolk. khalil, s., kakar, m. k., & malik, a. (2007). role of tourism in economic growth: empirical evidence from pakistan economy [with comments]. the pakistan development review, 985-995. liu, z. (2003). sustainable tourism development: a critique. journal of sustainable tourism, 11(6), 459475. mackinnon, j. g., haug, a. a., & michelis, l. (1999). numerical distribution functions of likelihood ratio tests for cointegration. journal of applied econometrics, 563-577. malik, s., chaudhry, i. s., sheikh, m. r., & farooqi, f. s. (2010). tourism, economic growth and current account deficit in pakistan: evidence from co-integration and causal analysis. european journal of economics, finance and administrative sciences, 22, 21-31. milne, s., & ateljevic, i. 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(2016). dynamic relationship between urbanization, energy consumption and environmental degradation in pakistan: evidence from structure break testing. journal of management sciences, 3(1), 01-21. sinclair, m. t. (1998). tourism and economic development: a survey. the journal of development studies, 34(5), 1-51. srinivasan, p., & kalaivani, m. (2016). tourism expansion and economic growth in asia-pacific nations: a panel causality approach. ullah, z., & wizarat, s. (2016). long term relationship between stock market development and http://dx.doi.org/10.1016/s2212-5671(16)30351-3 http://dx.doi.org/10.1016/j.tmp.2016.08.003 review of economics and development studies, vol. 6 (2) 2020, 229-244 242 economic growth in south asia: panel data & ardl model estimations. pakistan business review, 18(3), 541-557. wef. (2017). global competitiveness report world economic forum, new york: usa inc. zhang, l., & gao, j. (2016). exploring the effects of international tourism on china's economic growth, energy consumption and environmental pollution: evidence from a regional panel analysis. renewable and sustainable energy reviews, 53, 225-234. review of economics and development studies, vol. 6 (2) 2020, 229-244 243 appendices figure 1. cusum test (model-1) -12 -8 -4 0 4 8 12 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 cusum 5% significance figure 2. cusum square test (model-1) -0.4 0.0 0.4 0.8 1.2 1.6 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 cusum of squares 5% significance review of economics and development studies, vol. 6 (2) 2020, 229-244 244 figure 3. cusum test (model-2) -12 -8 -4 0 4 8 12 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 cusum 5% significance figure 4. cusum square test (model-2) -0.4 0.0 0.4 0.8 1.2 1.6 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 cusum of squares 5% significance review of economics and development studies vol. 5, no 1, march 2019 1 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads land reforms in central asia: the transition from production cooperatives to services cooperatives 1 muhammad waqas, 2 mian muhammad saleem 1 area study centre, university of peshawar, pakistan. 2 department of law, awkum, pakistan. article details abstract history revised format: february2019 available online: march 2019 at the eve of independence, the political leadership of central asian republics was committed towards privatization. different liberalization strategies were announced that would follow effective state legislation. it was intended that the privatization program would be extended towards agriculture sector and land reforms would be introduced. but the literature reveals that relatively very little development has been made in this domain and no detailed plan for agriculture reforms or efficient legislation on privatization of agriculture land has been adopted. this study analyzes the imperial and post-imperial era land tenure arrangements in the central asian republics that includes an analysis of the land tenure legislations made so far in the republics during soviet and post-soviet era. an analysis of the legislations yields the dramatic presence of imperial legacy in the land tenure system and conspiracy of silence on the land reforms in central asian republics. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords land tenure arrangements, collective farming, private ownership, production cooperatives, services cooperatives jel classification: d24, q12, q15, l84 corresponding author’s email address: advwaqas89@yahoo.com recommended citation: waqas, m. and saleem, m. m. (2019). land reforms in central asia: the transition from production cooperatives to services cooperatives. review of economics and development studies, 5 (1), 1-3 doi: 10.26710/reads.v5i1.517 1. introduction the semi-arid central asian republics (car’s) had a total of 274.4 million hectare arable land at the time of independence from soviet union (imf, 1992). see the table below for individual republic’s data. land tenure becomes vital in such scenarios. table 1: arable.land and.sewn.area in.central asian.republics in 1990 ( million hectare) state territory arable land sewn area kazakhstan 271.7 197.6 35.2 kyrgyzstan 19.8 10.1 1.2 tajikistan 14.3 4.3 .8 turkmenistan 48.8 35.8 1.2 uzbekistan 44.8 26.6 4.1 land tenure relates individuals with land as human beings have feet and no roots (grieves, 2008).the association of human with land is ensured somehow or another through land tenure arrangements. land reforms are basically the process of changing these arrangements. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 2 the outspread classification of land tenure arrangements can be delineated by three distinct characteristics based on the rights over the land. the first one is the sole ownership which establishes the sole rights of earnings, inheritance, alienation and abusus. the other form is the usufructuary ownership which establishes limited rights over the holding. the rights are limited to usus and fructus only. the owner is not entitled to the right of alienation and abusus. the third kind is collective ownership vested in a firm or organization. the individual as a shareholder possess corporate rights. land reforms can be termed as an attempt to transition from one kind of land tenure arrangements to another (de janvry, 1981). state being the driving force in land reforms assign and reassign the ownership rights. the legislation made so far in car’s in wake of land reforms initiatives did not satisfy the true essence of land reforms. the whole legislation made so far in the context of land reforms, since the collapse of the soviet union in 1991, is mere regulatory arrangements for the state owned collective farms. the republics follow the former soviet style collective model (kolkhoz); where the state confiscates the private ownership rights of individuals. the state collective model of land reforms was introduced in mid 1920’s in the former soviet union to boost production (gleason, 1993). the soviet imperialist’s collective model (kolkhoz) replaced the former russian imperialist individual farming model i.e., khutors. khutor was introduced in imperial russia through stolypin agrarian reforms in 1906-1914 that revolutionize the traditional commune (obshchina) form of agriculture (lieven, 2006). the car’s inherited the imperial legacy and continued with the soviet model even after independence in 1991. although the soviet style production cooperatives have been transformed and modified into services cooperatives through timely legislations and individuals are entitled to paper shares yet the sole-ownership of land vests in state. cooperatives are associations, of individuals or legal entities, striving towards a collective goal (services or production). the individuals or other legal entities forming such associations become its members. the members are provided with shares in the property of association in return for their investment in the collective capital of the association in the form of cash deposits or other valuable assets. the profits earned by the cooperatives are distributed among its members in proportion to their shares. a member can leave a cooperative anytime without the approval or consent of other members. a member can only be removed from membership on violation of the constitution of the cooperative. the expulsion must be backed by a unanimous vote of the general assembly. on expulsion, the member is entitled to his share in the form of cash or any other kind as prescribed by the charter of the cooperative. the transfer of shares by a member can be made only on the consent and approval of other members of the cooperative. the shares are not freely marketable (csáki & lerman, 2000). cooperatives are analogous to the business corporations; the only point of difference is that the former aims to maximize the benefits for its members and the later to maximize the profits respectively (bhuyan et al, 1998). the international cooperatives alliance (ica) describes production and services cooperatives as follows:  production cooperatives are those cooperatives in which the members are collectively involved in the process of production. the production might be of manufacturing, agriculture commodities, or services of any kind. production cooperatives include agriculture production cooperatives where the members are jointly involved in cultivation of collective resources of cooperative (farms and machinery) thereby producing various farm products. the soviet era collective farms are example of agriculture production cooperatives.  the other kind of cooperatives is the services cooperatives in which the members are provided with services for their independent production of the cooperatively held land. the car’s and all other commonwealth independent states (cis) continued the soviet established land pools (collective farms) and provide marketing services to the joint production instead of providing it to individual members. however the cis production cooperatives also provide certain services to the members like providing household plots and other externalities of the collective production, thereby developing a unique kind of cooperative–a mixture of production and services cooperative. the sway of legislation regarding land in car’s from soviet-era productive cooperatives to higgledy-piggledy services cooperatives in the wake of land reforms develop the conspiracy of silence on private ownership of land by the state actors. review of economics and development studies vol. 5, no 1, march 2019 3 the figure below illustrates the right to private ownership of land in car. the state authorities are completely silent on private ownership and have delivered only a few rights. the individuals are provided with paper shares and not concrete plots of the land in almost all the car. table 2 state private ownership” privatization strategy” allocation strategy” “transferability” kazakhstan household plot none shares buy and sell of private plots dubious uzbekistan none none intra-farm leasehold” use rights non transferable” turkmenistan all land none intra-farm leasehold use right non transferable tajikistan none none shares use rights transferable” kyrgyzstan none none shares use rights transferable the transitional economies of car’s have made very little progress in land reforms. the state authorities have not taken any solid steps in this regard. the mere regulatory legislation and transition from production cooperatives to chaotic services cooperatives does not satisfy the need for land reforms in true essence. car’s are hesitating from taking concert steps to ensure complete privatization of land. the supportive arguments established against the privatization are the traditional inconsistency of car’s with private ownership and the odds of disruption of already installed network of farms; though both arguments are subject to debate. the car’s remained under soviet communist-imperialism and is reluctant to privatization programs. although the case of arable land should be an exception to both systems of communism and capitalism as private ownership of land (house-hold land) neither satisfies the primary characteristic of capitalism i.e. production for profit; as agriculture land can be used for household food production unlike commercial lands which are exclusively used for profits; nor it can be owned collectively or by state as it would affects the individual’s basic right and would strengthen the impression of monarchy respectively. it should be dealt as natural right of an individual like the right to life and liberty. the right to have private property is the inherent right of every individual and should be respected accordingly in every system and society. however, there should be a definite system for division and distribution of arable land. distinction should be made between family farms and farms used exclusively for commercial purposes. certain limitation should be imposed on private ownership. references bhuyan, s., leistritz, f. l., & cobia, d. w. (1998). non-agricultural cooperatives in the united states: roles, difficulties, and prospects. department of agricultural economics, agricultural experiment station, north dakota state university. csáki, c., & lerman, z. (2000). farm sector restructuring in belarus: progress and constraints (vol. 475). world bank publications. de janvry, a. (1981). the agrarian question and reformism in latin america (p. 203). baltimore: johns hopkins university press. gleason, g. (1993). a collective action analysis of land and water policies in the new states of central asia. grieves, v. (2008). aboriginal spirituality: a baseline for indigenous knowledges development in australia. the canadian journal of native studies, 28(2), 370. international monetary fund. (1992) economic review: kazakhstan. washington dc: imf international monetary fund. (1992) economic review: kyrgyzstan. washington dc: imf international monetary fund. (1992) economic review: tajikistan. washington dc: imf international monetary fund. (1992) economic review: turkmenistan. washington dc: imf international monetary fund. (1992) economic review: uzbekistan. washington dc: imf lieven, d. (ed.). (2006). the cambridge history of russia: volume 2, imperial russia, 1689-1917 (vol. 2). cambridge university press. svetlana golovina, jerker nilsson, and axel wolz. (2012) the development of agricultural production cooperatives in the russian federation. journal of rural cooperation. volume: 40, number: 1, pp 43-58. review of economics and development studies vol. 5, no 2, june 2019 261 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads an investigation into effectiveness of technical and vocational education in pakistan 1 kamran siddiqui, 2 abdul hameed, 3 shabbir akbar, 4 mumtaz m. khan 1 phd scholar, university of management and technology lahore, pakistan, sidiqui_kamran@yahoo.com 2 professor, university of management and technology lahore, pakistan, drhameedpk@gmail.com 3 deputy secretary, establishment division islamabad, pakistan. 4 professor, university of engineering and technology lahore, pakistan, mumtazmkpk1@gmail.com article details abstract history revised format: may 2019 available online: june 2019 an investigation and validation of effectiveness of technical and vocational education at secondary level for poverty alleviation is need of the day. four sub-components such as locale, age, education and socio economic status have been considered important in determining the effectiveness of technical & vocational education at secondary level for poverty alleviation. out of 815 pass outs in matric technology and vocational education during 2013, 2014 and 2015, the parents of 494 were selected through proportionate stratified random sampling technique for study. the study established that there is a significant positive strong relationship between parents‟ perception towards effectiveness of technical &vocational education and poverty alleviation. the curriculum, assessment & evaluation and social aspects significantly and positively predicted the outcome variable poverty alleviation. the study is useful for policy makers, professionals, researchers and practitioners. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords course objectives, physical facilities, curriculum, assessment & evaluation, social aspects and academic facilities. jel classification: a20, p36, corresponding author‟s email address: sidiqui_kamran@yahoo.com recommended citation: siddiqui, k., hameed, a., akbar, s. and khan, m. m., (2019). an investigation into effectiveness of technical and vocational education in pakistan, review of economics and development studies, 5 (2), 261-268 doi: 10.26710/reads.v5i2.599 1. introduction first time the “poverty line” was introduced by mollie orshansky in 1963 based upon family expenses for three times adequate basic needs i.e. food, health facility, shelter and safety (bradshaw, 2006). it is significant to know that basic needs may be dissimilar from person to person according to social definition and past experience. world bank (2010) states that person is a poor if he/she cannot meet daily 2350 calories intake or has income lower than 2 us $ a day. thus, a significant majority of the people in world is living in low income (miankhail, 2014). there are 29.19 % population with income less than 2 us $ per day in pakistan (haroon, 2017). human capital approach says that education has key role in poverty reduction. this emphasizes direct relationship between education and earnings. second approach says that education is actually a basic need and it is important to provide the masses equally especially in rural areas (jandhyala, 2003). ojo & vincent (2000) view that education has multi-dimensional effects on man. it is not only a visa to victory, a permit to the mysterious and a way to great success. education enhances the ability of empowerment as well as gives purification, civilized behaviors, enlightenment, and confidence. servaas (2008) explains that with education a person knows his inner as well as outside environment. education is the base for national growth and poverty alleviation. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 2, june 2019 262 all over the world there is a sufficient need of education for skill and vocation. technical and vocational education (tve) is one of the considerable justifications of better earning of people having this form of education than others. the individuals who have technical or vocational education get appropriate employment chances than the people who have general education. therefore, tve reduces disparity and poverty by improving the skills as well as efficiency of the whole population (tarabini, 2010; olaitan, 2012). tve enhances the skills, information and approaches which are compulsory for employment (pauline, 2008). tve is that part of education that enhance the provable skills of individuals which ultimately pays back in the shape of better economy and well being (idris and oseni, 2011). pakistan is a developing country with sufficient set up of industry facing the problem of scarcity of skilled and semi-skilled labor. it is therefore, important to pay more attention to provide tve from schooling. (khwaja, 2009). technical education & vocational training in pakistan is structured at federal level through navttc as well as at provincial level through tevta (tushar 2013). punjab vocational training council and certain industries through workshops are providing tve in the province. 2. literature review according to universal declaration of human rights (udhr) 1948, as resolution 217 a (iii), everyone has the right to get basic facilities of life not for him alone but also for his family and dependents. it is fact that we need to access safe food and water, clothing, shelter, and basic medical care in order to live well, indeed, in order to live (thomas, 2007). poverty has been admitted as massive, systematic and continuous violation of human rights. the poor is in fact injured party and it is duty of government, the international community and ultimately each citizen to compensate. in this regard, a strong interest should be established in alleviating poverty on urgent basis (sane, 2003). now the question arises what is poverty? in economic context, poverty is a situation in which a person has fewer resources and consequently less welfare and joys to live on. poverty is also defined as a situation in which command over resources falls below a certain level (robert & felicity, 2003). firstly, poverty is considered in terms of deprivation in some materials of wellbeing which can usually be assessed in terms of money (edward, 2008). secondly, poverty is considered not only deprivation of basic needs but also secondary needs as health, literacy, communication, no threat from future, having job, availability of pure water, rights of property and freedom (cristovam et al. 2006). thirdly, poverty is subjective and has physical as well as psychological aspects that affect its victims to hunger, insecurity, violence, crime, discrimination, political repression and victimization (aliyu & abu, 2013). according to world bank benchmark, a poor person is one who lives on $2 or below a day. whereas 2735 million people in the world out of 6150 million are living on less than that. about 850 million people are under-nourished, over 1000 million have no access to pure water and 2600 million lack access to basic sanitation. in the world 2000 million people have no medical facility, 1000 million are shelter less and 2000 million are living without electricity (pogge, 2007). haroon (2017) says that poverty is prevalent in pakistan and is mostly a rural observable fact. according to asian development bank (2017) poverty rate in pakistan is 29.19 besides 40 percent of the urban population have to live in slum areas (haroon, 2017). nations are built on the prosperity of the local people whereas prosperous factors are brought through education. it is worldwide admitted fact that education helps the people in research, better financial system, maintaining a living, adopting changing trends in technology (undp, 2010). according to yusuf (2008) education, in every aspect is one of basic elements which can assist to achieve economic development by investing in human capital. omoniyi (2013) and aina (2008) state that education is a factor which can uproot poverty. deraniyagal (2005) and assaad and rouchdy (1999) have the view that education can significantly contribute technological ability & changes in industry. education can contribute in many spheres even in peasant farming (orazem, glewe & patinos, 2007). educated people get more wages in the labour market which is the result of their higher productivity. in middleincome countries, it has been observed that they developed markets for educated labour through education (ferreira & litchfield, 2012). omoniyi (2013) states that education surely makes the society well off but if the nation is provided tve, it can boost the society more and bring all the changes which the developed countries have. tve has very important role review of economics and development studies vol. 5, no 2, june 2019 263 in improving the capacity of production which is essential part of human resource development (akoojee, 2005 & nwankwo, 2013). the need of a country lies in qualitative and skilled workers (lamsal, 2012). for this purpose, almost all the countries are trying to get highly technical and vocational skilled persons in competitive environment to cope with employability, social inclusion and poverty reduction. tve provides not only knowledge but also practical expertise and behavior for the better performance in the labour market (keith, 2006) and william 2002). okon, eminue and leema (2016) depict that sufficient equipment and tools; material and text books as well as well qualified and experienced teachers are the basics for qualitative skills training. shannon, twale and moor (2003) say that consistency, unity and management are important for effective tve system. goran (2010); audu, kamin, & balash (2013) state that practical education can make men of nation productive and self-reliant. cedefop (2009) further says that effects of tve on social inclusion are also uncertain due to the insufficient reforms. hillage and pollard (2012) have the view that effectiveness of tve is associated with competency of teachers in the context of their theoretical knowledge, practical and pedagogical skills and having knowledge with new technologies. anil (2008) gives his opinion that an institution works effectively and efficiently to produce trained and qualified persons. but there are so many factors which may affect directly or indirectly the effectiveness of an institution (sangeeta, 2007). administration, infrastructure, teaching effectiveness, students, interaction with industry and society and curricular and co-curricular activities. research and development are some of the important factors. effectiveness of a technical institution, management and administration play a great role (benavot, 2010). technical institution must have building, equipped lab, library, canteen, hostels, workshops, halls and playground (beynon, hallak & postlethwaite, 2007). tirmazi (2006) has the view that tve is the best source to train the people, enhance economy and ultimately alleviate poverty. pakistan also has accepted this reality and established an effective structure of tve from secondary to higher level (mustafa, abbas & saeed, 2005). there are 327 institutions of tve in pakistan at national level and under control of nvttc. while in punjab, 200457 students are enrolled in 402 institutions under control of tevta. this study focused on the perception of parents of matric technology and vocational students at secondary level from 2013 to 2015 in sixty institutions, 494 out of 815 parents of the students matric vocational technology were selected. (http://www.tevta.gop.pk/img/successbygrapg/tevta_institute-popup.png). the major objective of the study was to investigate the perception of parents regarding the effectiveness of technical and vocational education at secondary level as a tool for poverty alleviation in pakistan. 3. research questions the study addressed core questions related to tve effectiveness in poverty alleviation. is there any significant difference between urban and rural parents‟ regarding course objectives, physical facilities, academic facilities, curriculum, assessment & evaluation and social factors of technical & vocational education as a tool for poverty alleviation; is there any significant difference among age groups of parents regarding course objectives, physical facilities, academic facilities, curriculum, assessment &evaluation and social factors of technical & vocational education as a tool for poverty alleviation; is there any significant difference among academic qualification groups of parents regarding course objectives, physical facilities, academic facilities, curriculum, assessment & evaluation and social factors of technical & vocational education as a tool for poverty alleviation; and is there any significant impact of course objectives, physical facilities, academic facilities, curriculum, assessment & evaluation and social factors of technical & vocational education on poverty alleviation scale as predicted by parents? 4. research methodology this study was descriptive in nature. a questionnaire as a research instrument was developed to find out of the parents‟ perception about effectiveness of technical & vocational education as a tool for poverty alleviation in pakistan. 4.1 instrumentation the questionnaire had three parts; demographic detail, effectiveness of tve at secondary level and the opinions about poverty alleviation. the questionnaire was also translated in urdu to make it more respondent friendly. according to guidelines of experts, the instruments were modified where necessary. finally questionnaires on five http://www.tevta.gop.pk/img/successbygrapg/tevta_institute-popup.png review of economics and development studies vol. 5, no 2, june 2019 264 points likert scale were launched in the field. the response options were strongly agreed (sa), agree (a), undecided (u), disagree (d), and strongly disagree (sd) numbered 5, 4, 3, 2, and 1 respectively for quantifying the responses. the chronbach alpha for parents‟ scale was 0.917 higher than 0.70. it indicates that the data set was consistent and reliable at acceptable level to proceed further. 4.2 population of the study punjab province was selected as population of the study being a well-populated province and approachable for the researcher 815 parents of all pass out students of technical and vocational education at secondary level in 2013, 2014 and 2015 from all over the punjab province are population of the study. source:http://www.tevta.gop.pk/institutes.php 4.3 sample design stratified random sampling technique was adopted to select a true representative sample from large and disperse population strata. in the first step, thirty-three districts of punjab were selected in which matric technical & vocational education is being offered. tevta has divided punjab into three zones, namely central zone with 11 districts; gujranwala, gujrat, hafizabad, kasur, lahore, mandi baha-ud-din, nanakana sahib, narowal, okara, sahiwal and sheikhupura; north zone with 11 districts; attock, bhakkar, chakwal, chiniot, jhang, jhelum, khushab, mianwali, rawalpindi, sargodha and t.t singh; south zone with 11 following districts; bahawalnagar, bahawalpur, d.g khan, khanewal, layyah, lodhran, multan, muzaffargarh, r.y. khan, rajanpur and vehari. source:http://www.tevta.gop.pk/institutes.php proportionate stratified random sampling technique was used to select the parents of matric technical and vocational education from each district. from each district at least 60% parents of passed out students were selected to provide representation of each district. in third stage the parents of passed out students from all institutions of all three zones and districts were selected randomly and proportionally. in this way, the data from 494 parents instead 489 were received out of 815 total parents of passed out students in the years 2013-15 from all districts in all three zones. table 1: breakup of parents by locale table 1 reveals that total sampled parents are 494. further it shows that 150 (30.4%) were rural parents and 344 (69.6%) urban parents. there were 157 (31.8%) parents having age 30-35 years, 198 (40.1%) having age 36-45 whereas 139 (28.1%) parents having age 46 years or above. intermediate, graduation and masters parents were in the ratio of 95 (19.2%), 224 (45.3%) and 175 (35.4%). total 261 (52.8%) from low class, 193 (39.1%) from medium class and 39 (7.9%) from high class were selected randomly as reflected above. 4.4 analysis and interpretation of data the statistical design for data analysis was prepared according to the research questions of the study. quantitative analysis was made using spss version 22. descriptive analysis was carried out; one-sample t test, pearson test and linear regression test were used in inferential statistical analysis. 4.4.1 one sample t-test (h1): there is significant difference between sample mean scores on the „poverty alleviation' factor from parents and cut-point score. (h0): there is no significant difference between sample mean scores on the „poverty alleviation‟ factor from parents and cut-point score. rural urban total 30-35 36-45 >46 total intermediate graduation masters total low class medium class high class total frequency 150 344 494 157 198 139 494 95 224 175 494 261 193 39 494 percent 30.4 69.6 100 31.8 40.1 28.1 100 19.2 45.3 35.4 100 52.8 39.1 7.9 100 demographic information statistics locale age education ses http://www.tevta.gop.pk/institutes.php http://www.tevta.gop.pk/institutes.php review of economics and development studies vol. 5, no 2, june 2019 265 table 2 n m(s.d) t-value df „p‟ poverty alleviation 494 96.21 (18.31) 24.15 493 0.000 *population cut point 88 the t-value = 24.15; p-value is 0.000, which is less than the significance level of 0.05. the null hypothesis is rejected and alternative is accepted. it is concluded that parents are satisfied on „poverty alleviation‟ through tve. table 3: pearson product moment correlation coefficient between parents’ perception towards effectiveness of technical & vocational education at secondary level and poverty alleviation variable „r‟ „p‟ effectiveness --poverty alleviation .733 .000 table 3 shows the relationship between parents‟ perception towards effectiveness of technical &vocational education and poverty alleviation. the results revealed that there is significant positive strong relationship exists between students‟ perception towards effectiveness of technical &vocational education and poverty alleviation (r = .733, p < .05). table 4: linear regression for the effect of technical & vocational education factors on poverty alleviation as predicted by parents model r r square adjusted r square std. error of the estimate 1 .767a .588 .584 6.654 a. predictors: (constant), social aspects, curriculum, assessment and evaluation, physical layout, academic facilities f (5,493) = 139.559, p<.001 table 5 model unstandardized coefficients standardized coefficients t „p‟ b std. error beta 1 (constant) 3.037 4.045 .751 .453 physical layout .151 .078 .088 1.925 .055 academic facilities .038 .085 -.021 .441 .660 curriculum .404 .056 .296 7.233 .000 assessment and evaluation .377 .120 .118 3.131 .002 social aspects .545 .050 .432 10.955 .000 a. dependent variable: poverty alleviation in table 4, the linear regression displays the strength of relationship between factors of technical & vocational education and the poverty alleviation of parents with adjusted r2 = .584. this implies that course objectives, physical facilities, academic facilities, curriculum, assessment and evaluation and social aspects accounted for 58.4% of variation in parents‟ poverty alleviation. the model is good fit and significant. the β value = .404, p = .000) indicates that curriculum factor is significant predictor which has a positive association with the poverty alleviation. this means that an increase in one unit of parents‟ curriculum will increase their poverty alleviation by 0.404 units as indicated by unstandardized coefficient b. it is concluded that curriculum has a positive significant effect on the poverty alleviation as perceived by parents. the β value = 0.377, p = .000) indicates that assessment and evaluation factor is significant predictor which has a positive association with the poverty alleviation. this means that an increase in one unit of parents‟ assessment and evaluation will increase their poverty alleviation by 0.377 units as indicated by unstandardized coefficient b. it is concluded that assessment and evaluation has a positive significant effect on the poverty alleviation as perceived by parents. the β value = 0.545, p = .000) indicates that social aspects factor is significant predictor which has a positive association with the poverty alleviation. this means that an increase in one unit of parents‟ social aspects will increase their poverty alleviation by 0.545units as indicated by unstandardized coefficient b. it is concluded that social aspects has a positive significant effect on the poverty alleviation of parents. review of economics and development studies vol. 5, no 2, june 2019 266 therefore, the results revealed that curriculum, assessment and evaluation and social aspects significantly and positively predict the outcome variable poverty alleviation for effectiveness of technical & vocational education at secondary level. 5. findings and discussion the results of „pearson‟ product moment correlation coefficient between parents‟ perception towards effectiveness of technical & vocational education and poverty alleviation revealed that there is a significant positive strong relationship exists between parents‟ perception towards effectiveness of technical & vocational education and poverty alleviation. the rural parents‟ perceptions are higher than urban parents on academic facilities, curriculum, assessment & evaluation and social aspects factors. however, there was found no difference of locale on physical facilities factor; according to parents‟ perceptions tve is effective in poverty alleviation without age difference. there is no age difference was found in perceptions on physical layout, academic facilities, curriculum, assessment & evaluation and social aspects factors; the perception of the parents who had higher qualification is more favorable than the parents having low qualification on academic facilities. however, no academic qualification difference was found on physical layout, curriculum, assessment & evaluation and social aspects; according to parents‟ perceptions tve is effective in poverty alleviation without difference in socio economic status factor. there was found no socio economic difference in perceptions on physical layout, academic facilities, curriculum, assessment & evaluation and social aspects. it was concluded that there is significant positive strong relationship exists between parents‟ perception towards effectiveness of technical &vocational education and poverty alleviation. the curriculum, assessment & evaluation and social aspects are significantly and positively predicted the outcome variables poverty alleviation for effectiveness of technical & vocational education at secondary level. 6. recommendations based on the findings, it is recommended that the parents must be vigilant about the academic performance of their children; the parentteacher meeting must be arranged on weekly or monthly basis; the parents must visit the institutions frequently; the parents should inform to the school management about the lack of physical and academic facilities; parents must have awareness about the academic and skills oriented performance of their children; parents may also meet with employers‟ to know the success of their children at work place. references aina, t. 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(2008).education and poverty reduction: omission, fashion and promises. retrieved on 13 march, 2016 fromhttp://www.hrscpress.ac.za . http://www.hrscpress.ac.za/ review of economics and development studies, vol. 6 (2) 2020, 289-299 289 measurement of stock market crisis & its dimensions: evidence from pakistan a mehwish aziz khan, b eatzaz ahmad a lecturer, department of business administration, federal urdu university of arts, science & technology, islamabad, pakistan b sbp memorial chair, school of economics, quaid-i-azam university, islamabad article details abstract history: accepted: 05 may 2020 available online: 15 june 2020 this study explores the history of stock market crisis in the emerging market of pakistan from different perspectives over the period july-1997 to december-2016. to identify and measure the timing of crises occurrence and their various dimensions (magnitude of crisis, days to recovery, duration of crisis, depth of crisis, size of crisis, etc.), cmax methodology is employed. thus, the study adds to existing literature by studying the pakistani market in this regard and also proposing a method to quantify the intensity of crisis (within cmax framework). the results indicate that the two major crises of 1997-2002 and 20082012 are found to coincide with a number of major financial, economic and political crises in pakistan and around the world. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: stock market crisis, cmax, intensity of crisis jel classification: r53, r59, g10 doi: 10.47067/reads.v6i2.207 corresponding author’s email address: eatzaz@qau.edu.pk 1. introduction stock market is a platform where the trade of financial assets occurs through stock brokers. it is a part of the financial system and functions as the backbone of the economy of a country since it facilitates both savers and investors to exchange funds and earn income. proper functioning of stock market makes the financial system sound and the economy grows. however, changing internal and external factors such as political environment, government policies, law and order situation, global factors, integration among international economies and so on may create disturbances in the performance of stock markets. this may paralyze the whole economy in the form of massive losses and stock market crisis may occur. financial crises have existed since the time financial markets developed. they vary in their intensity and are usually assessed to measure the size of the economic ellipses. the effects of financial crises spread over a number of sectors, essentially the financial sector. in emerging and developed markets, stock volatility upsurges and stock prices decline throughout the crisis period; however, upshots are more prompt, abrupt and protracted in emerging markets (patel & sarkar, 1998). when a capital market undergoes a major and abrupt drop in stock prices, it is termed as stock market crash mailto:eatzaz@qau.edu.pk review of economics and development studies, vol. 6 (2) 2020, 289-299 290 heading towards an economic or financial crisis. share prices become prone to unexpected and huge declines. therefore, one of the major concerns of analysts, academicians, and practitioners is to investigate when and why the stock market crashes occur. to answer this question, it is essential to define exactly what a stock market crash is. literature defined it in different ways, for instance, it is an abrupt drop in stock prices below a specific threshold level during a particular time period (patel and sarkar, 1998). stock market crash is also defined as the deviation of market price of a stock from its fundamental value for a long time period (smith, suchanek, & williams, 1988). later on, siegel (2003) and illing and liu (2006) supported this definition. it is important to explain the difference between the two terms: crash and crisis. according to kole (2006), a significant/huge decrease in price of a single asset, sector or market is called a crash, whereas, crisis is defined as an uncertain period that may affect many assets and many markets. thus crash may be referred to a single or many days and crisis may be referred to various months. a crisis can be measured in discrete or continuous measures. discrete measure is represented by a binary variable that describes a crisis to come about when a certain threshold level of specific financial or economic variable is contravened. the difficulty of delineating specific thresholds is overwhelmed by continuous measures of crisis occurrence that evaluate the strength of a crisis on an uninterrupted scale. real exchange rates, nominal exchange rates, and speculative pressure indices are the examples. drops in equity market and in gdp are also considered as measures of crisis (ghosh and ghosh, 2003). researchers and practitioners widely focus on the issue of identification of the critical point, that is, the time when the transaction price plunges dramatically (sornette, johansen, & bouchaud, 1996; patel & sarkar, 1998). various approaches to model this unusual price movements or financial crashes are available. some of these techniques are quite simple. for example, mishkin and white’s (2002) crisis specification, which is commonly used in literature, signifies a crash when the stock market shows a drop of 20 percent or more in price index. another approach adopted in al-rjoub and azzam (2012) is to apply the chow breakpoint test to investigate the time of start and end of crash and confirmation of the structural breaks at these points. more sophisticated methods of crisis identification include cusp catastrophe proposed by zeeman (1976), log periodic power law (lppl) by jacobsson (2009), the method of cmax by patel and sarkar (1998). the frequency of crises in the world has increased in the last decade; for instance, global financial crises of 2007-2008 and more recently the chinese stock market (an emerging market) turmoil of 2015. like other markets, the emerging market of pakistan is also fragile and reactive to upsets and news as the history has witnessed a few financial crises. therefore, the present study aims to analyze the occurrences and measurement of financial crises in pakistani stock market during the past 20 years (july 1997 to december 2016). the study adopts conventional approach of cmax proposed by patel and sarkar (1998) to identify the occurrence and duration of crises. it is relatively simpler and has a wide applicability in identifying equity crises, specifying its timing and measuring its magnitude. this technique has not yet been employed for the emerging market of pakistan. therefore, following this approach, the study defines a stock market crash as an abrupt slump in an index price below a fixed decline rate as a threshold level specified by patel and sarkar (1998). each crisis may show a specific pattern, that is, some crises show more depth and small duration (takes less time to recover), some depict low depth but long duration (takes more time to recover), while some may be deeper as well as longer in duration. therefore, all crises cannot be placed under the review of economics and development studies, vol. 6 (2) 2020, 289-299 291 group of uniform events; each crisis has its own statistical properties. this study attempts to explain pattern of crisis in pakistan in various dimensions, which includes beginning of crash, beginning of crisis, date of trough, days to trough, days to recovery, date of recovery, minimum and maximum index value during crisis period, duration of crisis, depth of crisis, magnitude of crisis, and size of crisis. the study also proposes a method to quantify the intensity of crisis, that is, to what extent the crisis affects the stock market. the remaining part of this study is organized as follows. section ii presents methodology and data followed by section iii, which provides empirical results. section iv provides a discussion of the results and last section v concludes the study. 2. methodology and data 2.1 identification of crises log-periodic power law, cusp catastrophe and cmax are three comprehensive techniques to identify stock market crises but cmax has the advantage of being relatively simple and easily interpretable. another advantage of the technique is that besides detecting crises, it provides statistical information on a number of dimensions of crises such as duration and magnitude. it detects more crashes, rather than detecting only well-known stock market crashes, and is a more sensitive statistical technique (vila, 2000) than some of the other known methods. due to these advantages, cmax technique is used in the present study. literature supports the use of this technique, for instance, cimpoeru (2015) and chatterjee, chiu, duprey, and hoke (2017) studied financial stress by using cmax methodology. ma, lee, lai, and lee (2017) studied the contributing factors in the occurrence of stock market crisis by cmax technique. the first task in cmax methodology is to detect the date of occurrence of a crash. for this purpose, rolling windows of fixed time duration are used. for daily data, the study selects short windows of 21 days which is the average number of trading days in a month. then daily stock price index is divided by the maximum price during the past 21 days. this ratio is known as cmax. following patel and sarkar (1998), a minimum threshold level is defined to measure the crisis, which is the average of cmax minus two standard deviations. if the value of cmax falls below this threshold level, it is considered as a critical decline in the stock index and a crash is supposed to have occurred. the stock market crisis indicator at time t, ct is defined as follow. ̅̅ ̅̅ ̅̅ ̅̅ ̅ the above method describes the way to find out the time when the crash occurred in the history. in order to avoid the double-counting of same crisis, further triggers that occur during a particular crisis are not considered as indicators of new catastrophes and are taken as a part of the existing one. as discussed above, the study also analyzes some other dimensions of the crises which are as follows. review of economics and development studies, vol. 6 (2) 2020, 289-299 292  beginning of crash when cmax measure is less than the benchmark of the mean value of cmax minus two standard deviations, i.e. ̅̅ ̅̅ ̅̅ ̅̅ ̅ . when this condition holds, a stock market crash is considered to have occurred.  beginning of crisisthe point in time when price index is at maximum within the window of last twenty-one days of the occurrence of crisis.  date of recoverythe date after the crash is triggered, at which price index is equal or greater than pre-crash maximum index level.  date of troughthe date at which price index approaches to its lowest level during the time from the beginning of crisis up to the time of recovery.  days to troughnumber of days after the beginning of the crisis to date of the trough.  days to recovery number of days from the date of the trough to date of recovery.  maximum index valuethe maximum price index level from the beginning of the crisis to recovery.  minimum index valuethe minimum price index level from the beginning of the crisis to recovery.  magnitude of crisisthe difference between the maximum and minimum price index values during a particular crisis.  duration of the crisisnumber of days from the beginning of the crisis to date of recovery or it can be said that it is the sum of days to trough and days to recovery.  depth of the crisisthe difference between pre-crash maximum price index and the average of price index from the beginning of the crisis to date of recovery.   size of crisisthe product of duration and depth of the crisis. 2.2 crisis intensity the study investigates an important element of crises, that is, crisis intensity, which is calculated by subtracting daily price index value from the pre-crash maximum index value of the crisis under consideration. this measure, given below, indicates the degree to which the market is affected on each day of the crisis. 2.3 data the price data of pakistan stock exchange (kse-100 index) are taken from yahoo finance at the daily frequency for the time period of july-1997 to december-2016. 3. results the cmax index of the pakistani stock market is graphically shown in figure 1 with its threshold level for the time span of july-1997 to december-2016. the index shows significant abnormal occurrences by crossing threshold levels in september-1997, november-1997, may-1998, june-1998, october-1998, may-1999, may-2000, december-2000, october-2001, may-2002, february-2003, review of economics and development studies, vol. 6 (2) 2020, 289-299 293 march-2005, june-2006, may-2008, july-2008, and december-2008. these occurrences can be attributed to various reasons, for instance, sanctions on pakistan due to nuclear tests in may 1999, the 9/11 attacks, or the global financial crisis of 2007-08. table 1 provides information on the dates when the crisis started and the crashes that are found to have occurred in the stock market of pakistan, along with the information about other dimensions of each crisis. these episodes of crises are analyzed in some detail in the following paragraphs. note that the crises listed in the table include only those occurrences of stock price index crossing threshold levels that indicate a new crisis, while all such occurrences that took place during a crisis are excluded. the crash of september-1997: the first crash during the period of analysis occurred on september 1, 1997, which was started a few months back in july-1997. the crisis took 50 days to recover from its pre-crash maximum level. during this time period, the lowest index value was 7.4388 and the highest value was 7.6148. the magnitude of price decline during this crisis was 16 percent 1 . the index moved to trough on september 1, 1997 in 17 days and started to recover on october 21, 1997 taking 33 days for complete recovery. the depth of this crisis was a drop of 8 percentage points from pre-crash maximum index price. as far as size is concerned, it was a drop of 4.02 points in index value in the total duration of the crisis i.e. 50 business days. the crash of november-1997: the second crash triggered on november 17, 1997. this crisis began in october-1997, which persisted for 1,186 days, the longest stock market crisis (during the time period under consideration). the price index reached to trough on july 14, 1998 in 153 days and took 1033 days to recover from this trough on october 9, 2002. the overall maximum value of price index during this crisis was 7.634 and the minimum value was 6.640. the magnitude of price decline during this crisis was 62.9 percent. the depth of this crisis was 40.51 percentage points drop from pre-crash maximum and the size was a total drop of 480.47 points in almost 60 months. the additional crashes shown in the figure 1 that triggered in may, june, and october, 1998; may, 1999; may and december, 2000; october, 2001; and may, 2002 are considered part of the crash of november-1997 because the index level on october 22, 1997 was not recovered till october-2002. figure 1. cmax index for pakistani stock market 1 the log price differences are converted to percentage form as follows: implies that ⁄ or ⁄ . it follows, therefore, that ⁄ or ⁄ . review of economics and development studies, vol. 6 (2) 2020, 289-299 294 0.92 0.94 0.96 0.98 1.00 1.02 1/98 1/00 1/02 1/04 1/06 1/08 1/10 1/12 1/14 1/16 cmax threshold table 1. dimensions of crisis in pakistani market the crash of february-2003: the third crash was triggered on february 3, 2003, which lasted for 59 days. this crisis began from january 16, 2003 and recovered on april 21, 2003. during this crisis period, the stock price index moved to a maximum value of 7.991 and reached a minimum value of 7.764. the magnitude of price decline during this crisis was 20.2 percent. it took 25 days to approach trough on february 27, 2003 and 34 days to starts recovery. the depth of the crisis was a drop of 11.63 percentage points from pre-crash maximum level and size of the crisis showed an overall drop of 6.865 points in 59 business days (or about three calendar months). the crash of march-2005: the next crash identified was triggered on march 24, 2005 and lasted for 212 days. the crises started on march 15, 2005, took 51 days to reach trough and 161 days to recovery on january 23, 2006. during this crisis, the index approached the maximum value of 9.239 review of economics and development studies, vol. 6 (2) 2020, 289-299 295 and a minimum value of 8.774. the magnitude of price decline during this crisis was 37.1 percent. depth of the crisis was a drop of 24.91 percentage points from the index value at beginning of the crisis. the overall drop was 52.81 points in about 10 months as the size of crisis. the crash of june-2006: this crash was triggered on june 14, 2006 and had a total duration of 103 days. the start of this crisis was observed on may 24, 2006 and recovery occurred in 88 days on october 17, 2006. during this crisis, the index approaches a maximum value of 9.316 and a minimum value of 9.078. the magnitude of price decline during this crisis was 21.2 percent. the index took 15 days to reach to trough level on june 14, 2006, while and depth of the crisis was a drop of 8.74 percentage points from the index value at beginning of the crisis. the size of crisis showed an overall drop of 9.00 points in about five months. the crash of may-2008: the last crash in the considered time period of the present analysis was triggered on may 26, 2008. this crisis began on april 28, 2008 and lasted for 1,089 days. it was the second longest stock market crisis in pakistan after the crash of november, 1997.the price index reached to trough on january 26, 2009 in 181 days, whereas, the index recovered from this trough in 908 days on september 18, 2012. the overall maximum value of price index during this crisis was 9.647 and the minimum value was 8.479. this crisis had the highest magnitude of price decline of 68.8 percent. the depth of this crisis was 40.26 percentage points drop from pre-crash maximum and the size was a total drop of 438.48 points in about 53 months. 4. crisis intensity figure 2 graphically shows the intensity of crises in pakistani stock market for the time span of july-1997 to december-2016. the figure shows that the crash of may-2008 had the highest single-day intensity. the figure shows that crisis intensity remained very high on a number of days during this crisis. the second most intense crisis by a close margin was that of november 1997 during which crisis intensity remained quite high on a large number of days. on average the two crises seem to show more or less of the same level of intensity. in comparison, all other crises appear to be relatively less intense. figure 2. intensity of crises in pakistani stock market 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1/98 1/00 1/02 1/04 1/06 1/08 1/10 1/12 1/14 1/16 5. discussion the findings show that cmax methodology identified the generally agreed popular episodes of historical financial crises, which authenticates its application to pakistan’s stock market. moreover, review of economics and development studies, vol. 6 (2) 2020, 289-299 296 some other small crash episodes are also identified along with them, which are either impression of international crises or independent national-level crises. the first crash identified in the present study occurred during the time period when the asian financial crisis influenced the world markets. asian crisis-1997 resulted in sharp falloffs of stock prices, huge devaluation of currencies, and significant increase in interest rates, which led to substantial amounts of capital outflows from the crisis affected countries. during this period, the economic situation of pakistan was also showing a downward trend, since the financial sector was in a weak condition and burdened with ‘bad debts’, low growth in large-scale manufacturing, low external reserves, etc. pakistan did not experience the adverse effects of the asian crisis immediately but there were internal constraints and downfalls that dragged the market towards failure. the three main reasons behind this scenario were as follows. first, there was an involvement of more sensitive private sector capital in financing of east asia boom but in pakistan, deficit was mainly financed by official flows and private bank deposits which could stabilize the system against balance of payment crisis. second, foreign currency exposure of the private sector was quite limited and, hence, this sector was unable to attract foreign capital. third, the introduction of banking reforms in early 1997 helped out to reduce poor credit decision-making, etc. (khan, 1999). the crash triggered in november 1997 is found to be the longest one that continued until october 2002 and also had the highest depth and second highest price decline magnitude among all the crises identified in this study. the fiscal year 1997-98 culminated with the sanctions due to nuclear testing by pakistan and in october 1999 democratically elected government was dismissed by marshall law. it was economic, political, and constitutional crisis and also an impact of the asian crisis. another important explanation for this downfall was an unjustified act of freezing foreign currency accounts because of the fear of capital outflow (khan, 1999). this crash had many episodes when cmax crossed the threshold level which can be seen in figure 1 and these episodes mostly occurred in the month of may 1998 at the beginning of summer. the main factor that can explain these episodes was that india and pakistan became nuclear powers on may 11 th and may 28 th respectively. this was followed by the international sanctions fiasco and foreign exchange crisis that account for tumbling of kse-100 index during this month. the effects of nuclear tests by india on pakistani stock market were more adverse as compared to the effects of nuclear detonation by pakistan (javed & ahmed, 1999). the adverse consequences of nuclear tests were later magnified by the announcement of financial budget of pakistan at the start of june, which caused apprehensions about capital markets along with other sectors. another reason was that several companies were approaching year-end in june and looming economic condition in the wake of nuclear tests by india and pakistan drove them to stay away from new market operations or managing large portfolios. in may-1999, another crash episode was seen due to the war like situation between pakistan and india on the issue of kargil that triggered the sanctions and deteriorated the investment-friendly country image of pakistan. the overall performance of various companies was poor with low payout ratios that caused decline in share prices and negatively affected the economy. the change in rules regarding the acquisition of outstanding shares by means of carry-over financing and change in exposure limit requirement in may-2000 caused the dumping of shares purchased via such mode. for instance, the market moved downwards as pso and adamjee shares dropped like ninepins (“equity market,” 2002). in may-2001, the weekly clearing system and working procedures were changed and future trading was announced just to monitor the speculation trend. an investigation of two leading review of economics and development studies, vol. 6 (2) 2020, 289-299 297 brokerage houses by the national accountability bureau (nab) declared the involvement of pilfered funds in excessive speculation and adjourned their trading activities. this resulted in a trend of heavy selling and affected the whole market negatively (“equity market,” 2002). the attack of september 11 in the us caused a sudden shift in volatility behavior of kse (ahmed & farooq, 2008). later on, due to influx of refugees as a result of military action of the us in the neighbor country afghanistan after 9-11 attack, once again the market showed a downward trend in 2001. the last episode of this second crash happened in may of 2002 due to the unfavorable external factors like tension in indo-pak relationships and increased frequency of suicide blasts after 9-11 attacks, especially the suicide blast of may 8, 2002 in karachi (“equity market,” 2002). finally, another factor was that implementation of corporate governance codes 2002 was found too costly by many companies. some of them delisted themselves, which also negatively influenced overall performance of the market (fatima, 2016; khan, 2017). the crisis in mid of march-2005 that significantly affected the small investors, occurred due to lock-in (a situation when price floors were set for shares prices), impact of circuit breakers and pulling out of funds by financiers of carry-over-trade (javed, 2007). an exceptional rise in stock market index was seen from december-2004 which continued until march 15, 2005, but an abrupt fall after this date indicated an abnormal behavior of the market. therefore, poor governance, excessive speculation, and breach of rules were the driving factors behind this crash (ali, 2017; raza & kemal, 2017). the next crash of june-2006 was of mild intensity and occurred mainly due to the excessive selling of stocks by investors. the reason was that pakistan’s government faced a strict resistance from investors and could not even strike the last year’s projected marginal capital gain tax of 0.001 percent (“indian market,” 2007). the last crash occurred in the may 2008, which had the highest price decline magnitude and second highest depth and duration among all the crises identified here. in 2008, pakistan coped with waning macroeconomic conditions, since current and fiscal deficits arose as a result of increasing oil prices, depreciation of pakistani currency, depleting foreign exchange reserves, and capital flight. the political condition was also in a transition phase as new democratic government took charge. the new government was unable to handle this poor economic condition and knocked the door of the international monetary fund (imf) (haq, 2010). along with these factors, the impression of global selling was also a contributing factor in this recession phase and also the stock market was experiencing a liquidity crunch when investments were diverted to safe investment mode of government’s scheme of national saving certificates (haque, 2010; ali, 2012). the kse index plunged with a great loss in market value of $36.9 billion on august 28, 2008 but it would be difficult to attribute this turmoil solely to any one of the various potential factors including macroeconomic pressures, poor law and order situation, political uncertainty, and global turmoil. in june-2008, the kse management and chairman of securities exchange commission of pakistan (secp) decided to introduce a circuit breaker (market could fall only up to one percent rather than usual five percent), prohibit short selling to prevent further decline and stop massive exit of investors. on july 14, 2008, old circuit breakers were also reinstated but the market still followed a downward trend, as evidenced by the crash episode of july 17, 2008, shown in figure 1. the management of kse with the consent of secp decided to place a price floor on kse index at the fixed level of 9144 points instead of using other options of letting the market behave freely or closing the market temporarily. this trapped the investors who wanted to take exit, which was a violation of the free market system (ali, 2017). but https://www.dawn.com/authors/298/kalbe-ali review of economics and development studies, vol. 6 (2) 2020, 289-299 298 when the price floor was revoked on 14 th of december-2008, the market was again crashed down to 4782 index points as indicated by cmax episode of december 19, 2008 shown in figure 1. 6. conclusion this study has employed the cmax technique of patel and sarkar (1998) to identifying and measuring crises in the stock market of pakistan over the period of july-1997 to december-2016. the study finds that cmax technique has identified all the major stock market crises that are backed by the universally agreed popular episodes of historical financial crisis along with their various dimensions (intensity of crisis, days to trough, days to recovery, duration of crisis, magnitude of crisis, depth of crisis, and size of crisis). this authenticates the effectiveness of cmax technique in the identification of stock market crashes. furthermore, some other small crash episodes are also identified, which are either impressions of international crises or independent national-level crises. the study finds that the crash of november-1997 had more depth and duration and the crash of may-2008 had the highest intensity and price decline magnitude among all the crises identified for the period under analysis. these major market fluctuations violate the efficient market hypothesis (emh) of traditional finance, that is, investors always perform rationally. thus the study provides platform to explore such factors, especially the behavioral factors that could cause these market variations. references ahmed, s., & farooq, o. 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(2019). the impact of employees’ emotional instability on organization citizenship behavior and burnout with mediating effect of workaholism, review of economics and development studies, 5 (2), 235-244 doi: 10.26710/reads.v5i2.572 1. introduction personality is noticeable concept that is commonly defined as an enduring and distinctive pattern of cognition and behavior that distinguish person’s adaptation to life (feldman et al., 1993; levine, 2018). emotional instability (neuroticism) is defined as a tendency to view world as an alarming place, to experience unpleasant emotions such as anxiety, depression, anger, impulsivity, high susceptibility to stress and impulsivity (djurkovic,2006) and to put oneself in a situation that foster negative effect (spurk et al., 2016). the term “emotional instability” is a part of ffm and is generally termed as “big five” (costa and mccrae, 1987). emotional unstable persons experience less life satisfaction, positive emotion and subjective wellbeing (olesen, thomsen and o’ toole, 2015) and one of the investigation has indicated that teachers who are neurotic and have http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 2, june 2019 236 less interpersonal relations faces burnout (cano gracia et al., 2005). thus, many literatures support a significant relationship between workaholism and emotional instability. a study conducted by shkoler., rabenu, and tziner (2018), argued that emotional instability is positively associated with work drive whereas negatively associated with work enjoyment. one of the most constant finding is that workaholism has positive relationship with neuroticism (clark et al., 2010; schaufeli, 2016). wiggins (1979), outline the gender differences in personality trait (i-e neuroticism). in term of personality trait (neuroticism), females reported higher levels of neuroticism as compared to males (lynn and martin, 1997; weisberg, deyoung and hirsh, 2011; de bolle et al., 2015). academia who are emotionally unstable lacks voluntarily commitment. studies (mahdioun et al., 2010; mosalaei et al., 2014 & kappagoda & kulathunga, 2013). all these researchers found significant negative relationship between emotional instability and organizational citizenship behavior. emotionally unstable individuals can be easily frustrated at the workplace. the investigation of kokkinoss (2007) indicated that neuroticism is positive predictor of burnout. the perfectionist workaholics are less adaptive and display more maladaptive behavior. many studies of work domains support, this supposition that emotional instability is associated with all the dimension of burnout (hill and curran, 2016). saeedy and rastgar (2015), demonstrated that individuals who are emotionally stable or low neuroticism may play a role as a passage for increasing ocbs by effecting a individuals perception and reaction (such as anxiety and complaining) to organizational conditions and hardships. although it is not being cleared that why such sequence of relationships were observed in one sample out of two. the emotional unstable personalities usually experience negative emotion, less enjoyment and are less engaged in their work. so many researchers have concluded that emotional instability is positively associated with all dimension of workaholism (or shkoler et al., 2017; souckova et al., 2014). as it revealed by many researchers work has the potential to elevate negative emotion (ng et al., 2007). therefore, working can be considered as mood modifier. workaholism is discovered as a personality trait by many researchers. so the higher score on traits such as neuroticism, leads to workaholic behavior (andreassen et al., 2012; burke et al., 2006; clark et al., 2010) according to shkoler et al. (2017), the individuals who are more emotional instable are more work driven. according to marcello, workaholism is predictor of burnout. (marcello et al., 2018) out of three dimension of workaholism, work drive is considered strongest predictor of burnout (goncalves, 2017). zimmerman (2008) conducted a study using personality as a predictor and found that neuroticism an aspect of personality is positively associated with burnout. khalil et al. (2018) also investigated the influence of personality trait on employee’s job burnout in the educational sector and found that personality trait have negative impact on burnout. bolino et al. (2015) give the most recent definition states that organizational citizenship behavior are less likely to be associated with organizational reward and promotes productive, psychological, positive and intellectual climate in the organization. bambale (2014) defined organizational citizenship behavior as an individual activity such as helping new and fresh colleagues, working more than organization requirement and engaging in creative and innovative activities. hellee et al. (2018) conducted a study to look into the connection between ffm traits of personality with positive aligned organizational citizenship behavior and negatively aligned deviance and unethical behavior at the workplace. the result declared that ffm facets are closely and purposively linked with positive and negative behavior and evident the utility of looking facet level relationship above the level of domain analyses. organizational citizenship behavior was having positive association with conscientiousness and extraversion and negative association with emotional instability. employees, who are highly driven, full involve in their work and enjoy their work shows high level of organizational citizenship behavior. the study of ali et al. (2012), who found meaningful and positive relationship between organizational citizenship behavior and dimensions of workaholism. teachers play a vital role in development and foundation of knowledge and as well as bring revolution in the society. they also promote training and education. academia is not highly financed sector as compared to other service sectors; they have been envied for their flexibility, tenure and freedom to chase their interest in research. these favors have been disappeared during past few decades. researchers have examined that the creativity, quality productivity of employee’s performance and work as well as their wellbeing, health and morale is hampered by increased level of workplace stress, which originates through workaholism. as universities academics reported prolonged teaching period and working hours joined with increase burden to publish research articles and to become more innovative than before (kinman, 2001; winefield et al., 2008; egeland and bergene, 2012; kyvik, 2013; teichler et al., 2013). the office is the foremost important setting for academia teachers and the working review of economics and development studies vol. 5, no 2, june 2019 237 atmosphere of university mentors has been changed due to administration and governance modification in universities during recent era. during past years, workaholism has substantially become a studied issue for empirical research. today’s turbulent and dynamic economy is conceptualized, as postindustrial society as working 24 hours a day is considered as a normal behavior (worall, mather and cooper, 2016). oates (1971), devised the term workaholism to pin a set of devastating behaviors and refers to individuals whose obligation to work has turn out to be overstressed that it may embodies dangers to one’s personal and communal relationships. approximately about ten percent or more of the employed population is engaged in the lifestyles that lead towards workaholism (sussman et al., 2012). according to kinman (1998), workaholism is a result of nature and policies created by the organization and one’s own zest to do work. it has been clearly document that the increase level of job stress results in significant cost to the community and organization (gillespie et al., 2001). to peruse an academic career and to fulfill the requirement of scientific publication, it has been claimed that overworking has become a necessity in universities (egeland and bergene, 2012). broadly, the academic staff of university is loaded up with higher level of work demands and lower level of support and assistance from institution. an organizational environment reinforces and promotes workaholics behavior as well as increase the likelihood of producing work-addicts (johnstone and johnston, 2005). universities seem to have various conditions linked with both poor psychological health and workaholic behavior (winefield et al., 2014; samad et al., 2015). furthermore, universities professors report increased stress, high workload as well as job burnout (gillespie et al., 2001; egeland and bergene, 2012). in modern and contemporary societies, burnout is one of the most widely examined mental health problem. now a day, people encounter increasing pressure and stress at the work due to major social and economic challenges. the educational and academic territory is considered as one of the service providing area. instructors are one of the basic service provider in the society. many researches have indicated that the instructor undergoes with emotional prostration and experience high level of burnout. academia teachers undergo from work-related anxiety, tiredness, stress, exhaustion and fatigue. these all consequences are termed as burnout syndrome. (novak et al., 2014; ahola et al., 2010). burnout can be defined as, a state of fatigue, tiredness and exhaustion in which a person is doubtful about worth of his/her occupation and is pessimistic about his/her abilities to carry out a task (bakker and costa, 2014).teaching is one of the challenging profession with marked stress that leads toward professional burnout. it is considered as an isolated profession (i-e being alone in a room from many hours every day) several teachers feel oppressed by stressors and responsibilities they encounter at work (sanford kaila, 2017). according to mathison (2015), the load and stress of working in teaching domain has been progressively increased in recent years. administration, teaching and research work has been increased which in turn has put pressure on instructors to publish papers in recognized journals for promotions. pervious researches have investigated workaholism as independent and dependent variable. according to authors knowledge the basic relationship of workaholism and its dimensions as mediator in relationship of emotional instability and organizational citizenship behavior and in relationship emotional instability and burnout were not previously reported. therefore, the distinguished feature of current study is the empirical investigation of model in pakistani culture. figure 1: conceptual framework 2. hypothesis h1 emotional instability will be related with workaholism. h2 emotional instability will be related with organizational citizenship behavior. h3 emotional instability will be related with burnout. h4 workaholism will be related with organizational citizenship behavior. h5 workaholism will be related with burnout. employee burnout workaholism emotional instability organizational citizenship behavior review of economics and development studies vol. 5, no 2, june 2019 238 h6 workaholism will mediate relationship between emotional instability and organizational citizenship behavior. h7 workaholism will mediate relationship between emotional instability and burnout. 3. methodology 3.1 participants four hundred academia teachers working in public and private sectors have been taken for the current study. data has been collected from different cities of pakistan (i-e multan, pakpattan, lahore, faisalabad and islamabad). convenient sampling technique was utilized in the current study which means to select those respondents that are easily accessible in order to reach sample size. participants who have omitted any response were not included in the study. 3.2 instruments and procedure in the current study, survey research design has been selected. data from participants have been collected using self-report questionnaire. this method is being chosen because it is economical with respect to time and as well as resources. participants selected for the current study were given questionnaires at their place of work. instructions were being communicated to teachers on how to fill the survey questionnaire. demographic sheet and informed consent were being attached with the booklet. six instruments are being used to collect data. the scale devised by john and srivastave (1999) has been applied to measure emotional instability. the inventory comprises forty-four items. however, for the current study emotional instability has been measure using eight items from the inventory (i-e 4, 14, 19, 29, 29, 39) and three-items are reversed coded (i-e 9, 24, 34). each participants were supposed to specify the degree of disagreement and agreement for every statement. likert-type scale has been used (strongly disagree “5” to strongly agree “1”). “is depressed blue” is an example of an item measuring emotional instability. to measure organizational citizenship behavior scale of smith et al (1983) has been used. eight items have been adopted from their scale of which three item were reversed-scored (i-e 3, 4 and 7). “i often help others at work who have excessive workload without being asked to do so” is an example of an item measuring organization citizenship behavior. participant’s burnout has been measured by scale proposed by ayala malach pines (2005) using ten items. this scale access the individual’s level of mental and physical exhaustion. “disappointed with people” is an example of item measuring respondent burnout at workplace. workaholism battery proposed by spence and robbins (1992) has been used to access participant’s degree of workaholism. this battery consists of twenty five likert-type items which is divided into 3 sub-scales. some items are reversed coded (1, 6, 8 and 11). “i seem to have inner compulsion to work hard” is an example of item measuring work drive. “my job is more like fun than work” is an example of item measuring work enjoyment and “wasting time is as bad as wasting money” is an example of item measuring work enjoyment. 3.3 results 3.3.1 reliability analysis of the construct scale firstly, the internal consistency among the items is measured. internal consistency is measured by cronbach alpha having value 0 to 1. according to nunnally (1978), a minimum acceptance criterion for reliability is 0.5 or greater. result of the study demonstrates high internal consistency of the instrument. table 1 scales items sample cronbach alpha emotional instability 08 400 0.722 organizational citizenship behavior burnout workaholism 08 10 25 400 400 400 0.750 0.914 0.824 3.3.2 descriptive information of the participants the descriptive information of the respondent demographic characteristics is shown in table 2. it is noted that about 60 percent of the respondent were males. mostly participant’s age was between 24 to 32 years. majority of the participants were holding m.phil. degree. out of 400 respondents, approximately 58 percent were having work experience between one to nine years. about 52 percent respondents were lecturer and 88 percent were permanent employees. approximately sixty percent respondents in this survey were government employees. review of economics and development studies vol. 5, no 2, june 2019 239 3.3.3 structure equation model the hypothesis were tested through structure equation model using smart pls. in the model emotional instability is independent variable, organization citizenship behavior and burnout are outcome variable and dimensions of workaholism are mediator. 3.3.4 hypothesis testing and direct effect in order to test hypothesis and to determine direct association between the variables including t-value and path coefficient structure model of smart (pls) has been utilized. according to henseler et al. (2009), the regression analysis and beta value are similar to path co-efficient. the t-value indicate the significance level of construct whereas, beta values are co-efficient regression. this study utilized bootstrapping resampling for 400 observation. the t-value should be > than 1.64 for significant relationship. the central theme of the present study is to determine model evaluation by analyzing the direct association and to verify the proposed assumed relationship of the variable with the help of structural model. however in the current study (05) hypothesis have direct relationship were analyzed, out of which (04) were supported and only (1) was not supported. moreover, figure (2) demonstrates direct effect. figure 2: structure model of direct relationship table (2) shows that all hypothesis which has been accepted and supported have value > 1.64 and those hypotheses whose t-value are less than 1.64 has been rejected. furthermore, figure (1) fully explains and highlight the direct effect of each variable on the dependent variable. table 2: summary of direct hypothesis testing direct hypothesis beta sd t stats p values interpretation ei→wh -0.39 0.050 8.10 0.00 supported ei→ocb -0.263 0.084 3.145 0.002 supported ei→bo 0.386 0.289 2.991 0.022 supported wh→ocb 0.412 0.050 8.495 0.000 supported wh→bo -0.100 0.119 0.911 0.036 not supported review of economics and development studies vol. 5, no 2, june 2019 240 in order to test hypothesis and to determine the significance of path coefficient, this study utilized bootstrapping resampling method. the results of partial least square structure equation model are being indicated. it demonstrates that there is negative relationship between emotional instability and workaholism. the result came out to be significant because the level of significance is 0.000. thus, supporting hypothesis 1. the result of the demonstrate that there is negative relationship between emotional instability and organizational citizenship behavior and it has been found that there is positive association between emotional instability and burnout. whereas, dimension of workaholism is also negatively associated with organizational citizenship behavior and work drive and involvement has no direct relationship with burnout. hence, supporting hypothesis 2, 3, and 4. thus rejecting hypothesis 5. 3.3.5 mediation model in the current study, the indirect effect of every variable is examine by utilizing the resampling mediation technique (bootstrapping). according to zhao et al. (2010) and hayes (2009), bootstrapping is a resampling procedure that is non-parametric and receives high responsiveness. furthermore, hair et al. (2014), recommend that for testing mediation effect pls (sem) bootstrapping technique is best suited for quantitative analysis. thus, the current study utilized the smart pls version 3.0 (ringle et al., 2015) to test the effect of workaholism (as a mediator variable). the t-value has been find out, utilizing the technique of bootstrapping by carrying out resampling of 5000. table 3: summary of mediation results mediation hypothesis beta sd t stats p values results ei→wa→ ocb -0.162 0.030 5.334 0.000 mediation ei→wh→ bo 0.040 0.046 0.882 0.378 no mediation in current study, after the assessment of direct model, it has been found that workaholism play a mediating role in relation of emotional instability and organizational citizenship behavior. whereas, there is no mediation effect of workaholism in relation of emotional instability and burnout. hence, supporting hypothesis 6 and rejecting hypothesis 7. 4. limitation and direction for future studies the current research has few limitations for future study. as the current study was conducted in higher education setting of pakistan, so in future sample could be taken from primary and secondary school teachers from diverse regional parameters for better generalization of results. present study design was cross sectional while in future qualitative study will conduct to attain implicit measures of employee’s through interviews. in future organizational citizenship behavior and burnout dimensions should explore for further understanding of these constructs. 5. conclusion this study investigates the relationship between variables such as emotional instability, organizational citizenship behavior, burnout and mediating role of workaholism. the result of the study indicates that emotional instability has direct relationship with organizational citizenship behavior and burnout. moreover, the study also reveals that workaholism play mediating role in relation of emotional instability and organizational citizenship behavior. references ahola, k., väänänen, a., koskinen, a., kouvonen, a., & shirom, a. 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technology; economic growth; gmm; south asian countries. jel classification: e44, g21, 04, c26 corresponding author’s email address: imran@bzu.edu.pk recommended citation: chaudhry, i. s., sabir, s. and gulzar, f., (2019). technology and economic growth: role of financial development in south asian countries, review of economics and development studies, 5 (2),323-332 doi: 10.26710/reads.v5i2.605 1. introduction sustainable growth is the main goal of developing countries (munir and mehmood, 2018). there are different factors that determine economic growth, of which financial development is the important one. moreover in early 1910s, economists believe that the banking sector development causes technological innovation by identifying entrepreneurs and providing them finance to introduce innovative products to facilitate production process (schumpeter, 1912). indeed, financial sector pools the savings of the household and allocates these savings to investment associated with highest returns. the financial sector development would overcome the adverse selection problem prevailing in credit market (king and levine, 1993). intuitively, differences in the growth rate of different countries are due differences in the quantity and quality of services provided by financial sectors (mckinnon, 1973; shaw; 1973). unlike the positive effect of financial sector on economic growth, it is also believed that financial sector has trivial effect on the rate of investment in physical capital, and thus has minor impacts on sustainable growth (solow, 1957). it is widely believed that financial development is the true indicator of future rates of economic growth, physical capital accumulation and high-tech innovations (levine, 1997), financial development reduces information and transaction cost by providing level playing field to the banks that affect savings, investment, technological changes and hence economic growth. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5 no 2, june 2019 324 therefore financial sector provides finance to entrepreneurs to make technological innovations in the form of new formula or blueprint to produce goods and services. in other words, financial development reduces information and transactions cost by facilitating the risk, mobilizing savings and allocating resources towards more productive investment (sabir and qayyum, 2018). therefore financial development impacts economic growth through capital accumulation and technological innovations (levine, 1997). financial development affects capital accumulation through saving rates but steady state growth can be altered through either changing savings or reallocating savings among capital technological innovations. nevertheless financial development impacts technological innovations which leads to increasing returns in production that results in sustainable growth (romer, 1990; grossman and helpman, 1991; aghion and howitt, 1992). many developing countries have under gone the process of massive financial restructuring and liberalization since 1990. at the same time, some of these countries have achieved high rate of economic growth, whereas others have lagged behind. however differences in their economic growth can be due to many factor, many economists believe that financial development significantly contributes in economic growth process (ahmed and ansari, 1998). the empirical literature suggests a positive association between financial development and economic growth (mckinnon, 1973; king & levine, 1993; calderon & liu, 2003). these empirical studies show that financial development effects economic growth through technological innovation channel (levine et al. 2002). moreover, a various studies find a non-monotonic connection between financial development and economic growth in high and middle income countries (arcand et al., 2012; law & singh, 2014; pagano et al., 2012), yet the influence of financial development and technological innovations on economic development and growth is not being studied for south asian countries. the objective of this study is to examine the effect of financial development and technological innovations on the economic growth of south asian countries. this study uses panel date of south asian countries over the time period 1991-2017. there exists a problem of endogeneity in the financial development and other explanatory variables. similarly the growth regression can have the serial correlation problem, heteroscedasticity and omitted variable bias, therefore this study uses system generalized method of moment of arellano and bond (1991), and blundell and bond (1998) to tackle these problems. the rest of the study is organized as follows. section 2 describes theoretical framework of financial development, technological innovation and economic growth. section 3 explains methodology and data sources whereas section 4 is about results and discussion. conclusion and policy recommendations are presented in section 5. 2. theoretical framework this study assume that output is produced by using physical capital and human capital and production function is specified by cobb-douglas function where y is the output in country i (i=1,2,…,n) at time t (t=1,2,…,t), k is the stock of physical capital, h is the human capital, and a is the labor-augmenting technology that raises exogenously at the rate of x. let assume that individual develop human capital by spending time on acquiring new skills instead of working. let g is the segment of time spent by raw unskilled labor to learn and accumulate skills to produce human capital h in the economy or country. therefore it can be written as where is a constant and l is the unskilled labor, if , then , implies that all labor is uneducated. therefore by increasing g, a unit of unskilled labor rises skilled labor h. moreover, labor grows exogenously at the rate of n and technology grows exogenously at the rate of x and financial development. where fd is the level of financial development in country i at time period t and is the vector of coefficient of financial development. in this growth model, the labor augmenting technology associates not only with technological innovations determined by x but also on financial sector development. for instance, financial review of economics and development studies vol. 5 no 2, june 2019 325 intermediaries increase the efficiency or productivity of a to enhance economic growth in two ways: 1) collecting information to assess different projects; and 2) encouraging individuals to invest in riskier projects but in more dynamic technologies through risk sharing. therefore to unscramble the productivity shocks, financial sector choose the technology which is most suitable to rectify the shocks. thus savings channelled through financial sector are distributed more proficiently towards productive investment which rises economic growth (pagano, 1993). in a neoclassical theoretical framework, the impacts of level of financial development on economic growth can be temporary, i.e. is supposed to be in steady state. however the level of financial development can vary country to country in the balanced state which implies that level of gdp per capita can also differ across countries. thus different countries can converge to different steady states depending on their initial level of savings and financial development. in the steady state, output or income per unit of effective labor is constant but output per person or labor grows exogenously at the rate of x. therefore output per unit of labor or worker can be written as where . people save and devote constant fraction of their output to accumulate human capital. we assume that human capital grows exogenously at the rate of g. taking logs of the both sides of equation using equation above, we obtain where fd is the financial development, g is the human capital development over the time and u is an error term which is normally distributed. we also estimate the combine effects of technological innovation and financial development on economic growth by using interaction between financial development and technological innovation as follows. where v is the error term. both equations (7) and (8) provide the foundation for econometric models. these equations can be written in reduced form as follows where a’s are the parameters to be estimated, fd and x are financial development and technology respectively. 3. methodology and data this study investigates the nexus between financial development, technological innovations and economic growth, and our modelling framework in the framework of mankiw, romer and weil (1992) is for constancy of parameter across the time period of a panel data set, lagged levels of gdp per capita are taken with fixed one lag: rather than taking the initial value of gdp per capita. a significant number of previous studies employ cross sectional techniques to estimate the economic growth regression (barro, 1991; king and levine, 1993a) and fixed effect dummy variable least square method is used to control country explicit effects. unfortunately neither cross sectional techniques nor fixed effect models tackle the problem of endogeneity in the review of economics and development studies vol. 5 no 2, june 2019 326 economic growth regression (caselli et al., 1996; seven and yetkiner, 2016). for instance, presence of and also indicates that fixed and random effects panel estimators are biased and inconsistent. moreover, due to endogeneity problem in the financial development variable, omitted variable bias, autocorrelation and cross sectional heterogeneity, this study uses generalized method of moment introduced by arellano and bond (1991) and blundell and bond (1998). since the use of exogenous instruments should enable us to produce consistent estimators using mother of all techniques gmm. there are three benefits of using gmm: 1) this method produces unbiased and consistent estimators of the regression parameters, in which explanatory variables are not strictly predetermined that can correlate with past or current values of random terms, and heteroscedasticity and autocorrelation exist within the model (roodman, 2009a). 2) system gmm fixes the problem of endogeneity as it uses the instruments which are unassociated with fixed effects while potentially circumventing the dynamic panel bias. 3) system gmm can be used for short time period and large cross sectional units. the system gmm consists of set of equation in which equation in first difference is instrumented with lagged level variables and system of equations in level are instrumented with lagged first difference. the efficiency of system gmm depends on the assumptions that there is no autocorrelation in the error term and instruments are not interconnected with error term. these issues and problems are fixed by using two well-known tests: arellano and bond test for autocorrelation which explores the first and second order autocorrelation in the first difference and hansen (1982) test is used to check the condition of over-identifying restriction for the validity of instruments. if both of the tests are satisfied, then estimates of the unknown parameters are reliable and efficient. this study uses panel data of south asian countries1 over the time period 1991-2017. data of bhutan and maldives are not available and we have skipped it from the sample. chosen time period covers an era of financial development and economic development in south asian countries. this time period, money growth and investment increase in this region. therefore economic growth increases. this study uses gross domestic product per capita (gdppc) as a dependent variable. a number of studies have used this variable as a dependent variable (choi 2006; shahbaz and aamir 2008; nawaz and khawaja 2016). this study uses credit to private sector by commercial banks percentage of gdp as a proxy for financial development. domestic credit to private sector by commercial banks is considered as financial assets which are provided to the private investors by commercial banks through exchange credits, purchase of bonds and securities, provision of loans and other accounts receivable that establish a claim of repayment. beck et al. (2007), jaumotte et al. (2013) and demirguc et al. (2009) took domestic credit to private sector as a percentage of gdp as a measure of financial development. technology is the formula or blue print to combine factors of production to produce goods and services. to measure technological innovation different proxies have been used in empirical economic literature such as patents registered by residents, patents registered by non-residents, trademarks registered, intellectual property rights and research and development (r&d) expenditures etc. (ginarte and park, 1997; jalles, 2010). this study used patents by residents, patents by non-residents and import of machinery and equipment as proxies for technology. human capital is a measure of the monetary value of a worker’s skill. it is considered as one of the significant determinant of economic prosperity for a longer time period. benhabib and spiegel (1994), and cohen and soto, (2007) used average year of schooling as proxy for human capital. however this study uses the education index of undp to examine the effect of human capital on economic growth and development. physical capital such as buildings, roads, dams, hospitals, schools, colleges, computers etc. are also used in production process. in existing empirical literature, different proxies have been used for physical capital such as gross fixed capital formation as percentage of gdp and investment to gdp ratio (hosseini and leelavathi, 2013). therefore this study also uses gross fixed capital formation as a proxy for physical capital. a system in which all trade distortions are eradicated for free mobility of goods and services across the countries is called trade openness. balanika (2012) stated that trade openness is a channel which stimulates foreign direct investment (fdi), capital inputs, and goods and services flow towards host countries. perhaps trade openness can affect economic growth positively because it generates employment opportunities which help poor segment of population to increase their income levels and it also causes reduction in poverty. to measure trade openness this study uses exports plus imports as percentage of gdp as a proxy for trade openness. in economic literature inflations rate has been measured as percentage change in consumer price index. increase in inflation hurts growth process because it acts like a tax on commodities. due to inflation, aggregate demand decreases, employment reduces, output decreases and income decreases. in this study, inflation is used to macroeconomic stability in the economy. in this study panel 1 afghanistan, bangladesh, bhutan, india, maldives, nepal, pakistan and sri lanka review of economics and development studies vol. 5 no 2, june 2019 327 data of 6 south asian countries for time period 1996 to 2015 are used. most of the data for variables2 is taken from world development indicators (wdi). data of human capital is taken from undp database and data of imports of machinery is taken from un com trade3. descriptive statistics of the variables are given in table 1 table 1: descriptive statistics variables obs. mean std. dev. min max ln(gdp per capita) 135 6.807 0.583 5.914 8.254 credit 135 31.483 13.633 8.799 80.996 ln(patent by non-resident) 135 5.830 2.388 0.000 10.446 ln(patent by resident) 135 4.587 2.223 -0.020 9.488 ln(physical capital) 135 23.722 1.622 21.380 27.465 inflation 135 7.791 3.753 2.007 22.565 tade openness 135 43.776 16.454 17.172 88.636 education index 135 0.437 0.151 0.210 0.751 ln(imports) 135 17.920 1.795 13.184 20.773 source: calculated by author 4. results and discussion we estimate equations (12) and (13) by employing system gmm due to potential problem of endogeneity in financial development variable, measures of technological innovations and human capital and results are reported in table 2. coefficients of trade openness, domestic credit provided by commercial banks to private sector (credit), education index and patents registered by residents are positive and statistically significant. these results imply that credit provided by banks to private sector has positive and statistically significant influence on economic growth. table 2: financial development, residents patent and gdp per capita variables gmm gmm ln(gdp per capita)t-1 0.873*** 0.728*** (0.000) (0.000) trade openness 0.001* 0.001* (0.082) (0.068) credit by banks 0.002* 0.014*** (0.079) (0.004) ln( physical capital) 0.021*** 0.012*** (0.000) (0.002) inflation -0.004 -0.001 (0.403) (0.792) education index 0.159*** 0.510** (0.000) (0.016) ln(patents registered by resident) 0.005 0.190** (0.433) (0.033) ln(patents registered by resident)*credit 0.002* (0.101) constant 0.298*** 0.109*** (0.003) (0.001) sargan test 0.161 0.148 ar(1) 0.000 0.000 ar(2) 0.752 0.179 source: author’s own estimation. note that *, ** and *** represent 10%, 5% and 1% level of significance respectively. small parenthesis indicates p-values. further, 1 percent increases in credit increases gdp per capita by 0.002 percent. this means that financial development increases demand for credit by private investors, investment increases, employment increases, productivity increases and hence gdp per capita increases. moreover human capital, which is measure with education index, has positive and significant effect on gdp per capita. one percent rise in human capital increases 2 see appendix a 3 correlation matrix is given in appendix review of economics and development studies vol. 5 no 2, june 2019 328 gdp per capita by 0.159 percentage points. we can notice that the magnitude of coefficient of human capital is greater than the financial development, which implies that human capital development contributes more in the gdp per capita determination than financial development. we consider human capital as a vital engine of economic growth. moreover patents registered by residents has positive but insignificant determinant of gdp per capita in south asian countries. we get the intuition from this analysis that technological sector is least developed in south asian countries and it is not playing significant role in the economic growth process. it would be worth emphasized that there exists a diffusion of technology from developed countries to developing countries like south asian countries. these countries are making less fraction of their gdp on research and development sector, therefore, this research and development sector has no impact on gdp per capita. trade openness and physical capital are positively affecting gdp per capita. however inflation has negative and insignificant impact on gdp per capita. moreover we also use interaction term of patents registered by residents and financial development in the growth regression. the coefficient of interaction term is positive and statistically significant which implies that financial development encourages technological innovations which increases gdp per capita of the country. this implies that financial development and technological innovations are complementary to each other and both these variables work together to determine economic growth (king and levine, 1995). in order to see that the foreign technology diffusion, we consider patents registered by non-resident and import of machinery in place of patents registered by residents. it is important to note that former is an indicator of knowledge diffusion and the latter is a proxy of technology diffusion. table 3 provides the summarized results of system gmm for financial development, technological innovations and gdp per capita. the results show that our variables of interest such as financial development, technology and human capital are significantly correlated with gdp per capita in south asian countries. this outcome is plausible with our expectations which proposes that credit provided by banks to private sectors is the source which has enhanced private investment in these countries. therefore, we can say that financial development has positive effect on economic growth of south asian countries. table 2 shows that patents application registered by non-resident has positive and statistically significant impact on economic growth. this corroborates with multinational corporations (mncs) research and development activities in south asian region along with the participation of industrial sector in global research and development sector. table 3: financial development, non-residents patent and gdp per capita variables gmm gmm ln(gdp per capita)t-1 0.877*** 0.781*** (0.000) (0.000) trade openness 0.001* 0.002* (0.054) (0.065) private credit by banks 0.002* 0.001* (0.077) (0.101) ln(physical capital) 0.018*** 0.010** (0.000) (0.039) inflation -0.003 -0.001 (0.403) (0.882) education index 0.102*** 0.454** (0.000) (0.016) ln(patents registered by non-resident) 0.012* 0.004* (0.088) (0.105) ln(patents registered by non-resident)*credit 0.001* (0.073) constant 0.285** 0.014* (0.028) (0.101) sargan test 0.192 0.136 ar(1) 0.000 0.017 ar(2) 0.693 0.464 source: author’s own estimation. note that *, ** and *** represent 10%, 5% and 1% level of significance respectively. small parenthesis indicates p-values. review of economics and development studies vol. 5 no 2, june 2019 329 for instance, fdi in south asian countries such as bangladesh, india, nepal, pakistan, and sri-lanka has increased which is the major source of technology from developed countries to developing south asian countries. this diffusion of knowledge or knowledge through either mncs or fdi has emerging impact on the productivity of our labor and capital which are significantly affecting economic growth. we can hypothesize that diffusion of technology is playing vital role in the process of economic growth than the domestic technology. a coefficient of human capital is again positive and statistically significant. human capital is the responsive factor which plays an essential role in the absorption of diffused technology and to enhance research and development within the country. human capital development has spill over impacts on economic development and growth of the country. interaction term of patents filed by non-resident and financial development is included in the growth equation. table 3 indicates that interaction term has positive and significant impact on economic growth. table 4: financial development, imports of machinery and gdp per capita variables gmm gmm ln(gdp)t-1 0.819*** 0.747*** (0.000) (0.000) trade openness 0.001* 0.001* (0.102) (0.101) domestic credit by banks 0.001** 0.002*** (0.047) (0.009) ln(physical capital) 0.010*** 0.010*** (0.000) (0.000) inflation -0.001 0.000 (0.203) (0.309) education index 0.119*** 0.417** (0.000) (0.012) ln(imports) 0.013** 0.007* (0.026) (0.063) ln(imports)* domestic credit by banks 0.001** (0.050) constant 0.060** 0.021** (0.022) (0.013) sargan test 0.114 0.115 ar(1) 0.000 0.000 ar(2) 0.972 0.138 source: author’s own estimation. note that *, ** and *** represent 10%, 5% and 1% level of significance respectively. small parenthesis indicates p-values. further, we use imports of machinery and equipment as measure of technological diffusion in place of patents. it is truth that developed countries are technological leaders around the globe. therefore it is necessary to import technology from developed countries to less developed countries where technology is unavailable. we assume that a country which is more open to the import of technology can derive greater benefits from foreign technology that enhances economic growth due to increase in productivity of other factors of production (kim et al., 2011). the results with import of machinery and equipment are reported in table 4. financial development and human capital have positive and statistically significant impacts on gdp per capita. interesting result is that the import of machinery and equipment has positive effect on gdp per capita. this implies that the countries which are importing better technology goods are in fact importing technological progress that improves the production efficiency (romer, 1990). moreover import of foreign technology in the form of machinery and equipment used in production of goods and services increase total factor productivity. therefore we can draw a corollary that import of technology from developed countries has spill-overs to developing countries in the sense that trade increases economic growth in developing asian countries. interaction term of financial development and technological innovation has positive and statistically significant impact on economic growth which ensures that both financial development and technological innovations are complementary to each other. rest of the variables appears with expected signs. we can conclude this section of the study by say that financial development, human capital and diffused technology are significantly contributing in the economic review of economics and development studies vol. 5 no 2, june 2019 330 growth of south asian countries. moreover, local research and development is not playing significant role in enhancing economic growth of these selected countries. 5. conclusions in this study, we have theoretically and empirically estimated the impact of financial development and technology on economic growth of south asian countries over the time span 1991-2017. this study used system gmm due to the problem of endogeneity, heteroscedasticity, serial correlation and omitted variable bias. this study extended the augmented solow growth model by incorporating the financial development, technological innovations and their interaction term. this study used domestic credit to private sector by banks as percent of gdp is used as a proxy of financial development, patents registered by residents, patents registered by non-resident and imports of machinery and equipment as alternate proxies for technological innovations and education index as a proxy for human capital. the results showed that financial development has growth enhancing impact on south asian countries and human capital development is significantly contributing in economic growth and development. however domestic technological innovations measured with patents registered by local residents has insignificant impact on economic growth. this is due to the reason that south asian countries are least developed due to lack of technological innovations. interaction term of financial development and technology has positive effects on economic growth which means that financial development along with technology determine economic growth in south asian countries. moreover diffusion of technology or knowledge measured with patents registered by non-residents is an important element of economic growth in south asian countries. their interaction term is positive and significant as well. this shows that diffusion of technology from developed countries to developing countries enhances economic growth due to developed financial structures. similarly, import of machinery and equipment is used as proxy for the diffusion of technology and it impacts economic growth positively due to increase in the total factor productivity. moreover interaction term of imports of machinery and equipment is positive which confirms their complementary impact on economic growth. here we suggest following policy recommendations; policy makers in south asian countries should further reform financial sector to boost economic growth. second policy makers should mitigate the constraint to credit extension for private sector. private sector investment can lead to high economic growth and development in south asian countries. third policy makers should focus on enterprise credit rather than consumer credit. enterprise credit leads to increase entrepreneurs which make investment and hen employment increases and then growth. fourth, there is a need to enhance investment in research and development sector which can play a catalytic role in 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(1956). a contribution to the theory of economic growth. the quarterly journal of economics, 70(1), 65-94. review of economics and development studies vol. 4, no 1, june 2018 79 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 1, june 2018 journal homepage: www.publishing.globalcsrc.org/reads investigating the influence of shareholder mechanisms on the perceived performance of listed firms in nigeria 1 mohammed nuhu, 2 halilu bello rogo, 3 mohammed umar danladi ¹school of business management, universiti utara malaysia.mohammed.nuhu12@yahoo.com ²department of economics and management science kano, nigerian police academy wudil ³department of business administration, university of abuja-nigeria articledetails abstract history revised format: may 2018 availableonline: june 2018 the current debate on the issues of shareholder rights to firm performance has grown as a topic of research both in the developed and emerging economy. there is serious concern regarding the effectiveness of the board transparency and accountability, company image and the rights of the shareholders in recent times. this paper investigated the influence of shareholders mechanisms on the perceived performance of listed firms in nigeria. the study is guided byagency theory and supported by the stewardship theory. the questionnaire was used as an instrument for data collection. 247 questionnaires were administered with 117 duly completed and returned. hence, the number of completed valid questionnairesis 114. however, data were analysed using partial least square structural equation modeling (pls-sem). empirical findings showed that board transparency/accountability and shareholder right were significantly and positively related to perceived firm performance. whilethe company image did not show any significant link to perceived firm performance.hence, based on the researches knowledge, this is the first of its kind to adopt primary data to investigate the influence of shareholders’ rights mechanisms on the perceived performance of listed firms in nigeria. therefore, the findings of this study,provide researchers, policymakers, firms, stakeholders, and the agencies of the government with a better picture of the transparency and accountability and the right of the shareholder. the study recommends that listed firms in nigeria should adhere to professional ethics and best business practices such as financial prudence and accountability to their board of directors. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords transparency, accountability, company image,shareholder rights, firm performance jel classification c10, f10, g12 corresponding author’s email address: mohammed.nuhu12@yahoo.com recommended citation: nuhu, m., rogo, h.b., danladi, m.u., (2018). investigating the influence of shareholder mechanisms on the perceived performance of listed firms in nigeria. review of economics and development studies, 4 (1) 79-89 doi: 10.26710/reads.v4i1.283 1. introduction lack of code of best practices of many companieshas become a topic of debate both in the developed and developing countries in the recent time. since early 1990’s scandals to date, has exposed many multinational companies both in the developed and emerging economies as a result of manipulation of http://www.publishing.globalcsrc.org/reads mailto:mohammed.nuhu12@yahoo.com mailto:mohammed.nuhu12@yahoo.com review of economics and development studies vol. 4, no 1, june 2018 80 financial statement unexpected corporate failures by the managing directors (nuhu & ahmad, 2017; sanusi, 2012; samaduzzaman et al, 2015). the findings of many studieshave suggested that the malpractices at high profile firms, especially enron, worldcom, tyco and many more corporate bodies in the united kingdom and the usare as a result of losses of more than usd 7 trilling of contributors/investors (lawal, 2016). again, lehman brothers scandals alone stood at usd 14.5 trilling (lawal, 2016; nuhu and ahmad, 2017). in africa, especially nigeria has seen the collapsed of high notable leading financial services(finbank, savannah bank, habib bank, bank phb, lion bank, bank of the north, inland bank, afribank, oceanic bank, african continental bank and intercontinental bank) (nuhu and ahmed, 2017). the scandals are as a result of the lack of a code of best practices and corruptions, reckless loan provision,and manipulation of the financial statementwhere is still found operating in the financial services firm in nigeria (sanusi, 2012). hence, this was the period, nigeria market capitalization fell/dropped from 12 trillion naira to 9 trillion naira (lawal, 2012, 2016; nuhu and ahmad 2017).this prompted the issue of shareholder mechanisms representative into board members have become a topic of debate, but stills, the issues, challenges and problems it tried to addresses/resolve remain inconclusive (nuhu and ahmad, 2017). the objectives of this paperare to reconcile the inconsistencies, inconclusive and mixed finding from previous studies, by bringing new research approach to investigate the causal/relationship between shareholder right mechanisms on the performance of quoted/listedcompanies in nigeria. this study is structured into the following heading; introduction, study literature reviews follow bythe methodology. also, the paper further contains findings/results,conclusion,and recommendations. 2. literature review shareholder rights and firm performance from empirical investigation in recent time by many scholars, there is mixed argument and conflicting finding between the shareholders right (the owner) and the managers right (the agent) which has generated a lot of conflict between the principal (owner) and agent (employee) (armour et al., 2017;lawal, 2016; nuhu&hussaini, 2017). despite numerous empirical investigations, the agency problem remains an unresolved issue in corporate governance. hence, many types of research supported by numerous theories have been investigated to find the lasting solution to the conflict between the owner (principal) and the manager (agent). but, however, none of these studies could fully answer the question of why firms keep on diminishing that affect their shareholders’ capital (ararat et al., 2016). lawal, (2016) argued that famousto the decline of family-owned businesses and the increase of pleased managers and managers. the independence of directors and managers was as a result of the advent of the high multi-divisional companyoperatesrendering to the staff. in the study of gómez-bezares et al, (2016), examines the effect of integrating sustainability into corporate strategy on numerousparts of shareholder right creation and financial performance in the context of british capital market. the data from ftse 350 companies from the period 2006–2012. using t-statistics and f-tests from ancova. the results support that companythat found to haveincorporated sustainability problems into their various business operations are mostly controlled by their leverage andresources, strongerthat influence performance and shareholder right creation than other firms. in another stream of research, evidence showed that the rights of shareholdersareinverse to the probability to firm diversify (lawal, 2016; nuhu&hussaini, 2017). this is in line with the believed of agency theory viewpoint, (lawal, 2016) studyvalidates that restrictive cgcode enables managers to pursue corporate strategies that are not consistent with shareholder wealth maximization. hence, the debate on the shareholder right will continue to be and remain an interesting area of research (lawal, 2016). the study attempts to investigate the relationship between shareholders right and the perceived performance of financial servicesfirms in nigeria. hence, the study hypothesized that: review of economics and development studies vol. 4, no 1, june 2018 81 hypothesis 1: there is a significant and positive relationship between shareholder rights and the perceived performance of financial servicesof listed firms in nigeria. board accountability and transparency and firm performance since early scandals, researchers, policy maker, investors and corporate stakeholders have severally called for managing directors and management accountable and transparent to their shareholders (naaraayanan& nielsen, 2016; nuhu and hussaini, 2017). however, managing directors and management accountable and transparent to their shareholders is regarded as important and critical mechanisms to resolve the bottleneck between the shareholder and the agent (keay, 2016; nuhu&hussaini, 2017). the recent studies have argued that managing directors and management accountable and transparent to their shareholders is in relation to a count head or the number of components that boards members must account and answerable to their owners (keay, 2016). in the work of krishnamurti et al, (2016), their study population of 97 companies within eight asian countries, while there studied is on the relationship between clsa (credit lyonnais securities asia)transparency as independent variable and business performance measure with tobin's q which is dependent variable found that transparency dimension has a positive relationship and has a positive effect on firm performance. contrary, amar (2001), found a negative relationship in examining the relationship between corporate management principles and business performance in the context of credit lyonnais securities asia (clsa's) research population of 495 firms in 25 developing countries. however, none of these recent researches discussions about direct relations between accountability and transparency and firm performance. hence, based on the literature, the study attempts to investigate the relationship between board transparency, accountability and the perceived performance of financial servicesfirms in nigeria. the following hypothesis has been developed. therefore, the study hypothesized that: hypothesis 2: there is a significant and positive relationship between board transparency, accountability and the perceived performance of financial servicesof listed firms in nigeria. corporate image and firm performance this study defined behavior as corporate reputation and ethical behavior of the firms. hence, business ethics has redirected the thought of recent studies that called for renewed attention due to corporate scandals in both developed and emerging economies like those of enron, arthur andersen, adelphia, tyco international, and worldcom, (gómez-bezares et al, 2016).in addition, the growing importance and called for governmental regulations and agencies, the amplified scrutiny of the many industries like media as well as increases worries and pressure from numerous stakeholders have put and placed the corporate business ethics challenge, particularly in the virtually all areas of firm’s improvement (nuhu & ahmad, 2016). in contrary, others remain skeptical (jensen, 2001) argued that ethical initiatives are wealth and investments without payoffs or gain and hence against the best interest of shareholders and stakeholders. but regrettably, there is very limited empirical study work that has explicitly answered and addressed these corporate ethical issues that the recent existing literature research has shown mixed results and inconsistencies (garay et al., 2017). therefore, the study attempts to investigate the relationship between corporate image and the perceived performance of financial servicesfirms in nigeria. the following study hypothesized that: review of economics and development studies vol. 4, no 1, june 2018 82 hypothesis 3: there is a significant and positive relationship between corporate image and the perceived performance of financial services of listed firms in nigeria. board size and firm performance the issue of appropriate board size has been the subject of intense discussion when it comes to analyzing the efficiency of the internal governance mechanism, supported by agency theory (tai, 2015). board size is even more pronounced in single-tier governance systems configured in such a manner that ensures the representation of both executive and non-executive members (lawal, 2016). the size of every board of directors is a vital and important attribute for every successful board mechanisms or structures. board size is determined on the basis of how it influences the communication, coordination, and control management activities of a firm (nath, et al, 2015). the ideal size of the board has further become a controversial argument and debate in the recent cg trends. johl et al contended that in malaysia for instance, there is no specific ideal size for every company on the board. the malaysia cg code does not specify the size of the board, but instead, every company board should decide its size in determining the impact on its numbers (johl et al, 2015). while in australia cg 2014 does not mention a specific number of people from the board of directors (appuhami&bhuyan, 2015). on the other hand, yermack (1996) study founda negative relationship between the board size and performance withthe sample of 452 us firms during the period of 1984-1991. in the same trend, bennedsenet al (2008), found a negative relationship between board sizes and firm performances using roa with the sample of 6,850 danish firms.ammariet al (2014), investigated the board structure of 40 french firms listed (sbf 120) during the periods of 2002-2009 found a strong negative relationship. in the opposite trend, zakaria et al (2014), examine malaysian listed firms using the panel data regression model, found board size positively influences firm performance. many studies have been carried out in recent years to determine the empirical validity of the idea of an optimal or moderate board size and its effects on firm operations and financial performance. overall, empirical studies on the nexus of board size and firm performance have yielded inconsistent outcomes ranging from positive (appuhami, 2015) to negative (nath et al, 2015). lawal (2012), argues that more than two decades of empirical study is yet to justify the above assumptions as inconsistency and inconclusive findings continue to dominate empirical studies on the relationship between board size and firm performance. therefore, the study hypothesized that: hypothesis 4: there is a significant and positive relationship between board size and the perceived performance of financial services of listed firms in nigeria. 3. theoretical framework the main theory of the study is agency and two supporting theories (managerial hegemony and stewardship theory).agency theoryis acknowledged by many researchers as the dominant theory as against numerous that affect virtually all the aspects of cg research (aguilera et al., 2008; nuhu&hussaini, 2017). review of economics and development studies vol. 4, no 1, june 2018 83 4. methodology this study adopted primary data.a self-administered questionnairewas used for the data collection.the study used287 board of directors offinancial serviceslisted inthe nigeria stock exchange as at january 2016. therefore, the total population of the study isthe total number of the individual directors on the boards of listed firms (287) of financial servicesin nigeria. however, the study used krijcie and morgan (1970) table to determine the sample size which is 165. salkind (1997) suggested that an additionalof 50% or double of the sample result should be increased or added tothe original sample size to elude/avoid a low response rate. thus, the higher the respondent’sresponse rate, the better the results (salkind, 1991). hence, 50% of 165 is 82.5 (83approximately). the total number of 248 copies of the questionnaire wasadministered with the assistance of members of staff of the nigeria stock exchange (nse) and securities and exchange commission (sec). the questionnaire was adapted from prior researchers. although, the study usedclose-ended format questions (questionnaire) that is based on a 5-pointlikert scale.in the end, 128 copies of the questionnairewere duly completed and returned. thisrepresents the response rate of 51.61 percent (52%). while 14 out of 128 copies of the questionnairewere invalid. therefore, the total number of 116 (47%) copies of the questionnaire was used for analysis after carrying out data screening. thus, statistical software for social sciences (spss)using version 22 for data screening and preliminary analysis. while smart pls 2.0 (partial least squares) software was used for the final analysis (hair, 2014; nasiru&keatooi, 2015; nuhu&hussaini, 2017). 5. results this studyadapted measurements from the work of ammann, et al, (2011) for corporate image; okpara (2011) for shareholders’ rights; khongmalai, et al, (2010) board transparency and accountability; ammann et al (2011) and khongmalai et al (2010) board size;rettab et al (2009) firm performance. however,the total of114 copies of the questionnaire was dulyreturned and usable.hence, smart pls was used to testmodel/hypotheses. 6. measurement model the convergent and the discriminant validity were used to testthe adequacy of the study items and variables. the convergent validity, construct reliability, indicators reliability, were assessed as suggested by hair, (2014). hence, the indicators reliability and the loadings of the items were carryout and they all met the threshold of 0.7 as suggested by hair et al., 2014. thevalidity and reliability, composite reliability and average variance extracted were carried outgiving the composite reliability above 0.7.the average variance extractedisalso above the 0.5thresholdsas suggested by hair et al., 2014. accordingly, the minimum/lowest composite reliability of this study is 0.756. while the lowest/minimumaverage variance extracted for the study is 0.616. see table 1 below: board transparency and accountability firm perceived performance board size corporate image shareholder right review of economics and development studies vol. 4, no 1, june 2018 84 table 1 loading (items), average variance extracted (ave) and composite reliabilities variables code loading (items) ave composite reliability board size bs1 0.930 0.850 0.919 bs2 0.914 corporate image ci4 0.937 0.797 0.940 ci5 0.945 ci6 0.846 ci7 0.839 corporate transparency, accountability cta2 0.918 0.783 0.878 cta6 0.851 shareholders right sr3 0.922 0.616 0.756 sr4 0.618 firm perceived performance fp5 0.924 0.832 0.908 fp6 0.901 again, the study assessedcross-loadings, inter-construct andcorrelation matrix.the square root of the average variance extracted across the diagonal was examined,the discriminant validity was also assessed for the constructs. hence, the items that are below the threshold of 0.5were deleted as suggested (hair et al., 2014). in table 2,the results show cross-loading of the items (see shadowed lines) which are higher on each respective construct that showsdiscriminant validity. hence, table 3, the square root of each constructof the average variance extracted must be higher than any other figure in the construct (fornell and larcker, 1981). therefore, the study model has successfullymet andsatisfied the threshold of validity and reliability as recommended by hair, 2014. the next step was toassess the structural model. table 2 variables correlations; average variance extracted (ave); mean and standard deviation. variables bs ci cta sr fp mean std. dev board size (bs) .850 2.78 .558 corporate image (ci) -.087 .797 2.92 .569 corporate transparency and accountability (cta) .513 -.094 .783 2.92 .569 shareholder right (sr) .054 .178 .014 .616 3.5 .669 firm performance (fp) .323 .098 .424 .706 .823 2.74 .522 note: the shaded numbers in bold are the square roots of average variance extracted (ave) across the diagonalline and offdiagonallines of the correlation among the variables review of economics and development studies vol. 4, no 1, june 2018 85 figure 1: the measurement model 7. structural model the first step in the structural model is to test the predictive power of the construct (independent variables) and the explanatory power of the study (entire model) model. hence, the explanatory power was examined through squared multiple correlations (i.e. r²)of the firm perceived performance as the dependent variable. therefore, figure 1 shows 67.7% (i.e.r²) and 0.677 for variation in the firm perceived performance are assessed by the independent variables. in line with the threshold or recommendation by falk and miller (1992), the results show that the study model has an acceptable r-square (r²) statistic greater than 10%. hence,the study observed formulated hypotheses with the standardized parameter estimates on the study constructs conforming to p-value and t-values that indicate the significance level. furthermore, to obtain t-values, partial least squares (pls) was performed with 5,000 bootstrapping procedures in the number of cases that represent the total number of the valid observation with no sign of changes option. the findings have shown support for the three hypotheses formulated in the path coefficients that showpositive and significant at 0.01 (1%) and 0.05 (5%) level of significance. while one hypothesis is not supported. interestingly, the effect sizes (f²) of the three supported hypotheses were small at 0.474 and 1.290 respectively (cohen, 1988). figure 2:the structural model review of economics and development studies vol. 4, no 1, june 2018 86 .364 (5.728) .017 (.241) .101 (1.436) .692(12.129) figure 3: the validated structural model figure 3 shows the validated structural model for the study. the values in parentheses indicate t-values that indicate significant relationships (p <0.01 and p < 0.05). the dotted lines indicatethat there is no significant, but positive relationship. table 3 the structural model (hypotheses test)assessment hypothesis relationship beta value std. error t-value p-value decision h1 sr -> fp 0.692 0.057 12.129 0.000*** supported h2 cta -> fp 0.364 0.064 5.728 0.000*** supported h3 ci -> fp 0.017 0.071 0.241 0.810 not supported h4 bs -> fp 0.101 0.070 1.436 0.150** supported ***p< .001; **p< .005 8. discussion the study investigated the relationship between shareholder mechanisms and theperceived performance of the financial servicesof listed firms in nigeria. hence, it shows that shareholder mechanisms positively relate to firm perceived performance. in overall, the findings/results of the study showedthat the empirical analysis supports the role of shareholder mechanisms in improving firm perceived performance (nuhu&hussaini, 2017). therefore, there is a strong positive,statistically significant relationship between corporate transparency and accountability on the perceived performance of financial services listed firms in nigeria. the result ofone of hypothesisthree is not supported as there is no relationship between corporate behaviour and the perceived performance of financial services listed firms in nigeria (β=.012; t value=0.179). therefore, the hypothesis two supported (β=.414; t value=8.481). the results of this hypothesis two are consistent with the prior findings (zehir et al, 2016) who showed that corporate transparency and accountability influence the firm performance. this result is also consistent with the prior studies (gibson, 2000). hence, there is also the statistically significant positive relationship between shareholder rights and the performance of listed financial services firms in nigeria. hence, this is consistent with the hypothesis number three.the results supported with β=.698; t value=11.949. the finding is in line findingsof gómez-bezares et al., (2016). however, the overall results show three hypotheses are significant and positive relatedto perceived firm sr ci bta fpp r²=.669 bs review of economics and development studies vol. 4, no 1, june 2018 87 performance show by t-values and p-values results (significant at p<0.01 and p<0.05) while one hypothesis notsupported. hence, this study showed that corporate governance mechanisms (corporate transparency and accountability and shareholder right) influence the performance of financial servicesin nigeria. however, the findings were expected to be significant and positive to perceived firm performance (jizi, 2017;lawal, 2016; nuhu&hussaini, 2017) argued in their findings that poor cg performance is mostly caused that leads to changes and reform of many corporate governance characteristics particularly in the area of transparency, and accountability as well as shareholder right (interest). 9. conclusion and future researchers in this study, the various related constructs of shareholder mechanisms that enhance firm perceived performance were analyzed. consequently, the findings of the study confirmed that the transparency and accountability, investor/shareholder rights are significant except corporate behaviour that showed no significant relationship. hence, there is a need to use more than one theory in a single study (lawal, 2016; nuhu&hussaini 2017). mix findings of the prior studies are as a result of relying on one theory (nuhu&hussaini, 2017). this study has also improved in the area of methodology over previous researchers by the use of primary data (questionnaire) as suggested by recent studies (lawal, 2016; nuhu&hussaini, 2017; johl et al, 2015).many studies on cg have relied strongly on particular methodological changes. the time is a good fit for methodological changes that took into considerationfor primary investigation (lawal, 2016). again, another advancement for primary data measurementis by using the "structural equation modelling-partial least square (sem-pls) for primary data analysis" (hair, 2014). this 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(2016). the role of stakeholder participation between transparency and qualitative and quantitive performance relations: an application at hospital management. procedia-social and behavioral sciences, 229, 234-245. review of economics and development studies vol. 4, no 2, december2018 145 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 2, december 2018 journal homepage: www.publishing.globalcsrc.org/reads teacher in promoting quality education: head teachers perception 1 mohammad nabi, 2 muhammad javed iqbal, 3 rahat mand, 4 intzar hussain butt 1 phd scholar sarhad university of science and information technology peshawar, pakistan. mohammadnabi71@gmail.com 2 director mass education sarhad university of science and information technology peshawar, pakistan. javed1qbal1941@yahoo.com 3 phd scholar sarhad university of science and information technology peshawar, pakistan. rahatmand70@gmail.com 4 assistant professor, university of education, lahore, pakistan. article details abstract history revised format: october 2018 available online: december 2018 this research was carried out to study the head teachers’ perception in terms of teacher in the promotion of quality education and about those characteristics which make them different from other facilities that bring quality in education. quality of education is the major concern of any country and preparing quality teachers is the prime importance in many countries. in this connection quality of teacher cannot be ignored. this study explores the quality characteristics of teachers through literature review that influence the quality of education. in response to the need of quality teacher, government of khyber pakhtunkhwa review and developed teacher education strategy (tes 2013-2018) to improve the quality of teacher in the province. in this regard two districts were taken to know the perception of head teachers of primary public schools in the province. a five point likert scale questionnaire was developed to know the perception of 108 head teachers in two districts swat and tank of khyber pakhtunkhwa pakistan. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords quality, quality education, quality teacher, pedagogical skill, professional commitment, teacher effectiveness, command over subject matter jel classification: i20, i21, j44, p36 corresponding author’s email address: mohammadnabi71@gmail.com recommended citation: nabi, m., iqbal, m. j., mand, r. and butt, i. h. (2018). teacher in promoting quality education: head teachers perception. review of economics and development studies, 4 (2), 145-151 doi: 10.26710/reads.v4i2.385 1. introduction education has substantial role in the development of an individual as well as serves the nation in particular. education is the improvement of the human body, soul, intellect, emotion, will and physical health. quality of education is elaborated in widen and with diverse meaning. it may mention to elevated standard of managerial skills, teaching, learning and achievements of learner. zaki and rashidi (2013) point out the parameters of quality in higher education which are institutional design, educational policies and practices, teaching staff, institutional leadership, curriculum, resources and learners. the quality of education contains on these ingredient, quality of management, quality of teacher, physical facilities and textbook quality. heads of the schools are the managers of their institutions know their teaching staffs very well and know how to achieve the objectives of quality education. teachers are the backbones of any educational institutions. they play an important role in the development of a child and impart quality education to their pupil. quality education is the need of the day. every country wants to improve the quality of education especially http://www.publishing.globalcsrc.org/reads mailto:mohammadnabi71@gmail.com mailto:rahatmand70@gmail.com mailto:mohammadnabi71@gmail.com review of economics and development studies vol. 4, no 2, december 2018 146 developing countries like pakistan. the objectives of the study are (i) to identify characteristics of teacher that affects the quality of education and (ii) to know the perception of teachers about the main component in quality education. the research questions of the study are (i) what are those characteristics of teachers which promote quality in education?, (ii) what is that prominent component which brings quality in education? 2. literature review 2.1 quality education it is difficult to define quality because it is a dynamic concept. sallis (2002, p. 1) argued that no any two person agree upon one definition but they are in a state of opposition when discussing quality. so many researcher defined quality. alexander (2008, p. 11) defines that it “can mean a degree of excellence”. another definition equalizes quality with the ability to satisfy human needs. iso define quality as "the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs". the product/service will be then the quality product/service that have total amount of excellence and features which fulfill human needs. in educational setting quality is attained by services that satisfy the learner needs. fredriksson (2004, p. 4) defines quality education “that best fits the present and future needs of the particular learners”. it is concluded by the fredriksson definition that education is a service which must fulfill the present and future requirements of the learner (customer). chisholm (2004, p. 14) concluded that the quality of education is connected to teachers, textbooks and the values raised in schools by curriculum. teachers, content, textbooks, environment are all the ingredients of quality education but “the quality of an education system cannot exceed the quality of its teachers” (barber & mourshed, 2007, p.7). a quality teacher contributes in the promotion of quality education. quality of education is mostly linked with student outcomes and teacher is the one who can delivers the lesson with effective teaching methodology. quality teacher have the following characteristics which are the essential tools for quality education. 2.2 subject matter command command over the subject matter is the most successful characteristics of the teachers which pays share in the enhancement of quality education and improves students learning. this ability of teacher accomplishes the aim of fitness in the subject is essential for quality of education. command on the subject matter of teacher makes the learners to understand well. subject and content knowledge of the teacher, and to apprehend that how students learn that subject and how to transport that knowledge to students in the class are the needed tools (wray, medwell, poulson, & fox, 2002). this teachers’ proficiency lay a deep foundation of teachers knowledge as smittle (2013, p. 3) describes “proficiency in subject matter is critical for developmental education teachers”. command on the subject is useful tool in the various aspects of teaching process as alexander, rose and woodhead (1992) who stated that subject knowledge is a crucial procedure at every pace in the teaching process: in assessing and diagnosing, in planning task setting, explaining, questioning and giving feedback. teachers’ command on the subject matter indicates quality teaching which add more to the students’ knowledge. it is certain that teachers' subject knowledge encapsulate exceedingly more than only their knowledge of the content which they will communicate in the class (wray, medwell, poulson, & fox, 2002). the characteristic of teachers command on the subject matter is the path way to quality of teaching that leads to the great deal of students’ achievements to quality education. lacking of this reality is equal to nothing and to achieve nothing is the wastage of time and financial resources. command on the subject matter is most important but it is ineffective without pedagogical skill because this skill give them expertise that how to teach. 2.3 pedagogical skills pedagogy is defined “as the art and science of teaching” (professional support and curriculum directorate, 2003, p. 4). pedagogical skill is of a great importance which no one can ignore because without pedagogical skill one can not imagine quality outcomes. zammit et al. (2007) defined quality teaching as teaching that produces an improvement in learner outcomes. obviously teacher knows the pedagogical skill well which helps him in the classroom and students’ outcomes. according to bhowmik, and banerjee, (2013, p.4) “(i) teaching should be carried out as smoothly as possible and (ii) it should result into the maximum output in terms of the expected better teaching outcomes”. pedagogical skill improve the quality of teacher and maximize the expected outcomes as according to professional support and curriculum directorate (2003, p. 4) quality pedagogy influences the quality of learning powerfully and directly which affects the students’ outcomes. pedagogical skill makes the teacher expert by having the powerful influence to engage and motivate students during delivering quality teaching. zammit et al. ( 2007, p.10) stated that many researchers point out significance of pedagogies which have the ability to motivate, engage and involve students in learning and develop students’ strategies for learning. committed review of economics and development studies vol. 4, no 2, december2018 147 teacher is using various pedagogical skill for effective learning. bhowmik, and banerjee (2013, p.1) argued that pedagogy, integrating an array of teaching strategies, shaping community confidence in the quality of learning and teaching in educational institutions. the effect of pedagogy builds confidence and makes the learner confident for the survival in society. according to the scottish executive (2005, p.7) we believe that we need to understand that how students learn and how to teach them that learning experiences leave them confident and competent. to achieve the purpose of students’ confidence and competitiveness “quality teachers apply a various teaching and meta-cognitive learning strategies that meet the needs of different level of students and the demands of different instructional goals, methods and topics”. (zammit et al. 2007, p.10). the skill “pedagogy makes a teacher: how to work as facilitators, coaches, models, evaluators, managers, and advocates” (bhowmik and banerjee, 2013, p.5) and make the teachers skillful in their role. to play a role in the promotion of quality education, professional commitment is vital. 2.4 professional commitment commitment is considered loyalty with a job and loyalty is the potent property of teacher which in case of lacking is a big loss to the quality of education. teacher’s commitment is a dedication to the teaching profession and giving first priority to teaching over others. teacher’s professional commitment is a crucial dimension of teachers towards the quality of education. according to razak, darmawan and keeves (2010) the concept of committed teachers has been used as synonym for quality teacher. to improve quality education is to maintain quality teachers for student’s quality achievements. maintaining teachers in their jobs in the school is crucial to keep standards and enhancing school performance especially in terms of student academic outcomes (shah & abualrob, 2012). students’ academic achievements are connected to the teachers performance which enhance school effectiveness, as fredriksson (2004) that teachers have the responsibilities to improve the school performance because they have real power to make a difference in learners’ capital enhancement while teaching. thus students realize their interest as obot . obi. essien. uko and akpan, (2012, p.136 ) remark that “students’ perception of teachers’ level of professional commitment has a significant influence on their interest”. this influence of teacher’s performance is the result of attrition tendency towards quality education. according to choi and tanng (2011) teacher commitment has been studied to expect teachers’ attrition tendency and approaches towards class performance or quality of education. 2.5 teachers effectiveness effectiveness of teacher is great characteristic as well as slogan for quality education. where there is effective teacher there will be quality education because “effective teachers consistently achieve goals that focus on desired outcomes for their students and teacher effectiveness is encompassed in knowledge, attitudes, and performance” (hunt, 2009, p. 30). it is true that “the effective teacher is very systematic in the preparation for and execution of each lesson” (mcber, 2000, p. 12) which is pointing to the enhancement of quality teaching. similarly bill and mallinda gates foundation (2010) concluded that dramatically enhancing education is to ensure that every pupil has an effective educator in every classroom for every school session. but what will be included in teacher effectiveness cheong, mong and tang (2002, p. 2) elaborate that “teacher effectiveness should include the quality of teacher competence and performance in various domains such as the behavioral domain, the affective domain, and the cognitive domain” these domains strongly affect the students outcomes. in the same vein “teacher effectiveness was measured in terms of the academic gains of students” (duckworth, quinn & seligman, 2009, p. 540). hunt (2009. p. 30) further describes that teacher effectiveness is broadly used in terms of pool of characteristics, competencies, and behaviors of teachers at every educational levels that enable learner to reach desired achievements. to achieve the desired goal effective teachers know the pedagogical skills as well as have the command on the subject matter as concluded by byrd and rasberry (2011, p. 5) that greater numbers of english language learners as well as special education pupil need educators who understand their subjects and different teaching strategies to transport the concepts and thoughts effectively. delaney, johnson, johnson and treslan (2010, p. iii) added that “instructors who are effective teachers are respectful to students, knowledgeable, approachable, engaging, communicative, organized, responsive, professional and humorous” 3. methodology 3.1 research design this study was descriptive survey design included in quantitative data. according to ary, jacobs, razavieh and sorensen (2010) survey research is also known as descriptive research practices tools such as questionnaires to collect information from groups of persons. in this study quantitative data comprises a questionnaire which was structured for head teacher. review of economics and development studies vol. 4, no 2, december 2018 148 3.2 population and sample of the study population of this study includes of head teachers of government male primary schools of two districts. in this survey the researcher selected multiple stage sampling technique. in the first stage two districts of khyber pakhtunkhwa, pakistan were chosen as stratified sample. in the second stage head teachers were randomly taken from every stratum. the sample of the study was 108 (10% of the population). 3.3 statistical analysis the data was analyzed with help of spss software. the results of questionnaire were analyzed on frequency percentage and graphs were drawn. the responses of questionnaire were gained through five point likert scale from strongly agreed (sa) to strongly disagreed (sda) 4. data analysis table 1 statement sa a un da sda mean s.div 1. students achieves competency if 68 29 13 4.52 0.67 teachers have command over subject matter. 2. teachers’ subject knowledge embodies 76 23 09 3.62 0.63 a good deal more than their knowledge of the content. 3. teacher uses pedagogical skill for effective 96 12 3.55 0.83 learning to improve students’ outcomes. 4. teacher’s commitment is loyalty to 89 11 08 3.95 0.63 profession affect the result of students. 5. to keep a committed teacher in school is to 84 16 08 4.70 0.59 improve the quality of education. 6. committed teachers have a great interest to 93 15 3.72 0.69 improve students’ achievement. 7. effective teachers are approachable, 11 92 05 4.05 0.38 responsive communicative, organized knowledgeable and humorous. 8. effective teachers consistently focus on 86 22 4.38 1.21 students’ academic achievements. 9. effective teachers prepare lesson plan that 83 12 13 3.64 0.68 deliver it effectively. 10. effective teachers participate in the 15 83 10 4.04 0.48 improvement of student outcomes. 0 20 40 60 80 100 1 2 3 4 5 6 7 8 9 90 70 78 93 93 86 95 80 77 91 head teacher review of economics and development studies vol. 4, no 2, december2018 149 table 1 statement 1 indicates that 90% respondents gave agreement that students achieve competency if teachers have command over subject matter. statement 2 reveals that 70% respondents agreed that teachers’ subject knowledge embodies a good deal more than their knowledge of the content of what they will teach. statement 3 point out that 78% of the respondents agreed teacher uses pedagogical skill for effective learning to improve students’ outcomes. 93% respondents favoured statement 4 that teacher’s commitment is loyalty to profession affect the result of students. statement 5 shows 93% respondent agreed that to keep a committed teacher in school is to improve the quality of education while 86% agreed with statement 6 that committed teachers have a great interest to improve students’ achievement. statement 7 reveals 95% of the respondent agreed that effective teachers are approachable, responsive, communicative, knowledgeable, organized and humorous. statement 8 shows that 80% of the respondents agreed that effective teachers consistently focus on students’ academic achievements and achieve the goals. statement 9 indicates that 77% respondents favoured that effective teachers prepare lesson plan and deliver it effectively. statement 10 shows that 91% of the respondents agreed that effective teachers participate in the improvement of student outcomes. table 2 statement sa a un da sda mean s.div 11. physical facilities play a role in 92 16 3.85 0.35 promoting quality education. 12. physical facilities play a more role than 13 95 2.24 0.65 teacher in promoting quality education. 13. text book plays a role in promoting 92 16 4.70 0.71 quality education. 14. text book plays a more role than teacher 18 90 2.33 0.74 in promoting quality education. 15. head teachers’ management participates 95 13 3.87 0.32 in promoting quality education. 16. head teachers’ management participate 25 83 2.46 0.84 more than teacher in promoting quality education. 17. quality of education cannot exceed the 89 09 10 3.73 0.62 quality of teacher. 18. quality teachers are the strongest source 100 08 3.92 0.26 to improve quality education. 19. teachers’ quality improves the students’ 101 07 3.93 0.24 outcomes 0 20 40 60 80 100 11 12 13 14 15 16 17 18 19 85 12 85 17 88 23 82 93 94 head teachers review of economics and development studies vol. 4, no 2, december 2018 150 table 2 statement 11 shows that 85% of the respondents agreed that physical facilities play a role in promoting quality education. statement 12 indicates that 88% disagreed while 12% of the respondents agreed that physical facilities play a more role than teacher in promoting quality education. statement 13 point out that 85% of the respondents agreed that text book plays a role in promoting quality education. statement 14 reveals that 83% disagreed while 17% of the respondents agreed that text book plays a more role than teacher in promoting quality education. statement 15 indicates that 88% of the respondents agreed that head teachers’ management participates in promoting quality education. statement 16 shows that 77% disagreed while 23% of the respondents agreed that head teachers’ management participates more than teacher in promoting quality education. statement 17 shows that 82% of the respondents agreed that quality of education cannot exceed the quality of teacher. statement 18 shows that 93% of the respondents agreed that quality teachers are the strongest source to improve quality education. statement19 indicates that 94% of the respondents agreed that teachers’ quality improves the students’ outcomes. 5. conclusion the perceptions of head teachers about the quality of teachers in the promotion of quality education reveal positivity. head teachers positively support that the main component in quality education is a teacher who has a strong role in the promotion of quality education than others facilities. head teachers have the perception that teachers’ command over subject matter, pedagogical skill, professional commitment and teacher’s effectiveness are those characteristics or tools which indicate the teachers’ efficiency and quality service that lead to the promotion of quality education. these characteristics make a quality teacher which is substantial to bring quality in education. 6. discussion the promotion of quality education for young generation sharply brings questions related to the role of the teacher and their education, their recruitment and their training. among others indicators which bring quality in education teachers are the most valuable asset that can bring quality education. it is cleared that an adequate number of quality teachers is required in order to improve the quality of educational processes. the question arises that all teachers can bring quality in education. the teacher perception is given importance that how they see the matter. they asked about quality of education and quality of teacher. they were agreed that quality teacher improve the students’ outcomes and quality teacher is the strongest source for quality education than any other physical facilities which can not be ignored. they shape the minds of the new generation for the future and come across all the boundaries of challenging world facing difficulties. they were agreed about the teachers’ command over subject matter which is crucial for delivering the content of the subject to the students effectively when they understand it well. they agreed that teachers’ subject knowledge embodies more than their knowledge of content and makes the students competent in the subject. they have an agreement that pedagogical skill is consider the most evident characteristic of quality teacher. without the pedagogical skill and only understanding the content well will run the well dry. using an array of pedagogy makes the lesson easy and effective for students. professional qualification inculcates pedagogical skill but more training in pedagogy is needed. professional commitment of teacher is a characteristic which improve students’ achievements and teachers were agreed that they are committed to their profession. they showed an agreement that lacking in professional commitment is equal to lacking in quality of education. they perceived that committed teacher improve the quality of education. quality teacher has the characteristic of effectiveness. they perceived that effective teacher prepare lesson plan, deliver it effectively, engage students in the class, motivate them for learning and satisfy students with the teaching. they were agreed that effective teacher consistently focus on students to achieve the goals and struggle to improve the quality of education. review of economics and development studies vol. 4, no 2, december2018 151 reference alexandar, a. 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(2010). the influence of culture on teacher commitment, social psychology of education 13, 185–205. sallis, e. (2002). total quality management in education. london: kogan. scottish excutive. (2005). pedagogy-towards a shared understanding for early years education in scotland. series of occasional papers on early years education. learning and teaching scotland. shah, m. & abualrob, m. m. a. (2012). teachers collegiality and teacher professional commitment in public secondary schools in islamabad, pakistan. procedia social and behavioral sciences, 46, 950 – 954. smittle, p.(2003). principles for effective teaching. journal of developmental education, 26,1-9. wray, d., medwell, j., poulson, l., & fox, r. (2002). teaching literacy effectively in the primary school. london & new york. routledge falmer. zaki, s. & rashidi, m.z. (2013). parameters of quality in higher education: a theoretical framework, international j. soc. sci. & education 2013,3(4), 1098-1105. zmamit et al. (2007). teaching and leading for quality australian schools. sydney: australian institute for teaching and school leadership. http://www.fao.org/docrep/w7295e/w7295e03.html review of economics and development studies vol. 4, no 2, december2018 219 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads social exclusion, entrepreneurship and public policy challenges for pakistan 1 saima shafique, 2 abou bakar, 3 fatima farooq, 4 kishwar perveen 1 associate professor, department of economics, numl, islamabad, pakistan. sshafique@numl.edu.pk 2 assistant professor, department of management sciences, the islamia university of bahawalpur, bahawalnagar campus, pakistan. 3 assistant professor, school of economics, bahauddin zakariya university, multan, pakistan. 4 phd scholar, school of economics, bahauddin zakariya university, multan, pakistan. article details abstract history revised format: november 2018 available online: december 2018 social exclusion is manifested in inability of the masses to eradicate its causes resulting in perpetual obstruction in attaining vital facilities of life. a level of human and social progress is directly linked with enabling populous to maintain sustained level of financial depth and development. societies with sufficient supply of entrepreneurs comfortably sustain a balanced progression of societal goals especially in current global atmosphere. with weak institutional setting and vaguely defined goals, there is a need to change the orientation of public sector in developing countries like pakistan. the public sector entrepreneurship is essential to create enabling environment for creating entrepreneur friendly policies. it is especially important for pakistan with cpec connecting most poor of the regions of the country with the main stream to create policies that can reduce the impact of social exclusion of people of these regions. urban fringe and labor skills development with efficient institutions having participatory and modern outlook (e-governance) to cater for the needs of entrepreneurs are essentially required for creating a socially vibrant and thriving population in pakistan. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords entrepreneurship, human development, public policy jel classification: l26, o15, z18 corresponding author’s email address: sshafique@numl.edu.pk recommended citation:shafique, s., bakar, b., farooq, f. and perveen, k. (2018). social exclusion, entrepreneurship and public policy challenges for pakistan. review of economics and development studies, 4 (2), 219-225 doi: 10.26710/reads.v4i2.406 1. introduction social exclusion occurs when people and/or regions suffer from reinforcing problems that are aggravated in intensity because of inherent inability to eradicate its causes. domain of social exclusion includes: employment, education and skills, health, facilities for housing, transport, prevention of crimes, social support, and social interactions. it is a general perspective on exclusion/inclusion but it is not an exhaustive list of all the factors. for societies and regions having relatively higher levels of human development, the exclusion from financial, social and leisure services is also important aspect of social cohesion. the general policy initiatives to cater for such issues are: tax and transfers; spending on public services of health, education, housing etc.; unemployment benefits and jobs creation, and; safe city and neighborhood (blattman et. al., 2017). but the process of policy creation is a sensitive task that demands ingenuity and high degree of commitment. at the same time the regional exclusion http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 220 plays a strong role in pakistan as even after almost seven decades of independence populations in certain regions could not be supplied with basic rights in terms of health, education, political voice, financial liberty and social independence. although pakistan has low level of vertical inequality but horizontal inequality and hostility is very high due to lingual, ethnic, regional, religious, sectarian, and gender based difference. insurgency in balochistan and federally administered tribal areas (fata) is mainly because of regional exclusion, and high interference of state actors in day to day life affairs of the common people. similarly, karachi is torn in daily violence based on ethnicity and religious sects (qadeer, 1996). all this is aggravated because of ‘unaccountable’ political elites and their supporting bureaucracy that has perpetuated the feeling of alienation and exclusion even in working classes having a good life support businesses, jobs and standard of living (karagiannaki, 2017). the perpetual control of a small group of landowners, businessmen and military leaders seems to always serve the interest of few instead of all in public policy making (kennedy, 1984). this is indicated in the vaguely defined policy objectives, prolonged time of policy formulation, weak accountability measures, and complex mechanism of implementation and feedback. the political voice of landless, minorities, women, unemployed, and small traders does not seem to have value. most of the rural population (more than half of the household) is either have small or no land ownership whatsoever; therefore, their dependence on landowners is perpetual. now with development of urban fringes in punjab, the same population is employed in miserable conditions in small and large production units. higher is the poverty, the higher is the horizontal division in society. therefore, the dependence of downtrodden does not enable them to create horizontal networks to claim rights especially when it comes to cast votes (leimgruber, 1994). the population in this segment of society is large that the middle class trying to organize in the urban areas is outnumbered and political elites easily make their way back to power corridors. it can be readily expected as pakistan is ranked 146 th according to human development index, and 115 th on the un gender inequality index in the world. since 1950s, planning commission of pakistan (pc) created five-year development plans till 1998. due to political instability, ninth plan could not be launched in 1998, but later a three year poverty reduction strategy was announced for 2001-04. along with these five year development plans, each ministry launched its own plans specific to its goals, but unfortunately, nothing concrete has been achieved due to coordination failure among different organs of the state. the politics of having a policy for each ministry for political face saving always lead to setting unclear over ambitious policy goals that were never achieved at federal as well as provincial levels of governments (abbasi, 2011). the issue of governance and mass corruption at political and bureaucratic levels has never been resolved due to weak judicial system. the national accountability bureau (nab) has yet to create an environment where corrupt will fear involvement in any wrong doing. scholars like spillance, reiser and reimer (2002) allocate a strong role of cognition as policy effect has to emerge from the grass root level. therefore, involvement of the local community leaders and information about cost and taxes are necessary for inclusion, trust and interest of the masses in political activism of public policy making. although the political participation seems to have improved over the years in pakistan, but absence of local governments raises a lot of questions about the intention of the political elites when it comes to the issue of power sharing. table 1: turnover in election 2013 gain over 25 years average area turn out in 2013 25 year average gain over 25 year average all pakistan 53% 41% 12% punjab 57% 45% 12% sindh 53% 39% 14% kpk 42% 32% 10% balochistan 36% 28% 8% with all these local challenges, the initiation of china pakistan economic corridor (cpec) has opened new opportunities as well as challenges for pakistan. on one end cpec is connecting most neglected regions of pakistan and on the other new business challenges have emerged that need genuine efforts of policy makers to reap the full benefits of this opportunity. similarly, the creation of special economic zones (sezs) in mostly remote areas with low level of urban and human development is also a challenge in its own (i.e. bannu, d i khan, gwadar, haripur, kalat, karak, khuzdar, killasaifullah, kohat, lasbella, mansehra, nowshera, sibi, and swabi). review of economics and development studies vol. 4, no 2, december2018 221 figure 1: social indicators for selected sez areas in pakistan 2. public policy in pakistan it is necessary to understand the concept of federalism and how pakistan has tried to embrace it to create a society and a national state. federalism creates a political organization where all the component units are represented despite pluralism and diversity in the society. the institutional arrangement offers autonomy to the participating units while at the same time cooperates with other units under the umbrella of federation ensuring political and social participation (sommers, et. al., 1999). the participating units coordinate to attain joint goals of the federation by creating environment where differences and conflicts can be ironed out for collective socio-economic progress (albareda, et. al., 2007). in islamic history, prophet muhammad (peace be upon him) created the system of state with inward harmony between different segments of muslims (i.e. ansaar, muhajirin, and ajmi) and outward with followers of other religions (i.e. jews and christians). without any discrimination and prejudice, property rights were enforced along with right to have a livelihood. the religious autonomy and protection of places of worship by the state created a unique mechanism of governance that was inclusive, stable and yet dynamic. today there are 28 countries in the world having federal constitution managing over 40% of the population with diverse social and ethnic mix. some of these countries are: argentina, australia, austria, brazil, canada, ethiopia, germany, india, iraq, pakistan, spain, south africa, united states of american and venezuela (abbasi, 2011). after its inception pakistan took nine years to formally craft a constitution in 1954 which in itself was not as comprehensive as was expected to uphold and further the philosophical foundations of the new state. later in it was replaced by the governance mechanism drafted in 1962 constitution that was authoritarian in nature. although the new constitution was able to bring economic growth to the society but it could not maintain order in political and social spheres which resulted in seceding of province of bengal (east pakistan) from the federation. it was then replaced by constitution of 1973 that is based on federal parliamentary system with provincial autonomy and independence of state institutions especially the judiciary (mushtaq, 2009). the empirical literature assessing impact of political factors (i.e. democracy) on growth is not very explicit about the explanations based on numerous factors. for ‘compatibility school’ democracy ensures economic freedom and market mechanism enables the agents to make optimal decisions about resources utilization, allocation, investments and rewards generation. but on the other hand the ‘conflict school’ argues that the democracy empowers certain groups to create political solutions for their specific benefits (human development report on nepal, undp, 2001). on one hand, the demand of middle and poor classes are for more redistributive policies due to need for immediate consumption, while on the other hand, the rent seeking behavior of politicians distort the market mechanism by creating monopolies. if one puts pressure for higher taxes and wages causing reduction in private profits and rewards, the other deprives the consumer of its surplus. having said that, there is no denying that stronger the democracy, the better will be social protection and development networks for human development in the long run 0 10 20 30 40 50 60 70 80 90 percentage of people below poverty line % pakka house % adult literacy population % review of economics and development studies vol. 4, no 2, december 2018 222 (luthans and ibrayeva 2006). therefore, democracy and governance has positive impact on economic well being by improving life expectance, education and skills of the masses. the empirical literature suggests that higher the political empowerment the better is the political outcomes for societal welfare. in case of pakistan, over the years the political empowerment has significantly improved life expectancy in pakistan, but the related social indicators have not grown accordingly. 3. public policy, regional growth and entrepreneurial behavior the public policy to support entrepreneurial activities is generally stretched between two extremes. either the policy generates high opportunity cost by supporting a large number of entrepreneurial startups in a region, or on the other hand, lowers opportunity cost with minimal support to new entrants. the former leads to a competitive environment with high degree of product innovation and differentiation, whereas, in the later, entrepreneurial activity will not be driven by ambition and determination. in any case, it is imperative for entrepreneurs to have first hand information about expected product life cycle, degree of competition, internal management needs, and research and development to minimize difference between anticipated and actual growth of the firm (kreuger, 2000, dutta and thornhill, 2008). the failure of former socialist countries to attain state-controlled economic growth strategy opened the doors for limiting the role of the state and gradually opening the markets for private sector initiatives. the challenge so faced was to create state institutions that can create environment for productivity growth by transferring property rights to the private sector and enforcement of contracts therein. the difference arising in growth rates of these countries raised the question about the ability of political institutions to crate supportive economic institutions that can formulate rules and plans for sustainable growth and development (kahan et.al. 2017). the cluster analysis of discrete components of state responsible for bringing about economic change reveals that these are highly correlated in developed industrialized countries but loosely and inefficiently connected in developing countries. this reveals the inherent inability of political institutions to foster the impulse to create economic efficiency through institutional reforms that establish dominance of institutions over reforms. but both political and economic institutions are endogenous and represent the society and aspirations of the people. the difference in per capita income of different countries is attributed to strength of its political institutions, geography and trade openness to withstand international competition (rodrik et al., 2002). conventional institutions – political or economic – are different from institutions in transition in terms of their dynamism to search for the optimal path for overcoming historical deficiencies for developing compatibility with economics and political realities (brodwin, 2001). china successfully brought about this transformation with continuity in political policies of controlled market oriented reforms since the time of deng. achievement of market liberalization and with limited private property rights was not a straight forward task to accomplish. china followed a ‘dual track’ approach where creation of township and village enterprises (tves) gave the decentralizedcentralized ownership to locality that charges pre-fixed planned prices for the community, and excess produce was sold to the state at higher market prices. this approach kept the reforms intact without creating conflicts while the market forces also came into being for economic implications. china has seen the expansion in agriculture and steel production manifold over the past few decades through this approach functioning at local level. tve also generated revenues at local levels even in the absence of a vibrant tax system. larger portion of this revenue was left with tves to deliver public goods that also generated revenue for them. it replaced the complicated fiscal system that was governed and managed by the central government. a geographic region sustains its competitiveness by pioneer new combinations of available factor inputs and replacing old obsolete economic structure with the new competitive ones (boschma, 2004). this inherent ability of a region to foster entrepreneurship describes the differences that emerge over time in economics growth (audretsch and keilbach, 2004) as indicted in figure 1. essential characteristics of public services entrepreneurs are the same as the private-sector entrepreneur as they are also innovators willingly challenge the risk associated with uncertainty. but the main difference between them is regarding institutional environment that has impact on motivation for desire to create and achieve. public sector entrepreneurs have to thrive within legal constitutional environment laden with political constraints. the regulatory and procedural environment also puts restriction on access to resources and ability to act freely to achieve goals (wong et al. 2008). the public services entrepreneurship has internal and external manifestation. the internal or direct public-sector entrepreneurship is concerned with increasing public revenues, innovate to deliver public service with minimum opportunity cost, and enhance output of public service through novelty and innovation. on the other hand, external review of economics and development studies vol. 4, no 2, december2018 223 or indirect public-sector entrepreneurship is to provide consultancy to promote private sector action for provision of services envisioned by the policy makers. figure 2:the pyramidal model of regional competitiveness (lengyel, 2012) e-governance has been initiated by the government of pakistan but it is still in its transition phase. the table below provides a logical sequence of depth and development of e-governance where pakistan seems to be in the initial phase where government information is published on the web but so far it has not increased its quantity and quality that citizens may value for the sake of impartial performance assessment. the interactive features for users in most of the websites of government departments are unproductive. table 2: basic structure of e-governance phase description phase 1: presence information dissemination, usually government-to-citizen (g2c) e.g. publishing policy or tender documents, regulations, promoting transparent government. effective content management is essential from phase 1 through all phases. phase 2: interaction moves from publishing to interaction with citizens and businesses, enabling communication and feedback and processing of forms. uses electronic data interchange (edi) and e-mail capability. phase 3: transactions offers services and financial transactions capabilities, such as license renewals, payments of fines etc. features include electronic filing, digital signature, information security etc. requires interoperable technologies, typically internet based. review of economics and development studies vol. 4, no 2, december 2018 224 phase 4: integration services are integrated across departments and levels of government for multi-channel, ‘one-stop’ service delivery, enabling greater responsiveness from all parties. requires the integration of back-office systems. phase 5: political participation promotion of channels for citizen participation, for example, voting online, public forums and opinion surveys. source: compendium to the measurement framework’. brussels: e-government economics project, european commission. 4. recommendations and suggestions the study proposes the following general policy recommendations:  create the opportunities for regional growth by empowering public-sector entrepreneurial and encourage them to expand their knowledge networks to private sector. create the possibilities by allocating resources for promoting culture of innovation and creativity in entrepreneurial incubators with the help of higher education commission (hec) and universities. create the ability by providing the authority to act on part of public as well as private sector entrepreneurs.  educate the public regarding benefits linked with innovations and newness, and enable information dissemination to create conducive environment to accept risks in the face of uncertainty  enact mechanism to ‘listen to the entrepreneur’, and map the entrepreneurial eco-system as per the needs of the region (community, resources, labor skills, communication etc.)  prepare for ‘crises’ and create social insurance environment for the businesses and workers. also prepare skills based work force to cater for future needs of businesses and entrepreneurship  support fast-growing firms and their needs to access the resources and clients.  enact framework for urban-fringe development by ensuring provision of services like: water, sewer, housing, roads & transit, city education, health, parks, protection of wildlife and habitats, fire and other services. 5. conclusion wide spread social exclusion in developing countries like pakistan puts a continuous pressure on governments to choose between sustaining the lives of most of populous and infrastructure development for economic growth. at the same time the weak institutions and poor governance also poses a challenge that retards returns to private investment as well as human capital formation. at the same time cpec is connecting pakistani markets to actors that are more efficient and competitive that exposes the abilities of institutions to create enabling environment for withstanding and sustaining to this situation. system revamp is a long process but public sector entrepreneurship is an immediate response through which existing potential can be harnessed along with future human capital formation. e-governance can improve communication and response to have efficient social outcomes of policy initiatives. at the same time entrepreneurial culture needs to be embedded in every tier of educational system to culminate the breed of future business developers and employer of resources for sustainable economic development and growth. references abbasi, zubair faisal. (2011). federalism, provincial autonomy and conflicts. center for peace and development initiatives (cpdi), islamabad (pakistan). pp: 4-22. audretsch, d.b., keilbach, m.p. and lehmann, e.e. (2006). entrepreneurship and economic growth. oxford press, oxford. blattman, christopher, julian c. jamison and margaret sheridan. (2017). reducing crime and violence: experimental evidence from cognitive behavioral therapy in liberia. american economic review 107(4), 1165-1206. brodwin, p. (2001). marginality and cultural intimacy in a trans-national haitian community, occasional paper no. 91 october. department of anthropology, university of wisconsin-milwaukee, usa. dutta, d.k. and thornhill, s. (2008). the evolution of growth intentions: toward a cognition-based model. journal of business venturing, 23, 307-332. kahan, dan, ellen peters, erica c. dawson, and paul slovic. (2017). motivated numeracy and enlightened selfgovernment. behavioral public policy 1(1), 54-86. kennedy, charles h. (1984). policies of ethnic preference in pakistan. asian survey, 24(6), 688-703.krueger, n.f. (2000). the cognitive infrastructure on opportunity emergence. entrepreneurship, theory and practice, 24, review of economics and development studies vol. 4, no 2, december2018 225 5-23. karagiannaki, e. (2017). the empirical relationship between poverty and inequality changes in rich and middle income countries: understanding the links between inequalities and poverty (lip). case paper 206, centre for analysis of social exclusion, lse, london. luthans, f., &ibrayeva, e. s. (2006). entrepreneurial self-efficacy in central asian transition economies: quantitative and qualitative analysis. journal of international business studies, 37 (1), 92-111. leimgruber, w. (1994). marginality and marginal regions: problems of definition. in: marginality and development issues in marginal regions, chang-yid.ch. (ed.), national taiwan university, taipei, pp. 118. mushtaq, m. (2009) managing ethnic diversity and federalism in pakistan. in: european journal of scientific research, vol. 33, no. 2, pp. 279–294. qadeer, mohammad a. (1996). an assessment of pakistan's urban policies, 1947-1997. the pakistan development review, 443-465. undp (2001) nepal human development report 2001, poverty reduction and governance. kathmandu, nepal. www.undp.org/publications/nhdr2001/index.html. review of economics and development studies, vol. 6 (1) 2020, 167-178 167 feedback impact in high, average and low achievers’ mathematics engagement in high schools’ classrooms a tahira batool a assistant professor, research and evaluation department, lahore college for women university, lahore. article details abstract history: accepted 26 march 2020 available online 31 march 2020 the present study has interrogated the effect of feedback on different ability groups’ engagement in mathematics. the sample of this quasiexperimental research study was consisted of 87 grade nine students. the control group was consisted of 43 students whereas experimental group has total 44 students. some feedback techniques and strategies were used in teaching during intervention. students’ engagement (cognitive, affective and behavioral) was measured by administering a questionnaire at the start and end of the intervention. results has shown that intervention has a noteworthy effect on average and low achievers cognitive engagement but it has no significant effect in case of high achievers cognitive engagement. results also have shown that intervention has significant effect on high, average and low achievers’ affective engagement. similarly, intervention has a noteworthy effect on of high achievers, average achievers and low achievers’ behavioral engagement. students in experimental group who were more engaged and spent more time on homework and extra work. these results highlighted the importance of feedback in mathematics classroom therefore further research on components of engagement is required. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: feedback, cognitive engagement, affective engagement, behavioral engagement, high achievers, average achievers, low achievers jel classification: a21, a22, c65 doi: 10.47067/reads.v6i1.194 corresponding author’s email address: tahirashehbaz@yahoo.com 1. introduction feedback is very important in assessment and is vital in helping students to learn from assessment (irons, 2008). therefore, teachers should be aware that positive dialogues are helpful in learning. kaplan, peck and kaplan (1997) has shown that there is a downward relationship between students’ poor academic performance and disengagement in which less engaged students’ performance was found poor. so, the feedback has positive effect on students’ achievement, but, the point to be explained is that which ability group of students is more beneficiary from feedback techniques (e.g. batool & akhtar, 2019). as, ali and iqbal (2013) have used feedback as an important component of formative assessment in their study and have has also recommend to find out the difference of effect on different ability students’ achievement in science. review of economics and development studies, vol. 6 (1) 2020, 167-178 168 the main objective of this study was to explore the effect of feedback on high, medium and low achievers engagement in mathematics. it was focused on finding out the effect of feedback on high, average and low achievers’ cognitive engagement in mathematics. similarly, comparison of affective and behavioral engagement of the average, high and low achievers of the experiment and the control groups in mathematics classroom was also point of investigation in this study. researcher has tried to find out a comparison of time spent on homework and extra work of both control and experiment group. 2. literature review feedback has an important role in improvement of mathematics achievement. research studies support this claim that feedback has significant effect on students’ performance (e.g., batool & akhtar, 2019; mory, 2004; narciss & huth, 2003). though, other studies on feedback have shown no effect on performance (e.g., kluger & denisi, 1996; fyfe, rittle-johnson, & decaro, 2012). ali and iqbal (2013) have used feedback as an important component of formative assessment in their study and have shown its significant effect on students’ achievement in science. they further told that formative assessment has more effect on high achievers and low achievers than medium ability students. there was a positive relationship between classroom environment and the level of students’ engagement (white & salovey, 2012). kearney, webb, goldhorn and peters (2013) has indicated in a multi-level analysis that when teachers provide critical feedback to the students’ mathematics assignments they have higher level of learner engagement as compare to those classes where teachers did not give same feedback to their students. according to kaplan, peck and kaplan (1997) there is a downward rise association between students’ poor academic performance and disengagement in which less engaged students perform poorly. a research conducted by kearney, webb, goldhorn and peters (2013) has also mentioned that students engaged in one class have same attitude with other classes, they further showed that critical feedback in the form of discussion plays important role in determining the level of students’ engagement. they said that when students are provided with feedback slowly, they are more engaged in their mathematics classes. bert (2011) has discussed that give chance to the student to show their competence by demonstration, let them come to the whiteboards and show their competencies. bert explained that these activities performed on the white board should be controlled by the teacher to engage students. kedwell (2010), has discussed that persuasive writing, organized debates and problem based learning can increase the level of students’ engagement. similarly, peer relationship also matters, like when students feel uncomfortable with their social group. researchers’ indication have shown high level of achievement does not ensure high level of mathematics engagement. they have further shown that despite of learners’ relative success in mathematics they were disengaged from mathematics and t. so, there is a need to understand the reason and degree of engagement required for high achievers (skilling, bobis, & martin; 2015). whereas, the engagement in mathematics is an influencing factor in mathematics and the relationship between engagement and achievement needs further explanations to support students’ engagement in mathematics (mcphan, morony, pegg, cooksey, & lynch; 2008). the researchers have noted that influencing factors like interest participation and achievement in mathematics decline as student transfer from primary to lower secondary school level (mcphan, morony, pegg, cooksey, & lynch; 2008). engagement is defined as a multi-dimensional construct. researchers have proposed that students’ engagement in education includes three main areas: cognitive, emotional and behavioral (connell, 1990; connell & wellborn, 1991; fredricks, blumenfeld, & paris, 2004; kong, wong, & lam, 2003).cognitive engagement comprises on deal with learning and a readiness to go further than the basic requirements to master problematic skills. cognitive engagement researchers have explored review of economics and development studies, vol. 6 (1) 2020, 167-178 169 learning as a key indicator of overall investment in learning (fredricks, blumenfeld, & paris, 2004). behavioral engagement comprises on the students’ level of involvement in the school activities and the contribution in educational learning tasks, positive manner and the absence of disturbing behaviors (fredricks, blumenfeld, & paris, 2004). both academic and nonacademic school behaviors are included behavioral engagement and have effect on academic achievement. behavioral engagement can be perceived as students’ positive conduct. for example, following the class rules in the classroom and showing a lack of troublesome behavior (finn, 1993).researchers have shown that positive behavior as completion of homework and obeying school rules are indicators of behavioral engagement. according to psychological and educational researchers affective engagement includes students and teachers relationships, it consists of students’ emotional responses that include interest and anxiety (russell, ainley, & frydenberg, 2005). affective engagement also includes emotions which are experienced by students such as frustrations, anxiety, attitude, interest, boredom, involvement, expectations and a sense of belonging (kong, wong, & lam, 2003). there is a need for conducting the studies on components of engagement and different ability group mathematics achievement. the main objective of the study is to explore the effect of feedback on high achievers, medium achievers and low achievers engagement in mathematics. following null hypotheses are formulated to address above questions: h01: there is no noteworthy effect of feedback on high, average and low achievers’ cognitive engagement in mathematics. h02: there is no noteworthy effect of feedback on high, average and low achievers’ affective engagement in mathematics. h03: there is no noteworthy effect of feedback on high, average and low achievers’ behavioral engagement in mathematics. h04: there is no comparative difference in means of students’ time spent on homework and extra work of control and experiment group 3. methodology 3.1 research design a quantitative research method was used in this study. researcher has used experimental method followed a quasi-experimental design. this design is also called matching-only pretest – posttest control group design. four chapters from text book of grade nine were selected for this study. the experiment was continued for 16 weeks. 3.2 sample convenient sampling technique was used and eighty six nine graders were selected to conduct this research. two intact classes of grade ix students of mathematics from the conveniently selected school were taken as the sample of the study. one section with 44 students was decided as an experiment group by using random assignment technique and similarly other section on with 43 students as a control group. researcher matched the groups on one variable that was students’ results in the subject of mathematics in grade viii to find the equivalence of both groups. control group was divided into three ability groups and same for experiment groups (groups were named as high achiever, average achiever and low achiever). 3.3 procedure feedback was given to the experiment group and no feedback to control group. feedback was given on students’ in-class work, independent practice assignments, daily homework and teacher’s review of economics and development studies, vol. 6 (1) 2020, 167-178 170 discussion with a student, a group of students or whole class. while control group was taught by routine methods that was already tradition in their class. sometimes feedback got the form of dialogic feedback. the planned feedback and interactive feedback were main techniques of feedback used in this intervention. feedback was given before starting the lesson, in the middle and when the lesson was at the end of lesson in the form of discussion, written comment or verbal work. at the start of the lesson, feedback was given when teacher was using questions to know about students’ previous knowledge to start a new lesson, in case of any misconception or misunderstanding appropriate feedback was given. similarly, in the middle of the lesson when teacher’s objective was to check students’ understanding about the concept taught, researcher gave them some written work in the form of problem solving techniques or discussion. if there was difficulty with understanding some concept, researcher gave them feedback in the form of written comments or verbal corrections or dialogues to facilitate them and involve them in thinking process so that they can got true meaning of the under consideration concept. however, feedback that was planned in advance, was not only planned for collecting information about students’ learning, rather it was introduced so as to engage students in mathematical concepts. it was also in the form of verbal or written comments on students’ answer on white-board or notebooks. students were asked to answer the question with think pair-share technique, they were asked to discuss or consult with their peer. after giving students some time for thinking, researcher was preceded for further question. this type of feedback was depending upon students’ response. the interactive or informal feedback took place when the teacher was interacting with a student, group of students or the whole class. questioning was the main instrument for such feedback. the response of the student to the question enabled the researcher to decide what to do next: whether to extend discussion or question answer session or give appropriate feedback to guide the student towards correct answer. as it was built on the students’ response which cannot be anticipated, therefore, the teacher kept on switching from formal to informal and informal to formal feedback. researcher has assigned homework in the form of daily homework and independent practice assignments to the students, to write answers to the given questions. instead of telling students about right or wrong answer, possible solution to the question were given on note books in case of home work. independent practice assignments were given at the end of each chapter. grades were given to the independent practice assignments by using grading rubrics. researcher observed all mistakes and misunderstandings in the assignments and gave appropriate feedback through discussions and written explanations according to the need in class. occasionally, the technique of peer assessment was also used. in this technique students got grades or comments leading to correct answer from their peers. the marked answer sheet was back to the relevant students. as researcher gave planned and unplanned feedback in order to enhance students’ engagement in mathematics, it will be quite inevitable to check the effect of feedback techniques on students’ engagement in mathematics. therefore, researcher administered a questionnaire (students engagement in mathematics) to the students of both the experiment group and the control group at the end of the intervention. review of economics and development studies, vol. 6 (1) 2020, 167-178 171 4. results the results obtained in this study are shown in tables. table 1 comparative cognitive engagement of the high, average and low achiever in mathematics classroom control group experiment group m sd m sd t p (two tailed) high achievers cognitive eng ( pretest) 3.44 0.28 3.22 0.25 1.573 .138 high achievers cognitive eng ( posttest) 3.44 0.16 3.42 0.11 0.522 .613 average achievers cognitive eng (pretest) 3.39 0.41 3.25 0.31 1.413 .162 average achievers cognitive eng(posttest) 3.34 0.38 3.65 0.12 -1.780 .141 low achievers cognitive eng (pretest) 3.32 0.16 3.17 0.33 1.155 .270 low achievers cognitive eng (posttest) 3.22 0.24 3.41 0.28 1.712 .033 eng = engagement, df(high& low achievers )= 14, df(average achievers) = 53, *p<.05, **p<.01 an independent samples t-test was conducted to compare the students’ cognitive engagement scores in mathematics classroom in pretest of control and experiment group high achievers. results revealed that that there is insignificant difference between the mean gain in cognitive engagement of experimental group (mean =3.22) and control group (mean =3.44) having t-value (1.573) and p = .138. the mean difference (0.21) analyzed in students’ cognitive engagement in control and experiment group was minor. it indicates that students in experiment group have no higher gain in cognitive engagement as compare to the students’ gain in cognitive engagement in control group. therefore, initially (in pretest) both groups have high achievers with same cognitive engagement. similarly, an independent samples t-test was conducted to compare the students’ cognitive engagement scores in mathematics classroom in posttest of control and experiment group high achievers. results revealed that there is no noteworthy difference between the mean gain in participants’ cognitive engagement scores of experiment group (mean =3.42) and control group (mean =3.44) having t value (0.522) and p = .613. the mean difference (0.04) among students’ cognitive engagement scores in posttest of control and experiment group was small. it indicates that students in experiment group have no higher gain in cognitive engagement as compare to the students’ gain in cognitive engagement in control group. therefore, intervention did not significantly effect on cognitive engagement of high achievers in experiment group. an independent samples t-test was conducted to compare the students’ cognitive engagement in mathematics classroom in pretest of control and experiment group average achievers. results revealed that there is no noteworthy difference among the mean gain in cognitive engagement of experiment group (mean =3.25) and control group (mean =3.39) having t value 1.413 and p = .162. the mean difference (0.14) between students’ cognitive engagement in pretest of control and experiment group was small. it directs that average achievers in experiment group have no higher gain in cognitive engagement as compare to the average achievers’ gain in cognitive engagement in control group. therefore, initially (in pretest) both groups have average achievers with same cognitive engagement. review of economics and development studies, vol. 6 (1) 2020, 167-178 172 likewise, an independent samples t-test was conducted to compare the students’ cognitive engagement in mathematics classroom in posttest of control group and experiment group average achievers. results revealed that there is no important difference among the mean gain in cognitive engagement of experiment group (mean =3.65) and control group (mean =3.34) having t value (-1.78) and p = 0.141. the mean difference (-0.31) in students’ cognitive engagement in pretest of control and experiment group was medium. the eta squared value (.06) has moderate effect size. it designates that average achievers in experiment group have higher gain in cognitive engagement as compare to the average achievers’ gain in cognitive engagement in control group. therefore, intervention has a reasonable effect on cognitive engagement of average achievers in experiment group. an independent samples t-test was conducted to compare the participants’ cognitive engagement in mathematics classroom in pretest of control group and experiment group low achievers. results revealed that there is no noteworthy difference among the mean gain in cognitive engagement of experiment group (mean =3.17) and control group (mean =3.32) with t value (1.15) and p = .270. the mean difference (0.15) among cognitive engagement in pretest of control and experiment group students was small. it indicates that low achievers in experiment group have no higher gain in cognitive engagement as compare to the low achievers’ gain in cognitive engagement in control group. therefore, initially (in pretest) both groups have low achievers with same cognitive engagement. similarly, an independent samples t-test was conducted to see difference of students’ cognitive engagement in mathematics classroom in posttest of control group and experiment group low achievers. results exposed that there is a significant difference between the mean gain in cognitive engagement of experiment group (mean =3.41) and control group (mean =3.22) with t value (1.71) and p = .033. the mean difference (-0.19) among cognitive engagement scores in pretest of control and experiment group was significant. the eta squared value (.17) has greater effect size. it designates that low achievers in experiment group have considerably higher increase in cognitive engagement as compare to the low achievers’ gain in cognitive engagement in control group. therefore, intervention has a significant effect on cognitive engagement of low achievers in experiment group. table 2 comparative affective engagement of the high achiever, average achiever and low achiever in mathematics classroom control group experiment group m sd m sd t p (two tailed) high achievers affective eng ( pretest) 3.36 0.33 3.45 0.35 -0.49 .629 high achievers affective eng ( posttest) 3.56 0.18 3.03 0.27 4.592 <.001 average achievers affective eng (pretest) 3.54 0.36 3.45 0.25 1.113 .270 average achievers affective eng (posttest) 3.48 0.23 3.05 0.28 5.962 <.001 low achievers affective eng (pretest) 3.53 0.14 3.39 0.21 1.680 .121 low achievers affective eng (posttest) 3.49 0.26 3.15 0.20 3.121 <.001 eng = engagement, df(high& low achievers )= 14, df(average achievers) = 53 an independent samples t-test was applied to see difference of the students’ affective engagement in mathematics classroom (pretest) of control group and experiment group high achievers. results revealed no noteworthy difference among the mean gain in affective engagement of experiment group (mean =3.45) and control group (mean =3.36) with t (14) = -0.49 and p = .629. the difference of mean (0.09) in participants’ affective engagement among pretest scores of control and experiment group was smaller. it indicates that students in experiment group have no higher gain in affective review of economics and development studies, vol. 6 (1) 2020, 167-178 173 engagement as compare to the students’ gain in affective engagement in control group. therefore, in pretest of participants both experiment and control groups have high achievers with same affective engagement. similarly, an independent samples t-test was applied to see difference of the students’ affective engagement in mathematics classroom in posttest conducted in control group and experiment group high achievers. results revealed a noteworthy difference among the mean gain in affective engagement of experiment group (mean =3.03) and control group (mean =3.56) having t value (4.59) and p <.001. the mean difference (0.53) analyzed among students’ affective engagement scores in posttest of control and experiment group was greater. the eta squared value (.60) has greater effect size. it indicates that students in experiment group have higher gain in affective engagement as compare to the students’ gain in affective engagement in control group. therefore, intervention has a significant effect on affective engagement of high achievers in experiment group. an independent samples t-test was conducted to see difference of the students’ affective engagement in mathematics classroom in pretest conducted in control group and experiment group average achievers. results revealed insignificant difference between the mean gain in affective engagement of experiment group (mean =3.45) and control group (mean =3.54) having t value (1.11) and p = .270. the mean difference (0.09) analyzed among students’ scores of affective engagement in posttest of control and experiment group was small. it indicates that students in experiment group have no higher gain in affective engagement as compare to the students’ gain in affective engagement in control group. therefore, initially (in pretest) both groups have average achievers with same affective engagement. in the same way, an independent samples t-test was conducted to see difference of the students’ affective engagement in mathematics classroom in posttest of control group and experiment group average achievers. results revealed that there is a significant difference between the mean gain in affective engagement of experiment group (mean =3.05) and control group (mean =3.54) having t value (5.96) and p <.001. the mean difference (0.42) among affective engagement in posttest of control and experiment group students was large. the eta squared value (.40) has greater effect size. it indicates that students in experiment group have higher gain in affective engagement as compare to the students’ gain in affective engagement in control group. therefore, intervention has a significant effect on affective engagement of average achievers in experiment group. an independent samples t-test was conducted to compare the students’ affective engagement in mathematics classroom in pretest of control group and experiment group low achievers. results revealed in analysis of scores in above table having t (14) = 1.68, p = .121 shows that there is no significant difference between the mean gain in affective engagement of experiment group (mean =3.39) and control group (mean =3.53). the mean difference (0.14) among control and experiment group students’ affective engagement was small. it indicates that students in experiment group have no higher gain in affective engagement as compare to the students’ gain in affective engagement in control group. therefore, initially (in pretest) both groups have low achievers with same affective engagement. similarly, an independent samples t-test was conducted to compare the students’ affective engagement in mathematics classroom (in posttest) in control group and experiment group low achievers. results revealed in analysis of scores in above table having t (14) = 3.12, p <.001 shows that there is a significant difference between the mean gain in affective engagement of experiment group (mean =3.15) and control group (mean =3.49). the mean difference (0.39) among affective engagement of control and experiment group students was large. the eta squared value (.39) has large effect size. it indicates that students in experiment group have higher gain in affective engagement as compare to the students’ gain in affective engagement in control group. therefore, intervention has a significant effect on affective engagement of low achievers in experiment group. review of economics and development studies, vol. 6 (1) 2020, 167-178 174 an independent samples t-test was conducted to see difference the students’ behavioral engagement in mathematics classroom in pretest conducted in control group and experiment group high achievers. results revealed in analysis of scores in above table 3 having t (14) = -0.67, p = .512 shows that there is insignificant difference among the mean gain in behavioral engagement of experiment group (mean =2.43) and control group (mean = 2.17). the mean difference (0.27) between control and experiment group students was small. it indicates that students in experiment group have no higher gain in behavioral engagement as compare to the students’ gain in behavioral engagement in control group. therefore, initially (in pretest) both groups have high achievers with same behavioral engagement. likewise, an independent samples t-test was conducted to compare the students’ behavioral engagement in mathematics classroom in posttest of control group and experiment group high achievers. results revealed in analysis of scores in above table having t (14) =-4.15, p <.001 shows that there is a significant difference between the mean gain in behavioral engagement of students of experiment group (mean =4.02) and control group (mean =2.67). the mean difference ( 1.35) in students’ behavioral engagement in control and experiment group was large. the eta squared value (.51) has greater effect size. it indicates that students in experiment group have higher gain in behavioral engagement in comparison with the students’ gain in behavioral engagement in control group. therefore, intervention has a significant effect on behavioral engagement of high achievers in experiment group. table 3 comparative behavioral engagement of the high achiever, average achiever and low achiever in mathematics classroom control group experiment group m sd m sd t p (two tailed) high achievers behavioral eng (pretest) 2.17 0.68 2.43 0.89 -.673 .512 high achievers behavioral eng (posttest) 2.67 0.76 4.02 0.48 -4.155 <.001 average achievers behavioral eng (pretest) 2.22 0.56 2.14 0.50 0.605 .552 average achievers behavioral eng(posttest) 2.30 0.60 4.17 0.37 -13.88 <.001 low achievers behavioral eng (pretest) 2.05 0.29 2.10 0.26 -0.381 .711 low achievers behavioral eng (posttest) 2.13 0.34 4.28 0.24 -14.51 <.001 eng = engagement, df(high& low achievers )= 14, df(average achievers) = 53, an independent samples t-test was conducted to see difference of the students’ behavioral engagement in mathematics classroom in pretest of control group and experiment group average achievers. results revealed in analysis of scores in above table having t (53) = 0.60, p = .552 shows that there is no noteworthy difference among the mean gain in behavioral engagement of experiment group (mean =2.14) and control group (mean = 2.22). the mean difference (0.09) analyzed in students’ behavioral engagement among control and experiment group was small. it indicates that students in experiment group have no higher gain in behavioral engagement as compare to the students’ gain in behavioral engagement in control group. therefore, initially (in pretest) both groups have average achievers with same behavioral engagement. similarly, an independent samples t-test was conducted to see difference the students’ behavioral engagement in mathematics classroom in posttest of control group and experiment group average achievers. results revealed in analysis of scores in above table having t (53) = -13.89, p <.001 shows that there is a significant difference between the mean gain in behavioral engagement of experiment group (mean =4.17) and control group (mean =2.30). the mean difference (1.35) among control and experiment group students’ behavioral engagement was large. review of economics and development studies, vol. 6 (1) 2020, 167-178 175 the eta squared value (.70) has greater effect size. it indicates that students in experiment group have higher gain in behavioral engagement as compare to the students’ gain in behavioral engagement in control group. therefore, intervention has a significant effect on behavioral engagement of average achievers in experiment group. an independent samples t-test was conducted to see difference of the students’ behavioral engagement in mathematics classroom in pretest of control and experiment group low achievers. results revealed in analysis of scores in above table having t (14) = -0.38, p = .711 shows that there is insignificant difference between the mean gain in behavioral engagement of experiment group (mean =2.10) and control group (mean = 2.05). the mean difference (0.05) between control and experiment group students’ behavioral engagement was minor. it designates that students in experiment group have no higher gain in behavioral engagement as compare to the students’ gain in behavioral engagement in control group. therefore, initially (in pretest) both groups have low achievers with same behavioral engagement. likewise, an independent samples t-test was conducted to see difference of the students’ behavioral engagement in mathematics classroom in posttest of control group and experiment group low achievers. results revealed in analysis of scores in above table having t (14) = -14.51, p <.001 shows that there is a noteworthy difference among the mean gain in behavioral engagement of experiment group (mean =4.28) and control group (mean =2.13). the mean difference (14.51) among control and experiment group students behavioral engagement was significant. the eta squared value (.90) has great effect size. it indicates that students in experiment group have higher gain in behavioral engagement as compare to the students’ gain in behavioral engagement in control group. therefore, intervention has a significant effect on behavioral engagement of low achievers in experiment group. table 4 comparison of time spent on homework and extra work of control and experiment group control group experiment group time spend on homework time spend on extra work time spend on homework time spend on extra work pre test posttest pre test posttest pre test posttest pre test posttest 0 12 10 20 11 13 23 20 3 1 20 18 11 8 20 10 9 4 2 4 3 5 15 2 3 4 4 3 2 4 2 10 3 3 4 17 4 3 2 2 4 2 3 13 5 2 4 3 3 2 2 2 20 mean 0.77 0.73 0.64 0.68 0.59 3.55 0.86 4.43 sd 0.61 0.59 1.12 1.17 0.50 1.11 1.28 0.66 results in table 4 revealed the time spent on homework and extra work at home. it indicates that mean score of time spent on homework is decreased in posttest of control group. on the other hand, time spent on homework is considerably increased in posttest of experiment group. 5. discussion this study was conducted to explore the feedback effects of three components of engagement (cognitive engagement, affective engagement and behavioral engagement) on three ability groups (high achievers, average achievers and low achievers). the findings of this research shows that students of each ability group have benefited from feedback which consequently resulted increase in students’ engagement in mathematics classroom. so, feedback has positive role in teaching and learning process review of economics and development studies, vol. 6 (1) 2020, 167-178 176 of each ability group (batool & akhtar, 2019; hattie & timperley, 2007). findings of this research has shown that when feedback techniques were used in mathematics classroom, high achievers’ cognitive engagement as compared to other ability groups was less increased. whereas, feedback has significant increase in cognitive engagement of both average achievers and low achievers cognitive engagement (e.g. fung, tan & chen, 2018; fielding-wells & makar, 2008; kong & hoare, 2011). there is less literature on relationship of components of engagement on different ability groups separately. therefore, there is still a need to explore these variables and their relationships) in case of affective engagement, feedback has a significant effect on affective engagement of high achievers. similarly, feedback has a significant effect on affective engagement of average achievers and low achievers in mathematics classroom.this finding has some identical features with previous researchers. similarly, in case of behavioral engagement, feedback has a significant effect on behavioral engagement of high, average and low achievers in nine graders’ mathematics classroom. engagement may be boosted by some supportive environment (e.g. motivation and performance feedback) in high school classroom (shernoff, kelly, tonks, anderson, cavanagh, sinha & abdi, 2016). this is an interesting finding of this study that students in classrooms with traditional teaching spent more time on extra work in the start of experiment. when feedback techniques were applied then students that were taught by using different techniques of feedback started to spent more time on extra work than other class (without feedback). so, feedback effect not performance in mathematics classroom but it has also helped students in engaging in activities and assignments at home. researchers have done research on grade five to twelve have shown that teachers feedback on homework have indirect relationship with their academic achievement by effecting their behavior on mathematics. (nunez, suarez, rosario, vallejo, cerezo & valle, 2015). 6. conclusion and recommendations it is concluded from this study that feedback has significant effect on engagement of each ability group (high, average and low achievers). data regarding each dimension of engagement (cognitive engagement, affective engagement and behavioral engagement) was collected two times during this study has shown significant difference in pretest and posttest of participants taught by using feedback techniques. it is shown that feedback has a significant effect on cognitive, affective and behavioral engagement of each ability group. only, feedback given to high achievers has no significant effect on their cognitive engagement. this study has also indicated that time spent on extra work is considerably increased in posttest of experiment group. therefore, feedback given to experiment group was also effective for homework and extra work done at home. so, students in experiment groups were not only performing well in mathematics classroom but they were engaged in activities and assignments at home also. there is a need for conducting research on components of engagement separately. the study also recommend to conduct research on mathematics achievement of different ability group. the sample was consisting of the students of mathematics studying in grade nine but the same study should be conducted for the students of other subjects and grades also to find out the effect of feedback on students engagement. references ali, i. & iqbal, m. h. 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(2015, july). the engagement of students with high and low achievement levels in mathematics. in proceedings of the 39th psychology of mathematics education conference (vol. 4, pp. 185-192). review of economics and development studies vol.2, no 1, june 2016 11 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 2: issue 1 june 2016 journal homepage: www.publishing.globalcsrc.org/reads infrastructure and households’ incomes in pakistan: a cross province comparative analysis of rural areas 1 ishtiaq ahmad, 2 muhammad bashir khan, 3 fatima farooq 1 assistant professor, department of economics, the islamia university of bahawalpur, pakistan, ishtiaq.ahmad@iub.edu.pk 2 assistant professor, ndu, islamabad, pakistan, 3 lecturer, department of economics, bahauddin zakariya university, multan, pakistan article details abstract history revised format: may 2016 available online: jun 2016 lack of earning opportunities in rural areas of developing countries is the key constraint to rural development and infrastructure has the force to increase such activities. hence, this study attempts to summarize status of rural infrastructural development along with exploring its role for enhancement of rural household's income in pakistan. on the basis of ‘pakistan 2008 mouza statistics”, a cross-province comparative analysis points out devastated state of rural infrastructural development in pakistan which is observed to be miserable on account of skewed distribution while favouring punjab and depriving balochistan. this study also exploits income generation model based on production function while including infrastructure as external factor with the hypothesis that it has multiplier effect on incomes. for this purpose household integrated economic survey (hies) for the year 2005-06 is used for rural areas only, which is latest in the sense that information on rural communities is uniquely available in this dataset. on the basis of analysis using log-lin functional form it has been concluded in this study that even infrastructural development has a positive role for rural households' incomes but its role is secondary in comparison to other attributes i.e. household size, livestock holdings, head's gender, age and education. it is further established that for rural households’ income even infrastructure for energy provision is most important but infrastructural need for different regions is different. © 2016 the authors, under a creative commons attributionnoncommercial 4.0 keywords personal income, infrastructure, rural analysis, households, micro data jel classification d31, h54, o18, q12 & c81 corresponding author’s email address: ishtiaq.ahmad@iub.edu.pk recommended citation: ahmad, i., khan, m. b. and farooq, f. (2016). infrastructure and households’ incomes in pakistan: a cross province comparative analysis of rural areas. review of economics and development studies, 2 (1) 11-28 doi: https://doi.org/10.26710/reads.v2i1.122 1. introduction development is the long lasting problem of developing countries like pakistan. under market-friendly http://www.publishing.globalcsrc.org/reads mailto:ishtiaq.ahmad@iub.edu.pk mailto:ishtiaq.ahmad@iub.edu.pk review of economics and development studies vol.2, no 1, june 2016 12 approach it has been recognized that although free market has a momentous job for economic development of low and middle income countries even then role of government could not be neglected in certain fields such as infrastructure, health, education etc (todaro and smith, 2008). private sector in free market economy works for sole objective of optimization, therefore, could be considered to contribute minimal in social sector and infrastructural development. role of infrastructure in development process is well recognized because it works in multiple directions. firstly, infrastructure enhances linkages among different sectors and helps to reduce transaction costs; secondly, it expands economic activities in the regions where installed; thirdly it generates employment for the inhabitants; fourthly it is a source of accelerated productivity in masses, and fifthly public works programmes are exclusive source of employment generation under governments’ control. therefore, infrastructure leads towards social sector development, income enhancement, and poverty reduction. so far as income is concerned it is important indicator of development at household level because it points out living standards along with potential of masses to contribute in resource base of the country and therefore helps to improve human as well as community development. this study takes into consideration the role of infrastructure in income of households, hence, attempts to contribute in development related studies. pakistan belongs to south asia where economy is predominantly rural in nature. this fact is obvious from data also because at the time of inception largest contributor in gdp was agriculture sector. with the passage of time even its contributions in gdp is shrinking in comparison to industrial sector but still its importance has increased because agriculture is the back bone of industrial sector in pakistan. nearly 62 percent of population lives in rural areas, two-third of exports in pakistan comprises of agricultural products, and 44 % of total labour is related to rural areas. similarly, poverty is also a rural phenomenon in pakistan because overall poverty trend in pakistan follows rural poverty trend [malik (1988), qureshi and arif (2001)]. hence, it is reasonable to explore the determinants of incomes in rural dimension of pakistan. this paper is divided into seven major sections. sections: 1 & 2 represent introduction and literature survey. in section: 3, data and methodology has been debated and section: 4 describes a cross-province comparative analysis of infrastructural development in case of pakistan economy. thereafter, theoretical framework and model for determining rural households’ incomes are discussed in section: 5. whereas section: 6 is related to analysis thereof. in the last, the section: 7 concludes the study and consequently suggests some policy recommendations on the basis of analysis. 2. survey of literature reardon (1998) found that, as a policy variable, the rural infrastructural development could also play a vital role for increasing rural non-farm activities. social rate of returns to electricity and road investment was discovered by canning and bennathan (2000). it was explored that both these infrastructural variables reflect a highly complementary relationship with other physical and human capital but enforcing a rapid diminishing return if invested in isolation. kwon (2001) explores that roads have their own explanatory power on income generation and poverty reduction other than economic growth. germano and thorbecke (2001) observed urban biased policies for poverty in sub-saharan african countries. it was concluded that rural development was an engine for poverty reduction and also a mode to promote incomes via economic growth. while exploring the factors determining the growth and poverty reduction in africa, deininger and okidi (2003) employed household panel survey data and constructed a model of economic growth at micro level. it was found out that access to infrastructure, agricultural exports, human and physical capital had the force, not only, to enhance economic growth and incomes but also to reduce poverty. nkonya et al (2004) also modeled household’s primary income and found public services as an important element in this regard. fan, nyange and rao (2005) review of economics and development studies vol.2, no 1, june 2016 13 investigated the role of public services for enhancement of household’s income while using household level survey and found that public services played a vital role for household’s income augmentation. mujeri (2002) found that infrastructure development generated employment through public works programmes. the impact of rural road projects was examined by khandker; bakht, and koolwal (2006) and it was concluded that roads were important public investments that had both short and long term effects on employment, income, and productivity. fan and chan-kang (2005) estimated that development of rural roads and other infrastructure proficiently widened income via growth and reduced the poverty in china. in considering determinants of market participation in rural areas of mozambique, boughton et al (2007) found important role of land, labour, livestock and public goods for crop market participation. olivia and john (2008) raised question on quality of infrastructure accessible to rural populace of indonesia in generating income/employment and established the evidence. angel (2010) investigated infrastructure for productivity and found that initially it worked for productivity enhancement but later this role was diminished after saturation point, hence infrastructure approach was adequate for developing countries. dillon et al (2011) mentioned road and irrigation as one of best source for productivity in rural areas of nepal. short-run and long-run impacts of infrastructural investment on employment and economic activity of us economy were studied by bivens (2014) who argued a positive impact thereof. frayne and mccordic (2015) attempted to determine relationship of food security with income and infrastructure and concluded that income alone was not sufficient to achieve the targets. bridge et al (2016) observed causal connection between electricity and incomes in both the directions. 3. data and methodology this study utilizes two different datasets i.e. ‘pakistan 2008 mouza statistics’ and ‘hies 2005-06’. these two datasets are based on two different surveys conducted for the same time, population and interrelated issues. former dataset is specifically designed for measuring rural infrastructural development while later is related to households’ demographics along with economic and social sector issues. interestingly, hies also provides data on infrastructure through rural community questionnaire and same is lastly available for the round of 2005-06 and thereafter rural community questionnaire is not included in hies. this is why this dataset is latest one to be used for analysis purpose of this study. furthermore, the ‘pakistan 2008 mouza statistics’ provides comparatively a comprehensive information on rural infrastructural development, therefore, this dataset is used separately in the analysis for the purpose of comparative analysis of rural infrastructure development among provinces of pakistan. descriptive and graphical analyses are utilized to explore the status of rural infrastructural development at provincial level. in case of analysis relating to determinants of households’ incomes, a log-lin income generation model based on production function is exploited wherein infrastructure is included as external factor with the hypothesis that it has multiplier effect for incomes. 4. rural infrastructural development in pakistan: provincial level comparative demonstration more often than not infrastructural services are distributed inter alia among three major categories: social sector development, communication along with energy sector development and markets including banking sector development. social sector helps to improve productivity, communication and energy sectors help to minimize costs and markets with banking sector help to enhance bargaining power and financial accessibility. consequently, infrastructure could be termed as skeleton for the life of review of economics and development studies vol.2, no 1, june 2016 14 economies. presenting a sketch of rural infrastructural development in pakistan before examining empirical investigation may offer insights into thesis in question. figure: 4.1 [source: authors’ estimation-gop (2008) & ahmad (2013)] figure: 4.2 [source: authors’ estimation-gop (2008) & ahmad (2013)] table: 4.1 social sector facilities a comparative analysis of the provinces (spatial distribution) sr. no type of facility mouzas within 10 km (percentage) balochista n khyber pakhtunkhwa punja b sindh 1 2 3 4 5 eduction 1 primary school 67.95 95.21 98.51 93.34 2 middle school 40.91 78.63 91.16 75.01 3 high/higher secondary school 26.72 58.40 76.80 63.56 4 college 10.40 25.39 34.59 17.50 5 vocational center 6.58 17.84 28.58 21.74 health 1 hospital/dispensary 36.03 59.13 74.45 67.27 2 rural health center 32.47 59.44 77.50 64.31 3 basic health unit 31.11 64.90 79.51 64.99 4 child & mother care centre 19.45 50.11 67.53 53.65 5 population welfare centre 24.80 56.16 74.99 57.08 6 n.g.o. dispensary 14.08 29.49 47.28 45.56 7 private doctor [mbbs] 19.85 56.35 70.08 68.65 8 midwife facility 32.58 56.00 73.48 74.61 9 veterinary facility 15.58 34.63 40.40 30.80 source : authors’ estimation-gop (2008) & ahmad (2013) review of economics and development studies vol.2, no 1, june 2016 15 4.1 social sector facility: a spatial distribution so far as spatial distribution is concerned, the figures: 4.1 & 4.2 coupled with table: 4.1 portray a skewed distribution of social sector facilities while favouring punjab and notifying balochistan as deprived region. the provinces of sindh and khyber pakhtunkhwa show a moderate level distribution of social sector infrastructural facilities. such a picture of spatial distribution is in line with the characteristics of developing countries like pakistan where dualism and unequal distribution prevail dominantly. 4.2 transport, communication and energy sectors facilities social overhead capital attained a vital position in development process of any country. tables: 4.2 along with figures: 4.3 & 4.4 discusses transport, communication and energy sector facilities. figure: 4.3 [source: authors’ estimation-gop (2008) & ahmad (2013)] figure: 4.4 [source: authors estimation-gop (2008) & ahmad (2013)] table 4.2 transport communication & energy sector facilities a comparative analysis of the provinces (spatial distribution) sr. no type of facility mouzas within 10 km (percentage) balochist an khyber pakhtunkhwa punja b sind h 1 2 3 4 5 communication 1 metaled road 49.38 79.03 97.36 91.6 0 2 transport 72.81 90.62 97.59 93.5 6 3 fixed line telephone 19.57 54.89 66.13 46.3 5 4 computer/intern et 15.91 45.07 58.00 42.1 9 5 p.c.o. 31.60 66.72 88.89 71.2 review of economics and development studies vol.2, no 1, june 2016 16 5 6 post office 23.24 63.62 88.35 68.1 5 energy 1 electricity 54.68 85.80 97.75 92.9 8 2 diesel / petrol pump 24.42 49.46 86.04 68.3 8 3 cng / lpg 5.07 18.17 32.19 25.7 5 source: author’s estimation-gop (2008) & ahmad (2013) 4.2.1 spatial distribution it is clear that spatial distribution of transport, communication and energy services is uneven and shows tilt of balance in favour of panjab. however, sindh and khyber pakhtunkhawa attained an average level of rural development in comparative statistics and balochistan is least developed region. 4.3 market and banking sector facilities the market and banking sector infrastructure plays a vital role in economic health of a region specifically for rural sector. table: 4.3 along with figures: 4.5 & 4.6 are the source for evaluating these services. table: 4.3 markets & banking sector facilities (accessibility analysis) a comparative analysis of the provinces (spatial distribution) sr. no type of facility mouzas within 10 km (percentage) balochistan khyber pakhtunkhwa punjab sindh 1 2 3 4 5 markets 1 livestock market 10.22 27.45 34.50 43.96 2 grains market 8.15 24.12 37.87 45.68 3 fruits market 7.45 22.31 38.19 39.51 4 vegetables market 8.76 22.95 40.79 41.27 5 govt. procure. cnt 6.64 16.47 45.06 44.95 6 seeds shop 12.68 39.57 70.08 55.46 7 fertilizers shop 12.21 36.23 66.66 54.57 8 pesticides shop 12.20 36.31 66.54 54.58 banking facilities 1 commercial bank 10.73 30.38 55.69 44.37 2 on-line banking 6.86 17.52 34.99 27.81 source: author’s estimation-gop (2008) & ahmad (2013) review of economics and development studies vol.2, no 1, june 2016 17 figure: 4.5 [source: authour’s estimation-gop (2008) & ahmad (2013)] figure: 4.6 [source: authour’s estimation-gop (2008) & ahmad (2013)] 4.3.1 spatial distribution it could be easily inferred that in case of market and banking sector facilities also, the region of balochistan has remained far behind as compare to the other regions of pakistan which fact has already been come to the surface throughout this analysis. similarly, the region of punjab is highest beneficiary in this perspective. 5 theoretical and empirical framework for determinants of rural households’ incomes now, it has been tried to explore the factors responsible for livelihood of rural households. normally, there are two major income sources available to rural civilization; farm and non-farm sectors. farm sector income depends upon labour and investment in land cultivation and non-farm income mostly comprises of economic activities other than farm e.g. shops, transportation, brick-kilns, workshops, labour activities etc. along with farm and non-farm income, rural populace also earns their livelihood while holding livestock and physical capital which comprises of farm mechanization tools (tractor and its accessories, tube-wells, livestock farms etc). on this behalf, total rural households income could be divided into two sectors i.e. farm and non-farm. then following nyange and rao (2005) and onyeiwu and liu (2011) while exploiting production function approach, rural households’ income could be modeled as: 𝑌𝑓 = 𝐴𝑓 𝑢(𝑧 𝜃 𝑙1−𝜃 ) [1] 𝑌𝑛𝑓 = 𝐴𝑛𝑓 (1 − 𝑢)(𝑙ℎ𝑘) [2] where z > 0, k ≥ 0, 1 ≥ u ≥ 0, 1 > θ > 0 𝑌𝑓 and 𝑌𝑛𝑓 represents rural households income from farm and non-farm sectors. a represents the total factor productivity. total time allocated to livelihood activities for a household is considered as “1” out of which 𝑢 is allocated to farm sector and (1𝑢) is allocated to non-farm sector. here, 𝑧, ℎ, 𝑙, and 𝑘 represent land holdings, human capital (education and health), labour, livestock and physical capital holdings of rural households. now total rural households’ income could be shown as: 𝑌 = 𝑌𝑓 + 𝑌𝑛𝑓 𝑌 = 𝐴𝑓 𝑢(𝑧 𝜃 𝑙1−𝜃 ) + 𝐴𝑛𝑓 (1 − 𝑢)(𝑙ℎ𝑘) [3] if households want to maximize their income [3] subject to time constraint: review of economics and development studies vol.2, no 1, june 2016 18 𝑢∗ = [ 𝐴𝑓(1−𝜃) 𝐴𝑛𝑓 ] 1 𝜃 ( 𝑧 𝑙 ) ℎ −1 𝜃 𝑘 −1 𝜃 [4] equation [4] implies that as the land per capita ( 𝑧 𝑙 ) is higher, more time is allocated to farm sector and similarly when human capital is high, more time is devoted to non-farm sector. maximization of rural households’ income leads to: 𝑦∗ 𝑙 = 𝐴𝑛𝑓 ℎ𝑘 − [(1 − 𝜃) 1 𝜃 − (1 − 𝜃) 1−𝜃 𝜃 ] 𝐴 𝑓 1 𝜃 𝐴 𝑛𝑓 1−𝜃 𝜃 ( 𝑧 𝑙 ) (ℎ𝑘) 1−𝜃 𝜃 [5] in developing countries like pakistan land distribution is skewed and majority of rural inhabitants have no land holdings and mostly depends upon their labour, human capital, physical capital and livestock. same fact is obvious in equation [5] whereby in case of no land holding the dependence of rural households’ income is correlated with human and physical capital along with livestock. with this perspective now this equation could be used to construct an econometric model as: 𝐻𝐻𝐼 = 𝛼 + ∑ 𝛽𝑖 𝑋𝑖 + 𝑢 admittedly at micro level, incomes of households (hhi) vary due to the variations in household’s socioeconomic and demographic characteristics (xi) as depicted in equation [5]. on behalf of hypothesis that infrastructure has the force to affect rural households’ income due to lowering transaction costs, increasing economic activities, generating employment opportunities and enhancing growth, a vector of infrastructure (𝑍𝑖 ) is added in the equation. it is adequate to add this vector because in literature survey the role of infrastructure in production function has specified as an input. hence, now the equation used for econometric analysis will be: 𝐻𝐻𝐼 = 𝛼 + ∑ 𝛽𝑖 𝑋𝑖 + ∑ 𝛾𝑖 𝑍𝑖 + 𝑢 [6] data employed in this study is household integrated economic survey (hies) 2005-06, which is subsample of pakistan social and living measurement (pslm) survey 2005-06. secondary sampling unit (ssu) in hies is household. information for a household has been collected through male and female separate questionnaires. data obtained could also be decomposed between rural & urban, male & female, and also for all the four provinces along with northern areas and kashmir. primary sampling unit (psu) in hies is rural community. information for rural communities has been collected through a separate rural community questionnaire. each psu includes sixteen ssus and psu is representative of revenue record having a specific ‘revenue unit no’ and known as mouza/deh in case of rural sector of pakistan. there are 1109 psus of the survey out of which 531 belong to urban and 578 belong to rural areas. during this survey in total 15453 households were interviewed and this study employed observations related to rural areas only. 5.1 operational model in this study two main vectors are utilized for analysis purpose; vector of households’ socio-economic conditions as main determinants and vector of infrastructural variables hypothesized as useful in income augmentation of rural households’ incomes, which are explained as under: households’ income (hhi): households’ income per capita per month is measured for this purpose and all provided incomes earned by households are included so that a comprehensive measure could be review of economics and development studies vol.2, no 1, june 2016 19 achieved for analysis. household size (hhs): this is the number of the members in a household and is a ratio scale variable. it is hypothesized that as the household size is increased, higher will be the income of household because in that case more opportunities are available to household for earnings. household’s head age (hhha): age of household head is quantified with the number of years after birth. this is a discrete and interval scale variable and if age is less than 12 months it is quantified with 0 years. hypothesis shows a positive relationship between household head age and household’s income. in rural areas of pakistan normally economically established people are holding the space of head of household in each income group. so, as the age of household head is higher, he is more established and able to earn more income. household’s head gender (hhhg): this is a binary variable and is measured with 1 if household’s head gender is male and in case of female, it is measured by 0. it is hypothesized that male household’s head have higher level of incomes. household’s head education (hhhe): this shows the education of household head in number of years in school attended by him. this is a discrete and interval scale variable which is hypothesized to be positively related with household income. value of livestock (vls): value of livestock is a measure of price in 1000 of rupees for livestock if owned by household. data of prices are available in hies. value of livestock is positively correlated with household income level as described in equation [6] above. roads (road): roads is a measure of accessibility of rural inhabitants for different types of roads. this is a multi-category dummy variable with three attributes i.e. metaled, paved and unpaved roads. it is hypothesized that as the quality of roads is higher, rural development is higher and there are more opportunities available to household for earning more incomes, hence, households’ incomes will be higher. road1, road2 and road3 represent metaled, paved and unpaved types of road respectively. electricity (elect) and gas (gas): these variables are measure of accessibility of the facility to households. using dummy variable technique, if facility is available in the vicinity than its value is taken as ‘1’, otherwise the value is ‘0’. load-shedding, failure to provide the facility in available capacity, in rural areas of pakistan is also a problem but even then economic activities in villages with the facility are comparatively more than villages without the facility. this is why the measure is taken as accessibility and not the time period of load-shedding for this variable and also the hypothesis of positive correlation between the facility and household’s income is considered in this study. primary schools (ps): number of primary schools in vicinity is taken as a measure of this variable. this is a discrete and ratio scale variable. in case no school is available in the vicinity then its value will be zero. as the number of schools is higher, higher will be the chance of productivity of masses and higher will be the income of households, hence a positive relationship with households’ income is hypothesized. phone (phond) and basic health units (bhud): normally these services are not available in rural vicinities of pakistan, therefore, to measure these variables a distance approach is used. by this approach it is attempted to find out that at how many distance the service is available. if service is available in the vicinity then distance is taken as zero otherwise distance is measured in kilometers. as the distance is higher, it means a low level of rural development and there will be a little chance of enhancement in productivity and communication system of the rural inhabitants which in turn results in lower level of income. therefore, a negative relationship is hypothesized for these variables. review of economics and development studies vol.2, no 1, june 2016 20 6 results and discussion after using fbs procedure for cleaning process 8480 observations relating to rural areas of the survey in pakistan have been used for analysis purpose. first of all an analysis regarding pakistan economy is conducted, thereafter, the analysis is decomposed for the four provinces of pakistan so as to explore regional differences. table 6.1 rural infrastructural development as determinant of rural household income: log-linear regression results of pakistan dependent variable: logarithm of rural household income observations: 8480 method: least square explanatory variables coefficient t-statistic probability c 4.971101 77.334900 0.0000 hhs -0.055638 -20.845630 0.0000 hhha 0.026774 36.593370 0.0000 hhhg 0.440660 11.400640 0.0000 hhhe 0.045529 20.785280 0.0000 vls 0.000557 10.334840 0.0000 road2 -0.076668 -1.977636 0.0480 road3 -0.011099 -0.351108 0.7255 elect 0.278119 6.770413 0.0000 gas 0.087557 2.419880 0.0155 ps 0.005511 2.113817 0.0346 bhud -0.000671 -1.034927 0.3007 phond -0.002217 -2.099303 0.0358 r 2 0.273007 f statistic 264.967400 adjusted r 2 0.271977 probability 0.0000 note : decimals up to maximum six decimal places have been used estimated by: authors on the basis of data collected through pslm survey [gop (2005-6)] while using eviews 6.1 infrastructure and rural households income in pakistan: the country analysis review of economics and development studies vol.2, no 1, june 2016 21 value of r 2 equal to 0.273 shows that model is overall good fit and f-statistics, with a value of 264.97, shows that in the model there exists considerable simultaneous impact of all independent variables on household’s income with a 1% significance level. there are two main vectors of explanatory variables i.e. one relates to household level characteristics and other relates to community level characteristics. first of all the vector relating to household level characteristics has been discussed. household size is significant at 1% level but the relationship of the variable with household’s income is not in line with hypothesis. joint family system is still a main characteristic of households in developing countries including pakistan and joint family system is working strongly in rural areas. this is why in a family structure like pakistani rural areas, most of the family members are dependent while few family member are independent/earner which pointed out towards high dependency ratio and low participation ratio. it is also important to mention here that household’s per capita income is the variable of interest as households’ incomes. hence, as the number of dependents is increased per capita income will be decreased and vice versa. on this behalf such a result should not be surprising. however, household head’s age, education and gender are statistically significant at 1% level and their relationship with dependent variable is as per expectation. similarly, livestock is not only significant at 1% level but also have the expected sign. in case of vector relating to community characteristics, keeping in view two important elements i.e. role of public sector in provision of different types of services, and the problems arising through multicollinearity, only six variables are selected for the study. unpaved roads and basic health units have been proved insignificant while electricity is significant at 1% level. paved roads, gas, primary schools and phones are significant at 5% level and show expected sign. metaled road has shown to be comparatively more important than paved and unpaved roads, which is in line with the hypothesis of the study. overall it looks that in relation to the vector of community related determinants of households’ incomes, the vector of household composition shows comparatively high level of significance and closer to economic theory in this regard. 6.2 infrastructure and rural households income in pakistan: a provincial level analysis overall the models in provincial level analyses are shown to be good fit for all the provinces discussed below and on account of f-statistics it could also be believed that explanatory variables have simultaneous significant impact on households’ incomes. 6.2.1 results for balochistan household size is again significant at 1% level and has an inverse relationship with household income as discussed above. household head’s age, gender and education are significant at 1% and appear as per expectation in line with the hypothesis and livestock is also significant at 1% level and have direct relationship with household income which follows the analysis related to pakistan economy. so far as community level characteristics are concerned unpaved roads, gas and basic health units are observed to be insignificant just like the analysis of pakistan economy. it is also worth mentioning here that relationship of gas has shown inverse relationship with household income which is against our expectation but statistically insignificant. primary schools and electricity are apparently significant at 5% and 1% level respectively and have direct relationship as per hypothesis. so far as roads are concerned metaled road has more strength than paved road i.e. higher the rural development, higher will be the income of households. it is also observed that access to phone facility is significant at 5% level review of economics and development studies vol.2, no 1, june 2016 22 but have a positive sign against hypothesis which means that as the distance of phone shop is increased, the level of rural development is decreased and households will earn more income. as per social phenomenon of rural areas in pakistan, it could be noticed that in early stages of development when people find the facility of phone they use it for strengthening their social and family contacts, therefore, it will be a cause of increase in family expenditures. normally, in the absence of a phone facility the service of post office is used for informing relatives regarding family’s happiness and sorrows due to which comparatively a little number of relatives will join different types of ceremonies and family has to bear relatively little expenditures. these facts inter alia may be a cause of this result in case of balochistan. the fact is evident from the definition of income: income ≡ consumption + change in net worth {world bank (2009)} however, as the development process has increased and reached to a sufficient level, then households also use phone facility for business and commercial purposes, therefore, their incomes will be increased. the increased income is then sufficient enough to overcome the expenditures incurred on social and family set up of the households. therefore, hypothesizing phone facility for increased household income is correct but in set ups like balochistan, which is under-developed in nature and still in a phase of development, a positive sign in the analysis may be justified. table 6.2. rural infrastructural development as determinant of rural household income: loglinear regression results of balochistan dependent variable: logarithm of rural household income observations: 1184 method: least square explanatory variables coefficient t-statistic probability c 3.079417 8.487509 0.0000 hhs -0.079327 -8.284783 0.0000 hhha 0.037104 14.12323 0.0000 hhhg 1.863101 5.549513 0.0000 hhhe 0.054164 7.403706 0.0000 vls 0.004271 5.466601 0.0000 road2 -0.387321 -3.46746 0.0005 road3 -0.162847 -1.644211 0.1004 elect 0.268172 2.545525 0.0110 gas -0.067855 -0.523892 0.6005 ps 0.020409 1.895086 0.0583 bhud 0.000324 0.210952 0.8330 phond 0.00374 2.102426 0.0357 review of economics and development studies vol.2, no 1, june 2016 23 r 2 0.280005 f statistic 37.9500 adjusted r 2 0.272627 probability 0.0000 note : decimals up to maximum six decimal places have been used estimated by: authors on the basis of data collected through pslm survey [gop (2005-06)] while using eviews 6.2.2 results for khyber pakhtunkhwa the vector of household level characteristics show the same behaviour as witnessed in datasets of pakistan, balochistan and khyber pakhtunkhwa. household size is significant at 1% level and has an inverse relationship with the household income. household head’s age, education and gender are also significant at 1% level and their relationship with household income is evident to be positive in table below. livestock is again significant at 1% level and positively related with household income. table 6.3 rural infrastructural development as determinant of rural household income: log-linear regression results of khyber pakhtunkhwa dependent variable logarithm of rural household income observations 1841 method least square explanatory variables coefficient t-statistic probability c 4.809422 19.69138 0.0000 hhs -0.034802 -8.119922 0.0000 hhha 0.021505 15.26032 0.0000 hhhg 0.261628 4.176199 0.0000 hhhe 0.038189 9.506964 0.0000 vls 0.00054 6.671405 0.0000 road2 0.125556 1.268779 0.2047 road3 0.081949 1.473274 0.1408 elect 0.843821 3.692188 0.0002 gas 0.008101 0.114429 0.9089 ps 0.011763 2.647186 0.0082 bhud 0.000612 0.446212 0.6555 phond -0.007643 -3.111019 0.0019 r 2 0.257063 f statistic 52.7087 adjusted r 2 0.252186 probability 0.0000 note : decimals up to maximum six decimal places have been used estimated by: authors on the basis of data collected through pslm survey [gop (2005-06)] while using eviews review of economics and development studies vol.2, no 1, june 2016 24 variables related to paved road, unpaved road, gas and basic health units are perceived to be insignificant in case of khyber pakhtunkhwa. electricity is significant at 1% level and has a positive relationship with household income. primary schools and access to phone facility are also significant at 1% level and have expected relationship with household income. so far as roads are concerned, the only reference category i.e. metaled road is significant at 1% level, therefore, it could be analyzed that impact of roads on household’s income is experimentally insignificant in case of khyber pakhtunkhwa. comparative analysis of provinces till yet shows that basic health units and unpaved roads are thoroughly insignificant. however, gas is proved insignificant for balochistan and khyber pakhtunkhwa, while paved road is shown to be insignificant for the analysis of khyber pakhtunkhwa only. 6.2.3 results for punjab in case of province of punjab the results of the vector related to household characteristics has shown the same behaviour which we have already observed in all the above analyses. all the variables i.e. household size, household head’s age, gender and education along with the variable of livestock, have been demonstrated to be significant at 1% level and their relationship with household income is as per expectation except the relationship of household size. but it has earlier been discussed that the cause of negative relationship of household size with household incomes in rural areas of pakistan is justified on account of higher dependency ratio and lower participation rate. in case of community level characteristics as mentioned in table above, first of all the relationship of roads with household’s incomes is analyzed and it came to the surface that reference category as metaled road along with unpaved road are found to be significant at 1% level whereas variable of paved road is insignificant. impact of metaled road is higher than paved and unpaved road. in the same pattern, impact of paved road is higher than the unpaved road. on this behalf it could be assessed in this analysis that metaled road is more beneficial than unpaved road which is in line with the theoretical aspect of the relationship. the variable of electricity has expected relationship with household’s income and is significant at 5% level. the variable of gas is also positively related with household’s income in line with the expectation presented by the literature in this regard. the gas is also significant at 1% level. the number of primary school has a negative relationship with household’s income but at the same time it has been proved an insignificant variable on statistical grounds. so far as the distances of basic health units and facility of phone are concerned, same have been evidenced as insignificant despite of the fact that these variables show an expected relationship with the household’s income level. table 6.4 rural infrastructural development as determinant of rural household income: loglinear regression results of punjab dependent variable: logarithm of rural household income observations: 3645 method: least square explanatory variables coefficient t-statistic probability c 5.27158 49.24431 0.0000 hhs -0.065546 -15.01364 0.0000 review of economics and development studies vol.2, no 1, june 2016 25 hhha 0.022048 21.03643 0.0000 hhhg 0.653095 13.77949 0.0000 hhhe 0.041617 12.57122 0.0000 vls 0.000447 6.944426 0.0000 road2 -0.032714 -0.659846 0.5094 road3 -0.204344 -3.922374 0.0001 elect 0.142586 1.751055 0.0800 gas 0.214304 4.054777 0.0001 ps -0.008001 -1.601001 0.1095 bhud -0.001536 -1.358682 0.1743 phond -0.003333 -0.597373 0.5503 r 2 0.306682 f statistic 133.8815 adjusted r 2 0.304391 probability 0.0000 note : decimals up to maximum six decimal places have been used estimated by: authors on the basis of data collected through pslm survey [gop (2005-06)] while using eviews in case of province of punjab, nearly three variables from community characteristics have been proved insignificant and one variable is proved partially insignificant. these variables are number of primary schools, distances of basic health units along with phone facility and paved roads. it looks till yet in the provincial level analysis of pakistan that vector of community characteristics is even found to be beneficial for rural regions of pakistan but on experimental grounds it could not establish reliability because as the comparative analysis among provinces is progressed the number of insignificant variables is increased. hence, in comparison to the impact of household level characteristics the impact of community level characteristics is not found to be consistent statistically. 6.2.4 results for sindh household level characteristics of the model in case of sindh also have not changed its response in the analysis. the variable of household size has inverse relationship with dependent variable and is significant at 1% level. the variables of household head’s age, gender and education are again noticed to be significant at 1% level and their relationship with the household income is positive as per expectation. in the same manner, the variable of livestock holdings is evidenced to be positive and significant at 1% level. throughout the analysis started from economy of pakistan up till the province of sindh in provincial level analysis, it has been witnessed that the vector of household characteristics have shown similar results for their relationship with the household’s income while having strongly significant experimental base. this could be a very good sign of the analysis in the sense that it follows the theory regarding review of economics and development studies vol.2, no 1, june 2016 26 household level attributes which has already been proved in repeated researches conducted in pakistan and worldwide. table 6.5. rural infrastructural development as determinant of rural household income: loglinear regression results of sindh dependent variable: logarithm of rural household income observations: 1810 method: least square explanatory variables coefficient t-statistic probability c 3.372402 13.748410 0.0000 hhs -0.069117 -12.847980 0.0000 hhha 0.024166 16.305610 0.0000 hhhg 2.379764 10.557500 0.0000 hhhe 0.044412 10.839440 0.0000 vls 0.003110 10.306420 0.0000 road2 -0.239390 -2.260978 0.0239 road3 0.064212 0.970812 0.3318 elect -0.022312 -0.273432 0.7846 gas -0.020620 -0.289674 0.7721 ps 0.005087 0.918607 0.3584 bhud -0.002797 -1.973598 0.0486 phond -0.013819 -3.763403 0.0002 r 2 0.379828 f statistic 91.71529 adjusted r 2 0.375687 probability 0.0000 note : decimals up to maximum six decimal places have been used estimated by: authors on the basis of data collected through pslm survey [gop (2005-06)] while using eviews in case of sindh, variable of accessibility to roads has shown the similar results that metaled road and paved road are significant at 1% and 5% level respectively and impact of metaled road is higher than paved road while unpaved road is proved to be insignificant. the accessibility of vicinities to electricity review of economics and development studies vol.2, no 1, june 2016 27 and gas facilities has shown unexpected relationship with the household income but in case of data regarding the province of sindh, these have been observed as insignificant. even the variable related to number of schools has the expected relationship but same have also been noticed as insignificant. in case of sindh, the only two variables which have been proved significant are distances of basic health units and phone facility from household’s regions which have also expected signs. in case of vector of community level characteristics, the analysis of sindh is in line with notion presented above that comparatively more variables have been proved insignificant. 7 conclusion and policy implication it has been concluded in this study that household level attributes of livestock holding, household head’s age, gender, and education along with rural infrastructural development in shape of community level characteristics of roads, electricity, gas, schools, hospitals and telephone, have positive role for rural households’ income. notwithstanding, noteworthy state of affairs depicted in the analysis points out the role of rural infrastructural development as secondary in nature when compared with renowned determinants as household level attributes. it could also be inferred that in rural areas joint family system, with intrinsic higher dependency ratio and low participation ratio, will be responsible for decline in income of the households. so far as provincial level analysis is concerned the same conclusion is obvious fact which strongly endorses earlier findings of the study.when specifically pursued the role of rural infrastructural development then electricity could be mentioned as most important factor for enhancing rural households’ income. important information came to the surface from provincial level analysis is that need of infrastructure type, for different provinces, is different. need for electricity in income generation process of households is a common factor for all provinces except the province of sindh. along with this facility of phone is of importance for provinces of sindh and balochistan, while facilities of gas and primary schools are proved to be beneficial in provinces of punjab and khyber pakhtunkhwa respectively. ultimately this study suggests that if the purpose of public policy is to enhance the income of rural inhabitants then infrastructural development may not be the priority, however, if focus is the development of rural areas then its role is of importance. it is also necessary to probe the need of regions when government of pakistan aims to provide public infrastructure for the purpose of enhancement of rural development and rural households’ incomes. references ahmad, i. 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(2008). “economic development”. 10 th edition, pearson. review of economics and development studies vol. 4, no 2, december2018 179 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads student evaluations of teaching in universities of pakistan: analysis from the perspective of closing the feedback loop 1 hakim ali, 2 bashir hussain 1 phd scholar, department of education, bahauddin zakariya university, multan &associate professor, government whisl college, multan, pakistan hakimalimphil@gmail.com 2 assistant professor, department of education,bahauddin zakariya university, multan, pakistan bashirhussain@bzu.edu.com articledetails abstract history revised format: november 2018 available online: december 2018 internationally, centralized systems for collecting students’ feedback have become an increasingly common practice in higher education institutions [heis] for monitoring quality of teaching as well as for professional development of faculty members. the collection, analysis and reporting of evaluation results are carried out systematically in many heis across the globe. however, how to effectively close the feedback loop with students as well as teachers on the results of student evaluations of teaching [sets] remain an issue to be addressed. consistent with global trend, heis in pakistan are also supposed to conduct sets. in this context, the main intention of this study was to determine whether the cycle of teaching evaluation process is completed, and feedback loop proceeds effectively towards closing around the sets or not in pakistani heis. to achieve the objective, the triangulation design was used in which an online search was carried out in 130 pakistani heis’ official websites to collect qualitative data. concurrently, a questionnaire comprising 13 close-ended items, with “yes-and-no” scale, was administered in online format to collect quantitative data from a sample of 507 faculty members and 110 administrators from 130 pakistani heis. based on content analysis of documents and descriptive analysis of participants’ responses, this paper concludes that universities in pakistan are bound by hec to collect feedback from students using central system of quality enhancement cells, but limited attention has been placed to close the feedback loop with students and teachers to inform improvements. finally, this paper recommends the need for universities in pakistan to genuinely listen to students’ voices and to act on their feedback as part of quality assurance. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords student evaluations of teaching, feedback loop, engagement with feedback, quality assurance, pakistani heis. jel classification: a20, i20, i23 corresponding author’s email address: hakimalimphil@gmail.com recommended citation:ali, h. and hussain, b. (2018). student evaluations of teaching in universities of pakistan: analysis from the perspective of closing the feedback loop. review of economics and development studies, 4 (2), 179-187 doi: 10.26710/reads.v4i2.402 http://www.publishing.globalcsrc.org/reads mailto:bashirhussain@bzu.edu.com review of economics and development studies vol. 4, no 2, december 2018 180 1. introduction and literature review formal systems of evaluating faculty teaching, typically comprising student feedback employing varied instruments and mechanisms, are common in higher education institutions [heis] across the globe. sets are generally required by heis as a means to explore students’ perspectives on the faculty instruction (hativa, 2013); to evaluate various aspects of faculty teaching quality and to “compare it across different courses, teachers, departments and institutions” (goos & salomons, 2016). stein et al. (2013) have revealed that faculty members are usually supposed to support student evaluations of their teaching as a part of an institutional evaluation system. these studies, however, also indicate that a substantial difference exists in how institutions practically implement a formal evaluation system (stein et al., 2013); how students, teachers and administrators engage with the practice of evaluation (moskal, stein & golding, 2016) and use the evaluation results for closing the feedback loop. the literature on sets is extensive and wide-ranging which ranges from the variety of the experiences of different cohorts of students (tucker, 2013) to effect of students’ feedback on teaching and learning (hattie & timperley, 2007); “the need for effective student engagement” (krause & coates, 2008) and on the importance of seeking experiences of first year students (kift, nelson, & clarke, 2010). furthermore, literature also reveals the “link between student satisfaction and student feedback” (grebennikov & skaines, 2009); procedures used and their effect on students’ satisfaction and response rates (moskal et al., 2016) and the strategies used for improving students’ satisfaction (nelson, smith & clarke, 2012). even though the substantial studies have been conducted formerly, there is paucity of knowledge about the practices that heis adopt in relation to the systematic use of students’ feedback for improving teaching, enhancing students’ experiences and renewing course designs (tucker, 2013). a number of scholars (i.e., leckey & neill 2001; nair, mertova, & pawley, 2010; shah & nair, 2009; watson, 2003) found that students are disinclined to take part in upcoming sets surveys, if they do not see any improvements ensuing from their feedback. earlier scholars argued that failure of universities in systematically closing the sets feedback loop leads to various hazards comprising decreasing response rates from students (leckey & neill, 2001); their disinterest in the feedback process (nair et al., 2010; shah & nair, 2009) and lack of trust between students, academics and universities on improvements owing to their voice (tucker et al., 2008; watson, 2003). this failure to close the feedback loop on sets creates such environment that students do not provide their feedback seriously and can also result in frustrating students, rather than providing constructive feedback (tucker, jones & straker, 2008). moreover, “failing to close the loop on feedback questions the quality assurance framework in institutions and the extent to which they are used to enhance educational quality” (shah, cheng & fitzgerald, 2017). the concept of ‘closing the loop’ is based on the notion that there is a cycle of feedback and action. figure 1 presents the generic feedback cycle with allied key moments illustrated eloquently by harvey (2003). figure 1: the cycle of feedback note: adapted from harvey, l. 2003, ‘editorial’, quality in higher education, 9(1), 3-20 student feedback is viewed as a significant measure for assurance of teaching as well as institutional quality (goos & salomons, 2016) and majority of the heis worldwide consider it vital to their annual monitoring and periodic generic feedbackcycle stakeholde r develop questionna ire questionnai re administrati on analysis of data report noting areas for action consultati on process action plan implementati on and monitoring feedback to stakeholder s review of economics and development studies vol. 4, no 2, december2018 181 review processes. however, simply collecting and analyzing such feedback is unlikely to lead to improvements (shah & nair, 2009) unless its results are communicated in a way that is informative to stakeholders, mainly students and teachers i.e., closing the loop. symons (2006) emphasized that universities need to complete the feedback cycle not only with students but strategies should also be developed for ensuring the successful closing of the loop with teachers. writing in the same vein, scott (2006) advocates that simply collecting students comments and providing each faculty member a list of these comments would not be sufficient to provide them with adequate information on experiences of students. vital to the dissemination of student feedback comments to stakeholders, is their “analysis into meaningful data” (symons, 2006) and timely provision of feedback results. ‘closing the feedback loop’ is the term, generally, refers to the “process of informing respondents about what happens to the results of any survey” (watson, 2003). in this article, closing the feedback loop refers to systematic processes in collecting, analyzing, reporting and sharing the student feedback results with stakeholders particularly students and faculty members; and “timely actions taken...as a direct result of student feedback” (shah et al., 2017) as well as implementing and “monitoring the effectiveness of actioned improvements” (shah et al., 2017). how to close this loop effectively has been an issue that universities have struggled with since the 1990s (watson, 2003). the rationale behind this paper is that universities/heis worldwide are using surveys at institutional and national level to assess students’ experiences regarding faculty’s teaching effectiveness. for example, the national student survey (nss) is employed in the uk, the course experience questionnaire (ceq) in australia and the national survey of student engagement (nsse) is employed in the usa and canada (price & baker, 2012). in the context of international scenario, higher education commission [hec] of pakistan also introduced a system for monitoring and carrying out periodic teaching evaluations of university faculty through students to assess faculty’s teaching effectiveness as well as students’ engagement in learning (batool, qureshi & raouf, 2010). institutions, using the results of sets surveys, identify their weak and strong areas and advertise their strengths for marketing themselves to prospective students. furthermore, these results are used for recognizing, rewarding and reviewing teachers and in some instances “distributing internal funding” (shah & nair, 2013). likewise, there is also evidence of using student feedback results for making decisions about institutional rankings and appraising institutional performance (johnson, 2000). however, how heis effectively use students’ feedback to improve teachers’ professional practices and students’ learning outcomes remains an area to be explored, specifically in the context of expansion and diversification of higher education as well as higher students’ expectations. furthermore, there is lack of evidence concerning effective engagement of stakeholders in communicating feedback results and in taking actions for improvement i.e., closing the feedback loop effectively; despite the fact, this is an important strategy to enhance students’ response rates and to identify areas in need of improvement (grebennikov & shah, 2013). 1.1 the present study the literature demonstrates that the cycle of closing the loop on sets involves four key aspects i.e., data collection, analysis, reporting and finally providing feedback to stakeholders. based on international practices, this paper analyzes sets practice in universities of pakistan from the perspective of closing the feedback loop and argues for the need to develop innovative ways to use feedback results for faculty professional development and engage academics as well as students in quality assurance activities. however, to date, there is limited research on the usage patterns of results of student feedback in pakistan for improving faculty instructional practices and the students’ learning experience. keeping in view this background, present study mainly analyzed the practice of closing the feedback loop on sets in pakistani universities at policy and practice level to genuinely know that how results from student feedback have been utilized for improving students’ learning as well as faculty instructional practices. the rationale behind this research work was also the emphasis of pakistani higher education sector on quality assurance mechanism, management of academic quality, the enhancement in faculty professional development as well as improving learning experiences of students. 1.2 research questions the major purpose of this study was to determine whether teaching evaluation process is completed from holistic perspective and feedback loop proceeds effectively towards closing around sets or not in pakistani heis. following research questions were formulated for analyzing practice of pakistani universities regarding closing the feedback loop around sets: review of economics and development studies vol. 4, no 2, december 2018 182 a. do policies of heis provide any guidelines for reporting of results to various stakeholders and closing the feedback loop on sets? b. what is the nature of data collection process in heis of pakistan in relation to closing the feedback loop on sets? c. are the data analyzed in meaningful format to report the stakeholders? d. are the results of analysis reported to all the stakeholders? e. is the feedback resulting from sets survey communicated to teachers and students to effectively close the loop on sets in heis of pakistan? 2. design and methods to achieve the objective, concurrent triangulation approach (creswell, 2009) was used in this study. the key objective of this design is to use qualitative and quantitative approaches simultaneously to explore in depth the same aspects of the research problem (creswell, 2009). the major benefits of this traditional mixed methods design include: the shorter data collection time and well-validated findings (creswell, 2009). the population for this study, both for qualitative and quantitative components, comprised such 130 pakistani heis in which quality enhancement cells [qecs] have been established before 2014. for qualitative data collection, the researchers carried out an online search in all the 130 heis’ official websites to collect publicly accessible documents (qual) related to key aspects of sets process to gain as full a picture as possible about closing the loop on sets. for quantitative component, a questionnaire (quan) was administered with faculty members and administrators to further confirm and triangulate the results of content analysis of documents. the participants from all the 130 heis were invited to complete the survey in online format using a ‘census approach’. from the 6933 email invitations that were sent to obtain informed consent of teachers and administrators including staff members of qecs, 1783 (25.7%) participants (1417 teachers and 366 administrators) from 91 universities across pakistan agreed to participate. finally, link to online survey questionnaire, administered via google forms, was e-mailed to these 1783 potential participants. after 2 to 5 reminders with the interval of 10 days, total 617 completed questionnaires were received from 507 teachers and 110 administrators including qec staff members. respondents were representative from the general, engineering, agriculture, medical, business and arts heis with a range of positions. the response rate was about 36% and 30% respectively which is reasonable for a voluntary survey. table 1 presents the demographic information of all the participants who participated in this study. table 1: showing demographic information of respondents position percentages university category percentages lecturer 34.2 general 64.2 assistant professor 40.4 engineering 19.6 associate professor 4.5 agriculture 7.3 professor 2.6 medical 0.8 chairman/hod 7.8 business 7.9 dean 1.8 arts 0.2 director/registrar 8.3 a self-developed questionnaire comprising 13 close-ended items, with “yes-and-no” scale, was used to elicit perceptions of the participants. section a of the questionnaire asked for demographic information while section b explored current practices (q1–13). the questionnaire was piloted with 17 participants from the five faculties of one public university i.e., social sciences, natural sciences, commerce and business management, engineering, agriculture and veterinary along with registrar and director quality enhancement cell (qec). a number of changes were incorporated on the bases of respondents’ feedback to make the language and format of items more understandable and for ensuring the alignment of items with research questions. expert opinion was also sought for improving the questionnaire items’ content validity. for the analysis of qualitative data (i.e., online accessible documents), a summative approach to qualitative content analysis (hsieh & shannon, 2005) was used. this approach involves both the ‘manifest content analysis’ and ‘latent content analysis’ aspects. ‘manifest content analysis’ quantifies the particular concepts in textual material and deals with the descriptive and objective overview of the “surface meaning of the data” (dornyei, 2007, p. 246). review of economics and development studies vol. 4, no 2, december2018 183 latent content analysis refers to the process of interpretation of content (hsieh & shannon, 2005). as the details of targeted concepts and key words were unavailable in accessible documents, the analysis could not proceed to ‘latent’ level and stopped at ‘manifest’ level (kondracki & wellman, 2002). participants’ responses on close-ended questionnaire were analyzed by applying descriptive statistics (i.e., frequency counts and percentage) and the results were presented in table 3, table 4 and table 5. 3. findings 3.1 findings regarding manifest content analysis in total, 47 online accessible documents and consolidated teaching evaluation reports were examined. the analysis specifically focused on searching key words related to all the aspects of sets process i.e., data collection, analysis, reporting, use of results and provision of feedback with a specific focus on exploring the existence of policy guidelines for closing the loop on feedback. it is worth noting that even a trivial indication of some evaluation activity was considered as an evidence/example of the existence of sets process and frequency of occurrences was presented in table 2. table 2:manifest content analysis of accessible documents aspects of sets process number of documents mentioning a specific aspect documents mentioning detailed procedure data collection 47 4 data analysis 13 0 reporting and use of results 6 0 use of results 1 0 provision of feedback 0 0 the analysis of documents displayed in table 2 revealed that all the heis in pakistan were bound to conduct sets as mandatory policy by hec and instrument for evaluation of faculty teaching by students was available on the websites of all the 130 heis. the content analysis of documents further showed that detailed information and policy guidelines regarding all the aspects of sets process as well as about the process of closing the feedback loop with students and faculty members was unavailable in documents obtained through search of institutional websites. 3.2 findings regarding participants’ perceptions the participants were asked to respond in ‘yes’ or ‘no’ to key aspects of the sets process (i.e., data collection, analysis, reporting and provision of feedback) to determine the extent to which these aspects are effectively and efficiently attended during sets. the other intent of this section was to determine whether sets process is completed and feedback loop proceeds effectively towards closing around student evaluations or not. table 3 summarizes the frequency counts and percentages of “yes” responses concerning the process of data collection; table 4 related to the process of data analysis and reporting of results while table 5 about provision of feedback. table 3: summary of perceived processes used to collect data on sets aspects of process “yes” % age regularity of use have you ever experienced/used student evaluations of teaching? 416 67.4 methods of data collection student evaluations of teaching (through questionnaire) 383 92.1 course evaluations by students 236 56.7 student interviews 37 8.9 informal student opinions 86 20.7 students as observers 41 9.8 nature of instrument used hec prescribed/developed 177 42.5 self-developed by the university 103 24.8 not known 136 32.7 frequency of using completed at the end of the each semester 366 88.1 twice per semester 15 3.6 completed annually 27 6.5 completed as required by the teacher 13 3.1 completed as required by the administration 48 11.5 review of economics and development studies vol. 4, no 2, december 2018 184 completed at the time of best teacher award decisions 12 2.9 delivery of sets form via teacher 3 0.7 department representative 79 19.0 qec staff 221 53.1 online access to student 113 27.2 mode of collection online 233 56.0 manual 174 41.8 not known 9 2.2 response rate by students 0-25% 186 44.7 26-50% 40 9.6 51-75% 102 24.5 76-100% 20 4.8 not known 68 16.4 in response to the question (have you ever experienced/used student evaluation of teaching?) asked to assess the actual practice/regularity in the use of sets, the analysis of data in table 3 revealed that majority of the respondents (i.e., 67.4%) believe that sets are conducted on regular basis in their institutions. it shows, however, almost one third (32.6%) of the participants perceive that this practice is still missing in their institutions and not being actually done regularly though exist in documented policy. the less than half of the participants (42.5%) reported that their universities use hec prescribed/developed student evaluation of teaching instrument, 24.8%, the lowest number of participants, also claimed that they use selfdeveloped/adapted as per format of hec student evaluation form while a considerable number of participants (32.7%) reported that they have no knowledge about the nature of instrument used. this result suggests that all the stakeholders either not involved/ consulted or do not take interest in development/selection of instrument. analysis further revealed with 88.1% responses that almost all the heis in pakistan use student evaluation instrument at the end of each semester. the percentage of ‘yes’ responses for the delivery of instrument depicts that there is general consistency across the country that faculty members are kept away/at arms-length from the process of data collection during sets. most often, qec staff administers the student evaluation instrument for collection of data either manually (41.8%) or online (56%). majority of the participants (9.6+44.7%) reported response rate below 50%. table 4: summary of perceived process for analysis of data and reporting of results aspects of process ‘yes’ % age data analyzed by teacher 06 1.4 department representative 75 18.0 staff of qec 295 70.9 not sure 40 9.6 reporting of data is the aggregated data reported to stakeholders? 173 41.6 mode of reporting of aggregated data means 149 86.1 standard deviation 08 4.6 graphic form 11 6.4 percentage 05 2.8 table 4 reveals that collected data is analyzed by staff of qec and teachers as well as departments are mostly kept away from the teaching evaluation process at this step also in majority of the heis. the question regarding reporting of data attracted 41.6% ‘yes’ responses which indicates that aggregated and analyzed data is not reported to stakeholders in majority of the heis in which student evaluation is actually conducted. further analysis revealed that data is mostly reported in the form of mean scores (86.1% yes), graphic form (6.4% yes) or in standard deviation (4.6% yes). review of economics and development studies vol. 4, no 2, december2018 185 table 5: summary of perceived process for provision of feedback on evaluation results aspects of process ‘yes’ % age access to students’ comments teacher 157 37.7 department chair 261 62.7 qec staff 291 69.9 not provided 48 11.5 access to end results students 12 2.9 teacher 204 49.0 department chair 249 59.9 qec staff 210 50.5 not provided 89 21.5 provision of feedback on evaluation results to students 23 5.5 to teacher 137 33.0 not provided 256 61.5 table 5 indicates that often students’ comments are available to chair (62.7% yes) and staff of qec (69.9% yes) and teachers (37.7% yes + not provided 11.5% yes) are rarely provided access to students’ comments. almost same situation can be observed regarding access to end results of student evaluations. these results point out a big weakness in the existing sets process i.e., no access to students’ comments and end results to all the faculty members which is the most frequent and effective source of formative feedback to teachers. analysis in table 5 further revealed that evaluation results are never fed back to students (5.5% yes) and rarely to their teachers (33.0% yes). this result suggests that the results are simply filed away and not disseminated to those who could use them at both faculty and institutional level. it means that the time and energy spent in the collection and analysis of this valuable information is wasted and that reports on the student feedback results do not reach to students and faculty members who are the most relevant stakeholders in university community. 4. discussion this mixed method study analyzed the pakistani universities’ practices of closing the feedback loop on sets. a number of scholars (i.e., hattie & timperley, 2007; shah & nair, 2013) argue that universities ought to develop and disseminate detailed guidelines for all the stakeholders regarding their roles and responsibilities in sets process, use of evaluation reports; interpretation of results as well as provision of feedback for effective implementation of institutional teaching evaluation system. writing in the same vein, shah and nair (2013) emphasize that similar guidelines should also be developed for members of promotion panels regarding the use of sets results. the results of content analysis of documents in this study, however, revealed that clear-cut policies and detailed guidelines are unavailable in accessible documents regarding all the aspects of sets process i.e., closing the feedback loop. limited evidence is available in documents on systematic usage of feedback from sets surveys by academics in pakistani universities to review curriculum content, assessment designs and teaching methods in a timely manner. the analysis of participants’ responses also confirms the results of content analysis. moreover, provision of feedback resulting from sets is increasingly being considered essential across the globe as a means to guide teaching practice, (hattie & timperley, 2007), to enhance faculty professional development (blair & noel, 2014), to improve students’ learning and to strengthen faculty development policies and practices (catano & harvey, 2011). however, the findings herein suggest that pakistani universities do not make systematic usage of the student feedback results to inform improvements. the results of this study further postulate that sets process in pakistani heis, is generally limited to the collection and analysis of data, and results are filed away, not fed back and communicated to stakeholders particularly students and teachers. overall, the results of this study are aligned well with the studies conducted by (scott, 2006; shah & nair, 2009; symons, 2006) who concluded that generally universities simply collect and analyze sets data and do not complete feedback cycle with stakeholders. but these results contradict with the suggestions of harvey (2003) who advocates that “views of students should be integrated into a regular and continuous cycle of analysis, reporting, action and feedback” to make an effective contribution to quality improvement in heis. harvey (2003) further review of economics and development studies vol. 4, no 2, december 2018 186 stressed that ensuring an appropriate action; providing feedback in transparent, objective as well as consistent manner and making reports publicly available to all the stakeholders is more important to gain support and trust from all the stakeholders than only concentrating on having mechanisms for data collection. 5. conclusion the results of content analysis of documents and survey responses evidently suggest that closing the feedback loop is an area which requires improvement in pakistani heis. although, all the universities in pakistan are bound by hec for collecting, analyzing and reporting student survey results, but there is limited evidence of effective use of student feedback to enhance faculty professional development and improve students’ learning experiences. it was concluded that though sets exist in pakistani heis as a documented policy but the extent of their actual use was notably low and there were problems/challenges of actual implementation on regular basis. there also appears to be little meaningful feedback of student evaluation results to students and faculty members, mainly because universities have not developed clear-cut policies and detailed guidelines for execution of sets process. universities in pakistan conduct sets only to fulfill hec administrative requirements not with any formative or summative intention. it was also concluded that heis in pakistan are experiencing low response rates on sets, which is worldwide concern of heis (smithson et al., 2015). the matter of low response is reflective of the skepticism of the students regarding the surveys and feedback. this aspect of low response, therefore, should be examined. this situation calls for the development and implementation of innovative ways by universities to listen to the students’ voices because students, being fee payers, are constantly demanding that their opinions should be heard and acted upon. references batool, z., qureshi, r.h. 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(2003). closing the feedback loop: ensuring effective action from student feedback. tertiary education management, 9(2), 145–157. review of economics and development studies vol. 5, no 2, june 2019 291 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads capital investment decision making and risk management methods: evidence from listed companies on pakistan stock exchange 1 mirza nasir mehdi, 2 anjum ihsan, 3 shahid bashir 1 phd scholar (finance), numl, islamabad pakistan; lecturer, szabist, islamabad pakistan, mirzanasir_mehdi.21085@yahoo.com 2 assistant professor, faculty of management sciences, islamia college university, peshawar, pakistan 3 assistant professor, faculty of management sciences, szabist, islamabad pakistan article details abstract history revised format: may 2019 available online: june 2019 capital investment projects are evaluated and appraised by the corporate managers of business firms listed on psx through different pragmatic methods, tools and techniques. the complexity of the application of all the methods simultaneously including traditional financial methods, strategic pragmatic methods and risk management methods, urge the corporate managers to apply at least one of the pragmatic methods so that projects‟ capital investment decision making criterion or criteria may be reached at to measure the appropriate capital investment decision making. keeping all this in view, this paper aims to study the risk management techniques rather than studying and measuring all the traditional methods. this paper examines the effect of financial and non-financial factors on risk management methods which are supported by different theories and empirical background with proper references and citations. the responses of the corporate managers of 250 listed business firms on psx through regression analysis show that almost 80% of the factors have a direct relationship with risk management methods. the maximum significant results of the study point out that the capital investment projects are also evaluated by the corporate managers through risk management methods but the application of the financial and strategic methods cannot be ignored. as many of the project financial experts apply the risk management methods simultaneously with the collaboration of other methods as well. the results also show that effect of firm size as a moderator is also partial significant. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords pakistan stock exchange, capital investment decision making criteria, risk management methods, strategic appraisal methods jel classification: d24, d25, g32, l20 corresponding author‟s email address: mirzanasir_mehdi.21085@yahoo.com recommended citation: mehdi, m. n., ihsan, a., and bashir, s. (2019). capital investment decision making and risk management methods: evidence from listed companies on pakistan stock exchange, review of economics and development studies, 5 (2), 291-302 doi: 10.26710/reads.v5i2.600 1. introduction 1.1 background of the study business firms all over the world are confronted with many quantitative and perception based financial decisions regarding capital investment decision making criteria. capital investment decision making means the investment decisions by the corporate managers regarding the new projects or business, expansion of the existing projects, and http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 2, june 2019 292 the replacement of the existing business or infrastructure for the long term survival of the business firms. the literature depicts that capital investment decision making (cidm) criteria include the risk management methods (rmm), conventional appraisal methods (cam), and the strategic appraisal methods (sam). jenson (2001) studied the capital investment decision making process and identified that corporate planning managers must have a criterion or criteria for evaluating the performance and decisions to make alternative courses of action. capital projects are not free from the risk of the underlying factors. therefore, the empirical literature discusses the risk management dimensions of the capital investment decision making process. akalu (2001) identified in the light of survey responses that risk focuses on the uncertain set of circumstances that affects the performance of a strategic project while making capital investment decision making. akalu (2001) is also of the view that the practice of handling project risk varies from firm to firm as it does from project to project. in the empirical literature beta analysis, sensitivity analysis, adjusted discount rate, quantitative risk analysis, probability analysis are the frequently applied risk management dimensions for the capital investment decision making (fadi and northcott, 2006; afonso and cunha, 2009). there has been criticism on the use of discounted cash flow techniques like npv and irr for evaluating investments in manufacturing and services facilities (gerwin, 1982; hayes and wheelwright, 1984). reimer & nieto (1995) identified the different capital budgeting tools for the evaluation of projects in business firms. lefley (1998) documented that arr also has the practical weaknesses like the pbp and ignores the time and patterns of the profits of projects. hodder (2001) also determines that npv and irr are biased against long term projects and have inability to evaluate strategic investments with future growth opportunities (gerwin, 1982; gold, 1983). 1.2 objectives of the study this capital investment study is aimed to analyze the key role of internal and external factors on capital investment decision making criteria of the firms with reference to perception and beliefs of corporate managers. keeping in view the firm‟s value, parameters of risk analysis are examined to reach at appropriate capital investment decision making criteria to facilitate the practitioners with the help of financial and non-financial determinants together with the inclusion of the moderator factor, firm size to check the relationship of this factor (fs) with the rmm and independent determinants. there is hardly any study in pakistan that focuses this issue of capital investment criteria in so much depth. 2. literature review 2.1 risk management methods lefley (1998) conducted a study to justify the new pragmatic approach to capital investment decision making which they named financial appraisal profile (fap). there is an argument that most of the business firms for the capital projects‟ investment, ignore risk altogether by adopting an un-scientific approach based on just intuition which can‟t overcome the risk that is hidden in the capital investment projects (drury and tayles, 1996; chadwell et al., 1996; lefley, 1997). fadi and northcott (2006) estimated that managers of the 72.7% of australian business firms apply capm to calculate the equity cost of capital that is based on firm's estimated beta while only 6 % of the malaysian business firms apply capm method for evaluating the risk factor inherent in the projects‟ life time, whereas, in hong kong just 26.9 % managers of the business firms apply the capm model to calculate the cost of equity. g. graham and harvey (2001) observe that 73% of the corporate financial managers of the respondents‟ investment firms are inclined mainly towards the use of capm (gitman and vandenberg, 2000; ryan and ryan, 2002; lazaridis, 2004). fadi and northcott (2006) observe that risk analysis methods are almost the same for strategic and non-strategic projects. lefley and morgan (1998) show that the risk analysis measures financial sensitivity to variations and by the identifications of capital investment type project‟s pbp. fadi and northcott (2006) also observe that risk analysis (sensitivity analysis) methods are almost the same in both kinds of the capital projects decision making. arnold and hatzopoulos (2000) suggest identify that popularity of sensitivity analysis is derived from its perceived simplicity and intuitive appeal. the results show that managers of 89% of firms, apply this method for projects‟ investment decision making. lefley and morgan (1998) argue that identification of the risk can be achieved through the analysis of the chances of success / failure embedded to capital projects. fadi and northcott (2006) found that probability analysis is widely applied tool for the assessment for decision making of capital investment. the results of their study are consistent with the study of abdel-kader and dugdale (1998) and show that 77 % of the business firms apply probability analysis for both kinds of capital projects‟ investment decision making. lefley and morgan (1998) stress on risk analysis for the continuation of capital investment projects. they argue that identification of the risk which is embedded to the investment projects and projects appraisal, can be achieved by the analysis of financial data related to the capital projects. they view that through the computer simulation analysis different values can be simulated and risk of the capital investment type projects review of economics and development studies vol. 5, no 2, june 2019 293 is adjusted accordingly. hussain and shafique (2013) observe that discounted payback period (dpbp) is the simplest and widely used method in the industry as it considers the required time to recover the original investment (suzette vivers and howard cophen, 2011). but unlike the simple pbp it calculates the recovery time period by discounting the cashflows with some pre-set cost of capital (peterson and fabozzi, 2002). al-ajmi et al., (2011) surveyed the 34 business firms in the gulf cooperation council (gcc) and observed that project managers are inclined towards capital evaluation methods with the inclusion of non dcf methods like pbp, dpbp and arr. 2.2 the linkage of exogenous factors with capital investment criteria corporate governance is the mechanism of the management inclined towards shareholders‟ interests, for the long term benefits of the firms (gul et al., 2013; kotha and swamidass, 2000; jensen, 1986) which may enhance the capital investment opportunities for the companies in the future. afonso and cunha (2009) identified the link of corporate strategy with capital investment decision making methods based on risk management methods (pike, 1996; brealey and meyer, 2012; verbeeton, 2006). manufacturing flexibility is also concerned with the production of goods outside the factories‟ premises (afonso and cunha, 2009; snell and dean, 1991, 1996; gerwin, 1993; parthasarthy and sethi, 1993; snell and dean, 1992). fadi and northcott (2006) found that the flexibility in manufacturing process has direct relationship with capital investment decision making criteria (butler et al., 1991; slagmulder et al., 1995; slagmulder, 1997; cooper and slagmulder, 1997). two factor theory (herzberg, 1967; house and wigdor, 1967) also describes that by increasing the motivation level of the workforce the efficiency of the capital investment projects at job level can be enhanced (deshields, 2005). the contingency theory (1915) states that the efficient managers who are involved into the capital investment projects, take decisions on the basis of current situation and also apply the intuitional skills to increase the efficiency of the investment projects. marimuthu et al., (2009) found that workforce is the human capital that enhances the efficiency of the organization through sales and employment level (bruggen et al., 2009; eckel and grossman, 2008). environmental uncertainty is the distortion in the political and economic environment that affects the effective capital investment decision making (afonso and cunha, 2009; fadi and northcott, 2006; caves and porter, 1980). miller‟s general environmental uncertainties theory describes the five major environmental uncertainties which impede the capital investment decision making which include the, political uncertainty, government policy uncertainty, macroeconomic uncertainty, social uncertainty, and natural uncertainty. davilla and foster (2005) identified that uncertainty has the direct relationship with the conventional and strategic methods while found that environmental uncertainty has the negative relationship with risk management methods (e.g. davilla and foster, 2005; ryan and ryan, 2002). the diffusion of innovation theory or the multi-step flow theory (rogers, 1995) also strengthens the linkage between different stakeholders of the capital investment projects through communication with the help of innovative technological instruments like computerized networking stations. afonso and cunha (2009) highlighted that modern technology has effect on risk management methods due to its risk alleviation quality (copeland and howe, 2002; ryan and ryan, 2002; graham and harvey, 2001; black, f., scholes, m., 1973). venture capital also affects the investment decision making process (bottazzi et al., 2008; davila and foster, 2007). stuart and sorensen (2007) observed the effect of venture capital on rmm. amit et al., (1998) also found that venture capital financing is generally considered by both academicians and practitioners as the most suitable financing mode in the earlier stages of capital projects‟ life (tyebjee and bruno, 1984, 1984; jain and kini, 1995; hellmann and puri, 2002). 2.3 exploring capital investment criteria based on risk: key research questions the major key task of this research oriented study is to explore the key questions on the basis of the problem statement of the study. the problem here is to identify the appropriate capital investment criterion based on the internal and external factors.  how do the internal factors affect the capital investment criteria of firms listed on psx?  to what extent external factors affect the capital investment criteria of firms listed on psx?  how does firm size as a moderator, affect the relationship between all factors and capital investment decision making criteria 2.3 exploring the risk management based theoretical framework. review of economics and development studies vol. 5, no 2, june 2019 294 the following hypothesis are developed based on the above stated theoretical framework: h1: corporate governance and strategy has the significant effect on rmm. h2: manufacturing flexibility is the significant predictor of rmm. h3: workforce efficiency has the significant effect on rmm. h4: environmental uncertainty is the significant predictor of rmm. h5: innovative technology adoption has the significant effect on rmm. h6: venture capital is the significant predictor of rmm. h7: firm size has significant effect on the relationship between rmm and all determinants. 3. research methodology 3.1 target population and sampling the population of this perception based study consists of the corporate level managers of companies listed on psx (pakistan stock exchange) covering 35 sectors. these 35 sectors consist of 584 registered companies on psx. therefore, the target population is the 584 companies listed on psx. it is the general phenomena that capital investment decision making is not driven by any single executive, rather the corporate managers at different levels are concentrated jointly in a meeting towards the capital investment decision making. therefore, in this current perception based study we included at least four executives from each company who are actively involved in the capital investment decision making criteria (fadi and northcott, 2006, afonso and cunha, 2009; gul et al., 2013). therefore, the actual sample size is the 1000 (i.e. 250*4) corporate managers at different levels from 250 selected sample companies 3.2 data collection methods and analysis in this managerial level study, the research evidence have been collected from the perceptions and verdicts of corporate managers of 250 sample companies listed on psx, by using two methods (fadi and northcott, 2006; afonso and cunha, 2009); 1. a mailed (electronic version); 2. self-administered questionnaire. this questionnaire was in english and a covering letter was also attached to each of the questionnaire, which served as an introduction to the purpose of this perception based study. after data collection, it was tabulated in excel sheets for statistical analysis. multiple regression analysis (multi-variant analysis) has been run to observe the effect of external and internal determinants on capital investment criteria. through spss, all the descriptive values are estimated so that all the values should be reviewed. the moderation effect of the firm size with the independent factor and rmm was also found. 3.3 econometric equations of regression model yi = cidc rmm = β0 + β1 (cgs) + β2 (mf) + β3 (we) + β4 (euc) + β5 (ita) + β6 (vc) + ԑi ------7. theoretical framework for capital investment decision making criterion based on risk management internal determinants  corporate governance and strategies  manufacturing flexibility  work force efficiency external determinants  environmental uncertainty  innovative technology adoption  venture capital capital investment decision making criterion  cidcrisk management methods (rmm) endogenous factor moderating driver  firm’s size exogenous determinants review of economics and development studies vol. 5, no 2, june 2019 295 where, cidcrmm is the capital investment decision making criterion based on risk management methods (rmm) of model-1. whereas, β0 and β1-----β6, are the coefficients of the regression lines shown above, ԑi is the error term or residual of the regression equations. to check the moderation effect of the firm‟s size with the independent factors and cidm criteria, the following equations has been built up. yi = cidc rmm = β0 + β1 (zcgs) + β2 (z fs) + β3 (cgs*fs) + ԑi ----------------------1a. yi = cidc rmm = β0 + β1 (zmf) + β2 (z fs) + β3 (mf*fs) + ԑi -------------------------2a. yi = cidc rmm = β0 + β1 (zwe) + β2 (z fs) + β3 (we*fs) + ԑi -------------------------3a. yi = cidc rmm = β0 + β1 (zeuc) + β2 (z fs) + β3 (euc*fs) + ԑi ----------------------4a. yi = cidc rmm = β0 + β1 (zita) + β2 (z fs) + β3 (ita*fs) + ԑi ------------------------5a. yi = cidc rmm = β0 + β1 (zvc) + β2 (z fs) + β3 (vc*fs) + ԑi --------------------------6a. 4. survey results 4.1 descriptive statistics in the table-1, the meanstatistics of all the variable are greater than three. this leads to the assumption that all these variables have good effect on rmm. it is also evident from the above shown table, that the values of the st. deviations statistics of all the predictors are also low and are less than the + (-), 0.60, that is good sign of these variables into the model. table-1: descriptive statistics for risk management model n minimum maximum mean s.d statistics statistics statistics st. error cgs 800 2.50 5.00 3.8504 .01767 .49989 mf 800 2.20 5.00 3.7974 .01988 .56227 we 800 2.20 5.00 3.8245 .01935 .54733 euc 800 2.20 5.00 3.8501 .01947 .55064 ita 800 2.20 5.00 3.8710 .02062 .58336 vc 800 2.20 5.00 3.8503 .02092 .59181 rmm 800 2.20 5.00 3.7801 .02006 .56745 table 2: correlation coefficients for risk management model (internal factors) cgs mf we rmm cgs pearson correlation 1 .435** .541** .322** sig. (2 tailed) .000 .000 .000 mf pearson correlation .435** 1 .507** .288** sig. (2 tailed) .000 .000 .000 we pearson correlation .541** .507** 1 .348** sig. (2 tailed) .000 .000 .000 review of economics and development studies vol. 5, no 2, june 2019 296 cgs mf we rmm cgs pearson correlation 1 .435** .541** .322** sig. (2 tailed) .000 .000 .000 mf pearson correlation .435** 1 .507** .288** sig. (2 tailed) .000 .000 .000 we pearson correlation .541** .507** 1 .348** sig. (2 tailed) .000 .000 .000 rmm pearson correlation .322** .288** .348** 1 sig. (2 tailed) .000 .000 .000 in table-2, the pearson‟s correlation coefficients‟ statistics for all the three internal variables and rmm show that these are positively correlated with rmm and are statistically significant at 0.01 significant level. in the table-3, the correlation coefficients‟ statistics for all the three external variables of and rmm have been stated show that these are positively correlated with rmm and are statistically significant at 0.01 significant level. table 3: correlation coefficients for risk management model (external factors) euc ita vc rmm euc pearson correlation 1 .546** .542** .318** sig. (2 tailed) .000 .000 .000 ita pearson correlation .546** 1 .570** .380** sig. (2 tailed) .000 .000 .000 vc pearson correlation .542** .570** 1 .319** sig. (2 tailed) .000 .000 .000 rmm pearson correlation .318** .380** .319** 1 sig. (2 tailed) .000 .000 .000 4.2 multi-variant analysis and results in table-4, the values of r, r2, and adjusted r2 of all the predictors of the model including cgs, mf, we, euc, ita, and vc, have been stated. the value of r2 shows that the 12.8 % variation in the overall risk management methods is owing to all of the six predictor variables in combined the adjusted r2 is 0.27. the f-statistic in table-4, is 30.666 and is significant at 0.01 level of significance and shows the overall fitness of the model at appropriate level. the table-5 shows the regression coefficients for all of the predictor variables and rmm. the tvalue for cgs (1.278) is significant at 5% level of significance. the significant t-value supports the first hypothesis of study. the t-value for mf (1.924) is also significant and supports the second hypothesis. the t-value for we (1.087) and is insignificant at 5% significant level and rejects the third hypothesis of study. the t-value for euc (.144) is insignificant at 5% level and rejects the fourth. the t-value for ita (3.215) is significant at 5% level of significance and supports the fifth hypothesis. the t-values for vc (2.025) is also significant at 5% significant level and supports the sixth hypothesis of study. the all this discussion concludes that overall rmm is a good model and is best fitted. review of economics and development studies vol. 5, no 2, june 2019 297 table-4: model summary for all predictors (multiple) and risk management model model r r square adjusted r2 f-value sig 1 .529a .280 .271 30.666 .000 a. predictors: (constant), cgs, mf, we, euc, ita, vc; b. dependent variable: rmm table-5: coefficients for all predictors (multiple) and risk management model model unstandardized coefficients standardized coefficients t-stat sig. collinearity statistics b std. error beta tolerance vif 1 (constant) .963 .179 5.367 .000 cgs .059 .046 .052 1.278 .032 .556 1.798 mf .074 .038 .073 1.924 .045 .634 1.578 we -.049 .045 -.047 -1.087 .277 .488 2.048 euc -.007 .046 -.006 -.144 .885 .454 2.204 ita .139 .043 .143 3.215 .001 .462 2.166 vc .082 .040 .085 2.025 .043 .512 1.953 a. dependent variable: risk management methods in table-6, model summary of regression results with moderation effect of firm size with rmm and independent factors has been stated. the results of the table-6 show that when the interaction term cgs_fs, is explained by rmm, r-square value becomes 27.00 % which shows that when moderator fs is introduced in the model, r2 is increased by 14.2 % resulting into r2 change of 0.142, but the f-value is decreased to 97.969 which was 116.704 before the entrance of moderator, fs showing that variance is increased, but overall fitness of the model is decreased. similarly, when interaction term we_fs, is regressed on rmm, the r2 is increased by 15.20 % resulting into r2 change of 0.1520, but the f-value is decreased to 98.058 showing that variance is increased but overall fitness of the model is decreased. in the same manner, the depiction of interaction term euc_fs by rmm, the explanation of ita_fs by rmm, and the depiction of interaction term vc_fs on rmm, due to which the respective changes in the r2 and f-stats are given in table-6. the presence of moderator, fs shows that it has partial effect on the fitness of model. table-6: model summary for all predictors regression results with fs as a moderator before moderation after moderation change statistics r2value fvalue r2-value fvalue r2 change f change df1 df2 sig. fchange .128 116.704 .270 a 97.969 a .142 -18.735 3 796 .000 .111 99.184 .278 b 101.924 b .167 2.74 3 796 .000 .118 106.367 .270 c 98.058 c .152 -8.309 3 796 .000 .122 110.783 .281 d 103.785 d .159 -6.998 3 796 .000 .179 174.145 .320 e 124.660 e .141 -49.485 3 796 .000 .137 126.872 .300 f 113.863 f .163 -13.009 3 796 .000 review of economics and development studies vol. 5, no 2, june 2019 298 it is observed from the table-7 that t-values for interaction terms, cgs_fs, mf_fs, ita_fs, and vc_fs are insignificant, all which show no moderation effect of firm size with cgs, mf, and vc in the rmm model. but, on the other hand, the t-values for interaction terms, we_fs, and euc_fs are significant, showing that firm size play a good role as a moderator in w-e and euc models with rmm. but, overall firm size has weak moderation in rmm model. the multicollinearity statistics, vif and tolerance level have also been tabulated in the table-7. table-7: coefficients for z-values of all predictors, moderator-fs & interaction for rmm-model model unstandardized coefficients standardized coefficients t-stat sig collinearity statistics b std. error beta tolerance vif 1 (constant) 3.778 .018 213.74 .000 cgs_fs .008 .016 .015 .489 .625 .991 1.009 2. (constant) 3.782 .017 218.15 .000 mf_fs -.012 .018 -.021 -.689 .491 .999 1.001 3. (constant) 3.768 .018 212.59 .000 we_fs .045 .017 .081 2.653 .008 .984 1.016 4. (constant) 3.770 .017 216.62 .000 euc_fs .043 .016 .081 2.697 .007 .993 1.007 5. (constant) 3.778 .017 222.81 .000 ita_fs .010 .016 .018 .620 .535 1.000 1.000 6. (constant) 3.778 .017 221.68 .000 vc_fs .012 .017 .021 .692 .489 .998 1.002 5. discussion and analysis according to gul et al (2013) & kotha and swamidass (2000), cgs has direct linkage with risk management methods (rmm). the results and findings of this capital investment study also support the convictions of the above mentioned authors. the results of multiple linear regressions are almost significant, t-stat is significant, and f value is good showing that cgs is the good predictor of rmm as shown in tables-5 of section-4. these results and findings support the studies of afonso and cunha (2009), brealey and meyer (1998), ryan and ryan (2002), graham and harvey (2002). in case of inclusion of moderator factor, firm size into cgs and rmm-model, the fvalue retains at appropriate level, but t-stat is insignificant showing that standardized beta coefficient is low as shown in table-7 of section-4. the significant results of this study show that manufacturing flexibility has the direct linkage with risk management methods (pike and ho, 1991, ho and pike, 1991; and arnold and hatzopoulos, 2000). the mean value of mf and sd are satisfactory as shown in table-1. the mf, also has the significant relationship with rmm, as shown in table-2. these results and findings support the studies (li et al., 2013; fadi and northcott, 2006; arnold and hatzopoulos, 2000). the results of multiple linear regressions are accepted; t-stat is significant, and fvalue is good enough depicting that mf is the good predictor of rmm as shown in tables 4 and 5. these results and findings support the studies (afonso and cunha, 2009; fadi and northcott, 2006; snell and dean, 1992; gerwin, 1993). in case of inclusion of firm size into the model, f-value retains at appropriate level as shown in table-6, also t-stat is significant shown in table-7. these results support the studies (fadi and northcott, 2006; graham & harvey, 2001; and sangster, 1993; and hodder and riggs, 1985). the we, also has the good expected significant relationship with rmm, as shown in table-2. the results of multiple linear regression are significant, t-stat is significant, and fvalue is good showing that we is good predictor of rmm as shown in table-5. these results and findings support the studies of lin and wang (2005), boxall (2003), and ryan and ryan (2002). the results of multiple linear regression analysis show that w-e has the insignificant results with rmm as shown in table-5, which contradicts the results of ryan and ryan (1986), graham and harvey (2001), forrester (2000), sauders and lewis (2004). when the moderator, fs is introduced into the we and rmm, the f-value becomes low as shown in table-6, but t-stat is significant shown in table-7 which shows good moderation effect of firm size. these results partially support the studies (see fadi and northcott, 2006; akalu, 2003; graham & harvey, 2001). the results and findings of multiple linear regression show that euc has insignificant results with rmm as shown in table-5, which shows that t-stat is negative but f-stats is significant as shown in table-4. in the case of moderation, firm size into the euc and rmm model, results of the f-value is review of economics and development studies vol. 5, no 2, june 2019 299 significant as shown in table-6, and the t-stats for interaction term, euc_fs is significant, as shown in tables-7, which all depicts that firm size plays a pivot role to strengthen the relationship between euc and rmm. the results of multiple linear regressions for ita are accepted; t-stats are significant, and fvalues are also acceptable all which is shown in table-4 and 5. these results and findings support the findings of above mentioned studies. the vc also has significant positive relationship with rmm, as shown in table-3. these results and findings support the studies (sorensen, 2007; fadi and northcott, 2006; amit et al., 1995; jain and kini, 1995). the results of multiple linear regressions are significant and accepted; t-stat is significant, and f-value is also statistically significant as shown in tables-4 and 5. these results and findings support the studies (croce et al., 2013; arsaln et al., 2013; afonso and cunha, 2009; lindsey, 2008, holmes, 1998). in the case of inclusion of moderator, firm size into the vc and rmm-model, f-value is statistically at good level as shown in table-6, but the t-stats for the interaction term, fs_vc is insignificant as shown in table-7, which depicts no moderation of firm size between vc and rmm. 6. conclusion and future recommendations it is concluded from the results, findings and analysis of the study as have described in section-4 and section-5, that all the predictors are statistically significant when these factors are tested separately on rmm, all which shows that these factors have the direct effect on the rmm, which is the technique to appraise the capital projects investment decision making. but it‟s also concluded from the multiple regression results and findings of section-4 and section5 that corporate governance & strategy, manufacturing flexibility, innovative technology adoption, and venture capital are significant predictors of rmm, which shows that these factors statistically affect the rmm and contribute towards the percentage changes in rmm. the results of risk management model conclude that workforce efficiency and environmental uncertainty are the insignificant predictors, showing the less effect of these exogenous determinants on rmm. the results of the rmm-model also conclude that all the predictors are positively correlated with one another and rmm, which shows the strong relationship of all these predictors and predicted variable, rmm. the results of moderation effect of firm size on the rmm conclude that fs has the low moderation effect between all the predictors and rmm. but, we conclude that the overall results are consistent with the past studies as was described in section-5. in future, different criteria like firm‟s efficiency can be taken for capital investment decision making. furthermore, the results of this capital investment study can be compared with the results and findings of future studies by taking sample of foreign and local business firms and the further future directions can be recommended to the researchers. references abdel-kader, m.g., & dugdale, d. 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(2006). do organizations adopt sophisticated capital budgeting practices to deal with uncertainty in the investment decision? a research note. management accounting research, 17(1), 106-120. review of economics and development studies vol. 5, no 2, june 2019 302 review of economics and development studies vol. 4, no 2, december2018 261 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads sectoral investment and employment generation in pakistan: an econometric analysis 1furrukh bashir, 2hafeez ur rehman, 3rashid ahmad, 4ismat nasim 1assistant professor, school of economics, bahauddin zakariya university, multan, pakistan. furrukh@bzu.edu.pk 2chairman, department of economics, university of management and technology, lahore, pakistan. hafeez.rehman@umt.edu.pk 3assistant professor, school of economics, bahauddin zakariya university, multan, pakistan. rashidahmad@bzu.edu.pk 4lecturer, department of economics, government sadiq college women university, bahawalpur, pakistan. ismat.nasim@gscwu.edu.pk article details abstract history revised format: november 2018 available online: december 2018 this study is projected at investigating the influence of sectoral investment on employment generation. for this purpose, time series data is collected from pakistan over the period from 1972 to 2017. augmented dickey fuller test reveals that few variables considered in the study are stationary at level and few at first difference. so, econometric results are estimated using autoregressive and distributed lag model for long run elasticities. long run co-integrating relationship is established at 2.5 percent level using ardl bound testing approach. ardl long run results concludes that agricultural investment, industrial investment, services sector investment and trade openness are increasing employment while inflation and tax revenue are seemed to be negatively related with employment of pakistan in the long run. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords agricultural investment, industrial investment, services sector investment, employed labor force, trade openness, inflation, tax revenue jel classification: f16, e22, e31, h25, j21 corresponding author’s email address: furrukh@bzu.edu.pk recommended citation: bashir, f., rehman, h., ahmad, r. and nasim. i. (2018). sectoral investment and employment generation in pakistan: an econometric analysis. review of economics and development studies, 4 (2), 261-270 doi: 10.26710/reads.v4i2.410 1. introduction employment generation is considered as key tool which shows the progress of any society. it is the only factor which may be a cause of reducing poverty among developing countries but employment opportunities are dependent upon available resources, technology, governance, political scenario and institutional plans. similarly, human capital, skills and capability regulate outcome or reward of employed labor force. pakistan is the 10th largest country of the world according to the size of the labor force. it has been observed that employment is decreased in pakistan during past few years there may be various reasons for this one noticeable thing is that labor force participation rate has also decreased at the ages of 15-19, 20-24. almost, 24 percent labor force is involved directly or indirectly in agriculture and agriculture supplied raw material to the industrial sector. but investments in agriculture sector and use of mechanized tools have made agriculture sector relatively capital intensive in recent years and it has shifted labor force to other sectors. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 262 kugler and kugler (2001) discussed the impact of payroll taxes on employment and wages during the time period of reforms of colombian social security. the estimates of the study reflected that only about a fifth of increase in payroll taxes was shifted to workers as lower wages and the unemployment among the unskilled was increased due to sharp rise in labor costs faced by firms. chukwu et al. (2003) examined growth of nigeria for 1981 – 2013 and showed that capital expenditure on agriculture and health had negative relationship with economic growth and capital expenditure on road education had positive relationship with economic growth. chen and ku (2005) explained the consequences of investment on domestic employment in china for period of 1993-1999. the study examined that foreign production had lead to increasing domestic employment and at the same time overseas production reduced costs of domestic production. aterido and dreamier (2007) examined investment and employment growth for the time period of 2000-2006. study showed that weak business environment shifted downward the size of firms and it was the cause of reduction in employment and growth of all firms specially micro and small firms. corruption and poor access also reduced the employment by affecting the growth of medium size and large firms. bose et al. (2007) examined results of government expenditure in 30 developing countries during 1970-1980. the result showed that capital and expenditure on education had positive effect on economic growth. baba et.al (2010) explored the cause and effect relation between investment and agricultural growth and rural development of himachal pradesh. moreover they investigated about behavior of investment in agriculture growth and poverty alleviation. the findings of the study explored that there was a negative trend in the growth rate of public investment and it was found that there was a significance effect of public and private investment on poverty alleviation and agricultural growth. amjad (2010) analyzed informal employment and foreign direct investment in pakistan using data of 30 years from 1980 to 2010. the researchers estimated that there existed positive relationship between employment and foreign direct investment, in pakistan while informal employment is negatively related with export, gdp, electricity consumption, manufacture & service sector. informal employment was positively related with education level and tax rate. agrawal et al. (2011) interrogated the effect of fdi on economic growth of india and china. the study found, from the analysis on time series data ranged from 1993-2009, that an increase in fdi would result increase in gdp of china and india. beatrice (2012) explained impact of capital investment on unemployment in romania for period of 2004-2012 and explored significant reduction of net investments due to a decrease in fdi and due to lower domestic and external demand which had led to rising unemployment. ahmad and ahsan (2011) explored the role of service sector in the enhancement of growth of the economy, development of trade and generation of employment in pakistan. according to them, information technology (it), research and development, up gradation of technology and human resource development (hrd), dynamic leadership at national level, quality education can be improved the services sector of pakistan. koojaroenprasit (2012) examined the effect of foreign direct investment on economic growth of south korean economy for the time period of 19802009. researchers explored that fdi had positive and significant impact on economic growth. moreover, the study indicated that human capital, employment and export also had positive while domestic investment had no significant impact on economic growth. phetsavong and ichihashi (2012) estimated the impact of public investment on economic growth of developing asian countries by using the time series data during the period of 1984-2009. result showed that private domestic investment contributed the main important role in generating economic growth, and second important factor was fdi so fdi and private investment had positive relationship with economic growth, while public consumption had negative impact on economic growth. dolence and laporesk (2012) investigated the relationship between labor taxation and its and employment growth. for this purpose characteristics of labor taxation and labor market performance had studied for five different groups of workers. it was concluded that european union -27 should continue with the trends tax wage as it will improve the labor market performance in the united states. adekunle and aderemi (2012) explored the relationship among domestic investment, capital formation and population growth in nigerian economy. the researchers concluded that the relation between growth rates of the population and capital formation was indirect and moreover the policy recommended that capital formation can be used to increase income and to reduce poverty review of economics and development studies vol. 4, no 2, december2018 263 in the country. aurangzeb and haq (2012) estimated the impact of investment on economic growth of pakistan during 1981-2010. the study concluded public investment, private investment and foreign direct investment as having positive impact on economic growth. faridi and chaudhry (2013) explored the relationship of globalization with employment in pakistan. the results showed that globalization, health expenditure and national savings were positively related with employment while population had negative effect on employment. umai and ullah (2013) investigated the effects of gdp and inflation on unemployment rate in pakistan. according to the result, inflation had insignificant impact on gdp and unemployment but the correlation between unemployment and inflation was positive and between gdp and unemployment rate the coefficient was statistically insignificant. ileginosa et al. (2015) examined the impact of domestic investment on economic growth and analyzed trends of private investment on economic growth. the study took time series data from economy of nigeria over the period of time from 1970 to 2013 and illustrated that economic growth was positively influenced by private investment while government protective investment exert inverse impact on economic growth. shuaib and ndidi (2015) investigated the cause effect relation between capital formation and economic development of nigeria. according to them, there exist strong relationship between capital formation and economic development and government should continue to encourage savings, investment and improve infrastructure which leads towards the sustainable growth. faridi et al. (2015) investigated the influence of sectoral output on employment in pakistan ranging from 1972 to 2014. the study explored that industrial, services sector and exports had positive effect on employment and consumer price index, exchange rate and population had positive as well as negative effect on employment. dikko (2016) explored the impact of capital accumulation on unemployment in south africa and nigeria. the findings of the study suggested that capital accumulation and unemployment were positively correlated with each other and moreover capital accumulation increased the unemployment rates in namibia, nigeria, and south africa. it was suggested that capital accumulation required for the steady state level of employment, satisfactory level of economic growth and development. vermeulen (2017) explored relationship between inflation and unemployment in south africa. he found that there exist no tradeoff between inflation and employment. moreover, there exists negative impact of inflation on unemployment in short run while positive long run relationship was found. this study is different from previous studies in a number of ways. previously, the effectiveness of various economic variables has been observed with employment and economic growth but few studies were relevant to sectoral investment and employment generation. keeping in view, the objective of the study is to explore the influence of sectoral investment on employment generation. the study considers various sectors as sectoral investment like investments on agriculture, industrial and services sectors. the objective of the study is to determine the effect of sectoral investment (agriculture sector, services sector and industrial sector) on the employment generation in pakistan during 1972 2017. 2. data and methodology this section gives detailed description about data sources, type, range, methodology to be used for estimation, model specification and variables used in this study along with their hypotheses. 2.1 data description the study employs annual time series data over the period from 1972 to 2017. data on some selected variables are collected through official sources such as world development indicators published by world bank organization, handbook of statistics on pakistan economy 2015 published by state bank of pakistan and economic survey of pakistan (2017-18) published by federal bureau of statistics pakistan. all variables are taken in natural log form so that results may be interpreted in percentage form or for calculation of elasticities. 2.2 model specification considering the objective of the study which is to see the influence of sectoral investment on employment generation in pakistan, the study specifies following models; 𝐸𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 = 𝑓 { 𝐴𝑔𝑟𝑖𝑐𝑢𝑙𝑡𝑢𝑟𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡, 𝐼𝑛𝑑𝑢𝑠𝑡𝑟𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡, 𝑆𝑒𝑟𝑣𝑖𝑐𝑒𝑠 𝑆𝑒𝑐𝑡𝑜𝑟 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡, 𝐼𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛, 𝑇𝑟𝑎𝑑𝑒 𝐸𝑥𝑝𝑎𝑛𝑠𝑖𝑜𝑛, 𝐹𝑖𝑠𝑐𝑎𝑙 𝑃𝑜𝑙𝑖𝑐𝑦 } review of economics and development studies vol. 4, no 2, december 2018 264 the above model may be rewritten in equation form as given below; 𝐸𝑀𝑃 = 𝛽0 + 𝛽1𝐴𝐺𝑅𝐼𝑁 + 𝛽2𝐼𝑁𝐷𝐼𝑁 + 𝛽3𝑆𝐸𝑅𝐼𝑁 + 𝛽4𝐼𝑁𝐹 + 𝛽5𝑇𝑅 + 𝛽6𝐹𝑃 + 𝑢𝑖 in the above equation, emp shows log of employment, agrin is log of investment in agriculture sector, indin presents log of investment in industrial sector, serin represents log of investment in services sector, inf demonstrates log of inflation, tr illustrates log of trade expansion and fp exhibits log of fiscal policy while 𝛽′𝑠 are coefficients and 𝑢𝑖 is error term of this model. 2.3 definitions of variables the variables used in above econometric model may be defined as follows; 2.3.1 employment (emp) employment may be defined as the proportion of population which is employed during the survey week. it is dependent variables in this study and employed labor force in pakistan is taken as proxy of employment. employed labor force is measured in numbers. 2.3.2 agricultural investment (agrin) agricultural investment is the amount of investment in agriculture sector. in this study, gross fixed capital formation of agriculture sector is taken as proxy of agricultural investment which is measured in pakistani rupees. agricultural investment is expected to be positively related with employment in pakistan. 2.3.3 industrial investment (indin) industrial investment is the amount of investment in industrial sector. in this study, gross fixed capital formation of industrial sector is taken as proxy of industrial investment which is measured in pakistani rupees. it is hypothesized as positive with employment in pakistan. 2.3.4 services sector investment (serin) it is investment done in expansion of services sector of pakistan. in this study, gross fixed capital formation of services sector is taken as proxy of services sector investment which is measured in pakistani rupees. the expected relationship between services sector investment and employment is positive in pakistan. 2.3.5 inflation (inf) to trace out the effect of inflation on employment, the study considers consumer price index. consumer price index is price index which is measured in units and it is expected that inflation and employment may be negatively or positively associated with each other. faridi et al. (2015) found negative or positive both impact of cpi on employment in the study. 2.3.6 trade expansion (tr) to see the effect of expansion in trade on employment generation, the study considers trade openness which can be measured by following formula; trade openness = (exports + imports) / gdp trade openness is measured in units. trade openness is expected to be positive or negative with employment of pakistan. 2.3.7 fiscal policy (fp) fiscal policy is an important factor which is having a significant effect on employment generation. the study considers tax revenue as a proxy of fiscal policy. it is measured in pakistani rupees. it is hypothesized that tax revenue may have negative effect on employment of pakistan. review of economics and development studies vol. 4, no 2, december2018 265 table 1: description of variables variables description sources of data units of measurement expected relationship emp employed labor force world development indicators, economic survey of pakistan (2017-18) number dependent variable agrin agricultural investment handbook of statistics on pakistan economy 2015, economic survey of pakistan (2017-18) pakistani rupees positive indin industrial investment handbook of statistics on pakistan economy 2015, economic survey of pakistan (2017-18) pakistani rupees positive serin services sector investment handbook of statistics on pakistan economy 2015, economic survey of pakistan (2017-18) pakistani rupees positive inf inflation, consumer price index world development indicators index/ units negative tr trade openness world development indicators index/ units positive/ negative fp fiscal policy, tax revenue world development indicators pakistani rupees negative 2.4 methodology the results of the study would be estimated on preliminary stage and econometric stages. preliminary stage of analysis considers granger causality test while econometric analysis includes unit root test, ardl bound test, ardl long run estimates and ardl short run estimates along with few diagnostic statistics. ardl technique is normally used where few variables of econometric model are stationary at level or i (0) and few variables are integrated of order 1 or i (1). the study uses phillips and perrons (pp) test for examination of unit root problem while ardl bound test would be calculated using following equation; 𝐸𝑀𝑃 = [ 𝛿° + ∑ 𝛿2𝑗 ∆𝐴𝐺𝑅𝐼𝑁𝑡−𝑗 𝑢 𝑗=0 + ∑ 𝛿3𝑗 ∆𝐼𝑁𝐷𝐼𝑁𝑡−𝑗 𝑢 𝑗=0 + ∑ 𝛿4𝑗 ∆𝑆𝐸𝑅𝐼𝑁𝑡−𝑗 𝑢 𝑗=0 + ∑ 𝛿5𝑗 ∆𝐼𝑁𝐹𝑡−𝑗 𝑢 𝑗=0 + ∑ 𝛿6𝑗 ∆𝑇𝑅𝑡−𝑗 𝑢 𝑗=0 + ∑ 𝛿7𝑗 ∆𝐹𝑃𝑡−𝑗 𝑢 𝑗=0 +𝛼0 𝐸𝑀𝑃𝑡−1 + 𝛼1 𝐴𝐺𝑅𝐼𝑁𝑡−1 + 𝛼2 𝐼𝑁𝐷𝐼𝑁𝑡−1 + 𝛼3 𝑆𝐸𝑅𝐼𝑁𝑡−1 + 𝛼4 𝐼𝑁𝐹𝑡−1 + 𝛼5 𝑇𝑅𝑡−1 + 𝛼6 𝐹𝑃𝑡−1 + 𝜔1𝑡 ] ardl long run results may be estimated by using following equation; 𝐸𝑀𝑃 = [ 𝑑° + ∑ 𝑑1𝑗 𝑚 𝑗=1 ∆𝐸𝑀𝑃𝑡−𝑗 + ∑ 𝑑3𝑗 𝑜 𝑗=0 𝐴𝐺𝑅𝐼𝑁𝑡−𝑗 + ∑ 𝑑4𝑗 𝑝 𝑗=0 𝐼𝑁𝐷𝐼𝑁𝑡−𝑗 + ∑ 𝑑5𝑗 𝑞 𝑗=0 𝑆𝐸𝑅𝐼𝑁𝑡−𝑗 + ∑ 𝑑6𝑗 𝑟 𝑗=0 𝐼𝑁𝐹𝑡−𝑗 + ∑ 𝑑7𝑗𝑇𝑅𝑡−𝑗 𝑠 𝑗=0 + ∑ 𝑑8𝑗𝐹𝑃𝑡−𝑗 𝑡 𝑗=0 + 𝑣1 ] review of economics and development studies vol. 4, no 2, december 2018 266 ardl short run results may be estimated by using following equation; ∆𝐸𝑀𝑃 = [ 𝑔° + ∑ 𝑔1𝑗 𝑚 𝑗=1 ∆𝐸𝑀𝑃𝑡−𝑗 + ∑ 𝑔2𝑗 𝑛 𝑗=0 ∆𝐴𝐺𝑅𝐼𝑁𝑡−𝑗 + ∑ 𝑔3𝑗 𝑜 𝑗=0 ∆𝐼𝑁𝐷𝐼𝑁𝑡−𝑗 + ∑ 𝑔4𝑗 𝑝 𝑗=0 ∆𝑆𝐸𝑅𝐼𝑁𝑡−𝑗 + ∑ 𝑔5𝑗 𝑞 𝑗=0 ∆𝐼𝑁𝐹𝑡−𝑗 + ∑ 𝑔6𝑗 𝑟 𝑗=0 ∆𝑇𝑅𝑡−𝑗 + ∑ 𝑔7𝑗∆𝐹𝑃𝑡−𝑗 + 𝑠 𝑗=0 ψ 1 𝐸𝐶𝑀𝑡−1 +∈1𝑡 ] where 𝛿𝑖, 𝑑𝑖, 𝑔𝑖 are coefficients, ∈1𝑡 , 𝑣1, 𝜔1𝑡 are error terms and 𝐸𝐶𝑀𝑡−1 is error correction mechanism or speed of adjustment term. 3. econometric results this section reports result of the study which are calculated using causality analysis, augmented dickey fuller test – unit root test, ardl bound testing, ardl long run & ardl short run tests. 3.1 causality analysis the results of causality analysis are estimated using granger causality test which are reported in table 2. it reveals that agricultural investment has one way causal relationship with employment. employment labor force is a source of agricultural investment in pakistan as pakistan is an agriculturist country. services sector investment has also causal affect on employment in pakistan shows that if services sector is developed in pakistan so there would be effect on employed labor force. industrial investment is proved to be a cause of employment generation and on the other side employed labor force also affects industrial investment in pakistan. tax revenue has no causal effect on employed labor force. similarly, trade openness does not have any causal effect on employed labor force in pakistan. table 2: granger causality test granger causality test results agricultural investment ←employment unidirectional causality services sector investment → employment unidirectional causality industrial investment ↔ employment bidirectional causality tax revenue ≠ employment no causality trade openness ≠ employment no causality consumer price index ←employment unidirectional causality 3.2 augmented dickey fuller – unit root test in this study, augmented dickey fuller test is used to examine the problem of unit root in the variables and their results are given in table 3. the variables i.e. employed labor force, agricultural investment, industrial investment, services sector investment, fiscal policy (tax revenue), inflation & trade openness are explored at level by including intercept and trend & intercept and also at 1st difference by including intercept. the results finalizes that employment, agricultural investment and services sector investment are stationary at 1st difference while fiscal policy (tax revenue), industrial investment, inflation (consumer price index) and trade openness are stationary at level. these results indicate that, having few variables stationary at level and few at 1st difference, autoregressive and distributed lag model (ardl) is the best choice for estimation of econometric results. 3.3 ardl bound test after checking unit root test using augmented dickey fuller test, it is necessary to check existence of long run relationship among variables used in the study which are employed labor force, agricultural investment, industrial investment, services sector investment, inflation, tax revenue and trade openness. the value of f-statistic is 4.1157 with number of parameters 6. this value of f-statistic is greater than the value of upper bound (i1 bound) at 2.5 percent level of significance as reported in table 4. it indicates that there exists long run relationships among variables used in this study. review of economics and development studies vol. 4, no 2, december2018 267 table 3: unit root test variable test for unit root in by including tstatistics probability remarks employed labor force level intercept 0.456131 0.9831 i(1) intercept and trend -3.00731 0.1421 1st difference intercept -9.9955 0.0000 agricultural investment level intercept -0.805515 0.8074 i(1) intercept and trend -2.282712 0.4339 1st difference intercept -6.46953 0.000 fiscal policy level intercept -4.71495 0.0004 i(0) services sector investment level intercept -0.427535 0.8951 i(1) intercept and trend -2.62782 0.2706 1st difference intercept -8.47023 0.000 industrial investment level intercept -3.234251 0.0247 i(0) inflation level intercept -1.44317 0.5523 i(0) intercept and trend -3.73144 0.0307 trade openness level intercept -3.09785 0.0342 i(0) table 4: bound test results test statistic value k f-statistic 4.115749 6 critical value bounds significance i0 bound i1 bound 10% 2.12 3.23 5% 2.45 3.61 2.5% 2.75 3.99 1% 3.15 4.43 note: null hypothesis: no long-run relationships exist 3.4 ardl long run results the results of ardl long run are presented in table 5 in which first column is about names of variables, second column shows values of coefficients, third column reports the values of standard errors, forth column presents the values of t-statistics and fifth column illustrates probability values concerning to each variable. considering agricultural investment, the results reveal that investment in agriculture is significant variable and gives positive impression on employment in long run. it may be interpreted as one percent increase in investment in agriculture will lead to 0.10 percent increase in employment in pakistan in the long run. positive relationship may be defined as higher investment in agriculture sector will increase more demand for agricultural inputs like labor. hiring more labor in this way will be a cause of more employed labor force. investment in industrial sector is also a significant variable and has positive impact on employment in long run. statistically, its interpretation may be as one percent increase in investment in industrial sector will increase employed labor force by 0.12 percent. positive relationship may be justified as more investment in industrial sector will increase demand for labor and capital. directly or indirectly, demand for labor will increase in every sector of economy so there would be upward pressure on employment in the long run. as regards to investment in services sector, it is seen that it is statistically significant variable and gives positive effect on employment in the long run in pakistan. on the average, one percent increase in investment in industrial sector will be a cause of 0.9 percent increase in employment. the positive sign may be explained as when investment will increase in services sector, demand for worker or labor will increase. the firms or industries or other sectors will hire more labor so employment will increase in the long run. faridi et al. (2015) also found the same relationship in their studies. with regards to inflation, it is observed that there is negative association of inflation in pakistan with employed labor force in the long run. on the average, one percent higher inflation may decrease employed labor force by 0.23 percent. statistically, its coefficient is significant as well. the reason of negative sign may be that higher inflation review of economics and development studies vol. 4, no 2, december 2018 268 will inversely affect purchasing power of people. it will severely affect demand for goods and services in return demand for labor will also decrease causing lower level of employment. faridi et al. (2015) also found negative impact of cpi on employment in their studies. in this study, tax revenue is found to be statistically insignificant with employment labor force. although it is having negative sign attached with which portrays those higher taxes may become a cause of lowering purchasing power in the long run which slowdowns the process of industrialization in pakistan. in this response, employed labor force will decrease. trade openness is obtained as having insignificant probability value with positive sign. more trade with other countries will be the most important cause of having more employed labor force in the long run. to trace out the effect of excluded variables from the study, constant term is considered in this study which is also significant with positive sign. in the long run, elasticity of employment with respect to agricultural investment, industrial investment, services sector investment and inflation are respectively 0.10, 0.12, 0.09 and -0.23. table 5: ardl long run result variable coefficient standard errors t-statistic probability agricultural investment 0.1040 0.0218 4.7517 0.0001 industrial investment 0.1232 0.0429 2.8723 0.0082 services sector investment 0.0932 0.0267 3.4832 0.0018 inflation -0.2329 0.1291 -1.8036 0.0834 tax revenue -0.0172 0.0521 -0.3303 0.7439 trade openness 0.0152 0.1126 0.1349 0.8938 constant 10.9583 1.4343 7.6398 0.0000 selected model: ardl(1, 2, 0, 2, 2, 1, 2) 3.5 ardl short run results the short run results of ardl are given in table 6 with short run coefficients, standard errors, t-statistic and probability values. in the short run, without lagged terms, agricultural investment, industrial investment and services sector investment are positive with employment while their lagged terms are negative with employed labor force. inflation is negative as well as positive, tax revenue is also negative while trade openness is positive with employed labor force. considering the most important of them i.e. error correction term, it is revealed to be negative which shows that the short run results would be converged towards long run results if there exist any disequilibrium in the short run. table 6: ardl short run result short run coefficient variable coefficient standard errors t-statistic probability d(agrin) 0.019278 0.027501 0.700998 0.4898 d(agrin(-1)) -0.065391 0.025971 -2.517856 0.0186 d(indinc) 0.017167 0.023260 0.738028 0.4674 d(indin(-1)) -0.050750 0.026513 -1.914161 0.0671 d(serin) 0.065810 0.019356 3.399972 0.0023 d(serin(-1)) -0.028019 0.016410 -1.707422 0.1001 d(inf) -0.503323 0.194342 -2.589882 0.0158 d(inf(-1)) 0.544195 0.188191 2.891711 0.0078 d(fp) -0.207188 0.076082 -2.723203 0.0116 d(tr) 0.009903 0.074031 0.133771 0.8947 cointeq (-1) -0.651285 0.175010 -3.721409 0.0010 4. concluding remarks there is a close linkage among investments of various sectors and their impact on employment generation in pakistan. considering the importance, the present study explores the contribution of sectoral investment in employment generation in pakistan. for covering the objective, the study collects time series data from 1972 to 2017 from pakistan. reliable sources are followed for the collection of data like economic survey of pakistan (2017-18), handbook of statistics on pakistan economy 2015 and world development indicators. for having results in form of elasticities, the study uses log log form of the model by taking natural log of all variables. while specifying the model, investments in agriculture (pak. rupees), industrial (pak. rupees) & services sectors (pak. review of economics and development studies vol. 4, no 2, december2018 269 rupees) along with some control/ supporting variables i.e. inflation (index/ units), trade openness (index/ units) & tax revenue (pak. rupees) are taken as explanatory variables while employed labor force (numbers) is taken as dependent variable. granger causality is applied for having cause and effect relationships among variables which reveal bidirectional causality among industrial investment and employment, unidirectional causality among agricultural investment & employment, services sector investment & employment, consumer price index & employment while no causality among trade openness & employment, tax revenue & employment in pakistan. augmented dickey fuller – unit root test is applied to analyze the stationary of variables which concludes that employed labor force, agricultural investment and services sector investment are stationary at first difference i(1) while trade openness, inflation, industrial investment and tax revenue are stationary at level i(0). having few variables stationary at level and few at 1st difference indicate that application of autoregressive and distributed lag (ardl) model for long run and short run results are most suitable in this study. ardl bound test is applied for checking long run association among variables which decides that there exists long run cointegration among variables used in this study. moreover, it has been observed that agricultural investment, industrial investment and services sector investment are obtained as enhancing factors for employment in pakistan in the long run with significant coefficients while inflation and taxes are seemed to be reducing factors for employment. on the other side, trade openness has been uncovered as increasing employment in pakistan but coefficient value is not statistically significant. in the short run, error correction term shows that there is convergence from short run results to long run results due to having negative sign attached with cointeq (-1). on the basis of econometric results of the study, it may be suggested that there is need to use expansionary fiscal & trade policy in pakistan for employment generation. moreover, investments in agriculture sector, industrial sector and services sector are should also be increased for attaining higher employment level in pakistan in the long run. 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(2017). inflation and unemployment in south africa: is the phillips curve still dead?. southern african business review, 21(1), 20-54. review of economics and development studies vol. 5 no 2, june 2019 355 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads a comparative analysis of intra-party democracy within the major political parties of pakistan, india and bangladesh 1 mian muhammad azhar, 2 abdul basit khan, 3 mussawar hussain bukhari 1 assistant professor, department of political science & international relations, government college university faisalabad, pakistan, muhammad.azhar@gcuf.edu.pk 2 assistant professor (ops), department of political science & international relations, government college university faisalabad, pakistan, basitniazai@yahoo.com 3 associate professor, chairman department of political science, islamia university bahawalpur, pakistan, mussawarbukhari@gmail.com article details abstract history revised format: may 2019 available online: june 2019 in the democratic form of government, political parties play a determinative and creative role. striving for public offices is their fundamental objective which distinguishes them from other social organizations; hence, parties utilize all channels to secure maximum parliamentary slots. in a representative and inclusive democracy, political parties perform a set of different jobs ranging from nomination of electoral candidates, managing their campaigns, transforming public sentiments and demands into public policy, citizens‘ integration as well as fabricating government and civil society. giving much importance to the political parties for the development of representative democracy, concerns have been raised about the ways in which they discharge their functions. if democracy deems not to flourish without political parties, then it is also important to assess how political parties are internally democratic in their determination and decision-making, influence and significance, proceeding and practices and distribution and dissemination of authority. in developing states, majority of political parties are operating as family-enterprises lacking true internal democratic culture. selfcentric, dynastic and interrupted politics have plagued the democratic norms and values. by focusing upon the ways and means which the parties adopt to elect their office-bearers as well as the mechanism which they prefer to nominate electoral candidates, the instant study will investigate whether or not the mainstream political parties in pakistan, india and bangladesh are democratic in their functioning? © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords political party, internal democracy, candidate nomination, intra-party elections jel classification: d72, e65 corresponding author‘s email address: muhammad.azhar@gcuf.edu.pk recommended citation: azhar, m. m., khan, a. b. and bukhari, m. h., (2019). a comparative analysis of intraparty democracy within the major political parties of pakistan, india and bangladesh, review of economics and development studies, 5(2), 355-364 doi: 10.26710/reads.v5i2.607 1. introduction it is a predisposition of human beings to live in groups and form such associations which cover social, cultural, economic and political aspects of their life. a political party is an organized body of people assembled to achieve http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5 no 2, june 2019 356 some goals within the political setup of a country. the term was emerged in the nineteenth century with the growth of representative institutions and the expansion of suffrage in europe and united states. it was then a structured organization aimed to capture public office in electoral competition with other parties; subsequently, the term was extended to political organizations with non-electoral motives, revolutionary organizations seeking to abolish competitive elections and the governing groups in totalitarian states (schlesinger, 1984). political parties provide a link between people and institutions through their elected representatives. bryce observes that political organizations are the mouthpiece of the people which represent them in corridors of the government. they communicate demands of the people to those who formulate and implement policies. strong and wellorganized political parties are important for open, competitive and representative political setup in the contemporary democracies (bryce, 1921). marquez believes that political parties play an important role to influence the political life at the grass-root level. they create awareness among the masses and mobilize them on national and international issues (marquez, 2005). azhar and muhammad believe that modern democracy is inconceivable without political parties which articulate and integrate different interests, visions, approaches and opinions to a workable and effective political philosophy (azhar & muhammad, 2015). schattschneider holds that these are nuclei of the modern political system (schattschneider, 1942) whereas stokes believes that political parties are an unavoidable part of democracy (stokes, 1999). a political party is an alliance of like-minded people with the foremost function to contest elections and nominate their candidates in all or some constituencies to attract maximum electoral support. secondly, all the political and electoral activities of the political parties aim to win the elections and gain public offices to materialize their manifestos. on the other hand, the primary function of parties in opposition is to pressurize the government to initiate and implement policies friendly for the state and citizens (hofmeister & grabow, 2011). political parties play an important role in transforming public sentiments and demands into public policy. for that purpose, they carefully formulate the manifestos, allocate tickets to the candidates capable of securing electoral triumph, conduct vigorous campaigns to get maximum public support in elections and finally form the government or opposition. while in government, parties articulate public interests and bridge the regional and national interests. in a heterogeneous society, if political organizations play their defined role and provide equal space to all segments of society in their ranks, then, they leave no option for the centrifugal forces to operate which, otherwise, would be active robustly and hit the national integration. since the political parties has gained centrality to modern political system, hence, it is important that they should internally be ruled democratically by providing equal opportunities for all to become part of political and electoral process (toerell, 2010). moreover, the democratic ideals require openness and inclusiveness in selection of electoral candidates as well as a shared decision-making mechanism among party leaders and its ranks. the instant study intends to assess the internal democratic level of major political parties of pakistan, india and bangladesh. for that purpose, it formulated the following research questions: 2. research questions  whether or not the mainstream political parties in pakistan, india and bangladesh are democratic in electing their office-bearers?  which mechanism these parties prefer to nominate electoral candidates? 3. research methodology to answer the above-mentioned questions, top two political parties each from pakistan, india and bangladesh are selected on the basis of electoral results of the last two elections (excluding 2018 election of pakistan); these are pakistan peoples party (ppp) & pakistan muslim league (nawaz) (pml-n) from pakistan, indian national congress (inc) and bhartia janta party (bjp) from india and bangladesh national party (bnp) and awami league (al) from bangladesh. the study is explanatory in nature and secondary sources of data is collected, arranged and analyzed to explain the research questions. the constitutions of these parties as well as existing literature including books, articles, legislation related to political parties and election management bodies, research reports along with electronic and print media commentaries are consulted to make the findings more meaningful. 4. intra-party elections an important yardstick to gauge the sanctity of intra-party democracy is the mechanism which the political parties adopt to appoint their office-bearers. a free, fair and transparent electoral process within the party not only review of economics and development studies vol. 5 no 2, june 2019 357 promotes the democratic norms and culture but also develops a mechanism to maintain dynamism. such democratic activities facilitate the recruitment of young and energetic political workers; provide equal chances to all partyworkers to contest intra-party elections and elevate their ranks in the organizational structure. moreover, these activities strike the role of dynasties in party ranks and challenge the party stalwarts to keep their positions intact. it also decreases the probability of fragmentation and factionalism within the party, develops a reliable conflict management system and minimizes the opportunistic and arbitrary use of the delegated authority. nevertheless, it all depends upon the degree of practical inclusiveness within the political party as well as the existence of a centralized power and authority therein (chousalkar, 1997). the following segment details the practices about intra-party elections within major parties of target countries. 4.1 the case of pakistan acknowledging the importance of intra-party elections, the political parties act (2002) of pakistan enshrines two mandatory conditions for contesting general elections i.e. submission of ‗statement of accounts or assets‘ of the party and detail of the intra-party polls. in that perspective, the constitution of pml-n requires that there should be intra-party elections periodically after a time-span of four years from the date of previous elections. the constitution incorporates; ―if the office of the party president falls vacant due to death or resignation or any other reasons before the expiry of the term, it is mandatory for the general secretary to convene the meeting of central working committee to elect an acting president and arrange to convene the meeting of the council of pmln to elect the president not late than 45 days‖ (―constitution pakistan muslim league (n),‖ 1996). however, in practice, uneven intra-party elections have become the afflicted feature of the party. in 2011, pml-n conducted intra-party election after a gap of a decade. the election was conducted to fulfill the requirement of the election commission of pakistan (ecp). mr. nawaz sharif was elected as the party chief and all other important slots went to his loyalists (khan, 2011). constitutionally, the next intra-party election was due in july 2015 but conducted in october 2016 i.e. after a delay of about fifteen months. in the said election, the party once again did not follow the democratic norms and values within its ranks and its election commission even did not release the final list of the contesting candidates. the election results were only the replica of the previous one wherein nawaz sharif, the then prime minister of pakistan, elected unopposed and almost all other slots were recaptured by the party stalwarts (―pmln‘s intra party elections on oct 18,‖ 2016; wasim, 2016a, 2016b). the apex court of pakistan disqualified nawaz sharif in panamagate case in july 2017; subsequently, pml-n‘s office of the president became vacant; nevertheless, after making an amendment in elections act 2017, nawaz sharif recaptured the office of the president of pml-n. on february 22, 2017, the supreme court of pakistan struck down the said amendment and nawaz sharif was de-seated as party president. to fill the vacancy, meetings of the central working committee and the general council of the party were held in islamabad. the said ―powerless‖ councils elected mr. shahbaz sharif (the younger brother of nawaz shrif) unopposed as party president. the election was nothing but the endorsement of a ―pre-decided‖ decision (malik & sheikh, 2018; ―pml-n elects shahbaz sharif its permanent president,‖ 2018; ―shehbaz sharif formally elected as pml-n‘s president,‖ 2018). ironically, one ―sharif‖ trusted the other ―sharif‖ (dynastyism) to fill the vacant slot of party president whereas party stalwarts and workers remained indifferent from the whole exercise. it appears that the claim of pml-n to be the democratic in its structure and functioning is only a slogan. on the other hand, the constitution of ppp provides that elections to the offices other than the ―patron-in-chief‖ and the ―patron‖ would be held after every three years. however, in case of resignation, death, incapacity and removal of office-bearers and upon a consequent endorsement by the central executive committee (cec), such vacant slots would also be filled through election (―pakistan peoples party: constitution,‖ n.d.; ―pakistan peoples party– oldest democratic political party,‖ n.d.). nevertheless, after the execution of zulfikar ali bhutto (the founder of the party) in 1979, his wife begum nusrat bhutto became the party head. her daughter benazir bhutto succeeded her and became the party head in 1988 after becoming the prime minister of pakistan. benazir remained party chief until her assassination in december 2007. her son, bilawal bhutto zardari, became the party head with asif ali zardari (her spouse) became co-chairman of the party through her ―will‖; the said nominations were also endorsed by the party‘s cec. surprisingly, the party did not conduct its intra-party election during the whole period and all the office-bearers were appointed through nominations (ullah, 2018). review of economics and development studies vol. 5 no 2, june 2019 358 besides, a set of new rules and regulations was introduced in 2002 by the musharraf-led government for the political parties which made it mandatory to conduct the intra-party elections. failing which, the ecp was empowered to cancel the registration of party. to contest the forthcoming general elections, the ppp registered itself with the ecp bearing a new name i.e. pakistan peoples party-parliamentarian (ppp-p); makhdoom amin faheem and raja pervaiz ashraf became its unopposed president and secretary-general respectively. benazir bhutto retained the slot of party head of ppp (―pppp elects amin fahim as president, ashraf as gs,‖ 2013). in case of ppp-p, the intra-party elections would have to be held after every two years or as determined by the ―federal organization‖ of the party. however, the last three elections for ppp-p were conducted in 2007, 2013 and 2017 with uneven periodical gaps. moreover, these were conducted secretly and the party only shared electoral results to the media. it seems that the said elections were conducted only to fulfill the requirements of ecp wherein a truly democratic letter and spirit was missing. majority of the office-bearers recaptured their slots unopposed. interestingly, in the recent elections, even bilawal bhutto, nayyar bukhari and saleem mandviwalla were not present at the occasion but re-elected (―zardari elected pppp president, bilawal elected ppp chairman,‖ 2017). 4.2 the case of india the doors of the indian democracy are not open for all and almost all the political parties are highly centralized or even remotely controlled. there, not only the central leadership but also parliamentary and assembly constituencies are in the clutches of certain political leaders who used money-muscle power to retain their political grip (khan, 2016). after partition of the subcontinent, the inc, which is highly centric to the ghandi family, took forty-six years to conduct the first election of the party president. the party is further criticized because of the centralizing impulses of mrs. indra ghandi which removed the internal democracy from the party (chousalkar, 1997). it conducts the intra-party elections periodically but these are only symbolic in nature since ghandi family is still ruling the party; mr. rahul gandhi is the current president of the party who was elected unopposed replacing his mother sonia gandhi in 2017(―missing intra-party democracy in india,‖ 2018). in the case of bjp, the election for the party president had never been conducted since its foundation. all of its presidents had been elevated through selection or nomination process. elections have taken place only at the state level, but this practice too has been jettisoned in recent years in favor of elections by consensus (hasan, 2017). although the nomination or selection of the party head in bjp does not require any dynastic succession but it is highly guided and controlled by rashtriya swayamsevek sangh (rss) which is a right-wing hindu nationalist organization widely recognized as the parent organization of the bjp. it appears that because of the non-prevalence of the dynastic succession, the bjp would have a better image of intra-party democracy than inc but the difference between two major parties in this regard is not significant; like inc, bjp is also a highly centralized party. its internal structure ranging from the allotment of party tickets and nomination of office-bearers is highly centralized and party workers are not allowed to play any role in all these activities (balwani & chibber, 2016). family rule has become a striking feature both in inc and bjp. the electoral results 2014 reveal that 14.89% of bjp‘s elected mps belonged to various dynasties. in the general election of 2004 and 2009, the proportion in this regard stood 14.49% and 19.13% respectively (singh, 2015). in short, both the mainstream political parties of india are subservient to their superemos who can drive the party on their will. even an electoral defeat cannot adversely affect their control over the party. 4.3 the case of bangladesh in bangladesh, representation of the people order (rpo), 1972, provides that there should be intra-party elections at regular intervals to elect the party heads and office-bearers. it also provides that these electoral proceedings would be communicated to the election management body of the state (amundsen, 2016; shamrat, 2017). the constitutions of both the major political parties (al &bnp) provide that the party councils will conduct their meetings at regular intervals of three years. these are the highest tier of the parties (a form of party caucus) in which representatives from the lower branch or district levels meet at national level. as per constitutions, these representatives/delegates are elected by party members at local level. however, these elections are only a mockery to the democratic process. these forums are empowered to elect party president and other organizational hierarchy (shamrat, 2017). in most of the cases, the representatives are handpicked by the party operatives based on their level of loyalty not to the party but to the party elites. this ―election-selection‖ process revolves around personality cults, sycophancy and patronage which adversely affect the essence of a true intra-party democracy. the influential and powerful party leadership hijacks the whole process. as a natural consequence, these handpicked delegates do in the party council what their pickers want from them to do. review of economics and development studies vol. 5 no 2, june 2019 359 both of the major political parties i.e. al &bnp are highly centralized and their decisions are made in authoritative manner. the party chiefs enjoy absolute and arbitrary powers in party affairs ranging from nomination of the office-bearers to allocation of the party-tickets in the parliamentary elections. no one dare to oppose the decisions of the party president. resultantly, party councils have become only public show to endorse the party decisions. both these parties have actually become dynastic since there is no change or competition for party presidency for last 30 years. hasina wajid, the leader of the al, succeeded to continue as party head for the last 37 years i.e. from 1981. she set an unprecedented record of longest ever serving chief of any political party (liton & molla, 2018). the slot of the secretary of the said party is also filled through nomination by the party chief instead of election. sharmat observes that ―position of the party chair is almost fixed, and he/she makes the final selection of party secretary privately before holding councils‖ (shamrat, 2017). bnp also practices in the similar manner. its chairperson has absolute and unchallenged authority to convene the party‘s national executive committee meeting. in its fifth national council, the party further empowered the chairperson to fill the empty slots of national executive and standing committees through nomination. the chairperson can also dissolve these committees without taking anyone on the board (kelly & ashiagbor, 2011). party councils not only elect the party chief in flimsy manner but also empower the chief to make the policies to operate the party accordingly. the meetings of these councils are quite irregular and infrequent. however, to some extent, al is more regular in convening its council meetings; since its inception, it had organized only 20 such meetings i.e. one in every three years. bnp, in this regard, is far behind than al; it conducted only six council meetings since its birth i.e. one in every six years. interestingly, the gap between 4th and 5th council‘s meeting of bnp was more than 16 years. similar trends have also been observed at sub-national level (power, 2013). elections for the committees at lower level are conducted irregularly and the real spirit of democracy seems missing in these elections. most of the committees are either ad hoc based or their tenure has been expired. in most of the cases, central leadership exercises their discretionary powers and makes nominations at national and sub-national levels. it is believed that level of internal democracy in al is more better than that of bnp in organizing committee meetings and electing leaders at sub-national levels (amundsen, 2013; ―politics of dynasty knows no boundaries,‖ n.d.). 5. candidate selection candidate selection/ticket allocation for contesting election is an important channel for the political parties to transform a centralized political system into an inclusive one hence it is important to know how parties allocate tickets to various applicants. in developed democracies, internal structure of political parties is well organized and established. they take all the stake-holders on board and conduct primaries for the candidate selection and allocating party tickets. in contrast, the political parties in developing democracies are internally less organized. here, instead of committed workers, parties need ―influentials‖, ―electables‖, ―feudals‖ and ―moneymuscles owners‖ to win elections. such candidates can easily manage to win favors of the party high-ups to secure their electoral tickets. moreover, probability to win the election is another significant factor during the allotment of party tickets rather than merit. although the process which the political parties adopt seems to be non-egalitarian but the calculation for electoral triumph is more important for the party. caste, religion, socialization and influence of the candidate over other social groups are some of the other factors which parties consider while nominating candidates. in some cases, there is corruption in ticket distribution (singh, 2015) whereas in some other cases, the general rule of the thumb is that party incumbents succeeded to get the nomination for tickets unless they are perceived to be no longer likely to win (farooqui & sridharan, 2014). 5.1 the case of pakistan to allocate the party tickets, the constitution of pml-n provides for a central parliamentary board comprising twenty members which is constituted and empowered by the central working committee. the president of the party along with leader of the parliamentary party as well as the provincial presidents of the party is the ex-officio members of the board which scrutinizes the applications and allocates party tickets. nevertheless the constitution of the party is silent about the criterion which the board has to follow to finalize the party nominees. the party head enjoys discretionary powers in allocation of party tickets. in most cases, the incumbents succeed to win the favors of the board. review of economics and development studies vol. 5 no 2, june 2019 360 during the general election of 2008, the party allocated tickets in sizeable numbers to those who jumped the party‘s sinking ship after the military coup of 1999 and contested the election of 2002 either in independent capacity or under the banner of the military patron political party i.e. pakistan muslim league-quaid-e-azam (pml-q). despite the commitment of mr. nawaz sharif of ―not to entertain anyone who had left the party when it was in the hot soup‖, above 145 pml-q loyalists secured tickets from pml-n (―146 get pml-n tickets, though they quit party after coup,‖ 2013). quite interestingly, the party preferred the political ―octopuses‖ at the expense of its diehard supporters. in the election of 2013, the party constituted national and provincial parliamentary boards comprising ―selected‖ people. this time the criterion for allocating tickets included topography of the constituency, voting patterns and the candidates‘ performance; nevertheless the ―influentials‖, ―electables‖ and ―loved ones‖ succeeded to secure their tickets. the party once again axed those who were committed to it and never shook their alignment (manan, 2013). party‘s local chapters, office-bearers, and other members were not consulted during the course of candidate selection (socio-economic background of political parties candidates for general election 2008, 2008). in the case of ppp, the constitution of party is silent over the process of ticket allocation; however, it is mentioned that active and diehard members of the party with an active record of promoting the aims of the party and in good standing are eligible to contest. their eligibility is subject to their credibility as a candidate that can win an election, their public record and their undertaking to remain loyal members of the party. hence the role of local party organizations in deciding the contestants for national and provincial assemblies during last election was unclear (internal democracy of major political parties, 2016). during the headship of benazir bhutto i.e. until 2007, the party constituted district boards where the applicants submitted their applications for party tickets. the board scrutinized the applications and sent to the concerned provincial board with their recommendation. however, in election of 2013, faryal talpur, the sister of mr. asif ali zardari who is the co-chairman of ppp, played key role to allocate the tickets. she conducted interviews of the applicants along with the provincial presidents and finalized the candidate‘s lists with the consultation of the cec (monitor political parties‘ internal democracy, 2016;―the ace encyclopedia: parties and candidates,‖ 2013). it can safely be concluded that like pml-n, ppp is also highly centralized in the process of ticket allocation. here, too, the committed party workers and local chapters are neglected during the electoral process and the preference is given to ―landlords‖ and ―electables‖ for contesting the election. 5.2 the case of india the inc sends observers in all the constituencies of lok sabha who prepare reports about the potential party candidates. these reports are forwarded to the district congress committee (dcc) and pradesh congress committee (pcc) which in turn forward them to the concerned state election committee (sec). each sec then prepares the panel of candidates for each constituency with their recommendations and sends it to the all india congress committee (aicc). the aicc constitutes a screening committee for each state comprising a senior member of the congress working committee, two senior party members not from that state, the state‘s pcc chief along with the state‘s congress legislature party leader. the screening committees prepare a docket, listing the pros and cons of each potential candidate and forward it to the central election committee (cec), which allocate party tickets to suitable candidates (gowda & sridharan, 2010; singh, 2015). in 2014, rahul gandhi, the then vice president of the inc, decided to conduct primaries in sixteen constituencies to elect the potential electoral candidates. the party, in this way, attempted to involve the lowest ranks of the party to vote for the candidates of their choice. it claimed that the process was successful hence to be implemented across the board in the forthcoming elections (polanki, 2014). on the other hand, the constitution of bjp does not prescribe any method to nominate electoral candidates. however, the mechanism which the party follows for the said purpose includes two committees for screening and recommendation of the candidates. the state election committee (sec) is mandated only for the municipal and local elections for each state whereas the central election committee (cec) of the party plays no role in this regard. however, in state and parliamentary level elections, sec plays only a recommendatory role for the potential candidates in each constituency and cec finally allocates the tickets (singh, 2015). in elections of 2009, a more centralized mechanism was adopted. the secs were not allowed to play their recommendatory role but could only forward the applicant‘s name to the cec which could make the final decision. a core group comprising senior leaders of the party was constituted for each state; it could decide the allocation of tickets hence was more powerful and influential while the cec was reduced only to a rubber-stamp (farooqui & sridharan, 2014). review of economics and development studies vol. 5 no 2, june 2019 361 the reality is that the process of allocating the electoral tickets of bjp is highly centralized; the party president along with some key leaders actually finalize the lists of the contestants and the lower ranks have nothing to do with this process (dhru & monterio, 2010). in actual allocating the party tickets, the major factors which the both mainstream indian political parties (inc &bjp) consider include caste, religion, money and muscle power of the candidate since the last two of the aforementioned elements contribute most towards the electability of any candidate. the parties do not feel any shy to allocate tickets to such ―winnables‖. over-centralization within the parties leads towards the uneven ticket allocation and those who possess high assets value and criminal records succeed to win the favor of party leaders. the following table shows how the candidates with criminal records succeeded to capture the party tickets and parliamentary slots. table 1: indian mps with criminal cases: a comparison between lok sabha of 2009 and 2014 lok sabha 2009 lok sabha 2014 p a rt y n u m b e r o f c a n d id a te s a n a ly z e d n u m b e r o f m p s n u m b e r o f m p s w it h p e n d in g c ri m in a l c a se s m p s w it h p e n d in g c ri m in a l c a se s (% a g e ) n u m b e r o f c a n d id a te s a n a ly z e d n u m b e r o f m p s n u m b e r o f m p s w it h p e n d in g c ri m in a l c a se s m p s w it h p e n d in g c ri m in a l c a se s (% a g e ) inc 438 206 44 21 462 44 8 18 bjp 428 116 44 38 426 281 98 35 sp 192 23 9 39 195 0 0 0 bsp 493 21 6 29 501 0 0 0 jd(u) 53 20 8 40 93 2 1 50 aitc 33 19 4 21 131 34 7 21 dmk 21 18 4 22 35 0 0 0 cpm 81 16 3 19 93 9 5 56 bjd 18 14 4 29 21 20 3 15 shs 46 11 9 82 58 18 15 83 ncp 68 9 4 44 35 6 5 83 admk 21 9 4 44 40 37 6 16 source:(collaborative conjunction between crime and politics, 2018; singh, 2015) the data reveals that the candidates having criminal charges have more probability to win the elections as compared to the clean candidates. the comparison shows that the lok sabhas of 2009 and 2014 had an average of 23% of such members who had criminal record whereas the average of such members who had a clean record was only 12% (dahiya, 2017; sastry, 2013; vaishnav, 2014). 5.3 the case of bangladesh there is no specific provision in the constitution of bangladesh about selection of candidates for elections of parliament. however, in 2008, the government amended the rpo to assure that the lower ranks of the party must involve in the process of candidate nomination; the order now requires that the lower tiers of the party would prepare the list of potential candidates and forward the same to the central committee or parliamentary board. the constitution of al provides for a parliamentary board which would scrutinize the applications for party tickets and decide about the final allotments. the board comprises eleven members including party president, general secretary and the deputy leader of the al‘s parliamentary party; other members are elected from the al council members (―declaration and constitution,‖ 2016). similarly, the constitution of bnp also provides for a parliamentary board to finalize the electoral candidates; the board works under the headship of the party chairperson whereas members of the party‘s standing committee, three vice-presidents, general secretary of the party and the president of the district committee are the other members of the board. the party convened districtwise meetings of the parliamentary board where the respective district president of the party also joins as a member. however, the board can include any person beyond the said list. like india and pakistan, there is no radical difference in the practices of both the major parties of bangladesh while finalizing the allotment procedure; here, too, the party chiefs enjoy the real deciding power. furthermore, winnability of the candidate is the most important factor which the political parties in bangladesh consider during the allocation of tickets; candidate‘s image in the constituency, his/her socialization and the ability to bear the review of economics and development studies vol. 5 no 2, june 2019 362 election expenses, contribution to the party and relationship with party high-ups are other important factors in ―seat politics‖ (amundsen, 2013, 2016). in some cases, although the applicants are interviewed and evaluated by the parliamentary board but the decision of allocation the party ticket solely depends how the applicant manages the party high-ups. a sizeable proportion of non-career politicians also succeed to get the party tickets by applying their financial resources as well as their relationship with the civil and military bureaucracy (mahiuddin, 2010). 6. conclusion the aforementioned detail reveals that almost all of the major political parties in pakistan, india and bangladesh are truly accused of having non-democratic intra-party setups. the dynastic rule prevails in all these parties and these ruling families assign the key-slots to their favorites as well as to the influential political figures at will whereas the grass-root workers are usually ignored during the process; whenever these parties conduct intra-party elections for electing their office-bearers, these elections are only symbolic in nature and everyone know who would be occupying what. a similar practice of favoring the ―electables‖ as well as the personal likes is also found during the course of ticket-allocation to the electoral contestants. such non-democratic practices consequently hinder the nourishment of democratic culture and cause the failure of grooming the alternate leadership within the party ranks since the genuine workers cannot get the opportunity to work at important party slots. the study also concludes that except the inc, all the selected political parties did nothing to make their ticketallocation process truly democratic. all the decisions in this regard are made behind the closed doors. the committed party workers fail to win the favors of central party leadership for the party tickets. the practice generates apathy and aloofness among the party workers which further discourages the induction of new blood. all these bottlenecks adversely affect the political culture and weaken the democratic institutions. by practicing in an excessively centralized and authoritative manner, political parties fail to assess the pulse of the public and remain distant from electorates. parties‘ structure remains weak and fragile and the gap between party leaders and workers remains un-bridged. such parties also face frequent deviations while implementing their decisions within the party or their members disintegrate while facing any political upheaval or turmoil. strong and inclusive political parties provide concrete foundations for establishing a democratic political culture in a developing state like pakistan, india or bangladesh. however, to reach at that level, parties need to internalize intra-party democratic norms and values in true letter and spirit. they should conduct free and fair intra-party elections at proper intervals, and the culture of centralized nominations and appointments should be discouraged. parties should provide career-paths to their workers and, in turn, seek loyalty from them. in allocation of the election tickets, parties should adopt transparent mechanism to scrutinize the applicants and, if possible, should conduct primaries to check the pulse of their workers. moreover, legal compulsions should be reinvigorated to make the functioning of parties more democratic and election commission be made more powerful to execute and implement the electoral as well as the party laws. references 146 get pml-n tickets, though they quit party after coup. 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(2017). retrieved february 7, 2018, from http://dunyanews.tv/en/pakistan/369418-zardari-elected-pppp-president-bilawal-elected-pp review of economics and development studies vol. 4, no 2, december2018 321 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads measuring socioeconomic stratification and mobility pattern: a case study of intra-generational and intra-temporal household mobility of southern punjab, pakistan 1 samra khalid, 2 nabila asghar 1 phd scholar economics department university of the punjab lahore, pakistan. samrakhalid88@yahoo.com 2 assistant professor, department of economics and business administration, university of education, bank road campus lahore, pakistan. drnabeelakhan.eco@gmail.com article details abstract history revised format: november 2018 available online: december 2018 the stratification process and mobility pattern describe the socioeconomic changes in society over the time period rather than at one point in time. the main objective of this study is to analyze the socioeconomic stratification of society and mobility across the time on the basis of base and final year socioeconomic stratification indicators of pakistan. for this purpose primary data has been collected from three districts of southern punjab on the basis of education as prevalence rate. the transformation results depict the sign of divergence of society with increasing size of ruler strata which is not due to reduction in the size of bottom strata. furthermore, an increase in income has not much impact on consumption behavior of households rather it exerts emphasis on material achievements in southern punjab. the study concludes that the degree of socioeconomic mobility has been positively related to the life chances of society and shows the symptoms of pro-poor growth. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords household stratification, household transformation, intragenerational change, intratemporal household mobility jel classification: d10, d64 corresponding author’s email address: drnabeelakhan.eco@gmail.com recommended citation: khalid, s. and asghar, n. (2018). measuring socioeconomic stratification and mobility pattern: a case study of intra-generational and intra-temporal household mobility of southern punjab, pakistan. review of economics and development studies, 4 (2), 321-329 doi: 10.26710/reads.v4i2.417 1. introduction stratification is the study of how one group may own and enjoys more economic resources than another, or it may be held in higher esteem, or it may be in a position to command other groups around. with the expansion of the capitalist era, the concept of socio-economic (se) stratification has become an important issue for economic practitioners and researchers. during the last few decades, attempts have been made to discover the se structure of people living around the world, so that resources can be channelized to remove the gap among the various se status belts around the society. in literature several criteria are available for measuring se stratification but the most important criteria that have been recently used are socioeconomic status index (sesi) and social economic status (ses) scale. socioeconomic status index (sesi) is a measure of economic and social position of an individual or family in relation to various se indicators such as income, education, occupation, expenditure, physical assets, social position, and social participation, (gaur, 2013). while ses scale uses more se variables such as housing, material possession, education, occupation, monthly household income, land, social participation, and http://www.publishing.globalcsrc.org/reads mailto:samrakhalid88@yahoo.com mailto:drnabeelakhan.eco@gmail.com mailto:drnabeelakhan.eco@gmail.com review of economics and development studies vol. 4, no 2, december 2018 322 understanding, (tiwari, 2005). but majority of researchers are of opinion that appropriate method to measure the stratification should be objective criteria as compare to subjective approach including wealth, property, adjusted income, education and occupation. the mobility measures the changes of society transition from traditional to developed one. the se mobility is the movement of individuals, social groups or categories of people between the layers or strata in a stratification system between two different periods of time and this movement can be intergenerational (within a generation) or intergenerational (between two or more generations). after the stratification and mobility of household, this study contributes to the extant literature by adding the consequences of se mobility on the consumption pattern of transformed households. it is an important issue for rapidly evolving middle class population in emerging economies like pakistan. the literature reveals that se factors play an important role in determining class specific forms of consumption (dimaggio, 1978).a variety of approaches have been employed to explain the consumption pattern of emerging class consumers. the researchers believe that the analysis offset mobility enables us to take dynamic view to gain an in depth understanding of the differentiated consumption behavior among the new middle class consumers, (for details see, song, et, al, 2015). given this context, the present study is an attempt to conduct stratification analysis with internal and external reliability criteria applicable to both urban and rural community. the present socioeconomic status index (sesi) measures intra-generational or intra-temporal household mobility with the use of gdp deflator to deflate the current observation to base year observation. this study estimates the household transformation pattern through leakage or injection in terms of intra-generational, and in the context of intra-temporal household mobility which means that se resources should be leakage from rich and transferred toward poor and struggling class of the society. the study constructs the household sesi and stratification profile of three districts of southern punjab (sahiwal, pakpattan and d.g. khan) and their transformation over the time period of almost twenty years from 2000 to 2017 as well as changes in consumption pattern with the help of appropriate statistical and econometric techniques. the novelty of the study is that it analyzes the comprehensive structure of the above mentioned three districts of southern punjab with the stratification of society into five socioeconomic strata, the pattern of society with transformation analysis and change in consumption pattern. the rest of the study is organized as follows. section ii discusses the most relevant studies related to the stratification process, transformation pattern and consumption pattern. section iii explains the theoretical and statistical methodology to measure the stratification process and transformation pattern. section iv deals with the analysis and interpretation of results and the last section conclude. 2. literature review several studies are available in the literature that have discussed the social stratification, socioeconomic status (ses) scale, stratification mobility and sesi for developing and developed countries [see for example davis et al (1945), duncun (1961), kuppuswamy (1967), sobel (1983), eijck and oosterhout (2005) and pareekh and trivedi (2012)]. song and li (2015)try to use three widely recognized stratifying dimensions (income, education, and occupation) and point out that educational attainment is the strongest indicator which explains the variance in culture consumption among the middle class households, while occupation plays a relatively weak role in explaining their consumption patterns. nadrag et al. (2014) analyze the main concepts of se stratification such as class and status. the study examines the particularities of se stratification in the us, including factors leading to the stratification of society (e.g. wealth, income, education, occupation) and the three types of social classes: upper class, middle class, and lower class. ghani (2014) tries to analyze the savings, earnings and consumption pattern of emerging middle class in pakistan. the study concludes that the significant difference in consumption patterns leads to further rise in expenditures on non-essential “positional” goods, such as durables, festivals, and education, often used to attain a higher standard of living. cavusgil & kardes (2014) analyze the key drivers of middle class growth in emerging markets which include urbanization, young population, rising wages, market liberalization, industrialization, modernization, reforms, and productivity growth. the study points out those middle class households have been targeted by multinationals as an attractive consumer segment due to their spending power and growing size. nayyab (2011) analyzes the size of middle class in pakistan using the data of pakistan social and living measurement survey (pslm), conducted in 2007-08 and measures the magnitude of the middle class through income and expenditure approaches. the study suggests a measure that consists of composite of five weighted sub-indices of factors (education, occupation, review of economics and development studies vol. 4, no 2, december2018 323 income, lifestyle, and housing) which are considered to be important for being part of the middle class. 3. theoretical framework and methodology the targeted respondents of this study are head of household who are born between the years of 1960-1970. current socioeconomic status (ses) is based on respondent’s current occupation, income, and other variables at the time of interview, when they are approximately more than 50 years old or near to retirement. finally, the survey is directed to respondents who are between the age 45-65actively working in the labor market. the year of 2000 is considered as a base year to measure the ses of household with deflate of the current values when majority of the respondents are engaged in occupation market and the year of 2017 is considered as a final year to measure the current socio economic status of households. the gap between “2000-2017” is almost 20 year and this economic cycle is enough to calculate the society transformation in terms of intra-generational and intra-temporal household mobility. the reason for inclusion of a particular age group is to make sure that the respondents and their children are being stable in the labor market on account of occupational income and educational achievements. pca is best considered as a summary empirical method for measuring the weights of se indicators. (milewska, et. al, 2014). the present study derives the sesi through assigning the weights of indicators by using principal component analysis (pca). this study uses the factor scores from the first principal component as weights and average of the each domain indicator weight should be equal to one. the signs of the weights indicate the contribution of the variable in household ses.a negative sign of sub category reduces ses, while a positive sign positively contributes in the ses of the household. the present study conducts stratification process through sesi of each household. if a household shows improvement for a given variable over the time period sesi increases which satisfy the monotonicity axiom as transforming the household into upper quartile. the sesi of a household can be measured in terms of n types of se profile, each type of profile is composed of i types of sub indicators ( . the study assign a weight w to each indicator and then sum up the weighted variables to arrive at the final estimate of j household in a particular domain, (for details see, moser and felton, 2007). these weights show the importance of one variable as compared to other enlisting in socioeconomic index and also show the geographical importance of each variable in terms of urban and rural perspective. the appropriate equations are given below. = + + + + = + + + + = + + + + = the last step in stratification process is to develop ses score range divided into five strata categories through inclusive method of class interval, (for details see, tiwari & kumar, 2005). the present study uses similar criteria to make the score card of each domain. all tables related to intra-generational and intra-temporal mobility criteria, sesi, weight and mobility scores are displayed in appendix. pakistan, like others developing countries has been under the process of different stages of se transformation. it has experienced development initiatives through different national, regional and international factors that have been taken into account to influence development programs in pakistan. this study provides a micro level insight on se transformation journey of southern punjab based on 20 year economic cycle. the study answers the following questions.  how much society had been transformed during 20 year economic cycle in terms of household socioeconomic profile?  what were the important factors which played role in transformation of household’s income inequality? in this study the targeted population is employed head of households of three districts of southern punjab. the reason for selecting only employed respondents is to analyze the labor market transformation and inequality. a stratified random sampling technique with population proportionate allocation has been used for data collection. data quality in this study is ensured through a built-in system of checking of enumeration by the supervisors in the field with the support of bureau of statistics (bos). the total sample is determined by using statistical formula, review of economics and development studies vol. 4, no 2, december 2018 324 where p (1-p) where p shows the value of prevalence rate (overall literacy rate) which is calculated by average literacy rate of all districts of southern punjab. further this total sample is divided in three districts (sahiwal, pakpattan and d.g.khan) which have highest, middle and lowest values of literacy rate respectively. total sample (n) is allocated to each district on the basis of population proportionate allocation. where n is district population and n is total population of three districts of southern punjab zone. according to the census of 2017 the distribution of sample (n) in each district urban and rural cluster is 37% and 63% respectively. the details are presented in table 1. table 1: southern punjab district wise sample criteria southern punjab, p = 50% , = 95% (1.96), southern punjab region sample, n = 384 district sample urban share rural share sahiwal, n = 138 n,51 n,87 pakpattan, n = 104 n,38 n, 66 d.g. khan, n = 142 n,53 n,89 4. analysis and interpretation of results the reliability of the scale has been determined by the test-retest method. the estimated sesi has been analyzed for a sample of 35 and 20 families (5% of sample population) from each zone of southern punjab and compiled their respective ses scores. after one month, it is again re-administered on the same sample and ses scores are calculated again. the two series of scores are arranged pair-wise, a pair being the scores of the candidate in two repetitions of the test. karlpearson’s coefficient of correlation between the two series is taken which is widely used measurement of reliability in social science survey. furthermore, for measuring the internal consistency of data cronbach’s alpha coefficient has been used. the content validity has been tested of estimated ses scale by the opinion of a well-known resource person. estimated ses by visualized analogue scale(vas) score of the each family is matched with ses by estimated ses scale of the head of a respective family. the two series of scores are arranged pair-wise. karlpearson’s coefficient of correlation between the two series is taken as the measurement of validity. the results are given in table 2 table 2: reliability and validity criteria note: source: author’s own calculations the final sesi was re-administered on 50 families through systematic sampling with a random start from sahiwal district. in this scenario, the applicability and reliability have also observed in terms of test-retest and cronbach alpha. the final estimated sesi has five variables to assess the ses namely education, occupation, income per capita, expenditure, housing and living condition. education, occupation, expenditure are in ordinal categorical form while income-per-capita and assets are interval categorical form displayed in sesi to measure the stratification and mobility process. income is linked with adjusted as well as deflated current income by gdp deflator to make it compatible in measuring the sesi for different domains of the household. the gdp deflator index of 2000-2001 and 2016-17 as a revised index is 108.02 and 256.25 respectively, have been used to deflate the current income. each profile alternative scoring is conducted on seven categories from 0 to 7, where ‘0’ is the lowest category whereas ‘7’ is the highest category. the results are presented in table 3. table 3 measures the extent of intra-generational and intra-temporal household mobility of each strata in urban and rural southern punjab. left hand side of column measures the intra-generational and intra-temporal household mobility of urban southern punjab. parenthesis values show the number of household which are transformed in upper strata. unfortunately in domainnot a single household is transformed which means heavy underprivileged occupied strata as poor receive no se benefits from the rich. the few number of household show leakage from lower strata (creeper, struggling and survivors) which is an indication of inequality and inefficiency structure. while in domain, the scenario is almost same because the size of strata is equal due to few leakage toward upper strata and few injection from lower strata (leakage = injection). creeping one step transformation has been observed among lowest three strata and hyper transformation has been witnessed between upper two strata tests reliability correlation with vas (validity) cronbach alpha southern punjab rural 0.92 0.96 0.71 southern punjab urban 0.95 0.94 0.73 review of economics and development studies vol. 4, no 2, december2018 325 (privileged toward ruler). the size of privileged strata dramatically is reduced due to more leakage toward ruler strata in case of both transformation domains. the right-hand side of table 3represents the scenario of rural punjab where privileged strata is almost converted into ruler se strata. in ruler area, the creeper socioeconomic strata and struggling socioeconomic strata become the victim in terms of the unskilled and unidentified agriculture labor having economic earning in terms of the non-monetary unit. the details of transformation of society are presented in table 4. table 3: intra-generational and intra-temporal mobility analysis intra-generational /intra-temporal household mobility of southern urban punjab intra-generational/intra-temporal household mobility of southern rural punjab remarks no of hh no of hh no of hh no of hh no of hh no of hh size of strata after transformation ruler se strata 15 15 15 15 26 15– 29 23 23 23 23 39 23 48 inject transformation, heavy commanding occupied strata privileged se strata 20 9 (11) 6 (14) 20 – 12 20 – 11 36 20(16) 11(25) 36 – 25 36– 18 leak > inject, size of strata dramatically reduce due to more leakage toward ruler strata survivors/ active occupation strata 22 19 (3) 17 (5) 22 – 21 22 – 20 45 40(5) 38(7) 45 – 43 45 – 43 leak = inject, size of strata is almost same struggling/ inactive occupation 41 39 (2) 38 (3) 41 – 39 4140 75 72 (3) 70(5) 75-72 75-70 leak = inject, size of strata is almost same creeper se strata 42 42 (0) 40 (2) 42 – 42 42 – 40 61 61(0) 61(0) 61 – 61 61 – 61 leakage transformation, heavy underprivileged occupied strata note: author’s own calculations, these values are calculated by the percentage change of parenthesis values of above table, these are the transformed number of households. table 4: transformation of society during and during 2000 2017 source: author’s own calculations table 4 shows how many households have been transformed from each strata toward higher ladder with negative sign which is an indication of transformation of household during 20 year economic cycle. the results reveal that there is a divergence of society with increasing size of ruler strata not due to reduction in the size of bottom strata. while no change in the size of creeper se strata. in case of intra-generational and intra-temporal household transformation only 4 percent decline is observed in the size of struggling and survivor se strata. there is an erratic number of household who are transformed from lower strata which means society has failed to provide equal socioeconomic benefits to all groups. the most stimulated group as intra-generational or intra-temporal household mobility is privileged se strata. it can be concluded that running transformation has been witnessed of privileged se group and ruler strata become heavy commanding occupied strata. after transformation it has been observed that the lower group is not in the list of change of strata size. the size of ruler strata has increased dramatically due socio economic stratification how much society transformed during 20 year economic cycle how much society transformed during 20 year economic cycle, all household se profile urban/rural analysis southern urban southern rural southern urban southern rural ruler strata no leakage only injection transformation no leakage only injection transformation privileged se strata -0.521 -0.44 -0.74 -0.69 survivors/active occupation strata -0.13 -0.11 -0.23 -0.15 struggling/inactive occupation -0.04 -0.04 -0.07 -0.06 creeper se strata no transform no transform -0.05 no transform review of economics and development studies vol. 4, no 2, december 2018 326 to more injection of the household from privileged strata. furthermore, the structure of southern punjab explains that there is stickiness among creeper, struggling and survivor socio economic strata while variability of transformation or mobility exists between upper two strata. the strata size of urban and rural southern punjab after mobility is depicted below: figure 1: the strata size of urban and rural southern punjab after mobility source: author’s work. the negative sign shows declining trend in household size in final year relative to base year domain and positive sign shows the upturn in household size growth among particular strata. as for as the consequences of mobility due to consumption change is concerned it presents the static picture of the possible consumption variation among transformed household. the study conceptualizes and proposes corresponding effects of mobility on their consumption patterns. however, some households achieve an advantaged social standing by simultaneously being intellectually developed (high education level), economically powerful(high income), and having an admirable professional or managerial jobs (high occupational prestige). under some circumstances, these households successfully evolve in to qualified members and developed greater interest and easier affordability of material and culture consumption together. 5. conclusion the whole stigma of this study is based on the concept of current changes that lies in the structure and transformation of society due to socioeconomic development process which further entails the changes in the se positions of societies from one generation to the other or within generation. in pakistan, especially in the boundary of punjab, no remarkable attempt has been made to analyze the se stratification of society and mobility across the time on the basis of base and final year se indicators. the stratification and mobility pattern have been analyzed using se factors index with reliability and validity criteria in terms of intra-generational and intra-temporal household transformation. the structural changes of southern punjab has been studied from different domain patterns in terms of their endowments of social, human and physical capital and other se characteristics. the assessment of incidence and nature of the extent of transformation would enable us to identify the process of convergence through which how much different se groups attempt to improve their positions. the results of the study show that mobility does little to alter the long-term positions of individuals in the se distribution as most of the household remained non-transformed. the process of intra-temporal household income mobility is based on occupation and wage structural reforms of society. the provincial government must ensure that the regulation and legislation laws must affect income inequality directly by reducing the extreme ranges of the income distribution. an increase in minimum wages increases the earnings of low-wage workers who are often near the bottom of the income distribution. the institutions must take initiatives to reduce excessive wages that would help in reducing the growth of executive class and reduce or limit increase in income inequality by affecting the review of economics and development studies vol. 4, no 2, december2018 327 upper se strata of income distribution. furthermore, higher degree of se transformation appears to be positively related to the outcomes of life chances in society. the higher degree of a se opportunity of life chances indicates greater portion of survivors and struggling se strata and lower the portion of leaching out group (creeper se strata). references cavusgil, s. t., kardes, i., (2014). middle class consumers in emerging markets: theoretical observations and empirical measurement (working paper). atlanta, ga: j mack robinson college of business georgia state university davis, kingsley; moore, & wilbert e. 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(2005). development & standardization of a scale to measure socio-economic statusin urban & rural communities in india, indian j med res 122, pp. 309-314. review of economics and development studies vol. 4, no 2, december 2018 328 appendix table a1: mobility pattern/socio economic status index/score card and weight analysis analysis criteria = origin point of household (base year observation = 2000) = current year observation, at the time of interview) intra-generational mobility, the score of this domain is categorize into five socio economic strata 1. education (head of household education score) 2. occupation (head of household occupation score) 3. income deflator (deflate current income as base year of 2000 value because of age and economic cycle constraint assumption, use gdp deflator index of 2016-17 =256.25 to deflate back year gdp deflator index of 2000-2001 = 108.02 2 (reference year) 4. expenditure pattern 5. asset + living status (it is based on subjective criteria, selfadministered). 1.education (head of household education score, either improved or not from base year) 2.occupation (head of household occupation score, either improved or not from base year) 3.current occupation income (adjusted as per capita income) 4.expenditure pattern 5. asset + living status (either it will be inherited or own hard work and how much total amount of physical and financial assets increased or decreased by the base year). intra-temporal household mobility, the score of this domain is categorize into five socio economic strata 3 1. education (head of household education score) 2. occupation (head of household occupation score) 3. income deflator (deflate current income as base year of 2000 value because of age and economic cycle constraint assumption, use gdp deflator index of 2016-17 =256.25 to deflate back year gdp deflator index of 2000-20001 = 108.02 4. expenditure % of income (expenditure deflate to base year) 5. asset + living status (it is based on subjective criteria, selfadministered) 1. education (average score of education member of all household) 2. occupation (average score of all earners of household) 3. income (per capita earning = head of household + spouse + other member who share all subsistence of basic life) 4. expenditure % of income. 5. assets + living status (it will be inherited or own hard work, if both so how much it will be inherited of total assets). table a2 socioeconomic stratification of southern punjab ses score of each domain ruler socioeconomic strata ≥ 20 ≥ 25 ≥ 27 privileged socioeconomic strata 16 – 19 20 – 24 22 -26 survivors/active middle socioeconomic strata 12 – 15 15 – 19 17 – 21 struggling socioeconomic strata 8 -11 10 – 14 12 – 16 creeper se strata 4 – 7 5 – 9 7 11 table a3 weight of indicator southern punjab urban southern punjab rural pca method occupation 1.03 1.01 1.20 1.04 1.02 1.11 income per capita 1.05 1.17 1.15 0.65 0.70 1.06 expenditure 0.77 0.79 0.80 0.76 0.82 0.60 assets 1.12 1.03 0.91 1.61 1.53 1.10 education 1.08 1.06 0.99 1.07 1.01 1.13 2current value deflate to back year = current value of income/ (gdp deflator of current year/gdp deflator to back year) 3 base year domain is same for intra-generational and intra-temporal household transformation ( ) review of economics and development studies vol. 4, no 2, december2018 329 table a4 review of economics and development studies, vol. 9 (2) 2023, 133-146 133 greening growth: the environmental implications of technology innovation, green finance, and foreign direct investment in pakistan javaid hussain a, sadia anjum b, muhammad yousuf c, fiaz ahmad d a visiting lecturer, university of layyah, layyah, pakistan b assistant professor, university of layyah, layyah, pakistan c phd scholar, iub, visiting lecturer, school of economics, bzu, multan, pakistan d assistant regional director, allama iqbal open university, regional campus dera ghazi khan, pakistan article details abstract history: accepted 25 june 2023 available online june 2023 this research delves deeply into the intricate interplay among technology innovation, green finance, foreign direct investment (fdi), gdp, and their collective impact on the environment. employing the autoregressive distributed lag (ardl) model over the timeframe spanning 1990 to 2021, the study aims to unveil nuanced insights into the intricate relationships that shape the environmental landscape. the study's findings offer an insightful perspective on the connections between these pivotal variables and their repercussions on environmental metrics. specifically, the outcomes reveal a negative correlation between technology innovation, green finance, and co2 emissions, as well as ecological footprints. this suggests a noteworthy linkage between technological advancements and the adoption of sustainable financial mechanisms with reduced carbon emissions and a less burdensome ecological footprint. these trends underline their potential to contribute positively to the well-being of the environment. in contrast, the study uncovers a positive correlation between fdi, gdp, and both co2 emissions and ecological footprints. this observation underscores the intricate dynamics at play, wherein foreign direct investment and economic growth appear to exert pressures that escalate carbon emissions and environmental impact. this intricate relationship brings into focus the potential trade-offs between advancing economic development and preserving the environment, necessitating a thoughtful equilibrium for sustainable progress. the implications of these revelations hold substantial weight for policymakers and government officials in pakistan. by illuminating the nuanced interconnections among technology innovation, green finance, fdi, and environmental indicators, this research equips decision-makers with invaluable insights to formulate effective policies. © 2023 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: technology innovation, green finance, ardl, pakistan jel classification: o14 doi: 10.47067/reads.v9i2.490 corresponding author’s email address: javaidh10@gmail.com review of economics and development studies, vol. 9 (2) 2023, 133-146 134 1. introduction in the ever-evolving tapestry of modern society, technology innovation has emerged as an undeniable catalyst, shaping every facet of our lives, from communication and healthcare to transportation and entertainment. this transformative power of technology has ushered in unparalleled convenience and efficiency, revolutionizing our interaction with the world. however, amidst these transformative triumphs, a growing shadow of concern has emerged – the impact of these innovations on the environment. as we find ourselves at the pivotal juncture of progress and preservation, it becomes paramount to unravel the intricate layers of technology's impact on the environment and to craft strategies that channel its potential toward fostering a sustainable future. the relationship between technology and the environment is a nuanced interplay of benefits and challenges. on one hand, technological innovation heralds a wave of solutions brimming with potential to mitigate pressing environmental concerns (ali et al., 2022; faheem et al, 2023). notably, renewable energy technologies present alternatives to fossil fuels, tapping into sources like solar, wind, and water power. this transition not only slashes greenhouse gas emissions but also charts a course toward cleaner energy ecosystems. electric vehicles stand as another emblem of progress, poised to metamorphose the transportation landscape by diminishing air pollution and reducing our carbon footprint (farooq et al., 2023; faheem et al., 2021). beyond this, the realm of technology-driven data collection and analysis opens the door to refined environmental monitoring and assessment (ahmed et al., 2023). a symphony of sensor networks, satellite imagery, and advanced analytics furnishes scientists and decision-makers with realtime ecological insights, fostering informed judgments and targeted interventions. here, technology evolves into a potent instrument for deciphering the intricate dance of ecosystems, tracking shifts in biodiversity, and orchestrating effective responses to natural calamities (ullah et al., 2023). yet, even as technology surges forward with unprecedented velocity, it carries its own ecological balance sheet. the manufacturing, utilization, and disposal of electronic devices generate electronic waste (e-waste), an escalating environmental concern. mismanagement of e-waste translates into the contamination of soil, water, and air, while imperiling human health. moreover, energy-intensive technological processes, like data centers and cryptocurrency mining, wield a hefty ecological toll through augmented energy consumption and ensuing carbon emissions. the dawn of the digital era, with its proliferation of smartphones, computers, and digital devices, casts a latent environmental shadow. data centers, bastions of the digital realm, sustaining the deluge of information we both create and consume, demand prodigious amounts of energy for their operations and cooling systems. these energy requirements, oftentimes met by non-renewable sources, can exert undue strain on local power grids (anwar et al., 2016; ahmad et al., 2021; chaudhry et al., 2021; farooq et al., 2023; uche et al., 2023). green finance, an innovative financing approach that places environmental sustainability at its core, is swiftly reshaping the financial landscape, bearing significant implications for our planet (farooq et al., 2020). with its central goal of directing capital toward initiatives and projects with positive environmental outcomes, green finance is not only revolutionizing investment strategies and resource allocation but also playing a pivotal role in addressing urgent environmental challenges. one of the most substantial effects of green finance lies in its power to propel sustainable development and alleviate environmental degradation. by channeling funds toward endeavors that promote renewable energy, energy efficiency, sustainable agriculture, and clean technologies, green finance operates as a catalyst, diminishing carbon emissions and mitigating the impact of climate change. for instance, the funding of renewable energy initiatives, such as solar and wind farms, not only diminishes dependency on fossil fuels but also expedites the transition toward a low-carbon economy. furthermore, green finance assumes a critical mantle in fostering innovation. the financial incentives extended to review of economics and development studies, vol. 9 (2) 2023, 133-146 135 businesses and organizations committed to environmentally friendly projects stimulate the advancement of research and development in clean technologies. this, in turn, gives rise to innovative solutions for enhancing energy efficiency, curbing waste, and managing resources sustainably. this innovative drive ripples across industries, nurturing a culture of innovation essential for addressing intricate environmental challenges. beyond its positive influence on environmental outcomes, green finance contributes to economic resilience and the mitigation of risks (taneja & ozen., 2023). as businesses and investors incorporate environmental considerations into their decision-making processes, they are better poised to anticipate and adapt to environmental risks. this proactive stance not only shields investments against potential losses resulting from environmental shocks but also encourages the adoption of sustainable business practices that can augment long-term profitability. additionally, green finance champions transparency and accountability. the integration of environmental criteria into investment decisions demands heightened disclosure and reporting on environmental performance. this fosters a culture of transparency within businesses and financial institutions, enabling stakeholders to accurately assess the environmental ramifications of their investments. consequently, companies are incentivized to enhance their environmental practices to attract green investments and showcase their dedication to sustainability. the reach of green finance transcends a single sector; its impact reverberates throughout economies, societies, and ecosystems. by mobilizing private capital in support of sustainable initiatives, green finance complements governmental endeavors to attain environmental targets outlined in international agreements like the paris agreement. it aligns financial objectives with environmental imperatives, fostering a harmonious synthesis of economic growth and ecological well-being (triki et al., 2023; anwer et al., 2023; ahmad et al., 2023; farooq et al., 2023; chaudhry et al., 2021). in the intricate realm of globalization and interconnected economies, foreign direct investment (fdi) emerges as a formidable agent transcending geographic confines, orchestrating transformative shifts in worldwide economies and industries (chaudhry et al., 2020). amid the fervent pursuit of economic expansion, technological progress, and elevated employment prospects, fdi emerges as a conduit through which capital, proficiency, and inventive ideas traverse borders. nevertheless, amid this pursuit of economic ascendancy, the environmental implications of fdi have garnered considerable attention and sparked lively debates. the nexus between fdi and the environment weaves a complex narrative, encompassing a spectrum of outcomes that span from constructive contributions to pressing apprehensions. this dynamic interplay prompts us to embark on a comprehensive exploration of the intricate impact of fdi on the environment, scrutinizing its potential to ignite environmental sustainability, propel resource depletion, usher in cleaner technological frontiers, and heighten the levels of pollution. in this expedition, our endeavor is to meticulously unravel the intricate threads that tether fdi and the dynamics of the environment, paving the way for a nuanced comprehension of how economic ambitions intersect with the ecological mandates on the global stage. at the core of fdi's potential constructive influence rests its capability to nurture environmental sustainability. foreign investors frequently import advanced technologies, managerial acumen, and exemplar practices from their home nations (jan et al., 2023; tanveer et al., 2023; chaudhry et al., 2021). these transmissions of knowledge can potentially galvanize the adoption of ecologically benign production methods, resource-efficient methodologies, and sustainable business paradigms in the host nations. consequently, fdi holds the potential to contribute to the curtailment of carbon emissions, the containment of pollution, and the advocacy of judicious resource management, thereby aligning economic growth with the stewardship of the environment. however, the symbiotic bond between fdi and environmental advancement is not devoid of intricacies. the pursuit of economic advantages, often review of economics and development studies, vol. 9 (2) 2023, 133-146 136 linked with augmented production and heightened consumption, can yield resource-intensive industries that exert strains on ecosystems, culminating in concerns of resource overexploitation. the establishment of extensive fdi ventures, such as mining enterprises or intensive agricultural setups, can act as catalysts for deforestation, habitat degradation, and soil erosion, thereby fundamentally reshaping local ecosystems (wang et al., 2023; tanveer et al., 2023). in this radiance, the ecological footprint of fdi extends beyond the immediate sphere of economics, fomenting deliberations on the equilibrium between development and preservation. moreover, the advent of fdi also introduces a dual narrative in the domain of technological advancements. on one hand, multinational corporations investing in host nations might bring forth advanced technologies that champion energy efficiency, waste abatement, and the adoption of renewable energy sources. this infusion of innovation has the potential to expedite the transition toward sustainable practices and cultivate a culture of environmental consciousness. however, the converse can also hold true, where industries tethered to antiquated or environmentally detrimental technologies may relocate to regions boasting less stringent environmental regulations. this migration exacerbates pollution levels, subsequently impairing air and water quality. in steering through this intricate terrain, governmental bodies and regulatory entities assume pivotal roles. devising policies that incentivize environmentally conscious fdi while discouraging practices that run counter to environmental well-being becomes paramount (kiani et al., 2023; chaudhry et al., 2021; tanveer et al., 2021; umar et al., 2021). the establishment of robust benchmarks for environmental standards, coupled with mechanisms for vigilant monitoring and stringent enforcement, stands as a safeguard ensuring that fdi adheres to principles of sustainability. similarly, the fostering of alliances between foreign investors, local communities, and environmental advocacy groups can give rise to an allencompassing strategy that mitigates adverse repercussions and leverages the potential of fdi for constructive transformation. the research impact of technology innovation, green finance, gdp and fdi on environment in pakistan" significantly contributes to our understanding in the following ways: the utilization of the autoregressive distributed lag (ardl) model for analyzing data spanning from 1990 to 2021 yields valuable insights into both the enduring relationships and fleeting dynamics of the studied variables. the ardl model's aptitude for handling variables with mixed orders of integration proves fitting, offering a robust framework to assess the intricate connections between technology innovation, green finance, foreign direct investment (fdi), and the environment. (ii) against the backdrop of the contemporary global context, this research addresses a pressing concern, shedding light on the pivotal roles played by technological advancement, sustainable financial mechanisms, and transnational investments in shaping economic growth and safeguarding environmental integrity. (iii) by centering on pakistan, the study acknowledges the distinctive socio-economic and environmental milieu of the nation. the insights gained provide a tailored perspective capable of guiding policy formulations and strategic decisions aimed at harmonizing economic development with the preservation of the environment. (iv) the research underscores the pivotal significance of technology innovation. as a catalytic force capable of reshaping production processes, consumption patterns, and the utilization of resources, technology innovation's interactions with green finance and fdi are scrutinized. the collective influence of these factors on pakistan's environmental trajectory is deciphered, contributing to an enhanced understanding of the intricate relationships at play. (v) the inclusion of green finance as a distinct element augments the research's contributions. through a meticulous investigation of the interplay between green financing initiatives and their outcomes within pakistan, the study casts light on the efficacy of such financial mechanisms in propelling sustainable practices and aligning economic growth with the imperative of environmental well-being. (vi) the ramifications of the research extend review of economics and development studies, vol. 9 (2) 2023, 133-146 137 beyond its immediate focus, permeating the broader discourse in the realm of environmental economics and sustainability. by unraveling the complex web of connections between economic advancement and environmental welfare, the findings enrich our comprehension of this nuanced interrelationship. 2. literature review ahmed et al. (2023) investigated the impact on china economic growth of technological innovation. study used auto regressive distributive lag model and data was used over forty years almost. the results of this study were showed that technology innovation has positive impact on economic growth of selected economy. ullah et al. (2023) studied that environment is a big problem nowadays in the world. study checked the impact of public investment and technology on the environment of pakistan. in this study was used (nardl) asymmetric technique to check the association among the variables. data was used over the time period from 1971 to 2021. the finding of this study were showed that there is the asymmetric relationship among the ict, public investment, economic expansion and environment in pakistan. uche et al. (2023) examined that in underdeveloped countries foreign direct investment have a great role. study found that foreign direct investment have positive relation with environment. for this panel auto regressive distributive lag model technique was used in the study. study defined also that in the brics economies carbon emissions are systematic with the passage of time foreign direct invest, technological innovation and environment also cleaned the environment. and also found the in the traditional method foreign direct investment, technological innovation and environment have positive and negative both impacts jan et al. (2023) checked the relationship between financial development, trade, economic growth, foreign direct investment and innovation on environment in pakistan. this study was used dynamic auto regressive distributive lag model to check the relationship among the variables. results of the study were found that negative effect of urbanization, energy consumption, and economic growth on carbon emissions. kiani et al. (2023) explored the technological impact on environment over the time period from 1991 to 2018 for selected countries. auto regressive distributive lag model results were showed that in the long time period technological innovation have positive impact and in the short time have negative impact on environment. ali et al. (2022) looked that in pakistan remittances, technological innovation, natural resource and economic growth effect on the environment. in this study urbanization and energy consumption were used as dependent variables and all other were used as independent variables. the data was used over the time period from 1990 to 2019 and autoregressive distributive lag model was used to check the association among the variables. ardl results were explained remittances have positive relationship with environment. results also showed that carbon emissions, economic growth, urbanization and technology have negative impact on environment. usman et al. (2022) used autoregressive distributive lag model and data from 1991 to 2020. in this study nuclear energy, renewable energy, technology innovation environment variables for selected country pakistan. finding of this study showed that in long time period nuclear energy have negative impact and technological innovation decrease pollution in the long time period. ullah et al. (2021) revealed that the role of technology in the economic development has very important role. study was used annual data time period from 1990 to 2018. ardl (auto regressive distributive lag) model was used to check the relationship between the variables. the results were showed that trade mark has symmetric impact on environment in long and short time period. li and ali (2023) aimed to study that how green finance decrease the carbon emission in china economy. the study was used delphi and fuzzy analytical hierarchy method to check the correlation among the selected the variables. the results were showed that political instability have a great crucial role in the green finance in china. the role of green finance to reduce the carbon emission very important. review of economics and development studies, vol. 9 (2) 2023, 133-146 138 taneja and ozen (2023) studied the association of green finance and energy consumption on environment in asian countries. in this study panel (ardl) technique was used to check the results of long and short time period. the results of this study were showed that green finance have negative impact on co2. in the asian countries green finance and renewable energy reduce the carbon emission. triki et al. (2023) influenced the performance of green finance and banks activities. in this study for the improvement of environment factor analysis technique was used. the results founded that banks and green financing have great impact on environment. environment reduced with the use of green financing in the selected economies. jahangir et al. (2023) studied the saudi arabia economies with the role of green finance and other variables like renewable energy, environmental quality and public health. the study was used data over the time period from 1980 to 2020. ardl (auto regressive distributive lag) model technique was used to c heck the association among the variables. the finding of the study was revealed that all variables have impact on environment and also decrease the environments impact. du and wang (2023) investigated the asean countries impacts of clean energy, grean finance, economic growth, urbanization and foreign direct investment on environment. the study used twenty years data from 2000 to 2020. the results of ardl were showed that clean energy and green finance have positive relationship with environment and also increased environmental quality. economic growth and urbanization process increase the pollutions. dai et al. (2022) identified china economy and the role of green finance, geopolitical risk, natural resource and environment. the data was used in this study time period from 1995 to 2020. quantile auto regressive distributive lag model was used. the outcomes of the study showed that variables natural resources, agriculture development and geopolitical risk have positive impact on environment. wu et al. (2023) explored the impacts population growth, foreign direct investment, trade openness and industries value added on environment in pakistan india, bangladesh, bhutan, sri lanka and nepal economies. the study was used data of pakistan and all others economies from 1990 to 2021. panel autoregressive distributed lag model was used to check the relationship between variables in this study. study was founded that industry value added and co2 have a negative relation and positive impact of foreign direct investment on environment. wang et al. (2023) studied the china economy and check the relationship of economic growth, environment, foreign direct investment on economic efficiency. study was used china data time period from 2009 to 2021. sbm (super-efficient model) was used to check the china economy impacts of selected variables. results were showed that in the china economy environment have different affects at different places or different regions. 3. methodology the analysis employs ardl model to investigate the relationship between the dependent variable, which is environmental impact, and the independent variables: technological innovation, green finance, gdp and fdi. the model is specified as follows: co2 = β₀ + β₁(tecn) + β₂(gfin) + β₃(fdi) + β₃(gdp) + ε where: environment = env; technological innovation = tecn; green finance =gfin; fdi = foreign direct investment; gdp = gross domestic product review of economics and development studies, vol. 9 (2) 2023, 133-146 139 variable measurement & data source measurement data source co2 emissions (kt) wdi environment (co2) renewable energy consumption (% of total final energy consumption) wdi green finance (gfin) patent applications, residents wdi technology innovation (tecn) foreign direct investment, net inflows (% of gdp) wdi foreign direct investment (fdi) gdp (constant 2015 us$) wdi gross domestic product (gdp) descriptive statistics encompass a range of summary measures that are employed to depict and succinctly outline the essential attributes of a dataset. they offer a condensed perspective of the dataset's central tendencies, diversities, and distribution configurations. these statistics encompass metrics such as mean, median, mode, standard deviation, variance, minimum, maximum, and percentiles. in the realm of effective econometric analysis, descriptive statistics form the bedrock. they play a pivotal role in facilitating comprehension of the data, evaluation of its quality, assessment of model assumptions, selection of variables, and formulation of hypotheses. through their initial portrayal of the data's characteristics, descriptive statistics aptly steer researchers toward suitable econometric techniques, thereby bolstering the soundness and dependability of subsequent analyses and conclusions (farooq et al., 2022; chaudhry et al., 2022; faheem et al., 2022). the correlation matrix holds a crucial significance within econometric analysis as it serves to illuminate the interconnections between variables and assists in the process of selecting and defining variables for modeling (chaudhry et al., 2022; faheem et al., 2022). it establishes a fundamental basis for generating hypotheses, conducting diagnostic assessments, testing assumptions, and exploring the dataset. through the revelation of the inherent structure of the data, correlation matrices contribute to fortifying the accuracy and dependability of econometric analyses (faheem et al., 2021). stationarity pertains to a characteristic of time series data wherein its statistical attributes remain consistent over time. essentially, it implies that the data's mean, variance, and autocorrelation remain unaltered as time progresses. in the realm of econometric analysis, stationarity holds immense importance as numerous statistical techniques and models rely on or are optimized for stationary data. the augmented dickey-fuller (adf) test and the phillips-perron (pp) test are instrumental tools employed to ascertain whether a given time series dataset exhibits stationarity or not (farooq et al., 2022; tanveer et al., 2022; faheem et al., 2022). cointegration reveals meaningful, enduring relationships among non-stationary time series variables (tanveer et al., 2022). the f-bound test plays a crucial role in this context by enabling the detection of cointegration. this, in turn, assists in selecting appropriate models, preventing inaccurate regressions, and enhancing the precision of econometric analyses. as a result, it becomes a vital tool for researchers and analysts working in this field. the autoregressive distributed lag (ardl) estimation technique is a statistical method utilized in econometrics to explore enduring connections between variables within a time series framework. it proves especially effective in scenarios where both the dependent and independent variables display varying integration orders, indicating non-stationary behavior. the ardl approach entails constructing autoregressive models for both the dependent variable and lagged independent variables. this strategy review of economics and development studies, vol. 9 (2) 2023, 133-146 140 facilitates the examination of immediate short-term dynamics as well as lasting equilibrium relationships among the variables. the ardl estimation method is favored in particular situations due to its array of benefits: (i) ardl adeptly manages cases in which variables possess distinct integration orders (such as one variable being of order 1 and another of order 0). this adaptability renders it suitable for a diverse array of economic scenarios. (ii) ardl tackles endogeneity concerns by incorporating lagged values of independent variables. this step assists in reducing potential bias in estimations. (iii) ardl demonstrates solid performance even when dealing with relatively modest sample sizes. this proves advantageous when confronted with restricted data availability. (iv)ardl estimation empowers researchers to analyze extended relationships between variables. this proves essential for comprehending the interactions of economic variables over prolonged periods. (v)ardl allows for model selection based on information criteria, aiding in the identification of appropriate lag lengths and variables for inclusion in analyses. (vi) ardl furnishes a framework for dynamic multiplier analysis, permitting researchers to scrutinize the effects of shocks and variable alterations over time. (vii) ardl estimation maintains robustness against various types of heteroscedasticities and autocorrelation, common characteristics of economic time series data (chaudhry et al., 2021; farooq et al., 2021; faheem et al., 2022). the following table shows the descriptive statistics and correlation matrix that description of variables and association of variables. descriptive statistics & correlation matrix co2 tecn gfin fdi gdp mean 124443.8 116.6516 49.31987 1.040954 1.99e+11 median 121608.7 91.00000 47.96000 0.735837 1.88e+11 maximum 198738.8 387.2000 58.09000 3.668323 3.41e+11 minimum 59026.00 16.00000 42.10000 0.375528 9.95e+10 std. dev. 42045.09 104.2243 4.063479 0.825176 7.45e+10 skewness 0.159102 1.150201 0.420858 2.160517 0.428144 kurtosis 1.831746 3.351020 2.501282 6.617068 1.910253 co2 1 0.89 -0.93 0.05 0.98 tecn 1 -0.71 -0.05 0.94 gfin 1 -0.23 -0.86 fdi 1 -0.048 gdp 1 the results of unit roots shows that all variables are integrated at first order of integration that leads to apply ardl estimation. 4. results & discussion table: unit root test co2 tecn gfin fdi gdp adf i(0) -0.731 3.504 -2.149 -2.012 2.677 i(1) -4.619*** -4.444*** -4.254*** -3.613** -3.682*** pp i(0) -0.739 3.345 -2.133 -2.055 2.63 i(1) -4.623*** -6.481*** -4.279*** -3.473** -3.764*** review of economics and development studies, vol. 9 (2) 2023, 133-146 141 table: f-bound test f-stat:6.61 1% 2.5% 5% 10% i(0) 3.74 3.25 2.86 2.45 i(1) 5.06 4.49 4.01 3.52 the following table shows association of the variables in short and long run. the results report tecn and gfin are negatively associated with co2 emission while other variables fdi & gdp are positively associated with co2 in both short and long run. the lower part of the table shows diagnostic test that reports our model is free from all problems. table: ardl results long run coefficient [t-ratio] tecn -0.87*** [-3.59] gfin -0.02** [-2.53] fdi 0.34* [1.98] gdp 0.59*** [8.03] c 2.65 [1.09] short run d(co2(-1)) 0.56*** [4.51] d(tecn) -0.03* [-1.82] d(gfin) -0.78** [-2.46] d(fdi) 0.68*** [3.50] d(gdp) 0.07* [2.35] ecm(-1) -0.81*** [-3.60] diagnostic tests r2 0.99 d.w 1.98 j.b 0.27(0.87) hetero 0.94(0.53) lm 1.95(0.18) ramsey reset 1.52(0.26) review of economics and development studies, vol. 9 (2) 2023, 133-146 142 -15 -10 -5 0 5 10 15 2002 2004 2006 2008 2012 2014 2016 2018 2020 cusum 5% significance -0.4 0.0 0.4 0.8 1.2 1.6 2002 2004 2006 2008 2012 2014 2016 2018 2020 cusum of squares 5% significance 5. conclusion & policy suggestions to conclude, this study, which investigates the impact of technology innovation, green finance, and foreign direct investment (fdi) on the environment, utilizing the ardl model for the period spanning from 1990 to 2021, has yielded insightful revelations about the intricate relationships among these variables and their collective ramifications. the findings have illuminated both positive and negative associations, thereby presenting a comprehensive panorama of the intricate interplay between economic advancement and the imperative of environmental preservation. the study's revelation of the inverse correlation between technology innovation and green finance with co2 emissions and ecological footprints accentuates the potential of innovation and sustainable financial mechanisms to make positive contributions to environmental well-being. this accentuates the significance of cultivating an innovation-driven culture and embracing green financial practices as effective means to mitigate carbon emissions and alleviate ecological burdens. on the contrary, the observed positive links between fdi, gdp, and co2 emissions, as well as ecological footprints, underline the necessity for circumspect approaches to economic growth. while fdi and economic development are pivotal drivers, they concurrently possess the capacity to escalate environmental strains. this underscores the review of economics and development studies, vol. 9 (2) 2023, 133-146 143 paramount importance for policymakers to meticulously balance aspirations for economic expansion with commitments to environmental preservation. the implications of the study's findings bear substantial weight for policymakers and government authorities in pakistan, as they navigate the intricate terrain of technology innovation, green finance, and fdi within the context of environmental sustainability: (i) encouraging and supporting technology innovation can lead to reduced carbon emissions and a diminished ecological footprint. policymakers can stimulate research and development in clean technologies, thereby cultivating an environment conducive to eco-friendly innovation. (ii) the study emphasizes the value of green finance in mitigating carbon emissions and ecological impact. policymakers can formulate policies that further incentivize investments in sustainable projects and encourage the adoption of green financial practices. (iii) while fdi and economic growth are indispensable, it's imperative to acknowledge their potential environmental consequences. policymakers can introduce measures that ensure fdi aligns with sustainable practices, thereby accounting for both economic and ecological aspects. (iv) given the diverse associations uncovered, policymakers can implement robust monitoring and reporting mechanisms for co2 emissions, ecological footprints, fdi, and gdp. this data-driven approach can facilitate timely interventions and informed policy adjustments. references ahmad, m. a., hashmi, a., ali, w., & faheem, m. 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(2022). do nuclear energy, renewable energy, and environmental-related technologies asymmetrically reduce ecological footprint? evidence from pakistan. energies, 15(9), 3448. wang, j., yang, l., & yang, j. (2023). how sustainable environment is influenced by the foreign direct investment, financial development, economic growth, globalization, innovation, and urbanization in china. environmental science and pollution research, 30(17), 49889-49904. wu, y., wang, r., & wang, f. (2023). exploring the role of foreign direct investment and environmental regulation in regional ecological efficiency in the context of sustainable development. sustainability, 15(11), 9104. review of economics and development studies vol. 4, no 1, june 2018 115 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 1, june 2018 journal homepage: www.publishing.globalcsrc.org/reads gender inequality in education and household poverty in pakistan: a case of multan district 1 saeed ur rahman, 2 imran sharif chaudhry, 3 fatima farooq lecturer, department of economics, ghazi university, dera ghazi khan saeedurrahman16@gmail.com professor, school of economics, bahauddin zakariya university, multan-pakistan. imran@bzu.edu.pk assistant professor, school of economics, bahauddin zakariya university, multan-pakistan fatimafarooq@bzu.edu.pk articledetails abstract history revised format: may 2018 available online: june 2018 present study is intended to explore the impact of gender inequality in education on poverty by employing logistic regression on primary source of data collected through a field survey of multan district. the study concluded that gender inequality in education has adverse impact on household poverty. the probability of household poverty falls with the increase in female-male primary, secondary and tertiary enrolment. the improvement in female-male literacy ratio also rejects probability of a household being poor. household size and number of children less than five years age have positive association with probability of poverty while the variables, qualification of household head, age of household, professional or technical skills of household head and ownership of house are negatively associated with household poverty. the study suggested that eliminating gender inequality in education in all level may be helpful in empowering women, creating productive employment opportunities in both formal and informal sectors and alleviating poverty. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords gender inequality, education, poverty, logistic regression, multan. jel classification: c25, d60, j10, i10, i30 corresponding author’s email address: imran@bzu.edu.pk recommended citation: rahman, s., chaudhry, i.s., farooq, f., (2018). gender inequality in education and household poverty in pakistan: a case of multan district. review of economics and development studies, 4 (1) 115-126 doi: 10.26710/reads.v4i1.286 1. introduction gender refers to difference in roles and responsibilities of women and men in a society. this difference is determined by society, culture, prevailing religious thoughts, moral and legal norms (anderson, 1988; alam, 2011).gender inequality represents dissimilarity in women and men’s status in recognizing their full human rights. it is the difference in social class, achieved ethnic and racial status by women and men and discriminative relative power of men and women in our society. men and women both are essential constituents of every society. the society cannot flourish adequately until and unless both contribute actively and efficiently in its development process. according to klien and nestvogel (1992), there is adequate evidence that when women and men achieved equal opportunities, their well-being got enhanced, the poor escaped quickly from poverty and ultimately economies grew faster. but when the burden of any one was shifted to the other, the growth and efficiency of both was hampered. in underdeveloped areas http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 1, june 2018 116 women had been leading disadvantageous and dependent life and their very minute economic contribution have been resulted in gender inequalities. (oakley,1972; alam, 2011). gender inequality is primarily the consequence of human behaviour that denies individual their human rights(north, 1990). the deprivation of women from basic freedoms infers extraordinary costs for society in terms of lower human capital, lower growth and bad governance (sen, 1999; world bank, 2001; klasen, 2002). gender inequality also inflicts costs on households, communities and countries. in an increasingly globalized world, gender inequality is a major predicament for development which makes countries less competitive due to rising cost of not reducing gender inequality. inequality in access to opportunities and resources, women’s minor representation in business and politics and violence and power imbalances create discrimination between men and women which impede the progress of women as well as society. it is obvious that hostage of the talents, energies and aspiration of half of the society hampers human development. gender disparity in education is present nearly in entire poor countries as well as among the poor within these countries. the low income countries of the world has exhibited substantial rise in gender inequality in education over the last three decades (world bank, 2001). gender inequality has now become an important concept for the empirical analysis and is essential for poverty alleviation as it has adverse influences on several valuable development goals. poverty influences the girl's access to education in many ways.in accordance with the recent evidence from west africa, poverty contributes a lot in gender inequality in access to education (okoijie, 1998; okoijie, 2002; appleton, 1996; atolagbe, 1999). education is worldwide accepted basic need for every human in everyday life and the perfect imperative tool for human resource development (king and lillard, 1983). it has been considered a vital constituent of women’s empowerment and opportunities. it has become a universally accepted human right. female’s education plays an important role in poverty alleviation in developing countries by increasing their productive activities due to improvement in their health by reducing fertility and various other human development outcomes like child survival, health and schooling (king and hill, 1993; strauss and thomas, 1995;world bank, 2000; pihs, 2001-02; schultz, 2002; world bank, 2007). pakistan reveals substantial gender inequality in education in both rural and urban areas. the progress regarding gender parity index (gpi) for primary and secondary education is slow. the mdg target of attaining gender equality in primary and secondary education in 2005 has already been missed. the target seems to be unachievable with the current pace of progress. gpi for primary education in 1990, 2001, 2005, 2008, 2010 and 2011 was 0.73, 0.82, 0.85, 0.88, 0.88, and 0.90 respectively. the gpi in primary education for the year 2012-13 is 0.89 with a one percent decline as compared to year 2011-12 and it was further declined by one percent from 0.89 to 0.88 in 2013-14. gpi for secondary education is consistently stagnant at 0.8 since 2006-07. according to global gender gap report 2012-13, gender parity index for literacy was 0.59, gpi for primary education was 0.82, gpi for secondary education was 0.76 and gender gap index for tertiary education was 83 in 2012-13. rigorous efforts are required to achieve the gpi targets for primary and secondary education by 2015. gpi for youth literacy has increased from 51 in 1990-91 to 0.65 during the year 2001-02 and to 0.78 in 2005-06. it was further improved from 0.78 percent in 2005 -06 to 89 percent in 2012-13 and again declined from 89 percent to 84 percent in 2013-14. the progress of this indicator is also slow and the mdg target of 2015 is not likely to be achieved for this indicator also. the reasons of girls’ low enrolment and high dropout rates are cost of attending school, availability and quality of school facilities such as safe drinking water, separate toilets and boundary wall, distance to school and parents attitude and ignorance (pihs, 1990-91, 2001-02; pslm; 1990-91-2008-08; pakistan mdgs report, 2010;global gender gap report, 2013; pakistan economic survey, 2014-15). poverty has emerged as a core issue and a central challenge for development to the government of pakistan since it has been placed among the millennium development goals. poverty is a complex, dynamic, gender and location specific multidimensional phenomena. persistence of poverty may vary by review of economics and development studies vol. 4, no 1, june 2018 117 social group and region. it is not easy to describe and quantify the poverty because it is qualitative in nature (chaudhry et al., 2009). poverty is the helplessness in achieving minimum living standard (world bank, 1990). ) poverty is the absence of access to achieve various commodities (world bank, 2000). the definition of world banks indicates the broader concept of poverty which includes not only food and nonfood items but also some essentials of human development such as key assets and social determinants. according to world development indicators (2012), 60.2 percent population is living below $ 2 a day and 21 percent population is living below $1.25 a day at international poverty line in local currency in pakistan. poverty rates have never been found stable in pakistan. inconsistent and unsuitable poverty alleviation policies have been resulted in ever changing poverty trends in pakistan.the poverty incidence is greater among women than the poverty incidence among men in pakistan (ministry of labour and manpower pakistan, 2009). the above observations about gender inequality in education and poverty provide an uneven agenda for the present study. as distinct from national poverty, the present study on poverty in multan district views the problems with the emphasis on different roles, rights and resources that men and women have in society and are important in determining the nature and scope of their educational inequality and poverty. present study is an attempt to investigate the impact of various indicators of gender inequality in education on poverty. 2. literature review the relationship among gender inequality in education and poverty is much debated at national and international level. there are many evidences from all over the world regarding the link between gender and poverty. feminization of poverty has become a worldwide phenomenon. poverty may affect girls' access to achieve education in various ways. gender inequalities in enrolment are greater among poor than among the non-poor countries. the causes of gender inequality in education are created by household's decisions.the main reasons for low investment in girls’ education are societal favorites like customs and culture, no future benefit of girls’ education to parents, early marriages, low or no returns from education of girls (gertler and alderman, 1989; dollar and gatti, 1999).pakistan has a male dominated society having gender as an organizing principle of the society.gender discrimination is a universal phenomenon and we cannot fully quantify the extent of gender discrimination. there are evidences from literature that females are more poor and vulnerable than males and are suffering from poverty of opportunity in terms of less access to health, education and earning in developing countries like pakistan. there are several studies examining the issue of gender inequality in education and its consequences on household welfare. the following studies have explored therelationship between gender inequality in education and poverty. a micro study was conducted by malik (1996). he explored the various rural and household specific determinants of rural poverty in pakistan using primary data obtained from a village of punjab in 1990 and calculated fgt index for various determinants of poverty. it is concluded that the households with higher level of education, a smaller number of dependents, smaller family size, a larger area to cultivate, greater participation in non-farm work and access to resources have low probability of being poor. the study highlighted that various non-farm activities enables the landless rural household to generate income and thus to escape poverty. klasen (1997) explored poverty and inequality in south africa using a household survey data. the author used income-based definition of poverty and developed a deprivation index having components such as education, employment, access to services, income, health, wealth and perceptions of satisfaction. the results suggest that poverty has strong association with poor education and lack of employment opportunities. the poor are facing low or no access to education, deficiency of better health care facilities and undersupplied basic infrastructure and are reliant on social transfers (remittances and pensions) and disability grants. poverty rates in rural areas are higher as compared to urban areas and among female review of economics and development studies vol. 4, no 1, june 2018 118 headed households and children. klasen (1999) examined the effects of gender inequality in education and employment on growth. this study concluded that gender inequality in education negatively effects growth of the economy by letting down the human capital’s quantity and quality. the estimates denote that there are 0.4 to 0.9 percent variations in growth rates due to gender inequality in education between south asia and middle east and, east asia and sub saharan africa. the progress in growth rates is prevented due to increase in fertility and child mortality rates caused by increase in gender inequality. the higher level of income and earnings are connected with advanced level of education. nasir (2002) investigated the relationship between the variables of human capital and earnings of regular wage employees. the study used hies data of 1995-96 containing the information about completed year of schooling and human capital model was estimated which was earlier adopted by mincer (1974) and becker (1964). the results showed that there is eight percent return on an additional year of education of the wage earner. the variable of experience indicated that each additional year of working in labour market resulted in wage increase of both male and female workers. the wages of male workers were found 10 percent greater than female workers for their experience, skills and competencies. females earn less than males because of lack of education and experience. chaudhry et al. (2006) explored the issues of poverty and its related concepts in rural agricultural economy. in this study an attempt has been made to analyze the macro variables earlier used by kemal (2001). the study concluded that unemployment, inflation and economic growth have significant association with poverty alleviation in rural areas of pakistan. results indicated that in rural areas incidence of poverty was forty percent and in urban areas it is thirty two percent. in rural areas, poverty incidence is more pervasive as compared to urban areas. the main variables such as inflation, employment and growth rate strongly influence rural poverty. it is suggested that poverty alleviation in rural areas is impossible without creation of investment opportunities, entrepreneurship and sustainable livelihood in the economy. de silva (2008) investigated the correlates of poverty in sri lanka. the study analyzed that the level of education was an extreme negative correlate of poverty. poverty was declined with the increase in education years. household probability of falling into poor was 43 percent for the illiterate household. tertiary education had strong poverty reducing impact followed by lower levels of education. household size is also an important correlate of poverty. household head’s gender was also associated with the standard of living or household welfare. the result of the quintile regression indicated that household of rural areas are poor. however, the inequality was found higher in urban areas as compared to rural areas. a micro study was conducted by chaudhry and rahman (2009). they explored the relationship between gender inequality in education and rural poverty. authors made logistic regression analysis of survey data gathered through a survey of rural areas of muzaffargarh district. the study found the negative or adverse relationship of gender inequality in education with rural poverty in pakistan. the indicators of gender inequality in education such as female to male enrolment ratios, female to male literacy ratio, female to male ratio of total years of schooling, female to male ratio of earners and household head’s educational level have negative impact on rural poverty. the study suggests that gender equality in education is necessary for increase in level of employment and mainstreaming gender into poverty reduction policies may reject poverty in developing countries like pakistan. chaudhry et al. (2009) explore relationship between household’s demographic and socioeconomic characteristics with rural poverty. the empirical analysis of the study consists of a poverty profile and an econometric approach. they used primary data collected from rural area of muzaffargarh district for poverty analysis. it is concluded that household size, participation rate, dependency rate, landholding, livestock, female head of household, age of the household head and residence in katcha house (house review of economics and development studies vol. 4, no 1, june 2018 119 made of mud) play a significant role with the probability of being poor household and affects the incidence of poverty. it was suggested that landless households should be allotted land. efforts should be made to alleviate poverty by improving demographic characteristics in rural areas of pakistan. chaudhry (2009) analyzed various factors influencing rural poverty in southern punjab (pakistan).the study concluded that it is possible to alleviate poverty by decreasing dependency ratio, controlling the size of households, improving the levels of education and increasing female participation in earnings and other economic activities. logistic regression analysis of the primary source of data was made. it was found that household’s chances of poverty increases with the increase in size of the household and the dependency rate of household. the relationship between education and poverty is negative because it is education which helps in achieving and availing employment opportunities and hence rejects poverty. poverty is a big obstacle in the way of economic development of an economy. chaudhry et al. (2010) and awan et al. (2011) explored the relationship between different levels of education with poverty incidence in pakistan. these studies found the opposite or inverse association between education and poverty. with the increase in level of educational attainment, the chances of escaping poverty increases because with the increase in education level earning potential of individual also increases. regarding the feminization of poverty, the study concluded that risk of poverty is less for male as compared to female. the study suggested that evasive action is needed to be taken to provide affable employment environment for the female, equal educational and training opportunity and resources targeted at education sector especially in higher education will be helpful for poverty eradication and wellbeing of the society. alam (2011) examined the effects of gender discrimination on gender development and poverty alleviation. the study is based on information collected from 50 respondents out of which 25 respondents are males and 25 are female. the survey was conducted in hazar khuani peshawar. the results indicate that gender disparity exists in the targeted area which affects poverty alleviation and gender development in many ways. it is concluded that females have unequal status, unequal opportunities in education, no permission to work outside home and no or low share in income or earnings of a family. male members of the family were decision makers. females were more vulnerable to poverty because of unjust distribution of resources. gender inequality is a hindrance in alleviation of poverty and education of females supports poverty alleviation. it is suggested that provision of equal social rights, equal education and skill enhancement opportunities to men and women may be helpful for gender development and poverty alleviation. 3. data and methodology for the present study the researcher has used primary data for empirical analysis. the primary data is a one shot exercise collected by conducting the field survey of rural and urban areas of multan district. multan is an ancient city and famous as city of saints for its sufi heritage. it is rich in agriculture and industry. it is pakistan's 6th most populous metropolitan city. according to 1998 census, it has a population of 3116851 persons out of which 1802103(57.82 percent) is rural population and 1314728 (42.18 percent) is urban population. the area of the district is 3721 square kilometers. the survey was conducted in 2015. a sample of 600 household was randomly selected from the entire district of multan. out of a sample of 600 households, 240 households (40 percent of the sample) were selected randomly from urban areas and 360 households (60 percent of the sample) were randomly drawn from rural areas of multan district. poverty theorists have observed that alleviation of absolute poverty is more applicable than the relative poverty to solve the problems of developing countries. in the present study we have used head count ratio which is a well-known method to calculate the incidence of poverty. here poverty is a dependent and dummy or categorical variable having value 1 if household is poor and 0 if the household is non-poor. poverty line is 1.25 dollars per person per day which is the world bank poverty line adopted for review of economics and development studies vol. 4, no 1, june 2018 120 developing economies. the poverty line of $1.25 is the simple average of the national poverty lines of fifteen very poor countries as suggested by world bank for poverty analysis in developing countries. poverty status regressions are mostly applied by using a probit or logit model. in probit or logit model a dummy or a categorical variable is used such as whether a household is poor or not. we have carried out empirical analysis of the impact of gender inequality in education on household poverty by employing logit model. the probability of being poor depends on a set of variables x so that prob (y = 1) =f (ß'x) prob (y = 0) =1 f (ß'x) using the logistic distribution we have prob (y = 1) = е β′ x /1+ е β′ x = ʌ (ß'x) where 'ʌ'represents the logistic cumulative distribution function. then the probability model is the regression: e [y/x] =0 [1-f (ß'x)] + 1 [f (ß'x)] =f (ß'x) table 1: the list of the variable of the model (investigating the impact of gender inequality in education on household’s poverty) dependent variables hypothetical relationship povt poverty: =1 if household is poor, 0 if non-poor (the household is considered poor if per capita income is less than 1.25$ per person per day, international poverty line) independent variables fsiz family size (number of members in a household positive gpipe it is the ratio of girls to boys in a household enrolled in primary education also known as ender parity index for primary education negative gpise it is the ratio ofgirls to boys in a household enrolled in secondary education also known as gender parity index for secondary education negative gpite it is the ratio ofgirls to boys in a household enrolled in tertiary education also known as gender parity index for tertiary education) negative gpiyl female male literacy ratio (adults, age 15 years and above) negative adts average distance to school from a household (km) negative agehh household head’s age in years negative quhh qualification of household head, completed years of education negative hown ownership status of house: 1 if own, 0 if rented negative mtshh marital status of household head: 1 if married, 0 if unmarried negative pqsh household head's technical/professional qualification or skill: 1 if yes 0 if no negative noch number of children in a household (less than or equal to 5 years age) positive in the present study i have made an attempt to analyze the impact of gender inequality in education on household poverty in pakistan using a new household level source of data from multan district. 4 results and discussion 4.1 summary of the findings of the field survey of multan district the field survey indicates that there are 6 percent female headed and 94 percent male headed households. average household size is found to be 6.1 percent. it has been observed that there are 37 percent poor households (222 out of 600 households) and 63percent non poor households (378 out of 600 households) and out of 37 percent poor households 29 percent urban and 71 percent rural households are poor. the households with literate head are 61 percent (366 households) and illiterate heads are 39 percent. among the literate 61 percent heads, 18 percent heads possess technical or professional education and others possess general education. out of 600 households, 88 percent possess their own house or residence and 12 review of economics and development studies vol. 4, no 1, june 2018 121 percent household live in rented house. the households where exists the gender inequality in primary enrolment were almost 71.17 percent while, 28.83 percent households represented gender equality in enrolment in primary education. gender inequality in enrolment in secondary education was found in 74.50 percent households while, the households indicating gender inequality in tertiary education enrolment were almost 81.84 percent. gender equality in adult’s literacy ratio was found to be in only 39.33 percent households. household data indicates severe gender inequality in adults’ literacy as well as in all levels of enrolment. 4.2 results of correlation analysis of the variables correlation analysis has been made in order to find the multicollinearity among the variables. the results of the correlation co-efficient of the independent variables used in gender inequality in education and poverty model are shown below in table 8.2. the results show that the values of correlation co-efficient are less than 0.45 indicating that there is no multicollinearity among the variables. if the value of coefficient is equal to or less than 0.80 then there will be severe multicollinearity among the variables. table 2 correlation co-efficient of the independent variables 4.3 results of the logistic regression estimates of the impact of gender inequality in education on poverty the results in table 8.3 indicate that constant has significant positive effect on household poverty. coefficient value of constant indicates the effect of all those variables which may have some impact on poverty but these have not been included in the model. pseudo r-square (coefficient of determination) represents the proportion of explained variations in poverty due to the variations in independent variables. the value of pseudo r-square (coefficient of determination) is 0.3150 which indicates that 31 percent variations in poverty have been explained by the independent variables. the probabilitychi 2 value is 0.000 provides the evidence that at least one of the coefficients for an explanatory variable is non-zero and proves that overall logistic model is good and significant at 1 percent level of significance. household size has significant positive impact on poverty. the co-efficient of household size is significant at one percent level and the odds ratio 1.44 confirms the positive relationship between household size and poverty. it is an important factor that determines poverty. the greater the household size, the lesser will be the per-capita income as it has diluting effect on household income. household size represents a complex mechanism in poverty status. on one hand participation of all family members in earning activities may pull the household out of poverty and on the other hand surplus labour force in a household brings down the marginal productivity, increases unemployment and ultimately pushes the household into poverty (rodriguesz. 2003; sabir et al, 2006). marginal effect of household size shows that probability of poverty increases by 5.4 percent with the increase of one member in a household.the results are also consistent with javed and asif (2011). . noch -0.1254 0.0405 -0.0153 0.0300 1.0000 mtshh 0.0972 0.0568 0.0314 1.0000 pqsh 0.3682 0.0683 1.0000 hown -0.0110 1.0000 quhh 1.0000 quhh hown pqsh mtshh noch noch 0.2815 0.0437 -0.0649 -0.1736 -0.1462 0.0618 -0.0572 mtshh 0.0541 0.0285 0.0554 0.0065 0.0668 -0.0255 -0.0364 pqsh -0.0218 0.0156 -0.0110 0.0932 0.2281 -0.0699 -0.0326 hown 0.1222 0.0790 0.0552 0.0794 0.1080 -0.0990 0.1562 quhh 0.0110 0.0955 0.2468 0.2042 0.4057 -0.0164 -0.0916 agehh 0.3559 -0.0137 0.0794 0.1291 0.0469 -0.0334 1.0000 adts 0.0890 -0.1724 0.0265 0.1697 -0.0241 1.0000 gpiyl 0.1425 0.1836 0.4586 0.4265 1.0000 gpite 0.2244 0.0919 0.3110 1.0000 gpise 0.3950 0.2333 1.0000 gpipe 0.2575 1.0000 fisz 1.0000 fisz gpipe gpise gpite gpiyl adts agehh review of economics and development studies vol. 4, no 1, june 2018 122 table 3 logistic regressionestimates of the impact of gender inequality in education on poverty explanatory variables coefficient z-stat. prob. odds ratio marginal effects constant household size female-male ratio of enrolment in primary education female-male ratio of enrolment in secondary education female-male ratio of enrolment in tertiary education female-male (age 15 years and above) literacy ratio average distance to school from a household (kilo meter) age of household head (years) qualification of household head (years of education) ownership of house (own house=1) head’s technical/professional qualification (yes=1) marital status of household head (married=1) number of children (less than 5 years age) 1.10200 0.362026* -0.684636*0.616803*2.97075*0.928435* 0.008046 -0.039089* -0.047127* -0.691679*0.835340*** 0.111718 0.310366* 1.82 5.94 -3.41 -2.66 -4.70 -3.54 0.21 -3.49 -2.47 -2.07 1.840 .312. 34 0.069 0.000 0.001 0.008 0.000 0.000 0.830 0.000 0.013 0.039 0.062 0.733 0.020 1.44 0.50 0.54 0.05 0.40 1.01 0.96 0.95 0.50 0.43 1.12 1.36 0.054 -0.099 -0.094 0.456 0.146 0.001 0.005 0.007 0.105 0.129 0.018 0.047 pseudo r2 = 0.3150 lr chi2(12) = 254.81 log likelihood = -275.863 prob> chi2 = 0.0000 test that all slopes are zero: g = 257.218, df = 12, p-value = 0.000 number of observations = 599 source: author’s calculations by using stata and minitab *=1 percent, **=5 percent and ***=10 percent level of significance the variables of gender inequality in education such as female-male primary, secondary and tertiary enrolment ratios negatively affect the probability of household’s poverty. the variables are significant at one percent level and odds ratios are 0.50, 0.54 and 0.05 respectively. the odds ratios are less than one and confirm the negative relationship between female-male enrolment ratios of primary, secondary and tertiary education and probability of poverty. greater the values of these enrolment ratios, the lesser will be the gender inequality in enrolment and the probability of poverty of household being poor decreases. marginal effects of the enrolment ratios indicate that probability of household poverty falls by 9.9 percent, 9.4 percent and 45.6 percent with the one unit increase in female-male enrolment ratios of primary, secondary and tertiary education respectively. the results specify that gender equality in primary enrolment is found to be more effective for poverty alleviation as compared to gender equality in secondary enrolment. however, there is little difference between the marginal effect co-efficient values of primary and secondary enrolment. similarly, gender equality in tertiary enrolment is more effective than the gender equality in primary as well as secondary enrolment. tertiary education is most effective for poverty alleviation as the co-efficient value of marginal effects 45.6 percent predicts that probability of household being poor decreases by 45.6 percent with the increase in female-male tertiary enrolment ratio by 100 percent. hence, elimination of gender inequality in primary, secondary and tertiary enrolment is necessary for poverty alleviation. gender inequality in education may have adverse impacts on poverty and other development goals. it may prevent the reduction in child mortality, fertility, and under nutrition, as well as reduce the educational gains of the next generation. the results are consistent with chaudhry, 2007; chaudhry and rahman 2009). female-male literacy ratio of adults (age 15 years and above) has also negative relationship with the probability of poverty. the odds ratio 0.40 confirms the negative impact of the ratio of femalemale literacy on probability of poverty. marginal effect of the variable shows that increase in literacy ratio by one unit reduces the probability of poverty by 14.6 percent. gender equalities in education are particularly important in the sense that female education has positive association with many development outcomes including reduction in fertility and child mortality (schultz, 2002). education level attained by household members reduces ethnocentricity, and thus increases one’s review of economics and development studies vol. 4, no 1, june 2018 123 flexibility of accepting new customs and norms and results in increase in female labour force participation especially in urban areas, which may reflect their higher wage premiums and higher opportunity cost of being inactive. however, research reveals low demand for girls’ education in many economies results in significant gender gaps in access to education (hill and king, 1995; filmer, 1999; winter and macina, 1999 and lincove, 2006). the negative relationship between female-male literacy ratios with the probability of household being poor has been similarly observed by ogawa and akter (2007), chaudhry and rahman (2009) and world bank (2010a). the variable of distance to school has expected positive co-efficient sign but insignificant impact on probability of household being poor and marital status of household head also has positive but insignificant impact on household’s poverty. this result is consistent with chaudhry and rahman, 2009). age of the household head has significant negative impact on household’s poverty. the variable is significant at one percent level. the greater the age of household, the lesser will be the probability of household’s poverty. odds ratio of 0.96 represents the negative impact of head’s age on poverty. marginal effect of the variable indicates that probability of poverty falls by 0.5 percent with the one year increase in the age of the household head. poverty mainly affects people who are under or above productiveages. generally, young people have low income because theirearly experience in the labor market starts with low income andfewer hours of work. as individuals age, there is gradual gainin education, work experience and labor network (khatun, razia, 2015). educational qualification of household head negatively affects household’s poverty. the variable is significant at one percent level and odds ratio 0.95 confirms the negative impact of that variable on probability of poverty. the value of marginal effect indicates that other variables remain same, the probability of poverty falls by 0.7 percent with the increase in an additional year of education of the head keeping other variables constant. probability of household being poor also decreases if the household has some technical and professional qualification. greater the technical skills and competencies lesser will be the chances of household being poor. the variable is significant at 10 percent level of significance and odds ratio of 0.95 confirms the negative association of this variable with probability of poverty. marginal effect of the variable shows that other variables remaining constant, the probability of that household’s poverty falls by 12.9 percent if its household head possess professional qualification or technical skill. although the educational level of other earning family members also is of great importance but that of head plays more influential role in shaping family members by being exemplary and willing to invest on education. the educational qualification level of household head contributes to competency, working efficiency, diversifying income, becoming visionary in creating conducive environment to educate the dependents with long term target to ensure better living condition of the family members. thus being educated reduces the chance of becoming poor in the sample households. the results are consistent with fitsum and holden (2003), chaudhry (2009) and javed and asif (2011). the probability of household’s poverty also falls if the household possesses its own house. ownership of a house rejects the probability of being poor. the variable is significant at one percent level and odds ratio is 0.50 which confirms the negative relationship. the probability of household poverty falls by 10.5 percent if the household has ownership of house. poverty is more prevalent among non-owners of house: they tend to be income poor, assets poor and consumption poor. it is obvious that the ownership of house relates to income, assets and consumption (ahmad, 2004). the number of children less than 5 years of age has significant positive impact on household poverty. greater the number of children of the mentioned age greater will be the dependency rate and greater will be the chances of household to fall in poverty. the variable is significant at 1 percent level of significance and odds ratio is greater than one (1.36) which confirms the positive impact of the variable on probability of being poor. marginal effect of the variable shows that probability of household’s poverty increases by 4.7 percent with the increase of one more child of the mentioned age in a household. with the increase in review of economics and development studies vol. 4, no 1, june 2018 124 children dependency ratio of a household, poverty level also increases. our results are consistent with chaudhry et al. (2009), chaudhry and rahman (2009). 5. conclusions and policy suggestions gender inequality in education has adverse impact on household’s probability of poverty. the households with greater gender inequality in education are more likely to be poor. female-male literacy ratio has negative association with household’s probability of being poor. the increase in adult female-male literacy ratio and the ratios of females and males enrolment in primary, secondary and tertiary education (indicators of gender inequality in education) have negative association with probability of poverty. the gender inequality in enrolment and literacy has been found to be higher in poor families and lower in rich families. human capital equality in a household (the equality in female-male level of education) is an important determinant of household poverty. international development institutions are also recognizing the importance of female education in achieving number of development goals (schultz, 1994). other variables such as age of household head, qualification of household head, head’s technical/professional qualification and ownership of house were found to have negative association with poverty. household size and number of children less than 5 years of age positively affects the probability of poverty. the results specify that gender equality in primary enrolment is found to be more effective for poverty alleviation as compared to gender equality in secondary enrolment. however, there is little difference (0.5 percent) between the marginal effects co-efficient values of primary and secondary enrolment. similarly, gender equality in tertiary enrolment is more effective than the gender equality in primary and secondary enrolment. tertiary education is most effective for poverty alleviation as the co-efficient value of marginal effects 45.6 percent predicts that probability of household being poor decreases by 45.6 percent with the increase in female-male tertiary enrolment ratio by one or in other words 100 percent. it is concluded that elimination of gender equality in enrolment and literacy educational is essential for poverty alleviation. on the basis of these conclusions, we suggest some recommendations for policy makers. government may take various steps to eliminate all forms of discrimination against women by incorporating the principle of gender equality in their legal system and by establishing public institutions and tribunals to ensure the effective protection of women against discrimination. it is impossible to alleviate poverty without the creation of productive employment opportunities. promotion of productive employment should be amongst the major goals of policy in its own right. it assumes particular significance in the context of the persistence of poverty at a high level and the observed increase in income inequality. labour is the only income generating asset of the poor. therefore, productive employment and an increase in the returns to employment can be helpful to achieve a higher rate of poverty reduction and to discontinue the rise in inequality. female employment is necessary to enhance the level of income and alleviate poverty prevailing in low income households. since female literacy is essential for poverty alleviation, government may provide free primary and secondary education to boys and especially girls. monthly stipend may also be awarded to the students belonging to poor family. in village areas distant schools are hurdle in the way increase in female and males’ enrolment. government may provide conveyance facility to the students especially female students of village areas. there is a need to increase the public expenditures on female education in order to achieve gender equity at all levels. for the elimination of gender inequality in education at all levels and to achieve the targets of millennium development goals, pakistan had made commitment to achieve overall gender equality in access to education till 2015. there is an ardent need to develop education and other infrastructural facilities without gender bias. review of economics and development studies vol. 4, no 1, june 2018 125 references alam, a.(2011). impact of gender discrimination on gender development and poverty alleviation. sarhad j. agric., 27 (2), 329-339. anderson. 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www.publishing.globalcsrc.org/reads impact of crisis management practices and strategic response on pricing strategy: evidence from textile industry in pakistan 1 sana affandi, 2 hina affandi 1 assistant professor, quaid-e-azam university islamabad, pakistan: sanaaffandi@gmail.com 2 assistant professor, foundation university islamabad, pakistan: hina.affandi@fui.edu.pk article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 this study has discovered the impact of crisis management practices and strategic responses on the price strategy in the textile industry of pakistan. in this research, independent variable iscrisis management practices (efficiency improvement and competitiveness improvement), mediating variable is strategic responses (pro-activeness and reactiveness) and where the dependent variable is price strategy. this study investigated the textile industry firms of pakistan by means of correlation and regression analysis via empirical findings. data has been gathered from the questionnaire method from the companies of textile industry. it is hypothesized that crisis management practices, strategic responses have significant impact on the price strategy in which strategic responses have a mediating role and these noteworthy impacts have been denied by the results of the study. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords crisis management practices, efficiency improvement and competitiveness, strategic response, pro-activeness and reactiveness, price strategy jel classification: q02, h21, h29 corresponding author’s email address: sanaaffandi@gmail.com recommended citation: affandi, s. and affandi, h., (2019). impact of crisis management practices and strategic response on pricing strategy: evidence from textile industry in pakistan. review of economics and development studies, 5 (4), 607614 doi: 10.26710/reads.v5i4.894 1. introduction the global textile industry more than past numerous years has become one of the most significant industry by contributing economic growth in the global economy. textile manufacturing is a labor demanding industry involving cheap labor of developing and underdeveloped countries via use of different strategies and cultivate comparative advantage in labor costs. the global recession has not only affected the textile industry globally but also countries have faced economic downturns specifically. the global textile industry faces volatile times regardless of the stage of supply chain to which companies belong. globally, textile industry has always the threat of unforeseen crisis that affect them deleteriously. nominal sales of textiles are recorded at -4% in 2015 owing to multiple currency depreciations worldwide and other economic factors (global textile report, 2016). textile industry is the mainstay of pakistan’s economy as it contributes 57% to the country’s exports. this sector needs to upgrade its strategies and policies in order to meet the volatile economic downturns and to survive on global level (ministry of textile industry, pakistan).textile industry in pakistan has been seen uncompetitive in international textile market due to the high cost of doing this business. pakistan faces a high risk in businesses due to unstable security situation, double digit inflation, and increased cost of financing distant from instant rise in energy costs that have led to different types of http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 608 crisis. consumer oriented businesses e.g. textiles have a sizeable market potential (business monitor international, bmi) and pakistan is a lucrative economy for investors in this regard. the word “crisis” is defined by two characteristics in chinese terminology that are seen as “danger” and the “opportunity” together. all types of adverse events are incorporated in this elaborative concept. in the context, the phrase crisis relates to all circumstances that are redundant, unforeseen, unique, and almost uncontrollable, basis extensive scepticism and uncertainty (boin, kofman&overdijk, 2004).efficiency improvement leads to achievement of economies of scale via technical efficiency and cost efficiency (berger, leusner, and mingo, 1997). efficiency is the measure of the ability of firm to assign resources professionally among production units and on the basis of experiential prices to provide the right assortment of input and output (deville, ferrier &leleu, 2013). this indicator is the first determinant for the crisis management practices.competitiveness is related to economic success which leads to market growth, high employment and better living standards for the employees working in an organization and also it is related to the efficient and effective utilization of a company’s limited resources (csath, 2007). however, this research will address the competitiveness improvement in terms of efficient and effective utilization of a company’s limited resources as the second indicator for determining crisis management practices. businesses produce special types of reaction to handle with crisis. the most victorious strategies to conquer crisis is to make use of practical response and reactive response (alonso-almeida & bremser, 2013). proactive response is a reaction to problem in advance that becomes crisis at later stages which involves anticipation of problemsand changes the way things are done. proactive strategy is a tactic to provide solution to business competition and workplace changes on the basis of anticipation. reactive response is shown in response to a problem or situation that becomes crisis for firms. reactive strategy provides a slow response to changes in firms environment i.e. problems that are addressed after they take the form of crisis. price strategy refers to the strategy for pricing the products and services in the market on the basis of estimation of the cost of resources and other factors. price and worth are flattering progressively more fundamental to the selections that consumer make about the place to shop and what to buy (textile and clothing, 2015). pricing strategy helps the companies to achieve profit maximization and also aids to achieve sustainability by use of different pricing strategies in case of adverse circumstances (nagle and holden, 1995). numerous studies have scrutinized the possessions of catastrophe in different industries especially in hospitality industry (aziz, 1995; leslie, 1996) and groundings for formulating strategies for future and past crisis situations or proceedings (lynch, 2004). as pakistan’s textile industry is lacking in research and development sothe rationale of this research is to examine the relationship between crisis management practices and strategic responses in the course of analyzing the price strategy in tough times for the textile industry in pakistan. this research work will describe the impact of crisis management practices in terms of two dimensions i.e. efficiency improvement and competitiveness improvement on the strategic responses by use of two core responses i.e. reactive response and proactive response via use of one strategy i.e. price strategy. little research has been done in pakistan on the crisis management practices and strategic replies during price strategy especially considering the textile industry of pakistan. this research will provide insight in the practical strategic responses through which the textile industry has reacted during hard times for the crisis management. 2. literature review crisis has been defined in chinese context as an amalgam of danger and opportunity.it has generally been used for incorporating all the unnecessary events that occur. so, in this regard, all types of situations which are not needed, not expected, unprecedented and are difficult to manage or even are unmanageable, creating chaos disbelief and uncertainity(boin, kofman&overdijk, 2004). crisis has also been seen as a http://www.businessdictionary.com/definition/response.html http://www.businessdictionary.com/definition/problem.html http://www.businessdictionary.com/definition/changes.html review of economics and development studies vol. 5, no 4, 2019 609 good or bad turning point with inclusion of moments related to life and death, a decline in the way of expansions occurred which are considered as hazardous (dinçer, 2009).crisis has also been considered as a situation which cannot be predicted beforehand by any organization and are considered unexpected (koçel, 1998). routine crisis situations have a unique feature of response in case of emergency and action which is quick and these are considered vital. crisis situation detection is seen as detection, prevention or providing responses to the changes respectively as these changes arise in the insufficient occasions. three features of crisis has been identified by literature i.e. crisis should be an abrupt sudden surprise that is comprised of event that is unexpected. second feature is that crisis eliminate the appearance of any business, person or a destination linked to it. the last promising feature is that availability of time should be limited for remedy that creates pressure (kalpaklıoglu, 2010). crisis word is worn in all the capacities of political affairs, culture and the financial system of the country (glaeser, 2005), which provide huge special consequence on the mainstream of any inhabitants. economic costs that are high which encompasses precautions that are classical and has created unique, inclusive and multidimensional problems related to snowball effects, which ultimately have impact on key resources and limits the area that is operational for manager to tackle (boin & lagadec, 2000). the art of taking decisions by observing evidences of an event that is referred as crisis to alleviate or somehow eliminating effects even when the event is non-predicting are referred as crisis management. this generally means that decisions are made for organizations regarding their future in the scenarios of stress and when there is deprivation of key information (seçilmiş& sarı, 2010). before the occurrence of crisis, there can be felt some clues. management is considered successful if the symptoms are identified and remedied before the occurrence of crisis. thus, to remedify the crisis situation, crisis management technique should be applied for prevention and mitigation of the crisis effects on its start. a high level of uncertainty can be observed which is required by businesses to ponder on the decisions related to survival. thus, focusing on choosing and implementing an appropriate strategy by businesses is considered as an integral part of thinking related to strategic management(karakaya, 2004). three parts can be considered for crisis management which includes the appraisal of multiple risks faced by a particular business. social, technical, political and monetary divisions are referred as key outside reasons. they are considered normal as to their occurrence within parameters which are typical and expected. terrorism, conflict at international level, foreign and domestic political volatility, and instability associated with economic and trade affairs are high-lightened by some authors as crucial sources of high order or corporate crisis that is considered abnormal (cushnahan, 2004). the management and synchronization of responses of the institution to an event that intimidates harm or has already harmed the people, structures, capability to operate, proceed and standing is regarded as crisis management. planning and incident responses arise automatically and also dealing with situation via dynamism in contingencies which also comes in unpredictable way as well. prediction of any crisis is on verge of top management. direct and indirect indications to the organization are sent by crisis before they occur. occasionally due to ignorance on the part of management as lack of analysis of the signals get them into crisis. this study undertakes management performance in times of catastrophe as equipped efficiency and competitiveness development as alonso-almeida & bremser (2013). to cope with crisis, businesses generate different responses as shown by several studies. the most effective and victorious strategies to conquer crisis is by practical measures that can include increased spending on marketing and developing innovative product (alonso-almeida & bremser, 2013).some others consent for the tourism concern that it should implement financial prudence strategies by continuing accessible staff stage and as a replacement for relying on grow in time of work or competence to increase litheness (okumus & karamustafa, 2005).reaction has been taken as a first section that groups the procedures taken by the restaurant, due to a beg off in income. customer value added has been taken to analyze management’s obligation to improve the superiority and services as part of a strategy to antedate intimidation and to be prepared to contradict them when they happen. flexibility is taken as the review of economics and development studies vol. 5, no 4, 2019 610 third section that closely relates to the management of a restaurant’s operations. litheness comprises measures to decrease fixed costs and to gain flexibility. proactiveness is taken as the fourth section that comprises activities that make stronger a firm’s competitive position. to the extent it is known that loyal customers have more buying activity, loyal customers tend to spend greater share of their income at the supplier, loyal customers are seen to be less price-sensitive than other customers and loyal customers spread positive word-of-mouth and in that way amplify the customers for products and the services (williams & naumann, 2011). in addition, it has been seen that extraordinary levels of customer loyalty and satisfaction revel in lower price compassion group (alonso-almeida &bremser, 2013). this study ensues management practices in eras of a crisis as operational efficiency and competitiveness enhancement acquire as features pretentious by the impact of a crisis (alonso-almeida &bremser, 2013). two different measures have been employed as strategic reaction (alonso-almeida & bremser, 2013). decline in income, pro activeness that comprises actions that toughen a firm’s viable point are seen as key components. as the price of the product is key to buyers as it influence their choices to buy and firms should focus on their price strategy or attaining profits during hard times so in light of this argument, the hypothesis discussed in next section are formed and conceptual framework has been shown. 3. research model and hypothesis figure 1: research model hypothesis 1: crisis management practices have impact on price strategy. hypothesis 2: crisis management practices have impact onstrategic responses. hypothesis 3: strategic responses have impact onprice strategy. hypothesis 4: strategic responses mediate the relationship between crisis management practices and the price strategy. 4. methodology 4.1 data and measures the objective of this study is to understand the impact of crisis management practices with the mediating role of strategic responses through the price strategy in textile industry context. questionnaire has been taken from king& spalding's global crisis management practice, schneider, & meyer (1991), alonsoalmeida &bremser, (2013) and williams &naumann, (2011).the study focusses on the textile industry of pakistan so a questionnaire has been distributed among several companies of this industry. so the total sample size of this study was 200. out of which, 175 questionnaires were returned for analysis and further 5 questionnaires were discarded due to missing responses. hence the response rate was 85% for this study. the managerial staff and administrators were the informants as their job related responsibilities were comprised of strategic management, marketing, sales and announcement tasks of the organization. the questionnaire has the measures of crisis management practices, strategic responses and the price strategy which have been measured from 7 points likert scale. review of economics and development studies vol. 5, no 4, 2019 611 4.2 analysis and results the following table illustrates the descriptive statistics of demographic variables. the table shows that the respondents’ age lies between 21 years to 59 years representing the mean age of 30 years approximately and the standard deviation. the statistics for gender and field of education are depicted in the following table. table 1: descriptive statistics of demographic variables demographic variables n minimum maximum mean standard deviation age 170 21 59 29.71 6.41 gender 170 0.00 1.00 0.29 0.45 field of education 170 1.00 3.00 1.55 0.596 the following table illustrates the descriptive statistics and correlation of the independent variable i.e. crisis management practices, mediator variable i.e. strategic responses and the dependent variable i.e. price strategy. only the correlation between strategic responses and price strategy has been found significant at 0.01 level. other values of correlation have been shown in the following table. table 2: descriptive statistics and correlation variables n mean standard deviation cmp sr ps crisis management practices (cmp) 170 4.49 0.89 1.00 strategic responses (sr) 170 3.99 0.66 0.07 1.00 price strategy (ps) 170 4.13 1.32 0.03 0.28* * 1.00 ** correlation is significant at the 0.01 level (2-tailed) 4.3 mediated regression analysis the following table illustrates the mediated regression analysis values. only the strategic responses has been seen to have significant effect on price strategy at p value=0.000 (significance level 0.01). the other paths are found insignificant. table 3: regression for mediation analysis strategic responses price strategy predictor variable b r2 ∆r2 sig b r2 ∆r2 sig crisis management practices 0.039 0.002 0.002 0.614 crisis management practices 0.076 0.006 0.006 0.325 strategic responses 0.287 0.083 0.083 0.000 mediation crisis management practices 0.017 0.083 0.083 0.816 review of economics and development studies vol. 5, no 4, 2019 612 5. discussion this objective of this studyis to dig out the relationship among crisis management practices and price strategy through the mediating role of strategic responsesin a textile industry context. management practices are seen on the dimensions of efficiency improvement and competitiveness improvement which are not related to the strategic responses which are considered from the perspectives of pro-activeness and reactiveness. however, strategic responses are seen to have significant association with the price strategy in the textile sector of pakistan. but there is found no mediation in the results when the study has been conducted in pakistan. except for the hypothesis 3, strategic responses have impact on price strategy, all the aforementioned hypothesis are rejected. this is due to the fact that the crisis management practices undertaken by the study efficiency improvement and the competitiveness improvement has not been given due importance in pakistan. however, if other dimensions of these variables are taken into account then these would have significant impact on the strategic responses and responses ultimately on the price strategy. however, the study has found that strategic responses have impact on price strategy which shows that by undertaking pro-active and reactive strategic responses, the price strategy can be influenced at large. 6. conclusion the result of this study suggests that there is no mediation found in the proposed conceptual model. however, only the relationship between the strategic responses and price strategy has been found significant. the results of this research have contribution to the vast 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(2019). impacts of oil discovery on households in uganda: a cge analysis. review of economics and development studies, 5 (1), 41-48 doi: 10.26710/reads.v5i1.391 1. introduction uganda is a landlocked country located in east africa. it is endowed with substantial natural resources, notably sufficient fertile land, fresh water bodies, regular rainfall, mineral deposits, diverse wild life and landscape (kamugisha, 1993). in 2006, approximately 6.5 billion barrels of recoverable oil were discovered, whereas the estimated level of production for 2020 was set at 200,000 to 230,000 barrels a day (musisi, 2018). the government is to receive revenue from the production share, exploration licenses, royalty, investment shares, capital gains and taxes on oil companies (vokes, 2012). this revenue is earmarked for infrastructure development, and debt servicing. the discovery is expected to generate jobs and boost gdp by 7% to 10% (vokes, 2012). the experiences of resource-abundant countries however, point to an alarming prospect. studies suggest that resource-abundant economies lag behind in terms of real gdp growth (gelb, 1988; sachs & warner, 1995, 2001); that the negative relationship between resource abundance and economic growth is stronger for oil, minerals, and other point-source resources than for agriculture (sala-i-martin & subramanian, 2013; stevens, 2003). nonetheless, several countries have managed to avoid this so-called “resource curse”. indonesia‟s economy grew by an average of 4 percent per year during 1965–90, despite high oil and gas exports (bevan, collier, & gunning, 1999). botswana grew at double-digit in the 1970s and 1980s due to rapid growth of diamond exports (acemoglu, johnson, & robinson, 2002). similarly, malaysia, australia, and norway, have successfully used resources to diversify their economies. nevertheless, the impacts of natural resources discovery on the economy rests on the absorptive and managerial capacity of the government to manage large-scale investment programs from the windfall (easterly, islam, & stiglitz, 2001; ross, 2001). the massive exports surges inflow of foreign exchange http://www.publishing.globalcsrc.org/reads mailto:koire.twaha@gmail.com mailto:arshad_bhatti@iiu.edu.pk mailto:naqqvi23@hotmail.com mailto:arshad_bhatti@iiu.edu.pk review of economics and development studies vol. 5, no 1, march 2019 42 thereby appreciating the real exchange rate rendering tradable such as agriculture uncompetitive (rodrick, 2003). a vast literature on oil exploitation examines primarily its impacts on the environment. for instance, ikelegbe (2005) found pollution of land, water, flora and fauna on a massive scale which destroyed the local economy in terms of increased unemployment, crop failures and diseases. these findings are consistent with davies and kingston (1992) and o'rourke and connolly (2003). other studies on oil extraction focus on production peaks, their impacts and mitigations. for example, hirsch, bezdek, and wendling (2005) and holland (2008) found increasing prices of oil and volatility to have negative economic, political and social consequences. studies on the impact of oil export mainly focus on economic performance. for instance, looney (1984) concluded that oil exports rapidly improved terms of trade, national income, balance of payments, fiscal budget and economy. similarly, heidarian and green (1989), karamelikli, akalin, and arslan (2017), parvin hosseini and tang (2014), adedokun (2012) and junior (2015) found positive impact of oil exports on the economy. however, peter (2010) found negative and insignificant impacts of oil export on nigeria. this study contributes to the existing literature on oil impacts as follows: methodologically, we employ cge modeling, which can capture the impact economy-wide. the findings provide an added input on oil policy formulation. finally, it highlights the impact of oil discovery in uganda on country‟s core challenges of poverty, inequality and welfare. 2. the computable general equilibrium model we use a static cge model as suggested by lofgren et al. (2002) to capture the inter-sectoral impacts of shocks. the model has five households1; three household endowments2, three types of labor3, production functions4, taxes and variables5. it is structured based on 3 blocks; price, production and trade, and institution and constraints. the price block links variables, while the production block shows how intermediate factors are combined using cobb douglas and leontief functions. it also shows how profits are maximized. the institutions block describes the earnings, expenditures and savings of the agents. households earn from labor, capital and land; and spend on commodities, taxes, and savings. firms‟ earnings from capital are spent on households. the government receives taxes and income from rest of the world; and spends on commodities, public service and savings. the constraints block describes how factor supply must equal factor demand, commodity supply must equal commodity demand, foreign earnings must equal foreign spending and savings must equal investment. the study uses the 2007 sam developed by thurlow (2008). armington elasticities are obtained from olarreaga et al. (2004) and population from the statistical abstract 2013 (ubos, 2013). 2.1 poverty indices we use the foster-greer-thorbecke (fgt) index to measure poverty (haughton & khandker, 2009). fgt indices , are described as ∑ ( ) (1) where, is the total population of households in the sample, is the population of poor households, is the poverty line, is the income of household j, and is the parameter that distinguishes between the different indices of fgt. when is 0, we have the head count ratio, a measure of the incidences of poverty. while =1 depicts poverty gapa measure of poverty depth and =2 depicts poverty severity. 2.2 inequality indices we employ the generalized entropy index to measure inequality as described by haughton and khandker (2009). theil indices ranges from 0 (lowest inequality) to in n (highest inequality). arithmetically, the indices are written as: theil t (tt) 1 rural-farm, rural non-farm, kampala non-farm, urban-farm, urban non-farm 2 labor, capital and land 3 self-employed, skilled and unskilled 4 constant elasticity of substitution and transformation 5 endogenous and exogenous review of economics and development studies vol. 5, no 1, march 2019 43 h h h h hh hh h h h h in tt in n yh yhn yh yh                           (2) where, yh is subgroup income, ∑yh is total population income, n is subgroup population, ∑n is total population, h is household. theil l (tl) h h h h hh hh h h h h in tl in yh n nyh n n                           (3) “symmetrized” theil index can be calculated as:   1 2 ts tt tl  putting values of tt and tl in the above equation 1 2 h h h h hh h h h ts in nyh yh n nyh                   (4) hoover’s index (hi) 1 2 h h h h h h h hi nyh nyh     (5) 2.3 welfare measures we use equivalent variations (ev) and compensating variations to measure welfare (cv) (hicks (1939). ev measures changes in wealth resulting from changes in prices, given that income remains constant and assesses the winner-loser concern when an economic policy is carried out. further, it measures changes in the value of money resulting from price change. described as 0 1 0 1 h h hh h cpih ev eh eh cpih          (6) where, is base year consumer price index of household (h), is shocked consumer price index of household (h), is base year consumption expenditure of household (h), is shocked consumption expenditure of household (h). cv, measures changes in utility due to price changes. it denotes the additional money a household would require reaching the initial utility after a change in prices, product quality, product launch or discovery. it finds the effect of price change on household welfare. stated as      11 0 0h h h hh cpiheh cv cpih eh   (7) further, we look at the economy wide ev (tev) which is arithmetically written as 0 100 h h h h tev ev eh              (8) review of economics and development studies vol. 5, no 1, march 2019 44 similarly, the economy wide cv (tcv) is described as 0 100 h h tcv cv eh         (9) 2.4 macroeconomic closures in the model, markets and accounts are cleared as follows: foreign saving is fixed enabling a flexible exchange rate to clear current account. savings are fixed too, enabling investment to adjust investment-saving account. the price of capital is also fixed, and factor price distortion adjusts to clear capital market. labor is fully employed, and wages adjust to clear the labor market. 3. simulation results, presentation and discussion the simulation designs are presented in table 1. a shock of 550% is performed on both oil production and export. a large shock as such is required given the small proportion of oil in the 2007 sam for uganda. table 1: simulation scenarios simulation base scenario share in sam forecasted new shares simulation 1 production 3.83% 3.83% x550% = 21.1% simulation 2 export 7.70% 7.70% x 550% = 42.4% in simulation 1, a shock on the production of oil is performed, which is only 3.83% of the total production as reported in 2007 sam for uganda. a shock of 550% raises the level of oil production to 21.1%, which portrays the picture in most resource-abundant economies. in second simulation a shock on oil exports is performed, which is 7.7% of the total exports. hence, an increase of 550% elevates it to 42.35% of total exports. this represents the real trend in poor oil rich nations, where oil accounts for the bulk of total exports. the results of these shocks are presented in tables 2 through 6. 3.1. impact on household income the results of income for various types of households are presented in table 2. except for rural farm households, where income increased from sh. 10,400,000.00 to sh. 10,718,240.00, other households have their incomes declining across all simulations. in simulation 1, income of rural farm households increases due to a surge in agriculture and diversity of its earnings. while, the decline in incomes of other households may be due to relative shares in declining sectors6. in terms of simulation 2, the results show how exports increased rural incomes via increase in agricultural exports and general economic improvements, as suggested by murshed (1997). table 2: impact on household income base simulation 1 simulation 2 hhd-r-f 10,400,000.00 10,718,240.00 10,822,448.00 hhd-r-nf 2,869,675.84 115,647.94 87,008.57 hhd-k-nf 3,666,723.61 151,435.69 122,175.23 hhd-u-f 1,570,701.05 69,424.99 53,749.39 hhd-u-nf 1,967,955.47 85,409.27 65,769.07 note: hhd-r-f is rural farm households, hhd-r-nf is rural nonfarm households, hhd-k-nf is kampala nonfarm households, hhd-u-f is urban farm households and hhd-u-nf is urban nonfarm households 3.2. impact on household poverty the impact of oil on various sectors, macroeconomic variables and households have greater bearing on both poverty and inequality. this is so because of their impact on household income and expenditure patterns. the estimated impact of oil discovery on household poverty is presented in table 3. in simulation 1, oil production reduces absolute poverty (p0: 31.43% to 28.91%), poverty gap (p1: 14.43% to 13.28%) and poverty severity (p2: 6.78% to 6.24%). similarly, in simulation 2, oil export decreases absolute poverty (p0: 31.43% to 26.71%), poverty 6 the results of simulations on various sectors and macroeconomic variables can be obtained from authors on personal request. review of economics and development studies vol. 5, no 1, march 2019 45 gap (p1: 14.43% to 12.27%) and poverty severity (p2: 6.78% to 5.76%). the reductions in poverty is due to improvements in sectors, macro economy and incomes. this result is consistent with idemudia (2009) study on oil and poverty in nigeria. table 3: impact on household poverty base simulation 1 simulation 2 p0 0.31426 0.2891192 0.267121 p1 0.144329 0.13278268 0.12267965 p2 0.067801 0.06237692 0.05763085 note: p0 is absolute poverty, p1 is poverty gap, and p2 is poverty severity. 3.3. impact on household income inequality the results of our simulations on income inequality are presented in table 4. in simulation 1, there is a decline in income inequality; gini (0.340863 to 0.31359396), theil l (0.276654 to 0.25452168), theil t (0.232254 to 0.21367368), theil s (0.21684 to 0.1994928) and hoover index (0.247102 to 0.22733384), and improvements in household welfare; tl (sh.471,251.501 to sh.508,951.6211), hi (sh.453,745.487 to sh.490,045.126) and tt (1.41e-06 to 1.52122e-06). table 4: impact on inequality indexes base simulation 1 simulation 2 gini 0.340863 0.31359396 0.289734 theil l 0.276654 0.25452168 0.235156 theil t 0.232254 0.21367368 0.197416 theil s 0.21684 0.1994928 0.184314 hoover‟s index 0.247102 0.22733384 0.210037 welfare using tl 471251.5 508951.6211 541939.2 welfare using hi 453745.5 490045.126 521807.3 welfare using tt 1.41e-06 1.52122e-06 1.62e-06 the above results are contrary to the findings of karl (1999), stilwell (2009) and yates (2009). they argue that oil booms tend to produce poverty, inequality and political crises. similarly, in simulation 2, inequality declines, and welfare rises. the decline in inequality and rise in welfare is due to the surge in economic sectors, notably agriculture sector. the results are consistent with the study of moradi (2009) on oil and inequality in iran. 3.4. impact on household welfare table 5 presents the equivalent variations, portraying individual welfare of households. apart from urban farm households, all simulations have a positive effect on welfare; which is consistent with caselli and michaels (2013). according to equivalent variation, simulation 1 suggests that to keep welfare at its earlier level, the households whose welfare improved should give up their income resulting from this rise. hence, rural farm should give up sh.18864.10, rural nonfarm sh.282.18, kampala nonfarm sh.489.14 and urban nonfarm sh.143.49. contrarily, urban farm households are affected by price fall, thus they should be offered sh. 68,961.92 to retain their welfare. in simulation 2, households with positive values of ev should give away the respective amounts to maintain their welfare and urban farm households should be extended an equivalent amount to retain their welfare. table 5: equivalent variation of households simulation 1 simulation 2 hhd-r-f 18,864.10 86,579.58 hhd-r-nf 282.18 261.03 hhd-k-nf 489.14 488.70 hhd-u-f 68,961.92 -53,534.39 hhd-u-nf 143.49 110.49 note: hhd-r-f is rural farm households, hhd-r-nf is rural nonfarm households, hhd-k-nf is kampala nonfarm households, hhd-u-f is urban farm households and hhd-u-nf is urban nonfarm households. review of economics and development studies vol. 5, no 1, march 2019 46 the cv index in table 6 suggests that in simulation 1; sh.29,582.34, sh.397.83, sh.640.57 and sh.228.90 compensate rural farm, rural nonfarm, kampala nonfarm and urban nonfarm households respectively for the rise in prices to enjoy the same welfare as before. conversely, urban farm households should give up sh.68,892.50 to remain at the same welfare as before the decline in price. similarly, according to simulation 2; hhd-r-f, hhd-rnf, hhd-k-nf, and hhd-u-nf should be given the amount in table 6 as compensation for the price rise effect, in order for them to enjoy the same welfare as before the price increase; while hhd-u-f should part with the amount in table 8 to click back to the original welfare. taking the economy as a whole, the values of ev and cv are depicted in table 9. table 6: compensating variation of households simulation 1 simulation 2 hhd-r-f 29,582.34 97,402.03 hhd-r-nf 397.83 348.03 hhd-k-nf 640.57 610.88 hhd-u-f -68,892.50 53,480.64 hhd-u-nf 228.90 176.26 note: as for table 5. table 7 shows that, individuals in the country are better off in simulation 1, while opposite in simulation 2. for example, with respect to tev in simulation 1, it is implied that individuals are better off and so must be given sh. 9836.60 to bring them to the initial welfare. in simulation 2, individuals are worse off and therefore an amount of sh. 6781.08 must be taken away from them to maintain the original welfare. regarding tcv in simulation 1, individuals are required to give up sh.7608.57 because they are better off than before, while in simulation 2, they should be given sh.9011.31 because they are worse off than before. table 7: economy-wide equivalent and compensating variations simulation 1 simulation 2 tev -9836.6 6781.082 tcv -7608.57 9011.312 note: tev is economy-wide equivalent variation, tcv is economy-wide compensating variation. 5. sensitivity analysis we perform sensitivity experiments before the conclusion on results to ascertain their robustness which has been accomplished by changing the values of elasticities as shown in table 8. we find the effect of changes in elasticities close to zero, leading us to conclude that the results are appropriate for use in our model (see tables a1 and a2, appendix a). table 8: simulation parameters for sensitivity analysis experiment change in elasticity sa0 original armington and cet elasticities sa1 50% rise in armington elasticity sa2 50% rise in cet elasticity sa3 50% reduction in armington elasticity sa4 50% reduction in cet elasticity sa5 50% rise in armington and cet elasticity sa6 50% reduction in armington and cet elasticity sa7 50% rise in armington and 50% reduction in cet elasticity sa8 50% reduction in armington and 50% rise in cet elasticity note: sa is „sensitivity analysis‟. cet is „constant elasticity of transformation‟. 6. conclusions and recommendations the findings of this study show that oil production and exports reduce absolute poverty, severity and vulnerability. the obvious cause for such results is discovery having a spillover effects on the incomes of rural households, who account for the largest percentage of poor worker-force. a surge in the production of oil reduces household review of economics and development studies vol. 5, no 1, march 2019 47 inequality, as measured by the gini coefficient and other entropy measures; while improving the household welfare. the results show that the poor can participate in the oil production process, though skilled labor and enormous investment are required for it; thus, leading to reduced inequality. on the other hand, oil exports equally reduce and enhance income inequality and welfare respectively. this is basically due to an increase in consumption of oil, which is a component of absorption inequality, as measured by mean expenditure. further, the income derived from oil absorption and export increase household consumption in terms of imports, which may lead to an increase in overall expenditures. therefore, since inequality in the model was computed using household expenditure, an increase in expenditure on domestic and import products mirrored a reduction of inequality in the simulations. obviously, with a reduction in inequality and poverty, welfare must equally improve as shown in the results. overall, we look at three major stakeholders: the government, households and the international community. to have a significant impact on poverty and inequality, the government should promote investment in sectors that surge because of oil boom such as agriculture, industry, health and education; while some resources must be allocated to manufacturing and services to turn around their plight resulting from the boom to create jobs and expand opportunities. the households, while making their investments, must diversify and improve on the volume and quality of their exports, cut consumption to boost private investment to escape from the menace of poverty and inequality. finally, the global community may share their expertise and experiences in oil policy formulation, managing dutch disease, and natural resource curse for this new wealth to benefit the country, particularly the poor masses. references acemoglu, d., johnson, s. 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(2009). enhancing the governance of africa‟s oil sector. occasional paper no 51, governance of africa‟s resources programme, saiia, south africa. appendix a. sensitivity analysis results table a1. effects of sensitivity experiments on national income accounts (% change from base) sa0 sa1 sa2 sa3 sa4 sa5 sa6 sa7 sa8 gdpfc -1.92e-09 -1.31e-09 -1.98e-09 -1.06e-09 -1.21e-09 -1.40e-09 -2.15e-10 -1.57e-09 -1.10e-09 gdpmp1 9.10e-14 2.78e-10 4.97e-11 4.36e-10 8.04e-11 1.56e-10 6.81e-10 1.40e-10 5.90e-10 gdpmp2 -1.74e-09 -1.30e-09 -1.81e-09 -8.59e-10 -1.05e-09 -1.39e-09 -2.83e-11 -1.40e-09 -1.07e-09 invest. -1.58e-08 -6.09e-09 -1.46e-08 -1.27e-08 -1.38e-08 -6.26e-09 -1.24e-08 -1.67e-08 -2.21e-09 export 2.92e-10 2.80e-10 7.12e-10 -4.59e-10 -4.25e-10 5.17e-10 -9.79e-10 -1.95e-10 -1.70e-10 import 7.31e-04 6.97e-04 6.81e-04 4.25e-04 5.36e-04 6.84e-04 3.51e-04 7.17e-04 5.22e-04 nitax -1.53e-10 -1.27e-09 -2.83e-10 9.50e-10 3.78e-10 -1.30e-09 1.63e-09 1.58e-10 -7.53e-10 prvcon 4.03e-09 -3.38e-10 3.55e-09 4.44e-09 4.35e-09 -3.59e-10 5.07e-09 4.64e-09 -9.85e-10 table a2. effects of sensitivity experiments on household income (% change from base) sa0 sa1 sa2 sa3 sa4 sa5 sa6 sa7 sa8 hhd-r-f 3.06e-10 -2.67e-10 2.13e-10 5.68e-10 4.52e-10 -2.81e-10 8.15e-10 4.69e-10 -3.05e-10 hhd-r-nf -4.03e-10 -3.71e-10 -4.32e-10 -1.62e-10 -1.98e-10 -3.97e-10 8.23e-11 -2.90e-10 -3.37e-10 hhd-k-nf -4.13e-10 -3.80e-10 -4.43e-10 -1.66e-10 -2.04e-10 -4.07e-10 8.39e-11 -2.97e-10 -3.46e-10 hhd-u-f -4.42e-10 -5.64e-10 -5.07e-10 -5.78e-11 -1.25e-10 -6.03e-10 3.44e-10 -2.42e-10 -5.37e-10 hhd-u-nf -4.34e-10 -4.03e-10 -4.66e-10 -1.74e-10 -2.12e-10 -4.31e-10 9.26e-11 -3.11e-10 -3.67e-10 http://www.monitor.co.ug/business/prosper/uganda-slow-pace-towards-oil-production/688616-4594748-format-xhtml-xqd9oyz/index.html http://www.monitor.co.ug/business/prosper/uganda-slow-pace-towards-oil-production/688616-4594748-format-xhtml-xqd9oyz/index.html https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1548197## https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1548197## https://ideas.repec.org/s/nbr/nberwo.html https://ideas.repec.org/s/nbr/nberwo.html review of economics and development studies vol. 4, no 2, december2018 293 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads explaining survival and growth of women entrepreneurship: organizational ecology perspective 1 sulaman hafeez siddiqui, 2 rabia rasheed, 3 muhammad shahid nawaz, 4 muhammad suhail sharif 1, 3, 4 department of management sciences, the islamia university of bahawalpur, bahawalpur, pakistan. 2 associate fellow, center for sustainability research and consultancy, pakistan. rabia@globalcsrc.org article details abstract history revised format: november 2018 available online: december 2018 sociological perspectives about organizational founding, survival and growth under organizational ecology theory offer research avenues to look into their implications for new organizational forms. women entrepreneurship or female run businesses in developing countries risk the liability of newness due to lack of their presence in commercial business activities. though the presence and role of women in rural economy of these developing countries is more than significant yet the urban sector still lacks the luster of new social values to accept and value this new organizational form. there is need to explore into sociological processes involved in the growth of women entrepreneurship. the present study, using qualitative exploratory research design, elaborates the key sociological processes postulated by ecology theory by which female run businesses make their way to create inclusive markets and shared growth in a socially constrained business environment. the organizational ecology framework is postulated to study the women entrepreneurship process i.e. birth, survival, and growth of female run businesses through change in the social value structure of the society. this perspective treats women entrepreneurship as a distinct organizational form and depicts it as a social process involving the population of organizations than the individual process targeting the women entrepreneurs themselves. the propositions resulting from the postulated linkages can be tested using quantitative methods. the theoretical framework developed here nonetheless offers fresh insights into the women entrepreneurship, its process and outcomes. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords women entrepreneurship, ecology theory of organizations, sociology of women entrepreneurship jel classification: l22, l26 corresponding author’s email address: sulman.siddiqui@iub.edu.pk recommended citation: siddiqui, s. h., rasheed, r., nawaz, m. s. and sharif, m. s. (2018). explaining survival and growth of women entrepreneurship: organizational ecology perspective. review of economics and development studies, 4 (2), 293-302 doi: 10.26710/reads.v4i2.413 1. introduction women entrepreneurship, as against women employment, due to its inherent flexibility for work-family balance not only provides financial empowerment to women but also helps them in the performance of their family roles. thus, the women empowerment through women entrepreneurship may raise quite less opposition from within the family(langan-fox, 2005). however, women in business tend to face an institutionalized gender system, which http://www.publishing.globalcsrc.org/reads mailto:rabia@globalcsrc.org review of economics and development studies vol. 4, no 2, december 2018 294 systematically discriminates the number and composition of business opportunities in the favor of men and thereby excludes women from the markets and social capital accumulation (shaw, carter andbrierton, 2001; paci, 2007). the issue is more pronounced in developing economies. since thegender roles are mainly socially rooted, the spread and growth of women entrepreneurs may alter the social structures and create a supportive environment for this new organizational form. the resulting social change in turn helps overcome this labor market imperfection which is responsible for relatively low success and earnings of women businesses. such social change is a great outcome for the economic development and growth process which requires modernity and flexibility in social attitudes and behaviors. social legitimacy of women in business markets and other social processes in the prevailing social eco system of markets requires investigation into sociology of women entrepreneurship. institutional models and population ecology models of organization theory conceptualize and explain the founding, survival and growth of new organizational forms (zucker, 1987; meyer and rowan, 1977; scott, 1987; tolbert and zucker, 1999; singh, house and tucker, 1986; hannan, 1997; singh and lumsden, 1990; carroll andkhessina, 2005; thornton, 1999). the ecology school of organizational theory explains that the new organizational forms have very high mortality rate. the survival of new organizational forms depends on the social group legitimacy earned by it. this stream of organizational studies has implications to explore into social processes involved in the founding, survival and growth of women entrepreneurship as a new organizational form. there is need to explore the sociology of women entrepreneurship which may explain how this relatively new organizational form influences and is influenced by the social eco system of the society or specific industry in which it operates. the present study has sought to bridge the organizational ecology theory with the theory and practice of women entrepreneurship specifically in context of developing economies. the qualitative exploratory research methodology based on grounded theory and literature review (pandit, 1996; strauss and corbin, 1997) has enabled the postulation of ecological model of women entrepreneurship. the proposed ecological model of women entrepreneurshiptheorizes that establishment, survival and growth of women entrepreneurs is both a cause and outcome of socio-cultural conditions and organizational eco-system surrounding this relatively rare and new organizational form. the success of women entrepreneurs would alter the value structure of society in their favor, which is the major impediment to women inclusion in market. thus, a virtuous circle of poverty alleviation and social change can be generated that may help develop inclusive markets, enhance shared growth and a continuous social change. such social capital accumulation is pre-requisite for any developmental strategy at base of pyramid (bop) markets (egal, 2012; petkoski et al., 2008; boyer, 2003).the policy focus towards the development of women entrepreneurship helps them earn such legitimacy. in the long run, the change in the social value system evolved through active women participation in economic and social life enable women entrepreneurs to get the desired momentum. the proposed relationships theorized by the ecological model of women entrepreneurship have implications to further dig into the social processes involved in the establishment and growth of women entrepreneurs. there is also need for further quantitative research to empirically validate the proposed relationships theorized by this model and enrich its explanatory power. 2. literature review this section reviews and synthesizes the key variables of the study and the context provides the foundation of the theoretical framework presented in the next section. 2.1 women entrepreneurship: distinct character and unique problems women entrepreneurs and their entrepreneurship process have been the focus of research studies and policy making institutions due to their greater and intergenerational effect on poverty alleviation (branch, 2003; langan-fox, 2005; arenius, 2003; orhan, 2005). the international institutions are increasingly giving a priority space to the women empowerment and participation in economic and social activities in developing counties who are facing incidence of feminized poverty (nfwbo (national foundation for women business owners) and catalyst, 1998; nfwbo, 2000; oecd, 2007; commission on the private sector, 2004; larson, 1996). both women entrepreneurs and their entrepreneurial process is different from that of their male counterparts. the gender and job models of sociology of work and other studies on women entrepreneurs identify them as distinct individual and form of entrepreneurial organization due to the unique problem that they face (loscocco et al (1991). the studies confirm that the personality characteristics of business women do not differ much from businessmen in a way that can reduce the success of their business (kalleberg andleicht,1991). however, there is ample empirical evidence that there aremuch less chances of women run business to start and survive or be profitable compared to those run by https://www.sciencedirect.com/science/article/pii/s1053482203000214#bbib50 review of economics and development studies vol. 4, no 2, december2018 295 male counterparts (verheul et al.,2004). the structuralperspective of gender model attributes this difference to the unique family and social position of women entrepreneurs as influenced by the gender system restricting chances of becoming entrepreneurs and successful entrepreneurs. the gender model explains the gendered differences in the women entrepreneurship process that leads to their concentration in traditional low profit and high competition sectors. the demand-supply side framework also treats the business women and the process of their entry, survival and growth in context of their unique gender framework. this unique characterization of business women requires a different theoretical treatment for its understanding so that according policy measures can be taken to improve their participation in more and better business opportunities while combating with their problems. women also represent an important category of population at base of pyramid (bop) market (prahalad and hart,1999; pillai, and amma, 2006; egal, 2012; petkoski et al., 2008; boyer, 2003). their week social position signifieseconomic exclusion of a greater chunk from the market. there is a need to develop market-based yet socially responsible business models that can enable the inclusion of women in exploiting the opportunities at bop and help develop inclusive markets (seelos and mair, 2007; fielden and davidson, 2005). 2.2 women entrepreneurship in pakistan a number of studies has looked into women entrepreneurship in pakistan (banuriand texas, 2006). this section provides the empirical pattern of women entrepreneurs in pakistan using the studies by goheer (2003), chaudhary (2009), aslam and zulfiqar (2008) and secondary data collected form official statistical sources. self-employed women in pakistan represent a very small minority in the population of firms representing less than 5 percent of all self-employed in pakistan with greater disparity between rural and urban areas (economic survey of pakistan, 2017). although the women in rural areas in pakistan are actively involved in farm and related activities but they mostly work as unpaid family workers or do not get full control over their resources and income as entrepreneurs. due to this, their entrepreneurial role is economically not countable. this represents the prevalence of severe inequality in business opportunities available to women and their ability to capitalize them indicating the existence of a highly institutionalized gender system. the pattern of their sectorial and size distribution is similar to those found in other international studies. most of the women enterprises are home based micro firms employing 0-3 persons, mostly females. one reason for their concentration is the ease of startup, prior experience or skill of women in the same field, requirement of little business skills, flexibility of business operations, historical/cultural tradition of women being in those businesses. this free entry into certain sectors has led to adverse competition there leading to high mortality rate or low enough profitability to allow scaling of business or helping the business woman come out of poverty trap. another explanatory variable for this concentration and its recent growth has been the distribution of micro credit to promote women enterprises in pakistan. the average loan size to women by these institutions is only rs. 20000 (pakistan microfinance network, 2008), which is even insufficient to start a self-sustaining micro enterprise. the sectoral distribution of women business reveals their concentration in textile 47 percent, health/education 34 percent, beauticians 33 percent, manufacturing 12 percent, food 5 percent and other 12 percent. the women entrepreneurs in textiles are mostly those who are working for some male entrepreneurs who buy from these women on exploitative prices. there is striking gender disparity between access to education, health and nutrition, which is also responsible for lack of women participation in employment and self-employment. the gap between male and female unemployment rate are baluchistan 21.37 percent, nwfp 19.94 percent, sindh 14.56 percent and punjab 9.64 percent. the various research studies by researchers and international institutions report the prevalence of a culturally and institutionally rooted gender belief system that is selectively working against women economic and social participation in pakistan. the disbursement of micro credit reveals that less than one quarter of total credit is targeted to females for establishment or growth of their enterprises. their loan repayment rate of 97 percent compared to that of men as 72 percent represents their strong business skills and commitment. business women in rural areas do not have full control over the sourcing and allocation of their business resources and income. they have to share the control with their spouse, brothers or father that diminishes their interest and motivation in business success. 2.3 labor market for women another issue related to the potential of employment to reduce poverty especially of women and children is the low labor force participation rates in developing countries. the women participation in the formal employment sector is though growing but is still poor and is rooted into their discriminating access to education and vocational training. the employment in the formal sector distant from home and long work hours also means a clear detachment of women from the traditional family roles. the employment, especially if the type of jobs available to women is low review of economics and development studies vol. 4, no 2, december 2018 296 paid is not considered a path out poverty for women at the base of pyramid (bop). the answer to why is that the low paid jobs do not afford women to maintain work-family balance as can be afforded with high paid decent jobs. better paid jobs for women are correlated with late marriage; low fertility rate and desire for fewer children. the low paid jobs which are mostly available to the women at the bop do not offer them any relaxation from their family roles prohibiting them to continue longer on their jobs or focus on their career progression. women, moreover, at the bop are more exposed to the rigid social value structures in developing countries where the lack of education and social awareness makes it difficult to absorb progressive cultural values. the normative expectations about the women roles coupled with the crowding effect in a male dominated job market prohibit women participation rate in the employment sector especially at the bop. this implies that growth does little to alleviate the poverty of women even when the employment elasticity is high or growth rates are sufficient to absorb the growing labor force. for growth to alleviate poverty of women through employment requires a fundamental change in the gender belief system that perpetuates the poverty. this gender belief system determines gender roles and identities, gender behavior, gender biased distribution of resources, gender stereo typing and self-assessment of individuals. this gender belief system in developing countries works as an institution giving legitimacy to the male decision power and crowding effect excluding women from economic output stream. the dream to develop inclusive markets and shared growth through employment is far from reachable in the presence of above mentioned labor market imperfections and gender belief system. figure 1: inability of growth to absorb labor (source: world bank) 3. theoretical framework this section postulates and elaborates the important theoretical linkages that help answer the research problem addressed in this study. the hypotheses developed here are supported by the available data on the topic and provide fruitful insight into the processes through which women entrepreneurship impacts poverty alleviation and social change. these processes have implications for developing inclusive markets at the bop in developing countries. 3.1 poverty alleviation through women entrepreneurship: a micro level model both theoretical and empirical research studies confirm the impact of women income on poverty alleviation. a larger portion of women’s income spends on the health education and nutrition of children thus their income has an intergenerational effect on poverty alleviation. whereas compare to men they spend their income on the more durable goods like household assets and immovable property etc., which may enhance the social prestige of family but does little to reduce the poverty risk that their children may expose to in future. the pattern of women spending also improves the labor productivity and results in better wages accrued to the family members. thus supporting the women income is a sure way to reduce the poverty risks and incidence of poverty in developing countries. but, as explained in the previous section, women employment offers little potential for women on their path out of poverty due to labor market imperfections and existence of a traditional gender belief system inhibiting women participation in income generating activities. moreover, the objective of developing inclusive markets cannot be reached by generating few more jobs to the women from upper middle class families in developing countries who have access to modern education and skills and live under more progressive social value structure. the real challenge is to provide income generating opopportunities to the women at the bop with little access to education and skills and a greater exposure to a rigid gender belief system entrenched under the social value structure of the society. women entrepreneurship offers potential to meet this challenge due to its inherent characteristics that make it workable for the women at the bop. it gives women opportunity to bypass the gender biased imperfect labor market in catching up the economic opportunities on their path out of poverty. women entrepreneurship provides women with the flexibility to create balance between work-family life through a considerable liberty to choose business location and flexible working hours. this in-turn also generates much less resistance by the male family members who are more interested in their traditional gender roles. this outcome is quite great in the prevalence of the traditional gender belief system. the control over resources gives women a chance to expand their income by putting more focus to capitalize over business opportunities. the increased women role in the economic decision making process enhances their participation in ownership, distribution and control of resources. these processes lead to a self-perpetuating mechanism of poverty alleviation at the bop. the gender and job models of sociology of work are pointed out by loscocco et al (1991) to explain the relative lack of differences in the establishment and success of female and male headed businesses. review of economics and development studies vol. 4, no 2, december2018 297 3.2 role of women entrepreneurship in developing inclusive markets at bop the role of women entrepreneurship is not limited to eradicating poverty discussed in the preceding section can be extended to development of inclusive markets at the bop. literature on bop discussing the economic potential of almost 4 billion market overlooks the role of women as entrepreneurs and consumers. women entrepreneurship supports the women income and increases the purchasing power of this large potential target market. also, at the same time, these women initiate the demand of other basic facilities like health, education, nutrition for their family members, which has an intergenerational effect on poverty reduction and development of inclusive markets. in order to balance the work-family relationship, these women entrepreneurs also generate the demand of the other value added products and services as well. another aspect of women entrepreneurship in relation to bop is the concentration of women businesses in high competition-low profit sectors. the majority of women businesses are small and concentrate in services and retail sectors (nfbwo, 1998). shaw, carter, &brierton (2001) identify that women workers, also, are concentrated in low paid, low status and low-skilled jobs. the same result is found in the ilo (2005) report on women entrepreneurship as is shown in figure 1 below. figure 1: concentration of women-owned businesses in low income, high competition sectors (source ilo, 2005) this, in turn, implies their strong business skills; and long and successful experience of providing products and services at low prices in the face of high competition. this makes them ideal business persons for creating and managing business activities at the bop. many business opportunities at the bop can be benefited through low skills and education. women entrepreneurship, thus, provides them with means to circumvent the sociocultural biasness, labor market imperfection, unemployment and underemployment in developing countries. women entrepreneurship also provides the flexibility of creating balance in work-family relationship, which is not as much possible in women employment. the responsibility of child rearing can also be aligned with the management responsibility of small and home based business. this signifies the role of women entrepreneurship in creating businesses for the bop and, thus, contributing to the growth of inclusive markets. 3.3 women entrepreneurship success and social change: an organizational ecology perspective according to hannan & freeman (1989) the organizational ecology is the most active line of theory and base of research for new organizations with in the frame work of organizational sociology. in the school of organizational theory the ecology explains the birth rate, survival and growth of new and existing organizational forms. the concept of organizational ecology defines how the environment and institutional conditions affects the organizational forms and their future changing compositions. this sociological concept of organizational studies defines organizations’ mortality and birth of organizations in the population of organization over long run. additionally, the organizational ecology theory focuses on how the populations of organizations change over time and how the demographic process of selective replacement affects the organizational founding, mortality and growth. carroll & hannan (2000) have explained the major fragments of organizational ecology theory which include the resource partitioning, density dependence, niche width and structural inertia. entrepreneurship is a process that can be as a creation of new organization, its survival/growth and the entrepreneur is the person who plays main role in the creation. carroll and khessina (2000) characterized entrepreneurial area or industry as high rates of new firm establishment. both entrepreneurship and ecology are broad research areas with a common focus on new organizational founding, survival and their success/growth. review of economics and development studies vol. 4, no 2, december 2018 298 carroll and khessina (2000) have developed the framework for linking the ecological studies with the entrepreneurship process yet their study does not discuss the link between ecological studies and women entrepreneurship. the other studies mentioned in the work of carroll et al also link the founding, success and growth of entrepreneurial venture with the environmental and institutional factors surrounding the process. thornton (1999) has also contributed to elaborate the sociology of entrepreneurship linking it with the ecological perspective. since women entrepreneur and entrepreneurship process is both affected to a greater extent by the environmental and institutional structure, there is a need to understand it in context of ecological perspective. the existing literature on women entrepreneurship does not give a comprehensive linkage between the social/ecological school of organizational studies and the founding and success of women businesses. though few studies on women businesses (oecd, 2007; kallegerg&leicht, 1991; loscocco et al, 1991) have mentioned the ecological perspective but have not fully elaborated it yet. women-owned businesses represent a new organizational form in the population of existing firms and, thus, their founding, survival and growth should be analyzed in relation to the population dynamics of male-owned businesses. given below in figure 3 is the women entrepreneurship process that encompasses various stages from inception to its survival and growth. this process is developed linking the ecological perspective with the austrian economic model of entrepreneurship, which has been work out by kirzner 1997; schumpeter. 2000). this extension of gender in ecology-entrepreneurship framework has not only enriched the explanation of the nature of women entrepreneurs and their businesses but also the process of women entrepreneurship in its relationship with the environmental context. figure 2 elaborates how the women owned business and the women entrepreneurship process directly affected by the demand and supply side influences. this figure also depicts how the supply and demand side factors influence the founding, survival and growth of women entrepreneurship. thus, allthese influences are causes and outcomes of women entrepreneurship process. figure 2: ecological framework of women entrepreneurship and its process the demand side influences also affect the number and nature of roles that can be filled by women in entrepreneurial capacities. these includes political and institutional framework conditions which leads to gender based occupational segregation and closure, family policy and market sources and access to information, education and work experience etc. all these conditions directly impact the entrepreneurial opportunities for women and their success if the opportunity converts into business. thornton (1999) further explains the supply side school focuses on the availability of appropriate persons to take entrepreneurial roles examining the entrepreneurship by focusing on the individual characteristics of entrepreneurs. according to oecd (2007), the entrepreneurial process should be seen as an iterative sequences of variation (why only certain kind of opportunities are discovered and by whom), selection (how selection process through competition and institutional forces selectively eliminates women owned businesses) and retention (why selection process retains women businesses in certain industries). the report further referring the work of aldrich (1999) and baum & rowley (2002) goes on to state that the processes of variation, selection and retention are embedded in the history and culture of society, which have attributed women a different role in society and that specific conditions have a strong and deep impact on the women entrepreneurship process. review of economics and development studies vol. 4, no 2, december2018 299 3.4 founding rate of women business according to population ecology theory the founding rate is affected by the rate of founding attempts and the rate of successful attempts. the underlying processes of founding rate represent the nature and number of entrepreneurial opportunities available to women and the access to information, skills and other resources by women to capitalize these opportunities through firm establishment. the gender system through demand and supply influences affects the nature and number of entrepreneurial opportunities available to women and their realization by them. thus, the lower rate of inception of women businesses is attributable to the fewer entrepreneurial opportunities offered to women in the society due to the gender system. carroll and hannan (2000) suggest that rate of founding depends on the organizational density.the population density refers to the number of similar firms already operating the industry. thus, the number of already established women businesses positively affects the founding rate of new businesses by females by providing role models, increased self-efficacy and reducing the liability of newness. this explains why the founding rate is high among upper middle class urban women in pakistan and other developing countries where the gender system is transited to provide more conducive social-cultural and institutional environment. another implication of this analysis is the explanation of high founding rate of women businesses in micro and small business and specifically in services sectors. since, these businesses require much less financial and human capital, these produces historically high founding rate of women businesses in these sectors and have accelerated further founding rates leading to their concentration. this suggest that the initial increase in the rate of founding of women in modern sectors of economy by providing them with information, skills and resources would create a self-perpetuating increase in the founding rate in these male dominated sectors. the interviews and discussion with our selected business women also pointed out that their opportunity recognition and entry decision was influenced to a great extent by the business operations of their female friends and family members. the other factors pointed out were gendered access to information, lack of skills and social support. 3.5 survival and organizational mortality the women businesses face a very high mortality rate compared to male headed businesses. the ecological explanation of this pattern is the selection process by which some organizational forms are selected and others are eliminated. the darwinian demographic explanation of organization and institutional theory relates the mortality rate of new organizational forms even if they succeed in establishment to their age, size and population density. age and size and population density represent liability of newness, liability of smallness and social legitimacy of women businesses; and are negatively related with the mortality rate. the age, size and population density also affect and are affected by the founding rate of women businesses, which in turn enhances age and social legitimacy of women in business. the institutional influence of gender system limits the success of women businesses even when they are established by associating with them liability of newness and smallness and thereby inhibiting the successful operations of women businesses. the survival of women businesses if managed through high founding rate or other measures at the early stage contributes to their age, size and population density over time, which, in turn target the gender system responsible for their lack of age, small size and low numbers in markets. the results of qualitative empirical data also reveal the pattern that most women went out of business because of the size of business too small to generate enough income, difficulties in managing business activities due to restriction on mobility and lack of trust by suppliers and distributors to work with them especially in those sectors where no or less women were doing business, difficulty in employing male employees, social disapproval etc. the women successfully doing business attributed their success to high profits that helped meet risks and losses, guidance/support by the family members, well established supply chain networks doing business with women in their business sector etc. 3.6 organizational profitability and growth the next issue related to women entrepreneurs and the stage in their entrepreneurial process is profitability and growth. the growth and profitability of business is determined by the individual characteristics and situation of entrepreneurs and the features of the business itself. on the individual characteristics front, the women entrepreneurs do not have any such personality differences which can cause them to manage their business poorly than men. the situation of women entrepreneurs in family and society is one dimension where they are disadvantaged compared to men. these disadvantages arise from the gender system which restricts their mobility, time, amount of effort and degree of control to contribute to their businesses profitability and growth. thus, these are mainly the concentration of women in low sales and profit sectors with micro size that inhibit them to produce enough savings that can be reinvested to boost growth. this gender segregation of businesses is the simultaneous cause and effect of low founding rate and high mortality rate of women businesses in high growth sectors. these review of economics and development studies vol. 4, no 2, december 2018 300 ecological constraints are perpetuated by the gender system and can be effectively altered through women entrepreneurship itself. role of women entrepreneurship in altering ecological constraints: the women entrepreneurs face the market failures like discriminating access to education, health and nutrition, lack of social networking due to traditional patriarchal structure of society, lack of access to finances etc. these market failures discriminate against the women’s possibility to become entrepreneurs and successful entrepreneurs and thereby block the establishment and growth of inclusive markets as the base of pyramid. the ecology-women entrepreneurship model identifies them as the outcome of patriarchal social value structure that has established the gender roles and economic and social status of women in the society. these social value structures are more prevalent and rigid at the bop affecting the socio-cultural behaviors of almost 4 billion people and excluding thereby almost 2 billion from the economic stream. the findings of ecological perspective imply that economic empowerment given by women entrepreneurship would give them social empowerment and thereby serve to overcome the above mentioned market failures by altering the social value structure of the society. establishment and success of women entrepreneurs would decrease the liability of newness associated with them and give them social legitimacy. the economic role of women would gradually evolve a social structure where the spread of new social and economic roles of women would create legitimacy in the society. the improved social status would make them role models for others and thereby further promote the economic role of women. this implies the role of women entrepreneurs as ‘social change agents’. the success of women entrepreneurs breaks the long held and culturally rooted attitudes and behaviors regarding women roles. successful business women become the role models and affect the social learning process which in turn results into change of cultural frame of reference. continued success of women entrepreneurs thus helps overcome the gender based social biasness limiting their entry in high growth sectors. this social change in turn helps overcome this labor market imperfection responsible for relatively low success and earnings of women businesses. such social change is a great outcome for the economic development and growth process which requires modernity and flexibility in social attitudes and behaviors. the process of social change can be best carried out through women entrepreneurship, as against women employment, due to its inherent flexibility for work-family balance. this not only provides financial empowerment to women but also helps in the performance of their family roles. thus the women empowerment through women entrepreneurship raises quite less opposition from within the family and the society. the process of social change can be speed up if it is linked with women entrepreneurship through the ecological vital rates discussed in the proposed model. 4. methodology given the novelty of idea and emergent nature of theories explaining population ecology and women entrepreneurs, the study makes use of qualitative research design (cresswell, 2009) using bibliographic method of literature survey in this area. personal interviews have been conducted with 10 women entrepreneurs with varying level of business turnover ranging from micro/cottage entrepreneurs to corporate level to further substantiate the propositions postulated by the study. the development of a sound theoretical framework has generated propositions which can be tested using quantitative explanatory research design. the regression model can be developed to measure the impact of women entrepreneurship on poverty alleviation using cross sectional data on traditional measures of poverty like head count ratio, poverty line and improvement in the quality of life regressed over the creation of women enterprises. the longitudinal data on women owned businesses’ founding, mortality and survival of women will be used to develop a lagged time series regression model. this time lagged model will be used to measure the impact of founding rate in t1 on the mortality rate at t2. the results of the model will be used to test the implications of organizational ecology theory for women entrepreneurship. this would also confirm the impact of women entrepreneurship on socio-cultural change that may give legitimacy to women businesses in the society. the hypotheses on social change are also supported using the results from qualitative interviews and focus group discussion. 5. conclusion the paper applies the population ecology theory of organizations to explain the survival, growth and profitability of women owned businesses in the context of a gender belief system that systematically discriminates against this new organizational form. this has allowed analyzing the impact of gender belief system and other social processes that institutionally work against the founding rate, survival and growth of female run businesses. the study also points out the market imperfections emerging from the socially constrained business environment that further weaken their chances of short term survival and long term growth. lack of social capital creates a business environment that mainly allows business opportunities to female businesses in the perfectly competitive markets. these perfectly competitive commodity and low-level services markets only offer possibilities of losses in short term while review of economics and development studies vol. 4, no 2, december2018 301 opportunity to barely earn normal profits in the long run. the study thus implicates direct public policy interventions to overcome barriers for founding, survival and growth of female entrepreneurs in the innovationoriented industries with opportunities of better profits and growth where this new organizational form lacks the due social support process. the ecology framework for analyzing the sociology of women entrepreneurship identifies the mechanism for their establishment, survival and growth through a kind of social change brought about by their continued existence and operations in the society. references arenius, p. 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(1999). the institutionalization of institutional theory. studying organization. theory & method. london, thousand oaks, new delhi, 169-184. verheul, i., van stel, a. j., &thurik, a. r. (2004). explaining female and male entrepreneurship across 29 countries (no. 0804). papers on entrepreneurship, growth and public policy. zucker, l. g. (1987). institutional theories of organization. annual review of sociology, 13(1), 443-464. http://www.jstor.org.mutex.gmu.edu/stable/2729693 https://www.sciencedirect.com/science/article/pii/s1053482203000214#bbib50 http://www.nfwbo.org/research/7-18-2000/7-18-2000.htm http://www.nfwbo.org/research/7-18-2000/7-18-2000.htm https://ssrn.com/abstract=1512266 review of economics and development studies, vol. 6 (2) 2020, 267-276 267 a causal nexus of energy consumption, private investment, economic growth and environmental degradation: evidence from pakistan a shabana parveen, b hazrat ali, c habib elahi sahibzada, d sohail farooq a assistant professor, department of economics, hazara university mansehra, pakistan email: shabana_economist@yahoo.com b ms scholar department of economics, islamia college peshawar, pakistan email: hazratali90046@gmail.com c assistant professor, department of education, hazara university mansehra, pakistan email: habib.elahi@yahoo.com d assistant professor, department of economics, hazara university mansehra, pakistan email: thesohailfarooq@hotmail.com article details abstract history: accepted: 17 may 2020 available online: 15 june 2020 the importance of private investment in the growth process of a country cannot be denied, however, its relationship with environmental degradation has not got much attention from researchers yet. the present study is an attempt to divert the attention of researchers and policy makers to the association with private investment and environmental degradation. the time series data was used from 1975 to 2017. the data was taken from wdi. to analyze the causal link among environmental degradation, private investment, energy consumption and economic growth, vector autoregressive (var) model is used. granger causality test is employed for knowing the course of causality in the variables. the results of the var model suggest that if an innovation of one standard deviation occurs from outside, it takes about 12 years for co2 emissions, 9 years for private investment, 10 years for energy consumption and about 8years for economic growth to adjust. moreover, the results show that most of the variation in all variables is explained by their own. granger causality test identifies four unilateral causalities in the variables running from co2 emissions to economic growth while the consumption of energy to co2 emissions, energy consumption to economic growth while from economic growth to private investment. the study recommends policy makers to make environmental friendly policies regarding consumption of energy, private investment and also economic growth. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: private investment; co2 emissions; energy consumption; economic growth jel classification: r42, r49, p28, r11 doi: 10.47067/reads.v6i2.204 corresponding author’s email address: shabana_economist@yahoo.com review of economics and development studies, vol. 6 (2) 2020, 267-276 268 1. introduction economic growth is a key objective of a country either it is developing or developed. literature proved that investment is a main factor that contributes in economic growth as due to investment an increase occurs in manufacturing goods that in turn leads to increase in production of other goods (muhammad and shaheen, 2016). likewise, investment is a key factor that brings an increase in literacy, improve technology and strengthen capital stock. literature also showed that there is more important role of private investment in contrast to public investment. it increases economic growth by reducing levels of unemployment, increasing income level and uplifting the life standard of the people. most of high economic growth countries are those that have more private investment (majid and khan., 2008). in addition, private investment accelerates economic growth and its impact on growth is stronger as compared to public investment, because of low corruption and transparency (muhammad and shaheen.,2016). the fundamental challenge for countries like pakistan is to bring an increase in output for a long period of time and improve life standard of people as this contributes to economic and social development. to achieve this goal, promoting private investment is the most important tool. studies conducted in pakistan (ajaz and ellahi., 2012; ross and renelt.,1992; ghani and din., 2006; naqvi.,2003) confirmed that private investment is a strong determinant of economic growth (gdp) in pakistan. they added that the more private investment, the more employment opportunities, improve productivity and technical knowledge due to spillover effect, and innovation. all these lead to increase aggregate demand, income and economic growth. no doubt, private investment is must for economic growth, but these (private investment and economic growth) are also important factors behind environmental degradation as increases in the production increases level of energy consumption and pollution. environmental degradation has become an alarming issue in the world due to increase in greenhouse gas (ghgs) emissions. carbon dioxide (co2) emissions are an important factor in the ghgs emissions as its proportion in total ghgs is about 60%.for the last two decades, the factors behind the increase in co2 emissions has got much attention from developing as well as developed countries. for a country, co2 emissions depend on many factors like urbanization and industrialization, also growth of economy and energy usage, trade openness, and fdi as most of the research work is done upon these determinants. however, very little empirical work has been done on the impact of private investment on co2 emissions. it is argued that private investment may having positive impact upon co2 emissions, so its impact on the natural environment is negative(hassan, 2018).pakistan is also facing environmental problems so the aim of current analysis is to observe the causal link of private investment with environmental degradation in pakistan. the first group of researchers consists of literature that analyzed causal link between economic development and energy consumption. in this regard, most of the studied confirmed causal link trending from consumption of energy to growth of economy by utilizing different econometric techniques such as, tang et al. (2016) confirmed causality is from usage of energy to gdp growth in vietnam. danmaraya and hassan (2016) applied auto regressive distributed lag (ardl) model for the time series data of nigeria and found a causal link from consumption of energy to the productivity of the manufacturing sector. similarly, odhiambo (2014) used data od sub saharan african countries and a multivariate framework, confirmed a causality from consumption of energy towards gdp growth in kenya republic and south africa. on the other hand, empirical studies also confirmed causality from review of economics and development studies, vol. 6 (2) 2020, 267-276 269 gdp growth to usage of energy like, rafindadi and ozturk (2016) discloses granger causality trending from gdp growth to energy usage in japan. ahmed and azam (2016) investigated 119 countries and presented causality moving from gdp to energy consumption in 25 countries. stern and enflo (2013) in swedish, confirmed the same. in addition, ouedraogo (2013) in 15 ecowas countries confirmed the same unidirectional causations trending from growth of economy to usage of energy, by using panel data. a third group of researchers (solarin and ozturk., 2016; rahman et al.,2015) exists that confirmed a bidirectional interconnection between emissions of co2 and consumption of energy. rahman et al. (2015) utilized toda-yamamoto causality test and highlighted bidirectional causality among aggregate output (gdp) and coal consumption for the malaysian economy. solarin and ozturk (2016) found the same association between consumption of gas and growth of economies in opec countries. similarly, liu and bae (2018) studied the causal link among consumption of energy, gdp growth , emissions of co2and other macroeconomic variables in china and confirmed bidirectional interconnection amongst emissions of co2and gdp growth. a fourth group of researchers argued that there is no fundamental association among gdp growth and consumption of energy, such as solarin and ozturk (2016) analyzed data of opec countries and suggested no interconnection between the two (gdp and consumption of energy) in angola and qatar. similarly, alper and oguz (2016) established the neutrality hypothesis in some of the european union (eu) countries, namely solvenia, poland, hungry, estonia and cyprus. rich literature is available that analyzed the causal association amid emissions of co2with consumption of energy, gdp growth and other macroeconomic variables. al-mulali et al. (2016) examined a causal relation among, trade openness, growth of economy, gdp, urbanization, and consumption of energy. the data for the years 1980-2012 were used for analysis. the study confirmed long and short term relationship in these variables. similarly, ahmed et al. (2016) worked on panel data for analyzing the interconnection among emissions of co2, consumption of energy and gdp from 1970 to 2013 in, china, brazil, south africa and india. the study used fully modified least square technique with granger causality test and confirmed bidirectional causality in emissions of co2 and consumption of energy. similarly, sarkodie and owusu (2016) conducted a study in ghana for the period of 19712013. the study used ardl and vecm models and concluded a bidirectional causality from consumption of energy to gdp growth while a unidirectional connection from co2 emissions to gdp and energy usage. in addition, khan et al. (2014) used data of the total world for analyzing the association between greenhouse gas (ghgs) discharges and consumption of energy for the span of 1975-2011. the study disclosed granger causality from energy consumption to ghgs emissions. causality of co2 emissions with many other macroeconomic variables like urbanization, industrialization, foreign direct investment, trade openness, exports and imports has been analyzed by researchers to name a few (al-mulali and ozturk.,2015; sarkodie and owusu., 2016;liu and bae., 2018) but very few studies (talukdar and meisner,. 2001; fu et al., 2014; hassan., 2018)has been conducted on the impact of private investment on the environment and its causal link with co2 emissions. this study is an attempt to catch the attention of researchers toward the private investment link with degradation of environment. 2. methodology 2.1 source of data and explanation of variables for analysis in current work, time series data has been used for the span of 1975 to 2017 which is taken from wdi. the macroeconomic variables included in this study are co2emissions (metric tons per capita) that is used for representing environmental degradation. private investment as % of real review of economics and development studies, vol. 6 (2) 2020, 267-276 270 gdp was use as proxy for private investment, real gdp growth rate was use as a proxy for the growth of economy and energy consumption (kg of oil equivalent per capita) is used for representing energy consumption of the economy. the study uses the var model for identifying the causal link with co2 emissions, private investment, gdp growth and energy expenditure. 2.2 model specification researchers used different econometric techniques for identifying causality among different macroeconomic variables. the present study follows the econometric technique used by sehrawat and mohapatra (2015) and sarkodie and owusu (2017) for analysis. ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ where co2 represents carbon dioxide emissions, pri stands for private investment, kt stands for energy consumptions, eg stands for economic growth, k stands for lag length and stands for error term. all the variables are transformed into a natural log before estimation. 3. results and discussion 3.1 result of adf and pp unit root tests stationarity is a common characteristic in time series data. to identify stationarity in the data, this study used adf test (1979) and phillips and perron (1988) tests. mathematical form of augmented dickey-fuller test can be represented as ́ where  = ρ-1 -1 ≤ ρ ≤ 1 and above model is assumed as: the t-ratio of the -coefficient of adf test.where test statistic distribution is affected by serial correlation, that is adjusted by phillips-perron (pp) test as follows: ́ ( ) ( ( ̂)) where the zero occurrences of residuals are f0 and evaluation of error variance is shown byγ0. https://link.springer.com/article/10.1007%2fs11356-019-04497-4#cr20 https://link.springer.com/article/10.1007%2fs11356-019-04497-4#cr46 review of economics and development studies, vol. 6 (2) 2020, 267-276 271 table 2 consists the results of unit root tests on the basis of adf and pp (both with an interrupt only and as well as with a linear deterministic trend) tests show that economic growth is stationary at level while, private investment, energy consumption and co 2 emissions became stationary at first difference. table 2 unit root test results variables adf test result pp-test result intercept intercept and trend intercept intercept and trend eg -11.135* -11.910* -9.282* -11.270* pri -0.471 -1.340 -0.501 -1.340 -6.259* -6.450* -6.258* -6.460* kt -2.055 0.153 -1.953 0.152 -5.404* -6.331* -5.472* -6.348* co2 emissions -2.236 -2.150 -4.044 -1.740 -7.728* -8.261* -7.628* -17.125* *significant at 5% level of significance 3.2 cointegration test results for identification of presence of the longer run association in variables, the likelihood ratio tests suggested by johansen (1988) is used in this study. these tests are presented in the two equations given as: ( ̂) ∑ ̂ where λˆiis the i th largest known association. the t showing the size of the sample in the two equations, given above. table 3 shows cointegration test results indicating the refusal of the null hypothesis of no cointegration for all four variables. it specifies the long run association in the variables. table-3: cointegration test results n. hypothesis a. hypothesis trace test statistics statistics critical value r = 0 r = 1 184.29* 47.86 r ≤ 1 r = 2 70.09* 29.80 r ≤ 2 r = 3 21.01* 15.50 r ≤ 3 r = 4 4.97* 3.84 *significant at 5% level of significance 3.3 impulse response function (irf) results irf depicts the response of the dependent variable to any innovation or shock that occurs in error review of economics and development studies, vol. 6 (2) 2020, 267-276 272 term. figure 1 shows the estimates of private investment, energy expenditure, co2 emissions and gdp growth in response of unitary shock or innovation that comes from outside. it shows that if 1 standard deviation shock/ innovation comes from outside, it takes about 12years for co 2emissions, 10 years for energy consumption, 9 years for private investment and about 8 years for economic growth to absorb it. figure 1. response of variables to impulses of 1 standard deviation innovation 3.4 variance decomposition results table-4: values of variance decomposition variance decomposition of co2 variance decomposition of eg period s.e. co2 eg pri kt 1 0.432808 1.638709 98.36129 0.000000 0.000000 2 0.491245 3.028181 90.11660 3.047765 3.807452 3 0.509624 9.427660 83.81356 2.885438 3.873347 4 0.516433 10.96205 81.91225 3.345625 3.780072 5 0.520921 10.81667 80.55613 4.710985 3.916219 6 0.522893 10.75363 80.11560 5.240234 3.890543 7 0.523133 10.82548 80.04428 5.235759 3.894479 8 0.523278 10.87346 80.00000 5.233291 3.893250 9 0.523331 10.87201 79.98386 5.250093 3.894035 10 0.523386 10.87035 79.96933 5.267095 3.893226 period s.e. co2 eg pri kt review of economics and development studies, vol. 6 (2) 2020, 267-276 273 var iance decomposition of pri cholesky ordering: co2 eg pri k 3.5 granger causality results granger causality (1969) test is used to identify about the trend of causality among these variables (co2 emissions, private investment, gdp growth and consumption of energy). when cointegration is confirmed in variables, then, granger causality test helps in identifying the direction of causality in the studied variables. the estimates of granger causality test are give n in table 5 which shows four unilateral causalities. first causality is consecutively from co2 to growth of economy, that is supported by sarkodie & owusu. (2016). the second one-way causality is trending from energy usage to co2 and the result is in line with, gul et al. (2015). third unilateral causality is from the consumption of energy to economic growth. the same was concluded by (danmaraya and hassan 2016;tang et al., 2016; odhiambo (2014) in their studies. the fourth unilateral causality is moving from economic growth to private investment. table 5 granger causality results null hypothesis f-ratios prob. eg ≠ co2 0.77482 0.4683 co2≠ eg 3.75680 0.0330 pri ≠ co2 0.07328 0.9295 co2≠ pri 0.85162 0.4351 kt ≠ co2 10.1342 0.0003 co2 ≠ kt 1.52104 0.2322 pri ≠ eg 0.34091 0.7134 1 0.019520 0.067762 14.16966 2.434868 83.32771 2 0.021144 0.061515 22.38896 6.472316 71.07721 3 0.021469 0.224156 22.12360 6.555566 71.09668 4 0.021657 1.320704 22.36543 6.444398 69.86946 5 0.021700 1.399427 22.31631 6.427943 69.85632 6 0.021751 1.406994 22.33672 6.711311 69.54498 7 0.021756 1.410090 22.33063 6.740099 69.51918 8 0.021760 1.438743 22.32807 6.737773 69.49542 9 0.021761 1.445728 22.32648 6.737285 69.49051 10 0.021762 1.445837 22.32541 6.743516 69.48523 period s.e. co2 eg pri kt 1 1.171879 0.572387 0.545561 98.88205 0.000000 2 1.226028 0.536974 8.202112 90.36061 0.900304 3 1.237366 0.743997 8.222435 88.75510 2.278472 4 1.242660 0.881620 8.749335 88.09172 2.277323 5 1.244345 0.975021 8.766654 87.95034 2.307983 6 1.244924 1.024680 8.780120 87.88357 2.311633 7 1.245237 1.024604 8.776000 87.87779 2.321607 8 1.245374 1.025248 8.781553 87.87209 2.321109 9 1.245399 1.028512 8.781212 87.86914 2.321138 10 1.245411 1.030484 8.781042 87.86738 2.321099 review of economics and development studies, vol. 6 (2) 2020, 267-276 274 eg ≠ pri 3.75529 0.0330 kt ≠ eg 3.31558 0.0477 eg ≠ kt 2.31198 0.1136 kt ≠ pri 1.59009 0.2179 pri ≠ kt 0.66598 0.5200 note :≠ stands for the null hypothesis means does not granger cause. 4. conclusions and policy implication private investment is an essential determinant in gdp growth of a country, but its role in the process of environmental degradation has not got the attention by researchers. the major objective of this work is to know about the causal link of private investment with gdp growth, co2 emissions, and energy expenditure. the estimates of the var model show that when one standard deviation shock or innovation is given, it takes about 12 years for co2 emissions, 9 years for private investment, 8 years for economic growth and 10 years for energy consumption to adjust. it seems that the policies regarding economic growth, private investment, co2 emissions and energy consumption are not effective as its adjustment time is long enough. furthermore, the results of causalities show that the response of each variable to its own innovation is much better as compared to other variables. furthermore, the fallouts of granger causality test shows four unilateral causalities namely, causality running from co2 to gdp growth, from energy usage to co2 , from energy usage to economic growth and, from gdp growth to private investment. the results does not confirm bi-directional causalities in the variables understudy while an independent type link is shown in private investment and co2 and, in private investment and energy consumption. the outcomes of the study have some policy implications. first, an outcomes reveals that all the used variables (private investment, gdp growth, consumption of energy and co2 emissions) are cointegrated so, when policy makers are formulating policies for private investment and gdp growth, they should keep in mind the issue of co2 emissions. second, energy is the basic requirement for economic growth and private investment so, improvement in energy efficiency and less carbon emissions technology should be the focus for policy makers. third, for reduction of co2 emissions, government may also formulate policies with the help of international organizations that are working for environmental improvement. the results of the recent study is helpful to understand the causal association among gdp growth, energy expenditure, private investment, and co2 emissions. the researchers of this study believe that this analysis tool not only helpful to policy makers in specific country like pakistan but also the analysis technique used in this paper have significant policy implications for understanding the causal association in private investment, consumption of energy, co2 emissions and growth of economy, in other nations. references ahmed k, shahbaz m, & kyophilavong p. 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bahauddin zakaria university multan, pakistan: zainach530@gmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 with the dawn of 21st century, the world has grown into a global village and the need for inter-communal interactions has also increased many times. urdu language is said to be one the third biggest language of the world along with chines and english and its speakers are constantly on the rise. with the emergence of the cpec (china pakistan economic corridor), urdu has assumed ever increasing importance due to the geopolitical and geo-economic condition of the south asian region. the undertaken study is a systematic attempt in this regard to work out a list of most frequent words of the urdu language for the chinese business community in pakistan. schmitt (2000) asserts that that learning a nonnative vocabulary is a continual process as the core vocabulary should encompass the ever changing linguistic needs of the time. the name of the urdu corpus for the undertaken research is urtenten that has been compiled from internet data. the corpus belongs to tenten corpus family that is corpora of the web with more than ten billion words. the corpus has been tagged according to unified parts of speech (pos) standard in indian languages. in order to process data, “sketch engine” has been used. list of frequent words for the chines business community has been retrieved from urtenten corpus with the help of sketch engine. the retrieved list of core urdu vocabulary is supposed to be useful for the chines business who is supposed to interact with the urdu speakers of the region. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords urdu, language learning, vocabulary building, corpus, word list, pakistan jel classification: n10, n15 corresponding author‟s email address: misschudry96@gmail.com recommended citation: qureshi, a. q., akhter, s. and shaheen, m., (2019). core urdu vocabulary for chines business community in pakistan, a corpus-based perspective. review of economics and development studies, 5 (4), 637-646 doi: 10.26710/reads.v5i4.893 1. introduction pakistan is a developing country of south asia. the region has been under colonial rule for many decades. the result is disintegration and the deteriorating economy. pakistan is not an exception in this regard. in these pursy times, cpec is a massive opportunity to boost pakistan economy. china-pakistan economic corridor (cpec) is the major part of the one belt one road (obor) that has roots in the traditional silk road. this new trade facility will not only provide china a cost effective chance of trade to global regions but it will also upgrade and expand the existing pakistani economy and infrastructure. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 638 with the emergence of china-pakistan economic corridor, there have also been signed many agreements between china and pakistan. for this purpose, visits of the officials of both the countries have increased many times. apart from these visits, many chines officials are constantly present in pakistan for technical assistance. there is a significant language barrier between the communities of pakistan and china. moreover, chines and urdu are absolutely different languages that have opposite linguistic origins. as a result, the officials of both the countries have to face a lot of linguistic obstacles that may hamper the true spirit of china-pakistan economic corridor. consequently, a wordlist of urdu language that is quite frequent, is the need of the hour to help the chines officials in pakistan for successful communication. significance of vocabulary especially in foreign language learning and teaching is an established phenomenon (biemiller, 2004). it determines the procedure of foreign language learning. the traditional methods to handle foreign vocabulary have hampered linguistic creativity of the language learners. one of the reasons of this obstructed linguistic creativity in the foreign language learners is the teachers centered approach of the learners of the foreign language who are at the lowest paradigm of autonomy (neuman & dwyer, 2009). in traditional foreign language class rooms, the teacher gets his own practice of vocabulary items and the learners‟ role is very passive. secondly, with the advent of new approach of lexical item to vocabulary, the focus has been on a long range of vocabulary items from single words to multi-words items or phraseology in the words of moon (2006). the various forms of urdu words are کتاب (single word lexical item), پرستی بت (compound word), کرنا بند بولنا (idiom), دور کے ڈھول سہانے (proverb), ُملکی خزانہ (collocation), etc. the handling of this type of complex vocabulary has never been an easy task. in foreign language context, there has been felt a great need to improve this dismal situation, because learning a long range vocabulary of a foreign language was putting pressure on the overall comprehension of the learners. with the emergence of innovations in foreign language teaching, there have occurred many motivating techniques and there is a considerable shift to student centered approach and autonomy rather than following the orthodox approach of language teacher as the policeman of the classroom. the use of computers in language teaching in the form of great corpora has also improved the situation of foreign language learning. according to hughes and mccarthy (2001), the vocabulary of a language covers all aspects of social life. qain (2002) describes vocabulary of a language in terms of depth, size, learner‟s autonomy and lexical organization. presence of large multi-purpose corpora has made it possible to implement qain (2002) learner friendly language theory with encouraging results. in this regard, retrieved frequency list with the help of large corpora has proved very useful in foreign language context. statement of the problem: urdu is one of the top five most spoken languages of the world. its ever increasing importance is due to socio-economic and geo-political position of the region where it is spoken, especially, the emergence of china-pakistan economic corridor has increased the importance of urdu language many times. in these conditions, it has become the need of the hour to work out for a specific vocabulary of urdu language for chines business in pakistan as the major portion of china-pakistan economic corridor is being carried through in the pakistani territories where urdu is spoken as an official language. consequently, a vocabulary list of urdu language that is very frequent, can help the chines businessmen in pakistan to communicate successfully over any speech event. as, urdu is a pidgin language, its vocabulary is very diverse with lot of loan morphology. review of economics and development studies vol. 5, no 4, 2019 639 diagram 1. urdu geo-political origin as vocabulary plays a significant role in overall comprehension of the language, it is the need of the hour to work for the focused and core vocabulary of the urdu language for chines so that that comprehension of the language may be improved in less time with maximum autonomy of the urdu learners of the foreign language. 2. research methodology corpus linguistics has revolutionized the art and craft of foreign language teaching. corpus is a collection of spoken or written text that is presented in electronic form. the corpus data is collected from real life situation to make the corpus more productive and helpful (mukoroli, 2011). there are many corpus tools to work with the collection of electronic text that help in determining new emerging meanings, spellings, word sketch, n-grams, concordance, key words, frequency lists, etc. the name of the urdu corpus for the undertaken research is urtenten that has been compiled from internet data. the corpus belongs to tenten corpus family that is corpora of the web with more than ten billion words. the corpus has been tagged according to unified parts of speech (pos) standard in indian languages. in order to process data, “sketch engine” has been used. list of frequent words for the urdu learners has been retrieved from urtenten corpus with the help of sketch engine. the following diagram shows the weightage of the collection of corpus from various domains. diagram.2 courtesy to urtenten corpus of the urdu web. 2.1 place of corpus in l2 learning there have been brought many innovations with the help of corpus in nearly all field of linguistics. especially, applied linguistics is the most influenced discipline in this regard. linguistics in corpus is a review of economics and development studies vol. 5, no 4, 2019 640 relatively new way of studying linguistics as it develops rapidly since the 1980s with the development of computer science, which offers dynamic technical support. with the advantages are almost incomparable in delivering huge amounts of real, efficient and powerful ability to research and study. corpus linguistics and its use in teaching and learning attracted a lot of efl researchers. the importance of corpus linguistics has also been widely accepted. a lot of linguistic studies on how linguistics can facilitate teaching and learning activities of various language levels, has highlighted the scope of corpus linguistics. johns (1986) identifies the significance of concordance in l2 learning. he states that the issue of l2 vocabulary can be handled in a successful manner if the learners of the foreign language are exposed with the concordance of the lexical items. mccarthy (2001) establishes the significance of past perfect verb form in spoken and written discourse with the help of corpus. corpus refers to the composition of the natural words, containing everything from a few sentences in huge bulk, written or oral for language learning. recently, the word "corpus" has been reserved for a collection of letters (or parts of the manuscript) that are stored and stored electronically. because computer can pack and process many files information, electronic banking is generally larger than the academic literature before used in the study of words. the process is dead but the odds can play a part in the text collection, and it is designed for some purpose. specific purpose of the decision model choice of texts, and the purpose is rather to store the books themselves because they are internal force. this separates the corpse from a library or electronic archive. this storage is kept there in a way that it can be learned in a linear way and effectively. cacoullos and walker (2009) examines the multiple use of “will” and “going to” with the help of corpus analysis and conclude that their use is not determined by certainty or intention. the application of corpus linguistics in teaching can be divided into two aspects: the direct one: taking the relevant knowledge of corpus linguistics: means of developing a linguistic corpus, and applications of linguistic corpus as the teaching materials; and the indirect one: based on both corpus and computer technology, including compiling corpus-based dictionary, editing grammatical reference, textbook, developing multimedia courseware, language learning software, or evaluating or testing tools. vocabulary is one of the three basic elements of language and is taken as the backbone of the whole language system as pointed out by sinclair (1992) “if the language regarded as the bone of the tongue, the vocabulary offers vital organs, flesh and body. he further argued that without grammar, many can happen to express in languages, but nothing can be expressed without vocabulary. reppen (2009) asserts that corpus tools like monoconc and wordsmith can be motivating for the foreign language learners and teachers. he states that foreign language learners and teachers should develop their own corpora of multiple registers for better handling of vocabulary issues. corpus linguistics has not same sense of potential as semantics, syntax, and pragmatics. its real significance is in its empiricism as it takes into account the real patterns of language. its analysis is objective and verifiability. it allows the collection of different genres and registers which makes it possible to show the wide repertoire of language. the corpus analysis is democratic in its approach as it provides equal chances to non-native speakers as to native speakers. lastly, focused results can be obtained for pedagogical purposes. according to reppen (2009) corpus tools like monoconc could help the teachers and the learners of the foreign language to develop their own material on vocabulary to determine the various shades of meanings and use. he also suggested using the reference corpora and multiple registers for the better handling of vocabulary issues. the role of corpus in handling the challenging issues of foreign language vocabulary is an established phenomenon and it has changed the entire scenario across many branches of linguistics. apart from this, it has led towards the autonomy of the l2 learners that was being hampered in the traditional class rooms of l2 learning (hoey, 2000). finally, corpus has helped in determining core vocabulary of any language that review of economics and development studies vol. 5, no 4, 2019 641 was not possible in the past and the l2 learners had to cram long list of vocabulary items. as a result, the undertaken research has adopted a corpus perspective to retrieve a core list of frequent words for the urdu learners of a foreign language. the core list of urdu language may also be useful for urdu lexicographers, lexicologists, grammarians, etc.. vocabulary is widely applied and its education is playing an increasingly important role in language learning. linguists turn to the corpus linguistics for the ways of improving the language learning, which does make sense, especially for efl vocabulary learning. as the learners lack a real context for the application of the language, sometimes, it is difficult for the learners to handle their learning and to acquire the usages and meaning of certain words accurately. the application of corpus linguistics into efl vocabulary learning can almost perfectly deal with that, for the language data in the corpus are all from natural contexts, which can help the learners to use the word accurately and properly. corpus was used to conduct research in europe in the early eighteenth century; the procedure was followed, with a great deal of time and effort. in the nineties, the main application of the corpus was the study of the dictionary and the use of grammar. it started getting eminence in the 1950s but began to recede in the mid-80s. during efl learning, learners are more or less exposed with the native language, which is called transposition of the first language. the transfer can be both positive and negative. the negative change affects the traditional comprehension of the accepted language. however, the expression of the same situation is different in two languages. there may be differences in both the situations. negative changes affect the learners understanding of the new knowledge of the foreign language and communication. the consequences of negative changes are very high is also often found in efl vocabulary learning 2.2 core vocabulary list of the urdu language urdu belongs to indo-aryan group within indo-european family of languages. its current place of use is south asia. it is official language of pakistan and one of the official languages of india. urdu language is spoken by more than one hundred and twenty million people. urdu is ranked as one of the top three languages of the world along with chines and english. urdu has rich vocabulary and has the impact of many regional languages. its vocabulary is also very diverse and not easy to handle for the foreign learners. with the emergence of corpus and its tools, there have occurred innovations in the field of foreign language learning (granger, 1998). it has taken place the orthodox techniques being used in the traditional foreign language class rooms. structurally, urdu is a complex language. the reason behind the fact is that urdu is a pidgin language and has the impact of many regional languages of the region. consequently, learning urdu as a foreign language is a challenging task. core vocabulary, retrieved through corpus data, can be used to face the challenges of urdu as a foreign language. the use of corpus and tools in the urdu language are comparatively a new phenomenon but they have strong potential to motivate foreign learners of urdu language. the retrieved urdu list of frequent words can be reshaped according to the needs and levels of the learners. it will counter the traditional laborious wordlists of urdu language that are not actively used in the real written and spoken discourse. the large number of urdu files refers to the bulk of the corpus, resulting in a focused and core vocabulary list. 2.3 word list according to mccarthy (1998) corpus data is generally gathered with two approaches. the first approach is the genre approach that does not rely only on a pre-decided idea of a text but also endeavors to create a healthy balance between the context and the language use with repeated patterns. it focuses the population of language users, the context in which language is used and the environment while, the second approach is called demographic approach where the users of a target language are focused and there is a consideration of the span of the time as well during which that language has been used. review of economics and development studies vol. 5, no 4, 2019 642 the genre approach is generally employed to compile corpus of a foreign language. the samples of corpus are different from one component to the other. keen observation and intuition are used to decide the appropriateness of the corpus sample. the sample size is basically determined on the basis of two factors. the considerable factor is the availability of the text and the second important factor is the readership of the selected text. following is the list of frequent words of the urdu language. the retrieved list is quite extensive but only the top two hundred frequent words have been indexed here. the list can be used as a point of departure and the list can be extended according to the level and the needs of learners of urdu as a foreign language. review of economics and development studies vol. 5, no 4, 2019 643 frequency word lists of the languages continuously evolve and grow with the passage of time (henriksen, 1999). similarly, word list of urdu language is dynamic and can be upgraded with the ever changing needs of the l2 learners and time. the rationale behind using large corpus to retrieve these lists is that the words in the list should reflect all aspects of life from social to academic. as the proposed word list has been driven from a large corpus of urdu language, it is supposed to be productive and potential for the l2 learners of the urdu language and will encompass all domains of urdu culture. 3. analysis and discussion descriptive research of a language is useful from many aspects. apart from helping the foreign language learners (gleason, 1961), it helps the translators to translate books for the foreign learners with lexical sensitivity, for the grammarians who intend to publish books on lexis and in language teaching for native speakers as well as for the foreign learners of the language. 3.1 structurally, urdu is a different language from english the significance of such descriptive studies becomes all the more important when the non-native learners of the urdu language constantly make comparisons of the target language with their mother tongue. realistically, such convergence of the target language and the mother tongue is not potential as “sunny day” and “ دن واال دھوپ ” have difference of meaning when used in their respective cultures. conversely, these attempts of convergence by english learners may lead to unsuccessful handling of the urdu language. as language is culture, expressed by language and no expression of language can occur without suitable word combinations. the above description of lexicon of the urdu language is potential as it is replete with cultural information. as the corpus data has been collected from various domains of urdu culture, the vocabulary list also reflects the word associations with full cultural meanings as the word روشنی (light) is occurring with word choices like الكريم القرآن (the holy quran) حديث (hadees), etc. connoting to some extent the muslims background of the urdu lexicon. the above description of urdu collocations shows that some words accept more word choice than the rest. for example a few urdu adjectives take more urdu nouns in association in comparison with urdu nouns that accept urdu verbs. for example urdu noun “ صدر” (president) take more nouns in association in comparison with urdu verbs. predictably, urdu vocabulary described in the above section, can be classified the most frequent as they have been retrieved from large corpus data. without considerable awareness of frequent wordlist, as supported by lewis (2004), it is difficult to handle overall language skills of urdu. these are the vocabulary items that shape the linguistic expressions of non-native learners, natural and fluent even though they lack grammatical strength sometimes. however, it is an established fact that urdu as l1 and as l2, lexical development differ significantly. the first difference in the case of urdu as l2 is the poverty of input of the word combinations in terms of quality and quantity that make the bulk of urdu review of economics and development studies vol. 5, no 4, 2019 644 lexicon. the l2 learners of urdu have to face lack of contextualized data that can only be presented in the form of lexical collocations. this situation puts foreign learners of urdu language in an extremely difficult position to create syntactic, semantic and morphological harmony among word associations of urdu language and they are at a loss to integrate words into acceptable combinations. learners of urdu as a foreign language usually focus on the single words items and disregard their association and context. consequently, they often refer to their mother tongue to produce word combinations in the target language that results in unacceptable lexical choices. summing up the corpus data, it can be safely claimed that urdu is a very rich language. its lexicon structure is very diverse. urdu language offers many word combinations of lexical collocations that are constituted with the help of single words. the corpus data of urdu lexical lexicon can be very useful in the description of urdu language at the level of lexis. 4. concluding remarks from a global point of view, the number of explicit vocabulary learning activities is quite high because it achieves 1/3 of all actions in the textbook. this it should be added that the percentage of explicit and accidental vocabulary activities are uniformly distributed along the units, as shown by the distribution of activities per unit. we must therefore conclude that in terms of the amount of work devoted when it comes to learning vocabulary, corpus strategies are well on the learner‟s way to achieving their goals of learning vocabulary. corps linguistics, based on the application of technology, shows its advantage in the efl vocabulary because of the ease of exploration and the natural content that it is given to the target word. although the quality of the corpus language in the efl guidelines is grounded,, as it has been identified above. in order to eliminate its disadvantage and make good use of it, a corpus should provide a context in which a word is present while not yet representative of it angels of all meanings and relationships of the text. moreover anything provided by the corps can only be used as evidence, rather than information. this exploration establishes that language corpora can upgrade the nature of vocabulary learning in second or outside language classrooms. by showing advantages of language corpora to learners, it is trusted that this examination can be useful to learners who are attempting to look for a productive method for learning vocabulary. the aftereffects of corpus based review will ideally guarantee the understudy's needs to create vocabulary at intermediate level. this is the primary investigation of its sort and fills a critical crevice in research on vocabulary techniques. vocabulary handling in any l2 program is a key indicator in overall comprehension of the language (bauer, 1998). computers and soft wares have contributed in improving this situation. the retrieved frequency list of urdu language is supposed to be very helpful for the chines business men who are working in various capacities in pakistan. the use of corpus and soft wares will also lead towards of the learners in the foreign language class rooms. the undertaken research is an innovation in the art of foreign language learning and fills a critical crevice in vocabulary building of urdu language for the chines business community in pakistan. references bauer, l.(1998). vocabulary. london and new york: routledge. biemiller, a. (2004). vocabulary instruction (pp. 159-176). new york: guilford press. cacoullos, r. t., & walker, j. a. (2009). grammatical variation and collocations in discourse language gleason, h.s. jr. (1961). an introduction to descriptive linguistics. new delhi: oxford and ibh publishing company granger, s. (1998). the computer learner corpus: london: longman. review of economics and development studies vol. 5, no 4, 2019 645 henriksen, b. (1999). three dimensions of vocabulary development, oup. hoey, m. (2000) „a world beyond collocation london mccarthy, m. j. (2001). issues in applied linguistics. cambridge: cambridge university press mukoroli, j. (2011).effective vocabulary teaching strategies: longman reppen, r. (2009). english language teaching and corpus linguistics: london: continuum press. moon, r. (2006). introducing metaphor, routledge neuman, s. b., & dwyer, j. (2009): vocabulary instruction in pre-k. oup qian, d.d. (2002). investigating the relationship between vocabulary knowledge and academic reading performance: continuum press. schmitt, n. (2000). vocabulary learning strategies. cambridge university press review of economics and development studies vol. 5, no 4, 2019 646 review of economics and development studies vol. i, no 2, december 2015 57 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 1: issue 2 december 2015 journal homepage: www.publishing.globalcsrc.org/reads co2 and environment change evidence from pakistan 1 javeria masood, 2 fatima farooq, 3 muhammad saeed 1 m.phil economics, school of economics, bahauddin zakariya university multan, pakistan, jmasood46@gmail.com 2 lecturer, school of economics, bahauddin zakariya university, multan pakistan 3 department accounting and finance, school of business, superior university lahore, pakistan articledetails abstract history revised format: nov 2015 available online: dec 2015 a safe and healthy environment is a basic right of all living bodies but in current era pollution is at peak. the present study applied bound test based co-integrating technique using annual time series data from 1970-2014 for exploring major determinants of environmental degradation. present study included four determinants were energy consumption, gross domestic products, fdi and population growth. finding of the present observed a significant relationship among energy consumption, gdp, population growth and environmental degradation in short run and longrun. however, foreign direct investment has a positive and significant association with environmental degradation at 10% level of significance both in short and long-run. the econometric findings suggest that pakistan has to sacrifice use of energy consumption, to have a safe and healthy environment for better livings; pakistan should adopt other way of energy like solar energy .while foreign direct investment must be used for pollution free machine or pollution free projects so that we can have clean pakistan. government of pakistan should care about green policy and should spread awareness in public so that population growth should not be a problem of environmental degradation. this research study made a unique participation in emergent body of empirical studies on practices of environmental awareness in pakistan by using bounds test based cointegration technique. © 2015 the authors, under a creative commons attributionnoncommercial 4.0 keywords ardl, corbin dioxide, bounds test, energy consumptions, ecm, environmental degradation. jel classification i12, i15, i18 corresponding author’s email address: jmasood46@gmail.com recommended citation: masood, j., farooq, f., and saeed, m. (2015). co2 and environment change evidence from pakistan. review of economics and development studies, 1 (2) 57-72 doi: https://doi.org/10.26710/reads.v1i2.116 1. introduction a safe and healthy environment is the basic right of all living bodies, previous generations hand over, this earth safe and sound to us. but in new times many things creating troubles that are not good for the safety of earth where we live or for space where we breathe. the scale of toxic waste of the atmosphere http://www.publishing.globalcsrc.org/reads mailto:jmasood46@gmail.com mailto:jmasood46@gmail.com review of economics and development studies vol. i, no 2, december 2015 58 has now touched a shocking level (pramanik, shil et al. 2007). in 19th century in the era of fifties and sixties, peoples started to think about the environment degradation because of that is the time when peoples activities started to damage environment .few events which made peoples interested in environment protection japans mercury poisoning, smoke pollution from london and a great oil leakage by terry canyon accident (bassey, effiok et al. 2013) it is observed that climate change is most problematic issue for the current century, for whole over the world particularly for developing countries because of; these countries have low income level and low ability to adopt environmental change. (abidoye, herriges et al. 2012).world largest organizations like united nations (un) or the world economic forum (wef), are trying to save nature and economy from opposing influence of global warming and climate change . (farhani, chaibi et al. 2014).corbin dioxide emissions (co2) is accounted for major participant for pollution , 92% of the entire ghg (green house gas) emissions (farhani, chaibi et al. 2014).a research study claimed that corbin dioxide is accounts for 58.8% of total greenhouse gas emission. the main reason for studying co2 emissions is that they play a focal role in the current debate on environment protection and sustainable development. there are many researchers, who worldwide studied energy consumption, gdp ,fdi, population growth and corbin dioxide emissions, many of them argued that energy consumption increase gdp of the country, while few of them argued no doubt energy consumption increase gdp but it also become the reason of co2 emissions .whereas many researchers claimed that co2 emissions trend varies in developed and developing countries, in poor countries if gdp increase ,it also a source of co2 emissions , but in case of developed countries in the beginning pollution increase but latter pollution tends to decrease due to increase in income level of countries .the following is a brief snapshot of worldwide conducted studies on energy consumption , gdp and co2 emissions. huang, hwang et al.(2008) conduct a research study on energy consumption and gdp on the base of income level .they argued environment quality improve in high level group because of when their income goes to up they starts efficient energy use and co2 emissions reduce. many authors remain busy in early decades to give empirical and theoretical answer of this problem and the supreme answer was the environmental kuznets curve hypothesis (ekc). the ekc (grossman 1995; torras and boyce 1998) explored relationship among ecological quality and energy, they argued an inverted-u shape relation between environment quality and income level, they claimed that in developed countries at start ecological quality degrades but eventually improve with earnings level increment. review of economics and development studies vol. i, no 2, december 2015 59 figure 1, is known as kuznet curve , which explain that pollution in poor countries increase with the production of goods , its means increase in production increase in pollution , further, above figure is also indicating that pollution increase at start but gradually pollution comes down in developed countries with increase of production of goods(galbraith 2007). figure 2, is indicating the trend of co2 in developed countries. five high income level developed countries are chosen randomly. the following graph is indicating zigzag co2 emissions, it is important to know that co2 emission is not going straightly upward. this graph is showing that at initial level co2 emission increase but ultimately decrease because of developed countries ceased product pollution intensive goods and they import same product from other countries with less preventive ecological shield laws. (grossman and krueger, 1995) flowing figure 3. is showing the results of gdp trend in developed countries. the graph is elaborating that all developed countries gdp is increasing with the passage of time .hence, we can easily observed that even gdp of developed countries increase but their environmental quality improving, it may be a results of high level technology . hoi, heshmati et al. (2010) observe investigated the existence of the environmental kuznets curve (ekc) for (co2) emissions and its causal relationships with economic growth and openness by using time series data. the environmental consequences according to openness and economic growth do not show uniform results across the countries. this study indicated that co2 emission depend on the characteristics of the country. further huang, hwang et al.(2008) explored association among energy consumption and gdp with respect to income levels. the results indicated that environmental development can be perceived in the high-income group because of the efficient energy use and the reduction in co2 emission gdp trend in developed countries 0 10 20 30 40 50 60 70 80 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 united kingdom united states japan canada australia figure 2:data source:wdi 1970-2011 co2 emissions trend in developed countries review of economics and development studies vol. i, no 2, december 2015 60 figure 4, is showing the results of co2 emission of selected developing countries for the period of 1970-2011, graphical line are demonstrating that in developing countries co2 emissions is continuously increasing , while sri lanka’s emissions is at top , while pakistan emission level is low as compare to other countries mentioned in the above graph. co2 emission trend in developing countries succeeding figure5, is indicating the gdp trend for the selected five developing countries, graphical lines are indicating that gdp of all countries is continuously increasing ,sri lanka’s gdp is top while pakistan’s gdp is at low level, if we compare graphs of co2 emissions and gdp of both countries with respect to income level ,developed countries fall in high level income and graphical presentation is showing that even their gdp is high but their co2 emissions is low , while if we talk about the developing (low income ) countries ,graphical presentation is demonstrating that those countries which have high gdp ,they have high co2 emissions .this dilemma with developing countries may be a cause of largely due to their environmental exposure, low income, greater dependence on climate-sensitive sectors and weak capability to adjust to the shifting climate(abidoye, herriges et al. 2012) gdp trend in developing countries 0 50000 100000 150000 200000 250000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 united states japan canada australia figure 3 0 1 2 3 4 5 6 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 sri lanka fiji kenya india paksitan figure 4 pakistan review of economics and development studies vol. i, no 2, december 2015 61 literature exposed that different studies are conducted in developed countries to analyze impact of energy consumption and gdp on corbin dioxide emissions. in developed countries many studies claimed that kuznet curve exist .while, developing countries are still less focused on this area of research. pakistan is fall in developing countries, where 21.3% of gdp comes from industrial sector (wiki2014) .environmental issues are addressing on global plat form, unfortunately this area of research is less focused in pakistani context. the significance of this research study is that; this study analyzed energy consumption, gdp and environmental degradation in pakistani context, because this area of research was les focused in pakistani perspective. further this study used unique econometric bounds test based cointegration technique (ardl approach) which is not frequently used for environmental studies. pakistan include in developing countries, where update and pollution efficient technology is scarcely used. thus, it is interesting to investigate impact of energy consumption and gdp on environmental degradation. present study is structured in different sections: the second section involves literature review on the oil consumption ,gdp and environmental degradation ; while third segment defines data source and methodology ,whereas fourth part discuss data and analysis .the fifth section reveals main finding and finally, last section elaborate conclusion, recommendation, limitation, and future scope of research. 2. literature review this part of study examines different studies, conducted by various researchers, in different countries. the prior studies investigated association among energy consumption, gdp and environmental degradation. the relevant literature indicated that different research group used different approaches to measure dependent variables. most of researcher used granger causality approach, few used fixed effect and random effect model, while some of researchers used panel co-integration etc. since, the present study is different from all above mentioned approaches because of, this study investigated the affiliation between energy consumption, gdp, fdi, population growth and environmental degradation in pakistani context through autoregressive distributed lag approach (ardl with cointegrating bounds). soytas et al. (2007) examined the association among income, carbon dioxide and energy consumption. this study discovered income doesn’t source of co2 emissions, further; this study claimed that energy consumption is a object of co2 emissions in united states. war and ayres (2010) examined association between energy consumption and gdp; findings revealed that energy consumption does granger couse to gdp. lee and change (2005) find out link between energy and gdp for taiwan .they claimed that use of energy is like an engine in long run for gdp but on the other hand , usage of energy cause harmful for economic growth .lim, lim et al. (2014) described connection among oil 0 2000 4000 6000 8000 10000 12000 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 sri lanka fiji kenya india paksitan figure 5 pakistan review of economics and development studies vol. i, no 2, december 2015 62 consumption, gdp and co2 emission .they opined that bi-directional causality running between oil consumption and gdp, on the contrary this study also find bidirectional causality between oil consumption and co2 emission . chen and huang (2013) inspected association between co2 emission and economic growth; they discovered that there is a long-run relationship among electric power consumption, gdp, energy use and co2 emissions. junky (2011) verified the environment kuznets curve (ekc) theory for 36 rich republics for the era of 1980–2005.the findings indicated unidirectional relationship from per capita gdp to per capita co2 emission. he, huo et al. (2005) attempted to demonstrate the existing status and prediction the upcoming trend of oil demand and co2emissions from the chinese road transportation sector. they claimed about china that in next two decades china will be largest oil consumer .drabo (2010) conducted a study having large sample size of rich and poor countries to test link between environmental indicators and economic convergence. finding of study showed that economic movement negatively affect by environmental deprivation, further, environmental degradation creates difficulties for the poor countries to be developed economically. auric, youssef et al. (2012) investigated the affiliation among carbon dioxide emissions, energy consumption, and real gdp for twelve mena countries (middle east and north african). the findings recommended that there is not essential that all mena republics scarify their development to decrease co2 emissions; they may attain co2 emissions decline via energy protection devoid of harmful longrun effects on economic growth. farhani, chaibi et al (2014) examined the energetic association among (co2) emissions, output (gdp), energy consumption, and trade. the empirical outcomes exposed the existence of bidirectional causational long-run associations among the variables. in the short-run, there are three unidirectional granger causality affiliations, which run from gdp, squared gdp and energy consumption to co2 emissions. pao and tsai (2010) inspected dynamic causative associations among chemical emissions, energy consumption and output for a panel of bric countries for the era of 1971–2005.this study claimed that in long run energy consumption positively associate with chemical emissions.in addition, study claimed bidirectional long run causality among energy consumption and output and energy consumption to chemical emissions. apergis and payne (2009) described in long run energy consumption positively and significantly effect to emissions, whereas real output displays the reversed u-shape pattern linked with the environmental kuznets curve (ekc) theory. on the other hand short-run dynamics specify unidirectional interconnection from energy consumption and real output, correspondingly, to emissions along with bidirectional causality between energy consumption and real output. hatzigeorious, polatidis et al. (2011) explored causational relationship among gdp, energy intensity and corbin dioxide in greece for the time period of 1977-2007.they claimed set of unidirectional and bidirectional casualties among projected variables. lotfalipour, falahi et al. (2010) examined association among fossil fuel consumption, economic growth and co2 emissions, by using todayammoto time series analysis technique in iran for the time 1967-2007. finding of the study argued that there is a unidirectional causality running from gross domestic product two proxies of energy consumption (natural gas use and petroleum products) to corbin dioxide. further this study suggested no causality in long run running from fossil fuel to co2 emission. this study also argued that fossil fuel consumption, co2 emissions, petroleum products do not be a source of economic growth. menyah and wolde-rufael (2010) conducted a study for the time period of 1965-2006; they inspected long run and casual link among energy use, economic growth and pollutant emissions for south africa. this study claimed for the short run as well as long run positive and significant relationship among economic growth and pollutant emissions. they also found unidirectional causality successively from review of economics and development studies vol. i, no 2, december 2015 63 pollutant emission to economic growth; energy consumption to economic growth and energy use to co2 emissions. ang (2009) scanned relationship among energy use, income level, trade openness and corbin dioxide emissions by consuming more than fifty years data for china .he argued that maximum energy use produce more income and bigger trade openness but are a cause of corbin dioxide emissions. blanco, gonzalez et al. (2013) examined relationship between fdi and co2 emissions, they conducted panel study from 18 latin american countries from 1980-2007. finding of the study claimed association between fdi and co2 emissions, thy claimed that there is causality running from fdi to co2 emissions per capita.omri (2013) examined relationship between co 2 emissions, fdi, and economic growth using dynamic simultaneous-equation panel data models for a global panel of 54 countries over the period 1990 –2011.finding of the study claimed of bidirectional causality running from fdi to co2 emissions.yanchun (2010) conduct a study in chine in which he explored link between fdi and co2 emissions ,this study clam that there is negative association between fdi and co2 emissions ,but still thy argued it does not that fdi is not harmful of us.shaari, hussain et al. (2014) conducted a panel study and data was collected from 15 developing countries, they found that fid does not have any effect on co2 in long run. (shi 2001) investigated about population growth and global carbon dioxide emission using data from 93 countries for the time period of 1975-1996. he claimed that population growth is one of the major determinant of co2 emissions. (martínez-zarzoso, bengochea-morancho et al. 2007) observed relationship among population and co2 emissions ,using data form european countries .finding of study found linkage between population and co2 emissions , further, they suggest population must be taken in account for further climate change.zhu and peng (2012) conducted a study in china in which author’s observe population change effect on co2 emissions for the time period of 1978–2008.study found changes in consumption level and population structure as major determinant of co2 emissions one the other hand population size does not effect on co2 emissions. finding of the study claimed a high correlation among consumption level and co2 emissions. population age, household size effect majorly co2 emissions and urbanization increase co2 emissions. conceptual frame work 3. data and econometric methodology gdp environmental degradation  corbin dioxide emissions (co2) fdi p.g energy consumption review of economics and development studies vol. i, no 2, december 2015 64 3.1 data and data source four variables energy consumption, gross domestic product (gdp) and carbon dioxide (co2) emissions are used in this study. annual data is taken from world development indicator, the world bank (washington) data base , for the time period of 1970-2014.present study castoff corbin dioxide emissions (co2) as dependent variable while energy consumption and gdp as explanatory variables .corbin dioxide is measure in metric tons per capita, energy consumption in kg of oil per capita and gross domestic product (gdp) in per capita (current us$).various studies employed these variables in different countries like (chen and huang ; fatai, oxley et al. 2004; lee and chang 2005; choi, heshmati et al. 2010; abidoye, herriges et al. 2012; arouri, youssef et al. 2012; lim, lim et al. 2014). table 1. variable description 3.2 econometric methodology present study is based on positivism research paradigm, which verified findings of previous studies, which are conducted in developed as well as developing countries. relationship is examined among projected variables through statistical software eviews 9 .following statistical techniques are used to analyze data. 3.3 unit root test: augmented dickey fuller test time series data mostly found non stationary, whereas sationarity in data is most important. there are many researchers who claimed that non stationary data produce spurious results, means non-sense results, hence to produce valid and to avoid from spurious results data must be stationary (gujarati and porter 1999).in the present study stationary of data is check through augmented dickey fuller test , which is frequently used in research studies. even though, ardl techniques has no need to check stationary of data but we have check stationary because of any variable which is stationary at second difference i(2), cannot be include in equation, as any variable stationary at i(2) ,in this case ardl produce nonsense results .the major reason of not included i(2) variable in ardl approach is ,fstatistics value calculated by pesaran, shin et al. (2001) and (narayan 2005) is no longer effective. 3.4 autoregressive distributed lag approach (ardl with cointegrating bounds) ardl approach is introduced by (pesaran, shin et al. 1996),(pesaran and shin 1998), whereas (pesaran, shin et al. 2001) developed it further. this approach got lot of fame due to many econometric advantages as compare to other cointegration methods. this approach does not force that all variables must be cointegrated on same order i.e. i(1), ardl approach correspondingly noble if all the variables cointegrated of order i (0) or i (1) or even variables projected in model stationary at i(0)& i(1) (pesaran 1997) and this was not acceptable in traditional approaches. autoregressive distributed lag approach to cointegration provide strong results and consistent estimate in case of small sample of long run coefficients as compare to other cointegarting approaches of traditional (pesaran and shin 1998; haug 2002) . considering the above advantages of ardl approach to cointegration, present study employed this approach considering assumptions of ardl also. first of all this study checked level of integration of all projected variables, because of any variable i (2) or above, ardl approach is not applicable. variable description units source co2 corbin dioxide emissions metric tons per capita (wdi) enu energy consumptions kg of oil equivalent per capita (wdi) gdp gross domestic product gdp per capita (current us$) (wdi) fdi foreign direct investment fdi ,net inflows (% of gdp) (wdi) p.g population growth population growth (annual %) (wdi) review of economics and development studies vol. i, no 2, december 2015 65 = 1 + 1 + t n t i i it t    where xt and yt are included in vector tt. yt represents the dependent variable co2 emission and xt represents a set of explanatory variables in model. time is denoted by t. vector error correction model (vecm) is given as below 1 1 t 1 1 + n i n i t t t i i ti t t yt t x                    the long-run multiplier matrix as: yx xx yy xy          the sloping essentials of the matrix are limitless, so the selected series can be either i(0) or i(1). if, 0 yy  then, y is i(1) and if , 0 yy  then, y is i(0). 3.5 bound test this study conducted bound test to find out long run relationship as given in equation (3.1), using fstatistics with the help of two bounds, i.e. lower bound and upper bound. to check cointegration among variables, null hypothesis assumes that no cointegration. it is concluded that if the f-statistics values comes greater than the upper bound then null hypothesis is rejected if f-statistics values comes lower then lower bounds we conclude no cointegrattion. but if f-statistics values fall between upper and lower bound the test is inconclusive pesaran, shin et al. (2001). as it already stated that present study use ardl exploration, so the first step to define the presence of long run relationship between the variables. pesaran and shin (1999) there must be maximum two orders of lag use to estimate ardl. 3.6 optimal lags to choose optimal lags present study elect optimal lags on the base of (sic) for all variables. model specification to verify the findings of the previous studies, this equation is developed 2 1 2 3 4co = fdi ienc gdp pg          --------------(3.1) whereas: β1, β2, β3, β4 are the co-efficient βо is intercept term µi is disturbance term co2 = corbin dioxide emissions (per capita) enc = energy use (kg of oil per capita) gdp = gross domestic product fdi =foreign direct investment p.g = population growth review of economics and development studies vol. i, no 2, december 2015 66 an ardl general equation:                       2 t 1 2 43 5 7 co 1 2 2 3 4 5 6 2 8 9 10 = b c d e t i t i t i t i t i i i ii i t i t i t i t i t i i co i enc i gdp i fdi i pg co enc gdp fdi pg                                                 (3.2) the intercept term is γͦo while 1, 2, 3, 4, 5, 6, 7, 8, 9, 10          are the coefficient of short run and long run. research hypotheses in order to answer the research questions and to achieve the objectives of this study, the following hypotheses are hereby state in the alternative form: ha: there is a relationship between co2 emissions and energy consumptions hb: there is a relationship between co2 emissions and gross domestic product hc: there is a relationship between co2 emissions and foreign direct investment hd: there is a relationship between co2 emissions and population growth 4. results and discussion this study comprises of five variables corbin dioxide as dependent variable, while energy consumption, gross domestic product, foreign direct investment and population growth as independent variables. whereas, outcomes presented in the succeeding section, unit root, ardl bounds test, and ardl approach, ecm and other diagnostic test. table 4.1 unit root at level at first difference conclusion variables t-values probability variables t-values probability co2 0.56666 .98 co2 -6.044 0.00000 i(1) enc -0.7409 .8246 enc -5.2940 0.0001 i(1) gdp 3.2306 1.000 gdp -3.4218 0.0159 i(1) fdi 2.5238 0.9999 fdi -5.4497 0.0001 i(1) p.g -3.3777 0.0563 p.g -1.52789 0.8034 i(0) table 4.1 represents the result of unit root tests of all series used in the study. unit root test is applied to check whither data is stationary or not .stationary in data is very import , because of , if trend exist in data, spurious results produce which is very harmful .hence, to avoid bogus results study have applied unit root tests. table 4.1 is representing that unit root is check at level and first difference, the output file of results indicating , that all the variables are stationary at 1st difference, except one variable p.g which is stationary at level at 10% level of significance. so, null hypothesis is rejected because there is no trend in analyzed data and accept alternative hypothesis because of data is stationary. now we can further move to explore relationship between independent and dependent variables. table 4.2 optimal lags review of economics and development studies vol. i, no 2, december 2015 67 -5.78 -5.76 -5.74 -5.72 -5.70 -5.68 -5.66 -5.64 a r d l (2 , 0 , 0 , 0 , 2 ) a r d l (2 , 1 , 0 , 0 , 2 ) a r d l (2 , 0 , 1 , 0 , 2 ) a r d l (2 , 1 , 1 , 0 , 2 ) a r d l (2 , 0 , 0 , 1 , 2 ) a r d l (2 , 1 , 0 , 1 , 2 ) a r d l (2 , 2 , 0 , 0 , 2 ) a r d l (2 , 0 , 2 , 0 , 2 ) a r d l (2 , 0 , 1 , 1 , 2 ) a r d l (2 , 1 , 2 , 0 , 2 ) a r d l (2 , 1 , 1 , 1 , 2 ) a r d l (2 , 2 , 1 , 0 , 2 ) a r d l (2 , 0 , 0 , 2 , 2 ) a r d l (2 , 0 , 0 , 0 , 0 ) a r d l (1 , 0 , 1 , 0 , 2 ) a r d l (2 , 1 , 0 , 2 , 2 ) a r d l (2 , 2 , 0 , 1 , 2 ) a r d l (1 , 0 , 0 , 0 , 2 ) a r d l (2 , 0 , 2 , 1 , 2 ) a r d l (1 , 1 , 1 , 0 , 2 ) akaike information criteria (top 20 models) e-veiws9 output table 4.2 representing optimal lag lengths criteria we applied akaike information criteria (aic) to choose optimal lags of variables including in ardl model, as above results are out of eviews 9 and software automatically selected two lags for corbin dioxide and population growth, while zero lag for energy consumption, gross domestic product and foreign direct investment. table 4.3 ardl bounds test: to know about long run relation f-statistics 8.16 critical value bounds significance i0 bounds (lower bounds) i1 bounds (upper bounds) 10% 2.45 3.52 5% 2.86 4.01 2.5% 3.25 4.49 1% 3.74 5.06 author’s calculation on the base of (pesaran, shin et al. 2001)( e-views 9 output) table4.3 demonstrating results of bounds test, if f-statistics value comes more than critical value of bounds, it indicate long run relationship among projected variables (pesaran, shin et al. 2001). as fstatistics value (8.16) is more than the upper bound of bounds value at 5%, which is suggesting that long run relationship exist between the variables. in a nutshell, proposed variables are cointegrating and will move together in long run. table 4.4 long-run coefficients of ardl (1, 1, 0, 0, 1) model dependent variable (co2) variables coefficient std.error t.statistic prob. constant -0.636458 0.120897 -5.264449 0.0000 enc 0.002644 0.000199 13.230393 0.0000 gdp 0.000137 2.200886 6.255483 0.0003 fdi 0.010214 0.005386 1.8963 0.0664 p.g 0.0520766 0.0215 2.41686 0.021 review of economics and development studies vol. i, no 2, december 2015 68 table4.4 contains the results of long run relationship between variables mentioned in equation (3.1).energy consumption is most significant factor of corbin dioxide emissions in pakistan. the effect of energy consumptions is significant at 5% level of significance. the coefficients value of enc (0.002644) which is indicating that increase one unit in energy consumption leads to over 0.002644 units increase in corbin dioxide emission in long run. gross domestic product (gdp) is also another significant factor of corbin dioxide emissions in pakistan. the effect of gdp is also significant on corbin dioxide emissions at 5% level of significance .the coefficient value of gdp (0.000137) is representing that increase 1 unit in gdp leads to over 0.000137 units increase in corbin dioxide in long run. in addition fdi is of determinant of co2 emissions which is positively and significantly associated with co2 emissions at 10% level of significance. fdi coefficient value is 0.010214, which is showing that if we increase one unit in fid it drives positive response to co2 emissions in long run. finally population growth is one of co2 determent with highest coefficient value (0.0520766), which is revealing that if we increase one unit in p.g it will positive response to co2 emissions in long run. present study supports the finding of (chen and huang ; shi 2001; martínez-zarzoso, bengocheamorancho et al. 2007; soytas, sari et al. 2007; zhu and peng 2012; blanco, gonzalez et al. 2013; omri 2013). table 4.5 error correction representation of the selected ardl (1, 1, 0, 0, 1) model dependent variable (co2) regressor coefficient std.error t.statistic prob. d(enc) 0.001920 0.000174 11.018820 0.0000 d(gdp) 0.000100 0.00023 4.4019722 0.0001 d(fdi) 0.007417 0.00391114 1.89639 0.0664 d(p.g) 0.383123 0.1567937 2.4434902 0.019890 ecm(–1) -0.6997 0.087184 -8.02628 0.0000 r2=0.46, f-statistics (prob) =5.39 (0.0002), d.w 1.597 table 4.5 is representing results of error correction representation of the selected ardl model. coefficients with “d” sign signifying short run elasticities. energy consumption once again in short runs with having most significant “p” value and greater “t” value as compare to other independent variable, effecting positively corbin dioxide emissions. the coefficient value of d(enc) (0.001920) expressing that if we increase one unit in d(enc) it will bring positive 0.001920 units increase in co2 emission in short run. while d(gdp) and d(p.g) also have positive and significant association with co2 emission in short run and both of the variables will react with co2 emissions with respect to their coefficients values in short run. however, d (fdi) is one of co2 determinant which is significant at 10% level of significance with coefficient value 0.007417. the coefficient (-0.6997) of error correction term (ecm (–1)) is significant at 5% level of significance. negative and significant error correction term indicates speed of conversion, its mean in next year dependent variable come toward equilibrium with the speed or 67%. diagnostic tests table 4.6 breusch-godfrey serial correlation lm test: f-statistics 0.1067 prob. f(2,34) 0.8990 obs*r-squared 0.2850 prob. chi-square(2) 0.8671 table 4.6 is showing results of serial correlation, serial correlation is a situation when error term depends on its previous time period error term. serial correlation is most important diagnostic test review of economics and development studies vol. i, no 2, december 2015 69 because of serial correlation exist when we neglect any relevant variable, serial correlation also provide information about incorrect functional form (gujarati: basic econometrics, fourth edition).null hypothesis for serial correlation is no serial correlation between residuals. meanwhile the p-value (0.8671) of obs*r-squared is greater the 5%, hence on the base of observed p-value of obs*r-squared we will accept null hypothesis. table 4.7 heteroskedasticity: breusch-pagan godfrey test: f-statistics 1.0078 prob. f(8,34) 0.8644 obs*r-squared 8.2423 prob. chi-square(8) 0.410 table 4.7 displaying output of heteroskedasticity, a situation when variance of residual doesn’t remain constant, it is called heteroskedasticity, which is not desirable, while if variance of residuals is constant it is called homoscedasticity, which is desirable. to check heteroskedasticity is most important in time series data because of, by virtue of heteroskedasticity existence standard error no more accurate and tstatistics may be higher or lower. null hypothesis is homoscedasticity or variance of residuals is constant. meanwhile the p-value (0.6752) of obs*r-squared is greater the 5%, hence on the base of observed p-value of obs*r-squared we will accept null hypothesis. table 4.8 cusum (cumulative sum of recursive residuals) test. brown et al. (1975) introduced cusum (cumulative sum) and cusum of squares tests. cusum test is based on a plot of the sum of recursive residual .following charts are showing two straight red lines, while there is one blue line which is within these two lines, red lines are representing 5% critical bounds, where null hypothesis of having stable parameters’ for each of projected variables is rejected if blue line cross redlines .on the other hand, if plot remain within two straight line null hypothesis is not rejected. cumulative sum test helps to show if coefficients of regression are changing systematically, whereas cumulative sum of square test is helpful to showing if the coefficients of regression changing suddenly (bhatti, al-shanfari et al. 2006) p.270).hence on the base of following charts representation we can conclude that there is no structure break or simple we will conclude that parameters’ are stable because blue line is existing within red straight lines ,hence we will accept null hypothesis of stable parameters. -20 -15 -10 -5 0 5 10 15 20 1985 1990 1995 2000 2005 2010 cusum 5% significance cusumsq (cumulative sum of squares) test review of economics and development studies vol. i, no 2, december 2015 70 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1985 1990 1995 2000 2005 2010 cusum of squares 5% significance 5. conclusion environmental problems always gained attention of the peoples from all over the world, the major reason of sudden change in people’s behavior is climate change, and in last few decades human activities are proved a main source of environment degradation, which is very harmful for the all living bodies. due to certain advantages, discussed in chapter three , present study applied bound test based cointegration technique, to test stability of parameters present study employed cusum and cusumq , by employing annual time series data from 1970-2015s for exploring major determinants of environmental degradation. present study included four determinants were energy consumption, gdp, fdi and population growth. finding of the study presented a positive association among energy consumption, gross domestic products, population growth and environmental degradation in short run as well as in long run. however, foreign direct investment has a positive and significant association with environmental degradation at 10% level of significance in short-and long-run. 6. limitation of the present study there are few limitations of this study , like present study measure environmental degradation with only on indications (co2) ,and other limitation is that there are other macroeconomic variables which are also hurt environmental like fdi ,oil prices etc. hence further student and researchers can add more explanatory variables and different proxies for environmental degradation. 7. recommendations the econometric findings suggest that pakistan has to sacrifice use of energy consumption, to have a safe and healthy environment for better livings; pakistan should adopt other way of energy like solar energy .while foreign direct investment must be used for pollution free machine or pollution free projects so that we can have clean pakistan. government of pakistan should care about green policy and should spread awareness in public so that population growth should not be a problem of environmental degradation. references abidoye, b. o., j. a. herriges, et al. 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"the impacts of population change on carbon emissions in china during 1978–2008." environmental impact assessment review 36: 1-8. review of economics and development studies vol. 5, no 1, march 2019 5 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads use and utility of teacher guides for primary school teachers in punjab 1 fayyaz ahmad ranjha, 2 muhammad khalid mahmood, 3 intzar hussain butt 1 phd scholar, university of education, lahore, pakistan. fiazahmad73@yahoo.com 2 assistant professor (retd.), university of education, lahore, pakistan. mkm@ue.edu.pk 3 assistant professor, university of education, lahore, pakistan. ib@ue.edu.pk article details abstract history revised format: february2019 available online: march 2019 this study is aimed at soliciting pubic primary school teachers’ viewpoints on use and utility of teacher guides, an initiative of government of the punjab. data were collected through focus group discussions of male and female teachers from district sargodha. teachers were asked to discuss need, importance and use of teacher guide and to suggest ways to improve. focus group discussions were audio recorded, transcribed and analyzed for extracting themes. it was found that teachers acknowledged the need and importance of teacher guide for better teaching. it was noted from their discussion that teachers used guides for lesson planning and activities but use of teacher guide was not optimal. some of the teachers were using it in best possible way, while majority were using it occasionally. they highlighted difficulties and challenges like high workload, language of teacher guides and lack of learning material required for suggested activities. the y suggested revising guides for language, removing inconsistencies with respect to schedule of guide and academic calendar. they also suggested lower workload of teachers by recruiting new teachers, providing teachers with training to use guides and making monitoring and supervision more rigorous. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords teacher guides, utility, use of teaching guide jel classification: a20, a21, a22 corresponding author’s email address: fiazahmad73@yahoo.com recommended citation: ranjha, f. a., mahmood, m. k. and butt, i. h. (2019). use and utility of teacher guides for primary school teachers in punjab. review of economics and development studies, 5 (1), 5-10 doi: 10.26710/reads.v5i1.518 1. introduction quality of teaching and learning in public primary schools in general and in the subjects of english, mathematics and science in particular has been a concern of the government of the punjab. various initiatives have been introduced and experimented to increase the pedagogical competence of working teachers. recently renamed as quaid-e-azam academy for educational development (qaed), the directorate of staff development (dsd) formerly known as education extension center was established in 1959 for the professional development of working teachers in punjab. dsd has been involved in in-service teacher training programs to improve teachers’ competence. in 2012, a continuous professional development program was launched in punjab initially in 12 districts and then in all the 36 districts. in order to support the psts (psts) in implementing the national curriculum 2009, the government of punjab took an initiative, with financial support from international donors (dsd, 2012), regarding provision of teacher guides. the task of development of teacher guides was entrusted upon the dsd. the dsd engaged experts from public and private schools for the preparation of teacher guides in the subject of urdu, english, mathematics and http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 6 science. the government of punjab, provided teachers’ guides in the subjects urdu, english and mathematics (grades 1 to iii) and in subjects english, mathematics and science (grades iv & v). success of any initiative in classrooms depends heavily upon the teachers who teach these classes. any initiative that does not match with its implementers’ views and beliefs is liable to failure and teachers are not an exception to it. keeping in view the importance of psts views and beliefs as far as the success of teacher’s guides’ initiative is concerned; it is not only important but necessary to develop deeper insights into teachers’ views and beliefs regarding use and utility of the guides in primary classrooms. there is ample research based evidence for use and utility of teacher guides in various contexts. teacher’s guides are manuals full of ideas and notes about how to organize instruction in the classrooms (harmer, 2007). the teacher’s guides should be flexible so that these could be adapted in varying contexts and should satisfy the teachers’ needs (cunningswoth, 1995). the teacher’s guides need also to provide explicit ways for planning instruction and how various values that are included in the curriculum best match with the teachers own teaching beliwfs and practices. these guides should also provide guidance on the age and level of the learners who may benefit from it (cunningsworth & kusel, 1991). the teachers can maximize the benefit of teacher’s guides if they facilitate teachers in designing and implementing formative assessments in order to monitor the progress of learners (zabihi and tabataba’ian, 2011). motivation is a key to learner, hence teacher’s guides should be organized in such a way that can develop motivation among teachers to teach and among learners to learn (cunningsworth & kusel, 1991). further the teacher’s guide should split the concepts into smaller portions keeping in view the attention span of young learners and to avoid any instances of boredom (chastain, 1988). for the successful imlemention of teacher’s guides, it is important that the guides should be easy to understand, written in a language which is native to its users, and should forward simple and clear suggestions regarding various tasks. the teachers guides which are developed according to the teachers and learners needs has a potential to be implemented by the practitioners (hemsley, 1997). the teacher’s guides can play an important role in forming the classrooms practices of teachers, especially the beginners and who are teaching in a second language as a medium of instruction (cunningsworth & kusel, 1991). the use of teacher’s guides varies by the teacher. some teachers try to follow the guides in tru letter and spirit, some take only guideline and than plan their own instruction keeping in view their local needs and there are some who hardly bother to look at them (barr & sadow, 1989 and durkin, 1984). the availability and use of teacher’s guides become more important in the contexts where people join the teaching workforce without prior teacher training (gearing, 1999) and in many countries where teacher training is missing, these guides are the only source for pedagogical guidance (richards, 1993). according to cunningsworth and kusel (1991) there are five functions i.e. 1) describe general goals and methodology, 2) develop teachers’ capacity, 3) develop an understanding regarding course materials’ structure 4) guidance on practical use of the suggested material and 5) provide lingo-cultural information. a teacher’s guide has a potential to help the teacher for innovating new tasks, assessments and methodologies (cunningsworth, 1995). teachers generally plan for instruction in advance, though this planning can vary from teacher to teacher and context to context. some teachers prepare a well sequenced written plan, the other may prepare a mental sketch. it can vary in complexity from teacher to teacher (jensen, 2001). this study has been conducted in the context public school of punjab, pakistan. in public schools textbook remains the only teaching source for a large majority of psts. it is a common practice to ask the student to read aloud from the textbook in languages followed by questions from the teacher’s side. the only exception, perhaps, is mathematics, where demonstration, drill and practice are commonly used as a method of teaching. these practices make learning experience dull and boring. a teacher who plans a lesson in advance can make learning meaningful and interesting for all the learners. since lesson planning is concerned with what to teach, how to teach and how to assess, therefore, it has remained part of pre-service teacher training programs, but has hardly been practiced by the psts. some senior teachers claim that they have plans in their mental bank, hence they can teach by using their memory and wisdom (jones 1998). in public primary schools of punjab, six classes (nursery to v) are accommodated. a large majority of the schools have access to very limited human and physical resources. most of the primary schools have two classrooms (there are many without functional classrooms), and on average 3 teachers. the schools do not have access to any type of teaching and learning aids except shared white/black boards and textbook. review of economics and development studies vol. 5, no 1, march 2019 7 the teacher’s guides initiative brought a change in the schools since the teachers had one more teaching aid with them which could have been more helpful. since the teacher’s guides talk about teaching and learning process and its outcome, therefore, the teachers who wish to help their children can better prepare themselves. teacher’s guides have the potential to make teachers autonomous learners as they learn self-reliance in their presence (hemsley, 1997). on the other hand, breeen and candlin (1987) mentioned that teacher’s guide can be viewed as a week servant of textbooks. human action and behavior is determined by some of the personality traits which are not visible. these hidden traits include attitudes, beliefs, self efficacy, self concept and many more (pajares 1992). ford (1994) defined beliefs as, “group of norms or opinions which were formed in the individual through his experiences and the overlapping of thoughts during the learning processes”. as harste, woodwards and burke (1984) claimed, “teachers make decisions about classroom instruction in light of theoretical beliefs they hold about teaching and learning. teachers’ beliefs influence their goals, procedures, materials, classroom interaction patterns, their roles, their students, and the schools they work in”. specific objective of the study was to solicit psts’ perspectives on need, importance, use and usefulness of teacher guide provided to them by government of the punjab. since government of the punjab has spent a huge amount on provision of teacher guide to all psts to improve teaching learning process in government primary schools, therefore it is importance to research into what teachers say about use and utility of these guides. 2. research methodology it was a qualitative inquiry employing focus group discussion technique for data collection. fifty male and fifty female psts were selected from ten cluster centers of district sargodha. two groups of five male and five female teachers were selected from each of the ten cluster centers. it constituted twenty groups comprising five teachers each. all the twenty groups were engaged in focus group discussions one by one. they were asked to discuss need, importance, nature and extent of their use, challenges and difficulties in use and ways to improve teacher guides. all the sessions were audio recorded with the permission of the subjects. all the recorded discussions were transcribed, responses were coded and themes were extracted by discourse analysis. 2.1 focus group discussions in order to know the views of psts regarding use and utility of teacher’s guides ffocus group discussions were conducted. in all twenty groups (10 each for male and female teachers) were formed to discuss following. 1. why teacher’s guides are needed for psts? 2. what is the importance of teacher’s guides for psts? 3. how do they use and how often do they use teacher’s guides while teaching in their classes? 4. what steps school education department should take to ensure maximum use of teacher’s guides by psts? 5. what difficulties and challenges do they face in using teacher’s guides? 6. do they have any suggestions for the improvement of teacher’s guides? 3. findings teachers’ responses during focus group discussions were recorded, transcribed, coded and analyzed to extract themes of discussions. the findings are presented below for each question. 3.1 need of teacher guide in response to the first question regarding need of teacher’s guides for psts, the teachers communicated that the guides are needed in order to improve effectiveness of the teaching and learning process by providing model lesson plans. one of the teachers said that “teachers can teach better by preparing for teaching with the help of teacher’s guides as it enables them to understand the structure and composition of effective lesson plan”. the other points emerged during discussion included: 1. teacher’s guides can help teachers to plan and prepare for teaching more effectively. teachers’ responses included: a) “teacher guides provide teachers with guidance about methods of teaching” b) “teachers guide enables teachers to learn how to teach” c) “teacher can devise their strategy for teaching to follow on next day” d) “it guide us how to teach “ e) “it guides teachers how to teach, what to teach and order of teaching” review of economics and development studies vol. 5, no 1, march 2019 8 f) “teacher can make lesson easy by using teacher’s guide” g) “it has provided teacher with a framework to follow “ 2. teacher’s guides provide teacher ready to use lesson plans. 3. “lesson plans in teacher guides are slo based therefore slo are achieved more effectively. further animations and pictures are helpful in explaining and making concepts clear”. 4. one of the teachers was of the view that “teacher’s guides save teacher’s time in preparing lesson” 3.2 importance of teacher’s guides the second question for the focus group discussion was, what is the importance of teacher’s guides for psts. it has been found that all the teachers believed that teacher’s guides are important for the psts since: a) the “guides include lesson plans which enable teachers to prepare for teaching, assessing students learning and assigning home work”. b) teachers can develop new activities and tasks for the students by reflecting how the activities suggested by the guides have worked in the classrooms. c) the guides provide student centered activities which may be used by the teachers in order to engage the learners. 3.3 extent of use of teacher’s guides the analysis of the data has revealed that the use of teacher’s guide vary by teachers. around half of the teachers responded that they hardly use teacher’s guides, whereas around one quarter mentioned that they often used and another quarter of teachers mentioned that they use these guides on daily basis. some teachers mentioned that they use the teacher’s guides to the extent of suggested student activities. it simply means that a large majority of the respondents occasionally use the guides provided to them by the government of punjab. this finding is surprising especially the dsd has been supporting and monitoring the use of teacher’s guides by the teacher through their district and cluster level monitoring and support staff. 3.4 nature of use of teacher’s guides in response to question, “how do you use teacher’s guides while teaching?” the teachers responded that: 1. they “follow whole process as given in teacher guides and guided by dte”. 2. a few teachers reported that “they compared text book and teacher’s guides to decide how to teach and what to teach and which aspect of teacher guide needed to be followed. they chose activities from the guides”. 3.5 suggestions to ensure use of teacher guides. the following suggestion for the effective use of teacher’s guides were forwarded by the respondents: 1) align teaching calendar with the lesson plans given in the teacher’s guides 2) align lesson plans with the slos given in the textbook 3) there should be rigorous monitoring mechanism in place for the implementation of teacher’s guides initiative 4) increase number of teachers so that there is a one to one class and teacher ratio so that teachers have some breathing space to look at the teacher’s guides. the workload needs to be rationalized. 5) teachers should be provided proper training for the use of teacher’s guides. 3.6 difficulties in using teacher guides the psts highlighted the following difficulties they face while using teacher’s guides; 1) extra ordinary workload of psts due teacher shortage. 2) unavailability of resources mentioned in the teacher guide. 3) lack of training to use teacher’s guides. 4) shortage of teacher’s guides for newly inducted teachers. 3.7 suggestions to improve teacher guides in response to the question, “how to improve teacher guide?” the teachers suggested that simple language should be used in the teacher’s guides. the psts’ representatives should be engaged in development of teacher guides. review of economics and development studies vol. 5, no 1, march 2019 9 student activities suggested in the teacher’s guides should be developed keeping in view the resource availability at the schools. 4. discussion and recommendations teacher’s guides is an important tool in the hands of teachers to make their teaching effective. teacher’s guides is especially recommended for teachers with training needs and nonnative english speaking teachers (gearing; 1999 richards; 1993; colman, 1986). pubic psts of punjab were provided with teachers’ guides to enable them implement new curriculum successfully. teachers’ recruitment policy of government of the punjab also allowed untrained teachers to be recruited. initiative of teachers guides also aimed at supporting novice untrained teachers to teach effectively at primary school level. effectiveness of teachers’ guide depend upon nature and extent of use by the teachers. present study revealed that use of teachers’ guides by the teachers was not optimal and nature of use also varied among the teachers. these findings were in consonance with findings of previous research studies like sadow (1989), moulton (1994) and durkin (1984). keeping in view teachers’ responses on teacher guides provided to them by government of the punjab and literature on nature and composition of teacher guides (cunningsworth and kusel1991; jones, 1998; hemsley, 1997; romiszowski, 1968), it can be claimed that composition and content of teacher guide under discussion are up to the mark and useful. teachers guides provided teachers with lesson plans based on student learning outcomes, composed of elaborated content and activities supportive to achieve the learning outcomes. it is a universal phenomenon that no initiative can be implemented without proper monitoring, training and motivation. teachers suggested rigorous monitoring, guidance and training for teachers’ motivation. references barr, r, & sadow, m. w. (1989). influence of basal programs on fourth-grade reading instruction. reading research quarterly, 24(1), 44-71. beyond the text book: the role of commercial materials in language teaching. relcjournal, 24(1), 1–14. breen, m. p. &candlin, c. n. (1987). 'which materials?: a consumers' and designers' chastain, k. (1988). developing second-language skills: theory and practice (3rd ed.). san deigo: harcourt brace jovanovich. colman, h. (1986). evaluating teachers’ guides: do teachers guides guide teachers? jalt journal, 8(1), 123-140. cunningsworth, a. & kusel, p. (1991). evaluating teachers guides. elt journal, 45(2) , 128139. cunningsworth, a. (1995). choosing your coursebook. oxford: macmillan heinemann. directorate of staff development (2012). teachers guide english for grades vi, vii & viii. lahore: directorate of staff development durkin, d. (1984). is there a match between what elementary teachers do and what basal reader manuals recommend? reading teacher, 37, 734-44 ford, m. i. (1994)." teachers' beliefs about mathematical problem solving inthe elementary school". school science and mathematics, 94(6),314-322. gearing, k. (1999). helping less-experienced teachers of english to evaluate teachers’ guides. elt journal, 53,122-127. guide.' in sheldon, l. e. (ed.). (1987) elt. textbook and materials: problems in evaluation and development. london: modern english publications harmer, j. (2007). how to teach english. england: pearson. harste, j.c. woodwards, v.a., and burke, c.l.(1984). language stories and literacy lessons. portsmouth,n.h. : heinemann hemsley, m. (1997). the evaluation of teachers' guide-design and application. english language teacher education and development, 3 (1), 78-83. jenson, l. (2001). planning lessons. in celce-muricia, m. (2001). teaching english as second or forieng language(3 rd ed.) (pp.403-409). boston: ma. heinle& heinle. jones, j. (1998). lesson planning:towards purposeful learning and effective teachin. encuentro, 10, 89-98. moulton, j. (1994). how do teachers use textbooks and other print materials? a review of literature. the review of economics and development studies vol. 5, no 1, march 2019 10 improving educational quality project, south africa, retrieved from http://pdf.usaid.gov/pdf_docs/pnabz282.pdf on july 15, 2015. pajares, m. f. (1992). teachers’ beliefs and educational research: clearing up a messy construct. review of educational research, 62(3), 307-332.richards, j. c. (1993). romiszowski, a. (1968).the slectionand use of teaching aids london: kogan page zahibi, r. &tabataba’ian, m.( 2011). teachers’ evaluation and use of teacher’s guide in foreign language classes. continental journal of arts and humanities, 3(1), 1-10. http://pdf.usaid.gov/pdf_docs/pnabz282.pdf%20on%20july%2015 review of economics and development studies, vol. 7 (2) 2021, 299 308 299 socioeconomic status, gender, and politeness strategies: studying the usage of request speech act in pakistani undergraduate students faiza mushtaq a , sumaira b , fasiha maryam c a lecturer, national university of modern languages, multan, pakistan email: faizamushtaq@numl.edu.pk b lecturer, national university of modern languages, multan, pakistan email: suhashmi@numl.edu.pk c lecturer, national university of modern languages, multan, pakistan email: fmaryam@nuuml.edu.pk article details abstract history: accepted 30 may 2021 available online june 2021 politeness strategy has non-linguistic as well as linguistic apprehensions. moreover, it is observed as part of the sociolinguistics and conversational competency of the orators of a particular language. this recent study investigates the politeness strategies in the context of punjabi language. the goal is to classify the politeness strategies as a part of pakistani set culture particularly with reference to punjabi language context. to make this study valid, brown and levison’s (1987) framework is employed as a ration ground for this study. the variable of gender and socioeconomic factors has been analyzed to investigate the impending result by stalking down the politeness strategies especially in pakistani culture context. a survey was conducted through an open ended questionnaire. for this study (dct) discourse conclusive test is selected as a modified version. a group of 120 people which is comprised of male and female native speakers of punjabi language are selected. this study investigates that in pakistani culture particularly with reference to punjabi language, people tend to remain informal when making requests which can be classified as informal politeness strategies. this study investigates socioeconomic status of punjabi language speakers both male and female by not making in gender specific. through this study frequency of politeness strategies has been undergone in punjabi language. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: politeness, informal, formal politeness, politeness theory jel classification: q01, p27 doi: 10.47067/reads.v7i2.366 corresponding author’s email address: faizamushtaq@numl.edu.pk 1. introduction politeness is a consciousness effort that requires patience, tolerance, perseverance. the social portent of politeness is not a new one. its roots are embedded in history through society, norms, cultures, traditions, customs values and religion. in the entire process of evolving pleasant and smooth review of economics and development studies, vol. 7 (2) 2021, 299 308 300 interpersonal relationships, now advance and elevated strategies are must. it is evident and accepted that politeness is integral part of society and can’t be ignored. politeness requires strategic implementation for a normal and efficacious happy life. politeness is observed as a verbal consciousness and understanding of proper social behavior. according to lakoff (1973) societies are responsible to develop this behavior and the major cause is to facilitate and smoothen the interaction and process of effective communication among the people of the society. though this concept constituent of conversational competency of the orator is not that primordial. the knowledge of politeness strategies as part of linguistics feature is quite mandatory for a person in order to be frequent in a particular set of language being spoken. since the last few decades people tend more to the linguistic junctures as a rudimentary requirement. to initiate this study, it is appropriate to start with a bird’s eye view of the politeness theory as evolving factors. the politeness strategies are not a new ones and many experimental work has been done related to this term. many researchers are on the way to analyses its impact on different societies. their comprehensive analysis may vary according to the kind of research is being done. according to haugh (2007) the variables between these two varieties are quite apt and can be observed being incorporating in different communities despite the language difference. accoding to cameron (2001) these doesn’t depend on the language differences rather based on emotional, cultural and social differences to which arundale (2006) agrees upon. related to the existing context, many researches have also been carried out in pakistan as well. the pakistani researchers have examined the ‘politeness theory’ in the pakistani context such as (rehman 2998, akram 2014, kousar 2015). this investigation is intended to imply the politeness strategies particularly to pakistani native orators. for this purpose brown and levinson (1987) theory has been selected which claims to be in nature universal. this study different because it tends to have variable analysis based on gender specific and socioeconomic status in relevance to pakistani language and cultural context. the present investigation is carried out on the base of following research questions: 1. what are the politeness strategies used in pakistani context? 2. do variables, such as, gender and socioeconomic status of speakers affect pakistani speaker's choice of politeness strategies? research objectives of this study are: 1. to examine the role gender in the choice of politeness strategies. 2. to identify socioeconomic status of politeness strategies particularly in pakistani context. 2. politeness as apparatus yu (2003) has provides his opinion about politeness as an essential apparatus for human interaction that is only possible through language. according to him, politeness serves is a dominant apparatus in the way to successfully transferring the messages as set of communication. robin lakoff (1973) as a well-known scholar and nominated as the first researcher who has initiated the work on politeness strategies also stresses out on the necessity of polite gestures in order to attain the targeted goals. through his research he concludes that the politeness is a verbal response which is essential and regarded as social behavior. this behavior is nurtured by society which enables a person to facilitate the interaction among people and the groups. this technique of politeness as a face saving technique was introduced in 1987 by levinson and brown. according to goffman (1955) the theory of politeness is a much needed one as a speech act to which austin (1962) and searle (1969) review of economics and development studies, vol. 7 (2) 2021, 299 308 301 agreed upon after a scrutinized analysis. grice (1989) has provided his opinion which stresses the need of politeness theory as a cooperative principle. they claimed that facial expressions are a universal phenomenon but “in any particular society, we should expect [face] to be the subject of much cultural elaboration” (1978). according to them (1987), politeness is an effort to constitute the art of restorative expression during the exchange of dialogues. levinson and brown (1987) further, described it as “something that is emotionally invested, and that can be lost, maintained or enhanced, and must be constantly attended to in interaction”. moreover, the strategies of politeness serves as a medium which serves as a cooperative source for humans to understand one another. according to sifianou (1992) politeness is “a set of social values, it guides rather instruct the members of a communication group to consider each other by satisfying shared expectations. these expectations are assumed to constitute part of socio-cultural knowledgeof the particular members of a communication group (which are termed as ‘interactants’ also). it includes both intentional strategies and also more fixed social indices”. to guarantee and promote harmonious interpersonal relations, according to her, such knowledge and its deployment is very necessary. holmes (1992) has presented another definition of politeness. homes (1992) expressed his opinion as “politeness works not alone, it involves taking account of the feeling of other person also. it is the characteristic of a polite person that they make others feel comfortable and at peace. being linguistically polite, it involves the person make other feel easy and comfortable by speaking appropriately in the light of their relationship to you.” holmes postulated his theory on this point that the effort of politeness is based on human set of values and human rational behavior values. it also involves avoid intruding on other people. in the most recent times, the trends in the cultural studies have stressed a lot on the need of maintaining good relations between the speakers and the hearer. according to lin (2013), it is an important element in the face-to-face conversation. it works even more effectively when the crosscultural communication is involved. there are a lot of cultural differences and among them social status is one. social standing is considered to be a well-known universal one. the awareness of social status varies from one culture to another. according to escandell-vidal (1998) in a set system of society, every single person has his or her own hierarchical pattern which asre based on rational differences in the matter of communication. these differences are largely depended on the systematic pattern of politeness. these patterns are classified as presenting polite gestures such as friendliness or requesting; defending or arguing; and apologizing or complying. according to the theoretical framework proposed by levinson and brown (1978) politeness can’t be considered as asymmetric. politeness is in close relation to social hierarchy. lakoff (1972) has also postulated the politeness theory suggesting that a set of people exiting in a particular social circle follow a certain set of rules to interact with one another. johnstone (2008) has provided his prevention rules to adopt. she has also expresses the two basic rules of politeness theory which are to be concise and to be relevant. on the other hand lackoff (1972) provides his founding regarding politeness theory while stating, “an essential asymmetry in polite behavior, in that whatever is a polite be a polite belief for the speaker tends to be impolite belief for the hearer and vice versa”. leech (1983) also agrees to the ration grounds presented by lackoff. in terms of universality leech’s and lakoff’s theory is parallel. on the other hand to investigate the founding of leech and lakeoff, bharumthram (2003) examined this claim. he decided by exploring the data which is known to be provided by levinson and brown in 1972. he examined that analysis provided be brown and levinson (1972) regarding the concept of ‘face’ as a universal notion. according to the analysis he claims that the idea is quite different when compared to the community who tends to speak english as a native language variety. he furthermore analyzed it on individual level such as he investigated the use of the world “please” in day to day conversation. he marked the conventional difference between the south african english speaking verses english review of economics and development studies, vol. 7 (2) 2021, 299 308 302 speaking community on cultural difference grounds whereas the rational was found that people tend to safe their own face while communicating. but levinson and brown (1978) has variable rational for this analysis. according to them “face” is not a single entity to be standardized rather it involves a level which is two folded and can be classified as positive and negative ones. they further illustrated that the speech of an adult person can set the standard of a negative or positive face and this only can be identified through his/ her movements. according to them (1978) the actions of the adults of a particular speech community with negative face are unhindered by former. on the contrary, adults with positive face have more opportunities to be connected and are considered competent member of a speech community. the attack of verbal and non-verbal gestures during the commination act is considered rational but if the actions and reaction are contrary as expected and such are titled as face threating acts (ftas) by levinson and brown, 1978. 3. theoretical framework in different cultural and linguistic context a substantial quantity of research has been conceded on the politeness strategies. on one hand, the issues regarding degree of politeness are addressed while on the other hand, the issues relevant to strategies of expressing politeness are also brought under the discussion. in literature a number of theoretical frameworks have been proposed. however, the most relevant and comprehensive theoretical framework is proposed by levinson and brown (1978). the success of the above mentioned theoretical framework of politeness strategies has been applauded by locher (2014). he declares the theory of politeness proposed by brown and levinson as an empirical framework for investigation. brown and levinson’s (1978) theory is comprehensive and detailed because it has a undoubted instance for the part of the politeness as a device of face saving. they analyze the strategies of being polite as an example of being polite while relying on a very complex and complicated system of expectations and interpretations. on these sets of systems the human being interact, communicate and cooperate with each other in a society an in different settings. for to understand its need, detailed review is provided underneath. brown and levinson has presented a unified and all-inclusive theory of politeness. in their theoretical framework, they perceived linguistic strategies as apprehensions for strategic politeness theory. one significant characteristic of their theory is that their arrangement which is classified in to two portions. in the first portion they have provided the fundamentals of politeness which revolves around the aspect of politeness. this also caters the interactive techniques of dialogue exchange. however, the second part is comprehensive which comprises the strategies of implementation. in the theoretical framework purposed by brown and levinson, the concept of ‘face’ is a binding section of discussion in order to discuss the term “politeness” in detail. the term “face” is further classified into two sections entitled as “negative face” and “positive face”. they have provided the explanation for positive face as a set where people self-image long for the endorsement they have for themselves. the second one is the ‘negative face’ which tends towards personal preserves, territories and right to non-distraction”. according to their research they have explored that there are many strategic plan that are involved in ‘positive polite-ness’ where the audiophile regardless of the intimidation involves oneself on positive levels. the “positive face” strategic plan tends to convey positive vibes for the audiophile based on personal emotions and largely safeties. this happens in many ways but the inclusion of this successfully can be possible when both the audiophile and orator are in close relationship such as friendliness, harmony and unity. levison (1978) has provided some samples in this theoretical analysis as “attend to h’s interests, needs, wants, (you look sad. can i do anything?); review of economics and development studies, vol. 7 (2) 2021, 299 308 303 use solidarity in-group identity markers, ( heh, mate, can you lend me a dollar?); be optimistic, (i’ll just come along, if you don’t mind.); include both speaker (s) and hearer (h) in activity, (if we help each other, i guess, we’ll both sink or swim in this course.); offer or promise, (if you wash the dishes, i’ll vacuum the floor.); exaggerate interest in h and his interests, (that’s a nice haircut you got; where did you get it?); avoid disagreement, (yes, it’s rather long; not short certainly.); and joke, (wow, that’s a whopper!).” (1978) the audiophile of the negative politeness encounters reluctance of acceptance. according to brown and levinson interpretation the actions of orators are always unobstructed in the ‘negative face politeness strategies’. levinson and brown (1978) have provided some samples for ‘negative politeness’ responses as, “be indirect, (would you know where oxford street is?); use hedges or questions, (perhaps, he might have taken it, maybe. could you please pass the rice?); be pessimistic, (you couldn’t find your way to lending me a thousand dollars, could you? so i suppose some help is out of the question, then?); minimize the imposition, (it’s not too much out of your way, just a couple of blocks.); use obviating structures, like nominalizations, passives, or statements of general rules, (i hope offense will not be taken. visitors sign the ledger. spitting will not be tolerated.); apologize, (i’m sorry; it’s a lot to ask, but can you lend me a thousand dollars?); use plural pronouns, (we regret to inform you.).” (1987) according to both researchers (1987), the strategic theory can be considered universal and is empirical on logical and rational grounds. the empirical labeling is done after scrutinized analysis as they declare the implicate nature of acceptance. 4. research methodology in order to discover the possible related responses to the investigation queries this research is intended. through this research, an amount of reactions are collected from the students of undergraduate level. a questionnaire is designed to collect the desired the data. the questionnaire is open-ended one which is designed according to dct (discourse completion test). the questionnaire serves the need to extract the relevant data that a researcher wants to explore. the questionnaire designed for the present study tends to investigate the students responses both adult male and female. they were asked to jot down the answers according their real life experiences. the questionnaire designed for the students comprise the personal statistics regarding the socio-economic status such as job status and particularly the level of education. while doing son the anonymity of statistics can be assured. the questionnaire comprises ten questions which includes questions related to socioeconomic status defending on diverse circumstances. the response is based on the assumption that while responding to the situation the students have provided the speech act. for this study, speech act is selected categorized as ‘request’. it is because of its intrinsic and fundamental reflection of politeness. the speech act of request is widely applicable to a sum of circumstances related to the student’s daily life status. in the current study, another significant aspect is that the ‘gender’ and ‘socio-economic status’ of the speaker were the variables and these are applicable to the speaker only, not the hearer. 4.1 participants the age group selected to execute this study a total of one hundred and twenty participant were selected ranging from 18-30 age group including both male and female. the participants are students of bahauddin zakaria university, multan. the interesting feature was as the students were of four different including department of sociology, department of psychology, department of zoology and microbiology departments. two of the department are form social sciences domain and remaining are pure sicenes. it made it more interesting on the in level which can also comprise the educational level review of economics and development studies, vol. 7 (2) 2021, 299 308 304 of understanding as an impact. this investigation was done on the part of parental jobs and educational hierarchy which is further classified into clusters.  a group of men with low socio-economic status  a group of women with high socio-economic status  a female group with low socio-economic status  a female group with high socio-economic status the researcher administered the survey herself. the word limit to jot sown their answers the students are given no word limits or any strict paradigm to follow. some of the respondents were sent the questionnaire through e-mail, and other social media connections (whatsapp messenger, facebook messenger). 4.2 data analysis the answers gathered through the help of the questionnaire are categorized based on the structural study for this research. as it has been declared the brown and levinson (1987) research model entitled as ‘politeness theory’ is applied as a framework. the framework initiates about the negative and positive politeness. furthermore, the data is analyzed using spss (statistical software) to clarify the connection between genders along with socio-economic status. furthermore, it will throw light on the question that how politeness strategies are used in pakistani culture. 5. result and discussion discourse completion test (dct) serves as the bird’s eye view for this current study as an adapted model particularly to pakistani culture context. the selected method of discourse completion test (dct) in the form of questionnaire reveals that the university students of undergraduate level, who participated in this study, use five strategies of politeness. brown and levinson (1987) interestingly enlist ten basic strategies for negative politeness. the following as mention below:  be conventionally indirect  question, hedge  be pessimistic  minimize the imposition  give deference  make an apology  inclusion of personal pronouns  fta as a universal rule  participative  obligation after a scrutinized analysis it is scaled as all three of all above mentioned fall under the category of negative politeness and the reaming can be entitled as the sub categories. in the list of negative politeness responses the first strategy serves the part of being indirect in the conversation. the second one can be suggested as question strategy which at time can be more valid as negative politeness strategy. however, the third one serves the both ends such as negative and positive ones which lo list entitled on the position of six as “apologize”. according to the students responses it is observed that students tends to respond more toward the positive strategy in comparison to the negative one which according to brown and levinson (1987) review of economics and development studies, vol. 7 (2) 2021, 299 308 305 can be titled and known as supra-strategy of positive politeness. the classified scheme of supra-strategy is mentioned below.  “notice, attend to h  exaggerate (interest, approval, sympathy with hearer)  intensify interest to h  use in-group identity markers  seek agreement  avoid disagreement  presuppose/raise/assert common ground  joke  assert or presuppose s´s knowledge of and concern for h´s wants  offer, promise  be sanguine  be indirect  enquire  take responsibility or declare mutuality  collaboration/ assistance”. (brown & levinson, 1987, p. 102) it is evident from the statistical analysis that the politeness strategy that is mostly occurred in the punjabi language was negative politeness strategy of ‘hedging’. table 1: frequency distribution of all five negative politeness strategies used by all participants type of negative strategy 1 2 3 4 5 total 320 372 32 25 269 1018 31.4% 36.5% 3.1% 2.5% 26.4% 100% as it is presented in table 1, the negative and positive politeness strategies are given the numbers as mentioned below. the total number of the students who enthusiastically provided their responses which a total number of 1018 responses including both the positive and negative politeness strategies. these responses are further classified as out of 1018 responses 327 as a percentage of 36.5% responded with the ‘hedging/questioning’ strategy. this further is classified on gender bases as a solid and valid hypothesis. so politeness strategies were analysed separately to investigate the acute modification between the responses made by the males and the females. this further is investigated on the bases to square down level of frequency on the bart of gender classification. review of economics and development studies, vol. 7 (2) 2021, 299 308 306 table 2: chi-square of effects of participant’s gender on type and frequency of employed politeness strategy strategy gender total male female 1 179 152 331 2 190 192 382 3 18 14 32 4 12 13 25 5 125 144 269 total 524 515 1039 chi-square 4.10079 p-value 0.63714 according to chart, it is quite clear that the level of frequency is more concerned with the difference on part of gender. table 3: the chi-square analysis for politeness strategies used by male and female participants of high socioeconomic status strategy gender total male female 1 78 94 172 2 89 83 172 3 15 7 22 4 7 7 14 5 87 53 140 total 276 244 520 chi-square 5.38619 p-value 0.29131 table 4: the chi-square analysis for strategies used by male and female participants of low socioeconomic status strategy gender total male female 1 73 77 150 2 99 102 201 3 7 7 124 4 9 7 16 5 69 66 135 total 257 259 503 review of economics and development studies, vol. 7 (2) 2021, 299 308 307 chi-square 0.151313 p-value 0.86209 the significant difference on part of gender response is done with the use of chi-square analysis to testify the level of frequency and occurrence. to make it valid this analysis is done on the level of socioeconomic status. in term of the analysis carried out, it can be unveiled that no significant differences are found as part of investigation which is evident in in both table no. 3 and table no. 4. table 5: the chi-square analysis for the effect of participants’ socioeconomic status on their politeness strategy use strategy status total high low 1 148 172 335 2 195 177 299 3 15 17 29 4 26 10 36 5 130 139 278 total 503 504 1238 chi-square 3.95618 p-value 0.41197 on the second level, it is estimated that there is no significant difference found on the level of both high and low level socioeconomic status that is evident in table n0. 5 through a chi-chart. there were ten situations that were given to the respondents. the analysis of types of strategies all ten situations express that in pakistani setting, the speakers appear to give priority to the “negative politeness strategies” especially while requesting. according to the result, it is found that 71 % of the students are more inclined toward the frequency of “negative politeness” but on the contrary “positive politeness strategies” were imply by 29 % students. according to the result, one can say that while requesting “negative politeness strategies” have been adopted in pakistani cultural context in contrast to “positive politeness strategies”. however, on the level of gender variable analysis, the findings the level of frequency on both gender and socioeconomic hierarchy have been analyzed with no significant difference. moreover, it is also have analysis the “politeness” strategies are similarly implied in contrast to many languages being spoken round the world communities. cross cultural similarities have also been explored and it is found that there is indeed a close connection between the different dimensions of language on the level of politeness. it is quite important to know that the culture of a particular community has strong impact of the frequency of occurrence and expression in the speech act process but can have a variety of expressions and emotional intensity. another significant observation has been declared that the model presented and experimented by both levinson and brown which claims to a universal one is actually valid and practical in nature. 6. conclusion this study aims at the impact of punjabi language usage based on gender specific and socioeconomic status. this study is conducted under the paradigm of the theory proposed by brown and levinson (1987) entitled as “politeness strategies” which includes framework for both positive and negative response. this theoretical framework proposed by brown and lenvinson claims to be universal after a long her investigation and research. to conclude it is found that the variables investigated in this study are baseless. these variables have no effect on the occurrence of politeness both on the basis of level of review of economics and development studies, vol. 7 (2) 2021, 299 308 308 gender as well as on socioeconomic level. however, the findings suggests that cultural orientation plays a significant role during the act of communication and dialogue exchange especially while requesting, pleading and imploring. secondly, the findings also suggests the rationality of the framework designed by the levinson and brown (1987) for the strategies of politeness which tends to discover the cross culture varieties and diversity of both language and culture. tho extend this study one can also be investigated further on the paradigm of educational level, profession grounding and largely dialect and regional level. references blitvich, p.g.c. (2013). introduction: face, identity and im/politeness. looking backward, moving forward: from goffman to practice theory. journal of politeness research, 9, 1–33. brown, p., & levinson, s. (1978). politeness strategies in social interaction. cambridge: cambridge university press. brown, p., & levinson, s. (1987). politeness: some universals in language use. cambridge: cambridge university press. cameron, d. (2001). working with spoken discourse. london: sage publications. fukada, a., & asato, n. (2004). universal politeness theory: application to the use of japanese honorifics. journal of pragmatics, 36, 1991-2002. haugh, m. (2007). the discursive challenge to politeness research: an interactional alternative. journal of politeness research: language, behaviour, culture,3, 295–317. holmes, j. (1992). an introduction to sociolinguistics. harlow: longman. ide, s. (1989). formal forms and discernment: two neglected aspects of universals of linguistic politeness. multilingua, 8, 223–248. lakoff, r. (1973). the logic of politeness: or, minding your p’s and q’s. papers from the 9th regional meeting. chicago linguistic society, 292-305. locher, m. (2004). power and politeness in action: disagreements in oral communication. newyork: mouton de gruyter. odlin, t. (1989). language transfer: cross-linguistic influence in language learning. cambridge: cambridge university press. shams, kazerooni (2015) gender, socioeconomic status, and politeness strategies: focusing on iranian high school students’ usage of request speech act: journal of applied linguistics and language research yu, m.c. (2003). on the universality of face: evidence from chinese compliment response behavior. journal of pragmatics, 35, 1679–1710. review of economics and development studies, vol. 6 (1) 2020, 204-215 204 individually perceived stress as a mediator between high accomplishment work practices and firm performance a areeba khan, b sulaman hafeez siddiqui, c sohail saeed, d asmara habib a department of management sciences, the islamia university of bahawalpur, bahawalpur, pakistan email: areeba.khan@iub.edu.pk b department of management sciences, the islamia university of bahawalpur, bahawalpur, pakistan email: sulman.siddiqui@iub.edu.pk c department of commerce, the islamia university of bahawalpur, bahawalpur, pakistan email: sohail.saeed@iub.edu.pk d department of management sciences, khwaja fareed university of engineering and information technology, rahim yar khan, pakistan, email: asmarahabib14@gmail.com article details abstract history: accepted 22 march 2020 available online 31 march 2020 this research paper investigates the mediatory effect of individually perceived stress in the direct relationship of high accomplishment work practices and financial performance of firm. this research narrates different mechanisms and procedure through which work practices enhances firm performance. cross sectional research design is opted for data collection purpose. data is collected from 500 employees of banking industry and analysis of data is done through confirmatory factor analysis and multiple regression analysis. the analysis of collected data shows that individually perceived stress significantly affects the direct relationship of high-performance work practices and firm financial performance. stress changes the direction of implemented practices in opposite direction due to which resultant results doesn’t match with the desired results. this paper contributes to literature by responding to the long waiting call for explaining importance of stress in high performance work practices and firm performance linkage. this paper also strengthens the literature by adding individual effect of four constructs of high performance work practices. current research also holds important and valuable implications for governing bodies or managing authorities of institutions. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: evaluation system, continuing education, flexibility, perceveid stress, firm performance jel classification: p36, p39 doi: 10.47067/reads.v6i1.196 corresponding author’s email address: areeba.khan@iub.edu.pk 1. introduction in current globalization world, firms are compelled to adopt different and unique procedures to keep competitive advantage with them in terms of shareholders, customers and employees. for better and rigorous performance, effective and efficient utilization of available resources is essential in context mailto:areeba.khan@iub.edu.pk mailto:sulman.siddiqui@iub.edu.pk mailto:sohail.saeed@iub.edu.pk mailto:asmarahabib14@gmail.com mailto:areeba.khan@iub.edu.pk review of economics and development studies, vol. 6 (1) 2020, 204-215 205 of firm. firm's effective internal control helps firm to take maximum advantage of external openings and selection of best possible available choices (cheng, 2014). firm's internal characteristics and control formulate firm's owned values and policies, these values and policies make firm influential in context of other firms (özçelik, aybas, & uyargil, 2016). in internal context of firm, work environment and employees are basic and preliminary concern for firm. as distinctive, highly motivated and competitive employees construct a healthy and positive firm's work environment (seong, 2011). successful and substantial firms create healthy and competitive work environment that elevate expertise, upgrade learning level and enlarge image of employees in terms of their performance (cheng, 2014). work environment also intimidate employees in putting extra efforts and time for progress of firm. employees’ distinctive characteristics and competencies place a strategic advantage for firm (cheng, huang, li, & hsu, 2011). energetic, devoted, self-assured and sanguine employees formulate a healthy and competitive work environment that withholds standing of firm strong and concrete. in such circumstances external destructive events have no deteriorating effect on groundings of firm (lengnickhall, beck, & lengnick-hall, 2011). communication fit; horizontally and vertically, among employees of firm and strategic objectives of firm ends up with successful completion of firm's overall growth and performance and also help employees in achievement of their individual goals (sunder, sadri, & sadri, 2014).employee involvement in firm's ongoing operational decisions and working devise a strategic fit between employer and employee. employees discipline and management of their work assignment enables the employees to work enthusiastically and actively and help him in timely completion of their assignment. apparently it's the firm whose performance is placed on external boards and presented to market and stakeholders, but in true essence it's the employees who are performing, and helping firm to stand firmly in market and among its competitors (rupp, wright, aryee, & luo, 2015). prosperity and downfall of firm depend heavily on firm's environment and its employees (jehanzeb & bashir, 2013). "to win in the market place you must win in the workplace (doug conant).” bundle of hpwps are applied to help build synchronization among firm and employees of firm. these practices help employees in understanding firm’s overall goals and motivate and encourage them to keep their individual goals in align with firm’s goals. this alignment helps firm in achieving overall expected growth (wei & lau, 2010). hpwps elevate expertise, upgrade learning level and enlarge image of the employee in terms of his performance. they also intimidate employees in putting extra efforts and time for firm’s benefit (saridakis, lai, & cooper, 2017). enhancement of employee’s expertise and proficiency in skills is done through inclusion of continuing education and training,error free performance evaluation system, participation and involvement in decision making, and flexible work environment (lai & saridakis, 2013). application of factors of hpwps is dependent on overall firm’s structure and culture (size of firm, employees of firm). practices behave different in different work environments; firms apply these practices according to their perception and consideration of work performance while keeping in view behavior of firm's own work environment (bromiley & ravi, 2016). in continuation of the above argument, researchers have witnessed a relationship of hpwp and stress, and hpwp and firm performance, but the mediating role of stress in the relationship of hpwp and firm performance is not yet been discussed. this study seeks to fill the gap by finding out “the impact of high performance work practices on firm performance with mediating effect of individually perceived stress" (topcic, baum, & kabst, 2016). current research has done major contribution to the hrm literature by discussing and analyzing individual impact of hpwps on financial performance of firm. it also review of economics and development studies, vol. 6 (1) 2020, 204-215 206 demonstrates the mediating role of individually perceived stress (ips) in the hpwp-firm performance linkage. current research also holds important and valuable implications for governing bodies or managing authorities of institutions regarding recruitment and selection of empoyees. it emphasises that firms should initially strive to recruit educated and energetic persons and then should groom them through proper training. firms should apply hpwps in accordance to their internal setup and structure and in liason to overall performance goals of the firm. as these practices stimulate employees individual performance to impact on overall performce of firm. 2. literature review 2.1 high performance work practices (hpwps) these practices are higher management's stratagem to positively influence overall performance of employees and firm (combs, liu, hall, &ketchen, 2006). these practices when applied in efficient manner throughout the firm they increase level of firm’s agility, individual's commitment, improve performance level (chow, teo, & chew, 2013), lower employee turnover, enhance creativity and create synchronization among the whole team (kim & kang, 2013). these positive developments build satisfaction level of customers and lead towards successful completion of desired firm's goals (gwaltney, 2013). different terminologies for work practices have been used in past; high performance work systems discussed relationship of performance and its related cost. it is quite difficult to streamline a specific bunch of practices that best elaborate the relationship of hpwps and firm performance. in this context, it is important to state different opinions. universal approach states that efficient performing hpwps in one firm can be implemented as it is to other firm, without considering any other context and change (huselid, 1995). on the other side, contingency perspective says that firms require different knowledge and skills for overall performance and growth (ruzic, 2015). whereas, amo theory suggests that there are three independent work system constructs that shape employee skills and characteristics and contribute positively to success of firm (appelbaum, bailey, berg, & kalleberg, 2000). these constructs are; ability of employee, motivation of employees and provision of opportunities for employees to contribute to firm. ability of an employee refers to his skills, experience, attitude and knowledge that help him in achieving different goals and fulfilling assigned tasks (boon, belschak, hartog &pijnenburg, 2014). continuing education and training are referred to as ability enhancing practice. motivation is defined as degree to which an individual participates in assigned duties and tasks (kim et al; 2013). performance appraisals and evaluation are considered to be one of the ways to increase motivation (demortier et al., 2014). for provision of opportunities to employees’ different ways are adopted by firms that help employees in participating for the development of firm. involvement in decision making as opportunity for employees to get involve in firm by all means, practically and theoretically (boselie, dietz, & boon, 2005). autonomy enhancing activities like flexibility and irregularity provide autonomy to employees at their work place (schimansky, 2014). these practices help employees in fulfilling their assigned targets without any hindrance and constraint. current study has opted for the following practices as shown in table 1. table 1 dimension of hpwps dimension practice references/resource ability continuing education & training sadri, 2014 motivation performance evaluation system bourne & bourne, 2012 opportunity participation in decision making kallaste &jaakson, 2005 flexible work hours west & dawson, 2012 review of economics and development studies, vol. 6 (1) 2020, 204-215 207 2.2 firm performance basic aim and objective of any business activity is maximization of profitability. organizational effectiveness encapsulates all factors relevant to functioning of firm (guthrie, 2001). firm's performance is considered to be an integral part of organizational effectiveness (gupta &kumar, 2013). it is normally depicted by operational and financial outcome (bititci et al., 2013). it measures how effectively assets and resources are utilized to obtain best possible outcome. it also checks out engagement level of employees, their work efficacy and knowledge utilization for achievement of desired operational results (guthrie, 2001). firm performance is divided into two groups; financial performance and non-financial performance. financial performance analyzed how well firm is satisfying its stake holders and investors (gupta &kumar, 2013). satisfaction of stakeholders represent performance outcome. customer satisfaction is also termed as measurement tool for financial outcome, because in current global and competitive business environment customer satisfaction and retention is one of the integral parts of measuring performance (selvam, 2016). it is strongly recommended to use hybrid of customerstakeholder perspective. financial performance is measured in terms of market share, profitability and growth. (selvam, 2016). whereas, non-financial performance is termed as strategic or subjective measures of firm’s performance (p. j. richard, devinney, yip, & johnson, 2009). it is measured in terms of customer referral rates(seong, 2011), revenue per employee, number of employees, employee satisfaction (retention of the valuable human capital), environmental performance, social performance (seong, 2011) and corporate governance (selvam , 2016). wei & lau (2010) suggested that these two measures serve their own perspectives so should not be treated as alternative of each other. current study focuses only on financial performance of firm. 2.3 financial performance market share and growth rate are used as measuring tools for investors and stakeholder’s satisfaction ( selvam, gayathri, vasanth, lingaraja, & marxiaoli, 2016). market share of firm helps investors and stakeholder’s to have relevant and important information regarding firm and their investment proposals and returns(tsay & goo, 2006). share price, changes in market value of shares, return on equity calculates firm’s numerical position in market. growth rate shows exact size of firm, what has been added in terms of assets, employees, infrastructure and technology? overall growth of firm adds economies of scale to firm and strengthen firm’s market position. growth factor is analyzed through market share growth, asset growth, net revenue growth, net income growth and return on assets. current study has analyzed return on assets (roa) and return on equity (roe) as measurement tools for firm financial performance (wei & lau, 2010). 2.4 individually perceived stress stress is basically a resultant factor of difference between work burden and capacity or capability of employee to handle it. stress affects both employee and employer. all levels of firm witness the effect of stress ( west & dawson, 2012).definition of stress changes with verification of central characteristics; these central characteristics include nature of stress full event and individual response to situation. widely use criteria to access stress are; environmental events or experiences (objective), psychological tradition (subjective) and biological approaches. there are different factors that cause stress like appraisals linked to performance, social evaluation and fear of failure ( wei & lau, 2010). employees perceive work stress as threatening or harm full. this perception causes mental break down or physical collapse. in addition to mental and physical damage stress also results in a financial loss to employee (hessel, vandoros, & avendano, 2014). in work environment, stress is divided into two items a) work content, b) work context. work content includes factors like, job diversification, job description, and job authority, whereas work context includes performance evaluation system, work hierarchy and work environment (leka, griffiths, cox, & organization, 2003). behavior or reaction of employees towards stressful situation narrates effect level of stress. employees react to stressful situations differently; one can be demoralized due to this feeling or one may quit the review of economics and development studies, vol. 6 (1) 2020, 204-215 208 job or decrease level of commitment. personality traits have a strong impact or relationship with the perception of stress (bartley & roesch, 2011). individuals with more self-confidence have lesser stress level than the ones with less self-confidence. current business world strongly favors concept of stress free work, because decrease in work stress and tension can automatically increase employee’s efficiency and effectiveness (luthans, avolio, avey, & norman, 2007). this increase in employee’s individual capacity will confirm overall rise in firm’s performance. researchers are of the opinion that workrelated stress badly affects work related feelings. work related stress causes distortion in employee’s working. mentally exhausted and physically dumped employee damages quality of services (boshof &mels 1994). 3. conceptualization of hypothesis 3.1 high performance work practices and firm performance continuing education and learning refers to that blend of resources, expectations and culture which motivate employees to enhance their working skills and capabilities during their course of work with firm (mallon & johnson, 2014). continuing education means an ongoing process of learning which helps firm in building sustainable organization, achieving better results and attracting high caliber talent. firms with ambitious performance culture pay full attention to employee’s improvement needs and make all necessary arrangement for fulfillment of these needs. development of employees is of paramount importance to achieve desired success level (coetzee 2014). for enhancing firm performance, it is compulsory to improve competency level of employees and for improving competency level of employees involvement in learning is recommended(sonnentag, niessen, & ohly, 2004).learning can be formal as well as informal; both effect level of performance of employees and firm (tannenbaum, beard, mcnall, & salas, 2010). formal learning includes organized and systematic learning whereas informal learning refers to experience based or observational learning. sources of informal learning are numerous and readily available and proved to be instrumental in enhancing work capabilities of employees (wang & noe, 2010). but to make things fruitful for firm it is necessary to utilize combine effect of both formal and informal learning, as single handedly no learning technique can provide maximum benefit. currently numerous firm’s learning and development departments are using old recommended thumb rule of learning “70:20:10 model” (1980). this model specifies that 70% of learning comes from work place environment, 20% through guidelines and criticism and only 10% relates with formal learning classes / training (kajewski & madsen, 2012). researchers have proved that poor management of employee training and development badly dampens overall performance of firm. properly managed strategies should be undertaken, which leads to successful achievement of firm performance goals (johnson et al 2012). h1a: there is a significant relationship between continuing education / training associated and firm financial performance. performance evaluations system also termed as “managerial processes” (u. s. bititci et al., 2011). basic aim of this system is to comprehend and improve employee’s performance. performance evaluation system is one of better ways to communicate employees regarding their work direction, their current performance feedback and intimidate them for better performance (bourne & bourne, 2012).researches have demonstrated that if evaluation system is followed by incentives, this makes employees feel as if they are treated fairly (khosa, rehman, asad, bilal, & hussain, 2015). this perception enhances their motivational level to perform better, influence their behavior and stimulate improvement action (bourne & bourne, 2012). performance evaluation system provides higher management with key points in relevance of employee competencies and firm’s internal sources review of economics and development studies, vol. 6 (1) 2020, 204-215 209 (koufteros, verghese, & lucianetti, 2014). these important points help them in taking strategic decisions to align employee’s competencies and firm resources in such a way to have maximum benefit for overall performance of firm thus creating a competitive advantage vis a vis market (sirmon, hitt, ireland, & gilbert, 2011). these practices help to create a coordination level among different tiers of firm. this coordination blends such a mixture of all resources so to achieve desired goals (chadwick et al., 2015). h1b: there is a significant relationship between performance evaluation system associated and firm financial performance. conflicts arise when there is lack of coordination and difference of interest in management and employees (lewicki, elgoibar, & euwema, 2016). employee’s involvement in decision making process helps firm to increase long term investment. employees intervention in strategic decision making gives them an authoritative feeling of controlling firm (pierce, kostova, & dirks, 2001). h1c: there is a significant relationship between participation in decision making and firm financial performance. flexibility in work hours is termed as a basic need of employees in current fast moving business world to meet assigned work targets along with family and social life (brough & o'driscoll, 2010). flexibility in work hours not only satisfies employees in terms of their work and personal life but also enhances their abilities and effectiveness towards overall success of firm (kossek & michel, 2011). flexible work hours stimulate positive feelings in employees and increase factor of happiness (golden, henly, & lambert, 2013). this stimulus improves performance of employees and impact positively on their performance. h1d: there is a significant relationship between flexible work hours and firm financial performance. h1: there is a significant relationship between high performance work practices and firm financial performance. 3.2 mediatory role of individually perceived stress in hpwps-firm performance linkage poorly managed and overly emphasized application of hpwps can produce negative impact on performance of employees. employees work for more hours and take tension to meet work demands and criteria of performance evaluation system (wei & lau, 2010). unfair means (inadequate leadership, low salary rise, appraisals without bonuses) adopted by firms to increase profitability of firm has a negative impact on well-being of employees (judge & colquitt, 2004). employees feel depressed if no monetary gain is provided to them. this phenomenon instead of improving numerical value of firm badly destruct the growth perspective of firm (decrease on number of employees) and satisfaction level of employees (masterson, lewis, goldman, & taylor, 2000).it is observed that motivation and appreciation in short run improve well-being of employee and in long run performance of firm (boxall & macky, 2014). undue pressure and reliance on hpwps results in work overload on employees (green, 2004) which increases level of stress and decreases benefits for employees (ramsay et al., 2000). unnecessary pressure on management to provide better and sometimes unrealistic performance goals results in a worse performance. implementation of procedures to improve firm performance in right direction can review of economics and development studies, vol. 6 (1) 2020, 204-215 210 reduce stress level of work environment which will prove to be beneficial for overall growth of firm (ambrose & schminke, 2003). h2: individually perceived stress significantly mediates the relationship of high-performance work practices and firm financial performance. 4. method 4.1 research setting, sample and procedure current research is termed as cross-sectional research and theoretical framework represented in figure 2. above mentioned hypotheses were tested with the help of data collected from employees of banking industry of pakistan. data is composed of responses from 500 employees of different banks in pakistan. collected data offers firm-level responses for institutional change occurred due to implementation of hpwps rated by general banking officers. it also provides information relevant to employee’s perception of different levels of stress and its after effects on employee’s performance. pakistan stock exchange offers yearly consolidated data of institutions in form of financial statements. financial data for last 10years was obtained from psx. figure 1 research model 4.2 measures data from sample respondents was collected through questionnaire. high performance work practices: through considering previous hr literature different items for hpwps were identified. researcher opted for those specific constructs that are aligned with contextual framework of paper based on amo theory (appelbaum, bailey, berg, &kalleberg, 2000).resultantly, index composed of four high performance work practices formulated as; continuing education, performance evaluation system, participation in decision making and flexible working hours. as per discussion in literature, constructs of hpwps were selected for realization of firm’s policies relevant to firm’s work environment. respondents answered questions for four mentioned constructs on a 5-point likert scale. to measure firm performance, numerical evaluation was used by the current study, therefore, financial statements were used to measure firm financial performance using indicators like, return on asset (roa)and return on equity (roe)(wei & lau, 2010). roa was calculated by dividing bank’s net income with bank’s total assets and roe by dividing net income with shareholder’s equity. 5. results and analysis collected data was analyzed using different statistical methods; reliability analysis, factors correlation matrix, exploratory factor analysis, confirmatory factor analysis and multiple regression analysis. table 2 shows reliability analysis of applied variables of study. cronbach α of variables was more than 0.80 which was higher than cut of point as suggested by hair et al 2010. individually perceived stress firm financial performance high performance work practices review of economics and development studies, vol. 6 (1) 2020, 204-215 211 table 2 reliability analysis of variables variables questions / items cronbach α continuing education 7 0.82 performance evaluation system 5 0.86 participation in decision making 5 0.95 flexible working hours 9 0.82 individually perceived stress 10 0.80 overall 43 0.84 factor correlation matrix as in table 3 and confirmatory factor analysis to test construct validity of items in table 4. cfa before and after drawing covariance of measurement model displays results of goodness of fit indices as per desired level. table 3 factor correlation matrix factor 1 2 3 4 5 6 1 1.000 2 .581 1.000 3 .190 .340 1.000 4 .383 .577 .387 1.000 5 .449 .687 .330 .555 1.000 6 .672 .693 .317 .611 .674 1.000 table 4 measurement model statistics goodness of fit indices desirable range measurement model before covariance after covariance absolute measures χ2 nill 561.495 502.989 nc ≤ 5 2.160 1.950 gfi ≥ 0.80 .886 .898 agfi ≥ 0.80 .858 .871 rmsea ≤ 0.08 .057 .052 incremental fit indices nfi ≥ 0.80 .897 .907 cfi ≥ 0.90 .941 .952 tli ≥ 0.90 .932 .945 6. hypothesis testing analysis of study was done through measurement of two hypothesis. hypothesis 1 states impact of four constructs of high-performance work practices on financial performance of firm through implementation of multiple regression analysis. results in table 5 shows that relationship between hpwps were positively related to firm financial performance with β=.087 and significance level of 0.161. second objective of research was to validate mediating effect of individually perceived stress on relationship of high-performance work practices and firm performance. results of analysis as in table 5 shows that ips positively and significantly mediates the hpwps-firm performance linkage. review of economics and development studies, vol. 6 (1) 2020, 204-215 212 table 5 path analysis path beta t sig objective i h1 hpwp fp .087 1.407 .161 objective ii h2 hpwp ps .294 5.772 .000 ps fp .122 1.978 .049 hpwp fp .087 1.407 .161 7. discussion current research has done major contribution to the hrm literature by discussing and analyzing individual impact of hpwps on financial performance of firm. previous studies have discussed high performance work system and employee creativity (g tang, 2017). few studies have explored the relationship of hpwps on overall performance of firm (bloom et al., 2012). but they haven’t explored the direct relationship of hpwps on financial performance of firm. results demonstrate that hpwps positively impact financial performance of firm. secondly, this study demonstrates the mediating role of individually perceived stress (ips) in the hpwp-firm performance linkage. previous researches suggest that it is crucial to explore the role of ips in the relationship of hpwp-firm performance (green, 2004). motivated to fill the said gap in literature, current study developed and tested hypothesis measuring mediating effect of individually perceveid stress in the invidual relationship of constructs of hpwps and firm performance. results of current study enhances working of previous studies. current research also holds important and valuable implications for governing bodies or managing authorities of institutions. first, study has explored employees as crucial success factor in case of customer-service oriented firms. firms should initially strive to recruit energetic, well-educated and enthusiastic employees and then theseemployees should be provided with different educational and recreational activities for constant improvement in their creative activities.second, firms should apply hpwps in accordance to their internal setup and structure and in liason to overall performance goals of the firm. as these practices stimulate employees individual performance to impact on overall performce of firm. third, management should keenly observe and mitigate factors that involve formulating stress among employees. study strongly supports that phenomena of perceived stress is as harmful as original stress. 8. limitations and future directions current study also holds certain limitations; first, data was collected restrictively from banking sector employees whereas future research can be done to explore work practices implemented on employees of different work industries. second, mediating role of individually perceived stress was analyzed in hpwps-firm performance linkage, future research can go for exploring level of firm help as moderating variable. 9. conclusion current study contributes to literature by analyzing mediating role of individually perceived stress in the relationship of high-performance work practices and firm financial performance. study also strengthens the literature by adding individual impact of mentioned constructs of highperformance work practices on firm performance. research witnessed that for improvement of overall performance of firm management should consider implementation of hpwps in liaison with firm’s internal environment and structure. review of economics and development studies, vol. 6 (1) 2020, 204-215 213 significance of research was four-fold that contributed both in theoretical and practical perspective. first, investigated the relationship of hpwps and firm performance in pakistan. second, investigated induction of mediating role of ips in direct relationship of hpwps and firm performance. third, provided 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(2012), “employee engagement and nhs performance”, available at: www. kingsfund.org.uk/leadershipreview (accessed 17 april 2012). review of economics and development studies, vol. 6 (2) 2020, 413-423 413 determinants of terrorism and its impact on economic growth: a panel study of south asian region a maria saddiqa, b shabana parveen, c sher ali, d waqas ahmed a phd scholar, department of economics, hazara university, mansehra, pakistan email: sweet_maria92@yahoo.com b assistant professor, department of economics, hazara university, mansehra, pakistan email: shabana_economist@yahoo.com c assistant professor, department of economics, islamia college, peshawar, pakistan email: drali@icp.edu.pk d lecturer, government post graduate college, mansehra, pakistan email: malik.waqas9390@gmail.com article details abstract history: accepted 25 may 2020 available online 15 june 2020 the objective of the study is to examine the key determinants of terrorism and its impact on economic growth in case of south asian region. panel data is used for the period of 1985-2018 for selected south asian countries. terrorism affected adversely most of the world’s regions since the start of the 1980s. the main issues which are faced by these countries are related to political or economic aspects like poverty, inflation, unemployment and repression. in present study we used the role of macroeconomic factors of terrorism. the study comprised of balance panel data and employed fixed effect model to analyze the determinants of terrorism in such a way that characteristics of each country can be taken into account. the findings of the study suggest that higher literacy rate determines terrorism, as confirmed by many studies, because the more people are educated the more knowledge they may have for making plans or strategies similarly, unemployment is not leading terrorism showing that more the people involved in terrorism are employed or experienced. a terrorist act destroys the infrastructure; people are afraid to move for their work in a terrorized society these results in low production and makes demand greater than supply consequently high inflation rate so economy has to pay higher economic cost in any form. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: terrorism determinants, economic growth, panel data technique jel classification: d72, d79, o47 doi: 10.47067/reads.v6i2.219 corresponding author’s email address: drali@icp.edu.pk 1. introduction terrorism was a limited phenomenon of middle east and south asia before the terrible event of review of economics and development studies, vol. 6 (2) 2020, 413-423 414 9/11/2001 when the terrorist attack on the world trade centre and pentagon shocked the global economy and influenced the socio-economic and geo-political ground of the world. since this horrible event of september 11, 2001, terrorism has become a familiar word for every one with negative conception (kellner, 2004). there are different types of cost of terrorism having their different impacts, like terrorism cost associated with law and order enhance the cost of military, police and judicial. when the aid and loans are given to a country in the result of a terrorism disaster then the cost takes form of influence on the political decision and thus becomes a challenge. social cost is in link with standard of living, health, education etc. which affects the poor sector of a country on a large scale. economic cost is related to the negative effect of terrorism on the growth enhancing programs of a country. it discourages foreign and local investors, damages infrastructure, deter consumer spending, depreciation of the currency, cause unemployment and thus hamper economic growth. for instance pakistan is under severe terrorist since mid 90’s. the average annual average growth rate was significantly above 5% till mid 90’s and since then this rate has declined to below 4% (calculations based on statistics reported in world development indicators, 2012). there can be numerous reasons of low economic growth; terrorism is one of them. terrorism, no doubt hampers economic growth by lowering foreign and local investment. but the more important issue is to look at the factors that cause terrorism in which low growth rate, inflation, inequality, unemployment, low literacy level, high population growth rate, ethnic and religious polarization, political structure, military expenditures, poverty, income inequality, regime durability, size of government, past incidences, trade openness, human development index, foreign aid etc are included (ismail and amjad, 2014). as if a country does not have a developed established economic system or is unable to fulfill the demand of its country men then it would cause negative effects on social, economic indicators of that country which may indulge people into terrorism activities. deterioration in investment, unemployment, inflation, inequality and poverty may intensify the feelings of anger, animosity which would be satisfied by participating in terrorist incidents. the studies like lawrence et.al. (1983), bloomberg et al. (2002), james and david (2003), quan and drew (2004), sharma kishor (2006) and carlos et al. (2007) showed in their results that it is low economic growth, democracy, high population growth rate, unemployment and inequality that lead to terrorism. however studies like freytag andreas et al. (2011), krisztina et al. (2010) and, caruso and schneider (2010) had shown that high economic growth can also cause terrorism. as increase in gdp growth in a country will improve the living and education standard thus humanizing the basic necessities thus there will be more consideration on technology and competition which leads to use of the technology and advancement in a wrong way, in order to compete over against their competitors. since 1985 south asia is suffering from high level of terrorist attacks; in these context 16,942 incidences of terrorism took place in south asia which is almost ¼ of the world wide terrorist attacks (global terrorism database). table 1.1 gives the summary of number of terrorist in the south asia along with other parts of the world since last twenty five years. table-1: numbers of terrorist attacks in south asia as well as other parts of the world years south asia rest of the world 1985 – 1990 3,115 (14.89%) 20,918 1991 – 1995 2,658 (10.11%) 26296 1996 – 2000 1,851 (18.57%) 9968 review of economics and development studies, vol. 6 (2) 2020, 413-423 415 2001 – 2005 1,879 (27.25%) 6896 2006 – 2010 7,439 (37.25%) 19,972 2011---2015 16,155(28.09%) 57502 2016---2018 16,466(48.31%) 34087 table 1.1 depicts that between 1985 and 1990, 20,918 incidence were occurred worldwide of which 14.89 % incidence took place south asia. this percentage though declined during 1991 – 1995, but thereafter it is continuously increasing. during 2006-2010 more than 37 percent of terrorist attacks took place in south asia region. while 2016-2018 its ratio increase very rapidly i.e 48%. these statistics clearly show that south asia is one of the largest victims of terrorism. in spite of being highly victim origin of terrorism hardly a few empirical analysis have been conducted to address this issue. nasir et al. (2011) work is notable that highlighted the determinants of terrorism by using the data of 1972 to 2006 for south asian countries. they found that both economic and political structure of a country leads to terrorism as high income inequality and deprivation in the political rights along with civil liberties are the major determinants of terrorism. moreover they found high literacy level is positively associated with terrorism. the study by nasir et al. (2011) covers the period till 2006. the most severe period in terms of terrorist attacks is from 2006 to 2010 (as shown in table 1.1). the present study attempts to analyze the factors behind terrorism in south asia. we shall extent the period till 2018 and shall also incorporate a few more determinants of terrorism. this study has a vital significance as it will be a comparative analysis of terrorism situation along with the impact of its on economic growth among four south asian countries. the study comprises of many sections, such as, after introduction in first section, review of the related studies is presented in next section. subsequently data and variables are explained in section 3. the next section is about methodology and estimation techniques and final section is about results and discussions and conclusion. alan and jatika (2002) analyzed the data of terrorist attack against israel between 70s and late 80s by conducting the public opinion poll in palestine. the public opinion showed that the rich and highly educated people are in favor of terrorist attacks against israel. on the same lines, bloomberg et al. (2002) investigated the importance of economic variables in determining the terrorist attacks by using the data of 127 countries for the years from 1968 to 1991. they found that high income and democratic countries experience more number of terrorist incidents, they also found that contraction in economic activity also leads to terrorist activities by bringing business cycles consequently enhancement in terrorist activities. in the same manner, carlos (2003) investigated the relation of deterrence effect, political effect and economic effects on terrorism for spain. the analyses were carried out from 1968 to 2000. he found that there is no significant influence of deterrence on terrorism but political effects significantly influence terrorism whereas economic effect on terrorism was unseen. similarly, james and todd (2004) quantified the relationship between economic growth and civil war by using the data of 84 countries for the period of 1961-1995 and reveled through results that poverty, political instability, barren terrain and large population are strong predictor for civil war as compared to ethnic and religious diversity. quan and drew (2004) estimated the effect of economic globalization on the number of transnational terrorist incidence within countries through the data of 112 countries from 1975 to 1997. they found that trade; direct investment and portfolio investment have an indirect positive review of economics and development studies, vol. 6 (2) 2020, 413-423 416 effect on transnational terrorist incidence but the economic development and the trading partners of a country reduce the number of terrorist incidence of that country. in short trade and foreign direct investment promote economic development thus it has a negative indirect effect on transnational terrorism. in another study of quan (2005) assessed the effect of democracy on transnational terrorism incidents for the data spanning form 1975 to 1997 for 119 countries. he found that democratic regime and economic development reduces the incidence of terrorism in a country, while income inequality and incidence of terrorism in past were positively associated with terrorism. kishor (2006), by using the data of country nepal for the years from 1974 to 2002 estimated the relationship between civil war and economic development. he found that development failure gives birth to civil war as once a country failed to achieve development it raise unemployment, poverty, rural-urban inequality which leads to frustration and resentment among youngster and provoke them for beginning of the civil war. similarly, peter et al. (2006) estimated the relationship of economic and political freedom with terrorism incidents for the data of 121 countries for the years 1996-2002. they found that political rights and civil liberty are negatively linked with terrorism incidents, whereas inequality, economic growth, poverty and education do not affect terrorism. atin and william (2007) demonstrated ethnic polarization as a determinant of terrorism. the analysis was based on 18 countries from 1982 to 1997. they found that high ethnic polarization leads to emergence of terrorism in those countries where there is a lack of economic freedom, thus roots of terrorism are economic rather than ethnic. likewise claude (2007) was a good empirical investigation at the micro level, in which he investigated the way through which terrorism is in linked with education and poverty. he used the data between the late 1980s and 2002. result showed that higher education and improvement in standard of living is positively associated with terrorism activities whereas the probabilities of getting married reduce the chance to be engaged in terrorist activities. carlos et al. (2007) analyzed the terrorist attack in africa against us citizens during 1978 to 2002. the study revealed that terrorist attacks are persistent and perpetuated in those countries which are characterized by poverty, low level of political and economic freedom. correspondingly thomas et al. (2009) identified the links between domestic terrorism and the rate of real gdp per capita growth in order to find either economic growth swayed the terrorism or terrorism affects growth negatively, they used the data of 7 western european countries for 1950-2004. they conclude that economic performance plays a role for determining the terrorist violence for some countries but terrorism never influences economic growth. andreas et al. (2010) tested in their working paper that poor socio-economic development is favorable or not for terrorism. they used data of five different samples of countries namely all countries, oecd countries, european countries, islamic countries, islamic countries excluding oil exporting countries for 1971 to 2005. they found that if countries are developed then they can get the benefits in terms of reduction in terrorism by increasing the opportunity cost of terrorism. krisztina et al. (2010) analyzed the determinants of domestic and international terrorism by using panel data set of 159 countries spanning from 1970 to 2007. they showed that gdp per capita, more open and competitive political system and more experiences of domestic conflicts leads to increase in international terrorism. raul and friedrich (2010) investigated the socio-economic causes of terrorism and political violence by using the data of 12 countries for 1994-2007. they found that greater the availability of the current economic opportunities for people, lower the chances to be involved in terrorist activities. moreover they also found that expected future review of economics and development studies, vol. 6 (2) 2020, 413-423 417 economic growth is positively associated with current terrorist activity which has been explained by productivity argument. james (2011) examined the relationship between poverty and terrorism by including a new factor of minority economic discrimination for the data of 172 countries and years from 1970 to 2006. he found out that economic status is a potential predictor of terrorism; moreover countries having high minority economic discrimination are more likely to face domestic terrorist attack than those countries where there is less minority economic discrimination. thus minority discrimination is a strong predictor of domestic terrorism. and clare (2011) examined whether the level of unemployment and higher education is in link with terrorist attacks. the analysis was based on 56 countries for the period 1980 to 2008. the study found that unemployment and population size are strongly related to terrorism but higher education has no significant relationship with terrorism. similarly, nasir et al. (2011) investigated the determinants of terrorism for selected south asia countries including pakistan, india, bangladesh and sri lanka. they analysis were based on data from 1972 to 2006. they found that economic growth has negative and inflation has positive effect on terrorism. after the above detail discussion this study aimed to trace out the macroeconomic determinants of terrorism affect economic growth in the selected south asian countries. in our analysis we analyze gdp per capita, inflation, literacy rate, freedom and unemployment rate as a determinant of terrorism for pakistan, bangladesh, india and sri lanka for the period of 1985 to 2018. 2. methodology the present study is based on selected countries of south asia (bangladesh, india, pakistan and sri lanka). the reason of selecting this region is that it is included in those regions which have been victim of terrorism in different periods. for instance, during 2005 – 2010 more than one-third of the global terrorist attacks were confined to south asia region. a south asian region consists of afghanistan, bangladesh, bhutan, india, maldives, nepal, pakistan and sri lanka, our study is restricted to bangladesh, india, pakistan and sri lanka. the reason of skipping other countries is non-availability of data. among the skipped countries, afghanistan is highly victim of terrorism, but data on other variables is not available. as far as period of analysis is concerned our data set is consisting upon the years spanning from 1985 to 2018 because in these years south asia faced terrorism at high level. 2.1 model specification and variables definition 2.1.1 the model since the objective of this study is to explore the role of major macroeconomic variables in determining the magnitude of terrorism. in specific our interest is to analyze how per capita gdp, inflation, freedom, literacy and unemployment affect terrorism. we are assuming in our model that the term fixed effect is because of the difference in the cross sectional units rather than time. the specified model is as follows for determinants of terrorism ∑ ( ) the subscript i is shows the cross sectional unit and t denotes the time. where, di = dummy variable for each cross-sectional unit, review of economics and development studies, vol. 6 (2) 2020, 413-423 418 pgdp = per capita gdp constant measured in us $, inf = gdp deflator as a proxy of inflation rate, fre = level of political freedom in a country, lit = literacy rate, un = unemployment rate. 2.1.2 variables description and data sources variables description and data sources are presented in the following table. table-2: data description (variables’ definition and data source) variable data source terrorist incidents number of terrorist incidents in a year global terrorism data base (gtd) per capita gdp gdp per capita (constant 2000 us $) world development indicator (wdi) inflation gdp deflator world development indictors(wdi) freedom average of political rights and civil liberties freedom house(fh) literacy rate percentage of the population above 15 who can read or write miscellaneous data source unemployment rate percentage of unemployed labor force laborsta by international labor organization and economic survey of pakistan 2.1.3 estimation technique this section elaborates the empirical model of the study for analyzing the determinants of terrorism. our study is based on four cross-sectional units and 34 years. therefore it is a balanced review of economics and development studies, vol. 6 (2) 2020, 413-423 419 panel data. panel data estimation can be analyzed by depending upon the assumption regarding the intercept term, slope coefficients and the error terms. as it will be wrong to assume that all countries are having same characteristics therefore we incorporate the cross country deterministic effect in the analysis through the varying intercept term. now there are two ways to incorporate deterministic effects in the model either in form of random effects model (rem) or fixed effects model (fem).fixed effects model allows the intercept term to vary across cross sectional units in order to capture the differences among cross sectional units because each cross sectional unit has different characteristics. in fixed effect model intercept may vary across time so that time effect can be captured. more over both cross sectional units and time effect can also be allowed to vary intercept term. these differences are taken into account by using the dummy variables in the fem model, after inclusion of the dummy variable fixed effect model is known as least square dummy variable model. in random effect model, the selected cross sectional units are taken randomly from a large set of population in which all cross sectional units have common mean value for intercept. the differences in the individual intercept term of each cross sectional units from this constant mean value are expressed in error term. in short we can say that in fixed effect model each cross sectional unit have its own fixed intercept and in random effect model mean value of all the cross sectional units is common intercept for all cross sectional units. the preference of fixed effect model over random effect model or random effect model over fixed effect model depends on the followings:  random effect model will be most appropriate when the cross sectional specific units are not correlated with the explanatory variable because the correlation between cross section specific units and explanatory variable makes the random effect model estimator biased which will not be biased in case of fixed effect model.  in fixed effect model, the least square dummy variable model can come across with the problem of degree of freedom when the cross sectional units are large in number but random effect model does not have such problem.  fixed effect model is preferred over random effect model when the number of time period is larger than number of cross sectional units due to convenience in computation.  if the cross sectional units are not taken randomly in the sample analysis then fixed effect model is most appropriate. when the cross sectional units are taken randomly then random effect model will be appropriate because the statistical inference of the estimators depends on the cross section units either they are observed or randomly drawings. we preferred fixed effect model over random effect model because we want to analyze the determinants of terrorism in such a way that characteristics of each country can be taken into account. 3. results and discussion review of economics and development studies, vol. 6 (2) 2020, 413-423 420 3.1 preliminary statistics of variables now we shall discuss the preliminary statistics of each variable. table 3.2 gives the average of different variable during the period of analysis. table-3: average statistics of each variable (1985 – 2018) bangladesh india pakistan sri lanka terrorism incidence 27.42 219.57 171.07 98.73 per capita gdp 360.58 436.09 515.56 802.23 inflation 5.57 7.37 9.67 9.58 freedom 3.71 2.78 4.71 3.80 unemployment rate 2.87 3.70 5.58 5.25 literacy rate 54.32 56.75 43.44 91.75 according to table 3.2 terrorist incidents remained high in india among all the south asian countries about 219.57 on average whereas pakistan faced 171.07 terrorist incidents as compared to india which is less, however there were less terrorist incidents in sri lanka and bangladesh. the statistics of per capita gdp reveal that on average sri lanka had highest per capita gdp, whereas bangladesh has the lowest per capita gdp. inflation and unemployment rate were high in pakistan among our all selected south asian countries with an average inflation rate of 9.67 and 5.58 unemployment rate. bangladesh had the lowest inflation as well as unemployment rate among these four south asian countries. since 1985 to 2018 india was the most democratic country and pakistan was the least, as the freedom rate was 2.78 in india and 4.71 in pakistan and when we look at the average literacy rate we found that sri lanka is the most literate society and pakistan is at bottom of the list. 3.2 results of the fixed effect model the results of our empirical analysis are presented in table 5.1. all the coefficients are significant except per capita gdp, the coefficient’s significance is showing that inflation, repression, literacy rate and unemployment rate is determining terrorism positively or negatively. if there is 1 unit change in per capita gdp it will bring 0.06 unit decline in terrorism incidence which is not significant because increase in gdp per capita will increase the share of investment, trade openness, government spending and decreases the inflation, unemployment, inequality, and poverty thus less the people use wrong ways for earnings and low incidence of terrorism. table-4: results of the estimated model variable coefficient std. error t-statistic prob. per capita gdp -0.064 0.095145 -0.677864 0.4995 inflation 10.359 2.675462 3.872023 0.0002 freedom -46.524 13.60143 -3.420531 0.0009 literacy rate 4.457 1.077633 4.136292 0.0001 unemployment -15.444 7.054014 -2.189425 0.0310 review of economics and development studies, vol. 6 (2) 2020, 413-423 421 rate fixed effects _pak—c 215.9114 _bng—c -32.16156 _ind—c 105.2191 _sri—c -99.49876 r-squared 0.355540 adjusted rsquared 0.301270 inflation is positively associated with terrorism incidence significantly. there will be 10.3 units increase in terrorist incidence due to 1 unit change in inflation. inflation is considered as an important determinant of terrorism because inflation reduces the purchasing power of money and makes a person unable to fulfill his basic needs which open wrong ways of earning in form of involvement in the terrorist activities. freedom is negatively associated with terrorism incidence showing more the repressive country will be there will be less terrorism incidence in a country. there will be decline in terrorism incidence of about 46.5 units in a country when there would be 1 unit change in repressiveness of a country. according to the results of this data set, repression is favorable for decreasing the terrorism as if there would be dictator ship or autocracy in these countries there will strict check and balance on all type of religious and political group demonstration that may lead to terrorism. literacy rate is positively and significantly related to terrorism incidence that 1 unit change in literacy rate will bring 4.45 units increase in terrorism incidence.it is because that literate people are better in handling the targets of a terrorist organization and helpful in making their plans. as far as unemployment is concerned surprisingly unemployment is not predicting terrorism. terrorist incidence decreases by 15.44 units if there occur 1 unit change in unemployment.it is because that a terrorist organization is preferring experienced people over non-experience so that they required less time to be trained as compared to unemployed who have no experience or we can say that most of people those are involved in terrorist incidents are employed or experienced and another reason of employed people to be involved in terrorist activities may be that there salary is not enough to fulfill their family needs so they use their experience or education in wrong way so that they can earn sufficient money. all the results are similar to the most of the previous studies predicting that lower level of per capita gdp, inflation, higher literacy rate and democratic political system leads to terrorism except unemployment which is not predicting terrorism significantly. 4. conclusion and policy implications we can conclude our results by saying this that as it has been obvious from many empirical works that higher literacy rate determines terrorism and explained by this arguments that more the people are educated more the knowledge they can have for making plans or strategies similarly unemployment is not leading terrorism showing that more the people involved in terrorism are employed or experienced. they have better skills used for the implementation of the plans of a terrorist organization. thus we can say highly educated and employed people can be a part of review of economics and development studies, vol. 6 (2) 2020, 413-423 422 terrorist organization more than illiterate and unemployed. a terrorist act destroys the infra-structure, people are afraid to move for their work in a terrorized society this results in low production and makes demand greater than supply consequently high inflation rate. thus we can see that in case of terrorism an economy has to pay economic cost in any form. we can see whenever there is low economic growth rate, high inflation rate it will reduce the purchasing power of country men and make them unable to fulfill their basic necessities, in such situation there is a need to provide more employment opportunities to qualified people and those who are already employed need to be provided high salary packages and other social benefits so that they cannot be exploited by terrorist organization. moreover there is a need to provide more political right to people so that they can convey their problems to their administrators rather than to solve by themselves in wrong ways. references arciszewski, t., verlhiac, j. f., goncalves, i., & kruglanski, a. 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(2006). the political economy of civil war in nepal. world development, 34(7): pp. 1237b bmm./1253. review of economics and development studies vol. 5, no 2, june 2019 245 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads an investigation into the role of leadership commitment on implementation of green banking: moderating influence of responsible leadership characteristics 1 aisha javeria, 2 sulaman hafeez siddiqui, 3 rabia rasheed, 4 muhammad shahid nawaz, 1 department of management sciences, the islamia university of bahawalpur, pakistan, aishajaveria@hotmail.com 2 lecturer department of management sciences, the islamia university of bahawalpur, pakistan, sulman.siddiqui@iub.edu.pk 3 assistant professor, department of management sciences, iqra university karachi pakistan, rabia7862009@live.com 4 department of management sciences, the islamia university of bahawalpur pakistan article details abstract history revised format: may 2019 available online: june 2019 the purpose of this study is to investigate the influence of leadership commitment on implementation of green banking in pakistan through the lens of moderating role of responsible leadership. the concept of green banking in modern banking industry is associated with pro-vision of environment friendly banking services through environment friendly banking operations and infrastructure. it can be referred to sustainable lending and depository product and services provide by banks through sustainable banking operations and infrastructure. an exploratory qualitative research design is used to postulate the theoretical model relating leadership role with implementation of green banking practices in pakistan. further studies are needed to empirically examine the postulated relationships signified by proposed model of the study. the proposed model and relationship will significantly contribute to better understanding of role of banks leadership towards transformation of conventional banking into sustainable banking practices and products. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords sustainability, green banking, leadership commitment, responsible leadership, banking industry jel classification: g20, m10 corresponding author‘s email address: aishajaveria@hotmail.com recommended citation: javeria, a., siddiqui, s. h., rasheed, r. and nawaz, m. s. (2019). investigation into the role of leadership commitment on implementation of green banking: moderating influence of responsible leadership characteristics, review of economics and development studies, 5 (2), 245-252 doi: 10.26710/reads.v5i2.561 1. introduction the concept of green in today‘s business life is associated with provision of environ-mental friendly goods and services. since last decade around the globe the one of the emerging concept in financial sector is green banking, it can be referred to environmental friendly lending and depository product and services provided by banks to its regular and prospect customers. the idea of green banking is already flourish in advanced countries and also under developed countries of asia; recently state bank of pakistan (sbp) on advice of pepa (pakistan environ-mental protection act-1997) initiated guide lines for green banking, 2017. in pakistan, sbp concept paper 2015 discussed following factors i.e. csr, environmental consideration, sustainability and economic benefits are four main reasons to adopt green banking by pakistani commercial banks. now a day‘s state is striving to amend product mix of recently pertinent energy sources to environmental http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no2, june 2019 246 friendly and reduced carbon product. many banks taken steps to usage of environmental resources by the adoption of green building, green it infrastructure and discontinuation of paper based banking, the adoption of paperless banking is utmost compliance of csr and environmental sustainable measure advised by financial and state regulator (sbp-2015).article 143 of constitution empowers federal government to act on behalf of government on global plate form to protect environment (pasha,2018) the time frame for implementation of gbg-2017 by commercial banks are one year from date of issuance, as such no past practice is seen in commercial banks of pakistan, we are starting from scratch and for this purpose we have conducted interviews from senior specialized bankers of different commercial banks. the major areas of emphasis are monitoring & control through proper reporting and documentation by applying environmental due diligence, risk rating and its categorization. however in light of regulator‘s guidelines, previous researches and above discussion we have deployed holistic framework for exploring the factors that facilitate the implementation of green banking in pakistan and would be a road map for future researches. the gbg clearly define the role of bank‘s management at every level, i.e adoption of green culture and resource efficient mindset in organization ,proper training of staff ,deployment of green human resource and environmental friendly products by diffusion of green information system. strategist should give attention to following three areas green business facilitation (gbf), environmental risk management (erm) and own impact reduction (oir) with equal importance, as banks are not directly contributing toward environmental destruction, but they may be the source to aid all these destructive activities. (gbg-2017).the appointment of resource efficient and wellequipped green banking officer is also stressed by sbp (gbg-2017) 2. literature review around the globe environmental concerns are earnestly discussed since last few decades. paris agreement-2015 deals with climate change it highlights lack of fund, poor infrastructure in developing countries, revamping lending structure, the 196 countries around the globe agree on the issue of global warming and keeping it below industry averages. to adopt environmental sustainable policy the paris agreement emphasis on offering on environmental friendly and less vulnerable product to effect climate.(the paris agreement 2015-16), with the global agenda of 2030 to attain zero emission of greenhouse gas by half of this century. nationally determined contributions (ndc) for individual countries to adopt measure to avoid such wastage of energy, revision of these measures as required within five years. unep highlight following the issues in implementation of green banking are lack of finance, poverty, informal financing, hawala hundi, lack of information, literacy level, tax evasion, absence of green investment opportunities, public awareness toward green financing.(unep-2016) now a days green curriculum e.g. green hrm, supply chain ,and strategic studies im-pact positively on product and services in shape of green staffing, human capital management ,branding and green marketing and sales as well (pavitra,2017), the environment and social developments. abn amro is one of the world‘s oldest bank creates a chair in the delft university of technology. the training of 600 relationship managers to educate customers regarding sustainable banking and training of suppliers to produce environmental friendly and energy efficient products is part of this case study. (abn amro-2016). the idea of green banking is already flourish in advanced countries and also under developed countries of asia, recently state bank of pakistan (sbp) on advice of pepa (pakistan environmental protection act-1997) initiated guide lines for green banking, (2017). the pdci report highlights the implementations issues in developing countries; pakistan is specially taken as prototype for regulators and provides guideline for implementation of green banking and sustainable financing. (pdci-2015). gap can be filled by establishment of green investment bank in developing countries. (josue, 2018), there is still a lack of awareness concerning the factors that influence a non-professional investor‘s use of sustainability information in the investment decision process (andrea-2016). with reference to subjected guideline by regulator and previous researches following gaps are identified, in order to implement green banking, the management should assign a senior manager as chief green banking manager (sbp-gbg, 2017), also there is a huge gap between green reporting initiative and green reporting guidelines (masud et al, 2018). after extensive research to comply with international and national regulator‘s obligation and literature review, we have found several impeding factors in implementation of sustainable or green banking in pakistan. luckily we have well defined procedure and guideline to facilitate dynamic forces for better applicability of sustainable banking. review of economics and development studies vol. 5, no 2, june 2019 247 green banking is not only a product or process to adopt it‘s indeed a transformation from conventional banking to sustainable banking, that‘s not only cover the environmental aspect of banking but also shields eco-system and all its stakeholders that plays a collaborative multiparty role and assure each other‘s interest by sharing their policies, guidelines, skills, infra-structures, human & financial capital, expertise & enterprise. the promising idea of sbp gbg policy and vision 2030 is key to achieve anticipated goals, by overcoming implementation issues banks can attain desired results. from literature review it reveals that banking industry is the primary financer of both individual and business sector, its act as an intermediary between regulator and customer that can play an important role in sustainable banking by adopting green banking in pakistan, from abrasion vision of bank‘s management or leadership is the key factor to nurture green banking. the role of leadership in implementation of green banking can be explored by the investigating leadership commitment level at calling, awakening and transformation stage halena,et al(2017) and designing a roadmap by integrating in-house and ex-house green banking practices with moderating effect of responsible leadership, sheetal patel(2018) , sadaf(2018). in contemporary studies banks are considered as more environment friendly institutions as they do not directly deteriorate atmosphere with pollutant material but they do contribute the same by providing facilities to their customer without practicing environmental due diligence sbp gbg,(2017), by adopting edd and policy guidelines by regulator and attaining desired knowledge and skills from academia‘s support. however, the basic research question is: at what stage perceived leadership commitment affects implementation of sustainable green banking, with moderating influence of responsible leadership characteristics? the paris agreement -2015 is designed by, unfccc, unep, and several other international and national regulatory bodies around the globe are working together to save eco-system by applying different theoretical models of financial, technological, behavioral, environmental and other protection measures in banking industry.(masud et al,2018). the influence of leader-ship commitments has been examined by classifying bank management into in-house and ex-house management (sbp-gbg17). in addition to benefit ecosystem as whole not concerning to only individual unit, it emphasis engaging end-user in the innovation process (edward-2018). this study is basically dealt with the transformation of banking industry from conventional to green banking. bank itself is the source of economic and social development through provision of goods and services in the society. the banking industry as whole for exploring in-house and ex-house issues of implementation of green banking ,by utilizing green it ,green hr, green finance and green reporting and monitoring 3. leadership commitment and sustainability challenge sustainability is major issue for leaders especially ceo, in present-day era of global antagonism and depression economic break down, technological revamping and environmental risk kalpana (2017). bass and avolio (1993) contributed in transformational leadership theories with context to servant leadership. contemporary researcher helena et al, (2017) make clear to different level of leadership either at calling, awakening and transforming. according to the un global impact report, 2010, sustainability is truly top ofmind for ceos around the world with 93 percent of them seeing sustainability to be vital to their company‘s future success (cooper et al. 2010). while the world valiantly fights the pentavalent crisis of economy, environment, society, governance and leadership, ceos grapple with a broader set of issues slowly burgeoning on the corporate surface. three-quarters of ceos suggest they would actively support new government policies that pro-mote ‗good growth‘ that is economically, socially and environmentally sustainable. pwc 14th annual global survey, 2011 according to the same report, new technologies are bound to play a vital role in embedding and enabling sustainability. ninety-one percent of ceos reported that their company would employ new technologies (e.g. renewable energy, energy efficiency, and information and communications technology) to help meet their sustainability goals over the next five years (cooper et al. 2010). review of economics and development studies vol. 5, no2, june 2019 248 figure1: proposed organogram for green banking office in context of sustainable green banking, the green banking guidelines (gbg) 2017 by sbp also states behavior & attitude toward environmental concern, change in market condition, indirect risk, direct and reputational risk, legal and regulatory risk, climate change, site, and sector are the few hindrance factors in adoption of gbg. alignment of gbg offices with resource efficient officers who are well-equipped with green banking knowledge and procedure and processes to further monitor and control the implementation process through strategy development to achievement of assigned targets.(sbp gbg-2017). in order to implement green banking, the management should assign a senior manager as chief green banking manager (sbp-gbg,2017).there is a huge gap between green reporting initiative and green reporting guidelines (masud et al,2018), (sbp-gbg,2017). perceived leadership commitments has significantly influence the implementation of green banking. 4. responsible leadership art of creating, and sustaining relationship ties with all stakeholders is called responsible leadership (rl) (maak and pless, 2006: 40). invigorating the ecological apprehension, managerial and organizational concerns are more associated to environmental sustainability. responsible leaders tend to be more sensitive toward natural environment and society while business planning (maak and pless, 2006), six predefined role of leader as servant , steward, architect, story teller ,coach and last but not lease as change agent (maak, pless 2006b) sustainable value creation and progressive conversion (zhiyong,2019). the society and environment are the key area of focus of responsible leadership (rl), rl always emphasize to transforms organization into socially responsible and sustainable organization, and this is the basic difference between rl and other form of leadership, zhiyong han et al (2019). zhiyong han et al (2019) also discussed the positive impact of responsible leadership (rl) on environmental citizenship behavior with context of environment, rl also have manifold moderating and mediating influence on organizational citizenship behavior. in supervision of proficient resource at ce level and establishment of green banking office, uti-lizations of less or both sides of paper, e-data base, estatement for customer, online communi-cations, using more daylight instead of electric lights, using energy saving bulbs. gbg (2017), unep (2016) yawider (2015), sharful (2015). green hrmvideo /audio conferencing in lieu of physical travel sensitize their staff regarding negative environmental implications of excessive usage of paper, conversion of bank‘s vehicles into cng or solar batteries, efficient use eco-font and printer cartridges, common use of table stationeries instead of individual use. all equipment powered by solar energy. sbp-gbg (2015,2017) vikas(2014) , gobinda(2015). studies reveals that employee interrelated training, daily operation associated run-through and bank‘s policy allied performance significantly influence on bank‘s environmental performance shumaya.et al (2017). equity bank kenya is one of the best examples of developing country. similarly responsible leadership influence on environmental social awareness, green financing shariful(2015), ieta(2016) and capacity building. maak et al, (2006) contributes idea of re-sponsible leadership by replicating transformational leader as change agent and supporter sus-tainable business with respect to different stake holders. encouraging borrowers to go green in-dustry good fit screening, extensive checklist provided by sbp for environment impact as-sessment (eia), rebate / subsidies on green financial products and services, legal and chief green banking officer regional gb in-house management branch gb inhouse management employee training & development regional gb ex-house management branch gb exhouse management review of economics and development studies vol. 5, no 2, june 2019 249 regu-latory reforms, coordination with vendors, management of indirect client risk in value chain (gbg,201517), (alurajah,2017), under supervision of dedicated and responsible leadership. responsible leadership characteristics has significant affect in relationship between perceived leadership and implementation of green banking 5. proposed model from literature review we have proposed a model and relationship that will significantly contrib-ute to better understanding of role of banks leadership towards transformation of conventional banking into sustainable banking practices and products. figure 2: proposed model an exploratory qualitative research design is used to postulate the theoretical model relating leadership role with implementation of green banking industry in context of pakistan. 6. limitations & scope for future study from literature review it reveals that green banking is to some extent already applicable in paki-stan but green banking is not implementing and yielding desired results with its true spirit and intensity to achieve sustainable banking. gbg(2017) unep(2016) green banking concept is more related to financing product and services which are more envi-ronmental sustainable and reduce carbon emission, the financing of green vehicle, green building and installation of solar panel to convert and use natural resource efficiently and assure sustainability. bangladesh is leading the green banking industry, india is also step forward in implementation of green banking than pakistan gbg(2017) unep(2016). following factors e.g mutable customer desires, protection policies, strict supervisory controls, altering technology and lack of sustainable. recently few researchers suggest that sbp should introduce flexible term green financing and islamic financing to enhance scope of renewable energy for greening econ-omy. sadia et al,(2018) few international studies by unep (2016-17), pdci (2016), wb clearly mentioned the imple-mentation dilemma in pakistan. for this purpose from scratch we have studied perceived leader-ship role in context of in-house and exhouse operations in light of guidelines provided by gov-ernment departments e,g epa(1997), pepa, sbp as regulator and monitoring authority and closely asses their working. in recent days green banking is on policy making stage, however contemporary studies emphasized on training and development under green human resource for promoting green banking businesses maeen et al,(2018) . being a responsible leadership, it‘s the responsibility of higher management to regulate the policy and procedure in supervision of skilled work force for green financial awareness programs tara (2016), sharif(2015), rah-man(2013), pasha(2018), which is the need of hour for professional and non-professional cus-tomer from general public as green investor and green creditors for better understanding of green banking demand masud(2018). further studies are needed on banking industry as whole for ex-ploring in-house and ex-house issues of implementation of green banking, by procuring the most of green it, green hr, green finance and green reporting and monitoring for betterment of future generation. review of economics and development studies vol. 5, no2, june 2019 250 references arulrajah, a.a, opatha, h.h.d.n.p. & na¬waratne, n.n.j. 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(2017). pricing of agricultural capital input in pakistan: an analysis of bound testing approach. journal of accounting and finance in emerging economies, 3(2) 101-110 doi: https://doi.org/10.26710/reads.v3i2.169 1. introduction pakistan is basically an agriculture country and agriculture have life-blood of pakistan’s economy. agriculture sector have most important in both national and international level. developed and underdeveloped countries have skipped the agriculture sector, before fifty years ago. in 1960’s, economists have realized the important of agriculture sector and burden of industries. in 1970’s to 1980s, the process of agriculture development increased day by day. 70% people of pakistan’s are engaged in village’s areas and almost 50% people belong to agriculture farming. the main developments features are labor force, growth rate of gross domestic product (gdp), foreign exchange earrings and land areas etc. in 1994, 4.5 % would have increase gdp but in 1996, gdp reached in 5.2 %. vegetables, fruits, wheat, cotton and rice are famous and important products of agriculture sector. according to north whitehead, “it requires a very unusual mind to undertake the analysis of the obvious”. 80 % nation’s exports depend on agriculture sector. agriculture sector gives the food and raw materials. the most important and essential crop is wheat and 14.4% contribute in agriculture fields. in 10 top countries of world, pakistan has existed to produce wheat crop. pakistan grows 8494 million hectors area with almost 2769 kg/ha yields. rice and cotton are also very important crops. in the developing countries of agriculture production, it is important to increase capital resources. generally, economist have fixed or operating as a division of capital goods. in the production process, contribution of fixed capital have not used immediately. that’s why; the term is commonly used for reference as tractors, trucks, pumps and hardware items for the collection. the work on capital is also involving the fertilizers that must be used in the process of production. the results widely known and http://www.publishing.globalcsrc.org/reads mailto:hinaali@wum.edu.pk mailto:hinaali@wum.edu.pk mailto:hinaali@wum.edu.pk https://doi.org/10.26710/reads.v3i2.169 review of economics and development studies vol. 3, no 2, december 2017 102 extensively studied the importance of capital goods, but they are generally less appreciate or recognized as a way of marketing is the process in a variety of price points. lower home price policy and interventionists that are follow by pakistan. government has a duty to maintain the balance of domestic price. most policy makers who back establish of price policy are moved their income in manufacturing sector. government controls the price policy through different mechanism such as fiscal and monetary situations, wage and interest rate, tax, subsidies, price stabilization and distribution of income etc. in 1960s, that’s time government had decided the three price policies like as voluntary sale, liberal subsidies policy and relaxed considerably policy. in liberal subsidies policies, tube-well, tractors and improvable seeds were included. in 1970s, due to devaluation of local currency, agricultural exports and monopolies of government had faced the deficit. in the period of 1980 to 90s, government had introduced the new agriculture policy. in 1981, agriculture price policy had been completely shaped such as support policy. due to this period, floating exchange rate policy had been applied. the devaluated of local currency, agriculture prices have different impact on exports, consumption, trade balance and foreign exchange rate on the product of agriculture sector. in the era of 2000s, due to bed governance and lack of funding, agriculture per year income increase by only 1 %. the higher prices of agriculture product are due to higher price of oil, whether situations and cost of energetic goods and have significant impact on prices of products especially in pakistan because pakistan is include in developing countries. 1.1 research objectives of this study the main objectives of this study are as follows: 1): to estimate the impact of prices on yield. 2): to analyze the effect of growth rate (gdp) on yield. 3): to measure the situations of imports and exports on yield. 4): to reveal the pricing of agriculture inputs in pakistan. hypothesis: h0: prices of agriculture inputs do not have significant impact on pakistan. h1: prices of agriculture inputs have significant impact on pakistan. 2. review of literature ahmad et al. (2008) examined the total productivity factor in the field of agricultural sector. in 2008, total factor productivity (tfp) had raised at the yearly average rate of 0.28 percent. time series data was used from 1965 to 2005. this study used the growth accounting method. the result of this study proposed that total factor productivity and value added had a vital role in agriculture sector. ahmad et al. (1999) pointed out the size of farm and land productivity. data was time series and applied the cob-douglas production function. land, output, fertilizer and tenants’ farm were variables that used in this study. the epitome of this paper proposed that land productivity and farm size had negative relation so that agricultural production was become very low. technical efficiency had positive relation with farm size. hsu et al. (2003) identified the china’s agriculture of total factor of productivity (tfp). this study consists of 27 provinces which covered the time period from 1984 to 1999. they used the econometric technique of ordinary least square (ols). total factor productivity (tfp) was calculated by malmoquist index. the result of this paper was that latest technology had given the higher productivity but the method of traditional was gave the less production. hassan et al. (2005) presented the mixed farming region of wheat farming especially in punjab province. review of economics and development studies vol. 3, no 2, december 2017 103 they used the wheat seeds, ploughing, irrigation and water charges were taken as variables. cob-douglas production function was used to estimate the analysis. the final suggestion of this paper explained that wheat crop had increased by increasing level of irrigation, fertilizer and ploughing. kiani (2008) analyzed the relationship between farm size and productivity especially in pakistan. annual time series data was used in this study. this paper applied the cob-douglas function of production. he took the variables of labor, farm size, cropping intensity, output land, tractor and fertilizers. productivity per acre and firm dimension had negative related with each other. he also discussed the place of rural labor market which had two determinants. hired labor and family labor were these two determinants. he also suggested that government should be removed or banned the higher price which had given on harvesting capital. olajide et al. (2012) revealed the relationship between economic growth and agriculture resources in nigeria they used the ordinary least square (ols) to estimate the data. they spanned over from the phase of 1970 to 2010. they took only two variables such as gross domestic product and agriculture output. international monetary fund’s (imf) and central bank of nigeria (cbn) were the sources of gathering data. the conclusion of this study proved that gross domestic product had positive related with agriculture sector. 34.4 percent agricultural sector had involved the economy development. ilyas et al. (2011) estimated the components of manufacturing of value added. this study was existed in pakistan. they had used yearly time period from 1965 to 2007. they determined the three components such like trade openness, total factor productivity and investment of price level. they had applied the bound testing approach to integration. world bank and federal bureau of statistics were means of collected data. the result of this study showed that both in short and long run, total factor productivity (tfp) had the most important and significant determinant in value added of manufacturing. trade openness and investment of price level had insignificant and negative impact on manufacture of value added. chaudhry et al. (2009) found the factors of yams productivity in punjab province of pakistan. they had taken the variables of plant protection, seed and sowing, yield per acre, cost of cultivation, irrigation and labor cost. they used the secondary time series data. ordinary least square (ols) and cobdouglas production function were both econometric technique that were used in this study. this study showed that worth of production would rise due to better seeds and water irrigation. ghafoor et al. (2010) worked at the factors impact on saving and investment on the small stage. primary data was used in this study. they had existed in sargodha district. saving of farmers, food consumption expenditure, age, health expenditure, family and agriculture expenditure, credit instalments, income of farmers, non-food expenditure, land holding were those variables that used in this paper. conclusion of this study proposed that small household earnings had negative impact on agriculture products so that farming households want to provide the credit at small interest then it can become to develop the agriculture sector. second important thing was that latest technology should be introduced for the small households at the lower prices. they bought the new technology to enhance the agricultural-sector. raza and siddiqui (2014) supported the outputs of agricultural determinants. annually time series data was used which coated data from 1972 to 2012. they applied the johannsen co-integration technique to estimate the empirical analysis. in this study, they had taken the variables of water availability, agricultural outputs, numbers of tube well, fertilizer consumption, numbers of tractors and labor in agriculture sector. they finally found that a large numbers of tractors had played a vital role in agriculture output. they also concluded that many labors, better seeds, many tube wells and availability of water had positive relationship with agriculture output. review of economics and development studies vol. 3, no 2, december 2017 104 3. data and methodology for assembling the model, i used the time series data of 41 years. this study covered the time phase from 1974 to 2014. in this paper, the econometric technique of auto regressive distributed lag (ardl) is applied. unit root of augmented dickeyfuller (adf) test also used to estimate the stationary of variables. all variables data are secondary that are taken from various sites. agricultural statistics of pakistan, state bank of pakistan (sbp) and world bank are sources to collect data. table 1: list is outcome and covariates variables. variables description of variables unit of measurement yield gdp price exr agri_ emp agri_ imp agri _exp ld yield gross domestic product prices of product exchange rate agriculture employment agriculture import agriculture export land million (rs) million (rs) billion (rs) 2010=100 million (rs) billion (rs) billion (rs) million (hectares) source: sbp and pakistan’s agricultural. 3.1 description of variables the descriptions of variables are as follows: 3.1.1 yield quantities of crops have measured of а harvest that is cultivated on per unit of land portion. the measurements of crops are mostly coated for grain and cereal which are generally measured in kilograms per hectare. it is also known as “agriculture output”. 3.1.2 gross domestic product the average value of goods and services are produced by domestic level within one year is called gross domestic product. it is very important indicator that is used to calculate the production and output of economy. gdp also included the total consumption, investment and government expenditure. 3.1.3 exchange rate the conversion of one nation currency into other nation currency. there are two components of exchange rate. one of the domestic currency and other is foreign currency. it can be estimated both indirectly and directly. the direct method is price of one unit of foreign currency into change in domestic currency and second method is the price of one unit of domestic currency into change in foreign currency. 3.1.4 price in commonly, price is those amount or payments that are given by one group to another in get back for produced things. most economists say that free market price system is determined by the intersection of demand and supply. 3.1.5 land agricultural land is known as crop land. agricultural ground has normally converted into agricultural side. for human being, cattle and production of yield food is the systematic and control usage. farming ground are being included land under forever harvest, arable land and permanents meadows. 3.1.6 agricultural employment agricultural labors are almost 1.3 billion in all over the world and 40 % of the world workforce. review of economics and development studies vol. 3, no 2, december 2017 105 employers are those people who work at public and private level and get remuneration in the form of salary, tips, wages and commission etc. 3.1.7 agricultural imports agricultural imports are those which bought from the other countries. in pakistan, the value of agriculture raw material imports were 4.29 in 2011 but it would increase in 6.17. in pakistan’s budget, imports has greater than exports that’s why economy has destroyed day by day. 3.1.8 agricultural exports goods and services produced in own country in which send to other countries for sell. usually, pakistan’s do lower exports and higher imports. according to food and farming ministry, pakistan have exported for fruits by 120 billion and 19 billion of fishes exported during 20092010. 4. econometric issues this portion consists of the important of econometric issues such like order of integration, bound test approach, and error correction model (ecm) and long run approach. augmented dicker fuller (adf) test is applied to estimate the unit root. when augmented dicker fuller (adf) result’s shows that some variables exist at level and some are exist at 1 st difference, it means that auto regressive distributed lag (ardl) must be used. ardl is used to examine the short run and long run relationship between variables. table 2. unit root of adf variables level 1 st difference conclusion yield -----------10.87* i(1) gdp -5.99* -----i(0) land -----------7.77** i(1) price -4.65*** ----i(0) ex ------4.36** i(1) agriemp ------9.73** i(1) agri – imp -5.99*** --------i(0) agriexp --------6.96*** i(1) source: (*, **, ***) shows that variables at significance at 1%, 5% and 10%. the above table shows that the result of augmented dicker fuller test of gross domestic product, price and agriculture imports are stationary at level and other variables are stationary at first difference. model specification: equation 1: y = f (yd)........ (1) where equation 1 present: y= output yd= yield equation 2: yiеld=α+a1(pri)+a2(gdp)+a3(еxr)+a4(land)+a5(agri_еxp)+a6(agri_imp)+a7(agri_еmp)+ε there are some particular variables that effect on yield such as price, gross domestic product, land, agriculture employment, agriculture imports and agriculture exports. now equation 2 is converted into ardl equation. ardl equation: ∆𝑌𝐼𝐸𝐿𝐷t= 𝑎0 + ∑ 𝛼 𝑘1 𝑖=1 1t ∆(𝑌𝐼𝐸𝐿𝐷)t-i + ∑ 𝛼 𝑘2 𝑖=0 2t ∆(𝑃𝑅𝐼)t-į +∑ 𝛼 𝑘3 𝑖=𝑜 3t ∆(𝐺𝐷𝑃)t-į + ∑ 𝛼𝑘4𝑖=0 4t ∆(𝐸𝑋𝑅)t-į + ∑ 𝛼 𝑘5 𝑖=0 5t ∆(𝐿𝑎𝑛𝑑)t-į + ∑ 𝛼 𝑘6 𝑖=0 6t ∆(𝐴𝑔𝑟𝑖_𝑒𝑥𝑝)t-į + ∑ 𝛼𝑘7𝑖=0 7t ∆(𝐴𝑔𝑟𝑖_𝑖𝑚𝑝)t-į + ∑ 𝛼 𝑘8 𝑖=0 8t ∆(𝐴𝑔𝑟𝑖_𝑒𝑚𝑝)t-į + ∅1 (yiеld) t-1 + ∅2 (pri) t-1 + ∅3 (gdp) t-1 + ∅4 (еxr) t-1 + ∅5 (land) t-1 + ∅6 (agri_еxp) t-1 + ∅7 (agri_imp) t-1 + ∅8 (agri_еmp) t-1 +𝜀t this equation shows the short run and long run equation between dependent and independent variables. review of economics and development studies vol. 3, no 2, december 2017 106 table 3. bound test. f – value 3.46 critical bound values lcb ucb 10% 1.92 2.89 5% 2.17 3.21 source: computation based on software review 9.5 the above table shows the bound testing result. if f value is greater than upper bound value then long run will be exist while if f-value is less than upper bound value it means that long run does not exist. this study shows that the long run relationship does exist. table 4: bound test. r 2 adjr 2 akaike schwarz darbin-watson 0.98 0.97 11.54 12.14 2.01 source: author’s estimation. 98 percent variation in yield variable is due to independent variables of price, land, gross domestic product, agricultural employments, agricultural imports and agricultural exports. the value of durbin watson shows that auto correlation does not exist. estimation of long run analysis: the long run equation and table are as follows: yieldt = ղ0 + ∑ ղ 𝒌𝟏 𝒊=𝟏 1i (𝒀𝑰𝑬𝑳𝑫)t-į +∑ ղ 𝒌𝟐 𝒊=𝟎 2i (𝑷𝑹𝑰)t-i + ∑ ղ 𝒌𝟑 𝒊=𝟎 3i (𝑮𝑫𝑷)t-i + ∑ ղ𝒌𝟒𝒊=𝟎 4i (𝑬𝑿𝑷)t-i + ∑ ղ 𝒌𝟓 𝒊=𝟎 5i (𝑰𝑴𝑷)t-i + ∑ ղ 𝒌𝟔 𝒊=𝟎 6i (𝑬𝑴𝑷)t-i + ∑ ղ𝒌𝟕𝒊=𝟎 7i (𝑳𝑨𝑵𝑫)t-i + ∑ ղ 𝒌𝟖 𝒊=𝟎 8i (𝑬𝑿𝑹)t-i +𝜺t in the long run, the analysis shows the relationship between yield and prices has negative and insignificance (matthias kalkuhe and jоachim vоn braun (2014)). the positive and significant relation established between land and yield. the relationship between gross domestic product and yield is significance and positive and this study confirm the result that is written in brackets “(olajidе, о.t., akinlabi, b. h. and tijani, a.a. (2011)”. exchange rate and yield have a positive and significant relation (riaz hussain (2015)).yield with import; export and employment have insignificant but positive relation among (david bоansi1, bоris odilоn kоunagbé lоkоnоn2 and jоhn appah (2014)). table 5. long run analysis. calculation finds out the review 9.5 long run coefficients variable coefficient std. error t-statistic prob. land 0.000277 0.000116 2.392984 0.0249 pri -6.715641 8.869644 -0.757149 0.4563 gdp 16.516976 5.188907 3.183132 0.0040 exr 783.294961 390.077687 2.008049 0.0560 agri_emp 14.213289 15.737069 0.903173 0.3754 agri_exp 3.491208 7.886175 0.442700 0.6619 agri_imp 44.525846 58.866156 0.756391 0.4568 c -3306.80... 1155.893409 -2.860825 0.0086 http://ajae.oxfordjournals.org/search?author1=matthias+kalkuhl&sortspec=date&submit=submit http://ajae.oxfordjournals.org/search?author1=joachim+von+braun&sortspec=date&submit=submit review of economics and development studies vol. 3, no 2, december 2017 107 explain the short run analysis the short run analysis shows that the variables relationship in short period. in the short run, co integration equation value must be negative and have a significant. in short run, exchange rate has negative relation with yield but have a positive relationship between yield and exchange rate. table 6. short run analysis. source: calculation based on reviews 9.5 test for stability the test for variables stability for short run and long run also rise through the “cusum” and “cusum square” diagram. cusum and cusum square are significant at 5 % level. figure 1. cusum figure 2. cusum square cointegrating form variable coefficient std. error t-statis tic prob. d(yield(-1)) -0.329603 0.107146 -3.076193 0.0052 d(land) 0.000244 0.000038 6.494314 0.0000 d(pri) -4.543272 2.771078 -1.639532 0.1141 d(gdp) 1.992348 1.077315 1.849365 0.0768 d(exr) -955.222313 377.228920 -2.532209 0.0183 d(agri_emp) 4.474471 4.444873 1.006659 0.3241 d(agri_exp) 1.159381 3.722650 0.311440 0.7582 d(agri_imp) 1.978771 11.426298 0.173177 0.8640 cointeq(-1) -0.490440 0.078124 -6.277746 0.0000 cointeq = yield (0.0003*land -6.7156*pri + 16.5170*gdp + 783.2950 *exr + 14.2133*agri_emp + 3.4912*agri_exp + 44.5258*agri_imp -3306.8091 ) -15 -10 -5 0 5 10 15 92 94 96 98 00 02 04 06 08 10 12 14 cusum 5% significance -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 92 94 96 98 00 02 04 06 08 10 12 14 cusum of squares 5% significance review of economics and development studies vol. 3, no 2, december 2017 108 5. conclusion in this study an attempt is to get the price of capital inputs in pakistan. this study attempts the time period from 1974 to 2014. furthermore, auto regressive distributed lag (ardl) is use to check the long and short run variables relationship. similarly, augmented dicker fuller test (adf) apply to examine the order of integration. the result of this study shows that price of capital and yield has negative and insignificant relation both short and long run and exchange rate are negative in short run and have positive in long run. so, prices of input capital are very high and farmers does not reach the purchased it and in this result production are very litter. government should make the price policy on the capital inputs. that, way the production will increase to use these inputs capital. references abid ,a. 2010. an analysis of bt cotton cultivation in punjab, pakistan using the agriculture decision support system (adss). ag. bio forum. 13: 274287. ahmad, k., and ilyas, m. 2011. trends in total factor productivity in pakistan manufacturing sector. interdisciplinary journal of contemporary research in business, 2(10), 81. ahmad, s. 1996. an investigation into the economic viability of small farmers in punjab (a case study of tehsil melsi of vehari district)". m.sc. thesis, deptt. of agri. economics, university of agriculture, faisalabad–pakistan akinboyo, o.l. 2008. five decades of agricultural policies: what role has statistics played? cbn bullion, 32: 134 – 165. alderman, h. m. ghaffar, c. and marito g. 1988. household food security in pakistan: the ration shop system islamabad: pakistan institute of development economics, and washington, d.c.: international food policy research institute. 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(eds.) socioeconomic research studies 2005-2006 punjab. nadeem, m. and d. byerlee. 2000. productivity growth and resource degradation in pakistan’s punjab: a decomposition analysis. world bank policy research, working paper no. 2480 of pakistan, m. phil. thesis submitted to quaid-i-azam university, islamabad. olajide, o. t. akinlabi, b. h. and tijani, a. a. 2012. agriculture resource and economic growth in nigeria. european scientific journal, 8(22). raza, j. and siddiqui, w. 2014. determinants of agricultural output in pakistan: a johansen co-integration approach. academic research international, 5(4), 30. salam, a. 1981. farm tractorization, fertilizer use and productivity of mexican wheat in pakistan. the pakistan development review 20 (3): 323–345. sial h.m and carter m.r. 1996. financial market efficiency in an agrarian economy: micro econometric analysis of the pakistan punjab. the journal of development studies, 32:771-798. review of economics and development studies vol. 3, no 2, december 2017 110 review of economics and development studies, vol. 6 (2) 2020, 301-313 301 determinants affecting governance in response to economic development in the developing countries: evidence from pakistan a nisar ahmad, b sumaira rehman, c m khyzer bin dost a, b & c superior university, lahore-pakistan article details abstract history: accepted: 15 may 2020 available online: 15 june 2020 the governance system of any country is required to be stable in any country. this study is the initial attempt to find the determinants of governance in pakistan. the data has been collected from world bank data bank from 2002-2016. the correlation test and structural equation modeling is applied to the data. the governance is the construct variable in structural equation modeling. the results shows that voice and accountability, political stability and violence terrorism, government effectiveness, gross domestic product per capital growth, gross national index growth. gender diversity and human development are the factors of governance in pakistan. it can be argued that regulatory quality, rule of law and the control of corruptions are not the confirmed factors of governance the latent variable in pakistan. i can say that regulatory quality is not important for the governance. the regulatory quality is not important factor for governance in pakistan but voice and accountability, political stability and the government effectiveness are the confirmed factors for the governance. the governance in pakistan is poor but other determinants are of economic growth and developments are improving so this shows that if policy makers want to improve the governance determinants then it will have positive effect on the economic development. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: governance, structural equation modeling, correlation, gender diversity and human development index, determinants jel classification: g34, g39, c30 doi: 10.47067/reads.v6i2.208 corresponding author’s email address: m.khyzer@superior.edu.pk 1. introduction after the episodes of wars and cold war, the world demands for advancement in accountability and transparency in political reforms (knack, 2001). during this vein, the unbearable corruptions unveil the flaw of social and political inappropriate and ineffective systems (rontos, salvati, sioussiouras, & vavouras, 2013). the governance of the world has faced to and fro phases after the failure of long episodes of reforms. especially the borrowing countries did not realize the importance of governance issues (salvati, vavouras, & rontos, 2013). the world witnessed the development problems of africa and the huge corruption during international aid distribution led to governance crises (killander, 2008).governance is basically the other name of exercising political power to control the review of economics and development studies, vol. 6 (2) 2020, 301-313 302 internal and external affairs of the nation (kaufmann, 2007). the system of governance requires political reforms to tackle the corruption by applying the accountability and sound frameworks of improvements (ronto, syrmali, & vavouras, 2015). the role of governance is the integral part of research because the researchers look for deeper determinants of governance for an economy. because governance assures accountability and accountability assures the corruption free culture (acemoglu, johnson, robinson, & yared, 2005). corruption free culture is the cause of economic and financial growth of any economy. the economic growth of any country depends upon the innovation and capital accumulation and other factors (rosenberg, 2004). the innovation will be introduced once the researchers and quality producers are motivated and protected. the issue of governance has been extensively discussed by researchers in the literature. the researchers always put emphasis on the importance of governance, the policy makers are always addressed by economists and researcher about the importance of governance for any country. governance is associated with different factors including economic, social and political factors. it is highly influenced by high growth rates, high per capita income and high human development standards. due to its multidimensional nature, the researchers do not have clear consensus on the issue of governance; neither has agreed on a general definition of governance (kjaer, 2011). researchers follow their own definitions depending upon the framework of their own focus apart from the possible actual definition based on economic aspect of governance. most of the researchers follow the definition given by the world bank (rontoet al., 2015). the world bank defined the governance as “governance is defined as the manner in which power is exercised in the management of a country's economic and social resources for development. good governance is synonymous with sound development management” (world bank, 2018). another definition of governance is “governance consists of the traditions and institutions by which authority in a country is exercised, this includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them” (world bank group, 2018). 2. research gap the issue of governance has been extensively discussed by researchers in the literature. the researchers always put emphasis on the importance of governance, the policy makers are always addressed by economists and researcher about the importance of governance for any country. governance is associated with different factors including economic, social and political factors. it is highly influenced by high growth rates, high per capita income and high human development standards. due to its multidimensional nature, the researchers do not have clear consensus on the issue of governance; neither has agreed on a general definition of governance (kjaer, 2011). 3. problem statement all the challenges which arise for government in making governance for the people and other dynamics that are mentioned in the above section makes it crucial for all the stakeholders to study that how the aspects of a national governance can influence the performance of the government. although number of researches are conducted to study the ups and downs of the governance but still a lot is known in terms that on what line of thoughts, the government makes its performance and to know that it is crucial to explore the effects that what kind of policy influence the national governance in what way. the current study has taken under study that the capacity of the government to effectively formulate and implement sound policies and the respect of citizens and the state for the institutions that govern economic and social interactions among them (world bank group, 2018). review of economics and development studies, vol. 6 (2) 2020, 301-313 303 4. hypotheses related to factors affecting governance in pakistan the hypotheses of the study are based on the research questions. h1a: the gdp per capita has positive impact on the governance h2a: the gni per capita has positive impact on the governance h3a: the gender diversity has positive impact on the governance h4a: the hdi has positive impact on the governance 5. determinants of governance while defining the governance the world bank has primarily focused on the reforms of public and private sectors in the country. the good governance is the basis of equitable development. the equitable governance depends on the sound economic and political policies and reforms. many researchers argue that good governance is based on public sector reforms. the world bank signifies three dimensions: i. the political regime. ii. the process of management reforms in which the policy makers of a country develop reforms by using social and economic resources of the country. iii. the capacity of the policy makers to design and implement the policies for controlling corruptions. the definition of governance covers the following broad points: a. the governance is the corruption free process by which the governments are elected, properly monitored and held accountable for any corruption. b. the process by which the government can develop effective policies for the betterment of the country. c. the governance is necessary so that respect of every citizen is secured and every citizen may have social and economic freedom. the governance determinants are based on six key aspects. these six dimensions of governance are discussed in detail with their ability to measure as following: 1. voice and accountability (va) 2. political stability and absence of violence/terrorism (psavt) 3. government effectiveness (ge) 4. regulatory quality (rq) 5. rule of law (rol) 6. control of corruption (coc) 6. literature review and governance theory governance and government are two different concepts. governance is old concept and whereas the government is a variable which develop the set of policies and rules to implement governance system in the country. governance is a basically an institutional capacity of the system developed by the government which ensures the accountability, effectiveness, transparency and impartiality. the governance outcomes are measured by using its types (iqbal & shah, 2008). the responsive governance is the one in which the system of governance ensures the public services according to review of economics and development studies, vol. 6 (2) 2020, 301-313 304 citizen requirements. this style of governance is committed to provide the safety of life and the properties of general public. the freedom of expression can be practicable in responsive governance system. over all the responsive governance is committed to improve the quality standards of life in the system (iqbal & shah, 2008). the fair governance fulfills the expectations of the citizens. this style of governance is also committed to add value to the citizen life standards. this style ensures the equality by providing the fair access of public services to poor peoples and minorities. the biggest problem in any country is the discriminations in enforcement of law and this fair governance style ensures the nondiscriminatory enforcement (iqbal & shah, 2008). another style of governance is responsible governance. this governance style is transparent and open. it works better with less cost. it ensures the integrity competitiveness and focus on outcomes. finally the accountable governance provides the access to justice and provides the effective legislation to the people (iqbal & shah, 2008). the topic of governance has been the main issue during last two decades (al‐marhubi, 2004). the researchers have been finding the determinants of governance and its determinants. similarly the debate on the impact of governance on economic growth and other economic determinants has been a hot issue in the field of research. voice and accountability which is one of the determinants of governance is found to have significant impact on economic growth (kaufmann, 2007). the literature finds the positive impact of voice and accountability on economic growth and poverty on the other hand the negative association has also been studied and the insignificant impact is also empirically argued. the living standards in ukraine were found to decline in 1990s and that happens because of destruction in the governance system (kaufmann, kraay, & zoido-lobatón, governance matters, 2000). the rule of law was not found to be properly implemented similarly the accountability system was not implemented and controlled properly. the political instability had provided opportunity for corruption. countries like russia and ukraine also witnessed governance challenges despite of being big emerging economies in the world (kaufmann et al., 2000). pakistan is at the bottom of the list of emerging economies and it has been facing the effects of poor governance since it has come into being. 7. underpinning theories of governance there are two theories which provide theoretical base for finding the determinants of governance in pakistan. one is called rational choice institutionalism (rci) and the other one is called sociological institutionalism (si). the rci argues that the formal economical rationales determine the governance system in a country. the political system is solely responsible designing the governance system in the country. in this system the citizens face the governance system designed by the public institutions. in rci theory it is assumed that to develop a governance system with the informal system of public servants and the citizens is highly costly and will take much time. so the public personals are assumed to develop a set of governance system and implement it to the citizen. this type of governance system is an instrument which is just applied to the citizen. pakistan has been suffering from this kind of situation because the governance system is designed by the agents. the ministers on national assembly and they do not ensure equity and justice. this poor governance system will make rich richer and poor poorer. this poor governance will enhance the opportunities of corruption, less accountability and instable political system in the country. the rci is further divided into two theories. the first one is public choice theory and second one is principal-agent theory. 8. public choice theory from pakistan perspective the public choice theory says that the governance system is designed by the ministers of national assembly in pakistan. “its fundamental assumptions are that actors’ interests diverge and that dominant actors design policies and governing institutions to favor their own interests.” (stephen, 2013)the ministers know that their activities are not monitored and controlled review of economics and development studies, vol. 6 (2) 2020, 301-313 305 properly then they are more concern to develop a system of governance which is light for them and tight for the general public. in pakistan the situation is similar to the public choice theory. a common man cannot carry a gun on the roads and similarly a common man cannot do corruption of single rupee in the country. but on the other hand the ministers do corruptions and break every rule of law in the country. in pakistan the policy makers are not controlled properly and make the policy on their own which is not in the favor of the citizens. 9. principal agent theory the rci also develop the principal and agent relationship in the country. the government personals are the agents of the principal the general public. the agents are the representatives of citizens on the parliament and are responsible to develop a system of governance which fulfills the requirements of citizens. on the other hand if this works on other way then the whole system will suffer a bad governance system. the conflict of interest will lead to bad governance system. if the agents are not properly controlled then they will not be developing a governance system which provides equity and justice. there will a possibility of preferences of enforcement of law. the law will be applied differently for poor people and minorities and for rich people. on the other hand si promotes the cultural theory. this approach says that the policy makers also take cares for the cultures and involve the individuals in making policies in the country. the cultural preferences are taken in to account and the public ministers also involve general public in making governance in the country. this approach is time consuming but brings the public and the government closer. the literature has empirically find the strength of better governance system and the empirically findings also support this argument. the countries with strong governance system have been facing better economic growth and development. the effective implementation of rule of law in the country has been empirically found to have positive impact on per capita income (kaufmann et al., 2000). the kaufmann et al. (2000) empirically finds the results of above arguments and provided a graph based on per capita income and infant mortality rate in the world. they studied that countries like usa, canada, singapore and netherlands are found to have comparatively higher per capita income and this has been positively associated to the rule of law. whereas bangladesh, indonesia, colombia and ghana have been shown as witnessing lowest per capita income and that was also found to have associated to rule of law. kaufmann et al. (2000) also empirically shown the impact of voice and accountability on infant mortality. they found that norway, greece and etnonia has witnessed lowest infant mortality and that was postively associated to voice and accountability. that shows that voice and accountability has positive impact on living standards. on the other hand afghanistan, kenya and iraq have sitnessed highest infant mortality and that had been linked to poor voice and accountability system in those countires. this is a big question that if the effective governance system is associated to better growth and development then how a country can develop a better governance system whereas the other countries are not able to implement an effective governance system. the problem in the literature related to the framework of determinants of governance is the debatable issue. particularly the study based in pakistan related to governance issue has not been discussed as much as the other countries are addressed in the literature. this studyis the novel attempt in pakistan. 10. methodology the data has been collected from world bank data bank from 2002 to 2016. the correlation test is applied to the check the association between all the variables and then the structural equation modeling sem is applied to find the determinants of governance. the stata 12 is used as statistical review of economics and development studies, vol. 6 (2) 2020, 301-313 306 software. the framework of this study is based on general theories and scientific articles. table 1 list of factors affecting governance variables va: voice and accountability psavt: political stability and absence of violence/terrorism ge: government effectiveness rq: regulatory quality rol: role of law coc : control of corruption gdppc_growth: gross domestic product per capita growth gnippp_growth: gross national income growth gdiv: gender diversity hdi: human development index (self-contribution) (self-contribution) figure 1: factor affecting governance in pakistan 11. results table 2: summary statistics variables observation mean standard deviation minimum value maximum value va 15 -0.8893 0.1522 -1.17 -0.69 voice and accountability (rontoet al., 2015) g o v e r n a n c e i n p a k i s t a n political stability and absence of violence/terrorism (rontoet al., 2015) government effectiveness (rontoet al., 2015) regulatory quality (rontoet al., 2015) rule of law (rontoet al., 2015) control of corruption (rontoet al., 2015) human development index (ronto et al., 2015) gender diversity (garcia-sanchez, cuadrado-ballesteros, & frias-aceituno, 2013) economic growth per capita (garcia-sanchez et al., 2013) gross national income per capita (ronto et al., 2015) review of economics and development studies, vol. 6 (2) 2020, 301-313 307 psavt 15 -2.2873 0.4476 -2.81 -1.55 ge 15 -0.622 0.1703 -0.82 -0.38 rq 15 -0.6553 0.1035 -0.91 -0.48 rol 15 -0.8406 0.0651 -0.97 -0.74 coc 15 -0.94 0.1209 -1.09 -.76 gdppc_growth 15 2.2459 1.8041 -0.485 5.478 gnippp_growth 15 0.0691 0.0213 0.04 0.11 gdiv 15 13.268 1.7220 11.08 15.56 hdi 15 0.5274 0.0147 0.504 0.55 (self-contribution) table 2 shows that there are 15 observations. the dataset covers the period of 15 years starting from 2002 to 2016. the mean value of va is -0.8893 and the standard deviation are 0.1522 which shows small standard deviation. the minimum value of this indicator is -1.17 and the maximum value of this indicator is -0.69 which shows that overall the situation of va is poor in pakistan. the average value of psavt is -2.2873 with standard deviation value of 0.4476 with the minimum value of -2.81 and the maximum value of -1.55. table 3: correlation table 12. correlation results table 3 shows the correlation between the variables. the va has negative correlation with psavt, ge, gdppc_growth, gnippp_growth and gdiv. on the other hand va has positive correlation with rq, rol, coc and hdi.va has strong negative correlation with psavt and ge which is –0.83 and -0.73 respectively. on the other hand va has strong positive correlation with hdi 0.78.on the other hand the va has very weak correlation with rol, coc and gdppc growth. here it can be argued that if the situation of va in pakistan will get improved then the human development of the country will be improved. on the other hand the freedom of voice and accountability will create more political instability and government effectiveness in the country. review of economics and development studies, vol. 6 (2) 2020, 301-313 308 table 3 shows that psavt has strong positive correlation with ge, gdppc_growth, gnippp_growth and gdiv in the country. on the other hand it has strong negative correlation with hdi. so here it can be argued that in pakistan if the situation of political stability improves then the gdppc_growth will also improve. the table 3 also provides sound evidence that if pakistan improves its political condition then the gross national income growth will also improve. here it can be argued that psavt is very important for pakistan. if the political stability will get improve then this will improve many determinants of development in pakistan. the ge also has positive correlation with gdppc_growth and gnippp_growth it also has very strong positive correlation with gdiv. the gender diversity means that the proportion of women on the every sector. the developed economies appreciate women to participate in every field of life. the female workers are proved to have positive impact on the performance of every business. in fact in pakistan the female workers are not appreciated in the professional field. 13. structural equation model structural equation model (sem) is used to empirically find the unobservable constructs. the latent variable is the one which is measured by one or more observed variables. i use sem because i need to find out the governance which is used as latent variable in my study. figure 9 shows the governance as latent variable which is found on the basis of six determinants of governance in pakistan. the factor loading analysis is shown in table 8. table 4: factors loadings factors loadings va -0.7874 psavt 0.9700 ge 0.9403 gdppc growth 0.7236 gnippp growth 0.8982 gdiv 0.8903 hdi -0.7118 (self-contribution) the factor loading analysis is done in stata 12 and only those factors are retained which have loadings above 0.7. the va and hdi show negative direction in factor loading analysis. but the loadings of va and hdi are more than 0.7 therefore it can be argued that these factors are confirm for the latent variable named as “governance” but these factors have opposite direction. va and hdi are confirmed factors of the governance but have opposite directions. rq, rol and coc are eliminated because these variables have loading below than 0.7 and are not assumed to be the confirmed factors of the governance. 14. discussion i can say that regulatory quality, rule of law and the control of corruptions are not the confirmed factors of governance the latent variable in pakistan. i can say that rq is not important for the governance. the regulatory quality is not important factor for governance in pakistan but voice and accountability, political stability and the government effectiveness are the confirmed factors for the governance. review of economics and development studies, vol. 6 (2) 2020, 301-313 309 (self-contribution) figure 2: standardized coefficients of sem figure 10 shows the sem diagram. all the factors are significant at 1 percent. the p-values of all the factors are 0.000. the path analysis shows the results of standardized coefficients. table 9 shows that the va has the positive impact on governance the standardized coefficient of va is 0.79 with the pvalue of 0.000. so the coefficient is significant at 1 percent level of significance. the psavt has negative impact on governance and its p-value is also 0.000.so the coefficient of psavt is significant at 1 percent level of significance. table 9 shows that the ge has the negative impact on governance the standardized coefficient of ge is -0.92 with the p-value of 0.000. so the coefficient is significant at 1 percent level of significance. the gdp per capita growth has negative impact on governance and its p-value is also 0.000. so the coefficient of gdp per capita growth is significant at 1 percent level of significance. table 9 shows that the gni growth has the negative impact on governance the standardized coefficient of gni growth is -0.84 with the p-value of 0.000. so the coefficient is significant at 1 percent level of significance. the gdiv has negative impact on governance and its p-value is also 0.000. so the coefficient of gdiv is significant at 1 percent level of significance. review of economics and development studies, vol. 6 (2) 2020, 301-313 310 table 5: results of structural equation modeling | oim standardized | coef. std. err. z p>|z| [95% conf. interval] -------------------+--------------------------------------------------------------- measurement | va < | gov | .7947634 .1063436 7.47 0.000 .5863338 1.003193 _cons | -6.046545 1.133736 -5.33 0.000 -8.268627 -3.824464 -----------------+--------------------------------------------------------------- psavt < | gov | -.9703582 .0320871 -30.24 0.000 -1.033248 -.9074687 _cons | -5.289339 .9996184 -5.29 0.000 -7.248555 -3.330123 -----------------+--------------------------------------------------------------- ge < | gov | -.9294077 .0479685 -19.38 0.000 -1.023424 -.8353912 _cons | -3.780521 .7369382 -5.13 0.000 -5.224893 -2.336148 -----------------+--------------------------------------------------------------- gdppc_growth < | gov | -.666984 .15151 -4.40 0.000 -.9639382 -.3700298 _cons | 1.28856 .3493034 3.69 0.000 .6039376 1.973182 -----------------+--------------------------------------------------------------- gnippp_growth <| gov | -.8420144 .083303 -10.11 0.000 -1.005285 -.6787436 _cons | 3.359596 .6655044 5.05 0.000 2.055231 4.66396 -----------------+--------------------------------------------------------------- gdiv < | gov | -.8895536 .0594615 -14.96 0.000 -1.006096 -.7730113 _cons | 7.975421 1.478821 5.39 0.000 5.076985 10.87386 -----------------+--------------------------------------------------------------- hdi < | gov | .7042338 .1352821 5.21 0.000 .4390858 .9693818 _cons | 36.93166 6.747709 5.47 0.000 23.70639 50.15692 -------------------+--------------------------------------------------------------- variance | e.va | .3683512 .1690359 .1498465 .9054772 e.psavt | .058405 .0622719 .0072259 .4720717 e.ge | .1362013 .0891646 .037752 .4913859 e.gdppc_growth | .5551324 .2021095 .2719542 1.133176 e.gnippp_growth | .2910117 .1402846 .113131 .7485817 e.gdiv | .2086944 .1057883 .0772738 .5636241 e.hdi | .5040548 .1905404 .240276 1.057414 gov | 1 . . . ----------------------------------------------------------------------------------- lr test of model vs. saturated: chi2(14) = 66.01, prob > chi2 = 0.0000 (self-contribution) review of economics and development studies, vol. 6 (2) 2020, 301-313 311 15. conclusion, discussions and recommendations finally it can be argued that regulatory quality, rule of law and the control of corruptions are not the confirmed factors of governance the latent variable in pakistan. i can say that regulatory quality is not important for the governance. the regulatory quality is not important factor for governance in pakistan but voice and accountability, political stability and the government effectiveness are the confirmed factors for the governance. the hypothesis which put question that the gross domestic product per capita has positive impact on the governance has been rejected because it shows negative impact on the governance in pakistan which is against the notion that governance has positive impact on economic growth. the other hypothesis is that gross national income per capita has positive impact on the governance and that hypothesis was also rejected as it shows negative impact. the gender diversity has negative impact on the governance and it is also against the findings. so the human development index has positive impact on the governance and the results are significant. the governance in pakistan is poor but other determinants are of economic growth and developments are improving so this shows that if policy makers want to improve the governance determinants then it will have positive effect on the economic development. research should also be conducted in other sectors rather than this sector. 16. limitations there are few limitations of this part of study. the first one is the availability of the data. the data is not available before 2002 and therefore the unavailability of the data is the main problem in pakistan. on the other hand the time-series model cannot be run because the observations are not adequate for running the time-series model. normally the time-series model predicts the impact of independent variables on dependent variable over the period of time. the time accounts for the variations incur over the period of time. the time-series model also accounts for the seasonal variations. normally the 40-50 observations are desirable for the time-series model but here the observations are 15 and therefore the time-series model cannot provide adequate findings. on the other hand the study is only based on the pakistan. the dimensions of the quality of this study can be widening if the panel study is conducted. further this study is only based on secondary data and the primary studies can also be conducted. the upcoming researchers can also interview the professionals and then can find the factors affecting governance in pakistan. 17. future directions the study makes a path that can lead future research and studies towards more conclusive and contributing results. it would most probably interest the academic scholars and other stakeholders if research in future will investigate that the other hypothesis is that gross national income per capita has positive impact on the governance and that hypothesis was also rejected as it shows negative impact. the gender diversity has negative impact on the governance and it is also against the findings. so the human development index has positive impact on the governance and the results are significant. the governance in pakistan is poor but other determinants are of economic growth and developments are improving so this shows that if policy makers want to improve the governance determinants then it will have positive effect on the economic development. moreover, results that showed insignificant values can be reconsidered in future by academicians as insignificant results are noticed among the researches in past as well. references acemoglu, d., johnson, s., robinson, j. a., & yared, p. 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(2018). the worldwide governance determinants. retrieved 2018, from world bank: http://info.worldbank.org/governance/wgi/#home review of economics and development studies vol. i, no 1, june 2015 21 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 1: issue 1 june 2015 journal homepage: www.publishing.globalcsrc.org/reads the effects of economic and financial development on financial inclusion in africa 1 olaniyi evans 1 department of economics, university of lagos, akoka, lagos, nigeria, olaniyievans@gmail.com article details abstract history revised format: may 2015 available online: june 2015 this study provides empirical evidence on the effects of economic and financial development on financial inclusion in africa, using panel fmols for the 2005-2014 period. the study shows that economic growth has a significant positive impact on financial inclusion, meaning that african countries with higher economic growth have more inclusive financial systems. gdp per capita has a significant positive impact on financial inclusion. that is, income is an important factor in explaining the level of financial inclusion in africa. it is, as well, established in this study, that although both economic and financial development promote financial inclusion, though the effects of economic development are much stronger. also, inflation is negatively linked to financial inclusion, and as well insignificant across all specifications. deposit interest rate is positively linked to financial inclusion, though insignificant. the low deposit interest rates in african countries do not encourage inclusive financial systems. population, though positive, is insignificant. internet has positive significant impact on financial inclusion, meaning that internet access is indispensable in a fast-moving and digital african economy. literacy is also statistically significant, meaning that adult literacy is an important factor in explaining the level of financial inclusion in africa. as well, islamic banking presence and activity are associated with higher financial inclusion. © 2015 the authors, under a creative commons attributionnoncommercial 4.0 keywords financial inclusion; financial development; economic development; panel fmols jel classification e62, f30, d14, g21 corresponding author’s email address: olaniyievans@gmail.com recommended citation: evans, o. (2015). the effects of economic and financial development on financial inclusion in africa. review of economics and development studies, 1 (1) 21-32 doi: https://doi.org/10.26710/reads.v1i1.113 1. introduction do economic and financial development affect financial inclusion? if they do, then what are the signs and magnitudes of the effects on financial inclusion in africa? which effects are much stronger? this study answers these questions. http://www.publishing.globalcsrc.org/reads mailto:olaniyievans@gmail.com mailto:olaniyievans@gmail.com review of economics and development studies vol. i, no 1, june 2015 22 development economics suggest that increased provision of financial services leads to the development of all levels of society. the supply-leading hypothesis suggests that financial development spurs growth, boosting overall economic efficiency, liquidity, savings, capital accumulation, and entrepreneurship. in contrast, the demand-following view suggests a lagged response to economic growth, implying growth creates demand for financial products. in other words, as the economy advances, economic growth generates increased demand for financial services, leading to higher financial development and thus financial inclusion. according to mohan (2006, p. 5), one of the key features of financial development is that “it accelerates economic growth through the expansion of access to those who do not have adequate finance themselves... it is this availability of external finance to budding entrepreneurs and small firms that enables new entry, while also providing competition to incumbents and consequently encouraging entrepreneurship and productivity”. however, policy emphasis has shifted away from financial development towards the development of inclusive financial systems (johnson & arnold, 2012). policy interest in financial inclusion has increased in importance over the past decade, as a result of concern for lack of financial inclusion by the g20 and other international forums. in recent years, most african countries have set up formal targets for achieving universal financial access by 2020 (i.e. lesotho, nigeria, rwanda). apart from the policy interest, financial inclusion plays “a critical role in reducing poverty and promoting growth in all fundamental development theories. conceptually, access to finance enables poor people to save and borrow, allows them to build assets, invest in education, and enables small and medium sized enterprises to take advantage of promising growth opportunities. hence the ability to access financial services, particularly credit, is very important in promoting growth and welfare” (demirgüç-kunt, 2014, p. 349350). despite the knowledge of the huge benefits from financial inclusion, only 23% of the adult population in africa has a bank account. in sub-saharan africa, over 40% of the population saves or sets money aside regularly, but only half of these population have a formal financial service provider at their disposal. while formal financial services penetration is mostly low in central and north africa, it is much greater in southern africa and on the rise in eastern and western africa. the population of adults having an account with a formal financial service is highest in mauritius (80%) and south africa (54%), followed by angola, mozambique, kenya, zimbabwe, and morocco (all about 40%). kenya particularly has a successful financial inclusion policy, with mobile banking leading the way. additionally, there are 14 african countries with less than 10% of the adult population having a bank account (i.e. egypt, niger, and congo). for example, in kinshasa, the central african republic, guinea and congo, less than 5% of adults have access to formal financial services. in niger, only 2% of the population has a bank account (demirgüç-kunt & klapper, 2012). there are many motivations for this study. the african economy, riding on its growth momentum, is facing rapidly rising incomes, as a result of expansion of economic activities and corporate profitability. accordingly, the demand for financial services has increased. moreover, the burst of entrepreneurship is growing across the continent, spanning rural and urban areas: this has to be fostered and financed. while there is evidence of increased financial development, in the recent decade, the breadth and coverage of formal finance is far lower than that of other continents and thus inadequate. deepening the financial system and broadening its reach is important, considering the current stage of development of the continent. there are, for that reason, significant benefits in examining the role of economic and financial development on financial inclusion in africa. additionally, existing studies in the literature have explored various determinants of financial inclusion, to the disregard of the importance of economic and financial development. this study fills that gap in the literature. moreover, africa has 34 of the current 48 less developed countries, making the continent a splendid context for the evaluation review of economics and development studies vol. i, no 1, june 2015 23 of the effects of economic and financial development on financial inclusion. this study therefore employs panel fmols to examine the impact of economic and financial development on financial inclusion in africa. the rest of this study is organized as follows. section 2 provides the theory and empirical review of literature. section 3 describes the data and econometric methodology. section 4 presents the findings and discuss their implications for the debate on financial inclusion. section 5 concludes. 2. theory and review of literature financial inclusion means availability, accessibility and use of formal financial service for all (kumar & mohanty, 2011). it implies provision of “access to payments and remittance facilities, affordable financial services, savings, loans and insurance services by formal financial system” (nagadevara, 2009, as cited in unnikrishnan & jagannathan, 2014, p. 20). recent theoretical and empirical contributions show how the financial system marshals savings, apportions resources, diversifies risks, and contributes to the economic system (king & levine, 1993; de gregorio & guidotti, 1995; demetriades & hussein, 1996; levine, 1997; khan & semlali, 2000; al-yousif, 2002; calderón & liu, 2003; rajan & zingales, 2003; omran & bolbol, 2003; christopoulos & tsionas, 2004; gupta, pattillo & wagh, 2009; mirdala, 2011; sassi & goaied, 2013; aizenman, jinjarak & park, 2015; echchabi & azouzi, 2015). similarly, an increasing number of studies suggests that financial inclusion is a precondition for economic growth (mohan, 2006; chibba, 2009; manji, 2010; kpodar & andrianaivo, 2011; unnikrishnan & jagannathan, 2014). for example, sarma & pais (2011), in a cross country analysis, found that income, income inequality, adult literacy, telephone and internet usage and urbanisation is an important factor in explaining the level of financial inclusion in a country. they argued that financial exclusion is a reflection of social exclusion, as countries with low gdp per capita have relatively lower rates of literacy, poorer connectivity and lower urbanisation seem to be less financially inclusive. in china, fungáčová & weill (2015) found that higher income and better education are associated with greater use of formal accounts and formal credit. in argentina, tuesta, sorensen, haring & camara, (2015) showed that education and income are all important variables for financial inclusion. in india, chithra & selvam (2013) showed that socio-economic factors such as income, literacy, population, deposit and credit penetration have significant association with the level of financial inclusion. as well, kumar (2013) showed the importance of socio‐economic and environmental structure in shaping the banking habits of the masses in india. in peru, camara, peña & tuesta (2014) found that education and income levels stand out as significant factors for financial inclusion. in africa, allen et al. (2014) found that population density is more important for financial development and financial inclusion than elsewhere. moreover, they show evidence that mobile banking improves financial access. in kenya, dupas and robinson (2009) found that financial inclusion has a positive impact on investment. it has also been shown that a positive and significant relationship exists between the usage of credit and the evolution of enterprises, mostly for smaller companies (carpenter & petersen, 2002). 3. materials and methods 3.1 data this study employs annual data on number of depositors with commercial banks (per 1,000 adults), deposit interest rates, gdp per capita, economic growth, inflation, money supply (% of gdp), number review of economics and development studies vol. i, no 1, june 2015 24 of internet users, population, credit to the private sector (% of gdp) and adult literacy rate. the study covers the 2005-2014 period. the dataset is collected from the world development indicators. consistent with the literature, the number of depositors with commercial banks (per 1,000 adults) is used as a proxy for financial inclusion (see varman, 2005; sarma, 2012; čihák, demirgüç-kunt, feyen & levine, 2012; mbutor & uba, 2013; naceur, barajas & massara, 2015). unavoidably, the need to obtain adequate data on the variables narrows down the attention of the empirical analysis to 44 african economies, namely, algeria, angola, benin, botswana, burkina faso, cameroon, cape verde, central african republic, chad, democratic republic of the congo, egypt, equatorial guinea, ethiopia, gabon, gambia, ghana, guinea, ivory coast, kenya, lesotho, liberia, libya, madagascar, malawi, mali, mauritania, mauritius, morocco, mozambique, namibia, niger, nigeria, republic of the congo (brazzaville), senegal, sierra leone, south africa, sudan, swaziland, tanzania, togo, tunisia, uganda, zambia and zimbabwe. 3.2 model consistent with the literature, (marshall, 2004; sarma & pais, 2011; laha, kuri & kumar, 2011; mehrotra & yetman, 2015), the functional model for this study is therefore stated as, finc = f(growth, gdpc, m2gdp, credit/gdp, interest, inflation, population, internet, literacy, islamic) (1) where gdp per capita and economic growth are the proxies for economic development (lucas, 1988; mankiw, romer & weil, 1990; gallup, sachs & mellinger, 1999). money supply (% of gdp) as well as credit to the private sector (% of gdp) are the proxies for financial development (garcia & liu, 1999; nzotta & okereke, 2009; wolde-rufael, 2009). deposit interest rates, inflation, number of internet users, population, credit to the private sector and adult literacy rate are included as control variables. they are the most important variables affecting financial inclusion (marshall, 2004; sarma & pais, 2011; laha, kuri & kumar, 2011; mehrotra & yetman, 2015). this is, as well, in order to preclude the omitted variable bias. therefore, the econometric model for the study is given as (2) where finc is financial inclusion (number of depositors with commercial banks per 1,000 adults); gdpc is gdp per capita, and growth is economic growth. m2gdp is money supply (% of gdp) and credit/gdp is the credit to the private sector (% of gdp). inflation is headline inflation, internet is the number of internet users, literacy is adult literacy rate, and population is the population. interest is the deposit interest rate; and t  are the residuals. islamic is a dummy variable which takes 1 if the country has islamic banking presence and activity, and 0 otherwise. islamic banking provides no-interest lending, which is an important factor for financial inclusion (see mohieldin, iqbal, rostom & fu, 2011; demirguc-kunt, klapper & randall, 2014; naceur, barajas & massara, 2015). 3.3 econometric techniques since the application of the standard pooled ols techniques to non-stationary data may yield spurious results, this study employs the panel fully modified least squares (panel fmols) which is capable of providing optimal estimates of cointegrating regressions. the panel fmols is appropriate for this study because, in order to achieve asymptotic efficiency, panel fmols modifies the least squares for endogeneity of the regressors and serial correlation, which are due to cointegrating relations (phillip & hansen, 1990; hansen & kim, 1995). although panel fmols is a nonparametric approach, capable of dealing with nuisance parameters, it ttttttt inflationinterestcreditgdpmgdpcgrowthfinc 6543210 2   ttttt islamicpopulationinternetliteracy   10987 review of economics and development studies vol. i, no 1, june 2015 25 may sometimes have problems, especially in small samples. to prevent these problems in the usage of panel fmols for estimation of long-run parameters, a cointegrating relation must be established among the set of i(1) variables. thus, we test for unit root and cointegration. the im, pesaran and shin w-stat, adf fisher chi-square and pp fisher chi-square are used to test for the order of integration. the three unit root tests are appropriate because the alternative hypothesis assumes that at least one individual cross section is stationary. the engle-granger based pedroni cointegration test is used to check for cointegration among the variables. the pedroni (1995, 1999) residual cointegration test is suitable for this study because the sample of countries used is heterogeneous (camarero & tamarit, 2002). the fmols estimator employs the initial estimates of the symmetric and one-sided long run covariance matrices of the residuals (phillips & hansen, 1990; phillips & moon, 1999; pedroni 1995, 2000) assuming an n+1 dimensional time series vector process (y, x), with the cointegrating equation, (3) where ' t x are the n stochastic regressors, '' 2 ' 1 ),( ttt ddd  are the deterministic trend regresssors and t1̂ are the residuals. the t2̂ is obtained as tt 22 ˆˆ   from the levels regressions (4) alternatively, from the difference regressions (5) let ω and λ be the long run covariance matrices which can be calculated by means of the residuals '' 212 )ˆ,ˆ(ˆ ttt   . then the modified data can be defined as (6) then the estimated bias correction terms is (7) the fmols estimator is thus (8) where ''' ),( ttt dxz  . note that the number of optimal lags is determined by the akaike information criterion (aic). 1. results and discussion firstly, in order to preclude spurious regression, im, pesaran and shin w-stat, adf-fisher chi-square and pp-fisher chi-square tests are used to determine the unit root properties and the order of integration tttt dxy 11 ' 1 ' ̂  tttt ddx 22 ' 21 \ 1 ˆˆˆ  tttt ddx 22 ' 21 \ 1 ˆˆˆ  2 1 2212 ˆˆ    tt yy 22 1 221212 ˆˆˆ    t                                 t t tt t t tt tyzzz 2 12 1 2 ' 1 0 ˆ ˆ     review of economics and development studies vol. i, no 1, june 2015 26 of the data. as shown in table 1, the three panel unit root results show that the variables are all i(1), thus indicating that it is appropriate to test for the existence of cointegrating relations. table 1. panel unit root tests ips w-stat adf-fisher pp-fisher growth -1.620 -1.985** 38.192 59.398* 39.514 105.094* finc -1.734 -2.059* 35.450 52.593* 38.736 90.273* m2gdp -1.608 -1.920** 37.079 58.621* 25.008 44.43** interest -1.691 -1.994** 36.145 53.117* 23.089 51.148* gdpc 2.838 -2.696* 14.973 59.966* 39.351 82.2711* inflation -1.623 -1.982** 35.951 52.229* 35.675 78.020* population 0.453 -2.389* 23.960 55.321* 53.619 177.681* credit 0.524 -3.605* 24.55 57.119* 41.488 59.937** capital 1.329 -2.648* 22.747 55.734* 32.319 95.363* internet -1.430 -1.953* 35.566 51.776* 38.246 50.149* notes: * and ** denotes significance at 1% and 5% levels. probabilities for fisher tests are computed using an asymptotic chi-square distribution. ips assumes asymptotic normality. having established that all the variables are i(1), the pedroni residual cointegration test is used to determine the cointegrating relations. as shown in table 2, the results indicate the presence of longrun relationships among the set of variables. table 2. pedroni residual cointegration test alternative hypothesis: common ar coefs. (within-dimension) weighted statistic prob. statistic prob. panel v-statistic -1.235 0.875 -1.670 0.961 panel rho-statistic 2.108 0.996 2.021 0.967 panel pp-statistic -9.526 0.000 -9.724 0.000 panel adf-statistic -6.802 0.000 -7.850 0.000 alternative hypothesis: individual ar coefs. (between-dimension) statistic prob. group rho-statistic 3.334 0.998 group pp-statistic -15.063 0.000 group adf-statistic -9.452 0.000 note: automatic lag length selection based on sic. newey-west automatic bandwidth selection and bartlett kernel table 3 shows the results of the panel fmols. to show that the results of the panel fmols are robust to different specifications, the results of the panel egls (cross-section random effects) and panel least squares specifications are provided in columns 2 and 3 in table 3. table 3: the effects of economic and financial development on financial inclusion dependent variable: finc review of economics and development studies vol. i, no 1, june 2015 27 panel fmols panel egls (cross-section random effects) panel least squares coefficient tstatistics coefficient t-statistics coefficient tstatistics growth 14.135** 2.071 5.664* 4.093 4.793* 3.312 gdpc 0.330* 3.659 0.037* 2.908 0.039* 4.235 credit/gdp 0.626 0.462 0.229 0.598 0.969* 3.966 m2/gdp -1.872* 2.857 -0.170 1.008 -0.537* 4.163 interest 1.423 0.886 0.654 0.162 2.983 0.679 inflation -8.000 -1.484 -3.566 -1.449 -0.691 -0.266 literacy 12.699** 2.253 15.541 0.628 -9.764 -0.547 ln(population) 39.903 0.720 18.341 0.545 35.167*** 1.704 internet 6.725* 2.736 12.599* 11.985 13.878* 13.028 islamic 89.987*** 1.756 163.646** 2.460 144.726* 3.778 adjusted r-squared 0.748 0.682 0.806 notes: *, **, and *** indicate significance at the 1%, 5% and 10% levels, respectively. the panel fmols long-run covariance estimates are via quadratic-spectral kernel, newey-west automatic bandwidth and nw automatic lag length. the economic development variables are statistically significant. economic growth has a significant positive impact across all specifications. this means countries with higher economic growth have more inclusive financial systems. in addition, looking specifically at gdp per capita, it has a significant positive impact on financial inclusion. this finding is in line with such studies as sarma & pais (2011), chithra & selvam (2013), camara et al. (2014), fungáčová & weill (2015) and tuesta, et al. (2015) who showed that income is an important factor in explaining the level of financial inclusion in a country. it is, as well, established in this study, that although both economic and financial development may be able to promote financial inclusion, the effects of the economic development are much stronger. turning to the impact of the financial development variables, credit/gdp is positive but insignificant. this is expected knowing that credit is extremely subdued in africa, due to a host of variables such as lack of collateral and credit information. this result is in contrast with chithra & selvam (2013) who found that deposit and credit penetration have significant association with the level of financial inclusion in india. additionally, m2gdp is significant, though negative across all specifications. this is not surprising, since there is too much liquidity outside the formal financial system. for example, in sub-saharan africa, over 40% of the population saves or sets money aside regularly, but only half of these population have a formal financial service provider at their disposal (demirgüç-kunt & klapper, 2012). population, though positive, is insignificant. the finding that population has insignificant impact on financial inclusion conflicts with chithra & selvam (2013) in india and allen et al. (2014) in africa. this also suggests that the contribution of population to financial inclusion may have been exaggerated by these studies. inflation is negatively linked to financial inclusion, and as well insignificant across all specifications. deposit interest rate is positively linked with financial inclusion, though insignificant. the low deposit interest rates in african countries do not encourage inclusive financial systems. the number of internet users have positive significant impact on financial inclusion. this result, which is similar to the one found by sarma & pais (2011) and allen et al. (2014), may be an indication that review of economics and development studies vol. i, no 1, june 2015 28 internet access is indispensable in a fast-moving and digital african economy. the significance of the internet for financial inclusion is evidenced in the case of kenya where m-pesa, a transformative mobile phone-based platform, has undergone explosive growth in a spectrum of services including money deposit and withdrawal, bill payment, remittance delivery, and microcredit provision. literacy is also statistically significant. literacy has assumed larger importance in recent years as financial markets have become increasingly complex and the uneducated finds it very difficult to make informed decisions. this finding is in line with sarma & pais (2011) and chithra & selvam (2013) who found that adult literacy is an important factor in explaining the level of financial inclusion in a country. as well, tuesta et al (2015) and camara et al (2014) showed that better education is a significant factor for financial inclusion. the islamic dummy variable has significantly positive impact on financial inclusion across all specifications. in other words, sharia-compliant finance (halal, which means permitted) is an important driver of financial inclusion. this result is in line with naceur et al (2015) who found some evidence that islamic banking presence and activity are associated with higher financial inclusion. 2. conclusion and policy implications this study provides empirical evidence on the effects of economic and financial development on financial inclusion in africa. economic growth has a significant positive impact on financial inclusion, meaning that countries with higher economic growth have more inclusive financial systems. gdp per capita has a significant positive impact on financial inclusion. that is, income is an important factor in explaining the level of financial inclusion in africa. it is, as well, established in this study, that although both economic and financial development may be able to promote financial inclusion, the effects of the former are much stronger. turning to the impact of the financial development variables, credit/gdp is positive but insignificant. this is expected knowing that credit is extremely subdued in africa, due to a host of variables such as lack of collateral and credit information. additionally, m2gdp is significant, though negative. this is due to too much liquidity outside the formal financial system: for example over 40% of the sub-saharan african population saves regularly, but only half of these population use a formal financial service. population, though positive, is insignificant. inflation is negatively linked to financial inclusion, and as well insignificant across all specifications. deposit interest rate is positively linked with financial inclusion, though insignificant. the low deposit interest rates in african countries do not encourage inclusive financial systems. the number of internet users have positive significant impact on financial inclusion, meaning that internet access is indispensable in a fast-moving and digital african economy as evidenced in the case of m-pesa in kenya. literacy is also statistically significant, meaning adult literacy is an important factor in explaining the level of financial inclusion in africa. as well, islamic banking presence and activity are associated with higher financial inclusion. in terms of policy implications, internet technology can reduce transaction cost and increase financial security. we know that for example in kenya, the development of mobile technology, m-pesa has certainly boosted mobile payments. there is need for increased coverage under satellite banking, mobile banking and other new platforms. synergy is needed between banking channels and the technology providers to enlarge reach. application developers, as well, will need to synergize core banking with micro financial applications. this is one way that financial inclusion can be spread in africa. review of economics and development studies vol. i, no 1, june 2015 29 financial literacy is a very immediate need. financial literacy should be targeted at the segments of african populations who are poor and under-educated. this is easily achievable by leveraging social networks and providing “rule of thumb” training. the interventions will require constant reinforcements to have long-term impacts. credit information is poor in africa. africa is not supposed to be left behind the data revolution. each african country will need a national registers of information, detailing payment defaults, bankruptcies and court judgments with respect to credit use difficulties. this will protect helpless consumers from manipulative lending and ensure the delivery of proper credit. correspondent banking, where supermarkets, post offices, and gas stations act as banking agents, is another important channel. this channel has been used successfully well in countries such as brazil to develop financial inclusion in the amazons. the old post offices in africa (via a post office card account) will be an ideal channel of agency banking. for this to be effective, micro finance institutions, business facilitators and business correspondents will need to be strengthened. as well, competition policy is very important. healthy competition is necessary for consumer protection, for the reason that it increases consumer power and provides the financial institutions with incentives to serve the under-served as well as to adopt technological advances to generate new products to reach the under-served parts of the continent. innovative product design and business models are also important for expanding financial inclusion. for example, the introduction of commitment accounts can help rural dwellers save more and thus increase their access to financial services. as well, the introduction of index insurance can have advantageous outcomes and enhance investment and productivity. it is important for african governments to create the required legal and regulatory framework, such as regulating business conduct, protecting creditor rights, and supervising recourse mechanisms to safeguard consumers. long term measures will include legal requirements for each and every citizen to have access to banking and payment services. an independent supervisory body will be required to enforce this mandate. finally, with the growing liberalization and economic growth, the importance of the banking sector will rise in the financing configuration of economic activities within the continent. to satisfy the increasing credit demand, the banking sector will need to channel credit from a broader deposit base to encompass activities yet not financed by the sector. the drift of the growing commercialization of rural activities, especially agriculture, will create greener pastures. banks will need to explore the possible profits of the increasing 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(2009). re-examining the financial development and economic growth nexus in kenya. economic modelling, 26(6), 1140-1146. review of economics and development studies, vol. 6 (1) 2020, 107-116 107 women empowerment and micro finance programs: a case study of district khairpur a misbah rahman, b muhammad saleem rahpoto, c ghulam muhammad mangnejo a ph.d sholar, department of economics, shah abdul latif university khairpur, pakistan b professor, department of economics, shah abdul latif university khairpur, pakistan c assistant professor of economics, shaikh ayaz university, shikarpur, pakistan email: mangnejogm81@gmail.com article details abstract history: accepted 26 march 2020 available online 31 march 2020 the model of double monetary improvement contains the lowest wages (between difference foundations) responsible for the continuous dualism. we use 2 years of micro data from a large number of workers in pakistan to test whether legally lowest wages have different effects on formal compensation, as opposed to the occasionally different segment. we find that the evidence from pakistan rejects the assumptions of these models: raising the minimum wage not only extends the compensation in the city format part (big urban effort), which are enclosed through the least wages rule, nonetheless also increases the salaries of altogether other specialists, z lowest legal allowance, which is generally considered to be an occasional split and is not regularly enforced (eg, small municipal companies, large provincial companies and small country companies). our finding also suggest that the lowest statutory minimum wages increase wages for specialists in these “random” departments more than in the urban form, and therefore may lose the normal pay gap amid these segments and city additional part, which is considered non binding nonetheless not governed b the least wage act: the freelance (in together city and provincial regions). least salaried may therefore lead to a symmetry amid official & casual workers, who referred to as selfemployed and paid labors. in any case, we discovery no indication that self-earned income falls by the lowest pay. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: double economy, random part, lowest wages, compensation jel classification: e20, e26, j30, j31 doi: 10.47067/reads.v6i1.188 corresponding author’s email address: mangnejogm81@gmail.com 1. introduction microfinance has been unequivocally underlined lately for women, as they are the dynamic piece of our general workforce. to accomplish economic development, the support of women is significant. tragically, asian women and particularly pakistani women are under limitations because of some conventional and social taboos and the most unfortunate of the least fortunate individuals on the mailto:mangnejogm81@gmail.com mailto:mangnejogm81@gmail.com review of economics and development studies, vol. 6 (1) 2020, 107-116 108 planet. thus, legislative and non-administrative establishments are presently concentrating on microfinance on enabling women. in pakistan, destitution has expanded quickly and different neediness decrease projects are required. pakistan is an agrarian nation. most by far of individuals rely upon agribusiness and have low wages, low expectation for everyday comforts. they have no help, no help, particularly budgetary. the circumstance of rustic territories has weakened. ladies have a low status, live under requirements and confinements. therefore, it is important to monetarily bolster women and they can begin a private venture. microfinance projects bolster them monetarily. there are numerous foundations and ngos working around there in the kanpur area, sind. the primary reason for these organizations is to give advances to poor women to begin their very own miniaturized scale business. microfinance is additionally a device foe enabling women. so that, we are keen on finding the extent of microfinance in khairpur. objectives of the study are as under: i. investigate crafted by the microfinance segment in pakistan. ii. investigate the significance and job of microfinance in lessening destitution and engaging women. iii. investigate the issues of women who are in microfinance iv. break down the connection among microfinance and strengthening of women in pakistan, it is for the most part a microfinance program, advance since the 1990s, to fortify the job of women in the public eye. thusly, just a couple of studies have been made on the connection among microfinance and strengthening of women. the business analyst and social reformers have various perspectives in this regard microfinance is another field in the budgetary part [1], and when women acknowledge the difficulties of culture and forbidden, they can expand their status in the public eye. before microfinance was not efficient and there was no logical information. microfinance started accurately by the outstanding social extremist muhammad yunus. the established the grammyn bank in bangladesh to improve women from bangladesh and diminish neediness. pakistan has an agro-based nation, and women are half of our complete populace. in the event that they are latent, the improvement procedure will be extremely moderate. most investigations demonstrate that women are progressively capable and dynamic to reimburse their advances than men, and they work genuinely and proficiently and are increasingly steady of the person. as indicated by the specialist there is a genuine case of grameen bank, which gives almost 96% of its microfinance administrations to women and has a united nation rating that around 76% of microfinance administrations are being utilized by women around the globe. muhammad yunus stated: “human rights acknowledged are sustenance, safe house, wellbeing and instruction, and the essential obligation of society is to ensure there is such a domain, that individuals can have such things, business is additionally right, yet society cannot give an occupation dependent on wages for all, so the option is independent work. at present, huge money, related establishments overlook right around 66% of the total populace. that is, it that i express that the privilege to credit must be given the most elevate need in the rundown of human rights. “the primary reason for the examination is too thin about the connection among microfinance and strengthening of ladies concerning pakistan. 2. abstract audit microfinance, giving money related administration to poor and low-pay families. it is depicted as banking for poor people. microfinance projects give microcredit/smaller scale credits, miniaturized scale reserve funds, small scaled protection and gathering preparing and other monetary review of economics and development studies, vol. 6 (1) 2020, 107-116 109 administrations for low-salary and needy individuals to oversee independent ventures. naheed (2013) says, “engaging ladies is the way to building the eventual fate of the country.” she focused on the significance of enabling women in the public eye. this is relative and expository examination on the general condition of women in various nations, for example, pakistan and india, the investigation additionally centers on the snags and entanglements looked by women to substantiate themselves in various segments. the examined women’s duties and said she was in charge of gathering the essential needs of society. strengthening offers fearlessness to women to battle social bad form. she additionally said that in the past women did not have equivalent rights with men. they did not claim property, not responsibility for guardians. they did not reserve the privilege to cast a ballot and did not have the ability to pick their activity. since we have left these bleak long stretches of submission to women, yet there is requirement of a solid development to battle victimization women and sex. strengthening is a procedure of assuming responsibility for their lives and sexual orientation correspondence. she examined the circumstance of women in pakistan that the constitution of the islamic republic of pakistan conceded equivalent rights to women and men. as indicated by the human development repot 2007/2008, pakistan’s position among 93 countries enlisted in the united nations is (gem), which is 82. diamond measures women’s strengthening at national dimension. as per the global gendering of gender (ggg) report, ten of the world’s greatest guilty parties are yemen, chad, pakistan, nepal, saudi arabia, morocco, turkey, egypt and oman. at the opposite end of the range, the best nations on earth to live with are sweden, norway, finland, ireland, new zealand, the philippines, germany, denmark, ireland and spain. ggg gathered information from 128 nations to build up an extensive logical list [1]. dr. muhammad saleem and missbah (2013) cleared the situation of women in the pakistani constitutional they said in their article that as indicated by the 1947 order in pakistan, the vote on women’s rights rose. in 1956 [7], she got the privilege to cast a ballot. in pakistan, numerous means have taken on the 1973 constitution to improve the status of women. they have conceded the privilege to state administrations and remote administrations. 10% share fixed at the national get together and 5% in the common gathering assigned for women. in 1985, the portion of the national assembly expanded from 10% to 20%. article 25 expressed that all natives are equivalent under the steady gaze of the law and reserve the privilege to approach security of the law, there must be no segregation on grounds of sex just [2], nothing in this article does not keep the state from making any arrangement for the assurance of women and youngsters. article 32 empowers nearby government establishments. article 34 states that women are completely associated with all circles of national life. article 35 states that the state must ensure marriage, family, mother and youngsters. on january 29, 2010. the president of pakistan marked the “ladies’ labor protection act 2009” [5], which parliament passed on january 20, 2010. the president marked two extra bills in december 2012, condemning the crude practices of baths, watasats, and the marriage of the holy qur‘an, who utilized women as tradable products for debates. the administration has additionally set up a unique working gathering inside the sindh locale to act against the act of packs to build up assistance lines and workplaces in the sukkur, jacobabad, larkana and khairpur regions [2]. on january 31, 1976, the pakistan women’s rights commission setup under the aegis of the ministry of justice and parliamentary issues, including unmistakable women’s legislators, social specialists and expert women from various circles of life [7]. the commission has tended to the issue of women’s legitimate changes and monetary conditions, the women’s legitimate changes and monetary conditions. the women’s unit made in 1979 and in this manner turned into a service in 1989. because of women’s interest and weight, and because of general familiarity with the ominous conditions encompassing the all-out number of women, the planning committee set up an expert working group on development review of economics and development studies, vol. 6 (1) 2020, 107-116 110 programs of women. the first of its sort – to give explicit suggestions for the 6th five years of age plan (1983-88) to assess and propose measures to upgrade ladies’ cooperation in various national exercises. (shafqat, sultana, 1995). naheed (2013) out in his article that “at the copenhagen summit in 1993 and at the international conference on population and development in cairo 1884, governments subscribed to the strengthening of ladies. this dedication is streamlined and figured in an unmistakable strategy at the fourth world conference on women in beijing in 1995, when governments focused on “engaging and propelling ladies, shame, for example [6], youngster relational unions, including the privilege to opportunity thought, heart, religion and convictions, in this manner adding to the ethical, moral, profound and scholarly needs of ladies and men, independently or in the public eye with others consequently guaranteeing the chance to live their lives etstvie with their very own desires. it additionally portrayed worldwide difficulties, the acknowledgement of women’s rights, whose sexual orientation effect has not been deliberately completely assessed. nonetheless, small-scale overviews demonstrate that there is a need to audit arrangements on business and nature of work. the advantages f developing worldwide economy are unevenly conveyed, bringing about more noteworthy monetary inconsistencies, feminization of destitution, expanding sexual orientation imbalance through frequently declining working conditions and problematic workplaces, particularly in the casual division and rustic zones. she recommended arranging projects to acquaint women with their rights. the legislature must be available to guarantee that there is no oppression the woman and her rights are ensured. training is an incredible asset for engaging women. that is the reason unique consideration ought to be paid to the instruction of women. juliet hunt (2002) says that to reduce destitution and improve the status of women, microfinance projects assume a significant job. it finds the solid connection between access to credit and the empowerment of women’s status in the family as well as in the network. in this article, microfinance should engage women. the specialist has utilized research methods and has met more than three weeks with female gatherings and staff from three ngos in bangladesh and one headquartered in bihar, india. these ngos give women microfinance for enabling and decreasing neediness. the analyst contends that advancement offices are focused on engaging women. it is important to explain credit issues that control the credit and its pay, which have the ability to choose the advance and the pay, how to utilize it, which oversees pioneering exercises though credit, authority over the buy and clearance of items available. though these inquires, the prompts the strengthening of women. research discoveries demonstrate that a minority of women who have acquired however do not control it. the vast majority of them assumed a side job in this procedure and for the most part held their companions, children, and other male individuals as an advance. ladies do not approach pay, they are created by credit, and men just give them enough cash to pay the advance week by week. at times advance administration has been increasingly entangled, as women have held a little advance for their own organization and have remained exchanged to men. the scientist has demonstrated that most of women have filled in as unpaid work, and men run business. choices on the utilization of credit, the age of pay through business is in the hands of men. as indicated by the analyst’s report, women have not profited by microfinance and there has been no adjustment in women’s lives since they have no basic leadership control, no pay control, advertising, etc. at the point when the advance is utilized underway, it will be powerful and helpful for mitigating neediness; generally, microfinance projects will fall flat. the scientist found that training is a significant factor in expanding the status of women. their finding was that the biggest microcredit projects do not and cannot contact the most unfortunate individuals because the least fortunate women will never have the option to reimburse the review of economics and development studies, vol. 6 (1) 2020, 107-116 111 credit. mushumbusi and jan kratzer (2013) express that the circumstance of women dressed in tanzania is low in contrast with men because of their customs. ladies have a terrible status because of culture, taboos and traditions, low training. engaging women is the focal issue in tanzania. the scientist contends that microfinance programs, generally centered around ladies, since ladies are a decent hazard factor, don’t mishandle the credit, share the advantages with their family, particularly kids, capable and committed than men, and when they get money related soundness, it will absolutely subjective and quantitative research. they said that microfinance is normal assume a significant job is lessening neediness and improvement. explains that microfinance is a budgetary administration for poor women who are unfit to improve their monetary status and are not monetarily solid to deal with their organization. microfinance prompts the strengthening of women. this makes them certain and dynamic in deciding. malik mohammad, pervez zamurad jiangsu and qiafat yolah (2011) women are a large portion of the all-out populace of pakistan and the greater part of them live in remote provincial territories underneath the neediness line. they are the most helpless and denied portions of the society. for significant and manageable monetary advancement, women’s support in financial exercises is similarly as significant as men. due to restricted chanced and assets, women’s cooperation in rustic territories is likewise low, so fitting advances are required. the principal microfinance bank (fbb) is workingeffectively in these remote zones. as indicated by the analyst, ladies interest is just 10% enlisted in the official area, showing that ladies have fewer open doors in the formal part, while in the causal areas there are numerous however unpaid. furthermore, the female just has a 5% standard in the open part, which is presently up to 10%, yet just 2.8% of them work in the open area. manis kumar, narendra singh bora, and amar johari brought up that india is the second biggest city on the planet, as indicated by the world bank, it is falling under low pay, and per capita salary is just $ 3262. the outcome is a low rate of training, medical issues, low expectation for everyday life. generally, individuals occupied with the horticultural area. to prevail in india, agribusiness must enable the rancher by making cultivating productive, and not by confiscating it for that specific reason, the rancher must be subsidized for their essential and little needs. microfinance is relied upon to it is along these lines important to share encounters and materials that will help not exclusively to get victories and disappointments, yet in addition to give information and direction to fortifying and growing microfinance programs. the procedure intercession can be comprehended utilizing the accompanying table. a definitive is to accomplish social and monetary strengthening. effective mediation hence relies upon how every one of these stages is deliberately considered, just as on the capacity of actualizing associations to accomplish a definitive objective, for instance, if credit conveyance is managed without the union of scc, it might have issues with itself its – security and recuperation. in the course of recent years, fruitful involvement in giving money to little business visionaries and makers has appeared needy individuals, when offered access to responsive and convenient monetary administrations at market costs, reimburse their advances and use incomes to expand their incomes and resources [6]. this not astonishing, as the main practical option for them is to get from the casual market at a lot more prominent enthusiasm than market costs. network banks, non-legislative associations and programs sparing gatherings around the globe have demonstrated that these small-scale advances can be gainful to borrowers and loan bosses, making microfinance a stand out amongst the best destitution decrease methodologies. this is illustrative paper dependent on auxiliary information. google on different sites has recognized information; inquireabout papers, and magazines. niaz hussain malik and muhammad luqman (2005) examine e that about 60% of worldwide microfinance customers are women. there are review of economics and development studies, vol. 6 (1) 2020, 107-116 112 numerous motivations to offer need to ladies, for instance, first, destitution decrease, effectiveness additions, and third, strengthening. strengthening is the procedure of progress to settle on their lives. by engaging, they increment their confidence, confidence and regard. as per the scientist, miniaturized scale credit plans seem, by all accounts, to be helpful to women’s strengthening and neediness mitigation, yet there are additionally some negative ramifications for women’s strengthening. past scientists guarantee that women do not for the most part approve; they have gotten some level of strengthening [4]. since strengthening is an exceptionally perplexing procedure to change the life of the individual with the goal that the projects for smaller scale credit have both a positive and a negative effect on engaging ladies and mitigating destitution around the globe. emphatically, this influences women to build their certainty, basic leadership, improve family and furnish them with social, money related and monetary chances. then again, women work in a constrained domain and their investment in pay creating exercises expand their outstanding task and duties sulaamman d. mohammad, gaza shahib, cedd iqbal hussain naqi and saba zehra (2012) featured the viability of micro financing in enabling women. the women’s empowerment index and the pakistan statistics scorebook assemble information for this examination. they utilized johansen’s reconciliation way to deal with survey the long haul connects between destitution, development and microfinance and the strengthening of women. the scientist found that there is appositive and huge connection between women’s strengthening and microfinance, and destitution is additionally huge and has negative connection with the strengthening of women. 3. information and approach in this examination, we inspect the connection between smaller scale credit and strengthening of women. for this reason, the creator uses look into strategies to discover the outcomes. the survey was set up for the investigation. two banks from the khairpur area have taken to gather information. 60 women chosen by the first fmfb and 60 with a complete example of 120 for the examination 3.1 client age the outcome demonstrates that a large portion of the customers were more than 40, may be in light of the fact that they are progressively mindful, preserving, it is additionally conceivable that they don’t utilize the advance themselves, they are just supporters of their male individuals. table 1 client’ age group evaluation frequency percentage 20-40 30 25% 41-50 50 42% 51-60 40 33% total 120 100% 3.2 status of instruction plainly, the instructive profile of our rustic women is extremely awful, of just 120 women, just 30 have gotten introductory training and 10 have gotten advanced education. this is the principle motivation behind why our women are disheartened right up until the present time. table 2 school, primary, college, university evaluation frequency percentage no school 80 67% primary level 30 25% college and university 10 8% review of economics and development studies, vol. 6 (1) 2020, 107-116 113 total 120 100% 3.3 conjugal status it is uncovered that wedded women are principally occupied with financial exercises. their offer is higher than unmarried women are. the study demonstrates that at times women are constrained by their male individuals to assume acknowledgement for budgetary help. table 3 married, unmarried, widow and divorce evaluation frequency percentage married 70 59% unmarried 40 33% widow 05 04% total 120 100% 3.4 business nature for the most part women take an interest in the casual area because of absence of instruction and budgetary issues. table 4 business nature tailoring, poultry, livestock, boutique and parlor evaluation frequency percentage tailoring and handicraft 50 42% poultry 10 08% livestock 30 25% boutique and parlor 30 25% total 120 100% 4. the old business or is it begun? generally, women have begun business before assuming acknowledgement; however, they face money related issues to deal with the business. table 5 old new business evaluation frequency percentage old 90 75% new 30 25% total 120 100% 4.1 paid sum most women have independent companies and take an interest in the casual part, so they take a short advance sum without much of stretch reimbursed. as the commitment of credits, they pay week by week or month to month. table 6 paid sum of salaries evaluations frequency percentage 15000-20000 60 50% 21000-35000 10 08% review of economics and development studies, vol. 6 (1) 2020, 107-116 114 36000-60000 20 17% 60000and above 30 25% total 120 100% 4.2 who offers you for credit? table 7 credit offer to relatives, friends and banks institutions frequency percentage relatives 20 17% friends 40 33% bank and institutions 60 50% total 120 100% most women express that brokers have roused them to join the microfinance program. they go way to way to publicize their plans and make it simpler for compatriots. 4.3 where do you spend a credit? the study found that most women spend a large portion of their credit from their business and the other half out of their own costs. along these lines, the fundamental reason for the credit is finished and is not useful to them. table 8 credit spend on business, self-expenditure & on both evaluations frequency percentage on business 20 17% on self-expenditure 30 25% on both 70 58% total 120 100% 4.4 who chooses the advance? table 9 yes, advance self and husband and male members frequency percentage self 30 25% husband and male members 90 75% total 120 100% the outcome demonstrates that women do not get, they are only an approach to help their male individuals. they have no basic leadership control. 4.5 month to month pay the vast majority of the respondents have a place with the pay gathering (5000-1000), so the dominant part live beneath the destitution line. their expectation for everyday comforts is exceptionally low. they cannot effectively meet their fundamental needs. table 10 month to month pay salaries evaluation frequency percentage 5000-1000 50 42% 10000-20000 40 33% 30000 and above 120 100% review of economics and development studies, vol. 6 (1) 2020, 107-116 115 4.6 month to month expenses most respondents state their month to month spending is 10000-20000, so its extremely hard for them to pay commitments on schedule and then again to deal with their family unit costs. table 11 month to month expenses salaries evaluation process frequency percentage 10000-20000 60 50% 20000-30000 40 33% 30000 above 30 17% total 120 100% 4.7 who chooses pay and expenses? of 120 respondents, 70 respondents said that their better half settled on salary and costs, we are just a sources. we pay a regularly scheduled payment, and male individuals give just the measure of the commitment. table 12 pay and expenses of self, husband and both evaluation frequency percentage self 10 08% husband 70 59% both 40 33% total 120 100% 4.8 do you contribute? under time or no? table 13 contribution under time or no evaluation process frequency percentage yes 70 59% no 50 41% total 120 100% most of individuals pay the credit in time. 50 respondents said they had money related issues so they could not pay commitments on schedule. the litigant brought up that, specifically, the measure of the credit is spent on other essential needs, so this sum is not valuable to us, and it does not put appropriately in business exercises, so it is hard to pay the portion on schedule. 4.9 when you take up your budgetary position we become better or no? table 14 budgetary position become well or no evaluation process frequency percentage yes 40 33% no 80 67% total 120 100% the information demonstrate that the monetary state of the respondent turns out to be less great after the credit, as the measure of the advance and the enthusiasm on it are hard to pay, in this way, they are experiencing tension in the wake of accepting the advance. review of economics and development studies, vol. 6 (1) 2020, 107-116 116 4.10 do you feel enabled? table 15 feel enabled for yes or no evaluation process frequency percentage yes 30 25% no 90 75% total 120 100% the outcome has demonstrated that microfinance projects are not completely enabled for women. it is uncovered that the measure of the advance is not utilized accurately in business exercises. a little measure of advance from private company that remaining parts to be utilized for day by day family costs so it is anything but a wellspring of pay increment and they feel additional weight for them when they cannot reimburse the credit on schedule. 5. conclusion in the region of haiphrop, microfinance projects are not a total wellspring of strengthening for women, different elements influence women’s strengthening, for example, male-ruled issues and social standards and taboos. the state of the woman is not improving. they face numerous issues because of the absence of instruction and numerous different reasons we examined in the report. microfinance projects are successful when utilized in a suitable manner and generally used to oversee business and produce salary. it will be valuable for women on the off chance that they have salary, settle on choices on homework and will be free for portability. it is proposed that preparation projects be composed by microfinance organizations and acquaint themselves with their rights. to ease destitution, the advance utilized to grow business as opposed to address individual issues. to control the pay and resource proprietorship. references dr. thresiamma varghese, “women empowerment in oman”, a study based on women empowerment in rural development”, pakistan journal of distance education,, 16(7): 52-59, 1999. dr. ajay sharma, ms. sapna dua, mr. vinod hatwal, “micro enterprise development and rural women entrepreneurship: way for economic empowerment”, a journal of economics and management, 1(6): 24-32, 2012. esther duflo, (2012) “women empowerment and economic development”, journal of economics literature, (50(4):71-76, 2012. helge ronin, “economic empowerment of women through micro credit, the case of the micro finance, investment and technical assistance facility (mitaf)”, text book, sle publication series. 1(01):43-56, 2012. isidore ekpe, norisah binti mat and razali che razak, “the effect of micro finance factors on women’s entrepreneur’ performance in nigeria: a conceptual framework”, international journal of business and social scinces, 1(2):111-121, 2010. islam md. rafiqul, “rural women’s empowerment through self income generating activities: a study on ngos, credit programs in bangladesh”, journal of global citizenship and equity education, 1(1): 109-115, 2011. juliet hunt, “reflection on micro finance and women’s empowerment”, development bulletin, 57:71-75, 2012. review of economics and development studies vol. 5 no 2, june 2019 333 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads brand-centered human resource practices and brand citizenship behavior: the notion to develop competitive advantage 1 asad ur rehman, 2 salniza bt md. salleh, 3 norzieiriani bt. ahmad 1 lecturer department of commerce, bahauddin zakariya university, multan, pakistan, asadrehmaan@bzu.edu.pk 2 associate professor, school of business management, (cob), university utara malaysia, sal1029@uum.edu.my 3 senior lecturer, school of business management, (cob), university utara malaysia, norzie@uum.edu.my article details abstract history revised format: may 2019 available online: june 2019 the brand citizenship behavior (bcb) is relatively a new aspect in marketing literature. researchers have given a label of bcb to the discretionary behavior that employees‟ exhibit for the successful delivery of brand promise. in internal branding, the role of an employee is recognized as critical in delivering the service as promised by the brand. as practitioners and academicians argue that, an employee‟s brandaligned behavior that goes above and beyond the job responsibility can be an asset for the company and is difficult for competitors to imitate. drawing on employees‟ brandaligned behavior to build the strong organization brand this study conceptualized that, the successful implementation of internal branding doctrine could be strengthened by brand-centered human resource practices and develop a new route for companies to build the competitive advantage. thus, the study found that the human resource practices such as fair recruitment process, training programs, and socialization practice could enhance the employees‟ brand citizenship behavior. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords brand citizenship behavior, brand-centered human resource practices, employee branding, internal branding jel classification: c91, e24, m10 corresponding author‟s email address: asadrehmaan@bzu.edu.pk recommended citation: rehman, a. u., salleh, s. b. m. and ahmad; n. b., (2019). brand-centered human resource practices and brand citizenship behavior: the notion to develop competitive advantage, review of economics and development studies, 5(2), 333-342 doi: 10.26710/reads.v5i2.606 1. introduction the role of brand-centered human resource (hr) practices especially in service-based organizations continues to grow in importance. as the practitioners and academicians recognized that the fairly recruited, well trained, and motivated employees are vital for organizations to create competitive advantage (saifalislam, osman, & alqudah, 2014; guest, 2017). literature suggests that organizations can be developed a competitive edge through brandcentered hr practices (chang, chiang, & han, 2012; king, so, & grace, 2013).nevertheless, brand-centered hr practices seems to be significant to become employees as brand champions (i.e. deliver successful brand promise). the hr practices provide a foundation to align an employees‟ behavior to build the successful organizational brand (punjaisri & wilson, 2017). however, earlier researchers do not address the issue of how brand-centered hr practices may influence on employees‟ brand building behavior and market performance (bravo, buil, de chernatony, & martínez, 2017; rehman, salleh, & ahmad, 2017). moreover, relatively little studies were emphasized on the impact of hr practices __ specifically to shape up employees‟ behavior in the perspective of http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5 no 2, june 2019 334 inside-out to develop the organization brand identity. therefore, it seems important to probe brand-centered hr practices in the perspective of employees‟ behavior to create the strong organizational brand. scholar documented that employees‟ brand behaviors (i.e. in role and extra-role) considered as significant to build a strong brand(king & grace, 2010). employee‟s in role brand behaviors is related to prescribed rules and regulation by the company based on their role as a brand representative. on the other side extra role behavior has focused on an employee‟s willingness to exert extra effort that goes beyond the prescribed brand roles and enhances the company‟s brand image(morhart, herzog, & tomczak, 2009). the employee‟s extra role behavior contributes to customers‟ loyalty and enhances company‟s brand performance(porricelli, yurova, abratt, & bendixen, 2014). according to shaari, salleh, and hussin (2012) employee‟s willingness to put forth extra role behavior is seen as vital for the successful delivery of brand promise. thus, employees‟ extra role brand behavior is also known as brand citizenship behavior (bcb) (burmann & zeplin, 2005). the notion of bcb is referred as “the employees‟ voluntary basis to project a number of generic employee behaviors that enhance the corporate brand identity” (burmann & zeplin, 2005, p. 282). brand citizenship behavior was originally derived from the theory of organizational citizenship behavior (ocb). the ocb stresses towards employees‟ discretionary and extra role behaviors that goes beyond their prescribed job requirements (bolino, hsiung, harvey, & lepine, 2015). the notion was coined by organ (1988) based on ideas of “willingness to cooperate” and “innovative and spontaneous behaviors”. by acquiring ocb, employees possibly displayed positive attitudes and behaviors towards the organization. they would help the organization to grow and build the organization success. hence, ocb perceived to be more intra-organization oriented. more recently, these concepts have been borrowed by researchers in the discipline of marketing, particularly in the study of brand management. thus, ocb becomes bcb. according to burmann, zeplin, and riley (2009), bcb is an extension of ocb that is not only intra-organizational focus yet also emphasize on the quality of brand-customer relationship (such as brand affinity, non-substitutability, and trust). hence, based on this perspective, bcb not only limited to work-related issues but also includes the brand performance issues mainly to achieve some sort of “brand champions” level(lin, lin, & chou, 2016). mostly the studies in relation to employees‟ brand citizenship behavior have discussed the role of leadership style, empowerments of employees, markets manipulation, and the organizations‟ brand identities(vallaster & de chernatony, 2006; henkel, tomczak, heitmann, & herrmann, 2007). however, chang, chiang, and han (2012) argued that human resource management is an important predictor of brand citizenship behavior. however, limited studies have addressed the human resource practices such as brand-centered recruitment, brand-centered training, and brand-centered socialization. it seems atruism that the key process of talent recruiting, well-organized training and socialization practices of a company, could enhance the employees‟ brand citizenship behavior. it is found that quite little studies, such as burmann and zeplin (2005) and burmann, zeplin and riley (2009), has discussed the significant influence of brand-centered hr practices on employees‟bcb. in addition, the results of researchers have shown that brand-centered human resource practices can create a primary base for companies to develop the competitive advantages (al-shuaibi, shamsudin, & aziz, 2016). nevertheless, previous scholars did not confer in detail how brand-centered human resource practices such as recruitment, training and socialization practice might increase the employees‟ behavior or describing the expected brand related performance from employee. thus, this study proposes an attempts to find the effect of brandcentered human resource practices on the employee‟s brand citizenship behavior. 2. literature review 2.1 brand citizenship behavior brand citizenship behavior (bcb) is a measure of the employees‟ willingness to perform extra role behavior that goes beyond its basic role requirement i.e. prompted the brand-supporting behavior(punjaisri, wilson, & evanschitzky, 2008).thus, bcb is referred to as all employees‟ behaviors that are consistent with brand identity and brand promise and in sum strengthen the brand (piehler, hanisch, & burmann, 2015). academicians and practitioners asserted that bcb is a key ingredient of internal branding, which encourages employees to align their behavior with organizational brand to create and maintain the consistent brand identity (henkel et al., 2007; baumgarth & schmidt, 2010,burmann & konig, 2011). however, as exhibited by the research, the employees‟ behavior is crucial in the internal branding process because all activities related to brand review of economics and development studies vol. 5 no 2, june 2019 335 identity are based on the decisions and actions of employees particularly in service sector (punjaisri, evanschitzky, & wilson, 2009). this is because, in service-based organization, employees have direct contact with customers and other external stakeholders are the epitome of the brand in their eyes (du preez, bendixen, & abratt, 2017). therefore, an employees‟ brand related behaviors can consistently transmit the positive brand image and create competitive edge for an organization.. moreover, employees‟ behavior indirectly influences customer brand experience because they are responsible for the successful delivery of company‟s products and services (miles & mangold, 2004). similarly, burmann et al. (2009) revealed that individual volunteer behaviors or extra efforts without any expectations of reward may contribute in the delivery of brand promise as expected by the customers. nevertheless, previous studies documented that relatively limited work is done __ how to turn the employees‟ behaviors consistent with the organizational brand promise (lohndrof & diamantopoulos; 2014; punjaisri & wilson, 2017). hence, based on the dearth of literature, the present study is attempted to fill the gap by investigating __ how bcb embolden employees to project the appropriate brand promise. 2.2 brand-centered human resource practices 2.2.1 brand-centered recruitment recruitment is considered as one of the most important human resource practice which has influenced the behaviors of employees‟ to do best performance for the fulfillment of brand promise. in essence, recruitment is a planned effort to appeal individuals whose values are consistent with the company‟s brand (punjaisri et al., 2008). it is assumed that when such individuals are trained, they could successfully deliver the desired brand value (mangold & miles, 2007).previous research expose how recruitment practice influences employees‟ behavior with respect to the job and organizational performance (saifalislam et al., 2014; zhang, di fan, & zhu, 2014). literature on branding has shown that, relatively limited work is addressed to show that how recruitment practices increase employee‟s brand citizenship behavior.for instance, scholars (aurand, gorchels, and bishop, 2005; burmann and zeplin, 2005; king and so, 2013; maclaverty, mcquillan, and oddie, 2007) have asserted the brand-centered recruitment as an important predictor of employees‟ brand citizenship behavior. jiang and iles (2011), stated that during the recruitment process firm communicate to the potential candidate about the organization‟s intents and nevertheless, what behavior is expected to be delivered by the company‟s brand. evidently, king and so (2013), claimed that brand-centered recruitment has instigated an employees‟ behavior according to organization‟s brand values to build-up strong brand. therefore, brand-centered recruitment practice encourages employees to align their behavior with respect to pro-brand manner. the qualitative and quantitative study of maclaverty, mcquillan, and oddie (2007), however, revealed that in corporate business the executives were responsible for internal branding within their organizations, they shown the importance of recruitment practices in internal brand building. according to these researchers, brand-centered recruitment found to be the good practice to constantly build the skill(s) among employees to deliver the brand promise. similarly, the findings of chang et al. (2012) advocate that, companies at large give attention to recruit those talented individuals who have positive attitude toward the brand citizenship behavior. however, these researchers did not discuss the employees‟ perspective related to the recruitment that may affect behaviors but most of studies focused on the recruitment practices in a management perspective as a part of internalization. previous literature documents that via certain human resource practice, such as recruitment process can motivate employees to affirm the brand-centered behavior(aurand, gorchels, & bishop, 2005).similarly, burmann and zeplin (2005) argued that brand-centered recruitment may commit employee behavior towards brand identity that is the strength of internal branding. thus, brand-centered recruitment enables employees to perform the pro-brand behavior, which might enrich overall brand performance of the company. 2.2.2 brand-centered training training communicates organization‟s brand values among employees and trained them how to perform their job to deliver an appropriate brand promise (alshuaibia & shamsudinb, 2016). especially, training programs help newcomers young employees to learn the company values and standards that exists prior to joining (king & so, 2013). hence, brand-centered training practice enable employee to better apprehend the organizational brand values and spectacle brand-building behavior. review of economics and development studies vol. 5 no 2, june 2019 336 researchers proclaimed that training programs are backed an employee(s)towards‟ brand performance (du preez et al., 2017). by commending a good job performance in a routine situations – brand-centered training encourage personnel to deliver an effective brand promises (king & so, 2013). previous study shows that training stimulate skills among employees and transfers brand value(s) or procedures in a way to prompt good performance and fulfill their job responsibilities successfully(chong, 2007). the well-coordinated training program aimed to help employees on how to incorporate brand values in their work, which provides base to make a tremendous impact on the branding success of organization(chang et al., 2012). while – the role of brand-centered training practices in influencing branding (both externally and internally) has been recognized as relatively limited in the perspective of employees brand building behavior (king & so, 2013).thus, it needs to create more comprehensive training programs that support an employees‟ branding efforts. 2.2.3 brand-centered socialization scholars claims that organizational brand is strengthened by communicating brand values among employees through socialization practice(burmann & zeplin, 2005). the brand-centered socialization helps employee(s) by giving orientation, involved in training or social activities and communicate them informal brand values(erkmen & hancer, 2014; du preez et al., 2017). in addition, socialization process have reduce employees‟ role ambiguity, role conflict, and improve in role job behavior to deliver the successful organizational brand (cooper‐thomas & anderson, 2002; hurrell & scholarios, 2014). brand-centered socialization is an ongoing practice that stimulate employees to successfully handle the work routine and help to learn an organization‟s pattern of activities(king & grace 2012). in addition, it also builds employee well-being and sets the foundation to provide an appropriate service to customers. in essence, socialization on workplace influence on employee(s) behavior because positive support of experienced colleagues backed to understand the organizational norms(kasemsap, 2015). thus, employee(s) tension or stress could be reduced by socialization practice and encourage them a sense of information sharing and developing association with their colleagues(bauer, bodner, erdogan, truxillo, & tucker, 2007). researcher asserts that due to socialization process employee(s) develop a good relation with their colleagues. on the base of working relations they create a peer networks among departments and participate in social activities. the social activities remove the confusion and ambiguity among colleagues and increase their cooperation with other to do their job in comfort zone (ge, su, & zhou, 2010). therefore, it is expected the positive link of socialization practice proactively engage employees towards brand building behavior. in consideration of internal brand management literature king and grace (2012) suggest that brand-centered socialization is considered as an important antecedent of employee brand related behaviors such as bcb. because socialization process help employees‟ to learn and identify the expected brand values and beliefs. without social understanding, good brand performance is a hard task for employee(s) and significant to diminish the expected brand promises (matanda & ndubisi, 2013). hence, band-centered socialization practice encourage employee(s) to adopt an organizational values and beliefs for an appropriate fulfillment of brand promise (du preez et al., 2017). the relationship between brand-centered human resource practices and brand citizenship behavior the prior studies in internal branding endeavor to probe the influence of human resource practices to stimulate employees‟ brand-citizenship behavior. it is assumed that human resource practice such as recruitment, training and socialization are likely to communicate an accurate, convincing, and significant brand message towards the target individuals. for instance the finding of bolino et al. (2015) reveals that firstly, companies may attempt to elicit more citizenship behavior among their employees by selecting those individuals who are generally predisposed to be engaged in citizenship. secondly, the individuals who have exhibited high levels of involvement on extracurricular activities in addition to their core obligations might also be inclined to prompt extra role behavior as future employees. furthermore, burmann and zeplin (2005) argued that brand-centered human resource practices proposes that how an individual can be fitted with company‟s brand to deliver the appropriate brand promise. as hurrell and scholarios (2014) stated that recruitment and training is a part of corporate brand management which helps managers to select those employees who are best fit with company brand. however, it is seen that in many companies during the recruitment process, the alignment of individual values with the company brand values is review of economics and development studies vol. 5 no 2, june 2019 337 often neglected. this might be due to the fact that individual evaluation process to fit with company brand may not be that easy to be managed as is thought of. this is because in recruitment process the adoption of appropriate screening techniques maybe critical. however, the use of socialization tactics may encourage individuals to initially attach with experienced employees to learn from them how to create an appropriate behavior afore joining the company __ help to better internalize the brand values. the study of gotsi and wilson (2001) investigated that what factors are important for companies to fulfill their promise and how employees perform their duties to satisfy the target customers. the finding of the study revealed that human resource practices should be aligned with company‟s brand values to elude any conflict promise. similarly, turek and wojtczuk-turek (2015) stated that a well-defined human resource practices creates a positive perception among employees to prompt their willingness to undertake extra-role behavior. hence, scholars suggested that brand-centered human resource practices (namely brand-centered recruitment, brand-centered training and brand-centered socialization) are critically important to build a successful organizational brand (du preez et al., 2017). in addition, researchers recognized that human resource practices may influence employees towards the development of bcb (burmann & zeplin, 2005; burmann et al., 2009; sepahvand & sepahvand, 2013; ravens, 2014). for instance, as cropanzana, bowen, and gilliland (2007), suggested that the individual who are selected through the fair recruitment process might realize the positive attitude about the company and thus spread good word of mouth with friends and family, opposite to those individuals who faced unfair recruitment. furthermore, when an individuals‟ has joined company on the base of a fair recruitment method, they are more willing to perform responsibilities honestly and create trustful relations with colleagues. in addition, academicians and practitioners asserts that the inducement of well-organized training programs and best practices of socialization might encourage employees to exhibit altruistic behavior such as bcb(king & grace 2012; hurrell & scholarios, 2014; porricelli et al., 2014). based on above discussion, the study thereby develops a proposition to examine, in specified array of approach, the fact of how do the brand-centered human resource practices (namely brand-centered recruitment, brand-centered training and bran-centered socialization) may strengthen the employees‟ brand citizenship behavior. proposition: the likelihood of employee brand citizenship behavior will be increased based on the brand-centered human resource practices. 3. conceptual model based on the review of literature this study develops the conceptual model that exhibits, brand-centered hr practices have strengthen the employees‟ brand citizenship behavior. this notion is supported by the social exchange theory (set) presented by blau (1964). the set assumption reveal the importance of the relationship among employee(s) and organization (eisenberger, armeli, rexwinkel, lynch, & rhoades, 2001). for instance, organizational goals can be achieved by motivating the employees (xiong, king, & du, 2016). in the line of this argument, high value social exchanges are developed that create the mutual trust among employees and loyal to the firm (chen & klimoski, 2003). similarly, previous study contend that by practicing of reciprocal exchanges with colleagues affirm to create valued benefits (molm & cook, 1995). such scenario, established the long-term and interactive relationship among organization and its employees that facilitate to build organizational brand performance. figure 1: brand-centered hr practices relation with employees’ bcb brand-centered hr practice  brand-centered recruitment  brand-centered training  brand-centered socialization brand citizenship behavior review of economics and development studies vol. 5 no 2, june 2019 338 in the setting of present study conceptual model set is viewed as a best platform to explain the volunteer behavior or extra-role behavior such as brand citizenship behavior (chang et al., 2012; hasnizam, salleh, & hussin, 2012). blau (1964) postulated that the perspective of social exchange is based on the perception of reciprocal relationship between certain actors such as individual actions depend on rewarding responses from others. this phenomena is representing the exchange relationship. however, the present study assume that the employees‟ positive perception related to the brand-centered human resource practices (namely brand-centered recruitment, brand-centered training, and brand-centered socialization) that are received from the organization encourage them towards better performance as an exchange process. hence, to exhibit the reciprocal behavior, employees contribute to deliver an appropriate brand promise by articulating positive brand citizenship behavior. nevertheless, supported by the set (kehoe & wright, 2013), an employees‟ perception related to organization ability to reciprocate with desirable benefits is directly linked with extra role behavior performed by the employees on behalf of organization e.g. bcb (king & grace 2012). therefore, set is considered appropriate to test that how the relationship among „brand-centered hr practices‟ effect on the „employees‟ bcb‟. researchers affirmed that organizational brand could be strengthened by the fulfillment of the promises and by developing the brand identity (burmann et al., 2009; punjaisri, wilson, & evanschitzky, 2009; altaf, mokhtar, & ghani, 2017). thus, employee(s) who play the role of customer-contact act can develop brand identity by offer to best brand value(s) to target customers. however, on the light of this argument, the effective implications of brand-centered hr practices might boost up the mutual trust among organization and its employees (burmann & zeplin, 2005; davies & gouldwilliams, 2005; chang et al., 2012; king & so, 2013). it is seems truism that when an employees‟ are satisfied by an exchange relationship, they may reciprocate the organization by prompting the extra role behavior such as bcb. 4. conclusion and discussion the study important contribution is a postulation of how „brand-centered hr practices‟ as an antecedent effect on „employees‟ bcb‟. which portrays that hr practices encourage employee(s) to do the extraordinary performance to deliver the strong “brand promises” (al-shuaibi et al., 2016), there by contributing to employees‟ brand citizenship behavior. as for the effect human resource practices on employees' brand behavior, clearly demarcates the dimensions of brand-centered hr practices (namely brand-centered recruitment, brand-centered training, and brand-centered socialization) and posit their influence on employees‟ bcbs. these practices stimulates employees to engage in extra role brand behavior, thereby improving customer perceptions toward an organizational brand. as practitioners and academics alike advocate that the human resource practices can strengthen employees' behavior towards the brand-related support mechanisms and engage them in both altruistic or extra role brand behavior(chang et al., 2012; piehler et al., 2015). previous studies has documents the effects of internal branding through the marketing control theory, brand identity theory, employee empowerment, and leadership theories (vallaster & de chernatony, 2006; henkel et al., 2007; terglav, ruzzier, & kaše, 2016). however, present study discuss the social exchange theory to clearly understand that how internal branding activities such as human resource practices encourage employees towards the brand building behavior. internal branding is regarded as the process of aligning employees‟ behavior, thus, it is seems truism, the high quality of social exchanges stimulate employees towards the reciprocal exchange of valuedbenefits, which might leads their behavior to deliver the successful brand promise (chang, chiang, & han, 2015). to sum it up, brand citizenship behavior seems to be positively enhanced by the brand-centered hr practices, thus in conclusion brand-centered hr practices are conspicuous approach which enables company to achieve sustainable competitive advantage. references al-shuaibi, a. s. i., shamsudin, f. m., &aziz, n. a. 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(2014). high-performance work systems, corporate social performance and employee outcomes: exploring the missing links. journal of business ethics, 120(3), 423-435. review of economics and development studies, vol. 6 (2) 2020, 323-337 323 impact of economic reforms on social sector of pakistan: an empirical analysis a muhammad shakeel , b azmat hayat a assistant professor, department of economics, government islamia college civil lines lahore, pakistan email: muhammadshakeel2000@gmail.com b assistant professor, department of economics, punjab university lahore, pakistan email: azmathayat.eco@pu.edu.pk article details abstract history: accepted 22 may 2020 available online 30 june 2020 this study evaluates the impact of economic reforms on the social sector of pakistan by constructing the index of economic reforms of the key sectors of the economy for the period 1971 to 2015 using ardl. for analysis purpose two separate models have been estimated for poverty and income inequality. the results of the study reveal that economic reforms impact poverty and income inequality negatively and significantly. the negative relationship of economic reforms show that economic reforms are helpful for improving the social sector of pakistan. moreover, both the models also show convergence from short run to long run period. the foreign direct investment exerts positive impact on poverty and gross fixed capital has positive impact on both poverty and income inequality. the relationship between population growth and income inequality is positive and significant. moreover, age dependency ratio and life expectancy reduces both inequality and poverty respectively in the long run. the role of crime appears to be insignificant in case of income inequality. the study suggests that government of pakistan should formulate and implement pro poor policies and introduce reforms for providing health and educational facilitates. furthermore, the introduction food subsidy to the poor will also be helpful in reducing the intensity of poverty and inequality in pakistan. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: economic reforms, ardl, poverty, income inequality jel classification: b23, b29, c10 doi: 10.47067/reads.v6i2.210 corresponding author’s email address: muhammadshakeel2000@gmail.com 1. introduction every country of the world is striving to achieve rapid economic growth through the development of its social sectors. as social problems like poverty and income inequality faced by an economy may retard the process of economic growth. chambers (2006) explains poverty as shortage of income, absence of material things, poor and weak physical capacity, capabilities and finally shortage of basic necessities of life both material and immaterial. from socio-economic point of view poverty review of economics and development studies, vol. 6 (2) 2020, 323-337 324 generates violent actions and life-threatening activities which are dangerous for the sustainability of a society (seccombe, 2000). poverty is a universal phenomenon and may be defined as a socio-economic deprivation (khan, 2001). mohsin (2013) evaluated high rate of poverty in muslim countries as in pakistan 24, afghanistan 53, indonesia 18, iran18, bangladesh 45, sudan 40, yemen 45, algeria 23, egypt 20 and nigeria 70 per cent. the term inequality is related to the distribution of resources, income and standard of living among different sects of the society. both poverty and income inequality create hurdles for economic opportunities for poor (fukuda, 2006). economists and researchers are of opinion that economic reforms may be helpful in decreasing poverty and income inequality in a country. kar (2009) and rao (2010) suggest that socio-economic reforms strategies are useful to fight against poverty an income inequality in class ridden societies. several reforms and efforts at the level of governments and international organizations have been introduced to eradicate poverty and income inequality (for detail see, united nations, 2000; todaro and smith, 2012; raimi and mobolaji, 2008). barrette and beardmore, (2000) point out that provision of basic necessitates of life to the poor is another strategy of reducing poverty. morduch et al. (2003) and awojobi and bein, (2011) state that the access to easy and soft loans through micro finance banks may be helpful in reducing poverty in developing countries and it has already shown fruitful results in bangladesh and china. the above discussion indicates that economic reforms can perform effective role to reduce poverty and minimizing income inequality from the society. lustig (2015) examines the reforms in the fiscal sector by improving tax structure and spending through social safety nets to achieve the goals of reducing poverty and inequality. several social institutions are a form of public goods which may provide opportunity to the people to make the most of their education, health, and skills. the establishment of social institutions and social spending can only be made successful through fiscal sector reforms as the income and expenditure priorities of the government are towards the weaker sections of the society. trade sector reforms help to overcome the phenomena of poverty by gaining comparative advantage, improving efficiency and generating employment opportunities. getting more jobs in response to the trade reforms may have an impact on economic growth through social sector of an economy. (see for example, anwar 2007; neutel and heshmati 2006; craft 2000; santarelli and figini 2002; nath and al-mamun 2004; agenor 2002; siddiqui and iqbal 2005). in most of the developing countries agriculture sector is a key sector for providing food and employment especially in rural areas. that is why reforms for this sector are regarded as highly important for achieving the goals of reducing poverty and income inequality. empirical findings suggest that agricultural reforms are effective in reducing rural poverty but highly skewed lands present the reverse results (for detail see, datt and ravallion 1998; timmer 1997; thirtle 2001). industrial sector is considered as the back bone as well an engine for the rapid economic growth of an economy. reforms in this sector are not only important but also necessary. rawski (1994) analyses chinese industrial reform accomplishments, prospects and implications. the industrial reforms in china have moved rapidly in the direction of transforming a largely planned economy into a market system. japan, korea, taiwan, and singapore have also introduced industrial reforms for reducing regulations and distortions in industrial sector. empirical evaluation of economic reforms and its impact on social sector of pakistan is the main review of economics and development studies, vol. 6 (2) 2020, 323-337 325 objective of this study. furthermore, the study analyses and quantifies the economic reforms introduced in pakistan in the sectors of agriculture, industry, trade, fiscal and finance. the novelty of the persent study is to quantify the economic reforms of the major sectors such as agriculture, industry, trade, fiscal and financial sector. the organization of the study is as follows: the review of literature and theoretical frame work are presented in section 2. section 3 explains poverty and income inequality in pakistan along with some strategies to combat it. section 4 describes the methodology, data sources, results and interpretations. the last section concludes. 2. literature review celikay and gumus (2017) examine the relationship of the spending of social sector on poverty reduction for the period of 2004 to 2011 using panel ecm. long run relationship shows positive association between social spending and poverty has been observed while negative in short run. ferrarini et al. (2016) evaluate the impact of poverty and social transfers in low, middle and high income countries. multilevel logistic regression and cross national data has been used for forty countries. the results show that explanatory value of transfer income is greater for cross-country differences in poverty than the degree of targeting it. qamar et al. (2016) analyze microfinance and non-monetary aspects of poverty. the expenditures on the education of the children and the actual condition of the houses are used as the main variables of non-monetary aspects. to measure the difference and significance of the variables chi-square test is applied by following binary logistic regression. the findings of the study show that micro finance has significant impact in reducing poverty and it is attained by giving better facilities in education and improving housing conditions. zaman and khilji (2014) investigate a the impact of economic growth on poverty reduction in different sections of a society. for this purpose annual data from 1964 to 2011 related to pakistan economy is used for empirical analysis. the results reveal that aggregate poverty has been increased both in rural and urban sector through interaction effect. overall impact of population shift on poverty reduction appears positive. cheema and sial (2012) develop a triangle of poverty, growth and income inequality. pooled data from eight household surveys of 1992-93 and 2007-08 is used for the study. random effects models have been used for empirical findings. the analysis of growth elasticity of inequality of the rural and urban areas indicates that income inequality is found relatively more in urban areas as compare to rural areas. khan and ahmad (2012) examine the impact of foreign investment on the policies which target the poor sections of the society for the time period from 1985 to 2011. fdi has positive relationship between economic growth but not same for pro-poor sections of the society. the study also finds that the intensity of income inequality is more than poverty reduction through foreign direct investment. khan and sattar (2010) evaluate the empirical piningof poverty on the economy of pakistan form 1973 to 2009. granger causality results show the existence of bi-directional relationships between trade and growth. empirically analysis show positive and significant impact on economic growth both in short and long run. foreign trade is highly important and conclusive role for reducing poverty in pakistan. gillani et al. (2009) explain poverty in pakistan particularly in relation with very important aspects of an economy as unemployment, inflation and crime. annual data from 1975 to 2007 has been used for empirical analysis. the study concludes that poverty is the main reason for the increase in crime in pakistan. chaudhary et al. (2006) examine rural poverty in pakistan and explain the review of economics and development studies, vol. 6 (2) 2020, 323-337 326 determinants at macro level using annual data from 1963 to 1999. the results of the study show that the effects of inflation, unemployment and growth rates are positive for poverty elimination in rural areas of pakistan. hulme and mosley (1996) critically analyze poverty, microenterprise and social development. the study shows that microcredit and microfinance strengthen the economy especially among low income groups. the role of micro finance and microcredit as antipoverty is questionable in south asia. the study concludes that both microcredit and microfinance polices would be more active in poverty reduction in developing countries. 3. theoretical framework the researchers and policy makers from developed and developing nations are agree that eradicating poverty is a huge task which requires consistent concentrated policies. they are of opinion that government should support those programs which can be helpful in increasing income and increasing social spending (see for example, friedman, 1962; hayek, 1960). while on the other hand, there is a very strong theoretical point of view that poverty can be reduced by introducing economic reforms through social spending in social safety nets through its public finance. brady (2003) focuses on fiscal sector reforms for eradicating poverty and inequality. spicker (2002) explains that targeted political choice and political decisions of a welfare state can eliminate poverty and its causes. some studies evaluate social spending and poverty to transform a poor and weak state into welfare and developed state (see for example, sinn, 1995; kenworthy, 1999; caminada and goudswaard, 2009; caminada et al., 2011). health indicators in millennium development goals (mdgs) are targeted with full concentration for eradication poverty in developing countries. life expectancy has very deep impact on poverty and is considered a major determinant for reducing poverty. foreign inflows in an economy in shape of fdi also provide employment to the masses and hence prove helpful for removing poverty and income inequality. torre (1985) explains the process of empowerment by providing financial support through reforming the financial sector. this empowerment can be attained by giving strength for powerless sections, enabling them to make their own decisions and may have complete control over their own affairs. from the above discussion it can be concluded that the role of the government is indispensable for reducing poverty and income inequality. this role of the government reflects in the socio-economic reforms introduced at time to time. furthermore, foreign direct investment, health sector reforms for reducing poverty and income inequality. the most important strategy of the government to fight against poverty is through reforming the sick and ill-planned sectors of an economy by combining the income support programe and social spending. economic reforms in the shape of subsidies, tax exemptions and coordinating the back bone of the economy as the sectors of agriculture, industry, trade, fiscal and financial sector may revive and generate employment opportunities and income generating economic activity. the impact of these economic reform policies and positive economic activities may diminish poverty and income inequality which is the main objective of this study. 4. methodology, data and model 4.1 methodology this study is based on the development of a statistically sound methodology of index construction. statistical information and techniques are very much important in measuring social and complex concepts of economic variables such as economic reforms. the present study has taken review of economics and development studies, vol. 6 (2) 2020, 323-337 327 different sectors such as agriculture, industry, financial, fiscal and foreign sectors as well as their sub sectors and finally the composite outcome variable as combined economic reforms index is constructed. the definition, construction and measurement of the desirable index is carried out on the basis of following the concept and idea of construction of human development index developed by mahbubul-haq (1990). moreover, vadlamannati (2009) developed a comprehensive economic reforms index for india by following physical quality of life index (pqli) for the period 1975 to 2006 which provides base for this study. the procedure for the analysis of the relationship between the variables is presented below. first step of methodology is to describe the variables regarding its statistics and then unit root test is applied. before applying ardl bound testing is required for further estimation. for the problem of multicollinearity we apply vif matrix. autoregressive distributive lag technique is employed to find the relationship of variables both in short as well as in long run (pesaran et al. 1999, 2001). in order to make the results robust we apply major diagnostic tests e.g. normality test, heteroskedasticity test, serial correlation and functional form test. stability of the model is tested by cusum and cusumsq test. 4.2 data the annual time series data from 19712015 for the variables foreign direct investment, population growth, life expectancy, exchange rate, age dependency ratio and gross fixed capital formation have been used from wdi. crime data has been taken from various statistical year books. the data for economic reforms has been generated by the author. the data for social sector has been taken from social policy development centre (spdc) macroeconomic and interpolated for two years (see for example, hyder, ahmed and jamal 2015). 4.3 model poverty =f (er, life, fdi, exc, lgfc)…………………………….....….. (1) gini = f (er, lgfc, popg, age, exc, lncrime)………………...........…….... (2) whereas; er = economic reforms index exc = exchange rate fdi = foreign direct investment lgfc = log of gross fixed capital gini = income inequality poverty = log of poverty popg = population growth lncrime = log of crime life = life expectancy age = age dependency ratio 4.3.1 ardl model ( ) ( ) ( ) ( ) ( ) ( ) ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) review of economics and development studies, vol. 6 (2) 2020, 323-337 328 ( ) ( ) ( ) ( ) ( ) ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) 4.3.2 the equation of error correction: ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) ( ) ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) ( ) 5. results and interpretation table 1 presents the results of descriptive statistics (see appendix). the kurtosis value of the coefficients i.e. economic reform, foreign direct investment, income inequality and crime are greater than 3 which show the distribution is leptokurtic in nature. while poverty, exchange rate, life expectancy, gross fixed capital, age dependency ratio and population growth have kurtosis values less than 3 showing they are playtykurtic in nature. the skewness value of exchange rate, poverty, gross fixed capital and population growth is near to zero showing normal skewness. while, coefficient of income inequality, economic reform, life expectancy, foreign direct investment, age dependency ratio and crime are negatively skewed. the difference between maximum and minimum values is not much showing no problem of outlier. table 2 unit root test variables unit root test augmented dicky fuller intercept & trend at level at first difference review of economics and development studies, vol. 6 (2) 2020, 323-337 329 er 3.951754 -3.867905** logpov -2.516058 -8.299763*** exc 0.359325 -1.906289* fdi -2.736157* lgfc -4.430138*** gini -3.103294 -14.96970*** popg -5.201313*** life -5.805620*** age -1.640505 -3.578927** lncrime -6.059279*** table 2 explains the findings of adf. the results of in of the unit root test reveal that there is mix order of integration. table 3(a) and 3(b) (see appendix) show correlation within the acceptable and moderate range. the diagonal of correlation matrix from upper left to lower right always show value one because it is a correlation between the variables itself and variables must be perfectly correlated with itself. the results of vif matrix are presented in table 4(a) and 4(b) (see appendix) which show that all the calculated values of the regressors have the values less than 10 which confirms that the model is free from multicollinarity. table 5 ardl bound test null hypothesis: no long-run relationships exist model 1 test statistic value k f-statistic 5.935698 5 critical value bounds significance i(0) bound i(1) bound 10% 2.26 3.35 5% 2.62 3.79 2.5% 2.96 4.18 1% 3.41 4.68 model 2 test statistic value k f-statistic 7.724297 6 critical value bounds significance i(0) bound i(1) bound 10% 2.12 3.23 5% 2.45 3.61 2.5% 2.75 3.99 1% 3.15 4.43 table 5 illustrates the results of bound testing which demonstrates that the calculated value i.e. 5.93 of f-statistic in model 1 is higher than upper critical bound i.e. 3.35 at 1% level of significance and in case of model 2 the calculated value i.e. 7.72 of f-statistics is higher than upper critical bound i.e. review of economics and development studies, vol. 6 (2) 2020, 323-337 330 3.23 at 1% level of significance with the conclusion of the existence of the long run relationship of the variables. table 6 results of ardl selected model: ardl(2, 0, 2, 1, 2, 2) dependent variable = poverty long run results short run results varia ble coefficie nt std. error t-stat pro b. variable coefficie nt std. erro r tstat pro b. er -0.28 0.06 -4.42 0.0 0 d(er) -0.21 0.06 3 3.36 0.0 0 life -0.08 0.03 -2.88 0.0 0 d(life) d(life(1)) -2.81 3.61 0.85 0.91 -3.31 3.95 0.0 0 0.0 0 fdi 0.05 0.01 4.62 0.0 0 exc 0.004 0.00 3.96 0.0 0 d(fdi) 0.01 0.00 1.47 0.15 lgfc 0.43 0.16 2.67 0.0 1 d(exc) d(exc(-1)) -0.0009 -0.002 0.00 0.00 0.65 -1.75 0.51 0.0 9 c 1.32 0.72 1.83 0.0 7 d(lgfc) d(lgfc(1)) 0.17 -0.16 0.12 0.10 1.41 -1.58 0.1 6 0.12 cointeq(1) -0.75 0.16 4.58 0.0 0 review of economics and development studies, vol. 6 (2) 2020, 323-337 331 table 7 results of ardl selected model: ardl (2, 0, 2, 0, 2, 1, 0) dependent variable = gini long run results short run results variable coefficie nt std. erro r tstat prob . variable coefficie nt std. erro r tstat pro b. er -0.10 0.01 6.06 0.00 d(er) -0.09 0.02 4.09 0.0 0 lgfc 5.24 0.41 12.6 7 0.00 d(lgfc) d(lfc)(-1)) 5.94 -2.96 1.87 1.55 3.16 -1.90 0.0 0 0.0 6 popg 2.64 0.49 5.34 0.00 d(popg) 2.57 0.61 4.19 0.0 0 age -0.15 0.05 2.89 0.00 d(age) d(age(-1)) 1.16 0.76 0.37 0.45 3.12 1.69 0.0 0 0.1 0 exc 0.03 0.01 2.53 0.01 d(exc) -0.01 0.02 0.86 0.3 9 lncrim e -0.27 0.25 -1.09 0.28 d(lncrim e) -0.26 0.23 -1.15 0.2 5 c -13.59 4.95 -2.74 0.01 cointeq(-1) -0.97 0.19 4.94 0.0 0 the results of model 1 are presented in table 6 which reveals the significance of economic reform at 1% level having a negative sign both in short and long run indicating that economic reforms reduce poverty in pakistan. the coefficient of life expectancy indicates that if life expectancy increases by 1% then poverty will reduce by 0.08 units in the long run. in case of poverty the exchange rate coefficient is significant in the long run but insignificant in the short run. the sign of the coefficient indicates that in the long run exchange rate increases poverty in case of pakistan. it may be due to unfavorable term of trade. magombeyi and odhiambo (2017) found positive impact of foreign direct investment on poverty and the present study also show the same results. the coefficient of fdi is significant and has a positive and significant impact on poverty. the long run coefficient of gross fixed capital indicates positive impact in model 1. the results reveal that in short run the coefficient is insignificant and carries a negative sign while one period lag of gross fixed capital is negative and significant. in model 1 the coefficient of error correction term has a negative sign and is statistically significant this is an indication of convergence. table 7 reveals long run and short run results of model 2. the coefficient of economic reforms is negative and highly significant in short run and long run. the negative sign indicates that economic reform reduces income inequality in pakistan both in long and short run. in case of income inequality the coefficient of gross fixed capital carries a +ve sign with significance in both short and long run indicating that gross fixed capital increases income inequality in pakistan. the coefficient of population growth shows positive and significant impact on income inequality indicating that population growth increases income inequality in the long run and short run. age dependency ratio reduces income review of economics and development studies, vol. 6 (2) 2020, 323-337 332 inequality in the long run but in the short run it has a positive and significant impact on income inequality. the coefficient of crime is negative and insignificant both in short and long indicating that the role of crime in income inequality is not indispensable in pakistan. in model 2 the value of ecm is negative and significant which is an indication of convergence. table 8 diagnostic test model 1 item test applied pvalues normality test jarque-bera 0.46 serial correlation lm test 0.11 heteroscedasticity white test 0.19 functional form ramsey reset test 0.15 model 2 item test applied pvalues normality test jarque-bera 0.77 serial correlation lm test 0.35 heteroscedasticity white test 0.12 functional form ramsey reset test 0.27 to confirm robustness of the results various diagnostic test have been employed in this study. in table 8 the results of the diagnostic test reveal that both models are free autocorrelation, hetrosaedasticity, normality problem and wrong functional form. plot of cusum and cusum square are presented in figure 1 and 2 which reveal that both models are stable. model 1 model 2 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 88 90 92 94 96 98 00 02 04 06 08 10 12 14 cusum of squares 5% significance -16 -12 -8 -4 0 4 8 12 16 88 90 92 94 96 98 00 02 04 06 08 10 12 14 cusum 5% significance -16 -12 -8 -4 0 4 8 12 16 88 90 92 94 96 98 00 02 04 06 08 10 12 14 cusum 5% significance -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 88 90 92 94 96 98 00 02 04 06 08 10 12 14 cusum of squares 5% significance review of economics and development studies, vol. 6 (2) 2020, 323-337 333 6. conclusion and policy recommendations poverty reduction and income inequality have always been given a priority by social development policy which indicates the impact of economic reforms on social sector of pakistan. the major findings of the study reveal that due to economic reforms in pakistan poverty and income inequality have dwindled both in the long and short run. in the short run, the term of both model are negative and statistically significant which shows convergence of the models. the government must shows its firm commitment to effective implementation of social protection and poverty alleviation strategies after having gross root level scientific surveys of poverty. furthermore, pro-poor spending policies should be formulated especially in health sector through socioeconomic reform strategies. the policies must be targeted through investing in low income groups, providing them better health facilities and helping in improving living standards. public sector development program should be pro-poor growth strategy oriented and foreign direct investment shows integration to the public sector development program targeting employment enhancing opportunities. furthermore, low level of inequality among the sections of society may also have positive impact because it generates competition but the suggested policy is to reduce inequality or at least check it from rising through taxes and subsidies, respectively. the present government of pakistan has 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(2012). the relationship between foreign direct investment and pro-poor growth policies in pakistan: the new interface. economic modeling, 29(4), 1220-1227 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=921391## review of economics and development studies, vol. 6 (2) 2020, 323-337 336 appendix table 1: descriptive statistics er exc fdi lgfc gini logpov popg lncrimes life age mean 0.19 39.05 0.74 11.33 35.54 1.50 2.74 12.43 60.56 83.59 median 0.08 28.11 0.54 11.41 36.65 1.49 2.79 12.65 60.90 87.25 maximum 0.96 102.77 3.37 12.59 37.40 1.71 3.36 13.42 66.32 89.37 minimum 0.00 4.76 -0.07 9.83 28.50 1.37 2.09 8.68 53.39 67.35 std. dev. 0.27 30.29 0.78 0.80 2.39 0.08 0.40 0.98 3.73 6.80 skewness 1.64 0.72 1.96 -0.19 -1.41 0.65 -0.16 -2.00 -0.22 -1.22 kurtosis 4.53 2.26 6.59 2.00 3.88 2.87 1.81 7.33 1.92 2.99 observations 45 45 45 45 45 45 45 45 45 45 table 3 (a) correlation matrix lgfc comind life fdi exc lgfc 1 comind -0.138526601 1 life -0.216048796 0.798332074 1 fdi -0.07523231 0.355916519 0.592541196 1 exc -0.18816143 0.930437283 0.930528652 0.479310268 1 table 3 (b) correlations matrix comind lgfc dage popg exc lncrimes comind 1 lgfc 0.8064101 1 dage 0.6343384 -0.81 1 popg -0.8312792 -0.8 0.74 1 exc 0.9304373 0.929 -0.8 -0.90698 1 lncrimes 0.6244114 0.906 -0.7 -0.55071 0.750665 1 table 4(a) vif matrix lgfc comind life fdi exc lgfc 1 comind 1.019565065 1 life 1.048962509 2.757358774 1 fdi 1.005692117 1.14505115 1.54108154 1 exc 1.036704227 7.446767021 7.456208145 1.298260114 1 review of economics and development studies, vol. 6 (2) 2020, 323-337 337 table 4(b) vif matrix comind lgfc age popg exc lncrimes comind 1 lgfc 2.8595713 1 age 1.6733186 2.892 1 popg 3.2365089 2.732 2.19 1 exc 7.446767 7.33 2.94 5.637257 1 lncrimes 1.6390476 5.591 1.92 1.435297 2.290936 1 review of economics and development studies, vol. 6 (1) 2020, 125-133 125 post 9/11 american footprints in pakistani media: a critique of semiotic discourses of pakistani newspapers a muhammad akbar sajid, b sajid waqar, c rabia mohsin, d muhammad javaid jamil a hod/ assistant professor numl multan campus, pakistan b phd scholar , the islamia university bahawalpur, pakistan c assistant professor, govt emerson college multan, pakistan d lecturer govt college makhdoom rasheed multan, pakistan article details abstract history: accepted 23 march 2020 available online 31 march 2020 this paper highlights the power of image in shaping perception of the people regarding post 9/11 american representation in pakistani print media discourses. the study deconstructs the semiotic discourse(s) of pakistani english newspaper dawn (daily) from september 2018 to february 2019 to argue that linguistic and semiotic devices and techniques work discursively to shape the readers’ perception regarding american foot-prints in pakistani print media. it employs multimodal critical discourse analysis approach by drawing upon machin (2007), van leeuwen framework for recontextualization (2008) and fairclough’s (2003) for visual and linguistic analyses to lay bare embedded ideologies propagated through word-picture conjunction. the levels of analysis include participants, settings, poses, objects, metaphor, inclusion, exclusion and discourse. moreover, the researchers have validated the findings of their semiotic analysis by conducting two focus group discussions among the students of linguistics and other disciplines. the findings reveal that print media semiotic discourses provide an appropriate use of language in graphic form. the findings reveal that no use of language is ideology free and words and pictures work in conjunction to propagate desired ideology to the target readership. additionally, the study notices the visible change that has taken place regarding american representation from superordinate to back foot and ready-to-hold dialogue through semiotic discourses of mentioned newspaper. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: semiotics discourses, american footprints, representation, print media, semiological discourse analysis jel classification: h56, l82 doi: 10.47067/reads.v6i1.190 corresponding author’s email address: masajid@numl.edu.pk 1. introduction semiotics, having non verbal power, acts as meta-language (jacobson, 1975). people usually regard their sense of sight more reliable than their sense of hearing. hence, a signifier, in an iconic mode, provides a deeper understanding than the words can. eco (1976) asserts that a picture speaks review of economics and development studies, vol. 6 (1) 2020, 125-133 126 more than thousand words. through semiotics, social and psychological human nature can be understood. a sign or gesture conveys meanings more emphatically. sign is a trace, clue or mark which stands for both universality and individuality, says barthes (1974). saussure (1916) considers semiotics a science that studies life of signs in the society. pierce (1931) concurs and states that semiotics is a system of principles to study behavior based on signs. krestiva (1969) opines that every speech act conveys a message. it may be done through language of words, posture, gesture, clothing or any other means in a social context. pierce and saussure both presented models to explain semiotics. although their models are different from each other in some respects, yet both lay stress on the semiotics as a more powerful means for imparting a specific ideology in the most effective manner. in sussreran model, a sign is made up of signifier and signified whereas pierce claims that an object produces 3 signs, i.e. icon, index and symbols. he called signifier as representamen, signified as interpretant whereas the third component of his model is object. both these models are based on semiotics which is a means of reflecting social reality that is culturally oriented and reflected through using certain devices in order to impart specific ideology and to shape individual's worldview. moreover, semiology has rocketed in the present era because every individual can extract meaning from semiotic discourses according to his/her mindset. one thing significant about semiotics is that it is culturally oriented and carries a plethora of interpretations. barthes (1974) argues that our senses are culturally trained to extract meanings from semiotics. additionally, it is also an observed phenomenon that human beings not only convey verbally but also employ different techniques of communication other than verbal language. still another significant feature of semiotic discourses is that with the help of word picture conjunction, and exploiting the technique of denaturalization of language, many explicit and implicit ideologies are propagated to the target audience. 2. semiotics: an influential genre of pakistani news papers newspapers are considered one of the best sites for ideological investment. print media is considered one of the best ways to influence and shape the mind of masses. hence, it plays a significant role in shaping the mindset of the target readership accordingly. still imagery means a lot where the propagation of implicit ideologies is concerned. political cartoons are regarded as communicative weapons. boorstin (1963) asserts that the meaning does not come out obviously; it often exists lengthily and waits out to be disclosed. he argues that political cartoons have become more interesting than original and in fact have become the original. in today’s world order, visuals are dominant images (kress 1966). political cartoons are a benighted ideology of realism. the way a cartoon is photographed, and where it is photographed, is a significant feature to be kept in mind while decoding semiotic discourse. print media discourses provide an insight into social, political and cultural reality of a society. they examine the role of language and visual language. they are an instrument of hegemony of political authority. moreover, political cartoons have a two-fold appeal, i.e. reproduction of ideologies and voice of mainstream media. semiotic discourse is a fast emerging domain of media discourses. it is one of the most influential ways of representation. even the most ideologically packed incident can easily be unpacked through semiotic discourses, which in turn are decoded by different mindsets differently. the process of unpacking the political cartoons needs social, political and cultural knowledge because they are culturally oriented. print media discourses serve as an active tool to propagate the ideology of the controlling group to the target audience. like many forms of discourses, print media discourses (visual and linguistic) implicitly/explicitly represent the world view of the controlling ideological group. it is observed that same incident most often finds different review of economics and development studies, vol. 6 (1) 2020, 125-133 127 representation(s) in accordance with the desires of controlling ideological group. different representation of the same event is very common phenomenon in pakistani print media. both linguistic and visual techniques are employed to propagate desired ideology and worldview to the people to win general consent and to make them behave in the manner as desired by controlling ideological group. therefore, print media linguistic & semiotic discourses carry power within & behind them. zubair and sajid (2012) assert that in pakistani newspapers, visual structures have strong ideological and semantic dimensions with deep influence over the masses instead of being more formal pictures. semiotics is context based and embodies various cultural connotations besides representing language in denaturalized way. research question is: how is america represented discursively through semiotic discourses of daily dawn? 3. methodology employed post 9/11 semiological representation of america has been through many phases. most often, the concept of super-ordination and sub-ordination has been plaid up. in the recent past, the ideology of doing more has been asserted on pakistan. this is how print media semiotic discourses have been representing pakus relationship and american foot prints in pakistani print media in a dominating way. the present research critically decodes the semiotics carrying pak-us relationship collecting data from pakistani english daily ‘dawn’ to highlight whether any change has occurred in pak-us relationship through semiotic discourses or not. the data for the present research has been collected from daily dawn. out of 25 political cartoons regarding american representation in pakistani mentioned newspaper, one has been purposively selected to decode at linguistic and semiotic levels. in order to analyse the selected image, the researchers have employed fairclough (2003) model of cda, kress and van leeuwen’s (2006) for visual analysis have been applied to analyse the data at linguistic and semiotic levels. the researchers find this model apt for the analysis as it investigates social practices, events, ideologies and texts being shaped and reshaped by power relations within a social context. furthermore, discourse analysis is a form of speech act analysis to find the social meanings using different techniques employed. 3.1 amended model of fairclough  implicature  representation  assumption  back/foregrounding  inclusion / exclusion  person as a state metaphor  discourse as a social practice  use of pronoun 3.2 amended model of kress and leeuwen the rationale behind devising an amended model is that data for the present research comprises linguistic and visual modes. in order to make semiotic analysis more valid, the researchers have also conducted focus group discussions on the selected images, concerning post 9/11 american foot print in pakistani print media semiotic discourses. this has been done to counter the arguments that are usually leveled against semiotic analysis that most often it matches semioticians’ specific way of decoding the images which, in certain cases, may not match with general perception on such texts. two focus group discussions were held. the first group consisted of the students of m.phil. linguistics studying at numl multan campus. the other group included the participants from other disciplines like education, review of economics and development studies, vol. 6 (1) 2020, 125-133 128 management sciences, and islamic studies. both the groups were of mixed gender and their age ranged from 25 to 50 years. each focus group discussion lasted for one hour and has been visually recorded. the levels which have been focused to analyze focus group discussion data are words, internal consistency, frequency, extensiveness and finding the big idea by employing kruger’s (2000) model for focus group data analysis. table 1 devices employed 1. gaze at the viewer 2. absence of the gaze at the viewer 3. close shot 4. medium shot 5. frontal angle 6. oblique angle 7. high angle 8. low angle 9. high angle level 1. demand 2. offer 3. intimate / personal 4. social 5. impersonal 6. involvement 7. detachment 8. viewer power 9. equality figure 1 4. linguistic and semiotic analysis wodak (2001) states that discourses are historically rooted and most often they cannot be analyzed comprehensively without having the knowledge of context. similarly, the semiotic discourse under analysis has different historical associations. in the past the taliban's were under the thumb of america and hence, were provided and exploited as desired by the controlling master of that time (america). philipson (1997) argues that power exists at various modalities and discursive modes of power are more influential as compared to coercive modes. talibanized ideology slowly and gradually continued prevailing among them and among other groups in afghanistan. therefore, they have not only gained strength in size as is obvious from semiotic under analysis but in number as well because at present more than 54 percent area of afghanistan is under the control of talibans. this is how discursivity worked to win general consent in terms of number and power. since the conquest of russia these trained fighters were not handled judicially, in this way they continued gaining strength in terms of number, and material goods, they continued propagating their ideology among the masses and hence review of economics and development studies, vol. 6 (1) 2020, 125-133 129 at present have gained so much discursive and coercive powers as has been illustrated in the semiotic under analysis to challenge america and afghan govt. fairclough (2003) opines that media discourses reflect social reality. similarly, the image under analysis illustrates that at present talibans being so powerful are in a position to decide whether to hold peace talk with the other allies (afghan govt. & america) or not. the semiotic under analysis illustrates that the way talibans' representative is heading forward to the other allies (afghan govt. & america) is very threatening. he is strongly built and well armed. he is heading forward towards the allies waiting for him to come and hold table talk with them as the language in graphic form (political cartoon) represents. moreover, another important thing to note is that both the allies as have been represented in the image are smaller in size as compared to the taliban's representative marching towards them frowningly. this implies that the talibans’ representative is least interested in holding table talk rather in confrontation. as far as visual discourses are concerned different techniques are used in order to propagate message comprehensively. the semiotic under analysis carries the linguistic text written in capital letters bold font. this typographic technique is used when something very important is meant to be highlighted. the linguistic text written in capital letters and within the box in the form of speech bubbles connotes the only and ever-growing worry in the minds of american and afghan presidents is ever increasing size of the talibans by all means. the cartoonist of the controlling ideological group wants to convey a message in accordance with the western perception and representation of stereotypical muslim who is bearded and caped. one thing is also important to note that danger or terrorism has been associated with he, manhood. it is also a western perception especially about the bearded muslims that they are no less than a threat terror to the west. if we look carefully at the end of the linguistic message the cartoon carries 'he is growing bigger and bigger….' there are four dots which stylistically are named as 'ellipses'. the use of ellipses (four dots) implies that the rest of the things have intentionally been left unsaid, presupposing that all the things are clear and well known to the participants. eco (2000) opines that word picture conjunction is a significant technique to enhance the effect of the message being propagated. similarly, the ongoing action in the picture has been linguistically supported by present continuous “he is growing….”. visually, this has been corelated by the representative of talibans on his toes. barthes (1974) argues that semiotic discourses are culturally oriented and carry plethora of information in them. this also holds valid because if the semiotic under analysis is decoded from western perspective it implies that muslim militants are growing with every passing day and now, they have crossed the limits. all the efforts made by the west (america) are proving futile. the militant talibans are least interested in holding talks, rather these attempts of restoring peace are unpleasant to them as is obvious from the face of the muslim militant shown in the picture. this is how the west supports its stance that the east (muslims) are the embodiment of evil and danger to the civilized west. on one hand there is a concept of growing. the use of word growing implies one thing more important is that growing is used for living beings. living beings have the capability of growing. it is pertinent to mention here that the talibanized ideology has been growing since its inception. ideology is regarded as a living being as it can drive the living beings. the astonished faces of american and afghan presidents illustrate that the talibans have gained strength beyond their expectations. hence, both are terribly afraid. the nearer the talibans’ representative is coming, the more afraid they are getting. another important point to notice as highlighted by the semiotic under analysis is that the afghan president seems more frightened as compared to the american president. his foot prints are invisible the way he is sitting on the chair. review of economics and development studies, vol. 6 (1) 2020, 125-133 130 still another, feature of the use of bigger is the use of comparative degree which when correlated with the size of the person is bigger as compared to the other two persons as mentioned in the image. one of them is the representative of america and the other is the representative of afghan presupposedly. if the sizes of the two persons are combined, they cannot be compared even with the single size of the bearded person who is alleged as a terrorist. this implies that despite the combined efforts of american and afghan governments are unable to crush the talibanized ideology. still another visual technique that has been employed here is that the person is approaching towards the chair vacant for him from the back side of the chair. moreover, empty chair at the left side of the table also implies that the other party that is involved in the talk is not responding to the arguments or discussion. moreover, one important thing is the size of the chair, the person is approaching to sit on seems too small as compared to the size of the person the chair is vacant for. it also implies that the taliban representative is from the way he is being entertained in the upcoming session of dialogue among the three parties. it seems that he is not comfortable with the terms and conditions on which the other parties are ready to hold discussion. one the implications might be as connoted by the small size of the empty chair that the demands of the taliban representative are as huge as his size is and he will be uncomfortable even if he sits at the dialogue table because of the too small size of the chair. this situation implies that although the three parties have been holding talks for sometimes yet not in accordance with the demands of the talibans. therefore, the representative of taliban is angry and perhaps he has made up his mind that things are not going to be settled through talks rather with gun as is illustrated by the style with which he is approaching towards them. still another important feature to be noticed is the dress code, the person having the gun in his hand is wearing a shalwar-qameez, turban with bearded get up which is most of the time is associated with muslim clergy man. according to western stereotypical perception about rigid and hardliner muslims, they are extremist and are least inclined in embracing any type of change in the form of dialogues initiated by the peace-loving west. moreover, the west perceives that such type of muslims are so rigid and close minded as is highlighted by tightly sealed turban. the west perceives that the hardliner muslims get the heat of extremism from the fundamentals of islam and finally explode them in the form of suicide attackers. they are so much under the influence of violent ideology that they are least inclined to listen to others. they picture under analysis illustrates that the earholes of the muslim / taliban representative are almost closed, therefore, he is not ready to listen to others because he is totally being driven by his violent ideology. rather he is fully inclined in doing whatever he has been fed-up with. the concept of persons as state metaphors has also been highlighted here. the three persons mentioned in the pollical cartoon respectively stand for their countries or school of thought. the american president as shown in the picture in sitting with flat footing which implies that up to a great extent, he is on backfoot. in the past it was observed that america has continuously been following the ideology of “doing more” from the taliban and pakistani government, but the present image illustrates the change in political scenario that has taken place has forced america to be on back foot. because of so many social political, geographical and economic factors, america has realized that holding talk may prove more beneficial than deciding things with coercive force. still another significant feature of the image under analysis is the boggled face of afghan president which implies that he is absolutely worried about his future because after the withdrawal of american forces (if possible) and handing over rule to taliban, he would have no ground to stand on as is obvious from the picture that his footprints are not visible. kress (2010) argues that cartoons are regarded as metaphorical representations of speech bubble; the two small speech bubbles on the hat of american president imply the thoughts in his mind that how to deal afghan government and taliban review of economics and development studies, vol. 6 (1) 2020, 125-133 131 in such a troubling situation. whereas, the three small speech bubbles on the head of afghan president imply that he is more worried about his survival. if the things are settled between taliban and american what would be his or present government’s status. still another important thing that has been shown in this image is that american president is wearing a flag of his country on his hat which implies that america has an identity of her own ; on the other hand afghani president is bare headed which means he does not have any peculiar identity. at the same time his survival is at the risk. one of the implicatures may be that because of the destruction caused by terrorism, afghanistan and the afghan governments have totally lost their control and they are totally under the thumb of america and perhaps this might be the cause of their losing identity. hence the overall image that appears after going through the linguistic and semiotic discourse is the political scenario regarding the america, afghan government and the talibans is very much vague till now. on one hand america with her allies is doing her best to restore peace and to abolish terrorism yet on the other hand despite doing their best the terrorism or the muslim fanaticism is growing bigger and bigger as has been shown at linguistic and semiotic level. so the underlying message that the image suggests is that america is the representative of the civilized world and peace whereas, muslim militants, especially the talibans have been represented as anti to all the peace restoring forces. this is a message to the rest of the world americatalibans dialogue are not going to get the desired results very soon because both are sticking to their deep-rooted ideologies. in this way fairclough’s (2003) claim seems justified that print media discourses are considered as one of the best sites for the ideological investment. so, the ideology that has been invested through the linguistic and semiotic discourses is that despite doing best america and the other allies, so far have not been able to come to restore the peace and so far have not been able to come to good terms to other parties because peace cannot be had with the gun rather it can be had with the dialogues. so, here we see two sides of the image, american and afghani presidents are waiting for the peace talk whereas the muslim militant / taliban have been shown least inclined in holding dialogue with them rather they seem more willing to confront, it seems perhaps they have decided that things are not going to be settled with carrot rather with stick as is connoted by the get-up of the taliban representative because he is marching towards america and afghan presidents with rolled selves and finger at the trigger of the gun. 5. focus group findings as mentioned earlier in the methodology section the researchers have validated the findings of semiotic analysis through the remarks of focus group participants’ remarks. the remarks of some of the participants have been included to support the stance. one of the focus group participants while expressing her ideas on the semiotic under analysis said: “post 9/11 media representation of america implies that perhaps america has failed in reaping her interests in afghanistan. the picture represents a changing scenario showing, america unable to handle taliban.” another participant remarks as: “the picture is meta-narrative. the chairs on which american & afghan presidents are sitting are unarmed whereas the man coming to hold dialogue the two presidents is fully armed. here the concept of unarmed chair and armed man has been juxtaposed. interestingly, the unarmed chair is vacant for the armed man”. one of female participants remarked as under: review of economics and development studies, vol. 6 (1) 2020, 125-133 132 “the political cartoon embodies different counter narratives. the three men in the picture are representatives of three different ideological groups.” fairclough (2003) opines that language connotes and denotes. the counter narratives have been portrayed. according to the participants that apparently , the representative of the talibans has been shown unwilling to hold dialogue but inwardly the american president is also unwilling to hold talk. this is a mere a show of. the talibans are the product of america. this is how the linguistic & semiotic discourses are connoting and denoting things simultaneously. hence, visuals carry bundle of interpretations. another participant remarked; “the way guy (representative of taliban) is approaching towards them is astonishing to both american and afghan president because perhaps his style is totally unexpected to them and hence, they are astonished.” the overall picture that emerges after analyzing the remarks of the participants is that the previously trained or in asian context the badmash or the terrorists/talibans, who were beneficial for america, now have gone beyond her control. it means that taliban and american are in direct contact or in direct clash with each other. afghani president is just like a harbinger between them. irony of fate is that america is going to settle the issue with nato forces, still trying to control the fate of the country. america is showing to the world that she is most concerned about the terrorist situation in afghanistan. the participants concluded their remarks that america has been trapped in her own evil design. now the talibanised ideology will continue increasing and there will be increase in their number with every passing day as is obvious from the picture. in this way the researchers validated their findings of semiotic analysis through focus group discussions. 6. conclusion the present research concludes that an obvious change is there regarding american representation through pakistani print media semiotic discourses i-e a shift from super-ordinate position to back foot (ready to hold talk) . in the past, it was observed that america was represented as dominant and pakistan and talibans as dominated, through print media discourses but the findings of the present research reveal that power paradigm shift is obvious. now print media representations of america through semiotic discourses is different in a sense that america has been represented as ready to hold talk instead of imposing her authority on pakistan/afghanistan. still another significant finding of the research is that semiotic discourses are significant genre of print media and word-picture conjunction works a lot in shaping the mindset of the target audience. the way she (america) has been represented through the semiotic discourses of pakistani print media is that america seems moving at back foot, ready for negotiation. the percentage of such data showing america on back foot and instead of asserting her superordination is ready to hold talk to resolve political issues. hence, the present research concludes that print media semiotic discourses on one hand shape the mindset of its readers and on the other hand represent political changes taking place in the global scenario. the impact of political cartoons on the people in the back drop of pakus relation is of vital significance. references barthes. r (1974). muthologies. new york: wang. eco, u. (1976). a theory of semiotics. bloomington: indiana university press. jackobson, r. (1975). coupdel’oeilsur le development de la semiotique. studies in semiotics. review of economics and development studies, vol. 6 (1) 2020, 125-133 133 bloomigton: indiana university press. kress, g. & leaween, v. t. (2006). reading images: the grammar of visual design. 2nd ed. london: routledge & new york. peirce. kristeva, j. (1969). semiotic. researches pour une semanalyse. paris: seuil. perice, c. (1931-58). collected papers of charles sanders peirce, vol 1-8, c. hartshome & p. weiss (eds.). cambridge & mass: harvard university press. kress, g. (2010), multimodality: a social semiotic: approach to contemporary communication. london: routeledge. saussure, f.de. (1916). course de linguistique generale. paris:payot. fairclough, n. (2003). analysing discourse: textual analysis for social research. london: routledge. peirce, c. s (193158). collected papers of charles sanders peirce, vol 1-8. c. hartshorne and p. weiss (eds.) cambridge, mass: harvard university press. phillpson, r. (1992). linguistic imperialism. oxford: oxford university press. wodak, r. (1996). disorders of discourse. london: longman. zubair, s. (2006). women, english literature and identity construction in southern punjab. pakistan journal of south asian development. 1(2) 249-271. boorstin, d. j. (1964). the image: a guide to pseudo-events in america, usa, harper & row. sajid, m. a. (2012). representations of islam: a study into the discourse of pakistani and western newspapers. bahauddin zakariya university, multan, punjab, pakistan review of economics and development studies, vol. 9 (2) 2023, 61-85 61 development expenditure allocation and district wise social development: a case study of punjab pakistan noman arshed a, hafeez ur rehman b, amna gulzar c a assistant professor, department of economics, division of management and administrative science, university of education, lahore, pakistan b professor, department of economics and quantitative methods, dr hasan murad school of management, university of management and technology, lahore, pakistan c department of economics and quantitative methods, dr hasan murad school of management, university of management and technology, lahore, pakistan article details abstract history: accepted 25 april 2023 available online june 2023 in the wake of achieving sustainable development goals, this study sets to investigate the allocation of development expenditures as government policy intervention and its role in the uplifting the social condition in districts of punjab. the constriction of a comprehensive social development is indexed using principal factor analysis. this study considered panel data for 36 districts of punjab ranging from 2008 to 2017. estimates from the panel random effect model advocated that the rise in the development expenditures by the government of punjab follows u shape relationship with the social condition of the province. this quadratic model helps to estimate district-wise effects of government development intervention on social development and its components via which resource mobilization optimization can be done. © 2023 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: development expenditure mobilization, social development index, panel random effect model jel classification: h53, o12 doi: 10.47067/reads.v9i2.214 corresponding author’s email address: hafeez.rehman@umt.edu.pk 1. introduction social development refers to the change that can put the people at the center of economic activity. it means a firm assurance that development process guarantees benefit to people and it focuses not only the poor but also an acknowledgement to that people and the way they interact with each other shapes development process (international institute of social studies). similarly, it can be said that social development means investing in people which implies the elimination of obstacles and the creation of capabilities. hence, it facilitates them to accomplish their goals in life with selfesteem and pride. social deevelopment creates change in non-economic disciplines like democracy, social freedom, peace, social justice, strong institutions, health & nutrition and education which lead to well-being of every individual (paiva, 1977; jones, 1981; meinert, 1987; estes, 1990). a recent study by inabo and arshed (2019) assessed the effect of mortality rate, access to improved water and access to sanitation review of economics and development studies, vol. 9 (2) 2023, 61-85 62 facilities for the case of nigeria. the results showed that increase in access to water and sanitation and decrease in infant moratality rate lead to increase in economic progress. similar outcome evidenced by rizvi (2019) for the case of education expenditures and its role on growth. fiscal policy is an effective tool in achieving economic growth which then can translated into sustainable growth by extending expenditures to development sector. while explaining the suitability of fiscal policy for social development, we must explore the opposing theories behind it. according to keynesian economists, increase in government spendings definitely effects economic growth in short run and may increase the long run too if it increases the capacity or resources (loizides & vamvoukas, 2005; hassan & kalim, 2012). but according to classical economists, economy is already fully employing resources in longer run, government spending will only distorts it by creating crowding out effect. hence there is a need to investigate the effect of fiscal policy at a smaller scale where the effects of expenditures are not agreegated out. pakistan economy has shown a continuously growth but at the same time, macroeconomic factors are imbalanced. pakistan’s gdp growth rate is increased from 5.4% to 5.8% in 2018 (economic survey, 2018). in terms of human development, pakistan ranks as one of the lowest in south asia specifically in education and health. literacy rate (10 years and above) is 58% only. average annual population growth rate (1998-2017) is souring to 2.40%. female participation in labour force is the lowest in the region. infant mortality rate is 63 per 1000 birth and under-five mortality rate is 89 per 1000 birth depict uncertainty socially (economic survey of pakistan, 2017-18). unsatisfactory economic condition, increased poverty, lack of education, inadequate healthcare facilities, sectarian conflict, extremism, lawlessness further deteriorate the situation. to deal with social, economic and political problems, pakistan requires a different development approach. decentralization of power makes the planning process possible at the grass root level. it is one of the outcomes of the 18th amendment in the 1973 constitution which led to the abolition of the concurrent list now, the provinces have the responsibility to provide services (burki, 2010). according to burki (2010), governments are in a better position to provide basic services to people as these are closer to their beneficiaries. punjab (shown in figure 1) is the 2nd largest province by area of pakistan after balochistan with 205,345 sq km of area. however, population wise it is the largest province with 536 population density per sq km (punjab development statistics, 2018). an average annual population growth rate (19982017) is 2.13% (economic survey of pakistan, 2017-18). as per the mics 2018 report, infant mortality rate is 60 per 1000 births, youth (male) literacy rate (15-24 year) is 77.7% and youth (female) literacy rate (15-24 year) is 71.7%, whereas employment rate among population (age 10 years and above) is 92.9%. percentage of mpi-poor people / headcount ratio is 26.1%. punjab province comprises 36 districts with great diversifications in term of area, environment, culture, language and population, social and economic conditions. punjab economy plays a pivotal role in pakistan’s gdp and the overall growth rate of the country. during 2017-18, punjab’s per capita income is 2% higher than national average. over the last five years punjab gdp growth rate was 4.9%. review of economics and development studies, vol. 9 (2) 2023, 61-85 63 fig: 1 punjab province map district wise fig: 2 infant mortality rate in punjab’s districts source: mics, 2018 bureau of statistics figure 2 is showing infant mortality rate (2018) across all over punjab. this is an indicator of measuring social and economic well-being of a country. it is quite obvious from the map as the dark areas are reflecting the intensity of the matter where infant mortality rate is very high. lodhran, khanewal, jhang, chiniot and hafizabad districts are showing high infant mortality rates. the poor and insufficient facilities provided by public sector have hostile effects on the quality of life. lack of proper care, vaccination, maternal care, education of mother and unhealthy and poor facilitation in hospitals (2018) review of economics and development studies, vol. 9 (2) 2023, 61-85 64 are the major cause of high infant mortality rate in this region. government should pay special attention to reduce health issues to ensure health children in punjab. table 1 shows the status of human development across the province. most of districts fall under the category of high level of human development and high-medium human development whereas only 3 districts muzaffargarh, dera ghazi khan and rajanpur are in low medium human development. there is no district falls under low human development category. table: 1 human development index in punjab districts national hdi rank district human development index high level of human development 1 lahore 0.877 3 rawalpindi 0.834 5 sialkot 0.834 6 jhelum 0.829 high-medium of human development 7 gujrat 0.795 8 chakwal 0.792 9 attock 0.786 10 faisalabad 0.782 11 gujranwala 0.769 12 toba tek singh 0763 15 norowal 0.748 16 nankan sahib 0.740 17 sheikhpura 0.738 19 layyah 0.729 20 sargodha 0.728 21 multan 0.718 23 mandi bahauddin 0.716 24 kasur 0.714 25 sahiwal 0.710 26 khushab 0.706 27 okara 0.705 28 hafizabad 0.705 medium human development 30 khanewal 0.699 33 jhang 0.682 39 pakpattan 0.66 41 lodhran 0.659 42 chiniot 0.657 43 vehari 0.655 46 bahawalpur 0.645 47 mianwali 0.645 49 bahawalnagar 0.63 50 bhakkar 0.628 51 rahim yar khan 0.625 review of economics and development studies, vol. 9 (2) 2023, 61-85 65 low medium human development 58 muzaffargarh 0.584 64 dera ghazi khan 0.535 69 rajanpur 0.506 low human development no district fall in this category source: punjab growth strategy 2023 fig: 3 number of malnutrition children in punjab’s districts source: mics, 2018 bureau of statistics figure 3 is showing number of malnourished children in all the districts of punjab. it is quite visible from the map that lahore district has the highest number of malnourished children among all the districts in punjab. although social development has been seen in punjab, but at the same time it is facing high number of malnourished children. low birth weight, lack of breastfeeding, lack of knowledge about nutrition, poverty, poor economic conditions, maternal education, and contagious diseases are the main causes. figure 4 is showing total percentage of literate men across all over punjab. the dark areas are reflecting the high percentage. it is quite visible that districts in northern punjab are performing well. south punjab district are not performing well due to government negligence, lack of proper attention, insufficient resource distribution, lack of facilities, poor economic conditions, poverty and cultural obstacles. figure 5 is showing total percentage of literate women across all over punjab. the dark areas are reflecting the high percentage. it is quite visible that districts in northern punjab are performing well. (2018) review of economics and development studies, vol. 9 (2) 2023, 61-85 66 the position in rajanpur, dg khan and muzaffargarh is alarming. although literacy rate among male is also low in these districts but the condition of female literacy rate is very pathetic. cultural obligation is one of the major reasons along with acute poverty prevailing in these areas. due to government negligence, lack of proper attention, insufficient resource distribution, lack of facilities, poor economic conditions and cultural differences literacy rate among female is low in districts of south side of punjab. fig: 4 total percentage literate (men) in districts source: mics, 2018 bureau of statistics figure 6 is showing average expenditure from 2008 to 2017 in all the districts of punjab. it is quite visible that a large chunk of development expenditures incurred on lahore district whereas bhakkar, khushab and hafizabad are the most neglected districts. based on the evidence provided in terms of disparity of social indicators and the disparity in the development expenditures. following are the research questions set to be answered • is a non liner pattern exists between development expenditures and social development? • what is the role of other controlling variables with respect to social development? • does development expenditures influence indicators of social development in appropriate direction? (2018) review of economics and development studies, vol. 9 (2) 2023, 61-85 67 fig: 5 total percentage literates (women) in districts source: mics, 2018 bureau of statistics punjab government is providing social services to its people as per constitution. the responsibility has shifted from federal government to provovincial government from 2011. this study is designed to analyze the performance of punjab government in terms of the dispersement of total development expenditrues for its districts. for this purpose the objectives of this study are as follow: • to investigate the non-linear impact of development expenditure on social development in punjab. • to assess how the incidence of development expenditures are influencing the components of social development index. fig: 6 expenditure per capita (rs. million) in punjab districts source: mics, 2007, 2011, 2014 and 2018 bureau of statistics (2018) review of economics and development studies, vol. 9 (2) 2023, 61-85 68 18th amendment of constitution of pakistan puts great responsibility on the provinces to ensure social, economic and political reforms in order to bring social development. in the previous discussion the position of punjab government across the districts is quite obvious where all districts are not equally happy and prosperous. discrimination has been found among them with regard to social development. there is a dire need to conduct a research in this regard as limited work has been found regarding social development in districts of punjab pakistan. 2. literature review social development is about human development and its well-being associated with economic and non-economic disciplines. it is a complex and alarming issue related to human welfare. the term development means the creation of circumstances for the recognition of human personality (seers, 1972). according to myrdal (1972), development means to generate employment, reduce poverty and inequity which implies a vertical movement of the social system as whole. development means an increase in gross national income (real income) over a long period of time (meier, 1976). does real national income an appropriate indicator to measure development? macgranahan (1972) emphasized that there are many limitation to take per capita gross national income (gnp) as a general measure of development. according to todaro (1977), although many developing countries attained economic growth and development goals during the ear of 1950s and 1960s, but it did not represent to a better standard of living of the people. these findings clearly depict that there were some deficiencies persisted with the definitions of economic growth and economic development. hicks and streeten (1979) proposed a new dimension for measuring development. this dimension incorporating social development’s related indicators like health, water supply, education, food, sanitation and hosing into gross national product (gnp). economic growth is no doubt has its importance, but it becomes valuable and workable when it reduces scarcities and improving lives of common people (sen, 1996). from adam smith to keynes the concept of social development has attracted the economists. it is basically the promotion of a sustainable system where the focus is to empower the marginalized segments, women and men to boost up their condition, to improve their living standard and to achieve improve their economic and social position in the society (bilance, 1997). kates (2018) described social development is that every individual should be under the scope of social development and there must be social equality and high priority must be given to the development of human resources. social development basically implies a change in social institutions. according to fan et al. (2008), public spending in terms of providing subsides can have positive influence on poor both in the short run and long run. during development stages, developing countries should allocate more government expenditure to those sectors that benefit the majority of poor. castro et al. (1999) gave the idea of efficiency and equity phenomenon related to public funds spending. education and health are the basic services which are most of the time are subsidized with public spending to serve the purpose. funds are efficiently utilized and the outcomes may be generalized. public spending or investment must ensure benefits to poor. many research studies found that government spending is helpful in agricultural production growth and poverty reduction (elias, 1985; fan & pardey, 1998; fan, hazell, & thorat, 2000; fan, zhang, & zhang, 2004). gupta and verhoeven (2001) analyzed the efficiency of government expenditure on health and education. they took 37 countries from africa between 1984 and 1995. they found that health and education spending became more efficient in that period. they concluded that for attaining impressive results african countries required more public allocations. review of economics and development studies, vol. 9 (2) 2023, 61-85 69 decentralization of public funds is the best possible way to ensure good governance and macroeconomic stability. empirical evidence proved that local administration performed well in comparison of center in term of providing services (campbell et al., 1991). fan et al. (2000) conducted a study to investigate the impact of government expenditure (development and non-development) on rural poverty and productivity in case of india. he concluded that government should give more focus on development side. more investment should be done in such sectors: rural roads, agricultural research, education, health, irrigation, sail and water conservation rural and community development. kumar (2017) suggested that in order to improve the social status of any country government should give prioritization to social sectors. according to land (1975), “social indicators are statistics which measure social conditions and changes therein over time for various segment of the society.” bunge (1981) divided the indicators into descriptive and normative form. normative variables involved judgments. according to him, development is not just about economic up in 1990, undp (united nation development programme) introduced human development index which involved 03 indicators for development. diener and suh (1997) determined that economic indicators are not sufficient to measure a true picture of social development. rao (1975) determined 64 social indicators in case of india for measuring social development, chakrevarty (1976) argued that education, health, employment, distribution of income, housing, and consumption are the relevant social indicators. morris (1979) took life expectancy, adult literacy rate and infant mortality rate and constructed a physical quality of life index and used it in term of social development in his work. ray (1989, 2008) gave 13 and 10 social indicators for measuring social development. however ohlan (2014) provided 43 indicators for social development. social development index (2014) described that “social development as the capacity of a society to meet the basic human needs of its citizens, establish the building blocks that allow citizens and communities to enhance and sustain the quality of their lives, and create the conditions for all individuals to reach their full potential”. kumar (2017) recommended that the selection of social indicators solely depend on the demography on the country and the availability of the data. a study by asghar, hussain and rehman (2012) assessed the role of government development spending on the poverty of pakistan between 1972 and 2008. the results from the vector error correction model showed that increase in the health and education expenditures lead to poverty alleviation of pakistan. qadir and majeed (2018) used the data of pakistan between 1975 and 2016 to assess the role of health expenditres on life expectancy and infant mortality rate. the results show that health expenditures significantly increase life expectancy and decrease infant mortality rate. a study on saarc economies by (arshed et al., 2018) indicated that increase in development expenditures reduces income inequality. similarly, for 73 developing countries, development expenditures were shown to decrease poverty gap (hassan, bukhari & arshed, 2020). a study by mamoon, raza and arshed (2015) used the indicator of road length as a instrument of market access to farmers and infrastructure. the results showed that for the case of punjab districts, increase in road length does not contribute in infant mortality rate. further arshed, kalim and anwar (2019) assessed the role of factory employment and population density on the crime rate for districts of punjab pakistan. the results showed that increase in employment makes them enganged in legal activities ensuring reduction in crime while high population density puts pressure on the social infrastructure which decreases the standard of living, motivating people to engange in crime. review of economics and development studies, vol. 9 (2) 2023, 61-85 70 previous studies assessed the role of development expenditures on the social development but lack in accounting for the minimum investment required to make the social infrastructure suitable to improve social development. secondly, there is dearth of studies at the district level of punjab pakistan which assessed the performance of government development expenses on the social development. there are few studies which explored the social development in districts of punjab. a study by arshed, anwar and sarwar (2016) asseted that increase in education and public order expenditures reduces while increase in health expenditrues and policy expenditures increases the crime rate. a study by arshed et al. (2019) assessed the role of development expenditure and its types on the incidence of crime in districts of punjab. the result showed that these development expenses improve the social conditions hence reduce crime rate. 3. conceptual framework kuznets in 1953, 1955 and in 1965 noticed an inverted u shaped relationship between economic development and income inequality. he used data sets of some industrial societies in 19th and 20th centuries and examined that at the initial stage industrial development grew income inequality but later on it stared declining when more development took place. this theory can be applicable in case of punjab by replacing inequality with social development and growth with development expenditure. initially social development decreases with the increase in development expenditure as policies and innervations take time to be mature and provide fruitful outcomes. it will hypothesise that development expenditure will follow u shaped pattern with social development index. on the other hand the theory of law of diminishing returns which explains that increase in inputs are initially growth promoting but later on their usefulness falls. this theory can be applied in this model by replacing social development as output target and development expenditure as input. at start development expenditure initially lead to development but over spending may lead to wastage resources or corruption. that is why this model may leads to inverted u shape theory. in following discussion it will try to find out the actual picture or correct situation in punjab. either punjab is successful in achieving social development or not. 3.1 research hypothesis this study is designed to analyze the performance of punjab government. either government is successfully achieving its goal nor. for his purpose the research hypothesis of this study is as follow: ha: development expenditure improves social status in the districts of punjab 3.2 research model following figure deicts the theoretical flow of effects from independent variables to dependent variable. the model in figure 7 with hypothesed quadratic effect of government development expenditures, following is the estimation equation. the data is collected for 36 districts between 2008 and 2017. here population density is used to control for the increase in the pressures on the available social infrastructure. employment and productivity is incorporated to control for increase in economic progress. road length in incorporated to control for the effect of connectivity and physical infrastructure. and lastly regime change controls for the decentralization regime. further the construction of the social development index is made using the indciators provided in table 3. review of economics and development studies, vol. 9 (2) 2023, 61-85 71 fig: 7 theoretical model 4. date and methodology 4.1 data framework in this study, panel data is be used using districts as cross sections and years as time periods, because of its ability to manage esstiamtion problems like multicollinearity, heteroscedasticity and autocorrelation. panel data also provides an efficient estimated results (hsiao, 2007). for the formulation of social development index, principal factor analysis technique will be employed. (pakes & griliches 1984). 4.2 sample of data in this study 36 districts of punjab considered form the period 2008-2017. different variables would be selected such as development expenditure, population density, productivity, road length /connectivity and employment. development expenditures data have been collected from planning and development board, government of punjab and population density, productivity, road length /connectivity and employment related data have been collected from various issues of punjab development statistics. 𝑆𝐷𝐼𝑖𝑡 = 𝛼1 + 𝛼2𝐿𝐸𝑋𝑃𝑖𝑡 + 𝛼3𝐿𝐸𝑋𝑃𝑖𝑡 2 + 𝛼4𝐿𝐷𝐸𝑁𝑖𝑡 + 𝛼5𝐿𝑅𝑂𝐴𝐷𝑖𝑡 + 𝛼6𝐿𝑃𝑅𝑂𝑖𝑡 + 𝛼7𝐿𝐸𝑀𝑃𝑖𝑡 + 𝛼8𝐷𝑈𝑀𝑖𝑡 + 𝑒𝑖𝑡 review of economics and development studies, vol. 9 (2) 2023, 61-85 72 table: 2 variables representation and transformation variable definition source of data social development (sdi) *social development index punjab development statistics development expenditure (lexp) development intervention per capita p&d board squared development expenditure (lexp2) incorporating quadratic effect p&d board population density (lpden) people per sq km punjab development statistics road length (lroad) metaled road length km punjab development statistics productivity (lpro) wheat productivity (production/sown area) punjab development statistics employment (lemp) no. of employed person punjab development statistics dummy variable (dum) regime change (pre 2011 = 0 and post 2011 = 1) self calculated * for the measurement of social development index following social indicators are being used from mics 2007, 2011, 2014 and 2018. factor analysis technique will be employed to determine the % age contribution of selected indictors for social development. this study will use variables in natural logarithm form. the reason behind to use this form is that to linearize the model by reducing the intensity of heteroskedasticity. this study will use square form of variable development expenditure the intention behind is that it is used to assume that the effect of development expenditures are following increasing returns is to show the marginal impact (barro 1990). 4.3 methodology zagorski and mcdonnell (1995) employed factor analysis method for the formulation of social development index. majumder et al. (1995) used several methods i-e principal component analysis (pca), multiple factor analysis, aggregation method, monetary index, ratio index and ranking method. awan (2012) used factor analysis technique, the taxonomic distance technique and the z-sum techniques are used for the development of social development index. panda et al. (2016) applied composite dimension index for this purpose. 5. result and discussion 5.1 index of social development table 3 reports all the indicators which this study have proposed for the constriction of social development index.these indicators are collected from punjab development reports and multi indicator cluster survey (mics). further, table 4 reports the kmo and bartlett’s test which indicate that the proposed indicators are sufficient in preparation of social development index. lastly, table 5 reports the mean and standard deviation of the constituted index of social development for each district of punjab pakistan. review of economics and development studies, vol. 9 (2) 2023, 61-85 73 table: 3 components of social development index sr# indicators reference education 1 youth literacy rate 15-24 year (male) (%) awan (2012), ohlan (2013) 2 youth literacy rate 15-24 year (female) (%) awan (2012), ohlan (2013) health 1 percent of household with iodized salt consumption (%) awan (2012), panda et al. (2016) 2 infant mortality rate (probability of dying between birth and the first birthday) nutrition 1 malnutrition (in numbers) ohlan (2013) infrastructure/ housing 1 household possessions (electricity %) afzal (2011) 2 percent of household by house ownership (%) sanitation 1 water on premises (%) afzal (2011) 2 percentage of household members with hand washing facilities where water and soap are present (%) 3 percentage of using improved sanitation (%) afzal (2011), awan (2012) other 1 child labor (%) afzal (2011), awan (2012), panda et al. (2016) table 4: kmo and bartlett's test kaiser-meyer-olkin measure of sampling adequacy. 0.779 bartlett's test of sphericity approx. chi-square 2164.982 df 45 sig. 0.000 table:5 social development index (2008 to 2018) district name average standard deviation attock 0.92277 0.172475 bahawalnagar -0.6925 0.204373 bahawalpur -0.91832 0.32232 bhakkar -0.7192 0.283501 chakwal 1.207565 0.298299 chiniot -0.8041 0.21912 dg khan -1.44376 0.393867 faisalabad 1.004215 0.254213 gujranwala 1.155822 0.163472 gujrat 1.360551 0.246878 review of economics and development studies, vol. 9 (2) 2023, 61-85 74 hafizabad 0.146118 0.248129 jhang -0.7299 0.261463 jhelum 1.196655 0.119618 kasur -0.39056 0.326466 khanewal -0.46949 0.248982 khushab -0.08503 0.199804 lahore 1.529616 0.23987 layyah -0.79057 0.404949 lodhran -0.861 0.164564 mandi bahauddin 0.538601 0.202859 mianwali 0.111936 0.337741 multan -0.16381 0.296879 muzaffargarh -1.46018 0.270024 nankana sahib 0.37935 0.360332 narowal 0.809982 0.244564 okara -0.39137 0.39455 pakpattan -0.80586 0.399839 rahim yar khan -0.86599 0.250266 rajanpur -2.46064 0.33441 rawalpindi 1.709035 0.134198 sahiwal -0.00663 0.265917 sargodha 0.099767 0.311538 sheikhupura 0.446639 0.230734 sialkot 1.183032 0.173256 tt sing 0.384315 0.154173 vehari -0.40023 0.310706 figure 8 is showing the status of social development index in all the districts of punjab. it can be noticed that the position of social development is better in northern districts of punjab. lahore, rawalpindi, chakwal, jehlum, gujrat, sialkot, gujranwala and faisalabad are performing well whereas situation in rajanpur, dg khan and muzaffargarh is disappointed. this figure 9 is showing a u shaped association between social development and expenditure incurred by the punjab government in all the districts. here, at the earlier stage government expenditure did not fulfil its purpose to ensure improvement in social status of districts but gradually every unit of government expenditure improve the situation. review of economics and development studies, vol. 9 (2) 2023, 61-85 75 fig: 8 social development index all across punjab between 2008 to 2018 source: mics, 2007, 2011, 2014 and 2018 bureau of statistics fig: 9 scatter plot diagram of social development and development expenditure 5.2 descriptive statistics table 6 reports the descriptive statistics of the indicators which are used in the construction of the social development index. (2008-2018) review of economics and development studies, vol. 9 (2) 2023, 61-85 76 table 6 descriptive statistics items minimum maximum mean std. dev. infant mortality rate 35.00 130.00 75.55 17.31 percent of household with iodized salt consumption(%) 0.80 81.00 38.15 19.67 water on premises (%) 37.50 99.70 83.92 11.42 malnutrition (numbers) 378.00 4906.00 1572.80 945.00 house ownership (%) 64.90 97.80 86.86 5.77 household possessions (%) 63.50 100.00 93.81 7.19 literacy rate 15-24 year(male) (%) 52.30 95.70 78.43 9.00 literacy rate 15-24 year(female) (%) 31.40 92.90 67.75 14.93 percentage using improved sanitation (%) 16.87 97.90 65.13 16.66 child labor (%) 0.90 32.70 12.51 6.92 the table 7 describes the correlation between the variables. the correlation between social development and government expenditure is 0.2901 which shows a positive relationship. while the correlation of independent variables are lower than 0.93 indicating the absence of multicollinearity. table 7: table of correlation sdi lexp lprod lpden lroad lemp dum sdi 1.000 lexp 0.246 1.000 lprod -0.232 0.064 1.000 lpden 0.525 0.1266 0.094 1.000 lroad -0.008 0.004 -0.004 -0.016 1.000 lemp 0.338 0.146 0.070 0.525 0.214 1.000 dum 0.095 0.727 0.216 0.056 0.0073 0.028 1.000 5.3 estimation results table 7 reports the estimates of panel random effect model. this model is selected as the hausman test has been found insignificant difference between the fixed effect and random effect model. using 350 observations, the wald test is significant showing that overall model is fit. the overall r squared is indicating the the proposed variables are explaining 26.4% of the variation in the social development index. in this selected model the variables like factory employment and population density have a significant postivie effect on social development index. while the dummy variable of decentralization found to show development promoting effects. development expenditure per capita is found negative and significant and square form of development expenditure per capita has been found positive and significant which means that marginal impact is shifting from negative to positive with increasing expenditures following the kuznets hypothesis (kuznets, 1953, 1955, 1965). some of the variabels are insignificant agriculture productivity has found out to be insignificantly impacting on social development because of disparities among districts (area, weather, soil, resources etc). same is the case with like road length; connectivity among districts is not improving social conditions. factory employment has positive impact on social development. population density has positive impact on social development, as according to optimistic review of economics and development studies, vol. 9 (2) 2023, 61-85 77 theory which tells that higher population density fuels economic growth. lastly the dummy variable of regime change indicates that when the decentralization regime started it led to a positive effect on the social development index. table 7 random effect model r-sq: within = 0.4282 between = 0.2634 overall = 0.2645 number of obs = 350 number of groups = 36 obs per group: min = 4.0 avg = 9.7 max = 10.0 wald chi2(7) = 235.14 prob > chi2 = 0.000 sdi coef. std. err. z p.|z| [95% conf. interval] lexp -0.1151 0.0411 -2.80 0.005 -0.195 -0.034 lexp2 0.0277 0.0059 4.65 0.000 0.016 0.039 lpro 0.0244 0.0348 0.70 0.482 -0.044 0.093 lpden 0.3265 0.0897 3.64 0.000 0.151 0.502 lroad 0.1142 0.0883 1.29 0.196 -0.059 0.288 lemp 0.1913 0.0691 2.77 0.006 0.044 0.027 dum 0.0127 0.0358 0.35 0.724 -0.056 0.090 intercept -4.9189 0.9177 -5.39 0.000 -6.717 -3.120 fig: 10 post regression fit plot of social development index and development expenditures figure 10 of quadratif fit plot using methodology of (dawson, 2014) shows confirmed the association plot shown in figure 8, which means that based on the actual estimation coefficients, increase in the development expenditrues have positive effect on social development expenditrues. -5.05 -5 -4.95 -4.9 -4.85 -4.8 -4.75 -4.7 -4.65 -4.6 low dev exp. high dev exp. s o c ia l d e v e lo p m e n t dev. expenses per capita effect of dev. expenses on development review of economics and development studies, vol. 9 (2) 2023, 61-85 78 table 8, firstly provides the linearized effect of development expenditures on social development index based on the average incidence of development expendtirues per capita in the district. secondly, while multiplying the linearized effect with the component matrix weights from the principal factor analysis (shown in appendix table 1), it can be seen that a 1% increase in the development expenditures per capita is moving the components of social development index in right direction except for the case of water on premises, malnutrition and house ownership. figure 11 shows that for 1% increase in the development expenditures per capita in punjab, there is 0.07% decrease in infant mortality rate, 0.037% increase in consumption of oidized salt, 0.08% increase in the access to electricity, 0.082% increase in male literacy rate, 0.091% increase in female litracy rate, 0.085% increase in access to improved sanitation and 0.05% decrease in child labor. these effects are supporting the theory but for the case of access to water, malnutrition and house ownership the effects are opposite, hence this study hints that the government expenditures per capita were not integrated / optimized with these targets in the past. there is a need to consider them in future. 6. conclusion and policy recommendation the main purpose of this study is to investigate the impact of development expenditure per capita on social development of the districts of punjab while controlling for population density, productivity, road length/connectivity and employment. this study considered panel data for 36 districts of punjab ranging from 2008 to 2017. development expenditures data have been collected from planning and development board (p&d), government of punjab and population density, productivity, road length /connectivity and employment related data have been collected from various issues of punjab development statistics (pds). this study adapted from the idea of kuznets curve to test u shaped relationship between government development intervention and social development index. in order to measure social development index for each districts principal factor analysis technique was utilized. the indicators used in the factor analysis are reported in table 3. model selection tests indicated that panel random effect model technique is appropriate. the estimation confirmed the u shaped / kuznets curve hypothesis while all independent varibales had positive effect on social development. while creating the channel of effects from the development expenditures to the indicators of social development, it can be seen that out of all indicators only 3 indicators were not properly targeted that is why increase in the development expenditires did not have an appropriate effect on them. review of economics and development studies, vol. 9 (2) 2023, 61-85 79 table 8 – marginal effects districtwise district sdi infant mortalit y rate house with iodized salt consumptio n water on premisi s under 1 year malnutritio n house ownershi p house with electricit y male literacy rate 15-24 year female literacy rate 15-24 year improve d sanitatio n child labor attock 0.114 -0.083 0.043 -0.047 0.014 -0.029 0.094 0.096 0.106 0.100 -0.059 bahakkar 0.104 -0.076 0.039 -0.043 0.013 -0.026 0.086 0.087 0.097 0.091 -0.053 bahawalnagar 0.101 -0.074 0.038 -0.042 0.012 -0.025 0.084 0.085 0.095 0.089 -0.052 bahawalpur 0.132 -0.097 0.050 -0.055 0.016 -0.033 0.110 0.111 0.124 0.116 0.068 chakwal 0.154 -0.113 0.059 -0.064 0.019 -0.039 0.128 0.130 0.144 0.136 -0.079 chiniot 0.133 -0.097 0.050 -0.055 0.016 -0.033 0.110 0.112 0.124 0.117 0.068 d.g. khan 0.137 -0.100 0.052 -0.057 0.017 -0.035 0.114 0.116 0.128 0.121 -0.071 faisalabad 0.109 -0.080 0.041 -0.045 0.013 -0.027 0.090 0.091 0.102 0.096 -0.056 gujranwala 0.134 -0.098 0.051 -0.056 0.016 -0.034 0.111 0.113 0.126 0.118 0.069 gujrat 0.08 4 -0.061 0.032 -0.035 0.010 -0.021 0.069 0.070 0.078 0.074 0.043 hafizabad 0.105 -0.077 0.040 -0.044 0.013 -0.026 0.087 0.088 0.098 0.092 -0.054 jhang 0.100 -0.073 0.038 -0.042 0.012 -0.025 0.083 0.084 0.094 0.088 -0.052 jhelum 0.114 -0.083 0.043 -0.047 0.014 -0.029 0.094 0.096 0.106 0.100 -0.059 kasur 0.103 -0.075 0.039 -0.043 0.012 -0.026 0.085 0.087 0.096 0.091 -0.053 khanewal 0.07 9 -0.058 0.030 -0.033 0.010 -0.020 0.066 0.067 0.074 0.070 -0.041 khushab 0.113 -0.083 0.043 -0.047 0.014 -0.028 0.094 0.095 0.106 0.099 0.058 lahore 0.20 8 -0.152 0.079 -0.087 0.025 -0.052 0.173 0.175 0.195 0.183 -0.107 layyah 0.111 -0.081 0.042 -0.046 0.013 -0.028 0.092 0.093 0.104 0.097 -0.057 lodhran 0.105 -0.077 0.040 -0.044 0.013 -0.026 0.087 0.088 0.098 0.092 -0.054 mainwali 0.149 -0.109 0.057 -0.062 0.018 -0.038 0.124 0.126 0.140 0.131 -0.077 mandi baha ud 0.116 -0.085 0.044 -0.049 0.014 -0.029 0.096 0.098 0.109 0.102 review of economics and development studies, vol. 9 (2) 2023, 61-85 80 din 0.060 multan 0.138 -0.101 0.052 -0.058 0.017 -0.035 0.114 0.116 0.129 0.122 -0.071 muzaffargarh 0.110 -0.081 0.042 -0.046 0.013 -0.028 0.091 0.093 0.103 0.097 -0.057 nankana sahib 0.105 -0.077 0.040 -0.044 0.013 -0.027 0.087 0.089 0.099 0.093 -0.054 narowal 0.122 -0.089 0.046 -0.051 0.015 -0.031 0.101 0.103 0.114 0.107 0.063 okara 0.09 0 -0.066 0.034 -0.038 0.011 -0.023 0.075 0.076 0.084 0.079 0.046 pakpattan 0.111 -0.082 0.042 -0.046 0.013 -0.028 0.092 0.094 0.104 0.098 -0.057 r.y. khan 0.105 -0.077 0.040 -0.044 0.013 -0.027 0.087 0.089 0.098 0.093 -0.054 rajanpur 0.09 8 -0.072 0.037 -0.041 0.012 -0.025 0.081 0.082 0.092 0.086 0.050 rawalpindi 0.155 -0.114 0.059 -0.065 0.019 -0.039 0.129 0.131 0.145 0.136 0.080 sahiwal 0.09 9 -0.072 0.037 -0.041 0.012 -0.025 0.082 0.083 0.092 0.087 -0.051 sargodha 0.107 -0.078 0.041 -0.045 0.013 -0.027 0.089 0.090 0.100 0.094 -0.055 sheikhupura 0.128 -0.094 0.049 -0.053 0.016 -0.032 0.106 0.108 0.120 0.113 0.066 sialkot 0.102 -0.075 0.039 -0.043 0.012 -0.026 0.085 0.086 0.096 0.090 -0.053 toba tek singh 0.09 9 -0.073 0.038 -0.041 0.012 -0.025 0.082 0.083 0.093 0.087 -0.051 vehari 0.08 5 -0.062 0.032 -0.035 0.010 -0.021 0.071 0.072 0.080 0.075 0.044 review of economics and development studies, vol. 9 (2) 2023, 61-85 81 fig: 11 overall net effect of development expenditures sdi infant mortality rate house with iodized salt consumption water on premisis under 1 year malnutrition house ownership house with electricity male literacy rate 15-24 year female literacy rate 15-24 year house using improved sanitation child labor net effects 0.097 -0.071 0.037 -0.040 0.012 -0.024 0.080 0.082 0.091 0.085 -0.050 -0.080 -0.060 -0.040 -0.020 0.000 0.020 0.040 0.060 0.080 0.100 0.120 % net effects of development expenditures review of economics and development studies, vol. 9 (2) 2023, 61-85 82 this study proposes the policy makers that, empirically the development expendtirues did nto target the access to clean water, reduction in malnutrition in under 1 year old children and increase in the house ownership of the citizens. by targeting them, then districts of punjab will surely move toward attaining sustainable development indicators. references arshed, n., anwar, a., kousar, n., & bukhari, s. 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(1995). “consumer confidence” indexes as social indicators. social indicators research, 36(3), 227-246. review of economics and development studies, vol. 9 (2) 2023, 61-85 85 appendix table appendix 1: table of component matrix (correlation) component matrix infant mortality rate -0.732 percent of household with iodized salt consumption 0.380 water on premises -0.417 malnutrition 0.121 house ownership -0.252 household possessions 0.829 literacy rate 15-24 year(male) 0.842 literacy rate 15-24 year(female) 0.936 percentage using improved sanitation 0.880 child labor (%) -0.515 review of economics and development studies vol. 4, no 1, june 2018 91 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 1, june 2018 journal homepage: www.publishing.globalcsrc.org/reads an empirical analysis of economic performance of asian economies: the role of electronic government 1 muhammad tariq majeed, 2 anwar shah ¹ assistant professors of economics in quaid-i-azam university, islamabad, pakistan. tariq@qau.edu.pk 2 assistant professors of economics in quaid-i-azam university, islamabad, pakistan articledetails abstract history revised format: may 2018 availableonline: june 2018 information and communication technology (ict) plays a key role in explaining the growth patterns of an economy. many of asian economies have exhibited high growth patterns in recent years. what explains economic performance of asian economies? does implementation of ict in public sector matters for the growth of asian economies? to answer this question, this study analytically explores and empirically tests the linkages of ict in public sector with economic performance reusing the panel data of 34 asian economies over the period 2003-2015. for empirical analysis, this study uses fixed effects, random effects, and system generalized method of moments (sgmm) estimation techniques. the empirical results show that e-government plays a positive and significant role in economic performance of the asian economies. this finding remains robust even after controlling the effects of trade, government consumption and inflation. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords economic growth; ict;asian economies; panel data jel classification d21, e71, g10 corresponding author‟s email address: tariq@qau.edu.pk recommended citation: majeed,m.t., shah, a., (2018). an empirical analysis of economic performance of asian economies: the role of electronic government. review of economics and development studies, 4 (1), 91102 doi: 10.26710/reads.v4i1.284 1. introduction asia is a fast growing region of the world and its dynamic economies lead global growth. however, high growth patterns of asian economies are not homogenous across the region. asian economies such as china, india and bangladesh are fast growing while some economies such as pakistan, kiribati, nepal and fiji are exhibiting slow growth rates. what are the fundamental factors of large differences in economic performance across asian economies? why do some economies produce high and sustained growth and others do not? this question has received much attention of the economist and policy makers and many causes of growth have been identified but still much of growth remains unexplained. recently, researchers have focused on information and communication technology as a potential cause of growth differences. the literature on causes of growth has largely shown favorable effects of ict. for example, levine (1997) asserts that ict facilitates information access that improves investment and growth. quah (2002) points out that ict improves broad based education, labor skills and consumer sophistication. moreover, http://www.publishing.globalcsrc.org/reads mailto:tariq@qau.edu.pk mailto:tariq@qau.edu.pk review of economics and development studies vol. 4, no 1, june 2018 92 increasing use of ict enhances labor productivity and as a result economic growth increases. recently, the concept of e-government and its linkages with economic development have attracted the attention of economists and policy makers. e-government is defined as the use of information and communication technology by government for “delivering and sharing” of information and better services to the people (chen et al. 2009; krishnan and teo, 2012). e-government adoption increases economic development through increasing accountability and transparency (bhatnagar, 2003; oecd, 2005; undp, 2006). theory suggests a number of mechanisms through which e-government increases economic development. first e-government enhances the quality of services and responsibilities of public sector(al kibsiet al., 2001; von haldenwang, 2004; and west, 2004). second, it strengthens the role of public and democracy (von haldenwang, 2004; and west, 2004). third, it helps to mitigate corruption and other malpractices in the society by assuring transparency and accountability(tirole, 1996; haigh, 2004; mishra, 2006; haigh and griffith, 2008; krishnan and teo, 2012). in spite of significant importance of e-government for various economic and social indicators, the empirical literature has virtually ignored the relationship of economic performance and e-government for asian economies. does e-government explains growth performance of asian economies. to our knowledge, this question is not yet addressed. there are some country specific studies which cannot be generalized for the region of asia. this study contributes into the empirical literature on causes of growth in asian economies by providing empirical evidence of the links of growth with e-government. the empirical analysis is based on panel data of asian economies and the results are obtained using fixed effects, random effects, and system generalized method of moments (sgmm)estimationtechniques. rest of the paper is organized as follows: second 2 provides relevant literature and explains the links of egovernment with economic growth. section 3 describes the data and section 4 explains empirical framework used for the study. section 5 provides a discussion on empirical findings. section 6 concludes the paper. 2. e-government and economic performance information and communication technology (ict) is a potential source of economic efficiency and research has largely shown its positive effects on economic performance (quah, 2002; levine, 1997). the research on ict has been recently focusing on ict implementation in public sector which is referred as e-government. for instance maetal., (2005) shows that an initiative of e-government in china is causing economic development through increasing transparency and decentralization of administration. what are the potential links which explain the impact of e-government on economic growth? egovernment boosts economic growth through various channels. lack of transparency in public services is one of the potential sources which inhibit economic performance of an economy. in this regard, egovernment helps to overcome this barrier by combating corruption. an implementation of e-government enhances transparency and accountability and probability of corruption decreases. in the presence of e-government interactions between government officials and citizens tend to decrease, thereby lowering the discretionary power of government officials. e-governments helps to eliminate information asymmetries by increasing quality and quality of information which enables the citizens to question the arbitrary and unfair decisions by public officials, thereby increasing accountability, transparency and lowering corruption. thus e-government helps to eradicate many opportunities of corruption (oecd, 2005; piatkowski, 2006). consequently, e-government enhances economic growth by lowing corruption. in a recent study, majeed and malik (2016), in a sample of 143 economies, found evidence that e-government helps to reduce corruption. according to world bank (2001), corruption is the largest single obstacle to economic development and growth process of an economy. therefore, to review of economics and development studies vol. 4, no 1, june 2018 93 have a sustainable and rapid economic growth elimination of corruption and its roots is fundamental. another mechanism through which e-government promotes economic growth is the quality of relationships between government and citizens. an implementation of ict tools in public sector improves relationsbetween government officials and citizens. for example welch et al. (2005) argued that availability of government websites improves the citizens‟ satisfaction from government and they trust on government.similarly, tolbert and mossberger (2006) suggested that government can build citizen‟s trust on government through efficient provision of services using e-government. however, some studies argue that e-government does not help to build citizen‟s trust on government. for example, using the survey data of 214 government website users for singapore teoet al. (2008) found that trust is built by the effectiveness of government policies rather thantheuse of technology. another mechanism through which e-government can enhance economic performance is reduction in climate degradation. in the presence of e-government movement of people and transport tend to reduce, thereby reducing the burden on environment. for example, using a sample of 105 countries from 20042008, krishnanet al. (2013), found that the effect of e-government on economic growth is mediated by reduction in corruption and environmental degradation. e-government can facilitate growth related activities by overcoming information asymmetries between economic agents and government for economic interactions. an improvement in quality of information and diffusion of knowledge facilitates production activities. another way through which e-government can increase economic growth is the productivity of public officials. ict tools help to increase productivity of labor and other inputs, thereby cost of production falls and production increases. for example, mahyideenet al. (2012), in a sample of 5 asean economies over the period 19762010, found that ict improves economic growth by improving the productivity of labor and other inputs and lowering the cost of production. using a panel data of 217 countries, choi and yi (2009)found that one percent increase in internet subscription leads to 0.05 percent increase in economic growth. similarly, using the panel data of oecd countries from 1996 to 2007, czernichet al. (2011) supported the positive association betweenbroadband and growth bhuiyan (2010) asserts the importance of e-government for kazakhstan. he argues that e-government is contributing into development process of kazakhstan by lowering the red tape cost, increasing control for corruption, reducing administrative and monitoring costs, lowering disguised employment, improving local and international relations, strengthening social cohesion and fostering economic growth. using a panel data of 44 african countries from 1988-20017, andrianaivo and kpodar (2011) found positive impact of ict infrastructure on economic growth. one strand of the literature opposes the development of ict infrastructure in the case of developing economies. the basic argument is that developing economies need to take care of the provision of basic health services,electricityand clean water instead of diverting scarce resources from basic services toward the provision of ict infrastructure(see ngwenyamaet al., 2006; morawczynskiandngwenyama, 2007).the success of ict infrastructure largely depends on the availability of complimentary factors such as technical staff, finance to maintain various costs associated with ict systems. for example, maintenance cost and upgrading costs are the intrinsic features of ict systems. similarly, some research studies have shown reservations in adopting e-government in the case of developing economies. kumar et al. (2007) proposed that the factors which affect adoption of e-government are different from other technologies. the e-government adoption is driven by socio-economic, traditional, culture, normative and human issues. the adoption of e-government needs a huge amount of investment on ict and broadband and sometime it precludes the investment on other important sectors like education, health among others. we can conclude from the literature review that literature on e-government and economic growth is emerging in recent years. most of the studies provide theoretical links and do not provideempirical review of economics and development studies vol. 4, no 1, june 2018 94 analysis. in addition the literature largely focuses on developed economies or country specific studies. the empirical literature generally focuses on ict rather than implementation of ict in public sector. the literature on ict merely focuses on internet whereas internet is one component of e-government. the concept of e-government is rather border then the mere use of internet in empirical analysis. egovernment is a broader measure that includes all information and communication technologies, web structure, and skilled labor that helps in the functioning of e-government. asia is a fast growing region as it is leading world economic growth. does e-government explain economic growth of asian economies? to our knowledge this question is not addressed. this study contributes in the literature on ict and growth using a panel data of asian economies. moreover, this study takes care of the issue of endogeneity. this study tests the following research hypothesis. h0: e-government does not explain economic growth of asian economies. h1: e-government causes positive effect on the growth of asian economies. 3. empirical model the empirical model for this study is based on cobb-douglas production function of mankiw, romer and weil(1992).the production function comprises three inputs that are labor, physical capitalandhuman capital. yit = ait lit αit k it βit h it ɤit (1) where i refers to cross sectional units that are asian countries in our sample t represents time period of the study. by taking the natural log of the equation 1 we have equation 1.1 logyit = logait + γ1 loglit + γ2 logkit + γ3 loghit (1.1) where a is a given state of technology in a country, y stands for real per capita gdp growth, l stands for labor forceparticipation,k stands for capital stock, and h stands for human capital. technological growth is a key driverofeconomic performance of an economy. following czernichet al. (2009) we have assumed that technology evolves exponentially over time which can be shown as follows: ai = a 0 eθit (2) taking log of equation 2 gives us logait = loga0 + θit (2.1) θ shows technological growth of a country. suppose that e-government boosts up the technological progress in a country through ict by facilitating spillover of knowledge, r&d and production of new technologies, so θ can be defined as: θit =α1 + α2 e_governmentit (3) substitutionequation 3 in equation 2.1 logait = α0 + α1 + α2 e_governmentit (3.1) where α0 + α1 = γ0 logait = γ0 + γ1 e_governmentit (2.2) by substituting equation 2.2 in equation 1.1 we have equation 1.3 logyit = γ0 + γ1 e_governmentit + γ2 loglit + γ3 logkit + γ4 loghit + eit (1.3) following barro (1991),in order to check convergence hypothesis, we have incorporated initial gdp per capita into equation 1.3 as a determinant of economic growth. review of economics and development studies vol. 4, no 1, june 2018 95 logyit = γ0 + γ1 yit −1 + γ2 e_governmentit + γ3 loglaborit + γ4 logcapitalit + γ5 loghuman − capitalit+γ5logxit+ eit (1.4) equation 1.4 is the final equation which is estimated using panel data estimators.xit is a matrix of control variables which includes trade openness, government final consumption and inflation. 4. the data description to estimate the impact of e-government on economic growth, this study uses unbalanced panel data of asian economies. all countries belonging to asia were short listed for empirical analysis. however, some of the countries do not have observations on e-government and therefore after data screening we are left with 34 economies. economic performance is measured using natural of gdp per capita at 2005 constant prices. following the literature of endogenous growth models, this study uses following controlvariables: initial gdp per capita, physical capital formation, human capital formation, labor force and egovernment. the effect of trade openness, government final consumption and inflation is also incorporated during sensitivity analysis of the baseline findings. the index of e-government is based on three components. the first component is „web connection and online service‟. this component measures the extant of web content approachability of an economy. moreover, it measures evolving online presence in websites which expands information provision through arranging multimedia contents, online transaction service and interactions of citizens with government. the second content is „telecommunication service‟. this component comprises fixed telephone, mobile telephone, number of personal computers and the number of internet users. finally, the fourth component is „human capital‟. this component is based on the rate of adult literacy and gross enrollment of primary, secondary and tertiary education. the index of e-government is developed using weighted average of these three components and it ranges from 0o to 1. the value of 0 implies absence of e-government and the value of 1 implies full presence of e-government. table 4.1reports summary statistics of the data used for empirical analysis. the lowest value of gdp per capita is 696 which belongs to afghanistan while the highest value of gdp per capita is 55838 which belongs to singapore. the quality of e-government on average in asian country is 0.40 which is relatively low. however, there are differences across asian countries. some countries have zero level of egovernment such as kiribati and some have the highest values such as korea has 0.8785. table 4.2 reports correlation matrix of the variables used for empiricalanalysis. e-government has positive and high correlation with gdp per capita. moreover, all components of e-government have positive correlation with gdp per capita. table 4.1: summary statistics of the data variables observations mean std. dev. min max y 344 9277 12091.9 696.6 55838.63 labor 312 64.54615 8.661987 38.6 85.1 capital 287 25.05979 8.646833 8.041532 63.04872 human capital 255 78.95593 26.08619 13.18077 154.8082 e-government 292 .3998195 .1991774 0 .8785 inflation 344 6.853444 7.244612 -22.09025 59.73974 trade 344 100.5652 62.57655 24.25 433.05 government exp 344 16.44151 13.02356 3.57 55.25 urban 336 14.50032 2.263721 9.595399 18.56387 fix_ telephone 326 15.08325 15.10355 .02 58.91 online service 300 .308733 .2357369 0 1 telecom infra 298 .1514594 .1990489 0 .7098 review of economics and development studies vol. 4, no 1, june 2018 96 table 4.2: correlation matrix variables 1 2 3 4 5 6 7 8 9 10 11 12 1. y 1.0000 2. labor -0.0756 1.0000 3. capital -0.1736 0.0876 1.0000 4. hc 0.6434 -0.1378 -0.0055 1.0000 5. e-gov. 0.7232 -0.1286 0.0310 0.7338 1.0000 6. inflation -0.2926 0.0718 -0.0711 -0.0541 -0.2866 1.0000 7. trade -0.1163 0.0560 -0.0815 -0.0465 -0.0349 0.0968 1.0000 8. gov-con -0.1438 -0.2859 0.1435 -0.2505 -0.4197 -0.0237 0.0083 1.0000 9. urban -0.0019 0.0525 0.0073 0.2510 0.1064 0.1060 -0.0172 -0.1547 1.0000 10. fix_tele 0.7905 -0.1547 0.0291 0.7531 0.8852 -0.3268 -0.1849 -0.3120 0.0533 1.0000 11. online 0.5652 -0.1745 0.0634 0.4795 0.8854 -0.2949 -0.1068 -0.3990 0.0906 0.7226 1.00 12. telecom 0.8106 -0.1563 -0.0179 0.6792 0.9106 -0.3509 -0.1218 -0.3121 0.0399 0.9301 0.7898 1.00 to test the presence of multicollinearity among independent variables, the vif (variance inflating factor) test is used (table a2). the values of vif for individual indicator and mean value for all indicators are less than 10 implying that there is not a serious issue of multicollinearity in our model. the lowest value of viif is 1.03 while highest value of vif is 2.34 and average value of vif is 1.93. the functional form of the model is tested applying link test (table a3). the results reported in table conform that functional of the model is correct as p-value of hat square is 0.11. figure 1 presents a graphical relationship between e-government and economic growth of asian countries. it is quite clear from figure that the relationship is positive and linear implying that e-government is positively associated with gdp per capita in the asian region. figure 1: economic growth and e-government 5. empirical findings the empirical results are estimated using fixed effects model. the fixed effects model is superior to ols because it controls country specific time invariant characteristics. furthermore, it also captures unobserved heterogeneity by estimating intercept for each cross sectional unit in the panel data. baltagi (2008) argues ols yields biased parameter estimates when panel data set comprises time invariant characteristics while fixed effects model gives unbiased results. since asian economies are heterogeneous and comprise time invariant characteristics, fixed effects model is more appropriate as compared to ols. table 5.1 provides fixed effects results for e-government and economic growth of asian economies. column (1) indicates that the effect of e-government on economic growth is positive and significant. in 6 7 8 9 1 0 1 1 e c o n o m ic p e rf o rm n c e 0 .2 .4 .6 .8 e-government fitted values y figure 1 relationship between gdp per capita growth and e-government review of economics and development studies vol. 4, no 1, june 2018 97 particular, one unit increase in e-government causes 0.14 percent increase in gdp per capita growth in developing economies. this effect remains robust in remaining regression results reported in table 5.1. table 5.1: e-government and economic growth: fixed effects models variables empirical results of fixed effects model (1) (2) (3) (4) yt-1 0.800*** 0.800*** 0.799*** 0.802*** (0.0304) (0.0302) (0.0312) (0.0303) labor -0.355*** -0.411*** -0.352*** -0.359*** (0.132) (0.136) (0.134) (0.132) capital 0.0468** 0.0334 0.0473** 0.0443** (0.0218) (0.0230) (0.0221) (0.0218) human capital 0.0893*** 0.0979*** 0.0889*** 0.0926*** (0.0336) (0.0338) (0.0339) (0.0336) e-government 0.144* 0.138* 0.143* 0.141* (0.0764) (0.0760) (0.0769) (0.0762) trade 0.0560* (0.0330) gov. consumption 0.00550 (0.0361) inflation 0.000710 (0.000507) constant constant 2.613*** 2.613*** 2.600*** (0.615) (0.611) (0.623) observations 168 168 168 168 r-squared 0.899 0.901 0.899 0.900 number of country 34 34 34 34 standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.1 to assess the robustness of growth effect of e-government, we include additional growth determinants one by one. in columns (2-4) we have incorporated trade, government consumption and inflation, respectively. the growth impact of trade turns out to be positive and significant implying that trade is an important source of economic performance of asian economies. this finding is consistent with a number of empirical studies on trade and growth (see majeed, 2015). column 3 includes government consumption as an additional control variable. the role of government consumption turns out to be insignificant. column 4 includes inflation as an indicator of macroeconomic instability. the effect of inflation also turns out to be insignificant. the advantage of fixed effectsmodel is that it captures time invariant characteristics of crosssectional units. however, it does not control the effects of random shocks in error terms. moreover, fixed effects may worsen the problem of multicollinearity due to dummy variables trap. we also use random effects model. table 5.2 reports empirical results of growth and e-government using random effects model. column 1 indicates that the effect of e-government on economic growth of asian economies is positive and significant. the parameter estimate on e-government indicates that one unit increase in adoption of egovernment cause 0.13 percent increase in economic growth. this effect remains robust in remaining columns of table 5.2. review of economics and development studies vol. 4, no 1, june 2018 98 table 5.2: e-government and economic growth: random effects models variables empirical results of random effects model (1) (2) (3) (4) yt-1 0.966*** 0.965*** 0.966*** 0.968*** (0.0103) (0.0104) (0.0103) (0.0104) labor -0.0144 -0.0197 -0.0150 -0.0181 (0.0499) (0.0511) (0.0518) (0.0501) capital 0.0329* 0.0325* 0.0329* 0.0324* (0.0168) (0.0170) (0.0169) (0.0168) human capital -0.00598 -0.00657 -0.00603 -0.00742 (0.0217) (0.0220) (0.0217) (0.0217) e-government 0.129** 0.134** 0.128** 0.126** (0.0578) (0.0586) (0.0610) (0.0578) trade 0.0105 (0.0144) gov. consumption -0.000581 (0.0125) inflation 0.000794 (0.000528) constant 0.258 0.241 0.261 0.257 (0.227) (0.235) (0.244) (0.228) observations 168 168 168 168 number of country 34 34 34 34 standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.1 since our endogenous growth model has a lag dependent variable on the right side, fixed effects and random effects methods may give biased results. in this case system gmm is more efficient and reliable. furthermore, it addresses the issue of endogeneity in the model using instruments for endogenous variables (baltagi, 2008). since installation of e-government requires huge cost, it may depend on gdp per capita. in this situation reverse causality problem will arise.comin and hobjin (2004) point out that twenty famous technologiesof the world were initially adopted by developed countries. it implies that developed economies have enough resources to manage the costs of these technologies. to maintain causality from e-government to gdp per capita growth, we use arrelano-bond (ab) model. we use both internal and external instruments to address the issue of endogeneity. internal instruments are own lag variables of endogenous variables while external instruments are fixed telephone lines and initial urban population.fixed telephone lines as instrument for broadband was used by czernichet al. (2011). since broadband access depends on cable, tv and fixed telephone lines, it is highly correlated with fixed telephone lines. urban density theory suggests that fixed costs of ict infrastructure decrease as urbanization increases because the availability of complimentary tools of ict becomes widespread and knowledge spill overs (anderson, 2008). table 5.3 reports the results of e-government and economic growth suing ab model. all columns of the model indicate that the impact of e-government on economic growth is robustly positive and significant. thus baseline findings remain intact. review of economics and development studies vol. 4, no 1, june 2018 99 table 5.3: e-government and economic growth:arrelano bond variables empirical findings of arrelano bond model (1) (2) (3) (4) yt-1 0.924*** 0.921*** 0.924*** 0.934*** (85.59) (84.02) (85.16) (75.73) labor -0.0555 -0.115 -0.0548 -0.0727 (-0.695) (-1.305) (-0.544) (-0.870) capital 0.0592*** 0.0549** 0.0592** 0.0590** (2.603) (2.407) (2.545) (2.496) human capital 0.0409** 0.0272 0.0410** 0.0187 (2.224) (1.339) (2.006) (0.837) e-government 0.312*** 0.356*** 0.312*** 0.307*** (4.721) (4.966) (4.654) (4.467) trade 0.0194 (1.548) gov. consumption 0.000165 (0.0117) inflation 0.00164* (1.916) constant 0.413 0.659* 0.409 0.487 (1.165) (1.703) (0.835) (1.316) observations 157 157 157 157 number of country 33 33 33 33 standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.1 5. conclusion the use of ict is growing in all spheres of life and its usage has changed the way people communicate, work and live. ict lowers information barriers, reduces transaction costs, and increases efficiency of the workers. the available literature on ict has identified merits of ict for growth and development. does ict implementation in public sector help to boost the growth of an economy? this question has received less attention. in particular, the region of asia which is a fast growing region has been ignored in empirical literature on growth and ict. this study contributories in ict and growth literature by empirically investigating the growth effects of ict implementation and adoption in public sector using a panel data of asian economies from 2003 to 2015. to measure ict in public sector, this study uses a novel measure ofe-government from the united nations that covers multipledimensions of e-government. estimation techniques take care of the country specific fixed and random effects. moreover, to address the potential problem of endogeneitysystem gmm method of estimation is used. the empirical results of study show that e-government contributes positively and significantly in the growth performance of asian economies. the parameter estimate on e-government suggests that one unit increase in e-government increases economic growth of asian economies by 0.14 percent. this finding remains robust to different specifications, alternative econometrictechniques and endogeneity problem. this finding implies that government of asian economies aiming at high and sustainable growth needs to adopt ict infrastructure in public sector to fulfill its responsibilities. another robust finding of our analysis suggests that human capital is a strong and robust determinant of growth in asia. this finding implies that investment in human capital is critical in asian economies. moreover, investment in human capital can offset the loss of employment created by the adoption of e-government. review of economics and development studies vol. 4, no 1, june 2018 100 though empirical findings are aligned with prior theoreticalexpectations, this analysis has certain limitations. first, asian economies are quite heterogeneous in terms of socioeconomic and cultural factors and therefore, adoption of e-government for some economics may not ensure economic prosperity. second, adoption of e-government requires huge implementation costs which may not be feasible for asian economies at lower level of economic development. the data set for all asian counties were not available, therefore, these findings cannot be generalized for the whole region and developing world. in addition, the sensitive analysis for this study is very limited. future research needs to extend this study for different sub-regions in the asia. the sensitivity analysis needs to be extended using more factors of growth. this study mainly focuses on positive aspects of egovernment ignoring its potential downsides. for instance, the consequences for income distribution need to be studied. similarly effects on labor market needs to be analyzed. references al-kibsi, g., de boer, k., mourshed, m., & rea, n. p. 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(2004).e‐government and the transformation of service delivery and citizen attitudes.public administration review, 64(1), 15-27. world bank (2001).available from http://www.worldbank.org/html/extdr/thematic.htm. appendix: table a1: summary of variables variables definition source economic growth natural log of the gdp per capita at 2005 constant prices. [1] http://www.worldbank.org/html/ review of economics and development studies vol. 4, no 1, june 2018 102 e-government extent of online availability of the government, telecom infrastructure, and human capital. [2] online service extent of the online availability of the government. [2] telecom service extent of telecom infrastructure of the government. [2] human capital gross secondary school enrollment of total population. [3] physical capital gross fixed capital formation in percentage of gdp. [3] labor force share of labor force participation in total population. [3] government consumption government spending in the share of gross domestic product at 2005 constant prices [1] urban population natural log of urban population [3] fix_telephone fixed telephone lines per 100 inhabitant [4] sources: [1]penn world tables (version 7.1); [2] global e-governance reports; [3] world development inndicaotrs (2014); [4] internation telecommunication union (2014) table a2: variance inflating factor variable l.y e-government labor capital human capital vif 2.34 3.09 1.03 1.14 2.04 1/vif 0.427350 0.323235 0.971980 0.876506 0.491118 mean vif 1.93 table a3: linktest y coef. std. err. t p>t [95% conf. interval] _hat 1.075286 .0476114 22.58 0.000 .9812796 1.169292 _hatsq -.0042897 .0027076 -1.58 0.115 -.0096357 .0010563 _cons -.3242146 .2062253 -1.57 0.118 -.7313953 .0829661 figure a1: marginal effect of e-government on gdp per capita of asian economies -1 -.5 0 .5 1 e( y | x ) -.4 -.2 0 .2 .4 e( egovernment | x ) coef = 1.8988059, se = .27096946, t = 7.01 review of economics and development studies vol. 5, no 2, june2019 365 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june2019 journal homepage: www.publishing.globalcsrc.org/reads impact of corporate reputation on firm risk: an analysis of pakistan stock exchange listed and pacra rated firms 1 allah bakhsh, 2 muhammad hanif akhtar, 3 adeel akhtar 1 assistant professor, bahauddin zakariya university, multan, pakistan, abkhan@bzu.edu.pk 2 professor of commerce, bahauddin zakariya university, multan, pakistan, hanifakhtar@bzu.edu.pk 3 assistant professor, bahauddin zakariya university, multan, pakistan article details abstract history revised format: may 2019 available online: june2019 this study has examined the impact of corporate reputation on risk exposure of the firms listed at pakistan stock exchange (psx) and rated by pakistan credit rating agency (pacra). it has employed firm’s credit ratings as a proxy for corporate reputation. it has covered the time period from 2007-2016 and unbalanced and undated panel regression analysis has been carried out to observe the significance of the relationship among corporate reputation and the firm risk i.e. total risk and its parts (systematic and unsystematic risk). it has been found that corporate reputation has a significant negative relationship with total risk and systematic risk of the firm. it is however found that corporate reputation is insignificant in explaining the unsystematic risk of the firms. leverage and profitability (the control variables) are also found significant in explaining the risk exposures of the firms. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords psx, pacra, firm risk, credit rating jel classification: f51, g30, m13 corresponding author: abkhan@bzu.edu.pk. recommended citation: bakhsh, a., akhtar, m. h. and akhtar, a. (2019). impact of corporate reputation on firm risk: an analysis of pakistan stock exchange listed and pacra rated firms, review of economics and development studies, 5(2), 365-372 doi: 10.26710/reads.v5i2.622 1. introduction corporate reputation is considered as a value enhancing intangible asset for of the firms (roberts & dowling, 2002). reputation of a firm is considered by the inequality concerning the extent of time which it takes to figure it up and its instability, i.e. the short time it takes to end (hall, 1992). firm managers considered corporate reputation as most important asset of the organizations. this managerial perception has theoretically and empirically been tested by a lot of researchers and most of them tried to explore the causal relationship between corporate reputation and firm performance i.e. deephouse (1997); roberts & dowling (1997); vergin & qoronfleh (1998); dunbar & schwalbach (2000); black, et al.(2000); chung, et al.(2003); rose and thomsen (2004); inglis, et al.(2006); (sanchez & luna, 2007); lee & roh (2012) and sánchez & vega (2018). on the other side, least attention is given to firm risk, while exploring the effects of corporate reputation, although; firm risk is considered as a most fundamental component for managing firms and controlling financial strategy (juan et al., 2013). it is believed that the performance of the firm, in economic terms; not only depends on higher returns, but, it also depends on low risk. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5 no 2, june2019 366 firm risk is defined in various contexts by the researchers, while having corporate reputation in consideration as well. conventionally, good corporate reputation is viewed as a risk reducing agent. but when it was analysed empirically with different type of risks, it gave contradictory results (delgado‐garcía, quevedo‐puente, & díez‐esteban, 2013), due to the fact that various strategic choices have different effects on risk factors(lubatkin & o'neill, 1987). according to orlitzky & benjamin (2001), total risk of the firm comprised of variance in returns over a period. according to the market model developed by sharpe(1964), firm risk comprised of two components i.e. unsystematic and systematic risk. systematic risk is idiosyncratic in nature due to its particularity to a firm that captures the degree of variation in the performance of the firm and which cannot be explained by general market trends. whereas, systematic risk is caused by the different macroeconomic variables and it covers the variation in firm performance due to overall changes in the market. with this premise, the current study is aimed to explore the impact of corporate reputation on various types of firm risks i.e. total risk and its components (systematic and unsystematic risk). it also aimed to explore that how corporate reputation affects the risk exposure of the firms. the study has implications for both practitioners and academics, due to its unique nature in pakistani context; where no significantly relevant research is found on the highlighted issue. it is also significant as pakistani markets are developing, where weak form of market efficiency is observed by various researchers, and where different cultural, economic and political perspective prevails(khan & khan, 2016). 2. literature review according to wartick(1992), corporate reputation is “the aggregation of a single stakeholder’s perceptions of how well organizational responses are meeting the demands and expectations of many organizational stakeholders”. similarly, fombrun & riel(2004) defined corporate reputation as “the collective representation of a company’s past actions and future prospects that describes how key resource providers interpret a company’s initiatives and assess its ability to deliver valued outcomes”. from the review of previous research on corporate reputation, it is found that higher corporate reputation results in better response to market drops (gregory, 1998). on the other side, in an event study, jones, et al.(2000), found no difference among companies having low and high reputation, when a 20% drop in market size was occurred in 1987. the role of risk in explaining the business profitability is examined by tan(2016), who did not find any significant impact of firm risk on profitability of chinese banks. whereas, srivastava, et al.(1997)found that corporate reputation is positively associated with systematic risk measured as beta. based on portfolios of firm made on the basis of different reputation level, they observed that investors were more comfortable to take risk of investing in firms having higher level of reputation. jones, et al.(2000) claimed that good reputation gives a protection to the organizations in odd times and act as an intangible asset. it is considered as a “reservoir of goodwill” in terms of public relations. while analysing the stock market crashes of 1987 and 1989, jones, et al.(2000) found no difference between the companies having low or high reputation in case when the market was dropped upto 20% in a day. they supported the hypothesis that “reputation serves as a goodwill reservoir”, which facilitate the companies in time of economic downturn.taking into consideration another view, iwu-egwuonwu(2011) have linked corporate reputation with the corporate governance quality. according to the researcher, corporate reputation needs to be considered as an outcome of corporate governance initiatives taken in an organization. the emphasized that the corporate governance is main pillar which helps organizations in developing their reputation and on the basis of this pillar, the future of the organizations can be predicted. maintaining a good level of corporate reputation pay back in shape of an increase in corporate goodwill i.e. a source of intangible assets. having a strong reputation is far most important for the survival of today’s companies, to sustain in today’s competitive market and to cultivate best financial performance. rindova, et al.(2005) examined that how the reputation of organizations covers the perceptions of various stakeholders, which subsequently effect the economic outcomes of the outcomes. two varying dimensions of corporate reputation are proposed by rindova, et al.(2005), which are the perception of stakeholders about the ability of organizations to offer quality goods or services and the prominence of organizations in the mind of stakeholders. a favourable effect of reputation on pricing ability of organizations is found by the researchers. review of economics and development studies vol. 5, no 2, june2019 367 moreover, corporate reputation is found to reduce the uncertainly exist in the relations of organizations with their stakeholders. good corporate reputation is also found to have a positive relationship with market value. dowling(2006) examined that how the reputed organizations become successful in creating better market value. they found that good corporate reputation gives good corporate value to the shareholders. brammer, et al.(2006) also examined the relationship of corporate reputation with shareholders return. they found investors can earn abnormal returns by investing in stocks having rising reputation scores. moreover, the stocks having substantial fall in reputation score also exhibited abnormal positive returns in long and short term. clarapérez-cornejo, et al.(2019) recently analysed how the quality of enterprise risk management effect the reputation of companies. they argued that the risk of reputation of companies stem from all other risks of companies. from the analysis of the data of spanish firms they found that enterprise risk management is a tool which become useful to manage the reputation of the companies. moreover, enterprise risk management systems provide a platform to control the reputational risks of the companies. whereas, in a comparative study of uk and usa firms, chung, et al.(2003) explored the association of a firm’s equity market performance including past and future performance with its corporate reputation ranking published. they found that firms with high reputation outperform the equity market performance than those who are ranked low. they also found a positive association between firm performance and firm size. to further explore that how the corporate reputation results in high market value, wang & smith(2015) carried out an analysis of “america’s most admired companies”. according to their findings, firms with high reputation reflect us $ 1.3 billion market value premium, which show that firms with better reputation achieve best performance in terms of finances, which also result in low capital costs. their findings supported the theory of impression management. in a study on the relationship of firm risk and corporate reputation, delgado‐garcía, et al.(2013) found that if the firms are reputed, their unsystematic as well as total risk become reduced. however, they found that due to good reputation, the systematic risk of firms increased. they also found that the firms with the highest reputation in the sample, the impact of reputation has lesser effect on firm risk. they concluded that degree of corporate reputation does not matter for the firm risk and what matters for the risk is that whether firms are reputed or not reputed. based on the above theoretical underpinnings, following theoretical framework of the study is developed: figure 1: theoretical framework of the study 3. data two resources identified for measurement of corporate reputation are the rating agencies, the one is pacra (pakistan credit rating agency) and the other one is jcr-vis (a japanese rating agency). pacra ratings are employed for this study. pacra considered following qualitative and quantitative factors while rating a firm for credit worthiness. qualitative factors included firm’s qualitative information i.e. industry risk, operating environment, market position, management, corporate governance and accounting practices. qualitative factors covered firm’s cash flows focus, earnings and cash flows, capital structure, financial flexibility, project risk evaluation, earnings measures, coverage ratios, leverage measures and profitability ratios. the rating agency rates the firms on long term and short-term basis, the long-term ratings are employed for this study. aaa is for “highest credit quality”, aa for “very high credit quality”, a for “high credit quality, bbb for “good credit quality”, bbfor “speculative”, b for “highly speculative” and ccc, cc, c showed “high default risk” firms. pacra ratings are used as a proxy for measuring corporate reputation by employing a dummy variable for reputation. firms are divided into two portfolios. firms having rating of “aaa”, “aa”, “a” and “bbb” are corporate reputation firm risk leverage profitability review of economics and development studies vol. 5 no 2, june2019 368 categorized as “good repute firms” and the firms having rating of “bb”, “b”, “ccc”, “cc” and “c” are categorized as “bad repute firms”. corporate entities are considered for study. data of only 47 companies is available on the website of pacra as per policy of pacra which stated that the data of only those firms has been disseminated which gave permission for it. most of the firms asked pacra to make their rating information confidential. therefore, study is conducted only on the available firm’s data. out of 47 firms, 17 are further deleted as these firms are not listed at pakistan stock exchange. final sample consisted of firm’s ratings during the period from 2007 to 2016. 4. variables and methodology from the review of previous literature, it has been found that corporate reputation impacts the risk exposure of the firms, however, literature also suggested to explore the phenomenon in more detail. two components of firm risk are found in previous studies on the relationship of corporate reputation on risk i.e. downside risk and systematic risk, whereas, the unsystematic risk is not focused in previous studies. therefore, to have a more comprehensive view of risk, this study has considered firm’s total risk as dependent variable, which considered both systematic and unsystematic components of risk. 4.1 firm risk as dependent variable firms risk is hypothesized as dependent on corporate reputation. it is worked out through daily stock price data, where firm total risk is segregated as under: firm total risk = systematic risk + unsystematic risk σ2 (ri) = βi2 x σm2 + σi2…………….. eq. i where σ2 (ri) is a measure of total risk for a firm i. σi2 is the standard deviation of the error term and is firm’s unsystematic risk. whereas, systematic risk which is also referred as beta is estimated by sharpe (1964) market model as under: ri = αi + βi x rm + ei………………… eq. ii for a firm i, lagged risk (for the year t-1) is employed for estimating the relationship between risk and reputation of that firm. beta is calculated by drawing the scattered diagram of stock returns and psx returns for each of the firm year for which pacra rating is available. 4.2 corporate reputation as independent variable corporate reputation is hypothesized as an independent variable. a dummy variable is introduced for corporate reputation. long term ratings of pacra are employed for this study(pacra, 2019). these are categorized as: aaa is for “highest credit quality”, aa for “very high credit quality”, a for “high credit quality, bbb for “good credit quality”, bb for “speculative”, b for “highly speculative” and ccc, cc, c showed “high default risk” firms. pacra ratings are used as a proxy for measuring corporate reputation by employing a dummy variable for reputation. firms are divided into two portfolios. firms having rating of “aaa”, “aa”, “a” and “bbb” are categorized as “good repute firms” and the firms having rating of “bb”, “b”, “ccc”, “cc” and “c” are categorized as “bad repute firms”. it distinguished those firms having “good repute” from those having “bad repute”. out of 30 selected firms as per criteria, 7 seven are found “bad repute firms” and 23 are found as “good repute firms”. corporate reputation dummy is 1 for “good repute firms” and 0 for “bad repute firms”. 4.3 control variables we employed two variables as controls. these are leverage measured through debt to equity ratio on the rationale suggested by theory that high levered firms are more exposed to risk (bowman, 1979). the other control variable is profitability of the firm, following the theory which established a relationship between profitability and firm risk (bowman, 1980). net profit margin is employed as a proxy for profitability, worked out by dividing net income with net sales. 4.4 methodology review of economics and development studies vol. 5, no 2, june2019 369 data consist of both cross sectional and time series; therefore, yearly panels of the data have been developed. following the objective of the study whether firm risk (total and in parts i.e. systematic and unsystematic risk) depends on corporate reputation or not, below given regression equations are estimated: firm risk t+1 = α0+ β1 cr t + β2 l t + β3 prof t + εt+1…………eq. iii systematic risk t+1 = α0+ β1 cr t + β2 l t + β3 prof t + εt+1…………eq. iv unsystematic risk t+1 = α0+ β1 cr t + β2 l t + β3 prof t + εt+1…………eq. v in these equations: cr = corporate reputation l = leverage prof = profitability regression results of eq. iii, iv and v are presented in table-3, 4 and 5 and are discussed in next section. descriptive statistics of the data and pearson correlation among the variables are reported in table 1&2. total numbers of observations are 103 after adjustments through unbalanced and undated panel data analysis through eviews. table 1: descriptive statistics total risk unsystematic risk systematic risk corporate reputation leverage profitability mean 0.999 0.995 0.003 0.834 2.320 0.047 maximum 1.383 1.000 0.384 1.000 9.752 0.438 minimum -0.676 0.957 -1.658 0.000 -16.320 -0.267 std. dev. 0.176 0.007 0.175 0.373 2.854 0.134 observations 103 103 103 103 103 103 table 2: pearson correlation total risk unsystematic risk systematic risk corporate reputation leverage profitability total risk 1.000000 unsystematic risk 0.136508 1.000000 systematic risk 0.998978 0.091602 1.000000 corporate reputation -0.009316 -0.067349 -0.006292 1.000000 leverage 0.051128 0.036605 0.049724 -0.188628 1.000000 profitability -0.065106 -0.014800 -0.064770 0.346384 -0.247038 1.000000 5. results and discussion results of regression analysis of unbalanced / undated panel, on the equations as estimated in equation iii, iv and v are tabulated in table 3, 4 and 5. results of the equation estimated for total risk and corporate reputation as shown in table 3, showed that the probability (f-statistic) of the model is 0.00 that means the model is significant. p-value for corporate reputation is 0.000 having a negative sign with the coefficient. this means that the corporate reputation of year t has a significant but negative relationship with total risk of the firm in year t+1. the value of rsquare is 0.07, which is low, showing that only 7 % variability in total risk is due to variability in corporate reputation. this result is in line with the previous study that of roberts and dowling (2002). leverage a (a control variable) also found to have a negative and significant relationship with total risk, p-value = 0.0278, whereas profitability has a significant and positive relationship with total risk of the firm. table 3: regression results equation iii dependent variable: tr(1) variable coefficient std. error t-statistic prob. cr -0.013021 0.051165 5.254483 0.0000 l -0.005151 0.006469 -0.796316 0.0278 review of economics and development studies vol. 5 no 2, june2019 370 prof 0.011383 0.145307 3.078339 0.0177 c 1.021861 0.048965 20.86923 0.0000 r-squared 0.07030 mean dependent var 0.999804 adjusted r-squared 0.023367 s.d. dependent var 0.177051 f-statistic 8.000284 prob(f-statistic) 0.000099 equation iv estimated the relationship between systematic risk and corporate reputation. beta of the firms is used as a systematic risk. corporate reputation is found to have a significantly negative relationship with systematic risk, p-value = 0.0069 with coefficient value = -0.010. here the control variables showed the same behavior as in case of total risk. leverage has a significant negative relationship, p-value = 0.0313 and coefficient value = -0.0053. profitability has a significant positive relationship, p-value = 0.0296 and coefficient value = 0.0018. probability (fstatistic) in case of this model is also significant having a value equal to 0.00204. table 4: regression results equation iv dependent variable: sr(1) variable coefficient std. error t-statistic prob. cr -0.010503 0.050896 -0.206370 0.0069 l -0.005309 0.006435 -0.825076 0.0313 prof 0.001888 0.144544 0.013060 0.0296 c 0.024797 0.048708 0.509092 0.0006 r-squared 0.007131 mean dependent var 0.004000 adjusted r-squared 0.023263 s.d. dependent var 0.176130 f-statistic 8.234628 prob(f-statistic) 0.002044 equation v estimated the relationship between unsystematic risk and corporate reputation. results are given in table 5. contrary to the above, corporate reputation has shown insignificant relationship with unsystematic risk. pvalue in this case is 0.2758. however, leverage is found significantly positive relationship with unsystematic risk. p–value in case of leverage is 0.0075. profitability is found to have an insignificant relationship with unsystematic risk. p-value is 0.1486. the model is fit as the probability (f-statistic) here is 0.00177, which is significant. table 5: regression results equation v dependent variable: usr(1) variable coefficient std. error t-statistic prob. cr -0.002517 0.002297 -1.095995 0.2758 l 0.000158 0.000290 3.044201 0.0075 prof 0.009496 0.006522 1.455816 0.1486 c 0.997064 0.002198 453.6403 0.0000 r-squared 0.026950 mean dependent var 0.995804 adjusted r-squared 0.002837 s.d. dependent var 0.008028 f-statistic 8.904742 prob(f-statistic) 0.001777 6. conclusion this research is carried out with an aim to explore the impact of corporate reputation on various types of risks i.e. total risk and its components (systematic and unsystematic risk), that how corporate reputation is affecting the risk exposure of the firms. pacra ratings are employed as a proxy for corporate reputation. firm risks are estimated by using sharpe (1964) market model. betas are calculated for each firm at each dissemination date of pacra ratings. data of 30 firms (as available with pacra) is employed for the period from 2007 to 2016. firms chosen for the study are only those which were listed at pakistan stock exchange during the time periodand have pacra review of economics and development studies vol. 5, no 2, june2019 371 ratings for more than two years. we observed that the corporate reputation has a significantly negative relationship with total risk and systematic risk of the firm. it however found that corporate reputation is insignificant in explaining the unsystematic risk of the firms. leverage and profitability (the control variables) are also found significant in explaining the risk exposures of the firms. the results are in line with a recently conducted study in spanish context by clarapérez-cornejo, et al.(2019), where the same type of relationships have been observed. these results are significant in pakistani context and give a direction to the corporate sector and academic researchers as well. future study is proposed to be conducted by incorporating the signaling theory, that how the corporate reputation affect the market value of the shares of the firms. references black, e. l., carnes, t. a., & richardson, v. j. 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(1992). the relationship between intense media exposure and change in corporate reputation. business and society, 31(1), 33-49. review of economics and development studies vol. 5, no 2, june 2019 269 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads effects of despotic leadership and sexual harassment on emotional exhaustion of employees in health sector of pakistan: moderating role of organizational cynicism 1 muhammad shaukat malik, 2 shahzadi sattar 1 director, institute of banking & finance, bahauddin zakariya university multan, pakistan, shoukatmalik@bzu.edu.pk 2 phd scholar, institute of banking & finance, bahauddin zakariya university multan, pakistan, shahzadi.sattar@nfciet.edu.pk article details abstract history revised format: may 2019 available online: june 2019 the purpose of this research study has been to examine the relationship between despotic leadership, emotional exhaustion and sexual harassment in the presence of organizational cynicism as the moderator. the abovementioned relationships were empirically tested by collecting and analyzing the data from the government sector hospitals in pakistan. the target respondents were female nurses working in the six different hospitals of multan and bahawalpur region. the sample of 350 nurses was randomly chosen to collect the data. the results of the study proved the positive effect of despotic leadership with the employee emotional exhaustion. the other relation, which is proved, is the significant positive relationship between sexual harassment and the emotional exhaustion in the presence of organizational cynicism as the moderator. based on the social exchange theory it is inferred that a reciprocal relationship exists in the organizational context between the leaders and the subordinates when the trauma and depression is lent to the subordinates the subordinates feel emotionally deteriorated. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords despotic leadership, emotional exhaustion, sexual harassment, organizational cynicism jel classification: d91, j54, h75 corresponding author’s email address: shahzadi.sattar@nfciet.edu.pk recommended citation: malik, m. s. and sattar, s., (2019). effects of despotic leadership and sexual harassment on emotional exhaustion of employees in health sector of pakistan: moderating role of organizational cynicism, review of economics and development studies, 5 (2), 269-280 doi: 10.26710/reads.v5i2.587 1. introduction the dysfunctional behavior exhibited by the organizational managers in the form of leadership style or sexual harassment is generally a source of damage or deterioration to the peer group, subordinates and ultimately to the organization as well. the dysfunctional behavior as defined by the peterson (2002) is a behavior that violates the policies and norms of workplace. this damages the overall organizational performance. with the passage of time negativity is flourishing at the workplace like workplace bullying, leg pulling, sexual harassment, exaggeration, embezzlement and other below the belt activities. the other forms of negative behavior is selfishness, extending break times, accepting kickbacks, theft and much more are flourishing with remarkable growth rate. the repercussions or jeopardizes of dysfunctional behaviors are quite enough can’t be discussed extensively. the remedy is constructive leadership style instead of abusive, despotic, tyrannical and toxic leadership style that is fostered in the presence of the favorable organizational atmosphere instead of cynicism. if the negativity prevails then employee absenteeism, declining productivity, increased turnover intentions and job dissatisfaction is the fate of the organization. chronic sufferings of employees lead them feel emotional exhaustion. when emotionally exhausted the employees personal and professional well being is at stake. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 2, june 2019 270 according to chauhan, nisma (2014) the historical perspective of nurses has focused more on cure than care. we are focusing more on producing doctors than nurse. even though they play in integral role in patient care but they are given least recognition comparatively which has led drastic shortage of nurses in the country. journal of pioneering medical sciences (2013) has cited existing nurse patient ratio as 1:50 whereas pakistan nursing council (pnc) has prescribed 1:10. pakistan has only 162 registered nursing colleges. the demand of the nurses in health sector exceeds supply. the shortage of health sector is due to the stigma attached with this profession. according to salma rattani the director bachelors of science in nursing (bsn) at agha khan university karachi and (sonam) school of nursing and midwifery said that “nursing isn’t a well reputed profession for females”. even though there is the sincere efforts from female nurses but ironically this profession is not safe from the usual biases. the odd –hours or in faroff areas nurses are exposed to security risks and threat of sexual harassment. only eight cases were reported pertaining to the sexual harassment in peshawar even though this problem persists in entire country. pakistan is categorized as the 57th country that is facing human resource management crises. the pay scale is very pathetic but still they are working due to poor economic circumstances. due to the worst behavior from their immediate seniors and supervisors, the nurses become emotionally exhausted and become very impolite and ruthless as a retaliation of the toxic behavior. now the awareness programs are launched when prime minister imran’s performance delivery unit launched prime minister citizens’ portal “awam ki awaz” on 29th october 2018. this portal is a voice of the people. it will help resolve issues confronting disabled, overseas pakistanis, women, minorities, investors, and politicians. 2. literature review 2.1 despotic leadership and emotional exhaustion according to the erkutlu, h. (2018) “leadership is the process of influencing followers to achieve the organizational goals”. schilling (2009) is of the view that leadership phenomenon has been romanticized since its inception and its beneficial impacts on followers and organizations are the long lasting. meanwhile naseer et al., (2016) is of the view that leadership darker side is seriously overlooked which reflects the ugly face of leadership and aftermaths are exposed. karakitapoğlu-aygün and gumusluoglu (2013) is of the view that leaders do not even exhibit the positive leadership behaviors all the time. the dysfunctional leadership or the darker side can never be concealed. the negativity of the leader has the deleterious effects on subordinates. to represent the negative side of the leadership certain other terms have been used like ashforth, (1994) called it petty tyranny tepper, (2007) said it to be the abusive supervision and einarsen et al., (2007) named it tyrannical leadership or destructive leadership then aronson (2001) called it to be the despotic leadership. house and howell, (1992) and naseer et al., (2016) is of the view that despotic leadership is exercised by a leader who has the thirst of attaining supremacy and dominance. he is led by the self-interests they are literally manipulative, arrogant, bossy, obstinate and unforgiving with inflexible attitude. schilling (2009) says that despotic leadership carries most of the negative traits of leadership. even though in the area of political leadership it has been discussed vigorously however in the broad management and applied psychology it is in embryonic stage. to date, no study, to our knowledge, has contributed to an understanding of how despotic leadership relates to employees’ organizational deviance, despite the fact that leadership is one of the most influential predictors of employee workplace deviance (tepper et al., 2009); thus, the first goal of this study is to address this muchuntapped issue. the abusive leadership, tyrannical, narcissist and the worst one despotic leadership indulge the followers in psychological distress. the followers become exhausted while combating with the negativity of the leadership feel suppressed and helpless. blau, (1964) gave the concept of social exchange theory for interpreting the reciprocal behavior of the followers. emerson, (1976) narrates that social exchange is based upon give and take between the parties and demand mutual obligation. the exchange process is two way and is dependent on the behavior of each party. the negativity begets negativity and trust worthy; dedicated and shared obligations beget the same in response. emerson, (1976) is of the view that individuals should comply with norms of reciprocity. the principles of exchange form the ideology of exchange process. based on the idea that every action has a reaction based upon the nature of action either it is based on the positivity or negativity. if the actions are based on evil deeds the recipient will react accordingly. cropanzano and mitchell, (2005) are of the view that according to the social exchange theory the organizational behaviors of employees are reliant or conditional upon the kind of the treatment they get from their immediate and organizational managers. in compliance with the reciprocity norm the subordinates reciprocate the ethical leader by demonstrating high level of commitment and trust. however, when the agents of the organizations treat them pathetically or in an obnoxious way, what good they can expect from span of control? they are dealt with the same poor narcissist and despotic way. nobody treats them in a valued and respected manner and hence span of control show the work deviance (lian et al., 2012; tepper et review of economics and development studies vol. 5, no 2, june 2019 271 al., 2009). de hoogh and den hartog, (2008); naseer et al., (2016) are of the view that despotic leadership is more toxic and it is low on ethical code of conduct, sensitivity, self evaluation, personal commitment and responsibility for ones action. aronson, (2001); de hoogh and den hartog, (2008) are of the opinion that despotic leaders are autocratic, more inclination towards controlling and they limit participation of subordinates in decision-making. naseer et al., (2016) is of the view that despotic leaders exploit and treat unfairly their followers since they lack ethical values. that is because of this malfunctioning of leaders the span of control becomes less effective and least efficient so is their morale towards organizational progress. they legitimate their authority to satisfy their own objectives and followers react in a less cooperative way by becoming less focused deteriorating organizational functioning and making it difficult to meet organizational objectives. the reciprocal behavior is not directly directed towards the despotic leadership because offending authority is difficult to address they choose narrow escape by workplace deviance it means they are distracted about their work. nauman .s (2018) is clearly of the viewpoint that emotional wear and tear is the result of pathetic leadership. emotional exhaustion happens to consume more emotional resources to deal with interpersonal interactions than the normal circumstances moreover these resources deplete immediately. the aggressive, tyrannical, unethical and despotic leadership leads to severe repercussions for the subordinates like depression, anxiety and burnout. despotic leaders are inconsiderate, autocratic and exploitative creating the stress and depression in subordinates and ignites the emotions of burnout. h1: there is a significant positive relationship between despotic leadership and emotional exhaustion 2.2 sexual harassment and emotional exhaustion hadi, a. (2018) defines sexual harassment as the gender based violence. the highest majority of victims are of the females but men may also be subjected to it. sexual harassment reflects the unequal distribution of power between the both genders and therefore couldn’t be separated from psychological or criminal offenses. therefore, it is discussed under criminal law. the pakistani society is patriarchal in nature that denotes a system of society where men controls the home, society and government as the head, ruler or descent is reckoned through the male line. in this, kind of the society women are subjected to violence, exploitation and discrimination. sexual harassment is a criminal act and is carried out or committed to control or to take charge of domination of male members over females. it is a means of intimidating and threatening women to limitize their social and physical mobility. unluckily sexual harassment has become the compulsory ingredient of workplace. the equal employment opportunity commission (eeoc) of united states of america has defined sexual harassment as the unwelcome sexual initiatives, asking for sexual favors physical and oral conduct having inclination towards sexual context which is huge interference in workplace that is a basic reason of offensive or hostile work environment. according to the international labor organization, “any unwelcome non verbal, verbal and physical conduct of sexual orientation that affects the self esteem of men and women which is offensive for the recipient as well. when if a person rejects or does not surrender is implicitly or explicitly affecting the job of such a person. it is a sheer humiliating, hostile or intimidating working environment for the victim. therefore, it can be said categorically that this is a social control exerted by men over women to restrict their progress if they refuse the sexual advances. based on the previous researches and conservation of resource theory the major reason of workplace stress is workplace aggression that deteriorates employee psychological resources. strain and stress is the major outcome of fear of losing psychological resources, loss of resources or after the resource investment the inability to replenish resources. resources are valued conditions, objects, energies, and personal resources that are means of attaining further resources that are valued and are strived to be obtained and preserved (hobfoll 1989, 2001). psychological depression and aggression is a job stressor that depletes and deteriorates affective and cognitive resources. when the resources are not replenished properly employees experience decreased level of poor work outcomes and well-being. after workplace aggression employees are left with insufficient level of motivational resources to act out the key behaviors at work. extending therapeutic interactions with distressed employees may stop triggering aggression. no doubt, the loss of job occurs when the strain arising from the peer group psychological aggression outweighs the benefits of employment (deery, s., 2011). therefore, employees express their resentment of being sexually stabbed or harassed through emotional exhaustion. friborg, m. (2017) quotes that various research reports highlight that sexual harassment has repercussions like job dissatisfaction, mental health problems and increased sick leaves and less interest in job. it also affects mental health of the employees as well. researches depict that sexual harassment is mostly from the supervisors, subordinates and colleagues. review of economics and development studies vol. 5, no 2, june 2019 272 h2: there is a significant positive relationship between sexual harassment and emotional exhaustion 2.3 organizational cynicism serves as the moderator between despotic leadership and emotional exhaustion ozler, d. e. (2011) defines organizational cynicism as the depression in employees caused by the belief that organization is lacking integrity which when gets associated with intense negative emotions lead to disapproving decisive behavior. it is the belief organizational people are motivated by skepticism and selfinterest. employees confront many problems due to cynicism as they develop negative emotions regarding organizations such as disappointment, anger, hopelessness included by burnout syndrome defined as a series of emotions like fatigue, hopelessness, lost and despair. therefore it is inferred that burnt out and cynicism are entangled observable facts. ozler, d. e. (2011) is of the view that burnt out or emotional exhaustion is due to the organizational cynicism. individuals with cynic views about their organizations start experiencing emotional exhaustion for the negative feelings they suffer from. individuals with negative feelings slowly become cynic. in most of the convergent views, it has become evident that cynicism is the predictor of emotional exhaustion. cynicism is the school of thought of ancient greek. the followers of socrates are the couple of firstly known cynics i.e diogenes and antisthenes of sinope. the mere belief is that social norms are unessential for one’s self-sufficiency and independence. refusing social institutions and tendency to adhere individualism is the ingrained idea of being cynic. now the further development in the concept has proved it a personality trait rather than a lifestyle. criticism has certain immediate negative components i-e hatred, outrage, disgrace and fatigue. particularly, a sort of ceaseless pressure is experienced for the most part managing troublesome individuals and emotional exhaustion develops as a response to this chronic strain. overstrain, low confidence, absence of concentrating on an issue, depletion in physical and enthusiastic capacities and depersonalization are among the most critical impacts of emotional exhaustion in people. low occupation execution, high turnover, diminishing hierarchical duty and employment fulfillment, high wellbeing costs, and diminishing imagination, critical thinking and advancement are of the negative impacts of emotional exhaustion in organizations. erkutlu, h., & chafra, j. (2017) has the vigorous insight about the organizational cynicism. according to him, organizational cynicism is simply an unconstructive behavior towards ones organization consisting of three major dimensions: unconstructive outcomes for the organization, the faith that my organization is lagging behind in uprightness and inclination towards significant disapproving attitude towards their organization, which is unswerving in nature (dean et al., 1998). the attitude is equipped by hopelessness, annoyance, disenchantment and disrespect towards ones company and strong faith that organization lacks integrity. neves, (2012) is of the view that mangers are the true agents of the firms and when the misalignment is detected in the practice and preaching employees face the organizational cynicism. egoistic mangers are deficient in uprightness is proved in empirical and theoretical researches. moreover, the egoistic behavior is negatively associated with the integrity of organizational settings. mangers’ egoism abolishes integrity in the organization. kets de vries and miller, (1985) are of the view that egoistic mangers fail to accept the fact that they have committed the mistakes. rhodewalt et al., (2006) presented their opinion about narcissistic and tyrannical leaders as they are self-conceited and they consider themselves, as they are a source of all the successes of organization. despotic leaders are tyrannical, oppressive, dictatorial, repressive, cruel and suppressive. their self gratifying rather hedonistic goals are to deceive, manipulate and exploit others. the destructive leadership lack in moral sensitivity since their first priority is their self only. their selfish attitude stuck in the way of visionary ethical goals instead of dedication for the organization. based on the underlying principle it can be inferred that toxic, unethical, pretty tyrant and despotic leaders have low behavioral integrity towards organization as a result subordinates develop the negative perception about leaders resulting in organizational cynicism. due to the ever-changing temperament of workplaces the exceptional, sort of the expectations are made from the employees. these demands have made serious nature of the pressures on employees’ minds and souls as a result employee’ deleterious psychological health conditions are reported. the chronic mental health conditions of employees have the hazardous impact on organizational effectiveness. through various convergent viewpoints of authors, it has been reported that employees who work under stressful circumstances suffer from loss of confidence, emotional exhaustion, anxiety & depression. therefore, the despotic attitude is typically unethical in nature. destructive leadership believes in personal gains and disrespects followers and lacks the empathy. the motive to exploit others is their top priority. the consistent preoccupation with one self depicts lack of moral sensitivity. the counterproductive job attitude is the repercussion and reflection of destructive leadership. since the access towards the despotic leadership is difficult, therefore due to uneasy approach towards the mangers the subordinates feel themselves less important for the leaders. erkutlu, h., & chafra, j. (2017) are of the view that no doubt destructive leaders are a source of disrespect and disgrace for the employees. this disrespect and disgrace is very much enough to emotionally discharge the span of control and review of economics and development studies vol. 5, no 2, june 2019 273 they get their emotional resources depleted that are difficult to be replenished. in the absence of organizational integrity, this exhaustion is increased. it is a condition of worn-out and drained due to accumulated stress from work life. h3: organizational cynicism serves as the moderator between despotic leadership and emotional exhaustion 2.4 organizational cynicism serves as the moderator between sexual harassment and emotional exhaustion özler, d. e. (2011) clearly depicts that emotional exhaustion is the start the centre and fundamental component of burnout syndrome. the most highlighting component burnout is the consequence of job stress. the workers whose emotional demands are not compatible to the emotional demands of their supervisors have more tendency of being victimized by emotional exhaustion. emotional exhaustion is a reciprocal reaction of demeaning action. whenever there is emotional, disturbance or exhaustion the concentration on job is simply impossible. whenever the staff becomes emotionally tired and consumed this lack of energy is reflected in emotional exhaustion. whenever there is emotional fatigue the employee performance is not up to the mark. rather the next working day becomes a burden due to the feeling of tension and anxiety. the outcomes of emotional exhaustion are absenteeism, being late to work, the psychosomatic complaints & turnover intentions etc. after going through the rigorous literature review, it may be concluded that there is a strong association between the organizational cynicism and emotional exhaustion. the feeling of depersonalization is the result of emotional burnout and is known as cynicism. there are convergent viewpoints in the literature about the relationship between organizational cynicism, organizational justice, psychological contract breach, organizational politics, perceived organizational support, staff doesn’t observe work, organizational commitment, emotional exhaustion and alienation. there are adverse effects of cynicism like lack of concern, hostility, lack of trust on others, misery, despising, frustration and irony which is related to lower job performance, staff circulation with quickness, conflicts among people, absenteeism and emotional exhaustion. cynicism has the repercussions on the organizational efficiency. organizational citizenship has the inverse relationship with organizational cynicism while on the other hand organizational cynicism has the positive relationship with alienation and emotional exhaustion. johnson, j. l (2003) put an insight into the theory of social exchange theory people want to have a fair and impartial relationship with the firms. upon the violation of psychological contract, the relationship between employees and employers become unbalanced. the poor outcomes of psychological contract breach are declined commitment, performance, contributions and increased turnover intentions. as a result, duties are neglected and poor organizational citizenship behaviors are emerged. employee withdrawal behavior is the ultimate voluntary reaction to elongate the psychological and physical distance with the firms, as employees perceive that organizational situation is very inadequate. violation of psychological contract has the adverse effect on employees and organizations with reduced beneficial behaviors towards organizational citizenship behavior and increased turnover intentions. when sexually harassed, employees feel emotionally drained and it becomes aggravated when there is the unconstructive behavior towards the organization. h4: organizational cynicism serves as the moderator between sexual harassment and emotional exhaustion figure 1 review of economics and development studies vol. 5, no 2, june 2019 274 3. methodology the present research investigated the moderation model of sexual harassment, despotic leadership with emotional exhaustion with organizational cynicism as the moderator in a cross sectional sample of about 350 nurses working in various governmental hospitals in multan, bahawalpur and muzaffargarh. looking into the fragility of the research predictors like sexual harassment and despotic leadership the hospitals had really given a very tough time to the researcher to find out the primary information. in certain conditions researcher had to seek the formal permission to get the questionnaire filled from the nurses. there were certain hospitals that had the reservations about the research and wanted the researcher not to reveal their names even though the anonymity of the respondent (nurses) were maintained. the criteria to tap the nurses was that at least sic\x months must be the job experience since sexual harassment is not the one time job it is repeated and consistently pursued to satisfy the needs of the perpetrator. using the purposive sampling and the causal survey research design 370 nurses were chosen to get the questionnaires filled. out of which 350 useable questionnaires were used to conduct research data analysis. 3.1 despotic leadership de hoogh and den hartog (2008) devised a a six-item scale. the target sample respondents were asked the questions like “my leader acts as a tyrant, imperious (dictator) and despotic” and “he expects from those who report to him the unquestioning obedience” 3.2 organizational cynicism brandes, dharwadkar, and dean (1999) as cited in kim, bateman, gilbreath, & andersson, 2009) measured organizational cynicism using the 5 items .an example item for this scale is “i believe top management says one thing and does another”. 3.3 sexual harassment fitzgerald et al. (1988) developed the sexual experiences questionnaire (seq), a self-report inventory representing the first attempt to assess the prevalence of sexual harassment in a manner that met traditional psychometric standards. 3.4 emotional exhaustion the “maslach burnout inventory general survey” developed by maslach and jackson (1981) measures emotional exhaustion. it comprises of five items scale like to measure the emotional exhaustion of employees (e.g. i feel emotionally drained from my work). 3.5 control variables this study is meant to inquire about the relationship between sexual harassment and emotional exhaustion, despotic leadership and emotional exhaustion with the moderating role of organizational cynicism. demographic variables are controlled in this study as the extraneous variable. where age is considered as the continuous variable and gender is considered as the categorical variable. this study is meant to investigate the association between workplace bullying, emotional exhaustion, employee engagement and employee performance. the demographic variables are not primarily a focus of study in this study. therefore, to rule out any impact of these demographic variables they are controlled. in demographic parameters the age is considered as a continuous variable, gender is supposed to be a categorical variable in research and employee job tenure for the years of services is categorized as continuous variable. 4. data analysis before going towards testation of hypothesized relationships, preliminary data analysis is performed. for this purpose, bm spss amos version 22 was used for data screening through missing value analysis, univariate outliers, normality analysis, descriptive statistics, reliability analysis, and correlation. the results of these tests provided the evidence of distinctiveness of the data sheet and as well as variables to run subsequent analysis. data was analyzed to show the impact of despotic relationship and sexual harassment on emotional exhaustion in the presence of moderation effect of organizational cynicism. 4.1 confirmatory factor analysis structural equation modeling (sem) technique was used to test the hypotheses by employing confirmatory factor analysis (cfa) of each variable by using amos version 22 (tabachnick & fidell, 1996; tabachnick & fidell, 2007). an acceptable measurement model is developed to define the observed variables in terms of latent variables i.e. exogenous and endogenous. here, a best fit measurement model is modified to represent the hypothesized theoretical framework by correlating each latent variable with every other latent variable freely. according to brown’s (2006), a criterion that is majorly used for the identification of the model fit is through review of economics and development studies vol. 5, no 2, june 2019 275 different model fit indices (harrington, 2009). the results of cfa four factor model indicated that absolute indices fit better with the data comprises root mean residual (rmr) = 0.90 ,chi-square minimum difference (cmin) = 3.14 , comparative fit indices (cfi) = 0.96 , ifi (incremental fit index) = 0.05, tfi (tucker lewis index) = 0.95, and root mean square error of approximation (rmsea) = 0.05. the results claim adequate fit in the form of values within acceptable range (kline, 2005; hu & bentler, 1999; harrington, 2009). table 1: fit indices of cfa sr. goodness of fit indices abbreviation acceptance criteria initial model re-specified model 1 relative-chi square cmin/df poor fit: > 5 3.67 rf 3.14 reasonable fit 3-5 best fit: 1-3 2 comparativefit index (cfi) poor fit: < 0.90 0.92 rf 0.96 reasonable fit ≥ 0.90 best fit: ≥ 0.95 3 root mean square error of approximatio n rmsea poor fit: > 0.1 0.08 rf 0.05 reasonable fit .06 .08 best fit: < 0.05 4 tucker lewis index tfi poor fit < 0.90 0.81 pf 0.95 reasonable fit > 0.90 best fit: > 0.95 5 incremental fit index (ifi) poor fit < 0.90 0.72 pf 0.90 reasonable fit > 0.90 best fit: > 0.95 6 root mean residual (rmr) poor fit > 0.05 0.07 pf 0.05 best fit < 0.05 initially, some values of cfa measurement model did not demonstrate adequate model fit due to having 3 items of sexual harassment whose factor loadings were greater than 0.40, but after removing those items i.e. sh11, sh12 and sh18, the final model of cfa yielded an adequate model fit as shown in figure i. moreover, poor model fit with latent variable indicates the presence of common method biasness (bagozzi and yi, 1990; podsakoff et al., 2003), but results certify the absence of common method variance in our data set. to make it ensure, significance of the structural parameters is scanned with and without the common latent methods variance factor to see whether adding it would significantly improve the model fit. findings declared that the influence of common method variance did not appear to be a major concern in this study. similarly, means, standard deviations and correlations of variables is presented in table ii. the alpha coefficients for each variable are also shown in table iii such as dl= 0.75, ee= 0.76, sh= 0.88, oc= 0.81. in addition, table iii also presents the threshold values of average variance extracted and squared correlation. the results claimed that despotic leadership (dl) is positively and significantly correlated with emotional exhaustion (ee) as (r = .614, p < 0.01). similarly, sexual harassment (sh) is also positively and significantly related with emotional exhaustion (ee) as (r = .504, p < 0.01). figure 2: measurement model review of economics and development studies vol. 5, no 2, june 2019 276 these results are consistent with our expectations based on the hypotheses outlined earlier. hence, results claimed the acceptance of hypothesis 1 and 2. table 2: mean, standard deviation and correlation **correlation is significant at the 0.01 level (2-tailed), **correlation is significant at the 0.01 level (2-tailed) table 3: reliability, average variance extracted and squared correlation variables squared correlation reliability ave dl ee sh oc dl 0.75 0.54 1 ee 0.76 0.61 0.369 1 sh 0.88 0.60 0.461 0.349 1 oc 0.81 0.58 0.313 0.358 0.414 1 4.2 moderation analysis table iv contains the results of three step moderated regression analyses. in step 1, independent variable and dependent variables were controlled. in step step 2, independent and moderated variables were controlled and in step 3 interaction term of independent and moderated variable was added. table 4: moderation analysis of organizational cynicism dv = emotional exhaustion r2 adjusted r2 f value standardized β coefficient model 1: effects of despotic leadership (dl) and organizational cynicism (oc) step 1 dl 0.377 0.376 223.650 0.616*** step 2 dl oc 0.460 0.457 156.785 0.454** 0.329*** step 3 dl oc int.dl_oc 0.461 0.456 104.478 0.421*** 0.426** 0.244** model 2: effects of sexual harassment (sh) and organizational cynicism (oc) step 1 sh 0.354 0.351 125.319 0.504*** step 2 sh oc 0.391 0.388 118.280 0.388*** 0.414*** step 3 sh oc int.sh_oc 0.463 0.462 78.683 0.362** 0.471** 0.182** using moderated regression, it is found in model 1 that despotic leadership significantly and positively interacts with organizational cynicism to predict emotional exhaustion (β = .244, p<.01). similarly, the simple slopes analyses also demonstrates that the effect of despotic leadership on organizational cynicism (β = .329, p<.01) and emotional exhaustion (β = .616, p<.01) was significant (table iv). indeed, the plotted interaction (figure ii) shows that at high levels of despotic leadership, employees who participated in high levels of organizational cynicism experienced high levels of emotional exhaustion compared to employees who participated in low organizational cynicism. review of economics and development studies vol. 5, no 2, june 2019 277 figure 3: interactive effect of despotic leadership and organizational cynicism on emotional exhaustion using moderated regression, it is found in model 2 that sexual harassment significantly and positively interacts with organizational cynicism to predict emotional exhaustion (β = .244, p<.01). similarly, the simple slopes analyses also demonstrates that the effect of sexual harassment on organizational cynicism (β = .421, p<.01) and emotional exhaustion (β = .426, p<.01) was significant (table iv). indeed, the plotted interaction (figure iii) shows that at high levels of sexual harassment, employees who participated in high levels of organizational cynicism experienced high levels of emotional exhaustion compared to employees who participated in low organizational cynicism. figure 4: interactive effect of sexual harassment and organizational cynicism on emotional exhaustion 5. conclusion the workplace harassment laws for women are even though introduced in pakistan but their implementation is not up to the mark. the protection against harassment of women at workplace act, 2010 section 2(h) implies to request for sexual favors, any unwelcome sexual advance other written or verbal communication, sexual demeaning and physical conduct of sexual nature which cause interference with job performance creating intimidation, offensive and hostile work climate. this law addresses to that complainant who refuses to comply to such a request and for whom this act is made a condition for employment. the section 3 of harassment act 2010 emphasize that every organization should constitute an inquiry committee to inquire about the complaints made against workplace harassment. total three members shall constitute the committee where third member should be a woman. if the person is found guilty of workplace harassment the following penalty under section 4 of protection against harassment act 2010 with certain minor punishment as stopping promotion temporarily or to major one as removal from the job. this act may be called the criminal law (amendment) act, 2009. there is a need to amend the pakistan penal code, 1860 and the code of criminal procedure, 1898 in which section 499 is about defamation of modest females ,503 is criminal intimidation to females, 509 is about insulting modesty or causing sexual harassment. the accused person shall be punished with imprisonment that may extend to three years or fine up to five hundred thousand rupees or with both .this amendment will not only make the public and work environment safer for women but it will open up the path for more women to pursue livelihood with dignity. it will reduce poverty as more and more women will get the courage to enter the job market. review of economics and development studies vol. 5, no 2, june 2019 278 minister for women development punjab, hameeda waheeduddin explains that the most important aspect under the new bill is the implementation of the rescue and protection system. “everything will be under one roof,” waheeduddin explains. as an initial step, the punjab government is establishing violence against women centers (vawc) across the province. these will be one-stop operations where women will be taken through the process of filing a first investigation report (fir), provided medical help and if required, shelter. for the kids and adults the voice for sexual oppression is raised nowadays and awareness is disseminated to call 1099 for protection against sexual victimization. the main problem is that females are still working with the mindset “never raise the voice against harassment that is going to disrupt their job and spoil their working environment. since jobs are rare in pakistan females feel especially in health sector and academia that loosing job is the ultimate source of poverty. the harassment in job is considered to be the part and parcel of job therefore tolerance is considered to be duty for females. this act requires all public and private organizations to adopt an internal code of conduct and a complain/appeals mechanism aimed at establishing a safe working environment, free of intimidation and abuse, for all working women. managerial influence in the form of despotic leadership is a curse for span of control. therefore, organizations must introduce some workshops and religious lectures to train the mangers psychologically and religiously. emotional exhaustion is a trauma after the tolerance of abusive supervision and sexual harassment. it needs psycho-social counseling or medical treatment and for additional medical leave. 6. managerial implications sexual harassment is a phenomenon in pakistan, which is in embryonic stage to be dealt with. the number of the females is victimized and they feel that since it is a part of their jobs therefore it should be tolerated. this result in emotional exhaustion and the positive energies are curbed down. the fruitful outcomes from the females are impossible to be achieved if this chronic disease in the organizations is not diagnosed and treated. the managers in the organizations should believe in integrative justice. the culprits must be identified and should be recognized as symbol of shame in working environment. the subjective norms must be properly adhered in organizations as well. the silent check in organizations like surveillance cameras must be introduced in the organizations. as per law the constitution of women harassment committees should be made mandatory. the toxins in the organization should be removed by whistle blowing as well when the management ensures the psychological safety of whistle blower. 7. limitations this research has certain limitations. the opinion is taken based on self reported responses which may create biasness. the further research may be based on responses from both sides managers and span of control. this study is a contribution to sexual harassment and despotic leadership literature which may offer new avenues for future research. this research may be replicated according to the circumstances in various geographical contexts. further variables as the dependent variables can be 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(2009), “abusive supervision, intentions to quit, and employees’ workplace deviance: a power/dependence analysis”, organizational behavior and human decision processes, vol. 109 no. 2, pp. 156-167. review of economics and development studies vol. 4, no 2, december2018 227 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads knowledge management, emotional capability, teamwork, and innovativeness: mediating role of organizational learning 1 syeda rumaisa khalil, 2 khawaja khalid mehmood 1 institute of management sciences, bahauddin zakariya university, multan, pakistan. rumaisa.kazmi@yahoo.com 2 assistant professor, institute of management sciences, bahauddin zakariya university, multan, pakistan. khawjakhalid@bzu.edu.pk article details abstract history revised format: november 2018 available online: december 2018 innovation has become critical success factor in many industries today and numerous scholars approve that it could be achieved through learning in organizations. despite the availability of numerous researches on innovativeness and organizational learning in international context, there are limited studies that analyze the effect of learning on innovativeness in context of pakistan. specifically, the research is limited regarding mediating role of organizational learning between knowledge management, teamwork, emotional capability, and innovativeness; and the main purpose of this study was to fill this research gap. this study draws its framework mainly from resource based view, knowledge based view, and dynamic capability perspective. for this research, data was obtained through survey from managers in pakistani smes operating in multiple sectors. the study performed its analyses using smartpls 3.0 based on 149 responses. the study concludes that organizational learning significantly mediates the relationship between knowledge management, teamwork, emotional capability, and innovativeness. the study provides valuable information for pakistani smes about how they could enhance their innovative capability through learning capability. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords knowledge management, teamwork, emotional capability, organizational learning, innovativeness, pakistani sme’s jel classification: m10, d83, o31 corresponding author’s email address: khawjakhalid@bzu.edu.pk recommended citation:khalil, s. r. and mehmood, k. k. (2018). knowledge management, emotional capability, teamwork, and innovativeness: mediating role of organizational learning. review of economics and development studies, 4 (2), 227-235 doi: 10.26710/reads.v4i2.407 1. introduction it is argued that in business, innovativeness plays a crucial role (damanpour, 1991). it has been an important and obvious requirement to be competitive and successful as it enables an organization to be able to adjust according to market changes (hult& ferrell, 1997). theoretically, innovation diffusion theory considers innovation as critical component of any business (aragón-correa, garcía-morales, &cordón-pozo, 2007). on the other hand, organizational learning theory describes how an organization could enhance its innovativeness and performance. zander and kogut (1995) argue that organizational learning is based on resources (tangible and intangible) which are significant for an organization to be innovative and competitive. scholars have suggested that number of factors could lead to innovativeness; however, some are more important, like organizational learning (garciamorales, llorens-montes, &verdú-jover, 2006; zander &kogut, 1995). further, it is argued that out of several http://www.publishing.globalcsrc.org/reads http://www.sciencedirect.com/science/article/pii/s0019850105001495#! http://www.sciencedirect.com/science/article/pii/s0019850105001495#! review of economics and development studies vol. 4, no 2, december 2018 228 variables that create innovativeness through means of organizational learning, some of the crucial ones are emotional capability (akgün, keskin, & byrne, 2009), knowledge management (garratt, 1990; su, huang, & hsieh, 2004), and teamwork (boyatzis, 2009; koman& wolff, 2008). by the analyses of existing literature and past studies’ results, it is figured out that to increase the level of organizational learning, an organization, at different levels, need to develop a system based on knowledge management. without proper knowledge management, it’s actually hard to attain a standardized and acceptable level of organizational learning among employees (garratt, 1990; su et al., 2004). moreover, some studies show that knowledge management is related to innovativeness in a positive manner and it casts a great effect on innovativeness (garcia-morales et al., 2006; nonaka& takeuchi, 1995; shani, sena, & olin, 2003). therefore, knowledge based view provides a theory for this study. as regards emotional capability, it is believed that it also makes organizational learning fast and effective. enhanced emotional capability makes employees to learn with full devotion and understanding and to be more productive (akgün et al., 2009). furthermore, many researchers argued that if an employee is satisfied with his/her work, then there are higher chances that innovativeness would be higher as more quality ideas could be produced (akgün et al., 2009; huy, 2005).along with that team based skills are also very important for an organization. it is believed that these skills enable organizations to enhance their learning and innovativeness (ayiro, 2010; boyatzis, 2009; koman& wolff, 2008). business environment today has become very competitive characterized by increased level of competition, advance technology and higher expectations by the customers and other stakeholders. hence, to catch up with the dynamic environment, it is important to choose and try effective ways to be innovative and attain superior performance for securing high position in the market. teamwork is such an approach which contemporary businesses adopt today. it is considered as one of the ways to create innovative ideas and to try out new things (bikfalvi, jäger, & lay, 2014). however, some suggest that in spite of number of researches, there are certain questions to be answered regarding teams and teamwork (benders &hootegem, 1999) and more and better studies could be conducted regarding teamwork. although there is a large volume of research on the above variables but one of the gap existing in the literature is about the role of organizational learning as mediator between knowledge management, teamwork, emotional capability, and innovativeness. further, there has been comparatively less research in sme context in pakistan for these variables which this study wanted to accomplish. this study is accomplished for smes in pakistan due to their utmost importance for the country. pakistan’s economy largely depends on sme sector. around 3.2 million companies operate in the country, which engage 78% non-agriculture labor, and contribute 25% to manufacturing goods exports (khan &khalique, 2014). notably, pakistani smes do not stand in par with large corporations with respect to innovation. but innovation could be considered to be very important factor behind smes success (ismail, omar, soehod, senin, & akhtar, 2013). similarly, researchers have highlighted the importance of knowledge management, teamwork, learning, and emotional capability also for smes (fu, chang, & wu, 2001; king, marks, & mccoy, 2002; piperopoulos, 2010). through its framework, this study therefore, puts forwards useful set of suggestions for smes regarding these variables. 2. literature review 2.1 mediating role of organization learning between knowledge management and innovativeness making the argument from knowledge based view, it could be suggested that in knowledge based economies today, knowledge management is important for smes to keep them well informed and address innovation. scholars have also argued that level of innovativeness can be enhanced by the proper knowledge management (chung-jen, jingwen, & yung-chang, 2010; garcia-morales et al., 2006). knowledge need identification, its acquirement, and interpreting it to clear up the strategic purposes can help gear up innovativeness (fugate, stank, &mentzer, 2009). in smes, effective knowledge management makes them capable to hold and share knowledge and thus innovate more (argote, mcevily, & reagans, 2003). moreover, knowledge management is also related to organizational learning. gunsel, siachou, and acar (2011) discussed knowledge management as a cyclic model that enhanced learning by applying new knowledge. in order to be innovative, smes should always be in a state of full awareness related to market competition and its emerging trends. the knowledge acquired about the customers, competitors and other stakeholders would facilitate learning in smes. organizational learning capability always plays a constructive role. cefis and marsili (2005) discuss that it is very important to enhance organizational learning because it can help every organization to compete more efficiently by introducing new product and services. so it can be said that learning capability is positively related to innovativeness (lemon & sahota, 2004). organizational learning is all about acquisition of required knowledge and https://www.researchgate.net/profile/ali_akguen https://www.researchgate.net/profile/ali_akguen https://www.researchgate.net/profile/ali_akguen review of economics and development studies vol. 4, no 2, december2018 229 then utilization of that knowledge to produce novel products and services. organizational learning enables organizations to compete through the introduction of something new. it involves the generation of unique ideas and then implementing those ideas effectively (garcía, ruiz, &llorens, 2007; salim&sulaiman, 2011). the discussion leads to following hypothesis. h1: organizational learning mediates the relationship between knowledge management and innovativeness. 2.2 mediating role of organization learning between emotional capability and innovativeness emotional capability is considered as an important competency of smes. emotional capability could comprise of certain dimensions like dynamics of playfulness, dynamics of encouragement, dynamics of reconciliation, dynamics of identification, dynamics of display freedom, and dynamics of experiencing. (huy, 1999). kocoglu, imamoglu, akgun, ince, &keskin (2015) argue that for the increased level of innovativeness, it is important to pay attention to the emotional aspects of an organization, which can help to get long lasting positive results. personal efficiency and potential can be increased at the organizational level by adopting certain measures and those measures include the management of emotions and taking care of employee’s identity. all this helps to enhance organizational learning capability by providing identity and shared vision (huy, 1999). overall, to support learning and innovation, it is important for upper management to do emotions management using shared vision, managerial commitment and high management support (akgün et al., 2009). the discussion leads to following hypothesis. h2: organizational learning mediates the relationship between emotional capability and innovativeness. 2.3 mediating role of organization learning between teamwork and innovativeness the business world is getting more complicated and the level of competition is increasing. to cope up with all the environmental changes and to compete in an efficient manner, a collective effort from employees is required. thus, teamwork could positively contribute in this matter (kozlowski & bell, 2003; marks, mathieu, &zaccaro, 2001). learning could be enhanced by working in the form of teams (offenbeek, 2001; yost & tucker, 2000) and team based capabilities could do wonders to attain high level of innovativeness along with learning (ayiro, 2010; boyatzis, 2009; koman& wolff, 2008). teamwork acts as a link between employees’ competencies and organizational learning (swieringa&wierdsma, 1992) as it enables smooth flow of knowledge between employees (marquardt, 1996). previous studies indicate that teamwork and innovativeness could be connected through organizational learning. learning individually may not be as efficient as learning in the form of groups in which knowledge is shared with more efficiency and ease (jordan, ashkanasy, hartel, & hooper, 2002). collective learning process could be more effective because collaboration, cohesion and cooperation is enhanced through teamwork (dyerson& mueller, 1999). the discussion leads to following hypothesis. h3: organizational learning mediates the relationship between teamwork and innovativeness. 3. methodology this study used survey method for data collection. almost 300 questionnaires were sent to senior executives and managers of smes in different parts of southern punjab, pakistan wherein most of the enterprises were located in multan. some questionnaires were sent through mail and others were delivered personally. the sampling process followeddillman (2000). unit of analysis was sme. the questionnaires sent were followed by telephone calls. this effort helped to get 185 responses. out of these, 149 responses were valid, which meant the response rate was 61% which is normally considered satisfactory for this kind of research(nutley, walter, & davies, 2007). the respondent companies were mainly telecom franchises (69), chemical related companies (22), and educational institutes (20). 20 belonged to hotels & restaurants and 18 questionnaires were responded by ginning, and travelling & tourism firms. questionnaire was constructed using past studies. eight items were adapted from study of rašula, vukšić, and štemberger (2008) to measure knowledge management. the study of akgün, keskin, byrne, and aren (2007) provided the items for organizational learning. items for emotional capability were taken from study of akgün et al. (2009). teamwork was measured by the items adapted from the study of montes, moreno, and morales (2005). the study of wang and ahmed (2004) helped to assess the innovativeness. https://www.researchgate.net/profile/ali_akguen https://www.researchgate.net/profile/ali_akguen https://www.researchgate.net/profile/ali_akguen review of economics and development studies vol. 4, no 2, december 2018 230 4. findings and conclusions 4.1 validity and reliability of the instrument this research involved mediator variable and therefore, mediator analysis was conducted using smartpls 3.0 software. measurement model was constructed to verify validity and reliability and structural model was constructed to test hypotheses, initially through pls algorithm and afterwards through bootstrapping (1000 samples) (preacher & hayes, 2008). for innovativeness, organizational learning, and emotional capability, a 2nd order formative model was used as these constructs contained various dimensions. table 1 presents information (for reflective models for knowledge management and teamwork) about items’ loadings and indicates that the loadings are more than 0.7 that indicate convergent validity (henseler, ringle, &sarstedt, 2012). table 1 also shows other statistics for reliability and validity. it presents cronbach’s alpha, which is used to gauge the internal consistency of data. the reported cronbach’s alpha for both constructs is greater than 0.7 which is satisfactory. ave values are greater than 0.5 that show divergent validity. composite reliability (cr) is greater than 0.7 which is also satisfactory chin (1998). all vif values were also less than 0.5. the model fit value srmr is 0.056, (<0.08) (hu &bentler, 1998) which is also satisfactory. table 1: item loadings 4.2. mediating effect of organizational leaning between knowledge management and innovativeness the structural model is provided in figure 1 and the results of hypotheses’ tests are provided in table 2. figure 1: structural model table 2 shows that knowledge management has significant indirect impact on innovativeness with p–value = 0.026, and t-value = 2.222, while the direct impact is also significant (p-value: 0.039). that’s why mediation effect of organizational learning is partial. all the variables are positively related i.e. the coefficients of impact of knowledge variables items loadings other teamwork tw13 0.804 cronbach’s alpha: 0.872, composite reliability: 0.907, ave: 0.662 tw14 0.808 tw15 0.843 tw16 0.846 tw17 0.766 knowledge management km1 0.900 cronbach’s alpha: 0.904, composite reliability: 0.927, ave: 0.679 km2 0.882 km3 0.848 km4 0.793 km5 0.774 km6 0.735 review of economics and development studies vol. 4, no 2, december2018 231 management on innovativeness (0.193), coefficient of impact of knowledge management on organizational learning (0.2), as well as coefficient of impact of organizational learning on innovativeness are (0.436) all are positive. it concludes that increase in knowledge management leads to increase in organizational learning and innovativeness. the bias corrected confidence intervals also show satisfactory statistics as zero does not fall between the two intervals. h1 is therefore accepted. table 2.results of hypotheses tests relationships direct effect indirect effect confidence interval (bias corrected) path coefficient pvalue tvalue path coefficient pvalue tvalue 2.5% 97.5% organizational learning → innovativeness 0.436 0.000 4.292 0.221 0.606 knowledge management → innovativeness 0.193 0.039 2.065 0.088 0.026 2.222 0.080 0.485 knowledge management → organizational learning 0.200 0.013 2.477 0.038 0.352 teamwork → innovativeness 0.061 0.427 0.795 0.120 0.003 2.943 0.001 0.378 teamwork → organizational learning 0.272 0.000 4.315 0.140 0.391 emotional capability → innovativeness 0.162 0.054 1.929 0.199 0.000 3.683 0.234 0.501 emotional capability → organizational learning 0.453 0.000 8.689 0.356 0.559 4.3 mediating effect of organizational leaning between emotional capability and innovativeness table 2 shows that emotional capability also has significant indirect impact on innovativeness with p–value = 0.000, t-value: 3.683, while the direct impact is not significant at least at 95% level of significance (p-value: 0.054). this concludes that organizational learning is a mediating factor between emotional capability and innovativeness (h2 is supported). all the concerned coefficients are also positive that suggest that as emotional capability increases, it leads to increase in organizational learning and innovativeness. confidence intervals also show satisfactory statistics with no zero falling between them. 4.4 mediating effect of organizational leaning between teamwork and innovativeness table 2 shows that teamwork has an indirect impact on innovativeness with the p-value of 0.003 (t-value: 2.943) and the direct effect is insignificant (p-value: 0.427). this concludes that organizational learning is full mediator between teamwork and innovativeness (h3 is supported). all the concerned coefficients are also positive suggesting that increase in teamwork increases organizational learning and innovativeness. confidence intervals also show satisfactory statistics with no zero falling between them. 5. discussion this research reveals the important and significant part that knowledge management, team work, and emotional capability play for improving organizational learning, and then how it enables smes to better address innovation. all the results of the study are supported by literature and previous research. firstly, the relationships revealed in this research between knowledge management, organizational learning, and innovativeness are supported by number of past scholars such as penrose (1959), hall (1993), and darroch (2005). hall (1993) argued that knowledge management was important factor for bringing innovation as it directly affected smes’ capability to do that. the process of decision making is affected by knowledge management in smes. the availability of knowledge puts smes in a right position to take right decisions on the basis of business related information and they should pay attention to knowledge management if they want to develop innovativeness (penrose, 1959). similarly, when smes focus on knowledge management, they attain highest level of organizational learning (gunsel et al., 2011). in smes, the effect of knowledge management and organizational learning is strong and it enables better sme growth (king et al., 2002). positive effect of organizational learning on innovativeness is also supported by large volume of research (darroch& mcnaughton, 2002; garcía-morales et al., 2006; shani et al., 2003). review of economics and development studies vol. 4, no 2, december 2018 232 secondly, every organization needs to manage emotional capability for being innovative as employees’ emotions are involved in their work as equally as their hands and minds. scholars argued that emotional capability was an important determinant of innovativeness in organizations (akgün et al., 2009; michie&gooty, 2005).huy (1999) argued that for smes, emotional capability was important to manage for improving their innovativeness and making fast progress. the importance of emotional capability makes it resonate across various research fields including organizational behavior (elfenbein, 2007), strategic management (huy, 1999, 2011), and innovation (akgün et al., 2009). the social constructionism theory of emotions (fineman, 1993), social psychology theory of creativity (amabile, conti, coon, lazenby, & herron, 1996), and the work motivation theories (locke, 1969; vroom, 1964) suggested that employees’ emotional capability affected their work attitudes, hence, affecting their performance, which eventually determined sme innovativeness. similarly, scholars argued that employees could perform better and learn effectively when organizations understand employees’ emotions and manage them through different measures (fineman 1993, rafaeli, &worline, 2001). finally, it is argued that for being innovative, organizations need to use team system or an integrated system instead of relying on old ways of planning and old techniques (olson et al., 2001; peterson et al., 1995). teamwork significantly affects innovativeness and that is proved correct for pakistani smes too through this study. teamwork also plays an important role in the advancement of organizational learning (marquardt, 1996; swieringa&wierdsma, 1992) because it upgrades the sharing of information and knowledge between members of a team or between different teams. this provides support to dynamic capability perspective that act as a base for the effect of teamwork on organizational learning and innovativeness. dcp states that integration of competencies is very important and every organization should integrate its competencies for better management (teece, pisano, &shuen, 1997). this research provides important guidelines for practitioners. it suggests management of smes in pakistan to focus on knowledge management processes for promoting learning and addressing innovation. smes must focus on identifying important and relevant knowledge and information from inside as well as outside the organization for being well informed. this would enhance their learning and ultimately innovativeness. they must also understand and manage emotional part of their labour and design emotion management programs and strategy for improving emotional capability among employees. further, for smes being small size organizations, it could be easier to practice teamwork compared to large enterprises; and they must organize their workplace around philosophy of teamwork for better learning. teamwork would provide employees opportunities to share their views and ideas, coordinate better, solve problems easily, share more, learn together, and innovate collectively. these measures could improve sme innovativeness which could be one of the leading factors behind their success. 6. limitations and future research there are number of limitations of this research. this study was conducted in pakistan only, so the main limitation is the limited generalizability of findings across other countries. secondly, the findings could not be easy generalized over large scale enterprises; and one must be cautious in applying the findings to sme types (or sectors) which were not included in this research. sole reliance on questionnaires instead of interviews, and study’s cross sectional design could also be a limitation. however, due to broad nature of the variables used in this study such as learning and innovativeness, there is a further room to look for more antecedents as may be pertinent to other sectors and countries. longitudinal research design could also be more revealing. references akgün, a.e., keskin, h., & byrne, j. 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(1995). knowledge and the speed of the transfer and imitation of organizational capabilities: an empirical test. organization sciences, 6(1), 76-92. https://doi.org/10.1287/orsc.6.1.76 review of economics and development studies vol. 4, no 2, december2018 199 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads trade reforms and productivity growth in manufacturing industries of pakistan 1 ansa nazli, 2 rehana siddiqui, 3 imran hanif 1 phd scholar, school of economic sciences, federal urdu university of arts science & technology, islamabad, pakistan. azka06@gmail.com 2 head, department of environmental economics,pakistan institute of development economics, islamabad, pakistan. rehana@pide.org.pk 3 assistant professor, head of economics department, nur international university, model town lahore, pakistan. ihanif@gsu.edu article details abstract history revised format: november 2018 available online: december 2018 trade has significant influence on total factor productivity (tfp) growth. there is lack of research at level in pakistan this paper investigates to what extent trade liberalization affects productivity growth employing endogenous growth model. using dea-malmquist index to panel data in the first step we examine tfp growth, and decompose it into technological change and efficiency change. we found technological change is the key source of improvement in productivity growth. in the second step, we employ generalized method of moments (gmm) to assess the effect of trade liberalization on productivity growth and its components. we found trade liberalization, and other variables have substantial effect on productivity growth through the channels of learning by doing, knowledge spillovers, technology diffusion, and transformation. the results also support the hypothesis that human capital plays a crucial role in the creation, promotion, and absorption of technology. the study emphasis on the need to invest in human capital with the latest and scientific education to nurture human skills. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords dea, efficiency, trade liberalization, malmquist, manufacturing, tfp, technical change, gmm. jel classification: b17, c30, d60, l60 corresponding author’s email address: ihanif@gsu.edu recommended citation:nazli, a., siddiqui, r. and hanif, i. (2018). trade reforms and productivity growth in manufacturing industries of pakistan. review of economics and development studies, 4 (2), 199-207 doi: 10.26710/reads.v4i2.404 1. introduction the role of international trade as an engine of growth has been at the center of trade policy debate over the past few decades. trade is considered to enhance productivity growth through knowledge spillovers, learning by doing, and diffusion of technology. it offers better-quality products that boost access to international markets (kemal et al., 2002) . trade liberalization leads to higher competition, which is in the long run met through higher tfp growth (gtfp). tfp growth the best overall measure of competitiveness reflects technological advancement.tfp indicates the enhancement in the quality of inputs with human resource development, and infrastructure. manufacturing sector plays a substantial role to meet domestic demand and to earn foreign exchange. despite being http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 200 a key sector of pakistan it is confronted by slow growth, poor infrastructure, unskilled labor, lack of up-to-date technology, and inconsistent policy. nationalization of heavy industries, increased oil prices, and political uncertainty in the 1970s, led to high cost of production and loss of private investor’s confidence which still prevails in the economy. the world trade organization (2005) gave momentum to the process of trade liberalization, sustained by country’s export and import flows and the reduction in tariff. pakistan also has liberalized its external sector since the 1990s under the structural / trade reforms. despite these reforms, industries are still inefficient and, have poor infrastructure. manufacturing industries are lacking behind in adaptation of advanced technology (mahmood et al., 2007). however, the benefits from trade liberalization are not circulated uniformly. trade liberalization is a key constituent of productivity growth through knowledge accumulation and transfer of technology (sachs et al., 1995; frankel &romer, 1999; goldar&kumari, 2003; jajri; 2007). trade leads to more competent allocation of resources and stimulates efficiency (edward, 1998; dollar and kraay, 2003). whereas, the other group of studies declare that credit constraints hinder the adoption of foreign technology in emerging economies and technology gains may not be captivated by firms (young, 1991); pack, 1994; topalova&khandelwal, 2011). these diverse views about trade openness and growth have important policy implications and are source of motivation to attempt the current study. the global market predictions for pakistan industries have significantly induced private investment through technology upgradation. adoption of advanced technology improves not only quality of products but also efficiency of production process. however, the current technology status is poor in pakistan; therefore, the efficiency of production process has become an important element for the development of these industries. the frontier method (parametric and non-parametric) is important because it identifies the sources of tfp growth. the data envelopment analysis (dea) by coelli et al. (1996) is justified because it can handle well with limited number of observations without requiring functional form. a number of studies show favorable / unfavorable effect of trade reforms on productivity growth at firm level (see, harrison, 1994; edwards, 1998; jajri, 2007; mahmood&talat, 2008). yet such studies are seriously lacking in case of pakistan. most of research has utilized aggregate data to investigate the effect of trade reforms on productivity growth (which shows average of all subsectors) whereas each sector reacts distinctly (kemal et al. 2002; yasmin and jehan 2006; din et al. 2003; mahmood& siddiqui, 2000; dutta and ahmed 2006). so far, there exists little research on the association of trade reforms and productivity growth at firm level. sheikh and ahmed (2011) examined effect of trade reforms on efficiency of 11 agro-based industries for the period 1970-2006. analyzing efficiency with dea and sfa he also explores the effects of reforms on efficiency. results show favorable effects of trade reforms on productivity growth. a similar result has been derived by ahmed et al. (2015) investigating trade and productivity linkage using variant of cobb-douglas production function and ols (pre and post liberalization) at firm level. they found positive influence of trade liberalization using excise duty on productivity growth for the period 1980-2006. using dea-bootstrapped model and truncated regression mujadad and ahmad (2016) have estimated technical efficiency of manufacturing sub sectors and its determinants. the study found adverse bearings of trade reforms on technical efficiency of manufacturing sectors over the period 1980-2006. the role of human capital is not investigated in determining the efficiency and productivity in these studies. whereas high productive and exporting firms are managed by highly educated managers and employ educated labor (grossman and helpman, 1991). some of current studies employing panel data give estimates for the entire data period. more research is needed at firm level, to arrive at better practical solutions for policy makers. considering the deficiencies of previous studies, the current study aims to address these gaps in the literature carried in pakistan.it provides a more comprehensive analysis of productivity and efficiency, employing dea malmquist index to examine the variations in tfp growth between eighteen industrial groups over time (malmquist, 1953). the study contributes to investigate trade liberalization impact on efficiency and productivity between the periods of 1980-2006, using better measures of inputs and output. this renewed perception on trade and growth will be helpful in framing appropriate policies. assessment of trade liberalization impact on productivity growth is worthwhile to detect the mechanisms through which trade reforms affect growth. the study is ordered as follows: section 2 describes data and methodology, section 3 gives some empirical results. finally, conclusions and policy suggestion are given in section 4. 2. data and methodology to appraise the association between trade liberalization and productivity growth we use balanced panel data (time series) of 3digit level according to pakistan standard industrial classification (psic) covering a period of 1980review of economics and development studies vol. 4, no 2, december2018 201 2006.the data on value added, labor, capital stock, investment, and worker’s wages have been collected from different issues of census of manufacturing industries (cmi) by federal bureau of statistics (fbs), government of pakistan. cmi was conducted on the regular basis until 1990-91 but after that, it is being issued after every five years. the serious restraint of this study is the use of data up to 2005-06, as cmi 2010-11 is still in process. due to this reason, the present study uses data with a gap of five years for each variable. cmi data for the year 2000-01 is different in classification from the data of 2005-06. therefore, for comparability, some of industries are merged into one industry group based on major activities. 2.1 methodology 2.1.1 malmquist tfp index data envelopment analysis (dea) by charnes et al, (1978) measures performance of dmu/firms using data on input and output of group of industries.given the limitation of reliable data on prices and quantities, malmquist index at constant returns to scale technology is utilized.in analyzing the growth of certain set of industries, malmquist index is a better way of deciding how much of this growth is caused by efficiency change / technological change. using the method established by fare et al. (1994) the output–oriented dea-malmquistto panel data is employed to focus on the expansion of output with given inputs, as firms aim to maximize profit (raheman et al., 2008). panel data captures the relevant connection amongst variables over time. tfp changes from one year to the next year as a result of change in technological change (techch) and, efficiency change (effch). we use deap software developed by coelli (1996), which has the added benefit of flouting technical efficiency into pure efficiency and scale efficiency. moreover, labor and capital as inputs and value-added as output are used. efficiency measures are calculated relative to the frontier that represents an efficient technology.technical efficiency of a firm can be the result of returns to scale or actual improvement in efficiency (banker et al. 1984). fare et al. (1994) also break technical efficiency in to pure efficiency and scale efficiency however; their technical change measure is built on crs technology. the malmquist index between period “t,” and the period “t+1” is given by, 2 1 111 11111 11 ),( ),( ),( ),( ),,,(                   ttt o ttt o ttt o ttt otttt o yxd yxd yxd yxd yxyxm (1) we can distinguish between efficiency change and technical change.   2 1 1111 11111 11 ,( ,( ),( ),( ),( ),( ),,,(           ttt o ttt o ttt o ttt o ttt o ttt otttt o yxd yxd yxd yxd yxd yxd yxyxm (2) mtfpi = efficiency change  technical change(3) mo is malmquist index; the term outside the brackets shows the change in technical efficiency (catching up). whereas the geometric mean of the two ratios inside the brackets measures the shift in technology. the catching up effect measures how much a firm is close to the frontier by capturing extent of diffusion of technology / improved utilization of existing resources. 2.1.2 estimating impact of trade liberalization on tfp growth using gmm following the previous studies of mahmood and talat (2008) and jajri (2007),we gauge the relative significance of the mechanisms: trade reforms (average tariff), human capital, and investment on productivity growth. we employ system gmm regression technique by arellano bover (1995) blundell and bond (1998). more specifically, we adopt the following models in the second stage: gtfpithcitinittait   techchithcitinittait (5) review of economics and development studies vol. 4, no 2, december 2018 202 effchithcitinittait (6) it is expected that the elasticity parameters, 0 ,1, 2,> 0 , 3 < 0. where, techch is technical change, effch is efficiency change, gtfp is growth in overall tfp and  ,   tariff, respectively. to handle the endogeneity in the explanatory variables of the dynamic growth model gmm is employed, by generating lagged values of the explanatory variables as internal instruments. gmm estimates are considered consistent as there is no second order correlation of the residual and have been applied in many empirical studies (das and paul, 2011). 3. results and discussion 3.1 results for total factor productivity growth table 1 reveals that on average, productivity improved during the period of twenty-five years. the progress in tfp growth as given by the malmquist productivity index at 3.2 percent. the comparison of the columns shows that growth in tfp is contributed mainly by technological invention (techch), which improved by 2.7 percent. the efficiency change (effch), stated in the third last column of the table shows a change of only 0.06 percent. mahmoodet al. (2007) found that manufacturing industries of pakistan have lack of efficiency. this result is also in conformity with mujaddad and ahmad (2016) who suggest some improvement in efficiency caused by learning behavior in manufacturing industries for the period 1995-2006. table 1: malmquist index of sectors means (1980-2006) no. name of industries tfp change tech change eff change pe change se change 1 food 1.051 1.033 1.016 1.000 1.016 2 tobacco 1.060 1.034 1.025 1.000 1.025 3 beverages 1.052 1.041 1.011 1.000 1.010 4 petroleum 0.977 1.020 0.956 0.959 0.988 5 drugs &medicine 1.010 1.015 0.994 1.020 0.957 6 electricals 1.035 1.029 1.005 1.354 0.742 7 fabricated metal 1.021 1.011 1.010 1.000 1.010 8 glass & products 1.053 1.036 1.024 1.010 1.014 9 industrial chemical 1.047 1.031 1.015 1.005 1.010 10 iron & steel 1.036 1.018 1.024 1.004 1.020 11 leather &footwear 1.038 1.023 1.015 1.005 1.010 12 machinery industry 1.011 1.029 0.981 0.995 0.896 13 other chemicals 1.042 1.036 1.006 1.000 1.006 14 wood, paper,publish 1.030 1.030 0.999 1.000 0.999 15 rubber 0.947 0.973 0.974 0.938 0.977 16 textile 1.063 1.049 1.014 1.010 1.004 17 transport goods 1.060 1.039 1.020 1.005 1.015 18 wearing apparel 1.058 1.039 1.018 1.010 1.008 mean 1.032 1.027 1.006 1.011 0.989 note. an index value greater than 1 indicates growth in productivity, and the value less than unity shows decline in tfp growth. scale value > 1 shows increasing returns to scale. the performance of each separate industry relative to the best practice in the sample is revealed in table 1. the results show u-shaped trend in most of the industries, which explains average productivity growth was higher in the 1980s. nevertheless, most of the industries are showing falling trend in the 1990s, which is due to macro-economic imbalances, recurrent changes of regimes and fluctuating policies. due to unfavorable external and internal environment the economy suffered by lack of private investment and high inflation which affected the growth of industrial sector. the industries improved in the decade of 2000-01 as the economy exhibited an average gdp growth of 7% (world bank report, 2002). favorable external environment, removal of sanctions imposed, and high review of economics and development studies vol. 4, no 2, december2018 203 growth in remittances led to improved growth in manufacturing industries. these conclusions are in accordance with the empirical studies of din et al. (2003) and zaidi (2005). industry-by-industry results show that textile group on average has the highest tfp growth at 6.3% per annum, during the period. tobacco (6.0%), transport goods (6.0%), wearing apparel (5.8%), glass & non-metallic mineral products (5.3%), and beverages (5.2%) follow the textile industry*bench mark industry here). on the other hand, petroleum and rubber industries show negative trend in tfp growth accounting 0.977% and 0.947% respectively. the overall technical change in all industries is found positive except in rubber industry (0.973%), which has poor technological adoption. textile (4.9%), beverages (4.1%), and transport (3.9%) industries display highest technology adoption. technical change have played major role in shifting the frontier outwards over the time. efficiency change shows the maximum output production by utilizing the existing inputs. table 1 in column 5 reports that on average tobacco, glass, non-metallic mineral products and steel & iron industries are highest performers in efficiency change. however, in the entire period, almost all industries performed poorly in terms of efficiency change. 3.2 empirical results: impact of trade liberalization on tfp growth using gmm to examine the linkage between trade liberalization and productivity growth, system gmm is employed. it helps to avoid dynamic panel bias by instrumenting endogenous explanatory variables, using their own lag-values to account for endogeneity. table 2 reports the findings of panel regression model;the substantial outcome of trade policy on productivity growth reflects that trade is a crucial factor of productivity growth. the result confirms the association of trade and growth in theoretical and empirical literature of growth (dollar and kraay, 2003; jajri 2007). the finding is also in confirmation with the literature in the perspective of pakistan (dutta and ahmed, 2000; kemal, et al. 2002; ahmed et al., 2015). table 2: panel gmm results of explanatory variables on gtfp (1980-2005) β hc in ta r2 p-j gtfp 0.75 (2.26) 1.7 (4.3)*** 0.03 (2.3)* 1.1 (2.1)* 0.88 0.45 source: estimated by author, notes: all values in parenthesis denote t-stat. show level of significance at***significant at 1%, **significant at 5%,*significant at 10%. ta (tariff), h (human capital), i (investment). the favorable and momentous impact of human capital (hc) on tfp growth (coefficient is 2.2) suggests the critical importance of human capital in refining production technologies (confirms endogenous growth hypothesis). quality aspect of human capital has greater potential in absorption and in explaining growth. education is a critical determinant in taming techniques of production and achieving efficiency in developing countries (haq, 2004). the model also displays the positive and statistically significant (5%) association of investment with productivity growth; however coefficient (0.03) shows weak effect. this is because investment levels fell down in pakistan with the erosion of business confidence in private sector in the 1990s. we found favorable effect of trade reforms on productivity growth; with the reduction in import tariff rate, import price declines relative to export price, move resources from imports to exports. 3.3 empirical results: impact of trade liberalization on technical change (techch) table 3 reports the findings of the model 2 (row 1) that show positive and statistically significant association of trade liberalization and other determinants with technological change. human capital (hc) has a key feature in adopting, absorbing, and enlightening production technologies. human capital and knowledge capital have a significant role in utilization of technology apparatus (mahmood& siddiqui, 2000). the investment coefficient displays positive linkage with technical change. it also reflects low investment during that period caused by political instability, uncertain business conditions, and lack of investor‘s confidence. due to neglect of social development by past regimes, and poor governance could not create favorable macroeconomics environment to benefit projects by trade reforms and fdi. these findings are in conformation with empirical study of khan and khan(2011). 3.4 trade liberalization and efficiency change (effch) table 3 (row 2) presents findings of the model 3 (efficiency change). reduction in tariff positively but insignificantly effects efficiency growth. the coefficient (0.001) shows, low efficiency growth, observed in a weak institutional setting. industrial inefficiency prevails due to import substitution bias. high tariff protection still review of economics and development studies vol. 4, no 2, december 2018 204 prevails in major sectors of pakistan economy. however, government neoliberalism policies in fiscal year 2000 led to some improvement in industrial efficiency. mahmoodet al. (2007) also found some improvement in efficiency of pakistan manufacturing. table 3: panel gmm results of explanatory variables on techch and effch β hc in ta r2 p-j techch 0.69 (2.79) 1.5 (2.9)*** 0.02 (1.94)* 0.4 (1.89)* 0.92 0.24 effch 0.96 (2.6) -3.5 (2.2)* 2.9 (2.4)* 0.001 (1.7) 0.41 0.19 source: estimated by author.notes: all values in parenthesis denote t-value. shows level of significance, at***significant at 1%, **significant at 5%, *significant at 10% panel gmm,1985-2006. the negative and significant influence of human capital on efficiency change reveals the neglect of social development in the country. the result is in conformation with awan et al., (2011) and among international research the study is in accordance with bils&klenow (2000), and temple (2001). the existing status of human capital in pakistan is not capable enough to absorb latest technology. there is immense need to invest in human capital with latest and scientific education to improve efficiency (jadoon et al., 2015). the test of over-identifying restriction, the sargen test fails to reject the null hypothesis and confirms the validity of instrumental variables. 4. conclusion in this paper we analyzed the implications of trade reforms, human capital and investment on productivity growth by employing endogenous growth model of romer, (1990) and lucas, (1988) with panel data at firm level. our findings display trade liberalization has a favorable effect on industrial productivity. the results justify the implementation of substantial trade reforms in the 1990s and early 2000. all the estimated equations render support to the prediction that trade liberalization enhances productivity growth. technological change is the key contributor of tfp growth in manufacturing industries however efficiency change has a negligible contribution. in light of the ongoing debate on the association of trade liberalization and productivity growth and its components. trade affects growth through the channels of knowledge spillovers and technology transmission. however, these effects are weaker on efficiency change. efficiency change is carefully connected to human skills and education. it highlights the deficiency of efficiency due to neglect of social sector in the country. the limitation of this study is the data availability until 2005-06. growth evaluation of these industries with new dimension is of great importance for their relative position. the dynamics of our industrial sector are almost same and this renewed perception on growth will be helpful in framing appropriate policies. we can presume some policy implications, first outward oriented strategy should be continued to promote exports and imports. education especially technical education and on the job training can equip the firms with efficient labor to adopt and benefit foreign technologies. public sector enterprises can be privatized to flourish private sector. foreign investors should be made to feel comfortable in the transfer of technology. references ahmed, g., khan., and afzal. m. 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(1978).measuring the efficiency of decision making units, european journal of operations research 2, 429-444. coelli, t. (1996) a guide to a deap version 2.1: a data envelopment analysis (computer) program .centre for efficiency and productivity analysis .armadale, nsw, department of econometrics, university of new england. australia (working paper 96/08). review of economics and development studies vol. 4, no 2, december2018 205 das, a., & paul, b. p. (2011). openness and growth in emerging asian economies: evidence from gmm estimations of a dynamic panel. economics bulletin, 31(3), 2219-28. din, m. u., ghani, e., & siddique, o. (2003). openness and economic growth in pakistan. the pakistan development review, 795-807. dollar, d., &kraay, a. (2003). institutions, trade, and growth. journal of monetary economics, 50(1), 133-162. dutta, d., & ahmed, n. (2006). trade liberalization and industrial growth in pakistan: a cointegration analysis. applied economics, 36(13), 1421-1429. edwards, s. (1998) openness, productivity and growth, what do we really know? the economic journal, 108; 383-398. fare, r., grosskopf, s., lindgren, b., &roos, p. (1994). productivity developments in swedish hospitals: a malmquist output index approach. in data envelopment analysis: theory, methodology, and applications (pp. 253-272). springer, dordrecht. frankel, j. a., &romer, d. h. (1999). does trade cause growth?. american economic review, 89(3), 379-399. goldar, b., & a. kumari.(2003) import liberalization and productivity growth in indian manufacturing industries in the 1990s. the developing economies. xli-4: 436-60. grossman, g. and e. helpman. 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(2011). foreign direct investment and economic growth in pakistan: a sectoral analysis. working papers & research reports, 2011. lucas, r.e. (1988) on the mechanics of economic development. journal of monetary economics 21: 3-42. mahmood& siddiqui (2000) state of technology and productivity in pakistan’s manufacturing industries: some strategic directions to build technological competence. the pakistan development review, volume 39(1), pp. 1-21. mahmood, a., &talat, a. (2008) total factor productivity growth in east asia. a two pronged approach. european journal of economics, finance and administrative sciences, issn 1450-2275 issue 14 (2008),©euro journals, inc. 2008.http://www.eurojournals.com. mahmood, t., e.ghani, &m.din.(2007).efficiency of large scale manufacturing in pakistan: a production frontier approach . pakistan institute of development economics (working paper 27). malmquist, s. (1953) index numbers and indifference curves. trabajosdeestatistica 4; 1,209-42.oulton, n. and m.o’mahony (1994) .productivity growth; a study of british industry, 1954-1986.cambridge university press. mujadad. g., & ahmad. k. (2016).measuring efficiency of manufacturing industries in pakistan an application of dea double bootstrap technique ,pakistan economic and social review volume 54, no 2 (inter 2016), pp 363-384. pack, h. (1994). endogenous growth theory: intellectual appeal and empirical shortcomings. journal of economic perspectives, 8(1), 55-72. pakistan government of (various issues) pakistan economic survey, ministry of finance, economic advisor’ wing, islamabad. raheman, a., afza, t., qayyum, a., &bodla, m. a. (2008). estimating total factor productivity and its components: evidence from major manufacturing industries of pakistan. the pakistan development review, 677-694. romer, p. m. (1990). endogenous technological change. journal of political economy, 98(5, part 2), s71-s102. sachs, j. d., warner, a, a., & fischer, s. (1995). economic reform and the process of global integration. brookings papers on economic activity, 1995(1), 1-118. sheikh, s. a., & ahmed, s. (2011). impact of trade liberalization and domestic economic reforms on technical efficiency of agro-based industries in pakistan. international journal of business and social science, 2(23). review of economics and development studies vol. 4, no 2, december 2018 206 temple, j. r. (2001). generalizations that aren't? evidence on education and growth. european economic review, 45(4-6), 905-918. topalova, p., and khandelwal, a. (2011). trade liberalization and firm productivity: the case of india. review of economics and statistics, 93(3), 995-1009. world bank. (2002). world development report 2003: sustainable development in a dynamic world: transforming institutions, growth, and quality of life. oxford university press. world trade organization. (2005). international trade statistics. world trade organization. yasmin, b., &jehan, z. (2006). trade liberalization and economic development: evidence from pakistan. young, a. (1991). learning by doing and the dynamic effects of international trade. the quarterly journal of economics, 106(2), 369-405. zaidi, a.(2005). issues in pakistan economy,2nd edition, oxford university press. appendix table a-1 no. of industries all industries no. of industries all industries 1 food 10 iron bars and steel industry 2 tobacco 11 leather & foot wear industry 3 beverages 12 machinery industry 4 coal and petroleum 13 other chemicals 5 drugs and medicine industry 14 paper printing and wood 6 electrical goods 15 rubber products 7 fabricated metal products 16 textile 8 glass & non-metallic products 17 transport goods 9 industrial chemicals 18 wearing apparel table a-2: definitions and construction of variables variables variable description capital stock(k) fixed asset. the value of capital stock (k) consists of the value of machinery and other fixed assets. employment (l) average daily workers involved in manufacturing include employees, working proprietaries, home workers. average tariff rate(t) it is constructed as the ratio of import duties to volume of imports. value-added (y) it is the total value of output minus the input costs. human capital(hc) investment(i) average wage, calculated as employment cost(wages ,salaries plus benefits) divided by number of employees for each industry, is used for the proxy of human capital gross fixed capital formation (gfcf) or fixed assets minus disposal of assets source: calculated by author review of economics and development studies vol. 4, no 2, december2018 207 table a-3: trends in average tariff, exports, and imports year average tariff exports imports 1990 40.0 189.22 155.32 1991 32.6 175.23 157.11 1992 35.3 179.77 159.43 1993 34.7 180.32 159.98 1994 33.5 180.23 160.55 1995 34.6 186.63 161.17 1996 22.9 199.88 198.76 1997 20.7 210.74 203.43 1998 17.7 267.89 220.74 1999 17.7 275.59 226.26 2000 17.0 266.96 224.61 2001 15.1 279.84 251.51 2002 15.6 281.83 224.97 2003 7.5 248.93 240.82 2004 13.3 274.02 287.81 2005 13.1 284.72 301.0 2006 13.1 289.58 340.71 2007 12.7 300.76 375.06 2008 11.7 318.97 427.0 2009 12.5 387.9 559.24 2010 12.7 411.0 612.7 2011 9.7 559.56 747.32 2012 10.0 641.15 823.33 source: statistical bulletins, state bank of pakistan(1990-91=100) review of economics and development studies vol. 4, no 2, december2018 127 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 2, december 2018 journal homepage: www.publishing.globalcsrc.org/reads contributing factors of capital structure: a case of non-financial companies listed at kse 100 1 sangeen khan, 2 lala rukh, 3 hazrat bilal 1 phd scholar hazara university, assistant director planning and development, university of swat, pakistan. sangeenkhan@uswat.edu.pk 2 phd scholar malakand university, lecturer, center for management and commerce,university of swat, pakistan. lalarukh@uswat.edu.pk 3 assistant professor, center for management and commerce, university of swat, pakistan. hbilal@uswat.edu.pk articledetails abstract history revised format: october 2018 available online: december 2018 the current study has taken the firms listed on kse (karachi stock exchange) now called pakistan stock exchange. the data for the said purpose is collected for five years of time period from 2005 to 2010. the results obtained demonstrate that all the selected variables under study shows a highly significant impact on the determinants of capital structure except the tangibility of the asset. the insignificant relationship of tangibility with the capital structure supports the financing hierarchy theory. while the growth, size and profitability shows a significant and negative relationship with leverage. the negative relationship of growth shows that higher the growth of the firms lower will be the leverage maintained by the firm. similarly, firms with smaller size show that such firms prefer high leverage as compared to firms of larger size. the results reveal that higher the profitability of the firm lower will be the leverage ratio. while the positive relationship of the volatility of the earnings states that firms with higher risks has high leverage ratio. overall a detailed description and impact of the different variables on leverage is provided in the current study. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords tangibility, kse, nonfinancial firms, leverage jel classification: g30, g32, r53 corresponding author’s email address: sangeenkhan@uswat.edu.pk recommended citation: khan, s., rukh, l. and bilal, h. (2018). contributing factors of capital structure: a case of non-financial companies listed at kse 100. review of economics and development studies, 4 (2), 127-133 doi: 10.26710/reads.v4i2.383 1. introduction the mix of financing (debt and equity) is known as capital structure and firm chooses its optimal capital structure to maximize its value. a firm can raise its capital by issuing equity or debt. capital structure is greater of importance because it can affects the firm’s value and that is why a lot of research has been done in this area of finance. modigliani & miller (1958) described in their paper that a firm’s risk can be determined by the standard deviation of its earnings, there are no taxes and bonds and stocks traded in perfect capital markets. their assumptions are unrealistic but it’s providing theoretical grounds. after miller & modigliani’s work many theories developed about capital structure. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 128 berle & means (1933) developed the agency theory. accoring to berle & means (1933) a gap arises among management of the firm and its shareholders because of decrease in equity ownership. shareholder are the primary owners of the business and management should work to maximise their wealth. but problem arises when managers starts to work for their own interest and ignore shareholder’s interest. this self interest of managers leads them to waste valuable cash flows for unprofitable opperyunities. some research suggest that the debt in financing mix provides a mechanism to control the manager’s self interest and reduce agency problem. capital structure decision requires tradeoff between benefit associated with tax shield and the cost of financial distress. when a firm increases percentage of debt the chances of bankruptcy increases with increase of debt. the firm chooses an optimal capital structure where benefit in the form of tax shield is greater. modigliani & miller (1958) assumed that the management and the investors have the same information while in real world managers of the firm have better information about the prospects of the firm. they purchase stock of the firm when it undervalued and sell the stock if it is overvalued. investors of the firm perceive this action of purchasing and selling stock by the management as a signal and react accordingly. investors consider that the firm’s prospects are good when management make announcement to repurchase the stock and firms prospects are not good when the firm make announcement about issuing new equity. whenever a firm needs funds to finance its assets and new projects it has three options. it may reinvest the profits, raise funds through debt or issue new equity. issuing new equity means bringing new owners to share profits which are not good for existing owners. that is why firm avoids issuing new equity and considers other options to raise funds. a firm must reinvest from profits when it need funds to finance its assets. if profits are not enough then it would raise funds through debt and then issue shares. objective of the study is to test the validity of determinants of capital structure for nonfinancial companies listed at karachi stock exchange 100 index. this study analyzes the determinants of capital structure for nonfinancial companies listed at kse 100 index and for this purpose data from 2005 to 2010 is selected for analysis. there are many other variables which may affect the capital structure but in this study five independent variables are selected as described by rajan & zingales (1995). 2. literature review first research was conducted by modigliani & miller (1958), investigate capital structure and the cost of capital. they found that the decision of capital structure does not affects the firm’s value. results of the study were based on unrealistic assumption but because of their research other capital structure theories came in to existance. after modigliani & miller (1958) many researchers investigated capital structure and capital structure theories. (fama & jensen, 1983) examined agency issues and described how to solve agency problems and features of residual claims. these residual claims cover a part of net cash flows and a conflict arises because of these claims among the states. those organization who wants servival residual claims are very important for them. they concluded that open organaization have unrstricted residual claims because there is no need for shareholders to require any other right. the factors such as greater the benefits of unrestricted risk sharing, specialized management, and the amount of organization specific assets,all in the favour of open organizations. unresticted stock residual claims provides the benefits which are helpful to resolve agency problems in the organization. myers ( 1984) tried to solve capital structure puzzle and described that capital structure change convey some information to investors. he studied capital structure in tradeoff framework and packing order framework and neglected the millers idea of “nuteral mutation”.he described that investors take interest in the announcements of financing choices which in turn affect stock prices. titman and wessels (1988) analyzed the explanatory power of some optimal capital structure theories which suggest that selection of capital structure by firms depend on factors associated with cost and benefit of debt and equity financing. they discussed the attributes suggested by capital structure theories which may affect the debt to equity ratios, growth and tax shield. they found that the smaller firms most of the time tends to use short term debt and there is no evidence found that the debt ratios are related to volatility, non-debt tax shield or expected growth. the results of the study indicated that the cost may be an important determinant of capital structure decision while short term debt ratios are negatively related to the size of the firms. this may be the firms face highly transaction cost when it issues long term financial instruments. review of economics and development studies vol. 4, no 2, december2018 129 harris and raviv (1990) studied how investors of the firm react ercieve information when firm takes decision about the debt policy of the firm. they described debt as a tool to restrict managers to take decisions of their own interest. moreover debt also convey some information about future prospects of the corporation to investors. investors use models such as static model to evaluate debt policy decisions which convey some information about income benefits due to debt and bankcruptcy cost. they argued that the information conveyed by debt to investors is the learning process. agrawal & nagarajan (1990) analyzed the family relations of top managers, leverage and cpital strucuture. the sample of 82 all equiry firms from 1979 through 1983 were selected to analysed. the empirical results of the study showed higher median stockholding in equity firms which was greater than leverage firms. equity firms also were found to have higher dollor valued stockholdings the leveraged firms. there was positive relationship of managerial ownership towards family involvement and that evidence was consistant that the managers of the all equity firms tried to reduce risk associated with diversification. agrawal and knoeber (1996) examined seven mechanisms to reduce and control agency problems. they suggested that the single mechanism may provide misleading results so they tried four of the mechanism which were sepeartelly regressed by ols method. sample of the data for annalysis incleded 800 firms in 1987. results of the showed significant relationship among perormance of the firm and inside ownership and inside ownership has poitive impact on the performance of the firm. results showed by second ols indicated insignificant effect of the firm’s performance and negative relationship of corporate control activity to firm’s performance. agrawal & jayaraman (1994) analyzed the free cash flow theory for all equity firms. they tested the hypothesis that firm’s pay out is high if it has low debt in its financing mix. the second hypothesis of the study was about negative relationship among ownership structure and dividends. they tested hopothesis for sample from 1979 to 1983. the results of the study indicated that the all-equity firms were paying higher dividend yields and payouts than levered firms. the results were consistant with that the ownership structure and dividends were substitute to reduce agency problem. baker & wurgler (2002) studied the impact on capital structure when a firm attempts to time the market and investigated that whether the market timing has long-run or short-run effect on capital structure of the firm. the results of the study indicated persistent impact on capital structure. they also found that low leverage firms are those who raised funds during high valuations and highly leveraged firms are those who obtained funds when their valuations were too low as measured by market to book ratios. they finally concluded that the capital structure decisions largely affected due to fluctuation in valuation of the firms and capital structure decisions are the outcome of past attempts to time the market. in their study kim, rhim, & kang (2005) said that corporate policies can be determined jointly not independently and they included the pension funding desion in to capital structur decision and divident policy. pension funding dicision is greater of importance because it affects valus of the stocks of the firm because of its size and risk. for empirical analysis of these policies various indpendent variables was selected such as size, growth, risk, tax, and leverage as mensioned in the previous leterature about capital. the concluded the results obtained from a three stage least squre equation. finally they concluded that the independent variables were consistant with the divident yeild while blockholdings and institutional varaibles were not consistant with the ownership variables because of issues other than agency cost. firm’s risk and institutional hodings were inversily related to pension funds. joher, ali and nazrul (2006) conducted study about ownership structure on kolalampur stock exchange by taking data from 1998 through 2002. the data of 100 companies of kolalampur stock exchange investigated to explore the impact of institutional holdings on ownership structure. they have used 2 stage least square simultanious model to find the impact and interdependency of ownership structure on debt policy. they found a significant impact of institutional ownership which indicates that institutional ownership helps to slove agency problem. the relationship of the debt and institutional ownership was negative suggesting managerial ownership get decrease as the firm increases its debt level. the relationship between the institutional owners and managerial ownership ware also inversly related suggesting instititional investors take better control over the firm. roshan (2009) investigated the relationship among ownership structure and capital structure. he reviewed prevoius literature and theories about capital structure and ownership structure. he described angency theory and free cashflow theory and argued that the main problem is the self interest of managers of the firms. most of the managers because of their self interest wast some of the free cashflows. he concluded that the ownership structure and capital structure has some relationship but he also descraibed that the researchers failed to find the determinrminents of capital structure to maximise value while dealing with agency problem as well. he also argued review of economics and development studies vol. 4, no 2, december 2018 130 that the debt financing is better as it provides tax shield and also help to control management. bortolotti, cambini, rondi, & spiegel (2007) conducted panel study and they took sample from 1994 to 2005 of 96 publically traded companies. they examined how capital structure is affected by the interaction of regualted firms, prices policies and investment. if regulators have not long-term prices then it may have incentives and the regulated firm get benefit of tax shield because of leverage. debt financing is the source to finance new oppertunities and regulators encourage firm’s and also regulators try to avoid price reduction because it can be reason of banckruptcy for highly regulated firms. they found that the europian regulated firm were highly leveraged and their interaction depends on regulatary framework and capital structure. the also found that the privatilly controlled firms increased their leverage because of ira and gor positive affect over regulated prices. in line with the above discussion there are hypothesis that will be tested in the present study. h1= there is a negative relationship between firm’s growth and its leverage. h2= there is negative relationship between firm’s profitability and its leverage. h3= there is a negative relationship between firm’s size and its leverage. h4= there is a positive relationship between firm’s tangibility and its leverage. h5 = there is a negative relationship between firm’s earning volatility and its leverage 3. research methodology 3.1 data description this study is based on the financial data which was collected from the official website of state bank of pakistan and the official website of karachi stock exchange 100. a published data was gathered from “the financial analysis of joint stock companies 2006-2010” available at the website of state bank of pakistan. study analyses the capital structure on non-financial companies listed at kse 100 from 2006 through 2010. the sample of 50 nonfinancial companies was selected to generalize the results for the whole nonfinancial sector listed at kse 100. 3.2 model specification there are five independent variables which may affect capital structure decision as described by rajan & zingales (1995) that are size, book-to-market ratio, profitability, tengibility and volatility of earnings. therefore the following equation would be estimated to test the hypothesis: l= leverage t= tangibility s= size g= growth p= profitability v = volatility of earnings 3.3 variables growth, profitability, size, tangibility and volatility are taken as independent variables and leverage is taken as dependent variable. 3.3.1 growth growth is independent variable. for this study growth can be calculated as a percentage increase of total assets of the firm. 3.3.2 profitability a high profit of the firms provides the ability to finance internally rather debt. according to pecking order theory a firm must finance its assets from profits and then leverage. so we are expecting negative relationship between profits and leverage. profitability ratio can be calculated as: review of economics and development studies vol. 4, no 2, december2018 131 3.3.3 size size is independent variable and for this study it can be calculate as taking natural logarithm of sales of the firm. 3.3.4 tangibility the firm having large portion of fixed assets must have the ability to obtain debt from financial institution. so we are expecting positive relationship between tangibility and leverage. tangibility ratio can be calculated as: 3.3.5 volatility of earnings the firm with stable earnings would be in a better position to repay debt and cost of debt. so it is expected that the volatility of earnings is negatively related to leverage. volatility of earnings can be calculated as: 4. results and discussion the results of the fixed-effects are presented in table 1 and f statistics are given in table 2. all the variables are significant except tangibility. coefficient of the firm’s growth is -0.0421 is significant as p = 000 < 0.05. study accepts the first hypothesis and confirms that the growth does matter to determine the capital structure of pakistani non-financial financial firms. this relationship is negative between firm’s growth and its leverage. the results support the pecking order theory that suggests preferring internal financing over debt when investment needed to finance projects. managers of the firm’s would not hesitate to take risky projects and increase the return of the shareholders of the firm. debt restricts managers to go for risky projects. on the other hand internal financing provide confidence to managers to go for risky projects and increase shareholders wealth. profitability is negatively related to the firm’s leverage as its coefficient is -0.241 and significant at 10% significance level (p = 0.09 < 0.10). so we accept the h2 that there is a negative relationship among leverage and profitability of the firm. profitability does matter to determine the capital structure of pakistani non-financial firms. the firm with higher profits becomes able to finance their assets from internal investment rather than using leverage to finance assets. so the results are in favor of pecking order theory. so we conclude that the non-financial companies listed at kse 100 index finance their projects from retained earnings rather than leverage. there is a positive relationship among size and the leverage of the firm. coefficient of the size is -0.0426 with p = 0.018, shows significant at 5% level so we accept the third hypothesis h3. results of the study prove that the size also an important determinant of the capital structure of non-financial companies listed at kse 100. having few assets reduces the small firm’s ability to obtain debt from financial institutions. it is required for firm’s to provide collateral against loans to secure the lender. on the hand large films will have large amount of assets to secure the lender and it helps large firm to obtain debt from financial institutions. coefficient of the tangibility is 0.051 indicating positive relationship but insignificant at 5% significant level as p = 0.455 which is less than 0.05. so we reject the fourth hypothesis (h4). this can be concluded that tangibility is not the determinant of capital structure of pakistani non-financial companies. it was considered that the higher percentage of fixed assets may make the firm to obtain debt at lower interest rate but study result are insignificant showing tangibility has no relationship with capital structure decision. the results are in line with results found by shah & hijazi (2004). volatility with coefficient 0.083 indicating significant positive relationship with capital structure with p = 0.000<0.05. study accepted the fifth hypothesis that there is a negative relationship of volatility of earnings with leverage of the firm. so it is concluded that the volatility of earning is an important determinant of the capital structure of pakistani non-financial companies listed at kse 100 index. volatility of earnings means risk associated with the earnings of the firm. high risk increases the chances of bankruptcy and financial institutions hesitates to give loans to the firm. on the other hand stable earnings help the firm to obtain debt. review of economics and development studies vol. 4, no 2, december 2018 132 table 1: fixed –effects statistics variables coefficient std. error t-ratio p-value constant 0.693474 0.0831017 8.3449 <0.00001 *** growth -0.0421564 0.0251081 -1.6790 0.09475 * profitability -0.241534 0.0784216 -3.0799 0.00237 *** size -0.0426262 0.0179027 -2.3810 0.01823 ** tangibility 0.0515952 0.0689247 0.7486 0.45502 volatility of earnings 0.0832511 0.0126669 6.5724 <0.00001 *** table 1: fixed-effects, using 250 observations, included 50 cross-sectional units, time-series length = 5, dependent variable: l table 2: r square model, f statistics r-squared 0.516714 adjusted r-squared 0.382881 f(54, 195) 3.860881 p-value(f) 2.64e-12 test statistic: f(49, 195) = 1.93961, with p-value = p(f(49, 195) > 1.93961) = 0.00080557 5. conclusion in this study we investigated the determinants of capital structure on the data of non-financial companies listed at karachi stock exchange 100 index. for this purpose five years data from 2006 to 2010 was used to analyze the effect of growth, profitability, size, tangibility and earning volatility on capital structure decision. we found that the all the variables except tangibility were significant. study concludes that the growth, profitability, size, and earning volatility are important determinants of capital structure of non-financial companies list at pakistan stock market. large profitable firms prefer internal financing over leverage and these results support the validity of pecking order theory. on the other hand small and risky firms face difficulty to arrange external financing to finance their projects. references agrawal, a., & jayaraman, n. 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(1988). the determinants of capital structure choice. the journal of finance , xliii (1), 1-26. review of economics and development studies vol. 5 no 2, june 2019 303 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads impact of employees core self-evaluations on employee engagement: moderating role of organizational culture 1 tahreem baloch, 2 muhammadi sabra nadeem, 3 muhammad zia ur rehman 1 phd research scholar, department of leadership and management studies, national defence university, islamabad, pakistan, tahreem.baloch@hotmail.com 2 assistant professor, faculty of management sciences, comsats, islamabad, pakistan 3 assistant professor, department of leadership and management studies, national defence university, islamabad, pakistan article details abstract history revised format: may 2019 available online: june 2019 core self-evaluations have predictive value for crucial work outcomes. however, less attention is given to examine the relationship between employee core self-evaluations and employee engagement. based on trait activation theory present study propose a research framework that examines the relationship of employee core self-evaluations with employee engagement accompanied by organizational culture as a moderator. it was assumed that employees core self-evaluation traits significantly interact with their perception about the organizational culture and produce valuable work outcome like employee engagement. confirmatory factor analysis was performed to demonstrate validity and reliability of proposed model and structural equation modeling was used to examine hypothesized model. the proposed model was supported empirically by data collected from 537 employees working in different branches of pakistan telecommunication company limited (ptcl). the result indicated core self-evaluations of employees as predictor of their engagement levels, also innovative and supportive organizational culture were found to have positive moderating effect on the relationship of employee core self-evaluations with employee engagement. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords dimensions of organizational culture, employee core selfevaluations, employee engagement jel classification: m12, m14 corresponding author’s email address: tahreem.baloch@hotmail.com recommended citation: baloch, t., nadeem, m. s. and rehman, m. z. u., (2019). impact of employees core self-evaluations on employee engagement: moderating role of organizational culture, review of economics and development studies, 5(2), 303-314 doi: 10.26710/reads.v5i2.538 1. introduction in today’s competing world, employees are considered valuable assets that make significant difference when it comes to competitiveness, innovation, and ultimately business success. influence of employee’s personality traits on workplace behavior have long been studied by organizational scholars (staw & cohen-charash, 2005) but now researchers are more interested in examining the interaction flanked by personality traits and situational factors on work place behavior (kacmar, collins, harris & judge, 2009; green et al, 2018). present research contributes to the interactional debate by examining the way by which core self-evaluations merge with perceptions of organizational culture to influence engagement of employees working in pakistan telecommunication company limited. cse has been proposed with a purpose to apprehend the impact of dispositional tendencies on employees http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5 no 2, june 2019 304 perception about their work (ferris et al., 2013). deficient research on exploring key characteristics of cse theory has escorted present research to make inquiry about why it is indispensable for employees to have a cse and what rationale does cse serve? to quench the thirst, present research intends to illuminate psychological process that relates cse theory to workplace behavior. though substantial literature has proven a positive relationship between cse and job satisfaction, the present study emphasizes on a more active assessment of the job that is employee engagement. provided that positive core-self evaluations make employees focus on the constructive, stimulating, challenging and productive aspects of their work (judge et al. 2005), it is expected that cse links positively to employee engagement too. cses can influence employee engagement (rich et al., 2010; karatepe, 2013), but the effect of environmental factors on workplace behavior must also taken into account (kacmar et al., 2009). trait activation theory (tat) enlightens personality traits interaction with environmental dynamic (kacmar et al. 2009; tett & burnett, 2003). tat implies that although every individual has distinctive dispositional tendencies yet certain traits are only demonstrated during appropriate situations (tett & guterman, 2000; kacmar et al. 2009). trevino (1986, p. 603) identified three types of situational moderators, (namely, immediate work context, organizational culture and work characteristics). focus of present research is on organizational culture as a situational moderator. organizational culture that is demonstrated by good working conditions, teamwork, effective dealing with employees, provision of flexible working policies, growth opportunities, and effective leadership positively promote employee engagement (suharti & suliyanto, 2012; naidoo & martins, 2014; brenyah and obuobisa-darko, 2017). keeping in view employee’s psychology, a research framework is presented in the study that examines the function of organizational culture as a situational moderator between employee core self evaluation and engagement of employees working in pakistan telecommunication limited (ptcl). three dimensions of organizational culture, namely, innovative, supportive and bureaucratic, presented by wallach (1983) were used as moderator connecting the relationship of employee core self evaluations and engagement of employees in ptcl. thus, present research paper aims at developing a better understanding of the moderational path that link cse to work outcomes. 2. literature review trait activation theory (tat) has been projected to elucidate combined role of personality traits and environmental factors in predicting work behavior (lievens, chasteen, day & christiansen, 2006; kamdar & vandyne, 2007). tat implies that every individual have distinctive dispositional profile however certain traits are only demonstrated during appropriate situations (kacmar et al. 2009). it is asserted that dimensions of organizational culture are related to recognizing different reaction of core self-evaluation among employees of pakistan telecommunication company limited (ptcl). perceptions takes vital role in enhancing the relationship of organizational culture with work related results (cegarra‐leiva, sánchez‐vidal & cegarra‐navarro, 2012). how effectively employees perceive their organizational culture may also have motivational impact on the employees. 2.1 core self evaluation and employee engagement though engagement is highly researched construct from the last two decades, still little research has been done so far on its antecedents (saks 2006; wollard & shuck, 2011; bailey, madden, alfes and fletcher, 2017). dearth of literature was found that examine direct influence of cses on employee engagement (rich et al., 2010; karatepe, 2013). cses is higher order construct and illustrated by four personality traits that are, self esteem, generalized self efficacy, internal locus of control and neuroticism. four traits of cse showed their independent association with employee engagement, for example, organizational based self-esteem was found predictor of employee engagement (rotich, 2016). self-efficacy, personal resources and resilience were found positively associated with employee engagement (del líbano, llorens, salanova, & schaufeli, 2012). according to xanthopoulou, bakker, demerouti, & schaufeli, (2007), personal resources include organizational based self esteem, self efficacy and optimism has positive influence on employee engagement. internal and external locus of control was found strongly associated with employee engagement (paramanandam & sangeetha, 2015; de laat, 2016). the fourth trait of cse, neuroticism, was also found to be related to employee engagement (shukla, parul, adhikari & singh, 2014; ziapour & kianipour, 2015; gulamali, 2017). based on reviewed literature, present research intended to examine impact of cse construct on engagement of employees working in ptcl, thus the following hypothesis was proposed: h1: employee core self evaluation is likely to have positive relationship with employee engagement. review of economics and development studies vol. 5 no 2, june 2019 305 2.2 organizational culture as a moderator influence of personality traits on employee workplace behavior is evident from previous literature (funder, 2006). however, now researchers are more interested in studying personality traits interactions with environment factors and the impact of this interaction on workplace behavior (kacmar, collins, harris & judge, 2009; green et al., 2018). this paper intends to put insights into literature by examining interactions of employees core self evaluations with organizational culture to influence employee engagement. core self evaluations (cses) encompasses stable personality traits that takes in subconscious and essential evaluations about individuals themselves and their abilities (judge, 1997). wallach (1983) defined organizational culture as shared acquaintance about the values, norms, philosophies and beliefs of how things work. culture can be divided into bureaucratic, innovative and supportive categories (wallach, 1983). a bureaucratic culture is considered as systematic and organized that place emphasis on control and power and it has properly defined authority and responsibilities. organizations that possess bureaucratic type culture are structured, mature, have proper hierarchies and are stable. comparing to bureaucratic culture that is power oriented, innovative culture is result oriented and is recognized by challenging environment, entrepreneurial ambitions and risk taking; however , differing from the two supportive culture is team oriented and is based on teamwork, collaboration, encouragement, harmony, and trusting environment (wallach 1983). according to wallach (1983) employee tends to work efficiently and effectively when the employees motivation complement organizational culture. moderating role of innovative, supportive and bureaucratic organizational culture between employees cses and engagement is examined for the first time in present research. however, independent traits of cses showed positive association with organizational culture, for example, organizational culture as a predictor moderator between employees locus of control and job satisfaction. suwarsi, and budianti (2009), also found strong association between locus of control and organizational culture (huizing, 2015). emotional stability was also found positively associated with cross cultural adjustments (peltokorpia & froeseb, 2012, 2014). based on the literature reviewed it was assumed that interaction between employees cses and organizational culture would influence employee engagement. thus, following hypotheses were suggested, h2: innovative organizational culture is likely to have a moderating impact on a relationship between employee core self evaluations (cses) and employee engagement such that cses–employee engagement relationship will be positive and stronger. h3: supportive organizational culture will moderate relationship between employee core self evaluations (cses) and employee engagement such that cses–employee engagement connection will be stronger and positive. h4: bureaucratic organizational culture will moderate relationship between employee core self evaluations (cses) and employee engagement such that cses–employee engagement relationship will be negative and weaker. figure 1: model of the study employee core selfevaluations employee engagement innovative organizational culture supportive organizational culture bureaucratic organizational culture review of economics and development studies vol. 5 no 2, june 2019 306 3. methodology 3.1 participants and procedure simple random sampling was used to collect data from the employees of ptcl working across the country. data was collected from employees of ptcl working in different branches across the country. a total of 630 questionnaires were distributed among ptcl employees, of whom 564 questionnaires were returned, therefore the effective response rate was 89.52%. out of the 564 received questionnaires, 27 were either incomplete or unreliable responses. thus, the usable response rate was 85.23% that were further analyzed using spss 20. and amos 20. the useable respondents profile and their characteristics are presented in table 1 below. table 1: respondents demographic profile (n=537) sample percent gender male 285 53.1 female 252 46.9 age < 25 12 2.2 25-30 144 26.8 31-35 148 27.6 36-40 92 17.1 41-45 73 13.6 46-50 43 8 51-55 25 4.7 education bachelor 35 6.5 masters 502 93.5 experience 1-5years 71 13.2 6-10 years 251 44.9 11-15 years 156 29.1 >15 years 69 12.8 3.2 measuring instruments different variables in the study were measured using scales that have been developed before, however confirmatory factor analysis (cfa) was performed to confirm the validity and reliability of the scales. 3.3 employee engagement scale employee engagement was assessed with the utrecht work engagement scale (uwes; schaufeli et al., 2002). the items of the uwes were grouped into three subscales of vigor, dedication and absorption. totally 15 items were included in the scale of employee engagement, among them five items were for measured the vigor, five items were used to measure dedication and five items were used to measure absorption. five point likert scale (ranging from strongly disagree to strongly agree) was used to assesses items of employee engagement. 3.4 core self evaluation scale to measure core self-evaluations of employees, core self-evaluations scale (cses) developed by judge, erez, bono& thoresen, (2003) was used. according to judge et al. (1997), core self-evaluations is a broad and higherorder trait that is specified by four well-established traits in the personality literature, namely, self-esteem, generalized self-efficacy, neuroticism, and locus of control. core self-evaluations are a basic, assessment of one’s worthiness, usefulness, effectiveness and competence as a person. the cses contain 12 items, and uses a fivepoint likert scale to attain responses. 3.5 organizational culture scale to measure organizational culture an instrument developed by wallach’s (1983) called the organizational culture index was used in the study. wallach’s (1983) has devised the oci into three dimension of organizational culture; these are bureaucratic organizational culture, innovative organizational culture and supportive organizational culture. oci is a 24 item instrument, where each dimensions of organizational culture was assigned eight items. five point likert scale (ranging from strongly disagree to strongly agree) was used to assesses items of each dimension of organizational culture. review of economics and development studies vol. 5 no 2, june 2019 307 3.6 results 3.6.1 measurement model using amos 20. software the validity and reliability of instrument was tested first. cfa was performed to examine the validity and reliability of the measuring instrument. convergent validity of the instrument was assessed using each item factor loading of at least 0.60, average variance extracted (ave) for a construct greater than 0.50 and composite constructs reliability greater than 0.70 (hair et al. 2012). table 2 presents the indices of the convergent validities. table 2: convergent validity of the measurement model items factor loading ranges from 0.62 to 0.94 and ave ranges from 0.50 to 0.76. composite reliabilities of all constructs were found to be > 0.9. ave, s and composite reliabilities for each construct were computed from data of factor loadings by applying their specific formulas. internal reliability of the each constructs along with number of items is presented in table 3. table 3: internal reliability of the constructs constructs no. of items cronbach's alpha employee engagement 15 .97 core self-evaluations 12 .94 innovative organizational culture 8 .96 supportive organizational culture 8 .89 bureaucratic organizational culture 8 .87 there are different fitness indexes that shows how the model is fitted to the data used in the study. according to holmes-smith (2006) and hair et al. (2012) at least one fitness index must be used from each category of model fit. there are three model fit categories that are absolute fit, incremental fit, and parsimonious fit. chi-square , gfi items factor loadings ave composite reliability items factor loadings ave composite reliability eev1 .86 .72 .97 oc11 .85 .76 .95 eev2 .91 oc2i .84 eev3 .87 oc3i .87 eev4 .80 oc4i .78 eev5 .80 oc5i .90 eed1 .90 oc6i .84 eed2 .82 oc7i .86 eed3 .90 oc8i .75 eed4 .86 oc1s .803 .60 .92 eed5 .92 oc2s .901 eea1 .94 oc3s .786 eea2 .75 oc4s .738 eea3 .74 oc5s .675 eea4 .82 oc6s .762 eea5 .83 oc7s .756 cses1 .80 .638 .95 oc8s .74 cses2 .87 oc1b .785 .50 .91 cses3 .89 oc2b .724 cses4 .88 oc3b .751 cses5 .77 oc4b .868 cses6 .73 oc5b .816 cses7 .70 oc6b .663 cses8 .62 oc7b .692 cses9 .86 oc8b .723 cses10 .91 cses11 81 cses 12 .72 review of economics and development studies vol. 5 no 2, june 2019 308 and rmsea represent absolute fit measures; cfi, tli, nfi and agfi reflects incremental fit measure; and normed chi-square and chisq/df represents parsimonious fit measures (keramati et al., 2010). to have a goodness of model fit, the comparative fit index (cfi) and tucker–lewis index (tli) should be greater than 0.90, the root mean square error (rmsea) must be less than 0.10 and chi-square/degree of freedom (χ2/do) needs to be less than 5 (henry and stone 1994). the testing results from cfa showed a good fit for the measurement model with the indices of cfi = 0.91, tli = 0.90, rmsea = 0.06, and χ2/df (1706/1332.8= 1.28). discriminate validity was evaluated by comparing the square root of ave of each construct by its correlations with other constructs. result of comparison is presented in correlation matrix in table 4. ave square root for each construct is greater than the correlations with other constructs as accurately put by (fornell and larcker 1981). thus, the results of measurement model indicate both validity and reliability at a highly acceptable level. table 4: correlation matrix *diagonal elements show the square root of the ave. 3.6.2 structural model fit structural equation modeling (sem) with amos 20.0 was used to evaluate the proposed model. mle (maximum likelihood estimation), that is considered as most common sem procedure was used to analyze the data. according to hair et al. (2012) mle required a sample size that is at least 10 times the total number of instrument items, thus the sample size (537) of present study was adequate for the mle to analyze data. the structural model aimed at testing the validity of the proposed model (table 5) and also endows with a path analysis for the determination of constructs relationships, as given in table 6. figure 2: structural model the model fit of structural model was examined first. the resulting indices showed good fit between the observed data and the hypothesized structural model with a highly acceptable values of cfi = 0.98, tli = 0.95, nfi =.97, gfi = .99, agfi =0.97, rmsea =0.053and χ2/do = 2.49 (7.49/3) with p-value of .058. secondly, the path coefficients for the hypothesized relationships between variables were tested and the variance explained for the endogenous variables (r²). result of hypothesized paths proved cses as important antecedent of employee engagement (with β=.0.641*). innovative and supportive organizational culture are also regarded as moderator (with (β= 0.70*** and 0.133*) between cses and employee engagement that strengthen their relationship. no significant result was found for bureaucratic culture to be a moderator (β= -0.46) between cses and employee engagement, however, negative coefficient and t-value indicates its inverse impact on the relationship. r² value = 0.46% shows the variance explained for the endogenous variable of the model. , thus, first three hypotheses are supported from the study. 1 2 3 4 5 1.employee_engagement 0.84* 2.cses .661** 0.79 3.innovativeoc .511** .452** 0.87 4.supportiveoc .501** .385** .382** 0.77 5. bureaucratic .039 -.012 -.075 .156** 0.70 review of economics and development studies vol. 5 no 2, june 2019 309 table 5: model fit indices for structural model model fit indices obtained values recommended cut-off values absolute fit measures chi-square 7.49 (p = 0.05) the lower, the better rmsea 0.053 <0.08 gfi 0.99 >0.8 incremental fit measures agfi 0.97 >0.8 cfi 0.98 >0.9 tli 0.95 >0.9 nfi 0.97 >0.9 parsimonious fit chi square /df 2.49 (7.49/3) < 5 4. discussion and recommendations 4.1 discussion the model proposed in the study examines the impact of core self evaluations (cses) on engagement of employees working in different branches of ptcl across pakistan. the three dimensions of organizational culture (innovative, supportive and bureaucratic) were used as a moderator, where innovative and supportive organizational culture were assumed to positively influence relationship between employees cses and employee engagement thus further strengthen their relationship, while bureaucratic culture was assumed to have negative influence and weaken the relationship between the two. findings indicate cses as predictor of employee engagement. as cses is higher order construct and constituted from four personality traits that independently had proved their impact on employee engagement. present research showed that collectively these four traits in the form of cses can cause variations in the employee engagement levels in ptcl. table 6: hypothesized paths structured paths coefficients t-value conclusion unstandardized coefficients standardized coefficients b std. error beta h1: cses → ee .709 .036 .64* 19.929 supported h2:cses*innovative→ ee .025 .011 .07*** 2.182 supported h3: cses*supportiveoc→ee .032 .008 .13* 4.148 supported h4:cses*bureaucraticoc→ee -.016 .011 -.05 -1.441 not supported employee engagement → r² 0.46 *p<.0001. **p<.01. ***p<.05. research findings of the present study strengthen the previous notion that personality traits can influence the workplace behaviour (schneider, 1987; funder, 2001; staw & cohen-charash, 2005). moreover findings from the research further strengthen the previous literature that examines the relationship between employees cses and engagement, for example the work of (rich et al. , 2010); karatepe, 2013). innovative and supportive organizational culture showed a positive moderation impact between the relationship of cses and employee engagement. though the relationship between culture and engagement has already established (homans, 1961; saks, 2006; robinson et al., 2004) and four personality traits of cses also showed positive association with organizational culture (unal and turgat, 2016; becker et al. (2014; brown, 2009; earley, 1994; oettingen, 1995; klassen 2004, gajdzik, ‎2005; evans, 2014; syahputra 2014; suwarsi, and budianti, 2009), yet the moderating role of three dimensions of organizational culture between cses and employee engagement has been tested for the first time in present study. sem results proved the model fitness of hypothesized model through exceptionally good model fit indices. findings indicate that supportive and innovative cultures have positive moderation effects between the relationships of employees core self evaluation and their engagement levels. thus, second as well as third hypotheses of the review of economics and development studies vol. 5 no 2, june 2019 310 study are also supported by findings of the study. however, bureaucratic organizational culture did not show significant moderation impact, thus, fourth hypothesis of the study was not supported by findings. over all, present research provides empirical evidence on personality traits interaction with environment factors so as to influence the work behavior (gerhart, 2005; kacmar, carlson, & bratton, 2004; kammrath, mendoza-denton, & mischel, 2005; kacmar, collins, harris & judge, 2018). employees core self evaluations include personality traits and is found to have influence on employee engagement (that is considered as work place behavior) through the interactional effect of innovative and supportive organizational culture. 4.2 theoretical implications the findings of present study reveals employees core self-evaluations as predictor of their engagement and also perception of employees about organizational culture acts a moderator between the relationship of cses and employee engagement. from theoretical viewpoint findings of present study proved that “right” organizational situations that promote innovative and supportive organizational culture bring forth personality traits like cses that further promote workplace outcomes of employees like employee engagement. practically results imply that organizations can be successful by harmonizing optimistic workforce to complimentary situations (like suitable organizational culture). 4.3 practical implications findings of the study serve several practical insinuations. firstly, the results entails that managers of the organizations are accountable to create and sustain such an organizational culture that encourage the constructive attributes in employees with elevated core self evaluations. accordingly, when innovative and supportive organizational culture pair with high core self-evaluators it provides employees with opportunity to capitalize on their strengths. results of present study also imply that looking for applicants with high cse would be beneficial to organizations, provided that supportive and innovative work culture is designed by organization to trigger these qualities. however if the managers and higher authorities are not capable to create a culture that promote innovation and appreciate supportive behavior, then hiring applicants with high core self-evaluation may not be suggested to such organizations, because in such a unsupportive environment high cse individuals are no better than individuals with low cse. thus, from findings it is recommended that cse must be taken into account while taking placement decisions. cse might be one of the many factors to consider when making placement decisions because individuals with high cse bloom in innovative and supportive organizational culture and leads to positive work outcomes. although this study attempts to put up knowledge on the relationship between cse and employee engagement by examining moderation path accompanied by organizational culture, however results of the study must be interpreted by keeping in mind some limitations. first, it is a cross sectional study, thus, causal elucidation about specific order of the variables cannot be made. moreover, the proposed research framework must be tested in different sector apart from telecom. 5. conclusion present paper examine impact of employees core self evaluation on engagement level of employees working in telecom sector of pakistan. sem was employed to empirically examine the cse impacts on employee engagement using three dimension of organizational culture as a moderator. the research contributes to conceptual insight of the cse as critical antecedents of employee engagement. furthermore, the research provides the crucial insights about the role of innovative and supportive organizational culture as a moderator between cse and employee engagement. findings of the study serve both theoretical and practical insinuations for organizational managers and practitioners who ought to take up the accessible resources effectively and efficiently in order to participate successfully in dynamic marketplace. 6. future research further research investigating appropriateness of definite dispositional traits and their interaction with explicit job settings to influence workplace behavior, would subsists equally for practitioners and researchers. moreover, present study included organizational culture as a moderator, even though the moderators was theoretically derived, yet further research can be done on exploring the impact of other work related moderators. further, the model presented in the study was tested in telecom sector only; 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(2015). a study of the relationship between characteristic traits and employee engagement (a case study of nurses across kermanshah, iran in 2015). journal of medicine and life, 8(spec iss 3), 134. review of economics and development studies vol.2, no 1, june 2016 29 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 2: issue 1 june 2016 journal homepage: www.publishing.globalcsrc.org/reads measuring inter-industry competitive advantage and performance of lesotho’s export sector macleans mzumara department of economics, bindura university of science education, p/bag 1020, bindura, zimbabwe macmzumara@yahoo.com article details abstract history revised format: may 2016 available online june 2016 the author investigated inter-industry competitive advantage and performance of lesotho’s export sector. the results show competitiveness in lesotho varies from one industry to the other. textiles industry is the most competitive in lesotho with 165 product lines which has revealed comparative advantage of equal or greater than 1. it is followed by miscellaneous industry with a demonstrated competitiveness in 35 product lines. the least competitive industries in lesotho were found to be foot wear/head gear and wood and wood products both with only 4 product lines. the following industries in lesotho performed badly and have no comparative advantage at all: animal and animal products; raw hides, skins leather and furs; plastic and rubber; chemical and allied industries; food stuffs; and mineral products. although lesotho has competitive advantage in textiles industry, it is also very vulnerable due to over-reliance on a single industry. there is a need to diversify through attracting foreign direct investment that will also usher in improvement in competitiveness across industries. © 2015 the authors, under a creative commons attributionnoncommercial 4.0 keywords comparative advantage, export performance, industrial export performance jel classification o19, f11, f13, f15 corresponding author’s email address: macmzumara@yahoo.com recommended citation: mzumara, m. (2016). measuring inter-industry competitive advantage and performance of lesotho’s export sector. review of economics and development studies, 2 (1) 29-54 doi: https://doi.org/10.26710/reads.v2i1.131 1. introduction most of the studies which cover the export sector of a country have focused on competitive advantage or comparative advantage in products. a given country is said to have comparative advantage in so many products. there are fewer studies which have looked at inter-industry competitive advantage or comparative advantage. the objective of this paper is to measure inter-industry competitive advantage and performance of lesotho’s export sector. the author’s motivation for this paper is based on the fact that lesotho is a member of the southern african development community (sadc). in this region countries of southern africa and the indian ocean are seeking deeper integration of their economies through increased intra-regional trade hence it is important studying competitive advantage or http://www.publishing.globalcsrc.org/reads mailto:macmzumara@yahoo.com mailto:macmzumara@yahoo.com https://doi.org/10.26710/reads.v2i1.131 review of economics and development studies vol.2, no 1, june 2016 30 comparative advantage of lesotho’s industrial structure. this paper begins by setting a hypothesis; ho: there is no difference in the comparative advantage and performance of industries in lesotho’s export sector. however, before the paper deals with the hypothesis, it is necessary to look at the literature on competitive advantage. 2. literature on competitive advantage the president’s commission on industrial competitiveness (1985) defines competitiveness as the degree a country is able to produce products and services in a free and fair condition in conformity with the international markets while increasing prosperity of its citizens. harrison (1999) defines competitiveness as the ability of the country’s firms to produce a good or provide a service then promote it. the good meets high international standards but are sold at lower prices. according to porter (1990, 2009) competitiveness is a product of a country’s human resource, physical capital e.g. factories and natural resources. in addition, competitiveness is determined by demand conditions as well as the performance of the firms and their strategies and most importantly how well prepared they are in relation to other competing firms. the paper will rely heavily on theories which are related to the principle of comparative advantage not with standing the fact that through out this paper, competitive advantage and comparative advantage are used interchangeably. the classical theory of comparative advantage points out that gains from exchange increases welfare and that free trade helps in making the world economy prosperous. various theories linked to comparative advantage have emphasized different aspects which determine it. the ricardian theory asserts that differences in costs and technological progress give respective countries comparative advantage. heckscher-ohlin-samuelson theory attributes comparative advantage from factor price differential. the neo-factor-proportion theory attributes comparative advantage of a country to arise from efficiency (productivity) of the factors. the technological gap and product cycle theory attributes comparative advantage to be influenced by technological innovations (bender & li, 2002). some other authors such as widgren (2005) and mzumara (2006) have attributed comparative advantage from factor endowment. that means a country with an abundant factor will use that factor more intensively to produce products which it will export. then it will import products which use its scarce factor less intensively. this analysis leads each country to specialization in the production of particular products. khatibi (2008) attributes comparative advantage from factor scarcity. however, widgren (2005) and mzumara (2006) dispute khatibi (2008) explanation which asserts that the relative scarcity would determine comparative advantage and contend that instead it will determine comparative disadvantage. there are different techniques or methods used to measure comparative advantage or competitive advantage. 2.1. measures of comparative advantage or competitive advantage one such measure that can be used to measure comparative advantage or competitive advantage is the revealed comparative advantage (rca). the rca index is a useful technique which is used to measure comparative advantage. the measure utilizes observable trade balances and assists researchers to conclude the relative sectoral competitiveness of a particular and this is shown when the sector is able to produce efficiently (ferto & hubbard, 2000). rca index measures a country’s competitiveness or comparative advantage and it is attained in a normal way such that it represents ratio of ratios which show relative trade shares (richardson & zhang, 2007). the rca measure employs the trend of trade balances to show relative sectoral competiveness. sectors which show international competitiveness are review of economics and development studies vol.2, no 1, june 2016 31 those sectors which efficiently produce products for international markets. the sectors which import show lack of competitive advantage. the rca is the most efficient and acceptable measure as it is not constrained by restrictive assumptions (mutambatsere, 2007). vollarth (1991) developed three alternative measures of the revealed comparative advantage. the first measure is known as relative trade advantage (rta). it takes an account of both exports and imports. it is calculated as the difference between relative export advantage (rxa) equals to rca index of balassa corresponding to relative import advantage (rma) and takes the form of: rta = rxa – rma where rxa = b (balassa) and rma = (mij/mit) / (mnj/mnt) where mij representing imports in country i of product category of j mit representing imports of country i of set of commodities t therefore rta = [(xij / xit) / xnj /xnt)] [(mij / mit) / (mnj / mnt)] where xij representing exports of country i of product category j xit representing exports of country i of set of commodities t xnj representing exports of set of countries, n of product category j xnt representing exports of set of countries, n of set of commodities, t mij representing imports of country i of product category j mit representing imports of country i of set of commodities, t mnj representing imports of set of countries, n of product category j mnt representing imports of set of counties, n of set of commodities, t the second measure uses a logarithm of the rta with in rxa to produce a third specification known as revealed competitiveness (rc) where rca = in rxa –in rma the advantage of showing the last two measures in logarithm is because of being asymmetric. therefore vollrath’s measure is positive and summarized as rta, in rxa and rc. the last one as given above is a revealed comparative advantage or competitive advantage (ferto & hubbard, 2000). the difference between balassa’s b and vollarath’s rxa is that rxa eliminates country and product double-counting which is a weakness in balassa’s index. the rxa takes an account all tradable products and all countries in place of subsets hence are more global (ferto & hubbard, 2000). serin and civan (2008) provide another technique besides the rca. this method is known as comparative export advantage (cep) index. it is a modified balassa’s technique. it is concerned with the measuring of export specialization of a country’s specific groups of products and uses the following formula: cep = in (xib / xb) / (xia /xa) with xib representing country b’s exports of good i xb representing b’s total exports xia representing total world exports of good i xa representing total world exports of all goods therefore an index value of b larger the index value of the country’s n shows relative comparative review of economics and development studies vol.2, no 1, june 2016 32 advantage or competitive advantage of country b against n. utkula and seymen (2004) concluded that there are four different techniques which can be used to measure competitiveness. 2.2. empirical evidence of measuring competitive advantage or comparative advantage through use of balassa (1965) revealed comparative advantage (rca) yeats (1997) applied rca and concluded that mercosur has no comparative advantage in the products it exports. the study also concluded that mercosur’s own trade restrictions determine trade variations. mirzaei et al (2004) found that iran has no comparative advantage in eggs it exports to the middle east region. utkula and seymen (2004) concluded there is a likelihood of negative trade creation effect for turkey in the event of it joining the european union. trade diversion effects were not significant. mutambatsere (2007) found that half of sadc member countries did not have comparative advantage in the production of maize (corn). only malawi, south africa and tanzania had a comparative advantage in the production of maize (corn). shinyekwa and othieno (2011) found that uganda has comparative advantage in a very limited range of products. mzumara (2011a) concluded that zimbabwe has comparative advantage in the production of a wide range of products. mzumara (2011b) found mozambique to have comparative advantage in the production of 222 product lines. mzumara (2012) found botswana has comparative advantage in the production of 244 product lines. mzumara et al (2012) found the usa to have comparative advantage in 1 791 product lines, canada in 814 product lines and mexico in 749 product lines. jaravaza et al (2013) found egypt to have comparative advantage in production of 733 product lines. chingarande and mzumara (2013) found south africa to have comparative advantage in 824 product lines. 3. methodology of all the techniques so far available, this paper has opted for balassa (1965) revealed comparative advantage (rca). the balassa’s rca remains valid in revealing true comparative advantage or competitive advantage (deardorff, 2010). according to wu and chen (2004) balassa’s method is very relevant and useful in a dynamic competitive market economy, competitive advantage or comparative advantage as shown in export composition is in line with competitive advantage or comparative advantage based on a country’s economy factor endowment and moves along with economic development. balassa (1965) formula is as follows:                  totw toti jw ji x x x x rca , , , , / with: xi,j representing country i’s exports of product j; xi,tot representing country i’s total exports; xw,j representing the world’s (all countries) export of product j; and xw,tot representing total exports in the world. an rca ≥ 1 demonstrates that the country has comparative advantage or competitive advantage in the production of the product. an rca < 1 demonstrates that the country has no comparative advantage or competitive advantage in the production of the product. data used in this paper for lesotho exports is a mirror data. both lesotho’s export data and the world’s export data was obtained from international trade centre (itc)’s trademap based in geneva, review of economics and development studies vol.2, no 1, june 2016 33 switzerland. the data was obtained on 6-digit level which is the most acceptable disaggregated international classification of products. individual rcas were computed for 2008, 2009 and 2010 the most recent available data then average rcas for the three year period were also computed. 4. results and discussion results show textile industry/sector has 165 product lines with rca ≥ 1. table 1 shows product lines in textile the industry/sector in which lesotho has competitive advantage or comparative advantage. table 1: product lines in the textile industry/sector in which lesotho has competitive advantage or comparative advantage industr y/sector code (50-63) product code product description 2008 rca 2009 rca 2010 rca average rca 55 550520 waste of artificial fibre 1464.467 2325.365 2702.011 2133.948 51 510610 yarn of carded wool >85% wool, not retail 533.737 818.9272 908.1849 753.6163 52 520535 cotton yarn >85% multiple uncombed <125 dtex, not retail 780.232 257.6784 617.495 551.8018 53 530290 true hemp fibre otherwise processed but not spun 397.2242 542.1116 638.4631 525.933 61 610819 women’s, girls’ slips or petticoats, material, knit 190.883 235.3972 518.2876 314.8577 51 510119 greasy wool (other than shorn) not carded or combed 0 0 612.5891 204.1964 55 550969 yarn of acrylic staple fibres, not retail 175.0726 174.9127 192.7222 180.9025 61 611239 men’s, boys’ swimwear, of material knit 128.0305 170.9908 232.3506 177.124 61 610520 men’s, boys’ shirts of man made fibres, knit 73.67956 188.2725 182.6666 148.2062 52 520849 woven cotton >85% < 200g/m 2 , yarn dyed 106.1601 169.391 163.9257 146.4923 61 610343 men’s, boys’ trousers, shorts, synthetic fibres, knit 131.2396 153.025 142.3001 142.1882 61 610463 women’s, girls’ trousers, shorts, synthetic fibres, knit 176.0398 78.79117 150.948 135.2597 61 610899 women’s, girls’ bathrobe, dressing 83.0856 138.8369 158.6428 126.8551 review of economics and development studies vol.2, no 1, june 2016 34 gown knit 51 510320 waste of wool or fine hair, not noils, garneted stock 110.4092 151.8258 113.0839 125.1063 55 551693 woven fabric <85% artificial staples, yarn dyed 92.11932 142.535 137.3487 124.001 61 610462 women’s, girls’ trousers and shorts of cotton, knit 121.39 125.8058 121.3955 122.8649 52 520299 cotton, waste, except garneted stock 106.6071 133.0463 106.3782 115.3439 51 510510 carded wool 97.31539 162.0626 73.76342 111.0471 60 600390 knitted/crocheted fabrics of a width not >30cm (excluding of 60.1/60.02) 83.91641 137.3072 98.37145 106.5317 62 620342 men’s, boys’ trousers and shorts, of cotton not knit 97.1616 88.92816 107.3416 97.81047 61 610510 men’s, boys’ shirts of cotton, knit 85.17909 107.8858 92.97811 95.34766 61 611219 tract suits, of materials, knit 61.08384 90.54383 109.6427 87.09011 52 520210 cotton yarn waste (including thread waste) 63.45671 98.91448 94.52044 85.63454 55 551694 woven fabric <85% artificial staples, printed 59.67601 100.3298 89.45057 83.15213 61 611020 pullovers, cardigans etc of cotton knit 95.19815 69.58482 52.26291 72.34863 52 521142 denim cotton <85% man made fibre, >200g/m 2 131.3136 79.37974 4.317854 71.6704 61 610590 men’s, boys’ shirts of materials, knit 0.106841 0 211.682 70.59627 51 510539 fine animal hair, carded/combed other than kashmire (cashmere) goats 67.43026 84.71719 56.45608 69.53451 62 621230 corselettes and parts thereof 55.28547 71.29656 72.69754 66.42652 51 510620 yarn of carded, wool, <85% wool not retail 57.86762 73.27546 66.4522 66.06155 62 620421 women’s, girls’ ensembles, of wool or 42.80074 73.27546 80.68213 65.58611 review of economics and development studies vol.2, no 1, june 2016 35 hair, not knit 62 6211141 women’s girls’ garments of wool or hair, not knit 33.66652 61.16675 99.49069 64.77465 61 610120 men’s, boys’ overcoats, etc, of cotton, knit 128.0404 61.42941 2.729685 64.00651 61 610422 women’s girls’ ensembles, of cotton, not knit 40.25132 66.67885 81.21598 62.71538 61 610461 women’s, girls’ trousers and shorts of wool hair, knit 51.64413 67.72307 64.29168 61.21962 62 620462 women’s, girls’ trousers and shorts, of cotton, not knit 52.96912 60.06809 60.66753 57.90158 51 510310 noils of wool or of fine animal hair 48.50851 63.48334 45.80478 52.9888 62 620920 babies garments, accessories of cotton, not knit 30.07711 64.81527 60.42514 51.77251 61 610342 men’s, boys’ trousers and shorts, of cotton, knit 68.34038 55.68044 25.34565 49.7882 55 551349 woven fabric >85% synth + cotton, <170g/m 2 printed 56.01616 52.82097 36.84347 48.5602 61 611030 pullovers, cardigans etc of man made fibres, knit 41.33047 39.17372 40.15073 40.21831 61 610341 men’s, boys’ trousers and shorts, of wool or hair knit 33.51238 43.48924 43.13545 40.04466 58 580220 terry toweling etc, other than cotton, width >30cm 23.75572 46.48924 43.8259 38.02362 62 620322 men’s, boys’ ensembles of cotton, not knit 29.76307 39.61805 41.43812 36.93975 62 620463 women’s girls’ trousers, shorts synth fibres, not knit 31.73006 60.42478 18.07077 36.74187 61 610892 women/girl bathrobe, dressing gown, knit 0.609107 15.85642 90.53367 35.6664 55 551692 woven fabric <85% artificial staples, dyed 26.1818 38.79565 37.39912 34.12552 52 520511 cotton yarn >85% 11.95128 14.87016 70.62404 32.48183 review of economics and development studies vol.2, no 1, june 2016 36 single uncombed >714 dtex, not retail 52 520942 denim cotton >85% >200g/m 2 48.90419 43.50275 3.385687 31.93089 61 610220 women’s girls’ overcoats, etc, of cotton knit 24.57083 15.80824 55.07846 31.81918 55 550962 yarn of acrylic staple fibres and cotton, not retail 24.59257 37.16611 32.87998 31.54622 52 520546 combed multi cotton yarn 22.00338 30.38637 40.69214 31.0273 63 630399 curtains drapes blinds valances, material, woven 25.38042 33.36231 33.61443 30.78572 61 610429 women’s, girls’ ensembles, of material, knit 21.86591 29.41051 34.4344 28.82511 61 611231 men’s, boys’ swimwear, synthetic fibres, knit 25.34188 29.09542 29.29538 27.91089 61 610610 women’s, girls’ blouses and shirts, of cotton, knit 23.44408 28.03742 29.745 27.0755 55 550961 yarn of crylic staple fibre and wool or hair, not retail 22.11471 28.87356 29.52269 26.83699 51 510810 yarn of carded fine animal hair, not retail 21.07172 29.25598 28.51461 26.28077 58 580219 terry toweling etc of cotton, width >30cm 20.86443 27.84668 28.59666 25.76925 62 620433 women’s, girls’ jackets, blazers, synth fibres not knit 25.50569 39.03295 12.26246 25.60037 52 520544 cotton yarn >85% multiple combed 192125 dtex, not retail 20.71369 25.94873 30.07281 25.57841 61 610839 women’s, girls’ nightdress pajamas, material, knit 12.77806 31.65805 31.72128 25.3858 61 610230 women’s, girls’ overcoats etc, man made fibres, knit 24.63584 19.80344 18.50479 20.98202 61 611130 babies garments accessories of synthetic fibres, knit 10.896 22.01322 28.29929 20.40309 62 621111 men’s, boys’ 16.33789 20.64028 22.4498 19.80933 review of economics and development studies vol.2, no 1, june 2016 37 swimwear, not knit 61 611430 garments, of man made fibres, knit 15.93504 19.04164 21.61134 18.86267 63 630520 sacks ad bags packing, of cotton 16.99609 19.80852 19.54253 18.78238 61 610441 women’s, girls’ dresses, of wool or hair, knit 15.59159 17.73089 21.5792 18.30054 61 611420 garments of cotton, knit 17.72045 23.58389 12.94247 18.08227 55 551441 woven plain >85% polyester + cotton >170g/m 2 printed 13.99475 19.86386 20.13246 17.99703 61 610712 men’s boys’ underpants or briefs man made fibre, knit 16.17099 22.994 10.43541 16.53347 55 551599 woven fabrics synthetic staple fibres 0 49.17599 0 16.392 61 610620 women’s girls’ blouses and skirts man made fibre, knit 8.050406 19.63091 19.84327 15.84153 61 610990 t-shirts, singles etc, of material, knit 13.43723 6.97613 24.04663 14.82 62 620422 women’s, girls’ ensembles, of cotton not knit 9.561238 13.75509 19.41249 14.24294 62 620423 women’s, girls’ ensembles, synthetic fibre, not knit 10.2366 14.7121 16.86091 13.93654 61 610331 men’s, boys’ jackets and blazers, wool or hair, knit 11.81921 13.87565 12.4746 12.72299 62 620411 women’s girls’ suits of wool or hair not knit 7.54242 11.35605 19.06406 12.65418 62 621112 ski suits of textile material not knit 8.539567 12.55326 16.28847 12.46043 61 610910 t-shirt, singlets and other vests, of cotton, knit 12.74531 12.03828 11.53178 12.10512 61 610719 men’s, boys’ underpants or briefs, material, knit 8.791444 12.7748 14.54471 12.03698 63 630259 table linen of material not knit 8.465237 13.87353 13.1709 11.83656 61 610829 women’s, girls’ briefs or panties, material 10.02862 12.25481 12.0846 11.45601 review of economics and development studies vol.2, no 1, june 2016 38 knit 52 520548 combed mult cotton yarn 9.122074 14.99771 10.00824 11.25494 61 610453 women’s girls’ skirts, synthetic fibres, knit 0 20.42306 13.34175 11.2463 63 630240 table linen of textile knit or crochet materials 7.228115 11.84031 12.18274 10.41706 61 610452 women’s, girls’ skirts, of cotton, knit 17.17936 6.172972 6.866861 10.07306 61 610130 men’s, boys overcoats, etc, of man made fibres, knit 22.81537 1.620441 3.254108 9.229973 61 611190 babies garments accessories of material, knit 6.243435 8.572633 11.07713 8.631066 61 611120 babies garments, accessories of cotton knit 10.76046 10.51876 4.439947 8.5733055 61 611691 gloves, mittens or mitts of wool or hair, knit 8.673206 9.701713 7.331941 8.568953 52 521225 woven cotton fabric > 200g/m 2 printed 6.801946 9.622003 8.750985 8.391645 61 610451 women’s, girls, skirts, of wool or hair knit 6.549044 8.160077 10.18207 8.297063 52 521211 woven cotton fabric c>200g/m 2 unbleached 7.932312 8.723681 7.062127 7.90604 63 630299 toilet or kitchen linen of material 7.057022 8.454543 7.904649 7.805405 62 620721 men’s boys’ nightshirts or pajamas, cotton, not knit 5.804854 8.738759 8.4412 7.661604 61 611241 women’s, girls’ swimwear, synthetic fibres knit 6.374205 7.485492 8.103202 7.320966 61 610322 men’s, boys ensembles of cotton knit 4.462305 8.076765 8.736708 7.091926 58 580610 slag wool, rock wool, similar wools, bulks sheet, roll 6.515055 7.310545 6.895576 6.907059 52 521049 woven cotton <85% + man made fibre <200g yarn dyed 5.189941 7.322063 8.198862 6.903622 62 620640 women’s, girls’ blouses, shirts, man 0.897239 0.924248 18.22402 6.681837 review of economics and development studies vol.2, no 1, june 2016 39 made fibre, not knit 54 540249 yarn synth filament, single untwisted, not retail 5.590221 7.968349 6.147948 6.568839 54 540834 woven fabric of artificial filament printed 4.959592 6.084889 8.241751 6.428744 55 551443 woven>85% polyester + cotton >170g/m 2 printed 5.974839 6.939034 6.01594 6.309937 52 520512 cotton yarn >85% single uncombed 714232 dtex not retail 1.919628 1.103449 15.88846 6.303846 63 631010 used or new rags textile material sorted 5.308897 6.772853 6.395625 6.159125 54 540269 yarn synthetic filament, multiple, not retail 5.506243 6.837043 5.492612 5.945299 52 520623 cotton yarn <85% singled combed 232192 dtex, not retail 0 0 17.74738 5.915793 52 520521 cotton, yarn >85% single combe >714 dtex, not retail 2.865638 4.952065 9.590424 5.802709 51 510710 yarn of combed wool >85% wool not retail 4.18376 6.053752 5.450682 5.229398 62 620829 women’s, girls’ nightdress, pajamas, material, knit 3.800378 4.419079 7.419924 5.213127 61 610332 men’s, boys’ jackets and blazers cotton, knit 4.771324 5.439659 4.990702 5.067228 62 620821 women’s, girls nightdress pajamas of cotton, not knit 4.305418 5.174277 5.428198 4.969298 65 650510 hair-nets of any material 4.013114 5.165106 4.653781 4.610667 53 530911 woven fabric >85% flax, unbleached or bleached 3.76202 5.316414 4.670599 4.583029 58 580134 woven warp pile fabric man made fibre, epingle (uncut) 2.154199 3.518066 8.016365 4.562877 55 550510 waste of synthetic fibres 3.377678 5.531777 4.669265 4.58624 52 520100 cotton, not carded or combed 0 0 13.5567 4.578901 review of economics and development studies vol.2, no 1, june 2016 40 55 550941 yarn >85% other synth staple fibres, single not retail 4.095134 5.089077 4.12678 4.43683 52 520959 woven cotton >85% >200g/m 2 , printed 3.413652 4.701848 4.915476 4.343659 61 610190 men’s, boys overcoats, etc of material knit 2.617608 3.689572 6.314393 4.207191 62 620811 women’s, girls slips etc, of man made fibres, not knit 2.838227 3.998438 5.053845 3.963503 63 630291 toilet or kitchen linen, cotton 3.310788 4.430793 3.971644 3.904408 62 620799 men’s, boys dressing gowns, material, not knit 3.316105 3.681299 3.84774 3.615059 52 520819 woven cotton >85%<200g/m 2 unbleached 3.447162 3.723765 3.427338 3.532755 62 621220 girdles pantry girdles and parts thereof 3.051308 3.627321 3.158141 3.278923 62 621590 ties, bow ties and cravats, material, not knit 2.956377 3.765672 3.054287 3.258779 55 551299 woven fabric >85% synthetic staple fibre 2.608476 3.765219 3.30824 3.227312 61 611212 track suits, synthetic fibre 0 0 9.434925 3.144975 61 611699 gloves, mittens or mitts, material, knit 2.787531 3.288573 2.875993 2.984366 63 630239 bed linen, of material 2.75744 3.171853 3.013543 2.980945 52 520821 plain weave cotton >85%<100g/m 2 , bleached 2.639912 2.917569 2.462884 2.673455 62 620711 men’s boys underpants or briefs, of cotton, not knit 2.089433 2.618508 2.80634 2.50476 63 630800 set, woven fabric and yarn for rugs, tapestry 1.996284 2.650166 2.671625 2.439358 50 500790 woven fabric of silk 1.780914 2.798224 2.482207 2.353735 61 610290 woven fabric of silk 1.570685 2.146557 3.165733 2.94335 62 620333 men’s, boys’ jackets, blazers, synthetic fibre, not knit 3.693293 2.697967 0.345002 2.245421 57 570231 carpets of wool or hair, woven pile, not made up 0 6.34895 0 2.116317 review of economics and development studies vol.2, no 1, june 2016 41 52 520645 cotton yarn <85% multiple combed <125 dtex, not retail 1.652396 2.107908 2.222857 1.994397 61 610419 women’s, girls suit of material, knit 1.689344 1.756386 2.43192 1.959217 62 620111 men’s, boys overcoats 1.698081 2.089259 1.929337 1.905559 63 630251 table linen, of cotton, not knit 1.802046 2.33611 1.420144 1.852767 50 500600 silk yarn retail, silk worm gut 1.366236 1.933218 1.818344 1.705932 63 630391 curtains drapes blinds valances, cotton, not knit 1.49668 1.896782 1.634189 1.67588 54 540262 yarn of polyester filament, multiple, not retail 0.777385 2.233404 1.775101 1.595297 61 610821 women’s, girls briefs or panties, of cotton, knit 1.417177 1.7519 1.577782 1.582286 62 621149 women’s, girls garments, material, not knit 1.238884 1.703938 1.687582 1.543468 62 620452 women’s, girls’ skirts of cotton, not knit 0.250618 4.323281 0.14005 1.529301 61 610791 men’s, boys’ bathrobes, dressing, gowns etc, cotton knit 0 0 4.486764 1.495588 62 621440 shawls, scarves etc of artificial fibres, not knit 1.854853 1.593605 0.943997 1.4641522 61 611599 hosiery of material knit 1.200357 1.535907 1.534356 1.430207 62 620343 men’s boys trousers, shorts synthetic fibre, not knit 1.221196 0.985337 1.834295 1.346943 62 621410 shawls, scarven, etc, of silk etc, not knit 1.231224 1.374072 1.405842 1.337046 60 600542 warp knit fabrics including those made on gallon machines 1.236335 1.34116 1.369447 1.315647 61 611019 jerseys, pullovers, cardigans, waist coats and similar articles, knitted or crochet 2.683121 1.145211 0 1.276111 61 610442 women’s, girls’ dresses, of cotton, knit 0.33087 0 3.135929 1.1556 61 611300 garments of knit or 0 2.047437 1.388476 1.145305 review of economics and development studies vol.2, no 1, june 2016 42 crochet impregnated fabric 63 630499 furnishing goods, material 0.995798 1.153073 1.224039 1.124303 52 520522 cotton yarn >85% single combed 714232 dtex not retail 0 0 3.142894 1.047631 62 620469 women’s, girls’ trousers, shorts, material, not knit 1.680786 1.334756 0.069234 1.028259 62 621139 men’s, boys’ garments, material, not knit 0 0 3.070753 1.023584 60 600610 knitted/crocheted fabrics in ch.60, wool/fine animal hair 0.884876 1.135021 1.006949 1.008949 59 590691 rubberized textile knit or crochet fabric 0.872887 1.150423 0.981644 1.001651 63 630510 sacks and bags, packing of jute or other bast fibres 0.828017 0.805569 1.368526 1.000704 51 511290 woven fabric, combed wool or hair with natural fibre 0.664068 1.098372 1.239302 1.000581 source: computed using the data obtained from trademap (2013) waste of artificial fibre in table 1 has the highest rca index of 2163.9. it is followed by yarn of carded wool >85% wool with rca index of 753.6. in the third place is cotton yarn >85% multiple uncombed with rca index of 551.8. it is followed by hemp fibre with rca index of 525.9. the fifth place is occupied by women’s, girls’ slips or petticoats material, knit with rca index of 314.9. they are followed by greasy wool not carded or combed with rca index of 204.2. in the seventh position is yarn of acrylic staple fibres, not retail with rca index of 177. on the ninth place are men’s, boys’ shirts of man made fibres, knit with rca index of 148. they were followed by woven cotton, >85% <200g/m 2 yarn dyed with rca index of 146.5. miscellaneous industry/sector has 35 product lines with rca ≥ 1. table 2 shows product lines in miscellaneous industry/sector in which lesotho has competitive advantage or comparative advantage. table 2: product lines in the miscellaneous industry/sector in which lesotho has competitive advantage or comparative advantage industry/sector code (90-97) product code product description 2008 rca 2009 rca 2010 rca average rca 91 911430 clock or watch dials 734.9591 1114.696 990.0328 9.46.5625 91 911390 watch straps etc and parts, of leather/plastic 264.4864 385.4482 388.5527 346.1624 review of economics and development studies vol.2, no 1, june 2016 43 etc 93 930119 artillery weapons (eg guns, howitzers and mortars) other than self – propelled 552.6757 278.1989 181.7531 337.5426 91 911090 clock movements, unpartly assembled rough 235.2498 307.2225 383.0574 308.5099 95 950790 fishing and hunting equipment and requisites 89.93768 107.7656 105.7204 101.1412 90 901850 ophthalmic instruments and appliances 14.84938 17.32502 16.55449 16.53347 91 910299 pocket-watch, base-metal case, non-battery 12.82605 16.26663 12.08797 13.72688 96 960329 shaving, hair, nail, eyelash and other toilet brushes 8.584942 11.1127 9.976256 9.891298 96 961310 pocket lighters, gas-fueled, nonrefillable 9.058878 9.98637 9.975211 9.673642 90 901050 appliances and equipment for ph labour 4.868285 11.74672 11.30239 9.305797 93 930320 shotguns, shotgun-rifles for sport, hunting or target 25.1559 0 0 8.385299 91 910199 pocket-watch, precious-metal case, nonbattery 7.920239 7.949009 7.268501 7.712583 90 900140 spectacle lenses of glass 6.07728 6.473324 8.383734 6.978113 91 911190 polysulphides, polysulpones etc in primary form 4.140181 6.538599 7.32294 6.000573 90 901010 equipment for automatic development of 4.305983 6.340591 6.83973 5.828768 review of economics and development studies vol.2, no 1, june 2016 44 photo film 95 950730 fishing reels 5.230046 6.259287 5.813091 5.767475 96 960500 travel sets toilet sewing, shoe, clothes cleaning 3.599232 5.027583 5.838611 4.821809 92 920190 harpsichords, keyboard stringed instruments 3.871247 4.200821 3.08264 3.718236 91 910119 wristwatch, precious metal, battery, other 4.043156 3.6117 3.158119 3.604148 96 960400 hand sieves and hand riddles 2.916279 4.059327 3.741066 3.572224 91 910911 clock movements, complete and assembled, battery/alarm 2.058481 2.909939 5.120567 3.363002 90 901090 parts and accessories for photo laboratory equipment 1.543122 3.184484 2.830542 2.519383 93 930111 artillery weapons (e.g guns, howitzers and mortars) self-propelled 1.181125 3.463022 2.145511 2.473261 90 900630 cameras for special use under water aerial 1.603093 2.031063 1.92483 1.806761 94 940421 mattresses of cellular rubber or plastic 1.648429 1.941745 1.871641 1.820605 90 903010 instruments to measure or detect ionizing radiations 1.714622 1.78084 192482 1.806761 95 950629 water-skis surfboards, other water sport equipment 1.538136 1.923861 1.927407 1.796468 90 900820 microfilm, microfiche or other microform 1.379415 1.549031 2.45596 1.794802 91 910519 alarm clocks, 1.175507 1.585993 1.72718 1.496227 review of economics and development studies vol.2, no 1, june 2016 45 non-electric 91 910990 clock movements, complete and assembled, nonbattery 1.426464 1.273039 1.024235 1.241246 90 900791 parts and accessories for cinematographic cameras 1.009167 1.438201 1.232092 1.226487 91 901813 magnetic resonance imagi 1.27743 1.207462 1.060425 1.131877 91 910529 wall clocks, non-electric 0.977544 1.133073 1.224039 1.124303 90 902221 medical apparatus using alpha, beta or gamma radiation 0.936459 1.275208 1.15412 1.121929 91 910191 pocket-watch, precious-metal case battery 1.050428 1.165088 0.881321 1.032279 source: computed using the data obtained from trademap (2013). in table 2 above, clock or watch dials have the highest rca index of 946.6. they are followed by watch straps and parts of leather which have rca index of 346. in the third place is artillery weapons which are not self propelled have rca index of 337.5. they are followed by clock movements partly or not partly assembled, rough clocks with rca index of 308.5. in the fifth position is fishing with rca index of 101. they are followed by ophthalmic instruments and appliances with rca index of 16.5. metals industry/sector has 23 product lines with rca ≥ 1. table 3 shows product lines in metals industry/sector in which lesotho has competitive advantage or comparative advantage. table 3: product lines in the metals industry/sector in which lesotho has competitive advantage or comparative advantage industry/sector code (72-83) product code product description 2008 rca 2009 rca 2010 rca average rca 73 730690 tube/pipe/hollow profile, iron/steel, riveted/open sea 122.6441 163.7072 181.4434 155.9317 72 720410 waste or scrap of cast iron 77.61197 148.7294 118.5789 114.9734 72 721011 flat rolled iron or non alloy steel, coated with tin, w>600mm, t>0.5m 17.30758 30.19138 24.06931 23.85609 72 720430 waste or scrap, of 14.63584 29.88272 21.41376 21.77074 review of economics and development studies vol.2, no 1, june 2016 46 tinned iron or steel 72 720429 waste or scrap, of alloy steel, other than stainless 10.32905 16.53893 14.53644 13.80148 79 790310 zinc dust 8.933945 14.71855 10.08642 11.2463 72 721260 flat rolled iron or non-alloy steel, width <600m, clad 8.255892 14.30606 10.5693 11.04375 76 761511 pots sourers, aluminum 5.517398 10.35718 8.662797 8.112458 73 732429 baths, iron or steel, except cast iron 5.927178 8.148817 8.384625 7.486873 72 721699 angles shps sec nfw worked 2.422386 5.358355 6.378371 4.719704 73 731300 wire for fencing, including barbed wire 3.377334 4.416347 5.23692 4.343533 76 761520 aluminium sanitary ware, parts threof 3.130298 4.467224 4.88606 4.161194 72 721310 hot rolled bar/rod grooved iron or non-alloy steel in irregular coils 2.66264 5.235812 4.429775 4.109411 73 731290 plaited bands/etc, iron, steel, no electric insulation 2.913953 4.332744 4.548398 3.931698 74 741820 sanitary ware and parts thereof of copper 2.630063 3.933839 3.393026 3.363002 82 821591 cutlery not in sets, plated with precious metal 1.655336 2.774786 2.37287 2.267664 73 730590 tube/pipes iron/steel riveted etc, diameter >406.4m 1.635459 2.269522 2.143444 2.016142 74 740400 copper/copper alloy waste or scrap 1.655615 2.545029 1.559924 1.920189 74 740929 plate/sheet/strip, copper-zinc alloy, flat, t>0.15m 1.350022 2.143403 1.546832 1.680086 review of economics and development studies vol.2, no 1, june 2016 47 73 731450 expanded metal, iron or non-alloy steel <3mm wire <100cm mesh 1.146067 1.774065 1.744617 1.554916 73 731439 grill, netting, fencing 0.770374 1.134448 1.228664 1.044495 82 821195 handles for knives 4.714329 8.639433 8.498724 7.284162 82 820140 axes bill hooks and similar brewing tools 6.5495 7.862517 6.964475 7.125597 source: computed using the data obtained from trademap (2013). tube/pipe/hollow profile, iron/steel, riveted/open sea in table 3 has the highest rca index of 155.9. it is followed by waste or scrap of cast iron with rca index of 115. in the third place is flat rolled iron or non alloy steel, coated with tin, width >600mm, t>0.5 with rca index of 23.9. this is followed by waste or scrap of tinned iron or steel with rca index of 21.8. in the fifth place is waste or scrap of alloy steel, other than stainless with rca index of 13.8. stone/glass industry/sector has 14 product lines with rca≥1. table 4 shows product lines in stone/glass industry/sector in which lesotho has competitive advantage or comparative advantage. table 4: product lines in the stone/glass industry/sector in which lesotho has competitive advantage or comparative advantage industry/sector code (68-71) product code product description 2008 rca 2009 rca 2010 rca average rca 71 710231 diamonds (jewellery) unworked or simply sawn, cleaved 202.9787 187.442 179.6041 190.009 71 711419 gold/silver smith wares of/clad with precious metal 119.3753 38.28053 29.85239 62.50274 71 711320 jewellery, parts, base metal clad with precious metal 35.06134 21.97244 29.44157 28.82511 71 710210 diamonds, unsorted 46.2564 0 0 15.4188 69 690810 glazed 13.48528 13.35935 16.14197 14.32886 review of economics and development studies vol.2, no 1, june 2016 48 ceramic mosaic tiles <7cm wide 71 711291 waste and scrap of gold including metal clad with gold but excluding sweepings 11.70539 14.91212 12.41408 13.01053 71 710229 diamonds industrial, worked 12.38463 11.79051 14.36107 12.8454 71 711230 ash containing precious, semiprecious metal comps 7.446278 18.71947 9.169246 11.97833 71 711620 articles of precious, semiprecious, artificial stone 7.151341 7.302498 7.265545 7.239795 69 690710 unglazed ceramic mosaic tiles <7cm wide 5.121887 6.708235 5.435306 5.755143 71 711810 coin (other than gold coin) not being legal tender 17.14601 0 0 5.715336 69 690600 ceramic pipes, conduits, guttering and fittings 2.038496 2.877976 3.285055 2.733842 69 691190 household and toilet articles of porcelain 0 0 3.297099 1.099033 69 691090 ceramic bath room 0.783745 1.149111 1.101472 1.011443 review of economics and development studies vol.2, no 1, june 2016 49 kitchen sanitary items not porcelain source: computed using the data obtained from trademap (2013). diamonds (jewellery) unworked or simply sawn, cleaved have the highest rca index of 190 in table 4. they are followed by gold/silver smith wares of clad with precious metal with rca index of 62.5. in third place is jewellery, parts, base metal clad with precious metal with rca index of 28.8. they are followed by diamonds, unsorted with rca index of 15. transportation industry/sector has 6 product lines with rca ≥ 1. table 5 shows product lines in transportation industry/sector in which lesotho has competitive and comparative advantage table 5: product lines in transportation industry/sector in which lesotho has competitive advantage or comparative advantage industry/sector code (86-89) product code product description 2008 rca 2009 rca 2010 rca average rca 88 880211 helicopters of unladen weight <2, 000 kg 27.77482 47.14019 61.1992 45.3714 88 880400 parachutes, parts and accessories 39.54833 44.93342 45.17364 43.21846 88 880220 fixed wing aircraft, unladen weight <2000kg 4.258103 11.64982 10.87832 8.928748 89 890790 buoys, beacons, coffer-dams pontoons, floats 7.530137 8.93927 9.519306 8.662904 89 890399 rowing boats, canoes pleasure boats except sail/powered 1.347047 2.345301 2.171187 1.954512 87 871500 baby carriages and parts thereof 1.271808 1.720653 1.599467 1.530643 source: computed using the data obtained from trademap (2013). helicopters of an unladen weight <2 000 kg in table 5 have the highest rca of 45. they are followed review of economics and development studies vol.2, no 1, june 2016 50 by parachutes, parts and accessories thereof with rca of 43. in third place is fixed wing aircraft, unladen weight < 2000kg with rca index of 8.9. vegetable products industry/sector has 5 product lines with ≥ 1. table 6 shows product lines in vegetable products industry/sector in which lesotho has competitive or comparative advantage. table 6: product lines in vegetable industry/sector in which lesotho has competitive advantage or comparative advantage industry/sector code (06-15) product code product description 2008 rca 2009 rca 2010 rca average rca 11 110313 maize (corn) groats or meal 16.67905 19.84502 17.55048 18.02485 14 140490 vegetable products 6.55742 9.858852 4.378384 6.93154 07 071120 olives, provisionally preserved 9.166686 0 0 3.055529 11 110220 maize (corn) flour 0 7.780081 0 2.59336 08 081340 fruits, dried 0 3.047325 3.133786 2.06037 source: computed using the data obtained from trademap (2013). maize (corn) groats or meal in table 6 has the highest rca index of 18. it is followed by vegetables products with rca index of 6.9. wood and wood products industry/sector has 4 product lines with ≥ 1. table 7 shows product lines in wood and wood products industry/sector in which lesotho has competitive or comparative advantage. table 7: product lines in wood and wood products industry/sector in which lesotho has competitive advantage or comparative advantage industry/sector code (44-49) product code product description 2008 rca 2009 rca 2010 rca average rca 48 481720 letter or correspondence cards, plain post cards 102.2355 128.411 106.5051 112.3839 48 482090 office supplies of paper, book covers, blotters 8.818591 10.70641 12.09913 10.54137 48 481930 sacks and bags of paper, having a width>40 cm 4.051041 5.378536 5.136341 4.855306 49 490210 newspapers, journals and periodicals >3 issue/week 1.114916 1.56969 1.702344 1.462317 review of economics and development studies vol.2, no 1, june 2016 51 source: computed using the data obtained from trademap (2013). letter or correspondence cards have rca index of 112 in table 7. they are followed by sacks and bags of paper with width of >740cm with rca index of 4.9. footwear/head gear industry/sector has 4 product lines with rca≥1. table 8 shows product lines in foot wear/head gear industry/sector in which lesotho has competitive and comparative advantage. table 8: product lines in foot wear/head gear industry/sector in which lesotho has competitive advantage or comparative advantage industry/sector code (64-67) product code product description 2008 rca 2009 rca 2010 rca average rca 64 640320 foot wear soles/uppers leather, strap instep and big 3.083797 5.024603 8.896674 5.668358 64 640220 foot wear, rubber, plastic, straps fix to sole by plug 2.103646 2.4147 1.760477 2.092941 65 650700 parts of hats and head gear 1.304664 1.344966 1.86321 1.27865 65 650699 head gear of other materials 0.99013 1.346112 1.216011 1.184056 source: computed using the data obtained from trademap (2013). foot wear, soles/uppers leather, strap instep and big have the highest rca index of 5.7 in table 8. the results also show that there were no products with rca≥ 1 in the following industries/sectors: animal and animal products; raw hides’ skins leather and furs; plastic and rubber; chemicals and allied industries; food stuffs; and mineral products. this shows lesotho is not competitive in these industries. the results although are based on industries are consistent with the results of empirical evidence discussed in the literature review. the empirical evidences were based on product lines rather than inter-industry competiveness. however, to arrive at inter-industry competiveness rcas for product lines were computed then categorized in their respective industries. these results are therefore consistent with reported empirical evidence. comparison of inter-industry competitive advantage in figure 1 below, shows comparison of inter-industry competitive advantage in lesotho. figure 1: comparison of inter-industry competitive advantage in lesotho review of economics and development studies vol.2, no 1, june 2016 52 in figure 1 above, textile is the most competitive industry/sector in lesotho with 165 product lines in which it has rca≥ 1. mostly are manufactured clothing. miscellaneous is the second competitive industry/sector with 35 product lines. it is followed by metals which has 23 product lines with rca≥1. in the fourth place is stone/glass with 14 product lines demonstrating competitive advantage. it is followed by transportation industry/sector with 8 product lines in which it has competitive advantage. the sixth place is occupied by vegetable products industry/sector with 5 product lines in which it has competitive advantage. they are followed by wood and wood products and foot wear/head gear industries/sectors each have 4 product lines in which they are competitive. 5. results and hypothesis the null hypothesis set in this paper is restated here; there is no difference in the competitive advantage and performance of industries in lesotho’s export sector. based on the results reported above and their analysis, the above null hypothesis is rejected and that the alternative hypothesis that there is a difference in the competitive advantage and performance of industries in lesotho’s export sector is true. conclusions and recommendations textiles ; 165 miscellaneous ; 35 metals ; 23 stone/glass ; 14 transportation ; 8 vegetable products ; 5 wood & wood products ; 4 foot wear/head gear ; 4 textiles miscellaneous metals stone/glass transportation vegetable products wood & wood products foot wear/head gear review of economics and development studies vol.2, no 1, june 2016 53 the paper concludes that there is evidence that competiveness in lesotho vary from industry to the other. textile industry is the most competitive of all industries in lesotho. the second most competitive industry is miscellaneous. the least competitive industries in lesotho are wood and wood products and foot wear/head gear. the following industries clearly demonstrate lack of competitive advantage and have performed poorly in international trade: animal and animal products; raw hides, skins leather and furs, plastic and rubber; chemical and allied industries; food stuffs and mineral products. competitiveness is very much concentrated in one industry mainly textile. lesotho is therefore very vulnerable due to over-reliance in a single industry. any disturbance in this industry would result in significant drop in exports for lesotho and its productivity. there are also a very limited number of products in all industries in which lesotho has competitive advantage except textile industry. textile industry is labor intensive hence such labor is readily available in lesotho. the conclusions as stated above demonstrate the need for lesotho to diversify its economy in order to improve on competitive advantage. lesotho should endeavor to attract foreign direct investment (fdi). if lesotho succeeds in attracting fdi, it will improve its competitiveness through infusion of technology as well as superior management skills. it is further recommended that lesotho should attract international firms which outsource from countries such as pakistan and bangladesh to boost its textile industry further as the country has demonstrated it has competitive advantage in the textiles industry. these chances of attracting the firms can be enhanced through offering them incentives to entice them locate to lesotho. fdi should not be restricted to textiles industry only but to other industries as well especially the ones with very little competitiveness or no competitiveness at all. references balassa, b (1965), “trade liberalisation and revealed comparative advantage,” newhaven: yale university, economic growth centre. bender, s and k. li, (2002), “the changing trade and revealed comparative advantage of asian and latin american manufacture exports,” yale university, economic growth center. center discussion paperno.843. chingarande, ann and macleans mzumara (2013), “is south africa really a giant of sub-saharan africa in international trade?” greener journal of business and management studies, 3(4), 158163. deardorff, a. v. (2010, “thoughts on revealed comparative advantage.” oecd global forum on trade chengdu, china, october 14. ferto, i and l. j. hubbard (2000). “revealed comparative advantage and comparative and competitiveness inhungarian agri-food sectors,” institute of economics hungarian academy of sciences, new series 2002/8. khatibi, a. (2008), “kazakhstan’s revealed comparative advantage vis-à-vis the eu-27.” ecipe working paper no. 03/2008. mirzaei, f., s, yazdani and a.a. gharahdaghi (2004), “competitiveness of the iranian egg industry in the middle east region,” animal science research institute. retrieved july 30, 2012, from ftp//ttp.fao.org/upload/-agrippa/672_endoc mutambatsere, e. 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(2004) “ revealed comparative advantage and competiveness: evidence for turkey vis-a –vis the eu/15,” paper presented at the european trade study group 6th annual conference, nottingham, september vollrath, t. l. (1991), “ a theoretical evaluation of alternative trade intensity measures of revealed comparative advantage,” weltwirtschaftliches archiv, 130, 265-279. widgren, m. (2005 “ revealed comparative advantage in the market,” turku school of economics, theresearch institute of finish economy (etla), cepr and cesifo. wu, h. l and c.h. chen (2004), “changes in the foreign market competitiveness of east asian export,” journal of contemporary asia, 34(4), 505-522. yeats, a. (1997), “ does mercosur’s trade performance raise concerns about the effects of regional trade arrangement?” world bank policy research working paper 1729. review of economics and development studies vol. 4, no 2, december2018 153 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 2, december 2018 journal homepage: www.publishing.globalcsrc.org/reads effect of board independence on earning response coefficient (erc): evidence from pakistan 1 wahid raza, 2 anjum ihsan, 3 shahid jan 1 ph.d scholar, department of management sciences, islamia college peshawar, pakistan. wrkhattak287@yahoo.com 2 assistant professor, department of management sciences, islamia college peshawar, pakistan. searchanjum@yahoo.com 3 chairman, department of management sciences, islamia college peshawar, pakistan. shahidjan@icp.edu.pk article details abstract history revised format: october 2018 available online: december 2018 this study investigates whether board independence plays a significant role to enhance the earning response coefficient (erc) while controlling the established determinants of earning response coefficient (beta, growth, size and earning persistence). the study selected 250 nonfinancial firms of different sectors on the basis of purposive sampling technique which are enlisted in pakistan stock exchange (psx) for the time periods of eight years ranging from 2008 to 2015. using reverse regression, it has been observed through statistical analysis that beta is negatively related to erc while others determinants (growth, size and earning persistence) are positively related to earning response coefficient (erc). moreover, the analysis result also suggested that corporate governance facet (board independence) plays a significant role to enhance the earning response coefficient, because as per pakistan code of corporate governance (2012), the independent directors include those who are not connected to the companies, have no relationship with the companies and are free to exercise their judgment without any pressure. the important contribution for literature is that before making investment decision in stock market, investors should evaluate the corporate governance variables (board independence) of the firms which can boost earning response coefficient (erc). secondly, previous studies (shah,2017; and collins & kothari, 2004) and others researchers mostly worked on developed countries in the same area, but this research study is limited to emerging economy of pakistan, that’s why it has great contribution for literature. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords board independence, independent directors and erc, erc determinants and board independence jel classification: f23, j21, p24 corresponding author’s email address: wrkhattak287@yahoo.com recommended citation: raza, w., ihsan, a. and jan, s. (2018). effect of board independence on earning response coefficient (erc): evidence from pakistan. review of economics and development studies, 4 (2), 153-164 doi: 10.26710/reads.v4i2.386 1. introduction the available literature mainly classifies directors of the companies’ as outside directors, inside directors and grey directors. those directors who are working currently as managers or executives are called inside directors, and http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 154 outside directors are those directors who represents such outside parties who has closely association with the companies and such nature of directors are also named as grey directors and those directors having no relation or affiliation with a company or business is called independent directors. according to pakistan corporate governance code (2012), the independent directors include those who are not connected to the companies, have no relationship with the companies and are free to exercise their judgment without any pressure. the effective board can only be ensured when all the authority and responsibility are under the control of independent directors and not it the disposal of high authority i.e chief executive officer (ceo) and some others top authorities who can distort the board independence (farooq & kimani; 2015; fama, 1981; fama & jensan, 1983; m.c. jensen & mecklings, 1976; and pearce & zahra , 1989). balatbat, taylor and walter (2004) based on a study conducted on australian firms documented that outside ownership is not closely associated with the firm performance while independent directors may be considered an important variable to improve the firm performance. zakaria (2014) argued that market volatility and earning fluctuation mostly happen an emerging market. it has been observed by previous studies (cheng & nasir, 2011) that earnings response coefficient research is scarce an emerging market. the drive and influence of erc has been explored a bite while comprehensive literature is still under process. so the main object of the study is to fill the gap in context of pakistani market which has not been exposed yet. information plays a vital role for investment decision. the published information can attracts the investors to make right decision if the announced or published information has great values for investors. it has been noticed that market will react accordingly as per the announced information. these all needed information are available on company own sites. moreover, investors can get thorough and accurate information through annual reports which describe financial position and performance of the firm. one other option is financial statement through which investors make investment decision for the sake of earning profit is earning response coefficient(saleem & khurshid, 2014; hartono, 2003). it has been introduced by the capital market researchers that erc has four significant determinants including beta, firm growth, earning persistence and firm size (bernard and rulands, 1987; easton and zmejeweski, 1989; collins and kothari, 1990; biddle and seaowe, 1991; cho and jungs, 1992; dhaliwal and reynolds, 1995; kai, 2003; kim, 2004; cheng and nasir, 2011, zakaria et al; 2014). stobars (1990) stated that erc determinants are considered an important tool to predict the returns of securities. it has been investigated through equally weighted index model and found that beta is considered as measure of systematic risk (collins and kothari, 1990). they used reverse regression analysis and found that the relationship between beta and erc is negative and significant. the same work of collin and kothari were further extended by other studies (huson, scot and wiere, 1999) and found that reverse relation exist between beta and erc which means that as beta increase erc will decrease and vice versa. moreover, collins and kothari, (1990) also investigated and found that companies whose profit margin is high, will positively affect the growth opportunities which will ultimately increase the erc. the earning persistence shows that how long time the earning remain or persist in the future as well. kormendi and lip (1987) argued that high returns are associated with earning persistence, which means that there a positive relationship between erc and earning persistence. brigham and houstan (2012) argued that firm size can be categorized through different scales like total income, total assets or capital. its common perception is that big companies share information on their sites which can decrease the uncertainty of the future cash flow of the company. 2. literature review 2.1 board independence / independent directors literature has broadly classified directors into outside directors, inside and grey directors. those directors who working as managers or executive is termed as inside directors, while outside directors are those who linked with such parties having business relation with the company and such directors may also called grey directors and independent directors are those who has no relation or affiliation with the company. comparatively, the outside independent directors are more responsible and have integrity than the inside directors review of economics and development studies vol. 4, no 2, december2018 155 to better handle the misappropriation of funds and other corporate affairs. the inside directors are more influential and try their best to serve for own and shareholder interest (fama, 1980; and fama & jensan, 1983) and implement strategies when organization feel some risks (judge & zaithaml, 1992). however, if the numbers of inside directors are in large, then possibility of firm performance will be low. hill and snell (1988) argued that presence of outside directors has positive impact on firm performance. the same results are also documented in other studies (baysinger & buttler, 1985; choi, park & you, 2009; pearce & zahra, 1993; schellenger, wood & tashekori, 1990; and jeng & pengs, 2008). in addition, the abnormal stock return is associated with independent outside directors in the board and the chance of price reaction goes up in their presence, thus enhancing the owner wealth (rosenstein and wyat, 1991). furthermore, hermalin and weisbach (1989) argued that independent outside directors’ plays an important role to enhance the performance of the poor firms by protecting them in hard time when firm are going to failure. moreover, beasley (1999) stated that independent outside directors in the board is an important tool to curb the fraudulent activities in the firm which will ultimately increase the firm performance. the corporate board is responsible to keep keen interest in the shareholder wealth and management activities which is considered the prime duty of the board. according to fama (1983) and fama & jensan (1987), if outside independent directors performance is poor then the chances increase that corporation will incur the reputation cost which is bad sign for the company. different researchers described the importance of independent outside directors in different time. for example its common perception that board can increase the erc and shareholder wealth (wang & ali, 2013; rosenstein & wyat, 1991), while other perception is that outside independent directors enhance the shareholder wealth during tender offer which is considered an important function for the firms(cotter, shivdaseni, & zener, 1999). though, other opinion prevails that outside directors might not be performing well up to the mark because overall board culture discourages the divergence (mace 1996; and jensen 1993). therefore, in general it’s still ambiguous to find positive correlation between independent outside directors and firm performance (yermack, 1997 and bhagat and black, 1999). 2.2 earning response coefficient the most important element of firm performance is earning profit which is considered the entity as a whole. ball and brown (1969) conducted research and found that investors make investment decision on the basis of profit information. it has been observed that company share price and return are closely associated with one another, which shows that stock return and share prices are directly proportion. erc shows the investment decisions that depend on account profit and investors try their best to invest such securities which has better chances of return in future. collins and kothari (1989) define erc as a measure of magnitude of securities abnormal gains in response to the unexpected profit components. the declaration of low erc indicates that the information regarding profit is not sufficient and it’s hard for investors to make right economic decision. the response of investors is high when earning information and profit announcement is marked or publicized well in time. according to (shah & hussain,2016; and sandi,2013) erc plays an important role to analyze or calculate stock value while using financial data of the companies,moreover, investors can easily access through these financial information that which company is more profitable and bearing less risk in future. erc is influenced by several factors which describe the characteristic or qualities of the companies, these factors are classified as beta, growth, size and earning persistence (susilawati, 2008). 2.3 beta a study conducted by collins and kothari (1990) and found that beta is an important variable and considered as measure of a systematic risk, moreover, they also found that relation between beta and erc is negative and significant while applying the reverse regression model of unexpected earnings on returns. additionally, huson, scot and wiere (2000) expended the work of collins and kothari (1990) and argued that there exist negative relation between beta and erc,means when beta increases erc will decreases and vice versa. 2.4 growth collins and khotari, (1999) stated that profit is directly linked with growth opportunities and erc, because profit information is most attractive factors for investor which will ultimately increase the growth opportunities and erc. review of economics and development studies vol. 4, no 2, december 2018 156 this shows that earning announcement and erc are directly linked to one another. on the other hand, one perception is that profit and growth opportunities have no linked with one another and consequently no effect to enhance erc (palupi, 2006). collins and kothari (1990) argued that growth opportunities is calculated by market to book ratio and this measure is alos used as a proxy for growth expectation. the mathematical expression of growth opportunities (go) are as under. growth opportunity = pij/ bvij here pij and bvij represent book value and market value of equity. the above formula indicates that as the growth opportunities increases, the stock return will also increase and vice versa. it’s also found that growth opportunities greatly influence the `erc which is positive sign for investors. 2.5 earning persistence the most important factor of erc is earning persistence which indicates that how long the earning will remain consistent and persistence in the coming future. previous researchers (kormendi and lipe, 1987; collins and kothari, 1990; lip, 1991 investigated and concluded that stock return and earning persistence are associated with one another, if stock return remain constant for long time so earning persistence will also persist in future. this shows and erc and earning persistence are positively related to one another. 2.6 firm size brigham and houston (2012 ) argued that size of a firm indicates that how much one firm is larger than the other and for this purpose size of the firm is classified on the basis of total income, total capital and total assets of the firms. its general perception that big companies share information on company site and investors can easily interpret this shared information and decrease the uncertainty of future cash flow of the companies. this indicates that those companies who are big in size will have higher erc (naimah and siddhartha, 2006). conversely, some studies (usman, 2015; & zahoor, 2013) have been conducted and their results show that firm size has no effect to increase or decrease the erc. in this study, most of the firms were large in size, but the investors did not take into account the size of the firm while taking investment decision (laila, 2013). 2.7 board independence and earning response coefficient (erc) as per pakistan code of corporate governance (2012), the independent directors include those who are not connected to the companies, have no relationship with the companies and are free to exercise their judgment without any pressure. the effective board can only be ensured by the presence of independent outside directors who have control on the line of authority and are not at the disposal of the chief executive officer (ceo) or some upper hand distorting the board independence (fama, 1981; fama & jensan, 1983; m.c. jensen & meckling, 1977; and zahra & pearce, 1990). balatbat, taylor and walter (2004) based on a study conducted on australian firms documented that outside ownership is not closely associated with the firm performance while independent directors may be considered an important variable to improve the firm performance and erc. comparatively, the outside independent directors are more responsible and have integrity than the inside directors to better handle the misappropriation of funds and other corporate affairs. the inside directors are more influential and try their best to serve for own and shareholder interest (fama, 1980; and fama & jensan, 1983) and implement strategies when organization feel some risks (judge & zaithaml, 1992). however, if the numbers of inside directors are in large, then possibility of firm performance will be low. hill and snell (1988) noted the positive effect of outside directors on the firm performance and erc. the same results are also documented in other studies (baysinger & buttler, 1988; choi, park & yoo, 2009; & pearce & zahra, 1992) the abnormal stock return increases due to increase of independent outside directors, moreover the price reaction greatly depend on their presence, which play a vital role to enhance the wealth of shareholders (rosenstein and wyat, 1999). furthermore, hermalin and weisbaich (1989) argued that its necessary to increase the numbers of independent outside directors to increase the performance of poor firms, because the presence of outside directors protect the firm from hard time while firm is going to failure. additionally, imran & malik (2015) and beasley (1996) noted that we can reduce the frauds and increase erc while increasing the numbers of independent outside review of economics and development studies vol. 4, no 2, december2018 157 directors in the board because it’s considered an important tool to control the fraudulent activities in the company kulkarni (2007) conducted a study who argued that independent outside director and firm growth are interlinked to each other which improves different areas or decrease the chances of default risk which will ultimately increase the erc. so independent outside director is important facet of corporate governance which can positively affects the erc and firm performance and decrease the exposure of firm for default risk. dunstan, keeper, truong and van zijl (2012) conducted a survey base research to find out that whether any relation exists between the board independence, firm’s growth and erc. for this purpose, they selected sample of 543 firms listed on the new zealand stock exchange. they found that the independent directors, board size and audit committee independence play an important role to increase erc and firm’s growth. h1: a significant relationship exists between board independence and earning response coefficient (erc). h0: in significant relationship exists between board independence and earning response coefficient (erc). in order to test the hypothesis, it’s mandatory to control other variables which also determine erc.the name of these control variables are beta, growth, size and earning persistence. 3. research methodology 3.1 study period and sample selection all non-financial firms are the study population. the study selected 250 firms of different sectors on the basis of purposive sampling technique for the period of 2008 to 2015, which can fulfill all the required data of the research. the data gathered from balance sheet analysis, annual reports and companies own sites. 3.2 statistical tool for data analysis the collective data has been passed away through various statistical tool and technique like descriptive statistics, correlational analysis and multiple regression analysis. 3.3 model specification = ∗ ( / ) variables n i.e x1.x2……xn which actually represent erc then = (x1, x2… x ) ∗ ( / ) in the ur regressions, the mathematical expression of the coefficient xi*(ux/p) on {xi*(ux/p)} represents the xi effect on erc. moreover, a significant measurement error exist, it’s clearly indicates that reverse regression will be used instead of direct regression. in this aspect, owing to the significant measurement error in ur, in this study for estimation purpose reverse regression is adopted instead of the direct regressions (collins and kothari, 1989). other scholars also have applied it with the same rational making strong the argument of using this method in this study (chao and jung, 1992; dhaliwal and reynolds, 1994; cready, hurt and saida, 2000; and gunny, jacob and jorgensan (2009). through regressions, the {xi} effect is tested which is base on the below technique. / = [1/ (x1,x2, …. , x )]/ the above expression represents the regressions equation. / = 0 + 1 + 2 ∗ 1 + 3 ∗ 2 + … + +1 ∗ + by applying reverse regression, the tests of coefficient is now reverse to the erc and therefore it becomes returns response coefficient (rrc). its mean that the regressions results will react oppositely. for example, if a positive and significant relation found amongst coefficient of xi*ur,so it will indicates that the coefficient xi is negatively associated to erc and vice versa. as we discussed above that coefficient {xi} represent the effect of xi on erc, for this purpose this study will run review of economics and development studies vol. 4, no 2, december 2018 158 regression to investigate the effect of beta, firm size, earning persistence and growth with these variables as the {xi}.the hypothesis of the study is, a significant relation exists between board independence and its effects on erc. the researcher has used board independence (bi) in this regression equation to set of {xi}. after adding the measure of board independence in a set of {xi}, the below regression equation was intended. / = 0 + 1 + 2 ∗ bi + 3 ∗ + 4 ∗ + 5 ∗ + 6 ∗ + ε thus when the value of ˆ 2 < 0 and also significant will show that board independence significantly effect on earning response coefficient (erc). 3.4 measurement of variables 3.4.1 control variables beta, growth, size and earning persistence are determinants of erc and act as control variables in this research study. 3.4.2 unexpected earnings unexpected earning is calculated by taking difference between current years earning per share (eps) minus previous year eps. moreover the unexpected earning is then deflated by previous years stocks prices. 3.4.3 unexpected returns the car (cumulative abnormal return) is actually proxy of unexpected return (ur) which is obtained from annual report of the firms. abnormal return is actually measured by differences between actual return and expected return, while sharp market model (1963) is used to obtain estimated expected return. 4. data analysis 4.1 descriptive statistics the sample size of this study consists of 250 non-financial companies listed on pakistan stock exchange (psx). the secondary data of these companies have been collected from their websites and official document issued by the state bank of pakistan namely the “financial statement analysis”. initially there were 2000 observations but outliers were found which were dropped through the statistical tests i.e. winsorization and cook’s distance test and finally 1697 observations were left which were used to estimate the results. table 1: descriptive statistic of earning response coefficient and board independence variable obs mean std. dev min. max uxp 1696 0.16853 1.42202 -4.4595 9.36208 beta 1697 0.5916 0.47862 -0.1684 1.90629 sz 1697 15.1934 1.56921 11.3189 19.2532 grth 1697 0.90628 0.94755 -1.8798 4.91669 eprs 1697 2.69677 9.35632 -34.972 34.6436 car 1697 0.06011 0.87625 -1.1231 4.40488 bi 1697 0.60399 0.20245 0.125 0.91667 the descriptive statistics of earnings response coefficient (erc), board independence and control variables are presented in table 1. the table shows that the mean value of uxp (unexpected earnings to price) is 0.16853 and the standard deviation is 1.42202. similarly, beta has the mean value of 0.5961 which is almost half of the market beta value of 1.0. this implies that selected companies in the sample are not financially geared substantially and the same companies have on average low level of systematic risk in comparison to the entire market. the standard deviation of beta is 0.47862 which highlights low dispersion in the distribution of beta values. the mean value of firm size is 15.1934 and the standard deviation is 1.56921. similarly, the mean value of firm growth is 0.90628 which is favorable as the market is willing to pay on average high price for the selected companies’ stock due to the high growth potential. the average value of earnings persistence is 2.69677 and its standard deviation is 9.35632. the car (cumulated abnormal return) mean value is 0.06011 and its standard deviation is 0.87625. the mean value of bi (independent non-executive directors) is 0.60399 which depicts the average percentage of independent non-executive directors in the board of selected companies in comparison to the lowest and highest values of 12% and 91% respectively. review of economics and development studies vol. 4, no 2, december2018 159 4.2 correlation analysis to test all the variables of the study, correlation analysis was performed. pearson correlation coefficient is shown amongst all the variables in the table. as pearson correlation represent the strength of linear relationship between two variables. the below table shows that board independence(bi),beta,growth (grth),size(sz) ,cumulative abnormal return(car)and earning persistence(eprs) are significantly correlated with the ratio of unexpected earning to price(ux/p) .however the relation among all the variables is moderate and statistically significant. the table of correlation indicates that there is no serious issue of multicollinearity amongst all the independent variables because none of the pearson coefficient exceeds 0.7(pallat, 1996). table 2: correlation analysis *. correlation is significant at the 0.05 level (2-tailed), **. correlation is significant at the 0.01 level (2-tailed 4.3 ordinary least square (ols) assumptions before performing the regression analysis, ols assumptions have been tested to determine. the first assumption tested was the normally that whether data is following the normal distribution or not. in this regard, wensorization and cook’s distance test were used after which outliers were dropped and then the normality assumption was tested through the shapiro-wilk test. another problem was multicollinearity which was also needed to be addressed. to check the multicollinearity, variance inflation factor (vif) test has been used which showed that there is no serious issue of multicollinearity amongst the explanatory variables as all the test values are less than critical the value of 10 (gujrati, 2005). the vif values are provided in the respective tables given below. in panel data analysis one of the main problems is heteroskedasticity which was tested through the breusch-pagan / cook weisberg test for heteroskedasticity. the test results show that the pertinent p-values are 0.05 which showed existence of heteroskedasticity in the data. to tackle this issue the robust standard error was used. to check the autocorrelation, durbin watson test was used. as a rule of thumb, the values between 1.5 and 2.5 are relatively acceptable (koksal & kettaneh, 2011). there is no serious autocorrelation as test values are in the range (1.5-2.5) given in table of the econometric models. moreover, hausman test was used to select random or fixed effects model, the test results indicated that fixed effect model (fem) is the appropriate model which was used to run the econometric models / equations. now the board independence and its effect on erc determinants, the following two econometric models are used to show the effect of these two variables. the estimation of two regressions equation are as follows. uxit/pit = α0 + a1carit + a2car*betait+ a3car*grthit+ a4car*eprsit+ a5car*sz it + year fixed effect + εit (1) uxit/pit = α0 + a1carit + a2car* biit + f (control variables) + εit (2) 4.4 erc and its determinants results uxit/pit = α0 + a1carit + a2car*betait+ a3car*grthit+ a4car*eprsit+ a5car*sz it + year fixed effect + εit (1) uxp bi beta grth sz car eprs uxp 1 bi -0.040 1 beta 0.021 0.166** 1 grth -0.04 0.203** 0.028 1 sz -0.056* 0.366** 0.199** 0.199** 1 car 0.045 -0.026 0.116** -0.0173 0.0447 1 eprs -0.33** -0.0244 -0.311** -0.130** 1 -0.160** -0.091** review of economics and development studies vol. 4, no 2, december 2018 160 table 3: dependent variable ux/p 4.5 effect of board independence on erc uxit/pit = α0 + a1carit + a2car* biit + f (control variables) + εit (2) the above table shows the car and beta relationship while using the fixed effect model. as can be seen from the respective test values, all assumptions of multiple regression are being fulfilled. the results presents that interaction of car and coefficient of beta is positively and significantly interlinked to each other which means that the relationship between beta and erc is negative and significant. these results are similar to the previous studies (e.g., zakaria, 2013; dhaliwal et al., 1992; dhaliwal and reynold, 1997; billings, 1999; and shanguan, 2007). the previous researchers have investigated and suggested that beta has negative relation with erc. similarly, the relation between the interaction of car and firm growth is negative and significant which means that according to reverse regression, the firm growth is insignificantly and positively related with erc. these results are similar to other pertinent studies (zakaria, 2013; collin and kothari, 1990; martikainan, 1997; billings, 2000; park and pincas, 2000; kim, 2005; ghosh et al., 2005; shanguan, 2007). the results also depict that car and earnings persistence are significantly and negatively related with each other which means that earnings persistence is significantly and positively related with erc. these results are similar to other related studies (zakaria, 2013; kormendi and lipe, 1987; collins and kothari, 1989; and dhaliwal and reynolds, 1994). as regards car and firm size, their relation is also negative and significant which means that the firm size has positive and significant relation with erc. these results are consistent with billings (1999) and vafeas (2000). however, martikainen (1997) found that the firm size and erc has no relation which means that for large and small firms, the erc will remain the same. similarly, walker (1995) also noted that the firm size is not a significant determinant of erc. nevertheless, shangguan (2007) found the consistent results that the firm size is positive and extremely significant determinants of erc which shows that for large size firms, the erc will be high. the below regression result shows the effect of board independence on erc. the test values depict that there is no violation of assumptions of multiple regression after statistical results the above table presents that the coefficient of interaction term of car and board independence is found negative and significant which mean (referring to reverse regression) that the interaction of coefficient of car with board independence has significant and positive relationship with erc. on the basis of this result it accepts the alternative hypothesis that board independence and erc are significantly interlinked to each other. these results are consistent with other studies (zakarai, 2013 bhojraj and sengopta, 2005). the results also highlight that large number of independent outside director in a board are favorable for the firms, because different directors have the potenti al of multi skill, ability to monitors and control all sort of company activities specifically related to the debt obligations in an efficient way in order to mitigate the impact of firms’ default risk on erc. therefore, it is concluded that the results support the hypothesis h1: board independence has positive and significant relationship with erc. in other words, companies with large number of independent directors in the boards may be less exposed to the default risk through better corporate pool ols regression dv=ux/p robust pool re fe variables beta p-value beta p-value beta p-value beta p-value vif car 2.1594 0.0000 2.1594 0.0010 2.1594 0.0000 1.9078 0.0000 1.20 carbeta 0.3644 0.0000 0.3644 0.0640 0.3644 0.0000 0.3155 0.0020 3.14 cargrth 0.095 0.0400 -0.0959 0.2070 -0.0959 0.0600 -0.0974 0.0500 2.57 careprs 0.019 0.0000 -0.0192 0.0200 -0.0192 0.0000 -0.0201 0.0010 1.15 carsz -0.1410 0.0000 -0.1410 0.0010 -0.1410 0.0000 -0.1221 0.0000 1.34 _cons 0.1466 0.0100 0.1466 0.0000 0.1466 0.0000 0.1469 0.0000 r2 0.0342 0.0342 0.0342 0.0337 adjusted r2 0.0308 f-value 9.9700 3.2500 59.8500 7.8100 p-value 0.0000 0.0035 0.0000 0.0000 lamgre 0.0000 1.000 hausman test 5.74 (0.04525) breusch –pagan 2.39 (0.53) swilk 1.66 (0.78) durbin watson 2.175 review of economics and development studies vol. 4, no 2, december2018 161 governance to positively affect the erc. table 4: dependent variable ux/p 5. conclusion this study explored the effect of board independence on earnings response coefficient (erc) while controlling the established determinants of erc (beta, firm growth, firm size and earnings persistence). the results indicate that there exists negative and significant relationship between beta and erc supporting the view that beta is a partial measure of risk specific to erc. these results are in line with other previous studies (zakaria, 2013; dhaliwal et al., 1991; dhaliwal and reynold, 1995; billings, 1999; shanguan, 2007) which also documented that beta is a measure of systematic risk and has negative relation with erc. the relationship of firm growth with erc is significant and positive which is also similar to results of other studies (zakaaria, 2013; collin and kothari, 1990; martikainan, 1997; &billings, 1999). according to palupi (2006) who argued that high growth companies has greater possibilities to earn high profit in the coming future. likewise, the results pertaining to earnings persistence with erc are also significant and positive. other studies also have documented the similar results like zakaria, 2013; kormendi and lipe, 1987, collins and kothari, 1989; and dhaliwal and reynolds, 1994. these studies highlighted that earnings persistence is concerned with firms’ profits, as long as earnings persist, firms will get more and more profit and termination of earnings persistence will directly affect the earnings and erc. thus, overall there may be a positive link between earnings persistence and erc. as regards the firm size it was found that it also has positive and significant relation with erc which implies for large firms the magnitude of erc will be high. these results are consistent with billings (1999) and vafeas (2000) who argued that big companies being having a sound reporting system are in a better position to publicized the company information on their sites which is good sign for investors to interpret these information to decrease the uncertainty of future cash flow. this mean that those firms whose size is high will have higher erc. similarly, results also support the hypothesis that board independence positively and significantly effect the erc. these results are consistent with zakarai, 2014 and bhojraj and sengupta, 2003 who also have supported the view that the presence of independent directors in the board provides multi-skills and improves the broad ability to better monitor and control the use of debt without undue pressure so that exposure to the default risk may be reduced and in turn affect the erc. moreover this research study is conducted in emerging economy of pakistan where corporate governance and capital market is not well developed and fluctuation in stock prices occurs due to different circumstances i.e. political instability, war and terror etc but still the statistical results are same as found in developed countries, that’s why this study has great literature contribution an emerging economies. the finding of this study highlights some ideas to others researchers in capital market in the area of corporate governance and earning response coefficient (erc). pool ols regression dv=ux/p robust pool re fe variables beta p-value beta p-value beta p-value beta p-value vif car 0.067 0.117 0.067 0.345 0.067 0.117 0.076 0.099 1.37 carbi -0.142 0.043 -0.142 0.066 -0.142 0.053 -0.008 0.047 1.06 beta 0.207 0.004 0.207 0.030 0.207 0.004 0.148 0.031 1.12 grth -0.120 0.001 -0.120 0.001 -0.120 0.001 -0.023 0.058 1.08 eprs -0.054 0.000 -0.054 0.000 -0.054 0.000 -0.064 0.000 1.05 sz -0.083 0.000 -0.083 0.000 -0.083 0.000 -0.577 0.000 1.16 r2 0.133 0.133 0.133 0.058 adjusted r2 0.130 f-value 37.130 24.170 259.910 42.810 p-value 0.000 0.000 0.000 0.000 lamgre 0.000 1.000 hausman test 62.81 (0.000) breusch-pagan 1.23 (0.29) swilk 1.21 (0.71) durbin watson 2.112 review of economics and development studies vol. 4, no 2, december 2018 162 5.1 recommendations recommendations are provided to suggest desired course of actions in light of findings of the study whereas future directions are provided to support the study findings. the relevant recommendations are as under:  steps should be taken at board level such as better asset allocation strategy to manage the systematic risk  the results pertaining to the firm size have the policy implications which may call measures by the regulators such as the securities and exchange commission of pakistan (secp) to consider firm size as an important factor to be a part of listing requirements so that only large size firms may be eligible to be listed.  similarly, companies should also consider the role of corporate governance facets to reduce exposure to the default risk by monitoring and productively using the corporate debt to improve the erc.  the policy implications by the regulators also call for improving the board independence by increasing independent directors in in the boards. the regulators should also take into account the role of board independence. 5.2 future directions  the current research study provides basis for the researchers to test all the tested and remaining constructs related to the corporate governance facets and erc.  it is suggested that future researches may be conducted with large sample sizes covering and longer time frame.  similar studies may be conducted in settings of other emerging economies to validate results of this study.  it is also suggested that further studies may be undertaken with more determinants of erc along with considering additional variables of corporate governance. this will further refine results of this study and 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(2013).impact of default risk on earning response coefficient. evidence from malaysia. journal of modern accounting and auditing, 9(9) review of economics and development studies vol. 4, no 1, june 2018 61 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 1, june 2018 journal homepage: www.publishing.globalcsrc.org/reads reduction of economic burden on state exchequer by using various international legal flexibilities under trips agreement 1994 of wto 1 muhammad danyal khan, 2 rao imran habib, 3 muhammad asif safdar 1 assistant professor, gillani law college, bzu, multan, pakitan. daniyal@bzu.edu.pk 2 assistant professor, gillani law college, bzu, multan, pakitan. raoimran@bzu.edu.pk 3 assistant professor, b.z, university multan, pakistan. asifsafdar6@gmail.com articledetails abstract history revised format: may 2018 availableonline: june 2018 during budget year 2016-17, public spending on procurement of medicines in pakistan surged 29% touching an exorbitant figure of pkr 7.5 billion (health budget, 2016-17)volume of provincial expenditure on medicine almost doubled rising to pkr 1.02 billion from 0.67 billion in last budget year 2015-16. growing sum of public spending on medicine procurement has many factors such as poverty, money devaluation, indigenous production incapacity, and less developed standards of research and development. apart from all enumerated above, global pharmaceutical patent protection regime under trips agreement, initiated by wto, plays a pivotal role increasing public spending on procurement of medicines in developed and least developed countries. this work presents ways for reducing economic burden on state exchequer by exploiting maximum possible flexibilities under wto regime to procure cost effective medicines. the work will be done in three parts; explaining pakistan role and status in global pharmaceutical patent protection regime, existing challenges, and potentials for the country to save public spending on health using international legal agreements under wto © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords trips agreement, wto, economic burden jel classification k11, h51, f53, i15, f53, h13 corresponding author‟s email address: daniyal@bzu.edu.pk recommended citation: khan, m.d., habib, r.i., safdar, m.a., (2018). reduction of economic burden on state exchequer by using various international legal flexibilities under trips agreement 1994 of wto. review of economics and development studies, 4 (1) 61-70 doi: 10.26710/reads.v4i1.281 1. introduction economic fragility in pakistan is one of the existence issues. besides weak economic conditions, health remains a major challenge but gets very marginal support from public funding (hestermeyer, 2008). moreover, half of budget on health disappears in procurement of life saving medicines in public sector. cost of medicines in pakistan and around the world is increasing after adoption of trips agreement under wto aspirations in 1994. the agreement obliges member states to protect global patents that ultimately give an edge to international pharmaceutical companies an advantage in setting and maintaining prices of medicines. developing countries like pakistan often struck themselves in two contrasting obligations. first is in the shape of millennium development goals (mdgs) to ensure various global standards of life with a great focus on protection of health. secondly, international obligations under trips agreement call for protection of global pharmaceutical patents which ultimately results in http://www.publishing.globalcsrc.org/reads mailto:daniyal@bzu.edu.pk mailto:raoimran@bzu.edu.pk mailto:asifsafdar6@gmail.com mailto:daniyal@bzu.edu.pk review of economics and development studies vol. 4, no 1, june 2018 62 high prices of essential lifesaving medicine. resultantly, a tangible portion of very meagre public spending on health is dumped on procuring essential medicines. (zaidi, 2011) health budget of pakistan has always been very small in comparison with other neighbouring countries. moreover, increase in health budget is also at snails speed as budget for year 2016-17 was up for only 9 percent in comparison with last year. while at provincial level, it surged only 14 percent and districts added mere 8% to their existing spending on protection of health, one of the basic rights (constitution of pakistan, 1973). one may understand plight of health in pakistan where half of its spending on health goes to procurement of medicines. during year 2016-17, as quoted already, half of the volume of total budget was consumed for medicines and rest of half supported all other expenditures on health including salaries, maintenance of hospitals, procurement of medical appliances and equipment, and emergency services. (health budget, 2016-17) review of economics and development studies vol. 4, no 1, june 2018 63 aforementioned statistics demonstrate public spending on procurement of medicine which constitutes a lion‟s share out of total spending on protection of health in pakistan. issue of rise in public spending on procurement of medicine went serious after adoption and compliance of trips agreement in compliance with wto standards. in year 2000, pakistan was supposed to comply with international commitments under trips agreement and patent ordinance 2000 was promulgated by a presidential order and patent law in pakistan went very aggressive in protecting global intellectual property standards in various fields of patents especially pharmaceutical patents (mahmood, kazmi, 2008). patents monopoly rights in the field of pharmaceutical products were not applied till 20 th century for the reason that it may impact upon public health. even prior to adoption and enforcement of agreement on trade related aspects of intellectual property rights (trips), patent monopolies protection in the field of pharmaceuticals was only taken in the developed countries and by the way of international treaty its enforcement was anticipated. it made pharmaceutical industry content by introducing many provisions of patent protection by the agreement, on the other side, the developing countries and ngos looked at them as major blow to right to public health and access to lifesaving drugs around the world (rakesh, 2000). advent of trade related intellectual property rights agreement which was signed in 1994.it has changed global setup on pharmaceutical patent and has drawn impact on developing and least developed countries. new challenges to comply with global technological standards of patent protection as intellectual property rights are leading towards economic burden (pogge, 2008, p76). pakistan, one of the signatory of trips agreement and one of developing countries is facing many economic issues while protecting global patent protection standards. the situation has become intricate as adoption and enforcement of recent international instruments along with protecting national population from health challenges by ensuring availability of essential lifesaving medicines to populationis one of very significant national issues where malaria, cancer, tb, and other life-threatening issues need state attention (abbas, 2013). this paper will contribute in qualitative manner towards issue of over burden on state spending on procurement of medicines. fundamental issue is scarcity of national funding on health and its better management through using international legal flexibilities provided in global pharmaceutical patent protection regime under wto. this work will be divided in three parts. first part will introduce reader with domain of globalization of pharmaceutical patent protection. second part will assess the impact of globalization under trips agreement and last part embarks on explaining international legal flexibilities those may be utilized to reduce economic burden on health budget by procuring cost effective medicines. 2. compliance of wto standards under trips agreement united states of america (usa) remained the main force behind adoption and compliance of trips agreement in 1994. further, enforcement of the agreement was contested by us to protect her national pharmaceutical industry. some writer believe that giant pharmaceutical companies such as pfizer, sanofi aventis, gsk, and other led influencing us government to enhance their profitability through protection of pharmaceutical patent globally. persuading enforcement move, us government, started contacting pakistan government through dispute settlement system of wto for complying and amending its existing laws in accordance with trips agreement. fundamental focus of us was pharmaceutical and agriculture sectors and it was claimed that existing intellectual property laws especially patent protection is not adequate and does only protect process patent ignoring product patent. furthermore, us stance, in wto, specifically claimed that level of protection provided by pakistan is in contravention with article 70.8 and 70.9 of national commitments towards trips agreement. based upon arguments forwarded by us, it was declared that level of protection for intellectual property rights is not adequate. moreover, representatives of pakistan accepted the us stance of non-compliance of trips obligations on state and ensured making patent and design act in consistency with global intellectual property protection standards. later on, an amendment was introduced in patent and design act of pakistan in 1997. this amendment basically introduced mailbox facility and also started granting exclusive rights of marketing in patents. review of economics and development studies vol. 4, no 1, june 2018 64 pakistan‟s efforts for makings laws trips-compliant were not appreciated by global pharmaceutical companies and it was alleged that nothing on ground is changed as the amendment was only theoretical giving no advantage to global patents. moreover, law on patents remained same in case of grant of rights to process and not to product. product patent were not introduced in pakistan till 2000. novel formation of molecules was also not considered under patent grant. responding to all these criticism and political pressure from us government, patent ordinance 2000 was promulgated. this ordinance went a step ahead that what was required by trips agreement and global patent protection standards. the ordinance introduced product patent along with process patent, giving an extra edge to global patent holders on pharmaceutical products. moreover, life of patent is set as 20 years without consideration to patent evergreening and factors related to delay in entry of generic medicine to market. to sum up, this paper introduces various flexibilities provided under trips agreement that may ease prices of medicines procured by state funding reducing economic burden on exchequer. 3. maintaining lower prices for medicines; statistics from pharmaceutical industry in pakistan after inception in 1947, pakistan was not doing well in pharmaceutical industry with only one pharmaceutical establishment and later it developed with the pace of 5% annually. in asia, pakistan secures 10 th position in pharmaceutical industry volume and per capita annual medicine distribution is at us 10. this figure is very small in comparison with average volume of usd 142 for other countries in region (mehmood; kazmi, 1988, p. 694). pharmaceutical industry in pakistan has maintained its unique feature of low prices for essential medicines. apart from all pharmaceutical regulations, many studies reveal that health care has not been priority at state level. this is demonstrated through annual public spending on health (zaidi;aleem;rashidine, 2013, p.635 ). on the same analogy of developing countries, pakistan faces many issues regulating pharmaceutical patents. in january 2010, problem of fake medicine was surfaced by interior minister declaring 50 percent of total volume in market as fake or unacceptable to standards of public health. resultantly, government introduced very strict regulations by upgrading drug act. many malpractices including fake medicine discourage international pharmaceutical companies in introducing their developed and effective products in pharmaceutical market of pakistan. apart from all these challenges, it is encouraging that trends of growth in pharma-industry of pakistan are positive with a prediction to reach total of pkr 290 billion in 2019. (health report, 2010). 4. access to medicine in pakistan; regulations for the pharmaceutical industry drug act 1976 is fundamental legislation in pakistan to regulate pharmaceutical industry. fundamental state organ with an authority to regulate under different laws is ministry of health. issues related to pharmaceutical regulation such as pricing, market competition, maintenance of standard medicines, control over fake drugs, and other ancillary matters are regulated under drug act of pakistan by ministry of health. registration of medicine also falls under preview of ministry of health and to the day, 40,000 medical brands have been registered and 14,000 out of them are molecules (das, 2005, p.33-52). during 2009, ministry of health used its powers and cancelled 4,000 registrations of imported drugs resulting from objection raised by local pharmaceutical manufactures. this step was aimed at protecting prices of medicine‟s (muzaka, 2011, p.77). adoption of intellectual property rights globally and especially pakistan‟s compliance towards bern convention, world intellectual property organisation and other international legal instruments obliges pakistan to enforce global patent standards. trips agreement under wto law enjoys a robust implementation mechanism and violation of it may get economic sanctions upon country. on the other hand, enforcement of global pharmaceutical patent standards leads towards high prices of essential medicines (khwaja, 2009, p.264). pakistan, as a state, has been subject of criticism from both state and international organisational level for non-compliance of international patent protection standards. many efforts of making medicines affordable, accessible, and available for middle and poor sanctions of society review of economics and development studies vol. 4, no 1, june 2018 65 are criticised internationally. pharmaceutical report of 2010, on the other hand have presented a grim report on access to medicine in pakistan. the report says that only rich and affluent class of pakistan can afford essential medicine and rest of the population is depending on state level sources of medicine i.e., public hospitals. moreover, as stated earlier that half of the medicines available in market are fake. this leaves poor faction of society without protection of health (khan, 2005, p.27). legal infrastructure of regulating pharmaceutical patents in pakistan suffers a paradoxical status. protection of international standards on pharmaceutical patent protection leaves state contravening its commitments towards right to health under icescr. measures supporting accessibility, availability, and affordability of drugs to poor factions of society attract wto action against the state. (ppma report, 2013). careful interpretation of international instruments such as trips agreement reveals that a good deal of international legal flexibilities is embedded in the agreement itself. moreover, this agreement does not obstruct member states‟ obligations towards health (mazuka, 2011, p.77). next portion of this article will explain various flexibilities available in trips agreement to protect right to health and access to medicine. 5. flexibilities under trips agreement during negotiation at uruguay rounds of wto-led campaign to adopt trips agreement, developing countries remained sceptical of future implication of the agreement. fundamental concern was underdeveloped industry in developing counties. it is worth noting that current industrial progress in developed countries was achieved in the era of absence of strong intellectual property regime where countries imported industrial ideas from other jurisdictions without being blamed of violating intellectual property as it was national subject matter. industrial progress of china is recent illustration where weak intellectual property regime let its industry flourish in very short time. gap between industrial progress of developed and developing countries was very wide and based upon reservations forwarded by developing and least developed countries, various flexibilities were included in text of trips agreement. arguments led by developing and least developed countries during trips negotiation based upon already existing obligations towards human rights regime and international commitments under mdgs. developing countries clearly objected to enforcement of international standards of intellectual property on food, agriculture, and most significantly pharmaceutical products. all of these areas are closely knitted with protection of minimum standards of human rights. moreover, in case of pharmaceutical patents, access to medicine is integral part of human right to health guaranteed by udhr, icescr, who charter, mdgs, and various other international legal instruments. in result of reservations from developing countries many flexibilities were introduced in the agreement but effective utilisation of these flexibilities is not yet achieved. many efforts are done in this regard and the most significant development related to access to medicine is doha declarations in 2001. it states: „we affirm that the agreement can and should be interpreted and implemented in a manner supportive of wto members‟ right to protect public health and, in particular, to promote access to medicine for all. in this connection, we reaffirm the right of wto members to use, to the full, the provisions in the trips agreement, which provide flexibility for the purpose.‟ (gopakumar, 2005) the declaration recognises and stresses on interpretation of trips agreement in a way that it protects public health as a matter of human rights in member countries. meaning of protection of health in this text is taken as access to medicine for the reason of impact of globalisation of pharmaceutical patent on availability and accessibility of essential lifesaving drugs (das, 2005). in case of interpreting public health and right of state towards protection of public interest, dispute resolution body may consider standards provided by mdgs, wipo, and un resolutions on elimination of malaria, tb, hepatitis, and aids (gopakumar, 2005).moreover, further guidance may be attracted from icescr and its later review of economics and development studies vol. 4, no 1, june 2018 66 interpretations in various meetings of international community of states (icescr1967, article 12). 6. compulsory licensing; piercing patent monopoly for access to medicine pharmaceutical patent monopoly is not an absolute right rather international legal system provides certain ways of scrutinising its operation. compulsory licensing is authority with state regulatory authority that makes it pierce patent monopoly and put product under monopoly open for market competition in case of any malpractice such as non-availability, violation of public interest, or any practice against state policy. article 31 of trips agreement defines and codifies compulsory licensing in following way: “where the law of a member allows for other use of the subject matter of a patent without the authorization of the right holder, including use by the government or third parties authorized by the government, the following provisions shall be respected: (a) authorization of such use shall be considered on its individual merits; (b) such use may only be permitted if, prior to such use, the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time. this requirement may be waived by a member in the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use. in situations of national emergency or other circumstances of extreme urgency, the right holder shall, nevertheless, be notified as soon as reasonably practicable. in the case of public non-commercial use, where the government or contractor, without making a patent search, knows or has demonstrable grounds to know that a valid patent is or will be used by or for the government, the right holder shall be informed promptly; (trips agreement 1994, article 31) title of this article was suggested as using product under patent monopoly without authorisation of patent holder and this authorisation is only provided to state authority on various conditions. moreover, this authorisation to state is not un-fettered and is subject to various conditions and limitations. moreover, patent holder have certain control over negotiation and accruing benefit from state that must be adequate and sufficient against the patent rights. the issue arises when developing countries invoke power of compulsory licensing that brings a great deal of international pressure from international community led by developing nations. writers on the topic have suggested a name for this pressure as „intellectual property politics‟ (cahoy, 2008). brazil, south-africa, india, thailand, and many other countries have tried to invoke their power of compulsory licensing to protect public interest of their population. all this was done to rationalise prices of medicine against deadly diseases where the population was not affluent enough to afford the treatment. malaysia and thailand used compulsory licensing to harmonise prices of drugs treating aids and other fatal diseases (mohara, 2012).compulsory licensing proved to be effective tool in brazil and south africa taking prices of essential medicines down enhancing availability, affordability, and accessibility of drugs. india has used various other methods including check on patentability to help local pharmaceutical industry and low cost of medicine. compulsory licensing has remained an effective tool to reduce prices of medicine but on the other hand some countries have not built capacity for production of life saving medicine. it is significant to note that pakistan imports almost 90 percent of its raw material for pharmaceutical industry from different countries. (pogge, 2008). moreover, international intellectual property politics also hinders global and national developments for brining prices of essential medicine lower (rashid, 2013). various tactics such as diplomatic pressure fear of economic sanctions, foreign direct investment, and free trade agreements marginalise operation of compulsory licensing (jain,2008). most significant is technical charter of intellectual property rights especially pharmaceutical patents where developing countries does not have enough legal experts to defend state‟s prerogative of using review of economics and development studies vol. 4, no 1, june 2018 67 compulsory licensing and often lose their case in wto dispute resolution system attracting economic sanctions (braun). k. m. gopakumar quotes prof. drahos stating: “over the years the steady drip of technical assistance leads to the formation of technocratic trust in the epo‟s system. a strong belief forms that the epo‟s system produce quality results and that belief in turn forms the basis of decision-making y patent examiners in under-resourced developing country patent offices. technocratic trust thus fosters a circle of decision-making in which the epo trains developing country examiners to make decisions in their own countries that predominantly benefit foreign companies, including european companies.” (gopakumar 2005) 7. principle of human rights supremacy; critical analysis of access to medicine patent ordinance 2000 of pakistan may utilise using flexibilities under trips agreement for protecting public interest by convincing international regulatory authorities. case of affordable medicine is already contested by various countries such as brazil, south africa, thailand, malaysia, and most significantly india. it is worth noting that indian legislation on pharmaceutical patents accommodated local industry in growing to great extent with easing patentability criteria. all this was done in accordance with international patent commitment as deciding standards of patentability is sole prerogative of state. although wto has been considered as „self-contained‟ regime and human rights role in interpretation during various disputes is kept minimum. many authors argue that international human rights regime is directly relevant to interpretation of public interest. these arguments rely on statutes of international court of justice (icj) which describe sources of for settlement of international disputes and adjudication as „general principles of law recognised by civilised nations‟. this brings human rights relevant to debate of sources of law in wto dispute settlement. monistic theory of international law takes it to next level and states adopting this theory put international above national law. for this reason, universally accepted principles of human rights come relevant to interpretation under dispute resolution body (dsb) of wto (marian, 2008).usa is one of the states those adopt international law primacy principle under monistic theory of international law. for the reason of human rights supremacy as an objective of national laws and also international law, one may claim that in case of conflict between global pharmaceutical patent protection under trips agreement of wto and right to health under icescr, later will prevail (vega, 1994).a majority of international community, except usa, is signatory to icescr and have made their internal laws consistent with obligation towards this document (fourie, 1990).right to protection of health and provision of adequate standards of treatment is integral part of icescr but it is unfortunate that us is not part to it. on the other hand, usa is party to iccpr and perusing its enforcement most vigorously (fourie, 1990).if analysed critically, access to medicine may be interpreted as integral part of right to life covered under iccpr. diseases like aids, cancer, tb, malaria, and other tropical infection cause threat to life. so, one may state that access to essential medicine forms part of both iccpr and icescr. moreover, it is duty of states to ensure affordability, availability, accessibility, and quality of medicine in their territories (hoen, 2002). 8. concluding remarks although road towards using flexibilities under trips agreement is but but not impossible to travel through (gopakumar, 2014). neighbouring country, india has smartly dealt with concept of patentability granting a grace period for their pharmaceutical industry to grow before triggering its laws equal to global standards of patent protection. moreover, academic campaign led by amartya sen justified state endeavours to ease patent monopolies bringing prices low on principles of human rights supremacy. pakistan needs to learn from this lesson of using carrot and stick both in regulating pharmaceutical patents and prices of essential medicines. utilising all available flexibilities under trips agreement will ultimately save major part of public spending on health. besides very small budget of health in pakistan, a good deal of resources may be saved to utilise them other than procurement of medicines. trips review of economics and development studies vol. 4, no 1, june 2018 68 flexibilities will not only facilitate national pharmaceutical industry but will also bring prices of medicine lower in pakistan. fundamental question is to harmonise national challenges with international requirements that will facilitate evolution of patent laws not revolution as adopted in 2000 by introducing a very strict ordinance (palmeter, mavroidis, 1998).additionally, paradox of public interest and strong patent protection in trips agreement may be contested in justifying efforts to facilitate lower prices of medicines in pakistan (dadupota, 2005). preamble of trips agreement makes it clear that "special needs of the leastdeveloped country members in respect of maximum flexibility in the domestic implementation of laws and regulations in order to enable them to create a sound and viable technological base”. article 8 of trips agreement further elaborate: “1. members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this agreement. 2. appropriate measures, provided that they are consistent with the provisions of this agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.” (trips agreement, 1994) using above mentioned provision of trips agreement of wto, following measures may be taken and justified by state of pakistan to reduce a good deal of economic burden spent on procurement of costly patented medicines: 1patentability criteria are sole prerogative of state and it may be defined in a way suitable to public interest and access to medicine. indian patent development and academic justification campaign is good illustration in this regard. 2regulation of price control may also be viewed technically and a due consideration may be given to public interest. even public spending to procure costly medicine indirectly is paid from the taxes of those who are not affluent enough to buy those drugs. 3although, compulsory licensing is included in patent ordinance 2000 but it usage needs both technical and state level will. regulatory authorities, ipo may keep a vigilant eye on various lifesaving drugs and advise state authorities in good time to invoke the power of piercing patent monopoly in public interest and later justifying in wto forums. this need technical expertise at both pharmaceutical and legal levels. 4last but not least, pakistan should be using vigilant system of using all flexibilities provided in international legal framework. human rights supremacy is good argument but as wto is selfcontained regime, it possesses much flexibility. references abbas, m. z. 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(2002). trips, pharmaceutical patents, and access to essential medicines: a long way from seattle to doha. chicago journal of international law. vega, c., (1994) protecting economic, social and cultural rights. whittier law review, 15 (1) 471, 478-80 zaidi, s., noureen, (2011) access to essential medicines: in pakistan identifying policy research and concerns, department of community health sciences, agha khan univeristy, retrieved 20 june 2018 from https://ecommons.aku.edu/cgi/viewcontent.cgi?referer=https://www.google.co.uk/&httpsredir=1& article=1189&context=pakistan_fhs_mc_chs_chs https://ecommons.aku.edu/cgi/viewcontent.cgi?referer=https://www.google.co.uk/&httpsredir=1&article=1189&context=pakistan_fhs_mc_chs_chs https://ecommons.aku.edu/cgi/viewcontent.cgi?referer=https://www.google.co.uk/&httpsredir=1&article=1189&context=pakistan_fhs_mc_chs_chs review of economics and development studies, vol. 7 (2) 2021, 277 -286 277 climate change and emergence of violent conflicts quratull ain abbas a , ahsan riaz b a lecturer, government and public policy department, national defense university islamabad, pakistan phd scholar, political science department, bahaudin zakariya university multan, pakistan email: aniabbas@hotmail.com b assistant professor, department of political science, the islamia university of bahawalpur, pakistan article details abstract history: accepted 25 may 2021 available online june 2021 climate change, also called global warming, refers to the rise in the average surface temperature on earth. over the past century, earth's average temperature has risen by 1.5°f, and is projected to rise 0.5 to 8.6°f over the next hundred years. these changes in the average temperature of the earth may lead to potentially dangerous shifts in climate and weather. increased rainfall, decreased precipitation, augmented temperature, frequent heat waves, droughts and floods have likely to pose challenges for economic, social and geo-political security of states. present study is an effort to understand the impacts produced by changing climate in social, economic and political spheres and its link with the emergence of violent conflicts. it further aims to investigate the relationship between national security and conflict however the main focus will be the domestic societies of under-developing countries. in order to address the objectives of this study, descriptive research approach has been applied. the validity of concept has been tested by qualitative analysis of the climatic variations on economic, social and geo-political spheres. the study finds out that climate change and economic stability are inextricably linked. the data of this study also suggested that the impacts of climate change are expected to act as a ''threat multiplier '' as a whole and can be more disastrous for the unstable regions thus resulting in shortage of food, water and other resources. it is thus concluded that scenario may lead to increased risks of conflicts among nations for control over the natural resources though climate change is unlikely to be a primary cause of conflict however it will remain an important factor in the emergence of conflict and it may also amplify the existing conflicts due to scarcity of resources. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: threat multiplier, temperature, climate, states, conflict jel classification: k32, q51 doi: corresponding author’s email address: aniabbas@hotmail.com 1. introduction the changing patterns of weather related phenomena have given rise to global warming that has resulted in an overall change in climate. the growing economic and industrial growth has resulted in an review of economics and development studies, vol. 7 (2) 2021, 277 -286 278 increase in greenhouse gases that has consequently resulted in an enormous increase in the intensity of co2 in the atmosphere. this amplification has further led to an overall increase in the global temperatures thus resulting in further extreme patterns of weather. the rudiments of this prevailing outlandish are starvation, eruption of diseases, riots as well as violence and war. droughts, storms, long persisting heat waves, wild fires, migrations, diseases, conflicts and extinction of various species have redefined the concept of national security for states. (boon, k., lovelace, 2012) the protection of the nations as well as its citizens from all kinds of internal and external terrorization either by the use of military or any other diplomatic mean is known as national security however; with the transforming global scenario has redefined the concept. the episodes of 1973 oil crisis and 9/11 era has further transformed the concept of national security. this new notion of national security not only includes the defense of the physical borders but also encompasses the economic, political, social, environmental and other transnational threats like drug trafficking, epidemics, transgression or social prejudice. currently, nations are striving hard to adopt such policies that can protect them from transnational threats specifically climate change. 2. literature review in the past decade much research has focused on climate change impacts. according to research conducted by yadigar sekerci and sergei petrovskii, in the "mathematical modeling of plankton-oxygen dynamics under the climate change", the increasing ocean temperatures could result in the earth's oxygen levels to fall radically this could result in killing a huge number of humans and animals. increasing temperatures will also impact the hydrological cycle by speeding it up thus leading to more evaporation and rain. (sekerci, y., & petrovskii, s. 2015) as reviewed by robert scribbler globally famines and droughts have already made half billion people to suffer and the rising temperatures shall further intensify the situation. (hobday, a. j., & matear, r. j. 2020) a similar study has been conducted by eu commission; the report claimed that around 240 million people are suffering from the food shortages. in another study presented by green peace it is claimed that water shortages and famine has affected 330 million people alone in india. likewise, rising temperature has led to the melting glaciers that have raised the sea levels, the phenomena is further explained by james hansen an xnasa researcher in july 2015 that sea levels are expected to rise 10 times more rapidly than predicted in the past. these impacts of climate changes are creating threats to the national security and it can be a cause of conflict as rightly pointed out by researchers. internationally, the most persuasive work showing link between varying climate and conflict came from, y. burke he claims that there exists a link between rising temperatures and eruption of civil war. he thus concluded that frequency of civil war is directly proportional to the mounting temperature. according to him, in africa increasing surface temperatures will produce a negative impact on agricultural output and economic performance, thus fuelling up the frequency of civil instability and up to some extent conflicts. likewise, hendrix and glaser are of the view, that climate acts as a trigger and may give rise to conflicts at different level. the emerging connection between the conflict and climate has been well pointed out by the security-planning department as well as the us center for naval analysis, they claim climate change as a "threat multiplier" referring to the fact that it can not only produce impact but can also worsen the existing domestic, global as well as regional tensions and conflicts. additionally, it has been predicted in pentagon quadrennial defense review that changing climate can act as an "accelerant of instability or conflict". a similar vision has been cited by uk defense review 2010 (us department of defense 2010), the emerging climatic changes can act as a nascent challenge for militaries as well as policy makers. in spite of a series of well structured researches on climate verification and its linkages with national security and conflict some questions still remain unanswered. although, the ability of the https://robertscribbler.com/2016/04/27/climate-change-drives-half-a-billion-people-to-suffer-hunger-water-shortages-as-droughts-and-heatwaves-wreck-crops-across-the-globe/ review of economics and development studies, vol. 7 (2) 2021, 277 -286 279 changing climate to fuel up clashes or intensification of existing shakiness in some of the world’s most vulnerable regions is now acknowledged in circles of national security even in the united states and many other nations of the world but research gaps still exists in many areas. for example, how climate change influence on economic, political and social spheres of nations and results in the emergence of conflicts, likewise how these spheres are interlinked in aggravating the origin of the ethnic conflicts at domestic level. present study is an effort to understand the impacts produced by changing climate in social, economic and political spheres and its link with the emergence of violent conflicts. it further aims to investigate the relationship between national security and conflict however the main focus shall be the domestic societies of under-developing countries. 3. research design and theoretical frame work in contemplation to reach the ambition of the study the descriptive research has been followed as it aimed at casting light on current climate change issues and meant to find out its relation with national security and conflict. qualitative and interpretative research methods have been used to find out answers how climate changes constitutes threat to national security and how these changes can be a cause of conflict. the soundness of concept is tested by scrutiny of data by implementing the political economy of climate change approach, the approach deals with analysis of climate change in perspective of political economy. analysis of the study from perspective of political economy will help examine the relation between various stake holders like states as well as different interest groups at domestic level and global level. the approach also helps to find the grass root causes of the emergence of conflict at various levels. for this purpose primary and secondary data collection techniques have been used. books, scholarly articles, archival data and other internet resources along with the reports published by different related institutions have been used. interviews of relevant personals of various public and private institutes, like pakistan meteorological department, pakistan agricultural associations and farmers. 4. analysis and discussion the global order is not static, it is dynamic and with the passing time new changes can be seen in the economic, social and political spheres around the globe. every great event around the globe has led to many new concepts and transformations in the world. today, defending the sovereignty of government, political system, protection of society from both domestic and foreign aggressors, protection of economic and financial resources along with the market insecurities, preservation of energy and natural resources, protection of domestic affairs from recently emerging transnational threats, securing nations from cyber-crimes and many more are considered more important than typical military security. consequently broadly speaking the concept of national security has broadened together with economic security, social security, political safety, human protection and environmental security. environmental security is a concept with multiple meanings, environmental problems such as shortage of water, disruptions in energy supply or ruthless changes in climate has been regarded as transnational threats and can be a basis of conflict amongst states in near future. previously, changing climate was seldom regarded as a threat to national security or a contributing factor to the emergence of conflict, but in recent years with the changing concept of security, presupposition is changing as the dogma of ''climate change '' and ''global warming'' adheres to the national security. in other words, climate change is directly linked with the national interest, review of economics and development studies, vol. 7 (2) 2021, 277 -286 280 when the national interest is in danger it will pose threats to national security and when national security is in danger, it may indulge nations into conflict. in short, climate change is considered as an important trans-national factor behind existing and many upcoming conflicts amongst nations. (author’s own compilation) according to a research titled “quantifying the influence of climate on human conflict” published in the american involvement for the advancement of science, 2013, there exists a statistical connection between emergence of conflicts and changing climate (hsiang, s. m., burke, m., & miguel, e. 2013). according to the research, increasing temperature and precipitation are interrelated with higher risks of social chaos, as well as individual violence. the changing climate may lead to three main categories of conflict influencing three major sectors of any nation, "personal level or individual violent behavior and transgression," which includes killings, physical attack, rape and family aggression thus producing negative influence sociologically putting the society towards more negativity ; "intergroup violence and political instability," such as domestic hostilities, riots, racial aggression as well as territory invasions thus leading to a threat full environment politically even leading to crash of governments in severe cases ; and "institutional breakdowns or state level conflicts," such violence and conflicts may lead to strives over resources amongst nations thus creating hazards economically for a nation. (addison, t. 2012) the impacts of climate change at these levels are felt equally in both developed and developing nations even the analysis of data from different developed and developing states like brazil, somalia, china or the united states, has shown clearly that the climate seems to be a vital factor in destruction of security and peace across societies thus these multiple vectors of climate change can result in a serious threat to the national security in economic, political and social aspects of state. climate change endanger national interest threats to national security national or international conflicts http://www.sciencemag.org/content/early/2013/07/31/science.1235367 review of economics and development studies, vol. 7 (2) 2021, 277 -286 281 three level of conflicts as a consequence of climatic change (author’s own compilation) an xworld bank leading economist lord stern has analyzed the expenses and opportunities of global climate change in a report known as "the stern review". it has been concluded in the report that early strategies to control ghg emissions may outlay only 2 % of the gdp however; the report projected a warning that any delay in devising strategies may elevate the economic costs up to 20% of the gdp. it will influence nations various economic sectors like agriculture, mining, forestry, fishing, infrastructure and energy security, consequently upsetting their economic system. climate change is about to produce the most profound influence in the field of agriculture (both arable and pastoral farming), in this respect agri-based economies will be more vulnerable as compared to economies having industry as their base, for instance african countries are more susceptible to various stresses of climate change, as it is estimated that around 250 million people (el-hinnawi, e, 2011) are expected to go through water as well as food insecurities. a similar case can be seen in pakistan whose major export is cotton, any disruption in cotton crop yield may directly affect the market economy of the country thus leading to less foreign exchange earnings and depressing balance of payment thus making country's economic security under further distress. various climatic factors like increasing temperature and precipitation can prevent crop growth for example, in 2010 and 2012 high temperature at night affected corn crop across us. similarly premature budding due to warm winters led to $220 million losses of cherries in michigan in 2012.( zhang, d. d., jim, c. y., lin, g. c., he, y. q., wang, j. j., & lee, h. f, 2006) likewise, high temperature may lead to more aridity in the atmosphere thus causing soil more drier, although irrigation has been used in many areas to overcome this issue but in most cases it has led to desertification of land .this situation makes less land available for agriculture thus causing a struggle amongst local communities for pastures and water, particularly in case of nomads. likewise a similar anxiety has been highlighted by suhrke in sudan according to him, such expansions of desert does not be evident in a vacuum, but to a certain extent in a socioecological system, he explains by exemplifying nomadic pastoralists, who are gradually becoming restricted in their search for pastures and water. it has been exposed, that armed violence has been personel level transgression inter-group violence and political instability institutional breakdowns or state level conflicts different levels of conflicts review of economics and development studies, vol. 7 (2) 2021, 277 -286 282 increased amongst pastoralist groups and farmer's communities, and one reason might be the increasing infringement of pastoralists towards irrigational fields for water as well as pasture. (suhrke, a, 1997) this study is analogous to safer world’s view of northern kenya and the perception presented by walker on the senegal's dry stretches, where disputes amongst pastoralist and farmers have given rise to brutal clashes. (schneider, g., gleditsch, n. p., & carey, s. c, 2010) moreover, changed precipitation pattern i.e., high or less rainfall then requirement results in surface agricultural pollution , heavy rainfall may wipe away manure and fertilizers off of the farms and into nearby water body thus making water more polluted and less production of crop yields .a similar damage can be seen in case of pastoral farming , rising temperature, drought and desertification leads to threaten pastures and food supplies along with increased vulnerability to diseases , reduced fertility and less milk and meat production thus giving a setback to those nations whose major exports are live stock products or agri based products as in case of pakistan. in short, low food production, desertification, droughts will eventually leads to resource depletion that can be cause of conflict at all levels. studies have shown that few climatic factors are found responsible for civil unrest in syria as observed in a report titled, “syria: climate change, drought and social unrest,” published in march 2012, from the "center for climate and security". according to the report, the existing conflict in syria has been associated to climate change up to some extent. according to the study presented by these authors, climate change has resulted in an internal displacement, rural disconnection and political instability that eventually contributed to the situation of civil war seen today in syria. this study cites shortages of water, famine, crop-failures and displacement as the main contributing factors to syria’s civil war, furthermore farmlands of syria has collapsed due to climate change. ( femia, f., & werrell, c, 2012) another catastrophic climatic impact on economy will be the destruction of the infrastructure , rising coastal levels, floods , cyclones, tsunamis and many more has led to destruction of infrastructure in both developing and developed nations for instance , when the river koshi which flows through the eastern side of terai region of nepal flooded in summer 2008, it resulted in displacement of more than 60,000 people, the national highway was damaged, and crops were shattered badly. south asia is the most vulnerable region; in fact most affected by the floods intricate ecological, humanitarian and security challenges. (theisen, o. m., holtermann, h., & buhaug, h, 2010) in this respect the most acute impact of climate change is in particular is felt by india and bangladesh. in september 2012 floods displaced 1.5 million natives in the north eastern state of assam, while in 2009; cyclone aila displaced 2.3 million inhabitants in india and approximately 850,000 in bangladesh. moreover, the sectors of fishing , forestry, and tourism are badly affected due to such changes specifically those countries whose major exports are fishing and whose major foreign exchange earnings is through tourism, such economies are more vulnerable to climate change impacts.(lapper, r, 2006) economically, it has another influencing impact on the nations, since last few decades nations are trying to shift their energy usage from oil to other alternative sources like renewable sources of energy but all these alternative sources are exposed to the climate change. moreover with the conditions of wto it is becoming nearly impossible for struggling economies to compete the market under above mentioned situations. this scenario has endangered the nation's national security directly or indirectly and forced them towards a more conflict prone scenario. socially, ''migration'' is the worst impact of climate change specifically in the third world states like bangladesh. it has been revealed that in 2008 agriculture has been main the occupation of around http://climateandsecurity.org/2012/02/29/syria-climate-change-drought-and-social-unrest/ review of economics and development studies, vol. 7 (2) 2021, 277 -286 283 1.4 billion population in third world countries however due to changing climatic influence, like increased food shortages and the reduction of employment opportunities and diminished farm-based activities has led to rapid outward migration. although, migration in itself is not the only destabilizing factor; it often payback to both the migrants and the states where they migrate however, accepting these migrants later becomes an issue for the states as these new comers are usually seen as a redundant burden. such influx can result in ethnic sentimental clash within community, as in case of assam and bangladesh, the country is going through summer droughts, flooding and salination of the rivers at the coast. consequently, about half a million inhabitants have been displaced within bangladesh to the hill tracts of chittagong and millions have migrated to india. both the communities in chittagong(bangladesh) as well as the north-east indian region, the region has faced social frictions and violent conflicts due to migration of people across the borders. in order to avoid such and other social havocs india has erected 2500 metres long barrier at the border. in other words buildup of climatic problems and issues in bangladesh will in return influence india too. added stressors of climate change and shifting migration patterns could be a security distress in areas of conflict in south asia. moreover, increased migration may lead to religious extremism as in case of assam-bengal. moreover, such social movements amplify the assaults, rapes and murders leading to conflicts and wars amongst different ethnic groups. as a result of these rising insecurities, many psychological disorders may arise amongst the general public. likewise when migration put pressure on land it results in competition over resources causing the origin of conflict amongst rural urban population secondly, it may give rise to social insecurities thus widening gap between rich and poor. as a consequence of overall changing climate there seems an increase in domestic violence in india, australia, us. studies have shown that tanzania has witnessed augmentation in assaults, rapes and murders particularly all throughout heat waves. there exists a correlation between increasing temperatures and larger conflicts, as higher temperatures make people more prone to aggression, racial clashes in europe and south asia as well as african civil wars are best examples. politically, it has direct impact on the institutions of the government as the individual level conflicts and civil war as a result of changing climate may leads to institutional inefficiency, even in some cases may lead to complete collapse of the system, changing climate may leads towards deteriorated relations amongst the states thus leading to failure of regionalization and regional interdependence. pakistan and india are facing multiple conflicts but one of the most important is over water resource. with the passing time, changing climate is leading the region towards water scarcity thus giving rise to conflict over water. the main source of economic development either industry or agriculture is water and it is currently under severe influence of climate change. globally this change of climate presents risks for south and south -east asia and the main area for concern will be accessibility to the resources. glaciers will be specifically under influence the glaciers will be under influence of the climate change as their excessive melting before time will result in excessive water in some of the major rivers across the globe. in the himalayan basin, the increased rate of melting of the glacial areas will eventually result in an increase in the flow of water during spring season while on the other hand a low flow will be seen during the remaining seasons – especially the summers. according to an estimate, the mass of the glaciers located in himalayas has reduced to 1,628 sq km in 2007; while it was around 2,077 sq km in 1962 with a decline of around 21percent.(gleditsch, n. p, 2011) this amplified rate in melting of glacier can produce two fold impacts like it may increase the run-off of the rivers similarly it may mount the avalanches outburst floods (glofs) at elevation. this situation will cause threat not only for the projects and dams at these rivers but it may also be a threat for future hydro projects in the area. if the present drift continued, water review of economics and development studies, vol. 7 (2) 2021, 277 -286 284 bodies in himalayan belt will soon go through amplification in the flood frequency. it may also lead to reduced flow during summer. some chief rivers in asia will specifically be under influence of climate change, like "the ganges basin (nepal, india and bangladesh); the indus basin (india and pakistan); and the mekong river (china, burma, thailand, laos, cambodia and vietnam)". in case of indus basin, water is one of the foremost reasons of conflict amongst india and pakistan. although growing water insufficiency in the region have forced both states to sign a treaty in 1960, the indus water treaty however an internal dissatisfaction prevails amongst both states. on the other hand upper riparian state china requires a huge amount of water to sustain its rapidly increasing economic growth. a similar concern may be seen in case of africa, due to increasing population growth and growing economies, and above all changing climate, riparian countries are taking one-sided actions to make water safe, while on the other hand they are not only potentially damaging the water bodies but it is also producing a negative impact on the relations among riparian states. in short it will not be wrong to quote that climate change is an important component of nontraditional security challenges, after terrorism it is on nation's top agenda to be tackled as in case of south asia. these changes are going to produce intense impacts on economic social and political spheres of nations, these spheres are interrelated, in other words impacts produced on one will be felt by all others for example, if agricultural production decreases it may lead to food shortages, directly affecting exports of an agri-based economy thus leading to economic backwardness on the other hand a sharp decline in food production will result in increased migration that will eventually produce social instability. this social instability may lead to conflicts at domestic level thus making the institutional failure and affecting the nations politically. the consequences produced as a result of instability are subsequently severe and can rightly be called as a "security problem". these security problems are considered as grave challenge to the existence of nations and considered as a matter of national security and in severe cases may lead to conflict. in order to cope up with these challenges, nations need to use both military and non-military tools .the link of national security , origin of conflict and climate change is well explained by the following flow chart , (author’s own compilation) climate change economic political social impacts economic,political and social instability and insecurity threat to national security conflict indviual level state level civil war review of economics and development studies, vol. 7 (2) 2021, 277 -286 285 5. conclusion researches and studies over time have shown a connection between conflict and climate. climate change not only fuel up the flames of social tension but it also contributes in the origin of conflict. the link between conflict and climatic events is general and that its impact has been felt everywhere across history of humans, different regions of the globe, various kinds of conflicts and across all skeptical scales. although it not true that all types of climatic events are the cause of all forms of conflicts but it can be strongly quoted it is one of the many factors that contribute to conflict. in this scenario the conflict will be at all levels affecting all regions but the severity of impacts shall vary region to region for instance, poorer countries will be more vulnerable as compared to developed nations. weak governance, poor infrastructure planning social chaos and corruption may lead the poor states to be the harsh target of climate change. though this scenario will not be the sole cause of the conflict but it will surely aggravate the existing conflicts as in case of india and pakistan in other words as mentioned earlier it will multiply the factors for current conflicts not only at international level but also at social levels. today climate change must be on top agenda of states as if timely steps would not be taken it may be disastrous for nation's especially underdeveloped and developing nations. in order to resolve this issue, nations must move hand in hands to deal with this global issue specifically third world for example issues related to water basins in south asia and africa has already been resolved with international cooperation. secondly, developing countries must improve their institutional structures and must undergo progress in their governance process. thirdly, nations must think over an economic shift as in case of india and china , they are gradually focusing on a shift from agriculture to industrial sector as industry consumes much less water and other natural inputs as compared to agriculture , this shift might be helpful for asian countries whose main source of income is agri-based economy. fourthly, states must possess better technological strengths and more capability in finances to overcome these climatic changes. sfinally negotiation process must be at its fastest pace by both developed and third world countries as this is a havoc that needs cooperation at all level. references addison, t. (2012). human security report 2009/2010: the causes of peace and the shrinking costs of war. boon, k., lovelace, d., & huq, a. (2012). terrorism: commentary on security documents index iv (vol. 101). oxford university press, usa. el-hinnawi, e. (2011). the intergovernmental panel on climate change and developing countries. the environmentalist, 31(3), 197-199. femia, f., & werrell, c. (2012). syria: climate change, drought and social unrest. the center for climate and security, 29. gleditsch, n. p. (2011, january). regional conflict and climate change. in workshop on research on climate change impacts and associated economic damages. hendrix, c. s., & glaser, s. m. (2007). trends and triggers: climate, climate change and civil conflict in sub-saharan africa. political geography, 26(6), 695-715. hobday, a. j., & matear, r. j. (2020). the impact of climate change on oceans: physical, chemical and biological responses. in research handbook on climate change, oceans and coasts. review of economics and development studies, vol. 7 (2) 2021, 277 -286 286 edward elgar publishing. hobday, a. j., & matear, r. j. (2020). the impact of climate change on oceans: physical, chemical and biological responses. in research handbook on climate change, oceans and coasts. edward elgar publishing. hsiang, s. m., burke, m., & miguel, e. (2013). quantifying the influence of climate on human conflict. science, 341(6151), 1235367. lapper, r. (2006). living with hugo: us policy toward hugo chávez's venezuela (no. 20). council on foreign relations press. schneider, g., gleditsch, n. p., & carey, s. c. (2010). exploring the past, anticipating the future: a symposium. international studies review, 12(1), 1-7. sekerci, y., & petrovskii, s. (2015). mathematical modelling of spatiotemporal dynamics of oxygen in a plankton system. mathematical modelling of natural phenomena, 10(2), 96-114. suhrke, a. (1997). environmental degradation, migration, and the potential for violent conflict. in conflict and the environment (pp. 255-272). springer, dordrecht. theisen, o. m., holtermann, h., & buhaug, h. (2010). drought, political exclusion, and civil war. int secur, 36, 79-106. us department of defense , quadrennial defense review pentagon 2010. https://www.defense.gov/news/special-reports/qdr zhang, d. d., jim, c. y., lin, g. c., he, y. q., wang, j. j., & lee, h. f. (2006). climatic change, wars and dynastic cycles in china over the last millennium. climatic change, 76(3-4), 459-477. review of economics and development studies vol. 5, no 4, 2019 615 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads regional wealth disparity and its impact on urban and rural child schooling in developing economies: a case of punjab (pakistan) 1 hafiza nadia bashir , 2 rao aamir khan , 3 muhammad sajjad 1 assistant professor of economics, comsats university islamabad. vehari campus, vehari, pakistan: nadia_bashir@hotmail.com 2 assistant professor, department of management sciences, comsats university islamabad, park road, islamabad. rao_aamir@comsats.edu.pk 3 assistant professor, department of management sciences, comsats university islamabad. vehari campus, vehari. pakistan: geosajjad@gmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 the purpose of this study is to check how regional wealth disparity affects urban and rural schooling in punjab. it is an effort to explore the influence of wealth disparity between the districts of punjab on school enrolment of children 3-4 and 5-9 years age group using micro data-sets of cluster survey in 2007-08, 2011 and 2014 in pakistan. this study uses the probit model and the principal component analysis to check district wealth disparity in punjab, pakistan.the principal variable i.e., socioeconomic disparity influences the school attendance severely in punjab, however it affects more the rural areas. the sliding down the disparity desires equivalent distribution of funds from government of punjab to the districts. the policy objective is to highlight the development of the districts of punjab. this study creates the district wealth disparity index with various formula and principal component analysis to check how regional wealth disparities affect schooling. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords child schooling, parents’ education, parents’ employment jel classification: p36, p39 corresponding author’s email address: nadia_bashir@hotmail.com recommended citation: bashir, h. n., khan, r. a, and sajjad, m., (2019). regional wealth disparity and its impact on urban and rural child schooling in developing economies: a case of punjab (pakistan). review of economics and development studies, 5 (4), 615-622 doi: 10.26710/reads.v5i4.878 1. introduction the provincial governments is concerned with education. the provincial governments are flowing their responsibility to the private sector and are not satisfactorily spending on education and particularly on school education. the funds distributed to the districts are having high disparity within the province which creates the high ratio of out of school children. the mechanism on school enrolment has devoted on the effect of rural urban locality on child schooling (siddiqui and uzma 2007; sawada and lokshin, 2009; kruger et. al. 2010 for nepal). some of them have touched the children activities like child labor, combining child labor and schooling, etc. (khan 2003). similarly studies have also estimated the impact of geographic regions on child welfare. (tharmmapornphilas, 2013 for thailand for child schooling). huisman and smits (2009) showed the http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 616 higher likelihood of child schooling in developed regions of developing countries (see also longwe and smits 2012 for sub-saharan africa). these studies have discovered that impact of region (urban/rural or geographical location) on education of children is due to socioeconomic and cultural diversity in the regions (tharmmapornphilas 2013)1. the punjab districts have too much difference in the structure of rural and urban areas. schools are in low number and quality wise. the insufficiency is more extensive in rural areas. in the same way, the adult proficiency estimate is quite worse in rural areas. the discrepancy between the districts may distress the children’s school attendance inversely in both areas. therefore both areas are independently examined and compared separately. regional disparities are identified in distinguishing conditions of life in pakistan, also in inadequate fiscal and growth prospective. the punjab province has 35 districts (jamal, 2012). a lot of issues create hurdle in delayed and low child’s schooling. parents make decisions considering so many things and their issues regarding education and work lead to low schooling of their children (azid and khan, 2010). the government of pakistan has tried to achieve the targets but remained unsuccessful due to low funding and mismanagement. from the studies debated above, the point of allusion appeared that if regional socioeconomic disparity is the reason of low school enrolment then disparity within the provinces among the districts may affect the child schooling. it provides prompting to the researchers for probing the impact of socioeconomic regional disparity in the province of punjab (among the districts) on child schooling. if it is demonstrated from the current analysis then strong policy proposal would be to reduce the regional socioeconomic disparity in punjab and to do the measures at provincial level. such type of conclusion will also negate the theory of unbalanced growth, that is to elevate the big cities, metropolitans and business/industrial cities firstly and then have the spillover effects of economic expansion of these cities2. in the current case, if the evidence is provided the proposed strategy would be to improve the socioeconomic status of all districts equally to have the universal primary education and pre-primary education to have the benefits of returns to education. the specific purposes of the study are:  to check how district wealth disparity index affects schooling of children at pre-primary and primary education levels in punjab.  to give policy implications for the enhancement school enrolment. 2. literature review viewing at related literature is to describe the enquiry with the prevailing facts that shows issue under study. so far many studies regarding disparity issue are found except in punjab. so we explain the literature. the regional disparity may be rural urban, among the geographic, administrative units of the countries, provinces and even within cities. khan (2003) examined child labor by using primary data. the probit model result show the effect of child age on probability of schooling. by using primary data, filmer (2005) examined the differences in schooling at country level. 1 regional socioeconomic disparity is also assumed undesirable as it creates political instability, crimes, corruption and social imbalance. it may create hurdle in economic development of countries. 2 currently the government of punjab is spending a lot in big cities particularly lahore while ignoring the other districts. for example, more than 50 percent of the development budget of punjab is spent on lahore (daily the news, august 4, 2016). review of economics and development studies vol. 5, no 4, 2019 617 kruger (2007) assessed the influence of child labor on schooling of children in brazil. huisman and smits (2009) focused on households variables for primary school enrollment in less developed economies. the logistic regression results showed that parents’ education and nature of work and wealth enhanced children enrollment. tsujita (2013) argued that elements which terminate the children from teaching in slum by consuming data in india. the outcomes showed that children from wealthier family were more expected to get education. lincove (2015) associated plans to evaluate difficulties to schooling over discovered and specified predilections by using survey data in nigeria. the probit model was used in the study. the literature evidenced that rural urban regional disparity, developed and under-developed areas of same city and socioeconomic disparity affects child schooling. by using two survey data of 2005-06 and 2010-11, shaheen (2016) find inequality of opportunity in pakistan. karagiannaki (2017) find child’s degree-level qualification attainment outcomes in early adulthood and their earnings by using data from the british household panel survey. waseem and munir (2017) find high disparity in the education and health sectors at both inter-provincial and intra-regional level. afzal et al. (2017) find effects of physical capital on economic growth in the long run in pakistan economy. idrees and shah (2018) analyses low educational disparity in urban areas and in females in case of pakistan. it is evident from the review of literature that there is lack of the estimation of disparity in punjab districts and its role in school enrolment. there is a need to capture impact of socio economic regional wealth disparities on child schooling. hence, this study is inevitable and worth contributing to the existing literature of economics. the policy formation constructed on the outcomes of the study may be supportive for school enrolment to attain the national targets and sdgs. 3. data and methodology to check the disparity at district level on 3-4 and 5-9 years of child schooling in punjab, the probit model has been used on micro-data of multiple indicator cluster survey mics) 2007-8, 2011 and 2014 on three models in both areas. the observations in the relevant models were for 23263 pre-primary urban and 60092 for primary urban children and 45814 for pre-primary rural and 117973 for primary rural children. we have used survey data and it coverages the whole punjab, pakistan. district wealth disparity index exemplifies the local inconsistency through regions and it has a vigorous effect on schooling. district socioeconomic disparity index has been constructed from the information given in mics. district disparity index symbolizes the wealth disparity across districts. firstly the wealth index of the household is constructed through pca by taking the ownership of consumer goods and dwelling characteristics (see for details filmer and pritchett 2001). this index has been formed by compelling the average of the wealth index of the households in the district3. 3.2 model specification the study has specified the following probit models: yuppit = β1 wdiit + a1hicit + ……. ..(1) 3 the average household income in the district may also be an alternative to household wealth index but latter is preferred as discussed by rutstein and johnson (2004). review of economics and development studies vol. 5, no 4, 2019 618 yupit = ζ1 wdiit + φ1hicit + ………. (2) yrppit = λ1 wdiit + σ1hicit + …..…... (3) yrpit = λ1 wdiit + σ1hicit + …..…... (4) the yuppit, ybpit, yrppit and yrppit show the probability of child at schooling. while, wdiit and hic indicate wealth disparity index and household related variables. the model 1, 2,3 and 4 represents the all urban and rural children school enrolment separately. is an error term. the variable descriptions are shown in appendix the table 2. 5. results and discussion the population of the study is comprised of urban and rural children (3-4 years and 5-9) in 2007, 2011 and 2014. table 3 in appendix displays the expressive figures. table 3 carries the basic statistics of dependent and explanatory variables of the models. it gives mean value, standard deviation and smallest and extreme of the variables. the figures show that on average the school enrolment for the urban children 3-4 years remained 32 percent and 5-9 remained 86 percent. however, in the same age group rural school enrolment remained 19 percent and 72 percent during the same period. the results of probit model are displayed in table 4. table 4. probit model results explanatory variables pre-primary urban(3-4) pre-primary rural (3-4) primary urban (5-9) primary rural (5-9) household characteristics district wealth disparity index -0.0364*** (-3.19) -0.0861*** (-8.05) -0.0129*** (-4.78) -0.0603*** (-9.95) household size -0.0052*** (-5.59) -0.0016*** (-3.11) -0.0010*** (-4.81) -0.0009*** (-3.48) chronic disease -0.0339 (-1.59) -0.0065 (-0.67) -0.0055 (-1.22) -0.0071 (-1.36) safety nets -0.0395*** (-2.83) -0.0240** (-2.3) -0.0042 (-1.88) 0.0003 (0.09) remittances 0.0466*** (3.54) 0.0300*** (4.4) 0.0077*** (4.29) 0.0149*** (6.95) head of household characteristics no education (base category) primary education (yes=1, no=0) 0.0360*** (4.14) 0.0391*** (5.68) 0.0116*** (13.66) 0.0223*** (14.46) middle education (yes=1, no=0) 0.0588*** (5.29) 0.0616*** (6.23) 0.0165*** (13.2) 0.0290*** (20.17) secondary education (yes=1, no=0) 0.0742*** (8.03) 0.0792*** (13.27) 0.0217*** (14.16) 0.0352*** (23.54) higher education (yes=1, no=0) 0.0904*** (6.23) 0.0783*** (5.6) 0.0224*** (15.34) 0.0330*** (15) review of economics and development studies vol. 5, no 4, 2019 619 head’s age 0.0014*** (3.74) 0.0009*** (6.43) 0.0002*** (5.02) 0.0004*** (7.1) sex, male (yes=1, no=0) -0.0120 (-0.95) -0.0347*** (-6.01) -0.0121*** (-5.69) -0.0186*** (-9.21) self-employed head (yes=1, no=0) 0.0161 (1.03) 0.0119 (1.14) 0.0076*** (2.16) 0.0111*** (3.56) government employee (yes=1, no=0) 0.0344** (2.32) 0.0414*** (4.8) 0.0059 (1.63) 0.0179*** (5.22) private employee (yes=1, no=0) -0.0021 (-0.14) -0.0073 (-0.91) -0.0005 (-0.13) 0.0021 (0.66) agricultural worker (yes=1, no=0) 0.0460* (2) -0.0063 (-0.83) 0.0051 (1.15) 0.0003 (0.14) laborer(yes=1, no=0) -0.0391*** (-3) -0.0296*** (-3.84) -0.0125* (-2.5) -0.0183*** (-5.32) mother characteristics no education (base category) primary education (yes=1, no=0) 0.1132*** (10.96) 0.0938*** (12) 0.0220*** (26.26) 0.0357*** (21.53) middle education (yes=1, no=0) 0.1818*** (12.46) 0.1365*** (12.81) 0.0227*** (19.55) 0.0337*** (12.79) secondary education (yes=1, no=0) 0.2071*** (14.62) 0.1573*** (15.62) 0.0270*** (19.97) 0.0362*** (11.27) higher education (yes=1,no=0) 0.2619*** (18.6) 0.1755*** (11.73) 0.0274*** (28.07) 0.0337*** (12.91) mother employment * boys (yes=1, no=0) 0.0333*** (2.57) -0.0051 (-0.74) -0.0047*** (-1.93) -0.0125*** (-4.74) mother employment * girls (yes=1, no=0) 0.0146** (2.17) -0.0009 (-0.12) -0.0031 (-1.36) -0.0081** (-2.28) child characteristics child age 0.0635*** (15.19) 0.0860*** (17.46) child age square 0.0519*** (47.74) 0.0309*** (30.25) -0.0039*** (-13.67) -0.0055*** (-16.88) child gender, male (yes=1, no=o) 0.0066 (1.02) 0.0057 (1.32) 0.0031* (2.21) 0.0189*** (6.8) siblings aged 1-4 years (yes=1, no=0) 0.0306*** (3.8) 0.0089 (1.42) -0.0027*** (-2.18) -0.0038** (-2.68) siblings aged 5-14 years (yes=1, no=0) -0.0422*** (-5.46) -0.0385*** (-9.51) -0.0032* (-2.01) -0.0079*** (-4.56) vitamin a (yes=1, no=0) 0.0427*** (4.48) 0.0320*** (6.27) 0.0049*** (4.24) 0.0082*** (4.16) government school (yes=1, no=0) 0.0344*** (2.32) 0.9097*** (18.81) 0.1298*** (12.09) 0.4253*** (19.92) iodized (yes=1, no=0) 0.0174** (2.66) 0.0082* (2.4) 0.0031** (2.42) 0.0047** (2.47) year2007 (yes=1, no=0) -0.1853*** (-8.93) -0.1488*** (-12.02) -0.0123*** (-3.28) -0.0507*** (-5.57) year2011 (yes=1, no=0) -0.0570*** (-3.3) -0.0019 (-0.7) 0.0004 (0.06) year2014 (yes=1, no=0) 0.0330*** review of economics and development studies vol. 5, no 4, 2019 620 (2.99) r-squared 0.22 0.36 0.30 0.49 number of observations 23263 45814 60092 117973 note: figures in parenthesis are t-values. ***, **and * indicate statistical significance at the 1, 5 and 10 percent levels, respectively. here, we show the results regarding schooling of children. moreover, we have made a comparison of children in rural and urban areas. the government should give commitment to the strategies for execution type of disparity. the distinction among the districts on the same lines may impact the welfare signals of the households of the disturbed districts. one of them may be the child schooling. the principal variable of the analysis we have used in our study district wealth disparity index appears as a main factor of child schooling. in all models, the impact of disparity index is negative but it has robust effect on schooling of girls as parallel to boys. huisman and smits (2009) reinforce and verifies that school attendance is greater in districts and nations requiring greater ranks of improvement living in municipal areas. the results directs that the child schooling is greater in urban than rural areas. due to well arrangement and extra number of educational organizations child school attendance is higher in urban areas. result show that majority of the households has nuclear family in urban areas. but, a trend of joint family system is observed in rural areas and people earn through agriculture and agro-business. the female of poor families also involve to work and children are forced to work as family helpers. so the results are different for both areas. it is found that household size decreases schooling. but household size affects child schooling. the result show diverse dynamics of household size in urban and rural areas. our findings are consistent with iram et al. (2008). the result also show a positive link of schooling and remittances. the result is consistent with khan and khan (2016). the educated household head has sent children to school in rural area. awareness and ability of decisionmaking increases with the increase of head age. it is strange to note that the minimum head age is 10 years and maximum age is 99 years in the sample. however econometric estimates show that increase in age enhances the probability of child schooling. head age positively affects the child schooling in both areas in all models. moreover, children of male heads are less willing to go to schools. it is supported by khan (2003). the variable government employees has increased the schooling of children in rural area. the result clearly conclude the importance and effectiveness of government employment employees in rural areas. the private head employee positively affects the attendance (pre-primary age group) in urban areas. the result also show a negative link of schooling and employment. the findings also show that children of educated mothers prefer to go to schools in both the areas of punjab. the conclusion is that mother’s employment tends to lessen the child schooling. the study results are similar with francessa et.al (2013). similarly employment of mother differently distresses the school involvement of children. the current model carries the interaction of women employment and boys as well as the interaction of women employment and girls. the estimates have shown that these interaction terms has decreased the school enrolment of all children. it explain that working women in informal sector engage their children in work with them in pakistan (siddiqui and uzma, 2007). an important policy proposal emerges from the review of economics and development studies vol. 5, no 4, 2019 621 discussion is that the minimum wages in informal sector employment should be increased and implemented. the study has also found that male school attendance has increased than female because parents wish to educate boys than girls. because females face some restraints to be literate. the probability of schooling has declined with the presence of siblings because child labor is an immense obstacle in child schooling. children are involved in labor work and also involved in household work with their parents. our outcomes are constant with the results of kruger (2007). iodized household affects the schooling of school-age children in both the areas. the public sector school is important for school attendance of children. additionally, schools are away from the households in rural areas. findings show that the households getting the safety nets tend to decrease the attendance. the year 200708 affects negatively the schooling of preprimary school, primary school whereas year 2011 tends to lessen the attendance of pre-primary school. 6. conclusion and suggestions we have analyzed the effect of wealth disparity between the districts of punjab on schooling. it is determined that disparity index has negative influence on the enrolment of all children. it is concluded that the effect of socio-economic disparity is stronger for rural areas. it has strong policy implication. allocation of the provincial funds to the districts un-proportionally that is not only creating socioeconomic disparity among the districts but affecting the human capital in the form of lower school enrolment. it is proposed to allocate the funds to the districts according to provincial finance commission award (still to be materialized) on the lines of national finance commission. the result supports the theory of balanced growth and negates the theory of unbalanced growth. the balanced growth of all districts in punjab would result into good quality labor force in the coming years. in the control variables, it is clear that public sector schools tends to increase the primary school enrolment for all children. so it may further be proposed that public sector spending on education should be increased in comparatively lesser developed districts. all the control variables have similar influences on schooling but head’s education affected the attendance in rural area. socio-economic disparity adversely influences the schooling in punjab, but the stronger results are observed for rural analysis. the results of influence of household size are differ in both the areas. the chronic disease in the household differently affects the attendance in both areas. there is a serious need to enhance the attendance in rural areas in order to narrow down the gap between rural and urban areas. references afzal, m., malik, m. e., begum, i., sarwar, k and fatima, h. (2010). relationship among education, poverty and economic growth in pakistan: an econometric analysis. journal of elementary education, 22(1), 23-45. azid, t. and khan, r. e. a. (2010). who are the children going to school in urban punjab (pakistan)? international journal of social economics, 37(6), 442-465. chabban, and mansour. (2012). the impact of remittances on education in jordan, syria and lebanon working paper no 684. filmer, d. and pritchett, l. (2001). estimating wealth effects without expenditure data – or tears: an application to educational enrolments in states of india. demography, 38(1), 115-132. filmer, d. (2005) gender and wealth disparities in schooling: evidence from 44 countries. 43, 351–369. review of economics and development studies vol. 5, no 4, 2019 622 international journal of educational research. francesca, glliianne claudia gianna, and grilli, (2013) mothers’ employment and their children’s schooling: a joint multilevel analysis for india world development vol. 41, pp. 183–195. huisman, j. and smits, j. (2009) effects of household and district-level factors on primary school enrollment in 30 developing countries. world development, 37(1), 179-193. idrees, m and shah, a. (2018). an empirical analysis of educational inequalities in pakistan. pakistan economic and social review, 56 (2), 313-324. iram, n. hussain, z., anwar, s. and akram, w. (2008). determinants of child school choice in punjab: policy implications. european journal of scientific research. 23(2), 1450-216. jamal, h. 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(2017). the effect of parental wealth on children’s outcomes in early adulthood. j econ inequal, 15, 217-243. kruger, i, d. (2007). coffee production effects on child labor and schooling in rural brazil. journal of development economics, (82), 448-463. lincove, j, a. (2015). improving identification of demand-side obstacles to schooling: finding from revealed and stated preference models in two ssa countries. world development, (66), 69– 83. rutstein, s. o. and johnson, k. (2004). the dhs wealth index. dhs comparative reports no. 6. orc macro, calverton. sawada, y. and lokshin, m. (2009). obstacles to school progression in rural pakistan: an analysis of gender and sibling rivalry using field survey data. journal of development economics, 88(2), 335-347. shaheen, s., sarwar, m. a and cheema, a. r. (2016). measuring inequality of opportunity in pakistan: parametric and non-parametric analysis. pakistan economic and social review, 54(2), 165-190. siddiqui, a. i. and uzma, r. (2007) socioeconomic determinants of school progression in pakistan. applied economics and international development, 7(2), 180-196. tharmmapornphilas, r. (2013). impact of household factors on youth’s school decisions in thailand. economics of education review, 37, 258-272. tsujita, y. (2013) factors that prevent children from gaining access to schooling: a study of delhi slums households. international journal of educational development, 33(4), 348-357. wasim, s. and munir, k. (2017). regional disparity and decentralization in pakistan: a decomposition analysis. mpra paper no: 83444. https://www.researchgate.net/profile/zakir_hussain24 https://www.researchgate.net/profile/sofia_anwar https://www.researchgate.net/profile/waqar_akram2 http://econpapers.repec.org/article/pidjournl/ http://econpapers.repec.org/article/pidjournl/ review of economics and development studies vol. 4, no 2, december2018 303 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads global trends of online dispute resolution (odr) with reference to online trade in pakistan 1 muhammed danyal khan, 2 serkan kaya, 3 rao imran habib 1 doctoral researcher, brunel university london college of business, arts and social sciences, department of politics, history and the brunel law school, pakistan. muhammad.khan4@brunel.ac.uk 2 doctoral researcher, brunel university london college of business, arts and social sciences, department of politics, history and the brunel law school, pakistan. serkankaayaa@yahoo.com 3 assistant professor, gillani law college, bahauddin zakariya university, multan, pakistan. raoimran@bzu.edu.pk article details abstract history revised format: november 2018 available online: december 2018 online trading in pakistan has been rising with every passing day. state level regulation for online trade is inevitable reality. online trade has systematically entered in online dispute resolution (odr) system that is the format of alternate dispute resolution system (adr). many multinational vendors such as amazon and alibaba are using online dispute resolution mechanism to make the trade efficient and less dependent on conventional remedial systems of civil laws and cumbersome procedures of classical courts. online trade in pakistan is a novel idea and is flourishing by every passing day. on the same time, online trade faces issues of dispute resolution. this paper will aim at introducing online dispute resolution (odr) as a model through case studies of various developed nations and international framework. moreover, this paper will identify the prospect and limitations of online dispute resolution in pakistan. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords online dispute resolution (odr), alternative dispute resolution (adr), negotiation, arbitration, european union (eu), uncitral technical notes jel classification: j52, k33, f53 corresponding author’s email address: raoimran@bzu.edu.pk recommended citation: khan, m. d., kaya, s. and habib, r. i. (2018). global trends of online dispute resolution (odr) with reference to online trade in pakistan. review of economics and development studies, 4 (2), 303-311 doi: 10.26710/reads.v4i2.415 1. introduction and background of study since the early 2000s, the amount of internet usage around the world has grown by 970 % as a consequence ofquick evolution of information and communication technologies (ict) ("world internet users statistics and 2017 world population stats", 2017). in the world, slightly fewer than 3.9 billion people are using the internet (“world internet users statistics and 2017 world population stats”, 2017). while the number of internet users is almost2 billion in asian, the number is almost 600 million in the eu(“world internet users statistics and 2017 world population stats”, 2017).while in 2002, the internet users in pakistan were only 133 thousand, this number has increased to 44 million in 2017(“internetworldstats.com, `internet usage in asia”, 2017). http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 304 table 1 even though the use of adr and odr to disputes has recently become more popular, most of legal academic literature emanates from west countries. by this time, there has been the relatively limited publication on this issue in developing countries. it is shown that odr is still in its initial phase in pakistan.the most of existing literature comes from developed countries such as the eu and the us, which has advanced jurisdictions, leave a significant legal literature gap in developing countries.it is obvious that pakistan has a different legal culture from the eu and the us. in pakistan, not only legal differences but also the cultural, the ict infrastructure and the regulatory challenge are some significant reasons that not allow to adr and odr to reach their full efficacy. this research assesses feasibility analysis of odr by considering the growth of odr in pakistan juridical circumstances. it analyses what and how can be practised from the odr legal academic literature in advanced jurisdictions such as the eu and the us and to implement this learning in pakistan context. the history of internet in asia is not very long. first mail from china was made on 20 th of september, 1987 and now it seems a miracle that almost everything is turning towards use of information technology including trade and commerce based on internet websites. for resolving online disputes, china has introduced various government and private level dispute resolution centres. the same trends are demonstrated by a world 2 nd largest population, india, where internet and information technology revolution is taking it to one of the largest internet using nation. india has seven hundred million mobile phone users consuming internet to facilitate from e-commerce. e-bay, an internet based vendor, has made its operations in india to the level of online dispute resolution through e-court. the same trends are observed in markets of pakistan. e-trading is a good tool to reduce the cost, increases efficiency of transaction and is time effective. the same has been benefited by various online vendors in pakistan. it has been observed that regulation of e-commerce in pakistan is not efficient as the transactions are prone to fraud, misrepresentation and other contractual misunderstandings. various studies have indicated the potentials of ecommerce in pakistan mentioning that 67% of companies in pakistan use internet websites to advertise their brands. review of economics and development studies vol. 4, no 2, december2018 305 absence of regulation on e-commerce at state level has made the trade un-certain for both consumers and vendors. this has given rise to various un-remedied disputes. pakistan has recently passed alternate dispute resolution bill 2016 recently but it does not cover the domain of ecommerce and online dispute resolution (odr). online trade and commerce in pakistan is conducted by various websites. a consumer enters an online web portal and takes various offers with the prescriptions and prices. the consumer, a private or company, then puts acceptance by putting an online order agreeing on the terms and conditions along with the description of product or services. late, the vendor delivers the goods. it is settled principle of contract law that ‘agreements are enforceable by law and the fundamental liability of all parties is to perform it with good faith’. now, this ‘good faith’ is not only delivery of goods or services but also the intended benefit of parties to the contract. online trade and commerce in pakistan lacks this ‘good faith’. parties in an online transaction cannot access each other easily and the communication on internet goes unproductive various times in case of online dispute resolution (odr) due to various reasons such as internet literacy, shortage of energy and power and high bandwidth requirements of internet. moreover, the lack of state regulation makes online commerce less certain. this issue leads towards leaving grievances un-remedied as well as impact on national economy. this paper will introduce readers with basic concept of online dispute resolution (odr) and global trends by quoting international infrastructure on online dispute resolution (odr). moreover, developments related to same issue will be presented to find the way out for online dispute resolution (odr) in pakistan. this study will play a pivotal role in turning alternate dispute resolution in commerce and trade to the level of online dispute resolution (odr) in e-commerce. this paper will be among pioneer scholarship on the issue introducing international standards of online dispute resolution (odr) at national level. study will also equip reader with various remedial methods in online dispute resolution (odr). primary question of study is finding the gaps of efficient e-commerce and trade by defining online dispute resolution (odr) and its trends globally. the study will also focus on efficiency of global experiences of online dispute resolution (odr) and how pakistan can benefit from that experience through this comparative study. 2. research methodology the study follows black letter approach involving doctrinal methodology. it will not be descriptive in a sense as it will aim at analysing the basic concept of online dispute resolution (odr) and its trends and perspective in pakistan and globally. the study will also take advantage of comparative methods of research by taking illustrations of operation of online dispute resolution (odr) in china and india. the study will then put forward some recommendations for pakistan based on experience of china and india based upon neighbourhood and identical trends of commerce and industry. 89 percent of population of pakistan are mobile users and almost all companies provide access to internet to its consumers. this makes e-commerce a potential in pakistan where internet users may access online vendors through websites and other mobile applications. online trade in pakistan is growing with rapid pace and it is speculated that it will touch the figure of 1 billion usd in 2020. online trade is compatible with environment in pakistan where half of population is female and due to socio-religious constraints they are not on equal terms with men to mobilise. moreover, the congested traffic conditions also play a vital role in boost of online trade. e-commerce in pakistan has been expanding with every passing day. recently, alibaba group has made their way by meeting prime minister of pakistan. various surveys indicate that e-commerce in pakistan bears a great potential and can play a vital role in boosting economy. many national groups like pakwheels, zameen property, draz group and kamyu are expanding their volume of trade with every passing day. but it has been observed that customer satisfaction and performance of e-contract faces many uncertainties and the consumer faces a great deal of trouble because of absence of effective regulation on state level. online transaction in pakistan and all over the world involves an online offer and acceptance through following procedures:  where a customer is visiting online portal of any company and in capacity of private individual, one is accepting an offer by the vendor by a click. this is also called b2c (business to consumer contract).  some of the online contract involves both companies where the contract involves contract between two organisations. this is also named as business to business contract (b2b).  where an online portal involves two consumers and acts as mediator between the two parties. this type of transaction is commonly known as consumer to consumer contract (c2c). e-commerce in pakistan is evolving and that is why many challenges come in its way. these challenges include lack of demand, mistrust from traditional society, very low awareness about technological use, infrastructural review of economics and development studies vol. 4, no 2, december 2018 306 issues, absence of effective regulation, ineffective advertising, and most significantly absence of vibrant odr. table mentioned below summarizes issues of e-commence in pakistan. table 2 note: shumaila & zeeshan, 2018 these transactions are based on online contact and agreements. sellers make an offer online and the buyer after going through the offer and the description of product and services makes an acceptance online. this transaction does not involve face to face contact of physical access between parties. in this case any kind of dispute related to transaction is a little hard to be resolved. the matter of dispute resolution (odr) is broad in perspective. online dispute resolution is mainly conducted through websites and emails. in some matters it is also conducted offline and face to face. it may also be understood that dispute resolution (odr) may not be confused to alternate dispute resolution. this dispute may also go to the courts and civil disputes. to make e-commerce more vibrant, the trends of dispute resolution (odr) are gaining strength in asia and globally. 3. basic structure of online dispute resolution every year billion transactions occur in the world. in the digital age, with the help of ict, there is no limitations on time and geographic and jurisdiction boundaries for completing transactions through the internet. international transactions or usage have increased the number of cross-border disputes. traditional disputes resolution system does not meet legal requirement of such disputes because:  various countries got different rules for trade and multiple prohibitive costs to invoke legal action in almost all jurisdictional aspects  since the localization factors on the internet are far less obvious, it is difficult to locate business locations and performance in cyberspace because of the infinite internet that can be accessed from anywhere in the world.  cyber related disputes may require legal experts who can adapt to various evolving technical, social and commercial practices of cyberspace (wang, 2017). in order for creating cost effective and more efficient solution for resolving disputes,odr has been awakened legal scholars` interest since 1990s. recently, a number of non-profit making public organizations such as world intellectual property organization (wipo), the american arbitration association (aaa), the american bar association (aba) the better business bureau (bbb), the national arbitration forum (naf)and china international economic and trade arbitration commission (cietac) go further to develop the scheme of odr(wang, 2017). review of economics and development studies vol. 4, no 2, december2018 307 there are various approaches towards to definition and description of odr mechanisms. for example, kaufmankohler and schultz define three perspectives;nominate cyberspace, non-adjudicative adr and arbitration(kaufmann-kohler& schultz, 2004). these authors additionally recognize that the essential feature of a practicable description of odr is that it focuses on the issues raised by its overarching feature, being operated online(kaufmann-kohler& schultz, 2004). odr has been recently described by uncitral technical notes on online dispute resolution (hereafter technical notes): odr is a mechanism for resolving disputes through the use of electronic communications and other information and communication technology. after these definitions and descriptions, it can be said that odr refers to help to resolve dispute with the assistance of ict, particularly the internet. this technology has been called as the `fourth party` by katsh and rifkin (katsh & rifkin, 2001, rainey, 2014). odr is not science fiction. each year millions of disputes are resolved online and hundreds of online dispute resolution providers offer their service around the world. every year only on ebay, around 60 million disagreements among traders are settled through odr (rule 2012). this is a `well-established` way of resolving disputes, appropriate for the internet age. whereas adr and odr mechanisms have some common features, such as lower cost, greater speed, more flexibility in outcomes and so on, odr has unique traits, which include bridging distance, saving travel and venue cost and enabling parties to access expertise outside their local area(rule, 2002). nevertheless, odr obviously has some drawbacks. text-based techniques can diminish communication cues that can in turn lead to misunderstandings, negative interpersonal behaviour, and frustration because of delays in response(tyler& mcpherson, 2006). 4. online negotiation; preliminary framework of odr online negotiation can also be called `e-negotiation` or `cyber negotiation`. negotiation is most common and basic forms of the dispute resolution. it is believed that the most of people do not think about in fact they are negotiating in day-to-day life. efficiency of negotiation may be considered in formal situation such as a business meeting or buying a car. the essence of negotiation can be defined that there is no third party in any type of communication between two or more people when they try to resolve their dispute(lodder & zeleznikow, 2010). in a pure negotiation disputants try to reach agreement without neutral body helping (rule, 2002). there are two key methods of negotiation available to resolve dispute over the internet: automated and assisted negotiation (kaufmann-kohler, 2005). `automated negotiation` and `assisted negotiation` were described by dr wang as: automated negotiation: the parties successively submit to a computer a monetary figure as a settlement proposal. the computer then compares the offer and the demand and reaches a settlement for their arithmetic mean assisted negotiation: the parties communicate with one another over the internet, using for instance e-mails, web-based communication tools or video conferences (wang, 2008) e-mail has become the foremost way of the communication in the workplace(epstein, 2001). invariably, e-mail negotiation has become most common in order to resolve disputes because of some advantages such as time and distance, cost effective, in writing, more planned and so on(epstein, 2001). however, according to a research, email negotiation `increased contentiousness`, `diminished information sharing, process cooperation and trust` and `increased effects of negative attribution` (ebner et al, 2009). it shows that face-to-face contact is better than electronically in order to reach consensus (ebner et al, 2009). 5. online mediation; an effective odr mediation is another type of method to resolve disputes. the main aim of mediation is to offer the parties to settle their disputes in a sustainable and self-determined way. today mediation is used in majority fields. in the past years, mediation was mainly focusing solving labour and family disputes. nevertheless, because of several benefits of the use of mediation compared to with other methods of dispute resolutions such as procedural flexibility, costefficient, time-efficient, it has been used in small claim disputes, consumer conflicts, commercial disputes, tax disputes, bankruptcy and so on. review of economics and development studies vol. 4, no 2, december 2018 308 the european parliament approved the ec directive of the european parliament and the council on certain aspects of civil and commercial arbitration (hereafter ‘ec directive on mediation’) defined `mediation` as: ‘mediation’ means a structured process, however named or referred to, whereby two or more parties to a dispute attempt by themselves, on a voluntary basis, to reach an agreement on the settlement of their dispute with the assistance of a mediator. this process may be initiated by the parties or suggested or ordered by a court or prescribed by the law of a member state(ec directive on mediation 2008 article 3).’ according to those descriptions, mediation refers a process that a mediator tries to assist two or more disputants to solve their dispute. parties are at freedom to abandon from the process at any time. the third party or mediator does not have the authorization to force a binding decision on them. mediation is grounded on the intentional involvement of parties. besides this, online mediation may be understood as `system-based` contrasting to a `face-to-face-based` device(betancourt& zlatanska, 2013). the only difference between offline mediation and online mediation is that parties and third party always communicate via the internet (wang, 2008). the e-mediation method reflects a track or a set of phases usually subjected to targets, report of proceedings, flow processes and, occasionally, complexschemes with algorithms that mayenhance suggestions(vilalta, 2012).electronic schemes offer parties producing informal pitches or suggestions, and parties are helped by third person, mediators, that cooperate online (vilalta, 2012). communication can be synchronized like asynchronous, such as cyber conference, chat, or e-mail. platforms may also organize unrelated caucasus and common areas and personal conversations. in a common field, each party(vilalta, 2012). these services frequently offer complementally phone support. 6. online arbitration; award and enforcement of odr arbitration is a way, impartial for third party, called `arbitrator`, awards final decision for parties. this method has increasingly been chosen by parties in order to resolve disputes, especially in international disputes due to various reasons that the one of main reasons is that the award given by an arbitrator is normally enforceable as a court judgement. businesses are willing to go to arbitration because arbitral award can be efficiently executed in 157countries signatories to the convention on the recognition and enforcement of foreign arbitral awards, also known as the "new york arbitration convention" or the "new york convention". it is permitted to remain as one of the most successful practices to provide confidence in the approval and enforcement of cross-border arbitral awards. online arbitrationmay be referred as an online version of offline arbitration. it includes everything from the `online arbitration agreement` to the `online arbitral award`. in online arbitration, the claimants, the arbitral tribunal, experts are supposed to make use of electronic devices, including sophisticated software and hardware devices, to participate in the proceedings(farned, 2011). the effective of the electronic devices can be seen particularly in comple and largescale arbitration procedure. he other significant advantage of online arbitration is that arbitrations witnesses and parties do not need to travel and accommodate( rnle, 2009). especially, international arbitrators desire to consider without travelling to abroad and would willingly issue an arbitral award in an electronic form. this type of mechanism may be feasible generally in consumer disputes such as small claims but not involve complex issues and high amount of money are at stake. 7. potentials and limitations of odr the main disadvantage of odr is that it avoids the using face-to-face interaction which gives a chance to the mediators and arbitrators to evaluate the credibility of parties and witnesses. when a dispute is handled on the internet, the disputants may involve in causing lacking the mediator`s or arbitrators` awareness. moreover, a party may not know another party that may cause tremendous misunderstanding between them. another commonly discussed issue regarding odr is that during resolving disputes, parties wish to keep all aspects of proceedings private. this could potential a party to print out and distribute recorded communication without permission of the other party. moreover, in the digital age, it is risky that unauthorised people could intercept communications transmitted over the ict. the third demerit of odr is that while odr is one of the best suited methods for resolving some kind of disputes, it may not be suitable for any types of disputes. for example, some significant disputes which is not parties` disposal need assistance from court that is why odr cannot handle those disputes. last but not least, some other review of economics and development studies vol. 4, no 2, december2018 309 factors may also be considered challenging or at least obstacles when used odr. language barriers in cross-border disputes, skills of or difficulty of using of computer or communicating may be a disadvantage for parties who are less familiar with these skills. while odr has some significant considered issues as discussed above, it also provides number of benefits. as opposed to traditional litigation, the one of main benefits of odr is that it is saving time. in a dispute, if a party wants to physically involve in the process, least one of disputant would have to travel which significantly reduces the speedy of process. odr also gives parties more flexibility in procedure, quicker solutions and more creative solutions (lide, 1996; hörnle, 2003). 8. the eu adr directive and the odr regulation the eu adopted two innovative legislations namely the directive on consumer alternativedispute resolution (hereafter the `adr directive`) and the regulation on consumer online dispute resolution(hereafter the `odr regulation`). the main aim of the new legislation is to resolve consumer disputes out of the court, faster, cheaper and simpler than the court may offer(adr directive, recital 5). more specifically, in the article 5 of the directive states that it is a requirement for member states to ensure the provision of adr entities(adr directive article 5) in order to resolve domestic and cross-border any type of contractual disputes which are parties’ disposal, between consumers and traders, except disputes related to health service and higher education (adr directive, article 5). the adr directive requires a duty on the member states to assure the provision of nationally certified cadr entities, which are available online, for consumer complaints arising from the purchase of goods and the provision of services(adr directive, article 2(2)). the directive applies to all both domestic and cross-border contractual disputes where a trader is established in the eu and a consumer is a resident of the eu(adr directive, article 2(1)). the odr regulation sets an `odr platform` that purposes to facilitate the resolution of consumer disputes arising from e-commerce (odr regulation, article 1). while the regulation does not define the odr, the descriptionof the odr platform is given in article 5 (2) as: ‘a single point of entry for consumers and traders seeking the out-of-court resolution of disputes covered by this regulation. it shall be an interactive website which can be accessed electronically and free of charge in all the official languages of the institutions of the union(odr regulation,article 5).’ according to this description, a single point of entry at union level, in order to settle domestic and crossborder complainant, are offered by odr platform to consumers(article 5).moreover, electronic case management tool that is a free of charge in all the official languages are offered(article 5). in the article 7 of the regulation, it is states that one odr contact point shall be designated by each member state(article 7). this odr contact point shall provide assisting to the resolution of disputes related to submitted complaints. procedure of the `registration of complaint` (article 8), `dispensation and conduction of a complaint` (article 9) and `dispute resolution mechanism` (article 10) are deeply dealt with by the regulation. moreover, in terms of protective reasons, the regulation examines in detail; `database` (article 11), `processing of personal data` (article 12), `data confidentiality and security` (article 13) and `consumer information` (article 14). 9. uncitraltechnical notes on odr it questions the scope and adequacy of international odr laws. there is no special binding legislation concerning odr for consumer and commercial disputes, but there are some essential legislative movements in the uncitral. in 2010, the uncitralestablished a working group called working group iiito develop rules to handle lowvalue, high-volume b2b and b2c e-commerce claims(del duca, rule & rogers, 2010). after its forty-ninth session in 2016 uncitral technical notes adopted (working group iii, 2016). it is worthy nothing that technical notes is descriptive and non-bindingand reflects the core principles of an odr process. technical notes rules not only focus on consumers, but also traders can be claimants. the technical notes are expected to have a significant influence on the advancement of systems to facilitate the resolution of disputes arising from cross-border low-value good or service contracts completed by using electronic communications, review of economics and development studies vol. 4, no 2, december 2018 310 10. conclusion online dispute resolution (odr) is going to play a pivotal role in establishing a robust e-commerce regime in pakistan sooner or later. online trade has already expanded its sphere from baby lotions to robotics. this paper focused on national preparedness for the vibrant regime with special focus of online dispute resolution (odr). ecommerce regulation got both state and private boundaries. online dispute resolution (odr) is the advanced format of alternate dispute resolution (adr) that is effectively playing its role for dispute resolution on private level. global trade giants such as amazon or alibaba are using computer based soft as well as face-to-face methods for trade related dispute resolutions. this paper has presented an overview of international framework on online dispute resolution (odr) that will help policy makers to 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(2017). retrieved october 19, 2017, from http://www.internetworldstats.com/stats.htm review of economics and development studies vol. 4, no 2, december2018 331 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads determinants of cost efficiency of takaful and conventional insurance firms of pakistan 1 muhammad abbas, 2 allah bakhsh khan, 3 salman abbas, 4 zeeshan mahmood 1 assistant professor, department of business administration, air university, multan campus, pakistan. mam@aumc.edu.pk 2 assistant professor, department of commerce, bahauddin zakariya university, multan, pakistan. abkhan@bzu.edu.pk 3 research scholar, air university, multan campus, pakistan. 4 assistant professor, department of commerce, bahauddin zakariya university, multan, pakistan. zeeshanmahmood@bzu.edu.pk article details abstract history revised format: november 2018 available online: december 2018 this study investigates the efficiency performance of takaful and conventional insurance firms of pakistan in terms of cost, allocative and technical efficiencies for the period of 2010-2015. six years panel data of takaful and listed conventional insurance firms of pakistan is taken under consideration. the methodology of data envelopment analysis (dea) is used in order to estimate efficiencies scores. furthermore, tobit regression analysis is carried out for determination of the real contributors of efficiencies in insurance and takaful industry of pakistan. in data envelopment analysis, labor, total fixed assets and total equity capital are used as input variables. simultaneously, the price variables are used along with input variables such as price of labor, price of total fixed assets and price of total equity capital. the output variables include invested assets, investment incomes and net premiums. in second stage analysis (i.e. tobit regression), dea efficiency scores are used as dependent variable, whereas age, size, and leverage are used as independent variables along with the dummy for conventional and takaful firms of pakistan. this study found that takaful and insurance firms have been operating on almost equal efficiency levels. furthermore leverage is the main contributor for efficiency optimization, followed by the firm size, whereas, firm’s age has no contribution in efficiency scores. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords takaful, insurance, cost efficiency, tobit regression, dea jel classification: g20, g22, g23, d61, c61, c24 corresponding author’s email address: abkhan@bzu.edu.pk recommended citation: abbas, m., khan, a. b. abbas, s. and mahmood, z. (2018). determinants of cost efficiency of takaful and conventional insurance firms of pakistan. review of economics and development studies, 4 (2), 331-340 doi: 10.26710/reads.v4i2.418 1. introduction in current years there has been a noteworthy expansion in insurance sector of pakistan all along with the opening of takaful firms in business. this incredible information prompts us to embark on the efficiency and productivity examination of insurance and takaful sectors. the intention of the study is to weigh up the efficiency of takaful and http://www.publishing.globalcsrc.org/reads mailto:abkhan@bzu.edu.pk mailto:zeeshanmahmood@bzu.edu.pk mailto:abkhan@bzu.edu.pk review of economics and development studies vol. 4, no 2, december 2018 332 conventional insurance companies of pakistan by approximation the allocative efficiency, technical efficiency, and cost efficiency over the time of 2010 to 2015. this pragmatic examination is pedestal on both life and general insurance sub division of insurance sector in array to present as the whole picture of the competence in the insurance business of pakistan. in pakistan, the takaful rules are implemented in 2005 under the secp. before that, insurance sector was consisted of barely conservative insurance firms. now 5 takaful firms (2 family and 3 general takaful firms) are operating with portfolio of shariah compliant products in the market.currently 5 life plus 27 general insurance companies are operating in pakistan under private conventional insurance system. total premiums written by conventional insurance is 223 billion whereas 10 billion is the total premium written for takaful companies for 2015 year. (insurance association of pakistan year book: 2015-16). takaful is growing at a rapid pace, since it is a shariahcompliant alternative to conventional insurance and its market share is potentially expected to improve up to 50 percent of overall sector share over the next five years. total gdp share of the insurance industry is roughly 0.9 percent, while islamic insurance build up 13 percent of the insurance business. 2. literature review early researches, about the efficiency of insurance industry using dea as a analysis tool, provide information in order to interpret the performances of the insurance sector across the countries, such as in the case of usa conducted by berger et al. (1997), cummins et al. (1999), meador et al. (2000), gardner and grace (2002), cummins and weiss (2002) and cummins et al. (2010). the findings are reported in the form of total factor productivity (tfp) growth and the malmquist index is used for tfp measurement. the japanese life insurance industry is analyzed by (fukuyama, 1997) who concluded that there is an increased in tfp by 19% in japanese insurance firms over the time span of 1988-1993. whereas, cummins et al. (1996) found that the tfp growth is 3.4% of italian insurance industry from 1986 to 1993.in spain, cummins and rubio-misas (2001) reported that efficiency of spanish insurance firms in terms of cost is recorded lower than to u.s. counterparts. in germany, rees and kessner (2000) concluded that the mean levels of german insurance efficiency is 48% and lower than that of british companies which are at mean levels of 57%. barros et al (2008) investigated the technical efficiencies of nigerian insurance companies under the period from 1994 to 2005 and found that the efficiency levels declined as a result of inadequacies in technology, scale and management. adu, et al (2011) assessed insurance companies efficiencies in ghana from the period of 2006 to 2008 and reported as the average efficiency score of life insurance in ghana was higher than that of non-life insurance firms. abidin and cabanda (2011) examined 23 non-life insurance companies of indonesia in term of the relative efficiency for the period of 2005 to 2007. they reported that the size of the insurance company has significant impact on the operational efficiency, thus confirming the theory of economies of scale. dutta and sengupta (2010) conducted a study to inspect the blow of technological innovation on the indian insurance industry efficiency. they evaluated the panel data of 12 life insurance companies for the period of 2006-2009 and found that an increase in investment on it-infrastructure significantly enhance technical and scale efficiency. in pakistan perspective, most of the studies found on the financial efficiencies focusingonly to the banking financial sector of pakistan, while the literature on insurance sector of pakistan is scant. afza& jam-e-kausar (2010) examined technical, pure and scale efficiencies of general insurance firms of pakistan. the sample size was consisted of 27 non life insurance firms of pakistan. the study estimated the average scores of technical efficiency (92.70%), allocative efficiency (81.12%) and cost efficiency (75.44%). the results show that there is considerable need to improve the insurance company operations in term of overall efficiencies, so that inefficient insurance firms should struggle towards the efficient frontier of insurance industry. there are quite number of studies on conventional insurance efficiency but novisible studies is observed on the efficiency of takaful operators as compared to their counterpart. this islamic finance alternative bring the dual financial system within the same sector of economy and a new study area originated in order to evaluate comparative efficiencies of conventional insurance sector with islamic insurance sector. i.e., takaful sector. furthermore, the results of these studies could be sources of guidelines for takaful and insurance operators, customers, investors, policy makers and regulatory bodies. in this connection some studies are givenbelow: review of economics and development studies vol. 4, no 2, december2018 333 saad, et.al, (2006)carry out a relative study of the efficiency of conventional life insurance and family takaful industry in malaysia during the period 2002 to 2005. this study established that the competitiveness of the malaysian takaful industry has been significantly appreciated as a repercussion of increase in public awareness of islamic finance. they found that company size has a significant impact on efficiency changes. kader et al (2011) investigated the cost efficiency of takaful firms operating in seventeen islamic countries and concluded that average cost efficiency scores of takaful firms are comparable with developed conventional insurers. ismail et al. (2011)also found that efficiency score for takaful firms’ remains lower (i.e. 64 percent) than their conventional counterparts (i.e. 87 percent). ismail, othman &bacha (2011) investigated cost efficiency and investment performance of the takaful industry and the conventional insurance industry using dea over the period of 20042009 and found that takaful had a lower significant return as compared to its conventional insurance counterpart. on the other hand, yusop, et al (2011) found that the efficiency level of life insurance and takaful operators in malaysia in regard totherisk management over the period of 2003-2007 was relatively high. saad et. al (2012)concluded that, the overall efficiency of the takaful companies was found below than its conventional counterparts. only one takaful company, namely, prudential bsn takaful bhd recorded tfp performances above the industrial average. the remaining 5 takaful companies are ranked the lowest among the 28 companies in terms of total factor productivity (tfp) performance. antonio et. al (2013)compared the cost efficiency between takaful and conventional insurance in malaysia over the period of 2009-2011. the input-output data were analyzed to measure and compare the level of takaful and conventional insurance efficiency using data envelop analysis (dea), which was measured by input approach (cost efficiency). this study found that the overall cost efficiency of conventional insurance companies in malaysia was better than that of takaful companies in 2011 although takaful had better overall cost efficiency level in 2010 and 2009. hidayat et. al (2015)carried out a study on the comparative analysis of financial performance of the takaful and conventional insurance companies in bahrain for the period of 2006 to 2011. this study found that conventional insurance companies in bahrain performed better than takaful companies in terms of profitability and efficiency during 2006-2011. ring 2006-2011. in pakistan, few studies have been conducted and very less literature is available particularly in the subject of takaful and conventional insurance comparison. khan et al.(2014)analyzed the takaful and conventional insurance companies of pakistan in terms of efficiency and productivity for the period 2006-2010. the results indicated that the insurance firms were more technically efficient exhibiting 89% efficiency for the given period. similarly, results also pinpointing the scale efficiency of 74%, which means a significant expansion in insurance sector of pakistan is observed during the period of 2006 to 2010. this study also analyzed the takaful and conventional insurance sectors in terms of economies of scales. it is concluded that the takaful firms are fighting efficiently with conventional insurance firms regardless of new in the field. results indicate that the takaful firms are supplementary efficient in comparison to conventional counterparts. malmquist productivity index reported significant enhancement in scale efficiency. it is recommended that takaful firms should increase their efficiency and win the competition by improving their services, product quality and marketability of their products. 3. methodology there are two different approaches which are generally used to measure insurance efficiency, generally known as parametric and non-parametric approach. if the data is statistically normal, then we use parametric approach otherwise non-parametric approach will be used. the most frequently practiced approaches in parametric approaches are stochastic frontier approach (sfa), distribution free approach (dfa) and thick frontier approach (tfa). whereas, in the nonparametric approaches encompasses data envelopment analysis (dea) and free disposable hull (fdh). 3.1 data envelop analysis the methodology of data envelopment analysis (dea) which is based on the mathematical programming approach was introduced by charnes et al. (1978). they drew this methodology upon the concept of efficiency which is reported in farrell (1957). according to charnes et al. (1978), data envelopment analysis (dea) calculates the efficiency under the supposition of constant returns to scale, whereas banker et al. (1984) introduced data envelopment analysis (dea) approach under the concept of variable returns to scale. the allocative efficiency is traced back to m.j. farrell (1957) and g. debreu (1951) who originated many of the ideas underlying dea. fare, grosskopf and lovell (1985) developed linear programming formulations of these concepts. review of economics and development studies vol. 4, no 2, december 2018 334 the result would be in form of scores for each dmu, these scores represents percentages ratios and score ‘1’ mean 100% efficient and scores less than ‘1’ mean less than 100% and represents inefficiency of the given dmu with reference to the benchmark dmu which would be100% efficient and scored ‘1’. results of each model for the selected sample year wise is given in the form of tables. tobit regression model, furthermore termed as a censored regression model, is intended to approximate linear associations among linking variables provided, there is either leftor right-censoring in the dependent variable (also recognized as censoring from under and above, respectively). 3.2 sample selection this paper attempted to represent the whole sector of conventional and islamic insurance operating in pakistan. therefore, the sample size included in this research could be said as the representative of almost 100% of the market share of pakistan’s insurance and takaful sector, such as listed firms of corporate sector, foreign firms and private firms.the data sample consist of 32 life and non-life conventional insurance firms of pakistan's corporate sector and 5 general and family islamic insurance firms known as takaful firms working in pakistan. the 6 years panel data from company’s annual financial reports is gathered from the year of 2010 to 2015 obtained from their respective official websites as well as repository of iap (insurance association of pakistan). 3.3 variables descriptions of dea different output variables are recognized by different studies to compute the efficiency and yield of insurance segment. mostly, previous researches used "premium income" as a common gauge of risk pooling as policyholders in reality pay money for protection against risk by acquiring insurance policies. since "premium incomes" does not have direct impact on the income statement of the company, because "claims" has to be deducted from these "premium incomes", remaining premium incomes termed as "net premiums", which is more realized contribution in the company's annual incomes. so, this study used"net premiums" (y1) as output variable instead of "gross premiums" or "premium incomes" in analysis. the measurement unit of this proxy is in the pak rupees (rs). some researchers used the proxy of "invested assets" (y2) such as cummins et al. (1999), worthington and hurley (2002), jeng and lai (2005). worthington and hurley (2002), which believe that "invested assets" as a productivity variable with the reason that net profit of the insurance firms comes from the intermediation role of premiums from policyholders and investment incomes. the measurement unit of this proxy is in the pak rupees (rs). furthermore, "investment incomes" (y3) is also considered as output variable for first stage dea analysis. the fact behind selection of this output variable is that, "investment incomes" is the one out of many streams of company's annual revenues, which is earned from the different investments in market. finally, considering the previous researches this study incorporates "labor" (x1), "total fixed assets" (x2) and "equity capital" (x3) as participatory input variables for the cost efficiency analysis. in order to estimate the cost efficiencies of selected insurance firms, unit prices of all input variables also accounted in the data for analysis, these unit prices are known as price variables. keeping in view three input variables, there are simultaneously three price variables named as: 3.3.1 price of labor (p1) it is measured as total wages paid for the year divided by total numbers of employees of the company. this data is collected on annual basis, of course employee turnover should also be kept in mind. this is calculated as average salary of each employee. the measurement of this proxy is in (rs). 3.3.2 price of total fixed asset (p2) it is measured as yearly accumulated depreciation divided by total asset worth, it will result average price of total assets year wise. the measurement of this proxy is in (rs). 3.3.3 price of equity capital (p3) this proxy measurement is carried out by dividing the annual dividend dispersed with the total equity capital. the resultant is the average charge of the equity capital. the measurement is also in the form of (rs). 3.4 variables descriptions of tobit regression: the second stage analysis of this study is the tobit regression. the need for this two-step analysis is to make projection on the determinants of cost efficiency of research sample of this study. in this connection certain explanatory variables are used in order to estimate dependent variable. these independent variables are as under: 3.4.1 age this independent variable represents the company's years of operation within the pakistan insurance sector or review of economics and development studies vol. 4, no 2, december2018 335 takaful sector. this proxy addresses the phenomena of 'learning curve theory', in which individuals or organizations collectively repeat a particular process, as time passes, they gain better and better skills or efficiencies from their experience and resultantly improved technical, operational and cost efficiencies over time. 3.4.2 size this proxy can be measured on total sales of the company or total assets of the company. this research used company's total asset as proxy for firm size, measured in rupees and denoted by "s" in the regression model. hardwick (1997) argued that there is a constructive association among the performance and size of the firm due to operational cost efficiency which boost output and cut down the unit cost. large company sizes also facilitate insurers to successfully branch out their understood risks and react more rapidly to alterations in market conditions. table 1: dea variables description symbol variable type (v) measurement y1 invested assets output amount in (pkr) y2 investment incomes output amount in (pkr) y3 net premiums output amount in (pkr) x1 labor input wages in (pkr) x2 total fixed asset input amount in (pkr) x3 total equity capital input amount in (pkr) p1 price of labor price wages/t . employees p2 price of t f a price acc. dep / total assets p3 price of equity capital price dividends / total equity table 2: dea – cost efficiency scores (input variables) (price variables) (output variables) labor x1 price of labor – p1 invested assets – y1 total fixed assets x2 price of tfa – p2 investment incomes – y2 equity capital x3 price of equity p3 net premiums y3 3.4.3 leverage the third independent variable for cost efficiency determinant analysis is leverage. leverage is the sum of debt which is used to finance a firm's assets. a firm with considerably additional debt than equity in order to finance its assets is considered as highly leveraged. there are two types of leverages i.e., financial leverage (debt/equity or debt/asset) and operating leverage. this study used only financial leverage and the measurement of this proxy is carried out in term of total debt / total asset ratios instead of total debt / total equity ratios of the company. the dependent variable used in this study is the ccr-i, bcc-i & cost-c efficiency score of data envelop analysis. furthermore, independent variables are used to explain further determinants of the cost efficiency of different firms of sample population. the past 10 years relationship between the variables is analyzed to predict future behavior of the cost efficiency determinants. it is represented as "ce" in the regression model. the dummy or indicator variables used in this study are "takaful firms" and "conventional insurance firms”. dummy variable with code "0" value is considered absent while dummy variable with code "1"is considered present in the regression. 4.5 regression equation dea scores ccr-i (it) = α + ß1 a (it) + ß2 s (it) + ß3 l (it) + ß) tkf_d + ε (it) dea scores bcc-i (it) = α + ß1 a (it) + ß2 s (it) + ß3 l (it) + ß) tkf_d + ε (it) dea scores cost-c (it) = α + ß1 a (it) + ß2 s (it) + ß3 l (it) + ß) tkf_d + ε (it) review of economics and development studies vol. 4, no 2, december 2018 336 5. results 5.1 dea efficiency scores the 1 st stage analysis of this study is based on the evaluation of efficiency scores with the help of data envelop analysis software. for this purpose, different approaches of dea are used such as ccr-i, bcc-i and cost-c models. the results indicate efficiency scores of takaful and insurance firms along with the ranking of whole sample for that period. these statistical results show the top ranked firms as 100% efficient firms and remaining firms are ranked with their respective scores. these scores are further analyzed for the determination of which sector (either takaful or insurance) is performing more efficiently over competitor sector. in simple words we are interested in the determination of leading and lagging sectors in takaful and insurance industry. 5.2 independent sample t-test analysis the independent samples t-test evaluates the mean values of two independent set of samples, such as takaful firms (tkf) and conventional insurance firms (cif), with the aim to establish statistical proof concerning the sample means, whether significantly dissimilar or not. from year 2010 to 2015, the probabilities of levene’s test are greater than desired significant level i.e., p ≤ 0.05, so that it gives us path to consider the values of ‘equal variance assumed’ in results and accept the null hypothesis (h0) for homogeneity of variance. while on the other side, the probabilities of t-test results are also higher than significance level, i.e., p ≤ 0.05, so that accept the (h0) hypothesis, and achieved that the average differences of ccr-i efficiency scores for conventional insurance firms and takaful firms are insignificant. based on the results, we can conclude that, during the year 2010 to 2015, there is no significant mean difference between the cif and tkf firms found and both groups are operating at almost equal levels in ccr-i, bcc-i and in cost-c scores. table 3: efficiency scores comparison of takaful and insurance sectors under ccr-i ccr – i 2010 2011 2012 2013 2014 2015 no. of firms cif 32 32 32 32 32 32 tkf 5 5 5 5 5 5 mean cif 0.451 0.523 0.397 0.462 0.370 0.310 tkf 0.355 0.325 0.30 0.338 0.332 0.202 st. dev cif 0.320 0.348 0.375 0.376 0.335 0.330 tkf 0.317 0.257 0.327 0.382 0.306 0.148 levene's test prob. 0.964 0.09 0.369 0.337 0.513 0.076 t-test prob. 0.540 0.231 0.598 0.500 0.815 0.481 md 0.095 0.198 0.094 0.123 0.0376 0.108 table 4: efficiency scores comparison of takaful and insurance sectors under bcc-i bcc – i 2010 2011 2012 2013 2014 2015 no. of firms cif 32 32 32 32 32 32 tkf 5 5 5 5 5 5 mean cif 0.726 0.731 0.626 0.697 0.640 0.590 tkf 0.720 0.650 0.715 0.662 0.689 0.626 st. dev cif 0.238 0.267 0.310 0.303 0.326 0.347 tkf 0.297 0.279 0.323 0.342 0.295 0.346 levene's test prob. 0.665 0.718 0.895 0.834 0.287 0.739 t-test prob. 0.960 0.533 0.554 0.816 0.754 0.833 md 0.006 0.081 -0.089 0.034 -0.049 -0.035 5.3 tobit regression analysis this results section deals with the estimates of tobit regression equation, as the final purpose of this research is to estimate the determinants of different dea efficiency scores. in this connection, dependent variable is considered as ccr-i, bcc-i and cost-c scores and simultaneously three tobit regression equations have been estimated. the results of these regression results are as under: 5.4 ccr-i model interpretation this regression results used ccr-i balanced pooled data file for the estimates. so that all the coefficients are positive in nature except dummy variable which tells that takaful firms (d=1) compare to conventional insurance review of economics and development studies vol. 4, no 2, december2018 337 firms (d=0) have a lower ccr-i scores with the magnitude of 0.196.leverage and takaful dummy variable is significant at level 1, while size variable is significant at level 2. whereas, age variable is insignificant (p value = 0.9056). so out of three independent variables, two variables (size & leverage) is significantly affecting the dependent variable i.e., dea ccr-i scores and the impact of age variable on ccr-i scores is statistically insignificant. table 5: efficiency scores comparison of takaful and insurance under cost-c cost c 2010 2011 2012 2013 2014 2015 no. of firms cif 32 32 32 32 32 32 tkf 5 5 5 5 5 5 mean cif 0.285 0.311 0.184 0.277 0.262 0.213 tkf 0.267 0.176 0.171 0.210 0.294 0.271 st. dev cif 0.277 0.290 0.204 0.282 0.284 0.242 tkf 0.285 0.173 0.165 0.176 0.255 0.235 levene's test prob. 0.928 0.205 0.833 0.57 0.919 0.988 t-test prob. 0.892 0.323 0.938 0.612 0.813 0.621 md 0.018 0.134 0.007 0.067 -0.032 -0.058 5.5 bcc-i model interpretation age and size variables are negatively correlated with dependent bcc-i scores variable which means as age and size of the firm increased it will affect bcc-i scores of the firm negatively. while on the other side levearge variable has positive impact on bcc-i scores, as leverage of the firm increased it will affect bcc-i score of the firms. takaful firms (d=1) compare to conventional insurance firms (d=0) have a lower bcc-i scores with the magnitude of 0.0992.only leverage is highly significant with level-1, rests of the variables are insignificant, which means only leverage has confirmed significant effect on the scores of bcc-i of firms. table 6 dependent variable ccr-i bcc-i cost-c independent variables coeff. prob. coeff. prob. coeff. prob. intercept c 0.253717 0.0000 0.577840 0.0000 0.115376 0.0008 age 0.000116 0.9056 -0.000626 0.4798 -0.000208 0.7584 size 2.01e-06 0.0295** -5.41e-07 0.5163 1.76e-06 0.0052*** leverage 0.534984 0.0000*** 0.441212 0.0000*** 0.535680 0.0000*** tkf_d -0.195923 0.0025*** -0.099279 0.0906* -0.132064 0.0034*** *: statistically significant at 10%, **: statistically significant at 0.05 %, ***: statistically significant at 1% table 7: descriptive statistics of dea efficiency scores ccr-i bcc-i cost-c mean 0.403838 0.669504 0.252047 median 0.262810 0.650231 0.151126 maximum 1.000000 1.000000 1.000000 minimum 0.040642 0.077928 0.001651 std. dev. 0.342953 0.299143 0.257344 observations 222 222 222 table 8: descriptive statistics of tobit regression age size leverage mean 32.53153 7770.544 0.293879 median 22.50000 1613.555 0.167210 maximum 83.00000 292227.0 1.023844 minimum 2.000000 17.34000 0.002586 std. dev. 24.14261 22630.18 0.292226 observations 222 222 222 review of economics and development studies vol. 4, no 2, december 2018 338 5.6 cost-c model interpretation third column of the table shows the results of tobit regression analysis with dependent variable cost-c score, in which independent age variable is negatively correlated with the cost-c scores of the firm, means as older the firm it will be less cost efficient as compared to new incorporated insurance firms. this is just because of the reason that as insurance firm get older its claim side become bigger and simultaneously expenses also increases which results negative impact on cost-c scores of the firm. whereas, size and leverage variables are positively correlated with the cost-c scores of the firms. it means, as volume of total assets of the firm increases, and then firm would be more efficient in cost-c score. size, leverage and dummy takaful variable are significant at level 1, while as age variable is not significant with the cost-c dependent variable. dummy variable coefficient is also negative in direction which tells us that takaful firms (d=1) compare to conventional insurance firms (d=0) have a lower bcc-i scores with the magnitude of 0.132, controlling for the other independent variables. 6. conclusions we found that among the top ranked list (100% efficient), conventional insurance firms are higher in numbers compared to takaful firms, but no statistical significant efficiency mean difference is found among the takaful and conventional insurance firms. that mean on average both sectors are operating on equal performance basis in either (ccr-i, bcc-i, cost-c) case of efficiency measure. in input oriented scale efficiency (ccr-i) regression results, we found that size and levearge is significant at level 2 and level 1 respectively and coefficients are positive in nature, so concluded that volume of total assets and firm’s financial leverage is highly correlated has positive relations with firm’s ccr-i efficiency scores. whereas dummy variable states that the marginal contributions of takaful firms are less than conventional insurance firms and reported as highly significant at 100%. only age variable is insignificant in estimates which means firm’s no of operational year have no impact on the firm’s ccr-i scores. in input oriented technical efficiency (bcc-i) regression results, we found that only levearge is significant at level 1 and coefficient is also positive in nature, where as age and size variables are insignificant, so concluded that volume of total assets and firm’s age are not correlated with firm’s bcc-i efficiency scores. whereas dummy variable states that the marginal contributions of takaful firms are less than conventional insurance firms and reported as insignificant only leverage variable is significant in estimates which mean firm’s financial leverage has impact on the firm’s bcc-i scores. in cost efficiency (cost –c) regression results, we found that size and levearge is significant at level 1 and coefficients are positive in nature, so concluded that volume of total assets and firm’s financial leverage is highly correlated has positive relations with firm’s cost-c efficiency scores. whereas dummy variable states that the marginal contributions of takaful firms are less than conventional insurance firms and reported as highly significant at 99%. only age variable is insignificant in estimates which means firm’s no of operational year have no impact on the firm’s cost-c scores. the firm’s age is the only independent variable which found insignificant in every estimate of regression, so for this finding, we can conclude that firm’s age has no impact on the efficiency scores of the firm. although this is contradictory with the theory of learning curve, but in case of insurance sector, as firm age is increasing, its claims and other liabilities also increases which means that age is not one of the determinants for efficiency measurement. this phenomenon is also evident from the year wise efficiency scores of ccr-i, bcc-i and cost-c, as different firms emerged as top ranked firms in different years, only some firms are consistently emerged as bench mark firms. so, age factor is not significant as determinant of efficiency score. in order to achieve benchmarked frontier, takaful firms should emphasis on total assets of the firm, as total asset is positively significant with the firm’s efficiency scores.since the financial leverage is also the significant contributor in cost efficiencies, so that firms should emphasis on increasing assets with the fuel of external funds. it is further suggested that takaful firms should reduce their operating cost and management expenses and should improve their investment assets and incomes by investing in healthy projects.furthermore, takaful firms on average competing with the conventional counterparts in 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(1993). the measurement of efficiency in life insurance: estimates of a mixed normal-gamma error model. journal of banking & finance, 17(2-3), 483-496. review of economics and development studies vol. 4, no 2, december2018 271 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads the calculus of rural poverty: evidence from district bhakkar – pakistan 1 sobia khuram, 2 mahmood ul hassan 1 assistant professor, institute of administrative sciences, university of the punjab, lahore, pakistan. sobia.ias@pu.edu.pk 2 monitoring and evaluation specialist, punjab skills development project, lahore, pakistan. mehmudchaudhry@gmail.com article details abstract history revised format: november 2018 available online: december 2018 the study was conducted to determine the factors associated with poverty in pakistan. using cross sectional survey design, data was collected from 300 households. multiple linear regression model was employed to analyze the data. results of regression analysis showed that household size, dependency ratio, participation rate, ownership of physical assets and landholding size had a significant impact on the poverty status of the households. the study suggested an increased investment in agricultural sector and creation of social infrastructure, with a view to create more employment opportunities, ensuring supply of healthy and educated workforce and thus reducing poverty. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords poverty, poverty line, household jel classification: i30, r20 corresponding author’s email address: sobia.ias@pu.edu.pk recommended citation: khuram, s. and hassan, m. (2018). the calculus of rural poverty: evidence from district bhakkar – pakistan. review of economics and development studies, 4 (2), 271-280 doi: 10.26710/reads.v4i2.411 1. introduction poverty has been a major challenge in pakistan since inception of the country. realizing its social and economic implications for overall development of the country, pakistan implemented various economic and social development models to conquer the menace of poverty. however, the goal of significant reduction in poverty remained elusive. latest official figures show that 29.5 percent of population in the country lives below the poverty line1. the phenomenon is more pronounced in rural areas where 35.6 percent population lives below the poverty line. in terms of multidimensional poverty index, in rural areas 54.6 percent of population lives below the poverty line2.a recent analysis shows that, if poverty line is shifted to rs. 5000 per person per month, 63 percent population of punjab slides down the poverty line3. inspired by the dominant development paradigms, pakistan, over the years, experimented with several development models to trigger economic development, leading to poverty reduction. these models included import substitution industries of 1948-55; export expansion of 1960-65; shift from agriculture to industry of 1966-67; population control policies of 1967-68; and gnp growth model of 1971-75 (haq, 1976). these were followed by programs implemented with the assistance of international development finance institutions such as structural adjustment programs (1980s & 1990s), poverty reduction strategy papers (2000s), millennium development goals (20002015), and now sustainable development goals (2015-2030). the evidence in literature suggests that, despite 1. pakistan economic survey 2015-16 2. pakistan multidimensional poverty index report 2016 3. punjab economic report 2017 http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 272 efforts, poverty remained unconquered. irfan and amjad (1984) noted that in mid-sixties, despite the increase in agriculture sector, rural poverty index increased from 42 percent to 55 percent. in seventies, the decrease in rural poverty was primarily attributed to the remittances sent by the overseas pakistanis. similarly, offshoots of structural adjustment programs were negative for employment, poverty and governance (kemal & naseem, 1994). literature suggests that there was an increase in poverty in 1990s (amjad& kemal, 1997; ali & tahir, 1999; jafri, 1999; arifet al., 2000).naseem (2012) noted that the poverty headcount ratio jumped from 24 percent (1987-88) to 30 percent (1998-99). therefore, keeping in view the economic development of the country, the perpetuity of the phenomenon poses a colossal challenge and merits attention of academia and the policy makers. in order to devise an effective and indigenous strategy to arrest poverty, it is imperative that an empirical study be conducted to unearth the underlying factors of rural poverty. the studies conducted in pakistan mostly rely on secondary data and are limited to counting numbers of the poor. the available literature and empirical evidence of poverty is scattered. the present study is an attempt to fill this gap and undertake a systematic investigation of factors responsible for rural poverty in district bhakkar – pakistan. 2. literature review there are two major groups of literature on poverty (aikaeli, 2010).the first group views poverty as a cultural (or behavioral) phenomenon; while, the second group takes poverty as a structural (or economic) phenomenon. the cultural group sets itself in line with the assumptions of classical economic theory. according to this perspective, poverty is caused when an individual fails to make rational decisions regarding utilization of resources available to him/her. this is seemingly influenced by 19 th century eugenics movement – describing the conduct and status of an individual in the society as a function of his/her genetic makeup (gordon, 2003). it argues that poverty is rooted in dysfunctional values of the poor. however, critics hold that the cultural strand only encompasses the symptoms and ignores the underlying realities of poverty. the structural viewpoint of poverty aligns itself with neoclassical (liberal/keynesian) economic theory, which recognizes that market externalities and initial differences in terms of individual potential, skills and resources play an important role in determining the status of an individual in the society. this view appreciates that inequality or disadvantage in respect of economic opportunities and location has an impact on the earning potential of individuals. in other words, the structural approach concludes that poverty of an individual cannot be explained in terms of his/her individual characteristics, while ignoring the socio-economic features of the location (holzer, 1991). among the factors underlying incidence of poverty were availability and access to economic opportunities, the level of median income and inequality (keynes, 1936; ellwood and summers, 1985; abramovitz, 1996). the present study aligns itself with the theoretical assumptions of structural paradigm and assumes that the household income (or welfare) is impacted by its social, economic and demographic characteristics. a number of national as well as international studies have been conducted following the structural group of poverty. at national level, shirazi (1995) noted that the head of a household’s educational level along with participation rate of a household were related negatively with the household poverty, while the size of the household had a positive correlation with the poverty status of a household. hashmiet al. (2008) concluded that education of head of a household, ownership of livestock; household size, dependency ratio, landholding size, and ownership of physical assets were important underlying factors to determine the poverty status of a household. arifet al. (2012) found household size and dependency ratio to be positively related with protracted poverty, while, ownership of land and livestock, housing structure and availability of rooms were found to be negatively related with chronic poverty. khan et al. (2015) found out that, in the presence of other factors, household size, female-male ratio and participation rate were significantly related with the rural poverty. akhtar et al. (2015) analyzed the headcount ratio, poverty gap and squared poverty gap of rural poverty. utilizing hies4 datasets, logit regression model was used to study the changes in poverty overtime. the study found out that landholding size, dependency ratio, household size and educational attainments of the households were significantly related with poverty status of rural households in terms of all three indices. similarly, there is evidence in international literature on developing countries that supports the findings that socioeconomic conditions and household composition are important factor towards determining the poverty status of households. dattet al. (1999) identified that the determinants of poverty in egypt included, among others, the level of education, participation rate, household size, child dependency ratio and old age of head of a household. 4. household integrated economic survey review of economics and development studies vol. 4, no 2, december2018 273 bogaleet al. (2005) noted that the determinants of rural poverty in ethiopia included landholding size, education level and livestock ownership. apataet al. (2010) stated that the key factors related to rural poverty in nigeria included level of education and female headed households. aikaeli (2010) found out that the determinants of rural poverty in tanzania included education of head of a household, participation rate, landholding size and gender of household head. bahta and haile (2013) found out that the determinants of poverty in eretria included education level, landholding size, household size and child dependency ratio. muhammad hussen (2016) identified that the determinants of rural poverty in ethiopia included, among others, livestock ownership, family size and land possession. review of the literature highlights that poverty (or welfare) status of a household is determined by the economic, social and demographic characteristics. too much demographic pressures can push a household towards poverty, while the well-being of a household could be improved by improving the economic status. the vast body of knowledge on the subject highlights that the factors related with rural poverty are both varied and complex. generally the rural areas in developing countries are marred by location disadvantages, along with inadequate availability and access to social and economic infrastructure. hence the literature on economic strands of poverty highlights how the poverty status of a household is defined by the structural and economic realities. this current inquiry, by building on the structural strand of poverty theory, aims to analyze the relationship between demographic and socio-economic characteristics of households and the level of poverty in district bhakkar. 3. methodology 3.1 theoretical relationship of household characteristics with poverty – hypotheses in order to investigate the relationship between household characteristics and the poverty status of a household, following thirteen hypotheses were developed for the purpose of the present study. it is important to take note that theoretical bases of these hypotheses have been drawn from the evidence available in the poverty studies conducted on the developing countries. 3.1.1 household size composition of a household is defined by means of its size and characteristics of its members, for example, age, literacy level, participation ratio. it is believed that poor households comprise large family size and younger population which lead to an increase in poverty. shirazi (1995) concluded that household size had a positive correlation with poverty status of a household. haq et al. (2005) also found a positive relationship between size of a household and its poverty status. hashmi et al. (2008) held that household size was found to have a strong impact on determining poverty status of a household. there are other studies which establish relationship between household size and poverty status of a household (dattet al., 1999; arifet al., 2012; khan et al., 2015; akhtar et al., 2015). hypothesis (h1): the larger is the size of a household, the higher the probability of its being poor. 3.1.2 dependency ratio dependency ratio is defined as the ratio of the number of family members (≤ 14 years and ≥ 65 years) not in the labor force to those members of a family which are in the labor force. this definition of dependency ratio is based on parameters defined by the world bank5, united nations,6 and the international labour organization (ilo)7. the dependency ratio allows us to assess the burden on members of a household in the labor force due to the household members who are not in labor force. hashmi et al. (2008) and dattet al. (1999) observed that dependency ratio has a strong impact in determining the poverty status of a household. arifet al. (2012) noted a significant positive relationship of dependency ratio with protracted poverty. results of empirical studies showed that dependency ratio was an important determinant of poverty (bahta& haile, 2013; akhtar et al., 2015). hypothesis (h2): the larger is the dependency ratio of a household, the greater the probability of its being poor. 3.1.3 gender of the head of household it is assumed that poverty status of a household is impacted by the gender of its head. it is perceived that households having women as their head are more prone to poverty compared to households with men as their 5. http://data.worldbank.org/indicator/sp.pop.dpnd 6. http://www.un.org/esa/population/publications/worldageing19502050/pdf/95annexi.pdf 7. https://www.ilo.org/ilostat/faces/home/statisticaldata/conceptsdefinitions review of economics and development studies vol. 4, no 2, december 2018 274 heads. the underlying assumption is that socio-cultural values prevailing in a typical pakistani rural society inhibit women to choose profession of their own choice or participate freely in paid economic activity. this limits their scope in obtaining paid jobs and contributing to the income (welfare) of their households. aikaeli (2010) concluded that gender of the head of a household was among the determinants of rural poverty in tanzania. hypothesis (h3): the households having females as their heads have a greater probability of being poor. 3.1.4 age of the head of household dattet al. (1999) and malik (1996) held that age of the head of a household was among the determinants of poverty status of a household. it is assumed that earnings of the head of a household are positively correlated within the age bracket of 25 to 64 years and have a negative correlation beyond and below this age cohort. the underlying assumption is that, prior to the age of 25 years, one remains engaged in his/her studies or keeps on searching for some employment and as such his/her contribution towards income of the household remains insignificant. however, as one grows in age, generally he/she succeeds in securing independent position in formal and nonformal settings, leading to increase in his/her income. the income curve again declines once he/she gets retired from active life. hypothesis (h4): the households having their heads within the age bracket of 25 to 64 years have a lesser probability of being poor; whereas, households having their heads up to 24 years and equal or above 65 years of age have a greater probability of being poor. 3.1.5 female to male ratio the female to male ratio (sex ratio) has important bearings on participation rate of a household. though not generalizable, but in a typical pakistani family socio-cultural traditions discourage women to opt for jobs far away from their homes, thus hampers the women’s participation in paid work. the studies suggest that female to male ratio has a relationship with poverty status of a household (malik, 1996; khan et al., 2015). hypothesis (h5): the higher the female-male ratio of a household, the higher the probability of its being poor. 3.1.6 education level of head of household education is considered as an agent of change. it enables the individuals to become an active part of society. schult (1961) and becker (1975) held that education was an investment and a skill set those results in provision of future benefits for the individuals. woodhall and psacharopoulos (1985) suggested that investment in education was a sure recipe to alleviate poverty both directly and indirectly. educated individuals were found to be better able to take benefit of technology and have access to basic necessities of life. human capital models argue that education help produce non-homogeneity in labor force. hence, better performance in education opens new vistas of professional opportunities, which result in improved socio-economic conditions of a household. there is ample evidence in literature that education of the head of a household has an important role in determining its poverty status (shirazi, 1995; hashmi et al., 2008; dattet al., 1999;aikaeli, 2010). hypothesis (h6): the higher is the educational attainment of the head of a household, the lower is the probability of its being poor. 3.1.7 participation rate participation rate is defined as the ratio of household members of working-age (≥ 15 years and ≤ 64 years) who are engaged in any paid employment to those members of a household who fall within working age bracket but are unemployed. in contrast to dependency ratio, the participation rate takes into account only those members of a household who are in labor force, excluding household member ≤ 14 years and ≥ 65 years. the participation rate is an important factor used to ascertain employment status of a household. since high participation rate indicates more number of employed members in a household. it is, therefore, assumed that increase in participation rate leads to decrease in poverty status of a household. shirazi (1995) concluded that participation rate of a household was found to have a negative relationship with the household poverty. dattet al. (1999) and aikaeli (2010) noted that participation rate of a household was included among the important factors determining the poverty status of a household. khan et al (2015) concluded that, among others participation rate turned out to be the significant factor associated with the rural poverty. hypothesis (h7): the higher is the participation rate of a household, the lower is the probability of its being poor. review of economics and development studies vol. 4, no 2, december2018 275 3.1.8 property and assets of household the property of a household comprises its tangible goods such as land, cultivated areas, livestock, agricultural implements, machinery, buildings, household appliances, other durable goods and its financial assets, for example, liquid assets and other financial assets. these indicators are of paramount interest in determining the poverty status of a household because they reflect wealth of the households; thus affect income level of the household. further, some of the households, particularly in rural areas, may be poor when their incomes are considered as an indicator of poverty, but they may be wealthy when their property is considered to weigh their status in the society. rowntree (1901) calls this class of poverty as secondary poverty, for it subsumes the households those apparently have means, but are still unable to make use of these resources to pull themselves out of poverty threshold. household property and assets, as proposed to be used in the current study, are discussed as under: 3.1.9 landholding size it is considered that ownership of agricultural land plays an important role in raising a household above subsistence level. the parameter used in this study was the landholding of a household in acres8. it is assumed that higher landholding size would lead to decrease in incidence of poverty of a household. hashmi et al. (2008) suggested that household size had a strong impact on determining the poverty status of a household. arifet al. (2012) found that ownership of land had a significant and negative relationship with poverty. akhtar et al. (2015) suggested that landholding size had a significant relationship with poverty status of rural households. it is argued that among others landholding size is an important determinant of rural poverty in developing countries (bogaleet al., 2005; aikaeli, 2010; bahta& haile, 2013). hypothesis (h8): the larger the issize of landholding of a household, the lesser is the probability of its being poor. 3.1.10 livestock population livestock plays an important role in rural economy of pakistan. it constitutes a significant part of a household’s income. it is a net source of steady earnings for rural communities. the sector contributes 11.9 % to the gdp9. its role in poverty alleviation efforts is, therefore, considered important. hashmi et al. (2008) suggested that ownership of livestock, had a strong impact on determining the poverty status of a household. arifet al. (2012) noted that ownership of livestock had a significant and negative relationship with poverty. bogaleet al. (2005) noted that livestock ownership was among the determinants of rural poverty in ethiopia. muhammad hussen (2016) demonstrated that, among others, livestock ownership was found to have an important role in determining rural poverty. hypothesis (h9): the larger is the size (value in monetary terms) of the livestock population of a household, the lesser is the probability of its being poor. 3.1.11 value of physical assets material possessions are important for household incomes. the study took into account the material possessions in the shape of agricultural equipment and machinery and household appliances such as tv, refrigerator, washing machine, fans, sewing machine, computer etc. it is assumed that ownership of physical assets has a negative relationship with poverty. hashmi et al. (2008) observed that among others ownership of physical assets had a strong impact on determining the poverty status of a household. malik (1996) also noted a correlation between ownership of physical assets and poverty of a household. hypothesis (h10): the higher is the cumulative monetary value of the household’s physical assets, the lower is the probability of its being poor. 3.1.12 access to health services and facilities (ahsf) health of a household is generally characterized by four types of variables which indicate living standards. among these, are; (a) nutritional status, such as weight for age, height for age and weight for height, (b) disease status, for example, infant and juvenile mortality and morbidity rates as related to certain diseases such as malaria, respiratory infections, diarrhea and sometimes poliomyelitis, (c) the availability of health care services such as primary healthcare centers, maternity facilities, hospitals and pharmacies, basic healthcare workers, nurses, midwives, doctors and traditional healers and medical services such as vaccinations, access to medicines and medical 8. an acre is about 0.405 hectare 9. pakistan economic survey 2015 review of economics and development studies vol. 4, no 2, december 2018 276 information and (d) the use of these services by poor and non-poor households. hypothesis (h11): the greater is the access to healthcare facilities to a household, the lesser is the probability of its being poor. 3.1.13 access to drinking water and sanitation (adws) it is commonly understood that water and sanitation significantly impact the living standards of households. there exists sufficient evidence in literature that access to clean drinking water and sanitation facilities are negatively skewed for the poor. hypothesis (h12): the greater is the availability and access to clean drinking water and sanitation facilities to a household, the lower is the probabilities of its being poor. 3.1.14 household shelter quality (hsq) shelter is a manifestation of overall personal life of a household. it is assessed in terms of poor and non-poor household groups. three components are important in this regard such as type of housing, housing services and the overall environment surrounding housing services. three type of indicator are important to track the quality of available housing. first type includes building and its characteristics like size and type of material (mud and straw, and baked and unbaked bricks). second, how it has been procured whether it is self-owned or taken on rent and what is the household equipment. third, services indicators comprise availability and use of drinking water, type of communication services available, sources of electricity and energy (kerosene, wood, dung cake etc.). finally, the environment related indicators mainly include the quality of sanitation, the degree of isolation or development (existence of road infrastructure which can be accessed in all weathers, type of transport facility that is available and how long it takes to get to the market) and the extent to which the personal life is safe. it is commonly assumed that housing facilities available to poor are precarious and have low sanitary conditions. this, in turn, results in poor health leading to lower working efficiency of household members. hypothesis (h13): the better is the quality of construction material used for construction of houses by a household, the lesser is the probability of its being poor. 3.2 profile of study area district bhakkar is present in the western part of the of punjab province in pakistan. the human development index (hdi) report of 2013 on pakistan’s districts classified bhakkar as an “underdeveloped” district with hdi 0.48.it comprises of four tehsils10including mankera, kallurkot, bhakkar, and darya khan with 42 union councils (ucs)11. it is important to differentiate here for the purpose of clarity and to avoid confusion that district bhakkar also includes a tehsil with the same name (tehsil bhakkar), a smaller administrative unit. the total population of the district amounts to 1,051,456 person’s12 with83.96% living in rural areas. the average size of the household in bhakkar equals to 6.613 persons per household. the literacy rate of the district is 51%, while the unemployment rate stands at 6.8%, along with average annual growth rate of 2.72%. out of total district population, 39% are underweight, with 12 % suffering from severe underweight conditions 14 . utilizing the mics 2003-0415 data,cheema et al. (2008) estimated 58 % of rural population in the district living below poverty line. the topography of the district bhakkar can be divided into three main areas. the rive rain area is mainly tube well irrigated, while the plain area is both tube well and canal irrigated. the third desert area is mainly rain fed. the major sources of income in the rural areas of the district include agricultural produce and livestock. 3.3 sampling design a sample of 300 households was drawn in the present study by utilizing the multi-stage implicit stratified cluster sampling16 design. at the first stage, two tehsils including bhakkar and mankera were selected. bhakkar tehsil was selected because it represents both rive rain and plain area, while mankera tehsil was selected because it represents 10. tehsil is an administrative division in pakistan with a city serving as an administrative center for towns and villages constituting the tehsil. 11. union council comprises a large village and surrounding areas often including small villages. it is third tear of local government in pakistan headed by a chairperson and number of elected councilors. 12. estimates are as per census report of 1998. 13. bhakkar district at a glance: pakistan bureau of statistics. 14. multiple indicator cluster survey 2007-08 15. the multiple indicators cluster survey 2003-04 16. designing household surveys samples: practical guidelines: the department of economic and social affairs of the united nations, secretariat, new york, 2005. review of economics and development studies vol. 4, no 2, december2018 277 the desert area. at the second stage of the multi-stage sampling, total of three ucs, one from each rive rain, plain and desert areas were selected. at the third stage, total of twelve villages, four from each uc, were selected randomly. at the fourth stage, a total of 300 households, with 25 from each village, were randomly selected for data collection. in the present study the unit of data collection was the household. 3.4 data collection by using the cross-sectional survey design and a multi-topic questionnaire, data was collected from 300 households selected on random. the questionnaire was initially developed in the english language but was later translated into urdu language, duly vetted by a linguistic expert. the questionnaire comprised of three main sections to collect data on demographic, economic and social characteristics of the surveyed households. the survey included total 50 questions with 13 related to demographic, 21 related to economic and 16 related to social characteristics of the sampled households. the survey respondents were also asked to suggest ways to lessen poverty. efforts were made to ensure that the survey respondent were the head of the randomly selected households. the data collection period lasted from april july 2016. 3.5 analytical model descriptive statistics were utilized to develop the socio-economic and demographic profile of the area. for empirical analyses, the world bank (2005) suggests that in most of the cases, contribution of various variables towards poverty of a household is estimated by using regression analysis. level of income (or expenditure) per capita– the “dependent” variable – is explained as an outcome of variety of variables (the “independent” or “explanatory” variables). for the purpose of current study, explanatory variables have been discussed in the previous section (theoretical relationship of household characteristics with poverty – hypotheses). following classical regression model, as employed to undertake poverty analysis, was used in the present study: ln (yi/ z) = αo + α1 x 1 i+α2x 2 i+… αnx n i where z denotes poverty line, yi is (per capita) income, x n i are “independent” variables, αn are the coefficients that are to be calculated and αo represents constant term. it may be noted that y / z is in log form, which is a common way of allowing for the log normality of the variable. the household size was adjusted, using adult equivalent (ae)scale17,as utilized in organization for economic cooperation and development (oecd) countries (wb, 2005). the concept of poverty line, as utilized in the current study, assumed the discrete characteristic of poverty, and could be signified by a single measure. the official poverty line of pakistan is rs. 3030 (or us$ 28.91)18 per adult equivalent per month. following the cost of basic needs (cbn) approach19, the poverty line was calculated in 2015. the analyses in the current study are based on this official poverty line. put another way, the log of rural income at the rate of rs. 3030 (or us$ 28.91) per adult equivalent per month has been used as independent variable in the present study. 4. results descriptive analysis of data offered important revelations on socio-economic characteristics of the rural households of district bhakkar. the data showed the average age of the head of households equal to 45 years. only 2% of heads of household were equal to or younger than 24 years. this suggested that trend of early marriages in rural areas, as commonly perceived, was not supported by this study. the literacy rate of the head of households came out to be 53 %; with only 2% receiving education up to bachelor level or above. this was close to 56 % literacy rate of the district. average household size came out to be 6.5 persons per household, which was also close to average household size (6.6 ) of the district20. the size of average landholding in sample came out to be 4.21 acres per household hence majority of the sample respondents comprised small land holders. a total of 76% farm sizes came out to be in the range of 1 to 7.5 acres. this figure was in accordance with the ‘census of agriculture – 2010’ estimate, highlighting that 79% private farms in punjab ranged between 0.5 to 7.5 acres21.the mean income of sample households came out to be rs. 209,824 (or us$ 2,002.137) per household per annum. given the household size of 6.5 persons per household in district bhakkar, it implies that annual per capita income turned out to be us$ 17. a dult equivalent. = 1 + 0.7 (n adult 1) + 0.5 n children 18. @ 1 us$ = 104.800 pkr. this rate has been followed throughout this study for conversion of pkr to us$. 19. pakistan economic survey 2015-16 20. http://www.pbs.gov.pk/ 21. agricultural census organization, government of pakistan, lahore. “census of agriculture – 2010” review of economics and development studies vol. 4, no 2, december 2018 278 308.021, which was much lower than national per capita gni of us$ 1,44022. 42% households received healthcare from hakeems23 followed by doctors who were available to 38% of population. overall, access to medical facilities was available to 70% households. a high 94% households reported that quality of drinking water available to them was satisfactory. latrine was available to 58% households in their own premises. district bhakkar has no proper sewerage system available. in more than 70% cases, baked bricks were the construction material used in construction of houses. average room occupancy came out to be 3.3 persons per room. it was noticed that, on most of the demographic and socio-economic indicators, results of the present study were close to the national average statistics. 4.1 factors affecting the rural poverty: regression analysis regression analysis is the most commonly used technique to study the contribution of different variables to household poverty (manual et al. 2005). it attempts to explain the level of income per capita – the dependent variable – as a function of variety of independent or explanatory variables. results of regression analysis show how closely each independent variable is related to the dependent variable, holding all other influences constant. following table presents the results of regression analysis of the data collected for the present study. table 1: determinants of rural income per capita: log linear regression results independent variables b se β sig. household size -.051 .014 -.202 .000 dependency ratio -.834 .253 -.163 .001 gender of household head -.264 .278 -.043 .343 age of household head -.007 .004 -.089 .071 female male ratio -.061 .060 -.046 .314 participation rate .396 .146 .125 .007 landholding size .048 .008 .333 .000 monetary value of livestock population .000 .103 .000 .997 monetary value of physical assets .530 .090 .328 .000 access to medical facilities -.071 .081 -.039 .378 availability of latrine .123 .082 .071 .135 quality of drinking water .087 .128 .030 .496 education of household head -.006 .009 -.033 .484 material used for house construction .142 .089 .074 .110 persons per room -.009 .022 -.021 .688 intercept -1.919 .672 .005 r 2 .474 adjusted r 2 .446 f – statistics 16.919 (.000) n 300 the empirical results of log linear regression presented in table 1 showed that explanatory power of the regression model, as measured by adjusted r 2 , was 0.446. it could be said that, on average, 45% variation in dependent variable was explained by independent variables. the test of significance, f-test, was accepted at 1% level. signs carried by the independent variables mostly supported the hypotheses. household size, dependency ratio, landholding size, value of physical assets and participation rate were found significant at 0.001. rest of the variables in the model, though had correct signs, but they were not found statistically significant. the magnitude of effects reported in column b (unstandardized co-efficient) showed that dependency ratio followed by the value of physical assets had the largest impact on the dependent variable. as such, the dependency ratio was the most significant predictor of poverty in the study area. the other variables having significant impact on the dependent variable include participation ratio, household size and landholding size. unstandardized b value of the household size indicated that for every one-unit increase in the household size (for each additional family 22. http://data.worldbank.org/country/pakistan?view=chart 23. a physician using traditional remedies review of economics and development studies vol. 4, no 2, december2018 279 member), there was 5% decrease in the household income. in case of the dependency ratio, for every one-unit increase in the dependency ratio, the income of the household would decrease by 83%. it showed that the dependency ratio had the largest impact in determining the poverty status of a household. the b value of the participation rate showed that for one-unit increase in participation rate, the income of the household would increase by 40%. regression coefficient for landholding size suggested that for every one-unit (one acre) increase in the landholding size accounted for an increase equal to 5% of the per person per month income of the household. likewise, for one-unit increase in the ownership of the physical assets of a household, the income of the household would increase by 50%. 4.2 discussion the results of descriptive analysis showed that most of the socio-economic characteristics of the sample households were close to national averages. for example, estimates of household size, literacy rate, and mean farm size came out to be close to survey results undertaken at national or sub-national levels. the results of regression analysis were also supported by national and international literature. for example, at national level, there was ample evidence that household size, dependency ratio, participation ratio, landholding size and ownership of physical assets had a significant impact on poverty status of a household (shirazi, 1995; malik, 1996; hashim, 2008; sabir et al., 2006; khan et al.,2015). also the factors identified as determinants of rural poverty in the present study found support from the studies conducted in other developing countries such as ethiopia, nigeria, tanzania, eritrea, and egypt (dattet al.,1999; zhao et al., 1999;bogaleet al., 2005;ibrahim & umar, 2008;aikaeli, 2010; bogale, 2011;bahta& haile, 2013; muhammad hussen, 2016). this adduced a clear evidence that findings of the present study were found in congruence with the findings of a body of literature available on the subject. it was, therefore, safe to conclude that household size, dependency ratio, participation rate, landholding size and ownership of assets were the significant factors responsible for causing rural poverty. the findings also supported the basic assumptions of structural strand of poverty, which recognizes that availability and access to economic opportunities play an important role in determining the status of an individual in the society. in the same vein, proximity of findings of descriptive data with national and sub-national statistics provided an evidence of the representativeness of the sample; thus increasing the generalizability of the findings of the study. 5. conclusion and recommendations the study concluded that general demographic and socio-economic characteristics of the sample were largely in agreement with that of population’s characteristics, as reported in national statistics. this showed that the sample was representative of the population. the study also showed that factors external to individuals were mainly responsible to determine the poverty status of rural households. also the household size, dependency ratio, participation rate, landholding size and ownership of physical assets did play role in determining the poverty level of a household. this was an evidence unto itself that study was rightly placed in positivist paradigm based on the assumptions of neoclassical economic theory. based on the findings of the empirical analysis, the study makes three recommendations. first, invest more, particularly in agriculture sector, to create additional job opportunities, thus; bringing positive changes in dependency ratios and improving participation rate. second, invest more on social 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(1985). education for development: an analysis of investment choices. world bank institute (2005). introduction to poverty analysis. review of economics and development studies vol. 5, no 1, march 2019 23 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads implementation of school improvement plan through results based management: a framework to practice 1 muhammad nadeem javed, 2 muhammad hameed nawaz, 3 muhammad latif javed, 4 muhammad javed 1 phd scholar, allama iqbal open university, islamabad, pakistan. nadeemjaved05@gmail.com 2 professor, department of education, university of lahore, lahore, pakistan. drmhnpk@yahoo.com 3 lecturer, department of education, the islamia university of bahawalpur, bahawalnagar campus, pakistan. 4 assistant professor, department of education, the islamia university of bahawalpur, pakistan. article details abstract history revised format: february2019 available online: march 2019 a school improvement plan is a “road map” that sets out the changes a school needs to make to improve the level of student achievement, and shows how and when these changes will be made. the objectives of the study were remained as, to identify the practices of results based management (rbm) in relation with the implementation of school improvement plan (sip) on the basis of performance, to explore the perceptions of the heads of schools and secondary school teachers (ssts) about implementation of school improvement plan (sip), to analyze the physical and educational facilitates in school improvement plan. a set of research questions was used to achieve the objectives of the study. the collected data was analyzed by using inferential and deferential techniques of data analysis. the findings and conclusions of the study show that school improvement plan is being carried out at secondary schools of punjab through result base management. it is also revealed that the whole process of school management is revolving around school improvement plan; administration has less training about result base management. some recommendations are given to synchronize the process to achieve desired objectives of school improvement plan. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords school improvement plan, result base management, roadmap jel classification: o20, o29, o30, o39 corresponding author’s email address: latif.javed@iub.edu.pk recommended citation: javed, m. n., nawaz, m. h., javed, m. l. and javed, m. (2019). implementation of school improvement plan through results based management: a framework to practice. review of economics and development studies, 5 (1), 23-32 doi: 10.26710/reads.v5i1.222 1. introduction a type of management strategy which focuses on performance, outcomes, impacts and achievement of outputs is called results based management. (rist & kusek, 2004). according to rassapan (2003) the idea of the (rbme) resultsbased management and evaluation and (rbm) results based management is presumed have been started with (mbo) management by objectives and (ppbs) program performance budgeting system of peter drucker in the 1960s and progressed into the procedure of reasonable structure for the community segment in 1970s. different countries have used this with changed names and forms in 1980s and 1990s. presently it has been established into a confirmed and recognized method for the better answerability, usefulness and competency of public sector. the zimbabwean government initiated this in the year 2005 and this idea is being used by most of the international donor agencies now, which was discussed in the document prepared by malaysian consultant for the government http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 24 of zimbabwe. results based management (rbm) is being used in many different public and private sectors institutions that’s why it can also be used in education sector as well, here the demand can be aligned with the results based management’s (rbm) objective, to provide a rational structure for intended management and planning in a decentralized environment which is grounded on accountability and teaching/learning. so the researcher can say a results based management strategy is such a type of strategy which ensures by its procedures, productions and facilities contributing to the attainment of defined objectives and anticipated activities. its main focus is to get the consequences and refine performance, assimilating modules learnt into the decision of management, observing and recording on performance. the initiatives taken for infrastructure, teachers and students of the school to improve the quality of education and for better management are now being categorized with a “road map” (http://dsd.edu.pk/pages/contents/74), ensuring: a) enrollment of all children of school going age will be 100%; b) retention of all enrolled students up to 16 years will be 100%; c) free, compulsory and internationally competitive education for all: d) recruitment and transfer of hr on the basis of merit; e) targets for officers and ranking of districts on the basis of targets achievement; f) transparency in selection of officers and retaining them with accomplished targets; and g) different incentives for good performance. statement of the problem is given as “implementation of school improvement plan through results based management: a framework to practice” 2. review of related literature 2.1 results based management different things to different people or organization can be meant by results based management (rbm). simply we can say that rbm is broad management technique which is focused at changing the way as institutions operate and by new methods of improving techniques of performance. "results-based lending provides an added tool for asian development bank (adb) to better meet the needs of its developing member countries and improve development effectiveness," says principal planning and policy economist xiaoqin fan at adb. (https://www.adb.org/features/piloting-results-based-lending-sri-lanka). poate said in (1997) the effective application of results-based management lies upon the scope of procedure and performance which are presently related to the existing strategic structure or policy. australian public service practices on a government aspect proposes that the institutional structure and policy might comprise formal cabinet confirmation of assessment necessities, solid managerial and political funding, vibrant commands given by central organization to cabinet for application and delegation of power to the responsible management.( p.56). fruitful application of rbm requires the back up of management system that uses the tool systematically for gathering, arranging, saving, examining and reporting of performance data. (poate 1997, p.57; olsen 1997, p.29; price water house coopers 1999, p.11). to complete the accountability process or framework a satisfying and effective work force is required. "accountability is a double road. the association needs to give incentive to the employees who made the product less expensive." (national performance review 1999). 2.2 results based management phases generally, organizational rbm practices can be divided in twelve procedures or phases, of which the first seven relate to results-oriented planning; (https://pndajk.gov.pk/.../rbm_handbook_working_together_for_children_july_2017) a) investigating the problems to be talked and explaining their reasons and effects; b) recognizing key shareholders and receivers, involving them in recognizing objectives and in designing interventions that meet their needs; c) articulating probable results, in pure, quantifiable terms; d) discovering performance indicators for each expected result, postul ating precisely what is to be measured along a gauge; e) set targets and standards for each indicator, specifying the expected or planned levels of result to http://dsd.edu.pk/pages/contents/74 https://pndajk.gov.pk/.../rbm_handbook_working_together_for_children_july_2017 review of economics and development studies vol. 5, no 1, march 2019 25 be achieved by specific dates; f) mounting a strategy by providing the theoretical outline for how expec ted results shall be understood, finding main modalities of action contemplative of restrictions and occasions and associated implementation agenda; g) matching probable results and the strategy forecast with the resources available; h) dealing and watching progress towards results with appropriate performance monitoring systems drawing on data of actual results achieved; i) recording and self-evaluating, comparing actual results, the targets and reporting on results achieved, the resources involved and eventual discrepancies between the “expected” and the “achieved” results; j) integrating lessons learned and findings of self -evaluations, interpreting the information coming from the monitoring systems and finding possible explanations to eventual discrepancies betw een the “expected” and the “achieved”. k) disseminating and discussing results and lessons learned in a transparent and iterative way. l) using performance information coming from performance monitoring and evaluation sources for internal management learning and decision-making as well as for external reporting to stakeholders on results achieved. 2.3 school improvement plan the basic issue to be focused regarding the school improvement is concrete concept of schools and school system. schools equip the students with knowledge, attitude and the skills which are important for the society and prepare them to serve the society in a better way. the core of school improvement is the process of making school effective, (jeilu, 2010, p.173), states “school improvement is an activity to improve the input and process in order to improve teaching learning and students result”. school improvement focuses on the outcomes as well as the importance of input add to the better of society in which they function, by preparing them with acquaintance, attitude and expertise related to social norms and the demand of society. they are principally places where all pupils enter to learn. schools therefore, are electric with tasks for delivering more efficiently the most vital instructive services teaching and learning. school progress as an activity to advance the input and course in directive to expand teaching learning and students result. in this situation school development is not only about the outcome, but also the significance of input. school improvement is commonly defined as the overall efforts to make schools healthier places for learners to study in and the different tactic for educational variation that enrich students’ outcome as well as managing change. (dimmock, 2000). they are probable to satisfy the desires of all pupils through polices of presence at a time to adopt their obligation more fruitfully, schools should progress their overall practices. the process of making schools effective is a core of what is called school development. according to educational improvement commission eic (2000) a school improvement plan is a road map that circles out the steps a school needs to take to advance the level of students’ success and display how and when these steps will be taken. the main focus of school improvement is enhancing students learning outcomes. by coordinating different activities, planning, supervision and estimation etc. of school chores serve as a frame of reference according to their prime concern. the area of sip is different in different countries. for e.g. the school domains were divided into four categories in moe (2006) and act (2009). these four domains were mentioned in act, learning and teaching, leading and managing, conducive environment and community involvement. harris, a (2002) states that, no doubt at school level there are many options for the teachers to reset the classroom accordingly for the improvement in teaching and learning process. (as it is an important component of learning outcome). fulan (1992) and harris, a. (2002) have stated that school improvement research signifies the main part of teaching learning in accordance of constant school improvement. the curriculum considered very important in teaching and learning process. in the preparation and implementation of curriculum, teachers are the basic factor in delivering content and evaluating the curriculum. for the safe school improvement, surrounding and healthy climate of school environment plays substantial role. moe (2006) states school environment is based on the factors such as focus on students, students’ authorization, students support and implementation of school improvement. the concept of community participation regarding educational affairs is most over used but least understood. the stake holders share and impact the decision on resources and development initiative by their participation in the community development process. review of economics and development studies vol. 5, no 1, march 2019 26 kruger,a.g.(1996) has also highlighted the following given actions as for parents to participate in schools activities like ; assisting children in their home task, fund raising; keep the building and grounds in working conditions; carrying of pupils; arrangement of school functions, supporting in co-curricular activities and facilitating in school activities. (p. 83). harris and linda lambert (2003) defined the perception of leadership as an indorsed variable depend upon communications among leader supporter and context. 2.4 principle of school improvement plan according to luneburg and ornstein (1991) there are some guiding principles which are important for school improvement are listed as: a) set of goals should be applied from mission statement of school that should be easy to understand. b) there should be a continuous checking and evaluation of students’ success. c) school should help all students’ especially low achievers by tutoring and toppers by starting any refinement program. d) principal and teachers should be engaged in enhancing capability to modify their information, knowledge and to polish their positive thinking. e) every teacher should participate for the success of progressive school programs regarding staff development and educational planning. f) school community relationships should be strong in the safe and healthy environment of the school to involve the parents and community in the implementation of sip. g) the staff, students and parents all should share the responsibility of leadership. (p. 294) stoll and dean fink (1996) highlight parents, school district, community pupils and other as contributing partners of school. schools can involve parents contributing a lot in the success of pupils by creating a strong sense of relationship. barnes (2004) propose that the way to launch a school improvement the first step is to form school improvement team which is a cluster of people who work collectively to develop lead and coordinate the school improvement process. (p. 5) the school improvement is a very difficult process which can be confronted by diverse aspects during its stage of implementation. in this approach, (fullan, 2001, p. 89-90) has mentioned that when a fresh derivative is presented unfeasible it will make difficulties for individuals and for institutions. thus, for accomplishment of the program it is essential to consider stimulating aspects prior to the implementation of the program and in owing process. a few complications identified by khosa (2009) contain; dysfunctional schools are fail to attain learning outcomes by the negligence of not converting time, teaching, physical and financial assets into learning process properly. in proper, incomplete and poor methodology of delivery curriculum is another major problem of the system. more to that, ineffective district support and monitoring functions also work as a hurdle in improvement. last but not least, support of community to school is not significant. the main problem that challenge school improvement efforts contain; missing of providing performance standards for pupils, teachers, staff and develop a standard guide system to evaluate the schools, create incentive systems to encourage self and peer monitoring and evaluation, and stimulate support and community for quality education. earl et al., (2003). stoll and fink (1996) specifies as (anderson, 1992, p. 84) says lack of willingness, awareness and knowledge of required change, incompetency to make the change and belief that change will bring no difference to the students are major challenges in attainment of sip. school improvement manual (moe, 2007, p. 2-3) also explains the hindrances of sip implementation such a shortage of training, reluctant school teaching and administrative faculty, unacceptable deviation from traditional practices, no organized efforts for programme monitoring, no focus on awareness of stakeholders and absenteeism of their participation at different level. similarly, harris and chapman (2002) also stated implementation of sip in developing countries as a challenge to bring changes in working system in school management. similarly in pakistan, deficiency of important inputs, low level of dedication and inspiration, poor management abilities are the expected challenges we have to face in applying sip. the objectives of the study were as to: a) identify the practices of results based management (rbm) in relation with the implementation of school improvement plan (sip) on the basis of performance. b) explore the perceptions of the heads of schools and secondary school teachers (ssts) about implementation of school improvement plan (sip). review of economics and development studies vol. 5, no 1, march 2019 27 c) analyze the physical and educational facilitates in school improvement plan. 3. methodology study was descriptive in nature and survey method was used to collect the data from respondents included in the study. besides, following procedure was used to carry out the study; 3.1 population the purpose of the study was to investigate and obtain the perspectives of educationalists on the basis of change initiative and explore the experiences, reflections and opinions of those who actually implement the changes in schools. therefore, the population had to be defined at two categories. for the first category, the institution’s heads that formed the population of the study and at second category, the teachers (ssts) of all the institutions in the population. 3.2 sampling stratified random sampling procedure was adopted which was focused on the districts included in the study. districts were selected on the basis of literacy rate (aepam, 2011) and http://www.pbs.gov.pk/pco-punjab-tables as given below: a) three districts with the highest literacy rate from the province. b) three districts with the lowest literacy rate from the province. c) three districts with the middle level literacy rate from the province. details are as follow a) 361 out of 4941 heads of secondary schools from the punjab province. (gay, 2009, p. 125). b) 380 out of 181356 (sst), from the province of the punjab teaching secondary classes. (gay, 2009, p. 125). because of large population, geographical conditions, shortage of time and large number of school which were not easily accessible for the collection of data so the number of schools’ heads were reduced to 223 and number of teachers have increased to 840 by using convenience sampling. convenience sampling is known as availability sampling, a specific type of non-probability sampling method which depends on the collection of data from the respondents of population who are conveniently accessible to contribute in the study. (https://researchmethodology.net/sampling-in-primary-data-collection/convenience-sampling/) 3.3 research design the research was descriptive in nature as data was collected by questionnaire. it was quantitative and survey method used. questionnaire. the research tool which was used in this study close ended with five-point likert scale questionnaires. 3.4 pilot study to check the reliability and validity of the instrument a pilot testing of the instrument has been done in the 4 schools of district bahawalnagar (five tehsils) with equal participation of urban & rural and male & female school which were not included in the sample, and for the validity of the instrument it has been checked by the three experts of the of their field of specialization i.e., one for public management field, one from the education department office and one from the school management specialist. 4. data analysis the data collected by means of different questionnaires was tabulated, interpreted and analyzed by using statistical formula to get quantitative analysis, i.e., percentage, mode, median and z-value were used. to analyze the data, weightage to different options was given as, s.a=5, a=4, un.c=3,d.a =2 and for s.d.a=1. data was grouped, coded & analyzed by using statistical techniques of percentage (%), weighted mean (w.m), standard deviation (s.d), anova, t-test & post hoc test through excel, 2010 & spss version 6. 4.1 findings of the study review of economics and development studies vol. 5, no 1, march 2019 28 table 1: group: heads and teachers of secondary schools respondents group population sample questionnaires distributed questionnaires returned rate of return head of the school 5590 223 223 200 89.68% teachers (ssts) 31,517 840 840 803 95.59% figure 1: group: mean: 4.12, s.d: 0.44 & c.intrv =(4.56+3.68) figure 2: group mean: 4.3, s.d: 0.3 & c.intrv : (4.6+4.0) figure 3: group mean: 4.1, s.d: 0.3 & c.intrv: (4.4+3.8) review of economics and development studies vol. 5, no 1, march 2019 29 figure 4: g.m 3.4 and s.d 0.16 & c.intrv: (4.05+3.74) figure 5: g.m 2.0 and s.d 0.16 & c.intrv: (2.6+1.6) figure 6: group mean : 3.5, s.d : 0.3 & c.intrv : (4.2+3.6) figure 7: group mean : 3.3, s.d : 0.44 & c.intrv =(4.6+3.2) 4.2 cross district analysis (anova) review of economics and development studies vol. 5, no 1, march 2019 30 table 2: policy and plans source of variation ss df ms f p-value f crit between groups 1.543223 8 0.192903 2.177265 0.034379 2.02209 within groups 9.923058 112 0.088599 total 11.46628 120 f calculated (2.177) > f table (2.022), ho is rejected & h1 is accepted table 3: t-test: two-sample assuming equal variances variable-1 (lhr) variable-2 (r.pur) mean 4.206897 3.95 variance 0.165665 0.011 observations 29 6 pooled variance 0.14223093 hypothesized mean difference 0 df 33 t stat 1.518804419 p(t<=t) two-tail 0.138335273 t critical two-tail 2.034515297 4.3 post hoc test (least square difference) anova is significant; it concluded that population means are not all equal. this can then carry out tests by the lsd method. table 4: post hoc test (least square difference) model mean difference (i-j) std. error significance. 95% confidence interval lower bound upper bound 1 rwp.17882 * .07886 .025** -.3351 -.0226 2 lhr .17882 * .07886 .025** .0226 .3351 jhelum.25844 * .10592 .016* .0486 .4683 d.g.khan.29571 * .10965 .008*** .0784 .5130 r.y.k .22571 * .09524 .020** .0370 .4144 rajan pur.43571 * .13391 .002*** .1704 .7010 3 lhr.25844 * .10592 .016* -.4683 -.0486 4 lhr.29571 * .10965 .008*** -.5130 -.0784 5 lhr.22571 * .09524 .020** -.4144 -.0370 6 lhr.43571 * .13391 .002*** -.7010 -.1704 *the mean difference is significant at the 0.05 level. 5. discussion the findings and conclusions of this research study aimed to find the objectives of the study were as to identify the practices of results based management (rbm) in relation with the implementation of school improvement plan on the basis of performance, to explore the perceptions of the heads of the schools and secondary school teachers (sst) who are the part of rbm participating in the process of implementation of school improvement plan (sip), to analyze the physical and educational facilitates in school improvement plan, to examine the retention linkage i.e., enrollment and attendance of students in relation with results based management of the school, to analyze the performance appraisal strategies adopted by school management and to propose revise strategies for the use of results based management, the main research questions based on the above stated objectives were: how does, the results based management link with the implementation of school improvement plan (sip) in punjab? does the results based management have effect on the teachers or officers ranking linked with the targets? which type of the incentives do teachers or officers get for good performance? and to what extent the heads are providing improved physical and education facilitates? the first purpose of the study was focused to “examine the practices of results review of economics and development studies vol. 5, no 1, march 2019 31 based management (rbm) in relation with the implementation of school improvement plan on the basis of performance, it can be discussed with questionnaire from the heads it was discussed that head of the school performs the duty of planner and coordinator, give guidelines of policy and plan to the school staff, he held monthly meeting with the staff about the sip, monthly meeting are held with the stakeholders of the school and head feel that they are eligible for incentive because of their performance. discussion shows that the head give guide lines and instruction to team members for school improvement plan; he provides the guide lines and instruction to team members for results based management (rbm), give instructions to the targeted management to implement school improvement plan (sip) in their schools. 6. conclusion and policy recommendations following are the conclusion of the study a) policy guidelines are given to school administration to carry out sip programme b) result based management practices are carried out at school level, under the leadership of school head. c) the heads and teachers are aware of sip to gadget their daily activities to get better results. d) head and teachers have improved their performance as a source of encouragement from sip e) there exist merit based policies about transfer/posting. f) incentives are given to teachers for good performance g) head performing his duty as a leader, manager and guide according to the situation, for sip h) there is a communication system in schools and department through liaison officer i) there is a weak element of training in schools j) counseling and orientation of students are also a point of concern to improve the data analysis, findings, conclusion and discussion in this study lead to the following set of recommendations: a. the current sip (cm road map for school improvement) for secondary school in punjab presented here is not fully accepted nor has likely for full implementation in the present state of our education system. it may be used with existing conditions of each according to the rbm where the indicator of rbm can be linked with the indicators of sip. b. the main part which is partially being implemented that is the training it may be further improved so that sip can achieve its targets. c. the perception of rbm may be explained as it may be very effective to achieve the objectives of sip. d. the significant beneficiaries of this research are the ‘students’ they may be given a main role to utilize their energies and potential to achieve sip and rbm goals. e. to make the rbm process and the role school improvement more valuable and targeted, the evaluation of the team may be offered to some external team, so that this third-party evaluation may make the members to remain energetic and alert for their duty. f. more incentive to officer/head and teachers may be given on good performance. g. clear guide lines and instruction regarding to sip may be given to each member of team for school improvement plan. h. network of communication between school, community and stakeholders may be increased. i. separate science lab, i.e., physics, chemistry and biology may be provided to the students. references aepam. 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(2008). results-based programming, management and monitoring (rbm) guiding principles, unesco paris, bureau of strategic planning, stoll, l. & fink, d. (1996). changing our schools: linking school effectiveness and school improvement. buckingham: open university press. review of economics and development studies, vol. 7 (3) 2021, 309 323 309 application of markov regime switching autoregressive model to gold prices in pakistan tahira bano qasim a ,gul zaib iqbal b , mahmood ul hassan c , hina ali d a assistant professor, department of statistics, the women university multan, pakistan b scholar, department of statistics, the women university multan, pakistan c assistant professor, department of economics, university of sargodha, sargodha, pakistan d assistant professor, department of economics, the women university multan, pakistan email: hinaali@wum.edu.pk article details abstract history: accepted 25 july 2021 available online september 2021 the goal of this study is to investigate the performance of the markov regime switching autoregressive (mrs-ar) model to estimate and forecast the gold prices in pakistan. initial analysis of the data covering from january 1995 to january 2019 reveals the existence of nonstationarity, heteroscedasticity, and structural changes. the dynamics of the data are studied in two distinct regimes. the empirical analysis provides evidence that the regime shifts are mattered and mrsar model is found to be suitable even in the case of nonstationarity. moreover, it is worthwhile to note that the markov regime switching successfully captures the nonlinearities and heteroscedasticity underlying the selected data and provides efficient forecasts. based on empirical evidence it is recommended that the applications of regime switching models should be promoted in other fields of life. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: markov process, gold, regime switching, autoregressive, heteroscedasticity jel classification: k49, c10 doi: 10.47067/reads.v7i3.368 corresponding author’s email address: hinaali@wum.edu.pk 1. introduction gold holds historic importance in the development of the human economic system. being a noble metal, it has been considered a symbol of wealth, prosperity, and nobility since pre-historic times. the advent of metal coins throughout the world provided a standard for financial exchange (mckay and peters, 2017). while the other metals lost their importance with time, gold made its way to the modern economy. it has been considered a commodity to stabilize the economy and prevent inflation. the use of ‘the gold standard’ in the pre-world war ii era was aimed at stabilizing the price of goods and preventing over-inflation (bahrami, moghadam and baghernia, 2020). till today gold holds its credibility as an indicator of wealth. it has been seen that during periods of economic and political uncertainty, investors turn to gold to save their wealth. it gives the impression that while other assets lose their value, gold promises some value regardless of the political and economic conditions. a study examining the role of gold as a safe-haven during covid-19 crises found that it served as a haven asset during phase i (31-12-2019 to 16-03-2020) of the crises, though it lost its position in phase ii (17-03review of economics and development studies, vol. 7 (3) 2021, 309 323 310 2020 to 04-04-2020) (akhtaruzzaman, boubaker, lucey and sensoy, 2020). however, in many studies, the inflation hedging properties of gold have been challenged and other assets like stocks and real estate have been shown to have provided better hedges (salisu, raheem, and ndako, 2020; zhu, fan, and tucker, 2018). in pakistan, gold holds its importance as a potential investment not only for investors and business groups but also for the common man. it has retained its cultural and social value and a middle class man considers it a safe investment option compared with real estate and stocks. moreover, gold price directly affects the country’s economy as well. in a study, it has been shown that crude oil price and gold price affect the exchange rate in the country which in turn affects the stock market (bakhsh and khan, 2019). another study has shown that gold and oil price have a significant effect on the stock market (shabbir, kousar, and batool, 2020). given the mentioned facts, stabilizing the gold price is crucial for the government for stabilizing the country’s economy. additionally, the potential investment interests for the common man that lie in gold make it beneficial to forecast and predict the price of gold and the factors affecting it. appropriate forecasts of gold prices not only guide decision making for the government but also provide a reference for investors to make informed decisions. the structural changes due to political and economic instability not only affect the stock markets but also gold prices. linear univariate models like autoregressive moving average (ma) and autoregressive moving average(arma) models cannot successfully capture these structural changes. in such a situation some nonlinear models such as state space models, threshold models and markov regime switching (mrs) models are considered suitable to accommodate the structural changes. mrs model introduced by hamilton(1989) characterized the structural changes in the data generating process describing the us business cycles. hamilton’s model is an autoregressive process in which parameters switch under the first order markov process from one regime to another. numerous studies have been conducted applying different univariate and garch-type models to estimate and forecast gold prices in pakistan. but to the best of our knowledge, no one has investigated the performance of the markov regime switching models to model gold prices in pakistan. in the present study, we have applied the markov regime switching autoregressive models to the monthly gold prices in pakistan to fill this gap. the main objective of the study is to build a suitable model to predict and forecast the gold price in pakistan accommodating the nonstationarity, heteroscedasticity, and structural changes simultaneously. the rest of the paper is organized as: section 2 describes the brief review of the previous studies; section 3 provides the data and methodology adopted in this study. results and discussion are provided in section 4; section 5 provides the conclusion of the study and recommendations for future work. 2. literature review numerous studies related to gold price modeling and its forecasting are available in the literature, some of these are as khaemasunun (2009) applied the multiple regression method and the arima model to forecast thai gold prices. the results presented that arima is the best model for the forecasting of thai gold prices. ismail, yahya and shabri (2009) used multiple linear regression for forecasting the gold price. they used different indicators to develop the models such as; ir (inflation rate), usdx (us dollar index), mi (money supply), spx (standard and poor 500), nyse (new york stock exchange), euro usd (usd/euro foreign exchange rate), t-bill (treasury bill) and crb (commodity research bureau future index). their findings revealed the significance of ir, mi, euro review of economics and development studies, vol. 7 (3) 2021, 309 323 311 usd, and crb variables in the model. sujit and kumar (2011) computed a vector autoregressive model and integration by considering the gold price, exchange rate, oil price, and stock returns. the results of their study showed that the variables are cointegrated. the univariate linear arima models are widely used to model the gold prices, for example, abdullah, 2012; khan, 2013; massarrat, 2013; davis, dedu, and boyne, 2014; khalid, sultana, and zaidi, 2014; guha and bandyopadhyay, 2016; tripathy, 2017, etc. due to the importance of nonlinear models, the application of these is increasing in many fields of life. adejumo albert and asemota (2020) investigated the performance of the markov switching autoregressive model to forecast the nigerian stock market returns. moore and whitehall (2005) applied markov regime switching models to the tourism area lifecycle data. ismail and isa (2006) compared the performance of the self-exciting threshold autoregressive (setar) model and the markov switching autoregressive (ms-ar) model to fit the exchange rates of three asean countries: singapore, malaysia, and thailand. based on the empirical results, they concluded that the ms–ar model best fits all the return series. to model the financial time series volatility, markov regime switching generalized conditional heteroscedastic (garch) models have been applied by many researchers such as cia, 1994; gray, 1996; klaasen, 2002; haas, mittnik and paolella 2004; marcucci, 2005; alizadeh nomikos and pouliasis, 2008; caporale and zekokh, 2019, etc. due to the importance of markov regime switching models, the applications of these models is increasing recently. however, there is still little work on regime switching models. in this study a trial is made to utilize the characteristics of the mrs models to forecast the gold prices in pakistan. 3. data and methodology our study is related to secondary data of monthly gold prices in pk rs per troy ounce in pakistan which is collected from the website www.indexmundi.com. the data cover 289 observations from january 1995 to january 2019, out of these total observations, 268 observations are used for estimation purpose and the remaining are used for forecasting purposes. excel, eviews 9 and minitab statistical software are used for analysis purposes. the methodology adopted in this study consists of the following steps 1. graphical representation of the data 2. stationarity checking by means of acf and pacf and dickey and fuller unit test. heteroscedasticity and nonlinearity testing by means of cusum and cusum squared and lm arch test. 3. modeling and forecasting applying markov regime switching autoregressive model. 4. the diagnostics of the residuals are checked by means of:  the correlogram of the acf, pacf and ljung box q-test by box and ljung (1979) of the residuals to check the independence of the residuals  the correlogram of the acf, pacf and ljung box q-test of the squared residuals to check the heteroscedasticity of the residuals. 5. forecast evaluation by means of rmse (root mean square error), mae (mean absolute error), mape(mean absolute percentage error) and thiel-u inequality. the models applied in this study are discussed in the following subsections 3.1 autoregressive model the autoregressive model of order m denoted by ar(m) is given as review of economics and development studies, vol. 7 (3) 2021, 309 323 312 (1) where ~ n(0, ). for the identification of the order of ar models, acf and pacf have been applied. 3.2 markov regime-switching autoregressive model in a markov regime switching model, all or some of the parameters switch from one regime or state to another under markov process governed by state variable, denoted by t s (marcucci, 2005). the state variable t s follows a first order markov chain with transition probabilities p( js t  | ) = ijp (2) indicating the probability of transition of the process from state i at time t-1 to state j at t (hamilton, 1989). for two state processes the transition matrix of constant transition probabilities may be given as:                qp qp pp pp p 1 1 2212 2111 (3) the two state markov regime switching autoregressive process of order m can be described as. yt { (4) where ~ n(0, the expected duration that a system stays in the ith regime is the function of transition probabilities. let di be the number of periods, the system stays in state i, then the probability that the system remains in state i under the chain rule and markov property, l periods is given as p(di = l ) = (5) and the expected duration of state i is e (d) = ∑ (6) 3.3 estimation the likelihood function for a given sample consisting of t observations, , , …, may be obtained as l( = ∏ ∏ ∑ (7) where is standard normal distribution conditional on the information set the set of all past observations on and be the vector of the parameters to be estimated which consisting of mean parameters, the regime process parameters and variance parameters. review of economics and development studies, vol. 7 (3) 2021, 309 323 313 the corresponding log likelihood function is l( = ∑ ∑ (8) which may be maximized concerning . the evaluation in (8) recursively involves the following steps: 1. obtain the one-step-ahead predictions of the regime probabilities as: = ∑ = j | (9) 2. next, form the one step ahead densities of the data in each regime using the probabilities in step one. (10) 3. obtain the marginal density ∑ (11) 4. find the filter probabilities ∑ all these steps are repeated successively for the entire sample. but to start the process the initial values of is required. in literature, unconditional probabilities of st for two states are suggested by hamilton (1999). then the log likelihood function may be generated as given in equation (8). the estimates of the parameters may be obtained by maximizing this function using the standard process. 4. results and discussion the plot of the gold price series is presented in figure 1. it is obvious that from 1995 to 1999 the gold prices are stable. from 2002 to 2004 is a slight upward change but afterward, a continuous rapid increase can be seen up to 2011. some variation with no trend can be seen between 2012 and 2013 and some increase and decrease can be observed. overall, the pattern of the series seems to be nonstationary. review of economics and development studies, vol. 7 (3) 2021, 309 323 314 0 40,000 80,000 120,000 160,000 200,000 96 98 00 02 04 06 08 10 12 14 16 18 figure 1: gold price series we have transformed the price series by taking its log to reduce the variability depicted in the data. figure 2 shows the log price series denoted by , showing a similar pattern as the price series with a smaller variation. 9.0 9.5 10.0 10.5 11.0 11.5 12.0 12.5 96 98 00 02 04 06 08 10 12 14 16 18 figure 2: log of gold price series to test the stationarity of the log series, we have applied the augmented dickey fuller test and the results are given in table 1. null hypothesis of the unit root is accepted indicating the nonstationarity of the series. review of economics and development studies, vol. 7 (3) 2021, 309 323 315 table 1: unit root test results t-statistic prob.* augmented dickey-fuller test statistic -0.130288 0.9437 test critical values at the level: 1% -3.452911 5%l -2.871367 10% -2.572078 to investigate the characteristics of the data set, we have regressed the series on constant and obtained the residuals. the results reported in table 2, for the lm-arch test to check the heteroscedasticity exhibits the conditional heteroscedasticity of the residuals series. table 2: heteroscedasticity test: arch the correlogram of acf and pacf of the residuals and squared residuals along with ljung box q-test results are given in figure 3 and figure 4 respectively. these results demonstrate that the residuals are autocorrelated showing the nonstationarity of the data. furthermore, conditional heteroscedasticity can also be observed in figure 2. under these conditions simple ar model seems to be inappropriate to model this series as these models are suitable under the assumption of stationarity and homoscedasticity. this leads to apply some sort of nonlinear models to handle this problem. f-statistic 3432.404 p-value f(5,278) 0.0000 obs*r-squared 279.4729 p-value 0.0000 review of economics and development studies, vol. 7 (3) 2021, 309 323 316 figure 3: correlogram of the residuals figure 4: correlogram of the squared residuals -100 0 100 200 300 400 96 98 00 02 04 06 08 10 12 14 16 18 cusum 5% significance review of economics and development studies, vol. 7 (3) 2021, 309 323 317 figure 5: cusum plot of the residuals -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 96 98 00 02 04 06 08 10 12 14 16 18 cusum of squares 5% significance figure 6: cusum plot of the squared residuals figure 5 and figure 6 represent the plots of the cusum and cusum squares of the residuals which are outside the significant limits showing structural breaks in the series and the variance. so it is also confirmed that the simple linear ar models are not suitable to model and forecast this series. after achieving the justification of the application of nonlinear models to the log price series we have applied regime switching ar (mrs-ar) with different orders and check the diagnostics. during this process, it is found that the acf is significant at lag 11, so the ar term at lag 11 has been included in the model along with initial orders. it is surprising that for each model the acf and pacf of squared residuals remained insignificant at each lag with a high p-value showing no conditional heteroscedasticity is left in the series. the estimation results of the model satisfying all the diagnostics are reported in table 4. this is a partial regime switching model in which the constant parameter and for i =1, 2 switch across regimes. but the coefficients of the autoregressive terms at lag 2 and 11 are nonswitching parameters denoted by and . in other words, the selected model is partially regime switching in which some of the parameters switch across regimes and some do not. it is obvious by table 4, that the coefficient of first order autoregressive term and log of the standard deviation in each regime is highly significant. however, the constant parameter in both regimes is insignificant. the variance in each regime is very small. the non-switching parameters are also highly significant with a p-value equal to zero. review of economics and development studies, vol. 7 (3) 2021, 309 323 318 table 4: markov regime switching ar model estimation results variable coefficient std. error z-statistic prob. regime 1 0.040191 0.115226 0.348801 0.7272 0.998321 0.010309 96.83633 0.0000 log( ) -3.089229 0.133701 -23.10551 0.0000 0.002074 regime 2 0.033581 0.047396 0.708517 0.4786 0.996958 0.004860 205.1365 0.0000 log( ) -3.565029 0.085006 -41.93833 0.0000 0.000801 common -0.185074 0.076953 -2.405015 0.0162 0.174410 0.064946 2.685466 0.0072 transition probabilities constant expected duration regime 1 regime 2 20.56045 38.38149 the value of the transition probabilities also shows that the regime switching in the process is important. expected duration of the system in regime 1 is approximately 21 months and in regime 2, it is 38 months approximately. the predicted filtered regime switching probabilities of the selected model are displayed in figure 7 also confirming that the regime switching is significant. regime 1 2 1 0.951363 0.048637 2 0.026054 0.973946 review of economics and development studies, vol. 7 (3) 2021, 309 323 319 0.0 0.2 0.4 0.6 0.8 1.0 96 98 00 02 04 06 08 10 12 14 16 regime 1 0.0 0.2 0.4 0.6 0.8 1.0 96 98 00 02 04 06 08 10 12 14 16 regime 2 filtered regime probabilities figure 7: filtered regime switching probabilities review of economics and development studies, vol. 7 (3) 2021, 309 323 320 figure 8: correlogram of the residuals of the estimated model figure 9: correlogram of the squared residuals of the estimated model review of economics and development studies, vol. 7 (3) 2021, 309 323 321 figure 8 and figure 9 display the correlogram of the residuals and squared residuals respectively demonstrating that the residuals are independent and there is no conditional heteroscedasticity in the residuals. the adf test results to test the stationarity of the residuals are given in table 5. the adf test-statistics is more negative than the critical value at 1% level of significance showing that the residuals are stationary. it is worthwhile to note that the response variable was nonstationary and after fitting a regime switching model the residuals become stationary indicating that regime switching models are also suitable even in case nonstationary time series. table 5: unit root test of the residuals t-statistic prob.* adf test statistic -15.07555 0.0000 test critical values at the level 1% -3.456197 5% -2.872811 10% -2.572851 4.1 forecast evaluation the diagnostic checks of the fitted regime switching autoregressive model showed the suitability of the model for forecasting. the forecasts of the fitted models are obtained for the period from jan, 2017 to jan 2019 based on the estimated model. to assess the forecasting suitability of the estimated model, the forecasts are evaluated on the basis of loss functions, rmse, mae, mape and thiel u inequality (for specification see pasha, qasim and aslam, 2007) and the results are given in table 6. the small values of these loss functions demonstrate that the forecasted values are close to the actual values showing the suitability of the fitted model. moreover, it is also confirmed by the plot of the forecast and actual values displayed in figure 10. table 6: forecast evaluation loss function value rmse 0.03104 mae 0.02594 mape 0.21825 thiel-u 0.00131 figure 10: comparison of forecast and actuality 11.4 11.6 11.8 12 12.2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 forecast comparison: actuals vs forecasts actual forecast review of economics and development studies, vol. 7 (3) 2021, 309 323 322 5. conclusion and recommendations in this study, the markov regime switching autoregressive model is applied to estimate and forecast the monthly gold prices from jan 1995 to jan 2019 in pakistan. initial analysis of the selected data set exhibits nonstationary, autoregressive conditional heteroscedasticity and structural changes. this justified the use of the markov regime switching model. a large number of two state mrs-ar have been fitted to the given data and the final model is selected fulfilling the diagnostics. all the switching and common autoregressive coefficients are found to be significant. high transition probability shows the regime switching is mattered. it is worthwhile to note that the regime process removes the nonstationarity as well as the conditional heteroscedasticity. the forecasting performance of this model also justified the importance of regime switching models. based on this study and literature review, it strongly recommended the use of regime switching models in other fields of life. moreover, for suitable forecasting, the use of these models may further be extended with non-normal distributions. the performance mrs-ar models may also be compared with garch-type models. references abdullah, l. 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(2018). the impact of monetary policy on gold price dynamics. research in international business and finance, 44, 319-331. http://www.wbiconpro.com/3-pravit-.pdf review of economics and development studies vol. 5, no 4, 2019 663 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads impact of passive leadership on organizational citizenship behavior and turnover intentions; mediating effect of organizational interpersonal trust 1 omer azam, 2 hafiz ghufran ali khan, 3 asif khan, 4 abdul zahid khan 1 program incharge, virtual campus comsats university, islamabad, pakistan: omerazam@vcomsats.edu.pk 2 assistant professor, faculty of management sciences, international islamic university, islamabad, pakistan: hafiz.ghufran@iiu.edu.pk 3 assistant professor, departmrnt of education karakoram international university, gilgit baltistan: asifbaseen@gmail.com 4 assistant professor, department of technology management, faculty of management sciences, international islamic university, islamabad pakistan: zahidkhan.fms@iiu.edu.pk article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 this study investigates the impact of passive leadership on organizational citizenship behavior and turnover intentions with the mediating effect of organizational interpersonal trust. data has been collected from a sample of 180 working at managerial levels in public and private sector universities based in islamabad. findings of the current study confirms that passive leadership is negatively associated with organizational citizenship behavior and employee turnover intentions and the mediating role of organizational interpersonal trust confirms the partial mediation between these relationships. the study provided with new insights into the body of knowledge and also provided with practical implications. limitations of the current study along with the future directions of research also discussed at the end. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords passive leadership, organizational citizenship behavior, turnover intentions, organizational interpersonal trust jel classification: d23, d29, j63 corresponding author’s email address: omerazam@vcomsats.edu.pk recommended citation: azam, o., khan, h. g. a., khan, a. and khan, a. z.,(2019). fragility impact of passive leadership on organizational citizenship behavior and turnover intentions; mediating effect of organizational interpersonal trust. review of economics and development studies, 5 (4),663-674 doi: 10.26710/reads.v5i4.663 1. introduction leadership can be represented as an exceptional resource that enables an organization to perform multilateral role and to deliver outstanding performance (viitala, kultalahti, & kangas 2017). passive leadership style or management by exception (passive) can be characterized as hesitant, uncertain and reluctant to take organizational decisional, being absent when needed to take important decision. passive leadership, laissez faire leadership, passive management by exceptionpassive style has found to be ineffective and poor style of leadership (lee. 2018). passive leadership can be termed as avoidant leaders, management by exception (passive) generally provides the group members with the complete freedom to make decision and to complete the work in whatever they see fit to perform. passive leaders possess passive behavior, acquire less information, http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 664 remain reluctant to share information and do not truly involve in organizational decision making, takes corrective action to prevent mistakes which may result in employee distrust, poor management, engagement into some negative outcomes like bad perception for seeking organization justice (adeel, khan, zafar & rizvi 2018). moreover, it has been found that those leaders who engaged in transformational leadership are consistent in their performance and productivity related issues, providing feedback and encouragement, building strong network and maintain effective organizational citizenship behavior. while leaders who seems to be engaged in management by exception and passive leadership might be consistent and find to be engaged in harassment related issues, keeping intentions of quitting and leaving their job and organization (frooman, mendelson & kevin murphy, 2012). the full range of leadership was developed by (bass 1985). cole, theories of leadership describe range of leadership styles such as transformational, transactional, laissez faire, authentic, servant leadership that directly affects the projects and organizational performance (raziq, borini, malik, ahmad, shabaz. 2018). 2. literature review 2.1 passive leadership and organizational citizenship behavior passive leadership, laissez faire leadership, passive management by exceptionpassive style has been found to be ineffective and poor style of leadership (lee. 2018). passive leaders avoid intellectual simulation that can be achieved by encouraging employees to participate, performing creative behavior; promote morally uplifting values (frooman, mendelson & kevin murphy, 2012). organizational citizenship can be characterized as voluntary practices that tap to result in improved functioning of organization’s tasks and duties (malik, saleem, & naeem 2016). while employees engaged in passive or avoidant style, laissez faire leadership and management by exception-passive exhibited extended extent, generally fail to intervene until problem become severe or serious, abdicate responsibility, absent when needed, or fail to follow upon request (nguni, sleegers & denessen, 2006). laissez faire is nonleadership that has almost no influence over the groups and makes difficult to distinguish the leaders from the followers (holtz & hu 2017). it is expected that laisses faire or passive leadership style leads an employee to little modification in ocb level of subordinates. hence it has been hypothesized that h1; passive leadership has negative impact on organizational citizenship behavior. 2.2 passive leadership and turnover intentions passive leadership avoids supervisory responsibility along with decision making that always be an inappropriate way to lead. empirical evidence suggests the facets of effective and inactive behavior are often to be referred as passive avoidant leadership (holtz et al. 2017). passive avoidant leadership that often termed as management by exception (passive) takes corrective action and devised strategies only when problem become retrospective and significant, reluctant to express his view and gratitude on important and controversial issues but there might be the cases where passive leader can be considered as transformational leader that aim to let followers learn from making mistakes (horwitz, horwitz, daram et al. 2008). the word turnover intentions describe as one’s intentions and propensity to quit or leave an organization (long, thean, ismail, & jusoh 2012). turnover can be classified as voluntary and nonvoluntary, functional and dysfunctional that impact to make decision of employee whether to stay or leave the organization. puni, agyemang, & asamoah, (2016) concludes that employee or any subordinate under the laissez faire or passive leadership style will have less turnover intentions,hence it has been conceptualized h2; passive leadership has negative impact on turnover intention. 2.3 passive leaders and interpersonal organizational trust passive leadership has unattractive characteristics towards the trust building process and interpersonal organizational trust. passive leader can be characterized as non-leadership and absence of leadership with review of economics and development studies vol. 5, no 4, 2019 665 a certain behavior that involves procrastination shown by an individual who has got power in his position. “interpersonal trust can be termed as the willingness of a party to be vulnerable to the actions of another party based on the expectations that the other will perform a particular action important to the trustor, irrespective of the ability to monitor that other part.” (guinot, chiva & roca-puig 2014) while distrust can be termed as opposite of trust, various academic scholars considered distrust to be as an exception that others will not act or work in the best interest of other party, by engaging and indulging other person in potentially injurious behavior (guinot, chiva & roca-puig 2014). interpersonal trust is a multidimensional construct of cognition-based and affect based trust (lewis and weigert, 1985; mcallister, 1985). hassan, toylan, semerciöz, & aksel (2012) claimed that interpersonal trust as the degree to which one is confident and willing to act upon the actions, words and decisions of others. from above discussion it can be concluded that passive leadership on part of leadership will lower up the sense of trust building process or upon interpersonal organizational trust h3. passive leadership is negatively associated with interpersonal organizational trust. 2.4 organizational interpersonal trust and organizational citizenship behavior trust can be expressed as set of beliefs or expectations, about choice, willingness and beliefs of having trusting behavior singh, & srivastava (2009). worked on following five types of citizenship behaviors included in the study were civic virtue, courtesy, sportsmanship, altruism and conscientiousness (podsakoff, mackenzie, moorman, & fetter 1990). den hartog, schippers, & koopman (2002) examined subordinate trust as a sort of mediating variable in organizational citizenship behavior and transformational leadership. a great nature of theoretical work has shown evidence that organization trust is a significant driver of ocb (yoon, jang & lee 2016). organizational citizenship behavior is the discretionary behavior of an employee that is not to be on the part of a workers and employee formal job requirement but nevertheless promotion the effective functioning of the job (appelbaum, bartolomucci, beaumier, boulanger, corrigan, dore, girad & serroni 2004). studies have shown strong and positive association between ocb and interpersonal trust. singh, & srivastava (2009) found that subordinates perception of their “leaders” trust in them influenced performance and ocb. a great nature of theoretical work has shown evidence that organization trust is a significant driver of organizational citizenship behavior (yoon, jang & lee 2016). hence, based upon the above discussion it has been hypothesized that h4; organizational interpersonal trust is significantly and positively related with organizational citizenship behavior. 2.5 organizational interpersonal trust and turnover intention turnover has received significant attention from academia and practitioners (dubey, gunasekaran, altay, childe, & papadopoulos 2016). turnover refers to those employees who are considering and thinking to quit a job (long, thean, ismail & jusoh 2012). turnover from the job for such kind of employees require adequate higher cost to retrain, reskill, and hidden cost in completing different tasks and projects with in a group (dubey et al. 2016). there are various factors that constitute to frame and impacting employee turnover as personal factors, work-related factors and external factors. when an employee feels safe, sound and morally protected about his job than fell highly satisfied and secured about the job (balkan, serin, & soran 2014). hence, based on above considerations it has been hypothesized that h5: organizational interpersonal trust is negatively related with employee turnover intentions. 2.6 passive leadership, organizational interpersonal trust and organizational citizenship behavior management by exception (passive) comes under the construct of transactional leadership is a situation in which leader waits passively until deviation occurs from the set standards. errors, mistakes and omissions review of economics and development studies vol. 5, no 4, 2019 666 are to be controlled when their severity become highly offensive only then make the corrections (mesu, riemsdijk & sanders 2009). passive leadership is a sort of least positive style of leadership and contrast a negative effect on organizational citizenship behavior. organizational leadership can be viewed as employee’s disbursing positive behavior in response to leader’s positive behavior and attitude towards justice, job satisfaction, work environment and positive feedback (spence, ferris, brown & heller 2011). in accordance to the social exchange theory an employee feels pleased and delighted about developing an exchange and reciprocate relationship by voluntary giving benefits and then expecting returns in future (compeer, smolders, & de kok 2005). literature suggest that trust can be developed by perceive organizational processes and outcomes to be fair, since trust must be present to foster ocb and to engage the employees actively in voluntary behavior (appelbaum et al., 2014). hence based on the supportiveness of above theory it can be hypothesized that h6; significant negative relationship between passive leadership and ocb is mediated by organizational interpersonal trust. 2.7 passive leadership, organizational interpersonal trust and turnover intentions turnover intentions are defined as the cessation of membership in an organization by which an individual who receive monetary compensation by an organization (watrous, huffman, & pritchard, 2006). researchers typically identify two forms of negative turnover which is to be believed as voluntary and involuntary. voluntary turnover is the form of turnover intentions which begin by the employee i.e. an employee quitting the organization whereas involuntary turnover is initiated by the organization i.e. an employee is “laid off” due to downsizing (balkan, serin, & soran, 2014). transactional leadership where an employee strongly focusses on contingent rewards and passive management by exception with employee turnover intention’s in large financial and multinational organizations (alzubi, 2018).. employees who trust each other are likely to be more willing to synchronize, working together constructively and help each other. mbah, & ikemefuna (2011) suggested that poor leadership style as passive leadership caused reason that why employees resort to portraying a deviant behavior and why employees leave their jobs. the link between passive leadership and turnover intentions can be studied by justice theory which explains that if employees are satisfied, trusted and perceive the procedures and processes to be fair then they will remain or stay productive and connected with their organization. therefore, on the basis of all above discussion it can be hypothesized that, h7; significant negative relationship between passive leadership and turnover intentions is mediated by organizational interpersonal trust. research model figure: 01 3. research methodology 3.1 sampling size & sampling technique simple random sampling technique was applied, a total of 330 questionnaires were distributed out of which 180 fully filled questionnaires were received back from the respondents of public and private sector universities based in islamabad. passive leadership turnover intentions organizational interpersonal trust organizational citizenship behavior review of economics and development studies vol. 5, no 4, 2019 667 3.2 measures and scales used all study variables were measured in a uniform way with using a 5 points likert scale whereas 1 represented strongly disagree, 2 represented disagree, 3 represented neither agree/neither disagree, 4 represented agree whereas 5 represented strongly agree. 3.3 passive leadership passive leadership of participants was carried out and measured using a 7-items scale developed by hartog, muijen, & koopman (1997). sample items included were “as long as work meets minimal standards, he/she avoids trying to make improvements”. the cronbach alpha reliability of the 7 scale items was .772. 3.4 interpersonal trust organizational interpersonal trust was measured using 6 items scale developed by hill, chenevert, & poitras, (2015). sample items included were “i think my colleagues are worthy of trust”. the cronbach alpha reliability of the 6 scale items was .825. 3.5 organizational citizenship behavior a 16 items scale was adopted from lee, k., & allen, n. j. (2002). was used to measure organizational citizenship behavior. sample items included “help others who have been absent”. the cronbach alpha reliability of the 16 scale items was .900 3.6 turnover intentions turnover intentions were measured using a 4 items scale adopted from wu, lin, hsu, & yeh (2009) that was developed by salanova, agut, & peiró (2005). sample items included “i often consider leaving my organization”. the cronbach alpha reliability of the 4 scale items was .823 table 01: correlation analysis 1 2 3 4 5 6 7 8 9 10 gender marital status -.157 ** age .347** -3.47 position type .167** -.134 .346** experience .368** .407* * .637** .141 education .269** ..150* -.112 .006 -.218** pl 2,52** .075 .016 .192* * .164* .022 (.772) oit 3.39** .109 .219** .066 .196* .021 .070 (.825) ocb -.076 .126 .218** -.075 .166 .042 .149* .449** (.900) ti .021 .070 .035 .141 .064 .205* * .116 .242** .162* (.823 review of economics and development studies vol. 5, no 4, 2019 668 n = 180. the reliabilities of variables are given in parentheses.**correlation is significant at the 0.01 level (2-tailed). hypothesis of first variable was assumed to be negative and this was found to be in line with h3 as the passive leadership (r = .070, p < 0.01) has very weak correlation with organizational interpersonal trust while the value of scale reliability was found to be .772 considers to be as good reliability. h1 was assumed to be negative and this was found to be contradictory as the passive leadership (r = .149, p < 0.01) has significant and positive correlation with organizational citizenship behavior. turnover intentions have assumed to have a negative relationship with passive leadership in h2 and this provide preliminary support of hypothesis as (r = .116, p < 0.01). organizational interpersonal trust has positive correlation with organizational citizenship behavior as the organizational interpersonal trust has positive correlation (r = .449**, p < 0.01) and this provide initial support of h4. the scale reliability (α) of organizational interpersonal trust found to be .825. organizational interpersonal trust has assumed to be negative relationship with turnover intention, this found to be in line with h5 as the organizational interpersonal trust (r = -.242**, p < 0.01) has negative correlation. 4. regression analysis the results indicate that passive leadership is significantly related to organizational citizenship behavior, where p = 0.46 and (β =.149, p >.001), thus hypothesis 1 is supported. organizational interpersonal trust was also found to be significant predictor of organizational citizenship behavior with approximately 20.2 percent of variance in organizational citizenship behavior was accounted by organizational interpersonal trust with p = .000 and (β =.449, p >.001), thus hypothesis 4 is accepted. passive leadership wasn’t found to be significant predictor of organizational interpersonal trust as the sig-value is marginally beyond .05 with (β =.370, p < .001) β also found to be insufficient, thus hypothesis 3 is supported. for the path of organizational interpersonal trust with turnover intentions results are shown in table (vii). further, organizational interpersonal trust has found to be significant forecaster of turnover intentions with approximately about 59 percent of variance in turnover intention was accounted by organizational interpersonal trust as the p = 0.01 and (β = -2.42, p >.001), hence hypothesis 5 is supported. passive leadership found to be significant predictor of turnover intention as the p = .120 and (β =, 116 p <.001), hence hypothesis 2 is not supported. table 02: results of simple linear regression analysis for h1 and h4 organizational citizenship behavior β r2 δr2 f t sig step 1 controls .049 .049 4.514 step 2 oit .449 .202 .202 44.92 6.70 .000 step 3 passive leadership .149 .022 .022 4.057 2.014 .04 table 03: results of simple linear regression analysis for h3 organizational interpersonal trust β r2 δr2 f t sig step 1 controls .127 .127 8.535 step 2 passive leadership 3.70 .005 .005 .888 .942 .034 review of economics and development studies vol. 5, no 4, 2019 669 table 04: results of simple linear regression analysis for h2 and h5 turnover intention β r2 δr2 f t sig step 1 controls 0.64 .004 .004 .721 step 2 oit -.242 .059 .059 11.16 -3.334 .001 step 3 passive leadership .116 .014 .014 2.438 1.561 .120 table 05: results of mediated linear regression analysis for h6 organizational citizenship behavior β r2 δr2 f t sig step 1 controls .049 .049 4.514 step 2 oit .414 .216 .168 16.204 6.141 .000 step 3 passive leadership .322 .231 .014 13.119 1.801 .020 table 06: results of mediated regression analysis for h7 turnover intentions β r2 δr2 f t sig step 1 controls .004 .004 .721 step 2 oit -.270 .072 .068 6.829 -3.669 .000 step 3 passive leadership .119 .085 .014 5.483 1.632 .104 control variables were entered and controlled in step 1 of mediated regression analysis, for step 2 mediating variables was entered and in step 3 predictor variable or criterion variable was entered that provide firm evidence that organizational interpersonal trust mediates the relationship between passive leadership and organizational citizenship behavior where (β = .322, p > .001, δr2 = .014, p > .001) and there is full mediation exist, hence h6 is supported. similarly, the mediated effect between passive leadership and turnover intention was found to be insignificant with (β = .119, p < .001, δr2 = .014, p < .001) and there is partial mediation and h7 is not supported. 5. discussion and findings results of the current study indicates that passive leadership and organizational citizenship behavior are significantly related to each other and hypothesis 1 was found to be supported but very weak relationship was between passive and organizational interpersonal trust. the results of this study are consistent with (malik, saleem & naeem 2016) where findings of study suggest that passive leadership style causes a permanent state of tension, dissatisfaction, conflict and decreased interest in subordinate. the result of our 2nd hypothesis was found to be supported, and the results of this study are in line with the study of (puni, agyemang & asamoah 2016). the results of passive leadership and organizational interpersonal trust for review of economics and development studies vol. 5, no 4, 2019 670 this hypothesis found to be supported and was linked with the previous study of (adeel, khan, zafar, & rizvi, 2018) which concluded that passive leadership is negatively associated with affect based trust and claimed that abusive behavior of supervisor may result in negative experience which can lower the affective commitment towards job and other psychological problems. likewise, the results of our 4th hypothesis for organizational interpersonal trust and organizational citizenship behavior found to be supported and the results of this study are in support of (podsakoff, mackenzie, moorman, & fetter 1990) in trust was conceptualized as faith and loyalty with the leader.. similarly, the results of 5th hypothesis, organizational interpersonal trust and turnover intention found to be insignificant, passive leadership influence personnel intention to leave or stay in the organization. similarly, the results of 6th hypothesis of passive leadership and organizational citizenship behavior through organizational interpersonal trust found to be supported as the organizational interpersonal trust is fully mediating the relationship between passive leadership and organizational interpersonal trust and these results are consistent with the study of (compeer, smolders, & de kok, 2005). moreover, the results of 7th hypothesis of passive leadership and turnover intentions through organizational interpersonal trust found to be insignificant but organizational interpersonal trust is partially mediating the relationship between passive leadership and turnover intentions. 6. limitations and direction for future research for the current study data was cross sectional and collected from managerial level employees and to assure the generalizability of findings and results for future research, it is suggested to undertake larger and diversified pool of employees representing different public and private sector organizations. future researchers are directed to explore the relationship of passive leadership on organizational commitment to change job satisfaction, psychological change, organizational justice, varied dimensions of trust and performance of employees by using bootstrapping, smart pls, network and path coefficients with structural equation modeling using amos. references adeel, m. m., khan, h. g. a., zafar, n., & rizvi, s. t. 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(2013). leadership in organizations. pearson education india. review of economics and development studies vol. 5, no 4, 2019 674 review of economics and development studies, vol. 6 (2) 2020, 315-322 315 nexuses between malnutrition, social exclusion of children and human capital: a qualitative study a uzma niaz, b nazia malik, c sadaf mahmood, d zahira batool a phd scholar in sociology, department of sociology, gc university faisalabad, pakistan email: uzmaniaz360@gmil.com b assistant professor, department of sociology, gc university faisalabad, pakistan email: naaziamalik@gmail.com c assistant professor, department of sociology, gc university faisalabad, pakistan email: sadaf.mahmood88@yahoo.com d professor, department of sociology, gc university faisalabad, pakistan email: batoolazam@hotmail.com article details abstract history: accepted: 22 may 2020 available online: 15 june 2020 the present study describes the parents’ attitude towards malnutrition, social exclusion of children, and human capital in three districts of south punjab, pakistan. the qualitative research approach is applied with three focus group discussions (fgds) with parents of children. the interview guide was used to collect data and thematic analysis approach was done. it was concluded that malnutrition made the children socially excluded by damaging their health, academic achievements, and losing their interests in games. it was also concluded that no education and skills of malnourished children become socially excluded from their workplaces. finally, it was concluded that this situation of malnutrition leads them toward social exclusion. therefore, this social capital of the future in the shape of social exclusion of children increases the economic burden of family and ultimately nation. to overcome this issue, steps should be taken by the government and community level. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: malnutrition, social exclusion, children, human capital, education, skills jel classification: i12, o17, e24 doi: 10.47067/reads.v6i2.209 corresponding author’s email address: uzmaniaz360@gmil.com 1. introduction it is a common perception for the majority of people that capital means money, shares in the stock market, and production plants. but actually, all these are the forms of capital and termed as assets that yield income. training, schooling, expenditures on medication, lectures on regularity, honesty, and punctuality are also forms of capital. all these forms help to uplift the health, improve the earning and interpolate to an individual’s good habits throughout his life. consequently, experts regard the expense of training, education, and health care as an investment in human capital. according to these experts, review of economics and development studies, vol. 6 (2) 2020, 315-322 316 knowledge, skills, and health quality of the people are the human potential of as in the way as their financial and physical assets because the training, education, and health are the most central investments in human capital. like other developing countries, pakistan retains its focus on 2030 agenda of sustainable development goals and trying to adopt and implement all seventeen sustainable development goals (17-sdgs) according to actual philosophy. three goals (1, 3, and 5) out of seventeen indicate the brighter future of the children throughout the world by giving the rights to the child. the sustainable development goals (sdgs) are determined worldwide plan of action for all communities, prosperity of the world, and the planet which stands for well-being and rights of every child (boy and girl). the sustainable development goals (sdgs) give the assurance of equity-based assurance to ‘leave no one behind’. to achieve the sustainable development goals (sdgs), and develop the human capital it needs to compete nationally and internationally, upholding the rights of every boy and girl and ensuring that no child is left behind is a vital pre-condition for pakistan in the 21st century. malnutrition remains a serious public health issue around the underdeveloped countries, especially in south asian and african countries. mostly malnourished children are present in developing and poor countries. ergin (2007) explained that 70% of malnourished belong to asia, 26% to africa, and 4% to latin america. grover (2009) explained that a study done in 53 countries explored that over 50% of deaths of the children are related to under-nutrition. malnutrition can be delineated in multiple ways. child malnutrition is a pathological condition caused by insufficient nutrition; malnutrition contains three broad concepts which can be described as under-nutrition, over-nutrition, and micronutrient deficiency. grover (2009) described that malnutrition is a physical condition of inadequacy or superfluity of protein, energy, and different other nutrients. malnutrition is the outcome of insufficient food supply which is caused by social, economic, political, and sometimes environmental factors like a natural disaster, as explained by shah (2003) that the major threats for stunting are female education ignorance, the poor economy of the household and overcrowding. malnutrition is consociate with brain functional and structural pathology. many cognitive problems have been related to poorly nourished children. wasting and stunting caused by chronic protein-energy malnutrition (pem) could have a continuous effect on the development process of cognition during childhood (>5 years of age). in poor societies, malnutrition is the best lookout as a “syndrome of developmental impairment,” this includes growth retardation, slow down cognitive skills and the process of behavioral development; diminished capacity for a normal immune response; and raised morbidity and mortality (martorell, 1999). malnutrition is the earliest reason for immunodeficiency around the world, and mostly affects infants and children as well as adolescents and elders (peter, 2008). dangour (2013) depicted that in the year 2000, it has been reported that over 200 million school-age children were found to be stunted said by the united nation for children’s funds. in this report, it is also marked out that if no serious effort is done to control this rate the proportion will reach up to 1 billion in 2020. room (1995), talked in the research regarding violation of the fundamental rights such as civil rights, social rights, and political rights as a citizen. a right-based approach in america was the model of inclusion of common people to engage them in common decisions under the umbrella of the inclusion movement. this inclusion movement was much common as sen (1992) called expressed its capability approach. review of economics and development studies, vol. 6 (2) 2020, 315-322 317 the philosophy behind this call was that all the people have equal access to necessities like the health of the people, food for the people, the roof for the people, and the right to enjoy the social life. child growth is considered as a significant index to check the nutritional level and health status in populations. stunting is recognized as the most significant indicator of child growth. thinness low body mass index is known as wasting. stunting comes from the less availability of food and nutritional ingredients, lack of childcare, and poor social and cultural environment. stunting consociate with high morbidity and mortality rate reduced mental and intellectual capacity and poor academic performance. stunting is known as the best indicator to predict social progress. child under-nutrition is considered a substantial indicator of diseases caused the millions of deaths of children and heavily increased the health expenditures in developing countries (mushtaq, 2011). in pakistan, section 2 (a) expresses the definition of the child, a child means a person who is under 18 years for male and it is less than sixteen years of age for a female. but according to the west pakistan vaccination ordinance 1958 section: (a) “child” means a person who has not completed the age of 16 years. the united nations convention on the rights of the child (uncrc) defines a child as “a human being below the age of 18 years unless under the law applicable to the child while in u.s. immigration law, a child refers to anyone who is under the age of 21. according to the paper published by sen (1992), social exclusion can be defined as “the inability to participate in, and be recognized by, society. a rich edition would also add the terminologies of such recognition, appreciation, and participation in the definition. specifically, recognition by the people by society and participation in society has to be on the terminologies of equality or equal opportunity. it would make sure equal opportunity inbuilt among the civic rights as citizenship and the protection of individual self-esteem and dignity are essential to establish the balance in all societies to make social interactions strong and long. a famous scottish philosopher and economist adam smith introduced the concept of human capital back in the 18th century. he defined the human capital that “human capital” is the cluster of individuals, commonly called workforce who work for or are qualified to work for the society or an organization” in its most basic sense. on the other hand, the different factors needed to create a sufficient supply of available labor form the basis of human capital theory and are critical to the economic and social health of the world’s nations, in a larger sense. human capital is the summation of education and knowledge, skills, abilities, and social traits that add to the individual’s capability to carry out the task in a way that creates the financial worth. malnutrition and health are closely interlinked with each other. malnutrition directly affects health. malnutrition puts the burden on the children in the form of different diseases. diseases and poor health status almost affect all the areas of the developmental process as well as creates problems throughout life. the physical and mental health of early life gives the basis for adult life. because the process of development mostly occurs in the early years of life so we discuss the three major areas of the lives of the children which are might be affected by malnutrition namely school performance, socialization process, and economy. there are many other factors like poverty, low parental education, social and gender discrimination, racism, political and environmental conditions and less availability of resources that hinder the school performance, damaging the economy and reducing the social activities; but despite that, these three aspects might be affected by malnutrition because better nutrition is considered the basic to proper human development and better health conditions. today the health review of economics and development studies, vol. 6 (2) 2020, 315-322 318 condition of millions of people all over the world is entirely discouraging, specifically in underdeveloped countries. ergin (2007) depicted that malnourished children had lower resistance to infectious diseases and they die early. he was of the view that the children who survive face the problems of growth retardation, illness, and poor nutritional levels which keep the malnourished children into a dreadful recurring cycle of sickness and this hindered the learning ability of the children. the malnutrition has a lot of significance in the present time due to its worst and long-lasting impacts on the lives of the children. in the present study, it was discussed how malnutrition reduces the potential of the children which makes them excluded from the mainstream. this exclusion of children is putting the burden on the families at one side and damage the human capital of the country on the other side simultaneously. children are the future of every nation and can play a vital role in the economy as the productive human capital of that country if this nursery becomes skillful and educated. provision of better nutrition to the children can include them in the productive layer of the economy of any country and ultimately, they can prove themselves as human capital for the nation as well. the overall objective of the study is “to explore parent’s attitude towards the relationship between malnutrition, social exclusion of children, and human capital. 2. review of relevant literature mahoney (1997) studied the connection between participation in extracurricular activities and the early dropout of the students from the school. the findings of the study explored that participation in extracurricular activities lowers the dropout rate of the students. norgan (2000) stated that growth-retarded children most probably had fewer job and promotion opportunities, low productivity as an adult, more prone to diseases, and higher mortality risk in adulthood. alaimo (2001) demonstrated that mostly food secure children probably had repeated their class, terminated from the school, and also showed lower performance in arithmetic scores. further, foodsecure children probably need a psychologist because they have psychosocial problems and face problems to live with other kids. patacchini (2008) explored that weak social ties create more opportunities for the delinquents to contact non-delinquents and this weakness in social relationships induce more the non-delinquents towards criminal activities. rena (2010) analyzed that in the international market of human capital educational quality have the much importance. he said new opportunities were captured by some developing countries got more benefits. education plays a very important role in economic growth because human capital development and economic growth were essential to each other especially (ranis, 2011). crookston (2011) stated that under-nutrition delays the children's entry into school lessens the years of schooling affects the height of the children and also reduced productivity as an adult. paul (2012) the research examined the association between the unbalanced meal program and academic performance of the learners. he took a sample of 300 students from both rural and urban areas. he considered the four factors of academic performance (retention, attendance, enrollment, and drop out of the students) to find out the association between academic achievement and an unbalanced meal program. the study displayed that an unbalanced meal program positively influenced the review of economics and development studies, vol. 6 (2) 2020, 315-322 319 academic performance of the students by taking into account the four factors; retention, attendance, enrollment, and drop out of the students. furthermore, the unbalanced meal program enhanced the enrollment and attendance of the students also lowered the dropout and retention rate of the students. this program is also helpful to remove hunger from the classroom, to improve social and gender equity, and in the development of some good habits among the students like washing the hands before the meal in the school. freijer (2013) explained that disease-related malnutrition has serious consequences for physical health and also creates psychosocial problems. he studied the additional costs related to diseases related to malnutrition and argued that the additional costs to manage the patient of diseases related to malnutrition were considerably higher than other patients. chinyoka (2014) found that malnutrition affects all the areas of physical growth and mental development of the child including school performance. the results of the study demonstrate that the undernourished and hungry children are less capable to attend the school and if attend then facing the problems in concentrating and learning, also having no interest to take part in physical activities and sports event. malnutrition also leads to poverty because malnutrition increases health expenditures due to its worst impacts on health. romaisa (2016) explored the relationship between human capital formation and poverty reduction with a special focus on the education and health sectors. so, she took infant mortality rate and health expenditures as health indicators on the other hand educational status detained with literacy rate and enrollment in higher education during the time period of 1973-2013. she concluded with the results that in pakistan, there is dire need to invest capital at a huge level in education and health sectors to make the children healthy and productive as human capital. this is the only way to make policies to mitigate poverty. to be trained with new skills to meet job demands is the direct connection between human capital development and planned activity for human capital. learning with necessary skills is the cure to all human resource development (hrd) efforts. consequently, all researchers focused on education, training, and skill development to increase performance. presently, hrd mainly focuses to develop people’s knowledge, expertise, productivity and satisfaction for development of his personality, community and nationwide for whole humanity (berg, 2016). khan (2019) tried to measure the impact of education and health sectors to eliminate poverty through the development of human capital. in this study, to measure the human capital, researchers have employed two proxy variables i.e. life expectancy and education expenditure. the controlled variables in the study are capital formation, labor force, agriculture, manufacturing value-added, and inflation. the fixed effect and random effect models are used in this study. results show that human capital variables are found significant. therefore, this contributes as an engine for development, growth, and job opportunities in developing countries. data and methodology the purpose of this study is to evaluate the nexuses between malnutrition, social exclusion of children, and human capital. this study was conducted in punjab province, pakistan. by using convenient sampling techniques three districts namely multan, lodhran, and muzaffargarh of south punjab were selected out of thirty eleven districts. the children ranging from the ages of 10-15 years working at auto workshops were the targeted population. the study carried out by using a mixedmethods research approach through qualitative and quantitative research studies. this article is based on a qualitative research approach and this part was carried out by the parents of excluded children review of economics and development studies, vol. 6 (2) 2020, 315-322 320 working on auto workshops with a specific age between 10 to 15 years. the minimum age for admission to work for a child is 15 years under punjab restriction on employment of children ordinance 2016. the qualitative research approach was applied through the focus group discussions approach by taking the information through focus group discussion guide. total 03 focus group discussions (fgds) were conducted (one fgd in each district) with parents of the children working at the auto workshop. qualitative data analyzed through transcribing the data and identification of themes for interpretation. 3. results and discussions the following results are extracted from the analysis of focus group discussions with the parents of the excluded children working at the auto workshop. 3.1 malnutrition, school performance and social exclusion of children the participants gave a clear view that malnourished children mostly show the low output to homework regular because of physical deficiency and also show little interest in co-curricular activities. this situation directs them to social exclusion. 3.2 malnutrition, low skills and social exclusion of children children suffering from malnutrition attain low grades in schools so their parents kept them from schools and put them at auto workshops for earning. but response during a discussion with the owners of auto workshops indicated that these children cannot show their interest in the work there too. due to lack of interest, they are beaten by the seniors/owners and this leads to an inferiority complex and they want to live alone. 3.3 malnutrition, social exclusion and human capital when the parents probed towards the role of children as human capital for the development of the country, they become upset and give their clear expression towards futuristic damage to the nation. they consented that due to malnutrition, their children become socially excluded and they cannot enjoy their basic rights like education health and skills. participants unanimously replied that the malnourished situation of their children does affect the human capital of the country. 4. discussions the children who bear malnutrition in early life can face many functional problems in later ages of life. malnourished children face many health issues and mostly suffered from diseases. diseases and other health problems put the burden on the economy of the household as well as on the economy of the nation. on the other hand, malnourished children remained poor performers in school, and ultimately they quiet. parents cannot bear these children and put them into auto workshops to earn some money. due to malnourishment, they are less productive because they have low capacity to do any kind of work; ultimately they face a lot of issues at the workplace and adopt different bad habits like smoking, drug addiction, and theft/robbery. these results of the focus group discussion are found very close to the study of chinyoka (2014) depicted that malnutrition also leads to poverty because malnutrition increased health expenditures due to its worst impacts on health. martorell (1999) stated that malnutrition lowers the intellectual performance, lowers the productivity level, and also lowers the work capacity. the better nutrition and food most probably will produce more healthy and productive adults, which in turn increased the human capital and economy. 5. conclusion malnutrition can be turned around into a vicious cycle with the social exclusion of children due to its adverse impacts on human capital. malnutrition of excluded children affects the human review of economics and development studies, vol. 6 (2) 2020, 315-322 321 capital in two ways. first, malnutrition leads to health problems (diseases) of the children and they remained alone and separate from others due to illness. moreover, malnourishment of children disturbs the school performance of such children and they quiet the school and ultimately they become excluded. secondly, these children are thrown into auto workshops to earn some money to cater to the economy of the household. but these children cannot perform better in their workplace too, so they become excluded. the above conclusion indicated that these excluded children become the burden due to malnourishment on the household and nation in the future. in short, this nursery which should be the asset as human capital in the future for the country, become the liability on the family as well as on the nation. 6. recommendations based on discussion and conclusions, it was suggested that awareness campaigns and workshops should b rearranged for the parents to upgrade their knowledge about the importance of health and damage done by the malnutrition of children. community-based health engagement services of malnutrition must be integrated to improve the immunity level of the children. malnutrition should be included in the mainstream development framework health structure. community-based social and physical activities must be planned and encouraged. there should be compulsory, training programs for teachers and students regarding malnutrition at the school level. references arif, r., faridi, m. z. and 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(1999). the nature of child malnutrition and its long-term implications. food and nutrition bulletin, 20 (3). the united nations university. national economic survey (2007). government of pakistan, economy of pakistan (2006–7), islamabad: http://www.sciencedirect.com/science/journal/00313955 http://www.sciencedirect.com/science/journal/00313955/56/5 review of economics and development studies, vol. 6 (2) 2020, 315-322 322 pakistan; norgan n. g. (2000). long-term physiological and economic consequences of growth retardation in children and adolescents. proceedings of the nutrition society, 59, 245–256. ranis, g. (2011). technology and human development. economic growth center yale university. shah s.m., selwyn b.j., luby s., merchant a., & bano r. (2003). prevalence and correlates of stunting among children in rural pakistan. pediatrics international, 45(1), 49–53. van den berg, h. (2016). economic growth and development. world scientific publishing company. review of economics and development studies vol. 5, no 2, june 2019 253 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads space of green politics in south asia: myth or reality? 1 altaf majeed, 2 mussawar hussain bukhari, 3 ali shan shah, 4 mian muhammad azhar 1 mphil scholar, department of political science & international relations, government college university faisalabad, pakistan, altafgill2027@gmail.com 2 associate professor, department of political science, the islamia university of bahawalpur, pakistan, mussawarbukhari@gmail.com 3 assistant professor, department of political science & ir government college university faisalabad, alishanshah@gcuf.edu.pk 4 assistant professor, department of political science & international relations, government college university faisalabad, pakistan, muhammad.azhar@gcuf.edu.pk article details abstract history revised format: may 2019 available online: june 2019 green politics is a political ideology comprises social progress through sustainable development, peace, social justice, and grass-root democracy. green politics is an evolving trend in world politics emerged in 1970s and revolutionized the political scenarios after the mid-80s with the discovery of „ozone hole‟ in 1984. currently, green or eco political parties are popular in many advance countries such as germany, france, uk, netherland, and spain etc. regions which present a bleak picture on ecopolitics are backward in environmental sustainability, and same is the case with south asia. environment is considered a secondary thing in south asia; because region is already tackling the primary goals of life such as food, shelter, inflation, health, and education etc. until achieving these goals; eco-politics will remain an illusion in south asia despite facing many environmental related challenges. hence, environmental slogans are not asian political parties. yet, there are some conservation and reforestation projects such as a billion-tree project in kpk of pakistan or kfcc (kerala forest conservation campaign) etc. south asia is prone to climate change and global warming; karachi, mumbai, and maldives are in the immediate threat to be drowned till 2050 if the sea level keeps rising due to the melting of glaciers. hence, the need is to focus on more environmental oriented political programs before it is too latepopular in the region. there is a nominal finding about environment in the manifestoes of south. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords environment, green politics, education, development, south asia jel classification: d70, n35 corresponding author‟s email address: muhammad.azhar@gcuf.edu.pk recommended citation: majeed, a., bukhari, m. h., shah, a. s. and azhar, m. m. (2019). space of green politics in south asia: myth or reality? review of economics and development studies, 5 (2), 253-260 doi: 10.26710/reads.v5i2.595 1. introduction green politics is an emerging trend in world politics stressing upon socio-economic progress through sustainable development, peace, social justice, and grass-root democracy. green politics is an evolving trend in world politics: the culture of sustainability and green politics started taking place in the world particularly in europe in early 1970s; when a group called „german greens‟ propagated a social movement focusing on environmentalism in http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 2, june 2019 254 germany (zubrin, 2012), later revolutionized the political scenarios after the mid-80s with the discovery of „ozone hole‟ in 1984 in southern hemisphere. montreal summit (1987) and kyoto protocol (1997) were the building blocks towards environmental sustainability and development; which set many targets and standards for environment. green politics started with the emergence of environmental issues and reached its zenith in 90s to that extent that american presidential elections of 2000 were contested on the slogan of „climate change‟. since then „environmentalism‟ has been an essential part of international agendas and state‟s policy making. the early proponents of green politics such as gandhi, uexcull, and spinoza etc. considered it much more than a mere political ideology; as they also share many other ideas like conservation, peace movements, feminism, and grass-root democracy etc. conservation of environment and its non-renewable natural resources were the basic goal of green politics at that time. gandhi once said; „earth has enough to satisfy human needs but not human greed‟. (michael and mckinney 2007) later in late 20th century, some ingredients of liberalism such as feminism were also incorporated in the green politics. now, according to a british green activist „dirik wall‟ there is four pillars of green politics: (wall, 2010) i. ecological wisdom ii. grass-root democracy iii. social justice iv. non-violence in 2001, „global green movement‟ organized by 800 delegates from 72 countries in canberra, australia promulgated a „global green charter‟ envisaging six guiding principles, (ggc 2001) which are: i. ecological wisdom ii. social justice iii. participatory democracy iv. non-violence v. sustainability vi. respect for diversity since its inception, green politics is vehement supporter of grass-root democracy. they have an opinion that people should be involved in local or grass-root political activities to play a direct role in decision making which is going to influence the people lives and their environment. besides, green ideology seeks to eliminate nuclear weapons completely from the world and espouse „world federation‟ where the chance of any war would be minimum. last but not least, social justice is an integral part of green politics; social justice encompasses the economic justice, consumer justice; need and responsibilities being a member of community. capitalism leads toward competition and competition leads toward waste of resources; hence, green ideology is a bit inclined towards socialism. green politics also inspires taking actions on individual level; such as individual decision of ethical consumerism. for instance, buying and consuming things that are eco-friendly, such as using paper bags instead of plastic bags for daily usage due to its recyclability and disposability. green ideology is an issue-oriented ideology; emerged with the emergence of environmental issues and proliferated with the proliferation of those issues such as global warming, ozone depletion, glaciers melting, water depreciation, desertification, depletion of non-renewable resources etc. there are many countries including pakistan which are highly affected with those issues, and usually such countries are the most palatable grounds for the popularity of green politics. but it is the general observation that the countries which are most prone to climate change are least aware and consequently least interested in green politics. the basic needs for the survival of human beings are food, clothes and shelter. it is really difficult for the people to divert their main intentions towards environment other than basic needs for survival. the simple question raised in the mind first is, a person who is surviving by leaps and bounds and is worried from where the food will come tomorrow, can divert his attention to the question of environment. 2. hypothesis economic backwardness, unawareness, and subtle democratic norms are few of the many reason behind the unpopularity of green politics in developing south asia. review of economics and development studies vol. 5, no 2, june 2019 255 3. literature review thomas poguntke evaluated the comparative role of green political parties in europe. according to him, green parties in europe hold no or limited power; hence, ineffective of implementing their green agendas into reality. besides, wherever they are in power, they are in coalition government, hence cannot dictate their demands or agendas. although, green party in the recent polls have shown exceptionally in finland but they have equally sabotaged badly in germany. hence, the picture of green politics is bleak in europe (poguntke, 2001). christine dann reviewed the history of global green political parties. first, he described what green politics is. green politics consists of four elements; ecological wisdom, non-violence, democracy, and social justice. the origin of green politics dates back to the time when man started taking interest in his environment and it started taking boom with the discoveries of ecological issues such as ozone depletion, desertification, deforestation, and global warming etc. according to chritine, future belongs to environment and consequently, environmental politics would be more appealing than any issue because of its sensitivities as the survival of human depends on it. (dann, 1999) ahmed discussed the stockholm conference on resilience which held from 21st august to 23rd august, 2017 in which more than 100 researchers participated. the agenda of the conference was to find the ways for the conservation on coral reefs, stop deforestation, and urbanization with healthier environment. he also discussed the status of environmental laws in pakistan. pakistan has devised environmental laws but lags behind in their implementation. for instance, article 11 of pepa (pakistan environmental protection act 1997) prohibits excessive emission of polluted waste of any sort: solid, air, or noise etc. but have little implementation. article 11 of pepa (1997) requires iee (initial environmental examination) and eia (environment impact assessment) reports for projects more than 50 million worth. these reports are unknown to most contractors in pakistan. pepa (1997) also promulgates the zero or minimum noise pollution in the vicinity of educational institutions, but with no application. kpk has taken an initiative to restore the environment in the form of „billion „tree tsunami‟. pakistan is in acute needs of taking steps towards environmental restoration and conservation. according to german‟s watch climate risk index of 2016: pakistan lost more than 2 billion dollars due to climate change related events. (ahmed, 2017) waqar m. (2014) criticized pakistan‟s politicians and political parties for neglecting environmental or climate change issue in their electoral campaigns. besides, they invested a little to tackle climate change which has affected pakistan adversely. human rights commission of pakistan in her annual report of 2013 said: “environmental issues cannot be sidelined as secondary matters of public policy” (ahmed, pakistan's politicians fail to protect environment, 2014) but in case of pakistan it is not an issue, not even a secondary one. according to world bank report, pakistan loses about 6% of gdp annually due to ecological or environmental degradation. despite the recent flooding from 2010 onward due to extreme weather conditions, no major political party of pakistan has focus much on environment in their election campaigns or manifestoes. they added the word environment in their manifestoes just nominally without much regard except pakistan tehreek-e-insaaf pakistan. pti in 2013 manifesto stressed on “green economy” based on reforestation, eco-tourism, small scale farming, and effective water management. „billion tree tsunami‟ is an offshoot of these visions. most of the other political parties look at these projects with much suspicion; but the fact is, even if these projects materialized only 10% into reality, it will change the land-scape of kpk from environmental deteriorated to environmental friendly province. 4. green politics and the contemporary world south asia is the region with enormous environmental issues ranging; from mangroves loss, water scarcity, deforestation, and desertification to rapidly melting of glaciers resulting into floods every year, rise of sea level rise, and changes in climate patterns. according to global risk index 2017, pakistan and india are included in „bottom 10‟ (bottom 10 is the 10 countries most affected by climate change). pakistan ranked 7th most prone to climate changes (kreft, 2017). major environmental issues in south asia are: climate change is the result of green house effect, and greenhouse effect complements by climate change. once this chain starts, it keeps on running with positive energy through climate feed-back mechanism. siachan are the 2nd largest glaciers in the world lies in south asia at the northern borders of pakistan and india; it is also the source of almost all the rivers in both countries, some of them such as indus, gangas, and brahmaputra etc. are few of biggest in the world. climate change results in melting of glaciers very fast and exposing new surfaces to absorb more energy, which in turn result in more melting of glaciers. the ultimate consequence is the review of economics and development studies vol. 5, no 2, june 2019 256 floods, partially due to water mismanagement, as witnessed in recent years in pakistan from 2010 onward. beside, melting of glaciers also results in depleting of fresh water sources. south asia hosts the one fifth population of the world with depleting water resources, making it a water stressed region. scarcity of fresh water is the major issue of pakistan and india and climate change is the main reason behind it. as for as pakistan is concerned, scarcity of clean drinking water in major issue. for the irrigation of agricultural territory in punjab and sindh, the fresh water is supplied by the only one river of indus, the major river in pakistan, while the other areas in the country remained deprived of fresh water. the shortage in the supply of fresh water has been posed severe threats for the economic survival of pakistan and for people living in pakistan. figure 1 source: (heyne, 2015) the situation has further become worsened because of polluted water in the pakistan. the main causes of polluted water include excessive use of fertilizers, disposing the wastage of industry into rivers and lakes, the sewage from urban areas remains untreated and finally dumped into the ocean and the use of contaminated pipelines for the transportation of water. the main cause of spread of diseases in pakistan is usage of filthy water because the fresh drinking water is contaminated. as a result, the main cause of reported diseases and health issues in pakistan are resulted by polluted water, directly or indirectly (sabir, 2012). 45% of infant deaths are due to diarrhea and 60% to overall waterborne diseases (pcrwr, 2015). india retains 24% forest cover of her total land which is close to international standard, 25% of total land. but circumstances are worse in case of pakistan as she retained between 2 and 5 percent only of its original forest cover leads to erosion and hits the soil‟s ability to retain water, further compounding the problems of water scarcity and flooding (gopinathan, 2014). deforestation occurs due to the weak energy infrastructure. most of the forest cutting, apart from commercial purpose, occurs for household need; for cooking and heating. despite alarming situation of forest cover, pakistan has no solid policy to tackle the situation. there are various bio-diversity and ecological issues related to forestry. government of pakistan announced her policy against forest cutting in 1992 which proved to be ineffective due to various economic and political issues. the need of the hour is to initiate the programs regarding reforestation and sustainable harvesting which could fulfill the energy needs of local people while conserving the forests for future generation as well. “carbon financing” may be the best strategy in this regard. it is an innovative idea where trees are given the value as they absorb carbon dioxide from the environment. developed countries give the finances in this regard as environment is considered a global entity. the role of government is to ensure the finances come in and trees are considered an environmental commodity, not just a wood for fuel (hussain, 2012). every country in south asia including pakistan needs to develop a strategy and attract investment to come to pakistan on climate change issue. this initiative can be taken at the saarc stage. the industries should also be involved; if one actually invests in projects and get carbon credit that is going to be credited on commodity exchange. it is the first environmental commodity of the world and the predictions of the world bank are that this market is going to be somewhere in the range of 5 to 10 billion dollars a year on exchange on this carbon emission. not surprisingly, climate change is compounding these stresses and causing new problems of its own. pakistan ranks among the worst-hit nations by climate change due to water scarcity and floods. the country relies on the indus river for irrigation, which is fed by glaciers in tibet and the himalayas. however, the melting of glaciers due to global warming, despite leading to short-term higher flows, will eventually lead to reduced flows outside of the monsoon season, compounding the water stress. review of economics and development studies vol. 5, no 2, june 2019 257 india is the biggest state in south asia as more than 1.3 billion people dwell there. there are more than 1300 working political organizations in india but not even one is green party. (nautiyal, 2012) apart from socioeconomic crisis, india is saturated with environmental issues; ranging from water shortage to population explosion, noise pollution, air pollution, deforestation, desertification, sea level rise, and solid waste etc. according to „world economic forum‟ report 2018: six out of ten world‟s most polluted cities of the world belong to india including gwalior, allahabad, raipur, dehli, ludhiana, and khanna. (wef, 2018) for such a crisis ridden country, it is unfounded to have no green party. there are working green or environmental groups in india such as sadhana forests, narmada bachao andolan, save silent valley, meri dilli meri yamuna, clean dilli, green dilli etc. (untouched, 2014) the only problem is that these green groups have no political backing. people of india considered these environmental organizations as activists without any political agenda. this is where the green activists in south asia lag behind developed world as they don‟t organize them politically. the need of time for green activists is to compose and regulate their energies for political organization. in this way, they can put pressure on national parties for regulating environmental policies at the very least. maldives is a tourist hub of south asia. it is a smallest country of the region located in indian ocean encompassing about 1200 islands. the average ground level of this country is 4 feet above the sea level, which makes it the world‟s lowest country. (musili, 2017) maldives is one of the most endangered countries in the world due to the rising sea level. according to the maldivian government reports, if carbon emission remained in current pace and sea level kept rising, maldives will be under water by 2020. government of maldives is even planning to purchase land in india, sri lanka or australia to relocate their population in case of such emergency. (musili, 2017) other environmental issues in this country are decreasing fresh water supply, lowering of water table, deforestation, and rapid increase in population which is putting pressure on other natural resources. (karthikheyan, 2012) besides, maldives is prone to frequent tsunamis which affect the countries‟ economic and social stature enormously. hence, there is dire need of propagating green politics in this country but the suit in not being followed. bangladesh and sri lanka are other notable countries of south asian region. both are small geographically but enormous in population. both are facing almost similar environmental related problems ranging from deforestation, ground water contamination, air pollution, floods, sea water contamination, and urbanization etc. (molla, 2016) social discrimination is widespread in both bangladesh and sri lanka on politico ethnic grounds. politics is being done on hatred in these states rather than political agendas. there is no party in sri lanka or bangladesh which keeps environment a primary agenda of their politics despite of the fact that both countries lose billions of dollars in flooding and other environmental related issues every year. rapid urbanization is another prevailing issue which is a breeding ground for other environmental crisis such as air pollution, water contamination, noise pollution, and lowering of water table ect. dhaka, and colombo are among the biggest cities of this region with no proper management. (alam, 2010) other environment related issues in south asia are, mangroves exploitation near karachi, desertification due to water scarcity, uncontrolled urbanization, running of old automobiles which are economical but a source of high air pollution etc. so, from the above explanation, it is clearly understood that south asia in saturated with environmental issues; still there is no clear eco-politics or environmental agendas in the manifestoes of political parties. the disapproval of eco-politics in south asia is inherent in socio-economic issues of this region. people of south asia are so deprived of even the primary needs of life that environment is considered a luxury here. real issues of this region are food, shelter, clothes, education, and health; environment is always secondary to these primary needs of life. hence, the game of politics in south asia is played on these primary yardsticks rather than environment. that is the primary reason for the un-popularity of eco-politics in south asia; as the political leaders are aware of the fact that economic settings define social behavior, which in turn encompass each and every aspect of life. according to karl marx: our society is like a tree and stem of that tree is economic structure and big branches that originate from these stem are our laws and legislations, which are necessary to govern the society. and small branches, bushes, and leaves are our living styles, religion, social philosophies, norms, and customs etc. hence, whatever we do with in a society, all depends upon our economic structure just like the whole tree depends upon the stem for its survival. (karl marx: das capital, 1867) review of economics and development studies vol. 5, no 2, june 2019 258 western societies have overcome their primary glitches long ago; hence environment, women rights, gay rights etc. have become their main stream issues. most of the european countries particularly germany, netherland, luxemburg, austria, france, spain, and italy have green political parties with large legislature shares. but in case of pakistan, economic conditions are so fragile and primary issues are so prevalent that no one, masses or political class, care about secondary issues; hence in spite of environmental challenges in pakistan, there is a little which is being done and propagated. education is the motor of every social engine; it keeps the society moving fast towards the positive and more progressive direction. awareness is the essence of educations and goals of education can only be fulfilled with strong economy. it is a matter of education that we choose facilities around keeping in mind our environment like bicycle or vehicle. but in the mindset in the countries like pakistan won‟t allow us to use bicycle because it is considered as transportation means for the poor and source of humiliation while it is environment friendly. it is all about materialistic mindset, the world top economies use bicycles more than any developing country like pakistan. for instance, in netherland out of 15 million population 14.59 use bicycles, about 99% of the population use bicycle and it is one of the world top economies. secondly, 80% of population in denmark use bicycle daily. out of 5.5 million people 4.46 use bicycle. (t10h, 2011) these countries are top in the world economy index but people are aware and concerned with the issues related to safe environment and economy. so, the economy and education of pakistan is lagged as compared to other economies and have very poor environmental awareness. the serious issues of lack in education and economic awareness lead to the very miserable conditions of politics related to ecology in pakistan. only the educated societies have worth to understand the links between human beings and environment and to act accordingly for the protection of our ecosystem. 5. conclusion political leaders play a major role in setting the course for their nations. unfortunately, political leadership of south asia is so oblivious that they consider environment a redundant object enforced on poor nations like pakistan by western authorities. politics is done on the basis of giving jobs, raising wages and salaries, tax cut, prioritizing education and health sectors and so on. no political leader has given a due attention to the environment in spite of having environmental laws. for instance, pakistan in the signatory of kyoto protocol 1997 hence created environmental protection agencies in each province and center with no effective functions. laws and policies are there, the real issue is enforcement; which people take very lightly. enforcement is guaranteed only through using authority; and using authority to implement environmental laws is not in the best political interest of our political leadership. hence, it is also a big reason for miserable condition of environmental politics in pakistan because the politics on environment can only be done when there are concerns with environment and in matter of pakistan the case is just opposite. the awareness is needed for our society to make them aware of their surroundings and this is only possible with education. to make contribution to our environment, it is necessary to strengthen the quality of our education and education. the real misery is that the literacy rate of pakistan is only 58% and we are ranked at 113th number out of 120th countries according to global literacy report. (khwaja, 2018) there were the best chances to propagate eco-politics in pakistan after earth-quake of 2005, floods from 2010-13, and most importantly after facing the water scarcity in various regions of pakistan. millions on people were affected with these ecological challenges; and if propagated effectively eco-politics could have become a main stream political agenda in pakistan with large backing of masses particularly those who were affected by it. besides, major cities of india like mumbai, kolkata, surat, and chennai are among the top 20 most prone cities to be drawn due to the rise of sea level (ghose, 2013); and sea level is rising due to rapid melting of glaciers which is a direct impact of global warming. but lack of political will abrogated all those cashing instances and the region still stays far from ecological related politics in spite of abundant ecological challenges. references ahmed (2017). saving pakistan‟s environment. the nations. august 31, 2017. alam g. m. (2010). environmental pollution of bangladeshits effect and control. dhaka dann (1999). global green party history 'time, space and the greens. from earth's last islands. the global origins of green politics'. lincoln university, new zealand review of economics and development studies vol. 5, no 2, june 2019 259 derek wall (2010). the no-nonsense guide to green politics. new internationalist. p. 12. isbn 978-1-906523-398 eu (2014). environmental working in india. earth untouched. http://earthuntouched.com/top-ngos-workingenvironment-conservation-writing/. ggc (2001). global green charter. https://www.globalgreens.org/globalcharter. retrieved: 06-11-18 ghose, t. (2013). the 20 cities most vulnerable to flooding. live science. retrieved: 12-07-18 karthikheyan (2012). environmental challenges for maldives. sage journal. https://doi.org/10.1177/097152311201700210. p. 52-62 khwaja, rizwan (2018). literacy rate in pakistan. the nation. 18-01-18 poguntke, t. 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"satellite based monitoring of groundwater storage variations over indus basin" . www.pcrwr.gov.pk. pakistan council of research in water resource, ministry of science & technology. sönke, k. and eckstein, d. (2017). global climate risk index 2017. german watch. p: 6 tahir, h. (2012). environmental issues of pakistan. http://envirocivil.com/environment/top-10-environmentalissues-in-pakistan pcrw. satellite based monitoring of groundwater storage variations over indus basin. www.pcrwr.gov.pk. pakistan council of research in water resource, ministry of science & technology. t10h (2011). top 10 countries with most bicycles per capita. top 10 hell. http://top10hell.com/top-10-countrieswith-most-bicycles-per-capita/. retrieved: 10-11-18 thomas, k. (2016). making the links between carbon markets in a post-paris world. world bank. http://blogs.worldbank.org/climatechange/making-links-between-carbon-markets-post-paris-world. retrieved: 02-09-18 waqar, m. 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http://blogs.worldbank.org/climatechange/making-links-between-carbon-markets-post-paris-world review of economics and development studies, vol. 6 (2) 2020, 391-400 391 role of transformative learning interventions in developing conducive environment for female adult learners in higher education a muhammad shabbir, b sajid masood, c ghazal khalid siddiqui a assistant professor, govt. college university, faisalabad, pakistan email: mskhalid606@yahoo.com b assistant professor, university of management & technology, lahore, pakistan email: sajid@umt.edu.pk c assistant professor, university of education lahore, pakistan email: ghazalkhalid@ue.edu.pk article details abstract history: accepted: 20 april 2020 available online: 15 june 2020 the increasing number of female adult learners required a need for a deeper and more additional background related consideration on the effects contributing toward educational achievement for the learners who return to study. the aim of this study is to define the role of transformative interventions in developing conducive learning environment for female adult learners in higher education with the consideration on hindrances faced, as they re-engage and continuing their post-compulsory educational passage. qualitative approach with explanatory case study design has been employed to conduct this study. semi-structured open-ended interviews conducted for 16 purposefully selected female participants. two private and two public universities were selected from which adult working students and experienced of having transformative learning interventions during their course. moreover, the experiences and responses highlighted the needs, hindrances and expectations of the adult students in higher education. they identified reflective activities including article review and reflective writing, faculty support, seminars, educational conferences, presentations, projects on real life issues, discussion and introducing demanding courses are the important transformative learning interventions for developing conducive environment for adults. the major factor responsible for developing conducive environment was experiences and exposure by the adult learner and providing opportunities through the andragogy and expertise. notes on interviews and reflection journals were utilized to triangulate data to support these methods. data analysis and results of the study indicated that participants experienced transformative learning interventions through both educational and non-educational related activities held in university by higher education. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: adult learners, transformative learning, conducive environment for learning, interventions jel classification: i20, i21, o13 doi: 10.47067/reads.v6i2.217 corresponding author’s email address: mskhalid606@yahoo.com review of economics and development studies, vol. 6 (2) 2020, 391-400 392 1. introduction maria was a bright student in school who passed her matriculation successfully and took admission in intermediate. but she was discouraged for continuing college by her parents, with the reason that they were not educated and had no backup because she was their elder child. she got married earlier and had two children but her marriage broke down. she was again dependent on her parents for look after herself with two children but she knew that they were unable to do so. she had little qualifications and no work experience for the job so she realized that she would have to do an admission in studies for the development of her career. she had difficulties to attend the college regularly with punctuality as there were no childcare facilities in university. she did her graduation privately with good marks and gained a place to study in university for masters. maria extremely felt that there was a great difference between herself and other students because of her age and financial entitlements. by the beginning of 2 nd semester, maria began to learn to use the computer to complete assignments but she had a serious problem to spend money on courses for learning computer programming and internet. she had facility to do her work in computer lab in university but she had a problem in managing the time for spending more after classes at university in computer lab. she felt lonely among the class because of her age and difficulties as no one helped her. in spite of many difficulties, she passed in b grade and completed her course effectively with success. when she looking back, she found that she survived in spite of less support and facilities offered to her as an adult student in university. she decided to stop her study after m.a and looking for job. but it was very difficult to have a job because of her age and gender even after gaining a degree; she didn’t have experiences of transformation. her qualification was traditional and it not comprise with the modern and updated demands of the job market. the next inspiring non-traditional adult student is samra who is an elder member of middle class family started his job as a clerk in administration department of a public university. she was just graduate so had many difficulties in maintaining herself due to globalization and technology advancement. she did few online diplomas for increasing his efficiency in computer programming as she found that technological competencies lead in achieving high levels in personally, socially, academically and professionally success. she married and had three children so she wanted to support and facilitates her family by increasing income with the promotion in job designation. she took admission in her own university in evening classes in master’s program for working students. she tried to balance his job and education. but in the 2 nd semester, the timings of classes would be changed and classes started one hour earlier before the regular class timings due to change in weather. samra had trouble with job timings to get take off from job one hour before. she requested her management to grant permission to leave the job one hour before. they granted the time and restricted her to complete the work in extra hours and not to join again in any further program for study during job. she also restricted by the university to attend the required regular classes at time to complete the targeted credit hours. she suffered to maintain the required regular timings of credit hours which were very difficult to manage the overburdened office assignments completions. samra struggled under the strain of juggling parenting, work and university, as many working students do. at last, samra successfully completed her course and earned master’s degree which helped her to get promotion in job as assistant to head of the department with an attractive salary package. but when she remembered the learning period in university with difficulties of age, married life, job, and expectations from organization where she worked, rigid & strict rules, regulation and policies of higher education, nevertheless the reason for working to meet multiple and sometimes contradictory immediate requirements of the roles as student, employee, and parent. sometimes, it creates high level of stress and anxiety which make it less likely that students will complete their course for degree with keen interest and motivation. she only qualified review of economics and development studies, vol. 6 (2) 2020, 391-400 393 with the formal education degree but didn’t learn any kind of transformation which is the need and requirement of her job. to cope with these challenges the implications and knowledge of transformative leaning and its interventions is required from university and teachers. all the adult students without the discrimination of gender and age will do their course in effective and useful way with the support of their teachers (andragogical knowledge), maintain their balance in work place (university’s rules, regulation and policies) and learning environment (transformative learning interventions) and change their structures analytically reflecting on beliefs and find new ways of defining their world of perception (transformative learning). 2. background of the study the population of asia has distinctive importance and scope because of its size, natural resources and planned location and it is also more meaningful as a “cultural concept”. from the last two eras, asia accomplished dynamic economic growth and a high level in innovation & creativeness in entrepreneurship of different sections. asia comprises with five high populated developing countries in the world that are bangladesh, china, indonesia, india and pakistan. many researchers and studies try to understand the reasons and suggestions on half of the world ‘population and three quarters of the non-literate adult population of the world. for periods of time, the focus point of academic studies has been trying to find out the effects contributing to educational success for adult learners. on the other hand, research concerned with the need for profounder and contextualized understanding of those impacts that has been less evident. many researches included the examination of impact of effects as single phenomena, for example, availability of flexible programs, and in the single perspective, experiences of adult learners balancing multiple roles in conflict situations in the demands of academic studies. the rights on the adult education are accepted by maximum government constitutions and in national laws which are reproduced in various international declarations and agreements. for example, universal declaration of human rights, 1966 international covenant on civil and political rights and international covenants on economics, social and cultural rights (unesco, 2008). the unesco international conferences held on adult education in elsinore in 1949 mentioned in field (2016), and many other regional and national proceedings were helpful in renewing governmental, national and international commitments, participate in advance thinking and develop policy & actions plans on the education of adults. the adult learners characteristics facilitate in attaining different precise aims and goals related to education. when the learner become adult, there is not a change in their needs only but there is a need to develop the learning process as well in relation of the requirements. there is a need to understand and know about the adult who “selects to accept primary responsibility for planning, implementing, and evaluating his/her own learning”. (merriam and brockett, 2007, p. 35). this adult phase described as “emerging adulthood (when adolescence is ending) to the end of life” (bjork lund and bee, 2008, p4). they divided the period of adult learning into four main groups; initial adulthood ranging from 20 to39; middle adulthood ranging from 40 to 64; older adulthood ranging from 65 to 74; and the late adulthood from75 as above. additionally, they distinguish advanced lifespan in further three phases classify accordingly with ages as young-old (65 to75), old (65 to 75), and oldestold (85 and older); considered as the significant division assumed the rapid and reliable increase in the adult population. review of economics and development studies, vol. 6 (2) 2020, 391-400 394 some studies described half from the total enrolment of nontraditional students are at the average age of 30 years (aslanian & brickell, 1990). researches related to adult learners described that they concerned with accomplishments, encouraged with identified factors in career advancement and require learning plans and programs that facilitates and support them, and efforts with their learning commitments. continuing education after a break involves progress in the direction of well-defined distinctiveness from the part of an adult learner. adult learners require balancing between participation in a novel developed personality and holding on to structured identity. 2.1 adult learners in higher education a vital drift has an important influence on registration and retention of the adult students in higher education is displaying the “changing life cycles as our nation’s population ages” (yankelovich, 2001, p. 8). the adult learners to be known with a various range of titles including non-traditional student, adult student, returning adult, adult returner, mature learner and various other are used for adult learner and they also have a broader range of cultural and educational backgrounds, abilities, responsibilities and experiences. 2.2 transformative learning theory in educational institutions mezirow (1981, 1994, and 1997) described that transformational learning create available possibilities for the attainment of transformation in learner with the combination of other kinds of learning, special experiences that are useful in form the learner thoughts and create a noteworthy influence in a paradigm shift which affects the learner ‘s consequential understandings (clark 1993). through the mezirow‘s theory, transformational learning in the classroom were highlighted on the subject to direction of involvement, analytical reflection and rational dialogues. perspective transformation practice is appropriate for the development of critically consciousness for how and why beliefs have come to provide variations for the perception, understanding the sense of the world; of reframing the suppositions to authorize more comprehensive, selective, absorptive and assimilative perception; and of creating conclusions or if not then performing on these new considerations. these wide-ranging, discerning absorptive and integrative are better viewpoints for adults select if they can because they are encouraged for recovered and comprehend sense of their knowledge (mezirow, 1991, p.14). as a constructivist, jack mezirow (1994) defined transformational theory in holding position to the ways in which learners understand and comprehend intelligence through the involvement necessary to constructing reference and understanding. transformational learning modifies the frame of reference and suppositions through which a learner can understand and realize the world. a belief system covers two structures; one is behaviors of attention and second is an opinion. belief system exaggerated and formed by views construct about cultural, social, educational and political events. but, an actual standpoint creates in their belief system (mezirow 1997). when learner begins analytically reflect and discover planned suppositions and dogmas, they become more visible, comprehensive, insightful and intense to transformation (lehman, 2003). 2.3 encouraging learning environments through the interventions of transformative learning during course, educator may function in many roles: teacher, guide, mentor, and colleague. their educators are charged with rising as much learning as possible: teaching skills, providing knowledge, and fostering personal and professional growth. this is essential to provide carefully planned activities and interventions for transformative learning and growth. disagreements in perspectives, allow students and teachers reflect on transformative learning experiences. review of economics and development studies, vol. 6 (2) 2020, 391-400 395 over the past decade, interest in practice of transformational learning increases in the fields of adult learning and higher education. if higher education provides transformative learning and the assurance of perspective transformation to the forefront of its function, faculty and staff must bring it in their practice, as distinguished from theory. transformational learning must essential for understanding, distinguishing, and reflecting possibilities for consequences, and intentionally employed strategies for assisting transformative learning in experience of the learner. practices of transformative learning focused on speculative content and applied activities encourage the methods for expressing acute concern and reflection in adult learners. the some of the following educational interventions that are effective in promoting transformative learning are considered analytically reflective; case study, collaborative learning activities, collaborative writing projects, critical incidents experiences, discussion on real life issues, interviews, discussions, student presentations, seminars, educational conferences, journals and research papers (king, 2005). 3. study objective this study is aimed at conducting a research to describe needs and hindrances confronted by adult learners in higher education along with determination of concepts andragogy and transformative learning. this study also aims to interpreted the learning experiences described by the study participants through the lens of mezirow transformational learning theory. and to generate suggestions for better conceptual understanding the role of transformational learning interventions in making the learning and teaching more effective with developing conducive environment. moreover, to encourage educationists to discover possibilities for transformational learning and its interventions in processes, practices, and environment for adults. 4. research methodology 4.1 research design this study is adopting a qualitative descriptive case study and using purposeful sampling in order to choose its sample. the study is limited to exploratory case study with the experiences of transformative learning interventions during the course in university as it would be more investigative through the outside or indirect activities from university. 4.2 population of the study population is female adult employed students from age 26 and above; studies in mphil and phd programs from private and public colleges and universities of lahore city. purposive sampling method was used that is useful in exploratory qualitative research, with limited means, as well as in the research where a single case (or small number of cases) can be significant in explaining the concerned issue. thus, from four universities; two public and two private from lahore, sample was drawn. 4.3 instrumentation instruments used for this research are semi-structure open ended interview comprised of ten questions. the first three questions were designed to know about the reasons of returning to education and the personal goals towards education from the respondents. whereas, next two questions were used to explore the needs of adult differ from young students and the hindrance they faced during their course in university. other two questions were to investigate the concept of transformation through learning and experiences for transformative learning interventions by respondents during their course in university. review of economics and development studies, vol. 6 (2) 2020, 391-400 396 the determination of arranging the unrestricted response interrogations was to collect further more records from participants to spread the results with more comprehensive view. interviewees were required to make available and shared a brief description about their experiences having transformative learning interventions during their course. 4.4 data analysis and findings on the bases of analyzed data following findings have been made that one who describe the happening of transformational learning, she must have the indication of change. the outcomes from the data analysis identified that all 16 of the participants in the study fixed change their opinions in some form or reshape their beliefs or ideas as an outcome of experiencing the transformative learning interventions in universities during their course. however, not all of the students’ thinking, beliefs and behaviors were transformed but all the participants discovered and expressed significance as a minimum in one of the transformative learning strategies. through critical reflection on their suppositions, beliefs and implementation on the experiential, transformational and andragogical strategies that defined enable many of the adult learners to modify their “meaning schemes” and transform their viewpoints. they developed their “emotional muscle” and started to admire and value their personal world of ideas and beliefs. some experiences were significant to certain individuals for specific reasons wherein the motivation towards education is substantial. brown (2008) clarified that firstly, the significance of experience is repetitive and examined through students’ experiences in a series of events related to education that happen in a planned and controlled way. secondly, the effect of critical reflection is discovered through students’ experience and involvement in variety of panels. in lastly, the active participation of students in semi-structured and open-ended interviews reflected the concept of rational discourse. the outcomes from the participants of this study mentioned that the involvement of both inservice education students and educators considering education as a professional development, experienced perception of transformation as a consequence of their experiences in the transformative classroom. the latest study explained that these effects are maintained and expanded the essentials to deliver educational institutions and their personnel with the consideration in the varieties of professional development practices that possibly will transform educators (king, 2004). consideration discovered that a most of the partakers experienced perspective transformative through interventions during the study and the participants found changes in attitudes and behavior towards themselves and others in their reflective situations, and in their understanding of other’s views on every day related concepts. the participants pointed out that the modifications were influenced by the university teacher’s support, solution of the challenges, discussions on global topics, reflection through journals, class activities and personal rational discourses. 5. discussion the discussion part is organized around the findings relating to the research questions. the discussion is based on the findings with the intention of synthesizing into cohesive vision from the female adult learner’s experience of receiving transformative learning interventions and motivation related events during study. 5.1 reasons of returning to education of adult students the first research question was to describe the reasons of returning to education of adult students? many of the respondents defined their reason for returning to education was for career development and advancement of their professional position. they classified and addressed the needs of review of economics and development studies, vol. 6 (2) 2020, 391-400 397 adult students in higher education for returning to educational formal institute for the purpose of proceeding their degree, and focused on the promotion for the job category meant dedication to an organization for a long timeframe within one’s career. few of them described their reason for continuing was to become competent and perfect with requirement of modern world and globalization. the respondents also mentioned that they work on self-identity by having the higher education degree adult students make their identities as learners together with other adult individualities (johnston & merrill, 2009). for the attainment of their selected academic and personal outcomes, students have to familiarize with the change in their institutions and transformation of practices for the promotion in their learning identities. 5.2 hindrances faced by the adult students in higher studies the discussion further moves with the second research question that is what are the hindrances faced by the adult students in higher education? research findings with the help of responses from the interviewees have clearly explained the sense of the hindrances they perceived as during the course in the university. the hindrances described by the respondents were time management, attendance, relationship with young fellows & teachers, financial issues, workload of assignments and the responses of administration on sensitive matters and these are in line with cross (1981). the most common hindrance faced by the students was time management. there was a noteworthy time requirement for attending the lectures. working full-time and or had family responsibilities and a learner has a smaller amount time she will have for university work with more external commitments and this can reason for developing stress. all the participants reported having difficulty in maintaining time management between job and university. the next hindrance reported by majority of the respondents was maintaining attendance. most of the adults who were willing to learn were on the job. due to the busy schedule in their work place, it was impossible to them to attend an educational institution regularly. sometime due to certain personal reasons or troubles, they were unable to attend the university. their busy schedule may not allow them to attend consistently the university. majority of respondents described their financial issues as the hindrance they faced. majority of the interviewees were financially independent and they were paying the fees by themselves. the fees that the students had to pay were quite high and for those working they had to save some amount their salary monthly because they had to pay their fees per semester. furthermore, students needed to pay it at one time once the semester starts which means they would need to prepare a large amount of money at one time as there were no payment installment schemes for it. on the other hand, there were no scholarships for adult students; some private universities offered the merit-based scholarship to the respondents but in the first semester it was rejected with the obligation of lower achievement ranking in assignments. 5.3 needs of adult student are different from the young student furthermore, the next research question was to explain the needs of adult student are differ from the young student? most of the participants explained that the needs of the adult student were differed significantly from the young class fellows. many of them mentioned that the teaching methods and practices for adult learners were different as for the younger students. there was no report of problems between the adults and younger learners they did not mix. although there was logic behind in the mind of adult students that colleges and universities are mainly structured for young students so they had no issue with that. being as an active student, there was a clear difference between these review of economics and development studies, vol. 6 (2) 2020, 391-400 398 learners and it was explained by most of the participants that the young students were more energetic and had a lot of time as compare to the adult students. some respondents mentioned their age as a disadvantage for causing them less energetic and faced difficulties in external commitments. on the contrast, some participants explained that they had significant benefit over the younger students in the way that they had more life experience and working skills to take along with the course. some mentioned they were capable to prepare for the course for satisfaction instead of having the pressure of receiving qualification promotion or upgrading the employment designation. 5.4 transformative learning and its conceptual understanding the important area of the research comprises around this question of research that what are transformational learning and its conceptual understanding? most of the interviewees described that they had a clear idea about the transformative learning. they reflected that it is used to transform the ideas and views on different issues, beliefs and topics. their beliefs, opinions, views and expressive responses facilitates to organize the meaning structures with the frames of reference based upon our experiences within our cultural perspective, that effect on how we understand and respond to events in our lives. some respondents described the transformative learning enhance our ability to understand and consider broader options and possibilities in our interactions. it encourages the practices in solving problems from different viewpoints. the aim is to generate integrated group of learners who shared experiences of activities to make meaning of their life experience. the two of the participants were not able to defined the transformative learning but they had knowledge about its interventions with the simple name “learning” and “change in behavior”. 5.5 experiences of adult learners of transformative learning interventions during the course this research question is related to the previous question that focuses on to describe the experiences of transformative learning interventions during the course for adult learner? the experiences of the respondents described that it is essential that the learners are willing to attend and listen to others, in order to reinforce relations that recognize and encourage the acceptance of differences among the participants, as well as their similarities. the majority of the participants experienced their engagement in seminars only for listen the information of the experts; there was no opportunity given for participation. some of them experienced educational conferences with high fees. some of them pointed to presentation; individually and in group. few of them described discussions in their experiences. few of them described that the formation of an opinion through articles reviews on social and critical issues during their course. 5.6 conducive environment for effective learning for adult learners the important point related to the objective of thesis was to define conducive environment for effective learning for adult learners? conducive learning environment is known as the atmosphere of the educational setting that make available conditions for making the learning process easy and interesting for the participants to work efficiently. conducive learning environment satisfies the needs of the participators for not only in the attainment of numerical competence. the participants defined the conducive environment in terms of physical facilities, relaxation in time, attendance and assignments, effective communication with teachers and young students and suitable teaching methods & practices for adults. review of economics and development studies, vol. 6 (2) 2020, 391-400 399 6. conclusion and recommendations there are some recommendations for further study based on the research findings that a comparative study on the bases of gender could be conducted between the contributors who involved with transformational interventions and the contributors who did not experienced. this comparison will be significant for understanding the effectiveness of transformation in learning with the help of interventions for adult learners. moreover, public and private institutions should have taken steps to serve adult learners and there will be a need for leadership and support from government to make adult learners viewed on the higher priority in several campuses. institutions should arrange events for engaging students in reflective writing and speaking activities that encourage participation on the real-life issues they experienced. the adult educators should have struggled to maintain a good rapport and relationship with the adult learners during the presentation of transformative learning interventions. this will stimulate the interest of the learners in the learning environment and process on the effective learning targets to be achieved. the adult facilitators employed would be skilled, qualified and expert for handling the transformative learning interventions for adult learners. this will provide them the opportunity to use reflective strategies with andragogical method in the learning situation to make the teaching learning process more effective. the higher education and academic staff struggle to nurture the transformative learning environment which is supportive, empathetic and favorable to enhance transformative learning in adult learners. references aslanian, carol b., and henry, m. brickell. 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(1966). jus dispositivum and jus cogens in international law. american journal of international law, 60(1), 55-63. yin, r.k., (2001). case study research: design and methods, third ed. sage, london. review of economics and development studies, vol. 6 (1) 2020, 179-203 179 financial inclusion and economic growth: empirical evidence from selected developing economies a noor ul ain, b samina sabir, c nabila asghar a kashmir institute of economics, the university of azad jammu and kashmir, muzaffarabad, pakistan b assistant professor, kashmir institute of economics, the university of azad jammu and kashmir, muzaffarabad, pakistan c assistant professor, department of economics and business administration, division of social sciences, university of education lahore, pakistan article details abstract history: accepted 22 march 2020 available online 31 march 2020 financial inclusion is a tool used to enhance economic growth, alleviate poverty, create employment and reduce income inequality in developing countries through providing affordable financial goods and services to low income group through financial institutions. this study analyzes the relationship among financial inclusion, entrepreneurship, institutions and economic growth for 33 developing countries over time 2004-2016 using generalized method of moments (gmm). the variables of financial inclusion, entrepreneurship and institutions are incorporated in solow growth model through total factor productivity. empirical results show that financial inclusion has positive effect on economic growth while entrepreneurship has negative but significant effect on economic growth. whereas some institutional variables like rule of law and political stability have negative and other institutional variables like control of corruption and government effectiveness have positive effect on economic growth. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: financial inclusion; institutions; development; economic growth; developing countries jel classification: e44, g21, o11, o47 doi: 10.47067/reads.v6i1.195 corresponding author’s email address: drnabeelakhan.ecu@gmail.com 1. introduction in developing countries of africa and asia, majority of people are not using the goods and services provided by financial institution or they do not have any bank account even. there are certain factors that lead to financial exclusion such as low income, financial illiteracy, lack of proper documentation, distant financial institution and complex financial goods and services (oji, 2015). according to global findex database (2014), almost 2 billion young people do not have bank account in mailto:drnabeelakhan.ecu@gmail.com review of economics and development studies, vol. 6 (1) 2020, 179-203 180 any bank; they are not using banking services especially in developing countries. there are many other reasons for not having account such as lack of money, geographical reasons, strict conditions of banks etc. due to financial exclusion poverty increases and economic growth decreases in developing countries. financial inclusion got importance in the world especially in developing countries since 2000. in 2015, the world bank group and its other 14 partners had announced the strategy named as universal financial access by 2020 (ufa2020) to enhance the inclusion of finance in the world. the objective of ufa2020 is to increase the access to the transaction account for storing money, sending payments and receiving deposits to fulfill the financial needs by all the adults of world. through the universal financial access 2020 initiative, the world bank and international finance corporation (ifc) have targeted 1 billion people to make them able to gain access to transaction account. in 2016, the world bank has added 16 new partners who made commitment to achieve the target of ufa2020 by the end of year 2020. financial inclusion means timely provision of affordable financial goods and services to the exclusive group such as needy and lower income group. different economists and organizations define financial inclusion in different ways. but all give the same meanings like access to financial goods and services at reasonable price for all members of society especially poor group by formal financial institutions. financial inclusion includes micro-saving, micro-credit, micro-insurance, sending and receiving payments etc. financial institutions particularly commercial banks play major role in promoting financial inclusion. the primary function of banks is to deposit money and grant loans. they play intermediary role between savers and investors to mobilize savings. banks are the source of finance for those who have entrepreneurial abilities and skills. according to archana (2013), micro financial institutions (mfis) and commercial banks play key part in increasing financial inclusion through channeling funds in the shape of loans to poor people of the economy. as a result new business start, employment increases, income level rises, demand for goods and services increases, productivity increases, and hence poor people also contribute in increasing economic growth. now a days the word financial inclusion is getting importance throughout the world. through inclusive financial system poor people get benefits by using broad range of financial services at low price (kunt and klapper 2012). inclusive financial system in which banks is a major part, creates link between different sectors of the economy and thus provide effective and suitable environment for different government policies to work effectively. when financial system is inclusive then financial institutions would be able to create credit to start economic activities. policy makers and financial institutions of developing and advanced countries are making and implementing different strategies to promote financial inclusion at individual as well as global level. due to the effectiveness of inclusive financial sector on growth, governments, banking sector and international financial regulatory bodies have started initiatives to make the financial system inclusive since 2000. for example steps taken by governments include legislative measures, the community reinvestment act (1997) of the united states, the french law against exclusion (1998), financial inclusion task force (2005) by united kingdom. at country level banks of different countries took different steps like german bankers associations voluntary code (1996), mzansi (2004) by the south african banking association, facilities of “no-frills” accounts and “general credit cards” by reserve bank of india (2005), national financial inclusion strategy (nfis) by few developing countries. economic growth has important policy implication for the welfare of the society. growth is the single important factor affecting the income of the poor. therefore economic growth is the key to review of economics and development studies, vol. 6 (1) 2020, 179-203 181 understand how to increase the income of the poor to bring them out of poverty. this is the reason that economic growth is eighth goal set by the united nations sustainable development goals(unsdgs) because it has positive impact on level of employment, level of national income and hence living standards of people. financial inclusion ranked the seventh in the sustainable development goals. financial inclusion got importance throughout the world due to its substantial impacts on growth, entrepreneurship, employment, income inequality and poverty alleviation (dixit and ghosh, 2013; onaolapo, 2015; fadan, 2014). financial inclusion has positive impacts on individuals level of income and thereby, economy as whole. enhancing financial inclusion modernizes the agriculture, promotes innovation, surges entrepreneurship and increases growth (kelkar, 2010). for low income group, access to credit creates entrepreneurship as well as investment opportunities, output increases and hence growth increases (islam and mamun, 2011). in the late 2000, the importance of financial sector development with respect to growth has been recognized through different studies. king and levine (1993) examined the relationship between growth and finance. financial institutions finance those entrepreneurs which introduce innovative and new goods in the market and results in economic growth. in low income and lower middle income countries, it has been seen that people have entrepreneurial abilities but they are deficient in financial facilities or have banking financial facilities at difficult or complex conditions. some people use informal credit facility that may result in their exploitation (onaolapo, 2015). by rajan and zingales (1996), the key role played by the financial sector is to reallocate the funds of those people have more amount of capital to those people have deficient in funds. finance may simply enable the pursuit of investment opportunities, and thereby contribute in long run growth. their work also proved that imperfection in financial market has an effect on investment and growth. developing countries are eager to achieve inclusive growth which can be possible through financial inclusion. financial services such as remittances, savings and insurance are considered very necessary for economic development and reduction of poverty because they likely make financial system stable, minimize the differences in income and resource distribution and hence results in inclusive growth (dhillon and mittal, 2016). without inclusive financial system lower income group has insufficient resource/income to get education or to become entrepreneur that creates hurdle in the development of human capital (beck, demirguc-kunt, and levine, 2007; and world bank, 2008). likewise small and medium firms must depend on their own limited income to continue their growth process. without lending infrastructure the access to finance is limited and the absence of lending infrastructure become obstacle in the way of making financial system inclusive (asia-pacific forum, 2016). dixit and ghosh (2013) studied financial inclusion as a tool for inclusive growth in indian states. financial inclusion play major role in growth through generating and mobilizing the resources. financial inclusions (via providing financial services) mobilize and allocate resources especially to that group of people who have not easy access to them. alter and yontcheva (2015) examined financial inclusion and development in the central african economic and monetary community (cemac) region and compared with peers of sab-saharan africa (ssa). all the cemac countries have less inclusive and less developed financial sector due to inflation, worse credit information and higher cost ratio. institutions are also important for the economic growth of country besides financial inclusion, fiscal policy, entrepreneurship etc. institutions can be financial, economic, political etc. institutions play important role in development of countries. alter and yontcheva (2015) found that cfa (african financial community) countries in sub saharan africa have developed financial sector due to strong review of economics and development studies, vol. 6 (1) 2020, 179-203 182 political institutions. financial inclusion and institutions both play very important role in economic growth. in nigeria financial inclusion does not contribute in economic growth because of poor performance of the institutional setup (adetiloye, 2017). nystrom (2008) found positive effect of institutional setup on entrepreneurship (self employment). institutional variable is measured with economic freedom index consist of consists of five variables ( size of the government sector, access to sound money, security of property rights, terms and conditions for international trade and quality of rules/ regulation of credit, labor and business). different studies showed that financial inclusion is a key to enhance growth and alleviate poverty. the present study examines the impact of financial inclusion, entrepreneurship and institutions on economic growth. in present study, the financial inclusion, entrepreneurship and institutions are taken together to see their impact on economic growth of developing countries which was hardly done in earlier studies up to our knowledge. on the basis of availability of data, 33 developing countries are taken over time period 20042016 in this study. system gmm is used to estimate the impact of financial inclusion, entrepreneurship and institutions on economic growth. this study is structured as follows: literature reviewed related to financial inclusion, entrepreneurship, institutions and economic growth is presented in section 2. section 3 is about methodology used in this study. section 4 discusses the empirical results. section 6 concludes the overall findings of the study. 2. literature review this section 2 provides the review of literature related to financial inclusion, economic growth, entrepreneurship and institutions in previous studies. 2.1 financial inclusion and economic growth king and levine (1993) investigated the relation between economic growth and financial depth. average of three measures of growth was taken over the time and three measures are these (i) real per capita gdp growth (ii) real per capita capital stock growth (iii) total productivity growth. financial inclusion is taken as financial depth and measured by liquid liabilities. they have used secondary data for 77 countries over the period 1960–1989. the study found positive and significant relationship between the real per capita gdp growth, real per capita capital stock growth, total productivity growth and financial inclusion. the main function of financial sector is to reallocate the funds of those people which have a large amount of capital to those people or firms which are deficient in funds. finance may simply create investment opportunities, and thereby contribute in long run growth. financial development may affect the growth in two ways, it lower the cost of capital or lower the cost of external finance. the firms who are lack of finance if given investment opportunities perform better in economy with efficient financial sector. financial development simply helps firms to escape from problem of funding internally. the industries depending on finance provided outside the industry are larger in countries having developed financial sector. it is proved that imperfection in financial market affects investment and growth (rajan and zingales 1996). christopoulos and tsionas (2004) investigated the relationship between financial depth and economic growth in long-run using panel data of ten developing countries. using panel unit root tests review of economics and development studies, vol. 6 (1) 2020, 179-203 183 and cointegration tests they found positive relationship between financial depth and growth. estrada et al. (2010) estimated the impact of financial development on real per capita gdp growth in developing asia. a panel data from 1987-2008 of 125 developing asian countries was taken. it is found that overall financial development has positive effect on real per capita gdp growth. financial depth affects more positively on growth then the financial structure. it is found that efficiency of investment has positive impact on output growth. there is no difference between finance-growth relationship of developing and industrialized countries. according to theory of finance-growth relationship and given literature the findings of this study are same. both financial development and financial openness has positive affect on growth and are beneficial for it. for developing asian countries, the effect of financial openness on growth is comparatively larger after post-crisis period. prochniak and wasiak (2017) examined the impact of financial sector development and its stability on economic growth of 28 european union (eu) and 34 organization for economic cooperation and development (oecd) economies. it is theoretically implied that financial sector development and stability has positive effect on output growth. this study used the data over the time period 1993-2013. different variables representing financial sector are used and each have different impact on growth. using the blundell and bonds gmm estimation method, it is found that credit creation and its enhancement is an important determinant for output growth. the relationship between domestic credit and gdp growth is negative especially for eu countries in the post crisis period which means that over indebtness does not enhance economic growth. another financial sector variable used in study is nonperforming loans in total gross loans which is also negatively related with gdp growth. third variable used is bank capital to asset ratio has positive relationship with gdp growth for oecd countries while has negative relationship for eu countries which is spurious relationship. the next variable market capitalization gives interesting result that both positive and negative type of relationship is found with output growth. when the level of capital market development become excessively high then output growth become low after some stage. this is true for countries which have well stabled capital markets. on the other hand countries having capital markets in the initial stage of development, development of capital markets leads to faster output growth. the model indicates negative relationship of inflation and government consumption expenditures and show positive relation of investment and trade openness on economic growth. alter and yontcheva (2015) examined financial inclusion and development in the central african economic and monetary community (cemac) region as compared with peers of sab-saharan africa (ssa). they also found the determinants of financial development in cemac region. they used panel data regressions for the time period 1997-2012, where all the variables are averaged over four years. macroeconomic variables such as per capita income is positively related, inflation and share of natural resource are negatively related to financial development. institutions, financial sector, population and technological advances variables impact on financial development. it is interesting in the study that low and high income countries are both far from the financial development stage. they also identify the countries which have achieved the financial development target and also recommend policy measures to cemac countries by which they can increase or boost financial inclusion. dixit and ghosh (2013) studied financial inclusion as an instrument for inclusive growth in indian states. in this paper they realized that the inclusive growth is important and financial inclusion is a tool to achieve it. using secondary data on variables, it is found that to achieve comprehensive growth there is need of equal distribution of financial inclusion opportunities. there is a need of resources to attain the objective of inclusive growth. financial inclusion plays important role in economic growth through generating and mobilizing the resources. review of economics and development studies, vol. 6 (1) 2020, 179-203 184 through formal financial system the inclusive finance for all units of economy affects economic activities. in urban areas, people engaged in productive economic activities, low income earners and small businessmen get special benefits from financial inclusion. onaolapo (2015) studied the effects of financial inclusion on growth of nigeria for data of thirty years (1982-2012). different models like sustainable financial model, social development model, financial ecosystem model and financial inclusion lifecycle model are given to point out the problems of financial exclusion and give suggestions to achieve full financial inclusion for the reduction of unbanked people. using ols techniques the study finds that there is positive relation between growth and financial inclusion. also financial inclusion plays role in poverty reduction. financial inclusion has also link with financial intermediation. in most of the low and lower middle income countries, it is seen that people have entrepreneurial abilities but they do not have financial resources to generate their own business. some people use informal credit facility that may result in their exploitation. this study also suggests enhancing financial intermediation among the rural poor to promote economic growth. financial development, such as easy access to loans and more credit facilities create more investment and productive opportunities that leads to growth. financial development gives advantage to investors that lead to upward shift in production function. an established and well developed domestic financial sector is required to generate higher amount of remittances from abroad. as a result both higher amount of remittances and financial development generate higher steady state level of output and capital stock. unbreen and nawaz (2014) found that remittances and financial development increases the steady state rate of output growth and capital stock in the long run. they extended the ramsay cass koopmans model of growth by including remittances and financial development in the financial sector for open economy. they found that at the initial stage, financial development leads to increase in consumption and net output that might appear in the form of trade deficit but in long run it appears in the form of trade surplus. they concluded that a well-developed financial sector with higher amount of remittances directly effects economic growth. fadan (2014) investigated the financial inclusion as tool for eradicating poverty and equitable distribution of income for developing countries especially for nigeria. in nigeria, central bank has adopted the national financial inclusion strategy to increase the financial inclusion. financial inclusion ensures simple and complex financial services to their customers. simple services include credit and saving facility while complex services include pension and insurance facilities. study revealed that in 2012, 46.3% population are financially excluded mostly are of age below 45 having no formal education living in rural areas. 80% of financially excluded people live in rural areas of nigeria. three key barriers in way of financial inclusion are physical access, eligibility and financial literacy. he concluded that financial inclusion is a tool for eradicating poverty and equal distribution of money and most of the developing countries of the world are giving attention to financial inclusion to redistribute income and to alleviate poverty. in africa, not more than 25% of young people have access to formal financial services. individuals and small industries have less reach to financial services as compared to other developing countries. no money, high cost, distance and documentation are major obstacles in way of financial exclusion. despite advances in financial sector services in last two decades, individual and firms are excluded from financial sector services. demirguc-kunt and klapper (2012) examined the overall condition of financial inclusion in africa as compared with other developing countries of the world. most of the adults in africa use traditional way of saving and borrowing until now. likewise smes face problems to get finance through financial sector. half of the firms in africa have not access to finance review of economics and development studies, vol. 6 (1) 2020, 179-203 185 by financial institution as big barrier in their way of growth. although african firms having bank account are comparatively more than firms of other developing countries but these firms depend on internal funding. more than 84% of smes finance in africa is internally financial. innovations like mobile money can engage more people to transfer money and pay bills at low cost with more access. archana (2013) highlighted institutions and their role in financial inclusion. according to archana, regional rural banks (rrbs), self help groups (shgs), micro finance institutions (mfis) and commercial banks are playing key role in financial inclusion for last few decades in india. financial inclusion is necessary part of inclusive growth and helps in alleviating poverty hence public and private sector is working together to promote financial inclusion in india. regional rural banks are small man’s banks having more ability to mobilization of deposits and credit creation to small borrowers in rural areas as compared to commercial banks. similarly shgs and mfis are also playing their best role in financial inclusion through micro financing in rural areas for poor. shgs are non-institutional channel of micro financing and are playing most effective role in financial inclusion in which 90% of members are women. through shgs-bank linkage program, commercial bank directly lend to shgs where delivery and recovery of credit is timely and assured. mfis are source of micro financing for poor in specific areas of india but playing significant part in inclusion of finance. in india institutions with the help of commercial banks are playing their role to alleviate poverty and to empower poor people of rural areas. hariharan and marktanner (2012) estimated effect of financial inclusion on growth. financial inclusion is a key of growth and development as it has ability to make capital. output depends on capital and total factor productivity in production function and financial inclusion affect output growth either by capital accumulation or total factor productivity. moreover due to increase in financial inclusion, the total factor productivity increases by creating link between saving and investment. different countries have different reasons for lack of financial inclusion. world is divided into financial inclusion surplus and deficit regions. it is empirically resulted that 10% rise in financial inclusion rises 1.34% of per capita income. babajide et al. (2015) investigated the effect of financial inclusion on growth. financial inclusion is a process to qualify and to make efficient the financial intermediary goods and services. financial inclusion is the part of financial development and it creates and collects savings and then change into productive investments. half of the total wealth of nigeria is shared by only 10% of the population. nigeria is the third largest economy of the africa. despite the fact that nigeria’s gdp growth on average is 7%, 67.1% of the nigerian population is living below the poverty level. the government of nigeria is giving importance to financial inclusion and targeted to achieve full inclusion by 2020. as aggregate production function is concerned, the financial effect is considered by changing saving and investment into output through two channels 1. by capital accumulation. 2. by technological change. using secondary data on ordinary least square regression equation model it is resulted that capital per worker is the main factor of financial inclusion and financial inclusion itself is the main factor as well as bank deposit rate and total number of resource rents are also factors for determining the output growth in the nigerian economy. after the emergence of shari’a complaint financial services and insurance kim et al. (2018) examined the relation between growth and financial inclusion for 55 member islamic countries of organization of islamic countries (oic). financial inclusion is gaining importance in recent decades among scholars, politicians and financial stakeholders. shari’a complaint financial products are more attractive towards investment as compared to western financial products so financial inclusion in review of economics and development studies, vol. 6 (1) 2020, 179-203 186 islamic countries play important role for growth of economy. they took per capita gdp as proxy of growth and five variables to measure financial inclusion. results of dynamic panel estimation found that financial inclusion has positive impact on growth and has mutual causalities with each other. adetiloye et al. (2017) examined the effect of financial inclusion on growth as well as on poverty. he used variables like loan to deposit ratio, liquidity ratio, broad money to gdp (ratio), credit to private sector, commercial bank branches and demand deposits for rural areas to measure financial inclusion. using data of nigerian economy over the time period 1986-2015, it is concluded that financial inclusion does not support growth in nigeria while financial inclusion helps in alleviating poverty. it is recommended in the study that resources should be allocated and utilized efficiently by making strong the regulatory framework. 2.2 institutions, entrepreneurship and economic growth commander and nikoloski (2010) analyzed the impact of institutions on economic performance of countries and firms. various institutional measures are taken and their impact on economic performance has been analyzed separately. in this paper institutional measures taken are political system (democracy or not), business and investment environment. growth in per capita income and real gdp growth are used as proxy for economic performance. data of 159 economies is taken over the time period from 1960-2009. gmm estimation is used and found positive but insignificant relationship between growth measures and political system. to find the relationship between growth performance and institutions the data over the period 2003-2007 was used and found little statistically significant relationship between them. autio and fu (2015) investigated the effect of quality of political and economic institutions on entrepreneurship. he used the data of 18 countries from asia pacific region over the time period 20012010. dependent variable is population prevalence of entrepreneurship. it is found that good quality of economic and political institutions has direct and positive impact on formal entrepreneurship. if institutions lack quality then more entrepreneurs will choose informal entrepreneurship. it is also found that good quality of economic and political institutions are necessary for entering entrepreneurs to formal entrepreneurship. chen and jin (2017) examined the use of credit an important indicator of financial inclusion in china. this study used the primary data of china household financial studies (chfs 2011) dataset. data was gathered from 28000 members of 8438 households using stratified random sampling. dependent variable used in the study is use of credit while socio-demographic variables like gender, education, employment etc. are used as independent variables. results show that household use of credit taken from financial institution (formal credit) is low and use of credit taken from other sources (informal credit) is high while use of formal credit is positively related with employment, education, income, asset and urban residence. the low level of formal credit was due to less credit creation by banks and lack of financial knowledge. the findings of study suggest that to increase financial inclusion policies should be designed in such a way that increase the access of household to formal credit and increase financial knowledge. as smes and entrepreneurship is important determinant of economic growth. carvo et al. (2012) showed that smes has negative or neutral impact on economic growth of developing countries while for developed countries smes and economic growth has positive relationship. this study used the averaged over 3 year data for 25 brazilian states for the period 1985-2004. the results show that relative size of smes has negative impact on economic growth while human capital of smes has review of economics and development studies, vol. 6 (1) 2020, 179-203 187 positive impact on economic growth. the negative results between two variables in brazilian states does not mean that small firms or entrepreneurs should be discouraged as author give reason for negative relationship to institutional failure that encourages rent seeking activities. hence author suggests promoting institutional and educational improvement as public policy for enhancing economic growth of brazil. martin et al. (2010) investigated the effect of entrepreneurship on economic growth. schumpeter was one of the earliest economists who included the entrepreneurship variable in growth models and analyzed its effect on economic growth. in schumpeter views innovation was the instrument to enhance economic growth. entrepreneurship has also role in promoting economic growth while profit social environment also has influence on it. martin et al. followed the same concept using gem (global entrepreneurship monitor) data over the period 2000-2006 for 25 countries. this study used entrepreneurship index calculated by gem as variable of entrepreneurship and concluded that entrepreneurship has positive but indirect impact on economic growth through private investment. with more entrepreneurship the private investment enhances which leads to more growth. nissan et al. (2011) estimated the relationship among organizations, institutions and economic growth. organizations and institutions have direct as well as indirect role to enhance economic growth. organizations and institutions play direct role through human capital and play indirect role through entrepreneurship and both has positive impact on economic growth. growth equation is used to test the hypothesis that whether human capital and entrepreneurship has positive impact on economic growth. ols estimation technique is used to estimate the data of eleven countries for the time period 20002005. organizations and institutions make economic agents able to use new technologies through providing education to them. institutions especially monetary provide funds to economic agents and make them entrepreneurs. empirical analysis showed that organizations and institutions play role in economic growth process. in summary, investment, inflation, government expenditure, openness rate and population growth are major determinants of economic growth. all these factors are to be used in their right direction for enhancing economic growth under the supervision of good institutions. through financial inclusion and entrepreneurship lower segment of economy can participate in economic growth where the above factors are also working side by side. until now, the impact of financial inclusion, entrepreneurship and institutions is analyzed separately. most of the studies showed theoretical relationship of financial inclusion and economic growth for only one developing country or developing countries of one region. moreover, impact of financial inclusion, entrepreneurship taking institutions together on economic growth is analyzed much rarely. this study is trying to fill this gap by establishing empirical relationship among them. 3. empirical framework the panel data model for current study is written as follows (1) where i = number of countries and t =time period (2004-2016). here represents dependent variable which is economic growth measured with per capita gdp, is used to represent vector of control variables that consist of inflation, gross fixed capital formation, trade openness, represents our targeted variables such as financial inclusion, institutions and entrepreneurship, is error term and α, β and δ are unknown parameters to be estimated. we have used different proxies of review of economics and development studies, vol. 6 (1) 2020, 179-203 188 financial inclusion and institutions rather than index because proxies are considered comparatively reliable than index. the dynamic panel data model of the study is written as (2) where i =1,…,n and t = 1,…,t, is country specific effect and “ ” is error term with zero mean and constant variance and zero covariance between explanatory variables and error term. we assume that e( ) = 0 and e( ) = . if lagged dependent variable appears as explanatory variable then strict exogeneity of the regressors no longer holds. for example growth and some other variables have reverse causation that creates endogeneity problem. in case of economic growth, the institutions can work better and the level of entrepreneurship and financial inclusion rises and vice versa. secondly some variables are of nature that affects other variables of different countries at the same time like international crises affect growth, financial inclusion and entrepreneurship of different countries at the same time. in such situation the least square dummy variable (lsdv) method cannot be used due to inconsistent estimates obtain from it. because of the correlation between lagged dependent variable and error term autocorrelation occurs. the instruments are used to eliminate the problem of autocorrelation. then we have instrumental variable (iv) technique proposed by anderson and hsiao (1982). the equation 2 can be modified as ( ) ( ) where ( is uncorrelated with so it can be used as instrument to estimate known known parameters. arrellano and bond (1991) noted that ( is not the only instrument for ( ) but all ( ) where j = 0, 1,….. are all legitimate instruments for ( ). hence arrellano and bond (1991) proposed first difference gmm technique to estimate panel data model. this technique also uses instruments to remove problem of endogeneity. instruments of lagged and explanatory variables are taken in this technique. to check the validity of instruments of system gmm, the sargan test is used. the higher p-value shows that instruments are valid and accepts null hypothesis. 3.1 description of variables this study takes economic growth as dependent variable. it is defined as increase in real market value of goods and services of an economy over time. per capita gross domestic product (gdp) is used to measure economic growth (estrada and park, 2010; hariharan and marktanner, 2012; babajida, 2015). financial inclusion means providing financial goods and services to needy and poor people on time at a low cost. there is no consensus on the measurement of financial inclusion and different proxies are used in different studies. babajide (2015) used commercial bank deposit (deposit account holders in commercial banks) as proxy of financial inclusion. hariharan and marktanner (2012) used review of economics and development studies, vol. 6 (1) 2020, 179-203 189 account at formal financial institution as proxy of financial inclusion whereas dixit and ghosh (2013) used index composed of banking penetration, availability of banking services and usage of banking system as proxy of financial inclusion. onaolapo (2015) used fd1 (ratio of broad money to gdp) and fd2 (ratio of credit to private sector to gdp) as proxy of financial inclusion. in this study we use commercial bank branches/100,000 adults and automated teller machine/100,000 adults as proxy of financial inclusion. entrepreneurship means the ability and skills to create, establish and maintain a business that involves risks to earn profit. data of entrepreneurship is available in form of index in global entrepreneurship monitor (gem) dataset. total entrepreneurship activity (tea) index by gem as measure of entrepreneurship is used in most of the studies by different scholars (martin et al, 2011; bjornskov and foss, 2007; sobel et al, 2007). nystrom (2008) used self-employment by compendia dataset as measure of entrepreneurship. autio and fu (2015) combine gem and world bank enterprise snapshot datasets to make proxy to measure entrepreneurship first ever. in this study, new business registered variable is taken as proxy of entrepreneurship. institutions are economic and political. institutional setups that make and regulate the rules for business in an economy are economic institutions. economic institutions are measured by business freedom index. institutional setups that make and regulate rule of law, protection of property, access to opportunity are political institutions and are measured by political right index (autio and fu, 2015). some studies used democracy (polity 2 and polity iv) as measure of institutions (hariharan and marktanner, 2012; commander and nikoloski, 2010). alter and yoncheva (2015) used index of government effectiveness, rule of law and political stability using data from worldwide governance indicator. nystrom (2008) used institutional quality measured by economic freedom index made of five components size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally and regulation of credit, labor and business. in this study we use control of corruption, government effectiveness, political stability and rule of law separately to represent political institution. inflation is sustained rise in prices of goods and services over time. consumer price index is used to measure inflation (christopoulos and tsionas, 2004; giri and sehrawat, 2017). caporale et al. (2009) used average consumer prices to measure inflation. consumer price index is used to measure inflation in this study. trade openness is measured as sum of exports and imports divided by gdp (prochniak and wasiak, 2017; giri and sehrawat, 2017). caporale et al. (2009) used international trade policy variable as proxy of trade openness in their study which is trade to gdp ratio. in this study trade to gdp ratio is used to measure trade openness. gross fixed capital formation is used as investment which is gross domestic fixed investment including land, machinery, purchase of equipment, plant, infrastructure etc. it is taken as percentage of gdp. gross domestic fixed investment as percentage of gdp is used to measure investment in this study. panel data for some selected lower income group and lower middle income group countries is used in this study. data for all variables is taken from world development indicators except institutions. data of institutions is taken from the world governance indicators. data for 33 developing countries such as afghanistan, bangladesh, bhutan, bolivia, burkina faso, congo, dem. rep., ei review of economics and development studies, vol. 6 (1) 2020, 179-203 190 salvador, georgia, ghana, india, indonesia, kenya, kosovo, kyrgyz republic, lao pdr, lesotho, moldova, mangolia, morocco, myanmar, nepal, nigeria, pakistan, phillpines, rawanda, senegal, srilanka, timorleste, togo, tunisia, ukraine, vanuate and zambia are taken over time period 2004-2016 is taken in this study. 4.1 results and discussions to check whether financial inclusion effects economic growth or not, different proxies of financial inclusion and institutional variable are used. new business registered (in number) is used to represent entrepreneurship. the values of institutional variables range between -2.5 to 2.5. the value – 2.5 shows worst institutions while 2.5 shows best institutions. in the study, data of 33 lower income and lower middle income countries is taken to check the effect of financial inclusion, we examined the impact of financial inclusion, entrepreneurship and institutions on economic growth. two proxies are used for indicating financial inclusion which are commercial banks branches per 100,000 adults and atms per 100,000 adults. to represent entrepreneurship natural log of new business registered (in number) is taken. for institutions control of corruption, political stability, government effectiveness and rule of law are used separately to see their effect on economic growth. natural log of per capita gdp is taken to represent economic growth. we estimate results in two steps. in step one, four models are estimated in which financial inclusion is measured with commercial banks branches/100000 adults with four proxies of institutional variables. in second step, another proxy of financial inclusion is used which is atms/100000 adults with four institutional variables and estimate the impact of financial inclusion on economic growth. 4.1 emperical impact of commercial banks branches/100,000 adults (cbbs/100000), institutions and entrepreneurship on economic growth in step one, financial inclusion is measured with commercial bank branches per 100,000 adults. for institutions proxies such as political stability, control of corruption, government effectiveness and rule of law are used. entrepreneurship is measured with natural log of new business registered (in number). the estimated results are displayed in table 1 to table 4. table 1. rule of law, financial inclusion and economic growth variables system gmm one-step two-step per capita gdp(-1) 0.935*** 0.936*** (0.000) (0.000) cbsb/100,000 adults 0.005*** 0.005*** (0.000) (0.000) entrepreneurship -0.009* -0.006** (0.09) (0.02) rule of law -0.014* -0.009 (0.10) (0.17) trade openness 0.0002** 0.0003*** (0.020) (0.000) inflation -0.0003*** -0.0004*** (0.009) (0.000) gross fixed capital formation 0.0002 0.0002*** review of economics and development studies, vol. 6 (1) 2020, 179-203 191 (0.68) (0.009) constant 0.5387*** 0.516*** (0.000) (0.000) chi square 7478.88 90973.75 sargan(p-value) 1.00 ar2 (p-value) 0.05 0.35 observations 396 396 no of countries 33 33 *, ** and*** represents significance level at 10%,5% and 1%. the results show that financial inclusion (cbbs/100000 adults) is positively related to economic growth. the result is consistent with the findings of previous studies (onaolapo., 2015; williams et al., 2017; adetiloye et al., 2017). the reason may be that increase in financial inclusion or increase in number of commercial banks branches means that more people get connected to banking services which increase their ability to save and invest in turn productive activities of economy increases hence output increases. due to financial inclusion, the poor and needy people get benefits from banks in the form of savings or credit. this increases the productive power of poor and talented entrepreneurs which generates employment in lower sector of economy. ultimately the production of goods and services increases. hence output increases that lead to rise in economic growth. table 2. political stability, financial inclusion and economic growth variables system gmm one-step two-step per capita gdp(-1) 0.942*** 0.940*** (0.000) (0.000) cbsb/100,000 adults 0.005*** 0.005*** (0.000) (0.000) entrepreneurship -0.009* -0.008** (0.09) (0.02) political stability -0.006** -0.007*** (0.024) (0.011) trade openness 0.0002 0.0002*** (0.26) (0.001) inflation -0.0004** -0.0004*** (0.003) (0.000) gross fixed capital formation 0.0003 0.0003*** (0.57) (0.005) constant 0.4940*** 0.507*** (0.000) (0.000) chi square 7469.43 61302.73 sargan(p-value) 1.00 review of economics and development studies, vol. 6 (1) 2020, 179-203 192 ar2 (p-value) 0.06 0.37 observations 396 396 no of countries 33 33 *, ** and*** represents significance level at 10%,5% and 1%. rule of law/ political stability and entrepreneurship are negatively related to economic growth. van stel et al. (2005) found the same result for developing countries and cravo et al. (2012) found the same result for brazil. cravo et al. (2012) give the institutional failure as reason of this negative relationship between entrepreneurship and growth. the poor performance by institutions of developing countries does not promote the productive entrepreneurship and full use of human skills. martin et al (2010) showed in his study that entrepreneurial activity has positive but indirect (through investment) effect on economic growth. better institutions of the country provide regulatory framework and supervision which allocates resources efficiently. in case of better institutions, not only the process of financial inclusion increases efficiently to achieve target level but also give security to small businessman and entrepreneurs. table 3. control of corruption, financial inclusion and economic growth variables system gmm one-step two-step per capita gdp(-1) 0.935*** 0.932*** (0.000) (0.000) cbsb/100,000 adults 0.005*** 0.004*** (0.000) (0.000) entrepreneurship -0.009* 0.006* (0.09) (0.06) control of corruption 0.004 0.009* (0.82) (0.10) trade openness 0.0002*** 0.0002*** (0.000) (0.000) inflation -0.0004*** -0.0004*** (0.004) (0.000) gross fixed capital formation 0.0002 0.0003*** (0.66) (0.004) constant 0.55*** 0.55*** (0.000) (0.000) chi square 7522.46 195086.11 sargan(p-value) 1.00 ar2 (p-value) 0.04 0.35 observations 396 396 no of countries 33 33 *, ** and*** represents significance level at 10%,5% and 1%. institutional variables (control of corruption and government effectiveness) have positive and review of economics and development studies, vol. 6 (1) 2020, 179-203 193 significant relationship with economic growth. this shows that public and civil services when make policies and implement on those policies independently (without interference of government) then the economic growth of economy rises. in addition, the less corruption or in absence of bribery each individual of economy (owner or labor) works efficiently to gain more in return. because one knows that one earns what he does. consequently this leads to growth of economy. alter and yontcheva (2015) found significant relationship between financial inclusion and rule of law for sub saharan african (ssa) countries. in sub saharan africa (ssa), african financial community (cfa franc zone) countries have developed financial sector due to better government effectiveness and property rights. table 4. government effectiveness, financial inclusion and economic growth variables system gmm one-step two-step per capita gdp(-1) 0.935*** 0.932*** (0.000) (0.000) cbsb/100,000 adults 0.005*** 0.004*** (0.000) (0.000) entrepreneurship -0.009* 0.006* (0.09) (0.06) control of corruption 0.004 0.009* (0.82) (0.10) trade openness 0.0002*** 0.0002*** (0.000) (0.000) inflation -0.0004*** -0.0004*** (0.004) (0.000) gross fixed capital formation 0.0002 0.0003*** (0.66) (0.004) constant 0.55*** 0.55*** (0.000) (0.000) chi square 7522.46 195086.11 sargan(p-value) 1.00 ar2 (p-value) 0.04 0.35 observations 396 396 no of countries 33 33 *, ** and*** represents significance level at 10%,5% and 1%. results show that inflation is negatively related to economic growth. the literature showed that increasing prices can affect negatively the economic activities. increase in prices of goods decreases the purchasing power and their ability to save. in result the demand for goods and investment decreases that leads to decrease in production of goods and services. as a result the employment level also decreases which leads to fall in economic growth. trade openness enhances the economic growth and trade openness is positively related to economic growth. trade volume positively and significantly effect on economic growth (yanikkaya., review of economics and development studies, vol. 6 (1) 2020, 179-203 194 2002; faiza., 2014). more imports and exports of goods and services increase the economic growth. table 5: govt. effectiveness, atms and economic growth variables system gmm one-step two-step per capita gdp(-1) 0.956*** 0.955*** (0.000) (0.000) atms/100,000 adults 0.0002 0.0002*** (0.57) (0.001) entrepreneurship -0.002* -0.003** (0.60) (0.13) govt. effectiveness 0.021** 0.022*** (0.023) (0.000) trade openness 0.0003 0.0002*** (0.15) (0.000) inflation -0.0003** -0.0003*** (0.026) (0.000) gross fixed capital formation 0.001** 0.001*** (0.04) (0.000) constant 0.3717*** 0.3867*** (0.004) (0.000) chi square 7467.26 582419.60 sargan(p-value) 1.00 ar2 (p-value) 0.05 0.35 observations 396 396 no of countries 33 33 *, ** and*** represents significance level at 10%,5% and 1%. rise in level of exports shows that economy is flourishing and leading the economy towards growth. also the imports of goods and services contribute in economic growth of developing country in sense that more imports of goods fulfill the needs of residents of country and imports of skillful human capital and machinery makes the residents efficient and competent that leads to positive changes in domestic human capital and enhancement of economic activities. gross fixed capital formation is positively related to economic growth, new investments on land improvements, infrastructure, plant, machinery, purchase of equipment, roads etc. can build potential in country to produce more goods and expand production network up to distant places hence employment level rises, output increases and level of economic growth rises. 4.2 empirical impact of atms/ 100,000 adults, institutions and entrepreneurship on economic growth in step two, we take atms/ 100,000 adults as proxy of financial inclusion and see its effect on growth. proxies of political institutional variables are government effectiveness, control of corruption, rule of law and political stability. here financial inclusion is measured with another proxy which is review of economics and development studies, vol. 6 (1) 2020, 179-203 195 atms/100000 adults. table 6: control of corruption, atms and economic growth variables system gmm one-step two-step per capita gdp(-1) 0.956*** 0.956*** (0.000) (0.000) atms/100,000 adults 0.0003 0.0003*** (0.40) (0.000) entrepreneurship -0.002 -0.003 (0.70) (0.31) control of corruption 0.006*** 0.007** (0.017) (0.05) trade openness 0.0003 0.0002*** (0.17) (0.000) inflation -0.0003*** -0.0003*** (0.01) (0.000) gross fixed capital formation 0.001*** 0.001*** (0.01) (0.000) constant 0.36*** 0.35*** (0.01) (0.000) chi square 7438.45 54911.77 sargan(p-value) 1.00 ar2 (p-value) 0.05 0.32 observations 396 396 no of countries 33 33 *, ** and*** represents significance level at 10%,5% and 1%. financial inclusion shows positive relationship with economic growth although the value of coefficient of atms/100000 adults is smaller than value of coefficient of cbbs/100000 adults but both are highly significant. the positive relationship shows that increase in number of atms connect more people to banking services. by more connection with banking services means that savers and investors are getting more benefits from services provided by commercial banks that increase the level of financial inclusion which in turn leads to growth of country. table 7: rule of law, atms and economic growth variables system gmm one-step two-step per capita gdp(-1) 0.956*** 0.957*** (0.000) (0.000) atms/100,000 adults 0.0003 0.0003*** (0.36) (0.000) entrepreneurship -0.002 -0.003*** review of economics and development studies, vol. 6 (1) 2020, 179-203 196 (0.69) (0.01) rule of law -0.005 -0.008*** (0.79) (0.006) trade openness 0.0003 0.0002*** (0.17) (0.000) inflation -0.0003** -0.0003*** (0.021) (0.000) gross fixed capital formation 0.001** 0.001*** (0.02) (0.000) constant 0.3500*** 0.3427*** (0.000) (0.000) chi square 7404.00 43813.60 sargan(p-value) 1.00 ar2 (p-value) 0.05 0.35 observations 396 396 no of countries 33 33 *, ** and*** represents significance level at 10%,5% and 1%. both institutions and financial inclusion are necessary for economic growth because adetiloye (2017) in his study show that financial inclusion does not support economic growth in nigeria and is recommended to not only deepen financial inclusion through credit delivery to private sector but also to allocate and use resources efficiently by authorities of nigeria. entrepreneurship has negative and insignificant relationship with economic growth. in developing countries the entrepreneurship and economic growth shows same result (van stel et al. 2005). there might be many reasons behind this relationship. one given by van stel et al. is institutional failure. other reasons might be limited transportation facility, lack of human skills and poor management. in developing countries the resources are less and environment for productive activities is not suitable. table 8. political stability, atms and economic growth variables system gmm one-step two-step per capita gdp(-1) 0.963*** 0.964*** (0.000) (0.000) atms/100,000 adults 0.0003 0.0002*** (0.40) (0.000) entrepreneurship -0.002 -0.003* (0.77) (0.10) political stability -0.006** -0.006*** (0.047) (0.007) trade openness 0.0002 0.0002*** (0.20) (0.001) inflation -0.0004*** -0.0003*** (0.016) (0.000) review of economics and development studies, vol. 6 (1) 2020, 179-203 197 gross fixed capital formation 0.001*** 0.001*** (0.01) (0.000) constant 0.297** 0.297*** (0.034) (0.000) chi square 7372.65 162163.30 sargan(p-value) 1.00 ar2 (p-value) 0.06 0.30 observations 396 396 no of countries 33 33 *, ** and*** represents significance level at 10%,5% and 1%. trade openness has positive relationship with economic growth. increase in trade of country shows that exports and imports of country are more. if exports are greater than imports then trade is surplus and the economy of that country gains. if imports are greater than exports then economy loses. but for developing countries the imports of goods and services can be beneficial when human capital of resident country become skillful by working with foreign skilled labor. hence trade of developing country play positive role in the growth of economy. inflation is negatively related to economic growth. increase in prices of goods and services directly affect the demand for those goods and services. as in developing countries mostly the people living in these countries are poor. with inflation they cut off their demand for expensive goods and services hence decrease in demand for such goods and services leads to cut off in production of expensive goods and services and growth decreases. gross fixed capital formation is positively related to economic growth that shows when investment level is high then economy grow. more investment means an economy is producing more goods and services. more employees are hired to produce these goods that generate employment. this enhances the level of income which increases in turn demand for goods and services. in this way economy expands and grows. 5. conclusion and policy recommendations this study examines the effect of financial inclusion, entrepreneurship and institutions on economic growth of developing countries. for financial inclusion two proxies are used such as commercial banks branches/100000 adults and automated teller machine/100000 adults. using panel data for 33 developing countries the system gmm is used to set up the relationship between financial inclusion and economic growth. summary of the results is as follows. financial inclusion has positive relationship, entrepreneurship has negative and some institutional variables has positive while some has negative relationship with economic growth. as financial inclusion is measured with two variables commercial banks branches per lac adults and atms per lac adults and both variables have positive relationship with economic growth and is highly significant. entrepreneurship shows negative but significant relationship with economic growth. four proxies of institutions such as rule of law, political stability, control of corruption and government effectiveness are used in step one where financial inclusion is measured with commercial banks branches/100000 adults. financial inclusion has positive and significant effect on economic growth. rule of law has negative but insignificant effect on economic growth and political stability has negative and significant effect on economic growth. government effectiveness and control of corruption review of economics and development studies, vol. 6 (1) 2020, 179-203 198 have significant positive relation with economic growth. entrepreneurship has negative and significant effect on economic growth. trade openness and gross fixed capital formation have positive and significant relationship while inflation has showed negative and significant relationship with growth. in second step four institutional variables are used with automated teller machines/100000 adults that is another proxy of financial inclusion. financial inclusion is positively related to economic growth. the effect of cbbs/100000 adults is stronger to atms/100000 adults because the coefficient of cbbs/100000 is greater. here again entrepreneurship and inflation have showed negative relation with economic growth. institutional variables like government effectiveness and control of corruption are positively correlated with economic growth whereas rule of law and political stability have negative and significant relationship with economic growth. trade openness and gross fixed capital formation are positively related to economic growth. 6. limitations of study data of entrepreneurship, financial inclusion were not available for most of the developing countries that is why only 33 low income and lower middle income countries are studied. 7. policy recommendations according to the conclusion of present study it is recommended that  financial inclusion is a tool applied by economies to target lower income group especially to make them able to participate in economic activities by providing them goods and services at reasonable price. if it is so, then it means lower income group of economy can play their role in economic growth. then government of developing countries should take effective steps to increase financial inclusion so that this factor can enhance economic growth beside other factors as well.  there is need for reforms of institutional quality. government should improve the institutions that perform best in economy. the tools of economic growth would be effective if the institutions work under proper supervision of government. 8. scope for future research in present study, the impact of financial inclusion and entrepreneurship is examined on economic growth but researchers can study the impact of financial inclusion on inclusive growth. this study can be extended further for developed countries or by comparing the effects on low and high income countries. references alter, a. and b. yontcheva. 2015. financial inclusion and development in the cemac. imf working paper. wp/15/235. amidzic et al. 2014. assessing 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1: descriptive statistics variables obs mean std. dev. min max per capita gdp 429 7.29 0.69 5.68 8.36 consumer price index 429 101.43 27.46 40.72 210.53 trade openness 429 75.73 31.17 0.17 155.76 gross fixed capital formation 429 23.99 8.68 2.05 68.02 new business registered 429 8.25 1.86 2.30 11.54 commercial banks branches 429 9.89 11.10 0.37 71.61 per 100,000 adults atms per 100,000 adults 429 14.31 17.68 -0.03 103.87 credit to private sector 429 29.94 18.08 1.07 80.84 rule of law 429 -0.58 0.53 -1.90 0.56 control of corruption 429 -0.57 0.56 -1.67 1.28 political stability and 429 -0.64 0.93 -2.81 1.38 absence of violence government effectiveness 429 -0.54 0.51 -1.75 0.6 appendix b table 2. description and source of variables. variable description source per capita growth value of goods and services wdi at current price in a year consumer price an index of prices used to measure wdi index inflation of economy trade percentage of it is difference of imports and exports wdi gdp used to measure trade openness commercial bank it is measured as no of commercial bank wdi branches / 100000 adults branches per 100,000 adults atms/ 100000 adults it is measured as no of atms wdi per 100,000 adults gross fixed capital formation it is variable used to measure wdi investment new business registered it is variable used to measure wdi review of economics and development studies, vol. 6 (1) 2020, 179-203 202 (numbers) entrepreneurship control of corruption it is variable whose value range wgi range between -2.5 to 2.5. rule of law it is variable whose value range wgi range between -2.5 to 2.5. political stability it is variable whose value range wgi range between -2.5 to 2.5. government effectiveness it is variable whose value range wgi range between -2.5 to 2.5. appendix c table 3. list of countries tunisia zambia afghanistan bangladesh ukraine bhutan bolivia vanuate burkina faso congo, dem. rep. ei salvador georgia ghana india indonesia kenya kosovo kyrgyz republic lao pdr lesotho moldova mangolia morocco myanmar review of economics and development studies, vol. 6 (1) 2020, 179-203 203 nepal nigeria pakistan phillpines rawanda senegal srilanka timor-leste togo review of economics and development studies, vol. 6 (1) 2020, 117-124 117 pakistan-united states relations in trump era and fatf a saadat hassan, b shahid hussain bukhari a phd scholar school of politics & international relations, quaid-i-azam university islamabad, pakistan b associate professor, department of international relations, bahauddin zakariya university, multan, pakistan article details abstract history: accepted 16 march 2020 available online 31 march 2020 the financial action task force (fatf) has become a modern diplomatic instrument for the united states of america to use it the way it wants for. as the u.s. led afghan peace process embraced the victory, washington, afghan taliban and kabul government have agreed upon limited ceasefire and withdrawal of troops from afghanistan soil. pakistani authorities are equally ready to cease the movement, amid the challenges posed by the fatf, by facilitating u.s.-taliban peace deal in qatar on feb 29, 2020, the biggest development happened ever in south asian region. it happened for the first time of grinding warfare since the u.s. invasion in 2001 which is considered to be a vital step to end the insurgency altogether in the region. pentagon finally accepted islamabad’s stance that there is no military solution to the afghan imbroglio. pakistani authorities, through afghan authorities, are said to be taking over pakistani taliban purportedly operating from afghanistan. after playing a key role in brokering the said peace deal, the challenge of fatf as a diplomatic tool to pile up pressure on islamabad to mold its role in favour of the us and the taliban talks. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: fatf, pak-us, us withdrawal, afghanistan, taliban peace process jel classification: d70, d72, d79 doi: 10.47067/reads.v6i1.189 corresponding author’s email address: shahidbukhari@bzu.edu.pk 1. introduction the application of fatf terms and conditions on pakistan apparently pave the way for these successful deal since islamabad not only facilitated the peace talks but also persuaded the taliban to show flexibility on an intra-afghan dialogue. so, it is noteworthy to work on what was the outcome of us-led peace process and its reflection in the relation of fatf's conditions vis-a-vis pakistan. the research would go on with future perspective of the u.s. overseeing afghanistan-pakistan talks about mutual security concerns. pak-us future relationships after u.s. and international troops withdrawal started and washington would seek endorsement of taliban agreement from the un security council (kaura & era, 2017). research design implies a research blueprint or strategy to know about foreign policy trends vis-a-vis pakistan and america. the prediction, strategy and trends i.e., hypothesis was also applied. it lays down a clear roadmap for generation, collection, evaluation and quantification of data. the research evaluated different books and research journals to build the opinion of diplomats, researchers, professors and thinkers. as far as sources are concerned, this paper relied on secondary mailto:shahidbukhari@bzu.edu.pk file:///c:/users/lenovo/downloads/kaura,%20v.,%20&%20era,%20t.%20(2017).%20us–pakistan%20relations%20in%20the%20trump%20era:%20resetting%20the%20terms%20of%20engagement%20in%20afghanistan.%20orf%20occasional%20paper,%20(128).%20https:/www.orfonline.org/wpcontent/uploads/2017/12/orf_occasionalpaper_128_us_pakistan.pdf review of economics and development studies, vol. 6 (1) 2020, 117-124 118 sources, such as books, research journals, interviews, newspapers articles however primary source was also somehow consulted for measurement of the main argument of the study such as documents analysis and study of foreign policy books. qualitative methods effectively deal with discovery of social reality, its rich description, meaning and interpretation. objective of this paper is many folds but mainly it focusses upon the core issue of pakistan response and impact of fatf as a challenge for pakistan vis-a-visa pak-u.s. ties and reasons for pakistan being in fatf grey list. conducting this study on empirical basis i tested this hypothesis fatf challenge: a case study of pak-u.s. ties. this is an analytical study in historical and contemporary perspective. the literature review for this research study is based on scholarly papers, research journals, special reports, articles and other sources relevant to the subject of the research too. both primary and secondary sources are used to undertake the research to evaluate the hypothesis and answer these questions,  what is fatf & how it is employed as a foreign policy tool in international system?  why is pakistan in fatf's grey list and did fatf serve the u.s. foreign policy agenda vis-a-vis pakistan? as american interests continued to prevail in south and central asian region by pouring pressure on pakistan through sword of fatf by placing her on its international terror-financing watch list. the paris-based monitoring group to tackle terrorism financing continued to alert islamabad either to blacklist it at a time when pakistani authorities were facilitating all stakeholders to get a peaceful and equally respectful withdrawal from afghanistan after fighting a long war which brought nothing, except the destruction, uncertainty and chaos in the region. the issue of terror financing, ranging from afghan taliban, their other proxies, the haqqani network and tehreek-e-taliban pakistan (ttp), has been one of the key factors which put the region in trouble since the soviet union's invasion in afghanistan's affairs four decades ago. the u.s. authorities and international community has been blaming pakistan of supporting militants. even president donald trump once said pakistan continued to sponsor militant groups, the statement inflamed an already tense relationship when he tweeted about decades of u.s. aid to pakistan with “nothing but lies and deceit” in return. then fatf's challenge created financial problems, foreign investments in particular, for pakistan. (yusuf, 2017). 2. pakistan-united states relations in trump era the future of pak-us ties is very much up hanging in the balance. many opinion makers believe that islamabad and washington relations will depend on successful afghan peace process. if peace and reconciliation efforts move forward, according to many experts that the both allies would get some degree of success and somehow, they achieved reasonable success story and from here washington and islamabad relationship could score a major victory (trump, 2017). but if the execution of talks between afghan government and afghan taliban do not remain successful, and especially if islamabad is seen by the u.s. as being somehow responsible for that, then the relationship could suffer. at this moment in time, the trump administration has been very up front and clear about its expectations for the relationship in the near future: it will center the relationship around peace and reconciliation in afghanistan and counterterrorism in pakistan, but if the u.s. sees pakistan making progress on both of those fronts, there could be great potential to broader the relationship into the realms of trade and investment. even now, there's been some deepening of the non-security side of the relationshipbilateral trade set a new record in 2018 and many believe that u.s. officials want to signal that there can be more of that if the two sides are able to make progress on the afghan peace and pakistan file:///c:/users/lenovo/downloads/yusuf,%20m.%20(2017).%20a%20marriage%20estranged:%20the%20strategic%20disconnect%20between%20pakistan%20and%20the%20united%20states.%20asia%20policy,%2024(1),%2046-52.https:/muse.jhu.edu/article/666576/summary file:///c:/users/lenovo/downloads/trump, review of economics and development studies, vol. 6 (1) 2020, 117-124 119 counterterrorism issues that concern washington the most right now. also, the corona pandemic created ripple for the whole world, also equally the u.s. engagements in afghanistan as well. fatf’s challenge for pakistan also took the new root after the paris based terror financing watchdog extended pakistan’s deadline for meeting its mandatory 40-points. there is a bit of a disconnect here though, as pakistan is keen to expand and broaden the relationship right away, seeking washington help to get rid of grey listing of fatf. while the u.s. would rather keep the scope narrow for now until there's more progress on the issues that concern washington the most, the alleged support of pakistan to militants either haunt to india or continue to damage the peace process. all this said, the idea of pursuing a deep and strategic partnership between the u.s. and pakistan sometime down the road is rather unlikely. first, there's just too much mistrust and baggage in the relationship. second, strategic rivalry with china is the overarching theme in u.s. foreign policy and in its strategic calculations. china and turkey are the only countries supporting pakistan in fatf’s move against pakistan. it would be very difficult to craft a u.s. strategic partnership with a nation that is one of the closest allies of america's top strategic rival--a nation that the u.s. sees not only as a competitor, but as a threat. this is why the us-india strategic partnership, for all its challenges, has more potential. that partnership is driven, in great part, by a shared concern about china's rise and the troubling strategic implications for both the u.s. and india. the main issue is that america’s retreat in the broader. muslim world & greater south asia coincides with the peaceful rise of china and resurgence of russia, so u.s. clout continues to diminish, hence, the u.s. is only one of three principal players -china, russia & us no longer the ‘sole superpower’. right now, the talks with the afghan taliban are the centerpiece of the pakistan-american foreign policy calculus, and pakistan is pivotal to the afghan peace process pushed by the americans. hence, the easing off of washington’s pressure on pakistan which has given ‘strategic space’ for pakistan to pursue its key foreign policy goals like kashmir, cpec and relations with india & iran (on all of which, islamabad & washington don’t see ‘eye to eye’) with greater confidence and more freedom to maneuver. in a post-american withdrawal from afghanistan scenario, washington is most likely to become antagonistic towards islamabad on account of pakistan’s nuclear weapon programme and islamabad’s strategic partnership with china. india continued to pile up pressure on pakistan when it comes to act against over 4, 000 suspects associated with militant organizations like jaish-e-muhammad (jem) or lashkar-e-tayyaba (let) or falah-i-insaniat foundation (fif) (siddiqa, 2011). as already mentioned, bailing out the u.s. from its afghan morass will not result in lasting u.s. goodwill for pakistan. any “rewards” will be made conditional on pakistan accepting indian hegemony, abandoning kashmir and loosening ties with its only strategic partner, china. fatf has been another challenge for pakistan and many believe to have it like a hanging sword on islamabad where pakistan is being molded the way american wanted to pursue peace process and get it done at all cost (haqqani, 2013). the u.s. categorically told pakistan to convince taliban for the deal otherwise be ready for actions either coming in shape of fatf or indian involvement in pakistan affairs. it will also require avoiding any development of cooperation with iran. as kissinger said the price of american friendship is higher than the price of its enmity. pakistan needs to develop as good a bilateral relationship with the u.s. as possible without seeking a strategic relationship with it which is out of reach and unaffordable. it must recognize that it cannot allow any development to weaken its strategic cooperation with china – even if that greatly displeases the us and some quarters in pakistan. on kashmir, pakistan must make clear that it will explore every opportunity for a peaceful resolution of differences with india no matter how long it takes. but it will never countenance kashmiri genocide no matter what the price. this is the only way to avoid genocide in kashmir and mutually suicidal war with india. there is no other way no file:///c:/users/lenovo/downloads/siddiqa,%20a.%20(2011).%20pakistan's%20counterterrorism%20strategy:%20separating%20friends%20from%20enemies.%20the%20washington%20quarterly,%2034(1),%20149-162.%20https:/www.tandfonline.com/doi/abs/10.1080/0163660x.2011.538362%3fjournalcode=rwaq20 file:///c:/users/lenovo/downloads/haqqani,%20h.%20(2013).%20pakistan,%20the%20united%20states%20and%20an%20epic%20history%20of%20misunderstanding:%20the%20magnificent%20delusions.%20new%20york:%20published%20public%20affairs%20in%20the%20us,%2030 file:///c:/users/lenovo/downloads/haqqani,%20h.%20(2013).%20pakistan,%20the%20united%20states%20and%20an%20epic%20history%20of%20misunderstanding:%20the%20magnificent%20delusions.%20new%20york:%20published%20public%20affairs%20in%20the%20us,%2030 review of economics and development studies, vol. 6 (1) 2020, 117-124 120 matter what bleeding-heart liberals might pretend to the contrary. after the national betrayal of 1971 a similar betrayal of kashmir would set in process the end of pakistan (swami, 2006). president trump’s approach towards islamabad has ranged from outright hostility to its desire to stay engaged with islamabad. its ambivalence notwithstanding, it appears evident that the trump's administration is pursuing an india centric policy towards south asia in which goals of counterterrorism, promotion of peace and development, india centered notion of strategic stability and existing from afghanistan with honor are key objectives. washington under trump has clearly spelled out its approach toward pakistan which is a combination of carrot and stick. this was on display in trump’s 2019 (new year) tweet in which he accused islamabad for taking billions of dollars from the u.s. and failing to deliver on peace in afghanistan. washington also laid down condition-based markers for america’s support for pakistan. trump has also used washington’s clout with the imf to enable islamabad receive imf's bailout package. washington has also used fatf sanctions as its main leverage to change islamabad’s strategic behavior. washington is using both its carrot and stick policy to achieve its goals. cut off of coalition support funds and withholding of arms supplies are primary examples. fatf’s tool was another additional diplomatic tool to pressurize pakistan by putting embargo on different economic deals. islamabad has caved in to the american pressure as well as its blandishments. pakistan struggled to wipe out terror outfits as well as thousands of suspected militants either though many of them were being supported by the hostile organizations. so, for this purpose fatf after u.s. adopted this mantra for pakistan asking it to fulfil its 40 toughest recommendations. they set a new deadline of june 2020, due to pandemic problems otherwise deadline expired in september last year. with an alarming tweet on january 1, 2019, the u.s. president donald trump almost cut off all ties with islamabad pointing out that pakistan continued to make fool pentagon and white house since decades. enough is enough, trump said, washington needed to review its policy towards south asia. before this, president trump laid out his government’s policy for south asia in august 2017, observing "pakistan must either 'do more' to have control on militants." since donald trump became the 45th president of the u.s. in 2016 presidential elections as a republican candidate (cohen, 2016), and took the charge of office on january 20, 2017, he made a telephonic conversation with the then prime minister nawaz sharif on november 30, which later gave rise to many speculations. in this conversation donald assured the prime minister, “i am ready and willing to play any role that you want me to play to address and find solutions to the outstanding problems”. on april 27, trump gave an address at the center for national interest, at washington dc based think-tank. in this speech, he raised objection on u.s. foreign policy in the post – cold war era and argued that the policy of that era was wasteful, unreliable and ineffective. but this time american foreign policy would mainly focus on rebuilding america’s military and economic stability. for this purpose, they would spread radical islam and fashioning what he called “a new rational american foreign policy”. being a businessman, trump knows that how the peace and stability is important for the growth of economy and trade. in july 2017, president trump claimed, “pakistan often gives safe heaven to agents of chaos, violence and terror.” on new year’s day in 2018, again trump gave remarks in his tweet that the us has “foolishly given pakistan more than 33 billion dollars in aid over the last 15 years, with little in return, promising no more”. he claimed that pakistan is not playing his role against the terrorism, rather pakistan is supporting these terrorist groups (afzal, 2018). in response to this, the then foreign minister of pakistan khawaja asif had said that mr. trump was likely “disappointed at the us defeat in afghanistan and that was the only reason he was flinging accusations at pakistan”. we have already told the us that we would not do more, so trump holds no any importance.” pakistan has already made countless sacrifices in the war against terror. thousands of file:///c:/users/lenovo/downloads/swami,%20p.%20(2006).%20india,%20pakistan%20and%20the%20secret%20jihad:%20the%20covert%20war%20in%20kashmir,%201947-2004.%20routledge file:///c:/users/lenovo/downloads/cohen,%20s.%20p.%20(2016).%20the%20south%20asia%20papers:%20a%20critical%20anthology%20of%20writings%20by%20stephen%20philip%20cohen.%20brookings%20institution%20press file:///c:/users/lenovo/downloads/afzal,%20m.%20(2018).%20pakistan%20under%20siege:%20extremism,%20society,%20and%20the%20state.%20brookings%20institution%20press review of economics and development studies, vol. 6 (1) 2020, 117-124 121 pakistani soldiers, police, intelligence professionals and also dozens of civilians have died in fighting against militant groups. on july 23,2019 donald trump held his facetoface talks with the pakistani prime minister imran khan during khan’s trip to washington dc. being a businessman, trump knows that for economic prosperity regional peace is an essential prospect. therefore, the purpose of this meeting was to mend relations and conflicts to be solved based on afghanistan taliban issue. khan’s gave his remarks about speaking at the united states institute of peace (usip) with trump as “one of the most pleasant surprises”. in this meeting imran khan explained pakistan’s role in helping united states while bringing security in the region by giving countless sacrifices in counterterrorism operations. trump also showed his wishes with the withdrawal of troops from afghanistan to cut down on united states entanglement in global affairs. trump said that pakistan is helping in the us to” extricate “its troops from afghanistan, through political negotiations. trump said that we could win war against taliban within 10 days but we don’t want to kill millions of innocent people. therefore, he expects from imran khan that he would play his role to pressure the taliban into striking a peace deal with the afghan government. imran khan also exclaimed that i am happy with this meeting with trump because we both have mutual goals that are to bring peace in afghanistan. moreover, after one week of this meeting on july 27, the united states gave approval of $125 million in technical and logistics support for pakistan f-16 fighter jets. donald trump also offered to mediate in the conflict of kashmir between india and pakistan at the white house meeting. washington has used a mix of tactics to try to achieve its goals in pakistan (hussain, 2016). these have included carrots and sticks. aid (both financial and military) has been one of the top carrots. the unstated idea has been to use aid as a leverage point: in effect, we're providing you with guns and money, and now you should help us out by going harder after the terrorists. when the u.s. has concluded that the carrots aren't working, it has resorted to sticks, such as cutting off security assistance after pakistan's nuclear weapons tests and more recently after trump concluded pakistan wasn't doing enough on counterterrorism. the idea from the u.s. perspective is that pakistan, recognizing the importance of the aid it's not getting, will act on u.s. demands in order to have that aid reinstated. what is often forgotten by u.s. policymakers is that every country has its own interests, and these interests of other countries often won't align with washington's. and despite us efforts to conciliate, cajole, or pressure, those countries won't necessarily adjust their interests just because washington is trying to get them to do so. every country follows its own interests (shah, 2007). the u.s. now regards major power competition as its primary concern. it has adopted indo-pacific strategy to pursue its interests in asia. the u.s. is likely to work with pakistan within the context of its global strategy. washington seeks to secure these goals by trying to leverage its influence on pakistan through 3 avenues: a) bilaterally, dangling the carrot of military aid & economic investment; using multilateral fora like imf & fatf to maintain pressure on pakistan; using ‘good offices’ of its close arab allies like saudi arabia & uae to influence pakistan. pakistan has now become quite experienced and used to this american game of ‘snakes & ladders’, so it also knows how to handle the u.s. deftly without conceding on its core interests (taliaferro, 2001). 3. resetting terms of engagement in afghanistan afghan government talks are directly related to pak-u.s. relations and the calculations that go into those relations. that is very clear. the main reason why us-pakistan relations have improved so much over the last year or so-and a core reason why imran khan was invited to washington this past summer-is because the us views pakistan not just as a key partner in the afghan reconciliation process, but as an essential partner in that process. president trump’s immediate aim was to obtain the support of pakistan in bringing the taliban to the negotiating table so that a deal between them and the kabul regime could be reached that would allow us troops to withdraw from afghanistan which would be file:///c:/users/lenovo/downloads/18hussain,%20m.%20(2016).%20pak-us%20relations:%20an%20historical%20overview.%20pakistan%20journal%20of file:///c:/users/lenovo/downloads/shah,%20s.%20m.%20a.%20(2007).%20pakistan%20and%20the%20war%20against%20terrorism.%20pakistan%20horizon,%2060(2),%2085-107 file:///c:/users/lenovo/downloads/1taliaferro,%20j.%20w.%20(2001).%20security%20seeking%20under%20anarchy:%20defensive%20realism%20revisited.%20international%20security,%2025(3),%20128-161 review of economics and development studies, vol. 6 (1) 2020, 117-124 122 presented as a historic achievement for trump’s election campaign. the us prefers an indian presence in afghanistan even if it needs pakistan’s assistance. china does not want to see indian influence in afghanistan. ultimately, it must be for a nationally acceptable kabul government to decide. but pakistan can no longer hunt with the hounds and run with the hare in afghanistan (chaudhry, 2018). the situation has been complicated by trump’s pulling the plug on the agreement with the taliban, the useless outcome of the afghan elections which will delay the formation of a new afghan coalition, the rise of isis-khorasan group in afghanistan, the mistrust of both kabul and the taliban towards pakistan and uncertainty about what role pakistan can play in afghanistan under current circumstances. at the regional level, the us wishes to work with pakistan to secure peace in afghanistan. the u.s. also wants to develop stronger commercial and investment ties with pakistan, says pakistan former ambassador to u.s. aizaz chaudhry. "the focus in recent years has been to find ways for pakistan and the u.s. to work together for peace and reconciliation in afghanistan. the u.s. has recently engaged in direct talks with taliban. this kindled a ray of hope for peace in afghanistan. however, there are still a number of requirements for peace to prevail in afghanistan. it is important to simultaneously facilitate intra-afghan dialogue. this process has started. all major and regional powers must support the intra-afghan dialogue. further, the u.s. can and must play a role in defusing tensions in south asia, and prevail upon the indian government to stop gross human rights violations and atrocities against the people of indian occupied kashmir. no country stands to gain more from peace in afghanistan than pakistan. pakistan, therefore, has been facilitating peace efforts, which have been widely appreciated including by the united states. it is important that pakistan continues its efforts to facilitate peace in afghanistan. peace in afghanistan can unleash enormous opportunities for regional connectivity and economic development. pakistan has suffered the most from the crisis in afghanistan. we, therefore, are convinced that a peaceful afghanistan would best serve the interests of the region. pakistan has supported the us-taliban talks and would continue to facilitate the peace process including intra-afghan dialogue. one of the primary reasons why washington wants to remain engaged with islamabad is its calculation that without islamabad’s help washington cannot leave afghanistan with honor. this imperative has created a convergence of interests between islamabad and washington," observed former pakistan ambassador. 4. pakistan, united states and fatf the fatf set toughest conditions for pakistan and many believe that its all happening on behest of superpowers like france, germany, uk and u.s. islamabad has always sought strong strategic relations with great power in order to counterbalance the threat from its arch-rival india. however, pakistan keeps strong relations with the united states during cold war but later on these relations have been facing volatile situations. this road remains bumpier after washington used fatf as a new sword for pakistan using as a tool for economic sanctions as well. but after the end of the cold war u.s. priorities changed which led to straining of relations between the two (cohen, 2004). nonetheless, the event of 9/11 led to reengagement of strategic realties between united states and pakistan on global war against terrorism in afghanistan. but after short period of time both the sides developed differences over the issue of terrorism especially in afghanistan. trump administration national security strategy 2017, also declared that the main focus of u.s national security would be at the strategic competition with the great power especially china and russia. it also declared that terrorism would be secondary issue in us national security strategy. pakistan—us relations are facing many challenges in current geo-strategic environment. first, drifting of pak—us goals in afghanistan. second, pakistan alleges support to afghan taliban. third, pakistan increasing defense cooperation with the china including china’s flag mark project “pakistan china economic corridor.” finally, the u.s. policy file:///c:/users/lenovo/downloads/chaudhry,%20g.%20m.%20(2018).%20historical%20perspective%20of%20pakistan-us%20relations%20and%20the%20usa's%20afghanistan%20and%20south%20asia%20strategy:%20implications%20for%20national%20security%20of%20pakistan%20with%20policy%20options%20to%20maintain%20strategic%20balance%20in%20south%20asia.%20journal%20of%20the%20research%20society%20of%20pakistan,%2055(2). file:///c:/users/lenovo/downloads/cohen,%20s.%20p.%20(2004).%20the%20idea%20of%20pakistan.%20brookings%20institution%20press review of economics and development studies, vol. 6 (1) 2020, 117-124 123 is to enhance strategic relations with india in the long run. drifting of pak-us goals in afghanistan (kaura, & era, 2017). the united states is fighting a longest war in its history in afghanistan (dalpino, c. (2017). past five years have been hectic for pakistan. fatf put pakistan into its grey list for the first time eight years back but islamabad gave political commitment and graded up. but again fatf put pakistan on its watch list in 2018. since june 2018, pakistan has been under pressure either from fatf’s permanent member countries or from u.s. however, pakistan under fatf’s sword played primary role in ousting of taliban from afghanistan but with the passage of time pakistan and united states developed differences regarding the end goals in afghanistan. the main bone of contention between the two was increasing role of india in afghanistan. while pakistan allege that u.s. is giving leverages to india to enhance its role in internal affairs of afghanistan. moreover, pakistan also emphasized the pukhtun populations should be given due to power share with the afghan government. in the current scenario, pakistan position in afghanistan is more aligned with the russia, china and iran rather than u.s. currently, pakistan is playing its role for the final settlement of afghanistan. however, if pakistan failed in persuading afghan taliban to find end solution of afghan conflict then such situation would have negative implication for pakistan security. moreover, pakistan foreign policy objective in afghanistan are to secure pak friendly regime and to minimize the role of india. 5. conclusion although it is not clear yet, what would be new shape of fatf’s challenge for pakistan, many, however, believe that june 2020, the new set deadline, could see a positive environment for islamabad. reasons are multiple, one most important is pakistan’s sincere efforts to cope with terror financing and money laundering in the country. pakistan gave a strong political commitment to fatf by fulfilling 13 key plans of paris based terror financing watchdog. this commitment shows that islamabad would be able to convince fatf and its members to get out of grey list. many experts believe that pakistan would manage to get the desired results in response to its hard work in fatf october 2020 meet up. but threat, however, has not over yet, according to many experts, pakistan must show more commitment to meet all 40 key recommendations of fatf which is ranging from improving its banking system to put check on militants associated with different 78 banned organizations. so, the coming months are though bumpy for pakistan either its relations with u.s. or fatf, but consistent efforts could help the state to get out of this terror financing dilemma. references afzal, m. (2018). pakistan under siege: extremism, society, and the state. brookings institution press. chaudhry, g. m. (2018). historical perspective of pakistan-us relations and the usa's afghanistan and south asia strategy: implications for national security of pakistan with policy options to maintain strategic balance in south asia. journal of the research society of pakistan, 55(2). cohen, s. p. (2004). the idea of pakistan. brookings institution press. cohen, s. p. (2016). the south asia papers: a critical anthology of writings by stephen philip cohen. brookings institution press. dalpino, c. (2017). us security relations with southeast asia in the trump administration. contemporary southeast asia, 39(1), 3-8. george, k, v. “starting to develop much better relationship with pakistan: trump,” the hindu, 14 october 2017. haqqani, h. (2013). pakistan, the united states and an epic history of misunderstanding: the magnificent delusions. new york: published public affairs in the us, 30. file:///c:/users/lenovo/downloads/kaura,%20v.,%20&%20era,%20t.%20(2017).%20us–pakistan%20relations%20in%20the%20trump%20era:%20resetting%20the%20terms%20of%20engagement%20in%20afghanistan.%20orf%20occasional%20paper,%20(128) file:///c:/users/lenovo/downloads/dalpino,%20c.%20(2017).%20us%20security%20relations%20with%20southeast%20asia%20in%20the%20trump%20administration.%20contemporary%20southeast%20asia,%2039(1),%203-8 review of economics and development studies, vol. 6 (1) 2020, 117-124 124 hussain, munawar. (2016). pak-us relations: an historical overview. pakistan journal of history and culture. xxxvii (2) kaura, v., & era, t. (2017). us–pakistan relations in the trump era: resetting the terms of engagement in afghanistan. orf occasional paper, (128). kaura, v., & era, t. (2017). us–pakistan relations in the trump era: resetting the terms of engagement in afghanistan. orf occasional paper, (128). kunwar khuldune shahid, india dominates talks as tillerson stops over in pakistan, asia times, 27th october 2017. pti, “donald trump ready for any steps if pakistan doesn't mend its ways: jim mattis,” economic times, 5 october 2017, http://economictimes.indiatimes.com/news/defence/donald-trump-ready-forany-steps-if-pakistan-doesnt-mend-itsways-jim-mattis/articleshow/60951178.cms. shah, s. m. a. (2007). pakistan and the war against terrorism. pakistan horizon, 60(2), 85-107. siddiqa, a. (2011). pakistan's counterterrorism strategy: separating friends from enemies. the washington quarterly, 34(1), 149-162. https://www.tandfonline.com/doi/abs/10.1080/0163660x.2011.538362?journalcode=rwaq20 swami, p. (2006). india, pakistan and the secret jihad: the covert war in kashmir, 1947-2004. routledge. http://www.sanipanhwar.com/india%20pakistan%20and%20the%20secret%20jihad%20the%20cov ert%20war%20in%20kashmir,%201947%e2%80%932004.pdf taliaferro, j. w. (2001). security seeking under anarchy: defensive realism revisited. international security, 25(3), 128-161. tillerson's stopover, (editorial), dawn, 26 october 2017 yusuf, m. (2017). a marriage estranged: the strategic disconnect between pakistan and the united states. asia policy, 24(1), 46-52.https://muse.jhu.edu/article/666576/summary http://economictimes.indiatimes.com/news/defence/donald-trump-ready-for-any-steps-if-pakistan-doesnt-mend-itsways-jim-mattis/articleshow/60951178.cms http://economictimes.indiatimes.com/news/defence/donald-trump-ready-for-any-steps-if-pakistan-doesnt-mend-itsways-jim-mattis/articleshow/60951178.cms https://www.tandfonline.com/doi/abs/10.1080/0163660x.2011.538362?journalcode=rwaq20 http://www.sanipanhwar.com/india%20pakistan%20and%20the%20secret%20jihad%20the%20covert%20war%20in%20kashmir,%201947%e2%80%932004.pdf http://www.sanipanhwar.com/india%20pakistan%20and%20the%20secret%20jihad%20the%20covert%20war%20in%20kashmir,%201947%e2%80%932004.pdf https://muse.jhu.edu/article/666576/summary review of economics and development studies vol. 5, no 1, march 2019 11 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads the moderating role of supervisory support in the relationship of emotional intelligence and job performance of pharmaceutical sales representatives 1 atiq ur rahman, 2 fayaz ali shah, 3 shahid jan 1 phd research scholar, department of management sciences, islamia college peshawar, pakistan. 2 assistant professor, department of management sciences, islamia college peshawar, pakistan. 3 associate professor, department of management sciences, islamia college peshawar, pakistan. article details abstract history revised format: february2019 available online: march 2019 the objective of this research paper is to find out the relationship of job performance (jp) with emotional intelligence (ei) of pharmaceutical sales representatives (psrs) of various pharmaceutical companies operating in khyber pakhtunkhwa (pakistan). another objective of this research investigation is to check the moderating role of supervisory support (ss) in the ei-jp link. data was collected from 400 psrs of companies operating in pakistan through convenience sampling technique. structural equation model (sem) was utilized for data analysis. the results of the study revealed that those psrs having high ei had high performance. furthermore, ss does not moderate the ei-jp link. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords emotional intelligence (ei), supervisory support (ss), job performance (jp), pharmaceutical sales representatives (psrs) jel classification: j20, j28, j29, corresponding author’s email address: shahidjan@icp.edu.pk recommended citation: rahman, a., shah, f. a. and jan, s. (2019). the moderating role of supervisory support in the relationship of emotional intelligence and job performance of pharmaceutical sales representatives. review of economics and development studies, 5 (1), 11-22 doi: 10.26710/reads.v5i1.519 1. introduction in recent years there has been an increased emphasis on researching the role of ei in selling sector. organizational psychologists have proved that employees’ ei significantly determines job-related outcomes in the working environment (abe, 2011; davis, & humphrey, 2012; fadaei, & kenari, 2014; farnia, & nafukho, 2016). researchers have proved that ei is of prime importance for a sales job. sales representatives’ (srs) performance is related to their ability to manage emotional and social problems and to brilliantly face the negative feelings produced by failures in sales (brown, cron, & slocum, 1997). it should also be emphasized that their emotional intelligence level enables the salespersons to quickly resilience after receiving the emotional aftershocks that is a routine problem. deeter-schmelz and sojka (2003) found that high performing salespeople unknowingly use their ei skills to be efficient in their work, and especially when they use the skill of empathy to know the customer’s needs perform better. they also maintained that perceiving others’emotions, and self-awareness positively influences sales calls and their impression on the customers respectively. the ability of self-regulation helps them in focusing issues and working with customers. cho, rutherford and park (2013) maintained emotional aspects as a serious phenomenon in the sale sector. at the same time, hur, han, yoo and moon (2015) suggested that supervisory support could be studied in relationship of ei and jp of sales representative. in general, however, it is concluded that highly emotionally intelligent salespersons perform better in their work environment. thus, this research was planned to study the moderating role of ss in the relationship of ei and jp of psrs. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 12 in pakistani context, ei has been studied in relationship with ocb (ali, 2009), students’ academic performance (nasir, 2011), employee turnover (siddiqui, & hassan, 2013), teachers’ performance (baloch, 2014), and medical students’ stress level (moghal, yasien, alvi, & washdev, 2016). researchers found that ei is positively related to jp (batool, 2014; ghuman, 2016; haakonstad, 2011; jorfi et al., 2010; love, edwards, & wood, 2011; shahhosseini, silong, ismail, & uli, 2012). some researchers found that emotional intelligence negatively related to jp (mitrofan, & cioricaru, 2014). some researchers suggested that organizational factors need to be investigated as moderating factors in the relationship between ei and jp (giorgi et al., 2014). thus, ss was taken to study the relationship between ei and jp (giorgi et al., 2014; hur et al., 2015). 2. literature review 2.1 ei and jp suliman and al-shaikh (2007) found that ei infuses creative and innovate qualities; decrease frustration level, goal conflict, and work-family conflict. sales representatives are supposed to work in a situation where emotional and social skills are essential. ei is a paramount optimizer of salespeople’s performance (haakonstad, 2011; ugwu, 2011). brown et al. (1997) maintained that managing emotional problems and negative feelings at the time of failure result in high performance (brown et al., 1997). higher the ei the greater the annual sales revenue (kidwell, hardesty, murtha, & sheng, 2011). kidwell et al. (2011) also maintained that high ei level enables the sales force to retain customers. research has proved that ei positively predicts sales performance and bad and good performers have the same level of ei in sale sector (harris, 2009). lindebaum and cartwright (2011) maintained that ei may not yield desired outcomes. a research study conducted by jennings and palmer (2007) found that ei development of sales representatives positively influences sales revenue of pharmaceutical companies. jennings and palmer (2007) took two groups, i.e. one is given with ei training program and the other one was control group. the ei and sales growth of the trained group was measured and then compared to the control group. the ei level of trained employees improved 18% as compare to control group which was decreased by 4%. moreover, compare to control group, the sale revenue of the trained participants improved by an average of 12%. bryant (2005) found that there is no relationship between ei and sales performance of employees at automotive retail stores. this is clear from the findings of the aforementioned studies, that ei is a predictor of sales representatives’ jp. but there might be some organizational factors, i.e. supervisory support that increases the relationship between the emotional aspects of sales representatives with their jp (hur et al., 2015). not only the sales sector, but ei is phenomenal factor vital for services sectors. ei positively influences organizational citizenship behavior (ali, 2009; yaghoubi, mashinchi, & hadi, 2011; cohen, & abedallah, 2015). employees’ ei positively predicts their impression at work environment (cole, & rozell, 2011). researchers found that ei is positively related with performance of employees (batool, 2014; farnia, & nafukho, 2016; ghuman, 2016; shamsuddin, & rahman, 2014). others found that ei positively predict job satisfaction of employees (anari, 2012; fadaei, & kenari, 2014; ghoniem, elkhouly, mohsen, & ibrahim 2011; ignat, & clipa, 2012; jordan, & troth, 2011; mousavi et al., 2012; nezad, & bahramzade, 2013; randeree, & chaudhry, 2012). moreover, applying the structural equation modeling (sem) for data analysis, the issue of ei in relationship with jp of psrs with the moderating role of ss in the pharmaceutical sector of khyber pakhtunkhwa (pakistan) has not been addressed yet. accordingly, the study in hand was designed to explore the said issues. no doubt, pharmaceutical industry plays a vital role in the economy of a nation through rehabilitation of individuals’ health. as the pharmaceutical industry significantly contributes to the economy and health of pakistan, the sale employees’ ei and jp is worth investigating. 2.2 ss as moderator ss is an important aspect of perceived organizational support (pos). research has proved that pos is important for the relationship between personal level psychological factors and job-related outcomes of employees (hur et al., 2015). according to hur et al. (2015), pos positively moderates the link of surface acting emotional labour strategy with job satisfaction, and the link of deep acting emotional labour strategy with job performance. simosi (2012) found that pos positively moderates the relationship between supervisory support and training transfer. khan, mahmood, kanwal and latif (2015) studied the mediating effect of pos on the link between ss and workplace deviance. khan et al. (2015) contended that pos partially mediates the link between ss and workplace deviance, and employees perceive support when the organization ensures performance based rewards, growth opportunities, and employees’ participation in decision making. at the same time, it is true to say that ss has also review of economics and development studies vol. 5, no 1, march 2019 13 been found important for the relationship between personal level factors and job-related outcomes of employees. wickramasinghe (2012) found that supervisory support moderates the relationship between work schedule flexibility and job stress. lu, cooper, and lin (2013) found that the higher the ss the greater the negative relationship between presenteeism and exhaustion. nixon, yang, spector and zhang (2011) added organizational support moderates the relationship between emotional labor strategies and job-related outcomes of employees in the retail sales sector and mobile phone companies. chen, sun, lam, hu, huo and zhong (2012) studied the interfering role of burnout, job satisfaction and ss in the relationship of emotional labor strategies and performance of employees employed at hotels in china. chen et al. (2012) found that the ss moderates the relationship between emotional labor strategies and job satisfaction and burnout of hotel employees. faheem and saeed (2015) found that high ss positively strengthens the relation of behavior-based sales control system with employees’ work engagement. yragui, demsky, hammer, dyck and neradilek (2016) investigated the moderating role of family-supportive supervisor behaviour in relationship of workplace aggression with well-being and work. yragui et al. (2016) found that supportive behaviours of supervisors lessen the turnover intention among the care providers employed in hospitals. yragui et al. (2016) also added that supportive behaviours do not strengthen the link between coworker psychological aggression (cpa) and turnover intention, but positively moderated the relationship between cpa and physical symptoms. yongxing, hongfei, baoguo and lei (2017) studied the moderating effect of pos in the relationship between work engagement and performance. yongxing et al. (2017) found that pos positively strengthened the link between work engagement and performance. kim, hur, moon and jun (2017) found a positive relationship between deep acting and job performance, which was positively moderated by the ss. kim et al. (2017) further added that ss aggravate the negative relationship between surface acting strategy and job performance of flight attendants of an airline company of south korea. jafri (2018) investigated the moderating role of ss in the relationship of trait ei and creativity. he found that job autonomy and ss positively moderated the relationship between ei and employee creativity relationship. on the basis of hur et al.’s (2015) and kim et al.’s (2017) suggestions, this study was designed to investigate the moderating role of ss in the relationship between emotional intelligence and job performance of psrs. thus, on the basis of the above discussed literature, it was hypothesized that; h1: ei is positively related with jp of psrs. h2: ss positively moderates the relationship between ei and jp of psrs. figure 1: conceptual framework 3. methodology 3.1 population, sampling, and sample size according to a recent report of pakistan pharmaceutical manufacturers’ association (ppma), there are 752 registered pharmaceutical companies employing more than 240000 employees operating in pakistan (waheed, 2017). as this research study aims to study the moderating role of ss in the relationship of psrs’ ei with their jp. in order to pursue the aim of this study, the psrs of pharmaceutical companies operating in khyber pakhtunkhwa (province of pakistan) were chosen as population for the study. the convenient sampling is followed when the population is just too large that it is impossible to include every individual. another reason for convenient sampling is that it’s a fast, inexpensive, and easy and the subjects are readily available. as the regional offices of the pharmaceutical companies are situated in peshawar, thus the data was collected from the psrs of peshawar region on the basis of convenience sampling technique. in order to collect the data from a sample of 384 psrs (krejcie & morgan, 1970), 600 questionnaires were distributed among psrs of peshawar region, i.e. 300 questionnaires in the first phase and 300 questionnaires in the second phase. among them only 421 questionnaires were received. 21 emotional intelligence supervisory support job performance https://explorable.com/social-science-subjects review of economics and development studies vol. 5, no 1, march 2019 14 questionnaires were found useless/incomplete, thus withdrawn, and the rest 400 (66.67% response rate) was found complete in all respects, were utilized for data analysis. 3.2 data collection tool the tool of self-reported questionnaire was utilized to measure the ei, perceived ss and jp of psrs. the questionnaire comprised of three parts, i.e. first was a covering letter, second part asks demographic information like age, education, experience, gender, job status, marital status, and company information, third part measures main variables of the study. data were collected by visiting clinics and hospitals wherein psrs were supposed to market their products. after ensuring the respondents’ and companies’ anonymity, and the confidentiality of the information provided, they were requested to provide the data. the purpose of the research study was introduced and questionnaire items were explained to the psrs. 3.3 measurement scale in order to measure the ei, ss, and jp of psrs, existing scales were used. the widely utilized and accepted schutte et al.’s (1998) 33-items tool was adopted for measuring psrs’ ei. a typical item is ‘i expect that i will do well on most things i try’. for measuring ss of psrs, deconinck and johnson’s (2009) four items scale was adopted. in order to measure the criterion variable, i.e. jp of psrs, four items tool was adopted used by hur et al. (2015). responses were collected and recorded on a five point likert scales that ranged from ‘strongly disagree’ to ‘strongly agree’. 4 data analyses for measuring the moderating role of ss in the relationship of ei and jp of psrs, the amos module was used for sem and confirmatory factor analysis (cfa). table 1 shows the minimum, maximum, mean value, standard deviation, and alpha (α) measured for ei, ss, and jp of psrs with the help of descriptive statistics. the alpha (α) shows the reliability of the constructs, i.e. ei, ss, and jp were 0.79, 0.86, and 0.75 respectively, were found acceptable (nunnally, 1978). table 1: descriptive statistics and reliability variable min. max. m s. dev. alpha (α) emotional intelligence 97 159 131.32 10.45 0.79 supervisory support 4 20 16.50 3.04 0.86 job performance 9 20 17.13 2.07 0.75 4.1 measurement model measurement model is the tool utilized to check the goodness of fit between the hypothesis developed and the data collected. in order to measure the variables of this research investigation, cfa was conducted. 4.2 cfa of the variables cfa were run for ei, ss, and jp of psrs. cfa was measured in the parameters of root mean square residual (rmr), goodness-of-fit index (gfi), comparative fit index (cfi), root mean square error of approximation (rmsea), and chi-square (χ 2 ). the model utilized is said to be fit when the value of rmr is equal or less than 0.080 (hu, & bentler, 1999), gfi is equal or less than 1.000 (joreskog, & sorbom, 1984), the cfi close to 1.000 (bentler, 1990; mcdonald, & marsh, 1990), and rmsea is equal or less than 0.08 (browne, & cudeck, 1993). table 2 shows that all the values fall in the acceptable range, thus the models accepted. figure 2: measurement model of supervisory support review of economics and development studies vol. 5, no 1, march 2019 15 figure 3: measurement model of emotional intelligence figure 4: measurement model of job performance review of economics and development studies vol. 5, no 1, march 2019 16 table 2: calculation of measurement model of variables goodness of fit index acceptable level fit indices emotional intelligence supervisory support job performance rmr < 0.08 0.056 0.004 0.006 gfi a higher value indicates a better fit 0.846 0.999 0.997 cfi > 0.900 0.901 1.000 1.000 rmsea < 0.08 0.059 0.018 0.010 degrees of freedom should be positive 488.0 1.0 2.0 chi-square 1168.622 1.904 2.079 figure 5: overall measurement model review of economics and development studies vol. 5, no 1, march 2019 17 table 3: calculation of the overall measurement mode parameters with the acceptable & calculated measures remarks accepted goodness of fit acceptable level calculated measures status rmr < 0.08 0.054 acceptable gfi a higher value indicates a better fit 0.911 acceptable cfi > 0.900 0.930 acceptable rmsea < 0.08 0.052 acceptable degrees of freedom should be positive 841 acceptable chi-square 1740.903 acceptable 4.3 structural model structural model of the variables was conducted and the values of cmin, df, gfi, cfi, tli, rmsea, and rmr were recorded. the values of these parameters were found acceptable as per suggestion of hu and bentler (1999), joreskog and sorbom (1984), bentler (1990), mcdonald and marsh (1990) and browne and cudeck (1993). figure 6: structural model of the variables table 4: goodness-of-fit for the structural model of the variables cfa model cmin df cmin/df gfi tli cfi rmsea standardized rmr 1740.903 841 2.070 0.823 0.912 0.900 0.052 0.054 4.4 hypothesis testing regression analysis was conducted for measuring the moderating role of ss in the relationship of ei and jp of psrs. the results of the regression analysis revealed that ei is significantly related with jp of psrs. in order to review of economics and development studies vol. 5, no 1, march 2019 18 measure the moderating role of ss, the model of baron and kenny (1986) composed of three steps was applied. the results revealed that ss does not moderate the relationship between ei and jp of psrs. table 5: emotional intelligence, supervisory support, and job performance dependent variable: job performance variable r 2 β p emotional intelligence 0.165 0.080 0.000 supervisory support 0.212 0.150 0.000 emotional intelligence * supervisory support 0.212 0.036 0.656 5. discussion the main aim of this research study was to analyze the relation between ei and jp of psrs. the results show that ei positively predicts jp of psrs. in other words, highly emotionally intelligent psrs proved high performers. the results of the same ei-jp link are linear with the results of previous researches (manna, & smith, 2004; hamilton, 2008; harris, 2009). research has also proved that emotional intelligence is important for customer orientation for psrs (pettijohn, rozell, & newman, 2010), sale success (cruz-moraza, 2013), and professional selling (mcfarland, rode, & shervani, 2016). however, the result of the second objective i.e. moderating role of ss in eijp link contradicts with the results of past researches. this is said to be true that ss is a sort of pos, and researchers have proved that organizational support positively moderates the relationship of ei with employees’jp (akhtar, ghufran, husnain, & shahid, 2017) and employee engagement (akhtar, ghufran, & fatima, 2017). for example, organizational support strengthened the relationship between ei and performance, which contradicts with the h2 (ss does not moderate the relationship between ei and jp of psrs). specifically, increased involvement in ei was related with high jp among employees with no influence of ss. it is possible to say that employees with high level of perceived support expect higher socio-emotional rewards and well-being compare to those with lower perceived support (nixon et al., 2011). thus aptly speaking, if psrs expect high ss, they may perceive ei as more stressful than those expecting low ss since they are likely to expect more compensation and rewards for their involvement in application of ei at workplace. therefore, ss does not seem important for psrs. in addition, it could be maintained that supervisor’s role is not elemental for job related outcomes of srs. researchers proved that srs generally don’t need direct supervision essentially implies that they should be selfmotivated and committed to perform their job better (simintiras, lancaster, & cadogan, 1994). others found that gifts, drug samples, and sponsorship of physicians to conferences are the tactics influencing physicians’ prescribing behavior which leads to psrs’ sale performance (ingole, & yegnanarayan, 2011). ease in work completion, career development, internal environment, and no pressure feeling at work (sahoo, routray, & dash, 2014), and education on drugs/products and marketing skills (meshack, 2015) is paramount for better sales performance of psrs. 6. implication of the research this research investigation contributes to the study of sales force of pharmaceutical companies in several ways. first, this study looks into the matter of ei in sale sector of pharmaceutical companies working in pakistan. second, this research investigation determines the role of ss in the relationship of ei and jp of psrs based on the suggestions of hur et al. (2015). this study helps in the better management of psychological well-being of psrs for tangible improvement in their jp. the predictive power of emotional intelligence for performance suggests the use of emotional intelligence measure as a selection tool by human resource managers. on theoretical facet, the reliability coefficients for the scales employed provide the idea for future studies. the establishment and dimension of the affiliation between ei and jp extend its validity to the business environment of a developing country like pakistan. the predictive strength of ei to provide an explanation for the corresponding variation of jp is a crucial contribution of the study to the prevailing frame of knowledge. on practical aspect, the existing researches have proven that employees’ overall performance can be expected on the basis of their ratings on ei, which additionally has advised using emotional intelligence measures as a diffusion device by human resource managers (cadman, & brewer, 2001; fatt, 2002). dulewicz and higgs (2004) have shown that emotional abilities can be enhanced and developed through schooling courses. fatt (2002) suggested that managers have to remember the contributions of ei as an essential thing for the improvement of employees. this research study indicated an excessive and effective relationship of ei with worker performance. as a result, management can design ei interventions to train and increase human assets to get work performance improved. review of economics and development studies vol. 5, no 1, march 2019 19 6.1 limitations and future research future researchers should conduct a longitudinal study to look into the matter thoroughly. career progression seems important in the field of pharmaceutical sales sector. so future researchers are advised to investigate the career progression, salary, co-worker support and other benefits like bonus and car choice as moderating or mediating factors in the same link of emotional aspects and job-related outcomes of psrs. the role of other individual level elements like age, field education (pharmacy, biology, and biochemistry, etc), product knowledge, communication skills, organizational commitment and training could be investigated as moderator in the relationship of ei and jp. 7. conclusion the first objective of this research study was to find out the relationship between ei and jp of psrs. the second objective of this research study was to find out the moderating role of ss in the relationship of ei and jp. the findings reveal that ei of psrs is positively related to their jp. high level of ei enables psrs how to use certain emotions to understand the customer needs, achieve sales targets, and increase market share and enhance their jp. surprisingly, it was found that ss does not moderate the proposed relation between ei and jp. it might be added that individuals do not expect ss. the individuals expecting ss, reciprocally needs to involve themselves in applying ei to know and understand the emotions of others as well as their own emotions to perform better may fallen them in stress. references abe, j. a. a. 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(2016). linking workplace aggression to employee well-being and work: the moderating role of family-supportive supervisor behaviors. journal of business and psychology. review of economics and development studies, vol. 6 (2) 2020, 277 288 277 mediating role of perception of job insecurity on the relationship between despotic leadership and work engagement: pakistani perspective a riffut jabeen, b nazahah rahim a oya, graduate school of business, university utara malaysia, sintok campus, malaysia email: riffutjabeen@gmail.com b oya graduate school of business, university utara malaysia, sintok campus, malaysia email: nazahah@uum.edu.my article details abstract history: accepted: 22 may 2020 available online: 15 june 2020 the importance of work engagement (vigor, dedication, absorption) in enhancing employee performance is a recognized area of research. in this competitive and hyper turbulent work environment, disengaged workforce is costly for any organization. despite its importance, a very low rate of work engagement (i.e.5%) has been found in pakistan. drawing on conservation of resource theory (cor), this paper proposes a conceptual framework to find out the impact of despotic leadership behavior on work engagement of employees with a mediating mechanism of employee’s perception of job insecurity. in previous literature little research has been done on despotic leadership and no study has found on this relationship before. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attribution-noncommercial 4.0 keywords: dark leadership, despotic leadership, work engagement, perception of job insecurity, conservation of resource (cor) jel classification: o17, q33 doi: 10.47067/reads.v6i2.205 corresponding author’s email address: riffutjabeen@gmail.com 1. introduction contemporary organizations are relying on research based directions for managers. these organizations are paying a great attention to the positive behaviors of employees in favor of both financial and non-financial organizations. in developing countries like pakistan, organization of human resource is a challenge for modern day organizations. contemporary volatile, uncertain, complex and ambiguous (vuca) environment is also forcing organizations to keep their employees engaged and to make them competitive (aon hewitt, 2017). previous researches show that committed and engaged employees can lead to several advantageous outcomes for an organization e.g. lower turnover intentions (allen, shore, & griffeth, 2003); greater organizational outcomes (whitman, van rooy, & viswesvaran, 2010; harrison, newman, & roth, 2006); higher level of satisfaction and commitment (schaufeli & salanova, 2007; schaufeli & bakker, 2004; demerouti bakker, de jonge, janssen, & schaufeli, 2001), but employee’s investment of energy in work is subjective to their perception about availability, safety and meaningfulness (rich, lepine & crawford, 2010). review of economics and development studies, vol. 6 (2) 2020, 277 288 278 gallup (2016) defined that engaged workers are “involved in, enthusiastic about and committed to their work and workplace”. according to gallup’s survey (2016), workers in east asia are remarkably less engaged as compare to workers in their counterparts in the rest of the world. so, their management/ leadership need to focus on leadership styles, before disengaged workforce harm their competitiveness. globally, employee engagement rate is 15%. there is remarkably low ratio of engaged workforce in east asian countries. in hong kong only 5%, china and japan have 6%, taiwan and south korea 7%, us, 33%, uk 8% and philippines 36%. in south asian countries as compare to india and sri lanka, nepal, afghanistan, kazakhstan and kyrgyzstan; pakistan has lowest engagement rate i.e. 5% and approximately 22% of employees in pakistan are actively disengaged from their work. a large number of factors have been highlighted and discussed in the literature that can be considered as a cause of lower work engagement (we) in pakistan. it is evident form previous literature that leadership is an influencing process with consequential outcomes on the performance and behaviors of human resource and for organizational advancement (avolio, 2007). in the wake of worldwide corporate scandals of multi billions economic losses such as enron ($74 billion), worldcom ($107 billion) and volkswagen ($87 billion); the notion of bad leaders has become a hot topic in research (world economic forum, 2015) in context of its impact on employee positive behaviors and useful for organizations (hoobler & hu, 2013). pakistan has been stunned by disclosures about the improprieties of kasab bank, axact a karachi-based software company, punjab provisional bank and bank of punjab scandals alleged involving leadership of the bank. according to transparency international (2017) report, pakistan score 117 among 180 countries in corruption and in asia pacific pakistan ranks 32 amongst corrupt countries. moreover, pakistan has more stressful and challenging work environment (naseer, raja, syed, donia, & dar, 2016; abbas & raja, 2014), high collectivism, uncertainty avoidance and power distance organization for economic co-operation and development (oecd , 2013). employees in such societies show less intention to leave the jobs or organizations. in comparison with individualistic societies, they do not want to disappoint their associates in workplace (naseer et al., 2016). in this context, study may also yield different results in comparison with countries with individualistic cultures. leaders have the capability to inspire their employees to put extra efforts in their work and to achieve organizational goals proficiently and effectively (asrar-ul-haq & kuchinke, 2016). organizations vary in relations of their leadership, management styles, culture, quality of communication, levels of trust and respect. house (1995) also asserted that most of the literature on leadership comes from individualistic culture (geert hofstede, 2001, 2011) such as north america with a growing need of understanding leadership phenomenon in numerous cultural settings and an empirically grounded theory to describe different conducts of leaders and its value in different cultures. fewer studies in literature have discussed the undesirable effects of despotic leadership (dl) i.e. a form of negative leadership. according to luthans, peterson and ibrayev (1998), there is more probability of negative leadership behaviors in cultures that have uncertainty avoidance, high power distance and collectivism, such as pakistan. in such cultures, followers have more tolerance of power differences that portray authoritarianism and oppression (naseer et al., 2016). work engagement among employees can be fostered by providing resources, supports and rewards. leaders who consistently create favorable work environment have more engaged employees (tims, bakker, & xanthopoulou, 2011). the aim of this conceptual study is also to highlight the effect of a destructive leadership towards we of employees by exploiting their perceptions of job security (jis). to the best of researcher’s readings, in existing literature the mediating relationship of perception of job insecurity on the association between despotic review of economics and development studies, vol. 6 (2) 2020, 277 288 279 leadership and work engagement has not yet been explored. 2. literature reviewed 2.1 the dark side of leadership “sometimes the dark side of leadership eclipses the bright side—to the detriment of both the leader and the organization” (conger,1990). leadership phenomenon encompasses the ability of an individual to influence followers in the achievement of organizational goals. previously, the leadership domain has always been glamorized. according to glasø, einarsen, matthiesen, and skogstad (2010) ; schilling (2009), literature has always been highlighting the advantageous and positive effects of leaders on organizations and followers. comparatively, researchers have largely ignored the dark side of leadership. however, a steady growth has been seen in the past few years’ literature on the potential ugly side of leadership (schaubroeck, walumba, ganster, & kepes, 2007; padilla, hogan, & kaiser, 2007; frost, 2004; kellerman, 2004; conger, 1990) showing that leaders can exert harmful influence over their followers (karakitapogluaygun & gumusluoglu, 2013), especially in this global world where the dysfunctional aspects of leaders and top management has become a serious alarm for organizations (hoobler & hu, 2013). under the umbrella of dark side of leadership, numerous terminologies have been used including: 2.2 destructive leadership according to ashforth (1994) there is an understood supposition that incompetent leadership merely mirrors the absence of leadership. however, literature depicts that rather than mere absence of effective leadership, there are variety of different behaviors under the phenomenon of destructive leadership. schilling (2009) has used an all-encompassing term “negative leadership” as disliked behaviors of leaders extending from ineffective leadership to destructive leadership. destructive leadership defined by einarsen et al. (2007) is “the systematic and repeated behavior by a leader, supervisor or manager that violates the legitimate interest of the organization by undermining and/or sabotaging the organization’s goals, tasks, resources, and effectiveness and/or the motivation, wellbeing or job satisfaction of subordinates”. the definition encompasses all physical and verbal, active and passive, direct and indirect behaviors of destructive leadership. in line with baumeister et al. (2001), einarsen et al. (2007) ; schyns and schilling (2013) argued that as compare to positive behaviors , negative behavior exert stronger effects on a person’s behaviors and actions in social interactions. therefore, as compared to understanding and augmenting constructive/ positive aspects of leadership, understanding and preventing destructive/damaging leadership is even more important (zellars, tepper & duffy, 2002; tepper, 2000; bies & tripp, 1998). few studies have been found in literature that have explored the prevalence of destructive leadership behavior in modern organizations (schat, frone & kelloway, 2006). hoobler and brass (2006) found that destructive leadership reduced family wellbeing; provoke intention to quit a job and reduce satisfaction (tepper, 2000); raise deviant work behaviors (duffy, ganster, & pagon ,2002); emotional exhaustion, job tension (harvey, stoner, hochwarter & kacmar, 2007) and resistant behaviors (bamberger & bacharach, 2006). taking in view the breadth of the concept, it looks crystal clear that destructive leadership is not just among one type of leadership behavior, but it encompasses a diversity of behaviors instead. 2.2.1 destructive leadership towards subordinates such leaders threat, demean or humiliate subordinates in public. they expose their subordinates not organization to physical violence (aryee et al., 2007). review of economics and development studies, vol. 6 (2) 2020, 277 288 280 2.2.2 destructive leadership towards organization such leaders neglect or aggressively avert organizational goals accomplishment e.g. they work for personal goals rather than organizational goals, damage task accomplishments of subordinates (conger, 1990); steal time, money and material resources of organization or inspire followers to engage in such deeds and behaviors (altheide, adler, adler, & altheide,1978 2.2.3 destructive leadership towards both, organization and subordinates according to kellerman (2004) a comprehensive concept of destructive leadership includes destructive behavior of leaders towards both, followers/subordinates and organization. such leaders harm both the organization (in terms of resources, e.g. money, time, materials) and the subordinates (in terms of personal resources e.g. positive behaviors). 2.2.4 absence of leadership supportive and disloyal leadership, liassaze fair leadership and failed leadership (einarsen et al., 2002, schilling, 2009) are considered as mere absence of leadership in literature. 2.3 despotic leadership as a form of destructive leadership behavior according to schilling (2009), one prominent example of negative leadership types is despotic leadership, as it embraces the most important characteristics of negative leadership. these leadership behaviors are prominently fixated and motivated on gaining dominance, supremacy, pride, and leader's self-interests, manipulative, bossy, controlling, demanding and unforgiving (mcclelland, 1975; bass, 1990; howell & avolio, 1992; house & howell, 1992); demanding obedience from their subordinates, exercise power over them and remain insensitive to the needs of employees (schilling, 2009); work for their personal benefits and often restrict participation of their subordinates in decision-making process (de hoogh & den hartog, 2008); low on ethical standards (aronson, 2001) and lack integrity and moral standards (naseer et al., 2016); are socially unconstructive share the characteristics of abusive supervision (martinko, harvey, bress, & macckey, 2013); weak motivational influence on their followers, that cause lowered inspiration in employees (de hoogh & den hartog, 2008) and work as a social stressor (nauman, fatima, & haq, 2018). 2.4 work engagement engagement was entered in the academic wordlist by social psychological work of khan for the first time in 1990 ‘s. khan presented the concept of “personal engagement” in his seminal paper. since that time researcher’s interest in engagement mushroomed and multiple researches have been conducted on the conceptualization, definition, theories and measures of engagement (macey & schneider, 2008). engagement concept has been evolved over the years in literature as: personal role engagement: according to khan (1990) engagement involves “the harnessing of organizational member’s selves to their work roles; in engagement people employ and express themselves physically, cognitively and emotionally during role performances”. work or job engagement: another stream of exploration related to engagement takes engagement as, “a positive, fulfilling work related state of mind that is characterized by vigor, dedication and absorption” (schaufeli, salanova, gonzalellez-roma & bakker, 2002, p. 74). the notion of engagement was presented as opposite of burnout. scaufeli et al. (2002) used the term “work engagement” rather than “personal engagement”. schaufeli and bakker (2004) also defined work engagement as “the degree of cognitive, physical and emotional connection of employees to their work review of economics and development studies, vol. 6 (2) 2020, 277 288 281 roles”. components of work engagement: vigor: denotes mental resilience, great energy, the readiness to capitalize effort, persistence in the time of difficulties, motivation and dedication to put time and effort in work. in essence, we reflect workers experience at work. dedication: refers to having an experience of involvement, pride, significance, challenge, enthusiasm, inspiration and meaningful pursuit at work. absorption: is being focused and absorbed in one’s work (bakker & dermouti, 2007). absorbed in one’s work happily means, fully focused to work. one feels difficult to detach him/ herself from work and time passes quickly (bakker, schaufeli, leiter, & taris, 2008). multidimensional engagement: in 2006, saks defined engagement as “a distinct and unique construct consisting of cognitive, emotional and behavioral components that are associated with individual role performance”. engagement involves physical, emotional or cognitive engagement of workers in work roles but it encompasses concurrent involvement of all these forms (rich et al., 2010) in an associated rather than fragmented manner (kahn,1990). work is always a fun, source of contentment and happiness for engaged employees so they do not work hard( gorgievski, bakker, & schaufeli, 2010). 2.4.1 engagement as management practice in the human resource management (hrm) “engagement as management practice” is an emerging field and scholars have begun considering “engagement as best friend of human resource management (hrm)”. truss et al. (2014) used the concept of “doing engagement” in contrast of “being engaged “in their research and assert that engagement is subject to “fixing, shrinking, stretching and bending”. 2.4.2 engagement as “state like” or “trait like” there is considerable agreement of researcher that it is a higher-order construct comprising emotional, cognitive and behavioral dimensions (christian, gharza, & slaughter, 2011). there has been a great discussion in psychology, related to the trait-like personality constructs and state-like psychological capacities. christian et al. (2011) asserts that we is simultaneously trait-like and statelike construct, being comparatively stable yet fluctuating over time. bakker (2011) also highlights that as engagement is based on employee’s perceptions about work environment and it changes overtime, so it is more state-like. literature depicts that adequate rewards and recognition from supervisors (laschinger & finegan, 2005); personal initiative and innovation (hakanen, perhoniemi, & toppinen-tammer, 2008); passion about work motivation (may, gilson, & harter, 2004); organizational performance (harter, schmidt, & hayes, 2002; whitman et al., 2010); performance at job (halbesleben & wheeler, 2008; bakker & bal, 2010; emotion, effort and energy (rich, et al., 2010; christian et al., 2011); performance at group level (harter, schmidt, & hayes, 2002) ; monetary benefits (xanthopoulou, bakker, demerouti, & schaufeli, 2009; schaufeli & bakker, 2008); satisfaction of clients (salanova, agut, & peiro, 2005); work life balance and meaningful work (neil chalofsky & vijay kumar, 2009; cipd, 2006); job satisfaction (anaza & rutehrford, 2012; schaufeli & salanova, 2007; schaufeli & bakker, 2004; demerouti et al., 2001); job performance (wang, sui, luthans, wang, &wu, 2014; kane-frieder, hochwarter, & ferris, 2014; bal & de lange, 2015) and greater organizational performance (barrick et al.,2015; whitman et al., 2010; harrison et al., 2006) are positively related to engagement while engagement lowers turnover intentions (allen et al., 2003). so, bakker et al. (2008) as well as nair and salleh (2015) recommended that focus on we may not only advantageous for employees but also help organizations to gain a competitive advantage in this world of competition. review of economics and development studies, vol. 6 (2) 2020, 277 288 282 2.5 relationship between despotic leadership and work engagement despotic leadership reduces follower’s performance, citizenship behaviors, creativity and life satisfaction (naseer et al., 2016; nauman et al., 2018); and increase work family conflicts by creating emotional exhaustion and anxiety among employees (nouman et al., 2018). according to leary et al. (2013) leader’s dysfunctional leadership either overt or covert, direct or indirect distract subordinate’s obsession from work to self-preservation and ultimately limit their engagement. despotic leaders with their unethical, aggrandizing and oppressive behavior work as a social stressor (nouman et al., 2018). cor theory postulates that people experience threat from a threatened or actual loss of resources (hobfoll, 1989), in time and energy form (hobfoll & hirom, 2001) and as compared to resource gain, resource loss is more noticeable. any loss in energy resources may cause further resource loss (nauman et al., 2018). loss of some resource in one sphere mostly become a cause of resource loss in some other sphere (de clercq, haq, raja, azeem, & mahmud, 2018). previous application of cor theory in this domain reveals that exposure to destructive leadership styles create stress and cause resource depletion among employees (whitman, halbesleben, & holmes, 2014; xu, loi, & lam, 2015; wu & lee, 2016; de clercq et al, 2018). when individuals face some aggressive situations such as despotic behavior of leaders, they try to cope with these behaviors by investing more attention and energy resulting a loss of energy resources. therefore, workers who became exhausted due to the depletion of important energy resources at work, particularly due to unethical and self-serving behaviors of leaders, may lose engagement (vigor, dedication, absorption) in their work. in previous studies, researchers have found that if leaders take care of their employee’s interests, employees exhibit higher levels of we in response (harter et al., 2002). following this line of inquiry, researcher believes that despotic leaders show least care to their employees, lack ethical values and norms, fulfill their personal objectives by exploiting their authority and position; resultantly remain unable to convince employees for the achievement of individual and organizational goals (kanungo ,2001). followers possibly start questioning norms of effective work behaviors (naseer et al., 2016), became less engrossed in the work, might show less cooperativeness or willingness to contribute effectively towards organizational progress which results in decrease engagement among followers. similarly, due to the discretionary nature of we (macey & schneider, 2008) this study supposed that despotic leadership negatively affects work engagement. einarsen et al. (2007) describe destructive behavior of leaders may vary overtime between societies and cultures. cultures with characteristics of high uncertainty avoidance, high power distance and collectivism like pakistan (naseer et al., 2016, oecd, 2013) have higher probability of the arise of despotic leadership behaviors (naseer et al., 2016). for instance, followers in such cultural context are more likely to tolerate power differences that portray authoritarianism and tyranny (luthans et al., 1998; naseer et al., 2016). in line with arguments the study proposes that: proposition 1a: despotic leadership significantly and negatively affects employee vigor. proposition 1b: despotic leadership significantly and negatively affects employee dedication. proposition 1c: despotic leadership significantly and negatively affects employee absorption. 2.6 job insecurity according to hui and lee (2000), perception of job insecurity (jis) is perception of employee review of economics and development studies, vol. 6 (2) 2020, 277 288 283 regarding uncertainty in future and involuntary major change in job from employing organization. later, cheng and chan (2008) as well as sverke, hellgren and näswall (2002) also viewed jis as high level of uncertainty and threat. it has been defined as a stressor with undesirable crucial consequences for both, employees and employer and further linked with powerlessness (de cuyper & de witte, 2005). according to sverke and hellgren, (2002, p. 27), when employees experience job insecurity this doesn’t entirely means that they will be laid off. rather job insecurity denotes to “the anticipation of this stressful event in such a way that the nature and continued existence of one’s job are perceived to be at risk”. according to the findings of klandermans, van vuuren, and jacobson (1991, p. 44) and sverke et al. (2002), job insecurity is one of the most significant job stressors as it “influences a much broader range of feelings, attitudes and behaviors than those related simply to performance” and employee sees stress as threat to his/her goals and he/she do not have adequate means to deal with this threat (lazarus,1991). it is taken as a known phenomenon in organizations (huang, zhao, niu, ashford, & lee, 2013) as it can occur independent of any specific crisis situation (sverke et al., 2002). 2.7 relationship between despotic leadership and perception of job insecurity lee et al.(2006) stated that the mainstream research on job security focuses mostly on external factors (such as national unemployment, organizational change) and personality traits (such as negative effectivity ,locus of control).taking into view the significance of job insecurity, some studies have observed that negative leadership also have adverse effect on perception of job security and proposed that poor and unethical treatment of abusive supervision (tepper, 2000), workplace bullying (park & ono, 2016; moore et al., 2012) and transactional leadership (khuong &yen, 2014; balducci, cecchin, & fraccaroli, 2012) adversely affects job security and decline the life span of work satisfaction and engagement. (hoel, cooper, & faragher, 2001). according to jordan, ashkanasy and hartel (2002) employees feel negative emotional reactions and stress in situations when organizations fail to provide secure jobs to them and ultimately this stress and negative emotions affect their work efforts. using cor theory as a basis present study proposes that despotic leadership also work as social stressor on employees and increase the sense of job insecurity among employees. proposition 2: despotic leadership significantly and positively affects employee perception of job insecurity. 2.8 relationship between job insecurity and work engagement perception of job insecurity (jis) triggers numerous negative job outcomes, for example decrease in we and performance, job satisfaction, an increased turnover intension, health problems and anxiety (schreurs, hetty van emmerik, günter, & germeys, 2012; huang et al., 2012; vander elst, van den broeck, de witte, & de cuyper, 2012; staufenbiel & könig, 2010; syerke at al., 2002). literature have found significant and negative link between jis perception and performance (cheng & chan ,2008; gilboa, shirom, fried, & cooper, 2008). empirical studies conducted by loi et al. (2011) and staufenbiel and könig (2010) have found that job insecurity is not related to performance. generally, uncertainty causes aversive results such as anxieties in individuals. (sverke et al, 2002) the perception of jis aroused, when individuals feel objective threat cognitively. individual variables and social environment affect the cognitive processes of individuals. according to the research findings of feng, lu and siu (2008), jis strongly negatively affect the performance of employees who have low self-efficacy and organizational citizenship behavior (ocb) (wang, lu, & lu, 2014). job insecurity causes lower satisfaction, trust, commitment and engrossment (cheng & chan, 2008), productivity, loyalty and trust (sverke et al., 2002); organizational support (ruvio &rosenblatt, 1999). whereas, it increases turnover (de cuyper, bernhard-oettel, berntson, de witte & alarco, 2008; smithson & lewis, 2000); and resistance to change (davy et al., 1997). researchers stander and rothmann (2010); vander elst, review of economics and development studies, vol. 6 (2) 2020, 277 288 284 baillien, de cuyper, and de witte (2010) as well as de cuyper et al. (200) reveal a statistically negative relationship between perception of jis and we. grounded on cor theory (hobfoll, 1988, 1998), the study suggested that people are striving to obtain and guard their resources. in literature, cor has also been used to explain the way of investment of resources (halbesleben & bowler, 2008). following this line of inquiry, the depletion or absence of resources can increase stress and uncertainty such as high job insecurity or burnout. moreover, in this stressful and challenging work environment (abbas & raja, 2014; kausar & anwar, 2010) with higher unemployment rate, a job is very necessary for a survival in society like pakistan. in pakistan the tendency among employees for searching and applying for parallel jobs and legal suits from employees on organizations (both public and private) is increasing substantially (rizvi, 2017). in such environment it is more likely that employees work under stress and valorize individual achievements by any means, even at the stake of ocb and job performance (naseer et al., 2016).based on aforementioned literature, present study also postulate that work engagement is also an important positive behavior of employees with vigor , dedication and absorption. so, perceptions of job insecurity also negatively affect all the three dimensions of work engagement among workers. proposition 3a: employee perception of job insecurity significantly and negatively effects employee vigor. proposition 3b: employee perception of job insecurity significantly and negatively effects employee dedication. proposition 3c: employee perception of job insecurity significantly and negatively effects employee absorption. 2.9 work engagement a mediator baillien and de witte (2009) found that jis perception fully mediates workplace bullying and organizational change relationship. according to lazuarus and folkman (1984), individuals cognitively assess challenges (stressors) that they face in their work lives. to understand the fundamental psychological mechanism, this study applies cor as theoretical model in the relationship between dl and we via jis. when individuals encounter despotic leadership behavior, they may begin to assess the solemnity of the consequences of dl. loss of important job features (job insecurity) may be one of the possible consequences of dl. mostly, individuals want to develop meaningful and positive relationships with others (baumeister et al., 2005). so as, even facing a mistreatment for a long period of time, employees (the victims of mistreatment) interpret the negative behavior of leader that arise the feeling of insecurity among employees and harmfully affect their dedication, absorption and vigor. therefore, dl may affect employee’s perception about jis and consequently arouse the feeling of powerlessness regarding loss of job features and lack of control to change the situation (vander elst, de cuyper, & de witte, 2011; de cuyper & de witte, 2007). hoel and cooper (2000) discussed that employees who perceive higher level of jis are less probable to guard themselves against aggressive and unfair behaviors of their co-workers and managers. some researchers have explored the relationship between dl and its main outcomes (naseer et al, 2016, numan, fatima & haq, 2018), but the basic mechanisms of these relationships have been examined in few studies only. this study is adding perception of jis as possible mediating variable using cor theory. on the basis of cor theory (hobfoll, 1989) and by integrating the above mentioned hypothesis of direct effects between constructs, present study proposed that perception of jis mediates the relationship of exogenous and endogenous variables. amalgamating the aforementioned arguments, the study proposes that. review of economics and development studies, vol. 6 (2) 2020, 277 288 285 proposition 4a. employee perception of jis mediates the relationship between despotic leadership and employee vigor. proposition 4b. employee perception of jis mediates the relationship between despotic leadership and employee dedication. proposition 4c. employee perception of jis mediates the relationship between despotic leadership and employee absorption. 3. proposed framework based on issues discussed above, the study proposed a frame work that brings perception of jis as a mediating variable in the relationship between dl and we constructs. figure1: proposed framework 4. conclusion and discussion it is widely accepted in literature that leadership is an influencing process with consequential outcomes. on repeated calls by researchers, the study is extending the research on the dark side of leadership by postulating that dl has negative effects on employee’s we through perception of jis and this perception is one of the main causes of low we rate in pakistan. to the best of researcher’s readings, the study is adding to the limited literature on negative leadership and is unique because it considers perception of jis as a potential mediator in this relationship. study has got excellent support and justifications for proposed relationships where dl had a negative effect on we and increasing perception of job insecurity in pakistan. on the repeated call of researchers, the study makes an important contribution in the negative and specifically in despotic leadership literature on explaining the role of despotic leadership in work engagement and perception of job insecurity. the study also extended the cor theory by proposing a conceptual model including dl, and we. organizations should focus on recruitment policies to prevent hiring of such leaders. moreover, organizations should organize the training sessions to improve ethical and moral behaviors of the leaders. feedback from employees about leaders may also be useful to find destructive behaviors of leaders and can be utilized in performance appraisal systems for leader’s performance appraisal. organizations should also take measures to improve employee’s perceptions about job insecurity. 5. future directions this study also guides future researchers to consider the personal benefits of despotic leaders as self-serving behaviors in organizations and either despotic leaders effect psychological capital of their followers (hope, optimism, resilience and efficacy) through their unethical and corrupt behaviors as negative behaviors have stronger effects on persons as compared to positive events in social interactions (schyns & schilling, 2013). moreover, another future research avenue may be to explore review of economics and development studies, vol. 6 (2) 2020, 277 288 286 the impact of dl on ethical climate and justice climate of the organization. references aasland, m. s., skogstad, a., notelaers, g., nielsen, m. b., & einarsen, s. 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(2015). the bad boss takes it all: how abusive supervision and leader-member exchange interact to influence employee silence. leadership quarterly,26,763–774. review of economics and development studies, vol. 6 (2) 2020, 217-228 217 cultivation of fear through media: analysis to reveal relationship between perception about covid 19 and socio-economic background of media consumers a samia manzoor, b aasima safdar a assistant professor of communication studies, bahauddin zakariya university, multan, pakistan email: samia.manzoor@bzu.edu.pk b assistant professor of communication studies, bahauddin zakariya university, multan, pakistan article details abstract history: accepted: 29 april 2020 available online: 15 june 2020 covid-19 is the pandemic that has been experienced by the whole world presently. the present research sought to explore how media is cultivating fear among heavy and light users of upper, middle, and lower socio-economic background. theoretical support for the present research was taken from the theory of cultivation analysis. twenty-one residents of multan belonging to upper, middle and lower socio-economic background were selected through snowball sampling technique and interviewed through whatsapp by the researchers. the interview data was analyzed through nvivo 10. eight themes emerged out of the interview data and it was observed that media was cultivating fear among the users of upper and middle socio-economic backgrounds as they were using media for longer periods of time while media users of lower socio-economic background were not very fearful of this pandemic. the results supported that media has strong cultivation effects regarding covid-19. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attribution-noncommercial 4.0 keywords: covid-19, cultivation theory, fear, social media, socioeconomic backgrounds, upper, middle and lower class jel classification: i19, m14, m19, o17 doi: 10.47067/reads.v6i2.198 corresponding author’s email address: samia.manzoor@bzu.edu.pk 1. introduction covid-19 has become one of the most threatening issues which the mankind is facing during recent years. this pandemic has created such fear in the minds of people that they have started to commit suicides (mamun & griffiths, 2020). there is no doubt about it that there are no humans left around the globe who are unaware about this deadly virus. media is playing a pivotal role in providing information about current situations to the public. so much so that governments are using channels of social media and television to provide awareness to the public about covid-19 (ait addi, benksim, amine, & cherkaoui, 2020). traditional and social both types of media outlets are taking this responsibility upon themselves to educate people about covid-19 and the related issues. especially in a country like pakistan where the literacy rate is low (rehman, jingdong, & hussain, 2015) and a great majority of people live in remote areas (shahzad, zahid, ur rashid, rehan, ali, & ahmad, 2017), media has become an even more significant role player in the review of economics and development studies, vol. 6 (2) 2020, 217-228 218 provision of information to the people belonging to all kinds of socio-economic backgrounds. this assumption also stands true that when media informs people about some crisis, sometimes it infuse a fearsome emotion in them (altheide, 2002). the present research aimed to explore the perceptions of people belonging to three major socioeconomic backgrounds in pakistan i.e. lower class, middle class and upper class. relationship between their media use time and their perception about covid-19 pandemic was developed. george gerbner assumed that media has strong cultivation effects (baran & davis, 2011). following the footsteps of gerbner (1969, 1970) it was tried to find out that how the media were cultivating the minds of users about covid-19, how the cultivation effect is different for people of different socio-economic backgrounds and for heavy and light users of media? 2. literature review it has been confirmed by literature that whenever some pandemic occurs mass media provides information in a very alarming and threatening way (bomlitz & brezis, 2008). when people receive this information through mass media they become fearful and frightened (alcabes, 2009). fear of the disease among people plays an important role in giving significance to the disease by them (setbon & raude, 2010; altheide & michalowski, 1999). mesch, schwirian, & kolobov, (2013) conducted research on media use of people and their fear of getting infecting by h1n1. it was observed that people who used media for longer periods of time were more fearful. they further observed that as time passes people lost interest in information regarding the disease. hansen (2009) observed the presentation of sars in norwegian media and observed that this disease received a lot of media attention in norway and thus created enormous fear in the public. fear of sars faced by the public developed hurdles in provision of medical facilities to them. ahorsu, lin, imani, saffari, griffiths, & pakpour, (2020) developed a sevenitem scale to measure the worry and fear of people due to covia-19 and suggested ways to overcome fear. they said that during the outbreak of infectious diseases people’s psychological reactions become negative. grupp (2003) wrote that fears are planted and cultivated by media. she added that fears are least cultivated through direct exposure. in her opinion the world has moved from a “fearsome life towards a life with fearsome media”. studies on fear have confirmed that the element of fear in everyday life has increased. a very important contributor of increasing fear in the society is the stories presented by media (furedi, 2007). llewellyn (2020) said that it is extremely important for people to understand the psychology of social media information only then we can avoid disinformation especially in crisis situations like the one the world is facing presently in the form of covid-19. van den bulck & custers (2009) found in a research on h5n1 that fear of a pandemic comes first than the actual pandemic. they further confirmed that exposure to television is strongly related to the increase in the fear of disease. ball-rokeach & defleur (1976) confirmed that during a crisis people rely more on media. garfin, silver, & holman (2020) conducted research on covid-19 regarding public health risk and media exposure and confirmed that people who use media for longer periods of time become more fearful of the disease. theoretical support for the present research was taken from theory of cultivation analysis presented by george gerbner. this theory states that “those who spend more time watching tv are more likely to perceive the real world in ways that reflect the most common and recurrent messages of the television world, compared to people who watch less television but are otherwise comparable in review of economics and development studies, vol. 6 (2) 2020, 217-228 219 terms of important demographic characteristics” (p. 4). cultivation theory further proposes that when an individual exposes himself to media content for longer periods of time they start living in a media reality that is actually not based on facts but just media content (tony, 2000). in fact this influence goes to such an extent that their views and perception about reality become totally based on what they repeatedly see and hear on media. cultivation occurs in two ways. one is mainstreaming, it happens when similar kind of content is shown on different media channels. for viewers these symbols and messages become more influential as compared to the other sources of information and thus they start thinking the way media guides them (baron & davis, 2003). the second way of cultivation is resonance, it occurs when media depiction of reality is supported by the real world incidents. resonance is when, what we see on media is reinforced by the real world experiences. this gives the audience a “double dose” that results in an increase in the cultivation effects (baron & davis, 2003). through the present research the researchers intend to know how much fear is cultivated through media in the people of different socio-economic backgrounds of pakistani society. this will open a new line of research, because whatever content pakistani media is showing about covid-19 pandemic is likely to have cultivation effects on the viewers. the present research helped to find out difference of cultivation effect in the people of different socio-economic backgrounds i.e. upper class, middle class and lower class about covid-19. what were the thoughts and opinions of public about this pandemic based on the information they were taking from media. jordan (1992) and yardi & bruckman (2012, may) conducted researches to identify relationship between ideologies of time and mass media use within the family system and comparison between middle to upper class white american parents and low income urban african american parents to know about how each group use technology respectively. this shows that previously researches have been conducted in the field of media studies by taking socio-economic status as a key variable. but it would be unique to find out that how media is cultivating fear regarding covid-19 among the heavy and light viewers of different socio-economic backgrounds. 3. method the present research employed qualitative approach. qualitative design has characteristics to describe the issue with rich details. denzin (1994) wrote that qualitative research involved many methods such as interpretative, naturalistic techniques for exploring the phenomenon. it helped the researcher to conduct the research in a natural setting and the researchers could explore the holistic picture of the phenomenon by analyzing words, reports, photos and information (creswell, 1994). for data collection, the researchers employed technique of in-depth interviews. it helped the researchers to analyze similar or different viewpoints of the informants about the issue at hand (rubin & rubin, 1995). the idea of qualitative interviews was to understand the thinking of interviewees (kvale, 1996) and what are their original thoughts. interviews were just like direct conversation (lofland & lofland, 1995) and a comprehensive interview gives detailed information about the topic from the interviewee who had pertinent knowledge (charmaz, 2006). 3.1 sample for the study for the present study, twenty one informants were selected from different socio-economic backgrounds. seven informants were selected each socio-economic background i.e. upper, middle and lower class. upper class could be defined as a group of people who are well educated, own business, earn more than their needs, have very safe future in terms of finances and they enjoy luxuries. middle class is defined as a group of people who possess high level of education, professional skills and a review of economics and development studies, vol. 6 (2) 2020, 217-228 220 relatively stable and high income (wang, 2009). they usually lack luxuries but they enjoy a stable life style. lower class is the people who face difficulty to make ends meet. they usually have scarce finances. usually they don’t have higher levels of education. they live life with limited resources with no choice of luxuries. these interviews were conducted from the residents of the city of multan by using the technique of snow ball sampling. as berg (1988) referred that in snow ball technique, the contacts were developed by the recommendation of people who were already in circle. the interviews were taken during the month of march 2020. researchers asked the informants about their consumption patterns of media and their perspective covid-19 crisis. the interviews were originally conducted in urdu language and afterwards were transcribed in english language 3.2 data analysis for the curent study, three types of coding were employed i.e. open coding, axial coding and selective coding (strauss & corbin, 1998). open coding classified and labelled the phenomenon as pointed by the data. the text was read line by line and was broken down into different codes. open coding moved towards to compare codes where similar codes were put together under same conceptual label. in this way each group became a concept (strauss & corbin, 1998). during axial coding the data was analyzed again by making associations between categories and its subcategories (strauss & corbin, 1998). the analysis explained the phenomenon implanted in the data. in the last step, the selective coding integrated the categories to a structure or theoretical framework. in this case, first step was to identify core category. for the data analysis purpose the researchers used nvivo 10. in the process of open coding, the researchers put data into numerous nodes of nvivo 10 software. in second steps, the researchers made connection with different codes and developed categories. in selective coding, the researchers carefully read all the categories and developed themes from the data. these themes answered the research questions at hand. 3.3 findings twenty one interviews were conducted for the present research, from informants belonging to upper, middle and lower socio-economic backgrounds. seven interviews were conducted from each socio-economic group. the informants from upper class were highly educated and mostly heavy consumers of media. they mostly used media for four to five hours on daily basis. they consumed not only pakistani media, but foreign news channels, news apps, social media and different news websites. the informants from middle were also mostly heavy consumers of media. they reported three to four hours of media use. they mostly watched pakistani electronic channels and used social media. they also relied on information received from their peer group. however, the informant from lower class used media approximately two to three hours daily. their main sources of information were television, radio and peer group. few informants from lower class replied that they consider their friends and family members more reliable sources of information as compared to media. review of economics and development studies, vol. 6 (2) 2020, 217-228 221 following themes emerged after analyzing the data from the informants: nvivo 10 model for perception regarding covid-19 i. covid-19 is a deadly virus the first theme emerged from data was that covid-19 is a deadly virus. the informants from upper and middle class were of the opinion that it could not be easily cured. it could be easily transmitted through touch and contact. it was started from animals and it had affected one forth human population of the world. there was a possibility that out of every 100 people, 3 to 4 people could be affected with this virus. there was no cure available right now. only those people have survived from this that had strong immune system. it was more dangerous for old people and people with weak immune system. until, the vaccine was made it is a greater threat for human beings. although government and doctors have suggested maintaining social distancing and self-isolation to combat the virus but it is very difficult to get themselves isolated. people had to perform different duties on daily basis. the question was for how long they could be isolated. the virus is very dangerous. it could only be treated if the patient is diagnosed at early stages. in later stage it affects respiratory system which causes major complications for the victims. the informants were of the opinion that corona virus had caused panic among the society. media is giving a lot of information that had caused anxiety among the masses. it had changed the life style of people around the world. the virus though emerged in wuhan, china but now it has spread all over the world. especially, western world are badly affected by it. the situation in pakistan is also getting worse day by day. however, the informants from lower class commented that corona was not a deadly disease. not everyone was affected by it. normal activities are going on. shops and markets are open and people are working. few people were affected by it but they were cured. it depends on the fate of individual either he is going to get badly affected by it or not. even few informants commented that the virus did not exist and it was just a faulty imagination. as one of the informant commented; “this is in our faddism (weham) that it is deadly.” ii. causing anxiety people from upper class had mix opinion regarding anxiety and fear factor. few were of the opinion that corona caused much panic and anxiety. as they started to follow media they became psychological disturbed. they felt corona symptoms among themselves. if they got ill and suffered from sore throat, review of economics and development studies, vol. 6 (2) 2020, 217-228 222 they thought that the virus has affected them until they consulted their doctor. such fears disturbed their sleeping patterns and regular life. but with the passage of time, the situation got better and they lowered media consumption regarding corona information. they reported that excessive use of media was a main cause of anxiety and fear in them. however, some of them reported that they never experienced any panic because they followed safety measures strictly. they admitted that exposure with corona positive person can create problems for them. although corona has caused much panic but they believed that not every corona victim dies. people get cured if they received proper medical attention. the informants from middle class also expressed mixed opinion regarding corona anxiety. few expressed that sometimes sneezing and other mild symptoms panicked them but soon they overcome this panic. they stressed on taking safety measures. they believed if they were destined to suffer from corona, they could not avoid it. they should not get panicked but should focus to take proper safety measures as suggested by who (world health organization). they suggested that they have trust in allah and they believed that hopefully they would not get this virus. as one of the informant commented that: “no. never. i don’t like to get panicked over nothing. if we have to face it, we will, we cannot avoid it if we are destined to suffer from it. but we must not get ourselves worried over nothing.” however, the informants from lower class were of the opinion that they never got panicked. they believed that it was just a disease which could be cured within few weeks. they were not concern about corona and did not express any fears regarding it. few were of the opinion that in the start. it was bit frightening but with the passage of time, things got normal. they stressed that they pray to allah and they have faith that they will be saved. there was nothing to be worried or panicked about. iii. depression third theme that emerged from data was depression. it was noticed that informants from upper and middle class expressed their deep concerns regarding covid 19. however, the informants from lower class were not frightened. as informants from upper and middle class were heavy consumers of traditional media, social media and new media. these extensive sources of information have increased their concerns regarding the disease. on the other hand, little media use and reliance of lower class saved them from anxiety and depression. informants from upper and middle class commented that when the corona virus broke out in pakistan they devoted much time to media for getting information. media provided them guidance about how to deal with the crisis. but gradually, they started feeling depression. as one of the informants commented that she started thinking that the corona virus would never end. if she gets affected by the virus, how she would be able to save her children. some of them revealed that due to the stressful situation, they have limited their media use. instead of watching corona news, they switched their interest towards other entertainment media. the decreased the use of media has made positive effects on them to lessen their stress and worry. other informants’ believed that it is a deadly virus, which has caused a number of deaths in western countries. if developed world could not cope with the crisis of corona, how the people in pakistan could be saved. there is no vaccine available for its treatment. scientists around the world are working to find a cure but there is no hope yet. they stressed that due to stress caused by corona virus their routines of life have been disturbed. they did not feel relaxed, happy and comfortable. they felt that now they could not enjoy their lives anymore. some of them commented that their sleeping patterns review of economics and development studies, vol. 6 (2) 2020, 217-228 223 have also been disturbed. they have this fear that they could be affected by the virus. iv. positive hope required the other theme that was emerged from data was positivity and hope. although people from all walks of life were disturbed due to this situation but still they had positivity and hope regarding the end of corona virus. the informants from all three socio-economic backgrounds i.e. upper, middle and lower classes expressed positivity and hope regarding it. as one of the informants commented that the virus emerged from wuhan but now normal activities of life have started there. china was badly affected by the novel corona virus but now they are coming back towards normality in life. same was the case, in some european countries, the death toll is decreasing. they stressed that we must hope for the best that the sooner or later scientists would find out a cure for covid-19. as scientist in america, uk, china and other european countries are already working on it. they are also giving good news regarding its cure. another informant commented that it is miraculous that pakistan is not yet badly affected by the corona virus. there are limited cases in pakistan as compare to the west. the informants stressed that we must believe on allah, and have faith and everything will be fine in the end. especially people from middle and lower socio-economic backgrounds stressed that if they will have strong belief on allah, they would soon be out of this pandemic. however, the informants from lower class commented that lock down situation had caused hopelessness. because, now they have no sources of income, they are living on savings; education of children is also getting severely affected. if this situation persists for a long time period, it would create sever economic problems for them. but overall, the informants were hopeful regarding the end of corona virus and stressed on precautionary measures and belief in allah. v. precautionary measures needed another theme that emerged from the data was precautionary measures. the informants from upper class were highly concerned about taking precautionary measures and social distancing. almost every one told that they are adopting precautionary measures. they stressed that it was very important to wear mask and gloves while going out of home. one of the informants told that she always maintains 2 meter distance from others, she washes her home every day and when she is outside she prefers not to come out of the car and mostly does shopping online. upper class informants shared that they are in self-quarantine and are adopting healthy life style by avoiding junk food. one of the informants commented that he was a very social person but since the pandemic hit he has started avoiding physically meeting with people and instead have started meeting online. many of the informants commented that social distancing was quite important because it was the only way through which we can limit the spread of the virus. if one wants to contact with others, one can use mobile, social media or online meeting applications. few of the informants commented that they are doing their work online and their office meetings are conducted through online meeting applications. similarly, the informants from middle class stressed on using face masks, gloves, hand sanitizers and social distancing, as one of the informants commented that: “i only wash hands when i feel there is a need to. otherwise when i go outside i use hand review of economics and development studies, vol. 6 (2) 2020, 217-228 224 sanitizer regularly. every time i disembark from my vehicle to fetch something or to do some chores i immediately apply hand sanitizer as soon as i get back in. i use face mask, hand sanitizer, and avoid going to public places.” they told that they had limited their outside activities and preferred to stay at home. as one informant commented whenever she buys fruits and vegetable from bazar she cleans the grocery and sanitizes her hands. the informants were of the opinion that media is giving them enough information regarding precautionary measures and they are trying their best to follow these guidelines. a few of the female informants told that they do not even call house help to perform household chores. all members of the family try to participate in household chores. complete isolation is pertinent to avoid the virus. however, when it was asked from the lower class informants what precautionary measures they have adopted to avoid corona? it was noted that informants also know about precautionary measures and most of them replied that they are following the guidelines to avoid the virus but it appeared that they were not highly concerned about these measures. as informants from upper and middle class commented that they tried to wash their hands three to four times in an hour while some of the informants from lower class said they wash their hands three to four times a day. even few commented that there was no need of such precautionary measures and social distancing because they do not consider the virus very serious threat. overall, it was noted that the informants from upper and middle class were more concerned about precautionary measures and social distancing than the informants with lower socio-economic background. vi. strong immune system data also revealed that people are concerned about their immune system. the informants from upper class told that through traditional and social media they have come to know that the virus was not dangerous for those who have strong immune system. people with weak immune systems are more vulnerable to this virus. the informants told that they are paying keen attention to boost up their immune system. they are taking healthy diet including fruits, vegetables and vitamin supplements. they have started avoiding junk food and try to take good sleep. it was noted that these informants not only consumed media but other internet sources were also utilized to get information regarding healthy life style and diet plans. the similar opinion was given by the informants from middle class. they stressed on healthy life style and strong immune system. one of the informants commented that it was very difficult to avoid the virus in a country like pakistan. only people with strong immune system could survive from it. however, the informants from lower class were not much aware of immune system. they were of the opinion that they are taking normal diet following their previous routine. they did not share information healthy life style, healthy food or supplements. they were not conscious to explore media to get information regarding special diet plans or medications for avoiding corona virus. they were continuing their normal routine. vii. religious sentiments religious sentiments was another theme that emerged from the data. the informants from upper class commented that during pandemic they had increased their religious activities because now they have more free time and they are free at home. some of the informants were of the opinion that there is no change in their religious activities. they are following their previous routines. few informants were review of economics and development studies, vol. 6 (2) 2020, 217-228 225 of the opinion that the pandemic was from allah. he was the master planner and he will get human beings out of this problem and they must have faith in allah and be consistent in their religious activities. the informants from the middle class were of the opinion that due to pandemic their religious activities had been increased. as one of the informants commented that it’s only our strong link with allah that can save us from this problem. another informant commented that: “it can be a punishment by allah, because when we humans go astray from the right path then he punishes us through such pandemics ….. and as a muslim i believe that only allah has the cure of this disease……not humans…….i have my faith and belief in allah so i don't feel depressed.” the informants stressed that everyone should increase their religious activities by offering prayers regularly and recitation of holy quran. they shared that they feel that religious activities give peace of mind and heart and one starts feeling strong. the informants from the lower class also told that they were praying to allah to save them from this virus. they also believed that this pandemic could be allah’s wrath so that people can learn a lesson and start following the right path. overall, it was noted that the informants from all classes commented that their religious activities have increased and only allah can save them from this agony. for this reason they have started spending more time and money in religious activities. viii. government actions regarding covid-19 last theme that was observed from data was government activities regarding pandemic. the informants from upper class had mixed opinion about government activities. some of the informants were of the opinion that government of pakistan was doing excellent to control pandemic. the government provided ration and money to the poor families. along that the government did smart lock down that was good strategy. because pakistan was not a developed country, it was very difficult to do complete lockdown in the country. however, some of the informants had quite different opinion regarding government activities. these informants were not satisfied with government measures regarding pandemic. they criticized government policies. they were of the opinion that there should be stricter lockdown because the virus spreads through person to person. spread of corona virus could only be avoided by implementing complete lockdown. most of the informants from middle class supported government strategies to combat corona virus. they were of the opinion that complete lock down could create lot of problems for those people who are economically weak. the government should make effective management system to regulate market and other economic sectors. people must be provided with economic resources. people should be stressed to wear mask compulsorily while going out of home and they should maintain two meters distance from others. otherwise, the situation in the country could get worsened. as the country health situation was not satisfactory. however, the informants from lower class were not satisfied with the policies of the government regarding corona virus. they mostly criticized the government. moreover, they did not support lockdown in the country. they were of the opinion that due to lockdown; poor families were living in very bad conditions. they do not have financial support. if this situation continues it would be very review of economics and development studies, vol. 6 (2) 2020, 217-228 226 difficult for the poor people to survive. government should make policies to support the people who had limited economic resources. 4. discussion and conclusion george gerbner (1998) defined heavy viewers as those who watch more tv and light viewers as who watch tv for lesser amount of time. according to this definition most of the informants belonging to upper and middle class socio-economic background were heavy users of media while most of the users belonging to lower class socio-economic background were light users of media. the findings of the present research are congruent to the cultivation analysis of george gerbner. the aim of the current research was to dig out how much fear has been cultivated in the minds of media users about covid19. in-depth interviews were conducted with twenty one users of media belonging to upper, middle and lower socio-economic backgrounds. the interviews were later analyzed through nvivo-10 and eight themes emerged from the interview data. it was revealed that users of upper and middle class were very much fearful of covid-19 while the users of lower class were not. upper and middle class people reported that corona is an extremely deadly virus, they reported that they corona id causing anxiety and depression among them while the users of lower class opined that this virus is just a myth. they were not depressed of anxious. media users of upper and middle class were taking lots of precautionary measures including building up their immune system but people of lower class were neither concerned about precautionary measures nor they were well aware about immune system. “positive hope” was the theme that was present in interviews of almost all the informants no matter they belong to lower class, middle class or upper class. in the “government actions regarding covid-19” pro-government upper and middle class media users appreciated the actions of government while anti-government upper and middle class media users and most of the lower class users were of the view that government’s actions are not satisfactory. government needs to respond to this pandemic in smarter ways. moreover it was observed that though there was a difference of usage patterns among people of upper and middle socio-economic backgrounds but as they were spending time on social media so even if they are not using media for longer hours they were using media smartly. this way they were getting quality and comprehensive information even if they were spending less time on media. people of lower socio-economic background were using very little time on social media due to the lack of internet availability. people were staying at home they were deprived of the internet they used to have at their work place. to use personal mobile data is expensive and people from lower socioeconomic status consider it wastage of money to buy mobile data. so the information they were having mostly based on tv news, newspapers or peer group. the results of the study concluded that media is definitely cultivating fear among people of upper and middle socio-economic backgrounds as they were spending lots of time on media while people of lower class were not frightened of the virus because their media consumption time is far less as compared to the other two socio-economic groups. social media’s role in the cultivation of fear among users is the most devastating as social media is a platform where everyone can share their views. few people have the ability to distinguish between information from authentic sources and personal information shared by other users that is why people of different socio-economic backgrounds who used media for longer periods of time were more afraid of the corona virus. references ahorsu, d. k., lin, c. y., imani, v., saffari, m., griffiths, m. d., & pakpour, a. h. 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analysis 1 rashid ahmad, 2 furrukh bashir, 3 altaf hussain ¹ assistant professor, school of economics ,bahaudin zakariya university multan. rashidahmad@bzu.edu.pk 2 assistant professor, school of economics ,bahaudin zakariya university multan. furrukh@bzu.edu.pk 3 lecturer, department of economics, the islamia university of bahawalpur, pakistan. altafhussain@iub.edu.pk articledetails abstract history revised format: may 2018 available online: june 2018 the objectives of the study are to examine the influence of human capital and governance on poverty. for this purpose, the study considers 44 developing countries and chooses time span from 2004 to 2017. the data on all variables are collected through world development indicators. the study utilized the index for human capital and three governance indicators i.e. political governance, economic governance and institutional governance developed by world bank organization. generalized method of moment (gmm) is employed on the panel data for estimation of econometric results. the results conclude that human capital and high technology exports are found to be significant causes of reduction in poverty in developing countries. moreover, not only political governance, institutional governance, economic governance but also overall governance are reducing poverty in developing countries. gross fixed capital formation and trade openness are found to be statistically insignificant. on the other side, savings for natural resource depletion is examined as increasing poverty in developing countries. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords poverty, human capital, governance, panel data, generalized method of moments (gmm). jel classification: i32, j24, p48, d02, c33, c82 corresponding author’s email address: furrukh@bzu.edu.pk recommended citation: ahmad, r., bashir, f., hussain, a., (2018). human capital, governance and poverty reduction: a panel data analysis. review of economics and development studies, 4 (1) 103-113 doi: 10.26710/reads.v4i1.285 1. introduction no society can surely be flourishing and happy, of which by far the greater part of the numbers are poor and miserable (smith, 1776). in pursuance of economic development poor section of the society is neglected not only in context of living standards but also in human capital development. poor people are unable to meet even their necessities such as health, education, shelter and essential nourishment. there has been continuing debate over the issue of poverty. many researchers investigated the determinants of poverty in different context. after investigating the traditional factors of poverty, researchers switched to other most important factors such as health and education which are considered as the main ingredients of human capital. recent figures of world bank reveal that there are 769 million people in the world who live below international poverty line of us$1.90. the importance of this issue can be accessed from the commitment of major international organizations. as united nations puts the poverty at top so the first sustainable goal is “end poverty in all its forms everywhere”. according to un, poverty is more than the lack of http://www.publishing.globalcsrc.org/reads mailto:furrukh@bzu.edu.pk review of economics and development studies vol. 4, no 1, june 2018 104 income and resources to ensure a sustainable livelihood. the manifestations of poverty include hunger and malnutrition, limited access to education and other basic services, social discrimination and exclusion as well as the lack of participation in decision-making. economic growth must be inclusive to provide sustainable jobs and promote equality rather than just increase the level of gdp and most especially gdp per capital. hassan and birungi (2011) confirm the negative impact of human and social capital on poverty reduction through household income and its impact on household welfare. human capital augmented with quality education affects national income which significantly reduces the poverty (afzal et al., 2011). factors such as health, nutrition, and formal education, which an individual embodies and which provide future returns, are components of what is coined as “human capital”. at the same time, as mentioned above, one should recognize that these factors are consumables as well. as such, an increase in a person’s income will in turn lead to an increase in the demand for these components of human capital given that they are normal goods. the emergence of institutional economics opened the new door of investigation into the issue of poverty. initially, corruption was considered as indicator of governance and its impact on poverty was investigated along with interaction term of growth and investment by mauro (1995); knack and keefer (1996).studies suggest that investment in human capital is the precondition for developing countries to absorb modern technology and improve productivity, which in turn leads to higher income and improved economic performance (barro, 1991; mankiw et al., 1992; romer, 1990). this paper presents the effect of human capital and governance on poverty considering developing countries. . the empirical findings of this examination will assist the concerned authorities to formulate the public policies and programs for poverty reduction through human capital development. this paper is organized as follows. in the next section, a review of selected literature on the relationship between human capital, governance and poverty is presented. this is followed by the baseline econometric model to be estimated. after this, data and methodological issues are discussed. empirical results are reported in subsequent section of results and discussion. the final section gives concluding remarks and policy recommendations. 2. literature review gupta, davoodi and alonso-terme (2002) investigated the impact of corruption on the income inequality and poverty. regression results of the study showed the positive impact of corruption on income inequality and poverty and policy to curtail the corruption had been suggested. quang dao (2007) examined the effect of different components of human capital on severity of poverty and income distribution in developing countries. least square estimation confirmed the dependence of poverty and income distribution on multiple factors of human capital such as gender parity in schools, prevalence of child malnutrition, birth attended by skilled professionals and primary school completion. tebaldi and mohan (2010) used the panel data of countries to determine the impact of institutions on income distribution and poverty. results of panel regression showed that control of corruption, political stability and government effectiveness contributed to economic growth which in turn affect the income distribution positively and reduce poverty. bakhtiari and meisami (2010) explored the influence of health and education as the main ingredients of human capital on income distribution and poverty in islamic countries. results of panel data revealed the significant impact of health and education on poverty. the study suggested the improvement in health and education infrastructure for improving income distribution and poverty reduction. janjua and kamal (2011) pointed out the education as key factor in poverty reduction. results of gls estimation showed that income growth contributed to poverty alleviation but income distribution did not play a significant review of economics and development studies vol. 4, no 1, june 2018 105 role in poverty reduction. gounder and xing (2012) highlighted the economic (household income) and social factors (health and education) of poverty in terms of monetary and non-monetary context. 2sls and logistic regression was used on data from household income and expenditure survey, 2002/03 of fiji. findings pointed out the significant impact of education on not only household income but also on household activities to improve the health status as non-monetary measure of poverty. dias and tebaldi (2012) analyzed the relationship among institutions, human capital and growth for the period of 1965 – 2005. empirical results of dynamic panel data estimated through gmm showed that human capital and as well as physical capital instead of levels determined long run economic growth. perera and lee (2013) examined the impact of economic growth and institution quality on poverty and income inequality in asia for the period of 1985 – 2009. results of gmm estimation showed that economic growth leads to low poverty although improvements in the level of corruption, democratic accountability, and beauracratic quality appear to increase poverty levels but improvements in political stability and law and order situations reduce the poverty levels. akanbi (2015) examined the empirical relationship between governance, physical infrastructure and levels of poverty in sub-saharan africa. empirical results of 2sls estimation revealed that governance and infrastructure are significant determinants of the poverty in the region. muhammad, egbetokun, memon, and hyder (2015) explored the role of governance in the relationship between human capital and economic growth. empirical results of fixed effect model estimation showed in most of the cases it has been found that the relationship between human capital and economic growth is insignificant for countries with low level of governance. ayodeji and adebayo (2015) identified the reasons of poverty in nigeria and theoretical and conceptual framework has been presented to describe the relationships among government policies, human capital, economic development and poverty reduction. faria, montesinos-yufa, morales, navarro, (2016) attempted to separate the role of human capital and economic institutions in development process. findings of the study showed that economic institutions and policies are strongly linked to development. human capital measured by cognitive skills showed a strong effect on institutions. zghidi, sghaier and abida (2016) investigated the causal link between remittances, economic freedom and economic growth in north african countries. gmm results estimated for four countries showed positive relationship between remittances and economic growth. effects of remittances were more pronounced in presence of the economic freedom variable. oyinlola and adedeji (2017) examined the role of financial development in human capital growth relationship. results of gmm estimation revealed the presence of positive direct impact of both human capital and financial development on inclusive growth. akobeng (2017) investigated the effect of gfcf on poverty and explored whether the gfcf and poverty relationship can be strengthened in the presence of institutions. results of gmm estimation showed that gfcf appeared to be negatively signed and are significant across the poverty measures. the interaction of gfcf and institutional democracy is negative and significant. 3. data, models and methodology 3.1 data and methods the study utilizes panel data of 44 developing countries (see table 1) over the period from 2004 to 2017. the data used in this study is taken from three sources like world development indicators and world governance indicators managed by world bank organization and penn world table 8.0. units of measurements, data sources and variable definition are given in table 1 in more details. the results of the study are measured at three stages. at first stage, descriptive statistics are calculated; secondly, correlation analysis is done to check problem of multicollinearity and lastly, gmm methods is applied for econometric results of all the models to examine the impact of human capital and governance on poverty reduction. gmm method is much suitable to solve the problem of endogeneity present in the review of economics and development studies vol. 4, no 1, june 2018 106 models. more technically, ols does not account for un-modeled and un-observed country-specific variations. therefore, ols coefficients might be distorted due to significant correlations between unobserved country specific factors. in this way simple ols can provide bias coefficients. table 1 list of developing countries in the study s. no. name of country s. no. name of country s. no. name of country s. no. name of country 1 argentina 12 ecuador 23 kazakhstan 34 portugal 2 armenia 13 el salvador 24 kyrgyzstan 35 romania 3 australia 14 estonia 25 latvia 36 serbia 4 belgium 15 finland 26 lithuania 37 slovakia 5 bolivia 16 greece 27 netherlands 38 slovenia 6 brazil 17 honduras 28 norway 39 spain 7 costa rica 18 hungary 29 pakistan 40 swaziland 8 cyprus 19 iceland 30 panama 41 thailand 9 czech republic 20 indonesia 31 paraguay 42 turkey 10 denmark 21 ireland 32 peru 43 ukraine 11 dominican republic 22 italy 33 poland 44 united kingdom note: author’s own compilation 3.2 model specification keeping in view the objectives of the study that is to see the effect of human capital and governance on poverty, the study specifies following models with few variations. 3.2.1 model 1 𝐻𝐶𝐼𝑖𝑡 = 𝛽1 + 𝛽2𝐻𝐶𝑖𝑡 + 𝛽3𝐺𝐶𝐹𝑖𝑡 + 𝛽4𝑆𝑁𝑅𝐷𝑖𝑡 + 𝛽5𝑇𝑂𝑃𝑖𝑡 + 𝛽6𝑇𝐸𝐶𝐻𝑖𝑡 +∈1𝑡 3.2.2 model 2 𝐻𝐶𝐼𝑖𝑡 = 𝛽1 + 𝛽2𝐻𝐶𝑖𝑡 + 𝛽3𝐺𝐶𝐹𝑖𝑡 + 𝛽4𝑆𝑁𝑅𝐷𝑖𝑡 + 𝛽5𝑇𝑂𝑃𝑖𝑡 + 𝛽6𝑇𝐸𝐶𝐻𝑖𝑡 + 𝛽7𝑃𝐺𝑂𝑉𝑖𝑡 +∈2𝑡 3.2.3 model 3 𝐻𝐶𝐼𝑖𝑡 = 𝛽1 + 𝛽2𝐻𝐶𝑖𝑡 + 𝛽3𝐺𝐶𝐹𝑖𝑡 + 𝛽4𝑆𝑁𝑅𝐷𝑖𝑡 + 𝛽5𝑇𝑂𝑃𝑖𝑡 + 𝛽6𝑇𝐸𝐶𝐻𝑖𝑡 + 𝛽7𝐸𝐺𝑂𝑉𝑖𝑡 +∈3𝑡 3.2.4 model 4 𝐻𝐶𝐼𝑖𝑡 = 𝛽1 + 𝛽2𝐻𝐶𝑖𝑡 + 𝛽3𝐺𝐶𝐹𝑖𝑡 + 𝛽4𝑆𝑁𝑅𝐷𝑖𝑡 + 𝛽5𝑇𝑂𝑃𝑖𝑡 + 𝛽6𝑇𝐸𝐶𝐻𝑖𝑡 + 𝛽7𝐼𝐺𝑂𝑉𝑖𝑡 +∈4𝑡 3.2.5 model5 𝐻𝐶𝐼𝑖𝑡 = 𝛽1 + 𝛽2𝐻𝐶𝑖𝑡 + 𝛽3𝐺𝐶𝐹𝑖𝑡 + 𝛽4𝑆𝑁𝑅𝐷𝑖𝑡 + 𝛽5𝑇𝑂𝑃𝑖𝑡 + 𝛽6𝑇𝐸𝐶𝐻𝑖𝑡 + 𝛽7𝐺𝑂𝑉𝑖𝑡 +∈5𝑡 where hci is poverty head count ratio, hc is human capital index, gcf is gross capital formation, snrd is adjusted saving, top is trade openness, tech is high technology exports, pgov is political governance, egov is economic governance, igov is institutional governance and gov is overall governance. review of economics and development studies vol. 4, no 1, june 2018 107 table 2: description of variables variable description/ measurement data sources hci poverty headcount ratio at $1.90 a day (2011 ppp) (% of population) world development indicators hc index of human capital per person based on years of schooling and return to education. penn world tables 8.0 gcf gross fixed capital formation (constant 2010 us$) world development indicators snrd adjusted savings: natural resources depletion (% of gni) world development indicators top trade is the sum of exports and imports of goods and services measured as a share of gross domestic product. world development indicators tech high-technology exports (% of manufactured exports) high-technology exports are products with high r&d intensity, such as in aerospace, computers, pharmaceuticals, scientific instruments, and electrical machinery. world development indicators pgov a composite index construct by principal component analysis (pca) based on the data of two governance indicators i.e. voice and accountability (va) and political stability and no violence (psnv). world governance indicators egov a composite index construct by principal component analysis (pca) based on the data of two governance indicators i.e. government effectiveness (ge) and regularity quality (rq). world governance indicators igov a composite index construct by principal component analysis (pca) based on the data of two governance indicators i.e. rule of law (rl) and control of corruption (cc). world governance indicators gov a composite index construct by principal component analysis (pca) based on the data of all six world governance indicators. world governance indicators note: author’s own compilation. 4. results and discussion as per objectives of the paper which is to identify the impact of human capital and globalization on poverty. so, to capture the effects of human capital by including three dimensions and overall governance on poverty, five models ate estimated by using gmm estimation. the descriptive statistics for the variables used in the paper are presented in the table 3. review of economics and development studies vol. 4, no 1, june 2018 108 table 3: summary statistics variable mean max min std. dev. hci 2.8842 28.0000 0.0000 4.9426 hc 2.9049 3.7342 1.5209 0.4925 gcf 22.3179 43.6198 11.4413 5.4747 snrd 1.7904 17.5182 0.0000 2.7574 top 92.4159 216.1867 22.1059 40.6716 tech 19.9207 1747.509 0.0765 111.5052 va 0.5329 1.8009 -1.4948 0.7984 psnv 0.1930 1.6202 -2.81 0.7888 ge 0.4575 2.3539 -1.0538 0.9015 rq 0.5554 1.9251 -1.2962 0.8347 rl 0.3510 2.1003 -1.3715 0.9951 cc 0.3143 2.4699 -1.3733 1.0274 sources: authors’ own calculation based on the data taken from the sources mentioned above. the mean for head count index is 2.88 with the maximum and minimum values of 28 and 00 respectively. human capital has mean value of 2.90 with maximum and minimum value of 3.73 and 1.52 respectively. among governance indicators having the range of -2.5 to +2.5, voice and accountability and regulatory quality have maximum value of mean 0.53 and 0.55 respectively with maximum 1.80, 1.92 and minimum -1.49, -1.37 values. table 4 illustrates the bivariate correlation of the variables. there is a strong significant negative association between index of human capital per capita and head count index as poverty measures with correlation coefficient of -0.502 for the poverty headcount. the association between all six indicators of governance and the poverty measure significantly negatively correlated with correlation coefficients of 0.423, -0.551, -0.526, -0.542, -0.551 and -0.486 respectively. table 5 presents the results of gmm estimation for 5 different models in which impact of human capital is determined in the presence of different dimensions of governance. gmm estimation results of model 1 in which human capital along with other economic variables is used as main determinant of poverty shows the negative and significant impact on head count index as measure of poverty although gfcf, savings of natural resource depletion have positive and significant impact on poverty but trade has insignificant impact on poverty although it is positive. the impact of high technology exports on poverty is negative in first model. the signs of coefficients are logically and economically valid. as the human capital per person increased meaning when people acquire more knowledge and skills the income levels are enhanced that lower the proportion of the population living on or below the poverty line. in second model in which political governance is used along with the same variables used in first model, signs of coefficients remain the same and political governance affects the poverty negatively and significantly at 1% level with the value of coefficient -0.712 with the introduction of political governance in the model there is a slight change in the value of coefficient for human capital and improvement in the value of r-squared. empirical results of model 3 in which political governance is replaced with economic governance show the significant and negative impact of economic governance on the poverty the value of coefficient -0.892 with the improvement in the coefficient for human capital although the impact of the other variables on the poverty remain same throughout the models. economic governance is replaced with institutional governance in fourth model and its results show the negative and significant on poverty although coefficient for human capital is slightly reduced but still review of economics and development studies vol. 4, no 1, june 2018 109 more than the coefficients in model 1 and 2. in fifth model all six governance indicators are combined to form overall governance and its impact through human capital on poverty is estimated. results show the negative and significant impact of governance on poverty and impact of other variables including human capital remain the same throughout the other models. although the impact of human capital on poverty is slightly different with the introduction of different dimensions of governance but results prove that governance does matter for human capital to have a negative impact on poverty. good governance is very useful for effective public policies relating to health, education and skill development which boost the level of human capital which in turn increase the income levels and reduced poverty by raising the living standards. results estimated in the paper are consistent with the economic theory and are aligned with the results estimated by the other researchers (tebaldi and mohan, 2010; janjua and kamal, 2011; akanbi, 2015; perera and lee, 2013). review of economics and development studies vol. 4, no 1, june 2018 110 table 4: correlation matrix variables 1 2 3 4 5 6 7 8 9 10 11 12 1. hci 1 2. hc -0.502 1 3. gcf -0.043 0.202 1 4. snrd 0.315 -0.024 0.018 1 5. top -0.193 0.284 0.135 -0.271 1 6. tech -0.010 0.003 0.264 -0.045 0.092 1 7. va -0.423 0.569 0.009 -0.399 0.161 0.020 1 8. psnv -0.551 0.611 0.086 -0.311 0.336 0.004 0.768 1 9. ge -0.526 0.590 0.052 -0.360 0.238 0.018 0.871 0.760 1 10. rq -0.542 0.594 0.126 -0.442 0.290 0.012 0.851 0.759 0.930 1 11. rl -0.551 0.582 0.028 -0.400 0.242 -0.007 0.889 0.783 0.971 0.948 1 12. cc -0.486 0.511 -0.019 -0.310 0.171 -0.0184 0.868 0.750 0.957 0.898 0.963 1 sources: authors’ own calculation based on the data taken from the sources mentioned above. review of economics and development studies vol. 4, no 1, june 2018 111 table 5: gmm estimation results dependent variable: poverty poverty head count index: dependent variable model 1 model 2 model 3 model 4 model 5 human capital per person -3.632 (0.0000) -3.656 (0.0000) -5.162 (0.0000) -3.972 (0.0000) -3.777 (0.0000) gross fixed capital formation 0.049 (0.0610) 0.036 (0.2963) 0.043 (0.2009) 0.027 (0.4298) -0.034 (0.3263) savings for natural resource 0.554 (0.0000) 0.433 (0.0000) 0.377 (0.0000) 0.402 (0.0000) 0.385 (0.0000) trade openness 0.004 (0.4444) 0.003 (0.4628) 0.003 (0.4561) 0.003 (0.5795) 0.003 (0.5113) high technology exports -0.001 (0.7593) -0.009 (0.8165) -0.004 (0.7671) -0.005 (0.7481) -0.004 (0.7834) political governance -0.712 (0.0000) economic governance -0.892 (0.0000) institutional governance -0.855 (0.0000) overall governance -0.533 (0.0000) constant 15.471 (0.0000) 12.548 (0.0000) 11.558 (0.0000) 12.305 (0.0000) 11.732 (0.0000) observations 506 506 506 506 506 r-squared 0.3478 0.4640 0.377805 0.380369 0.376821 durban-watson stat 0.109317 0.101111 0.100364 0.102222 0.099819 sources: authors’ own calculation based on the data taken from the sources mentioned above. 5. concluding remarks the ultimate objective of the paper was to estimate the impact of human capital on pervert ratio in developing countries in the presence of governance level in selected countries. panel gmm approach is exploited to meet the objective of study by using data for 44 developing countries. the central opinion of this paper after gmm estimation is that human capital and globalization are key instruments to reduce poverty. additionally, governance measures such as political governance (voice and accountability and political stability and no violence), economic governance (government effectiveness and regulatory quality) and institutional governance (rule of law and control of corruption) interact with the human capital to reduce poverty. the results of correlation matrix show that there is no multicollinearity in the models. multicollinear variables are added in separate models like political governance, economic governance, institutional governance and governance. the results conclude that human capital and high technology exports are found to be significant causes of reduction in poverty in developing countries. moreover, not only political governance, institutional governance, economic governance but also overall governance are reducing poverty in developing countries. gross fixed capital formation and trade openness are found to be statistically insignificant. on the other side, savings for natural resource depletion is examined as increasing poverty in developing countries. review of economics and development studies vol. 4, no 1, june 2018 112 an effective poverty reduction strategy should be formulated while keeping in mind the human capital development through health and education and improving the governance infrastructure. further, people should be more productive and economically active which is only possible through inclusive growth that may prove as recipe for poverty reduction in developing countries. a successful poverty reduction strategy should be a development strategy that must depend on participation of poor in economic growth. future research may look at the issue of quality, accessibility and affordability of human capital and poverty reduction relationships. references afzal, m., malik, m. e., begum, i., sarwar, k., & fatima, h. (2012). relationship among education, poverty and economic growth in pakistan: an econometric analysis. journal of elementary education, 22(1), 23-45. akanbi, o. a. (2015). structural and institutional determinants of poverty in sub-saharan african countries. journal of human development and capabilities, 16(1), 122-141. akobeng, e. (2017). gross capital formation, institutions and poverty in sub-saharan africa. journal of economic policy reform, 20(2), 136-164. ayodeji, i. o., & adebayo, l. f. (2015). the interface between government policies, human capital development and poverty reduction in nigeria. european journal of business and innovation research, 3(4), 11-25. bakhtiari, s., &meisami, h. (2010). an empirical investigation of the effects of health and education on income distribution and poverty in islamic countries. international journal of social economics, 37(4), 293-301. barro, r. j. (1991). economic growth in a cross section of countries. the quarterly journal of economics, 106(2), 407-443. dias, j., & tebaldi, e. (2012). institutions, human capital, and growth: the institutional mechanism. structural change and economic dynamics, 23(3), 300-312. faria, h. j., montesinos-yufa, h. m., morales, d. r., & navarro, c. e. (2016). unbundling the roles of human capital and institutions in economic development. european journal of political economy, 45, 108-128. gounder, r., & xing, z. (2012). impact of education and health on poverty reduction: monetary and nonmonetary evidence from fiji. economic modelling, 29(3), 787-794. gupta, s., davoodi, h., & alonso-terme, r. (2002). does corruption affect income inequality and poverty?. economics of governance, 3(1), 23-45. hassan, r., &birungi, p. (2011). social capital and poverty in uganda. development southern africa, 28(1), 19-37. janjua, p. z., & kamal, u. a. (2011). the role of education and income in poverty alleviation: a crosscountry analysis. the lahore journal of economics, 16(1), 143. knack, s., keefer, p. (1996) institutions and economic performance: cross-country tests using alternative institutional measures. economics and politics, 7(3), 207–27. mankiw, n. g., romer, d., & weil, d. n. (1992). a contribution to the empirics of economic growth. the quarterly journal of economics, 107(2), 407-437. mauro, p. (1998) corruption and the composition of government expenditure. journal of public economics, 69,263–279 muhammad, a., egbetokun, a., memon, m. h., &hyder, a. (2015). human capital and economic growth: the role of governance/comments. pakistan development review, 54(4), 529. review of economics and development studies vol. 4, no 1, june 2018 113 oyinlola, m. a., &adedeji, a. (2017) human capital, financial sector development and inclusive growth in sub-saharan africa. economic change and restructuring, 1-24. perera, l. d. h., & lee, g. h. (2013). have economic growth and institutional quality contributed to poverty and inequality reduction in asia?. journal of asian economics, 27, 71-86. quang dao, m. (2008). human capital, poverty, and income distribution in developing countries. journal of economic studies, 35(4), 294-303. romer, p. m. (1990). endogenous technological change. journal of political economy, 98(5, part 2), s71s102. tebaldi, e., & mohan, r. (2010). institutions and poverty. the journal of development studies, 46(6), 1047-1066. zghidi, n., sghaier, i. m., &abida, z. (2016). remittances, institutions, and economic growth in north african countries. journal of the knowledge economy, 1-18. review of economics and development studies vol. 5, no 2, june2019 373 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june2019 journal homepage: www.publishing.globalcsrc.org/reads perceptions of prospective teachers about peer assessment as a tool for reflective practices 1 uzma shahzadi, 2 bashir hussain 1 phd scholar, department of education, bahauddin zakariya university, multan pakistan, uzmashah_bzu@yahoo.com 2 assistant professor, department of education, bahauddin zakariya university, multan. pakistan, bashirhussain@bzu.edu.pk article details abstract history revised format: may 2019 available online: june2019 peer assessment is a collaborative learning method that assists students to have a control of their learning and involve them in reflective process. this study focuses on exploring the perceptions of prospective teachers about use of peer assessment as a reflective tool in classrooms of teacher education programs. this study was quantitative in nature and used descriptive research design. all prospective teachers enrolled in the bachelor programs of teacher education programs (i.e., bs and b.ed. hon. elementary) of public sector universities of pakistan served as population of the study. using multistage purposive sampling technique, a sample of 1374 prospective teachers was selected. for seeking prospective teachers‟ opinion, a questionnaire comprising 17 items on a five-point likert scale, was developed. questionnaire was validated by experts. reliability of questionnaire was ensured with cronbach alpha value of 0.79. for data analysis, both descriptive and inferential statistics were used. from analysis of data, it was found that prospective teachers perceive that they are sometimes equipped with necessary skills for involving in peer assessment and occasionally their teachers provide them necessary tools to carry out peer assessment for the reflective learning. it was also found that majority of students agree that peer assessment helps them in identifying their weaknesses and strengths more effectively. while prospective teachers reported that peer assessment is an activity that takes a lot of time and it carries biasness with its procedure. it is, however, recommended that peer assessment might be an important component of classroom teaching and learning practices. it is further recommended that promotion of peer assessment in classrooms may be used as a tool for creation of reflective teaching and learning environment. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 peer assessment, reflective practices, feedback, teacher education programs. jel classification: a20, i21 corresponding author: uzmashah_bzu@yahoo.com recommended citation: shahzadi, u. and hussain, b. (2019). perceptions of prospective teachers about peer assessment as a tool for reflective practices, review of economics and development studies, 5(2), 373-380 doi: doi 10.26710/reads.v5i2.623 1. introduction in the field of assessment, the focus of the literature has changed from the reliability and validity of teacher and student marking (davies, 2009; falchikov & goldfinch, 2000) to student learning (wiliam, 2011) since the last few http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5 no 2, june2019 374 decades. use of formative assessments is considered as one of the most productive process for addressing student learning and improving teaching process in classrooms. assessment for learning, is most largely coined term in the literature of assessment. in this context, literature reports many tools for assessment for learning. peer assessment, when used for reflection, is also considered as a tool for assessment for learning. it has been noted that peer assessment can motivate the learners not only to focus on their learning but also to consider the ways they get engage with learning process of their peers and in return get benefitted from the discussion of relevant content (mcgarrigle, 2013). peer assessment is, therefore, becoming increasingly widespread in higher education as educators seek to diversify assessment methods and engage students in the assessment process (bloxham & boyd, 2007). peer assessment is thus defined a process and an arrangement in which individuals consider amount, level, value, worth, quality, success of products, or outcomes of learning of peers of similar status (topping, 1998). the literature directs such approach to get fit well within social constructivist approach. to assist students in such a co-construction of knowledge, research suggests involving students in the peer assessment and use criteria that is discussed and negotiated with the researcher/teacher (topping, 2009). this is also evident that peer assessment facilitates learning by guiding students to talk with each other about their work and share their experience (mcgarrigle, 2013). peer assessment provides an opportunity for the learners to reflect on their own learning as well as on the learning of their peers. swaffield (2011, p. 443) argued that “sharing criteria with learners enables them to develop a clear sense of what they are aiming at”, which coupled with “self and peer assessment helps students learn not only the matter in hand but also to develop metacognition”. peer assessment is an alternative assessment method that benefits the students by engaging them in reflective practice through a process of provision of prompt feedback. it is commonly quoted that peer assessment helps learners in increasing the awareness of the quality of their work, self reflection and on their performance as peer evaluators and in development of lifelong learning skills (egodawatte, 2010; falchikov, 1996; gielen, 2007; langan & wheater, 2003). literature also reports the benefits experienced by students participating in a formative feedback approach, including making criteria explicit to students, providing them with the opportunity to participate in a non evaluative feedback session, reviewing the work of their peers and reflecting on their approach to assignment (cartney, 2010; cho & mcarthur, 2010). one of the advantages of this approach is that when less confident students are involved in peer assessment and freely/fairly assign grades improves their feedback provision mechanism without indulging themselves in the associated concerns regarding competition or rivalry (wood & kurzel, 2008). because of its characteristics and benefits for the learners, it is also discussed under the umbrella of student centered approach. literature supporting this, presents its potential benefits in a way to allow students to actively participate in the assessment process. it provides an opportunity to the students to think more deeply and develop important cognitive skills such as teamwork, critical thinking, decision‐making, self‐monitoring and regulation, problem solving, get inspiration from their peers‟ work, collaborate, criticize constructively, suggest improvements, reflect and make sensible judgments (sluijsmans, dochy & moerkerke, 1998; sung et al., 2005). peer assessment is, thus, also known as an effective reflective tool to develop reflective practices in classrooms. peer assessment is also beneficial in the sense that the control and responsibility are given back to learners (siow, 2018). in pakistan, traditional assessment is commonly used method to assess learning and skills of learners in majority of classrooms. there is greater focus on the summative assessment than formative assessment. assessment data is, therefore, used to make decisions for classroom promotions rather than for learning. with educational reforms, integrated assessment methods are being addressed as a need at tertiary level. as a result of this, the induction of newly designed teacher education programs, formative assessments along with reflection are kept as an integral part of classroom teaching. the present research, therefore, aims to explore the role of peer assessment as reflective tool. 2. review of literature learning and process of learning that how humans learn and how teacher can infer the learning of an individual in a classroom is the most frequently asked question in the literature since long. assessment procedures and research in the field is facilitating the understanding of question that how can we utilize the results of assessment. this concept is known as assessment for learning. it is also known as formative assessment procedures. formative assessment is a continuous form of assessment that is carried out as an integrated form of assessment in teaching learning practices. peer assessment is also categorized as formative assessment procedure. it is defined as a process that review of economics and development studies vol. 5, no 2, june2019 375 provides students with opportunities to reflect upon their own understandings, build on prior knowledge, generate inferences, integrate ideas, repair misunderstandings and communicate their understandings (roscoe & chi, 2007). thus, peer assessment can have a variety of benefits for students, such as improved conceptual understanding, communication skills and self-assessment skills (black, harrison & lee, 2003; falchikov, 2005). peer assessment procedures involve analysis of peer work. in the literature, it is evident that peer analysis provides an opportunity for students to make judgments about the quality of a work, to give constructive criticism, to assign a grade, or to generate feedback. through peer assessment, therefore, a sense of distanced objectivity is developed during practical analytic experience that helps individuals in application of concepts in their own work (black, harrison & lee, 2003). sadler (1989) quoted that students are exposed to a variety of examples, while involving in peer analysis and it, in return, helps them in quality learning. peer assessment helps in strengthening the analytical, evaluative and critical abilities of individuals by encouraging them to involve in self-assessment. in this way, peer assessment supports both reflection and the reflective practices in classrooms. role of peer assessment and its benefits in individual development is noted by many authors in literature. kollar and fischer (2010) contend that peer assessment is “an important component” of “a more participatory culture of learning aiding the design of learning environments”, as well as being, “fundamentally a collaborative activity that occurs between at least two peers” (p. 344345). facilitating students to partake in some form of assessment interaction encourages some control over their own learning and alters the balance of power, where, as it is noted that, peer interaction of any form engages students in development of their own learning, both cognitively and emotionally (vickerman, 2009). bloxham and boyd (2007) stated that benefits for students participating in peer assessment include: helps them to understand the academic standards of the module, understand assessment criteria and how they are applied to students‟ work, understand alternative approaches to academic tasks, developing their ability to make judgments and justify their point of view, develops their ability to give constructive feedback to the peers and prepares them for self regulated learning by building their capacity to monitor their own progress rather than rely on a third party to do it (p. 62). bloxham and west (2004) also found that peer assessment helped students learn, developed their critical thinking skills and enhanced students‟ understanding of assessment standards. likewise, kearney (2013) contends that educators should design such assessments that involve and engage students and that build essential skills such as "critical thinking and autonomous learning", whilst also inspiring „innovation and creativity (p. 876). along with many advantages, however, literature also points out concerns about some aspects of peer assessment approach. around the limitations and risks of peer assessment, several important issues have been raised by the students and academia in higher education institutions (kaufman & schunn, 2011; patton, 2012; vickerman, 2009). accuracy and validity of feedback from peers is the point of concern in literature of peer assessments and formative assessment. it is noted that students tend to over-mark, particularly if process takes place in small established groups and/or if the identities of assessor and assesse are known (vickerman, 2009). furthermore, students are hesitant to take responsibility in peer assessment. in patton‟s qualitative study on undergraduate, students shared experiences of peer assessment, and noted that some students prefer facilitators to take responsibility for assessment as they do not consider that their peers have the necessary „expertise‟ required to grade their work. patton (2012) also noted that epistemological expertise of facilitators and professors invests them with legitimacy and authority to assess student work when this expertise is absent, students are less likely to take on board critiques of their work. likewise, studies also found that students perceive peer assessment process as inconsistent and unfair (foley, 2013; kaufman & schunn, 2011). it is also observed that judging the written work of students from across many disciplines is, in itself, a complicated task for facilitators, and more complicated situation for first year students alone. students have also reported feelings of anxiety while grading their peers when lacking experience in conducting peer assessment (brown, rust & gibbs, 1994). despite some of its disadvantages, it is noted that peer assessment develops several skills among students that includes a wide range of cognitive, behavioral, and transferable skills. these soft or transferable skills include: communication, critical thinking, reflective thinking, collaboration, teamwork, self-management, and awareness (reinholz 2016; suñol et al. 2016; wu, chanda, & willison, 2014). peer assessment is known for providing opportunity to act as assessor, evaluator and manage learning during the process. peer assessment enable individuals to be independent and lifelong learners (boud & soler, 2016; carless, 2013). for this reason, the higher review of economics and development studies vol. 5 no 2, june2019 376 education institutes consider the development of individuals in such a way that they can take responsibility of their own learning and development and act as reflective practitioners. 3. objectives main objective of this study was to explore the perceptions of prospective teachers about the role of peer assessment as a reflective tool in classrooms of teacher education programs. this study further investigated the difference between perceptions of male and female prospective teachers and difference between perceptions of prospective teachers enrolled in bs education program and b.ed. (hons.) elementary program. 4. methodology this study was descriptive and quantitative in nature. accessible population of the study was all prospective teachers enrolled in regular and accredited bachelor teacher education programs of public sector universities. multistage purposive sampling technique was used to select a sample size of 1374 prospective teachers from 21 public sector universities, from six administrative units i.e. ict area, punjab, sindh, balochistan, khyber pakhtunkhwa, and gilgit baltistan. teacher education departments offering regular and accredited bachelor‟s degree programs were selected purposively. intact group (census) of prospective teachers from available semesters are selected for data collection. an instrument i.e., perceptions of peer assessment as a reflective tool (ppar) was developed by the researchers. the instrument was developed on a five-point likert scale and comprised 17 statements. instrument was validated by taking experts‟ opinions. cronbach alpha value was found to be .79. the data were analyzed by using descriptive and inferential statistics, with the help of spss version 22. 5. data analysis data were analyzed using both descriptive and inferential statistics i.e., the mean, the standard deviation and an independent sample t-test. independent sample t-test was applied to explore the significant difference among independent samples. to examine the perceptions of prospective teachers about the role of peer assessment as a tool for reflective practices in classrooms of teacher education programs of pakistan, values of mean and standard deviations were calculated, and results are presented in table 1. table 1: necessary skills, procedures and tools for peer assessment practice sr. no themes n mean sd 1 necessary skills for peer assessment 1374 3.3 1.3 2 clarity in procedure of peer assessment 1374 2.5 1.4 3 tools are available for peer assessment 1374 2.5 1.4 4 lot of responsibility for student 1374 4.1 1.0 5 overall 1374 3.1 1.2 table 1 represents that the mean values of two statements fall between 2.0 and 2.5. it shows that the prospective teachers have less clarity in procedures of peer assessment during teaching and learning in classrooms and tools for peer assessment are occasionally provided in classrooms. furthermore, table 1 reflects that mean value of one statement lies between 3 to 3.5 and it shows that prospective teachers are sometimes equipped with necessary skills for peer assessment. it is also reported by prospective teachers that often peer assessment address lot of responsibility for students. overall, mean score represents that prospective teachers sometimes are provided with necessary skills, procedures and tools for peer assessment as reflective practice tool in classroom teaching learning practices, but with some concerns. values of standard deviation comparatively show moderate level of consensus among students. it can be therefore concluded that prospective teachers need to be trained in necessary skills, procedures and tools for peer assessment practice. table 2: effective role of peer assessment to support reflective practice sr. no. themes n mean sd. 1 assists me to master the reflective skills 1374 3.3 1.3 2 analyze my strengths and weaknesses 1374 3.4 0.9 3 effective tool for critical thinking 1374 3.5 1.1 4 needed for constructive learning 1374 3.3 1.3 5 motivates students for healthy competition 1374 4.1 1.1 overall 1374 3.6 1.1 review of economics and development studies vol. 5, no 2, june2019 377 the above table 2 represents that the mean values of four statements lie between 3.0 and 3.5. it shows that the prospective teachers sometimes use peer assessment as a reflective tool to seek assistance to master reflective skills and they reported that peer assessment is sometimes needed for constructive learning. moreover, prospective teachers reported that use of peer assessment sometimes provide opportunity to analyze their own strengths and weaknesses and sometimes it is an effective tool for critical thinking. table 2 also indicates that peer assessment motivates the students more often for healthy competitions. overall mean score reflects that less often there is an effective role of peer assessment to support reflective practices in classrooms. table 3: peer assessment as feedback tool to support reflective practice sr. no. themes n mean sd. 1 peer assessment provides prompt feedback 1374 3.9 1.08 2 3 4 feedback assist in self assessment feedback supports reflection prompt feedback from peers regulate learning 1374 1374 1374 3.5 3.6 2.7 1.4 1.2 1.3 overall 1374 3.4 1.2 the above table represents that the mean value of one statement is 2.7. it shows that occasionally feedback regulates learning of prospective teachers. mean values of three statements lie between 3.5 and 4.0 that shows less often use of peer assessment to support reflection and in providing prompt feedback. it is also reflected that less often peer assessment assist in self assessment. the overall mean score (3.4) shows the prospective teachers perceive that the use of prompt feedback in peer assessment sometimes supports reflective practices in classrooms. table 4: role of peer assessment as less reflective practice tool sr. no. themes n mean sd. 1 peer assessment is more subjective 1374 3.8 0.9 2 peers are more demanding 1374 3.4 1.2 3 it is a biased procedure 1374 2.9 1.4 4 it wastes time 1374 3.0 1.5 over all 1374 3.3 1.3 table 4 represents that the mean values of two statements lie between 2.5 and 3.0 that shows that peer assessment is occasionally a biased procedure and sometimes it wastes time of prospective teachers. furthermore, mean value of one statement is 3.4 and it indicates that the peers are more demanding in a peer assessment task and prospective teachers also responded that less often peer assessment is more subjective in nature. overall mean score of 3.3 represents that prospective teachers sometimes consider peer assessment as a less effective reflective tool in the classroom teaching learning practices. inferential statistics i.e. independent sample t-test was also applied. table 5 represents the independent sample t test (gender) followed by interpretation of the test. table 5: independent sample t-test (by gender) participants n mean df sig. cohen‟s d female prospective teachers 121 52.53 1372 .000 .30 male prospective teachers 353 55.20 the results of table 5 presents that the significant value (p-value) for the role of peer assessment is 0.00 i.e., p<0.05. it shows that there is a statistically significant difference between perceptions of female and male prospective teachers about the role of peer assessment as reflective practice tool in classrooms. table further reflects that male prospective teachers perceive that the role of peer assessment as a reflective tool is higher than that of female prospective teachers. the effect size was found .30 that shows the medium effect size between the two means. table 6: independent sample t-test (by program) participants n mean df sig. cohen‟s d prospective teachers (bs. education) 371 53.75 1372 .122 .08 prospective teachers b. ed. (hons.) 1003 53.01 review of economics and development studies vol. 5 no 2, june2019 378 the results of table 6 indicate that the significant value (p-value) for the role of peer assessment is 0.12 i.e., is p>0.05. it indicated that there is statistically no significant difference between the perceptions prospective teachers enrolled in bs and b. ed. (hons.) elementary program. table reflects that there is no difference between the perceptions of prospective teachers enrolled in bs. education and b.ed. (honors) elementary programs about the role of peer assessment as a reflective tool. table further reflects that cohen‟s d effect size is .08 and it is depicting that there is very small effect between the two means. 6. discussion and conclusions this research study intended to explore the perceptions of prospective teachers about the role of peer assessment as reflective tool. the results of the study are generally, in line with the theory and findings from the previous researches. the study concluded that peer assessment assign lot of responsibility to the students in classroom and it assist the students in developing their critical and reflective skills. findings are in line with the findings of the study conducted by adachi, tai and dowson (2018), which found that peer assessment makes students responsible for assessing their peers. it was also revealed that peer assessment promotes concept of prompt feedback that helps students in developing their reflective abilities and reflective learning. the findings of the study are in line with the findings of the study conducted by stegmann et al. (2012) which found that academics recognize that participation in peer assessment and giving feedback may benefit the provider of feedback more than recipient. peer assessment encourages students to be the part of healthy competition. furthermore, this research study concluded that peer assessment less often acts as an effective tool for critical thinking and reflective tool in teaching and learning. the study also concluded that occasionally peer assessment is a biased procedure and sometimes it is a time waste activity as perceived by prospective teachers. this study concluded that there is a significant difference the perceptions of male and female prospective teachers for role of peer assessment as reflective tool. the finding is in line with the study conducted by ahmed and molen (2010) that showed a significant difference in number of male and female students who show comfort in involvement in peer assessment procedures. it was also found that there is no significant difference between the perceptions of prospective teachers enrolled in bs education and b.ed. (honors) elementary program. it was also revealed that peer assessment is time waste and biased activity as perceived by prospective teachers. this is in line with the findings of the study conducted by adachi, tai, and dawson (2018), which concluded the time constraints and reliability of student judgment skills. the study recommends that clarity in carrying out peer assessment for reflection might be provided and prospective teachers may be made acquainted and equipped by providing necessary information, strategies and tools for use of peer assessment. policies regarding assessment might be altered to include peer assessment as an important component of our traditional assessment procedures. assessments data might be utilized to develop reflective practice among prospective teachers. references adachi, c., tai, j. h. m., & dawson, p. 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(2014). implementation and outcomes of online self and peer assessment on group based honors research projects. assessment & evaluation in higher education 39(1): 21–37. review of economics and development studies, vol. 7 (3) 2021, 343-356 343 investigating the predictors and outcomes of entrepreneurial bricolage sumera asgher butt a , zulfiqar ahmed bowra b , naveed iqbal chaudhry c a ph.d. scholar, hailey college of commerce, university of the punjab, lahore pakistan email: samera.bilal@pugc.edu.pk b principal, hailey college of commerce, university of the punjab lahore, pakistan email: zulfiqar.hcc@pu.edu.pk c associate professor, department of business administration, university of the punjab, gujranwala campus, pakistan email: naveed.iqbal@pugc.edu.pk article details abstract history: accepted 29 july 2021 available online september 2021 entrepreneurial leaders have the ability to influence business model innovation and entrepreneurial bricolage. introducing alternative ideas and behaviors in an enterprise nowadays often linked to innovation. companies are eager to take advantage of or benefit from new goods or services or technological marketing channels in this context. due to the recognition of leadership as an important driver of business innovation, a perceptual framework has been established in order to study the consequences of entrepreneurial leadership on the desire to build business model innovation in organizations, with business acting as a mediating moderating function on entrepreneurial bricolage and entrepreneurial self-efficacy. to explore the conceptual model of the study, five hypotheses have been proposed. a self-managed survey was conceived to acquire cross-sectional responses from 325 people working in the punjab, pakistan manufacturing industry. the results demonstrated that, when entrepreneurial self-efficacy is high, the link between entrepreneurial leadership and business model innovation models is stronger. as a result, this is a one-of-a-kind cross-sectional study that investigates the mediating-moderating process of business bricolage and entrepreneurial self-efficacy in pakistan's manufacturing industry. the study contributes to existing research while also assisting legislators in taking action to govern workplace self-efficacy and encouraging leaders to use entrepreneurial bricolage techniques and business model innovation. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: investigating, predictors, outcomes, entrepreneurial bricolage jel classification: l26, l29 doi: 10.47067/reads.v7i3.370 corresponding author’s email address: samera.bilal@pugc.edu.pk 1. introduction a sort of "entrepreneur" leader that is different from previous styles of behavioral leadership is needed in the increasingly unstable and competitive environment that business companies face (gupta review of economics and development studies, vol. 7 (3) 2021, 343-356 344 et al., 2004). leadership includes entrepreneurial ideals enterprise, enterprising purpose and entrepreneurial administration (covin & slevin, 1988; miller, 2011; schumpeter & nichol, 1934; stevenson, 1983). it takes a comprehensive orientation to entrepreneurship in order for entrepreneurial initiatives to encourage the development of better skills for continuously creating and subverting real worth. as a result, entrepreneurship would include a basis for significant advantage and technological growth in all types of businesses looking for leadership and productivity in the new era. entrepreneurial leadership is an individual who can reorganize their business to take advantage of new chances and increase their capacity to develop strategies to compete in a highly uncertain environment (huang et al., 2014). (gupta et al., 2004) defined three-dimensional entrepreneurial leadership, innovation (to encourage creativeness between team members and to produce new goods and services), pro activeness (to motivate people to compete with other firms) and risk taking (eagerness to face ambiguity and take liability). entrepreneurship leadership seems to have a connection with strong organizational growth, because it generates a competitive edge and guarantees sustainability (palalic, 2017). nonetheless, there have been few studies on the relationship between entrepreneurial leadership and business model innovation, so this association needs to be investigated in this research. business models have often evolved, but in latest days, professionals and legal scholars were much more interested in them. we're hearing even more from businesses adults and kids, from a variety of industries where business model creativity has become a core factor of growth. although brilliant and successful business models frequently seem to have gotten right from the president's desk to execution, enabling the organization to fame and wealth, modern business models usually fail the first run around, as legislators overcome difficulty at both investigative and development phases. organizations are facing the complexity and randomness of rapidly environments at the observational period, as their new business plan has been conceptualized; additionally, began developing their psychological models of the world on small or incomplete perceptual images, they will be hindered through their own "analogical reasoning." new business models necessitate organizational reconfiguration at the transition period, which necessitates legislators mobilizing raw materials, developing specialized skill sets, and adjusting organizational processes to facilitate training, improvement, and transformation. it is commonly recognized that entrepreneurs have to establish business limits and identify the product/service they want to offer throughout the initiating phase (trimi & berbegal-mirabent, 2012) this is a particularly tough challenge for new technological firms, which often need major expenditures and have a limited period to develop the concept into a full-time enterprise, avoiding product obsolescence (trimi & berbegal-mirabent, 2012). innovation is defined as a drive to accomplish things in a more imaginative way. in the context of a business, innovation refers to the fusion of a variety of current methods that enable a firm to accomplish and outperform its competitors (al-ansari et al., 2014). for example, just because of product innovation and business model innovation (bmi) apple organization has become the center of market attraction and cover 30 times larger than its original market. in organizations, entrepreneurial leadership is accessing the circumstances and identifying the best ideas, preparing the organization for projects to be tackled and selecting the best for scale-up, and then systematizing these one-time efforts by constructing the platforms and skills required (lindgardt et al., 2009). however, a few tasks are critical in these phases in order to seek business model innovation (bmi) (lindgardt et al., 2009), but with the help of entrepreneurial leaders, followers can cope with those critical phases. the majority of entrepreneurs experience major budget constraints (shepherd et al., 2000). most creative companies, as (aldrich, 1999; aldrich et al., 1941)lamented, “can’t always seem to get whatever they want, and definitely might not get everything they need.” insufficient capital, relational, contextual, and some other asset protections are used to build the harmonic company (bourgeois iii & review of economics and development studies, vol. 7 (3) 2021, 343-356 345 eisenhardt, 1988; brüderl et al., 1992). bricolage habits have been described as a means for certain businesses to “make do” by combining capital available to solve new problems (baker & nelson, 2005). bricolage behaviors which are effective can aid in the growth of companies that are capable of handling price swings, succeed, and maybe even resilience in the face limited funding. in the last decade, bricolage has emerged as one of the most important principles in entrepreneurial education for understanding entrepreneurs' dynamic behavior and methods in resource creation and use. the extent to which consumers believe they have the potential to effectively fulfill the different duties of entrepreneurship is known as entrepreneurial self-efficacy (ese) to partake in the new business economic growth with no need for a minimum degree of entrepreneurial self-efficacy (boyd & vozikis, 1994; krueger jr & brazeal, 1994; markman et al., 2002; zhao et al., 2005).possible future founders are unable to be adequately inspired self-efficacy also enjoys (judge & bono, 2001; stajkovic & luthans, 1998). people who have high levels of self-efficacy, for instance, are more prepared to follow imperfect market, stick to them even in the midst of adversity, and rebound rapidly from disappointment. the above advantages are probably to be especially beneficial in the world of contemporary entrepreneurial intention, which is marked by increasing magnitude, absolutely imperative demand, and knowledge exposure (baron, 1998). as a result, it's really no surprise that entrepreneurs with strong entrepreneurial self-efficacy experience better financial performance (bradley & roberts, 2004) and drive their companies to increased sales and labor productivity (baum & locke, 2004; baum et al., 2001) while those with poor entrepreneurial self-efficacy cannot make their performance better. the first part of this study is to look at the influence of entrepreneurial leadership on innovation of the business model as well as the link between entrepreneurial leadership and self-efficiency (renko et al., 2015) on entrepreneurial bricolage where self-efficacy is a moderator between entrepreneurial leadership and bricolage, and bricolage plays a mediating role between business model innovation (bmi) and entrepreneurial leadership. 2. literature review and development of hypothesis 2.1 entrepreneurial leadership and business model innovation a lot of entrepreneurship research has looked at how entrepreneurial leadership affects growth, imagination, learning, and business efficiency (covin & slevin, 1989; huang et al., 2014; wiklund & shepherd, 2005; zahra, 1991). leadership is considered as having a significant impact on creativity and imagination (yukl et al., 2013). we describe entrepreneurial leadership as a "leading role that develops creative scenarios that serve to organize and assemble a" supporting cast "of those involved with a vision of strategic value development to be identified and exploited (gupta et al., 2004).according to (schumpeter & nichol, 1934), they highlighted that the process of disruptive innovation, entrepreneurship and innovation are linked. innovation is defined as a drive to accomplish things in a more imaginative way. in the context of a business, innovation refers to the fusion of a variety of current methods that enable a firm to accomplish and outperform its competitors(al-ansari et al., 2014). it is all part of new technology, such as commodity efficiency, manufacturing, economies and commodities, and new corporate innovation, which is described by the oecd's new organizing strategy (deschamps & van nes, 2005; rosenbusch et al., 2011). the adoption of unique corporate objectives in a company's management procedures, staff structure, or stakeholder interests is defined by the oecd as organization innovation. for various types of development, such as generating creativity and new designs, building alternative company models, enhancing customer experiences, and increasing performance, procedures, and sales channels, several forms of entrepreneurial leadership skills are recommended (deschamps & van nes, 2005). the request for innovation of the organization is the first stage in creating or adopting organizational innovation. this creates a further pressure on entrepreneurial leaders to remain vigilant about new products and procedures in their organization, review of economics and development studies, vol. 7 (3) 2021, 343-356 346 test them, and propose them. innovation par excellence would be achieved by an on-going high degree of trade vigilance, but also a duty to gain and grow the expertise and skills needed to make use of these options (park, 2005). in recent years, several findings have shown that some leadership styles (i.e. supportive, transformational and democratic etc.) have been positive in the field of innovation within the organization (gumusluoğlu & ilsev, 2009; hsiao et al., 2009; jung et al., 2008; jung et al., 2003; oldham & cummings, 1996; sarros et al., 2008; tierney et al., 1999). el is more prevalent among founding leaders than those of unfounded organizational leaders. a mixed-method research by (he et al., 2017) found that entrepreneurs are characterized and openly viewed as someone having a view, motivation, integrity and transparency. moreover, in businesses confronting a chaotic environment, el plays a key role and hence demands more attention to study. in recent research (fontana & musa, 2017), el was characterized as a distinctive leadership style that focuses on the development of diverse talents and on building and developing shared procedures in an organization to address an unclear business innovation model (innovation process), as well as to make systematic strategies and access innovative results (innovation performance). while this research has provided helpful insights, subsequent research suggests that entrepreneurial behaviors are more relevant in many situations, alongside participatory, supporting and transformative behaviors. literature from recent times implies that organizations, with an increased rivalry for essential resources, must be more entrepreneurial to enhance their capability in the complex and explosive environment for the long term (gupta et al., 2004). researchers have thus began researching "ways to advocate entrepreneurial conduct in companies and the notion of entrepreneurial leadership is one of them in the literature" (renko et al., 2015). (newman et al., 2018) has verified that innovative conduct will be more convincing when people operate under a powerful entrepreneurial leader. so from the above discussion we can conclude that: h1: entrepreneurial leadership have a significant influence on the business model innovation (bmi). 2.2 entrepreneurial leadership and entrepreneurial bricolage (baker & nelson, 2005) identified bricolage activities as a method that some entrepreneurs "create" by combining available resources to address new challenges. entrepreneurial behavioral theory seeks to clarify how businessmen might occasionally "do" resource constraints to recombine the available resources. bricolage may occasionally produce "great unanticipated results" (lévi-strauss, 1967), but it can also lead to poor performance, implying that a reliance on bricolage in too many business sectors may interfere with a company's ability to focus on a prime opportunity. but it did not specify or evaluate certain behaviors that might undermine the advantages of bricolage. entrepreneurial leadership is assisting in the discovery of new and valuable bricolage prospects (baker & wurgler, 2007; baker & nelson, 2005) for example, by using all the social relationships it has access to, the us toy business may exploit local resources as inexpensively as feasible. business leaders may also assist companies to decrease lock in constraints on the utilization of present resources and identify new potential applications for accessible resources by means of knowledge engagement, environmental detection and mission management (di domenico et al., 2010). this will help entrepreneurial leadership clarify resources and attributes and hence encourage more bricolage techniques. thus we can make a hypothesis that: h2: entrepreneurial leadership have a significant effect with entrepreneurial bricolage. 2.3 entrepreneurial bricolage and business model innovation bricolge was frequently considered the final choice for companies addressing organizational imbalance and lack of competitiveness in its early years of adoption. for example, (fuglsang, 2010) discovered, for example, that bricolge is a processing method that inexorably leads to productive innovation. bricolage invites businesses to build unique value propositions by combining current and review of economics and development studies, vol. 7 (3) 2021, 343-356 347 new capital. since these tools are not uniform, they can be bricolaged to build new value propositions. from the preceding results, it is approved that business model significantly relates to the entrepreneurial performance (afuah & tucci, 2003; george & bock, 2011; zott & amit, 2010). according to (phangestu et al., 2020) when entrepreneurial leadership increases the business innovation model then the start-ups getting stronger. entrepreneurial bricolge, we believe, has three primary business (bmi) implications. first, by bricolaging current and new resources, companies may build a new value proposition. these resources cannot be recognized but can be used for developing new values through bricolage. a relative study of wind turbine product innovation was conducted by (garud & karnøe, 2003), for example, in denmark and the united states. they observed that danish companies were even scouring waste products for material. they have recreated product designs based on the resources available and attained the desired aims. conversely, companies in america concentrated on how components and parts may be made and improved on the basis of conventional designs and finally have achieved less than their danish counterparts. this example provides a valuable reference source for entering businesses employing line by line resources that indicate that they can also play an unintended role in the development of innovative goods or services via bricolage. thus bmi can drive business bricolage by means of the creative value suggestion of the firm model. second, bricolage's new value proposition may enable companies to expand beyond their market borders, re-analyze, and redefine themselves as target market segments .bricolge can improve bmi by changing the company model's consumer categories, mediums, and customer relationships (baker & nelson, 2005; desa & basu, 2013). third, bricolage might let enterprises to build new regulations and standards in the existing conditions by refusing to adopt the rules and practices of the default industry (baker & nelson, 2005). in short, bricolage can help bmi by changing one or more components of the business strategy. from the above arguments we can conclude that: h3: entrepreneurial bricolage have a significant effect on the business model innovation. 2.4 bricolage is mediating the relationship of entrepreneurial leadership and business model innovation when institutional support or resource shortages are insufficient as a result of uncertainty, entrepreneurial bricolage (eb) acts as a change or innovation agent (garud & karnøe, 2003). bricolage is a significant method of innovation, if young companies join it instead of referring to resource limitations. eb mediates the link between entrepreneurial leadership and the innovation model of firms (hooi et al., 2016). (hambrick, 2007) acknowledged the influence of the senior management team on the success of a firm. therefore, to forecast organization results, it is vital to comprehend their conduct. managers can use a limited range of resources to implement business policies in order to increase performance and build sustained competitive advantage, according to rbv theory. in order to flourish over time, organizations, including society and the environment, need to conserve their resources. for long-term success, organizations, including society and the environment, must conserve their resources. to do so, they must also incorporate social responsibility principles into their business actions (halabi & samy, 2009; zain, 2006), and be able to design and invent solutions by repurposing available resources: engage in entrepreneurial bricolage. (gundry et al., 2011) found that entrepreneurial bricolage mediated the relationship between disruptive innovation and the innovation environment. this study also supports the notion that bricolage improves business performance by encouraging entrepreneurial innovation, which leads to entrepreneurial leadership. however, certain subjective resource utilization efforts eventually restrict firms and make it harder for them to create innovation in business models. entrepreneurship must thus inspire the innovative use of resources through bricolage in order to foster business model innovation. moreover, entrepreneurial management review of economics and development studies, vol. 7 (3) 2021, 343-356 348 in many companies can merely establish a network of resources without resulting significantly in innovation in their business models. h4: entrepreneurial bricolage mediates the relationship between entrepreneurial leadership and business model innovation. 2.5 self-efficacy moderates the relationship between entrepreneurial leadership and entrepreneurial bricolage according to (hmieleski & corbett, 2008) a high level of entrepreneurial self-efficacy favorably moderates the association between an entrepreneurial leadership and entrepreneurial bricolage. almost all of the study scholars have explored the direct or mediating influence of entrepreneurial self-efficacy on employees' creativity or creative behavior, but have showed no interest in exploring the moderation path for this variable. according to (bandura et al., 1999) the self-efficacy hypothesis divides into two categories (i.e. general to specific). the generalized self-efficacy stays steady in general, but it is recognized that as it progresses toward specificity, it becomes more vulnerable to personal and contextual circumstances. (bandura et al., 1999) the creative/ entrepreneurial self-efficacy belongs inside the specificity continuum, according to bandura's two continuum model. according to (forbes, 2005; tierney & farmer, 2002), creative/ entrepreneurial self-efficacy is dependent on personal and environmental characteristics and the study of (kickul et al., 2009; mcgee et al., 2009; yang & cheng, 2009) and may lie on a high or low continuation, which may influence the strategies used to enhance innovative behavior among employees. (ahlin et al., 2014; jaiswal & dhar, 2015; mokhber et al., 2016) (hmieleski & corbett, 2008; indrawati et al., 2015). past research shown that leadership is favorably linked to the self-efficacy of employees (aggarwal & krishnan, 2013; jaiswal & dhar, 2015). while (momeni et al., 2014) revealed that creative work behavior is positively connected with the self-efficacy of workers. employees with considerable autonomy lead, in the other hand, to the capacity to carry out their jobs effectively. the moderator variable for the link between entrepreneurial leadership and entrepreneurial bricolage has therefore been assigned creative self-efficacy for workers. h5: entrepreneurial self-efficacy moderates the relationship between entrepreneurial leadership and entrepreneurial bricolage. 3. conceptual framework 4. research methodology 4.1 data collection for the aim to obtain data a quantitative, cross-sectional research methodology and survey (questionnaire) tool were chosen to compile data from defendants employed at the manufacturing district of sialkot and gujranwala divisions, punjab, pakistan. using the random sampling method, out entrepreneurial leadership entrepreneurial bricolage business model innovation entrepreneurial self-efficacy review of economics and development studies, vol. 7 (3) 2021, 343-356 349 of 400 questionnaire 325 were selected with the response rate of 81.25. 75 questionnaire were skipped during the screening process due to a lack of merit and were discovered anonymously not performed by people during the outcomes analysis. following the selection process, a total of 325 questionnaires were chosen. 4.2 instrumentation this study's instrument was split into two parts. the first segment dealt with demographic and organizational facts about the respondents. the second section was divided into five parts, each with its own set of questions designed to elicit respondents' perspectives on each variable. all the items of questionnaire variable that are present in questionnaire are adopted from the previous literature. three scaleitem of entrepreneurial leadership was adapted from the (renko et al., 2015), 4 scale-item items of entrepreneurial bricolage is adapted from the (gundry et al., 2011; senyard et al., 2010). 3 scale-item of business model innovation is used to adopted from the (zott & amit, 2007, 2008) scale. and selfefficacy questionnaire items were adapted from (george & bock, 2011) article named as self-leadership and performance outcomes: the mediating influence of self-efficacy 5. findings of the study 5.1 correlation analysis the mean, standard deviation and correlation between the different variables are shown in table 1. in order to assess the meaning of associations between variables, a correlation test is done. table 1 shows that entrepreneurial leadership has positive and substantial correlations, r = 0.473, r = 0.308 and r = 0.327, respectively, to entrepreneurial bricolage, business model innovation and entrepreneurial self-efficacy. in addition, the entrepreneurial self-efficacy is good with entrepreneurial bricolage and substantially connected with r = 0.330. it is also shown from the data that the entrepreneurial bricolage has a good connection with business model innovation with r = 0.243. table 1: mean, standard deviation and correlation variables mean sd x m y w entrepreneurial leadership (el) 4.126 0.688 1 entrepreneurial bricolage (eb) 3.914 0.661 0.473** 1 business model innovation (bmi) 4.072 0.554 0.308** 0.243** 1 entrepreneurial self efficacy (ese) 4.266 0.667 0.327** 0.330** 0.369** 1 ** correlation is significant at 0.01 level 5.2 measurement model the reliability and validity of items shown in table 2. the values of the coefficient cronbach alpha (α) were assessed for reliability. the reliability values for all dimensions, entrepreneurial leadership, entrepreneurial self-efficacy, entrepreneurial bricolage and innovation in business models are over threshold 0.70 that means all the variable design possess strong internal consistency. for validity the convergent validity and discriminant validity were tested. for convergent validity the factor loading and average variance extracted (ave) were analyzed. according to (fornell review of economics and development studies, vol. 7 (3) 2021, 343-356 350 & larcker, 1981) the factor loading value and the values of ave must be more than 0.50 for each construct to confirm the presence of validity. in table 2, factor loading values for each item are between 0.549 and 0.875 indicating that all values are over the minimum threshold as set by (hair et al., 2010). also, the values of the extracted average variance (ave) exceed 0.50. next for the discriminant validity, the values of cronbach’s alpha of each construct and its correlations with other model variables were compared. the greater values of the alpha than the average of its correlations with other variables, indicates the presence of discriminant validity (ghiselli et al., 1981; sila & ebrahimpour, 2005). the positive values of discriminant validity in table 2, indicated the evidence of the discriminant validity. thus, all the table findings suggest that internal reliability and validity of the measuring model is available. table 2: reliability and validity analysis variables items loading values (λ) cronbach’s alpha (α) average variance extracted (ave) discriminant validity entrepreneurial leadership (el) 3 0.79, 0.875 0.574 0.774 0.573 0.405 entrepreneurial bricolage (eb) 4 0.615, 0.698, 0.661, 0.527 0.713 0.539 0.365 business model innovation (bmi) 3 0.607, 0.725, 0.632 0.710 0.541 0.403 entrepreneurial self efficacy (ese) 9 0.661, 0.692 0.546, 0.592 0.568, 0.658 0.590, 0.565 0.549 0.829 0.665 0.489 5.3 mediation analysis the mediation analyses were performed using the methodology of (baron & kenny, 1986). in this respect, firstly, the direct effect of the independent (entrepreneurial leadership) to the dependent (business model innovation) variable and then the indirect effect between the two variables should be assessed by means of a mediating variable (entrepreneurial bricolage). the findings of latent direct and indirect impact variables are shown in table 3. direct effect: the direct association between dependent and independent variables has resulted in an important and favorable impact of entrepreneurial leadership on business-model innovation. this substantial result allowed the mediation test to be analyzed. the findings also lend support to the theoretical connections between enterprise leadership and enterprise bricolage, which benefited and significantly improved the business innovation model. indirect effect: the value of the beta co-efficient then changed from 0.191 to 0.042 in p< 0.01, and remained significant by establishing a mediation variable entrepreneurial bricolagein between independent and dependent variable. the results therefore revealed that the entrepreneurial bricolage is somewhat mediated between entrepreneurial leadership and the innovation business model. review of economics and development studies, vol. 7 (3) 2021, 343-356 351 table 3: direct and indirect effects hypotheses coefficient se 95% ci findings total effect elbmi 0.233 0.043 (0.109, 0.278) significant direct effect elbmi 0.191 0.041 (0.153, 0.314) significant eleb 0.190 0.043 (0.109, 0.278) significant ebbmi 0.780 0.036 (0.188, 0.327) significant indirect effect bootstrap result elebbmi 0.042 0.016 (0.070, 0.111) significant (partial mediation) 5.4 moderated mediation analysis process macro model 7 was used to analyze the moderating effect of entrepreneurial self efficacy between entrepreneurial leadership and entrepreneurial bricolage. the overall results supported the proposed hypothesized moderated mediation model as shown in table 4. the result of r2 = 0.258 * * first reveals that 25.8 percent of the variation to entrepreneurial bricolage is attributed to moderation in the case of entrepreneurial bricolage as an outcome variable. the relationship to the interacting action value (β = 0.09, ci 0.18 to 0.08) with mediator entrepreneurial bricolage demonstrates a favorable and significant one. as a result, increased business self-efficiency in the workplace will significantly boost employee bricolage. secondly, the positive direct impact of x on y (β = 0.39) was also found. next, there are three distinct levels of ese moderator: low, medium and high level of el conditional indirect effects on bpi through eb. in table 4, all the conditional indirect effects of moderator ese were demonstrated to be substantial. with (β = 0.46; β = 0.49) and β = 0.520). the moderated meditation value index finally confirmed that el * ese supported the moderated overall mediation model with an indirect impact of 0.06 and bootstrap ci (0.19 to 0.20). the results have therefore shown that the favorable influence of el on bmi via eb grows as ese in employee’s increases. table 4: moderated mediation results relations r 2 β se p llci ulci decision eleb 0.258** 0.79 0.15 0.00 0.53 1.10 sig eseeb 0.45 0.14 0.00 0.29 0.78 sig el*ese = x*w (int) 0.09 0.04 0.00 0.18 0.08 sig elbmi 0.101** 0.32 0.06 0.00 0.29 0.54 sig ebbmi 0.53 0.08 0.00 0.48 0.78 sig direct effect: elbmi 0.39 0.06 0.00 0.31 0.56 sig conditional indirect effect of x on y via m ese levels low 0.46 0.06 0.17 0.42 sig med 0.49 0.04 0.15 0.34 sig high 0.52 0.05 0.14 0.28 sig review of economics and development studies, vol. 7 (3) 2021, 343-356 352 index of moderated mediation ese index (0.06) 0.03 0.19 0.07 sig (accepte d) β = unstandardized regression coefficient; se = standard error; ll = lower limit; ci = 95 % confidence interval; ul = upper limit 6. conclusion and implications of the study it is a complicated and frequently unpredictable entrepreneurial climate. as a result, no entrepreneur has the ability to predict all circumstance he or she will encounter properly. likewise, no entrepreneur can thrive by getting things on the fly. effective business innovation model tends to involve a mixture of planned and spontaneous actions — a problem space that is typical of spontaneous activity. trust in entrepreneurial capabilities is important in order to succeed in this at the time of entrepreneurial bricolage. entrepreneurs must have self-efficay and he should must be confident in their capacity to identify important resources and how to recombine to solve issues and take advantage of opportunities. the major aim of this research is to inspecting the basic impact of entrepreneurial leadership on business model innovation with the mediating function of entrepreneurial bricolage and the moderating influence of entrepreneurial self-efficacy. the findings of this study show that the presence of entrepreneurial self-efficacy at all levels has a positive impact on the impact of entrepreneurial leadership on increasing bricolage and developing the company's business model innovation. this study demonstrates that entrepreneurial leadership can be viewed as an innovation perspective and a critical role in business bricolage. almost all of the researchers in the study focused on the mediation influence of entrepreneurial self-efficacy on creativity and innovative performance of individuals, but none studied the moderation route to this variable. 7. discussion the primary goal of the study is to investigate the effects of entrepreneurial leadership on the development of business model innovation by mediating the entrepreneurial bricolage of pakistan's manufacturing workers. a recent study found that entrepreneurial leadership can create an innovation model and have a significant impact on entrepreneurial bricolage. almost all research students researched, but showed little interest in the moderation path for this variable, but only studied the direct or mediating impact on the creativity or the creative behavior of workers on entrepreneurial selfefficacy. as a result, the study also demonstrates that entrepreneurial leadership motivates its employees to engage in entrepreneurial bricolage, which is consistent with previous research. as a result, the findings of this study indicate that the presence of self-efficacy among entrepreneurial leadership and entrepreneurial bricolage has significantly moderated their relationship. 8. future directions and limitations about the fact that this study makes important theoretical and functional contributions, it has many drawbacks. lack of knowledge of workers about these terms that are working in manufacturing sector is the one of the major limitation of the study. to begin, the data collection process is solely based on self-report questionnaires. despite criticism from some researchers, this approach was considered appropriate due to the complexities involved with the unbiased evaluation of any of these variables. even so, prospective studies should look at ways to collect data from multiple informants in order to reduce the risk of response bias. second, this study used one-short or cross-sectional data, which makes it impossible for organization to compare the before and after effects of entrepreneurial bricolage on business innovation model and on firms who adopts entrepreneurial leadership. as a result, for future studies, a longitudinal analysis or qualitative interview with top management is review of economics and development studies, vol. 7 (3) 2021, 343-356 353 recommended, where more detailed conclusions can be produced after reforms are implemented. references afuah, a., & tucci, c. l. 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(2010). business model design: an activity system perspective. long range planning, 43(2-3), 216-226. review of economics and development studies, vol. 6 (2) 2020, 363-379 363 an empirical study on students’ satisfaction from mawlana bhashani science & technology university, bangladesh a mohima akter, b md nazmus sadekin, c ataul karim patwary a department of economics, mawlana bhashani science and technology university, santosh, bangladesh email: mohimaakter142@gmail.com b department of economics, mawlana bhashani science and technology university, santosh, bangladesh email: sadekin08@gmail.com c school of tourism, hospitality and event management, universiti utara malaysia, sintok, kedah, malaysia email: raselataul@gmail.com article details abstract history: accepted 11 may 2020 available online 15 june 2020 the main motive of this study is to explore university canteen foodservice attributes (food quality, food variety, price fairness, ambience, staff, and student satisfaction)in mawlana bhashani science & technology. data are accumulated through a simple random sampling technique. a total of 355 numbers of valid questionnaires is used for statistic exploration. for measuring the performance of all factors for student satisfaction, 7 points likert scale is used.qualitative& quantitative systems are used in the paper. microsoft excel version 10.0, smart pls software version 3.0, spss software version 20.0, is performed to analyze and test the theoretical model. following the literature, data are analyzed using crosstab analysis, pearson correlation coefficients, structural equation modeling; confirmatory factor analysis, and path analysis. the findings show that food quality, food variety, ambience & staff have a significant positive influence on student satisfaction, and the price has a negative impact on student satisfaction. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: price fairness (pf), food quality (fq), food variety (fv), ambience (amb), staffs (sta), student satisfaction (ss), structural equation modeling (sem), partial least squares (pls), mawlana bhashani science and technology (mbstu) jel classification: e3, e31 doi: 10.47067/reads.v6i2.215 corresponding author’s email address: raselataul@gmail.com 1. introduction thinking about food reminds people of two things. one is 'taste', and the other is ‘need’. firstly, the food satisfaction of people from different countries varies in their taste. they maintain their nutrition according to their food taste. in a few countries, like india, china, colombia, sri lanka, korea, jamaica, mexico, laos, indonesia prefers to have spicy food (kiprop, 2018). and, few countries like to have non-spicy food, such as pakistan and several arabian countries. most of the people are meat-lover, and few are vegetarian. so, the food satisfaction of the people across the world mostly depends on their review of economics and development studies, vol. 6 (2) 2020, 363-379 364 taste. but it is not limited in just taste. when people think about any individual country which is mostly underdeveloped or developing countries, it needs to talk about the need. in a few countries, like somalia, nigeria, south sudan, mali, bangladesh, many people of these countries can hardly have three times meal. their satisfaction depends on their regular meal which they can hardly achieve. they cannot think about even their health. food is an integral part of life. food satisfaction cannot be described with one definition. in simple words, food satisfaction in the form of pleasure which comes not only taste but also needs. it varies across the world, among the individuals of the country. satisfaction with food-related life is defined as a person’s overall assessment regarding his or her food and eating habits (schnettler et al., 2017). food satisfaction enriches life in every way. a proverb goes on ‘health is wealth’. it does not only refreshes the mind of a person but also helps him/her to concentrate on education, family life & job fields as well. sulek and hensley (2004) find the significance of food quality, physical settings & service in a full-service restaurant and reports that food quality appears to be the most important indicator of customer satisfaction although food quality describes only 17% of repeat-patronage intention (namkung & jang, 2007). in one study which is conducted in amritsar and jalandhar of india, it is found that 15.3% people have their meal from branded restaurants, 23.3% people take food from fast food outlets and the rest 61.4% people use other shops or like to have food from their own home (kumar & bhatnagar, 2017). though the statistical studies of satisfaction related to the food of different countries, people are hardly found, a standard measure can be emphasized of satisfaction. through figure 1, it can be said that after satisfying the hunger, completing the nutrition, a person will think to fulfil their satisfaction. figure 1: hunger & satisfaction guide so say that the quality of food & satisfaction varies among the world countries. developed countries’ food pattern shows in fulfilling students’ expectations compelling variables are food & review of economics and development studies, vol. 6 (2) 2020, 363-379 365 beverage quality, price & value fairness, food taste, nutrition, comport, assortment, convenience &operating hours. in the university area, students mostly gather in the campus canteen to have their meals. serving healthy and nutritious food at a reasonable price in the campus canteen is essential. for the time being, the number of students registered in universities is increasing continuously, causing increase demand and constant rivalry between food service providers inside & outside of the university (garg, 2014; patwary, omar, & tahir, 2020). consequently, the evaluation of university food services becomes essential (knutson, 2000; andaleeb & caskey, 2007). eunkyung et al. (2013) and dimitrios and katerina (2014) underline that students’ satisfaction in the university cafeteria highly depends on food quality, staff, and ambience. presently, mawlana bhashani science & technology has various challenges that need to be addressed, especially in terms of its canteen service quality provided to students’. for instance, a lot of students complain about the quality of food, variety of food display, physical environment & service quality in the canteen. hence, evaluating the students’ food satisfaction at mbstu, where the findings would serve as a feedback mechanism for providing pleasant & satisfying canteen services. this study aims to investigate the total dining experience measuring behavioural characteristics of university students', and perceptions of different food service attributes and evaluate the most significant factors which have an impact on student satisfaction on food and beverage attributes on-campus canteen. the study also attempts to find out the combination of price fairness, quality of food, food variety, ambience, and staff for student satisfaction. 2. literature review 2.1 students’ satisfaction drivers’ in university foodservice canteen greater satisfaction with food-related life positively associated with higher levels of life satisfaction & happiness (schnettler et al., 2015; sadekin, ali, & islam, 2018a; sadekin, aktar, & pulok, 2014; sadekin, ali, & islam, 2018b). the customer experience of food, service, price, and healthfulness significantly affected customer satisfaction levels and behaviour (nasir & morgan, 2017). there is a positive consequence of satisfaction on loyalty, behavioural intentions, and switching costs (prayag, hassibi, & nunkoo, 2019). quality of food & beverages, services, value, price, hygiene and cleanliness, location, and food variety influence students’ satisfaction (ng, 2005; patwary & rashid, 2016; alom, patwary, & khan, 2019). food and beverage quality features, for example, cleanliness, quality & menu variety price and value fairness are viewed as vital by university students and staffs eating at the cafeteria (herrmann, xia, monroe, & huber, 2007; martin-consuegra, molina, & esteban, 2007; oliver & swan, 1989; patwary, roy, hoque, & khandakar, 2019; patwary, mohammed, hazbar, & kamal, 2018). five factors will be investigated concerning their impact on student satisfaction for the motive of the current study: price fairness, food, and beverage quality, food variety, ambience, and staff. 3. theoretical underpinning jerry (1972) develops the cue utilization theory. this theory mainly focused on intrinsic and extrinsic cues to help the customers to evaluate the quality of any products. as a consequence, customer satisfaction is determined based on the quality assessment. in this study, food quality, food variety, ambience & staff are reflected as intrinsic cues & price fairness is indicated as an extrinsic cue for determining student satisfaction. review of economics and development studies, vol. 6 (2) 2020, 363-379 366 figure 2: the cue utilization theory of student satisfaction source: jerry, (1972) 4. hypothesis development 4.1 price fairness mui et al. (2014) show that improving the food quality and price for long term sustainability the university cafeteria should take serious measurements. klassen, trybus, and kumar (2005) and nadzirah, ab-karim, ghazali, and othman (2013) find that as students buy food on limited funds, so the price is the first student concern in university foodservice. they were receiving the right value for the money paid to encourage customers to revisit a food service establishment (azim, tarannum, & patwary, 2017; li, 2008; yuksel & yuksel, 2002). xi and shuai (2009) show that student satisfaction with the cafeteria foodservice establish when price occurs somewhat. thus, h1 is formulated as: h1: there is a significant positive relationship between price fairness and students’ overall satisfaction. 4.2 food quality according to peri, “food quality is a necessary condition to satisfy the needs and expectations of customers.” food and beverage quality such as taste, smell, appearance, size, shape, colour, gloss, consistency, and texture are the acceptable quality property for customers (imram, 1999; mcwilliams, 2000; patwary & omar, 2016). oh (2000) finds a relationship between consumer satisfaction with food and beverage quality and his/her intention to return to a specific restaurant. (namkung & jang, 2007) reveals customer satisfaction and behavioural intentions significantly affected by the overall food quality. (nor et al., 2016) find the relationship between food quality attributes and customer satisfaction is statistically significant. ng (2005) explains that price, value, convenience, and cleanliness are less important attributes than food quality attributes (taste, freshness, and appearance). thus, h2 is formulated as: h2: there is a significant and positive relationship between food and beverage quality and students' overall satisfaction. 4.3 food variety xi and shuai (2009) find that student satisfaction significantly influenced by food variety. (ryu et al., 2008; islam & patwary, 2013) postulate that food variety is the predictor of customer satisfaction. ahmed et al. (2017) state menu variety is the predictor of customer satisfaction. thus, h3 is formulated as: h3: there is a significant positive relationship between food variety and overall student satisfaction. 4.4 ambience troye et al. (1995) define ambience as a structural element. (baker et al., 1994; rys et al., 1987) say ambience is one of the fundamental indications to customers judging restaurant quality. atmosphere and cleanliness are significant variables that have an impact on student satisfaction (andaleeb & caskey, 2007; patwary, 2017). physical setting influences customers’ perceptions of service quality (norhati and hafisah, 2013). thus, h4 is formulated as: h4: there is a significant positive relationship between ambience and student satisfaction. 4.5 staffs barlett and han (2007) show that the interaction between the canteen staff and the student is review of economics and development studies, vol. 6 (2) 2020, 363-379 367 important as it influences student satisfaction. the staff performance is significant at each food outlet as it is increasing the degree of customer satisfaction (mui et al., 2014). thus, h5 is formulated as: h5: there is a significant positive relationship between staff and student satisfaction. 5. research design research design presents the research design, sampling technique, research model research instrumentation measurement, data collection procedure& statistical analysis. 5.1 research design, sampling technique a self-report experience through a survey questionnaire is developed to obtain the required data. a simple random sampling technique is used for the data collection. using the following formula by krejcie & morgan (1970), the sample size is determined. here, population size, n = 5671 at 95% confidence level chi-square value with degrees of freedom, one is, χ2= 3.841 population proportion, p = 0.5 margin of error at 95% confidence level, e = 0.05 at the given conditions the sample size is approximately 359.79 or 360 5.2 research proposed model based on the literature review, the research proposed model of the study is illustrated in the figure below: figure 3: research proposed model figure 3 shows the proposed model which conceptualizes the relationship among the factors of review of economics and development studies, vol. 6 (2) 2020, 363-379 368 student satisfaction, price fairness, food quality, food variety, ambience & staff. here, in this proposed model, student satisfaction is a dependent variable, whereas price fairness, food quality, food variety, ambience, and staff are the independent variables. 5.3 research instrumentation, measurement & data collection procedure the 7 points likert scale (strongly disagree to strongly agree) is used to measure the constructs. a total of 360 structured questionnaires are distributed, out of which 355 are received from the respondents. 5.4 statistical analysis for this study, hypotheses are tested with sem using pls. bootstrapping is applied to determine the significance level of the loadings, weights, and path coefficients. 6. result analysis & discussion in this study, descriptive statistics such as frequency distribution& crosstabs analysis have been applied to show demographic profile & to investigate the difference of students' satisfaction according to their gender & foodservice attributes of the students where several graphical presentations are used. after using smart pls 3.0; semestimations are completed for testing the hypotheses. data source: author table 1 shows the male respondents are 57.2 %and female respondents. data source: author table 2 shows 42.8% among male and female 64.8% live in the hall, 26.2% live in a mess, and 9% live at home. 6.1 descriptive statistics for the fulfilment of objective 01 following frequencies, percentage & mean analyses are given below within table & figure. review of economics and development studies, vol. 6 (2) 2020, 363-379 369 data source: author figure 4:behavioral characteristics of the respondents on taking food items in terms of behavioural meal consumption table 3 and figure 4 can be seen the highest proportion (42.20%) of the students have daily breakfast &lunch daily (50.40%) and (31.30%) have dinner two or three times per week in the canteen. the highest proportion did not have dinner (21.90%) whereas 26.90% have dinner daily in the canteen. review of economics and development studies, vol. 6 (2) 2020, 363-379 370 figure 5: behavioral characteristics of the respondents with food stuff & soft drink in terms of behavioral consumption of food staffs and soft drink table, four and figure 5 shows most of the students consume meat occasionally (40.70%), once a week (37.70%), 2 or 3 times a week (33.30%), fish&vegetables everyday (24.60%), fast food daily (26.10%), occasionally (30.90%) or 2 or 3 times per week, soft drink daily 16.00%, 2 or 3 times a week 22.10%. review of economics and development studies, vol. 6 (2) 2020, 363-379 371 data source: author table 5 shows students' overall perceptions which are expressed with mean value at descending order. the overall mean rating scale is overall mean for the food, and beverage quality is (m= 4.46)>, overall satisfaction for the ambience (m=4.38)>, overall mean for the student satisfaction is (m=4.19)>, price fairness (m= 3.95)> and overall mean for the food variety is(m= 3.94)>, and this overall result is measured using the research variables satisfaction level. review of economics and development studies, vol. 6 (2) 2020, 363-379 372 6.2 correlation analysis for the fulfilment objective, 02following correlation analyses are given below within a table. note: *correlation is significant at the 0.01 level (2-tailed) table 6 shows the results of correlation coefficients matrix correlation are significant at the 0.01 level & no correlation coefficient is equal to 0.90 or above. this testing provides support for the discriminant validity, i.e. all the constructs are distinct (amick & walbery, 1975). this correlation also indicates a strong positive relationship between the research variables. 6.3 regression analysis for the fulfilment of objective 03 following model measurement results is given below: 6.4 measurement model figure 6 demonstrates results’ using pls algorithm technique for the hypothesized model is shown given below: figure 6: hypothesized model structure & results review of economics and development studies, vol. 6 (2) 2020, 363-379 373 figure 7 demonstrates results using pls algorithm technique for the hypothesized model shown given below: figure 7: hypothesized model structure & results hair et al. (2010) explain the lower limit value of cronbach’s alpha is 0.60. composite reliabilities of constructs exceed the cutoff value of .70; which ensures adequate internal consistency (hair, anderson, tatham, & black, 1998). fornell and larcker (1981) recommend that ave explain variance, which has less than 50 per cent. here in our analysis achieve these requirements see within table7. data source: author discriminant validity implies how well an individual item factor connects to its hypothesized construct in comparison to others (osman, sentosa et al. .2013). table 8 demonstrates discriminant validity is measured via cross-loadings & the square roots of ave, which satisfies the above-mentioned criteria & we termed discriminate validity as significant (fornell & bookstein 1982). review of economics and development studies, vol. 6 (2) 2020, 363-379 374 convergent validity is a scale's capability to come or load together as a single construct, and each loading is measured for another block of indicators (osman, sentosa, et al. 2013). the values of outer loadings should be greater than 0.7, revealing that the indicators share more variance (lv) than with error variance. a lower limit of .50 may be acceptable (chin, 1998). the value of convergent validity using the cross-loading matrix is given in table 9, which fulfil the above-mentioned criteria data source: author the predictability & strength of a model is reflected by the r 2 values, which are another vital determinant of the model (chin1998). on the other hand, adjusted r 2 attempts to correct r 2 to adjusted r 2 . chin et al. (2008) classify r 2 values. where r 2 latent variables substantial (r 2 = 0.67), moderate (r 2 = 0.33), or weak (r 2 = 0.19). table 10 represents this analysis which depicts the model as fitted & satisfactory. review of economics and development studies, vol. 6 (2) 2020, 363-379 375 for testing research hypotheses, the bootstrapping technique of pls-sem is applied to generate the value of t-statistics, p-value to see whether these value support hypothesis or not. the level of confidence for the testing hypothesis is chosen to be 0.95; all hypotheses for which the significance number is outside the range -1.96 to 1.96 are supported. from table 11, it appears that hypotheses are supported at a 5% significance level & path coefficient with t-statistics which is larger than 1.96 where, h2, h3, h4 & h5 are supported, and h1 is not supported. value of t statistics of h1 is1.739, which is lower than the acceptance criteria 1.96 & p-value is higher than 0.05. that’s why this hypothesis is not supported. note:*the tabulated value of t = 1.96, **significant = p < 0.05, ***= not significant table 12 shows a summary of hypothesis testing. 7. discussion following table 11 and table 12, hypothesis testing is interpreted. the hypothesis h1 is not accepted as the beta coefficient value is 0.009 & insignificant at p < 0.05level. this implies that students are not concern or probably they have satisfactory perceptions about food price. several scholars (nadzirah et al., 2013; mui et al., 2014) also support this result. hypothesis h2 is accepted since the beta coefficient review of economics and development studies, vol. 6 (2) 2020, 363-379 376 value is 0.176, and the value is less than 0.05. the result is compatible with some former researchers (ng, 2008; andaleeb and caskey, 2007). hypothesis h3 is accepted where the coefficient value is 0.004, and the p-value is,p < 0.05. this result is consistent with several researchers (garg & kumar, 2017; mccall and lynn, 2008). hypothesis h4 is accepted by the analysis as the outcome beta coefficients 0.313, and the p-value is significant at p < 0.05. this outcome is consistent with other researchers (imran, 2018; kumar & bhatnagar, 2017). the hypothesis h5 is accepted by the result of the beta coefficient value of 0.819 p significant value level is p < 0.05 (barlett & han 2007; mui et al. 2014). finally, these supportive results are fruitful for the students’ food satisfaction to make a final canteen background. 8. conclusion this part displays a brief and extensive decision of the study result. assessing different perceptions of food attributes the study reveals that among five dimensions of canteen food services four dimensions such as food quality, food variety, ambience, and staff have a significant positive impact on student food satisfaction. this result contributes to improving food and beverage outlets which are useful for student satisfaction. at what time university neglect to take an interest in their general services faithfully, whereas frustrated students’ might perceive the total product offered as below their expectations as food and beverage outlets can have a distinct impression. to retain students' retention university secretary can promote the manufacturing delivery and check students’ food requirements. besides, confirming continual progress could be benefitted towards systematic arrangements for students’ satisfaction. providing cycle menu planning and fresh foods in the menu choices for a particular time, the university canteen administrators must take necessary steps. attractive and pleasant ambience, staff training and development should be ensured. this study has significant classifications for university cafeterias, to take various enhancing directions and procedures. references alom, s., patwary, a. k., khan, m. m. h. 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(2002). measurement of tourist satisfaction with restaurant services: a segment based approach. journal of vacation marketing, 9(1), 52–68. https://doi.org/10.1016/j.appet.2015.02.008 review of economics and development studies, vol. 6 (2) 2020, 339-350 339 political economy of fiscal decentralization and poverty in pakistan: an empirical analysis a yasir karim, b rana ejaz ali khan a phd scholar, department of economics, the islamia university of bahawalpur, pakistan. email:karimyasir777@gmail.com b professor and chairman, department of economics, the islamia university of bahawalpur, pakistan. email:ranaejazalikhan@yahoo.com article details abstract history: accepted 29 april 2020 available online 15 june 2020 theoretically the decentralization in any form may put very promising impact on the economy and the welfare of community. the current study examines the impact of fiscal decentralization on poverty in pakistan. the fiscal decentralization is captured by two indicators, i.e. revenue decentralization and expenditure decentralization and political economy by government stability. the findings reveal that expenditure decentralization has positive while revenue decentralization has negative impact on poverty. the government stability as a proxy of political economy has shown negative impact on poverty. the study provides the evidence that fiscal decentralization has neutral effect on poverty in pakistan. the policy framework of fiscal decentralization needs specific modifications to attain the desired impact. however, the political economy may be further strengthened. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: fiscal decentralization, expenditure decentralization, revenue decentralization, poverty, government stability jel classification: h70, h71, h72, i30 doi: 10.47067/reads.v6i2.212 corresponding author’s email address: karimyasir777@gmail.com 1. introduction the traditional theory of public finance has supported fiscal decentralization as a policy to improve allocation of public sector resources and to provide the public services according to preferences and needs of local communities. the decentralization eliminates the monopolist status of central governments and the competition between local governments provides efficient public services [musgrave (1959), oates (1972)]. the second generation theory of fiscal decentralization explained that there exists a strong relationship between local expenditures and local revenue, and local prosperity [qian and weingast (1997), qian and roland (1998)]. the decentralized system acts productively to attain the outcomes of public sector resources according to community desires and increases political participation [blais et al. (2011)]. fiscal decentralization is a process of delegation of fiscal decision making process to lower tiers of the governments, that is a system of transferring responsibility of tax collection and spending http://reads.spcrd.org/website/ issn (p): 2519-9692 issn(e): 2519-9706 review of economics and development studies, vol. 6 (2) 2020, 339-350 340 decisions from central to local governments [thiessen (2001)]. in developing countries the political, economic and social systems are so complex that central governments remain unable to successfully address the issue of poverty. a large number of economies have initiated the process of fiscal decentralization in the last few decades to enhance the welfare of local community and eliminate poverty. the empirical literature evidenced decentralization as a tool to eradicate poverty. it leads to improve the provision of social welfare goods like education, health, sanitation and water availability [ahmed (2015)]. public sector social welfare schemes and provision of social protection may help in mitigating poverty but it can only be achieved through resource distribution policies [jamal (2006)]. the redistribution of resources and expenditures are the important policy tools to eradicate poverty and inequality but subject to provision of institutional quality [shahzad and yasmin (2016)]. fiscal decentralization caters the local social needs and it is an important policy instrument for achieving social goals [ahmed (2016)]. however, there are some evidences of failure of traditional theory of public finance given by oates (1972) which states that regional and local governments have the position to provide the public services to the locals according to their preferences and needs as compared to the central government. for instance, shahzad and yasmin (2016) have found positive impact of fiscal decentralization on poverty and inequality. similarly, koethenbuerger and lockwood (2010) presented the situations where fiscal decentralization can result in lower economic growth when provinces charge taxes even higher than the central governments. the political economy may the bridging tool between the fiscal decentralization and its desirable effects like reduction in poverty, income inequality and regional disparity, and provision of social services, etc. which may be inferred from the findings of jutting et al. (2004) who stated that characteristics of an economy like institutional quality and political conflicts affect the direction of impact of fiscal decentralization on poverty. shahzad and yasmin (2016) also explained that institutional quality (democratic values) can change the direction of impact of fiscal decentralization on poverty. ahmed (2015) has also mentioned that elite capture element interferes in the implications of fiscal decentralization. in pakistan, the process of decentralization was started fifty years ago, though continuous efforts have not been done for its implementation. the tiers of fiscal decentralization also varied during this time period along with strength of political decentralization. the political economy of the country has not remained encouraging as well. in this scenario, the question arises whether the country has attained the objective of fiscal decentralization or not. the core objective of the current study is to evaluate the impact of fiscal decentralization on poverty in pakistan. 2. literature review globally extensive research has been done on different dimensions of decentralization and poverty. a large number of studies have found a negative impact of fiscal decentralization on poverty [galasso and ravallion (2000), bossuyt and gould (2000), valaris (2012), faridi and nazar (2013), ahmed (2015), nursi and tawakkal (2019)] while some studies have found a positive impact of fiscal decentralization on poverty [shazad and yasmeen (2016)]. some other studies have shown mixed effects or conditional effects. for instance, silas et al. (2018) found that only intergovernmental transfers affects the poverty while country’s won source revenue and expenditures do not affect poverty in kenya. similarly the intergovernmental transfers positively impacts poverty in low income review of economics and development studies, vol. 6 (2) 2020, 339-350 341 households while it negatively affects the poverty in high income countries. in the earlier studies, rao et al. (1998) examined the effect of fiscal decentralization on poverty alleviation in vietnam. the study claimed that intergovernmental transfers play a vital role in ameliorating poverty so the best approach of fiscal decentralization is flow of fiscal resources from top to bottom. bossuyt and gould (2000) discussed the impact of fiscal decentralization on three african countries that is guinea, mozambique and ethiopia through qualitative analysis. they concluded that fiscal decentralization is the incredible factors for reeducating poverty in these countries. in addition, administrative decentralization and political decentralization are other factors of reduction in poverty. galasso and ravallion (2000) proposed a model of decentralized targeting for anti-poverty programs like bangladesh’s food-for-education program. the results explained that within village targeting is positively influenced by program size, lower land inequality, less remoteness, fewer shocks, and less private redistribution. the decentralization in the form of credit transfer reduces poverty which ultimately lowers the income inequality. jutting et al. (2004) found that an unambiguous link between decentralization and poverty reduction cannot be established. the fiscal decentralization may increase or decrease poverty depending upon the characteristics of countries including institutional quality, political conflicts, quality of infrastructure and capacity of the local governments. in the recent studies, valaris (2012) established the association between fiscal autonomy and poverty in 48 american states. the fiscal autonomy was measured by vertical imbalances of states that is the gap between own revenue and own expenditures. the results indicated that fiscal autonomy negatively impacts poverty. ahmed (216) has examined the effect of fiscal decentralization on education sector for a sample of 62 countries. the study found that different sources of fiscal decentralization have distinct effect on education expenditures and education quality. it evidenced that decentralized structure cater better to local social needs. agyemng-duah et al. (2018) investigated the effect of fiscal decentralization on poverty in ghana and other developing countries in two opposing views. first one is of optimist view which claimed that fiscal decentralization is a power sharing concept and the process of decentralization share all resources with local community. the local community reduces poverty by efficient and local community targeted programs and projects. the second one is pessimist view of fiscal decentralization which opposes this mechanism. the argument is based on the notion that decentralization flourishes corruption in the local community leaders. in this way the process of decentralization may increase poverty, income inequality and regional disparity. the study confirmed the potential role of fiscal decentralization in poverty reduction. nursini and tawakkat (2019) used three indicators of fiscal decentralization, i.e. regional government expenditures, regional government revenues and intragovernmental transfers to see their impact on poverty covering 33 provinces of indonesia. they found negative impact of regional government revenue and intragovernmental transfers on poverty but no effect of regional government expenditures on poverty. review of economics and development studies, vol. 6 (2) 2020, 339-350 342 for pakistan, faridi and nazar (2013) focused on the relationship between fiscal decentralization and poverty in pakistan using ordinary least square (ols) technique on data set covering the time period of 1972-2010. the results reported negative effect of expenditures and revenue decentralization on poverty. ahmed (2015) using legislative bargaining model of fiscal federalism concluded that decentralization has positive impact on pro-poor social services delivery in pakistan. however, decentralization has higher effect on services like rural development and water management rather than education which reflects the capture of local elite. the political representatives may expect award of irrigation projects and physical infrastructure in elections. similarly, shahzad and yasmin (2016) investigated the relationship between fiscal decentralization and poverty as well as inequality in pakistan by using gmm technique for the time period 1972 to 2013. they found a positive impact of fiscal decentralization captured by three indicators, i.e. expenditure decentralization, revenue decentralization and composite decentralization on poverty and inequality. they explained that fiscal decentralization has weakened the central government and curtailed its capability of spending on long-term development projects. however, the presence of institutional quality measured by democratic index through interaction term with fiscal decentralization makes the effect of all the three indicators negative on poverty. ahmad (2020) has attempted to see whether the mere decentralization (resource distribution under nfc award, i.e. federal transfers) or the other criterion of decentralization, i.e. revenue generation by the provinces in pakistan is important to attain the goals of fiscal decentralization. the study evidenced that simple fiscal decentralization under nfc award has no enough impact on economic growth but provincial source revenue generation effectively impacts economic growth. the provinces should be encouraged and incentivized to generate their own resources instead of being dependent on federal government [khattak et at. (2010)]. although plethora of the work exists in the area of fiscal decentralization and poverty but a few number of studies have focused on pakistan. therefore, present study will be an addition to the literature by investigating the fiscal decentralization and poverty in pakistan with new data set capturing the fiscal decentralization through expenditure decentralization and revenue decentralization and political economy through government stability. the present study departs from faridi and nazar (2013) and shahzad and yasmin (2016) by incorporation of political economy as a variable in the econometric analysis with latest data. 3. political economy, fiscal decentralization and poverty the decentralization makes the effects on development outcomes like poverty reduction, enhancing the quantity and quality of education, health outcomes, provision of social services, employment generation, and water and sanitation facilities, etc. through the political, fiscal and economic system of a nation [kaliranjan and otsuka (2012)]. fiscal decentralization makes the policy makers and executors accountable through local elections and even some times by judicial system. the transparency remains the precondition for the process along with control of elite capture culture, leviathan governments and capacity issues of local governments. the political economy emerged as the center of these actors as it is defined as the process of collective efforts of political, economic and administrative institutions for attaining the national targets. if the stakeholders deviate from the objectives of national targets the process may results into collapse of the objectives. to empirically review of economics and development studies, vol. 6 (2) 2020, 339-350 343 estimate the impact of political economy in a stylish econometric way is a complex phenomenon that is why there is a need for proxy of political economy. if the governments have unity, legislative strength and popularity alternatively the government has no risk of stability the actors of political economy has less likelihood of deviating from the national objectives. so the stability of the government may be a proxy of political economy. the stable governments adopt the proper way of fiscal decentralization and set the achievable targets like the elimination of poverty and other socioeconomic indicators. in the current study government stability is being used a proxy of political economy. 4. data and methodology the functional form of the poverty and fiscal decentralization is given as: pov = f (expd, revd, gstab, topen, inf, health, edu, unemp) ……………… (1) for accessing the impact of fiscal decentralization on poverty in pakistan, time series data from 1980 to 2019 is used. the data is collected from different sources, i.e. economic survey of pakistan [fbs (various issues)], world development indicators [world bank (2020)], pakistan statistical year book [pbs (various issues)], and jamal (2006). the brief summary of the variables, their measurement and source of data are presented in table 1. table: 1 description of variables and measurements description of variables measuring units source of data pov: poverty head count ratio jamal (2006) and pakistan economic survey [fbs (various issues)] expd: expenditure decentralization expenditure decentralization is calculated as a ratio of the provincial government expenditures (less grant in aid) to the total government expenditures. authors’ calculation from the data set of pakistan statistical year book [pbs (various issues)] revd revenue decentralization the revenue decentralization is calculated as a ratio of the provincial government revenue (less grant in aid) to the total government revenue. authors’ calculation from data set of pakistan statistical year book (various issues) gstab: government stability it shows the government’s ability to carry out its declared program and its ability to stay in office. it is sum of three components (government unity, legislative strength and popular support) each with a maximum score of four points (very low risk) and minimum of zero points (very high risk) international country risk guide [icrg (2020)] topen: trade openness (export + import) /gdp pakistan economic survey [fbs (various issues)] inf: inflation consumer price index pakistan economic survey [fbs (various issues)] health: health infrastructure index the index is comprised of number of nurses, number of basic health authors’ calculation from the data set of pakistan economic survey review of economics and development studies, vol. 6 (2) 2020, 339-350 344 units, number of doctors, number of dispensaries, and number of hospitals. the index has generated using principle component analysis. [fbs (various issues)] edu: education index the index is comprised of primary, secondary and higher education enrolment. the index has been generated by using principle component analysis. authors’ calculation from data set of pakistan economic survey [fbs (various issues)] uemp: unemployment unemployment rate pakistan economic survey [fbs (various issues)] 4.1 descriptive analyses descriptive analysis in table 2 describes the summary statistics of the variables. all the variables show wide dispersal from their respective mean value. almost all variables are little bit skewed, that is pov, gstab, topen, inf, health and unemp are positively skewed while others are negatively skewed. kurtosis values indicate that the inf has lepto-kurtic distribution, while all other variables are platy-kurtic. the jarque-bera (jb) test is a joint hypothesis measure of skewness and kurtosis. jb probability values show no problem of abnormality table: 2 summary of descriptive statistics pov expd revd gstab topen inf health edu uemp mean 25.55 0.25 0.24 6.73 0.30 9.36 121.38 109.45 5.34 median 25.65 0.24 0.34 6.50 0.30 10.10 120.64 99.99 5.37 std. dev. 3.58 0.04 0.19 2.11 0.03 3.86 58.85 71.36 1.46 skewness 0.54 −0.12 −0.93 0.14 0.32 0.25 0.11 0.21 0.17 kurtosis 2.60 2.82 2.39 2.19 2.15 3.15 1.91 1.65 2.35 jarque−bera 2.24 0.16 6.37 1.22 1.88 0.46 2.05 3.32 0.88 probability 0.33 0.92 0.04 0.54 0.39 0.79 0.36 0.19 0.64 observations 40 40 40 40 40 40 40 40 40 source: authors’ calculation correlation matrix is given in table 3. in the analysis, most of the variables are positively correlated to one another. the variables of expd, gstab and topen are negatively related to pov, while all other variables are positively related to pov. table 3: correlation matrix pov expd revd gstab topen inf health edu unemp pov 1 expd −0.60 1 revd 0.05 −0.15 1 gstab −0.40 0.24 −0.31 1 topen −0.48 0.69 −0.56 0.59 1 inf 0.49 −0.66 0.38 −0.17 −0.76 1 health 0.48 −0.71 0.42 −0.16 −0.79 0.99 1 edu 0.30 −0.22 −0.09 0.42 0.04 0.53 0.49 1 unemp 0.29 −0.20 −0.38 0.46 0.27 0.26 0.21 0.65 1 review of economics and development studies, vol. 6 (2) 2020, 339-350 345 4.2 econometric estimation the stationarity of the variables is examined by augmented dickey fuller (1979, 1981) and philips-perron [phillips and perron (1988)] tests while schwarz information criteria (sic) is followed for adf equation. the autoregressive distributed lag (ardl) technique is used when the stationarity results are mixed such as i(0) and i(1) or even i(1). the ardl technique resolves the issue of endogeneity of variables. it provides a good long term results that are free from all the errors [narayan (2005), odhiambo (2008)] and therefore provides the appropriate estimation of short and long run estimation [bentzen & engsted (2001)]. for the long run estimation following equation is regressed ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ………………………. (2) the equation for short run estimation is given as: ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ …………………. (3) the error correction term lagged represents the speed of adjustment of disequilibrium. 5. results and discussion 5.1 test for stationarity findings of stationarity tests are reported in table 4. the results show that inf is integrated of i(0). the remaining variables are integrated at i(1) under both augmented dickey fuller test and phillips-perron test statistics. table: 4 results of stationarity of data variables adf test statistic phillips−perron test statistic at level 1 st difference conclusion at level 1 st difference conclusion intercept intercept intercept intercept lpov − −4.522352 0.000000 i(1) − −4.493434 0.0009 i(1) expd − −7.080838 0.00000 i(1) − −7.233933 0.0000 i(1) revd − −6.717240 0.00000 i(1) − −6.733951 0.0000 i(1) gstab − −5.158394 0.0001 i(1) − −5.158394 0.0001 i(1) topen − −8.799529 0.00000 i(1) − −9.056906 0.0000 i(1) inf −2.825941 − i(0) −2.856077 − i(0) review of economics and development studies, vol. 6 (2) 2020, 339-350 346 0.0063 0.005 health − −9.152986 0.0000 i(1) − −9.885030 0.0000 i(1) edu − −5.720507 0.00000 i(1) − −5.718657 0.0000 i(1) unemp − −7.660590 0.00000 i(1) − −7.688763 0.0000 i(1) 5.2 bound test the long run relationship is tested through bound test. the f-statistic value is 5.249. it is statistically significant at 1 percent. the upper boundary critical value is 3.714. therefore, it is concluded that f-statistic value is greater than the upper bound critical value which confirms that cointegration exists in the model. 6. results of ardl estimation the results of ardl for long run and short run are shown in table 5 and 6 respectively. all the variables are highly significant at one percent level of significance. table: 5 long run results variables coefficient std. error t-statistic prob expd 1.901567 0.126771 14.999994 0.0424 revd −0.802129 0.038025 −21.094765 0.0302 gstab −0.012468 0.000763 −16.334588 0.0389 topen −5.409158 0.086579 −62.476328 0.0102 inf 0.014380 0.000249 57.710633 0.0110 health 0.011876 0.000405 29.340244 0.0217 edu −0.013542 0.000421 −32.168992 0.0198 unemp 0.051132 0.000989 51.680972 0.0123 c 2.352568 0.019952 117.912366 0.0054 table: 6 short run results variables coefficient std. error t-statistic prob d(expd) −0.641833 0.030854 −20.802535 0.0306 d(revd) 0.181738 0.009947 18.270383 0.0348 d(gstab) −0.005413 0.000354 −15.281339 0.0416 d(topen) −0.544371 0.035588 −15.296327 0.0416 d(inf) −0.002922 0.000167 −17.481195 0.0364 d(health) −0.002463 0.000110 −22.459924 0.0283 d(edu) 0.005097 0.000185 27.524540 0.0231 d(unemp) 0.003122 0.000446 6.996572 0.0904 ecm(−1) −0.737047 0.011160 −66.044708 0.0096 the principal objective of the study was to see the impact of fiscal decentralization on poverty in the perspective of political economy in pakistan. for the purpose two principal indicators of fiscal decentralization were included in the analysis. the first indicator was expenditure decentralization. the long run results in table 5 show that expenditure decentralization (expd) leads to increase the poverty in pakistan. theoretically the expenditure decentralization should decrease poverty in the country. review of economics and development studies, vol. 6 (2) 2020, 339-350 347 however, the positive impact of expenditure decentralization may be due to the diseconomies of scale, misallocation of resources and corruption when provinces have more control over expenditures as compared to the central government. similarly, the inferior administrative capacity of local authorities and leviathan government is also counted as the potential threats linked with fiscal decentralization [weingast (2014), ahmad (2020)].the positive impact of expenditure decentralization (alternatively fiscal decentralization) on poverty (or decreasing community welfare) has been evidenced by the literature. shahzad and yasmin (2016) have shown the increasing effect of fiscal decentralization on poverty and income inequality. silas et al. (2018) used three indicators of fiscal decentralization, i.e. intergovernmental transfers, own source revenue and expenditures and found that own source revenue and expenditures have no effect on poverty in kenya. similarly, nursini and tawakkal (2019) have also found no effect of regional expenditures on poverty in indonesia. galiani et al. (2000) pointed out that there remains the chances of no improvement of social indicators by decentralization of even deterioration of social indicators if the local communities have no voice and face elite capture (bardhan and mookherjee 2005) of if local governments lack the capacity to administer pubic services efficiently (smith 1985). the second variable to capture the fiscal decentralization was revenue decentralization. the coefficient for revenue decentralization (revd) demonstrates a fall in poverty by 0.8 percentage point due to one unit increase in revenue decentralization. it is inferred that if provinces are given the authority to collect and impose taxes then equality and equity principle of taxation prevails in tax structures. the provinces have a better position and in close contact with different segments of society and they impose taxes rationally keeping in view the welfare of the poor which leads to decrease the poverty. nursini and tawakkal (2019) have also found similar results for indonesia, i.e. regional government revenue and intergovernmental transfers reduce the poverty but regional government expenditures does not. they suggested that regional governmental expenditures should focus on priority programs for poverty alleviation rather than operational expenditures. however, the positive impact of expenditure decentralization and negative impact of revenue decentralization on poverty explain another mechanics of rent seeking by local political leaders. in the expenditure decentralization they have more chances of corruption by giving the inefficient, ill-defined, badly-managed projects to corrupt contractors through rent seeking. the badly identified projects and area are executed for rent seeking. on the other hand such type of chances of rent seeking remains low for political leaders in revenue decentralization. another important variable of the analysis was government stability used as a proxy of political economy. the coefficient of government stability demonstrates that one unit increase in government stability decreases poverty by 0.01 percentage point. the government stability represents the ability of the government to stay in office. it is basically comprised of three components, i.e. government unity, legislative strength and popular support. the governments with low risk of stability makes the rational and transparent decisions efficiently. they execute the programs and policies rapidly. such type of decisions and executions result into increased employment, productivity and income which diminishes poverty. the stable governments never frame the policies which affect different segments of the society differently that is termed as political economy. they also restrict political corruption as they enjoy popular support. the legislative strength protect the economic rights of the people. as a result of totality of these components the poverty diminishes in the country. the trade openness as an economic indicator was included in the analysis as control variable. the results show that trade openness reduces poverty in the country. it is supported theoretically and review of economics and development studies, vol. 6 (2) 2020, 339-350 348 empirically. the inflation has shown positive effect on poverty. the result is consistent with the findings of shahzad and yasmin (2016). it explains the fact that high cost of living makes difficult for the poor to satisfy their basic needs. the health infrastructure index was also included in the analysis as control variable. conceptually the health infrastructure helps the community to gain human capital and enhance productivity. in this way the poverty may be reduced. the results have shown that health infrastructure index has positive impact on poverty. it is a strange result but may be explained on the basis that heavy expenditures on health infrastructure in the form of construction of hospitals and hiring the doctors burdens the local government resources. it shortens the expenditures for direct welfare of the poor community and for the projects of employment generation. the result is partially corroborated by the positive impact of expenditures decentralization on poverty. malik (2008) has pointed out that at initial stage of decentralization the local governments face heavy capital costs in the form of construction of hospitals, schools, administrative offices and hiring of staff which may adversely affect the welfare of the local people. the education index that is comprised of indicators of education outcomes like the primary and secondary school enrolment, and higher education enrolment. the education index decreases poverty. it is supported theoretically as well by the empirical literature [jutting et al. (2004)]. the unemployment has shown positive impact of poverty. the unemployment directly affects the income level of the households so increase in unemployment pushes the households into poverty. the short run results given in table 6 show that coefficient of ecmt-1 is -0.74 which confirms that the variation in equilibrium is corrected by 74 percent each year. the results of diagnostic tests also show that the model satisficed all the diagnostic tests, i.e. no serial correlation have been found in regression, and no autoregressive conditional heteroscedasticity and white heteroscedasticity are found. furthermore, the residual term is also normally distributed which justify the well specified functional form of the model. 6. conclusion the study has focused on the impact of fiscal decentralization on poverty in pakistan in the perspective of political economy. the ardl technique was applied on time series data for the period of 1980 to 2019. the major findings of the study are that revenue decentralization has negative impact on poverty while expenditure decentralization leads to increase the poverty. so it cannot be decided that fiscal decentralization has encouraging effect on poverty mitigation in pakistan. the political economy captured by government stability has shown negative effect on poverty. in the control variables the trade openness, education have shown negative effect on poverty while inflation, unemployment and health infrastructure index have shown positive impact on poverty. there are some policy recommendations to improve the mechanism of fiscal decentralization for poverty mitigation. the expenditure decentralization is of major concern which has shown positive impact on poverty. as discussed in earlier section the disguised reasons for such type of results may the inefficiency of the local governments in identifying the projects and particularly the incidence of corruption as well as insufficient capacity for execution of projects. it needs transparent accountability of the local governments and training for capacity building. the revenue decentralization has shown review of economics and development studies, vol. 6 (2) 2020, 339-350 349 negative impact on poverty so this side should be encouraged. however, political economy has satisfying results so it needs strengthening of government stability. furthermore, the employment generation should be focused and inflation should be curtailed for poverty mitigation. as the health infrastructure has shown positive impact on poverty due to its burden on local government funds, so the local governments should demand funds from central government for capital investments. references ahmad, i. 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(2014). second generation fiscal federalism: political aspects of decentralization and economic development. world development, 53, 14-25. world bank (2020) world development indicators database. available at https://datacatalog.worldbank.org/dataset/world-developmentindicators retrieved on january 10, 2020. https://ir.library.illinoisstate.edu/cpe/2i review of economics and development studies, vol. 6 (2) 2020, 245-255 245 agriculture, manufacturing and economic growth in india: a co-integration analysis a imran ali baig, b md. abdus salam, c shah mohd khan a research scholar, department of economics, aligarh muslim university, aligarh email: mabaig@myamu.ac.in b professor, department of economics, aligarh muslim university, aligarh email: salam9@gmail.com c associate professor, department of psychology, a.m.u aligarh. email: shahmohdkhan.py@amu.ac.in article details abstract history: accepted: 08 may 2020 available online: 15 june 2020 this study examine the most debatable question of the last three decade, i.e., “does the agriculture growth affect the economic growth?” with the use of annually data from 1966-to 2016. the study employed unit root and causality test suggested by the dicky fuller, phillips-perron and granger respectively. besides, ardl techniques used to analysis the relationship among the variables, i.e., agriculture, manufacturing and economic growth for the short as well as long period of time. as per outcome, result shows that, uni-directional causality running from manufacturing and economic growth to agricultural growth. moreover, unidirectional causality running from economic growth to manufacturing growth. results also showed that bidirectional causal relationship between economic and agriculture growth. it can be concluded that, this study support of a very famous statement “agriculture is the engine of economic growth" this statement is valid for the short period of time but manufacturing contributed more than agriculture sector to the economic growth in the long run in india. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: agriculture growth, economic growth, manufacturing growth, stationarity, ardl model, granger causality jel classification: o10, o11 doi: 10.47067/reads.v6i2.200 corresponding author’s email address: mabaig@myamu.ac.in 1. introduction this study examines the most debatable and confusing issue "does the agriculture sector matters in the economic growth in the case of india." gardner raised the question on the causal relationship between two most important variables of the economy i.e. agriculture and economic growth in his "elmhirst" lecture in 2003. gardner (2005) proved that there is a significant positive relationship between agriculture and economic growth. however the main question on the directional causality among the variables need to be discussed. his conclusion was that ‘’an investigation of lags... review of economics and development studies, vol. 6 (2) 2020, 245-255 246 does not show agriculture as the leading sector." many studies contradict each other to answer this question which as mentioned above. some of the scholars argue that transfer of the excess resources (labors) from agriculture sector always leads to the agriculture driving economic growth and development. while other scholars believe that increasing wages in the non-agriculture sector leads to the increases productivity of agriculture. thereby implies that one-way causality was running form economic growth to agriculture growth (lewis, 1954). some well-known developmental economist emphasized on the non-agriculture sector (industrial sector) and explain industrial sector is the foundation of development of the economy, and they biased against of agriculture sector (schiff, valdés, & bank, 1998). but in the 1970s, which low-income countries challenged this view and explain the necessity of agriculture development became part of the conventional wisdom (world bank, 1982). the classical economist clark (1940) and kuznet (1960) clarify the essential facts concerning the agriculture sector in economic growth and development. lewis (1954) emphasized on the double sector economy on the basis of abundant labor in the agriculture sector and thus transfer from farming to industrial development. hardly, after few years, ranis and fei (1961) extended the two-sector model which had been adopted by numerous scholars (matsuyama 1992; steger 2000; vollrath 2009). while another scholar humphries and knowles (2010) argues that transfer of labor is directly associated with the economy (economic growth) of the nation. most of the classical economist thought that agriculture sector plays utmost role through production and consumption linkages in the economic growth. johnston & mellor, (1961) explain agriculture sector contributes mainly through five interlinkages in the economy for the developing nations, which are transfer of excess labor to the non-agriculture sector, providing the foods for the domestics consumption, provision of market for industrial production, savings uses for the investment in the nonagriculture sector; and use of earnings obtained from agriculture export to the finance the import of goods. apart from, singer (1979) emphasized on agriculture demand led industrialization (adli). adelman, et al. (1984) proposes that the adli appropriate for middle-income nations which are not yet export driven. notwithstanding, gollin, (2009) thinks about that extensive offer of agriculture sector in developing countries does not straightforwardly suggest that economic development must be founded on an adli-type. the recently hypothetical and pragmatic research on this subject shows the intensity of debate has been increased (gardner, 2005; gemmell, lloyd, & mathew, 2000; tiffin and irz, 2006). research on this subject is essential because it supports to formulate the appropriate policy (domestic and international) in favor of decision making regarding the allocation of limited resources to different sectors of the economy (especially agriculture and non-agriculture sector). the main purpose of this article is to find out the answer of the most debatable and confusing question "does the agriculture growth matter in economic growth in the developing countries”? we examine short and long-run causality relationship among the variables, i.e., agriculture, manufacturing and economic growth. this research article divided into five distinct sections; first part deal with the introduction and underlying problems of study and the second part explains the previous literature which illustrates different views of the researchers regarding this question. third section deal with data, methodology and analysis and the fourth section primarily deals with empirical results and discussions and finally, the fifth section explains the conclusion and policy implication based on major studied variables. 2. previous studies previous studies show the confusing result and remain a dearth of unanimity on the role of the agriculture sector in economic growth and development. some economist believes that agriculture growth is a precondition to industrial development and economic growth, but ideas of other economist disagree and argue for a different path. several researchers argued that economic growth depends on the development of the agricultural sector (schultz, 1964; gollin, parente, and rogerson, 2002). review of economics and development studies, vol. 6 (2) 2020, 245-255 247 researchers believe that growth in the agricultural sector could be a catalyst for national growth through its effect on rural income and allocation of resources for transformation into an industrialized economy (datt & ravallion, 2002). a prior effort by several developing nations to industrialize their economy without previous agricultural development resulted in depressing economic growth rate and very much skewed income distribution (bhagwati & srinivasan, 1975). timmer (1988) explain agriculture is the secondary sector that indirectly pays to the economic growth and development through its food price stability and availability of food and poverty reduction. in a hypothetical analysis, matsuyama (1992) and baig & salam (2019) explained agricultural development is the foundation of economic growth for the developing nation. while many studies have outlined the theoretical relationship between agriculture and economic growth. researcher’s findings contradict each other and have not reached on any consensus on this issue. izuchukwu (2011) found the significant causal relationship among agriculture and economic growth and also argue that there is a significant positive impact of the agriculture sector on the economic growth in nigeria. on the other side, the result of dim & ezenekwe (2013) shows the evidence against this result. while other many studies show the positive causality relationship among agriculture and economic growth by the use of different methodology (oluwatoyese, 2013; srikanth & sathyanarayana, 2011). recently, in the context of bangladesh, one of the studies shows that one-way causality exists among agriculture and economic growth (rahman & hossain, 2014). while others found a negative relationship between the variables (aggrey, 2009). awokuse & xie, (2015) explained the positive long-run impact of agriculture on economic growth. he considered the agriculture sector as a foundation for developing economies. the relationship between agriculture and economic growth is an empirical question for further investigation. specifically, earlier research employed the correlation, and ordinary least square techniques may have problems due to spurious regression. however, findings explain only the association among the variables, but it failed to capture the directional causality between agriculture and economic growth. tiffin & irz (2006) applied a bivariate granger’s causality model to analyze causal relationship among the variables and result indicated the strong support in favor of causality running from agriculture to economic growth for the developing countries while the result is inconclusive in the case of a developed nation. both of them have improved their study on the cross-sectional analysis, as they applied the modern time series in the modeling (i.e., co-integration and ecm) to examine the bi-directional causal relationships between agricultural value-added and economic growth. they show strong indication in support of causality running from agriculture to economic growth in the case of developing countries, but the causality results for developed nations were inconclusive. another study by storkey et al., (2013) investigated the causality relationship between agriculture and economic growth and saw a significant causal relationship among the variables. matahir (2012) employed johannsen co-integration techniques to examine the non-causality relationship between agriculture and other economic sector. he suggests that researchers should stress on the agriculture sector as a vital tool in the analysis of inter-sectoral growth policies. recently siaminamini (2017) investigated the impact of service and agriculture sector on the economic growth of sixty-two developing nations. she explains the service sector is directly associated with economic growth while inversely relationship between agriculture and economic growth. thus, the multivariate causality framework employed to explore the causal relationship between agriculture and economic growth in india. the present study tries to fill the gap in the pragmatic works on the vibrant interaction between agriculture and economic growth. the primary objective of this study is to investigate short and long run causal relationship among agriculture, manufacturing and economic growth by the use of autoregressive distributed lag (ardl) error correction mechanism and granger’s causality approach. review of economics and development studies, vol. 6 (2) 2020, 245-255 248 3. data and methodology on the availability of annual times series data obtained from national account statistics (nas) and reserve bank of india (rbi) from the period of 1966-2016 of the three variable, i.e., agriculture, manufacturing, and economic growth to explore the causality relationship for the short as well as long period of time among the variables. 3.1 model this study based on the three crucial variables namely agriculture growth (gross value added), manufacturing (gross value added) and economic growth (gross domestic product) denoted by the x, y, and z respectively and also take the natural logarithm of each variable. in this model which is given below. economic growth takes as a dependent variable whereas, agriculture and manufacturing growth are independent variables. ln(z) = + ln(x) + ln(y) + …….. (1) 3.2 unit root test prior to run the regression, to check the stationarity to evade the spurious regression that misleads the result in the model. augmented dicky-fuller (adf) and phillips-perron (pp) test employ to detect the stationarity at all the levels (dickey, & fuller, 1961). ……….. (2) the null hypothesis implies that unit root in the series and alternate hypothesis means time series as stationary. if the null hypothesis is rejected, times series is stationary. primarily, we check time series are balanced or not. if balanced (all the variables are stationarity at the same level either integrated order 0 or 1), so at what level time series is stationary. if time series stationary at integrated at order 0. when the variables are trend stationary in the long-run relation, the common practice has been to de-trend the series and to model the de-trended series as stationary distributed lag or autoregressive distributed lag (ardl) models (peasaran & shin, 1999). however, we proceed towards the auto regressive distributed lag bound model (ardl bound). 3.3 ardl bound test for co-integration this study employed recently developed the ardl bound testing method to investigate short and long relationship among the agriculture, manufacturing and economic growth in india. we use the ardl co-integration techniques (peasaran & shin, 1999) and (peasaran et al., 2001) which is basically overcome that problem that arises in the other co-integration models. there are several advantageous of ardl model comparing to other co-integration models such as engel and granger (engel and granger, 1987), johansen and johansen and juselius methods. ardl model is applicable at any situation either variable is integrated order at ‘0’ or ‘1' level and also at fractionally integrated. and other advantages in the long run model is that it gives the unbiased and efficient result if the sample size are small and finite (harris & sollis, 2003). and also laurenson and chai (2003) express the ardl model overcome the non-sense regression coefficient problem. ardl model is insufficient for investigation the direction of the causality between the variables. to explore the direction of causality among the variables employed the granger’s causality test. the ardl equation used in this given as follows. ∑ ∑ ∑ review of economics and development studies, vol. 6 (2) 2020, 245-255 249 ∑ ∑ ∑ ∑ ∑ ∑ in the above equation, ‘x' denotes the agriculture growth, ‘y' denotes manufacturing growth and ‘z' represents economic growth. where are constant terms, are the long term coefficients, and are the white noises error terms. the null hypothesis of no co-integration between the variables is while its alternatives in equation 3. in the equations (4) and (5) the null hypothesis and against alternate hypothesis is that and respectively. the optimal lag length determined by the akaike and schwarz information criteria. null hypotheses has been verified by computing the general f-statistics or wald test and comparing them with two critical bound values (lower and upper bound), that provide a band covering all possible classifications of the regressors into purely i(0), i(1) or mutually co-integrated. if the estimated value of f statistics is outside to the critical bound values, so the result are conclusive, and if f statistic lies inside critical bound values, in these conditions, the result is inconclusive. when f-statistics is greater than upper bound values, the null hypothesis will be rejected. while f-statistics is below than lower bound value, we can't reject the null hypothesis (peasaran, 1997 & peasaran et al., 2001). 3.4 granger causality test to investigate the direction of causality among the variables. thus, we use causality test suggested by the granger to analysis the causal relationship among agriculture, manufacturing and economic growth (equation 6, 7 and 8). ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ in equation (6) the coefficients of variables of agriculture growth and manufacturing growth statistical different from zero. this shows uni-directional causality running from agriculture and manufacturing growth to economic growth. similarly in the equation (7), if all the coefficients of agriculture and economic growth are statistically significantly different from zero. this implies that review of economics and development studies, vol. 6 (2) 2020, 245-255 250 one-way causality running from agriculture and economic growth to manufacturing growth. in equation (8), all the coefficients of manufacturing and economic growth are statistically significantly different from zero. this indicates the uni-direction causality is running from manufacturing and economic growth to agriculture growth. if none of them is statistically significant different form zero, in this condition no causal relationship between the variables. the adequacy and stability of the specified models were also analysis with various diagnostic tests for coefficients of determination (r-square), adjusted r-square, j-bera (normality test) test, serial correlation (lm test), heteroscedasticity (white’s test) and structural stability (cusum tests and cusum square). 4. results and discussion descriptive statistics shown the value of skewness of all variables are moderately greater than zero that indicated all the variables are slightly positive skewed. the economic growth are more skewed than agriculture and manufacturing growth. moreover the probability of jarque-bera test are greater than 5 per cent we accept the null hypothesis i.e. "data is normal" (table,1). table: 1 descriptive statistics statistics lnx lny lnz mean 3.9 3.58 4.41 median 3.89 3.52 4.36 maximum 4.22 4.3 5.08 minimum 3.57 3.01 3.9 standard dev. 00.18 00.38 00.34 skew. 00.08 00.28 00.32 kurto. 1.81 1.89 1.87 j-b test 3.05 3.29 3.58 probability 0.21 0.19 0.16 sources: computed by the author table 2, presented the results of unit root test (augmented dicky fuller and phillips-perron test) implies agriculture growth is the stationary at the 1 percent level of significance at the with or without trend levels while other two variables are also the stationary at the 1 percent level of significance at the without trend level. the marks of asterisk *, **, *** shows 1, 5, and 10 percent level of significance respectively. table: 2 unit root test a.d. fuller test pp test variables agriculture growth (lnx) 5.53 * 0.04 -5.74* 7.46* -0.49 -5.93* manufacturing growth(lny) 11.83* 2.40 -1.11 15.82* 7.20* -0.65 economic growth (lnz) 14.46* 3.10** -0.65 14.66* 4.13* -0.38 sources: computed by the author review of economics and development studies, vol. 6 (2) 2020, 245-255 251 after analyzing the stationarity, all the variables are stationary at the integrated order 0. we proceed towards the ardl model. prior to run the regression to find out optimal lag with the help of akaike and schraz information criteria. table 3, shows the agriculture and manufacturing growth which contribute the economic growth and development. thus, comparatively agriculture growth is highly affected to economic growth in the short run (table 3). the long-run coefficients of manufacturing growth showed the positive significant relationship between manufacturing and economic growth at the 10 per cent level of significance. moreover the coefficient of agriculture growth shows positive impact on economic growth but it is insignificant. table: 3, estimating ardl (1, 1, 1) model. long and short run coefficients with ect (-1). economic growth as a dependent variable sources: computed by the author in the table 4, f-statistics i.e. 20.45 is greater than critical upper bound value which shows there is long-run relationship exist among variables at the 1 per cent level of significance. the value of coefficient of error correction term is small and negative implies to adjust the disturbance in the longrun equilibrium in the slow process. table: 4 ardl co-integration bound testing approach result ardl model optimum lag length f-statistic variables x, y and z (1,1,1) 20.45 significance level critical bound f-values lower upper 1 percent 3.88 5.3 2.5 percent 3.22 4.5 5 percent 2.72 3.83 10 percent 2.17 3.19 sources: computed by the author the specific ardl model (1, 1, 1), passes of all the diagnostic tests such as series autocorrelation, heteroscedasticity and normality (table 5). we accept all the null hypotheses “there is no serial correlation and heteroscedasticity by the lm and white test respectively while in the jarque-bera test the null hypothesis are “data is normal” as p-value are greater than 0.05 level of significance. review of economics and development studies, vol. 6 (2) 2020, 245-255 252 table: 5 result of residual test residual test f-stat [prob.] serial correlation lm test 0.7 heteroschdasticity test 0.8 jarque-bera test 0.19 sources: computed by the author to check stability of specific ardl model i.e. ardl (1, 1, 1), we used cumulative sum of recursive residuals and cumulative sum square of recursive residuals suggested by the brown in his research paper published in the 1975. figure: 1 result of stability of the model [cusum-test] figure: 2 result of stability of the model (cusumq-test) review of economics and development studies, vol. 6 (2) 2020, 245-255 253 fig. 1 and fig.-2 are the plots of cusum and cusumsq respectively remains within the 5 percent critical bounds and confirmed that model stable and policy prescriptions can be reliably derived from the coefficients of the model at the 5 percent level of critical bound values. the ardl model explores the only short and long-run relationship among the variables. to analysis, the causality among the variables, the granger’s causality test had been used. result of granger’s causality shown in the table 6 indicated that one way causality running from manufacturing and economic growth to the agriculture growth. morevore, uni-directional causality runnign from economic growth to manufacturing growth. however, result also explore the bi-directional causality relation between the agriculture and economic growth. agriculture causes economic growth viz.a.viz economic growth causes agriculture growth. this result supported various previous studies such as tiffin & irz (2006), sri kanth & sathayanarayan (2011), izuchukwu (2011), oluwatoyese (2013), storkey et.al (2013) and rahman and hossain (2014) in which explored the long run causality relationship and they found causality running from agriculture sector to economic growth. apart from, some studies contradict this result namely aggrey (2009) and dim & ezenekwe (2013) they found no positive significant impcat of agriculture on economic growth. result of this study showed agriculture sector is primary sector that directly contribute to the economic growth and development though providing of food to people of the country and raw materials to the non-agriculture sectors. table: 6 causality relationship (granger causality test) review of economics and development studies, vol. 6 (2) 2020, 245-255 254 sources: computed by the author 5. conclusion and policy implication to find out the answer of the most important question "does the agricultural affects the economic growth?’’ in india from 1966 to 2016 achieved. researcher employed the ardl and granger’s causality model to investigate causality relationship among i.e. agriculture, manufacturing and economic growth for the short as well as long period of time. in the first step, we used the ardl cointegration approach to investigate the short and long run relationship among the variables. in the second step, we applied the granger’s causality model to check the causality among the variables. result indicated that one way causality running from manufacturing and economic growth to the agriculture growth. nevertheless uni-directional causality running from economic growth to manufacturing growth. however, result also explored the two way directional causality between the economic and agriculture growth. agriculture causes economic growth viz-a-viz economic growth causes agriculture growth. this study supported a very famous statement “agriculture is the engine of economic growth" this statement is valid for the short period of time but in the long run nonagriculture sector contributed more than agriculture sector to the economic growth in context of india. in india, agriculture is the primary sector of the indian economy since the 1950s. but from 1990s, nonagriculture sector leads to economic growth and development due to huge public investment. policymakers ought to be emphasize on agriculture as well as the non-agriculture sector for formulating appropriate policy to improve overall economic condition and development in the country. however, empirical results of this study provide to the policymakers a better and clear empathetic of agriculture and economic growth nexus for framing appropriate policy for the short as well as long period of time that plays an important role to enhance and upgrade the standard of living of the people of india as a particular and for the low-income countries as a general. government increase the percent of investment to gdp in the agriculture sector through the better irrigation facility, improved seeds technology 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(1988). the agricultural, i. review of economics and development studies vol. 5 no 2, june 2019 315 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads the politics of religious extremism in pakistan: an analysis 1 sidra karamat, 2 muhammad muzaffar, 3 ali shan shah 1 phd scholar, department of political science and international relations, gc university, faisalabad, pakistan, sidrahkaramat@hotmail.com 2 assistant professor, department of political science, gc women university, sialkot, pakistan 3 assistant professor, department of political science and international relations, gc university, faisalabad, pakistan article details abstract history revised format: may 2019 available online: june 2019 in this study, the connection between islamic values and country policies has been carefully connected to the foundations that create political legitimating and the basic nature of a country. islam performs a crucial part in the social fabric of pakistan and has been integrated as the guiding concept for the constitutional procedure and governmental systems of the country but at the same time produced implicit stress for their future improvements. various government authorities have used religious beliefs for their quest for governmental authenticity and power. this has consequently brought about politicization of spiritual explanation in pakistan demonstrated in the form of sectarian disputes, persecution of spiritual unprivileged or disempowerment of certain spiritual organizations and management. whereas controversy about interpreting religious identity continues pervading the pakistani community, it is observed that large parts of the pakistani inhabitants follow pluralistic types of islam based on heterogeneous spiritual and devotional methods. islamic political parties should cooperate on federal or provincial levels with national and local political parties to eliminate the religious extremism in pakistan. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords religious factions, military wings, extremism, politics jel classification: corresponding author‟s email address: sidrahkaramat@hotmail.com recommended citation: karamat, s., muzaffar, m. and shah, a. s. (2019). politics of religious extremism in pakistan: an analysis, review of economics and development studies, 5 (2), 315-322 doi: 10.26710/reads.v5i2.604 1. introduction religious political parties play an important role of pakistan‟s politics. their number has spread since earlier years of freedom. apart from the jamaat-e-islami, islamic parties and groups usually recognize with a particular religious denominational or sectarian group; there can be more than one party with the same religious sectarian identity. in addition to their common competitors, these political parties are packed from each side. on the one side, the national and ethnic/ethnic political parties develop assistance that reduces across religious-sectarian, social and local identity. many of people choose these political parties rather than islamic parties. on the other side, islamic parties are under stress from fundamentalist groups that espouse assault, if required, to engage in their religious and governmental plans (abbas, 2015). those with powerful religious orientations usually trim towards these. some activists shuttle between islamic parties‟ jihadi and radical groups. all islamic parties suggest an islamic socio-political and financial order for http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5 no 2, june 2019 316 pakistan. they talk about of an islamic order in wide conditions to show their ambitions, or talk about its features at a level of abstraction. however, they diverge when it comes to converting the subjective principle or their statements and pronouncements into a codified constitutional and judicial system, institutional preparations and procedures of a religious system required for running country in the 21stcentury. they have not been able to generate a distributed lawful and constitutional document as a substitute for the current constitutional and judicial system. islamic parties have poor electoral status. no islamic parties have ever been able to protect more than a few parliamentary seats in the national and provincial elections of legislative assemblies. their efficiency is better when they develop a regional and national political alliance or when they enjoy the benefits of an army regime. if they make a political coalition of their own, their electoral efficiency enhances. several reasons describe their hopeless electoral efficiency. islamic parties cannot make a reputable claim that they are the only protectors of religion (ullah, 2013). the significant parties do not disown islam. the pakistan tehreek insaf (pti), pakistan muslim league (pml) and its various groups, along with the pakistan people party (ppp), the mutihda qumi moment (mqm) and others, do not decline the recognition of the pakistani country with islam. their perspective of an islam-oriented political order diverges from that of islamic parties. the prospect of a secular system in the marxian sense has never been popular in pakistan. most regional and national parties talk about of social and religious tolerance and socio-economic rights and the prospect of equal rights. 2. extremism in pakistan: a brief history pakistan is the muslim majority state and also officially recognized as the islamic republic of pakistan. therefore, the constitution of pakistan gives the constitutional safeguard for all religious activities and also secures the religious rights of the minorities. the government of pakistan cannot pass any law which violates the teachings of islam. pakistan has trialed (to different degrees) with the incorporation of islamic legal constitution in to the important of the nation-state, but in neither, country has traditional islam applied specified impact state governance. in present environment progressively reducing world, spiritual customs are modified and dependent power politics and financial change, new electronic media, and changing social objectives. primary spiritual beliefs and practice the religious principles will continue to modify even in the upcoming, as all living societies do. despite being an islamic republic constitutionally, there was a clear distance between state policies and religious values, as well as difference between public and private islam, at least in the powerful decades after the formation of pakistan (misra, 2003). on 11thaugust1947 the founding father of pakistan quaid-e-azam mohammad ali jinnah said in his first speech with to the pakistan legislative assembly clearly mentioned that religious values were a personal matter of the people and defined the equal rights of religion. however, the power of spiritual groups, who put all their initiatives into announcing pakistan an islamic country, had been overlooked or perhaps the objectives of the federal government who would take on the reins of pakistan, were not that apparent because in less than two decades after it, the legislative assembly shifted the objective resolution on 7thmarch 1949, promising a draft an islamic constitution. with the secession of eastern pakistan, the religious-political parties desired to improve the ideological foundation for pakistan and integrated islamic injunctions into the1973 constitution. the origins of these problems of islamic identification go back to the pre-partition era. the problem of social pureness appeared after the decrease of islamic power, when shah wali ullah and other islamic revivalists in the sub-continent tried to protect the unique identification of the islamic society through strict adherence to genuine islam. the potentiality of an political alliance between „ulama‟ and fundamentalist management was confirmed in 1953 when serious rioting split out in lahore over the problem of whether the individuals the ahmadi sect should formally be considered a non-islamic religion (abbas, 2015). the problem was of particular significance because of the existence of ahmadis in sensitive government positions. later, in the nineteen fifties, the pakistani government most structured, spiritual urban group, the jamaat-e-islami, and other like-minded parties started to use islam to promote exclusionary state policies and start public group riots by politicizing the identification query, that is, “who is a muslim?” the jamaat-e-islami led an effective activity to have the small ahmadiyya sect (which is doctrinally anathematic to the jamaat) announced non-muslim by situations. review of economics and development studies vol. 5 no 2, june 2019 317 the islamic parties‟ whole heartedly reinforced zia in this venture of “moral purification” of community, which would, in their viewpoint, lead to a political group based on islamic concepts. the jamat-e-islami was of crucial significance to zia. it was the only party with a dedicated cadre of loyalists that was standing in preparedness to reverse and dull any anti-zia frustration released by any political power (afzal, 2018). remarkably, the military expanded their role was also an important aspect in the islamization procedure. they were no longer merely the defenders of the boundaries, but also defenders of pakistan‟s “ideological frontiers”. religious knowledge and dedication became the factors for the selection of the army personnel. 3. challenges of “old and new islamists” the natural threat presented by the religious groups is that there has been an important move in their policy. basically, there is now a difference between what can be known as “old” and “new” islamists in pakistan. new islamists (pakistani taliban, jihadi groups, islamists), who were originally motivated by maududi‟s islamic liberation theology and later designed their own understanding, are usually protagonists of governmental islam, that is, they search for to improve country policies through islamic ideas and islamic ideas through country policies. they are compared with the old islamists (traditional islamic madaris /ulemas /pirs /sufis and mainly bralevi religious parties) who were covered by the secular elites, and thus, prevented governmental conflict. islamist organizations are centered mainly in the financially marginalized and culturally conventional regions of pakistan (cheema, 2008). the new islamists were not eager to work out such a choice. the governmental technique followed by the new islamists in pakistan was to try to catch civil community organizations with a perspective to gradually capture the state. the country policies of islam experienced an important change as an outcome of zia‟s regime in 1980 to include pakistan definitely in afghanistan „anti-soviet jihad. as this participation became deeper, the interservices intelligence (isi) director took over complete control over applying country policies on this side. initially, the isi obtained the help jamat-e-islami to channel cia-procured hands and money to afghan warlords or as they were famously known as the mujahideen (holy warriors). this describes the governmental power and the development and participation of the “new islamists” in the politics of pakistan. attack on religion in country politics is also due to a deficiency of the religious custom of “ijtihad” whereby spiritual clerics provide a private presentation of the quran with a view to apply quranic rules to modifying conditions. in present scenarios pakistan has several of these so-called “ulema” and islamic elite, but the governmental power of this management does not allow the „real‟ islamic researchers to communicate a specified explanation of the sacred written text. moreover, researchers who challenge to brand the eliminating of simple citizens in the name of religion as non-muslim, face threats and severe critique from islamic parties whose mostfavored organ for public mobilization is often a call for jihad against the “infidels”. it is also to be observed that the phrase 'jihad' is being absolutely abused by pakistani islamic elite. it is exciting to observe that one does not find in the qur'an the phrase 'jihad' in the feeling in which it is being famously used, that is, 'holy war'(day & degenhardt, 1984). the term in the qur'an for war is 'qitaal' and not jihad. the word' jihad' is used in its actual feeling, which is to endeavor, claim or create initiatives. thus, jihad in the qur'anic language means to say you or to create initiatives to enhance what is right and to ban what is wicked. a simple and overzealous effort to present the rules of a various social development into the socio-political material of a post-colonial, urbanizing, pluralistic community with a growing breakdown to main group connections, can neither actually sustain serenity nor fulfill the finishes of rights. on the other hand, it breeds assault and disregard for the rule of law and current judicial system. 4. politico-religious mobilization pakistan did not notice an unexpected “opening up “after the failure of the ussr. it was already going through an “islamic globalization” in the type of a brotherhood with muslim states, particularly saudi arabia on one side and iran on the other, with the united states performing as a facilitator, at least between saudi arabia and pakistan. compared with the globe, pakistan got experience of spiritual extremism not long after its independence (abbas, 2015). though pakistan had yet to observe its aggressive manifestation, the introduction of islamic regime into the objective resolution of 1949, provided an advantage to the mullahs in the legislative assembly. later, in the1970s, with a moderate liberal like zulfiqar ali bhutto succumbing to the requirements of islamic parties to announce ahmadi‟s non-muslim, the ground for spiritual extremism had been set. the jihad against communism and zia‟s accommodation of the spiritual right, changed the community from a tolerant islamic community to one hi-jacked by the wahabi/ deobandi attitude, commanded by the taliban. review of economics and development studies vol. 5 no 2, june 2019 318 the politico-religious nationalisms have been significantly pushed by “extremist” versions. compared with their forbearers, these versions have several identifying features in the pakistani perspective. first, they believe the spiritual identity of most as not merely one critical facet of the state identity, but as main and overriding, and hence the monopoly of the deobandi/sunni declaring a very doubtful majority, obtained through coercion and worry(smock, 2006). second, they consider cultural or spiritual identity to be different from those of most, presumptively unfamiliar and cheating, which led to the formation of a tiered perception of citizenship. third, extremist spiritual movements are often spread by motions that believe that public and even extremist assault are “normal” and genuine way of promoting their perspective and of maintaining spiritual and cultural unprivileged in their(subordinate) place. the governmental viewpoint of the sipah-e-sahaba in the1990s, and currently, the tehrik-e-taliban pakistan (ttp) and tehrik-e-nifaz-e-shariat-e-muhammadi (tnsm) is dependent on the regime of the “survival of the fittest”, with the ‟fittest‟ being the supporters of their own group. lastly, and perhaps most alarmingly, spiritual extremism encourages extreme rivalries with other countries that do not part their spiritual identity. the army dictators, after all, were not spiritual lovers (with the exemption of zia). actually ayub opposed the impact of the traditional 'ulema‟ and presented many contemporary rules. yahya khan too refrained from invoking spiritual orthodoxy for legitimizing his regime. beginning from bhutto until musharraf and zardari government however, have been more accommodative of islamic orthodoxy (cheema, 2008). the taliban trend was an all-natural result of the policies of previous regimes. and the madrasas then set up in the north waziristan region are rolling out a lot of 'taliban' every season. though they do not become „ready-to-kill‟ lovers instantly, they have no contact with the opposition portion of islam either. thus, the focus is more on growing a jihadist attitude than offering truly spiritual alignment (murphy, 2013). most of these madrasas have promote the interest of religious parties as they are under the supervision and guidance of islamic parties; very few of them are separate, and get finical aids from various resources, such as some muslim countries, most significantly saudi arabia. 5. to promote specific political goals the main causes of identity mobilization are associated with the actual features of state politics in an inadequate country and its vulnerability to the attack of external powers into its body politic. sectarianism in pakistan shows that the imperatives of state politics in such countries merge with the interest of worldwide powers to entrench identity cleavages in the governmental procedure. pakistan‟s struggling because of spiritual extremism is no key. in pakistan, the problem is not simply antagonism towards other spiritual places, for example, assault against the ahmadis or christian believers, but even cleavages within the islamic group. solidified spiritual islamic groups vary with each other on explanation which changes according to various variations and often brings to serious types of sectarian assault. religious beliefs is politicized and used for starting violence activities by two religious sects in pakistan, which even though somewhat inter-related, display certain variations based to their goals, areas of function, and target of assault (abbas, 2015). first, there are sectarian group from the sunni and shia variations of islam that have been effective in militant actions which are mostly, but not specifically instructed against individuals from the other sect. this public schism on sectarian division was the immediate results the procedure of islamization legislation in pakistan, created by chief executive zia ul-haq in 1977–88; sectarian assault was unusual before this regime. the shias, sensation motivated after the 1979 iranian revolution and embittered by zia‟s islamization system, designed an organization known as the tehrik-e-nifaz-fiqah-e-jaffria (movement for the imposition of shia law) and protested against the president‟s legislation. they were effective in obtaining evade clauses in the new islamized rules for themselves and in having the shias, normally, excused from certain elements of those rules. not only did chief executive zia develop frightened about shia power in pakistan, but the sunnis were also protest at the time. they terrifying that individuals might search for transformation from sunni sect to shiism in order to search for exception to this rule from zakat (the yearly tax of 2.5 % on the benefits of muslims to be allocated among the poor) or from other, more firm sunni family rules. the vigilante sunnis therefore, designed sipah-e-sahaba pakistan (army of the partners of the prophet). the other set of spiritual extremists believe in a „grand‟ plan, and the activity or system of the remains of the afghan war. this actions describes ted gurr‟s regime of comparative privation despite being people of an islamic country, these groups are still not pleased and happy with the level of review of economics and development studies vol. 5 no 2, june 2019 319 islamization of group. they evaluate their country with the “ideal” islamic country where sharia or islamic rules are completely applied (afzal, 2018). 6. politics of religious extremism haqqani considers that progressively the political determination for an ideological countries progressed into a strategic determination for the jihadist belief, both, for local impact and for domestic reasons. for example, the pakistani army used islamist idioms and took the help of religious groups to keep out of power the chosen secular political leadership, reinforced by the majority bengali-speaking population. the revolt of bengali people and brutal violence of the bengalis by the army followed. the role of religion in the politics of pakistan and its militant expression increased several times over after the anti-soviet afghan war. the way kashmir battle became more of an islamic battle than territorial/apolitical argument, says a lot about the effect of religious extremism. of crucial significance for knowing the effect of pakistani religious extremism on the state‟s condition policies is to understand the relationship between religious extremism and assault dedicated by non-state actors. in particular, religious extremism tends to motivate religious assault and terrorism and also, because of its determination and virulence, brings about “reactive” religious assault, terrorism, and even militant movements (murphy, 2013). most of the literary works typically concentrates on religious extremism as a trend outside the central government, (practical execution of the religious belief, most of the things the followers of trust in country policies talk about cannot be applied in contemporary country, religious political parties lack proper skills or attitude that assures good government in contemporary nation state system, hence they use either emotional slogans, motto religious affiliation or power to make individuals accept their global view point and manage to get seats in general elections) what happens when the ideological philosophy becomes a reality and experienced power, religious extremist parties when they come to power, use assault as a semi-official tool of government and governmental self-preservation the mma used the emotional term „islam in danger‟ during the general elections of 2002 in the history of the united states attack on afghanistan in 2002 and approved the activities taken by militants and the taliban in the tribal areas of pakistan against the “infidels”(misra, 2003). this shows that it is important to look at the effect of religious extremism on democracy. we have experienced how religious extremism has marketed majoritarian and illiberal ideas of democracy that damage the civil and political rights of religious unprivileged. in other words, it is important to understand the important government aspect that religious beliefs and its extremist version perform in pakistan, particularly in democratic politics, how these entice government support and apply government impact beyond primary followers and be successful in forming nationwide country policies. one can claim that religious extremism undermines democracy. surprisingly, it has seen that at least in one example in pakistan, democracy assisted religious extremism in the form of mma‟s regime in the nwfp and baluchistan through a genuine electoral process in 2002. it is another issue however, of how the members of the mma carried out their election strategy asking the voters whether they wanted to choose the quran or america. when the nizam-e-adl control in swat in the nwfp region was passed by the parliament despite modern, moderate political regime governing the federation (people‟s party) and the region (awami national party), is yet another example that democracy is not a remedy to all problems, even though many problems can be linked to authoritarian regime. it is true that subsequent army government authorities relied on religious parties for authenticity in pakistan. in the initial period after freedom, islamic parties could not perform any significant democratic role and the country tended very most secular when it had been most elitist and unprivileged (ullah, 2013). later, however, extended times of authoritarian rule, assisted these spread islamist groups to claim governmental power under the supervision of the army dictatorship. therefore, what has specifically been a traditional group of islamic fundamentalists joined the world of mass-based political activities (for example the 1985 party-less elections) as a consequence of democratic opportunities, even if short-term and politically poor. unfortunately, the conversion to democracy in pakistan after extended times of army rule, brought into power, islamic parties with a confrontational plan against the west. finally, there is a number of far attaining government repercussions of the attack of trust in the politics of pakistan. for example, religious extremism encourages religiously-defined ideas of national identity that politically unite and muster individuals and serve as a standard of government authenticity. religious extremism by its very nature is believed to operate at the edges of community rather than at the centerstage of national political life, but this leads to apolitically important and growing alliance between religious review of economics and development studies vol. 5 no 2, june 2019 320 extremism and government nationalism. except for the comparative solitude of some tribal areas in kpk and baluchistan, pakistani community is confronted with the social impacts of an international urban commercial society (abbas, 2015). according to the khyber pakhtoon government, the recently finalized swat contract with the taliban was to control the law and purchase situation. on the other hand, if the taliban resort to assault and go beyond what is approved, chief executive zardari would have to reevaluate the agreement? sufism which fascinates a lot of south asian people to accept islam does not believe any type of extremism in religion. pakistani muslims are seriously looking for magic that can help them break the pattern of foreign-funded, highly-politicized islam that is still “foreign” to the 170 million individuals this place in the globe. the implementation of sharia was never a ritual in any portion of the country until gen. zia-ul-haq enforced his questionable hudood ordnance because of its anachronisms. the orthodoxy of the religious political elite in pakistan, particularly the wahabi-deobandi islam, does not have its origins in the ground. this brand of islam is doctrinaire, virulently illiberal of diversity, misogynist and passionate with jihad in contrast to the religion and religious techniques of common individuals of pakistan which is syncretism, resistant, and devotional and combined in the mystical religion of the indus valley and its „languages‟. musicand dancing are very much a portion of this folk religious custom. it is therefore, important to engage in collaboration rather than conflict, especially on negligence the policy-makers, to ensure the possibility of a happy features in which “essential elements of democracy will be communicated in the veins of new religious states.” it is important to know the difference between the religious orthodoxy that need to battle and the better ethical principles of islam that prospered in the religious land of the indus valley that need to be merged. to be able to maintain the ideal of moderate and modern country, and to deal with the country policies of ancient religiosity in a post-colonial religious majority country like pakistan a purposeful public technological innovation effort is needed (cheema, 2008). despite severe restrictions in understanding, examining and interpreting modernity and progressiveness, there is a huge amount of average, urban citizens within pakistan‟s civil community, who have the intelligent quality, administrative ability and experience of public activism and are the only visible public power that can battle the religious orthodoxy and perform an effective aspect in developing country. 7. conclusion all political parties identify the constitution of pakistan as the basic law of pakistan which provides theoretical as well as institutional preparations for deep relationships between the pakistani state system and islam. most islamic political parties have a religious-sectarian identity that reduces the political parties to the individuals with a strong religious-sectarian alignment. others, who do not share the religious orientations of the parties, stay away from it. islamic parties contest with one another on the basis of spiritual perspective, sectarian identity and character of the political leaders. even within each sect, there is more than one political party, making electoral competition more narrowly targeted. islamic parties have a public image problem. not lots of individuals particularly the educated youth believe in islamic leadership as having enough political expertise and an understanding of the characteristics of domestic and international state policies. they have a tendency to participate in the national or regional parties in a very large number. with some exclusions, many islamic parties either sympathies with militant groups or sustain an uncertain character towards these groups. the power of islamic political parties relies upon on having street strength faithful activists and madrassa students. the religious parties that have connection with mosques and madrassas seem to develop more political power. few political parties are making inroads into government college and universities to hire adolescents to their flip. the power of islamic political parties improved during the army regime of general zia-ul-haq, when he merged with the us and middle eastern states to build afghan-islamic resistance to deal with soviet soldiers in afghanistan. it was during this period that the jamaat-e-islami and some other islamic political parties that were involved in the first afghan „jihad‟ or experienced the benediction of the army regime, increased their position as money and weaponry ran to chosen islamic and radical groups. some of these political parties ongoing to keep interaction with militant groups even after the end of the first afghan „jihad‟ and prolonged assistance to al qaeda and taliban activists when they joined up with pakistan from afghanistan, after the us committed its air attack on afghanistan in october 2001. the recent use of assault by some islamic parties with barelvi customs has created a variety of improved demonstration and assault. however, the success of their demonstration relies upon on their ability to collect review of economics and development studies vol. 5 no 2, june 2019 321 assistance from other religious parties. their active role in the anti-ayub and anti-bhutto political movements created governmental impact because they were working together with national parties. in the same way, some islamic political parties have use power at the federal or provincial levels, in cooperation with national and local political parties, or by either becoming a member of hands with army government or experiencing their benediction. islamic political parties can make thing tricky for any federal government because of their cadres but none can, on their own, come to the rule through democratic elections. references abbas, h. (2015). pakistan's drift into extremism: allah, the army, and america‟s war on terror: allah, the army, and america's war on terror. london, united kingdom: routledge. afzal, m. (2018). pakistan under siege: extremism, society, and the state. ‎ sanihsoghdw ,.c.d w noggnihsaw shaoionoighwiosaa. cheema, p. i. (2008). political role of religious communities in pakistan. islamabad, pakistan: islamabad policy research institute. day, a. j., & degenhardt, h. w. (1984). political parties of the world (2nd ed.). london: longman group limited. misra, a. (2003). rise of religious parties in pakistan: causes and prospects. strategic analysis, 27(2), 186-215. murphy, e. (2013). the making of terrorism in pakistan: historical and social roots of extremism. london, united kingdom: routledge. ullah, h. k. (2013). vying for allah's vote: understanding islamic parties, political violence, and extremism in pakistan. washington, d.c., united states: georgetown university press. review of economics and development studies, vol. 6 (1) 2020, 153-166 153 abnormal returns, corporate financial policies and the dynamics of leverage: empirical evidence from non-financial sector of pakistan a kashif hamid, b zahid hussain, c muhammad mudasar ghafoor a faculty member, ibms,university of agriculture faisalabad.email:kashif.boparai@hotmail.com b faculty member, fms, national textile university, faisalabad, email: zahid@ntu.edu.pk c assistant professor, university of the punjab, jhelum campus, jhelum. email: mudasar@pugc.edu.pk.com article details abstract history: accepted 19 march 2020 available online 31 march 2020 the aim of this study is to evaluate impact of corporate financial policies and the dynamics of leverage on financial performance of non-financial sector in pakistan. in this study we used the data from fertilizer, chemical and cement sector for the period 2008-2017. abnormal return has been taken as dependent variable and change in cash to lagged market values, change in ebit to lagged market values, change in dividend to lagged market value, net financing to lagged market value, lagged cash values to lagged market values, lagged cash values to lagged market values crossed by change in cash to lagged market value, change in total assets net of cash to lagged market values, change in interest to lagged market values, operating leverage, financial leverage, total leverage, leverage ratio, leverage ratio to change in cash crossed by lagged market values and wacc are taken as explanatory variables. ols, fixed effect and random effect models has been used to express the impact of these variables on return. hence it is concluded that leverage dynamics are significant contributors in designing the corporate financial policies. corporate financial policies have significant impact on the financial performance of the non-financial sector of pakistan. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: financial leverage, total leverage wacc, fixed effect, random effect, robust jel classification: b26, d53, o47 doi: 10.47067/reads.v6i1.193 corresponding author’s email address: kashif.boparai@hotmail.com 1. introduction downfall in industrial sector has become critical issue in the economy of pakistan in recent years. these downfalls may be due to financial policies incorporated by the firms in a traditional manner. in first instance the core domains of leverage policies and its dynamics are discussed in a brief manner. leverage is used to magnify the level of returns and the optimal level of leverage is a result of high integrated leverage policies of the firm. leverage dynamics are changing dynamics and still have loop holes in the policies for strengthen the anatomy of the industrial structure of pakistan economy. in business context the term leverage means a corporate debt used to finance the assets of a firm. leverage can increase the firm's risk of bankruptcy as well as assist to enhance the abnormal mailto:kashif.boparai@hotmail.com mailto:zahid@ntu.edu.pk mailto:mudasar@pugc.edu.pk.com mailto:kashif.boparai@hotmail.com review of economics and development studies, vol. 6 (1) 2020, 153-166 154 returns of the firm. leverage is classified into three domains as operating leverage, financial leverage and total leverage. operating leverage is a ratio of fixed cost to variable cost. if a firm has high fixed costs as compared to variable costs then firm has high operating leverage. operating leverage can also be interpreted as a change in ebit to change in sales. if the result is greater than one then it means operating leverage exits in the business. financial leverage means the amount of debt in capital structure of the firm. huge amount of financial leverage can increase the risk of default and bankruptcy. the financial leverage is computed as percentage change in earning per share divided by the percentage change in ebit. if the result of ratio is greater than one, then it shows the presence of financial leverage in the business. total leverage means the total amount of risk faced by a business firm and it is a combination of operating and financial leverage. total leverage is calculated as percentage change in the earning per share divided by percentage change in sales. total leverage is a result of multiplication of operating leverage and financial leverage. further leverage ratio can affect a corporate risk, financing capacity, cost of capital, strategic decisions investment and finally shareholders wealth. cai and zhang (2011) used financial leverage ratio to identify the impact on firm stock price. modigliani and miller (1958), leverage ratios can also be affected by the many other elements additionally to the issuance of the security and share repurchase, including earnings accumulation, dividend payment, provision or use of trade credit or payment of existing credit line etc. in second instance a brief introduction of corporate financial policies is discussed as adopted by the firms. such corporate financial polices include cash policies, earning management, dividend policies, asset management, capital structure and cost of capital policies. cash management includes the sustainability of optimal level of the most liquid item in the current asset. its change over the span of time indicates the ultimate requirement of the business unit but the excessive amount of cash indicates the precautionary needs. the earning management dilemma indicates the level of earnings after meeting the fixed and variable costs and how various policies regarding to the costing is used to enhance the profitability. dividend policy may affect the market value behavior over the financial years. whereas the asset management includes the total size of the firm and its sustainability over the span of time with best performing portfolio of current assets as well as fixed asset and its role in enhancing the returns on asset. capital structure is the mix of long term debt and equity in the business financing portfolio. the optimal capital structure theory leads to the maximization of earnings before interest and taxes by reducing the weighted average cost of capital. tangibility, size, profitability, market to book ratios have number of times been reported by different researchers that may affect the corporate financial policies. as bhatti, majeed, rehman and khan (2010) investigated the impact of leverage on systematic risk and stock returns for the industrial sector of pakistan. however, cost of capital is the weighted-average of after tax cost of firm’s long-term debt, common and preferred stock. cost of capital is the rate of return which could be earned on an investment with the similar risk. it may also be defined from company as well as investor point of view. from company’s point of view, the cost of capital refers to the cost of debt or equity to finance an investment. however from an investor point of view, the cost of capital is the required rate of return that an investment must provide to the business. cost of capital is used as a bench mark parameter because it is used to evaluate the new projects of a firm, as well as it is the minimum return that investors expect for providing capital to the company. a firm's securities typically include both equity and debt therefore one must calculate the cost of equity and the cost of debt both are necessary to determine a firm's cost of capital. a more important calculation of cost of capital is the (wacc) weighted average cost of capital. the purpose of this study is http://economics.about.com/od/production/ss/the-costs-of-production_4.htm http://www.readyratios.com/reference/debt/financial_leverage.html http://www.accountingcoach.com/blog/what-is-preferred-stock https://www.boundless.com/definition/finance/ https://www.boundless.com/definition/required-return/ https://www.boundless.com/definition/required-return/ https://www.boundless.com/definition/security/ review of economics and development studies, vol. 6 (1) 2020, 153-166 155 to investigate the relationship and to model the leverage dynamics and corporate financial policies for the abnormal returns of the firms. in this study we are focusing to investigate the changing dynamics of explanatory variables on the firm’s abnormal returns to optimize the best corporate financial policies for the industrial sector pakistan. this study will contribute in designing the optimal mix of strategic financial policies to identify the key elements that may magnify the returns level. 2. literature review aivazian, ge and qiu (2005) examined the effect of financial leverage on the firm’s investment decisions and concluded that there exist negative association between leverage and h investment decisions. the outcomes support the agency theory for corporate leverage and its disciplinary role for lower growth firms. dangl and zechner (2006) investigated that long term debt maturities abolish share holders’ incentives and decrease in leverage leads to poor corporate performance. whereas short term debt maturity increases shareholders interest due to declines in leverage. however, a short debt maturity increases the transactions costs. they identified the tradeoff between the higher expected transactions costs against the commitment to decrease the leverage when the company is performing poorly. therefore it motivates towards an optimum maturity structure of the corporate debt. debt maturity requires the suitable level of financial leverage to reduce the volatility of the cash flows of the firm. they also found that the share holders’ incentives to decrease the debt are non-monotonic in the presence of corporate leverage. if the firm is pressed towards bankruptcy by a determined series of low cash flows, then ownership can start again issuing the debt to refinance the maturity bonds. abdullah, aydemir, gallmeryer and hollifield (2006) studied the impact of financial leverage on market portfolio of small companies with market risk. in an economy with both constant price of risk and a constant interest rate, financial leverage creates small difference in share return volatility at the level of market but significant deviation at the individual level of the firm. in an economy having more realistic deviation in the price of risk and interest rates, there is a significant variation in the return volatility at firm as well as at market level. in such economies, financial leverage has less impact upon the dynamics of returns volatility at market level. financial leverage increases more stock returns volatility on small size firm. maia (2010) investigated the relationship between the expected equity returns, capital structure determinants and the financial leverage of the firms. it is concluded that firms having lower leverage leads to a higher discount-rate of beta and firms with high leverage is related to lower cash-flow of beta. moreover the key determinants of the corporate capital structures are associated with the firm’s sensitivities due to systematic risk and are significantly important for high and low leveraged firms. the study reveals that short-term shocks are comparatively more important for the firms having low leverage and financial risk is more sensitive to the firm’s cash flow. bhatti, majeed, rehman and khan (2010) investigated the cotton, chemical, engineering, sugar, cement , fuel & energy, communication and transport industries sector and concluded that high level of leverage in these industries cause higher level of systematic risk as well as high volatility in the stock prices. cai and zhang (2011) documented a negative and significant impact of change in a firm's leverage ratio on the firm’s stock prices. they found that the negative effect is very stronger for that firms which have higher leverage ratio, face more severe financial constraints and have higher likelihood of default. moreover, firms which have an increase in the leverage ratio tend to have low future investment. these results are constant with debt overhang theory which tells us that an increase in the leverage may leads to the future underinvestment, thus decrease in the value of a firm. johnson, chebonenko, cunha, d’almeida and spencer (2011) examined the endogenous choice conditions of debt which persuades a negative relationship between the leverage and the expected stock returns. review of economics and development studies, vol. 6 (1) 2020, 153-166 156 faulkender, flannery, hankins and smith (2012) explored that the cash flow realizations can provide opportunities to the firm to adjust the leverage at the lower marginal cost. they found that a firm’s cash flows attributes are not only affect the leverage target, but also speed of the adjustment towards those targets. adjustment speeds is driven by an economical concept of adjustment costs. further they investigate that how market timing and financial constraints affect the adjustments towards a leverage target. obreja (2013) suggested a new dynamic model for the corporate sector that associates operating leverage to both book-leverage premium and value premium in stock returns. due to which the book-leverage premium become negative while the value premium becomes positive. without the operating leverage, the symbols of both premiums are reversed therefore this model has quantitatively many important for cross-section stock returns. yarram (2013b) identified positive relation between ownership concentration and leverage. the study used data for 465 firms during the period 2004 to 2010. frank and goyal (2015) identified the serious defect in the trade-off theory due to contrary relation between leverage and profitability. study reveals that the theory is not defected but by applying a leverage ratio in which profitability influence both the numerator and denominator. firms have taken the offsetting actions for predictions. when profitability increases firms issue debt and repurchase equity, and repay debt and issue equity capital when profitability declines. consistency with varying transactions costs, to fully undo the profitability shocks; therefore such adjustments are not generally sufficient. however on an average the leverage ratio falls as profitability increases. ball, gerakos, linnainmaa and nikolaev (2016) reported that adjusted cash flows create a profit measure mainly unchanged by the timing of payments and receipts of cash. they identified that prior research do not cover expected returns which may rise in profitability and fall in accruals. riccetti, russo and gallegati (2016) developed a model which has three main financial accelerators: leverage, stock market and network. the leverage effect shows negative shocks over the firm’s output as a result of banking sector which is less willing for loans. moreover, firms has less willing for the further investment and therefore the credit reduction more reducing the outputs. due to the stock market effect lower profit over stock returns which reduces the firm’s capitalization on the stock market. the credit network may be transmitting the initial shock. they concluded that if the stock market is the main indicator of economy then variation in the stock market may destruction real economy. the result has relevant implications for the monetary policy. teng, si and hachiya (2016) analyzed the leverage-return dilemma and observe the returns affect due to bank debts by considering the capital structure heterogeneity and dynamic nature. the relative leverage examined that the returns has strong and positive relationship with leverage. the positive relationship may be partially described in the way that the relative components may negatively forecast the prospect asset growth or may contain considerable information about the future risk. nadarajah, ali, liu and haung (2016) examined the effect of corporate governance and the stock liquidity over the firm’s leverage decisions in order to drive for the stock trading system and less severe for australian governance environment. the non-financial sector data is taken for 1207 firms during the period of 2001-2013. the outcomes indicate that the negative stock relationship exist between the liquidity and leverage. the results support the past research, which the firms having more liquid stocks have significantly less leveraged. the outcome also indicates that the significant negative relationship exists between leverage and corporate governance quality, which shows that the firms having high corporate governance quality significantly decrease leverage. duan et al, (2018) investigated the impact of leverage effect and uncertainty of economic policy review of economics and development studies, vol. 6 (1) 2020, 153-166 157 on the future volatility in the regime switching framework. the results of this study indicate that the har-rv having the leverage effect and uncertainty of economic policy with regimes can get higher forecast accuracy than garch and rv-type models. moreover the results of this study show that these factors in regime switching framework can substantially increase the performance of har-rv’s forecast. admati et al, (2018) studied the firms’ incapability to commit to future funding choices has thoughtful results for capital structure dynamics. with debt, shareholders resist leverage reductions pervasively without considering how much these reductions may increase the value of firm. the choices of leverage can have the implication for shareholders value. shareholder value reduced due to new debt threat of bankruptcy and asymmetric behavior. the asymmetric behavior makes leverage adjustment just through arbitraging process. 2.1 hypothesis h1: change in cash to lagged market values has a negative impact on abnormal return and has a significant positive relationship with abnormal return. h2: change in ebit to lagged market values has a positive impact on abnormal return and has a significant positive relationship with abnormal return. h3: change in dividend to lagged market values has a positive impact on abnormal return and also has a significant positive relationship with abnormal return h4: net financing to lagged market values has a positive impact on abnormal return and also has a significant negative relationship with abnormal return. h5: lagged cash values to lagged market values has a positive impact on abnormal return and also has a significant positive relationship with abnormal return. h6: lagged cash values to lagged market values crossed by change in cash to lagged market value has a positive impact on abnormal return and also has a significant negative relationship with abnormal return. h7: change in total assets net of cash to lagged market values has positive impact on abnormal return and also has a significant positive relationship with abnormal return. h8: change in interest to lagged market values has negative impact on abnormal return and also has a significant negative relationship with abnormal return. h9: operating leverage has positive impact on abnormal return and also has a significant negative relationship with abnormal return. h10: financial leverage has a positive impact on abnormal return and also has significant negative relationship with abnormal return. h11: total leverage has a positive impact on abnormal return and also has significant negative relationship with abnormal return. h12: leverage ratio has a positive impact on abnormal return and also has significant negative relationship with abnormal return. h13: leverage ratio to change in cash crossed by lagged market values has a positive impact on abnormal return and also has significant negative relationship with abnormal return. h14: wacc has a positive impact on abnormal return and also has significant negative relationship with abnormal return. 3. data and methodology in this study we used the data for the chemical, cement and fertilizer sector during the period 2008-2017. these sectors consist of 42 companies which are registered at karachi stock exchange (kse). the data has been taken from the official website of the state bank of pakistan. we deployed descriptive statistics, correlation, ordinary least squares model, fixed and random effect models to analyze the data. review of economics and development studies, vol. 6 (1) 2020, 153-166 158 3.1 model specifications to explore the impact of leverage dynamics and corporate financial policies on abnormal returns the model is identified in this manner. model: effect of leverage dynamics and corporate financial policies on abnormal return. abnormal return = f (change in cash to lagged market values, change in ebit to lagged market values, change in dividend to lagged market value, net financing to lagged market value, lagged cash values to lagged market values, lagged cash values to lagged market values crossed by change in cash to lagged market value, change in total assets net of cash to lagged market values, change in interest to lagged market values, operating leverage, financial leverage, total leverage, leverage ratio, leverage ratio to change in cash crossed by lagged market values and wacc) regression equation for effect of leverage dynamics and corporate financial policies on abnormal return: ar i,t = αo + α1 δc /mt-1 + α2 δebit /mt-1+ α3 δd /mt-1 + α4 nf /mt-1 + α5 ct-1 /mt-1 + α6 [ct-1 /mt-1]×[ δc/ mt-1] + α7 δna /mt-1 α8 δi /mt-1 + α9 dol + α10 dfl + α11 dtl + α12 lr + α13 lr /[ δc × mt-1] + α14 wacc + ὲ (1) whereas, ar = abnormal return, δc /mt-1 = change in cash to lagged market values, δebit /mt-1 = change in ebit to lagged market values, δd /mt-1 = change in dividend to lagged market values, nf /mt-1 = net financing to lagged market values, ct-1 /mt-1 = lagged cash values to lagged market values, [ct-1 /mt-1] × [δc/ mt-1] = lagged cash values to lagged market values crossed by change in cash to lagged market values, δna /mt-1 = change in total assets net of cash to lagged market values, δi /mt-1 = change in interest to lagged market values, dol = operating leverage, dfl = financial leverage, dtl = total leverage, lr = leverage ratio lr / [δc × mt-1] = leverage ratio to change in cash crossed by lagged market values, wacc = weighted average cost of capital simple linear model in a static level is expressed in the manner below: h cross section regression will produce a biased estimate of beta coefficient if there exist correlation between and xit. therefore it is necessary to identify whether the unobserved individual effects are random or fixed. there exist two basic methods for this model. the fixed effects method take to be a group specific constant regarding to the regression model. on the other hand random effects method specifies that is a group specific disturbance. 3.1 fixed effects model fixed effects model indicates a constant slope but differ in intercepts in comparison to crosssectional firms. fixed effect model controls the potential correlation between the regressors and review of economics and development studies, vol. 6 (1) 2020, 153-166 159 unobservable individual effects. however the fixed effects method takes to be a group specific constant term in regression model. fixed effect model is narrated as below: in the case of the presence of fixed effects, β and can be estimated consistently and efficiently by the within groups estimators (wg) attained from ols equation. ȳ = ∑ : ̅ =∑ and = ∑ then, (3) subtracting this equation from equation to get: ̅ (4) ̅ pooled ordinary least square can be used to the transformed model to estimate β in a natural phenomenon and (wg) can also be used to eliminate any time-invariant variable in this model. it is because that is taken as fixed constant, and the estimator of β is known as (βwg). [∑ ∑ ̅ ̅ ] [∑ ∑ ̅ ̅ ] (5) the fixed effect estimators are given by: ̂ = ̅ β ̂ (6) one of the biggest advantages of the fe model is that the error terms may be related with the individual effects of the model. on the other hand if the group effects are unrelated with group means of the regressors, it is better to apply a thriftier parameterization of the panel model. 3.2 random effect model the random effects model is a regression equation with a random constant term. a specific effect is visualized as an outcome of a random variable. in simple terms, a static random effects model may be explained as below. β ` (7) (8) where is independent and identical distribution such that: ( ( -e ( = { } -e ( ) = { } ) = 0 (9) review of economics and development studies, vol. 6 (1) 2020, 153-166 160 the appropriate gls estimator of β shows that the random estimator, given by is consistent. 4. results and discussion 4.1 descriptive statistics table 1 indicates that the returns are positive i.e. 0.005 in chemical sector along with 1.319 standard deviation. whereas table 2 indicates that returns are -0.0022 along with 1.22234 standard deviation. more over table 3 indicates also negative abnormal returns which are -0.0106 in fertilizer sector along with 1.2234 standard deviation. so the return behavior is different in each sector. it can be visualized in the figure 1. this figure indicates that cement sector is more growing sector in pakistan and providing high abnormal returns that chemical and fertilizer sector. however each sector has now streamlined the abnormal returns in positive domain. figure 1: average abnormal returns table 1 descriptive statistics of chemical sector ar ccmt cebitmt cdmt nfmt ctmt ctmtccmt cacmt cimt ol fl tl lr lrccmt wacc mean 0.005 0.135 0.097 0.081 835991.625 79634.6647 17047.49194 0.02752 0.38509 -199.06216 -18.463 -3578.0595 0.172 -16.289 254396.87 standard error 0.090 0.056 0.065 0.080 187291.567 21546.0215 20786.34266 0.01190 0.31671 200.90633 13.679 3572.2219 0.015 14.781 36812.807 median -0.085 0.000 0.000 0.000 30106.0943 653.20 0 0.00049 0.00000 0.38442 0.445 0 0.068 0.000 32089.832 mode -2.050 0.000 0.000 0.000 0 0 0 0.00000 0.00000 0.00000 0.000 0 0.000 0.000 0 standard deviation 1.319 0.822 0.955 1.181 2758977.07 317392.717 306201.948 0.17527 4.66544 2959.53509 201.506 52622.115 0.224 217.742 542286.51 sample variance 1.738 0.676 0.911 1.396 7.61195e+1 1.00738e+1 937596329.8 0.03072 21.76630 8758847.925 40604.6 27690870.zz 0.050 47411.480 2.9407e+11 kurtosis 80.212 126.361 148.841 204.311 55.15645097 42.63340811 69.13406489 33.61051 199.86800 216.98738 101.610 216.993086 1.042 61.621 47.3618597 skewness 7.292 10.368 11.237 14.089 6.508652344 6.170453969 -0.233987248 2.77219 13.94168 -14.73028 -9.973 -14.7305703 1.388 -6.677 5.65140206 range 17.511 11.712 15.269 18.259 29077150.47 2720052.5 5630668.75 2.53875 69.80553 43733.69129 2443.378 775677.968 1.000 2781.803 5652902.88 minimum -2.436 -1.078 -2.433 -1.111 0 0 -2932362.5 -1.14523 -2.40489 -43594.20751 -2213.652 -775171.945 0.000 -2136.977 0 maximum 15.075 10.634 12.836 17.148 29077150.47 2720052.5 2698306.25 1.39351 67.40064 139.48378 229.726 506.023039 1.000 644.826 5652902.88 sum 1.135 29.215 20.976 17.491 181410182.7 17280722.25 3699305.75 5.97237 83.56393 -43196.48861 -4006.407 -776438.92 37.361 -3534.614 55204121.5 count 217 217 217 217 217 217 217 217 217 217 217 217 217 217 217 table 2 descriptive statistics of cement sector ar ccmt cebitmt cdmt nfmt ctmt ctmtccmt cacmt cimt ol fl tl lr lrccmt wacc mean -0.0022 0.3485 0.1482 466.5387 2314056.378 68134.95794 45701.66902 0.0123 15.9685 3.6409 -26.6954 -31.2389 0.2513 -8.0480 322330.023 standard error 0.1090 0.1812 0.0936 431.7426 487538.3145 27402.81013 61236.35743 0.0042 15.8921 1.3569 29.6055 30.0958 0.0269 9.6120 48541.7605 median -0.3200 0.0000 0.0023 0.0000 352285.5728 6628.850982 0 0.0024 0.0023 0.7454 0.0000 -0.0261 0.2399 0.0000 101714.839 mode -0.3300 0.0000 0.0000 0.0000 0 0 0 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0 standard deviation 1.2234 2.0338 1.0501 4846.2988 5472604.008 307595.7808 687376.4074 0.0473 178.388 15.2312 332.3208 337.8246 0.3016 107.8947 544879.91 sample variance 1.4967 4.1365 1.1028 23486611.910 2.99494e+13 94615164390 4.72486e+11 0.0022 31822.3 231.99 110437.1 114125.48 0.0910 11641.269 2.9689e+11 kurtosis 12.385 74.052 94.6760 124.8990 22.11551124 103.042707 78.65718542 45.9330 125.993 36.3703 123.3702 114.8071 5.8413 42.1837 9.26285538 skewness 3.0350 8.0927 9.1795 11.1547 4.168285445 9.755675658 7.183158924 5.7494 11.2245 5.6346 -11.0446 -10.5172 -1.3280 -4.7545 2.91946824 range 8.4507 21.595 12.5559 54319.0443 41214663.45 3329072.727 9765029.545 0.5211 2003.59 141.6478 3983.85 3944.6518 2.2498 1224.6454 2976581.32 -1.5 -1 -0.5 0 0.5 1 1.5 2 2.5 3 3.5 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 cement chemical fertilizer review of economics and development studies, vol. 6 (1) 2020, 153-166 161 minimum -1.3312 -1.4756 -1.5068 -0.2564 -529875.455 0 -2966880.165 -0.1011 -1.14 -22.3630 -3708.33 -3708.333 -1.2667 -914.1729 -84366.775 maximum 7.1195 20.119 11.0492 54318.7879 40684788 3329072.727 6798149.38 0.4200 2002.45 119.2849 275.52 236.3185 0.9832 310.4725 2892214.55 sum -0.2760 43.911 18.6671 58783.8727 291571103.6 8585004.7 5758410.297 1.5455 2012.03 458.7485 -3363.62 -3936.099 31.662 -1014.049 40613582.9 count 126 126 126 126 126 126 126 126 126 126 126 126 126 126 126 table 3 descriptive statistics of fertilizer sector ar ccmt cebitmt cdmt nfmt ctmt ctmtccmt cacmt cimt ol fl tl lr lrccmt wacc mean -0.0106 0.0074 0.0556 0.0043 636569.59 85491.74 -4641.98 0.0012 0.44674 1.0000 16.679 0.4337 0.1955 8.1098 3763733.43 standard error 0.0813 0.0104 0.0540 0.0024 188844.42 42562.61 3544.572 0.0015 0.44785 0.2501 17.529 0.7746 0.0299 16.0096 822090.907 median -0.0980 0.0000 0.0000 0 74466.2349 1378.679 0 0 0 0.6316 0.9577 0.6162 0.1577 0 2523845.56 mode -0.1900 0.0000 0.0000 0 0 0 0 0 0 0.0000 0 0 0 0 0 standard deviation 0.4945 0.0630 0.3286 0.0147 1148695.77 258898.2 21560.79 0.0089 2.72417 1.5211 106.62 4.7117 0.1821 97.3824 5000583.76 sample variance 0.2446 0.0040 0.1080 0.0002 1.3195e+12 6.7e+10 4.65e+08 8e-05 7.42112 2.3137 11369 22.2 0.0332 9483.34 2.5006e+13 kurtosis 0.7947 26.4220 36.8374 20.638 3.30020663 15.50172 26.55863 14.797 36.9977 5.9476 36.442 28.054 -0.149 18.6577 2.64903433 skewness 0.7442 4.5656 6.0634 4.2602 2.02155328 4.020568 -5.04952 0.756 6.08249 2.0174 6.0126 -4.9705 0.8516 3.05205 1.77956574 range 2.2535 0.4673 2.0473 0.086 4234412.48 1224904 125131.5 0.0718 16.6428 8.1942 693.27 29.882 0.6176 748.286 17925004.3 minimum -0.9606 -0.1160 -0.0487 -0.0057 0 0 -122346 -0.0325 -0.0736 -1.126 -47.77 -25.741 0 -256.008 0 maximum 1.2929 0.3513 1.9986 0.0803 4234412.48 1224904 2785.509 0.0393 16.5692 7.0676 645.51 4.1406 0.6176 492.278 17925004.3 sum -0.3908 0.2726 2.0569 0.159 23553074.8 3163194 -171753 0.043 16.5296 36.999 617.14 16.049 7.2331 300.063 139258137 count 37 37 37 37 37 37 37 37 37 37 37 37 37 37 37 4.2 correlation matrix table 4 indicate that in chemical sector net financing to lagged market value has r = 0.21 with abnormal return and lagged cash values to lagged market values crossed by change in cash to lagged market value r = 0.17 to abnormal return and lagged cash values to lagged market values has highly significant relationship of 0.76 to abnormal return. table 5 indicates that change in dividend to lagged market value has 0.31 degree of correlation to abnormal return. net financing to lagged market value has 0.25 degree of relationship to abnormal return. table 4 correlation matrix for chemical sector ar ccmt cebitmt cdmt nfmt ctmt ctmtccmt cacmt cimt ol fl tl lr lrccmt wacc ar 1.00 ccmt 0.01 1.00 cebitmt 0.09 0.03 1.00 cdmt -0.03 0.01 0.00 1.00 nfmt 0.22 0.01 0.03 0.08 1.00 ctmt 0.06 0.02 0.07 0.06 0.66 1.00 ctmtccmt 0.18 0.23 0.07 0.04 0.08 0.03 1.00 cacmt -0.03 0.06 0.22 0.03 0.32 0.66 -0.07 1.00 cimt 0.76 0.07 0.06 -0.02 0.31 0.29 0.33 0.26 1.00 ol -0.07 -0.07 0.01 0.00 -0.04 0.01 0.00 -0.01 0.01 1.00 fl -0.09 -0.04 0.01 0.01 -0.03 -0.02 0.01 0.01 0.01 -0.01 1.00 tl -0.07 -0.07 0.01 0.00 -0.04 0.01 0.00 -0.01 0.01 1.00 -0.01 1.00 lr -0.04 0.01 -0.03 -0.05 0.06 -0.08 -0.06 -0.07 -0.06 0.05 0.01 0.04 1.00 lrccmt 0.00 0.01 0.01 0.01 0.05 0.03 0.00 0.01 0.01 -0.01 0.02 -0.01 -0.10 1.00 wacc 0.06 0.02 -0.03 0.11 0.63 0.22 0.00 0.02 0.02 0.01 -0.11 0.01 0.21 0.09 1.00 significant at 5% level table 5 correlation matrix for cement sector ar ccmt cebitmt cdmt nfmt ctmt ctmtccmt cacmt cimt ol fl tl lr lrccmt wacc ar 1.00 ccmt 0.10 1.00 cebitmt 0.00 0.00 1.00 cdmt 0.31 -0.02 -0.02 1.00 nfmt 0.25 0.29 0.21 0.00 1.00 ctmt 0.06 0.04 0.89 0.02 0.37 1.00 ctmtccmt 0.06 0.89 -0.34 -0.01 0.17 -0.29 1.00 cacmt -0.15 0.15 0.31 -0.06 0.16 0.36 0.04 1.00 cimt -0.06 0.02 -0.01 -0.01 -0.03 -0.02 -0.01 0.01 1.00 ol -0.05 -0.03 0.11 -0.01 0.01 0.03 -0.03 0.32 -0.02 1.00 fl -0.03 0.06 0.01 0.01 0.03 0.02 0.05 0.04 0.01 0.01 1.00 tl 0.00 0.06 0.01 0.02 0.02 0.02 0.05 -0.08 0.01 0.01 0.97 1.00 lr 0.03 -0.13 -0.43 -0.05 0.02 -0.42 0.06 -0.21 -0.04 -0.05 -0.01 -0.01 1.00 lrccmt 0.04 0.01 0.01 0.01 0.06 0.02 0.00 -0.01 0.01 0.02 0.31 0.31 0.04 1.00 wacc 0.05 -0.04 0.32 -0.01 0.27 0.37 -0.13 0.07 -0.04 -0.04 0.03 0.04 0.01 0.00 1.00 significant at 5% level table 6 indicate that net financing to lagged market value has positive relationship to abnormal review of economics and development studies, vol. 6 (1) 2020, 153-166 162 return in chemical sector with r = 0.37 significant at p = 0.05 and change in total assets net of cash to lagged market value also has -0.41 significant at p < 0.05 negative relationship to abnormal return. more over operating leverage has positive relationship to abnormal and financial leverage and leverage ratio to change in cash crossed by lagged market values has negative as well as total leverage and weighted average cost of capital has positive degree of relationship to abnormal return. 4.2 regression models table 7 indicates that change in total assets net of cash to lagged market value has significant negative impact on abnormal return at p < 0.01 as expressed by ols, fixed effect as well as in random effect behavior. in fertilizer only fixed effect exist at p < 0.1 on abnormal return. change in dividend to lagged market value has positive significant impact on abnormal return at p = 0.01 in cement sector in each model but in chemical sector ols and random effect model has negative impact whereas fixed effect has positive effect. lagged cash values to lagged market has positive impact at p = 0.01 in chemical sector. lagged cash values to lagged market values crossed by change in cash to lagged market value has significant impact in chemical sector but fertilizer sector is visualized in ols and random effect at p = 0.10. financial leverage has negative impact on fertilizer sector at p = 0.1 and in chemical sector p < 0.05. net financing to lagged market value has positive impact p < 0.05 in cement sector and in fertilizer sector but no impact in chemical sector. operating leverage has positive significant impact p < 0.01 in fertilizer sector only. r2 values indicate that these variables are significant explanatory variable in fertilizer and chemical sectors. table 6 correlation matrix of fertilizer sector ar ccmt cebitmt cdmt nfmt ctmt ctmtccmt cacmt cimt ol fl tl lr lrccmt wacc ar 1.00 ccmt -0.09 1.00 cebitmt 0.01 0.93 1.00 cdmt 0.00 -0.26 -0.03 1.00 nfmt 0.38 -0.06 0.17 0.59 1.00 ctmt 0.17 -0.33 -0.04 0.89 0.69 1.00 ctmtccmt -0.34 0.38 0.07 -0.64 -0.67 -0.88 1.00 cacmt -0.42 0.12 0.05 0.40 0.04 0.13 0.32 1.00 cimt 0.02 0.92 1.00 -0.05 0.16 -0.05 0.06 0.01 1.00 ol 0.19 -0.10 -0.10 0.22 -0.02 0.19 -0.10 0.18 -0.11 1.00 fl -0.09 -0.02 -0.03 -0.03 -0.07 -0.02 0.03 0.01 -0.03 -0.10 1.00 tl 0.10 -0.02 -0.01 0.07 0.08 0.06 -0.06 0.00 -0.02 0.36 -0.92 1.00 lr 0.11 0.32 0.34 0.03 0.49 0.02 0.03 0.12 0.33 0.06 -0.02 0.08 1.00 lrccmt -0.10 0.02 -0.01 0.00 -0.13 -0.03 0.03 0.00 -0.01 -0.03 0.83 -0.80 0.06 1.00 wacc 0.18 -0.23 -0.04 0.43 0.52 0.60 -0.57 -0.03 -0.04 0.03 -0.06 0.09 0.05 -0.29 1.00 significant at 5% level table 7 ols, fixed effect and random effect in cement, fertilizer and chemical sector cement fertilizer chemical ols fixed effect random effect ols fixed effect random effect ols fixed effect random effect c -0.165262 -0.220954 -0.165262 -0.143758 -0.210643 -0.143758 -0.05613 -0.094081 -0.05613 p-value 0.3204 0.2594 0.3366 0.3049 0.3111 0.3174 0.4249 0.2548 0.4451 cacmt -4.405112 -3.899884 -4.405112 -42.7069 -48.47508 -42.7069 -2.080546 -1.853921 -2.080546 p-value 0.141 0.2374 0.1545 0.1145 0.0968* 0.1237 0.00*** 0.0001*** 0.00*** ccmt 0.157796 0.137478 0.157796 -2.560336 -2.16734 -2.560336 -0.026715 -0.00958 -0.026715 p-value 0.3494 0.4486 0.3655 0.6648 0.7268 0.673 0.6825 0.8935 0.6955 cdmt 0.0000763 0.000085 0.0000763 -8.070432 -7.503018 -8.070432 -0.003843 0.009267 -0.003843 p-value 0.0006*** 0.0005*** 0.0009*** 0.631 0.6707 0.6399 0.9309 0.8498 0.9339 cebitmt -0.188717 -0.187192 -0.188717 -18.28941 -8.571451 -18.28941 0.157125 0.164571 0.157125 p-value 0.4399 0.4638 0.4552 0.494 0.8178 0.5052 0.0062*** 0.0087*** 0.0088*** cimt -3.74e-04 -3.97e-04 -3.74e-04 2.244321 1.065661 2.244321 0.247282 0.247262 0.247282 p-value 0.5229 0.5318 0.5368 0.4827 0.8108 0.4941 0.00*** 0.00*** 0.00*** ctmt 4.46e-07 4.41e-07 4.46e-07 3.03e-06 0.00000221 0.00000303 -2.56e-07 2.59e-07 -2.56e-07 p-value 0.6154 0.6583 0.6272 0.1843 0.5471 0.1956 0.3795 0.5034 0.4004 ctmtccmt -3.97e-07 -3.41e-07 -0.00000039 0.0000449 0.0000379 0.0000449 -6.01e-07 -4.05e-07 -6.01e-07 p-value 0.4483 0.5446 0.4634 0.0757 0.3289 0.0831* 0.0016*** 0.0609** 0.0026*** fl -0.00073 -0.000429 -0.00073 -0.004499 -0.005902 -0.004499 -0.000617 -0.000634 -0.000617 p-value 0.5987 0.7725 0.6108 0.0687*** 0.0719*** 0.0757*** 0.0183** 0.027** 0.0239** lr 0.096748 -0.029828 0.096748 -0.61518 -0.44282 -0.61518 -0.114929 -0.199994 -0.114929 p-value 0.8115 0.9494 0.8176 0.4208 0.6482 0.4329 0.6481 0.553 0.6623 lrccmt 3.90e-04 3.16e-04 3.90e-04 0.000203 0.000364 0.000203 -0.000069 -0.000045 -0.0000696 review of economics and development studies, vol. 6 (1) 2020, 153-166 163 p-value 0.7008 0.7796 0.7103 0.9191 0.8621 0.9212 0.7726 0.8607 0.7822 nfmt 5.2e-08 8.29e-08 0.000000052 4.25e-07 4.45e-07 0.000000425 2.81e-08 2.39e-08 2.81e-08 p-value 0.0268** 0.006*** 0.0322** 0.0096*** 0.0389** 0.0114* 0.421 0.5722 0.4413 ol 0.001549 0.000771 0.001549 0.217091 0.211024 0.217091 -0.000619 -0.000968 -0.000619 p-value 0.8379 0.925 0.8432 0.0052 0.0128 0.0063 0.8043 0.7199 0.8126 tl 5.38e-04 2.43e-04 5.38e-04 -0.105136 -0.136382 -0.105136 0.0000328 0.0000524 0.0000328 p-value 0.6955 0.8677 0.7051 0.1042 0.1023 0.113 0.8155 0.7299 0.8233 wacc -4.97e-09 3.16e-08 -4.97e-09 -1.13e-08 1.14e-08 -1.13e-08 6.39e-08 7.24e-08 6.39e-08 p-value 0.9814 0.9176 0.982 0.6556 0.7965 0.664 0.6426 0.6992 0.657 r-squared 0.208216 0.256934 0.208216 0.59091 0.61797 0.59091 0.690325 0.705565 0.690325 adjusted r 2 0.108352 0.052212 0.108352 0.318184 0.257164 0.318184 0.668756 0.644362 0.668756 cross section 14 14 14 4 4 4 24 24 24 observations 126 126 126 36 36 36 216 216 216 ***significant at 1% level, **significant at 5% level, * significant at 10% level 5. conclusion the industrial fall has become the most critical issue in the economy of pakistan in the present era. these downfalls may be due to financial policies incorporated by firms in a traditional manner. even researchers are trying to investigate the basic determinants which can affect the financial policy of firms in the industrial sector of pakistan. the purpose of this study is to investigate the relationship and to model the leverage dynamics and corporate financial policies for abnormal return of the firms. this study has taken 10 years balanced panel data for the period 2008-2017 from chemical, cement and fertilizer sector of pakistan. moreover in fertilizer sectors negative abnormal returns exist. in this study we are focusing to investigate the changing dynamics of explanatory variables on the firm’s abnormal returns to optimize the best corporate financial policies for the industrial sector pakistan. results conclude that chemical sector is more growing sector in pakistan and providing high abnormal returns than cement and fertilizer sector. results indicate that the returns are positive in chemical sector and in cement and fertilizer sector returns are negative. correlation indicates that in chemical sector net financing to lagged market value has positive correlation with abnormal return and lagged cash values to lagged market values crossed by change in cash to lagged market value has little positivity to abnormal return and lagged cash values to lagged market values has highly significant relationship to abnormal return. further results for cement sector indicate that change in dividend to lagged market value has positive degree of correlation to abnormal return and net financing to lagged market value has positive degree of relationship to abnormal return. maia (2010) argued in the same manner. for fertilizer sector results indicates that net financing to lagged market value has positive relationship to abnormal return and change in total assets net of cash to lagged market value also has negative significant relationship to abnormal return. the study of dangl and zechner (2006), abdullah, aydemir, gallmeryer and hollifield (2006) faulkender, flannery, hankins and smith (2012) also support our argument as well. moreover operating leverage has positive relationship to abnormal return leverage ratio to change in cash crossed by lagged market values has negative as well as total leverage and weighted average cost of capital has positive degree of relationship to abnormal return. aivazian, ge and qiu (2005), cai and zhang (2011), johnson, chebonenko, cunha, d’almeida and spencer (2011) and obreja (2013) also support this last argument. further results indicates that change in total assets net of cash to lagged market value has significant negative impact on abnormal return as expressed by ols, fixed effect as well as in random effect behavior. in fertilizer only fixed effect exist on abnormal return. change in dividend to lagged market value has positive significant impact on abnormal return in cement sector in each model but in chemical sector ols and random effect model has negative impact whereas fixed effect has positive effect. a lagged cash value to lagged market has positive impact in chemical sector. lagged cash values to lagged market values crossed by change in cash to lagged market value has significant impact in chemical sector but fertilizer sector is visualized in ols and random effect . financial leverage has negative impact on fertilizer sector and in chemical sector and our study support to the facts of riccetti, russo review of economics and development studies, vol. 6 (1) 2020, 153-166 164 and gallegati (2016). net financing to lagged market value has positive impact in cement sector and in fertilizer sector but no impact in chemical sector. operating leverage has positive significant impact in fertilizer sector only as results reported by frank and goyal (2015). r2 values indicate that these variables are significant explanatory variable in fertilizer and chemical sectors. h1 is rejected it is concluded that change in cash to lagged market values has no negative impact on abnormal return and have no significant positive relationship with abnormal return and in the same manner h2 is rejected that change in ebit to lagged market values has no positive impact on abnormal return and no significant positive relationship with abnormal returns. however h3 change in dividend to lagged market values has a positive impact on abnormal return in cement sector only and also has a significant positive relationship with abnormal return in cement sector only but the same is hypothesis is rejected for other sectors. h4 results indicate that net financing to lagged market values has no impact in chemical sector but has a positive significant impact in cement and fertilizer sectors on abnormal return. according to h5 lagged cash values to lagged market values has a positive impact on abnormal return and also has a significant positive relationship with abnormal return has highly significant relationship to abnormal return in chemical sector as well as h5 has a positive impact on abnormal return in chemical sector only. however results for h6 indicates that lagged cash values to lagged market values crossed by change in cash to lagged market value has a positive impact on abnormal return and also has a significant negative relationship with abnormal return has a little positive correlation to abnormal return in chemical sector as well as has a significant impact in chemical sector but fertilizer sector is visualized in ols and random effect model only. according to h7 change in total assets net of cash to lagged market values has positive impact on abnormal return and also has a significant positive relationship with abnormal return has negative significant relationship to abnormal return in fertilizer sector as well as has a significant negative impact on abnormal return as expressed by ols, fixed effect and random effect models but in fertilizer sector only fixed effect exist on abnormal return. however, h8 indicates that change in interest to lagged market values has negative impact on abnormal return and also has a significant negative relationship with abnormal return is rejected in all sectors. as per h9 results it is concluded that operating leverage has positive impact on abnormal return and also have a significant negative relationship with abnormal return has a positive relationship to abnormal return and also has a significant positive impact on abnormal return in fertilizer sector only but according to h10 financial leverage has a positive impact on abnormal return and also has significant negative relationship with abnormal return has a negative correlation with abnormal return in all sectors and also has a negative impact on abnormal return in fertilizer and chemical sectors. h11 is rejected for other sectors except fertilizer sector. h12 indicates that leverage ratio has a positive impact on abnormal return and also has significant negative relationship with abnormal return but rejected in all sectors. however h13 indicates that leverage ratio to change in cash crossed by lagged market values has a positive impact on abnormal return and also has significant negative relationship with abnormal return fertilizer sector only. according to h14 the wacc has a positive impact on abnormal return and also has significant negative relationship with abnormal return is rejected for fertilizer sector where the results are in negative domain. hence it is inferred from this study that modeling the leverage dynamics and corporate financial policies significantly contribute in the firm performance. hence it is concluded that leverage dynamics are significant contributors in designing the corporate financial policies and have significant impact on the financial performance of the non-financial sector of pakistan. the practical implication of this study reveals that it is guiding to the industrial policy makers and to the corporate financial managers in developing strategic plans for non –financial sector of pakistan. review of economics and development studies, vol. 6 (1) 2020, 153-166 165 references abdullah, c., aydemir, m., gallmeryer, f. and hollifield, b. (2006). financial leverage does not cause the leverage effect. afa 2007 chicago meeting paper. admati,a., demarzo, p,m., hellwig, f, m., and pfleidered, p. (2018). the leverage ratchet effect. the journal of finance,.vol. lxxiii, no. 1. aivazian, v., ge, y. and qiu, j. (2005). the impact of leverage on firm investment: canadian evidence. journal of corporate finance.11(1), 277-291. ball, r., gerakos, j., linnainmaa, j. t. and nikolaev, v. (2016). accurals, cash flows, and operating profitability in the cross section of stock returns. journal of financial economics. 121(1), 28–45. bhatti, a. m., majeed, k., rehman, i. and khan, w. a. (2010). affect of leverage on risk and stock returns: evidence from pakistani companies. international research journal of finance and economics. 58,32-49. cai, j. and zhang, z. (2011). leverage change, debt overhang, and stock prices. journal of corporate finance. 17(3), 391-402. dangl, t. and zechner, j. (2006). debt maturity and the dynamics of leverage. efa zurich meetings paper. duan, y., chen, w., zeng, q., liu, z., (2018). leverage effect, economic policy uncertainty and realized volatility with regime switching. physica a. 493. 148–154. faulkender, m., flannery, m. j., hankins, k. w. and smith, j. m. (2012). cash flows and leverage adjustments. journal of financial economics, 103(3), 632-646. frank, m. z. and goyal, v. k. (2015). the profits-leverage puzzle revisited. review of finance. 19(4), 1415-1453. johnson, t. c., chebonenko, t., cunha, i., d’almeida, f. and spencer, x. (2011). endogenous leverage and expected stock returns. finance research letters. 8(3), 132–145. maia, m. v. (2010). cash-flow risks, financial leverage and the cross section of equity return. publicly accessible penn dissertations.161 modigliani, f. and miller, m. h. (1958). the cost of capital, corporation finance, and the theory of investment. the american economic review. 48(3), 261-297. nadarajah, s., ali, s., liu, b. and haung, a. (2016). stock liquidity, corporate governance and leverage: new panel evidence, pacific-basin finance journal. obreja, l. (2013). book-to-market equity, financial leverage, and the cross-section of stock returns. the review of financial studies. 26 (5), 1146-1189. riccetti, l., russo, a. and gallegati, m. (2016). stock market dynamics, leveraged network-based financial accelerator and monetary policy. international review of economics and finance, 43(c). 509–524. teng, m., si, j. and hachiya, t. (2016). banking relationship, relative leverage and stock returns in japan. pacific-basin finance journa., 40(pa), 86–101. yarram, s. r. (2013b). ownership and financial leverage: australian evidence. the asia pacific journal of economics & business. 17, 13-2 http://www.sciencedirect.com/science/journal/0304405x/121/1 http://www.sciencedirect.com/science/journal/10590560/43/supp/c review of economics and development studies, vol. 6 (1) 2020, 153-166 166 abbreviations to variables ar abnormal return ccmt change in cash to lagged market values cebitmt change in ebit to lagged market values cdmt change in dividend to lagged market values nfmt net financing to lagged market values ctmt lagged cash values to lagged market values ctmtccmt lagged cash values to lagged market values crossed by change in cash to lagged market values cacmt change in total assets net of cash to lagged market values cimt change in interest to lagged market values ol operating leverage fl financial leverage tl total leverage lr leverage ratio lrccmt leverage ratio to change in cash crossed by lagged market values wacc weighted average cost of capital review of economics and development studies vol. 4, no 1, june 2018 71 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 1, june 2018 journal homepage: www.publishing.globalcsrc.org/reads determinants of corporate cash holdings: evidence from mncs in pakistan 1 nadeem ahmed sheikh, 2 khawaja khalid mehmood, 3 mujtaba kamal 1 institute of management sciences, bahauddin zakariya university, multan, pakistan. shnadeem@hotmail.com 2 institute of management sciences, bahauddin zakariya university, multan, pakistan. khawjakhalid@bzu.edu.pk. 3 institute of management sciences, bahauddin zakariya university, multan, pakistan. mujtabakamal41@gmail.com articledetails abstract history revised format: may 2018 availableonline: june 2018 the purpose of this article is to investigate whether firm-specific variables (i.e. size, growth opportunities, profitability, capital expenditures, leverage, dividends, cash flow and working capital) affect the cash holdings of mncs. moreover, to investigate whether theories relevant to cash holdings provide any justification to narrate the cash holding behavior of listed mncs on pakistan stock exchange (psx) for the period 2006-2016. results indicate that profitability positively impacts cash holdings. firm size positively impacts cash holdings in pooled ordinary least squares, while it negatively impacts cash holdings in the fixed effects method; however the relationship is insignificant. leverage, growth opportunities, dividends, working capital ratio and capital expenditures are significant and negatively related to corporate cash holdings. finally, cash flows are unrelated to cash holdings. in short, results indicate that firm-specific variables significantly affect the cash holdings of mncs. moreover, (+/-) coefficients of different explanatory variables indicate that theories relevant to cash holdings provide some support to explain the cash holding behavior of mncs in an emerging economy pakistan. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords cash holdings, multinational companies (mncs), pakistan stock exchange (psx), pakistan jel classification e23, f65, j11, k01 corresponding author’s email address: shnadeem@hotmail.com recommended citation: sheikh, n.a., mehmood, k.k., kamal, m., (2018). determinants of corporate cash holdings: evidence from mncs in pakistan. review of economics and development studies, 4 (1) 71-78 doi: 10.26710/reads.v4i1.282 1. introduction cash is the oil that lubricates the economy. according to keynes (1936) an individual or a firm holds cash for transactional, speculative and precautionary motives. transactional motives include holding cash for the purchase of raw materials, for payment of salaries and wages, for taxes and dividends, and to use cash for other expenditures arising in the ordinary course of business. speculative motives include holding cash to take the benefits of unexpected opportunities such as an unexpected decline in the price of raw materials, decline in indirect taxes, and reduction in import duties etc. finally, precautionary motives include holding cash for unexpected needs such as increase in minimum level of wage rate, increase in tax rates, and increase in materials price due to shortages or increase in import duties etc. the baumol model (1952) of cash treats cash as an inventory item where inflows and outflows can be predicted with certainty. moreover, this model suggests that a firm could decide an optimal level of cash by weighing http://www.publishing.globalcsrc.org/reads mailto:shnadeem@hotmail.com mailto:khawjakhalid@bzu.edu.pk mailto:mujtabakamal41@gmail.com mailto:shnadeem@hotmail.com review of economics and development studies vol. 4, no 1, june 2018 72 the advantages of reduction in opportunity cost with conversion cost. for instance, by investing cash into marketable securities a firm bears conversion cost but it can save some opportunity cost. in contrast, when future cash flows are uncertain then a model for the demand of money proposed by miller and orr (1966) suggests that the cost-efficient cash balances can be determined by identifying an upper control limit (i.e. maximum balance) and a return point (i.e. target balance). several empirical studies have explored the factors that affect the corporate cash holdings however their results are mixed. moreover, a number of empirical studies have rather used the data from non-financial companies to examine the cash holding behavior of a specific economic group like mncs. as for authors’ knowledge, no research yet have studied the cash holding behavior of listed multinational companies in pakistan. thus, inconsistent empirical results and a little research on multinational companies in pakistan are few important reasons that have necessitated the need for this study. we are sure that results of this study will be of great use for corporate managers in determining a balance cash level by keeping in mind the impacts of firm-specific constructs on corporate cash holdings. remaining paper is structured as follows. section 2 presents detailed literature review on the determinants of cash holdings. section 3 provides data description and research methodology. section 4 provides findings and results. section 5 presents discussion on the findings. lastly, section 6 presents the conclusions of the study. 2. literature review this section presents the results of previous studies regarding relationship between firm-specific variables and corporate cash holdings. the literature review reveals a number of motives to hold cash in corporations. for instance, by holding cash, corporations can avoid liquidating their assets unnecessarily (ahrends, drobetz, & nomikos, 2017). similarly, scholars have argued that factors like precautionary motives, brokerage costs, asymmetric information, and cash flow volatility in industry are important factors behind cash holdings (ahrends et al., 2017; miller & orr, 1966; myers & majluf, 1984; opler, pinkowitz, stulz, & williamson, 1999). they suggest that brokerage costs lead corporations to have more liquid resources. similarly, in case of asymmetric information, borrowing funds from the market proves more costly compared to internally available funds which could actually be ideal for meeting investment requirements. additionally, they argue that if in firm’s industry, average volatility of cash flows is higher, it would lead firm to hold more cash. ahrends et al. (2017) studied cash holdings of shipping companies belonging to various countries and found that those companies had higher cash holdings compared to similar companies in rest of heavy industries and that greater cash holdings were in fact attributable to higher marginal value to cash. roy (2018) examined role of corporate governance in determining cash holdings among india based organizations. specifically, impact of audit related attributes, the role of board of directors, and ownership structure was assessed for 58 listed companies in india and the findings indicated that companies having stronger corporate governance were having lower cash holdings, whereas their counterparts had higher cash holdings. roy (2018) also noted that companies also hold more cash to avoid uncertainty, to save them from raising higher funds from market, for making use of market opportunities as they come and for maintaining financial flexibility. in another study, hsu (2018) analyzed the relationship between corporate social responsibility (csr) practices and cash holdings for firms based in united states for the period 2005-2015. he found that firms with higher levels of csr had significantly lower levels of cash holdings; and over the life-cycle, cash holdings portrayed a hump shape. certain scholars have attempted to relate expenditures in research and development, and intangible assets (like organizational capabilities and knowledge capital) to corporate cash holdings. they argue that firms that spend greater on research and development tend to hold more cash; and firms with higher level of intangibles are also inclined to greater corporate cash holdings (falato, kadyrzhanova, & sim, 2014; lei, qiu, & wan, 2018; lyandres & palazzo, 2016). study of lei et al. (2018) covering rich sample of forty five developed and developing countries indicates that investments and cash holdings are influenced by review of economics and development studies vol. 4, no 1, june 2018 73 asset composition and its interaction with the financial development. opler et al. (1999) used the data of us firms during 1971-1994 to identify the variables that impact the cash holdings. they found that firms with volatile cash flows and strong growth opportunities hold relatively more cash. in contrast, firms that can easily approach to financial markets prefer to hold low cash. in sum, they reported their findings congruent with the prophecy of trade-off model of cash. ozkan and ozkan (2004) have analyzed the data of 1,029 uk firms during 1984-1999 to explore the factors affecting the cash holdings. they found a significant non-monotonic impact of managerial ownership on cash holdings. moreover, results indicate that leverage, cash flows, growth opportunities, and liquid assets are some important variables that affect the cash holdings. ferreira and vilela (2004) used the data of companies in emu countries to identify the factors that affect the cash holdings. they observed that investment opportunities and cash flows were directly; while liquidity, size and leverage were inversely linked to cash holdings. moreover, they observed that strong investor protection and concentrated ownership are inversely linked to cash holdings. furthermore, results indicate that capital market development is negatively linked to cash holdings. drobetz and grüninger (2007) analyzed the data of non-financial swiss firms during 1995-2004 for exploring the factors that affect the cash holdings. they found that firm size and tangibility are inversely while operating cash flows and dividends are directly linked to cash holdings. moreover, they observed a non-linear relationship between leverage and liquidity. furthermore, they observed that growth opportunities are unrelated to cash holdings. harford, mansi, and maxwell (2008) observed that firms with weaker governance structures prefer to repurchase stocks rather than to increase dividends in order to avoid future payout commitments. kim, kim, and woods (2011) analyzed the data of 125 restaurant firms in united states during 1997-2008 for investigating the variables affecting cash holdings. they observed a positive association between investment opportunities and cash holdings. in contrast, size, liquid assets except cash, capital expenditures and dividends are inversely linked to cash holdings. in sum, it is revealed that their findings are in agreement with the predictions of trade-off model of cash. ramezani (2011) analyzed the data of us companies during 1990-2000 to explore the effects of financing constraints, managerial flexibility, and the value of the firm’s real options on cash holdings. results indicate that financially unconstrained companies and the companies with the valuable real options tend to have greater cash holdings. in addition, increase in cost of capital is an important factor that encourages the firms to hold more cash. finally, companies with increased market power, and the companies with lower operational flexibility tend to hold less cash. al-najjar (2013) has analyzed the data of chinese, brazilian, indian and russian firms, in particular, to explore the effects of dividend policy and capital structure on corporate cash holdings. the study observed that dividend policy and capital structure have some role in determining the corporate cash holdings. notably, he observed that similar variables in developed and developing countries, for example, firm size, dividend policy, and capital structure affect the cash holdings. finally, results indicate that firms in countries with weak shareholder protection tend to hold more cash. wasiuzzaman (2014) has used the data for publically traded firms in malaysia for the period 2000-2007 for studying determinants of cash holdings. results indicate that growth opportunities, cash flows, debt levels, dividends and substitutes of liquid assets are important variables that are positively linked to cash holdings. in contrast, results indicate that board independence is inversely related to corporate cash holdings. moreover, firm size, cash flow volatility and board size have no significant affect on cash holdings. mun and jang (2015) have used the data for restaurants operating in america to explore the effects of working capital on profitability. in addition, they have analyzed the effects of cash level on profitability and working capital. a u-shape relationship was found between working capital and profitability. furthermore, results indicate that cash is an important factor that affects the level of working capital. they found that interactive effects exist among working capital, profitability and cash. wu, yang, and zhou (2017) have analyzed the data of 1,873 firms listed on shanghai and shenzhen review of economics and development studies vol. 4, no 1, june 2018 74 stock exchanges of china during 2000-2013. they observed that chinese mncs do not have cash holdings greater than those of domestic firms unless those multinational companies greatly rely on foreign sales. moreover, the multinationals of non-state owned enterprises shows the insignificant differences in cash holdings for non multinationals. furthermore, they observed that chinese mncs invested more but had lower profitability particularly in non-state owned enterprises sample. finally, they found that the need of liquid cash for mncs in china was different from companies in the united states. in sum, results of earlier empirical studies (in different countries of the world) on determinants of corporate cash holdings are mixed. thus, mixed findings are an important reason that has evoked the need for this study. 3. data description and methodology 3.1 data description the aim of this article is to explore the determinants of cash holdings of mncs in pakistan. to estimate the effects of explanatory (i.e. firm-specific) variables on cash holdings, the data was collected through annual reports of listed mncs on psx for the period 2006-2016. data for shares’ market price was taken from annual diaries of psx (formerly karachi stock exchange). total 31 mncs were found listed on psx during the study period. data of some companies was found missing during the study period; that is why, final sample consists of 260 observations relevant to 28 mncs during 11 years. 3.2 measurements of variables variables used in this study and their measurements are taken from previous empirical studies on corporate cash holdings. variables’ definitions are reported in table 1. table 1: variables’ definitions variable definition cash it cash cash & bank balance / net assets. net assets defined as taking the difference between total assets and cash & bank balance. profitability it pro profit before taxes / net assets. firm size it size natural logarithm of total sales. leverage it lev total liabilities / stockholders equity. growth it gro market price per share / book value per share. market price per share determined as (high price of the year + low price of the year / 2) dividend yield it dy dividend per share / market price per share. cash flow it cflo profit from operations + depreciation + amortization / net assets. working capital it wc net current assets current liabilities / net assets. net current assets are computed by taking difference between current assets and cash & bank balance. capital expenditures it ce long-term assets / net assets. 3.3 methodology congruent with earlier empirical studies three panel data techniques such as ols, fixed effects method and random effects method were used to explore the effect of explanatory variables on cash holdings of mncs. further, hausman test (1978) was used to select either the random effects method or the fixed effects method was preferable to predict the effect. the basic regressions are presented as follow: )...( 876543210 olscewccflodygrolevsizeprocash itititititititititit   )...( 876543210 fecewccflodygrolevsizeprocash itititititititititiit   review of economics and development studies vol. 4, no 1, june 2018 75 )...( 876543210 recewccflodygrolevsizeprocash itiititititititititit   4. results 4.1 descriptive statistics descriptive statistics presented in table 2 indicates that cash & bank balance on average represents 12.17 percent of net assets. net assets are defined as total assets minus cash & bank balance. table 3 presents the yearly averages of cash & bank balance during the study period. results indicate that cash & bank balance vary from 8 percent to 18.3 percent. the variation in cash & bank balance may be due to policy decisions made by the companies’ management keeping in mind the needs of business during military (2006-2008) and political regimes (2009-2016). the mean of firm size, calculated as natural log of sales, is 16.06. the mean of leverage, measured as debt to equity ratio, is 260 percent. mean value of market-tobook ratio (i.e. growth) is 5.51 times. the mean dividend yield is 2.85 percent. the mean cash flows are 22.24 percent of net assets. mean working capital ratio is 10.12 percent of net assets, and finally capital expenditures represent 40.18 percent of net assets. table 2: descriptive statistic table 3: yearly averages of cash & bank balance year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 cash & bank balance 10 13.9 8.4 9.1 12.3 8.0 9.1 8.5 10.4 18.3 13.8 no. of obs. 15 22 23 27 28 28 28 28 28 28 5 4.2 regression results regression results on the relation between firm-specific variables and cash holdings are reported in table 4. results indicate that in all regressions, profitability is significant (positive) predictor of cash holdings. in pooled ols method, firm size is directly related to cash holdings. in contrast, size is negatively related to cash holdings in the random effects and fixed effects method; however the relationship found is not significant. in all estimation methods, leverage, growth, dividends, working capital ratio and capital expenditures are significant (negative) predictors of cash holdings. finally, cash flows have no significant affect on cash holdings. the hausman test results favor to use fixed effects method’s estimates. in sum, regression results confirm that firm-specific variables significantly affect the cash holdings of mncs. variable n mean sd min max it cash 260 0.1217 0.1956 0.0003 1.3843 it pro 260 0.1662 0.1630 -0.1444 0.7167 it size 260 16.067 1.3404 12.849 19.340 it lev 260 2.6075 1.5256 1.0020 10.892 it gro 260 5.5170 10.124 0.2553 106.35 it dy 260 0.0285 0.0286 0.0000 0.1251 it cflo 260 0.2224 0.1643 -0.0539 0.8049 it wc 260 0.1012 0.2552 -0.8115 0.6730 it ce 260 0.4018 0.1959 0.0004 0.9993 review of economics and development studies vol. 4, no 1, june 2018 76 table 4: effects of firm-specific variables on corporate cash holdings variables pooled ols fixed effects random effects coefficient tstatistic coefficient tstatistic coefficient zstatistic c 0.1547 1.32 0.7066*** 3.08 0.4668*** 2.69 it pro 0.7145*** 2.69 0.7547*** 3.16 0.8213*** 3.35 it size 0.0213*** 3.10 -0.0212 -1.54 -0.0027 -0.26 it lev -0.0721*** -7.37 -0.0377*** -4.46 -0.0472*** -5.40 it gro -0.0065*** -6.23 -0.0024** -2.54 -0.0037*** -3.79 it dy -0.9162*** -3.02 -0.8235*** -3.07 -0.8825*** -3.21 it cflo -0.0114 -0.04 -0.0429 -0.18 -0.1378 -0.57 it wc -0.6372*** -10.4 -0.7804*** -12.6 -0.7381*** -12.1 it ce -0.4410*** -7.90 -0.3636*** -4.02 -0.4091*** -5.42 2 r 0.6006 0.3605 0.4737 f-statistic 47.17 57.90 prob (f-statistic) 0.0000 0.0000 wald 2  401.90 prob (wald 2  ) 0.0000 hausman test ( 2  ) 95.42 prob. ( 2  ) 0.0000 5. discussion on empirical results the results of regression suggest that profitability positively affects cash holdings. this positive effect is consistent with the argument that highly profitable companies hold more cash for permanent as well as seasonal needs. moreover, profitable firms prefer to use cash to pay dividends in order to mitigate the agency problems that stems from the availability of free cash flow. the positive relationship confirms the findings of mun and jang (2015), al-najjar (2013). firm size also positively affects cash holdings. the positive effect of size on cash holdings confirms the fact that large firms have more ability to generate profits due to economies of scale which in turn make them able to accumulate cash that can be used to finance permanent as well as temporary needs. the positive effect supports the findings of study by ozkan and ozkan (2004). moreover, leverage negatively affects cash holdings. this negative effect is congruent to the predictions of pecking order hypothesis which suggests that profitable companies with sufficient liquid resources (i.e. cash holdings) borrow less compared to profitable companies with insufficient liquid resources. the negative relationship between leverage and cash holdings found consistent to the findings of mun and jang (2015), al-najjar (2013), and opler et al. (1999). notably, capital expenditures (i.e. investment in real assets) and growth opportunities (i.e. market-to-book ratio) are inversely related to cash holdings. although the negative relationship seems illogical however this may be due to the reason that profitable mncs despite the availability of cash avoid unnecessary/unproductive investment in real assets in order to mitigate the agency problems that stems from the availability of free cash flow. the inverse relationship between growth opportunities and cash holdings confirm the findings of ferreira and vilela (2004). alternatively, the inverse relationship between capital expenditures and cash holdings confirms the findings of wasiuzzaman (2014). dividends are negatively associated with cash holdings. this negative association is in line with the fact that distribution of cash to shareholders leads to reduction in liquid resources. thus firms that distribute cash dividend hold less cash. the inverse relationship between dividends and cash holdings confirms the findings of al-najjar (2013), opler et al. (1999), and ozkan and ozkan (2004). working capital ratio is review of economics and development studies vol. 4, no 1, june 2018 77 negatively related to cash holdings. working capital ratio is measured by taking the difference between current assets except cash & bank balance and current liabilities scaled by net assets. the mean value of working capital ratio is positive which indicates that mncs prefer to finance current assets with shortterm as well as long-term funds. moreover, it indicates that availability of sufficient liquid resources diminishes the need for cash due to the reason that net current assets can be convertible into cash as needed. the negative relationship confirms the findings of mun and jang (2015), opler et al. (1999). in synopsis, results indicate that profitability, size, leverage, growth, dividends, capital expenditures, and working capital ratio are some important variables that significantly affect the cash holdings. moreover theories relevant to cash holdings i.e. pecking order theory, trade-off model of cash holdings, and free cash flow theory surely provide some support to explain the cash holding behavior of mncs in pakistan. 6. conclusion we have explored the effects of firm-specific variables on cash holdings of listed mncs in pakistan. results reported in table 3 indicate that the amount of cash & bank balance vary from 8 percent to 18.3 percent of net assets during the study period. the variation in cash holdings may be due to the policy decisions made by the managers because of uneven business condition during military (2006-2008) and political regimes (2009-2016). the results of regression presented in table 4 indicate that profitability is positively associated to cash holdings. the positive impact of profitability on cash holdings is consistent with the argument that highly profitable companies hold more cash for permanent as well as seasonal needs. moreover, they may use cash to pay dividends to shareholders in order to mitigate the agency problem that stems from the availability of free cash flow. it was also found that firm size positively effects cash holdings. this positive effect confirms the fact that large size companies possess greater ability for generating profits because of economies of scale which in turn make them able to accumulate cash that can be used to meet permanent as well as temporary needs. leverage is inversely related to cash holdings. the inverse relationship confirm the predictions of pecking order theory that profitable companies having sufficient liquid resources (i.e. cash holdings) borrow less compared to less profitable companies having insufficient liquid resources. capital expenditures and growth are negatively related to cash holdings. although the negative relationship seems illogical however this may be due to the reason that profitable mncs despite the availability of cash avoid unnecessary investment in real assets in order to mitigate the agency problem. dividends are inversely related to corporate cash holdings. the inverse relationship is in support of the fact that cash distribution to shareholders leads to reduction in liquid resources. thus, firms distributing cash dividends hold less cash. working capital ratio is negatively related to cash holdings. more importantly, the mean value of working capital is positive which indicates that mncs prefer to finance current assets with short-term as well as long-term funds. moreover, it indicates that availability of sufficient liquid resources diminishes the need for holding excess cash. in short, the findings suggest that company profitability, size, leverage, growth opportunities, dividends, capital expenditures, and working capital ratio are some crucial variables which substantially impact the cash holdings of mncs in pakistan. the results of this research provide guidance to corporate managers in determining a balanced amount of cash, keeping in mind the positive or negative effects of explanatory variables. this study has explored the effects of firm-specific variables on corporate cash holdings however there is a need to explore the effects of governance variables on cash holdings of mncs in pakistan which is the task for future research. references ahrends, m., drobetz, w., & nomikos, n. k. 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(2011). financial constraints, real options and corporate cash holdings. managerial finance, 37(12), 1137-1160. roy, a. (2018), corporate governance and cash holdings in indian firms. in simon grima, pierpaolo marano (ed.) governance and regulations’ contemporary issues (contemporary studies in economic and financial analysis, volume 99), pp. 93-119, uk: emerald publishing limited. wasiuzzaman, s. (2014). analysis of corporate cash holdings of firms in malaysia. journal of asia business studies, 8(2), 118 – 135. wu, w., yang, y., & zhou, s. (2017). multinational firms and cash holdings: evidence from china. finance research letters, 20, 184-191. https://dx.doi.org/10.2139/ssrn.2350863 https://doi.org/10.1108/md-09-2017-0865 https://www.google.com.pk/search?rlz=1c1chbd_enpk800pk800&q=palgrave+macmillan&stick=h4siaaaaaaaaaopge-luz9u3mcyzzdvt4gixty1mzeontdqyyq30k_nzclktszlz8_tlizjlsllz4svzi7klrqpkk3iyiznsiwazo8wsqqaaaa&sa=x&ved=0ahukewic0j_i4ulbahxmvxqkhzlcdueqmxmi-aeoataw https://www.emeraldinsight.com/author/roy%2c+amitava review of economics and development studies vol. 5 no 2, june 2019 343 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads framing effect and financial wellbeing: role of investment behaviors as mediator 1 khalil ur rehman wahla, 2 hameeda akhtar, 3 syed zulfiqar ali shah 1 phd scholar, faculty of management sciences, international islamic university, islamabad, pakistan 2 assistant professor, faculty of management sciences, international islamic university, islamabad, pakistan 3 associate professor, faculty of management sciences, international islamic university, islamabad, pakistan article details abstract history revised format: may 2019 available online: june 2019 based on the premise that human beings are not rational agents and are frame dependent while making investment decisions, this study has found a significant impact of framing effect on investment behaviors and financial wellbeing. structural equation modelling is employed in stata, on the data collected from 344 respondents from pakistan (299 salaried persons and 45 businessmen), having more than three years’ experience. we supported the view of behavioral finance that framing effect could influence the financial wellbeing negatively. we extended the analysis further by validating the mediating role of investment behaviors between framing effect and financial wellbeing, which is a contribution to the body of knowledge in the field of behavioral finance. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords framing effect, investment behaviors, financial wellbeing jel classification: d25, d60, d69 corresponding author’s email address: recommended citation: wahla, k. u. r., akhtar, h. and shah, s. z. a., (2019). framing effect and financial wellbeing: role of investment behaviors as mediator, review of economics and development studies, 5(2), 343354 doi: 10.26710/reads.v5i2.555 1. introduction behavioral finance studies found that human beings could always not be rational while making financial decisions (otuteye & siddiquee, 2014; howard, 2012; slovic, 2001) and financial behaviors could be determined by the behavioral biases (oecd, 2013; baker & ricciardi, 2014). with specific reference to framing effect, it has been evident that decisions made by human beings tend to be frame dependent (kahneman & tversky, 1984), i.e. framing same information in different ways can influence the decision. this phenomenon is against the rational choice mechanism the basis of utility maximization theory of neumann & morgenstern (1944). considering another perspective, literature on financial wellbeing shows that researchers have been striving hard to explore the determinants of financial wellbeing (xu, beller, roberts, & brown, 2015). assuming that positive financial behaviors lead to better financial wellbeing, sometimes financial wellbeing is referred to as positive financial behaviors, however longitudinal studies differentiated financial wellbeing from positive financial behaviors (cpfb-usa, 2015). financial wellbeing could be affected from various aspects of individual financial decision making, such as retirement planning (lusardi & mitchell, 2006), how the finances are managed (lusardi & mitchell, 2007; vlaev & elliott, 2014), financial behaviors (gutter & copur, 2011), capability of dealing with loans (tsai, dwyer, & tsay, 2016) and how financial satisfied individuals are (ali, rahman, & bakar, 2015). more specifically, financial wellbeing could be explained by individua l characteristics, financial stressors and financial behaviors (kim, garman, & sorhaindo, 2003). http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5 no 2, june 2019 344 apropos the above, a gap is felt in the existing literature concerning interrelationships of framing effect, investment behaviors and financial wellbeing of the individuals. although, studies by kahneman & tversky (1984), shefrin & thaler (1988), thaler (1990), barber & odean (2000), barber & odean (2001), stango & zinman (2009), antonides, groot, & raaij (2011) and barber & odean (2013) are found on the relationships between behavioral biases and the outcomes of financial decision making, however a direct link of behavioral biases with financial wellbeing is not found in the existing literature. these studies concluded that biased behaviors could affect the outcomes negatively. with regards to the relationships among behavioral biases, financial decision making and financial behaviors, studies are conducted by tversky & kahneman (1974), kahneman & tversky (1979), slovic (2001), campbell (2006), thaler & sunstein (2008), stango & zinman (2009), howard (2012), otuteye & siddiquee (2014), baker & ricciardi (2014), allgood & walstad (2016), groot & raaij (2016) and frydman & camerer (2016). furthermore, financial behaviors, specifically investment behaviors are linked with financial wellbeing by gutter & copur (2011), stango & zinman (2009), gutter & copur (2011) and allgood & walstad (2016). with this background, we found that not a single study is conducted to research specific interrelationships of framing effect with investment behaviors and financial wellbeing, which, if investigated; could provide valuable theoretical and policy insights, for better understanding the financial decision making phenomenon, when it is already evident that human beings have limited capacity to understand the complex situations i.e. bounded rationality (simon, 1957; simon, 1999; simon, 2000). bounded rationality shed light on deviations from purely rational behavior, due to limited processing capacity of the decision-making units. therefore, the current study; while extending the existing body of knowledge aimed to find out the links between framing effect, investment decisions and financial wellbeing. the basic assumption of the study is that the financial wellbeing of the individuals depends upon how rationally they behave. excessive information or the level of information availability affect the decision required to be made on the basis of that information and individuals could find least ability to process that information (malhotra, jain, & lagakos, 1982; rubinstein, 1998; fasolo, mcclelland, & todd, 2007). in scenarios, where information is available excessively or presented in a complicated way, human beings tend to find “shortcuts”. (simon, 1957). such shortcuts, if in some case are advantageous, could also lead to systematic mental errors and resultantly could make the consequences unfavorable. these shortcuts are referred to as heuristics and behavioral biases by tversky & kahneman (1974) and kahneman & tversky (1984). framing the same information in different ways could lead to different outcomes (kahneman & tversky, 1984), therefore we argued that framing could affect the financial wellbeing of the individuals, as individual human beings have restricted ability to process the available information in a complex situation while also having time constraints. it is also argued that framing can also affect the way individuals behave towards their investments, where investment behaviors can also affect the finance wellbeing. section 2 of the study comprised of review of related literature and hypothesis development. section 3 explained the variables and the methodology adopted. in section 4 findings of the study and critical discussion with reference to specific literature is carried out. the last section concluded the study, highlighted the limitations and future research directions. 2. hypothesis development based on prior research in this section, we have reviewed the existing literature on framing effect, investment behaviors and financial wellbeing and based on that, we have developed certain hypothesis for subsequent testing. 2.1 framing effect and financial wellbeing from the evaluation of existing literature, a negative association of framing with financial wellbeing is evident. it is also evident that framing could influence the financial decision making, in contradiction to rational choice theory (kahneman & tversky, 1984), which could have serious consequences towards financial wellbeing of the individuals. based on these literary findings, it is argued that due to the existence of framing effect, individuals could exhibit least competence in making rational decisions and this could have negative consequence on the overall financial wellbeing of the individuals. therefore, following hypothesis is developed: h1: existence of framing effect affect the financial wellbeing of the individuals negatively review of economics and development studies vol. 5 no 2, june 2019 345 2.2 farming effect and investment behaviors human beings exhibit various financial behaviors some could be negative, and some could be positive (allgood & walstad, 2016). for instance, sometime their investment behaviors could be illogical and beyond rationale due to their emotions, personality traits and also due to the mental mistakes occur unconsciously (baker & ricciardi, 2014). the mental mistakes occur during the decision making process are called as heuristics, a simplified mechanism of choice (tversky & kahneman, 1974; kahneman & tversky, 1979; thaler & sunstein, 2008). while making choices, human beings could be biased, they could rely on heuristics and they could be frame dependent. such phenomenon could lead to the occurrence of anomalies at individual as well as market level (slovic, 2001; howard, 2012; otuteye & siddiquee, 2014). investors use mental shortcuts while making investment decisions and could show behavioral biases (jain, jain, & jain, 2015). moreover, frydman & camerer (2016) also claimed that frame dependency could affect the financial behaviors of the individuals. based on above, it is argued that human beings suffered by framing could exhibit negative investment behaviors, therefore it is hypothesized that: h2: existence of framing effect affect the financial behavior of the individuals negatively. 2.3 investment behaviors and financial wellbeing financial behaviors significantly affect the financial wellbeing, for instance it matters how individuals plan their family budget, how much they save for the future and how much they spend by using risky credit cards (gutter & copur, 2011). with specific reference to investments, the way individuals manage their investments, could affect their financial wellbeing. for instance, behaviors such as investing in financial securities and eobi etc., rebalancing the investments once every year and investing more than 50% of retirement portfolio could be healthy for the overall financial wellbeing (allgood & walstad, 2016). reverse causality between investment behaviors and financial wellbeing could also exist, however literature is silent in this regard. mostly, financial wellbeing is determined as an outcome of how the individuals behave i.e. how they planned their retirement (lusardi & mitchell, 2006), how they managed their finances (lusardi & mitchell, 2007; vlaev & elliott, 2014), how they behaved towards their finances (gutter & copur, 2011) and how they coped with their debts (tsai, dwyer, & tsay, 2016). with this premise, it is claimed that positive investment behaviors could lead to better financial wellbeing and negative investment behaviors could weak the financial wellbeing of the individuals, therefore it is hypothesized that: h3: negative financial behaviors affect the financial well-being of the households negatively. 2.4 mediating role of investment behaviors between framing effect and financial wellbeing if hypothesis 1 is accepted that framing could affect the financial wellbeing negatively, hypothesis 2 is accepted that framing can affect the investment behaviors negatively and hypothesis 3 is accepted that negative investment behaviors could affect the financial wellbeing negatively, a mediating role of investment behaviors will be evident. therefore, following preposition is developed: p1: existence of framing effect affect the investment behavior of the households negatively, which in turn affect the financial well-being of the households negatively. therefore, following theocratical framework is proposed on the basis of review of related literature. figure 1: theoretical framework of the study 3. methodology this section presented the methodology employed for conduction of the research. it involves defining techniques for sample and data collection. considering explanatory nature of the study, positivism research philosophy is adopted. quantitative research methods are used to quantify framing effect, investment behaviors and financial framing effect (independent variable) financial wellbeing (dependent variable) investment behaviors (mediating variable) review of economics and development studies vol. 5 no 2, june 2019 346 wellbeing. an online questionnaire1 is developed to target only the salaried persons and businessmen having minimum three years job or business experience, assuming that these individuals are mainly involved in financial decision making. a sample must be representative of the population for which it is intended for, however representativeness cannot be fully achieved, because the similarities between sample and the population are not possible to determine (pedhazur & schmelkin, 1991). for the sample in this study, inclusion criteria were salaried persons and businessmen having minimum three years job or business experience. it can be claimed that such a broader inclusion criterion would eliminate any part of the population appropriate for inclusion in the sample. moreover, the collected data is not meant for use in norm referencing procedures and also not required to be representative of any other variable of interest. for such cases, homogenous sample is considered as a pre-requisite (rust & golombok, 2009). based on this premise, heterogenous sample is considered advantageous as it benefits correlational studies (pedhazur & schmelkin, 1991). therefore, convenient sampling is considered appropriate for this study. a sample size ranging from 200 to 400 is considered appropriate for social sciences research (hair, sarstedt, ringle, & mena, 2012), therefore in the current study sample size of 344 is finalized. table 1: summary statistics variable description percentage / mean (sd)2 profession (occup) job 86.92% business 13.08% experience (yoe) 3-5 years 30.52% 5-10 years 31.10% above 10 years 38.37% gender (gen) male 84.01% female 15.99% age group (ag) 18-24 8.72% 25-34 52.03% 35-44 23.55% 45-54 11.05% 55-64 4.65% education (e) primary education 0.29% middle level 0.58% matriculation 0.87% intermediate 3.78% graduation 27.33% masters 36.34% ms / m.phil. 28.78% phd 2.03% field of study (edu_fos) business management 43.31% computer sciences 12.50% engineering 9.88% physical sciences 12.21% social sciences 22.09% monthly income (mi) pkr 25,000 11.34% pkr 37,500 31.98% pkr 75,000 35.17% pkr 100,000 21.51% marital status (ms) divorced/separated 0.87% married 69.48% single 29.65% framing effect (fe)3 no 59.30% yes 40.70% financial wellbeing score (fwb) 20.95 (5.02) investment score (inv) 3.42 (1.06) 1 the questionnaire devised is available at https://goo.gl/forms/dv8yvja5ozuwhalj3. 2 for continuous variables, mean and standard deviation are reported in parenthesis. 3 framing effect is treated as a dichotomous variable. four questions were asked to check framing effect. framing is identified as per following criteria: for instance in first question, program a reflects risk aversion and program b reflects risk seeking. in second question, program c reflects risk aversion and program d reflects risk seeking. if selected program in questions 1 and 2 are: a&c no framing effect, a&d framing effect, b&c framing effect, b&d no framing effect. if framing effect = no = 0, if yes = 1. https://goo.gl/forms/dv8yvja5ozuwhalj3 review of economics and development studies vol. 5 no 2, june 2019 347 nine questions are asked about demographics. questions concerning framing effect (04), investment behaviors (04) and financial wellbeing (10) are adopted from the studies of kahneman & tversky (1984), allgood & walstad (2016) and cpfb-usa (2017), respectively. scores are calculated for investment behaviors and financial wellbeing. investment behaviors are coded to reflect the negative investment behaviors. in total 1,061 individuals were approached, out of those 611 responded. considering salaried persons and business holders with job or business experience more than three years, the sample finalized consisted of 344 respondents. from the response rate, it is evident that the sample is representative. the possibility of significant response bias could be minimized by attaining high response. to make the analysis adequate, 50% response rate could be considered as sufficient (rubin & babbie, 2010). response rate to the survey questionnaire is recorded as 56.30%, which is enough to carry out the analysis. table 1 presents summary statistics. to address the validity and reliability issues, the guidelines of collingridge (2014) are followed. the questionnaire items adopted from the studies of kahneman & tversky (1984), allgood & walstad (2016) and cpfb-usa (2017) were further discussed with experts from the field to ensure face validity. accordingly, questions were rephrased / amended keeping in view the local settings. some of the questions were phrased negatively to avoid reckless responses. afterwards, a pilot testing was carried out on a sample size of 80. the data collected in pilot study was analyzed and internal consistency was checked through cronbach alpha. questionnaire items pertaining to investment behaviors, having low cronbach alpha value; were further rephrased to make them simpler and easy to understand. for the construct validity of the proposed hypothesis, confirmatory factor analysis is carried out, as suggested by atkinson, et al. (2011). results of confirmatory factor analysis are presented in table 2. based on hypothetical framework of the study, four models were developed to test the best fit. rmsea value of all the models is less than 0.08, therefore considered as good. cfi values of all the models are above 0.90 except model 4, having value of 0.382. model 1, 2 and 3 are considered as statistically superior then model 4 in terms of rmsea and cfi and x2. based on the confirmatory factor analysis, the validity of model 4 is found lower. table 2: fit indices for confirmatory factor models in overall sample rmsea 90% ci cfi df x2 x2/df p model 14 0.000 0.000, 0.000 1.000 35.788 0.000 model 25 0.000 0.000, 0.000 1.000 23.869 0.000 0.000 p<0.05 model 36 0.000 0.000, 0.000 1.000 33.149 0.000 0.000 p<0.05 model 47 0.058 0.031, 0.085 0.382 62.828 34.429 34.429 p<0.05 for the final dataset, cronbach alpha statistics are reported in table 3, showing overall reliability of the questionnaire as 0.74. thus, data collection instruments are found reliable to test the hypothesis. table 3: reliability statistics variable construct items in the scale reliability coefficient of scale all all 18 0.74 independent variable framing effect 04 0.62 dependent variable financial wellbeing 10 0.69 mediating variable investment behaviors 04 0.77 4. findings and critical discussion this section is about findings of the study and their critical review with reference to the studies already conducted. to test the hypothesis, structural equation modelling (sem) is employed in stata. 4.1 hypothesis 1 hypothesis 1 is tested with 50 bootstrap replications and its results are presented in table 4. the model is found fit for estimation as shown by overall goodness of fit statistics i.e. p>chi2 equals to 0.003. from the results, it is evident that fe negatively affect fwb at a significant level. probability of significance is 0.041. two control 4 model 1 comprise of framing effect and financial wellbeing. 5 model 2 comprise of framing effect and investment behaviors. 6 model 3 comprise of investment behaviors and financial wellbeing. 7 model 4 comprise of framing effect, financial wellbeing and investment behaviors. review of economics and development studies vol. 5 no 2, june 2019 348 variables i.e. mi and number of children have also shown a significant effect on fwb at a p-value of 0.000 and 0.006 respectively. however, mi has shown a positive impact, whereas number of children has shown a negative impact. from this analysis, we found that framing effect decreases the fwb. moreover, higher the monthly income resulted in higher fwb, however, if number of children is higher, it will lower the fwb. these results support the findings of (kahneman & tversky, 1984), and are in line with the behavioral finance approach, which claims that human beings are frame dependent. table 4: results for hypothesis 1 standardized observed coef. bootstrap std. err. z p>|z| normal-based [95% conf. interval] structural fwb < fe -0.085 0.042 -2.040 0.041 -0.167 -0.003 occup 0.111 0.868 0.130 0.898 -1.590 1.813 yoe -0.042 0.159 -0.270 0.791 -0.353 0.269 gen 1.276 0.802 1.590 0.112 -0.296 2.847 ag 0.004 0.034 0.120 0.906 -0.063 0.071 e -0.072 0.131 -0.550 0.584 -0.327 0.184 fos-bm -0.398 0.809 -0.490 0.622 -1.984 1.188 fos-cs -0.222 0.832 -0.270 0.790 -1.852 1.408 fos-eng -0.491 1.155 -0.430 0.671 -2.754 1.772 fod-ps -0.292 0.968 -0.300 0.763 -2.189 1.605 mi 0.000 0.000 4.570 0.000 0.000 0.000 ms 0.118 0.744 0.160 0.874 -1.340 1.576 child -0.655 0.237 -2.760 0.006 -1.120 -0.190 _cons 19.764 1.975 10.010 0.000 15.893 23.634 var (e. fwb) 0.901 0.034 0.837 0.970 the results of model executed with respect to profession suggested that fwb of salaried persons is significantly and negatively influenced by fe, at a p-value of 0.053, whereas fwb of businessmen is not influenced by fe. no statistically significant difference is found in case of gender, age_g, edu and other demographic variables. 4.2 hypothesis 2 hypothesis 2 is estimated to ascertain the impact of fe on investment behaviors. structural equation modelling is executed with 50 bootstrap replications and its results are presented in table 5. it is found that fe affect the negative investment behaviors in a positive way at a significance p-value of 0.032, which means that framing effect escalate the negative investment behaviors. two control variables i.e. profession and education have also shown significant impact on negative investment behavior. it shows that those who do business are less likely to exercise negative investment behaviors than those who do job. moreover, those who have higher level of education are less likely to exercise negative investment behaviors. overall, these findings suggest that framing escalate negative investment behaviors. table 5: results for hypothesis 2 standardized observed coef. bootstrap std. err. z p>z normal-based [95% conf. interval] structural inv < fe 0.088 0.045 2.180 0.032 0.011 0.157 occup 0.359 0.181 1.980 0.048 0.004 0.715 yoe 0.016 0.034 0.470 0.638 -0.051 0.082 gen 0.091 0.149 0.610 0.543 -0.202 0.384 ag -0.005 0.009 -0.530 0.593 -0.022 0.013 e -0.060 0.029 -2.040 0.041 -0.117 -0.002 fos-bm -0.046 0.141 -0.320 0.747 -0.322 0.231 fos-cs -0.109 0.202 -0.540 0.590 -0.504 0.287 review of economics and development studies vol. 5 no 2, june 2019 349 fos-eng -0.040 0.206 -0.190 0.846 -0.445 0.364 fod-ps 0.025 0.187 0.130 0.894 -0.341 0.391 mi 0.000 0.000 -0.740 0.461 0.000 0.000 ms 0.030 0.174 0.170 0.863 -0.311 0.372 child 0.020 0.054 0.380 0.707 -0.086 0.126 _cons 4.155 0.479 8.680 0.000 3.217 5.093 var(e.inv) 1.078 0.125 0.858 1.354 these results support the viewpoint of allgood & walstad (2016), baker & ricciardi (2014), tversky & kahneman (1974), kahneman & tversky (1979), slovic (2001), thaler & sunstein (2008), howard (2012), otuteye & siddiquee (2014) and jain et al. (2015), who found the individuals involved in such behaviors which are beyond logic and reasoning. no statistically significant difference is found in subgroups based on demographic variables. 4.3 hypothesis 3 hypothesis 3 is estimated to check the association between negative investment behaviors and fwb. structural equation modelling results are shown in table 6, from where it is found that investment behaviors affect fwb at a significance p-value of 0.037. beta value is recorded as -0.112 that means the impact is in negative direction. therefore, it can be argued that exercising negative investment behaviors by the individuals could result in lesser financial wellbeing. furthermore, a subgroup analysis found that fwb of males is adversely affected due to their negative investment behaviors, comparing to females. mi (a control variable) has shown a positive impact on fwb at a significant p-value of 0.000. this shows that having higher income could result in higher level of financial wellbeing. whereas, having higher number of children could result in lesser financial wellbeing. the results of this model show that if individuals will exercise negative investment behaviors more then they will enjoy financial wellbeing less. table 6: results for hypothesis 3 standardized coef. oim std. err. z p>z [95% conf. interval] structural fwb < inv -0.112 0.054 -2.090 0.037 -0.217 -0.007 occup 0.237 0.842 0.280 0.778 -1.413 1.888 yoe -0.045 0.142 -0.320 0.751 -0.323 0.233 gen 1.115 0.695 1.600 0.109 -0.247 2.478 ag 0.002 0.039 0.040 0.965 -0.074 0.078 e -0.084 0.121 -0.700 0.485 -0.321 0.152 fos-bm -0.314 0.683 -0.460 0.645 -1.652 1.024 fos-cs -0.233 0.817 -0.290 0.775 -1.835 1.368 fos-eng -0.415 1.034 -0.400 0.688 -2.442 1.611 fod-ps -0.274 0.871 -0.310 0.753 -1.981 1.433 mi 0.000 0.000 4.360 0.000 0.000 0.000 ms 0.069 0.680 0.100 0.919 -1.263 1.401 child -0.634 0.294 -2.160 0.031 -1.210 -0.058 _cons 21.366 2.292 9.320 0.000 16.874 25.858 var (e.fwb) 22.817 1.882 19.409 26.822 lr test of model vs. saturated: chi2(0) = 0.00, prob > chi2 = . the relationship between negative investment behaviors and financial wellbeing as found in this model is in line with the empirical findings of lusardi & mitchell (2006), lusardi & mitchell (2007), gutter & copur (2011), vlaev & elliott (2014), ali, rahman, & bakar (2015), tsai, dwyer, & tsay (2016) and allgood & walstad (2016). 4.4 proposition 1 this preposition is estimated to find out mediation role of negative investment behaviors between fe and fwb. results with 50 bootstrap replications estimated through structural equation modelling in stata are shown in table 7. mediating role of investment behaviors (p-value = 0.022) is found in case of fe and fwb (0.045). from these results, it is evident that framing have a significant positive impact on negative investment behaviors and negative review of economics and development studies vol. 5 no 2, june 2019 350 investment behaviors have significantly affected financial wellbeing of the individuals in a negative way. therefore, it can be argued that framing effect escalates negative investment behaviors and resultantly it posed a negative impact on the financial wellbeing of the individuals. table 7: results for proposition 1 standardized observed coef. bootstrap std. err. z p>z normal-based [95% conf. interval] structural inv < fe 0.087 0.049 2.010 0.045 0.002 0.195 occup 0.359 0.216 1.660 0.097 -0.065 0.783 yoe 0.016 0.031 0.520 0.606 -0.045 0.077 gen 0.091 0.144 0.630 0.529 -0.192 0.374 ag -0.005 0.008 -0.590 0.553 -0.020 0.011 e -0.060 0.026 -2.250 0.025 -0.111 -0.008 fos-bm -0.046 0.156 -0.290 0.770 -0.351 0.260 fos-cs -0.109 0.219 -0.500 0.619 -0.537 0.320 fos-eng -0.040 0.183 -0.220 0.826 -0.398 0.318 fod-ps 0.025 0.181 0.140 0.890 -0.329 0.379 mi 0.000 0.000 -0.780 0.435 0.000 0.000 ms 0.030 0.193 0.160 0.876 -0.348 0.408 child 0.020 0.040 0.510 0.611 -0.058 0.099 cons 4.155 0.559 7.430 0.000 3.059 5.251 fwb < inv -0.540 0.235 -2.290 0.022 -1.001 -0.079 _cons 22.795 0.793 28.760 0.000 21.242 24.348 var(e.inv) 1.078 0.095 0.905 1.283 var(e.fwb) 24.796 1.806 21.497 28.601 to the best of the knowledge of the authors, the mediating role of investment behaviors in the relationship of framing effect and financial wellbeing is the area which remained unexplored. this could be considered as an addition in the field of behavioral finance. it can be inferred from the validation of this proposition that by not indulging in framing effect, investors could have positive investment behaviors, which can put a positive impact on their financial wellbeing. 5. conclusion the premise of this study was that human being do not act rationally. they tend to be involved in decisions which are based on heuristics and mental shortcuts. they could be frame dependent due to their restricted ability to absorb the excess information in complex learning environments. irrational approach of the individuals could lead them to exercise negative investment behaviors. it was also learnt that negative investment behaviors by the individuals could influence their financial wellbeing negatively. considering these factors, the role of framing effect is investigated in defining the investment behaviors and its further impact on financial wellbeing of the individuals. by employing sem on the sample data collected from 344 respondents, we have found a significant impact of framing effect on investment behaviors and financial wellbeing, which is in line with the contemporary research in the field of behavioral finance. we also supported the view of behavioral finance researchers that the negative investment behaviors could influence the financial wellbeing negatively. based on validations of these hypothesis, we further found a mediating role of investment behaviors on the relationship of framing effect and financial wellbeing, which is an addition to the body of knowledge in the field of behavioral finance. for the investors and regulators in pakistan, this study provides valuable insights. investors are recommended to analyze critically the investment options they could have. before, making any investment decision, they need to first understand the information associated with each investment opportunity. they have to scrutinize the detailed terms and conditions of the investment opportunity to make an optimal investment decision. on the other side, regulators are required to devise the investor awareness programs to enhance the learning level of investors with regards to investment information. such regulations are required to be introduced which could bound the investment houses to lay down the information associated with an investment in a simple and easy to understand review of economics and development studies vol. 5 no 2, june 2019 351 way. they need to make bound to highlight the negative as well as positive aspects of the investment opportunity they offer. as far as future research directions are 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(2015). personality and young adult financial distress. journal of economic psychology, 90-100. review of economics and development studies, vol. 6 (1) 2020, 135-146 135 dynamic role of mother empowerment in reducing malnutrition among children: evidence from sub-saharan africa a mariam abbas soharwardi, a tusawar iftikhar ahmad a department of economics, the islamia university of bahawalpur, pakistan. article details abstract history: accepted 25 march 2020 available online 31 march 2020 in sub-saharan africa, two out of five children are malnourished and malnutrition causes almost half of the child deaths (45%). mothers are the primary caretaker of children's health, but unfortunately, most of the mothers, are not empowered in sub-saharan africa. this study examined the role of mother’s empowerment in the reduction of malnutrition (stunting, wasting, and underweight) among children under five years of age in twenty-two sub-saharan african countries. cross-sectional data from the most recent demographic health survey (2011-2016) of twenty-two countries are used to analyze the relationship between mother's empowerment and child malnutrition through the binary logistic regression analysis. results show that the countries with low empowerment, the prevalence of malnutrition is high. mother empowerment is found to be a statistically significant predictor in reducing malnutrition. mother’s education, body mass index, and age at first birth proved to be a strong predictor for reducing malnutrition. household wealth index and household locality also have a statistically significant impact on the reduction of malnutrition. at the household level, malnutrition of children can be minimized by empowering boosting their self-esteem, self-confidence, economic resources, social resources, awareness and decision making. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: malnutrition, demographic health survey, binary logistic regression jel classification: j10, j11 doi: 10.47067/reads.v6i1.191 corresponding author’s email address: mariam.abbas@iub.edu.pk 1. introduction the malnutrition and child survival is influenced by the interaction of parents behaviour at the household level; this interaction affects children under five years more because they do not go to school and stays at home (badake et al., 2014). women (mothers) as the primary caregiver to family and children are maybe responsible for the illness of their children. globally the burden of malnutrition has declined from 32.5 percent to 21.9 percent, and the number of children affected has fallen from 198.2 million to 149.0 million(who, 2018). this decline did not meet the sdg-21 . malnutrition among 1 sustainable development goals 2nd “end hunger, achieve food security and improved nutrition and promote sustainable agriculture.” review of economics and development studies, vol. 6 (1) 2020, 135-146 136 children under five years of age is the result of insufficient food intake, repeated attacks of infectious disease, low education of parents, unhygienic environment, and inadequate childcare(suara & aryee, 2018; yalew, 2014). given this background, women empowerment plays a very crucial role in determining the nutrition status of children under-five years (bose, 2011). mother’s reproductive health and child health outcomes are significant correlates of women's disempowerment (dimbuene et al., 2018; hotchkiss, godha, gage, & cappa, 2016). the utilization of child health services depends on women's empowerment. children of empowered mothers have full access to health services and have an awareness of how to save their children from unhealthy food and environment (amare, ahmed, & meharie, 2019). 1.2 the rationale of the study an improvement has been seen in reducing malnutrition in the understudy countries, but still, these countries are far from the global target of reducing malnutrition at the end of 2025. in literature, several studies were conducted, for (nigeria, burkin faso, zimbabwe, ethiopia, tanzania, and ghana) in the context of mother empowerment and child health. the present study explores the role of mother empowerment, at the household level, in reducing malnutrition in twenty-two countries. the role of mother’s empowerment in reducing malnutrition was not previously studied in these twenty-two countries. therefore, this study is an attempt to fill this gap. another contribution of this study is to utilize the quantitative measurement of women’s empowerment while following the kabeer (1999) conceptual framework of resource-agency-outcome. following are the objectives of the study  to highlight the status of women empowerment across the countries in sub-sahara africa.  to find out the role of mother empowerment in reducing malnutrition in sub-sahara african countries. 1.3 limitation of the study the current study faces some limitations in the following areas;  only the ever-married women of 15-49 years having children under five years of age at the time of the survey are selected for this study.  only those countries are selected for whom complete information about the indicators of women empowerment (work status, awareness, decision making, self-esteem, and self-confidence) and the indicators of malnutrition (stunting, wasting and underweight) are available. 2. literature review 2.1 women empowerment ( measurement) there are different measures and frameworks to define women empowerment in previous literature. kabeer (1999) defined women empowerment as a process and conceptualize empowerment in terms of resource, agency, and achievement. beteta (2006) flourish the concept of women empowerment through the gender empowerment enabling environment (geee). the geee included questions covers the gender aspects from the world value survey and collect data from the women’s organizations in a country and raise the voice for women right and no tolerance of government against gender discrimination. charmes and wieringa (2003) hypothesize the women’s empowerment matrix in six dimensions and included the physical, socio-cultural, religious, economic, political, and legal aspects. moreover, measure this matrix at individual, community, household, state, region and globally. desai review of economics and development studies, vol. 6 (1) 2020, 135-146 137 (2010) has highlighted that the challenge to measure women empowerment is the lack of gender base data for most of the dimensions and levels. beteta (2006), also agrees with this lack of data measurement at the household level, desai (2010) believes that most of the data was available for the aggregate or household level. data at the community, state, and region levels was available only for very few countries. at the same time, desai (2010) pointed out that women empowerment was measured with the use of universal indicators. wherase the dimensions of women empowerment had different values in different regions and countries. (mosedale, 2005; odutolu, adedimeji, odutolu, baruwa, & olatidoye, 2003). in india, women are educated but lacks the decision power, (jejeebhoy, 2000), in bangladesh women have better decision power as compared to india but with low education levels (jejeebhoy & sathar, 2001) in nepal women are deprived of the right of the land ownership (allendorf, 2007). in pakistan's women have lack of freedom of mobility (ahmad & sultan, 2004), in sub-saharan africa they suffering from health issues (heggdal, 2016) and affecting gender-based violence in zambia (hof & ritchers, 1995). given the context and background of the countries, a comprehensive index of women empowerment has been constructed through five dimensions and with the help of nineteen indicators. 2.1 women empowerment and malnutrition in child in under five years of age ndaimani, mhlanga, and dube-mawerewere (2018) measured women empowerment by the decision making and access to assets, in zimbabwe by using the demographic health survey and found a decisive role of mother empowerment in the treatment of diarrhea and uptake of child vaccination in children under five years of age. amare et al. (2019) studied the nutritional status of children under five years of age and the determinants of child nutritional status and found that the mother’s role had primary importance in the improvement of child nutritional status. for child well-being, women’s decision making autonomy appeared to be the most significant determinant. in india and nepal, older women with less than two children have more independence in decision making as compared to young mothers. mother’s with more autonomy in decision making seems to be a good for their children(ibrahim, tripathi, & kumar, 2015). cunningham, ruel, ferguson, and uauy (2015) explained the link between mother empowerment, childcare, and child nutrition in the rural nepal. for this study, women empowerment in agriculture index (weai) and five sub-domains of empowerment has been constructed to investigate the relationship between mother empowerment and child’s nutritional status. findings proved that mother’s empowerment has a strong influence on child care and his/her nutritional status. mother’s empowerment at home correlates with child health and wellbeing. empowerment of women and mothers are the prime factors for achieving the targets of social actions and health promotion movements. mothers in all cultures and regions are the first ones who provide care to their children more than anyone else. the involvement of women in social actions and health promotion programs ensures the success of these efforts. for the social and economic development, the participation of women stands necessary along with giving them empowerment and an unbiased gender environment (bennett, 2002; cherayi & jose, 2016; kar, pascual, & chickering, 1999). parasar (2004) examined the link between mother empowerment and child nutrition and immunizations in india. different dimensions of women empowerment have been evaluated for capturing their effects on children's health and survival. decision making and education have a more significant impact on child immunizations and nutrition. children of more empowered mothers have proper vaccinations and nutrition on time as compared to less empowered mothers(bhandari & chhetri, 2013; chipili, msuya, pacific, & majili, 2018; lamontagne, engle, & zeitlin, 1998). in pakistan review of economics and development studies, vol. 6 (1) 2020, 135-146 138 decision making in the purchase of food, purchase of clothing, in medical treatment and travel have more influence on child health care practices along with the wealth of households. empowerment is revealed as the prime factor in the promotion of health care practices in children, even women of wealthy families with no empowerment seems to fail to provide child care in an appropriate way (khan, 2018). 3. methodology for analysis, data has been extracted from the most recent demographic health surveys (20112016) for analyses. dhs surveys present a wide range of evidence on the target sample of the population comparable across the countries. dhs data is national-level data and collected by cluster sampling method by multi-stages. women between 15 to 49 years of age are appropriate to participate and men from 15 to 65 years are also applicable to participate2. 3.1 countries selection criteria for analysis only countries with the dhs datasets (2011-2016) and with comprehensive indicators of anthropometric measures of children under five-year of age and indicators selected for women empowerment were included in the study. following the criteria, only 22 sub-sharan african countries out of 49 were included. missing values are not included in the analysis. 3.2 conceptual framework for model malnutrition is a globally addressed issue. the most common forms of malnutrition are stunting, wasting, and underweight. it is the outcome of insufficient food intakes, irregular eating habits dietary and repeated infectious diseases(who, 2018). inadequate food intake and improper eating habits linked with psychological and family factors. moreover, inadequate sanitation-related with the environmental condition of households. a household is a multi-person unit where a family or group of persons lives together. in homes, mothers are the primary caregiver of children. children's health and nutritional status grew up under the observation of mothers. for this study, we start from the household which maximizes a preference function u=u(yi….yn) …………………………equation (1) subject to the resource allocation ∑piyi=i=w+v ………………………equation (2) household is unit assumed to produce and consume vector of commodities (yi), constituted by becker (1965) and strauss and thomas (1995) in their theories of time allocation and revised theories of choice forming the household’s utility function. yi are the market commodities purchased, and pi is the market price, i is money income, w is wage and v is income from other sources (aguiar, botelho, lago, maças, & sampaio, 2012; aguiar & hurst, 2007; juster & stafford, 1985). households usually will be maximizing their utility by combining the time and market good to produce more necessary public goods (healthy children) which have a direct effect on the human capital accumulations for the household as well as for nations. the new utility function of household’s is now represented as; u=f(yi,ni,li)……………….equation (3) 2 details related to data collection and sampling methodology used for dhs surveys are present on the website (measure dhs, 2019). review of economics and development studies, vol. 6 (1) 2020, 135-146 139 the household is then assumed to produce a vector of commodities ni. these commodities are associated with different types of activities related to nurturing and rearing children to enhance their nutritional status (becker, 1965; becker, fonseca-becker, & schenck-yglesias, 2006; grossman, 1972; willis, 1973). the good nutritional status is estimated by standardizing anthropometric measures (stunting, wasting, and underweight). the household utility function is therefore maximized subject to different constraints including the time-specific nutrition and income. following the work of grossman (1972) general health production function, the reduced form of production function of health (nutritional status) of a child in a household can be derived as (garcia, alderman, & sathar, 1989; jamal, 2018; khan & raza, 2014, 2016) hi=f(wemp, mi, ci, fi, hi, ci) i=1,2,3 … ….equation (5) hi is health (malnutrition ) which depended on the vector of health inputs; women/mother’s empowerment (wemp), mother’s characteristics (mi), child (ci), father characteristics (fi), household’s characteristic (hi)and country characteristics. in this study, the focus is on the development of the relationship between health (malnutrition) and empowerment, along with parent's and households’ characteristics. the production function of health eq(5) presents the economics of nonmarket activities which plays the more important role of the vector of inputs for the production of market goods (becker, 1974, 1981; becker & lewis, 1973; cummins et al., 1991). investing time in the health of a child results in human capital formation which in turn becomes the life cycle earnings and productivity (browning et al., 2014). 3.3 indicators of malnutrition the three most common anthropometric indicators used to measure malnutrition in children of under five years age are stunting (low height-for-age), wasting (low weight-for-height), and underweight (low weight-for-age) calculating z score below than −2 standard deviations (sd) (jamal, 2017; khan & raza, 2014). table 1 measurement scale for malnutrition (dependent variable) measure description measurement scale in dhs data stunting height-for-age if a child is stunting 1, otherwise 0 wasting weight-for height if a child is wasting 1, otherwise 0 underweight weight-for age if a child is underweight 1, otherwise 0 ciaf composite index of anthropometric failure if a child is undernourished 1, otherwise 0 (khan & raza, 2014, 2016) 3.4 conceptual framework for women empowerment the concept of empowerment previously defined in the term of power, autonomy, control, selfefficacy, and as a goal. the power is someone’s ability to make choices and express the concept of empowerment as a process by which people who have been denied to get the ability to make choices, become able to make choices (kabeer, 1999, 2001). it is challenging to define empowerment in a single dimension because it is a multidimensional process. change does not occur in one step or sudden; it takes time, strategies and planning. if a person who denied to make choices suddenly asked her/him to make choices, they cannot make the right choices. kabeer (1999) explained the ability to exercise choices in terms of three interrelated dimensions resource, agency, and achievement. resources are not only economic but also included human and social, serves to enhance the ability to make choices. review of economics and development studies, vol. 6 (1) 2020, 135-146 140 change in resources, change the ability to make choices because resources are measured as potential rather than actualized choices. agency is the ability to recognize one’s goal and acts upon it. in the scenario of kabeer (1999), resource-agency-achievement framework, the present study explained empowerment as a process that can be attained in terms of five interrelated dimensionswork status, awareness, decision making, self-esteem, and self-confidence. table 2 women empowerment index: a representation of kabeer’s framework (1999) main concept kabeer’s dimensions subdimensions indicators women empowerment index resource work status  respondent is currently working  respondent 's employment status awareness  respondent watching tv  respondent reading newspaper or magazines  respondent listening to the radio  heard about family planning on the radio  heard about family planning on tv  heard about family planning from newspapers agency decision making  the decision to spends about women's husband earnings  the decision to women’s health  the decision about large household purchases  the decision about visits to family or relatives achievement self-esteem  beating justified if wife argues with husband  beating justified if the wife neglects children  beating justified if without telling husband  beating justified if the wife refuses to  for sex  for have sex with the husband  beating justified if wife burns food selfconfidence  getting medical help for self: not want to go alone  getting medical help for self: getting  money for treatment source: dhs data 3.5 statistical analysis descriptive statistics and cross-tabulation have used to describe the current situation of women's empowerment and malnutrition within the countries of sub-saharan. spss 22.0 version has used to analyze the data. the mother empowerment index is calculated through the factor analysis. these underlying factors are inferred from the correlations among the p variables. each factor is estimated as a weighted sum of the p variables. the ith factor is thus fi=wi1s1+ wi2s2+ wi3s3+…+ wipsp eq1 wip is the weight for mth principal component and pth variables. s variables used in factor analysis. (antony & rao, 2007; gupta & yesudian, 2006; hightower, 1978). these factor scores have accumulated the mother empowerment index in the range of 01-4.4. this mother empowerment is then further divided into three groups low, medium and high as followed by (brajesh & shekhar, 2015; jeckoniah, nombo, & mdoe, 2012). review of economics and development studies, vol. 6 (1) 2020, 135-146 141 4. results and discussion according to table 3 within the sub-saharan african countries, it is found that congo democratic, chad, and sierra leon are the countries where malnutrition is at extremely alarming followed by stunting (44.1%,42.9%,37.7%), wasting (23.2%,32.5%,16.0%) and underweight (7.9%,14.2%,9.4%). these are the same countries where high mother empowerment is at its lowest (3.4%,1.3%,3.4%). gabon, kenya, nambia, and uganda are the countries where malnutrition is comparatively low followed by stunting (22.9%,27.1%,23.0%,30.3%), wasting (8.3%,13.2%,13.8%,13.1%) and underweight (4.1%,5.5%,8.0%,5.3%). these are the countries where mother empowerment is comparable to other countries is high (17.6%,36.5%,44.6%,26.6%). the same trend and inverse relationship between mother empowerment and malnutrition have been found in the remaining sub-saharan african countries. table 3 current situation of women empowerment and malnutrition evidence from dhs sr# countries years mother empowerment malnutrition low medium high stunting z score<-2 wasting z score<-2 underweight z score<-2 1 burkina faso 2014 7.6% 82.0% 10.4% 34.2% 24.9% 15.3% 2 ethiopia 2016 23.4% 65.1% 11.5% 35.9% 25.2% 11.9% 3 gabon 2012 8.0% 74.4% 17.6% 22.9% 8.3% 4.1% 4 gambia 2013 7.6% 82.5% 10.0% 25.8% 17.9% 11.7% 5 comoros 2012 7.9% 77.3% 14.8% 27.7% 14.5% 11.6% 6 congo democratic 2014 20.9% 75.8% 3.4% 44.1% 23.2% 7.9 7 cote d'ivoire 2012 16.0% 76.8% 7.2% 29.8% 14.6% 7.1% 8 cameroon 2014 10.0% 77.6% 12.4% 31.6% 13.7% 5.7% 9 chad 2015 38.9% 59.8% 1.3% 42.9% 32.5% 14.2% 10 kenya 2014 5.2% 58.2% 36.5% 27.1% 13.2% 5.5% 11 liberia 2013 1.5% 81.0% 17.5 30.9% 15.3% 6.6% 12 mali 2013 1.9% 79.2% 18.9% 37.7% 25.2% 12.6% 13 malawi 2016 1.8% 77.0% 21.2% 35.2% 25.2% 12.6% 14 mozambique 2011 2.5% 75.6% 22.0% 39.3% 11.9% 3.2% 15 namibia 2013 4.1% 51.3% 44.6% 23.0% 13.8% 8.0% 16 nigeria 2015 12.9% 68.2% 18.9% 36.1% 26.9% 16.6% 17 sierra leon 2013 19.1% 77.5% 3.4% 37.7% 16.0% 9.4% 18 tanzania 2016 8.5% 72.3% 19.2% 33.4% 13.7% 4.8% 19 tonga 2014 5.9% 83.4% 10.6% 28.3% 16.8% 7.3% 20 uganda 2011 4.1% 69.3% 26.6% 30.3% 13.1% 5.3% 21 zimbabwe 2011 1.9% 83.0% 15.1% 30.7% 9.7% 5.3% 22 zambia 2013 2.1% 82.0% 15.9% 38.2% 14.4% 6.1% source dhs table 4 depicts the results of binary logistic regression and explains the relationship between mother empowerment and malnutrition among children under five years. composite women empowerment has a significant impact on all the indicators of malnutrition. women with high and medium composite empowerment index negatively affect the stunting, wasting, underweight with odds ratios less than one. mother empowerment is assessed through working status, awareness, decision making, self-esteem, and self-confidence. all these dimensions of empowerment make a mother secure review of economics and development studies, vol. 6 (1) 2020, 135-146 142 and take better care of her child rather than disempowered women (haroon, 2018; ndaimani et al., 2018; siddhanta & chattopadhyay, 2017) table 4 results of binary logistic regression stunting (height for age) <-2sd wasting (weight for height) <-2sd underweight (weight for age) <-2sd independent variables std. err. logistic ratio std. err. odd ratio std. err. composite women empowerment index(low as reference category) medium 0.817*** 0.055 0.875** 0.066 0.769** 0.088 high 0.909*** 0.031 0.923** 0.039 0.806*** 0.053 mother body mass index (less than 18.5 kg/m2 is reference category) more than 18.5 kg/m2 0 .974** 0.012 0 .979 0.014 0.910*** 0.020 mother's education ( no education is reference category) primary 0.911*** 0.016 0.734*** 0.019 0.689*** 0.026 secondary 0.861*** 0.018 0.731*** 0.022 0.766*** 0.030 higher 0.798*** 0.033 0.732*** 0.040 0.829*** 0.053 mother’s age on her first birth ( age below 19 years old is reference category) 20-25 0.891*** 0.015 0.958** 0.018 0.954* 0.025 above than 25 0.851*** 0.034 0.890*** 0.043 0.941 0.056 child age in months 1.001** .001 1.001 .001 0.998 .001 child gender ( male child as reference category) female child 0.980* .037 1.041** .024 1.043* 0.038 father’s education ( no education is reference category) primary 0.900*** 0.017 0.757*** 0.020 0.740*** 0.027 secondary 0.946*** 0.020 0.821*** 0.024 0.781*** 0.032 higher 0.975 0.031 0.962* 0.037 0.939 0.049 father's employment status ( father did not work is reference category) father did work 0 .898*** 0.016 0 .949*** 0.019 0 .956* 0.0 27 household's wealth status (poorest is reference category) poorer 0.942*** 0.022 0.883*** 0.027 0.882*** 0.041 middle 0.999 0.021 0.959 0.026 0.980 0.042 richer 0.959** 0.020 0.914*** 0.025 0.932** 0.046 richest 0.951*** 0.018 0.899*** 0.023 0.933** 0.056 type of residence ( rural areas are reference category) urban areas 0.974*** 0.026 0.962*** 0.027 0.923*** 0.026 <=5 0 .992 0.018 0.944*** 0.022 0 .873*** 0.028 <=4 0 .963** 0.018 1.042* 0.022 1.078** 0.029 constant 1.519** 0.154 1.276 0.184 0.533** 0.273 cox & snell r square .005 .013 .008 nagelkerke r square .007 .020 .018 mother's body mass index, mother education, and maternal age on her first birth, and each have its different effect on malnutrition. regression results proved that body mass index 18.5kg/m2, review of economics and development studies, vol. 6 (1) 2020, 135-146 143 education, and age at first birth above 20 years have a significant role in reducing malnutrition. mother’s health, education, and age at first birth interlinked with the health and care of her child (amare et al., 2019; scantlan & previdelli, 2013). malnutrition increased with the increase in child age because chances to increase in malnutrition among children under five years have more probability if they do not take the proper and sufficient food intake (khan, mann, zafar, hashmi, & akhtar, 2010; khan & raza, 2014) in the female child there are fewer chances to be stunting and wasting but have more chances to be underweight as compared to male children. the total number of children ever born has its significant effect in reducing the stunning, wasting and underweight (amare et al., 2019; nosheen & chaudhry, 2018) father education and father employment status and have a different impact on stunting, wasting and underweight. according to the results of table 7, binary logistic regression results proved that father education and employment status have a negative and significant effect on stunting, wasting and underweight. household characteristics were measured by three different characteristics of household wealth status, total household members, type of residence, and each component have a significant effect on stunting, wasting and underweight. the binary logistic regression results proved that household richest wealth status, total household member equal to or less than four and locality in urban have a negative and significant effect on stunting, wasting, underweight. household wealth and locality (urban) provide support to provide sufficient, proper and healthy food to children in urban areas provision of hospital, vaccination and awareness more significant than the rural areas (kumar, mittal, & sharma, 2010; kyu et al., 2016; njau et al., 2006). 5. conclusion in this study, an association of mother’s empowerment index with the indicators of malnutrition was found to be statistically significant. however, all three indicators of malnutrition were significantly associated with the sociodemographic characteristics of mother, father, children and household. there is a need for policymakers to strengthen the change in the social behavior of family strategies, as this will be likely to increase uptake of child health services. policymakers in low-income countries can consider promoting gender equality in health, education and in decision making to improve children’s health care. references aguiar, m., botelho, g., lago, c., maças, v., & sampaio, j. 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(2014). prevalence of malnutrition and associated factors among children age 6-59 months at lalibela town administration, north wollozone, anrs, northern ethiopia. j nutr disorders, 4(132), 2161-0509. https://dhsprogram.com/what-we-do/survey-types/dhs-questionnaires.cfm#cp_jump_16175 https://dhsprogram.com/what-we-do/survey-types/dhs-questionnaires.cfm#cp_jump_16175 https://www.who.int/news-room/fact-sheets/detail/malnutrition https://www.who.int/news-room/fact-sheets/detail/malnutrition review of economics and development studies vol. 4, no 2, december2018 135 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 2, december 2018 journal homepage: www.publishing.globalcsrc.org/reads corporate governance and firm efficiency: empirical study of pakistan 1 muhammad nisar khan, 2 adnan ahmad, 3 muhammad ilyas, 4 ihtisham khan 1 phd scholar, abdul wali khan university, mardan, lecturer in finance, bacha khan university, charsadda,pakistan. nisarmgnt@bkuc.edu.pk 2 assistant professor, abdul wali khan university, mardan, pakistan. 3 lecturer in finance, abdul wali khan university, mardan pakistan. 4 assistant professor, abdul wali khan university, mardan pakistan. article details abstract history revised format: october 2018 available online: december 2018 in this exploratory study, we examine the effect of firm level corporate governance on firm efficiency calculated through data envelopment analysis (dea) during the period from 2008-2017 for a sample of 136 non-financial firms listed on pakistan stock exchange (psx). dea is a non-parametric technique developed by charnes, cooper and rhodes (1978) which is used to measure firm efficiency by taking different input and output variables. in this study we have used three input and three output variables for firm overall technical efficiency (ote) measurement, input variables were total assets, total liabilities and cost of goods sold (cgs) and output variables were gross sales revenue (sales), income before tax (ibt) and net income (ni). overall technical efficiency was calculated through dea for selected non-financial firms. in the second stage, the association between firm efficiency measured through dea and corporate governance estimated by corporate governance index has been fully confirmed in selected firms. firm size, growth, dummy variable for financial crises 2007-09, gdp growth, and operating cash flows (ocf) were used as control variables. the results show that better implementation of cg practices by the firms will help in increasing their efficiency. in other words, better cg practices help firms to utilize their resources in the better way to produce firm outputs (sales/profit). © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords data envelopment analysis, corporate governance index, nonfinancial sector, pakistan stock exchange. jel classification: d22, g10, g20, g34, r50 corresponding author’s email address: sangeenkhan@uswat.edu.pk recommended citation: khan, m. n., ahmad, a., ilyas, m. and khan, i. (2018). corporate governance and firm efficiency: empirical study of pakistan. review of economics and development studies, 4 (2), 135-144 doi: 10.26710/reads.v4i2.384 1. introduction in the modern world, it is becoming highly important for organization to know how efficiently and effectively its operations are? as compare to its competitors. for example, these comparisons may be take place among different universities, such as the department of one university may compare its performance with the same department in some other university. similarly, a bank branch in one city may compare its performance with the branch in some other city of the country; furthermore, the firms in non-financial sector may compare their results with each other. this paper in fact is an attempt to measure the efficiency of non-financial firms listed in pakistan. http://www.publishing.globalcsrc.org/reads mailto:nisarmgnt@bkuc.edu.pk review of economics and development studies vol. 4, no 2, december 2018 136 what does this word ‘efficient’ mean? it means working well, without waste and quickly; while the word ‘effective’ means to produce what is actually desired. this thesis is primarily concerned to measure to efficiency of the non-financial firms that how well, without waste and quickly firm performs. the concept of efficiency was discussed in more details in the thesis from which this paper extracted. to calculate the efficiency of the companies, different research studies have been conducted. farell, (1957) for the first time empirically calculated the firm efficiency and charnes et al., (1978) generalized the farell’s concept of technical efficiency measurement from a single input and single output to multiple inputs and multiple outputs. this model was presented by charnes, cooper and rhodes, that is why it is known as ccr model. which was further extended in 1984 by banker, charnes and cooper, and that model was named as bcc model. this method combines different inputs and outputs of a set of decision-making units (dmus) to produce efficiency. corporate governance has become an independent and new area of research in the last three decades (denis, 2011). it is discussed in the different areas of study such as finance, management, accounting, economics, politics, law, and organizational behavior. there are different definitions of cg available in the literature (shleifer & vishny, 1997; oecd, 1999). there are many more definitions of cg, which were categorized by the researchers and scholars into two types, such as “broad” or “narrow”. this categorization is based on the concentration of cg system to which degree it is satisfying shareholders or all stakeholders. if the cg system is only emphasizing on shareholders it can be called narrow (sternberg, 2004; west, 2006) and if it is satisfying a wide range of all stakeholders interests then it is known as broad context (gillan, 2006). there are different scholars who have been given narrow cg definitions. for example, shiekh & chatterjee (1995, p.5) defined cg as; “a system whereby directors are entrusted with responsibilities and duties in relation to the direction of company’s affairs”. similarly, (sheifer & vishny, 1997 p. 737) define cg as “the way in which suppliers of finance to corporations assure themselves of getting a return on their investment” sir adrian has been given broad cg definition in world bank report (1999, p.7) as “concerned with holding the balance between economic and social goals and between individual and communal goals.... the aim is to align as nearly as possible the interests of individuals, corporations, and society” this paper is an attempt to study the association of corporate governance and firm efficiency in the non-financial firms listed in pakistan stock exchange (psx). for efficiency measurement, a very well-known model data envelopment analysis (dea) was used. dea was initiated by e. rhodes in his doctoral dissertation supervised by w.w. coopers, at carnegie mellon university on the doctoral dissertation. e. rhodes evaluated the “unfairness” black and hispanic students experience under government subsidized public education program. in order to evaluate the accomplishment of the program, “increase in the pride of the students who receive the benefit of the program” was used as an output, and “hours mother spend with their children on reading books together” was used as an input. the results were published on european journal of operation research in 1978. since then, dea has been developed mainly for the purpose of estimating output efficiencies of decision-making units (dmus herein after). in this paper three input and output variables were used to estimate the firm overall technical efficiency (ote), input variables were total assets, total liabilities and cost of goods sold (cgs) and output variables were sales, income before tax and net income. dea was used to estimate the efficiency score, after calculating the efficiency score of 136 non-financial firms. these ote scores were used as dependent variable and corporate governance index (cgi) was used as independent variable to check the effect of cg on firm efficiency, some control variables were also added to the model to better predict the effect of cg on firm efficiency. the results suggest that good cg practices positively affect the firm efficiency. review of economics and development studies vol. 4, no 2, december2018 137 2. literature review firm performance is used as dependent variable and is very relevant construct in the research of management field. regardless of this relevance, no concrete consensus has been developed about its definition measurement and dimensionality, different researcher has used different proxies for firm performance. efficiency is important for the purpose that organization performance is an important characteristic. organizations such as financial and non-financial, small or big must get the optimal performance so that to compete in the market. mohamad & said, (2010) recommend that the major objective of the organization is to improve performance. many experts and researchers define performance in different ways. one aspect of firm’s performance is efficiency measurement. it can be in terms of increasing outputs, decreasing cost or maximizing the profits. a firm is considered as technical efficient if from the given level of inputs, producing maximum level of outputs or at the minimum level of input produce given level of output. most of the literature suggests that efficiency measures of dmus are compared to firm operating in the same industry or sector (mantri, 2008). one example is study of philips et al,. (1994) who compare all the us computer industry firms by measuring productive efficiency using the inputs and outputs from their financial statements. similarly, reynolds & thompson (2007) measure the efficiency of 62 full service restaurants for comparison where their input variables are restaurant seats, hourly server wage and a standing alone facility restaurant as a coding variable, and total daily sales and percentage of tip as output variables. abbott & doucouliagos (2003) measure the efficiency of 36 australian public sectors universities in teaching and research. dea is also used to analyze the time series data of dmus operating in the same sector/country. for example flegg et al,. (2004) applied dea to 45 british universities to measure efficiency in the period of 1980/81 to 1992/93. barros & santos (2006) used portuguese hotel industry from the period of 1998 to 2002 to measure efficiency. dea also allows firms from same sector across countries for comparison, as mantri (2008) compared efficiency of german and swiss hospitals. firms in finance sector have gained great attention to compare efficiency of firms. touhami & solhi (2008) studied moroccan banks efficiency during the period from 1993 to 2006. batra & tan (2003) used the data of six countries sme’s indonesia, malaysia, maxico, colombia, guatemala and taiwan to measure technical efficiency. their results showed that technical efficiency rises with the firm size and a substantial overlap occurs in the distribution of efficiency with firm sizes, while some small firms are producing higher efficiency than the large firms. there are some factors that differentiate high efficient companies from low level of efficient companies in these six countries, and these factors are, education and training of employees, use of latest technology and automation, and quality control. wu (2005) uses the data of taiwan’s steel industry during the period of 1970-1996 to examine the performance, their results recommend that technical efficiency and industry evolution is highly affected by the companies involved in liberalization and adopting new technology. while wu et al., (2006) uses dea to examine the retailing industry performance in taiwan, the results showed that half of the companies were inefficient. hong & park (2007) used dea based approach and examined that through support vector machine (svm), they evaluated single company and efficiency of it venture business was provided without comparing with other firms. the most important variables to provide financial information were capital turnover, employees’ productivity and sales/employees for efficiency evaluation of it business venture. din et al., (2007) used output oriented dea approach under crs and vrs model assumption to evaluate the technical efficiency of large manufacturing sector in pakistan. data of 101 companies were collected in two parts, from 1995-96 and 2000-2001. capital, industrial and non-industrial cost and labour were used as inputs variables and contribution of gdp was used as output variable. the result of crs model showed improvement in mean efficiency from 0.23 in 1995-96 to 0.42 in 2000-01. on the other hand, an increase in efficiency score has occurred from 0.31 to 0.49 during these two periods under variable return to scale model. singh (2006-07) used dea model to measure the efficiency of sugar mills in uttar pradesh. the results found 93 percent of overall technical efficiency during the period of 1996-97 to 2002-03, and further suggested that the mill may reduce 7 percent of inputs to become more efficient than others. review of economics and development studies vol. 4, no 2, december 2018 138 meenakumari & kumaraj (2008) evaluated the efficiency of 29 public electric utilities (soeu’s) in india and employed crs and vrs model assumption of dea to calculate efficiency. yearbook 2004/05 and teri energy data directory were used for data collection. first of all, correlation between inputs and outputs were calculated through regression analysis and found positive correlation among all variables. and the dea results recommend that under crs and vrs model, 24% of soeu’s were efficient. joshi & singh (2009) used ccr and bcc models of dea to evaluate the productivity efficiency of readymade garment in india. primary data of eight garments firms were used. inputs variables were stitching machines and operators and garments pieces produced are used as output variable. primarily, correlation analysis showed that inputs and output are significantly correlated. their results recommend that under crs model firms are 75 percent efficient and could increase by 25 percent. while firms are 83 percent efficient under vrs model. barita et al., (2011) have used crs model of dea to find out the technical efficiency and to find out the benchmarking units for indian safety performance industries. the output taken was the number of accidents and annual budget percentage was taken as input variable; under crs model, out of thirty units only seven were found efficient and for inefficient units benchmarking was done to become efficient. mahadevan (2002) analyzed the data of malaysian manufacturing firms during the period of 1981 to 1996 to measure the growth of productivity. he used dea to calculate the malmquist index of growth and technical change in tfp (total factor productivity). from malmquist index change in technical and scale efficiencies were decomposed. they had taken capital and labor as inputs variables and value added was taken as output variable. the higher tfp growth was obtained by non-ferrous metal industry, which was 3.7 percent and lowest tfp growth was obtained by petroleum refineries which was -0.3 percent. they also recommended 0.8 percent weighted average tfp growth; 0.3 percent technical change; 0.5 percent technical efficiency, 0.4 percent pure technical efficiency and 0.1 percent scale efficiency changes were found. they claimed that due to minimal gain in technical change and technical efficiency, tfp growth was low, with other industries operating at optimal scale. baten et al., (2006) applied stochastic frontier production approach on bangladesh manufacturing industry to examine the technical efficiency during the period of 1981/1982 to 1999/2000. 3-digit sensus selected factories were covered. they used value added labor and capital as their research variables. to model the: half normal distribution and truncated normal distribution, these two alternative distributions were applied. they found that under truncated normal distribution, the technical efficiency was estimated for the selected industry was 40.22 percent while 55.57 percent under half normal distribution potential output was estimated. they also recommended that parameter of time varying inefficiency was positive which shows decline in technical efficiency in the selected period of time. duzakin & duzakin (2007) analyzed 480 firms’ performance of manufacturing firms from 12 industries in turkey during the year of 2003. crs model of dea output oriented based model was applied. two input and three output variables were used. net assets and average number of employees were used as inputs variables and gross value added, profit before tax and export revenue were used as output variables. they analyzed that deviation from the standard was average scored from 0.178 to 0.989 and recommended that 278 firms results remained below average, and 65 firms were identified efficient firms. the main reason of inefficiency in turkish firms was the minimum level of inefficient exports. watanabe & tanaka (2007) used the chinese industry at province level to examine efficiency over the period of 1994 to 2002. the two efficiency measures were estimated through directional output distance function, the one, which consider only desirable output, and the other, which consider both desirable and undesirable outputs. inputs were material, capital and labor while industrial products was taken as desirable output and sulfur dioxide was taken as undesirable output. they recommended that the result with only desirable output, the efficiency level was biased. they concluded that ignoring the undesirable output may tend to overestimate efficiency of industries in sichuan, shandong and hubei. they also added that industrial structure of province significantly affects the efficiency levels. 2.1 corporate governance and firm efficiency lin, ma, & su (2002) studied 461manufacturing firms listed in china to study the relationship between corporate governance and firm efficiency. efficiency was measured through dea. there results recommend that firm efficiency is significant negatively affected by state ownership while state and managerial ownership positively review of economics and development studies vol. 4, no 2, december2018 139 affect firm efficiency, u shaped relationship was found among ownership concentration and firm efficiency. andries, alin, bogdan & simona (2016) this study attempted to study influence of corporate governance on firm efficiency, the sample consists of 139 commercial banks from 17 central and eastern europe from the period of 2005 to 2012. the results show that good corporate governance practices significantly affect technical efficiency. this study examines the relationship between corporate governance and the efficiency of turkish banks using a sample of 10 banks listed in borsa istanbul from the period of 2005 to 2015. efficiency was estimated through data envelopment analysis (dea) and panel regression models were used to find out the effect of cg on banks efficiency. the results revealed negative and significant association among free float rate and board independence with the efficiency of the banks. finally, the consequences have showed that there is no statistically significant relatioship among corporate governance and bank efficiency. (mustafa, işıl & fatih, 2016). this research examined the effect of corporate governance on the efficiency of financial performance of oil and gas companies listed in kuala lumpur stock exchange malaysia from the period of 2007 to 2011. efficiency was estimated through data envelopment analysis (dea) technique under constant return to scale (crs) model and variable return to scale (vrs) model. results show that firm size and ceo/chairman duality significantly affect the efficiency of corporate governance in producing financial performance. (ong, soh ,the & ng, 2014). kashif rashid (2008) studied the developing (malaysia) and developed (australia) capital markets to check the relationship between corporate governance and firm performance. the results shows that there is positive association between corporate governance and firm value. ece oguz (2016) studied the association of corporate governance and firm performance of 90 firms listed in turkey during the period from 2008 to 2014. there results recommended that corporate governance variables significantly affect firm performance. kusuma h., ayumardani a., (2016) studied 11 islamic banks of indonesia to examine the effect of corporate governance efficiency on bank performance during the period from 2010 to 2014. for corporate governance efficiency, data envelopment analysis (dea) was applied. the results show that corporate governance significantly affects the firm efficiency. leora f. klapper inessa love (2002) studied the association among cg, investors protection and firm performance in 25 developing market. their results suggest that countries where protection to shareholders are weak and judicial efficiency is poor, firm level corporate governance matters a lot in those countries. humera khatab, etal (2011) explore the relationship between corporate governance and firm performance of 20 listed firm in karachi stock exchange during the period from 2005 to 2009. their results suggest that corporate governance practices positively affect the performance measured through roa, roe and tobin’s q. 3. data collection and methodology the population of this study was all firms listed on pakistan stock exchange (psx), the sample size of the conducted study was extracted from psx listed companies and include only 136 non-financial firms listed on psx. the panel data have total numbers of firm year observations are 1360, which represent 136 non-financial listed firms selected from pakistan stock exchange (psx) over a period of 2008-2017. input and output variables data for firm efficiency measurement and corporate governance index was collected from annual reports of the companies. table 1: represent the inputs and outputs variables used in the study input variables output variables total assets (ta) gross sales revenues (sale) total liabilities (tl) income before taxes (ib) cost of goods sold (cgs) net income (ni) firm overall technical efficiency scores were calculated through dea by taking the above given input and output variables. firms efficiency score was used as dependent variable, corporate governance index (cgi) and other control variables were used as independent variables review of economics and development studies vol. 4, no 2, december 2018 140 the regression model is given below; oteit = β0 + β1*cgi + β2*wgi + β3*size + β4*lev + β5*f_crises + β6*growth + β7*gdpg αi + β8*beta + β9*ocf + εit this part of the research discusses the quantitative data and results analysis conducted in this research study. in the first instance, it presents the assumptions of regression analysis. it provides the descriptive statistics of the data; then testing hypotheses to check the effect of country governance and corporate governance on firm efficiency. these results based on the panel data analysis techniques, but before conducting panel data analysis, the dependent variables were first measured through data envelopment analysis (dea) technique (see introduction section of the thesis for details) table: 1 descriptive statistics ote cgi size lev growth f_crises gdpg ocf mean 0.707 78.074 15.823 1.360 12.273 0.298 3.449 1.183 median 0.657 78.572 15.702 1.078 12.093 0.000 3.507 0.066 maximum 1.000 100.000 19.840 3.678 16.099 1.000 4.833 3.108 minimum 0.460 57.158 11.907 -1.188 8.010 0.000 1.607 -1.801 std. dev. 0.106 7.534 1.507 1.177 1.968 0.458 1.150 1.607 skewness 0.245 -0.033 0.339 0.234 0.299 0.881 -0.320 0.753 kurtosis 3.007 2.869 3.143 2.914 2.945 1.776 1.744 3.270 ote is dependent variables where the ote stands for overall technical efficiency, cgi is independent variables where cgi stands for corporate governance index of listed firms the rest of variables were used as control variables which consist of size which was the logarithm of total assets of the selected listed firms, lev is the leverage of the selected listed firms calculated as ratio of debts/equity, growth is the change in sales of selected listed firms, f_crises is the dummy variable for financial crises, gdpg is the growth of gross domestic products, ocf is the operating cash flows of selected listed firms. all variables were winsorised at 1 and 99 percentiles to remove outliers. table: 2 correlation matrix of variables included in the study ote cgi size lev growth f_crises gdpg ocf ote 1 cgi 0.112* 1 size 0.027 0.081* 1 lev -0.133* 0.094* 0.133* 1 growth 0.214* 0.085* 0.630* 0.07* 1 f_crises -0.04** -0.15* -0.13* 0.14* -0.08* 1 gdpg 0.059* 0.072* 0.05** -0.08* 0.04 -0.19* 1 ocf 0.08* -0.035 -0.11* -0.05* 0.02 0.02 0.03 1 *(**) represent the significance level at 5% and 10% respectively 3.1 test for multicollinearity to test the relationship between independent variables, this study has calculated variance inflation factor (vif) to check whether independent variables are highly correlated or not with each other. high correlation between two or more independent variables lead to high multicollinearity which can affect regression estimation (hair et al., 2009), the test results are given below (wooldridge, 2002): 1 vif = ---------------------- 1 – ri 2 where, ri 2 denotes unadjusted r 2 of the model after running the regression of dependent and independent variables. if the value of vif is greater than 10, it means there is the problem of multicollinearity (gujarati, 2003). review of economics and development studies vol. 4, no 2, december2018 141 the below tables shows that vif results are less than 10, it means that there is no problem of multicollinearity. table: 3 vif values variables vif 1/vif cgi 1.06 0.943 size 2.06 0.485 lev 1.07 0.935 growth 1.95 0.513 f_crises 1.28 0.781 gdpg 1.32 0.758 ocf 1.02 0.980 mean vif 1.38 3.2 test for heteroscedasticity to test for the issue of heteroscedasticity in the data, breusch-pagan / cook-weisberg was conducted as the problem of heteroscedasticity can invalidate significance of statistical tests that assume that error term variance does not vary, and the model is uniform and uncorrelated (johnston, 1972). table given below shows that the results of breusch-pagan for which the null hypothesis is ho = constant variance. below given table shows that there is problem of heteroscedasticity among the models. table: 4 heteroscedasticity test results model breusch-pagan / cook-weisberg [if f<0.05 there is heteroscedasticity] model 01 (ote) chi2(1)=40.23 prob > f = 0000 3.3 test for autocorrelation in panel data models, serial or autocorrelation can bias the standard errors, due to which the results can be caused less efficient (drukker, 2003). for this purpose, durbin-watson test was applied on the panel data to check for autocorrelation. the below given table shows that there is the problem of autocorrelation in the model as the value of durbin-watson test is less than 2. table 5: test for autocorrelation model durbin-watson statistics model 01 (ote) 0.79743 3.4 model specification this study uses panel data to examine the effect of corporate level governance on firm efficiency, for this purpose, some model specification tests were carried out to select the best model among pooled, fixed and random effect models for regression analysis. these model specification tests were chow test for selection among pooled and fixed effect model, hausman test for selection among fixed effect and random effect model, and breusch-pagan lm test for selection among random and pooled regression models. (see hausman, 1978; gujarati, 2003; breusch and pagan, 1979). below table shows the summary of all models specification test for regression panel models. table 6: model specification model specification tests model 01 (ote) chow test for pooled versus fixed effect model if ≤ 0.05→ fixed effect prob>chi2= 0.0000 hausman test for fixed versus random effect model if ≤ 0.05→ fixed effect prob>chi2= 0.0000 breusch-pagan lm test for pooled versus random effect model if ≤ 0.05→ fixed effect ------- decision fixed effect model review of economics and development studies vol. 4, no 2, december 2018 142 table: 7 results of fixed effect model with dependent variable (overall technical efficiency). variables coefficient std. error t-statistic prob. c -0.098 0.0408 -2.396 0.017 cgi 0.001 0.0004 3.549 0.000 size 0.004 0.0026 1.735 0.083 lev -0.012 0.0024 -5.026 0.000 growth 0.014 0.0019 7.263 0.000 f_crises -0.011 0.0067 -1.717 0.086 ocf 0.000 0.0001 3.338 0.001 gdpg 0.002 0.0027 0.714 0.475 r-squared 0.505 adjusted r-squared 0.458 f-statistic 22.624 prob(f-statistic) 0.0000 3.5 main regression results table 7 depict the results of fixed effect models of regression analysis showing the effect of corporate governance on firm efficiency (overall technical efficiency) during the period from 2008 to 2017. all the variables were evaluated statistically by looking into its p-values, variable at 1% significance level were considered highly significant, significant at 5% and marginally significant at 10%. on the other hand, the coefficient values of each variable represent change in dependent variable due to unit change in independent variable holding all other variables constant. table 7 depict that there is significant positive association between corporate governance index and efficiency score calculated through dea under constant return to scale (crs) model at the significance level of 1%, where 0.1% change in corporate governance index practices brings 1% change in firm efficiency. these results confirm the first hypothesis of the study and was consistent with prior studies on performance (firm efficiency) and corporate governance (see klapper and love, 2004; thomsen, pedersen and kvist, 2006; huang hsiao and lai, 2007; ponnu and karthigeyan, 2010; le and buck, 2011; dedu and chitan, 2013; andreou, louca and panayides, 2014; gupta and sharma, 2014; yoo and jung, 2014). 4. conclusion of the study this research study is an attempt to check the association among corporate governance and firm efficiency. firms efficiencies were estimated through data envelopment analysis (dea) developed by charnes, cooper and rhodes (1978). firms overall technical efficiencies ote) were calculated through dea under constant return to scale model. after estimating the firm efficiencies, corporate governance was estimated as corporate governance index (cgi) developed by attiya javed (2010). some control variables were added to the regression model to better predict the effect of corporate governance on firm overall technical efficiency. these control variables were firm size (logarithm of total assets), leverage (ratio of debts to equity) firm growth (change in sales) gdp growth (change in gdp), a dummy variable for world financial crises of 2007-09 and operating cash flows. the regression results show that good corporate governance significant positively affect the firm overall technical efficiency. leverage and period of financial crises has significant negatively affect the firm efficiency while firm size, growth and operating cash flows have significant positively affected the firm efficiency. gdp growth has shown no relationship with firm efficiency. references abdelkhalek, t., & solhi, s. 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(1996) “the mechanisms of governance”. oxford university press, oxford. review of economics and development studies, vol. 7 (2) 2021, 287 298 287 gender poverty gap: a comparative analysis of india and pakistan muhammmad siddique a, misbah nosheen b a phd scholar, department of economics, hazara university mansehra, kpk, pakistan email: siddique63@yahoo.com b hod, department of economics, hazara university mansehra, kpk, pakistan email: misbah_nosheen@yahoo.com article details abstract history: accepted 25 may 2021 available online june 2021 this paper attempts to estimate gender poverty gap in pakistan using multidimensional poverty approach and compares it with india. pakistan data have been used to compute multidimensional poverty. findings of the paper suggest that there is gender poverty gap in pakistan. both india and pakistan are suffering from poverty. head count poverty is high in both countries but india has managed to lift more people out of multidimensional poverty. the paper recommends to design targeted oriented policies reduce gender poverty. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: multidimensional poverty; gender poverty, deprivation; pakistan; india jel classification: i130, i32 doi: 10.47067/reads.v7i2.364 corresponding author’s email address: siddique63@yahoo.com 1. introduction poverty is common, globalized curse and unique syndrome (chosal, 2008). world community is belligerent against tenacious poverty. process of reduction in poverty is lukewarm despite titanic measures taken by countries individually and by international agencies. gender poverty is even more pervasive and persevered. according to bureau of international information program, united states department of state (2017), women of the developing world face poverty disproportionately. picture of poverty is seen even bleak if one views it through the lens of multidimensional poverty. unidimensional poverty does not cover the viscosity of deprivation suffered by poor segment of society. on the other hand, multidimensional poverty takes into account several overlapping deprivations experienced by poor people. just like the speed of light which changes as medium through which its travels changes, scenario of poverty changes as we move from money – metric measure of poverty to multidimensional poverty -measure. according to alkire and jahan (2018), “for multiple overlapping deprivations the global multidimensional poverty index (mpi) is suitable measure”. review of economics and development studies, vol. 7 (2) 2021, 287 298 288 umpteen empirical studies on multidimensional poverty considered household as a unit of identification (rogan, 2016a; klasen and lahoti, 2016)1. multidimensional approach for poverty suffers from some weakness. this approach assumes that all members of a household are considered multidimensional poor if household is identified as poor (klasen and lahoti, 2016). women particularly in a household face inequality. they have no or limited access to economic resources. they are predominantly engaged in household caring jobs. globally, unpaid domestic work is disproportionately carried out by female. women, on average, spend two to ten time more time than their counterpart on domestic care work, left with insufficient time for personal care, leisure, paid work and other social and political activities (karimli et al, 2016). in many developing nations women accept their role as unpaid domestic workers a divine right. in some muslim societies women consider it a sin to question the authority of man. notably, if a women in a household is not poor even then she is more vulnerable to poverty. an endoscopic examination of poverty is needed for exploratory diagnostic of intra – household disparity and female and male contribution of gender gap in poverty. countries like pakistan and india use to invest far less on women workers than working me although women appear to be productive than men, in india poor families particularly depends on the earning of the women for their survival (world bank, 2016). both countries enviably manage to reduce poverty particularly multidimensional poverty during last two decades. about 270 million people in india moved out multidimensional poverty between 2006/06 to 2015/16 (undp; 2020). gender analysis of poverty could not make it place in multidimensional poverty critique. multidimensional poverty index developed by alkire and foster (2011) is based on household’s deprivation on three dimensions – education, health and standard of living. since mpi is calculated from information from each household, so it is possible to consider the deprivations of male and female separately. household survey data provides information regarding the characteristics of both male and female living in respective households. in order to find the gender gap in poverty, data can be decomposed according to male and female headed households and separate regressions can be carried for these sub groups to estimate the gender poverty gap (lastrapes & rajaram, 2016). the present study endeavors to estimate the gender poverty gap using money – metric and multidimensional approaches by decomposing the data into male and female household heads. no previous study arguably undertook gender dimension of poverty using both money and multidimensional approaches in pakistan. this study may contribute significantly in enhancing the understanding regarding the gender aspect of poverty and hence, may facilitate in targeting gender poverty in pakistan. 2. literature review after introduction of capability approach by sen (1976), the accent pf poverty debate has shifted from unidimensional poverty to multidimensional poverty which covers various dimensions of deprivation. since then various approaches to estimate poverty incorporating different dimensions have been proposed. cerioli and zani (1990) were first to suggest a fuzzy approach which include seven dimensions of deprivation. cheli and lemmi (1995) modified the fuzzy approach and proposed a new approach called totally fuzzy and relative (tfr) approach to estimate multidimensional poverty. both approaches failed to mustered considerable support due to arbitrary aggregation adopted by these approaches. a flexible approach was proposed by alkire and foster in 2007 which includes three dimensions – education, health and standard of living, education has two in indicators which include year of 1 espinoza – delgado and klasen (2017) used i individual – based approach to multidimensional poverty for nicaragua. review of economics and development studies, vol. 7 (2) 2021, 287 298 289 schooling and school attendance. nutrition and child mortality are the indicators of heath. standard of living contains six indicators – access to drinking water, improved sanitation, cooking fuel, type of floor of house of household, availability of electricity, asset owned by household and fuel. this approach received tremendous support as being more dynamic and flexible. an index known as multidimensional poverty index (mpi) was developed by alkire and santos (2007) which is very simple and easy to understand. this index is also decomposable into subgroup. the undp collaborated with oxford poverty and development initiative developed first global mpi in 2010 for undp flagship publication human development report. since then it is updated regularly to include newly released data. globally, this index is used to compute multidimensional poverty head count and intensity both for individual countries and group of developing countries. researches rigorously used this approach to have a clear picture of poverty. among notable studies which used af methodology are batana (2008) for sub – saharan countries, jamal and harron (2007), naveed and islam (2010), maqsood et al (2012) for pakistan, battiston et al for latine america, angulo et al (2003) for colombia. literature on multidimensional poverty is growing momentously. multidimensional poverty approach gained currency in recent years as being innovative and much representative. it covers broad dimensions of deprivation of poor. supporters of multidimensional poverty are of the view that unidimensional poverty is not good measure of poverty. it covers just one dimension, that is, income. unidimensional poverty takes a household into account as a unit of measurement thus ignoring intra – household disparities. so, this approach is gender blind. it is silent on resource allocation within the household. multidimensional measure of poverty removes this deficiency. multidimensional poverty is broader phenomenon. “the poverty is multidimensional phenomenon” (atkinson, 2003). “multidimensional poverty is capable of capturing key dimensions of deprivation such as health, housing, education, schooling, and standard of livings (chravarty, 2003; thornbeck, 2008). these were the big reasons that the poverty paradigm has shifted from a unidimensional to multidimensional approach” (lugo, 2016). a handsome body of literature is present on multidimensional poverty explaining the vulnerability of female. some popular approaches have been introducing for the measurement of multidimensional poverty. methodology which gained respectable appreciation in the literature is one proposed by alkire and foster (2007, 2011). the approach has been further refined by alkire et, al (2015). individual level poverty has been conducted by vijaya et al (2005) identifying gender difference in poverty in indian city of karnataka. concept of multidimensional poverty received tremendous popularity in social scientists as being useful tool for policy makers. seeing the importance of the phenomenon of multidimensional, a group of researchers especially ophi took the responsibility to grill this measure of poverty. brandolini (2008) conducted a study estimating multidimensional poverty for italy, france, germany and britain kingdom. kabubu et al (2010) estimated the ‘multidimensional poverty in kenya.. jamal (2009) worked on multidimensional for pakistan. results of the study are summarized, “in 2004-05, 54 percent of the population were multidimensional poor”. the paper further divulged, “in urban areas the extent of multidimensional poverty is less than in rural areas. in rural areas 69 percent were poor than in urban areas 21 percent people”. calvi (2016) found that poverty in women increased with age and intra-household inequalities were more pronounced in india. gender poverty gap was not visible when household data is used but it was palpable when individual level data was used. review of economics and development studies, vol. 7 (2) 2021, 287 298 290 lastrapes and rajaram (2016) took new area of poverty and investigated effects of gender and social caste on penury in india for the period 2005-06. the paper used measures of household wealth from the national family health survey (nfhs) of india. the paper used asset-based measures of poverty which were quite different from official measures. official measures of india are based on consumption expenditures. however, main focus of the study was gender poverty and paper sorted data for head of families both for male and female. logistic estimation results revealed that female-headed households generally and households belonging to marginalized social classes particularly were more likely to be poor than their counterparts. marginalized social class was found to be more strongly associated with poverty. whereas the gender of the household head is associated with poverty but not so robustly as marginalized social class. crawford et al (2017) examined gender dimension of multidimensionality of poverty in fiji covering environment, health and unpaid [ work dimension. findings of the study revealed that about 91 % of women and 65 & of men were reported to be exposed to fumes related to cooking and heating. women and men respectively on average were exposed to one hour and 45 minutes per day of perfumes related cooking and heating. women suffered twice as more health problem as men linked to unclean cooking and heating fuel (25 percent of 12 percent). female were more likelihood than male to be severely deprived and very deprived in raising their voice. primary responsibility for water fetching in fiji rests with women. moreover, women were more than double likely than men to report no control over personal decision (5 percent of 1.4 percent). lasimbo et al (2017) analyzed empirically multidimensional welfare deprivation of women in rural and urban south-south (ss) nigeria using secondary data from nigeria demographic health survey (ndhs, 2013). sample consisted of 1965 women from alkire and kanagaratnam (2018) computed global multidimensional index for 105 developing countries which constitute about 75 percent of world’s population which covers approximately 5.7 billion people. some new indicators have been incorporated. child stunting and age – specific body mass index (bmi) cutoffs have been included in health dimension. a new indicator namely “child deaths within the 5 years period preceding the survey” was considered in health dimension. tekgue and akbulut,(2019) calculated multidimensional poverty in turkey in four equally weighted dimensions using survey of living conditions during 2006-15. the study used health, education level, employment status and household living conditions as indicators of the multidimensional poverty. findings of the study suggested that employment led to faster reduction in gender poverty. older individuals were vulnerable to poverty. young cohort improved. the paper concluded that gender poverty gap existed in turkey. 3. methodology the present study employs alkire and kanagaratnam (2018) methodology to compute multidimensional poverty index for pakistan using household integrated income and expenditure survey (2015 -16). alkire and kanagaratnam (2018) methodology is the latest description of alkire and foster (2010) methodology which is continuously being updated for newly released data. a brief description of the dimensions, indicators and cutoff point for each dimension is illustrated in following table. review of economics and development studies, vol. 7 (2) 2021, 287 298 291 table (1) cutoff point for each dimension dimension indicator deprived if notdeprived if read/ write can’t read/write can read /write education can’t conduct arithmetic operation can conduct arithmetic operation year of schooling <than 6 years of schooling ≥ years of schooling bhu does not visit at all, once a while always visit health water source open well, river, stream, ponds, other tanker truck, water fetcher, water motor, covered well, mineral water, water tap, hand pump residential status on rent, subsidized rent personal residence, (self-hired, hired), without rent energy source candle, firewood, other electricity, gas, kerosene oil standard of living types of roof wood/bamboo, other rec/brc types of toilet facility not available (linked to open drain) other privy seat, flush (linked to septic tank) cooking fuel fire-wood, sticks etc. cow dunk, cakes coal, wooden coal, other electricity, gas, kerosene oil assets does not possess tv, ac does possess all refrigerator, sewing machine, assets, washing machine, motor cycle, car own calculation based on al methodology (2018) 4. multidimensional poverty measurement following steps are involved in alkire and foster methodology. • dual cut-off identification which identifies poor from nonpoor. dual cut – off implies deprivation cut off and poverty cut off between poor and nonpoor. this describes which person is deprived in an indicator and whether that person is deprived enough to be considered poor. • calculating the headcount ratio of multidimensional poverty, h. proportion of poor people. • calculating the intensity of multidimensional poverty, a. average deprivation shared by poor. • calculating the m0 which is: m0 = h* a review of economics and development studies, vol. 7 (2) 2021, 287 298 292 5. multidimensional poverty, national results in the table (1) national results of multidimensional poverty are reported. these results have been generated using demographic health survey (dhs) 2013 -14 survey data. since household integrated icome and consumption survey (hiics) 2015 -16survey was conducted for rebasing purpose by combining two data sets, household integrated economic survey (hies) and federal bureau of statistics (fbs). since health section is not reported in hiics 2015 -16, therefore, dhs survey data for 2013 -14 has been used for estimating national and provincial multidimensional poverty. table 2 mpi, national results coefficient std. error (95% c.i) h 0.40 0.006 0.774 0.774 main mo 0.208 0.004 0.464 0.480 additional 0.52 0.002 0.613 0.623 results are based on statistical package stata results shown in table (2) suggest that head count for pakistan is 40 percent and intensity is 52.0 percent. multidimensional poverty index is 20.8 percent. this means that in pakistan almost 21 percent people experienced deprivation in all dimensions. this is worth noting that mpi varies at different cutoff level. higher the cutoff point lower is the multidimensional poverty index. 6. decomposition by region table (3) mpi by region baluchistan islamabad kpk gb punjab sindh total h 0.60 0.813 0.661 0.673 0.714 0.56 0.663 m0 0.29 0.56 0.350 0.36 0.411 0.364 0.364 pop 0.177 0.059 0.192 0.105 0.256 0.211 1.00 indices by subgroup (absolute) table(4) aggregate baluchistan islamabad kpk gb punjab sindh total h 0.162 0.075 0-191 0.107 0.814 0.272 0.193 m0 0.153 0.087 0.183 0.0.093 0.511 0.278 0.207 contribution of subgroup to indices 7. gender analysis of multidimensional poverty after calculating national multidimensional poverty index gender analysis of multidimensional poverty is accomplished. there are 3535 household heads of which 32 87 are male and 248 are female headed households. only 3027 observations are available for male headed households because of missing values and 224 female headed households are included for analysis. review of economics and development studies, vol. 7 (2) 2021, 287 298 293 8. multidimensional poverty of female population table (5) mpi female member of household coefficient st. error 95% c. i h 0.219 0.004 0.211 0.226 mo 0.21 0.003 0.181 0.194 a 0.958 0.001 0.856 0.860 calculations are based on statistical software stata it is apparent from the results shown in the table (5) that multidimensional poverty index is 0.188 which lower than overall mpi index. next, mpi for male population is calculated. 9. multidimensional poverty for male population table (6) mpi for male population coefficient st. error 95 percent c.i h 0.245 0.004 0.237 0.233 mo 0.209 0.003 0.202 0.26 a 0.854 0.001 0.852 0.856 calculations are on statistical software stata 10. multidimensional poverty for female headed households and male headed households as the main objective of present study is to analyze the gender poverty gap in pakistan, so, this section serves the data analysis regarding gender poverty. to accomplish the purpose multidimensional poverty for female headed house is calculated. pakistan dhs data has been sorted to get the heads of households. then female and male headed households have been segregated to get separate analysis for female and male headed households. in this section multidimensional poverty for female headed households is calculated. first deprivation of female household heads in each indicator is demonstrated. table (7) deprivation of female headed households in each indicator indicator type weight deprived % year of schooling binary 0.17 31.946 school attendance binary 0.17 10.00 cooking fuel binary 0.08 39.732 floor binary 0.08 58.929 water binary 0.08 86.161 toilet binary 0.08 73.661 underweight binary 0.08 86.607 nutrition binary 0.17 81.250 assets binary 0.04 67.411 electricity binary 0.04 16.875 calculations are on statistical software stata review of economics and development studies, vol. 7 (2) 2021, 287 298 294 results shown in the table (7) reveal that highest deprivation faced by female headed households is in accessibility of electricity followed by child of head suffering from underweight problem. it is heartening that all the female household heads have minimum deprivation in education dimension because majority of them manage to complete their 5 years schooling and also minimum of them did not attend the school. table (8) mpi for female and male headed households male headed household female headed household coefficient coefficient h 0.263 h 0.28 m0 0.209 m0 0.21 a 0.754 a 0.75 calculations are based on software stata a comparison between female and male heads of household suggests that female headed households are slightly multidimensional poorer than their counterpart male headed households. hence, answer of research question is given, that is, there is gender poverty gap in pakistan.2 11. a comparison of contribution of each indicator to multidimensional poverty table (9) contribution of each indicator indicator female headed male headed m0 m0 years of schooling 0.050 0.000 school attendance 0.200 0.200 cooking fuel 0.100 0.100 floor 0.100 0.100 water 0.100 0.100 toilet 0.100 0.100 underweight 0.200 0.200 nutrition 0.100 0.100 assets 0.05 0.05 electricity 0.05 0.05 calculation are based on statistical software stata a comparison between multidimensional poverty contributed by each indicator shown in table suggest that only years of schooling by the family member of household head contributes more to multidimensional poverty. all other indicators contribute equally towards the multidimensional poverty. 2 it is worth noting that rural area present worse situation of multidimensional poverty. 1.1 billion people in rural area while 0.2 billion people in urban areas live in multidimensional poverty globally (world bank group, 2018) review of economics and development studies, vol. 7 (2) 2021, 287 298 295 12. multidimensional poverty index: comparison with india india’s poverty reduction performance is exceptionally good. if we talk of multidimensional poverty, india got along to drag out 271 million people from multidimensional poverty between 2005 – 06 and 2015 -16. thus, cutting poverty rates from formidable 55 percent to decent 28 percen.. a comparison of multidimensional poverty index between pakistan and india is portrayed in table (10). table 10 comparisons mpi and sever poverty: india and pakistan region/country surve y year mpi head count intensity number of poor people in sever poverty % east asia& pacific dhs 2015-16 0.025 5.9 43.1 117.7 m east europe& central asia dhs 0.009 2.4 38 3.5m latin america 0.042 10.10 41.8 52.3m south asia 0.143 31.3 45.8 545.9m sub sahara 0.317 57.8 pakistan dhs 2012-13 0.228 43.9 52.0 84,772,712 24.7 india dhs 2015-16 0.121 27.7 43.9 364,224,988 8.6 source: ophi, 2018 from the table (10) it can be concluded that mpi and sever poverty for india is far below than pakistan. 13. conclusion multidimensional poverty results suggest that 23 percent people in pakistan suffered deprivation in, education, living standard and health services. gendered analysis of multidimensional poverty suggests that female headed households are poorer than male headed households. performance of india in reducing poverty is enviable. 14. future research the analysis can further be improved by utilizing individual level information in the estimation model. furthermore, incorporating attribute like women’s empowerment in the model can translate gender gap in poverty more explicitly. references abbas, a., awan, s., waqas, m., and ashraf, a. 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(2005) moving from the household to individual multidimensional poverty aanalysis. review of economics and development studies, vol. 7 (2) 2021, 287 298 298 appendix table comparison of poverty: india & pakistan country year of survey mpi % headcount 2016 intensity of deprivation population vulnerable to multidimensional poverty national poverty line 2006-17 ppp$1.90 a day population in sever multidimensional poverty india 2015-16 0.121 27.5 364.225 43.9 19.1 21.9 21.2 pakistan 2012-13 0.228 43.9 79.773 52 14.5 29.5 6.1 undp human development reports review of economics and development studies vol. 4, no 2, december2018 209 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads dilemmas of adolescents: dark triad and relational aggression, moderated by economic status 1 saima riaz, 2 zakia bano, 3 raheel abbas, 4 muhammad rizwan 1 lecturer, department of psychology, university of gujrat, pakistan. 2 department of psychology, university of gujrat, pakistan. 3 assistant professor, school of economics, bahauddin zakariya university, multan, pakistan. raheel.abbas@bzu.edu.pk 4 phd scholar, school of education sciences, nanjing normal university nanjing, china. article details abstract history revised format: november 2018 available online: december 2018 objective of the present study was to find out the relationship between dark triad and relational aggression among adolescents. a sample of 612 adolescent students with age range 12-19 were selected from different educational institute of gujrat, pakistan. dark triad personality scale short version and the urdu version of diverse adolescent relational aggression scale were used to measure relational aggression. the findings of the current study revealed significant predictive relation of machiavellianism with relational aggression [r2 =. 220; f (1, 607) = 171.340, p<.01], narcissism with relational aggression [r2 =.189; f (1, 607) = 141.753, p<.01] and psychopathy with relational aggression [r2 =.265; f (1, 607) = 218.635, p<.01]. conclusion: the present study supported the predictive relationship of dark triad with relational aggression. these findings may have implication in the future intervention and prevention procedure for adolescents. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords dark triad, machiavellianism, narcissism, psychopathy, relational aggression, adolescents jel classification: a14, d91 corresponding author’s email address: raheel.abbas@bzu.edu.pk recommended citation:riaz, s.,bano, z., abbas, r. and rizwan, m. (2018). dilemmas of adolescents: dark triad and relational aggression, moderated by economical status. review of economics and development studies, 4 (2), 209-218 doi: 10.26710/reads.v4i2.405 1. introduction human aggression is a social behavior. according to baron and richardson (1994) aggression is any conduct which is aimed at damaging another individual who does not want to be mistreated. aggression usually appears in different forms such as physical violence which involves hurting others bodily like beating, jolting, shooting, or stabbing; and oral aggression includes hurting others by degrading words (like name calling, yelling, swearing, and screaming). one other form of aggression is relational aggression which is more damaging than physical aggression among adolescence. relational aggression pertains to deliberately damaging another individual’s social relations, inclusion within a group, or feelings of acceptance (crick &grotpeter, 1995). relational aggression emphases on the utilization of one’s association to disturb the others relations. efforts are made to damage the relationships and these relations are also a target for manipulating someone. the culprit exploits his or her links as a basis for attaining power, to gain the social approval, and to distribute violence. victim’s relationships are tried to be managed by these manipulations. violent conducts possibly would be evident http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 210 in real actions both physically or verbally. different verbal means are used such as disseminating rumors, rolling eyes, overlooking, making faces, exclusion, gossip, and friendship removal (cheng, 2009). generally, relational aggression is the basis of psychological and emotive harm that is considered far more damaging as compared to physical harm (young, nelson, hottle, warburton, & young, 2011). moreover, relational aggression does not belong to a specific country or culture but can be observed across cultural restrictions (bowie, 2007). in all terms, relational aggression damage others by destroying or threats to destroy the relationships by affecting their acceptance in group, friendship, or group insertion. during the adolescence period social elements become very important. in adolescence era peer group have an impact on ones’ evaluation about his or her self. relational aggression with teenagers is especially significant as they are passing through a transitory period (siegel, la greca, & harrison, 2009). emotions of anger, jealousy, and envy may be underlying children’s wish or need to use social aggression. recognizing relational aggression in school settings is not very simple as relational aggression is not considered aggression by teachers and parents. students who are involved in relational aggression deny that nothing has been done by them (young, boye, & nelson, 2006). personality denotes to individual variations in distinctive forms of thinking, feeling, and acting. personality has some bright aspects while others are dark. three facets are the most prominent in this regard, machiavellianism, narcissism, and psychopathy. grouping of these three aspects were proposed by paulhus and williams (2002) that capture discrete differences in malicious potentials. further, these personality traits are called the ―dark triad.‖ according to them the person’s moral judgments ―fit‖ their personality. the judgments which a person put forth match the traits which he or she possesses. the dark triad expresses distinctive associates but share a common core of cold-hearted manipulation (furnham, richards, &paulhus, 2013). previously, the concepts of dark triad have captured extensive interests, as huge number of pragmatic studies realized their usefulness in forecasting human conduct (kam& zhou, 2016). the first member of dark triad, machiavellianism represents the propensity to abuse others for one’s own benefit in a cynical, manipulative, and dishonest relational style (wilson, near, & miller, 1996). people with high intensities of machiavellianism incline to engage in manipulative strategies by implementing tactics that maximize self benefits (ryckman, thornton, & butler, 1994). further, machiavellianism are related with a disrespect for the significance of ethics and the practice of untruthfulness to follow and uphold control (smith &lilienfeld, 2013). narcissism, one other notion of dark triad, is marked by magnificence, a sense of being privileged, and an absence of empathy (smith &lilienfeld, 2013). extreme self-exaggeration is the symbol of narcissism, which comprises an overstated view of a person, imaginations of being a controller, sense of achievement and appreciation, and a wish for the endorsement of this self-love believes being reinforced by others (o'boyle, forsyth, banks, & mcdaniel, 2012). the third dimension of dark triad is psychopathy which is basically a personality issue that is about lessened remorse, weakened empathy, and significant antisocial conducts (blair & viding, 2008; marsh, 2013). being impulsive, non-empathetic, self-centered, with marginal emotional responsiveness to hostile stimuli are the key features of people who are high in psychopathy (jones &paulhus, 2017; paulhus& williams, 2002; patrick, 1994). furthermore, psychopathy is an individual's absence of worry for other persons and societal monitoring mechanisms, impulsivity, and an absence of remorse when their activities damage others (o'boyle et al., 2012). personalities with the traits of machiavellianism, narcissism, and psychopathy are in public aversive but still are within the normal range. prosocial personality traits follow personal growth in the well-liked form as agreeableness and conscientiousness, but antisocial personality qualities achieve individual purpose through the ghastly form (jonason& webster, 2010). these three traits are conceptually distinct but empirically are not separated personality variables. three sets of interconnected tenets are core to the machiavellian personality: an affirmed trust in the efficacy of manipulative strategies in working with other individuals, a pessimistic opinion of human nature, and an ethical viewpoint that places convenience and practicality above code of conduct (o'boyle et al., 2012). a study was conducted by ghim, choi, lim, and lim (2015) to check the causal relations within concealed narcissism, internalized humiliation, annoyance contemplation, and relational aggression. results depicts that narcissistic anger was directly linked with relational aggression (onishi, kawabata, & yoshida, 2012). furthermore, research findings revealed that narcissism, and machiavellianism were associated to particular types of infantile aggression. moreover, narcissistic qualities displayed the strong exceptional relationship with explicit aggression and relational aggression (lau &marsee, 2013). hence, narcissism was directly linked with unconcealed aggression, and relational aggression (lau, marsee, kunimatsu, &fassnacht, 2011). additionally, one study review of economics and development studies vol. 4, no 2, december2018 211 demonstrated that narcissism was positively associated with physical aggression as well as relational aggression (ojanen, findley, & fuller, 2012). psychopathy, one of the units of dark triad also exhibits a positive link with relational aggression. psychopathy has a protruding effect on how people justify their deceitful conducts. it was found that the dark triads act as influential psychological precursors to deceptive behaviors. (harrison, summers, &mennecke, 2016). relationship of psychopathic qualities with violence were also discovered in a research on the sample of grade five to grade nine school children. in addition, these qualities were gauged by both teacher as well as self-report evaluations. association was found between psychopathic qualities and aggression (marsee, silverthorn, & frick, 2005). adolescence is considered a period in which an individual goes through tremendous changes like physical, emotional and psychological. present research would play a vigorous role to help out the parents and teachers so that they should stress on the development of healthy personality and minimizing the relational aggression consequences. narcissism, machiavellianism, and psychopathy predicted relational aggression (knight, 2016). besides, a research scrutinized the association amongst relational aggression and psychopathic qualities amongst a sample of confined adolescent females (marotta, 2016).economic status of an individuals is an important demographic indicator of different behavioral problems and is long established and well accepted (mcgrath & elgar, 2015).like it has link with aggression (tippett&wolke, 2014). the material conditions in which individuals develop and live have a long-term influence on their peculiar and social personalities. this influences both the way they think and feel about their social environment and key aspects of their social behavior. moderated effect of economic status has also been investigated in the present research. conceptual frame work has been depicted in the following figure figure 1: conceptual framework of current research 2. method 2.1 participants 612 adolescent students with age ranges 12 to 19 years were randomly selected from different educational institutes of district gujrat, pakistan. informed consent was assured before data collection. at the end respondent were thanked and acknowledged for their help and cooperation in the study.besides, permission was also taken from the head of all institutes from where data were collected. participation was voluntary and confidentially was assured. 2.2 measures 2.2.1 dark triad of personality (d3-short) dark triad personality scale short version (d3-short), originally constructed by paulhus (2013) and translated by gul-e-sehar and fatimah (2016) was used to measure dark triad of personality. it is a 5 point likert type scale with three subscales machiavellianism, narcissism and psychopathy. each sub-scale comprises of 9 items and total scale comprise of 27 items. alpha reliabilities for the sd-3 subscales are .71, .77, and .80 for machiavellianism, narcissism, and psychopathy respectively. 2.2.2 the diverse adolescent relational aggression scale the urdu version of diverse adolescent relational aggression scale (riaz, 2014) originally developed by horton (2010) was used to measure relational aggression. the scale consisted of27 items to illustrate relational aggression, acts and effects. there is no reversely scored item. all items are worded positively to rate the relational aggression. responses have been rated on four-point likert type format ranging from strongly disagree to strongly agree. scale has a composite score; all the items are totaled for getting a score for relational aggression with high scores showing more relational aggression. score range of the scale is 27-108. cronbach’s alpha reliability for the scale is review of economics and development studies vol. 4, no 2, december 2018 212 .78, and the split half reliability is .7. 3. results linear regression was conducted to find out the predictive relationship between moral disengagement and relational aggression. results showed that all three members of dark triad are significant predictor of relational aggression. table 1: summary of linear regression analysis of sub dimensions of dark triad as predictor of relational aggression among adolescent students (n=612) finding of linear regression mentioned in above table revealed that machiavellianism explained the 22% variance in the relational aggression while one-unit increase in machiavellianism will increase score on relational aggression by .469. narcissism is significant predictor of relational aggression. narcissism explained the 18.9% variance in the relational aggression while one-unit increase in narcissism will increase score on relational aggression by .435. psychopathy is also a significant predictor of relational aggression in adolescent students. psychopathy explained the 26.5% variance in the relational aggression while one-unit increase in psychopathy will increase score on relational aggression by .515. table 2: summary of multiple regression analysis of sub dimensions of dark triad as predictor of relational aggression among adolescent students (n=612) table 3: coefficients of multiple linear regression of sub dimensions of dark triad as predictor of relational aggression in adolescent students (n=612) variables un standardizedcoefficients standardizedcoefficients b se β t p constant .866 .099 8.756 .000 machiavellianism .182 .020 .299 9.123 .000 narcissism .176 .024 .244 7.411 .000 psychopathy .218 .020 .358 10.918 .000 finding of multiple linear regression mentioned in above table revealed that machiavellianism, narcissisms and psychopathy are significant predictor of relational aggression in adolescent students. all three collectively account for 42.3% variance in the relational aggression. table 4: summary of multiple regression analysis of sub dimensions of dark triad as predictor of relational aggression moderated by economic status in adolescent students (n=612 note: dependent variable: relational aggression, predictors: machiavellianism, narcissism, psychopathy results mentioned in table 3 and 4 revealed that economic status has a moderated effect on the relationship of dark triad and relational aggression among adolescent students. variables r r 2 b se β f p machiavellianism .469 .220 7.690 .588 .469 171.340 .000 narcissism .435 .189 8.450 .710 .435 141.753 .000 psychopathy .515 .265 8.445 .571 .515 218.635 .000 variables r r 2 f p machiavellianism, narcissism, psychopathy with relational aggression .654 .428 151.526 .000 variables r r 2 f p less than 15,000 .751 .564 49.934 .000 15,000 to 30,000 .672 .451 57.607 .000 above 30,000 .613 .375 52.872 .000 review of economics and development studies vol. 4, no 2, december2018 213 table 4: coefficients of multiple linear regression of sub dimensions of dark triad as predictor of relational aggression moderated by economic status in adolescent students (n=612) ranges variables un standardizedcoefficients standardizedcoefficients b se β t p less than 15,000 machiavellianism .269 .042 .415 6.398 .000 narcissism .220 .046 .314 4.805 .000 psychopathy .218 .044 .323 4.983 .000 15,000 to 35,000 machiavellianism .129 ..033 .214 3.953 .000 narcissism .163 .042 .234 4.070 .000 psychopathy .237 .033 .425 7.253 .000 above 35,000 machiavellianism .204 .032 .329 6.354 .000 narcissism .148 .039 .194 3.827 .000 psychopathy .219 .032 .349 6.949 .000 4. discussion present research found out the association between dark triad and relation aggression among adolescents. dark triad is a combination of attributes of machiavellianism, narcissism and psychopathy that contain the propensity to pursue respect and unusual handling, to be heartless and indifferent and to regulate others. dark triad personalities have an unbalanced opinion of themselves which may depict the violence intrinsic in the dark triad. dark triad personality traits are highly prevalent among adolescents. webster and jonason (2013) document an average score of 36 of college students on the dark triad while anyone scoring above 45 would be viewed as very high on the dark triad. it was hypothesized that machiavellianism would be a significant predictor of relational aggression among adolescents. according to the results of regression analysis machiavellianism explained the 22% variance in the relational aggression [r =. 469; f (1, 607) = 171.340, p<.01] while one-unit increase in machiavellianism will increase score on relational aggression by 7.69. the reason of this significant finding was that the individual with machiavellian trait are unlikely to take unsafe probabilities as they have a more precise insight of their likelihoods of triumph. so, machiavellians are perhaps less probable to practice explicit violence to attain their objectives, and more probable to utilize indirect and concealed strategies, like relational aggression to acquire what they desire. as mention earlier, machiavellianism is a personality attribute that is categorized by scheming and abusive approach concerning others, absence of sympathy, and a cynical understanding of human nature, representing at least an immoral if not terrific way of operating on others to achieve one's goals (calhoon, 1969). machiavellianism preach that one of the primary methods for obtaining and maintaining power is to manipulate others with absolute disregard of emotions and moral principles (makijaveli as cited in simić et al. 2015). so, people with strong machiavellian attitudes utilize other individuals as an instrument to attain their personal objectives. individuals who are high on machiavellianism, score low on conscientiousness as compared to persons with a low machiavellian mind set (austin, farrelly, black, & moore, 2007). thus, people with machiavellians attributes are much more target concerned as compared to people-oriented. people high in machiavellian qualities recommend relational tactics that support self-centeredness, dishonesty and operating on others (jakobwitz& egan, 2006). further, the machiavellian resides high preference on money, authority, and rivalry (stewart & stewart, 2006). due to self-centered behavior, extra concern for obtaining goals and less empathetic attitudes towards others machiavellians adolescents involved in relational aggression. a study findings supported the current research outcomes that machiavellianism showed positive association with relational aggression among youngsters (kerig&stellwagen, 2010). the reason of this positive association, may be that adolescence is an age of personality development, during this era teenager compare themselves with their peers, wants to be liked and be powerful, and for attaining desired aims they adapt some negative behaviors which leads to negative outcomes like relational aggression. an evolving line of investigation has been dedicated to the inspection of both positive and negative consequences of relational aggression. in this line a varied array of current researches directs that relational aggression is associated with a multitude of undesirable progressive outcomes (card, stucky, sawalani, & little, 2008). furthermore, there is a study which talked about the association between machiavellianism and indirect review of economics and development studies vol. 4, no 2, december 2018 214 aggression (knight, 2016). while other research has endorsed the notion that there is a direct relationship between machiavellianism and relational aggression (pursoo, 2013). but one study conducted by matt and krawczyk (2017) has little bit different findings. according to them machiavellianism, did not have a significant impact on cyberbullying behavior. narcissism, the second member of dark triad, is also a significant predictor of relational aggression among adolescents. narcissism explained the 18.9% variance in the relational aggression. tracey and robbins (2003) claim that they protect themselves against the sentiments of feeling inferior and disgrace by making external attributions for their letdowns, which leads to the sentiments of aggression and annoyance towards other persons. in the same line, morf and rhodewalt (2001) have stated that while the egotistical sense of personality is clearly exaggerated, which is also highly susceptible to unwanted conducts. individuals with narcissism are continually worried and strive to uphold their exaggerated self-assurance by a range of personal and social tactics. furthermore, narcissism is regarded as a detachment between an insentient sense of inadequacy and a conscious sensation of supremacy. furthermore, narcissists are by means extremely self-centered people. they’re so principally absorbed on their individual wishes and worries that they give little consideration to the distresses of others. as mentioned earlier, in adolescence period relationally aggressive behaviors is very common. relational bullying includes an inequity of control, in which a student or a group of students oppresses another student who is incapable to efficiently protect him/herself (raskauskas&stoltz, 2004). the undesirable deeds that are combined in relational aggression can be verbal or nonverbal, and displayed openly or indirectly, and comprise of harmful intimate and social associations to upset one another. these deeds can comprise of wicked conversation, social segregation (werner & nixon, 2005) and can be one in which relational intimidation happens. further in this age, formations of self and a solid purpose to hold self-esteem are pertinent to narcissism. current study emphases on narcissism as a personality attribute on which persons in the common population differ (raskin& terry, 1988). though, one investigation revealed that it is likely to consistently and meaningfully measure ―normal narcissism‖ in children and teenagers (thomaes, bushman, stegge, olthof, 2008). undeniably, a study has exposed that narcissists involve in diverse self-control policies to be able to retain their exaggerated self-opinion (morf&rhodewalt, 2001). early adolescents are conscious about themselves and their behavior is directed by a numberless behavioral standard, and their self-views are extremely dependent on other’sattitudes (harter, 2006; reimer, 1996; rosenberg, 1965). zimmer-gembeck, trevaskis, nesdale, & downey (2014) stated that indirect violence touches the heights in the period of late childhood and teenage years, owing to the developmental signs (i.e., the growth of higher oral abilities, social consciousness) practiced in this age. findings of the present research are consistence with preceding researches. research findings revealed that narcissism was positively linked with relational aggression through domination goals for both genders, in youngsters (ojanen, findley & fuller, 2012; ghim, choi, lim, & lim, 2015). in the same line another study conducted in japan on adolescent students revealed that narcissistic rage is positively associated with relational aggression (onishi, kawabata,kurokawa& yoshida, 2012). furthermore, it has been revealed by other researchers that narcissism was directly associated with overt aggression, and relational aggression. (lau &marsee, 2013; lau, marsee, kunimatsu, &fassnacht, 2011). in nutshell, narcissists are highly driven to endure their individual and others insights of themselves as greater beings. they exhibit self-promotion and are disposed to imagine about infinite capability and control. (hook, 200). the third dimension of dark triad, psychopathy, is also found to be a significant predictor of relational aggression in adolescent students. psychopathy explained the 26.5% variance in the relational aggression [r =.515; f (1, 607) = 218.635, p<.01]. according to cleckley (1988), psychopathy as having both personality and behavioral characteristics that may include artificial appeal, superficial feelings, absence of empathy and regret, proneness to boredom, failure to prevent problematic behavior, and persistent desecration of social standards. in addition, insensitivity and coldness are considered a crucial feature of psychopathy (frick & hare, 2001). another characteristic of psychopathy which is important with reference to adolescent that it has been shown to be fairly stable across teenage period in terms of constancy and level of felonious conduct (lynam, miller, vachon, loeber, &stouthamer-loeber, 2009). psychopathy is a severe personality disorder that first revealed itself early in life and continues during most of the lifetime. most clinicians and investigators agree that psychopathy is related to a collection of emotional, relational, http://journals.sagepub.com/author/kurokawa%2c+masayuki review of economics and development studies vol. 4, no 2, december2018 215 and behavioral features, vital to which are a profound absence of regret or guilt and a cold-hearted neglect for the feelings, rights, and prosperity of others (cleckley, 1988; hare, 1996). individuals with this condition are typically described as impulsive, self-centered, deceiving, sensation-seeking, and irresponsible. given these characteristics, it is not astonishing that psychopaths commit a disproportionate amount of severe repetitive misconduct, violence and often come into interaction with the criminal justice system. findings of previous researches are in line with the results of the present study that psychopathy is significant predictors of relational aggression. (holdship, 2015; coyne, nelson, graham-kevan, keister, & david, 2010). furthermore, a study on females endorse the positive relationship between relational aggression and psychopathic traits (marotta, 2016). according to czar, dahlen, bullock and nicholson (2011) psychopathic traits are predictive of relational aggression. further, specific personality traits inherent in psychopathy can help predict frequency of relational aggression (holdship, 2012). in the same line a study conducted on canadian teenagers longitudinally revealed that psychopathy predicted bullying throughout adolescence (free, 2017). according to the findings of present study economic status has a moderating effect on the relationship of dark triad and relational aggression (see table 3,4). previous researched endorse this notion. like a research supported the idea that economic status and economic activity have a part in determining the personality traits (yang, & lester, 2016). another study supported the notion that socioeconomic status has impact on the adolescent aggression (shameem, & hamid, 2014). in nutshell, machiavellianism, narcissism and psychopathy were found to be significant predictor of relation aggression in adolescents. economic status has a moderating effect on the relationship of dark triad and relational aggression. the variance explained by them ranges from 18.9%-26.5%. psychopathy is found to be explaining more variance in relational aggression among adolescents as compared to the other two members of dark triad. narcissism and machiavellianism were differently related with demonstrations of hostility amongst youngsters. psychopathy was steadily linked to all types of aggression, however machiavellianism only foretold relational aggression (paulhus, curtis, & jones, 2017). finding of the present study revealed that dark triad is a significant determinant of undesirable behavior of relational aggression moderated by economic status of individuals so there is need to address these personality aspects of adolescents to lessen such negative behaviors. information is worth implication for parents, educationists and counselors as well. references austin, e. j., farrelly, d., black, c., & moore, h. 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(2014). relational victimization, loneliness and depressive symptoms: indirect associations via self and peer reports of rejection sensitivity. journal of youth and adolescence, 43, 568-582. review of economics and development studies vol. 5, no 2, june 2019 281 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads making foreign aid work: issues of cost effectiveness of educational aid in pakistan 1 asif khan, 2 tasawar baig, 3 saadia beg, 4 hafiz ghufran ali khan 1 assistant professor, department of educational development, karakoram international university, gilgit, pakistan 2 assistant professor and head, department of international relations, karakoram international university, gilgit, pakistan, tasawar.baig@kiu.edu.pk 3 assistant professor, department of international relations, karakoram international university, gilgit, pakistan 4 assistant professor, faculty of management sciences, international islamic university, islamabad. pakistan article details abstract history revised format: may 2019 available online: june 2019 the quality of inclusive and accountable institutions in a donor-recipient country determines the effectiveness of foreign aid. this study examined whether the role of donor agency or the implementing agency was more helpful in the successes of two foreign-funded educational interventions in northern pakistan. the two interventions, each focusing on teachers‘ development program and the capacity development of principals, were funded by two different international donors. the study also provided a comparison of the two international donors working styles and their strategies applied for the execution of their respective projects. the findings of the study, which were generated through qualitative methods, noted wide variations not only in the working strategies of the two donors, but also the role of the executing agency. it was noted that multiple factors determined the productivity of the two projects; one of the elements that contributed the success or failure of the two project was their design or road map. based on the findings of this study, it was maintained that a proactive role of both the entities is crucial for the success of such interventions. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords foreign aid, aid effectiveness, poor governance, institutional accountability jel classification: a20, d24, f35 corresponding author‘s email address: tasawar.baig@kiu.edu.pk recommended citation: khan, a., baig, t., beg, s. and khan, h. g. a., (2019). making foreign aid work: issues of cost effectiveness of educational aid in pakistan, review of economics and development studies, 5 (2), 281-290 doi: 10.26710/reads.v5i2.591 1. introduction the effectiveness of foreign aid relies on the capacity of the recipient country to utilize external assistance through inclusive and accountable institutions. these inclusive institutions facilitate developing not only friendly domestic policies to attract overseas assistance, but also strive to create transparent procedures to achieve foreign aid objectives. during the period from 1960 to 1990, foreign aid was directed to address such issues as security concerns of the cold war, promotion of democracy and human rights, and promotion of export markets in developing countries (graham, 2002). however, a paradigm shift in foreign aid occurred in 2000 when a new menace global terrorism threatened world peace and security. in the united states, the events of 9/11/2001 convinced the global community, especially the influential northerners, that as long as issues such as rampant http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 2, june 2019 282 poverty, illiteracy, social injustices and political instabilities of the developing countries are not properly addressed, the world will remain vulnerable to terrorist attacks, and as a result, world peace will be in jeopardy. such a conviction led to the massive flow of foreign assistance to those countries which were supposed to be the sanctuaries or the breeding grounds of terrorism. for the last two decades, pakistan has remained a major recipient of foreign aid and grants from bilateral and multilateral agencies in north america, europe, and asia. besides fortifying security establishments, a good chunk of the foreign aid is allocated to strengthen the social sector including health, education, agriculture, and energy sectors. although there has been a significant reduction in the economic assistance provided to pakistan, it is still significantly large, from an annual us $2.3 billion till 2013 to us $1.6 billion 2014 onwards (rana, 2017). very limited information is, however, available regarding the contribution of this foreign aid towards the development of various economic sectors in pakistan. in the context of developing countries, researchers have also shown their concerns about the productivity and utilizations of foreign assistance (riddell, 2012). therefore, this study was conducted to examine the execution and some of the accomplishments of two foreignfunded educational projects in pakistan. this study examined the comparative effectiveness of the donor agency and the implementing agency in making the two interventions productive and meaningful. there is a dire need for such a study since the scaling down of aid commitments from donor agencies, due to their limited contributions in developing countries, is a serious issue (wane, 2004). 2. context of the study the study conducted in northern pakistan particularly examined two foreign-funded educational projects. in order to maintain privacy, the actual names of the two donors are not used in this study; instead, donor-1 and donor-ii are used as pseudonyms. a multi-million dollar project, focusing on the training of elementary school headmasters, was initiated by donor-i. the specific aim of this project was to develop the managerial skills of elementary headmasters in such a way that could help the schoolteachers to improve their teaching practices. since the said project was also implemented in other parts of pakistan, a government agency was responsible at the federal level to oversee the project. at the regional level where this study was conducted, the local director of education was responsible for the execution of this project. a four-member team, headed by a project director, appointed by the local department of education, was responsible for the execution of this project. another multi-million dollar project focusing on the teachers‘ preparation program was launched by donor-ii with the specific objective of replacing the traditional teacher‘s preparation programs (ct, ptc, b.ed.) with an updated and innovative teachers‘ development program. this project was also launched simultaneously in other parts of the country. while executing this project, donor-ii ensured that whatever innovation they brought to the teachers development program would have to be supported by the higher education commission of pakistan (hec) and the federal government through policy making. donor–ii established their offices across the country and the pakistani staff executed the project with the support of the local department of education. 3. methodology the study used a qualitative approach to generate data through the application of such tools as interviews, document reviews, observations, and focus group discussions. the venues of both the projects were two government colleges of education, one each for male and female. the sample of the study in case of the donor-i funded project, which focused on training the headmasters, was the project director and the three resource persons/trainers. additionally, through an opportunity sampling strategy, six headmasters (two female and four male trainees) were selected to seek their perspectives about their training program. the duration of each recorded interview was 40 minutes. the interview sessions, document reviews, and observations covered such areas as the quality of the training, knowledge level of the resource persons, involvement of the donor agency, training manual, and the annual progress report of the project. the sample of the study in case of the donor-ii funded project, which focused on a new teachers‘ development program, was ten instructors (five males and five females from two colleges of education), two principals each from the two colleges, and students who were enrolled in the new teacher development program. specific themes, such as the quality of the program, availability of resources, and knowledge level of instructors, induction of prospective teachers, and the role of implementing agencies were discussed. both the donors and local directorate of education review of economics and development studies vol. 5, no 2, june 2019 283 were the focus of interviews, document reviews, and observations. focus group discussions were conducted to seek the perspectives of students. a thematic approach was used to analyze the data. 4. conceptualizing foreign aid – literature review foreign aid has remained one of the most widely discussed and debated concepts over the past six decades or so. there is a polarized understanding of the impact of foreign aid among academics, political-economists and development practitioners. during the post-world war-ii period, world politics witnessed the emergence of new nation-states due to the decolonization processes across the world. by and large, these newly independent states had fragile political-economic conditions, and foreign aid was believed to be a significant factor to stabilize the weak domestic conditions of these poor societies. moreover, the rationale behind foreign aid is designed on development models of western or advanced societies. to replicate these western-oriented development models, the donor countries appropriated foreign aid to ―fill the gaps in resources, encouraging domestic investment and industrial development under the belief that foreign aid could help developing countries to accelerate the takeoff into selfsustained growth by generating new domestic investment‖ (khan & ahmed, 2007, p.216). at the same time, the post-war era developed a bipolar structure of world politics, where the utilization of foreign aid was carried out for political objectives rather than to emphasize ―raising the quality of life throughout the third world‖ (miles, 2012.p.28). however, the commitments of foreign aid were designed to facilitate the stages of growth through investment and increase productivity vis-à-vis to transfer technology (khan & ahmed, 2007). this original construction of notions about foreign aid to reduce the foreign exchange gap with provisions of access to the technology, enrich human capital and access to the global market, which actually yields different outcomes (ali & ahmed, 2013). most of the foreign aid resources are generated through international donor agencies residing in western countries, and statistics show that since 1960, more than us $2.2 trillion dollar is pumped into developing societies under development assistance programs designed to accomplish social reform initiatives (monkam, 2012). subsequently, the developing countries gradually become highly dependent on foreign assistance, which has its own domestic economic, political and social repercussions. ali and ahmad (2013) acknowledge the benefits of foreign aid for the development of the recipient nation, but argue that ‗reliance on aid makes the pendency of the economy on external sources, increases ways to corruption and also affects economic administration badly. for instance, as in case other third world countries, pakistan has remained one of highest recipients of foreign aid, and pakistan received more than us 73 billion dollars as foreign aid from 1960 to 2002 (khan & ahmed, 2007). sarwar, hassan and mahmood (2015) have vividly portrayed a chronological overview of foreign aid in pakistan. their overview suggests that since 1947, pakistan is heavily dependent on foreign aid, however the flow of aid fluctuated due to geo-strategic reasons. the volume of aid assistance remained higher until the 1980s. in the 1960s, it was equal to 6.6 percent of gnp, in the 1970s 4.2 percent to 5.5 percent of gnp and in the 1980s it was equal to 4.6 percent of gnp. in the 1990s, pakistan faced a huge financial crunch due to its nuclear tests in 1998, nevertheless, the flow of foreign aid resumed as a result of the incidents of 9/11. pakistan once again become a frontline state and started to accrue foreign aid resources (sarwar et al., 2015). the fundamental issue with foreign aid was to critically evaluate the cost effectiveness of the overseas aid assistance as it pertains to the general development of third world countries, which is still a controversial issue. it is controversial due to the bipolarity or dichotomy of aid works itself. to elaborate this dichotomy, easterly (2008) quotes two instances from a single report produced by department for international development (dfid). on the one hand, the dfid report endorses the cost-effectiveness of aid work, which says that the aid assistance ―help(ed) [to] reduce poverty by increasing economic growth, improving governance and increasing access to public services‖ and on the other hand, the same report suggests that ―aid does work already and will work in the future, but aid is also not working‘ which reflects the limitations and conditionalities of aid effectiveness‖ (easterly, 2008, p.1). easterly (2008) further argues that this dichotomy can be found in reports and projects of other major donor agencies like the world bank (wb), international monetary fund (imf) and so forth. sachs (2005) finds foreign aid useful and his work advocates for support for a massive increase foreign aid for the development of poor countries. in contrary, easterly (2008) argued that it makes no sense to provide additional foreign aid to third world countries, because the donors have no idea where the money is going and it is being wasted (easterly, 2008). one possibility of the misuse of foreign aid is the ―lacks the capacity to utilize outside review of economics and development studies vol. 5, no 2, june 2019 284 assistance effectively‖ (diamond, 2006, p.34). in response, sachs argued that one should not blame the novel idea of foreign aid and ―believing aid money is completely squandered would not justify, if system is not in place‘, therefore, it‘s rather ―corruption is the culprit‖ or "poor governance", and in this condition foreign aid causes harm to the recipient nations, specifically because aid is distributed by local politicians and finances the creation of corrupt government systems in order to channel the overseas donor‘s assistance for their own gain‘. this creates frustration and sachs believes that the aid assistance is a ‗money down the drain‖ (sachs, 2005, p.310). despite the fact that pakistan received a huge amount of foreign aid, over the decades the country has failed to improve its self-sustaining indicators of socio-economic development (nasir, rehman, & orakazai, 2012). a fundamental reason for this failure is the diversion of ―development expenditure to non-development expenditure‖ to benefit corrupt individuals for political gains, which negatively affected societal growth plans (din & awan, 2015). this vindicates the view that corruption is the culprit and bad governance mechanisms allowed foreign aid to serve ―the vested interests of influential people‖(khan & ahmed, 2007). hence, much of the aid received in most of the poor countries ‗undermines government accountability to citizens because it goes into the pockets of corrupt bureaucrats and politicians. foreign aid is used to import unsuitable technology, expand government bureaucracies and encourage a larger, unproductive and corrupt government in developing countries or it is just misused (sarwar et al., 2015). how to make the aid effective? there are variety of ways to make it cost effective, however, keeping in view the new millennium consensus was developed on set of values and principles known as ―aid effectiveness paradigm‖ to be practiced in ―post-aid world‘, which actually requires the development effectiveness consigning [with] the aid effectiveness to the past‖ (mawdsley, savage, & kim, 2014 p.27). the new effectiveness paradigm and future aid initiatives will be strung around three important areas: 1) the outcome-based measures will be gauged based on achievement of impact, 2) concept of development is expanded, which shall not focus only on income poverty alone, and 3) aid as a joint venture between governments and non-state actors in order to achieve the targets of mgds and now sdgs together (mawdsley, savage, & kim, 2014). other significant aspects of aid effectiveness are linked with the domestic policy orientations of the recipient country. more friendly policies toward donor agencies, ensued by stronger accountability and transparent relationships between donor agencies, end users of aid, accountability within projects, and active participation of community, can yield positive outcomes (winters, 2010). constructing stronger relationship between domestic and external actors, as identified previously, help in institutionalizing the foreign aid process at an implementation scale, and also develop more inclusive processes with the participation of civil society (mawdsley et al, 2014). lack of an institutionalized mechanism is a core impediment for the effectiveness of aid, while aid is more effective in countries with superior accountability institutions, because good institutions stands on a base of an effective norms and principles that regulate the appropriate behaviors and constraints for unnecessary actions (winters, 2010). in short, institutions are humanly devised constraints that ―reduce uncertainty by establishing a stable structure to human interactions‖ (north 2004, p.6). henceforward, the effectiveness of foreign aid through an ‗aid effective paradigm‘ certainly anticipates the provision of transparency, which is linked with participation of a civil society and local stakeholders in rule-making and implementation, and an accountable institutional structure to sanction misbehavior (auer, 2007). until recently, foreign aid has not been effective to the recipient countries, because aid is circulated and distributed through accountable procedures by local politicians, false finances mechanisms and corrupt governments. these complex situations can only be bridled through strong, inclusive institutions to temper the misbehaviors. 5. major findings 5.1 donor-i funded project a review of the documents, such as annual progress report, showed that the project achieved its target in terms of the utilization of 92 percent of the budget and the provision of training to some 550 headmasters during the initial phase of its implementation. it was claimed by the project director and his staff that the project was one of most successful interventions in northern pakistan. the claims of the project staff were endorsed by the official reports which stated that the project has largely contributed to the knowledge of headmasters in terms of their understanding about supporting the teachers with their teaching practices. the project staff/trainers mentioned that they conducted the professional development sessions in a very systematic manner; for instance, they mentioned that they determined the training needs of the headmasters through a need assessment exercise. additionally, they review of economics and development studies vol. 5, no 2, june 2019 285 explained that they use a tool to determine if the knowledge level of the headmasters was enhanced after attending the training. during a review of the documents, it was noted that the need assessment tool, which was used to determine the training needs, comprised of only three questions: a) if they attended any training before b) what are their expectations from the training c) if they have any suggestions. a good number of trainees commented that they had not seen the need assessment tool before the training. before the start of a new session, the trainers would administer a pre-test questionnaire to understand the previous knowledge of the trainees about the topic of that session. however, the headmasters expressed their concerns about the authenticity of the pre-test questionnaire by saying that they come from urdu medium schools and backgrounds whereas the questionnaire, which contained at least 10-12 questions, was in english. a review of the said document confirmed the concerns of the trainee headmasters. for instance, in one of the questions of the said tool, the headmasters were asked to elaborate the steps of classroom observations. some of the answers include: taking attendance; maintaining cleanliness, maintaining discipline, etc. when the opinions of project director and their staff about the aforementioned gaps were sought, they were adamant in saying that the said tools were very helpful in addressing the different activities of the training sessions. however, they admitted that before the inception of the program they were not provided with any training or orientations. even the project director was appointed after the recruitment of the three trainers by the local department of education, which was the executing agency, according to the project staff. there was consensus among the participants/trainees that the project would have been very productive and successful if it was organized in a very professional manner. they had the opinion that since the name of a wellreputed international donor agency was involved and a huge amount of financial resources were allocated, they had great expectations from the program which were not fulfilled. it was noted that the program was exclusively designed for the headmasters, but a good number of the participants were teachers. some of the participants mentioned that they were verbally informed by the headmasters or the officials of the department of education that they were to attend the sessions a day before the training. one of the female headmistresses mentioned that she did not know that the training was exclusively designed for the head teachers and she only came to know this when she reached the training venue. it was noted that some of the participants even came three or four days after the start of the training sessions. during the observation of the training sessions, it was noted that late arrival of the trainees and their absence was a common practice. the project staff, including the project director, blamed the officials of the local department of education for the previously mentioned gaps. they mentioned that sometimes they sent multiple reminders to the officials to nominate the headmasters in a timely manner. they also added that since there is no mechanism for follow-up, participants do not take these sessions seriously and they only attend these sessions to secure the financial benefits (ta/da). despite the fact that absenteeism and late arrival was frequently noticed, the daily attendance register reported 100 percent participation. the project staff mentioned that a federal unit team made a single visit during the lifecycle of the project, whereas the role of the donor was only limited to ensure the proper utilization of the funds without any involvement. occasional visits from the officials of department of education were also noticed, which was limited to only monitor the running of the project. the knowledge level of the resource persons, content of the different sessions, and the classroom practices (training sessions) were not compatible with the objectives of this project, which was improving the classroom practices through the involvement of headmasters. the participants also reported the questionable skills of the resource persons and their content knowledge. the resource persons/trainers admitted that they had no prior experience around providing training to the headmasters or the adult learners. it was noticed on many occasions that the resource persons would start their sessions by informing the participants that they only came to know about the topic of the sessions this morning since the project director would decide the topics. in addition to permanent staff, guest speakers would come to deliver lectures. the trainees pointed out that since the guest speakers were invited on a very short notice, their lectures were limited to sharing their personal stories. a training module addressing the objectives of the project was developed by a federal unit that was compatible with the objectives of the program, however, the resource person would not follow that module; the project director was not mindful of this situation. the training was designed to create awareness about the teaching and learning culture of the school; however, it was noticed that the resource persons were more focused on the administrative aspect of headship, which was noticed during the observation of training sessions. for instance, on one occasion the project director conducted a session on the responsibilities of the head teachers and he discussed 12 responsibilities; none of them addressed the teaching and learning practices. the trainees pointed out that the knowledge they were review of economics and development studies vol. 5, no 2, june 2019 286 getting from the resource persons was obsolete and outdated. it was noted that the training sessions were traditional devoid of interactions and discussions; lecture methods were the popular mode of these sessions. on one occasion, a resource person asked the trainees to comment on the content and methodologies of the trainers in the presence of the researchers; the trainees were candid in saying that they were dissatisfied. 5.2 donor-ii funded project with the support of higher education commission and government of pakistan, donor-ii launched the new teacher‘s preparation program in two government colleges of education in northern pakistan and other parts of the country. on one hand, the donorii ensured the provision of the new curricula, learning resources, training of instructors about the new program, and the availability of technology to the two colleges of education. on the other hand, it started developing policies with the help of hec for the phasing out of old traditional teachers‘ preparation programs such as ptc, ct, and b.ed. both the students who were enrolled in the new teachers‘ preparation program called advance diploma in education (ada) and the instructors had very positive opinions about the new program. one of the instructors mentioned, ‗although for the last many years other sectors of economy was thriving except the education sector, however, the launching of a new ade program is a great contribution to address the quality issues of education in pakistan‘. instructors acknowledged that a new generation of teacher are being produced and they are equipped with new skills and are ready to bring changes to the classroom practices. one of the strengths of the new program was its practice-oriented teaching approaches and reflective practices that enabled the students to understand the multiple approaches of teaching, rather than focusing on a teacher-centered approach. there was consensus among the students and instructors that both the content and curricula of the ade program was developed according to the needs of the students and the society. as mentioned earlier, not only were the instructors provided training before the inception of the program, they were also provided opportunities to develop the curriculum of their own subjects. the researchers also participated in one of the curriculum development workshops where curriculum experts from a foreign country was invited to help the instructors with the curriculum development processes. instructors were candid in admitting that trainings and curriculum development workshops helped them to understand the group work, student-centered approaches, and discussion methods. a glimpse of the said concepts noticed during the observation of some of the classes where the instructors were applying the said approaches. students pointed out that their instructors are still wrestling with the challenges of the new program, a point which was endorsed by some of the instructors. two of the issues associated with the new program were the integration of information technology and the literature, which was in english. students mentioned that a very modern program has been given to a very traditional teaching force which lacks computer and internet skills; they also mentioned that a limited grasp of english sometimes makes their teaching practices questionable. the program was designed to connect the instructors with the internet for accessing updated literature/knowledge and illuminating their teaching practices. there were mixed opinions about the integration of modern technology in the program. for some instructors, technology was a great source, helping them to enrich their curriculum and improve their teaching, and for others, it was a hurdle since they had limited understanding about the application of modern technology. it is pertinent to mention here that the instructors were offered training on computer usage and the internet before the inception of the new program. however, the instructors agreed that the lack of power and internet connectivity in the whole region neutralized their efforts to become more acquainted with the technology. some of the instructors also admitted that although they were well versed in methodologies, due to their weaker grasps of english, they had a limited influence on their students. besides the phasing out of a traditional teachers‘ development program, at the policy level it was also decided that the minimum criteria for becoming school teachers would be two years of teacher education with an advance diploma in education (ade). as a result, more than 70 government colleges of education across the country, including northern pakistan, stopped enrolling students in traditional ct and ptc program. however, both the students and the instructors reported that a good number of teacher education colleges in pakistan are still offering traditional degrees such as ptc and ct; students can take these exams as private candidates as well. one of the instructors commented that since education is considered as a professional degree just like medicine and engineering, students should not be allowed to take private exams to become a teacher; he added that if this situation continues, it would make the success of the new program questionable. review of economics and development studies vol. 5, no 2, june 2019 287 although they were enthusiastic, it was noticed that a sense of uncertainty prevailed among the students about their own future with an ade degree. they mentioned that at the time of the launch of the new ade program, it was promised by the government that not only would the teachers with ade degrees be given enhanced pay scale /grades, but they also will be preferred at the time of employment, due to the rigorous nature of their program. however, they said that none of these promises were fulfilled by the government. it was noted that although the local government had phased out the ptc and ct program from northern pakistan, they had neither changed the service rules, nor made the service rules friendly to the ade graduates. while commenting and comparing the quality of traditional ct/ptc and ade programs, one of the instructors mentioned that as compared to ade, students score good grades in traditional programs due to the rigorous nature of new program… the good grades helps the students (with ptc, ct) to secure jobs since the government is still accepting application of students who have ptc and ct degrees …additionally, the recruitment policies are grade-oriented not the competency oriented and this situation discouraged the students to pursue ade. one of the implications of this situation was that when students failed to secure employments with an ade degree, they started pursuing m.ed. degrees with the apprehension that ade is not enough to get employment. in this regard, a review of the advertisement published in the local dailies endorsed the concerns of students about the recruitment policies regarding ade program; nowhere in the advertisement was it mentioned that ade graduates would be preferred or that they would be given better pay scales. since the donor‘s staff was stationed in the region, they had developed and maintained a very robust liaison with the local department of education, two colleges of education, and with the other stakeholders who were involved in the execution of the project. from the provision of instructional material to the availability of modern technology, the staff would monitor the timely delivery of the said resources. it was noticed on multiple occasions that through the involvement of a third party, the donor monitored the overall progress of different components of this project. for instance, during a workshop, the researchers were interviewed by a representative of a western agency famous for monitoring and evaluations of the foreignfunded projects. the interview covered such areas as content of the training, knowledge level of the resource person, general opinions about the project, logistics, etc. 6. analysis and discussion a broader generalization cannot be made based solely on the findings of this study, because context and geographical locations may have an impact on the overall productivity of these kinds of interventions. however, many important lessons can be drawn that could help the international donors, recipient countries, and implementing agencies to review their policies and capacities for making themselves better prepared if such kinds of opportunities emerge in the future. furthermore, the research can contribute to the body of knowledge in two ways; firstly, the study provided a comparison of working styles of two international donors and their strategies applied for the execution of projects in a particular geographical location; secondly, the study critically analyzed whose role, international donors or the implementing agencies of the aid-receiving countries, is more important for the success of any foreign funded intervention. there is no doubt that for the implementations of any project, the foreign donors remain dependent on the host countries and their affiliated institutions, as the present study noted, where a local directorate of education was either an executing agency or a partner of two different foreign funded projects. the role of the director of education was central in the implementation of the donor-i funded project, which focused on the capacity development of elementary school principals. through its regional office, donor-ii executed a new teachers‘ development project while maintaining a close liaison with the local department of education; in other words, the department was an equal partner of the implementation of the said project. it has been largely recognized that the effectiveness and quality of any foreign intervention depends upon its design or road map (wane, 2004). a clear variation between the implementation processes of the two projects speaks loudly about the way it was designed. as the study noted, donor-ii designed the project in such way that the success of their intervention was contingent upon the active participation of governmental entities such as hec, the ministry of education, and the regional department of education. not only did donor-ii lead these governmental entities to develop policies regarding the phasing out of traditional teachers‘ development programs, but donor-ii also engaged these entities in such a way that they acted as equal partners, which is evident from a meaningful relationship between the donor agency and the local director of education. however, such linkages and connections were not explicit in the donor-i funded review of economics and development studies vol. 5, no 2, june 2019 288 projects, in which a multimillion project was executed by a group of people who enjoyed a substantial level of freedom without an explicit involvement of either the donor agency or the local director of education. it seems that the said project was launched in haste without developing a clear road map of execution and defining clear polices. the anomalies in the hiring of the project staff, such as hiring the trainers before the recruitment of the project director, lack of proper orientation for the project staff, and limited competencies of the trainers are just some of the examples of the questionable designing of the donor-ii funded project. it has also been suggested that a large flow of financial assistance may not be workable in the countries where they lack clear policies; therefore it is necessary to be more focused on policy-making because clear policy-making is a primary determinant of success of any intervention, as the study noted in the donor-ii funded project (graham, 2002). pakistan has remained a major recipient of foreign aid, as a result of different geo-political circumstances in contemporary history, whether it was the russian invasion of afghanistan or pakistan‘s involvement in the global war on terror. however, there is a particular mismatch between the level of investment made on the development of education and the money that comes from different donors. researchers have attributed the limited capacities of provincial and district level officials to the limited success of foreign interventions in pakistan. one can contest the opinion of researchers regarding the limited capacities of district-level competencies; their preoccupation with their official responsibilities could be another reason for their limited contribution towards the success of these foreign interventions. therefore, one of the important lessons drawn from this study is that only making the district officials responsible for the implementation of any intervention may not be a successful model; instead, working together as equal partners might ensure the success of foreign interventions, as this study noted. unlike donor-i, which was totally dependent on local administration for the implementation of its project, donor-ii entertained the local directorate of education as an equal partner, thereby maintaining a close liaison for the execution of the new teachers‘ development program. one can assume that this model can serve two purposes; on one hand, it can empower the local institutions, and on the other hand, working together can provide opportunities to local institutions to enhance their capacities and skills. proper monitoring and follow up mechanisms greatly determine the success and productivity of any foreign intervention. it has been reported that limited capacities of implementing agencies, as well as an absence of a proper monitoring system, creates opportunities for corrupt practices (chapman, 2002). as the study noted in the donor-i funded project, both the trainers and the trainees were less serious and less committed regarding their responsibilities. irregularities in the maintenance of proper records of the trainees‘ daily attendance, and the project director‘s indifferent behavior regarding some of the processes of training are some of the implications regarding the absence of a proper monitoring and evaluation mechanism. therefore, the aforementioned circumstances neutralized the productivity of the project. although proper monitoring of their projects remained a challenging task for the donors in conflicting zones like pakistan, there still are donors who ensured the productivity of their interventions through the involvement of a third party in the monitoring processes (harmer, stoddard, & didomenico, 2011). the same pattern was also noticed in this study where monitoring and evolution through the involvement of a third party was an integral component of the donor-ii funded project. the monitoring processes cover such areas as timely provision of instructional resources, training workshops, observations of teaching practices by instructors as well as prospective teachers, reviews of portfolios developed by students, etc. one can argue that the said project was not a complete success, keeping in view the problems faced by the students regarding employment opportunities with an ade degree. there is no doubt that donor-ii fulfilled their responsibilities, by successfully laying the foundation of a new teachers‘ development program through the provision of all the required resources, and led the hec and government of pakistan to endorse the new program. the onus is now on government of pakistan to address the issues of employment of ade graduates and develop uniform policies regarding the entry requirements for the teaching profession in pakistan, not only at the provincial levels, but also the different educational systems of pakistan that presently follow different hiring policies for teachers. as the instructors and principals of two colleges of education asserted, the success and the continuation of the new program is contingent upon the introduction of structural reforms. for the success of any foreign intervention, the role of both the donor agency and the recipient country is equally crucial, as the study noted, the absence of any entity could neutralize the productivity of the projects. one of the advantages of working together is that it creates opportunities for both parties to learn from each other. since the capacities of implementing agencies of developing countries are still an area of concern, it is essential to explore new models through the involvement of non-state actors and entities. since developing countries like pakistan review of economics and development studies vol. 5, no 2, june 2019 289 always need the support of foreign donors for the development of its various sectors, a separate cell equipped with the required skills can be established to oversee and execute the foreign funded projects. reference ali, s., & ahmad, n. 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(2010). accountability, participation and foreign aid effectiveness. international studies review, 12, 218-243. https://www.brookings.edu/articles/can-foreign-aid-help-stop-terrorism/ https://tribune.com.pk/story/1498815/war-terror-aid-pakistan-received-33-4bn-us/ http://idei.fr/sites/default/files/medias/doc/conf/jjl/papers/59wane.pdf review of economics and development studies, vol. 7 (4) 2021, 525 531 525 an empirical test for natural rate of unemployment and expectations augmented phillips curve hypothesis in perspective of chinese economy mazhir nadeem ishaq a , sana batool b , rukhsana rasheed c a department of economics, the islamia university of bahawalpur, pakistan email: mazhir.nadeem@iub.edu.pk b department of management sciences, the govt. sadiq college women university bahawalpur, pakistan c department of management sciences, the govt. sadiq college women university bahawalpur, pakistan article details abstract history: accepted 25 november 2021 available online december 2021 this research study investigates the natural rate of unemployment and the expectations augmented phillips curve for chinese economy by analyzing the data ranging from 1980 to 2020. the empirical methodology of this study test the relationship between inflation rate and rate of unemployment which proved to be negatively significant (it proves the existence of classical phillips curve around 1960) in china. the study also analyzed the expectations augmented phillips curve allowing the effects of price expectations on money wages increases. finally, the study also analyzed the natural rate of unemployment for china that was around 4.86 per cent that can be compared with the natural rate of unemployment (as prescribed by economists 4 to 5 per cent). the study suggests certain tools that will be helpful for policymakers in maintaining the conditions of stable inflation in china. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: natural rate of unemployment, expectations augmented phillips curve, china jel classification: e00, e24, e31 doi: 10.47067/reads.v7i4.412 corresponding author’s email address: mazhir.nadeem@iub.edu.pk 1. introduction phillips curve changes over time and is different for different economies. with time, the conventional phillips curve shows contradictory findings. economists in recent years argued the “broken down” nature of the phillips curve (summers, 2017). even phillips curve slope in recent decades has become flatter. ashiya in 2017 finds the japanese phillips curve with a constant inflation rate of non-accelerating for unemployment and finds find the productivity coefficient to be positive through regression analysis and it was contradictory so they use modified phillips curve relation. the government and business used various forecasting models for macroeconomic policies. the expectationsaugmented philips curve is a fundamental element for almost every model. the classical theories assumed that without systematic error, prices adjusted freely while the expectations developed review of economics and development studies, vol. 7 (4) 2021, 525 531 526 rationally. therefore, assumptions imply that philips curve is steep and any deviation from nairu is short-lived. price and wage inertia will results to move away real wage and relative price prices from market clearing levels. phillips curve changes over time and is different for different economies so what would be the phillips curve in the situation of deflation. the conventional phillips curve explains the situation of high inflation but what happens with low inflation or if inflation is negative (at deflation). when deflation starts phillips curve relation break down due to the main worker’s reluctance reasons to accept fall in wages nominally. this means that workers are accepting a real wages cut which occurs only when wages nominally increases more slowly than rate of inflation. if this argument works, unemployment and inflation relation in the phillips curve may disappear. this situation of deflation exists in many countries due to very low inflation. one of the best examples is negative inflation in japan since the 1990s. the combined action of both structural and frictional unemployment is measured in natural rate of unemployment. such a situation in a country may exist due to equilibrium in labour market and expansion in economy. even developed economies may also experience this situation of natural rate of unemployment because many workers are trying to get better jobs. the federal reserve estimates the natural rate of unemployment to be at 3.5 per cent to 4.5 per cent for achieving the goals of full employment. here, the question is why economists don’t want the unemployment rate at zero? there is only one way the economy could have an unemployment rate at zero it is the situation of overheated. even a very developed economy the united states of america never experienced an unemployment rate at zero. only in 1953, the lowest unemployment recorded was 2.5 per cent it was due to overheating of the united states economy during korean war, after that when the bubble burst the recession of 1953 stars. in 1926, irving fisher identified the phillips curve statistically using bidirectional causation between unemployment and inflation. philips curve was graphed and plotted by a.j. brown in 1955, jan tinbergen in 1936, lawrence klein and arthur goldberger in 1955, arthur w. philips in 1958. the formulation of expectations augmented phillips curve was made in 1970. humphrey (1985) studied the phillips curve and makes some innovations; first: re-specification of excess demand variable, second: he innovate the expectations augmented equation. mitra (2012) showed that for solow and samuelson pc a rise in 4 per cent to 5.5 per cent will result in a 3 per cent to 2.5 per cent fall in inflation. 2. the review of literature franz (2005), karanassou and sala (2010) finds a negative unemployment and inflation relationship. niskanen (2002), taiwoo et al. (2013) found a positive link between the rates of unemployment and inflation. brauer (2007) concluded that a variety of factors cause the flactuation in busness cycle and hence so the natural rate of unemployment. the natural rate is governed by the rate at which jobs are simultaneously generated and destroyed, the rate of turnover in individual jobs, and how quickly jobless workers are matched with vacant positions (daly et al. in 2011). furuoka (2007) conducted a study in malaysia where it was examined that during decision making about macroeconomic policies, the phillips curve has played a significant role. this study found the existence of a long-run tradeoff between inflation and unemployment rate. review of economics and development studies, vol. 7 (4) 2021, 525 531 527 lagged changes in the unemployment rate affected the change in inflation rate (lavi and sussman, 2007). the conventional phillips curve represents inflation and unemployment inverse relationship. many economists estimated the phillips curve for developed, middle income countries and as well as for developing countries. most of them relate the relationship of unemployment to price inflation rather than wage inflation. as they think that the wages paid by the company are closely connected with the price the company charge. based on the discussion of previous studies and literature, the natural rate of unemployment and the expectations augmented philips curve for chinese economy can be discovered. 3. data & methodology the methodology used in this study is both empirical and experimental. the data for this study was collected from world bank website. the data analyzed ranged from 1987 to 2020. inflation is taken as consumer annual price percentage and unemployment is taken as a percentage of the total labour force. the expectations augmented phillips curve that hypothesized that if real inflation rises, expected inflation will also increases, and it will move the phillips curve upwards to give the same increase in expected real wage at each employment level. for expectations augmented phillips curve, we suppose presents inflation rate at time t, which defines the change in price level as a percentage we uses consumer price index (cpi), presents unemployment rate at time t, so the expectations augmented phillips curve can be written as: ( ) ( ) where, actual inflation rate at time t expected inflation rate at time t, the expectation being formed in year (t-1). = natural rate of unemployment at time t. = stochastic error term. as, is not directly observable, but it presents a starting point for the assumption that means this year's inflation is predicted to be similar to that of the previous year (t-1). so, equation no i can be written as the regression model in standard form as follows: ( ) suppose, , so equation (ii) can be written as: ( ) or ( ) the expectations augmented phillips curve argues that changes in inflation rates over two time periods are linearly connected to the present unemployment rate. now, in order to calculate the natural rate of unemployment, we utilize the following formula: review of economics and development studies, vol. 7 (4) 2021, 525 531 528 ( ) economists estimate that the natural rate of unemployment is between 4% and 5%. in the figure, is the natural rate of unemployment, also known as the nairu (non-accelerating inflation rate of unemployment), is defined as "a rate of unemployment in which inflation is neither dropping nor accelerating." if authorities reduces unemployment below the rate of natural unemployment rate say , inflation will rise from a to b point on the pc1 phillips curve. now, if a gain in the money pay surpasses the growth in output per person, it will show its natural level on pc2 at point c, which is based on greater predicted inflation. now, if the government reduces unemployment to u1, the inflation rate will accelerate to point d, but a higher rate of money wages will move the natural rate of unemployment to point e on pc3, which is based on a higher projected inflation rate. to reduce inflation, the authorities must temporarily raise unemployment above the natural rate point e to f on pc3. figure 1 presents the expectations augmented phillips curve as the money wage rate declines, individuals return to work, and unemployment falls to point c at the natural level of unemployment, this will lower public expectations about the predicted inflation rate. 4. results and discussion table 1 presents descriptive statistics on inflation and unemployment rate for china from 1987 to 2020. inflation is taken as consumer annual price percentage and unemployment is taken as a percentage of the total labour force. review of economics and development studies, vol. 7 (4) 2021, 525 531 529 table 1: descriptive statistics 1. source: world bank development indicators. 2. notes: inf = inflation, consumer prices (annual %), unem = unemployment, total (% of total labor force). inflation with a mean value of 4.9674 having a standard deviation of 6.2599 and unemployment mean value is 3.5794 with 0.8585 is the standard deviation. the correlation for inflation and unemployment rate is -0.5325 which show the negative relationship main reason for phillips the curve is -0.5325 which show the negative relationship main reason for phillips curve. figure 1 presents the original phillips curve drawn from real-time data and clearly showing that inflation and unemployment have a negative relationship. figure 2: phillips curve of china as expected, there is a negative relationship between inflation and unemployment rate; a low unemployment rate would lead to increases in inflation, indicating price acceleration. the research model presents the following results as under: ( ) = 18.8652***, ***, r 2 = 0.284 t = -3.56, = 4.70 model equation 6 illustrates that if the unemployment rate falls by 1 per cent, on average inflation rate goes up by about -3.8827 per cent. equations vi also shows, if unemployment will go down to zero (0), the inflation will be 18.8652 for the next year. both coefficients are significant at 1 per cent level of significance. -5 0 5 10 15 20 e( in fla tio n | x ) -2 -1 0 1 2 e( unemployment | x ) variables mean std. dev. minimum maximum observations inf 4.9674 6.2599 -1.4 24.26 34 unem 3.5794 0.8585 2 5.15 34 review of economics and development studies, vol. 7 (4) 2021, 525 531 530 the natural rate of unemployment is the rate of unemployment required to maintain a constant rate of inflation. as a result, the natural rate of unemployment is also known as the non-accelerating unemployment rate (nairu). here, the natural rate of unemployment can be calculated as, ( ) ( ) as a result, china's natural unemployment rate is at 4.86 per cent. according to economists, the natural rate of unemployment is between 4 and 5%, and china's natural rate of unemployment is exactly what economists predict. according to the oecd economic outlook database in 2009 based on data from 1970 to 2008, the natural rate of unemployment in some european countries was 6 per cent in denmark, 6 per cent in germany, 7.5 per cent in ireland, 5.6 per cent in the netherlands, 3.9 per cent in sweden, and 6.7 per cent in the united kingdom. 5. conclusion the history of the phillips curve is strongly linked to the discovery of the natural rate of unemployment. changes in labour market conditions over time are the only way to adjust the natural rate. labour market, cross-country differences policies also imply a cross country natural rate of unemployment differences. phillips curve changes over time and is different for different economies. with time, the conventional phillips curve shows contradictory findings. economists in recent years argued the “broken down” nature of the phillips curve (summers, 2017). even phillips curve slope in recent decades has become flatter. using data from 1980 to 2020, the current research paper explores the expectations augmented phillips curve and the natural rate of unemployment in china. the first result is that the relationship between inflation rate and unemployment is negatively significant (it proves the existence of the classical phillips curve around 1960) in china, and the second result is that the expectations augmented phillips curve, which is a reformulation of the phillips curve that allows for the effects of price expectations on money wages increases, shows that if the unemployment rate falls by 1%, the average inflation rate rises by about -3.8827 percent. if unemployment will go down to zero (0), the inflation will be 18.8652 for the next year, second: the study reveals the natural rate of unemployment for china is 4.86 (may be compared to the natural rate of unemployment suggested by economists of 4 to 5%), which will be useful for policymakers in sustaining stable inflation circumstances in china. references ashiya, n. (2017). the modified phillips curve as a possible answer to japanese deflation. advances in economics and business, 5(10). brauer, d. (2007). the natural rate of unemployment, cbo working paper, 2007-08. daly, m., hobijn, b., & valletta, r. (2011). the recent evolution of natural rate of unemployment. federal reserve bank of san francisco, working paper, 2011-12. franz, w. (2005). will the (german) nairu please stand up?, german economic review, 6(2). humphrey, c. (1985). barter and economic disintegration, man new series, 20(1), 48-72. karanassou, m., & sala, h. (2010). phillips curves and unemployment dynamics: a critique and a holistic perspective, journal of economic survey, 24(1), 1-51. review of economics and development studies, vol. 7 (4) 2021, 525 531 531 furuoka, f. (2007). does the “phillips curve” really exist? new empirical evidence from malaysia. economics bulletin, 5(16), 1-14. lavi, y., & sussman, n. (2007). the phillips curve in israel. israel economic review, 5(1). phillips, a.w. (1958). the relation between unemployment and the rate of change of money wage rates in the united kingdom, economica, 25(100), 283–299. mitra, s. (2012). a review of services quality research in india, ims management journal, the journal of ims koltata, 4, 54-66. nistanene, w. a. (2002). on the death of the phillips curve, cato journal, 22(2), 193-198. oecd. (2009). economic outlook database. summers, l. (2017). america needs its unions more than ever, financial times, 3 september. taiwoo, m. a., ayodeji, a., & bako, y. a. (2013). impact of small and medium enterprises on economic growth and development, american journal of business and management, 1(1), 18-22. review of economics and development studies, vol. 7 (3) 2021, 371-382 371 an analysis of the outcome of socio economic factors on mobility and changes in consumption pattern in northern punjab, pakistan samra khalid a , nabila asghar b , hafeez ur rehman c a assistant professor, higher education department, government of the punjab lahore, pakistan email:samrakhalid88@yahoo.com b associate professor, department of economics and business administration, division of management and administrative science, university of education lahore, pakistan email: nabeela.asghar@ue.edu.pk. c professor/chairman, department of economics and statistics, (hsm) university of management and technology lahore, pakistan email: hafeez.rehman@umt.edu.pk. article details abstract history: accepted 28 august 2021 available online september 2021 the relationship between mobility and consumption pattern has been neglected in the past particularly in developing countries. socioeconomic mobility is the movement of individuals, social groups, or categories of people in the layers or strata between two different periods. for effective policy making, it is important to gauge the mobility pattern which portrays the socio-economic changes of society over the period as opposed to at one point in time. this brings up the need to examine the way in which elements of socio-economic mobility impacts the consumption in the emerging class of the society. socioeconomic factors and their influence on intra-temporal household mobility reveal the education as an important mediating factor in northern punjab. whereas, opportunity of education and occupation work together to bridge the gap between an increase in household income and socio-economic status. this study concludes that education and occupation based mobility of households divert their consumption pattern toward more cultural goods. the emerging class seems to be attracted more towards conspicuous consumption including private schools, health care, shopping and the consumer goods to enhance their living standards. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: socio-economic mobility, intratemporal mobility, cultural consumption, socio-economic factors, positional goods jel classification: o17, j62, j69 doi: 10.47067/reads.v7i3.379 corresponding author’s email address: hafeez.rehman@umt.edu.pk. 1. introduction socio-economic mobility is related to the changes in income, political power, skills and review of economics and development studies, vol. 7 (3) 2021, 371-382 372 education. the rise from lower to higher echelons in the society coincides with substantial changes in the income, education, skills, and other socio-economic indicators. socio-economic mobility is determined by multiple factors such as social and cultural capital, inherited wealth and financial resources, labor market participation and occupation progression, educational achievements and geographical location (bowles and gintis, 2002). it is important for emerging society to measure the causes and changes in mobility due to the socio-economic factors and their impact on consumption pattern of the households over time. most of the studies related to emerging economies measure the changes in consumption patterns and the direction in which the consumption of society has moved after the mobility. however, the consumption patterns, based on the complex human nature and behavior, vary as the households shift towards higher socio-economic echelons. due to transformation, the variability in consumer’s behavior emerges not because of economic disparity of specific strata alone but also due to socio-cultural heterogeneity factors associated with other groups. in globalized economy, the researchers have tried to examine the way in which the dynamics of socio-economic mobility exerts influence on consumption patterns. the changes in consumption patterns describe the consequences of mobility through measuring the extent of characteristics of conspicuous and culture consumption as an effect of household mobility. in punjab province no astounding endeavor has been made to dissect the socio-economic mobility over time which depends on base and final year of socio-economic indicators regarding the mobility of the society. further the research work is limited in terms of the impact of mobility on the changes in consumption pattern in northern punjab. this study investigates how consumption behavior fluctuates as middle class households move from one financial strata to the next. further, it measures the shape of consumption pattern of transformed households on the basis of socio-economic indicators in northern punjab, pakistan. the main objective of the study is to develop the linkage between mobility and socio economic factors of northern punjab, which is a diverse and innovative thought in the literature of punjab. the significance of the study is that it analyzes comprehensive structure of northern punjab in terms of causes and consequences of mobility. 2. literature review since the beginning of current century, the researchers have tried to measure the effects of socio-economic mobility on consumption pattern in developed and developing countries. several studies have identified the socio-economic factors responsible for intra-temporal household mobility. the review of previous studies may help us to identify the research gap regarding the relationship between socio-economic factors, mobility and changes in consumption pattern. delorenzi (2006) points out that geographical mobility is an important source for people to achieve socio-economic mobility from backward areas to developed cities, as it improves their living conditions and provide better life chances for them as well as their children. his study concludes that economic migration is beneficial for the people having better occupation and it becomes significance source of high mobility in a well-established labor market. the study conducted by paiva, silva and feijo (2013) point out that an increase in emerging class gives support to a boom in the domestic consumer market. while, the young group with higher education divert their consumption towards cultural goods including education items. pintelon et al. (2013) bring up the existence of robust review of economics and development studies, vol. 7 (3) 2021, 371-382 373 relationship between income and material consumption. their study describes that household income is the main source which brings changes in consumption pattern of cultural goods. their study concludes that mobility and changes in consumption pattern are highly correlated and access to better educational facilities promote cultural consumption in a society. uner and gungordu (2014) observe that after the introduction of market liberalization in turkey, the household of middle class gained sharp rise in disposable income and experienced substantial changes in life style. the results of the study reveal that the white collar professionals have gained relatively more benefits due to an improvement in education. goldthorpe (2016) points out that educational policy is key to promote mobility. the education is a best positional good and the motivational factor that helps the individuals in improving their lifestyles. song and li (2016) mention that a strong association exists between household education and changes in consumption pattern. they are of opinion that middle-class families have more access to cultural capital than working-class families. their study concludes that education has significant impact on the consumption of culture goods. reeves and vries (2018) point out that cultural consumption is often viewed as a form of personified cultural assets, which can be converted into economic income through education, technology, and research & development. the results of their study reveal that the households, who consume more on cultural activities, are more likely to earn high wages in future. the review of literature has identified several factors responsible for intra-temporal household mobility. likewise, the socio-economic factors responsible for mobility and changes in consumption pattern after mobility in northern punjab have scantly been studied which is much needed. this study is an attempt to bridge the research gap by analyzing the relationship between socio-economic factors and mobility and observing the effects of socio-economic mobility on consumption pattern based on education, occupation, and income in the northern punjab. 3. data and methodology for analyzing the socio-economic patterns of the northern punjab, this study uses the primary data from the survey conducted by xyz in 2017. this study analyzes the data from three districts, namely sargodha, bhakkar, and rawalpindi. to ensure the reliability of the results, the analysis was limited to the data of the 45 – 65 year old respondents as they are supposed to be properly adjusted in the labor market based on their occupational income and educational achievements1. the data for two intervals: 2000 as the base year and 2017 as the final year of the same household were analyzed. the sample size for three district of northern punjab was fixed at 3522. household with average literacy rate 65 percent were included in the sample as proportional to the population of each district (see table 1 for details). 1the confirmation of age is based on the national identity card of respondents. 2 n where p (1-p) and p shows the value of prevalence rate (overall literacy rate).prevalence rate is calculated by average literacy rate of all districts of punjab. ( ) where n is district population n: total population of three districts of each zone. review of economics and development studies, vol. 7 (3) 2021, 371-382 374 table: 1 district-wise sample size northern punjab district sample urban sample rural sample rawalpindi, n = 172 64 108 sargodha, n = 123 45 78 bhakkar, n = 57 21 36 it is essential for estimation of mobility that the same number of observations of socio economic indicators for both base year and final year are analyzed. the year 2000 is considered as the base year to gauge the financial status of household and the year 2017 is considered as the final year to measure the current socio-economic status of families. the monetary cycle of 15 years is sufficient for measuring the structural changes in the context of intra-temporal household mobility. this study shifts from the intra-generational mobility toward intra-temporal household mobility, which indicates the extent of household transformation during the economic cycle due to collective occupation earning in labor market or combination of other socio-economic factors. the criteria of intra-temporal household mobility are presented in table 2. table 2: criteria of intra-temporal household mobility (analysis criteria of 2017) (analysis criteria of 2000) education (average score of education of all household members), education (education score of head of household) occupation (average score of all earners of household) occupation (score of head of household’s occupation) total household income (occupation income) base year income3. (the base year income is determined on the basis of occupation scale) expenditure pattern expenditure pattern assets + living status (it is inherited and own hard work. asset + living status (it is based on subjective criteria, self-administered). socio-economic mobility of households is measured in terms of ‘n’ types of socio economic profile and each type of profile is composed of ‘i’ types of sub-indicators such as ( . these indicators are measured in the form of ordinal and dichotomous variables. a weight is assigned to each indicator which shows the importance of one variable relative to other variables included in socio-economic index. it also indicates the geographical importance of each variable in terms of urban and rural perspective. the raw scores of each unit are calculated after multiplying each socio-economic variable by an appropriate weight. appendix ii exhibits the socio-economic status index (sesi). 3 if govt. employee defines the bs-scale and occupation department in year of 2000 with the help of pay scale chart/salary stage. if private employee defines the private institution scale and occupation department in year of 2000 with the help of pay scale chart define minimum wage rate for unskilled and semi-skilled worker in year of 2000 which is declare by government under minimum wage3 act review of economics and development studies, vol. 7 (3) 2021, 371-382 375 ∑ this study is divided into two parts: part i deals with the analysis of the relationship between socio economic factors and mobility of households; whereas, part ii is related to the analysis of the impact of mobility on the changes in consumption pattern of the households in northern punjab. part i the logistic model given below has been used to analyze the relationship between socioeconomic factors and mobility. for this purpose, those socio-economic factors are included in the model which contributes in the intra-temporal household mobility from base year domain to the destination domain. model 1 + + the description of the variables is presented in table 3. table 3: description of the variables variables description of variable dependent variable calculated through ses index. ses index based household is; 1= if households transform from one se strata to another during 15 year economic cycle. 0 = otherwise. 1. occupation improvement of head of households there are three categories of occupation of head of household; 0 = nonimproved from base year, 1= occupation progress from semi-skilled to clerical, 2= occupation progress from semi-professional to professional. this variable is used to study the association between occupation progression of head of household and his upward mobility. 2. level of education the average score of education members of all households, ‘0’ if x≤ 2.5, ‘1’ if x>2.5. education creates sense of awareness about better life, which increases mobility. 3. number of dependent members of household members less than 18 years and above 60 years of age are included in this variable. ‘0’ if x < 2, ‘1’ if x 2. this variable shows the negative relationship between the number of dependent members of households and upward mobility. 4. number of earning member the number of earning members among the total number of households, ‘0’ if x < 2., ‘1’ if x 2. this variable measures the association between more earning hands and upward mobility review of economics and development studies, vol. 7 (3) 2021, 371-382 376 5. movement within country 1 = if households move toward other cities for betterment, ‘0’otherwise. this variable is used to study the association between inter-country movement and upward mobility for better education, occupation and family development. 4. results and discussion the results presented in tables 4 and 5 show that education level of household is positively associated with upward mobility. this indicates that educated households have more chances of upward mobility in 15 years economic cycle as compared to those who are uneducated. in northern punjab, the educated households have 23.3 times more chances of transformation toward upper strata due to more educated members in the family. similar results have been reported by forsyth and furlong (2003), breen and jonsson (2005), and platt (2006). in table 5, the results related to both urban and rural regions of northern punjab are presented. the coefficients of household education level are positive and statistically significant at 1% level of significance for urban and rural regions of northern punjab, i.e. 2.9 and 3.2 respectively. these coefficients reveal that average high level of education promotes chances of mobility in both urban and rural regions. these results support the arguments made by miliband (2003) and delorenzi et al. (2005). the number of dependent members of household is negatively related to upward mobility. the odds ratio less than unity indicate that more dependent members discourage mobility. the odds ratio is 0.43 which means that household who has more number of dependent members have 57 times more chances of no mobility as compared to the household who has less number of dependent members or more earning members. hence, more participation in labor market is the protection against low degree of mobility. in urban and rural regions, the odds ratios are 0.32 and 0.28 respectively, which indicate that if households have more than two dependent members then the chances of their mobility is reduced by 0.68 and 0.72 odds respectively. table 4: socio-economic factors analysis of northern punjab variables expβ slopeβ p-values household education level 24.272 3.189 0.0000 number of dependent members 0.426 -0.854 0.0680 earning members 7.329 1.992 0.0000 geographical movement 5.306 1.669 0.0000 occupational progression: from semi-skilled to clerical occupational progression: from semi-professional to professional 6.839 18.092 1.923 2.895 0.0000 0.0040 constant -4.9 0.0000 negelkerkey r-square 0.53 goodness of fit test (x2) hosmer-lemeshow 8.6 0.0037 source: author’s own calculations the coefficients of earning members is positive and statistically significant at 1% level of review of economics and development studies, vol. 7 (3) 2021, 371-382 377 significance, which means that household with more earning members have 6.3 times more chances of upward transformation in northern punjab. the similar analysis holds for both urban and rural regions of northern punjab. table 5: socio-economic factors analysis of urban and rural northern punjab northern punjab (urban) northern punjab (rural) variables expβ slopeβ p-values expβ slopeβ p-values household education level 19.533 2.972 0.0000 26.146 3.264 0.0000 number of dependent members 0.323 -0.860 0.0610 0.280 -1.274 0.0390 earning members 15.51 2.017 0.0000 6.135 1.814 0.0030 geographical movement 6.110 1.810 0.0000 7.832 2.058 0.0000 occupational progression: from semi-skilled to clerical occupational progression: from semi-professional to professional 7.214 17.180 1.976 2.844 0.0000 0.0050 7.945 11.157 1.073 2.412 0.0000 0.0020 constant -4.8 0.0000 -6.9 0.0000 negelkerkey r-square 0.73 0.78 goodness of fit test (x2) hosmerlemeshow 8.5 0.0037 10.3 0.0018 source: author’s own calculations the coefficient of geographical movement is positive and significant at 1% level of significance which indicates that geographical movement for higher education provides 4.3 times more economic opportunities for upward mobility as compared to those who have not experienced geographical movement. these results are consistent with gibbons et al. (2005), delorenzi (2006), gibbons et al. (2005) and murphy (2006). furthermore, household geographical movements are 5.1 and 6.8 times in urban and rural regions respectively as compared to those who are un-mobile toward big cities. these findings are in aligning with kenyon et al. (2003), and warschauer (2003). the coefficient of occupation progression of head of household is positive and statistically significant at 5% level of significance. the results show that the chances of upward transformation are increased by 17.1 odds if the head of household has occupational transformation from semi-professional to professional. while the chances of upward mobility are 5.8 times high, if households have occupation progress from semi-skilled to clerical. the chances of upward mobility increases by 16.2 and 10.2 times if head of households have occupation transformation from semi-skilled to professional occupation in urban and rural regions of northern punjab respectively. part ii after measuring the level of mobility that society faces during 15 years of economic cycle in terms of improvement in socio-economic indicators, the consequences of mobility are analyzed in the context of changes in consumption pattern. the emerging households follow the consumption level of other families across the strata as they have to spend more in a society, where their income is low review of economics and development studies, vol. 7 (3) 2021, 371-382 378 relative to others. this is called as demonstration effect, which is regarded as the cost of mobility that society bears. the study uses expenditure pattern as an indicator of demonstration effect. two situations may come up if household’s consumption exceed his income. the first situation put the household in the category of borrowers, if his basic expenditures are higher than his income. in second situation, the household is neither borrower nor saver, if his total expenditures (other than basic expenditures) exceed his income level due to demonstration effect. in this situation, the consumption pattern mostly lies in the category of positional goods. for analyzing the consumption behavior of household, in the context of demonstration effect, it is indispensable to consider positional goods. the details of positional goods are presented in appendix i. model 2 the consequences of mobility have been measured through two different models given below: = ………… (2a) in the above model, the dependent variable is related to the changes in consumption pattern of the transformed households from basic towards cultural goods in more than 15 years of economic cycle. if his consumption pattern shifts from basic expenditures to cultural goods, then the values of dependent variable will be ‘1’ otherwise ‘0’. = ………… (2b) in the above model, the dependent variable shows consumption pattern changes toward cultural and material goods simultaneously, as transformed households avail the emerging benefits of education, occupation and income which make them to divert their consumption pattern towards cultural and material goods. if the household’s consumption pattern shifts from basic to both positional and assets goods then the value of dependent variable will be ‘1’ otherwise ‘0’. all the independent variables are same in both models and the variables are incorporated in the model after the logistic regression assumptions are fulfilled. table 6: description of variables (consumption models) variables description of variable occupation of head of household based on the specific occupation held by the head of the household at current time, ‘0’, if occupation progress from semi-skilled to clerical, ‘1’, if occupation progress from semi-professional to professional. this variable is used to study the association between the occupation progression and changes in household consumption pattern. mobile-classes divert their consumption pattern towards more material consumption to maintain and uplift their prominence due to increased material assets. 1. education of other members average score of educated member of household, ‘0’ if x ≤ 4.5 and ‘1’ otherwise. education has direct and positive influence on changes in consumption pattern. review of economics and development studies, vol. 7 (3) 2021, 371-382 379 2. income monthly household per-capita income at current time period, ‘0’ if x 50000, ‘1’ if x 50000. this variables measures the total household income in qualitative terms with two categories, which shows the relationship between socio-economic stratification and changes in consumption pattern of transformed household. 4.1 results and discussion of model (2a) and (2b) the education level of other household members has positive and statistically significant relation with changes in consumption pattern in northern punjab. among the three dimensions, education is the single most powerful indicator relative to income and occupation which explains the direction of cultural consumption of transformed households of northern punjab by 19.7 times higher in households who have average education score higher than 4.5 as compared to others. while, the chances of more cultural consumption among educated household is 26.3 and 14.4 times more as compared to those household who average education level is less than 4.5 in urban and rural northern punjab respectively. it shows that most of the educated household members are inclined towards more cultural goods in their consumption portfolio. these results are in-line with song and li (2016), and uner and gungordu (2016). table 7: consumption analysis of northern punjab (model a) dependent variable: consumption pattern shift from basic to cultural goods of mobile households during 15 years economic cycle factor of mobility northern punjab northern punjab (urban) northern punjab (rural) odds ratios coeffi cient pvalues odds ratios coeffici ents pvalues odds ratios coeffic ients pvalues education 20.77 3.03 .000 27.33 3.30 .011 15.45 2.738 .000 household income 7.33 1.99 .001 17.06 2.83 .050 4.91 1.593 .019 occupation progress 8.40 2.12 .001 12.24 2.50 .071 6.22 1.829 .009 constant -29 (.000) -3.8 (.001) -2.3 (.000) negelkerkey r square .68 .75 0.53 goodness of fit test ( 7.8 (0.0016) 5.9(0.0011) 6.5 (0.0025) source: author’s own calculations the results of the study show that income has less impact on cultural consumption as compared to education and occupation progress. the households having income more than rs. 50,000 have 6.3 times more chances to change consumption portfolio toward cultural goods in northern punjab. similar results hold for urban and rural regions of northern punjab. the results of model (2b) suggest that among the three dimensions, income and occupation are more powerful indicators relative to education, which explain the consumption direction of mobile household toward positional and physical goods in northern punjab. in general, upward mobility plays review of economics and development studies, vol. 7 (3) 2021, 371-382 380 an important role in enhancing consumption of middle and privileged strata households. education has a significant impact on cultural consumption while income boost the material consumption as intragenerational assets of transformed households. the study cannot deny the importance of income, as it is related to purchasing power and materializes the full potentials of the transformed households who have a bounty of resources but their educational achievements and occupation progress shape the direction of resources to consume. our results are consistent with ustuner and holt (2010). the model (2b) explains that consumption pattern of households shift from basic expenditure toward positional and assets based goods during 15-year economic cycle. the results indicate that income is important factor which increases the household assets as compared to education. there exists positive relationship between income and consumption on positional and assets goods because households having more than rs. 50,000 income are more likely to experience positional and assets based consumption in both urban and rural regions of northern punjab. the occupation progression has positive relationship with consumption on positional and assets goods. occupation and income are the combined factors which change the consumption pattern toward material and assets goods. in terms of occupation progress from semi-professional to professional, the head of household have more chances by odds of 7.4 and 13.7 in urban and rural respectively to change their consumption pattern towards economic capital as compared to those having occupation transformation from semi-skilled to clerical. 5. conclusion and recommendations this study analyzes the impact of socio-economic factors which contribute in household upward mobility in northern punjab. despite other socio-economic factors, educational achievements appear to be a strong predictor of socio-economic transformation of household. furthermore, education turns up as a significant factor which changes consumption pattern from basis to cultural goods. the job opportunities in labor market are positively related to increase in volume of active occupation groups and privileged groups which lead to high intra-temporal household mobility. the earning factors of these groups play a significant role in more intra temporal household mobility due to increase in education and occupation expertise overtime. in northern punjab, education based mobile household spend a considerable amount of income on cultural goods which shows that if society wants to increase the consumption of cultural goods and services, it must increase the educational opportunities. education is a strong element which boost the society’s cultural values in the light of more library visits, more participation in conferences and seminar, learning advance technology and conducting research for innovation. on the other side, income and occupation progress based on mobile households have strong relationship with positional goods and assets based consumption simultaneously as all these uplift socio economic status in society as compared to education. the results of the study show that education system and polices are highly important because suitable designed education policies can have a scope to counter education inequality and provide more education incentives to lower strata. it may help them to enter in the education industry after surrendering occupation market as child labor. the government should introduce concrete measures review of economics and development studies, vol. 7 (3) 2021, 371-382 381 for satisfying the unmet need of the societies through developing micro and small scale industry especially in rural areas for generating labor market activities. references bowles, s and ginitis, h. (2002). the inheritance of inequality. journal of economic perspectives, 16 (3), 3–30. breen, r. and jonsoon, j. o. (2005). inequality of opportunity in comparative perspective: recent research on educational attainment and social mobility. arjournals.annualreviews.org by university of california los angeles, 31, 223–243. delorenzi, s. (2006). neighborhood, ethnicity and social mobility. london: institute for public policy research, 1-11. delorenzi, s., reed, j, and robinson, p. (2005). maintaining momentum: promoting social mobility and life chances from early years to adulthood, london: institute for public policy research. forsyth, a, and furlong, a. (2003) ‘access to higher education and disadvantage, young people, british educational research journal, 29 (2), 205-225. gibbons, s. and silva, o. (2006), faith primary schools: better schools or better pupils london. centre for the economics of education london school of economics. kenyon, s., rafferty, j. and lyons, g. (2003) ‘social exclusion and transport in the uk: a role of virtual accessibility in the alleviation of mobility-related social exclusion’ journal of social policy, 32 (3), 317-338 miliband, d. (2003) ‘opportunity for all: targeting disadvantage through personalized learning’, new economy, 224-229. murphy, j. t. (2006) “representing the economic geographies of “others” reconsidering the global south.” journal of geography in higher education, 30(3), 439-448. paiva, g. f., silva, d. b., and feijo, c. a. (2013). consumption and socioeconomic classification in brazil, a study based on the brazilian family expenditure survey. paper prepared for the iariw-ibge conference on income, wealth and well-being in latin america. pintelon, o, cantillon, b, den bosch, k, v and whelan, c, t. (2013). the social stratification of social risks: class and responsibility in the new welfare state journal of european social policy. platt, l. (2005). migration and social mobility, the life chances of britain’s minority ethnic communities. bristol, the policy press. reeves, a, and varies, r. (2018). can cultural consumption increase future earnings? exploring the economic returns to cultural capital. the british journal of sociology, 70(1), 214–240. song, j, cavusgil, e and li, j. (2016). social stratification and mobility among chinese middle class households: an empirical investigation. international business review, 25,646–656. uner, m, m and gungordu, a. (2016). the new middle class in turkey, a qualitative study in a dynamic economy, international business review, 30, 1-11. review of economics and development studies, vol. 7 (3) 2021, 371-382 382 appendix i: the positional goods 1 shifting the residence toward posh area. 2 hiring extra sweeper at home. 3 new brand of car as positional good 4 expenditure on hoteling and shopping 5 new brand of mobile 6 more expenditure on children appendix ii: socio-economic status index (sesi) of household education profile occupation profile monthly income profile expenditure pattern profile living status profile education (rural + urban ) occupation (rural + urban) adjusted income of adjusted income of adjusted income of expenditure pattern. asset urban region asset rural region score illiterate < 1000 < 5000 <7000 < 3 <4 0 can read and write unskilled worker 10004999 600014999 700015999 income is less than basic expenditure, y < c, borrowers 3-5 5 -7 1 primary semiskilled workers 50009999 1500023999 1600024999 income fulfill basic necessity of life expenditure y = c, survivors 6 -8 8 -10 2 high school skilled workers 1000014999 2400032999 2500033999 income fulfill basic and education expenditure y = c 9 -11 11-13 3 intermediate + specialized training clerical 1500019999 3300041999 3400043999 income fulfill basic and education expenditure, y > c pitiable saver 12-14 14 -16 4 graduate semi professional 2000024999 4200050999 4400053999 expenditure on positional goods, healthy savers y > c 15-17 17 -19 5 master professional 2500029999 5100059999 5400062999 expenditure on cultural goods y > c 18 -20 20 -22 6 professionals/m.phil ph.d executive class ≥ 30000 ≥ 60000 ≥63000 expenditure on increase the value of assets/material consumption y > c > 20 >22 7 review of economics and development studies vol. 4, no 2, december2018 313 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads learning styles preferences and diagnostics at higher education level: a comparative perspective among three faculties 1 hajra shaheen, 2 hukamdad malik, 3 wajeeha aurangzeb 1 phd, education scholar, numl, islamabad, pakistan. 2 associate professor (head education department), numl, islamabad, pakistan. 3 assistant professor education/ qec, numl, islamabad, pakistan. waurangzeb@numl.edu.pk article details abstract history revised format: november 2018 available online: december 2018 this study aimed at exploring and comparing learning styles preferences among students of management sciences, social sciences and languages. homogenous purposive sampling technique was used to select sample of study comprising of 300 graduating students of the three faculties. grashareichmann scale consisting of 60 five point likert scale statements was used to explore learning styles preferences of students on six variables namely; avoidant, collaborative, competitive, dependent, independent, and participant. results based on one-way anova and post-hoc tukey’s test revealed that a statistically significant difference occurred among the learning styles preferences of students enrolled in three faculties. management sciences students preferred competitive and independent learning style, social sciences students were mostly avoidant and dependent learners whereas languages students have adopted collaborative as well as dependent learning styles. it is recommended that teachers may require to bring variation in teaching learning process to cater to the needs of diverse learners. it is advisable for teachers to plan such learning activities which make them independent and self-directed learners. it is also recommended that situational factors such as nature of course requirements and motivation to attend the classroom could also have an impact on the preferred learning styles. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords learning styles, grashareichmann scale, avoidant, collaborative, competitive, dependent, independent, participant style jel classification: a23, c12, d83, i23, i29 corresponding author’s email address: waurangzeb@numl.edu.pk recommended citation: shaheen, h., malik, h. and aurangzeb, w. (2018). learning styles preferences and diagnostics at higher education level: a comparative perspective among three faculties. review of economics and development studies, 4 (2), 313-320 doi: 10.26710/reads.v4i2.416 1. introduction ‘learning styles” is a process which encompasses the fact that every student experiences learning differently. the particular way in which a learner learns or accepts, interpret and digest and then retains information can be regarded as his/her learning style. for example while experiencing how a clock can be constructed some students understand the process by merely focussing on instructions which were given orally while others need the practical demonstration. in classroom management strategy and education theory this concept of individual learning styles has gained significant acceptance. previous experiences, cognitive ability, emotional ranks and environmental factors affect individual learning styles. in similar words, this can be expressed as everybody is a unique individual. http://www.publishing.globalcsrc.org/reads mailto:waurangzeb@numl.edu.pk mailto:waurangzeb@numl.edu.pk review of economics and development studies vol. 4, no 2, december 2018 314 the top priority of mentors thus, is to differentiate between the learning dynamics of their students and introduced varied teaching practices accordingly. learning styles of students do not measure a single aspect of student personality. different researchers identified various learning styles measuring different ways or aspects how students take information and process it. a significant amount of literature on the topic is present in studies done by cassidy (2004) and swanson (1995). individual dissimilarities led to the creation of the literature in learning dynamics. during the era of 1960’s these matters were trending in ranks of investigative psychology which then continued in early 1970’s with same flow but due to the evolution of professional interest, societal focus got diverted and these matters saw a decline (curry, 1983). curry (1983) also expresses that learning is a dual phenomenon, a product and a process. it is a process as it is adaptive in nature, focusing on future with a holistic view, thus altering an individual’s mental, emotional, moral and social skills. a product, on the other hand refers to the more of a permanent shift in one’s potential or actual behaviour. the enhanced capability of the individual to adjust to surroundings impulse exhibits the process. king (2011) emphasized that various students have distinct learning styles in which they comprehend efficaciously. this argument is supported by considerable amount of literature and discusses how dissimilarities in culture affect learning styles. furthermore, learning or mentoring process can be less efficacious if learning style of learner and teaching styles are inharmonious. a belief cannot only be legit because of its wide acceptance. recent study of empirical literature shows that little evidence supports the argument that end results are remarkable when individuals’ learning dynamics are in accordance with instructional techniques. but also various researches deny this concept as well. clearly, some people have firm understating of their own learning preferences but the importance of those preferences is unclear (lewis, 2014). learning style which is prioritized by an individual some time causes contradictions among learners. in view of few scholars, educational performances of a learner arealso influenced by learning styles. to lead teaching and learning process it is vital to point out students learning styles,owing to the reason that it can make learning procedure effective by aiding teachers to educate their students in accordance with certain characteristics of students. the most crucial hurdle mentors face is distinguishing differences between students learning styles preferences (anderson & adams, 1992). many theories have been built regarding learning style; many of them are based on cognitive styles (kolb’s learning styles, impulsive ─reflective, etc). these styles are classified by keefe (1979) into five classes: receptive, attentional, expectancy, physiological and incentive, retention and concept formation. personality-oriented, activityoriented, mental self-government styles and cognitive-oriented are four classes in which sternberg and grigorenko (1997) classified learning styles. many researchers have proved that performing impulsively or reflectively is influenced by previous experience not the style itself and so it cannot be regarded as definition of style as preference, as being previously assumed that individuals perform differently according to their cognitive styles (impulsive vs. reflective) to solve problems. a model on learning styles was given by grasha and riechmann concerning learners’ involvement and interaction insread of personality and cognition, due to which, this design isn’t ranked in discussed divisions. they believed that this model helped teachers and professors acknowledge which teaching methodology would be appropriate for a specific learning style (grasha,1996). various characters that learners’ have in connection with their surroundings, teachers, content of course and classmates are social interactions and these social interactions are considered as learning styles by grasha and reichmann (1996). they also recommended that emotional and social aspects, like learners attitude towards teachers, learning and classmates are factors which identify learning styles. their design of learning style is not focused on overall evaluation of cognition and personality (due to the fact that styles are preference of individual whereas personality is continuous) characters but on learners’ reaction towards activities done in class room.this idea of learning styles has emerged with the investigation of type of personality studies along with how a person with a particular personality must be treated within system of education. the concept of universal strategies further supports the idea that every learner is unique. moreover, the most scientifically supported techniques involve planning, such as scheduling your class over a series of days, putting in significant effort such as making your students practice a number of times before evaluating them, and to be honest, teachers are not willing to put so much into it(markus& kitayama,1991). every student is a unique individual and his/her learning style preference also differs from others. a rich and authentic course may be developed only if the teacher knows learning style preferences of the respective students. review of economics and development studies vol. 4, no 2, december2018 315 furthermore, teachers must be aware of students’ learning styles and their preferences in order to effectively tailor the instructional methods and strategies to cater to student needs. this helps to build a conducive learning environment which is imperative for excellent performance of students. this study may help to build an insight for educators to assess the learning style preferences of their students and then design teaching-learning environment accordingly. 2. literature review in 1950’s and early 1960’s the interest in effect of individual differences in process of learning led to studies regarding learning styles (samadi, 2011). different explanations have been given regarding learning styles after the term was firstly discussed by talan in 1954.relatively stable components of students’ interaction’ with the learning surrounding can be described as learning style (karimi, 2012). the capacity of an individual to learn and assimilate the surrounding can be regarded as learning style (azarkhordad & mehdinezhad, 2016). learning styles also refer to the method of learning how to respond to current stimulants in learning area (seif,2011). daff (2004) elaborates learning style as a various perception type, encoding, processing, and storage. the particular way students learn and remind is learning style,as classified by smith & dalton (2005). various roles where learner establish connection with mentors, content of course and fellow class members is also learning style as suggested by grasha and reichmann (1996). grasha (1996) also suggests the students to show flexibility of styles of learning and efficient contact with teacher (halili, naimie, sira, abuzaid and lenge, 2014). three aspect bipolar have been raised as initial model for classroom interaction (rafati, 2012): competition-participation, dependent-independent and avoider-partnership, but after revising their model they argued that individuals in each aspect are not situated at contrary poles but are on monopole continuum. competition avoidance, participation, dependence, independence and partnership can all be in an individual, according to new classification. table 1: learning styles proposed by grasha-riechmann competitive style: where students compete in a teacher-cantered classroom. cooperation style: where students work in groups by sharing ideas with others. avoiding style: when a student is least bothered and tries to be anonymous in class. participatory style: these students actively participate in discussions during lectures. dependent style: they are strong students who follow clear-cut instructions independent style: they are independent thinkers and determine their goals and learning process. source: grasha, 1996 students’ learning styles were inspected by rezayi, koohestani, ganjeh and anbari (2008), mansouri (2000) and najafi, karimi & jamshidi (2009). all of themconcluded that, converging and absorbing learning style are repeatedly used by students. further these scholars indicated that in order to elevate use of training techniques by teachers they should apply manuscripts, speeches, use of diagrams and self-learning. students’ educational record can be predicted through the use of learning styles like abstract conceptualization and active learning, aswas recommended in a research conducted by izadi and mohammadzadeh (2008). further learning styles were scrutinized by number of researchers like ayati & khoshdaman (2012) who studied connection between cultures and learning styles, graf (2005) worked upon the relation between cognitive aspects of learners and learning styles and karimi (2012) established connection between student’s previous record and learning styles. in order to improve the methods of learning and student performance, he suggested the fusion of two or more methods, like non-verbal – visual, verbal – visual. because of gender element, both male and female have difference in learning styles.this was revealed by the research conducted in relation with learning styles proposed by grasha-riechmann. the content of study is also a factor in difference between learning styles. for example the students of arts have inclination regarding participative and collaborative learning whereas independent learning style is preferred by students of scienceand also different learning styles can be seen in students of different majors. verily, it appears obvious that different fields have different learning styles (amin & rajaei, 2013 and căpiță, 2014). the purpose of this study is to investigate the males and females preferred learning styles, since there is difference between the cultures and personality aspects of every society, and it will further investigate the contrast between social sciences, languages and management science majors because of need of various learning styles and different contents. review of economics and development studies vol. 4, no 2, december 2018 316 3. conceptual framework the primary focus of grasha-reichmann model is the attitude of the students towards, activities conducted in classroom, learning, teachers and fellow mates; grasha-reichmann highlighted the enhanced ability to communicate with others, organize materials and to solve a problem rather than investigating connection between student style, achievement and methods. for examining learning styles of students of management science and social sciences and languages at higher level of education they provided six styles: 3.1 competitive these students retain content in context to perform better in class than others. they perceive they should compete with other class members in a path of perks that are being offered. they prefer to lead the discussion by becoming a leader in a more teacher oriented class. 3.2 collaborative these students have understanding that they can learn better through sharing of talents and ideas. they coordinate with fellow class members and teacher and prefer working cooperatively with others. their preferences are lectures. 3.3 avoidant they are not interested in learning and going to class.they avoid participating in class and cooperating with teacher and fellow students and are completely least bothered about class happenings. they prefer to avoid activities in classroom. 3.4 participant they are the quality segment of class. they appreciate coming to class and own the duty of extracting much out of the course. throughout the course activity they participate as much as they can. they prefer discussion oriented lectures and discussion of material. 3.5 dependent the students of this character possess small amount of curiosity towards intellect and retain the necessity. they look for specific guidelines regarding how to do and what to do and see teacher and fellow students as support. their preferences include obvious directions and outlines written of board. 3.6 independent the genre of students is the one who are self-dependent and think for themselves. in class they listen to the ideas of others but their primary choice is to work on their own. they grasp the necessary content and feel confident on their abilities. their preferences include independent study. the objectives of the study are to explore learning styles preferences of students enrolled in management sciences, social sciences and languages at higher education level and to compare learning styles preferences of students studying in management sciences, social sciences and languages at higher education level. the hypothesis of the study is “there is statistically no significant difference in learning styles preferences of students enrolled in management sciences, social sciences and languages at higher education level”. 4. methodology descriptive survey design was applied to explore and compare the learning styles preferences of students across three faculties (management sciences, social sciences & languages) at higher education level from one public sector university of islamabad. this design was appropriate because the intention was to collect large scale data about learning styles preferences of graduating students (boudah, 2016).homogenous purposive sampling technique was used to select sample of study due to the sample having same set of characteristics.population included 3000 graduating students of social sciences, management sciences and languages. sample included 300 students (10% of the population)enrolled in the graduating semesters of faculties of management sciences, social sciences and languages in two public sector universities of islamabad. grasha-reichmann scale was used to explore learning styles preferences of students on six variables namely; avoidant, collaborative, competitive, dependent, independent, and participant. the instrument comprises of 10 questions per scale that is 60 elements in total. the responses were recorded on a five-point likert scale these included (1) strongly disagree, (2) disagree, (3) neutral, (4) agree and (5) strongly agree. the grasha-reichmann student learning styles scale (grslss) had been constructed to measure learning preferences of adults, review of economics and development studies vol. 4, no 2, december2018 317 undergraduate and above all; it measures affective and cognitive behaviours of students instead of perceptual behaviours. 5. results table 2 displays the mean value scores of students of management sciences, social sciences and languages on grslss. it reveals that highest mean score on competitive subscale was by students of management sciences (m=24.90). it means that students of management sciences prefer competitive learning style as compared to students of other faculties. almost all students preferred collaborative learning style. students of social sciences showed more mean score on avoidant learning style as compared to others (m=24.47). participant learning style was again preferred on about same mean scores by students of all faculties. students of languages scored highest on dependent learning scale (m= 24.84) and students of management sciences scored highest on independent learning styles (m=24.30). table 2: mean scores of management sciences, social sciences and languages students on grslss (n=300) sub scales management sciences social sciences languages mean sd mean sd mean sd competitive 24.90 6.99 20.47 4.04 19.84 3.98 collaborative 23.89 6.93 23.30 5.85 23.79 5.89 avoidant 17.90 3.92 24.47 4.04 21.84 3.98 participant 23.82 6.74 23.21 5.78 23.09 6.39 dependent 21.90 3.92 22.47 4.04 24.84 4.98 independent 24.30 6.19 21.43 4.22 19.73 3.54 table 3: one way anova for difference in learning styles preferences among three faculties (n=300) sum of squares df mean square f sig. between groups 3664.560 2 1731.770 79.388 .010 within groups 6185.360 297 22.855 total 9558.980 299 a one-way anova between subjects was conducted to compare the learning styles preferences among students of management sciences, social sciences and languages. there was a statistically significant difference in the learning styles preferences among social sciences, management sciences and languages students at p<.05 level for the three conditions mentioned in table 3[f (22.855) =79.38, p=.01] table 4: post hoc comparisons using tukey hsd test for dependant variable “learning styles” (i) subject (j) subject mean difference (i-j) std. error sig. 95% confidence interval lower upper management sciences social sciences 7.660 * .655 .046 8.19 5.15 languages 6.040 * .655 .034 7.54 5.52 social sciences management sciences 7.670 * .655 .046 6.25 9.19 languages 1.530 * .655 .039 3.11 2.05 languages management sciences 6.140 * .655 .034 4.52 3.56 social sciences 1.630 * .655 .039 3.15 3.11 note: *. the mean difference is significant at the 0.05 level. tukey hsd test indicates that the learning styles preferences of students of social sciences, management sciences and languages were significantly different from each other , thus h01 is not accepted, where p<0.05 levels. 6. discussion in regular fashion the dominant learning styles of students enrolled in all three faculties were collaborative and participative. this conclusion aligns with findings of rahimi & abedi (2014) who elaborated that students of iran prioritize participative learning styles. but results have shown that there are notable differences in competitive and avoidant learning styles preferences among students of all three faculties. competitive styles were clearly preferred by management sciences students and avoidant style was dominant among social sciences students. contrarily, participant style was dominant among all students. the number of students who preferred the style of dependence review of economics and development studies vol. 4, no 2, december 2018 318 was more among languages students. this result contradicts with the findings of rahimi (2014) who claimed that languages students prioritize participative, independent and cooperative learning styles. regional culture and environment of university surely caused this difference. deducting from these findings, larger proportion of management sciences students primarily preferred competitive style, while social sciences students had largely stuck to avoidant and dependent style and languages students manifested collaborative and dependent learning style. findings of safavi, shooshtaryzadh, mahmoudi & yarmohammadian (2010) are harmonious with these results. however, the findings of ayati & khosh-daman (2012) and hossein, zadeh, farmanbar, yeganeh and asadpour (2017) deny the existence of connection between subject / faculty and learning styles and this contradicts with these results. hence it appears that in advancement of the process of teaching-learning, learning styles have a vital role and modifying methods of teaching and learning styles is a fruitful way of continuing learning. the genesis of such environment is necessary where thoughts and opinions can be expressed to get learners thinking. undeniably, the involvement in group discussion and activities is of primary significance and appealing way for the fostering of creativity and innovation and social progress, and students can evolve their mental capabilities by becoming a part of these types of activities. the researchers concerning cooperative teaching methods have a firm believe since learning is a social practice, learning activities is necessary for harvesting of information and ideas. for achieving positive mental activity and different educational objectives, the teaching method with cooperative style roots aid that opportunity. whereas student study for grades and marks because of the use of racing or competitive methods in teaching and learning. nevertheless it enhances the motivation but not efficacious in context with quality learning, so by the nourishing participative and cooperative styles student learning can be enhanced. results have shown that management sciences students are more inclined towards doing things which require more interaction with others and they are more comfortable with interaction, competition and cooperation as compared to others. whereas the reason of management sciences students having independent styles is their inclination towards doing things individually and desire of making decision and also they have less inclination towards dependence and collaboration. the results of amir and jelas (2010) are aligned with these as they concluded that in competitive and dependent style management sciences students got higher grades. mahamod et al. (2010) also discovered that collaborative, participative and dependent styles are more used by social sciences students. o’faithaigh (2000) expressed that because social sciences and languages students naturally have the underlying fear of failure, they are dependent upon educator, whereas males embrace competitive and independent styles. while discussing the learning styles preferences with respect to the field of science and humanities, fuhrman and grasha (1983) explain that participatory learning style is influenced more by the type of personality characteristics being involved while choosing particular area of study. therefore, preferring a specific learning style and choosing the particular field of study may have some common grounds. hence, people having extrovert nature would preferably opt for fields that require interaction whereas introverts would choose the other way round. not only that, learning styles are not fixed, and therefore can vary in different circumstances depending on environment; thus, majors that provide greater opportunity of teamwork and collaboration, may gradually result in loss of an individual’s independence by solely focusing on cooperative and participative styles. 7. conclusion the findings of learning styles preferences of participants have shown that learning styles of participation will get affected by styles of teaching, choice of subjects, and classroom communication. learners who possessed significant communication styles and had friendship web are more successful by the use of cooperative and independent learning (cho et al., 2007) which results in top of the line academic result. the verdicts of current study also prevailed in expressing that languages and social sciences students have lower mean scores as compared to management sciences students on independent learning styles subscales. it is mentionable that higher level of education demands from its students to become self-directed learners. grasha proposed that various learning styles of students and teaching styles should coincide with each other. therefore, he proposed the use of various activities in classroom to encourage adaptability, flexibility, perpetual and independent learning devoid of choice of any subject. in order to uncover learner with both, familiar and unfamiliar paths of learning the mentors must possess set of skills that would assist them to use different pedagogical methods that may be in line with the fact that students possess various degree of learning styles. empirically proven evidence exhibits that when students are able to manage and monitor their styles of learning, their accomplishments can be enhanced. learning styles preferences may vary from variation in choice of subjects, as pedagogy for each discipline varies. however, teachers may require to bring variation in teaching learning process to cater to the needs of diverse review of economics and development studies vol. 4, no 2, december2018 319 learners. students of social sciences and languages manifest dependent learning style significantly as compared to their counter parts, so it is advisable for teachers to plan such learning activities which make them independent and self-directed learners. it is also recommended that situational factors such as nature of course requirements and motivation to attend the classroom could also have an impact on the preferred learning styles. learning becomes more effective and meaningful when classroom managers/teachers understand how and why students think and learn. references amin khandaghi, m. rajaei, m. 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(1995) learning styles: a review of the literature, educational research information centre document no. ed 387 067 https://www.researchgate.net/profile/elena_grigorenko3?_sg=lc4ihmhslqhn98-2kvvr259wntal01q4vsm1xdaacuxrzwuqkgwfdadort1o2aehicas934.uk2m5vkqkxqvhcbcmen7utqbrzchomxywrvetqaa47vfdnsj2j46k6twp5aue460cc06nfauq7ttckpt1tlmra review of economics and development studies vol. 4, no 2, december2018 165 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 2, december 2018 journal homepage: www.publishing.globalcsrc.org/reads effect of service quality on customers satisfaction: an application of hedperf model 1 nisar muhammad, 2 shahid jan kakakhel, 3 fayaz ali shah 1 phd research scholar, islamia college peshawar, pakistan. nisar.afridi20@yahoo.com 2 associate professor, chairman, department of management sciences, islamia college peshawar, pakistan. rahamkarya@hotmail.com 3 assistant professor, department of management sciences, islamia college peshawar, pakistan. fayaz@icp.edu.pk article details abstract history revised format: october 2018 available online: december 2018 the aim of this study was to measures the effect of service quality on customer satisfaction. there are 384 respondents were selected from 19 universities of khyber pakhtunkwa (pakistan). the proportionate stratified sampling method was used for the collection of data. the collected data was analysed using spss and amos packages. exploratory factor, confirmatory analysis and parallel analysis were also performed. structural equation modelling technique was used to investigate the relationship among variables under investigation. findings of the research reveals that majority of the respondents were satisfied with the dimensions of hedperf model in universities of khyber pakhunkhwa (pakistan). the dimension academic was ranked the most important dimension of service quality. thus, this unique finding implies that universities should nurture the academic quality rigorously in order to enhance students’ satisfaction without ignoring the remaining dimension of service quality. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords customer satisfaction, hedperf, service quality, higher education jel classification: f23, i23, l15 corresponding author’s email address: nisar.afridi20@yahoo.com recommended citation: muhammad, n., kakakhel, s. j. and shah, f. a. (2018). effect of service quality on customers satisfaction: an application of hedperf model. review of economics and development studies, 4 (2), 165-177 doi: 10.26710/reads.v4i2.387 1. introduction higher education sector in pakistan is one of the most developing sectors in the south asian region, 192 public and private sector universities, with a total enrolment of 12951780 (hec, 2015). in the modern challenging and competitive academic environment, service quality is considered the most powerful competitive weapon that determining marketing and business strategy (datta & vardhan, 2017; eurydice, 2017). similarly, customers’ satisfaction is also a major challenge for universities and it is also one of the main sources of competitive advantage and customer retention (razali et al., 2017; saravanan, 2018). one common challenge faced by every education institution is how to service its students better. delivering excellent quality service is vibrant and significant for the success and growth of the organization (ali et al., 2016; saravanan, 2018). the higher education sector has not been exempted from higher competition and demand for excellent service quality (felix, 2017; kawshalya 2016). currently, students have a wide range of universities services to pick from it. (datta & vardhan, 2017; eurydice, http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 166 2017; saravanan, 2018). service quality is considered an essential element for higher education institutions. however, most of the research studies has been conducted in malaysia (razali et al., 2017; ali et al., 2016), india (saravanan, 2018; krishnamoorthy et al., 2016), uae (datta & vardhan, 2017; ibraheem, 2016), uk (kawshalya, 2016; douglas et al., 2006), and africa (felix, 2017; liben, 2017), and very few studies has been undertaken to measure service quality of universities in pakistan. hence, it is very important for organizations to possess knowledge about the students’ behaviour and satisfaction in order to deliver better service quality to its customers. 2. review of literature the increasing interest of researchers in service quality have made the development of different tools to investigate service quality (cumhur & aydinli, 2016; datta & vardhan 2017; ibraheem, 2016; khurana, 2017; minh & huu, 2016; razali et al., 2017; truong et al., 2016). there is a substantial body of evidence available in the literature that measures the service quality and customer satisfaction in higher education industry. (asaduzzaman, hossain, & rahman, 2013; bharwana et al., 2013; choudhury, 2014; cerri, 2012; chopra, chawla, & sharma, 2014; cheruiyot & maru, 2013; datta & vardhan, 2017; donlagic & fazlić, 2015; esther-r, 2015; gallifa & battle, 2010; ghotbabadi, feiz, & bahar, 2015; green, 2014; govender & ramroop, 2012; hill, 1995; ibraheem, 2016; kanakana, 2014; khan, ahmed & nawaz, 2011; khodayari & khodayari, 2011; kiran, 2010; koni, zainal, & ibrahim, 2013; malik, 2010; mosahab, mahamad, & ramayah, 2010; naidoo, 2014; oliveira, 2009; rasli et al., 2012; shah, 2013; shaari, 2014; truong et al., 2016; twaissi & al-kilani, 2015; vaz & mansori, 2013; yousapronpaiboom, 2014). beside the servqual various others models have been introduced and applied in higher education sector. cronin and taylor (1992) derived performance based model (servperf) from the servqual model. this model was only concentrating on perception aspects of the servqual model and ignoring expectations aspects of the model. ho & wearn (1996) introduced higher education total quality management model of excellence called hetqmex. this model basically focused on innovative technique rather than traditional one to maintain quality in higher education institutions. in 2016 hesqual model was introduced by teeroovengadum et al., to measures service quality in higher education sector (teeroovengadum et al., 2016) this model was consists of administrative quality, core educational quality, support facilites quality, physical quality and transfromative quality. similarly, various researchers suggested various dimensions of service quality that mostly influence the satisfaction of the customers in higher education industry. such as reliability (cronin & taylor, 1992; parasuraman et al. 1988), academic (abdullah, 2005; randheer, 2015), programme quality (osman et al. 2017), tangibility (asefi et al., 2017; parasuraman et al. 1988), non-academic (abdullah, 2005), culture (randheer, 2015), programme issues (abdullah, 2005; randheer, 2015), understanding (abdullah, 2005), empathy (asefi et al., 2017; parasuraman et al. 1988), access (abdullah, 2005), responsiveness (cronin & taylor, 1992, mwiya et al. 2017) reputation (abdullah, 2005), knowledge (jiewanto et al. 2012), and assurance (asefi et al., 2017; parasuraman et. 1985), osman et al. (2017) conducted a study to examine the association between service quality and students satisfaction. the finding of the study revealed that program quality has strong significant effect on students’ satisfaction. sultan & wong (2012) found that reliability influence students satisfaction more than other dimensions. on the other hand the study of twaissi & al-kilani (2015) concluded that dimension tangibility has strong effect on students’ satisfaction in higher education industry. according to saravanan (2018) factors that can increases the satisfaction level of customers are knowledgeable employees, friendly employees, helpful employees, better service quality and quick service. mwiya et al. (2017) recommended that quick and timely response of the employees can increase the level of customers’ satisfaction. jiewanto et al., (2012) found that employees’ knowledge and courtesy can inspire trust and confidence of the students which has a significant effect on level of satisfaction. the study of sultan and wong (2012) suggested that dimension reliability is the most important dimension of service that significantly affects the satisfaction of the customers. according to osman et al. (2017) all the dimension of service quality has a significant connection satisfaction of the customers. the study further recommended that dimension programme quality has higher effect on satisfaction in higher education industry. various researchers suggested that dimension tangibility are significantly associated with customer satisfaction (asaduzzaman et al. 2013; bharwana, bashir, & mohsin 2013; datta and vardhan 2017; mangin 2013; truong et al. 2016). on the other hand, researchers recommended that dimension reliability have a signficant effect on customer satisfaction (diab et al. 2016; chopra, chawla & sharma 2014; khan, ahmed & nawaz 2011; shah 2013). yusoff et al., (2015) suggested that physical appearance and fee structure were the main determinants of students’ review of economics and development studies vol. 4, no 2, december2018 167 satisfaction. the findings of onditi et al. (2017), recommended that dimensions academic and non-academic should be incorporated for effective estimation of service quality and students satisfaction in higher education top agenda. the study further suggested that universities should be aware of the important apects of service quality which are determined by the feedback of the students. servqual is the most widely used and acceptable model for measuring service quality although higher education industry specific model hedperf should be tested in various countries to validate it (onditi et al., 2017). according to randheer (2015) academic, non-academic, access, programme issues, reputation, understanding and culture were the most significant dimension of service quality in higher education industry. brochado (2009) also recommended that hedperf scale is a best measurement instrument to measure higher education industry service quality. various researchers recommended that industry specific model should be used in higher education industry (kara, 2016; khalifa & mahmoud, 2016; krishnamoorthy et al. 2016; liben et al., 2017; osman et al., 2017). therefore, the current selected the hedperf model to use in the current study. abdullah (2005) proposed a performance based new measurement scale known is hedperf model. this scale was consists of 41 indicators, containing of 13 items adapted from servperf scale and 28 items derived from the literature. hedperf model was consists of six dimensions namely, non-academic aspect, academic, access, programme issue and understanding. the objective of hedperf model was to develop a scale that measures the service quality of higher education industry. the most important dimension of hedperf scale was dimension access (abdullah, 2005). the study found that students perceived access was the most influential variable to measure service quality, which is related to the approachability, ease of contact, and availability. later on the hedperf scale was modified into five dimensions with 38 items. non-academic aspects: this dimension related to the duties carried out by the non-academic staffs that fulfil the needs and requirements of the study in the institutions (abdullah, 2005). academic aspects: the dimension academic aspect refers to the duties and responsibilities of the academics (abdullah, 2005). the main duty of academic staff is transmitting of knowledge through research and producing of knowledge through research (eurydice, 2017). access: dimension access relate to the ease of contact, approachability and availability of items (abdullah, 2005). programme issues: the dimension programme issue concentrating the importance of specialization offered by the higher education institutions (abdullah, 2005). reputation: reputation denotes the image of the institution perceived by the students (abdullah, 2005). the objectives of the study are (i) to investigate the effect of academic aspects on customer satisfaction (ii) to investigate the effect of non-academic aspects on customer satisfaction (iii) to investigate the effect of access on customer satisfaction (iv) to investigate the effect of reputation on customer satisfaction (v) to investigate the effect of programme issues on customer satisfaction. the hypotheses of the study are as follows; h1: academic aspects has a significant effect on customer satisfaction h2: non-academic aspects has a significant effect on customer satisfaction h3: access has a significant effect on customer satisfaction h4: reputation has a significant effect on customer satisfaction h5: programme issues has a significant effect of customer satisfaction 3. conceptual framework figure 1: conceptual frame work review of economics and development studies vol. 4, no 2, december 2018 168 4. research methodology public and private sector universities of khyber pakhtunkhwa (kp) were the target population of the study. according to hec (2018) there are 36 universities imparting education in kp out of which 19 universities were selected for data collection on personal judgement. the present study takes into consideration only those universities which are established before 30 th june 2010. there are 384 respondents were selected as a sample for the present study. the adequate sample size for the analysis of the data would have a ratio of 10 to 1. in first phase of the sample size only 19 universities were selected for data collection. in second phase of the sample sized proportional allocation technique was applied, where the size of the sample from universities were kept proportional to the sizes of the population. the third phase was consisting of systematic sampling technique with the aim to draw sample from departments and faculties. according to hair et al., (2006) specific item would be selected on the basis of random sampling technique in systematic sampling technique. in present study the first item was selected randomly in the class and the remaining unit of sample were selected at fixed interval. the randomly selected unit was every 3 rd student in the class row. the adapted questionnaire of abdullah (2005) was used in the current study. the questionnaire was reliable and already tested by abdullah (2005) to measure higher education industry performance. confirmatory factor analysis was also performed for the item reduction. firstly construct wise cfa was done and then overall model cfa was performed. table 1: demographic profile of the respondents gender frequency %age male 273 71.4 female 111 28.6 total 384 100 age frequency per cent 18-20 106 27.6 21-25 202 52.6 26-30 57 14.8 31-35 17 4.4 36+ 2 .5 education frequency %age bachelor 151 39.3 master 173 45.1 m.phil./ms 43 11.2 phd 17 4.4 duration frequency %age <1 123 32 1-2 years 143 37.2 2-3 years 90 23.4 3-4 years 28 7.3 4.1 cfa for academic figure 2 represents the original measurement model for the dimension academic. the value of chi square 29.99 with degree of freedom was statistically significant at p<0.001 level. the other fit indices showed that model was not acceptable (rmsea = 0.135, gfi = 0.89, cfi = 0.89 and srmr = 0.021). thus the model was further investigated in the light of modification indices suggested by different researchers. the error of ad2 and ad5 were highly found correlated with other indicators. therefore, the ad2 and ad5 were deleted. table 2 provides the final cfa for the dimension academic with four indicators. review of economics and development studies vol. 4, no 2, december2018 169 figure 2: dimension academic table 2: confirmatory factor analysis for academic indicators loading reliability error variance ad1 0.81 0.731 0.39 ad3 0.79 0.821 0.44 ad4 0.62 0.762 0.51 ad6 0.66 0.837 0.32 fit indices chi-square = 5.13, df = 2, p = 0.11, rmsea = 0.058, srmr = 0.082, cfi = 0.952, gfi = 0.973, note: all t-values were significant at p<0.05 4.2 cfa for access figure 3: dimension access table 3: confirmatory factor analysis for access indicators loading reliability error variance ac1 0.72 0.892 0.23 ac3 0.67 0.793 0.37 ac4 0.80 0.642 0.46 ac6 0.78 0.811 0.51 fit indices chi-square = 6.39, p = 0.04, rmsea = 0.063, srmr = 0.072, cfi = 0.932, gfi = 0.881 note: all t-values were significant at p<0.05 figure 3 represents the original measurement model for the dimension academic. the chi square value of 31.54 with degree of freedom was statistically significant at p<0.001 level. the other fit indices showed that model was not acceptable (rmsea = 0.151, gfi = 0.90, cfi = 0.84 and srmr = 0.019). thus the model was further review of economics and development studies vol. 4, no 2, december 2018 170 investigated in the light of modification indices suggested by different researchers. the error of ac2 and ac5 were highly found correlated with other indicators. therefore, the ac2 and ac5 were deleted. table 3 provides the final cfa for the dimension access with four indicators. 4.3 cfa for non-academic figure 4 represents the original measurement model for the dimension academic. the chi square value of 31.55 with degree of freedom was statistically significant at p<0.001 level. the other fit indices showed that model was not acceptable (rmsea = 0.176, gfi = 0.89, cfi = 0.91 and srmr = 0.018). thus the model was further investigated in the light of modification indices suggested by different researchers. the error of na1, na3, na5 and na6 were highly found correlated with other indicators. therefore, the na1, na3, na5 and na6 were dropped. table 4 provides the final cfa for the dimension non-academic with four indicators. figure 4: dimension non-academic table 4: confirmatory factor analysis for non-academic indicators loading reliability error variance na2 0.91 0.821 0.29 na4 0.86 0.683 0.28 na7 0.64 0.765 0.38 na8 0.72 0.775 0.42 fit indices chi-square = 4.88, p = 0.03, rmsea = 0.043 srmr = 0.114, cfi = 0.964, gfi = 0.921 note: all t-values were significant at p<0.05 4.4 cfa for programme figure 5: dimension programme review of economics and development studies vol. 4, no 2, december2018 171 figure 5 represents the original measurement model for the dimension academic. the chi square value of 21.76 with degree of freedom was statistically significant at p<0.001 level. the other fit indices showed that model was not acceptable (rmsea = 0.234, gfi = 0.85, cfi = 0.89 and srmr = 0.075). thus the model was further investigated in the light of modification indices suggested by different researchers. the error of pr1 and pr3 were highly found correlated with other indicators. therefore, the pr1 and pr3 were deleted. table 5 provides the final cfa for the dimension programme with four indicators. table 5: confirmatory factor analysis for programme indicators loading reliability error variance pr2 0.88 0.751 0.48 pr4 0.76 0.861 0.25 pr5 0.64 0.679 0.31 pr6 0.80 0.743 0.40 fit indices chi-square = 6.28, p = 0.05, rmsea = 0.047 srmr = 0.035, cfi = 0.932, gfi = 0.910 note: all t-values were significant at p<0.05 4.5 cfa for reputation figure 6 represents the original measurement model for the dimension academic. the chi square value of 25.84 with degree of freedom was statistically significant at p<0.001 level. the other fit indices showed that model was not acceptable (rmsea = 0.201, gfi = 0.89, cfi = 0.90 and srmr = 0.120). thus the model was further investigated in the light of modification indices suggested by different researchers. the error of ru3 and ru4 were highly found correlated with other indicators. therefore, the ru3 and ru4 were deleted. table 6 provides the final cfa for the dimension reputation with four indicators. figure 6: dimension reputation table 6: confirmatory factor analysis for reputation indicators loading reliability error variance ru1 0.83 0.791 0.44 ru2 0.74 0.835 0.51 ru5 0.71 0.731 0.33 ru6 0.84 0.658 0.28 fit indices chi-square = 4.12, p = 0.05, rmsea = 0.065 srmr = 0.062, cfi = 0.912, gfi = 0.951 note: all t-values were significant at p<0.05 4.6 cfa for customer satisfaction figure 7 represents the original measurement model of customer satisfaction. the model was examined in the light of various indices suggested by various researchers. the error of cs2, cs7, cs8 and cs9 were found correlated review of economics and development studies vol. 4, no 2, december 2018 172 with other indicators. therefore, the above mentioned indicators were dropped. figure 7: customer satisfaction table 7: cfa for customer satisfaction indicators loading reliability error variance cs1 0.79 0.712 0.22 cs3 0.83 0.697 0.32 cs4 0.80 0.871 0.44 cs5 0.75 0.893 0.27 cs6 0.88 0.756 0.39 cs10 0.72 0.684 0.20 cs11 0.91 0.734 0.35 cs12 0.82 0.712 0.19 fit indices chi-square = 5.33, p = 0.05, rmsea = 0.512 srmr = 0.063, cfi = 0.957, gfi = 0.932 note: all t-values were significant at p<0.05 table 8: parallel analysis dimension random eigenvalue eigenvalue from pca decision academic 1.0196 1.0763 retained non-academic 1.0176 1.0682 retained access 1.0082 1.0132 retained reputation 0.0871 0.0911 retained programme 0.0785 0.0853 retained understanding 0.0654 0.0701 dropped overall model fit indices chi-square = 3.22, p = 0.04, rmsea = 0.034 srmr = 0.071, cfi = 0.932, gfi = 0.943 note: all t-values were significant at p<0.05 review of economics and development studies vol. 4, no 2, december2018 173 figure 8: overall model table 9: summary of hypotheses testing dependent independent hypotheses estimate s.e. c.r. p decision customer satisfaction <--academic h1 .336 .033 10.234 *** accepted customer satisfaction <--non-academic h2 .069 .025 2.768 .006 accepted customer satisfaction <--access h3 .466 .052 8.894 *** accepted customer satisfaction <--programme h5 -.232 .117 -1.978 .068 rejected customer satisfaction <--reputation h4 .352 .036 9.717 *** accepted hypothesis 1: academic aspects has a significant effect on customer satisfaction hypothesis 1 investigated the effect of academic aspects on customer satisfaction. the path coefficient of 0.36 and the p-value were significant, the hypothesis was accepted by the study. hypothesis 2: non-academic aspects has a significant effect on customer satisfaction hypothesis 2 investigated the effect of non-academic aspects on customer satisfaction. since the standardized path coefficient of 0.40 and the p-value were significant, indicating that non-academic aspects has strong effect on customer satisfaction. therefore, the hypothesis was accepted by the study. hypothesis 3: access has a significant effect on customer satisfaction hypothesis 3 investigated the effect on dimension access on customer satisfaction. the standardized path review of economics and development studies vol. 4, no 2, december 2018 174 coefficient of 0.43 and the p-value were significant, indicating that access has positive effect on customer satisfaction. therefore, hypothesis was accepted by the data. hypothesis 4: reputation has a significant effect on customer satisfaction hypothesis 4 investigated the effect on dimension reputation on customer satisfaction. the standardized path coefficient of 0.33 and the p-value were significant, indicating that dimension reputation has a significant effect on customer satisfaction. hence the hypothesis is supported. hypothesis 5: programme issues has a significant effect of customer satisfaction hypothesis 5 investigated the effect of programme issues on customer satisfaction. the standardized path coefficient -0.32 and the p-value 0.068 were negatively insignificant, indicating that programme issues has slightly negative effect on customer satisfaction. hence the hypothesis is not supported by the data. 5. discussion and conclusion the overall model fit indices reveals that rmsea 0.034 which is lower than the suggested value of 0.08 (hair et al. 2010). the value of cfi 0.932 was greater than the suggested value of 0.9. similarly, the chi square value was 3.22 and which was significant at 0.04. according to hair et al. (2010) at least one index must be satisfied the minimum acceptable level of goodness of fit. hence, the present study presented a good model fit for the analysis of data. table 8 indicates the statistically significant association between independent and dependent variables. in higher education sector faculty members and other supporting facilities are considered the most important significant indicators of customer satisfaction (kara, 2016; liben et al., 2017). according to khalifa and mahmood (2016) academic and non-academic aspects were the most influential dimensions of customer satisfaction in higher education industry. krishnamoorthy, aishwaryadevi and bharathi (2016) added that bedsides the academic and non academic aspects the teaching material and curriculum were the key determinants of customer satisfaction. farahmandian (2013) and yusoff et al. (2017) also found that academic aspects, curriculum and teaching methods were the most significant dimension of customer satisfaction. table 9 highlights the statistically significant association between hedperf model and students satisfaction. the dimensions academic aspect (estimate, .336), reputation (estimate, .352), non-academic (estimate, .069) and access (estimate, .466) are significantly associated with the satisfaction of the students. on the other hand, the dimension programme has statistically insignificant relationship with students’ satisfaction, which estimate -.232 units. therefore, the hypotheses h1, h3, h4, and h2 are accepted and h5 is rejected. according to kara (2016) quality of teaching and teaching facilities were the most significant dimensions of customer satisfaction. teaching faculties and supporting facilities were considered the most influential variables of students’ satisfaction (liben et al., 2017). on the other hand, khalifa & mahmoud (2016) found that non-academic staff helpfulness and academic staff individualized attention were positively associated with students’ satisfaction. onditi et al. (2017) found that dimension academic aspects and non-academic aspects were the main predictor of customer satisfaction in higher education industry. randheer (2015) suggested that dimension culture significantly affect the satisfaction of the customers. in higher education industry students considered curriculum, staff competency, academic aspects and teaching methods were the most significant variables (krishnamoorthy, aishwaryadevi, & bharathi, 2016). various researchers considered the dimension academic aspects the most influential variable of students’ satisfaction (liben et al., 2017; kara, 2016; osman et al., 2017). according to farahmandian et al., (2013) academic aspects, teaching curriculum and teaching quality were significantly associated with students’ satisfaction. the study of osman et al., (2017) revealed that programme quality was the most powerful dimension of students’ satisfaction in bangladesh higher education industry. garcl a-aracil (2009) found teaching quality, course outlines and teaching material were the most influential variables of students’ satisfaction in european countries. similarly, navarro, (2005) found academic staff and teaching techniques were highly significant association with satisfaction. hence, better service quality and satisfied customer can bring competitive advantage (channoi, 2014), particularly building a brand name of the institution (arpan, raney, & zivnuska, 2003; dib & alnazer 2013; druteikiene, feldman et al., 2014; khalifa & mahmoud, 2016; kim & periyayya, 2013; kantanen, 2012; stimac & simic, 2012; teo & soutar, 2012). public and private sector higher education institutions should be aware of the importance of the education. similarly, competition in the higher education sector is also getting tighter with the increase of private higher education institutions. every university is trying their best to win the competition, therefore, it need continuous review of economics and development studies vol. 4, no 2, december2018 175 service quality improvements including the academic aspects, reputation, non-academic, program and access. the current study found academic is the most important and influential dimension of service quality, that bring a big difference in the level of satisfaction of the customers. therefore, both sector universities should concentrate on all aspects of service quality and particularly on dimension academic. references abdullah, f. 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(1985). problems and strategies in service marketing. journal of marketing, 49(2), 33-46. review of economics and development studies, vol. 8 (2) 2022, 203-209 203 electrical consumption in the industrial sector of pakistan: a structural time series analysis muhammad zahir faridi a, hina ali b, tahira bano qasim c, maheen sadaf d a professor, school of economics, bahauddin zakariya university multan, pakistan email: zahirfaridi@bzu.edu.pk b associate professor, department of economics, the women university, multan pakistan email: hinaali@wum.edu.pk c assistant professor, department of statistics, the women university, multan, pakistan email: tahirabanoqasim@yahoo.com d phd scholar, department of economics, the women university, multan, pakistan email: ashfakhan774@gmail.com article details abstract history: accepted 30 may 2022 available online june 2022 the usage of energy is the central factor in promoting the contribution of the industrial sector economy to develop the economy. indeed, pakistan is a growing but recently united country with severe shortages of electricity resources. therefore, the industry has a growing quantity of growth that leads to economic progress and also prioritizes inevitable challenges to stimulate industrial growth. the purpose of the study is to investigate the relationship between electrical consumption, oil consumption, and gas usage in manufacturing and its impact on the economic growth in pakistan. results declared electricity and gas have a positive and significant impact in the short and long run while fuel consumption has a negative shock on the economy in the short run but is positive in long run. the fault correction model (vecm) ensures bilateral relations in the industrialized sector, oil consumption and financial progress in pakistan. in addition, findings revealed a strong correlation between the variables tested and suggested that the pakistani government must develop a strong policy to reduce gas and oil to produce electricity, instead of relying on solar energy, water, airstream and biomass sources. therefore, the government should increase stokes and storage of oil and gas to provide the industrial sector at a cheap rate. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: oil, gas, electricity consumption, economy of pakistan jel classification: l95 doi: 10.47067/reads.v8i2.453 corresponding author’s email address: hinaali@wum.edu.pk 1. introduction policymakers are trying to control the problem of global warming for the last few decades at the lowest cost. according to different reports, energy consumption in the industrial sector has a vital role review of economics and development studies, vol. 8 (2) 2022, 203-209 204 in the long run and sages of energy are increasing day by day. pakistan is a developing country where energy is produced at high rates and the usage of energy consumption in industries is costly but its impact on the economy of pakistan is positive and significant. so, energy consumption in the industrial sector should be produced by cheap sources like wind, fuel and biomass following the term and conditions to control the environmental changes (akhtar et al. 2018). many organizations are working to achieve these targets but it’s not only the duty of the private sector but the government should try to resolve the problems and facilities of the industrial sector because when the industrial sector grows then the economy of that country also grow (abdoli, gudarzi farahani & dastan, 2015). pakistan is the richest country in the world with coal of $ 189 billion tonnes which is available in makarwal and this can be used in the industry after proper cleaning and if we control the crisis of electricity then it will boost the economy. the combination of electricity from different sources from 2014 to 2015 was different as 65000 mw through hydropower was limited to 12 present, the electricity that was generated through water was increased by 42% and it is predicted that local electricity demand can reach 82.5% till 2035 (kamran, 2018). according to different surveys and reports, the growth rate of pakistan’s economy increased from 2019 to 2021 in different sectors and to achieve this sustainable situation government tries its best through policies and different strategies. the increasing ratio in growth rate recorded a strong relationship between the energy consumption in the production process so there exists a significant relationship between energy consumption and production. further petroleum consumption decreased by less than 1 percent while energy, oil and gas consumption increased by 1 % during the last 3 years. household consumption of energy sources is less than 60% of its total stock and the remaining use for the industrial sector and others that are most costly due to use of the nonrenewable sources. the purpose of this paper is to analyze the electric consumption in the industrial sector and its impact on the economy of pakistan for this we use the data from 19822021. ardl approach uses to check the long run and short relationship between the variables. dickey fuller (adf) and phillips-peron root tests use to check the stationarity of variables. the granger causality test is used for the forecasting values of the model for the future. 2. literature review kraft and kraft (1978) defined the relationship between energy and gross domestic product using the different investigation statistic approaches such as granger and cointegration approaches. results showed nonstationarity between variables. the use of force plays an important role in the economic enhancement of an economy. campbell and person (1991) presented the energy relative and financial growth in the short run (xu & pan, 2009). xu and pan (2009) displayed a linkage between energy and economic growth in the long run, results declared a positive relationship to economic growth (kim & lee, 2021). shahbaz et al. (2013) used the time series data from 1970 to 2010 to indicate an analysis of the positive effect of energy and oil consumption and sari also verified it. dastan et al. (2015) declared electricity consumption and growth showed the deviation effects due to the disagreed of oil consumption for growth as zhang and chandio (2019) in carbon emission, energy consumption and economic growth (zhang & cheng, 2009). hassan et al. (2018) well-defined using data from 1977 to 2013 for long run relations in pakistan and showed the significant analysis of oil consumption on the economic growth (rafique and rehman 2017). chandio, jiang and rehman (2018) defined the consumption of gas and electricity in agriculture positive impact in the long and short run and was estimated at 1 %,0.5%,0.6% and 0.4 %. johnson approach and ardl were used and results remained stable till 2016. review of economics and development studies, vol. 8 (2) 2022, 203-209 205 aized et al. (2018) in structural changing and economic growth defined that change in temperature due to carbon dioxide has a negative impact on the environment but increases the growth rate of an economy so the need for time is to use this higher temperature to produce the energy sources so that use this energy for the further production process to increase the growth rate of an economy. sari, ewing and soytas (2008) explored in electrical consumption and gdp in bangladesh that there is a strongly positive impact of electricity consumption on gdp and also defined about lack of causality that was due to omitting important variables (lu, 2016). appiah and gatsi (2020) growth of population, income and saving explained the consumption of energy has a positive impact on economic growth while saving and population growth have a negative impact on the economy used by ardl approach. lin and yousef (2020) explored the relationship between energy and gdp. findings of the markal model defined the supply and demand side of energy sources and also discuss the energy supply and demand gap. results explored the gap due to the decline of primary sources of energy. lin and yousaf (2021) showed in their work a correlation between energy consumption and economic growth in the short run as well as the long run. investment in increasing the energy stock is a significant and positive effect on growing the economic growth and financial growth of pakistan. 3. methodology the study links the energy consumption (electricity, gas, and oil) in industry sectors and economic growth using the data of pakistan from 1982 2021. 𝐺𝐷𝑃𝑡 = 𝑓 (𝐸𝐶𝐼𝑡, 𝐺𝐶𝐼𝑡, 𝑂𝐶𝐼𝑡, 𝑉𝐴𝐼𝑡, 𝑇𝐸𝐶𝐼𝑡) it is assumed that non-linear correlations exist between dependent variations and autonomy, model is defined as follows: gdpt = ε + ε1ec it + ε 2gcit + ε 3ocit + ε 4vait + ε 5tect + t this study used a few measurement checks; the model is organized by double log on both sides, as follows: 𝐿𝑛𝐺𝐷𝑃𝑡 = 𝜀 + 𝜀 1𝐿𝑛𝐸𝐶𝐼𝑡 + 𝜀 2𝐿𝑛𝐺𝐶𝐼𝑡 + 𝜀 3𝐿𝑛𝑂𝐶𝐼𝑡 + 𝜀 4𝐿𝑛𝑉𝐴𝐼𝑡 + 𝜀 5𝐿𝑛𝑇𝐸𝐶𝑡 + where t = error term gdp = per capita income ec = power consumption gci= gas consumption oci= industrial consumption of oil vai= value added tec= overall energy consumption. data is collected from world bank index and various pakistani financial research issues. review of economics and development studies, vol. 8 (2) 2022, 203-209 206 table1: results of descriptive statistic and correlation matric variables gdp eci gci oci vai tec mean 8.4778 8.5446 12.9098 15.1458 2.0710 2.8048 median 8.3895 8.4881 12.7071 15.1655 2.0769 2.8062 maximum 8.9642 9.1280 14.4761 15.6977 2.2398 2.1620 minimum 8.2303 9.6255 10.1636 13.8781 1.9785 2.8657 std. dev. 0.2110 0.3302 0.5036 0.4666 0.1574 0.0906 skewness 0.9641 −0.5932 0.6697 −1.3496 0.9520 0.3077 kurtosis 3.6682 3.4629 3.2418 6.3383 3.6107 3.0439 jarque-bera 3.7275 3.0211 3.6251 16.6800 6.6639 2.5126 probability 0.0888 0.2658 0.3429 0.000038 0.0117 0.3364 source: authors’ computation. by the descriptive statistic and correlation matrix, we find out the relationship between endogenous and exogenous variables. results of connecting matrix show, that manufacturing power feeding (electricity, gas, and oil) have a strong relationship with economic growth. that suggests a vital force in promoting progress. economic evolution is similarly closely related to industry worth added. table 2: augmented dickey fuller (adf) and phillip-peron (pp) unit root test results. variables intercept trend and intercept deduction τμ τt τμ τt lngdp 3.3865 −4.0774 −3.1315 *** −3.3191 *** i(1) lneci −3.4299 −3.7228 −3.7709 ** −4.4272 * i(1) lngci −3.6705 −4.1314 −3.3341 *** −11.8105 *** i(1) lnoci −4.4115 −4.3098 −6.3994*** −6.2805 *** i(1) lnvai −2.2189 −3.6431 −7.1122 *** −7.1687 *** i(1) lntec −0.6285 −4.5303 ** −3.1305*** −3.4917*** i(1) p-p unit root test lngdp 2.7373 −2.1874 −3.2279*** −5.2354*** i(1) lneci −3.2299 −3.7228 −3.770984 ** −4.2272 * i(1) lngci −3.6705 −4.1314 −3.3341 *** −9.6466 *** i(1) lnoci −3.3638 −3.4098 −6.2805 *** −6.3994 *** i(1) lnvai −2.9896 −3.4931 −7.1122 *** −7.1687 *** i(1) lntec −2.2579 −4.4436*** −3.1365*** −3.4928 *** i(1) source: writers’ addition *, **, *** represent rejecting the null hypothesis at a different level. to check the stationarity of data, we can use different tests such as augmented dickey fuller and philip test. further test results will decide on a statistical approach for the diagnosis of data. estimates show that all variables in the model are stationary on level one 1(1) so we will use the ardl. we are also using selective lag in ardl. review of economics and development studies, vol. 8 (2) 2022, 203-209 207 table3: bounds test, results dependent variable f-statistic fgdp 10.69 feci 6.06 fgci 16.53 foci 9.93 fvai 3.25 ftec 3.20 critical values lower bound upper bound 10% 1.05 1.90 5% 1.29 2.00 2.5% 1.4 2.93 1% 2.03 3.95 basis: writers’ totaling. ardl test is used to check the long run relationship between the variables. if the results of the unit root show all variables are stationary at level one then will use the ardl. the ardl boundary assessment method is used to assess the existence of a merger organization between the use of industrial power (electricity, gas, and oil), and financial progress in pakistan. these findings indicate the existence of a long-term equity relationship among all variables. table 4: granger causality test (vec) results dependent variable autonomous variables δgdp δeci δgci δoci δvai δtec δgdp — 3.1096 (0.256) 9.3817 *** (0.124) 6.2660 * (0.055) 6.2336 * (0.056) 2.0759 (0.681) δeci 8.2035 *** (0.008) — 15.4627 *** (0.002) 8.8011 * (0.030) 0.6799 (0.654) 3.6739 (0.349) δgci 0.7497 (0.660) 1.4493 (06411) — 1.5110 (0.376) 0.8167 (0.714) 2.2262 (0.659) δoci 8.3087 ** (0.127) 0.7065 (0.693) 6.5834 ** (0.048) — 4.8179 (0.241) 2.6518 (0.560) δvai 0.0297 (0.880) 3.2327 * (0.053) 8.8119 *** (0.006) 6.8995 ** (0.139) — 3.5206 (0.369) δteci 0.1104 (0776) 0.3124 (0.562) 2.3583 (0.200) 2.7770 (0.205) 4.6343 (0.050) — source: authors’ calculation. granger causality defines if there is a linear relationship between the variables then how much one dependent variable defines the independent variables in the model. the possibility of changing allows us to measure directional casual communication between dynamic contexts. however, table shows the causality bonds that are temporary vecm-based models. as ardl binds the test method and johansson integration was applied and showed the long-term integration estimates that exist between variables, in the meantime, the cause of the granger in the short term through the vecm process may review of economics and development studies, vol. 8 (2) 2022, 203-209 208 present a need for the effects of thoughtful expression of strong policy outcomes. in addition, references through the vecm model ensure two industry oil-related relationships and the progress of the economy. likewise, manufacturing gas consumption is worth adding to (% of gdp) financial growth in pakistan. 4. conclusions and policies this effort is sightseen connection between industrial power and economic growth. ardl statistic technique explains the long run relation between dependent and independent variables using annual data from 1982 -2021. by vecm model bidirectional confirm linking economic growth to the industrial sector in pakistan as industrial oil, and gas consumption boosts the percentage gdp of the country. according to finding electricity and gas consumption in the industry has a positive and authentic impact on the economy in both time period of long and short run but oil has a negative impact in the long time period but positive in the short period. so, we can say oil consumption is also effective for the economy of pakistan in the short run. the results found a strong correlation between the variables examined and suggested that the pakistani government must develop a strong policy to reduce gas, lubricant and remnant fuels to generate voltage, instead of relying on solar energy, water, wind and fuel springs in pakistan. therefore, government should effort to expend more energy sources, policies and technology instead of remnant coals. extra power assets, hydropower, fissionable power, breeze power and planetary generators can be developed in proportion to the use of natural gas. it may happen soon to meet the demand for power in pakistan. thus, a sustainable energy system is a very important increase in the use of regular oil and gas, oil and corresponding to extra familiarity as well many of those programs through immediate investment in sources of energy. last resort, this revision expands the area of research shortly as testers may practice, organizational procedures to bring back more awareness of the use of oil and gas in manufacturing and monetarist progress in pakistan. ardl discusses nonlinear asymmetric and industrial index instead of industrial growth. recent research has calculated the combined rate of co2 emissions of pakistan; however, from now on discover the relationship between these variables' co2 emissions is at a divisive level (according to industry intelligence) and may exceed the rendering of better quality. therefore, these may support policymakers to speak in an environmentally friendly manner regarding energy policies. references abdoli, g., gudarzi farahani, y., & dastan, s. 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(2009). energy consumption, carbon emissions, and economic growth in china. ecological economics, 68(10), 2706-2712. review of economics and development studies vol. 5, no 1, march 2019 33 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads political stability and institutionalization in pakistan: an overview of major political developments during 2008-2016 1 imran khan, 2 ali shan shah, 3 muhammad azhar 1 ph.d. scholar, department of political science and international relations gc university, faisalabad, pakistan. imranbzu2014@gmail.com 2 assistant professor, department of political science and international relations gc university, faisalabad, pakistan. 3 assistant professor, department of political science and international relationsgc university, faisalabad, pakistan. article details abstract history revised format: february2019 available online: march 2019 political development refers to the significance of institutionalization and is a closely interrelated trend of modernization. political development in a state depends on political participation while political participation depends on institutionalization. political stability increases the prospects for civilian rule, and institutionalization strengthens the political system. political history of pakistan presents the infrequent institutionalization of political system for democratic stability and the political experiences of pakistan are just a posed in order to understand the problems of political institutionalization. this paper explores the close relationship between institutionalization, political development and political stability, and also highlights the views provided by different social scientists in an explanation of these terms. the purpose of this study is to evaluates the democratic process and major political developments during 2008-2016 as a case study because this is the unique era for political stability and institutionalization in the political history of pakistan. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords political development, political stability, institutionalization, political parties, political participation jel classification: d72, p16, p26, p48 corresponding author‟s email address: imranbzu2014@gmail.com recommended citation: khan, i., shah, a. s. and azhar, m., (2019). political stability and institutionalization in pakistan: an overview of major political developments during 2008-2016, review of economics and development studies, 5 (1), 33-40. doi: 10.26710/reads.v5i1.565 1. introduction the current political history of the developing countries shows that those countries have been facing various kinds of political, social and economic problems which have slowed their progress and shaken their stability. since the beginning of the 1950s, many social science theorists have been involved in studying these developmental problems and their possible solutions. political development, social mobilization, political participation and political culture have closely relation with each other. in developing countries, the divergence between institutionalization and mobilization is the main idea of politics. in this perspective, an impartial crux of the politics is studied for the growth of political institutions (huntington, 1968). except for samuel p. huntington and a few others, most contemporary writers on political change tend to associate modernization with political development. the research of both modernization and political development is vast and complicated. most writers on comparative politics do not seem to distinguish between political development and modernization. in fact, the two terms have been used interchangeably. referring to the process of change, gabriel a. almond argues, http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 34 “whether we call this set of trends a movement toward a „world culture,‟ a „development syndrome,‟ „political modernization,‟ „political development,‟ or „political change,‟ it seems quite evident that all of us have been writing about movement in a particular direction” (almond, 1970). almond is one of the first political scientists to propose a general theory of political development. he studies modernization from the system functional approach. in 1960, he dealt with the functional categories of all political systems, dividing them into input (socialization, articulation, communication and aggregation) and output (rulemaking, rule application and rule adjudication). in 1963, he also emphasized on integration, participation, distribution and international accommodative capabilities. in a developed political system, he argues that the structural differentiation is on high degree which is characterized as “the emergence of legislatures, political executives, bureaucracies, courts, electoral systems, parties, interest groups, media of communication” (almond, 1960). political party is a primary institution of any democracy and believed to function democratically for political development. however, the elitist political history of pakistan shows a totally different scenario. the mainstream political parties are less than a dozen such as; pml-n, the pml-q, the ppp, the pti, the jui-f, the mqm-p and the anp. there are also many nationalist and religious political parties. these parties have won the most number of seats in every general elections of pakistan (salim, 2005). the inconsistence history of political development in pakistan reflects the weak organizational strength of political parties, centralized political system and imbalance civil-military relations which restrict the growth of political institutionalization. the selection of pakistan as a case study is guided by the consideration that this country has lack of institutionalization and uneven political developments. political parties are perhaps the most significant social organizations and their strength decides the nature of democracy in any country. huntington saw strong political parties as essential and sufficient conditions for democracy and institutionalization. political parties have been extremely weak in pakistan. existing more as personality centred factions they could not clearly aggregate interests. factionalism is still a feature of the pakistani party system (kanwal, 2017). 2. political institutionalization the process of the evolution and stabilization of institutions is political institutionalization. huntington defines institutions as “stable, valued, recurring patterns of behaviour” and describes institutionalization as “the process by which organizations and procedures acquire value and stability” (huntington, 1968). he further describes that political systems can be treated as developed or underdeveloped depending upon their ability to have their institutions keep pace with popular participation. huntington argues that political institutionalization in a modern polity is not possible without political parties. a political party, according to him, is almost necessary to channelize the participation of the mobilized masses. huntington also uses the terms political order and disorder instead of political stability and instability (huntington, 1968). institutionalization is a prime requisite of political development. political development could be accomplished only through strong institutions. the intensity of institutionalization of any society can be considered, according to huntington, by the following four indices: (1) adaptability in opposition to rigidity; (2) complexity in opposition to simplicity; (3) autonomy in opposition to subordination; and (4) coherence in opposition to disunity (huntington, 1965). political institutionalization is a significant aspect of political development. in trying to differentiate development from modernization, bill and hardgrave argued that development should be “understood in terms of a system‟s response capacity in relationship to demands”, whereas modernization pertains to “those changes associated with man's increasing control over his natural and social environments” (bill & hardgrave, 1973). modernization unleashes forces which lead to increasing demands on the political system. it leads to political participation among other things. samuel huntington was much more specific in his definition of development. according to him when institutions keep pace with mobilization and participation, political development occurs. when there is a gap between the development of institutions and participation, this is leading to political decay. in order for political institutionalization to take place, mobilization may have to be controlled and gradually expanded as institutions acquire the capacity to absorb it (bill & hardgrave, 1973). huntington argues that political institutionalization in a modern polity is not possible without political parties. a political party, according to him, is almost necessary to channelize the participation of the mobilized masses (huntington,1968). review of economics and development studies vol. 5, no 1, march 2019 35 3. political stability political development has always depended on political and social stability. political stability and smooth political transformations always generate constitutional and political developments. in the 1970s, political stability and political development was one of the main topics of comparative politics circle. particularly, researchers believe that the political stability and political developments are necessary in a democratic government and political parties generate the process of political development (lei, 2013). political stability has great importance in the evolution of a country. a stable political development helps in building a continuous and coherent path for sustainable development. empirical research shows that the political stability in a country measures through different ways such as economic development, social and cultural development, and political participation and political development. political stability is directly proportional to the governmental strength. an unstable political environment will bring political instability. political stability means government stability, which means political stability. “political stability is like a moving cycle which need to be keep on moving. but it requires maintenance, repairs and reforms on certain interval” (subba, 2017). in general, political stability explains as: • the members of the government can change without violence, either by democratic election or some other means of succession. • policies don‟t change radically between successive governments. • institutions like the legal system, the public service and the judiciary don‟t change when the government changes (birch, 2017). claude ake describes political stability as “the regularity of the flow of political exchange. the more regular the flow of political exchange, the more stable” (ake, 1975). leon hurwitz defines this concept with five approaches which follows as: “(a) the absence of violence; (b) governmental longevity/duration; (c) the existence of a legitimate constitutional regime; (d) the absence of structural change; and (e) a multifaceted societal attribute” (hurwitz, 1973). shaohua lei explains political stability in his thesis as: “a durable polity, whereby the central government in the polity has the capability to restrict or control endogenous subversions and to absorb exogenous challenges” (lei, 2013). 4. political participation verba, nie and kim concentrates more on the objectives of political participation and defines the concept of political participation as “refer to those legal acts by private citizens that are more or less directly aimed at influencing the selections of governmental personnel and the actions that they take” (verba, nie & kim, 1978). political participation, as showed from its name, concerns only political actions. finer says participation in one‟s family affairs, one‟s workplace, the collective or village fields and the like are not political participation except insofar as the policies adopted there are in some clear way related to policies propounded for or administered on behalf of the public as a whole (finer, 1972). verba and nie make the same distinction between political participation and participation in the other spheres. they have limited their argument to „participation vis-a-vis the government‟ and excluded participation in the other spheres such as family, school, job, and voluntary associations. their main concern is “to describe and explain patterns of participation outside of those that are more narrowly political— i.e., aimed at affecting the government” (verba & nie, 1972). nevertheless, the impact of social participation on the political process cannot be neglected. this point, actually, has been stressed by several scholars. the argument is that individuals who are involved in community affairs are much more likely to participate in politics than those who are not active. perhaps the most important empirical study that supports this argument is almond and verba‟s findings in the civic culture that persons participating in decisions in one organization are more likely to participate also in decisions of other organizations. political participation takes some form of „political action‟ to influence the government. therefore, positive and negative feelings toward the government are not viewed as political participation (verba & nie, 1972). 5. theoretical framework political development is a multi-dimensional concept which is used by different political thinkers, economists and sociologists. therefore, many perspectives and challenges appeared during analysis on this concept. political development as an operational theory, has been complicated to the different political, economic and sociological perspectives. the concept of political development is an essential requirement for the achievement of democracy review of economics and development studies vol. 5, no 1, march 2019 36 and autonomy. political history of twentieth century shows that most of the countries in the world focus on political development. different thinkers presented different concepts of political development, e.g. lerner (1958) used it as the multi-dimensional process of social change; almond (1960) described political development as mobilization of power; lapalombara (1963) defined it as one aspects of building of democracy (karimi, 2014). the study of lucian w. pye is particularly important that he defines the political development as “adjustment between old patterns of life and new demands” (karimi, 2014). pye also presented ten different aspects of his theory of political development: “as the political prerequisite of economic development, as the politics typical of industrial societies, as political modernization, as the operation of a nation state, as administrative and legal development, as mass mobilization and participation, as the building of democracy, as stability and orderly change, as mobilization and power, as one aspect of a multi-dimensional process of social change” (pye, 1966). he also acknowledged three fields of any country i.e; population, organization of polity and government performance; where the political development could be observed (pye, 1966). huntington (1968) defined the role of institutionalization in political development. he claimed that political decay is also another possibility of institutionalization. huntington also considered political stability as an indicator of political development, but later huntington and nelson (1976) argued that the political participation is a necessary element of political development. almond and coleman (1960) utilized structural functionalism approach for studying political development. moor (1993) employed class analysis to defines the political development and institutionalization. binder (1961) considers development of a country depends on its capability of political system to resolve the participation, penetration and legitimacy crises of development. some other scholars have propensity to distinguish between modernization and political development (mushtaq, baig & mushtaq, 2018). it is suggested that “the simplest definition of democracy, rule by the people, implies participation” (keim, 1975). pennock sees participation as being more inclusive and more indeterminate than democracy (pennock, 1979). lapalombara says, “it always includes some form of widespread participation in the political process” (lapalombara, 1974). however, he argues, voting and other forms of political participation are not limited to democracies. there is an immense significance of governmental strength for political development and institutionalization. however, the political organizations, political development and institutionalization are closely related to each other. rostow (1960) defines that the political development is a classical view of industrial society. eisenstadt (1964) observes the specialization, secularization and differentiation of political culture in political development. effectiveness, efficiency and capacity are known as main aspects of political development (kanwal, 2017). apter published a study of modernization in 1965. his main proposition is that a system must achieve a balance between coercion and information. he uses the term mobilization to refer to the political system in many developing countries where power is centralized within an executive. binder argues that political development concerns the political consequences of crossing from tradition to modernity. before modernity is completed, the nation must pass through five crises, which include identity, legitimacy, participation, distribution, and penetration (apter, 1965). 6. major political developments in pakistan during 2008 to 2016 benazir bhutto, the twice prime minister of pakistan, assassinated in an attack in rawalpindi on 27th december 2007. the election commission of pakistan announces on 2nd january 2008 that general elections are postponed from 8th january due to the assassination of benazir bhutto and now will be held on 18th february (the telegraph, 2007). on the announced date, elections were held with full of fears, violence and tight security situation in pakistan. the total 34980069 votes were casted in the elections 2008 and the turnout was around 44%. in the national assembly, ppp got majority with 91 general seats, pml-n got 69 general seats and pml-q got 38 general seats. ppp decide to form the governments with the coalition of pml-n, jui-f and anp at the centre and in provinces (urdu point, 2008). on 17th march 2008, the 329 newly-elected members take oath for next five years in the national assembly which consists of 342 seats. the new prime minister yusaf raza gilani was elected on 24th march 2008 (dawn, 2013). on 25th august 2008, the pml-n quit the coalition government after five months. the main reason behind this the issues of restoration of the judiciary and the impeachment of president pervaiz musharraf (the telegraph, 2008). review of economics and development studies vol. 5, no 1, march 2019 37 on 18th august, pervaiz musharraf resigns from his presidential office and muhammad mian soomro takes over as caretaker president (the guardian, 2008). the unilateral recommendation of asif ali zardari as a presidential candidate was also a reason of variance between the two parties. asif zardari, the co-chairman of ppp, wins presidential election with 481 votes and takes oath as the 12th president of pakistan (the news, 2008). in march 2009, lawyers and political parties of opposition undertook a long march for the restoration of judiciary. the long march was successful and the reinstatement of the judges was announced by the then prime minister gilani (dawn, 2009). after the restoration of judiciary, almost all mainstream political parties work together for the 7th national finance commission award. this award was introduced in 2009. the nfc award is helped to the federal and provincial governments of pakistan for the equal distribution of revenues and resources. the 7th nfc award was passed by the federal government and all four provincial finance ministers on 30th december 2009. this award was addressed as a landmark achievement for the financial autonomy of provinces and a logical modification in the policy of government to increase the share of provinces (dawn, 2009). on 9th march 2010, president zardari signed the bill of protection against harassment of women at workplace (dawn, 2010). the national assembly passed the famous 18th amendment in the constitution on 8th april 2010. on 15th april 2010, this amendment was also passed by the senate. on 19th april 2010, when president asif ali zardari signed the amendment bill, it became an act of parliament. the most important feature of this amendment is to reduce the presidential powers and enhance the provincial autonomy. particularly, this amendment removes the presidential powers to dissolve the parliament and these powers are transformed to the prime minister. after this amendment, president is just a ceremonial head of the state. this amendment renamed baluchistan as balochistan, sind as sindh and north west frontier province (nwfp) as khyber pakhtunkha (kp). the manuscript of the constitution is also excluding the name of general zia-ul-haq. the limit on third time becoming as cm and pm has been removed. the 18th amendment in the constitution of pakistan is a landmark achievement of all political parties specially the ppp. this amendment is eliminating the presidential powers to dissolve the parliament (tribune, 2010). pml-n and mqm quit the ppp government, thus ppp lost the strength in the national assembly. mqm remained part of ppp government in sindh to achieve maximum political advantages through bargaining tactics and polarization. pml-n was a major coalition partner of ppp but their mutual distrust and following of old practices of power politics did not let them continue together for a longer period. resultantly, the situation emerged with these developments was tricky one to manage for the government. in april 2011, ppp had negotiations with pml-q and succeeded to form a coalition at the centre with pml-q. chaudhry pervez elahi became deputy prime minister of pakistan without any constitutional powers (kanwal, 2017). the 19th amendment was assented by the president on 1st january, 2011. this amendment is reforming the judicial appointments procedure and the tribal areas of district tank and laki marwat have been including to fata. this amendment eliminates the powers of chief justice for the selection of judges and now the judicial council of pakistan sent recommendations to the president for the appointments of judges. the high court of islamabad was renamed as islamabad high court. in the procedure of appointment of new judges, the prime minister is also a member of judicial council. this amendment also suggested that in camera sessions of the committee meetings will be held and the record shall be maintained. the parliament and their committees will not be permitted to argue on the routine of judges. this amendment altered the following articles; 81, 175a, 182, 213 and 246. most part of this amendment deal with the judicial appointment procedure and justice system of pakistan (business recorder, 2010). the 20th amendment was signed by the president on 28th february, 2012 and it became an act in the constitution of pakistan. this amendment has establish a process for the set-up of a caretaker government and matters related to the chief election commissioner and other members of the ecp. according to this amendment, the ecp has the powers to appointed the caretaker pm and cm. the new chief election commissioner took oath in the office of chief justice of pakistan. this amendment is specially designed for the conduct of free and fair elections in the country (dawn, 2012; the nation, 2017). the new coalition government remained busy to control the political strength of pml-n in the punjab. then a move was started to create new administrative units in pakistan. the move had mustered the support of right wing parties including ji and pml (functional). prime minister gilani was a strong supporter to constitute southern punjab as a separate province. pml-q also joined the move to weaken the influence of its opponent, pml-n in the review of economics and development studies vol. 5, no 1, march 2019 38 punjab. zardari fully supported gilani to start discussion process with all the political parties with an outlook to make a separate province in southern punjab to give them political and administrative identity (kanwal, 2017). the seven-member bench of supreme court declared his decision of contempt of court on 19th june 2012. according to this decision, pm gilani was disqualified for a period of five years to not become a member of parliament. after the disqualification of pm gillani, raja pervaiz ashraf is elected as prime minister of pakistan on 22nd june 2012. throughout the period, both parties could not evolve consensus on long awaited issue of indus water distribution between punjab and sindh and construction of kalabagh dam. not any referendum was conducted to decide the solution of the issue as promised by the pm of pakistan, syed yousaf raza gilani (dawn, 2012). the democracy in this period has been undermined by the weak organization of political parties as well as by the zero-sum-game approach to politics. political parties continued to work as undemocratic institution with nonpolitical power sharing pattern. both leaders of ppp and pml-n did not pay any attention to improve internal democratic structure of the party. political parties have identifications through their leaders who remained key decision makers and embodiment of the party itself (kanwal, 2017). despite the continuity of these old patterns of party politics some positive developments are also observed during the period. for the first time, an elected government completed its five years in the history of pakistan. aghaz-ihaqooq-e-balochistan, seventh nfc award, passing of 18th amendment, political reforms in gilgat-baltistan and allocation of special funds to khyber pakhtunkhawa for the development of infrastructure and increasing gas development surcharge for balochistan were such developments which show the positive contribution of political parties to popular demands of the provinces to strengthen the federation. however, the dynamics of balochistan in security perspective remained beyond the capacity of the government and continued subject to security establishment for governance. despite an unstable path and many other issues, it was a great milestone for an elected government that has completed the constitutional tenure (kanwal, 2017). the caretaker prime minister, mir hazar khan khoso took his charge on 25th march 2013. general elections 2013 was held across pakistan on may 11, 2013. the total registered number of votes were 84207524, and 46217482 votes were polled, the turnout was 55.02%. pml-n got majority in national assembly with 128 general seats, ppp got second majority with 33 general seats and pti got third position with 28 seats. nawaz sharif was elected as new prime minister of pakistan. mamnoon hussain, the candidate of pml-n, was won the presidential election. pti and pat mutually organized the azadi march and dharna on 13th august 2014 (urdu point, 2013). the 21st amendment bill was passed by the parliament on 6th january 2015. president mamnoon hussain signed the amendment bill on 7th january, 2015. this amendment bill modified the article 175 of the constitution and has also contained a sunset clause which will be expire after two years. this amendment generated military courts for the speedy trial of terrorists. the decision to amend the constitution came after the incident of army public school peshawar (tribune, 2015; dawn, 2015). the 22nd amendment was signed by president mamnoon hussain on 2nd june 2016 and it became an act in the constitution of pakistan. after this amendment, the retired judges and bureaucrats will also be eligible for appointment as a member of election commission or chief election commissioner. maximum age for appointment as a member of election commission (65 years) and chief election commissioner (68 years) is also being fixed (dawn, 2016; the nation, 2016). 7. conclusion this paper studied the concepts of political stability, political development and political participation in general. this study also examined that most political development theorists have highlighted the significance of increasing political participation in the developmental process. political parties are important for proper making of institutionalization and political developments in any democratic system. it helps in the change of political culture and effects political participation. political history of pakistan reflects the least concern to institutionalize the political system for democratic stability and shows that political stability and institutionalization was not the priority of the past governments. similarly, political participation and mass mobilization not seems to be institutionalized through articulating and aggregating mass interest for the consolidation of political system. however, despite the continuity of old patterns, ppp, pml-n review of economics and development studies vol. 5, no 1, march 2019 39 and some other political parties showed enough maturity to save the political system through cooperation in introducing a number of reforms in the constitution, these efforts considered to strengthen the federation of pakistan. the most significant of these is the 18th amendment to the 1973 constitution of pakistan. in this paper, the structure and functioning of the two governments during 2008-2016 is discussed to assess the political institutionalization in terms of political development. an elected government completed its tenure for the first time in the history of pakistan. five years of government of ppp completed from 2008 to 2013. after the general elections of 2013, smooth democratic transition was made possible and pml-n came into government. an overview of major political developments from 2008 to 2016, is also helped us to understand that this era was unique in the history of pakistan. references ake, c. 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(2017). political development in pakistan: continuity and change during zardari period. journal of the research society of pakistan volume no. 54, issue no. 2 (july december), 137-153. karimi, m., & singh, s. s. (2014). political development concept by looking briefly at the iran's mohammad reza pahlavi rule. journal of public administration and governance vol. 4, no. 4, 67-78. keim, d. w. (1975). participation in contemporary democratic theory. in r. pennock, & j. w. chapman, participation in politics (p. 1). new york: lieber-atherton. lapalombara, j. (1974). politics within nations. englewood cliffs: prentice-hall. lei, s. (august 2013). contentious politics and political stability in contemporary china: an institutionalist explanation. salt lake city, utah: the university of utah. mushtaq, i., baig, f., mushtaq, s. (2018). the role of political parties in political development of pakistan. pakistan vision vol. 19, no. 1, 176-190. pennock, r. (1979). democratic political theory. princeton: princeton university press. pye, l. w. (1966). aspects of political development. new york: little brown and company. salim, a. (2005). political parties in pakistan. sdpi research and news bulletin vol. 12, no. 1, 6-10. subba, s. (2017, february 15). political stability. retrieved from www.quora.com: https://www.quora.com/whatis-political-stability the express tribune, 20 april 2010. the express tribune, 7 january 2015. http://www.quora.com/ review of economics and development studies vol. 5, no 1, march 2019 40 the guardian, 18 aug 2008. the nation, 7 june 2016. the nation, 17 feb 2017. the news, 7 sep 2008. the telegraph, 27 dec 2007. the telegraph, 25 aug 2008. urdu point, 2008. https://www.urdupoint.com/politics/general-election-2008.html urdu point, 2013. https://www.urdupoint.com/politics/general-election-2013.html verba, s., nie, n. h. (1972). participation in america: political democracy and social equality. new york: harper & row. verba, s., nie, n. h., kim, j. (1978). participation and political equality: a seven-nation comparison. new york: cambridge university press. review of economics and development studies vol. 4, no 2, december2018 247 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads institutional determinants of bilateral trade flows: a panel data analysis 1 muhammad ramzan sheikh, 2 imran sharif chaudhry, 3 naila gul, 4 muhammad hanif akhtar 1 associate professor, school of economics, bahauddin zakariya university, multan, pakistan. ramzansheikh@bzu.edu.pk 2 professor / director, school of economics, bahauddin zakariya university, multan pakistan. imran@bzu.edu.pk 3 lecturer, department of management sciences, virtual university of pakistan. nailagul@vu.edu.pk 4 professor, department of commerce, bahauddin zakariya university, multan, pakistan. haneefakhtar@gmail.com article details abstract history revised format: november 2018 available online: december 2018 this study analyzes the institutional determinants of bilateral trade flows and homogeneity effect for pakistan with eco countries by using panel data for years 2003-2014. gravity trade model is estimated through panel least squares technique. impact of institutions is very important for international trade as international businesses involve many governance systems. the results show that average impact of institutional quality and bilateral trade flows is positive. moreover, institutional homogeneity effect exhibits that bilateral trade flows are positively related with the governance similarity. thus, institutional quality and institutional homogeneity has dominant impact on the bilateral trade flows. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords eco, bilateral trade flows, panel data, institutional quality, institutional homogeneity, gravity trade model jel classification: q27, e02 corresponding author’s email address: ramzansheikh@bzu.edu.pk recommended citation:sheikh, m. r., chaudhry, i. s., gul, n. and akhtar, m. h. (2018). institutional determinants of bilateral trade flows: a panel data analysis. review of economics and development studies, 4 (2), 247-260 doi: 10.26710/reads.v4i2.409 1. introduction international trade is considered as an engine of economic growth. many economies are adopting economic integration and opening up their economies to encourage the economic development and for better standard of living. asean, eu and nafta are some examples of economic integration. sustainable development achievement is the main objective of economic planners. eu and asean has promoted international trade, stimulated economic development and encouraged other countries to make economic groups. present study is based on the economic cooperation organization (eco). eco was originally established by pakistan, turkey and iran in 1964 as regional cooperation for development (rcd). its basic areas were trade, banking, communications, political and cultural affairs, industry, transportation and railway. rcd was renamed in 1985 to economic cooperation organization (eco). it was recognized after the collapse of soviet union to collaborate with the separated states. central asian states and afghanistan were included in eco in may 1992 so, eco members were increased from 3 to 10 including afghanistan, azerbaijan, iran, kazakhstan, kyrgyzstan, pakistan, tajikistan, turkmenistan, turkey and uzbekistan. major aims and objectives of eco include sustainable economic development, better living standard of people, promotion of economic, social, technical, cultural and scientific cooperation, elimination of trade barriers for the expansion of intra-regional trade, better infrastructure for http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 248 transportation and communication, development of industrial potential, enhancement of agricultural, natural, energy and human resources, privatization and economic liberalization. trading opportunities are very good in eco region. eco has become a flourishing regional organization and its international importance is increasing but at the same time, the organization faces very hard challenges. there is lack of proper institutions and infrastructure that’s why resources are not fully utilized in the region. eco countries are dependent for their exports and imports on industrial economies therefore joint trade among the member countries has been sluggish over time. trade potential of the region has not yet explored fully so the need of the time is to collaborate with each other so that higher intra-regional trade target could be accomplished within the eco region. pak-eco trade has many benefits as pakistan has well established trade traditions, well developed communication and transportation resources, geographical contiguity, religious and cultural bonds etc. due to less information about demand of consumers and the ineffective marketing techniques to introduce new products, trade is low with eco region. greater economic cooperation and joint ventures can be reached in different fields between pakistan and eco member countries. many prospects exist and many other opportunities can be generated, whether these opportunities will be exploited or not, it will depend on the vision and spirit of the planners and policy makers in eco countries. the rest of the paper is organized as: section 2 shows the review of empirical studies. section 3 explains the model specification. section 4 illustrates the data and methodology. section 5 depicts the results while section 6 concludes the paper along with polices. 2. review of empirical studies this section exhibits the review of empirical studies based on the gravity trade model. number of empirical research studies has been done on trade determinants as a whole in literature both in developed and developing countries. studies on eco countries are very limited in pakistan particularly on bilateral trade determinants by using gravity trade model and panel data. institutional framework is an informal barrier to trade other than quota and tariff. impact of institutions is very important for international trade as international businesses involve many governance systems. strong and effective domestic institutional mechanism is an important determinant of trade but institutional effect has received very little attention in the literature on international trade. recent empirical studies of alvarez et al. (2015), bojnec and ferto (2015), de groot et al. (2004), koukhartchouk and maurel (2003), and anderson and marcouiller (2002) have investigated the institutional effects on the level of trade. in pakistan, no study is done so far on institutional determinants of bilateral trade flows and institutional homogeneity effect on the level of trade for eco countries by using panel data and gravity trade model. this study captures the effect of institutional quality and institutional homogeneity on trade. table 1 presents some empirical studies based on the gravity trade model. table1: review of empirical studies author variables data type signs data sources technique wang (2016) bilateral trade flows gdp per capita gdp distance exchange rate inequality vegetable oil seeds border language, fta colonial heritage balanced panel data set of 80 countries for years 2000-2013 gdp + per capita gdp distance exchange rate + inequality vegetable oil seeds + border + language + fta + colonial heritage + wdi oecd national accounts data files imf, ifs data base cepii ppml alvarez et al. (2015) bilateral trade flows distance labor competitiveness sectoral price level sectoral income share adjacency language governance indicators panel data of 186 countries for years 1996-2012 and 20002012 labor competitiveness + sectoral price level sectoral income share distance adjacency + language + governance indicators +/ un comtrade wdi cepii world bank’s wgi panel least squares review of economics and development studies vol. 4, no 2, december2018 249 bojnec and ferto (2015) agro-food exports flows gdp per capita gdp distance, border language, rftas government size legal system access to sound money panel data of 29 oecd countries for years 1995-2003 gdp + border + language + rftas + distance – per capita gdp – institutional quality + sound money + tariff + legal system + institutional homogeneity – oecd bilateral trade database wdi cepii efw ppml rizwanulhassa n and shafiqurrehma n (2015) bilateral trade flows gdp per capita gdp exchange rate volatility distance border panel data of 5 major saarc countries for years 1991-2010 gdp + per capita gdp + exchange rate volatility distance + border + imf dots wdi ifs gls ravishankar and stack (2014) exports flows gdp distance per capita gdp differential real exchange rate landlocked colony member of eu panel data of 17 countries for years 1994-2007 gdp + distance per capita gdp differential + real exchange rate landlocked colony + member of eu + imf dots ifs wdi cepii stochastic frontier analysis (sfa) khan et al. (2013) trade flows gdp per capita gdp distance cultural similarity panel data of 10 countries for years 1990-2010 gdp + per capita gdp + distance – cultural similarity imf database of economic outlook cepii ols mohmand and wang (2013) exports flows gdp distance border language religion trade agreements member of wto panel data of 142 countries for years 1995-2011 gdp + distance – language + border + religion + trade agreements + wto + un comtrade wdi cepii cia world fact book panel least squares mukhanov (2013) exports flows gdp per capita gdp distance border language members of eco panel data of 11 countries for years 2000-2011 gdp + per capita gdp + distance border + language + eco + un comtrade wdi cepii panel least squares nasiri and hassani (2013) trade flows gdp, distance per capita income population, border language membership in eco, eu, asean, and eaec cross sectional data of 161 countries for year 2011 gdp + per capita income + distance – language + membership with eco and asean + customs reports of islamic republic of iran world bank united nations ols malik and chaudhary (2012) imports flows gnp exchange rate population size openness panel data of 6 countries for years 1996-2006 gnp + openness exchange rate import flows lagged value + ifs, imf sbp’s publications and pakistan economic survey review of economics and development studies vol. 4, no 2, december 2018 250 inflation rate import flows lagged value distance gls inflation rate – population size + achakzai (2006) exports flows gdp per capita gdp distance border language members of eco cross sectional data of 137 countries for year 2005 gdp + per capita gdp + distance border + language + eco + un comtrade wdi cepii ols de groot et al. (2004) exports flows national income per capita income distance, border language, religion membership in same pta colonial empire institutional quality cross sectional data of more than 100 countries for year 1998 gdp + per capita gdp + border + language + religion + membership in same pta + colonial empire + distance – governance indicators + wits wdi sala-i-martin (1997) ols source: authors’ compilation in all these studies, various specifications of gravity trade model have been estimated through least squares technique by using cross sectional and panel data and different explanatory and dummy variables. all studies show expected signs for basic gravity variables of gdp and distance. trade volumes are positively correlated with gdp while inversely linked with distance. border and language dummy variables are also positively correlated with trade in almost all the studies. 3. model specifications 3.1 model specifications for institutional determinants of trade following model specifications are used to find the institutional determinants of bilateral trade flows of pakistan with eco countries. in each model, bilateral trade flows is used as dependent variable; and gdp, per capita gdp, distance, adjacency, and area are used as independent variables along with governance indicators. all variables are in log form except the dummy variables and governance indicator. as all the governance indicators are interrelated with each other so each governance indicator is used separately in each model to avoid the problem of multicollinearity. model 1: voice and accountability in this model, gravity trade model is estimated with governance indicator of voice and accountability. ij 1 i j 2 i j 3 i j 4 i 5 j 6 i j 7 i ij log(trd ) log(gdp .gdp ) log( gdp . gdp ) log( ) ( ) ( ) ( ) ( ) pc pc dst vac vac adj area µ                  (1) model 2: political stability in this model, gravity trade model is estimated with governance indicator of political stability. ij 1 i j 2 i j 3 i j 4 i 5 j 6 i j 7 i ij log(trd ) log(gdp .gdp ) log( gdp . gdp ) log( ) ( ) ( ) ( ) ( ) pc pc dst pst pst adj area µ                  (2) model 3: government effectiveness in this model, gravity trade model is estimated with governance indicator of government effectiveness. ij 1 i j 2 i j 3 i j 4 i 5 j 6 i j 7 i ij log(trd ) log(gdp .gdp ) log( gdp . gdp ) log( ) ( ) ( ) ( ) ( ) pc pc dst gef gef adj area µ                  (3) review of economics and development studies vol. 4, no 2, december2018 251 model 4: regulatory quality in this model, gravity trade model is estimated with governance indicator of regulatory quality. ij 1 i j 2 i j 3 i j 4 i 5 j 6 i j 7 i ij log(trd ) log(gdp .gdp ) log( gdp . gdp ) log( ) ( ) ( ) ( ) ( ) pc pc dst rql rql adj area µ                  (4) model 5: rule of law in this model, gravity trade model is estimated with governance indicator of rule of law. ij 1 i j 2 i j 3 i j 4 i 5 j 6 i j 7 i ij log(trd ) log(gdp .gdp ) log( gdp . gdp ) log( ) ( ) ( ) ( ) ( ) pc pc dst rlw rlw adj area µ                  (5) model 6: control of corruption in this model, gravity trade model is estimated with governance indicator of control of corruption. ij 1 i j 2 i j 3 i j 4 i 5 j 6 i j 7 i ij log(trd ) log(gdp .gdp ) log( gdp . gdp ) log( ) ( ) ( ) ( ) ( ) pc pc dst ccr ccr adj area µ                  (6) model 7: composite governance indicator in this model, gravity trade model is estimated with composite governance indicator. composite index is constructed by taking the simple arithmetic average of the scores of each governance indicator and it shows the average effect of overall governance quality on bilateral trade flows. ij 1 i j 2 i j 3 i j 4 i 5 j 6 i j 7 i ij log(trd ) log(gdp .gdp ) log( gdp . gdp ) log( ) ( ) ( ) ( ) ( ) pc pc dst comp comp adj area µ                  (7) where: trdij = total amount of imports and exports between country i and country j gdpi = gdp of country i gdpj = gdp of country j pcgdpi = per capita gdp of country i pcgdpj = per capita gdp of country j dstij = distance between country i and country j vaci = voice and accountability of country i vacj = voice and accountability of country j psti = political stability of country i pstj = political stability of country j gefi = government effectiveness of country i gefj = government effectiveness of country j rqli = regulatory quality of country i rqlj = regulatory quality of country j rlwi = rule of law of country i rlwj = rule of law of country j ccri = control of corruption of country i ccrj = control of corruption of country j compi = composite governance indicator of country i compj = composite governance indicator of country j adjij = dummy variable of adjacency/common border between country i and country j areai = dummy variable of total land area of country i µij = error term studies of alvarez et al. (2015) and de groot et al. (2004) have used these governance indicators to find the institutional determinants of trade. review of economics and development studies vol. 4, no 2, december 2018 252 3.2 model specifications for institutional homogeneity effect on the level of trade following model specifications are used to find the institutional homogeneity effect on the level of trade of pakistan with eco countries. in each model, bilateral trade flows is used as dependent variable; and gdp, per capita gdp, distance, adjacency, and area are used as independent variables along with governance indicators. all variables are in log form except the dummy variables and governance indicators. model 1: institutional homogeneity in this model, gravity trade model is estimated by including composite index of governance similarity to see the institutional homogeneity effect on the level of trade. ij 1 i j 2 i j 3 i j 4 ij 5 i j 6 i ij log(trd ) log(gdp .gdp ) log( gdp . gdp ) log( ) ( ) ( ) ( ) pc pc dst simindex adj area µ               (8) model 2: institutional quality and institutional homogeneity in this model, gravity trade model is estimated by including both composite governance indicator and composite index of governance similarity to see the institutional quality and institutional homogeneity effect on the level of trade. ij 1 i j 2 i j 3 i j 4 i 5 j 6 i j 7 i j 8 i ij log(trd ) log(gdp .gdp ) log( gdp . gdp ) log( ) log( ) log( ) log( ) ( ) ( ) pc pc dst comp comp simindex adj area µ                    (9) governance similarity index is constructed by following formula using the methodology of helpman (1987); egger (2000, 2002); shin and serlenga (2007). similarityij = log {1-(compi ÷ compi + compj)2 – (compj ÷ compi + compj)2} (10) a study of de groot et al. (2004) has used these indices to find the institutional quality and institutional homogeneity effect on the level of trade. 4. data and methodology in present study, panel data of eco region (10 countries) are used from years 2003-2014 (12 years). panel data provide more efficient results due to more degree of freedom and more reliability. panel least square technique is used to estimate the different specifications of gravity trade model to find the economic determinants of trade. data of all the variables are gathered from un comtrade, wdi, penn world table, and cepii1. stronger institutional quality tends to increase the international trade and competitiveness. six governance indicators are used to find the institutional determinants of bilateral trade flows of pakistan with eco countries based on kaufmann and kraay (2002). table 2 presents description of all variables used in this study. table 2: description of variables: summary and sources 1see “notes on cepii’s distances measures: the geodist database” by mayer and zignago (2011) variables description unit data source expected sign dependent variable trd bilateral trade flows obtained by adding bilateral imports and bilateral exports us$ un comtrade -------- economic variables gdp gdp used as a proxy for economic size of the country current 2005 us$ wdi positive dst distance from capital to capital used as a proxy for trade costs kilometer cepii negative pcgdp per capita gdp used as a proxy for current wdi positive review of economics and development studies vol. 4, no 2, december2018 253 5. results and discussions now we discuss the institutional determinants of trade in eco countries. 5.1 institutional determinants of trade 5.1.1 descriptive statistics table 3 presents the descriptive statistics of all institutional variables. average effect of composite index is 0.45 on bilateral trade flows for eco member countries with maximum value of 0.89 and minimum value of 0.12 and this average effect is 0.49 in case of pakistan with maximum value of 0.80 and minimum value of 0.25. the standard deviation of composite index is 0.20 and 0.16 for eco countries and pakistan respectively which show greater dispersion from their mean value. table 3: descriptive statistics m e a n m a x im u m m in im u m s ta n d a r d d e v ia ti o n s k e w n e ss k u r to si s j a r q u e b e r a p r o b a b il it y vaci -1.27 -0.03 -2.22 0.56 0.42 2.87 3.32 0.19 vacj -0.95 -0.74 -1.26 0.15 -1.00 2.85 17.98 0.00 psti -0.88 0.75 -2.70 0.79 -0.29 2.92 1.49 0.47 pstj -2.32 -1.56 -2.81 0.44 0.73 1.93 14.80 0.00 gefi -0.77 0.40 -1.68 0.51 0.44 2.94 3.43 0.18 gefj -0.62 -0.37 -0.81 0.18 0.32 1.24 15.77 0.00 rqli -0.95 0.42 -2.18 0.73 0.15 1.89 5.97 0.05 rqlj -0.64 -0.45 -0.88 0.11 -0.39 2.71 3.08 0.21 rlwi -1.02 0.16 -1.96 0.52 0.61 3.16 6.74 0.03 rlwj -0.85 -0.73 -0.98 0.07 0.17 2.40 2.14 0.34 ccri -0.98 0.17 -1.64 0.44 1.12 3.68 24.44 0.00 ccrj -0.93 -0.73 -1.07 0.14 0.28 1.26 14.96 0.00 compi 0.45 0.89 0.12 0.20 0.66 2.94 7.92 0.02 compj 0.49 0.80 0.25 0.16 0.41 2.17 6.15 0.05 simindexij 0.48 1.00 0.00 0.50 0.07 1.01 18.00 0.00 source: authors’ calculations level of development of the country 2005 us$ dummy variables adj adjacent /common borders assumes the value of 1 if countries share same border and value of 0 otherwise 1 and 0 cepii positive area total land area assumes the value of 1 if countries are large size in area and value of 0 otherwise 1 and 0 cepii positive institutional variables vac voice and accountability estimate wgi positive pst political stability estimate wgi positive gef government effectiveness estimate wgi positive rql regulatory quality estimate wgi positive rlw rule of law estimate wgi positive ccr control of corruption estimate wgi positive comp composite governance index average of all indicators calculated positive simindex governance similarity index calculated by formula calculated positive review of economics and development studies vol. 4, no 2, december 2018 254 values of skewness for composite index are 0.66 and 0.41 for eco countries and pakistan respectively while for normal distribution, skewness should be zero. values of kurtosis of composite index are 2.94 and 2.17 for eco countries and pakistan respectively while for normal distribution, kurtosis should be 3. this shows that data of eco countries of all governance indicators follows non-normal distribution. jarque-bera test also confirms the same results. 5.1.2 correlation matrix table 4 displays the correlation matrix of all variables. the sign of the correlation coefficient describes whether the two variables are positively correlated or negatively correlated. the absolute value without regard to sign shows how strong or weak the relationship is. table 4: correlation matrix vaci vacj psti pstj gefi gefj rqli rqlj rlwi rlwj ccri ccrj compi compj vaci 1.00 vacj -0.08 1.00 psti -0.13 0.06 1.00 pstj 0.09 -0.86 -0.07 1.00 gefi 0.72 0.09 0.17 -0.07 1.00 gefj 0.08 -0.73 -0.07 0.87 -0.10 1.00 rqli 0.88 0.03 0.13 -0.04 0.79 -0.05 1.00 rqlj -0.03 0.44 0.02 -0.35 -0.04 0.08 -0.02 1.00 rlwi 0.68 -0.02 0.31 0.03 0.92 -0.01 0.77 -0.08 1.00 rlwj 0.02 -0.27 -0.01 0.37 0.03 0.23 -0.01 -0.18 0.04 1.00 ccri 0.65 -0.03 0.12 0.07 0.88 0.07 0.64 -0.01 0.91 0.02 1.00 ccrj 0.00 -0.06 0.02 0.22 -0.01 0.45 -0.01 0.34 0.01 0.09 0.10 1.00 compi 0.81 0.01 0.31 0.00 0.94 -0.02 0.89 -0.03 0.96 0.02 0.88 0.02 1.00 compj 0.04 -0.28 -0.02 0.56 -0.05 0.77 -0.04 0.40 0.00 0.43 0.09 0.79 0.00 1.00 source: authors’ calculations table 4 shows that the composite governance indicator of eco countries has strong positive correlation with all governance indicators. composite governance indicator of pakistan has strong positive correlation with government effectiveness and control of corruption. 5.1.3 institutional determinants of bilateral trade flows: pakistan with eco countries table 5 presents the estimation results of all the model specifications of gravity trade model for institutional determinants of bilateral trade flows of pakistan with eco countries. equations (1), (2), (3), (4), (5), (6) and (7) are estimated in models 1, 2, 3, 4, 5, 6 and 7 respectively for institutional determinants of bilateral trade flows of pakistan with eco countries. table 5 shows the estimation results of all seven models. product of gdp coefficient is positive and significant in all seven models. model 7 shows the average effect of all six governance indicators showing that bilateral trade flows will increase by 1.03% on average with 1% increase in gdp of both countries. product of gdp shows economic size of a country in terms of market size and production capacity. higher gdp means higher production capacity, large domestic markets, and large varieties of goods available for trade; so, if gdp of a country increases, its trade volume also increases. economic growth is also measured by the level of gdp; higher the gdp of a country, higher will be the economic growth of that country and higher will be the trade volume. economic size does matter for trade therefore, large economies tend to import more because of their higher incomes and also tend to export more because of their large variety of output or production; so, larger the economy, larger will be the trade (krugman, 2012). study of de groot et al. (2004) on institutional determinants of trade also established the positive association between gdp and trade. product of per capita gdp coefficient is positive in all seven models. model 7 shows the average effect of all six governance indicators showing that bilateral trade flows will increase by 0.70% on average with 1% increase in per capita gdp of both countries. per capita gdp shows the level of development, infrastructure, and purchasing power of a country. these are very essential for bilateral trade as more developed the countries, more will be the trade flows. with the development of a country, transportation facilities become better which enhance the level of trade. people demand more exotic foreign varieties which may lead to the innovation or invention of new products. “exporting country’s per capita gdp should have a positive coefficient when the composition of trade flows review of economics and development studies vol. 4, no 2, december2018 255 involves capital-intensive products and negative when composition of trade flows involves labor-intensive products. on the other hand, importing country’s per capita gdp should have a positive coefficient when composition of trade flows consist of luxury goods and negative when composition of trade flows consist of necessity goods” (bergstrand 1989). study of de groot et al. (2004) on institutional determinants of trade showed positive sign of per capita gdp for importer country while negative sign for exporter country. table 5: panel data estimates of institutional determinants of trade model 1 model 2 model 3 model 4 model5 model 6 model 7 variables voice and accountability political stability government effectiveness regulatory quality rule of law control of corruption composite indicator c -32.747 (0.0000) -34.403 (0.0000) -32.005 (0.0015) -32.625 (0.000) -19.674 (0.0175) -19.849 (0.044) -28.290 (0.0004) gdpi . gdpj 1.1230 (0.000)* 1.0614 (0.000)* 1.1075 (0.0003)** 1.1357 (0.000)* 0.84047 (0.0003)** 0.8090 (0.0041)** 1.0302 (0.000)* pcgdpi. pcgdpj 0.6154 (0.1381) 1.1778 (0.0140)** 0.4572 (0.3721) 0.5678 (0.1789) 1.1467 (0.0062)*** 1.0199 (0.0371)** 0.7047 (0.0991)*** dstij -1.9692 (0.0041)** -2.2608 (0.0007)* -1.6125 (0.0429)** -1.8891 (0.0073)** -2.9846 (0.000)* -2.4025 (0.0012)** -2.1824 (0.0027)** adjij 3.6480 (0.0000)* 3.0149 (0.000)* 3.8345 (0.0000)* 3.9194 (0.0000)* 4.3522 (0.000)* 3.9775 (0.000)* 4.0821 (0.0000)* areai -2.467 (0.0000)* -2.436 (0.000)* -2.655 (0.0000)* -2.614 (0.0000)* -2.685 (0.000)* -2.537 (0.000)* -2.654 (0.000)* governance indicator i 1.362 (0.0388)** -2.111 (0.0527)*** 0.681 (0.5371) 1.1026 (0.0955)*** 3.624 (0.0028)** 2.588 (0.0307)** 2.452 (0.0551)*** governance indicator j 0.519 (0.4488) 1.679 (0.0060)** 0.243 (0.6061) -0.435 (0.2144) 0.496 (0.0949)*** -0.2002 (0.3768) 0.3212 (0.5616) r 2 0.911396 0.91693 0.90785 0.91125 0.91536 0.91045 0.910296 d.w. stat 1.944636 2.09181 2.050812 2.004844 1.90328 1.94287 1.921552 f-statistic 101.7184 109.165 97.43506 101.5354 106.951 100.543 100.3503 probability (f-statistic) 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 source: authors’ calculations, p values in parenthesis *, **, *** represents the 1%, 5% and 10% level of significance respectively. distance coefficient is negative and significant in all seven models. model 7 shows the average effect of all six governance indicators showing that bilateral trade flows will decrease by 2.18% on average with 1% increase in distance of both countries. higher the distance among trading countries, lower will be the trade volume as transportation cost increases. “there is very little that economists fully understand about global trade but there is one thing that we do know – commerce declines dramatically with the distance” (leamer 2007). “the further the distance between two trading countries, the lesser the bilateral trade between them” (tinbergen, 1962; poyhonen, 1963; bergstrand, 1985). all empirical studies conducted on gravity trade model confirmed the negative relationship between trade volume and distance. adjacency or common border dummy variable is positive as expected and significant in all seven models. countries sharing the same border tend to trade more. the countries with adjacency have more tendencies to trade than the non-adjacent countries (leamer 1993; helliwell 1997). study of de groot et al. (2004) on institutional determinants of trade also showed positive relation of border with trade volume. area dummy is used to capture the country size. area coefficient is negative and significant in all seven models. larger the country size, lower will be the trade volume. frankel and romer (1999) used the land area and showed significant impact on trade with negative sign. study of de groot et al. (2004) on institutional determinants of trade showed positive relation with trade area. in present study, negative sign of area may be due to the fact that all eco countries are large in terms of size but are not fully developed and equipped with proper infrastructure of transportation and communication which may cause reduced trade. governance indicators are the estimates with values ranging from approximately -2.5 to +2.5 indicating weak and strong governance performance respectively and their log cannot be taken so their interpretation is done by using the exponent values according to the standard deviation from the mean value which provides good indication of governance quality. voice and accountability coefficient is positive and significant for eco member countries while positive and insignificant for pakistan. trade will enhance by strong voice and accountability system in trading countries. countries having fair election system, freedom of expression, and free media, will cause good governance, appropriate policy actions; more awareness will boost the trade among trading countries. from mean, 1% increase review of economics and development studies vol. 4, no 2, december 2018 256 in standard deviation of voice and accountability; bilateral trade flows will increase by 114.4%2 on average in case of eco member countries and 8.1% on average in case of pakistan. study of alvarez et al. (2015) showed the negative sign for voice and accountability indicator. study of de groot et al. (2004) on institutional determinants of trade confirmed the positive sign of voice and accountability indicator. political stability coefficient is negative and significant for eco member countries while positive and significant for pakistan. countries having stable governments, absence of violence and absence of terrorism provide safe and secure environment for foreign investors which encourage the trade. from mean, 1% increase in standard deviation of political stability; bilateral trade flows will decrease by 81.1% on average in case of eco member countries and will increase by 109.3% on average in case of pakistan. negative sign of political stability indicator for eco member countries may be due to the lack of institutional framework and proper implementation of policies in those countries. study of alvarez et al. (2015) also confirmed the negative sign for political stability indicator. study of de groot et al. (2004) on institutional determinants of trade showed positive sign of political stability indicator. government effectiveness coefficients are positive and insignificant for eco member countries and for pakistan. countries having strong government policies, high quality of public and civil services independent of political pressure, proper policy framework and its implementation with true spirit encourage the level of trade. from mean, 1% increase in standard deviation of government effectiveness; bilateral trade flows will increase by 41.6% on average in case of eco member countries and will increase by 4.5% on average in case of pakistan. studies of alvarez et al. (2015) and de groot et al. (2004) also confirmed the positive sign of government effectiveness indicator. regulatory quality coefficient is positive and significant for eco member countries while negative and insignificant for pakistan. countries having stable framework of policy formulations to promote the development of private sector encourage the level of trade. from mean, 1% increase in standard deviation of regulatory quality; bilateral trade flows will increase by 123.6% on average in case of eco member countries and will decrease by 4.7% on average in case of pakistan. negative sign of regulatory quality indicator for pakistan may be due to the lack of polices and implementation of those policies for private sector development. studies of alvarez et al. (2015) and de groot et al. (2004) showed the positive sign of regulatory quality indicator.rule of law coefficient is positive and significant for eco member countries while positive and significant for pakistan. countries having proper enforcement of laws against crime and violence, laws of property rights, efficient police and courts provide safe and secure law and order situation for domestic and foreign investors which encourage the level of trade. from mean, 1% increase in standard deviation of rule of law; bilateral trade flows will increase by 558.2% on average in case of eco member countries and will increase by 3.5% on average in case of pakistan. studies of alvarez et al. (2015) and de groot et al. (2004) also confirmed the positive sign of rule of law indicator. control of corruption coefficient is positive and significant for eco member countries while negative and insignificant for pakistan. countries having strong anti-corruption departments to exercise their power for public gain and to eliminate corruption secure the investors from any fraud or bribery and encourage the level of trade. from mean, 1% increase in standard deviation of control of corruption; bilateral trade flows will increase by 212.3% on average in case of eco member countries and will decrease by 2.8% on average in case of pakistan. negative sign of control of corruption indicator for pakistan may be due to the lack of polices and management to operate anti-corruption departments and improper implementation of laws against corruption which may shatter the confidence of investors and cause reduced trade. studies of alvarez et al. (2015) and de groot et al. (2004) showed the positive sign of control of corruption indicator. composite governance indicator coefficient is positive and significant for eco member countries while positive and insignificant for pakistan. average effect of all the governance indicators is positive with the level of trade. from mean, 1% increase in standard deviation of composite index; bilateral trade flows will increase by 63.3% on average in case of eco member countries and will increase by 5.3% on average in case of pakistan. study of de groot et al. (2004) on institutional determinants of trade also showed positive sign of composite governance indicator. overall results are good fit as coefficient of determination r2 shows that 91% of the variation in bilateral trade flows is due to the explanatory variables. gdp, distance, border, area, political stability and rule of law are found to be the major significant determinants of bilateral trade flows. there is no problem of auto correlation as the value of durbin-watson is around 2 in all the models.probability value of f-statistic is zero in all the seven 2(2.718 0.56×1.362083 -1) = (2.718 0.7627 -1) = 1.144×100 = 114.4% all other indicators are also calculated by the same pattern. review of economics and development studies vol. 4, no 2, december2018 257 models which shows that overall models are significant. 5.2 institutional homogeneity effect on the level of trade table 6 presents the results of all the model specifications of gravity trade model for institutional homogeneity effect on the level of bilateral trade flows of pakistan with eco countries. equations (8) and (9) are estimated in models 1 and 2 respectively for institutional homogeneity effect on the level of bilateral trade flows of pakistan with eco countries. table 6 shows the estimation results of these two models. product of gdp coefficient is positive and significant in both models. model 1 shows that bilateral trade flows will increase by 1.18% on average with 1% increase in gdp of both countries. model 2 shows that bilateral trade flows will increase by 1.02% on average with 1% increase in gdp of both countries. product of gdp shows economic size of a country in terms of market size and production capacity. higher gdp means higher production capacity, large domestic markets, and large varieties of goods available for trade. economic growth is also measured by the level of gdp; higher the gdp of a country, higher will be the economic growth of that country and higher will be the trade volume. economic size does matter for trade therefore, large economies tend to import more because of their higher incomes and also tend to export more because of their large variety of output or production; so, larger the economy, larger will be the trade (krugman, 2012). study of de groot et al. (2004) on institutional determinants of trade also confirmed the positive relationship between gdp and trade volume. product of per capita gdp coefficient is positive in both models. model 1 shows that bilateral trade flows will increase by 0.23% on average with 1% increase in per capita gdp of both countries. model 2 shows that bilateral trade flows will increase by 0.69% on average with 1% increase in per capita gdp of both countries. table 6: estimation results of gravity modelfor institutional homogeneity effect variables model 1 model 2 similarity index composite governance index and similarity index constant -34.83682 (0.0000) -28.07496 (0.0005) gdpi.gdpj 1.188703 (0.0000)* 1.024507 (0.0000)* pcgdpi.pcgdpj 0.231916 (0.5879) 0.699460 (0.1021)*** dstij -1.279007 (0.0702)*** -2.164331 (0.0032)** simindex 0.059840 (0.7128) 0.057366 (0.7407) compi 2.438173 (0.0559)** compj 0.271612 (0.6406) adjij 3.687360 (0.0000)* 4.080503 (0.0000)* areai -2.559490 (0.0000)* -2.633569 (0.0000)* r2 0.907368 0.910402 durbin-watson stat 2.056706 1.903181 f-statistic 110.1982 89.41696 probability (f-statistic) 0.0000 0.0000 source: authors’ calculations, p values in parenthesis. *, **, *** represents the 1%, 5% and 10% level of significance respectively. per capita gdp shows the level of development, infrastructure, and purchasing power of a country. these are very essential for bilateral trade as more developed the countries, more will be the trade flows. with the development of a country, transportation facilities become better which enhance the level of trade. people demand more exotic foreign varieties which may lead to the innovation or invention of new products. “exporting country’s per capita gdp should have a positive coefficient when the composition of trade flows involves capital-intensive products and negative when composition of trade flows involves labor-intensive products. on the other hand, importing review of economics and development studies vol. 4, no 2, december 2018 258 country’s per capita gdp should have a positive coefficient when composition of trade flows consist of luxury goods and negative when composition of trade flows consist of necessity goods” (bergstrand 1989). study of de groot et al. (2004) on institutional determinants of trade showed positive sign of per capita gdp for importer country while negative sign for exporter country. distance coefficient is negative and significant in both models. model 1 shows that bilateral trade flows will decrease by 1.27% on average with 1% increase in distance of both countries. model 2 shows that bilateral trade flows will decrease by 2.16% on average with 1% increase in distance of both countries. higher the distance among trading countries, lower will be the trade volume as transportation cost increases. “there is very little that economists fully understand about global trade but there is one thing that we do know – commerce declines dramatically with the distance” (leamer 2007). “the further the distance between two trading countries, the lesser the bilateral trade between them” (tinbergen, 1962; poyhonen, 1963; bergstrand, 1985). all empirical studies conducted on gravity trade model confirmed the negative relationship between trade volume and distance. adjacency or common border dummy variable is positive as expected and significant in both models. countries sharing the same border tend to trade more. adjacent countries trade more than non-adjacent countries (leamer 1993; helliwell 1997). study of de groot et al. (2004) on institutional determinants of trade also showed positive relation of border with trade volume. area dummy is used to capture the country size. area coefficient is negative and significant in both models. larger the country size, lower will be the trade volume. frankel and romer (1999) used the land area and showed significant impact on trade with negative sign. study of de groot et al. (2004) on institutional determinants of trade showed positive relation with trade area. in present study, negative sign of area may be due to the fact that all eco countries are large in terms of size but are not fully developed and equipped with proper infrastructure of transportation and communication which may cause reduced trade. composite governance indicator coefficients are positive and significant for eco member countries while positive and insignificant for pakistan. average effect of all the governance indicators is positive with the level of trade. from mean, 1% increase in standard deviation of composite governance index; bilateral trade flows will increase by 62.83% on average in case of eco member countries and will increase by 4.44% on average in case of pakistan. better institutional quality enhances the overall trade by reducing transactions costs. de groot et al. (2004) also showed positive sign of composite governance indicator. governance similarity index coefficients are positive in both models. average effect of all the governance indicators is positive with the level of trade. model 1 shows that from mean, 1% increase in standard deviation of governance similarity index; bilateral trade flows will increase by 3.036% on average. model 2 shows that from mean, 1% increase in standard deviation of governance similarity index; bilateral trade flows will increase by 2.909% on average. countries with similar levels of institutional quality tend to trade more. institutional homogeneity raises the similar environment and familiar rules and regulations thus lead to enhance the business, investment and trade between the trading countries. study of de groot et al. (2004) on institutional determinants of trade also confirmed the positive sign of governance similarity index. overall results are good fit as coefficient of determination r2 shows the value of 0.91 gdp, distance, border, area, and composite governance indicator are found to be the major significant determinants of bilateral trade flows. there is no problem of auto correlation as the value of durbin-watson is around 2 in both models. probability value of f-statistic is zero in both models which shows that overall models are significant. 6. conclusion and policy implications the main objective of the study is to estimate the different specifications of gravity trade model to find the institutional determinants of bilateral trade flows of pakistan and to assess the impact of institutional homogeneity on the level of bilateral trade flows of pakistan with eco countries. panel data of 10 eco countries are used from year 2003 to 2014. the study finds out that institutions are cogent to enhance trade. the results of institutional determinants of trade show that average effect of all the governance indicators as captured by composite index is positive on bilateral trade flows. stronger the institutional framework of eco countries; more will be the bilateral trade. low quality of institutions increases the transaction costs to exchange the goods and services resulting in low trade. this explains why developed countries having strong and efficient institutional mechanism tend to trade more and developing countries have low quality and inefficient institutional framework tend to trade less. the review of economics and development studies vol. 4, no 2, december2018 259 results of institutional homogeneity effect show that bilateral trade flows are positively correlated with the governance similarity. trade will increase if trading countries have similar quality of institutions. thus, institutional quality and institutional homogeneity has dominant impact on the bilateral trade flows. uncertain and insecure situation about contract enforcement and governance is reduced with a better quality of the institutional framework. institutional homogeneity raises the similar environment and familiar rules and regulations thus lead to enhance the business, investment and trade between the trading countries. pakistan is an important strategic partner of the eco region so pakistan should use its influence to improve the regional economic integration by full implementation of eco trade agreement (ecota) for an eventual free trade agreement in the region. at the institutional level, pakistan should work with the eco secretariat to help establish a joint commission on economic and technological cooperation in the eco region to facilitate trade in goods and services, mutual investment, technical collaboration, and cross-border trade in energy. institutional framework should be made strong and efficient in all eco member countries to enhance the level of trade. references achakzai, j. k. 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(2016). analysis and comparison of the factors influencing worldwide four kinds of vegetable oil trade: based on gravity model.modern economy, 7(02), 173. review of economics and development studies vol. 3, no 2, december 2017 147 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 2 december 2017 journal homepage: www.publishing.globalcsrc.org/reads efficiency of microfinance providers in pakistan: an empirical investigation 1 rashid ahmad, 2 altaf hussain, 3 muhammad umer, 4 kishwar parveen 1 assistant professor, department of economics, the islamia university of bahawalpur, pakistan. bahawalnagar campus, pakistan.rashid.ahmad@iub.edu.pk 2 lecturer, department of economics, the islamia university of bahawalpur, pakistan. bahawalnagar campus, pakistan altafhussain@iub.edu.pk 3 m.sc scholar, department of economics, the islamia university of bahawalpur, pakistan. bahawalnagar campus, pakistan 4 mphil scholar, school of economics, bahauddin zakariya university multan, pakistan article details abstract history revised format: nov 2017 available online: dec 2017 purpose: the aim of this study is to assess the efficiency of microfinance institutions in pakistan using quarterly data from microfinance connect of second quarter of 2006 and second quarter of 2016 for comparison of two different time span. to estimate efficiency of microfinance institutions in pakistan, the data envelopment analysis are employee. out of 52 microfinance providers in pakistan, only 15 microfinance institutions is sample across the industry based on profile of gross loan portfolio of each microfinance provider. to estimate the efficiency of microfinance providers in pakistan (i.e. constant returns to scale, variable returns to scale and scale efficiency), malmquist productivity index and total factor productivity of the microfinance institutions, two input variables(loan amount disbursed, total staff) and output variables (gross loan portfolio and number of active borrowers) are used. the results of the study conclude that mfis in pakistan are working below their optimum scales measurements and only one microfinance provider (khushali bank) out of 15 in our sample in 2007 and (thardeep rural support program) in 2016 works on efficient frontier and while others are inefficient. it recommended that the institutions should increase loan amount disbursed and invest resources to the train their staff. moreover, microfinance providers should expand by increasing number of offices to assist community. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords microfinance, microfinance efficiency, technical efficiency, scale efficiency, total factor productivity, malmquist productivity index, crs, vrs. jel codes: g21, h21, o47 corresponding author’s email address: rashid.ahmad@iub.edu.pk recommended citation: ahmad, r., hussain, a., umer, m. & parveen, k., (2017). efficiency of microfinance providers in pakistan: an empirical investigation. review of economics and development studies, 3(2) 147-158 doi: https://doi.org/10.26710/reads.v3i2.173 1. introduction microfinance consolidation refers to the supply of loans and other financial services, such as savings, insurance to the poor. due to the collateral needs of the banks, where services are not obtained from commercial banks to poor and the poor are willing to pay but they do not have anything to mortgage. the term also describes the sustainability of the provision of such services. more broadly, we can say that this service is very helpful for poor and near poor families because they access to high-quality financial services, not just credit but also money transfer, savings and insurance (christen, rp, rosenberg, r and http://www.publishing.globalcsrc.org/reads mailto:rashid.ahmad@iub.edu.pk mailto:altafhussain@iub.edu.pk mailto:rashid.ahmad@iub.edu.pk https://doi.org/10.26710/reads.v3i2.173 review of economics and development studies vol. 3, no 2, december 2017 148 jayadeva, v., 2004). the main equity of microfinance companies is to improve access to financial services for the poor because poverty in pakistan is increasing day by day. most of the people live below the poverty line and they need credit. credit is the pillar of the microfinance industry. the rural support program account has increased by about 44% of microcredit where credit agencies and banks accounted for 22% and 31% correspondingly. in the second quarter of 2016, the number of active borrowers in pakistan was more than 4.1 million for the first time in the history of microfinance industry of pakistan, which gradually increased from 2010. in pakistan, microfinance industries contain 10 “microfinance banks”, 16 “microfinance institutions”, including eight “rural support programs”, 19 “non-governmental organizations” and two “commercial financial institutions” (micro watch2016). 2. literature review different studies have conducted on different aspects of microfinance, such barriers to microfinance outreach, the emergence of microcredit, indicators of microfinance performance, effectiveness of microfinance and microfinance regulatory frameworks. however, this study focused on the analysis microfinance efficiency in pakistan. the following reviews of the different studies presented to explore the work done in the area of microfinance. hartarska and nadolnyak (2007) explored the collision on microfinance institution's efficiency by using data of 114 microfinance institutions from sixty-two countries by collected cross-country data from mix market. it analyzed the efficiency itemized of specific mfi's such as macro-economic variables. descriptive statistics measured the outreach and random effect model was used for empirically estimation on panel data. the results suggested that supervisory participation was not affected by the sustainability as much as outreach of the institutions, which have better capital condition have better sustainability. akhtar and jaffri (2009) explored that most appropriate poverty alleviation based on islamic microfinance institutions in pakistan. furthermore, conventional microfinance institutions was successors in muslim countries but these are not accomplished the wants of overall muslim clients in pakistan. they used the data of the previous 5 years of akhuwat (an islamic microfinance institute in pakistan). this study based on case study of akhuwat, which distribute the charitable loans of interest free. the islamic microfinance encourage, uplift the standard of living of the people, conversely increase economic development, and increase the richness of any country. rauf and mehmood (2009) investigated the impact of microfinance sector on the performance in pakistan. using the panel data from 2004 to 2007by including 1165 branches and 9539 workers working in microfinance industry measured the outreach with the help of six dimensions i.e depth of the outreach, breath of outreach, possibility of outreach, value or cost of financial service and operational sufficiency or cost outreach. the results showed that if the microfinance institutions increase their efficiency and outreach then they must adopt massive development technique and showed progress in the context of different indicators. ahmad (2011) estimated the efficiency of mfi's (microfinance institutions) in pakistan. in the study data of 2007 and 2009 was used. “data envelopment analysis dea a non-parametric technique” was used in this study with the context of earnings to balance technology underneath the basis of sustainability. in and out, (input and output strategy) oriented model was used in study. the results suggested that increase the technology and improvement managerial skills decrease the inefficiency. specific trainings should be arranged for the staff so for as for clients in the microfinance industry of pakistan. abayie et al (2011) empirically investigated the economic efficiency of mfi's (microfinance institutions) review of economics and development studies vol. 3, no 2, december 2017 149 in ghana data of 135 microfinance institutions was used as sample for the duration of three years (20072010). cobb-douglas stochastic model was used to calculate the efficiency under the assumption the firms fully utilize their savings and gave better quality services to their clients. the results showed that for the sake of increase the customer confidence the institute should gave good and better quality services to their clients with more influence to increase their existent and business. the main reason of inefficiency in ghana was disparity in management differences and practice in technical capacities. so to overcome this increase training programs. hermes et al (2011) explored the tradeoff between to the efficiency of mfi's (microfinance institutions) and the outreach of the poor. panel data of 4035 microfinance institutions for the year of 1997 to 2007 was collected from mix market. stochastic frontier analysis technique was used to measure the efficiency of microfinance institutions. the result showed that the investors invest for commercialization only but they did not focus on efficiency. ana & sefa (2012) investigated social performance of 878 microfinance institutions of 98 countries from during the era of 2000 to 2010. social performance of microfinance institutions was evaluated on the basis of profit status, regulation status, age, assets as well as regulation status. the panel data was collected from mix market database estimated efficiency of microfinance institutions with the help of regression analysis. the results indicated that new, and younger as much as non-regulated institutions performs well as compared to old once and regulated institutes. if the financial institutions performs well, they must have bigger amount of assets and loan amounts as much as loan per loan officer. hassan & shazad (2012) evaluated the challenges faced by microfinance institutions, which exterminate poverty and empowering of women in pakistan. women empowerment and poverty alleviation are the main problems in pakistan. the author highlighted some major problems that will reduce the poverty alleviation and increase women empowerment. some problems faced by microfinance institutions were low literacy rate, absence to reach the financial facilities, informal cradle of finance, managerial disabilities, parallel borrowing, interest rate formation in pakistan women suppuration and informal instrument of savings. these issues are reduced that it can increase the proficiency of microfinance organizations in pakistan. kipesha (2012) investigated the efficiency of mfi's (microfinance institutions) in east african countries like burundi, tanzania, rwanda, uganda and kenya. the panel data was used from 2009 to 2013 and data envelopment analysis approach (non parametric approach) used for measure the efficiency of thirty five microfinance institutions with five banks, seventeen nbfi's four cooperation’s and nine ngo,s . two approaches were also used are pr0duction appr0ach and “intermediation approach” under “constant returns to scale and variable returns to scale”. the outcomes showed if the mfi's by utilize their resources in efficient way to increase the efficiency and also decrease the wastage of big amount. most inefficiency-detected institutions still have the chance to improve them in the context of reached the frontier line. ferdousi (2013) explored the performance of the mfi's (microfinance institutions) in asian countries i.e. india; china; and bangladesh. he collected data from microfinance institutions of sampled countries. data envelopment analysis and tobit regression analysis was used to measure the efficiency. the results showed that the institutes of india and china perform better as compare to bangladesh on the efficiency scale of constant returns to scale tahir and tehrim (2013) discussed the structure for efficiency in microfinance institutions of five countries i.e. laos, indonesia, vietnam, cambodia and philippines. the “data envelopment analysis” method was used to calculate the efficiency of microfinance institutes in five countries. intermediation approach and production approach was used to calculate the efficiency of microfinance institutions.. the results showed that efficiency was the essential dimension for microfinance institutions sustainability. review of economics and development studies vol. 3, no 2, december 2017 150 ahmad and khan (2014) analyzed efficiency and performance of mfi's microfinance institutions in india by means of monetary and non-financial behaviors with 4 operational parameters (outreach, financial efficiency and sustainability). eleven year panel data of 97 mfi,s was collected in comparative and absolute form. the author applied hausman test to discover the sustainability. the results showed that there exist positive relationship between gross loan portfolio numbers of depositors, total deposits, number of women borrowers. farooq and khan (2014) discussed the financial functioning of islamic and conventional microfinance institutions in pakistan. islamic microfinance institutions provided small size loans to the poor according to sharia in pakistan to desired people. time series secondary data from 2005 to 2010 was used to compare islamic and conventional microfinance banks by using mix market technique. the results showed that islamic microfinance banks are worthwhile and defensible as much as justifiable even in the nonappearance of collecting interests to their clients. mehmood and khan (2014) examined and compared the efficiency of islamic mfi's and conventional mfi's in pakistan using panel data between the eras of 2008 to 2011 (4 years). “data envelopment analysis” was used to measure the competence of specific conventional microfinance establishments but all of islamic microfinance institutions in pakistan. it was founded that two out of three imf's functioning efficient boundary and conversely two out of nine conventional mfi's and ngo's were inefficient according to criteria of technical efficiency. yilmaz (2014) measured the efficiency of microfinance institutions in turkey by the process of offered model. the data was collected from forty microfinance institutions of turkey during the year of 2003 by using profit damaged data. “data envelopment analysis” technique was uses to calculate the financial productivity of microfinance institutions. the findings of the study revealed that all microfinance institutions in turkey were in early stage and they must need to be upgraded. 3. methodology to calculate efficiency of microsoft institutions in pakistan, input and output method was used. three input variables i.e. loan amount disbursed, total staff and number of offices and two output variables i.e. “number of active borrowers and gross loan portfolio” has been taken for analysis. . mfi’s corporate structures in pakistan mfb mfi rsp ngo cfi total total 10 16 8 19 2 55 there are approximately fifty-five microfinance institutions which are working in pakistan (micro watch,q3 2016). out of 55 institutions, there are ten microfinance banks (mfb), sixteen microfinance institutions (mfi), eight rsp (rural support program), nineteen non-government organizations and two commercial financial institutions (cfi). 3.1 variable description input variables input variables used in this study are as follows.  loan amount disbursed loan amount disbursed that type of money, which paid to run any business in any field to the customer’s review of economics and development studies vol. 3, no 2, december 2017 151  total staff total staff are all the human and output variables resource, which work for any microsoft organization to do any operation.  number of offices number of offices are the institutions work place to give the loans. output variables output variables used in this study are as follows  number of active borrowers number of active borrowers are the individuals that receive loan from any organization and principally responsible repay after a specific time.  gross loan portfolio gross loan portfolio are the loans provides to the clients and did not written-off in any record and they did not receive any interest on it. that is the total amount lend to the clients of any mfi’s. in this, study two broader clutches as inputs and outputs used to portion the competence of microfinance foundations in pakistan. to calculate efficiency microsoft institutions in pakistan , three input variables i.e loan amount disbursed, total staff and number of offices and two output variables i.e “number of active borrowers and gross loan portfolio” has been taken. 3.2 sampling techniques there are approximately fifty-five microfinance institutions which are working in pakistan (micro watch, q3, 2016). out of 55 institutions, there are ten microfinance banks (mfb), sixteen microfinance institutions (mfi), eight rsp (rural support program), nineteen non-government organizations and two commercial financial institutions (cfi). in this study, i have chosen fifteen institutes based on gross loan portfolio of microfinance providers by using proportionate sampling. the selected microfinance institution from which data is collected are as follows  microfinance banks (mfb). khushali bank, tameer microfinance bank.  microfinance institutions (mfi) akhuwat, kashaf foundation, dameen support program, asa pakistan.  rural support programs (rsp) national rural support program, thardeep rural support program  non-government organizations (ngo) brac pakistan, rural community development society, al-mehran rural development organization, shah sachal sami foundation, shadab rural development program, baidarie.  commercial financial institutions (cfi) orix leasing pakistan. mfb mfi rsp ngo cfi total total 10 16 8 19 2 55 sampled 2 4 2 6 1 15 theoretical framework for the current study, production approach is used to calculate the efficiency of microfinance providers. production approach in order to process transactions such as grant loans or capture deposits, under the production model, most of the financial institutions use human and physical resources. [vassiloglou and giokas (1990); soteriou and zenios (1999)]. figure 1: production approach (conceptual framework) review of economics and development studies vol. 3, no 2, december 2017 152 3.4 data envelopment analysis data envelopment analysis is very efficient to find the efficiency [mehmood & khan (2014);ahmad (2011);tahir & tehrim (2013), kipesha (2012)] of any organization either it is public or private. it also calculate the profitability of any organization by enhancing input output resources. when we find efficiency of any organization weather public or private and their core objective is to gain profit by enhance of inputs or output resources, in this study data envelopment analysis: a non-parametric technique is used to quantify the efficiency of microfinance institutions in pakistan. in data envelopment analysis technique, it is very important technique to measure the linear broadcasting approximation. in this technique, data envelopment analysis the decision-making unit (dmu) is used. if score of the dmu is, lesser then one the organization is considered to be less efficient if score of decision making unit is one then the organization is considered to be efficient. moreover, the efficiency of microfinance institutions is calculated by adopting input and output techniques. 3.5 malmquist productivity index professor sten malmquist introduced malmquist productivity index (mpi). mpi is very efficient technique to measure the year-by-year fluctuation in the status of decision making units [kortelainen, (2008)]. in this study, decision-making units determine the performance, whichuses “n” inputs and “m” output, by adopting malmquist productivity index.technical and allocative efficiency are measured to evaluate the efficiency of mfi’s in pakistan, technical efficiency refers to potential of dmu and it illustrate that how can output be increased by keeping the same level of input and “allocative efficiency” of a dmu refers to “marginal product” by comparing with its “marginal cost”. mathematical form of malmquist productivity index is as follows: mo (x t+1 ,y t+1 , x t , y t ) = 𝐷o t+1(xt+1,yt+1) do t (xt,yt) [ 𝐷0 𝑡(xt+1,yt+1) do t+1(xt+1,yt+1) 𝐷0 𝑡(xt,yt) do t+1(xt,yt) ] 1 2 …… . . 𝑖 in this model external the braces is describes the alteration in “technical efficiency”, however, the symmetrical mean of the two proportions intimate the brackets calculates the movement in knowledge between the 2 decades ‟stand t + 1 future; and it shows next one year we can consider it progress in technology. •loan amount disbursed •total microfinance staff •number of agents inputs microfinance institutions as the production units mfi's •gross loan portfolio •number of active borrowers outputs review of economics and development studies vol. 3, no 2, december 2017 153 so: efficiency change” = 𝐷o t+1(xt+1,yt+1) do t (xt,yt) ……………ii technical change” =[ 𝐷0 𝑡(xt+1,yt+1) do t+1(xt+1,yt+1) 𝐷0 𝑡(xt,yt) do t+1(xt,yt) ] 1 2 ….… iii in the above equation technical shows, xt = input vector in period of time t”,yt= output. direction in period of time t”, “dt = distance function at period of time t”, “dt+1 = distance function at period of time t+1”, “xt+1 = input vector at period of time t+1”.“yt+1 = output vector at period of time t+1”.to circumvent randomly selecting one boundary to calculate the catalogue, the (geometric-mean)pragmatic as keep an eye on in below equation: m (xt+1,yt+1, xt, yt) = √ 𝐷𝑡(xt+1,yt+1) 𝐷𝑡(xt,yt) × 𝐷𝑡+1(xt+1,yt+1) 𝐷𝑡+1(xt,yt) …… … … … . 𝑖𝑣 “malmquist productivity index” has already been adopted for the measurement of efficiency of m microfinance institutions in pakistan. underneath data envelopment analysis, malmquist index is a method which provide assistances to calculate the fluctuation in “technical efficiencies” (te) of two different time spans. “malmquist index” helps to calculate the comparative productivity of the dmu,s (mfis in our case) at production point ( t+1 x , t+1 y ) with production points ( t, t xy). if there is an improvement in productivity, the result of malmquist index is greater than one, while if it is lessthan 1 it illustrates a downward trend in productivity and moreover if the index result is 1 then it shows no change in productivity from time period t to t+1. scale efficiency is also a constituent upsetting efficiency transformation as described in succeeding equation (mehmood and khan 2014). the formula for the change in the productivity is as follows “productivity change = scale efficiency change × technical efficiency change × technical change” malmquist index does not demand the information pertaining prices of inputs or outputs. additionally, it does not need supposition of revenue expansion or price minimization (balk, 1993). 4. results and discussion this section explains the measurement of the efficiency of microfinance institutions in pakistan. data envelopment analysis is used to measure the efficiency of microfinance institutions in pakistan. 4.1 comparative technical efficiency scores of mfi’s under crs, vrs and scale efficiency the results of the study are demonstrated by comparing the data of two different time spans i.e 2007 and 2017 by using dmu in pakistan the results of variable returns to scale (vrs) shows that thardeep rural support works efficient in pakistan and others are inefficient in 2016 while on the other hand khushali bank works more efficient in 2007. the rural development society near to efficient frontier 0.905 in 2016 but in 2007 it was 0.001. damen support program 0.321 points efficient in 2016 but it is 0.002 points efficient in 2007. sh sachal sami foundation 0.232 points efficient in 2016. others were less than 0.010 in 2016 as much as 2007. according to the variable returns to scale (vrs) thardeep rural support program and shah sachal sami foundation works efficiently in 2016 and only khushali bank was efficient in 2007 and rural development program is near to efficient frontier in 2016 but in 2007 it was inefficient. damen support program 0.336 points efficient in 2016 but in 2007 it was 0.002. asa pakistan, orix leasing pakistan and national rural support are less then 0.200 points in 2016 but in 2007 it is near about to zero. according to scale efficiency, thardeep rural support program works efficient in 2016 and there are many banks that works efficient in 2007 i.e . khushali bank, tameer microfinance, akhuwat, kashf foundation, damen support program, national rural support and thardeep rural support, rural development society and orix leasing company. while, damen support program, brac pakistan and rural development society works efficient in 2016 review of economics and development studies vol. 3, no 2, december 2017 154 but in 2007 they were not efficient. therefore, it concluded that in the year 2016 microfinance institutions are more efficient than the 2007 in all (i.e crs, vrs and scale efficiency) frontiers. table 1: comparative technical efficiency scores of conventional and islamic mfis under crs and vrs sr # dmu’s vrs crs scale efficiency vrs crs scale efficiency 2016 2007 1 khushali bank (kb) 0.002 0.054 0.034 1.000 1.000 1.000 2 tameer microfinance b 0.002 0.053 0.034 0.003 0.003 1.000 3 akhuwat (akhu) 0.001 0.064 0.017 0.009 0.009 1.000 4 kashf foundation (kashf) 0.000 0.029 0.009 0.035 0.035 1.000 5 damen support program 0.321 0.336 0.958 0.002 0.002 1.000 6 asa pakistan (asa) 0.003 0.156 0.017 0.000 0.000 nan 7 national rural support 0.007 0.167 0.043 0.000 0.000 1.000 8 thardeep rural support 1.000 1.000 1.000 0.001 0.001 1.000 9 brac pakistan (brac) 0.140 0.142 0.984 0.000 0.000 nan 10 rural development society 0.905 0.926 0.978 0.001 0.001 1.000 11 al-mehran organization 0.001 0.059 0.017 0.000 0.000 nan 12 sh sachal sami foundation 0.232 1.000 0.232 0.000 0.000 nan 13 shadab organization 0.007 0.030 0.239 0.000 0.000 nan 14 baidarie 0.002 0.053 0.034 0.000 0.000 nan 15 orix leasing pakistan 0.096 0.130 0.739 0.001 0.001 1.000 mean 0.181 0.280 0.356 0.070 0.070 nan table 2: malmquist index summary of microfinance institutions in 2007 mfis 2007 scores effch techch pech sech tfpch khushali bank (kb) 4.794 0.960 4.277 1.121 4.604 tameer microfinance bank .ltd 0.168 0.960 0.174 0.964 0.161 akhuwat (akhu) 0.561 0.960 0.544 1.031 0.539 kashf foundation (kashf) 2.572 0.960 2.851 0.902 2.471 damen support program (dsp) 0.137 0.960 0.104 1.312 0.131 asa pakistan (asa) ******** 1.001 ******** 0.368 ******** national rural support programme 3.352 0.960 3.343 1.003 3.220 thardeep rural support programme 0.045 0.960 0.075 0.597 0.043 brac pakistan (brac) ******** 1.001 ******** 0.569 ******** rural community dev society 0.171 0.960 0.198 0.865 0.164 al-mehran rural development org ******** 1.001 ******** 0.712 ******** shsh sachal sami foundation (sssf) 1.000 0.980 1.000 1.000 0.980 shadab rurl developmnt organization ******** 1.001 ******** 0.360 ******** baidarie ******** 1.001 ******** 0.507 ******** orix leasing pakistan ltd. (olp) 2.883 0.980 1.642 1.756 2.826 mean ******** 0.977 ******** 0.796 ******** note: effch= “technical efficiency change”, techch=”technological change”, pech=”pure efficiency change”, sech= “scale efficiency change”, tfpch=”total factor productivity change”. source:authors own calculation using software deap review of economics and development studies vol. 3, no 2, december 2017 155 table 3: malmquist index summary of microfinance institutions in 2016 mfis 2016 scores effch techch pech sech tfpch khushali bank (kb) 4.677 1.090 0.404 11.584 5.097 tameer microfinance bank .ltd 1.706 1.090 0.398 4.292 1.860 akhuwat (akhu) 9.785 1.090 0.589 16.621 10.665 kashf foundation (kashf) 1.419 1.090 0.336 4.218 1.547 damen support program (dsp) 0.682 1.090 0.336 2.029 0.744 asa pakistan (asa) 0.051 1.090 0.336 0.151 0.055 national rural support programme 1.059 1.090 0.370 2.863 1.155 thardeep rural support programme 0.327 1.090 0.336 0.973 0.357 brac pakistan (brac) 0.536 1.090 0.336 1.592 0.584 rural community dev society 0.390 1.090 0.336 1.160 0.425 al-mehran rural development org 0.019 1.090 0.037 0.506 0.020 shsh sachal sami foundation (sssf) 0.000 1.044 0.000 22.409 0.000 shadab rurl developmnt org 0.101 1.090 0.341 0.297 0.110 baidarie 1.728 1.090 0.301 5.741 1.883 orix leasing pakistan ltd. (olp) ******** 1.044 ******** 1.000 ******** mean 0.788 1.084 0.364 2.163 0.854 note: effch= technical efficiency change, techch=technological change, pech=pure efficiency change, sech= scale efficiency change, tfpch=total factor productivity change. source: authors own calculation using software deap  the results of the study shows that khushali bank had the highest technical efficiency change in 2007 followed by national rural support programme while in 2016, akhuwat is at the top while calculating the technical efficiency change among the microfinance providers in pakistan.  the results of the study shows that asa pakistan, brac pakistan, al-mehran rural development organization, shadab rural development organization and baidarie had the highest technological change (techch) in 2007 followed by shah sachal sami foundation and orix leasing pakistan ltd. while in 2016, all the institutes were on the same level except shah sachal sami foundation while calculating the technological change among the microfinance providers in pakistan.  the results of the pure efficiency change shows that khushali bank had the highest pure efficiency change in 2007 followed by national rural support programme and while in 2016, akhuwat is at the top followed by khushali bank among the microfinance providers in pakistan.  the results of the study shows that orix leasing pakistan had the highest scale efficiency change (sech) in 2007 followed by damen support programmeand while in 2016, shah sachal sami foundation is at the top followed by akhuwat while calculating the scale efficiency change (sech) among the microfinance providers in pakistan.  the findings of the study illustrate that khushali bank had the highest total factor productivity change (tfpch) in 2007 and national rural support programme follows it. moreover, in 2016, total factor productivity change (tfpch) ofakhuwat is at the top followed by khushali bank while calculating the scale efficiency change (sech) among the microfinance providers in pakistan. 4.2 comparative summary of efficiency aggregates of microfinance institutions in pakistan. in the above table the pure technical efficiency in 2016 very little change in shah sachaal sami foundation but in 2007 it is non constant trend but most of the time it is constant. according to pure efficiency change we can say that in year in 2016 there is constant trend regardless of some institutions but in 2007 it is change over time. the technical efficiency change of khoshali bank is grater from all banks in 2007 as much as in 2016. on the other hand, scale efficiency of khoshali bank is much greater in 2016 as 11.684 and the year 2007, it is 1.121 as much as there is variable trend it varies bank. total factor productivity change is also grater in khoshali bank in 2007 but in 2016, it is grater in akhuwat. the review of economics and development studies vol. 3, no 2, december 2017 156 overall results concluded that institutions should want to increase the technical efficiency change efech because it is decreases in 2016 as compare to 2007. the above diagrams showed that 2 out of 15 institutions are efficient with according to constant returns to scale, 1 efficient according to variable returns to scale and 1 in scale efficiency. rest of the institutions are inefficient in 2016. on the other hand, 1 is efficient according to variable returns to scale as much as variable returns to scale. moreover, 9 efficient with according to scale efficiency. 4.3 comparative tfp scores of microfinance institutions (mfis) over time now in this portion of the study discusses separately tfp “(total factor productivity)” scores showed and discussed in different time period is that results calculated based on input variable divided by the output variable. so loan amount disbursed as input variable and gross loan portfolio is the output variable. the results showed the difference between two time lags. i.e q1 2007 and the q1 2016. there in 2007 kashaf foundation works better in 2007 but in 2016 decrease their productivity from 0.504699 to 0.430085. damen support program also decrease their productivity in the year 2016 like 0.428739 to 0.409239 as much as akhuwat 0.497855 to 0.398219. rest of the institutions increase their productivity with the compare of previous year to next year. the khushali bank improves its productivity from 0.359384 to 0.404099 and tameer microfinance bank 0.220047 to 0.343467 as much as thardeep rural support program improves too much as 0.195871 to 0.432241 review of economics and development studies vol. 3, no 2, december 2017 157 table 4: comparative tfp scores of microfinance institutions (mfis) over time tfp 2016 2007 khushali bank (kb) 0.404099 0.359384 tameer microfinance bank .ltd 0.343467 0.220047 akhuwat (akhu) 0.398219 0.497855 kashf foundation (kashf) 0.430085 0.504699 damen support program (dsp) 0.409239 0.428739 asa pakistan (asa) 0.444784 0 national rural support programme 0.471335 0.433681 thardeep rural support programme 0.432241 0.195871 brac pakistan (brac) 0.873825 0 rural community dev society 0.445802 0.369948 al-mehran rural development org 0.621477 0 shsh sachal sami foundation (sssf) 0 0 shadab rurl developmnt organization 0.376889 0 baidarie 0.130848 0 orix leasing pakistan ltd. (olp) 0.394041 0.199007 mean 0.411757 0.213949 (source: author’s own calculations) 5. conclusion the study concludes "technical efficiency" and “total productivity” of microfinance institutions of pakistan. the results of the study conclude that technical efficiency provides us best performance decision making units dmus from 2007 to 2016. it is found that in 2007, only one microfinance institute in pakistan out of 15 and only one in 2016 mfi's, ngo's, rsp's, mfb's, cfi's works on the efficient frontier. however, generally, an assessment of proficiency of these both kinds of organizations provides an irresistible advantage to the mfis and ngo in 2016 as compare to 2007. in the light of overhead results, we accomplish that the microfinance institutions in 2016 were more efficient as compared to 2007. however, microfinance institution are more concentrating on further growth in terms of their factor productivity. objective oriented training should be arranged for the staff as much as for the clients to generate the awareness of microfinancing in pakistan. in the coming years, auxiliary research should be conducted by having a larger data set of imfis to quantify their efficiency for the comparison between ngo's and mfis. enhancement in technology and improvement in managerial skills can decrease the inefficiency. references abayie. e. f. o., amnor. k., &reiming. j. m., (2011). the measurement and determinants of economic efficiency of microfinance institutions in ghana: a stochastic frontier approach. african review of economics and finance 2(2) 149-166. ahmad, u. (2011). efficiency analysis of micro-finance institutions in pakistan (no. 34215). university library of munich, germany. ahmad. m. a. i., ahmad. z. & khan. a. a., (2014). performance analysis of microfinance institutions of india. a research journal of commerce, economics and social sciences. 8(1) 1-12. ahmad. u., (2011). efficiency analysis of micro-finance institutions in pakistan. mpra munich personal repec archive. paper no 34215. akhter. d. w., akhter. d. n., & jaffri. s. k. a,. (2009). islamic micro-finance and poverty alleviation: a case of pakistan. processing 2 nd cbrc, lahore pakistan. review of economics and development studies vol. 3, no 2, december 2017 158 ana. m., & sefa. a., (2012). microfinance social performance: a global empirical study. applied econometrics and international development. 12(2) 51-68. balk, b. m. 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(2008). dynamic environmental performance analysis: a malmquist index approach. ecological economics, 64(4), 701-715. mahmood. h. z., mahmood. d. b., & khan. m., (2014). efficiency analysis of conventioanl vs. islamic microfinance: an appraisal for sustainability in pakistan. international journal of empirical finance. 3(4) 192-201. nedolnyak. d., & hartarska. v., (2007). do regulated microfinance institutions achieve better sustainability and outreach: cross country evidence. applied economics 39 1207-1222. nghiem, h.s and j. laurenceson (2004) the nature of ngo microfinance in vietnam and stakeholders perception of effectiveness. jel-o12, o16, o17, p34, r29, uq, australia. rauf. s. a., & mahmood, .t. (2009). growth and performance of microfinance in pakistan. pakistan economic and review 47(1) 99-122. tahir. i. m., & tahrim. s. n. c., (2013). efficiency analysis of microfinance institutions in asean: a proposed efficiency framework. interdisciplinary journal of research in business. 3(04) 18-26. yilmaz. n. k., (2014). efficiency measurement methods for microfinance institutions: applications in turkey. international journal of economics and finance studies. 6(1) 42-52. review of economics and development studies vol. 4, no 1, june 2018 1 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 1, june 2018 journal homepage: www.publishing.globalcsrc.org/reads protectionist trade policies and agricultural productivity in waemu countries 1 honorésèwanoudé houngbédji 1 centre d’etudes, de formation et de recherches en développement faculté des sciences economiques et de gestion, université d’abomey-calavi (uac), benin. hounore@yahoo.fr articledetails abstract history revised format: may 2018 available online: june 2018 this paper assesses the effect of protectionist trade policies on the agricultural productivity of waemu countries from 1995 to 2016. a multiple linear regression model with panel data was used in this study. the estimations results indicate that the protectionist trade policy captured by state subsidy to agriculture and tax on the import of goods have a positive effect on agricultural productivity of waemu countries. in addition, the study reveals that sufficient availability of farm machinery and fertile soil would be of particular importance to the development of agricultural sector. in the face of globalization, these results encourage the adoption of a protectionist trade policy which would certainly improve the agricultural productivity in waemu countries. © 2018 the authors, under a creative commons attribution-non commercial 4.0 keywords protectionist trade policies , state subsidies , protection rate, agricultural productivity, waemu. jel classification h7, h29, q18 corresponding author’s email address: hounore@yahoo.fr recommended citation: houngbédji, h. (2018). protectionist trade policies and agricultural productivity in waemu countries. review of economics and development studies, 4 (1) 1-9 doi: 10.26710/reads.v4i1.275 1. introduction the importance of agriculture as an engine of development has been debated since several decades. the consensus that emerges is that an increase in agricultural production is a key point for the transition from subsistence to commercial farming, which is supposed to lead to an improvement in farmers' incomes (houmy, 2008). within this framework, it has been recognized that a developed agricultural sector is an effective mechanism for successful entry of developing countries into globalization. although agriculture remains a source of wealth for the sub-saharan african countries 1 , it is clear that global competition continues to be unfavourable (baldin, 2012). past economic policies in sub-saharan africa failed to stimulate the agricultural sector in an efficient manner as was the case for asian and latin american countries (haggblade and gabre-madhin 2010). empirical evidence has shown that sub-saharan african countries are being hurt by agricultural subsidies to production and exports from the north (tockarik, 2003) even though the world trade organization (wto) has always tried to punish states that violate the regulation in this regard (anderson and valenzuela, 2006). unlike the industrialized countries, the agricultural sector occupies an important position in the most 1-agriculture is the main source of employment with 65% of full-time jobs, 25 to 30% of gdp and over half of total export earnings. most countries in sub-saharan africa still depend on agriculture for over 20% of their exports (douillet, 2012). http://www.publishing.globalcsrc.org/reads mailto:hounore@yahoo.fr mailto:hounore@yahoo.fr 2 developing countries where it is the major contributor to gdp and is the primary source of income for the population (brüntrup et al., 2008). thus, the development of agricultural sector is of great importance for poverty reduction in west african economic and monetary union (waemu) countries. in this context, it is necessary for these countries to protect the sector through a protectionist trade policy. producers, in industrialized countries continue to benefit from advantageous commercial policies. economic theory is not on the side-lines of the protectionist trade policies that countries engaged in international trade must adopt. while the classics consider that a protectionist trade policy is harmful or even dangerous for the economy, other theories argue that this helps the local industry to develop through state interventions in a context of imperfect competition at a world scale. by protectionist agricultural trade policy, we mean all measures that can be taken to change the equilibrium generated by the imperfect market situation for the benefit of the protectionist nation (krugman 1979).strong distortions and price variability observed in global agricultural markets become problematic for all countries depending on international trade. these distortions are source of concern for developing countries, which are faced with a lack of means to support their agricultural production and their producers like in industrialized countries. this situation compromises a genuine "fair competition" despite the interventions of the wto. it was in this context that, in light of the various reforms and like most developing countries, waemu has adopted protectionist trade policies to enable their producers to be competitive in the international market. however, the competitiveness is still embryonic with a structural deficit despite the production potential in the region (resakss, 2011). as an illustration, in the waemu zone, the stylized facts relating to the dynamic of agricultural productivity regarding the protectionist trade policy (export subsidies and import tax) lead to an ambiguity relationship. indeed, agricultural productivity has increased from 22% over the period 19952002 to 25% and 19% over the period 2003-2010 and 2011-2016, respectively. over the same periods, the subsidy rate increased from 6% to 18% and then to 30%, while the import tax increased from 24 % on average at 27 % and 28 % 2 .this stylized fact seems to confirm at first that the relationship between agricultural productivity and protectionist trade policy is linear. in a second step, these statistics invalidate the supposed linear relation as the increase of the variables related to the protectionist commercial policy does not necessarily induce a growth of the agricultural productivity (we observe a decrease of 6%). these facts reveal that the relationship between protectionist trade policy and agricultural productivity is uncertain. this justifies the interest of this paper in this face of regional market integration observed in developing countries. therefore, the purpose of this paper is to assess the impact of protectionist trade policies on agricultural productivity within waemu countries. the paper is structured in five sections namely: literature review in section 2, methodology in section 3, results and discussion in section 4 and finally; section 5 presents the conclusion. 2. literature review the concept of protectionist trade policy has been widely discussed in the literature. it should be noted that various protectionist trade policy indicators (specialization indices, import tax, intra-industry trade rate, revealed comparative advantages, and subsidy, among other.) have been proposed. they most often focus on the intra-industry exchange versus inter-branch exchange debate. following the influx of theoretical studies on protectionist trade policy in the early 1980s, many empirical contributions have emerged. we will retain in this paper some recent studies in general and those focused on sub-saharan africa countries. 2.1. general studies on protectionist trade policy in his study, goreux (2003) seeks to evaluate the damage caused by subsidies to african cotton producing countries. based on elasticity calculation and simulations, goreux (2003) shows an increase in the world cotton price index from around 2, 9% to 13,4% and a gain in export earnings. however, the main limit 2-the statistics were calculated based on data from wdi. we took the average annual indicators of sub-periods review of economics and development studies vol. 4, no 1, june 2018 3 that blunts the scope of these results lies in the same value of the elasticity retained for the countries. this implies that these countries have the same level of development and, by extension, identical structural characteristics. this hypothesis is not verified. in addition, the theoretical construction of the model would require rich countries to agree to eliminate their subsidies to allow the advent of fair trade as advocated by the wto. obviously, this suppression is far from being a reality. from this moment, the empirical literature attempts to qualify the conclusions of goreux (2003) as "a translation of theory to algebra and finally to numbers "(shepherd, 2004). in addition, beyond this limit, the study lacks theoretically testable foundations. this limitation was addressed in the work of poonyth et al. (2004) and bonjean et al. (2006) who adopted different approaches. first, poonyth et al. (2004) evaluate the impact of us country subsidies on the world price and traded volumes of cotton using agricultural trade policy simulation model (atpsm). the study reveals that a reduction in subsidies in all countries would result in a 3.1% to 5% increase in the world price depending on the values of the supply and demand elasticities. bonjean et al. (2006) adopted a bayesian var to evaluate the impact of us and european subsidies on the international cotton market employing a dynamic partial equilibrium model. they found that the impact of us aid on the world price varies, on average, from 3% to 7%; whereas, the impact of european aid is about 2%. following the same approach as previous studies, crowley (2007) examines the effects of tariffs imposed by us on japanese exports over the period 1992 and 2001. the results reveal that us tariff led to a 5% to 7% increase in exports to the third market and a 5 to 19% decrease in japanese exports. beyond this rich empirical literature, in a recent study, francis (2017) shows that protectionist trade policy has a negative impact on the productivity of the economy by discouraging competition, specialization, innovation and the transfer of knowledge within the usa. indeed, the study indicates that the economy is thus less able to adapt well to technological changes or economic downturns. lower productivity growth leads to lower growth. in the same vein, derek and collab (2013) have shown that a permanent ten percentage point increase in us tariffs on imports from all regions would result in a permanent 1% decline in the level of real gdp. thus, tariffs and other protectionist measures can negatively affect an economy in many ways. 2.2. studies on sub-saharan african countries the empirical literature has been abundant in sub-saharan african countries. first, using time-series econometric techniques, mahaman (2006) showed that subsidies granted by northern countries have a negative influence on economic growth in niger. this leads to a decline in the growth of real gdp and in turn the well-being of the populations. douillet (2012) analyzed the effect of trade policies adopted by sub-saharan african countries on gdp growth and agricultural growth, based on a computable general equilibrium model. referring to the assumption that the impact of trade policies on a country depends on the relative impacts of its competitors (carrère and de melo 2010), the study conducts simulations using the general equilibrium model. the results show that strengthening the integration process through multilateral integration favours trade in products at more advanced stages of processing and impacts economies in terms of gdp growth, welfare, and the volume of agricultural exports. thus, regional integration could be a mean of stimulating this competitiveness through the effect of industrial learning it induces ("learning by doing"). however, the gains from trade reforms are unequally distributed in favour of the richest within africa, south africa and nigeria. addressing the specific issue of cotton, faye (2011) assessed the impact of us subsidies on exports of the product over the period 1982 and 2007. using a vector autoregressive (var) model, the study revealed that the effects of an increase in us and european subsidies on burkina’s cotton production are negative in the first four months. on the other hand, these effects become positive between the fourth and sixth months before becoming negative again between the seventh and the tenth month. overall, the study postulated that us subsidies on cotton negatively affect economic activity and in turn welfare in burkina. the issue of protectionist trade policy has not focused solely on annuity products. other studies have sought to assess their effect on food products such as maize and rice. in this group of studies, we can cite 4 wire et al. (2015) and liverpool-tasie et al. (2015). from a sample of 820 rice farmers in northern ghana, wire et al. (2015) shows that fertilizer subsidy increases land productivity but decreases labour productivity. liverpool-tasie et al (2015) using panel data models, estimated the effect of profitability of fertilizer use on maize production in nigeria. they also found that the strategy to reduce fertilizer transportation costs appears to have a much greater effect on agricultural productivity than fertilizer subsidies. like subsidies, discriminatory protectionist measures can also distort a country's production and, in turn, exports from a foreign country to third country markets. in total, the empirical evaluation of these different approaches reveals three main lines of results. while some studies found a positive relationship between protectionist trade policy and agricultural productivity, others show that it generates a negative impact or to some extent that this outcome is mixed or even conditioned. what about the waemu countries? 3. methodology as part of modelling the effect of protectionist trade policies (pcp) on agricultural productivity (pa), we first try to expose the specified model, and present the characteristics of our specification panel on the eight (8) waemu countries during the period 1995-2016. 3.1. specification our specification is based on the empirical model developed by issiyaka et al (2010) which seeks to analyze the impact of chemical fertilizer subsidies on cereal production in burkina faso. starting from his model, ours is as follows in panel data: ln(p)it = αi + α1ln(m)it + α2ln(s)it + α3ln(t)it + α4ln(k)it + α5ln(f)it + α6ln(ta)it+ µit where,  pit the value added of agricultural production from country i in year t ;  mit a variable of agricultural mechanization which measures the quantity of machine used for the production in country i in year t ;  sit state subsidy to production in country i in year t ;  tit are tax on goods, including levies imposed for income or protection and determined on a specific or ad valorem basis from country i in year t ;  kit the human capital of the country i in year t ;  fit measures amount of fertilizer used (in kilograms per hectare) for the production in country i in year t;  tait arable land available in hectare from country i in year t ;  µit denotes the error term. with αi, (the specific effect for each country); α1, α2, α3, α4, α5 et α6, the parameters. all variables are in logarithms. 3.2. variables description agricultural productivity (p): agricultural productivity measures the efficiency of the use of production factors. there are several productivity indicators such as total factor productivity that reflects the efficiency of the use of all factors of production, including the productivity of land and farm labour, which is the two most commonly, used partial productivity indicators (farm, 2013). however, as shown by fuglie et al. (2012), this indicator as defined only takes into account the value of agricultural production. to get a better idea of the economic efficiency of production, it would be more appropriate to use the value added. in the case of our study, we use agricultural productivity in terms of value added of agricultural production. review of economics and development studies vol. 4, no 1, june 2018 5 protectionist trade policy is captured by state subsidies (s) and import tax (t) which are supposed to benefit the producers of this good and the state (oloukoi, 2009). agricultural mechanization (m) is the set of tools and machines that can intervene in manual cultivation, hitched or motorized for all operations from clearing and land development to processing. it increases the productivity of human labor (unido, 2008). this variable refers to the number of wheel and track tractors operating in agriculture after the calendar year. quantity of fertilizer used (q) results in the use of fertilizers, improved seeds, phytosanitary products, animal or motorized traction, and water control. thus, the amount of fertilizer used is fertilizer consumption (100 grams per hectare of arable land). it measures the amount of plant feed used per unit of arable land (rahman 2004). arable land " in hectare’’(ta) includes temporary land for mowing or grazing, land under the market or vegetable gardens and land temporarily fallow. land abandoned due to shift culture is excluded. human capital (k) is captured by several indicators in the literature. in this paper, the labour force is a good proxy for human capital to the extent that it measures the level of labour available in the agricultural sector. 3.3. estimation method and data source the first thing to check when using panel data is the nature of the model specification (homogeneous or heterogeneous specification of the data generating process, fixed effect or random effect). however, before anything else, it is important to assess the quality of our series through the stationary test. this depends largely on the reliability of our estimates. in this respect, we carry out the im-pesaran-shin stationarity test (ips). the data used in this study comes from the world development indicators database (wdi) and the uemoa annual reports. this study focuses on the eight (8) countries of waemu namely: benin, burkina faso, côte d'ivoire, guinea, mali, niger, senegal and togo. given the availability of statistics for each country, the period covered by the study extends from 1995 to 2016. that is, an observation of 176 (22 x 8) for each variable, which allows us to have a cylindrical panel. 4. analysis and presentation of the results 4.1. result of preliminary tests first of all, we need to take a hard look at the data we have. a summary of these data can be found in the following (table 1) shows large differences in the values of some variables, meaning that the waemu countries have different characteristics regarding the evolution of the variables explained. we then chose to use in this analysis a log transformation. this procedure has the advantage of correcting the problem of large discrepancies and gives us the opportunity to interpret the coefficients in terms of elasticity and also allows to exclude the influence of the different units of measurement in the model to be estimated. the analysis of descriptive statistics of the variables of the model can be extended by that of the correlations that we present in the table 2. indeed, this analysis aims to detect the problem of multicollinearity which makes it difficult to interpret the results from the econometric estimations. from this table, it appears that agricultural productivity (p) remains weakly correlated with the explanatory variables. even better, as can be seen, the partial correlation between the variables is weak by compared to 0.5. thus, these results suggest a risk of multicollinearity that is almost low in the model to be estimated. 6 table 1: description of the variables variables mean std. dev min max observations agricultural productivity (p) 5.94 0.54 4.87 7.03 176 subsidies (s) 2.24 1.21 -0.90 3.61 176 import tax (t) 3.19 0.36 2.40 3.84 176 quantity of fertilizer used (q) 1.34 1.69 -5.48 3.52 176 agricultural machines used (m) 6.81 1.55 4.38 9.33 176 arable land (ta) 2.62 0.65 0.95 3.83 176 human capital (k) 4.26 0.14 3.93 4.53 176 source: author table 2: matrix of correlation coefficients between variables variables p s t q m ta k agricultural productivity (p) 1.00 subsidies (s) 0.31 1.00 import tax (t) 0.22 0.34 1.00 quantity of fertilizer used (q) 0.14 -0.19 -0.47 1.00 agricultural machines used (m) 0.16 0.08 0.14 0.20 1.00 arable land (ta) 0.33 0.20 0.02 -0.13 -0.55 1.00 human capital (k) -0.26 0.22 -0.01 -0.08 -0.15 0.34 1.00 source: author, from the estimation in stata 14 after describing the variables and analyzing the correlation matrix, it is necessary to check the stationarity of the variables, essential condition for a good estimation of the model. stationarity test. the ips test performed on each series of our model gives the following results reported in table 3.we find that all p-values are below the critical value of 5%. this leads to the admission that all the variables are stationary. since the stationarity of the variables is verified, it is appropriate to test for the model specification. it is therefore appropriate to use the hausman test which aims to choose between fixed effects and random effects model. table 3: results of the stationarity test variables value of the statistic p-value with constant with trend decision p -2.48 0.0065 yes yes stationary s -3.24 0.0006 yes yes stationary t -1.95 0.0252 yes yes stationary q -4.27 0.0000 yes yes stationary m -1.31 0.0937 yes yes stationary ta -0.56 0.0864 yes yes stationary k 0.66 0.0471 yes yes stationary source: author, from the estimation in stata 14 table 4 reports the results of the hausman test of model specification. note that the conclusions from the first two specification tests are obviously contradictory. such results of hausman test makes it possible to discriminate between a fixed effect model and a random effect model. if the probability of the hausman test is less than 5%, it is concluded that the fixed effects model is preferable to the random effects model. for this study, the chosen model is the one with fixed effect. review of economics and development studies vol. 4, no 1, june 2018 7 table 4 : specification test source: author, from the estimation in stata 14 4.2. estimation result and discussion the results of model estimates characterizing agricultural productivity through protectionist trade policies are presented in table 5.the results show that protectionist trade policy variables (subsidies, import tax) and the amount of agricultural machinery used, availability of arable land were found to be relevant in explaining the level of agricultural productivity in terms of value added within waemu countries. indeed, the study indicates that a 10% increase in subsidies to agriculture (s), generates an increase in the capacity to produce in terms of a surplus value added of 0.4%. thus, the response to an increase in aid to agriculture (s) induces an increase in the level of agricultural productivity. this could be explained by the fact that an increase in subsidies implies a reduction in production costs and therefore an increase in the production capacity which certainly affects agricultural productivity. these results are consistent with those found by wire et al. (2015) and liverpool-tasie et al. (2015) who show that within countries, protectionist trade policies via subsidies and import taxes are an effective weapon for improving the welfare of vulnerable countries in the global market via increasing agricultural productivity. table 5: results of estimations endogenous variable : agricultural productivity coefficient t-student grants (s) 0,042 3.94 ** quantity of fertilizer used (q) -0.022 -0.07 import taxes (t) 0.172 2.11 ** human capital (k) -0.054 0.21 agricultural machine (m) 0.325 7.53 ** arable land (ta ) 0.565 6.70 ** number of observations 1 76 r square within 71 % source: author, from the estimation in stata 14 as for the agricultural import tax (t) when it increases by 10%, there is an improvement in local production of 1.7%. this result reveals that the local products protection policy through a limitation of the entry of foreign products into the national markets of the waemu countries favours the sale at reasonable prices of local products on their market. thus the added value resulting from this flow positively influences agricultural productivity. similarly, the variables quantity of agricultural machinery used and availability of arable land have a positive impact on the level of agricultural productivity of the respective order of 3.2% and 5.6%. this result could be justified by the fact that the higher the use of agricultural machinery, the more the amount of cultivated land. controlling for other factors, this would fisher's test of our model model pcs and agricultural productivity statistical f. (7,168) = 220 probability = 0.000 r 2 (within) 0.68 observation presence of individual fixed effects test breush and pagan statistical prob ˃ chiba 2 = 0.000 r 2 (between) 0.60 observation presence of random effect hausman test statistical prob˃chi2 = 0.0001 observation presence of fixed effect. 8 induces an increase in productivity under normal conditions. these results are in line with those found by crongd (2010) in south kivu in the democratic republic of congo, which showed that the use of agricultural machinery favoured an 85% increase in maize production, 95% increase in bean production and 11% increase in groundnut production. in sum, this study shows that protectionist trade policies have a positive effect on the level of agricultural productivity of the waemu countries. this corroborates the results of shepherd's (2004) empirical studies which showed that subsidies affect global production. in addition, these results support studies that state that import restrictions benefit domestic producers (crowley, 2007; wire et al., 2015 and liverpool-tasie et al, 2015). 5. conclusion the purpose of this paper is to assess the effect of protectionist trade policies on agricultural productivity in the waemu countries. from the estimation of fixed effect model over the period 1995 to 2016, two major conclusions can be drawn from the study. first, the study shows that state subsidies to agriculture and import taxes have a positive effect on agricultural productivity growth. second, protectionist trade policies will be conducive to productivity growth, within a framework of quantitative use of agricultural machinery and increasing the availability of arable land. in terms of implications for economic policies, this study suggests that protectionist trade policies must be encouraged in all the countries of the union. for this purpose, the study suggests (i) to provide to producers subsidized agricultural machinery in order to gradually eliminate the use of archaic tools. this would increase the extension of uncultivated arable land and productivity since the farmer man's physical strength is very limited compared to the use of machinery; (ii) to promote the valuation of the potential arable land in each country; (iii) to train producers to adapt to new farming techniques, climate change, and water management such as irrigation. references anderson kym and ernesto valenzuela (2006). do global trade distortions still harm developing country farmers? development research group the world bank 1818 h street nw washington dc 20433, 41p. baldin claire (2012). la qualité sanitaire et environnementale comme variable stratégique du commerce agricole nord-sud : une étude en termes de normes et de technologies agricoles » gredeg umr 7321, cnrs, université de nice sophia-antipolis bu st-jean magasins 26p. brüntrup m. et al, (2008). politique commerciale et développement agricole au sénégal. studies / deutsches institut fürentwicklungspolitik issn 1860-0468. pdf. bonjean, c. s .calipel et f. traoré (2006). l’impact des aides américaines et européennes sur le marché international du coton : résultats d’un modèle d’équilibre partiel dynamique, notes et études économiques, ministère de l’agriculture et de la pêche, n° 27, avril, 57-89. carrèreet de melo (2010). the doha round et market access for least developed countries: scenarios for the eu et us markets. journal of world trade 44 (1): 251–290. claire b., (2012). l’impact des subventions agricoles et des technologies de l’agriculture de précision sur les pays de l’afrique subsaharienne. commission de l’uemoa aux questions posées par les etats membres de l’omc, ouagadougou. pdf crongd-consortium (conseil régional des ong de développement) sud-kivu (2010). la dépendance alimentaire au sud-kivu. bukavu, rd congo : crongd. 53-69. crowley, (2007). effets des droits antidumping imposes par les etats-unis sur les exportations japonaises d’environ. economic and social commission for asia and the pacific (escap). un, 212. derek anderson et collab (2013). getting to know gimf: the simulation properties of the global integrated monetary and fiscal model, imf working paper wp/13/55, 27/02/2013. douillet, mathilde (2012). trade policies and agriculture in sub-saharan africa comparative analysis in a computable general equilibrium framework. thèse de doctorat en sciences économiques review of economics and development studies vol. 4, no 1, june 2018 9 soutenue le 22 juin 2012. institut d'etudes politiques de paris/programme doctoral economie des relations internationales. faye mama talla (2011). impact des subventions agricoles sur les exportations de coton du burkina faso, mémoire pour l’obtention d’un dea, (economie et finance) université cheickantadiop dakar, 2011. francis généreux, (2017). le protectionnisme : un frein à la croissance économique » desjardins, etudes economiques, 4. fuglie k., wang s. and ball v. e. 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(2004). the impact of us subsidies on the world cotton market: a reassessment », gem working paper, sciences-po. tokarick s., (2003). measuring the impact of distortions in agricultural trade in partial and general equilibrium, imf, working paper. wiredu a et al, (2015). impact of fertilizer subsidy on land and labor productivity of rice-producing households in northern ghana, center for studies of african economies. review of economics and development studies, vol. 7 (4) 2021, 561 576 561 cpec dynamics; bilateral currency swap agreement and balance of payment of pakistan muhammad nadeem javaid a , sikander bizenjo b a karachi school of business and leadership, bahadurabad, karachi, pakistan email: nadeemjavaid75@gmail.com b dawood hercules corporation, 9th floor, dawood center, pidc, karachi, pakistan email: sikanderbizenjo@gmail.com article details abstract history: accepted 13december 2021 available online december 2021 the china pakistan economic corridor (cpec) is considered as principal strategic component of china’s belt and road initiative (bri). both countries have signed deals to the tune of $46 billion in 2015. now these investments and loans call for repatriation of profits and interests which are causing a burden on pakistan’s, already fragile, balance of payments (bop). this study investigates the impact of china – pakistan bilateral currency swap agreement (bsa) on pakistan’s bop by exploring three similar cases of bsa’s of china with: new zealand, mongolia, and ukraine. our analysis shows that bilateral trade in all the three cases has felt a strong and positive outcome but china as the foremost winner. our recommendations suggest how pakistan could gain the full advantage of the bsa in short, medium, and long-term. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: cpec, bilateral currency swap agreements, china, pakistan, trade, bri, obor, macroeconomics jel classification: f14, f15, f17, f62, f63 doi: 10.47067/reads.v7i4.417 corresponding author’s email address: nadeemjavaid75@gmail.com 1. introduction the bilateral relation between china and pakistan are traced back to 1951 when pakistan, amongst the first few countries, recognized the statehood of people’s republic of china. this connection grew stronger over the years and hit the highest note when president xi jinping announced an unprecedented investment deal worth 46 billion dollars in 2015 under cpec, terming pakistan as an “iron brother” (mustafa & zafar, 2017). cpec, which is presently valued at $62bn, are series of investments that china is undertaking in pakistan, including a 3000km highway connecting china’s xinjiang region to pakistan’s gwadar port (cpec ltp, 2017). it is one of the six economic corridors under china’s bri which is often referred to as maritime silk road of the 21 st century. the bri initiative envisages to connect 65 countries encompassing 40 percent of world’s trade output and 62 percent of population through six land corridors and numerous sea channels (shah, 2018). the bri reflects a paradigm shift from traditional chinese approach of neutral trade ties to more regional and global cooperation, review of economics and development studies, vol. 7 (4) 2021, 561 576 562 encompassing economic, security and political landscape (vangeli, 2017; shah, 2018). cpec, in this new ‘chinese dream’ under president xi jinping is not only the principal strategic component of bri but also “the flagship project” (shah, 2018) the deals of such an unprecedented scale would certainly require repayments in the form of repatriation of profits on investments as well as interest payments on loans. as per international monetary fund (imf) estimates, these repayments would range from $3.5 billion to $4.5 billion per annum from the year 2023 (imf, 2017). keeping in view the existing anomaly of bilateral trade with china, the cpec and other investments related obligations are likely to put enormous pressure on pakistan’s already stumbling bop (imf, 2017). in order to finance these repayments, pakistan has to boost her exports among other financial inflows, as any additional pressure on bop at this stage will aggravate the domestic economic problems. according to the state bank of pakistan (2018), if the growth in exports continues at the same rate as of 2017-18, the payments linked to cpec shall not create any additional burden on pakistan’s external payment capacity. however, pakistan’s volatile nature of export performance and competitiveness during the past necessities’ serious consideration regarding the sustainability of bop. in case, pakistan fails to generate the required level of exports or other non-debt creating financial inflows to finance its cpec-related obligations, then would the china-pakistan bsa will facilitate the latter in shielding its bop from deterioration? this study aims to explore the impacts of chinapakistan currency agreement in depth. this paper is structured as follows. in section ii, we explore the literature on bilateral currency swaps. in section iii, we outlined the mutual trade between pakistan and china, with reference to china pakistan free trade agreement (fta) and cpec. section iv presents the basis of analysis and investigates the three case studies on which pakistan’s case can be analyzed. and section v presents the conclusion and policy recommendations. 2. understanding bilateral currency swap agreements according to the imf, bsa is defined as, “… an agreement between two central banks to exchange a cash flow in one currency against a cash flow in another currency according to predetermined terms and conditions” (imf, 2017, p. 4). to illustrate further, a bsa is signed between people’s bank of china and another central bank, then the counterparty central bank is able to sell it’s currency to china for renminbi (rmb) – also known as the yuan – at a pre-agreed exchange rate date in the future (zhitao, wenjie, & cheung, 2016). further, the rmb is then lend to the local banking sector to do trading with china. in other words, bsa propels liquidity to conduct rmb-dominated trade overseas (bank of korea, 2012). bsas came into light in the 1970s and since then have been expanded substantially. these agreements have risen from $3.8bn in 1995 to $31.5bn in just over a decade (munro & wooldridge, 2010). the need for these agreements have become more imminent after the fall of wall street and in the aftermath of global financial crisis in the 2008-09 (park, 2016). it was against this backdrop that many currencies were set to replace the us dollar in the international monetary market. euro for one was the top contenders; the global foreign exchange reserves of euro rose from 17.9 percent in 1999 to 28 percent in 2009 (park, 2016). similar to europe, beijing too was quick enough to seize this opportunity of uncertainty in the global financial markets. china first took the center-stage in the global economy in 2009 when they became world’s largest exporter and second largest importer. and by 2014, they were the largest trading economy in the world (park, 2016). these ambitions were further enhanced as china aimed to have rmb as the dominating trading currency of the world. these agreements are used by china to aid a partner country in need outside the bretton wood institutes (mcdowell, 2019). since 2009, china has sealed around 32 bsas (spivak, 2017). many new partner countries have signed currency contract with china, including pakistan. although, pakistan holds a special significance due to its trade relationship with china, vis-à-vis cpec. researchers have extensively explored the implications of bsas; however, the literature on bsa in relation to pakistan is extremely weak and this paper aims to fill this gap. review of economics and development studies, vol. 7 (4) 2021, 561 576 563 3. pakistan’s bop and its trade ties with china pakistan had witnessed a reasonably good trade balance during the early years of her inception. the current account balance of pakistan has seldom been stable as evident from the figure 1. to illustrate with the help of graph (figure 1), the data extracted from world bank approximate that the trade balance was stable during the 1980s and 90s, but took a sharp decline around 1995 and 1996. despite the fact that workers’ remittances have surged during this period, the overall trade balance had deteriorated. for instance, in 1994 and 1996, the deficit in current account on an average increased from $3.1 to $3.6 billion respectively. on the contrary, the years leading up from 2001 witnessed a sweeping upsurge; trade deficit was low and the current account was in surplus for the first time in country’s history (sbp, 2001). the predominant factor behind this surplus of $1.3 million in 2001 and $3.1 million in 2003 were due the events unfolding post 9/11 attack in the us; the coalition support fund in the war against terror and easing of tariffs had contributed in ameliorating pakistan’s bop (sbp, 2001). this upsurge lasted for 7 years before current account plummet to $15bn during 2008-09, owing to the global financial crisis. figure 1: pakistan's balance of payment timeline it is pertinent to note that pakistan has traditionally maintained an import substitution regime instead of an export orientation (sbp, 2001). notably, pakistan had the same approach with its regional trade partners as well, including china. the present bilateral trade between pakistan and china is highly in favor of the latter as depicted in figure 2. nevertheless, many new developments in the country, including cpec and bsa with china are silver-linings that this anomaly in bilateral trade may change to make this partnership more balanced. china and pakistan have enjoyed an “all-weather” friendship based on their mutual interest in trade and geo-politics (mustafa & zafar, 2017). the friendship was given a physical shape in 1982 with the construction of karakoram highway (kkh) – often known as the eighth wonder of the world – that connects chinese city of kashgar to pakistan’s gwadar. albeit, the relation of trade goes well before kkh to 1963 when both of the countries signed their first bilateral agreement (kumar, 2006). this was followed by the establishment of chinapakistan joint committee to facilitate fostering of trade and technology in both countries. it uplifted the trade and the new dawn of memorandum of understandings (mous) begun; six mous were signed in may 2001, seven in 2004 and twenty-one in 2005 (kamal & malik, 2017). these mous were to expand the cooperation in trade, defense, energy, infrastructure, social sector, among other areas. the mutual trade received even a bigger forward push with the agreement on early harvest program in january 2006 which are often labelled as the foundation stone of the china pakistan free trade agreement (cpfta) (kamal & malik, 2017) review of economics and development studies, vol. 7 (4) 2021, 561 576 564 4. trade between china and pakistan and its implications on pakistan’s bop pakistan and china signed their free trade agreement in 2006, which has significantly boosted the mutual trade between the two neighboring countries. the volume of bilateral trade in 2015 was $13.77bn, approximately $10bn more than what it was in the 2002 (ministry of finance, 2018). moreover, as per the cpec’s long term plan (ltp), based on the tariff reduction modality, both of the parties eliminated almost 36 percent of total tariff lines in the first phase, which concluded in 2012 (cpec ltp, 2017). the negotiations for the second phase had begun in 2013 and are still going on till date. since the fta, the trade between two countries had considerably improved; still, highly skewed in favor of china. to give an illustration, the figures 9 to 11 in the appendix show the composition of trade between both countries for two different periods; 2006 as the baseline year when the fta was signed and a decade later in 2016. there are some changes in the exports but the overall composition of the imports of both countries remain almost the same. it is pertinent to note that both of the countries have benefited from signing cpfta, but the accumulated trade is highly skewed towards china. for instance, the exports to china from 2006 to 2016 have increased by 214 percent, as oppose to imports from china, which have augmented by 369 percent. in view of research by pakistan business council, the utilization of tariff reduction under cpfta for pakistan remains at mere 4 percent, against china’s 60 percent (pbc, 2018). the bilateral trade overtime is further boosted with the advent of cpec under the bri initiative. the tenancy of trade in favor of china has strained the current account balance of pakistan and consequently asserting pressure on the bop of the former. the trend of trade in figure 2 shows that pakistan’s imports have witnessed a sharp surge from 2013 onwards. conversely, the exports have only managed to increase until 2013, before proceeding on a decline trend. this discrepancy in country’s trade pertinent to china is due to both demand and supply side factors. for instance, according to national tariff commission (2015), high cost of doing business in pakistan is one of the dominant causes of decline in exports. in addition, the inefficiency and red-tapism is also adding up to the cost of doing business and making pakistan’s exports uncompetitive in the international market. similarly, energy crisis and high energy tariff are adding to the cost. furthermore, exports stagnation is also due to non-innovative export policies and paucity of identifying new export base in china (pbc, 2018). additionally, china surpasses pakistan in most of the trade sectors. for instance, pakistan’s primary exports is textiles but china itself is a giant supplier of textiles and enjoys greater comparative advantage, thus causing a skewed trade policy in favor of china (kamal & malik, 2017). other non-quantifiable reasons behind low exports in pakistan are: meagerness of market diversification, political and social instability, abysmal market access and trade facilitation, less educated and skilled force among others (ntc, 2015).. in the recent years, overvalued pakistani rupee has further constrained the export flow from the country. another shift comes from the demand-side owing to china’s preferential change from low-tech products like textiles to more high-tech products (liang, 2008). pakistan’s exports to china are mainly low-valued, and such industries in china itself are relocating to other countries as they are loosing their advantage in china (pbc, 2018). notably, the present dip is also due to the slowing down of chinese economy from 2013 onwards. on the other hand, the imports from china have been rising since singing the cpfta in 2006. the largest increase have come from 2013 onwards which is largely explained by the imports of expensive machinery and equipment under the backdrop of cpec (imf, 2018). and finally, a sizeable number of power projects under the umbrella of cpec are supported by imported coal from china; thus, further boosting the import bill (cpec ltp, 2017; pbc, 2018). review of economics and development studies, vol. 7 (4) 2021, 561 576 565 source: date collected from oec and pakistan bureau of statistics 5. cpec as the principal strategic component of bri cpec is one of the six corridor under china’s one-belt one-road (obor) initiative, also known as bri. it is an attempt to expand chinese economy through creating a mutually beneficial network of economies. china has heavily invested in the financial and economic sectors in various countries in order to shape global economic governance (giuseppe gabusi). this mega investment is being termed as the magnum opus of chinese premier xi jinping’s government (swaine, 2015). these ambitious plans under bri are set to connect mainland china with many of its neighbors across continents, spanning over 65 countries (irshad et al 2015). according to vangeli (2017), bri reflects the will of chinese government to be a world player through aligning their economic and policymaking frameworks with global governance issues. bri is envisaged to promote china’s ambitions of converting strategic partnerships into economic ones (huang, 2016). within bri, cpec is the most expensive of its projects to-date, as it has already surpassed a whooping $60bn investment (small, 2017). in the words of chinese foreign minister wang yi, “if 'one belt, one road' is like a symphony involving and benefiting every country, then construction of the china-pakistan economic corridor is the sweet melody of the symphony's first movement.” (small, 2017, p. 81). cpec is seen as a gateway for pakistan to steer its economy on a sustainable upward movement. the effects of cpec on pakistani economy are already visible; the mutual trade between china and pakistan have the growth rate of 18.8 percent on average and the former has surfaced as the largest source of foreign capital for latter (cpec ltp, 2017). however, the mutual trade between the two countries is highly tilted in favor of china. investments under cpec will soon call for repatriation of profits and interest payments back to china. according to an estimate by the imf, from the year 2024-25 onwards, pakistan will have to pay approximately $3.5 to $4.5billion per annum1 (imf, 2017), coupled with already high import bill and stagnant exports. therefore, some alternative measures would be required to settle this growing pressure on pakistan’s bop. bsa could facilitate in the short-term meanwhile some robust long-term interventions would be needed for smooth functioning of the pakistan economy. 6. analysis the cpec investments have touched a whooping $62bn and is spread across the range of sectors in pakistan. as the early harvest projects under cpec are about to be realized, pakistan has to design a framework of paying back the obligations in order to avoid a bop crisis, which may threaten the stability of its currency or ability to pay for imports. a report by the state bank of pakistan extrapolates that chinese firms, who have invested in cpec are entitled a us$17 percent return on equity. the situation is further worsened by a downward 1 1.2 percent to 1.6 percent of fy2015-16 gdp 0 2 4 6 8 10 12 14 16 18 2003 2010 2017 u s d b il li o n figure 2: pakistan china trade (post cpfta) fta signed in 2006 pakistan's imports pakistan's exports pakistan's trade deficit review of economics and development studies, vol. 7 (4) 2021, 561 576 566 trend of exports as shown in figure 3. exports have declined from $25 billion in fy2013 to $20 billion in fy2016, a substantial 20 percent drop in just 4 years before picking up in 2017. reductions in energy shortfall in the country is the key factor contributing to the growth in the exports, as the largest portion of cpec investments are drawn towards improving the energy sector (cpec ltp, 2017). figure 2: trend of exports in pakistan source: date collected from pakistan bureau of statistics if the export sector had not encountered an energy crisis, the projections in table 1 show that a 10 percent growth in 2017-18 would have increased the exports to $39 billion. keeping in a more modest estimate of a mere 5 percent increase, the exports would have still touched $30 billion by 2017-18. as the situation of energy normalizes in the country, exports have presented a positive growth of approximately 14 percent in 2017 and are projected to keep growing. consequently, the imports have surged drastically, from $53 billion in fy2016 to $60 billion in fy2017 2. this 13 percent increase is mainly due to the imports of expensive and heavy machinery to facilitate the cpec projects. however, through analyzing the data from pbs (2018), a more holistic view of imports displays that on average, the imports have only increased to 4.6 percent per annum in the last decade from 2007 to 2017. given the existing growth rate in exports, the imports would less likely to build additional pressure on the bop. the recommendations at the end of the paper would further provide blueprints on where more to cut down on the imports and where to enhance the export bill. 2 the projections of imports are given in the appendices (table 3 and 4) 24.4 25.1 23.7 20.8 20.4 23.2 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 exports (usd billions) review of economics and development studies, vol. 7 (4) 2021, 561 576 567 table 1: trends and projections of pakistan’s export revenue (usd billions) 2012-2013 to 2017-18 years actual growth if exports had grown at: 5% 10% 15% 2012/13 24.4 2013/14 25.1 24.4 26.8 28.1 2014/15 23.7 25.6 29.5 32.3 2015/16 20.8 26.9 32.5 37.1 2016/17 20.4 28.2 35.7 42.7 2017/18 23.2 29.7 39.3 49.1 table 2: projections of pakistan’s export revenue (usd billions) 2018-19 to 2023-24 years if exports grow at: 5% 10% 15% 2018/19 24.4 25.5 26.7 2019/20 25.6 28.1 30.7 2020/21 26.9 30.9 35.3 2021/22 28.2 34.0 40.6 2022/23 29.6 37.4 46.7 2023/24 31.1 41.1 53.7 source: data collected from pakistan bureau of statistics if pakistan manages to increase her exports as per the projections in table 2, a 10 percent increase will bring the export revenue to $41 billion by 2023. an estimate by state bank approximates that if the export bill is risen to $40 billion by the year 2023, the payment stream of cpec projects would not cause any stress on bop (hussain, 2018). however, should the circumstances change and pakistan could not finance the cpec payments through her export bill, will the bsa complement it? to answer this question, this paper has employed an approach of comparing the bsas with matching characteristics to pakistan’s and then generalizing the results to predict pakistan’s future gains or losses. 7. methodology and case studies the study has applied a comparability model which will first isolate the agreements that were similar in value with that of china and pakistan’s agreement. the bsa between china and pakistan is currently valued at cny 20bn or $3.3bn, so only those agreements will be selected if they are close to this range. furthermore, only those agreements will be considered which were signed prior to 2015 to avoid an estimation bias of immaturity of bsa in the analysis. this paper will evaluate the overall trade, the composition of trade and the trends of trade under the backdrop of bsa to propose relevant policy implications for pakistan to benefit from this agreement. the overall analysis of these bsas which involve china and one other party indicate that only 3 agreements are meeting the criterion. first, it was the bsa with new zealand, which is worth at $3.9bn, signed in april 2011. second, the bsa between china and mongolia, which was signed in may 2011 with the worth of $2.36bn. and third, the bsa with ukraine, signed in june 2012 also valued at $2.36bn. apart from the aforementioned bsas, other bsas with china are not meeting the conditions of this methodology. review of economics and development studies, vol. 7 (4) 2021, 561 576 568 according to yelery (2016), the primary rationale behind china’s bsas with these specific countries are mainly driven by trade. numerous studies have proffered that the priority is given to those countries with whom china has been involved in colossal trade (yelery, 2016). furthermore, china has been cautiously selecting the countries that hold crucial geographical positions in their respective regions, have a strong political alignment towards china and are likely to support the latter in ending what they term as the notorious “dollar trap” through internationalization of rmb (yelery, 2016). the countries that are vulnerable to dollar volatility and could benefit from such bsas are partnering with china. 8. new zeeland and china the mutual trade volume between new zealand and china has been sky-rocketing. within two years of signing the bsa, china took over australia as new zealand’s top trading partner. the composition shows that the trade is not skewed towards any party but is almost comparable for both. the exports from new zealand to china were valued at $8.8bn, whereas, the imports from china were at $8bn in 2017 (stats nz, 2018). the top 5 primary exports to china are: concentrated milk, rough woods, acyclic alcohols, sheep and goat meat and frozen bovine meat, and the major imports are: computers, broadcasting equipment, telephones, furniture and seats (oec, 2018). the target which was set by both countries to reach $20bn bilateral trade was just revised to $30bn by the year 2030. the success of this agreement is evident from the fact the bilateral trade between these two countries has increased by three fold in the last decade. figure 4 that the overall trend for both imports and exports is growing. in 2017, both imports and exports have witnessed their all time highest. figure 3: nz’s trade in good and services with china (usd billion) source: date collected from stats nz 9. mongolia and china mongolia is a landlocked country and disadvantaged in terms of trade for not having a seaport. however, their trade dynamics completely changed when they signed a bsa with china. the agreement between people’s bank of china and bank of mongolia was signed in 2012 for the total worth of cny 5bn but it was later increased to cny 10bn. the analysis of the trade between the two countries shows that china is the largest trading partner of mongolia in terms of both exports and imports. the composition of their bilateral trade shows that 80 percent of mongolia’s export market is in china, while only 37 percent of overall imports are coming from china. it is pertinent to note that mongolia’s imports are more diversified than its exports. the the primary exporting commodities to china are: copper ore, coal briquettes, crude petroleum, iron ore and animal hair, whereas, the major imports from china are: electricity, telephones, stone processing machines, other iron products and iron structures (oec, 2018). the recent statistics in mongolia’s foreign trade review shows that in 2017, the trade turnover with china has increased to almost 50 percent (bank of mongolia, 2017). in the words of former mongolia prime minister, sukhbaatar batbold, trade with china will provide the country with “… economic 26.9 30.4 39.4 51.2 43.4 48.2 54.4 28.7 30.5 31.9 34.2 39.2 42.6 43.9 2011 2012 2013 2014 2015 2016 2017 $ b il li o n exports imports review of economics and development studies, vol. 7 (4) 2021, 561 576 569 opportunities that could to a certain extent offset the disadvantages associated with the lack of mongolia’s access to the sea.” (anzai, 2018). figure 5 shows that mongolian exports in 2015 have been the highest, whereas they have remained stagnant in other periods at approximately $3bn to $4bn on average per year. the imports from china on the other hand show a declining trend. it is worth noting here that mongolian economy was battling a severe economic crisis before imf came to rescue in 2017 and approved a three-year bailout program. despite the fact that mongolian economy was in shambles, the bilateral partnership has touched unprecedented heights as china is now the largest trading partner and investor in mongolia. the share of exports to other trading partners is almost stagnant to what they were in 1995 (vorshilov & ulzii-ochir, 2016). figure 4: mongolia’s trade in goods and services with china (usd billion) source: data collected from world bank 10. ukraine and china ukraine is the third country that has a relatively comparable sized bsa with that of china-pakistan’s. the trend of bilateral trade between ukraine and china seem to be uncertain as depicted in figure 6. imports have taken a hit in 2015 and 2016, before slightly picking up in 2017. similarly, exports were stagnant in 2016 and fell in 2017. the composition of the trade shows that the major exporting products to china are: iron ore, seed oil, corn, rough wood and soybean. and the primary imports from china are: telephones, iron, rubber footwear, broadcasting equipment and pesticides (oec, 2018). it is pertinent to note that ukraine was hit by a politicalcum-security crisis in 2013 when the tensions between ukraine and neighboring russia soared in november 2013. the situation slightly eased down in 2015 but reports surmise that russian intervention in ukraine continues to date, thus the uncertainty in their trade dynamics (osce, 2016). review of economics and development studies, vol. 7 (4) 2021, 561 576 570 figure 6: ukraine’s trade in good and services with china (usd billion) source: data collected from world bank 11. china-pakistan bsa and trade – lessons from case studies the analysis of three bsas that are fulfilling the criteria of the employed methodology shows that bilateral trade in all the three cases have reckoned a strong and positive outcome. china has become the largest trading partner of new zealand and mongolia, and one of the significant trading partner of ukraine. therefore, based on the above case studies the ballooning of overall trade under the backdrop of bsa is highly probable. it is worth mentioning that china has only signed a fta with new zealand, their trade with mongolia and ukraine is not boosted by any such agreement, yet. secondly, as far as the composition of the trade is concerned, the exports of new zealand and mongolia to china are greater than what they are importing. in case of ukraine, the composition is reversed and trade is more skewed towards china. albeit, as mentioned earlier, the case of ukraine cannot be validated under the present circumstances when the country is battling security challenges. finally, the trend analysis indicates that imports and exports for new zealand – apart from few fluctuations – have an increasing trend. in case of mongolia, exports show a slight increase at first but then they remained stagnant, whereas the imports have a declining trend since the signing of the bsa. the trend in ukraine is rather inconsistent due to prevailing conflict. table 3: trade with china post-bsa overall trade new zealand mongolia ukraine china emerged as the largest trade partner china emerged as the largest trade partner uncertain composition of trade almost comparable: not skewed in favor of either party skewed favor of mongolia: export quantity is larger than imports uncertain trends of trade upward trend for both exports and imports stagnant exports and downward imports downward trend for exports and slightly upward for imports it is worth noting that the central focus for pakistan at this stage is to boost her exports to china in order to shrink its trade deficit. the indications here are establishing that with the bsa, pakistan’s exports to china are likely to grow if managed properly. review of economics and development studies, vol. 7 (4) 2021, 561 576 571 12. conclusion and policy recommendations based on these findings, this paper has extrapolated short, medium and long-term policy recommendations for the pakistan’s relevent government bodies to adopt in order to gain the maximum benefits of the bsa with china, and use it as a means to improve its exports to china. there is a growing pessimism in pakistan about its ability to repay cpec-related obligations and a possible bop crisis in making. at this conjunction, pakistan has a good chance to seize the opportunity and utilize the bsa in its favor and ameliorate its trade dynamics with china. the findings of the case studies presume a positive indication for pakistan. this bsa can certainly turn out to be a golden opportunity for the country. and in short and medium term at least, bsa will aide in ameliorating the bilateral trade between both trading partners. short and medium term policy recommendations i. bsa being short term in nature, pakistan has to maximize its benefits in the next three years by boosting exports, simultaneously identifying new products to export to china; ii. negotiate better terms with china regarding free trade agreement and further reduce tariff lines, specially on the products that pakistan has comparative advantage. for instance, the tariff rate for pakistan on semi-milled or wholly milled rice stands at 65, whereas the tariff rate from china’s top importer vietnam is at 35; iii. utilizing bsa and cpfta, pakistan should identify new product markets in china. for instance, being an agrarian economy, pakistan should tweak its agriculture policies and use these agreements to penetrate in the ever growing $125bn chinese food market; iv. in the short and medium term, pakistan ought to prioritize attracting fdi to lure nearterm inflows in order to strengthen the foreign reserves and ease pressure on bop long term policy recommendations i. increase research spending on, and financial support to industries that have high export potential, including rice sector and leather industry ii. analysis of the case studies show that primary imports for china are raw materials (mainly iron-ore, coal, and copper), and pakistan has a huge untapped potential in terms of raw materials and natural resources, this calls for further research in this area iii. promote the special economic zones under the cpec and support the industries that have high export potential. for instance, the export potential of rice to china is estimated to be at $1143 million and the current export is only limited to $193 million. iv. diversifying the exports of the country and gradually moving towards high-value exports; switching from low-end agriculture products to manufacutred goods v. include the list of products that pakistan has comparative advantage over china in the new rounds of fta, including rice, textiles, medical instruments, organic meat and leather vi. protect the domestic consumer goods 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of economics and development studies, vol. 7 (4) 2021, 561 576 576 table 4: trends and projections of pakistan’s imports (usd billions) 2012-2013 to 2017-18 year actual growth if imports had grown at: 5% 10% 15% 2012/13 44.9 2013/14 45 47.1 49.4 51.6 2014/15 45.8 49.5 54.3 59.4 2015/16 44.7 52.0 59.8 68.3 2016/17 53 54.6 65.7 78.5 2017/18 60.8 57.3 72.3 90.3 table 5: projections of pakistan’s imports (usd billions) 2018-19 to 2023-24 year if imports grow at: 5% 10% 15% 2018/19 63.8 66.9 69.9 2019/20 67.0 73.6 80.4 2020/21 70.4 80.9 92.5 2021/22 73.9 89.0 106.3 2022/23 77.6 97.9 122.3 2023/24 81.5 107.7 140.6 source: data collected from pakistan bureau of statistics review of economics and development studies, vol. 8 (2) 2022, 211 221 211 a review of the strength of trade polices of emerging economies and their goal of sustainable economic development rahat sabah a a phd scholar, greenwich university karachi, pakistan email: rahatsabah@gmail.com article details abstract history: accepted 25 may 2022 available online june 2022 developing nations are trying to handle the economic problems by applying different strategies, on the other hand they are highly impressed with the infant-industry idea, that is belong to classic growth theory of traditional trade. which is not a worldwide valid idea. according to many economists and scholars the infant-industry proposal stops the emerging countries to enter into international business market. the nations who embrace this idea could not enjoy the competitive advantages in the global market and who decide not to enter into the international market, they have to face high cost of business, inefficient production and decease in jobs opportunities. this study has explored that many firm want to grow their business all over the world at present-day and they are seeking reliable international suppliers and freedom of movement in operating their investment units. to attract the foreign and local investors the emerging nations have to enhance the corporate image of their ftz/epzs setup, which is protected by the both endogenous and exogenous growth theories. in its performance and functions, it has the significance and power to increase the capacity of trade and industry which in turn cause to create business opportunities and provide the path of economic growth, therefore this study has suggested to spend much time and efforts on r&d not only to update the trade strategies and macroeconomic policies but to improve the supply chain system also in the regions. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: epzs, growth theories, economic difficulties, trade policies, sustainable economic growth, developing nations jel classification: o47, doi: 10.47067/reads.v8i2.461 corresponding author’s email address: rahatsabah@gmail.com 1. introduction the current trade & industry of developing countries is under pressure of competitive environment. however, the productive capacity of the nation could be increase through the advancement of both technological and agricultural sectors. these sectors are the important grounds for the long run economies (flitton & currie, 2022). the developing nation should to walk towards growth according to their economic setting because regional development is promising decent living conditions for the inhabitants (olsen, 2022). having the double financial system, the countries should review of economics and development studies, vol. 8 (2) 2022, 211 221 212 give special importance and emphasis first on agriculture areas to produce food products. agricultural is considered the backbone of any economy. so, the agro-based industries need reforms to increase the export, fdi and to create opportunities for the people (shabanov, v. et al., 2021). the production level of food in developing countries is not enough to meet the demand of population, so agricultural system is not helping the low-income people (amorim, w. s al., 2019). numerous developing republics has been attempting to give attention on industrial policies and epzs used as industry shelter program. different terms have been used for epzs in different states such as free trade zones (ftzs) special economic zones (sezs) etc. epzs are the areas where different incentives are presented and provide barrier-free environment by the host country ‘s government to appeal foreign investors (world investment report, 2019). epzs is a mature strategy firstly used in the tyer city of greek with the aim to give the employment to nearly fifteen hundred people because they have lost their jobs due to the install of modern technology in air travel institute. the management of that airport had decided to turn the airport into duty free zone. that experience was proved very successful and in the first years almost 440 jobs were formed and it has become wealthy iceland in the earth after a number of years (neveling, 2017). similarly, engman & pinali, (2007) has stated that epz is not a fresh experience for the countries. now epzs are used as an industrial zones where different incentives schemes are offers to attract foreign and local investors. the venture capitalist imported their material that go through the processing before being to report it. to find the success story of the roman epzs. the british kingdom fallow it this and put it into practice. the key reason of formation of epzs is to search out foreign direct investment and to intensification of export volume of the country. a wide range literature has showed that the export has the capacity to increase the whole elements of production and help the countries to batter and well use of its possessions. free trade strategy have the ability to catch the consideration of exporters, to generate fdi, increase employment /jobs opportunities and create healthier economic development for the country in which they functioning (rondinelli, 1987). similarly, siroën & yücer, (2014) had believed that the epz is a trade strategy developed by the administration to give confidence and support to financial system. but every single free trade zone could be declared export processing zones but each and every export processing zones could not consider as free trade zones in some countries due to the difference in trade policies of the different countries. 2. literature review 2.1 concept of economic growth the simple term of economic growth is to talk about a rise in combined /aggregate production in an economy and this collective increase in production often associate with the increase of average marginal output/productivity. adam smith gives number of their ideas about how economies should work (boettke, p. (2018). mostly economist defined the economic growth as the development in annual rise and an increase in the national income of a country over a limited period of time, usually one year. it is measured by using the statistics on gdp that is a measure of the whole income earned by the individuals of a country as a result of their contribution in process of production. (schmeltzer m, 2017). rostow’s stages of growth model is considered the one of the key historical models of economic development published by an american economist named walt whitman rostow in 1960 in an admirable approach (kyianytsia, 2021). review of economics and development studies, vol. 8 (2) 2022, 211 221 213 figure 2.1 stages of economic growth (rostow, 1960) (source : costa et al., 2016) 2.2 theories of growth theory is a greek word which meaning is “to look at. it gives details about causal relationship among the related variables.it help the researcher about how to grow a better measurement tools for theory-building (wacker, j. 2004).nodoubt economic actions have always been the part of human life. they are running and traveling for the sake of obtaining or achieving of wealth to satisfy their social pleasure and psychological needs (hirschman, a. o. (2002). a. classical growth theory the classical theory of economic growth is a mixture of economic efforts done by english economist adam smith, robert malthus these classicists’ economist believed that all economic resources including land, labor forces, assets and free enterprise are the wealth of nations (pelsa& balina, 2022). it is believed that the stable condition is done temporary and will finally come back. thenry george has contribute the major contribution in the economic development by joining the thoughts of classical growth theory together with the gravity model of trade. however classical economists are often considered as unenthusiastic in their prediction about economic growth dupont, b. (2017). b. neoclassical growth theory the neoclassical theory is considered the broad and extended edition/version of the classical theory the organization is considered like a social system and human efforts could put down impact on it. it gives importance on emotionless and physiological variables and considered them main factors in getting efficiency. it summarized that a constant economic growth is the consequences of a combination of the 3 driving forces like labor, resources, and technology (rumanzi et al., 2021), this theory argues that a difficult set of intuitions in a financial system doesn’t matter. according to them the additional line of neoclassical thoughts about the free market are called the traditional neo-c la s s ic a l g r o wt h t h eo ry wh i c h wa s i n fa c t c rea t ed fr o m t h e h a r r o d , d o m a r a n d s o l o w m o d els (girardi, 2021). c. new growth theory the new growth theory believes that the all-economic growths are associated with new knowledge. the economies are increase due to the increase in knowledge rather than labor and capital of any society (park, s. c. (2018). knowledge is a big science to stitch a shirt in a batter way. review of economics and development studies, vol. 8 (2) 2022, 211 221 214 history shows that the all development is the results of knowledge-based economies because the it helps to adapt the particular location and technology for economic activities (phale, k., et al., 2021). 2.3 exogenous growth concept the exogenous growth concept is the ideology of neoclassical economic philosophy, it stresses that the economic development is driven by technological growth which is an independent power for economic growth. (durusu-ciftci & yetkiner, 2017). the technology, saving rate and capital are the main factor of production in exogenous growth model which help to regulate the economic development. romer model has also considered that the technological improvement helps to increase the economic development sasakura, (2021 2.4 endogenous growth concept the endogenous growth theory has rejected the exogenous growth concept. the endogenous growth theory believe that the economic development depends on the internal elements that include education, innovation and individuals which cause to increase the productivity and economic position in positive way (gómez-caicedo et al.,2022). the advocate of this concept challenge that the new ideas playing avital role for the technological advancement. “learning by doing “model is also fallow this idea because it is used to explain the arrow model to describe that how the innovation effect the economic output (casterton-campos et al., 2022) 2.5 worldwide trade theories a) the heckscher-ohlin theory: according to this theory countries should export their resources, which are surplus and purchase only the resource that could not produces or available in their region. (leamer, 1995). b) mercantilism: it believed that the nation should increase its gold and silver asset through export less reliance on import because the wealth of nation is determined through the quantity of gold and silver they have (rankin, 2011). c) absolute advantage: it stress that a nation should produced their goods more professionally and efficiently than the other country. this theory responded that the economic condition of the countries should not judge on the bases of gold and amount silver but fairly by the slandered of living of the people in that region ( seretis & tsaliki, 2016). d) comparative advantage: it believes that they a country may produce a batter product than the other country and could have an advantage in various areas of business. however the buy and sell could still take place between these two countries (hoen& oosterhaven, 2006). e) the export based theory: it believes the prosperity of the nation could be achieved only through exporting of more commodities or goods and services (conner &prahalad, 1996). f) the product life cycle theory: it believes that the some product is turn into items and changes their origin when they accepted and used on worldly wise level. sometime the same countries who have invented that good have to import this item from another country. for example the personal computers were invented by untied us and later it changes its origin. (golder & tellism, 2004). g) the linder’s demand theory: it believes that the countries should make parallel or same industry and then trade among each other in different goods and products (leamer, 1995). h) the new trade theory: this theory is the combination of different model, it focuses on return to level of export and effect of trade and industry system (deraniyagala & fine, 2001). i) the worldwide strategic rivalry theory: this focus on the multinational corporations and their hard work to obtain competitive benefits against the other international firms and their line of business. the companies should enter in the international competition to prosper and make progress by developing competitive advantages (rasler., & thompson, 2006). review of economics and development studies, vol. 8 (2) 2022, 211 221 215 2.6 key market system a. free market: there is no barrier for sellers. they can sell their product or services where they want (aune, 2002). b. traditional: paper money is not used its use barter system and depends on organic products, hunting and fishing (witell et al., 2011). c. command economy: it relies on decision of governments regarding allocation decisions. no market there (grossman,1963) d. mixed economy: this system defends private possessions and allows some level if financial freedom to use the capital, but the administration can interfere in activities for social purpose (kopel, 2014). 2.7 relationship between trade policies and economic growth in developing many studies are identifying the positive relationship between trade and economic growth. the association of trade and economic growth had its significance influence on the economy. (safi et al., 2021). a wide literature on the relationship of trade policies and economic development in developing countries has published from the last decades. for example, omotor, (2008) has analyzed the relationship among export and economic growth in nigeria between the time period of 1979 to 2005 and pound positive link between the economic growths. in china, tang, t. c. (2014) has working on ardl model to examine the empirical affiliation between export and economic growth, he found longrun relations between exports and gdp. in the same way in south korea, otieno, o. l. (2015) has also tested empirically the relationship between trade and economic development and japan and found the bi-directional causality among trade and economic development. to get the quicker steps of economic growth the developing nations cannot denied the importance of trade strategies. on the other hand , when the trade-openness index was used to observed the effect of trade openness on financial development in south africa by using the example period 1975 to 2014 as a substitute for openness, the study could not find the any support for the encouraging relationship between free trade and economic growth due to the size of the country and its geography (malefane, 2018).while the african industries have achieved the quicker step of economic growth through the planning of foreign trade. (obeng‐odoom, 2020). similarly, cetin & yucel, (2018) examined the effect of trade openness and economic growth in situation of turkey and found that there is a positive relation between the trade openness and economic development. the free trade agreement (fta) between pakistan and china on a number of macroeconomic and trade objects/variables they found the negative impact on the pakistan economy in term of trade balance while the potential export sectors become positively mature in pakistan (khan muhammad et al., 2017). 2.7.1 growth policies pursued in developing economies and their outcomes trade policies of the developing countries are strongly influenced by the classic theory about international trade. after the 2nd world war many developing countries started efforts to accelerate their development through limiting imports of manufactured goods. they want to nurture their manufacturing sector and serving the domestic market. the economic argument that protects manufacturing industries are called the infant industry discussion or argument (baldwin, 1969). many scholars assumed that the infant industry suggestion is not a worldwide valid idea because it brings unemployment, high rates and inadequate production lin, j. y. (2011). similarly, rodrik, (2008) has suggested that the emerging economies have the great positional to gain comparative advantages. they may have become conscious about that positional during the initial period of protection. this was not good the countries should always try to enter into competitive advantage even a single industry which we have enough resources. for instance, the south korea has become of the exporter of automobile inspite that they had limited capital and labor. same as the pakistan and inida had protected their heavy review of economics and development studies, vol. 8 (2) 2022, 211 221 216 industrialized sector from many years and started to export in light sectors of textile. the developing countries should protect their sectors only if this protection helps them to increase their export in other sectors. otherwise, they should not fallow the infant industry idea. adewale, (2017). 2.8.1 role of epzs in developing economies export is an important factor of financial development. a comprehensive literature has been produced about the function and utility of zones. most epzs focus on to attract foreign direct investment as result has become the major sources of fdi, especially for those countries that have not completely opened their economies for the other countries in the world, as china has done first, it undoes its foreign exchange policy in the zones (bhagwat & srinivasan, 2002). many developing states are using epzs to attract corporations having advance technology to increase export of those some products. the confirmed success of epzs such as singapore and hong kong in attracting foreign direct investment (fdi) and promoting exports has become a significant factor in the decision process to establish epzs for the other developing countries. such as south korea, taiwan and mexico in recent years, they used epzs as an additional instrument for overall strategy of economic development (lectard & rougier, 2018). india, indonesia and the philippines have already adopted the different trade strategies of development and focus industrialization. an enclave of the small business firm could help the entrepreneur exist in the developing countries with of economic development (tunio, m. n. (2020). effort has been done already to observe the link between the export and economic growth. in other words, epzs represent a compromise between the advocates of an inward-looking strategy of development, and those favoring an outward-looking strategy centred on a relatively liberal foreign trade regime and inflows of fdi (chirwa, w, 2018). 2.8.2 epzs as trade policy tool and prospects in pakistan' government of pakistan has established export processing zones authority to increase the export of the country and to give acceleration to the investment projects and industrialization by providing an investment friendly environment to the local and foreign investors to bring the new technology in the country and creating job opportunities for people (muhammad & khan, 2021). pakistan started setting up epzs in the 1980s to attract the both local and foreign investors and start creating a network with close cooperation and joint venture agreements with the private sectors (boyce, 2017.the kepz was the first project of pakistan government that was introduced in karachi, which is associated with the national highway system that provide helpful and suitable line to the market of the far east and europe (dossani et al., 2020).pakistan has graded high rank in doing business for south asia region. the rate of return on investment is extremely high in pakistan especially in power sector and mining (khan & rehman, 2019), therefore to make investment in such areas has become more attractive, to increase foreign direct investment (fdi) magnets in upcoming years (irfan et al., 2022).though, the practical practice of emerging sezs/epzs is not visible because of the interior and exterior challenges met by pakistan therefore, these activities growing year by year.(zia et al., 2018).currently the kepz, sepz, sialkot, gepz, repz, reko dek, al-tuwairqi steel, saindak, reko dek, and duddar and gwadar are working smoothly these export processing zones (epzs) are located at sound strategic location and providing premium incentives and facilities to investors and added value significantly in the financial development of to pakistan. (epza year book, 2021). 3. limitations of study and directions for future research in the evaluation and review of the strength of trade policies in emerging countries the different growth theories and trade policies pursued by developing countries are discussed to find out the outcome of these trade strategies. infant industry idea was taken as unit of analysis while studying, review of economics and development studies, vol. 8 (2) 2022, 211 221 217 analyzing and investigating the financials performance of the developing nations. this study has kept its focus on growth philosophies, developing nations, trade policies financing problems and sustainable economic development. this study is too much effective by these countries because there is no restriction to find out the logical techniques to bring the socio-economic welfare in the regions. however the data about the yearly export figure, trade balance, and gdp growth rate of these countries could not be collected and analyzed due to the time constriction. so the future research will be about their current financials structure and level of agricultural and industrial policies of all these developing nations. 4. conclusion in order to generate new ideas to improve the financial health of developing countries growth philosophy and the outcome of their trade policies was discussed and analyzed. the study has found that the developing nations are highly influenced by the idea of infant industry and limited and reducing their trade volume and engaged in manufacturing goods. as a result, they are facing high dues, indicate production metrical and unemployment in their region. they have ignored their agricultural sectors and producing food product which is the basic and key element of economic development. if the developing economies wants to bring the sustainable socio-economic development in their areas they have to keep focus equally on both industrial and agricultural sectors and increase their trade volume through food products. 5. recommendations: 1. epz policy : to get benefit from of epzs policy, there is need to understand the current different and same business sectors in these countries. according to their own economic setting they should establish or update their trade zones in the fallowing three stages to improve the financial health of the country. anther’s compilation review of economics and development studies, vol. 8 (2) 2022, 211 221 218 2. dual economic system : many emerging nations have dual system of economy agricultural and industrial, there is lot of resources for trade in that countries. they should established specific zones for specific trade commodity. for example farming / agri-business products, educational and science related products. there is a lot of demand of food items in the international market. surgical instruments are also traded all over the world, so these countries should focus on their potential of trade to get commutative advantages through epz policy. to attract the foreign and local investors for investment project, these states should effort on the fallowing factors showing in the figure below. figure 6.2 investors’ friendly environment regarding trade policy, incentives packages, infrastructures and in management service play the key role in the achievement of export objectives of any types trade zones so, there is need to be implement strategic policies and procedures to enhance the corporate image of the of trade zones. 3. barter trade zones : emerging economies should develop a system of barter trade zones among each other to release the pressure of currency crisis. every emerging country should have their special trade zones where they produce those products which they have in excess and a in rare/ scarce in other country. in other words the product should be produced on demand of neighbor country. the trade of student products, children products and educational toys should be encouraged. 4. natural economic system : it cannot be said that the economic structure of the developing countries cannot be grow like developing economies and they need to adopt unique way of industrializing, doing business, managing labors force, destructing of income and introducing technological growth because the difference has been found in the financial resources and environment everywhere in the world. so nations should go with the natural economic system of according to the availability of their own resources. 5. increase trade capacity : history has shown that, the countries who not expand their trade volume could not learn from the other countries. if we discourage the imposts, could we bring new and different technologies, knowledge, skills and strategies from other countries ? the developing nations should keep their focus on searching new markets for trading their resources. sustainable economic development could not be complete by just promoting export only. countries need both buy sell to go with the natural setting of financial growth. incentive package intelligent marketing corporate image innovative projects advance infrastructure strategic location of zone review of economics and development studies, vol. 8 (2) 2022, 211 221 219 references amorim, w. s., deggau, a. b., do livramento gonçalves andrade, j. b. s. o. 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(2018). special economic zones (sezs): a comparative analysis cpec sezs in pakistan. pakistan j. soc. sci, 9, 37-60. review of economics and development studies vol. 4, no 2, december2018 341 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads exploring the impact of financial development on inequality: evidence from three asian countries 1 abdul qayyum khan, 2 muhammad haroon hafeez, 3 naima saleem, 4 muhammad azam 1 department of management sciences, comsats university islamabad, wah campus, pakistan. qayyum72@ciitwah.edu.pk 2 institute of management sciences, bahauddin zakria university, multan, pakistan. haroonhafeez@bzu.edu.pk 3 department of management sciences, comsats university islamabad, wah campus, pakistan. naimasaleem@ciitwah.edu.pk 4 department of management sciences, abdul wali khan university mardan, kpk-pakistan. drazam75@yahoo.com article details abstract history revised format: november 2018 available online: december 2018 the broad objective of the present study is to investigate the impact of financial development along with some other variables namely gdp per capita, inflation rate, human capital, and trade openness for three developing asian countriesbangladesh, india and pakistan. annual time series data during the period 1980-2014 have been used for empirical investigation. after employing appropriate tests and estimation techniques, it is found that the financial development is statistically insignificant for all three countries, it implies that yet these developing countries are not efficiently allocating domestic private credit to poor segments of population. the results also reveal that inflation impedes income inequality for bangladesh and india. gdp growth rate is insignificant for india and pakistan however it is significant for bangladesh having statistically positive relationship with income inequality. it means that gdp growth rate is linked with growth of income of elite class rather than bottom segments of population. national income improves inequality for bangladesh but have insignificant affect on income inequality for india and pakistan. similarly, trade openness is insignificant for india and pakistan, however it is significant for bangladesh having statistically positive relationship with income inequality, which indicates that there is increasing unemployment in these countries due to lesser employment opportunities for skilled and unskilled labour. empirical results of human capital shows insignificancy for india and pakistan where as it is significant for bangladesh; hence revealing that these countries failed to optimally utilize their resources in educational sector. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords financial development, inequality, developing asian countries jel classification: b26, d63 corresponding author’s email address: haroonhafeez@bzu.edu.pk recommended citation: khan, a. q., hafeez, m. h., saleem, n. and azam, m. (2018). exploring the impact of financial development on inequality: evidence from three asian countries. review of economics and development studies, 4 (2), 341-355 doi: 10.26710/reads.v4i2.419 http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 342 1. introduction academic debate on the issue of inequality has radically increased in recent years. previously, this issue was regarded as a highly sensitive political matter, thus, most of the researchers preferred to avoid rather than embrace it for scholarly investigation. since last decade, there has been a growing concern over this issue among social scientists in general and economists in particular. in addition, the issue of inequality has received greater attention by international labor organization (ilo), united nations (un) and world bank who have acknowledged that economic growth and well being of any nation or region is largely reliant on diminishing income inequality (ortiz and cummins, 2011). there are several types of inequalities that prevail in any society in terms of access to food, water, shelter, education, information and health. however, the exclusive focus of this paper is on exploring the issue of income inequality in selected asian countries. income inequality concerns with the degree to which there exists inequity and disparity of income among the members of a given population. income inequality is frequently discussed in terms of the percentage of income to a percentage of population. cross-country variations in terms of income disparities and prevalent scenarios with reference to poverty are quite alarming. it is quite stunning that 1.2 billion people (22 percent of global population) are struggling to live below $1.25 per day. the problem becomes further intensified if the poverty line is raised to $2.50 per day. it exhibits that 2.7 billion (50 percent of global population) people are living below the poverty line. similarly, 44.4 percent (730 million) people in south asia are striving to live on $1.25 to $2.50 per day (human development report, 2014). furthermore, according to fuentes-nieva and galasso (2014) the wealth of 3.5 billion poor people equals that of 85 richest people in the world. it definitely is a shocking statistic that signifies inequality prevailing in the developed as well as developing countries. in case of developing countries income inequality has ascended by 11 percent during 1990-2010 (united nations development programme, 2014). income inequality poses highly severe threats to people as it refers to inequality of opportunities to meet the requirements of life. in unequal societies, the social and economic consequences are quite worse as compared to societies where there are lesser inequalities. people living in countries where there are less income inequalities face lesser health associated risks, have longer lives, lesser probability to encounter mental disorders, perform better in their studies, are socially mobile, try to avoid indulgence in crime and violence, have lesser tendency towards illegal narcotics and other drugs, and there is lesser likelihood of giving teenage births (wilkinson and pickett, 2010). due to aforementioned consequences of income inequalities, economic growth and development of unequal societies is severely hampered. in literature, many causes of income inequality have been discussed such as entrepreneurial skills and competencies of individuals, migration from rural to urban areas, inflation, unemployment, access to credit and finance and financial instability (ang, 2010; bittencourt, 2010; shahbaz and islam, 2011). in order to tackle with the issue of income inequality, numerous past and contemporary researchers have emphasized on financial stability through financial sector development (greenwood and jovanovic, 1990; levine, 2005; beck, demirguc-kunt and levine, 2007; demirguc-kunt and levine, 2009; bittencourt, 2010; shahbaz et al., 2015, sehrawat and giri, 2015). according to beck et al. (2007) financial development can have a significant impact on income distribution and poverty levels. they further added that financial development can lessen the disparities in income inequality and poverty levels through aggregate economic growth. the role of financial sector development in the context of developing countries is deemed to be more prominent. it is because of the fact that majority of poor people do not have access to credit and finance. it has been highlighted in the literature that people living in developing countries in asia such as iran, pakistan and india, toil hard to get access to finance due to their inability in terms of fulfilling collateral requirements and lack of established relationships with financial institutions (ang, 2010; shahbaz and islam, 2011; shahbaz et al., 2015; sehrawat and giri, 2015). consequently, asian countries are ranked at the bottom in terms of inequality-adjusted human development index developed in 2014. for instance, india, bangladesh and pakistan are ranked 135, 142 and 146 out of 187 countries. gini coefficient (income inequality indicator) for india, bangladesh and pakistan for years 2003-2012 was 33.9, 32.1 and 30.0 respectively (human development report, 2014). however it is interesting to note that all of asian countries did not perform poorly in terms of income inequality, thailand and malaysia can be referred to as exemplary nations where income inequality has reduced significantly during the last decade (human development report, 2014). by probing the issue of income inequality in selected asian countries, this paper makes a noteworthy contribution in understanding the role of financial development in alleviation of poverty and reducing disparities in income distribution among the population.therefore, the broad objective of the present study is to explore empirically both the short and long run relationship between financial development and income inequality in developing asian countries namely bangladesh, india, and pakistan. the outcomes are expecting to guide the review of economics and development studies vol. 4, no 2, december2018 343 policy makers to formulate prudent public policy and thereby reduce income inequality and improve social welfare of the people. the rest of the paper is structured as follows. section 2 reviews the literature with respect to relationship between financial development and income inequality, section 3 elaborates data and methodology. section 4 exhibits the findings of the study; section 5 entails discussion, implications and conclusion. lastly, section 6 offers recommendation for future research. 2. literature review the relationship between financial development and economic growth has been extensively studied in the past. there are numerous studies that have linked financial development to economic growth (see, for instance, schumpeter, 1934; robinson, 1952; mckinnon, 1973; shaw, 1973; king and levine, 1993; levine, loayza and beck, 2000; benhabib and spiegel, 2000; christopoulos and tsionas, 2003; ang and mckibbin, 2007; ang, 2010, kar et al, 2011; nyamongo et al, 2012). it clearly indicates that the relationship between financial development and economic growth has grabbed the attention of several past as well as contemporary researchers. one of the underlying rationales pertaining to financial development and economic growth relationship is that financial development substantially improves the allocation of capital and lessens capital market imperfections (levine, 2005). however, the most intriguing question in this regard is that who actually exploits the maximum benefits arising from such economic growth. it may benefit the poor in terms of generating employment opportunities; however, to a greater extent it could be advantageous for the wealthier because of incremental returns and profits. in order to answer this question, it is imperative to study the financial development and income inequality linkage. with reference to income inequality, the scholastic debate was initiated by kuznets (1955) who investigated the dynamics of income inequality with particular reference to developing nations. surprisingly, there exist a very few noteworthy studies that have attempted to explore the relationship between financial development and income inequality. according to extant literature, there are two major theoretical hypotheses with respect to financial development and income inequality relationship. greenwood and javanovich (1990) envisaged an inverted u shaped relationship; whereas, a negative linear relationship was predicted by some of the other researchers (see for example, banerjee and newman, 1993; galor and zeira, 1993; aghion and bolton, 1997, mookherjee and ray, 2003, 2006). the inverted u-shaped relationship implies that during the early phases of financial development, only beneficiaries would be the wealthier people in the society as they would be able to extract returns and profits from the newly developed financial markets. resultantly, income inequality would be intensified. however, as the financial markets would further develop and become mature, the poor people would also be able to get access to financial markets. hence, inequality would gradually decrease because the larger population of the society would reap the merits of financial development (tan and law, 2012). non linear relationship between financial development and income inequality can be explained in terms of finance-inequality widening phenomenon and finance-inequality narrowing phenomenon. finance-inequality widening refers to the situation in which rich people of the society reap the benefits of financial development as they can fulfill the collateral requirements in order to get access to financial institutions, consequently their various personal and professional projects are financed by the financial intermediaries, whereas the poor and deprived section of the society fail to meet preliminary requisites pertaining to access to financial institutions. finance-inequality widening is quite evident from the study conducted in united states by jerzmanowski and nabar (2013) who used a measure of banking deregulation and concluded that financial market development benefits highly educated and skilled workers more than the less educated and low-skilled workers. thus, the inequality gap between the privileged and the deprived social class keeps on widening. contrarily, finance-inequality narrowing refers to the scenario in which the inequality gap between the wealthier and the poor population of the society is narrowed as the poor people gradually get access to financial intermediaries. as the financial markets become more mature and liberalized, the larger section of the society can yield the benefits of financial development as they can invest for better health, education and housing facilities. hence, financial development results in reducing income inequality (shahbaz et al., 2015). 3. empirical methodology 3.1 data sources and variable explanation annual time series data covering the time period 1980 to 2014 has been used in this study. data have been collected from world bank development indicators (2015) and house hold income inequality from penn world data (2014). financial year 1990 has been used as the base year in order to convert current price data into constant price review of economics and development studies vol. 4, no 2, december 2018 344 time series. the present study also takes the natural logarithm of gini coefficient which were used in recent empirical works like liang (2006a), liang (2006b), ravallion and chen (2007). gini coefficient makes direct comparison of population irrespective of their sizes and incorporates full information measures by looking at all parts of the population distribution. therefore, in economic literature, gini coefficient is the broadly used measure for inequality. existing literature suggested many variables to be proxy for financial development like rousseau and wachtel (1998), rioja and valev (2004) and levine et al. (2000) used ratio of liquid liabilities including central bank, deposit money bank and financial institutions to gdp denoted by lly to measure the overall size financial intermediary sector. to avoid the problem of ignoring the allocation of capital demetriades and hussein(1996) and king and levine (1993) used the ratio of credit to the private sector to gdp denoted by privo. the present study uses the ratio of money supply m2 to gdp as financial depth,suggested by levine et al.(2005). in addition to the measure of gini coefficient and financial development, this paper incorporates other variables which control other factors linked with either financial development or income inequality. following beck et al. (2007) and ang (2010), the other variables included are: the growth rate of per capita gdp (gro), inflation rate (inf), human capital that is government expenditure on education, total (% of gdp), financial depth money and quasi money (m2) as percentage of gdp and trade openness (tr=export+import/gdp) are used. it is evident from the literature like barro (2000), beck et al. (2007) and ang (2010) concluded that the increase in growth rate of per capita supports is lessening the income inequality. hence, the association between the gro and gini coefficient should be negative. the literature remains indecisive about the effect of inf on the income inequality. cutler and katz (1991), clarke et al. (2006) and ang (2010) pointed out that the inflation and income inequality have positive relationship. easterly and fischer (2001) and beck et al. (2007) believed that inflation has a negative effect on the income inequality, on the other side bulir (2001) argued that the inflation rate improves the income inequality in the low inflation economies while in high inflation economies inflation rate worsens the income inequality. tro is the sum of exports and imports as a percentage of gdp. barro (2000) and ang (2010) pointed out that trade openness positively affects income inequality. before starting to perform any empirical estimation of the model, it is required to analyze the time series data. the analysis of data depends on finding out whether the series is stationary or non–stationary. augmented dickeyfuller (adf) test examines the hypothesis that the variable in question has a unit root. the akaike information criterion (aic) is used to select the optimum adf lag. stationarity of the variables is checked once when an intercept is included, and then when both an intercept and a linear deterministic trend are included. if the series is found to have a unit root differencing the data is appropriate to make it stationary. 3.2 methodology to test the hypothesis that income inequality depends on financial development along with other variables such as inflation rate, trade openness and growth rate of per capita gdp, % of gdp, human capital and financial depth, the following econometric regression equation is used: (1) where gini is used to measure the income inequality, fd is the financial depth, gro is the growth rate of per capita gdp, inf is the inflation rate, human is used for human capital, gdp is growth rate and tro is used to represent trade openness. in order to check the existence of long run relationship among the variables included in this study, johansen likelihood ratio (lr) test is used. once it is found that the regression variables have long term relationship (cointegration), and then error correction mechanism (ecm) is used to ascertain the short term behavior of the variables. in error correction mechanism (ecm), first, difference of dependent variables are regressed on first difference of all independent variables and the lag value of residual is obtained from regression of variables at level. the parameters of all independent variables show short term effects of independent variables on dependent variables, and parameter of lag value of residual will show rapidity in which the short term disequilibrium will be restored. therefore, the following error correction model is estimated: (2) where, in error correction mechanism (ecm) equation, dependent variable depends on the equilibrium error term (ut-1) besides other independent variables. the parameter of equilibrium error term is expected to be negative. the review of economics and development studies vol. 4, no 2, december2018 345 positive/negative value of ut-1 acting with their respective parameter brings equilibrium in short term. if all other independent variables have positive short-term aggregate impact on dependent variables, then ut-1 must be positive, so that the negative parameter makes it negative and restores the equilibrium. in similar fashion if all other independent variables have negative short-term aggregate impact on dependent variables, then ut-1 must be negative, so that the negative parameter makes it positive and restores the equilibrium. the absolute value of parameter indicates how quickly the equilibrium will be restored. 4. results and discussion 4.1 empirical results 4.1.1 normality of the data it is quite obvious to check normality before analysis of linear model for its coefficient determination. histograms and normal probability plot of the residuals were obtained for all the three countries from linear regression model as mentioned before. the results are shown in following histograms. graph 1: histogram & normal probability plot of residual (bangladesh) graph 1.1 graph 2: histogram & normal probability plot of residual (india) review of economics and development studies vol. 4, no 2, december 2018 346 graph 2.1 graph 3: histogram& normal probability plot of residual (pakistan) graph 3.1 review of economics and development studies vol. 4, no 2, december2018 347 a visual study of the histograms & normal probability plot for (graph 1, graph 2 and graph 3) as shown above, reveal that most of the residuals lie within the normal curve, very few residual lie outside, either on left or right side, showing positive and negative skewness, some residual lies outside on top peak, causing a little kurtosis. as a whole data for all the three countries are normally distributed as mostly the residuals lie inside the normal curve. 4.1.2 model stability test it is important to test model stability as country shift might affect it. in this regard cumulative sum of recursive residuals (csusm) and their squares (sucsusm) are used for model stability as proposed by brown et al. (1975). graph 4: plot of cumulative sum of recursive residuals (csusm) for bangladesh graph 5: plot of cumulative sum of recursive residuals (csusm) for india -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 88 90 92 94 96 98 00 02 04 06 08 10 12 14 cusum of squares 5% significance -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 88 90 92 94 96 98 00 02 04 06 08 10 12 14 cusum of squares 5% significance -16 -12 -8 -4 0 4 8 12 16 88 90 92 94 96 98 00 02 04 06 08 10 12 14 cusum 5% significance review of economics and development studies vol. 4, no 2, december 2018 348 graph 6: plot of cumulative sum of recursive residuals (csusm) for pakistan both (csusm) and their square (sucusm) shown above in graph 4 depicts that residuals of the model lie in the critical region indicates the model is stable throughout the period for all the three countries. 4.1.3 park test park test is being used for detection of heteroscedasticity. first we run the log linear model for all the three countries data and save the residuals, then took the square of the saved residual and regress all the independent variables on the square of the residual. the results of park test are given below in table 4.1.3a, 4.1.3b and 4.1.4c for bangladesh, india and pakistan respectively. coefficient of all independent variables for the three models (bangladesh, india and pakistan) are statistically insignificant as the calculated t-statistics in absolute term for most of the variables are smaller than the tabulated value, showing no heteroscedasticity in the models. table 1: park test coefficients for bangladesh model unstandardized coefficients standardized coefficients beta t sig. b std. error (constant) .002 .001 3.810 .001 lnfd .000 .000 -.271 -.609 .548 lnhuman .001 .000 .625 2.706 .011 lntro .000 .000 -.567 -1.504 .144 lngdp .000 .000 -.582 -1.500 .145 lngro .000 .000 .618 1.893 .069 lninf -0.0000840 .000 -.198 -1.251 .221 where lnfd is natural log of financial development, , lnhuman is natural log of human capital, lntro is natural log of trade oppeness, lngdp is natural log of gdp growth% , lngro is natural log of national income (gdp per capital growth) and lninf is inflation gdp deflator index. a. dependent variable: e2 table 2: park test coefficients for india model unstandardized coefficients standardized coefficients beta t sig. b std. error (constant) .004 .001 2.657 .013 lnfd .000 .001 -1.005 -1.340 .191 lnhuman .000 .000 -.159 -.941 .355 lntro .000 .000 .904 1.480 .150 lngdp .000 .000 -.395 -.949 .351 lngro 0.0000710 .000 .206 1.083 .288 lninf -0.00002.87 .000 -.055 -.287 .777 where lnfd is natural log of financial development, , lnhuman is natural log of human capital,lntro is natural log of trade oppeness, lngdp is natural log of gdp growth % , lngro is natural log of national income(gdp per capital growth)and lninf is inflation gdp deflator index.a. dependent variable: e2 -16 -12 -8 -4 0 4 8 12 16 20 88 90 92 94 96 98 00 02 04 06 08 10 12 14 cusum 5% significance review of economics and development studies vol. 4, no 2, december2018 349 table 3: park test coefficients for pakistan: model unstandardized coefficients standardized coefficient b t sig. b std. error (constant) .001 .005 .217 .830 lnfd .000 .001 .036 .190 .851 lnhuman .000 .001 -.269 -1.476 .151 lntro 0.0000717 .000 .037 .195 .847 lngdp .000 .000 -.506 -1.770 .088 lngro .000 .000 .388 1.415 .168 lninf .000 .000 -.219 -1.162 .255 where lnfd is natural log of financial development, , lnhuman is natural log of human capital, lntro is natural log of trade oppeness, lngdp is natural log of gdp growth % , lngro is natural log of national income(gdp per capital growth)and lninf is inflation gdp deflator index.a. dependent variable: e2 4.1.4 non stationarity of the time series before conducting empirical estimate of the model, it is important to examine the time series data. the analysis of the data depends on findings whether the series is stationary or non-stationary. correlations between variables have been analyzed by pearson correlation matrix. adf; augmented dickey-fuller (1981) test examines the hypothesis that the variable is in tenancy of a unit root. when the series was found to preserve data in a unit root difference, it is appropriate to make it stationary in the congressional procedure in order to avoid the problem of spurious regression of non-stationarity of the time series.thus, results of unit root test are reported in table 4.1.4,as shown below in which there are three saarcbased z growth( gro) , gdp, tradeopenness( tro), human capital( government expenditure on education), financial depth (fd)and gini incomeinequality (ie) variables included. the result of the test shows that the seven variables are stationary at level i(0) when intercept is included exceptlninfbang,lninfindia, lngrobang, lngdpindia, lntrobang, lntroindia, lnhcbang, lnfdban, lnfdind, lnfdpak, lniebang, lnieindia and lniepak it is stationary at level but with first difference i(i). as far as trend is considered in the model all variables are stationary at level except lninfbang,lninfindia, lngdpindia, lntroindia, lnhcbang, lnfdban, lnfdind, lnfdpak, lniebang, lnieindia and lniepak that are stationery in their first difference. almost all the variables are stationary in both the cases (when intercept is included only and when both intercept and `g trend is included) by taking values at level with first difference. table 4: adf test for stationarity (bangladesh, india and pakistan) variables include intercept only include intercept and trend result test statistics1 critical value test statistics1 critical value lninfbang -3.913414 [0] -3.639407 -8.112252 -4.262735 i(1)* i(0)* lninfindia -2.341988 [0] -3.639407 -2.744965 -4.252879 i(0)* -8.893337 2 [0] -3.646342 -8.732783 -4.262735 i(1)* lninfpakistan -4.568532[0] -3.639407 -4.667377 -4.252879 i(0)* i(0)* lngrobang -3.536614[0] -2.951125 3 -6.267406 -4.252879 i(0)** -13.20575[0] -3.646342 -6.766725 -4.273277 i(1)* lngroindia -4.894563 [0] -3.639407 -6.588460 -4.252879 i(0)* i(0)* lgropakistan -3.728861[0] -3.639407 -3.677150 -3.548490 3 i(0)** i(0)* lngdpbang -7.894563[0] -3.639407 -13.20253 -4.252879 i(0)* i(0)* lngdpindia -2.587407[0] -3.639407 -3.772542 -4.252879 i(1)* -8.576389 [0] -3.646342 -8.515513 -4.262735 i(1)* lngdppakistan -3.775109[0] -3.639407 -7.811738 -4.262735 i(0)* i(0)* lntrobang -2.475607[0] -3.639407 -10.88266 -4.252879 i(0)* -15.65151[0] -3.646342 i(1)* lntroindia -0.016148[0] -3.639407 -3.087843 -4.252879 i(0)* review of economics and development studies vol. 4, no 2, december 2018 350 -6.771507 [0] -3.646342 -6.664818 -4.262735 i(1)* lntropakistan -4.513784 [0] -3.639407 -4.465257 -4.252879 i(0)* i(0)* lnhcbang -2.986598 [0] -3.639407 -3.309720 -4.252879 i(0)* -8.163136[0] -3.646342 -8.254622 -4.262735 i(1)* lnhcindia -4.582140 [0] -3.639407 -4.659621 -4.252879 i(0)* i(0)* lnhcpakistan -6.388934 [0] -3.646342 -6.275629 -4.262735 i(0)* i(0)* lnfdbang -0.772995[0] -3.639407 -2.295986 -4.252879 i(0)* -4.706943[0] -3.646342 -4.670874 -3.552973 i(1)* lnfdindia -0.432653[0] -3.639407 -1.366774 -4.252879 i(0)* -4.436287 [0] -3.646342 -4.361975 -4.262735 i(1)* lnfdpakistan -2.628106[0] -3.639407 -2.548322 -4.252879 i(0)* -5.445069 [0] -3.646342 -5.432816 -4.262735 i(1)* lniebang -3.699761[0] -3.639407 -6.475282 -4.273277 i(1)* -6.213876[0] -3.646342 i(0)* lnieindia -1.465064[0] -3.639407 -2.710653 -4.252879 i(0)* -5.471743 [0] -3.646342 -5.628972 -4.262735 i(1)* lniepakistan -1.961043[0] -3.639407 -1.695246 -4.252879 i(0)* -5.994004 [0] -3.646342 -6.299824 -4.262735 i(1)* 1 figures in square brackets besides each statistic represent optimum lags selected using the minimum aic value, 2 figures in parentheses are first difference of variables, 3 at 5% significant level, * show result when the intercept is only included, ** show results when intercept and trend is included. 4.2 co-integration analysis summary of the detail of regression estimates of the johansen co-integration test as specified by bayer and hanck. (2013) are given in table 4.1.5.as shown below, where, the result indicates that first three for bangladesh, first four for india and first and last null hypothesis for pakistan are rejected as maximum likelihood ratio statistics are greater than critical value at 0.05 percent level of significance which indicates that there exists four, three and five co-integrating relationships among the variables for bangladesh, india and pakistan respectively. table 4.1.5: cointegration test results countries n. hypothesis a. hypothesis maximum likelihood ratio test statistics critical value bangladesh r=0 r=1 219.2813** 125.6154 r˂=1 r=2 150.6484** 95.75366 r˂=2 r=3 88.27245** 69.81889 r˂=3 r=4 45.00191 47.85613 r˂=4 r=5 27.39630 29.79707 r˂=5 r=6 11.45244 15.49471 r˂=6 r˂=7 2.081861 3.841466 india r=0 r=1 187.1146** 125.6154 r˂=1 r=2 121.5844** 95.75366 r˂=2 r=3 86.77489** 69.81889 r˂=3 r=4 54.75572** 47.85613 r˂=4 r=5 28.64669 29.79707 r˂=5 r=6 8.670479 15.49471 r˂=6 r˂=7 0.022283 3.841466 pakistan r=0 r=1 147.3298** 125.6154 r˂=1 r=2 91.09221 95.75366 r˂=2 r=3 61.67796 69.81889 r˂=3 r=4 44.32651 47.85613 r˂=4 r=5 28.14463 29.79707 r˂=5 r=6 14.14139 15.49471 r˂=6 r˂=7 5.271451** 3.841466 review of economics and development studies vol. 4, no 2, december2018 351 4.3 result of linear regression models the result of the linear regression model for all the three countries are presented in table 4.1.6, shown below, the results are logical because the explanatory power of r 2 is fairly high for bangladesh, moderate for india and low to moderate for pakistan; and there is no serious autocorrelation problem as shown in durban-watson statistics. table 4.1.6 regression result for bangladesh, india and pakistan *indicates statistical significant at 1% level of significance, ** indicate statistical significant at 5% level of significance, a. dependent variable: lnie the estimates of linear regression illustrate that inf is negatively related to income inequality (ie) in bangladesh and india -.014 and -.013 respectively. it raised positively in case of pakistan with .001.the coefficient of inf is statistically significant at 5% level of significance for bangladesh and india, while for pakistan, it is statistically insignificant at 10% level, as it’s p-value is 0.888 so, inf doesn’t affect the income inequality in pakistan. the result shows that 1% increase in inf leads to decrease in income inequity by 1.4 % and 1.3% for bangladesh and india respectively. these findings are similar with satti et al. (2015), shahbaz et al. (2010), shahbaz and islam (2011), bluir. (2001) and easterly and fischer (2001). beck et al. (2007) and bittencourt (2010) also reported that inflation impedes income distribution in kaghiztan, pakistan and brazil respectively. moreover, cutler and katz (1991), clarke et al. (2006) and ang (2010) pointed out that the inflation and income inequality have positive relationship. national income (gro) is insignificant for india and pakistan whereas it is significant for bangladesh having statistically negative relationship with income inequality i.e. -.025. the coefficient of gro is statistically significant at 5% level of significance for bangladesh. the result shows that 1% increase in gro leads to decrease in income inequality by 2.5% for bangladesh. theses findings contradict with barro (2000), but are consistent with satti et al. (2015), shahbaz et al. (2010) who believed that growth of income improves inequality. gro have no affect in income inequality in india and pakistan. growth rate (gdp) is insignificant for india and pakistan; however, it is significant for bangladesh having statistically positive relationship with income inequality which is .069. the coefficient of gdp is statistically significant at 5% level of significance for bangladesh. the result shows that 1% increase in gdp leads to increase in income inequality by 6.9% for bangladesh. these empirical findings are similar with satti et al. (2015), shahbaz et al. (2010), but they are in contradiction with barro (2000) who reported negatve impact of gdp on income inequality in low income countries. gdp have no significantaffect on income inequality in india and pakistan. trade openness (tro) is insignificant for india and pakistan, however it is significant for bangladesh having statistically positive relationship with income inequality which is .065. the coefficient of tro is statistically significant at 5% level of significance for bangladesh. the result shows that 1% increase in tro leads to increase in income inequality by .65% for bangladesh. tro have no significant effect on income inequality in india and pakistan. human capital (hc) shows insignificancy for india and pakistan whereas it is significant with 1% level of significance for bangladesh with .106. the result shows that 1% increase in hc leads to increase in income inequality by 10.6% for bangladesh. hc have no significant effect on income inequality in india and pakistan. pvalue of financial depth (fd) is insignificant for all three countries namely bangladesh, india and pakistan. the results of fd contradict with sebastian and sebastian (2011) for 138 developed and under developing nations, tan and law (2012) for malaysia, leing-zhang and xia-lia (2012) for china, satti et al., (2015) for kaghistan but consistent with the results of the studies conducted by clarke et al. (2006) for 83 developed and undeveloped variables bangladesh india pakistan coeffients t-statistics prob coeffients t-statistics prob coeffients t-statistics prob c 3.600 84.425 .000 3.979 48.253 .000 3.619 16.439 .000 lninf -.014 -2.973* .006 -.013 -2.110** .044 .001 .143 .888 lngro -.025 -2.410** .023 .001 .367 .716 -.003 -.407 .687 lngdp .069 3.207* .003 -.041 -1.609 .119 -.018 -1.442 .161 lntro .065 2.951* .006 .022 1.594 .122 .027 1.492 .147 lnhuman .106 3.825* .001 .000 .023 .982 -.017 -.642 .526 lnfd -0.000007 .000 1.000 .012 .380 .707 .070 1.180 .248 r 2 0.867 0.577 0.342 adj. r 2 0.839 0.487 0.196 dw 1.113 0.818 0.749 f-stat 30.451 6.378 2.340 prob. 0.00 0.00 0.60 review of economics and development studies vol. 4, no 2, december 2018 352 economies, batuo et al. (2012) for african countries and shahbaz et al. (2015) for iran. 4.4 error correction mechanism once it is found that the regression variables have long term relationship (cointegration), error correction mechanism (ecm) is used to ascertain the short term behavior of the variables. in error correction mechanism (ecm) first difference of dependent variables are regressed on first difference of all independent variables and the lag value of residual obtained from regression of variables at level. the parameters of all independent variables show short term effects of independent variables on dependent variables, and parameter of lag value of residual shows rapidity in which the short term disequilibrium will be restored. therefore, the following error correction model is estimated: where, in error correction mechanism (ecm) equation, dependent variable depends on the equilibrium error term (ut-1) besides other independent variables. the parameter of equilibrium error term is expected to be negative. the positive/negative value of ut-1 acting with their respective parameter brings equilibrium in short term. if all other independent variables have positive short-term aggregate impact on dependent variables, then ut-1 must be positive, so that the negative parameter makes it negative and restores the equilibrium. in similar fashion if all other independent variables have negative short-term aggregate impact on dependent variables, then ut-1 must be negative, so that the negative parameter makes it positive and restores the equilibrium. the absolute value of parameter indicates how quickly the equilibrium will be restored. table 4.1.7 regression results of error correction model (ecm) country ecm equation bangladesh t = (2.595) (-1.336) (-3.182) (2.902) (1.735) (0.409) (-1.514) (-1.787) r 2 = 0.470, d = 1.718 india t = (0.949) (0.780) (-0.00) (0.586) (0.20) (2.093) (-0.236) (4.839) r 2 = 0.530, d = 1.866 pakistan t = (0.817) (-.017) (-0.201) (-0.454) (0.850) (-0.739) (0.189) (-1.808) r 2 = 0.150, d = 2.069 gini equation for error correction mechanism (ecm) indicate that first difference of income inequality ( ) depends on first difference of real output ( ), first difference of financial depth ( ), first difference of net income that is gdp growth per capita ), first difference of ( ), first difference of inflation ( ), first difference of gdp ( ), first difference of human capital ( ) and equilibrium error term ut-1. the result in table 4.1.7 as shown above for bangladesh indicates that short-run changes in real output have statistically significant positive impact on short-run changes in income inequality. financial depth to income inequality in short-run have negative but statistically significant impact on the short-run changes in income inequality. the short-run changes in gro have statistically significant negative impact on the short-run changes in inequality. gdp, human and tro to income inequality in short-run have positive but statistically insignificant impact on income inequality. the result also indicates that about 0.197 of discrepancy in previous year is eliminated this year. it means that 19.7% short term disequilibrium will be adjusted in first year while 80.3% will carry forward to the next period. empirical result on india indicates that short-run changes in real output have statistically significant positive impacts on short-run changes in income inequality. inflation (inf), financial depth (fd), gdp and trade openness (tro) to income inequality in short-run have positive but statistically insignificant impact on the short-run changes review of economics and development studies vol. 4, no 2, december2018 353 in income inequality. the short-run changes in human and income (gro) have statistically significant negative impact on the short-run changes in inequality. the result also indicates that about 0.524 of discrepancy in previous year will further inflate in next year. the coefficient of equilibrium error term indicates that any disequilibrium in short run in previous year will further inflate the disequilibrium in long run. the result for pakistan indicates that short-run changes in real output have statistically significant positive impact on short-run changes in income inequality. financial depth to income inequality in short-run have positive but statistically significant impact on the short-run changes in income inequality. the short-run changes in gro and tro have statistically significant impact on the short-run changes in inequality. gdp, human and inflation (inf) to income inequality in short-run have negative but statistically significant impact on income inequality. the result also indicates that about 0.191 of discrepancy in previous year is eliminated this year. 5. conclusion and recommendation this study makes an empirical attempt by using time series data over the period of 1980-2014 in examining both the short and long run relationship between financial development and income inequality in three developing asian countries-bangladesh, pakistan and india by endogenising other factors, such as gdp, gdp growth per capita ( income), inflation, financial depth, human capital and trade openness. a visual study for normality test indicates that whole data for three countries are normally distributed as most of residual lies inside normal curve. stability test findings show that cusum and sucusum (brown et al., 1975) lies in the critical region. no hetroscedasticity has been detected by park test in the model. when the series is found to preserve data in a unit root difference, it is appropriate to make it stationary in the congressional procedure, in order to avoid the problem of spurious regression of non-stationarity of the time series, thus the findings indicate that all variables are stationary by taking values at level for both cases. there is no serious auto-correlation problem as shown by the durbin–watson statistics. cointegration relationship between all variables for three countries leads us to accept hypothesis as there exist cointegration relationship among independent n dependent variables. it is found that empirical model fulfills the assumptions of clrm (classical linear regression model) as inflation impedes income inequality for bangladesh and india while it has no shown for pakistan.growth rate (gdp) is insignificant for india and pakistan however it is significant for bangladesh having statistically positive relationship with income inequality.it means gdp is linked with growth of income of elite class rather than bottom segments of population. national income improves inequality for bangladesh but have insignificant affect in income inequality for india and pakistan.trade openness (tro) is insignificant for india and pakistan, however it is significant for bangladesh having statistically positive relationship with income inequality which means there is increasing unemployment in countries by lowering employment opportunity for skilled and unskilled labour comparatively. human capital (hc) shows insignificancy for india and pakistan where as it is significant for bangladesh; it means these countries have not efficiently used there resources in educational sectors. financial depth (fd) is insignificant for all three countries bangladesh, india and pakistan. it means these developing countries are not efficient for allocating domestic private credit to poor segments of population. our findings indicate that income-inequality relationship for developing countries has contradictory results. in case of bangladesh, financial development increases income inequality; these results are consistent with wahid et al. (2011) and barro (2000); but in case of pakistan and india financial development mitigates income inequality, these findings are consistent with law and tan (2009); shahbaz and islam (2011); arora (2012); ang (2010) and shahbaz et al. (2015) for malaysia, pakistan, india and iran respectively who reported financial development impairs income distribution.the results for bangladesh, india and pakistan indicate that short-run changes in real output have statistically significant positive impact on short-run changes in income inequality. the empirical findings demonstrate that though the relationship is not highly cogent, but the expansion of financial sector development is indispensible. furthermore, the findings of this study imply that a certain level of financial development is prerequisite for reducing income inequality. there is no denial to the fact that large imbalances in distribution of income would result in highly detrimental socioeconomic impacts. as emphasized by pickett and wilkinson (2015) societies with higer proportions of income inequalities suffer from worse health issues which may lead to violence and other social problems in the society. hence, it is imperative for the governments to outline policies for narrowing the income differences and ensure that merits of financial development are not limited only to the privileged section of the society. pro-rich financial deveoplment will lead to irreversible social and economic tribulations. thus, it is fundamental that the deprived section of the society must be benefitted from financial development in order to enhance socioeconomic development holistically. nevertheless, it is highly plausible that different nations get review of economics and development studies vol. 4, no 2, december 2018 354 affected by distributional shocks differently as determined by their respective political and institutional set-up as well as nature of distributional shocks. it is anticipated that future researchers would give adequate attention to such details which might result in enhancing our insight about income inequality to a greater extent. references aghion, p. and bolton, p., 1997. a theory of trickle-down growth and development. the review 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2012. further evidence on the great crash, the oil-price shock, and the unit-root hypothesis. journal of business & economic statistics. http://data.worldbank.org/ review of economics and development studies, vol. 8 (3) 2022, 251-258 251 factors affecting foreign direct investment: the case of the netherlands sidra shaukat a, sara shokat b, khadija kanwal khan c a m.phil. economics scholar, national college of business administration & economic, multan, pakistan email: sidrakhan@gmail.com b caspam (centre for advanced studies in pure and applied mathematics), bahauddin zakariya university, multan, pakistan email: sarakhan@gmail.com c state bank of pakistan email: khadijakhan@gmail.com article details abstract history: accepted 25 august 2022 available online september 2022 this study analyzes the effect of gross domestic product, inflation, and natural resource rent on foreign direct investment in the netherland. our analysis employs the autoregressive distributed lag model from 1980 to 2018. the empirical results show that gross domestic product and natural resource rent positively affected foreign direct investment while inflation negatively affected both the short and long run. this study recommends that government officials and policymakers formulate policies to promote foreign direct investment for the development of the economy of the netherland. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: foreign direct investment, inflation, natural resource rent, ardl, netherland jel classification: p33, p45, e22 doi: 10.47067/reads.v8i3.470 corresponding author’s email address: sidrakhan@gmail.com 1. introduction foreign direct investment numbers have developed emphatically as a significant type of worldwide capital exchange over the many previous years. it is the most important economic indicator and critical component for a country's financial health and addresses a vital cause of funding capital speculation (morshed et al., 2022). additionally, it similarly assurances strength, as the "cold" fdi streams are viewed by way of a steadier wellspring of external financing due to its long-term stay in a country than "hot" portfolio investment treated as short period and a sentence always used for hot money is "hot money burns economy." the term "fdi" refers to a cross-border venture in which the resident of one country controls or has significant influence over the administration of a resident of a different nation. fdi relationships form when a direct investor directly possesses equity in a direct investment firm that allows it to be ten percent or more of the voting power. it benefits both economies (remitter and beneficiary) through overflow impact. it is an opportunity for an investor to invest in review of economics and development studies, vol. 8 (3) 2022, 251-258 252 developing countries and flourish his business. it is also beneficial for the economy to attract investors to develop the country's infrastructure, human capital, and per capita income (faheem et al., 2022). fdi plays a significant role in the nation's growth and a sense of competition to produce better. it is a non-obligation unfamiliar resource. the job of the fdi is very significant concerning the exchange of innovation in technology and skills. late years have seen a huge shift in the world's fdi, as nonindustrial nation fires the top choice for mnes to set up their work and business. various hypotheses clarify the rationale and factors behindhand the speculation choice away from the home nation (pattayat, 2016). foreign direct investment hurts the environment even though it increases economic development (faheem et al., 2021). according to the pollution haven theory, foreign direct investment negatively influences the environment in developing countries since there are few environmental controls in place (phh). consequently, developing economies are more concerned with real economic growth than sustainable economic growth (hoang et al., 2022). furthermore, fdi provides chances to enhance professional advancement in technology, capital information sources, and human resources improvement by preparing locals using foreign skills and adds to corporate incomes in the host nation (feldstein, 2000). an increase in growth with better quality, export out, and up-gradation in delicate and hard infrastructure will lead the economy to better economic growth and increase in balance of payment condition, i.e., increase in exports and decrease in imports. conversely, foreign portfolio investment (fpi) is a capital stream into a country that looks for monetary revenues in the short term over an interest in the stock and security markets. economies do not recommend fpi since it is connected with quick outpourings in emergencies to make a profit and leave the stocks, disrupting the operations of native financial markets. the previous literature shows mixed findings about factors of foreign direct investment. especially in the case of the effect of gdp, natural resource rent, and inflation boost foreign direct investment. in contrast, others were found to be negatively affected in different regions, including the netherlands. to fill this gap, our study tries to check the exact relationship between the abovementioned variables with foreign direct investment. the design of the paper is by way of the following. section 2 is literature writing proof of fdi, and section 3 clarifies the methodology. at last, the conclusion portion of this paper may furnish some planning and strategy for policymakers to develop certain ideas concerning fdi in the netherlands. 2. literature review reuber et al. (1973) observed that the profitable market, the liberal host government strategies, the technological setup, and the proximity of cultures were the primary factors that drew us investment. according to garibaldi et al. (2001), who studied the factors affecting foreign capital inflows in 26 transition economies between 1990 and 1999, the main factors that influenced fdi flow into these economies included the size of the market and inflation, fiscal deficit exchange rate regime economic reforms, risk analysis, and trade openness, the access to natural resources investment barriers and the bureaucracy. foreign direct investment in turkey was studied by bilgili et al. (2012). this study focused on time-series data from 1988 to 2010. the dynamic model applied the likelihood methodology of the markov regime switching model, which positively affected long-run growth on fdi and capital accumulation. derazo (2013) aimed to associate the relationship between market size, trade openness, geographical proximity, and foreign direct investment. the study employed ols. the study employed ols and multiple regression methodology using the panel data from 1990 to 2010. the review of economics and development studies, vol. 8 (3) 2022, 251-258 253 results show that fdi bilateral effect and gravity variables are based on the constant return to scale. addison et al. (2003) described the association between gdp, foreign direct investment, and trade openness. the study used secondary panel data from 1988 to 2000. the empirical results show that gdp growth and trade openness positively affect fdi. kimino et al. (2007) investigated fdi (foreign direct investment) in japan. the study used panel data from 1989 to 2002. the study used the pooled ordinary least square methodology. the findings provided a very important side to the determinants of foreign direct investment inflow in japan. cavallori and addona (2013) specified the role of foreign direct investment on economies by using the panel data from 1985-2007. the study used the regression approach that indicates the results income effects negatively, and output is positively related to the exchange rate. output has less influence, while the interest rate is more influenced by fdi. kachoo and khan (2012) estimated how the elements of foreign direct investment influenced developing economies. the study used panel data from 1982-2008. the ordinary least square methodology is applied for this purpose. the results show that gdp has a positive association and the wage rate negatively links with fdi. pattaya (2016) determines the effects of foreign direct investment by applying the time series data from 1980 2013. the study employed multiple regression techniques on macroeconomic variables like gdp, trade openness, exchange rate, and fdi inflows. the conclusion reveals that the gdp has a direct effect on fdi. by using data from 1985 to 2012, faroh and shen (2015) evaluated the economy of sierra leone. they discovered that, while interest rates have no bearing on fdi inflows, rate of exchange stability and greater trade openness consistently and meaningfully fascinate extra fdi. the examination proposes that to attract an ever-increasing number of foreign capital inflows, these nations need to keep up with development energy to develop their market size further and trade policies, utilize plentiful labor supply and discourse foundation blocks, and follow further open trade policies. abbott et al. (2012) conducted an observational. the findings of an analysis of the effect of the exchange rate command on flows to fdi, an exchange rate command board comprising 70 emerging countries between 1985 and 2004, showed that the non-industrial nations that have fixed or intermediate exchange rate systems were significantly more successful than those that have rigid exchange rate system frameworks for attracting fdi flows. similarly, from 1990 to 1999, foreign direct investment and portfolio investment moved to twentysix eastern european transition nations, with the former soviet union, examined by garibaldi et al. (2001). the regression analysis suggests that the flow of foreign direct investments is an effective method to explain the basic economic indicators like how big the market is, a deficit in the budget and the rate of inflation, changes in the rate of exchange economic reforms, risk assessments as well as trade openness, abundance in natural resources obstacles to investment and administrative burdens. however, the basic economics don't adequately reflect the flow of portfolios. however, sahoo (2006) conducted a study between 1975 and 2003 to examine the causes of foreign direct investments in south asian nations. pakistan, bangladesh, india, and sri lanka were among the countries which were represented in the sample. panel co-integration and pooled ordinary least squared were used to establish the determinants of foreign direct investment. the dependent variable, fdi, and the 11 explanation variables were included in the analysis. the primary variables that predict fdi, per the study's empirical findings, were the size of the market, the growth rate of the labor force, and the index of infrastructure, as well as trade openness. levy-yeyati et al. (2002) identified to what extent developed economy economic cycles and interest rate changes influenced fdi flow to emerging countries between 1980 and 1990. they study the components of bilateral fdi by using the gravity model. they determine that fdi movements since the united states and europe change counterreview of economics and development studies, vol. 8 (3) 2022, 251-258 254 cyclically to the source country's business cycle and that interest rate phases are major predictors of fdi arrivals. 3. data and methodology the current paper uses foreign direct investment as the dependent variable, and gross domestic product, inflation, and natural resource rent are independent variables. the data is sourced by world development indicator (wdi). the study covers the data from 1980-2018 for the netherlands. previous researchers used conventional least square methods to establish the long-term correlations of timevariable variables, including the johansen (1990) cointegration technique and the engle-granger causality method. a different approach for cointegration, referred to by "ardl," or the "autoregressive distributed lag (ardl)" bound test, was suggested in recent research by pesaran et al. (2001), pesaran and shin (1999), and nayaran (2006). in contrast to other methods, such as the engle-granger traditional two-step approach and the maximum likelihood method of cointegration employing this ardl model, also known as "bound testing approach, "bound testing approach," has many advantages (johansen) and juselius (1990). ardl is the most reliable method of establishing the cointegration relationship in smaller samples than johansen cointegration techniques that require large samples to provide accurate estimates of parameters per pesaran (2001) and nayaran (2006). the most significant advantage is that ardl estimation can be utilized with regressors that are either absolute ordered zero or pure ordered, or a mix of both (faheem et al., 2020). in contrast to other methods of cointegration that require the regressors are connected in the same way. because of this, we employed the ardl method. 4. econometric strategy: the study uses the time series econometric approach autoregressive distributed lag (ardl) model on behalf of stationarity results (augmented dickey-fuller adf and phillips perron pp test). autoregressive distributed lag model (ardl) is most suitable in case-mix order integration. this methodology has advantages over traditional econometric methodologies. it can be applied even in the case of a small sample; it is suitable if all variable is stationary at level i(0) or 1st difference or mix the order of integration (chaudhry et al., 2021; farooq et al., 2020). the study has applied the f-bound test to check the long-term co-integration between variables. table 1: data sources and variables description variable symbol source foreign direct investment fdi wdi gross domestic product gdp wdi inflation inf wdi natural resource rent tnrr wdi 5. results and discussion 5.1 descriptive stat and correlation matrix the outcomes of descriptive statistics show the mean, median, maximum and minimum values of the data of all variables. this table also indicates the data's standard deviation, skewness, and kurtosis. the following table 4.1 portrays the descriptive statistics and correlation matrix. review of economics and development studies, vol. 8 (3) 2022, 251-258 255 table 4.1: descriptive statistics & correlation matrix results fdi gdp inf tnrr mean 9.37e+10 6.78e+11 2.254282 0.683434 median 2.05e+10 7.10e+11 2.113788 0.497602 maximum 7.34e+11 9.47e+11 6.738930 1.856437 minimum -3.61e+11 4.20e+11 -0.691203 0.094484 std. dev. 1.71e+11 1.73e+11 1.552631 0.441841 skewness 1.219023 -0.130353 1.186813 1.029180 kurtosis 7.310618 1.533825 4.945912 3.209919 jarque-bera 39.85393 3.603659 15.30859 6.956480 probability 0.000000 0.164997 0.000474 0.030862 sum 3.65e+12 2.65e+13 87.91699 26.65393 sum sq. dev. 1.10e+24 1.13e+24 91.60514 7.418507 observations 39 39 39 39 fdi 1 gdp 0.486 1 inf -0.218 -0.397 1 tnrr 0.077 -0.254 0.415 1 5.2 unit root test results the following table 4.2 show the adf and pp test results. the outcome results explain variable gdp and foreign direct investment is non-stationary at a level, and they are stationary at first difference. on the other hand, variable inf and tnrr are stationary at both level and first difference. table 4.2;’ unit root test adf test;’ pp test;’ level(0) 1st diff level(0) 1st difference fdi -2.717 -6.040*** -2.671 -5.960*** gdp -0.400 -3.879*** 0.017 -3.818*** inf -3.246** -5.246*** -3.246** -5.353*** tnrr -3.337** -5.661*** -3.300** -8.561*** note: *, **, *** denotes significance level at 10%, 5% and 1%, respectively. 5.3 ardl bound test results the following table 4.3 shows the results of long-run co-integration. the value of the f-test is upper than (1) upper bound, which shows a long-run association among the variables. table 4.3: ardl bound test results test statistic. value. i(0) i(1) f-statist 4.646705 2.72 3.77 k 3 3.23 4.35 3.69 4.89 4.29 5.61 review of economics and development studies, vol. 8 (3) 2022, 251-258 256 5.4 long run/short-run results and diagnostic checking the following table 4.4 explains the main ardl results. the results show all variables are significant in the long run and short run. more specifically, foreign direct investment positively affects gdp and total natural resource rent. at the same time, inflation negatively affects foreign direct investment in both the long and short run. table 4: short and long run estimations variable coefficient std. error t-statistic prob. short run estimates d(lgdp) 16.35 5.32 3.06 0.004 d(linf) -0.511 0.249 -2.048 0.052 d(ltnrr) 0.640 0.213 2.997 0.006 ect -0.644 0.158 -4.064 0.000 long run estimates lgdp 7.327 0.495 14.789 0.000 linf -0.463 0.201 -2.298 0.031 ltnrr 0.697 0.153 4.522 0.000 c -175.382 13.497 -12.994 0.000 5.5 diagnostic estimates all the result for the diagnostic tests seems to have a white sound. the value for r-squared is 0.93, and the adjusted rsquare is 0.93. the results show model is free from severe issues of hetero and serial correlation and is normal and stable in the long term. table 5: diagnostic estimates r2 0.94 adj. r2 0.93 j.b test 0.774 (0.678) hetero test 1.532 (0.207) lm test 0.094 (0.910) ramsey reset test 1.270 (0.268) 6. conclusion and policy implication our work explores the effect of gross domestic product, inflation, and natural resource rent on foreign direct investment in the netherlands. the study applies the autoregressive distributed lag model for 1980-2018. the empirical results show that gross domestic product and natural resource rent positively affected foreign direct investment while inflation negatively affected both the short and long run. this study recommends that government officials and policymakers formulate policies to promote foreign-direct-investment (fdi) for developing the country of the netherlands. references abbott, a., cushman, d. o., & de vita, g. 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(2006). foreign direct investment in south asia: policy, trends, impact and determinants. review of economics and development studies vol. 4, no 2, december2018 281 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no.2,december 2018 journal homepage: www.publishing.globalcsrc.org/reads an overview of english language as a window of economic opportunity in pakistan 1 ayaz ahmad, 2 sana hussan, 3 muhammad shoaib malik 1 department of english, abdul wali khan university mardan, pakistan. ayazmardan@gmail.com 2 m. phil. scholar, department of english, abdul wali khan university mardan, pakistan. 3 assistant professor, department of pakistan studies, national university of modern languages, islamabad, pakistan. article details abstract history revised format: november 2018 available online: december 2018 this paper overviews the worth of english language learning in pakistan through the lens of economic cost and benefit comparison. the value is explored from theoretical perspective, using the theoretical construct of economic value of a language proposed by francois grin, which is applied in conducted interviews and reviewing the existing literature on language policy and planning of pakistan. the paper finds that english language, due to the colonial legacy, enjoyed a privileged position in sociopolitical structure of the nascent pakistani state. the historical entrenchment of english language created a system of values ensuring its domination in sociopolitical domains. values in these domains determined differentiated earnings, costs and benefits for sociopolitical strata of pakistan. the historical evolution structured these domains in such a way that the incumbency of english overcame challenges to its privileged position. the current growth of english language predicts continuation of its global and local domination in the foreseeable future. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords english language teaching, english language economics, value of english language, pakistan and english language learning, elt, tesol jel classification: a10, a11, z13 corresponding author’s email address: ayazmardan@gmail.com recommended citation: ahmad, a., hussan, s. and malik, m. s. (2018). an overview of english language as a window of economic opportunity in pakistan. review of economics and development studies, 4 (2), 281-291 doi: 10.26710/reads.v4i2.412 1. introduction english language is mostly spoken as a second language in pakistan. its speakers’ population is not very high there. based on the graduated students of english medium schools, the total number of its speakers may be around 8 percent of the total population (mahboob, 2003a). english language is a dominant language as it enjoys official status in pakistan. various studies focusing on the domains of english use in pakistan has found that english language dominates other languages (mahboob, 2003b; rahman, 1998; rasool, 2004). english is touted as window of opportunity, but the reality on ground presents a different picture of failures, deprivations and marginalization. so, who benefits from the use of english language? and what are the benefits? what are the future directions? the instrumentalist perspective tells us that whether individual or the state intervenes in language attributes to attain some ends. economic development is normally presented as the most important imperative for pursuing english language learning. the importance of english in different aspects of our collective life in pakistan accrues some economic benefit which determines the willingness to pay the cost in labor and resources. all the concern can be reduced to a simple question. is english worth learning? what is the cost and benefit, for who benefits exceed cost http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 4, no 2, december 2018 282 and for whom costs remain higher than the benefits accrue from learning it. the promise of personal and collective wellbeing makes the analysis of language question from this perspective worth study. the presentation of the study begins with introducing the research problem in introduction, then the underpinning research framework and context is built with the help of literature review. next the adopted methodology including sources and methods of data collection and analysis are established. finally the discussion and analysis of the historical background of english language in pakistan, the current scenario of the economics of english language and future prospects overviews the economics of english language in pakistan. the study concludes with the key valuation of key findings. 2. literature review the study is based on theoretical and factual underpinning about language economics. this section explores economic implication from the perspective of a linguist. such an approach complements the economics of language where the economist tackles language related issues from the economics perspective. this section first explores the beginning and general nature of economics of language that specifically relate to english language, then it focuses the theoretical positions pertinent to the understanding of theoretical underpinning of this study. historically the study of language from political perspective was ignored in the modern linguistic enquiries of western europe in the twentieth century. the ideas of saussure laid the path for later linguists when he considered the parole aspects of language as trivial and not worth the study by a linguist (de saussure, 1915). while the western writers in their attempt to purify the field of linguistics, the marxist theorists took interest in the study of language from economic and political perspective (lenin, 1964 [1913-1914]; stalin, 1972[1950]; voloshinov, 1973). ahmad (2016) contends that economic and language relation was initially explored systematically in the marxist writing where language is considered a superstructure and economics is considered the base on which this structure is established. the marxist interpretation of this relation between language and economics is projected in politics through the class struggle between haves and have-nots. other scholars also support this position (e.g. see (lecercle, 2006; lenin, 1964 [1913-1914]; schiffman, 2002). the non-marxist western writer started taking interest in the relation of economics and language in the second half of the twentieth century. grin (2006) gives the credit of beginning this investigation to the canadian researchers. economists in the united states also took interest in exploring the econometric relation between the earning of english and spanish speaking segments of the us society. study of the relation of language and socioeconomic context underwent three transformations as it evolved in europe and america. first, the emphasis was laid on studying language as an ethnic and cultural component. these early studies focused discrimination on ethnolinguistic basis. then the researches took a descriptive turn and started viewing language as “human capital”. eventually the two earlier foci were combined and studied combined ethnolinguistic and human capital strands. some studies also explored the role of language in international trade (grin, 2006). so, the researches in the economics of language normally fall into these three categories. the work of spencer, clegg, and rush (2017) conform to the second era of francois grin. while studying the effects of socio-economic background on the competence and vocabulary of gsce students in english language they established that students belonging to the under privileged and poor socioeconomic background have weak language skills and vocabularies. the finding implies a higher cost for the students from backward segment of socioeconomic spectrum of society in reaping the benefits of language learning in their earnings from professional career where language skills and vocabulary is valued. the work of phiilippe van parijs belongs to the third category as the writers in his edited book, “cultural diversity versus economic solidarity” argues if it is possible to balance linguistic diversity and economic efficiency. the work find it desirable in the contemporary value system of modern democracy to preserve cultural and linguistic diversity and argue that the benefits of preserving diversity are greater than the costs such efforts incur(van parijs, 2013). the writers in cossan and godley (2000) edited work also agree with this approach. while they propose that culture playing a “residual” effect in promoting economic growth, they consider culture as “shared values and beliefs” (p.2). language is included as expressive tool of the culture of a community through which the community participates in economic activity. they consider “value” as the pursuit of some material and selfish objectives using the tool of language. language as tool of communication helps in formation of shared values and belief and thus promotes cooperation. human-capital models are often used in knowing the outcome of language learning in the form of increase/decrease in income. the capitalist entrepreneur attempt to maximize her profit and cuts down costs. so the review of economics and development studies vol. 4, no 2, december2018 283 jobs which require less communication are assigned to those who cannot participate in the language of workplace. usually the speakers of minority languages and immigrants fall in this category. such people normally lack language skills in the standardized language adapted to the high end jobs in workplace. the income differential between the more proficient, less proficient and non-users of work place language arise from their language proficiency (grin, 2006). language is the essential characteristic of human beings. as humanity enters the era of “knowledge-based economy”, the economics of language becomes an important area of understanding the new directions of economy. economy of the contemporary world is inextricably linked to language as it directly influences efficiency through communication. the recent direction of research in economics of language inevitably lead us to study the role of english in shaping global and local markets as they move to knowledge intensive transactions. an important question arises about the role of automatic translation technologies such as the one employed in australia in the form of telephone interpretation service, whether these technologies will replace the need for learning language as an economic capital or what will be the future form of communication in work place (lamberton, 2002). breton (1998)combined the ethnic aspects and economic perspectives in his study of french and english language in canada. this work, explores the relation of language and economics in the perspective of globalization and relates the local and global market effects on earnings of people with different language resources and competences. it finds that pluralism in canadian language ecology produces salubrious effects. while breton (1998) focused local effects of language and earnings relationship, chiswick and miller (1995) undertook a comparison of earnings of immigrants of australia, united states, canada and israel. they found a consistent pattern of earning affected by the immigrant’s language skills. there from they conclude significance of the learning of the dominant language of the host country in deciding the income of the immigrants. they consider language proficiency a product of exposure to language, learning abilities (quality of learning experience) and relevance of the acquired language skills to the jobs the learner could undertake. the major portion of instrumental language planning happens without proper statements in official documents. this “unplanned” portion of language planning specifically happens in the use of language in education, which result from the interplay of economic, social and political forces at national or local level (baldauf, 1994; daoust, 1998). rosool(2004) highlights the role language in education for the globalized world in general and pakistan in particular, where english language education shapes the means of nation in participating the knowledge based economy. supporting this stance, the minister of education. language related values generated through policy and planning include pluralism, assimilation, vernacularization, internationalism and nation building (cobarrubias & fishman, 1983; daoust, 1998). the policy of assimilation of minority and minoritized language speakers happens due to common notion that a plurilingual state is considered pathological needing measures to eliminate this anomaly (mansour, 1993). administrative and economic efficiency is normally realized through “standardization” of a language and the efforts of promotion or proscription of a language (ferguson, 2006; fishman, ferguson, & dasgupta, 1968; haugen, 1966). nationalism is a process whereby, “history, myth, ritual and symbol are invented to promote a spurious identity. the construction of a narrative of the past allows a group to imagine that it belongs together” (wright, 2000, p. 13). language plays a central role in construction of this identity on which nationalism hinges. marschak’s(1965) deserves the credit of pioneering language economics. his approach to language economics redefines economics terminology so it can be applied to the study of language. he generalizes the definition of economics –considering efficiency as the key aspect of linguistics— is inherent to studying language as communication. for him economics of language views language as “an optimal communication system”. success in communication is enhanced by certain features of language. the increase in success may incur cost. the best approach to finding the most economic way of achieving communication goal or the optimal level where the minimum linguistic features are balanced against maximizing chances of successful communication. he considers “normative” and “explanatory” angles as a set of perspectives that can sufficiently explain economics of language based communications. he explains “efficiency and viability” essential features of language when it is viewed from economics perspective. these features can be viewed from a “normative” angle which advocates for increasing the efficiency of language based communication. an economic view of language searches for “communication system best suited to a given goal; or, more generally, best suited to a given scale of values”. so, suitability of language to an “average achieved value” is “weighted by the probabilities of the various contingencies”. in a simple case of assigning value two states are possible, in one the set objective of communication is achieved and in the second failure to attain the set objective happens. this approach is adopted in the normative sense of economy of communication. in the “explanatory” aspect of communication “survival” of a trait of communication through review of economics and development studies vol. 4, no 2, december 2018 284 language is sought. “viability” or feasibility is an important trait in the explanatory aspect. further, marschak (1965) considers the study language policy as a reliable means for understanding economics of language. he considers policy as a process of assigning values to linguistic features. there might be more than one value that is associated with language question. in such a case the values are prioritized (again based on some other value). national unity’s promotion being such a value that determines the cost and benefits. morality and aesthetics are other values, normally used in determining language (in normative or explanatory sense). the policy itself becomes in the end a matter of making choices, “to govern is to choose”, and to make choices, a scale of values is necessary. concept of “evolution” justifies the survival of the fittest. so, a language feature that is suitable to a context will survive and those unmatched to the needs of context will disappear. while explaining the formation of a policy about language he recounts that the socially dominant group can assign values to a language or features of a language. the aristocrats of society control the process of assigning values as they lead in setting example for the rest of society to follow. “the principle of least effort” may be a value that explains why some languages or their forms survive and are more frequent than others. effort acts like cost, therefore, the survival and flourishing of certain traits in language explain that these are the conditions of economics of language. further, a language survives when the society where it is spoken survives. francois grin takes the credit to make economics a mature field of scholarship. for him, , “… economics of language refers to the paradigm of theoretical economics and uses the concepts and tools of economics in the study of relationships featuring linguistic variables; it focuses principally, but not exclusively, on those relationships in which economics variables also play a part” (grin, 1996, p. 6). further, grin(2006) identified the following points playing crucial role in understanding the economics of language 1. how linguistic features influence economic features, e.g. proficiency’s effects income 2. how economic features influence linguistic features, e.g. price of english language learning effects on over/under use of certain forms in a given domain 3. how linguistic and economic processes/dynamics relate to each other and influence each other building on the concept of his predecessors especially jacob marschak, grin (2006) details how to effectively analyze language policy for economic considerations. while exploring the relation of language with earning the capitalist dominant group’s role in allowing their group members a lion’s share of income, resulting in unequal earning. lang (1986)echoes this theory in his explanation of the linguistic context of the united states, from whence he speculates that those people who speak the same language work together in better way, therefore, the economic forces in workplace compels the minorities to learn the language of majority and also to bear the cost of such learning. church and king (1993) argue that the learners make such decision on the basis of weighing cost against benefits. however, grin (2006) argues that the nature of language as commodity of public use is unique as it increases when used by masses unlike other goods that decrease when consumed and therefore the supply of standard commodities normally decrease. grin argues that the public policy is a process of making decision about available choices and a policy can be evaluated on the bases of comparing benefits and cost. a language policy normally has some overt or covert goals which are taken into account to compare available options for cost and benefits. a state must intervene when the market of language fails to adjust and it happens when, (a) actors make wrong decision due to little information, (b) high cost of transaction discourage actors, (c) goods without proper market, (d) externalities where actions of one affect the interest of others, (e) defects in market such as monopoly and (f) “hyper collective public good”. the environment of language normally shows the features of a failed market, thereby the intervention of state becomes necessary to adjust its defects. the private cost and benefits are easier to evaluate as compared to public cost and benefits. as a society comprises individuals, therefore, the public cost or benefit can be inferred from the private. the social and individual cost can be “market” or “non-market” based. the evaluation of language policy pose a unique problem as the investment that state makes does not yield immediate effects, therefore, exact cost never remains precise, however, normally it remains within reasonable limits so that the misgivings about the maintenance of records in multilingual context being very high, normally is inflated. for example in european union it is less than one percent of the total budget. francois grin basis this position on his earlier works e.g. (grin, 1994, 1999, 2000; grin, jensdottir, & o' reiagain, 2003) and the work he has published recently echoes this approach to economics in language planning e.g. (grin, 2010). all issues that confront humanity have linguistic, economic and political aspects, and no issue can be confined purely to any particular discipline. review of economics and development studies vol. 4, no 2, december2018 285 3. research approach this study is essentially a theoretical and qualitative exploration of the english language economics in pakistan. economics of language of francois grin as discussed in literature review constitute the theoretical framework for the collection and analysis of data. the leading objective of this study is to find if english language is worth learning in the context of pakistan. this lead objective yields other subsidiary concerns. of these the most pertinent being finding:  the value of english language learning in terms of cost and benefits in pakistan.  the segments of society that reap the most and the least of the benefits accruing from learning english language in pakistan.  the future prospects of english language learning in pakistan. based on these objective, the study answers the following research questions:  what features of english language in pakistan contribute to its value in terms of cost and benefits that result in its value?  how the value of english language learning is established?  what segments of pakistani society reap the most of benefits accruing from english language learning in pakistan?  what segments of pakistani society is marginalized in the distribution of benefits accruing form english language learning in pakistan?  how english language learning results in different dividends for different segments of pakistan?  based on the current trends, what are the future prospects of the value of english language learning in pakistan?  while answering these questions, the study also answers the fundamental question, “is it worth to learn english language in pakistan?”. while there are many confounding factors which make the drawn inferences about the worth of a language unreliable, the study attempted to account for some of these factors such as education, skills, experience, intelligence, existing class division and system of privileges because such elements are intricately woven into the language use and linguistic context. the scope of this paper confines the researcher to gloss over these important factors. the researchers hope that future studies with a narrower focus would be able to account for the individual confounding elements more effectively. however, the general overview such as this one would be constrained to economize on details and tend to generalize where nuances of individual and smaller niche groups would be overlooked. 3.1 data collection the exploratory and theoretical demands review of a number of secondary sources, however the study includes some primary data which was collected through unstructured exploratory interviews with4 experts of english language teaching and education belonging to abdul wali khan university mardan and university of peshawar. 3.2 data analysis the study overviews various reports and studies and analyzes them with the help of francois grin’s concept of finding worth of a language feature by estimating the cost and benefits accruing from the process or product of learning a language. the study compares the costs and benefits qualitatively and thereby attempts to provide direction for future research where on large scale the quantitative data would be used to get numerical outcomes. the study, therefore, focuses on arguments and qualitative estimation of value. 4. discussion and analysis this section finds answer to the questions raised in research approach of the paper. discussion and analysis begins with summarizing the relation of sociopolitical, economic and language policy and planning enunciated in literature review. a brief historical overview then provide a diachronic evolution of economics of english language in pakistan. the current context of english language is then explored to determine its worth. eventually, the prospects of english language in pakistan are highlighted last. review of economics and development studies vol. 4, no 2, december 2018 286 the reviewed literature points that english language in pakistan exist in the multilingual and multiethnic context where sociopolitical and economic division intermingle and result in a complex language planning and a twolayered language policy. the sociopolitical divisions and contest maintain an economic dimension which helps in understanding the nature and dynamics of such division, as economic value inevitably provides practicability to the strategies of contestant groups. one dimension of strategizing the sociopolitical contest for economic value motivates language policy and planning. so, language policy and planning become an instrument of realizing economic gains of sociopolitical contests. if language policy and planning can become an instrument, it also can become an effect of the economic valuation that is rooted in the contest of sociopolitical classes, and language policy and planning also can become raison d’etre, the primal cause of sociopolitical divisions effected through economic measures. therefore, language policy and planning operates in the form, visualized in figure1. figure 1: cycle of economic values, sociopolitical class values and language policy planning contest english language due to the colonial legacy enjoyed a privileged position in sociopolitical structure of the nascent pakistani state. the historical entrenchment of english language created a system of values ensuring its domination in sociopolitical domains. values in these domains determined differentiated earnings, costs and benefits for sociopolitical strata of pakistan. the historical evolution structured these domains making the incumbency of english overcome challenges to its privileged position. historical process coupled with strategizing of sociopolitical elite control access to the learning of english language through stratified educational system. the urban citizens, the salaried class, entrepreneurs etc. form an elite who limit access to their class through restricting access to a selective spectrum of english language l2speakers. the learners of ordinary english medium educational institutes (such as schools, colleges, universities, and institutes for technical and professional education) face substantial barriers in horizontal and vertical movement in the domains of english language. the benefits of elite are reflected in their higher earning and presence of more opportunities to advance their careers. the cost of marginalized segments make their efforts less fruitful and thus they do not get enough freedom of economic choices in job market. the political slogan of abolishing the stratified education along improving quality of education is necessary to make english an equitable asset in international job market for learners of english language. there is exist extensive literature on the origin of english in south asia and its continuation in pakistan after partition of south asia(see for example baumgardner, 1996; mahboob, 2003b; rahman, 1996; rahman, 1998, 2004a, 2004b, 2005), however, the analysis restrict themselves to sociopolitical consideration in domain of education. the economic consideration would make such narration more understandable. the nascent state of pakistan was forced to use english language despite the desire of its social and political elite to replace it completely by urdu that had played historical role in forming muslim identity in the anticolonial struggle and in shaping the two nation concept for indian muslims. a major constraint was the cost of doing this in the financially impoverished early years. later, the rate of development was low and spending on education remained a low priority in the face of security related challenges, which required immediate attention. language policy in postworld war ii states, who attained their freedom from colonial rule, remained a tool of shaping “nation-state” in the hand of governments imbued with the spirit of nationalism (liddicoat & baldauf, 2008, p. 3).the scarcity of trained teachers, books, building and other related requirements resulted in the poor quality of teaching in urdu government schools while the english medium private schools did well as they had better resources available to them. two opposing views emerged regarding the economic worth of english language in pakistan. one view considered english as an essential component of quality education that was considered vital of economic development and prosperity of the country. the second view took nation-building as a higher aim than economic development and focused transition to urdu language. this second view considered provision of better governance economic values sociopolitical class values language policy and planning review of economics and development studies vol. 4, no 2, december2018 287 in urdu language that was better understood by the bureaucracy and population as compared to english and was taken as a means of realizing economic development without depending on english language. in practice, neither of these two views completely prevailed, therefore, both view saw accommodation, while urdu was acclaimed to be the legitimate representation of pakistan identity, english language was not made illegitimate and was proclaimed to be a temporary fixture till time and resources become suitable for the desired shift. the earlier history of education in pakistan saw a large number of urdu medium education and small number of english medium education. while the education in english medium was high and return on investing in such education was high, the high cost of this education allowed only elite to afford such education. urdu medium education imparted in state run schools was failing in delivering its purpose of ensuring better earning of the majority of its graduates. therefore, the low earnings of its graduates was taken as proof of its low quality. the official commissions, the stories in newspapers and anecdotal stories all undermined the credibility of the government urdu medium education. the demand of english medium private schools steadily grew and in urban areas english medium schools gradually started to open. the era of 1980s saw initially a trickling of such schools, but later in 1990s these schools started to pour of nowhere. this growth lowered the fee in many of the newly opened school to such degree that they could be afforded by the middle and lower middle class families. in 1990 the democratic government started to accept the superiority of english medium private schools and they allowed introduction of english as a medium of instruction in government schools as well. initially some schools were chosen to impart such schools, in khyber pakhtunkhwa for example such schools were called centennial schools. later in the era of general musharraf english language’s importance was recognize and it was made compulsory from first grade onward. zobaida jalal khan (2004), unveiled the policy of musharraf’s government where english language was assigned the role of modernization and development in pakistan through improvement of education. the transformation of education in and after 1990s was due to the fact that government accepted english language learning as a means of increasing better paid jobs for the learner, therefore, the decision to introduce english in government schools was driven by making access to english language learning open to all citizens who could not afford private schooling. rahman (1998, pp.228-248) points to the following features of english language in pakistan which adds to value. comments based on focus group discussion are added in square brackets by the researcher.  english as an international language. [it is now universally agreed that english is an international language therefore it provides access to international job market, especially the higher paying multinational companies in pakistan.]  historically employed in domains of power. [the colonial legacy has allowed english domination in domains where distribution of power-which professor rahman explain in terms of economic gainstake place such as industry, job market, government, education etc. the historical factor has resulted in a network of production and consumption of language based items and services. the sudden change of a language in domain of power is traditionally rejected by most of the commissions and report, as such a change may disrupt the sociopolitical and economic machinery in pakistan.]  modernization, efficiency and retention of privileged status. [modernization is considered as improvement in domains of power, which like developed states would result in prosperity. as quality education and technology can be cheaply accessed through english language, therefore, learning of english would help in faster modernization. efficiency refers to avoidance of wastage. modernization and efficiency through english language are normally promoted as positive arguments which uses economic value as its premises. it is argued that due to the efforts of anglophone developed states (and also in non-anglophone states where sizeable l2 population exists) english language stores a great source of information. modern technology like internet has most of its resources (websites/pages) in english language. so, investing in local/national language and transferring knowledge through translation will demand resources and time which are not economically viable, therefore, the fastest route to partaking in the race of development is to adopt english language. the privileged position of english is historical and social, adding to its value as for private market and non-market gains it is supposed to offer best returns.]  fear of intensification of existing rivalries in multilingual former colony. [in some of multilingual former colonies of britain such as nigeria, tanzania, kenya and india , english language is presented as the neutral language that promotes unity and lessens language based tensions. however, in other former colonies like malaysia and pakistan (and india too), local languages have acquired a symbolic status of anticolonial resistance and english language is attacked as a colonial legacy and continuation of servility. in pakistan the fluctuation in the economic value of english language is greatly determined by this controversy between urdu and english language]. review of economics and development studies vol. 4, no 2, december 2018 288  lwc (language of wider communication) function of english in pakistan. [english is not only understood (though to a limited degree) in most of pakistan and it is also known to people in south asia, therefore, its learning facilitates regional communication and would help in economic activities, and its learning would help learners to gain more from learning it as compared to the cost in the form learning it. however, urdu/hind which resemble closely also has a competitive function as lwc.]  urdu the substituting language is only symbolically supported. [despite the constitutional status, historical importance, presence of a national language development department and a number of court decisions and reports favoring the conversion from english to urdu use in offices, courts and public spaces, the continued domination is often construed as conspiracy of powerful elite who reduce all these policy documents to rhetoric. the lack of resources, will, sincerity and malicious intention offers a spectrum of interpretation of this contradiction between the de jure and de facto situation of english language. from the economics of english language, the interpretation becomes straightforward as due to presence of dominant position of english in globalized economy and high cost of investment that will incur from the conversion, the constitution protection and official policy statements do not succeed. though significant gains have been made in this direction.]  government invests in cadet colleges and english medium schools where the future leadership is formed.[the cadet colleges were only few institutions in 1990s when professor rahman was writing the book, now the high fee english medium schools, colleges and other institutions especially universities (both general and those focused on medicine, engineering, science and technology) have mushroomed to the extent that every district has them in dozens. such english medium institutions, schools and colleges largely cater to need of middle class students, so the former elitist education is now available to majority or urban population. however, the skills and variety of english that is learnt in most of these institution does not guarantee economic benefits to all learners. still many parents prefer these english medium schools etc. which make establishing them a profitable business and hence proves that demand for english language learning exist among the middle and lower middle class especially in urban areas.]  the hamoodur rahman report, regrets the accelerated pace of conversion from english to urdu, which compromised the quality of education. [as discussed in the analysis of point no. 6, this report is given as example, where the enormity of undertaking a complete transformation is forewarned and a cautious course is suggested. the economic cost is implied].  urdu medium school graduates are marginalized in higher education and prestigious jobs.[this issues highlight the dominant belief of those parents who can not afford high tuition fees of private english medium schools. the consider, english being a major factor which added to the economic success of english medium going children and failure of their urdu medium going children, the current education policy also points to this fact and in khyber pakhtunkhwa province, the government has therefore made english as medium of instruction from grade 1 onwards].  the small affluent class wield great power in lobbying for english and the less affluent support it as it (english) is considered as a means to enter the elite club. [as discussed in point no. 6, the frustration with non-implementation is rationalized in the form of blaming an affluent elite who lobby for the promotion of english language. the demand for english language among the parents especially the poor is normally ignored in making this assumption. the promise of economic benefit accruing from learning english language does not simply arise from local and national influence, in the age internet and smartphones the global domination and demand for english is also affecting the choice of learning english locally in pakistan. though, the elite can not be absolve completely, their role in continuing the domination of english language would not have been effective if english had been seeing a waning influence in the global economy.]  people trust status quo and believe in its continuation. [people learn english language because they believe this domination is not going to end soon, therefore, the invest in learning english language so they would partake in the larger global market. the growing demand of english medium schools indicates that english language is expected to yield more benefits than the cost incurred by investing in learning it.]  international interaction (english as lingua franca) through english. [ the current global reach of english is phenomenal as great number of people estimated to be more than a billion speakers including l1 and l2 speakers (jenkins, 2015) makes it an attractive resource where investment in it by learning it enable speakers to participate in the global market]. review of economics and development studies vol. 4, no 2, december2018 289 the question to improve english appears rhetorical as the very people who raise concerns about the abysmal quality of english language learning/teaching, themselves as a class support separate elitist education. network effect of grin propose that if more people learn english language the available opportunities to speakers are to be divided among all, so a competition would take place where competence is to be determined on the basis of what variety of english is mastered. the spread of a language therefore does not result in maximization of value for all. depending on the language market, the majority of learners invest in learning the language only to bear the cost of the services available. in most cases the language based services they receive would have an non-market utility for them and they would remain mostly consumers bound to a specific type of market due to their loyalty based on their historical attachment and the investment they have already made, keep them psychologically satisfied even when they are not earning anything or rather remain consumers of a language based market where advertisement/propaganda keep them loyal buyer of language based commodity. english language instead of losing economic significance for learners of english is constantly expanding globally. however, a debate has emerged whether the localization of english in different parts especially the former colonies is good or bad. while some like braj kachru consider it a good sign, while others like randolph quirk consider it ominous for efficient communication. so, the future of english depend on whether a single global form (such international english) would ultimately emerge or whether the localized form would diverge to such a degree that they would become mutually unintelligible (jenkins, 2015). both of the extreme positions are unlikely to happen and english would grow as would its newly emerging varieties, especially in the newly emerging markets like pakistan, india etc. those who learn it would have to compete especially in the case of english language teacher, where the native english language teacher make good earnings, the non-native teacher despite the higher cost they pay in terms of formal training and expenses normally do not make as much as the untrained native speaker can make. however, in other places where communication is supplemental to other technical skills the non-native speakers have fair prospects. 5. conclusion due to expansive nature of the topic, the researcher is content with providing an overview, which obviates the need for further researches to focus on each questions raised in this paper and thereby further improve the field. the paper explored english language economics in pakistan and found this language has a strong economic presence in pakistan. this economic trait is sustained by the historical cause of colonial rule and contemporary elements of globalized markets. the paper finds that economic dividend is greater for the existing sociopolitical elite while for the poor earning to investment ratio remains weak, therefore, the economic aspect of english language in pakistan causes disparity and widens the gap between the rich and the poor. english language is expected to remain dominant in foreseeable future, therefore, it offers as a good source of personal investment for private gains. the social/collective gains from english language are doubtful, as the new learners have to compete for limited job market, or they need to innovate and create new opportunities of earning. the non-native learners who aspire to become english language teacher would face unfair domination of native-english teachers. references ahmad, a. 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(2000). community and communication : the role of language in nation state building and european clevedon: multilingual matters. review of economics and development studies vol. 5, no 2, june 2019 381 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june2019 journal homepage: www.publishing.globalcsrc.org/reads the mediating role of psychological capital and organizatioanal commitment between work environment and job bunrout 1 muhammad shahid, 2 nazim ali 1 department of commerce and management sciences, university of malakand, pakistan. 2 department of commerce and management sciences, university of malakand, pakistan. article details abstract history revised format: may 2019 available online: june2019 the objective of this research was not only to investigate the relationship between working environment (we) and job burnout (jb), we and organizational commitment (oc), we and psychological capital psychcap, oc and jb, psychcap and jb but also to investigate the mediating effect of oc and psychcap between the relationship of working environment and jb of doctors working in hospitals of kp, pakistan. data were collected from three hundred and thirty doctors. the results revealed a significant negative relationship between we and jb, oc and jb, psychcap and jb while positive relationship was found between we and oc, we and psychcap. the results also explored that oc partially mediated the relationship between we and jb. psychcap also partially mediated the relationship between we and jb. when both oc and psychcap were included as mediators, the relationship between we and jb became insignificant (full mediation). © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords work environment, commitment, psychcap, burnout, pakistan jel classification: corresponding author: recommended citation:shahid, m. and ali, n.,(2019). the mediating role of psychological capital and organizatioanal commitment between work environment and job bunrout, review of economics and development studies, 5(2), 381-386 doi: doi 10.26710/reads.v5i2.624 1. introduction due to innovation and development, new technology is emerging each day. the efficiency and utility of resources has reached the optimum level. it is a fact that these technological innovations cannot operate perpetually; these need some human resource to operate. the human resource of an organization needs to be committed and motivated. numerous studies have analyzed different factors like rewards, trainings, we etc. which may lead to oc and consequent increased performance. there are certain issues which may lead to problems like jb and intention of employees to leave current job etc. the primary objective of this study is to focus on health sector being crucial to individual’s life and community health. in this study we investigate the effect of we on burnout of job while taking oc and psychcap as mediating variables. in research studies different features of we were focused and were found to be significant in maintaining employee’s productivity and efficiency (karasek, 1990). we and employee’s perceptions about their we are of utmost importance in order to know about the development of their attitude (bibi, karim, & ud din, 2013). negative and unwanted changes in attitude and behavior of employee’s are intensely influenced by their we. leiter and maslach (1988) emphasized the association aspects especially interpersonal interaction with administrators and colleagues as contributory reasons for burnout development. likewise, background of burnout studied at http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 2, june 2019 382 organizational level was found to be associated with organizational we, moral and social backing (fong, 1993) and admittance to organizational assists (quick & tetrick, 2011). literature review disclose that the projecting relationship of we and burnout had been supported by several research studies (langballe, innstrand, aasland, & falkum, 2011). due to the prevailing increasing cases of burnout among employees of medical profession, escribàagüir, martín-baena, and pérez-hoyos (2006) conducted a research study with the aim to investigate the relationship between we and burnout among medical staff in spain including nursing and emergency unit doctors. the secondary aim of the study was to find that either we effect on burnout was dissimilar for nurses and doctors. data was collected from 945 respondents including nursing staff and emergency doctors in spain with the help of mail questionnaires. savicki (2002) conducted a research study on burnout based on treatment/health care providers, teachers and administrators of youth and child care covering thirteen cultural backgrounds including canada, united states, denmark, slovak republic, england, scotland, germany, poland, austria, israel and australia. in spite of visible variations in different culture of the target population, in findings of the research study it was suggested that depersonalization and emotional exhaustion were associated with high level of job pressure and minimal managerial support, innovation and job orientation. high level cohesion among co-workers/colleagues was found to be linked with enhanced sense of personal achievements or accomplishment at workplace. in a research study, robinson et al. (1991) found that personal accomplishment and depersonalization in workplace were predicted by job pressure, job involvement and job orientation. on the other hand, findings of contrary nature about the relationship of burnout and we were also suggested by literature review. in pakistan context research study was carried out by (chughtai & zafar, 2006; hayat, 2004) in which he describes the dimension of relationship among oc and we facets. chughtai and zafar (2006) argue that the facets of working environment such as pay, opportunity, promotion, supervision, and training are strongly associated with oc. abdullah and ramay (2012) a good and cooperative working environment can increase the commitment towards the organization. different research studies illustrate that there is a significant relationship exist between jb and oc for instant (ahmed & ramzan, 2013; tosun & ulusoy, 2017) argued that jb has negative relationship with oc. the severe increase of emotional exhaustion effects oc because the heavy bourdon of getting competitive advantage in business, employee retention and employee performance, according to (bruce, 2009) afore mentioned issues causes burnout which reduce oc. many researchers address that today jb can be see almost everywhere in different form of organization, in which individual provide direct services to the customer e.g. industries like education sector, health sector and banking sector. previously the main reasons for reusing the oc were considered an unlimited transition of jb because of role conflict, heavy workload and uncertainty in job performance beside this less feedback provided by the manager, rapid technological changes (ahmed & ramzan, 2013; hallsten, 2017). jb occur in those organization in which employee directly involve with the customer (gorji, vaziri, & iran, 2011). some strategic changes in the organization also responsible for reducing oc and increasing jb (bruce, 2009; marek, schaufeli, & maslach, 2017). similarly getting market positioning and psychological fatigue of doing the same nature of work daily, work involvement, organization characteristic and culture, coordination with manager are the main reason for the jb (parker & decotiis, 1983). some other studies tried to find out the foremost reason and market forces that contribute to oc and jb in addition the key reason that can help in controlling the jb and increase the individual oc and employees satisfaction (bakker, albrecht, & leiter, 2011). employees can be motivated to control burnout and increase their performance through oc. it reflects that when requirement and job responsibility increase while resources for work requirement decrease hence, jb will occur in the organization. on the other side when resources for job increase ultimately oc and work engagement will increase. dimensions like (social support, policies, culture rules and organization context etc.) and psychological stress both affect the oc and work engagement (klusmann, kunter, trautwein, lüdtke, & baumert, 2008). due to financial crisis when organization start downsizing or increasing work load on individual resultantly they will feel stress and this kind of mental state reduced oc (glasberg, norberg, & söderberg, 2007). due to this issues an employee perception about his skills become negative and feel less worth as employee in the organization (van den broeck, vansteenkiste, de witte, & lens, 2008). employee commitment and motivation contribute to the organization performance (ahmed & ramzan, 2013). stress occur when individuals are strongly committed towards the working environment and do not perform well in the work setting that will result jb. stress is the aggressive reaction of individual and other kind of job requirement deployed on employees (executive, 2001). when employees feel high level of stress their morale will become low and feel drained out that will directly affect oc (wani, 2013). it is argued that work load, pressure and clash of review of economics and development studies vol. 5, no 2, june 2019 383 interest among employee will decrease the commitment level and that will lead to low performance and intention towards job turnover (allam 2013). burnout is actually reaction on an employee towards interpersonal and emotional stress related to job pressure and professional stress (maslach, schaufeli, & leiter, 2001). burnout has three dimensions namely; emotional exhaustion, dwindled personal accomplishment and depersonalization. emotional exhaustion is an unwanted and negative attitude of an individual characterized by reduced energy level, fatigue and lack of enthusiasm towards job. personal accomplishment is termed to be individual feelings about his competence and fruitful achievement related to his job. depersonalization in an unwanted attitude of an employee wherein he/she keeps apart from work and practice uninterested attitude at work station (freudenberger, 1974). burnout may develop when an employee does not have confidence on his own competence (cherniss, 2017). in recent years, researchers had started to explain the process of burnout with respect to resources. psychcap is considered as a significant personal resource and is defined as “an optimistic psychological condition that an individual portray in the process of development” (luthans, avolio, walumbwa, & li, 2005). psychcap is composed of four capacities including self-efficacy, optimism, resilience and hope; all the capacities can be developed, measured and managed effectively for the desired outcome. specifically individuals with high level of psychcap possesses additional resources to perform their assigned tasks, presume something good to happen, think positively in dealing with negative conditions and swiftly recover from hindrances (luthans & youssef, 2004). according to ventura, salanova, and llorens (2015) employees with increased level of self-efficacy will recognize challenging job which may leads to high level involvement and diminished burnout hence erection of psychcap can minimize the occurrence of burnout. true leadership accompanied by psychcap among recently graduated nurses was observed to be considerably associated with burnout of lower level. in simple words it was established psychcap is associated with jb (estiri, nargesian, dastpish, & sharifi, 2016; laschinger & fida, 2014; moyer, aziz, & wuensch, 2017; pu, hou, ma, & sang, 2017). 2. methodology the data was collected by using self-administered technique, snowball technique. the questionnaires were first distributed among the doctors and as the doctors are very busy in their duties, so enough time was given to them for their response. they were approached a day or two for collecting the questionnaires. total 360 questionnaires were collected, among them 30 were incomplete which were not considered for data analysis. 3. measurement the commitment of the doctors towards their organization was assessed through the 18 item questionnaire adopted from meyer, allen, and smith (1993). three dimensions of oc were used in this study (affective, continuance and normative). burnout in the job of the doctors in this study was measured using the “maslach burnout inventorygeneral survey (mbi-gs)” developed by maslach for jb. in this study the three dimensions (emotional exhaustion, depersonalization and personal accomplishment) were used to measure the jb. psychcap was measured using the scale developed by (luthans, youssef, & avolio, 2007) called “the psychcap questionnaire (pcq)”. the we was developed by (moos, 1994) was modified with aim to find out the doctors perception about their we. in this study the ten dimensions has been used for measuring the we. 4. results the total number of respondents are 330 out of which 286 are male and 44 are female. 139 respondents are having mbbs qualification, 101 has done fcps, 86 has completed mrcp and only 4 respondents have completed phd. out of the total respondents 186 are the medical officer, 37 senior medical officer, 25 registrar, 39 assistant professors, 35 associate professors and the remaining 8 are professors. out of the total respondents 114 falls in the age category of 20----30 years, 95 falls in the category of 31----40 years, 86 falls in the age category of 41----50 years, 35 falls in the category of 51 and above. all the variables were correlated in the first step for checking the relationship among them. the negative and significant relationship between we and jb was found (r= -.509). similarly, the negative and significant relationship was also found between oc and jb. the relationship between jb and oc was significantly negative (r= -.604). the relationship between jb and psychcap was negative and significant (r= -.538). however, the relationship between we and other variable of the study was positive and significant except jb. it was (r= .620) with oc and (r= .57) with psychcap. oc and psychcap were also found significantly and positively correlated. the relationship between both was (r=.492). all the details regarding the relationship among these variables have been presented in the following table. review of economics and development studies vol. 5, no 2, june 2019 384 oc as a mediator partially mediated the relationship between independent and dependent variables. similarly, psychcap also as a mediator partially mediated the relationship between we and jb. now oc and psychcap both were added as mediators to test the path from we to jb. after adding these both as mediators the path from independent to dependent became insignificant. which means that oc and psychcap together fully mediated the relationship between we and jb. figure: the mediating role of oc and psychcap between we and jb χ2 = 235.874; df = 165; cmin/df = 1.430; gfi = .933; cfi = .986; rmsea = .036; srmr = .0543 5. limitations and recommendations the fist limitation of this study is that the data were collected from doctors working in government hospitals of kp, pakistan, so the results cannot be generalized to other doctors working in private hospitals of kp, or doctors of other provinces of pakistan. the results of current data may be different from the results of data to be collected from those doctors who did not participate in this current study. the responses recorded on the questionnaires used in this study will be different from the responses to be recorded by using other types of questionnaires. the management should focus on increasing the quality of we so as to mitigate the jb of doctors, for the we showed a significant negative relationship with jb. similarly, increased quality of we will enhance the commitment of doctors which in inevitable for the treatment of patients. for future research, it is recommended to include the personal variables either as mediators or moderators. it is also recommended to test other important variables such as job satisfaction, organizational citizenship behavior etc., as mediators between the relationship of we and jb. the impact of working environment should be explored on other variables such as employees’ performance, turnover intention etc. references ahmed, a., & ramzan, m. 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(2013). job stress and its impact on employee motivation: a study of a select commercial bank. international journal of business and management invention, 13-18. review of economics and development studies vol. 5, no 2, june 2019 225 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads impact of teacher’s self-efficacy on student’s motivation towards science learning 1 shama ghaffar, 2 shams hamid, 3 martin thomas 1 iqra university pakistan. sh.ghaffar12@gmail.com 2 iqra university pakistan. shamshamid@hotmail.com 3 iqra university pakistan. martin.thomas@iuk.edu.pk article details abstract history revised format: may 2019 available online: june 2019 the study aims to identify the role of teachers’ self-efficacy towards motivating students’ learning process in intermediate colleges of karachi, pakistan. using a causal research design, purposive sampling as a sampling technique and questionnaire as a data collection method, data were gathered from selected intermediates colleges of karachi. the data from 312 sample cases were then analyzed by employing pls-sem through smartpls3 and results were identified. the results of the current study showed that teachers’ self-efficacy has significantly positive effect on goal achievement active learning and learning environment. in addition, teachers’ self-efficacy was found to have significant positive impact on performance goal and science learning value. by the initiation of proper training and working over the embracement of self-efficacy, the motivation of the students towards the learning of science, can be improved. the professional courses and teacher education programs to develop the sense of self-efficacy are also proposed by the professionals. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords teachers’ self-efficacy, performance goal, achievement goal, students’ motivation, intermediate colleges, pakistan jel classification: i230, a22 corresponding author’s email address: sh.ghaffar12@gmail.com recommended citation: rahman, a., ghaffar, s., hamid, s. and thomas, m. (2019). the impact of teacher’s self-efficacy on student’s motivation towards science learning. review of economics and development studies, 5 (2), 225-234 doi: 10.26710/reads.v5i2.540 1. introduction teachers play a significant role in the way student’s perceive and motivate them but teachers’ low self-efficacy have a negative impact on perceived abilities to perform that can be a challenge for students (greco, bernadowski, & parker, 2018; kilday et al., 2016; mazlum, cheraghi, & dasta, 2015). this will lead students to believe that perhaps studies are not their personal strength (laninga-wijnen, ryan, harakeh, shin, & vollebergh, 2018; taştan et al., 2018); thus decreasing his/her possibilities of performing well if not capable of doing such a task (hamid, shahrill, matzin, mahalle, & mundia, 2013; miller, ramirez, & murdock, 2017). when engagement and interactivity decline due to lack of teachers’ self-efficacy, there is high possibility that students may face (1) less-interactive and productive in the classroom; (2) they may not persist in their studies and coursework due to higher difficulty and uncertain teachers’ behavior and (3) they find themselves unable to accomplish tasks and coursework (shum, lau, & fryer, 2018; thompson, 2016; zee & koomen, 2016). as noted by (greco et al., 2018), high achievement is consistent with teachers’ self-efficacy and importantly direct to inclining morale, efficacy and motivation in students (kilday et al., 2016). http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 2, june 2019 226 lack of self-efficacy in teachers can increase complicated and difficult learning experience for students and it adversely affect students’ motivation and academic achievement in pakistan (aslam & ali, 2017). teachers’ feeling of hesitation to express and lack of confidence were few critical problems that are currently faced by teachers in pakistan (gulistan, hussain, & mushtaq, 2017). moreover, pakistan is currently facing shortage of quality teachers with strong self-efficacy beliefs. poor education system due to typical teaching strategies and pedagogies, and weak self-efficacy beliefs of teachers, students were lagging far behind national and international requirements (shahzad & naureen, 2017). although a substantial research has revealed that teacher’s self-efficacy can influence teachers and students; but unfortunately, such studies have failed to investigate more explicit link between teacher self-efficacy and students' motivation and achievement (bolton, 2018; greco et al., 2018; hallinger, hosseingholizadeh, hashemi, & kouhsari, 2018; hardré & hennessey, 2013; ma & cavanagh, 2018; sahin-taskin, 2017). however, these literatures have particularly used self-efficacy theory (hallinger et al., 2018; miller et al., 2017; yamamoto & yamaguchi, 2016; zee & koomen, 2016) and achievement goal theory (laninga-wijnen et al., 2018; miller et al., 2017; pamuk, sungur, & oztekin, 2017; taştan et al., 2018) for providing considerable solution to these problems. in this regard, a humanistic organismic perspective is used to examine motivated from the self-determination theory (deci & ryan, 2002a, 2011; deci & vansteenkiste, 2004). there are different forms of motivation that are integrated on a platform of self-determination according to self-determination theory. moreover, the selfendorsement and greater choice of the behavior also explains different forms of motivation accordingly. the absence of self-determination is represented through motivation. individuals disengage themselves from the activity and ultimately halt doing activities when motivated (deci & ryan, 2002b, 2008). similarly, external pressures and incentives regulate extrinsic motivation. individuals perform a behavior in order to acquire a reward or ignore a negative consequence when extrinsically motivated. the behavior is regulated through guilt, ego-evolvement, and introjections when the external pressures internalized the regulating behaviors(deci & ryan, 2002b, 2008; gagné & deci, 2005; ryan & deci, 2014; ryan & deci, 2000). moreover, self-determined motivation is revealed from the identification. the behavior is important and vital to the individual when it is identified. likewise, integration is another form of self-determined motivation, which appears when the behavior performed is integrated with other elements of the self-individual (deci & ryan, 2002a). consequently, intrinsic motivation is revealed from the higher prototyping of self-determination. individuals are engaged in the activities performed for the satisfaction and pleasure driven while performing the activity when intrinsically motivated. therefore, using self-determination theory, the study has intended to examine the impact of teacher self-efficacy on the students’ motivation and achievement. 2. literature review 2.1 self-determination theory a humanistic organismic perspective is used to examine motivated from the self-determination theory (deci & ryan, 2002a, 2011; deci & vansteenkiste, 2004). there are different forms of motivation that are integrated on a platform of self-determination according to self-determination theory. moreover, the self-endorsement and greater choice of the behavior also explains different forms of motivation accordingly. the absence of self-determination is represented through motivation. individuals disengage themselves from the activity and ultimately halt doing activities when motivated(deci & ryan, 2002b, 2008). similarly, external pressures and incentives regulate extrinsic motivation. individuals perform a behavior in order to acquire a reward or ignore a negative consequence when extrinsically motivated. the behavior is regulated through guilt, ego-evolvement, and introjections when the external pressures internalized the regulating behaviors(deci & ryan, 2002b, 2008; gagné & deci, 2005; ryan & deci, 2014; ryan & deci, 2000). moreover, self-determined motivation is revealed from the identification. the behavior is important and vital to the individual when it is identified. likewise, integration is another form of selfdetermined motivation, which appears when the behavior performed is integrated with other elements of the selfindividual(deci & ryan, 2002a). consequently, intrinsic motivation is revealed from the higher prototyping of selfdetermination. individuals are engaged in the activities performed for the satisfaction and pleasure driven while performing the activity when intrinsically motivated. different forms of motivation are distinctly associated with the performance, well-being, behavioral, psychological, physical, and creativity as demonstrated through the research on self-determination theory(sahintaskin, 2017). the association between long-lasting maintenance of weight loss, higher quality learning, higher levels of well-being, and prolonged abstinence from smoking behaviors and self-determined forms of motivation is review of economics and development studies vol. 5, no 2, june 2019 227 positively emerged. increased anxiety in school children and negative health and well-being consequences are positively related with non-self-determined forms of motivation(deci & ryan, 2016). evidence of automatic procedures associated to motivation is integrated in the humanistic theory of motivation, which includes self-determination theory (han & yin, 2016; rodríguez et al., 2014). a rigorous impact on the level of motivation of an individual can be explained appropriately through autonomy and controlling supportive contexts (taştan et al., 2018). the level of self-determination for the effects to expose the effects is affected from the controlling environments of individuals. the effects of autonomy supportive environments are associated with the level of self-determination. these effects can occur when individuals are not aware of the presence of nonconscious motivational procedures(kuo, tuan, & chin, 2018; schiefele & schaffner, 2015). 2.2 relationship between teachers’ self-efficacy and active learning strategy the research of de jong et al. (2014), show that there is a strong relationship between the teachers' efficacy and the performance of the teachers. this means that if the teacher has high self-efficacy, he/she will more likely be able to teach students. the opposite will be the case if the teacher has low self-efficacy. in case of low self-efficacy, teachers' might not be well equipped with abilities when dealing with the heterogeneous classrooms or the classrooms which have students from diverse backgrounds. this shows that teachers' efficacy can also be affected by the heterogeneous classrooms as they might be less confident about their abilities when they see students with different backgrounds (marsh, & seaton, 2013). the relationships between teachers and students also influences classroom climate (doğan & adams, 2018); teachers are responsible for regulating the classroom environment, including regulating classroom discipline, implementation of approaches and methods to learning, interacting with the students in the classroom(shum, lau, & fryer, 2018). taştan et al. (2018) found that students’ perceptions of positive affinity with their teachers were related to their pursuit of pro-social classroom goals such as getting along with others and being socially responsible, and were more strongly correlated to student interest in school than perceived support from parents and peers. one way that teachers convey these qualities is through their discourse with their students in the classroom(edwards, 2017; greco, bernadowski, & parker, 2018). classroom discourse structure concerns the manner in which teachers engage student participation in learning, promote intrinsic motivation, and balance appropriate challenges with skill levels(rowbotham, 2015; whitworth & chiu, 2015). h1 teachers’ self-efficacy has significant impact on active learning strategy. 2.3 relationship between teachers’ self-efficacy and achievement goals schunk, pintrich, and meece (2008) found that students' perceptions of positive affinity with their teachers were related to their pursuit of pro-social classroom goals such as getting along with others and being socially responsible and were more strongly correlated to student interest in school than perceived support from parents and peers. perceived support from teachers also is a positive predictor of effort in schools and the pursuit of social responsibility goals, including acting in pro-social ways that encourage peer cooperation. conversely, students who perceive teachers as harsh and cold are found to consistently display poor social behavior and low social goals as well as to achieve lower academically, in comparison with their peers (zee & koomen, 2016). yerdelen and sungur (2018) investigated the relationship between student achievement and teacher efficacy. the result of the study indicated that students’ achievement was higher in classrooms of teachers who had more contact with their coaches,? and in classrooms of teachers with greater confidence in the effectiveness of education. a number of studies have elaborated about the influence of teacher self-efficacy beliefs on children’s achievement and success at school (miller, ramirez, & murdock, 2017; rodríguez et al., 2014; taştan et al., 2018). teacher’s selfefficacy beliefs may influence a student’s achievement in several ways: teachers with high self-efficacy beliefs are more likely than teachers with a low sense of self-efficacy to implement didactic innovations in the classroom, to use classroom management approaches (kilday, lenser, & miller, 2016) and adequate teaching methods and encourage students’ autonomy, and to take responsibility for students with special learning needs (laninga-wijnen, ryan, harakeh, shin, & vollebergh, 2018), to manage classroom problems (chacon, 2005), and to keep students on task (deci & ryan, 2016). h2 teachers’ self-efficacy has significant impact on achievement goals. 2.4 relationship between teachers’ self-efficacy and science learning value some of the authors also believe that there are several different factors that contribute toward the self-efficacy, these factors include own past performance of an individual, verbal feedback as well as persuasion, the observation of the performance of the other individual, appropriate or realistic setting of the goal as well as factor of review of economics and development studies vol. 5, no 2, june 2019 228 constructive and positive feedback (hamid, shahrill, matzin, mahalle, & mundia, 2013). previous research has established that science self-efficacy is associated with science achievement and science-related choices across grade levels (ubuz & aydınyer, 2017). in addition, past success in science could possibly contribute to higher selfefficacy which, in turn, could lead to better future performance (holbrook, rannikmae, & valdmann, 2014). at the college level, research has indicated that science self-efficacy is a predictor of achievement, persistence in sciencerelated majors, and career choices (moyo & mnguni, 2018; taştan et al., 2018). at the high school level, research has indicated that self-efficacy is a stronger predictor of achievement and engagement in science-related activities than is gender, ethnicity, or parental background (dunn & lo, 2015; kuo et al., 2018). among middle school students, science self-efficacy predicts science achievement, with girls having higher science grades and stronger self-efficacy than do boys (salzburg, 2015). the sense of self-efficacy of the teachers can positively influence the motivation as well as learning of the students even when the students are considered to be difficult or when the students are unmotivated. most of the research studies have also indicated a positive relationship between selfefficacy of the teacher’s beliefs as well as cognitive outcomes of the several students such as achievement in the special and core academic subjects of the teachers and also the skills and performances (shahrill & mundia, 2014). h3 teachers’ self-efficacy has significant impact on science learning value. 2.5 relationship between teachers’ self-efficacy and performance goal performance goals, on the other hand, concern demonstrating own competence or ability to others and being the best in a group while doing a task (ghanizadeh & ghonsooly, 2014; han & yin, 2016). accordingly, performance approach goals concern outperforming others and having favorable judgments about their competence, whereas performance avoidance goals focus on avoiding unfavorable judgments about competence and looking incompetent (schiefele & schaffner, 2015).in addition, pamuk, sungur, and oztekin (2017) examined how the interaction between student and teacher characteristics affects teachers’ predictions of students’ academic and social success. findings indicated that teachers with high efficacy made less negative predictions about students, and seemed to adjust their predictions when student characteristics changed, while low efficacy teachers seemed to be paying attention to a single characteristic when making their predictions (skaalvik & skaalvik, 2017; taştan et al., 2018; zee & koomen, 2016). the researchers have also shown the buffering effect of the self-efficacy on the relationship between strain and stress whereas some of the researchers also demonstrated the relationship of the development of the self-beliefs of the teachers as well as emotional exhaustion, however the researcher had not demonstrated a direct effect of the change in the self-efficacy of the teachers on the change in the burnout and also did not examine the prediction of the variation in one variable through starting levels of the other variable (ingersoll, 2012). the most important objective of the classroom management is to reduce the level of disturbance during the lesson so as to attain the teachings of high quality (zee & koomen, 2016).it is found that the teachers who possess the better skills of teaching maintain the class room management and also succeed in reducing the disturbance during the lessons by constantly observing the behavior of the students and also by telling the students that they know about their activities within the class. h4 teachers’ self-efficacy has significant impact on performance goal. 2.6 relationship between teachers’ self-efficacy and learning environment the study by guo, justice, sawyer, and tompkins (2011) also indicate that administrators are very important in the leadership of education and that the administrators that are making continuous efforts in order to increase the achievement level of the students contribute toward enhancing the student motivation. students mostly attended the classes of those teachers in which they enjoy to learn something because the teachers make effort in order to engage the students in different tasks and these teachers also love their profession and thus contribute towards engaging and motivating the students to perform outstanding throughout their academic life (wyatt, 2014). according to (ghanizadeh & ghonsooly, 2014; han & yin, 2016) motivation is a process for goal-directed activity that is instigated and sustained. teachers who care were described as demonstrating democratic interaction styles, developing expectations for student behavior in light of individual differences, modeling a "caring" attitude toward their own work, and providing constructive feedback (han & yin, 2016). moreover, efficient teachers encourage students for understanding(deci & ryan, 2016; doğan & adams, 2018). they treat students’ misunderstandings in the subject and they utilize different visual aids in order to make the subject more enticing and meaningful (miller et al., 2017; pamuk et al., 2017; rodríguez et al., 2014; taştan et al., 2018). additionally, they give students opportunities to engage in conversations and give substantive feedback rather than scores on assignments(yerdelen & sungur, 2018). additionally, there is some evidence that teachers’ affect, like enthusiasm for learning and their sensitivity concerning students’ treatment, might affect students’ review of economics and development studies vol. 5, no 2, june 2019 229 emotions related to the objectives (zee & koomen, 2016). such type of teacher also shows the characteristics of being persistent, more focused towards their academic activities, gives maximum time in the classroom, utilizes the difficult and innovative strategies for the teaching, gives support to the low grade teachers and provide motivation to the learners, and also give positive remarks to the student’s achievements as compare to the teachers who have low expectations from their teachings and who consider that their teaching will not influence the learning of the students (zumbrunn, tadlock, & roberts, 2011). h5 teachers’ self-efficacy has significant impact on learning environment. figure 1: conceptual framework 3. design/methodology/approach this research strategy primarily focuses on individuals, groups and institutions, involving different types of methods and materials and importantly, the core theme based on the analysis to describe, compare, contrast or classify the accessible and target population (saunders, lewis, & thornhill, 2009). in the current study, the data collection process was taken place at intermediate government colleges of karachi city. this research setting was taken into consideration to improve the response of the participants and provide institutional environment that can help to provide better and comprehensive viewpoint about teachers’ self-efficacy at the college. furthermore, this research setting was selected based on the rationale that teachers can be deliberate in sharing their opinion in the context of their profession. the study has used online sample size calculator for estimating desirable number of sample representatives from the infinite population. the study has used anticipated effect size as 0.30 and statistical power as 0.95 and confidence interval was at 5 percent, as estimated by soper (2018), an online sample size calculator for structural equation modeling.the estimation has provided minimum sample size of 256 responses from the accessible population. thereby, the study has distributed total 500 sample responses, whereas 378 responses were return and after discarding useless 66 questionnaires, the study retained 312 questionnaires with the response rate of 82.6 percent. the study has purposefully focused on using survey methodology as primary data collection technique. the study has competent option of employing partial least square (pls) structural equation modeling (sem) using smartpls software. additionally, the rationale for using pls-sem as data analysis technique is that it belongs to second generation data analysis technique, capable of handling any number of sample data and also, it includes advance versions of discriminant validity and convergent validity estimations. therefore, the study has purposefully employed pls-sem as data analysis technique. 4. findings for assessing the internal consistency of the variables in pilot study, the study has undertaken the threshold of 0.60 for cronbach’s alpha recommended by nunally and bernstein (1994). all the constructs in pilot study have achieved considerable internal consistency and hence, the instrument has been statistically validated for data analysis. as per the suggestive parameters of (hair, 2010; tabachnick, fidell, & osterlind, 2001), factor loadings should be greater than 0.70 for adequate construct development while (hair, hult, ringle, & sarstedt, 2016) manifested that review of economics and development studies vol. 5, no 2, june 2019 230 item loadings between 0.40 and 0.60 should also be taken into consideration in case their relative constructs have adequate convergent validity. here, in the present tabulation, all items were loaded with greater than 0.50 loading values, whereas their respective constructs have also achieved convergent validity at recommended thresholds. hence, the construct validity has been manifested appropriately. there are total of 8 items to check their validity, including achievement goal, active learning strategies, efficacy in class, and efficacy in instructional practices, efficacy in student engagement, learning environment, performance goal, and science learning value. table 1: convergent validity composite reliability average variance extracted (ave) achievement goal 0.795 0.567 active learning strategies 0.833 0.714 efficacy in class 0.765 0.528 efficacy in instructional practices 0.834 0.502 efficacy in student engagement 0.867 0.685 learning environment 0.774 0.537 performance goal 0.833 0.719 science learning value 0.765 0.531 in the above tabulation, all the constructs have greater than 0.60 value of cronbach’s alpha coefficient; thus, adequately met threshold for reliability analysis (nunally & bernstein, 1994). moreover, all the constructs showed greater composite reliability than threshold of 0.80 as suggested by fornell and larcker (1981); hair (2010); hair, sarstedt, ringle, and mena (2012); tabachnick et al. (2001). finally, ave coefficients should have greater values than 0.50 for adequate variance among the items (fornell & larcker, 1981; hair, 2010; hair et al., 2012; tabachnick et al., 2001). figure 2 table 2: path analysis using structural equation modeling (sem) estimates std. dev. t stats p values teacher's self-efficacy → achievement goal 0.102 0.051 2.012 0.044 teacher's self-efficacy → active learning strategies 0.279 0.054 5.185 0.000 teacher's self-efficacy → learning environment 0.202 0.059 3.458 0.001 teacher's self-efficacy → performance goal 0.236 0.055 4.265 0.000 teacher's self-efficacy → science learning value 0.216 0.049 4.390 0.000 review of economics and development studies vol. 5, no 2, june 2019 231 figure 3 5. discussion the study has shown a significant and positive effect of teacher’s self-efficacy on achievement goal. this finding is supported with the findings of previous studies (eren, 2009; lavasani, malahmadi, & amani, 2010; mojavezi & tamiz, 2012). lavasani et al. (2010) have found a positive and direct effect of teacher’s self-efficacy on achievement goals of students of mathematics class. mojavezi and tamiz (2012) have also revealed a positive and significant impact of teacher self-efficacy on the motivation and achievement of students. eren (2009) has presented that efficacy beliefs and achievement goals predict significantly the conceptions of teachers about learning and teaching. taştan et al. (2018) have further reported significant effect of motivation and self-efficacy of teachers on academic achievement goals in science education. bolton (2018) has found an insignificant impact of teachers’ self-efficacy on students’ achievement goal and motivation. mazlum, cheraghi, and dasta (2015) showed that there is a direct and positive impact of teachers’ self-efficacy on the deep learning approaches of students. virtanen, niemi, and nevgi (2017) have also revealed that self-regulated learning strategies of students are directly affected by professional competences of highly motivated teachers. sahin-taskin (2017) has asserted that active learning strategies are supportive in evaluating the professional development of pre-service teachers with respect to alternative assessment methods. ma and cavanagh (2018) have reported a moderately higher level of self-efficacy of pre-service teachers on teaching experience, personal qualities and attributes, teacher-student relationship, and previous informal teaching and other relevant experience. tilfarlioglu and ulusoy (2012) have revealed a significant and direct impact of teachers self-efficacy in efl communications for classroom management and the perceptions of misbehavior of english language teachers and its causes. hasan and bozkaya (2016) have shown that there is a positive and direct effect of self-efficacy beliefs and goal orientations of teachers. furthermore, different characteristics of motivation are portrayed through the mastery and performance oriented pre-service teachers. similarly, chea and shumow (2017) have asserted a positive and direct effect of performance-avoidance goal orientations and writing mastery with respect to teachers’ self-efficacy. 6. conclusion in this study, self-efficacy of teachers is in view, to evaluate the student’s motivation through active learning strategies, science learning value, performance goal, and achievement goal and learning environment. the results of the study conclude that self-efficacy of teachers’ acts as major influencer of the active learning strategies, science learning value, performance goal, achievement goal and learning environment. moreover, teacher’s self-efficacy is significantly impacting on the motivation of the students, related to the science learning, as all the independent variables; active learning strategies, science learning value, performance goal, achievement goal and learning environment are positively impacting by the teacher’s self-efficacy. managers and professionals need to focus over the development of self-efficacy within the teachers, as it motivates the students. by the initiation of proper training review of economics and development studies vol. 5, no 2, june 2019 232 and working over the embracement of self-efficacy, the motivation of the students towards the learning of science, can be improved. references bolton, a. 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(2011). encouraging self-regulated learning in the classroom: a review of the literature. metropolitan educational research consortium (merc), 1-28. review of economics and development studies, vol. 7 (3) 2021, 325 341 325 do governance, foreign direct investment and human capital matter to bolster trade liberalization? fresh insight from developing countries muhammad umar a , imran sharif chaudhry b , muhammad faheem c , fatima farooq d a mphil scholar, school of economics bahauddin zakariya university, multan, pakistan email: mailumarramzan@gmail.com b dean of social sciences and director, school of economics bahauddin zakariya university, multan, pakistan email: imran@bzu.edu.pk c assistant professor, school of economics bahauddin zakariya university, multan, pakistan email: faheem@bzu.edu.pk d associate professor, school of economics, bahauddin zakariya university, multan, pakistan email: fatimafarooq@bzu.edu.pk article details abstract history: accepted 22 july 2021 available online september 2021 this study aims to explore the impact of governance, foreign direct investment and human capital on trade liberalization in developing countries (lower income, middle income and upper middle income). the study employed fixed effect for the period of 2000 to 2019. results show governance, foreign direct investment and human capital are highly significant with trade liberalization in the case of lower-income countries. in the case of middle-income countries, empirical findings demonstrate governance and foreign direct investment are highly significant with a negative sign, while human capital has positive on trade liberalization. in the case of upper-middle-income countries, results show human capital and foreign direct investment affect positively, while governance has a negative effect on trade liberalization. on the behalf of results it is suggested that in the countries where human capital is high, most of the inflows of foreign direct investment happen. it means that the government can develop human resources to attract more foreign direct investments. the governments of developing countries should also concentrate on education, including training facilities and other quality educational facilities for human skill development. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: trade liberalization, human capital, governance, developing countries, fixed effect jel classification: p33, j24, g39,o57 doi: 10.47067/reads.v7i3.369 corresponding author’s email address: fatimafarooq@bzu.edu.pk 1. introduction the role of governance is a necessary component of development effectiveness. the government, however, plays a crucial role in the distribution of economic resources (azam, 2021; xu et al., 2021). review of economics and development studies, vol. 7 (3) 2021, 325 341 326 also, its essential for the social association, political order, rules and regulations, trade policy, and economic growth. the private sector has problems supplying such goods, such as defence, schooling, and health care as the government would obtain them (fazekas & czibik, 2021; khan et al. 2019; lahouij 2016; akujuru et al. 2015). governance is a prominent force in the growth process, but what does progress in administration concentrate on in developing countries? the advice given to emerging countries has focused on building governance skills referred to as "good governance," which focuses on creating land, eliminating corruption, the rule of law, and the refinement of transparency by the government (khosroabadi 2016). however, historical evidence does not indicate that developing nations can establish these capabilities at a level that will dramatically affect their long-term progress. these are entirely essential requirements for governance. instead, the evidence shows that stable developing countries have more accurate administration that allows prosperity and stability to be sustained. these skills were country-specific, considering the substantial difference in initial structural and political circumstances around countries and the economic challenges to be tackled. it is a considerable understanding that promoting growth in developing countries is a challenge for identifying the right economic policies and preserving adequate management capacities that are chronically lacking in developing countries. therefore, government weaknesses in poorly performing areas around the world have gained a great deal of consideration. however, the specific governance skills needed to stimulate and manage growth in countries at differing stages of development and face diverse development challenges are considerably less accepted (akujuru et al. 2015). in developing countries, foreign direct investment (fdi) is a crucial way to finance it (li et al., 2021). fdi takes into account cash or non-cash inflows and provides advantages for the host countries. foreign direct investments have beneficial impacts on the economy through moving technical knowledge and capital. due to some complications, many countries avoid foreign direct investment. that is the basis of international borrowing and the cause of non-debt inflows to achieve the targets. by use of resources generates funds for developing countries (zakarias 2016; shuaib et al. 2015). foreign direct investment is not the only source of private financing and a source of technology changes, management expertise, and information and employment. foreign direct investment in developing countries has a significant outflow and macro and micro-level instability. an increase in exports and capital stimulates foreign direct investment. foreign direct investment is overcoming the disparity between domestic spending and domestic savings. foreign direct investment provides different forms of investment for global and domestic investors. foreign direct investment is a base of a transformation of technological skills, managing capital, and access to markets for a sustainable economy (dada & abanikanda, 2021; osei & kim 2020; samantha et al. 2017; maliwa & nyambe 2015; emmanuel 2014; zeb et al. 2013; agrawal et al. 2011). empirical studies have generally recognized the value of human capital as an engine for economic prosperity and growth like other indicators of economic growth (maitra & chakraborty, 2021; matousek & tzeremes, 2021; chaudhry et al., 2021; anwar et al., 2016). no nation may archive its sustainable growth goals without investing in human resources. human beings are considered a country's most valuable commodity. human capital has played a crucial role in improving people's talents, skills, and capacities to contribute to their growth (muringani,2021; özdoğan, 2021; ahmad et al., 2021). the two key determinants of human capital are health and education. state investment in the health and education sectors should be expanded. this investment helps growing numbers of people to benefit from simple living needs(fang & chang 2016; awan et al. 2015; azam & ahmad 2014; chani et al. 2012) the remaining sections of the paper are as follows: section 2 is about previous literature. section 3 review of economics and development studies, vol. 7 (3) 2021, 325 341 327 demonstrates the data and methodology. section 4 explains the empirical results and the last section provides the conclusion and recommendations. 2. literature review abdelbary & benhin (2019) contributed to the ongoing deliberation on the factors that enhance economic development in the air conditions in association with other states in the world with an emphasis on the often-ignored role of supremacy in growing. the study found clear evidence that human capital and investment have had a significant positive impact on growth, but that regulatory efficiency has had a significant negative impact. the most striking finding from the standard model is that growth in the whole sample is important and surely defined by the coefficient of governance, whereas it is negative in the sample of air conditions. fraj et al. (2018) examined the governance and economic development relationship with an emphasis on exchange rate governance. results showed that good governance promotes flexible exchange rate regime selection, and that stability in exchange rates require better governance to promote economic growth in developing countries. efficient management speeds up economic growth in industrialized countries if the exchange rate system is not too volatile, while stability in exchange rates improves economic output if regulation is not a good standard. estimates have also demonstrated that the existence of the exchange-rate system plays a key role in the decision to increase the standard of governance. the optimum exchange rate system is calculated by the standard of governance. on the traditional side, the relationship between the general governance index and the grade of transaction versatility is statistically important, reflecting the significance of theoretic and methodological foundations brought up in this study. khosroabadi (2016) analyzed the impacts of quality control metrics on income allocation for turkey, pakistan, and iran in the surrounding economies. the findings suggest that, as a result of the ups and downs of the governance index in iran, the overall governance quality index was weaker and the governance quality index in turkey was much better compared to iran and pakistan and that, for each of the three countries, a major negative link existed between them. the findings indicated a negative impact on the decrease of inequalities from the standard index of governance that may successively show the increase of the impact of these metrics on income sharing. akujuru et al. (2015) investigated good governance, city government, and sustainable development in nigeria. the survey identified crucial issues in nigeria, which include a shortage of employment, a lack of resources to implement local government services and corruption, lack of effective governance preparation, lack of transparency and accountability, non-government cooperation, and the absence of a government to ensure good governance, and economic empowerment of the people. it was obvious and established from the report that good governance encourages empowerment and economic growth in the regional administrations of emohua. it was also proposed that local councils concentrate on projects that will empower local people instead of mutual cash transfers and controls. iqbal et al. (2015) analyzed the governance problems and they're on income inequality in pakistan to explore the association between governance and inequality. there has been a major negative association between government and income inequality. pakistan has faced poor democratic governance, due to an unstable regional government, considered a critical state. osei & kim (2020) explored the effect of foreign direct investment on economic growth is affected by an increase in financial development. they found substantial evidence that foreign direct investment generally fosters growth, but when the ratio of private sector credit to gross domestic product reaches 95.6 percent, the growth impact of foreign direct investment becomes marginal. this result is robust to various econometric approaches, diverse subsamples and analysis of interactions, and review of economics and development studies, vol. 7 (3) 2021, 325 341 328 distinct measures of financial growth. nantwi & erickson (2019) analyzed the effect of foreign investment on south american countries' economic development. in a grid of ten south american countries, the pedroni cointegration test ensures a long-term association of foreign direct investment and economic growth. this research long-run projection identified major positive effects of foreign direct investment on regional economic development. short-run multimodal causality between foreign direct investment and development was found in the vector error correction model findings. negative and important is the error term. this suggests the nature of the variables' long-run balanced relationship. sokang (2018) investigated the effect of foreign direct investment on cambodia's economic development. the research findings indicate that foreign direct investment is having a favorable influence on cambodia's economic growth. this direct correlation may benefit from an appropriate foreign direct investment fund being financed in the economy of cambodia, which has been able to exert sufficient influence to turn it positive or to boost development. samantha et al (2017) explored foreign direct investment effects on sri lanka economic development. the findings of this study confirm the long-term relationship between the variables. foreign direct investment is favorably associated with shortand long-term economic growth but is not a significant factor in sri lanka's economic development. siddique et al. (2017) examined the nexus of foreign direct investment to pakistan's economic development. the results show the co-integration that persists between economic development, foreign direct investment, trade, physical capital, and human resources. the short-run results for fixed capital, foreign direct investment, and human capital are important and optimistic. in the short term, variable labor and trade have a negative effect on production. real capital, foreign direct investment, intellectual resources, and trade have a positive impact on economic development in the long term. the findings also demonstrate the causality of one-way economic development to foreign direct investment, physical capital, labor, and trade. the results also reflect the one-way causality of labor and physical capital from human capital to the workforce. there are bidirectional causes and effects between foreign direct investment and physical capital, and between physical and human capital. there is no relationship between trade and any other factor about causality. it means the government should develop human skills to draw more foreign direct investment. zekarias (2016) examined the effect of foreign direct investment in 14 eastern african economies on growth in production. empirical studies show three fundamental realities, foreign direct investment has a positive impact on growth in production, a conditional balance has been observed at the 5 percent level, and local investment levels have never been decreased by foreign investment. maliwa & nyambe (2015) analyzed the foreign direct investment effect on economic growth in zambia. findings showed that foreign investment and economic development has no causal relationship, which means that during the time under review, the zambian economy did not benefit from the inflow of foreign investment into the country. the absence of a positive impact of foreign investment on zambia's economic growth may be triggered by the failure to meet some of the prerequisites of ensuring foreign investment is used effectively. agrawal (2015) investigated the association between foreign direct investment and economic growth concerning brics nations. econometric findings showed that, because massive foreign investment has impacted a huge increase in economic development in the selected countries, foreign direct investment has positively affected production growth. also, foreign investment is closely interlinked with production growth, which means the association between two variables in a longer period. causal approaches also shown that foreign direct investment and economic development have a long causal relationship. jun (2015) review of economics and development studies, vol. 7 (3) 2021, 325 341 329 analyzed the nexus of foreign capital investment and economic development of south asian associations for regional cooperation countries. the integration of foreign direct investment and economic development was significant in two ways. a further study discussed strong two-way causality evidence from foreign direct investment to economic development. it was also stated that the large foreign investment was driven by foreign inflows to emerging economies up to the economic expansion and the resulting productivity increase. findings indicate that cpi and free trade had relatively low economic development, while foreign direct investment, financial growth, human resources as well as government expenditures had a considerable positive impact. chowdhury et al. (2018) analyzed the importance of human capital on the growth of the economy. it has been postulated from the study that there is a solid, constructive relationship between the production of human resources and economic growth. in this model, life expectancy is considered to be the most significant predictor, as it has a major effect on bangladesh's economic development. they recommended introducing workable strategies to bring about increased economic development. health and public education spending should be used wisely and efficiently so that the nation can have reliable health care coverage and a high-quality school system. fang & chang (2016) said human capital plays a key role in the development of the economy. for the growth and production of factor input, the function of energy is extremely significant. the assets and human capital are in close association. in the economic growth of the world, asia-pacific countries play an important part. asia-pacific contributes 27.4 percent of global gross domestic product, with its share of energy demand increasing from 12 percent to 41 percent in 2014. for sixteen countries, the data from 1970 to 2011 is used. the findings of the analysis indicate that the two key contributors to economic growth are electricity and physical capital. the findings from the granger causality panel suggest that the granger induces energy for economic development. but relationships vary between countries. the role of energy in economic growth has been significant. the influence on regional economies is real to human resources. awan et al. (2015) said that many countries promoted their economy through knowledge and technical revolution. it was realized that human resources were based on skills and knowledge. the role of human capital was vitally important for modern economic growth. education was a very important factor for human development and help people to get a better jobs. the health sector was also very important for economic growth. the role of the education sector was very important for the living standard of the people because with the help of higher education and technical skills they can easily get better jobs. to achieve the objective of economic growth literacy rate must be improved in the country. the literacy rate is a key indicator of education for the long-run impact on the economy. the result of the study show that there is a positive and significant relationship is found between the variable. the result showed that one present increase in gross fixed capital increases economic growth by 0.73percent. omotayo (2015) stated that the prosperity of the country is driven by human resources. training is a central part of the production of human capital. the effect of human resources on economic growth is optimistic. education investment is very poor in nigeria relative to other african nations. in any country's growth, the role of education and health is very critical. the capability of individuals is strengthened by good health and education. both elements are closely related. state funds the health and education system in several countries. nigeria has a relatively high literacy rate. many workers are unqualified and are unable in the production process to use modern technology. education plays a significant role in growing people's talents and awareness. data was used between 1980 and 2012. to review of economics and development studies, vol. 7 (3) 2021, 325 341 330 assess the link between human resources and economic growth, the ols methodology is used. the study shows that economic development and investment in human resources are substantially related to nigeria. samar & waqas (2014) stated that a shortage of schooling, health care, and unemployment and skilled manpower was the primary cause of low economic development. in the development of human resources, the role of health and education was extremely significant. it contributed to growing people’s efficiency, growth, and professional power in the region. strong educational levels have also raised the country's revenue and expenses. education and health expenditure in pakistan was very poor compared with other countries worldwide. to meet sustainable development goals, spending should be expanded in both the education and health sector. this research used data from 1979 to 2010. the augmented dickey fuller root test unit was used as well as the co-integration and error correlation process. the study indicates that human capital is linked to economic development in the long run. the enrollment of college has a favorable economic growth relationship. gerhands & hans (2013) stated telecommunications, political, and cultural interactions were exponentially increasing because of globalization worldwide. the development of europeanization would lead to the free exchange of goods, services, and staff in the european union. the kof index helps to calculate which country is in different ways linked to another country. the demands of individuals shifted, notably about jobs and schooling, due to the establishment of the european union. the role of english in the world has expanded. english is quite useful for students since it is used in many countries around the world as an international language. in educational analysis, the role of human capital in educational fields is very important. this research uses data from 2000 to 2010. the parents' investment in the education of their children aims to boost education. to evaluate the results, the logistic regression model is used. asghar et al. (2012) investigated the empirical study of cointegration and causality analysis on human capital and economic growth in pakistan. they stated that the main goal of a nation is economic development and that it can be accomplished through human resources. education, health care, and technological capabilities expenditure have played a key role in improving productivity and in leading to economic development. the role of human capital in economic development was very significant as healthy people were more efficient. because of decreased social sector allocations, the government of pakistan is not willing to benefit from human resources. generally, there are limited conclusive results relating to empirical studies of the impacts of governance, human capital, and foreign direct investment on trade openness in developing countries due to differences in methods, measurement, sample size, area of the research, and data period. 3. data and methodology the study covers the data from 2000-2019 for the developing countries (low-income, lowmiddle-income, and upper-middle-income countries). the data for this research is sourced from the two different sources; i.e; the data of trade, foreign direct investment, human capital, gross domestic product, broad money official exchange rate, personal remittances received and tax revenue is sourced from world development indicators. and world governance index (average of all six indicators) variable data is sourced from world governance indicators. the simple linear model is as follows yit = α0 + βxit +εit review of economics and development studies, vol. 7 (3) 2021, 325 341 331 x and y are used as dependent and independent variables, and (t) shows time. t=1, 2, 3, ...t. there are two approaches of estimating for panel data random and fixed. this approach is helpful for the assessment of the panel data. the concept of fixed effect is used to test the influence of factors that differ over time. the constant for each set is unique in this model. the set approach is also known as ls dummy variables. for each group, this model allows for various constants. the fixed impact model equation becomes: yit= βo + β1x1it+β2x2it +.......+βkxkit+ εit yit& xkshows the independent and dependent variables, i &t are subscripts. βk shows the coefficient, εit is the error term. to check validity, f-test applied, ho = 0 h1 ≠ 0 when the critical f value is less than the value of the statistical f, the null hypothesis is rejected. the random effect approach is the next method of assessing the panel data. the deviation is across randomlyto each section. β0 = β + υi where υi= 0, means the standard random variable. random effect methodequations as follows: yit = (β + υi) + β1x1it+β2x2it +......+βk x kit + εit yit = β + β1x1it + β2x2it +.....+ βk x kit + (υi + εit) if the panel dataset contains current cross-sectional data, then the form of fixed effect is more suitable. it is easier than the random effect solution to the cross-sectional results representing several survey studies. hausman introduced this test in 1976 under the no correlation assumption. for the decision between the random and fixed effect process, the hausman test is recognized. 3.1 model specification to check the impact of governance, human capital, and fdi on trade, we have specified the same model for lower-income, lower-middle-income, and upper-middle-income. a fixed and random effect model estimates this model. this model has been specified as follows: the econometric equation of trade is specified as follows: tradeit = βo+β1wgiit + β2hcit+ β3 fdi it + β4gdpgit + β5m2it + β6erit + β7remit +β8taxit +εit review of economics and development studies, vol. 7 (3) 2021, 325 341 332 where trade = trade openness (exports + imports) wgi = world governance index (average of all six indicators) hc = human capital (peroxide by enrollment of secondary school) fdi = foreign direct investment, net inflows gdpg = gross domestic product growth m2 = broad money ex= official exchange rate rem = personal remittances received tax = tax revenue we have specified the same models for lower-income, lower-middle-income, and upper-middleincome countries. if there is no correlation in these models, these models would be estimated by the hausman test. 4. results and discussion 4.1 descriptive statistics and correlation matrix the descriptive statistics and correlation matrix are shown in the following table 4.1, 4.2, and 4.3. table 4.1 shows that the average values of all variables of model trade, world governance index, human capital, foreign direct investment, gross domestic product growth, broad money, exchange rate, remittances, and tax are 20.71, 1.74, 13.78, 25.82, 3.83, 19.04, 403.97, 1.25, 12.21 respectively. while the maximum values of trade, world governance index, human capital, foreign direct investment, gross domestic product growth, broad money, exchange rate, remittances, and tax are 137.67, 4.26, 41.54, 57.02, 13.57, 646.64, 3334.75, 47.20 and 19.15 respectively and minimum values of trade, world governance index, human capital, foreign direct investment, gross domestic product growth, broad money, exchange rate, remittances, and tax are -31.33, -1.19, -0.67, -4.14, -3.98, -1.58, -1.38, -1.33, 3.28 respectively. the following table 4.1 also displays the correlation matrix of key variables which is used in our model of lower-income countries. review of economics and development studies, vol. 7 (3) 2021, 325 341 333 table 4.1: descriptive statistics and correlation matrix of key variables for low income countries trade wgi hc fdi gdpg m2 er rem tax mean 20.71 1.74 13.78 25.82 3.83 19.04 403.97 1.25 12.21 median 4.04 0.00 15.89 34.21 3.09 -0.52 -0.17 -0.69 11.92 maximum 137.67 4.26 41.54 57.02 13.37 646.64 3334.75 47.20 19.15 minimum -31.33 -1.19 -0.67 -4.14 -3.98 -1.58 -1.38 -1.33 3.28 std. dev. 30.08 6.25 8.57 19.60 2.34 84.82 824.56 6.66 3.26 skewness 1.34 4.52 0.22 -0.26 1.64 6.81 2.18 6.04 -0.28 kurtosis 4.86 24.88 2.69 1.59 8.51 48.56 6.60 40.77 3.00 jarquebera 46.30 2.40 1.25 9.73 178.29 9800.46 138.32 6813.00 1.34 probability 0.00 0.00 0.54 0.01 0.00 0.00 0.00 0.00 0.51 obser. 378 378 378 378 378 378 378 378 378 trade 1 wgi -0.18 1 hc -0.59 0.15 1 fdi -0.83 0.15 0.69 1 gdpg 0.50 -0.10 -0.42 -0.44 1 m2 0.12 -0.06 -0.34 -0.20 0.61 1 er 0.62 -0.14 -0.56 -0.64 0.00 0.03 1 rem 0.30 -0.08 -0.36 -0.30 0.68 0.97 0.11 1 tax -0.24 0.34 0.38 0.36 -0.19 -0.39 -0.35 -0.43 1 the following table 4.2 shows that the average values of all variables for lower-middle-income countries trade, world governance index, human capital, foreign direct investment, gross domestic product growth, broad money, exchange rate, remittances, and tax are 83.59, -0.35, 28.50, 25.82, 5.01, 56.06, 501.07, 8.35, 14.82 respectively. while the maximum values of trade, world governance index, human capital, foreign direct investment, gross domestic product growth, broad money, exchange rate, remittances, and tax are 156.86, 0.75, 91.67, 57.02, 18.36, 119.35, 8069.61, 34.50 and 28.71 respectively. minimum values of trade, world governance index, human capital, foreign direct investment, gross domestic product growth, broad money, exchange rate, remittances, and tax are 22.38, -1.27, 91.67, 4.14, -14.76, 12.66, 0.91, 0.04 and 4.52 respectively. the following table 4.2 also displays the correlation matrix of key variables which is used in our model of lower-middle-income countries. review of economics and development studies, vol. 7 (3) 2021, 325 341 334 table 4.2: descriptive statistics and correlation matrix for lower-middle income countries trade wgi hc fdi gdpg m2 er rem tax mean 83.59 -0.35 28.50 25.82 5.01 56.06 501.07 8.35 14.82 median 85.49 -0.30 27.71 34.21 4.83 53.34 45.31 5.76 14.77 maximum 156.86 0.75 91.67 57.02 18.36 119.35 8069.61 34.50 28.71 minimum 22.38 -1.27 6.79 -4.14 -14.76 12.66 0.91 0.04 4.52 std. dev. 30.90 0.41 19.48 19.60 3.50 24.80 1160.63 7.70 4.27 skewness 0.07 -0.11 3.30 -0.26 -0.48 0.61 3.14 1.37 0.20 kurtosis 2.12 2.65 4.45 1.59 8.54 2.94 13.89 4.36 2.77 jarquebera 7.85 1.71 88.29 9.73 313.81 15.02 1568.77 92.79 2.06 probability 0.02 0.43 0.00 0.01 0.00 0.00 0.00 0.00 0.36 obser. 630 630 630 630 630 630 630 630 630 trade 1 wgi -0.03 1 hc 0.24 0.07 1 fdi -0.14 -0.56 -0.64 1 gdpg 0.05 0.00 -0.20 0.00 1 m2 -0.14 0.41 0.06 0.03 -0.13 1 er 0.23 -0.28 -0.15 0.97 0.22 -0.32 1 rem 0.19 0.15 0.19 -0.39 -0.20 -0.01 -0.18 1 tax 0.27 0.38 0.33 -0.21 -0.18 0.42 -0.21 0.29 1 the following table 4.3 shows that the average values of all variables for upper-middle-income countries trade, world governance index, human capital, foreign direct investment, gross domestic product growth, broad money, exchange rate, remittances, and tax are 82.52, -0.10, 43.18, 4.53, 6.89, 66.94, 278.16, 4.18, 16.73 respectively. while the maximum values of trade, world governance index, human capital, foreign direct investment, gross domestic product growth, broad money, exchange rate, remittances, and tax are 157.97, 0.67, 93.54, 31.25, 22.56, 207.67, 6177.94, 21.97 and 27.37 respectively. the minimum value of trade, world governance index, human capital, foreign direct investment, gross domestic product growth, broad money, exchange rate, remittances, and tax are 22.11, -0.96, 9.19, 4.89, -2.58, 14.61, 0.18, 0.09 and 7.84 respectively. the following table 4.3 also represents the correlation matrix of variables, which is used in our model of upper-middle-income countries. review of economics and development studies, vol. 7 (3) 2021, 325 341 335 table 4.3: descriptive statistics and correlation matrix of key variables for uppermiddle income countries trade wgi hc fdi gdpg m2 er rem tax mean 82.52 -0.10 43.18 4.53 6.89 66.94 278.16 4.18 16.73 median 76.51 -0.13 41.83 3.51 5.73 51.20 8.21 1.57 15.67 maximum 157.97 0.67 93.54 31.25 22.56 207.67 6177.94 21.97 27.37 minimum 22.11 -0.96 9.19 -4.89 -2.58 14.61 0.18 0.09 7.84 std. dev. 34.88 0.30 19.87 4.05 4.48 40.06 895.96 5.41 5.07 skewness 0.16 -0.06 0.52 2.76 2.78 1.42 4.29 1.47 0.39 kurtosis 1.86 3.08 2.48 14.81 2.90 4.72 22.26 3.99 2.17 jarquebera 12.82 0.21 12.61 1564.71 1245.90 101.81 4093.44 88.85 11.88 probability 0.00 0.90 0.00 0.00 0.00 0.00 0.00 0.00 0.00 obser. 432 432 432 432 432 432 432 432 432 trade 1 wgi 0.00 1 hc1 0.09 -0.15 1 fdi 0.28 0.25 -0.03 1 gdpg 0.19 0.15 0.19 -0.21 1 m2 0.08 0.16 -0.17 0.12 -0.18 1 er -0.20 -0.08 -0.03 -0.13 -0.56 -0.22 1 rem 0.27 0.11 -0.27 0.36 0.00 0.13 -0.13 1 tax 0.47 0.27 -0.25 0.32 0.41 -0.13 -0.30 0.35 1 4.2 unit root test table 4.4 shows unit-roots results of all variables by applying llc, ips, and fisher-adf chisquare tests. results show that all variables trade, wgi, hc, fdi, gdpd, m2, er, rem, and tax are stationary at level. so we are applied random and fixed effect model econometric techniques apply for determining the long-run relationship results. review of economics and development studies, vol. 7 (3) 2021, 325 341 336 table 4.4: results of unit root test for unit root in level low income countries low middle income countries upper middle income countries ips llc ips llc ips llc result intercept intercept + trend intercept intercept + trend intercept intercept + trend intercept intercept + trend intercept intercept + trend intercept intercept + trend trade -2.19250 (0.0142) -2.66382 (0.0039) 2.93074 (0.9983) -5.10504 0.0000) -1.11163 (0.1331) 1.45557 (0.9272) -3.24044 (0.0006) -3.12481 (0.0009) -1.44761 (0.0739) -1.24978 (0.1057) -2.40934 (0.0080) -4.45731 (0.0000) i(0) wgi 1.14487 (0.8739) 0.07921 (0.5316) 0.57409 ( 0.7170) -2.93671 (0.0017) 2.25332 (0.9879) -1.84350 (0.0326) 0.17324 (0.5688) -7.33930 (0.0000) 1.17656 (0.8803) 1.49972 (0.9332) -0.63460 (0.2628) 0.60926 (0.7288) i(0) sse -5.00315 (0.0000) 0.53690 (0.7403) 12.5746 (0.0000) -5.24764 (0.0000) 3.56375 (0.9998) 4.31608 (1.0000) -1.32780 (0.0921) 0.55493 (0.7105) 1.66406 (0.9519) 2.11826 (0.9829) -10.1370 (0.0000) 0.63942 (0.7387) i(0) fdi -3.18448 (0.0007) -0.70255 (0.24212) -4.57326 (0.0000) -4.43109 (0.0000) -5.17992 (0.0356) -0.55084 (0.0856) -4.57326 (0.0019) -9.22548 (0.0047) -17.0335 (0.0000) -12.2799 (0.0000) -22.0726 (0.0000) -19.2988 (0.0000) i(0) gdpg -7.97685 (0.0000) -5.20975 (0.0000) -6.76100 (0.0000) -6.31584 (0.0000) -9.08167 (0.0000) -7.87575 (0.0000) -10.4064 (0.0000) -11.5331 (0.0000) -7.58499 (0.0000) -9.45831 (0.0000) -8.73253 (0.0000) -12.9637 (0.0000) i(0) m2 2.64793 (0.0960) 1.07529 (0.0089) -0.23811 (0.0259) -1.24433 (0.0167) 2.23601 (0.0273) 2.31833 (0.0898) -0.85303 (0.0968) -1.02174 (0.0035) 1.46767 (0.0989) -0.62714 (0.0653) -2.14949 (0.0158) -4.09302 (0.0000) i(0) er 1.78903 (0.9632) 0.92591 (0.8228) 0.80805 (0.7905) -2.74296 (0.0030) 32.0880 (1.0000) 20.8102 (1.0000) 5.37742 (1.0000) 1.10895 (0.8663) 2.01257 (0.9779) 0.97835 (0.8360 -0.37549 (0.3536) -3.50708 (0.0002) i(0) rem -0.72636 (0.2338) -1.01964 (0.1539) -2.57749 (0.0050) -4.35707 (0.0000) -0.01663 (0.4934) -0.22835 (0.4097) -2.63421 (0.0042) -3.48757 (0.0002) -1.93768 (0.0263) -0.55123 (0.2907) -3.77537 (0.0001) -2.69643 0.0035) i(0) tax -0.84266 (0.1997) -0.27325 (0.3923) -3.45917 (0.0003) -4.72484 (0.0000) -7.03290 (0.0000) 0.34194 (0.6338) -22.1781 (0.0000) -3.97880 (0.0000) -1.10353 (0.1349) -1.02407 (0.1529) -3.60742 (0.0002) -5.32539 (0.0000) i(0) review of economics and development studies, vol. 7 (3) 2021, 325 341 337 hausman test determines whether the fixed-effect method is used or the random effect method is used. the null hypothesis is that the random effect method is efficient and consistent. if the value of the hausman statistic is high then our null hypothesis is rejected random effect model is exists. so, it is more appropriate to use estimators of fixed effects. if the hausman statistic value is low then we use the random effect model. the results of this test presented in the following table. the following table shows that lower-income, lower-middle-income, and upper-middle-income countries result from random effect models, which shows the p-values of these countries' models less than 10 percent. so the fixed effect model consists of the estimation of long-run relationships. table 4.5: hausman test for trade models 4.3 results of fixed effect models in this section, we will discuss the results of fixed effect estimate of trade models for low, middle and upper-middle-income countries. this result shows the relationship between world governance and trade negative but significant. the negative coefficient of the world governance index shows bad institutional quality decrease overall trade by increasing costs for transactions that a 1percent change in the world governance index will bring changes in the opposite direction in trade by 0.6079 percent. other variables like human capital, foreign direct investment and money supply affected negatively while gdp growth, exchange rate, remittances and tax are associated positively with trade. table 4.6: fixed effect estimates of trade model for low-income countries dependent variable: trade variable coefficient std. error t-statistic prob. c 17.5606 4.3075 4.0767 0.0001 wgi -0.6079 0.3211 -1.8932 0.0610 hc -0.4795 0.1250 -3.8346 0.0002 fdi -0.6143 0.0606 -10.1389 0.0000 gdpg 2.3029 0.4936 4.6653 0.0000 m2 -0.5859 0.0364 -16.0965 0.0000 er 0.0073 0.0013 5.7431 0.0000 rem 7.4082 0.5033 14.7195 0.0000 tax 1.3395 0.2618 5.1156 0.0000 this result shows the relationship between world governance, fdi and money supply negatively affected trade in case of lower middle income countries. these variables effected trade significantly. other variables like human capital, gdp growth, exchange rate, remittances and tax are associated positively with trade. test summary chi-sq. statistic chi-sq. d.f. prob. correlated random effect test for low income countries 5.12 9 0.023 correlated random effect test for low middle income countries 2.56 9 0.052 correlated random effect test for upper middle income countries 3.8 9 0.006 review of economics and development studies, vol. 7 (3) 2021, 325 341 338 table 4.7: fixed effect estimates of trade model for low-middle-income countries table 4.8 presented the first relationship between the world governance index and trade for upper-middle-income countries. the empirical results show that governance affected trade negatively. while other variables like human capital, gdp growth, exchange rate, remittances, money supply and tax show positive relation with trade. more specifically, increase in human capital, gdp growth, exchange rate, remittances, money supply and tax will increase trade significantly. table 4.8: fixed effect estimates of model for upper middle income countries dependent variable: trade variable coefficient std. error t-statistic prob. c -24.6986 11.9765 -2.0623 0.0404 wgi -15.3608 7.0699 -2.1727 0.0309 hc 0.3970 0.1092 3.6348 0.0003 fdi 0.7044 0.5299 1.3292 0.1852 gdpg 0.7261 0.2511 2.8910 0.0042 m2 0.2111 0.0548 3.8558 0.0002 er 0.0014 0.0023 0.6121 0.5411 rem 0.7988 0.4034 1.9801 0.0490 tax 3.7228 0.4707 7.9087 0.0000 5. conclusion and policy recommendation our study analyzed the impact of governance, foreign direct investment and human capital on trade liberalization in developing countries (lower income, middle income and upper middle income) for the period of 2000 to 2019 by employing fixed effect. the findings show governance, foreign direct investment and human capital are highly significant with trade liberalization in the case of lowerincome countries. in the case of middle-income countries, empirical findings demonstrate governance and foreign direct investment are highly significant with a negative sign, while human capital has positive on trade liberalization. in the case of upper-middle-income countries, results show human dependent variable: trade variable coefficient std. error t-statistic prob. c 13.0934 5.4069 2.4216 0.0164 wgi -25.1537 8.1693 -3.0790 0.0024 hc 0.1964 0.1214 1.6172 0.1075 fdi -0.4420 0.2395 -1.8458 0.0665 gdpg 1.7030 0.5227 3.2579 0.0013 m2 -0.1791 0.0900 -1.9897 0.0480 er 0.0129 0.0023 5.5453 0.0000 rem 0.7293 0.2828 2.5790 0.0107 tax 4.4889 0.4715 9.5206 0.0000 review of economics and development studies, vol. 7 (3) 2021, 325 341 339 capital and foreign direct investment affect positively, while governance has a negative effect on trade liberalization. on the behalf of results the study recommends the following policy suggestions:  developing countries must focus on policies that encourage institutional growth that attract foreign direct investment but, more importantly, are able to target foreign investment in sectors which will lead to higher returns on local investments.  on the behalf of results it is suggested that in the countries where human capital is high, most of the inflows of foreign direct investment happen. it means that the government can develop human resources to attract more foreign direct investments. the governments of developing countries should also concentrate on 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(2013).“role of foreign direct investment in economic growth of pakistan”.international journal of economics and finance, 6(1), 32. review of economics and development studies vol. 5, no 2, june 2019 405 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads globalization and macroeconomic instability: evidence from unemployment in pakistan 1 amjad ali, 2 zilakat khan, 3 sher ali 1,2, 3 assistant professor, department of economics, islamia college peshawar, pakistan, drali@icp.edu.pk article details abstract history revised format: may 2019 available online: june 2019 growing population in the present globalized world is a challenge for the developing to engage the increasing labour force in productive environment. the creation of new employment opportunities is not easy to handle with existing resources (lack of capital both physical and financial) and became a more intense challenge for policy maker. fairley free transaction also affect employment/unemployment in developing countries. therefore, this study aimed to examine the impact of globalization on unemployment in case of pakistan for the period of 1980-2017. globalization is measured by three different forces i.e. trade flows, fdi flow and remittances flow. to estimate the responsiveness of unemployment to globalization ardl co-integration techniques is employed. bound test confirmed co-integration relationship between the variables under consideration. the results of short run and long run estimates showed that globalization forces affected unemployment in pakistan. globalization in the shape of trade affects unemployment directly while the impact of remittances is negative to unemployment. the impact of fdi is positive but insignificant. therefore, this study suggests that proper attention should be paid toward policy formulation regarding trade and remittances inflow to increase employment opportunities in pakistan. globalization should be perused with adequate policies that will certainly smooth macroeconomic environment of pakistan. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords globalization, employment elasticity, ardl, pakistan. jel classification: c30, e24, f60 corresponding author’s email address: drali@icp.edu.pk recommended citation: ali, a., khan, z and ali, s. (2019). globalization and macroeconomic instability: evidence from unemployment in pakistan, review of economics and development studies, 5 (2), 405412 doi: 10.26710/reads.v5i2.631 1. introduction the world globalization was first used in a newspaper in 1961, and got popularity in the last quarter of the 20th century. the term globalization is debated in the contemporary academic and research because of its variant nature. it has economic, geographical, political and social aspects. therefore, its causes and consequences are reported different to different economies. due to its diverse nature different academics exports and researcher are not agreed on a unique definition1 and its causes and consequences (ali, 2013; afzal, 2007). it impacts are different on different economies (developed and developing) depending the on the nature and composition of the countries, it is beneficial for resource oriented and highly equipped economies, its effect are not even the same for developing economies, even it impact is variant in the same country (ali et al., 2015). there are some similarities and dissimilarities are existed. but most of them are nearly agreed on that globalization is the unification and merger of the world’s economies through cross-border transaction of products and resources (nayyar, 2001; unctad, 2000 http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no2, june 2019 406 and world bank, 2004).it has various dimensions i.e. economic, cultural, political and social. in fact, cultural amalgamation hurts cultural integrity. 1.2 globalization’s measure the present study is dealing with globalization in the context of economics. therefore, economic aspects of are discussed here. these aspects are trade transaction financial transaction (proxy by fdi) and labour migration (proxy by inflow of remittances). these measures are defined as:  trade: trade is measured by theintegration of export and import of pakistan in million dollars.  fdi: foreign direct investment is measured by inflow of direct investment in millions of dollars to pakistan.  labour migration: is proxy by the inflow of remittances to pakistan in millions of dollars. 1.3 globalization’s history the term globalization is concerned with the development and progress technology. the study of the globalization’s history tells us that the phenomenon of globalization is the outcome of development and advancement in technology. the study of the world economic history was of the view that globalization has two episodes: 19th century episode and 20th century episode. both the episodes globalization witnessed incredible inventions and advancement in technology. those inventions and advancements in technology brought the world closer and closer. some treaties were also responsible for the integration of different economies of the world under suitable conditions. the liberalization or minimization on cross border restriction of goods and services, capital is known as globalization. most of the economic spectators were of the view that the process of globalization has two episodes. these episodes are identified by different economic experts like baldwin and o’rourke (2000), maddison (2001), nayyar (2001) williamson (2002), mostert (2003), solimano and watts (2005) and daudin, morys and o’rourke (2008). these episodes are:  the 19th century episode of globalization and  the 20th century episode of globalization. the second half of the 19th century witnessed a huge integration of the world economies in trade, capital and people migration, especially in 1870s. the period of 1970 to 1914 (pre-world war 1st period) was considered the first episode of globalization. the globalization’s process was strengthened by the forces of new technological innovation and advancement in means of communication. production and factor of production were more mobile in this period, even passport and visa obligations were not mostly required and very few barriers on funds flow (financial integration). the pace of integration forces were slowdown between world war-i and world war-ii’s period. the period witnessed various restrictions and barriers on flow of goods and services, capital and people mobility to prevent domestic economy from foreign competition. isolation (free from foreign competition) was considered the way to flourish their economies bitterly. after world war-ii the process of integration started once again. this integration was very slow at the beginning but got acceleration in the last quarter of the 20th century. after ww-ii all the developed countries decided that they would not repeat the previous committed mistakes; but it took enough time to achieve the same position of pre ww-i period. most of the new independent developing economies from the colonial power immediately after ww-ii adopted import substitution industrialization (isi) policy. the soviet union (ussr) community was also protected; different barriers were put on international transaction. but the time has changed, in the last quarter of the 20th century; the phenomenon of globalization has started with greater strength. the soviet union bloc is getting integrated with the rest of the world. developing countries are also turned towards more globalized policy to get economic growth. yet, most studies were of the view that the today economy is more globalized on term of trade and capital markets than the 19th century globalization while less globalized in term of people mobility. therefore 19th century period of globalized in term of factor of production, while 20th century period of globalization is more globalized in term of production and capital. however, the 20th century episode of globalization is of more important than the 19th century episode, due to its nature and pace. the 20th century episode of globalization is not only due to its rapid pace and characterized by the considerable development in new information technologies on market integration, efficiency and industrial organization, but international organization and institutions like world bank, international monetary fund, world trade organization etc. are involved to maintain and keep in view its different consequences2. weather it affect review of economics and development studies vol. 5, no 2, june 2019 407 both the developing and developed world similarly are not. it was observed that desirability of the process of globalization is different among the developing countries due to their social, political, environmental and geographical situation. hence the impacts of globalization are different due to it’s their participation in the process of globalization. 1.4 globalization and pakistan pakistan came to its existence on 14th of august 1947. the new independent country faced so many challenges at the start. for a nascent country it was difficult to compete at international market. therefore, the economy was kept isolated in the initial about two and a half decades. import substitution industrialization policy was practiced and extensive restrictions were used to protect domestic economy. green revolution policy was adopted in the decades of 1960s, which turned in tremendous growth. with the emergence of bhutto’s regime in 1970s the policy of nationalization was adopted. export bonus scheme was introduced to encourage domestic production. the liberalization of economy was started in zia’s regime in 1980s with the help of world bank and international monetary fund. trade restrictions were reduced at a huge amount and environment for international investment was prepared but implemented in 1990s. facts and figures regarding liberalization are given in table-1. table 1: tariff reforms in pakistan year max tariff rate no’s of slabs ave** tariff rate ave rates (%)* 1987 250 17 77 - 1989 125 17 65 44 1991 95 17 65 40 1994 80 13 56 39 1995 70 13 50 32 1998 65 05 45 22 1999 50 05 25 17 2000 35 04 20 16 2002 25 04 17 11 2004 25 04 16 13 source: national tariff commission, cbr and wdi.*custom duty and import tariff as % of total revenue (wdi). **ave stands for average it clear from above table that during the period of 1986 to 2004 trade restriction were reduced at a very huge amount maximum tariff rate were reduced from 250% to only 25 % and the number of slabs were reduced from 17 to only 4 and average tariff rate was reduced from 77 % to only 16%. such reduction leads to increase in trade and might affect fdi positively. it should be noted that what happened to the forces of globalization. the forces of globalization are given in the following table. table 2: openness statistics in pakistan year trade remittances fdi 1980 30. 399 8.343 0.142 1985 27. 190 8.638 0.261 1990 29. 998 5.509 0.599 1995 30.001 3.399 0.809 2000 29. 102 1.499 0.689 2005 32.013 4.109 1.471 2010 36.008 5.018 2.892 2015 32.832 6.409 0.689 2017 28.064 7.680 == source: world bank (wdi) and economic survey 2016 & 2017. the bird’s eye view of the table-2, discloses the trend in globalization forces regarding pakistan. trade, fdi and remittances as percentage of gdp are shown of percentage of gdp an average of every five year. trade and remittances first showed a decreasing trend and then increasing trend. while fdi showed an increasing trend and then decreasing in 2010s and 2016-17 periods. review of economics and development studies vol. 5, no2, june 2019 408 1.5 globalization and employment plethora of literature regarding globalization emerged in the last three decades; most of the literature is concerned with the impacts of it on growth, development, inequality etc.it is considered as communication built for economic growth, because it provides access to foreign technology, capital and market. all these opportunities ensure growth (afzal 2007, ali et al 2013). but growth was also tested against volatility, in some of the recent studies and it was found negatively related (kose et al., 2005). the association globalization with employment was first introduced by rodrik (1999). employment of the country depends on trade composition and policy regarding it. developing country’s labour is mostly unskilled and semi-skilled, and it was observed that the unskilled workers are badly affected by import liberalization. because the import of capital intensive commodities required relatively high skill workers and also replace labour by capital, employment demand favored skilled workers (crankshaw, 1997). this huge reduction in trade barriers leads to more open domestic market for foreign production and may affect the employment situation of the country. more import compare to export may affect employment status adversely. on the other hand the increase in export and its demand at international market might leads to the maximum utilization of production resources, affect positively (increased) output and employment of the domestic economy. the increase in national outputin reverse increase the demand for foreign product (imported goods) affect employment badly. remittances and fdi might increase employment rate due to the increase in consumption of domestic goods and by an increase in private investment. huge remittances might increase inflation by increasing domestic demand for goods and services. the impacts of globalization forces are different for different economies at different times. so the impact of globalization is not clear. it is ambiguous and the most debated topic in the literature. this research work will fill the gap to assess that what is the impact of globalization on employment in developing countries? therefore, this study aimed to examine the impact of globalization on employment in pakistan. 2. material and methods literature reported different impacts of globalization on developing economies depending on the different nature of the developing countries. but this study is interested to investigate the impact of globalization on employment elasticity of the developing country i.e. pakistan. we know from literature that employment/unemployment is determined by the forces of labour demand and labour supply, which can be written as: ),( lylaboursuppndlabourdemantunemployme  (1) ),,( ionglobalizatvestmentdomesticinwageratendlabourdema  (2) ),,( ionglobalizatincreasepopulationwageratelylaboursupp  (3) annual time series data about wage rate is not available for the economy of pakistan. therefore, this factor is ignored. while other important variable increase in population, domestic investment and globalization are taken into account for the present study. the final equation will be of the form as: ),,( globdipopemp  (4) similarly unemployment is also is determine by the forces mention in equation (4) ),,( globdipopune  )5.......(............ln 4310 tdipopglobune   where ln= natural log une=unemployed labour force pop=increase in total population di= domestic investment glob= globalization forces (trade, fdi and remittances) review of economics and development studies vol. 5, no 2, june 2019 409 data for the present study is taken in millions of dollar. therefore, natural log is employed to reduce the intensity of the data and to get elasticity estimates for the variables under consideration. to get the estimates of the equation (4) annual time series data are collected from world bank (world development indicator) for the period of 1980-2017. as the nature of the data is time series, therefore, stationerity tests are necessary to investigated. for this purpose adf and pp tests are employed to examine the stationerity of the data. the results of adf and pp stationerity tests are shown in table-2 which confirms that the variables are of the different order of stationerity. therefore literature suggests auto-regressive distributive lag (ardl) technique for estimation of the required estimates. 3. results and discussions 3.1 stationarity test results the results of the adf and pp tests are given in the following table 3. table 3: results of adf and pp tests variables adf test statistics pp-test statistics order of integration (at 5% level of (at 10% level of level ist difference level ist difference significance) significance) lnune -1.189 -5.11* -1.312 -5.402* i(i) i(i) (0.607) (0.004) (0.609) (0.000) lntrd -1.986 -5.105* -2.158 -6.014* i(i) i(i) (0.303) (0.000) (0.215) (0.000) lnfdi -2.017 -6.085* -2.103 -6.008* i(i) i(i) (0.502) (0.000) (0.448) (0.000) lndi -4.032* -8.450* -4.206 -5.00* i(0) i(0) (0.003) (0.012) (0.041) (0.003) lnpop -1.638** -4.615* -1.79** -4.411* i(1) i(1) (0.283) (0.002) (0.308) (0.005) *, ** represent 1% 5% level of significance the results in table 3 showed that all the variables are stationary at first different except domestic investment. ardl co-integration technique is suitable for estimation of the said impact. the testing for the existence of long run relationship is tested and the results of the bond test is given in table-4. 3.2 results of the bond test the first step in ardl procedure is the testing of long run relationship table 4: test for long run relationship model f-calculated (p-value) f-statistics critical values at 5% level^ i(o) ---- i(1) result fy {lnune /(lntrd,lnfdi, lnr, lndi, lnpop)} 11.54 (0.000)* (4.29)----(5.37) co-integration * represent significant at 5% level unemployment is tested against globalization and other controlled variables. the results of the bound test are given in table 4. the value of the wald statistic is turned out is 11.54, given with critical values. as the outcome of the test greater then upper bound critical value, this confirmed the existence of the co-integration relationship. after the confirmation of co-integration the next step is the estimation of the parameters in both the short and long run. long-run elasticity estimates: ttttt popdirfditrdlnune 72.029.019.002.032.022  t.vs  (0.55) (3.81)* (-1.45) (-2.4)** (-2.17)** (1.74) short-run elasticity estimates: popdirfditrduneune tt   09.065.003.012.0201.0601.055 1 )48.0. vst (-2.81)** (2.92)* (0.29) (0.85) (5.28)* (0.11) review of economics and development studies vol. 5, no2, june 2019 410 12 33.0   t ecm (-6.03)* *, ** and *** represents the significance at 1%, 5% and 10% respectively the long run and short run results show that the measures of globalization affect significantly unemployment except fdi in the long run. the effect of trade is positive on unemployment. trade provides the opportunity of market enlargement and access to foreign technology and expertise, but also a threat to the labour market in the developing countries. the labour force in developing countries are not of good skill and experienced of sophisticated technological equipment’s which reduce in demand for low skill labour and they get out from completion. the impact of fdi and r variables are negative but fdi is found statistically insignificant at 5% level. the result of this study is consistent with afzal (2007) and roy (2012) and ali et al., (2013 & 2015) contradicts with the findings of shahbaz et al. (2008). the value of ecm is negative and significant its value is -0.33 shows that any disequilibrium in the model will be adjust in about three years. all the used diagnostic tests indicate the absence of any problem is shown in table 5. these tests are  jarque-bera statistic for normality of residuals,  breusch-godfrey test for serial-correlation,  arch residuals for hetro-scedasticity and  ramsey reset test for specification error. sketch of cumulative sum of recursive residual (cusum) and cumulative sum of square of recursive residual (cusumsq) statistic indicate no evidence of mis-specification and structural instability for the period estimated. table 5: diagnostic tests tests f-statistic probability 1 . serial correlation 1.150 0.301 2. hetro-scedasticity 0.069 0.794 3. normality* 1.760 0.420 4. functional form 1.615 0.224 *.chi square test for normality figure 1 (a) figure 1 (b) review of economics and development studies vol. 5, no 2, june 2019 411 4. conclusion and policy recommendations the prime objective study is to examine the impact of globalization on unemployment in pakistan. the nature of the study is time series. therefore, testing of stationerity is necessary for this purpose adf and pp tests are used. the outcomes of unit root tests suggested ardl technique for estimation. globalization is measured by trade, fdi and remittances flow. some other variables like gross domestic investment and population increase are also incorporated to the model based their theoretical and empirical importance. the empirical results show that the measures of globalization affect unemployment in both the short and long run. trade transactions lead to increase unemployment while the impact of remittances is negative. it means that with the increase in remittances there is fall in unemployment. the impact of fdi variable is insignificant. the variable di inversely related to unemployment and found statistically significant. the variable increase in population is found insignificant. globalization in the form of trade integration provides opportunities for a greater access to large market; maximum utilization of the domestic resources enhances output and employment in developing countries. but, regarding developing countries it is not clear because in developing countries most of the labours are of low and semi skill and they cannot compete at international market with high skill labour. for developing countries like pakistan it should keep in mind that liberalization in trade restriction may hurt labour market. pakistan’s exports are increasing by decreasing or even not increasing. while their imports increasing by increasing. such gap put pressure on current account balance. fdi and remittances should be encouraged to reduce unemployment in pakistan which is helpful in engagement of previously unemployed labour force in productive environment. domestic investment should also be encouraged to provide new employment opportunities which may help in reduction of unemployment. globalization can be used as tool to control and reduce unemployment and to augment growth which may further help in the reduction of poverty to make sure stable economic environment in pakistan. 5. suggestion for future research the present research study is about one of the most important and debated topic globalization and its impact on developing countries. the measure of globalization is taken peculiarly in literature. globalization is the reduction or removal of restriction on cross border flow of products and resources. but there is no proper data on barriers removal for developing countries and trade openness, remittances and fdi are mostly used in literature. it is suggested that further research should be done regarding globalization by its real presentation removal of restriction on cross border flow of products and resources. references afzal, m. 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(2003) measuring trade openness, 1980-1999. working paper, florida state university, las vegas santos-paulino, a. and a.p. thirlwall (2004). the impact of trade liberalization on exports, imports and the balance of payments of developing countries, economic journal, 114(1), 50-72. shahbaz, m, ahmad, k and a.r chaudhary ( 2008) economic growth and its determinants in pakistan‖. the pakistan development review, 47( 4), 471–486. state bank of pakistan, assets, liabilities and foreign investment (various issues), karachi. thirlwall, a. p. (2000). trade, trade liberalization and economic growth: theory and evidence. the african development bank, economic research papers, no.63. world bank (1990), world development report, oxford university press, washington. http://www.iiste.org/ review of economics and development studies, vol. 8 (2) 2022, 167 181 167 energy substitution effect in major energy consumption sectors of pakistan: translog cost function sidra nazir a, nasir mahmood b, gulnaz hmaeed c a phd scholar, pir mehr ali shah university of arid agriculture, rawalpindi, pakistan email: sidranazir.shah@gmail.com b lecturer, pir mehr ali shah university of arid agriculture, rawalpindi, pakistan email: nasir@uaar.edu.pk c assistant professor, pir mehr ali shah university of arid agriculture, rawalpindi, pakistan email: gulnaz.hameed@uaar.edu.pk article details abstract history: accepted 25 may 2022 available online june 2022 there is inadequate works available in case of pakistan that tested rebound effect (re) having energy use and its impacts on environment, this study, comparative analysis of energy substitution effect on pakistan’ three major energy consumption sectors industrial, transport and electricity sector has done, by using translog cost function in time series data framework. from analysis, it has been concluded to have diseconomies of scale in each sector of economy of pakistan, as elasticity of cost concerning output is greater than one. all energy and nonenergy-inputs are substitutes for each or but labor is needed more than any or input sectoral wise as it is cheaper and easily available in pakistan. from results, in industrial sector capital intensive production has preferred to increase use of energy. re in pakistan is negative, which means super conservation or have less use of energy. this could be having high price of energy-inputs and underdevelopment, disinvestment so less profit and income generation, and technological progress leads to less use of resources. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: elasticities, energy-inputs, translog cost function, lmdi model, rebound effect jel classification: q4, q11, q21 doi: 10.47067/reads.v8i2.448 corresponding author’s email address: sidranazir.shah@gmail.com 1. introduction since occurrence of oil price tremors in 1973, world has placed its struggles to improve energy competent machinery to decrease energy use and reducing dependence on costly resources of energy, explicitly, petroleum products. it causes a destructive impact on macroeconomic condition of oil trading nations. globally this phenomenon has recognized, having inexpensive, trustworthy, sustained and upto-date energy for everyone should be one of sustainable development goals which approved in such conditions. though reduction in per-unit cost of energy-inputs, resulting from improvement in energyinputs which are being more efficient, energy demand is not decreasing having an increase in energy use day by day. this phenomenon was first discussed by william jevons during nineteenth century. to review of economics and development studies, vol. 8 (2) 2022, 167 181 168 improvement in energy-inputs, it leads to change in respective prices causing affect income of consumers and also leads to use of energy substitutes. though, having income and substitution effect does not cause to decrease in energy use with an appropriate proportion. this phenomenon leads to a re in making energy policies re is also a need to keep in consideration rebound effect. energy has a very strong impact on economic growth of pakistan as discussed by (siddiqui, 2004; nazir, s., and qayyum, 2014). in pakistan, energy components like oil and gas have high use in commercial and industrial sectors. oil is largely imported and extensively used as a source of energy in industrial, transport, and power generation sectors (nazir, s., and qayyum, 2014). therefore, prices of both oil and gas vary considerably and result in changes in consumer behavior over time with substituting effects on each or. for example, declining trend is observed in use of compressed natural gas (cng) use for transport sector from 2012 to 2017 having its shortage and increased load shedding over time in contrast to a rising trend in share of petrol use from 8 % in 2008 to 57 % in 2017 in electricity production (ceic, 2008a; 2017b) followed by 14 % decrease in march 2019. similarly, industrial sector is also a major user of various forms of energy including a 27 % share of electricity and 648 mmcfd (million cubic feet per day) of natural gas during last fiscal year 2018 to july 2019 (yearbook, 2018). power plants output contribution and total production cost share of se plants about 12 % and 32 % respectively. similarly, industrial sector is also a major user of various forms of energy but oil use has declined to 31 % during 2018, there was use of 10 % of cng in industrial sector of pakistan with an approximate contribution of 1.40 % growth during fiscal year 2019 in economy of pakistan (economic survey of pakistan, 2018-19). there is a need to analyze substitution, own, and output elasticities at sectoral as well as aggregate level with more advanced methodology and updated data and different energy-inputs, also need to check rebound effect at sectoral and aggregate level. followings are main objectives of study: 1. comparative analysis of energy substitution effect in three major energy consumption sectors of pakistan, including industrial, transport, and electricity production sector using translog cost function in time series data framework. 2. give policy suggestion for idea 2030 through forecasting, related to use of energy and nonenergy-inputs in production process and ire impact on environment, at aggregate level. 2. literature review according to (lin & ahmad, 2016b) energy use is very important in every sector of economy of pakistan like transport, industrial sector, and also power sector. one of reasons for having different results regarding substitutes and complement of inputs and outputs primarily depends on countryspecific data and sample size (stern, 2011), but se studies are too old criticized by (smyth, narayan, & shi, 2011). in case of pakistan, none of studies or than this study has estimated inter fuel and factor analysis. in pakistan's perspective, very few studies have estimated elasticity of substitution (eos) at aggregate or dis-aggregate level for manufacturing sector ( kazi, et al., 1976; kemal, 1982; ahmed, 1982; battese and malik, 1986; mahmood, 1989; kalim, 2001; chishti and mahmood, 1991; zahid et al., 1992; s. f. mahmud, 2000; zafar and ahmed, 2005; batool and zulfiqar, 2011), except (lin and ahmad, 2016). alvi et al (2018) have investigated direct re in case of household electricity sector. alivelu (2007) has explained relationship between indian railways' cot function, by estimating translog cost function and found elasticity between fuel capital, capital labor, and labor fuel. before this study, few studies have done on this issue, like borts (1952), koshal (1970), meyer, et al (1964), and verma review of economics and development studies, vol. 8 (2) 2022, 167 181 169 (1988), after big gap, in 2007 this is only study which has estimated model for railway sector, provided very useful results. krishnapillai & thompson (2012), have added in literature of united states (us) economy after 1989, (thompson, 2006) has explained translog production and cost function to estimate relationship. allen (1938) has given concept of relative substitution elasticity, which has also been used in this study. a detailed theoretical background of energy substitution has been discussed in which cobb douglas production function and energy substitution have explained. literature has discussed rse of thompson and tylor (1995). energy cross-price substitution elasticity methodology has discussed could be calculated through shephard lemma. study has also explained concept of translog production function originally generated by christensen et al (1973), which has been used by many studies followed by translog cost function. thompson (2006) has criticized on production function should not only comprise upon labor and capital but various natural factors should also be included like energy, raw material, etc., lachaal et al. (2005) have used variable translog cost function to find out neoclassical duality theory eos between inputs and price elasticity. ayadi & hammami (2015) have also used translog cost model in their study to analyze cost structure in transport sector of tunisia using panel data of transport companies from 2000-2010. berndt et al. (1975) studied this issue primarily as among foundational literature available related energy-inputs and using cost models. in example of us electricity producing enterprises, christensen and greene (1976) employed cross-sectional data for 1955 and 1970 using a translog cost function. efficiencies of scale has observed. moshiri & aliyev (2017) have analyzed transport sector of canada to check re of gasoline price efficiency to fuel use. for both energy and non-energy-inputs, stern (2011) has described various test used to measure eos and complementary. kinugasa (1997) has also used flexible translog cost function to analyze economies of scale and technological transformation for gas company of australia and found increasing return to scale and have hicks neutral and non-neutral technological progress in gas sector. 3. materials and methods 3.1 oretical framework in all-economic process energy is needed under macroeconomic framework. eos (between capital/labor or energy-inputs like oil, gas, electricity, and coal) indicates how much one input increased; there is lowered to get same level of production. demand elasticity of substitutes indicates, energy-inputs may have an elasticity between 0 and 1 (stern, 2004). 3.2 economic linkage between energy and output translog cost function (tcf) which is modification of neo-classical production function (ncpf) given by charles cobb and paul douglas in 1928. this function states, output (y) is obtained by utilizing input likes labor, capital, and for intermediary inputs like energy. so, output function can be derived as: 𝑌 = 𝑓 (𝐾, 𝐿, 𝐸) (1) from cobb-douglas production function, cost function has derived in which cost has minimized. review of economics and development studies, vol. 8 (2) 2022, 167 181 170 3.3 empirical framework in analysis, it has proposed to use three inputs labor, capital, and energy, with input prices like pl, pk, and pe. 3.1 translog cost function as microeconomic assumption is; firm will minimize its cost subject to given output (y) determined by inputs 𝑓(𝑥). so function has formulated as below, used by like (adetutu, 2015; mahmood, 1989; thompson, 2006). 𝐶(𝑦, 𝑝𝐿, 𝑝𝐾, 𝑝𝐸) = 𝐾, 𝐿, 𝐸𝑚𝑖𝑛 (𝑝𝑙 𝐿, 𝑝𝑘 𝐾, 𝑝𝐸 𝐸) (2) subject to: y = f(x) where; c = cost of production y = output pl = price of labour pk = price of capital pe =price of energy k = capital l = labour e = energy tcf formulated by (christensen et al. 1973) is more flexible and free from restrictions, tcf for three inputs and prices shall be as under m = 3 inputs lncost = β0+ ∑ 𝛽𝑖 𝑚 𝑖=1 lnpit + 0.5∑ ∑ 𝛽𝑖𝑗 𝑚 𝑗=1 𝑚 𝑖=1 lnpit lnpjt + βtt +0.5βttt 2 + ∑ 𝛽𝑖𝑡𝑚𝑖=1 t lnpit +βy lnyt +0.5βyy (lnyt )2 + ∑ 𝛽𝑖𝑦 𝑚 𝑖=1 lnpit lnyt +βytt lnyt (3) where cost is equls; cost = pll+pkk+pee. for duality property re are some restrictions of symmetry and homogeneity as below: ∑ 𝛽𝑖𝑚𝑖=1 = 1 and ∑ 𝛽𝑖𝑗 𝑚 𝑖=1 = 0 for all m by applying shephard’s lemma on translog cost equation after applying restrictions input demand function can be obtained in terms of cost-shares (s) by differentiating concerning each input price as below: si = βi+ ∑ 𝛽𝑖𝑗 3 𝑗=1 lnpj + βit t +βiy lny (4) where βi and βij are distribution and substitution parameters, s is cost of shares. equation can be estimated individually for capital and energy cost of shares by using seemingly unrelated regression (sur) knows as gls method that converges to maximum likelihood (mle). 3.2 decomposition of energy demand equation and calculation of rebound effect utilizing slutsky model, which equates marshallian input equation given cost with hicksian input demand provided productivity, one may determine breakdown of energy demand at disaggregate level (sub-industries of pakistan) (hicks, 1932). it has split into substitution & output impact. our primary focus is on energy’s own price impact, which is relevant for rebound inquiry. using wang et al (2018).'s work, direct re has been computed using formulas below. review of economics and development studies, vol. 8 (2) 2022, 167 181 171 in accordance with (ang, 2004; wang and zhou, 2008), equation defines direct energy rebound impact (5). 𝑅𝑒𝑏𝑜𝑢𝑛𝑑 𝐸𝑓𝑓𝑒𝑐𝑡 (𝑅𝐸) = ∆𝑇𝐸2 ∆𝑇𝐸1 ⁄ = eit{yt−yt−1}λ yt{eit−1−eit}φ (5) where ∆te1 denotes energy savings brought on by technological advancement and ∆te2 denotes an increase in energy intake. re stands for direct electrical re, for λ technical advancement rate predicted by cobb-douglas production system, φ technological advancement rate calculated using lmdi decomposition technique, which is explained in following section. in equation (5), while re lies between 0 and 100%, direct energy re resulting from economic development is small and general energy intake demonstrated a descending inclination; when direct energy re is greater than 100%, direct energy rebound resulting from economic development of progress is extensively better than energy savings resulting from technological development and total energy intake suggests a rising inclination. except, bigger re shows energy usage indicates a noticeable upward inclination. 3.3.3 cobb-douglas production function for technological rate in this study, a better cobb-douglas production function has indeed been built to relate economic output, energy supply, and technical advancement to gross domestic product (gdp), as shown in equation. (6) yt = at ft(l, k, e) = at lα kβ e γ (6) in equation (6) a represents technical advancement during t-th year, l represents labour input during t-th year, and β represents output elasticity of labour capital. k represents capital input during tth year, and γ represents output elasticity of energy. let's say; at = a0ea, where a0 denotes base year's technical stage. calculate growth rates of all variables by taking logarithms of each side of aforementioned equations. equation (7) below describes technological advancement λ: λ = ag yg ⁄ = yg−αlg−βkg−γeg yg (7) 3.3.4 lmdi decomposition energy demand model this direct energy conversion re can be broken down into three categories: energy technology effect, energy substitution impact, and industrial structural impact. to examine direct power paradoxical effect over all three areas of essential industries, lmdi decomposition model is employed. so, total effect will be calculated as, ∆ei = ∆ein + ∆eit + ∆eis ∆ei stands for variability of overall energy intensity. lmdi decomposition method has been used to separate ∆ei into ∆ein, ∆eit, and ∆eis, illustrating change in energy intensity brought on by an influence on energy substitution, an impact on energy technology, and an impact on structure of energy industry, separately. construction approach proposed by (wang and zhou, 2008), as stated by equation, may be used to describe technological development/progress effect φ (8). review of economics and development studies, vol. 8 (2) 2022, 167 181 172 φ = {−1}n [ ∆eit ∆ei ⁄ ] φ = {−1}n [ ∆eit ∆ein + ∆eit + ∆eis ⁄ ] (8) 3.3.5 data sources and variables data information has been geared from a number of sources, including federal bureau of statistics of pakistan (fbs), international monetary fund (imf), world bank indicators (wdi), publication of an economic survey of pakistan (since 1989-2018), labour force survey, and energy yearbook, which are all accessible for pakistan, time series data. deals with measurement by (berlemann & wesselhöft, 2016) utilised by (kamps et al., 2006; lin & ahmad, 2016b), capital stock dataset has calculated indicator capital used in industrial, transport, and electricity sectors as shown in formula (9) below: kt =kt-1 (1-δt) + it (9) where kt is capital stock, t represents investment’s rate of depreciation, which is an investment. data on capital (k), labor (l), output (y), and overall energy usage are needed for regression analysis (e), and material utilized (m), which was collected for pakistan between 1990 and 2019 in order to calculate direct rebound impact from their translog minimization problem. overall cost as well as all costs of production are computed based on (adetutu, 2015), labor costs are computed by dividing labour reimbursement by number of people employed, while capital costs are measured by dividing capital reimbursement by fixed capital stock. energy costs are computed by dividing primary input energy costs at existing selling prices by gross energy use. combination of industry’s capital, labour, and energy expenditures is overall cost. for average correction, logarithmic form will be applied to all observations. 4. results and discussions 4.1 sectoral analysis of energy substitution under translog cost function three major economic sectors of pakistan such as industrial, transport and power sector which have a greater % of energy-inputs use has been used. translog cost function estimations have indeed been made for pakistan's 3 sectors of economy, however by imposing modelling limitations, restricted cost model has estimated first. by using sur technique, output parameter for each of three areas are higher than zero and statistically meaningful, so in cost model, all coefficients are statistically significant at 1% threshold. these has been estimated through sur approach also, after normalizing by input prices to apply homogeneity and by differentiating cost function by shephard lemma concerning input prices and derived cost shares estimated for all three sectors through cost equation. next, scale elasticity tests are shown in table 1, for three areas, where elasticity of output was deduced from their cost model, industrial sector's elasticity of cost to outcome, or scale elasticity, is larger than one and considerable, showed lose to industrial sector cause low production having high cost. since coefficients of input and output elasticity of demand are statistically significant and positive, however, projected cost function is non-decreasing in output and price of input. monotonicity situation for cost model has been evaluated, given in table 1. done for all three areas (industrial, transport, and power sector). review of economics and development studies, vol. 8 (2) 2022, 167 181 173 eos has indeed been determined for each of three areas listed in table 2. according to allen and uzawa technique, eos for industry is measured in first column. coefficient for k-l is a little less than one and statistical significance, inelastic and substitutable in industrial sector. findings are comparable with (chishti & mahmood, 1991; mahmood, 1989), in which elastic demand of substitution for labour and capital in manufacturing sector is column 1's substitution elasticity for capital and oil, which is larger than one and noteworthy, displays a strong substitutability in an industrial factor of pakistan but labor and oil are limited to substitute in this sector, labour is vital for industrial sector and unreplaceable. eos for transportation sector is discussed in second column of table 2. all of parameters are significant. oil and capital are inelastic and capable of being substituted. however, elasticities of capitalgas and oil-gas are elastic in nature, so substitutable in transport sector. eos coefficients for allen's elasticity for power are in column three, elasticity of labour with respect to oil, gas, coal, and oil gas was more than one, indicating elastic nature, can be substituted for gas, coal, and oil. oil and gas are also substitutable each sector of pakistan based upon price of inputs and methods of producing electricity. coefficients of oil-coal and gas-coal are less than one, shows oil and gas are limited substitute with coal and inelastic change with coal. capital in industrial sector is greater than one consistent with (kazi et al., 1976), and in transport sector, all inputs are substitute consistent with (lin & ahmad, 2016a). in table 3, own-price elasticity for capital, labor, and oil has been calculated in case of industrial sector of pakistan; all estimates of elasticity are significant and have expected negative signs consistent with microeconomic theory. coefficient of all inputs shows highly elastic demand in all three sectors industrial, power, and transport sector of pakistan. own elasticity of demand for capital, labor, oil, gas, and coal for all three sectors is elastic but among all labor and oil in power, sectors are more elastic prices than other sectors. table 1: properties of monotonicity cost function (non-decreasing in input prices and output) economic properties industrial transport power scale elasticity (output) 4.120646*** .8161446*** 30.03694*** capital 2.599022*** 4.055864*** labor 4.646246*** 200.9239*** oil 7.312061*** .1266402*** 67.29036*** gas .8191019*** 1.941521*** coal 22.3616*** note: delta method se (standard errors), ***donated significantat1% level table 2: allen’s elasticity of substitution between inputs variables industrial transport power k-k -4.44854*** -1.748346*** l-l -5.80525*** -19.7811*** o-o -11.65124*** -3.767429*** -17.17665*** g-g -7.008045*** -11.62145*** c-c -8.148812*** note: delta method se (standard errors), ***donated significantat1% level review of economics and development studies, vol. 8 (2) 2022, 167 181 174 table 3: own elasticity of demand of inputs variables industrial transport power capital-labour .8780108*** capital-oil .9991169*** capital-gas 1.019719*** 1.00052*** capital-coal labour-oil .9375715*** 1.000733*** labour-gas 1.000889*** labour-coal 1.002751*** oil-gas 1.037864*** 1.000001*** oil-coal .9988231*** gas-coal .9985498*** note: delta method se (standard errors), ***donated significantat1% level 4.1.1 substitution effect given methodology previously, energy substitution effect has been calculated as demand for energy input changes with change in price of energy-inputs. value of substitution effect for industrial, transport, and power sectors have been calculated for energy-inputs; like oil and gas for each sector. since 1991-2018 it can be examined in figure 1, substitution effect of gas for transport factor shows less change and for industrial sector of pakistan but substitution effect for oil in transport sector shows very high change synchronized with total substitution effect in transport sector. in 2016 transport sector, gasoline use was 55 % having a shortage of cng. petrol use increases between 18-57 % in 2017 having over burden of gas sector and its reduction. therefore, an upsurge in usage of fo and high-speed diesel (hsd) because of rise in power sector requirements, sale of petrol increased since 2012 having cng curtailment, and cng use for transport sector shows decreasing trend after 2012-2017, use of petrol increases and reaches at 57 % in 2017 as it was 8 % in 2008. as pakistan's major import is petroleum or petroleum product from which major part is consumed by transport sector of pakistan. although in whole era since 1991 to 2018 substitution effect for oil for transport sector shows higher change having high change in price of petrol and petroleum product in world and pakistan but in 2005 it shows sudden decrease and in 2007 shows spikes again followed by again increasing trend since 2008 up to 2015 and abrupt decline in 2017 in transport sector of pakistan substitution effect of oil in gas for power factor also showed some change in 2008, price control is needed to control change in substitution effect having change in price. according to report of economist, on august 6, 2018, oil use will decrease in 2030 having coal, hydro or renewable resource use will be increased. demand for costly inputs is being substituted with inputs having effect of price. in case of pakistan for development, energy-inputs are needed but non-energy-inputs like labor and capital are more appropriate options and available at cheaper prices than energy-inputs. only a need to have efficient labor knowing advanced technologies. review of economics and development studies, vol. 8 (2) 2022, 167 181 175 figure 1: substitution effect in three sectors (transport, industrial, power) source: author’s self-calculated 4.1.2 structural effect structural outcome refers to variation in effect of energy use intensity as structural effect has been calculated through gdp of each sector so it's affected by change in gdp of sector and by gdp of whole nation. it can be seen in figure 2 structural effect of oil in power sector followed by total structural effect in power sector shows very high change. according to government of pakistan in 2015 and 2016 industrial sector has accelerated its production by about 4.8 % and 6.8 % respectively and is expected to increase in 2017. structural effect of oil in transport sector also shows two high spikes but less than other sectors. however, structure of production in any sector can influence need for energy and economic growth. figure 2: structural effect in three sectors of pakistan (transport, industrial, power) source: author’s self-calculated. 4.1.3 technological effect in technological effect, use of advanced technology that affects use of energy leads to a technological effect in figure 3. but power sector has shown a higher technological effect synchronized with total technological effect in power sector. oil use has increased in power sector having electricity is -0.0025 -0.002 -0.0015 -0.001 -0.0005 0 0.0005 0.001 0.0015 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 s u b s t it u t io n e f f e c t years s u b s t i t u t i o n e f f ect o f ( o i l & g a s ) t h ree s ect o rs i n pa k i s t a n 1 9 9 1 2 0 1 8 oil(tr) gas(tr) oil(power) gas(power) oil(ind) gas(ind) -0.01 -0.005 0 0.005 0.01 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 s t r u c t u r a l e f f e c t years s t ru ct u ra l e f f ect o f ( o i l & g a s ) t h ree s ect o rs i n pa k i s t a n 1 9 9 1 2 0 1 8 indoil indgas totalind powoil powgas totalpow troil trgas totaltr review of economics and development studies, vol. 8 (2) 2022, 167 181 176 being highly produced by oil and oil products, it shows high technological effect in industrial sector, oil in transport sector also shows significant spikes in 2006 and 2017 that is in line with total technological effect in transport sector of pakistan having increase of energy use having technological progress has increased, energy use has increased. economic progress needs to use energy-saving technology and products, bad effects of energy emission in industrial and power sector can be removed. figure 3: technological effect in three sectors of pakistan (transport, industrial, power) source: author’s self-calculated figure 4: total effect in three sectors of pakistan (transport, industrial, power) source: author’s self-calculated 4.1.4 total effects figure 4 of total effect of all three sectors for oil and gas has calculated, where total structural effect has shown higher change in 1992 and 1991 to 2000, followed by total technological effect in same era but when structure effect shows increasing trend, technological effect shows a declining trend. in figure 5, it can be examined that total substitution effect has less change than change in structural and technological effects. overall total effect has mitigated to less change but still change between 1990 to 2007 and some increasing trend seen in 2010 to 2018, it can be having a higher increase in energy prices, less use of energy. changing technology and structural advancement leads to an increase in -0.01 -0.005 0 0.005 0.01 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 t e c h o n o l o g ic a l e f f e c t years tech n o l o g i ca l e f f ect o f ( o i l & g a s ) t h ree s ect o rs i n pa k i s t a n 1 9 9 1 2 0 1 8 oilind gasind totalind oilpow gaspow totalpow oiltr gastr totaltr -0.006 -0.004 -0.002 0 0.002 0.004 0.006 t o t a l e f f e c t years to t a l e f f ect ∆in ∆it ∆is ∆i review of economics and development studies, vol. 8 (2) 2022, 167 181 177 energy demand, which leads to higher change. 4.1.5 direct rebound effect in case of three sectors re is given in table 6, value of direct rebound affected by energy-inputs used in pakistan from 1991 to 2018; has been given. surprisingly, figure 6 in case of pakistan in three sectors indicates a pretty negative trend for overall rebound impact. this is because pakistan has underdeveloped technology. super conservation is name given to this situation since it increases efficiency, which lowers value of materials being conserved. when re exceeds one for a few years, as it did between 2007 and 2009, it is referred to as re occurs "backfire effect."; demonstrates energy conservation has decreased, resulting in a re positive, called jevons paradox, arise from rise in energy, greater efficiency; having decrease in price of energy in both oil and gas specifically oil in power and industrial sectors. substitution impact, which was earlier computed and showed increased energy input use as a result of a price decline, also contributes to re. as it can be seen in graph value lies below 100% in case of pakistani industries since 1990 up to 2007, after this a clear spike which is above 100% shows technological progress accompanied with high energy use, as in case of pakistan, calculations showed direct energy conversion re from economic development is larger than 100 hundred %, it is substantially better to direct energy re from technological progress, and overall pattern in is rising. additionally, larger re denotes energy use and supports a more obvious upward trend. according to economic survey of pakistan 2007-08, fiscal year was year of a structural shift, and real per capita gdp of pakistan has shown an increase of almost 5% as compared to last five years. energy demand has also increased with an increase in per capita income and strong economic growth. having a high value of re in 2008 is also having use of energy products like petroleum, coal, gas, and electricity has showed increased use up to 10.1%, 11.9%, 2.8%, and 5.7% respectively. useful resource crisis can be aggravated through impending wear change, whose effect and potential to de-stabilize geographical unfold and area of human habitats is most effective just starting to be unstated. pakistan has to be prepared to evolve to approaching changes and mitigate terrible effects. table 6: direct rebound effect of three sectors (industrial, transport and power) of pakistan using k, l, oil and gas as input 𝛌 𝛗 ei re% 0.28404 -0.45 5.460129 -1.04474 0.392382 -0.48259 5.329131 -8.4138 0.11519 2.437305 5.270224 1.63232 0.019902 3.017142 5.442345 -0.32548 0.733708 0.584228 5.461819 20.94765 -0.07541 0.750633 5.434872 -0.213 -2.51823 0.667431 5.455328 -92.2042 -0.43021 0.709032 5.544133 -32.3761 0.443356 -4.90812 5.523275 0.491225 -0.27461 -4.63816 5.625939 0.182481 -0.78944 -0.59354 5.540251 -47.9554 -0.17647 3.520527 5.521179 -0.31621 -0.13474 1.266447 5.408805 -4.0395 review of economics and development studies, vol. 8 (2) 2022, 167 181 178 0.479461 -1.28092 5.392914 -28.2919 -0.08314 0.599302 5.384773 -0.0488 -0.35695 1.003383 5.185952 1.515653 0.472726 0.600908 5.088105 14.54617 -1.36152 -0.64558 5.113627 -38.9303 -0.34317 -0.02234 4.943676 91.60498 2.563449 -0.33396 4.879832 123.483 0.184227 10.49077 4.872116 0.125169 -0.29648 1.396879 4.777466 -0.674 -0.02751 1.825415 4.668988 -0.05465 0.189661 -0.14963 4.582162 -2.51128 -0.31022 0.528582 4.536275 -0.09277 -0.12506 0.809027 4.422163 0.574905 0.3463 0.668804 4.479219 0.826617 -0.03995 0.738916 4.450691 -1.34558 0.153173 0.70386 4.464955 -12.6147 figure 5: direct rebound effect in case of three sectors of pakistan source: author’s self-calculated figure 6: forecasted direct re in case of three sectors of pakistan source: author’s self-calculated -150 -100 -50 0 50 100 150 r e % years re% 4 9 14 19 24 29 34 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 % years forcecasted rebound effect review of economics and development studies, vol. 8 (2) 2022, 167 181 179 in figure 6, forecasted re has been displayed from 2019 to 2030, re values will remain below 34 % but positive in next decade, showed backfire re, in all three main sectors. in future, globally the demand will increase for energy cause shortage of supply in whole world, causing a dilemma for supplier to meet demands and maintain sustainable development goals (sdg). pakistan requisite a combined strategy that links energy, climate, sustained economic and progressive goals organized. for occasion, pakistan is a participant in paris climate change agreement and united nation's sgds in accumulation to have implemented, on state intensities, vision 2030 and progressive accomplishments similar to china pakistan economic corridor (cpec). 5. conclusion having diseconomies of scale at sectoral level (industrial, transport, and power sector) and aggregate level, having positive output elasticity shows inputs used at a sectoral and aggregate level have a positive impact on economies of scale, consistent with (lin & liu, 2017). according to results, labor and capital inputs show more substitution with or inputs like energy (oil, gas, and coal). high substitutability has been found between capitals (k) with or inputs. all energy and non-energy-inputs are substitutes to each or and positive, as labor-energy has greater elasticity consistent with (berndt et al., 1975; mahmood, 1992). in case of pakistan's re in three energy use sectors (industrial, transport, and power), a negative re has been calculated which shows super conservation, consistent with (saunders, 2000; turner, 2009). according to results, there are following policy implications. having diseconomies of scale at sectoral level (industrial, transport, and power sector) and aggregate level, re is needed to split large industries into small as diseconomies of scale is problem of large-scale industries. according to results labor and capital inputs shows more substitution with or inputs like energy (oil, gas, and coal), so government needs to take clear actions and policies for labor efficiency improvement by an increase of wages, providing information and communication technologies (icts), training and skills for new methods of production in industries, electricity generation and fast and efficient transportation using cheaper resources including renewable energy-inputs. negative re is having low investment and fall in use of advanced technologies leads to a low level of profit. need to have such productive policies with technological progress, with implication of energy-saving policies are than no energy use policies. references adetutu, m. o. 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(1992). technical change, efficiency, and capital-labour substitution in pakistan’s large-scale manufacturing sector. pakistan development review. review of economics and development studies, vol. 8 (4) 2022, 329-345 329 military spending is for prosperity & growth: an analysis of different income level countries shaikh muhammad saleem a, faisal sultan qadri b a assistant professor & research economist, pakistan shipowners’ government college, karachi, pakistan email: sheikhsaleem.m@gmail.com b associate professor & research economist, applied economic research centre, university, karachi, pakistan email: faysalsultan@yahoo.com article details abstract history: accepted 18 november 2022 available online december 2022 the study illuminates the linkages between military spending and economic growth through a cross-country dataset of 67 countries from 1990 to 2018. the full sample is divided into three sub-groups namely high income, middle income, and low-income countries in order to check the consistency of our findings. it has already been documented in various studies that the sensitivities associated with military spending sometimes relaxed the obligation to justify the need for a specific threat for a country. it is, however, more convincing and ethically justified if the military spending is aligned with the broader national interests. in the full sample as well as in the sub-sample groups, we have found a positive relationship between military spending and economic growth. the fisher and the kao cointegration tests indicate a long-run relationship, the dumitrescu and the hurlin causality test indicate the existence of bidirectional causality. the cross-section dependence test rejected the null hypothesis and suggested a long-run relationship. the hausman test supported fixed effect regression and cointegrating results of fully modified ordinary least square and dynamic ordinary least square were used in order to find out the long-run coefficients. it would be more appropriate if the same relationship is tested country wise while taking country specific factors into account before making decisions regarding major changes in military spending. this study would serve as a baseline for all such studies. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: military spending, economic growth, panel data, income level countries jel classification: h56, f43, c33, e01 doi: 10.47067/reads.v8i4.468 corresponding author’s email address: sheikhsaleem.m@gmail.com 1. introduction the increasing realization regarding the economy and national security linkages has compelled almost all countries to take economic decisions while considering national security consequences. even strong economies like the u.s.a, u.k, china, etc. cannot afford to take military decisions while ignoring review of economics and development studies, vol. 8 (4) 2022, 329-345 330 its economic fallouts. however, the ultimate fact remains the same ensuring internal and external security is the core objective to achieve and maintain national security. that’s the reason why the countries have found to place internal and external security as the top priority issue, danek (2013). among expenditures to ensure national security, military spending is the single, most important component. besides the host economy, military spending is found to affect the neighbouring countries too, collier and hoeffler (2002). some countries increase their military expenditures due to internal and external insecurities while some countries encourage producing military products for exports, malecki (1984). though military spending is primarily based on national security requirements, however, it affects aggregate output and national income through a multiplier effect, dunne and tian (2013). 1.1 military spending: a historical review after the end of the cold war, many countries got the opportunity to reduce military spending and reallocate more resources towards human development. however, post 9/111, some countries had to increase military spending to cope with rising security threats, murshed and sen (1995), dunne (1996), d’agostino et al. (2010), dunne and tian (2016). historical trend of military spending source: world bank (2020), percentage of gdp the historical trend in figure 1 presents global military spending as a percentage of gdp. it confirms the above stated significant consequence associated with the end of the cold war and 9/11. that is, the global military spending as a percentage of gdp gradually reduced in the nineties and start increasing from 2001. the lower income countries were found to be more volatile in terms of military spending relative to their middle income and high-income counterparts. a sharp declining trend in military spending as a percentage of gdp is observed since the early nineties while this spending is found to be lowest relative to the other countries after 2012. this might be partly because of increasing geopolitical stability in the post-cold war period while an increase in gdp growth relative to the military spending growth is probably another significant reason. the military spending in middle income and high-income countries are relatively more stable. there is a slight declining trend in the case of middle-income countries in the observed period. in the case of high-income countries, there was a decline in the nineties till 2001 however, it started increasing slightly after that period. after 2009, a 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 world high income middle income low income review of economics and development studies, vol. 8 (4) 2022, 329-345 331 slight consistent declining trend is observed and it converged to the global and middle-income countries' pattern. it is difficult to infer from the above trends conclusively because the countries in the same income level differ in geographical regions, geopolitical situations, and the level of internal and external risks. therefore, there is a need to find out theoretical as well as empirical justification for this pattern. 1.2 military spending: the ethical considerations as gluck (1986) explains, ethics deals with the study of morality from a philosophical perspective. however, the term ethics is generally used in place of morality (which distinguish the desirable and undesirable act as right and wrong). on the other hand, the core objective of military spending is to ensure national security which implies being ready for military action at least for safeguarding the homeland. the sensitivities associated with national security sometimes demand to increase military spending without justifying the need or the level of threat and even without specifying the enemy country, hersh (2001). conversely, it is also believed that military spending must be ethically justified and must be in line with the broader national interests. in other words, military spending increases the level of security of a country which indirectly affects economic growth and prosperity through expansion in business and commerce activities while it can directly increase aggregate demand, employment, and income through a multiplier effect. in both cases, an increase in this spending is considered to be ethically justified. 1.3 military spending, prosperity, and growth nexus several research studies on this subject have been conducted that differ in terms of regions, countries, data, period, and econometric models. according to the neo-classical theory, countries can take economic benefits from military spending. under the keynesian theory, military spending can improve economic growth if it can increase output2 through multiplier effects and lead to an opportunity for increasing the level of employment and income, dunne and tian (2013). the institution's approach argued that high military spending gives benefit to the interest group which may be few individuals, firms, or industries. the group can become a pressure group and can influence in raising military spending without any threats. the marxist approach is dominant in the general literature on economic development which argued that military spending is necessary for capitalist development. military spending is required to maintain capitalism and prevent stagnation, dunne (1996). empirical findings in this regard are widely different. for instance, hirnissa et al (2009) concluded that the direction of the relationship between military spending and economic growth cannot be predicted while khilji and mahmood (1997) found that an increase in military spending hampers economic growth in the case of advanced economies whereas this relationship is found to be opposite for developing countries. generally, studies have found a positive3, negative4, or no meaningful5 relationship between military expenditure and economic growth, frederiksen and looney (1983). according to benoit (1978), military expenditure can promote economic growth in less developed countries (ldcs) through increasing human capital. it has been documented widely that development projects, education, and training institution, media information, medical care, etc. significantly contribute to the economic growth of third world countries, kentor and kick (2008). the military input fosters skilled human capital in the society that plays important role in economic wellbeing. it is argued that direct and indirect costs on military activities affect social wellbeing and peace however, it generally gives more benefit than cost thus review of economics and development studies, vol. 8 (4) 2022, 329-345 332 positively affecting economic growth (pieroni, 2009). as discussed earlier, military spending does not need to be justified in all cases. however, if it is found to be positively related to economic growth and prosperity, it is ethically justified as well. in light of the above theoretical and empirical studies, there is a need to find out the relationship between military spending and economic growth around the globe. this study aims to fill this gap by using a global dataset and appropriate econometric techniques. the next section explains the data and methodology of this study. section 3 presents estimation results and analysis while section 4 concludes the study along with discussing relevant policy implications. 2. material and method this section presents the model and framework that is based on military spending and economic growth. for this purpose, a global dataset has been used that is divided into a group of countries based on the income levels such as high-income countries, middle-income countries, low-income countries. since the four groups (including the global dataset) consist of the same variables, the study has employed a single equation model for all the groups. our first sample has been taken from the global dataset that consists of 67 countries6. the rest of the countries are not included because of unavailability or missing data such as botswana, senegal, cuba, panama, north korea, cyprus, qatar, etc. few countries were excluded because the same did not exist during a specific period such as angola, cape verde, south sudan, tajikistan, brunei, bosnia, etc. thus the countries are narrowed down to 67 (see, appendix 1). data on military spending is taken from sipri (stockholm international peace research institute) website and the other datasets are taken from the world bank for the 1990 to 2018 period. the main function of the model is expressed in general form as follows: 𝑮𝑫𝑷𝑷𝑪 = 𝒇 (𝑴𝑬𝑷𝑪, 𝑻𝑮𝑫𝑷, 𝑮𝑫𝑺𝑮𝑫𝑷, 𝑳𝑬 ) (1) in the following model, gdppc is used as gross domestic product per capita [aizenman and glick (2006), dunne (2012)] as a dependent variable at time t of ith country, whereas mepc is used as military expenditure per capita [aizenman and glick (2006)] at time t of ith country, tgdp is used as trade percentage of gross domestic product [nikolaidou, (2008)] at time t of ith country, gdsgdp is used to represent gross domestic savings as a percentage of gross domestic product at time t of the ith country while le is used as life expectancy at birth year at time t of the ith country are used as independent variables in the model. in the model, 𝜀 is used as the error term while 𝛼 is used as a coefficient of variables. 𝒍𝒐𝒈 (𝑮𝑫𝑷𝑷𝑪)𝒊𝒕 = 𝜶𝒊 + 𝜶 𝐥𝐨𝐠(𝑴𝑬𝑷𝑪)𝒊𝒕 + 𝜶 (𝑻𝑮𝑫𝑷)𝒊𝒕 + 𝜶 𝐥𝐨𝐠 (𝑮𝑫𝑺𝑮𝑫𝑷)𝒊𝒕 + 𝜶 (𝑳𝑬)𝒊𝒕 + 𝜺 𝒊𝒕 (2) 3. results and discussion 3.1 cross-section dependence test pesaran (2004) proposed the pesaran cd test to check cross-sectional dependence characteristics in the data (all variables). the result of table 1 has found strong evidence that each variable in different groups (world, high-income, middle-income, and low-income) has cross-sectional dependence. the results allow us to test the military spending-economic growth relationship in all the models since the above test is a prerequisite for the second-generation unit root test7. review of economics and development studies, vol. 8 (4) 2022, 329-345 333 table 1: results of pesaran cd dependence test gdppc mepc tgdp gdsgdp le world pearson cd test 204.58 137.17 70.38 11.36 217.03 prob. 0.00 0.00 0.00 0.00 0.00 high income countries pearson cd test 83.74 61.63 54.85 11.64 97.67 prob. 0.00 0.00 0.00 0.00 0.00 middle income countries pearson cd test 11.79 80.30 26.38 2.36 101.04 prob. 0.00 0.00 0.00 0.00 0.00 low income countries pearson cd test 10.86 3.47 6.69 4.89 19.52 prob. 0.00 0.00 0.00 0.00 0.00 3.2 panel unit root to avoid any spurious regression, levin, lin, chu (2002) statistics are used to examine the data (each variable) at the level and first difference. the results are presented in table 2. it is found that all variables are non-stationary at the level and stationery at the first difference. review of economics and development studies, vol. 8 (4) 2022, 329-345 334 table 2: results of common unit root statistic source: author’s estimation note: parenthesis considered prob. values variables world high income middle income low income level 1st difference level 1st difference level 1st difference level 1st difference gdppc -0.60 -0.56 20.7 -18.9 -0.41 0.55 -9.77 -11.9 2.01 0.81 -13.2 -9.03 0.60 0.30 -10.7 -10.4 (0.27) (0.28) (0.00) (0.00) (0.33) (0.71) (0.00) (0.00) (0.97) (0.79) (0.00) (0.00) (0.72) (0.62) (0.00) (0.00) mepc 0.10 -1.11 -29.5 -25.4 0.30 1.33 -16.2 -12.3 0.37 -0.78 -21.5 -16.8 0.90 -0.79 -9.45 -8.51 (0.54) (0.13) (0.00) (0.00) (0.62) (0.90) (0.00) (0.00) (0.64) (0.21) (0.00) (0.00) (0.81) (0.21) (0.00) (0.00) tgdp -1.03 0.65 -4.15 -4.65 -0.64 -0.89 -23.8 -21.5 1.14 0.63 -31.5 -27.5 1.25 -0.96 -9.04 -6.96 (0.15) (0.74) (0.00) (0.00) (0.25) (0.18) (0.00) (0.00) (0.87) (0.73) (0.00) (0.00) (0.89) (0.16) (0.00) (0.00) gdsgdp -0.10 3.93 -4.81 -15.1 -0.96 1.56 -16.3 -13.8 0.72 2.72 -28.3 -26.3 -1.18 -0.45 -17.2 -15.1 (0.45) (1.00) (0.00) (0.00) (0.16) (0.94) (0.00) (0.00) (0.23) (0.99) (0.00) (0.00) (0.11) (0.32) (0.00) (0.00) le 0.50 -1.21 -4.30 -4.03 -0.25 -0.50 -20.8 -18.1 -0.98 -0.87 -8.54 -5.48 0.76 0.91 -6.64 -17.4 (0.69) (0.11) (0.00) (0.00) (0.43) (0.30) (0.00) (0.00) (0.16) (0.19) (0.00) (0.00) (0.77) (0.82) (0.00) (0.00) review of economics and development studies, vol. 8 (4) 2022, 329-345 335 3.3 fisher (combine johansen) cointegration fisher (1932) derived a technique to use individual independent tests for panel cointegration whereas an alternative approach was proposed by maddala and wu (1999). this approach is used in panel data by combining cointegration tests from individuals. table 3 reported two statistics, the first block represents trace statistics while the second block maximum eigenvalue statistic. the null hypothesis of no cointegration was rejected and the results prove the existence of cointegration between military spending and economic growth in all models. table 3: results of fisher cointegration trace statistic prob. max. eigenvalue prob world 1338.0 0.00 856.5 0.00 685.2 0.00 406.5 0.00 383.3 0.00 262.7 0.00 232.0 0.00 172.2 0.01 high-income countries 395.2 0.00 241.9 0.00 199.6 0.00 122.4 0.00 116.4 0.00 70.84 0.06 middle-income countries 835.7 0.00 543.5 0.00 413.1 0.00 246.4 0.00 221.9 0.00 158.7 0.00 123.5 0.00 93.69 0.03 low-income countries 144.2 0.00 95.37 0.00 90.15 0.00 45.91 0.00 55.89 0.00 44.05 0.00 24.20 0.01 20.42 0.05 source: author’s estimation note: intercept in ce and var with lag 1 3.4 kao (engle-granger residual-based) cointegration kao (1999) use the adf test for panel cointegration and the results (table 4) show strong evidence for the existence of a relationship between military spending and economic growth. it is found that a significant long-run relationship exists in all models as the results have rejected the null hypothesis of no cointegration in all four cases. table 4: results of kao cointegration adf t-statistic prob. world -4.200 0.000 high-income countries -4.40 0.000 middle-income countries -3.534 0.000 low-income countries -2.582 0.004 source: author’s estimation note: individual intercept with sic automatic selection criterion review of economics and development studies, vol. 8 (4) 2022, 329-345 336 3.5 hausman test hausman (1978) developed a hypothesis of no correlation. it deals with endogeneity and compares an appropriate model from the random effect or the fixed effect, sheytanova (2015). the results show (table 5) that there is a correlation between the error term (random effect model) and independent variables. in this regard, the random effect estimation is inconsistent, and the fixed effect estimation is more appropriate to use for further analysis. table 5: results of correlated random effect hausman test test summery chi-square degree of freedom prob. world cross section 165.18 4 0.00 and period random 102.37 4 0.00 high income countries cross section 23.95 4 0.00 and period random 238.58 4 0.00 middle income countries cross section 7.69 4 0.05 and period random 9.87 4 0.04 low income countries cross section 77.71 4 0.00 and period random 13.48 4 0.00 source: author’s estimation 3.6 least square regression – fixed effect it is found that fixed effect estimation is more appropriate to analyze panel regression which is consistent with saleem and iftikhar (2019). the next step is to estimate fixed effect regression which is presented in table 6. review of economics and development studies, vol. 8 (4) 2022, 329-345 337 table 6: results of olsfixed effect variables world high income middle income low income coefficient t-stat prob. coefficient t-stat prob. coefficient t-stat prob. coefficient t-stat prob. c 6.17 24.96 0.00 8.37 4.48 0.00 6.66 14.42 0.00 4.51 7.37 0.00 mepc 0.16 20.93 0.00 0.13 8.31 0.00 0.16 15.87 0.00 0.08 3.12 0.00 tgdp 0.00 1.34 0.17 0.00 6.44 0.00 0.00 1.17 0.24 0.00 3.21 0.00 gdsgdp 0.00 8.58 0.00 7.66 0.09 0.92 0.00 5.63 0.00 0.01 6.51 0.00 le 0.41 7.28 0.00 0.23 0.53 0.59 0.14 1.32 0.18 0.32 2.27 0.02 effect specification adjusted r2 0.99 0.97 0.97 0.92 durbin watson 1.90 1.95 1.90 1.97 prob. (f-statistics) 0.00 0.00 0.00 0.00 source: author’s estimation review of economics and development studies, vol. 8 (4) 2022, 329-345 338 it is found that the relationship between military spending and economic growth is positive and statistically significant. some of the other variables such as trade is found insignificant in the world and middle-income countries while domestic savings is also found insignificant which might be due to increased military expenditure in high-income countries. moreover, the life expectancy effect is also found insignificant in affecting the growth of high-income countries. this might be due to already high life expectancy rates in the high-income countries while this linkage might become weaker because the population after retirement age is less likely to contribute to the process of economic growth. 3.7 fmols regression fully modified ordinary least square (fmols) regression proposed by phillips and moon (1999) to check the robustness of the model (consistent with saleem and iftikhar, 2019 and frimpong, 2018). it focuses on the nonparametric method to resolve serial correlation and endogeneity issues. table 7 presents the findings of fmols. review of economics and development studies, vol. 8 (4) 2022, 329-345 339 table 7: results of fmols variables world high income middle income low income coefficient t-stat prob. coefficient t-stat prob. coefficient t-stat prob. coefficient t-stat prob. mepc 0.27 23.90 0.00 0.05 2.17 0.02 0.27 27.35 0.00 0.15 5.40 0.00 tgdp 0.00 6.89 0.00 0.00 3.57 0.00 0.00 4.01 0.00 0.00 3.41 0.00 gdsgdp 0.00 3.13 0.00 0.00 0.56 0.57 0.00 2.80 0.00 0.01 5.48 0.00 le 1.07 11.62 0.00 3.66 9.69 0.00 1.32 11.62 0.00 0.61 4.57 0.00 effect specification adjusted r2 0.99 0.96 0.97 0.90 source: author’s estimation review of economics and development studies, vol. 8 (4) 2022, 329-345 340 the table shows a positive and statistically significant effect of military spending on economic growth in fmols regression which is consistent with the initial findings through panel ols. 3.8 dols regression dynamic ordinary least square (dols) regression was proposed by mark and sul, (1999 & 2003) to check the robustness of the model. this method resolves serial correlation and endogeneity issues using leads and lags. the finding through dols is presented in table 8. table 8: variables world high income middle income low income coefficient t-stat prob. coefficient tstat prob. coefficient t-stat prob. coefficient tstat prob. mepc 0.21 10.07 0.00 0.06 2.38 0.01 0.31 11.78 0.00 0.14 4.39 0.00 tgdp 0.00 1.56 0.11 0.00 2.97 0.00 0.00 0.89 0.37 0.00 3.04 0.00 gdsgdp 0.00 4.03 0.00 0.00 0.63 0.52 0.00 1.76 0.07 0.01 4.67 0.00 le 2.22 8.76 0.00 3.63 8.99 0.00 1.71 4.51 0.00 0.62 4.08 0.00 effect specification adjusted r2 0.99 0.96 0.99 0.90 source: author’s estimation table 8 also confirms the findings of previous tests. military spending and economic growth are found to be statistically significant and positive contributors to economic growth using different leads and lags in all models. 3.9 dumitrescu-hurlin causality after establishing a positive, long run relationship between military spending and economic growth, it is also relevant to check whether a causal relationship exists between these two or not. this is done by employing dumitrescu and hurlin (2012) framework. this test is different from the standard granger causality test because it assumes all individual coefficients and fits well in existence in crosssection dependence (dogan et. al, 2015). in this test, the null hypothesis states the existence of no homogeneous granger casualty while the alternative hypothesis suggests a causal relationship. the results are presented in table 9. table 9: results of dumitrescu-hurlin causality test summery w-stats prob. results world mepc does not homogeneously cause gdppc 3.41 0.00 bidirectional gdppc does not homogeneously cause mepc 4.27 0.00 bidirectional high income countries mepc does not homogeneously cause gdppc 5.24 0.00 bidirectional gdppc does not homogeneously cause mepc 4.23 0.00 bidirectional review of economics and development studies, vol. 8 (4) 2022, 329-345 341 middle income countries mepc does not homogeneously cause gdppc 1.91 0.00 bidirectional gdppc does not homogeneously cause mepc 4.47 0.00 bidirectional low income countries mepc does not homogeneously cause gdppc 3.54 0.00 bidirectional gdppc does not homogeneously cause mepc 3.15 0.00 bidirectional as shown in the table, bidirectional causality between military spending and economic growth is found to have existed. the results remain consistent in the full-sample model and the other models consisting of high income, middle income, and low-income countries. 4. discussion the statistical and graphical evidence presented in this paper found that military spending positively contributes to the economic growth in all the groups of countries though the magnitude of this effect varies in all the groups. in the case of the full sample and middle-income countries model, it is found that a 1 percent increase in military spending (as a percentage of gdp) increases gdp growth by 0.16 percent. in the case of high income and low-income countries, the magnitude is found to be 0.13 percent and 0.08 percent respectively. this finding supports the argument that military spending is pro-growth for almost all countries. as discussed earlier, an increase in military spending promote growth through direct as well as the indirect channel. it increases aggregate demand and income through the multiplier effect directly. at the same time, it increases the level of security in an economy which positively affects production, employment, and income level. this effect is found to be relatively weaker in the case of low-income countries which might indicate the presence of inefficient utilization of military spending or the weak linkage between military spending and the level of security in the economy. it is also found that the magnitude of the relationship does not only vary country-group-wise but also varies with the estimation method used in a particular study. though the ols, fmols, and dols coefficients are positive and statistically significant, however, magnitude varies greatly. military spending and economic growth are found to have bi-directional causality. it means that more economic growth increases military spending while more military spending leads to having more growth. this causal relationship is consistent in all groups of countries. this means that besides geopolitical and other relevant factors, economic growth is also a significant factor in military spending decisions. 5. conclusion and policy-implications the study illuminates the linkages between military spending and economic growth through a cross-country dataset of 67 countries which were divided into three sub-groups namely high income, middle income, and low-income countries. it has already been documented in various studies that the sensitivities associated with military spending sometimes relaxed the obligation to justify the need for a specific threat for a country. it is, however, more convincing and ethically justified if it is aligned with the broader national interests. review of economics and development studies, vol. 8 (4) 2022, 329-345 342 although, literature also considers political regime (see blomberg, 1996), social structure (see pieroni, 2009), socio-cultural (see benoit, 1978), and historical characteristics (see figure 1) as important factors that influence a military-growth relationship. the fear hypothesis of military spending is based on security concerns and the insecurity determined by the military power in the region. different incidents such as separatist movements, extremist activities, border disputes, terrorist threats, maritime intervention, and a few other random disputes force countries to strengthen their defense systems. in the full sample as well as in the sub-sample groups, we have found a positive relationship between military spending and economic growth. more economic growth implies more jobs, income, better standard of living thus leading to prosperity. in this way, military spending in almost all the countries and groups is found to be ethically justified as well though the magnitude varies greatly. there is a need to further enlighten the relevant factors as we have found the coefficient sensitive to the technique employed, though they remain positive and significant in all the cases. it is also important to explore the magnitude of the direct and indirect channels involved in this relationship to find out their relative importance. it is also important to find out the impact of combat and non-combat expenditures separately and check the possibility if a part of the non-combat expenditure is reallocated for the underdeveloped sector of the economy. this is more important for the low income and middle-income countries to check the possibility to reallocate some of the non-combat expenditures to the education and health sector. a proper strategic framework is needed to restore health and education and bring them to par with the developed nations. it would be more appropriate if the same relationship is tested country wise while taking country specific factors into account before making decisions regarding major changes in military spending. this study would serve as a baseline for all such studies. endnotes 1. 11th september 2001 2. help to increase industrialization by increasing aggregate demand 3. hassan et. al. (2003) 4. deger (1986) 5. dakurah et. al. (2001) 6. in line with kentor and kick (2008) 7. dogan et al. 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countries middle-income group countries lowincome group countries algeria korea, south australia algeria madagascar argentina madagascar austria argentina mali australia malaysia belgium bangladesh mozambique austria mali canada belize nepal bangladesh mexico cyprus bolivia rwanda belgium morocco denmark brazil sudan belize mozambique finland cameroon bolivia nepal france china brazil netherlands germany colombia cameroon new zealand greece dominican republic canada nigeria ireland ecuador china norway israel egypt, arab rep. colombia oman italy el salvador cyprus pakistan japan eswatini denmark paraguay korea, south guatemala dominican republic philippines netherlands india ecuador portugal new zealand indonesia egypt, arab rep. russian federation norway iran, islamic rep. el salvador rwanda oman jordan eswatini saudi arabia portugal kenya finland senegal saudi arabia malaysia france south africa spain mexico germany spain sweden morocco greece sri lanka switzerland nigeria guatemala sudan united kingdom pakistan india sweden united states paraguay indonesia switzerland uruguay philippines iran, islamic rep. thailand russian federation ireland tunisia senegal israel turkey south africa italy united kingdom sri lanka japan united states sudan jordan uruguay thailand kenya tunisia turkey source: based on world bank classification (wdi, 2020) review of economics and development studies vol. 5, no 3, 2019 421 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads fragility of nascent democracies: a case study of pakistan 1 syed shahid hussain bukhari, 2 waseem din , 3 imtiaz ahmad warraich 1 assistant professor, department of political science, bahauddin zakariya university, multan, pakistan. email address: shahidpolsc@yahoo.com 2 phd. candidate, department of political science, university of punjab, lahore, pakistan. 3 assistant professor, department of sociology, bahauddin zakariya university, multan, pakistan article details abstract history revised format: 30 june 2019 available online: 31 july 2019 democracy has always been targeted by the forces that are against this particular type of system yet it has emerged as an efficient and more delivering system around the world. in this research article, those forces have been identified and an exclusive analysis has been given with regards to the threats faced by the democratic system of pakistan. a comprehensive study of the root-causes, which contributes to the destabilization process, has been given. suggestions and recommendations have also been given to treat the malady of destabilization. finally, it has been deduced that the states like pakistan that are under threat of destabilization need socialization and awareness to reduce such threats by rationally coping with the situation. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords democracy, destabilization, pakistan jel classification: f50, f59, n25 corresponding author’s email address: shahidpolsc@yahoo.com recommended citation: bukhari, s. s. h., din, w. and warraich, i.a.(2019). fragility of nascent democracies: a case study of pakistan. review of economics and development studies, 5 (3), 421-427 doi: 10.26710/reads.v5i3.685 1. introduction with more than 100 countries around the world (out of 193), democracy has taken its roots, and fruits of democracy have been relished by the people of these states. it is a system through which people elect their own representatives who come into the power and legislate for these people according to their wishes. abraham lincoln’s definition is well known that “democracy is the government of the people, by the people and for the people”. so in a democratic system, people are the master of their own will. but things do not go as smoothly as appear on the surface. though people are the master of their own will yet there are many challenges which are being faced by this system for its sustainability. after world war ii, many countries got independence from their respective imperialist powers. these independent countries mostly belong to the third world. as they were already facing many difficulties in the region i.e. economic, social, educational, cultural, etc. liberty proved a mixed blessing for them. they have to confront on many fronts. to solve all these issues they need a strong and stable system of government that has the ability to address these issues along with international recognition so that they might not fall again into the hands of evil mongers. most of these new states opted democracy as a viable system for their sustainability. they opted for it because it was a system at that time which was functioning smoothly and delivering successfully. though it was not as favorable for these countries’ condition but no other better alternative was also present. some states found it better for them whereas others’ experience was not very good. after world war ii, the victorious alliance also suffered and the world was divided into bi-polar powers i.e. in usa and ussr. each indulged into the cold war and tried to show its superiority and hegemony over the other through different means. there started a race of arms http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 422 and race of capturing as many states as possible to show their strength. ussr was a communist power whereas the usa was a capitalist power. to increase their influence both used all forms of ways whether legal or illegal through a policy of intervention into other states. the soviet communists wanted to impose their ideology over as many states as they could gain by hook or by crook and vice versa. the united states and its western allies decided to check the communist expansion. so through different plans, war-torn europe was supported by the usa as it considered that ussr was bringing communism into the continent of europe as well. apart from the plans like marshall plan and formation of nato by the usa and formation of warsa pact to counter the nato attack by the ussr, another way to enhance the influence was to bring the newly independent states into their ideological whole. so both these powers adopted a policy of intervention and made these newly liberated states a parasite so that they could never stand at their own. to achieve this very end they exploited those conditions which were favorable for them. they gave them aid and debt, used the elite of these countries which include civil and military elite, fanned the religious extremism, supported the so-called nationalist, provided arms and aid to the evil forces working within a state, etc. apart from this physical intervention they also poisoned these nations through many invisible evil practices which not only corrupted their entire system and made them sluggish, dependent, irresponsible, fanatic and insecure but turned these new entities of the world into such habits that they are even paralyzed to think better for themselves and their future generation to come as well. among such nations was the nation of pakistan who got independence from british imperialists on august 14, 1947. like many other nations, this nation also adopted democracy as a system of government for it. this nascent democracy was also hijacked by these evil forces that have their evil intentions to destabilize it. therefore, this article discusses in detail about these hidden forces and explores how they work and exploit the circumstances into their favor. 2. literature review the vulnerability of the democratic system lies in its very existence. whenever everyone is invited to join the system, there is every likelihood that some opportunist would also penetrate through this open invitation. these are forces who try to monopolize or create influence on the system so that they could achieve their interests. they try to paralyze the system so that it always remains dependent. khalid bin sayeed in his book politics in pakistan: the nature and direction of change (sayeed, 1980) describes the prevailing environment about the future government in pakistan. politics of pakistan took different dimensions soon after the independence. laziness of the leaders after the demise of quaid-e-azam in 1948 put the country on another track. the arguments started for the type of government in the country. in the meantime, the first constitution was formulated. the different leaders tried to influence in accordance with their school of thoughts which made the environment unstable. hassan askari rivi in his book, the military and politics in pakistan (rizvi, 2000), shares that from the governor generalship of quaide-azam there started a race for keeping the maximum power with one person. after the death of quaid-e-azam, the military expanded its network to hijack the politics of the country. with the inclusion of ayub khan and skinder mirza, the military crept into the affairs of politics. thereafter, the role of army increased in the politics of pakistan, and with our sour relations towards india army further affirmed its position and dictators one after the other contaminated the politics of the country. munir ahmad in his book, the civil servants in pakistan (ahmed m. , 1964) elaborates how the civil bureaucracy got its hold in the affairs of government. from day one bureaucrats like ch. muhammad ali, malik ghulam muhammad, and amjad ali were very close to jinnah; and after independence, these bureaucrats played a nasty role in the political history of the country. they not only manipulated themselves but also joined hands with the army to be powerful in the country. s.m. akhtar in his book, economy of pakistan (akhtar, 1951), explains the precarious condition of pakistan as the economy was a total collapse. the offices of the new country were held under tents, there was no food to eat, and india blocked the rightful share of pakistan which also made the situation even worst. economic condition was unexplainable. the expenditures to meet the needs of the country were below the requirements. the migrants were coming but there was nothing to give them. then due to lack of proper system, for one and a half-decade, no progress could be made to improve the conditions. the economy was run under unstable conditions. liaquat ali khan made a tour to the usa and the economic support was obtained from the countries apart from political support. ch. muhammad ali in his writing emergence of pakistan (ali, 1967), explicitly gives the overview of the situation what factors forced the muslims of india to claim their self-identity. the struggle for an independent state gained momentum under the leadership of quaid. he also explains in detail the manipulation of lord mountbatten and jawahir lal nehro during the time of partition for the change of boundaries. further, he describes the misfortunes, which pakistan inherited from india and what happen to people who came from india. i.h.qureshi in his book, islamic elements in the political thoughts of pakistan (qureshi i, 1960), elaborated those elements that were active and wanted to bring an review of economics and development studies vol. 5, no 3, 2019 423 islamic style of government in pakistan. the people, who were a part of the struggle, were mostly religious in character. after independence, those who were against the formation of pakistan also joined hands with the islamic elements. the role of maulana modoodi and his islamic team tried to implement islamic laws and jurisprudence in the country. he was a part of heated debate to stop adoption of democracy as a system for pakistan and gave cogent reasons how pakistan was created in the name of islam and that minorities should be treated as zimis in the islamic state and no administrative post should be given to them as it may prove dangerous for the interests of an islamic state. g.w. chaudhry in his book constitutional development in pakistan (chaudhry.w.g, 1958) said that the constitution development process was very slow in the country from the very first day said g.w. chaudhry. from the first basic principles committee report to the form of the future constitution, every process was being impeded by the people of different schools of thoughts. after the promulgation of the 1956 constitution there started debates about its working. after two years it was abrogated and general ayub khan got his way into the politics. he gave his constitution of 1962. he legalized his government through the introduction of the basic democracies system. constitution of the country remained a controversy after the independence due to lack of leadership and consensus on its basic form. due to this reason institutions also could not gain proper ground as well. mohammad waseem in his writing, politics and the state in pakistan (waseem, 1994) , depicts the development of pakistan in political perspective. he also discusses how zia ul haq came to power, zulfiqar ali bhutto's arrest and sentenced, muhammad khan junejo’s government, zia’s islamization process, his support for jihad in afghanistan and his tragic death in august 1977. 3. democratic ideals briefly speaking the criteria which distinguish a democracy from a non-democratic state are democratic values and practices, institutions, rule of majority, opposition and competing parties, constitutional government, fundamental rights, equal opportunities for all, independent judiciary, free media, rights of minorities, responsible leadership, free and fair elections, absence of any social, economic, cultural or regional distinctions on the basis of caste, creed, sex, religion or nationality. a democracy that does not fulfill such criteria partially or completely may be termed as semi or pseudo-democracy. following are the ideals of a successful democratic system. i. faith in the common man ii. the state is the means and individual is the end iii. freedom of expression. iv. liberty and equality for all v. participation on the broader scale vi. peace and security vii. the welfare of the people viii. guarantee of a stable government ix. efficiency and deliverance 4. stability/instability of democracy as discussed earlier there can be many non-democratic forces working within a system to destabilize it so that they could get their ulterior motives complete. they use each and every method to bring instability in the system. here question comes into one’s mind that why democracy is a soft target for all evil forces to be attacked easily. the answer is that it is the only system through which everyone is invited to come and participate in the betterment of people. finding this opportunity favorable these evil forces come into the system through exploiting those conditions which are poor and thus easy to target. whereas in an authoritarian system no one is allowed to enter without the permission of the despot or the ruler. in a democratic system, such forces could be checked easily as well but it all depends on the proper performance of the system. if the people in government and people in opposition are functioning according to the constitution and laws of the land, institutions are independent and working within their jurisdiction, federal and provincial government (in a federal and parliamentary system) are doing their own job according to their mandate, judiciary is independent and delivering, a vibrant civil society is present, media is free, education is the priority of government, defense is strong and last but not least there is no politicking over the national interests by the political parties then there is no likelihood that any evil force with any ulterior motive could creep into the system. though there are chances and possibilities of entering these forces in every system how developed it may be yet if the system is strong, stable and independent, it can check these things easily. there are different kinds of forces that contribute to destabilizing a democratic system. these forces utilize review of economics and development studies vol. 5, no 3, 2019 424 different ways and method to penetrate into a system. looking closely it is observable that there are mainly two kinds of forces that contribute to the fragility of the democratic system in some way or the other. some of them are visible while the others are invisible. i. military establishment ii. civil bureaucracy iii. ethnic cleavages iv. foreign assistance/intervention v. political crisis/instability vi. economic depression vii. poor law & order viii. institutional collapse ix. weak writ of government x. discontinuity of system these forces, in general, may cause destabilization of democracy anywhere in the world. the more these forces shall get stronger more the fragility of democracy be enhanced. an analysis of the role of these forces in pakistan with relevance to the stability/instability of democracy is given below. 5. democratic stability/instability in pakistan pakistan is a country that got its independence after the second world war from british imperialism in 1947. before it was a part of undivided india. after getting independence it faced many problems which even challenged its very existence. the challenges it faced were so serious that pakistan could not properly organize its internal structure of the governance. then the death of quaid-e-azam in 1948 and unfortunate demise of the liaquat ali khan never allowed it to stand on its feet. economically weak, ideologically divided, educationally backward, internally distressed, externally vulnerable and ethnically diverse pakistan fall prey to the forces of destruction. as the geostrategic location of pakistan was very important so all the regional and international power tried to have their influence on pakistan. so due to miserable internal conditions in the country and geostrategic position on the map it attracted the evil mongers to conspire against it. in every system, there are many forces and players who work for and against the system at the same time. pakistan is a nascent democracy in the sense that since its inception it has faced four military interventions, weak economy, illiteracy, racism, religion fanaticism, sectarianism, terrorism, tug of war for power between center and provinces, slow judicial system, ideological differences, political unrest, weak institutions, controlled media, low participation, non-serious attitude of the political parties and many other problems which are normally faced by the nascent democracies around the world. although the conditions are getting better due to the continuity of elections yet the system is facing a serious threat due to the poor performance of the civil government who never satisfied the masses, which resultantly will again provide a chance to non-democratic forces to intervene. 5.1 military intervention military intervention has always been a chronic problem for pakistan since its inception in 1947. after the death of quaid-e-azam (1948) and liaquat ali khan (1951), ayub khan, the first pakistani commander in chief of the army got his way into politics. in 1954, the new government of muhammad ali bogra gave him the portfolio of defense ministry (while he was army chief) and maj. gen. sikandar mirza was given the portfolio of the interior ministry. both these men were not civilians but from military bureaucracy. they manipulated with the civil bureaucracy and during the period of sikandar mirza as governor-general, the monopoly of the military bureaucracy was at its peak. democracy could not take roots during this period. then on october 1958 first martial-law was imposed by the sikandar mirza by abrogating the first constitution of pakistan 1956. ayub khan took control of the country as chief martial law administrator (cmla) and later became the president. he introduced a new constitution in 1962. after ten years he gave control to another dictator gen. yahya khan who abrogated the constitution of his predecessor and imposed martial law in 1969. during his period east pakistan became bangladesh after being dismembered from west pakistan on dec 16, 1971. after him, zulfiqar ali bhutto took oath as the president and first civilian cmla on dec 20, 1971. he later became the prime minister of pakistan on aug 14, 1973, after giving the first consensus-based constitution of pakistan 1973. bhutto government was later on toppled by another dictator gen. zia-ul-haq in 1977 by holding the constitution of 1973 in abeyance and imposing martial law again. he imprisoned the z. a bhutto who was later on sentenced to death in a fake case backed by the gen. zia. after that gen. zia reigned for another ten years till his death in a plane crash on aug 17, review of economics and development studies vol. 5, no 3, 2019 425 1988. then the civilian government of benazir bhutto came in 1989 which lasted till august 1990 and was dissolved by the then president ghulam ishaq khan on the corruption charges. nawaz sharif then became the prime minister in 1992 whose government was also dissolved by the same president on same charges. then again the government of benazir bhutto came in 1993 which was dissolved by his own president farooq ahmad laghari in 1996. (yousaf, 1999)nawaz sharif came again with a heavy mandate in 1997 but due to his unpleasant policies and kargil crisis of 1999, his relations with the army got soured and his own hand-picked gen. pervez musharaf toppled his government on october 12, 1999, through a military coup. general musharaf later became the president of pakistan and reigned till 2008, a period of almost ten years again in military control. although for the first time in the history of pakistan, parliament has been able to complete its tenure from 2008-2013 and 2013-2018, none of the prime minister of pakistan has yet completed his tenure in office for the 72 years long history after the creation of pakistan. the role of the military establishment in the functioning of civilian government is increasing day by day and it has now become part of various important decision-making bodies in pakistan. therefore, one can conclude that democracy in pakistan is yet nascent and needs to be strengthened. 5.2 civil bureaucracy civil bureaucracy is another force which is responsible for weak democratic set-up in pakistan. bureaucrats often conspire against the elected representatives. due to the absence of a constitution in the initial phases, the role of civil bureaucracy was unspecified. so the routine changes in the ministries allowed the civil bureaucrats to do according to their will and in this way, they penetrated into the political scenario of the country. bureaucracy always joined hand with military bureaucracy to destabilize democracy. as they are chosen for the civil service through a tough competitive examination system, they think that they are superior to the elected representatives. so through different ways, they create hindrances in the working of government as they know that politician is dependent on them because of their low education and incapabilities. two governments, each of benazir bhutto and nawaz sharif were also dismissed by the bureaucrats like ghulam ishaq khan and farooq ahmad khan leghari. in the same fashion, bureaucrats helped the government of gen. musharaf to take ground. in the recent past to fail the ppp governments of yousaf raza gillani and raja pervaiz ashraf led by asif ali zardari, the bureaucracy did play their silent role through creating hurdles following the policy of red-tapism and refusing to follow the government’s instructions. whenever the military takes on the civil government it is in fact bureaucracy that helps them to sustain long. role of bureaucracy remains powerful as long as the politicians are depended on them. so finding the powerful and educated politicians above them becomes difficult because they paralyze the entire system through official tactics, which results in the failure of the democratic government to deliver. pakistan has been a victim of this highly educated force of the country since its initial days. (ahmed m. , 1964) 5.3 ethnic cleavages ethnic cleavages have also haunted pakistan from the very beginning. after the first eight or nine years of independence, bengalis of east pakistan started a movement of separation from west pakistan. although there were many injustices committed to them by the leaders of west pakistan yet the movement gained momentum due to the bengali ethnic slogan. finally, pakistan was dismembered and east pakistan became bangladesh on dec16, 1971 due to this ethnic cleavage. currently, again pakistan is facing an ethnic insurgency in the province of balochistan. in balochistan, the banned organizations like bloch liberation army(bla) and bloch liberation front(blf) are challenging the writ of the government. (ahmed a. s., 1986) 5.4 foreign assistance and intervention foreign assistance and intervention is another cause. all the anomic elements cited above have allowed the powerful nations to intervene in the country as it is dependent on others to survive. if we look back it is noticeable that pakistan’s history is replete with foreign assistance. as pakistan could never stand on its feet so it always needed aid from other countries to sustain. from liaquat ali khan to imran khan, all the governments whether military or civilian depended on aid and foreign assistance. from the usa, uk, germany, france, china, uae, saudi arabia, eu, japan, turkey, and institutions like imf, world bank, asian development bank, usaid, ukaid, pakistan is receiving assistance. the new government of imran khan, who came with a slogan of change, is also not an exception. the new government has also taken a loan from the imf for its government’s business to run. when these countries provide loan or aid to pakistan they also interfere in the country’s affairs through different ways. usa, uk, eu, china, saudi arabia all influence on the policies of the government. therefore, even the popularly elected governments of pakistan fail to perform in accordance with the wishes of the masses that consequently creates outrage against democracy, resultantly paving the way for non-democratic forces. review of economics and development studies vol. 5, no 3, 2019 426 5.5 political instability political instability is another reason for the fragility of democracy in pakistan. since its creation in 1947, pakistan is in a state of political crisis which has been further aggravated by the economic, social, ethnic, religious and linguistic problems. two major mainstream political parties i.e. pakistan people’s party and pakistan muslims league(n) have never been allowed to function properly by the establishment on the one hand, and due to their own weak intra-party structure and personal interests to fulfill on the other. after coming to power they misuse the power, appoint their diehards and loved ones on the lucrative positions, disrespect the law and ignore the merit policy. they stop the benefiting projects started by the previous government and play politics over the national interests e.g. kala bag dam, creation of new provinces, naming of the nwfp as kp, owning or disowning the war on terror in the country, etc. there is no democratic culture found in the political parties; harsh treatment is meted out to the opposition parties, no leadership qualities are seen while making a person party leader and also no culture exists to accept the mandate of successful political parties rather always alleging rigging in the elections. although the civilian governments continue to rule in pakistan in the wake of elections, the allegations of rigging continue to hinder their performance. moreover, it has heightened polarization in the society which can provide a justification to the non-democratic forces to legitimize their intervention in the system. 5.6 struggle for power between the centre and province then there is a struggle for power between the centre and province. the tug of war for power between the center and provinces has hung the whole system because neither the center nor provinces are ready to take/share their powers as well as responsibility. after the passing of the 18th amendment, it was hoped that the situation would become better but this struggle yet continues as the statements by the central government often show their apprehensions about the 18th amendment. 5.7 economic depression economic depression: constant economic growth is one of the indicators to be called a stable state. the states, in which the economy is downtrodden become a victim of endemic problems. though no state can maintain the economic growth at a high level forever yet it does not mean that there could be no way out to bring it back to a higher level again. pakistan is among those states who are economically depressed. the problem that it faced from its very first day is still faced by it even after a lapse of 72 years. the problems discussed earlier are a natural corollary that causes an economic depression. pakistan’s permanent dependence on others has made it economically vulnerable. it is well known that political stability and economic stability are interdependent. economic instability leads to political instability which makes it difficult for the democratically elected governments to survive. towards the end, one can say that all the non-democratic forces irrespective of the fact whether they are visible or invisible, take advantage of their role in the system and weaken the democratic governments in pakistan. democratic set-up is extremely shattered by such forces which consequently hinder pakistan to become a prosperous, independent, social, welfare and democratic state. the solution lies only in the continuity of the democratic system. looking precisely the study has identified the following problematic areas which also accompany a set of recommendation to address the underlying factors. the study suggests the following. i. destabilization happens when the internal situation of the country is precarious. ii. larger participation with limited checks in the system invites the evil forces of destabilization to come into the system that further aggravates the precarious situation. iii. dissatisfaction, despondency, non-deliverance, inherent weaknesses and economic depression fuel the fire of destabilization. iv. foreign adventurism, repeated military interventions, terrorism, sectarianism, race and ethnicity, religious extremism, poor law and order, political crises, institutional collapse and weak writ of the government are the elements to be exploited by the mongers of destabilization v. irresponsible civic behavior further disillusions the grim situation within the country which results in destabilization of a democratic process. vi. stability could be achieved if practical measures are adopted to improve the present conditions. review of economics and development studies vol. 5, no 3, 2019 427 following suggestions can help to achieve this much-desired end. i. internal weaknesses of the system should be addressed. ii. aggrieved elements should be brought back into the system through dialogue and dispensation. iii. economic independence and a responsible political attitude bar these evil forces to penetrate into the system. iv. system of checks and balance in every sphere of the country should be adopted to avoid breaches of internal and external security. v. national integration should be promoted to a larger extent. vi. law and order situation should be improved. vii. individuals must fulfill their civic responsibilities. viii. democratic norms should be adopted by politicians and civilians on the whole. in the nutshell, if one wants to support the democratic process one shall have to behave in a mature political way and will have to stop the interference of the forces cited above in the democratic process. conclusion every system whether it is a monarchy, communism, dictatorship or a democracy suffers one or more than one problems. these weaknesses allow the forces of destabilization to utilize the poor situation by exploiting those elements which are angry or working against the system for one reason or the other. in this way, they create hatred towards the entire system by fanning the fire of deprivation. increasing despair and despondency radicalize the people who finally refuse to come back in the national-whole. democracy becomes prey to these forces easily because it is a more vulnerable system than the communism, monarchy or dictatorship. those systems are controlled by the dictatorial and opportunist clique whereas democracy invites these elements into the system to participate and perform. if the democratic norms do not take roots, institutions are weak, leaders don’t have the ability to deliver, and the country is not independent economically then the situation could be easily exploited. on the other hand, dictators control the weak system by not allowing much participation, despite poor performance and poor situation and reign for decades as it has been witnessed in pakistan. references ahmed, a. s. (1986). pakistan society: islam, ethnicity and leadership in south asia. new york: oxford university press new york. ahmed, m. (1959). government and politics in pakistan. karachi: pakistan publishing house,. ahmed, m. (1964). the civil servants in pakistan. karachi: oxford university press. akhtar, s. (1951). economics of pakistan. lahore: publishers united limited. ali, c. m. (1967). the emergence of pakistan. lahore: research society of pakistan, university of the punjab. callard, k. (1959). political forces in pakistan 1947-1959. new york: institute of pacific relations . chaudhry.w.g. (1958). constitutional development of pakistan. longman group limited. haqqani, h. (2005). pakistan: between mosque and military. vanguard books (pvt.) ltd. haqqani, hussain. (2004). pakistan’s internal divisions. in m. i. shahid., contemporary affairs (p. 35). advanced publishers. masud, m. (1995, may 5). the new bureaucrats, public servant or feudal’ munshi. dawn. qureshi i, h. (1960). islamic element in the political though in pakistan. mimeographed. rizvi, a. h. (2000). the military and politics in pakistan 1947-1997. lahore: sang-e-meel publication. sayeed, b. k. (1980). politics in pakistan; the nature and direction of change. praeger publishers usa. waseem, m. (1994). politics and the state in pakistan. islamabad: national institute of historical and cultural research. yousaf, h. (1999). pakistan, a study of political development 1947-97. lahore: sang-e-meel publication. zaidi, a. s. (1999). issues in pakistan economy. oxford university press pakistan. ziring, l. (1980). pakistan: the enigma of political development. england: frederick a, parager, publishers . review of economics and development studies, vol. 8 (2) 2022, 141 153 141 role of professional skills in promoting healthcare system: a performance perspective rizwan shabbir a, muhammad abrar b, aysha batool c a assistant professor, lyallpur business school, government college university, faisalabad, pakistan email: rizwanshabbir@gcuf.edu.pk b professor, lyallpur business school, government college university, faisalabad, pakistan c phd student, lyallpur business school, government college university, faisalabad, pakistan article details abstract history: accepted 10 may 2022 available online june 2022 this paper aims to investigate the impact of sustainable practices especially sustainable production and sustainable supplier management on supply chain performance. this empirical study demonstrates the contextual examination of sustainable practices especially with reference to an emerging economy like pakistan. survey was employed to collect data from 100 food manufacturing firms. exploratory factor analysis and structure equation modeling were used through amos to test hypothesis. the results reveal that sustainable production and sustainable supplier management both significantly impact triple bottom line. however, sustainable production generates stronger impact on social performance, while, sustainable supplier management significantly effects environmental performance. additionally, the findings provide valuable insights regarding the use of sustainable production and sustainable supplier management and their impact on supply chain performance. finally, it propagates utility of ecological value chain management mentioning the impact of couple of sustainable practices on tipple bottom line. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: professional skills, coproduction, healthcare, performance, workflow efficiency jel classification: j24, k32 doi: 10.47067/reads.v8i2.443 corresponding author’s email address: rizwanshabbir@gcuf.edu.pk 1. introduction pakistan has been striving to improve the healthcare system and has developed many strategies and reforming programs. pakistan has also joined hands with international and national ngos further to speed up the process of healthcare services betterment. the healthcare sector of pakistan includes public and private stakeholders, delivering medical facilities at primary, secondary, and tertiary care centers. public hospitals and medical institutions are government-operated. these are supported with government funding and provide free healthcare services to the citizens. the private healthcare sector provides health services to above 71% of the population. because most private hospitals are profitoriented, they try to offer better health services to patients than the public sector. the pakistan social review of economics and development studies, vol. 8 (2) 2022, 141 153 142 and living standards measurement (pslm) survey shows that 67.4% of pakistani families seek suggestions from private doctors (pbs, 2021). pakistan's health service framework is struggling with various rudimentary difficulties. it is essential to reconsider the structure of the medical services segment to bring dynamic advancements. in the past few years, the health sector has introduced a promising national health vision 2016-2025 to deliver essential healthcare services to all populations and meet the sustainable development goals 2025 (kumar & bano, 2017). with the emergence of the covid-19 outbreak, it has become critical for patients living in remote places to receive healthcare services and consultations without necessarily being present at healthcare centers. as a result, more resilient and improved healthcare systems are needed in the post-covid-19 age, with added operational, communication, and technical support through advanced digital techniques to cater requirements of doctors and the nursing staff (chigurupati et al., 2020). pakistan is the world's sixth most populated country, and health reserves are insufficient to meet the needs of the people. pakistan is one of 57 nations with a significant shortage of health workers (rana, sarfraz, kamran & jadoon, 2016). a gallup report structured upon the pakistan economic survey held in 2015-16 indicates that the number of hospitals in the country in 2015 was 1,167. along with those hospitals were 5,695 dispensaries, 5,464 basic health units (bhus) or sub-health centers, 733 centers for child health and maternity issues, and 675 rural health centers. the total number of beds was 118,869, and its availability for the general public was 1,613 per bed. in pakistan, the doctorto-patient ratio is 1:1300, the doctor-to-nurse ratio is 1:2.7, and the nurse-to-patient ratio is 1:20 (nishtar, 2006). the human development index (hdi) ranks pakistan 154th out of 187 countries (uncp, 2021). the country's healthcare sector lacks integration and utility of it health applications, compulsory healthcare supplies, and electronic health record maintenance systems (punjani et al., 2014). furthermore, the availability of ehealth services is limited in pakistan due to inconsistent technological execution and a dearth of ehealth infrastructure development planning (kumar & bano, 2017). with the emergence of technology, the healthcare sector evolved from paper-based to paperless systems. e-health uses it and digital communication to enhance the approach, efficiency, efficacy, and quality of medical and corporate procedures used by healthcare organizations and the healthcare workforce. it involves gathering, analyzing, and disseminating information to provide care services. ehealth, or digital health, is an essential instrument to assist nations in establishing secure, effective, and sustainable healthcare delivery systems (who, 2021); globally, the fast growth of ict and ehealth efforts promotes changes in care services systems (lapão & dussault, 2017). it is additionally critical that most of the investigations about ehealth and its successful reception and use have been done in both developed (alvarez, 2004; eysenbach, 2001) and developing states (braa et al., 2004; mosse & sahay, 2003). the growing use of it technologies in health care is an emerging, developing, and underrepresented sector for coaching and capacity development for health professionals. in today's demanding environment, information systems (is) have received much attention in the healthcare business to improve healthcare facilities' efficiency and effectiveness (safdari et al., 2014). rapid and comprehensive improvements in medical technology have made electronic health information system management, or e-hmiss, a priority for care services (saghaeiannejad-isfahani et al., 2015). the failure to execute a sustainable national health system with increasing population figures review of economics and development studies, vol. 8 (2) 2022, 141 153 143 has emphasized the need for a robust e-hmis. the pandemic health emergency of covid-19 in developing countries also called attention to a robust health performance system. the critical issues regarding smart governance depend on three attributes: firstly, management should use smart technological devices for executing different public service tasks (madon et al., 2007). likewise, the government of pakistan (gop) has operationalized "khidmat markaz," a national identification system and computerized passport system. the expansion towards smart governance linked all these databases for exploring economic development tools. economic indicators worldwide showed a transformation in industrialization from service to specialized products with value-added services. thirdly, governance in the 21st century calls for a set of rules to supervise citizen protection privacy policies that require a privacy-based design method. such smart governance enables private and public institutes to create and share a free market that utilizes general citizen information with various stakeholders and specific citizen information with specialized public service providers and strictly uses this information (cordella & willcocks, 2012). 2. factors for a sustainable healthcare system there is a requirement for social capital and capabilities to advance ehealth. the training, knowledge, and consciousness of professionals and doctors regarding the utilization of it applications and their applicability in hospitals can be developed gradually and sustained by providing appropriate instruments and apparatus and suitable training on regular spans for progressively immediate access to the information available on the web. malik et al. (2009) critiqued that the slight utilization of the web by the healthcare experts of developing countries like pakistan is more often a direct result of inappropriate instruments and gadgets and deficiency of appropriate training programs on the subject of ehealth systems. kimaro and nhampossa (2004) discussed that ehealth ventures in developing nations are often fruitless because of it experts' deficiency, information, and capability in ehealth frameworks. it experts require training and instruction to utilize all ehealth applications successfully. qazi and ali (2011) illustrated that training is a continuous component, and healthcare experts should be well-trained. 2.1 professional skills katz (1955) proposed that efficient management systems depend on three essential personal skills: technical, human, and conceptual. katz claimed that these abilities are distinct from attributes or qualities. individuals acquire skills to function and accomplish their objectives or goals, but characteristics or traits define their inherent selves. the capacity to use one's knowledge and talents to achieve goals or objectives is called skill. katz (1955) first introduced these three skills approaches and postulated that these skills (conceptual, human and technical) provide a basis for individual efficiency and performance in any working environment. later work by mumford et al. (2007) supported katz's work by further adding that functional or strategic skills are aligned with conceptual skills while interpersonal or communication skills are aligned with human skills. katz's model is described as the best framework for the capacity development of employees (griffith et al., 2019). shiferaw et al. (2020) studied the ts of clinical practitioners in public hospitals. they concluded that it increases the healthcare provider's capacity to perform the care activities by increasing their knowledge of the it system. bjerrum et al. (2018) recommended that simulation-based it systems are beneficial in acquiring ts for healthcare personnel. robinson and kersey (2018) concluded that physicians' training programs on electronic health records (ehr) systems significantly influence care quality, accuracy, and safety. melby et al. (1997) also suggested a significant relationship between healthcare staff cs and care service efficiency. such as, physician cs must be maintained with the advancement of health systems into the digital era since the lack of synchronous and asynchronous cs review of economics and development studies, vol. 8 (2) 2022, 141 153 144 limits the technologies' potential added value (lum et al., 2020; van galen et al., 2019). waheed et al. (2021) examined the influence of functional capabilities on employee effectiveness in the healthcare industry and found a significant association. in another study, karatepe et al. (2007) showed that the service industry's self-efficacious frontline employees (fles) perform their jobs at elevated levels. peña et al. (2016) also specified that fs could improve workflows, value co-creation, and system performance in healthcare. parra-rizo and sanchis-soler (2020) also confirmed that individuals with fs face fewer difficulties performing their responsibilities and getting along with others. h1a-c: professional skills (functional, technical, communication) directly impact health system performance 2.2 workflow efficiency and coproduction rezai-rad et al. (2012) explain that to deal with clients' relevant concerns and maintain an average utilization of icts in health associations, medical services providers must be offered a chance to participate in information systems improvement processes incorporating the is substance as indicated by their necessities. coproduction is often regarded as a viable approach for addressing critical difficulties in the health sector (mcmullin & needham, 2018; voorberg et al., 2015), where resources are severely limited. coproduction also pressures healthcare systems by posing a long-term threat if resources are not blended. for this purpose, researchers have pushed for more individualized care based on new relational models in which informal carers and local communities share duties with care professionals, allowing people to feel like team members and improving service quality (marsilio et al., 2021). first-line healthcare professionals actively collaborate with healthcare stakeholders such as health providers, general practitioners, social services, and others to coproduce the care services (agyepong et al., 2021; turk et al., 2021). h2a-c: professional skills (functional, technical, communication) directly impact coproduction in the healthcare system critical organizational issues such as teamwork, work demands, information technology, and structure within healthcare operations can impact clinician efficiency. furthermore, intensive care's dynamic nature necessitates doctors to change their jobs often while executing patient care activities (bastian et al., 2016). as a result, a deeper understanding of the numerous parts that make up workflow is an integral part of process optimization. efficient workflow describes how tasks and responsibilities in an organization are done with the help of the best available technology and methods to avoid delays and unnecessary resources (carlisle et al., 2020). understanding the interrelationships influencing and shaping workforce behavior can help healthcare operations drive workflow efforts. healthcare practitioners can more quickly identify the leverage points leading to desired workflow results if they have a deeper grasp of the health information management system and its aspects (e.g., processes, information). the work of denton et al. (2018) explored the effect of electronic health records (ehrs) on workflow efficiency (we) of clinics and associated performance standards. the authors determined that it-based systems like ehr improve the workflow of clinics, patient safety, and quality of care services. similarly, holman et al. (2016) investigated the primary care physicians' (pcps) workflow and their effect on care performance and patient relationships by concluding that ict platforms played a vital role in improving care efficiency. lapão and dussault (2017) reviewed the past literature on e-health and its effect on care service staff efficiency. the authors disclosed that e-health improves clinical decision-making, disease management and control, and workforce efficiency. moreover, bastian et al. (2016) developed a three-phase framework model for hospitals to identify and categorize different workflows for better quality care. the model proved worth supporting the care staff to improve review of economics and development studies, vol. 8 (2) 2022, 141 153 145 workflow efficiency. h3a-c: professional skills (functional, technical, communication) directly impact workflow efficiency in the healthcare system 3. methodology in line with the quantitative study, this part of the research examines the impact of required professional skills, workflow efficiency, and coproduction on the performance outcomes of e-hmis. this research work is based on primary data collection and quantitative methodological choice. the data is collected through a structured survey instrument from the frontline employees working in the public hospitals of big cities in pakistan through a questionnaire. the study variables were identified, and all the measurement scales for variables were adopted, i.e., fs (7-items), ts (8-items), cs (7-items), we (7-items), cp (11-items), and hp (6-items), were developed and validated by the researchers as a part of the higher education commission of pakistan's research project "a step towards smart hospitals: sustainable health information system from big data perspective" and the same were adopted for this study. each construct was measured on a five-point scale from "1=strongly disagree" to "5=strongly agree". the participants of this study were frontline workers who operate computerized healthcare management information systems and have the necessary computer literacy to use the it-based databases. employees aged 25 years or above were considered the target sample to obtain reliable and meaningful responses. almost half of the respondents were 25-30 years old, and the rest were aged above 30 years. most of the respondents, i.e. almost 48.4%, had an intermediate education level, and the rest were qualified with a bachelor's 16.3%, a master's 29%, and above master's 6.3%. table 1: demographics profile age in years frequency percent gender frequency percent 25-30 85 53.5 male 90 56.60 31-35 39 24.5 female 69 43.40 36-40 10 6.3 above 40 25 15.7 experience in years education less than 5 83 52.21 intermediate 77 48.4 5-10 30 18.86 bachelor 26 16.3 11-15 29 18.23 master 46 29 more than 15 17 10.70 above master's 10 6.3 4. results exploratory factor analysis is a statistical technique to refine the construct measurement scales by reducing the number of items utilized. efa is a necessary procedure in the development of scales for questionnaires. it is also used to explore the multidimensionality of the constructs. efa divides the items of a construct to statistically and theoretically meaningful sub-dimensions to help define the concepts and better empirical investigation. efa for this research work was conducted on the collected data using statistical package for social sciences (spss) v.22. software. the objective of efa was to recognize the items in the questionnaire that significantly loaded the constructs. secondly, future researchers assessed the underlying multidimensionality of the constructs for better application in the pakistani healthcare sector or similar contexts. review of economics and development studies, vol. 8 (2) 2022, 141 153 146 principal components analysis was employed with varimax factor rotation. the number of items was retained based on the commonalities, which should be ≥ 0.5 (mitra & datta, 2014). at the same time, the number of factors was kept by assessing the (i) eigenvalue criteria (eigenvalue should be >1) and (ii) cumulative variance explained by the factor, which should be more than 50%. the kaiser-meyer-olkin (kmo) test value of 0.784 was attained for functio0nal skills, which is considered suitable for sampling adequacy (≥0.6 value is deemed to be good). two factors were achieved with more than one eigenvalue. the first factor with an eigenvalue of 3.201 explained 33% of the total variance. the second factor with eigenvalue 1.207 explained more than 29% of the total variance. the first two factors explained more than 62% of the cumulative variance. the kmo test value of 0.739 was attained for communication skills considered good for sampling adequacy (table-2). the bartlett's test of sphericity for communication skills was also significant, with a chi-square value of 457.306 at the significance level of 99%. two factors hold eigenvalue above one. the first factor with an eigenvalue of 3.306 explained 34% of the total variance. the second factor with eigenvalue 1.391 explained more than 32% of the total variance. these two factors explained above 67% of the cumulative variance. the kmo test value for the technical skills construct was 0.812, which is considered a good indicator of sampling adequacy (table 2). the bartlett's test of sphericity for technical skills was also significant, with a chi-square value of 676.398 at the significance level of 99%. varimax factor rotation with kaiser normalization was performed to refine the dimensions of technical skills. the rotated component matrix presented in table-25 depicts that ts1, ts2, ts3, and ts8 formed component 2. component 1 consisted of ts4, ts5, ts6, and ts7. the items loaded on the second factor were related to the user's knowledge about and familiarity with information and communication technology and ehmis, so it was named "tech-familiarity." sample items include "i am familiar with ict (information and communication technologies)" (ts7). items in the first component were about the system operating skills of e-hmis users. for example, "i can troubleshoot software-related issues" (ts5). thus, the second factor was termed "operating skills." the kmo test value for the coproduction construct was 0.762, which is considered suitable for sampling adequacy (table-2). the bartlett's test of sphericity for technical skills was also significant, with a chi-square value of 855.737 at the significance level of 99%. the first factor with an eigenvalue of 4.455 explained >21% of the total variance. the second factor with eigenvalue 1.572 explained more significant than 20% of the total variance. the third factor with an eigenvalue of 1.454 explained almost 20% of the variance, whereas, the fourth factor with an eigenvalue of 1.034 explained approximately 16% of the total variance. these four factors explained above 77% of the cumulative variance. varimax factor rotation with kaiser normalization was performed to improve the dimensions of coproduction. the rotated component matrix below depicts that cp9, cp10, and cp11 formed component 1. component 2 consisted of cp4, cp5, and cp6. the third factor contained the items cp1, cp2, and cp3. the final dimension of coproduction loaded item numbers cp7 and cp8. the items loaded on the first factor were related to the user's self-efficacy to coproduce in e-hmis implementation, named "user self-efficacy." sample items include "i am capable of providing constructive suggestion to improve health information system." (cp9). the second component loaded items related to the consideration by the organization of the users' role in the coproduction process. for example, "my organization often asks my opinion for potential changes" (cp5). so, the second component was named "consideration." the third factor contained questions about the organization, user responsiveness, and knowledge sharing and hence was called "knowledge sharing." the example item is "my organization promptly responds to my queries" (cp3). the fourth factor containing items cp7 and cp8 was awareness of review of economics and development studies, vol. 8 (2) 2022, 141 153 147 challenges such as cost, and time needed in the coproduction process. thus, it was called "awareness." the sample item is "i know that coproduction process is demanding/effort-full" (cp8) the kmo test value for the "healthcare system performance" construct was 0.775, which is considered good for sampling adequacy. the bartlett's test of sphericity for technical skills was also significant, with a chi-square value of 321.866 at the significance level of 99%. to improve the dimensions of the construct "workflow efficiency," varimax factor rotation with kaiser normalization was performed (table-43). the rotated component matrix below depicts that hp4, hp5, and hp6 formed the first component. in contrast, the second factor was loaded with hp1, hp2, and hp3. the first factor loaded items about the operational sustainability of the healthcare system performance, e.g., "improve energy (electricity) efficiency" (hp6). hence, it was identified as an "operational sustainability" performance. items in the second component were about the increase in the economic sustainability of the healthcare system due to e-hmis. for example, "increased the hospital revenues." (hp2). the second factor was termed "economic sustainability" performance. table 2: principal component analysis for healthcare performance system motive (eigen-value) kmo bartlett's test variance explained cronbach's alpha composite reliability functional skills .784** 351.245** 0.805 0.860 problem solving skills 33.088 analytical skills 29.882 communication skills .739** 457.306** 0.809 0.862 user-oriented 32.940 other-oriented 34.161 technical skills .812** 676.398** 0.876 0.901 operating skills 36.474 tech-familiarity 32.113 coproduction .762** 855.737** 0.836 0.870 user self-efficacy 21.373 consideration 20.088 knowledge sharing 20.003 awareness 15.953 workflow efficiency .750** 495.753** 0.832 0.875 efficiency 39.363 effectiveness 28.275 healthcare system performance .775** 321.866** 0.772 0.846 operational sustainability 36.478 economic sustainability 33.230 the results revealed that cronbach's alpha values for all the six constructs were greater than 0.70, ranging from 0.772 to 0.876, which fulfilled the statistical cut-off criteria recommended by the researchers (rahimnia & hassanzadeh, 2013). composite reliability is another measure to assess the reliability and internal consistency of the construct and the items loaded on it, similar to cronbach's alpha (netemeyer et al., 2003). it indicates the cumulative shared variance that all the items of a specific construct combinly explain in that construct. logically, the observed items intended to measure review of economics and development studies, vol. 8 (2) 2022, 141 153 148 their latent construct should demonstrate a good amount of variance to be called adequate representatives of the latent construct. according to hair et al. (2017), the composite reliability value should be greater than 0.70. the results presented in table-2 depict that all the six measures were found to have good reliability values of cr>0.70 (hair et al., 2017). the values ranged from 0.846 to 0.901, where the construct of technical skills had the highest composite reliability of 0.901. table 3: r square construct r square r square adjusted coproduction (cp) 0.312 0.299 workflow efficiency (we) 0.333 0.320 performance of healthcare system (hp) 0.516 0.500 the value of r-square is a statistical measure that indicates the proportionate amount of variance that the independent variable predicts in the independent variable. the r-square value of 0.25, 0.50, and 0.75, represents a weak, moderate, and substantial variation (hair et al., 2017). the table-3 shows that coproduction, workflow efficiency, and healthcare system performance had an r square value of 0.367, 0.312, 0.333, and 0.516, respectively. the total effects table-4 shows the cumulative effects of functional skills on coproduction (β=0.362 and p <0.001), workflow efficiency (β=0.404 and p <0.001), and healthcare system performance (β=0.218 and p <0.001). thus, the good functional skills of e-hmis users can enhance the positive outcomes through increased coproduction and workflow efficiency, which can, in turn, have positive impacts on overall healthcare system performance through e-hmis. technical skills are also significant predictors of workflow efficiency while utilizing an e-hmis with a β coefficient of 0.194 at p > 0.001. similarly, the most significant impact of technical skills of ehmis users is finally on the improvement of healthcare system performance, which is also previously seen in the direct and indirect effect results. thus, the technical skills of e-hmis users are a source of better healthcare system performance due to a statistically significant coefficient. table 4: total effect of proposed hypotheses hypotheses sample mean t-value confidence interval 2.5% 97.5% functional skills -> health system performance (h1a) 0.21* 2.340 0.023 0.389 communication skills -> health system performance (h1b) 0.27** 4.431 0.145 0.372 technical skills -> health system performance (h1c) 0.40** 5.910 0.272 0.546 functional skills -> co-production (h2a) 0.36** 4.239 0.184 0.521 communication skills -> co-production (h2b) 0.31** 4.499 0.168 0.439 technical skills -> co-production (h2c) 0.27* 3.041 0.087 0.428 functional skills -> workflow efficiency (h3a) 0.40** 4.867 0.228 0.561 communication skills -> workflow efficiency (h3b) 0.37** 5.696 0.237 0.486 technical skills -> workflow efficiency (h3c) 0.20* 2.915 0.070 0.322 haddad (2017) also found that functional competencies (task-related skills) and managerial competencies (communication skills etc.) increase employee performance. review of economics and development studies, vol. 8 (2) 2022, 141 153 149 5. discussion and conclusion the fs and ts of the frontline employees, the first line users of e-hmis, directly enhance the cp of healthcare services and we of the employees. it is because better fs improves the efficacy of the employees to participate as active stakeholders in the cp process of the healthcare system and efficiently perform workplace tasks. similarly, as the technology-based system of e-hmis needs a skill set of technical abilities to operate such a system, the frontline employees having ts can better use and utilize the computerized system. they can participate in the value co-creation and cp process of the digitalized medical record system by providing feedback about the advantages and disadvantages of the prevailing system. the e-literacy of the frontline employees in the form of ts can enhance their we through agility, effectiveness, and efficient work management. this is why ts has a direct positive association with e-hmis-driven overall healthcare system performance. studies indicate that the technical literacy and competency of e-hmis users is a crucial factors for the better performance of this technology-based system (heeks, 2006). similarly, the person-job fit theory also highlights the importance of employee skills for achieving better performance. thus, better cs can enhance their functional and task performance ability through direct feedback and interaction with health services clients, which in turn help them in cp of healthcare services. similarly, this positive impact of cs on fs of employees also enhances we because they are better able to understand and perform the tasks according to the healthcare service consumers' needs. technology is the need of time. the new age of the digital world has integrated technological aspects in every field of life, and it is crucial to follow the trends by allowing a change in the traditional system. the healthcare sector works as the backbone of the public services structure in any economy. better health is the citizens' fundamental right, which is directly dependent upon a better and more efficient healthcare sector that meets the needs of people cost-effectively. government and private institutions should arrange training and education programs to enhance the functional, communication and technical abilities of the frontline employees to achieve the benefits of e-hmis through co-productivity and operational efficiency. frontline employees are the doors for all the inputs by service seekers. they are also the first and foremost users of e-hmis because they initiate the record entries in the system. increasing these employees' literacy and competency level can enhance the we and stakeholders' participation in the cp process, strengthening e-hmis performance. the study model can be applied to design frontline employee’s skill-building training programs through public and private collaboration. improving workers' skills can enhance their job satisfaction and bring performance benefits. the theoretical contributions of the paper include empirical evidence in the context of technology and healthcare services and e-healthcare system literature. it provides insights into the antecedents of e-healthcare system performance through a quantitative study. secondly, the article extends the research about frontline employees and their required basic skills in the emerging domain of e-healthcare system application. thirdly, the literature about cp and we is also enhanced by studying their role as factor of e-hmis performance. moreover, the cp process is emphasized by studying the less researched role of frontline employees as a stakeholder in service sector performance. acknowledgment this research is sponsored by the "higher education commission" under project no. 9577/punjab/nrpu/r&d/hec/2017 titled as "a step towards smart hospitals: sustainable health information system from big data perspective" review of economics and development studies, vol. 8 (2) 2022, 141 153 150 reference agyepong, i. a., godt, s., sombie, i., binka, c., okine, v., & 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(2021). the who stepwise approach to surveillance (no. who/euro: 2021-2446-42201-58182). world health organization. regional office for europe. https://apps.who.int/iris/bitstream/handle/10665/341077/who-euro-20212446-42201-58182-eng.pdf?sequence=1. http://www.ncbi.nlm.nih.gov/pmc/articles/pmc4355824 https://doi.org/10.1186/s12913-020-05848-5 https://doi.org/10.1136/bmj.m4752 https://www.pk.undp.org/content/pakistan/en/home/library/annual-reports/undp-pakistan-annual-report-2020.html https://www.pk.undp.org/content/pakistan/en/home/library/annual-reports/undp-pakistan-annual-report-2020.html https://doi.org/10.1080/0142159x.2018.1481284 https://doi.org/10.1080/14719037.2014.930505 https://doi.org/10.21203/rs.3.rs-741263/v1 https://apps.who.int/iris/bitstream/handle/10665/341077/who-euro-2021-2446-42201-58182-eng.pdf?sequence=1 https://apps.who.int/iris/bitstream/handle/10665/341077/who-euro-2021-2446-42201-58182-eng.pdf?sequence=1 review of economics and development studies, vol. 7 (3) 2021, 357-370 357 impact of network factors on supply chain performance: a case of textile sector of pakistan nadir munir hassan a , muhammad nauman abbasi b a assistant professor, department of business administration, air university, multan, pakistan email: nadir.magsi@aumc.edu.pk b professor, institute of management sciences, bahauddin zakaraiya university, multan, pakistan email: abbasimna@bzu.edu.pk article details abstract history: accepted 30 july 2021 available online september 2021 this study elaborates the importance of network perspective in driving performance outcomes especially in the context of agriculture (textile) supply chains. the impact of network factors (i.e. actors, resources, and activities) on overall supply chain performance have been explored. by deploying survey, a two-stage cluster sampling was used to attain study objectives. the textile firms from punjab and sindh were selected for data collection. through a structured questionnaire, 482 responses were generated and analyzed using pls-sem. the findings of the study confirmed that network actors (textile firms), the activities they perform, and the resources they have, generate a significant and positive impact on supply chain performance. the study recommends the need for understanding the role of integrative initiatives between the studied variables, i.e. network factors. further, it is argued that integrated network factors can generate a significant impact on supply chain performance. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: network perspective, supply chain performance, supply chain integration, agriculture (textile) supply chain jel classification: r41, l25, l29 doi: 10.47067/reads.v7i3.378 corresponding author’s email address: abbasimna@bzu.edu.pk 1. introduction in the recent era, increasing interest in technological adoption and digitization at large has raised the need for mindful synchronization between firms, and supply chains. specifically for agrobased industries which are striving to compete in the market for better profits and also significantly contributing to the overall gdp of the country, through increased reach to international markets. in the given era, businesses are heading towards saturated and complex markets, and the competition has moved beyond firms, and now it’s between supply chains. the concept of looking onto firms, from the perspective of supply chain management isn’t new (ahmed, munir, & sameer, 2020). whilst, consistent development and up gradation of theories and new practices reflect that supply chains are increasingly prone to disruption these days. to tackle the issue of disruption, inconsistencies, and to enhance performance, there is an ever review of economics and development studies, vol. 7 (3) 2021, 357-370 358 rising need for mindfully aligning the chains processes (khan & qianli, 2017). it is believed that better integration across chains can significantly enhance chain performance (green, mcgaughey, & casey, 2006; ho, au, & newton, 2002). for example, covid-19 has been one such recent environmental phenomenon that has reaffirmed practitioners, researchers and scholars, to look into countering strategies, managing natural and supernatural uncertainties across value chains. this is the era in which there is an ever rising need for thoughtful relationship management within and across the chains. it is need of the hour to realize that, in the given competitive business environment, chains and firms can hardly operate in isolation. firms should not undermine the significance of integrating across chains, from raw material acquisition to service delivery to end consumers (farooq & o’brien, 2012; mungan, yu, & sarker, 2010). while seeking collaboration, one needs to be mindful of the fact that experts have started seeing supply chains as a complex network of manufacturing, processing and resource delivery (aslam & amos, 2010; zhou, tu, han, xu, & ye, 2017), who’s operation management require network-based optimization. likewise, the sequence of flow in scn management deals with the allocation of material, information and processes to achieve multiple objectives (ke, huang, & gao, 2018; wang, hu, & zhou, 2017; zhang et al., 2019). for the given reason there exists a dire need for firms (among networks) to develop strong relationships to seek appropriate performance outcomes. accordingly, the study was initiated to “examine the influence of network factors (i.e. actors, resources, and activities) on supply chain performance”. the textile industry of pakistan is targeted to verify the phenomenon under investigation due to its significant contribution to gdp and global markets, i.e. total export of the pakistan textile sector is 9.6 million us dollars and this makes around 8.5 percent of pakistan's gdp (bhutto & jamal, 2020). in reality, the textile supply chains (tsc) are comparatively complex because of number of reasons including: demand variability, environmental concerns, product variety, lack of product standardization, and seasonality (majumdar & sinha, 2019). despite many studies have explored the significance of integrated network perspective still studies have failed to provide an executable solution and hence remained inconclusive. therefore, an attempt has been made to understand the role of network factors and to measure their impact on supply chain performance especially in the context of textile supply chains. 2. literature review with constant increase in operational technicalities for organizations, reduced life cycles of products, and ever rising need for upgraded customer service made researchers and managers to focus on supply chain management (davis, 1993). since 1990s, supply chain view point have been at the epicenter of firms looking to provide their stakeholders with services, in line with the market trends. resultantly they have been eyeing managing their operations in line with best supply chain practices (e.g. (stevens, 1989). scm has been defined as the set of tools and techniques used for managing supply chain activities for effective coordination to improve overall supply chain performances (kusi-sarpong, sarkis, & wang, 2016; liu, bai, liu, & wei, 2017). it’s reasoned that efficient management of supply chains depends on; functional attributes, resources at hand, and demand fulfillment (heckmann, comes, & nickel, 2015). ideally, all concerning philosophies of scm consider all supply chain functions for sc strategy formulation, in pursuit of enhancing business performance (borges & vieira, 2014; muysinaliyev & aktamov, 2014). earlier literature on supply chain still contains contradictory viewpoints, despite number of research initiatives to understand multiple aspects of supply chain, and very scarce performance outcomes of scm have yet been explored (bala, 2014; oualid, mocan, dumitrache, & amine, 2016). therefore, number of scholars have propagated the need for detailed insights into the effect of relationship between firms, the review of economics and development studies, vol. 7 (3) 2021, 357-370 359 activities they perform, and the resource they have, on sc performance outcomes. the significance of sc relations from the viewpoint of the network perspective is not hidden anymore. a network is a system shaped by core factors (e.g. actors, activities and resources) that join the number of linked firms (l. jraisat, 2016b). a network is defined as a set of links among constellations of actors (jarillo, 1988; ritter & gemünden, 2004; sanzo et al., 2003) and these links make connections with each other to provide functions in a two-way process for overall firms’ performance. network perspective helps in providing with a workable framework for evaluating the business dynamics, wherein, firms (as actors) aimed to have better control and resource allocation over vertical supply chains including production, logistics and marketing activities (mikkola, 2008). herein, the management of network relationships can be viewed as a primary driver of both b2b and b2c markets (grönroos, 2011; c. harland, zheng, johnsen, & lamming, 2004; lazzarini, chaddad, & cook, 2001). unfortunately, lack of coordination, synchronization and integration among network factors is regarded as one of the vital reason behind deterioration of sc performance. in networks, actors (firms) connect each other functionally to bring suppliers, producers, logistic providers and consumers together. the key actor creates a position that enhances strategic transaction and firms’ performance (sanzo, santos, vázquez, & álvarez, 2003) and is being flexible to be oriented by customer preferences (dalvi & kant, 2015). authors like, (c. m. harland, 1996b; mikkola, 2008; ritter & gemünden, 2004) have recommended, business stature (e.g. investment with partners, firms reputation, and leadership), social alignment (i.e. socializing and developing a certain integrative bond with channel members across value chain). business position (i.e. leadership position in the industry backed the reputation), social bonds (e.g. social activities and friendships with other members of the supply chains), image (e.g. family name, and recognition intensity of the firm), & relationship partners (e.g. partners of new products) to illustrate the role of actors in a network perspective. similarly, effective resources allocation and utilization, is always considered as a hallmark to attain competitive advantage, hence, wise allocation of resources especially within network perspective leads to remarkable gains within and across the chain (mikkola, 2008). the extent to which resources are shared notably influence the performance of the firm and their chain members (christensen & klyver, 2006). literature suggests four classifications of resource that includes; physical resources (e.g. facilities that have the ability to assist the flow of information, both within and across the organizations), financial resources (e.g. staff related assistance, and other facilitations) and informational resources (i.e. information sharing both inside and beyond firms among channel members) (ritter, 1999). similarly, sc activities play their part in converting resources into meaningful form, in order to encourage actors to attain their objectives and fortify the interconnectivity within the supply chain networks. moreover, activities have an important role in improving coordination, cooperation & collaboration between actors (bourlakis & bourlakis, 2005). sc activities majorly include; exchange activities (i.e. flow of information, products, personnel and money), planning activities (i.e. analyzing the internal networks and thinking over the future course of action), organizing activities (e.g. assembling and allocating the available resources) and controlling activities (i.e. checking mechanisms through staff management and information exchange) (ritter, 1999). this is where networks create various exchanges to reach out the required resources and through mindful leadership, access to prompt information, which could help in making the right decisions for improved businesses and sc performance. review of economics and development studies, vol. 7 (3) 2021, 357-370 360 interestingly, sc performance is a multidimensional construct, hence, measured differently by different authors. for example, maestrini et a. (2018) stated it as “a set of metrics used to quantify both the efficiency and effectiveness of actions.” while, nugraha and hakimah (2019) studied sc performance in the context of supplier partnership, customer relationship, information sharing, and technology adoption. sudusinghe and seuring (2020) (for textile & apparel supply chains) have measured sc performance considering social and economic sustainability as performance parameters. resultantly, high performing supply chains usually depend on their cutting edge abilities of their channel members, and on their endeavors to establish relationships across supply chain networks (michalski, montes-botella, & narasimhan, 2018). in line with the stated discussion, the given hypotheses have been formulated for empirical verification; h1: network actors (sc firms) have a significant impact on sc performance. h2: network resources have a significant impact on sc performance. h3: network activities have a significant impact on sc performance. 3. research methodology a structured questionnaire was used to test the hypotheses. while, a partial least squares structural equation modeling (pls-sem), widely recommended for management research (kaufmann & gaeckler, 2015), was applied to investigate and testify the phenomenon under investigation. grounded in the literature, a framework has been established to investigate the direct relationship between network factors (i.e. network actors, resources, and activities) and sc performance. the theoretical framework comprises of one broader iv (i.e. network perspective), divided into three aspects (i.e. network factor), termed as ac, rs, & av, while, sc performance (scp) is observed as dv. smart pls 3 ringle, da silva, and bido (2015) along with bootstrapping technique were utilities to observe the significance level of assumed relationships. initially, framework was used to gather firstorder constructs, followed by estimation of structural model, and second-order constructs estimation (joseph f hair, risher, sarstedt, & ringle, 2019). 3.1 population and sampling technique: the textile sector of pakistan was selected for data collection and empirical verification of the phenomenon under investigation due to its economic significance. unfortunately, the textile sector is stagnant for a long, when related industries in neighboring countries like, india, and bangladesh have shown reasonable growth. this increases the need to probe the factors that hinder sc performance in this sector. literature also emphasizes on increasing attention towards the implementation of integrational strategies which can greatly influence sc performance and can enhance the competitiveness in textile supply chains (verma et al., 2020). the target population was comprised of textile units. official representative authorities/bodies, i.e. all pakistan textile mills association (aptma) and all pakistan bedsheets and upholstery manufacturers association (apbuma) were requested to provide a list(s) of textile units operating in these regions. the list(s) includes 1776, registered textile units, involved in spinning, weaving, processing (knitting), dyeing, printing, garment manufacturing and filament yarn manufacturing. the listed firms were divided into four geographical clusters (i.e. punjab, sindh, baluchistan and khyber pakhtunkhwa). furthermore, using multi-stage, cluster probability sampling was applied to consider only ‘registered textile units’ operating in punjab (i.e. largest cotton producer) and sindh (i.e. seaport for export purposes). review of economics and development studies, vol. 7 (3) 2021, 357-370 361 table 1:cluster sampling with proportionate technique details into clusters firms in cities total textile firms rule of thumb (multiply by 5/ 10 max) sample size req. morgan table error: 5% req. sample from each cluster (city wise) questionnaire distributed (organization wise) total= 726 response received (organization wise) total= 493 city wise response rate (in %age) overall response= 68% punjab multan 228 1776 200/ 390 322 50 97 64 66 lahore 384 1776 200/ 390 322 84 146 104 71 faisalabad 443 1776 200/ 390 322 97 178 136 76 sindh karachi 431 1776 200/ 390 322 94 197 116 59 others 290 1776 200/ 390 322 64 108 73 68 managers representing marketing, operations and production and supply chain departments were selected as a respondent. practically, bigger sample size is preferable to avoid non-response bias (sekaran & bougie, 2003). however, due to the prevailing pandemic (covid-19), data collection remained quite challenging, yet it produced good output with a useable response of 482 (i.e. 68%), out of 726 distributed questionnaires. the demographic details are presented in table-2: review of economics and development studies, vol. 7 (3) 2021, 357-370 362 table 2:demographic specifications of the respondents 3.2 operationalization of the measurement instruments to measure ‘network actors’, 4-items scale suggested by c. m. harland, (1996b); l. jraisat, (2016b); mikkola, (2008); ritter & gemünden, (2004), while, for ‘network resources’ 4-items scale by l. jraisat, (2016b) and ritter, (1999) have been adopted. similarly, 4-items scale as suggested by l. jraisat, (2016b); ritter, (1999); ritter & gemünden, (2004) were adapted to measure the construct of ‘network activities’. finally, 11-item scale of sc performance has been adopted from (green jr, whitten, & inman, 2008). the responses were measured on likert scale, ranging from 1 to 7, wherein, 1 stands for strongly disagree and 7 stand for strongly agree. demographics description response rate % of responses gender male 408 84.64 female 74 15.35 age less than 30yrs 64 13.27 30-40yrs 298 61.82 41-50yrs 84 17.42 51-60yrs 36 7.49 above 61yrs 0 qualification college level 4 0.8 under graduate 326 67.63 post graduate 152 31.57 position top management / director / cfo / company secretary 62 12.86 general manager / sr. manager 214 44.39 production in charge / mill manager 206 42.75 operational sector spinning 221 44.60 weaving 121 25.10 knitting 27 5.5 dyeing and finishing 84 16.42 garments 40 8.38 company location multan 77 16 lahore 1070 22 faisalabad 123 25 karachi 131 27 others 44 10 review of economics and development studies, vol. 7 (3) 2021, 357-370 363 table 3:variables, items & cronbach alpha variables number of items cronbach alpha network actors my firm has a good image and a leadership position. 0.785 my firm keeps doing of social events and friendships with other actors. my firm is considered as a pioneer and family business recognized in the chain. my firm creates relationships with new actors. network resources my firm offers information exchange inside the firm and between firms. 0.719 my firm’s top management has financial support offered for staff and new development. my firm’s staff are trained by local and/or international experts. my firm provides infrastructures for harvesting and postharvesting. network activities there are exchanges of goods, services, money, information and personnel between my firm & its partners. 0.747 there are analyses of network quality and resources and network environment by my firm. there are formal and/or informal agreements between my firm & its partners. there are controls of the network output by my firm. sc performance my firm’s primary supply chain has the ability to deliver zerodefect products to final customers. 0.881 my firm’s primary supply chain has the ability to deliver value added services to end customers. my firm’s primary supply chain has the ability to eliminate late, damaged, and incomplete orders to final customers. my firms primary supply chain has the ability to quickly respond, to and solve problems, of final customers. my firm’s primary supply chain has the ability to deliver products precisely on time to final customers. my firm’s primary supply chain has the ability to deliver precise quantities to final customers. my firm’s primary supply chain has the ability to deliver shipment of variable size on frequent basis to final customers. my firm’s primary supply chain has the ability to minimize total product cost to final customers. my firm’s primary supply chain has the ability to minimize all types of waste throughout the supply chain. my firms primary supply chain has the ability to channel safety stock throughout the supply chain my firms primary supply chain has the ability to deliver smaller lot sizes and shipping case sizes to final customers review of economics and development studies, vol. 7 (3) 2021, 357-370 364 4. results considering the significance of common method bias in data (bagozzi, 2011), the current study used (un-rotated) factor analysis with 23 items of the constructs, reflected that none of the factors accounted for more than 50% of the variance. output revealed 36% of total variance accounted by a single factor that reflects the absence of common method bias. furthermore, in order to check the reliability and suitability of the data used, data screening was managed. based on the recommendations of joseph et al (2010), out of 493 responses, 11 responses were deemed invalid and hence eliminated. the descriptive scores (mean value) remained in between 5.52 to 6.36 and (standard deviation) 1.08 to 1.79. structural models were looked into after ensuring the reliability and validity of the variables under consideration, followed by measuring the relationships between latent variables. smart pls 3.0 by ringle et al., (2015) was used to determine causal links among the constructs in these theoretical models, and to evaluate the outer model (measurement model) and the inner model (structural model). this study adopts a two-step process; one is an assessment of measurement model and second one measurement of structural model (joseph f hair, ringle, & sarstedt, 2013; hair jr et al., 2014). further, confirmatory factor analysis (cfa) was employed and out of 23 items, 06 were deleted with loadings lesser than the cutoff value of 0.50. all variables have ave and composite reliability above the threshold value of 0.50 (fornell & larcker, 1981; hair jr et al., 2014), while, the values of cronbach’s alpha (above then threshold level, i.e. 0.7) reflects internal consistency. the discriminant validity was analyzed by using ave as recommended by (fornell & larcker, 1981). the comparison among the latent constructs as explained in table 4 & 5 summarize the square root of ave of the constructs; i.e. network actors (ac) = 0.821; network resources (rs) = 0.799; network activities (av) = 0.813; and sc performance (scp) = 0.74. table 4:loadings, composite reliability and ave constructs items outer loadings vif composite reliability average variance extracted (ave) network actor ar1 0.774 1.288 0.861 0.674 ar3 0.853 1.921 ar4 0.834 1.873 network activities av1 0.801 1.358 0.854 0.661 av2 0.787 1.602 av3 0.849 1.617 network resource rs1 0.787 1.408 0.841 0.638 rs2 0.774 1.396 rs3 0.834 1.419 sc performance scp1 0.674 1.774 0.906 0.548 scp2 0.694 1.991 scp3 0.718 1.752 scp4 0.827 2.69 scp5 0.749 2.446 scp6 0.824 2.877 scp7 0.741 2.179 scp8 0.678 1.672 review of economics and development studies, vol. 7 (3) 2021, 357-370 365 table 5:discriminant validity matric fornel larcker criterion network activities network actor network resource sc performance network activities 0.813 network actor 0.576 0.821 network resource 0.56 0.562 0.799 sc performance 0.598 0.641 0.67 0.74 the measurement model of the given study is as follows: figure 1:measurement model 4.1 assessment of significance of the structural model direct relationships this section elaborates both the structural (inner model) & measurement models (outer model), and direct relationships as emphasized by (joseph f hair et al., 2010). by making use of the criteria suggested by hair jr et al. (2014), the t – value greater than 1.64 is considered to be as significant, which helps in upcoming decisions concerning the formulated hypothesis. based on recommended t-value, all of the (03) direct hypothesis, were accepted. the structural model for the given direct relationships are as follows: review of economics and development studies, vol. 7 (3) 2021, 357-370 366 figure 2:structural model direct relationships the results presented in figure 2, generated with the help of smart-pls 3.2.8 (ringle et al., 2015), illustrate the path p-value, t-value, coefficient value and the standard errors. based on these standard values the hypothesis decision has been made regarding significance level of each hypothesis. while, table 6 indicates that those hypothesis which were supported in this current research have a pvalue of less than 0.05. table 6:hypothesis testing direct hypothesis beta standard deviation t statistics p values decision activities -> sc performance 0.187 0.044 4.301 0.000 supported actors -> sc performance 0.286 0.042 6.754 0.000 supported resources -> sc performance 0.439 0.044 10.060 0.000 supported 5. discussions the outcomes of this study, empirically verify the impact of network perspective (i.e. actors, resources, and activities), on sc performance. though, the outcomes are contextual and was specifically tested for textile supply chains, still it adds newness and valuable insights to the existing body of knowledge. by considering, multi-factors network factors, fundamental question like, why firms, when aligning their resources and activities with channel partners (as a network) can help in enhancing sc performance in developing nations, such as pakistan. however, the topic pursued for empirical outcomes is just a beginning in understanding the use of network perspective in tsc. empirical outcomes have reflected a positive significant relationship between all three network factors (i.e. actors, resources, and activities) on sc performance. it supports review of economics and development studies, vol. 7 (3) 2021, 357-370 367 the idea of channel members across agriculture (textile) chains exchanging, sharing, and coordinating their resources and activities with each other. the results authenticate that channel members need to come closer to each other and to strengthen their relations for better sc performance. the outcomes of the given study, conjoin with the outcomes and suggestions of the previous research studies, propagating a positive relationship between network factors and business performance outcomes (håkansson, havila, & pedersen, 1999; c. m. harland, 1996b; kahiya & dean, 2014; mikkola, 2008). it is important to note that practically, actors across textile supply chains are subject to number of procedural and bureaucratic contingencies, which hinder their smooth alignments across value chains. similarly, sc activities across agriculture (textile) chains are mostly managed at an individual level, but if managed in a coordinated manner across firms and chains, will help in managing the issues of both shortages and surplus of output produced. lastly, resources aren’t shared as such across chains, which causes the compromised performance outcomes. so, if resources will also be aligned across channel members will takes the burden off from all textile units, and compromised ones in particular and help them in contributing towards overall supply chain performance. practically, the study brings to fore, some of the future research related questions. future studies can look into the possibilities of, how to integrate network factors in a better planned manner, for achieving the overall sc performance (duffy, 2008; dyer & nobeoka, 2000; le, thi nguyen, & van nguyen, 2013). researchers can also pursue the longitudinal research approach, to develop a better idea on how, integration among network factors across industries takes place, and also on how it helps achieving the overall sc performance. furthermore, there has been a recent uprising on, use of multiple extent of supply chain integration across value chains, because of varying needs of industries. future researchers can check the relationship between multiple extents of sci along network factors, in generating overall chains performance. future studies can also introduce certain mediating (i.e. supply chain integration dimensions) and moderating variables (i.e. environmental complexity, environmental dynamism & environmental uncertainty etc.) in through the prism of interpretive lenses like resource based view, a-r-a model, and contingency theory to address the issues of multiple extents of integration, and contextual nature of value chains networks, across the globe. likewise, all industries are contextual in nature, and are usually subject to specific uncertainties, the role of moderating variables (e.g. environmental uncertainty, environmental dynamism, & role of culture etc.) can help researchers in developing a better understanding on how supply chains are better managed (wiengarten, li, singh, & fynes, 2019). lastly, the given study has implications for firms operating within agriculture (textile) sector of pakistan and beyond. by considering chains as networks of actors, their resources and activities, firms can take a step towards improving the overall performance. proper consideration in policy making on network orientation both at dyadic and chain level will be of great utility. it is believed that outcomes of this study, once implemented in true letter and spirit, will also help other industries and manufacturing sectors of pakistan to enhance their sc performance. keeping prevailing pandemic (covid-19) and geostrategic dynamics in mind, it will help pakistan to increase its textile exports, which eventually will takes the nation in achieving its larger goals of import substitution, ultimately enhancing firms, supply chain and national level performance. review of economics and development studies, vol. 7 (3) 2021, 357-370 368 references ahmed, r., munir, r., & sameer, m. 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(2017). a class of level-2 fuzzy decision-making model with expected objectives and chance constraints: application to supply chain network design. international journal of information technology & decision making, 16(04), 907938. review of economics and development studies vol. 5, no 4, 2019 859 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads interconnection of strategic integration, hrm effectiveness and market performance: evidence from banking sector of pakistan 1 muhammad waseem, 2 abdul majid, 3 hazrat bilal, 4 naveed farooq 1 phd scholar and assistant professor,department of management sciences, hazara university, mansehra: mwaseem@hu.edu.pk 2 associate professor, department of management sciences, hazara university, mansehra, pakistan 3 assistant professor,center for management and commerce,university of swat, pakistan: hbilal@uswat.edu.pk 4 assistant professor,institute of business studies and leadership, abdul wali khan university, mardan, pakistan naveedfarooq151@gmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 the main aim of current study is to highlight the effects of strategic integration (si) of hrm on hrm effectiveness (hrme) and market performance (mp) in banking sector of pakistan. in addition, the mediating role of hrme and moderating role of market orientation (mo) were also tested. a structured and standardized measures were used to gather data from the officers working in banking sector of pakistan. it was found that both vertical and horizontal integration of hrm positively affected hrme and mp of the banks. the results revealed that hrme mediates the relationship of si of hrm and mp. in addition, it was also observed that by nurturing a market-oriented culture, the organizations can further strengthen the relationship between si of hrm and mp. this study added valuable inputs into the existing research on the shrm integration and its effects on mp of the firms by incorporating the moderating role of mo and mediating role of hrme. the results suggested that si of hrm along with mo within an organization will not only improve the hrme, it will also lead to better mp. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords strategic integration, market effectiveness, market orientation, market performance jel classification: g14, g19 corresponding author‟s email address: mwaseem@hu.edu.pk recommended citation: waseem, m., majid, a.,bilal, h. and farooq, n., (2019). interconnection of strategic integration, hrm effectiveness and market performance: evidence from banking sector of pakistan. review of economics and development studies, 5 (4), 859-868 doi: 10.26710/reads.v5i4.901 1. introduction strategic integration of hrm refers to a complete integration of hrm process with organizational strategies, both vertically and horizontally (beer et al., 1984). vertical integration of hrm refers to the integration of hr strategy and corporate level strategy. horizontal integration focuses on internal alignment of different sub-functional units of hrm like staffing, human resource development and rewards management etc. (gratton and truss, 2003). jackson et al. (2014) in their study highlighted that si of hrm is positively associated with organizational performance (op). they argued that si differentiates shrm from traditional hrm research because shrm not only focuses on improving customer value, but it also highlights the contributions of hrm in improving firm performance. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 860 the organizational outcomes are the ultimate results, whereas, hr outcomes like responsiveness, effectiveness and efficiency of hr department are the immediate outcomes of si of hrm (rogers & wright, 1998). colakoglu, lepak and hong (2006) stated that, as an immediate outcome of si of hrm practices it enhances hrme, and as a result hrme influences the market and financial performance of an organization. therefore, hrme acts a bridge between si of hrm and various outcomes, preferably market performance. therefore, in this study, hrme is taken as a mediating variable. similarly, the mo is also considered as an important and related phenomenon in connection with si of hrm practices and various organizational outcomes (harris & ogbonna, 2001). it was argued that the market orientation (mo) can play a significant role in improving market performance (mp) by developing and maintaining a close relationship with the customers (hult & ketchen, 2001). gebhardt et al. (2006) highlighted that existing research is mainly focusing on external outcomes of mo and ignores the internal consequences of mo. kirca et al. (2005) also suggested that the researcher must also consider the internal employee related processes in the relationship of market orientation and various performance outcomes like mp. considering the importance of market orientation, this current study also tested the moderating role of market orientation in between the si and mp. 2. literature review 2.1 strategic integration of hrm there are numerous studies that highlighted the importance of strategic integration of hrm. it is now widely acknowledged that hrm can play a proactive as well as a reactive role in organizational settings. hrm can proactively help in designing the organizational strategy, whereas, in a reactive role, hrm strategy is based on overall organizational strategies. lawler et al., (2011) argued that successful organizations develop effective hrm systems in order to apply specific business strategies. naznin and hussain, (2016) argued that hr leader is now considered as an important value contributor in an organization and is directly involved in the process of overall strategic planning. while operationalizing the notion of si of hrm, the available literature categorized this concept into two broad categories: horizontal integration and vertical integration . 2.2 vertical integration (vi) vi refers to the alignment of hr strategy with corporate or business strategy (gratton & truss; 2003). it focuses on linking a set of hr policies/practices with overall organizational strategies as proposed in contingency perspective of hrm. different indicators have been used to evaluate the vi, for example, representation of hr leader in bods, his participation in formulation of organizational strategy, the existence of mission statement, business strategy and written hr strategy ( dietz et al., 2004). 2.3 horizontal integration of hrm hi of hrm is recognized as an integral part of si and is defined as the process of designing internally consistent and coherent hr practices, which improve organizational effectiveness by developing synergies (fombrun et al., 1984). a higher level of internal consistency among the hr practices helps to attain some synergies that positively influence the organizational performance (jiang et al., 2012; kidron et al., 2013). 2.3 hrm effectiveness (hrme) hrme effectiveness refers to “the delivery of high-quality technical and strategic hrm activities”. the technical hrme focuses on improving conventional hrm activities like staffing, training and rewards management etc. the strategic hrm effectiveness focuses on achieving competitive advantage through innovation and creativity in managing hrm. 2.4 market orientation (mo) mo refers to the organization‟s capabilities to meet customer‟s expectations, for example, the organizations ability to follow market trends and in developing close relationships with customers. ruekert (1992) presented an empirical evidence of the relationship of mo with hr like recruitment, training and reward management. the intelligence perspective views market orientation as an organization‟s capability to obtain information regarding customer needs and communicating such information throughout the organization for improving customer responsiveness (kohli & jaworski, 1990). following the approach of zhou et al. (2008), we focused on both the cultural and market intelligence perspectives of mo. these findings of zhou et al., suggested that mo can be used as a tool to improve the utility of organizational resources and capabilities. zhou et al. (2008) argued that mo helps the firms in achieving competitive advantage. review of economics and development studies vol. 5, no 4, 2019 861 2.5 market performance in studying the ultimate performance outcomes of an organization, two dimensions of organizational performance can be identified, market performance (mp) and financial performance (fp). mp refers to a firm‟s effectiveness in achieving market targets like customer satisfaction, customer loyalty and market share. oh, cho and kim, (2014) defined the mp as an ability of firm to achieve market-related targets as compared to its competitors. 2.6 strategic integration and market performance several authors highlighted the vertical linkage of hr practices or subsystems of hrm with overall organization strategy and its outcomes. miles and snow (1984) in their studies developed the theoretical basis of both types of si. they argued that an appropriate arrangement between hrm strategy and organizational strategy and consistency among the hr practices are essential in achieving market targets. schuler and jackson (1987) studied employees‟ behaviors that are needed in organization for each of the three porter‟s (1980) strategies i.e. innovation, quality-enhancement and cost reduction and identified the appropriate hr practices for each. similarly, the researchers also highlighted the importance of hi and its importance in facilitating organizational outcomes. however, the propositions that organizations with aligned bundles of hr strategies always outperform others have not always found support by the empirical findings (samnani & singh, 2013). therefore, in-depth investigation is necessary to probe the effects of vi and hi on various performance outcomes like market performance. therefore, the study in hand is an effort to examine the effects of both vi and hi on market performance of the banks. the following hypotheses were developed to evaluate the effect of hi and vi on market performance of the banks. hypotheses 1: if hr practices are vertically aligned with each other, it will lead to high market performance. hypothesis 2: if hr practices are horizontally aligned with each other, it will help organizations to achieve high market performance. 2.7 strategic integration and hrm effectiveness wang and shyu (2008) concluded that vi directly effects the success of an organization and labor output. in addition, they also investigated the effects of hrme on organizational performance and concluded that si of hrm offers several solutions to complex issues in organizations. they argued that si advocates that equal importance should be given to all types of organizational resources while establishing and implementing the goals.kidron et al. (2013) argued that actual integration mechanisms help to improve coordination and cooperation between different hrm functions and among hrm employees, which will result in positive synergies and thereby positively influencing hrme. hypothesis 3: vertical integration of hrm positively affects hrm effectiveness. hypothesis 4: horizontal integration of hrm positively affects hrm effectiveness. 2.8 mediating role of hrm effectiveness as noted in previous section, many researchers found a positive association among shrm practices and op; however, there are some researchers who believed that the immediate effect of strategic management practices is on hrm outcomes (e.g. dyer & reeves, 1995; colakoglu, lepak & hong 2006 etc.). these positive hrm outcomes then influence various performance outcomes (fey et al. 2000). the organizational outcomes are the ultimate results while the hr outcomes are the immediate outcome of strategic human resource management (rogers & wright; 1998). it is important for a firm to better utilize its capabilities by effectively managing the human resources, because fundamentally employees are not efficient (russo & fouts, 1997), the effective management of hr helps firms in achieving better outcomes (pfeffer, 1994). in this study, we included hrme as an outcome of si and mp as an outcome of hrme. in other words, hrme acts as a bridge between si of hrm and mp. based on these arguments, we hypothesized that: hypothesis 5: the relationship between vertical integration of hrm and market performance is mediated by hrm effectiveness. hypothesis 6: the relationship between horizontal integration of hrm and market performance is mediated by hrm effectiveness. review of economics and development studies vol. 5, no 4, 2019 862 2.9 moderating role of market orientation several researchers have investigated the direct impact of mo on op ( ketchen, hult, & slater, 2007). however, still there is a need to highlight the mechanism through which mo affects organizational performance. some researchers studied the innovativeness and customer loyalty in relation with mo, however, the internal organizational processes through which mo improves organizational performance are rarely discussed. gebhardt et al. (2006) highlighted that there is a limited understanding of mo due to the lack of research on internal processes. kirca et al. (2005) suggested that the researcher should also take into account the internal employee related processes in the relationship of mo and op. a market-oriented organization focuses on unifying the distinct endeavors in the delivery of customer value and also on providing an incentive to its customers as compared to its competitors (kohli and jaworski 1990). mo has the potential to attract, satisfy and retain the customers and then attaining the desired market targets like sales growth and market share. zhou et al., (2008) in his study argued that mo indirectly influences financial performance through the market performance. hence, it is predicted that mo further strengthens the association between si of hrm and mp. considering the above-mentioned arguments, following hypotheses have been developed: hypothesis 7: market orientation strengthens the relationship between vi and mp. hypothesis 8: market orientation strengthens the relationship between hi and mp. the following theoretical framework was developed based on review of relevant literature: 3. methodology the current study was conducted on baking sector of pakistan. the data was collected from 351 managers of different banks from seven districts of khyber pakhtunkhwa province of pakistan. this research tested hypothesized model by employing a cross-sectional design to test the proposed hypotheses. in the course of data collection for the current study, all the national and international standards were considered. a structured questionnaire was used for the purpose of data collection. data collection for the current study was a lengthy process which was initiated in the month of june 2018 and was completed in march 2019. data collection process was based on three phases. in the first phase, questionnaires were mailed on the postal addresses of bank managers. in the first phase, the response rate was not satisfactory. in second phase respondents were contacted through phone calls for their cooperation. in this phase, the response rate was also not desirable. in the last phase, 5 research assistant were hired, trained and guided to collect the data from seven districts selected for the research. after all these phases of data collection, the research team has collected 351 useable responses. review of economics and development studies vol. 5, no 4, 2019 863 3.1 measures strategic integration was operationalized with its two dimensions: vertical integration and horizontal integration. a scale consisting of 12-items was used for measuring the level of vi (budwar, 2000). these 12 items produced the cronbach‟s α value of 0.88. whereas, a scale consisting of five items and introduced by gratton and catherine (2003) was adapted to measure the hi. in current study its cronbach‟s α value was 0.78. hrm effectiveness was assessed through an eight-items scale which was introduced by ryu & kim (2011). this scale basically based on the perception of employees about the services they receive by hr department. these 08 items produced the cronbach‟s α value of 0.86.market performance was evaluated with a 7-items scale formulated by delaney and huselid, (1996). these 07 items produced the cronbach‟s α value of 0.82.a set of fifteen questions was used to measure market orientation (han, kim & srivastava, 1998). these 15 items produced the cronbach‟s α value of 0.80.manager‟s age, gender, nature of job, educational level of manager, experience and education were taken as control variable. 4. results and analysis table 1 shows the statistical results of hypothesized relationships of predictors and criterion variables. both descriptive and inferential statistical techniques were used in data analysis. first section provides the mean, sd and the coefficient of correlation among the study variables. the findings presented in table 1 confirm the significant correlation among the variables of the study. as it is clear from the results that vertical integration is significantly correlated with hrme (r=0.23), mp (r=0.42) and mo (r=0.33). similarly, horizontal integration is significantly correlated with hrme (r=0.28), mp (r=0.32) and mo (r=0.47). hrme is significantly correlated with mp (r=0.34) and mo (r=0.31). table: 1 summary of correlation variable mean sd 1 2 3 4 5 6 7 8 9 10 age 29 .87 1 gender 0.8 .82 .07 1 education 3.2 .84 .10* .01 1 job type 1.3 .83 .05 .03 .02 1 experience 2.4 .80 .04 .01 .02 .02 1 vi 3.4 .89 .05 .07 .08 .05 .02 (.890) hi 3.5 .92 .03 .09 .08 .05 .02 .32** (.850) hrm e 3.7 .90 .01 .07 .02 .03 .06 .23** .28** (.849) mp 3.6 .88 .01 .05 .04 .07 .04 .42** .32** .34** (.827) mo 3.2 .89 .04 .01 .02 .05 .08 .33** .47** .31** .41** (.872) 4.1 mediation analysis table 2 presents the findings of simple regression test. the results confirm the prerequisites conditions of mediation proposed by baron and kenny (1986). first three conditions were confirmed because the results presented in table2 confirm the standard norms of baron and kenny (1986) approach. the results shown that vi significantly predict hrme (β = 0.23), and mp (β = 0.42). therefore, h1 and h3 are confirmed. moreover, horizontal integration significantly predicts predict hrme (β = 0.28), and mp (β = 0.32). therefore, h2 and h4 are confirmed. moreover, the positive relationship between hrme and mp is also confirmed (β = 0.34). table: 2 regression with hrm effectiveness as mediator and mp as dependent variable independent factors hrm effectiveness mp r2 s.error β t-value sig. r2 s.error β t-value sig. vertical integration 0.35 0.065 0.23 3.53 0.00 0.13 0.087 0.42 4.82 0.00 horizontal integration 0.16 0.036 0.28 7.77 0.00 0.10 0.043 0.32 7.44 0.00 hrm effectiveness -----0.35 0.054 0.34 6.29 0.00 hrm effectiveness (human resource management effectiveness); mp (market performance) review of economics and development studies vol. 5, no 4, 2019 864 table 3 shown the results for the confirmation of fourth condition. results presented in table 3 confirmed the mediation of hrme, because when hrme was included as the mediator, the direct effect of vertical integration on mp was insignificant (β = 0.09). furthermore, the direct effect of horizontal integration on mp was also insignificant (β = 0.06). these results confirmed the mediation of hrme between vertical integration and mp and horizontal integration and mp. therefore, h5 and h6 are hereby confirmed. table 3. multiple regression results for mp model factor r2 f s.error β t-value sig. 1 vertical integration 0.35 89.26 0.094 0.09 0.95 0.65 hrm effectiveness 0.065 0.58 8.92 0.00 2 horizontal integration 0.36 92.26 0.040 0.06 1.50 0.05 hrm effectiveness 0.057 0.55 9.64 0.00 4.2 moderation analysis table 4 captures the results of moderation of mo on the association between vertical integration and mp as well as moderation effect on the association between horizontal integration and mp. table 4 presented the results of moderation of mo on vertical integration and mp and confirmed that coefficient of the interaction term i.e. vertical integration x mo is significant, which indicates that market orientation moderates the relationship of vertical integration and mp (β = .18, p<.01). therefore, h7 is hereby confirmed. table 4 also presented the results of moderation of mo on horizontal integration and mp and confirmed that coefficient of the interaction term i.e. horizontal integration x mo is significant, which indicates that mo moderates the relationship of horizontal integration and mp (β = .21, p<.01). therefore, h8 is hereby confirmed. table: 4 results of multiple hierarchical regressions step 1 step 2 step 3 moderating effect of market orientation vertical integration 0.42** 0.33** 0.37** market orientation 0.29** 0.24** vertical integration x market orientation 0.18* r2 .32 .36 .38 adjusted r2 .31 .33 .35 ∆ r2 .32 .05 .02 ∆ f 291.76** 47.56** 20.98** horizontal integration 0.32** 0.29** 0.31** market orientation 0.25** 0.41** horizontal integration x market orientation 0.21* r2 .32 .36 .38 adjusted r2 .31 .33 .35 ∆ r2 .32 .05 .02 ∆ f 291.76** 47.56** 20.98** furthermore, slope analysis as recommended by aiken et al. (1991); figure 2 and figure 3 presents the outcomes of slope analysis. review of economics and development studies vol. 5, no 4, 2019 865 5. conclusion the findings of current study confirmed that both horizontal and vertical integration of hrm have a vital role in the achievement of market targets in banking sector of pakistan. it was observed that both dimensions of si are positively associated with mp of banks. the results of this study augment the claim of rbv theory, which states that firms can achieve sustainable competitive advantages through efficient utilization of internal resources. similarly, it was also observed that si of hrm will improve hrme and better hr outcomes lead to improved organizational performance. the organizational outcomes are the ultimate results while the hr outcomes are the immediate outcome of shrm. 1 1.5 2 2.5 3 3.5 4 4.5 5 low vertical integration high vertical integration m a r k e t p e r fo r m a n c e low market orientation high market orientation figure 2. slope analysis of vertical integration 1 1.5 2 2.5 3 3.5 4 4.5 5 low hi high hi m a r k e t p e r fo r m a n c e low market orientation high market orientation figure 3. slope analysis of horizontal integration review of economics and development studies vol. 5, no 4, 2019 866 it was observed that vertically and horizontally aligned hr practices improve hrme and in return hrme improves the mp of an organization. the results indicate that hrme positively mediates the relationship between si of hrm and mp. these findings highlighted the importance of hrm in improving organizational performance, therefore, it is concluded that firms can improve their performance by effectively managing their human resources. the results of this study also confirm the findings of previous studies which indicated that both vertical and horizontal integration are the important predictors of hrme and helps to significantly increase business performance ( jiang et al., 2012; ridder et al., 2012; kidron et al., 2013). the study also highlighted the importance of adopting a market-oriented approach, it was observed that market orientated approach further strengthens the relationship of shrm integration and mo. implications and limitations this study also contributes to the existing knowledge through notable ways. this study developed a theoretical model on the basis of the gaps identifies in previous studies. the findings not only validated the results of previous studies regarding the impact of si of hrm on organizational outcomes, it also has the potential to fill the gap highlighted by the previous studies. most of the literature focuses on innovativeness and customer-related outcomes ( cacciolatti, and lee, 2016) such as customer loyalty in relation with mo, however, the internal organizational processes like employees related concerns are ignored in previous studies (kirca et al., 2005; gebhardt et al., 2006). this study also has important practical implications. as the banks are currently facing a very strong competition by both national and international players, they must maintain a set of internally coherent and vertically aligned hr practices along with mo. a strategically aligned and flexible approach to the management of human resources will improve customer responsiveness and will enable the banks to provide quality services to the customers. the main limitation is its cross-sectional design which limits the causal relationships. the future studies may extract the findings through a longitudinal study which may consider how si affects important organizational and employees related outcomes over the period. secondly, this study has collected the data from a smaller sample; therefore, future research may collect the data from larger samples across pakistan so that the generalizability issue may be resolved. references baron, r. m., & kenny, d. a. 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(2008). market orientation, job satisfaction, product quality, and firm performance: evidence from china. strategic management journal, 29(9), 985-1000. review of economics and development studies, vol. 7 (2) 2021, 231-242 231 bilateral trade intensity and business cycle synchronization nexus: an analysis from major trading partners of pakistan maryam batool a , nabila asghar b a phd scholar, department of economics, university of the punjab lahore, pakistan email: maryam.pu16@gmail.com b associate professor, department of economics and business administration, division of arts and social sciences, university of education lahore. pakistan email: nabeela.asghar@ue.edu.pk article details abstract history: accepted 30 april 2021 available online june 2021 the existing research on the relationship between bilateral trade and business cycle synchronization (bcs) is limited in the context of developing countries like pakistan. theoretically, bilateral trade can lead to convergence as well as divergence of business cycles depending upon prevailing economic conditions in a country. the present study is an attempt to explore the relationship between bilateral trade and business cycle synchronization in pakistan. for empirical analysis, data of six major trading partners of pakistan is collected for the period 1991-2017 and multidimensional fixed effect estimation technique has been used. the results of the study show that bilateral trade has significant and positive impact on bcs. the coordination of fiscal and monetary policies appears to be significant determinants of gdp synchronization. these results have strong implications for policymakers and practitioners for formulating and implementing policies for pakistan to get the maximum benefits of bcs. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: business cycle synchronization, trade intensity, hp-filter, panel fixed effect jel classification: e36, f40, f44 doi: 10.47067/reads.v7i2.353 corresponding author’s email address: nabeela.asghar@ue.edu.pk 1. introduction the research work on the relationship between bilateral trade and business cycle synchronization (bcs) started in 1961 when mundell presented a theory on optimal currency areas. the theory states that the formation of a monetary union may generate massive benefits for participating countries and these benefits depend on higher trade linkages, more synchronized business cycles and easy mobility of labour. but the research work conducted by frankel and rose (1998) added a new dimension in this field of research. they disclosed that the two most valued criteria trade integration and business cycle synchronization are related to each other. afterward, several studies have been conducted to check and to add new impetus in this relationship (for example; see, shin and wang. 2003, chiquiar and ramos-francia, 2004, calderón et al., 2007, inklaar et al.,2008). these studies review of economics and development studies, vol. 7 (2) 2021, 231-242 232 validate that trade integration leads to more synchronized business cycles. over the past few decades, bilateral trade flows among countries have increased rapidly. the diversity in natural resources and benefits of specialization are the major root cause of trade. over the years, globalization and removal of trade barriers along with lower transportation cost have boosted the inter-dependence of countries. presently, it has been observed that free trade not only gives benefits to all trading nations but also have increased their overall wellbeing. some studies have advocated that enhanced trade results in higher growth (see, for example, frankel and romer, 1999). furthermore, it has been observed that an increase in economic growth exerts a positive impact on the economy of trading partners as higherincome often leads to higher demand for imported commodities which causes an increase in exports of trading partners. this leads to an increase in income of trading partners and this cycle of trade will keep on benefiting the trading partners. thus, economic integration in the form of enhanced bilateral trade improves the growth of the region and helps the trading partners to be in a similar phase of the business cycle. bilateral trade refers to the sum of imports and exports normalized by gdp or total trade and is considered as the most important determinant of business cycle co-movements. however, theoretically this relation is vague. the enhanced trade can lead to convergence as well as divergence of business cycles as increased trade can affect output movements in several ways. if trade mainly occurs as discussed by heckscher-ohlin and david ricardo, then increased trade may result in a dissimilar industrial structure and in this situation, business cycles of countries may diverge. while, on the other hand, if larger proportion of trade is in the form of intra-industry trade which may result in a symmetric industrial structure and more synchronized movement of the business cycles. furthermore, in case of consumption-oriented trading countries an increase in trade may increase the gdp raising the demand for imports and exports of the trading partners. the research work conducted on the relationship between bilateral trade and bcs show that countries may get involve in higher bonding of trade relations, which may lead them toward a similar phase of the business cycle. thus, trading partners play a significant role in the business cycle fluctuations in an economy. furthermore, similar monetary and fiscal policies may result in symmetric shocks to the economy which may lead them toward an increase in bcs. keeping it in view, the present study has included the policy channels by computing two variables as proxies of fiscal and monetary policies. fiscal policy coordination indicates that countries will adopt similar policies if they have a similar ratio of budget deficit to gdp. as a result, their growth pattern may become similar and their business cycles will converge. the main objective of this study is to analyze whether trade channel along with other channels are helpful in coordinating bcs of pakistan and its trading partners or not. in table 1, average values of bcs and bilateral trade are presented. the sample period 1991-2017 is divided into three sub-sample periods of nine years each from 1991-98, 2000-08 and 2009-17. the average of each period helps in understanding the behaviour of variables during that period. review of economics and development studies, vol. 7 (2) 2021, 231-242 233 table 1: averages measure of business cycle synchronization and bilateral trade in sub-samples country & period bcs (hodrick prescott filter) trade intensity (export only) trade intensity (import data) trade intensity (export + import) bangladesh 1991-99 2000-08 2009-17 0.0240 0.4693 0.3063 0.0014 0.0011 0.0011 0.0045 0.0038 0.0038 0.0031 0.0026 0.0027 china 1991-99 2000-08 2009-17 -0.1445 0.5022 0.3397 0.0080 0.0174 0.0241 0.0039 0.0070 0.0092 0.0058 0.0114 0.0164 india 1991-99 2000-08 2009-17 0.1789 0.4637 0.2733 0.0040 0.0058 0.0083 0.0020 0.0023 0.0037 0.0056 0.0076 0.0104 iran 1991-99 2000-08 2009-17 0.0128 0.2817 0.2498 0.0072 0.0073 0.0194 0.0022 0.0022 0.0035 0.0029 0.0041 0.0058 pakistan 1991-99 2000-08 2009-17 0.0104 0.5797 0.0384 0.0042 0.0039 0.0047 0.0030 0.0030 0.0026 0.0034 0.0031 0.0032 sri lanka 1991-99 2000-08 2009-17 -0.0836 0.5361 -0.0192 0.0015 0.0017 0.0019 0.0039 0.0051 0.0034 0.0027 0.0032 0.0026 united states 1991-99 2000-08 2009-17 0.0351 0.6142 0.1093 0.0038 0.0056 0.0077 0.0114 0.0189 0.0221 0.0080 0.0134 0.0154 in the first time period, the business cycle synchronization is low among all countries. however, all countries show a tremendous increase in bcs during second period, which decreases again in 200917. the situation is worst in sri lanka as its bcs average is negative in the third period. overall the gdp synchronization in pakistan, sri lanka and the united states show the highest fluctuations over the three periods. the trade intensity measures show a positive trend over sub-sample periods. bangladesh indicates a small decrease in trade intensity. china shows a massive improvement in its output correlation as well as in all three measures of bilateral trade. during the second sub-sample period, the gdp synchronization of china has increased by more than two-folds and its bilateral trade has also doubled. the bilateral trade of india has shown a rising trend but their business cycle synchronization has fluctuated over periods. business cycle co-movement of india improves in second periods but it decreases again in the third period. pakistan’s gdp synchronization faces a massive decrease in the third period but still it has improved relative to the first period. trade intensity of pakistan shows review of economics and development studies, vol. 7 (2) 2021, 231-242 234 mixed behaviour during the selected time. the united states shows a strong improvement in synchronization of its business cycle during the second period and a relatively low but a decrease in the third period. bilateral trade of the u.s. shows constant improvement. the results reveal that all the countries included in the sample have shown higher trade linkages which enhanced synchronization of business cycles. it is a positive sign which indicates the significance of this relationship. 2. review of literature frankel and rose (1998) analyzed the co-movement of business cycles using data of 20 industrial countries from 1959 to 1993. the study found the relationship between bilateral trade among trading partners and the correlation of their business cycles. the study concluded that more bilateral trade resulted in more synchronized business cycles and the countries with less synchronization among them were likely to be more synchronized after joining the common monetary union. barrious and lucio (2003) provided evidence on the existence of synchronization of regional business cycles. the study used quarterly data from 1988-1998 and annual data for the period 19751998 for iberian and european regions. the study used gmm for estimation purpose and pointed out that integration of eu had affected the co-movement of iberian regional cycles positively. the results revealed that different frequencies of data resulted in a difference in estimates. the study concluded that the size of the economy and industrial structure played a key role in affecting economic cofluctuations. gruben et al. (2002) attempted to investigate the findings of frankel and rose (1998) regarding the higher trade flows which resulted in greater synchronization of business cycles. the main objective of this study was to observe the validity of the instruments used by frankel and rose (1998). the study claimed that frankel and rose (1998) had used inappropriate method as their instruments were overestimated. however, the authors pointed out that their results were still in line with frankel and rose (1998). artis and siebert (2003) tried to analyze the existence of european business cycles. the study used quarterly data of 23 countries for the period 1970-2001 and employed hp-filter to separate cyclical components from gdp data. the results revealed that the european business cycle did not exist. the study concluded that higher globalization resulted in more synchronized world business cycles. shin and wang (2003) analyzed the impact of growing bilateral trade on the gdp co-movements of 12 asian economies. using panel fixed effect model and data for the period 1976-97, the results of the study show that increasing intra-industry trade or total trade could be more effective than interindustry trade in synchronizing business cycles. the positive correlation indicated better prospects of unified currency in the region. the study concluded that the cost of entering a monetary union could be heavily reduced through intra-industry trade which had a higher ratio in the trade of the region. barrios et al. (2003) attempted to analyze the patterns and determinants of uk regions and the euro area. the study used a sample of six euro area countries and 11 uk regions from 1966 to 1997. the findings of the study indicated that business cycles of the uk and eurozone were dissimilar and internal business cycles of both the uk and eurozone were highly correlated. imbs (2004) attempted to explore the important determinants of gdp co-movements using a simultaneous equation model. the results of the study verified that trade had a significant and positive impact on gdp co-movements as explained by other studies on the subject matter. the study pointed review of economics and development studies, vol. 7 (2) 2021, 231-242 235 out that specialization intensified gdp co-movements along with financial integration. böwer and guillemineau (2006) used the sample of 12 member countries of euro area from 1980 to 2004. this study checked the determinants of gdp co-movements in eurozone using extreme bound-test. the results show that single currency may increase both bilateral trade intensity and intraindusry trade which, in turn, increases the synchronization of business cycles among eurozone countries. camacho and quiros (2006) formed a new framework based on multivariate markov-switching procedures for observing the gdp comovements as this approach has shown better results than traditional approaches in the literature. the simulation results revealed that the univariate approach generated lower values of gdp co-fluctuations. the study concluded that g7 countries belonged to eurozone had more correlated business cycles than other countries and the same was also true for english-speaking g7 countries. kose and yi (2006) investigated whether standard international business cycles could validate the positive relationship between bilateral trade gdp co-movements or not. following the methodology of frankel and rose (1998) and using the data of 21 oecd countries from 1970-2000, three-country models were formulated for simulating the results of complete asset market and financial autarky. the study concluded that trade intencified the business cycle synchronization in both market sitations. calderón et al. (2007) used the data of 147 countries to analyze the effect of bilateral trade on output synchronization. the study found that increased trade resulted in higher co-movements of business cycles in both industrial and developing countries. the only difference was that in developing countries the business cycle correlation was smaller as compared to industrial countries. xing and abbott (2007) investigated the impact of trade, specialization and financial integration on gdp co-fluctuations. the study verified the existence of a significant relationship between trade, specialization and finance and pointed out that bilateral trade intensity and industrial structure had a positive and significant influence on business cycle synchronization. inklaar et al. (2008) attempted to explore the relationship between trade intensity and gdp comovements among 21 oecd countries during 1970-2003. they constructed a multi-variable model to examine the effects of specialization on gdp co-movements using similar policy along with bilateral trade. they verified that enhanced trade helped in co-movements of business cycles but its effect is smaller than as mentioned in previous studies. the study concluded that industrial specialization and coordination of monetary and fiscal policies had positive impact on business cycles. rana et al. (2012) tried to extend the research work of shin and wang (2003) through improving business cycle specification. they claimed that intra-industry trade was the major force in deriving the business cycles towards co-movements in east asia and europe. this study unveiled that the trade intensity had a strong impact on gdp synchronization in both regions. the study recommended that east asian countries should strengthen the coordination of economic policies to fully capture the benefits like europe. gouveia and correia (2013) examined the relationship between trade integration and gdp comovements in the euro area with focus on southern european countries. the study pointed out that the gdp co-movements appeared due to increased trade and the trade imbalances had increased after review of economics and development studies, vol. 7 (2) 2021, 231-242 236 existence of emu trade strongly intensified cyclical correlation. misztal (2013) attempted to observe the influence of international trade on gdp co-movements in the eurozone, eu, and poland. the results of the study showed that an increase in trade did not necessarily lead to greater synchronization, which depends on the structure of trade rather than the intensity of trade. further, intra-industry trade had appeared as the main source of co-movements. antonakakis and tondl (2014) attempted to explore the additional factors and channels like market integration and coordinated economic policies along with bilateral trade that triggered output co-movements in the eu. the study used data from 1995-2012, to explore the direct and indirect channels. the findings of the study showed that trade and fdi both had a positive effect on business cycles co-fluctuations in the eu and the increased specialization did not harm the co-movements of business cycles. furthermore, income disparities and less synchronized fiscal policies along with exchange rate fluctuations hindered output co-movements. the study suggested that coordination in economic policies is necessary to have an effective monetary union. duval et al. (2014) explored the relationship between trade intensity and gdp synchronization. they used value-added trade of 63 countries for the period 1995-2012 and claimed that this data would provide better results than gross trade data. the results of the study revealed that trade intensity increased the synchronization of business cycles and this impact had become stronger during crisis times. saiki and kim (2014) attempted to link the business cycle with trade integration. their major contribution was introducing vertical intra-industry trade. using data from eurozone and east asia for the period 1970-2011, the results showed that output synchronization had been increasing over time in eurozone and asia but synchronization progressed faster in east asia. the study concluded that vertical intra-industry trade had unambiguously increased output movements in east asia but not in eurozone. furthermore, the adaptation of the euro had increased gdp synchronization and the impact of bilateral trade intensity was ambiguous on the business cycle. the review of previous studies revealed that the relationship between bi-lateral trade intensity and bcs is different in different countries. the research work on pakistan economy is very limited which brings up the need for analysing the crucial relationship between bi-lateral intensity and bcs as it may provide guidelines to the policy makers to formulate effective policies. 3. data and methodology the main focus of this study is to analyze the impact of bilateral trade intensity on business cycle correlation using panel data for the period 1991 to 2017. the data of related variables have been collected from renowned websites world development indicators (wdi), international monetary fund (imf), and united nation conference on trade and development (unctad). for analysis purpose, a multidimensional panel model is formed in which seven countries namely bangladesh, china, india, iran, pakistan, sri lanka, and the united states are included. following shin and wang (2003), the sample period is divided into three sub-periods of nine years each from 1991 to 1999, 2000 to 2008 and 2009 to 2017 for analysis purpose. 3.1 model specification considering the nature of analysis, a three-dimensional panel model having two cross-sectional review of economics and development studies, vol. 7 (2) 2021, 231-242 237 dimensions and one time-series dimension is used for estimation purpose and each model uses a different measure of bilateral trade. model 1: bcs(i,j)τ = α + α1btix(i,j)τ + α2fp(i,j)τ + α3mp(i,j)τ + α4exv(i,j)τ+ α5is(i,j)τ + εijt model 2: bcs(i,j)τ = α + α1btim(i,j)τ + α2fp(i,j)τ + α3mp(i,j)τ + α4exv(i,j)τ + α5is(i,j)τ + εijt model 3: bcs(i,j)τ = α + α1btit(i,j)τ + α2fp(i,j)τ + α3mp(i,j)τ + α4exv(i,j)τ + α5is(i,j)τ + εijt where, bcs(i,j)τ is the correlation of business cycles between country i and j during τ period. btix(i,j)τ is bilateral trade intensity based on exports, btim(i,j)τ is bilateral trade intensity based on imports and btit(i,j)τ is bilateral trade intensity based on exports and imports. fp(i,j)τ is fiscal policy correlation and mp(i,j)τ is the monetary policy correlation. exv(i,j)τ measures the volatility of exchange rate between trading partners and is(i,j)τ measures the similarity of industrial structure between i country and j country during τ period. for measuring bcs, first of all, data of real gdp in us$ is collected from wdi and hp-filter is used to obtain business cycle components. then the correlation of these cyclical components is calculated to measure the value of business cycle synchronization. bcsijτ=corr(ci, cj)τ following frankel and rose (1998) three measures of bilateral trade intensity are used i.e. btix(i,j)τ , btim(i,j)τ and btit(i,j)τ in analysis. first measure btix(i,j)τ uses export data only while btim(i,j)τ uses import data only and btit(i,j)τ uses both import and export data. btix(i,j)τ = ( ) ( ) ( ) btim(i,j)τ = ( ) ( ) ( ) btit(i,j)τ = ( ) ( ) ( ) ( ) ( ) ( ) a higher value of any of these indexes indicates greater trade intensity between country i and country j. fiscal policy is proxied by the ratio of budget deficit to gdp between countries. ( ) ( ) ( ) ( ) ( ) ( ) using the simple correlation between the fiscal policy value of country i and j is calculated. review of economics and development studies, vol. 7 (2) 2021, 231-242 238 fpcijτ = corr(fpit, fpjt)τ monetary policy is proxied by the annual growth rate of money supply. data is collected from wdi and correlations between these growth rates are computed. mpcijτ = corr(mpit, mpjt)τ exchange rate variability is measured following antonakakis and tondl (2014). official exchange rate data from wdi is used to compute this variable. then, bilateral exchange rates are derived which are used to compute exchange rate variability. exchijτ = stdev[d(ln(biexij))]τ where biexij is the bilateral exchange rate between country i and j. following imbs (2004) and xing and abbott (2007) an industrial similarity index is formed. for measuring this variable, the gdp value-added of six industries namely, agriculture, mining, construction, wholesale, transportations and other activities have been used. data is collected from unctad. ( ) ( ∑∑ ( ) ( ) ) this index is expected to have a negative value because its lower value represents more similar industrial structures. it means that the negative value of this index means higher synchronization of business cycles. 4. result and interpretations 4.1 hp-filter results the estimations begin with the use of hp-filter to detrend the real gdp of all the countries included in the model. hp-filter converts gdp series into two parts namely, trend and cycle. trend component shows the long-run trend of gdp series while cycle shows the short-run fluctuations over time that represent a business cycle. both trend and cycle depend on the value of lambda (λ) used in hp-filter. as this study uses annual data the value of λ equals to 6.25 is used in econometric analysis (for details, see ravn and uhlig, 2002). the cyclical portion of gdp of all the countries is shown in following diagrams. review of economics and development studies, vol. 7 (2) 2021, 231-242 239 -1,000,000,000 -500,000,000 0 500,000,000 1,000,000,000 1,500,000,000 2,000,000,000 92 94 96 98 00 02 04 06 08 10 12 14 16 bangladesh -6e+10 -4e+10 -2e+10 0e+00 2e+10 4e+10 6e+10 8e+10 92 94 96 98 00 02 04 06 08 10 12 14 16 china -3e+10 -2e+10 -1e+10 0e+00 1e+10 2e+10 3e+10 92 94 96 98 00 02 04 06 08 10 12 14 16 india -3e+10 -2e+10 -1e+10 0e+00 1e+10 2e+10 3e+10 92 94 96 98 00 02 04 06 08 10 12 14 16 iran -4,000,000,000 -3,000,000,000 -2,000,000,000 -1,000,000,000 0 1,000,000,000 2,000,000,000 3,000,000,000 4,000,000,000 92 94 96 98 00 02 04 06 08 10 12 14 16 pakistan -1,500,000,000 -1,000,000,000 -500,000,000 0 500,000,000 1,000,000,000 1,500,000,000 2,000,000,000 92 94 96 98 00 02 04 06 08 10 12 14 16 srilanka -4e+11 -3e+11 -2e+11 -1e+11 0e+00 1e+11 2e+11 3e+11 92 94 96 98 00 02 04 06 08 10 12 14 16 us figure 1: results of hp-filter the cyclical portion of gdp captured by hp-filter shows the fluctuation of gdp over the considered period. almost all the countries have experienced heavy fluctuations during 2008 due to the global financial crisis. bangladesh faces a heavy decline in gdp during 2004 due to natural calamities. their economy improved over time but faces severe decline during 2015. china also faces a decline in gdp in 2005 but massive exports and heavy investment has boosted its economy in coming years. india and pakistan both face continuous ups and downs in their gdp. while the economy of iran has been heavily affected due to economic sanctions. being an economic super power, the united states had faced problems particularly during the global financial crisis. review of economics and development studies, vol. 7 (2) 2021, 231-242 240 4.2 results of panel estimation the results of all the three models are presented in table 2. table 2: fixed effect estimations model 1 model 2 model 3 variable coefficient standard error coefficient standard error coefficient standard error bilateral trade intensity 8.95 (2.58)** 3.46 13.55 (2.89)* 4.69 18.13 (4.11)* 4.41 fiscal policy correlation -0.25 (-3.13)* 0.08 -0.27 (-3.25)* 0.08 -0.28 (-3.32)* 0.08 monetary policy correlation 0.08 (2.71)* 0.08 0.20 (2.60)** 0.08 0.18 (2.34)** 0.08 exchange rate variability 0.21 (0.92) 0.21 0.21 (1.00) 0.21 0.24 (1.12) 0.22 industrial similarity -0.26 (0.22) 0.22 0.23 (-1.08) 0.21 -0.20 (-0.95) 0.21 within r 2 0.48 0.49 0.33 *, **, *** show significant at 1%, 5% and 10% respectively. the results in the above table show that all three measures of bilateral trade intensity have a positive and highly significant impact on gdp co-movements. it validates the theoretical relationship between them as expressed by frankel and rose (1998). the positive sign of the coefficient explains that expansion of bilateral exports leads to a boost in gdp co-movements. fiscal correlation negatively affects synchronization. it supports the point raised by clark and wincoop (2001) that dissimilar fiscal policy may result in higher synchronization of the business cycle. besides, pakistan’s fiscal policy is highly volatile and it often changes due to political reasons. therefore, its correlation has a negative impact on gdp synchronization. monetary policy correlation has a positive and significant impact on gdp co-movements in all three models. the significance of the variable shows the potentials of enhancing synchronization among trading partners through monetary channel. these results are in line with shin and wang (2003). exchange rate variability has a positive and insignificant impact on output co-movements in all models which indicates that the exchange rate works under the mundell hypothesis i.e. exchange rate variability is a fluctuations absorber in the model. as expected, industrial similarity has a negative coefficient which indicates that a big difference in the production structure of countries leads to divergence of the business cycle. these results are consistent with xing and abbott (2007) except that industrial similarity is significant in their model. 4.3 variance inflation factor lastly, vif is computed to check the multicollinearity among regressors. for measuring this, independent variables are regressed on each other and r 2 of that regression is used to compute vif. the results of vif are presented in table 3. review of economics and development studies, vol. 7 (2) 2021, 231-242 241 table 3: vif analysis variable vifi 1/vifi fp 1.22 0.83 mp 1.18 0.85 exch 1.02 0.98 is 1.07 0.94 the results show that the values of vifi are less than 10 which is an indication of the absence of multicollinearity among regressors. 5. conclusion and policy recommendations bilateral trade intensity appeared as the most important determinant of business cycle. the period average of bilateral trade and business cycle synchronization show that both have improved over time. business cycle synchronization has shown an improvement in the trading partners of pakistan. the results of this study reveal that bilateral trade is beneficial for enhancing business cycle synchronization in major trading partners of pakistan. it implies that in the modern global world business cycle of a country is under the continuous influence of its trading partners. these results are in line with frankel and rose (1998) and shin and wang (2003). economic policies have also come up an important source of converged business cycles. thus, policymakers can utilize this channel to enhance synchronization. the negative sign of fiscal coordination indicates that different fiscal stances may help countries in synchronizing their business cycles. the sign of the coefficient of industrial similarity is consistent with the theory buy it is insignificant because the countries included in the sample have diverse industrial structure that become hurdles in the way of improving the bcs. from the above analysis it can be concluded that bilateral trade and coordination of fiscal and monetary policies are prime sources of converged business cycles. the convergence of business cycles is necessary for developing countries to enhance their economic integration and to reap the full benefits of currency unions. this calls for a need to formulate and implement consistent monetary and fiscal policy policies in these countries. references antonakakis, n., & tondl, g. 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(2013). international trade and business cycle synchronization in poland, the european union and the euro zone. contemporary economics, 7(3), 65–78. https://doi.org/10.5709/ce.1897-9254.90 mundell, r. a. (1961). a theory of optimum currency areas. the american economic review, 51(4), 657-665. rana, p. b., cheng, t., & chia, w. m. (2012). trade intensity and business cycle synchronization: east asia versus europe. journal of asian economics, 23(6), 701–706. https://doi.org/10.1016/j.asieco.2011.11.003 ravn, m. o., & uhlig, h. (2002). on adjusting the hodrick-prescott filter for the frequency of observations. review of economics and statistics, 84(2), 371-376. saiki, a., & kim, s. h. (2014). business cycle synchronization and vertical trade integration: a case study of the eurozone and east asia. ssrn electronic journal, 407. https://doi.org/10.2139/ssrn.2376787 shin, k., & wang, y. (2003). trade integration and business cycle synchronization in east asia. asian economic papers, 2(3), 1-20. xing, t., & abbott, a. (2007, september). the effects of trade, specialisation and financial integration for business cycle synchronisation. in 9th european trade study group conference (pp. 13-15). review of economics and development studies, vol. 7 (4) 2021, 533 542 533 an empirical analysis of globalization-poverty nexus: evidence from pakistan muhammad tariq majeed a , sohail farooq b a associate professor of economics in quaid-i-azam university, islamabad, pakistan email: tariq@qau.edu.pk b associate professor of economics in hazara university, mansehra, pakistan email: thesohailfarooq@hotmail.com article details abstract history: accepted 25 november 2021 available online december 2021 despite the significant progress that has been observed towards the millennium goals, more than one billion people still live on less than 1.25 us dollars per day. a large body of the literature has focused on the growth effects of globalization and generally documents favourable effects of globalizing on economic growth. does globalization reduce poverty? this question has received relatively less attention and the available evidence is not conclusive. this study investigates the impact of globalization on poverty in pakistan using annual time series data from 1975 to 2018. the empirical analysis for the effect of globalization on poverty is based on the ardl approach to cointegration. the empirical findings show that globalization exerts a significant adverse influence on the annual poverty of pakistan. it implies that the ongoing process of globalization is leaving the poor of pakistan behind. globalization accentuates not ameliorates poverty and thus marginalizes the poor of pakistan. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: globalization; poverty; inequality; pakistan jel classification: f21, f41, j24 doi: 10.47067/reads.v7i4.413 corresponding author’s email address: tariq@qau.edu.pk 1. introduction does globalization reduce poverty? this question is highly debated among researchers and policymakers. the available research provides conflicting answers to this question. on the one hand, globalization is considered a solution to poverty while on the other hand globalization is considered a cause of poverty. the studies by bhagwati and srinivasan (2002) and dollar and kraay (2004) conclude that economic openness increases economic growth which, in turn, reduces poverty. contrary, harrison, and mcmillan (2007) compile the results of 15 country-specific studies and argue that orthodox perspectives on the linkages between globalization and poverty are misleading, if not downright wrong. they show that the gains from trade are highly unequal and that the poor do not always benefit from globalization. review of economics and development studies, vol. 7 (4) 2021, 533 542 534 jeffrey williamson (2002) points out that “the world has seen two globalization booms over the past two centuries and one bust. the first global century ended with world war i and the second started at the end of world war ii, while the years in between were ones of anti-global backlash”. in the first period of globalization, poverty fell from 84% in 1820 to 66% in 1910. in the second period of globalization, poverty fell from 55% in 1950 to 24% in 1992. in the inter-war period, the world population living in poverty remains probably stagnant. the historical negative relationship between globalization and poverty masks variations within and between countries in their experiences with globalization. many decades of increasing globalization have not yet silenced the debate over the benefits of globalization. the fierce street protests surrounding the ministerial meeting of the wto and similar protests at the world bank and the imf show that the anti-globalization debate is getting strong. sala-i-martin (2002) notes that poverty rates have declined remarkably over the last twenty years. he finds out that the number of one-dollar-a-day poor declined by 235 million between 1976 and 1998. the number of $2/day poor declined by 450 million over the same period. however, performance across regions has been far from uniform. specifically, he finds: asia has undergone dramatic improvements, particularly after 1980. latin america reduced poverty substantially in the 1970s but that effectively stopped in the 1980s and 1990s. africa has been a disaster area with respect to poverty as poverty rates in this region have increased substantially over the last thirty years. in africa, the number of $2/day poor increased by 227 million and the number of $1/day poor increased by 175 million over the period 1970-1998. in 1960, 11% of the world’s poor lived in africa while by 1998 that proportion had risen to 66%. the literature provides different theories on the distributional and poverty consequences of globalization which can be classified into three categories (wade, 2001): first, the neoclassical growth theory predicts income convergence across nations in the long run, in response to increased international capital flows. second, the endogenous growth theory which shows less convergence and, more probable, divergence because diminishing returns to capital are offset by increasing returns to technological innovations. third, the dependency theory implies that developing countries have relatively limited access to the markets of developed countries and have a narrow exports base. therefore, international economic integration is less awarding for developing countries and globalization does not cause absolute convergences. in the presence of such diversified theoretical predictions, estimating the actual impact of globalization on poverty remains largely an empirical issue. also, no previous effort has been made to quantify the relative contributions of globalization to poverty in pakistan. in addition, cross-country studies mask the true effects of globalization in a country-specific setting. therefore, in this study, we focus on the economy of pakistan to unleash the true impact of globalization on the poor of pakistan. pakistan is a low-middle income developing country where more than 60 million people live under the poverty line. such an alarming figure of poverty is a serious drag on the rapid and sustained economic growth of the economy. this study contributes to the literature by empirically determining the poverty effect of globalization for pakistan. the analysis is based on annual time series data from 1975 to 2018 and we use the ardl approach to cointegration. the rest of the discussion is structured as follows. section 2 provides a review of the related literature and theoretical links of globalization with poverty. section 3 describes the data and analytical framework for the study. section 4 presents a discussion on econometric methodology and estimation procedure. section 5 puts forward results derived from the research questions and a discussion on these review of economics and development studies, vol. 7 (4) 2021, 533 542 535 results. finally, section 6 concludes the discussion. 2. theoretical links of globalization and poverty there are various channels through which globalization can affect poverty. in the literature, the main link of globalization with the poor is described through the implications of the heckscher-ohlin (ho) model. according to the model, a nation will specialize in a product that requires intensive use of its abundant factors of production. since developing countries are abundant in low-skilled labour demand for abundant labour will increase their wages, thereby decreasing wage inequality and poverty. the ho model predicts a lower inequality and poverty with the assumption of identical technologies across countries. however, if this assumption is dropped then trade effects also depend on technology diffusion from developed countries to developing countries that generate a skill premium and increase the demand and wages of high-skilled labour. thus trade makes wage distribution more unequal (see, for example, berman et. al., 1994; autor et. al., 1998). davis and mishra (2007) argue that the implication of the ho model that trade liberalization increases the wages of unskilled labour is ‘worse than wrong’. they show that such implication is based on a very narrow interpretation of the stolper–samuelson (ss) theorem. the ss theorem holds under the following conditions: 1) if all countries produce all goods; 2) if goods produce at home and abroad are close substitute, or 3) if comparative advantage can be fixed vis-à-vis all trading partners. moreover, the empirical evidence from developing economies such as india and poland suggests that labour is not as mobile as the ho model considers. in real life, there are too many barriers to labour mobility for workers. another reason that the poor of developing economies may not gain from trade is that they work in those sectors which are historically protected such as textile and apparel. trade reforms may result in less protection for unskilled workers. one strand of the literature suggests that globalization helps to eradicate poverty when complementary policies are in place. for instance, a case study of gambia shows that the poor farmers only expected to benefit from greater excess to export markets if they access complementary inputs such as credit support and technical know-how. some studies also highlight the importance of the social safety net as complementary input. for instance, if the farmers of mexico have not received income support from the government their incomes would have been halving during the 1990s. the impact of globalization on the poor also depends on how globalization is measured. some studies show that globalization in the form of exports growth and foreign investment inflows help to reduce the poverty. for instance, harrison and mcmillan (2007) show evidence that poverty has fallen in regions where exports or foreign investment increased. contrary to this, financial globalization can have a diverse impact on the poor. fdi decreases poverty while financial inflows increase poverty. financial globalization enhances the risk of financial crises and the poor are more vulnerable to the financial crisis. in the case of indonesia poverty rates increases at least 50% after the currency crisis in 1977. cross-country evidence shows that financial integration causes higher consumption and output volatility in low-income developing countries. financial integration can help to ameliorate poverty if strong institutions more stable policies hold in financial integrating economies. however, developing economies lack these strengths. on the one hand, unrestricted capital flows increase poverty, on the other hand, fdi inflows are associated with a reduction in poverty. it is noteworthy that globalization produces both winners and losers among the poor. even in the same region, two sets of farmers producing the same good may be affected in diverse directions. for instance, in mexico, small and medium corn farmers’ income fell by half in 1990, while the income of review of economics and development studies, vol. 7 (4) 2021, 533 542 536 large corn farmers increased. in a case study of brazil, carneiro and arbache (2003) find out that trade liberalization may not be sufficient to significantly reduce poverty. in another case study of papua new guinea, gibson (2000) finds out that poverty increased during the 1990s. in a recent study, majeed (2010) finds that trade accentuates, not ameliorates, and that it intensifies, not diminishes, poverty in the case of pakistan. in the case of mexico, evidence shows that firms demand more white-collar workers in exporting sectors as compared to non-exporting sectors of production. thus exports cause an adverse effect on inequality (hanson and harrison, 1999). moreover, berman and machine (2004) confirm this positive relationship between exports and inequality for developing countries. these models establish a positive relationship between trade and inequality but do not provide a direct link between trade and poverty. it is also pointed out in some survey studies that the relationship between globalization and poverty has been assessed indirectly (winters et al., 2004; goldberg and povcnick, 2006; ravallion, 2004). our study establishes a direct relationship between globalization and poverty. some recent studies suggested conflicting evidence of different measures of globalization on poverty. khan and majeed (2018) investigated globalization and poverty nexus for113 developing countries from 1980 to 2014. their findings suggest that globalization reduces poverty. however, political globalization is not helpful in poverty reduction. dhrifi et al. (2020) show the poverty-reducing effect of fdi in a sample of 98 developing economies from 1995 to 2017. anetor et al. (2020) explored the impact of trade and fdi on poverty using panel data of 29 sub-saharan economies from 1990 to 2017. their findings suggest that fdi has a negative impact on poverty reduction while trade has a positive impact on poverty reduction. dada and akinlo (2021) explored the influence of fdi on poverty in sub-saharan africa over the period for the period 1986–2018. their findings suggest that the fdi increases poverty at a higher degree of environmental degradation. these studies provide panel data evidence that cannot be generalized for an individual economy. since globalization is a multidimensional and complex phenomenon, a simple focus on a specific aspect of globalization can give misleading results. it is also evident from the above-discussed literature that different forms of globalization exert conflicting effects on the poor of developing economies. one possible solution to this problem is to analyse the marginalization of the poor in relation to a comprehensive measure of globalization. the present study considers various forms of globalization and uses an overall index of globalization to determine its poverty effect in the case of pakistan. 3. data and modeling we incorporate the globalization index in the poverty model to estimate the poverty impact of the overall globalization process in the economy of pakistan. some other variables are also important for the poverty model that needs to be controlled to avoid specification bias. these are the gini coefficient, education, financial development, and economic growth. in order to build a poverty model, this study follows a basic poverty-growth model suggested by ravallion (1997). in this study, data is extracted from the government of pakistan (various issues) and from world development indicators (wdi) over the period 1975-2013. the annual time series data on poverty, gini coefficient and education is derived from government of pakistan while the data on gdp, financial development has been derived from wdi (2015). the data on globalization index is derived from kof index based on dreher et al., (2008). review of economics and development studies, vol. 7 (4) 2021, 533 542 537 the general functional form of our model is as follows: povt= yt ginit edut ft globt (1) we use log-liner specification for empirical purpose because it provides efficient results and also convenient to interpret parameters estimated. the functional form of growth model is constructed as follows: (2) where, is the natural log of real gdp per capita, is the natural log of gini coefficient, ft is the financial development , and is the natural of globalization and is the error term which is normally distributed with zero mean and constant variance. 4. econometric methodology for empirical analysis, we use the ardl approach to cointegration. one of the advantages of the ardl approach is that it does not require the same level of integration for all variables. it does not matter whether variables are integrated of order zero or they are integrated of order one or they have a mix order of integration. this feature of ardl gives it an edge over standard cointegration techniques. in the case of mixed order of integration standard cointegration techniques become unstable because the power of the test to determine cointegration becomes low. the only condition for ardl is that no variable should be integrated of order two. the ardl method is based on two steps. first, the long-run relationship between variables is tested using f-statistic. f-statistic is used to test the significance of the lagged levels of the variables in the unrestricted error correction model (ecm). second, the parameter estimates of the error correction model of the long-run relationship are obtained. the ecms corresponding to the globalization-poverty relationship (2) is provided below as equation (3). (3) where δ is the first difference operator or change between two consecutive periods we test the presence of the long-run relationship between variables using-f statistics. we test the following hypothesis. the null hypothesis that the long-run relationship does not hold between variables meaning that that the coefficients of the lagged variables are simultaneously equal to zero. while the alternative hypothesis is that the long-run relationship holds between variables suggesting that at least one of these coefficients is not equal to zero. h0= k=0 for all k h1= k≠0 for at least one k the distribution of f-statistics is non-standard which depends on the orders of integration of the variables comprised in the ardl model. the critical values given by pesaran et al. (2001) are used to compare with the computed f-statistics. this gives three possible outcomes of the long-run relationship review of economics and development studies, vol. 7 (4) 2021, 533 542 538 between variables. first, if f-statics is lesser than the lower-bound critical value the null hypothesis of no long-run relationship is accepted. it implies that variables included in the ardl model do not have a long-run relationship. second, if f-statics is larger than the upper-bound critical value then the null hypothesis of no long-run relationship is rejected suggesting that the long-run relationship holds between variables included in the ardl model. third, if f-statics is larger than the lower bound but smaller than the upper-bound then null hypothesis of no long-run relationship remains indecisive. 5. empirical results 5.1 unit root test as a first step of estimation procedure, we test time series properties of the data using the standard unit root tests the augmented dickey–fuller (adf) and phillips–perron (pp) tests. the basic purpose of unit root tests is to ensure that no series is integrated of order two. table 1 exhibits the results of adf and pp tests. the results reported in table 1 show that all variables are integrated of order one at 5 % level of significance except the variables of inflation which is level stationary at 1 % level of significance. nevertheless none of the series is integrated of order two suggesting that the basic requirements of ardl procedure are met and we can safely move on the next step of the estimation. table 1: results of adf and pp tests variables adf test statistics pp test statistics order of integration (at 5% level of significance) order of integration (at 10% level of significance) level first difference level first difference gdp per capita -2.09 (0.53) -0.67* (0.003) -1.80 (0.69) -0.67* (0.003) i(1) i(1) globalization -1.88 (0.64) -5.65* (0.000) -2.00 (0.58) -5.68* (0.000) i(1) i(1) education -2.06 (0.55) -5.27* (0.000) -2.38 (0.38) -5.27* (0.000) i(1) i(1) inequality -2.12 (0.51) -5.59* (0.000) -2.21 (0.47) -5.61* (0.000) i(1) i(1) inflation -4.53 (0.004) -8.89* (0.000) -4.58** (0.004) -8.94* (0.000) i(0) i(0) financial development -1.42 (0.84) -5.6* (0.000) -1.71 (0.73) -5.6 (0.000) i(1) i(1) poverty -2.38 (0.39) -4.57* (0.004) -2.20 (0.47) -4.55* (0.004) i(1) i(1) note: the test statistics significant at 5% and 10% levels of significant are indicated by * and ** respectively. 5.2 bound test for cointegration in the next step of ardl model, we estimate equations (3) and (4) to determine the long-run relationship between variables. to determine the optimal number of lags, we use schwarz bayesian criterion (sbc). our estimated model satisfies different diagnostic tests which have been reported in table 2. the lm test for serial correlation indicates our empirical findings are not plagued with the problem of serial correlation. for heteroscedasticity the white test is applied which also shows that our review of economics and development studies, vol. 7 (4) 2021, 533 542 539 results are not suffering from the problem of heteroscedasticity. the ramsey reset test is applied to check the functional form and it is clear from the test that our model is clearly specified. finally, we apply jarque–bera test to test the normality of residuals which also shows that the residuals are normally distributed. the results of bounds tests for equations 3 are reported in table 3. the fstatistics of bound tests indicate that in the inequality growth specification the calculated f-statistics is larger than the upper bound critical value. it implies that the long-run relationship exists in growth inequality equation. table 2: results of diagnostic tests test statistics model 1 (eq. 2) f-statistics probability lagrange multiplier test for serial correlation 1.72 0.20 white test for heteroscedasticity 0.62 0.71 ramsey's reset for functional form 1.72 0.20 jarque–bera test for normality 0.58 0.75 table 3: f-statistics for cointegration relationship the model computed f-statistics critical f-statistics at 5% level* outcome lower bound upper bound fy (pov/ gdp, ineq, edu, fd, glo) 5.32 2.84 4.29 cointegration *the critical values are taken from pesaran et al. (2001), table ci (iii), case 111: unrestricted intercept and no trend. 5.3 poverty and globalization our poverty globalization model confirms the long run relationship. in the next step of empirical analysis, we present short run and long run parameter estimates for poverty model developed in equation 3. the parameter estimate on poverty is positive and significant at one percent level of significance both in the short-run and long-run. this empirical finding is consistent with the theoretical studies on poverty and globalization (davis and mishra (2007). this finding implies that absolute poverty increases as globalization proceeds. the coefficient of ecm term is -0.59 and statically significant at 5 percent level of significance. it implies that 59% error correction will take place towards equilibrium each year. review of economics and development studies, vol. 7 (4) 2021, 533 542 540 table 4: short-run relationship cointegrating form variable coefficient std. error t-statistic prob. ∆povertyt-1 0.418891 0.106223 3.943493 0.0007 ∆gdp per capita -0.758501 0.622942 -1.217611 0.2369 ∆gdp per capita t-1 2.585985 1.105802 2.338561 0.0293 ∆income inequality -0.087199 0.066964 -1.302169 0.2070 ∆globalization 1.140936 0.499489 2.284205 0.0329 ∆globalization t-1 0.962809 0.258711 3.721555 0.0013 ∆education -0.050336 0.068696 -0.732745 0.4718 ∆financial dev. -0.322035 0.233418 -1.379650 0.1822 ∆financial dev. t-1 0.322001 0.193914 1.660536 0.1117 cointeq(-1) -0.594678 0.147578 -4.029572 0.0006 cointeq = log(pov) (-0.9411*lnpy + 0.4249*log(g) + 1.3310*log(og) 0.3219*lnedu 0.3766*log(fd) + 7.2561 ) table 5: long-run relationship long run coefficients variable coefficient std. error t-statistic prob. gdp per capita -0.941097 0.543387 -1.731907 0.0980 income inequality 0.424875 0.169612 2.504977 0.0206 globalization 1.330969 0.303373 4.387238 0.0003 education -0.321930 0.117232 -2.746108 0.0121 financial dev. -0.376565 0.262040 -1.437052 0.1654 constant 7.256082 1.895492 3.828073 0.0010 -16 -12 -8 -4 0 4 8 12 16 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 cusum 5% significance -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 cusum of squares 5% significance figure 1 cusum test figure 2 cusum square test review of economics and development studies, vol. 7 (4) 2021, 533 542 541 5.4 stability tests we apply cumulative sum of recursive residual (cusum) and the cumulative sum of square of recursive residual (cusumsq) tests to check the stability of the model. the figure 1 and 2 shows the plots for cusum and cusumsq, respectively. both figures show that the estimated line is well within the critical limits at a 5 percent level of significance implying that model is stable and reliable. 6. conclusion the purpose of this study has been to assess the poverty effects of globalization for pakistan over a long period 1975 to 2018. the empirical analysis for the effect of globalization on poverty is based on the ardl approach to cointegration. the empirical findings show that globalization exerts significantly adverse influence on annual poverty of pakistan. it implies that ongoing process of globalization is marginalizing the poor of pakistan and leaving them behind. contrary to this, economic growth and education are the key sources which help to reduce poverty in the case of pakistan. since globalization accentuates not ameliorates poverty in the case of pakistan, it has important policy implications. leaving the poor segment of society on market forces and international integration may increase their sufferings and vulnerabilities. it is necessary that complimentary policies such as investment in human capital, reforms in financial sector, improvement in labour laws need to be placed as complimentary priorities while proceeding for globalization. future studies can focus on multidimensional poverty as it is more comprehensive measure of poverty. this research mainly established a direct association between globalization and poverty whereas future studies can explore the indirect effects of globalization on poverty. this study assumes a symmetric association between globalization and poverty while future studies can focus on asymmetric relationships between globalization and poverty. references anetor, f. o., esho, e., & verhoef, g. 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(1997). can high inequality developing countries escape absolute poverty? economics letters, 56, 51–7. ravallion, m. (2004). pro-poor growth: a primer. world bank policy research working paper no. 3242. sala-i-martin, xavier (2002). the world distribution of income (estimated from individual country distributions), mimeo columbia university. wade, r.h. (2001). is globalisation making the world income distribution more equal? working paper series, no. 10, development economics studies institute, london school of economics. williamson, jeffrey (2002). winners and losers over two centuries of globalization,’ wider annual lecture 6, unu/wider, helsinki. winters, l. alan, mcculloch, neil and mckay, andrew (2004). trade liberalization and poverty: the evidence so far. journal of economic literature, 42 (1), 72-115. review of economics and development studies vol. 5, no 3, 2019 451 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads impact of psychological empowerment on job performance of teachers: mediating role of psychological well-being 1 nisar ahmed, 2 beenish malik 1 ms student, institute of management sciences, university of balochistan, nisarahmed_mengal@yahoo.com 2 lecturer, institute of management sciences, university of balochishtan, miss.malik@yahoo.com article details abstract history revised format: 30 june 2019 available online: 31 july 2019 this study was carried out to investigate the impact of psychological empowerment and psychological well-being on the performance of teachers and to explore the effect of psychological well-being as a mediator between psychological empowerment and performance. convenience sampling was used to collect data from 261 secondary school teachers through a survey questionnaire in this cross-sectional study. the collected data was statistically analyzed by using spss software 23. coefficient correlation, multiple regression and mediation analyses were carried out in pursuance of study objectives. it was found that psychological empowerment and well-being were significantly and positively related to job performance of teachers. moreover, results showed that psychological well-being partially mediated the relationship between psychological empowerment and well-being. when teachers perceive higher level of psychological factors (viz. psychological empowerment & well-being), they perform better. therefore, it is essential for administrators and executives to attend to psychological factors of teachers in order to increase their performance. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords psychological empowerment, psychological well-being, job performance, correlation, mediation analysis jel classification: m54,p10,p19 corresponding author’s email address: miss.malik@yahoo.com recommended citation: ahmed, n., malik, b. (2019). impact of psychological empowerment on job performance of teachers: mediating role of psychological well-being. review of economics and development studies, 5 (3), 451-460 doi: 10.26710/reads.v5i3.693 1. introduction the primary and secondary schools are building blocks of an educational system. these schools provide the foundation to the whole educational journey of the students. the role of teachers at these schools appears as the builders of these foundations, particularly the secondary school teachers along with ensuring a stabilized educational base for the students, lay the stage for their higher learning. moreover, teachers have a significant influence in shaping the behaviors and attitudes of their students (asrar-ul-haq, anwar & hassan, 2017). they have a considerable effect on the achievements of students (talance, 2016). according to akhtar, shah, ghazi and khalil (2015), teachers have a dominant impact on the students and school. therefore, one of the most current discussions in pedagogy is related to the performance of teachers. many practitioners and researchers have attempted to find the ways in order to enhance the performance of teachers. mehmood, qasim and azam (2013) opined that teachers with high emotional intelligence perform better. farooq http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 452 and kai (2017) suggested that they should be motivated through financial and other social benefits. likewise a large number of researches have revealed innumerable behavioral factors which could influence the performance of teachers (e.g. akhtar et al. 2015; asrar-ul-haq, et al. 2017; grady, 1984; khan & ahmed, 2015). the psychological factors such as empowerment and well-being play a crucial role in enhancing the performance of teachers. psychological empowerment (pe) has been defined with respect to four components, namely; meaning, competence, autonomy and impact (spreitzer, 1995; thomas & velthouse, 1990). as noticed by tastan (2013), the empowerment components have received much attention in education sector particularly within school teachers. empowerment brings not only change but also job satisfaction, commitment and well-being within teachers in schools. similarly, given the burden of work-related stress in teaching, the role of psychological well being (pw) is very crucial to be considered. according to ryff (1989), psychological well-being consists of six dimensions which are self-acceptance, environmental mastery, autonomy, life purpose, positive relationship with others and personal growth. naheed, rehman and shah (2000) argued that psychological wellbeing is a key determinant of effective teaching. despite of their prominent and professional status in the society, teachers sometimes cannot play their role as desired from them due to heavy work stress (ozu et al. 2017) and inadequate compensation for their services (rashid & mukhtar, 2012). according to farooq and kai (2017), in pakistan, the learning and competency level of both students and teachers remains very poor due to myriad challenges. although there has been tremendous progress in technology and considerable educational reforms have been undertaken but the educational institutes are still confronting invincible challenges in the form of low academic performance, heavy work stress on teachers, lack of students’ interest in studies and falling quality education (asrar-ul-haq, anwar & hassan, 2017). hence, there arises the need to study the psychological factors which can reduce the teachers’ stress and increase their performance and to what extent the psychological well-being mediates the relationship between psychological empowerment and job performance of secondary school teachers. so far, however, there has been little discussion about the role of psychological empowerment and psychological well-being in determining the performance of teachers in the context of pakistan. moreover, there have been inadequate studies highlighting the role of psychological well-being as a mediator in the past. therefore, the intention of present study is to identify the relationships of psychological empowerment and well-being with the job performance of secondary school teachers in quetta. more importantly, this paper will try to investigate the effect of psychological well-being as a mediator between psychological empowerment and job performance. in the perspective of contribution, this paper will help the educational experts/administrators in designing strategies for promoting the empowerment and well-being level among the teachers in order to ameliorate their performance. 2. theories and hypotheses development 2.1 psychological empowerment psychological empowerment has gained a considerable attention from both researchers and administrators (arsalan & zaman, 2014; degago, 2014; indradevi, 2011; meyerson & dewittinck, 2012; ölçer, 2015). this is a strategy used by many organizations to equip their human resource with an effective tool i.e. autonomy at workplace (imam & hassan, 2015; & randolph, 1995).on wielding this power employees become more creative (nawaz, hassan, shaukat, & assadullah, 2014), effectively adjust to the changes in the environment (dess & picken, 2000;) and display higher performance (degago, 2014) to bring development to both their organization and themselves (meyerson & dewettinck, 2012). according to ghani, hussin and jussof (2009), the concept of psychological empowerment carries different sense in different contexts (zimmerman, 1990). according to thomas and welthouse (1990), psychological empowerment comprises of four cognitions: meaningfulness, competence, choice and impact. in addition, spreitzer (1995) described psychological empowerment as a set of four cognitions formed by work environment which indicate an employee’s orientation to her/his work role. these dimensions are competence, meanings, selfdetermination and impact. hence, psychological empowerment is an employee’s perception of his level of autonomy, self-competence, his ability to have influence in the workplace and find meaning in the work he/she does. review of economics and development studies vol. 5, no 3, 2019 453 2.2 psychological well-being in current time psychological well-being has emerged as a hot topic for many research scholars. it is like a stimulus which promotes growth and development in employees. as stated by avey, luthans, smith and palmer (2010), the importance of well-being in behavioral sciences and particularly in health psychology has been much focused because of its positive effects on different life domains as well as work outcomes. andrew and whitney (1976) have defined psychological well-being as a person’s evaluative response to his or her life either in the form life satisfaction i.e. cognitive evaluation or affective balance i.e. the level of positive affect surpasses the level of negative effect. ryff (1989) has evaluated the characteristics such as autonomy, relationships, self-acceptance, sense of environmental skill, meaning in life and the individual growth as the important components of psychological well-being. according to alam and rizvi (2012), well-being is a sense of contentment, of one’s role in work environment, happiness and satisfaction with day to day matters. it is a perception of achievement, belongings, utility and absence of dissatisfaction, worry and distress. 2.3 job performance job performance is a vital concept in much of work psychology (viswesvaran & ones, 2000). it is impossible for an organization to achieve its objectives without enhancing the performance of its personnel. alromaihi, alshomaly and george (2017) opined that it is necessary to understand the performance of each employee because important management decisions are made on the bases of individual performance. therefore, this construct has become a centre of attention from all practitioners and researchers from different fields (e.g. alromaihi, et al. 2017; degago, 2014; murphy & kroeker, 1988). moorhead and griffen (1999) have defined the job performance as all the work associated behavior which an organization expects from its employees. according to dai & ziao (2016) it means how well an employee does his duty. in addition, degago (2014) defined it as the achievement of a goal by an employee as expected by the organization. thus, job performance is the desired behavior displayed by employees at work. 2.4 relationship between psychological empowerment and job performance many authors have attempted to know the impact of psychological empowerment on job performance (e.g. arsalan & zaman, 2014; degago, 2014; indradevi, 2011; meyerson & dewettinck, 2012; nawaz et al., 2014; ölçer, 2015; sun, 2016; tuuli & rowlinson, 2009; yilmaz, 2015). tuuli and rowlinson (2009) found that psychological empowerment had both direct performance outcomes and also indirect performance consequences by using motivation, performance ability and opportunity as mediators. similarly, indradevi (2011) also found that all the components of psychological empowerment including competence, autonomy, meaningful work and impact were significant determinants of job performance. hence, the first hypothesis is proposed as: h1: psychological empowerment is positively related to job performance. 2.5 relationship between psychological empowerment and psychological well-being there is a considerable amount of literature describing the relationship between psychological empowerment and well-being (mcclain, 2001; tahira, ruhi, & jibeen, 2010). according to the findings of tastan (2013), psychological empowerment was positively correlated with well-being. moreover, in her study, psychological wellbeing was 79% affected by psychological empowerment. based on the existence of relationship between psychological empowerment and psychological well-being the following hypothesis is developed. h2: psychological empowerment is positively related to psychological well-being. 2.6 relationship between psychological well-being and job performance a number of study analyses have examined the relationship between psychological well-being and job performance (e.g. alam & rizvi, 2012; daniel & haris, 2000; jalali & heidari, 2016; wadhawan, 2016; wright, cropanzano & bonnet, 2007). according to wadhawan (2016) psychological well-being predicts high level of job performance. therefore, it is hypothesized that psychological well-being will affect the performance of secondary school teachers. h3: psychological well-being is positively related to job performance. review of economics and development studies vol. 5, no 3, 2019 454 2.7 psychological well-being as a mediator there are only a few studies in literature that deal with the mediating role of psychological well-being. according to the study results by griffen, scheier, botwin and diaz (2001) psychological wellbeing fully mediated the relationship between early competence and later substance use among the junior high school students. furthermore, clausen, hogh, carneiro & borg (2012), conducted a study on care workers in which they attempted to find the role of psychological well-being as a mediator between experiences of acts of offensive behavior and turnover. they found that psychological well-being was a partial mediator between bullying and turnover relationship and full mediator between threats and turnover and unwanted sexual attention and turnover associations. therefore, the need arises to use psychological well-being as a mediator between psychological empowerment and job performance of secondary school teachers in order to reveal to what extent it explains the relationship between empowerment and teachers’ performance. thus, the fourth hypothesis of study is established: h4: psychological well-being is a mediator between psychological empowerment and job performance. 2.8 conceptual framework in this study it is hypothesized that psychological empowerment predicts job performance of teachers both directly and indirectly via psychological well-being as a mediator. thus, the model for the study is designed as under: figure 1: 3. research methodology 3.1 sample this cross sectional study was carried out in government high schools of district quetta. convenience sampling technique was employed to approach 261 out of 1454 secondary school teachers and data was collected from both male and female teachers through a survey questionnairelynt high schools of ols (positively and significantly related to job performancechological empowerment and job performanc. 3.2 measures 3.2.1 psychological empowerment the psychological empowerment scale used by spreitzer (1995) was utilized to measure the empowerment level of secondary school teachers. this scale was comprised of 12-items which were further divided into 4 dimensions named as; meaning, competence, self-determination and impact. each dimension had three items, rated from 1 (very strongly disagree) to 7 (very strongly agree). higher score on the scale showed the higher level of empowerment of ssts. sample items were ―the work i do is very important to me‖ and ―i am confident about my ability to do my job‖. 3.2.2 psychological well-being psychological well-being scale used by diener et al. (2009) was employed to measure the level of well-being of ssts. this scale was consisted of 8 items which highlighted an employee’s purpose, self-esteem, optimism and relationship with coworkers. this was a seven-point likert scale which ranged from 1 (strongly disagree) to 7 (strongly agree). an example item was ―my social relationships are supportive and rewarding‖. review of economics and development studies vol. 5, no 3, 2019 455 3.2.3 job performance job performance scale developed by kuvaas (2007) was employed to evaluate the performance level of ssts. this scale included 6-items and measured the performance on a 5-point likert scale, rated from 1 (strongly disagree) to 5 (strongly agree). example items were ―i try to work as hard as possible‖ and ―the quality of my performance is top-notch‖. 3.4 data analysis techniques data collected through survey questionnaire was analyzed by using spss version 23. after reviewing descriptive statistics of sample, data reliability analysis was carried out. moreover, to test the hypotheses, pearson’s correlation was run to evaluate the relationship between constructs as a preliminary support and regression analysis was conducted to determine the mediation effect. 4. results 4.1 descriptive statistics and data reliability and correlation analyses the descriptive results of this study demonstrated that female respondents were 132 and male respondents were 129. 88.7% of the teachers were master in qualification and 46.7% had marked the age group of 31-40 years. moreover, 113 teachers had teaching experience of <1-10 years, 80 were in service since 11-20 years and the rest had service of more than 20 years. as given in table 1, the mean scores indicated that teachers perceive high levels of psychological empowerment (m = 5.62, sd = .74) and psychological well-being (m = 5.99, sd = .70) and they view themselves able to meet the requirements of job and consistently perform well on their jobs (m = 4.16, sd = .515). in addition, cronbach’s alpha was established in order to calculate the reliability of the constructs. the reliability values are shown in the parentheses of the same table. the cronbach’s alpha for all constructs were greater than 0.70 which is considered as acceptable level of reliability (saleem, bashir & sajjad, 2016). psychological empowerment observations had highest level of reliability with cronbach’s alpha .881.furthermore, the pearson correlation results showed that psychological empowerment was significantly correlated with psychological wellbeing (r = .67, p < 0.01) and job performance (r = .57, p < .01) and the relationship between psychological wellbeing and job performance was also statistically significant (r = .65, p < 0.01). it provides ample evidence that psychological empowerment and well-being are significant drivers of teacher’s performance. table 1: means, standard deviations, data reliability and correlation results (sample = 261) variables m sd 1 2 3 1 psychological empowerment 5.6178 0.74035 (.88) 2 psychological well-being 5.9952 0.70411 .67** (.84) 3 job performance 4.1577 0.51466 .57** .65** (.78) **correlation is significant at the 0.01 level (2-tailed). 4.2 effects of pe on pw and jp as mentioned earlier, this paper intends to explore the role of psychological well-being as a mediator between psychological empowerment and job performance. for this purpose, the preliminary regression assumptions were tested according to the criteria as recommended by field (2005). first assumption necessitated that dependent and independent variables should be measured on continuous scale. this assumption was fulfilled as the study variables were continuous. second assumption of non-zero variance was also held as the explanatory variables (i.e. psychological empowerment and well-being) had variance in their values as shown by the standard deviations in the descriptive result (table 1). third, normality assumption was tested by p-p plots. according to which all variables showed normal distribution and no data point was found deviated from the normality. fourth, there was no high multicollinearity predicted in explanatory variables. fifth, assumption of independent errors was evaluated by the durbin-watson statistics which was in the acceptable range (1.5-2.5).finally, the assumption of homoscedasticity was confirmed by scatter plot of standardized residuals which displayed the dots randomly and consistently dispersed. thus, after confirming the assumptions, regression analysis was carried out and summarized in table 2. based on pearson’s correlation coefficient and regression results it is found that psychological empowerment is positively and significantly correlated to psychological well-being and job performance which makes the acceptance of hypothesis one and two certain. moreover, results also confirmed the hypothesis three, review of economics and development studies vol. 5, no 3, 2019 456 showing a positive and significant relationship between the mediator (psychological well-being) and dependent variable (job performance). in addition, regression analyses results demonstrated that psychological empowerment explained 33% variation in job performance and 45% in psychological well-being. likewise, psychological wellbeing explained 43% variation in job performance. table 2: no. dependent variable predictor β std. error r square f value p value 1 jp pe 0.402** 0.035 0.334 130.034 0.000 2 pw pe 0.641** 0.044 0.454 215.198 0.000 3 jp pw 0.482** 0.035 0.435 199.095 0.000 **p < .05 4.3 mediating effect of pw in the relationship between pe and jp for mediation analysis, the three steps as laid down by barons and kenny (1986) were carried out. first, it was found that the independent variable (psychological well-being) significantly predicted the dependent variable (job performance). second, the independent variable also significantly predicted the psychological well-being (i.e. mediator). third, the mediator was a significant predictor of dependent variable while reducing the beta and pvalues of independent variable. as shown in table 3, the mediating effect of psychological well-being is worked out between psychological empowerment and job performance. the beta value for psychological empowerment drastically decreased as compared to regression result when mediator (psychological well-being) was introduced in the analyses. it decreased from .402 to .171. the indirect effect is summarized by using bootstrap method. the indirect effect of psychological empowerment on job performance is .2313 and bootstrap standard error is 0.0313. while, the bootstrap 95% llci (lower limit confidence interval) is .1775 and ulci (upper lower limit confident interval) is .2958. it is found that indirect effect is significantly different from zero and the role of psychological well-being as a mediator between psychological empowerment and job performance is confirmed. thus, it is revealed that psychological well-being partially mediates the relationship between the psychological empowerment and job performance. thus, high level of psychological well-being perception among secondary school teachers leads to instill high level of empowerment perception in them. when the teachers experience high empowerment level, their performance level will rise as well. table 3: mediating role of psychological well-being dependent variables pw jp effect of pe on pw .64** effect of pw on dv .48** direct effect of pe .17** indirect effect of pe (through pw) .23** total effect (direct + indirect) .40** 95% confidence interval for indirect effect lower bound .1775 upper bound .2958 **p < .01 pw = psychological well-being, pe = psychological empowerment, jp = job performance 4.4 mediation reporting result figure 2 illustrates the direct and indirect effects of pe on jp. path c shows the direct impact of pe on jp (i.e. 0.4019, p < 0.00001) while path c displays the indirect impact of pe on jp through the mediating role of pw (i.e. 0.1706, p < 0.0001) and the effect of pw on jp (i.e. 0.3610, p < 0.00001) is also shown in path b. review of economics and development studies vol. 5, no 3, 2019 457 5. discussions the objectives of the present paper were to investigate the relationship of psychological empowerment with psychological well-being and job performance of secondary school teachers in quetta. in addition, a particular objective was to investigate the mediating effect of psychological well-being between psychological empowerment and job performance. as hypothesized, the results of regression analyses confirmed a significant and positive relationship between psychological empowerment and job performance. moreover, it was revealed that psychological empowerment explained 33.4%variation in job performance. this finding is consistent with the results of arsalan and zaman’s (2014) survey in which they explored the effect of empowerment on the performance of employees in software sector of pakistan. the results also showed that psychological empowerment was significantly related to well-being of teachers. the role of teachers’ empowerment is very crucial in boosting the level of psychological well-being in teachers. the results of current paper displayed that psychological empowerment explained 45% variance in teachers’ well-being. research findings by tastan (2016) also pointed towards wellbeing as an important outcome of psychological empowerment. moreover, well-being is also shown as a predictor of job performance. according to regression results, well-being explained 43% variance in the performance of teachers. as indicated by alam and rizvi (2012), well-being is an internal feeling of employees which persuades their external performance. thus, the performance of teachers is determined by; a) the purpose and meaning in their jobs, b) being optimist, c) their teaching ability, d) having a collaborative work environment at school and, e) getting their belongingness and self-esteem needs fulfilled. one of the more significant findings to emerge from this study was that psychological well-being positively and significantly mediated the relationship between psychological empowerment and job performance. the findings revealed that well-being improved the explained value of psychological empowerment from 33.4% to 46.7%with a change in r-square value of 13.35%.this result confirmed that teachers who experience impact, self-determination and competence on their job and feel that they have meaningful job, tend to demonstrate higher performance. this performance further increases when they perceive well-being along with empowerment. 6. conclusion the following conclusions can be drawn from the present study that there are positive and significant relationships between psychological empowerment and psychological well-being, psychological empowerment and job performance and psychological well-being and job performance. moreover, there is a partial mediation effect of psychological well-being on the relationship between psychological empowerment and job performance of secondary school teachers. the findings of this study will be supportive for the strategists in formulating and implementing policies in order to enhance the effective performance of teachers. therefore, this study recommends that psychological empowerment and well-being practices should be promoted as these constructs are effective determinants of teachers’ performance. review of economics and development studies vol. 5, no 3, 2019 458 7. limitations and future direction this study focused only secondary school teachers, whereas, expanding the concerned study to all teachers in primary and secondary schools will provide more accurate and solid results. moreover, this study was a crosssectional study. a longitudinal study will show the long term effects of psychological empowerment and well-being on the performance of teachers. further, the data collected, was based on 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93-104. wadhawan, d. k., (2016). psychological well-being as a predictor to job performance and job satisfaction. international journal of academic research and development, 1(3), 1-3. yilmaz, o. d., revisiting the impact of perceived empowerment on job performance: results from front-line employees. turizam, 19(1), 34-46. zimmerman, m. a., (1990). taking aim on empowerment research: on the distinction between individual and psychological conceptions. american journal of community psychology, 16,725-750. review of economics and development studies vol. 5, no 4, 2019 891 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads the impact of financial signaling and information asymmetries of macroeconomic covariates and debt vs. equity 1 rana shahid imdad akash, 2 iqbal mehmood, 3 kashif hamid 1 assistant professor,school of business management, nfc-iefr, faisalabad, pakistan. shahid.imdad@yahoo.com 2 associate professor, government college of commerce, faisalabad, pakistan. i.mahmood70@yahoo.com 3 faculty member, university of agriculture, faisalabad, pakistan. kashif.boparai@hotmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 present study investigates the existence of macroeconomic variables effect on capital structure and to evaluate the behavioral aspects of financial signaling and asymmetry of information on the non-financial sector of pakistan. extreme bounds analysis an econometric technique is used to analyze the robustness of financial signaling and information asymmetry covariates of macroeconomic factors on capital structure policies and to compute the empirical findings. the results conclude that interest rate is significantly influencing the decisions of the managers regarding to the composition of long run financing decisions. hence it is identified that corporate non-financial sector has lesser signaling effect generated by the macroeconomic forces in financial decisions. however the null hypnosis cannot be rejected as this study identified. this study is meaning full and leads toward the practical version of financing decisions by the corporate sectors with the changing policies of the macroeconomic forces in pakistan. there must be coherence between the macroeconomic policies and corporate sector policies, therefore information asymmetries may overcome. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords financial signaling, asymmetries, debt vs equity jel classification: g10, g15, h63, h69 corresponding author’s email address: shahid.imdad@yahoo.com recommended citation: akash, r. s. i., mehmood, i.and hamid, k.., (2019). the impact of financial signaling and information asymmetries of macroeconomic covariates and debt vs. equity (the theory and empirics among emerging and transitional market: perspective from pakistan). review of economics and development studies, 5 (4), 891-902 doi: 10.26710/reads.v5i4.876 1. introduction the major concern of the financial managers of companies is to take capital structure decision to minimize the cost of capital. these decisions must be make in order to increase of the value of its assets, which may increase the wealth of shareholders. the theoretical underpinning of financial management is desired to optimize the capital structure by minimizing the cost of financing and to ultimately maximize the firm value. the optimal capital structure has a significant impact on capital market behavior. there are various important factors that may have significant importance with reference to the relationship of the capital structure and the economic factors. however the major economic factors may have significant influence http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 892 on the strategic capital structure decisions. most of theories are based on internal structure of the company which may base on stability and smoothness of economic factors and variables. all theories of capital structure have significance importance to answer the questions regarding to tax saving combination of capital structure, minimize cost of capital. all these concepts and constructs of the theories are relevant to the internal factors of the company such as managerial factors, buy and sell decisions etc may be controlled by companies but the external factors of the companies are less considered but found significant in previous studies. the changes in macroeconomic variables such as money supply, inflation rate, interest rate, exchange rate, gross domestic product, industrial production, reserves and accounting variables such as amount of dividend, short term debt ratio and long term debt ratio may have significant effect on capital structure and ultimately to financial resources. these financial resources are highly sensitive to the situations of economic. the investor’s decision making will lead to market situations and represent to economy of the country. thus we motivate to explore the impact of economic conditions on decisions and composition of financial resources among companies listed on kse. the capital structure is extensive to provide answers to the aspects that affect the decisions against changing firm’s capital structure. however we cannot deny some important economic explanatory variables, which may play a significant role for corporate choices and decision making. this study is contributing in the empirical literature of capital structure studies by deploying new methodology along with macroeconomic variables in the model for identification of financial signaling and market information asymmetries at the same state and to identify the robustness of factors together on capital structure decision in non-financial sector of pakistan to overcome the gap in the previous researches. 2. literature review the transitional and emerging countries require special focus to financial factors which support at level of economy. the asymmetric behavior in transitional economies is very high as compared to the developed market. modigliani and miller (1958) established that trade off different tax and other financial benifits with debt against financial distress cost can be used to find optimal capital structure. jensen and meckling (1976) also described that financial distress cost, agency cost and bankruptcy cost can be used to establish trade of theory. this will create the equilibrium between advantages tax cost and disadvantages bankruptcy cost and financial distress to choice the capital structure. gertler and hubbard (1993) documented that equity finance reduces the spread that firms insulate against aggregate risks due to tax bias. this can proceeded the prediction regarding dividends may varied with macroeconomic conditions. harris et al. (1994) indicated that the financial liberalization and reforms have an impact on investment decisions and credit allocation. the effect may differ due to change in type of firms. the results showed that shift in administrative to market dependent credit allocation stay increased borrowing costs of small firms particularly. this should be beneficial at the same time to provide widened access to finance. lamont (1995) explained a model of corporate debt overhang can be used to create multiple equilibriums in which economic activity may determined by expectations. corporate financial structure has impact on macroeconomic performance by debt overhang when debtors make new investments. in conclusion the debt can create multiple expectation equilibrium and economic activity. review of economics and development studies vol. 5, no 4, 2019 893 kochhar (1997) explained that the management of the company decides about financing decision to reach the optimal market value of stocks. the maximization of shareholders value is possible by optimal maximum efficiency and selecting appropriate risk for the company. michaelas et al. (1999) presented that capital structure is time and industry dependent. the changes in economic growth pattern have positive relationship with long term debt. harris and raviv (2002) described that reduction in cost of financing can enhance the market price of the share. ju and ou‐yang (2006) developed that the interest rate in long run is the key determinant of optimal capital structure and debt maturity. kohher (2007) explored highest market value is used for financial resources to obtain optimal level of maximum efficiency at selected appropriate level of risk of the company. there are various theories of optimal capital structure to find the basic truth about the optimal capital structure or not and cost of capital. niu (2008) doing theoretical and practical preview of capital structure and its determinants, firstly drew attention towards different theories of capital structure and then suggested seven different determinant factors from practical aspect i.e. a negative linkage of leverage with growth opportunities, liquidity and volatility and both positive and negative relationship with profitability and tax. bokpin (2009) proposed a study model on macroeconomic development and capital structure decisions. the gross domestic product (gdp) per capita and choice of capital structure have negative significant relationship. inflation has positive significant impact on choice of short term debt and equity. the stock market development has insignificant impact on choice of capital structure. the control variables – asset tangibility, return on equity (roe), return on asset (roa) and tobin’s q are the significant predictors of corporate financial structure. chadegani et all (2011) investigated the effects economic and accounting variables on capital structure of listed companies initial data between 2001-2008 of tehran stock exchange are used multivariate regression model seemingly unrelated regression equations. the results represents the positive relationship between exchange rate, dividend, long term debt ratio , short term debt ratio and bank credit and negative relationship between inflation, interest rate and gdp with capital structure in tse. doukas et al (2011) found that a perceived capital market may favorable. the indication of market timing and cost of equity adverse selection – asymmetry of information are important frictions. this can lead to issue more debt in hot – debt market period than cold-debt market periods. it is described that the firms with equity adverse selection of more (less) debt where market conditions considered as hot (cold). the evidence provided that the hot-debt market effect on the capital structure. the issuance in hot debt market may not rebalance actively to leverage to stay within the range of choice optimal capital structure. artikis and nifora (2012) investigated that the market risk premium, the size, and the momentum idiosyncratic factors had a statistically significant positive relationship with equity returns. the leverage and value risk factors had a statistically significant negative relationship with equity returns. the leverage is priced as a risk factor by constructing a leverage factor contains significant information content. it has a smaller magnitude but still considerable portion as compared to the size and value risk factors. lemma and negash (2013) indicated that the economy growth rate and inflation influenced the choice of capital structure. this signified the role of the probability of bankcruptcy, transaction cost, agency cost, tax and asymmetry of information’s, finance to access and timing of the market associated in decisions of the capital structure of firms. review of economics and development studies vol. 5, no 4, 2019 894 matemilola et al (2013) described unobservable firm’s specific effects i.e. marginal skills and marginal ability. the mis-specification may occur due to firm specific factors i.e. marginal skills and marginal ability. these factors have significant relationship with capital structure decisions. the low level of debt advised to manager to increase in debt level. ahmad and abdullah (2013) investigated optimal level of debt to maximize the value of the firms. the results estimators reflect the single threshold of debt ratio level 64.33 percent impacts on firm’s value. the addition in debt beyond the threshold may not increase in value of the firms. more level of debt could proceed to a debt overhang and insolvency to microeconomic level of the firms. this might be cause vulnerability in financial system of the firms. it should lead to financial catastrophes. 3. theoretical framework 3.1 theories of financial signaling and asymmetric information the information asymmetry which is basically resolved through the best decision making of management. the decision of debt and equity reflects change the behavior of the investors and creditors which leads to signals in market. the confidence and trust is based on favorable signals due to market value excellence and lack due to unfavorable signals and asymmetry of information. fama and french (1988) was not agreed to the notion that the more profits of firms no need more debt. the more debt may producer of poor signals. the interest charges and future development are being depended on earnings. 3.2 agency cost theory (act) the agent managers and principals owners may lead agency behavior due to financial signaling and asymmetries. this may be between shareholders and manages and shareholders and creditors. jensen and meckling (1976) described agency cost of monitoring expenditure by principal, bonding expenditures by the agents and residual loss. 3.3 static trade off theory (tot) myers (1984) indicated the static tradeoff theory (stt) to explain a firm used targeted debt to equity ratio. the benefit and cost associated with the selection of debt choices debt equity. the taxes, agency cost and cost of financial distress may lead to doubtful situation on achievement of target. the bankruptcy cost that may be raised due to financial distress. pecking order theory (pot): myers and majluf (1984) explored the pecking order theory (pot) to financial decisions of capital structure. the firms have a preference to finance through use of internal fund, i.e. retained earrings, external financing means a bank loan and then equity to finance. the reluctance to issue equity to avoid asymmetric information between manager and investor. 3.4 signaling and information asymmetry theory ross (1977) documented signaling and information asymmetry model to convey the information quality of the company to market due to selection of capital structure choice. the misalignment information of company returns between management and investor may lead unfavorable signals and information asymmetry. then management can have enjoyed more returns but are penalized in case of bankruptcy. 3.5 transaction cost economics (tce) williamson (1988) described the transaction cost economics approach concerned to debt which is more valuable due to excellent collateral of general assets and more liquidity. the liquidity and security may increase capacity to meet the payments of debt. ronald (1937) documented transaction cost economics due to difference between market to buy and to make based on decision to use markets. kochhar (1996) described debt concerned to buy and equity concerned to make. review of economics and development studies vol. 5, no 4, 2019 895 3.6 life stage theory frielinghaus, mostret and firer (2005) presented that the fundamental premise of life stage of organization and living in the organisms in a similar fashion. the firms can utilize more debt as to mature. bender and ward (1993) showed that the choice of capital structure may effected by life stage of firm. these are used to manage the business risk and to increase financial risk. adizes (1979) resulted that life stage is used to describe the typical pattern of behavior. adizes (1996) as the interrelationship of flexibility and control. 3.7 market timing theory baker and wurgler (2002) provided that the choices of capital structure are positively and strongly related to the timing of the market. the capital structure showed the cumulative effects to time the equity of olds attempts. the stocks issued when the stock is overpriced and buy back when the stock underpriced. it argued that macroeconomic and accounting factors affect the capital structure of the firm. frank and goyal (2004) provided that there is no empirical sufficient support to validate this theory and unable to define the optimal capital structure. 4. data and methodology 4.1 data the study is an attempt to identify the effect of financial signaling of macroeconomic variables on choice between financing decisions of debt vs. equity. this study is based upon the secondary financial data of firms from the period 2001 2018. the data of firm’s income statement and balance sheets is obtained from balance sheet analysis of joint stock companies listed on the karachi stock exchange. the macroeconomic variables data is taken from international financial statistics which is published by imf. this study has focused on the companies of five non-financial sectors that are listed on the karachi stock exchange. a balanced panel data has been taken for analysis purposes. section -1: macro asymmetric behavior, theory /hypothesis and examples: macrocosmic covariates theory /hypothesis literature justification of variables money supply money supply cause to increase in the price levels of goods and services. ultimately inflation that will reduce the purchasing power. it should increases the retained earnings to reduce the financial leverage or debt. (drobetz et al., 2007). inflation rate inflation rate is the increasing levels of goods and services price to reduce the purchasing power. inflation rate has influence on management decisions of financing to increases the retained earnings to reduce the financial leverage. (drobetz et al., 2007). interest rate increase in interest rate will cause increase in investor and creditors expected rates. since financial managers are seeking to achieve the lowest cost sources of financing to increase in interest rates and cost of financing to eliminate this way of financing. (bokpin, 2009). review of economics and development studies vol. 5, no 4, 2019 896 section -i1: direction of the effect & empirical findings of macroeconomic variables: 4.2 methodology the methodology is used to examine the effects of change of macroeconomic and accounting determinants in the debt vs. equity. the panel data studies of the determinants of debt vs. equity are typically based on regression equation n yct = α t + ∑ βnc x ntc + ɛ ct f=1 where t = 1,….., 10 c = number of the firms in each group the desired change in debt vs. equity is measured as yct = ∆ d/e = (d/e t – d/e t-1) this study makes use of robust multiple regression analysis. the robust regression model is run over this kind of data. the robust regression model is as under exchange rate exchange rate can be effective on the capital structure of those companies which use foreign funds. increasing the exchange rate will lead to decrease in cash and increases interest expense and finally increases the debts ratio. (fanelli and keifman, 2002). industrial production the increase in industrial production improves strength of cash flows and earnings ultimately to gdp and it leads to reduction in the debt to equity ratio. (bokpin, 2009). reserves the increase in reserves improves strength of cash flows and earnings ultimately to gdp and it leads to reduction in the debt to equity ratio. (bokpin, 2009). gross domestic product gross domestic product (gdp) is the total monetary value of goods and services produced in a given year. based on literature review, the increase in gdp improves cash flows and earnings and it leads to reduction in the debt to equity ratio. (bokpin, 2009). covariates measure (proxy) theoretical findings empirical findings money supply ms (m2) negative negative inflation rate if (cp index) negative negative interest rate ir (t-bill rate-6m) negative negative exchange rate er (dollar rate) positive positive industrial production ip (ip index) negative negative reserves re(gold+forex) negative negative gross domestic product gdp (gdp deflator) negative negative review of economics and development studies vol. 5, no 4, 2019 897 ytk = α t + β1 macroeconomic + ɛ ct where ytk = debt vs. equity ms = money supply if = inflation rate ir = interest rate er = exchange rate ip = industrial production re = reserves gdp = gross domestic product ɛ ct = error term ytk = α t + β1 (ms) + β2 (if) + β3 (ir) + β4 (er) + β5 (ip) + β6 (re) + β7 (gdp) + ɛ ct this model is a base model considering the impact of seven time-varying financial covariate of macroeconomic determinants makes changes on the capital structure. n ytc = α t + ∑ βnc (macroeconomic financial covariates) ntc + ɛ ct f=1 where, for the model as defined above, yctk = capital structure response for company c in year t (t =1,..,10). fcnct = time-varying macroeconomic financial covariate f (f =1,..,7) for company c in year t (t =1,..,10). β = intercepts and slope coefficients for fixed effects (for which explicit individual estimates are produced) ɛ ct = random error for company c in year t. it can be expressed in an expanded form as follows: yct = α t + β1 macroeconomic + ɛ ct yctk = α t + β1 (money supply) + β2 (inflation) + β3 (interest rate) + β4 (exchange rate) + β5 (industrial production) + β6 (reserves) + β7 (gross domestic product) + ɛ ct yctk = capital structure response for company c in year t (t =1,.., 10). β1 to β7 = coefficients of fifteen time-varying macroeconomic financial covariates. extreme bounds analysis issues in methodology: it is an alternative of parameters of simple regression. the simple regression is an emerged bayesian solution due to model mis-specification and biasness in choice of variable. the parameters in simple regression may not be best representative and interpreted one. the leamer (,1978, 1983, 1985) and leamer & herman (1983) developed bayesian econometric technique extreme bounds analysis (eba). levine & runlet (1992) and levine & zervos (1993) showed the usefulness of extreme bounds analysis (eba). the extreme bounds analysis has power of reporting and assessing sensitivity of the estimated results where change in specification of model. xaviar x.sala-i-martin (1996, 1997) argued that a particular variables coefficient of a growth regression is not pessimistic criteria. the coefficients density function is important to resolve this problem by option of coefficients robustness and fragility. there is no theoretical justification for a specific combination of variables. moreover there may be some theoretical justification is available for specific countries or group of countries but it may not be valid to all countries. it may used to explain that this is poor goodness of fit of the particular model where we used cross – sectional data set. these large numbers of explanatory variables encountered through sensitivity analysis. review of economics and development studies vol. 5, no 4, 2019 898 the extreme bounds analysis (eba) is used for sensitivity analysis. this extreme bounds analysis (eba) can be used to avoid the pitfall of selective reporting. this also proceeds by direct incorporation of prior information’s and followed a systematic approach to test the fragility of the coefficient estimates. so, leamer,s extreme bounds analysis (eba) helped to resolve the big phenomena of classical econometric i.e mis-specification of model and biased criteria of inclusion or exclusion of variables in study. it is evident that growth regression of panal data is caused number of statical and theoretical problems. the basic problem is inclusion or exclusion of the variables in the particular regression construct. it is evident that different economies are unacceptable econometric biased fundamentally due to regression model design of panal data. secondly, the problem of choice of single equation model or double equation model. moreover, the parametres alerts where related variables included or excluded in regression construct. it is obvious that at factual required and desired variable is sensitive regarding to minor changes in the model. it is actually the matter of fact of great concern to ascertain that which value of parameter is reliable and valid for policy making. the simple regression coefficients or parametres are objectionable ultimately economic research pursuits to policy making. in this regard, doubtfulness of fulfillment of ultimate aim, the research endeavourers become more reliable and valid for a futile activity. the modified approach of extreme bounds analysis (eba) searched the maximum and minimum bounds to estimate the upper and lower bounds from series of parameter or coefficients of m combination which is used to satisfied the condition for selection criteria of coefficients robustness. it is used to stat that coefficients must be statically significant at 5% level of significance and entailed that do not to reflect the opposite sign. the parametres at 50% of significance are used to obtain by incorporation of m variables combinations. the upper and lower bounds which are used to maintain identical in sign will inferred to result in robust otherwise fragile. 5. results and discussion: 5.1 macro level signaling and asymmetric covariates the high exchange rate (er) may lead to low in cash and high interest expense. table 3 indicates that the exchange rate (er) has negative insignificant relation to financing decisions (debt vs equity) which means reduction in debt to equity ratio. the managers required to establish the minimum cost sources to decrease in debt. the negative significant relation of interest rate (ir) means reduction in debt vs. equity. table 3: the sensitivity and validity of macroeconomic financial covariates: variables coefficients t value ms -5.43221 -1.54 inf 4.61453 1.46 ir -0.29614 -2.63** er -3.69121 -1.52 ip 0.82421 0.95 re -2.43216 -1.58 gdp -5.23752 -1.49 *** significant at 1% level, ** significant at 5% level * significant at 10% level review of economics and development studies vol. 5, no 4, 2019 899 the interest rate does not support the tax shield benefit due to negative impact with debt vs. equity. the financial managers also feel threat of bankruptcy. the bankruptcy supports the transaction cost, asymmetric information and agency assumption due to the negative impact of interest rate. the high interest rate will increase the investor expected rate of return. the industrial production (ip) improved strength of cash flows and earnings to make reduction in debt. industrial production (ip) has positive insignificant impact on debt vs. equity. it is used to lead more debt. the cash flows of the company can be strengthened by increase in gross domestic product (gdp) and reserves (re). the gross domestic product (gdp) and reserves (re) has negative insignificant impact on debt vs. equity. the result of sensitivity is reflected in the table 4. the results showed the range values of parameters of variables of interest. the βmax and βmin are used in respect to significance level in percentage at 5% level of significance. these maximum and minimum bounds can be required to measure signaling sensitivity of the debt vs. equity (de) and macro variables. the fragility and robustness indicates the extent of signaling and change in debt vs. equity in the reported variables. the results represent the negative insignificance relationship of inflation (inf), interest rate (ir) , exchange rate (er), reserve (re) and gross domestic product (gdp) have fragile relationship and no sensitivity to debt vs. equity. table: 4 eba of the coefficients sensitivity: modified approach dependent variable: de m varaibles included: tg pf sz variables β base β max β min sign β,s (%) eba results ms -0.117 0.000 -0.117 0% fragile inf 0.053 0.069 0.053 0% fragile ir -0.007 0.000 -0.007 0% fragile er 0.049 0.000 0.049 0% fragile ip 0.009 0.000 0.009 0% fragile re -0.007 0.000 -0.007 0% fragile gdp 0.113 0.118 0.103 0% fragile robust relationships in the group 0 % globally robust the results presented in table 5 also showed the range values of β upper bound and β lower bound of variables of interest with respect to level of significance at 5%. the results also represent the negative insignificant relationship of inflation (inf), interest rate (ir) , exchange rate (er), reserve (re) and gross domestic product (gdp) are fragile variables. table: 5 eba of the coefficients sensitivity: leamer approach dependent variable: de m varaibles included: tg pf sz variables mean µ upper bound (µ+2s) lower bound (µ-2s) cases sign. at 5% leamer eba results ms 0.000 0.000 0.000 0% fragile inf 0.000 0.000 0.000 0% fragile ir 0.000 0.000 0.000 0% fragile review of economics and development studies vol. 5, no 4, 2019 900 . table: 6 eba of the coefficients sensitivity (trimmed ols @2% m.d): modified approach dependent variable: de m varaibles included: tg pf sz variables β base β max β min sign β,s (%) eba results ms -0.059 -0.059 -0.083 0% fragile inf -.119 -0.119 -0.173 0% fragile ir -0.079 0.079 -0.102 75.2% robust er -0.331 -0.331 -0.457 0% fragile ip -0.097 0.000 0.097 0% fragile re -0.001 0.000 -0.001 0% fragile gdp -0.107 -0.069 -0.110 0% fragile robust relationships in the group 16.8 % globally robust table: 7 eba of the coefficients sensitivity (trimmed ols @2% m.d ): leamer approach mahalanobis distance is used for trimming which is meant for exclusion of the outliers. the results also represent the negative robust and signaling relationship of variables. the interest rate sensitivity is more as presented in table 6 and table 7 respectively. the money supply (ms), inflation (inf) , exchange rate (er), industrial production (ip), reserve (re) and gdp have negative insignificant signaling relation to debt vs. equity. er 0.000 0.000 0.000 0% fragile ip 0.000 0.000 0.000 0% fragile re 0.000 0.000 0.000 0% fragile gdp 0.000 0.000 0.000 0% fragile robust relationships in the group 0 % globally robust dependent variable: de m varaibles included: tg pf sz variables mean µ upper bound (µ+2s) lower bound (µ-2s) cases sign. at 5% leamer eba results ms 0.000 0.000 0.000 0% fragile inf 0.000 0.000 0.000 0% fragile ir 0.098 -0.096 -0.110 75.2% robust er 0.000 0.000 0.000 0% fragile ip 0.000 0.000 0.000 0% fragile re 0.000 0.000 0.000 0% fragile gdp 0.000 0.000 0.000 0% fragile robust relationships in the group 16.8 % globally robust review of economics and development studies vol. 5, no 4, 2019 901 the negative significant relation of interest rate (ir) is used to make decrease in debt vs. equity. industrial production (ip), reserve (re) and gdp improved strength of cash flows and earnings to make reduction in debt. industrial production (ip), reserve (re) and gdp has negative insignificant with debt vs. equity. hypothesis hence proved due to significant negative relation of interest rate (ir). it is used to decrease in debt vs. equity due to high agency cost and also consistent with the objective. the interest rate (ir) has 73.3% robust and sensitive relationship to debt vs. equity. 6. conclusion this study finally concluded that all theories of capital structure identified that financial signaling and asymmetries of information changed the behavior of investors and lenders in a perspective where borrowing signals provides a positive impact and equity financing generates negative signals to the stock market investors but still there is a need to realize this impact that must have an index of capital structure based upon industrial average and the return anomaly or we may can visualize the impact of financial signals and change in capital structure parameters by analyzing cross section of various industry of nonfinancial sector that either the movement of capital from one industrial sector to another appealing industrial sector have caused an increase the return or not. the study concluded that financial signaling and information asymmetries of macroeconomic variables indicate that interest rate (ir) has the most significant negative impact which cause to an increase in debt vs. equity and after while decrease in interest rate (ir). the financial managers should require achieving the lowest cost sources and reduction in debt composition. the economic and financial policy makers should definitely consider the impact of macroeconomic factors on financing to facilitate the non financial sector in pakistan in a more dynamic way. the debt vs. equity is the main concern among contributing factors as shown in the financial crises history. the borrowing of money is utilized for investment and industrial production. the failing in investment and industrial production should be the main reason of bankruptcy. the degree of bankruptcy is mostly used to increase the financial crises. the real and growth oriented utilization of borrowing of money for investments can better handle the financial crises. this asymmetry of information affects the psychology and perception of investor in decision of investments. the imperfections can misprice the value of the firm. there should be improvements in trust and confidence of investors to make the market more proficient and frictionless to reduce the anomalous behavior and mis-presentation of the market. the only efficient capital markets can have the practical implications to fair market value of firm. references ahmad, h.a. and abdullah, h.a.n. 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(2008). theoretical and practical review of capital structure and its determinants. international journal of business and management, 3(3), 133-139. review of economics and development studies, vol. 7 (2) 2021, 187-203 187 productivity dynamics: a case of pakistan muhammad nadeem javaid a , gulzar ahmed b a karachi school of business and leadership, national stadium road, 74800 bahadurabad, karachi, pakistan email: nadeemjavaid75@gmail.com b ministry of planning development & reform, pakistan email: gulzar_maitla@yahoo.com article details abstract history: accepted 30 april 2021 available online june 2021 this study estimates the total factor productivity (tfp) for pakistan at aggregate and sectoral level from 1982 to 2016 with a data set rebased at 2005-06. we employ actual returns to scale instead of the oversimplified assumption of constant returns to scale for measuring the tfp. our results show that average economic growth during this period is 4.7 percent with 0.7 percent contribution from tfp. while, average tfp growth for agriculture, industry, and services sector is 1.5, 4.6, and 4.3 percent, respectively. besides, there is a noticeable decreasing trend in tfp as well as economic growth relative to 1980’s. further, our analysis reveals that the physical and human capital contribution in productivity is quite negligible at aggregate and sectoral level. this implies that size able investments in human capital formation can further help the economy to attain high growth trajectory in the short to medium terms. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: productivity, aggregate and sectoral level, human capital formation jel classification: d24, o47 doi: 10.47067/reads.v7i2.350 corresponding author’s email address: nadeemjavaid75@gmail.com 1. introduction economic growth of a country is fuelled by rising labour productivity and total factor productivity; which is a portion of output driven by operational efficiency, managerial skills, innovation, and competitiveness. measurement and interpretation of the productivity is a major interest of entrepreneurs and policy-makers to untangle the complex factors of economy (nadiri, 1970). regardless of data and methodologies, tfp is widely accepted as a driver to create the difference in world’s income as compared to saving rates, labour and the capital stock that makes a relatively small difference (prescott, 1998; hall and jones, 1999; jerzmanowski, 2007 and comin, 2006). however, some studies show that major contribution in output growth is due to factor inputs; jorgenson and griliches (1967) found that 96.7 percent growth in output is inputs driven and the rest is explained by tfp. solow (1956) used the technology as an exogenous variable and suggested that technology and the capital accumulation account for major increase in the output per worker. the endogenous growth theories used the technology as an endogenous variable and argued that output growth mainly review of economics and development studies, vol. 7 (2) 2021, 187-203 188 determined by knowledge spill-over, innovation and human capital (romer, 1990; grossman & helpman, 1993). recent literature highlights that economic growth of a country is propelled thru tfp besides conventional factors such as level of private investment, saving rate, labour, and capital productivity (see e.g. bosworth & collins, 2008; lee & hong, 2010; lópez-cálix et al, 2012). manyika et al (2014) explained that disparities in the past and present economic growth and gdp per capita growth of a country is mainly explained by the pool of workers and labour productivity. felipe (2007) explained that china and india have achieved the high tfp growth in the asian region through structural transformation, skill development and improving human capital. collins (2004) estimated average tfp growth; for india 1.19, china 2.68, bangladesh 0.37, sri lanka 0.75 and for pakistan 0.87 percent during the period of 1960-2003. jorgenson and vu (2005) also estimated the tfp growth for india 2.49, china 2.49, bangladesh 0.41 and for pakistan 0.52 during the period of 1995-2003. however, in pakistan, economic growth tends to fluctuate with high volatility and decreasing trend relative to 1960s and 80s because of political instability, low level of investment, and technically inefficient workforce (pasha et al, 2002; khan, 2006; amjad & awais, 2016). it is imperative to examine the structure of real gdp growth while considering the factors other than inputs (labour and capital) to boost the economic growth. pakistan is lagging behind as compared to its regional competitors in spite of having a greater proportion of youth in its demography and economic potential. the growth of pakistan is lower than its south asian counterparts, which needs to be empirically analysed for designing the better policy interventions. previously some studies (e.g. see burney, 1986; sabir & ahmed, 2003; kemal et al, 2002) have concluded the positive association of economic growth and total factor productivity using growth accounting approach. table 1: productivity analysis for pakistan in literature research study period covered estimation methodology tfp growth (percent) kemal et al (2002) 1965-2001 growth accounting approach; economy 1.66 agriculture 0.37 industry 3.21 pasha et al (2002) 1973-98 growth accounting framework economy 2.2 sabir and ahmed (2003) 1973-2002 tfp index = output/input economy 1.8 agriculture 2.0 manufacturing 4.0 services 0.4 world bank (2006) 1960-2005 growth accounting approach economy 1.08 lopex calix et al (2012) 1981-2011 output per worker/capital stock, human capital, and arable land economy 1.4 agriculture 1.5 industry 1.6 services 0.9 park (2010) 1970-2000 growth accounting approach/with actual labour share/constant labour (0.6) economy (actual share) 0.5 economy with labour share 0.6 1.1 review of economics and development studies, vol. 7 (2) 2021, 187-203 189 source: author’s own compilation large variations in the tfp growth in literature are shown in table 1; which could be due to the use of different time periods, estimation techniques and assumptions in these studies. park (2010) estimated the lowest tfp growth of 0.5 by using actual labour share and then with assumed labour share of 0.6 and resulted in 1.1 % tfp growth. the overall variation of tfp growth lies from 0.5 % to 1.8 % in these studies. data analysis and estimation techniques in these studies are based on the oversimplified assumptions because they assumed the coefficient’s values and constant return to scale assumption for measuring the share of capital and labour instead of park (2010) method, who used actual and adjusted labour share while measuring tfp. therefore, this issue requires a comprehensive empirical analysis of tfp for better evidence-based policy making. our study’s contribution is three-fold; first, this study employed the data of all the variables on same base year 2005-06, which is never done before in pakistan’s perspective. therefore, this study may provide more true and recent analysis of real gdp growth and total factor productivity at the aggregated and sectoral level i.e. agriculture, industry and services. second, this study follows a more robust methodology devised by cole & neumayer (2006), which employs the dynamic return to scale and estimated values of input coefficients instead of constant return to scale and assumed input shares. third; contrary to the previous studies that rely on traditional growth rate method (e.g burney, 1986; martin & mitra, 1999; chaudhary, 2009), we applied the output per worker method e.g. and compared it with growth rate method while estimating tfp. rest of the paper is organized as follows; in the following section we explain the data and construction of variables, section 3 illustrates the econometric methodology for tfp estimation, section 4 discusses the results of tfp and growth rates of major variables for the aggregate and sectoral level. the last section presents conclusion and policy recommendation. 2. data and variable description variables selection and data analysis for total factor productivity is quite a difficult task because tfp estimates are sensitive to the time period coverage, assumptions, and estimation techniques. some authors use the real gdp growth rates data at constant prices and others use gdp at purchasing power parity (srinivasan, 2005). we used the data from 1982 to 2016 on a constant base year 2005-06 for all the variables, which are organized as follows: 2.1 output the data of gross domestic product (gdp) in million rupees is taken from pakistan bureau of statistics at constant factor cost of different years and then it is rebased at 2005-06 (it is the latest available rebasing). sector-wise data of real gdp is derived from the overall gdp by using the sectoral share of agriculture, industry and services sector. in addition, the sectoral shares are first converted at the same base year 2005-06 before deriving the contribution in real gdp. because a great deal of structural transformation has occurred during last three decades as agriculture’s contribution to gdp has declined to 19.5% from 30% in 1980s; industry’s share has increased slightly during these last three decades from 18% in 1980s to 21% in 2016 but showing the sign of premature deindustrialization. while services contribution is continuously increasing from 52% in 1980s to 59% in 2016. 2.2 measuring capital stock we generated the physical capital stock data series through employing perpetual inventory method and used the gross fixed capital formation (gfcf) with 5% depreciation rate to generate the review of economics and development studies, vol. 7 (2) 2021, 187-203 190 capital stock series (see, e.g. nehru & dhareshwar,1993 ; barro & lee, 2010). initial capital stock where ko is the initial capital stock and, is the value of investment at year 1 and delta is the rate of depreciation that is assumed 0.05, g is the overall gfcf average growth rate. kt is the capital stock series and (i) is the gross fixed capital formation in million rupees. however, the capital stock series for each sector (agriculture, industry and services) is generated using sector-wise data of gfcf. 2.3 measuring human capital we used the barrow-lee average years of schooling from the world development indicators to construct the human capital variable. however, this index is available with five years gap so we interpolated the intermediate values. according to this method, human capital per worker is assumed to have relation with years of schooling that means percentage increase in workers’ productivity is due to additional years of education (barro & lee, 2010), which is written as: in this equation measures the efficiency of per unit of labour with s years of education relative to no education. according to bosworth & collins 2008, the return to an extra year of schooling often fall between 5 to 10 percent; thus, we used the 7 percent assumption which is also in line with lópez-cálix et al 2012 and amjad & awais, 2016. the final form of the variable is given below. 2.4 measuring the labour labour is used as the input in the production function and it is measured in different ways as depending upon the availability of data. mostly it is measured as the number of hours worked. however, working hour’s data is not available in pakistan, therefore, we used the number of workers employed as labour. data of labour for the overall economy and sector wise is taken as an employed labour force in million from various issues of labour force survey of pakistan. 3. productivity measurment solow (1957) pioneered the measurement of the tfp; that explains the unrepresented part of the output, which is not captured by inputs. jorgenson and griliches (1967) extended this approach using the capital and labour based on production function with constant return to scale. they concluded that tfp measures the intensity and efficiency thru which inputs are utilized in the process of production. subsequently, literature evaluates the contribution of human capital, which has the potential to enhance tfp through technical and managerial efficiency (see, e.g. lee and hong, 2010; park, 2010; aiyar and dalgaard, 2005). this study follows cole and neumayer (2006) and do not restrict equal to one rather relies )( 1 0   g i k t ttt idkk   )1(* 1 )( s eh   )(s h = (1.07) s a + b review of economics and development studies, vol. 7 (2) 2021, 187-203 191 on actual returns to scale. besides they included the intercept and error term for measuring tfp, which is the overall unrepresented part of the production function. we used the human capital and physical capital stock for measuring the tfp for the whole economy but for sector level the average years of schooling data is not available. so we used the labour and capital inputs, for sector-wise measurement, which are commonly used and widely accepted. hence, our tfp estimation technique follows two steps; in the first step we calculated tfp for aggregate level and in the second step we estimated tfp for the sectoral level. 3.1 tfp estimation at aggregate level 3.1.1 traditional approach consider the overall cobb douglas production function, where as y is the real gdp, a is the total factor productivity, k is the capital stock and l is the labour. whereas is the elasticity of capital and is the elasticity of labour. after taking the log and growth rates of the equation (1) equation (2) is estimated by applying the ols method and the residual represents the gtfp given in equation (3) 3.1.2 tfp estimation at aggregate level the general production function can be represented as: we consider the cobb-douglas production function y is the real gdp, a is the tfp, k is the capital stock and h is the human capital; where as is the elasticity of output with respect to capital and is the output elasticity with respect to human capital. to break down the above equation (2) to analyse the logarithmic growth rates of inputs in the aggregate output as follow equation (3) is transformed to output per worker after dividing output and capital with labour. y = ak a l b (1) gy = agk + bgl+gtfp (2) gtfp = gy -agk + bgl (3) y = f(akh) (1) y = ak a h b (2) d lny = d lna+a * d lnk + b * d lnh (3) review of economics and development studies, vol. 7 (2) 2021, 187-203 192 it can be written as follow in equation (4) is the intercept and is the error term while t represents the time (years). ols technique is applied on equation (4) and the coefficients are estimated. while is not necessarily equal to one it is allowing the possibility of increasing or decreasing returns to scale. 3.1.3 sector wise tfp estimation equation (1) is divided by labour (l) to transform the equation (1) into per worker form. after the simplification and taking the log of growth rates we obtain the equation (5) we estimated the values of coefficients of capital and labour given in equation (6) by applying ols technique. after the estimation of equation (6) we can get the tfp by adding the intercept and error term as given in equation (7). 4. results and discussion 4.1 analysis at overall economic level table 2 shows the estimates of aggregate production function described by equation (4). these coefficients of physical capital and human capital indicate increasing return to scale at aggregate level of economy. elasticity of output with respect to human capital is 0.96, which means that if there is 1 percent change in physical capital there will be 0.96 percent change in the output per worker in the same direction. y = ak a l b (1) y l = ak a l b l (2) y l = a l k l æ è ç ö ø ÷ a l a l b (3) y l = a k l æ è ç ö ø ÷ a l a+b-1 (4) d lny = ad lnk + (a + b -1)d lnl+ d lna (5) d lny t = d 0 +ad lnk t + (a + b -1)d lnl t +e t (6) tfp t = (d 0 +e t ) = d lna (7) review of economics and development studies, vol. 7 (2) 2021, 187-203 193 table 2: production estimates at overall economic level -ordinary least square dependent variable output per worker constant 0.0071 (0.005) physical capital stock 0.967*** (0.125) human capital adjusted labour 0.867 (0.714) r-square 0.63 ***and** shows the significance level at 1% and 5% respectively values in parenthesis are standard error the output elasticity with respect to human capital (h) is 0.86, which indicates that if there is 1 percent increases in human capital there will be 0.86 percent increase in the output. the positive sign of human and physical capital illustrates that improving the education of labour and capital in production process may boost the output per worker. human capital is statistically insignificant because real gdp has numerous determinants and there could be an omitted variable bias. pakistan’s economic performance at aggregate level from 1982 to 2016 is presented in table 3. table 3: factors of overall economic growth, 1982-2016 period real gdp growth investment % of gdp (2005-06) growth in labour productivity percent contribution in labour productivity tfp physical capital human capital 1982-1990 5.9 24.9 3.7 0.9 2.3 0.5 1991-2000 4.3 22.1 2.0 -0.2 1.6 0.6 2001-2010 4.4 17.7 0.7 0.7 -0.7 0.7 2010-2016 3.9 13.9 2.4 1.8 0.5 0.1 1982-2016 4.7 20.3 2.2 0.7 0.9 0.5 own calculation; rounded off to nearest tenths results in table 3 reflect the declining growth of average real gdp and tfp over the years. real gdp growth declined to 4.7 percent, from 5.93 percent in 1980s. it is due to 18 percent decline in investment to gdp ratio as compare to 1980s besides other factors. the average total factor productivity growth is 0.7 percent, which contributes 15 percent to the average real gdp growth. average labour productivity growth decelerated to 2.2 percent with contribution of 0.7, 0.9 and 0.5 of tfp, physical capital and human capital respectively. this little contribution from human capital is due to unskilled workforce and lack of quality education in pakistan. these results corroborates with previous studies. the average tfp growth in previous studies varies from 0.5 percent to 1.7 percent using the different time periods covering from1970 to 2015 i.e. (lee and hong; 2010; chaudhry; 2009; review of economics and development studies, vol. 7 (2) 2021, 187-203 194 lopez-calix et.al; 2012 and amjad and awais; 2016). our results summarize that high real gdp growth in 1980s was primarily driven by investment on new technology, which in turn raised the tfp, labour productivity and gdp growth. however, in later decades considerable reduction in investment to gdp ratio caused the decline in both tfp as well as labour productivity. figure 1 shows the positive association between labour productivity and total factor productivity which means that output per worker increases with efficient resource utilization, improvement in entrepreneurial skills and labour training. figure 1: growth of labour productivity and tfp vertical bars in the graph represent the tfp and the line presents the labour productivity (lp). in 1982 lp and tfp are 4.2 and 2.9 percent, respectively and it shows the fluctuations throughout the years. the overall labour productivity decreased to 2.6 percent in 2016 from 4.2 percent in 1982, which is 38 percent less than the lp in 1982. probably due to a decrease in lp, the tfp declined from 2.9 in 1982 to 1.6 in 2016. further, the overall analysis depicts that in the years of political stability both tfp and lp are rising and on the other hand years such as 1991 to 1992, 1997-1998, 2007, 2008, 2009 and 2010 shows the negative trends due to political instability and natural disasters including the floods of 2008 and 2010 in these periods. similarly, the trends in figure 2 present the positive relation between real gdp and tfp. -6 -4 -2 0 2 4 6 8 -4 -3 -2 -1 0 1 2 3 4 5 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 tfp lp review of economics and development studies, vol. 7 (2) 2021, 187-203 195 figure 2: real gdp growth and tfp, 1982-2016 figure 2 shows the average high growth in the 1980s and there are many fluctuations in the 1990s perhaps due to political uncertainty. further, then the high growth period started from 2005 and then suddenly declined in 2010 due to intense floods in this year, which caused the damage of infrastructure as well as crops at large in pakistan. there is positive increase and trend in growth of real gdp and tfp since 2011. 4.2 agriculture sector the agriculture sector is considered to be the backbone of pakistan’s economy because 66 % of the population is attached to this sector. it contributes 19.8 percent in gdp and provides jobs to 42.3 percent of the total labour force1. it also plays a vital role in providing raw material to the industrial sector. therefore, it has forward linkages to the exports and economic development of pakistan. total factor productivity has a considerable share in real gdp of agriculture sector. our study estimated the agriculture tfp through solow residual applying ols method by using capital and labour inputs. table 4 presents the ols estimates of production function for agriculture sector by using the capital and labour. the elasticity of output with respect to capital is 0.88 percent that is same through both methods. 1 pakistan economic survey 2015-16 0 1 2 3 4 5 6 7 8 9 10 -4 -3 -2 -1 0 1 2 3 4 5 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 tfp gy review of economics and development studies, vol. 7 (2) 2021, 187-203 196 table 4: production function estimates of agriculture sector----ols result coefficients output per worker method (1) growth rate method (2) constant 0.015*** (0.005) 0.015*** (0.005) capital stock 0.88** (0.37) 0.88** (0.37) labour 0.004 (0.38) 0.12** (0.048) r-square 0.64 0.096 ***and** shows the significance level at 1% and 5% respectively values in parenthesis are standard errors results are shown in column (1) and (2) are the elasticities of output with respect to inputs. however, we estimated the coefficients or share of inputs by two methods, in column (1) the variables are transformed in output per worker as many previous studies estimated and in column (2) logged form growth rates are taken to estimate the coefficients. the elasticity of physical capital stock is 0.88 that is same in both columns and elasticity of labour varies in two methods although the tfp remain same in each method. inputs and tfp contribution in real gdp growth of agriculture is presented in table 5. table 5: growth in agriculture sector and tfp, 1982-2016 period real gdp growth investment % of gdp (2005-06) growth in labour productivity percent contribution in labour productivity tfp physical capital labour 1982-1990 3.9 31.9 1.8 0.6 1.2 -0.0008 1991-2000 4.4 21.9 2.9 2.7 0.2 -0.0006 2001-2010 2.2 15 -0.9 1.1 -2.0 0.012 2010-2016 2.2 14.2 2.3 1.3 1.0 -0.00006 1982-2016 3.2 20.9 1.4 1.5 -0.05 0.0007 own calculation table 5 shows the economic performance of agriculture sector. it shows that the average real gdp growth is 3.2 percent with 47 percent contribution from tfp during the period of 1982 to 2016. decade wise results reveal that economic performance in1990’s is relatively better as real gdp registered 4.4 percent growth with 2.7 percent growth from tfp and 2.9 percent from labour productivity. agriculture sector boomed in 1990s due to agriculture reforms, trade liberalization policies, subsidized fertilizer and hybrid seeds besides support price programs in this decade. it resulted in high yield of crops and encouraged farmers to enhance cultivation area and production. in 2000s real gdp growth decreased 50% from previous decade with sharp decline in investment as well as labour review of economics and development studies, vol. 7 (2) 2021, 187-203 197 productivity. it is all due to sensitivity of agriculture sector to weather patterns; series of natural disasters occurred in 2000’s; such as earth quack in 2005, floods in 2008 and 2010. moreover, the average -0.05 percent negative contribution of the physical capital and neglible share of labour in labour productivity indicates the underutilization of capital and uneducated labour attached to this sector. our estimates of tfp in agriculture sector are reasonably similar to some recent studies i.e. lopez-calix et.al (2012) and amjad and awais (2016). figure 3: agricultural real gdp and tfp growth figure 3 shows the trend of real gdp and tfp. line represents the tfp and vertical bars present the real gdp growth of agriculture sector. it is quite evident that tfp and output growth in agriculture sector move in tandem with each other. 4.3 industry industry consists of manufacturing, mining and quarrying. manufacturing is the second largest sector in the industry, which contributes 13.6 percent to gdp and provides jobs to 15.3 percent of the total labour force. the share of other sectors in gdp such as mining and quarrying, construction, and electricity & gas distribution are 2.98, 2.58 and 1.85 respectively2. the manufacturing sector is considered to be vital for pakistan because most of the exports are from textile and semi-manufacturing industries. strengthening this sector may enhance the export earnings, external competitiveness, and export share in the international market (ara, 2005). our results in table 6 show that the capital has same elasticity 0.55 in both methods given in column (1) and (2) which represent that if there is one percent change in the capital there will be 0.55 percent change in manufacturing output growth, which is almost similar to chudhary (2009). 2 economic survey of pakistan 2015-16 -10.00 -5.00 0.00 5.00 10.00 15.00 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 gy tfp review of economics and development studies, vol. 7 (2) 2021, 187-203 198 table 6: production function estimate for industrial sector---ols results coefficients output per worker method growth rate method constant 0.046*** (0.010) 0.046*** (0.010) capital stock 0.545* (0.397) 0.545** (0.229) labour -0.47* (0.305) -0.015 (0.054) r-square 0.85 0.059 ***, **, * show the significance level at 1%, 5% and 10% respectively values in parenthesis are standard errors the coefficient of capital is also statistically significant at 10 percent significance level. the elasticity of manufacturing output with respect to labour shows negative sign because there is a low level of labour productivity and under utilization of labour in this sector. however, the high growth rate in 1980s and 2000s is due to trade liberalization and export-oriented policies, which were favorable for industries. table 7: growth rates of industrial sector 1982-2016 period real gdp growth investment % of gdp (2005-06) growth in labour productivity percent contribution in labour productivity tfp physical capital labour 1982-90 7.3 46.8 5.8 6.3 0.2 -0.7 1991-2000 3.7 40.0 5.5 2.3 2.4 0.8 2001-2010 6.5 24.7 -1.2 5.8 -3.4 -3.6 2010-2016 3.7 10.3 -1.5 4.4 -3.5 -2.4 1982-2016 5.4 31.9 2.3 4.6 -0.9 -1.4 own calculations; round off to nearest tenths results in table 7 show that industry grew by 7.3 percent in the 1980s and 3.7 percent in 1990s. this sharp decline in real gdp growth in 1990s was due to 63 percent decline in tfp, which means that tfp has considerable impact on real gdp growth. further, results show that negative labour productivity growth in 2000s and 2010s is -1.2 percent and -1.5 percent respectively. it is perhaps due to sever energy crisis in these periods that worsened in 2010s and lowered the 50 percent real gdp growth in industrial sector. it also caused the underutilization of physical capital and labour in this sector, consequently declining the labour productivity and real gdp growth. review of economics and development studies, vol. 7 (2) 2021, 187-203 199 our results of average tfp for industry is compatible with previous studies and present the true picture of industrial growth. sabir and ahmad (2003) found 4 percent growth of tfp for the period 1973 to 2002. chaudhry (2009) found the higher tfp growth in industrial sector than agriculture sector, which is also true in the case of our study. pasha (2002) found the 6.6 percent tfp growth for small and large-scale manufacturing in 1980s and this study estimate the 6.3 percent tfp in 1980s. real gdp and tfp growth in the industrial sector is depicted in figure 4. it presents the positive relation between tfp and gdp growth in this sector. figure 4: industrial sector real gdp and tfp growth the graph shows that industrial sector sustained the average growth of 8 percent from 1980s. subsequently, it sharply declined to 3.5 percent in 1990’s due to political instability, regional uncertainty and lack of implementation of reforms. further, the negative trend of tfp and gdp occurs in late 2000s due to four natural disasters in five years including the floods of 2008 and 2010 (lopezcalix et.al, 2012). 4.4 services sector according to economic survey of pakistan 2015-16, the services sector is growing at more than 6 percent and contributing 59 percent in gdp. government is trying to exploit its potential by providing a peaceful and conducive environment for economic activity. despite the high growth of services sector and its high subsector growth, there is lack of research and investment on human capital in this sector. for the estimation of tfp, we applied the ols method and results are given in table 8. column (1) present the output per worker method’s results and column (2) shows the estimates of growth rates method. the elasticity of output with respect to capital is 0.21, which is similar in two methods. however, elasticity of output with respect to labour is varying in two methods. -6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 gy tfp review of economics and development studies, vol. 7 (2) 2021, 187-203 200 table 8: production function estimate in services sector-----ols results coefficients output per worker method (1) growth rate method (2) constant 0.041*** (0.011) 0.043*** (0.014) capital stock 0.21 (0.41) 0.21 (0.41) labor -0.77* (0.42) 0.023 (0.03) r-square 0.93 0.032 ***, **, * show the significance level at 1%, 5% and 10% respectively values in parenthesis are standard errors results interpret that if there is 1 percent change in the capital there will be 0.21 percent change in output of the services sector. coefficient of labour is negative in output per worker method and positive in growth rate method. however, results are statistically insignificant perhaps due to omitted variable bias. overall economic performance of services sector is given below in the table 9. table 9: growth rates in services sector period real gdp growth investment % of gdp (2005-06) growth in labour productivity percent contribution in labour productivity tfp physical capital labour 1982-90 6.3 3.4 2.8 5.2 0.23 -2.6 1991-2000 4.5 3.4 0.5 3.4 0.2 -3.0 2001-2010 5.0 3.1 3.1 4.1 0.4 -1.5 2010-2016 4.6 2.4 1.9 3.9 0.02 -2.0 1982-2016 5.1 3.2 2.0 4.3 0.2 -2.4 own calculation; round off to nearest tenths table 9 shows that 6.3 percent real gdp growth and 5.2 percent tfp growth in 1980s in services sector. in 1990s low level of tfp and labour productivity growth in this sector cause the decline in real gdp growth. overall results present that tfp is the crucial driver in services sector’s real gdp growth. the fluctuations in real gdp growth are in tandem with tfp and labour productivity. the average labour productivity growth during the period of 1982 to 2016 is 2 percent with 0.2 percent share of physical capital, -2.4 percent contribution of labour and 4.3 percent share of tfp. overall performance of this sector remained satisfactory over the years but still there is a need to invest in human capital to further exploit the potential of this sector. figure 5 depicts the picture of stable growth and tfp as compare to agriculture and industrial sector. review of economics and development studies, vol. 7 (2) 2021, 187-203 201 figure 5: real gdp and tfp growth in services sector figure 5 shows that real gdp growth and tfp tandem to each other during the years. however, some fluctuations exist in real gdp and tfp growth such as in the period of 1999 and 2009. 5. conclusion long-term economic growth cannot be sustained without high labour productivity, technological advancements and efficient utilization of time and resources. our results confirm that tfp and real gdp growth are positively correlated at both aggregate and sectoral level in pakistan’s context. the results further confirm that economic growth and the tfp fluctuates in tandem with each other at overall as well as at sector level. during 1982 to 2016, average tfp growth at aggregate level remained 0.7 percent, and sector wise tfp registered a growth of 1.5, 4.6 and 4.3 percent for agriculture, industry and services, respectively. this shows that the tfp growth in pakistan is quite low as compared to other asian countries, e.g. tfp growth in china is 4.0 percent, singapore 2.0 percent, korea 1.4 percent, viet nam 1.5 percent, thailand 1.5 percent and india 1.4 percent (lee and hong 2010). furthermore, at aggregate level percentage contribution of human capital, physical capital and tfp in economic growth are 11%, 19% and 15% respectively, which are considerably low as compared to its peer countries. our results reveal that real gdp performance varies across sectors; in industrial sector, the highest gdp growth of 7.3 percent in 1980s was driven by high growth in tfp 6.3 percent during the same period. similarly, the lowest industrial gdp growth in 1990s was also due to a massive decline in tfp during the same period. the services sector also shows the highest 6.3 percent real gdp growth and 5.3 percent tfp growth in 1980s. the sudden decline in services sector gdp growth to 4.5 percent in 1990s was due to 35 percent decline in tfp from the previous decade. in 1980s services and industrial sector’s high real gdp and tfp growth was perhaps due to a high level of investment, trade liberalization, adoption of new technology and economic reforms through deregulation and private sector development. however, the tfp growth in agriculture sector in all the decades remain considerably low as compared to industrial and services sector. it also caused the relatively low real gdp growth in this 0 1 2 3 4 5 6 7 8 9 10 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 gy tfp review of economics and development studies, vol. 7 (2) 2021, 187-203 202 sector. in 1980s tfp growth in agriculture sector was 0.6 percent and the average tfp growth in this sector is 1.5 percent during the period 1982-2016. furthermore, the physical capital contributes negatively i.e. 0.04 percent in agriculture gdp growth. the reason of negative contribution of physical capital in agriculture sector is due to lack of innovation, underutilization of the existing capital and unskilled and uneducated workforce in this sector. similarly, the output per worker growth in industry is also negative due to fewer training of workers and lack of market oriented technical education in pakistan. therefore, the situation calls for economic reforms in general and educational reforms, in particular, to give a boost to the productivity in the commodity producing sectors of the economy. given the demography of the country that 60% population is below the age of 30 years, if they are imparted quality education and skills then this could enhance the tfp in a quick possible manner. this implies that pakistan’s economy has the potential to follow the high growth trajectory in the short to medium term by merely focusing on the productivity growth. references amjad, r., & awais, n. 2016. pakistan's productivity performance and tfp trends 1980-2015: cause for real concerns. munich: mpra. burney, n. a. 1986. sources of pakistan's economic growth . pakistan development reveiw , 25, 573-589. barro, r. j., & lee, j. w. 2010. a new data set of educational attainment in the world 1950-2010. new york: national bureau of economic research. bosworth, b., & collins, s. m. 2008. accounting for growth: comparing china and india. journal of economic perspectives , 22 (1), 45-66. chaudhry, a. 2009. total factor productivity growth in pakistan: an analysis of the agricultural and 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44 (4), 479-503. romer, p. m. 1990. endogenous technological change. journal of political economy , 98 (5), 71102. review of economics and development studies, vol. 6 (1) 2020, 13-22 13 impact of economic status on the consumption pattern of tv by school children of district vehari a samia manzoor, a aasima safdar, b sobia shareef a assistant professor of communication studies, bahauddin zakariya university, multan, pakistan b m. phil student of communication studies, bahauddin zakariya university, multan, pakistan article details abstract history: accepted 16 march 2020 available online 31 march 2020 probing the effects of mass media on viewers has always remained a topic of interest for the researchers. this specific study is based on the assessment of the consumption patterns of the tv viewing by schoolgoing children in relation with their demographics. as district vehari is an economically poor district of punjab (pakistan). so the present study intended to evaluate the consumption pattern of tv of school going children of an economically weaker city. the sample comprised of 420 school-going children. a survey questionnaire was developed to collect the required information. qualitative information was also gathered from the parents of the students to gauge their economic status. findings of the study revealed that the reason to spend this much time on tv viewing is the economic condition of families. parents cannot afford personal gadgets for their kids so children are bound to watch tv. however tv viewing varied with the individual differences of the students i.e. age, and gender etc. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: economic status, tv viewing, consumption patterns, entertainment, gratification jel classification: a10, e21, l82 doi: 10.47067/reads.v6i1.180 corresponding author’s email address: samia.manzoor@bzu.edu.pk 1. introduction mass media plays a central role as a source of both information and entertainment for people around the world. because of its audio-visual universality and simulative power, tv is considered very popular as a form of communication even in the 21st century when media technologies have become essential part of children’s life (jamieson & campbell, 2000). tv is an important element in developing the relationship between media and society as it plays the role of a window to see the outer world (gerges, 2003). when it comes to the socialization of children, tv has been the best tool since its advent in mid-1900s. however, the parental attitude towards tv determines the extent of exposure of their children to this medium (katz, haas, gurevitch, 1973). from 1970s to 90s, the technological advancements caused substantial changes in consumption patterns of tv and the content broadcasted in programs (samuel, 2017). this change somehow affected the attitude of people towards tv shows and their behaviors in real life. as marshal mcluhan said review of economics and development studies, vol. 6 (1) 2020, 13-22 14 ‘medium is the message’, a number of new trends were introduced as the consequence of this change in technology (rubin, 1983). invention of cable television and interactive media is a more advanced step offering the viewer’s more choice and diversity in programs and content (sinclair, jacka, cunningham, 2000). however with the advent of information technology elders as well as children have moved away from tv. but some people argue that tv still occupies a unique place in our lives. tv viewing is somehow related with the economic status of the people. in a country like pakistan children are dependent on their parents for any commodity due to economic restrains. but she is moving towards technological advancement on a fast pace. however the area of southern punjab is still considered economically vulnerable. district vehari was selected for data collection in the present research because it is best suitable as an example of a general type of town of south punjab. the present research not only focuses on the importance of the economic status of parents on the consumption of tv but it also shed light on the awareness level of parents about the gadgets available to kids as well as parental control on the usage of different gadgets by their children. the results of the present research will enable us to estimate the relationship of economic status with the consumption pattern of tv of small town children. moreover this research will enable the stakeholders of tv programming to take initiatives to produce programs that will help to better educate the people of such towns in pakistan, who are not only economically weak but also have less social knowledge. 2. literature review there have been several studies conducted to explore the impact of different variables on tv viewing habits of youngsters. the researchers investigated the effects of gender, age, interests, audience attentions, knowledge and many other variables. as palmgreen and rayburn (1978) studied discrepancy approach and analyzed the exposure of audience to tv within the context of uses and gratifications theory. objective of the study was to compare the level of gratification people expected from tv viewing and the level of gratification they actually received from it. results indicated that model effectively supported the level of gratification expected and received for those who made their own decisions for viewing while there was difference in the level of gratification expected and received for those who let others to make viewing decisions. likewise, rubin and perse (1987) evaluated audience activity related to news gratifications received from tv viewing. researchers developed hypothesis that news viewing was related to audience intentions, selection and involvement in the local news. findings of the study supported the presumed hypothesis that audience activity is one of the most important variables in media usage and its effects on audience. lin (1993) modeled the process of gratification and entertainment seeking through television viewing. the main objective of the study was to examine the major motives to watch tv, activities in which people engage after tv viewing and lastly the satisfaction they receive from it. findings of the study supported this assumption and however, the researchers suggested a revised theoretical model for the future research. however, harper-gilmore (1994) examined the relationship between television and elementary school-going children. the results of the study showed that parents’ involvement in tv viewing influenced the impact of tv on children and thus this dimension needed more study. vincent & basil (1997) conducted research on college students concerning gratifications received from news, their media usage and their knowledge on current events. the main purpose of the study was to compare the consumption patterns of news usage for gratification by the college students in contrast with traditional functions of news. findings of the research revealed that surveillance level was increased with the age and year in college increased. students who consumed news for this purpose used all types of media review of economics and development studies, vol. 6 (1) 2020, 13-22 15 while for entertainment students only viewed tv. on the other hand, ruggiero (2000) explained the uses and gratification approach within the context of 21st century. he took interactivity, demassification, hypertextuality and asynchroneity as the variables for the study. schmitt, wolf and anderson (2003) inquired about the variations in viewing behaviors of children and adolescents during tv programs and during commercials. the findings of their study showed that social interaction was the main activity followed by playing games by the children, reading books for the adults and doing domestic chores for females. moreover, researchers concluded that people were mainly engaged in activities during the programs which were less attractive or were of less interest for them like commercials etc. utter, scragg, schaaf (2005) investigated the linkage between consumption pattern of commonly advertised food products and tv viewing and effect on children and young people of new zealand. core objective of the research was to examine the association between the time spent on watching tv and dietary behaviors of children and young people. researchers concluded that when other factors like age, gender, ethnicity, physical activity and socio-economic status etc. were controlled, duration of the tv viewing affected the dietary behaviors of the children and young i.e. chances of obesity increased with increase in time spent watching tv. ebersole and woods (2007) scrutinized the motivations of audience to watch reality tv in the uses and gratifications scenario. researchers presumed five main influential factors i.e. entertainment, time pass, mood changing, personal identification for the real characters, and mediated participation. results indicated that due to interactive nature of the television, audience identified the real characters which play the important role in attraction of the audience towards reality television and programming. steffen, fulton and labarthe (2009) scrutinized the relationship between obesity in children and adults in relation with their tv viewing patterns and obesity in parents. multi-variate regression analysis was employed to test the inter-relationship among the variables. findings of the study evidently indicated the effect of both genetic and environmental linkage on children’s weight. overall, the researchers studied the impacts of motivation, environmental linkages, ethnicity, physical activity, behavior of children, age groups and psychological factors etc. it was noted that there were few studied explored the impact of socio-economic status on the tv viewing habits of children. the present study filled this gap and studied the impact of economic status on tv viewing habits of youngsters through quantitative and qualitative approaches. 2.1 uses and gratification uses and gratification approach is utilized as theoretical framework for the study. prime concern of this theory is to examine what people do to media instead of what media does to people (blumler, 1979). this theory was developed by elihu katz, j. g. blumler, and michael gurevitch in 1974. it is very important to analyze the gratification received by watching tv before its effects are analyzed (katz, blumler, gurevitch, 1973). some of these are listed as distraction, personal relationships, surveillance, and personal gain. according to these researchers tv viewing also gratifies five main needs of audience i.e. intellectual, emotional, personal, social and tension release. with the advent of new technologies robinson (1972), winick (1988) and tannenbaum (2014) discussed functions of tv. according to the researchers there are three main widely accepted functions of watching television by children, i.e. entertainment, information and social utility. however under the domain of uses and gratification theory some of the negative effects of tv have also been discussed by katz, blumler, gurevitch (1974); and liebert & sprafkin (1988). according to these researchers some of the negative effects of tv are physical effects, emotional effects, cognitive effects, behavioral effects. review of economics and development studies, vol. 6 (1) 2020, 13-22 16 2.2 research questions and hypotheses rq1 do children tv viewing pattern differ during weekdays and weekends? h1.1: it is more likely that duration of viewing tv by children on weekdays and weekends will be significantly different. rq2 what is the effect of demography on children’s tv viewing? h2.1: it is more likely that a strong relationship exists between gender and tv viewing of children. h2.2: it is more likely that a strong relationship exists between age and tv viewing of children. rq3 what is the greatest gratification that children sought from tv? h3.1: it is more likely strong relationship exist between gratification sought by children from tv and their age. h3.2: it is more likely that strong relationship exist between gratification sought by children from tv and their gender. rq4 what is the economic status of parents of school going children of vehari? rq5 what is the opinion of parents regarding the control on children use of gadgets? rq6 how the economic status of parents is related with the awareness and control of parents on their children’s gadget use? 3. method mix mythology has been adopted for data collection; quantitative as well as qualitative methods are used. survey technique has been used for the collection of data. through this survey data has been collected from students regarding their tv consumption, preferences, gratifications etc. multiple choice questions mainly constituted the survey. moreover each child’s parents were interviewed personally by the researchers to know about the economic status of the family, knowledge of parents about the gadgets and their control over children’s gadget use. 3.1 population and sampling acknowledging the requirements of the study, population of this research is comprised of all the school going children of district vehari especially class 1st to 10th grade students (both govt. and private sector schools are included). 420 children (210 from each gender) have been selected through stratified sampling technique. schools have been divided in to two strata i.e. private schools and government schools. out of this initial strata 10 government (5 girls and 5 boys schools) and 5 private (co-education) schools have been chosen from district vehari. students of these schools have been further divided into two groups’ boys and girls, which then sub-divided into three categories on the basis of, age i.e. children (4-8), adolescents (9-12) and adults (13-17). 4. findings 4.1 children tv viewing pattern during weekdays and weekends h1: it is more likely that duration of viewing tv by children on weekdays and weekends will be significantly different. table 1 relationship between children’s duration of watching tv on schooldays and weekends no. children’s duration of watching tv on school days and weekends duration school days weekends 1 less than an hour 33 9 2 one hour 100 32 3 two hours 153 99 4 more than two hours 74 127 review of economics and development studies, vol. 6 (1) 2020, 13-22 17 5 do not know 53 92 6 do not know because tv remained turned on all the time 7 61 total 420 420 chi square value = 127.663, p-value = 0.000 above table is the cross-tabulation between the children duration of watching tv on school days and weekends. thus, chi-square test signifies that p-value is 0.000 which means that results are significant for the relationship between both variables, so this hypothesis is accepted. 4.2 effect of demography on children’s tv viewing h2.1: it is more likely that a strong relationship exist between gender and tv viewing of children. table 2 relationship between gender and tv viewing of children gender less than an hour one hour two hours more than 2 hours do not know do not know because tv remained turned on all the time school days weekends school days weekends school days weekends school days weekends school days weekends school days weekends total male 14 2 50 13 78 55 41 61 24 54 3 25 420 female 19 7 50 19 75 44 33 66 29 38 4 36 420 total 33 9 100 32 153 99 74 127 53 92 7 60 840 chi square value= 6.428, p-value = 0.267 this table is the cross-tabulation between the gender of children and duration of watching tv on weekdays and weekends. thus, chi-square test signifies that p-value is 0.267 which means that results are non-significant for the relationship between both variables, so this hypothesis is not accepted. h2.2: it is more likely that a strong relationship exist between age and tv viewing of children. table 3 relationship between age and tv viewing of children age 4-8 9-12 13-17 tv viewing of children school days weekends school days weekends school days weekends total less than an hour 13 1 8 4 12 4 42 one hour 55 16 27 8 18 8 132 two hours 45 47 58 24 50 28 252 more than two hours 15 47 23 44 36 36 201 do not know 12 20 21 43 20 29 145 do not know because tv remained turned on all the time 0 9 3 17 4 35 68 total 140 140 140 140 140 140 840 chi square value =119.266, p-value = 0.000 above table is the cross-tabulation between the age of children and duration of tv viewing on review of economics and development studies, vol. 6 (1) 2020, 13-22 18 weekdays and weekends. chi-square test signifies that p-value is 0.000 which means that results are significant for the relationship between both variables, so this hypothesis is accepted. 4.3 reasons to watch tv h3.1: it is more likely that strong relationship exist between gratification sought by children from tv and their age. table 4 relationship between age and reasons of watching tv age reasons of watching tv to get entertainment for relaxation to ensure social interaction for pass time to escape from problems as habit to get information para social interaction companionship other(if any then mention it) total 4-8 42 21 18 14 0 9 14 7 10 5 140 9-12 46 14 3 35 1 29 11 0 1 0 140 13-17 22 16 9 25 8 12 27 10 11 0 140 total 110 51 30 74 9 50 52 17 22 5 420 chi-square= 97.642, p-value = 0.000 cross-tabulation between the age of the children and the reason why children watch tv is illustrated in above table. three categories were developed in age category as 4-8, 9-12 and 13-7. reason to watch tv was divided into ten categories i.e. entertainment, for relaxation, to ensure social interaction, for pass time to escape from problems, as habit, to get information, for parasocial interaction, for companionship, and other. the, chi-square test signifies that p-value is 0.000 which means that results are significant for the relationship between both variables, so this hypothesis is accepted. h3.2: it is more likely that strong relationship exist between gratification sought by children from tv and their gender. table 4 relationship between gender and reasons of watching tv chi-square =16.586, p-value = 0.121 above table is the demonstration of cross-tab between the gender of the children and the reason why children watch tv. two sections were developed in gender category as male and female. reason to watch tv was divided into ten categories i.e. entertainment, for relaxation, to ensure social interaction, for pass time to escape from problems, as habit, to get information, for parasocial interaction, for companionship, and other. the, chi-square test signifies that p-value is 0.121 which means that results are non-significant for the relationship between both variables, so this hypothesis is not accepted. 5. qualitative analysis an interview was conducted with the parents of the children; the reason of this interview was to estimate the economic status of the respondents and to gauge economic status wise control of tv gender reasons of watching tv to get entertainment for relaxation to ensure social interaction for pass time to escape from problems as habit to get information para social interaction companionship other(if any then mention it) total male 60 29 15 32 8 23 23 9 7 4 210 female 50 22 15 42 1 27 29 8 15 1 210 total 110 51 30 74 9 50 52 17 22 5 420 review of economics and development studies, vol. 6 (1) 2020, 13-22 19 viewing and gadgets use of the children. the following themes emerged out of the answers of the parents: 5.1 economic status some of the parents were initially reluctant to talk about their economic situation but when reassured that their views will be kept confidential shared their economic situation. in most household only one male was the only earning hand, mostly doing a blue collar job or managing the finances through agriculture owning a small piece of land. on the basis of the responses of parents, three categories of economic status emerged. 5.1.1 middle class most of the parents told that they belong to the middle class. as they had one family car, a house where every member of the family was not entitled to a separate room and the monthly income was though sufficient to make their ends meet but not enough to afford luxuries. 5.1.2 lower middle class a few number of the parents told that it becomes difficult sometimes for them to provide all needs to the family in the limited household budget however they also categorized themselves as middle class. 5.1.3 upper middle class a little category of parents classified themselves as upper middle class. as they had sufficient savings, personal home and secure future plans. so out of these findings it was resulted that most of the households of vehari have middle class economic status with slight variations. 5.2 knowledge about gadgets 5.2.1 extremely poor knowledge most of the parents told that they don’t hold sufficient knowledge about modern day gadgets available to children. though many of them knew about video games but they were unaware about the contemporary video games and other technological items available to them. mothers were more naïve about this whereas fathers were comparatively more knowledgeable. 5.2.2 moderate knowledge some parents shared that their children use their mobiles and some others told that they have given their children a tab for their personal use. majority of the parents when asked do their kids have their personal gadgets? their answer was no. either the children were using their parent’s mobiles in their free time or they were given a single tablet or mobile which they were sharing with their siblings. affordability was the prime factor for not having personal gadgets. most of the parents told that they do not have the purchasing power to buy some hi tech gadget to their children. this comprises of the vastest category of parents. 5.2.3 sufficient knowledge very few parents were knowledgeable about xbox, playstation, and related gear. only a couple of parents admitted that they have provided their kids with personal gadgets or they are enjoying some hi tech gear. these parents were the scarcest. although they were knowledge about modern day gadgets but affordability was a major factor for them. 5.3 parents control on children media use review of economics and development studies, vol. 6 (1) 2020, 13-22 20 almost all the parents said that they control their kid’s media use. but how much they were controlling and how much they were successful in this control had varying responses. 5.3.1 no control some of the fathers said that they don’t want to control their kid’s leisure time when the kids are doing great at school. but almost all the mothers’ said that they have given schedule to their kids to use any kind of gadget including tv. but when question about the strictness in following the strictness using gadgets mostly parents admitted that they are not very strict with it. it was also observed that upper middle class mothers were not very much concerned with what and for how long their kids’ are using tv or any other device, 5.3.2 moderate control usually parents of middle school children were more concerned about the time and content control of children. middle class parents were most concerned about this issue. almost all the parents belonging to middle class told that their children either use the mobile of parents or are enjoying a single gadget that is meant for all the siblings so they cannot use it for longer periods of time. 6. discussion after the decades of research in the field of mass media, uses and gratification approach is now considered as the most influential theoretical foundation for the researchers. the present research is unique because not only the children’s consumption pattern of tv were identified but it was also explored that how does the economic situation of parents affect the consumption pattern. keeping in mind the basics of uses & gratification approach, some questions were developed by the researchers which are answered as following: a finding regarding the type of gratification tv provides to children in this study is evident from respondents’ answers that for both age groups 4-8 and 9-12 entertainment was the maximum gratification while for the age group 13-17 watched tv to get information. previous researchers like mcquail, blumler & brown (1972); rijitha (2009); woods & ebesole (2007); wincent & basil (1997); palmgreen & rayburn (1979) approved this point while rubin (1987) rejected it. but this study is the addition to studies which accepted it. moreover the durations and timings change for tv watching on schooldays and weekends because during schooldays, children have to go to school and to do homework, that’s why they have less time to watch tv but on weekends they have more time but also some students like to play games (physical games) than sitting in front of tv, so the changes in pattern are slight. these reasons are argued by mullings (2012). harper (1992) argued that although media has significant effects but the demographics of the children in particular and psychographics in general influence the patterns of effects on viewers by media. though the results regarding the effects of children demography (gender, age) and tv viewing preferences, which shows that there might not significant changes in viewing patterns on the basis of gender but age matters a lot, in childhood children like cartoons etc. but with the passage of time children’s preferences change, girls start taking interest in dramas, movies while boys like games and action programs. economic status of the families plays a pivotal role in their viewing preferences. vehari is a small district of south punjab. most of the families are managing their expenses within limited resources. and belong to the middle class. they do not have the resources to provide luxuries to their children. this is a main reason that children in this region are bound to spend most of their leisure time in watching tv. moreover due to the lack of education and awareness of parent they have very limited or no control on their children’s consumption of tv. these factors reveal that economic status of a review of economics and development studies, vol. 6 (1) 2020, 13-22 21 family is very important in the gadget and tv use of their children. 7. conclusion the results of the present research show that the demography of the children considerably influences the tv viewing pattern of children, especially their age a great influence on their tv consumption. children’s interest in tv and their gadget use is very much related with their age. so this information is of utmost importance for parents. parents need to have a control on their children regarding their tv consumption and their gadget use. furthermore, it was found that patterns of watching tv were significantly different for school days and weekends. subsequently, they love to watch tv during schooldays for just two hours as they have a lot of other activities like school, homework etc. but there is an interesting finding that even on weekends they watch tv just a little more than two hours because they love to play physical and computer games. parents’ economic status also played a key role in determining the consumption of different gadgets including tv. this research was conducted in an area where purchasing power of the parents was not much that is why affordability of gadgets was a major factor. due to lack of personal gadgets children were bound to watch tv more. it was concluded that findings of this study supported the earlier work done by several researchers that demographics play important role. it opens a new dimension in the theory of uses and gratifications that children start using the medium which is available to them to gratify their needs. in a country like pakistan tv is still a source of entertainment to most of the children living in not so developed areas. so tv channels need to produce programs to meet the needs of school going children. as special programs are not designed for children so they are bound to consume programs meant for adults and with very limited control of parents on their consumption of tv they become familiar with such topics and issues which are not suitable at their age. references blumler, j. g. 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(ed.), television as a social issue. sage, beverly hills, ca, pp. 217–238. https://www.utpjournals.press/doi/pdf/10.3138/utq.86.4.78 review of economics and development studies vol. 3, no 2, december 2017 91 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 2 dec 2017 journal homepage: www.publishing.globalcsrc.org/reads need for managing own exposure to foreign exchange risk: empirical evidence from the nigerian economy 1 bello a. ibrahim, 2 musa talba jibrin, 3 daud mustafa, 4 abubakar jamilu baita 1 department of economics,north west university, kanon nigeria, ibelloalhaji@gmail.com 2 department of economics, university of maiduguri, nigeria mtdjibir@gmail.com 3 department of economics,north west university, kano, nigeria, mdaud1431h@gmail.com 4 department of economics, north west university, kano, nigeria abubakarbaita@gmail.com article details abstract history revised format: nov 2017 available online: dec 2017 purpose: the nigerian national currency (the naira) has suffered series of exchange rate fluctuation on numerous occasions in the last two years. as a result, the value of the currency has changed significantly and rapidly many times, impacting on both visible and invisible trade. it is common today to hear importers, exporters and even consumers complaining about the adverse consequences of these trends which manifested in form of general rise in prices of goods and services. studies have shown that many nigerian foreign traders, particularly those in the small and medium sector, either lack the basic knowledge on how to manage foreign exchange risk or are skeptical about its efficacy. this is surprising considering how costly, in terms of cash flow and profitability, unfavorable changes in the value of the naira can be. in response to this gap, this paper utilized secondary data on naira/dollar exchange rate spanning over 18 months period (january 2015 to june 2016), to provide an empirical understanding of the intricacies of naira/dollar exchange rate and how the resultant trends can affect domestic users of foreign exchange in nigeria and hence the need to privately manage same. the paper thus introduces the subject matter of foreign exchange risk, its determination/calculation using facts and figures and its management to both the public and private business sectors in nigeria. the empirical results clearly established why it makes sense for stakeholders to reduce exposure to currency risk. the paper also highlighted some of the common techniques and instruments that can be used to mitigate this risk. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords exchange risk, hedging, forward contract, options, swap jel classification: f31, g32, f40, g23 corresponding author’s email address: ibelloalhaji@gmail.com recommended citation: ibrahim, b. a., talba, m. j., mustafa, d. & jamilu. a. b., (2017).need for managing own exposure to foreign exchange risk: empirical evidence from the nigerian economy. review of economics and development studies, 3(2) 91-100. doi: https://doi.org/10.26710/reads.v3i2.168 1. introduction ample evidence abounds to prove that over the last two years, the ‘naira’ has been passing through difficult period. the currency which was officially pinned to an exchange rate of n192 to one us dollar is depreciated so drastically that as at end of 2016 to date, it exchanges for n350 and above to the dollar. experts have attributed this development to the crash of crude oil price which inadvertently reduced the country’s foreign exchange earnings. following this, government finds it difficult to fulfill its obligation http://www.publishing.globalcsrc.org/reads mailto:ibelloalhaji@gmail.com mailto:mtdjibir@gmail.com mailto:mdaud1431h@gmail.com mailto:abubakarbaita@gmail.com mailto:ibelloalhaji@gmail.com https://doi.org/10.26710/reads.v3i2.168 review of economics and development studies vol. 3, no 2, december 2017 92 of supplying adequate foreign exchange; and so a number of measures aimed at reducing demand were put in place. these measures among others include banning the importation of certain goods into the country, refraining from making foreign exchange allocations to some major players (notably bureau de change), putting increased emphasis on the much orchestrated need for diversification of the economy and lately, the re introduction of the flexible exchange rate regimes. in spite of these moves the naira currency continue to provide grounds for enormous negative media headlines as the competitive exchange rate maintained an above n300 level thereby impacting significantly and rapidly on both domestic and international transactions. while on one hand importers complain of acute shortage of foreign currency, which makes it difficult and exorbitant for them to import, on the other the largely underdeveloped domestic sector grabbles with the problems of take-up, epileptic power supply, insecurity, unreliable business atmosphere and unstable government policy. further, the increased pressure coming from government quarters aimed towards economic diversification, self-sufficiency and self-reliance, all appear to have fundamentally compounded the situation leaving the national economy prone to excessive and persistent inflationary trends. the success of the re-introduced flexible exchange rate policy equally relies on effective management of trends in the market which is expected to come through periodic intervention. what this implies is that the government would still play the role of tailoring the market towards ‘a shadow exchange rate’ alongside a competitive rate that exists in the market. under this dispensation, economic agents, notably importers, exporters and nigerian consumers would be left to face the full wrath of market forces; which given other macroeconomic policies, will reduce pressure on the naira. the argument in this study is that while this exchange regime reigns, there is need for end-users of foreign exchange to fine tune avenues for independent defense that would hedge them against exchange rate escalation. hence there is need for the economy as a whole to move towards adopting a double edge mechanism for managing foreign exchange pressure as is done in most market oriented economies. in the context of this policy, the formal decision on the type of exchange rate system to be followed and its management still resides with the authority while other economic agents, both profit and none profit making, should assume a pro-active role through careful focus and analysis of exchange rate situation to safeguard against unforeseen negative consequences that can impact on businesses profitability and cash flow. this strategy has for long been practiced by large business sectors in, especially developed countries, which more often than not placed them at advantage in minimizing foreign exchange risk. in developing countries like nigeria however, a predominant part of the business class may not have adequate knowledge/ access to such remedial measures due mainly to their types, sizes and general lack of awareness. this paper is thus intended to serve as a source of reference for all categories of foreign exchange users in nigeria. firstly, it provides an empirical understanding of the intricacies of naira/dollar exchange rate; and secondly, it creates awareness on the need for some form of ‘own control’ of foreign exchange risk. the knowledge of the common techniques and instruments that can be used to mitigate foreign exchange risks is also highlighted. on the over all, the attendant consequences of both falling domestic exchange rate (depreciation) and rising domestic exchange rate (appreciation) were looked into and highlights made on how companies in nigeria can be affected. 2. literature review 2.1 foreign exchange risk access to finance and its effective management are essential ingredients to success in all forms of organizations. however, this fact is threatened by a number of constraints. according to olutunla (2001) poor financing and/or lack of its effective management is a great hindrance to acquiring material inputs and better technologies for production. finance is related to foreign exchange because some review of economics and development studies vol. 3, no 2, december 2017 93 organizations source their finances from foreign countries. in addition, most capital goods, raw materials and expertise are purchased from abroad. thus, foreign traders would have to either convert a foreign currency for use locally (if sourced from a foreign body) or convert local currency to foreign one (to patronize foreign markets). clearly, converting one foreign currency to another necessitates the use of exchange rate defined as the price of a foreign currency in terms of a domestic one. according to nwude (2012), exchange rate is a key variable in the context of general economic policy formulation as it affects the performance of other macroeconomic variables. its appreciation or depreciation in both the short and long run according to mustapha and fabumi (1990), adetifa (2003), esezebor (2004), agene (1991) and levi (1990) depend on specific factors namely: (i) interest rate differentials (ii) speculation (iii) central bank intervention (iv) hot money (v) hedging (vi) demand and supply (vii) exchange controls and regulation, and (viii) political and general economic climates. these factors are not entirely government centered. for instance, activities of speculation and hedging can be carried out by both the government and end-users of foreign exchange. there is need therefore for both parties to be involved in the process. accordingly, while government is saddled with the responsibility to adopt the most appropriate exchange rate policy for the economy as a whole, end-users of foreign exchange are expected to determine whether there is need to hedge and which hedging instrument is appropriate for minimizing their individual exchange risk. according to madura (1989) foreign exchange risk refers to the effect of unexpected exchange rate changes on the value of a firm. papaioannou (2006) sees it as the possible direct loss (as a result of an unhedged exposure) or indirect loss in the firm’s cash flows, assets and liabilities, net profit and, in turn, its stock market value from an exchange rate movement downward or upward. for companies that sell their goods and services internationally and get paid in a foreign currency for example, foreign exchange risk is the likelihood that a downward change (depreciation) in exchange rates will result in the company receiving a lower amount of domestic currency than originally anticipated because the foreign client will be paying less than before of his own currency. with currency depreciation, importers will be paying more of the domestic currency than initially planned. on the other hand an upward change in exchange rates (appreciation) would mean that exporters will receive more in foreign currency and by extension the domestic one; while importers will be paying less of domestic currency to obtain same amount of the foreign currency. generally, a foreign exchange risk is a financial risk caused by an exposure to changes in the exchange rate between two currencies which could result in a loss. it is also called currency or exchange risk. according to cpa (2009) foreign exchange risk can originate from any of the following:  where there are business imports or exports between 2 or more countries.  where other costs, such as capital expenditure, are denominated in foreign currency  where revenue from exports is received in foreign currency  where incomes, such as royalties, interest, dividends etc., are received in foreign currency  where the business’s loans are denominated (and therefore payable) in foreign currency  where the business has offshore assets such as operations, subsidiaries or foreign currency deposits shapiro (1996); madura (1989) and papaioannou (2006), identified three different types of exchange risks namely: 1. transaction risk. this is basically cash flow risk dealing with the effect of exchange rate movement on transactional account exposure related to receivables (export contracts), payables (import contracts) or repatriation of dividends. an exchange rate change in the currency of denomination of any such contract will result in a direct transaction exchange rate risk to the firm; review of economics and development studies vol. 3, no 2, december 2017 94 2. translation/accounting risk. this is a balance sheet exchange rate risk which relates exchange rate movements to the valuation of a foreign subsidiary and, in turn, to the consolidation of a foreign subsidiary to the parent company’s balance sheet. 3. economic risk. this reflects on the risk to the firm’s present value of future operating cash flows from exchange rate movements. in essence, economic risk concerns the effect of exchange rate changes on revenues (domestic sales and exports) and operating expenses (cost of domestic inputs and imports). economic risk is usually applied to the present value of future cash flow operations of a firm’s parent company and foreign subsidiaries. it is pertinent to point out that exchange risk, notwithstanding the type, can impact adversely on business profitability and cash flow. according to cpa (2009) exchange risk effects can be highlighted into two major categories as follows: 1. declining domestic exchange rate which can result to; a. making domestically produced goods more competitive against imported goods b. increasing the cost of capital expenditure where such capitals are imported c. increases the cost of servicing foreign currency debt d. increases exporters’ competitiveness in terms of cost, thereby potentially increasing their market share and profitability. e. domestic business could become more attractive to foreign investors f. increases the cost of investing overseas and thus makes it unattractive. 2. rising domestic exchange rate. this can lead to; a. making exports less competitive, thus reducing the profitability of exporters b. decreasing dividends, which in turn can lead to a fall in the market value of the business c. decreasing the value of investment in foreign subsidiaries and monetary assets (when translating the value of such assets into the domestic currency) d. decrease in the value of foreign currency income from investments, such as foreign currency dividends, when translated into the domestic currency e. decrease in the cost of foreign inputs, thus giving importers a competitive advantage over domestic producers f. decrease in the value of foreign currency liabilities. hence lowering the cost of servicing these liabilities decreases g. decrease in the cost of imported capital equipment thereby lowering capital expenditure h. decrease in the cost of investing overseas thereby encouraging capital flights i. makes the economy less attractive to foreign investors 2.2 foreign exchange risk management 2.2.1 the rationales managing foreign exchange risk is a technical subject requiring knowledge of hedging instruments and techniques. for most users of foreign exchange this may seem too complex, costly or time-consuming. others yet may not have broad knowledge about hedging instruments and techniques or may simply believe that hedging is a mere speculative activity. export development canada (2010), identified the following as the main importance of exchange risk management to business organizations i. minimizing the adverse effects of exchange rate movements on profit margins ii. increasing the predictability of future cash flows iii. eliminating the need to accurately forecast the future direction of exchange rates iv. facilitate the pricing of products sold on export markets and; v. offers temporary protection to business competitiveness in the event of a rise in the value of local currencies (thereby buying time for businesses to improve productivity). review of economics and development studies vol. 3, no 2, december 2017 95 the adoption of a foreign exchange management strategy is similar to taking on an insurance policy in which the insurance company accepts to indemnify the insured against any unexpected eventuality (risk) that may affect the insured assets. the insured risk, in this case, is the reduction in cash flows and/or profit margins caused by un-favorable changes in the exchange rate. according to export development canada (edc) (2010) effective exchange risk management does not only protect a company’s cash flow but also ensure that the company’s efforts and talent are focused on its core business activities. allen (2003); and jacque (1996), assert that effective currency risk management decision requires the establishment of an operational framework of best practices. it is thus a multi-step process. edc (2010), imf 2006 and habibie (2013) identified five stages as follows: i. determining/ calculating company exposure this involves identifying and measuring the foreign exchange exposures that you want to manage. as mentioned earlier, the focus for most companies is on transaction risk. for an exporting company paid in u.s. dollars for example, measuring exposure may involve subtracting the u.s. dollars it expects to receive over a one year period, against the money it will need in order to make payments in u.s. dollars over the same period. the difference determines the exposure to be hedged. ii. development of an exchange rate risk management strategy. after identifying the types of currency risk and measuring the firm’s risk exposure, a currency strategy needs to be established on how to deal with these risks. in particular, this strategy should specify the firm’s currency hedging objectives and whether and why the firm should fully or partially hedge its currency exposures. iii. creation of an entity to deal with the execution of exchange rate hedging. this entity will be responsible for exchange rate forecasting, the hedging approach mechanisms, the accounting procedures regarding currency risk, costs of currency hedging, and the establishment of benchmarks for measuring the performance of currency hedging. iv. development of a set of controls for periodic monitoring of hedging performance. this includes setting position limits for each hedging instrument, position monitoring through mark-to-market valuations of all currency positions on a daily basis (or intraday), and the establishment of currency hedging benchmarks for periodic monitoring of hedging performance (usually monthly). v. establishment of a risk oversight committee. this committee would in particular approve limits on position taking, examine the appropriateness of hedging instruments and review the risk management policy on a regular basis. 2.2.2 common techniques and instruments according to edc (2010); cpa (2009); papaioannou (2006); and florena-olivia (undated), there are two broad methods that can be used to manage foreign exchange risks. 2.2.3 natural hedging the objective of natural hedging is to reduce the difference between receipts and payments in a given foreign currency so that ultimately, the net amount to be received would have been minimized. natural hedging can be by way of using foreign currency proceeds to make payment abroad, borrowing from abroad, increasing procurements from foreign suppliers, and building or buying a production facility abroad. review of economics and development studies vol. 3, no 2, december 2017 96 an inherent disadvantage of natural hedging however is, it takes time to implement. (e.g. finding new suppliers in another country, initiating and securing credit facility or building a production facility abroad may after all be cumbersome). 2.2.4 financial hedging this method involves buying foreign exchange hedging instruments that are typically sold by banks and foreign exchange brokers. the ones most commonly used are foreign exchange forward contracts, currency options and swaps. 2.2.5 forward contracts this allows a foreign exchange user to set the exchange rate at which he will buy or sell a given quantity of foreign currency in the future (on either a fixed date or during a fixed period of time). they are flexible instruments that can easily match future transaction exposures (generally up to one year). forward contracts are easy to use and carry no purchase price – which makes them very popular. the only obligation being that the exporter has a contractual commitment to deliver to (or purchase from) a bank or foreign exchange broker a fixed quantity of foreign exchange at a future date. if he does not, then the forward contract could be terminated or extended which could carry a price tag. this last point explains why foreign exchange brokers set limits on the maximum amount that can be hedged using forward contracts. it also serves to explain why collateral is often required when you buy a forward contract. 2.2.6 currency options standard options give a foreign exchange user the right, but not the obligation, to buy or sell foreign exchange in the future at a pre-determined exchange rate. because these options do not oblige the company to sell or buy foreign currency (contrary to forward contracts), they are often used by companies that bid on contracts. currency options allow companies to benefit from favorable movements in exchange rates, which is why most types of currency options carry an upfront cost. the perceived complexity of currency options and the fact that most of them carry a purchase price has restricted their application. yet basic options are not difficult to understand and some of them, commonly called “zero-cost collars” or “participating forwards”, cost nothing to purchase. in addition, they provide protection when exchange rate moves in an unfavorable direction and participation when it moves in a favorable one. also, options can lead to an increase in market share and improvement in business margins. 2.2.7 swaps this involves the simultaneous selling and buying (or buying and selling) of a foreign currency. swaps are simply a combination of a “spot” transaction (purchase or sale of foreign currency for delivery within 24–48 hours) and a forward contract. there are no direct costs associated with the purchase of swaps (some collateral may need to be posted). swaps are extensively used by companies around the world for cash management purposes and to borrow in foreign currencies. generally, the argument on the appropriate strategy to manage (hedge) the different types of exchange rate risk is yet to be settled (jacque, 1996). in practice, however, corporate treasurers have used various currency risk management strategies depending, ceteris paribus, on the prevalence of a certain type of risk and the size of the firm (allen, 2003). 3. methodology the study utilized secondary data on naira/dollar exchange rate based on the operations of parallel markets (bureau de change) in nigeria over a period of 18 months (january 2015 – june 2016). the study utilized descriptive tools such as tables, percentage, and polygons to clearly portray the monthly changing trends and how it affects nigerian importers and exporters. the ultimate focus of the study is to assess the extent of exchange rate volatility between the two currencies and whether the resultant variations warrant review of economics and development studies vol. 3, no 2, december 2017 97 the adoption of hedging techniques by nigerian business enterprises. 4. results and discussion 4.1 trends in the naira/dollar exchange rate fluctuations the data utilized in this paper, shown in table1 below, is on the operations of the autonomous foreign exchange market in nigeria. table 1: naira/dollar exchange rate over 18 months period: january 2015 – june 2016 mo nt. j a n f e b m a r a p r m a y j u n j u l a u g s e p o c t n o v d e c j a n f e b m a r a p r m y j u n xrat e 1 9 6 2 1 3 2 2 3 2 1 1 2 2 0 2 1 9 2 3 7 2 1 7 2 2 3 2 2 5 2 3 2 2 5 8 2 9 0 3 3 0 3 2 1 3 2 1 3 3 7 3 5 0 %δ 7 . 9 4 . 5 5 . 8 4 . 0 0 . 3 7 . 7 9 . 5 2 . 7 1 . 0 3 . 3 1 0 . 0 1 0 . 9 1 2 . 3 2 . 8 0 . 0 4 . 8 3 . 6 source: cbn, 2016. key: mont. = month; xrate = exchange rate; %δ = percentage change the first column of table 1 presents the raw data (naira/dollar exchange rate) as obtained from the cbn source. the second column shows the percentage change between successive months over the one year six months period. it can be observed that fluctuation was a recurrent feature of the exchange rate throughout the period. it is revealed that the naira currency is disfavoured in 11 of the 17 variations witnessed (constituting 59%), all of which are above 3 percentage point. on the other hand, of the 4 variations (24%) in which the naira currency was favoured, only 2 were above 3 percentage point. this clearly shows the predominance of adverse volatility trends which can significantly affect business profitability and cash flow. this outcome is made clearer in the polygon as presented in figure. 160 200 240 280 320 360 160 200 240 280 320 360 ja nu ar y f eb ru ar y m ar ch a pr il m ay ju ne ju ly a ug us t s ep te m be r o ct ob er n ov em be r d ec em be r ja nu ar y f eb ru ar y m ar ch a pr il m ay ju ne 2015 2016 figure 1: naira/dollar exchange rate over 18 months period january 2015 to june 2016 review of economics and development studies vol. 3, no 2, december 2017 98 -10 -5 0 5 10 15 ja nu ar y f eb ru ar y m ar ch a pr il m ay ju ne ju ly a ug us t s ep te m be r o ct ob er n ov em be r d ec em be r ja nu ar y f eb ru ar y m ar ch a pr il m ay ju ne 2015 2016 figure 2: percentage change in naira/dollar excahange rate over 18 months period january 2015 to june 2016 4.2 measurement of foreign exchange risk the data presented in the previous section is utilized in table 2 to compute the risk of exposure to foreign exchange risk and to analyze how it can affect importers and exporters. table 2: exchange rate fluctuation and its effects on imports and exports jan. 2015 to jun. 2016 month exr(nominal) exr (ratio) net changes import effect export effect january 196 0.0051 february 213 0.0047 0.00040721 negative positive march 223 0.0045 0.00021053 negative positive april 211 0.0047 -0.00025503 positive negative may 220 0.0045 0.00193881 negative positive june 219 0.0046 -0.00002075 positive negative july 237 0.0042 0.00034680 negative positive august 217 0.0046 -0.00038889 positive negative september 223 0.0045 0.00012399 negative positive october 225 0.0044 0.00003986 negative positive november 232 0.0043 0.00013410 negative positive december 258 0.0039 0.00043438 negative positive january 290 0.0034 0.00042769 negative positive february 330 0.0030 0.00041797 negative positive march 321 0.0031 -0.00008496 positive negative april 321 0.0031 0.00000000 negative positive may 337 0.0030 0.00014791 negative positive june 350 0.0026 0.00038022 negative positive computed by author, 2016 it is clear from the table that the two parties are affected differently following different fluctuation trends over the periods. the table shows how rising and falling currency value can affect profitability and cash flow for both importers and exporters. to make the above point clearer, we assume that a nigerian exporter sold cocoa to a u.s. based buyer, for say us$100,000 in the month of march 2015. if, as shown the table, the usd/naira exchange rate review of economics and development studies vol. 3, no 2, december 2017 99 during this period was 0.0045 and that this rate was used for the transaction, the exporter would have expected to receive n22, 222, 222. assume further that the us$100,000 was only received one month later (in april) when the naira is worth 0.0047 usd/n (which is equivalent to a 5.8% increase in the value of the naira). this would mean that the exporter could receive only n21,276,595 implying a reduction of n945,627 than expected. in this circumstance the company must have suffered a loss of nearly a million naira, which is avoidable if it had adopted a hedging strategy. a second scenario is where a nigerian based firm initiated a transaction with a us based supplier to buy automobiles worth usd100,000. this, it is assumed, was in november 2015 when as shown in table 2, the naira/dollar exchange rate was 0.0043. assume further that the transaction was actually completed in march 2016 when the exchange rate has appreciated to 0.0031. this means the nigerian firm must have paid n322, 258, 064, which is higher than n23, 255, 813, being what it would have paid if the transaction was finalized in the month of november. the net loss to the firm of n9,002,251 was due to naira depreciation over the period which could have been avoided if the firm had a hedging strategy in place. it is pertinent to point out that both depreciation and appreciation have distinct economic advantages and disadvantages depending on economic exigency and need (refer to the effects of rising and falling domestic currency value in the literature section). thus, while importers would prefer currency appreciation as it tends to reduce their dollar requirement for purchase abroad, exporters would be more comfortable with depreciation since it increases the total naira quantity received in the event of a transaction. to the government both may be desirable depending on the country’s economic policy and situation. the above analysis has revealed that both importers and exporters can suffer a monetary lose following volatility in currency exchange rate irrespective of the effectiveness of government exchange rate policy. this necessitates that users of foreign exchange should be vigilant to ensure that unwarranted exposure to risk is detected and remedied. 5. conclusion and recommendation one of the attributes of an ideal currency anywhere in the world is that it should allow for complete freedom of monetary flows, so that traders and investors could willingly and easily move funds from one country/currency to another in response to perceived economic opportunities. an irony however is that this does not happen in reality. in spite of this constraint there is increasing evidence to show that in response to emerging socioeconomic realities, more and more businesses in nigeria and other third world countries are increasingly pursuing overseas business opportunities. this form of trade, unlike internal, involves foreign currency which necessitates the use of exchange rate. thus, although it is the statutory responsibility of government to provide a well-managed foreign exchange atmosphere, the other parties involved in such transactions should equally be concerned with how such cross currency dealings may inhibit their profitability and smooth cash flow. this implies that the responsibility to put a favorable exchange rate in place is a joint one, between the state and the business interest. this paper has utilized practical evidence to prove that exchange risk is indeed a reality and that traders dealing in trans-border activities can use hedging tools to safeguard against the unforeseen adverse effects on inputs costs, output price, credit sources, and overall asset value. we conclude by asserting that the desire for firms and individuals to hedge is deterministic. it is determined by the interaction of a number of concurrent activities within the immediate business environment, the foreign exchange market and the economy at large. therefore stakeholders must carefully assess when to hedge and using what strategy for achieving maximum business success and sustainability. review of economics and development studies vol. 3, no 2, december 2017 100 references adetifa, s.(2003): international business finance in nigeria, ikeja lagos, mcbay publishers. agene, c.e.(1991): foreign exchange and international trade in nigeria, lagos, gene publications. allen, s.l. (2003): financial risk management: a practitioner’s guide to managing market and credit risk, (hoboken, new jersey: wiley). cbn (2016): monthly average exchange rates of the naira (naira per unit of us dollar) https://www.cbn.gov.ng/rates/exrate.asp?year=2016&month=9 cpa (2009): a guide to managing foreign exchange risk. white paper, retrieved from www.cpaaustralia.com.au dated 2/5/2016. *edc (2010): managing foreign exchange risk: a white paper, retrieved from esezebor, e.a.(2004): international finance, lagos, cibn press. www.ed.ca/wp ,mfer 0310, dated 3/5/2016. gali, j. & monacelli, t.(2005): monetary policy and exchange rate volatility in a small open economy, review of economic studies 72: 707-734. habibnia, a. (2013): exchange rate risk measurement and management, lse risk stochastic group. a.habibnia@ise.ac.uk jacque, l. (1996): management and control of foreign exchange risk, (norwell, massachusetts: kluwer academic publishers). levi, m.d.((1990): international finance, the markets and financial management of multinational business, singapore, mcgraw-hill. madura, j. (1989): international financial management, 2nd ed. (st. paul, minnesota: west publishing company). morgan, j.p. (2012): best practices: foreign exchange risk management, issued by us dept. of commerce, census bureau and the bureau of economic analysis mustapha, r.s & fabumi, b.l.(1990): finance of international trade, lagos, f&a publishers. nwude, e.c. (2012): a survey of foreign exchange rate determinants in nigeria. european journal of business and management: issn 2222-2839 (online), 4, 13. olutunla, y. (2001). management of small and medium enterprise in nigeria. enugu: edge publishers. papaionnou, m. (2006): exchange risk measurement and management: issues and approaches for firms, imf working paper series w/p/06/255. shapiro, a.c. (1996): multinational financial management, 5th ed. (hoboken, new jersey: wiley). https://www.cbn.gov.ng/rates/exrate.asp?year=2016&month=9 http://www.cpaaustralia.com.au/ http://www.ed.ca/wp review of economics and development studies, vol. 8 (3) 2022, 223 231 223 the impact of post-covid-19 economic recession on public perception of climate change and environmental behavior in pakistan shariq waheed a, husnain waheed b, ra’ana malik c, abdul ghaffar d a postgraduate scholar, department of gender studies, university of the punjab, lahore, pakistan. email: shariqwaheed2@gmail.com b department of economics and finance, foundation university, rawalpindi, pakistan. email: husnainwaheedd@gmail.com c professor and chairperson, department of gender studies, university of the punjab, lahore, pakistan. email: raana.malik@yahoo.com d phd scholar, school of statistics, dongbei university of finance and economics, dalian, china & lecturer, government dayal singh graduate college lahore email: abdulghaffar884@gmail.com article details abstract history: accepted 25 july 2022 available online september 2022 the interconnection between economic development, fervid crossovers in the frame of contagious diseases, and environmental problems, in particular, have, until now, seen less scrutiny from environmental economists. empirical evidence suggests that great economic recessions have proven to affect the prioritization of environmental and climate protection. the current study surveys the perception of the residents of lahore, pakistan regarding their environmental perception and awareness of climate change issues at the time of post-covid-19 economic recession. furthermore, the present study investigates several economic factors including the impact of economic recession influencing the environmental behavior of mainstream society. a cross-sectional quantitative research design was utilized to gather data from 343 respondents belonging to a public university in pakistan. to statistically analyze the date, chi square test and multinomial logistic regression was utilized to examine significant economic factors associated with environmental behaviors. the findings reveal that climate change is viewed as one of the main ecological problems in lahore, pakistan. furthermore, significant association was found between individual’s socioeconomic background and impact of economic recession with their prioritization of climate action. the present research has several implications as identifying rising challenges of economic and climaterelated threats can aid in adopting a more dynamic approach to strategic and structural investments. the current paper suggests robust policy interventions against financial instability to ensure collective as well as individual effort against climate change for a stable and sustainable future. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: economic recession, climate change, covid-19, environmental economics jel classification: f15, doi: 10.47067/reads.v8i3.459 corresponding author’s email address: shariqwaheed2@gmail.com review of economics and development studies, vol. 8 (3) 2022, 223 231 224 1. introduction climate change is one of the formidable obstacles faced by humanity in present times. however, its direct consequences on wellbeing of humans are not generally coherent making it difficult for individuals to envisage the sources of climate change and its potential impact on their lives (mochizuki & bryan, 2015). however, it does not suggest that the reverberations of climate change do not bother human beings. (carolyn, 2010). numerous researches have endeavored to measure the public discernments and perspectives regarding the dilemma of climate change on both national and international level. most of residents in developed nations appear to be sensitized with the outcomes of climate change. (skoufias, 2011; lorenzoni & pidgeon, 2006), despite the fact that they do not clearly know the contrivance through which anthropocentricism has an impact on it (pihkala, 2018). the era of covid-19 was followed by a period of economic turmoil. empirical evidence suggests that during covid-19, a decline of 26.4% in gdp of pakistan was reported from march to june as compared to pre-covid-19 setting. industry took a loss of 6.7%, services took a loss of 17.6%, agriculture on the other hand remained relatively unhurt and only declined by 2.1% (moeen et al., 2021). all households saw a decrease in income, yet high-income groups seemed to bear loss more as compared to low-income ones. it has been seen that the expansion in unemployment in pakistan converted into three times increase in poverty. (moeen et al., 2020). in an economic crisis scenario, individuals with low income tend to be more perturbed regarding climate change as they do not have the necessities to overcome the adverse effect of climate change or other ecological catastrophes. contrary to that, high-income individuals are relatively less concerned about climate change, firstly because they have the resources to overcome the effects of climate and secondly they may perceive that they will have to pay higher taxes to fight climate change. (lo, 2014) economic recession is one of the main factors, which drives popular opinion on climate change. the covid-19 pandemic lead to labor shortage, supply chain disruptions, and chaos in the energy market, which eventually lead to recession. during recession, the focus of general public may shift from the greater good to personal benefit. (shum, 2012). this model portrays the european union where a single among two residents perceive climate change to be a serious issue during 2013, positioning it as the third most serious issue (european commission, 2008). this trend was altered compared with 2008 which was marked by economic crisis, where 62% of european citizens considered climate threat as the second most difficult issue faced by the planet (european commission, 2013). a european country like greece, which was hit by an economic crisis between 2009 and 2015, affected how citizens of greece perceived the solemnity of climate change. in 2008, 90% of the greek citizens contemplated climate change to be absolute global issue and recession to be 4th most serious issue. a trend reversal was seen in 2013 when recession was segregated as 2nd most serious issue and climate change was segregated as 3rd most serious issue. (papoulis et al., 2015). several evidences have indicated the impact of income background and economic recession on the prioritization of climate change in general public. however, these studies were framed in western setups, which resulted in a scarcity of economic-disaggregated data related to environmental concerns from asian countries especially from pakistan. moreover, the interconnection between economic development, fervid crossovers in the frame of contagious diseases, and environmental problems, in particular, have, until now, seen less scrutiny from environmental economists. in this context, the current study surveys the perception of the youth of lahore, pakistan regarding their environmental perception and attitude related to climate change issues during post-covid-19 economic crises. furthermore, the present study investigates several economic factors influencing the environmental review of economics and development studies, vol. 8 (3) 2022, 223 231 225 behaviour of mainstream society. 2. research hypothesis the current study intends to explore the perception of university students regarding climate change. the study also seeks to decipher the association between variables including climate change perception, socio economic background, climate action prioritization and post-covid-19 economic recession. the study aims to test the following hypothesis: h1: socioeconomic background would be significantly associated with subjective perception of climate change. h2: socioeconomic background would be significantly associated with the prioritization of climate action. h3: impact of post-covid-19 economic recession would be significantly associated with prioritization of climate action. 3. methodology the purpose of the research was to investigate the perception of university youth about climate change during period of post-covid-19 economic recession along with exploring the association between variables that affect environmental behaviour through a self-reflective quantitative survey. 3.1 study design, population and procedure the research team initiated the recruitment of participants on 15th april 2022 through a cross sectional quantitative research design. the participants were contacted directly and data collection was done face to face via a pencil, paper-type test where survey questionnaire were dispersed among respondents and were collected back on spot. the study population comprised of 343 university students (both males and females) aged 17 to 30 years enrolled in undergraduate and postgraduate programs. respondents were allocated in current study from university of the punjab, lahore, pakistan using non-probability convenience sampling method. study utilized non-probability convenience sampling because of on hand and easy access to large population (lehdonvirta et al., 2021; stratton, 2021). the participation in this study was voluntary. simple and inclusive language was used in the survey questionnaire for easy understanding of participants. in the current study, spss (version 20) was employed with the statistical significance set as 0.05. total 356 questionnaires were received after survey completion, of which 13 incomplete responses were excluded. finally, 343 responses were eligible for analysis. of the respondents 178 were male and 165 were female. the descriptive statistics of the participants are given in table 1. table 1: descriptive statistics of participants (n=343) demographic information frequency percentage gender male 178 52 female 165 48 education level undergraduate students 187 54.5 postgraduate students 156 45.5 marital status single 271 79 married 71 21 review of economics and development studies, vol. 8 (3) 2022, 223 231 226 3.2 measures the survey questionnaire used for collecting data in this study was segmented into 4 categories: respondent’s socio-demographic, socio economic status, climate change perception, prioritization of climate change and economic recession. the socio-demographic segment of the questionnaire included characteristic information including gender, age, education, income and marital status. revised new ecological paradigm scale (nep) developed by dunlap et al., 2000 was employed to measure respondent’s perception of climate change by measuring agreement with different statements regarding the relationship between the climate and human beings (sample item: if things continue on their present course, we will soon experience a major ecological catastrophe.) for present study, nep scale was modified to focus on the main subject of the research i.e. climate change. consisting of 15 items, responses were rated on a 5-point likert type scale (1= strongly disagree to 5= strongly agree). the even items were scored reversed; the positive, high perception was indicated by the agreement with odd numbers while agreement with even number indicated low climate perception. the revised new ecological paradigm scale has repeatedly showed high internal consistency (claudio et al,. 2022; derdowski, 2020; barradas & ghilardi 2020). in current study, the reliability of nep scale was satisfactory (α=6.16) the socio-economic background of the respondents was measured by averaging the responses about monthly income and education level. respondent’s prioritization of climate change was measured by the question: ‘here are some issues now being discussed in the parliament. do you think each of these issues should be a low, medium or high priority for the current government? (mildenberger & leiserowitz, 2017)’ respondents indicated their priority for the ‘climate change’ item using a threepoint scale ranging from ‘low’ to ‘high’. finally, participant self-reports were utilized to establish measures of economic recession impact. the economic recession variable was measured by question: ‘how much has the economic downturn in this country since covid-19 personally hurt you and your family? (mildenberger & leiserowitz, 2017)’. participants indicated the extent of being impacted by the economic recession using two options either ‘some’ or ‘á lot’. 3.3 ethical considerations apa 7th version ethical guidelines were adhered to in the design and execution of this research. before the initiation of the study, formal approval and ethical clearance was taken from respondents to carry out the research. moreover, participants’ identities were promised to be kept confidential and anonymous. furthermore, the study was formally approved by internal review board of university of the punjab, lahore, pakistan. 3.4 data analysis the analysis of data was carried out employing descriptive and inferential statistics. the testing of proposed hypothesis was carried out utilizing inferential statistics. the comparison and association between variables was tested using chi-square test. multinomial logistic regression analyses was then utilized to examine economic factors influencing individual environmental prioritization and behaviors. the reference category for regression in current study was high prioritization of climate action. findings from multinomial logistic regression analyses are given as odds ratios. review of economics and development studies, vol. 8 (3) 2022, 223 231 227 4. findings and discussion the present study investigated the perception of respondents related to climate change during post covid-19 economic recession along with surveying the association between several factors influencing the environmental behaviour including socio economic background, perception of climate change, prioritization of climate action and economic recession. in current study the age of respondents ranged from 17 to 30 years. the current study constituted 178 (52%) male and 165 (48%) female respondents. there were 72 (21%) married participants and 271 (79%) single participants. a majority of respondents 187 (54.5%) were enrolled in an undergraduate program while 156 (45.5%) were enrolled in a post graduate program. the association between different variable including climate change perception, socio economic background, climate change prioritization and post-covid-19 economic perception were measured using chi-square statistics. table 2: frequencies and chi-square results for climate change perception and socio-economic background (n=343) low moderate high x2(1) p source n % n % n % low 31 27 34 25.5 27 28.4 .210 moderate 75 65.2 94 70.8 57 60 5.85 high 9 7.8 5 3.7 11 11.6 table 2 reveals that chi-square test of independence showed no significant association between socioeconomic background and climate change perception with x(1,n=343)= 5.85, p=.210, φ=.13. hence hypothesis 1 was rejected. the findings report no significant differences among different socioeconomic backgrounds, where the perception of all the socioeconomic backgrounds regarding climate change is high. this suggests that most of respondents were aware of climate change and its adverse effect on the living conditions of humanity and that respondent’s level of information is good regarding climate change. (akerlof et al., 2013). moreover, people need to be better informed on the issue, in order to gain knowledge of every possible action they can undertake to mitigate the potential impact. (moser, 2009) table 3: frequencies and chi-square results for climate action prioritization and socio-economic background (n=343) low moderate high x2(1) p source n % n % n % low 8 7 16 12 36 37.8 0.000 moderate 27 23.4 87 65.5 38 40 101.7 high 80 69.6 30 22.5 21 22.2 review of economics and development studies, vol. 8 (3) 2022, 223 231 228 table 3 reveals that chi-square test of independence showed significant association between socioeconomic background and climate action prioritization with x(1,n=343)= 101.7, p=.000, φ=.54. hence hypothesis 2 was accepted. results revealed climate action prioritization to be high in respondents with medium (40%) and low (37.8%) socio economic backgrounds. table 4: frequencies and chi-square results for climate action prioritization and post-covid-19 economic recession (n=343) some a lot x2(1) p source n % n % low 3 1.25 57 55.3 .000 moderate 115 47.9 37 35.9 156.3 high 122 50.8 9 8.8 table 4 reveals that chi-square test of independence showed significant association between post-covid-19 economic recession and climate action prioritization with x(1,n=343)= 156.3, p=.000, φ=.67. hence, hypothesis 3 was accepted. results revealed climate action prioritization to be low in respondents mostly affected by post-covid-19 economic recession (55.3%) and high in respondents least affected by post-covid-19 economic recession (50.8%). table 5 factors prioritization of climate action low medium exp β 95% ci exp β 95% ci socio economic status low .058*** .024-.144 .187* .094-.371 moderate .311* .138-.700 1.603 .816-3.149 high (rc) 0.00 0.00 impact of economic recession some .123* .062-.246 *.277 .160-.482 a lot 0.00 0.00 results from a multinomial logistic regression analysis for socio economic status and impact of economic recession affecting prioritization of climate action (low, medium, high) rc= reference category, ***p value =0.000, **p value =0.001 , *p value = <0.05 table 5 shows the findings from multinomial regression analysis. the model explained 27% variation in the relationship between socio economic status of the individuals and their prioritization of climate action. the results suggest that low socioeconomic status was a significant determinant of low as well as medium climate action prioritization. the results also reveal that individuals with moderate socio-economic status have lower odds (69%) of having low prioritization of climate action than the individuals having high socio-economic status. review of economics and development studies, vol. 8 (3) 2022, 223 231 229 in this study there is a significant association between socioeconomic backgrounds and prioritization of climate change. where most of the respondents with low and moderate socioeconomic backgrounds responded with high prioritization of climate action. the outcomes suggest that the reason behind high prioritization of climate change among low and moderate socioeconomic background is their lack of resources to tackle climate change, they believe that they will be most affected by rising temperatures, extreme weather events, floods, droughts and reduction of farmland. while on the other hand respondents with low climate change prioritization belong to high socioeconomic background and the outcome suggests that the reason behind their low prioritization of climate change is firstly excess of resources to handle the effects of climate change and secondly, they believe that in order to oppose climate change government would impose high taxes on respondents with high socioeconomic background. table 5 further shows the effect of the impact of economic recession on climate action prioritization. the model explained 13% variation in the relationship between impact of economic recession on the individuals and their prioritization of climate action. the relevance of impact of economic recession on individuals is evident in it being a significant predictor of individual’s prioritization of climate action. compared to individuals greatly affected by economic recession, those who are relatively less impacted by economic recession are 88% less likely to have low prioritization of climate action and 73% less likely to have medium prioritization of climate action. the findings of this study suggests that the respondents most affected by post covid-19 economic recession have low climate action prioritization. in the wake of rising covid-19 cases government limited transportation and construction, weak domestic consumption lead to delay in commercial investments (alam et al., 2021) and increase in unemployment was linked with plummeting household incomes and rising poverty during and after the lockdown (moeen et al., 2021). the study suggests that respondents most affected by recession wanted the government institutes to focus on revival of economy instead of climate action. respondents most affected by post covid-19 economic recession were struggling with their basic needs so ultimately their top priority was their basic needs and revival of economy instead of climate action prioritization. the findings of this study also suggests that respondent’s least affected by post covid-19 economic recession had high climate action prioritization. the outcome suggests that these individuals belonged to the sectors which were least affected by post covid-19 recession which means that they had enough resources to fulfill their basic needs and these individuals wanted government institutes to focus more on climate action. a limitation of present study is that the population of current research were mainly university students who are not at the forefront of being severely impacted by economic recession comparatively to other working groups of mainstream society. the future study should seek to test the hypothesis of current research in other societal groups too, in order to decipher other dimensions of economicenvironmental behavior. furthermore, there has been no work done in similar domain, particularly in asia or pakistan before the covid-19 economic recession, which delimits the present research to explore and compare trends regarding climate change perception and prioritization in phases of economic growth, and recession. in this context, present search constitutes the base for futures studies on economic situation-climate change nexus. 5. conclusion the findings show medium to high level of perception related to climate change during post-covid-19 economic recession in the mainstream public. the study also reveals significant association between variables like socio economic background and prioritization of climate action, review of economics and development studies, vol. 8 (3) 2022, 223 231 230 also impact of post-covid-19 economic recession and climate change prioritization. the present research has several implications as identifying rising challenges of economic and climate-related threats can aid in adopting a more dynamic approach to strategic and structural investments. the 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(2021). population research: convenience sampling strategies. prehospital and disaster medicine, 36(4), 373-374. review of economics and development studies vol. 5, no 4, 2019 799 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads an analysis of the tariff and non-tariff barrier on global cottonseed oil trade 1 fazal hadi, 2 zahoor ul haq, 3 javid iqbal, 4 sher ali 1 phd scholar, department of economics, abdual wali khan university mardan, kp, pakistan. fazalhadisw@yahoo.com 2 professor, department of economics, pakhtunkhwa economics policy research institute, abdual wali khan university mardan, kp, pakistan. zahoor.haq@awkum.edu.pk 3 assistant professor, department of economics, abdual wali khan university mardan, kp, pakistan. javediqbal@awkum.edu.pk 4 assistant professor, department of economics, islamia college peshawar. drali@icp.edu.pk article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 this study is conducted to estimate the effect of both tariff and non-tariff barriers on global crude cottonseed oil, refined cottonseed, and cottonseed oil. this effect is estimated for a sample of developed and developing countries using data over the period 2005 to 2015. the study employed three maximum residue limits (mrl) indices, namely li and beghin, actual heterogeneous index (ahi) and heterogeneous index (hi) as well as two estimation techniques, poisson and ordinary least square method (ols). marginal effects are obtained by using the poisson technique. estimated parameters such as distance, common border, ptas, are found significant and according to prior expectations. the role of tariffs is more substantial in the oilseed trade compared to the trade in cottonseed crude oil. it is also found that the estimated elasticity by using poisson technique is highly elastic as compared to ols method. however, the aggregation of commodities at a higher level, as in the case of cottonseed oil, shows that the effect of the tariff on trade becomes statistically insignificant. further, cottonseed crude oil is a major commodity affected by tariffs, particularly in the case of trade between north-north and north-south countries. finally, the effect of tariffs on cottonseed refined oil trade was found insignificant. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords tariff, non-tariff barriers, cottonseed oil, global trade jel classification: f13, f01 corresponding author’s email address: fazalhadisw@yahoo.com recommended citation: hadi,f., haq, z., iqbal, j. and ali, s. (2019). an analysis of the tariff and non-tariff barrier on global cottonseed oil trade. review of economics and development studies, 5 (4), 799-808 doi: 10.26710/reads.v5i4.896 1. introduction cotton is a major worldwide commercial cash crop and primary source of fiber. cotton is also used to produce more food for humans and feed for animals. cottonseed is a byproduct of cotton, which further consists of hull and kernel. the hull of the cotton seed produces fiber and lint while, kernel carries protein, oil, carbohydrates, vitamins, and minerals. the top five cottonseed oil producers are china, india, pakistan, the united states, and uzbekistan. cottonseed oil is further a by-product of cottonseed and an important source of edible oil. cottonseed oil is also known as “heart oil” which is one of the most unsaturated edible oils. the quality of cottonseed oil depends on time, place and season in which cotton http://www.publishing.globalcsrc.org/reads mailto:fazalhadisw@yahoo.com mailto:zahoor.haq@awkum.edu.pk mailto:javediqbal@awkum.edu.pk mailto:drali@icp.edu.pk mailto:fazalhadisw@yahoo.com review of economics and development studies vol. 5, no 4, 2019 800 plant is located in the field. furthermore, the high-quality cottonseed oil is produced in dry weather and low-quality cottonseed oil is produced in wet weather conditions. the crude cottonseed oil has good stability due to the presence of gossypol on cottonseed (bambawale et al., 2004). during the refining process, gossypol is removed from cottonseed oil. it is a natural toxin that protects cotton plants from naturally damaging insects and shields cotton plants (kanoi, 2005). non-refined cottonseed oil is also used as a pesticide. it is used in cosmetics, laundry detergents and insecticides. the cottonseed oil contains a high concentration of vitamin e, fatty acid, and antioxidants that are beneficial to human skins, moisturizing, anti-aging, and anti-inflammatory properties. crude oil also contains a chemical called as aflatoxins that has a strong flavor and odor. these are extracted to turn crude oil into excellent edible oil during the refining process. being healthy food, its demand has been growing gradually, and thus creating market expansion opportunities for cotton. the gossypol present in cottonseed not only acts naturally against predators but also makes insects infertile by reducing sperm production in male insects. the codex committee of 1967 declared that gossypol is not a health hazard as it is removed during the refining process. the stored value of cottonseed oil is also good and is comparable with other edible oils (abdelhameed 2013). cottonseed oil is better than other edible oils as it lasts a long time in a relatively high temperature due to its anti-oxidant contents. like olive oil, cottonseed oil consists of polyunsaturated fatty acids that helps in lowering ldl (“bad” cholesterol) and increase hdl (“good” cholesterol). non-tariff barriers (ntbs) can significantly restricts trade among nations. otsuki, wilson, and sewadeh (2001) estimated the effect of protectionist measures on the imports from africa to european union (eu). they found a negative relationship between the imports from africa to eu due to these ntbs. beghin & bureau (2001) concluded that the non-tariff barriers have a necessary role in future trade agreements. they argued that the governments are required to be abreast of the costs mrl policies and to accordingly frame the policies keeping them in view. there has been a dearth of understanding of the effect of mrls on trade among developed countries or developing countries in the case of cottonseed oil. therefore, an estimation of the effects of tariffs and non-tariff barriers will highlight the importance of mrls on countries' trade. finally, it is also not known whether mrls and tariff effects on trade are similar or different. similarly, what is the nature of these effects among developing countries and developed countries? researchers, policymakers, investors, and entrepreneurs need such knowledge for their decision making. the present study focuses on the impact of ntms and tariff on global cottonseed oil trade. the reasons for focusing on the global cottonseed oil trade for the study are as follows: the impact and incidence of ntms in the cottonseed oil sector are great and need attention. usually, trade restriction in this sector is related to shipments, labeling and marking requirements. in the usa, trade restrictions are in the shape of security parameters, document verification at ports while the restriction imposed by the eu in this sector comprises of issues relating to compliance with labor and environmental norms. the imports and exports of cottonseed oil are greatly affected as tariff rates are reduced (saini & gordhan, 2007). several studies are available where the effects of ntms on specific countries’ trade are studied; however, not many focus on the effect of ntms on global cottonseed oil trade. 2. econometric modelling the conceptual model used in the study is based on the haq, meilke, and cranfield (2013) and haq and meilke (2009, 2010). this study extended their model by considering non-tariff measures in the analysis. the model assumes that consumer in each importing country i maximize a constant elasticity of substitution (ces) utility function from the consumption of imported cotton product k subject to his income constraint i. the maximization problems assume that consumer has perfect information involved in the choice problem. preferences are complete, reflexive and continuous. the consumer is assumed to review of economics and development studies vol. 5, no 4, 2019 801 be price taker i.e. prices are fixed and exogenous. hence, the search for better prices, bargaining, and discount are ignored. further prices are linear, and every unit of the cotton and textile product cost the same price. hence, quantity discounts are assumed away. the maximization theory also assumes that goods are divisible. cotton products are assumed to be differentiated. hence, a country i are assumed to have a consumption bundle of homogenous and differentiated products. the utility function for a representative consumer in the country i is defined over homogenous (xh) and differentiated (xf) cotton products where f = 1, f and h = f + 1, h. preferences for differentiated products are assumed to be weakly separable such that   hffi uuuuuuu ,,,,,, 121    (1) where the general utility function u consists of sub utility functions h u and f u . the subs utility function f u is assumed to be additively separable such that expenditure i e on differentiated cotton products (xf) in terms of the numeraire good xh for country i is given as ∑ f 1f ififihi xpxe   and ifp is the price of cotton products f. non-satiation is assumed implying that total expenditure is equal to income. the subs utility function f u is assumed to have a (dixit & stiglitz, 1977) ces utility function to allow for substitution between differentiated products. ρ1 n 1n ρ nf xu          (2) where fu is defined over varieties nn of differentiated products in country i, and 1ρ0  to preserve concavity. maximizing the utility function (2) subject to the income constraints yields the following demand function for each variety of cotton products.     in 1n ρ1 ρ in ρ1 ρ in inin i p p px ∑   (3) where in x represents the demand for variety n in a sector of country i, in p represents the price of each imported variety and ii represents per capita income of the country. hence, inin px represents the expenditure on imports of country i on variety n and is presented by in m . the relationship between import price of a variety in p and export price of the same variety jn p is given as follows. (4) where is the trade cost faced by exporting country j in exporting product variety n to country i. substituting for and taking the natural logarithm on both sides of equation 4 gives the following function. ( ) ( ) ∑ ( ) ( ) trade costs, are determined by distance between trading partners (d), trade partners sharing a common border (b), tariff (t) and non-tariff barriers (ntb), preferential trade agreements (pta), preferential market access such generalized system of preferences (gsp). jacks, meissner, and novy (2008), haq et al. (2013) and haq and meilke (2010, 2009) have such a relationship in their analysis. however, this study contributes to the existing literature by explicitly considering non-tariff barriers in the analysis. we are unaware of a study that has considered both tariff and mrls effects in the same study. review of economics and development studies vol. 5, no 4, 2019 802 ( ) (6) jacks, meissner and novy (2008) estimated equation 6 assuming a value for the substitution elasticity and then included the estimated cost in the bilateral trade equation. the parameterized form is given as follows: ( ) ( ) ∑ ( ) ( ) ( ) ( ) ( ) ( ) (8) in the above equation, lnn and jp are specific to the exporting country and will be captured using exporter fixed effects   j  , while∑ is importing country specific and will be captured by importer fixed effects   i  . haq et al. (2013) and haq and meilke (2010, 2009), mátyás (1997) and egger (2002) used these effects to control for unobserved heterogeneity. the   jiff j i vσ1ε  is the error term and it is assumed to be uncorrelated with the repressors. further simplification of equation 8 yields the following estimable equation. (9) the variable mrl can be measured in many ways. 3. results and discussions this section presents the results of the model estimated for crude oil, refined cottonseed oil and the combination of the both crude and refined oil. both ordinary least squares (ols) and poisson estimation procedures were used. the analysis used three different mrls indices namely li and beghin (lb), actual heterogeneous index (ahi) and heterogeneous index (hi). the combination of three commodities, two estimation techniques and three measures of mrls produces eighteen regression estimates for each coefficient. the tables for cottonseed show that the total numbers of observations are 2,062. however, only 710 observations are left for the analysis when zero trade-flow is omitted. hence, two-third of the observations is zero trade flows. similarly, in the case of crude seed oil three-quarter of the observations are zero-trade flow while it is two-third for the refine oilseed. hence, on overage only one-third of the observations are used in the ols regression analysis as with logarithm specification, zero observations become missing and therefore poisson regression is used too. in the case of r-squared, it ranges from 0.563 for refined seed oil to 0.666 for crude seed oil. in the case of regression analysis, r-squared is an important indicator for at least three reasons. first, it explains the variability of the dependent variable from its mean that is the proportion of the total variation as unexplained by the model. second the denominator of the r-squared formula (that is ∑ ( ̂) ∑ ( ̅) ) represents sum of the squared errors of the null model. the null model shows the predicting of the endogenous variable without exogenous variables while the numerator shows the sum of squared errors of the fitted model. hence, the ratio clearly shows improvement in the prediction power of the model due to exogenous variables. third, r-squared can also be determined as the square of the correlation between the predicted and actual values of the model. hence, high square is not only indicative of the good explanatory power but also strong predictive power of a model. the fstatistics and wald chi-squared show that all the models are statistically significant that is the effect of all the exogenous variables excluding the intercept on the dependent variable is statistically significant. all the fixed effects controlling for the importing and exporting countries are statistically significant implying that ignoring these effects would lead to biased estimates. however, the year fixed effects are statistically significant 20 times out of 27. the effect of distance on trade is assumed to be negative while common border, preferential trade agreement (pta) and general system of trade preferences (gsp) is supposed to have a positive effect on trade. the review of economics and development studies vol. 5, no 4, 2019 803 estimated results show that the effect of distance on the trade of all the commodities is negative and statistically significant. the marginal effect (that is elasticity’s) of distance on trade estimated using poisson is consistently higher as compared to the elasticity’s estimated using ols. elasticity’s are higher for crude seed oil as compared to others. the effect of the common border on crude seed oil is consistently positive and statistically significant while it does not affect refined seed oil trade. similarly, the effect of ptas on the trade of all the three commodities is positive and statistically significant. in the case of pta, out of the 36 estimated parameters (tables 2 to 10) only seven have a statistically insignificant effect on trade. however, the effect of pta estimated using poisson is much smaller than those estimated using ols. the effect of gsp on trade is predominantly statistically insignificant. however, its effect is positive whenever it is statistically significant. a tariff is an important determinant of crude seed oil trade only. its effect is negative and statistically significant. its elasticity estimated using poisson is highly elastic as compared to the elasticities estimated using ols. this is the first evidence of its kind of the effect of the tariff on crude oil trade. poisson estimates show that, on average, a 10 percent increase in tariff reduces crude oil trade by about 25 percent, keeping other variables constant while the same effect estimated using ols is about 14 percent. when commodities are aggregated to four-digit that is cottonseed oil, the effect tariff on trade fades away as none of the parameters of simple average tariff is statistically significant. seed account for two-thirds of the cottonseed that both cotton bolls, seed, and lint. there could be physical barriers to the utilization of seed because of a chemical tetraploidy, largely available in the crude oil. the other is that cottonseed could deteriorate due to non-availability of storage to keep the seed cool and dry and stop degradation (gregory et al., 1999). while there are mrl standards for crude oil but countries and especially the eu do not specify these standards for processed products like crude oils. in such a situation when mrl is not defined for a processed food product, then the upper limit of mrls is set equal to the mrl of raw product in this case cottonseed. the concentration of the product during the refining process is also considered in the mrl determination. hence, the allowable bandwidths of mrls in cottonseed vary according to the chemical nature of the pesticides and the oil contents. if a pesticide is highly soluble in fat or difficult to be eliminated during the primary extraction process, then mrl is determined by multiplying the seed mrl with concentration factor. pesticides might also be solvable in water or fat or both. the bottom line is that untraceable traces of chemicals might exist in cottonseeds, and concentration during initial processing would lead to its detection in the crude oil. hence, mrl standards are typically set higher in cottonseed, followed by crude and refined oil to protect human health. results compiled in table 11 show that the effect of mrls on cottonseed is more prominent. however, it also gets all the pesticide sprayed on cotton plant and has the highest potential to absorb these. mrls measured using heterogeneous index (hi) and actual heterogeneous index (ahi) has a significant effect on crude cottonseed oil trade. the heterogeneity index of trade (hit) of ntms by rau et al. (2010) is binary and measures the dissimilarity of ntms of importing and exporting countries. however, countries could be dissimilar or otherwise in the stringency of the regulatory environment. in such a case, the effect of hi could be more intense. these effects are primarily inelastic except the marginal effect estimated using ols for ahi which is highly elastic (–6.989). the ahi also shows a statistically significant effect of mrls on cottonseed trade, though its effect is smaller than those estimated with hi. the effect of mrls on crude oil trade is statistically insignificant for all the indices and estimation procedure. in the case of refined cottonseed oil trade, the effect of mrls on trade is statistically significant for one-third of the cases. in the refined oil case, both the li and beghin and hi indices show a statistically significant effect of mrls on refined cottonseed oil. finally, the overall effect of mrls on cottonseed oil is statically significant as presented in tables 8 to 10. these tables consistently show a statistically significant and negative effect of mrls on trade. irrespective of the measure, mrls have a statistically significant negative effect on cottonseed and refine cottonseed oil. since none of the measures of mrls is perfect, therefore, if even one index shows a statistically significant negative effect on trade, then one can argue about the stringency of ntms. poisson uses more observations as compared to log-linearized ols regression and hence produces statistically significant estimates. fixed effects are added to the estimated models to control for any heterogeneity stemming from differences between trading partners due to the factors other than those controlled in the model. however, such analysis fails to explain as what happens to trade between the pair of countries having similar as compared to different development levels. developed (northern) countries are considered rich and export manufactured goods and services while review of economics and development studies vol. 5, no 4, 2019 804 developing (southern) countries are considered poor and export primary commodities in the form of food, minerals, and raw materials. the production process is generally shifted from north to south for reducing the cost of production for their products in the international markets. standards such as mrls emerged in the north. irrespective of the initial effects of standards, these increased trade among northern countries once their harmonization took place (chen and mattoo, 2008). however, mrl standards are more stringent in north and are considered as a stumbling block to north-south integration as south does not have the technology to attain and maintain these standards (otsuki et al., 2001). but on the positive side, the adoption of northern standards, the southern partner countries can get an indirect benefit by improving goods quality, production techniques and product management (begins and maertens 2015). however, such improvements do not come without a cost and higher cost also changes market price and thus has the potential to change the direction of trade. the cost of standards also differs by export destination. the idiosyncratic nature of standard in the north and the adaptation of these standards by the southern partners may cost higher than other markets. if a southern trade partner adopts a standard for accessing the european union market, but it does not guarantee access to the united states market, the cost for the southern exporting country increases. this effect of the standards may be reduced by adopting the international standard of the codex. wilson and otsuki (2004) suggest that countries should adopt international standards as these are cost-efficient and provide access to a wider range of export destinations. otsuki et al., (2001) empirically show that international standards are less trade impeding than the domestic ones. 4. conclusions and recommendations this study was primarily conducted to estimate the effect of both tariff and non-tariff barriers on global cotton and its selected products trade. all the estimated models were statistically significant and the estimated parameters of gravity type variables such as distance, common border, ptas, etc. are according to prior expectations. the elasticity estimated by using the poisson technique is highly elastic as compared to the elasticities yielded by ols. cottonseed crude oil is the important commodity affected by tariffs especially trade among north-north and north-south countries. the effect of tariffs on cottonseed refines oil trade is statistically insignificant. mrls have both positive and negative effect on trade. the effect of mrls measured through li and beghin index and poisson technique produced positive and statistically significant results, while it has negative effects on trade when measured through ahi and ols method. in the first case, the same effect estimated using ols is statistically insignificant while in the second case the effect estimated using poisson is statistically insignificant. hence, the estimated results are inconsistent across the estimation procedure even for the same measure of mrl. this implies that the analysis does not provide conclusive evidence. the effect of mrls on crude oil trade is statistically insignificant for all the indices and estimation procedures, while it is statistically significant for one-third of the cases of refined cottonseed oil trade. both the li and beghin and hi indices show statistically significant effects of mrls on refined cottonseed oil. the overall effect of mrls, when both crude and refined oil trade observations are aggregated to four-digit level, is statically significant. irrespective of the measure, mrls have a statistically significant negative effect on refine cottonseed oil. since none of the measures of mrls is perfect, therefore, if even one index shows a statistically significant negative effect on trade, then one can argue about the stringency of ntms. in the case of cottonseed, crude oil mrl standards are trade enhancing among north-south regional trade but in the case of refined oil, the same effect becomes statistically insignificant. trade restricting effects are observed when the south region is involved in the trade. there is a great need for uniformity and harmonization of mrl standards. the standard of the effect of mrls on human health must be established uniformly for all countries. this will reduce ambiguity and conformity. the existing harmonization of standards has been making standards more stringent contrary to the objective of harmonization. this stringency is evident in the north-south trade in this study. one of the ways to decrease ambiguity in standards is to make it mandatory for all countries to adopt the international standards of the codex alimentarius committee rather developing their own. the analysis presented in this study ignored how trade is effected when a country switches from one regime of mrl standard to another. the study recommends that such a study be conducted in order to highlight the effect of regime change in trade standards and to show whether the incremental effect of increasing or decreasing the stringency of trade standards has been increased. review of economics and development studies vol. 5, no 4, 2019 805 references abdelhameed, a. a. a. 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(2008). trade effects of sps and tbt measures on tropical and diversification products. ictsd project on tropical products: issue paper. disdier, a., & marette, s., (2010). the combination of gravity and welfare approaches for evaluating non-tariff measures. american journal of agricultural economics, 92, 713– 726. haq, & meilke. (2009, 2010). the role of income and non-homothetic preferences in trading differentiated food and beverages: the case of canada, the united states, and selected eu countries. canadian journal of agricultural economics, 57, 169189. haq, meilke, k., & cranfield, j. (2013). selection bias in a gravity model of agri-food trade. european review of agricultural economics, 40(2), 331-360. kanoi, f. (2004). agri-inputs marketing research. cotton crop track, a report on seeds. chennai, 2005. maskus, k. e., otsuki, t., & wilson, j. s. (2001). an empirical framework for analyzing technical regulations and trade. quantifying trade effect of technical barriers: can it be done, 29-58. otsuki, t., wilson, j. s., & sewadeh, m. (2001). saving two in a billion: quantifying the trade effect of european food safety standards on african exports. food policy, 26, 495514. saini, & gordhan, k., (2007). economic co-operation in south asia: the dilemma of safta and beyond: indira gandhi institute of development research, mumbai, india. song, h., & chen, k. (2010). trade effects and compliance costs of food safety regulations: the case of china. agriculture and agricultural science procedia, 1, 429-438. wilson, j. s., & otsuki, t. (2004). standards and technical regulations and firms in developing countries: new evidence from a world bank technical barriers to trade survey. world bank, washington dc. winchester, n., rau, m. l., goetz, c., larue, b., otsuki, t., shutes, k. & nunes de faria, r. (2012). the impact of regulatory heterogeneity on agri‐food trade. the world economy, 35(8), 973-993. appendices table 1: ols and poisson estimates of the effect of tariff and mrls measured using partner li and beghin index of trade for crude cotton seed oil variables poisson marginal ols estimates review of economics and development studies vol. 5, no 4, 2019 806 estimates effects (logarithm) distance -0.000*** -3.542*** -0.515 (0.000) (0.987) (0.447) common border -0.277 -0.045 0.866 (0.624) (0.101) (0.602) partner simple average tariff -0.266*** -2.338*** -0.142*** (0.052) (0.457) (0.037) li and beghin index as a measure of mrls -0.548 -0.398 0.713 (0.722) (0.524) (0.578) preferential trade agreements 3.945*** 1.449*** 1.680 (1.079) (0.397) (1.475) generalized system preferences 0.189 0.012 -3.961* (1.666) (0.104) (1.526) real per capita income of reporting country 2831.214 0.539 -2.511 (603.124) (0.115) (4.595) constant -5.111** -52.205 (1.835) (87.709) fixed effects partner country 1290.500**** --3.610*** reporting country 402.500*** ---14.210*** years 141.890*** ---2.670** summary statistics number of observations 1,226 1,226 327 wald chi-square 7028.310*** ------ pseudo r-squared 0.556 ------ f-statistics ------. r-squared ------0.666 rmse ------2.166 robust standard errors are given in parentheses. ***, ** and * show significance at 99, 95 and 90 level of significance. table 2: ols and poisson estimates of the effect of tariff and mrls measured using partner li and beghin index of trade for refine cotton seed oil variables poisson estimates marginal effects ols estimates (logarithm) distance -0.000*** -1.211*** -1.050*** (0.000) (0.323) (0.149) common border 2.763*** 0.231*** 0.253 (0.537) (0.045) (0.359) partner simple average tariff -0.0383 -0.325 -0.004 (0.032) (0.271) (0.022) li and beghin index as a measure of mrls -0.977* -0.723* -0.376 (0.397) (0.294) (0.319) preferential trade agreements 2.528*** 0.626*** -0.316 (0.829) (0.205) (0.398) generalized system preferences 0.066 0.007 0.025 (0.521) (0.062) (0.525) real per capita income of reporting country -974.501 -0.659 -5.544** (849.585) (0.144) (2.743) constant -4.476*** -104.067 (0.885) (52.222) fixed effects partner country 5711.12**** --14.360*** reporting country 2325.610*** ---11.88*** years 30.510*** ---0.95 review of economics and development studies vol. 5, no 4, 2019 807 summary statistics number of observations 3546 3546 1199 wald chi-square 15197.670*** ------ pseudo r-squared 0.514 ------ f-statistics ------. r-squared ------0.563 rmse ------2.444 robust standard errors are given in parentheses. ***, ** and * show significance at 99, 95 and 90 level of significance. table 3: ols and poisson estimates of the effect of tariff and mrls measured using partner li and beghin index of trade for cotton seed oil variables poisson estimates marginal effects ols estimates (logarithm) distance -0.000*** -1.814*** -1.358*** (0.000) (0.156) (0.075) common border 1.693*** 0.937*** 1.848*** (0.109) (0.006) (0.165) partner simple average tariff -0.010 -0.086 0.001 (0.017) (0.146) (0.012) li and beghin index as a measure of mrls 0.316* 0.245* 0.017 (0.181) (0.141) (0.159) preferential trade agreements 1.585*** 0.319*** 0.319*** (0.177) (0.036) (0.144) generalized system preferences -0.473 -0.069 0.644 (0.330) (0.048) (0.262) real per capita income of reporting country 291.051 0.057 0.312 (202.637) (0.039) (0.922) constant -2.728*** -4.455* (0..312) (2.608) fixed effects partner country 4011.230**** ---131.220*** reporting country 4065.210*** ---36.000*** years 33.530*** ---3.140** summary statistics number of observations 9,729 ---5,296 wald chi-square 11315.790*** ------ pseudo r-squared 0.568 ------ f-statistics ------. r-squared ------0.581 rmse ------2.553 robust standard errors are given in parentheses. ***, ** and * show significance at 99, 95 and 90 level of significance. table 4: the effect of tariff and non-tariff barriers on cotton and its selected products estimated using ols and poisson estimates for north-north, north-south, and south-south trade variables trade direction poisson estimates marginal effects ols estimates (log) cotton seed crude oil (151221) partner simple average tariff nn -0.259*** (0.053) -2.324*** (0.471) -0.113*** (0.038) ns -2.245*** (0.498) -16.605*** (3.689) -0.234 ss --------- review of economics and development studies vol. 5, no 4, 2019 808 variables trade direction poisson estimates marginal effects ols estimates (log) li and beghin index nn -0.555 (0.779) -0.421 (0.590) 0.786 (0.561) ns 8.791*** (1.494) 4.351*** (0.739) -6.757 ss --------- cotton seed refined oil (151229) partner simple average tariff nn -0.043 (0.032) -0.375 (0.287) -0.007 (0.024) ns 0.165 (0.106) 1.231 (0.790) -0.116*** (0.055) ss -3.615*** (0.212) ------ li and beghin index nn -1.045** (0.408) -0.819 (0.320) -0.492 (0.342) ns -0.913 (1.228) -0.524 (.705) 0.364 (1.24) ss 2.64** (1.569) ------ cotton seed oil (1512) partner simple average tariff nn -0.0156 (0.016) -0.142 (0.147) -0.003 (0.013) ns -0.092 (0.047) -0.679** (0.344) 0.013 (0.026) ss 0.046 (0.06) 0.254 (0.363) -0.055 (0.145) li and beghin index nn 0.705*** (0.227) 0.583*** (0.187) 0.215 (0.201) ns 0.864*** (0.227) 0.573*** (0.151) -0.107 (0.284) ss 0.376 (1.098) 0.162 (0.473) 1.531 (1.529) robust standard errors are given in parentheses. ***, ** and * show significance at 99, 95 and 90 level of significance. review of economics and development studies, vol. 6 (1) 2020, 43-55 43 the influence of training and development on organizational commitment of academicians in pakistan a altaf hussain, b muhammad asad khan, c mohammad hanif khan a assistant professor, department of commerce and management sciences, university of malakand, khyber pakhtunkhwa, pakistan email: altafhussain@uom.edu.pk b phd scholar, universiti tun hussein onn (uthm) malaysia, email: asadkhanbte06@gmail.com c lecturer, department of tourism and hotel management, university of malakand, khyber pakhtunkhwa, pakistan, email: hanifyousafzai@uom.edu.pk article details abstract history: accepted 28 march 2020 available online 31 march 2020 it is recognized globally that training and development not only enhances the abilities, knowledge and skills of the staff member but it also changes their attitudes and behaviors. such change in their attitudes and behaviors makes them committed with their respective organizations. this research work inquired association of training & development along with its dimensions with organizational commitment. we used smart-pls to make analysis of the data which were gathered from 320 academic staff of seven public sector universities of khyber pakhtunkhwa (kp), pakistan. the results of this work found a significant influence of training & development and its dimensions on organizational commitment of academic staff. the results further suggested that training and development play crucial role in the enrichment of organizational commitment of academic staff. committed academic staff not only stays longer with the universities but put more effort and perform better as compared to non-committed academic staff. we also concluded in this study that if the management of the universities intends to enhance the commitment of academic staff with the universities, they need to provide them maximum opportunities of training & development. we also discussed the theoretical and practical implications of the results. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: training & development, organizational commitment, influence, smartpls jel classification: m53, p36, p46, o30 doi: 10.47067/reads.v6i1.183 corresponding author’s email address: altafhussain@uom.edu.pk 1. introduction training & development which provides skills, knowledge and abilities to employees are considered crucial for the performance, competitiveness and innovation of any organization (urbancova, 2013). it is documented by several scholars that training & development is vital tool which helps develop skills, knowledge and abilities of employees in organization. personnel capital is considered a prime source for gaining competitive advantage in every organization (bashir & long, review of economics and development studies, vol. 6 (1) 2020, 43-55 44 2015). therefore, every year organizations spend billions of rupees on provision of training & development to their employees. in the year, 2013 organizations in united states (us) spent $164.2 billion on provision of training & development to their employees (staff, 2013, december 12). training & development is offered to employees because it is a learning process in a structured manner whether given by the hr training staff or management of the organization. training & development is considered helpful in attaining the goals and objectives of organization as it provides skills, knowledge and abilities to employees (bashir & long, 2015). training & development is a tool which not only improves the performance of employees but also change their attitude and behavior towards organizations. such change in attitude and behavior of employees makes them committed with the respective organizations. committed employees perform better and are less likely to quit organizations as compared to non-committed employees. therefore, organizations should make every effort to retain committed employees because such commitment of employees helps reduce turnover costs associated with their recruitment, selection and training (huang & chen, 2013). several studies have declared that training & development basically enhances the commitment of employees with the respective organizations (bulut & culha, 2010; silva & dias, 2016). organizational commitment is labelled as psychological attachment of any employee with organization. organizational commitment has been categorized as affective, normative and continuance commitment (meyer & allen, 1991). affective commitment is termed as emotional attachment or identification of any employee with the organization (allen & meyer, 1990). normative commitment is termed as obligation of an employee to remain with the organization (allen & meyer, 1990). while, continuance commitment is termed as cost of leaving an organization by employee (allen & meyer, 1990). the commitment of academic staff with the respective universities is also essential for both the quality of higher education and success of universities. therefore, educational leaders highly emphasize on the organizational commitment of academic staff as highly committed academic staff not only stay with the universities but also perform better as compared to not committed academic staff. several studies have documented that training & development positively affect the enhancement of organizational commitment of employees in organizations (al‐emadi & marquardt, 2007; k. r. bartlett, 2001; bashir & long, 2015; jehanzeb, rasheed, & rasheed, 2013; newman, thanacoody, & hui, 2011; silva & dias, 2016). resultantly, committed employees are less intended for quitting their organizations and put more effort on behalf of their respective organizations. despite, there exists a myriad of literature which reveals positive relationship of training & development with organizational commitment but majority of research work have considered employees in industrial organizational settings. also these studies highlight that training & development is associated with employee’s organizational commitment in west (bashir & long, 2015). the research is scant on the said subject in asia, particularly in pakistan. though researchers have declared that influence of training & development on organizational commitment of employees differs due to culture both region and country wise (bashir & long, 2015). as the results of the studies conducted in west (bartlett, 2001) gave different results regarding influence of training & development and its three dimensions on organizational commitment in comparison to studies conducted in china and qatar (al‐emadi & marquardt, 2007; newman et al., 2011). therefore this study is aimed to investigate the influence of training & development on the organizational commitment of academicians of public sector universities in pakistan, because research on this particular area is equal to naught. 2. relationship of training & development and its dimensions with organizational commitment, theoretical framework and hypotheses development several studies have corroborated significant positive influence of training & development on review of economics and development studies, vol. 6 (1) 2020, 43-55 45 organizational commitment of employees (ahmad & bakar, 2003; bulut & culha, 2010; silva & dias, 2016). these researchers are of the view that with availability of training & development to employees in various organizations, it enhances their skills, knowledge and abilities which ultimately enhance the effectiveness of organizations. these employees take the impression that they have been taken care of and have been supported in terms of career and skills development. such impression of value and care from employers lead to creation of psychological attachment of employees with the organization. such psychological attachment will let them stay longer and perform better by putting more effort on behalf of respective organization. social exchange theory can best explain the positive association of training & development with organizational commitment. according to blau (1964) attitudes and behaviors of employees in the organizations are largely affected by the psychological contract which exists between the employer and employee. as this psychological contract is unwritten and both the parties have mutual expectations from each other which needs to be met. if employees expect training & development from their respective employers, in exchange employers expect longer stay and better performance from their employees. only highly committed employees will stay longer and perform better. so association of training & development with organizational commitment is based on principle of reciprocity. such principle of reciprocity also leads to employees’ positive attitudes and behaviors which ultimately improve employees’ performance. the same is true for relationship of training & development with organizational commitment of academicians. the association of training & development and its dimension with organizational commitment has been proposed in the research model shown in figure 1. figure 1 research model of the study training & development is operationalized as perceived availability of training, motivation to learn from training and perceived benefits of training. availability of training is defined as when organizations provide training and development opportunities to their employees. the association of availability of training with organizational commitment has been investigated by several studies. a study of mcneese-smith and nazarey (2001) conducted on nurses in the county hospital of los angeles, usa, revealed that 40 percent nurses’ organizational commitment is found associated with provision of training and learning opportunities to these nurses. in another similar study, bartlett (2001) found same results regarding association of these two variables. results regarding three components of organizational commitment were such that affective commitment was found in strong review of economics and development studies, vol. 6 (1) 2020, 43-55 46 association to training as compared to normative and continuance commitments. in similar vein, barlett and kang (2004) also performed research study on the nurses of hospitals in new zealand and usa and compared their level of organizational commitment based on their access to training & development in these hospitals. keeping in view the findings obtained from research conducted on two groups of nurses, a strong positive association was found between access to training and organizational commitment. specifically, strong correlation was found between two components of organizational commitment i.e. affective and normative commitment and access to training. however, this study also found low level of organizational commitment in nurses of new zealand in comparison to nurses in usa. a study conducted on local professionals in malaysia revealed positive association of training with organizational commitment(ahmad & bakar, 2003). in this study five dimensions of training were examined in relation with three components of organizational commitment. availability of training had significant and positive association with affective and normative commitment and non-significant association with continuance commitment. another similar study carried out by newman et al. (2011) on chinese employed at multinational companies. findings of this study documented significant and positive association of availability of training with continuance commitment and association with affective and normative commitment was found non-significant contrary to the findings of the other two similar studies (bartlet, 2001; bulut & culha, 2010). similarly, several other recent studies endorsed the positive association of training & development with employees’ organizational commitment (alhassan, 2011; jehanzeb et al., 2013; newman et al., 2011; silva & dias, 2016; yang, sanders, & bumatay, 2012). however, the results of these studies revealed that strength of the relationships varied for association of these two variables but mostly strong relationship of affective commitment was found with availability of training as compared to normative and continuance commitment. motivation to learn from training is defined as the desire to learn the content of training programs (noe & schmitt, 1986). such desire to learn enhances and ensures employees presence and participation in training programs offered by organizations. it is also suggested that employees with less motivation or those who lack motivation at all are either fail to learn or master the content of training programs or less successful to apply the learnt skills in the jobs (bashir & long, 2015). several studies have explored the influence of motivation to learn on organizational commitment and its three components (ahmad & bakar, 2003; newman et al., 2011; silva & dias, 2016). majority of these studies have found positive association of motivation to learn with organizational commitment along with its three components. one of these studies documented that two important components have critical role in the motivation to learn from training, one component generally measures the motivation of an individual employee to learn and second component specifically measures that how an individual is motivated to teach the learnt skills during training programs (bartlett, 2001). bartlett (2001) corroborated that motivation to learn from training was significantly positively related with affective and normative commitment while non-significant association was found with continuance commitment. another similar study has argued that those employees who are motivated to learn in the start are predicated to exhibit high organizational commitment (bulut & culha, 2010). in similar vein, ahmad and bakar (2003) also corroborated significant positive relationship between motivation to learn and organizational commitment. significant positive relationship was found between motivation to learn and affective and normative commitments while non-significant association was fond with continuance commitment. however, newman et al. (2011) found positive association of motivation to learn with continuance commitment and non-significant association with affective and normative commitment opposing the results of several other studies (bartlett, 2001; bulut & culha, 2010) which found positive relationship among these variables. several other studies also revealed significant positive association of motivation to learn with organizational commitment (bashir & long, 2015; review of economics and development studies, vol. 6 (1) 2020, 43-55 47 jehanzeb et al., 2013; silva & dias, 2016). perceived benefits of training means positive results obtained as a result of participation in training & development programs (yang et al., 2012). these positive results could be in form of personal related, job related or career related. these positive results could also be beneficial for the organizations in terms of employee retention and performance both individual and organizational. in the past, studies have been carried out on association of perceived benefits of training with organizational commitment. findings of such studies have documented positive relationship between these two variables. bartlett (2001) investigated perceived benefits of training along with its three types in relation with organizational commitment. career related benefits had significant positive association with all three components of organizational commitment. personal related benefits had significant positive association with affective and normative commitment and job related benefits had only significant association with normative commitment. ahmad and bakar (2003) also reported similar results of positive association of perceived benefits of training with all three components of organizational commitment among white color professionals of malaysia. similarly, al-emadi and marquardt (2007) also reported positive association of perceived benefits of training and three components of organizational commitment. contrary to this, nonsignificant association was found of perceived benefits of training with organizational commitment of managers in chinese multinational firms (newman et al., 2011). however, several other recent studies found significant and positive association of perceived benefits with organizational commitment (bashir & long, 2015; bulut & culha, 2010; riaz, idrees, & imran, 2013; silva & dias, 2016). based on the above mentioned discussion and evidences mentioned in the literature, following hypotheses have been formulated in this study. h1: training and development is significantly and positively associated with organizational commitment h2: availability of training is significantly and positively related with organizational commitment. h3: motivation to learn from training is significantly and positively associated wit organizational commitment. h4: perceived benefits of training are significantly and positively associated with organizational commitment. 3. research design survey based research design was used in the study. it is also categorized as correlational descriptive research design which identifies association between training and its three dimensions and organizational commitment. the target population for present study is academic staff of seven public sector universities of khyber pakhtunkhwa (kp), pakistan. the total sample size for this study was 320 academic staff, which was selected from total population of 1921 academic staff employed at seven public sector universities of kp, pakistan. selection of 320 samples was based on krejcie and morgan (1970) method. sampling in this study was done in two steps i.e. proportionate stratified random sampling and systematic random sampling. for the purpose to get maximum response the researcher distributed 450 questionnaires to the target population. out of which 320 filled questionnaires were received back recording a response rate of 71 %. out of total returned questionnaires, 306 were used for analysis and 14 survey questionnaires were dropped due to deficient data. 4. data analysis and results training & development was measured as second order formative construct having three review of economics and development studies, vol. 6 (1) 2020, 43-55 48 dimensions i.e. perceived availability of training, motivation to learn from training and perceived benefits of training measured as first order reflective constructs. organizational commitment was treated as second order reflective construct. its three components were treated as first order reflective constructs. smartpls 3.2.6 was used to analyze the data. the researcher analyzed the data of the current study in two stages. in the first stage, measurement model of the study was assessed determining its unidimensionality, reliability and validity using smartpls (refer figure 2). while, in second stage, structural model was assessed testing the hypotheses formulated in the study. 4.1 measurement model reliability and validity the reliability of measurement model was established as the composite reliability (cr) for all the constructs was above the recommended value of 0.70 (refer table1).validity of measurement model was determined using both convergent validity and discriminant validity. convergent validity was determined using both the composite reliability (cr) and average variance extracted (ave) recommended values. the measurement model of the current study had sufficient convergent validity because both cr and ave values for all the constructs of measurement model were above the recommended values of 0.70 and 0.50 respectively (refer table 1). table 1 measurement model’s reliability and convergent validity constructs cronbach's alpha rho_a composite reliability average variance extracted (ave) mtl 0.905 0.911 0.921 0.517 oc 0.937 0.941 0.945 0.503 pat 0.768 0.773 0.844 0.520 pbt 0.917 0.924 0.929 0.507 trgdev 0.873 0.875 0.923 0.799 measurement model’s discriminant validity was determined using two types i.e. fornell and larcker criterion and heterotrait-monotrait ratio of correlations (htmt). according to fornell and larcker (1981) criterion, sufficient discriminant validity was established for measurement model because square root of ave at the diagonal of correlation matrix was found above than the squared inter construct correlation (sic) of each construct at the off diagonal of correlation matrix (refer table 2). table 2 discriminant validity of measurement model fornell & larcker criterion mtl oc pat_ pbt trgdev mtl 0.719 oc 0.573 0.71 pat 0.668 0.57 0.721 pbt 0.654 0.536 0.651 0.712 trgdev 0.679 0.623 0.681 0.691 0.894 note: sq. root of ave is represented at diagonal while inter construct correlations are represented at off diagonal of correlation matrix according to htmt criterion sufficient discriminant validity was established for the measurement model because all the htmt values of the constructs were found below 0.90 (henseler, ringle, & sarstedt, 2015). based on both the criteria of fornell and larcker (1981) and htmt, sufficient discriminant validity was established for the measurement model of the current study (refer table 3). table 3 discriminant validity of measurement model htmt criterion review of economics and development studies, vol. 6 (1) 2020, 43-55 49 mtl oc pat pbt trgdev mtl oc 0.614 pat 0.792 0.669 pbt 0.894 0.571 0.762 trgdev 0.882 0.686 0.683 0.751 based on the overall statistics and psychometric evaluation of the model, it was strongly considered to interpret the structural estimates. figure 2 measurement model with results 4.2 structural model estimation and analysis smartpls is a non-parametric statistical technique which is suitable for analysis of slightly nonnormal data as well. bootstrapping procedure was employed to assess the significance and standard errors of different parameters estimates. structural model was assessed for each direct relationship between constructs. for detailed results of structural models refer to figures 3, 4 and 5. path coefficients, t-statistics and p-values for all structural models are given in table 4. all hypotheses formulated in the study were tested using structural models of the study. the hypotheses formulated in the study (h1, h2, h3, h4) were assessed based on path coefficient, t-statistics and p-values. training and development was significantly associated with organizational commitment having path coefficient (beta coefficient) of 0.623 (refer figure 2). in other words, one unit change in training & development will bring a change of 0.623 units or 62.3 % in organizational commitment of academic staff. similarly, training & development has significant positive effect on organizational commitment of academic staff with path coefficient of (β=0.623, t-statistic=11.074, p=0.000). perceived availability of training has significant positive effect on organizational commitment of academic staff with path coefficient of (β=0.576, t-statistic=9.637, p=0.000). motivation to learn from training has significant review of economics and development studies, vol. 6 (1) 2020, 43-55 50 positive effect on organizational commitment of academic staff with path coefficient of (β=0.584, tstatistic=9.085, p=0.000). similarly, perceived benefits of training has significant positive effect on organizational commitment of academic staff with path coefficient of (β=0.552, t-statistic=8.325, p=0.000). thus, all four hypotheses formulated in the study (h1, h2, h3, h4) have been supported and validated by the empirical data of the study. detailed results have been mentioned in the table 4 and shown in figures 3, 4 and 5 respectively. table 4 structural models estimates and hypotheses testing hypotheses effect path coefficient t statistics p values results hi trgdev -> oc 0.623 11.074 0.000 supported h2 pat -> oc 0.576 9.637 0.000 supported h3 mtl -> oc 0.584 9.085 0.000 supported h4 pbt -> oc 0.552 8.325 0.000 supported figure 3 structural model of perceived availability of training and organizational commitment figure 4 structural model of motivation to learn from training and organizational commitment review of economics and development studies, vol. 6 (1) 2020, 43-55 51 figure 5 structural model of perceived benefits of training and organizational commitment r-squared (r2) was used to assess the explanatory power of the research model. training & development and organizational commitment have r2 values of 0.997and 0.388 respectively which fall in the range of substantially strong (cohen, 2013). overall the model exhibited satisfactory explanatory variance in the endogenous constructs (refer to table 5). the effect size for each predictor construct was evaluated using f2. it basically reveals the increase in r2 relative to the proportion of variance which is unexplained in the endogenous latent construct. the effect size for perceived availability of training, motivation to learn from training, perceived benefits of training was 0.738, 0.682 and 0.720 respectively. training & development has effect size of 0.633 on organizational commitment. the values of all effect sizes fall in the substantially strong range (cohen, 2013). the predictive capability of the model was evaluated employing stone-geisser q2 for endogenous constructs of the study. both the endogenous constructs of the study (training & development and organizational commitment) have q2 review of economics and development studies, vol. 6 (1) 2020, 43-55 52 values of 0.684 and 0.205 respectively. both the values of q2 are above 0 indicating satisfactory predictive relevance (hair, sarstedt, ringle, & gudergan, 2017). table 5 coefficient of determination (r2), predictive relevance (q2) and effect size (f2) f2 construct r2 q2 oc pbt trgdev oc 0.388 0.205 mtl 0.682 pat 0.738 pbt 0.720 trgdev 0.997 0.684 0.633 note: stone-geisser q2 was calculated using blindfolding procedure in smartpls 4.3 discussion on results of the study and its implications results revealed significant positive influence of training & development and its dimensions on organizational commitment among the target population. hence, it was concluded from the results of this study that training & development has significant positive effect on organizational commitment of academic staff validating hypothesis 1. the association between these two variables validates the social exchange theory. reciprocity is the main principle of social exchange theory (cropanzano & mitchell, 2005). translating to this study, when universities provide training and development to their academic staffs, in exchange they display commitment towards their respective universities. when they have such opportunities of training and development from their universities, they consider themselves to be important and in exchange of such support and care they display commitment. when they become committed with their universities, they are less likely to quit and perform better for their respective universities. perceived availability of training was found significantly and positively associated with organizational commitment validating hypothesis 2. it was further concluded from the results of this study that when academic staffs have the opportunities of training & development, not only employees’ knowledge, skills and abilities get improved as a result of such training & development but also their attitude and behavior get changed. as a result of such access to training and development, the academic staffs become emotionally attached with their respective universities and as a result organizational commitment of academic staffs is enhanced. the academic staffs identify themselves with the university, morally obligate to remain with the university and consider perceived cost of leaving the university as a result of access to training & development programs offered in the universities. motivation to learn from training was also found significantly and positively related with organizational commitment validating hypothesis 3. it was concluded from the results of the study when academic staffs are motivated to learn from training, such motivation enhance their presence and participation in training & development programs which in turn increase their feelings of self-worth. such aspects of motivation lead to increase academic staff’s organizational commitment. perceived benefits of training was found significantly and positively related with organizational commitment validating hypothesis 4. it was further documented that benefits related with job, career and personal get obtained as result of access to training and development by academic staff. such benefits of training & development are highlighted in terms of gain and loss to the academic staffs. one major benefit accrued as result of training & development programs is enhanced organizational commitment. the findings of study further propose that when academic staffs are available with training and development, motivated to learn and gain benefits of training in the form of personal, career and job review of economics and development studies, vol. 6 (1) 2020, 43-55 53 related, organizational commitment of academic staffs is increased. the findings of the current study are in line with the findings of the previous studies validating that training & development along with its dimensions are positively related with organizational commitment (ahmad & barker, 2003; bashir & long, 2015; bulut & culha, 2010; silva & dias, 2016). the findings of current study add to the literature in the sense that relationship of training & development and its dimensions with organizational commitment in academic settings is not fully explored specific to the context of pakistan. from financial aspects, the findings of this study are important if academic staffs are not committed with their respective universities; they would not stay longer and would not put more effort on behalf of their universities. the universities would need to incur cost in recruitment, selection and training and development of new employees. anyhow if the academic staffs are committed, the universities not only save this recruitment and selection costs but also save the universities from tarnishing its image due to less committed academic staffs. overall findings of present study concluded that training & development and its dimensions has got critical role in the improvement of academic staff’s organizational commitment. therefore, management of the universities should take every step for the enhancement of organizational commitment of academic staffs. one strategy used to enhance academic staff’s organizational commitment is to provide them training & development by their respective universities. this study established a link of theoretical and empirical research of training & development with organizational commitment among academic staff based on exchange and reciprocity mentioned in social exchange theory which is not often recognized in the current literature. moreover, the findings of present study validate the importance of social exchange theory in explaining change in attitude and behavior of academic staff as a result of training & development practices. despite, the existence of myriad of literature on training & development in relation with organizational commitment but majority of these studies have been carried out on employees in industrial organizational settings at one hand and on organizational commitment of employees in the west at other hand (bashir & long, 2015). less research has been conducted on the said subject in the asia especially in academic settings of pakistan. therefore, this study established an empirical link of training & development and its dimensions with organizational commitment among academic staffs. the findings of present study concluded that training & development improves their knowledge, skills and abilities and changes their attitudes and behaviors which make them emotionally attached with organization thereby increase their organizational commitment. credit of increase in organizational commitment goes to social exchange theory, whereas academic staff perceives availability of training & development as sign of care and trust and perceives their efforts are recognized by universities. in return academic staffs reciprocate more commitment towards universities due to emotional attachment created with the respective universities. the findings of present study have also carried practical implications for the stake holders of higher education sector by understanding the influence of training & development on organizational commitment of academic staff. the hypotheses formulated on relationship of training & development and its dimensions with organizational commitment have been found significant and supported by the empirical data of the study. these findings have further elaborated the key role of training & development in the enhancement of organizational commitment among academic staff in pakistan. it has carried a clear message for the management of the universities that if they have intended to increase the commitment of academic staffs, they would have needed to provide ample opportunities of training & development to them. the findings of present study have also given an insight to the policy makers of higher education sector about the availability of training & development which affect review of economics and development studies, vol. 6 (1) 2020, 43-55 54 organizational commitment of academic staff and in turn affect the effectiveness of universities as committed members stay longer and put more effort as compared to non-committed academic staff. 5. conclusion, limitations and recommendations for future studies it was concluded that findings of current study were found almost similar to the findings obtained in the developed countries of the world. though, it is not quite common due to the difference in culture both in developing and developed countries. hence the findings of this study is both significantly and empirically important for the both the academia and policy makers of higher education sector. the study also carried certain limitations. firstly, the data were collected only from academic staffs of universities and non-academic staffs were not included as respondents. so results of study could not be generalized to non-academic staffs. secondly, data collection was carried out using one method of data collection i.e. survey questionnaires and using only one method of data collection hardly suffices absolute reality. thirdly, this study reflects researcher’s point of view which is not absolute reality. fourthly, results were drawn on cross sectional data which were collected at one point of time. this study investigated the direct influence of training & development and its dimensions on organizational commitment of academic staffs. future studies can incorporate other attitudinal and behavioral outcomes in such relationship. future studies can be carried out employing potential mediator or moderator in such relationship. this study used cross sectional research design for analysis. future studies can use longitudinal research design for analysis in order to increase its generalizability. this study was carried out using quantitative research design. future studies can use triangulation method in order to increase both its validity and generalizability. references ahmad, kamarul zaman, & bakar, raida abu. 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(2016). the role of organizational training on organizational commitment. the case of private security employees working remotely. european journal of business and social sciences, 5(08), 14-30. staff, atd. (2013, december 12). $164.2 billion spent on training and development by u.s. companies. from https://www.td.org/insights/1642-billion-spent-on-training-and-development-by-uscompanies urbancova, hana. (2013). competitive advantage achievement through innovation and knowledge. journal of competitiveness, 5(1), 82-96. yang, huadong, sanders, karin, & bumatay, carolina perey. (2012). linking perceptions of training with organizational commitment: the moderating role of self-construals. european journal of work and organizational psychology, 21(1), 125-149. http://dx.doi.org/10.1016/1053-4822(91)90011-z http://www.td.org/insights/1642-billion-spent-on-training-and-development-by-us-companies http://www.td.org/insights/1642-billion-spent-on-training-and-development-by-us-companies review of economics and development studies vol. 5, no 4, 2019 817 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads utility of computer labs in secondary schools as perceived by students with diverse demographics 1 hakim ali, 2 anam zahra, 3 uzma shahzadi, 4 muhammad dilshad 1 associate professor, department of education, government wilayat hussain islamia college, multan, pakistan. hakimaliwhisl@gmail.com 2 m.phil scholar, institute of social sciences, bahauddin zakariya university, multan, pakistan. 3 assistant professor, department of education, university of sargodha, sargodha, pakistan. 4 associate professor, department of education, bahauddin zakariya university, multan, pakistan article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 the accessibility of modern computer technologies in schools is increasing all over the globe. generally, the presence of a well-equipped and functional computer lab facility in school provides the opportunity not only to modernize educational methods but also to augment students and teachers‟ interest towards the efficient use of computer technology along with access to quality education. in line with prevailing global trends, federal and provincial governments in pakistan especially government of the punjab also made concerted efforts to provide computer lab facility in secondary schools in past two decades. in this context, this article mainly focused on examining the usefulness of computer labs for enhancement of secondary school students learning experiences. descriptive survey design was used to achieve the objectives of this study in which a self-developed questionnaire designed on likert five-point format was administered to 320 sample students selected from 32 secondary schools using cluster and stratified random sampling techniques. both the descriptive (i.e., percentage, mean, sd) and/or inferential statistics (i.e., independentsample t-test) were used to analyze collected data. the results revealed that secondary school students believe, with a higher level of consensus, that computer labs are useful for enhancement of their learning. some concerns, however, were also highlighted by students regarding the availability of required physical facilities in computer labs. it was recommended for school authorities to provide well-equipped and fully functional computer labs in schools to achieve maximum benefits for students. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords computer technology, secondary schools, computer efficacy, gender, location jel classification: l86, l89, j19 corresponding author‟s email address: hakimaliwhisl@gmail.com recommended citation: ali, h., zahra, a., shahzadi, u. and dilshad, m. (2019). utility of computer labs in secondary schools as perceived by students with diverse demographics. review of economics and development studies, 5 (4), 817-826 doi: 10.26710/reads.v5i4.898 1. introduction technology has been playing a pivotal role in 21 st century education from primary to university level. over the years, computer technology has become an integral part of education and its impact on teaching http://www.publishing.globalcsrc.org/reads mailto:hakimaliwhisl@gmail.com mailto:hakimaliwhisl@gmail.com review of economics and development studies vol. 5, no 4, 2019 818 and learning is widely accepted (mitra et al., 2000). computer technology is utilized as a key instrument for creating conducive learning environment in an institution (gilakjani, sabouri & zabihniaemran, 2015) as well as help learners to succeed and become more independent. it is beneficial not only for students to develop their creativity (machnaik, 2002) but also for teachers to meet their instructional goals (bennett et al., 2000) and to play more effective role as facilitators of learning (gilakjani et al., 2015; naimova, 2008). writing in the same vein, bajcsy (2002) stated that computers help both the teachers and students to interact with each other and provide useful materials. likewise, a number of scholars (e.g., campbell, 2001; teo, 2009) consider information technologies as an indicator of economic development and job opportunities for students. computers are on demand throughout the school day in the new model of integrating technology into the curriculum. the successful integration of computers in educational settings mainly depends on availability of well-equipped and functional computer lab facility in schools (saadon, rambely & suradi, 2011). the computer lab serves as the center for teaching computer usage to whole classes as well as to instruct in-service teachers of other subjects, usually by a specialist computer teacher. zhao and frank (2003) support this notion and emphasize that computer technology should be an inevitable component of all the educational settings as both the students and teachers can use it for numerous academic purposes. computer labs equipped with necessary software packages attract students to come to labs (saadon & liong, 2011); influence students‟ motivation to learn and increase their interest in teaching-learning process (gilakjani et al., 2015). furthermore, computers help students to collect new information (gilakjani et al., 2015); investigate topics and to be more productive (naimova, 2008; worthington & zhao, 1999). similarly, saadon et al. (2011) concluded that “practical teaching and learning process in the labs helps students in internalizing scientific method and understanding mathematical science concept introduced”(p. 352). furthermore, modern computer technologies work as an effective instrument of change and innovation for all the stakeholders in educational settings. computer technology boosts creative thinking among students (wheeler, waite & bromfield, 2002) and they perform better while solving problems (williams, 2003). likewise, computer helps learners in improving as well as performing mental and creative activities more efficiently (graff, 2003; mikropoulos et al., 2003). classroom teachers use computer labs for guiding students‟ learning, connecting curriculum to the real world activities (gilakjani et al., 2015) and creating technology-based research projects. likewise, computer technology helps the teachers of mathematical sciences subjects to integrate the elements of software use in the course curriculum (saadon et al., 2012). in addition to students and classroom teachers, technology specialists use the computer labs for teaching in-service teachers where they instruct teachers on various aspects of using computers in educational settings. finally, the traditional computer lab also serves as the location for networked printers and scanners that are used by the whole school. writing in the same vein, graff (2003) proclaims that modern computer labs are beneficial for developing positive attitudes among students toward using computers. al-harbi (2010) found that students using computers had more positive attitude toward e-learning. furthermore, studies on gender differences in students‟ attitudes towards use of computer prove that female secondary school students indicated less positive computer attitudes than boys (al-harbi, 2010; sainz & lopez-saez, 2010; volman et al., 2005) and female students also make less intense use of computers as compared to boys‟ students (nelson & cooper, 1997; sainz & lopez-saez, 2010). similarly, graff (2003) found that girls did not like to use computers and felt lack of confidence in using computers than boys (dickhauser & stiensmeier-pelster, 2002). palaigeorgiou et al., (2005) also found that girls were much worried about hardware usage and did not find computer usage valuable in their personal as well as social life. studies of demographic differences in students‟ views about utility of computer technology tend to examine a number of diverse areas including boys‟ and girls‟ perceptions of computers, their interest in use of computers and students‟ access to computers. some studies also focus on analyzing the influence review of economics and development studies vol. 5, no 4, 2019 819 of students‟ experiences, educational level and school location on students‟ attitude towards using computers (shashaani & khalili, 2001). a number of researchers have found that male students as compared to their female counter parts have greater access to computers, take more interest in learning computer usage (badagliacco, 1990; shashaani, 1994) and enjoy working with computers (reinen & plomp, 1997; zhao, lu, huang & wang, 2010). another group of scholars, however, summarized that gender was not a statistically significant predictor of students‟ attitude towards computers (alothman, robertson, & michaelson, 2017; kay, 2008). they found that male and female students were equally interested in using computers (shashaani & khalili, 2001) as well as participating in computer activities (shashaani, 1993). several other scholars and researchers (alothman et al., 2017; dhamija, 2014; sainz & lopez-saez, 2010) have studied the usefulness of computer technologies in relation to students‟ place of origin and school location. alothman et al., (2017), for example, concluded that the location was among the key factors which significantly predict students‟ attitudes towards using computers. likewise, dhamija (2014) found that urban students in comparison with rural undergraduate students have more positive attitude towards the use of computer technology in education. these differences are more salient among rural area students enrolled in the domain of technology in secondary education (sainz & lopez-saez, 2010). considering the global trends, it is evident that acquisition of computer skills is almost mandatory for students in this digital age to perform efficiently in their school subjects. the technologically advanced countries have made effective use of the implementation of computer technologies to modernize their educational landscape at secondary and even primary school level (kosakowski, 1999). generally, the presence of a well-equipped and functional computer lab facility in school provides the opportunity not only to modernize educational methods but also to augment both the students and teachers‟ interest towards the efficient use of computer technology along with access to quality education (world bank, 2002). writing in the same vein, kreisel, (2003) stated that both the students and teachers in academically advanced societies use animation, visual design and design software to clarify as well as present important educational concepts. in line with the prevailing global trends in education, the use of computer technologies in pakistan has substantially increased in the past three decades and has become an important component of educational policies. in the fiscal year 2005-2006, federal government initiated a project to establish computer labs in secondary schools to promote computer education in pakistan. consequently, 515 computer labs were established in secondary schools of punjab. later on in the year 2008-2009, in continuation of this policy, government of the punjab established computer labs in the total 4286 government secondary and higher secondary schools in all the 36 districts of the punjab province. in the year 2013-2014, 636 computer labs were further provided in newly upgraded secondary and higher secondary schools along with equipping 500 elementary schools with computer labs to expand the project. it was assumed that the project will bring revolutionary changes in traditional methods of teaching presently used at secondary school level. it was also assumed that computer labs may be useful in providing necessary skills to secondary school students to meet the future challenges of competitive knowledge based economy. considering the above mentioned background, there is sufficient evidence in literature about the usefulness of computer labs in enhancing students‟ learning outcomes at all educational levels. it can, thus, be concluded that along with other school facilities, existence of a well-equipped and functional computer lab in secondary schools is also essential for enhancement of students‟ learning outcomes. as mentioned earlier, the past several years have witnessed a rapid growth of computer technology and its use in all the educational settings in pakistan. however, little effort has been made to investigate the utility of computer labs from the perspective of secondary school students. it is, therefore, substantial to be acquainted with students‟ viewpoints about the utility of computer labs at secondary school level in pakistan. similarly, usefulness of computer labs has not much been studied from the perspective of review of economics and development studies vol. 5, no 4, 2019 820 students‟ gender as well as location of secondary schools. the main purpose of this research paper, therefore, is to analyze secondary school students‟ perceptions about utility of computer labs. this article further explores the influence of secondary school students‟ gender and school location on utility of computer labs. research questions: this paper mainly examined secondary school students‟ views about utility of computer labs at khanewal district. following specific research questions were formulated for this study. 1. to what extent, secondary school students perceive computer labs as useful for their learning. 2. what differences exist in secondary school students‟ perceptions based on their gender regarding the utility of computer labs? 3. what differences exist in students‟ perceptions based on the location of secondary school (rural/urban) regarding the utility of computer labs? 2. research design and methods this study mainly focused on examining utility of computer labs in secondary schools of khanewal district as perceived by students with diverse demographics. the researcher used descriptive survey design in this study. all the secondary school students, both male and female, presently enrolled in 9 th grade and 10 th grade in government schools of district khanewal, served as a population for this study. total number of government secondary schools, both male and female, in khanewal district was 183. out of 183 government secondary schools, 32 schools (i.e., 18% of the population) were selected using cluster sampling technique. of these 32, sixteen schools were selected from each gender using stratified random sampling technique, eight from rural area schools and eight from urban area schools. at the next step, 10 students were randomly selected from each school from those students who were present on the specific days of data collection, 5 from 9 th grade and 5 from 10 th grade. this resulted into random selection of 320 secondary level students, who served as a sample for this study. of these 320 sample students, 160 (i.e., 50%) were boys and 160 (i.e., 50%) were girls. similarly, 160 (i.e., 50%) were from urban area schools and 160 (i.e., 50%) were from rural area schools. table 1 presents the details about demographic information of sample students. table 1: demographic information of sample students total students frequency total %age 9 th class 10 th class 9 th class 10 th class boys 80 80 160 50% 50% girls 80 80 160 50% 50% grand total 160 160 320 100% 100% urban schools boys 40 40 80 50% 50% girls 40 40 80 50% 50% total 80 80 160 100% 100% rural schools boys 40 40 80 50% 50% girls 40 40 80 50% 50% total 80 80 160 100% 100% a self-developed questionnaire, comprising two sections, was used in this study as a research tool for data collection. first section of the questionnaire sought for demographic information from the sample respondents. the second section comprising 26 closed-ended items was designed on likert 5-point scale format. the items were constructed after thorough review of related literature. these items were review of economics and development studies vol. 5, no 4, 2019 821 representative of various dimensions essential for exploring students‟ perceptions regarding utility of computer labs in secondary schools. to check the face validity as well as content validity of the self-developed instrument, two retired professors and one serving associate professor of education were selected as experts. all the three experts provided encouraging comments and helped in finalizing the instrument. as a second check, the researchers administered the instruments to 30 secondary level students who were enrolled in schools of multan city for pilot testing. the participating students were particularly requested to point out any problems regarding reading, understanding and completion of the questionnaire. generally, students reported the instrument to be easy and understandable. the research instrument was finalized according to the experts‟ opinions and students‟ comments received during pilot testing. the cronbach‟s alpha value of the questionnaire was 0.81 in final study which is considered highly reliable. after seeking permission from the respective chief executive officers [ceos] as well as school heads and class teachers, the tool was administered personally in 32 secondary schools. the entire process of the questionnaire administration took approximately 15 to 20 minutes in each school. finally, total 320 students completed the questionnaires in all the 32 sample schools. 3. data analysis and results in response to specific research questions, data were analyzed on two bases and results were presented in following sections. first, statement-wise analysis of students‟ views about utility of computer labs was done by using descriptive statistics i.e., mean and standard deviations. for ease of analysis, responses on options „agree‟ and „strongly agree‟ were combined into one option i.e., „agree‟. likewise, „disagree‟ and „strongly disagree‟ were combined into one option i.e., „disagree‟. second, comparison of students‟ perceptions gender-wise and area-wise was done by using independent sample t-test. results were presented in table 2, table 3 and table 4 followed by interpretation. table 2: students’ views of computer labs’ utility sr. no statement/theme agree % age disagree % age undecided% age mean sd 1 my computer lab is always functional 99.7 0.3 0.0 4.3 .45 2 allotment of only one period for computer practice 100 0.0 0.0 4.5 .50 3 comfortable in using computer in computer lab 66.9 33.1 0.0 3.4 1.1 4 availability of well-trained computer teacher 99.7 0.3 0.0 4.6 .49 5 i like to attend the computer lab 91.6 5.6 2.8 4.1 .72 6 i visit the computer lab regularly 88.4 11.3 0.3 4.1 .86 7 regularity of computer teacher 87.5 12.2 0.3 4.2 .94 8 computer teacher comes to the lab in time 99.7 0.0 0.3 4.5 .51 9 availability of sufficient number of computers 12.5 87.5 0.0 1.6 .99 10 easy access to computer at the time of need 37.5 62.5 0.0 2.6 1.3 11 importance of computers success in school subjects 94.1 0.0 5.9 4.2 .50 12 computers improve the quality of work 90.0 3.4 6.6 4.0 .62 13 computers encourage group work 93.1 2.8 4.1 4.1 .60 14 participation in computer lab activities 99.4 0.3 0.3 4.4 .51 15 positive effect of computer lab work on studies 96.2 2.2 1.6 4.2 .59 16 permission to use printer 0.0 100 0.0 1.0 .00 17 computer lab fulfills my course requirements 25.0 75.0 0.0 2.5 .87 18 computer lab an integral part of educational process 98.8 0.0 1.2 4.6 .52 19 learning with computers is waste of time 0.0 100 0.0 4.6 .49 20 i often play computer games in computer lab 0.0 100 0.0 4.6 .50 21 enjoying with power point presentations 99.4 0.6 0.0 4.3 .50 22 use of internet more at school than at home 0.0 100 0.0 1.9 .32 23 sufficient seating arrangement in the computer lab 12.5 87.5 0.0 1.8 1.3 24 importance of computer skills for future life 93.8 0.0 6.2 4.1 .47 25 internet facility at home 30.9 69.1 0.0 2.9 1.4 26 importance of computers skills to get a job 83.7 3.1 13.1 4.0 .66 review of economics and development studies vol. 5, no 4, 2019 822 overall perceptions 3.66 .68 analysis of students' responses in table 2 shows that majority of the respondents agreed with most of the statements (i.e., 17 statements), and reacted positively by agreeing with these seventeen statements. it can, thus, be concluded that there are positive acknowledgements by the students regarding functionality of computer lab, availability of trained teachers, interest in computer lab activities and utility of computer labs for enhancement of their learning and success in future life. table 2 further depicts that most of the participants disagreed with 9 statements and very low percentage of respondents remained undecided on all the 26 statements. it can, thus, be inferred that almost all the students were participating in computer lab activities in their schools and they had a clear-cut view about the facilities available as well as activities performed in their computer lab. overall, the findings (mean= 3.66, sd= 0.68) from the questionnaire portrayed that majority of the participants acknowledged that computer labs are useful at secondary school level. however, participating students expressed their concerns regarding the availability of sufficient number of computers, restrictions on using printer and availability of required seating arrangement in computer lab. the table 2 also shows that values of standard deviation for majority of the statements were around 0.50, which shows higher level of consensus among the participants. on the whole, it is inferred that secondary school students believe, with a higher level of consensus, that computer labs are useful for enhancement of their learning. the differences between secondary school students‟ perceptions based on their gender regarding the utility of computer labs were examined by using an independent sample t-test, and results are shown in table 3. table 3: gender-wise comparison of students’ views of computer labs’ utility category n mean sd t sig. (2-tailed) male 160 97.63 6.47 4.90 .000 female 160 94.36 5.43 table 3 presents the mean scores for the responses of male and female secondary school students. the mean scores of male participants are reasonably higher than their female counter parts. the p-value of 0.000 (i.e., p˂0.05) demonstrates that there is a statistically significant difference between views of students based on their gender regarding the extent of the utility of computer labs at secondary school level. it can, therefore, be inferred that students‟ gender has significant impact on their perceptions about the utility of computer labs. students enrolled in boys‟ secondary schools believe that computer labs are more useful for enhancement of their learning. furthermore, the differences between secondary school students‟ perceptions based on the location of secondary school (rural/urban) regarding the utility of computer labs were examined by using an independent sample t-test, and table 4 presents the results. table 4: area-wise comparison of students’ views of computer labs’ utility category n mean sd t sig. (2-tailed) urban 160 99.06 4.78 10.21 .000 rural 160 92.92 5.91 table 4 indicates that the mean score for the responses of urban area secondary school students is reasonably higher than their rural area counter parts. the p-value of 0.000 (i.e., p˂0.05) demonstrates that there is a statistically significant difference between the views of urban and rural area secondary school students regarding the extent of the utility of computer labs. it can, therefore, be inferred that school location has significant impact on students‟ perceptions about the utility of computer labs. students review of economics and development studies vol. 5, no 4, 2019 823 enrolled in urban area secondary schools believe that computer labs are more useful for enhancement of their learning. 4. discussion this study contributes to the analysis of secondary school students‟ perceptions about utility of computer labs within the context of pakistan. the study of computer lab‟s utility in attitudinal research is substantial because of the belief that awareness of the usefulness of computer technology in daily life will motivate students to learn about it. a number of previous studies (shashaani & khalili, 2001; zhang & espinoza, 1998) found that an individual‟s attitude towards computers is directly related to his or her perception of the usefulness of computers. individuals feel a need to learn computing skills when they recognize that computer technology is essential in their future careers (zhang & espinoza, 1998). in this study, secondary school students perceived computers as beneficial and valuable tools that could be helpful for them to improve their learning. this is an encouraging finding, particularly, in pakistani context. this article further explores the influence of secondary school students‟ gender and school location on utility of computer labs. findings of this study verify previous predictions about lower perceptions of female students towards the usefulness of computers than their male counterparts and confirm the results of several earlier studies (dickhauser & stiensmeier-pelster, 2002; nelson & cooper, 1997; shashaani & khalili, 2001; volman et al., 2005). nonetheless, and in line with the conclusions of meta-analysis completed by whitley (1997), it cannot be postulated that even though female embrace less positive attitudes towards usefulness of computers as compared to male counterparts, their attitudes towards computer use are negative. major reasons for these divergent attitudes of boys and girls towards computer use might be the differences in their interests and motivations in considering the utility of computers, and the role computers play in their lives (sainz & lopez-saez, 2010); as well as their ultimate use of computers (volman et al., 2005). deyoung and spence (2004) recommend that gender differences in attitudes towards computer use can be reduced by making girls get in contact with computers from early years of schooling. at the same time, our findings prove that students enrolled in urban area secondary schools hold more positive views about the utility of computer labs than students who are enrolled in rural area schools. these findings are aligned well with earlier scholars (dhamija, 2014; sainz & lopez-saez, 2010). lack of physical facilities in rural area schools‟ computer labs as well as discouraging attitude of administration regarding the use of computer labs can limit the rural students‟ use of computer labs in a higher extent than urban area school students who have relatively more opportunities of using computer labs. corresponding with the results of this study, it is suggested for future researchers to include different types of contextual variables to explore the adolescents‟ perceptions towards utility of computer labs in order to gain in-depth understanding of the conditions and situations which influence their views. 5. conclusions and recommendations it is evident from the findings of this study that the views of secondary school students about the utility of computer labs are positive but respondents also exhibited their concerns about deficient physical resources in computer labs particularly in relation to the number of computers and availability of required seating arrangement. to be specific, following most important conclusions were drawn to answer the three main research questions. first, students believe that computer labs are useful for enhancement of their learning and success in future life. second, students enrolled in boys‟ secondary schools believe that computer labs are more useful for enhancement of their learning. third, school location has significant impact on students‟ perceptions about the utility of computer labs. students enrolled in urban area secondary schools believe that computer labs are more useful for enhancement of their learning. based on the results of this study, it is recommended for school authorities to provide well-equipped and fully functional computer labs in schools to achieve maximum benefits for students. review of economics and development studies vol. 5, no 4, 2019 824 references al-harbi, k. a.-s. 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(2003). factors affecting technology uses in schools: an ecological perspective. american educational research journal, 40 (4), 807-840. review of economics and development studies vol. 5, no 4, 2019 826 review of economics and development studies, vol. 7 (3) 2021, 395-405 395 how behavioral factors influence investment performance of individual investors in pakistan stock market: a moderated mediation approach mumtaz ahmad a , iqra mehboob b , syed zain ul abdin c a department of commerce, the islamia university of bahawalpur, pakistan email: mumtaz.ahmad@iub.edu.pk b department of commerce, the islamia university of bahawalpur, pakistan email: iqramehboob07@gmail.com c ibm &as, department of finance, the islamia university of bahawalpur, pakistan email: zain.naqvi@iub.edu.pk article details abstract history: accepted 25 august 2021 available online september 2021 the primary objective of study is to know the influence of behavioral factors on investor’s investment decision and investment performance. four behavioral factors as herding, prospect factors and market factors are used in this study and financial literacy as a moderating variable among the behavioral factors and investment decision. we use the questionnaire to collect primary data from individual investors actually trading in pakistan stock exchange. for data analysis, we utilize amos software and hayes process tool in two stages. the findings reveal that behavioral factors positively influence investment decision and investment performance. but there is no moderating role of financial literacy. in addition to these, individual investors and security organizations can ultimately take advantage from the results of this research as a guide for their analysis and forecasting of security market trends in order to maximize the outcome and to improve their investment efficiency. further, study recommended investigation of all investor types and in all financial markets including the behaviors of institutional investors along with behavioral financial factors; we should consider some economic factors that could have an impact on investors' decisions. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: behavioral finance, pakistan stock exchange, investors decisions, investment performance and financial literacy jel classification: p33, f31,g11 doi: 10.47067/reads.v7i3.385 corresponding author’s email address: mumtaz.ahmad@iub.edu.pk 1. introduction standard finance assumes, in the investment decision-making process individuals behave rationally and take into account all available information. according to orthodox economic theories have held that investors in the equity market often act rationally when making investment decisions (nayak and kumar, 2020). as noted, efficient market hypothesis principle describes that the price of securities that are traded in the market is right at any given time and represents all available review of economics and development studies, vol. 7 (3) 2021, 395-405 396 information. the efficient market hypothesis notes that the share price represents all the details available (zahera and bansal, 2018). according to peters, (1996) centered on knowledge and rationality the efficient market hypothesis characterized economic theory until the1980s. although, the emh has enormously struggled to justify behavior of the market probably quite significantly, becoming incapable to understand why us share prices dropped by more than thirty per cent over the two months period preceding the october 1987 crisis. traditional finance during the past decade was used to know about how investors create their investment decisions (keswani et al 2019).however, behavioral economists reject this definition of perfect rationality, claiming that an investor's irrationality can happen as a consequence of incorrect assumptions, various perceptions of scenarios, and perception distortion and influencing their day-today investment decisions based on feelings, purpose, behavior, and social connection (jhandir & elahi, 2014). investors respond to and perceive the same information in different ways, leading to the transmission of different interpretations of market signals, leading to distinguished conduct. currently, behavioral finance has been developed to understand investor behavior when no satisfactory explanations are given by conventional financial theory. in this modern field, studies have not solved the issue of assessing which of the corresponding factors are most crucial while making an investment decision (heuristic, herding, prospect and market) responding to the following research questions which are main target of the current study.  what are impacts of the behavioral factors (heuristic, herding, prospect and market factors on investment decisions at the pakistan stock exchange among individual investors?  what are impacts of the behavioral factors (heuristic, herding, prospect and market factors on investment performance at the pakistan stock exchange among individual investors?  what is the impact of investment decisions on investment performance at the pakistan stock exchange among individual investors?  is financial literacy playing a role as a moderator in the relation between behavioral factors and investment decision and performance? for this study authors got motivation from several aspects as, first previously, many studies have been performed in advanced countries upon the effects of behavioral factors, demographic factors related to investment decision and investment performance. a further significant consideration is that, because of the culture differences, values and financial market infrastructure, financial literacy and level of education, the outcomes of studies done in developed countries cannot be applied to developing countries. it is, however, necessary to know which behavioral factors influence the decision-making of stock exchange investors in pakistan because pakistani shareholders tend to obey the actions of their herds and are affected by their close relatives and friends' views. further, authors got courage from areiqat et al (2019) recommendation in which they studied few behavioral factors with investment decision and recommended that these variables are insufficient so we should include other behavioral factors in future studies to make it a comprehensive research work. similarly, financial literacy research has grown dramatically for the us and other western countries since the 2000s (lusardi and mitchell, 2014), but is still pretty rare in pakistan. so we investigate the moderating role of financial literacy amongst behavioral factors and investment decision and performance. by attempting to fill this gap because contributes to the literature of behavioral finance. pakistan review of economics and development studies, vol. 7 (3) 2021, 395-405 397 is one of the growing developing economies in the world. market regulators and policy-makers are worried about individual investor behavioral patterns. areiqat et al (2019) exposed that behavioral indicators helps the investors to choose a successful stock investment strategy..it is known as psychology has effect on the behavior of market players and how individual investors make choices: how they view and acknowledge in particular (antony 2019). 2. theoretical framework and hypothesis development the psychologists, kahneman and tversky, (1979) they established the basis of the prospect theory are one of the most essential and parenting research carrying out related to the behavioral factor and investment decisions. the prospect theory was implemented as substitute to the expected utility theory, rational expectation theory and the effective market hypothesis. thaler (1980) has put forward ideas of applying the prospect principle to financial system. being a finance theorist, he believes that when making investment decisions, people do not always behave logically, they often make mistakes. recent financial dynamics critically state financial markets have become more competitive and unpredictable (qureshi et al 2012). in such circumstances, the predicted utility principle and efficient market hypothesis as stated by the traditional financial theory cannot clarify the image regarding the investor's investment behavior and preferences. according to baker and nofsinger, (2010), investment decisions are influenced through "cognitive mistakes", "fundamental heuristics" and "psychological prejudices”. behavioral finance has become an integral component of making an investment decision as it influence investor’s performance (jahanzeb et al 2012). many proponent of behavioral finance claim that due to irrational behavior investment show poor performance this exclude investors from the security market. some others, on the other hand, suggest that over-confident investors with excessive trading behavior might benefit from high results (anderson et al 2005). kyle and wang (1997) describe overconfidence as the behavior of someone who over-evaluates the accuracy of their own data and sees an overconfident investor one who’s "subjective distributions of probability are too tight." the overconfident investors deal far greater than other rational challenger in the balanced situation, and anticipate a better investment return in the prolonged run. mahmood et al (2016) in an effort to recognize about the influence of behavioral factors like heuristic, prospect and herding on investment performance and revealed that herding and heuristic was positively influence investment performance while prospect is negatively influence investment performance. similarly, javed et al. (2017) revealed the results in pakistani stock market that behavioral factors like herding, some heuristics (over confidence, availability and representativeness) have significant influence in optimistic way on investment performance. hence, above literature established the facts that behavioral factors may influence investment performance of individual investors. thus, our first hypothesis is: h1: behavioral factors influence investment performance of individual investors. investors and financial analysts use a heuristic approach to speeding up analysis and investment decisions (nayak and kumar, 2020). according to perveen et al (2020), there are mental shortcuts that allow fast decisions under uncertainty. in dynamic and unpredictable circumstances, individuals use this criterion to make decisions and relate to the heuristics (qureshi et al 2012). overconfidence is a perceptual heuristic tendency that could be defined as unjustified beliefs in one's logical judgment, decisions and perceptual capabilities. investors have become overconfident in their investment skills, and this will proceed to investment mistakes (arieqat et al 2019). this implies that when investors review of economics and development studies, vol. 7 (3) 2021, 395-405 398 overestimate their investment capacity, when making their investment choice, they make misjudgment. according keswani et al (2019) overestimation of the awareness of investors based on their positive business experience. the mental shortcuts in decision making process that is opposite to the gathering and analysis of the information are known as “heuristic” and these mental shortcuts are helpful in complex and uncertain situations however they may lead to biased decision (khan et al 2017). ahmad (2018) in his study discussed the investor behavior and investment decisions. similarly, availability bias is a perceptual heuristic bias, also regarded as a mental shortcut, which arises as individuals in their decisions or predictions depend too much on readily accessible information (ngoc, 2014). according to abreu (2014), the existence of anchoring means that investors make an evaluation about their own anchor and adapt to an evaluation. when making decisions, the propensity to adhere towards one bit of information is regarded as anchoring (kanagasabai and aggarwal 2020). one of the described phenomenon’s is herding, pertaining to which investors appear to disregard their own private views and follow trading behavior of their equivalents (aharon 2020). investors prefer to differently consider every aspect of their investment collection, which may leads to ineffectiveness and uncertainty in investment decision-making (shiller, 2000).market-related factors influence can be seen on the actions of investors and this can contribute to a major change in investor decision-making (keswani et al 2019). individual investment decision making process even get affected by several psychological factors which are derived from market forces such as price change, market knowledge, historical tendencies of stocks, essentials of given shares, customer priority and over response to price variation (nayak and kumar 2020).so, our second hypothesis is: h2: behavioral factors influence investment decisions of individual investors as clarified overhead, previous literature have mostly studied the straight influence of behavioral factors of individual investors on investment decisions and investment performance and conveyed the diverse outcomes (keswani et al., 2019; nayak and kumar, 2020). a primary constraint with these researchers work is that they are unsuccessful to explain the intervening role of investment decisions among the relationship of behavioral factors and investment performance. theoretically, prospect theory for decision making commit that individual’s decisions are supported by the possible worth of losses as well as gain than the ultimate result, furthermore individual make assessment of these losses and gains by using sure psychological shortcuts to release the burden of mental activities in decision making (kahneman & tversky, 1979). theoretically, later on, abdin et al., (2017) confirmed the mediating role of investment decisions (in the presence of anomalies)between the heuristics and investment performance in term of hazard and yield because with the help of decision theory individuals are make better decisions (slovic et al,. 1977)..from the above arguments, this study foresees that investment decision is a missing link among behavioral factors and investment performance. therefore, our third hypothesis is that: h3: investment decision mediates the relation between behavioral factors and investment performance. there are two main dimensions of financial literacy have been discussed in the literature i.e. perceived and actual. perceived financial literacy is a self-trust and believes of an individual on their own financial knowledge (carlson et al 2009). however an individual with higher level of presumed financial knowledge and lower level of real financial knowledge might be considered as overconfident (allgood and walstad 2016). review of economics and development studies, vol. 7 (3) 2021, 395-405 399 financial literacy is valuable and emerged as substantial need for investor’s decision-making over the years. it is a specific knowledge unlike the general knowledge of financial products. it is also the capacity for effective wealth management and informed financial decision-making (ahmad et al 2018). similarly, gouws and shuttle worth (2009) revealed that financial literacy is the basic skill needed for making accurate and informed investment decisions at individual and organizational level. financial literacy has become a very interesting matter in recent years, as financial markets have turn into more dynamic and it has become problematic to make knowledgeable choices (arif, 2015). finally, on the base of above discussions it is concluded that fourth hypothesis will be as: h4: financial literacy moderates the relation between behavioral factors and investment decision. figure 1: conceptual frame of study) 3. research methodology 3.1 data, sample size, sampling procedure and measurement of variables the sampling frame is defined by cooper and schindler (2003) that set of all the population elements from where the sample is taken. in this active individual investors were selected in pakistan stock exchange. convenience and purposeful sampling methods are used to achieve the goals of the study. there are two reasons to choose this sampling techniques; first, it is one of the costs and time effective, second, willingness and availability of respondents is compulsory for data collection. we visited brokerage houses to collect the data and total of 500 survey questionnaire distributed among the individual investors in pakistan stock exchange out of which 400 returned and 352 were usable. all items in the questionnaire were answered using a five-point likert scale from 1 (strongly disagree) to 5 (strongly agreed) except then specified. to measure heuristics, we used five dimensions of heuristics that are 3 items for overconfidence taken from (babajide and adetiloye 2012). similarly, 2 items used to measure representativeness, 1 item focused on gambler’s fallacy, 2 items for anchoring, 4 items for herding, 7 items for prospect factors, 6 items for market factors and 2 items for availability are adopted by (waweru et al, 2008). for the measurement of investment decision, 7 items are adopted from (pasewark & riley, 2010). three items were used to measure the investment performance behavioral factors: heuristic factors herding prospect factors market factors investment decision financial literacy investment performance h2 h1 h3 h 4 review of economics and development studies, vol. 7 (3) 2021, 395-405 400 taken by (phuoc and thu ha 2011).similarly, 8 items are used to measure financial literacy which were adopted from (al-tamimi and kalli, 2009). 4. results and discussion 4.1 data screening, cleaning and assessment of outliers while completing of the data entry process, while punching data upon receipt of the questionnaires, the researcher reviewed and verified that all questions had been responded. for this, the authors have been visited manually from case to case with great care to search any omitted value in the excel data file and found that out of 400 questionnaires 361 were usable and rest of the 39 questionnaires completely rejected due to lack of completion and omitted values as recommended by (tabachnick & fidell, 2007). in this study, authors used the recommendation of hodge and austin (2004) suggestions and used the mahalanobis distance statistical approach on the basis of chi-square values at critical alpha 0.001 as a criterion for the identification of outliers in the results. after applying the statistical gauge mahalanobis distance, author found that 7 extreme values in the data then these values deleted from data set and remaining data set of 352 sample size used for further analysis. table 4.1: correlations gend er age educatio n level heurist ic factors herdi ng prospe ct factors marke t factors investmen t decision investment performan ce gender 1 age .015 1 education level -.013 .080 1 heuristic factors -.025 .141 * * .108 * 1 herding .002 .035 .064 .180 ** 1 prospect factors .053 -.017 .087 .438 ** .171 ** 1 market factors .058 .065 .077 .347 ** .232 ** .336 ** 1 investmen t decision -.043 .071 .140 ** .389 ** .273 ** .323 ** .387 ** 1 investmen t performa nce .021 .015 .190 ** .455 ** .416 ** .411 ** .500 ** .538 ** 1 financial literacy -.118 * .148 * * .073 .236 ** .154 ** .220 ** .282 ** .677 ** .366 ** gender male = 1 , female = 2 ***p< 0.001, **p < 0.01, *p < 0.05 according to hair et al (2010) variance inflated factor (vif) exceeding 10 and the tolerance value below 0.10 indicate the possible issue of multicollinearity. in this study, authors used both methods (vif method and correlation) to check the problem of multicollinearity. however, the results show that review of economics and development studies, vol. 7 (3) 2021, 395-405 401 correlation between all independent variables is less than 0.70. and the value of tolerance is more than 0.10 while vif is lower than 10. so there is no multicollinearity issue as can be seen in table 4.2 table 4.2: tolerance value and the variance inflation factor (vif) collinearity statistics independent variables tolerance vif heuristic factors 0.758 1.319 herding 0.931 1.074 prospect factors 0.766 1.306 market factors 0.815 1.228 in this analysis, it has revealed that total variance explained is 64.795% which is in acceptable range and the retained variables are divided into seven factors (herding, market factors, heuristic factors, prospect factors, investment decision, investment performance and financial literacy), the value of kmo is 0.937 (sig = 0.000), and 64.795 percent of the total variance explained, and all factor loads are higher than 0.5. these indicators demonstrate that for these factors, the factor analysis is very sufficient and approved. while performing cfa, it has been observed that the 7-factor model (containing heuristic factors, herding, prospect factors, market factors, investment decision, investment performance and financial literacy) fits well with the data (comparative fit index [cfi] = 0.95, tucker–lewis index [tli] = 0.95, root mean square error of approximation [rmsea] = 0.04 and (goodness of fit index [gfi] = 0.85 significantly fit with the data much better than other factor. therefore, these results indicated that the scale of all variables possessed adequate discriminant validity to test our hypotheses. after completion of efa and cfa, the reliability and validity analysis for each aspect is given below. the level of composite reliability shown in the table showing that a substantial percentage of the loadings of the products factor is also more prominent than 0.7, these loadings appear in their respective sections acknowledging the internal consistency of the selected items. convergent validity is declared in the existing examination by using an average variance extracted (ave) for each element.they offered the limit to ensure the convergent validity more notable than and contrasting with 0.5. table 43: reliability and validity composite reliability cronbach’ alpha ave msv asv heuristic factors 0.912 0.913 0.509 0.255 0.152 herding 0.932 0.931 0.774 0.205 0.075 prospect factors 0.909 0.910 0.589 0.231 0.134 market factors 0.917 0.918 0.648 0.305 0.154 investment decision 0.936 0.936 0.675 0.518 0.238 investment performance 0.900 0.902 0.750 0.348 0.249 financial literacy 0.943 0.943 0.674 0.518 0.156 review of economics and development studies, vol. 7 (3) 2021, 395-405 402 4.2 regression results we utilize the hayes (2013) process tool for moderated mediation approach. analysis is completed in two stages: first, we used process model 4 to test mediation, using 5000 bootstrap samples with 95 percent bootstrap ci. we take into consideration the probability that the value of the hypothesized moderator could depend on a statistically significant indirect impact. the hypothesized moderator was presented in the second stage and the entire moderated mediation model was tested (in process model 7).by creating an interaction term based on behavioral variables and financial literacy, the moderation test was carried out. these variables grand mean centered beforehand (aiken & west, 1991). three different moderator levels evaluated the conditional indirect effect: mean value, as well as one standard deviation below and above. a basic moderation model was also used in the hayes method tool (model 1) in an attempt to further explore the nature of moderation across basic slopes. table 4.4: regression results moderated mediation β se t llci ulci dv: investment decision (mediator) (r 2 = 0.55***) constant 0.25 6.03 behavioral factors 0.55*** 0.07 8.39 0.42 0.68 financial literacy 0.24*** 0.21 1.33 -0.17 0.66 behavioral factors × financial literacy 0.105 0.06 1.82 -0.008 0.218 dv: investment performance (r 2 =0.47***) constant 0.25 -3.22 investment decision 0.31*** 0.05 6.40 0.21 0.40 behavioral factors 0.85*** 0.07 11.02 0.71 1.01 indirect effect effect boot se boot llci boot ulci bf-ip via id 0.25 0.06 0.14 0.39 conditional indirect effect effect boot se boot llci boot ulci -1sd 0.12 0.05 0.04 0.23 m 0.19 0.05 0.09 0.31 +1sd 0.20 0.06 0.10 0.32 ***p<0.01, **p<0.05,*p<0.1 the analysis demonstrate that there was a significant positive direct relationship between behavioral factors (heuristic factors, herding, prospect factors and market factors) and investment performance (β =0.85, p <0.001), thus support for hypothesis 1. it is consistent with the findings of keswani et al (2019). behavioral factors (heuristic factors, herding, prospect factors and market factors) were also positively and significantly associated to investment decision (β= 0.55, p <0.001), therefore supporting hypothesis 2. investment decision was positively and significantly related to investment performance (β= 0.31, p <0.001). in addition, we saw a significant indirect effect of behavioral factors (heuristic factors, herding, prospect factors and market factors) on investment performance through investment decision, β =0.25, 95% ci(0.14, 0.39), hence supporting hypothesis 3.the analysis also showed that the interaction term created with behavioral factors (heuristic factors, herding, prospect factors and market factors) and financial literacy was insignificant (β = 0.11,p = 0.068), that does not support hypothesis 4. behavioral factors (heuristic factors, herding, prospect factors and market factors) had a significant indirect effect on investment performance via investment decision when financial literacy was low, β= 0.12, 95% ci (0.04, 0.23) and moderate,β= 0.19; 95% ci (0.10, 0.30), and high, β= 0.20; 95% ci (0.10, 0.32). review of economics and development studies, vol. 7 (3) 2021, 395-405 403 we also test the effect of all behavioral factors (heuristic factors, herding, prospect factors and market factors) on the investment decision and performance to know about the impact of all these variables so that we can understand and conclude which behavioral factors have a major influence on investment decision and performance. we also test the moderating role of financial literacy on all these behavioral factors (heuristic factors, herding, prospect factors and market factors) separately and their relation with the investment decision and performance and found the r 2 from 35% to 51% in each case respectively. 5. conclusions, implications and limitations it is concluded from the result that behavioral factors (heuristic factors, herding, prospect factors and market factors) have a positive and significant effect on the investment decision and performance. it also reveals that investment decision has a significant positive effect on investment performance and also performs mediating role between behavioral factors (heuristic factors, herding, prospect factors and market factors) and investment performance. it means in pakistan stock market people showing behavioral biases while making their investment decision. they rely on heuristic factors and investors use heuristic in uncertain situation while making their investment decision and showing overconfidence. it has observed that investors during their financials decisions follow the actions of majority in the market. market factors also have a significant positive relation with investment decision and performance. financial literacy also shows a significant positive relation with investment decision and performance. but financial literacy doesn’t show any moderating role between behavioral factors and investment decisions. in addition to this, individual investors can ultimately take advantage from the results of this research along with security organizations as a guide for their analysis and forecasting of security market trends. this research can be used for psx investors to improve their investment efficiency because overconfidence neglects the prevailing risk in the market which can affect the investment performance. this study has consequences and significant impact for decision makers. investors may be motivated by overconfidence and herd behavior to bear unnecessary hazards that occurs redundant market fluctuations. for investors, better reliability, readily usable information also increases their financial decision-making. educating investors more about market as well as the risk of their investments becoming unconventional is critical. in the case, the securities and exchange commission might recommend that qualitative and quantitative details be disclosed in its entirety in relation to the relevant uncertainties to which companies are susceptible. the cross 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(2018). do investors exhibit behavioral biases in investment decision making? a systematic review. qualitative research in financial markets, 10(2), 210-251. review of economics and development studies vol. 3, no 2, december 2017 111 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 2 december 2017 journal homepage: www.publishing.globalcsrc.org/reads foreign direct investment, external debt and economic growth: evidence from some selected developing countries 1 imran sharif chaudhry, 2 shumaila iffat, 3 fatima farooq 1 director/ professor, school of economics, bahauddin zakariya university, multan, pakistan, imran@bzu.edu.pk 2 mphil scholar, school of economics, bahauddin zakariya university, multan, pakistan, 3 assistant professor, school of economics, bahauddin zakariya university, multan, pakistan, fatimafarooq@bzu.edu.pk article details abstract history revised format: nov 2017 available online: dec 2017 purpose: the aim of this paper is to analyze the relationship between foreign direct investment, external debt and economic growth. the study is based on a sample of 25 region wise selected developing countries. panel unit root tests suggest that selected variables are stationary at the level of first difference. using data from 1990 to 2014, results of fmols method suggest that the core variables, foreign direct investment and external debt have significant positive relationship with economic growth. labor, gross domestic saving and government expenditures have positive while gross capital formation exerts negative impacts on economic growth. moreover, fdi exerts outstanding effects on growth because one unit rise in fdi raise the growth by 4.03 units while one unit rise in external debt upgrade the growth up to 2.13 units. it means that boundaries of selected developing nations are absorbent to fdi than external debt. the results of “johansen fisher panel co-integration test” reveal that, there exists a long period relationship among all the explained and explanatory variables. in order to investigate the causal relation among selected variables, pair wise granger causality test is employed. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords foreign direct investment, external debt, economic growth, co-integration, causality jel codes: c33, f21, f34, o47 corresponding author’s email address: imran@bzu.edu.pk recommended citation: chaudhry, i. s., iffat, s. & farooq, f., (2017). foreign direct investment, external debt and economic growth: evidence from some selected developing countries. review of economics and development studies, 3(2) 111-124. doi: https://doi.org/10.26710/reads.v3i2.170 1. introduction developing nations are not fully financed from internal resources but external funding is also mandatory to minimize the divergence between saving and investment. all the developing economies in the globe are continually motivated for high economic growth. thus, such nations fascinating the external inflows specifically in the form of foreign direct investment and external debt, which are supposed to be principal sources of external financing. foreign direct investment is considered as a source of non-cash and cash inflows into the boundaries of recipient nations from abroad. world investment report (2011) declared that most of developing nations around the globe have practiced extensive growth in worldwide transactions because of fdi. moreover, the net contribution of fdi in global gdp has grown-up more than five-times compared to the era of http://www.publishing.globalcsrc.org/reads mailto:imran@bzu.edu.pk mailto:fatimafarooq@bzu.edu.pk mailto:imran@bzu.edu.pk https://doi.org/10.26710/reads.v3i2.170 review of economics and development studies vol. 3, no 2, december 2017 112 nineties and beginning of 20th century. lyroudi et al. (2004) explained that fdi can be transmitted by mncs in the host nations. external debt is one of among the external sources of finances that have strong effects on the growth of developing nations. external debt is component of total amount of debt in the nation that is payable to recipient economy. it is believed that external debt is beneficial to the recipient nations only if utilized cautiously in the investment & development projects. investment projects with the help of external borrowing are favorable only when returns exceed the cost. developing nations are constantly facing the trouble in term of limited financing facilities but external debt from industrialized economies, worldwide organizations like imf and world bank provides rays of hope to the capital deficient nations. past studies shed light on the impacts of external debt on growth of developing economies and categorized into two heads. first group of studies is related to traditional school of thought who considers that borrowing from external resources is positively associated with the economic growth of less developed nations. moreover, slow growth of underdeveloped economies is backed by low level of domestic savings and foreign exchange earnings. both the low savings and foreign exchange revenues lead to the twin deficits (fiscal and trade deficits). general purpose of this work is to conduct the foreign direct investment, external debt & economic growth analysis with specific reference of some (region-wise) selected developing countries. to attain this broad objective, the work has a few specific objectives, which are given below:  to make available the conclusive evidence on the association of fdi &economic growth specifically in context of developing countries.  to analyze the interconnection of externa1 debt &economic growth regarding developing nations.  to empirically scrutinize the effects of labor, capital, general government final consumption expenditures, and gross domestic saving on economic progress of selected developing nations. 2. review of past literature ndambendia and njoupouognigni (2010) described the affectivity of fdi and foreign aid on output growth in the case of thirty-six african nations. the period of study was from 1980 to 2007. this research work inspected the longer period association between fdi, external aid & output growth. potent evidence has found about positive effects of foreign aid and fdi on output growth. moreover, pradhan (2009), asghar et al. (2011), agrawal and khan (2011), khachoo and khan (2012), zakari et al. (2012), zeb et al. (2013), jun (2015), agrawal (2015), zekarias (2016) provided the potent evidence about positive impacts of fdi on growth of developing nations. brecher and alejandro (1977) elucidated that fdi adversely influenced to growth of recipient economies if mncs transfer their surplus revenues to their parent nationn [ahmad and hamdani (2003), eller, haiss and steiner (2005), falki (2009), hossain and hossain (2012), bashir et al. (2014)]. chenery and strout (1966) concluded that external borrowings plays a very crucial role to bridge the gap between saving and investments. frimpong and abayie (2006) appraised the impact of externa1 debt on growth with specific reference to ghana. empirical outcomes suggested that co-efficient sign of external debt was considerable positive during the period of study (1970-1999). furthermore, sulaiman and azeez (2012), rahman et al.(2012), kasedi and said (2013) favored the positive impacts of external debt on the growth of developing nations. bruton (1969) gave contradictory arguments about two gap theories. aid was a source of divergence rather than convergence between saving and investment. furthermore, external aid contracts the growth than to expand. chowdhury (2001) ascribed the debt-growth nexus with specific reference to highly indebted poor and non-highly indebted poor nations. panel results interpreted a considerable negative causal effect that run from debt to economic growth in the case of both categorized economies. moreover, review of economics and development studies vol. 3, no 2, december 2017 113 clements et al. (2003), presbitero (2008), choong et al. (2010), farhana & chowdhury (2014) , soydan and bedir (2015), bonga, chirowa and nyamapfeni (2015), sheikh et al. (2015) disclosed that debt overhang curb the growth in the case of less developed nations. however, this study enlightens few of the following findings, which were not conducted in the past studies.  the study demonstrates a comparison between the effects of fdi and external debt on the economic growth based on selected developing countries during the time span of 1990-2014.  the pros and cons of fdi and external debt on economic growth, which provides sound platform to outweigh the parameters.  selecting countries continent wise to find out the basics of economic growth which benefits to have a clear picture of developing economies.  3. theoretical and conceptual framework since the work is essentially associated with the economic growth, models and theories of economic growth collectively construct the theoretical skeleton. fdi inflows and external debt are included into the following theories to enlighten their anticipated impacts on economic growth. such theories are included, which shows the positive and negative impacts of fdi and external debt on growth of developing nation. a. fdi and economic growth modernization theory postulated that fdi contributes positively to the growth of less developed countries. the theory posits that economic growth is enhanced by process of capital formation in most of developing economies. harrod-domar growth model ascribed the mechanism of the economy by which higher level of investment leads to the higher level of economic growth. for a nation to expand and develop, it requires turning away fraction of its possessions from recent consumption and invested them in process of capital formation. saving is the resources distraction from the current consumption. saving is not just determinants of the gdp and h-d model argues that every nation must save a certain proportion of gdp that can replace cost of capital. dependency theory shows the adverse effects of fdi on growth of the host nation. 1 conceptual illustration: figure 1 figure 1 displays the influence of fdi on economic growth. the right half of fig1 illustrate the positive effects of fdi on growth through technology transfer, employment opportunities, provision of efficient management and infrastructure development while left half elucidated that the repatriation of profits, crowding out effect on domestic investment, capital flight, foreign ownership. review of economics and development studies vol. 3, no 2, december 2017 114 b. external debt and economic growth chenery & strout (1966) in dual-gap theory stated that overseas aid plays a vital role in bridging the saving-investment or import-export gap. financing gap theory supports the positive impacts of external debt on growth of less developed nations usually; the concept of “financing gap” has tainted the less developed nations, which notably encouraged so-called external source of borrowings. gap between available funds from domestic resources and total funds requirement refers as financing gap; and external financing is most prominent way to minimize that gap. debt overhangs theory states that, when economies have high external debt/gdp ratio has comparatively meager finances to make the productive investment, which resultantly deters the growth. the crowding out effects theory ascribed that, charging the high interest rate on debt from debtor country and tot (terms of trade) of that nation will be deteriorates the growth. furthermore, recipient nation do not get facility to get external borrowings anymore. the right half of figure 2 depicts the positive impacts of external debt on growth of nation through productive projects; improved technology & expertise, favorable bop, raising the efficiency in allocation of resources productivity, debt overhang, crowding out effect, uncertainty, high inflation rate. 2 conceptual illustrations: figure 2 4. description of data and methodology a. sample, description of data and model specification to combine the time span (t) from 1990 to 2014 with the cross sections (i) that are 25 (region wise classified) developing countries makes the analysis of panel data in order to investigate the association among fdi, externa1 debt and economic growth. economic growth (proxies by gdp at constant 2005 us$) is the dependent variable of this study. independent variables are externa1 debt and fdi. foreign direct investment is proxies by fdi, net inflows (bop current us$) and external debt is proxies by external debt stocks, total (dod, current us$). other independent variables of this study are labor, capital, gross domestic saving and general government final consumption expenditures. labor is proxies by labor force, total (current s$), capital is proxies by gross capital formation (current us$), gross domestic saving (current us$) and government final consumption expenditures (current us$). data for all the variables is taken in millions us$. table: 1 data description variables proxy used unit of measurement source of data economic growth rgdp us dollars wdi labor lf us dollars wdi review of economics and development studies vol. 3, no 2, december 2017 115 theoretical model based on neo classical production function is presented as 𝑹𝑮𝑫𝑷 = 𝒇(𝑳𝑭,𝑮𝑪𝑨𝑭) (1) here, rgdp is the real gross domestic product serve as a proxy for economic growth; lf denotes the labor force, total. gcaf is the gross capital formation (proxy for capital). 𝑹𝑮𝑫𝑷 = 𝒇(𝑳𝑭,𝑮𝑪𝑨𝑭,𝑭𝑫𝑰,𝑬𝑫𝑻) (2) rgdp is not only effected by above-mentioned (labor, capital, fdi and external debt) four variables. there are many factors that influence the rgdp, but this study includes following two variables (gross domestic saving and government final consumption expenditures) in function (2.2) as follows 𝐑𝐆𝐃𝐏𝐢𝐭 = 𝐟(𝐋𝐅𝐢𝐭,𝐆𝐂𝐀𝐅𝐢𝐭,𝐅𝐃𝐈𝐢𝐭, 𝐄𝐃𝐓𝐢𝐭,𝐆𝐃𝐒𝐀𝐢𝐭,𝐆𝐅𝐂𝐄𝐢𝐭) (3) since analysis is based on panel data, so “t” and “i” subscripts are used with each variable. in equation form it can be written as; 𝑹𝑮𝑫𝑷𝐢𝐭 = 𝜷𝟏𝒊 + 𝜷𝟐𝒊𝑳𝑭𝐢𝐭 + 𝜷𝟑𝒊𝑮𝑪𝑨𝑭𝐢𝐭 + 𝜷𝟒𝒊𝑭𝑫𝑰𝐢𝐭 + 𝜷𝟓𝒊𝑬𝑫𝑻𝐢𝐭 + 𝜷𝟔𝒊𝑮𝑫𝑺𝑨𝐢𝐭 + 𝜷𝟕𝒊𝑮𝑭𝑪𝑬𝐢𝐭 + µ𝒊𝒕 (4) above equation word of i (i =1, 2 .., n) shows the cr0ss sections while t (t=1, 2… t) represented instant and u denotes the error term. b. panel unit root test – levin, lin & chu test ll&c (2002) recommended panel unit root test for checking stationarity of selected variables. h0 (null hypothesis) of the test means the existence of a non-stationarity in available data while the h1 (alternative hypothesis) means the existence of stationarity in the data. h0: non-stationary data h1: stationary data c. panel co-integration johansen fisher panel co integration test after checking the data stationarity, the next task is to judge the long run relationship among variab1es. if all variab1es have similar integrating order & long run correlation prevails among the variables, an evaluation of that sort of relationship will provide errors in stationary form. variables are co integrated only if long run equilibrium link prevails among them. fmols method co-integration test give authorization about presence or absence of long run relationship among selected variable. if whole variables have first integrating order, and long run relationship exists, then the next phase is to estimate the specified model by employing the fmols method, devised by pedroni in 1996 &2000. d. granger causality test causality is a very essential concern in econometrics, which refers to the ability of one variable to cause another variable. granger (1969) devised a comparatively trouble-free test that posits the causality as: consider two variables x and y, a variable is supposed to granger cause x only if the x is predicted by the lagged values of the y, and remaining all terms suppose to be same and vice versa. pair wise granger causa1ity tests pair wise granger causality test shows causal link between selected variables just as pair wise. it can best be illustrated in the form of following equations capital gcaf us dollars wdi foreign direct investment fdi us dollars wdi external debt edt us dollars wdi gross domestic saving gdsa us dollars wdi govt. final consumption expenditures gfce us dollars wdi review of economics and development studies vol. 3, no 2, december 2017 116 5. data analysis and findings a. descriptive analysis b. table: 2 descriptive analyses rgdp lf gcaf fdi edt gdsa gfce mean 249,625.80 68.63 97,027.50 8,004.49 64,432.49 97,459.88 40,775.54 median 56,951.65 15.77 11,141.13 752.18 22,503.09 5,165,037 6,400.70 maximum 5,270,061 806.50 4,782,094 290,928.40 959,509.80 5,165,037 1,408,395 minimum 1305 0.67 0.00 -4,550.036 629.44 -2,275.14 90.39 std.dev. 562,964.40 159.43 396,128.3 28,733.20 110,062.60 422,073.7 123,656.8 skewness 5.02 3.89 8.68 7.15 3.58 8.77 6.89 kurtosis 35.34 13.67 87.68 61.47 20.51 88.56 61.33 above table depicts the descriptive statistics results. results show that average of real gdp is 249,625.80 with standard deviation 562,964.40 and maximum at 5,270,061 while minimum at 1305 during the time span 1990 to 2014 with reference to some selected under developed nations. average of labor is 68.63 while its degree of dispersion is 159.43 and its maximum value is 806.50 while minimum is 0.67 during the period of study. gross capital formation, is 97,027.50 at average, with standard deviation of 396,128.3 and maximum at 4,782,094 while minimum at 0.00. foreign direct investment has average value of 8,004.49 with standard deviation 28,733.20and maximum at 290,928.40 while minimum at -4,550.036. external debt is 64,432.49 at average with standard deviation of 110,062.60 and maximum at 959,509.80 while minimum at 629.44. here the variation in external debt is more than foreign direct investment. gross domestic saving has an average value of 97,459.88 with degree of dispersion 422,073.7 and maximum at 5,165,037 while minimum at -2,275.14. the average value of government final consumption expenditures is 40,775.54 with standard deviation of 123,656.8 and maximum at 1,408,395 while minimum at 90.39.departure from symmetry is said to be skewness. as per descriptive statistics, all the variables are positively skewed. the kurtosis refers to degree of peakedness or flatness of distribution. for the normal distribution, value of kurtosis is three. available results give testimony about leptokurtic nature of distribution because value is greater than 3 as per findings. c. analysis of correlation matrix to check the strength of relationship between the variables, correlation matrix is used in this study. following table interpreted that how much the variables are highly correlated with each other. table: 3 correlation matrix correlation (probability) rgdp lf gcaf fdi edt gdsa gfce rgdp 1.00 lf 0.79 (0.00) 1.00 gcaf 0.92 (0.00) 0.66 (0.00) 1.00 fdi 0.93 (0.00) 0.67 (0.00) 0.96 (0.00) 1.00 edt 0.90 (0.00) 0.60 (0.00) 0.79 (0.00) 0.82 (0.00) 1.00 review of economics and development studies vol. 3, no 2, december 2017 117 gdsa 0.91 (0.00) 0.66 (0.00) 1.00 (0.00) 0.96 (0.00) 0.77 (0.00) 1.00 gfce 0.94 (0.00) 0.65 (0.00) 0.96 (0.00) 0.96 (0.00) 0.88 (0.00) 0.88 (0.00) 1.00 d. investigating the order of integration table: 4 llc results test at level table : 5 llc results at first difference levin, lin &chu test (at first difference) variables intercept intercept and trend statistic probability statistic probability rgdp -3.93918 0.0000* -12.4508 0.0000* lf -3.00414 0.0000* -7.14370 0.0000* gcaf -8.99304 0.0000* -10.3162 0.0000* fdi -22.3298 0.0000* -16.7172 0.0000* edt -5.22198 0.0000* -9.66518 0.0000* gdsa -11.5291 0.0000* -12.1451 0.0000* gfce -7.20418 0.0000* -11.1880 0.0000* *exhibits the rejection of null hypothesis (stationary data) table 4 exhibits the results of llc panel unit root test both at individual intercept and individual intercept with trend. the econometric outcomes shows that null hypothesis is accepted which indicates the presence of unit root. therefore, data for all selected variables is non-stationary at level while results of table 5 show that all the selected variables became stationary at first difference. on the other way, all the macroeconomic variables have not unit root and integrating at the first order. d. panel co-integration tests table: 6 results of johansen fisher panel co integration test hypothesized no. of ce(s) fisher stat.* (from trace test) probability fisher stat.* (from max-eigen test) probability none 1,379.00 0.00 1,449.00 0.00 at most 1 1,124.00 0.00 574.80 0.00 at most 2 700.60 0.00 351.70 0.00 levin, lin& chu test(at level) variables intercept intercept and trend statistic probability statistic probability rgdp 20.6430 1.0000 2.97653 0.9985 lf 15.3920 1.0000 -0.22235 0.4120 gcaf 12.4401 1.0000 1.19839 0.8846 fdi 3.27091 0.9995 -1.71348 0.0433 edt 13.3757 1.0000 9.02749 1.0000 gdsa 6.71047 1.0000 1.1830 0.8815 gfce 17.6822 1.0000 4.96960 1.0000 review of economics and development studies vol. 3, no 2, december 2017 118 at most 3 422.90 0.00 229.50 0.00 at most 4 239.20 0.00 140.90 0.00 at most 5 151.20 0.00 131.10 0.00 at most 6 96.64 0.00 96.64 0.00 * probabilities are computed using asymptotic chi-square distribution. table 6 exhibits findings 0f johansen fisher panel co integration test. the first column depicts the hypothesized number of co-integrating equation from none to at most six. second & forth columns carries the values of fisher statistics while third and fifth columns shows the respective probability values. values of fisher statistic are designed with regards to “trace” & “maximum eigen statistics”. as per probability values given in third and fifth column, the analysis clarifies about the rejection of h0. all the explained and explanatory variables have co-integration. e. fully modified ols result table 7 results of fmols method variable coefficient std.error t-statistic prob. lf 842.68 73.76 11.42 0.00 gcaf -1.62 0.53 -3.05 o.00 fdi 4.03 1.41 2.85 0.00 edt 2.13 0.20 10.67 0.00 gdsa 1.67 0.49 3.37 0.00 gfce 0.66 0.37 1.78 0.08 c -9,474.32 10,682.4 -0.89 0.38 r-squared adjusted r-squared 0.97 0.97 mean dependent var. s.d. dependent var. 249,918.80 563,368.40 interpretation of fmols results above table depicts the fully modified ols results for 25 region wise selected developing nations. the outcomes are as per expectations. coefficient of labor is positive and considerable significant because when labor force goes up by one unit then economic growth will go up by 842.68 units. its justification is quite clear that rise in units of labor force pull the real gross domestic product in upward direction. this impact might be due to high rate of participation. as the labor force is increasing, participants in economic activity are also increasing. therefore, due to such addition of participants, high economic activity leads to high economic growth. this result is consistent with the studies of zekarias (2016).coefficient of gcaf have negative and insignificant relationship with gdp. moreover, foreign direct investment has a significant positive association with rgdp because according to findings, when fdi increases by one unit then it will expand the economic growth by 4.03 units. fdi is found to have positive impact on economic growth because; foreign direct investment is a great source of establishment of new industries in developing nations. it is also helpful in job creation and poverty reduction process. positive effect of fdi on economic growth is supported by the literature ndambendia and njoupouognigni (2010), pradhan (2009), asghar et al. (2011), agrawal and khan (2011), khachoo and khan (2012), zakari et al. (2012), zeb et al. (2013), jun (2015), agrawal (2015), zekarias (2016). external debt has considerable positive association with rgdp as per study, because one unit rise in external debt brought 2.13 units rise in economic growth. external debt has a positive influence on review of economics and development studies vol. 3, no 2, december 2017 119 growth of developing nations as per finding. the developing nations usually face the dual gap (internal and external gap) and internal financial possessions are insufficient to bridge that gap. hence, external debt for developing nations is a major source to meet the financial needs and accelerate the economic growth. positive correlation between external debt and economic growth is supported by studies of chenery and strout (1966), frimpong and abayie (2006), sulaiman and azeez (2012), rahman et al. (2012), kasedi and said (2013). f. pair wise granger causa1ity test table: 8 results of pair wise granger causa1ity test null hypothesis: obs. f-stat. prob. lf does not granger cause rgdp 575 44.58 0.00 rgdp does not granger cause lf 575 25.08 0.00 gcaf does not granger cause rgdp 575 19.37 0.00 rgdp does not granger cause gcaf 575 81.36 0.00 fdi does not granger cause rgdp 575 9.36 0.00 rgdp does not granger cause fdi 575 57.36 0.00 edt does not granger cause rgdp 575 38.23 0.00 rgdp does not granger cause edt 575 22.99 0.00 gdsa does not granger cause rgdp 575 13.59 0.00 rgdp does not granger cause gdsa 575 98.37 0.00 gfce does not granger cause rgdp 575 24.33 0.00 rgdp does not granger cause gfce 575 63.60 0.00 gcaf does not granger cause lf 575 18.75 0.00 lf does not granger cause gcaf 575 29.26 0.00 fdi does not granger cause lf 575 17.59 0.00 lf does not granger cause fdi 575 23.21 0.00 edt does not granger cause lf 575 0.42 0.00 lf does not granger cause edt 575 29.14 0.00 gdsa does not granger cause lf 575 16.58 0.00 lf does not granger cause gdsa 575 24.58 0.00 gfce does not granger cause lf 575 11.37 0.00 lf does not granger cause gfce 575 23.52 0.00 fdi does not granger cause gcaf 575 19.20 0.00 gcaf does not granger cause fdi 575 12.71 0.00 edt does not granger cause gcaf 575 2.56 0.08* gcaf does not granger cause edt 575 26.65 0.00 gdsa does not granger cause gcaf 575 72.96 0.00 gcaf does not granger cause gdsa 575 37.58 0.00 gfce does not granger cause gcaf 575 1.25 0.29* gcaf does not granger cause gfce 575 26.61 0.00 review of economics and development studies vol. 3, no 2, december 2017 120 edt does not granger cause fdi 575 5.99 0.00 fdi does not granger cause edt 575 16.17 0.00 gdsa does not granger cause fdi 575 20.48 0.00 fdi does not granger cause gdsa 575 9.41 0.00 gfce does not granger cause fdi 575 21.51 0.00 fdi does not granger cause gfce 575 33.55 0.00 gdsa does not granger cause edt 575 30.60 0.00 edt does not granger cause gdsa 575 2.25 0.11* gfce does not granger cause edt 575 35.86 0.00 edt does not granger cause gfce 575 2.78 0.06* gfce does not granger cause gdsa 575 10.07 0.00 gdsa does not granger cause gfce 575 35.47 0.00 *exhibits the acceptance of null hypothesis (no causal relationship) table: 8 interpreted the causal relationship among variables. it declares that there exists uni and bi directional causality among variables. figure 3 diagrammatical representation of pair wise granger causality results review of economics and development studies vol. 3, no 2, december 2017 121 elucidation: figure 3 elucidates the pair wise granger causal relationship between the variables. the arrow sign depicts the direction of causality. all the above figures show the bidirectional causal association between the selected variables except the figure (i), (m), (s) and (t). figure (i) explain the unidirectional causality between lf and edt because labor force causes the external debt while edt does not cause the lf. figure (m) explicates the one-way causal link between edt and gcaf because gcaf cause the edt while external debt does not cause the gcaf. 6. concluding remarks, policy implications and future prospects panel unit root tests suggest that the entire selected variables are stationary at the level of first difference, meaning that all the variable have i(1) integrating order. the results of “johansen fisher panel co integration test” reveal that, there exists a long period relationship among all the explained and explanatory variables. findings of “fully modified ols” method declared that, both the fdi and external debt have significant positive association with the economic growth in the case of 25 region wise classified developing economies. so, the study declares that, the effect of foreign direct investment is outstanding than external debt on the growth of developing nations because one unit rise in fdi raise the growth by 4.03 units while one unit rise in external debt upgrade the growth up to 2.13 units. it means that boundaries of selected developing nations are absorbent to fdi than external debt. furthermore, units of labor have considerable positive association with economic growth. furthermore, negative impact of the capital stock and significant positive impact of gross domestic saving on economic growth has noted during span 1990-2014 in the case of developing countries. pair wise granger causality test has been employed for analyzing the uni and bi directional causal relation among selected variables. results of this study are likely to make available a prospect to structure several policy implications. both the fdi and review of economics and development studies vol. 3, no 2, december 2017 122 external debt contributes positively to the growth in context of some selected developing countries. therefore, the government should positively focus on utmost use of possessions to boost fdi inflows and proper utilization of external debt to augment the economic growth. this study provides suggestions that how to improve the structure of developing nation to attract more fdi in order to upgrade the economic growth. host countries should provide the business-welcoming atmosphere to the foreign investors to be a magnet for huge fdi. for this purpose, developing nations must have to mounting skilled and educated personnel, provision of jobs to uneducated people as per their skills. moreover, safety of foreign investors and appropriate structure of tax also captivate massive foreign investment. since agriculture sector is backbone in most of developing nations but deficient financial sources leads to the usage of poor techniques of production and low quality inputs in this sector. huge amount of fdi can provides finance to modernize the structure of agriculture sector in developing countries. external debt should to be use for productive projects and returns from that projects must be higher than its cost. government of developing nations should 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(2016). “the impact of foreign direct investment (fdi) on economic growth in eastern africa: evidence from panel data analysis”. applied economics and finance, 3(1), 145-160. review of economics and development studies, vol. 6 (1) 2020, 83-95 83 analysis of pollution haven hypothesis (phh) and environmental kuznets curve (ekc) in selected association of south-east asian nations (asean) countries a fouzia latif gill, b abid rashid gill, c k. kuperan viswanathan, d mohd zaini b abid karim a economics department, government sadiq college women university bahawalpur, pakistan, email: fozialatifgill@gmail.com b economics department, the islamia university of bahawalpur, pakistan, email: abid.rashid@iub.edu.pk c othman yeop abdullah graduate school of business, university utara malaysia, malaysia, email: kuperan@uum.edu.my d othman yeop abdullah graduate school of business, university utara malaysia, malaysia, email: zaini500@uum.edu.my article details abstract history: accepted 19 march 2020 available online 31 march 2020 the pollution haven hypothesis (phh) claims that following the international trade, developing countries tend to specialize and export pollution-intensive goods to advanced countries. the current study examines the phh claim in the context of exports of the six major asean countries to japan in the environmental kuznets curve (ekc) framework for the period 1989-2017. the fully modified ordinary least square (fmolos) panel co-integration approach has been employed to estimate the coefficients of the ekc model. the results reveal that the ekc does exist while the exports of pollution-intensive goods from the asean to japan increase the co2 emission. the study concludes that world pollution cannot be curtailed unless advanced countries reduce the consumption of pollution-intensive goods. therefore, an integrated welldevised global program is imperative to tackle the alarming issue of global warming, and advanced countries should lead this program. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: co2 emission, pollutionintensive industries, international trade jel classification: q52, j53, k23, l16 doi: 10.47067/reads.v6i1.186 corresponding author’s email address: fozialatifgill@gmail.com 1. introduction for the last several decades, the advocates of free trade and environmentalists have been engaged in hot debate over the environmental impact of international trade. the increase in industrial pollution all over the world became a vital subject in the history of ecological economics. the economists, scholars, policymakers, industrialists and govt associated bodies showed great concerned about the effect of global trade on environment (ederington and minier, 2003; grossman and krueger, 1993). this debate started in the 1970s and became intense at the start of the 1990s when copeland and taylor (1994) presented their famous hypothesis, i.e., pollution haven hypothesis (phh). this research study was presented in the background of trade between developed and developing nations. this was first study that related a country’s pollution size with the volume of its international trade. the phh mailto:fozialatifgill@gmail.com mailto:kuperan@uum.edu.my mailto:fozialatifgill@gmail.com review of economics and development studies, vol. 6 (1) 2020, 83-95 84 postulates that in free trade regime, the developing nations become a pollution haven for developed nations. the pollution-intensive industries tend to shift their production process from advanced nations that have strict environmental regulations to those developing nations that have lax environmental regulations. resultantly, the developing nations incline to specialize and export pollution-intensive commodities as they have comparative advantage in its production. the phh is also one of the criticisms on the ekc. the ekc postulates a nonlinear inverted u-shaped income-environment link. income growth deteriorates the environment of a country at initial phases of economic development nevertheless, at the advanced stages, economic growth generates the conditions that are conducive for a better environment (grossman and krueger, 1991; panayotou, 1995; shafik and bandyopadhyay, 1992). figure 1 explains this nonlinear association between pollution and income growth. figure 1 the ekc relationships between income and pollution table 1 trade as % of gdp of the asean region 2011 2012 2013 2014 2015 2016 2017 brunei 87 87 83 81 81 81 81 cambodia 125 137 142 145 148 149 149 indonesia 50 50 49 48 42 44 43 malaysia 155 148 143 138 134 136 138 myanmar 33 33 41 43 45 46 48 philippines 68 65 60 61 61 62 63 singapore 377 367 362 360 326 325 328 thailand 114 112 106 105 98 99 99 vietnam 163 157 165 170 179 182 183 source: world bank focus economics (2016) however, according to the proponents of phh, ekc theory does not incorporate the impact of changes in trade pattern on the environment of a country. they claim that increased international trade has mad developing countries a pollution haven for the pollution-intensive industries. these industries migrated from advanced nations to developing nations to get benefit of lax environmental regulations. this migration has decreased pollution in developed nations as they start to import pollution-intensive product from the developing world. in developed countries downward bend of the ekc and the upward steeper ekc in developing countries may reflect the relocation of the polluting industries (cole, 2004; nahman and antrobus, 2005; stern, 2004). the ekc therefore, does not infer a net reduction in review of economics and development studies, vol. 6 (1) 2020, 83-95 85 pollution in advanced nations, rather it implies a relocation of the pollution from the rich nations to developing nations. the asean countries have been following trade and investment liberalization policies for the last three decades. the increased international trade has played a vital role to propel these countries towards the status of middle and high-income countries. table-1 demonstrates that asean countries have the highest trade to gdp ratio as compared to the other region of the world (world bank, 2018). however, liberalized trade and economic growth are also followed by several environmental problems in these nations. the world bank (2017) report observes a momentous increase in co2 emissions from the asean countries like malaysia, singapore, thailand, vietnam and indonesia. the asean environmental report (2018) also indicates that in 90’s and 20’s the industrial and urban establishment have damaging impact on the environment in asean countries. similarly, the asean countries also have deteriorated air quality in their cities as evinced by world air quality index 2018. further, the environmental performance index (epi, 2018), that is a comprehensive measure of environmental conditions of a country shows that the asean countries especially indonesia, thailand, vietnam, laos, and burma have alarming indicators of the environmental quality. hence, the asean countries as leading trade partner of the advanced countries and having severe environmental problems is a case to be investigated for the phh trade patterns. the increasing trends of trade and pollution indicate that the asean countries may have the phh trade pattern. the scant empirical studies such as atici (2012), elliott and shimamoto (2008) and takeda and matsuura (2006) investigates the trade-environment link in the asean countries. among these studies atici (2012) is the latest study that investigated the trade and environment link for 1970-2000 period. this study, however, looked at total trade impact on the environment and did not examine the impact of pollution-based export industries on the environment. also, the studies did not analyse the trade link between advanced countries and the asean in the ekc framework. moreover, previous studies did not test the phh claim that developing countries have the skewed ekc because they specialize and export pollution intensive goods to advanced countries. if this test had employed, results would have highlighted how much exports of pollution-intensive exports contributed to the ecological loss of economic development in the asean countries. 2. literature review since the 1990s, the phh has become the centre of the debate on the environmental impact of international trade. this debate became increasingly vital as the global production chain reshaped the patterns of international trade (taylor, 2004). the empirical studies about the trade aspect of the phh have mixed outcome and several interpretations. stern (1998) claimed that downward slope of the (ekc) in advanced countries indicates a transfer of the pollution-intensive productions from advanced nations to emerging economies. antweiler et al. (2001) also supported the phh theory. they showed that trade liberalization had significantly increased the sulphur dioxide (so2) emissions in the cities of developing countries. they further highlighted that advanced countries had diverted their specialization from heavy to lightweight industries and then to services. meanwhile, the developing countries increased their specialization in heavy industries. fontagné et al. (2001) and keller and levinson (2002) also endorsed that solving the problem of endogeneity between trade and regulations would increase the empirical support for the phh. similarly, davis and caldeira (2010) claimed that 30 per cent of consumption-based co2 emissions in developed countries was due to imported goods. peters et al. (2011) also concluded that co2 emissions in advanced countries had stabilized for the period 1990-2008 while it had doubled in http://www.sciencedirect.com/science/article/pii/s0889158311000402#b0210 review of economics and development studies, vol. 6 (1) 2020, 83-95 86 developing countries in the same period. they claimed that net co2 emission transfer from less developed to developed nations had increased via traded goods. in 1990 it was 0.4 gt and in 2008 it was 1.6 gt. likewise, lin et al. (2014) reported that “in china manufacturing of exports caused the emissions of 17% of black carbon, 27% of nitrogen oxides, 22% of carbon monoxide and 36% of anthropogenic sulphur dioxide”. from the analysis of 187 countries for the period 1970 -2012, kanemoto et al. (2014) also confirmed the shift of pollution burden from advanced nations to developing countries. they therefore, recommended that consumption of pollution-intensive goods should be curbed in advanced countries to curb global pollution. sawhney and rastogi (2015) analysed us-india trade for the period 1991-2010 and concluded that india had become pollution haven for the iron, steel and chemical industries of the usa. mccollough et al. (2016) also reported that the tyre industry (one of the most polluted industry) of the usa had shifted its manufacturing to india. this shifting resulted in a decrease in emissions in usa and increased emissions in india. tang (2015) revealed that imports of toxic chemicals of the usa from developing economies had increased during the period 1989-2006. in indicates the specialization patterns of developing countries. these empirical findings and facts provide a robust support to the phh. oita et al. (2016) examined the global nitrogen footprint for 188 countries. the results revealed that 25 per cent of global nitrogen footprint was due to internationally traded commodities that were exported from emerging nations to the developed nations. they therefore, concluded that nitrogen pollution in developing countries had been primarily driven by the demand of the consumers of wealthy countries. o'sullivan (2017) also reported that globalization of goods and services had shifted the harmful effects of some production activities from consuming societies to producing societies. he cited the example of the toys that are sold in the usa, and western europe and are manufactured in china. equally, zhang et al. (2017) claimed that high mass consumption in the usa and western europe were related to 108600 premature deaths in china. libo and chang (2017) also found a significant impact of international trade on all pollution indicators in china. they, therefore, recommended that industrial enterprises from china should strictly adhere to environmental standards and to clean development. on the contrary, the opponents of the phh claim that following the trade liberalization, a country becomes more competitive and efficient in resource use and to implant environment-friendly technologies. mani and wheeler (1998) stated that phh had been as transient as low wage-havens. wheeler (2001) claimed that suspended particulate matter (spm) and organic water pollution (bod) had been on the decline in mexico, brazil, and china since from the beginning of trade liberalization era. kahn (2003) found that pollution content in manufacturing imports of the usa from developing countries for the period 1958-1994 had decreased. melo (2004) also revealed that pollution-intensive industries had higher trade barriers as compared to other industries. he examined the trade of five most pollution-intensive industries between 22 developed and 30 less developed countries for the period1981-1998. similarly, lovely (2008) claimed that fdi and production fragmentation had positively contributed to curtail pollution in china. atici (2009) found that trade liberalization did not increase the emission levels in the eastern and central european countries. kearsley and riddel (2010) also claimed the lack of empirical support in favour of the phh. also, he and wang (2012) claimed that trade liberalization generally leads to an upsurge in economic activities and wealth generation that eventually lead a country to attain a quality environment. moreover, international trade transfers advanced and energy-efficient technologies to developing nations. tan et al. (2013) examined the australia and china bilateral trade for the period 2002-2010 to verify the phh stance. their results specified that trade is beneficial for the environment of both nations. this finding is contrary to the phh claim that increased trade deteriorates the global review of economics and development studies, vol. 6 (1) 2020, 83-95 87 environment. they also discovered that co2 emission from australia and china in nontrade time period was high than the trade period between two nations. likewise, keho (2016) found that trade has increased energy efficiency in six african countries that is the indicator of the improvement of the environment. further, mahmood and alkhateeb (2017) found international trade helpful in reducing pollution for the kingdom of saudi arabia (ksa). they analysed the influence of international trade on co2 emissions for time span of 1970 to 2016. hence, the conclusive empirical results on the phh trade patron are still pending. especially in the context of trade between advanced and developing nations, the census has not been built yet about the authenticity of the phh. 3. methodology 3.1 model following the grossman and krueger (1995) and shafik (1994), the current study employs following basic model. this model is extensively used to examine the ekc relation between income and environment for a panel data set. (1) here, , stands for pollution, for income and µit is the residual term that is assumed to be white noised. whereas countries are shown as i = 1.2.3.….…. n and years as t = 1.2.3.4…. t. the ekc relation between income and environment is determined when >0 and <0. past studies specify that pollution is determined by several variables other than income, therefore, two critical determining factors of pollution: (ec) energy consumption and foreign direct investment (fdi) are incorporated in equation (2) as a control variable. (2) as current study aims at determining the impact of the phh trade pattern on the slope of the ekc, therefore, the exports of pollution-intensive goods from asean countries to japan ( are included in the ekc equation (3). (3) if in equation (3) is found positively significant, it can be interpreted that are contributing to the pollution of asean countries. the point on the ekc where pollution starts to decline with further growth in income can be attained by following formula turning point income level (4) the comparison of this point calculated from equation (2) where are supposed to affect the income environment relation implicitly and from the equation (3) where have been included explicitly, would reveal how much production, specialization and exports of the pollution-intensive goods contribute in delaying the turning point on the ekc. in other words, it would indicate how much have contributed to increasing environment cost of economic growth in the asean countries. some scepticism may be developed about the implicit impact of on the turning point of the ekc. the difference in income level where the ekc turns from the equation (2) and the equation (3) may be due to other factors then . to overcome these uncertainties, the current study includes in the ekc specification as interaction term with income. in this way turning point income level has become context-specific (rehman et al., 2012; webber and allen, 2004). this specification essentially delivers a method to investigate diverse turning points of the ekc corresponding to different level of . the review of economics and development studies, vol. 6 (1) 2020, 83-95 88 equation (5) shows the extended model of the ekc by adding with income as an interaction term. (5) the equation (5) can be used to find the true impact of on the turning point of the ekc. aubourg et al. (2008) claims that through this model the turning point income level can be calculated inclusive of the exports indicators. the income level at the turning point of the ekc can be derived as follow. turning point income level (6) now the turning point per capita income level from in the equation (6) has become dependent on . by assuming different values of , the turning income level of the ekc can be calculated corresponding to different levels. moreover, wald test of zero restriction on the parameters is employed to detect the interaction term effect in this model. co2 emission is mostly used as proxy of the environment in the prior literature on the ekc and the phh. studies like hassaballa (2013) and kivyiro and arminen (2014) provides a logical explanation of taking co2 emission as a measure of pollution. according to them, co2 is closely related to the local pollutants like nox (nitrogen oxide) and so2(sulphur dioxide). it is also a significant determinant of global warming and climate changes. similarly, as per the practice of ekc and the phh studies, gdp per capita has been taken for the proxy of the income. while the exports of pollution-intensive goods from the asean to japan (xdja) has been employed to observe the presence of the phh. the pollution-intensive goods include those goods that have the most polluted production process. in the context of this study, chemical, plastic, paper and pulp and wood industries are taken as most pollution-intensive industries. 3.2 data dependent upon the availability of the data, the analysis is confined to only six main asean countries, i.e. thailand, malaysia, vietnam, singapore, philippine and indonesia for the period 1989 2017. as per previous exercise of the phh and the ekc studies, co2 emission is taken in ‘metric ton.’ the data about co2 emissions is attained from the report of international energy statistics (ies, 2018). whereas, the per capita income of all countries has been gathered from the world economic outlook 2018. the data for fdi and energy consumption (ec) has been attained from world development indicator 2018. the ec is measured in kg of oil equivalent per capita. while, the data for export of pollution-intensive from asean countries to japan has been taken from international trade statistics (2018). 4. results and discussions the empirical analysis includes descriptive statistics, panel unit root tests, panel co-integration tests and fully modified ols (fmols). the analysis starts with descriptive statistics given in table-2. the standard deviations relative to the mean indicate substantial variation in the variables. moreover, the values of skewness and kurtosis indicate that variables are normally distributed and are not skewed to left or right. table 2 descriptive statistics variables co2 x ec fdi xdja mean 147 7125 1697 7.58e+09 1729145 median 104 2356 845 3.84e+09 1235932 std. dev. 125 11852 1679 1.18e+10 1607783 review of economics and development studies, vol. 6 (1) 2020, 83-95 89 skewness 1.59 2.57 1.42 3.246102 1.41 kurtosis 5.93 9.26 3.90 14.54442 4.65 observations 156. 156 156 156 156 the analysis of time series data requires the investigation the unit root properties of the variables. in table-3 the results of panel unit root tests: levin et al. (2002)(llc) and im and pesaran (2003)(ips) are surmised. according to the results all the variables are non-stationary at level i.e., i (0). however, they become stationary at first difference i.e., i (1). hence, it is concluded that all the variables are integrated of order (1). table 3 panel unit root tests statistics llc ips variable level first difference level first difference co2 2.09 -10.36 4.05 -9.26 [1.00] [0.00] * [1.00] [0.00] * x 7.13 -5.54 8.07 -4.1 [1.00] [0.00] * [1.00] [0.02] * x2 6.69 -1.97 6.67 -1.27 [1.0 [0.02] * [1.00] [0.10] * fdi 3.72 -9.59 4.43 -12.19 [0.99] [0.00] * [0.99] [0.00] * ec 0.52 -8.47 0.51 -7.84 [0.70] [0.00] * [0.70] [0.00] * xdja 5.55 -2.81 5.19 -3.59 [1.00] [0.002] * [1.00] [0.00] * note: the lag selection for every variable is based on akaike info criterion (aic). newey-west bandwidth selection with bartlett kernel is used for the llc test. the levin, lin, and chu (llc) and im, pesaran and shin w-stat (ips) tests have ho: the series has a unit root. llc and ips tests for all the series include a constant as an intercept. *rejection of the null hypotheses of a unit root at the 5% significance level the outcome of panel cointegration tests i.e., pedroni(1999) and fisher (1932) for the equations (2), equations (3) and equations (5) is given in table-4, table5, and table-6 respectively. five out of seven pedroni tests statistics reject the null hypothesis of no cointegration in all cases. the alternate hypothesis is therefore, accepted. which implies a long run cointegrating link in three equations. moreover, fisher tests statistics also do not accept the null hypothesis of none, at most one and at most two co-integration vectors for all equations. then, an alternate hypothesis of at least one, more than one and more than two co-integration vectors are accepted. hence, there is robust proof that variables in equation (2), equations (3), and equation (5) have long-run equilibrium co-integrating relationship. table 4 the test statistics of panel cointegration test for equation (2) pedroni residual cointegration test automatic lag length selection based on aic with a max lag of 4 statistic prob. panel v-statistic 2.482 0.0065 panel rho-statistic -1.165 0.122 panel pp-statistic -3.149 0.0008 panel adf-statistic -3.248 0.0006 group rho-statistic 0.7142 0.7624 group pp-statistic -1.747 0.0404 review of economics and development studies, vol. 6 (1) 2020, 83-95 90 group adf-statistic -2.489 0.0066 johansen fisher panel cointegration test unrestricted cointegration rank test (trace and maximum eigenvalue) hypothesized no. of ce(s) fisher stat.* (from trace test) prob. fisher stat.* (from max-eigen test) prob. none 102.5 0.00 66.88 0.000 at most 1 50.18 0.00 31.93 0.0014 at most 2 26.94 0.0079 25.35 0.0133 at most 3 10.7 0.5549 10.75 0.5506 at most 4 11.76 0.4652 11.76 0.4652 * probabilities are computed using asymptotic chi-square distribution table 5 the test statistics of panel cointegration test for equation (3) pedroni residual cointegration test automatic lag length selection based on aic with a max lag of 4 statistic prob. panel v-statistic 1.768 0.0385 panel rho-statistic -0.439 0.3304 panel pp-statistic -2.855 0.0022 panel adf-statistic -3.012 0.0013 group rho-statistic 1.414 0.9213 group pp-statistic -1.545 0.0612 group adf-statistic -2.503 0.0062 johansen fisher panel cointegration test hypothesized fisher stat.* fisher stat.* no. of ce(s) (from trace test) prob. (from max-eigen test) prob. none 233.5 0.00 156.6 0.00 at most 1 103.1 0.00 43.67 0.00 at most 2 67.7 0.00 44.71 0.00 at most 3 33.35 0.0009 25.05 0.0146 at most 4 17.92 0.1182 15.12 0.2348 at most 5 17.97 0.1167 17.97 0.1167 * probabilities are computed using asymptotic chi-square distribution table 6 the test statistics of panel cointegration test for equation (5) pedroni residual cointegration test automatic lag length selection based on aic with a max lag of 4 statistic prob. panel v-statistic 1.036 0.1501 panel rho-statistic -0.447 0.3275 panel pp-statistic -2.805 0.0025 panel adf-statistic -3.010 0.0013 statistic prob. group rho-statistic 1.2036 0.88 group pp-statistic -1.799 0.03 group adf-statistic -2.860 0.0021 johansen fisher panel cointegration test review of economics and development studies, vol. 6 (1) 2020, 83-95 91 hypothesized no. of ce(s) fisher stat.* (from trace test) prob. fisher stat.* (from max-eigen test) prob. none 205 0.00 123.4 0.00 at most 1 109.2 0.00 70.67 0.00 at most 2 53.49 0.00 30.1 0.0027 at most 3 31.38 0.0017 26.48 0.0092 at most 4 14.88 0.2483 14.44 0.2734 at most 5 15.45 0.2177 15.45 0.2177 * probabilities are computed using asymptotic chi-square distribution after confirming the long run cointegration relation, the fmols is applied to estimate the cointegrated relation. the results for all three equations are shown in table-7. from the results, it is evident that the coefficient on income (x) is positively significant, and the coefficient on squared income (x2) is negatively significant. the ekc presence is therefore, justified for the asean countries. the results are in line with (borhan et al., 2012; kumar and khanna, 2009; lipford and yandle, 2010; saboori et al., 2012). the turning point on the ekc where pollution starts to decline with further economic growth is observed at $17921 gdp per capita for the equation 2. all the asean countries are well below to this per capita income level except singapore, that is an advanced country with per capita income of 57714 (2017). these results are in line with jain and chaudhuri (2009), who claim that advanced countries are on the falling part whereas developing economies are at the rising part of the ekc. table 7 estimation results of pooled fmols variables model no 2 model no 3 model no 5 x 0.014337 (0.001) 0.009638 (0.050) 0.019725 (0.00) x2 -4.00e-07 (0.000) * -3.30e-07 (0.000) * -6.76e-07 (0.000) * dxja*x 2.24e-09 (0.000) dxja 1.71e-05 (0.000) fdi 9.91e-09 (0.000) 8.06e-09 (0.000) 7.99e-09 (0.000) ec 0.019565 (0.122) 0.020881 (0.133) 0.000974 (0.010) r2 0.836 0.868 0.872 observations 150 150 150 turning point 17921 14603 17454 these results imply that more economic expansion in the asean countries especially in thailand, philippine, vietnam and indonesia that are below to the turning point of the ekc, will bring more emission of co2. these countries, therefore, need to pursue effective environmental policies while pursuing economic growth. the results of the equation-3 are almost like the results of the equation-2 regarding size, sign, and a significance level of the coefficients. the exports of pollution-intensive goods from asean to japan (xdja) have a positive and significant impact on pollution. it implicates that xdja also contributes to pollution in the asean countries. interestingly, when xdja is controlled to affect the income-environment relation in equation-3, the turning point income at ekc is observed at $14603 per review of economics and development studies, vol. 6 (1) 2020, 83-95 92 capita . therefore, it can be concluded that the specialization and export of pollution-intensive goods delaying the turning point of the ekc. the higher adjusted r2 (coefficient of termination) of the equation-3 indicates that it is superior to equation -2 in terms of speciation and explanatory power. the results of equation-5 are also almost tantamount to the equation-2 and equation-3 regarding the size, sign, and a significance level of the coefficients. the interaction term has a significant positive effect on pollution. it suggests that given level of income, pollution in the asean countries increases with the increase in xdja. this also can be interpreted in another way around. the income level where ekc turns in the equation-5 can be calculated by the formula given in the equation-6. in this formula, xdja is taken as zero, income level where ekc turns is $14590 per capita. however, considering the average value of xdja, the income level where ekc turns, reaches to $17454 per capita. hence specialization and exports of pollution-intensive goods (chemical, plastic, paper and pulp, woods) to advanced countries like japan delays the turning point of the ekc. this suggests that exports of pollution intensive goods increase the environmental cost of economic growth in asean countries. table 8 wald test of restrictions null hypothesis: c (3) =0 interaction does not matter in the model alternate hypothesis: c (3) =0 interaction does matter in the model test statistic value df probability t-statistic 3.68648 139 0.0003** f-statistic 13.59016 (1, 139) 0.0003** chi-square 13.59016 1 0.0002** normalized restriction (= 0) value std. err. c (3) 1.04e-09 2.83e-10 restrictions are linear in coefficients. **rejection of the null hypotheses at 5% significance level it is also worth mentioning that peak turning point per capita gdp in the equation-5 at average xdja is almost like the turning point per capita income in the equation -2 where the impact of export of pollution-intensive is supposed to exist implicitly. this indicates that three models adequately explain the effect of xdja on pollution in the asean countries. furthermore, the coefficients on explanatory variables as well as on interaction term are consistent regarding the sign, magnitude, and significance level. the equation-5 has the highest adjusted r2 than equation-2 and equation-3. it implies that equation-5 is more correctly specified. the results of the study confirm both the contributing role of the pollution-intensive exports to pollution and delaying of the ekc turning point. the coefficient on fdi in all three models is significant and positive. which defines that fdi also contributes to co2 emission in the asean countries. this empirical output is another support to the phh stance that fdi fal-mulali and sheau-ting (2014)lows to the developing countries harm the environment of the host country. the results are similar to baek and koo (2009), kostakis et al. (2017) and neequaye and oladi (2015) who claimed that fdi has increased the pollution in developing countries apart from increasing the income and employment. moreover, the coefficients on energy consumption (ec) in all three models are also positively significant. this implies that ec also has contributed to the increase in the emission of co2 from the asean region. the results are similar to the findings of ang (2007) ramanathan (2002). finally, to justify the inclusion of interaction term in equation-5 wald test of coefficient restriction has been employed. the f-statistic, t-statistics, and chi-square statistics in table-8 reject the null hypothesis. the alternate hypothesis is therefore, accepted that interaction term has significant review of economics and development studies, vol. 6 (1) 2020, 83-95 93 impact in the equation 5. 5. conclusions and recommendations in recent times, environmental problems such as water and air pollution, environmental changes, and global warming have attracted significant attention of communities, academic scholars, and policymakers. environmental issues exert severe threats to human life as well as the future of the planet. the attempts are underway to understand the driving factors of environmental changes. the theories like ekc and the phh try to explain this phenomenon in economic prospectus. however, the existing environmental policies that focus the reduction of greenhouse gases domestically overlook the importance of embodied co2 emission in internationally traded flows. the current study therefore, investigates this issue in the context of the trade between asean countries and japan. according to the results, the phh holds in case of asean versus japan trade. the results also confirm that economic growth does maintain a nonlinear inverted u-shaped connection with the pollution for the region. the necessary message of the phh is that world pollution cannot be curtailed unless advanced countries reduce their high mass consumption, particularly of pollution-intensive products. a logical question in this context arises, to whom present developing countries would pass their pollution-intensive production process in future when they would become rich? the current study, therefore, does not recommend any partial solution for the environmental problems of the world, especially for global warming and environmental changes that are mainly driven by co2 emissions. an integrated well-devised global program is imperative to tackle these alarming issues, and advanced countries should lead to this program. the developed countries should assist developing countries by providing them with finance and technology in making sound environmental policies because developed countries are the ultimate users of pollution-intensive goods. moreover, people of developed countries must adopt a sustainable lifestyle to reduce their carbon footprint. moreover, the pollution-intensive goods are resource-intensive, and emerging nations have comparative advantage in the production of these goods as environment resources are under-priced there. the pricing policies for environmental goods, therefore, need to be examined in developing countries. the real cost of environmental resources must be reflected in the price of goods and services that are produced using these resources. references al-mulali, u., & sheau-ting, l. 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(2017). transboundary health impacts of transported global air pollution and international trade. nature, 543(7647), 705-709. https://www.voanews.com/a/pollution-trade-study/3804203.html review of economics and development studies, vol. 6 (1) 2020, 83-95 96 review of economics and development studies, vol. 7 (4) 2021, 493 500 493 factors affecting non-performing loans in pakistan during the covid-19 pandemic: a case of micro finance banks muhammad akbar ali ansari a , nadia hanif b , muhammad sohail tahir c , ali junaid khan d a assistant professor, department of commerce, the islamia university of bahawalpur, pakistan email: makbar.ali@iub.edu.pk b assistant professor, department of economics and business administration, division of administrative and management science, university of education, lahore, pakistan email: nadiahanif77@yahoo.com c assistant professor, department of management sciences, comsats university islamabad, vehari campus, pakistan email: sohailutm@gmail.com d institute of business management & administrative sciences, the islamia university of bahawalpur, pakistan email: junaaidkhan@yahoo.com article details abstract history: accepted 18 december 2021 available online december 2021 the basic purpose of this study is to investigate the factors affecting non-performing loans of microfinance banks in pakistan during the covid-19 pandemic. the research used secondary data from the pakistan bureau of statistics and sbp websites regarding the banking industry in fy 2020–2021, and the data was subjected to a multiregression analysis. the analysis included a number of variables, including gdp growth rate, management efficiency, bank size and return on assets. according to the study's results, all three variables had a statistically significant effect on the outcome except business size. nonperforming loans have been found to have an important positive association with the country's economy. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: non-performing loans, covid19 and microfinance bank jel classification: h81 doi: 10.47067/reads.v7i4.409 corresponding author’s email address: junaaidkhan@yahoo.com 1. introduction unpredictability will inevitably increase banking risks as the degree of uncertainty in the financial markets grows. because of this foundation, managing and growing a great business becomes a very demanding and challenging endeavor. as a result, bank managers are in charge of developing an adequate risk management strategy and policy for their institutions (bhadury et al., 2021). operations review of economics and development studies, vol. 7 (4) 2021, 493 500 494 must be safe, stable, and lucrative for management to be held responsible for achieving balance. for the sake of this definition, "risk" is "a circumstance in which there is a possibility that the ideal result we anticipate or aspire for would depart negatively from what we expect or hope for." accordingly, for "risk" to exist in financial transactions, it must meet the following criteria: it must be conceivable, it must result in economic loss, and it must be unexpected and unplanned. (hassan et al., 2022). the quality of a bank's loans is important since loans are the riskiest component of its assets, and the quality of those loans is a crucial driver of the stability and profitability of the institution. according to the basel committee on risk management, non-performing loans are those that are not collected within 90 days of the loan's original due date and are thus considered non-performing. when we believe that giving loans is one of the most critical operations performed by all banks, we can grasp the significance of the banks' exposure to non-performing loans and the necessity of risk management in the banking industry. consequently, numerous solutions for mitigating the threat have been developed so far. they have shown their effectiveness (or inefficiency) to the maximum degree possible during financial crises. a rising number of discussions regarding problematic loans and how to deal with them is taking place, which is a positive development in this atmosphere. it is becoming more probable that banks will settle challenging loans and clean up their balance sheets to provide a solid foundation for future lending growth to consumers and businesses (mezghani et al., 2021). the global spread of covid-19 is a human tragedy taking place all over the globe, with europe serving as the epicentre of the pandemic at the moment. in the wake of the covid-19 pandemic, the economy has been thrown into chaos, with many enterprises trying to stay in business due to the outbreak, and pakistan was no exception. because of the significance of bad loans, which have been shown to be a substantial danger to the financial system, this issue was chosen as the primary focus of the study. national and international studies on financial stability conducted by central banks have shown that non-performing loans constitute the greatest danger to the financial stability of the banking industry. an analysis is conducted in this article on the influence of the covid-19 outbreak on the issue of non-performing loans within pakistani microfinance banks when loan loss provisions and the real gdp growth rate are taken into account. the fundamental assumption is that these factors will significantly influence the number of nonperforming loans in the financial system, which is supported by the evidence. because of this, we should conduct a study to determine if and how these attributes are connected. indeed, by using the right econometric approach, it will be feasible to determine whether or not these variables are moving in the same direction as one another. given what has been stated in both the academic and empirical literature, it is reasonable to conclude that empirical study into the relationship between these characteristics and non-performing loans is necessary. an increasing number of non-performing loans has been identified due to insufficient effective preventative and control measures (agnihotri et al., 2021). a more in-depth discussion was had on the role that stress testing plays in aiding in the monitoring of financial stability and interconnections in the financial system. another study identified the shortand long-term objectives that must be met to be successful (karim et al., 2021). even while banks can escape bankruptcy, non-performing loans have a detrimental influence on their cost structure and efficiency and their desire to lend to other businesses and individuals (banna et al., 2021). in the case of high levels of non-performing loans (karim et al., 2021), the npl ratio begins to rise rapidly as credit growth is slowed, whereas in countries with "no npl issue," the npl ratio remains stable as a result of strong credit growth and nominal gdp growth. "the gdp has a strong de-terministic impact on the non-performing loan ratio" (almarayeh & review of economics and development studies, vol. 7 (4) 2021, 493 500 495 almarayeh, 2021). the authors write: "this demonstrates that the health of the economies of (chosen) developing markets is correlated with the quality of bank assets." another school of thought is that quick remedial action has a significant influence on the stability of the banking system and the reduction in the number of non-performing loans (zhang et al., 2020). research published in 2020 investigates the impact of macroeconomic variables on nonperforming loans and financial stability in pakistan's banking sector (mohanty & mishra, 2021). according to the statistics, an improvement in macroeconomic circumstances is correlated with an improvement in credit quality, and the reverse is true. further research has shown that improved macroeconomic cases result in more favourable conditions for the financial stability of the banking industry as a whole. banks delayed recognising non-performing loans due to the covid-19 pandemic, waiting for recognition in the income statement and concealing the existence of a capital loss. when this occurs, it can result in non-viable businesses being supported for a lengthy period (known as "doubtful loans") and critical firm-level restructuring efforts being postponed, both of which have adverse effects on economic development. the basic purpose of this study is to investigate the factors affecting non-performing loans of microfinance banks in pakistan during the covid-19 pandemic. 2. literature review in recent years, covid-19 has transformed the scientific scene. as the virus wreaks havoc on the global economy every day, measures are being conducted by various governments across the world to flatten the covid-19 curve. in general, social science scholars are continually generating empirical evidence to demonstrate the effect of covid-19 on the economy. covid-19 was extended throughout the african continent as a severe side effect of globalization (almarayeh & almarayeh, 2021). ozili and arun (2020) indicated in another study in pakistan that the covid-19 outbreak led the pakistan economy to decline, producing economic distress for the country's people. while investigating the relationship between covid-19 and microfinance banks in pakistan, researchers hypothesized that the pandemic harmed the firms' operating activities while also causing disequilibrium in the supply chain and a financial crisis in the selected enterprises (ajmal et al., 2021). meanwhile, collins (2020) employed differential analytic modelling to analyse how the covid19 pandemic influenced stock market value in china, europe, and the united states. the analysis found that the covid-19 outbreak caused the dynamics in stock markets in various nations. however, examining the effect of the covid-19 pandemic on the country's small and medium-sized companies according to the study, a modest decline in microfinance banks' production and sales and a significant drop in contracts and deliveries were caused by the country's covid-19 closure (wronka, 2021). there is a considerable direct link between banks, other financial institutions, and the promotion of entrepreneurial growth in india (miah et al., 2021). a conceptual review was conducted to assess several policies taken by the indian government to promote equity ownership in the country's microfinance institutions (miah et al., 2021). the chi-square test was done to determine the connection between micro-credit and microfinance bank development (ajmal et al., 2021). the study gathered data from 450 respondents and determined a significant association between micro credit and the expansion of microfinance banks in the state under consideration. in comparative research done in lagos, the analysis found that the state's informal sector activities grew considerably after three years of review of economics and development studies, vol. 7 (4) 2021, 493 500 496 operations. the study also indicated that the state's microfinance operations were fueled by conventional financial institutions' refusal to help emerging micro-enterprises and community banks' conversion to microfinance banks (wronka, 2021). similarly, researchers studied microfinance institutions and their challenges (hassan et al., 2022). the author exploited the survey results to suggest that microfinance organizations directly reduce poverty. in a different vein, they used structured questionnaires to gather data from pakistan on the effect of microfinance institutions and microfinance policies on employment prospects. according to the authors, microfinance bank growth is linked to the spearman correlation. the following variables are significantly associated with non-performing loans: gdp growth is associated with a decrease in non-performing loans (jamil et al., 2021; ltifi & hichri, 2022). furthermore, babouek and janar identified a positive relationship between non-performing loans, bank specific factors, and macroeconomic factors are associated with a decrease or increase in the rate of non-performing loans (agnihotri et al., 2021; banna et al., 2021; mezghani et al., 2021). 3. methodology in this study, we sought to evaluate the existing hypotheses or replicate them by analyzing the cause and effect connection among indicators of non-performing loans of microfinance banks in pakistan. a quantitative research approach is merely employed in this study. the quantitative examination approach is beneficial if numerical information is created via samples to evaluate the application of current theory through analysis (hassan et al., 2022). the outcomes and techniques of prior investigations are reviewed. 3.1 research design the purpose of this study was to investigate the factors that affected non-performing loans of microfinance banks in pakistan during covid-19. it looked at two categories of variables. one that was macroeconomic in nature and another that was bank-specific. this study's quantitative nature uses this inquiry was carried out using a study technique, which was requested as part of the request. in this study, the researcher selected a sample of microfinance banks from pakistan for investigation. 3.2 population and sample the sample size is governed by the variables involved as well as by the sample itself. it is the primary rationale for selecting a sample for a study, and it also assists researchers and readers in making demographic predictions about the population. the data from ten microfinance institutions was used as a sample over the last two years, from 2020 to 2021, during the covid-19 pandemic. information was gathered from annual reports of bans and state bank online pages. and gdp growth rate obtained from the state bank of pakistan's database. this information is utilized to investigate the theoretical framework. 3.3 the operational model it makes use of a panel data regression model to investigate the impact of different factors on non-performing loans of microfinance bank in pakistan. when the same individual is monitored over a period of time, the panel data regression model is used (agnihotri et al., 2021). it is composed of time series and cross-section data, and it is called panel data (banna et al., 2021). the data collected by a bank over time is referred to as a cross-section. given the likelihood that panel data would vary within (banks), individual-specific (bankspecific) variables enable panel data estimation to take this variability into account while estimating review of economics and development studies, vol. 7 (4) 2021, 493 500 497 panel data (zhang et al., 2020). both dependent and independent variables must be considered in this investigation. in the above equation, gdpgr is economic growth, bs is bank size, roa and me is management efficiency. to measure these variables, following explains the measures of each variable in table 1: table: 1 description of variables name of variable measure non-performing loan npl non-performing loans to total loans of banks bank size bs natural logarithm of total assets of banks. economic growth rate eg growth rate of gross domestic product management efficiency me management efficiency ratios return on assets roa return on assets 4. conceptual framework 5. result and discussion banks specific factors were collected from audited financial statements of microfinance banks were all investigated. and gdpgr data obtained from state-bank website. npl gdpgr bs me roa review of economics and development studies, vol. 7 (4) 2021, 493 500 498 table 2: descriptive statistic: dependent variable – non-performing loan variable name mean minimum maximum standard deviation non-performing loan 0.155 0.119 0.180 0.125 table 2: descriptive statistic: factors affecting the level of non-performing loan variable name mean minimum maximum standard deviation eg 3.89 2.65 5.10 0.23 bs 13.37 12.69 15.61 1.06 roa 4.05 4.03 8.96 1.46 me 0.23 0.12 0.56 1.12 table 3: empirical results of regression analysis independent variables coefficient std. error t-statistic prob. eg -0.012 0.139 2.194 0.024 bs 0.015 0.063 1.982 0.613 roa 0.292 0.275 3.121 0.018 me 0.341 0.112 1.223 0.011 r-squared 0.683 mean dependent var 0.155 adjusted r-squared 0.278 s.d. dependent var 0.124 as demonstrated in table 4, the empirical results using the panel data regression model, we were able to arrive at these conclusions. to establish the relationship between the dependent and independent variables, the ordinary least squares (ols) model was utilized. the ols regression model is used in research when there are a large number of independent variables to examine. the threshold of significance in this study's analysis is set at 5 percent. all of the independent variables' p-values and t-values are less than the 5% criterion for statistical significance. as a result of the model's empirical results, the value of r-square is 68.30 percent, which is a high figure that represents a good fit model. this 68 percent figure indicates that non-performing loans changed as a result of the independent variables studied.the durbin-watson statistic is also used to measure the auto-correlation between two variables. the fact that the durbin-watson statistic is 2.01 indicates that there is no auto-correlation in the residuals as supported by the data. the f statistic test may be used to examine whether or not all independent variables have an influence on the dependent variable. the correlation value of 2.012974 indicates that there are six explanatory variables that are related to the independent variable (non-performing loan). review of economics and development studies, vol. 7 (4) 2021, 493 500 499 economic growth in pakistan has a negative coefficient and has a statistically significant impact on bank non-performing loans during covid-19, as shown by a p-value of 0.024 at the 5 percent level of significance. it implies that non-performing loans are adversely associated with economic development. increased economic growth will result in a reduction in non-performing loans. economic growth is measured in this study by the pace at which the gross domestic product growth rate. the number of non-performing loans is positively connected to the size of the bank. the size of the bank has a statistically insignificant impact on non-performing loans using this independent variable, as shown by a p-value of 0.613 at 5 percent. management efficiency has a positive and significant impact on npl during covid-19. the value of this variable's coefficient is positive, as shown by a p-value of 0.011 at 5 percent. the p-value of 0.018 demonstrates that roa has a significant impact on non-performing loans. 6. conclusion microfinance banks are one of the most significant actors in the contemporary financial markets of third-world countries with their lending activities. given that the placement of loans is the primary activity of banks and the most critical item on banks' balance sheets, it is vital that microfinance bank management correctly handles loans that banks issue to clients. the quality of granted loans is one of the primary variables impacting the bank's profitability. and during the covid-19 pandemic, microfinance bank management has placed a specific priority on monitoring and regulating the quality of loans and avoiding the incidence of non-performing loans during the pandemic. due to the financial crisis during covid-19, there was a decline in economic activity and, therefore, a fall in the buying power of people and legal organizations. hence, microfinance banks faced a rise in the number of non-performing loans. however, during the covid-19 pandemic, nonperforming loans are predicted to grow, and according to some studies, the banking industry all over the world might experience one of the most challenging years in 2020 and 2021. the examination of the collected data from the microfinance banks found the relationship between the postulated factors and non-performing loans during the covid-19 pandemic. thus, it was established that the improvement of non-performing loans is mainly related to improving economic circumstances in the nation. economic growth in pakistan has a negative coefficient and has a statistically significant impact on bank non-performing loans during covid-19, as shown by a p-value of 0.024 at the 5 percent level of significance. on the other hand, the size of the bank has a statistically insignificant impact on non-performing loans using this independent variable. management efficiency has a positive and significant impact on npl during covid-19. the value of this variable's coefficient is positive, as shown by a p-value of 0.011 at 5 percent. the p-value of 0.018 demonstrates that roa has a significant impact on non-performing loans. the effect of the covid-19 pandemic on non-performing loans in the banking industry of pakistan is not yet sufficiently visible considering the enforced moratorium on lending. in particular, these moratoriums have kept a significant number of loans from falling into the category of non-performing loans, and the true impact of covid-19 on this variable is not anticipated until after the moratorium term has expired. further studies may be conducted in the future to learn more about these and other macroeconomic causes that may have repercussions for non-performing loans. review of economics and development studies, vol. 7 (4) 2021, 493 500 500 references agnihotri, d., kulshreshtha, k., & tripathi, v. 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(2020). impact of covid-19 on china’s macroeconomy and agri-food system – an economy-wide multiplier model analysis. china agricultural economic review, 12(3), 387–407. https://doi.org/10.1108/caer-04-20200063. review of economics and development studies, vol. 7 (4) 2021, 501 514 501 dependence of academic performance on english speaking anxiety in academic programs of english medium instructional context rafaquat ali a , bushra shoukat b , ali ahmad kharal c a assistant professor, department of education, bahawalnagar campus, bahawalnagar, the islamia university of bahawalpur, pakistan email: rafaquatiub@yahoo.com b assistant professor, department of english, bahawalnagar campus, bahawalnagar, the islamia university of bahawalpur, pakistan email: bushra.shoukat@iub.edu.pk c principal, islamabad college for boys, sector: g-6/3, islamabad, pakistan email: dralikharal@gmail.com article details abstract history: accepted 17 december 2021 available online december 2021 most countries in the world have adopted english medium instruction in universities. the increasing global trend of the english language as the medium of instruction has made researchers focus on students' adjustment and performance in english medium instructional contexts. one key issue highlighted in english medium instruction is english speaking anxiety. the literature has pointed out that english language speaking anxiety among students has a dependency on their personal and interpersonal worries and the context of learning. pakistan is also a country that has adopted english medium instruction at different levels of education. therefore, the current study probed the dependencies of english language speaking anxiety on students' academic programs and how these anxieties impact students' academic performance in pakistan. the survey study design consisted of convenience or accidental sampling. the structural equation modeling helped researchers infer the significance of academic programs' impact on academic performance, the effect of language anxiety dimensions on academic performance, and the impact of academic programs on academic performance via englishspeaking anxieties. the academic departments significantly impact students' academic performance directly and indirectly through language-speaking anxieties. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: english medium instruction, communication apprehension, test anxiety, anticipated anxious behaviour in speaking english, comfort in speaking english, science students, academic performance, pakistan jel classification: p36, i21 doi: 10.47067/reads.v7i4.410 corresponding author’s email address: rafaquatiub@yahoo.com 1. introduction in an era of modern times, the english language has occupied a pivotal position in the league of international languages and has become a tool of globalization (schneider, 2014). this world language review of economics and development studies, vol. 7 (4) 2021, 501 514 502 is not limited to only being used for translation communication, but it is now the language of business, diplomacy, education, arts, sports, and tourism (schneider, 2014). the english language is successful enough to compete with national languages in different countries such as japan, germany, spain, and france (shohamy, 2014). the educational policies of various nations have introduced english as a compulsory subject at the primary level (nunan, 2003), and most of the countries have opted for the english medium of instruction and examination at higher education level (foyewa, 2015). english has been recognized as the language of science and research (gordin, 2015), and more than 98% of international scientific research is published in english (ramírez-castañeda, 2020). this mounting importance of english in an era of globalization has highlighted different issues related to english language learning in non-native english-speaking countries. in teaching english, whether as a foreign language, or a mainstream subject, the four skill areas are focused on; reading, writing, speaking, and listening (hinkel, 2006). however, english speaking skills depend on several other vital skills: content, discourse, information structuring, and the sound system (nunan, 2003). these sub-skills put students under stress while speaking and anticipating english speaking situations, and students might undergo anxiety. public speaking anxiety is considered a panic of delivering a speech or talk in public or a classroom because the speaker worries about negative feedback and expects humiliation from others (american psychological association, 2020). at the same time, the field has turned into english language anxiety, and the researchers now see this as a global phenomenon (nunan, 2003). from a psychological perspective, these are undesired cognitive and physiological reactions to a social and public speaking environment that end in difficulties in speaking effectively (fremouw & breitenstein, 1990). in other words, language anxiety is the condition of uneasiness felt by the learners in situations that involve the use of the english language, such as the classroom or formal and informal discussions (gardner & macintyre, 1993). although anxiety is mostly prevailing among students, it moderately impacts routine life (rapee et al., 2009). often, academicians use communication apprehension and audience anxiety in place of speech anxiety (fremouw & breitenstein, 1990). however, it is a distinctive variable in foreign language learning, and it has unique ramifications because students often think that they do not have the mental ability to learn a foreign language, and they feel that they are not capable of learning this language (horwitz et al., 1986). students who suffer from english speaking anxiety avoid potential communication situations to reduce speaking stress (pappamihiel, 2002). ultimately, the probability is that this will negatively impact students' academic performance (aida, 1994). such students might develop negative beliefs about themselves. for example, they believe that they lack ability, have low intelligence, and are naturally not capable of learning this language (horwitz et al., 1986). this higher language speech anxiety reduces their internal motivation to learn, and they become anxious during learning and fail to communicate their learning and feelings (young, 1991). it damages their interpersonal relationships, self-reliance, self-esteem, and consequently, they become stressed and depressed (d'esposito et al., 2011). although personal and interpersonal worries play a critical role in developing language speech anxiety, students' language learning beliefs, teacher-student interactions, classroom environment, and students' language backgrounds also play a prominent role in english speech anxiety (young, 1991). this language anxiety has a more adverse impact at the university level because teacher-student dialogues and discussions are integral to higher education. therefore, students' unwillingness and inabilities to communicate hinder their effective communication with teachers at the university level; consequently, they have to suffer academically (boohar & seiler, 1982). furthermore, those students' academic performance is adversely affected who study subjects that have laboratory work or fieldwork review of economics and development studies, vol. 7 (4) 2021, 501 514 503 as part of their educational activities (miller & edmunds, 1992; seiler et al., 1978). furthermore, this anxiety is more heightened in small group classes because there is a possibility of frequent teacherstudent communication and dialogue (mccroskey, 1977). 2. conceptual framework the students' speech anxiety impedes their learning, and they develop a variety of undesired psychological and mental health issues such as stress, depression, low self-esteem (d'esposito et al., 2011; young, 1991), which might be even more harmful to the students not even from the educational perspective but also for overall general health and living (hughes et al., 2008). therefore, it is essential to identify english speaking anxiety levels in students. in the ever-increasing importance of the english language in the globalization era, different efforts are underway to understand nature, develop measures, and ascertain the impacts of english speech anxiety on students learning. however, there are various measures, definitions, alternative terms, and construct labels such as communication apprehension, public speaking anxiety, and language anxiety or english speech anxiety (young, 1991). yaikhong and usaha (2012) combined all these measures and proposed an english speech anxiety model that unified all mainly used measures, concepts, and terms in a thai study. the public speaking class anxiety scale in english comprises four dimensions of english speech anxiety; anticipated anxious behaviours in speaking english, comfort in speaking english, communication apprehension, and test anxiety (yaikhong & usaha, 2012). yaikhong and usaha (2012) identified commonalities in the various famous instruments of foreign language anxiety and combined these models into a single english-speaking anxiety measurement model. for the reasons, speech anxiety can be most prevalent in situations associated with frequent student and instructors interaction, such as lab work in science classes (seiler et al., 1978), small classroom settings (mccroskey, 1977), and university education (boohar & seiler, 1982). hence, speaking anxiety is anticipated to be more related to students' grades in those situations. therefore, it is important to test this model in contrasting classroom environments. young (1991) recommended that the relationships between academic grades and anxiety types should be probed because english speech anxiety has different dimensions. therefore, it is needed to examine which dimension impacts students' grades and to which extent. although previous studies have highlighted the relationships of various academic programs with students' academic performance, there is a need to explore proportions of variance in these differences explainable by the students' speech anxiety in an english medium instructional environment. in an english medium of instruction, students' medium of instruction and examination is english, but english is not their first or second language; instead, it is a foreign language (macaro et al., 2017). furthermore, it is worthwhile to explore whether it is possible to explain students' anxiety dimension differences regarding the subject they are studying and how these different dimensions of speaking anxiety impact students' academic grades. pakistan has english medium instruction at the university level. therefore this study aimed to discover students' speaking anxiety links to various academic fields offered to students. consequently, the conceptual framework shown in figure 1 depicts that the current study explores the relationships of different academic areas with students' english speech anxiety and their academic performance. review of economics and development studies, vol. 7 (4) 2021, 501 514 504 figure 1: conceptual framework based on the above conceptual basis, the study has the following objectives: 1. to explore the impact of different fields of study on students' english speech anxiety. 2. to discover the impact of different dimensions of speech anxiety on students' academic performance. 3. to identify the impact of students' academic programs on their academic performance. 4. to identify the total effect of academic programs on students' academic performance, including students' english speaking anxieties. 5. to find the mediation role of different speech anxieties in determining the impact of academic programs on students' academic performance. the researcher formulated the following postulates to fulfil the pre-defined objectives of the study: 1. there will be no significant impact of different fields of study on students' english speech anxiety. 2. there will be no significant impact of different dimensions of speech anxiety on students' academic performance. 3. there will be no significant impact of students' academic programs on their academic performance. 4. there will be no significant total effect of academic programs on students' academic performance, including students' english speaking anxieties. 5. there will be no significant mediation role of different speech anxieties in determining the impact of academic programs on students' academic performance. review of economics and development studies, vol. 7 (4) 2021, 501 514 505 3. method 3.1 sample the study sample was 534 undergraduate and postgraduate students of the bahawalnagar campus of the islamia university of bahawalpur. researchers used the convenience sampling technique (gay et al., 2012) in this study. the students available and volunteered to respond were counted as the study sample. the sample comprised 48 (8.98%) social science, 294 (55.05%) science, 27 (5%) computer science and information technology, and 165 (31.46%) english literature students in the sample. the sample size was considered sufficient because it was above the minimum rule of 10 times per arrow in the model (hair et al., 2017) (figure 2). 3.2 data collection the researchers used efl public speaking class anxiety scale (pscas) (yaikhong & usaha, 2012) to measure students' english language speech anxiety. this scale was developed by yaikhong and usaha (2012) by combining different items from the most prevalent english language anxiety scales. the selected items of pscas in this study measured four dimensions: anticipated anxious behaviours in speaking english, communication apprehension, discomfort in speaking english, test anxiety. the pscas final version of yaikhong and usaha (2012) consisted of 17 items. these 17 items were found relevant and appropriate in the thai context. however, there were 14 items found suitable in the pakistani context. the dimensions of anticipated anxious behaviours in speaking english and communication apprehension consisted of four items each, whereas discomfort in speaking english and test anxiety dimensions consisted of three items each. the researchers reversed the coding of 03 items of comfort in speaking english for changing these into discomfort in speaking english to make this dimension cohesive with the other three dimensions that imply speaking anxiety. in this way, 14 items were found valid and reliable in this study (table no.1 and table no. 2). the students provided their responses to each statement on a five-point scale of agreement ranging from strongly disagree =1, disagree =2, neutral =3, agree =4, strangely agree =5. the academic department was coded dummy variables. each department has two values, 0 and 1. 3.3 data analysis the researchers used the structural equation modeling approach to identify the significance and strength of anticipated direct and total effects. the structural equation modeling partial least squares approach was chosen because of its robustness to small sample size and normality issues (hair et al., 2019). furthermore, the pls-sem is suitable for exploratory research (hair et al., 2017) because the objectives and hypotheses of the study are exploratory. the smartpls2 software assisted in pls-sem modeling. 4. results 4.1 measurement model analysis table no. 1 and figure 2 depict different measurement model associated parameters. the values of average variance extracted (ave) of four dimensions of english speaking anxiety are above 0.50. it means that the four dimensions of public speaking anxiety have adequate convergent validity (hair et al., 2019). furthermore, the composite reliability rho and internal consistency measure cronbach's alpha values are above 0.70. these values reflect the composite reliability and internal consistency reliabilities of dimensions of english speaking anxiety within an acceptable range (hair et al., 2019). furthermore, all item loadings on the supposed dimensions of speech anxiety are significant and above 0.50 because the loading of an item on the latent variable should be above 0.50 to consider its loading significant (hair et al., 2014). review of economics and development studies, vol. 7 (4) 2021, 501 514 506 table no. 1 loadings, validity and reliability measure items loadings ave composite reliability cronbach’s alpha anticipated anxious behaviors in speaking english pscas_2 0.7308*** 0.5742 0.8435 0.7576 pscas_3 0.7359*** pscas_5 0.7986*** pscas_15 0.7638*** discomfort in speaking english pscas_4r 0.8873*** 0.6415 0.8421 0.7209 pscas_10 r 0.7704*** pscas_12 r 0.7373*** communication apprehension pscas_9 0.7331*** 0.5751 0.8438 0.7581 pscas_11 0.7893*** pscas_13 0.7933*** pscas_14 0.7146*** test anxiety pscas_1 0.8906** * 0.606 9 0.82 0.7174 pscas_7 0.7808** pscas_17 0.6465** p< 0.001= ***, p< 0.01=**, p<0.05=*, non-significant= n.s figure no. 2: first and second stage sem analysis review of economics and development studies, vol. 7 (4) 2021, 501 514 507 the measure model results show that the four latent variables in the model, anticipated anxious behaviours in speaking english, communication apprehension, discomfort in speaking english, and test anxiety have the discriminant validity (table no. 2). the square root of aves of these latent variables is above their interrelationships with other latent variables in the model (table no. 2). hence the data in table no. 2 affirm that latent variables in the model have discriminant validity (henseler et al., 2016). table no. 2 discriminant validity latent variables (fornell-larcker criterion) sr. no latent variables 1 2 3 4 1 anticipated anxious behaviours in speaking english 0.758 2 communication apprehension 0.737 0.758 3 discomfort in speaking english 0.047 -0.019 0.801 4 test anxiety 0.688 0.675 -0.013 0.779 4.2 structural model analysis table no. 3 shows that different academic programs impact students' english speech anxiety. various educational programs impart impacts on students' academic grades. the academic programs included in the study, the social science, english literature, physical sciences, computer science, and information technology, were associated with a significant decrease in students' anticipated anxious behaviours in speaking english. however, there are differences in the magnitude of these academic programs' negative impact on anticipated anxious behaviours in speaking english. the computer science and information technology program has the most negligible adverse effect on anticipated anxious behaviours in speaking english. in comparison, the english literature department has the highest negative impact on students' anticipated anxious behaviours in speaking english. unexpectedly, physical science impact was the second higher negative impact on anticipated anxious behaviours in speaking english. it is worth mentioning that students with higher academic backgrounds opt for sciences. the negative impact of social sciences on anticipated anxious behaviours in speaking english was half compared to the negative effects of the physical sciences and english literature departments on students' anticipated anxious behaviours in speaking english. the academic programs significantly impacted students' comfort in speaking english. the academic programs of social science and physical sciences positively and substantially impact students' discomfort in speaking english. the impact of english literature on discomfort in speaking english was negative but not significant. these impacts are almost in the anticipated directions. review of economics and development studies, vol. 7 (4) 2021, 501 514 508 table no. 3 direct effects path original sample (o) sample mean (m) t statistics academic programs -> anticipated anxious behaviours in speaking english social sciences -> anticipated anxious behaviours in speaking english -0.1012 -0.1035 2.2259* english literature -> anticipated anxious behaviours in speaking english -0.2121 -0.2178 4.1778** physical sciences -> anticipated anxious behaviours in speaking english -0.1958 -0.2007 3.6389* computer sciences & information technology -> anticipated anxious behaviours in speaking english -0.0836 -0.0829 2.2744* academic programs -> discomfort in speaking english social sciences -> discomfort in speaking english 0.1244 0.126 2.5996* english literature -> discomfort in speaking english -0.0229 -0.0237 0.4405 n.s physical sciences -> discomfort in speaking english 0.147 0.1482 2.769* computer sciences & information technology -> discomfort in speaking english 0.0424 0.0425 1.0085 n.s academic programs -> test anxiety social sciences -> test anxiety -0.1332 -0.134 3.0368* english literature -> test anxiety -0.1434 -0.1474 2.6983* physical sciences -> test anxiety -0.1918 -0.1949 3.6787* computer sciences & information technology -> test anxiety -0.0518 -0.0518 1.13 n.s academy programs -> communication apprehension social sciences -> communication apprehension -0.1669 -0.1717 3.6684* english literature -> communication apprehension -0.2139 -0.2183 4.3293** physical sciences -> communication apprehension -0.1709 -0.1743 3.4091* computer sciences & information technology -> communication apprehension -0.0457 -0.0453 1.1368 n.s public speaking class anxiety scale dimension and grades anticipated anxious behaviours in speaking english > grades -0.0494 -0.053 0.8288 n.s discomfort in speaking english -> grades 0.0261 0.027 0.7104 n.s test anxiety -> grades -0.1537 -0.1461 2.5849* review of economics and development studies, vol. 7 (4) 2021, 501 514 509 communication apprehension -> grades 0.0981 0.0928 1.6287 n.s academic program and grades social sciences -> grades -0.1318 -0.1333 2.9743* english literature -> grades -0.0188 -0.0207 0.3919 n.s physical sciences -> grades 0.0092 0.0077 0.1655 n.s computer sciences & information technology -> grades -0.1488 -0.1482 3.2282* p< 0.001= ***, p< 0.01=**, p<0.05=*, non-significant= n.s there was a significant impact of different academic programs on students' test anxiety. academic programs of physical sciences, english literature, and social sciences negatively impact students' english speech test anxiety. in comparison, the impact of computer science and information technology on english-speaking test anxiety was also negative but insignificant. likewise, the effects of academic programs of english, physical sciences, and social sciences are adverse and significant. all these students are afraid of speaking english in class and have english communication apprehension. in the case of different dimensions of english speech anxiety on students' academic grades, only the dimension of test anxiety has a significant negative impact on students' grades. in comparison, the academic programs of social sciences, computer sciences, and information technology significantly negatively affect students' academic grades. the other two academic programs have insignificant impacts. table no. 4 shows the total effects of academic programs on students' grades. there are significant total effects of academic programs on academic grades via speech anxiety dimensions. it means that students' speech anxiety can intervene in relationships between students' academic grades and academic programs. table no. 4 total effects via english speaking anxiety the direction of total effect original sample (o) sample mean (m) t statistics academic programs on grades social sciences -> grades -0.1195 -0.1204 2.6714* english literature -> grades -0.0079 -0.009 0.1643 n.s physical sciences -> grades 0.0354 0.0347 0.6416 n.s computer sciences & information technology -> grades -0.1401 -0.1397 3.0761* p< 0.001= ***, p< 0.01=**, p<0.05=*, non-significant= n.s table no. 5 shows the mediation role of dimensions of speech anxiety on students' academic grades. test anxiety was the only dimension that had a significant negative impact on students' academic grades. in comparison, the academic programs of social sciences and computer science have substantial adverse effects on students' grades. however, only the social sciences academic program has a significant negative impact on test anxiety, whereas the computer science program has an insignificant negative impact. the ratios of total effect and total indirect effect show that the impact of review of economics and development studies, vol. 7 (4) 2021, 501 514 510 the social sciences academic field on academic grades is significantly partially mediated by the students' english speech test anxiety. table 5 summary of mediation results hypothesis direct effect indirect effect total effect vaf decisio n social sciences on academic grades sciences on test anxiety test anxiety on grades mediation english speech test anxiety in the impact of academic programs on students' academic performance -0.1318 -0.1332 -0.1537 -0.1113 18.41% partial mediation table 6 shows that the hypothesized structural model explains 2.6 % variance in anticipated anxious behaviours in speaking english, 3.2% variance in communication apprehension, 3.1 % variances in discomfort in speaking english, and 2.1% variance in test anxiety. the structural model explains a 5.5% variance in students' academic grades. 5. discussion the study found that there is a likelihood that students' english speech anxiety will differ with regard to programs of study. it is found that anticipated anxious behaviours in speaking english were least negatively related in computer science and information technology students, whereas it was most negatively associated with english literature and physical sciences students. the english literature students usually communicate with teachers in english. therefore, the anticipated anxious behaviours in speaking english was most negatively related to this academic program. science students generally communicate in english with teachers during regular class and practical work. therefore, this practice reduced their anticipated anxious behaviours in speaking english. whereas social sciences students are not having dialogue like the english literature and science class students, there is a relatively less negative association with anticipated anxious behaviours in speaking english. table no. 6 variance function of model variable r square anticipated anxious behaviours in speaking english 0.0263 communication apprehension 0.032 discomfort in speaking english 0.0316 test anxiety 0.0217 grades 0.0559 review of economics and development studies, vol. 7 (4) 2021, 501 514 511 the study found that social sciences and physical science programs positively associate with the discomfort in speaking english. it is in line with the literature that students of these programs most of the time read the content specific to the subject, and their general speaking skills are not improved. therefore, they usually feel uncomfortable when explaining things being read or learned. the fear of negative evaluation and test anxiety were least negatively associated with social sciences and most negatively related to physical science students. it means that social science students are the most to have speech test anxiety. the english communication apprehension was most negatively associated with english literature and physical science students and least negatively related to social sciences. overall it seems that students of social sciences are the students who can have the most apparent english-speaking anxieties as compared to english literature and physical sciences students. although the anticipated anxious english speaking behaviour, communication apprehension, and speaking discomfort seem unrelated to academic grades, the english speech test anxiety was the only one that appeared relevant to students' academic grades. it is in line with the literature because general anxiety is also related to lower academic grades (siebers, 2015; vitasaria et al., 2010). the same general anxiety is reflected in students' speech anxiety. therefore, it appears that english speech anxiety components, communication apprehension, discomfort in speaking english, and anticipated anxious english speaking behaviour have some different roots and implications than the test anxiety element of english speech anxiety. here general anxiety seems reflected in english-speaking test anxiety. this finding corroborates earlier findings that high levels of anxiety in students are associated with their low academic grades (siebers, 2015; vitasaria et al., 2010) in this way, the test anxiety element seems to mediate the impact of the social sciences program of study on students' academic performance. the other dimensions do not lead to significant relationships to academic grades. therefore the remaining three dimensions do not significantly mediate the relationships between academic programs and academic grades. this study corroborates that subject nature and classroom practices impact students' anxiety levels. the students' academic performance or academic grades vary with regard to their academic programs. the relationships of social science are less negative with different dimensions of english language anxiety, and consequently, it has a negative association with students' grades. the relationship of social sciences with grades is mediated by test anxiety. these affirm the prior findings that english speech anxiety is negatively associated with students' academic performance (amiri & ghonsooly, 2015). furthermore, it is reiterated that students' speech anxiety can mediate the relationship between students' academic programs and academic grades. the social sciences students receive education in partial english medium instruction. therefore, they might have high speech anxiety (chou, 2018). the science students are optimistic and enthusiastic about the english medium of instruction (al-masheikhi et al., 2014). therefore, the lesser levels of anxiety than social sciences students in speech anxiety are understandable. another factor of high anxiety in social sciences students is that most of the subjects offered to social sciences' students before entering into university education in grades: 10-12 are in urdu. whereas the subjects offered to science students are offered in english. the english background of science students, compared to social science students, assist science students in overcoming their speech anxiety. review of economics and development studies, vol. 7 (4) 2021, 501 514 512 6. conclusion the impact and direction of different dimensions of english speaking anxiety depend on the courses and academic programs the students study. however, the test-anxiety element in english speaking anxiety, roots in general test anxiety, might lead to low 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(1991). creating a low-anxiety classroom environment: what does language anxiety research suggest? the modern language journal, 75(4), 426-439. doi:10.2307/329492 review of economics and development studies vol. 5, no 4, 2019 713 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads effects of malnutrition on the academic performance: a case study of grade 6-8 learners in punjab, pakistan 1 muhammad shabbir, 2 qamar-uz-zaman, 3 muhammad atif 1 assistant professor department of sociology gc university faisalabad, pakistan. 2 mphil scholar, department of sociology gc university faisalabad, pakistan. 3 phd scholars department of sociology gc university faisalabad, pakistan. article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 the present research is design to assess the “effects of malnutrition on the academic performance of grade 6-8 learners in rural areas of tehsil hafizabad”. quantitative research approach was used to achieve the objectives of the study. quantitative data was gathered by using scheduled interview from the sample of 150 learners of the three selected schools. data was analyzed through statistical package for social sciences (spss). the outcomes of the study revealed that the malnutrition, particularly the use of low quality foods significantly lowers the academic performance in terms of lowering the understanding level of the learners and attainments; it reduces the attendance rate ultimately. it was observed that the less participation in physical activities, low income of the household and crowded demographic conditions reduced the learning capacity of the students. some useful suggestions were also made, strictly ban on low quality food, awareness programs should be launched for public, and more studies must be conducted to highlight and overcome the issue. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords malnutrition, academic performance, rural area, low quality food, physical activities jel classification: p27, p29, p25, l19 corresponding author’s email address: recommended citation: shabbir, m., zaman, q. and atif, m. (2019). effects of malnutrition on the academic performance: a case study of grade 6-8 learners in punjab, pakistan. review of economics and development studies, 5 (4) 713-720 doi: 10.26710/reads.v5i4.882 1. introduction malnutrition remains a serious public health issue around the underdeveloped countries, especially in south asian and african countries. . mostly malnourished children are present in developing and poor countries. ergin (2007) explained that 70% malnourished belong to asia, 26% to africa and 4% to latin america. grover (2009) explained that a study done in 53 countries explored that over 50% of deaths of the children are relate to under-nutrition. malnutrition can be delineated in multiple ways. child malnutrition is a pathological condition caused by insufficient nutrition; malnutrition contains three broad concepts which can be described as under-nutrition, over-nutrition and micronutrient deficiency. grover (2009) described that malnutrition is a physical condition of inadequacy or superfluity of protein, energy and different other nutrients. malnutrition is the outcome of insufficient food supply which is caused by social, economic, political and sometimes environmental factors like natural disaster, as explained by shah (2003) that the major threats for stunting are female education ignorance, poor economy of the household and overcrowding. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 714 malnutrition and health are closely interlinked with each other. malnutrition directly affects the health. malnutrition put the burden on the children in the form of different diseases. diseases and poor health status almost affects all the areas of developmental process as well as creates problems throughout the life. physical and mental health of early life gives basis for adult life. because the process of development mostly occurs in the early years of life so we discuss the three major areas of the lives of the children which are might be affected by malnutrition namely school performance, socialization process and economy. there are many other factors like poverty, low parental education, social and gender discrimination, racism, political and environmental conditions and less availability of resources that hinder the school performance, damaging the economy and reducing the social activities; but despite that these three aspects might be affected by malnutrition because better nutrition is considered the basic to proper human development and better health conditions. today the health condition of millions of people in all over the world is entirely discouraging, specifically in the underdeveloped countries. ergin (2007) depicted that malnourished children had lowered resistance to infectious diseases and died early. he was of the view that the children who survive face the problems of growth retardation, illness and poor nutritional level which keeps the malnourished children into dreadful recurring cycle of sickness and this hindered the learning ability of the children. according to the world health organization (who) malnutrition means the cellular imbalance among the nutritive ingredients, energy and the need of these ingredients to assure the body’s growth, care, feeding, and other particular functions, (grover, 2009). the progress of the population of any state is closely interconnected to the academic achievement of the population of that state. the development of any society depends extremely on the quality of academics. it has been found that malnutrition and impaired health in early life possibly affect the cognitive skills. malnutrition reduced the academic performance and causing delay in attending school (ghosh, 2013). the provision of education and food is generally approved as a fundamental human right. it is committed by all member countries of the united nations in 2000 to accomplishing universal primary education and abolishing hunger, (unicef, 2004). malnutrition is a significant public health issue in pakistan. due to the high prevalence of malnutrition 740,000 children deaths happen every year in pakistan (unicef, 1996). the problem of malnutrition is not only found in children of age group under five, but also malnutrition is a major issue in older children. studies conducted in 1980’s show the high prevalence of malnutrition in the male school children in rural areas of pakistan ranging from 47-70%. malnutrition was highly spread among elderly children and those who belong to poorer and larger households, (mian, 2002). according to the findings of national nutrition survey of 2011 the percentage of underweight and wasting children in pakistan is 31% and 17% respectively. the stunting rate in pakistan is 44%. a huge figure of 58% of the households is facing the problem of food insecurity (nns 2011). the development of any nation depends upon the nutritional level and educational level of the people. many studies have given sufficient data about the importance of the proper food and nutrition for the development of the cognitive skills and better academic performance. but until now, it could not been clearly described that how nutrition obstructs or enhances academic performance. the results of the study will reflect the true picture of present situation of nutritional level of the children and its impact on the academic performance in rural areas. pakistan is a country in which people have poor nutritional level and also the low educational level particularly in rural areas so this study will help the policy makers, government organizations as well as private sector organizations and institutions to develop the futuristic policies for the betterment of the rural areas. this study is also beneficial for the parents and teachers to plan that how they can improve and enhance the present nutritional level and academic performance of the learners. chinyoka (2014) found that malnutrition affects the academic performance. the results of the study demonstrate that the undernourished and hungry children are less capable to attend the school and if attend then facing the problems in concentrating and learning, also having no interest to take part in review of economics and development studies vol. 5, no 4, 2019 715 physical activitieslike sports event. freijer (2013) explained that disease related malnutrition has serious consequences for the physical health and also creates psychosocial problems. he studied the additional costs related to diseases related malnutrition, and argued that the additional costs to manage the patient of diseases related malnutrition were considerably higher than other patients. ogunsile (2012) explored that all the dietary patterns healthy dietary patterns (e.g. intake of breakfast, fruits, three square meals, milk, vegetables) and unhealthy dietary patterns (e.g. the use of sweets, chewing gum, and soft drinks) and body mass index had significantly effects the academic performance of the students. florence (2008) demonstrated that the students who eat overall low quality diet found to be poor performers on the tests and assessments. girls who belonged to socioeconomically wealthy families have higher performance than boys. fu (2007) described that the children with high level of unhealthy consumption pattern means high intake of foods like sweets and fried foods (low quality foods) and the inadequate use of dairy products as well as inadequate intake of foods like vegetables, meat, fish, fruits and eggs, which are considered as highly nutrient packed foods had more chances to show poor academic performance. crookston (2011) stated that the children who belonged to wealthy and smaller size family get higher scores in assessment. trudeau (2008) explored that the participation in physical activity enhanced the academic performance of the learners, and positively associated and influenced the behavior of the learners in the classroom, enhanced memory and concentration of the learners. martorell (1999) explored that malnutrition affects the physical growth, cognitive development and weakens the immune system. he argued that the children who bear malnutrition in early life can suffer many functional complications as adults, including lowering intellectual performance, lowering the productivity level and have low capacity for work. the better nutrition and food most probably will produce more healthy and productive adults, which in turn increased the human capital and economy. 2. objectives of the study  to study the dietary patterns of the grade 6-8 learners in middle schools of district hafizabad.  to investigate the participation of grade 6-8 learners in physical activities.  to explore the socio-economic status of the grade 6-8 learner’s families.  to suggest suitable remedies to overcome the malnourishment of the grade 6-8 learners at dustiest hafizabad. 3. hypotheses of the study hypothesis 1  the higher the use of low quality food, the lowers the academic performance of the learners. hypothesis 2  the less the participation in physical activities, the lowers the academic performance of the learners. 4. research methodology the researcher used the quantitative research approach in this research. the universe of the study was the tehsil hafizabad, punjab, pakistan, whereas the people of tehsil hafizabad were considered as the population of the study. multistage sampling technique was used to draw the sample. in step i the researcher drew two union councils (sagar kalan and mangatneecha) out of 46 union councils of tehsil hafizabad by using convenient sampling. in step ii the researcher drew three schools from the two selected union councils through convenient sampling. in step iii proportionate sampling was applied to draw the sample from the selected schools. in step iv 150 respondents were selected through simple review of economics and development studies vol. 5, no 4, 2019 716 random sampling technique. structured interview schedule was used as a tool for data collection from the students. quantitative data was analyzed through statistical package for social sciences (spss). bivariate and multivariate analysis techniques were used to analyze the data. chi-square and gamma tests were applied for bivariate analysis in the end multiple linear regression analysis was also employed to analyze the combined effects of independent variables on the dependent variable. 5. analysis and discussions (bivariate analysis) research hypothesis 1: higher the use of low quality food, the lower the academic performance of the learners. table 1: association between the use of low quality food and the academic performance of the learners the use of low quality foods academic performance total never sometimes often never 0 2 0 2 sometimes 20 49 7 76 often 2 22 48 72 total 22 73 55 150 2  = 58.133 a d.f= 4  = 0.851 p-value = 0.000 table 1 depicts that there is highly significant connection among the two variables. results match with fu (2007) &florence (2008) explained that the students who take overall low quality diet, fried foods and sweets found poor performers in the tests and had overall lower performance in the school. it means that the quality of food had greater importance for quality education; so parents, teachers and government should focus on food quality. research hypothesis 2: the less the participation in physical activities, the lowers the academic performance of the learners would be. table 2: association between participation in the physical activities and academic performance of the learners. participation in physical activities academic performance total never sometimes often often 0 13 16 29 sometimes 4 37 35 76 seldom 4 10 1 15 never 14 13 3 30 total 22 73 55 150 2  = 46.550 a d.f= 6  = -0.637 p-value = 0.000 table 2 reveals that less participation in physical activities lowers the academic performance. results acknowledged trudeau’s work (2008) and explored that the participation in physical activity enhanced the academic performance, memory and concentration level of the learners. so, we can say that physical activities are much important for a healthy body and to maintain the healthy life because a healthy body contains a healthy mind. hence teachers and parents should promote the physical activities and sports events in schools while motivating and supporting the children to participate in. review of economics and development studies vol. 5, no 4, 2019 717 multivarite analysis table 3: influence of various independent variables on dependent variable: a multiple linear regression analysis independent variable un-standardized coefficients standardized coefficients t significance (p-value) i b std. error i  constant 7.636 3.462 ______ 2.205 0.029 malnutrition 0.334 0.071 0.320 4.714 0.000 participation in physical activities -0.380 0.111 -0.235 -3.418 0.001 low income -0.827 0.263 -0.215 -3.141 0.002 crowded demographic conditions 0.306 0.108 0.200 2.825 0.005 2 r =0.356, f=21.560, p-value=0.000 the overall model is significant with 35.6 % effect on dependent variable. detailed description is as under: the regression coefficient bi=0.334 for the independent variable “malnutrition” showed a highly significant connection with academic performance having p-value=0.000. findings of the study acknowledged chinyoka (2014) and explored that malnutrition lessens the capability of the learners in concentrating, learning and attending the school. this implies that better nutrition is considered the basis of healthy life so parents should provide better nutrition to their children, which in turn enhances their academic capability. the regression coefficient bi=-0.380 for the independent variable “participation in physical activities” showed that less participation in physical activities decreases the academic performance. results matching with trudeau (2008) found that one who took part in physical activities gave better performance in academics. chinyoka (2014) explained that malnourished children take little interest in physical activities and sports event. the regression coefficient bi=-0.827 for the independent variable “income level” showed that lower income level of the household hindered the academic achievements of the students. results of the study acknowledged crookston (2011), stated that the children who belonged to wealthy family get higher scores in assessment. florence (2008) demonstrated that girls who belonged to socioeconomically wealthy families have higher performance than boys. it means that economy lessens the food security issues and improves the living standard of the people; and this high socioeconomic status gives them better educational environment. so government should take solid steps to alleviate poverty from the society. the regression coefficient bi=0.306 for the independent variable “crowded demographic conditions” showed that the children who belonged to overcrowded family have poor academic performance. outcomes acknowledged crookston (2011), stated that the children who belonged to smaller size family get higher scores in assessment. mian (2002) explained that larger household size was a major threat to review of economics and development studies vol. 5, no 4, 2019 718 malnutrition and malnutrition lowers the academic performance as described by chinyoka (2014).it means that small size of the family makes it easy for the parents to provide proper nutrition and better academic environment to their children because small size reduces the expenditures of the family; so government should make the laws about the size of family. 6. conclusion the results of the study show that the unhealthy dietary patterns, particularly the excessive use of low quality food and junk food which increases the diseases among learners. this situation of illness of learners decreases the academic performance in terms of reducing attendance rate as well as reduce the attainment level of the learners as explained by chinyoka (2014) also that malnutrition minimize the attendance rate and concentration level. these results lies very close to the findings of fu (2007), florence (2008) & ogunsile (2012) that the students who eat low quality diet and follow unhealthy dietary patterns found to be poor performers in the routine school tests and had overall lower performance in the school. the students suffering from malnutrition cannot participate actively in games and extra– curricular activities due to their weakness and laziness. results show that the students’ who participate less in physical activities show poor performance in the academics and these results are found in the line of the results explored by trudeau (2008) that the participation in physical activity enhanced the memory and concentration level of the learners and ultimately the performance in schools. the results of the study also reveal that the low income of the household and crowded demographic situation also lowers the academic performance of the students, these results are found similar to the results of the research by crookston (2011) which stated that the children who belonged to wealthy and smaller size family get higher scores in assessment. 7. recommendations the following suggestions and recommendations come out directly from the outcomes of the study described above.  government should launch awareness programs for public about the adverse effects of malnutrition.  parents should manage lunch boxes for the children and discourage the eating of low quality and junk foods and strict ban should be imposed on the sale of low quality foods, junk foods, energy drinks and other cold drinks at the canteens of schools.  the quality of food items for the children should be improved by making and implementing strict laws and rules. references crookston, b.t., dearden, k.a., alder, s.c., porucznik, c.a., stanford, j. (2011). impact of early and concurrent stunting on cognition. maternal & child nutrition, 7(4), 397–409. chinyoka k., (2014). impact of poor nutrition on the academic performance of grade seven learners: a case of zimbabwe. international journal of learning & development, 4(3), issn 2164-4063. florence, m. d., asbridge, m., &veugelers, p. j. (2008).diet quality and academic performance. journal of school health, 78(4), 209-215. fu, m.l., cheng, l., tu, s.h., pan, w.h. (2007). association between unhealthful eating patterns and unfavorable overall school performance in children. journal of the american dietetic association, 107(11), 1935-1943. freijer k., tan s.s., koopmanschap m.a., mejjers j.m.m., halfens r.j.g., nuijten m.j.c. (2013). the economic costs of disease related malnutrition. clinical nutrition. 32(1), 136-141. grover z., ee l.c. (2009).protein energy malnutrition, pediatric clinics of north america, 56 (5), 1055-1068. ghosh s., saha h. (2013). the role of adequate nutrition on academic performance of college students in north tripura. international journal of health sciences and research, 3(8), 56-63. https://pubag.nal.usda.gov/?q=%22cheng%2c+l.%22&search_field=author https://pubag.nal.usda.gov/?q=%22tu%2c+s.h.%22&search_field=author https://pubag.nal.usda.gov/?q=%22pan%2c+w.h.%22&search_field=author http://www.sciencedirect.com/science/journal/00028223 http://www.sciencedirect.com/science/journal/00028223 http://www.sciencedirect.com/science/journal/00028223/107/11 https://www.sciencedirect.com/science/journal/02615614 http://www.sciencedirect.com/science/journal/00313955 http://www.sciencedirect.com/science/journal/00313955/56/5 review of economics and development studies vol. 5, no 4, 2019 719 mian r.m.a., ali m., ferroni p. a., underwood p. (2002).the nutritional status of school-aged children in an urban squatter settlement in pakistan. pakistan journal of nutrition, 1(3), 121-123. national nutrition survey (2011). research and development solutions. key findings, policy briefs series no. 41, december 2013. ogunsile s.e., (2012). the effect of dietary pattern and body mass index on the academic performance of inschool adolescents. international education studies, 5(6), issn 1913-9020 e-issn 1913-9039 published by canadian center of science and education. trudeau f., shephard r.j. (2008). physical education, school physical activity, school sports and academic performance. international journal of behavioral nutrition and physical activity.5:10. https://doi.org/10.1186/1479-5868-5-10 unicef (2004). state of the world’s children. oxford and new york: oxford university press. https://doi.org/10.1186/1479-5868-5-10 review of economics and development studies vol. 5, no 4, 2019 720 review of economics and development studies, vol. 7 (3) 2021, 417 431 417 factors contributing towards women employability: an impact assessment of a women skill development training program a fozia sarwar, b rana ejaz ali khan a department of economics, the islamia university of bahawalpur, bahawalpur, pakistan email: sarwerfozia7@gmail.com b department of economics, the islamia university of bahawalpur, bahawalpur, pakistan email: ranaejazalikhan@yahoo.com article details abstract history: accepted 30 august 2021 available online september 2021 it is an impact assessment study of a women skill development training program namely district industrial homes in punjab. a quasi experimental (ex post facto) research design has been applied to develop a counterfactual relationship between the outcomes of this program and the demographic and personal characteristics of the women trainees that have get training from the program within time period of 2016 to 2019. the analysis has observed that computer application and stitching/ cutting are most popular trades among women. further, it has been observed as the time period since the women has gotten training increased the visibility of trained women in market is decreased. the majority of the women were unmarried, of age 15 to 25 years and majority of them have education level intermediate or above. the female work participation was much higher among the women respondents, however, majority of them were unemployed and had no utilization of their skills in daily life business. the data shows that all the unemployed women were unmarried and all the entrepreneur women were either divorced or widow. another interesting fact have been revealed from the bivariate analysis that all the women that were unemployed have education metric or below metric and all the women that have any employment status have intermediate or above education level. the women employment status has been found more in families with large family size comparatively and all the women that did not practice the veil were unemployed. the female work participation and women employment status have been observed relatively high in low income families. the multinomial regression analysis have established that education level, mother’s education level, family size and own family house contribute positively and age dependency ratio, female work participation, veil and family employment (total) has negative impact on women employment status. © 2021 the authors. published by spcrd global publishing. this is an open-access article under the creative commons attributionnoncommercial 4.0 keywords: women employability; women employment; skill development training jel classification: e24, j31 doi: 10.47067/reads.v7i3.397 corresponding author’s email address: sarwerfozia7@gmail.com review of economics and development studies, vol. 7 (3) 2021, 417 431 418 1. introduction skill development training is an organized activity that is aimed at imparting knowledge, information and instructions to enhance the recipient’s competence, performance and productivity or to help them to attain a required level of knowledge and skills (ahmed, 2016; ali et al., 2020). the technical and vocational skill development training prepares an individual for self-reliance and to develop himself or herself as a productive member of the society. in this regard the labor force capability enhancement programs are observing a paradigms shift from curriculum based education to competency based education (abrar-ul-haq, akram, ashiq, and raza, 2019). in pakistan like many of other developing countries the increasing poverty patterns and day by day increasing cost of living are compelling the women to engage in various forms of economic activities through which they can generate income to meet their family welfare and improved standard of living. even though women are engaged in numerous productive undertakings but the financial return to their efforts are quite minimal (kaur and kaur, 2019; ali, yusop, kaliappan, & chin, 2020). in pakistan generally and in punjab specifically there are number of programs that have had been initiated by the government to provide the technical and vocational skill development training to the individuals in order to meet the growing needs of the day by day modernizing labor market (faridi, chaudhry, and mumtaz, 2009). however in this respect, social welfare & bait-ul-maal department, punjab has took the lead by establishing the institutions of skill development specifically for downtrodden, illiterate and economically neglected women of the society (khan and ali, 2016). district industrial homes in 36 districts of the punjab are working to impart skill development training to the women, under the administrative control of social welfare & bait-ul-maal department. the scheme of dih /sanatzars was launched in 1979. apart from imparting trainings in various skills /trades, various saleable articles are prepared by the same trained ladies registered with sanatzar as workers. the service delivery mechanism of these institutions is producing extra ordinary success stories in the field of women employability, women self-employment and women entrepreneurship. district industrial homes in 36 districts of punjab is the targeted intervention that is mainly concerned with imparting skills development and vocational training to the women in different local and marketable trades. the major targets of these institutions include socioeconomic empowerment of local women through skill development training, creating opportunities of self-employment through order work and promotion of local arts, crafts and fusion of these local products with latest market trends. thus the significance of the current study is that it is determined to relate the outcomes of the aforesaid targets of this program with the personal, demographic, cultural and socioeconomic characteristics of the beneficiaries. the current study has focused the factors that influence or restrict the women participation in the skill development training program. further importance of the study with respect to empirical literature is that it has focused to determine the determinants of employment of the trained women beneficiaries of the district industrial homes across the punjab. due to increasing scope of skill development training in economic issues like labor force participation, quality of labor force, output growth, employment trade competitiveness, economic growth and economic development it has been appeared as an important area of research. the economic theory and research is giving its due importance to the impact assessment of the skill development and vocational training programs, whereas, as an area of review of economics and development studies, vol. 7 (3) 2021, 417 431 419 research it has not been focused exhaustively as the general education. the female contribution to the socioeconomic development of the economy cannot be ignored. however, the existing cultural, demographic and social barriers did not allow them to grow in society in independent manner. since majority of women are unskilled so unable to earn and understand their potential rights. thus, all the programs that are intended to promote women development and women empowerment has made the women skill development training a pivot element of their program policy. in the goal of world community to utilize the potential of this marginalized segment of the society the government of pakistan is also taking part actively. the initiative of district industrial homes in all 36 districts of punjab is also the part of these efforts. the current study is impact assessment study of this program namely district industrial homes in punjab in order to evaluate the program contribution towards the women employment status and income generation activities of the beneficiary women. the main objectives of the study are: i. to study the profile of the trained women identifying their personal characteristics, demographic characteristics, characteristics related to training, social status and employment status. ii. to understand the profile and to ascertain the relationship and extent of influence of personal, social, demographic and training related characteristics on women employment status. iii. to estimate the factors contributing towards women employment status of the trained women. 2. literature review skill development training as a field of research has proved its importance specifically in validation of the models of human capital formation and estimation of investment returns in this regard. the theories of labor economics and empirical investigation in respect of benefits of skill development training have put forth its importance as a distinct field of research. wu (2019) has investigated the role of skill development training in employability of immigrant women in taiwan. the study adopted the model of contextual development1 for the analysis. the employability has been measured as self-perceived2 employability on the basis of 4-scale likert scale that included four aspects of respondents perception about their employability. the study concluded that the skill development training in both direct and indirect ways contribute towards the personal and career development of the immigrant women and fostering their needs of enhancing capabilities and empowerment. likewise, jabar and zaza (2015) conducted an impact assessment of the women skill development training program for the refugee women at zaatari refugee camp, jordan. the study observed that the training impact positively to the income generating and economic situation of the women. the training increased their self-confidence and improved their communication, professional, occupational and business skills. panitsidou, vastaki and valkanos (2012) recorded the views of unemployed women that are skilled and graduate from some technical and skill development program in a case study of greece. the study observed that majority of the unemployed women was in productive age i-e 1 the development contextual model asserted that individual’s personal development is dependent as the contextual perspective of individual personal development and dynamic multilevel contexts. 2 self perceived employability has been defined as some ones perception about the characteristics of employability that are required to get or hold a designed job. review of economics and development studies, vol. 7 (3) 2021, 417 431 420 20 to 40 years old. further it is found that in greece the vocational training is contributing towards improvement in capabilities and skill development among women however its role in tackling female unemployment is limited. hilal (2012) highlighted the role of two ngos in socioeconomic and human development of women in occupied palestinian territories. the study stated that the training playing crucial role in increasing the women labor market participation and opportunities of employment. moreover the study also proved the importance of ngos in sharing the burden of provision of facilities of skill development and vocational training (see also king and palmer, 2010; mcgralh, 2012; powel, 2012). jain (2015) has tried to evaluate the skill development training program conducted by the ngo namely maa durga shakti educational welfare charitable trust for the local women in jaipur, india. the study found that majority of the trained women respondents respond that the training has increased their confidence, improved their communication skills and knowledge about income generation. likewise, panwar (2017) conducted the impact evaluation of krishi vigyan kendva (kvk) skill development training program for the rural women in khandawa district, india. the study concluded that after training the rural women relatively moved to the high levels of employment and income generating activities (see also sushma, 2007; deharia, 2009). liliane and mbabazi (2015) studied the impact of agaskee project on the women empowerment and employability. the the study concluded that the agaskee project impact positively and significantly to the socioeconomic empowerment and employment status of beneficiary women. khan and ali (2016) tried to assess the impact of services of agha khan rural support program (akrsp) designated for the welfare and economic empowerment of the local women. majority of the women responded that training helped them to be economically productive and become socially independent. nazir, vaida and dar (2012) also tried to assess the impact of skill development training on the lives of women in indian occupied kashmir. the authors studied the krishi vigyan kendras (kvk) skill development training program working in indian occupied kashmir the training provided the women with adoptable knowledge, confidence and participation in daily life business. the study established that skill development training has positive and significant impact on the socioeconomic uplift of the women through generating means of earning (see also alese, 2013 for nigeria; aslam and rawal, 2013 for pakistan). 3. research methodology 3.1 research design the research design of any study is a specific conceptual structure that define the boundaries and limits in which the research is conducted holistically. the present study is designed to do the impact assessment of the women skill development program that is a social intervention of the social welfare & bait-ul-maal department, govt of punjab. as per requirement of the objectives of the study ex-post facto research design has been adopted for the purpose of impact assessment of the district industrial homes in punjab. review of economics and development studies, vol. 7 (3) 2021, 417 431 421 3.2 population of the study the population of the study are the women which have attained training in any trade from the district industrial homes in punjab in the three years period of 2016 to 2019. thus all the beneficiary women of the skill development training program in period 2016 to 2019 form the population of the study. 3.3 sampling procedure for the purpose of sampling procedure the stratified random sampling technique has been applied. in the present study population of the study is women beneficiaries of district industrial homes in punjab that are situated in all 36 districts of punjab. administratively, punjab consists of 9 divisions and all 36 districts are divided among these 9 administrative units. the all 9 divisions of punjab have taken as strata and minimum one district has been selected from each division randomly. in this way total 10 district industrial homes from 10 different districts have been selected for the study. these districts are lahore, sahiwal, bahawalpur, rajanpur, muzaffargarh, faisalabad, sargodha, chakwal, narowal and rahimyar khan. in start it was decided to select randomly 10 percent of the women as sample from each selected district industrial home who have get training in period 2016 to 2019. but during the survey it become much harder to approach these women. the contact number of majority of them was not responding, many of them have not given their address to the institution and many of them were not willing to respond for the research purpose. thus data for the study was selected purposively from the women who were registered at the center for center work/ order work, from the women that usually were in touch with the teachers, incharges or other females’ student getting training there. moreover the women enrolled at the center also helped a lot in data collection and it became easy with their help to approach the women at their homes for data collection. in this way data was collected from 1431 women respondents through a structured questionnaire. 4. results and discussion in society majority of the women are contributing to the daily business of life as per their capability, capacity and prescribed social gender role, however, majority of them did not have opportunities to involve in paid economic activities. keeping in view the contribution of women in family economic activities, whether in direct or indirect way, the women employment status has been categorized in five employment categories, i.e. unemployed, unpaid family job, self employed, wage earner and entrepreneur. 4.1 bivariate analysis the bivariate relationship between multiple categories of women employment status and the considered factors for the analysis has been given in ensuring paragraphs one by one. in the table 1 the analysis of bivariate relationship between employment status and training course is given. the majority women respondents who had achieved the employability status had get training in the courses of embroidery/knitting, english grammar/speaking, fine arts and stitching/cutting. further it has been observed from the analysis that majority women which were self-employed had attained training in the courses of stitching/cutting and tailoring. it is pertinent to mention here that all the women who had attained training in the courses of aerobics/gym, beautician and computer application all of them were unemployed. review of economics and development studies, vol. 7 (3) 2021, 417 431 422 table 1: women employment status and training course women employment status training course total aerobics/ gym beautician computer aapplication cooking dress designing/ craft designing embroidry/ knitting english grammer/ speaking fine arts stitching/ cutting tailoring unemployed 10 319 429 14 0 0 0 0 0 0 772 family job unpaid 0 0 0 49 61 44 0 0 0 0 154 wage earner 0 0 0 0 0 28 24 36 141 0 229 self employed 0 0 0 0 0 0 0 0 223 23 246 entrepreneur 0 0 0 0 0 0 0 0 0 30 30 total 10 319 429 63 61 72 24 36 364 53 1431 an important fact had been observed during the analysis that all the women who have established entrepreneurship all of them were skilled in tailoring training course. table 2: women employment status and year of training employment status year of training total 2016 2017 2018 2019 unemployed 140 126 220 286 772 family job unpaid 4 63 31 56 154 wage earner 40 44 63 82 229 self employed 43 40 58 105 246 entrepreneur 4 12 4 10 30 total 231 285 376 539 1431 the table 2 has explained that majority of women get training in year 2019 and majority of them, more than 50 percent of them, were utilizing their skills in one way or the other. out of total 264 self employed women 105 women were graduated from the training program in year 2019. similarly, most of the wage earner women were also graduate from training program in year 2019. withal, most of the entrepreneur women had attained training in year 2017 from the women skill development training program, district industrial home. table 3: women employment status and reason of training employment status any other reason because of financial incentive for self employment for time pass to get some job to have skill for personal use total unemployed 31 72 102 38 402 0 772 family job unpaid 0 0 127 0 154 0 281 wage earner 0 0 0 0 28 201 229 self employed 0 0 0 0 0 246 246 entrepreneur 0 0 0 0 0 30 30 total 31 72 229 38 584 477 1431 the women respondents were asked about the reason due to which they decided to participate in women skill development training program. it is observed that majority of the women respondents which were unemployed during the survey responded that their reasons of training were for time pass, for self-employment, because of financial incentive and any other reason. all the women who were able to secure any employment status were those women who review of economics and development studies, vol. 7 (3) 2021, 417 431 423 have responded during analysis that their reasons of training were to get some job and to have skill for personal use. table 4: women employment status and age employment status age total 15 ≤ 15-25 25-35 35-45 unemployed 11 557 177 27 772 family job unpaid 1 119 30 4 154 wage earner 6 170 45 8 229 self employed 2 187 51 6 246 entrepreneur 0 25 3 2 30 total 20 1058 306 47 1431 the table 4 describes that majority of women were of age 15 to 25 years and maximum number of employed women also belonged to this age braket table 5: women employment status and marital status employment status marital status total divorced/widow married unmarried unemployed 0 0 772 772 family job unpaid 0 0 154 154 wage earner 0 103 126 229 self employed 6 240 0 246 entrepreneur 30 0 0 30 total 36 343 1052 1431 as so far marital status of respondent women concerned it has been observed that all of the unemployed women were unmarried. moreover, all the women involved in unpaid family job were also unmarried. all the married women were employed. there were 30 women which have established entrepreneurship and all of them were either divorced or widow. table 6: women employment status and education level. employment status education level total illiterate below primary primary matric inter or above unemployed 37 50 132 470 83 772 family job unpaid 0 0 0 0 154 154 wage earner 0 0 0 0 229 229 self employed 0 0 0 0 246 246 entrepreneur 0 0 0 0 30 30 total 37 50 132 470 742 1431 table 6 shows that all the women respondents who had education level illiterate, below primary, primary and matriculation all of them were observed to have no employment at all. thus, in society only those women were observed to have employability of their skills who had a good education level besides the skill development training. review of economics and development studies, vol. 7 (3) 2021, 417 431 424 table 7: women employment status and family size employment status family size total 5 ≤ 5-10 10-15 15-25 unemployed 545 227 0 0 772 family job unpaid 0 154 0 0 154 wage earner 0 229 0 0 229 self employed 0 194 52 0 246 entrepreneur 0 0 16 14 30 total 545 804 68 14 1431 respectively, table 7 shows that there were 546 women that belonged to the families where in family size was five and below and surprisingly no woman out of them was employed. all the women that were belonged to the families where there in family size was comprised of more than 10 family members were employed and have utilization of their skills. the analysis has clearly established that larger family size is supporting the employability of the skilled women. table 8: women employment status and family income employment status family income total 10000 & below 1000020000 2000030000 3000040000 40000 & above unemployed 0 67 408 106 191 772 family job unpaid 0 134 0 0 20 154 wage earner 0 149 0 0 80 229 self employed 118 60 0 66 2 246 entrepreneur 23 0 0 7 0 30 total 141 410 408 179 293 1431 table 8 provides the analysis of bivariate relationship between employment status and family income of the women respondents. it is clear from the table that women employment was high in low income families and unemployment is high in relatively high family income categories. table 9: women employment status and own family house table 9 shows that there were 206 women that responded that they were living in the house that was not owned by their family and all of these women were found unemployed and have no use of their skills. employment status own family house total 0 1 unemployed 206 566 772 family job unpaid 0 154 154 wage earner 0 229 229 self employed 0 246 246 entrepreneur 0 30 30 total 206 1225 1431 review of economics and development studies, vol. 7 (3) 2021, 417 431 425 table 10: women employment status and female work participation employment status female work participation total 0 1 unemployed 287 485 772 family job unpaid 0 154 154 wage earner 0 229 229 self employed 0 246 246 entrepreneur 0 30 30 total 287 1144 1431 further table 10 shows analysis of bivariate relationship between women employment status and female work force participation. the women respondents were asked whether their families allowed them to participate in work outside home and 287 women had told that they were not allowed to work outside home. all of these women were observed unemployed and no utilization of their skills at all. table 11: women employment status and veil employment status veil total 0 1 unemployed 336 436 772 family job unpaid 0 154 154 wage earner 0 229 229 self employed 0 246 246 entrepreneur 0 30 30 total 336 1095 1431 the results in table 11 has described that there exists cultural domination of the norm of veil among women as majority of the women carry veil while visiting outside of the home. however, a surprising fact have been observed during the analysis that there were 336 women which did not carry veil and all of them were observed to have no employment status at all. 4.2 multinomial logistic regression analysis in this section analysis has been extended to the multinomial logistic regression analysis. in the data set the women employment status has been categorized as unemployed, family job unpaid, self-employed, wage earner and entrepreneur. the category of women employment status “unemployed” has been used as base category and the multinomial logistic regression analysis compare the all the other outcomes of the dependent variable with this contrast category and estimates are discussed in reference to this common reference category (greene, 2012). in the current analysis the odd ratios have been utilized to interpret the regression estimates instead of regression coefficients. the predicted values of odd ratios for the women employment status has been obtained by application of r-studio 3.04 and results are reported in the tables 12(a,b,c,d). review of economics and development studies, vol. 7 (3) 2021, 417 431 426 table 12a: results of multinomial logistic regression analysis women employment status: case-1: family job unpaid relative to base level predictors estimate odd ratios std. error p-value (intercept) -1.93356 0.1446 0.897235 0.03116 edul 0.01448 1.0145 0.130231 0.911465 fedul -0.04005 0.9607 0.114456 0.726402 medul 0.519706 1.6815* 0.108157 1.55e-06 age -0.04089 0.9599** 0.021026 0.051777 fs 0.350722 1.4201* 0.05716 8.47e-10 dpnr -0.02885 0.9715* 0.00343 4.07e-17 hh 0.462376 1.5878 0.388941 0.234515 fwp -1.1519 0.3160* 0.25133 4.58e-06 veil -1.1311 0.3226* 0.21359 1.19e-07 ofh 1.053464 2.8675* 0.374643 0.004925 fempl (f) -0.31258 0.7315 0.215763 0.14742 fempl (t) -0.32043 0.7258** 0.154014 0.03748 the results in the 1 st case of women employment status, that is family job unpaid, show that he mother’s education level has strong significant impact on women employment status. in case-1 one unit increase in mother’s education level leads to 1.6815 times increase in women employment status. the age as a predictor has strong significant impact on women employment status for category of unpaid family job, however, its impact is negative as odd ratios value is less than one. the family size has positive impact on women employment status for category, unpaid family job. table 12b: results of multinomial logistic regression analysis women employment status: case-2: self employed relative to base level predictors estimate odd ratios std. error p-value (intercept) 0.531621 1.7017 0.713457 0.456191 edul -0.05586 0.9456 0.097755 0.567706 fedul -0.11402 0.8922 0.081229 0.160414 medul -0.01469 0.9854 0.077612 0.849904 age -0.06871 0.9335* 0.01789 0.000123 fs 0.338308 1.4025* 0.045247 7.61e-14 dpnr -0.02631 0.9740* 0.002715 3.29e-22 hh 0.928208 2.5299* 0.38667 0.016372 fwp -0.18568 0.8305 0.228001 0.415421 veil -0.70265 0.4952* 0.189936 0.000216 ofh -0.31345 0.7309 0.230936 0.174687 fempl (f) -0.25355 0.7760 0.177862 0.153995 fempl (t) -0.27622 0.7586** 0.123176 0.024928 review of economics and development studies, vol. 7 (3) 2021, 417 431 427 table 12c: results of multinomial logistic regression analysis women employment status: case-3: wage earner relative to base level predictors estimate odd ratios std. error p-value (intercept) 1.146641 3.1476*** 0.707439 0.105053 edul 0.075392 1.0783 0.106822 0.480334 fedul 0.053379 1.0548 0.084269 0.526448 medul 0.070212 1.0727 0.077142 0.362739 age -0.13885 0.8703* 0.020884 2.95e-11 fs 0.35835 1.4309* 0.045234 2.33e-15 dpnr -0.02565 0.9746* 0.002717 3.71e-21 hh -0.10669 0.8988 0.288402 0.711443 fwp -0.31494 0.7298 0.225296 0.162141 veil 0.141056 1.1514 0.211053 0.503916 ofh -0.15653 0.8551 0.24824 0.528325 fempl (f) -0.12628 0.8813 0.167655 0.451319 fempl (t) -0.28462 0.7523* 0.121115 0.018775 further the analysis provides the evidence of negative association between dependency ratio and women employment status. similarly female work participation and veil as predictor also have negative impact on women employment status in case-1. respectively if women respondents are living in own family house there is probability of 2.8675 times higher women employment status. the predictor family employment (total) has significant and negative impact on women employment status. the multinomial logistic regression results for women employment status case-2 of self employed are also presented in table 12. the results indicate that education level, father’s education level and mother’s education level did not have significant impact on women employment status, however, odd ratios present the negative association between these predictors and women employment status. the age as a predictor has negative impact on women employment status category of selfemployed. likewise odd ratios shows that if there is one unit increase in family size the women employment status increased by 1.4025 times. the dependency ratio has significant negative impact on women employment status. the results indicate that gender of the head of the household has strong positive association with women employment status. if the women do not carry veil while moving outside the house there are 0.4952 times more chances that they are self-employed in comparison to the unemployed women. respectively family employment (total) has negative impact on women employment status. review of economics and development studies, vol. 7 (3) 2021, 417 431 428 table 12d: results of multinomial logistic regression analysis women employment status: case-4: entrepreneur relative to base level predictors estimate odd ratios std. error p-value (intercept) -9.45555 7.83e-05* 2.942549 0.001312 edul 1.023589 2.7831** 0.484347 0.034572 fedul 0.243083 1.2752 0.22158 0.272621 medul -0.1664 0.8467 0.179246 0.35323 age -0.08734 0.9163 0.055781 0.117405 fs 0.458389 1.5815* 0.119128 0.000119 dpnr -0.0564 0.9451* 0.012109 3.19e-06 hh -0.52523 0.5914 0.706491 0.457221 fwp 2.366812 10.6634 1.776831 0.182847 veil 1.170434 3.2234 0.750193 0.118718 ofh 1.481797 4.4008 1.106781 0.180624 fempl (f) 0.721442 2.0573*** 0.448903 0.108028 fempl (t) -1.0468 0.3510* 0.374138 0.005144 number of observations 1431 lr chi 2 (52) 2913.775 pseudo r 2 0.00902 log likelihood 1456.887 the table 12c represents the multinomial logistic regression results for women employment status case-3; wage earner relative to base level (unemployed). the results shows that even though education level, father’s education and mother’s education level did not have significant impact on women employment stratus however, the association have been found positive. the first significant predictor in the analysis is age and odd ratios shows that if there is one unit increase in age of the women there is 0.8703 times decrease in women employment status in case-3 of category wage earner. however, family size has strong positive impact on women employment status, higher the family size higher the probability of women employment status of the wage earner relative to the base level of unemployed. the variable dependency ratio has negative association with women employment status. likewise, family employment (total) has also strong negative association with women employment status. the results for women employment status case-4 category show that education level has positive impact on women empowerment status. if education level increases by one unit the women empowerment status in case-4 increased by 2.7831 times. the family size also has positive impact on women employment status, the one unit increase in family size increases the probability of the women being entrepreneur by 1.5815 times relative to unemployed (i.e. base category). however, results show strong negative association between the dependency ratio and women employment status of case-4. the variables family employment (female) and family employment (total) both have significant impact on women employment status, however, family employment (female) contributes positively and family employment (total) contributes negatively to the women employment status. 5. conclusion it is an impact assessment study of a women skill development training program namely district industrial homes in punjab. the analysis is categorical in determining the factors of review of economics and development studies, vol. 7 (3) 2021, 417 431 429 women employment status and the variables, i-e. education level, father’s education level, mother’s education level, age, family size, dependency ratio, female work participation, own family house, veil and family employment has been entered into the analysis as predictors in analyzing the impact outcome. the descriptive states of the data showed that majority of the women has attained training in computer application and stitching/ cutting. the majority of the women responded that they have get the training to get some job. respectively majority of the women were of age 15 to 25 years and majority of them were unmarried. the education level was also found quite better among the trained women respondents as majority of them have education level intermediate or above. the majority of women respondents belonged to the families where there the family size was 5 to 10 family members. in majority cases head of the household was a male. the veil is dominant cultural practice and majority women belong to the families with good socio-economic status in society. it has been observed during the bivariate analysis that the trades aerobics/ gym, beautician, computer application and cooking were skills of no market return. the trade of stitching/ cutting has been observed as the trade of maximum return as majority self-employed and wage earner women have attained training in this skill, likewise, all the entrepreneur women were observed to have skill of tailoring. the data shows that all the unemployed women were unmarried and all the entrepreneur women were either divorced or widow. another interesting fact have been revealed from the bivariate analysis that all the women that were unemployed have education metric or below metric and all the women that have any employment status have intermediate or above education level. the women employment status has been found more in families with large family size comparatively. respectively highest women employment status and female work participation have been observed in low income families. for the purpose to find the cause and affect relationship between women employment status and independent variables multinomial regression analysis have been applied. in the analysis it has been observed that education level, mother’s education level, family size and own family house contribute positively and age, dependency ratio, female work participation, veil and family employment (total) has negative impact on women employment status. references abdelhak, a., mohammed, t., 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(2016). employability skills leading to empowerment in beautician industry a research study of beauty parlors in mangalore city. international journal of innovative research in science and engineering, 2(10), 120-129. review of economics and development studies, vol. 8 (4) 2022, 319-327 319 determinants of tourism arrivals in china sidra shaukat a, khadija kanwal khan b, sara shokat c a m.phil. economics scholar, national college of business administration & economic, multan, pakistan email: sidrakhan@gmail.com b state bank of pakistan email: khadijakhan@gmail.com c caspam(centre for advanced studies in pure and applied mathematics), bahauddin zakariya university, multan, pakistan email: sarakhan@gmail.com article details abstract history: accepted 18 november 2022 available online december 2022 the aim of study has to investigate behavior of tourism under the threat of co2 release in case of china. the research work employed secondary time-series-data over the time duration 1996-2019. the research work used tourism arrivals as dependent and co2 emission, gdp growth rate, tourism expenditure and trade are used as independent variables. the study also applied ols is applies for the findings. the results of ols indicate that, positive impact of co2 emission on tourism arrivals in china. it means that, tourism increase with the increase in co2 emission. while other variables, like gdpgr, tourism expenditure, and trade are positively increasing the tourism. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: ordinary least square (ols), tourism arrivals, tourism expenditures, co2 emissions jel classification: q56, c20, c30, c40 doi: 10.47067/reads.v8i4.471 corresponding author’s email address: sidrakhan@gmail.com 1. introduction carbon dioxide is a chemical compound which is present in earth's atmosphere as a gas (chaudhry et al., 2020; tanveer et al., 2021). it is exhaled by animals and used by plants in a process called photosynthesis. by trapping heat from the sun, carbon has kept earth, climate habitable for humans and billions of other species. but accelerating carbon dioxide emission have periodically harmed environment by warming earth’s temperature during ice age cycles over the past million years or more (chaudhry et al., 2022; faheem et al., 2022; tanveer et al., 2022). now co2 is at its peak level than at any time in past 3 million years. according to the washington post “earth’s carbon dioxide level hit record high despite corona virus related emission drop” tourism industry is the combination of industries has a tendency to facilitate through imparting infrastructure, items and offerings and make feasible travelling for review of economics and development studies, vol. 8 (4) 2022, 319-327 320 unique functions and travelling to awesome locations of enjoyment and commercial enterprise interests’ tourism industry completely depends on environment and natural resources. for instance, heater climates are general favored environs for recreation and leisureliness (farooq et al., 2020). preconditions for tourism are natural beauties such as pure water, biodiversity, sands and land escape. the loss of non-renewable resources, the unsustainable use of renewable resources, and the loss of biodiversity are some of the threats posed by global environmental changes to these bases of tourism (gossling and hall, 2015). co2 emissions are positively and statistically strongly influenced by visitor arrival, tourism contribution is significant for co2 emission in underdeveloped as well as developed economies. however, richer countries are more affected than less developed ones. the unwto predicts that by 2030, there would be 1.8 billion foreign arrivals. it is predicted that through 2023, co2 emissions from the tourism sector will increase by 2.5% year, there are some controversies. tourism is an industry with low energy use, low emissions, and low carbon emissions. it is also competitive and has to deal with climatic change, energy conservation, and emission reduction (chaudhry et al., 2022). china is the fourth-most visited country in the world, according to the world population review. china's total energy consumption from tourism in 2008 was 428.30 pj, or 0.51% of the country's overall energy consumption. china's carbon dioxide emissions from tourism in 2008 were 51.34mt, or 0.86% of all national emissions, much below the average level for the world (5%). tourism transport is the largest energy consumer and carbon dioxide discharger in the chinese tourism. it consumes 72.08% energy and discharges 67.72% carbon dioxide of the total tourism industry (wu and shi 2011; faheem et al., 2020). in this regard of china tourism industry is facing many environmental threats as well as co2 emission. this research work has focused the economy of china to discover the behavior of tourism industry in this scenario to observe its harmful impacts on overall climate. the remaining parts of the article are organized as following. section two designates the literature context of the research work. part three presents the data sources. section four converses the main results and implications of the results findings. finally, section five précises the contributions of the article. 2. literature review jermsittiparsert and chankoson (2019) study the behavior of tourism industry underneath the situation of environmental threats and carbon emission: time series analysis from thailand in view of these findings, it is inferred that for in general the travel industry, ecological elements are assuming their significant job as a rule. while inside and out examination demonstrates that elements like carbon emanation from assembling and development ventures and carbon outflow through different parts had their important and significant way on entirely components of the travel industry in the area of economy of thailand. all these findings are giving sensible proof to their provincial and administrative ramifications as much significant consideration is mandatory to control the unsafe impact of natural pointers on the travel industry. tang et al. (2018) study the tourism-related co2 emission and its decoupling effects in china: a spatiotemporal angle at the national level, the all .out co2 discharges of the travel industry expanded from 37.95 mt in 2000 to 100.98 mt in 2015 with a usual yearly development pace of 7.1%. the outcomes additionally demonstrated that carbon dioxide discharges of the travel industry in china’s economy were commanded by the travel industry transport; that represents over 83 percent of absolute review of economics and development studies, vol. 8 (4) 2022, 319-327 321 carbon dioxide outflows. at the commonplace level, the most noteworthy carbon emanations from the travel industry happened in eastern, shandong, zhejiang, and jiangsu. anser et al. (2020) study the carbon discharges damage to international tourism: the necessity for carbon-free has been largely sparked by the united nations' sustainable development programme. creating green international tourism would make it viable to pursue tourism (intl tour). policies, environmentally sound production and consumption practises, green logistics management, and stringent environmental laws. these all factors contribute to paving the way for environmentally sustainable travel. the study used a sizable panel of diverse nations from 1995 to 2018 to calculate the cost of carbon emissions in intl tour. yin et al (2018) research work more about the dynamic analysis of tourism industrial ecoligization in central china: its stated and advancement the conventional exploration indicated that travel industry is "smokeless modern ecoligization is a significant pattern of the travel industry. in addition, tourism mechanical colorizations the most ideal decision and technique to accomplish the travel industry supportable turn of events. hong xia (2014) study the chinese public’s willingness to pay for co2 discharge decrease: a case study from 4 provinces or cities. this examination set up that there is a huge distinction in members' wtp for carbon dioxide discharge decreases strategy between various societal gatherings in the four (4) districts. the outcome demonstrates the individuals whom were happy through their present life & who were emphatically mindful of environmental modification issues revealed a more significant level of wtp. members who were youthful, male and individuals from the communist party were happy to pay a greater wtp. qiao and gao (2017) investigated an application of norm activation theory was used to look at chinese tourists' perceptions of climate change and mitigation behavior. it implies that tourists' perceptions of climate change (including event and anthropogenic causation) and their observations of the travel industry's commitment to environmental change have a significant impact on the industry's standards for carbon reduction and energy conservation, which at that point expands their aim to embrace such practices. mikayilov et al (2019) analyzed the effect of tourism on the assessment of the environment. along with the traditional functional form and fixed coefficient methodologies, they conduct analyses of how tourism affects environmental degradation using a time-varying coefficient cointegration methodology, which is the first to be applied to the relationship between tourist's ecological imprint. gosling et al., (2015) examine the variability among markets in the amount of co2 emitted from the tourism industry. this article investigations the piece of universal the travel industry markets showing up via air and their individual commitment to discharges at 11 chose nations with particularly extraordinary the travel industry states. the ramifications of variations in the marketplace piece of the nation’s somewhere in the range of 1995 and 2010 for normal traveller carbon force and complete discharges are inspected. results show varieties in between advertise outflow powers of up to a factor thirty (127–3930 kg carbon dioxide/traveller) if looking at singular markets for the entire scope of goals, and up to a factor five (370–1830 kg carbon dioxide/vacationer) if contrasting normal emanation powers between goals. becken and patterson (2006) examine a crucial step to achieving sustainable tourism is measuring national carbon dioxide discharges. this study recommends two methodologies for representing carbon release outflows towards the tourism; a base active investigation including industry & tourist analysis, and a top-down investigation utilizing ecological bookkeeping. utilizing the contextual analysis of new zealand, we exhibit that the two methodologies bring about comparative evaluations of how much the tourism adds to national carbon dioxide outflows. the base up review of economics and development studies, vol. 8 (4) 2022, 319-327 322 examination gives definite data on vitality end-utilizes, the principle teamsters of carbon dioxide discharges. these outcomes could be utilized for improvement of focused industry-based ozone depleting substance decrease procedures. kapeller et al. (2019) study the holiday travel behaviour and correlated co2 emissions in austrian tourist. the impression of the travel industry through movement is paying essentially to amassing of human made co2. because of various choices in transportation, coming about outflows rely firmly upon the selections of people on the most proficient method to traveling. land travel is the principle method of transportations, despite the fact that air travel had indicated a huge increment through the most recent decades, in austria. li et al. (2019) study the balancing tourism’s economic benefit and carbon dioxide discharges. in the exact examination, the proposed strategy is executed to investigate the harmony between monetary development and the co2 discharges of the travel industry segments in beijing for 2007_2012, and gives viable approaches to advance higher pay and low carbon the travel industry improvement. in like manner, to accomplish the decrease in the sectoral outflows force, advancement to a progression of linked measures are suggested that would viably progress the allot discharges power to the travel business industry, along these lines lessening beijing's co2 emanations. for the most part, beijing's travel industry shows powerful financial development and encountered a huge diminishing in co2 emanations during the time of 2007–2012. sunlu, (2003) explored tourisms effects on environment. the study focuses that tourism has to comprise the concepts and performs of sustainable consumption. sustainable intake contains of constructing customer call for products which had been made the usage of cleanser manufacturing methods, and for offerings together through tourism offerings which could be well-appointed in a manner that diminishes environmental effects. the tourism enterprise could play a main role in imparting eco-friendly statistics and uplifting focus between vacationists of the environmental effects in their works. tourists and tourism related organizations devour a sizeable quantity of goods and offerings; transferring them closer to the usage of the ones which could be produced and furnished in an environmentally sustainable way may want to have a sizeable tremendous outcome at the planet's environment. zhu et al (2017) studied low level of carbon conversion and path of sustainable progress of tourism industry. first of all, the study explores the ties among low carbon and sustainable progress, along with investigating current challenges faced by tourism sustainable development. at the end, this study suggests for tourism industry to adopt a low carbon transition. the study offers a comprehensive plan for sustainable development including maximum use of renewable energy, adopting green building constriction to save energy, accelerating green investment, following a consumption and production path which is sustainable, to enhance energy and efficiency off water, waste disposal, and reduction in ghg release and in due course develop its sustainability. peters (2010) observes the traveller transport, co2 emission and factors of technology. his recommendations are that final effect of energy consumption significantly relays upon negative as well as positive response from the expertise in tourism transport. for the best future consequences in tourism industry, the paper proposed that special emphasis is needed to the technological development in the tourism transportation and associated matters. bahram et al (2017) looked into the link between co2 emissions and the growth of tourism. in order to determine the long-term equilibrium dating and the causal relationship between tourism development and carbon dioxide emissions, this paper empirically examined the tourism-related co2 emissions in asia pacific countries from 1995 to 2013 through the channels of energy consumption and actual profit growth. even in the long run, tourism review of economics and development studies, vol. 8 (4) 2022, 319-327 323 arrivals have a statistically significant negative impact on the level of carbon dioxide emissions. the results support the argument that tourism in the asia-pacific region prompted ekc. in this empirical evaluation, the theoretical ekc framework has been taken into account. 3. data & methodology time series data from 1996 to 2019 were employed in the current investigation to find out the bond among dependent variable and independent variables. the data of tourism arrival, co2 emission, gdp growth rate, total export, and trade are collected from world development indicator (wdi). the ordinary least square (ols) technique was used in the current investigation to determine the bondings among the dependent and independent variables. an approach for estimating unknown parameters in a linear regression model is called ordinary least squared. previous literature used different methods to prove different theories (amjad et al., 2015; aftab et al., 2015; anwar et al., 2016; chaudhry et al., 2019; chaudhry et al., 2021; faheem et al., 2019; faheem et al., 2020; faheem et al., 2021; faheem et al., 2022; farooq et al., 2021). the information is expressed in logarithm form for both dependent and independent variables. formulate the approximated equation as follows: ti = f (co2, gdpgr, texp, trd) the econometric model is log-log model, it means that dv and ivs are in logarithm form. the following is the study's multiple regression model: ti = β0 + β1co2 + β2gdpgr + β3texp + β4trd + µi ti = tourists arrivals co2 = carbon dioxide emission gdpgr = gdp growth rate texp = total expenditures on tourism trd = trade µi = error term 4. results and discussion recent section of research paper, analysis of empirical data would be present. 4.1 descriptive stat; in this present study will be done to analyze the empirical data. reviewing certain fundamental characteristics of dependent and independent variables is necessary for this research work. ti co2 gdpgr tex trade mean: 44.79967 5.202254 9.060774 6.981523 44.92228 median: 50.875 5.33491 9.130646 6.06429 42.7474 maximum: 59.27 7.557211 14.23139 13.44511 64.47888 minimum: 20.034 2.648649 6.7 2.726149 32.4247 std. dev: 13.71131 2.050316 1.935358 3.604283 9.940188 skewness: -0.56463 -0.06834 0.855237 0.291707 0.623951 kurtosis: 1.698386 1.310431 3.35462 1.565372 2.176447 observations: 24 24 24 24 24 data-source; calculations done by e-views-9 review of economics and development studies, vol. 8 (4) 2022, 319-327 324 in the table above, descriptive statistics of 24 observations are summarized. the very 1st row displays the average values for ti, co2, gdpgr, tex, and trade, which are, respectively, (44.79967), (5.202254), (9.060774), (6.981523), and (44.92228). the table's second-to-last row contains the skewness values. skewness is a measure of the data distribution's asymmetry and equity relative to its mean. the data distribution is skewed if the mean, median, and mode all fall inside the middle and top points of the bell curve. here can observe from the table that ti and co2 are negatively skewed since their mean values are lower than their median values. gdpgr, tex, and trade, on the other hand, are positively skewed since their mean values are higher than their median values. the values of kurtosis in the second last row illustrate the flatness and peakness of the data to the normal distribution. if the probability distribution is extremely peaked and the value of kurtosis is larger than 3, the distribution is known as leptokurtic. if the probability distribution displays flatness of the data and the value of kurtosis is less than 3, the distribution is unknown as platykurtic. the values of ti, co2, tex, and trade in the table below are less than 3, indicating that these variables are platykurtic, whereas the value of gdpgr is larger than 3, indicating that these variables are leptokurtic. 4.2 pairwise correlation the problem of multicollinearity between variables is commonly identified by pairwise coefficients of correlation. the presence of multicollinearity is demonstrated by strong coefficients of correlation for multiple variables. varb ti co2 gdpgr tex trade ti: 1 co2: 0.038874 1 gdpgr: -0.34895 0.053329 1 tex: 0.253338 -0.81769 0.026963 1 trade: 0.184698 0.6739 -0.63156 0.184675 1 data-sources; calculated by using e-views-9 the correlation-matrix of all factors considered in this study is shown in the present study table above. the correlation matrix depicts the pair-wise correlation. it demonstrates that co2 is correlated to gdpgr (-0.34895) which is negative correlation. while co2 is positively correlated with texp and trade about (0.253338) and (0.184698) points so, er and correlation are less. 4.3 ordinary least squared results; the effect of iv’s on dv’s is shown in the table below. ordinary least squared approach; varb coeff’s std. e t-stats prob. co2: 0.232095 0.055982 4.14586 0.0006 gdpgr: 0.108812 0.088784 1.225582 0.2362 tex: 0.088906 0.039847 2.231196 0.0386 trade: 0.294638 0.075688 3.892792 0.0011 ti(-1) 0.569212 0.080722 7.051547 0.0000 c: -0.23316 0.171896 -1.356405 0.1917 r2: 0.974974 durbin-watson test: 2.27916 adjusted r2: 0.968022 data sources; calculations by using e-views_9 review of economics and development studies, vol. 8 (4) 2022, 319-327 325 the findings indicate that the coefficient of co2 emission has a positive but insignificant influence on tourism. it displays that 1percent rise into co2, (0.232095) unit increase in tourism. the gdpgr coefficient has a positive and insignificant influence on tourism. uncertainty 1 % increases in gdpgr, (0.108812) units upsurge in tourism. the tex coefficient has a positive and considerable effect on tourism. it demonstrates that a 1% increase in tex leads to a (0.088906) unit increase in tourism. the value of coefficient of trade is also indicates positive but significant influence on tourism. it displays that one percent rise in trade it would get (0.294638) units upsurge in tourism. the autocorrelation problem is tested using the breusch godfrey serial correlation lm test. the findings of the breusch-godfrey serial correlation lm test are shown in the table below. b_g serial corrl lm test f_statistic 0.1454 prob. 0.0897 data source; calculations using e-views_9 the autocorrelation problem is approached by using the lag of the dependent variable. because the probability value seems insignificant, no autocorrelation exists. the heteroskedasticity problem is tested using the breusch-godfrey test. the findings of the breusch godfrey test for heteroskedasticity is shown in the table below. hetero_test b_p_g f_stats 0.5202 prob. 0.4675 data source’ calculations using e-views_9 the results of the breusch pagan godfrey test for heteroskedasticity is shown in the table above. the probability value is negligible, insignificant indicating that the data is homoskedastic. 5. conclusion the goal of this research is to investigate the behaviour of the tourism business in the face of environmental challenges and co2 emissions. annual time series data from 1996 to 2019 are used to investigate the association between the dependent variable tourist industry and the independent variables co2, gdp growth rate, international tourism expenditures (% of total imports), and trade (% of gdp). ols approach is applied to evaluate the long run relationship among dv and iv’s. the results express that co2, international tourism expenditure and trade show the positive and significant relationship with dependent variable tourism. while gross domestic product growth has positive and statistically insignificant impact on tourism industry of china. references aftab, m. r., rehman, m., abdul, c., & faheem, m. 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(2017, may). low carbon transition and sustainable development path of tourism industry. in iop confser: earth environ sci (vol. 64, p. 012053). review of economics and development studies vol. 5, no 2, june 2019 387 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads socioeconomic status, dependent personality and nail biting behavior among adults: evaluation of structural relationship 1 zakia bano, 2 imtiaz ahmad warraich, 3 iram naz, 4 aqsa shahzadi 1 assistant professor, department of psychology, university of gujrat, pakistan 2 assistant professor, department of sociology, bahauddin zakariya university, multan, pakistan 3 lecturer, department of psychology, university of gujrat, pakistan 4 mphil, department of psychology, university of gujrat, pakistan article details abstract history revised format: may 2019 available online: june 2019 the main objective was to investigate the socioeconomic status and dependent personality as the predictor of nail biting among adults. a sample of 101 adults that nail bit was selected from sialkot city that aged above 19 to 75 years using purposive sampling from government and private educational institutes and local communities. the socioeconomic status and nail biting measured in the demographic form asking information about income, education, profession and do you nail bit. further, dependent personality was checked with dependent personality disorder scale urdu version (shahzadi & bano, 2018). results showed that there is significant predictive relationship present between these two variables on samples (n= 101), r= .432 which indicates a moderate correlation. the r2= .187 which indicated that 1.8% variation in the dependent variable, can be explained by the independent variable. adjusted r-square a modify form of r-square which is also 1.7 variation in data. descriptive results of this study showed that these two variables from sample (n= 320) are co-occur only in (n= 101) participants with 31.5 percentage generally in both male and female of sialkot city. structure equation modeling was used for the analysis of data. the model fit summary indicated the p value of .000 which indicates that socioeconomic factors and dependent personality was the significant predictor of nail biting among adults. all the model fit indices were also in the best prescribed limits as chi-square/df (1.106), goodness of fit index (.976), adjusted goodness of fit index (.940), comparative fit index (.974) and root mean square error of approximation (.033). furthermore, the income regression estimate indicates that when income, profession and dependent personality goes up by 1 standard deviation, the nail biting goes up by 0.21, 0.12 and 0.4 standard deviations respectively whereas in case of education, it goes up by 1 standard deviation and the nail biting behavior goes down by .09 standard deviations. conclusion: in conclusion, the socioeconomic status and dependent personality was the significant predictor of nail biting behavior among adults. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords socioeconomic status, income, education, profession, dependent personality, nail biting behavior, adults jel classification: a14, d91 recommended citation: bano, z., warraich, i. a., naz, i and shahzadi, a. (2019). socioeconomic status, dependent personality and nail biting behavior among adults: evaluation of structural relationship, review of economics and development studies, 5 (2), 387-396 doi: 10.26710/reads.v5i2.629 http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no2, june 2019 388 1. introduction in current research one of the compulsive oral habit of nail biting is focused for the adult population. roberts, o’connor and belanger (2013) stated that nail biting is the insertion of fingers into the mouth or if a contact of nail and teeth is present is called nail biting. an individual putting his or her fingers in mouth over and over again and cannot control this behavior is also known as nail biting. it is also called with another name as onychophagia and defined as putting and biting one or more than one finger nail by teeth in mouth (ghanizadeh, & shekoohi, 2011). nail biting is a common behavior usually seen in childhood and adolescence, according to shahraki, yassaei, & moghadam, (2012) children shift their habit of thumb sucking into nail biting when they grow up. people bit their nails when they need satisfaction in stressed situations. however, many people, even in adulthood, practice nail biting in stress. when these practices get repetitive and intentional acts of habitual behaviors they become disorders and people indulge in self-harm (physically) and feel embarrassment for powerlessness over their behavior (maraz, hende, urban & demetrovics, 2017). further, nail biting is reflected in psychiatric disorders such as impulse control disorders due to three features of intensity, duration and frequency (ghanizadeh, 2008). nail biting can be classified into self-injurious behavior or as a stereotypic movement disorder (stein & simeon, 1999). other believes, nail biting is related to spectrum of obsessive compulsive disorder (pacan, grezesiak, reich & szepietowski, 2009). according to maraz, hende, urban and demetrovics (2017) nail biting is the part of pathological grooming disorders. ghanizadeh and shekoohi (2011) suggested that the emotional and major depression disorders are underlying of nail biting. furthermore, nail biting prevalence in adulthood was 4.5 to 10.7% (leung & robson 1990). moreover, the unappealing look of physical damage to skin and nails may cause feelings of embarrassment, humiliation and guiltiness, leading to complex family and social associations (siddiqui, qureshi, marei, & mahfouz, 2017). hence, people consider nail biting is one of the anxious patterns of behaviors, but the driving energy may not be nervousness. these indications display that people are often perfectionists whom with impulsive nail biting, skin picking, or hair pulling, and these behaviors help them to soothe their dullness, frustration and disappointment. another important study reported that one from very 20 individuals suffered from stereotypic repetitive disorders, like nail biting and hair pulling to harm their grooming or cause pain for them. here, it is reported that these behaviors are very hard to quit and feel weak to discontinue (cosier, 2015). there could be numerous factors that can affect the nail biting behavior in adults. beside, other the socioeconomic status of the affective population is important to be noticed. the socioeconomic status has been measured in this study with the indicators of education, profession and income. a study conducted on nail biting behaviors of children showed that families that had average income show grater nail biting habits whereas parents with better education’s children showed less nail biting behavior (rajchanovska, & zafirova, 2011). schwartz (2019) in the article titled as it’s called onychophagia or nail biting argued that if nail biting hinders the social and work activity there will be a need of psychotherapy to uproot the greater psychological issue. another important factor affecting the nail biting behavior of adults that has been study in the research is dependent personality. everybody has his/her own personality. almost every day we assess and describe the personalities of different people. according to cattell (1950) a personality is something which indicates what a person is likely to do in a certain situation whereas the dependent personality disorder is categorized anxious personality disorders, which are marked by feelings of nervousness, anxiety and fear. furthermore, the dependent personality disorder is also marked by helplessness, submissiveness, an excessive need to be taken care of and for constant reassurance and an inability to make decisions. dependent personality disorder is one of the most frequently diagnosed personality disorders. it appears equally in men and women, and usually appears in early to middle adulthood. a pervasive and excessive need to be taken care of which leads to submissiveness and clinging behavior as well as fears of separation is described as dependent personality disorder (simonelli & parolin, 2017). finally, there is a need to study the link between dependent personality and nail biting. after searching it has been witnessed that there was no direct study found to established the linked between dependent personality and nail biting. therefore, to establish the link the characteristics of dependent personality were examined. this disorder is closely related to nervousness, anxiety, fear and depression. further, the dependent patients have negative and disrupting social behaviors (overholser, 1996). there were researches that established the linked between nervousness, anxiety, fear, depression and antisocial behavior with the nail biting behavior (ghanizadeh, 2008; ghanizadeh & shekoohi, 2011). review of economics and development studies vol. 5, no 2, june 2019 389 on the basis of indirect association of these variables researcher made an assumption and hypothesized that dependent personality disorder would be a significant predictor of nail biting. further, it examine the socioeconomic status and dependent personality as the predictor of nail biting behavior among adults. 2. methods 2.1 participants participants for this study was a total number of 101 individuals (n=101), recruited from government and private educational institutes and local communities of sialkot city. male and female both participants were selected with age range of 19 years to 75 years old. 2.1.1 inclusion criteria  age range of participants were between 19 years to 75 years  participants were from all communities and government and private universities  participants were included who have both mail biting habit and dependent personality disorder 2.1.2 exclusive criteria  age range of participants was not below the 18 years  participants were not included who do not have both nail biting habit and dependent personality disorder 2.1.3 sampling technique purposive sampling strategy adopted by researcher to select the participants from government and private colleges/universities and local communities. sample size was n=101 which comprises male and female participants. 2.2 research instrument the instruments which were used in this study are demographic form and indigenous scale of dependent personality disorder (dpds). 2.2.1 demographic form a demographic form was used to obtain information about participant. demographic form included; name, age, gender, birth order, education, profession, marital status, number of siblings, guardian, mother living, father living, living with parents, family system and do you bit your nail? if yes, then in which situation you mostly bit your nails? your fingers get wounded when you bit your nails? do you often bite your nails? do you bite your nails for a specific reason? can you control your habit? do you bite your nails unconsciously? 2.2.2 dependent personality disorder scale (dpds) dependent personality disorder scale is a 21-item self-report likert scale designed to measure the dependent personality disorder among adults. responses of each items were scored as 0 = strongly disagree, 1 = disagree, 2 = neutral, 3 = agree and 4 = strongly agree. the dependent personality disorder scale shows good reliability. 2.3 procedure samples of male and female adults were taken from different colleges, universities and communities of sialkot. consent letter was presented to heads of the institutes describing the research study. after getting permission students and faculty were approached and briefed about the purpose of the study. all participants were also assured about the confidentiality about the personal information gathered during the data collection and would be privately kept and will only be utilized when required for the sole purpose of our research work after filling the personal and demographic information as per predetermined research criteria, newly developed dependent personality disorder scale (dpds) was administered. to avoid misunderstanding of the content the questions were read out one by one by the researcher. completion of the questionnaire was followed by thanks to participants for their contribution in the study. 2.4 ethical issues in research current research was conducted with careful consideration. participants were treated with respect. an informed consent form was signed from every participant and at the same time they also have will to withdraw their review of economics and development studies vol. 5, no2, june 2019 390 participation at any time without sorry. in short, during the whole procedure of current research, researcher kept four key of ethical principle; respect for the person’s right and dignity, responsibility and integrity. 2.5 data analysis for analyzing the predictive relationship between variables linear regression and structure equation modeling (sem) was used through analysis of spss-21 and a moment structures (amos) (version 21) for windows. the sem is considered as the best analysis to estimate structural associations between different variables. the sem analysis gives model fit indices to establish the relationship. 3. results a total of 101 adults were included in the study. the linear regression analysis and structure equation modeling (sem) analysis was executed to foresee the socioeconomic status and dependent personality disorder as the predictor of nail biting among adults. table 1: frequencies of demographic characteristics of the sample (n=101) characteristics frequencies percentages f % gender male 36 35.6 female 65 64.4 age 18-------29 76 75.2 30-------41 15 14.9 42-------53 4 4.0 54-------65 1 1.0 66-------75 4 4.0 birth order first order 37 36.6 middle 36 35.6 younger one 28 27.7 education under metric 1 1.0 metric 5 5.0 f.a 13 12.9 b.a 33 32.7 m.a 48 47.5 higher education 1 1.0 profession job 13 12.9 business 6 5.9 student 72 71.3 jobless 2 2.0 house wife 8 7.9 marital status married 21 20.8 unmarried 80 79.2 guardian mother 4 4.0 father 78 77.2 other 18 17.8 mother living yes 92 91.1 no 9 8.9 father living yes 91 90.1 no 10 9.9 review of economics and development studies vol. 5, no 2, june 2019 391 living with parents yes 85 85.1 no 15 14.9 family system joint 44 43.6 neutral 57 56.4 table 9 shows the frequencies of different demographic characteristics of the sample. table 2:summary of linear regression analysis of nail biting as a predictor of dependent personality disorder predictor r f p dependent personality disorder .432 .187 .178 22.703 .000 note p<.05, table shows nail biting would be a significant predictor of dependent personality disorder. this table provides the r and r square values. the r value represents the simple correlation and is 0.432 which indicates a moderate correlation. the square value indicates how much of total variation in the dependent variable, can be explained by the independent variable. in this case, 1.8% can be explained. adjusted r-square a modify form of r-square which is also 1.7 variation in data. table 3: summary of coefficients of nail biting as a predictor of dependent personality disorder model un standardized coefficient standardize coefficient b se beta t p constant 41.592 2.278 18.257 .000 nail biting 2.347 .493 .432 4.765 .000 dependent variable; dependent personality disorder table provides the β0 and β1 values. β0 is an initial point of regression. this line is starts from 41.592. β1 is slop and it shows one unit change in independent variable cause 2.347 unit change in response. p-value .000 shows the highly significance of model. table 4: model fit summary (n=101) p value chi-square/df gfi agfi cfi rmsea .000 1.106 .976 .940 .974 .033 gfi= goodness of fit index, agfi=adjusted goodness of fit index, cfi= comparative fit index, rmsea= root mean square error of approximation the table of model summary showed the p value of .000 which indicated that the model was fit and confirmed the significant relationship of socioeconomic status and dependent personality on the nail biting behaviors of adults in sialkot. the model fit indices were also in the appropriate limit as chi-square/df ratio was below the prescribe limit of less than 3. the values of gfi, agfi and cfi were above .900 and model is said to be best if the value is above .90. finally, the rmsea value was .033. figure 1: structure equation modeling (path analysis) for socioeconomic status, dependent personality on nail biting behavior review of economics and development studies vol. 5, no2, june 2019 392 further, the figure gives the standardized regression weights. these could help in determining the amount of change in nail biting behavior because of income, education, profession and dependent personality. the income regression estimate was .21 that indicates that when income goes up by 1 standard deviation, the mail biting goes up by 0.21 standard deviations. further, the education regression estimate was -.09 which means education goes up by 1 standard deviation, the nail biting behavior goes down by .09 standard deviations. on profession regression estimate was .12 which specify that when profession goes up by 1 standard deviation, the nail biting goes up by .12 standard deviations. finally, on dependent personality regression estimate was .4 that reflects that when dependent personality goes up by 1 standard deviation, the nail biting behavior goes up by 0.4 standard deviations. 4. discussions it was hypothesized that dependent personality disorder would be a significant predictor of nail biting behavior. according to the finding of this study, the research hypothesis has accepted and significant. mostly it is observed that dependent personality disorder can cause negative consequences in everyday regulation and can pose significant trials for management of dependent personality disorder’s traits and patterns of emotions of clinginess, insecurity, and suggestibility (bornstein, 2012). furthermore, people with dependent personality disorder practice increased distress and relational clashes and have less social support (trull, jahng, tomko, woods, & sher, 2010). specifically, dependent patients have complications creating and keeping close interpersonal association, because of negative and disrupting social behaviors, which leads to subjective feelings of loneliness and depression (overholser, 1996). high levels of dependency and dependent personality disorder are linked with an increased risk for other mental illnesses. dependent personality disorder is often comorbid with eating disorders, anxiety disorders, and somatization disorders (bornstein, 1992). dependency is a problematic construct and people considered dependency a negative trait or construct which lead to serious personality issue such as dependent personality disorder. this disorder is closely related to anxiety, fear and depression. further, individuals need support and guidance in every aspect of their life even in their everyday choices and decisions. this clingy behavior makes them sick and led to worst just due to fear of losing that person whom which they are dependent. if that person left, people with dependent personality disorder experience extreme anxiety and fear of separation. the reason might be that mostly people dislike dependency and clingy behavior, submissiveness and these types of comments make dependent people overwhelmed about being left alone and being taken care of their selves which cause depression and other emotional disorders. previously several disorders were investigated with personality disorders but in this study researcher interested to examine and exploring the relationship of habits with dependent personality disorder. researcher chose nail biting habit on the basis of prevalence and everyday observations in surroundings. researcher assumed that there would be a relationship between nail biting habit and dependent personality disorder. as mentioned earlier that dependent personality disorder is closely associated with anxiety, depression, obsessive compulsive disorder and fear (simonelli & parolin, 2017). studies also indicated that nail biting is also related with above mentioned disorders (ghanizadeh, 2008; ghanizadeh & shekoohi, 2011). on the basis of indirect association of these variables researcher made an assumption and hypothesized that dependent personality disorder would be a significant predictor of nail biting. results also showed highly significant and positive predictive relationship between these variables which suggested that person with dependent personality disorder also has chance of nail biting behavior and it has been proved that current findings supports the assumption of researcher and stated that there is a predictive relationship between these two variables. but the lake of supportive evidences that dependent personality disorder and nail biting is directly associated, so present study is the first effort to relate and explore the relationship of these variables. a lack of evidence on nail biting is insufficient to clear the notion that nail biting leads to which types of psychological and behavioral problems among adults. limited literature on nail biting habit and indicate that these are behavioral issues which can be a consequence of stress or anxiety. there is no evidence found in review of economics and development studies vol. 5, no 2, june 2019 393 above mentioned literature about the relationship of nail biting and dependent personality disorder. current research would be a first effort to relate these three variables that whether the dependent personality disorder can be a predicator of nail biting behavior among adults. in our study data was obtained using the demographic form and indigenous dependent personality disorder scale (dpds) and was analyzed statistically. linear regression analysis was performed to examine the relationship between nail biting and dependent personality disorder among adults. the relationship between these two variables were highly significant r2 (n=101) = .187, p = .000. the individuals with dependent personality disorder also had nail biting behavior. according to age ranges groups 76 participants (n = 76) were in 1st group of age (18 to 29), 15 participants (n = 15) were in 2nd group (30 to 41), 4 participants (n = 4) were in 3rd group (42 to 53), 1 participant (n = 1) in 4th group (54 to 65) and 4 participants (n = 4) were in 5th group of age (66 to 75). which shows that nail biting and dependency is more common in young adults with 75%, with the growing age both variables decreases as 14% in thirties, 4% in forties, 1 percent in fifties and again increases from 1% to 4% in sixties and seventies. total of 320 samples were selected for this study (n=320), 119 were male participants (n=119, 37.3%) and 195 were female participants (n=194, 60.8%). only 101 participants (n=101, 31.5%) had both nail biting and dependent personality disorder. according to results, from selected participants (n = 101), 36 were male adults (n = 36, 30.2%) with nail biting and dependent personality disorder and (n = 65, 32%) were females’ adults with both nail biting and dependent personality disorder. from total number of participants (n = 320) 42 male participants (n = 42, 13.1%) had dependent personality disorder and 93 female participants (n = 93, 29.1%) had dependent personality disorder. results showed that female adults have more percentage of dependent personality disorder than male adults. percentage of nail biting behavior from total samples (n = 320), 69 were male participants (n = 69, 21.6%) and 72 were female participants (n = 72, 22.5%) which shows that nail biting behavior is equally practiced in both genders. further, the objective of the study investigates the socioeconomic status and dependent personality disorder as the predictor of nail biting among adults. structure equation modeling was done to analysis the results of the study. the analysis has given the model fit that was established significantly at the p value of .000. this model fit confirmed the predictive relationship of socioeconomic status and dependent personality with the nail biting behavior among adults. furthermore, the index of chi square/df (1.106) was in the acceptable limit of less than 3 (byrne, 2006). the values of other indices of gfi (.976), agfi (.940) and cfi (.974) were above .900 whereas a value greater than .90 was considered as appropriate hooper, coughlan & mullen, 2008) (hu & bentler, 1999). however, in the current research the indices were well above the limit thus, establishing the predictive relationship. lastly, the remse value was .033 and browne and cudeck reported that the value less than 0.08 may be considered as a reasonable good model (browne & cudeck, 1993). in conclusion it could be said easily that it was a good fitted model and there was a predictive relationship between the socioeconomic status and dependent personality with nail biting behavior among adults. it was hypothesized that the socioeconomic status and dependent personality disorder will be the predictor of nail biting among adults. as the above mentioned finding accepted the hypothesis there was no direct study available on adults to support the findings. the role of socioeconomic status in predicting the nail biting behavior was confirmed with the significant relationship of income, education and work with the nail biting (rajchanovska, & zafirova, 2011) (schwartz, 2019) whereas dependent personality can cause negative consequences in everyday regulation and can pose significant trials for management of dependent personality disorder’s traits and patterns of emotions of clinginess, insecurity, and suggestibility (bornstein 2012). furthermore, people with dependent personality disorder practice increased distress and relational clashes and have less social support than most (trull, jahng, tomko, woods, & sher, 2010). specifically, dependent patients have complications creating and keeping close interpersonal association, because of negative and disrupting social behaviors, which lead to subjective feelings of loneliness and depression (overholser, 1996). as mentioned earlier that dependent personality disorder is closely associated with anxiety, depression, obsessive compulsive disorder and fear (simonelli & parolin, 2017; pincus & gurtman, 1995; overholser, 1996). studies also indicated that nail biting is also related with these disorders (ghanizadeh, 2008; ghanizadeh & shekoohi, 2011). finally, this indirect association was supportive by the finding of the current research hence, the present study is the first effort to relate and explore the relationship of socioeconomic status and dependent personality with nail biting behavior among adults. review of economics and development studies vol. 5, no2, june 2019 394 5. conclusion dependency is very common in all groups of ages especially among adults. it is needed to develop the tool for measurement and management for dependent personality disorder its causes and leading behaviors. nail biting is one of these, which is alarming behavior for fear, stress and anxiety. hence, the purpose of current research is to find out the predictive associations between nail biting and dependent personality disorder. it is concluded that there is a significant predictive relationship between nail biting and dependent personality disorder, these behaviors lead to each other, there would be more chances of have nail biting habit with dependent personality disorder. 6. limitations and recommendations there are certain limitations of the present study which can be overcome and worked on in future. the sample of the current study was just taken from few institutes and communities of sialkot city. sample size was very small and difficult to generalize to the whole adult population. further, inclusion of large groups and different age groups can improve the results and findings of 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(2010). revised nesarc personality diagnoses: gender, prevalence, and comorbidity with substance dependence disorders. journal of personality disorders. 25(4), 412-26. review of economics and development studies vol. 5, no2, june 2019 396 review of economics and development studies vol. 5, no 4, 2019 695 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads public policy formulation in pakistan during military regimes 1 zeb-un-nisa, 2 ghulam mustafa, 3 muhammad arslan 1 ph.d. scholar, department of political science and international relations, government college university, faisalabad, pakistan.zaiba.haroon6507@gmail.com 2 assistant professor, department of political science and international relations, government college university, faisalabad, pakistan. ghulammustafa@gcuf.edu.pk 3 m.phil. scholar, department of political science and international relations, government college university, faisalabad, pakistan arslanjabbar78@gmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 pakistan has faced intermittent military interventions in politics since its establishment. in altered military governments, pakistan faced severe swipes in public policy formulation since first martial law of ayub khan to the last military government of general musharraf. military governments tried to get de-jure prestige after coming into power and designed the government structure to sponsor their interests. under military governance, performance of judiciary, religious leaders, external players and local administration persisted in critical situation. during military regimes, transformation program was executed in the country through public policy formulation intended to bring broadminded modifications in the constitution, legal and public domains of the country. this study will observe the major policies of the military regimes in pakistan and their impacts on social setup of the country. the core purpose of this study is to scrutinize the process of public policy formulation in pakistan during military regimes, their effects upon the socio-political environment of pakistan and addresses the key causes of disappointing results of these policies. the causes of armed forces interventions in politics of pakistan will also be analyzed. the findings specifies that pitiable articulation of policies, feeble establishment, dominating behavior of military executives, poor structure of funds management, varied interests of community and that execution of public policies blemished by exploitation are noteworthy reasons to failure of public policies in the country. the study acclaims rearrangement of sociopolitical situations as benevolent expansions for difficulties of public policy. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords crisis management practices, efficiency improvement and competitiveness, strategic response, pro-activeness and reactiveness, price strategy jel classification: g32, g39 corresponding author‟s email address: ghulammustafa@gcuf.edu.pk recommended citation: nisa, z, mustafa. g and arslan. m. (2019). public policy formulation in pakistan during military regimes. review of economics and development studies, 5 (4), 695-702 doi: doi 10.26710/reads.v5i4.875 http://www.publishing.globalcsrc.org/reads mailto:zaiba.haroon6507@gmail.com mailto:ghulammustafa@gcuf.edu.pk mailto:arslanjabbar78@gmail.com mailto:ghulammustafa@gcuf.edu.pk review of economics and development studies vol. 5, no 4, 2019 696 1. introduction public policy is the main source through which governing body establishes guidelines or handles the necessities of its inhabitants according to the directions given by the constitution. the stability and progress of administration of any well managed country is a marvel that is reliant upon public policy. since the establishment of pakistan, the governing bodies have been struggling to implement a cherished mechanism for public policies formulation and implementation to address public issue but remained failed to adopt it. the public policy formulation is a technical role of governing body which is a complex procedure effected by the different environmental and socio-political powers. public policy formulation in pakistan has always been faced political involvement and stress due to which it has been an arguable subject of policy developers. handling the issues that are affecting the social development and economic growth of the country is the prime objective of public policy and to provide suggestions for the improvement of social indicators and economic sector. since its existence, pakistan remained failed to articulate a strong public policy to overcome its issues. after pakistan came into being in 1947, the number and power of army raised progressively due to numerous factors associated to colonial era. the royal inheritance united with the absence of proficient public servants, paved the way for martial law in the country and interference of the army in the public administration. top level bureaucracy invited the military rulers to run the country by giving reductions to them against the public representative. the migration on massive scale and communal assassinations of the people accompanied by partition, growth of nationalist activities on ethnic basis and disputes with india and afghanistan due to durand line and kashmir shaped the image of profound defenselessness. the first war between india and pakistan was broke out after few months of partition over kashmir. the declarations of indian representatives that pakistan will not be able to persist for a long time added fuel to the fire which resulted national disintegration. these elements influenced the initial security measures of the country and gave the reason for extraordinary and growing endowment of budget for military. (giunchi, july 2014) ayub khan imposed first military government on october, 08 1958 in the country. after the martial law of general ayub, country perceived four martial laws with small intervals. in four martial laws, military dictators captured the governments upsetting the democratic esteems. second military government was enforced by yahya khan in 1969 replacing general ayub khan. third military government was initiated by general zia on july 05, 1977 and he governed the pakistan for eleven years. unsuitable public policies and imposing quick islamization by zia caused uprising of sectarianism in the country. during musharraf‟s era economic and social development was observed which reflects that the public policies of his tenure remained beneficial for pakistan. public policy is a blend of the actions, requirements and decisions taken by government. environmental directives such as financial, political and societal features not only form the shape of public policy also affect productivity and impacts of policy. initially, the term public policy was presented by the american political scientist, harold lasswell in 1951 who is accepted the creator of policy science and after that in several of publications. “public policy is whatever governments choose to do or not to do” (dye, 2013). “public policy refers to the actions taken by the administrative executive branches of a country for varying classes of issues, in a way that they are consistent with the laws and institutional customs” (hill, 2014). “public policy is a formal document statement of intentions and sets of actions of a government to either remove certain deficiencies or to improve the conditions in any particular area of concern/interest” (raja, 2015). 2. public policy formulation significant duty of an executive body of any country is to formulate public policy and its enactment. review of economics and development studies vol. 5, no 4, 2019 697 according to the “constitution of islamic republic of pakistan” 1973, sole concern of an executive branch is policy making through further division amongst the central, provincial and local governments. “the principles of policy”, chapter 2 of the “constitution of islamic republic of pakistan” 1973 is observed as charter of desires of the people of the country.” formulation of public policies is the exceptional zone of designated legislature of the state and policies formulated by the legislature are being executed by the apparatus of the state. logically, strategy and policy are different from each other. public policy is honestly universal representing that what has been prepared whereas strategy summaries the precise actions for understanding the objectives and goals defined by the policy. a great number of individuals, interest and pressure groups, politicians, ministers, legislators, public servants, organizations, authorities, experts, external countries to safeguard their interests are involved in the development of public policy. man as an individual and in society is a being of social nature. hence, the life of man is the life of social interaction. man‟s social interaction does not exist in isolation of social problems and as man interacts in different spheres of life – politically, economically, technologically, educationally, and otherwise, these social problems diffuse and spread along these sectors of life. it is in recognition of these social problems and in a bid to proffer durable and reliable solutions to them that the government is always seen formulating policies in response to them and in relation to fostering development, stability, growth, citizenry wellbeing and administrative efficiency. this is necessary because if attempts are not made to address these problems as they arise, they may degenerate into uncontrollable stages with the society‟s socio-economic growth and development endangered (okoli and onah, 2012). in view of this, a policy is a conscious plan of action and the action itself, initiated to solve a specific social problem. it is a plan or course of action by a government, political party or business designed to influence and determine decisions, actions and other matters (lennon, 2009). 3. theoretical frameworks for examining public policies the study of policy process and analysis has speedily developed as unique extent of theoretical study which appropriately described to draw attention towards an extensive series of educational benefits, commonly in the western world. the stages model adopted for collecting data for this study offers an upright design for the methodical framework to examine the public policies. due to this model, presentation of composite procedure for formulation of public policy comparatively becomes easy in modest way to pursuing a logical apparatus that may be imposed to formulate the public policy. the stages model is stated into different ways and has been individually named as linear model, public policy cycle, heuristic stages model or the sequential model (i.e. jones, 1997; lemieux, 2002; smith & larimer, 2009; anderson, 2011). according to the stages model, the procedure of making of public polices can be distributed into numerous stages. actually, every stage parallels to numerous moments in policy cycle. public policies are framed by executive branch and executed by public and private actors. according the model of howlett and ramesh‟s (2003), policy cycle have five phases i.e. agenda setting, policy formulation, policy adaptation/decision making, implementation and evaluation. 4. research methodology this study on public policy formulation in military regimes in pakistan was exploratory in nature. the research design was qualitative. the data was collected through secondary sources which includes research articles published in various journals and available on online sites. moreover, data was also collected through books written on public policy by some foreign and local authors. 5. public policy formulation during the military regime of ayub khan (from 1958 to 1969) first military government was imitated by ayub khan on october 08, 1958. his regime is regarded as golden sixties. after taking control as “chief martial law administrator”, he declared that martial law review of economics and development studies vol. 5, no 4, 2019 698 will be eliminated after handling prevailing situation in the country i.e. economic, social and administrative misperceptions. in the beginning years, general ayub khan gave stress to improve the supervision of government to firming his control. “constitutional commission” was formed by him. commission reported on may 06, 1961 that presidential system is suitable for the country in place of parliamentary system. ayub enforced a new constitution in the country on march 01, 1962 and lifted martial law on june, 06 1962. according to the new constitution, general ayub took oath as president of pakistan. he introduced “political parties act” on july 16, 1962 through which he expelled all political parties and seal their offices. convention muslim league was structured by the followers of ayub khan and he declared as president of convention muslim league on december, 24 1963. presidential elections were planned in january 1965. on july 21, 1964 all political parties in opposition included council muslim league of khawaja nazimuddin were organized as “combined opposition parties” (cop) at dhaka. aim of this alliance was to provide joint contestants for presidential, national and provincial assemblies. conventional muslim league had chosen ayub khan as presidential candidate. ayub had given a stunning manifesto to the country. according to him „public will‟ was supreme in all affairs of the country, democracy would fundamentally base on realism and basic rights of the public must be protected. as per forthcoming packages he committed that provision of broadest, imaginable and evenhanded sharing of wealth, adoption of a viable mechanism to preclude the repetition of floods in east pakistan and rehabilitation of affected ones, constancy of costs of goods to avoid inflation, a complete code of ethics for media, principal of parity between two parts of pakistan according to the constitutional requirements, progress of the concept of islamic nationalism for alliance with muslim world, struggle for independence of kashmir, protection of minorities and equality of privileges. (hussain, 2018) the program launched by general ayub was actually transformation which was imposed through implementation of public policies. the agricultural policies/green revolution of ayub khan improved the constancy of the government. the most significant and consistent public policy firstly was formulated in pakistan in the era of field martial ayub khan. (ansari, 1970) 6. public policy during general yahya khan’s regime (1969 to 1971) general ayub was removed on march 25, 1969 in result of campaign planned cooperatively by “people‟s party of pakistan” of “west pakistan” and religious parties from “east pakistan”. general yahya khan acquired control of the country as substitution of general ayub khan. in his tenure, pakistan indulged in civil war resultantly divided the country into two parts in 1971 by giving birth to bangladesh as an independent country. after observing the tense political condition of the country, general yahya decided that general elections would be detained on october 05, 1970 to transfer command to voted representatives of the public. he initiated legal framework order (interim constitution) on march 29, 1970 as guideline for upcoming elections. first general elections were held in the country in december, 1970 for which credit is gone to yahya khan. mujeeb ur rehman picked up 160 seats out of 162 in eastern part of the country but his party awami league remained failed in getting any seat from western part of the country whereas, mr. bhutto got 81 seats of national assembly in western part of the country. both mujeeb ur rehman and zulfiqar ali bhutto wanted to become the prime minter of the country. yahya khan decided to handle the situation by using forces in eastern part and remained unsuccessful. at least, yahya handed over the authority of remaining part of the country to mr. bhutto on december 20, 1970. review of economics and development studies vol. 5, no 4, 2019 699 7. public policy during the regime of general zia-ul-haq (from 1977 to 1988) after the harrowing happening of “fall of dhaka”, country recuperated its administrative framework in the command of mr. bhutto from people party of pakistan as prime minister of pakistan. beside commendation of general tikka khan, mr. bhutto indorsed general zia as “chief of army staff” of pakistan. later on, general zia deposed mr. bhutto on july 05, 1977 by initiating third martial law in the country and governed the pakistan for eleven years till august 17, 2019. general zia is admired for the promotion of islamic values in the country. his firms believe was that pakistan gain freedom on the notion of two nation theory based on islamic values. hence, islamic laws must be adopted for the governing of it. but, determination of zia was much critiqued due to selfcentered relatively less advantageous for public. (ziring, 1988). the administrative situation of the country was extremely uncertain in the regime of general zia. after taking charge of chief martial law administrator, general zia declared that he will ensure the conduction of general elections within 90 days in pakistan and the country will observe its representative administration very presently. but, general zia suspended the program of general elections against his promise and initiated the program of accountability against politicians. (arif, 1995). the society of pakistan was overwhelmed and divided on religious, political and traditional foundation since its existence. due to forceful stress on islamization and unsuitable policy steps of general zia, it was further divided into clusters. though, general zia was not the main source of the divisions of nation but undoubtedly he enhanced the division of society due to his brutal policy. (shakir & qadri, 2015) general zia gave attention for the existence and growth of the country. zia considered the country an islamic state rather than democratic. zia was against secularism and not acknowledged the significance of administrative procedure. pakistan‟s public policy was mandatory to be consisting of secularism & islamic ideology however, significance stress of zia towards islamic side played vital role towards destruction in every field. the story of the era of general zia can be surmised according to the reality that there was a need of public policy for pakistan which could handle the dominant circumstances and organized under irreligious elements (ziring, 1988). 8. public policy during the regime of general musharraf (from 1999 to 2008) forth martial law of the history of pakistan was enforced by general musharraf on october 12, 1999. his era is deliberated as best regime of the country regarding quick progress of economy and social development. perfect public policy was designed and executed during the entire tenure of musharraf and the country was developed significantly during his eight years tenure. era of general musharraf is deliberated as peculiar regime by military in the history of pakistan. in military administration of general musharraf, democratic values were motivated which is observed as contradictory against dictatorship. the features of the era of general musharraf are distinctive and fairly remarkable such as these situations were not examined in the whole past of the country. (shakir & qadri, 2015). pakistan was facing political disorder and some more depreciation issues. after commencement of martial law, general musharraf tried to get possible chances to overcome these issues. incident of attacks of 9/11 on twin towers in united states and consequent announcement of united states to start battle against terrorism appeared as danger for the autonomy of the country. but, musharraf changed it with his absolute competence into benediction for pakistan. he remained successful to assure united states that pakistan will be an ally in war against terrorism under particular terms of complete clearance of debts, removing review of economics and development studies vol. 5, no 4, 2019 700 economic prohibitions and an extra aid of $19 billion (rabbi, 2012) to handle the horrific issues of economic situation of the country, general musharraf implemented a completely straightforward policy. musharraf was fully aware that a firm policy is required to alleviate as he had took responsibility of incapacitated economy. the former democratic government gone with $900 million debts from international monetary fund, massive external loan of 47.6% of gdp ($43 billion) in 1998 and about 93.3% of gdp was entire loan (world bank, 2014). general musharraf wants to commence democracy in the country for which he accepted the decision of the “supreme court of pakistan” & held countrywide elections in 2002 to restore the democracy. generous consideration and passion to acquire progress and focused aims were the main motives of musharraf that assisted the country to generate finest public policy eternally. general musharraf was farsighted and liberal minded person wanted to support public awareness in the country. due to his liberal thinking, he passed the law of women empowerment in pakistan. musharraf formulated flawless policies for all sectors as he imagined the country amongst the rapidly growing countries of the world. in view of musharraf, restoration of pakistan from ashes to gold was possible through secularism and country should be free from different types of discriminations. musharraf conducted referendum like zia to prolong his occupancy and was criticized by the opponents as dictator minded person. as “chief martial law administrator”, musharraf permitted to all political parties of pakistan to take part in general election (this permission was granted first time in the history of the country) he fixed a perimeter of bachelor‟s degree for assembly members to enhance the worth of parliament and vote. to deliver extra authorization he decreased the age limit for voter from 21years to 18 years. the reserved seats of minorities and women for senate and national assembly were increased. for proper representation on local basis, local body elections were held in 2001. distinguish policy measures of general musharraf were; formation of national reconstruction bureau, freedom of media, operational execution of education system, women empowerment and immunization package. formulation of public policies such as liberty of media, women empowerment and actual execution of these policies clearly indicate that musharraf was not a narrow minded leader. in musharraf‟s regime, economic growth of the country was on the way of progress than formerly and the country was registered in the row of world‟s settled economic powers of future. the external loans of pakistan were declining significantly and growing speed of economy was remarkable. primary economic symbols like foreign assets, gdp, equilibrium of payments, equilibrium of trade, decrease in poverty and unemployment were all encouraging. general musharraf planned a five year plan of economic development to fight against the dominant economic issues of pakistan and for the improvement of fiscal zone of the country (khan, 2004) stress was placed upon to regulate unemployment and inflation, reestablishment of macroeconomic permanency, restoration of key institutions, through enhanced fiscal authority, structural reforms and modifications to eradicate falsifications. in the very beginning of the era of musharraf, economic restructuring was planned which was proved fruitful to achieve success. to acquire the desired objectives significantly in the following years and for the growth of economic condition, reforms were implemented successfully. dribbles of economy were channelized towards boosters by introducing an appropriate procedure of policy and they assisted for the growth of economic condition (husain, 2009). musharraf presented the country as model place for investment by improving the parameters of economy and via improved structural capabilities of the industry. general musharraf struggled hard to be operative and highest amount of fdi arrivals were inflated to support the economic position by oversees depositors review of economics and development studies vol. 5, no 4, 2019 701 which stabilized the pakistani economy and delivered employment on large scale to local inhabitants (nasir, 2013). 9. conclusion the immense examination of the study of formulation of public policy during military regimes in pakistan and their effects as prescribed by the developers of policy determines that there is no specific sequel to categorize the reasons of the unacceptable outcomes of policy. moreover, there are several conventional measures replicated as main reason for letdown of public policies during military regimes in the country like dominant attitude of the martial law administrators, nonexistence of a suitable structure for formulation and implementation of policies, absence of organizational structure, lack of democratic participation of political leadership, enormous corruption, lack of visionary leadership, adoption of central method in policy execution, inadequate financial allocations, weak community establishment, dejected civic facilities, untrained human resources, doubtful policy intentions and pitiable checking and assessment classification. it has been recognized that the procedure of formulation of public policy and its implementation during military regimes had dominated by the personals in authority. implementation plays commanding role in determine the success and failure of policies. the findings indicate that implementation of public policy in country is a complicated procedure and based on thoughtlessness. public policy is formulated by elites holding authority, political sponsorship, out of power leading groups, affiliated secret powers, and effective apparatuses for contribution in the policy subsystems. due to instability and weak political conditions country has to face martial laws with different intervals. general muhammad ayub khan initiated the first martial law in the country october 08, 1958. the first martial law was finished in 1969 with the replacement of another military rule by yahya khan. general zia ul haq enforced third martial law in the country in july 1977 and endured in authority for eleven years. in his tenure he faced ferocious resistance for speedy enforcement of islamization. his inappropriate policies caused sectarian uprisings and exploded ethnic and racial differences among different classes. forth martial law was initiated in the country in october, 1999 by general musharraf. at the time of imposition of martial law by general musharraf, impression was that musharraf wants to promote democracy but the facts of his period proved opposite. examination about significant features of public policies throughout the musharraf regime demonstrate that formulation of policy during the regime of general musharraf was impeccable yet though, policies were defiantly improved in comparison with the policies of preceding martial law administrator of the country. general musharraf was an imaginative intellectual having generous personality. the suitable policy primly gratified the beneficiaries in the greater concern of the country. therefore, appropriate policy procedure may be implemented to achieve the desired results of the public policies. several strategies can be adopted by government for successful implementation of public policy to acquire desired results i.e firming the absolute role of legislature in policy formulation process, carrying further probable commitment of people at indigenous level of policy formulation, draft out a solid emphasis on public worth in policy formulation and fetching the contribution of community in consumption of present funds appropriately. the governments should be accountable for emergent of practicable policies for public to handle their concerns. the armed forces of the pakistan are most contemporary and biggest in the world. pakistan army became the pivotal political power in late 1950s which progressively penetrated in its economy. in 1980s, pakistan‟s military found infiltrated in decisive political decision making although utmost penetration into the social order and economy was initiated in the succeeding decade and continued to till now. review of economics and development studies vol. 5, no 4, 2019 702 references ansari, s. h. (1970). forced modernization and public policy: a case study of ayub khan era (195869) . journal of political studies, vol 18, issue – 1, , 45-60 . arif, k. m. (1995). working with zia : pakistan's power politics, 1977-1988. karachi: oxford university press. bajwa, f., & ansari, s. h. (2018). understanding the hidden power relations in policy implementation: the case of pakistan. issra papers volume-x, issue-iii, 1-15. hill, m. (2014). the public policy process (sixth edition). london and new yark: routledge. husain, i. (2009). the role of politics in pakistan ‟s economy. journal of international affairs, 1-18. hussain, a. (2018). politics of combined opposition parties (cop) during ayub khan era (1958-1969). journal of the punjab university historical society , 11-22. khan, s. r. (2004). pakistan under musharraf, 1999-2002 : economic reform and political change. lahore: vanguard,. rabbi, f. (2012). war against terrorism and its repercussions for pakistan. pakistan journal of history and culture,, 71-90. shakir, r., & qadri, s. (2015). public policy analysis under military governance in pakistan: a comparative study of two contrasting regimes. public policy and administration research, 4854. waseem, m. ( january 2011). patterns of conflict in pakistan: implications for policy . brookings. ziring, l. (1988). public policy dilemmas and pakistan's nationality problem: the legacy of zia ul haq. asian survey, 795-812. lennon, s. (2009), educational policy. accessed from http://www.lennonportal.net/index.file/ policy world bank. (2014). data retrieved november 26, 2019 from world development indicators online (wdi) database. http://www.lennonportal.net/index review of economics and development studies, vol. 8 (2) 2022, 111 125 111 globalization and energy consumption: empirical implications for income inequality in developing countries muhammad ali gardezi a, imran sharif chaudhry b a phd scholar, school of economics, bahauddin zakariya university, multan, pakistan email: mag_gardezi@yahoo.com b dean faculty of arts and social sciences, bahauddin zakariya university, multan, pakistan email: imran@bzu.edu.pk article details abstract history: accepted 30 april 2022 available online june 2022 the objective of this study is to envisage the impact of globalization and energy consumption on income inequality in developing countries. the specific objectives are to discover the impact of economic, social, political, and overall globalization along with energy consumption on income inequality. to attain the empirical outcomes, this study employed the system-gmm on a panel dataset from 1996 to 2018 in a sample of sixty-nine developing countries as per the classification of world bank. to further validate the empirical outcomes different interaction terms between overall globalization and energy use, political globalization and energy consumption, social globalization and energy consumption are all regressed on income inequality. the main finding of this study is that income inequality is positively affected by globalization and is statistically significant. this research also discovered a negative correlation between energy consumption and income inequality. the study suggests that developing nations should adopt policies to open their markets to the entire world, make effective use of globalization, and promote policies that reduce income inequality. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: globalization, energy consumption, income inequality jel classification: f02, o13 doi: 10.47067/reads.v8i2.440 corresponding author’s email address: imran@bzu.edu.pk 1. introduction world economies are achieving significant economic growth, but this success is not acquired in terms of equal income distribution (shabaz et al., 2021). the increase in income inequality has becomes a matter of concern to all developed as well as developing nations. the rapid decline in equal distribution of income leads to more focus on the examination of the dynamics of income inequality in developing countries (wildman, 2021). extreme income disparities have gone out of control. hundreds of millions of people live in poverty hulme and shepherd (2003) whereas the richest one percent of the population gets huge profits. millionaires are in greater numbers than ever before, and their incomes have climbed to new heights. during this time, the world's poorest people grew poorer. review of economics and development studies, vol. 8 (2) 2022, 111 125 112 globalization seems to have economic, political, as well as social effects on all people throughout the world and globe is known as a globalized society, and people socially know each other through various forms of communication and globalization is a way through which the economy of the world is linked via foreign direct investment and trade (mishkin, 2009). through the influx of capital for economic development, globalization has brought the world's established and growing economies closer. many countries have benefited from globalization, which has had a major impact on the socioeconomic, environmental, and political elements of human life. by producing and investing in goods and services, technical change, financial convergence and information exchange all contribute to the increased interconnection between countries as a result of globalization. globalization reduces the income gap in emerging countries by increasing labor’s demand because emerging countries are richer in unskilled labor (ha, 2012). globalization, on the other hand, promotes economic disparities in emerging countries (bukhari & munir, 2016). as a result, analyzing the influence of globalization on income disparity has become a significant topic in the political economy and internationally (dixon & boswell, 1996; rudra, 2008; lundberg & squire, 2003; milanovic & squire, 2005). energy consumption is a parameter for measuring the rate of economic growth and industrial development. in both industrialized and emerging countries, energy usage serves as a fuel for rapid economic expansion. inequalities are frequently explored in-depth in terms of income, but differences in energy availability and usage might show income disparities as well. as a result, overall energy statistics can be utilized to uncover economic disparities at the worldwide, geographical, and national levels (mainali et al., 2014). oil, natural gas, coal, nuclear, solar, hydraulic, biomass and wind are primary energy sources that are utilized directly. secondary sources of energy that are utilized after being converted include diesel oil, solar energy, gasoline, and coal-based electricity. primary energy consumption makes it simpler to uncover income inequalities (sonora, 2021). this is because the primary energy source is the most readily controllable kind of energy. income inequality is affected by several variables such as gdp (deininger & squire, 1997; hoffmann et al., 2020; yang & greaney, 2017; zungu et al., 2021), population (bor et al., 2017; dong et al., 2018; zhan et al., 2021; zhong, 2011), and unemployment (costantini et al., 2018; mishchuk et al., 2018). this is an insufficient list, but it does indicate a general tendency in the existing literature. the influence of globalization on income disparity was scientifically explored by previous recent researchers and concluded that globalization has a positive impact on income disparity (ha, 2012; dorn et al., 2018; abakumova & primierova,2018; auguste, 2018; elgindi, 2016; asteriou et al., 2013; mah, 2013; choi et al., 2019). while on the other hand, the studies of globalization and income inequality found that globalization harms income inequality (cabral et al., 2016; ruana, 2020; balanet et al., 2015; zhou et al., 2011; lee, 2010; bechtel, 2014; kinnaman, 2018; mohanty, 2017). related to this, some studies discovered a positive link between income inequality and energy usage. (topcu & tugcu, 2019; uzar, 2020; asongu & odhiambo,2020; bianco et al., 2018; ajmi et al., 2015; salgado et al., 2020; galvin & sunikka, 2018). while some researchers found that energy use has a negative relationship with income inequality (duan & chen, 2018; mohanty, 2017), the significant results are still unclear. the goal of this research is to find significant results by estimating globalization and energy use on income inequality in developing countries. income inequality is a problem from the social point of view. for the economists and policymakers, rising income inequality among the developing countries is a major challenge. it is often assumed that globalization offers countries more opportunities to pursue higher productivity growth. globalization provides new chances for countries to improve their growth and development, but it also review of economics and development studies, vol. 8 (2) 2022, 111 125 113 creates conflicts for policymakers in regulating global, regional, and national economic systems, as well as imposing constraints on them. there is a lot of discussion over why certain countries profit more from globalization than others. complementary policies and initial conditions in the host country have also resulted in a divergence of benefits from globalization among countries. over the previous few decades, the gap between rich and poor countries has widened because of globalization. despite the enormous potential afforded by globalization, its current patterns are exceedingly complicated and uneven, and detractors are always saying that as globalization increases, rich countries have more benefited at the expense of poor countries. despite advances in technology, neoliberal reforms, and cross-national integration, the benefits of increased incomes and output growth have not been evenly distributed among the population which caste a serious doubt on the impact of globalization on the income inequality. the main questions arise how different type of globalization like political, social, and economic globalization along with the energy consumption impact the income inequality of the developing countries. this study is consisting of five sections. section one contains introduction, second section establishes the review of existing studies, section three is data and econometric strategy, section four presents the result and discussions and finally section five concludes the study. 2. literature review in this section, the connection between globalization, energy consumption, growth, population, and unemployment are reviewed. the researcher will try to pinpoint these connections with respect to theoretical and empirical research and reviewed a variety of macroeconomic channels. several empirical studies have investigated the relationship between globalization and macroeconomic factors, as well as a few other topics such as globalization and economic growth. (bataka, 2019; kurniawati, 2020; majidi, 2017; radulovic & kostic, 2020; samimi & jenatabadi, 2014; zahonogo, 2018 among others); inflation (ahmad & civelli, 2016; ali et al., 2019; altansukh et al., 2017; lv et al., 2019; mazumder, 2017 among others); education (ali et al., 2019; malinetskiy & sirenko, 2020; poddubnaya et al., 2021; spring, 2008; zajda, 2020 among others); financial development (hussain et al., 2020; kandil et al., 2017; muye & muye, 2017; kılıçarslan et al., 2018; zameer et al., 2020 among others); (fuinhas et al., 2019; hassan et al., 2019) environment (crawford-brown, 2013; gallagher, 2009; kayikci, 2019; pischke, 2018; postolache et al., 2019; j. yang et al., 2019 among others) globalization. however, only a few researchers have found a link between globalization and income inequality (abakumova & primierova, 2018; adams, 2008; balan et al., 2015; heimberger, 2020 among others). the majority of literature supports that globalization has a positive impact on income inequality such as (baddeley, 2006; chordokrak & chintrakarn, 2011; khan & faridi, 2008; urata & narjoko, 2017 among others) and others have a negative impact like (adams, 2008). asteriou et al., 2014 has empirically analyzed the association linking globalization and income disparity by using the panel data of twentyseven eu countries. according to their findings, there is a positive relationship between globalization and income disparity. dorn et al. (2018) examined the link between globalization and income disparities using panel data from 140 countries. they used instrumental variable estimates to conclude that globalization has a large positive impact on income disparity. similarly, using data from both developed and developing nations, atanasova and tsvetkov (2021) evaluated the impact of globalization on income disparity. for data estimation, they employed adf and pp fisher approaches. globalization has a detrimental influence on income disparity in emerging countries, according to the study's findings. on the other hand, gdp growth has no positive relationship with income disparity. review of economics and development studies, vol. 8 (2) 2022, 111 125 114 while on the other hand munir and bukhari (2020) analyzed the relationship between inequality and globalization by taking three aspects of globalization as financial globalization, trade globalization, and technological globalization. this study used ho and ss theorem as a theoretical base. they used panel data and found that financial globalization positively influences the income disparity, trade globalization negatively influences the income disparity and technological globalization also has a negative connection with income disparity. heinze (2020) explored the association between globalization and inequality, and poverty. finally, they reported that globalization has a positive impact on income disparity but has a negative impact on poverty. several empirical kinds of research, on the other hand, have looked into the relationship between energy consumption and macroeconomic variables, as well as other variables such as energy consumption and growth. (chen et al., 2020; dat et al., 2020; esen & bayrak, 2017; huang & huang, 2020; ivanovski et al., 2021; magazzino et al., 2021; shahbaz et al., 2020 among others); inflation (bassey & ekong, 2019; naraghi et al., 2021; sultan et al., 2020; talha et al., 2021 among others); employment (glasure & lee, 1995; muniyoor, 2020; payne, 2009; tiwari, 2010; yu & jin, 1992 among others); trade (alkhateeb & mahmood, 2019; amri, 2019; ben aïssa et al., 2014; farhani et al., 2014 among others); health (akbar et al., 2020; caruso et al., 2020; haseeb et al., 2019; qu et al., 2017; xing et al., 2019 among others); human capital (akram et al., 2019, 2020; alvarado et al., 2021; asghar et al., 2020; salim et al., 2017; yao et al., 2019); financial development (khan et al., 2020; magazzino, 2018; odhiambo, 2019; raza et al., 2020; tsaurai, 2020; yang et al., 2020 among others) duan and chen (2018) used a graphical analysis of the lorenz curve to investigate the relationship between energy usage and income disparity. panel data of 121 countries were analyzed by the multi-regional input out the model and found that energy consumption reduces income disparity in all three forms such as petroleum, coal, and natural gas. topc and tugcu (2020) examined the correlation between renewable energy consumption and income disparity and found that renewable energy use had a negative influence on income inequality. (santillán-salgado et al., 2020) used a sample of 134 countries to empirically investigate the impact of gdp growth and energy use on wealth disparities. they used the gini index as a proxy if income inequality. the main findings of the study demonstrated that energy use has a long-term favorable impact on income disparities. while on the other hand dong and hao (2018) empirically analyzed the electricity consumption and income disparity in china using a panel from 1996 to 2013. they used the gmm approach for the estimation of panel data. their findings revealed that the urban and rural effects of income inequality on electricity are dependent on income level. the study also revealed a substantial inverted u-shaped association between per capita power usage and per capita gdp. galvin and sunikka-blank (2018) explored the relation of energy use with income disparity in high-income countries using data from the 1950s to the 1980s. the data revealed a negative link between income disparity and energy use. the majority of studies discovered a link between energy use with income inequality. the dependent variable was energy consumption, while the independent variable was income disparity. only one study has looked into how energy consumption affects inequality. however, past empirical research implies that the actual influence of energy use on income inequality there may be needed to be investigated. as a result, the goal of this research is to find out how globalization and energy use affect economic inequality. while on the other hand topcu and tugcu (2019) used panel data from developed countries (1990-2014) to investigate the association between renewable energy use and inequality. the generalized methods of moments and the dynamic common effects estimator were both used in this work as panel data methodologies. according to their findings, increasing renewable energy usage leads to a reduction in income disparity. while on the other hand globalization's impact on income inequality review of economics and development studies, vol. 8 (2) 2022, 111 125 115 in emerging and developed countries, according to baekand and shi (2016). they estimated panel data for 52 developing and 26 developed nations throughout the period 1990-2010. they used the gini index, ho, and sst model for using the comprehensive sets for this study. the result of the study showed the positive relation of globalization with income inequality in developing countries. heshmati and lee (2010) used panel data by taking 61 developing and developed throughout 1995-2001. the finding of the study indicated that there has a negative relation between globalization with income disparity. 3. data and econometric strategy 3.1 data source the effect of globalization and energy usage on income inequality in developing nations is investigated using panel data collected over a twenty-three-year period from 1996 to 2018.this study is based on secondary sources of information. table 1 description of variables and data sources variables symbol measurement data sources gini index gini it is a statistical dispersion measure used to describe income disparity. swiid* globalization index glob is measured by political, economic and social dimensions of globalization. kof index (dreher, 2006) economic globalization index eglob is measured by trade flow, fdi & portfolio investment, and restrictions on these outflows and inflows. kof index (dreher, 2006) political globalization index pglob is measured by the membership of international organizations, number of treaties signed by other countries, embassies numbers, and un security council meetings. kof index (dreher, 2006) social globalization index sglob is measured by information flows, personal contact, and cultural nearness. kof index (dreher, 2006) energy consumption enc energy use (kg of oil equivalent per capita). wdi** gdp growth rate gdpr gdp growth rate (annual %). wdi total population pop the de facto definition of population, which includes all residents regardless of legal status or citizenship, is used to calculate the total population. wdi total unemployment uemp unemployment, total (% of the total labor force) (modeled ilo estimate). wdi * standardized world income inequality data base, ** world development indicators review of economics and development studies, vol. 8 (2) 2022, 111 125 116 system gmm is used for the analysis of unbalanced panel data for developing countries. we used eight econometric models to find out the impact of globalization and energy consumption on income inequality in developing countries. income disparity is described as a function of globalization, energy usage, income, population, and unemployment, as seen below: 3.2 model specification to unveil the impact of globalization and energy consumption on income inequality in developing nation the following models are to frame gini = f(glob, enc, gdpr, pop, unemp) (1) the squared term of gdp growth incorporates in the model because the kuznets-type model is used to analyze the influence of globalization and energy consumption on income inequality in developing countries. gini = f (glob, enc, gdpr, gdpr2, pop, unemp) (2) all variables are in logarithm form, where gini represents the gini coefficient, glob indicates the globalization index, enc is the energy consumption, gdpr is the gdp per capita growth rate, pop indicates the total population and unemp represents the unemployment rate. giniit = β0it + β1giniit−1 + β2globit + β3encit + β4gdprit + β5gdpr 2 it + β6popit + β7unempit + ɛit (3) giniit = β0it + β1giniit−1 + β2eglobit + β3encit + β4gdprit + β5gdpr 2 it + β6popit + β7unempit + ɛit (4) giniit = β0it + β1giniit−1 + β2pglobit + β3encit + β4gdprit + β5gdpr 2 it + β6popit + β7unempit + ɛit (5) giniit = β0it + β1giniit−1 + β2sglobit + β3encit + β4gdprit + β5gdpr 2 it + β6popit + β7unempit + ɛit (6) eglob, pglob and sglob are economic globalization, political globalization and social globalization respectively. the interaction term might be expressed as follows to evaluate the contribution of globalization in moderating the impact of energy usage on income disparity. giniit = β0it + β1giniit−1 + β2globit + β3encit + β4gdprit + β5gdpr 2 it + β6popit + β7unempit + β8(glob ∗ encit) + ɛit (7) giniit = β0it + β1giniit−1 + β2eglobit + β3encit + β4gdprit + β5gdpr 2 it + β6popit + β7unempit + β8(eglob ∗ encit) + ɛit (8) giniit = β0it + β1giniit−1 + β2pglobit + β3encit + β4gdprit + β5gdpr 2 it + β6popit + β7unempit + β8(pglob ∗ encit) + ɛit (9) giniit = β0it + β1giniit−1 + β2sglobit + β3encit + β4gdprit + β5gdpr 2 it + β6popit + β7unempit + β8(sglob ∗ encit) + ɛit (10) review of economics and development studies, vol. 8 (2) 2022, 111 125 117 to find out the relationship between globalization and energy consumption on income inequality, environmental quality, and economic growth, a total of sixty-nine countries are selected. the list of developing countries was taken by undp (2020). all the models were estimated by system gmm estimation technique. 3.3 estimation technique the first distinction is that arellano and bond developed the gmm estimator (1991). in the righthand side of the model, the dependent variable's lag is added as a regressed. when the lag of the dependent variable is used as a regressor, the issue of correlation between the error term and the regressors arises. the difference gmm estimator is used with the lag of the regressor as an instrument. even though the model contains autocorrelation, these instruments may be insufficient. gmm contains a variety of potential faults, according to arellano and bover (1995) and bond and blundell (1995). if the variables are persistent, the authors suggest that lag levels are insufficient instruments in first difference gmm estimation. according to the authors, using lag level and lagged difference variables as instruments in the model eliminates the problem of endogeneity and weak instruments. arellano and bover (1995) and bond and blundell (1995) created the two-step system gmm estimation approach (1998). this method is used to overcome the limitations of the panel and cross-sectional investigations. due to heterogeneity and endogeneity, the first issue is omitted variable bias. system gmm equation is given below. δyit = α + β1yi,t−1 + β2xit + λi + φt + €it (11) where xit denotes control variable, β1 denotes the coefficient of lag of dependent variable λi denotes the cross country unobserved effect, φt denotes time effect €it denotes error term, i represents country and t represents time. 4. results and discussion 4.1 descriptive statistics the following table shows the descriptive statistics that comprise mean, maximum, median, minimum, standard deviation, kurtosis and skewness values. the values of gini, glob, eglob, sglob, enc, and pop are positively skewed while pglob, and gdpr are negatively skewed. table 2 descriptive statistics mean median minimum maximum std. dev. skewness kurtosis gini 43.20 42.10 5.90 68.00 8.41 0.23 3.10 glob 55.62 55.73 24.45 88.55 11.86 0.08 2.72 eglob 49.94 49.68 18.03 87.00 13.46 0.35 2.94 pglob 68.50 69.36 23.40 93.50 14.25 -0.38 2.52 sglob 48.26 48.62 9.78 88.22 17.38 0.02 2.26 enc 1066.64 694.18 113.09 12172.41 1285.05 4.58 30.66 gdpr 26.21 26.32 0.01 41.68 3.88 -0.91 8.44 pop 7.06e+7 2.03e+7 1.11e+06 1.40e+09 2.03e+08 5.38 31.75 uemp 7.53 5.75 0.21 33.29 5.70 1.39 4.98 source: author’s calculation review of economics and development studies, vol. 8 (2) 2022, 111 125 118 4.2 correlation matrix table 3 shows the correlation matrix of some selected variables of the 69 developing nations, which will be used to determine the strength of factors. the correlation matrix may also be used to check for multicollinearity between variables; if the correlation coefficient is larger than 0.8, there is a lot of multicollinearities. table 3: correlation matrix correlation gini glob eglob pglob sglob enc gdp pop uemp gini 1 glob -0.19 1 eglob -0.09 0.31 1 pglob -0.11 0.18 0.04 1 sglob -0.23 0.40 0.37 0.13 1 enc -0.35 0.19 0.19 0.05 0.28 1 gdpr -0.02 -0.04 -0.02 -0.04 -0.07 -0.05 1 pop -0.12 -0.03 -0.05 0.10 -0.05 -0.02 0.06 1 uemp 0.31 0.08 0.08 -0.02 0.13 0.01 -0.10 -0.05 1 4.3 panel regression results and discussions table 4 presents the results of system-gmm of developing countries. the usage of lagged terms in all models is statistically significant, indicating that the study was conducted using a dynamic model, and indicates that one year of income inequality is highly affected by the previous year of income inequality. table 4 dependent variable : income inequality (two-step s-gmm results of developing countries) dependent variable: natural logarithm of gini coefficient index variables (1) (2) (3) (4) (5) (6) (7) (8) l.lngini 1.038** * 1.005*** 1.059*** 1.036*** 1.037*** 1.041*** 1.018*** 1.037*** (0.010) (0.009) (0.008) (0.007) (0.009) (0.007) (0.001) (0.001) lnglob 0.047** 0.076*** (0.023) (0.006) lnenc 0.017** * (0.004) 0.021* (0.011) 0.018** (0.009) 0.011*** (0.003) 0.068** * (0.007) 0.063** * (0.012) 0.034** * (0.001) 0.043** * (0.002) lngdpr 0.171** 0.160*** 2.070*** 0.170** 0.158** 0.183** 0.005** 0.013* (0.081) (0.049) (0.187) (0.069) (0.080) (0.074) (0.002) (0.007) 𝐋𝐍𝐆𝐃𝐏𝐫𝟐 0.167*** (0.055) 0.156*** (0.041) 1.687* (0.871) 0.158*** (0.057) 0.148** (0.066) 0.168*** (0.060) 0.025*** (0.001) 0.022** (0.011) lnpop 0.004** 0.004** 0.005** 0.004** 0.002** 0.005** 0.004** 0.003** review of economics and development studies, vol. 8 (2) 2022, 111 125 119 * * * (0.002) (0.001) (0.001) (0.002) (0.001) (0.002) (0.002) (0.001) lnuemp 0.010** 0.008** 0.010** 0.007** * 0.005** 0.006** 0.007* 0.008** (0.005) (0.004) (0.005) (0.001) (0.002) (0.003) (0.004) (0.004) lneglob 0.028** * 0.078** (0.039) (0.005) lnpglob 0.011*** (0.003) 0.036** * (0.001) lnsglob 0.013 0.044 (0.012) (0.052) ln(glob*enc) -0.022* (0.012) ln(eglob*enc ) 0.018*** (0.002) ln(pglob*enc ) -0.019* (0.011) ln(sglob*enc ) -0.020 (0.021) constant 0.571*** 0.595*** 5.803*** 0.591*** 0.488** 0.586** * 0.212*** 0.111*** (0.201) (0.139) (0.509) (0.203) (0.229) (0.202) (0.006) (0.004) groups 69 69 69 69 69 69 69 69 instrument 44 49 52 52 49 49 66 67 observations 1,225 1,225 1,225 1,225 1,225 1,225 1,225 1,225 ar (1) p-value 0.0894 0.0785 0.00022 1 0.0807 0.0646 0.0873 0.001 0.000 ar (2) p-value 0.112 0.109 0.343 0.117 0.112 0.117 0.147 0.157 hansen p-value 0.594 0.727 0.491 0.808 0.735 0.499 0.577 0.451 source: author’s calculation; standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.1 results are presented in table 4 and indicate a significant positive effect of globalization on income disparity in selected developing countries (𝛼2 = 0.047, 𝑝 < 0.05). therefore, it is concluded that globalization worsens the distribution of income in selected developing countries. model one further shows a significantly negative relationship between energy consumption and income inequality (𝛼3 = −0.017, 𝑝 < 0.01). it means energy use has a positive effect on income disparity. the overall results reveal that energy consumption has a negative association with income inequality. all the production sectors are entirely dependent on energy use because of excessive use of energy due to this, production increases which leads to generating employment, as results income inequality decreases in review of economics and development studies, vol. 8 (2) 2022, 111 125 120 overall developing countries. the coefficient value of gdp growth showed a positive relationship between growth and income disparity (𝛼4 = 0.171, 𝑝 < 0.05). it implies that growth has a significantly favorable impact on income inequality. additionally, the estimated gdp square coefficient demonstrates a negative relationship between income inequality and growth (𝛼5 = −0.167, 𝑝 < 0.01). it means growth square has a significantly negative impact on income disparity. the inverted u-shaped relation between gdp growth and income disparity is exposed by this result. this supports the kuznets hypothesis (1955), which states that when a country's per capita income rises, income disparity rises to a certain level and then income inequality starts reducing as per capita income rises. the coefficient value of population shows a positive association between population and income disparity (𝛼6 = 0.004, 𝑝 < 0.05). it means the population has a statistically positive relation to income inequality. the coefficient value of unemployment shows the positive relationship between unemployment and income inequality (α7 = 0.010, p < 0.01). it means that unemployment has a statistically significant positive association with income inequality. economic globalization shows a positive relationship with income inequality in selected developing countries (𝛼8 = 0.028, 𝑝 < 0.01). it means that economic globalization is positively associated with income inequality. political globalization also shows a positive association with income inequality in selected developing countries (𝛼9 = 0.011, 𝑝 < 0.01). political globalization is positively affecting income inequality. it means that political globalization has a worse effect on income inequality in selected developing countries. social globalization has a positive but insignificant correlation with income disparity in developing nations (𝛼10 = 0.013, 𝑝 > 0.1). it means that social globalization has an insignificant effect on income disparity in all developing nations. four interaction terms are introduced in this analysis. first, in model five, the interaction term of overall globalization and energy consumption is introduced. the coefficient value of that interaction showed a significantly negative correlation with income inequality (𝛼11 = −0.022, 𝑝 < 0.1). so, the interaction term of model five concluded that the joint effect of globalization and energy use that is used as an interaction term is helpful for income inequality in selected developing countries. second, in model six, the interaction term of economic globalization and energy consumption is introduced. the coefficient value of that interaction term showed a significantly negative relationship with income inequality (𝛼12 = −0.018, 𝑝 < 0.01). therefore, the interaction term of model six concluded that the joint effect of economic globalization and energy use that is used in the interaction term is helpful for income inequality in selected developing countries. third, in model seven, the interaction term of political globalization and energy consumption is introduced. the coefficient value of that interaction term showed a significantly negative correlation with income inequality (𝛼13 = −0.019, 𝑝 < 0.1). hence, the interaction term of model seven concluded that the combined effect of political globalization and energy consumption which are used in the interaction term showed a positive effect on income disparity in selected emerging countries. fourth, in model eight, the interaction term of social globalization and energy consumption is introduced. the coefficient value of that interaction term showed an insignificantly negative relationship with income inequality (𝛼14 = −0.020, 𝑝 > 0.1). the interaction term of model eight concluded that the combined effect of social globalization and energy consumption which are used in an interaction term has no significant impact on income disparity in selected emerging countries. all model's diagnostic tests on system-gmm reveal the results. the findings of arellano and bond's (1991) serial correlation test are presented in this analysis. the presence of first-order ar (1) serial correlations does not mean that the estimates are inconsistent. all models succeeded the ar (1) review of economics and development studies, vol. 8 (2) 2022, 111 125 121 and ar (2) tests, as evidenced by their p-values. the existence of second-order ar (2) autocorrelation, on the other hand, indicates that the estimates are inconsistent. as a result, ar (2) is more genuine. the results of ar (2) show that there is no serial correlation in this investigation. extra instruments have been used as a necessity for system-gmm, the p-values of the hansen tests reflect the total instruments' validity. when the p-value is significant, we reject the null hypothesis and conclude that the instruments are invalid. but in these models, we don’t reject the null hypothesis of the hansen test meaning that the instrument is valid in all models. as a consequence of these tests, it is possible to conclude that the estimated model is correctly specified. 5. conclusion and policy recommendations this study's main goal is to examine how globalization and energy consumption affect income inequality in developing nations. the purpose of the research is to achieve the hypothesis that “globalization and energy consumption improves economic growth but deteriorates income inequality”. sixty-nine developing countries are selected for this analysis. the estimation method used in this analysis is system-gmm (s-gmm) two-step method. finally, the study has concluded the whole findings regarding the impact of globalization, energy consumption on income inequality. according to the finding of this study, income inequality in developing nations is positively and statistically associated with globalization. the positive association between globalization and income inequality indicates that an increase in globalization leads to increasing income inequality is due to, it increases the demand for labor, the high-skilled labor earned more as compared to low-skilled labor, which creates income inequality. income inequality and energy consumption are negatively and significantly correlated, as energy consumption increases it reduces income inequality. because most production sectors depend on energy consumption, which leads to increased employment as a result, income inequality decreases. moreover, in this empirical research, the interaction term of globalization and energy consumption, economic globalization and energy consumption, and political globalization and energy consumption all have a significant and favorable influence on lowering income inequality in developing countries. while the interaction term of social globalization and energy consumption shows negative and insignificant relationship income inequality in developing countries. furthermore, population and unemployment have a positive link with income inequality. additionally, there is a positive correlation of population and unemployment with income inequality. based on the findings of panel data analysis, it is recommended that globalization and industrial growth should be designed to minimize income disparity in all developing nations. because globalization does not contribute to the notion of sustainable development, developing nations should adopt policies to open their markets to the entire world, make effective use of globalization, and promote policies that reduce income inequality. according to 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(2021). economic growth and income inequality: a nonlinear econometrics analysis of the sadc region, 1990–2015. african journal of economic and management studies, 12(2). https://doi.org/10.1108/ajems-09-2020-0465 review of economics and development studies, vol. 7 (3) 2021, 453 464 453 academic service learning for underprivileged communities in pakistan: enhancing development beyond economics zehra habib a a associate professor and senior fellow, department of education, iobm, karachi, pakistan email: zehra.habib@iobm.edu.pk article details abstract history: accepted 29 august 2021 available online september 2021 this study focuses on development of disadvantaged communities via an academic service learning project, incorporated in the phd coursework of a private university. school teachers from an underprivileged community in a charitable village school of baluchistan were given training by the students after doing interviews for needs analysis and developing and implementing a workshop based on their needs. as part of the workshop evaluation process, teachers’ perspectives were examined after teachers had incorporated the workshop strategies in their classrooms. findings were highly positive, because teachers demonstrated enhancement in learning and constructive gain in scholarship which they could transfer to students and to other teachers in the community. data from students who had carried out the project, accentuated improved learning and a keen desire for voluntary participation in service learning projects for helping underprivileged communities. this study not only contributes to the body of literature in academic and community service learning in the pakistani educational context, but elaborates on the value of factors beyond economics for advancement of deprived segments of society. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: academic service learning; community service; development beyond economics jel classification: p36, o12 doi: 10.47067/reads.v7i3.400 corresponding author’s email address: zehra.habib@iobm.edu.pk 1. introduction in the globalized and digital age, students consider theory based coursework as inadequate in the cutting edge and competitive international scenario because they cannot practically apply the knowledge they have gained. they are looking for additional value in their education to make them more employable in the competitive market (tomlinson, 2008). many psychologists such as piaget (1959), dewey, (1960) and vygotsky (1962) put forward social constructivists learning theories that accentuate the significance of social immersion and dynamic involvement of individuals in the group learning process in the construction of knowledge (tokke, 2017). no longer is it adequate for graduates to simply depend on learning of theory and test taking (andrews & higson, 2008). however, in a developing country like pakistan, academic service learning (asl) is an emerging and relatively new concept in the higher educational context. review of economics and development studies, vol. 7 (3) 2021, 453 464 454 academic service learning (asl) is a teaching and learning approach that incorporates significant communal work at charitable organizations or public service places to enhance learning (hayward, 2014; sass & coll, 2014). asl is a channel between university and community that connects the real world to theoretical textbook knowledge and contributes to civic development. (bansal et al., 2012; resch & schrittesser, 2021). currently universities are focusing on fulfilling community needs and combining these with academic goals, leading to positive outcomes for both, i.e., wide-ranging segments of society and the students (lieberman, 2014; trigos et al., 2020). development is often linked to economics and is considered to be the generation of wealth from which communities profit. it is thus a venture for advancing the economy and contributing to the cumulative and prosperous growth of citizens of a country (california association for local economic development, 2021). however, the delineations of development go beyond its economic aspect and scholars have defined it as a process which leads to advancement and makes a headway towards constructive transformation, adding to the environmental and societal enhancement of a community or an individual (sid for international development, 2021). though economic development is of vast significance for any country, long term development is not possible if health and education of the common man are neglected. thus the main purpose of development is to achieve an improved life for the masses (darling-hammond, 2020; islam & ali, 2015). academic service learning is a means of connecting university faculty and students to grassroots populaces, but in pakistan, this is a relatively new model. even though some universities are integrating it in their syllabi, the degree of success is not equal for all (morrison, 2016). the pakistani educational milieu is deficient in linking learning with real life contexts, as such, it is imperative that academic learning is assimilated with community service (aslam, jaffery & zaidi, 2011). asl is a powerful tool for helping disadvantaged segments of societies, and further research is needed to determine their long-term impacts (berg, et al., 2016). in this global scenario, it is the responsibility of higher education institutions to concurrently disseminate knowledge and raise awareness of students regarding civic duties for service and development of disadvantaged communities (plater, 2011). particularly, “given the host of social problems pakistan faces, it is important to increase awareness among its youth about their civic role in society” (aslam, jaffery & zaidi, 2011, p. 524). the current research posits that integrating asl in the educational context, particularly at the tertiary level is crucial if education is to be imparted from the perspective of developing proficient and responsible citizens. thus six phd students enrolled in a curriculum oriented course of the education department of a private university carried out a service learning project in a charitable school in a village of baluchistan province. baluchistan is a highly underdeveloped province of pakistan, and its villages are even more backward and deprived of educational facilities than any other rural areas of the other three provinces (sarfaraz & nomani, 2020). despite an educational emergency declared by the provincial government, data indicate that 963 out of 13,000 schools in the province are not even operational. statistics of 2016-17, indicate that 22.6 million children are out of school in baluchistan which takes it to a high of 66 percent. there is very limited concept of girls’ education in rural baluchistan and an almost non-existent educational ethos in its rural districts, depriving the children of quality education from public run schools (baloch, 2017). 40 percent of children do not go to school in baluchistan and until government, civil society and ngos do not make conscious efforts to improve the state of education in that province, the situation will continue to be distressing (quetta voice, 2020). thus the rationale for this research to select a charitable school in a rural district of baluchistan for the academic service learning project is because the province is lacking in educational facilities. 2. literature review literature on asl is disposed more towards its benefits to students and has focused less on community development (gellar et al., 2016). yet service learning is most significant when school – community liaisons in poverty stricken, underdeveloped areas, help meet the socio-emotional needs of the population, be they students, teachers or societal members in any other capacity (sanders, 2003). communal involvement and development pedagogies are often called academic service learning which combine learning and development so that all parties involved may benefit from the service (atwell & schlund, 2021). opportunities for community-university collaborations improve students’ capacity to realistically implement their learned skills in real world settings and review of economics and development studies, vol. 7 (3) 2021, 453 464 455 underdeveloped groups value the human resources and expertise needed to achieve their goals (bandy, 2011). however, aslam et al. (2011) declare that there is a dearth of service learning projects for benefits of society in pakistan, though the demand for such projects is on the rise (morrison, 2016). there are several empirical studies in the international context, demonstrating the value of service learning, aiding growth not because of economic incentives but due to educational contribution. such studies demonstrate the value of service learning from the developmental perspective of disadvantaged echelons of society. in a qualitative study, resch and schrittesser (2021) conducted semi-structured interviews with 13 teachers to explore how service learning could assist professional teacher development in austria. their findings reflected that service learning helped connect theory with practice, and improved pedagogical skills of teachers. the most crucial finding of the study related to service learning as a tool for engagement with community because the participants emphasized the linkage between service learning and community development, highlighting “public welfare, societal benefits, social participation and responsible citizenship” (p.7) as constructive factors of service learning. another qualitative study was conducted in the malaysian higher education context (yusof et al., 2020), involving both students and teachers, underlining their perspectives on challenges encountered while conducting service learning. individual, face to face interviews were conducted with the teachers, while focus group interviews were held with the students. findings indicated that students found a huge gap between theory and practice and were desirous of having more service learning experiences incorporated in the curriculum. challenges that teachers encountered included a lack of structural support and the implementation aspects, particularly from the standpoint of time, preparation and delivering the task. richard et al. (2017) conducted a quantitative analysis, using data from 30 campuses in the united states to examine whether service learning conducted during the years of study in higher education led to more civicmindedness after graduation or post-graduation. using a quantitative scale, the authors studied curricular and co-curricular aspects of service learning programs. findings demonstrated that civic mindedness was associated with recurrent civic action if students had been exposed to asl during their college or university days. results further indicated that obligations to development of the lower strata of society via service learning depended on the number of opportunities provided to students to engage in asl related courses. thus course based asl had contributed to creating a zest amongst students for civic development even after completion of university education. regarding empirical researches in service learning in the pakistani context, (ahmed, et al., 2019), conducted a quantitative study with 315 respondents which examined standpoints of teachers of vocational training institutes and outcomes of service learning experienced by vocational training students. findings indicated that outcomes of partaking in service learning amplified students’ comprehension of course content via experiential learning and contributed to development of social skills, augmenting a zeal in students for community service. furthermore, participation in service learning enhanced students understanding of issues that affiliates of vocational academia faced. in a study conducted in lahore, (aslam et al., 2011) implemented a service learning project in a health center for young women from the grassroots level of society. 13 students from a girls’ college aided to raise awareness of 48 women participants regarding iron deficiency anemia (ida). data from students revealed a huge improvement regarding bonding with the women and an increased consciousness that they could play a role in the development and betterment of society. the women enrolled from the community affirmed that the service learning project had helped vastly in improving their knowledge regarding iron deficiency anemia (ida) and its deterrence. the positive effect of the project encouraged faculty for inclusion of service learning in the upcoming curricula of the college. findings of a qualitative study conducted by (iqbal et al., 2021) in regions of punjab, with 30 elementary review of economics and development studies, vol. 7 (3) 2021, 453 464 456 school teachers from vocational training institutes indicated positive results via service learning. the teachers considered planning as the most important phase of service learning followed by duration of the project. if the duration would be long enough, then participants of the project would achieve more. training was another factor very important for those who were going to impart the service learning. teachers were also of the opinion that needs of the population for whom service learning was being implemented had to be focused on prior to commencement of the project. findings also indicated that collaboration was the strongest element in success of service learning projects, for example, establishing a link among the participants and the practitioners. reflection was another factor that surfaced in the findings because when students reflect on their service learning experience, it initiates their enthusiasm for community development and their responsibility as active citizens. 3. methodology qualitative methodology was apt for this research because this approach focuses on aspects in their natural settings and endeavors to interpret phenomena “in terms of the meaning people bring to them” (denizen & lincoln, 2005, p.3). patton asserts that qualitative research allows for detailed and in depth study of issues (patton, 2002). 3.1 setting a charitable school in a village district of baluchistan was the setting for this research study where the asl project was implemented. this school had initially started with a bamboo mat, a blackboard and a few slates. with efforts from the philanthropists who run the school, it now has a full-fledged, well-furnished building and caters to students up to grade five. this school offers education to both boys and girls, including provision of books and uniforms. furthermore, the school prepares students for the baluchistan board exam, because in baluchistan, students of grade five have to sit for a board exam in order to be promoted to grade six. after clearing the exam, the students have to transfer to a public school in a nearby area, should they be interested in further education. as a community service, the phd in education program, conducted a workshop for teachers in the school, based on curriculum content implementation. after obtaining consent from the trustees, the principal and the teachers of the school, the community service was conducted in different phases. however, there were the restrictions of staying within the confines of the curriculum prescribed by the board of education, baluchistan. within these challenges and limitations, students aimed for professional development of the teachers, endeavoring to train them for activity based and communicative teaching. 3.2 participants besides the six phd students of a private university in karachi, the principal of the school and five teachers who taught grade five students were participants in this research. the subjects taught by the teachers were maths, english, islamiyat, science and social studies. table one below explains demographics of the principal and teacher participants. table one denotes the demographics of the principal and the teachers participants participants educational qualifications subjects taught experience principal m.ed. ---19 years teacher b.ed. maths 5 years teacher b.ed. islamiyat 9 years teacher ba english 3 years teacher intermediate soc. studies 5 years teacher intermediate science 6 years review of economics and development studies, vol. 7 (3) 2021, 453 464 457 3.3 tools for data collection the tool used for data collection from the principal and the five teachers of the charitable school were individual, in-depth semi-structured interviews. all interviews were conducted in urdu and were recorded with the participants’ consent. the recorded interviews were later translated and transcribed in english recorded conducted in urdu and then translated and one of the students interviewed the principal and each of the other five students interviewed a teacher. individual semi structured interviews are not only flexible and provide indepth information, the value of such interviews is also that these can be complemented by follow up questions (dejonckheere & vaughn, 2019). data collection tools also included a focus group interview with the phd students who implemented the asl project. the research was divided into four different phases and a description of each phase follows below: 3.4 phase one in the first phase, the students interviewed the principal and the teachers to find out their needs in order to develop a workshop for implementing the curriculum. need analysis pertains to comprehending the needs of the learners in order to design a training program made precisely in alignment with their requirements (bleich, 2018). needs analysis is the most important and pertinent step prior to launching a workshop or any training program, because this helps in identifying the lacks and gaps and demarcates the areas that should be focused on for the workshop (morrison, 2020). 3.5 phase two the six phd in education students, under guidance of their faculty, developed a workshop based on the data derived from the needs analysis conducted in phase one. the contents, activities and material involved catered to the needs of the teachers and subjects they taught. the content and activities of the workshop were discussed thoroughly in class prior to the implementation and feedback from the course supervisor and peers was incorporated to ensure the productivity of the project. keeping in mind the background of the school, the students made sure that the materials used for the workshop project were cost effective. enthusiasm of the students was remarkable at this stage, because each one was contributing ideas and volunteering to provide materials that were cheap in cost, yet beneficial for activities. this workshop was based on bloom’s taxonomy and incorporated latest and innovate teaching techniques and was student centered. however, the changes introduced were gradual, keeping in mind the culture of rural baluchistan, so that the teachers may not feel overwhelmed by the change. since pedagogy is one of the most significant aspects of curriculum implementation, students planned activities that would help teachers think out of the box and introduce change in their pedagogical practices even though the change would be evolutionary and a small one. for english, the skill of writing was most focused on due to the request of the english teacher during the needs analysis segment. for islamiyat, the units chosen from their text were rehamdili (kind heartedness) and ikhlakiyat (good behavior). the students planned that these topics should be taught through role plays, as this would develop their interest and would also involve them in the role play. for maths, the problem solving method was used for solving hcf and lcm, rather than the traditional method and emphasis was laid on understanding the basic principles. for science, out of door activities were planned for taking children out on the ground outside the classroom and teaching them about plants. also, low cost, no cost apparatus was used for demonstrating the concept of molecules. lastly for social studies, the chapter on pakistan’s parliament was chosen and highly interactive and role play activities were developed to make students comprehend the concepts of voting and the formation of parliament. the teachers were given one month for incorporating training of the workshop in their pedagogical practices in classroom. 3.6 phase three the third phase of the research was conducted after the teachers had implemented strategies from the workshop with their students. this phase comprised of interviews with the principal and teachers for workshop evaluation and to comprehend if the teaching approaches of the workshop had a positive impact on the teachers and their students. review of economics and development studies, vol. 7 (3) 2021, 453 464 458 3.7.1 phase four the fourth and final phase of the research comprised a focus group interview with students to understand their perspectives of the entire asl project and to help them reflect on their experience of the hands on learning project. figure 1 describes the four phases of the asl project 4. findings and discussion 4.1 findings from needs analysis the principal of the school during her interview for needs analysis lamented that there were no professional training facilities available for the teachers in the remote areas of the province. thus teachers taught via age-old traditional methods and there was nothing teachers did to enhance students’ interest in learning. in the words of the principal: i was teaching in karachi for a long time; so i come from an urban setting; but i took up position of principal here because i wanted to help education in the remote areas. i try to train teachers myself by sharing with them what i have learnt; but that is not enough. i am not aware of the latest techniques myself. our greatest needs are two: training teachers to teach with new methods and particularly, helping our english language teachers, because they are the weakest here. we want to improve english language of the students because it is only when children are well versed in english that they can progress. i strongly feel that if these children have to rise, they need to be proficient in english. four of the five teachers, during their individual interviews regarding their needs in the teaching set up, shared perspectives, ranging from lack of professional training, to dearth of teaching methodologies. the fifth teacher, who taught islamiyat, had a totally different perspective. standpoints of all teachers are being discussed below. the social studies teacher expressed the thought that there should be different teachers teaching different grades because it is too much for her to be teaching social studies to students of all five grades in school. concerning her pedagogical needs, she reflected that she only teaches what is in the textbook but she has been searching the net and is aware that there are newer techniques of teaching. an excerpt from her interview highlights the key points regarding her pedagogical needs: review of economics and development studies, vol. 7 (3) 2021, 453 464 459 i only teach what is written in the textbook. the children find it so boring, but then what else should i do? i know some technology and have been searching the web and reading and have found that there are new ways to teach and to raise interest of students. how can i do that? we need proper training. there is lack resources, even though the lady who runs this school is very generous and tries to provide as many resources as possible, but she cannot take all the burden on herself. the maths and science teachers had identical perspectives to share regarding their teaching needs. they lamented that they did not get any training in the remote rural areas. they considered that even though this was a private, charitable school, it was the duty of the government to provide teachers with training regarding new techniques to teach. like their peer who taught social studies, they too were desirous of knowing how to make the courses more interesting for the students because the children did rote learning, which according to them, did not help the cause of education. the most prominent perspective was that of the english teacher who complained that children did not know even to write a proper sentence in english and they were expected to write a paragraph for the board exam of grade five. in her words: the students suffer most while learning english. my english is ok but it is not that good. i need training to teach children how to learn english. you know, we have to make children sit for a board exam in class five in baluchistan and these children have to write a paragraph but they cannot speak or write one sentence correctly. so the only solution is that there are three paragraphs already given in their textbook and one of these comes in the exam, so the children learn the paragraphs by-heart and then write down as much as they can in the exam. even learning by heart is extremely difficult for them. so i want to know how to make them write. one of my cousin’s teaches in karachi, and even though she teaches at a government school, she says that the children understand some english…here, it is hardly a few words. among the five teacher participants, only the islamiyat teacher who had been associated with the school for several years, declared that the islamiyat textbook was good and that the children were learning. in his perspective: we have a good islamiyat textbook and the children are learning the subject well. i really cannot think of how else we might improve our teaching, but yes, if you have new ways to offer, i’ll be interested to know what these are. doing needs analysis contributed majorly to deciphering teachers’ needs, according to which the workshop was then planned and prepared. previous literature corroborates that conducting need analysis is the most significant step prior to conducting any professional development program. this is so because identifying problems and then looking for solutions is better than planning a training which may not help the recipients. conducting a needs analysis helps to identify areas which trainers may not have considered (mcpheat, 2020; morrison, 2019). thus in this research, needs analysis were crucial because it yielded results based on which the workshop was developed and delivered by the phd students. 4.2 teachers responses during the workshop as explained in the methodology section, the workshop based on bloom’s taxonomy was conducted keeping in mind the needs of all the teachers. when asked if they were aware of bloom’s taxonomy, all five respondents commented that though they had studied it, they could not recall its contents. four out of five teachers were highly responsive and took a keen interest in the workshop. the english teacher was particularly excited with ideas regarding novel techniques of teaching writing and commented that “i never knew that teaching english writing could be so interesting.” it was the islamiyat teacher who raised the most objections to the workshop activities saying, “it will be very difficult to implement all this role play and all the activities that review of economics and development studies, vol. 7 (3) 2021, 453 464 460 you are showing and i don’t think students will be interested in all this.” however, as per the requirement of the research, he assured that he would “try to” implement the activities in class because he had to report to the principal of the school, regarding implementation. 4.3 teachers responses after implementation of workshop activities the post workshop implementation findings from teachers reported a positive change not only in their outlook towards teaching but also how they had noted a positive change in students’ attitude towards studies because of their active involvement in classroom activities. the maths teacher had implemented all activities to the hilt and expressed how keen students were to study maths now and how well they had performed in their monthly test after doing activity based learning. in her words: if one workshop could bring so much difference in the students, others of the similar kind could help so much. the students are taking such keen interest. they want to participate in activities! they are not shy any more. i used to find them to be very shy and not responsive…but not now! they have participated in activities and have in fact, performed very well in their test which i gave them after implementing workshop learning. but i have to say that one workshop will not suffice…we need proper training. if your institute establishes a link with ours, if your students keep coming here, it would do us a world of good. we could also train other teachers following your mode of workshop and we can benefit the entire community this way. the social studies teacher had a positive outlook but with some reservations: her reservations are expressed below: it was an excellent workshop and we benefitted a lot from it….but, the activities done in the workshop as far as social studies is concerned were too many and though i was able to do some of these during the one month we got, i needed more time. the students of course enjoyed doing activities about their civic responsibilities but there was no time to implement the activities regarding parliament. i want to add that this type of training should not stop. instead of one workshop, we need at least 6 months of training. this would be very beneficial for development of the entire community of students here. after all, if we have good educated students, then the nation will develop well. the science teacher took the children out in the field to teach them about plants and other natural elements and she too said that the students had performed better on the test. she also demonstrated the experiment about the molecules and expressed that students particularly enjoyed the role play of scientists trying to explain the concepts of atoms and molecules. the english teacher realistically admitted that though students who had actually disliked the english class prior to it being activity based, were now taking interest in learning to write a paragraph, though their progress was “very slow,” and they were yet very far from learning paragraph writing. because they were exceptionally weak in english. moreover, like her counter parts, she too expressed the hope that workshops would not stop and the training would continue. the most surprising findings emerged from the data of the islamyiat teacher. as reported earlier, he was the one who had most reservations regarding the workshop and who had said that students would not be interested and that he will not find the time to implement the activities explained in the training. the teaching outcomes for him were most positive and he was most enthusiastic regarding implementing what he had learned. an excerpt from his interview will shed light on his views: i cannot believe it! i thought the students would shy away from the activities and the role play and i had thought that they were content to learn from their textbook but i got just the opposite reaction from the students! they all wanted to take part in the role play and could not wait for their turn. each one of them took keen interest in the activities and so i must say that i was mistaken that they would not be interested. such workshops should continue for us so that review of economics and development studies, vol. 7 (3) 2021, 453 464 461 both teachers and students can benefit. the findings from this study are similar to findings of previous research. resch and schrittesser (2021), had found in their study that teachers who were part of a service learning project during their professional development had derived huge benefits from such professional training as did the teacher participants in the current research. challenges encountered by teachers in the present study are similar to challenges faced by teachers in previous empirical researches. for example, one teacher complained of lack of time for preparing and carrying out the project activities in class, implementing the project activities. similarly, findings of yusuf et al (2020) indicate that teachers faced the issue of time management in delivering activities and strategies studied during training. moreover, teachers’ emphasis in their interviews regarding continued professional development and not just a random workshop as indicated by findings, has been underscored by several other researchers. continued professional development helps teachers during their entire career and continued learning by teachers is key for achieving educational goals (antley, 2020; karlberg & bezzina, 2020; mizell, 2010). 4.4 findings from students data from student’s focus group interview at the end of the semester regarding their academic service learning project was highly positive and very encouraging. all six students expressed satisfaction of having done hands on experiential learning and enthusiastically acknowledged that they had learnt much more than if they would have simply studied theory. more importantly, they acknowledged that they were more aware of the community needs regarding education in rural areas of baluchistan and expressed the desire for further academic learning experiences and admitted that hitherto, they had not realized nor recognized the need of community development and education dissemination in the rural areas of the country. in fact, they wanted to offer voluntary services for future educational development in this and other parts of the country. an excerpt from what a student said in the focus group interview is included below: i wish we could have project based learning in all our courses. we have learned so much more this way…and going to baluchistan, getting out of our shells and trying to understand their educational needs has made such a difference. i would like to volunteer my services for further helping the teachers in this and in other rural communities because better teachers will generate better students and together they could contribute to developing a community of refined citizens. another student expressed her take on the entire service learning experience in the following way: i could not get enough of it! i admit that initially, when we were developing the workshop content and materials, it was a lot of hard work, but the hard work has paid off in more ways than one: we have acquired so much more knowledge than we could have through theory based teaching. also, to see the enthusiasm of the teachers, to see their success and the glow on their faces after implementation, was in itself a success story. i want to volunteer my services for this school, for ngos and for any other educational projects where i can be of any help. we, as students need to work for the betterment of underprivileged communities…that is one super lesson i’ve learned from this experience. the findings from students’ data corroborate the findings of previous studies conducted by resch and schrittesser (2021), ahmed et al., (2019) and richard et al., (2017) wherein service learning generated civic mindedness and enthusiasm among students to volunteer their services for community development. in the study by aslam et al. (2011), students’ knowledge increased due to experiential and hands on learning, similarly in the current study, students declared that they had grasped a lot more via practical learning projects than they could if the curriculum course had been simply theory based. all these researchers, including the current study point in the same direction, i.e. service learning is not only beneficial for students but also from the perspective review of economics and development studies, vol. 7 (3) 2021, 453 464 462 of community development, particularly if the community is disadvantaged and deprived of facilities for suitable education. 5. limitations the academic service learning project yielded positive results albeit with some limitations. we had to restrict our curriculum implementation strategies to the prescribed baluchistan board curriculum and could not add creative content to the syllabi. furthermore, this research was based on a single service learning project and applied only at one school. service learning projects need to be designed and carried out regularly in urban and rural sectors for educational development of communities living there. 6. conclusion and recommendations this research highlights the contribution of service learning in academia for community development and advocates a roadmap for integrating community development projects in the higher education milieu in pakistan. such ventures also provide encouragement to students for volunteering their services to help less privileged communities because there are factors beyond economic elements which can enhance development. it is also recommended that a policy should be formulated at the governmental level whereby professional training could be given to teachers in rural areas so that they can transfer their improved pedagogical skills to students in rural communities who form an important segment of the pakistani community. a public and private sector partnership is also advocated whereby both sectors can contribute to education via service learning projects in the poorer areas of pakistan and thus help development because education is the prime factor leading to development in any country. references ahmed, i., said, h., & mohamad nor, f. 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(2020). challenges of service learning practices: student and faculty perspectives from malaysia. malaysian journal of learning and instruction, 17(2), 279-309. http://ppaf.org.pk/doc/balochistan%205strategy%20_2020pdf http://www.sid-israel.org/en/what-is-development http://doi.org/10.1080/01425690701737457 http://doi.org/10.3389/fpsyg.2020.00047 review of economics and development studies, vol. 8 (4) 2022, 347-353 347 green nudges: a review of behavioral economics based interventions for reducing carbon emissions fabiha moina a habib university, school of arts, humanities, and social sciences, department of social development and policy email: fabiha.moin1999@gmail.com article details abstract history: accepted 28 november 2022 available online december 2022 climate change poses a great threat to human civilization as the signs of an upcoming climate disaster have started showing around the world in the form of heatwaves, forest fires, cyclones, and floods. one of the biggest contributors to climate change is carbon emissions which are the direct result of anthropogenic activities. with the fast-approaching climate crisis, countries require innovative and fast solutions to reduce their carbon emissions. with the slow rate of transition from the supply side, there is a need for more demand-side interventions to mitigate climate change. one such form of intervention is offered by behavioral economics in the form of green nudges which refer to changes in the decision-making environments in order to promote a more climateresponsible consumer behavior. this paper conducts a review of the green nudge interventions across the world and discusses their efficacy as a policy intervention in developing countries to mitigate climate change. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: nudge theory, behavioral economics, climate change, carbon emissions jel classification: d72, f02 doi: 10.47067/reads.v8i4.446 corresponding author’s email address: fabiha.moin1999@gmail.com 1. introduction climate change is one of the most crucial challenges faced by the world right now as the devastating effects of gradual changes in weather patterns have already started appearing in most countries in the form of heatwaves, floods, hurricanes, and other natural calamities. one of the biggest threats posed by climate change is global warming which refers to the rise in earth’s temperature (unfccc, 1992). the international panel for climate change (ipcc) sixth assessment report predicted a 1.5-degree celsius rise in global temperatures if the current patterns of human behavior do not change. global warming is a result of the trapping of greenhouse gasses (carbon dioxide, methane, nitrous oxide, and water vapor) in the atmosphere: the greenhouse effect. ever since the beginning of the industrial revolution, human activities have resulted in altering the natural environment. some of the “hot spot behaviors” that are considered to have the greatest climate impact include meat and dairy review of economics and development studies, vol. 8 (4) 2022, 347-353 348 consumption, use of fossil fuel-based energy, and air travel (thøgersen, 2021). the ipcc report also alarmed that the net anthropogenic greenhouse gas (ghg) emissions have continued to rise in the past decade 2010-2019, while the annual ghg emissions were higher in 2010-2019 than in the previous decade. ipcc recommended that in order to mitigate harmful climate outcomes, ghg emissions, especially co2 emissions must be reduced through geoengineering, green technologies, efficiency, and reducing overall consumption. however, the technical energy systems undermine the rate of progress required to significantly reduce ghg emissions, and hence, a demand-side approach that can deliver instant outcomes is needed. this paper aims to tap into the efficacy of the application of nudge theory in behavioral economics to reduce global ghg emissions. by analyzing the successes of different types of “green nudge” interventions that have taken place globally such as setting green defaults, changing social norms, and increasing salience, the paper will conclude with the limitations of the nudge theory and analyze the nudge theory as a tool for reducing emissions in the developing countries that require fast and innovative solutions for climate change mitigation. 2. objective the objective of this paper is to address the cause-and-effect relationship between human consumption patterns and greenhouse gas emissions as an efficient tool for targeted programs to reduce emissions. by using the concept of nudges and choice architecture, states can come up with cheap solutions to a much bigger problem of climate change. by building a case for using the nudge theory and choice architecture as tools to devise interventions aimed at reducing ghg emissions, this paper argues in favor of using human cognitive biases to achieve prosperity and well-being. 3. theoretical concepts the neoclassical theory in economics assumes that human beings are rational consumers and take rational decisions that maximize their utility. however, recently a new branch of economics has developed which argues that human beings are influenced by the environments they are a part of, and they do not always make rational decisions. this branch is called behavioral economics. a combination of psychology and economics, behavioral economics aims to investigate the subconscious struggles and limitations that humans face while making decisions (cooper, 2017). states, policymakers, and firms have used the concepts of behavioral economics to influence consumer behavior in order to channel the demand in such a way that it maximizes social wellbeing. behavioral economists argue that human cognition operates based on a dual system having two classifications: system 1 and system 2 (lundstrom, 2018). while system 1 involves impulsive and rapid thinking, system 2 is concerned with critical thinking. kahneman (2003) argues that system 1 is responsible for decision-making due to the slow response rate of system 2. this implies that most of the decisions that humans make are based on intuition and impulse rather than critical rational thinking. markets and firms have historically capitalized on human subconscious limitations to maximize their profits rather than aiming to eliminate them. developed by richard thaler and cass sunstein, the nudge theory in behavioral economics argues that these subconscious limitations can be influenced by how choices are framed in order to maximize well-being (thaler & sunstein 2008). they argue that for decisions that are rare and difficult to translate into future gains or losses with no feedback the human subconscious requires a nudge in the right direction. their idea of nudge is rooted in the “stimulus-response compatibility” whereby humans tend to alter their response in relation to the signal or stimulus they receive (thaler & sunstein, 2008). choice architecture is referred to as the context in which humans make decisions (sunstein, 2013). the best kind of choice architecture is the one that does not confuse system 1 at all review of economics and development studies, vol. 8 (4) 2022, 347-353 349 (thaler & sunstein, 2008). hence, thaler & sunstein propose nudges as alterations in the choice architecture that aim to make predictable changes in human decisions without directly prohibiting them from alternative options or altering the economic incentives for making the choice. effective nudging can help people make the best decisions for their well-being and is cheap and easy to implement (miłaszewicz, 2022). instead of being coercive like laws and regulations, nudging gives people freedom of choice but just makes the desirable “right” decision easier to make. thaler & sunstein name this phenomenon “paternal libertarianism” where the paternal aspect refers to the interferences in the choice architecture surrounding individuals are made to steer while the libertarian aspect implies the conservation of freedom and available alternatives (siipi & koi, 2021). a good choice architecture as per thaler & sustain (2008) should have nudges that are designed being cognizant of the right incentives to the right audience, mapping of future aspects, the power of defaults and feedback mechanisms, and expecting errors and lastly structuring complex problems in a simplified manner. in the context of climate change, while most consumers agree that they need to adopt more sustainable options, they fail to translate that into active choices, and this is called the intention-action gap (unep, 2017). ipcc (2022) has indicated that comprehensive demand-side interventions can reduce global greenhouse gas emissions by 40%-70% by 2050. in such a scenario, nudges can be used as tools by policymakers to overcome psychological barriers to the ecological problem of climate change to promote sustainable behaviors (petel, 2020). a climate nudge or a green nudge is defined as an intentional change in the choice architecture in order to promote a more climate-friendly behavior from the consumers. miłaszewicz (2022) states some of the common types of climate nudges that have been used by governments and the private sector to promote a more climate-responsible consumer behavior. these include: setting green defaults, appealing to peoples’ individual and social identities such as “green consumers”, setting up collective social norms, giving people regular feedback, and changing the physical environment around them to enable them to make sustainable choices. the next section is going to discuss each of these types of green nudges as policy interventions across the world through a review of the literature. 4. discussion 4.1 setting green defaults the default effect is believed to be a consequence of individuals’ processing limitations (brown and krishna 2004). they choose the default in order to avoid taking an immediate decision or because they implicitly assume that the default was chosen for a reason (keller et al. 2011). people also have a status quo bias as they may choose the default due to loss aversion because the potential losses involved in moving away from the default seem larger than the potential gains (johnson & goldstein, 2003). an example of green defaults is opt-out schemes where consumers are automatically enrolled in sustainable options, and they can choose to opt out of those. one such intervention took place in germany where the electricity providers signed up their consumers for a green tariff by default and they would have to reach out to the service provider to opt out of that tariff. using a multivariate logistic regression model on micro-level data from the german socio-economic panel (gsoep) covering private households, kaiser et al. (2020) found that electricity consumers in germany were more likely to stay in default green tariffs they were enrolled in by their electricity provider even though it was more expensive than the other available tariff options. in order to reduce paper consumption, rutgers university in 2008 set the printers across their campus to a default setting of “print on both sides” rather than print on one side. this resulted in a significant decrease in the paper consumption patterns across the campus as the three rutgers review of economics and development studies, vol. 8 (4) 2022, 347-353 350 campuses saved 62 million sheets of paper between 2008 and june 2011 (cho, 2013). araña & león (2012) conducted a field experiment in gran canaria as a part of a carbon offsetting program targeted toward subjects using air travel for attending conferences and conventions. amongst the two treatment groups, one was presented with an opt-in scheme where they were told the amount of ghg emissions their travel will contribute and as compensation, they can choose to donate some amount to programs that aim at reducing ghg emissions. whereas the second treatment group was given an opt-out scheme where they were by default charged an amount to compensate for the ghg emissions their travel would cause, and they could choose to opt-out of contributing that amount. results from their field experiments showed that the treatment group which was given an opt-out scheme was more likely to support the carbon offsetting programs as compensation for their air travel. another study conducted in denmark in 2011 is analyzed by toft et al. (2014) as part of the improsume project, financed by energinet.dk in the framework of eranet smart grid measured the number of respondents who would choose a smart meter that made the electricity provider control some aspects of the consumer’s electricity supply. the respondents were given opt-in and opt-out schemes randomly and toft et al. (2014) report that 60% of respondents given the opt-in scheme agreed to have smart meters while 79% of the respondents given the option to opt out chose to have smart meters in their homes. 4.2 giving feedbacks a well-designed choice architecture is the one that gives people feedback on their progress so far (thaler & sunstein, 2008). in the context of green nudges, feedback serves as reminders and better information on the energy consumption of the individuals. the feedback green nudge has been used in different interventions as a way to promote climate-responsible behavior. becker & seligan (1978) conduct an empirical analysis of a study conducted in new jersey in which a signaling device was installed in households using air conditioners during summers to tell the users when the outside temperature was low enough for them to open windows and doors instead of using air conditioning in order to counter wasteful air conditioning and energy consumption. their findings reported that the signaling device was an effective tool in reducing the households’ energy consumption. another example of green nudge in the form of feedback is a series of programs conducted by the energy company opower in the united states as per which the company sent out home energy report letters to over 600,000 residential utility customers, comparing their electricity use to that of their neighbors (allcott, 2011). the programs resulted in an energy use decrease of between 1.4% and 3.3%, with an average energy consumption reduction of 2% (allcott, 2011). this result is equivalent to an 11-20% short-run increase in electricity prices, and the cost of the programs was similar to that of traditional energy conservation programs (allcott, 2011). furthermore, lynham et al. (2016) discuss a study conducted in 65 residential households of an apartment complex in the us using a randomized-control experiment. the experiment had two treatment groups both of which had an in-house display of energy usage installed in their homes for different amounts of time: the first group for the full 90 days of the experiment, the other treatment group for a period of 60 days. the inhouse displays would provide households with live information on their electricity consumption and serve as feedback. lynman et al. (2016) found that providing real-time feedback through in-house displays reduces the average household electricity consumption by up to 11%. to further reiterate the positive effects of feedback, they also noted that the effect diminished over time, as displays were removed indicating that it was the constant reminders that contributed to the reduction in energy consumption of the households. 4.3 changes in the physical environment & increasing salience salience is a type of nudge that caters to the low attention spans of people as it simplifies the review of economics and development studies, vol. 8 (4) 2022, 347-353 351 information presented to them (sunstein, 2013). cooper (2017) identifies the us department of energy and the environmental protection agency’s energy star label as a salient feature as the label is easy to recognize which makes it easier for consumers to recognize and pick from grocery stores’ shelves. another example of applying salience nudge is a study conducted by szekely & brocke (2016) which involved 1350 participants and presented evaluation results of their behavior. they created flight booking platforms with options for low, medium, and high amounts of carbon emission by one passenger. the fact that there were different stations based on carbon emissions increased the salience of the number of emissions they would cause as a result of their air travel. a donation box for 0-12 euros was also placed beside the ticket counter. the results showed that exposure to carbon emission amounts impacted the number of voluntary donations made. therefore, the carbon emission amount was used to nudge people to react against climate change. in gravert and kurz (2017), a similar outcome of salience was found when a restaurant rearranged its menu in favor of a vegetarian option. as a result of placing the vegetarian dish at the top of the menu, the restaurant was able to reduce the share of meat dishes ordered from 50% of the total orders to around 30%. moreover, in a study by tiefenbeck et al. (2016), an animation of a polar bear standing on melting ice was used to give feedback on energy consumption. as a result of this salient nudge, the average shower time was reduced by 22%. another type of nudge that caters to the low attention span of individuals is the change in the physical environment. in cases when individuals have limited attention or the environment serves as a barrier to desirable behavior, these types of nudges bring about optimal outcomes (carlsson et al., 2019). an example of change in the physical environment is discussed by kallbekken and saelen (2013) who evaluated the effectiveness of a green nudge provided through the physical environment, aiming to reduce food wastage in restaurants. plates 50% smaller than the standard size were provided as a nudge and as a result, a 20% reduction in the food wasted was recorded. 5. limitations of the nudge theory although from the above literature review it can be seen that nudges serve as effective tools to promote climate-friendly behavior. however, there have been some ethical arguments against the nudge theory that should also be highlighted in order to come up with the best solutions to reduce carbon emissions. one of the arguments against nudge theory is that it is undemocratic. while nudges focus on channeling individuals to make decisions that are in their best interest, the underlying question is how can someone else define an individual’s best interest? (brooks, 2013) moreover, another argument against the nudge theory is that although thaler & sunstein have argued that nudges are transparent, they are still a form of manipulation where the individual is being manipulated into making a choice (binder, 2014). hausman & welch (2010) on the other hand, claim that although there is a loss of autonomy when applying the nudge theory, the social benefits that have historically resulted from them outweigh the cost of lost autonomy. 6. conclusion climate change for our generation is like a ticking bomb with very limited time to correct the wrongs. global ghg emissions pose a serious threat to climate patterns, further exacerbating the devastating effects. while major supply-side changes are difficult to make immediately, there is a crucial need to shift towards demand-side interventions to alter the way individuals consume in an economy and channel consumption patterns towards sustainable practices. this paper built a case for the nudges as effective policy tools by highlighting the effective usage of different types of nudges such as green defaults, feedback on energy consumption, the salience of sustainable products, and the change in the physical environment. it can be seen that across all interventions, nudges proved to be successful in channeling individuals and households towards making sustainable choices. review of economics and development studies, vol. 8 (4) 2022, 347-353 352 although there are some ethical limitations to nudging, however, the literature reveals that the social benefits are much greater. hence, in crucial situations like that of climate change which requires immediate action and results, nudges should be used by policymakers in order to mitigate the effects of climate change by reducing ghg emissions. in the context of developing countries that face a greater vulnerability to climate change, green nudges could serve as an innovative climate-responsible action for these emerging markets. however, the successes of behavioral economics-based green nudges in the developed world could also be a result of the well-structured institutions and mechanisms in place, a characteristic that lacks in most developing countries. hence, effective public-private partnerships in these countries are required to build channels through which green nudge interventions would serve as a solution to reduce their greenhouse gas emissions in the face of rising consumerism. bibliography allcott, h. 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(1992). retrieved may 15, 2022, from https://unfccc.int/files/essential_background/background_publications_htmlpdf/application/pd f/conveng.pdf review of economics and development studies, vol. 8 (4) 2022, 311-318 311 causal relationship among sme’s import, export, deposits, and small manufacturing contribution to gdp – toda yamamoto analysis muhammad ahmad mazher a a unikl business school, university kuala lumpur, malaysia email: muhammad.mazher@s.unikl.edu.my article details abstract history: accepted 15 november 2022 available online december 2022 the purpose of the study was to identify the causal relationship between pakistani smes' imports, exports, domestic deposits, and gdp in the small manufacturing sector over 2007-q1 to 2020-q4. granger causality is a revolutionary and cutting-edge econometric technique that was presented by toda and yamamoto (1995). this technique enabled us to identify various kinds of observations, all of which are discussed in detail in the concluding part of the article. four-causal relationship among the variables which revealed the empirical results. (i) fluctuations in exports values, total imports values and deposit in domestic currency may cause the changes in gdp of small manufacturing sector in pakistan (ii) fluctuations in gdp of small manufacturing and deposits in domestic currency may cause the changes in total exports value in sme sector in pakistan while changes in total imports value do not make the cause of changes in total exports value in pakistan sme sector (iii) fluctuations in gdp of small manufacturing and total exports value may cause the changes in total imports value in sme sector in pakistan while changes in deposit in domestic currency do not make the cause of changes in total imports value in sme sector in pakistan and (iv) fluctuations in gdp of small manufacturing, total exports value, and total import values does not make the cause of changes in deposit in domestic currency in sme sector in pakistan. using secondary data and an estimation method to take into account new factors, the study also makes a big contribution to the ongoing research on smes in pakistan. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: sme imports, sme exports, sem deposits, gdp, toda yamamoto jel classification: e00, f41, f43, f62, f63 doi: 10.47067/reads.v8i4.469 corresponding author’s email address: muhammad.mazher@s.unikl.edu.my 1. introduction small medium enterprises (smes) are crucial to a country's progress because of the jobs they generate, the growth of the domestic economy, and the alleviation of poverty they bring. the importance of these enterprises cannot be overstated, particularly for economies still in progress. according to bauchet & morduch (2013) and savlovschi & robu (2011), smes have consistently review of economics and development studies, vol. 8 (4) 2022, 311-318 312 outperformed their companies due to their agility and speed. small and medium-sized businesses (smes) are good for economies all over the world because they make people think of new ways to use community resources. through imports and the price of goods, smes are an essential gear in the global economic success engine. they play a substantial part in the global economy by significantly increasing gdp and the standard of living in countries all over the world. additionally, it alleviates poverty because it generates more jobs in different economies than major corporations (oba and onuoha 2013). one of the most striking reasons for the exceptional economic progress of modern nations is the abundance of smes (de giorgi and rahman 2013). according to littlewood & holt (2018), when it comes to addressing income inequalities, increasing inventiveness and profitable businesses, and combating hunger, it is just the sme sector that makes the biggest impact. smes are the backbone of the pakistani economy, just as they are in other emerging and developing nations. the sme business sector is playing a crucial role in driving the economy forward, fostering technical innovation, encouraging economic regeneration, providing a supply chain for large enterprises, and advancing society. all kinds of commercial enterprises can benefit from their development in both urban and rural settings. the establishment and growth of such enterprises is producing revenue, creating jobs, and helping to reduce poverty. therefore, the contribution to economic growth by smes in outlying urban areas is mostly attributable to their ability to create new jobs (grimes 2000; oyelana and adu 2015). the sme sector has many obstacles in developing nations, including a lack of money and financial prospects, loans with high-interest rates, outdated infrastructure, and limited access to current technologies, as well as weaker trade and investment prospects. it is important to recognise that, despite all the challenges, smes have a significant impact on the economy, helping to raise employment rates and people's standard of life. according to the most recent survey data we have for pakistan (the economic census of pakistan in 2022), the country is host to more than 5 million enterprises. smes are responsible for 40% of pakistan's gdp and 25% of its total exports. when it refers to the share of the labouring population that it employs, the sme employs only often less people than the agricultural sector. the small and medium-sized enterprise sector accounts for 78% of all private sector jobs. small and medium-sized enterprises (smes) are critical to alleviating poverty, growing national economies, and creating new jobs. rising sme finance may be traced back to 2013 and the different regulatory measures and facilitative roles taken by sbp. sme lending was rs 524 billion in december 2021, up from rs 284 billion in december 2013. still, market flaws, high processing costs, and the fact that sme owners and entrepreneurs can't get loans without real collateral are structural barriers that keep banks from lending to smes (sbp 2022). various researches have been carried out to investigate the relationship that exists between the success of smes and the state of the economy (aina and rtp 2007; cravo, gourlay, and becker 2012; kongolo 2010; minniti and levesque 2010; spencer and gomez 2004). academics from both developing and advanced economies have studied smes (eze and okpala 2015; harrison and baldock 2015; kandasamy et al. 2015; van stel, carree, and thurik 2005). policymakers and academics have been interested in smes for decades, but there has been a lack of studies analysing the relationship between smes and economic growth in developing nations, and in pakistan in particular. a systematic in-depth analysis of the current situation of pakistan's small and medium-sized enterprise (sme) market is essential, and timely implementation of the growth elements is required to ensure the country avoids disaster. the results of studies that look into how smes help the economy grow as a whole always seem to have a massive effect on the growth and management of smes in the years to come. various studies have been conducted on the effect of smes on gdp growth, and their findings have been contradictory. they also found evidence that threatened smes' status as the solution for economic growth and job creation (kadiri 2012). primary data have also been used in a few other studies about the significance of smes in the growth of the economy (qureshi and herani 2011; shaikh, shafiq, and shah 2011). for the purpose of doing empirical research, this study depends primarily on secondary sources because there is a deficiency of previous secondary research conducted review of economics and development studies, vol. 8 (4) 2022, 311-318 313 in pakistan on the subject of interest. this study extends the current body of information on smes by analysing the role that smes play in supporting the economic boom. 2. literature review according to tambunan (2006), the classical school of thought and the modern school of thought are the two primary schools of thought that predominate in the discussion of the role that smes play in the general development of underdeveloped countries. the phrase "classical" is used to characterise a series of hypotheses about the growth of smes, which encompass a broad variety of literature, including anderson (1982) and morse & staley (1965). these theories have been around for a long time and are considered to be quite reliable. "classical" economic theories predict that large businesses will eventually contribute to economic growth and raise incomes, while small and mediumsized businesses (smes) will see their revenues and gains decline. according to "current conceptions," the sme sector serves dual, complementary functions. by adding more to gdp, they speed up economic growth, and by creating new jobs and the unique effects of income growth, they help reduce poverty. the growth of smes also contributes to gdp and the alleviation of poverty. increases in employment and output in smes have a multiplier effect on the economy, affecting gdp and poverty alleviation in three main areas: manufacturing, finance, and retail. the world bank (2018) proposes three primary pieces of evidence in support of the sme sector in developing nations. all of these arguments are congruent with the "modern" perspective on the relevance of the sme sector of the economy. the first argument asserts that the sme sector is essential to the growth of the economy. the contemporary version of the economic theory of smes serves as the conceptual underpinning for this study. the large majority of authors agree that smes play a crucial role in the expansion of the nation's economy. miller (1990) suggests that small businesses create more new jobs than large ones do. increasing employment is a direct result of enterprise expansion and new venture formation. the significance of smes in the economy of west virginia was highlighted in a study conducted by gebremariam et al. (2004). it was discovered that smes, the reduction of poverty, and overall economic growth all have an association with one another that is both positive and statistically significant. smes are very important to the economies of industrialised countries, as rohra & panhwar (2009) rightly point out. a similar finding was made by mateev & anastasov (2010), who investigated the effect of smes on economic growth in eastern and central europe. they discovered that an increase in the number of prospering smes is an indication of economic expansion. both wen (2011) and ayanda & laraba (2011) contended that the increase and growth of the sme sector is linked to the growth of the national economy, claiming that this has served as a foremost accelerator in the development of rural areas. researchers also contended that the expansion and expansion of the sme sector is linked to the growth of the economy. it was also widely recognised that the expansion of the economy, the elimination of poverty, and the reduction in the inequality between income levels were all consequences of the initiatives of smes. dixit & kumar panday (2011) made the supposition that smes in the indian economy from 1973 to 2007 would play a vital role in the expansion of india's economy. they found that there is a correlation between the effectiveness of smes and the expansion of the gdp. despite this, a few studies have concluded that the growth of smes contributes virtually nothing to economic expansion. the study by kadiri (2012) analyses the function that smes play in the expansion of the labour market. in order to analyse the results, he used the binomial logistic regression technique. the findings suggest that smes do not make a major contribution to the expansion of the economy because the government does not provide them with adequate assistance or obligations. vijayakumar (2013) discovered, through the use of time series data, that there is a negative and significant relationship between smes and the growth of the economy in sri lanka. but, uma (2013) did an identical study in india and came to the conclusion that smes are essential to economic growth and represent a precise review of economics and development studies, vol. 8 (4) 2022, 311-318 314 solution to contemporary challenges like poverty, unemployment, instability, and overpopulation. oyelana & adu (2015) examined the effects of smes on the south african economy and culture. their research suggests that smes contribute significantly to the effort to reduce poverty and generate new employment opportunities. ilegbinosa & jumbo (2015) examined the function that smes perform in the growth of the nigerian economy. the dependent variable in this analysis is real gdp, and the regressors are inflation, interest rates, and the availability of credit to smes. the data showed that there was a favourable and significant association between smes and growth when certain businesses had better access to finance. the findings of the authors' research led them to the conclusion that smes make a major contribution to the expansion of the national economy. further research on the link between smes and the growth of gdp in nigeria has shown that smes have a favourable and considerable impact on the country's economic expansion (folorunso et al., 2015). the growth of the entire economy is also greatly influenced by the expansion of smes. this segment is responsible for the creation of around four million jobs each year. additionally, the industry employs both unskilled and semi-skilled rural communities, which helps to raise living standards. consequently, it is worthy of praise that smes are substantial contributors to the gross domestic product (gdp), international trade, and industrial production of the nation (perwaiz 2015). according to karadag (2016), smes make a substantial contribution to the growth of both society and the economy. according to neagu (2016), smes play an important part in the current economy, and it has been demonstrated that they are a large and profitable source of innovation. neagu argues that smes are essential to the modern economy. as a result, one might draw the conclusion from the body of previously published research that studies of the effect of smes on economic growth have shown mixed results. pakistan is a country where much research has used descriptive statistics, although the results have often been unclear (qureshi and herani 2011). researchers have only applied econometric methods in a few studies, and they haven't analysed in detail the time-series characteristics of the data. the literature again emphasises that previous studies addressed the issue of a small sample size affecting the credibility of their conclusions. so, the goal of this study is to make up for the problems found in the literature by making the study period longer and using strict econometric methods. 3. research methodology there have been many different hypotheses proposed to explain economic growth, including all of those proposed by barro (1991), and mankiw et al. (1992). numerous professionals and academics have relied on these models for decades, and they provide a theoretical framework for analysing data that may be used to stimulate economic growth. growth literature for conventional factors like capital, labour, and technology has also advanced as a result of this change. the growth framework also includes measurements of other variables. in the same way, the present research adopts the methodology of cravo et al. (2012) to focus on the contribution of smes to pakistan's economic growth. this study will be based on the following conceptual framework. gdpsm = β0 + β1 (smsexpv) + β2 (smeimpv) + β3 (ddc) + 𝜺 ……….. (a) here, gdpsm representing the gdp of small manufacturing (pak rs. in million), smeexpv as total sme exports value (pak rs. in million), smeimpv as total imports (pak rs. in million), and ddc is deposit in domestic currency (pak rs. in million). the variable selection is entirely based on available data for pakistan sme sector sourced from oecd database. this research has never been carried out in the same manner in pakistan. toda & yamamoto (1995) novel econometric granger causality approach were modified for use in estimating the standard model. to top it all off, no other research has ever attempted a secondary data base study in the sme review of economics and development studies, vol. 8 (4) 2022, 311-318 315 sector in pakistan using the granger causality method, thus the results will undoubtedly be original. 4. estimations and results table 1-unit-root test results variables adf phillips-perron i(0) i(1) i(2) i(0) i(1) i(2) gdp of small manufacturing 0.0857 0.7057 0.0000 0.0000 deposit in domestic currency 0.9876 0.1899 0.0000 0.9952 0.1562 0.0000 total export value 0.1790 0.3024 0.0000 0.1268 0.2520 0.0000 total import value 0.7245 0.9393 0.0000 0.0658 0.9051 0.0000 estimations made by the researcher using eviews 11 toda & yamamoto (1995) postulated that economic series might be either integrated across orders or non-cointegrated, or even both. granger causality tests based on the ecm are inapplicable in such cases. thus, they devised a different test that works whether yt and xt are non-cointegrated, cointegrated by arbitrary order, or i(0), i(1), or i(2). specifically, this is the increased granger causality proposed by toda & yamamoto (1995). this method permits asymptotic-theory-based examination of causation between integrated variables. 4.1 var lag order selection criteria the log-length criteria confirm that majority of the methods such as lr, fpe, aic, and hq confirm the lag-length 6 while only sc method expose the lag-length criteria as 2. hence, we select 6 as the lag-length criteria for further analysis. 4.2 johansen cointegration test according to outcomes of johansen cointegration test, both trace and max-eigenvalue tests confirm 3 cointegrating equations. the results confirm that there is log-run association among all the variables chosen in this model for estimations. table 2-var granger causality or block exogeneity wald tests dependent variable: gdp of small manufacturing excluded chi-sq df prob. total export value 53.33423 6 0.0000 total import value 13.57776 6 0.0347 deposit in domestic currency 19.78672 6 0.0030 all 121.6773 18 0.0000 dependent variable: total export value excluded chi-sq df prob. gdp of small manufacturing 28.09914 6 0.0001 total import value 1.960338 6 0.9233 deposit in domestic currency 18.13628 6 0.0059 all 71.08002 18 0.0000 dependent variable: total import value excluded chi-sq df prob. gdp of small manufacturing 23.82055 6 0.0006 total export value 17.60913 6 0.0073 deposit in domestic currency 9.399819 6 0.1523 review of economics and development studies, vol. 8 (4) 2022, 311-318 316 all 31.80688 18 0.0232 dependent variable: deposit in domestic currency excluded chi-sq df prob. gdp of small manufacturing 7.132765 6 0.3087 total export value 6.427183 6 0.3771 total import value 0.995675 6 0.9858 all 10.91268 18 0.8980 estimations made by the researcher using eviews 11 the above table revealing granger causality proposed by toda and yamamoto (1995) estimations. according to results, change in total exports values, total imports values and deposit in domestic currency may cause the changes in gdp of small manufacturing sector in pakistan. change in gdp of small manufacturing and deposits in domestic currency may cause the changes in total exports value in sme sector in pakistan while changes in total imports value do not make the cause of changes in total exports value in pakistan sme sector. changes in gdp of small manufacturing and total exports value may cause the changes in total imports value in sme sector in pakistan while changes in deposit in domestic currency do not make the cause of changes in total imports value in sme sector in pakistan. lastly, changes in gdp of small manufacturing, total exports value, and total import values does not make the cause of changes in deposit in domestic currency in sme sector in pakistan. 5. conclusion this study reveals the empirical relationship among total exports value, total imports value, deposits in domestic currency, and gdp of small manufacturing in sme sector in pakistan over the period 2007 to 2020. the quarterly data was explored from oecd database. the overall outcomes confirms that the data is not stationary at level and first difference but stationary at 2nd difference. using granger causality proposed by toda & yamamoto (1995) econometric technique, we estimate the four-causal relationship among the variables which revealed the empirical results. (i) fluctuations in exports values, total imports values and deposit in domestic currency may cause the changes in gdp of small manufacturing sector in pakistan (ii) fluctuations in gdp of small manufacturing and deposits in domestic currency may cause the changes in total exports value in sme sector in pakistan while changes in total imports value do not make the cause of changes in total exports value in pakistan sme sector (iii) fluctuations in gdp of small manufacturing and total exports value may cause the changes in total imports value in sme sector in pakistan while changes in deposit in domestic currency do not make the cause of changes in total imports value in sme sector in pakistan and (iv) fluctuations in gdp of small manufacturing, total exports value, and total import values does not make the cause of changes in deposit in domestic currency in sme sector in pakistan. according to the results, the government of pakistan could increase the value of its exports, import more 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pakistan, pme@superior.edu.pk 2 assistant professor, the superior college, lahore, pakistan, khyzer_bin_dost@hotmail.com 3 managing director, scientia academia, johor bahru, malaysia, md@scientiaacademia.com.my 4 director general, the superior college, lahore, pakistan, directorgeneral@superior.edu.pk article details abstract history revised format: 30 june 2019 available online: 31 july 2019 this study plays its role in the literature by investigating the impact of energy consumption on agriculture sector, and environmental cleanliness on gross domestic product, in five south asian countries from the period of 1990 to 2015. energy is now becoming a challenge for the south asian countries especially country like pakistan. developing countries are in a race to gather more and more resource for the production of energy. the main objective of research is to examine the short-run and long-run relationship between economic growth and energy consumption on agriculture sector of economy in south asian countries. granger causality test and error correction model is employed to get the results. the empirical results showed the presence of co-integration among the variables and it indicates gross domestic product has a positive relationship with energy consumption in agriculture sector and environmental cleanliness. granger causality results showed that unidirectional causality is present between gross domestic product and agricultural sector while no causality is present among environment cleanliness. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords energy consumption in agriculture sector, environment cleanliness, gdp, south asian countries jel classification: q40,q49,q10,q19,n25 corresponding author’s email address: pme@superior.edu.pk recommended citation: khan, m. z. u., dost, m. k. b., akram, m. w. and sabri, p. s. u. (2019). energy consumption in agriculture sector, environmental cleanliness and economic growth: an empirical evidence of south asian countries. review of economics and development studies, 5 (3), 429-436 doi: 10.26710/reads.v5i3.690 1. introduction agriculture is the main area of source for creating nations and feeding people. it supplies sustenance and job to the greater part of the populace. an adequate supply of residential nourishment is extremely important for stable economy and political framework in creating nations. it is the primary reason of the strength of the horticulture part. farming area in south asian nations is exceptionally vital for the continuous nourishment supply to the local populace. this is additionally vital as horticulture records for almost 30 percent of the gdp. it connects with majority of the populace and for a great many people rural items make up a substantial piece of utilization and have a weight of 57 percent in the purchaser value record. any strategy which influences the horticulture division in this manner influences everybody in the general public. the quick changes in the agrarian segment essentially http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 430 influenced the little agriculturists in south asian nations amid the 1960s. the popular green revolution had profound impacts for profitability by the presentation of high-yielding seed assortments and enhanced composts. the new biotechnologies present new seeds that upgrade the physiological quality, synchronicity and energy. it empowers the foundation of yield in various environments which gave a catalyst to horticultural automation (bakhsh, ahmad, hassan, & gill, 2007). energy is a key wellspring of economic growth in light of the fact that numerous creation and utilization exercises include energy as fundamental information. energy is a standout amongst the most critical inputs for economic growth. from a physical perspective, the utilization of energy drives economic profitability and industrial development and is a key to the operation of any present day economy. (asghar, 2008a)contend that energy is in charge of any event and a large portion of the industrial development in an advanced economy. south asia is otherwise called southern asia; it is the southern area of the asian landmass. amid the period of british empire it was likewise named as "indian subcontinent". the present nations incorporated into south asia are: afghanistan, bangladesh, bhutan, maldives, nepal, india, pakistan and sri lanka. in addition, the british ocean region, mauritius and tibet locales are additionally incorporated into south asia. the region of south asian is around 5.1 million km2; it is 11.51% of the asia subcontinent. south asia covers 3.4 % of the world's property surface region. . it is most thickly populated geological locale of the world. it is the natural surroundings of one fifth of the world's populace. south asian populace is around 1.749 billion. it involves more than 24% of the world's populace. each of the eight countries involving south asia is the part of the south asian association for regional cooperation (saarc). it is an association for the economic collaboration of every one of the eight nations (lucas, 1976).as indicated by the report of world bank which was distributed in 2015, south asia turns into the quickest developing conservative area on the planet. india is the biggest and quickest developing economy in the locale (us$2.180 trillion). pakistan has the following biggest economy in south asia ($250 billion) trailed by bangladesh and sri lanka (quah, 1996). south asia is the country of 24% of the world populace and the gdp development of this area is exceptionally promising, from 5.5% to 6.5% from 2004 to 2010. yet at the same time south asia is set apart as one of the locales with least per capita utilization of energy. normal appropriation of assets is uneven and it makes unevenness between territorial requests and supply in south asia, because of a few different variables. a few locales have parcel of energy assets while different districts have less assets for the most part developed countries have bunches of energy sources and they are rich, while the developing nations also have energy deficiency status. south asia demonstrates wide differences as far as energy assets and electricity which are delivered and utilized as a part of various nations. the rate of utilization of fills and the openness to the energy assets differ incredibly in rustic and urban territories. south asian nations are energy inadequate nations since they have less oil and gas assets(pereira). they intensely rely on imports to full fill their necessities of oil and gas. the utilization of renewable energy assets additionally fluctuates extraordinarily in south asian nations. for the most part south asian nations hand-off on single energy sources with the exception of india and pakistan. afghanistan, maldives, nepal and sri lanka expend 78%, 100%, 67% and 79% oil, individually. bhutan utilizes half of hydroelectricity energy. 74% energy consumption of bangladesh relies on upon common gas. more prominent reliance on sole energy source creates energy security worries and in addition it restricts the alternative of differing qualities. a standout amongst the most critical point that numerous south asian nations have enough coal assets (india and pakistan) however they are yet importing coal from different nations. like india had imported 28 million tons of coal in year 2006. to support the gdp of the locale or to keep up the development of economy, a consistent supply of energy at sensible costs is the need of great importance. south asian nations are utilizing distinctive sorts of imported energy assets which are persistently expanding their import bills. still the vast majority of the south asian nations are not ready to full fill their energy requests. when contrasted with developed countries, south asian individuals have less extravagance. the energy bills of south asian residents are additionally high when contrasted with the subjects of numerous developed countries. it is additionally disturbing that the energy needs of south asian nations is expanding step by step and it will build three times in next 15 to 20 years. key difficulties in the energy division of south asian nations are expanding energy deficiency, predominance of single fuel, expanding import spending plan and the absence of required energy framework. it is the need of great importance to pay consideration on the energy approach of the saarc nations. review of economics and development studies vol. 5, no 3, 2019 431 to diminish import spending innovations must be created to build the profitability of oil, gas and coal in the area. south asian nations have wide assortment of renewable energy assets like hydra, wind, sun oriented and tidal. bioenergy must be utilized as a part of various zones of life to build the economic growth or to full fill the provincial family unit request. the energy interest of the area is expanding with a yearly rate of 5% because of family and modern division. thus, it is the need of an ideal opportunity to step for the un-interfered energy supply to all divisions of economy. electricity is one of the central energy source everywhere throughout the world. it is an optional type of energy which is created from essential energy sources like coal, oil and normal gas. numerous different strategies for electricity era are practically speaking now days like hydro-electric strategy, atomic innovation, sun oriented, and wind, geothermal and tidal techniques. generation, transmission and dissemination of electricity to every single part of the nation is a costly method and it needs parcel of spending plan. electricity is a vital energy source so it is ideal to examine it independently (tang, shahbaz, & arouri, 2013). use of electricity in the general public is the fundamental pointer of a dynamic economy. as indicated by un human development index the utilization of electricity is straightforwardly related with way of life. those nations which have per capita utilization of energy is beneath 1,000 kwh have hdi scores under 0.6. in the event that the utilization level of energy expanded in the nation the hdi score made strides. utilization of electricity in south asia is most reduced per capita. notwithstanding the way that south asia is honored with numerous regular electricity creating assets. numerous south asian nations like pakistan, india, nepal and bangladesh are confronting the gigantic lack of electricity. they are creating half less electricity than the accessible potential. they require right around 40000mw more electricity to full fill their necessities or to run their economy consistently. india had been confronting 9% electricity lack in 2011. bhutan is likewise confronting the lack of essential energy as force supply. in pakistan the hdi have medium quality which is 500kwh for every capita. in south asian nations conventional strategies are utilized for the era of electricity. for the most part fuel is transported in from the created nations and after that it is utilized for electricity era as a part of south asia. different techniques for electricity generation are likewise in like manner practice. like bhutan, nepal, pakistan and bangladesh are utilizing hydroelectric assets. india is likewise utilizing coal on expansive scale for the creation of electricity. coal gasification innovation is likewise presented in pakistan, as of late (brisse, schefold, & zahid, 2008)energy is the critical criteria for the improvement of the economy of the nation. the development rate of gdp likewise relies on upon the interest of energy and electricity is one of the main components which decide the way of life in created nations. electricity assumes the most fundamental part in the improvement of the economy. it decides the advancement of the nation. for the transformation of creating country into a created country the prerequisite of energy increments commonly(han, özyilmaz, zhang, & kim, 2007) energy is considered as the most important factor for the generation of wealth and also an important component in economic progress of the country. this fact makes the energy resources as an essential fact for every country of the world. in an effort to balance energy supply and demand, every country is making policies and strategies. every country aims to attain the perfect balance between energy supply and demand. many factors determine the world energy consumption and production some of which are: population growth, economic performance, consumer tests, technological developments, government policies concerning the energy sector and developments on world energy markets. the energy is responsible for at least half the industrial growth in a modern economy (asghar, 2008b; foran & poldy, 2002). energy is a key source of economic growth because many production and consumption activities involve energy as a basic input. energy is one of the most important inputs for economic development. from a physical point of view, the use of energy drives economic productivity and industrial growth and is central to the operation of any modern economy. the specific research questions that this research aimed to answer are:  what is the impact of energy consumptions of agriculture sector on economic growth of south asian countries?  what is the impact of environmental cleanliness (co2) on economic growth of south asian countries? 2. literature review to achieve a managed development of farming efficiency, enough interest in the rural area is irreplaceable, particularly in the preparatory phases of monetary advancement. this improves rural generation and accordingly, there is a move in hr in the mechanical and administration division from agribusiness area. the end goal to change from agrarian segment to mechanical division an adequate improvement in the rural part efficiency is necessary review of economics and development studies vol. 5, no 3, 2019 432 (duranton & puga, 2004). on the interest side, the development in agrarian creation increments rural wage which prompts increment in the interest for modern items. in addition on the supply side, the expansion in the profitability in the horticulture part moves hr from the farming to the modern segment(jorgenson, 1967) like numerous creating nations, south asian countries (sacs) have ensured their horticultural parts to settle their residential sustenance supplies. this is additionally mandatory as farming part represents about 30 percent of the gdp. it offers vocation to the heft of the populace and for some individuals horticultural items make up a gigantic piece of utilization and have a weight of 57 percent in the buyer value file. any adjustment in the approach which influences farming segment subsequently straightforwardly impacts everybody in the general public.(henneberry, khan, & piewthongngam, 2000) agricultural division additionally helps in the quicker development of the modern segment. this may exchange the abundance work from horticultural segment to different areas by producing business. strategy creators in these nations are going ahead to take after mechanical drove development strategies and they trust that it will upgrade monetary advancement, while the need to support agribusiness division is debilitating. hence, any component hindering the capital arrangement in the horticultural division may have unsafe results on highly required profitability development. keeping in mind the end goal to obey with the usage of financial and basic change strategies and to balance the diminishing agrarian profitability, it is necessary to make substantial capital interest in the agribusiness and agro-subordinate mechanical areas in the locale. it will secure sustenance supply in these nations; particularly it readies these nations to adapt to expanding populace and nourishment request. moreover, approach producers must need to consider the macroeconomic bearings of arrangement changes in the rural segment and their centrality in the general balance for development, circulation and welfare. 2.1 environmental cleanliness & economic growth the normal ascent in populace and the financial advancement that must happen in numerous nations have genuine risk for nature in light of the fact that the vast majority of the energy creating frameworks (for instance, era of power, warming, cooling, or intention power for transportation vehicles and different uses) are crushing the earth and are unsafe for the biological community (dincer & rosen, 1998). the point of the effect of financial development and co2 outflows has been reported in the writing of economy. distinctive specialists have focused on various nations, eras and have utilized diverse sorts of intermediary variables for energy utilization. creator examined the impact of monetary development, co2 outflows, capital, money related improvement, and populace on energy utilization(hamrita & mekdam, 2016) utilized disintegration technique for their studies. they broke down the components that influence the move in the level of energy related co2 emanations. they portrayed that outflow of co2 in the mechanical division demonstrated a diminishing pattern because of good energy proficiency and fuel exchange. in any case, the effect of contamination coefficient and energy force on co2 outflows in the horticultural area was verging on ignored. then again, energy force changed a more extensive territory and greatly affected energy actuated co2 emanations than the contamination coefficient. the natural effect of energy utilization is lessened by upgrading the effectiveness of energy asset usage (by and large alluded to as energy protection), and by substituting all the more ecologically generous energy assets for harming ones. amid late years the ecological impact of human exercises has become drastically because of the increments in the total populace, asset utilization, and modern action. 3. methodology the objective of the paper is to make it clear that how much south asian countries are investing over energy, how much they are consuming per annum and what is its impact over gdp. in this research, we consider the following; pakistan, india, nepal, bangladesh and sirilanka. it was aimed to study the history of these five south asian countries for a long time, but managed to gather the data for 25 years. we will see in the descriptive data statistics that how other researchers use different testing for the analysis of the data gathered. 3.1 variables and data source in the above model shows the list of independent variables, which have been utilized to fulfill the objective like; co2 used as proxy variables which has been used by different researcher. as independent variables used total energy consumption, trade openness, energy consumption in agriculture, services and industrial sector. the present study is based on panel data, for the time period of 1990-2015.in this study, collected from world development indicator and international energy agency to check the impact of energy consumption in different sector of the review of economics and development studies vol. 5, no 3, 2019 433 economy of south asian countries. there are different studies around the world, which fused these variables. the general functional form of the model is given as in the following: ( ) 4. results and discussion table 1: panel unit root table 2: panel descriptive statistics lngdp lnco2 lecia mean 1.806817 3.558678 3.341761 median 1.625590 3.279030 2.950851 maximum 4.968563 7.532955 4.375737 minimum -2.118042 -0.116534 2.424882 std. dev. 0.970870 2.073367 0.682282 table 3: panel correlations lngdp lnco2 lecia lngdp 1.000000 lnco2 0.221609 1.000000 lecia 0.010413 0.192319 1.000000 table 4: johansen fisher panel integration test hypothesized fisher stat.* prob. fisher stat.* prob. no. of ce(s) (from trace test) (from max-eigen test) none* 180.6 0.0000 180.9 0.0000 at most 1* 103.8 0.0000 62.32 0.0000 at most 2* 71.19 0.0000 48.58 0.0000 at most 3* 84.71 0.0000 67.96 0.0000 table 5: granger causality test null hypothesis obs f-statistic prob. status lecia does not granger cause lngdp 112 4.81013 0.0304* unidirectional causality lngdp does not granger cause lecia 0.04162 0.8387 lnco2 does not granger cause lngdp 111 2.27256 0.1346 no causality lngdp does not granger cause lnco2 0.84301 0.3606 variables methods statistics p-value statistics p-value level first difference lco2 levin, lin & chu t -3.12677 0.5062 -2.44236 0.000 im, pesaran and shin w-stat -0.39129 0.3478 -4.60874 0.000 adf-fisher chi-square 13.6792 0.1881 40.0183 0.000 pp-fisher chi-square 12.0303 0.2830 353.665 0.000 lecia levin, lin & chu t -1.17367 0.1203 -4.09657 0.000 im, pesaran and shin w-stat 0.60347 0.7269 -5.35225 0.000 adf-fisher chi-square 5.67097 0.8421 48.1803 0.000 pp-fisher chi-square 11.9863 0.286 99.167 0.000 lgdp levin, lin & chu t 0.27767 0.6094 -1.54526 0.0221 im, pesaran and shin w-stat 0.28871 0.5748 -3.84970 0.0061 adf-fisher chi-square 6.06292 0.8099 32.7442 0.0001 pp-fisher chi-square 7.49211 0.6783 117.776 0.0003 review of economics and development studies vol. 5, no 3, 2019 434 table 6: error correction model error correction: standard error t-statistics cointeq1 (0.31739) [-3.98441] d(lngdp(-1)) (0.26558) [ 0.60775] d(lecia(-1)) (2.17190) [-1.29085] d(lnco2(-1)) (0.43154) [-0.16510] c (0.13966) [ 0.01061] r-squared 0.518750 adj. r-squared 0.358333 sum sq. resids 27.11139 s.e. equation 0.640920 f-statistic 3.233767 log likelihood -73.38917 akaike aic 2.166049 schwarz sc 2.809179 mean dependent 0.004836 s.d. dependent 0.800109 5. discussion energy is a rising and a serious issue of the modern world. it is getting on more and more challenging for the policy makers with time. south asian countries have limited energy resources. they rely on the exported energy resources for the fulfillment of their demands. in some south asian countries the exploration of energy resources demand lot of investment but many south asian countries have natural resources and they have the capacity to full fill their requirements or to control the energy crisis(stjepanović, 2013). the governments of these countries are not focusing on their goals properly due to different causes. pakistan is facing the serious issues of energy shortfall. it has enough natural resources for the generation of electricity but the country is not politically well established to solve this issue. pakistan also lacks government funding and they are not focusing seriously on the issue of energy shortage. some of the south asian countries have many other problems like they are not using the energy resources properly and efficiently. the wastage of energy resources is the serious cause of energy shortfall in these countries. moreover, this inefficient utilization of energy resources has serious implication of the environment. this behavior caused many environmental problems and it is deteriorating are environment(felipe, mccombie, & naqvi, 2010). the pollution level is also increasing day by day due to inefficient use of the energy resources(saidi & hammami, 2015). hygienic and human friendly environment is the necessity of life for all living things. it is the main need of the society because it enhances the life quality of the citizens. intellectuals and researchers are working day and night to achieve the ever increasing energy goals of the world. on the other hand, the search of efficient, sustainable and environment friendly energy resources is on its peak. they are trying to cross all those hurdles which are creating problems in the achievement of nature friendly and enough energy resources. 6. conclusion a balanced panel of five south asian countries was developed and considering the data of 25 years that also contains annual data of our variables we consider for this study. to satisfy the core purpose and objective of the study and considerable verification of the results originated from the test of the panel data we selected, we tried to incorporate many other countries as possible as we can with a considerable and reasonable time frame of the observations. the central objective of this study is to broadly survey and analyze the current landscape of the south asia’s service sector so as to assess its potential to serve as an engine for inclusive economic growth. our study indicates that services are already an important source of output, growth, and jobs in the region. this observation is very calculated and measured for the particular reading of the variables that is required for the result of the study. this research work is done to conclude the importance of the energy and its utilization for the coming eras. the increased rate of energy consumption is a sign of ending resources and it is important to look after the other resources that can fix this issue of increased cost of energy production. the only reliable source of energy is feeding different sector but with the time world is running out of the resources to support energy that is supporting the industries. this research work emphasis over the effects of energy consumptions and costs bore to cope with the energy production(siddique & majeed, 2015). there were different studies in consideration that helped in review of economics and development studies vol. 5, no 3, 2019 435 compiling this project. it is studied and observed all the studies related to south asian countries that energy consumption is always an issue in such region and it is never taken in consideration. we studies different factors as variables for the countries individually and in a panel data that helped in understanding the real situation regarding energy consumption. references asghar, z. 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(2010). is pakistan's growth rate balance-of-payments constrained? policies and implications for development and growth. oxford development studies, 38(4), 477-496. foran, b. d., & poldy, f. (2002). future dilemmas: options to 2050 for australia's population, technology, resources and environment: csiro sustainable ecosystems canberra. hamrita, m. e., & mekdam, m. (2016). energy consumption, co2 emissions and economic growth nexus: evidence from panel granger causality test. han, m. y., özyilmaz, b., zhang, y., & kim, p. (2007). energy band-gap engineering of graphene nanoribbons. physical review letters, 98(20), 206805. henneberry, s. r., khan, m. e., & piewthongngam, k. (2000). an analysis of industrial–agricultural interactions: a case study in pakistan. agricultural economics, 22(1), 17-27. jorgenson, d. w. (1967). surplus agricultural labour and the development of a dual economy. oxford economic papers, 19(3), 288-312. lucas, r. e. (1976). econometric policy evaluation: a critique. paper presented at the carnegie-rochester conference series on public policy. pereira, j. c. a new global (dis) order? environmental issues, international relations and the path towards cooperation. quah, d. t. (1996). regional convergence clusters across europe. european economic review, 40(3), 951-958. saidi, k., & hammami, s. (2015). the impact of co 2 emissions and economic growth on energy consumption in 58 countries. energy reports, 1, 62-70. siddique, h. m. a., & majeed, m. t. (2015). energy consumption, economic growth, trade and financial development nexus in south asia. stjepanović, s. (2013). can economic growth last? seriously. economic research-ekonomska istraživanja, 26(sup1), 1-12. tang, c. f., shahbaz, m., & arouri, m. (2013). re-investigating the electricity consumption and economic growth nexus in portugal. energy policy, 62, 1515-1524. review of economics and development studies, vol. 8 (4) 2022, 297-310 297 inspecting the nexus between internal factors, external factors, and house prices: ardl approach on the djiboutian real estate industry sadik aden dirir a a faculty of law, economics, and management, university of djibouti. djibouti email: sadikaden1999@gmail.com article details abstract history: accepted 25 november 2022 available online december 2022 land business such as real estate has shifted radically in the course of the last years. what's more, it has been catching a lot of interest. in my country, djibouti purchasing a typical house costs multiple times the yearly family income. accordingly, the current paper analyzes the relationship that exists between various factors and house prices in the djiboutian market. in this review, an ardl approach was adopted to predict and foresee the factors that influence the djiboutian real estate industry for a period of 29 years. the model demonstrated a positive and apparent link between the employment rate, manufacturing cost, national income, external debt, lgdp, tax, inflation, and house prices. except for the inflation rate that displayed no remarkable influence on the djiboutian real estate industry. the outcome will give a substantial and unmistakable examination to the djiboutian populace to know better how their income affects their selections of houses and it will likewise give the public authority an understanding of the most proficient method to direct the rising costs of real estate in relation to residents' earnings. the paper will likewise extend the actual literature and add evidence concerning the real estate industry in the horn of africa, especially the somali peninsula. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: internal factors; external factors; house price; real estate; ardl; djibouti jel classification: d14; d33; r12 doi: 10.47067/reads.v8i4.464 corresponding author’s email address: sadikaden1999@gmail.com 1. introduction the real estate industry is considered a phenomenon across countries and histories. the industry showcases a want and a need, a portion of individuals utilize houses as a means of housing and family building, whereas others consider purchasing a house a tool to broadcast their affluence. and others purchase for the sake of tangible investments (delmendo, 2020). the consumption of real estate offers a cover and a significant tool of abundance for families. subsequently, buying a house means a lifetime accomplishment for some families and addresses one of the biggest tools of homeownership, therefore denotes a deposit of wealth and a wellspring of income assortment for the government (diamond & mcǫuade, 2019). review of economics and development studies, vol. 8 (4) 2022, 297-310 298 one of the first industries to encounter a gloomy state of things in terms of many types of activities, such as sales, values, availability, financing, building, and lending, is the real estate sector (ricks, 2020). real estate is very intimately related to a specific geographic area, which has an impact on both the balance between the sale and acquisition of real estate as well as the value of individual properties. disasters could disrupt this, leading to an imbalance in space between urban and rural areas. conflicts between formal and informal property also result from legal inconsistencies relating to real estate. lack of legislative requirements for everyone to be eligible for sustainable housing, whatever their location, is the challenge (brotman, 2021). coping with double standards, which dishonest communities can enact to protect the safety of the elite's property while battling the presence of vulnerable people on unofficial land, is an even bigger problem. three fundamental factors such as land use pattern, population density pattern, and neighborhood unit design can be used to describe the spatial component of cities. but when both are subject to human activity, cities are defined by a variety of dynamic interactions between the social networks and physical elements, constituting the urban system (feres, 2021). for a country to advance and develop the real estate industry is an indispensable factor. that is why most countries around the globe are providing many regulations such as tax exoneration to make house prices proportional to the income earned. and apparently, it is something djibouti is lacking and failing to achieve. china the investment in real estate promoted 3311.98 hundred million in 2000 to 44319.69 hundred million yuan in 2011 which is 13 times higher. these results indicate how vital are household spending and real estate investment for the macro economy. other data revealed that real estate benefit in the usa is close to their annual average gdp (hong, 2014). the real estate sector participates a crucial role in a nation's economic growth since the linkage of government policies on the real estate industry and the volatility of house prices influence the population’s purchase of houses. for example, increasing house costs and offering a low-interest rate motivate households to purchase houses and enhance housing finance which as a result ameliorates economic performance (gardner, 2019). house prices have increased unprecedentedly in djibouti. it takes almost 10 months for an average person to buy a house, and taking a loan from the bank is not helping the case with their unimaginable loan conditions. a lot of questions arise about this price increase. when the average income increased only twice the cost of houses increased ten times over the last decades. what increased the house’s prices 10 times from their normal cost? consequently, this paper explores the real estate industry of djibouti by utilizing an ardl model to assess the cointegration between various factors and house prices. moreover, the real estate industry in the horn of africa has not been investigated sufficiently, which means there is a lack of geographic information about the region since we possess little information about the somali peninsula when it comes to purchasing houses. therefore, in this paper, we hypothesize the presence of a prominent link between internal and external factors and the cost of real estate in djibouti. the study is composed of the following. section 1 will consist of background studies where the past literature on our topic will be dissected and reviewed. section 2 involves presenting the methodology adopted by the study and how the data was collected. furthermore, section 3 compromises displaying the findings, and finally section 4 consists of a discussion and conclusion. 2. literature review all the more explicitly, starting from early 1997 to 2002, actual house costs increased around 28% while the actual per capita of each individual went up only around 15%. interestingly, during the review of economics and development studies, vol. 8 (4) 2022, 297-310 299 past 20-year time span, actual house costs increased just 13% while the new exhibition of house costs relative to income is taken as proof by some that house costs are off the mark with "essentials," and that costs should deteriorate or tumble to permit income to catch up (glaeser, 2002). in a study conducted by byrne and norris (2022) they stated that the increase in housing costs across the countries is a significant contributing element of homelessness, especially among the youth, the never ceasing increase of prices in the real estate industry, is mainly affecting young people in relevance to other demographic individuals. in emerging countries and african countries, the real estate industry is considered a vital employment engine next to agriculture. this is a result of the channel in reverse and forward linkages that exist with the other sectors such as the construction and infrastructure sectors (kisho & marfatia, 2017). for governments, the prices of houses represent a noteworthy restriction on solving poverty. investigation of spatial destitution traps has exhibited that the more underprivileged people's house cost increase in relevance with rich people abundance disparity is probably to go up (rehman, ali, & shahzad, 2020). al-masum and lee (2019) presume that real estate markets with more adaptable and straightforward circumstances are more subjected to greater instability. the experimental examination of (asal, 2018) doesn't uphold the cointegration between earning and lodging costs over the long run. bahmani-oskooee and ghodsi (2016) discover that per capita pay and lodging costs are emphatically and unequivocally related and the significance of the typical measure of borrowings which is straightforwardly connected with the low-loan fees as the primary inspiration driving the shift in housing costs. 2.1 does income inequality affect house prices? one of the fundamental requirements for the settlement and development of individuals is housing or shelter. thus, through increased investment and job creation, the housing market is one of the variables that influence any nation's socioeconomic development and serves as a tool for economic growth in some industrialized and emerging nations (aha, 2018). the cost of housing is likened to a two-edged sword. on the one hand, rising home costs are preferable since they boost the economy by generating wealth. however, a rise in housing costs diminishes demand for homes and results in rising rental rates, which is detrimental to both the economy and society (ahmed, 2020). additionally, rising housing costs could result in rising household spending, which could then fuel high inflation and macroeconomic instability. therefore, rather than increasing productivity, the adverse effects of high housing costs include a decrease in the wealth impact, a decline in township housing, and an increase in housing investment (he, hu, wang, & yao, 2020). confronted with a restricted supply of lodging stock, similar to the case in a large number of top-level income nations, this inserts upward pressure and tension on housing costs, forcing low earners workers out of the market monfared & pavlov (2019). additionally, as an immediate aftereffect of the offering system, that increases the worth of houses, property holders and financial backers anticipate that house costs should continue to go up and hold on to properties that in any case would have been put onto the market, further confining supply and forcing costs up muzindutsi, jamile, zibani & obalade (2020). the property market, often known as the real estate industry, is crucial for speculators, land developers, and regulators as well as for the nation's economy. however, one of the most significant economic difficulties of the twenty-first century is the level of property prices, which was made even more problematic by the worldwide financial crisis of 2008 (parrikar, 2019). it is also asserted that the pre-crisis housing bubble was one of the origins and initiators of the financial crisis of 2008 albeit it was also impacted by the same catastrophe (kleinman, 2020). review of economics and development studies, vol. 8 (4) 2022, 297-310 300 a connecting element is that as individuals acquire more, they become less open to properties and houses that are being constructed and built in the close area to them and are more able to pay to restrict development in spaces lining them, further confining supply (gyourko, mayer & sinai, 2013). a subsequent prompt peculiarity by which earning difference and housing price are associated is that imbalance has been associated with placing assets into lodging, expanding the desire for acquiring houses demonstrates that real estate became a measurement for social and financial accomplishment (nakajima, 2005). this clearly showcases the extended use of lodging by the rich as a self-absorbed exhibition of affluence and abundance, while lodging use for shallow reasons represents mimicry tries of lower-pay laborers (dwyer, 2009). the outcome of this phenomenon made the housing stock more overpriced. for globally engaging urban communities, which have set up strategies intended to draw in the unfamiliar venture, expanded pressure from utilization streams stems from local people, yet additionally from global financial investors who may not be guaranteed to involve those houses for significant stretches of time (chong, 2007). a study carried out by authors such as coskun and jadevicius (2017) observed the presence of a positive connection between interest rates, income, housing purchasing, and urbanization. the authors find that housing prices are extremely sensitive to changes in income and monetary policy. they come to the conclusion that turkey's housing market is a crucial tool for implementing monetary policy in the real economy. (kolcu & yamak, 2018) research demonstrates that long-term changes in income level have a favorable impact on housing values. on the other hand, while interest rates on mortgages have little impact on home prices over the long term, they do have a big and detrimental impact in the short term. the income volatility and climate change-related savings issues affect households in developing economies as well. they also experience limitations in the insurance and low credit sectors, as well as social coverage. following these obstacles, emerging nations frequently experience issues with the allocation of savings, which makes it difficult to decide on profitable investments (watson, 2019). another issue for households in emerging nations is finding a source of income. although there are many options for capital investment, domestic savings and investing in real estate are the most dependable option (kenjio, 2020). it is claimed that raising money from domestic sources is known to be the engine of economic growth in developing nations. the economic well-being of households is frequently threatened in developing nations like those in east africa as a result of surging prices in tern of real estate, income volatility, and basic consumption (rosenthal, strange & urrego, 2022). 2.2 factors that affect the real estate industry we mentioned a booming construction industry four years ago. long-standing perceptions of rapid real estate growth exist. however, the scenario seemed clear-cut and warmly accepted due to the strong economy, as well as the positive reactions of investors, contractors, politicians, and economists. building companies have exhausted their supply of work, and shareholders have been well-positioned and supported by their income. in most nations, five to seven percent of the nation's gdp was contributed by the construction industry. investors took out loans with high-interest rates for a longer time, which pleased the banks (golob, bastic & psunder, 2012). additionally, (case, 2003) emphasized in their study that it is important to establish and routinely monitor the findings of measures of many elements affecting the real estate market. they discovered that investors who reside in developed cities think that real estate prices can remain stable and that there is only minimal price risk at very high price levels. researchers believed that investors are thinking incorrectly, according to their research. according to (ge, 2008), both internal and review of economics and development studies, vol. 8 (4) 2022, 297-310 301 external forces have an effect on the real estate market. they were reduced to the internal ones. those factors consist of credit conditions, inflation, economic development, interest rates, the location of the property, and the speed of sales of real estate. according to guo, yuan, & chen (2011), the real estate market has a significant impact on economic growth. however, he discovers that the conventional real estate operating model is detrimental to the realization of national economic interest, limits the process of modifying the national living environment, and reduces the effectiveness of the market economy. additionally, they learn that both the expansion and scope of property investment can be used to facilitate the real estate industry's development on economic growth. for property investment, interest rates are also crucial. without buying or selling the underlying asset directly, ciurlia and gheno (2009) stated that the real estate derivatives market enables investors to minimize risk and return the expository shape to property. given how quickly a market is expanding, there is an urgent need to use straightforward pricing strategies. in their study, frappa and mésonnier (2010) discovered strong support for the favorable impact of inflation targeting on actual house price rise and the ratio of house price to rent. additionally, the success and profitability of businesses are significantly impacted by inflation. real interest rates are lowered as a result of inflation, but because of the inflationary pressure, nominal interest rates will also decline. in addition to that, the location of the property may be a vital determinant of the house price. in particular, many qualities may be assessed using the pertinent future indices. differences in the year, real estate property size, style, or asset amortization may be particular. in real estate literature, it has been recommended that house cost and income amount ought to have proportional and long-run balance relationships, for example, cointegration (goodman, 2008). nonetheless, divergence is generally identified between house cost and earnings all around the globe so the lodging reasonableness and affordability issue has been a significant issue in numerous regions and is broadly examined. during the last few years, numerous nations have encountered quick increments and high unpredictability in house costs. contrary, the increase in earnings and incomes is moderately slow and gives off the impression of being not able to reach the expanded house cost (chen, 2004). several countries such as ireland, japan, the united kingdom, and thailand have suffered a problem with affordability. for instance, taiwan's housing cost has gone up quickly over the course of years (banerjee, 1999). an uncommon peculiarity in taiwan is that house cost rises significantly more quickly than the population income, and hence the taiwan lodging framework is continually under the tension of affordability issue. in the last 30 years (1973-2002), the actual expansion in normal house cost in taipei has been 7.0%/annum with a 21.1% standard deviation, showing an exceptionally high pace of increment and high levels of house cost. in any case, family pay during similar periods has expanded by just 4.4% with a 6.2% standard deviation. affordability is a diverse part of multidimensional elements. an action is connected to various particular, yet, related, metropolitan aspects, for example, land use, network designs, and populace dispersion (miller, 2018). 3. methodology 3.1 data sources in this study, the data used is secondary data published by the world bank over the period 1991 until 2020. we incorporate the house prices in djibouti as a dependent variable to estimate the model. some other variables such as gdp, national income, external debt, employment, inflation rate, amount of tax paid, and total manufacturing cost was also selected to assess the djiboutian real estate industry. consequently, to carry on with the study and forecast the long-run relationships from short-run review of economics and development studies, vol. 8 (4) 2022, 297-310 302 dynamics an autoregressive distributed lag (ardl) is performed. table 1: variable definition variables definition source years 1991 until 2020 hp average house price in djibouti department of the ministry of budget in djibouti lgdp the logarithm of gdp per capita (current us$) world bank inc net national income (current us$) emp percentage of total employment tafm tariff rate, applied, simple mean, manufactured products % tax tax payments db external debt country economy inf inflation, consumer prices (annual %) the statistics portal for market data 3.2 econometric model we apply the ardl approach to cointegration for empirical analysis. the ardl technique has the benefit of not require the same degree of integration for each variable, which is one of its benefits. it does not really concern if factors have varied order of integration, integration of order zero, or integration of order one. ardl has an advantage over traditional cointegration methods because of this characteristic. standard cointegration procedures become unstable when there is a mixed order of integration because the test's ability to detect cointegration is reduced. there are two steps in the ardl approach. first, the f-statistic is used to examine the long term association between the variables. in the unconstrained error correction model, the significance of the lagged values of the variables is evaluated using the f-statistic (ecm). the second step is to derive the parameter estimates for the long-run relationship's error correction model. consequently, since we could not obtain a cointegration among the variables in the long run we only performed the short-run cointegration which is specified by the below equation. our model's general functional form is as follows: hp𝑡 = yt, lgdpt, inct, empt, tafmt, taxt, dbt, inft (1) hp = ∫ (𝑙𝐺𝐷𝑃, 𝐼𝑁𝐶, 𝐸𝑀𝑃, 𝑇𝐴𝐹𝑀, 𝑇𝐴𝑋, 𝐷𝐵, 𝐼𝑁𝐹) (2) we employ the log-linear assumption for empirical purposes because it yields effective outcomes and makes it simple to comprehend estimated parameters. the following is how the functional form of house price model is put together: 𝐻𝑃𝑡 = 𝛽0 + 𝛽1𝐿𝐺𝐷𝑃𝑡 + 𝛽2𝐼𝑁𝐶𝑡 + 𝛽3𝐸𝑀𝑃𝑡 + 𝛽4𝑇𝐴𝐹𝑀𝑡 + 𝛽5𝑇𝐴𝑋𝑡 + 𝛽6𝐷𝐵𝑡 + 𝛽7𝐼𝑁𝐹𝑡+𝜀𝑡 (3) in this equation, 𝛽0 is the constant, and 𝜀𝑡 is regarded as the equation's error term. the parameters of 𝛽1 through 𝛽7 are the coefficients that are utilized to calculate the house price. the below table contains the short-run equation used to estimate the ardl bounds testing. review of economics and development studies, vol. 8 (4) 2022, 297-310 303 4. results and discussion a preliminary study of summary data and a correlation coefficient analysis opens this section. table 2 provides the fundamental estimation of the central tendency and distribution of the variables, and it is clear that over the study period, tax per capita has the greatest average of 24.60 and emp has the lowest average of 0.834. we also notice that, with the exception of hp, emp, and tax, series are favorably skewed across the analyzed time frame. except for inf, all variables exhibit moderate tails in terms of dataset peaks as indicated by kurtosis. since we are unable to reject the jarque-bera probability, the normality analysis test reveals that all series are normally distributed, which is desirable. table 2: descriptive statistics hp lgdp inc emp tafm tax inf mean 4.161034 3.090757 8.946672 0.834333 15.25433 24.60000 2.215954 median 4.487280 2.971127 8.855661 0.850000 18.00000 23.00000 1.879688 maximum 5.092159 3.507816 9.465647 0.930000 33.49000 36.00000 11.95862 minimum 2.761928 2.877089 8.668920 0.700000 0.000000 0.000000 -0.847390 std. dev. 0.777962 0.238051 0.270914 0.057517 13.70503 10.50648 2.419940 skewness -0.565566 0.707503 0.717582 -0.788655 0.006885 -0.956653 2.158771 kurtosis 1.806312 1.858283 2.042493 3.207855 1.389028 3.642691 9.797201 jarque-bera 3.380440 4.132201 3.720642 3.163890 3.244275 5.092237 81.05389 probability 0.184479 0.126679 0.155623 0.205575 0.197476 0.078385 0.000000 sum 124.8310 92.72271 268.4002 25.03000 457.6300 738.0000 66.47863 sum sq. dev. 17.55153 1.643381 2.128435 0.095937 5447.010 3201.200 169.8272 observations 30 30 30 30 30 30 30 the pairwise correlation between the different variables, which is underlined in table 3, is what we attempt to investigate. there is a substantial statistical relationship between gdp, inc, emp, tax, and db to house prices (p< 0.01). this shows that a high level of house prices is correlated with increased gdp, income, employment, taxes, and national debt. table 3: correlations matrix variables hp gdp inc emp tafm tax inf db hp 1.000 lgdp 0.798 1.000 inc 0.840 0.993 1.000 emp 0.724 0.441 0.481 1.000 tafm -0.210 -0.092 -0.099 -0.194 1.000 tax 0.836 0.762 0.773 0.739 -0.172 1.000 inf 0.325 0.044 0.070 0.172 -0.231 0.234 1.000 db 0.867 0.921 0.952 0.494 -0.111 0.764 0.124 1.000 review of economics and development studies, vol. 8 (4) 2022, 297-310 304 the current study then uses the adf and pp unit root tests to investigate the characteristics of stationarity of the studied variables. after running the test all the variables were revealed to be stationary at first difference which implies the dataset satisfies the test of i (i) and not i (2). table 4: the results of unit root test variables panel a: augmented dickey-fuller test mckinnon critical value at level note at first difference note hp -1.792 not stationary -4.642*** stationary 1% 3.750 5% 3.000 10% 2.630 lgdp 1.315 not stationary -4.012*** stationary inc 2.06 not stationary -2.795* stationary emp -2.199 not stationary -5.045*** stationary tafm -6.44*** stationary -7.319*** stationary tax -2.278 not stationary -5.527*** stationary inf -3.721** stationary -8.328*** stationary db 0.9705 not stationary -4.297*** stationary ***, **, and * indicate significance at 1% and 5%, and 10% level respectively table 5: the results of unit root test part 2 variables panel b: phillips–perron test at level note at first difference note hp -1.288 not stationary -29.424*** stationary 1% 17.200 5% 12.500 10% 10.000 lgdp 0.914 not stationary -23.227*** stationary inc 1.285 not stationary -11.870* stationary emp -5.301 not stationary -27.560*** stationary tafm -25.629*** stationary -28.584*** stationary tax -4.226 not stationary -28.637*** stationary inf -19.885*** stationary -35.825*** stationary db 0.054 not stationary -22.906*** stationary ***, **, and * indicate significance at 1% and 5%, and 10% level respectively consequently, it is important to look into long-run characteristics. to determine the best performing model, we investigate the lag criterion selection prior to the examination of long-run equilibrium. therefore table 6 suggests that 2 is the appropriate lag order for the study. table 6: log order selection criteria lag logl lr df p fpe aic hǫic sbic 0 -72.1007 6.6e-08 6.16159 6.27306 6.5487 1 105.04 354.28 64 0.000 1.4e-11 -2.54153 -1.53827 0.942435 2 272.882 335.68 64 0.000 2.9e-14 * -10.529* -8.6343* -3.9485* review of economics and development studies, vol. 8 (4) 2022, 297-310 305 according to the bounds test result presented in table 7, the estimated f-statistics for the house price specification are less than the upper bound critical value with a value of 1.59. thus, it suggests that long-run cointegration does not exist. as a result, the model will only estimate the short-run cointegration. table 7: ardl bounds test model: f (hp, gdp, inc, emp, tafm, tax, inf, db) optimal lag length: ardl ((2,2,2,2,2,2,2,0) f-statistic: 1.591 t-statistic: -2.314 critical value 10% 5% 2.5% 1% [i_0] [i_1] [i_0] [i_0] [i_0] [i_1] f 2.030 3.130 2.320 3.500 2.600 3.840 2.960 4.260 t -2.570 -4.230 -2.860 -4.570 -3.130 -4.850 -3.430 -5.190 table 8, demonstrates the short-run estimation result. the factors employed in the study have a distinctive impact on house prices. more importantly, the impact varies among the lags. starting with the lgdp, we notice that an increase of 1% in lgdp at lag (2) reduces house prices by 6.75% and with (p < 0.10) statistical level. national debt revealed a similar impact, since a 1% increase in the djiboutian national debt decreases the house price by 3.19% with (p < 0.05) significance level. on the other hand, an increase in national income at lag (2), manufacturing cost at lag (1), and employment at lag (2) rise the house prices by 10%, 0,02%, and 4.77% respectively. this mainly indicates that in djibouti the national income, employment, and manufacturing cost plays a vital role in increasing the value of the real estate industry. finally, the model illustrated that the inflation rate does not have any noteworthy impact on the djiboutian real estate industry. this can be explained by the fact that the djiboutian currency does not fluctuate since it is tied to the dollar. table 8: ardl short-run estimation variable coefficient std. error t-statistic prob.* hp (-1) 0.119775 0.350848 0.341388 0.7444 hp (-2) 0.426788 0.305339 1.397751 0.2117 lgdp -5.142479 3.036428 -1.693595 0.1413 lgdp (-1) 5.531515 3.600362 1.536378 0.1754 lgdp (-2) -6.759223 3.142411 -2.150967 0.0750* inf 0.055 0.027 2.040 0.088* inf (-1) -0.033155 0.017858 -1.856551 0.1128 inf (-2) -0.022064 0.018183 -1.213448 0.2706 dp -3.196552 1.294923 -2.468527 0.0486** inc 6.549699 3.598083 1.820330 0.1186 inc (-1) -7.813416 4.288050 -1.822137 0.1183 inc (-2) 10.01134 4.057149 2.467581 0.0486** tafm -0.003984 0.003276 -1.216046 0.2696 tafm (-1) 0.012 0.006 2.070 0.083* tafm (-2) -0.006412 0.003567 -1.797369 0.1224 tax 0.003237 0.010693 0.302728 0.7723 tax (-1) -0.006190 0.011056 -0.559871 0.5958 review of economics and development studies, vol. 8 (4) 2022, 297-310 306 tax (-2) 0.017386 0.010529 1.651276 0.1498 emp -2.246985 1.896602 -1.184743 0.2809 emp (-1) -0.437592 1.616868 -0.270642 0.7957 emp (-2) 4.772544 2.225494 2.144488 0.0757* c -30.41466 13.98925 -2.174145 0.0726* r-squared 0.995132 mean dependent var 4.258679 adjusted r-squared 0.978096 s.d. dependent var 0.708283 s.e. of regression 0.104826 akaike info criterion -1.642053 sum squared resid 0.065931 schwarz criterion -0.595321 log-likelihood 44.98874 hannan-ǫuinn criteria. -1.322056 f-statistic 58.41220 durbin-watson stat 1.922427 prob(f-statistic) 0.000028 ***, ** and * indicate significance at 1% and 5%, and 10% level respectively different diagnostic tests have been presented in table 9. the results indicate that our estimated model is satisfied. the lm test for serial correlation shows that the issue of serial correlation does not affect our empirical findings. also, the white test is used to test for heteroscedasticity, and this again demonstrates that our results are free from heteroskedasticity. in addition to that, we observe the durbin-watson test that is close to 2.0 which implies the model is not suffering from autocorrelation. table 9: diagnostic test tests prob verdict durbin-watson 1.922427 no prominent autocorrelation breusch-godfrey lm test for autocorrelation 0.8051 no serial correlation white's test for heteroskedasticity 0.4110 the model is free from heteroskedasticity to determine the model stability, we perform the cumulative sum of the recursive residuals (cusum) and the cumulative sum of the square of the recursive residual (cusumsǫ). the plots for cusum and cusumsǫ are shown in figures 1 and 2, respectively. the estimated line is well inside the critical bounds at a 5% level of significance, as seen in both figures, indicating that the model is stable and dependable. review of economics and development studies, vol. 8 (4) 2022, 297-310 307 to sum up, the last 10–12 years have been the most significant period in african real estate, according to many specialists. we have transitioned from a glut of foreclosed properties, hesitant purchasers, and wary lenders to skyrocketing prices, a dearth of available properties, and heated competition. african countries are experiencing unprecedented and dysfunctional urbanization due to the present demographic surge. finding adequate property has turned into a major issue. the rate of urbanization on the continent is the highest in the world. the pace of urban population increase has reportedly attained 3% annually, according to un-habitat. in reality, assuming the current course of events continues, the urban population will increase from 40% in 2009 to 60% in 2050. the government has taken numerous initiatives to increase housing accessibility for underprivileged individuals. however, the issue continues, and the size of the ghetto is growing. as a result, only members of the upper social classes can afford to reside inadequate homes. this condition widens the divide between the rich and the underprivileged and calls for several steps to ensure shelter for everyone. public authorities in several east african countries have chosen to construct low-cost or affordable state housing as a means of halting the growth of slums. nevertheless, the targeted underprivileged demographic was not benefited from such initiatives, and civil servants benefited from them. these types of initiatives were unsustainable due to rising demand and a shortage of public financial resources. in previous initiatives, the djiboutian government constructed houses for newlyweds in order to support them and relieve some of the unbearable housing costs however, the targeted demographic could not benefit from such policies. housing demand is essentially limitless in theory. people with adequate homes seek larger and more comfortable homes, whereas those without adequate homes yearn for one. unfortunately, this need is not actually satisfied, particularly due to financial constraints. besides regulations limiting property accessibility prevent numerous social developments of real estate proposals. additionally, because credit institutions are reluctant to support public building projects, it is challenging for developers of residential properties to find longperiod funding. in addition to these challenges, the availability of competent individuals, fundamental infrastructure (including such roadways, energy, water, etc.), and high building prices cannot be ruled out. in djibouti for an average person to purchase a house, there will be many conditions that need to be stultified. first, the individual has to consult the government for the land purchasing (the djiboutian government monopolized and control the real estate industry), next after satisfying the government requirement the person purchases the land based on two options, with the help of a bank (the bank offer a loan and even a construction contract for a review of economics and development studies, vol. 8 (4) 2022, 297-310 308 long-term interest rate) or from a personal investment which is nearly impossible because of the astronomical house prices. in relevance with our short-run model outcome. the variables used in the study displayed distinctive effects on housing costs. what's more, the influence differs between the lags. starting with the lgdp, we see observed an increase of 1% in the lgdp at lag (2) resulting in a 6.75 percent decrease in housing prices with a statistical threshold of (p 0.10). the impact of the national debt was comparable, with a 1% increase in djibouti's national debt decreasing home prices by 3.19% with a significance level of (p 0.05). the price of homes increases by 10%, 0,02%, and 4.77%, respectively, in response to increases in national income, manufacturing costs, and employment. the primary takeaway from this is that djibouti's national gdp, employment rate, and manufacturing costs all have a significant impact on how valuable the real estate sector becomes there. the model also showed that the djiboutian real estate market is not much impacted by the inflation rate. this can be explained by the fact that since the djiboutian currency is linked to the dollar, it does not fluctuate. 5. conclusion and implication the lack of efforts to address the housing problem in djibouti highlights the necessity of doing a more comprehensive examination of the demands of the populace and taking the surroundings of the homes into account. to put sustainable housing policies into practice on a bigger scale, we need a fundamental change. a strategy that will incorporate all of the sector's participants in various fields and take into account important variables including the accessibility of property investment, the national income level, the permitted forms of leasing, the financing sector, and the infrastructure situation. as a result, the study shed the light on the relationship that exists between various factors and house prices. a data of 29 years (1991 until 2020) was collected from sources such as ministry of budget and finance in djibouti, the world bank, statista, and the country’s economy. to carry on with the investigation an autoregressive distributed lag (ardl) model was performed. consequently, the shortrun findings unveiled a positive and apparent link between the employment rate, manufacturing cost, national income, external debt, lgdp, tax, inflation, and house prices. except for the inflation rate that displayed no apparent influence on the djiboutian real estate industry. nevertheless, those impacts varied across the variables. for instance, lgdp and external debt reduced house prices. whereas the rest increased the djiboutian real estate industry’s value in conformity with the results, we suggest that a partnership with the private sector is required because government funds won't be enough to cover the surging costs of housing problems. subsidies to the private industry that are only basic simply will not work well. implementing leverage-producing incentive mechanisms is the answer in this case. to ensure the integrity of the system, government bodies should provide a favorable climate for investors and establish appropriate legislation and regulations and monitor the increasing house prices in consonance with the djiboutian populace. finally, the paper will offer a concrete framework for the real estate industry in djibouti. it will also provide empirical evidence to the experts and the djiboutian government to know the necessary regulations concerning the real estate industry in proportion to 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(2019). the suburbanity of frank lloyd wright’s broadacre city. journal ofi urban history, 45(5), 1006-1029. review of economics and development studies vol. i, no 1, june 2015 33 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 1: issue 1 june 2015 journal homepage: www.publishing.globalcsrc.org/reads households socio-economic determinants of childhood diarrhoea morbidity in selected south asian countries 1 sofia anwar, 2 aisha iftikhar, 3 aisha asif, 4 zahira batool 1 professor and chairperson, department of economics, government college university faisalabad, pakistan. sofia_eco@gcuf.edu.pk 2 mphil scholar, department of economics government college university faisalabad, pakistan. 3 phd scholar, department of economics, government college university faisalabad, pakistan.aieshasif@gmail.com 4 associate professor, department of sociology government college university faisalabad, pakistan. articledetails abstract history revised format: may 2015 available online: june 2015 this study attempts to find out the association between the household socioeconomic factors with childhood diarrhoea in pakistan, bangladesh and nepal. to estimate the determinants of diarrhoea, the study uses the data derived from the demographic and health surveys (dhs) in three asian countries: pakistan, bangladesh and nepal from 2011 to 2013. to find out the diarrhoea morbidity among child under five, the child age, child gender, mother’s education and working status, child immunization, source of drinking water, type of toilet facility, washing hands behavior, floor material, and economic status of household has been used as independent variables. binary logistic model is used to estimate the probability of diarrhoea morbidity among children of selected countries in this study. the results of binary logistic regression indicate that to reduce diarrhoea morbidity, washing hands especially after using toilet and at time of preparing food and eating food can play a major part. mother’s education and work status have significant impact on diarrhoea morbidity. the study concludes that family size has a strong impact on childhood diarrhoea morbidity. in small families, mothers have more time for child care than large families. so the chances of diarrhoea incidence are less in small families. © 2015 the authors, under a creative commons attributionnoncommercial 4.0 keywords diarrhoea morbidity demographic and health surveys (dhs) pakistan bangladesh nepal jel classification i12, i15, i18 corresponding author’s email address: sofia_eco@gcuf.edu.pk recommended citation: anwar, s., iftikhar, a., asif, a. and batool, z. (2015). households socio-economic determinants of childhood diarrhoea morbidity in selected south asian countries. review of economics and development studies, 1 (1) 33-44 doi: https://doi.org/10.26710/reads.v1i1.114 http://www.publishing.globalcsrc.org/reads mailto:aieshasif@gmail.com mailto:sofia_eco@gcuf.edu.pk review of economics and development studies vol. i, no 1, june 2015 34 1. introduction according to united nations children’s fund (unicef) diarrhoea is the ranked 2nd among the primary killers of children less than five worldwide. it is estimated that nearly 1.7 billion cases of diarrhea are reported around 760 000 not survive every year (unicef/who, 2013).according to who in the under five children deaths 9 percent are due to diarrhoea and the same figure is prevalent in pakistan while nepal and bangladesh have 6 percent share of death owing to this menace (who, 2015).about 72% of deaths associated with diarrhoea occur in the early 2 years of child life with peaks at age 6–11 months and therefore mortality is highest from age 0–11 months, the ages at which the risk of disease and severe disease also peak. further the global burden of incidence and severe disease for diarrhoea and pneumonia is highest in southeast asia and africa (walker and et al, 2013). the incidence and case-fatality ratios are much higher in low-income than in middle-income and high-income countries. it was targeted in the millennium development goals that efforts must be taken to decrease child mortality up to two thirds between 1990 and 2015. diarrhea is a communicable disease that may be caused by viral or bacterial. it is transmitted by food or water used by the patient. the socioeconomic factors of diarrhea incidence have been explained in the literature. but it is essential to identify their degree so that it can be decided that how much care is necessary to handle diarrhea. diarrhea is usually caused by any waterborne or food borne pathogens. to reduce the occurrence of diarrhea, improvement in ecological factors, i.e. availability of sufficient and clean drinking water, providing better cleanliness, facilities, and individual cleanliness can play a significant part (chakrabarti, 2003). diarrhea can spread more easily in these unhygienic environments. it is generally familiar that coverage to diarrheal pathogens in under developing countries is due to factors, i.e. infant’s age, accommodation situation, quality of water, education level, accessibility of lavatory services, the economic position of people, feeding habits, the common hygienic conditions (individual or home hygiene) around the house and living place (woldemicael, 2001). there are many interventions in sanitation, water and cleanliness programs that work to decrease the rate of diarrhea (azizullah, 2011; nantan et al., 2008; walker et al., 2003; woldemicael, 2001). it is widely recognized that child morbidity influenced by socio-economic, demographic, and environmental factors such as child age, maternal education and occupation, socio-economic status, place of residence, housing conditions, improved toilet facilities and water source and number of children in the household (ahuja et al., 2014; chakrabarti, 2012; kandala et al., 2008; 2009; mihrete et al., 2014; verma et al., 2016; woldemicael, 2001; zeleke et al., 2014). higher morbidity has also been reported in children during complementary feeding as a result of increased exposure to contaminated food. in related studies, low level of maternal education and maternal power to take decisions were observed to be risk factors for childhood morbidity (amugsi et al., 2014). identifying the basic environmental and socio-demographic factors that determine childhood morbidity remains important in reducing child mortality. indeed, several studies have shown that childhood morbidity in less developed countries is the result of interactions among behavioral, socio-economic and environmental factors (mihrete et al., 2014; unicef/who, 2009, 2012, 2013). it stands to reason that understanding childhood morbidity involves explaining the relationship and interactions of these factors. this is crucial for more focused implementation of child health interventions for policy formulation and review of economics and development studies vol. i, no 1, june 2015 35 intervention prioritization in pakistan, bangladesh and nepal. this research explains the main factor associated with diarrhea. the findings of the study can be useful to make hygiene programs further efficient. this study proves a valuable involvement to the presented verification on association among diarrhea morbidity and household’s socioeconomic determinants. this study carries to explore the association between the household socioeconomic factors with childhood diarrhea in pakistan, bangladesh and nepal. 2. data and methodology a. data to estimate the factors of diarrhea, the cross-sectional data were used. the data were taken from the demographic and health surveys (dhs) in three asian countries: pakistan, bangladesh and nepal from 2011 to 2013. the dhs surveys are household survey dataset from the selected countries at the national level. it is generally conducted in low and middle income countries. b. description of variables the study took the households having the child less than five years of analysis. to find out the diarrhea morbidity among child under five, child sex, education and working status of mother, child immunization, drinking water source, toilet facility, washing hands behavior, floor material, economic status of households and household size used as independent variables. c. methodology to analyze the dichotomous, continuous and categorical explanation of variables by the use of categorical independent variables logistic regression was used. the dependent variable will be the incidence of diarrhea among children less than five. the dependent variable will be in binary form, i.e. if diarrhea is prevailing among children, then value will be 1 otherwise 0. this function is said to be a logistic distribution function and to estimate it, maximum likelihood (ml) method is used. the main feature of this function is that it ensures that the likelihood ranges from 0 to 1. this study will use binary logistic model to estimate the probability of diarrhea morbidity among children of selected countries. the logistic model is written as follows: here y = 1 shows that a specific child is affected by diarrhea and x is the set of independent variables. pi is the restricted possibility that a specific child is having diarrhea. in the perspective of logic model it can be written as it can be written as zi= review of economics and development studies vol. i, no 1, june 2015 36 if pi shows the chance of having diarrhea then (1 – pi) indicates the chance of no diarrhea. the proportion of diarrheal morbidity to no diarrhea is pi / (1 – pi) is the odds ratio of having diarrhea. if we take the natural log of the odd ratio we get as so it can be said that li is linear with reference to the parameters and xi shows the independent variables. the benefit of this model is that only li is linearly associated with not the probabilities (gujarati, 2004). 3. results and discussions table 1, 2 and 3 depicts frequency distribution and cross tabulation of individual’s various demographic, economic, environmental and behavioral variables factors with reference to diarrhea in pakistan, bangladesh and nepal.in pakistan, there are 80 percent chances of not having diarrhea morbidity and 19 percent chance of having diarrhea in children in urban areas. the childhood diarrhea in rural areas of pakistan is 22 percent. while the 78 percent children have no diarrhea in rural areas of pakistan (ali et al., 2009). variables description diarrhea pakistan bangladesh nepal no yes total no yes total no yes tota l d e m o g r a p h ic v a r ia b le s p la c e o f r e si d e n c e urban = 1 3567 (80) 888 (20) 4455 (100) 2163 (95) 95 (4.2) 2258 (100) 913 (87) 136 (13) 1049 (100) rural = 0 4675 (78) 1311 (22) 5986 (100) 4611 (9.9) 249 (5.1) 4860 (100) 3462 (86) 543 (14) 4005 (100) chi sq. value =5. 95 gamma =0. 59 chi sq. value = 2.81 gamma = 0.10 chi sq. value =.252 gamma = 0.26^ g e n d e r o f c h il d male =1 4156 (78) 1173 (22) 5329 (100) 3490 (95) 191 (5.2) 3681 (100) 2224 (84) 396 (15) 2620 (100) female= 0 4086 (80) 1026 (20) 5112 (100) 3284 (96) 153 (4.5) 3437 (100) 2151 (88) 283 (11) 2434 (100) chi sq. value=5.914^ gamma = -.058^ chi sq. value=2. 101 gamma = -.080 chi sq. value=13.196* gamma = -. 150^ review of economics and development studies vol. i, no 1, june 2015 37 table 1: household’s demographic variables distribution with reference to diarrhea morbidity selected south asian countries source: demographic and health surveys (dhs), author's own calculation note: figures in parenthesis are the percentages ^, *, t indicate coefficients are significant at 1, 5 and 10 percent level respectively. h o u se h o ld s iz e 1-5 members = 1 1491 (76) 468 (24) 1959 (100) 3470 (95) 167 (4.6) 3637 (100) 2056 (86) 313 (13) 2369 (100) 6-10 members =2 4302 (79) 1129 (20) 5431 (100) 2830 (95) 147 (4.9) 2977 (100) 2076 (86) 333 (13) 2409 (100) 11-15 members =3 1770 (80) 445 (20) 2215 (100) 399 (93) 28 (6.6) 427 (100) 197 (87) 29 (12) 226 (100) > 15 members = 4 679 (81) 157 (18) 836 (100) 75 (97) 2 (2.6) 77 (100) 46 (92) 4 (8) 50 (100) chi sq .value=13.544^ gamma = -. 067* chi sq. value =.248^ gamma =.058 chi sq. value = 1.754 gamma =.008* m o th e r ’s e d u c a ti o n no education=1 4639 (78) 1238 (21) 5877 (100) 1210 (95) 64 (5) 1274 (100) 2026 (86) 312 (13) 2338 (100) incomplete primary=2 400 (73) 143 (26) 543 (100) 1153 (93) 76 (6.2) 1229 (100) 618 (87) 89 (12) 707 (100) complete primary= 3 749 (79) 191 (20) 940 (100) 837 (93) 59 (6.6) 896 (100) 256 (84) 46 (15) 302 (100) secondary= 4 1465 (78) 410 (21) 1875 (100) 2982 (96) 119 (3.8) 3101 (100) 1222 (86) 192 (13) 1414 (100) higher=5 989 (82) 217 (18) 1206 (100) 592 (95) 26 (4.2) 618 (100) 253 (86) 40 (13) 293 (100) chi sq. value = 16.955* gamma = -. 019 chi sq. value 18.164* gamma = -. 144^ chi sq. value =1.327 gamma =.010^ review of economics and development studies vol. i, no 1, june 2015 38 table 2: household’s economic variables distribution with reference to diarrhea morbidity selected south asian countries source: demographic and health surveys (dhs), author's own calculation note: figures in parenthesis are the percentages ^, *, t indicate coefficients are significant at 1, 5 and 10 percent level respectively. the results depicted in table 4 indicate that in pakistan and bangladesh urban children have less probability of having diarrhea as compared to rural children, but results are insignificant. results are consistent with the studies (arif & naheed 2012). the results illustrate that the probability of diarrhea morbidity in female children is more than the male children in all three countries. this may be due to the care in gender bias in these countries. household size has a significant impact on childhood diarrheal morbidity. children living in households with 1 to 5 members have less probability to have diarrhea morbidity as compared to those children who lives in household above 15 members in three countries. in small household size, the chances of diarrhea are. .44 times, .27 times and. 26 times less than large household size. results are consistent with (kaas, 1994). variables description diarrhea pakistan bangladesh nepal no yes total no yes tota l no yes tota l e c o n o m ic v a r ia b le s w e a lt h i n d e x poorest = 1 1904 (78) 513 (21) 2417 (100) 1398 (94) 82 (5.5) 1480 (100) 1377 (87) 201 (12) 1578 (100) poorer = 2 1588 (76) 501 (24) 2089 (100) 1292 (95) 68 (5.0) 1360 (100) 895 (86) 138 (13) 1033 (100) middle = 3 1584 (78) 431 (21) 2015 (100) 1289 (94) 78 (5.7) 1367 (100) 748 (84) 139 (15) 887 (100) richer = 4 1538 (78) 421 (21) 1959 (100) 136 (96) 53 (3.7) 1422 (100) 693 (85) 114 (14) 807 (100) richest = 5 1628 (83) 333 (17) 1961 (100) 1426 (95) 63 (4.2) 1489 (100) 662 (88) 87 (11) 749 (100) chi sq. value = 30.747* gamma =.061* chi sq. value 8.91^ gamma =.058 chi sq. value =6.941 gamma =.007^ m o th e r ’s w o r k s ta tu s not working = 1 6727 (79) 1723 (20) 8450 (100) 6076 (95) 307 (4.8) 6383 (100) 1623 (85) 274 (14) 1897 (100) working=0 1490 (76) 469 (23) 1959 (100) 698 (95) 37 (5.0) 735 (100) 2752 (87) 405 (12) 3157 (100) chi sq. value = 12.058* gamma=.103* chi sq. value = .072 gamma = .024 chi sq. value = 2.658 gamma = -.069^ review of economics and development studies vol. i, no 1, june 2015 39 table 3: household’s environmental and behavioural variables distribution with reference to diarrhea morbidity selected south asian countries source: demographic and health surveys (dhs), author's own calculation note: figures in parenthesis are the percentages ^, *, t indicate coefficients are significant at 1, 5 and 10 percent level respectively. variables description diarrhea pakistan nepal bangladesh no yes total no yes tota l no yes total e n v ir o n m e n ta l a n d b e h a v io u r a l v a r ia b le s s o u r c e o f d r in k in g w a te r improved source = 1 7008 (79) 1858 (21) 8866 (100) 5973 (95) 298 (4.8) 6271 (100) 3399 (86) 524 (13) 3923 (100) non-improved source = 0 1232 (78) 341 (21) 1573 (100) 801 (94) 46 (4.4) 847 (100) 976 (86) 155 (13) 1131 (100) chi sq. value = .419 gamma = .022 chi sq. value = .748 gamma = .070 chi sq. value =.091 gamma = .015^ t y p e o f t o il e t f a c il it y improved = 1 5778 (79) 1483 (20) 7261 (100) 3262 (95) 154 (4.5) 3419 (100) 1987 (87) 281 (12) 2208 (100) non-improved = 2 426 (78) 114 (21) 540 (100) 2372 (94) 128 (5.1) 2500 (100) 376 (88) 50 (11) 426 (100) no facility= 3 2036 (77) 602 (22) 2638 (100) 1135 (94) 62 (5.2) 1197 (100) 2072 (85) 348 (14) 2420 (100) chi sq. value = 6.68^ gamma = .062^ chi sq. value = 1.563 gamma = .056 chi sq. value = 3.868 gamma = .063^ v a c c in a ti o n no = 1 1338 (77) 382 (22) 1720 (100) 1557 (94) 83 (5.1) 1640 (100) 813 (85.3) 140 (14. 7) 953 (100) yes = 2 6904 (79) 1817 (20) 8721 (100) 5217 (95) 261 (4.8) 5478 (100) 3562 (86) 539 (13) 4101 (100) chi sq. value = 1.633 gamma = -. 041 chi sq. value =.241 gamma = -. 032 chi sq. value =1.592 gamma = -. 065^ u se s a v e w a te r no = 1 3216 (60) 2097 (39) 5313 (100) 4134 (92) 329 (7.4) 4463 (100) 1646 (72) 639 (28) 2285 (100) yes = 2 5026 (98) 102 (2) 5128 (100) 2640 (99) 15 (6) 2655 (100) 2729 (98) 40 (1.4 ) 2769 (100) chi sq. value =2204.8* gamma = -.940* chi sq. value = 167.69* gamma = -.867* chi sq. value = 757.10* gamma = -.927^ u se c le a n in g a g e n t soap = 1 4766 (80) 1185 (19) 5951 (100) 2967 (95) 118 (4.1) 3095 (100) 1989 (86) 312 (13) 2301 (100) mud = 2 1152 (78) 325 (22) 1477 (100) 592 (95) 28 (4.5) 620 (100) 1123 (86) 179 (13) 1302 (100) nothing = 3 2324 (77) 689 (22) 3013 (100) 3215 (94) 188 (5.5) 3403 (100) 1263 (87) 188 (13s s) 1451 (100) chi sq. value = 11.42^ gamma = .072^ chi sq. value =6.94^ gamma = .132^ chi sq. value = .426 gamma = -.015^ review of economics and development studies vol. i, no 1, june 2015 40 the results also point out that family economic position is a vital and important forecaster of infant diarrhea in three selected countries. children belonging to poorer families have a more significant probability of diarrhea morbidity than richer families in three countries. past research showed the same results (arif & naheed 2012). mother’s education indicates a negative relationship by the danger of diarrhea in the three selected countries. children of uneducated and low educated mothers have 1.36times, 1.96 times and 2 times more likelihoods of diarrheal morbidity respectively as compare to the children of highly educated mothers. the findings are in line with (arif & naheed, 2012). table 4: household’s socioeconomic determinants of childhood diarrhea morbidity in selected south asian countries independent variables pakistan bangladesh nepal b odd ratios b odd ratios b odd ratios place of residence urban = 1 -0.004 0.99 -0.01 0.99 0.09 1.09 rural = 2 reference category child gender 1 = male = 1 -0.09 0.91 -0.21 t 0.81 -0.39* 0.67 0 = female = 2 reference category households size 1-5 members =1 -0.81* 0.44 -1.31 t 0.26 -1.34^ 0.26 6 -10 members = 2 -0.79* 0.45 -0.86 0.42 -0.69 0.49 11-15 members = 3 -0.37^ 0.68 0.06 1.06 -0.20 0.81 above 15 members = 4 reference category wealth index poorest = 1 0.27 t 1.31 0.31 1.38 0.34 1.41 poorer = 2 0.31^ 1.36 0.41 1.51 0.52^ 1.69 middle =3 0.09 1.09 0.28 1.33 0.49^ 1.63 richer = 4 0.15 1.16 0.70^ 2.02 0.25 1.28 richest =5 reference category mother education no education = 1 0.30^ 1.36 0.67^ 1.96 0.69^ 2.00 incomplete primary = 2 0.07 1.08 0.37 1.45 0.66^ 1.94 complete primary = 3 0.26^ 1.30 0.18 1.21 0.48 1.63 secondary= 4 0.07 1.07 0.60^ 1.84 0.22 1.25 higher education = 5 reference category work status working = 1 0.129 t 1.138 0.01 1.01 0.17 t 1.19 not working = 0 reference category water source improved = 1 -0.27^ 0.76 -1.31* 0.26 -0.28^ 0.01 non improved = 0 reference category toilet facility improved toilet = 1 -0.15^ 0.86 -0.22 0.80 -0.25^ 0.77 non-improved = 2 -0.30^ 0.73 -0.29 0.74 -0.16 0.84 no toilet = 3 reference category flooring type 0.052 1.05 -0.30 0.73 0.48^ 1.62 review of economics and development studies vol. i, no 1, june 2015 41 natural floor = 1 rudimentary = 2 -0.55 0.577 1.017 2.766 0.629 1.88 finished = 3 reference category vaccination yes =1 -0.24^ 0.785 0.158 1.171 -0.152 0.859 no = 0 reference category use save water yes = 1 -3.78* 0.023 -2.64* .071 -0.16 0.846 no = 0 reference category cleaning agent soap = 1 0.19^ 0.82 -1.92* 0.146 0.721* 0.48 mud= 2 -.065* 0.94 -2.05* 0.128 0.304^ 0.73 nothing =3 reference category constant 0.826* 2.284 1.69 5.417 0.71 2.035 source: demographic and health surveys (dhs), author's own calculation ^, *, t indicate coefficients are significant at 1, 5 and 10 percent level respectively. working status of mothers is positively related to the possibility of children being ill due to diarrhea in pakistan and nepal. workers’ children have 1.14 times 1.192 times more chances of diarrhea than housewife’s children in above cited countries. past research concluded similar results (arif, 2004) about 88% global deaths due to diarrhea are considered with insecure water, insufficient cleanliness, and portable sanitation (who/unicef, 2004). our study, confirming the same, finds that type of source of drinking water, toilet facility, flooring type, adopts any methods to save water and use soap or other cleansing agent for washing hands and quality of drinking water are significantly associated with diarrhea (palit et al., 2012). results show that those children existing in those houses with natural flooring are 1.63 times more probable to be ill due to diarrhea than those living in homes with finished flooring in nepal, other two countries revealed insignificant results. children living in households having improved sources (piped water or a motor-pump) inside the house were 77 times, .25 times and .28 times in pakistan, bangladesh and nepal respectively, fewer expected to be sicker than kids in those families having other an improved sources of water, including well or river unprotected dug well or springs, tanker truck/cart and surface water. the quality of drinking is measured by adopting any method to save water is significantly associated with the odds of suffering from diarrhea (galen et al. 2003 banda; et al. 2007; alam 2007). in our study, the children with access to safe drinking water are almost .023 times, .07 times and.84 times in pakistan, bangladesh and nepal respectively, less likely to suffer from diarrhea than those who use unsafe water. this is the estimated example, as piped water is generally said to be less polluted than other sources. results also show that the prevalence of diarrhea among children who lived in households that had an improved toilet facilities (with flush system) was substantially lower than among those who lived in households without the flush system. children belonging to households equipped with separate flush toilet are almost .8 times in all selected countries less likely to suffer from diarrhea than the children with access to other type of toilets (includes pit latrine, dry toilet and toilet shared by other households). toilets covered under another type are generally unhygienic and shows a higher risk of getting diarrhoea among children. hands washing behavior of children has significant impact on diarrhea morbidity. hand washing with soap significantly .82 times, .15 times and .48 times had lowered the incidence of diarrhea among children in three selected countries. if children use soap or mud to wash their hands, they have less review of economics and development studies vol. i, no 1, june 2015 42 possibility to become sick because of diarrhea than those who do not use anything to wash hands (luby, 2011). use the soap for washing hands has exposed to decrease the frequency of diarrheal infection by over 40 per cent (unicef/who, 2009). it previously indicates that water and sanitation interventions can show a significant part in reducing the frequency of this sickness between kids (palit et al., 2012; roushdy et al., 2012; waddington et al., 2009). hand washing has received significant attention in efforts to promote better hygiene. washing children who had immunized were .78 times less likely to be sick more due to diarrhea than children who did not have this immunization in pakistan but these results were insignificant in other two countries. the studies proved that immunization is not directly linked with diarrhea morbidity but immunization is probably helpful to defend children against measles linked diarrhea (arif, 1998). 4. conclusion & recommendations this study explains the factors related to diarrhea among children of less than age five in three south asian (pakistan, bangladesh and nepal) countries. although different variables play different roles for diarrhea morbidity across the countries, but still we can express the significance of various factors which may supportive to manage diarrhea morbidity in south. although the results of binary logistic regression showed that the residential place, mother’s education, flooring type have not a significant impact on diarrhea morbidity in three countries but they showed positive association with diarrhea morbidity. the focus of present study is on the contact of sanitation conditions on diarrhea morbidity and has established a significant relationship among diarrhea morbidity and sanitation conditions mainly water source and do something to make water safe. the study concluded that in order to attain millennium development goal 4 (to decrease under-five death by two-thirds between 1990 and 2015); there is a need to promote attention specified to diverse factors influencing the identical allocation of economic and environment resources and amenities to all parts of the world particularly the high-mortality countries. there is a need to introduce different programs to promote family cleanliness and hygiene. it has been proved by research that cleanliness and hygiene are more vital than the quality of water. the study found that children with measles immunization are having fewer chances to be sick due to diarrhea. so it can be concluded that immunization of children reduces child mortality as well as to reduce diarrhea morbidity among children under age five. it is clear from the results of binary logistic regression that washing hands behavior of children has significant impact on diarrheal morbidity. the study indicated that to reduce diarrhea morbidity, washing hands especially after using the toilet and at the time of preparing food and eating food can play a major part. education of mother and employment position has not significant impact on diarrhea morbidity but they have a strong association with diarrhea morbidity. the study concluded that family size has a strong impact on childhood diarrheal morbidity. in small families, mothers have more time for child care than large families. so the chances of diarrhea incidence are less in small families. references alam, m. m., kobayashi, n., ishino, m., ahmed, m. s., ahmed, m. u., paul, s. k., & naik, t. n. (2007). genetic analysis of an adrv-n-like novel rotavirus strain b219 detected in a sporadic case of adult diarrhea in bangladesh. archives of virology, 152(1), 199-208. ali, m., atkinson, d., & underwood, p. (2000). determinants of use rate of oral rehydration therapy for management of childhood diarrhoea in rural bangladesh.journal of health, population and nutrition, 103-108. review of economics and development studies vol. i, no 1, june 2015 43 amugsi, d. a., mittelmark, m. b., lartey, a., matanda, d. j., & urke, h. b. (2014). influence of childcare practices on nutritional status of ghanaian children: a regression analysis of the ghana demographic and health surveys. bmj open, 4(11), e005340. arif, a., & naheed, r. (2012). socio-economic determinants of diarrhoea morbidity in pakistan. academic research international, 2(1), 490. arif, g. m., & ibrahim, s. (1998). diarrhoea morbidity differentials among children in pakistan. the pakistan development review, 205-230. azizullah, a., khattak, m. n. k., richter, p., & häder, d. p. (2011). water pollution in pakistan and its impact on public health—a review. environment international, 37(2), 479-497. banda, k., sarkar, r., gopal, s., govindarajan, j., harijan, b. b., jeyakumar, m. b., & thomas, v. a. (2007). water handling, sanitation and defecation practices in rural southern india: a knowledge, attitudes and practices study. transactions of the royal society of tropical medicine and hygiene, 101(11), 1124-1130. chakrabarti, a. (2012). determinants of child morbidity and factors governing utilization of child health care: evidence from rural india. applied economics, 44(1), 27-37. chakraborty, n., islam, m. a., chowdhury, r. i., bari, w., & akhter, h. h. (2003). determinants of the use of maternal health services in rural bangladesh. health promotion international, 18(4), 327337. gujarati, d. (2004). basic econometrics. united states military academy, west point. kandala, n. b., emina, j. b., nzita, p. d. k., & cappuccio, f. p. (2009). diarrhoea, acute respiratory infection, and fever among children in the democratic republic of congo. social science & medicine, 68(9), 1728-1736. kandala, n. b., ji, c., stallard, n., stranges, s., & cappuccio, f. p. (2008). morbidity from diarrhoea, cough and fever among young children in nigeria. annals of tropical medicine & parasitology, 102(5), 427-445. luby, s. p., halder, a. k., huda, t., unicomb, l., & johnston, r. b. (2011). the effect of handwashing at recommended times with water alone and with soap on child diarrhea in rural bangladesh: an observational study. plos med, 8(6), e1001052. mihrete, t. s., alemie, g. a., & teferra, a. s. (2014). determinants of childhood diarrhea among underfive children in benishangul gumuz regional state, north west ethiopia. bmc pediatrics, 14(1), 1. mihrete, t. s., alemie, g. a., & teferra, a. s. (2014). determinants of childhood diarrhea among underfive children in benishangul gumuz regional state, north west ethiopia. bmc pediatrics, 14(1), 1. nanan, d., white, f., azam, i., afsar, h., & hozhabri, s. (2003). evaluation of a water, sanitation, and hygiene education intervention on diarrhoea in northern pakistan. bulletin of the world health organization, 81(3), 160-165. palit, a., batabyal, p., kanungo, s., & sur, d. (2012). in-house contamination of potable water in urban slum of kolkata, india: a possible transmission route of diarrhea. water science and technology, 66(2), 299-303. roushdy, r., sieverding, m., & radwan, h. (2012). the impact of water supply and sanitation on child health: evidence from egypt. population council. unicef. (2010). diarrhoea: why children are still dying and what can be done. retrieved from http://www. unicef. org/media/files/final_diarrhoea_report_october_2009_final.pdf. waddington, h., snilstveit, b., white, h. and fewtrell, l. (2009) water, sanitation and hygiene interventions to combat childhood diarrhoea in developing countries. new delhi, india: 3ie walker, c. l. f., perin, j., aryee, m. j., boschi-pinto, c., & black, r. e. (2012). diarrhea incidence in low-and middle-income countries in 1990 and 2010: a systematic review. bmc public health, 12(1), 1. review of economics and development studies vol. i, no 1, june 2015 44 who/unicef (2013) ending preventable child deaths from pneumonia and diarrhoea by 2025: the integrated global action plan for pneumonia and diarrhoea (gappd), who press, world health organization, geneva. isbn: 9789241505239. accessed on 23rd december 2013. available at http://apps.who.int/iris/bitstream/10665/79200/1 /9789241 505239_eng.pdf woldemicael, g. (2001). diarrhoeal morbidity among young children in eritrea: environmental and socioeconomic determinants. journal of health, population and nutrition, 83-90. walker,c.l.f, rudan, i., liu.l., nair, h., theodoratou,e., bhutta,z.a., l o’brien,k., campbell, h., and black,r.e. (2013) global burden of childhood pneumonia and diarrhoea lancet . 381: 1405–16 published online april 12, 2013 http://dx.doi.org/10.1016/ zeleke, t., & zewdie aderaw alemu, a. (2014). determinants of under-five childhood diarrhea in kotebe health center, yeka sub city, addis ababa, ethiopia: a case control study. global journal of medical research, 14(4). review of economics and development studies vol. 4, no 1, june 2018 23 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 1, june 2018 journal homepage: www.publishing.globalcsrc.org/reads poverty alleviation through institutional empowerment of social and economy on poor society in gowa regency 1* syamsu nujum, 2 fadhia ratu pratiwi 1 lecturer, department of management, universitas muslim indonesia,syamsu.nujum@gmail.com 2* lecturer, department of management,universitas muslim indonesia,fadhilapratiwi.frp@gmail.com articledetails abstract history revised format: may 2018 available online: june 2018 the purpose of this paper is to examine the extent to which the role of government in empowering marginal/poor communities through various empowerment programs.to examine and explain the extent to which the benefits of programs to empower the poor society in reducing poverty. to examine and explain the poverty reduction model that is more in line with the local wisdom of the people of south sulawesi especially in the community in kabupaten gowa. it is intended to find a model that fits the needs and conditions of the poor communities in south sulawesi, especially in gowa so that it can be applied to poverty alleviation efforts in the future. an interview and observation were done to 20 people from the poor community, government, community leaders, and practitioners in gowa regency. descriptive and reflective sections were used to analyze the data and examining the poverty alleviation model through the empowerment of socio-economic institutions in south sulawesi in gowa regency. with the method of synergizing between social institution and economic institution, the researcher found that society can develop itself creatively and productively, so gradually poverty will decrease as expected. based on survey results, observations and interviews on the subject in this study, it can be concluded several things: that poverty experienced by the people of gowa regency is cultural and structural poverty so that people naturally experience poverty without realizing it as a problem in their lives living as they are with the non-poor community. poverty is seen as something destiny and need not be too much of a problem, but they live their lives as they are. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords model, empowerment, poverty, institutional, social, economy jel classification codes i12, h 32, j45 corresponding author’s email address: fadhilapratiwi.frp@gmail.com recommended citation: nujum, s., pratiwi., f.r., (2018). poverty alleviation through institutional empowerment of social and economy on poor society in gowa regency. review of economics and development studies, 4 (1) 23-29 doi: 10.26710/reads.v4i1.205 1. introduction poverty is a crucial problem faced by all countries in the world, both developed countries, and developing countries.poverty is still a global issue today.this means that poverty is not only a significant problem in third world countries, but it is also an issue in the advanced industrialized countries.it is at least observable in the data showing that in the united states in 1980 there were still 2.8 million subsidized people, more than half of the group is still relatively weak, as described (sulaiman cited in muhtar, 2005). http://www.publishing.globalcsrc.org/reads mailto:fadhilapratiwi.frp@gmail.com review of economics and development studies vol. 4, no 1, june 2018 24 in the context of indonesia, poverty alleviation has been going on since pelita i (48 years old).the effort has not been able to eradicate poverty significantly, especially with the economic crisis that occurred in 1997 caused the poverty rate to increase and reach 40 percent of the total population indonesia (muchtar, 2005).the incidents are a valuable lesson for the government in carrying out the national development in general, and the poverty reduction program in particular that places the poor as the object of development needs to be corrected.thus, in poverty reduction efforts need to change the development paradigm that places the poor as the object of development changed to the subject of development in addition to broad community participation is necessary for formulating poverty alleviation programs. as with south sulawesi, there have been many programs undertaken by the government in efforts to alleviate poverty such as; urban poverty program (p2kp), fishermen economic empowerment program (pemp), inpres village left behind (idt), raskin, and direct cash assistance (blt). all such poor community empowerment programs have not been able to run efficiently. even the bsm program at this time very concerns because there are still many people who can become bsm participants. 2. theoretical study 2.1 theory and the concept of empowerment community empowerment efforts are central issues that often leveled by the government and society, but until now the issue of community empowerment is still in the socialization stage to find a model of development specific community groups, given the complexity of the problems faced by the community itself both individually and in groups. community empowerment often uses the term community development. community empowerment can be defined as a method that enables people to improve their quality of life and be able to enlarge their influence on the processes that affect their lives (ama, 1993) in suharto (2005).in particular, community development is concerned with the efforts to meet the needs of disadvantaged or oppressed people, whether caused by poverty or by discrimination based on social class, ethnicity, gender, gender, age, and disability (twelve trees, 1991). the definitions and the statements gave us a sight that empowerment is a process and purpose, whereas a process; empowerment is a series of activities to strengthen the power or empowerment of weak groups in society. it is including individuals who have problems of poverty,while empowerment as a goal indicates the state or outcome to be achieved by a social change; namely people who have power, independence or have knowledge and ability in fulfilling their life needs both physical, economic, and social such as; confidence, able to convey aspirations, have livelihood, participate in social activities and independent in carrying out task -the task of his life. empowerment is a significant aspect of getting attention in making public policy to clear the direction and objectives to be addressed and achieved by public policy, and most importantly is such a policy accommodates the needs of the community. in connection with the above opinion, sennet and cobb (1972) and conway (1979) in suharto (2005) stated that the lack of empowerment of the community is caused by several factors such as; powerless economic security, lack of experience or access to the political arena, to information, lack of financial support, lackof training. 2.2 the concept and poverty indicators in general, the concept of poverty can be distinguished from different perspectives, but can be distinguished in three forms as described by townsend in ridwan (2008), as follows: review of economics and development studies vol. 4, no 1, june 2018 25 a. absolute poverty, a state in which the level of income people have is below the poverty line, or some income not is enough to meet the basic minimum needs of life. therefore absolute poverty is often referred to as natural poverty. b. relative poverty is a form of poverty by looking at what percentage of the national income is received by a population group with a specific income class compared to the proportion of national income received by the population group with other income groups (based on the dimension of place and time). c. cultural poverty is a form of poverty that refers to the attitude of a person or society who because of their cultural factors do not want to try to improve their level of life despite the efforts of outsiders to help him. even in the theory of "culture of poverty" it has been stated that poverty can arise as a result of the values or culture shared by the poor themselves, such as lazy, easy to surrender to fate, lack of work éthico and so on. 2.3 the concept and theory of institutional there is a belief that institutionality can be a source of efficiency in the economic progress that most economists, even the most liberal, have accepted. it is just that until now there is still no clarity about the meaning and definition of the institutional. at least, although at the same level of substance many economists define institutions with diverse perspectives (yustika, 2006). north (1994) cited in yustika (2006) defines institutions as rules that limit human devised behavior to build structures of political, economic, and social interactions. in this context, institutions have three components, namely formal institutions, informal institutions, and enforcement mechanisms. 3. methodology this research was conducted in south sulawesi in gowa regency. the choice of location is based on the consideration that poverty research at the site can provide sufficient information because the chosen location has a sparse (population) number of people can also represent other areas. an interview and observation were done to 20 people from thepoor community, government, community leaders, and practitioners in gowa regency. descriptive and reflective sections were used to analyze the data and examining the poverty alleviation model through the empowerment of socio-economic institutions in south sulawesi in gowa regency. the process of data analysis is done qualitatively with open interviews, qualitative approaches that emphasize interpretive paradigm, to understand the meaning behind the individual's awareness of research subjects. 4. result and discussion 4.1 gowa regency poverty mapping gowa regency as a district very close to the city of makassar, with community activities focusing on agriculture in general so that the condition of society only rely on income in the agricultural sector. it is known that people living from agricultural livelihoods face low-income issues compared to industry and services sectors. based on survey data of region potential by regency and city in south sulawesi year 2014, it is known that gowa regency has poor society as many as 60.000 people or 8.73 percent of total population that exists. in general, the poor community in gowa regency can be classified into two traits of poverty: a. absolute poverty, where the income level of the poor is below the poverty line, where incomes are not enough to meet the minimum essential needs of everyday life. review of economics and development studies vol. 4, no 1, june 2018 26 b. cultural poverty, where the poor are due to cultural influences, they accept their situation, they do not want to try to improve the level of life and accept the situation as it is. they are caught in a cycle of poverty which is naturally without them knowing it. based on data from bps year 2013, it can be explained that the income of farmers on average per year for rice farmers only rp 2.851.000, -, for palawijafarmers rp 2.612.000, -, horticultural farmers rp 1.773.000, -, plantation crops rp 729.000, livestock business rp 612.370. this figure can be understood how the low income of people working in agriculture sector earns below the poverty lineis based on the assumption that someone who earns rp 300.000, per month is considered not poor.then the highest farmer income is rice farming of rp 2.851.000, if divided by 12 months it will get the number rp 237.583 per month. 4.2 reviewing empowerment strategies appropriate to local communities poverty is one of the problems that must be considered in development because one measure of development success is to reduce poverty. therefore now there has been a shift in the meaning of development from an orientation that prioritizes the rate of growth towards equitable development. according to thetraditional view, development is always identified with increasing per capita income by economic growth strategy (trickle down effect strategy). with a high growth rate, per capita income will rise so that unemployment, poverty, and inequality in income distribution can be solved. however, the fact is that the increasing rate of economic growth is accompanied by increasing unemployment, poverty and the increasingly uneven distribution of income. in connection with that, new ideas emerged to look at the concept of development. economic development should not only rely on an increase in national income but also need to pay attention also to poverty and income distribution. the poverty alleviation program undertaken by the government has been considered less emphasizing the empowerment aspect, more like santaclaus so that its impacts make people spoiled, do not want to work hard even according to gumilar (2007) the provision of various direct financial assistance impacts to perpetuate poverty. it should be realized that the problem of poverty is not only an economic problem but rather a complex problem, multidimensional so that the response requires an approach or strategy from various aspects, both economic, political and socio-cultural aspects. program poverty alleviation is like santaclaus such as cash transfer programs (blt) although based on good intentions, but in fact not able to encourage the poor to become an independent citizen. therefore, poverty alleviation programs that need to be more emphasized empowerment aspects, among others need to be equipped with entrepreneurship education, to change the attitude of mental dependence and develop awork ethic, so that it can grow self-reliance.in this way, it is expected to generate awareness of the poor to engage in productive activities resulting in increased incomes and reducing poverty. on the other hand, efforts to alleviate poverty should not only be the responsibility of the government but a shared responsibility of both government and society. to overcome poverty, the most critical efforts in alleviating poverty should be madeby the community itself, especially at the village level.the community itself is one type of local institutions need to be improved its role to come forward in poverty alleviation programs in their respective regions. 4.3 approach and theory of poverty a. poverty approach there are several approaches to understanding poverty. according toarmawan (http: //indrasetiawanusd.wordpress.com/2006/12/02/) in understanding poverty can be done with five approaches, as follows : review of economics and development studies vol. 4, no 1, june 2018 27 1. the income approach: where a person is said to be poor if his income is below a reasonable minimum level. 2. basics needs approach, where one is said to be poor if they are not able to meet basic needs such as; food, clothing, shelter, primary school and so on. 3. the accessibility approach, where a person is weak because of lack of access to productive assets, social and physical infrastructure, information, markets, and technology. 4. human capability approach, where someone is said to be poor if the relevant does not have the ability that can function at a minimum level. 5. inequality approach, in which a person is said to be poor if the income is to the community in his community. this approach is a relative poverty approach. from these figures, the stronger is that poverty is not just a matter of income or a small economic aspect, but a multidimensional problem.poverty not only talks about low incomes but also concerns about inadequate housing, limited access to productive assets, low human development and so on. b. the theory of poverty poverty is a classic problem that has existed since time immemorial and will likely remain an actual problem today.therefore, although the poverty alleviation program has done, poverty still exists. according to suharto in understanding poverty, there are two paradigms or grand theory, namely the neoliberal and social democratic paradigms. neo-liberal supporters argue that poverty is an individual issue caused by the weakness of the individual's weaknesses and choices. poverty will be lost if market forces are expanded to the most significantextent, and economic growth is driven to the highest possible level.therefore, poverty reduction strategies must be 'residual,' temporary, and involving only families, self-help groups or religious institutions.meanwhile, the state only acts as a night watchman and can only intervene if the institutions are not able to carry out their duties. neo-liberal theory believes that thanks to the superiority of market mechanisms and economic growth naturally will be able to overcome poverty and social injustice. social democratic theory argues that poverty not an individual issue, but a structural problem. poverty is caused by injustice and inequality in society due to the clogging of certain groups' access to various community resources. social-democrat supporters argue that equality is an essential prerequisite for achieving independence of freedom.the realization of freedom can only be achieved if everyone has or can reach resources, such as education and good health and adequate income.the state has an essential role in ensuring that everyone can participate in activities in the community that enable them to make choices in fulfilling his or her needs. c. indicators of poverty in determining poverty, there are several criteria for measuring poverty. tambunan states that the magnitude of poverty can be measured with or without reference to the poverty line.the concept that refers to the poverty line is called absolute poverty, while the concept of measurement not based on the poverty line is called relative poverty.relative poverty is a measure of the gap in income distribution, while absolute poverty is the degree of poverty below the poverty line, where minimum needs for survival not be met. the existence of various criteria of poverty causes the difference of data about poverty. poverty criteria are as follows: 1. world bank criteria the world bank uses the basis of per capita income in dollar-denominated standards. in 1990 the world bank established a poverty line of $ 1 per capita per day and in 2000, and now the world bank sets a poverty line of $ 2 per capita per day. 2. central statistics bureau criteria review of economics and development studies vol. 4, no 1, june 2018 28 the criteria used by the central bureau of statistics (bps) to determine the poverty line is the minimum expenditure required to meet the needs of daily living. the minimum spending on daily living is measured by food expenditure equivalent to 2100 calories plus expenditure for non-food items that include clothing, housing and various goods and services (khomsan, 2007). 1. criteria according to sayogya sayogya uses the equivalent kilogram of rice to determine the criteria for poverty line boundaries. based on that, sayogya grouped the community into four groups, as follows: 1. very poor under 240 kg equivalent of rice for rural areas, below 360 kg equivalent of rice for urban. 2. poor equivalent 240 320 kg of rice for rural and equivalent 320 480 kg of rice for urban areas. 3. almost poor equivalent 320 480 kg of rice for rural and equivalent 480 720 kg of rice for urban areas. 4. quite equals more than 480 kg of rice for rural equals more than 720 kg of rice for urban areas. d. national program for community empowerment (pnpm) independent poverty is a complex issue so that its mitigation requires the participation of various parties together and coordinated.poverty reduction efforts need to involve caring groups, volunteers, businesses and local governments.to improve the effectiveness of poverty alleviation starting in 2007 the government launched a popular national community empowerment program called pnpm independent. based on pnpm independent general guidelines, pnpm independent is a national program in the form of a policy framework as the basis and reference for the implementation of community-based poverty reduction programs.pnpm independents implemented through harmonization and development of system and program mechanisms and procedures, provision of assistance, and stimulant funding to encourage community initiatives and innovation in poverty reduction efforts in a sustainable way. pnpm mandiri as the development of the sub-district development program (kdp) and the urban poverty program (p2kp) and the acceleration of development of disadvantaged and special areas (p2dtk) for the development of disadvantaged areas, post-disaster, and conflict. empowerment-based poverty reduction in pnpm mandiri is strengthened by various community empowerment programs implemented by various departments/sectors and local governments. e. learning process as a strategy empowerment of poor people in poverty alleviation program is one of the realizations of empowerment process in poverty eradication program given in pnpm mandiri. the poor people in the rural area given the learning process through learning activities, training, and assistance by the village facilitators to increase awareness, understanding, and participation of citizens, to foster an attitude of community independence in overcoming the problem including the desired development.learning activities in the context of empowering the poor are done through (1) climate creation, (2) potential strengthening and (3) protection, with the following realization. a. creation of a climate that enables the development of universal values of humanity. for this purpose, socialization of universal human values, societal principles, and sustainable development are carried out.universal values of humanity in the form of togetherness, honesty, volunteerism, justice, equality, and unity in diversity, during the social principles of cooperation, democracy, transparency, and accountability.the socialization of these values and principles is considerednecessary as globalization fosters the development of different values and cultures that glorify the spirit and soul of individualism destroyingexcellent values and cultures which are the richness and superiority of the indonesian nation. review of economics and development studies vol. 4, no 1, june 2018 29 b. institutional strengthening, which is carried out through the process of forming local institutional learning in the form of self-helping community body (bkm) and non-governmental groups (ksm) are entrenched, transparent and accountable. rooted in the formation of institutions conducted with the bottom of the community base ranging from neighborhood, hamlet and the village / urban village level. c. strengthening the potential and power, in the form of providing financial aid, human resource development, infrastructure development which is incorporated in the learning of development of tridaya, which is economical, social and environmental development. this potential strengthening is intended as a stimulant as a means to mobilize and increase citizen participation. tridaya development is one of the elaborations of the program of thedevelopment program in pjm pronangkisby the priority needs. development of economic sector in the form of revolving capital loan which is intended for poor people who have abusiness registered in self-mapping (ps) and joined in selfhelp groups (ksm). 5. conclusion based on the survey results, observations and interviews on the subject in this study, it can be concluded several things, as follows: (1)that poverty experienced by the people of gowa regency is a cultural and structural poverty, so that people naturally experience poverty without realizing it as a problem in their lives living as they are with thenon-poor community.poverty is seen as something destiny and need not be too much of a problem, but they live their lives, as they are; (2)to empower the poor community, it is necessary to select the right strategy for the needs of the community in moving the local wisdom of the community to be able to help them out of the hardships of life; (3)an ideal empowerment strategy is strategy with the model of learning in addressing the problems faced in the life of the community. learning can change the people's mindset from laziness to being diligent from helpless be to empowered. references anantonya, s. 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(2005). membangunmasyarakatmemberdayakanrakyat. “kajianstrategi pembangunan kesejahteraan sosial dan pekerja sosial. bandung:penerbitaditama. sumodinigrat.(2002). membangun ketahanan ekonomi indonesia melalui pemberdayaan ekonomi rakyat.yogyakarta: penerbit universitassarjanawiyatatamansisw. review of economics and development studies, vol. 7 (2) 2021, 205-213 205 do human resources run economic growth? empirical evidence from pakistan bilal alam a , muhammad niamat ullah b a department of economics, institute of social sciences,gomal university dera ismail khan, pakistan email: bilal.alam868@gmail.com b department of economics, institute of social sciences, gomal university dera ismail khan, pakistan email: nematbabar@gu.edu.pk article details abstract history: accepted 30 april 2021 available online june 2021 this study analyzes the role of human capital in economic growth using data from 1981 to 2017. the data were taken from the world bank (wdi) and the economic survey of pakistan (various issues). it was scrutinized for stationarity of variables through adf and an appropriate time series econometric technique of ardl is applied for empirical analysis. the results suggest that both proxies of human capital, education, and health have positive impacts on the economic development of pakistan. the study findings also suggest that government machinery may divert enough resources for the improvement of education and health services to accumulate human capital for achieving the desired goal of higher growth and development. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: education index; health index; human capital jel classification: p36, i18, j24 doi: 10.47067/reads.v7i2.351 corresponding author’s email address: bilal.alam868@gmail.com 1. introduction human capital (hc) is a wider concept (goode 1959, mincer 1958, becker 1961 and schultz 1961) which has all the indispensable ingredients of society, culture, politics, and economics (harbison and myers, 1964). for economists, it is an important determinant of growth. the various theoretical discussion has been made on the possible role of human capital in economic growth e.g. growth theories human capital. two main theories highlighted the role of human capital in economic growth i.e. exogenous theory of solow (1956) and the endogenous theory of romer (1989, 1990, & 1994) and lucas (1988). in exogenous growth theory, technology is taken as an exogenous factor and the role of labor and capital is defined in this framework while endogenous theories of growth postulated that human and physical capitals are the prime factors of growth. various researchers confirm the role of human capital in the development and growth of a country (sequeira 2007; wilson & briscoe 2004; abbas 2000). review of economics and development studies, vol. 7 (2) 2021, 205-213 206 most of the empirical studies used education and health as a proxy of human capital in their studies and claimed that it is the real proxy that captures the true picture of human capital. both developed and developing countries spend a handsome amount of their budget on health and education with a belief that good health and a well-educated labor force are more productive than ill-health and less educated ones. for developing countries, it is a bit difficult to cope with the challenges of education and health for all slogans. it is observed that in less developed nations wealthier people enjoy good health and education facilities compared to poor masses of the country that’s why both the drop out and mortality rates are higher than the developed world e.g. north american, european and japanese children have the capability of getting 12 years of education (on average) as compared to the african or south asian countries who spend less than 4 years in school (undp 1998). since the inception of pakistan, the government paved great attention to developing human capital. zulfiqar ali bhutto government put extra efforts to enhance education through nationalization policy along with improving the manpower in pakistan by sending it to develop world specifically golf countries. in the current scenario, pakistan ranked 164 th (in a total of 195 countries) in respect of investment in health and education, the two very important determinants of human capital. the position of pakistan was improved from 166 to 164 from 1990 to 2016. these statistics suggest that we are very lag behind the developed world as far as human capital development is concerned. to achieve higher economic benefits we need to develop our human capital and this study is a timely struggle to evaluate the role of human capital in the economic development of pakistan. the rest of the paper is organized as follows; after the brief introduction, there is a discussion on relevant literature which is followed by data and methods. results and discussion are carried after a methodology. the conclusion is presented in the last section of this study. 2. literature review although there is a huge discussion on the role of human capital in economic growth but to make the discussion easy and to come out with some conclusion, the current study emphasized the most relevant studies. ali et al (2016) examined the role of human capital in bangladesh's economy for the sample period from 1981 to 2014. by applying johansen cointegration they found that the accumulation of human capital has a significant and positive effect on bangladesh's economy. khan et al. (2016) analyzed the selected south asian countries i.e. srilanka, pakistan, bangladesh, and india. in the time frame of 1971 to 2013, they found that human capital (which was proxy by education and health) boost the growth of these sample countries. guptha et al (2017) also analyzed the same hypothesis for the indian economy taking 1991 to 2105 as a sample period of the study. study results specify that both human capital and technology have a positive and significant impact on india's economic growth. hassan (2017) examined male and female health capital's effect on economic growth. study findings showed that in the long run, both variables have a significant and positive effect on the nation’s growth on the other hand both the variables have a negative and insignificant impact on the growth process. hakooma and seshamani (2017) investigated the underlying hypothesis for the zambian economy. they found that there are long-run influence of human capital on the economic development of zambia. review of economics and development studies, vol. 7 (2) 2021, 205-213 207 osoba and tella (2017) examined interactive effect between economic development and human capital accumulation in nigeria. they have taken education and health spending variables as independent variables whilst gdp has taken as a dependent variable. to examine the data fully modified ordinary least square has been applied to calculate the findings. study results specify that on both sides of dependent and independent the variables have a positive and significant relationship and also indicate interactive effect between education and health variables. ogundari and awokuse (2018) suggested that health and education have been normally applied to estimate human capital and similarly vast literature has been estimated the relationship between human capital and the growth process. thus both education and health capital are being considered the major elements for the formation of human capital and it is the human capital that contributes very much to enhance the economic growth of any country. khan and chaudhry (2019) estimated that the formation of human capital plays a critical role in enhancing economic growth and create employment for individuals in any nation. a fundamental objective of the literature is to calculate the impact of human capital on economic growth and employment in developing countries. for this purpose life expectancy and education are taken as proxies for human capital by utilizing panel data ranging from 1996 to 2018. results of this analysis found out that life expectancy and education have a positive and significant effect on real gdp and employment in developing countries. maku et al (2019) checked the impact of human capital accumulation on nigerian economy’s using ardl to estimate the short-run and long-run impact of hc on the selected country's economic growth. this analysis found that in the short run human capital and economic growth have a negative and insignificant relationship while in the long run it is found the presence of a significant and positive relationship between the two in the case of nigeria. it is concluded from the mentioned literature that health and education are the major elements for improving the individual’s life. for any technological development, education performs a critical role it is experienced that those countries have made progress in technology that could be able to improve their education. similarly, technological development makes capable the labor force to raise their productivity level and it raises their remuneration. higher-income individuals make them capable to improve their health status. it is a natural fact that healthy individuals are more efficient and active as compare to under nourish they proved themselves very productive for their country's economic development. the main aim of this analysis is to check the impact of human capital in terms of male education and male health on the economic performance of pakistan's economy using the time series data from 1981 to 2017. 3. materials and methods 3.1. model specification previous empirical literature used various models to analyze the role of human capital in economic growth. this study followed knowles and owen (1995) who augmented the mankiew et al. (1992) growth, model. the specific form of the model is; review of economics and development studies, vol. 7 (2) 2021, 205-213 208 here in this model, growth is represented by gross domestic product, medu is used for male education which is one of the proxies of human capital, mlf is male labor force, fcf is fixed capital formation and mle is male life expectancy. the specific econometric form of the model is as following; lngdpt = α + β1tmedut + β3mlft + β2fcft + β4mlet + ɛt--------------3.2 here ε α and β are the error term, constant term and slope coefficient respectively and “t” is time subscript. 3.2 data sources 3.2.1. data secondary data for the period of 1981 to 2017 are collected from world development indicators and different issues of pakistan economic surveys. where gross domestic product (gdp) is employed to calculate economic growth. earlier empirical literature used the same proxy for economic growth (i.e. khan 2016; chaudhry 2009). male education is calculated by using the education enrollment index. its calculation is based on the various stages of schooling levels. the level of education as a proxy of human capital was also used by previous literature (e.g. barro & lee; 2000). physical capital is a proxy by fcf which is also used by ali et al (2012). male labor force participation is another important determinant of human capital which one of the most productive means especially in developing nations. following knowles and owen (1995) this study used the male life expectancy index as a proxy of human capital. literature supports the idea that healthy individuals have a positive and significant influence on any economic growth as healthy people having higher prospect to acquire higher education, training & skills which in turn make them capable to work for a longer time to increase their productivity. 3.2.2 estimation strategy this study used the ardl approach for model estimation developed by pesaran and shin (1995; 1998 and 2001) this approach is completed in three different stages where at stage one it is attempted to find out the cointegration in the model, while in the second and third phase (once the cointegration established) long and short-run elasticities are calculated. short run deviations were estimated through error correction mechanism (ecm) suggested by sargan (1964). some diagnostic tests were also employed to find the validity of the model. the coefficient stability was tested through cusum and cusumq. 4. results and discussion 4.1. unit root analysis the stationarity of data is tested through the application of the adf test. although testing data for stationarity is not the pre-condition of ardl but still, it is believed that time-series data most of the time has time trends and which may cause spuriousness in results if not handled properly (gujrati; 2003) therefore this study tested the data for stationarity to avoid the misleading conclusion. results of stationarity analysis are given in table 4.1. table: 4.1 unit root test variable level 1 st difference decision c t + c c t+c lngdp -2.25(0.191) -2.67(0.253) -3.46(0.015) -3.50(0.054) i(1) medu 0.11(0.962) -2.71(0.237) -5.63(0.000) -5.58(0.000) i(1) mlf -5.86(0.000) -6.07(0.000) i(0) fcf -4.37(0.001) -4.34(0.007) i(0) lem -1.82(0.723) -1.87(0.648) -5.84(0.000) -5.95(0.000) i(1) review of economics and development studies, vol. 7 (2) 2021, 205-213 209 results of stationarity analysis suggested that variables like male labor force and fixed capital formation are stationary at a level while others at first difference. having a mixed order of integration leads us to apply the ardl approach discussed above. 4.2. long run cointegration the result of long-run cointegration is made based on wald f statistics. is suggested by pesaran and shin (1995, 1998, 2001) that for the presence of long-run cointegration the calculated wald f value has to be greater than the upper boundaries of tabulated wald f values at 5% level. results are displayed in table 4.2 which suggested that there is long-run cointegration in the model as the calculated value (6.537) is far upper than the upper boundaries of tabulated values (4.544) at 5% level. table 4.2: the bound test for cointegration specification lower bound upper bound f-statistic decision lngdp/medu, fcf, mlf, lem 3.202 4.544 6.537(.031) integrated 4.3. long run estimates here in this model, it is confirmed the presence of long run cointegration and we proceed towards estimating the lr calculations. in table 4.3 indicate that all the chosen variables' coefficients are positive and significant. in our calculation, it is found that an increase of one percent in the life expectancy of the male population leads to a seventeen percent increase in economic growth. the outcomes bear with the suggestion of knowles and owen (1995) and barro & martin (1995) having discovered a viable and positive relationship between male life expectancy and income level of any nation. the findings of our study imply that healthy individual’s contribution to economic productivity is higher than unhealthy individuals which leads to raising economic growth. similarly, results also show that contribution of male education to economic growth is positive and significant. study outcomes suggest that a 1% increase in male education raises economic growth by fifteen percent and these results are consistent with well-known barro & lee (1994) & barro & martin (1995). the reason behind education's positive impact on the economy is that educations generate a skilled and trained labor force and this type of labor force has a much higher productivity level as compared to un-skill and untrained individuals. our model findings come to this conclusion that by raising the training and skill of the individuals the output per worker is rising and in turn, it leads to higher economic growth. it is normally believed that the formation of human capital perform a crucial role in shaping a country's economic growth. so it is concluded from this discussion through education and quality health facilities human capital of any nation may improve. in our model, fixed capital formation and labor force participation are controlled variables that indicate positive and significant association with growth rate. the results displayed in table 4.2 shows that every 1pc increase in fcf enhances gdp by 16 percent. khan (2016) & lucas (1988) also found similar results and argued that if sufficient resources are redirected for improvement of human capital resultantly fixed capital would be utilized efficiently. it is the human capital that creates trained and skilled labor force and fcf efficient utilization required skill and train labor force. further, the results also revealed that a 1pc increase in mlf leads to a 10pc rise in gdp which supports the idea of khan (2016). in pakistan male population having dominancy over the female population and due to this reason the greater part of the employed labor force compose of on male labor force and their review of economics and development studies, vol. 7 (2) 2021, 205-213 210 contribution to economic growth is significant. since workers work and earn income against providing their services by this way they save a part of their income for further investment to raise the productivity level of a nation. table.4.3 long run coefficients regressor coefficient stand. errors t-ratio prob lem .1760 .0742 2.368 [0.054] mlf .1023 .0436 2.346 [.015] medu .1586 .0628 2.525 [.050] fcf .1626 .0798 2.037 [.046] a 10.5506 .054801 192.5261 [.000] t .010956 .0065252 1.6790 [.104] r-squared .92 r-bar-squared .88 f-stat. 54.8[.000] dw-statistic 1.9459 4.4. short run dynamics short-run dynamics are not very much different than long-run elasticities. error correction mechanism (ecm) suggests that any disequilibrium is adjusted with a reasonable speed of adjustment (41%). similarly, the values of r square and adjusted r square show that variations in regress and are well explained by the regressors. table.4.4 short run coefficients regressor coefficient stand. errors t-ratio prob dlem .0740 .0499 1.478 [.153] dmlf .0886 .0396 2.2373 [.081] dmedu .053983 .023830 2.264 [.031] dfcf .0043165 .0013888 3.1081 [.004] da 4.4264 1.3037 3.3951 [.002] t .0045963 .0022486 2.0440 [.050] ecm(-1) -.41954 .12361 -3.3940 [.002] 4.5. diagnostic tests the outcomes of the diagnostic test are shown in table 4.5 which suggested that the model is free of heteroskedasticity and autocorrelation. similarly, the table also confirmed that error terms are normality distributed and the model is functionally well structured. table 4.5: diagnostic tests test statistics lm version serial correlation 1.009 [.315] functional form .1346 [.714] normality 2.113 [.348] heteroscedasticity .01606 [.899] review of economics and development studies, vol. 7 (2) 2021, 205-213 211 4.6: stability test coefficient stability is confirmed through cusum and cusumq. the displayed figures suggested that 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(1956). a contribution to the theory of economic growth. the quarterly journal of economics, 70(1), 65-94. review of economics and development studies, vol. 7 (2) 2021, 267-276 267 revealed comparative advantages and exports competitiveness of asean-5 countries in the global market muhammad shahid maqbool a , furrukh bashir b , hafeez-ur-rehman c , rashid ahmad d a department of economics, government graduate college gojra, pakistan email: shahidmakbool@gmail.com b assistant professor, school of economics, bahauddin zakariya university, multan, pakistan email: furrukh@bzu.edu.pk c professor/ chairman, department of economics, university of management and technology, lahore, pakistan email: hafeez.rehman@umt.edu.pk d assistant professor, school of economics, bahauddin zakariya university, multan, pakistan email: rashid.ahmad@bzu.edu.pk article details abstract history: accepted 28 may 2021 available online june 2021 this study aims at measuring the comparative advantage and competitiveness of the asean-5 (malaysia, indonesia, philippines, singapore and thailand) economies in the world market. the current study employed four indices of revealed comparative advantage namely revealed comparative advantage index (rca), lnrca, vollrath index (rca#) and revealed symmetric comparative advantage index (rsca). the data for the analysis has been taken from international trade center un-comtrade statistics for the exports of electrical machinery for these selected economies from 2003-2020. the findings of the analysis portray that malaysia, philippines, singapore and thailand had a comparative and competitive advantage, while indonesia had a comparative and competitive disadvantage in the electrical machinery in the global economy. this study will be helpful for the policy makers to boost human capital formation and to increase technology transfer and innovation to enhance the competitiveness and comparative advantage. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: comparative advantage, competitiveness, asean, electrical machinery jel classification: n10, l94 doi: 10.47067/reads.v7i2.360 corresponding author’s email address: furrukh@bzu.edu.pk 1. introduction exports are considered the engine of economic growth that is indispensable for the prosperity and welfare of the nation. an economy can win friends through trade relations among different economies in the world and ensure the optimal allocation of the available resources in the economy. following the concept of comparative advantage depending on their factor endowments, each economy is likely exporting those products which can be produced at relatively low cost. the asean-5 ( review of economics and development studies, vol. 7 (2) 2021, 267-276 268 malaysia, indonesia, singapore, philippines and thailand) exports have been rapidly growing over the last few decades. a large share of high-technology products in asean-5 exports is also an indication that t fear of terms of trade deterioration is not warranted for the asean-5 countries, as their exports are of high quality and consequently of higher price (ghani and sofyan, 2014). electrical and electronic machinery and appliances are the major component of manufactured exports accounting about half of the exports in malaysia. table 1 export growth product group 85 of asean-5 economies in the world market during 20032020 years malaysia indonesia philippines singapore thailand 2004 11.672 7.383 10.442 28.236 17.993 2005 9.0549 11.5 -0.676 11.773 2.2067 2006 3.7199 -0.51 10.029 21.093 12.492 2007 3.1989 4.18 -0.163 3.8453 10.942 2008 -1.325 8.816 -6.14 0.1198 -0.192 2009 -11.23 -1.42 -25.24 -18.92 -13.09 2010 23.431 27.31 -8.677 34.292 29.328 2011 9.9971 7.444 -16.39 0.8193 5.2741 2012 -3.315 -3.41 72.43 -1.35 -4.907 2013 2.4126 -3.03 5.5838 5.0018 1.9197 2014 8.1936 -6.64 6.9884 0.7762 4.0742 2015 -8.947 -12.1 12.332 -5.335 -4.453 2016 -2.386 -4.84 -2.882 -2.85 1.1539 2017 17.618 3.909 12.423 8.0301 14.519 2018 20.951 4.575 15.92 3.8862 2.941 2019 -1.371 -3.54 5.5373 -6.361 -3.271 2020 5.4153 8.121 -8.488 9.3566 0.618 sources; author’s calculations by using itc data table 1 highlights the export growth of asean-5 countries of the product group 85 in the world market. a positive and negative trend of growth of the selected product was seen in the analysis during 2003-2020. theoretically, the concept of competitiveness cannot be separated from international trade theories. according to adam smith (smith, 1776), countries trade with each other depends on their absolute advantages—countries produce a product in which they have an absolute advantage and will exchange it for commodities in which they do not possess such advantage. in other words, countries export goods for which they use fewer inputs in production, and import goods that others can produce using fewer inputs, reflecting absolute differences in labor productivity. this idea was developed by ricardo (ricardo, 1817), arguing that not absolute but comparative advantages are responsible for global trade between nations. in the ricardian model, production technology differences are the basis of ca and therefore production and trade are driven by the most effective use of resources. according to ricardo (ricardo, 1817), the economies should specialize in those commodities where they have a ca in, though technological superiority (high labor productivity) does not guarantee competitiveness. many studies have employed revealed comparative advantage index to evaluate the comparative review of economics and development studies, vol. 7 (2) 2021, 267-276 269 advantage and competitiveness of the exports of different sectors of the world. balassa and marcus (1989) also utilized rca index to examine the competitiveness of usa and japan during 1967-1983. amir (2000) measured the export competitiveness between malaysia and other asean economies by using the rca index during 1994-1998. the results of this study illustrate that malaysia reassessed the determinants which influenced its export competitiveness. the export competitiveness of china and asean-5 countries in the usa and japan was examined by aziz and bakar (2005) by employing conventional shift-share analysis during 1992-2003. the findings of the study indicated that china had strong positive net shifts in textile and clothing products in both markets. the revealed comparative advantage was measured by abidin and loke (2008) for malaysian manufacturing exports from 19962006, and the study concluded that malaysia had a comparative advantage in electrical and electronics exports. the export competitiveness of electrical and electronic products of malaysia was examined by yaacob and muhammad (2008) by employing rca index and cmsa. the study measured the export competitiveness between malaysia and other concerned competitor countries. the findings of the study illustrate that malaysia had a strong ca in the selected commodities in the us market. the findings of cmsa illustrate that in the first sub-period, malaysia was competitive in the selected four markets. however, in the second and third sub-period, cmsa results highlight that these selected exports increased due to structural effect. yahya et al., (2011) measured the export competitiveness of malaysian products in the arab gulf market by employing rca index during 1998-2007. the tea competitiveness was measured by oktaviana et al., (2016) by employing constant market share analysis in asean economies during 20112014. the findings of the analysis illustrate that the major weakness of tea exports in singapore, thailand, malaysia and vietnam was the effect of market distribution. the determinants of export competitiveness were examined by amanbayev and masih (2017) by using time series data. the study concluded that inflation, interest rate, money supply and exchange rate were the major factors of export competitiveness of malaysia. yakob and zam (2017) investigated the comparative advantage of the manufacturing export sector of malaysia by utilizing several indices of rca. this study measured rca indices of 144 industries during the time span from 2010-2015. the findings of the analysis illustrate that high technology products had a high comparative advantage in the world market. shuquan (2019) used shift share analysis technique to compute net gain and losses for the asean-5 and china from 1993 to 2007. during the first period (1993-1997), all selected five economies observed positive export growth. however, china and philippines were champions in terms of net shift with positive value. during the second period (1998-2002), all asean countries except china showed the negative net shift value, and the similar trends for third period (2003-2007) was observed also. the export competitiveness of leather exports of pakistan was measured by maqbool et al., (2019 a, b) by employing cmsa during 2003-2014. the results of the analysis indicate that pakistan was competitive in the leather sector. the competitiveness of top five cotton exporting economies was measured by maqbool et al., (2020) by using rca indices the findings of the study depicts that pakistan, india, china and usa had a comparative advantage , whereas vietnam had a comparative advantage during 20082017 and comparative disadvantage from 2003-2007. maqbool et al., (2020) examined the trade competitiveness of pakistan’s cereal products in the global market by using several indices from 20032018. the results illustrate that pakistan was competitive in the concerned sector during the selected time span. the present study measured comparative advantage and competitiveness of product group 85 (electrical machinery and equipment and parts thereof; television image and sound recorders and reproducers, sound recorders and reproducers, and parts and accessories of such articles) of asean-5 review of economics and development studies, vol. 7 (2) 2021, 267-276 270 economies. there is no valuable study available in the literature that has employed these four indices to measure the competitiveness of product group 85 of the selected economies. this present study will be beneficial and helpful for the policy makers of the economy to formulate their policies to boost economic position of the economy in the world market. 2. methods and material the present study focuses on the analysis of the competitiveness of the product group 85 of asean-5 economies with an objective to measure the comparative advantage of its exports and to point out the position of this sector in the global market. the concept of comparative advantage is set by balassa (1965) and the original model is explained as follows ( balassa, 1965); rca ∑ ⁄ ∑ ⁄ (source: erkan and kazim, 2014) = electrical machinery exports of the economy ∑ = country’s total exports = global electrical machinery exports ∑ =total exports of the world the value of rca index greater than 1 indicates ca, or in the terminology of balassa, a revealed comparative advantage (rivlin, 2000). the current study employs logarithms to the rca index and lnrca>0 indicates ca, while lnrca<0 highlights the comparative disadvantage of the economy (faustino, 2008).to contain the problem of skewness, the index of revealed symmetric comparative advantage has been employed. the rsca index is defined as rsca = (source: akhtar et al., 2009 and ignjatijevic et al., 2013) vollrath (1991) commenced the index for comparative advantage, and this index is considered a good measure of measuring competitiveness because this index eliminates the dilemma of doublecounting in global market (gnidchenko and salnikov, 2015). the vollrath index is explained as rca# = { (∑ ) } { (∑ ) *(∑ ∑ ) (∑ )+ (∑ ) } ( source: topcu and sarigul, 2015) where country’s electrical machinery exports ∑ = country’s total exports ∑ = world’s electrical machinery exports ∑ ∑ = world’s total exports review of economics and development studies, vol. 7 (2) 2021, 267-276 271 table 2: rca classifications (source; hinloopen, 2001) 3. results and discussions table 3 (a): various revealed comparative advantage indices related to the electrical machinery exports of asean economies 2003-2020 malaysia philippines indonesia years rca rsca lnrca rca# rca rsca lnrca rca# rca rsca lnrca rca# 2003 2.767 0.469 1.018 3.951 3.725 0.577 1.315 6.633 0.736 -0.152 -0.307 0.705 2004 2.535 0.434 0.93 3.443 3.717 0.576 1.313 6.656 0.667 -0.2 -0.405 0.631 2005 2.518 0.431 0.923 3.383 3.617 0.567 1.286 6.195 0.633 -0.225 -0.457 0.596 2006 2.277 0.39 0.823 2.912 3.426 0.548 1.231 5.623 0.529 -0.308 -0.636 0.49 2007 2.237 0.382 0.805 2.801 3.35 0.54 1.209 5.24 0.508 -0.326 -0.677 0.471 2008 2.125 0.36 0.754 2.553 3.515 0.557 1.257 5.411 0.5 -0.333 -0.692 0.466 2009 2.208 0.377 0.792 2.745 3.107 0.513 1.134 4.573 0.537 -0.301 -0.621 0.5 2010 2.157 0.367 0.769 2.656 2.12 0.359 0.751 2.557 0.506 -0.328 -0.682 0.468 2011 2.299 0.394 0.832 2.833 2.102 0.355 0.743 2.472 0.466 -0.364 -0.764 0.432 2012 2.217 0.378 0.796 2.693 3.346 0.54 1.208 4.907 0.482 -0.35 -0.731 0.448 2013 2.202 0.375 0.789 2.682 3.154 0.519 1.149 4.514 0.473 -0.358 -0.748 0.439 2014 2.252 0.385 0.812 2.79 3.001 0.5 1.099 4.228 0.444 -0.385 -0.812 0.409 2015 2.12 0.359 0.752 2.638 3.152 0.518 1.148 4.908 0.406 -0.423 -0.903 0.367 2016 2.142 0.364 0.762 2.693 3.119 0.514 1.137 4.881 0.393 -0.436 -0.935 0.354 2017 2.192 0.373 0.785 2.79 3.115 0.514 1.136 4.878 0.348 -0.483 -1.055 0.312 2018 2.359 0.405 0.858 3.109 3.422 0.548 1.23 5.779 0.345 -0.487 -1.064 0.309 2019 2.383 0.409 0.869 3.175 3.416 0.547 1.228 5.83 0.372 -0.458 -0.988 0.334 2020 2.295 0.393 0.831 3.12 3.083 0.51 1.126 5.188 0.351 -0.481 -1.048 0.31 sources; author’s calculations by using itc data sr. no classificationso of rca interpretations a 0 < rca ≤ 1 indicates no ca b 1 < rca ≤ 2 shows weak ca c 2 < rca ≤ 4 depicts moderate ca d rca > 4 highlights strong ca review of economics and development studies, vol. 7 (2) 2021, 267-276 272 table 3 (b): various revealed comparative advantage indices related to the electrical machinery exports of asean economies 2003-2020 singapore thailand years rca rsca lnrca rca# rca rsca lnrca rca# 2003 2.771 0.47 1.019 4.024 1.566 0.221 0.449 1.732 2004 2.832 0.478 1.041 4.2 1.526 0.208 0.423 1.677 2005 2.78 0.471 1.022 4.04 1.389 0.163 0.329 1.486 2006 2.806 0.475 1.032 4.13 1.303 0.132 0.265 1.375 2007 2.754 0.467 1.013 3.92 1.282 0.124 0.248 1.344 2008 2.65 0.452 0.975 3.571 1.202 0.092 0.184 1.24 2009 2.504 0.429 0.918 3.361 1.127 0.06 0.12 1.151 2010 2.583 0.442 0.949 3.537 1.14 0.065 0.131 1.166 2011 2.444 0.419 0.894 3.147 1.133 0.062 0.125 1.155 2012 2.414 0.414 0.881 3.088 1.073 0.035 0.07 1.085 2013 2.442 0.419 0.893 3.163 1.069 0.033 0.067 1.081 2014 2.411 0.414 0.88 3.131 1.083 0.04 0.08 1.098 2015 2.428 0.416 0.887 3.283 0.99 -0.01 -0.01 0.988 2016 2.424 0.416 0.885 3.3 0.968 -0.02 -0.03 0.963 2017 2.31 0.396 0.837 3.064 1.002 9e-04 0.002 1.002 2018 2.197 0.374 0.787 2.828 0.984 -0.01 -0.02 0.981 2019 2.141 0.363 0.761 2.729 0.956 -0.02 -0.05 0.948 2020 2.189 0.373 0.784 2.929 0.922 -0.04 -0.08 0.907 sources; author’s calculations by using itc data review of economics and development studies, vol. 7 (2) 2021, 267-276 273 figure 1: revealed comparative advantage index of asean-5 economies from 2003-2020 the aim of the current study is to examine export performance and competitiveness in the electrical machinery exports in the asean-5 economies by employing rca, rsca, lnrca and vollrath index from 2003-2020. figure 1 depicts the trend of rca index of asean-5 countries in the selected export sector during 2003-2020. in table 3 (a,b), the findings of present study illustrate that malaysia review of economics and development studies, vol. 7 (2) 2021, 267-276 274 had a moderate ca in the electrical machinery exports having the values of rca> 1during 2003-2020. the positive trend of lnrca and rsca depicts that malaysia paid much attention on the specialization in the concerned sector and the positive values of these indices indicate comparative advantage. moreover, the competitive advantage was observed by utilizing vollrath index and the results show that malaysia had a competitive advantage during the selected time period (mohammad, 2020). the rca index of philippines highlights that philippines had a moderate comparative advantage from 2003-2020. the positive indices of rsca and lnrca indicate that philippines had ca in the concerned export sector. in addition, the competitive advantage was also seen in this sector during 2003-2020. philippines had a higher rca index among the other selected economies in the global market in electrical machinery exports (aldaba, 2020). similarly, singapore had a comparative and competitive advantage in this product group exports having the rca values greater than 1 from 20032020. the indices of rsca and lnrca also highlights the comparative advantage in singapore during the selected time span (jayawickrama & thangavelu, 2010). in indonesia, the rca index describes that indonesia had a comparative disadvantage in the current export sector from 2003-2020 because the rca index is less than 1. the negative indices of rsca and lnrca highlight that indonesia had a comparative disadvantage in this sector during above mentioned time period. the competitive disadvantage was also seen by vollrath index during 20032020 in the selected product group in the world market (tampubolon, 2020). in thailand, the results of rca, rsca, lnrca and rca# indices depict that thailand had a comparative and competitive advantage in the years from 2003-2014 and in the year 2017, while it had a comparative and competitive disadvantage in the remaining years (apaitan et al., 2020). 4. conclusion this study aims to to measure the comparative advantage and competitiveness in the electric machinery in the selected asean-5 economies by employing a set of revealed comparative advantage indices. the data has been collected from the international trade center (itc) on the exports of electrical machinery of these economies during 2003-2020. the results of the study describe that malaysia, thailand, singapore, philippines had a comparative and competitive advantage in the selected product, whereas indonesia had a comparative and competitive disadvantage. only trade liberalization is not sufficient to enhance the market share of these countries' exports in the global market, some other structural factors such as research and development, productivity and technology are also needed to be addressed. the formation of the productive polices are direly needed to boost human capital formation and to increase technology transfer and innovation so that asean-5 economies can improve their comparative and competitive advantage. references abidin, m. z., & loke, w. h. 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(2017). the comparative advantage of malaysia manufactured exports. saudi journal of business and management studies, 2, 521-531. review of economics and development studies vol. 4, no 1, june 2018 11 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 1, june 2018 journal homepage: www.publishing.globalcsrc.org/reads economic determinants of tax buoyancy in pakistan: an ardl bounds testing approach 1 muhammad ramzan sheikh, 2 muhammad hanif akhtar, 3 muhammad nauman abbasi, 4 fahid subhani 1 associate professor, school of economics, bahauddin zakariya university, multan, pakistan. ramzansheikh@bzu.edu.pk 2 professor, department of commerce, bahauddin zakariya university, multan, pakistan. haneefakhtar@gmail.com 3 associate professor, institute of management sciences, bahauddin zakariya university, multan, pakistan. abbasimna@bzu.edu.pk 4 m.philscholar, ncba&e, lahore, pakistan. fahidsubhani@gmail.com articledetails abstract history revised format: may 2018 available online: june 2018 fiscal policy, being the policy of government expenditures and revenues can play an imperative role in mobilization of resources. tax revenues determine the capability of an economy to finance government spending but tax situation in many developing countries like pakistan is very unfortunate. this study explores the economic determinants of tax buoyancy in pakistan for the period of 1996 to 2016. for this purpose, aggregate and disaggregated analyses of various types of taxes have been conducted using the ardl bounds test technique. the findings of the study demonstrate that various taxes buoyancies have mixed results with various economic factors. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords economic determinants, tax buoyancy, pakistan jel classification h29, h20 corresponding author’s email address: ramzansheikh@bzu.edu.pk recommended citation: sheikh, m.r., akhtar, m.h., abbasi, m.a., subhani, f., (2018). economic determinants of tax buoyancy in pakistan: an ardl bounds testing approach. review of economics and development studies, 4 (1) 11-21 doi: 10.26710/reads.v4i1.276 1. introduction since last many decades, the fiscal deficit stands as one of the imperative issues across many developing countries due to the imbalance between expenditures and revenues (ansari, 1982). one can easily understand the escalating demand for public funds to finance the public expenditures in developing countries to achieve the goals of socio-economic development. for this purpose, an effective tax policy needs to be amplified to become a significant tool for the better mobilization of resources (wawire, 2011). thus, a government can play a pivot role in stabilization of economy by using different tools of fiscal policy. tax is a major source of revenue for any government for administrating its functions. collection of revenues from different tax sources may support to enhance the speed of development for any country (haque, 2009). in any country, if tax administration is not performing in an efficient way, it shows that there is some ambiguity in the fiscal system. http://www.publishing.globalcsrc.org/reads mailto:ramzansheikh@bzu.edu.pk mailto:haneefakhtar@gmail.com mailto:abbasimna@bzu.edu.pk mailto:fahidsubhani@gmail.com mailto:ramzansheikh@bzu.edu.pk 12 developing countries may increase their economic growth through proper mobilization of their domestic resources which can be attained by the generation of tax revenues (wilford and wilford, 1978). unlike most of the developing countries, pakistan is blessed with natural, physical and human resources but she is facing the problem of fiscal deficit due to the inappropriate utilization of the resources. historically, pakistan is facing the music regarding socio-economic and political spheres. the situation of fiscal deficit has remained flimsy and it is recorded at 3.9 percent of gdp in the current year. there are many reasons for low tax collection including tax evasion, complicated procedure, and narrow tax base. since last three years, the trends of fiscal indicators have been observed ascendant in pakistan. overall public revenues and particularly tax to gdp ratio have mounted from 9.8 percent to 12.6 percent and 13.3 percent to 15.3 percent respectively while public spending to gdp ratio has condensed from 21.5 percent to 19.9 percent (gop, 2016). thus, the country is compelled to rely on developed countries for the financial assistance to finance its development projects. thus, in a developing country like pakistan resource mobilization may help to reduce the fiscal deficit and achieve economic development. rest of the paper is organized as: section 2 explains the concept and measurement of tax buoyancy. section 3 discusses the various studies conducted on the subject. section 4 outlines the model, data and methodology. in section 5, the results and discussions have been explained. finally, the conclusion and polices have been offered in section 6. 2. tax buoyancy: concept and measurement tax buoyancy is a measure to determine the tax performance of any country and an important ingredient in the fiscal policy of an economy. the concept of tax buoyancy can be used to calculate the sensitivity, responsiveness, proportionate or percentage change in tax revenues or tax receipts to percentage change in gdp. tax buoyancy is a crude measure and does not differentiate between the discretionary and automatic growth of revenues. the formula of tax buoyancy is given as: percentage change in tax revnue tax buoyancy = 100 percentage change in gdp  a tax will said to be buoyant in which revenues increase by more than one percent for one percent increase in gdp or output or national income. tax buoyancy explains the growth in tax revenues by adopting the discretionary changes (change in tax base) and automatic changes (increase in number of taxpayer by increase in real income or through tax administration work efficiently).during the economic growth process, tax buoyancy reveals the capability of the tax structure to generate the tax revenues. 3. review of assorted literature in this section, we have examined all those empirical studies which are associated with our analysis along with their key results. a number of studies have been conducted to investigate the tax buoyancy across different countries with different results.table 1 shows the summary of the reviewed empirical literature. table 1: assorted studies on tax buoyancy reference(s) time country methodology main results naqvi.a.h (2016) 2004-2014 comparative performance of states of india ordinary least squares (ols) an aggregate analysis has been done in which general category shows that haryana, goa, and rajasthan having the low buoyancy which is less than one. bayu.t (2015) 1974-2010 ethiopia johansson cointegration the findings of the study show that value added in the services sector, budget deficit, and import having positive and significant impact while manufacturing sector has insignificant and official development assistance has negative but significant impact. krushna.a.v (2015) 1950-2010 india log linear regression tax buoyancy is greater than unity. it is very high in 1960s to 1970s and approximately constant in 1980s to 2000s. review of economics and development studies vol. 4, no 1, june 2018 13 bonga et al. (2015) 2000-2013 zimbabwe ordinary least squares (ols) individual tax and excise duty are significant. company tax, carbon tax, vat and custom duty are insignificant impact on gdp. belinga.v et al. (2014) 1965-2012 oecd countries error correction model short run: personal income tax, social security contribution, excise tax and property tax having the buoyancy coefficient less than one while corporate income taxes and goods and services taxes have buoyancy coefficients greater than one. long run: personal income tax, social security contribution, corporate income taxes and goods and services taxes having buoyancy coefficients greater than one. excise tax and property tax having the buoyancy coefficient is less than one. yousaf and haq (2013) 1980-2011 bangladesh johansen cointegration and vector error correction technique elasticity and buoyancy coefficients of total tax revenue, direct taxes, sales tax and value added tax is greater than one. whereas customs duties elasticity and buoyancy coefficient cotton (2012) 1990-2009 trinidad and tobago least squares regression buoyancy coefficients of direct and indirect taxes, income tax , company tax, property tax, excise tax and trade tax are less than one while value added tax buoyancy coefficient is greater than one. shaikh (2012) 1974-2009 pakistan ordinary least squares (ols) method buoyancy estimates are more than unity because of diversification, expansion of tax base and manufacturing sector. structural changes occur in economy as the size of agriculture has shrink in gdp. proportion of direct tax is also increasing in the total taxes. ahmed and mohammed (2010) 1998-2008 25 developing countries pooled least square inverse relationship between grants and tax buoyancy while positive relationship of import, manufacturing, services, monetization and budget deficit with tax buoyancy. begum (2007) 1991-2005 bangladesh ols tax buoyancy ratio is greater than unity for both direct and indirect taxes. rasheed.f (2006) 1980-2004 pakistan cointegration test tax buoyancy of gdp, volume of trade and mo is less than one whereas growth in tax revenue has not significant relationship with investment, credit, inflation and public debt. timsina (2006) 1975-2005 nepal ordinary least squares (ols) import tax (inelastic) positively, income tax (elastic) positively, vat (inelastic) positively, excise tax (inelastic) positively affect the tax revenue. mukarram (2001) 1981-2001 pakistan chain indexing technique elasticity and buoyancy of estimates are higher for direct taxes followed by sales taxes. however, customs and excise duties appear to be relatively rigid, for this the overall tax elasticity is low as well. further, the estimates of buoyancy are higher than their corresponding elasticities for all the taxes. leuthold and n’guessan (1986) 1970-1979 ivory coast ols value added tax, total consumption tax and import tax are buoyant. income tax, profit tax, excise duty, gasoline tax, trade tax and export tax buoyancy coefficient is less than one. source: author’s compilation 4. model, data and methodology 4.1 model specification a number of tax buoyancy models have been proposed with economic variables. the models observe the impact of economic variables further across total tax buoyancy, direct tax buoyancy, indirect tax buoyancy, income tax buoyancy, workers’ welfare tax buoyancy, customs duty tax buoyancy, federal 14 excise duty tax buoyancy and sales tax buoyancy. to investigate the impact of economic variables on tax buoyancy, following econometric models of aggregate taxes and disaggregate taxes have been estimated: a) aggregate models model 1: total tax buoyancy model 1 2 3 4 5 6 7t t t t t t t t t tbt mva ava sva trade oda bd inf                 (1) model 2: direct tax buoyancy model 1 2 3 4 5 6 7t t t t t t t t t tbd mva ava sva trade oda bd inf                 (2) model 3: indirect tax buoyancy model 1 2 3 4 5 6 7t t t t t t t t t tbindt mva ava sva trade oda bd inf                 (3) b) disaggregate models model 4: income tax buoyancy model 1 2 3 4 5 6 7t t t t t t t t t tbit mva ava sva trade oda bd inf                 (4) model 5: workers welfare tax buoyancy model 1 2 3 4 5 6 7t t t t t t t t t tbwwt mva ava sva trade oda bd inf                 (5) model 6: custom duty buoyancy model 1 2 3 4 5 6 7t t t t t t t t t tbcd mva ava sva trade oda bd inf                 (6) model 7: federal excise duty buoyancy model 1 2 3 4 5 6 7t t t t t t t t t tbfed mva ava sva trade oda bd inf                 (7) model 8: sales tax buoyancy model 1 2 3 4 5 6 7t t t t t t t t t tbst mva ava sva trade oda bd inf                 (8) 4.2 description of the variables table 2 shows the description of the variables in detail. table 2: variables with description variable(s) description tbt total tax buoyancy (total tax as percentage of gdp) tbd direct tax buoyancy (direct tax as percentage of gdp) tbindt indirect tax buoyancy (indirect tax as percentage of gdp) tbit income tax buoyancy (income tax as percentage of gdp) tbwwt workers welfare tax buoyancy (workers welfare tax as percentage of gdp) tbcd custom duty tax buoyancy (custom duty as percentage of gdp) tbfed federal excise duty tax buoyancy (federal excise duty as percentage of gdp) tbst sales tax buoyancy (sales tax as percentage of gdp) mva manufacturing value added (percentage of gdp) ava agriculture value added (percentage of gdp) sva services value added (percentage of gdp) trade trade (percentage of gdp) oda net official development assistance received (percentage of gni) bd broader money (percentage of gdp) inf inflation (measured by cpi)  error term review of economics and development studies vol. 4, no 1, june 2018 15 4.2 data and methodology the data for dependent variables have been taken from the website of federal board of revenue of pakistan (fbr) for the period of 1996 to 2008 and for the period of 2009 to 2016from budget briefs by ministry of finance, government of pakistan. the data on independent variables have been extracted from the world development indicators (wdi) for the period of 1996 to 2016. the study has used the ardl methodology for analysis. 5. results and discussions 5.1 unit root analysis table 3 describes unit root test results at level. the results of adf represent that variables have mixed order of integration. table 3: adf test results adf unit root test at level variables intercept lags intercept and trend lags none lags conclusion tbt -1.4464 (0.2020) 0 -1.2993 (0.1180) 1 0.1552 (0.7184) 2 i(1) tbd -2.5475 (0.1216) 1 -3.4326 (0.0783) 1 -0.3354 (0.5508) 0 i(1) tbindt -1.2041 (0.4644) 0 -1.9706 (0.3303) 1 -0.4110 (0.5200) 2 i(1) tbit -1.5865 (0.1028) 0 -1.4355 (0.0779) 1 -0.4157 (0.5198) 0 i(1) tbwwt -1.4129 (0.2336) 0 -1.9231 (0.4565) 3 -1.3309 (0.2633) 4 i(1) tbcd -0.6072 (0.1359) 0 -1.6329 (0.4538) 0 -1.1637 (0.3433) 0 i(1) tbfed -1.7360 (0.3984) 0 -1.6441 (0.4115) 4 -1.3886 (0.1480) 0 i(1) tbst -1.7448 (0.3927) 2 -1.0081 (0.1583) 2 -0.9171 (0.3049) 2 i(1) mva -2.4242 (0.1487) 0 -3.0835 (0.1378) 0 -0.5481 (0.4661) 0 i(1) ava -1.4013 (0.5597) 0 -1.4300 (0.8173) 0 -0.5370 (0.4708) 0 i(1) sva -1.4808 (0.5153) 4 -2.8742 (0.1949) 3 1.4708 (0.9575) 4 i(1) trade -3.1984 (0.0361) 0 -2.9976 (0.1580) 0 -0.8617 (0.3288) 1 i(1) oda -3.1544 (0.0393) 0 -4.3088 (0.0163) 1 -0.7359 (0.3827) 2 i(0) bd -1.6998 (0.4154) 0 -1.5641 (0.7687) 0 -0.6412 (0.4260) 0 i(1) inf -4.4763 (0.0026) 0 -4.3456 (0.0143) 0 -1.0201 (0.2647) 1 i(0) source: authors’ calculations 5.2 bounds analysis table 4 shows the results of wald test of the tax buoyancy models for economic variables. the calculated value of f-statistics in each tax buoyancy model is more than the values of upper bound at 5 percent and 10 percent levels of significance. therefore, a long run relationship exists in all the tax buoyancy models. table 4: the f-test for cointegration at 5% significance level at 10% significance level models f-statistics lower bound upper bound lower bound upper bound model 1 3.9502 1.97 3.18 1.7 2.83 model 2 4.7497 2.32 3.5 2.03 3.13 16 model 3 3.3483 2.32 3.5 2.03 3.13 model 4 13.3016 2.32 3.5 2.03 3.13 model 5 4.2444 2.69 3.83 2.38 3.45 model 6 10.7365 2.32 3.5 2.03 3.13 model 7 9.2554 2.32 3.5 2.03 3.13 model 8 5.0315 2.69 3.83 2.38 3.45 source: authors’ calculations 5.3 long-run estimating results the next step is to conduct the detail investigation of long-run relationships and detect the long-run coefficients of ardl models. table 5 and 6 display the estimated long run results of aggregate models and disaggregate models respectively. firstly, we explain table 5 in which the long-run results of aggregate analysis of overall, direct, and indirect tax buoyancy models have been shown. the dependent variables are overall tax buoyancy, direct tax buoyancy and indirect tax buoyancy in model 1, 2 and 3 respectively. the results of mva indicate that it has a positive and significant impact on overall tax, direct tax, and indirect tax buoyancies. it suggests that when manufacturing sector grows, government revenues from this sector would escalate as in the case of pakistan, the government collects 68% of the tax revenues from this sector (gop, 2016). so, the revenues from the direct taxes and indirect taxes increase the total tax revenues of the government. so, manufacturing sector growth leads to increases in the volume of gdp and tax revenues of the government by the manufacturing sector. thus, the values of the overall tax, direct tax, and indirect tax buoyancies coefficients will increase that might be beneficial for the economy. qazi (2010) exhibited that manufacturing sector is significant and positively related with total tax buoyancy, direct tax buoyancy and indirect tax buoyancy for selected developing countries. so, through the tax revenues of the manufacturing sector, the economy will be more fuelled by this sector. these results are consistent with the studies by mawejje and munyambonera (2016), karagoz (2013) and chaudhry & munir (2010). the variable of agricultural value added (ava) has a positive impact on total tax, direct tax, and indirect tax buoyancies. the positive impact of ava reveals that as agriculture sector grows, revenues of this sector will also grow which may contribute to gdp significantly. thus the government income from the agriculture sector in the form of direct taxes and indirect taxes will increase, leading to an increase in total or overall tax revenues. most of the incomes of agriculture sector are exempt from tax in pakistan. due to the strong political lobbies in developing countries, the agriculture sector is exempted from tax-net (qazi, 2010). so, the agriculture sector is leading to the lesser contribution to the national exchequer. qazi (2010) asserted that agriculture sector is insignificant and positively related to total tax buoyancy, direct tax buoyancy and indirect tax buoyancy for selected developing countries. these results are in line with karagoz (2013), chaudhry and munir (2010) and ghura (1998). table 5: long run estimates of tax buoyancy models (aggregate) variables model 1 model 2 model 3 overall tax buoyancy model dependent variable: tbt ardl (1, 1, 1, 1, 1, 1, 1, 1) direct tax buoyancy model dependent variable: tbd ardl (1, 0, 1, 0, 0, 0, 1, 0) indirect tax buoyancy model dependent variable: tbindt ardl (1, 0, 0, 0, 0, 1, 1, 1) mva 0.0913 (0.0312) 0.5854 (0.0226) 0.6567 (0.0746) ava 0.0529 (0.4928) 0.3888 (0.0256) 0.4022 (0.1312) sva 0.1231 (0.0064) 0.5938 (0.0025) 0.5007 (0.0557) trade 0.1462 (0.0798) 0.0184 (0.6446) 0.2052 (0.0041) review of economics and development studies vol. 4, no 1, june 2018 17 oda -0.1452 (0.5003) -0.0321 (0.7736) -0.5100 (0.0127) bd 0.0035 (0.0930) 0.1396 (0.0002) 0.0222 (0.5088) inf -0.0821 (0.0119) -0.0094 (0.0347) -0.0273 (0.0332) c -----50.2849 (0.0052) -38.7964 (0.1021) source: authors’ calculations services value added (sva) demonstrates a positive impact on overall tax, direct tax and indirect tax buoyancies for pakistan. with the growing services sector in the country, government revenues in the form of direct and indirect taxes will also increase. qazi (2010) has revealed that services sector is significant and positively related to the total, direct and indirect tax buoyancies for selected developing countries. bayu (2015) reported that services sector has a positive impact on total tax buoyancy for ethiopia. so, through the tax revenues of the services sector, the economy will be more stimulated. our results are supported by the studies of samir et al. (2016) and chaudhry &munir (2010). trade openness (trade) reveals that it has a positive impact on the total, direct and indirect tax buoyancies. trade is significant for total tax and indirect tax buoyancies while insignificant for direct tax buoyancy. as this sector grows, the contribution of this sector in the national income may also increase. so, the government income from the international trade in the form of direct taxes and indirect taxes may increase as well. it has been noted that tax on trade is historically an integral source of revenues for the government because it is easy to collect (farhadian-lorie and katz, 1989). so, through the tax revenues of international trade, the economy will be more triggered. the results are matched with the studies of karagoz (2013), chaudhry and munir (2010), gupta (2007) and ghura (1998). net official development assistance (oda) has a negative impact on all tax buoyancies. oda is insignificant for total tax buoyancy and direct tax buoyancy while it is partially significant for indirect tax buoyancy. as official development assistance increases, gdp growth increases but tax revenues will not boost up. in such a situation the government might not adopt the discretionary or the automatic measures for enhancing tax revenues. hence, the buoyancies coefficients of total tax, direct tax, and indirect tax might not be increased. qazi (2010) came up with the findings that official development assistance is negatively related with total tax buoyancy, direct tax buoyancy and indirect tax buoyancy for selected developing countries. as official development assistance of any country increases in the form of foreign aid or external borrowings, the dependence of the government on internal revenue sources will decrease. bayu (2015) discovered that official development assistance has a negative impact on total tax buoyancy for ethiopia. moreover, our results are at par with ayenew (2016), chaudhry and munir (2010) and ghura (1998). now we turn the results of broad money (bd). it explains that broader money has positive impact on total, direct and indirect tax buoyancies. bd is found significant for total tax buoyancy and direct tax buoyancy while insignificant for indirect tax buoyancy. the positive sign on bd reveals that the greater the degree of monetization and financial depth exists in the country, the more will be the economy documented. board money may be a large tax collecting revenue source for pakistan contributing significantly to the gdp. the government may collect the taxes from banking transactions. qazi (2010) found the positive association between the broad money tax buoyancies for selected developing countries. furthermore, the sign of bd is quite similar as in the studies by karagoz (2013) and chaudhry and munir (2010). inflation is a core macroeconomic variable that has a strong bearing on tax revenues. the values on the coefficient of inf depict a negative and significant impact on overall, direct and indirect tax buoyancies. the inverse relationship between inflation and tax buoyancies shows that with an increase in inflation, the 18 purchasing power of people may decrease. according to the musa (2016) total tax revenues may decrease due to the high prices and less utilization of goods and services. therefore, the values of the overall tax, direct tax, and indirect tax buoyancies coefficients will decrease and the government has to hinge on internal or external borrowings to meet the expenditures. the sign of this variable is justified through studies by wijayanti and firmansyah (2017), mawejje and munyambonera (2016), muibi and sinbo (2013) and ghura (1998). table 6: long run estimates of tax buoyancy models (disaggregate) variables model 4 model 5 model 6 model 7 model 8 income tax buoyancy model dependent variable: tbit ardl (2, 1, 1, 1, 1, 1, 1, 1) workers welfare tax buoyancy model dependent variable: tbwwt ardl(1, 1, 1, 1, 0, 0, 0, 1) custom duty buoyancy model dependent variable: tbcd ardl(1, 0, 1, 0, 1, 1, 0, 1) federal excise duty buoyancy model dependent variable: tbfed ardl(2, 1, 1, 1, 1, 1, 1, 1) sales tax buoyancy model dependent variable: tbst ardl(1, 0, 1, 1, 1, 0, 1, 0) mva 0.5889 (0.0431) 16.2426 (0.0116) 2.5308 (0.0421) 0.3166 (0.0702) 1.9007 (0.1006) ava 0.3978 (0.0416) 10.3420 (0.0106) 1.7799 (0.0541) 0.0342 (0.0361) 1.8517 (0.0446) sva 0.5748 (0.0280) 10.1135 (0.0134) 2.0250 (0.0255) 0.7160 (0.0186) 1.6029 (0.0613) trade 0.0410 (0.0905) 1.4846 (0.0124) 0.2452 (0.1129) 0.3080 (0.0120) 1.1775 (0.0017) oda -0.1254 (0.1232) -0.6630 (0.0374) -3.5522 (0.0056) -0.7051 (0.0151) -3.1679 (0.0015) bd 0.0995 (0.0132) 0.0947 (0.0195) 0.2185 (0.0778) 0.3563 (0.0050) 0.1241 (0.1404) inf -0.01341 (0.0390) -0.0676 (0.0489) -0.2337 (0.0151) -0.0109 (0.0606) -0.1434 (0.0570) c -50.2492 (0.0327) -976.3142 (0.0130) -180.9086 (0.0382) -55.0631 (0.0239) -107.8521 (0.1356) t -----0.4512 (0.0086) ---------0.3258 (0.0026) source: authors’ calculations now we explain the long-run results of disaggregate tax buoyancies. in table 6, we have five disaggregate tax buoyancies models in which income tax buoyancy, workers welfare tax buoyancy, custom duty buoyancy, federal excise duty buoyancy and sales tax buoyancy are the dependent variables respectively. these models have the same economic explanatory variables as explained in table 4. it can be observed that we have the same signs of explanatory variables with income tax buoyancy and workers welfare tax buoyancy as these variables have similar signs with direct tax buoyancy. moreover, we have found the same resemblance of explanatory variables with federal excise duty buoyancy, customs duty buoyancy, and sales tax buoyancy as economic variables have with indirect tax buoyancy. 5.5 error correction results having investigated the long-run relationship between variables used in our models, now we explain the error correction estimates of these variables. the coefficient of ecm shows how slowly or quickly, a variable move towards the equilibrium path. tables 7 and 8 show the error correction results of all tax buoyancy models. table 7 shows the coefficient values of error correction terms of model 1, model 2 and model 3 are 1.0293,-1.4805 and -1.4541 respectively. the negative signs of error correction coefficients confirm the existence of a convergence trend towards the equilibrium. the results show that in model-1 the error will be corrected in one year and approximately two weeks, in model 2, it will be corrected approximately in one and a half year and in model 3, the error will also be corrected in a year and approximately five months. review of economics and development studies vol. 4, no 1, june 2018 19 table 7: error correction results of tax buoyancy models (aggregate) variables model 1 model 2 model 3 overall tax buoyancy model dependent variable: tbt ardl (1, 1, 1, 1, 1, 1, 1, 1) direct tax buoyancy model dependent variable: tbd ardl (1, 0, 1, 0, 0, 0, 1, 0) indirect tax buoyancy model dependent variable: tbindt ardl (1, 0, 0, 0, 0, 1, 1, 1) d(mva) 0.7938 (0.0246) 0.8667 (0.0253) 0.9549 (0.0584) d(ava) 0.7943 (0.0321) 0.7276 (0.0224) 0.5848 (0.0971) d(sva) 0.8259 (0.0121) 0.8791 (0.0041) 0.7281 (0.0371) d(trade) -0.2309 (0.0185) 0.0273 (0.6376) -0.2983 (0.0022) d(oda2) -0.4187 (0.1856) 0.0476 (0.7697) -0.5033 (0.0847) d(bd) -0.2140 (0.0122) -0.0053 (0.9076) -0.1597 (0.0265) d(inf2) -0.0513 (0.0445) -0.0139 (0.3757) -0.0052 (0.8233) cointeq(-1) -1.0293 (0.0151) -1.4805 (0.0001) -1.4541 (0.0001) source: authors’ calculations table 8 shows the error correction coefficient values of model 4, model 5, model 6, model 7 and model 8 are -2.6267,-1.1190, -1.0840, -1.2434 and -1.9203 respectively. the negative signs of error correction coefficients show that there is convergence trend towards the equilibrium. the results demonstrate that in model-4 the error will be corrected in two years and six months, in model-5 it will be corrected in one year and one month, in model-6 this time will be one year and approximately one month, in model-7 the error will be corrected in one and more than two months, in model-8 the error will also be corrected in one year and more than nine months. table 8: error correction results of tax buoyancy models (disaggregate) variables model 4 model 5 model 6 model 7 model 8 income tax buoyancy model dependent variable: tbit ardl (2, 1, 1, 1, 1, 1, 1, 1) workers welfare tax buoyancy model dependent variable: tbwwt ardl(1, 1, 1, 1, 0, 0, 0,1) custom duty buoyancy model dependent variable: tbcd ardl(1, 0, 1, 0, 1, 1, 0, 1) federal excise duty buoyancy model dependent variable: tbfed ardl(2, 1, 1, 1, 1, 1, 1, 1) sales tax buoyancy model dependent variable: tbst ardl(1, 0, 1, 1, 1, 0, 1, 0) d(tbit(-1)) 0.6502 (0.0306) ---------------- d(tbfed(1)) -------------0.2491 (0.0139) ---- d(mva) 1.2074 (0.0609) 10.5182 (0.0056) 2.7434 (0.0265) 1.0709 (0.0176) 3.6499 (0.0793) d(ava) 0.7713 (0.0535) 6.8053 (0.0040) 0.6915 (0.2511) 0.4204 (0.0316) 5.7405 (0.0102) d(sva) 1.1513 (0.0488) 6.7519 (0.0070) 2.1952 (0.0121) 0.9285 (0.0134) 3.7838 (0.0325) d(trade) 0.0519 (0.1530) -1.6615 (0.0053) -0.5914 (0.0095) 0.0966 (0.0387) -1.4280 (0.0193) d(oda) -0.1127 (0.2226) -0.7420 (0.3867) 1.3625 (0.0628) -0.4943 (0.0256) -6.0833 (0.0177) d(bd) -0.0250 (0.1968) -0.0010 (0.9950) -0.2369 (0.0428) 0.0265 (0.0800) -1.0305 (0.0064) d(inf) -0.0032 (0.3942) -0.1345 (0.0787) -0.0259 (0.4794) 0.0225 (0.0336) -0.2754 (0.0088) d(t) -----0.5049 (0.0069) ---------0.6255 (0.0191) cointeq(-1) -2.6267 (0.0291) -1.1191 (0.0004) -1.0840 (0.0002) -1.2435 (0.0040) -1.9203 (0.0155) source: authors’ calculation 20 6. conclusion and policy implications the present study investigates the impact of economic determinants on different dimensions of tax buoyancies in pakistan. the study has used the time series data for the period of 1996-2016 to estimate the eight models for examining the relationship between economic determinants of tax buoyancy. the analysis has been done by aggregate and disaggregates levels. three models are related to aggregate levels while five models are associated to disaggregate levels. all the economic determinants are positively related to tax buoyancies in aggregate and disaggregate levels except official development assistance and inflation. the results of the study have alluded to some important policy implications for policy makers and future research.  firstly, the manufacturing sector has a positive relationship with the tax buoyancies which reveals that it is the biggest source of the government revenue collection and it has a large share in the total tax revenues. thus, with the government and policymakers need to put good policies in place that we will and ensure on increase in tax collection by this sector.  secondly, the agriculture sector has a positive relation with tax buoyancies. but it can be observed that contribution of this sector in tax revenues is very low. so, there is need to impose some taxes in this sector for revenue-enhancing which might lead to an increase in tax buoyancy as well.  thirdly, the services sector has a positive impact on tax buoyancies. services sector has a significant contribution in gdp. hence, the government can widen the tax base for this sector and may increase its tax revenues.  fourthly, the trade openness has a positive relationship with tax buoyancies. for increasing the tax revenue there must be increased in the tax base on trade in the form of customs and federal excise duty to augment buoyancy coefficient.  fifthly, evidence on official development assistance has a negative relation with tax buoyancies. implying of the government depends on the foreign aid and external borrowings; it will not impose further taxes in order to generate revenue in the country. that’s why total tax revenues will be decreased and value of tax buoyancy will decrease as well. so, government should less 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(2013). elasticity and buoyancy of major tax categories: evidence from bangladesh and its policy implications. research study series no.-fdrs 03. http://sydney.edu.au/law/parsons review of economics and development studies vol. 5, no 4, 2019 809 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads a proposed language policy for education in pakistan 1 tariq khan, 2 itbar khan, 3 aziz ahmad 1 assistant professor, department of english, university of malakand, pakistan.tariqkhan1975@gmail.com 2 lecturer, department of education, university of malakand, pakistan. 3 assistant professor, department of english, university of malakand, pakistan. article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 the 72-year nascent history of pakistan reflects a vacillating picture of language planning, policies and practices (for education) at all levels, that can, in turn, potentially pave the way for viable future (in the current context) only if reformed pragmatically. the present position paper attempts to explore and examines the pestilent plight of dated language planning, policies and practices for education in pakistan. for that matter, strategies outlined and practices espoused have contributed the least to bring about a transformational change in language for the education system of pakistan in a futuristic milieu. thereby, resultantly, creating a language hodgepodge in the pakistani education system. the existing research recommends the bilingual method of comparative language learning and teaching, in which both of the languages (e.g., urdu and english) are coped with, creatively, so that both develop equally. translation and translation studies would become integral to such an integrated method and approach. for that to happen, pakistan largely needs english, to be materialized, as an instrumental international language (eiil), rather than literature or linguistics. thus, the said prospective way out may dissipate the existing dilemma of language policy in the education system of pakistan—that lacks a workable and practicable means of instruction—for disseminating education as enlightenment. the existing study (while examining the aforesaid issue) pursues the pakistan futuristic foundation and institute (pfi), islamabad, as an educational role model and mentor. since the need and importance of language in education is seminal to the holistic-integrative growth and development of overall education system at all levels, that is why the researchers have probed and examined the current language impasse in education while observing, studying and experiencing it, objectively. in this connection, the current study is qualitative, experiential, holisticintegrative, and characteristically futuristic. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords bilingualism, education system, english language teaching, futuristic-integrative-holism, multilingualism. jel classification: p36, p37 corresponding author‘s email address: tariqkhan1975@gmail.com recommended citation: khan, t., khan, i. and ahmad, a. (2019). a proposed language policy for education in pakistan. review of economics and development studies, 5 (4), 809-816 doi: 10.26710/reads.v5i4.897 1. introduction today, the english language has its own acquired, rather than originally inherent, important as a popular international language. its importance lies both in its diversity as well as its versatility. its diversity or http://www.publishing.globalcsrc.org/reads mailto:pakistan.tariqkhan1975@gmail.com mailto:tariqkhan1975@gmail.com review of economics and development studies vol. 5, no 4, 2019 810 variety is global, as engineered by past british imperialism-cum-colonialism, and current „globalismglobalization‟ in the post-colonial period (crystal, 1990; howard, 1990; potter, 1990; mcarthur, 1998; acarthus, 2003). thus, english is an ever-escalating linguistic means of interactive international communication, verbal and written, formal and informal. it is a language of education, science and technology, of research and development; of diplomacy and international relation; and of the political economy in terms of trade and commerce, international and regional. if not local-national. or all of these reasons—and many more—like creative, research and journalistic writing, and mediause—english is being wooed and pursued (in ‗hot pursuit‘?), used, misused and abused currently, as perhaps never before in its long, interesting and continuing history from old english, through middle english to modern english, and beyond, post-modern, and even ―futuristic‖ english, because any language which seeks longevity in the future, needs must be futuristic, developmentally—in adaptative language change, according to life change and social change (copley, 1961; barfield, 1965; barber, 1982; dixon, 1997). and so the contemporary phenomena termed ―englishes‖ (in the plural) by world-level linguists like david crystal and tom mcarther—because of its many myriads of manifestations worldwide. the above is a realistic portrayal of the current baseline situation. it is also a pragmatic plea for english— but with plentiful pragmatic caveats, as recorded below in this paper. 2. the present pak. position: a critique the present picture in pakistan is a pitiable misuse and abuse of english, rather than of its sensible proper use. the civil society and media present a hodge-podge of linguistic pollution, which is neither english nor urdu, nor yet any other pak. language. in fact, we are continuously violating all the three universal codes of one‘s visible identity: the dress code, language code, and behaviour code. we have retained english in pakistan, officially and academically, but sadly, the quality of english teaching and learning has deteriorated decade by decade with every generation, if not every year. that applies also to education, generally. the numerical proliferation, partly, if not wholly, because of the population explosion, is obvious. so is the menacingly mushrooming so-said ―english‖ (medium) school system for the microscopic minority alienated elite—alienated socio-culturally, linguistically, educationally and even religiously. the self-financing privatization of education has caused corrosive commercialization. education has also become ―bazari‖ or ―street-smart‖, in that even universities are housed in hired commercial buildings and markets. one misses miserably the campus culture and academic milieu of educational institutions of the pre-and post-independence periods. thus, the pernicious political economy and socio-politics of elitist education—a malevolent minority—is manipulating and marginalizing mainstream education, by impoverishing it qualitatively and quantitatively as financial outlay on state-sponsored and funded education for pakistan‘s majority—the poor people and middle-class masses. national resources are being frittered away on cultural alienates, many, if not most, of whom will go and settle abroad, to serve greener pastures. if some return, they will do so only on their own terms as agents and instruments of international imperialism, through indigenous imperialism. if it sounds cynical or pessimistic, one has only to review and analyze conscientiously, pakistan‘s pestilent history ever after the death of its founding father, the quaid-e-azam muhammad ali jinnah, on 11 th september 1948. all of the above tensions, trends and issues need to be resolved in favour of the abiding national needs and interests if pakistan is to move ahead. it can do so the best, educationally, because education is the key to the future of any nation, and indeed, humanity, itself: a future in the sovereign peace of fraternal freedom which is, minimally, sustainable, if not ideally perennial. language is, in turn, the key to education, because education as an act of interactive and interpersonal communication, is in language, essentiating language use and usage (crystal, 1984). review of economics and development studies vol. 5, no 4, 2019 811 another issue of critical concern is that in pakistan, the core concerned policies and practices—concerned with societal education and filial upbringing or nurturing—or the lack of them—run at cross-purposes. these are:  education and economic policies and practices.  education and language policies and practices.  ideology and culture policies and practices.  education and media policies and practices. the reason for this confusion and misdirection is that we have really lost sight of our creative visionary ideology—islam—and pay it only hypocritical lip service on ceremonial occasions. one‘s ideology inspires and serves doubly, integratedly and holistically, the national interests and human interests, through moral values education and integrated family studies (azam, 2005). the focus is on basic life skills, which enable one to seek moral-spiritual-secular self-realization, and lead a successful, useful and fulfilling life. for this to be possible, it is essential that the four life-long intergender and intergenerational sociological processes of family nurture and societal education, acculturization and socialization, are well-integrated (azam, i., 2006, 2007; azam, z., 2006). creativity is central to such a reformed plan and programme of true education as enlightenment (“irfan”), which serves the triple perennial primary purposes of education as such: (i) moral-spiritual. (ii) secular-economic. (iii) integrative-holistic. creative-critical-synthesizing thinking skills create creative societies, which shun war and terrorism and help to create and sustain peace. moral values education is what motivates them to such noble ideals and action (azam, i., 2004, 2007; azam, z., 2005). the foregoing general psycho-social and moral-spiritual-secular principles must inspire pakistan‘s national policy, planning and practice—including education and language—if it is to sustain its sovereignty in the 21 st century, and develop on its own and into its own, in full-flowered self-realization. 3. language and education: l1, l2, etc. language is an essential means of education, oral and documentary. the post-colonial period contracted in confusion with the clarity of vision in the colonial period: the vision of sovereign fraternal freedom. educationally and linguistically the confusion was, and continues, over the relative role and importance of l1, l2, etc., i.e., one‘s mother/father tongue or national language, (l1), or the second language, preferably indigenous (l2), and a third elective, rather than imposed, foreign language, english, for the third muslim world former or former british colonies. the confusing, if not conniving, controversy in pakistan has been: whether to retain english as a second, logically third language, or impose it as the first language. the history of the disintegration of imperialism and collapse of colonialism amply proves that nothing alien, be it language, culture, education, values, or a politico-economic or social system can be imposed on indigenous peoples, stay on and succeed for long—unless it is indigenized, internalized and assimilated willingly by them, and integrated into the mainstream of their own psyche. so is the case with english as language and literature. but the presently prevalent english school system is bending backwards to work an impossible miracle of cultural and linguistic hybridization reminiscent of the anglo-indians of the british days in south asia. the teacher of english—foreign or native—recommends the ―direct method‖ of teaching english to pakistani children, as the best method. but at what cultural cost and loss? the result is simply shocking, to say the least. the foreign teacher of english may be excusable, because of the person‘s ignorance of pakistani languages. but what excuse has the pakistani teacher to ignore or neglect our own rich multilingual heritage and tradition? above all, the ―direct method‖ may work in english medium institutions, but it does not work in the mainstream mixed media review of economics and development studies vol. 5, no 4, 2019 812 and seminary (madrassa) system. what is the way out? simply, to turn to educational psychology, expertise and experience, for guidance, as under (winch, 1990; beare & slaughter, 1994; doherty, 1994; iqbal, 1996; isani & virk, 2005). the consensus even at the highest level of the unesco is that creativity and education as essentially integral to each other as one‘s critical life support system, and are the best in one‘s own language, especially basic or foundational, formative education. therefore, the venturesome classification of languages, as epitomized below, suggestively, succinctly: 4. classification of languages 4.1 “zaban-e mun”: my language: l1 – l2 we are fortunate in pakistan to be multilingual. the classification of our own languages as ‗local, provincial, regional and national‘, is erroneous. it smacks of imperialistic exclusion and divisiveness. all of our languages being pakistani are equally national—and nationalistic. all merit, intrinsically, equal treatment—at all levels—state, governmental and private; socio-cultural, educational and linguistic. we must cater to all of our languages, in order to promote national integration, socio-culturally, linguistically and educationally. the federal and provincial governments should take the lead and set the example—by adopting the pakistani languages for popular and official use. 4.2 “zaban-e-yaar”: my friends’ language in the case of pakistan, they are, essentially, the islami languages like araby, farsi and turki. we have a rich historical heritage in them, which needs to be revived. while pakistan‘s spiritual kaaba is the (muslim) middle east, its cultural qibla is south-west-central asia. we need to return to these robust roots and messianic moorings and benefit from their geosociological blessings (azam, 2004). our urdu language reflects this legacy in the most lively and creative manner. araby is essential for understanding the holy quran and following it faithfully to be a true muslim. it needs to be introduced right from the beginning, both at home and school. 4.3 “ zaban-e-ghair”: an alien or foreign language the global multiplicity of languages is a rich tribute and testimony to human thought and wisdom, culture and civilization. a bilinguist is a more fluent, articulate and communicative person than a unilinguist. a multilinguist is even more interactive, socio-culturally than a bilinguist. such a person‘s circle of friends is wide and varied. one can befriend an ‗alien‘ or ‗foreigner‘ by means of the person‘s language. it is the fulsome facilitator of the friendship factor. pakistanis being natural or born multilinguists are skilful at learning foreign languages. the national university of modern languages, islamabad, (numl), is a tribute to pakistan‘s flair for languages. pakistan needs to encourage foreign language learning as a matter of persistently practised policy, to cover all of the main and major languages of the world, north and south, east and west—so that they all become ―zabaan-e-yaar‖, the friends‘ language, in order to build bridges of friendship and peace with all peoples of the world, through their languages, literatures and cultures, by mutual understanding and appreciation, and reciprocal respect. 5. the english language today while for its native speakers/users, the english language is the first language for many, and the second language for some, for the preponderant global majority of its non-native users, it is simply an instrument language, and so its classification as: eiil: 5.1 english: an instrumental international language this is its net worth and basic reality which needs to be recognized and respected. only then can it be put to the best use. english needs to be acquired not to become personally british, american, canadian, australian or newzelandian, etc. –unless one really wants to move abroad—otherwise one becomes a misfit in one‘s own country and culture. english should be required for its pragmatic, secular benefits: educational and economic. that essentiates teaching and learning english well. the english teacher‘s role review of economics and development studies vol. 5, no 4, 2019 813 is virtually vital. established english teaching departments and institutions like the numl, should be able to serve the purpose of standard english teaching. what pakistan largely needs is english as an instrumental international language, rather than literature or linguistics. of course, these options should be available at the tertiary level of education, to those truly interested in them—along with research and creative writing but for the majority at the school and college level, eiil, should do, and be catered to effectively (faure, et al., 1972; jennings & cornish, 1982; delore, et al., 1996; talati, et al (eds), 1998; rahman, 2004). thus, while conceding that the english language may be our national need—an education need—indeed, it is well-nigh a global instrumental need—let us not turn it into an obsessive-compulsive psychological issue. let it remain a worldly need—―dunyavi zaroorat‖—and not become a paralyzing ―mujboori‖ (constraint or compulsion). there should never be any compromise on quality, criteria and standards: culture as well as educational. the objective should be excellence for those who aim high, command or mastery for those who come next, and finally, fluency and flow for others—both students and teachers, especially the latter. 5.2 english language teaching: bilingualism based on the researchers‘ experience at tertiary level of education (m.a.; m.phil.; and ph.d.), and interaction at all levels, they recommend the bilingual method of comparative language and literature learning and teaching, in which both of the languages (e.g., urdu and english) are coped with, creatively, so that both develop equally. translation and translation studies would become integral to such an approach. the core caveat is for the teacher to be competently and creatively bilingual (if not multilingual). for that to happen, pakistan must tap its multilingual potential and promise, creatively. the stress in language teaching should be on the four basic language skills: listening, speaking, reading and writing. a teacher is expected to be a triple role model, as: (a) a moral person; (b) a competent communicator; and (c) and expert subject specialist. the dangerously disturbed balance between science and technology education, and the arts, humanities and languages/literatures, needs to be restored in our system of education at all levels (rope, et al., 2001). policy, planning and practice 6. conclusion and recommendations (azam, 2001, 2007; rahman, 1990, 1996; mansoor, meraj & tahir (eds), 2004)  education as enlightenment (―irfan‖) needs to be perennialized as living tradition: modernized and futurized.  there should be complete coordination between the economic, education, language, culture and media policies, to serve the abiding national interest as subservient to the national ideology.  basic education (primary) needs to be in the mother/father tongue or a pakistani language.  bilingualism may be introduced right from the start, in relation to other pakistani languages.  the mixed media system is more pragmatic, depending on the subject being taught, and the availability of teaching texts and materials in a particular medium or language.  the mainstream state system of education ought to be prioritized for the poor and middle classes.  english may be introduced at an apt school level (class v, e.g.).  it may be taught bilingually.  multilingualism needs to be encouraged, vis-à-vis the pakistani languages, and other islami and international languages.  english need to be adopted as an instrumental international language.  it also needs to be adapted for indigenization as ―pakistani english‖.  above all, the state and government policy, planning, programming and practice must be indigenized—pakistanized. review of economics and development studies vol. 5, no 4, 2019 814 in the final analysis, self-reliance is the seamless secret of sovereign survival: in thought, word and deed. that is the meaning and message of creativity and originality. references acarthus, t. 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(1998). the study of language. cambridge: cambridge univ. press. review of economics and development studies vol. 5, no 4, 2019 816 review of economics and development studies, vol. 6 (1) 2020, 23-31 23 south asian university and educational integration: potentials and outcomes for peace promotion between pakistan and india a muhammad tasleem ashraf, b abdul basit khan, c ali shan shah a ph.d. scholar, department of political science & ir government college university faisalabad email: ranatasleemashraf@gmail.com b assistant professor, department of political science & ir government college university faisalabad email: basitniazi@yahoo.com c assistant professor, department of political science & ir government college university faisalabad email: alishanshah@gucf.edu.pk article details abstract history: accepted 10 march 2020 available online 31 march 2020 through education conflicts, poverty, socio-economic injustice, distrust and constant threats to peace can be eradicated. education is a powerful tool which can bring positive change, prosperity and justice. conflict resolution and promotion of peace within the societies and with other nations of world can also bring through education .role of educational institutions are always been considered most important and powerful to bring different cultures and nations closer. mutual conflicted issues has created uncertainty and distrust in both countries. the wars of 1965, 1971 and recently kargil conflict in 1999, cross border terrorism and blame game has pushed the relations into uncertain conditions of distrust. the south asian university is window of integration where both countries students got the chance to get education under one roof. objectives of establishing south asian university for closer integration of saarc countries is still a big challenge for the member nations as it can be used for the peace promotion and people to people connection. in this research paper the objectives and input of south asian university is examine for bringing nations closer through education. the study examines the role of university to bring the students of pakistan and india closer and for developing the atmosphere of friendship and trust in both nations. the study examines the civil society connectivity and different kinds of cbms in both nations’ students by using the platform of university and its impacts on pak-india relations and developing the peace in the region. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: the south asian university, pakistan india, educational integration, student’s interaction, regional peace jel classification: n15, a23, a29, h75, i20 doi: 10.47067/reads.v6i1.181 corresponding author’s email address: ranatasleemashraf@gmail.com mailto:ranatasleemashraf@gmail.com mailto:basitniazi@yahoo.com mailto:ranatasleemashraf@gmail.com review of economics and development studies, vol. 6 (1) 2020, 23-31 24 1. introduction sir syed ahmad laid the foundation for modern education in the light of islamic principles after the war of independence for the muslim of sub-continent. he considered modern education as tool of progress for the muslim of india. in 1875, he established mao college in aligarh. it is examined that a number of muslim students who took active part in the movement of pakistan, were the students of aligarh university (mohiuddin, 2007, p. 59). political, social, moral and economic development is based on education. only those nations have made progress which have developed their educational system on the basis of collective responsibilities and for promoting friendly environment. for the sustainable socio-economic growth of the country, education play the vital role. it enhances the competences, skills in the people for positive output. process of education enable the people to be a good citizens for efficient contribution of the society. education teaches us about the adjustment within the society and how to live peacefully with other communities of the world. nations develops their relations with each other by taking advice from the expertise having good education and skill in the relevant flied. education brings harmony and collective unity and responsibility to up raise the quality and worth of life. educational institutions through their social curriculum always try to produce true leadership for the welfare of state and regional stability. education can bring the people closer for deeper inter action with each other. while focusing on the world, it is examined that for all kind of developments in different fields are ultimately connected to education, which plays the main role in positive development among the nations. the nations which are playing the leadership role in the world are well-educated and it is noted that those nations have spent a lot on education. in the case of india and pakistan,the educational institutions and the south asian study centers can pave their vital role through the process of education to the both sides’ learners for developing peace and security between both countries. without education we cannot develop a normative system of living. educated societies transform the values of social harmony, mutual integration, and culture of peace, both nationally and internationally. education brings the positive change in human personality and develop the sense of understanding about their individual and collective responsibilities. character building or positive change in human behavior comes through learning. harmonized segments of society promote the culture of peace and integration and enable the youth to encourage the culture of mutual interdependence to resolve their conflicts. the behavior of the youth can be modified through promoting the values of tolerance, justice and peace. higher education is considered as a gateway where universities plays active role for creating role models, scholars, and thinkers to serve the humanity by creating the values of tolerance and harmony. different disciplines of social sciences exchange ideas to address the conflicts among the societies by avoiding violence. the role of university education is changing day by day such as the educational institutions in higher education level contribute in social development besides imparting knowledge. germans and malaysian universities are playing the role for promoting ethnic awareness. institutions are developing the values of inter-ethnic integration among the undergraduates (alvi, amjad, shahzad, & usman, 2015, p. 39). regionalism is gaining strength and importance due to its significance day by day. it has drawn fruitful results on the regional stability. regionalism has providing the suitable environment for mutual economic dealings and it is also supporting for the friendly ties of the nations with each other. different tools or measures are utilized by the nations for mutual trust building or for creating friendly environment. education is most powerful tool to understand the different cultures and to bring the nations on a common table to address the bilateral or multilateral issues with one another. the main objective of research is to examine the role of the south asian university for bringing students of south review of economics and development studies, vol. 6 (1) 2020, 23-31 25 asian nations together to establish regional stability and creating interaction with one another. historical analysis has elaborated that mutual concerns created deep gaps in social connectivity or linkages of the citizens of india and pakistan. the objective of the study is to examine how an educational institution with the support of curriculum and environment can play its role for social and educational integration between indian, pakistani youth studying in sau. what’s are the measures taken by south asian university for creation of mutual interaction and friendly atmosphere between the students in the case of pakistan and india. one objective of the research is to introduce the sau as common educational platform for south asian students and unique opportunity to meet different cultures of the region with mutual integration. study is also important because through the promotion of the curriculum based on the importance and promotion regional peace and stability, the factors of distrust and hate can be eliminated. the study will be significant for the students of international relations to understand the role of common educational institution for the promotion of regional peace, bringing youth closer for mutual understanding and to improve the relations with each other. hypothesis of the study are; h1: educational integration is tool for interaction and cbms. h2: regional peace in south asia can be promoted through education. h2: through sau regional stability and peace can be promoted both sides by eliminating distrust and hate. 2. methodology for the collection of the evidence both qualitative and quantitative approaches are used. official web side of university, annual reports published by the university and both sides’ foreign offices, policy briefing, books, research articles, research reports, national newspapers and magazines are used to collect and analyze the data. the research will be descriptive. both primary and secondary source of information are used to collect the data according to the statement of the problem. 3. poor literacy rate in south asia india and pakistan is facing challenges as both nation in the saarc cluster have poor literacy rate. the system of education in both sides is filled with discrimination. the factors of caste, creed, gender imbalance and class oriented features are dominated because of illiteracy. in the year of 2000, a framework of action was developed in dakar conference. in was decided that every nation of the world has to spend at least six percent of gdp for education. it was noted during the period of 2002 to 2004 that expenditure on education in public sector of india was 3.3 percent and pakistan spent 2.0 percent. high literacy rate is required for regional integration. discriminated educational system in india has built the gaps in people and issues of caste, creed and gender inequality lift behind the worth of peace and socio-economic propensity, on the other hand pakistan is spending lowest on education in the region which is question mark over the comment of dakar frame work of action (islam, nag, lama, & khanal, 2010, pp. 100-102). 4. historical background of educational integration between pakistan and india regional leadership generated the idea to formulate organization to develop cooperation among the regional countries. regionalism is south asia was redesigned for uplifting worth of life. in december 1985 south asian association for regional cooperation (saarc) was established. the head of the states of seven countries including pakistan and india acknowledged the worth of regional cooperation and people to people interaction to fill the gaps. it was decided to develop public opinion and integrated program of action (ipa) was lunched. exploring educational integration for regional cooperation was one among nine parameters of program (wignaraja & hussian, 1989, p. 348). review of economics and development studies, vol. 6 (1) 2020, 23-31 26 third summit of saarc was held in november 1987. the lunch of saarc audio visual exchange (save) was examined as key success by the south asian nations. in the field of digital content save program is the earliest initiative in south asia which has connected the regional states for information sharing. before this in second annual gathering of saarc head of the states stressed to encourage the role of scholars, academia and professionals for closer integration. save program has multiple features such as improving literacy, joint production and youth collaboration among regional entities. objectives of save program itself indicate the promotion of integration through mutual talk’s events and exchange information (arinto & akhtar, 2010, p. 122). in december 1988 it was recognized that poverty, hunger and illiteracy is big challenge for the regional prosperity and stability. without improving literacy rate it is not possible to uplift the life standerds of the people of south asia. members of saarc states agreed to include education as part of ipa. the indian prime minister rajiv gandhi and pakistani counter partner benazir bhutto established an agreement to remove of hated material and misrepresentations from both sides history books. it was also decided to remove images which indicate the concept of enemy and create hate for each other (ahmed & das, 1998, p. 18). this is significant measure taken by the leadership of both countries that finally they realized and reached on an agreement that in the curriculum of history there is some material that create distrust and misunderstanding between youth of both nations and that conflicted readings and images should be removed from the text books. this step was taken in the sitting of saarc summit and counted a step towards friendship. in december 1991 colombo declaration issued by the south asian regional states. mohammad nawaz sharif, prime minister of pakistan and narasimha rao the prime minister of india participated. in this summit leaders stressed on science and technology education and measures for its promotion through workshops, conferences, seminars. leaders welcomed arrangement for network of research and development centers. in this summit leaders noted with satisfaction that in march 1992 saarc visa scheme will become operational for the heads of national academic institutions of all member states(dixit, 2002, pp. 272-273). human resource development centre (hrdc) was proposed in the saarc ministers in may 1997. the proposal was accepted to establish in pakistan. this center was formulated with the objectives to contribute for the education activities. center organized many workshop, lectures, seminars and training programs on different topics and issues related to south asia. pakistani and indian scholars, learners, trainers and participants got the golden opportunity to meet each other and develop common understanding on different issues related to the humanity. in july 1998, distance education based open universities of the saarc countries arranged a meeting of vice-chancellors. they agreed to establish the distance learning platform to up lift the quality of life and to create integration through education in the people of the region. the vice chancellor of allama iqbal open university islamabad, (aiou) bangladesh open university, indira gandhi open university and open university of sri lanka were presented in the meeting .a saarc consortium of open and distance learning (sacodil) was recognized in that sitting.(saez, 2011, p. 87). 5. idea for establishing south asian university in november 2005 during thirteen summit of saarc held in dhaka, leaders of the state review of economics and development studies, vol. 6 (1) 2020, 23-31 27 calculated the successes of member countries towards primary education. leaders stressed on the area of science, technology and higher education and also advised the member’s state without education we cannot meet the challenges of twenty-first century. prime minister of india manmohan singh during the thirteen summit in dhaka communicated the idea to establish a south asian university (sau) which must provide the education and learning facilities with complete professional excellence. singh also aimed that university will be a sources of inter connectivity among the people of south asian region. mamohan singh during his speech on 12th november 2005 outlined the vision of sau in these words, “the people of our subcontinent are at the cutting edge of scientific and technological research and in the front ranks of the knowledge society across the world. wherever enabling environment and world-class facilities are made to our talented people, they excel. let this become a forum where our academicians, scholars, researchers and gifted students can work together in the service of human advancement.”(hawkins, mok, & neubaver, 2012, p. 60) 6. establishment of south asian university fourteen summit of saarc was held in april 2007 in new delhi, india. during the summit important, innovative and dynamic measures were discussed in the shape of inter-governmental agreements. these agreements were signed to create south asian university and food bank. prime minister of islamic republic pakistan shaukat aziz and prime minister of republic india were also present on the precious moment and signed the agreement on 4th april 2007 for the creation of south asian university of world standerd educational institution. leaders agreed to structure a courseplotting committee to draw up the bye laws, curriculum, structural frame work, governance and financial matters of the university as well (gupta & shukla, 2009, p. 459). inter-governmental meetings of steering committee were established in different times between the officials of member states for south asian university. all these meeting were arranged to find out the draft for structure, rules, business plan and about the regulation of university. in the last seventh meeting of the steering committee members confirmed the modalities for south asian university (cooperation, 2015). 7. sau vision and objectives itself promote the peace promotion to promote of regional peace and security, to grow the education of science and technology, to establish good citizenship, to improve quality of life and to create the regional consciousness is also the subject of the south asian university. university is also a forum to for providing to scholars, researchers, academician and gifted students to work together. pakistan and india has the disappointing linkages in the department of higher education and research projects. in the case of pakistan and india this area has been closed before the establishment of south asian university. students as well the faculty arrangements in sau is a part of confidence building measures (shama, 2008, pp. 96-98). in the case of pakistan and india according to stephen t. cohen the formation of south asian university has provided the opportunity to the students of both countries to join classes in india . before this both countries universities students find it stiff and almost impossible to attend educational courses in each other countries. it was the first example of educational integration in pak-india. vision for educational integration came true as south asian university provided a door to bring the students of both nations closer (cohen, 2013, p. 31). review of economics and development studies, vol. 6 (1) 2020, 23-31 28 pakistan and especially india both governments play a key role for the creation of this university. establishment of the university is innovative exercise which opened the doors for the students of pakistan to get their higher education in india under the umbrella of saarc. it is a clear indication and useful measure for the development of mutual trust and good relations between pakistan and india through education. this process of education is everlasting and will go on, interaction of the indian, pakistani students will produce the future leadership and more cooperation areas as well. 8. first academic session of sau sau started its process of education in august 2010 with the fifty pioneer students that were enrolled in the opening session of the university courses from saarc member countries. the students were enrolled in program of masters in economics and masters in computer application. in opening academic session of the sau the majority students were granted admission from india, two students from pakistan took admission in sau and opened the window of trust building through educational process, two from bhutan five from bangladesh and one from sri lanka. sau develop its courses in july 2011 and has been providing students postgraduate degree in international relations, sociology, computer science, biotechnology and law. it is considered that university will give the opportunity to 700 teachers in eleven faculties with attractive salary benefits and 7000 students from the south asian region were entertained in its own campus when it will be operational in full strength. about 80 percent teachers were appointed from the saarc states and 20 percent may appointed from other than saarc countries (saurabh & upreti, 2012, p. 264). theme of saarc is to connect nations with each other for cooperation and regional integration. new delhi declaration in which sau established was a milestone and reflection of the collective wisdom and the vision of intra-connected south asia. the vision of the south asian university itself elaborate the regional consciousness and efforts to improve the quality of life. both important countries pakistan and india took active part and played a productive role for reaching on an agreement to establish an institution for education. south asian university is landmark for cooperation and significant tool for confidence house in saarc nations especially between india and pakistan. the teaching faculty that is appointed from member states is symbol of regional integration and a constructive measure to bring people closer through the education phenomena. saarc member states contributed financial support but a care full analysis shows that government of india took active part and going to produce 50 percent funds for the south asian university expenditures. this contribution of india indicate the cooperation towards the joint adventure of saarc countries. the creation of university also raised some sensitive questions one of them was about the visa policy and living, travelling settlement of the staff and students especially in indian. these questions were addressed when indian and pakistan diplomatic dealings were in crunches because of november 2008 terrorist attacks in mumbai. these tense conditions created the communication gap between two countries. pakistan made some objections against the distinction treatment with staff members and students in the university and asked to revisit in visa regime. the interior ministry of indian government considered these complaints and made some changes in visa policy. staff and students of pakistan enable to enjoy same status as others foreigners had in indian universities (saez, the south asian assocation for regional cooperation (saarc) an emerging collaboration architecture, 2011, p. 88). new university setting will give a lot of scope for innovation. it will provide the active and vibrant student community that contribute truly the application of saarc charter and infect the review of economics and development studies, vol. 6 (1) 2020, 23-31 29 university is the future of regional integration especially in the case of pakistan and india. 9. south asian university and pak-india educational integration in the second session of the sau six academic programs were offered to the students of saarc countries. total 23 seats were offered to pakistan and 7 students joined the university after qualifying the admission test held in lahore (university, 2010-2011, pp. 14-16).south asian university is developing its educational programs, plans and courses to improve higher education and to produce the real leadership for the region. the higher education especially in social sciences play a major role understand and bring the people together (university, annual report, 2012-2013, pp. 3-4) 10. celebration of pak-india independence days and different festivals independence day celebration in south asian university is most important event for confidence building and people to people interaction. students from pakistan and india jointly celebrate the independence day. another important steps taken by the sau is writing clinic. it was established to improve the academic vocabulary, diction and language writing skills. this service was provided to all students free of cast by the sau administration. this writing clinic is another example of student’s integration. introduction of south asia is non-credit course which is compulsory to all master level students of sau the main outline of this course is to introduce the learner’s common issues, history of region and challenges of south asia. students have to pass this course for obtaining the degree from sau (university, annual report, 2012-2013, pp. 19-23). all these activities in south asian university created linkages of students of saarc member countries through the process of education. the celebration of independence day of pakistan and india on the same stage and place is a clear indication of trust building and harmony among the students of both countries. in future this university can make a bridge of friendship between india and pakistan. the research work, lectures, workshops, and training programs of the university academia can also bring the people closer. south asian university annual calendar narrated the interaction of the pakindian students in different events which are examined as measures for filling the gaps in the both sides’ youth through higher education.. (university, annual report, 2014-2015) 11. conclusion in case of pakistan and india it is examined that both states are facing the common problems such as poverty, socio-economic disparity, injustice and both sides are spending huge economic resources on the arms for self-protection or survival. both nations have mutual conflicts which are always been observed as constant threat to peace of the region. through educational integration in both countries, regional peace and prosperity can be achieved and it would be also beneficial for the international peace and prosperity. conflict resolution and promotion of peace is only possible in the educated environment. south asian university has created friendly atmosphere in the students of saarc nations. it has developed the opportunities among the people of different cultures for integration especially in the case of pakistan and india. for defusing the distrust, hate among the youth of pakistan and india sau has given the opportunities to celebrate festivals. these kind of confidence building measures develop the approach of collective peace by avoiding conflicts. the south asian university is window of integration where both countries students got the chance to get education under one roof. the core purpose of universities are to produce educated, skilled and professional leaderships in the every filed of life which must play their role for collective social justice, prosperity and peace in region of south asia. for creating friendly environment between pakistan and india, giving the better possibilities of integration in education can bring positive role for regional peace and stability education is process of positive change in human mind and behavior and this process create the ability review of economics and development studies, vol. 6 (1) 2020, 23-31 30 to solve the problems of the individuals and the societies of the world. in wider meaning education comprises every impact in the socio-economic and political life of the individuals, the form of government, environment, the problems and their solution, the values and political system of the state is also designed through the educational innovation. education has a profound relation with the progress of the states in all field of life and play vital role for integration and propensity of the people. all celebrations arranged by the sau showed that integration between the pakistani and indians students has developed sense of owning the diversities and promoting the equality and worth of all human beings and their faiths and beliefs. sau is playing an important role to being the students of indo-pak closer for role model in future. university is giving learning of mutual interdependency and promoting a culture of peace and acceptance to each other especially in the case of india and pakistan. 12. recommendations  hate material and images should be removed from the text books that related with the historical information of both countries. measures should be adopted with complete consensus of both sides to remove the things that have no concerned with reality.  there should be a coordination between the ministries of higher education of both counties for joint programs on common issues and interests of south asian region. in this regard research programs, workshops, seminars, lectures, debates, training program, competition program should be organized to overcome the common issues.  both india and pakistan should take common measures to increase literacy rate which is very low in both countries. both countries should make a comprehensive action plan to eliminate illiteracy and should design courses that open the ways of common integration through process of education. this action plan must be supported by all government departments, civil society and media of both nations should also play their positive role as well.  open and distance learning courses and programs should be planed between india, pakistan. these courses should cover the matters of common interest in south asian region.  both side’s governments and public universities should honor the certificates and degrees that were awarded by their own countries educational institutions such as degrees of sau is valued and is acceptable in eight saarc nations.  both countries should encourage their research scholars, educational experts, and academia to visit and exchange their experiences, knowledge and skills with each other. these events should be arranged at all levels. both sides’ governments should make the visa policy easy and friendly through one window operation for scholars and experts.  competition programs should be designed in students, scholars and between the people of civil society which are contributing and working in different fields of lives.  indo-pak scholars should be provided all kinds of support and facilitations to visit higher educational institutions and access to information in both countries. efforts and contributions should be admired, encouraged, appreciated and rewarded in this regard also.  council for ministers for education should met regularly after one year. this council should introduce the common vision for integration through education and also create new subjects, courses of common interests which should be taught through distance education in pakistan, india and as well as in the campus of sau.  on regular basis students and teachers delegates should visit one another country to gain higher education. india, pakistan should arranged teachers training programs based on integration and harmony under the umbrella of sau.  india and pakistan should provide higher education by sitting up their regional campuses of high rank universities in one another country. review of economics and development studies, vol. 6 (1) 2020, 23-31 31  regional campuses of sau should be established in every member state of saarc. new regional centre for the promotion of integrated education in south asia should be established as part of saarc.  india, pakistan’s study centers which are working in south asia for south asian studies, their researches, studies and finding should be considered, valued while making the policies of integration in south asia. references ahmed, s., & das, s. (1998). movements of people, ideas, trade and technology: towards peaceful coexistence of india and pakistan. albuquergue nm: sandia national laboratories. alvi, d. f., amjad, a., shahzad, k., & usman, a. d. (2015). strengthing national integration among youth. journal of contemporary studies, 31-41. arinto, p. b., & akhtar, s. (2010). digital review of pacific asia 2009-2010. new delhi: sage publications pvt. ltd. cohen, s. p. (2013). shooting for a century: the india pakistan comundrum. washington dc: brooking institue press. cooperation, s. a. (2015, january 25). saarc. retrieved from saarc-sec.org: www.saarcsec.org/areaofcooperatio/detail.php? activity_id=17 dixit, n. j. (2002). india, pakistan in war and peace. london: routledge. gupta, k. r., & shukla, v. (2009). foreign policy of india. new delhi: atlantic publisher & dist. hawkins, j. n., mok, k. h., & neubaver, d. (2012). higher education regionalization in asia pacific : implication for governance, citizenship and university. london: palgrave macmillan. islam, m., nag, c., lama, m. p., & khanal, d. r. (2010). economic integration in south asia: issues and pathways. new delhi: pearson education. mohiuddin, y. n. (2007). pakistan a global studies handbook. califonia: abc-clio.inc. saez, l. (2011). the south asian assocation for regional cooperation (saarc) an emerging collaboration architecture. new york: routledge. saurabh, & upreti, b. c. (2012). strengthening saarc: exploring vistas for expanded cooperation. london: pentagon press. shama, k. a. (2008). the internationalization of higher education: an aspect of india's foreign relations. new delhi: gyan publishing house. university, s. a. (2010-2011). annual report. new delhi: south asian university. university, s. a. (2012-2013). annual report. new delhi: south asian university. university, s. a. (2012-2013). annual report. new delhi: south asian university. university, s. a. (2013-2014). annual report. new delhi: south asian university. university, s. a. (2014-2015). annual report. new delhi: south asian university. wignaraja, p., & hussian, a. (1989). the challenge in south asia: development, democracy and regional cooperation. tokyo: united nations university press. review of economics and development studies, vol. 8 (3) 2022, 277-295 277 consumers purchase intention for energy efficient household appliances in southern punjab, pakistan muhammad irfan chani a, bilal tariq b, muhammad saleem ali c a, b & c comsats university islamabad, vehari campus, pakistan article details abstract history: accepted 25 august 2022 available online september 2022 consumption of electricity all over the world has been increasing since past years. however, the present investment trend is presenting marks of power supply shortage. hereafter, several countries have incorporated energy efficiency as a limited solution to forthcoming energy problems. actually, a lot of households are not substituting their household energy products with energy-efficient ones. usage of energy efficient appliances in pakistan is still at poor level. the main focus of the study is to see the consumers purchase intention for the energy efficient household appliances in southern region of punjab. this study using a questionnaire that was administered to four hundred consumers in three district of south punjab, pakistan. partial least square (pls) regression is used. the findings shows that more favorable attitudes, social influence and perceived behavioral control towards energy efficient household appliances significantly impact on purchase intention of the consumers. this study also proved that environmental concern and moderation is also positive impact on household decision to purchase efficient home energy appliances. creating awareness through advertisement about energy star labelling will beneficial for consumers. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: energy efficient appliances, purchase intention, environmental concern, household jel classification: p28, p48, q47 doi: 10.47067/reads.v8i3.438 corresponding author’s email address: saleemali20@yahoo.com 1. introduction electricity is commonly and mainly vital form of energy. it is worth noting here that the demand for electricity all over the world has been increased over the past few decades with the rapid increase in population growth. the role of energy is very important in development of a country. a study of tan, ooi and goh (2017) showed that consumer intention to buy energy-efficient home appliances is influenced by positive attitude and pbc in malaysia. household behavior is diverging about consumption of energy and it sets up through economic decision making (zhou & yang, 2016). moreover environmental issues such as change in climate, population increased and specially in genetically engineering are mostly discussed in every international conferences. all the environmental problems is due to energy if energy usage reduced then environment can save. more purchases of green and recyclable products enhance consumers product efficiency. with the usage of more efficient review of economics and development studies, vol. 8 (3) 2022, 277-295 278 products, users saved electricity and environment save due to less use of fossil fuels (mills & schleich, 2013). for this context, usage of efficient energy appliances play a significant role to reduce energy demand in household sector. recent decade, most of the writer mainly focus on the energy behavior of the household in residential area. most of the field study done in home energy to check the behavior of the households towards energy efficiency (abrahamse et al., 2007). mostly thermal plant is used to generate energy and that cause to environmental problems like air pollution. so the consumption of electricity can be reduced through smart technologies installed in home and it led to the development of the society. with the increase of the household family size may increase home appliances and this cause to raise his electric bills. energy is a very important part in nation building as a result it’s a backbone in a socio economic development of a country. nobel laureate theller (2017) described that how individual decision will manipulate with limited rationality, his social preference and lack of self-control. in this context, this study is very interesting to examine the consumer intention to buy energy proficient home appliances. most of the researchers focus on encouraging the energy-saving behavior. with the uses of energy efficient appliances, the energy can be saved and these findings are also very useful in policy making for conserving the environment in germany (mills & schleich, 2012). the major share of household energy consumption based on energy appliances, the most of the greenhouse gas emission comes from electric products like air conditioners, refrigerator, and tvs at the household level in china (xu, 2010). energy consumption may contribute to serious problems of the environment in canada due to weather changes and exploitation of natural resources in the production of power generation (ngo, west & calkins, 2009). electrical appliances that perform household tasks are known to them household appliances. the features of home appliances are that they do not carry fast, costly and technologically moving ahead of time. affordable television, expensive ac, washing machines, fridge and ovens can be considered as one of the largest household appliances that develop experience in fast-growing consumer goods because they are such for consumer durable goods purchased at high frequency. so, consumers cannot buy home appliances again in small cases (wilson, 2016). consumer performance is analyzed with the use planned behavior theory, its best explaining the behavioral intention of the consumers (ajzen, 1991). this theory based on social pressure selfmotivation and attitude. nowadays pakistan is facing power shortage in the industrial sector, agriculture and household sector and this lead to decrease the economic productivity (choudhary, khan, & abbas, 2008). economic survey sheds the light that there is urgent need to create awareness in general public about the use of energy efficient and environmentally friendly techniques. qureshi et al. (2016) highlighted that use of led lights has not only conserved electricity but are also environmentfriendly. a rapid increase in energy demand of household sector in pakistan increases the electricity bills only because of usage of inefficient electric appliances. most commonly used energy appliances are a refrigerator, iron, washing machine, tube lights, water heater, air conditioner and water pump. they all require more amount of electricity. energy saving appliances are now a common desire of every consumer because energy prices are increasing rapidly. with the uses of energy-efficient appliances, every household can save money and conserve the environment. energy efficient appliances like led, cfl lights are economical and eco-friendly. review of economics and development studies, vol. 8 (3) 2022, 277-295 279 home-based applications are comparatively costly and contain planning, information of appliances and estimation before purchase. since 1980, energy demand has increased almost six times in pakistan and is likely to be re-joined by 2016. with a very high dependence on hydrocarbons as a major source of energy, the situation is not permanent. contrary to this, demand for energy is actually expected in developed economies, such as the oecd. although in 2005 they were less than 2030, despite their expectations of an increase of 50% in their economies. due to significant progress in energy efficiency in these countries, pakistan will get benefit to adopt their models. existing energy infrastructure is also desperately needed to improve: transmission and distribution are disabled, large water reservoir lost working capacity, and generating current price strategy, many options that provide costly energy imbalance in the mix of arbitration (govt of pakistan, 2017). last decades, global power consumption is increasing rapidly. however, the current investment trend indicates power failure, many nations have agreed to use energy proficiency equally limited resolution to the upcoming energy issues. in fact, various people does not exchange their home energy home appliances with efficient products. household incentives to accept energy-saving appliances can be doubled. firstly, it is assumed that the households that maximize their utilization are meant to minimize the cost of services such as food cooling or laundry drying. therefore, in addition to initial purchase costs, it is expected that the energy efficiency and related energy costs of the appliances over time are relevant criteria for choosing a technology along with other features such as size, design, accountability or other operating expenses. secondly, as the purchase of energy-saving applications leads to less resource use and lower emissions of local and global pollutants, environmental degradation is diminishing. therefore, from an economic point of view, adopting an energy efficiency device also creates a public good in terms of a cleaner environment (leeuw, pierre & ajzen, 2015). the problem of a shortfall in electricity is uses of electric appliances which cause a gap between supply and demand of electricity. people facing load shedding that timing of load shedding in summer seasons is high due to increase in household demand of energy (govt of pakistan, 2017). this survey also highlighted that there is four percent increase in consumption of electricity in households sector from june 2016 to june 2017 while industrial sector consumption of energy is decreased by one percent. the demand of electricity for households increases the total demand. now the problem is that how people can use energy efficiently because every consumer wants to save money. if electricity bills are increasing every month than it’s very difficult to manage his income to meet his expenditure. also, load shedding is a big problem of pakistan and it is increasing hourly. there is no research about using energy efficient products in the selected district of south area of punjab. in this context, this study can be a unique contribution which will conduct in three district of southern punjab (multan, khanewal and vehari) to see the buying intention of energy-efficient home appliances and also sees the consumers’ behavior about environment conserving. second including the environmental variable in the research is also a new contribution in theory of planned behavior. last is last is including moderation term in the model also raises the importance of this study. to fill the gap by using tpb with two environmental variable and moderation term can increase the importance of energy efficient appliances. the objectives of the study are: • to analyze the consumer behavior about the purchase intention of energy-efficient household appliances. • to check the moderating role of environmental knowledge in a relationship with perceived behavioral control and purchase intention of energy-efficient household appliances. review of economics and development studies, vol. 8 (3) 2022, 277-295 280 2. hypothesis development theory of planned behavior is developed by icek ajzen in 1985, it is one of the best theory that explained the human behavior about the way of they behaving. this theory is explained by its three main variables and that’s are perceived behavioral control, attitude and subjective norm. many past studies applied theory of planned behavior to see the purchasers purchase intention about electricity saving behavior (wang, zhang, yin & zhang, 2011); energy saving behavior (wang, zhang & li, 2014); energy efficient products (wang, wang & guo, 2017) and pro environmental behavior studied by (chan et al., 2014). 2.1 attitude attitude is mentally state; it may be positive or negative according to the situations. attitude is a mental state of activeness seeking and it’s organized by individual experience (ivancevich, konopaske & matteson, 2010). it’s also influence by object, others person responses and relevant situation. if there is one positive attitude is performed towards action, there is possibility that task is performed by the consumer. as three independent determinants of consumers purchase intention in the theory attitude is satisfactory or unfavorable assessment towards a positive behavior (ajzen, 1991). wang et al. (2011) define attitude is the degree of consumers consciousness to execute an energy saving behavior. it’s also include that information of energy saving types and its past experience also helpful to do positive behavior. for reviewing above literature about the attitude it can be said that purchase intention of energy efficient appliances is influence by positive attitude and research hypotheses is h1: “attitude has positive impact on the purchase intention of energy-efficient appliances” 2.2 subjective norm the second element of the theory of planed behavior is subjective norm. subjective norm is the thinking of other people about you that how you will perform a certain behavior. ajzen (1991) defined that subjective norms is the perceived social pressure to perform the behavior. in simple words, its individual observation or belief near what key others trust to do a task or perform behavior. it also defines as a viewpoint of the nearest people who are very close to me that can influence his decision making for example his family members, colleagues, friends and relatives. earlier studies propose that subjective norm was positively affect the consumers behavioral intention about using energy efficient household appliances (han & kim, 2010). subjective norm is related to the mathematics as saw compression from the others regarding which action should performed according to the expectation. because sn either inspire or prevent that how an individual act (klockner, 2013). household energy saving behavior is largely affected by the norms. however, while purchasing energy appliances our decision is also influence by friends’ decision, family members and our knowledge about those products. subjective norm is positively and significant impact on intention of the consumers. people who had strong public or social relation is positive attitude about his decision and intention. so, research second hypothesis is h2: “subjective norm has significant impact on purchase intention of energy-efficient appliances when environment concern is high” 2.3 perceived behavioral control this is consumers relieve or complexity to achieve a particular behavior. for consumption purpose whether a consumer can simply consume product or he faces difficulty while using that product. perceived behavioral control is individual internal factors that influence his decision. as the review of economics and development studies, vol. 8 (3) 2022, 277-295 281 person have more control on his behavior by using energy saving appliances, he definitely purchases more things in future (alam et al., 2014). in the recent studies, theory of planned behavior is widely used especially in behavioral economics and green behavior while purchasing. pbc is confirmed and significant impact on purchase intention (chan et al., 2014). a recent study in malaysia found that pbc has positive effect on small family members by using renewable energy appliances intention (alam et al., 2014). many studies also focus on incentives that is provided by the government on energy appliances is more favorable for consumers. wang et al. (2017) concluded that purchase intention is significantly affect by the perceived behavioral control. so that study third hypothesis is h3: “perceived behavioral control has positive impact on purchase intention of energy-efficient appliances” 2.4 environmental knowledge (ek) people mostly ignore the environment while making purchase of energy appliances. people who have more knowledge or well aware of ecological issues have positive attitude. environmental knowledge is defined that it’s a person knowledge about his nearest environment or regarding issues and how much he know about the problem of the environment (kaiser et al., 1999). in simple word, people knowledge, awareness, problems and solution about the environment is called the environment knowledge. ek is generally affected by pro-environmentally attitude and behavior. those who had lack of ecological-knowledge are not used environmentally friendly products. while purchasing green products, a study in swiss found that young consumer’s intention is more engage with positive environment attitude (kanchanapibul et al., 2014). there is positive relationship between energy knowledge and energy saving behavior (wang et al., 2011). for reviewing some literature, we expect that there is significant relationship between environmental knowledge and intention. so the fourth hypothesis is: h4: “environmental knowledge has significant impact on purchase intention of energy-efficient appliances” 2.5 environmental concern (ec) environment concern is the motivation in the consumers while buying products. while people have more knowledge about the environment issues, have more concern to save the environment. people who have more concern about the environment are more involve in pro-environmental attitude. environment concern is most popular variable is used in today studies while measuring environment behavior (albayrak et al., 2013). its self-responsibility of the respondents to the energy saving behavior while measuring environmental concern (wang et al., 2014). ec can lessen the take-bake effect that are related to the pro environment behavior (urban & scasny, 2012). for that reason many scholars found that there is significant relationship between behavioral intention and environmental concern (albayrak et al., 2013; chan et al., 2014). usually i suppose that purchase intention of energy efficient household appliances is positively related with environmental concern. thus, study fifth hypothesis is: h5: “environmental concern has significant impact on purchase intention of energy efficient appliances” review of economics and development studies, vol. 8 (3) 2022, 277-295 282 2.6 moderate effect moderator is a variable that effect the path of the variable or strength between the dependent variable and the predictor variables. the last hypothesis that i developed to see the moderate role of environmental knowledge and perceived behavioral control on purchase energy efficient appliances. the study sixth hypothesis is: h6: “environmental knowledge and perceived behavioral control has significant moderate the intention to purchase energy-efficient appliances” 2.7 proposed model mainly theory of planned model is adopted that given by ajzen in 1991. my model is derived from that model and it defined the relationship between the dependent and independent variables. figure 1. theoretical model for analyzing consumers buying intention for energy efficient household appliances. this research model has three variables that are adopted from the ajzen theory of planned behavior that is attitude, subjective norm and perceived behavioral control. but added two more variable that is environmental concern and environmental knowledge to see the effect of these variables on purchase intention. figure 1 shows that all variables are directly influence the dependent variable that is purchase intention but environmental knowledge and pbc has moderate effect on purchase intention. 3. methodology the chapter of research methodology is very important in the research process. it is the organized way of doing research in a systematic way. this chapter includes research design, approaches, sampling, data collection techniques, questionnaire design and analytical technique. 3.1 research design for this research data is collected from the household’s age above 20 who are teaching in the government colleges in three districts of south punjab, pakistan. present study mainly focuses on the government college faculty as respondents are taken from three district of south punjab, pakistan (multan, khanewal and vehari). simple random sampling technique is used because it is easy to collect the data from the faculty. a pre-tested questionnaire is used for this study. questionnaire were filled form the lecturer, assistant professors and associate professors for different subjects. the main concern was to see the well-educated household behavior about the purchasing the household energy appliances. partial least square regression is used for this research. adopted questionnaire is taken for attitude subjective norm environmental concern purchase intention perceived behavior control environmental knowledge review of economics and development studies, vol. 8 (3) 2022, 277-295 283 this research mostly question is taken from the literature (tan et al., 2017; paul et al., 2016). twentynine questions are used for this research and 400 questionnaire is filled from the faculty of government colleges in 4 months. all questions are measured on five-point likert scale. this included (1 strongly disagree to 5 strongly agree). the questionnaire in this research consists of seven sections. a) section one is related to the demographic variable (e.g., age, gender, profession, education, discipline, income). b) section two is related to the consumer’s attitude about purchasing energy efficient household appliances. this section contains five questions to measure this variable. c) third section include four items of subjective norm. d) fourth section include five items of perceived behavioral control. e) fifth part of the questionnaire contains of environmental related variables that is environmental concern f) sixth section have environmental knowledge relevant questions. g) the last section is dependent variable that is purchase intention included four questions. table 1 recorded the household demographic details which included age, education, marital status, residence and income level. most of the respondents aged lying between 41 and 50 years and this is half of the total sample data. while 87.5 percent married respondents also have good experience to purchase energy efficient products. mostly respondents have master degree and their monthly income is between 50000 to 70000. lastly, many households belong to the rural area and they himself purchase the products for their home. all the detail of the respondents is given in the table 1. table 1. respondent’s profile variable frequency percentage age (years) 20-30 31-40 41-50 51-60 marital status single married education masters ms(mphil) phd income level (rs) 50000-70000 71000-90000 91000-110000 111000-130000 131000-150000 residence rural urban 20 120 200 60 50 350 280 70 50 295 70 15 10 10 242 158 5 30 50 15 12.5 87.5 70.0 17.5 12.5 73.75 17.54 3.75 2.5 2.5 60.5 39.5 review of economics and development studies, vol. 8 (3) 2022, 277-295 284 3.2 reliability reliability shows the accuracy of the data. the first step in the research is to check whether the data is reliable or not. if the results of the scale reliability meet the accuracy point then it further proceed otherwise not. table 2 showed that the value of cronbach’s alpha is greater than 0.7 or closes to the recommended value of the cronbach’s alpha (hair et al., 2014). table 2. reliability analysis variables cronbach’s alpha number of items attitude subjective norm perceived behavioral control environmental concern environmental knowledge purchase intention 0.698 0.710 0.871 0.860 0.795 0.749 5 4 5 6 5 4 table 2 showed all the variables reliability that are measure through cronbach’s alpha values. the reliability of environmental concern and pbc are quite high as compared to the other variables. while attitude reliability values are close to the 0.7. 4. results 4.1 normality of data to check that collected data is normally distributed, jarque–bera (jb) test of normality is used and verified through skewness and kurtosis, the range of skewness and kurtosis between -2 and 2 (gravetter & wallnau, 2014) for normal data. all values are placing well within range. table 3. normality of data statistics att sn pbc ec ek pi n valid 400 400 400 400 400 400 skewness .030 -.092 -.440 .186 -.134 -.450 std. error of skewness .122 .122 .122 .122 .122 .122 kurtosis -.717 -.105 .801 -.551 -.583 .393 std. error of kurtosis .243 .243 .243 .243 .243 .243 jarque-bera 8.767 0.794 22.864 7.515 7.008 15.742 probability 0.012 0.672 0.000 0.023 0.030 0.000 results present in table 3 showed that normality of data values that are measured through skewness and kurtosis. all the given values are rages between -2 and +2. it means that the data is normally distributed. review of economics and development studies, vol. 8 (3) 2022, 277-295 285 4.2 validation of data there are some new constructs are used to test the data validation and they are construct validity (cv), convergent validity (cv) and discriminate validity (dv). 4.2.1 construct validity construct validity (cv) is used to test how well the required items measurement represent the whole population from the selected sample (hair et al., 2014). for this research cross loading and outer loading is tested for construct validity. haier et al., (2014) argue that the value of outer loading greater than 0.50 is significant considered and below than 0.50 is insignificant. using principal component analysis in spss the results of cv are here. bold values are greater than 0.50, so its significant. table 4. construct validity att sn pbc ec ek pi att1at t2att3 att4at t5sn1 sn2 sn3 sn4 pbc1pb c2pbc3 pbc4pb c5 ec1 ec2 ec3 ec4 ec5 ec6 ek1 ek2 ek3 ek4 ek5 pi1 pi2 pi3 pi4 0.754 0.890 0.865 0.870 0.730 0.223 0.452 0.231 0.416 0.321 0.453 0.459 0.150 0.170 0.235 0.400 0.400 0.320 0.135 0.193 0.268 0.300 0.129 0.142 0.333 0.325 0.473 0.453 0.323 0.417 0.233 0.455 0.362 0.222 0.692 0.856 0.725 0.903 0.472 0.460 0.235 0.454 0.453 0.253 0.125 0.400 0.332 0.468 0.336 0.452 0.423 0.327 0.226 0.347 0.313 0.176 0.266 0.400 0.332 0.423 0.157 0.289 0.132 0.470 0.399 0.256 0.388 0.760 0.809 0.793 0.777 0.860 0.223 0.410 0.315 0.193 0.330 0.109 0.299 0.345 0.458 0.466 0.777 0.579 0.530 0.499 0.497 0.369 0.417 0.406 0.312 0.323 0.227 0.269 0.245 0.369 0.190 0.361 0.447 0.360 0.250 0.889 0.910 0.852 0.900 0.844 0.815 0.341 0.432 0.449 0.192 0.126 0.240 0.413 0.173 0.176 0.090 0.070 0.159 0.293 0.453 0.359 0.140 0.099 0.355 0.263 0.400 0.292 0.329 0.277 0.107 0.327 0.293 0.423 0.422 0.177 0.700 0.820 0.512 0.789 0.757 0.093 0.480 0.176 0.269 0.369 0.320 0.393 0.355 0.255 0.162 0.244 0.388 0.088 0.109 0.147 0.053 0.144 0.292 0.488 0.440 0.355 0.399 0.406 0.366 0.199 0.280 0.420 0.060 0.357 0.880 0.918 0.733 0.911 note: above 0.50 value loading are significant and bold. att (attitude), sn (subjective norm), pbc (perceived behavioral control), ec (environmental concern), ek (environmental knowledge), pi (purchase intention). review of economics and development studies, vol. 8 (3) 2022, 277-295 286 results in table 4 describes the questionnaire construct that truly define the variable. if the value of the outer loading is greater than 0.5 than its truly describe the population mean (hair et al., 2014). so, in this table all the bold values are greater than 0.5 which indicate that outer loading is truly represent the construct. 4.2.2 convergent validity (cv) convergent validity (cv) is used when many items are measured on same construct. there are two test is used for cv measurement, one is composite reliability. (cr) and second is average variance. extracted (ave) (hair et al., 2014). the value of cr and ave is greater than 0.50 is acceptable (hair et al., 2014). cr measure internal reliability of the latent construct while ave describe the indicators variance for the justification of construct. table 5. convergent validity measures items loading cr ave α att1 att2 att3 att4 att5 sn1 sn2 sn3 sn4 pbc1 pbc2 pbc3 pbc4 pbc5 ec1 ec2 ec3 ec4 ec5 ec6 ek1 ek2 ek3 ek4 ek5 pi1 pi2 pi3 pi4 0.754 0.890 0.865 0.870 0.730 0.692 0.856 0.725 0.903 0.760 0.809 0.793 0.777 0.860 0.889 0.910 0.852 0.900 0.844 0.815 0.700 0.820 0.512 0.789 0.757 0.880 0.918 0.733 0.911 0.877 0.874 0.899 0.948 0.843 0.921 0.849 0.632 0.801 0.755 0.524 0.746 0.698 0.710 0.871 0.860 0.795 0.749 note: cr = (square. of the summation of the factor loading)/ (square of the summation. of the factor loading) + (square of. the summation of the error variances), ave = summation of square of the factor loading/ (summation of square of the. factor loading) + (∑e.v). review of economics and development studies, vol. 8 (3) 2022, 277-295 287 in this analysis, where purchase intention (pi) is dependent variable and independent variables are subjective norms, perceived behavioral control, environmental concern and environmental knowledge respectively. results are present in table 5 shows the results of cr, ave and cronbach’s alpha which indicate that all the results are significance according to the literature. all the values are greater than 0.5, which means that construct that are design for research is good to measure the variable reliability. 4.2.3 discriminate validity (dv) dv is used to differentiate the construct from the other construct (haier et al., 2014). it is also used to measure the correlation between possibly overlapping construct. according to the fornell.larcker criterion, loading of items should be greater from their own construct in model. the value of ave square root should be greater than other construct (fornell & larcker, 1981; hair et al., 2014; tan et al., 2017). table 6. discriminate validity latent variable att sn pbc ec ek pi attitude subjective norm pbc environmental concern environmental knowledge purchase intention 0.921 0.499 0.356 0.596 0.362 0.556 0.794 0.438 0.700 0.597 0.298 0.894 0.555 0.499 0.630 0.868 0.423 0.700 0.723 0.566 0.863 note: the bold values are square root of ave and remaining entries are square correlation with the use of fornell-larcker criteria (fornell & larcker, 1981). finally, the results in table 6 shows that square root of ave values are greater than the square correlation of construct. it can be said that all the construct different from each other. 4.3 regression analysis and moderation to find out the relationship between dependent variable and independent variables, regression analysis is done and results are given below. in regression analysis, partial least regression is used to test the hypothesis. 4.3.1 hypothesis analysis to test the hypothesis, a bootstrapping function is used. minimum of 5000 bootstrap samples is selected and one-tailed t-test critical value (1.645) at five percent level of significance and 2.33 (one percent significant level) is applied (hair et al., 2014; tan et al., 2017). the results of pls regression is here. the bootstrapping sample identify the coefficients values and t-values suggests that hypothesis are statistical significant. review of economics and development studies, vol. 8 (3) 2022, 277-295 288 table 7. pls regression results unstandardized coefficients standardized coefficients t-value sig. b std. error beta (constant) .222 .196 1.134 .257 att .157 .047 .161 3.340 .001** sn .099 .045 .093 2.185 .029** pbc .226 .047 .210 4.808 .000** ec .238 .051 .225 4.659 .000** ek .222 .047 .211 4.698 .000** note: **p <0.05 results shows in table 7 that the values of the standardized coefficient is significant at five percent level. using bootstrapping function for testing the hypothesis, nearly 5000 bootstrap sample is selected minimum. the value of attitude is 0.161 (p-value, 0.001) indicate that people attitude towards energy efficient appliances is positive and want more products that needs less energy. it means that attitude has significant impact on buying energy efficient home products. coefficient of subjective norm is also positive and significant (0.093, p-value, 0.029). this indicate that there is positive relationship between purchase intention and the subjective norm. this indicates that social pressure on households to buy efficient electric products more because his closest friends and family members suggest to buy. third variable is the perceived behavioral control and that is significant i m p a c t o n t h e p u r c h a s e i n t e n t i o n o f e n e r g y e f f i c i e n t h o m e a p p l i a n c e s . coefficient values of environmental concern and perceived behavioral control are high compare with the other three variables. 4.3.2 correlation analysis correlation is used to test the relationship between the variable. for this study pearson correlation is used. the given table described the results of the correlation. table 8. correlation analysis correlations att sn pbc ec ek pi att pearson 1 correlation sn pearson .484** 1 correlation pbc pearson .437** .405** 1 correlation ec pearson .602** .441** .460** 1 correlation ek pearson .508** .367** .425** .492** 1 correlation pi pearson .546** .428** .500** .552** .525** 1 correlation **. correlation is significant at the 0.01 level (2-tailed). review of economics and development studies, vol. 8 (3) 2022, 277-295 289 the results presents in 8 table describe the pearson correlation among all variables. the stronger the association of the two variables, the closer the pearson correlation coefficient, r, is to either +1 or -1 depending on whether the relationship is positive or negative, respectively (swinscow & campbell, 1997) and (hinkle, wiersma, & jurs, 2003). correlation results with double asterisk shows highly significant relationship between two variables and values without asterisk show insignificant relationship. the analysis shows that attitude is positively associated with subjective norm and perceived behavioral. similarly, environmental variables that are ek and ec are also significant and associated with purchase intention of energy efficient appliances. 4.3.3 moderation results moderation term is used in this model that is done in spss 25. pbc is taken as a moderator between ek and pi. the results of the moderation is given in table 9. table 9. moderation results coefficientsa model unstandardized coefficients standardized coefficients tvalue sig. b std. error beta 1 (constant) 1.307 .200 6.549 .000 ek .141 .068 .133 2.069 .039 pbc .307 .047 .286 6.525 .000 pbc*ekb .054 .011 .330 4.975 .000 dependent variable: pi pbc* ek: interaction term this moderation analysis is done in statistical software spss. the level of significance is five percent. all the variable is significant at five percent level of significance. the result shows in table 9 that interaction term (pbc*ek) is significant because p values is 0.000. it shows that 33 percent change in dependent variable is explained by the moderator. results also indicate that households purchase intention is decisively moderated by the interaction term (perceived behavioral control and environmental knowledge). while environmental knowledge and perceived behavioral control is also significant impact on purchasing energy efficient appliances. but perceived behavioral control is more important factor while purchasing energy products instead of environmental knowledge. figure 2. moderation effect 1 1.5 2 2.5 3 3.5 4 4.5 5 low pbc high pbc d e p e n d e n t v a r ia b le low ek high ek review of economics and development studies, vol. 8 (3) 2022, 277-295 290 5. discussion and conclusion 5.1 discussion attitude of the consumers about the use of efficient energy home appliances is positive and significant to the household purchase intention. therefore, these results purposes that positive attitude of the consumers about using efficient energy products in their homes buy more products that consume less energy. finding of this study is also related with the former studies by (greaves et al., 2013 and ha & janda,. 2012). the study of the presented of the tpb authors fishbein and ajzen (1975) found that positive attitude existence of purchase intention of efficient home energy appliances is admitted. their results showed that attitude of the consumers is very high correlated with intention to buy more efficient energy home appliances and suggest that attitude is rational predictor of the household real behavior. the result also indicates that consumers that have past experience to buy efficient home appliances is positive impact on their behavior. now this specify that the consumers of the selected three district of the southern punjab mostly representing satisfactory attitude about efficient energy home products. this attitude still more positive if government should subsidies on the energy efficient products than people buy more efficient products (galarraga et al., 2016). if the products that needs more energy are going to be expensive and government impose taxes on inefficient appliances than may be people will shift towards buying more efficient appliances. subjective norm found significant and positive related with the purchase intention and the impact of subjective norm on the dependent variable is about 0.093 which means that nine percent variance is explained by subjective norm in purchase intention. the finding of ha & janda (2012) is also similar with that concluded that subjective norm is positive and significant related with the consumer purchase intention of energy efficient home appliances in korea. it can be said that both countries culture are different that’s why these significant level is changes from country to country. it’s the consumers’ responsibility to perform a certain behavior about buying energy efficient products. a study of lopez (2014) showed that it may be possible that subjective norms may affect indirectly to the household behavior about buying efficient appliances. widely used in the social research, pbc are very important factor in theory of planned behavior. perceived behavioral control results also indicate that it is significant and positive impact on pi. a study conducted in china found that pbc and purchase intention of the energy efficient home appliances are positive and significant correlated (wang et al., 2017). in this study environmental concern is also significant and positive impact on intention to buy more efficient energy product. the value of the coefficient of environmental concern is 0.225, it shows that one percent increase in the environmental concern will bring twenty five percent increase in the consumers purchase intention to buy more efficient home appliances. these finding are reliable with finding of (albaryak et al., 2013; tan et al., 2017; urban & scansy, 2012). but these finding are not linked with the study about visiting green hoteling in malaysia that environment concern is not a substantial interpreter of the purchase intention (ramayah, 2010). but in this case, in the selected region of my study consumers are more concern to save the environment because summer season increases and temperature are too high almost fifty degree centigrade. that’s why people are more and well aware about conserving environment. next variable is environmental knowledge that is positive impact on the purchase of energy efficient products and also significant. the value of the environmental knowledge is 0.211 that shows review of economics and development studies, vol. 8 (3) 2022, 277-295 291 that if one percent change in the ek will bring change in dependent variable about twenty one percent change. the study of tan et al. (2017) found the insignificant impact on pi but positive results shows that people of the malaysia are less knowledge able as compare with the pakistani consumers. may be the reason is that data is collected from the well knowledge household’s in southern region of the punjab, pakistan. same results found (chan et al., 2014). another study by carfora et al. (2017) concluded that moderating role of environmental knowledge and pbc has a positive impact on buying efficient electric appliances. their research results showed a significant relationship with the household knowledge about the environmental issues, behaviors towards saving energy and the use of energy related appliances. due to the several energy crisis in the past ten years in pakistan, energy demand increased the use of more efficient appliances for homes. increase in the tariff in electricity bills raises the household monthly bills. many strikes are happen against government fail to provide the electricity. if consumers buy more efficient energy products (e.g. dc inverter ac and refrigerator, led lights) instead of inefficient appliances that consume more energy is helpful to reducing the monthly expenses of the households. most important factor that influence the household purchase intention is social pressure (friends, family member) and his own ability to purchase products. household purchase decisions is also affected by the others persons buying decision. using the theory of planned behavior variable in my research helpful to find out the household buying decision of energy appliances. most of the people are buying products as their relatives and friends ask to buy. because social pressure and products knowledge are more helpful while making purchasing. more positive attitude towards buying efficient energy appliances for home is more effect on the household decision. struggle and mediations is helpful to increase the perceived behavioral control and make a sense of independent effectiveness to improve the attitude of the consumers like the finding of chan et al. (2016). our main energy system knowledge to the consumers still not impact on the customers purchase intention to buy efficient products, if government and the policy makers spend more in the advertisement to save the electricity. according to the latest survey (govt of pakistan, 2017), many consumers are not buying the efficient home appliances because of the high price relative to the old appliances. if marketers and government subsidies low energy consumption products or make a choice for the consumers to change their home inefficient appliances with the new appliances then the people behavior will change automatically. more knowledge about the products also helpful to the consumers to buy efficient products. more knowledge about the environment activities like increase in co2 emission in the air, global warming, reduction in the forest and waste generation that cause to pollute the environment. every country have now more concern about the energy efficiency and the environment. more people are well aware about these problems of upcoming decades faced by the southern punjab not only but also whole area of the pakistan. because of the summer seasons extended every year due to environment change and electricity shortfall raises as day past. for the government side such as wapda that provide electricity to the whole country should advertise the labeling schemes about the energy efficient products for home. electronic media and print media helpful for the household behavior and its intention while taking decision to buy the efficient products like malaysia and singapore (tan et al., 2017). many companies in the markets provide efficient products like sony, samsung, hair and panasonic’s dc inverter ac’s, refrigerator, led lights and tv, washing machines review of economics and development studies, vol. 8 (3) 2022, 277-295 292 and air-collar that takes less energy. now-a-days government of pakistan printed the labeling schemes on electric bills. but the problems is that most of the educated person not read the bills, they did not know that these labeling products are helpful to reduce the expenses on their monthly electric bills (govt of pakistan, 2017). most of the consumers does not know about the peak and offp e a k time periods in the electricity. in the peak time period charges of electricity raises if household reduce its appliances consumption in that time, it will save electricity and also cost of that uses. household should consume more in the off-peak hours. it is very good advantage for the residential sector in the southern punjab, pakistan. it is often seeming that people who have more concern in the consumption of the electricity in the peak hours, have more intention to buy efficient energy appliance for their homes. many past studies beliefs that if the consumers have ability and enough knowledge to observe his consumption of the electricity on monthly basis, they will able to buy more efficient products by replacing their old inefficient appliances (tan et al., 2017). 6. conclusion in this study, by developing a model to analyze the consumers purchase intention for efficient energy home appliances in the southern punjab, pakistan. this study mostly focus on the theory of behavioral economics, theory of planned behavior. main focus of the study is to find out the household purchase intention and the moderation role of the environmental concern with the perceived behavioral control and the intention to purchase efficient products that needs less power. this is primary study and data is collected from the adopted questionnaire form the past literature. questionnaire have twenty nine items of the five independent variable (attitude, perceived behavioral control, subjective or social norms, environmental concern and environmental knowledge) and dependent variable is purchase intention of the energy efficient products. questionnaire is filled from the government college’s faculty. partial least square regression is used to test research six hypotheses. also moderation regression is run to check the moderating role of environmental knowledge and perceived behavioral control in relationship with purchase intention. the results described that all the variables are significant impact on the consumption of the electric efficient home appliances. the results of the moderator variable are also significant and positive link with the dependent variable purchase intention of energy efficient products. 7. policy implications finding of this study provides policy implication for the consumers to raise the uses of energy efficient home products awareness and also support the energy efficiency in pakistan. first of all, most of the energy is used in the household sector. companies of energy products making should work with the government to promote the efficient products. most of the brands like samsung, haier, panasonic and sony will work with the energy department to promote his products that needs less energy. most of the household is educated in this study and their behavior towards energy saving is positive. improving energy can save environment, more knowledge about environmental sciences will bring changes in the consumer’s attitude about buying energy efficient products. the current study is done in the three district of the southern punjab, pakistan, and it can be further extended in other region of the pakistan to explore the household behaviors towards saving or using efficient energy home appliances. secondly, due to time constraints, only government college’s faculty is selected as a respondents for my research, further this research can be done in others regions of pakistan respondents like illiterate households, comparison of low and high level income households. review of economics and development studies, vol. 8 (3) 2022, 277-295 293 references abrahamse, w., steg, l., vlek, c., & rothengatter, t. 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(2016). understanding household energy consumption behavior: the contribution of energy big data analytics. renewable and sustainable energy reviews, 56, 810-819. review of economics and development studies vol. 5, no 4, 2019 869 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads do migrant remittances spur financial development in pakistan? evidence from linear and nonlinear ardl approach 1 muhammad faheem, 2 azali mohamed, 3 fatima farooq 4 sajid ali 1 lecturer, school of economics bahauddin zakariya university multan, pakistan: malik007.bzu@gmail.com 2 professor, faculty of economics and management, universiti putra malaysia, serdang, selangor, malaysia: azali@upm.edu.my 3 assistant professor, school of economics bahauddin zakariya university multan, pakistan: fatimafarooq@bzu.edu.pk 4 lecturer, school of economics bahauddin zakariya university multan, pakistan: sajidali1136@gmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 the study asseses the influence of migrant remittances on financial development over the period of 1976-2018 in pakistan. this study has applied the linear autoregressive distributive lag (ardl) model and nonlinear autoregressie distributed lag (nardl) model to check the symmetric and asymmetric effect of remittances. results of the ardl and nardl bound test confirm remittances, fdi, real gdp and inflation significantly contributing to financial development. the outcomes of ardl and nardl have also confirmed the significant positive effect of migrant remittances on financial development in long-run. the asymmetric ardl results show the existence of remittances nonlinear effect on financial development. specifically, the study found remittances decrease have a significant impact while remittances increase have no any significant effect on financial development. based on findings, this study recommends the plan for the policymakers of recipient countries, especially pakistan, could harvest the potential gain of migrant remittances though positive asymmetric association with financial sector development. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords nardl, financial development, migrant remittances, pakistan jel classification: f24, b26, f43 corresponding author’s email address: malik007.bzu@gmail.com recommended citation: faheem, m., mohamed, a., farooq, f. and ali, s., (2019). do migrant remittances spur financial development in pakistan? evidence from linear and nonlinear ardl approach. review of economics and development studies, 5 (4), 869-880 doi: 10.26710/reads.v5i4.905 1. introduction migrant remittances are considered more stable than any other international financial flows and become a significant input in asia, africa, latin america and pacific region’s economic development during the last three decades (ratha, 2004; bhattacharya et al., 2018). however, still, it relies on informal transfer channel1 inspite of bank transfer (adams and page, 2005). however, the bank estimates show the flow of remittances reached $529 billion to lowand middle-income economies in 2018 (world bank, 2018). 1 informal remittances transfer channel is medium of unrecorded capital export through unofficial international financial transaction (brown, 1992). http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 870 economic development of a country depends on finance and it is supposed to be core of modern economy (aibai et al., 2019). since the 2000s, the integration of developing countries with the capital inflows and the global financial system is due to the third phase of globalisation because financial globalisation improves the functioning of financial system (bhattacharya et al., 2018). the role of financial institutes and markets is significant in economic growth and development, especially in productive activities through their role in finance allocation (levine, 2005; nazar et al. 2018). sound research has been done in empirical studies to check their role in different economies by using various econometric techniques. a lot of literature highlights the efficiency of financial institutions and financial markets to enhance economic growth (pagano 1993; levine 2003; goodhart, 2004). pakistan economy is in the list of the fastest-growing economies of asia, which remains its position in the world’s remittance recipient countries (world bank, 2018). traditionally, in pakistan, migrant remittances have remained the source of foreign exchange earnings (luqman and haq, 2016). following graph shows the trend of personal remittances from 1976 to 2018. the increase in personal remittances shows upward trends with time. source: authors’ computation with data from wdi many studies have been explained the impact of remittances while a few of them considering financial development. the previous literature discussed the linkage of remittances with different areas of interest i.e., remittances and dutch disease effect (hassan and holmes, 2013; chowdhury and rabbi, 2014; roy and dixon, 2016; urama et al., 2019), remittances impact on growth (cooray, 2012; meyer and shera, 2017), remittances influence on education and sustainable development (calero et al., 2009; adams and page 2005); remittances and environmental effect (li and zhou, 2015), remittances and political institutions (williams, 2017); remittances and foreign exchange earnings (keely and tran, 1989), remittances and health expenditures (valero-gil, 2009; terrelonge, 2014); household expenditure pattern (taylor ,1992; ogunwole, 2016); on investment (glytsos, 2005; kapur and mchale, 2003; balde, 2011), poverty and income inequality (bang et al., 2016; docquier and rapoport, 2003), unemployment (ratha, 2005), and remittances and productivity of the labour (al mamun et al., 2015; al mamun et al., 2016). however, a single question arises that if the developed financial market is responsible for the country’s economic growth then why many countries are still financially underdeveloped in the world and remittances inflows have any influence on financial development? this study tries to answer by analyzing the symmetric and asymmetric relation of migrant remittances with financial development by employing ardl and nonlinear ardl (nardl) in pakistan. the rest of our paper is structured as follows. literature review provides in section 2. section 3 presents methodology. section 4 repots the empirical results and discussion. in the last, concluding remarks and some policy recommendations are given in section 5. 0 2 4 6 8 10 12 0 5000 10000 15000 20000 25000 1 9 7 6 1 9 7 8 1 9 8 0 1 9 8 2 1 9 8 4 1 9 8 6 1 9 8 8 1 9 9 0 1 9 9 2 1 9 9 4 1 9 9 6 1 9 9 8 2 0 0 0 2 0 0 2 2 0 0 4 2 0 0 6 2 0 0 8 2 0 1 0 2 0 1 2 2 0 1 4 2 0 1 6 2 0 1 8 p e rs o n a l r e m it ta n ce s r e ce iv e d ( % g d p ) p e rs o n a l r e m it ta n ce s r e ce iv e d ( u s m il li o n d o ll a rs ) personal remittances inflow to pakistan remit remitm$ review of economics and development studies vol. 5, no 4, 2019 871 2. literature review although there is an ambiguous and unclear association of migrant remittances with financial development (aggarwal et al., 2011), however, literature explains several reasons behind the linkage of remittances with banking sector development is positive. the first and most important reason is as remittances being lumpy as sending the cost of migrant remittances is fixed that increase households demand for banking products. secondly, banks act as paying agents because the most unofficial source is used by household rather than the formal financial sector and offer banking products to unbanked households. thirdly, the processing fee of the bank against remittances transactions could be a source of income. fourthly, banks are provided with information related to the household income of recipient by processing remittance flows that could be used to extend credit (demirgüçkunt et al., 2011; opperman and adjasi, 2019). the literature displays the empirical linkage of international remittances with the financial sector development that is still evolving. remittances encourage financial sector growth through the formal channel (nyamongo and misati, 2011). on the other side, remittances relax the household financial constraints that reduced the demand for credit (giuliano and ruiz-arranz 2009). the literature is divided into two main categories; an indirect association which states that remittances and growth relationship is affected by a given level of financial development, and by checking the link between remittances and financial intermediation by considering the impact on financial deepening and widening. the study of opperman and adjasi (2019) uses two-step gmm estimator to evaluate the migrant remittances effect, migrant remittances volatility on financial development and concluded that remittances and volatility in remittances affect efficiency and banking sector depth in africian countries. the results of the study of williams (2016) also in support of the above study by showing the positive linkage of remittances with financial development in 45 africian economies by employing dynamic panel estimator for the period 1970-2013. similarly, the study of aggarwal et al. (2011) proved the positive influence of remittances on financial development in 109 under-developed countries. the study of chowdhury (2011) contributed in literature through finding the same result in case of bangladesh. in contrast, brown et al. (2013) showed the negative influence of migrant remittances on financial development by using the sample of 138 countries. additionally, motelle (2011) concluded in favour of no causal effect of remittances with financial development in lesotho. however, nonlinear effect of one variable with other variable is common in current studies. for example, the study of akthar and masih (2019) found the asymmetric effect of remittances on exchange rate by employing ardl and nonlinear ardl estimation over the period of 1976 to 2017 in bangladesh. similarly, al mamun et al., (2016) employed ardl and nardl method and results concludes remittances affect labor productivity positively in bangladesh over 1982-2013. furthermore, other factors also affect financial sector. otchere et al. (2015) found bidirectional causal relation of fdi with financial sector development in african economies. similarly, the study of azman-saini et al. (2010) concluded that the affect of fdi remained positive on economics growth after a threshold level of financial development. similarly, extensive studies are existing that shows the positive association of fdi on macroeconomic indicators including financial development (anwar et al., 2016; chaudhry et al., 2017; makiela and quattara, 2018; sultanuzzaman et al., 2018; aibai et al., 2019). the strong institutional quality is needed for the efficient operation of financial markets, and successful financial liberalization and overall reforms are necessary for the financial sector to improve remittances policies (hansen 2012). 3. methodology the data source is world development indicators (wdi) and study covers the period from 1976 to 2018 for pakistan. this study used financial development as dependent variable and broad money (bm) is used to measure financial development the study uses other variables as control variables like, inflation rate, fdi and gross domestic product. the literature shows different cointegration techniques are applied to test the relationship of migrant remittances with financial development. the study uses linear ardl and nonlinear ardl method to achieve the study objective. this methodology have additional advantages over traditional cointegration techniques such as; firstly, it is independent of the same compulsion order of integration as it can be applied if variable are i(1) or mixture i(0) and i(1) order; no variable should be on i(2). secondly, this methodology expresses simultaneously short term and long term components that eliminate endogeneity of variables and serial correlation (pesaran and shin 1999). thirdly, this methodology is appropriate even with a small sample size ( narayan and narayan 2005). https://scholar.google.com/citations?user=26wmwp4aaaaj&hl=en&oi=sra review of economics and development studies vol. 5, no 4, 2019 872 the following specification is adopted to achieve our objective: (1) where fd, remit, fdi, infl and gdp shows financial development, migrant remittances, foreign direct investment, inflation rate and gross domestic product, respectively. moreover, α = (α0, α1, α2, α3, α4) shows longrun parameters estimates. we can write equation (1) in an ardl framework that is shown in shin et al. (2011). ttttt n i itiit n i iit n i iit n i iit n i it gdpinflfdiremitfd gdpinflfdiremitfdafd                11514131211 5 0 5 4 0 4 3 0 3 2 0 2 1 1 10 (2) for the asymmetric relationship, non-linear ardl model is applied that decompose partial sum of remittances positive and negative changes to shows the asymmetric effect (shin, yu, and greenwood-nimmo (2014). so, following equation presents the asymmetric co-integration: uremitremitfd tttt    (3) where fd is financial development is the dependent variable, remit t  and remit t  are the partial sum process of remittances changes (negative and positive) and ut shows the error term. and   and   represents the long-run parameters of remit t  and remit t  . further, the following equation shows the partial sum of changes in remittances (positive and negative): )0,max( 11 remitremitremit j t j t j jt     (4) )0,max( 11 remitremitremit j t j t j jt     (5) the formulation of nonlinear ardl will completed after supplanting remit+ and remitin place of remit in equation (2): tttttt n i itiit n i iit n i i n i itiit n i iit n i it gdpinflfdiremitremitfd gdpinflfdiremitremitfdafd                       1161514131211 6 0 6 5 0 5 4 0 4 3 0 3 2 0 2 1 1 10 (6) 4. results and discussion for checking the unit root, the augmented dickey fuller (adf) and phillips perron (pp) tests are used. the findings are shown in table 4.1. the result of the adf and phillips perron test confirms that the financial development, remittances, fdi, gdp and infl are non-stationary at the level and all variables become stationary at first difference. table 4.1: results of unit root tests level first difference variable adf pp adf pp fd -1.14 -1.02 -5.55*** -6.78*** remit -1.56 -1.87 -6.14*** -6.19*** review of economics and development studies vol. 5, no 4, 2019 873 fdi -2.91 -1.96 -4.33*** -4.29*** infl -4.59 -3.07 -7.95*** -7.95*** gdp -2.36 -2.78 -4.95*** -4.59*** note: *** denote significant at 1%. a cointegration test is performed for linear specifications, and the results are shown in table 4.2. the computed value of f-statistic is 4.967 which is clearly higher than higher bounds that show the long-run linear association of financial development with others variables like, migrant remittances, inflation, gdp and foreign direct investment. table 4.2: linear ardl bound test result 10% 5% 1% lowe bound i(0) 2.45 2.86 3.74 upper bound i(1) 3.52 4.01 5.06 f-statistics 4.967 before going to estimate the long-run model and making inferences, there is need to pass some diagnostic tests. the value of r2 is about 0.93 which explained the variation in the financial development concerning the regressor. to check the autocorrelation in the residual lm test is conducted, and the result shows the absence of autocorrelation. moreover, jarque-bera and ramsey reset tests show the normality and well specification of the model. cusum and cusum of squares tests used for model stability. moreover, descriptive statistics show the overall picture of the data and the correlation matrix of variables presented in the appendices. the primary focus of this empirical study is to check the remittances influence on financial development , so let us start with cointegration and long run forms equations that is based on table 4.3. the results explains migrant remittances show significant effect on financial sector development with positive sign. in simple, findings explains that a 1% increase in remittances inflow increase financial development by 0.60%, 0.50% in long run and short run, respectively. the findings also concludes fdi and gdp show positive linkage with financial sector development both in long run and short run. however, these control variables are essential to include in the study for better analysis of dynamics and garner valid inference of the above variable relationship. the findings are in agreement with the studies that showed positive linkage of remittances with financial development (chowdhury, 2011; william, 2016; opperman and adjasi, 2019). table 4.3: linear ardl long run/shor-run estimation and diagnostic checks regressors coefficients standard error t-ratio (prob.) long -run coefficients remit 0.600 0.170 3.522***(0.001) fdi 3.317 0.652 5.087***(0.000) gdp 0.071 0.006 11.172***(0.000) infl 0.082 0.119 0.696(0.492) intercept 31.119 1.549 20.082***(0.000) short -run coefficients d(fd(-1)) 0.378 0.125 3.009***(0.005) d(remit) 0.5000 0.144 3.475***(0.001) d(fdi) 2.762 0.510 5.412***(0.000) d(gdp) 0.059 0.012 5.097***(0.000) review of economics and development studies vol. 5, no 4, 2019 874 d(infl) -0.219 0.112 -1.959*(0.059) d(infl(-1)) -0.226 0.097 -2.337**(0.025) ect -0.833 0.133 -6.265***(0.000) diagnostic tests r square 0.934 serial correlation 0.330(0.721) f-statistic 56.972(0.000) functional form 1.788(0.192) j.b test 1.753 (0.416) hetero test 0.408(0.907) note: ***, **, * shows significance level at 1%, 5% and 10% ; the values in ( ) are p-values. now turning to results of nonlinear autoregressive distributed lag model, a cointegration test is performed for nonlinear specifications, and the results are shown in following table. the computed value of f-statistic is 4.26 which is higher than upper bounds that show financial development and others variables like, migrant remittances, inflation, gdp and foreign direct investment cointegrated in long run. table 4.4: nardl bound test for cointegration 10% 5% 1% lowe bound i(0) 2.26 2.62 3.41 upper bound i(1) 3.35 3.79 4.68 f-statistics 4.26 the estimated results of nardl model presented in the following table 4.5. the long run and short run results revealed that the effect of negative changes in remittances on financial development is positive and significant at 1%, while positive changes in remittances show insignificant effect. in simple words, a 1% decrease in remittances will lead to 62%, 54% decrease in financial development. in addition, the coefficients fdi and gdp are significant with positive sign in long run and short run. the value of r2 is about 0.94 which explained the variation in the financial development concerning the regressors. to check the autocorrelation in the residual lm test is conducted, and the result shows the absence of autocorrelation. moreover, jarque-bera and ramsey reset tests show the error tends to follow the normal distribution and correct specification of the model. the results also support the long run and short run asymmetry. table 4.5: nonlinear ardl long run/shor-run estimation and diagnostic checks regressors coefficients standard error t-ratio (prob.) long -run coefficients remit_pos 0.246 0.357 0.690(0.495) remit_neg 0.623 0.166 3.756***(0.001) fdi 3.308 0.625 5.288***(0.000) gdp 0.093 0.021 4.392***(0.000) infl 0.082 0.114 0.713(0.482) intercept 34.359 1.788 19.207***(0.000) shor -run coefficients d(fd(-1)) 0.390 0.126 3.104***(0.004) d(remit_pos) 0.213 0.304 0.699(0.489) d(remit_neg) 0.539 0.148 3.638***(0.001) review of economics and development studies vol. 5, no 4, 2019 875 d(fdi) 2.863 0.518 5.527***(0.000) d(gdp) 0.081 0.023 3.449***(0.002) d(infl) -0.220 0.112 -1.964*(0.05) d(infl(-1)) -0.229 0.097 -2.371**(0.024) ect -0.865 0.136 -6.358***(0.000) diagnostic tests r square 0.937 serial correlation 0.664(0.523) f-statistic 50.986(0.000) functional form 2.641(0.069) normality 1.502 (0.472) heteroscedasticity 0.546(0.829) wlr 0.011 (0.000) wsr 0.236 (0.023) note: ***, **, * shows significance level at 1%, 5% and 10% ; the values in ( ) are p-values. to assess the stability of the parameters ardl model is insufficient, so study applied the cusum and the cusum of squares in figure 1 and figure 2 respectively that shows the stability of the parameters. -20 -15 -10 -5 0 5 10 15 20 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 cusum 5% significance figure. 1 cusum test. -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 cusum of squares 5% significance figure. 2 cusum of square test. review of economics and development studies vol. 5, no 4, 2019 876 4. concluding remarks and policy implications this paper rigorously explores remittances link with financial development. the study employed the linear ardl and nardl model for the period of 1976-2018 to achieve this objective in pakistan. the linear ardl result shows that migrant remittances significantly influence financial development. specifically, the financial development leads to increase 0.50, 0.60 per cent as one per cent increase in the inflows of remittances increases in the shortrun and the longrun, respectively. the other variables like fdi and gdp positively linked with financial development and while inflation have negative sign. the long run results of nardl, the financial development effect of negative changes in remittances shows to be positive and significant at 1%, while positive changes in remittances appears to be insignificant. in simple words, a 1% decrease in remittances will lead to 62% decrease in financial development. this recommends the plan for the policymakers of recipient countries especially pakistan, could harvest the potential gain of migrant remittances though it has positive association with financial development. references adams jr, r. h., & page, j. 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(2017). do remittances improve political institutions? evidence from sub-saharan africa. economic modelling, 61, 65-75. review of economics and development studies vol. 5, no 4, 2019 879 appendices descriptive statistics fd remit gdp infl fdi mean 46.31332 5.214781 117.4894 8.070025 0.856340 median 45.31106 5.021795 106.0658 7.692156 0.620823 maximum 58.86769 10.24763 253.9353 20.28612 3.668323 minimum 37.83940 1.453638 33.81353 2.529328 0.061630 std. dev. 6.206424 2.212975 61.95885 3.705305 0.799127 skewness 0.482692 0.105764 0.493772 0.777461 2.128949 kurtosis 2.079921 2.126129 2.188268 3.960552 7.336815 jarque-bera 3.186502 1.448375 2.927857 5.984961 66.17997 probability 0.203264 0.484718 0.231326 0.050163 0.000000 sum 1991.473 224.2356 5052.046 347.0111 36.82263 sum sq. dev. 1617.827 205.6849 161233.8 576.6299 26.82136 observations 43 43 43 43 43 correlation matrix fd remit gdp infl fdi fd 1 remit 0.0155 1 gdp 0.878 -0.079 1 infl 0.034 -0.164 -0.055 1 fdi 0.639 -0.366 0.442 0.336 1 review of economics and development studies vol. 5, no 4, 2019 880 review of economics and development studies vol. 5, no 4, 2019 741 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads is pakistan really a pollution haven country? 1 hina, 2 javed iqbal, 3 asia baig, 4 muhammad yusuf amin 1 ms scholar, department of economics, abdul wali khan university mardan, khyber pakhtunkhwa, pakistan: hinakhan5617@yahoo.com 2 assistant professor, department of economics, abdul wali khan university mardan, khyber pakhtunkhwa, pakistan. 3 demonstrator, department of economics, abdul wali khan university mardan, khyber pakhtunkhwa, pakistan. 4 lecturer, institute of business studies and leadership, abdul wali khan university mardan, kpk, pakistan article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 in this study, the pollution haven hypothesis (phh) validity has been tested for pakistan and its impact on exports of pakistan has been investigated as well. the phh predicts that environmental regulations‟ variability among countries affects polluting industries location and trade flows. autoregressive distributed lag (ardl) or bound test of cointegration is used to investigate the short and long-run relationships. we found positive and statistically significant short-run and long-run relationships between co2 (proxy for lax environmental policy) and fdi inflows. finally, trade balance index (tbi) of metal and mining, primary iron & steel, chemicals and rubber products does not support the phh. while the pulp & paper and the textile industry validated the existence of pollution haven effect. we can conclude that phh does exist for pakistan and therefore such policies are needed that encourage fdi inflows that do not adversely affect the environment. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords pollution haven hypothesis, foreign direct investment, environmental regulations, autoregressive distributed lag, trade balance index jel classification: p45, k32, k39 corresponding author‟s email address: hinakhan5617@yahoo.com recommended citation: hina, iqbal, j., baig, a. and amin, m., (2019). is pakistan really a pollution haven country? review of economics and development studies, 5 (4), 741-754 doi: 10.26710/reads.v5i4.885 1. introduction inflows of fdi have increased almost in every region of the world but major trend is observed towards the developing countries (ullah, shah, & khan, 2014). fdi inflows to asian region increased to $541 billion in 2016 due to significant growth in the east and south asian economies (world investment report, 2016). fdi is like a doubled-edged sword for economies as if it enhances economic growth, labor productivity and innovation but also harms environment (wang, gu, david, & yim, 2013). many developing countries are already facing severe water scarcity, poor air quality and floods. the unchecked fdi inflows may further worsen environmental conditions (gamso, 2018; cole & elliott, 2005). conversely, some studies argue that an increasing level of fdi inflows reduce the air pollution by adopting more advance technology (kirkulak, qiu, & yin, 2011). air quality in pakistan is deteriorating due to increase in co2 emissions. the highest temperature http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 742 recorded in pakistan reached to 53.5 0 c in 2017 causing many deaths (ellis, saifi & martinez, 2015; wasif, 2017). annual cost of environmental degradation has increased to rs. 450 billion (ali, waqas & ahmad, 2015). the gravity of the problem can be gauged from pattern of co2 emissions and fdi in figure 1. the graph shows that co2 emissions in pakistan have been showing an increasing trend over a period of time. pakistan' emission per unit of output (emission intensity) is almost double of the average world intensity (qureshi, 2006). figure 1: fdi and co2 emissions in pakistan (compiled from the world bank, 2017). in pakistan, major investment has taken place in the polluted sectors of oil & gas, textile, construction, power, chemicals & transport (board of investment, 2018). a $33 billion investment in energy projects under the china pakistan economic corridor (cpec) of which some is based on coal is an environmental concern too. while exports are pre-requisite for economic growth, environment quality is also important for good quality of life. the larger fdi inflows coupled with the existing environmental deterioration in developing countries raise questions of pollution havens. to answer this question, this study empirically investigates the fdi-environment and trade-environment relations in case of pakistan. 2. literature review the nexuses between fdi and economic growth is explained through either endogenous growth theories (romer, 1986) or the environmental kuznets curve (ekc). further related to fdi flows there are two prominent theories, the one is the porter hypothesis and another is the pollution haven hypothesis (baek & koo, 2009). the empirical work on phh has been generally with mixed results. birdsall and wheeler (1993) found contradictory results to phh for latin america. levinson (1996) found that if state differences in environmental regulations are large, then pollution haven effect can be observed, however, if differences between states are very small then the pollution haven effect fades. however, eskeland and harrison (2003) reported that foreign firms are less polluted compared to domestic plants. cole and elliott (2005) used data of 59 developed and developing countries on fdi and found no evidence for phh. fan (2012) studied the fdi-investment decision in chinese provinces based on enviornmental stringency and found no evidence that investor favor lax enviornmental enforcmemt. keho (2015) used co2 emission as a proxy for measuring environmental pollution and no long run effect of fdi on country's environment was found. contrary to the above, aliyu (2005), hoffmann, lee, ramasamy, and yeung (2005), beak and koo (2008), ridzune, avazalipour, zandi, saberi, hakimipour, and damankeshideh (2013), noor and ahmad (2014), and aliyu and ismail (2015) reported the existance of the phh. that pollution haven hypothesis existed. 0 0.5 1 1.5 2 2.5 3 3.5 4 0 0.2 0.4 0.6 0.8 1 1.2 year co2 fdi review of economics and development studies vol. 5, no 4, 2019 743 3. research methods grossman and krueger (1991) pioneered the work on phh explaining the trade flows and environmental quality between the united states and mexico. the heckscher-ohlin (h-o) and the factor endowment theories also provide a framework for trade-environment nexus and that how environmental regulations affect trade patterns and multinational investment decisions. these theories predict that country will specialize in production and exporting the products that uses the locally abundant factor. also, they envisage environment to be treated as a productive resource and its assimilative and regenerative capacities as natural endowments. therefore, jurisdictions with stricter environmental regulations may inflict additional cost on pollution-intensive sectors. however, such firms may relocate to the less stringent regions to gain comparative advantage (ratnayake & wydveled, 1998). following the kolstad (2011), we present the phh as follows: (1) where is economic activity and could be exports, fdi or employment while corresponds to environmental regulations, is a matrix of other control variables and the last term is the error term. based on asghari (2012), hassaballa (2014), ratnayake and wydeveld (1998), sarmidi, noor and ridzuan (2015), yoon and heshmati (2017), and zhang (2005) equation (1) can be represented as follows: (2) where is the fdi inflow in pakistan in year t in sector i and represents the environmental regulation, is the vector of independent variables, while are the parameters to be estimated and is the random stochastic error term, and the subscript denotes country while is for time period. equation (2) is further extended as follows. (3) the variables used in the estimation are summarized in the table 1 as follows: table 1: variables description variable description foreign direct investment (% age of gdp) carbon dioxide emissions (metric ton per capita) used as proxy of pollution level; high levels of co2 represent laxity of environmental standards. according to phh, relationship between fdi and co2 must be positive. gross domestic product (% age annual growth rate) measuring the wellbeing of the country and market size. based on previous literature and theories expected relationship between fdi and gdpgr is positive. labor force participation (% of total population) and expected relationship between fdi and lab is positive gross secondary school enrollment used as a proxy for skilled labor gross capital formation (% age of gdp) review of economics and development studies vol. 5, no 4, 2019 744 energy import (% age of energy use) to reflect the energy availability and expected sign for this variable is negative trade openness (export plus import as a proportion of gdp), more liberalize the trade is the more confidence the investor will have in this market. data on the relevant variables have been collected from the world development indicators (wdi) for 1980-2017 period. covariates have been selected on the basses of dunning „eclectic‟ theory which states that fdi is attracted due to the reasons such as (a) location specific advantages which include availability of raw material at low cost, (b) advantages due exclusive ownership of certain assets such as technology, patents, trademarks and skills and (c) internalization advantage which protects them against the market failures. lax environmental regulations offer location specific advantage (ratnayake & wydeveld, 1998). trade balance index (tbi) can be used to test the export competitiveness in polluting industries. a country specializes in export (as net-exporter) or import (as net-importer) in dirty products for group of products based on the tbi of lafay (1992). this study used products that are classified as per the standard international trade classification (sitc) specifically the 3-digit sitc revision 2. tbi index is formulated as follows: where stands for exports and imports of country for agroup of goods . the tbi takes value from minus one to one. a negative value indicates that the country is “net-importer” and a positive one as “net-exporter”. 4. results and discussions dickey & fuller (1979, 1981) and phillips & perron (1988) tests are used to examine the stationarity of the time series data. following the engle and granger (1987), augmented dickey fuller (adf) and phillips-perron (pp) tests both with and without trend are provided in table 2. the unit root test demonstrates that the labor force participation rate and gross domestic product growth rate are stationary at level while rest are stationary at first difference. table 2: adf and pp stationarity tests variables adf methodology pp methodology w it h o u t t re n d p ro b a b il it y w it h t re n d p ro b a b il it y w it h o u t t re n d p ro b a b il it y w it h t re n d p ro b a b il it y fdi (%age of gdp) -2.80 0.06 -3.05 0.13 -1.86 0.34 -1.85 0.66 co2 emission (mt/pc) -1.65 0.44 -4.62 0.00 -0.74 0.82 -2.68 0.25 gdp (annual growth rate) -3.89 0.00 -3.81 0.02 -3.85 0.00 -3.81 0.02 lab (%age total population) -4.78 0.00 -5.47 0.00 -4.80 0.00 -5.47 0.00 skl (gross percentage) -0.71 0.83 -2.90 0.17 -0.38 0.90 -2.86 0.18 cap (%age of gdp) -1.68 0.43 -2.62 0.27 -1.76 0.39 -2.69 0.24 eng (%age of energy used) -2.01 0.28 -2.87 0.18 -2.04 0.26 -2.33 0.41 trade openness (%age of gdp) -1.71 0.41 -2.44 0.43 -1.77 0.38 -2.56 0.30 fdi (%age of gdp) -4.03 0.00 -3.98 0.01 -4.00 0.00 -3.95 0.02 co2 emission (mt/pc) -5.97 0.00 -4.11 0.01 -6.66 0.00 -6.48 0.00 review of economics and development studies vol. 5, no 4, 2019 745 gdp (annual growth rate) -7.67 0.00 -7.70 0.00 -10.73 0.00 -16.57 0.00 lab (%age total population) -9.87 0.00 -9.82 0.00 -19.99 0.00 -33.58 0.00 skl (gross percentage) -6.32 0.00 -5.22 0.00 -9.52 0.00 -9.55 0.00 cap (%age of gdp) -6.07 0.00 -5.98 0.00 -6.07 0.00 -5.98 0.00 eng (%age of energy used) -5.17 0.00 -5.12 0.00 -5.16 0.00 -5.10 0.00 trade openness (%age of gdp) -7.73 0.00 -7.78 0.00 -7.75 0.00 -7.84 0.00 note: indicating unit root at first difference. ardl bounds test developed by pesaran, shin & smith, (1996) and pesaran et al., (2001) does not require same order of integration for all the variables. this approach is even valid for i(0), or i(1) or even if some are i(0) and some are i(1). ardl model based on equation (3) can be specified as follows: ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ where represents first difference operator, is a drift element, is a white noise error term. the terms with summation show error correction for short-run estimates, while rest of the terms shows the long-run relationship. the first step in ardl method requires a selection of optimal lag length. a lag length one had the lowest schwarz information criterion (sc) value and thus selected. the second step entails the estimation of ardl model and then computing of f-statistics using ardl bound test methodology. both the calculated f-statistics and its critical values are provided in table 3. the fstatistic (4.33) is greater than the upper bound critical value (4.26), and the null hypothesis of no long-run associations is rejected. table 3: testing the long-run associations model f-statistic 4.33*** critical value bounds significance lower bound upper bound 1% 2.96 4.26 5% 2.32 3.50 10% 2.03 3.13 *** indicate 1% significance level table 4 reveals strong positive and statistically significant long run relationship between co2 and fdi inflows. the effect of gdp growth on fdi inflow, as expected, is positive. also, fdi inflow is positively affected by energy imported (eng), gross capital formation (cap), trade openness (open) and labor force participation rate (lab), although insignificantly. the secondary school enrollment ratio (skl) affects fdi inflow significantly at five percent which is contrary to the general expectation. table 4: ardl long-run estimation (dependent variable fdi) regressor coefficient std. error t-statistic prob. co2 7.6589 1.8163 4.2168 0.0003*** gdpgr 0.3151 0.1541 2.0447 0.0511* review of economics and development studies vol. 5, no 4, 2019 746 lab 0.0089 0.0425 0.2115 0.8342 skl -0.1064 0.0497 -2.1406 0.0419** cap 0.1288 0.1263 1.0197 0.3173 eng 0.1315 0.0785 1.6742 0.1061 open 0.0911 0.0603 1.5097 0.1432 c -12.1214 4.1691 -2.9074 0.0074*** ***, **, * indicate 1%, 5% and10% significance levels short-run error correction ardl results are provided in table 5. in short-run there exists a positive and significant relation between co2 and fdi inflows as well. similarly, eng positively affects fdi inflow. gdp growth does not affect fdi inflow significantly. unlikely in the long run, secondary school enrollment ratio affects fdi inflow in short run. likewise, in the long run, trade openness, labor force participation rate, gross capital formation affects fdi insignificantly with positive signs in the short run. highly significant error correction term with negative sign indicates the presence of long-run relationship with 45 percent speed adjustment from previous year‟s disequilibrium in fdi inflow to current year‟s equilibrium. no evidence of serial correlation and hetroscadasticity is found. table 5: short-run ardl model (dependent variable δ (fdi)) cointegrating form variable coefficient std. error t-statistic prob. δ(co2) 3.4659 0.9652 3.5907 0.0013*** δ (gdpgr) 0.0591 0.0476 1.2416 0.2255 δ (lab) 0.0041 0.0193 0.2113 0.8343 δ (skl) 0.0230 0.0283 0.8155 0.4222 δ (cap) 0.0583 0.0613 0.9513 0.3502 δ (eng) 0.0595 0.0315 1.8907 0.0699* δ (open) 0.0412 0.0259 1.5867 0.1247 cointeq(-1) -0.4525 0.1089 -4.1545 0.0003*** r-squared 0.886025 adjusted r-squared 0.842189 breusch-godfrey serial correlation lm test: f-statistic= 0.065662 probability = 0.7999 obs*r-squared= 0.96925 probability = 0.7556 heteroskedasticity test: : breusch-pagan-godfrey f-statistic=1.519100 probability =0.1885 jerque bera normality test jerque bera statistic = 4.1978 probability = 0.1225 ***, **, * indicate 1% , 5% and10% significance levels the ardl model stability is tested using cusum and cusum square tests. figure 2 and figure 3 shows plots of the cusum and cusum squares indicating that all coefficients of the model are stable. review of economics and development studies vol. 5, no 4, 2019 747 figure: 2. plot of cusum figure: 3. plot of cusumsq table 6 exhibits the outcomes of granger pair wise causality analysis between the variables. we find that co2 emissions granger causes fdi inflows and similarly the fdi inflows granger cause co2 emissions (bi-directional causality). the results can be interpreted that on one side lenient environmental regulations (higher levels of co2 emissions) attracts the fdi while on another side fdi inflows are one of the major factors responsible for increasing level of pollutions. results validate the unidirectional causality in case of gdpgr and fdi inflows running from gdpgr to fdi inflows. no casual evidence was found in case of labor force participation rate and foreign direct investment inflows. skill labor granger causes fdi indicating that pakistan's skill labor affects the foreign direct investment inflows. causality from fdi inflows to gross capital formation exhibits that level of fdi affect the gross capital formation. similarly, unidirectional causality was observed from energy imported to foreign direct investment inflows. lastly, in case of openness and foreign direct investment no causality was found from either side. -15 -10 -5 0 5 10 15 92 94 96 98 00 02 04 06 08 10 12 14 16 cusum 5% significance -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 92 94 96 98 00 02 04 06 08 10 12 14 16 cusum of squares 5% significance review of economics and development studies vol. 5, no 4, 2019 748 table 6: pair wise granger causality tests granger causality results f-value prob. result 5.84697 3.23312 0.0020*** 0.0280** 2.30987 1.53678 0.0788* 0.2194 0.13613 0.32434 0.9821 0.8929 3.32343 0.61702 0.0219** 0.6881 0.83776 2.69508 0.5372 0.0479** 2.14192 0.11800 0.0982* 0.9870 0.55852 0.54038 0.7305 0.7436 ***, **, * indicate 1%, 5% and10% significance levels sector wise per capita emission data is not available for pakistan and therefore aggregate level data were used. to study the prediction of pollution haven hypothesis that fdi contributes to developing countries exports due comparative advantage in polluting products. this study uses pakistan trade statistics for most polluting industries to find if pakistan exports increase due to its lax environmental regulations. table 7 shows the seven most polluting sectors of pakistan along with the product codes. furthermore, figure 4 shows calculated tbi values for the said products. table 8 reports the unit root results of tbi. the tbi index of metal and mining, primary iron and steel, chemicals and rubber products does not support the pollution haven hypothesis because the value of tbi is between 0 and -1 which shows that pakistan imports more as compare exports. while the pulp and paper industry provide evidence for the pollution haven effect as the tbi value reached to 1 in 1994 showing the country became net exporter and thereafter tbi value have been continuously increasing showing an increase in exports. pulp & paper industry tbi has unit root so pollution haven does exist. the tbi values of textile industry from 1982 till 1996 shows pakistan as net exporter of textile products with varying from 1997 to 2017. tbi values for textile industry has unit root which also validate the existence of pollution haven effect. table 7: selected pollution intensive industries of pakistan industry product code metal & mining 281, 282, 287, 288, 289 primary nonferrous metals 681, 682, 683, 684, 685,686, 687,689 pulp & paper 251, 641, 642 primary iron & steel 671, 672, 673, 674, 675, 676, 677, 678,679 chemicals 512, 513, 514, 582, 583, 584, 585 textile 261, 262, 263, 264, 265, 266, 267, 268, 269 rubber products 621, 625, 628 source: (qureshi, 2006; indriya & widodo, 2011) review of economics and development studies vol. 5, no 4, 2019 749 figure 4: pollution intensive industries trade performance, tbi values table 8: unit root results of tbi unit root test of tbi industry tvalues (prob.*) decision metal and mining -4.4* (0.0013) stationary (does not support phh) primary nonferrous metal -5.92* (0.0000) stationary (does not support phh) pulp and paper -2.30 (0.1777) has unit root (confirm phh) primary iron and steel -6.3* ( 0.000) stationary (does not support phh) chemicals -3.7* (0.0084) stationary (does not support phh) textile -0.58 (0.8612) has unit root (confirm phh) rubber products -6.16* (0.0000) stationary (does not support phh) 5. discussions and conclusions this study investigated the pollution haven hypothesis which predicts that environmental regulations variability among countries or regions affect polluting industries location and trade flows. a positive and statistically significant relationship between co2 emissions and fdi inflows both in short-run, and longrun was found. therefore, we can conclude that lenient environmental policy of pakistan may attract polluting industries from other countries. similar conclusions are drawn by aliyu (2005), acharyya (2009), baghebo & apere (2014), hoffmann, et al. (2005), hassaballa, (2014), leslie (2016) and ridzune, noor & ahmad (2014). we found weak evidence of pollution havens from exports side except for the textile, paper and pulp industries of pakistan similar to the results of akbostanci, tunc, & turutasik (2007), indriya & widodo (2011), and qureshi, (2006). pakistani government needs to invest in human capital and make their labour force more competitive and efficient to attract the foreign -1 0 1 1982 1987 1992 1997 2002 2007 2012 2017 matel & mining primary nonferrous matels pupl & paper iron & steel chemicals textile ruber products review of economics and development studies vol. 5, no 4, 2019 750 investment. references aliyu, m. a. (2005, june). foreign direct investment and the environment: pollution haven hypothesis revisited. in eight annual conference on global economic analysis, lübeck, germany (pp. 9-11). aliyua, a. j., & ismail, n. w. 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(2005). environmental regulation and foreign direct investment: provincial evidence from china. economic department, 136-140. https://tribune.com.pk/story/1421639/pakistans-hottest-day-recorded-turbat/ review of economics and development studies vol. 5, no 4, 2019 781 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads impact of managerial self-efficacy, improvement-oriented employees' voice fearing external threat on performance 1 arooj fatima, 2 mumtaz muhammad khan, 3 sher muhammad malik 1 riphah international university, faisalabad, pakistan. aroojf122@gmail.com 2 imperial college of business studies lahore. pakistan. mumtazmkpk1@gmail.com 3 department of geography, the islamia university of bahawalpur pakistan. shergeo2000@yahoo.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 managers’ self-efficacy, being an active area of research, is important as it encourages employees’ performance. the feedback of highly self-efficacious managers in making better decisions is important to meet the global challenges that world is facing. this study explores literature on the relationship between managerial self-efficacy and employees’ performance. we further empirically tested the hypothesis in the banking sector in pakistan and the results supported the theoretical implications. the study can serve as a basis for further studies and is practically useful for managers for improving employee performance. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords managerial self-efficacy, employees’ performance jel classification: m12, m19, p17,p19 corresponding author’s email address: aroojf122@gmail.com recommended citation: fatima, a., khan, m.m., and malik, s.m. (2019). impact of managerial self-efficacy, improvement-oriented employees' voice fearing external threat on performance. review of economics and development studies, 5 (4), 781-790 doi: 10.26710/reads.v5i4.904 1. introduction adopting manager’s positive perspective, the study explores that managerial self-efficacy impacts their employees’ performance. first, the phenomenon that due to managers’ efficacy beliefs and their abilities they can achieve high levels of performance, because they think they can obtain results that are important for them and having belief that they can do most of the tasks relative to others. indeed, self-efficacy can increase performance and individuals activate their suitable task-related effort by perceiving themselves as highly self-efficacious and stay longer on task against difficulties. this self-regulatory behavior can increase the possibilities of successful results (tims, bakker, & derks, 2014). self-efficacy refers to an individual’s perception that in a specific task situation how effectively one can perform (blomquist, farashah, & thomas, 2016). in a number of analyses, the impact of self-efficacy has been examined on organizational settings. very few studies checked its overall impact directly on employees’ performance (cherian & jacob, 2013). high self-efficacious individual remains committed to their certain practices and when they face barriers or setbacks in goal achievement they keep on going (latham, seijts, & slocum, 2016). individuals with strong sense of self-efficacy set higher goals and they have solid dedication with the aim of achieving http://www.publishing.globalcsrc.org/reads mailto:aroojf122@gmail.com mailto:mumtazmkpk1@gmail.com mailto:aroojf122@gmail.com review of economics and development studies vol. 5, no 4, 2019 782 them (wood & bandura, 1989). this article builds various theoretical contributions towards literature on managerial self-efficacy and employee’s performance. this study, therefore, contributes in line with previous research to check the effect of high managerial self-efficacy on employee’s performance. this article explores that all the researches that have investigated, self-efficacy has no direct effect that look on work performance. there exist various intervening, moderating and mediating variables in the relationship of self-efficacy/work performance (iroegbu, 2015). this study would check the direct effect of self-efficacy on employees’ performance. therefore. this study’s contributions serve to the understanding of managerial self-efficacy and the performance of employees from different perspectives. the findings of this study have also practical implications for knowing that how managerial self-efficacy impact employees’ performance. taken simultaneously, we proclaim that when employees assess high managerial self-efficacy or manager’s positive affect about their sense of self-efficacy, the employees, in turn, are more likely to experience greater performance, because manager’s positive affect evokes employees to perform better. 2. theory and hypothesis 2.1 managerial self-efficacy managerial self-efficacy refers to the recognized ability of a manager within the organization domain to be successful and influential (fast et al., 2014); subjective idea that one can successfully accomplish the behavior required to gain a desired outcome (bandura, 1997); an individual’s confidence that he or she is able to performing a task and confidence in his/her ability to succeed in a task (mensah & lebbaeus, 2013). the employees who have perceptions about their beliefs of high efficacy are more inclined to be self-assured and optimistic for the achievement of their goals. the efficacy of employees increases when their goals are achieved and there are chances that they perform again the behaviors that contribute to success (nansubuga, 2017). the person with high self-efficacy can naturally astonish the processes and results in the give and take relationship between the employee/manager and the organization. it means that he/she is giving his/her best to their accessible tasks, spending plenty of high efforts because of having his/her strong beliefs for what he/she is able to achieve. it doesn’t matter how the organizational environment appears in front of them. moreover they have discernment about their own capabilities, and they unavoidably would be progressing judgments about performance incentives, organizational rewards, the process by which those results are achieved, and in the manner the organizational players play their roles for those interchange (çelik, yeloğlu, & yıldırım, 2016). self-efficacy may play a major part in motivation (choice, effort, and persistence), learnedness, self-regulation and achievement (schunk & dibenedetto, 2016). according to the social cognitive theory, high effort and persistence are parts of individual’s inspirational behaviors that they have link with self-efficacy (chaudhary, rangnekar, & barua, 2012). high managerial self-efficacy is distinct from low managerial self-efficacy, one form of threatening feeling in which managers turn to voice averse (fast et al., 2014). a main difference between these two types of self-efficacy is the belief of managers in their abilities. additionally, high managerial selfefficacy focuses on manager’s positive behavior towards employee’s improvement-oriented voice because of their high self-beliefs in challenging situations. this article focuses on high managerial self-efficacy for two theoretical reasons. first, managers can actively influence the voice, through inviting the feedback of employees directly on a range of problems. when voice is invited or solicited by managers, they build a climate on the whole to encourage the voice of employees and allow improvement-oriented ideas. very few studies checked motivations of manager’s to show behavior that appreciate and prevent employees’ voice from managerial angle, or their true response to employees’ voice when it is provided. review of economics and development studies vol. 5, no 4, 2019 783 2.2 managerial self-efficacy and employees performance: from manager’s positive perspective the convincing evidence encourages the view that managers occupy the roles that have formal control on juniors, practice a powerful requirement at work to show higher personal competence. in the perspective of manager’s roles, however the limit in which perceptions of managers are considered efficacious by themselves should impact in what way they access their work and their interaction with others in particular ways. growing on such fundamental ideas, the research presents and checks the view that in the managerial role the self-perceived competence refers to as managerial self-efficacy (fast et al., 2014). self-efficacy defines self-confidence of someone who does liveliness in a certain environment (kocaeksi & gazioglub, 2014). the current study is going to investigate manager’s positive influence such as how manager’s self-efficacy beliefs influence employee’s voice and in turn, their performance. self-efficacy is known as the main component to determine the expertise and ability of leader (mayer, davis, & schoorman, 1995). an individual belief about his ability of achieving a valuable result is associated to his working and style. over the 30 years, self-efficacy belief’s measures have appeared to be a better predictor of performance of person in many areas (blomquist et al., 2016). thus, a deficiency of self-efficacy does inhibit the task fulfillment, and a great level of self-efficacy promotes it (beeftink, van eerde, rutte, & bertrand, 2012). thus, from manager’s positive perspective, research suggests that manager’s self perceptions provide a strong close up in which they build awareness of and acquire step in their climate of work. critically, in what way managers recognize their character and in presenting that character or role together with their sense of efficacy, then there is a possibility to affect how threatened they feel when employees speak up (fast et al., 2014). when managers show positive response towards employee’s opinion, the employees are more prone to perform better. for example, self-efficacy is a form of self-referent thinking with which people judge and manages their own mental picture, experiences and way of acting (bandura, 1977; van dinther, dochy, & segers, 2011; zimmerman, bandura, & martinez-pons, 1992). it suggests that people spend their efforts on tasks according to their self-beliefs. for example, recent studies argued that high self-efficacious persons in a particular discipline (i.e. task and job specific) can depreciate the difficulty of the challenges of the job and they can tackle challenges of the job with their overrating ability (cheema & skultety, 2017). extrapolating it to the domain of performance, self-efficacy has appeared to be a well founded predictor of both motivation and task performance, and effect personal goal setting (iroegbu, 2015). an appreciable effect of self-efficacy on jordanian academics performance is associated to their high self-efficacy level (haddad & taleb, 2016). the empirical studies generally support the positive relationship between selfefficacy and job performance and the study expected positive relationship of task/job specific selfefficacy has with job performance (chen, 2017). the study explains that the provision of the construct of project management self-efficacy as a quality measure of hopeful performance as any other studies of management have performed prior to their study (blomquist et al., 2016). from manager’s positive perspective, then, certain positive responses must be present from managers to encourage employee’s responses to suggestions, and it helps employees to increase their performance. hypothesis 1. there is a positive relationship between managerial self-efficacy and employees’ performance. 3. overview of study time lagged cross sectional primary data is collected. from. employees of randomly selected sample branches of national bank of pakistan, al-falah bank and al-baraka bank. faisalabad. review of economics and development studies vol. 5, no 4, 2019 784 4. method 4.1 sample and procedure the population of this research is (625) and through random sampling technique 238 employees national bank of pakistan, al-falah bank and al-baraka bank are selected for the purpose of data collection. these three organizations have familiar characteristics that are especially related for testing hypothesis regarding managerial self-efficacy and employees’ performance. preliminary interviews disclosed that managerial self efficacy has a contributing role in employee performance. the research survey is self administered at each organization: staff employees of banks selected through random sampling technique provided ratings of the independent and dependent variable. we collected data in a clear and cost effective way by means of the questionnaires. the same survey is used at each place, with simply minor changes in wording (e.g., “achieve results” versus “obtain outcomes” or “construct the organization or group improved” versus “make the organization or group better”). the response rates of the three organizations show that at national bank of pakistan, 124 of 142 employees (87% response rate) complete the survey; at al-falah bank 74 of 84employees (88% response rate) complete the survey; and at al-baraka bank 10 of 12 employees (83% response rate) complete it. in total, surveys were distributed to 238 employees with 208 responses (87% overall employee survey response rate). six respondents did not show their working experience, monthly income and marital status, so we excluded their participation from the analysis, resulting in a sample of (202) participants relative to a final response rate of (84%) percent. we generated separate random number for rest of the 36 employees. after merging these three organization’s data, the final sample comprised of 238 employees (77.3% male). there were 54 females in this sample who rated a percentage of (22.7%) employees. 4.2 measures 4.2.1 managerial self-efficacy managerial self-efficacy is measured using eight items measured developed by chen, gully, and eden (2001), in which it was assessed the perception that one can capably perform tasks and achieve the objectives. in managerial role, in order to ensure the realization of capability assessed by the measure, we particularly asked respondents to respond the questions as they associated it to their own work and job field. the sample items of the study were: “when facing difficult tasks, i am certain that i will accomplish them”; “i will be able to successfully overcome many challenges”; “i am confident that i can perform effectively on many different tasks”; and “compare to other people i can do most tasks very well,” α = 0.86. participants rated the items on a 5-point scale ranging from 1 (strongly disagree) to 5 (strongly agree). pilot testing of items these items are pre-tested to demonstrate internal reliability. the pre-test consisted of 25 full-time employed individuals from three banks. participants rated the eight items for managerial self-efficacy. the eight items for managerial self-efficacy demonstrated internal reliability in this sample, α = 0.70. a test result of internal reliability is low here because of low sample size. 4.2.3 employees performance to assess employees’ performance we used the 21 items measure developed by williams and anderson (1991). we used all items in our research. these items were used to measure irbs and ocbs in sample. employees rated the items on a 5-point scale (1 = strongly disagree and 5 = strongly agree). out of the 21 items, 7 items sample measured directed irbs (e.g., “i meet formal performance requirements of the job”), 7 items measured interpersonally aimed ocbs (ocbis; e.g., “i help others who have been absent”), and the other 7 items measured ocbs (ocbos; e.g., “i conserve and protect organizational property”). the estimated reliability was α = 0.80. review of economics and development studies vol. 5, no 4, 2019 785 4.3 analytical strategy since staff employees were nested within three organizations, we used random sampling technique for the collection of data. as explained that having a complete list of sample units or participants and by using a table of random numbers individuals were selected (martinez-mesa, gonzález-chica, duquia, bonamigo, & bastos, 2016). the variables were theorized and examined at the individual level (i.e., level 1 variables). 4.4 results before testing the hypothesis, we evaluated the study variables through checking the correlation. table 1 indicates a strong relationship between managerial self-efficacy, and employees’ performance r = .611 at significant level. descriptive statistics are given in table 2. in the table the independent variable managerial self-efficacy has mean value 4.07, sd = .57. in the same way the values for employees performance are mean = 3.83 and sd = .42. the values for demographic variables of this study like gender, age, qualifications, marital status, monthly income, work experience at current institution and work experience in previous institution are mean 1.22, 1.21, 2.46, 1.49, 1.56, 2.09, 2.37 respectively. the sd values are .41, .48, .71, .50, .81, .1.14, .1.42 respectively. the results of table 3 present the regression analysis. linear regression (lr) was used to test the hypothesis. hypothesis 1 predicted that there would be significant positive relationship between managerial self-efficacy and employees’ performance (β .611, t = 11.857, p < 0.05). as illustrated in fig. 1 our values of mean and standard deviation are within range. this helped for making a decision for further analysis. table 1 result of correlations. correlations managerial self-efficacy employees performance employees performance .611** . 1 **. correlation is significant at the 0.01 level (2-tailed). note. n = 238. ** p < 0.01. *p < 0.05. table 2 mean and standard deviation. variables minimum maximum mean std. deviation 1 gender 1.00 2.00 1.22 .41 2 age 1.00 3.00 1.21 .48 3 qualifications 1.00 3.00 2.46 .71 4 marital status 1.00 2.00 1.49 .50 5 monthly income 1.00 4.00 1.56 .81 6 work experience at current 1.00 4.00 2.09 1.14 review of economics and development studies vol. 5, no 4, 2019 786 institution 7 work experience in previous institution 1.00 5.00 2.37 1.42 8 managerial self-efficacy 1.75 5.00 4.07 .57 9 employees performance 2.57 5.00 3.83 .42 note. n = 238. table 3 variables dv: employees performance model 1 main effects managerial self-efficacy .611 employees’ performance r square .373 f value 140.587 fig. 1. mean and standard deviation of managerial self-efficacy and employees’ performance. 4.5 discussion this study discloses that managerial self-efficacy is positively related to employees’ performance. in regression analysis, there is significant positive relationship between variables of the study. almost every organization is facing different kind of external threats. the role of employees regarding their performance is very important and they are very much concerned with their organization. being highly identified employees of the organization they point out problems and giving their solutions to management in order to protect their organization. the manager’s role is important regarding the voice of the employees, if they have high self-efficacy then they are more likely to welcome the employees 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 mean std. deviation review of economics and development studies vol. 5, no 4, 2019 787 improvement-oriented ideas and due to effect of their high self-efficacy the employees perform better. this study shows direct effect of managerial self-efficacy on employees’ performance positively. this research extends further than this line of analysis and exposes the effect of high managerial self-efficacy on employees’ performance. our results show that high self-efficacious managers encourage the employees’ improvement-oriented voice fearing external threat. lebel (2016) study found that when employees feel that their supervisor is open to their input then their fear of external threat associates positively to voice. the results of this study are inline that managers being highly self-efficacious take the employees improvement-oriented voice because they have strong self beliefs. therefore, the overall findings of this study indicate a significant positive relationship between managerial self-efficacy and employees’ performance. 4.6 theoretical contributions this article’s main contribution exists in theoretically and empirically discovering that the employees’ performance increases experiencing high managerial self-efficacy. previous research has concentrated on how low managerial self-efficacy effect improvement-oriented voice, one can logically expect that persons having low managerial self-efficacy would seek rigidly to benefit on other’s recommendations and ideas (fast et al., 2014). mostly in organizations managers are considered as a sign of fear, this fear lead employees to silence. however, fear’s sources not always impact voice in equally. a relevant contribution lies in extending previous voice research by suggesting that employees represent the whole organization and the organizations that do not give voice opportunities to employees, to share their views and ideas, cannot make progress in a world of competition. doing so follows calls for research exploring how employees identification with their organization encourage their effort or action in which they protect their larger organization, by proposing the solutions of the problems (lebel, 2016). self-efficacious managers take improvement-oriented voice positively rather negatively because they have higher self beliefs in challenging situations. thus, this study emphasizes that sound assessment of these variables in context of human resource management is important to understand and predict behavior patterns and performance of employees, suggesting that by understanding these variables we can address problems relating to employee’s performance. similarly the contributions of this article lie by recognizing a contingent relationship between managerial self-efficacy and employees’ performance. the relationship between managerial self-efficacy promotes the notion that gives important implications for managerial practices, that leader’s positive affect boost up employee voice by means of psychological safety. the study also gives advice to organizations that managers affect should be positive to subordinates while they are contacting with them (liu et al., 2017). in such a case, the perception of employees regarding their supervisor’s accessibility to information is considered a vital contextual motive that may glint voice fearing external threat (lebel, 2016). thus, this article’s results encourage conceptualizations of high managerial self-efficacy as effecting employees’ performance at multiple levels in the causal chain. the contribution of this article is also towards identifying why managerial self-efficacy facilitates or increases employees’ performance. there is also a psychological mechanism that explains manager’s perceptions to appreciate the voice of employees, which in turn, increases their performance. additionally, managers who are open to employees’ ideas help transform improvement-oriented employees’ voice fearing external threat into their performance, indicating to employees that their effective and active attempts on organization’s behalf will be encounter positively to the overall organization success. this study also constructs on past work by cherian and jacob (2013), and lai and chen (2012) study findings show that self-efficacy cannot become the determinant of performance lonely, there are other factors like locus, tasks complexity and effort that can affect positively their performance, which is to review of economics and development studies vol. 5, no 4, 2019 788 some extent dissimilar to what the researcher of this study concluded, that managerial self-efficacy shows direct positive effect on employees performance. additionally, this study’s results describe the positive relationship between managerial self-efficacy and employees’ performance similar to the study of iroegbu (2015) which has found the significant positive correlation between job specific self-efficacy and work performance. 4.7 limitations, strengths, and future directions the results of this study facilitate us to delve into the relationship between managerial self-efficacy and employees’ performance. this study’s results should be accomplished in view of its limitations, many of which proposed possible path and offer various opportunities for future research. this study was a crosssectional field study of three organizations. specifically, this research employed cross-sectional data from a range of bank branches to better construct the relationship between variables. additionally, multisource data in this study was shown to partially equalize possible common method bias. furthermore, data for independent and dependent variables were collected at the same time. therefore, research in future could perform experimental designs to investigate causality in a more accurate way. an ecological validity challenge may exist by doing this, creating manipulations like in a lab setting managerial self-efficacy effects participants in the similar way as employees confronting managerial selfefficacy in organizational settings. moreover, in a lab setting manipulation in high levels of managerial self-efficacy, such as building a scenario through which employees understand they can undergo real consequences (e.g., don’t give value to employee’s opinion and strict behavior of instructors in class) may cause psychological and moral problems. in spite of these dilemmas, we argue besides other voice scholars (milliken et al., 2015), expressed that employees are given the reason that it is easy to speak about the issues and problems being faced at work place might seem as a straightway thing to do. such styles are found to be effective on individual’s job performance and assigned tasks and duties. additionally, there can be other possible fears or threats apart from economic threat, fear of layoffs and loss of revenue with improvement-oriented employees voice that direct managerial self-efficacy towards employees’ performance. according to this aspect, organization’s welfare depends upon privilege of objection because it is as necessary for organization’s welfare as it is for the defense of human rights (redding, 1985). while beyond the view of this article, other potential proactive voice behaviors should be discovered in future research following managerial self-efficacy. for example, voice up proactively in favor of organizational strategy and policies (maynes & podsakoff, 2014). there may be reasons because of employee’s familiarity to existing policies and they don’t want to do any change, so by perceiving manager’s positive effect regarding their self-efficacy they voice up. this study is conducted on banking sector of faisalabad pakistan. the main limitation of this study is that it is conducted on only three banks with their branches which are not representing the whole banking sector of pakistan. future researches can be conducted on other sectors like multinational companies to find out if study variables may effect in a different way in line with the sector in which the people work in. future researches could explore the effect of the study variables with low levels of managerial selfefficacy. 4.9 practical contributions and conclusion this study gives practical implications for managers and employees in organizations. the study results suggest that managerial self-efficacy is important during times of uncertainty when employees raise their improvement-oriented voice. specifically, managers can encourage employees during times of uncertainty by taking their ideas and suggestions. managers can take measures to solicit employees to voice their ideas and suggestions in spite of fear by becoming more receptive towards them. therefore, in the time review of economics and development studies vol. 5, no 4, 2019 789 span of economic uncertainty, managers’ role must be supportive towards improvement-oriented ideas. such attempts from managers may facilitate the organizations to improve internally by taking the advantages of voice. this study discerning the notion of lebel (2016, 2017) that managers and leaders have a powerful influence on employee’s behaviors. for example, the researchers believe that when they are open to employees input because of their high self-efficacy then employees fears will be positively related to speaking 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(1992). self-motivation for academic attainment: the role of self-efficacy beliefs and personal goal setting. american educational research journal, 29(3), 663-676. review of economics and development studies, vol. 6 (1) 2020, 57-65 57 challenges for federalism in pakistan, post musharraf era a ghulam ali, b razia musarrat a phd scholar, department of political science, the islamia university of bahawalpur, pakistan email: g.ali666 @yahoo.com b professor, department of political science, the islamia university of bahawalpur, pakistan email: drrazia_mussarat@yahoo.com article details abstract history: accepted 12 march 2020 available online 31 march 2020 federalism is a form of government that solves the challenges of diversity of a state. many ethnic groups resides in pakistan .baluchistan is the biggest province having smallest number of population of the state ,punjab the dominant province in terms of population and size has further divisions on linguistic and territorial grounds. small provinces always raised their voices against the unjust sharing of resources, administrative posts and political positions. the study reveals that mostly resources and political and administrative positions are shared by the two dominant provinces, punjab and sindh and other federating units and regions are usually deprived from these prestigious positions that is causing unrest in those regions which is very harmful for the integration of the state. post musharraf era in pakistan is witnessing a continuity of democratic regimes in the state and democratic government of yousaf raza gailani shared maximum powers to the provinces in the form of 18th amendment but still state of pakistan has to do a lot more for solving the issues of the provinces. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: federalism, diversity, regime, challenges. units jel classification: h77, h70, h79 doi: 10.47067/reads.v6i1.184 corresponding author’s email address: g.ali666 @yahoo.com 1. introduction so far, pakistan has lagging far behind from becoming a true and participatory federalism. image of masses about pakistan as a federal state is totally different from that of bureaucrats, elites and politicians. post musharraf era has experienced elections for three times in 2008, 2013 and 2018 and democratic governments restructured the political system of pakistan by amending the constitution but federalism in pakistan is still facing many challenges that are deteriorating the integration of the state. in this article these challenges are discussed so that a viable solution could be presented. 2. literature review rehana saeed hashmi says that besides the constitutional arrangements only federalism can diffuse the ethnic tensions. the focus of article “ethnic politics: an issue to national integration (the case study of pakistan)” is on the diversity and national integration and representation .but the work mailto:g.ali666@yahoo.com mailto:g.ali666@yahoo.com mailto:g.ali666@yahoo.com review of economics and development studies, vol. 6 (1) 2020, 57-65 58 does not disclose how these ethnic tension can be removed (hashmi, 2015). asma faiz (2015) presents his ideas about federalism and also explains why federalism requires re-examining to meet the present era challenges. the book is a collection of articles that deals with all dimensions of federalism. it begins with the political and constitutional origin of pakistani federalism then an article by muhammad waseem explains that pakistan is a majoritarian federalist state. arshad javaid burki in his two articles took a view of 18th amendment and termed it as restructuring and redesigning of the constitution of pakistan. besides all this the work fails to point out existing challenge of fata, situation of federation after 18th amendment and challenges posed by 18thamendment for federal system of pakistan. nasreen akhtar describes that there are two main reasons of ethnic tension in a state, identity crises and fragile economic conditions. according to her it was the ethnicity that destroyed the interprovincial harmony that caused dismemberment of pakistan (akhtar, 2015) asim describes that federalism in pakistan is in fragile condition this is due to the broken history of democracy in pakistan. politicians never tried to strengthen democracy and the generals have to take the charge of the federalism in pakistan. federalism is suffering in pakistan due to punjabi dominance .a move for shrike province is started in the southern punjab, if this is succeeded, that will end the dominance of punjab in pakistan .he does not taken into account the challenges in the creation of new provinces in pakistan (sajjad, 2015). amir hanif and shehbaz hussain describe about the threats and challenges that the federation of pakistan is facing in the form of corruption, religious millitancy, etnicity, social and political exclusion. their point of view is that although 18th amendment has reshaped the federalism in pakistan, linguistic ethnicity is deteriorating the federal basis of the state (shehbaz, 2015). muhammad iqbal chawla and anjum zia (2018) have taken a view of the 18th amendment, especially the relations of punjab and central government during the years from 2008 to 2013 in their article re-contextualizing the 18th amendment: working of federalism in pakistan. according to the writers the 18th amendment has strengthened the federalism in pakistan by transferring the concurrent list to the province. 3. research methodology the article is based on descriptive and analytical methodology. the data for this article is collected through secondary sources and for this purpose article published in various journals and books on the topics of federalism and power sharing are consulted. some statistical data is also collected through different websites of government of pakistan. 4. money laundering and corruption a big challenge that the federalism of pakistan is facing currently is the corruption and its acceptance at social level. corruption is a big hurdle in the economic development of the state and pakistan is constantly borrowing from the international donors’ agencies and its friendly states. the situation is so worst that the federation of pakistan has to borrow loans for returning the installments of the old loans. it is only because of the corruption. many peoples working in every administrative, political or social department are indulged in corrupt practices. but the issue is not only the corruption rather its acceptance as a social evil and taking it lightly by the society and the political system is the real problem. bureaucrats, businessmen and politicians all have accepted it as a social norm and granted it legitimacy (ahmad, 2010).many religious minded and fair persons have raised their voices against this social evil but so far proved useless. pti chairman imran khan started a compaign against the corruption and money laundering in the state and his sit in islamabad was against the corruption of politicians that helped to some extent for producing awareness in the society. after coming into power in 2018 his government took radical steps for eradicating corruption and money laundering from the review of economics and development studies, vol. 6 (1) 2020, 57-65 59 state. both the evils are destroying the spirit of federalism from the political system of pakistan. 5. linguistic crises and challenges lingual diversity is the key feature of the pakistani federalism. more than six main and near about fifty nine minor languages are being spoken in the state. this is at one side is the cultural strength of the federation but at the other side is the matter of concern for pakistan. pakistan’s policy makers always remained unaware from the power of this diversity and no effort is made to use this diversity for producing social capital or for uniting the federation of pakistan. lingual conflict has broken the federation of pakistan in past when founding fathers announced and rulers of west pakistan tried to enforce urdu as the national language. in reaction political leadership of east pakistan tried to make bengali as the main language of the state. although the conflict was solved in the constitution of 1956 and again in the constitution of 1962 by declaring urdu and bengali both as the national languages of the state but the grievances started in the beginning of the federalism in pakistan were never minimized. it resulted into the dismemberment of pakistan. state policies are favoring english and urdu and the regional languages have never gain importance in pakistan. even urdu has not made yet the official language of the state that is the reason of failure of many students in different level exams. presently many languages are in danger of elimination from this part of the world and their speakers are raising their voices for the survival of their mother tongues. saraiki and hazarvi speaking people are demanding their separate provinces to keep their identity intact. mohajirs of sindh are wishing their separate province to save their cultural symbol urdu. but the question is that whether the state is ready to face this situation by making new provinces or this issue will remain unresolved for the creation of hurdles for a well balanced, united and peaceful federation of pakistan. 6. challenge of diversity every federal state has to face diversity and infarct federalism is adopted only to manage the diversity of the state. ethnicity in pakistan started on racial grounds in balochistan in 1948 that converted into a conflict which is still a danger for the unity of the state. instead of dissolving the ethnic tensions ,the policies of ruling class is increasing grievances of the masses(majeed, 2014).many small ethnic groups residing in different provinces are demanding their identity in the form of their own province but constitutional ,economic and administrative problems are big hindrance in the way of becoming pakistan a collaborative federalism. un balanced economic growth of different regions, military dictatorships and lack of rule of law are major issues that are creating ethnic tensions in the state. in pakistan mainly ethnic tensions are created on the bases of sect, language and provincialism. pakistan faced shia sunni conflict that was based on the sectarian grounds. the intensity of this conflict was seen from zia ul haq rule to till the era of pervaiz musharraf. in this conflict the mosques and religious educational institutes (madrassas) of the opposite sect were attacked and hundreds of the people were killed. musharraf put ban on sectarian organizations to stop this ethnicity. sindhi mohajir and then pashtun mohajir conflict on the linguistic grounds ruined the peace of karachi (majeed, 2014).this linguistic ethnicity was crushed in army actions during nawaz sharief era. decision makers of the state try to make policies for controlling the ethnic tensions but still effective measures needed to be taken by the authorities. 7. issue of sharing the resources smaller federating units have many complaints about the distribution of finances, water, gas, electricity and of the developmental projects of the federal governments. according to them as the punjab has the major share in federal bureaucracy and in political positions they always try to give major share to punjab. sindh is demanding more share of natural gas .from 2008 to 2018 pakistan is review of economics and development studies, vol. 6 (1) 2020, 57-65 60 facing energy crises that are proving negative in industrial and social development of the provinces. chief minister of sind sayed murad ali shah has stated again that sindh is the main producer of natural gas and the people of sindh are facing the most shortage of gas. they must provide their share according to their needs. the other issue of the small provinces and the remote areas of punjab is the low share in the cpec projects. they have always been complaining about their low representation in political positions. here these reservations have been discussed in detail. 8. allocation of funds: nfc award in pakistan, the smaller units have been arguing that the formula of n fc award benefits the punjab. nfc award has remained a bone of contention among provinces and it was only three times since 1973 that national finance commission announced its recommendations. fiscal sharing’s from the centre to the provinces are necessary for development of the federating units. according to the 18th amendment, once the share from nfc award allotted to any province was never be reduced. this provision has halted the complete mergence of fata to kpk.according to the recommendations of fata reforms committee, 3 percent share from the nfc award should be given to fata but no province is ready to reduce its share .according to the nfc award of 1997 population based formula for sharing of finances was adopted .balochistan received 5.3 percent kpk, 13.54, sindh 23.28 and punjab 57.88 percent. at that time nothing was allotted for fata and now this is the major hurdle for integration of fata to kpk. 9. under-representation in political offices; a political challenge federalism is the method of economic and social up gradation of small ethnic groups. representation of these groups in key political positions is a source of uplift for them. in a federation like pakistan where one ethnic group or province dominates the federalism due to its numerical majority, special arrangements for the equal representation of small ethnic groups should be adopted otherwise these groups feel themselves oppressive that give birth to a conflict with in federation. under representation of small constituent units in the political offices is a big challenge for federalism in pakistan that is creating a sense of deprivation in the people of balochistan, fata and kpk. the main issue of the small provinces particularly of kpk and especially of balochistan is lack of power sharing and under representation in political offices. their basic grievance is that they are not getting their due share in political positions and are being excluded from the power structure of pakistan the ethnolinguistic groups residing in small provinces in pakistan have concerns that their representation in national and provincial legislatures is very low that is why they are being deprived from the esteemed political offices like prime minister, president, chairman senate and speaker of national assembly. they believe that larger share of political positions is beneficial for them. the evidence also shows that the concerns of the small province like kpk and balochistan are true because the post dismemberment history of pakistan reveals that zafrullah khan jmali of balochistan is the only person who became prime minister of pakistan but no one from kpk.as for office of president is concerned only one person is elected as president of pakistan i.e. ghulam ishaq khan from kpk but not a single person from balochistan, fata and gilgit baltastan. the representation of small ethnic groups must be increased for the solidarity of the federation of pakistan. table 1 under representation of kpk and balochistan in political positions (provincial origins of prime ministers of post-1971 pakistan) s# name duration period ymd province elected or caretaker 1 zulfiqar ali bhutto august 14, 1973 to july 5, 1977 03-10-22 sindh elected 2 muhammad khan m arch 24, 1985 to may 29, 03-02-05 sindh elected review of economics and development studies, vol. 6 (1) 2020, 57-65 61 junejo 1988 3 benazir bhutto december 2,1988 to august 6, 1990 01-08-04 sindh elected 4 ghulam mustafa jatoi august 6, 1990 to november 6, 1990 00-03-00 sindh caretaker 5 nawaz sharif november 6, 1990 to april 18, 1993 02-05-12 punjab elected 6 balakh sher mazari april 18, 1993 to may 26, 1993 00-01-22 punjab caretaker 7 nawaz sharif may 26, 1993 to july 18, 1993 00-01-08 punjab elected 8 moeenuddin ahmad july 18, 1993 to october 19, 1993 00-03-01 punjab caretaker 9 benazir bhutto october19, 1993 to november 5, 1996 03-00-16 sidh elected 10 miraj khalid november 5, 1996 to february 17, 1997 00-03-12 punjab caretaker 11 nawaz sharif february 17, 1997 to october 12, 1999 02-07-25 punjab elected 12 zafarullah khan jamali november 21, 2002 to june 26, 2004 01-07-05 baloch elected 13 shujaat hussain june 30, 2004 to august 28, 2004 00-01-28 punjab elected 14 shaukat aziz august 28, 2004 to november 15, 2007 03-02-17 punjab elected 15 m. miansomoro november 15, 2007 to march 25, 2008 00-04-10 sindh caretaker 16 yousaf raza gillani march 25, 2008 to june 19,2012 04-02-25 punjab elected 17 raja pervaiz ashraf 22 june 2012 to 24 march 2013 0-09-12 punjab elected 18 mir hazar khan bajrani 25 march 2013 to 5 june 2013 0-02-11 sindh caretaker 19 nawaz sharif 5 june 2013 to 28 july 2017 04-01-23 punjab elected 20 shahid khaqan abbasi 01 august 2017 to 31 may 2018 00-01-20 punjab elected 21 nasir ul mulk 01 june 2018 to 18 august 2018 00-02-18 kpk caretaker 22 imran khan 18 august 2018 to date punjab elected source: compiled by the researcher in the above table, it is clear that prestigious position of prime minister was never enjoyed by any person from fata besides being the territory of pakistan. this position went to balochistan only for one tme for the period of about one and half year when zafrullah khan jamali was elected as prime minister of pakistan on november 21,2002.the situation of kpk is much worst than balochistan. so far only one caretaker prime minister is appointed from that province. this situation is very negative for the harmony of the federalism in pakistan. table 2 under representation of kpk and balochistan in political positions (presidents of pakistan post-1971 era) s# name duration period ymd province elected or non elected review of economics and development studies, vol. 6 (1) 2020, 57-65 62 1 zulfiqar ali bhutto december 20,1971-august 13, 1973 01-08-23 sindh nonelected 2 fazal ilahi chaudhry august 13, 1973 – september 16, 1978 05-01-03 punjab elected 3 zia-ul-haq september 16, 1978 – august 17, 1988 09-11-01 punjab nonelected 4 ghulam ishaq khan august 17, 1988 – july 18, 1993 04-11-01 kpk elected 5 farooq ahmad khan november 14, 1993 – december 2, 1997 04-00-18 punjab elected 6 muhammad rafiq 01january, 1998 to june 20, 2001 03-05-19 punjab elected 7 pervez musharraf june 20, 2001 to august 18, 2008 07-01-28 mohajir nonelected 8 asif ali zardari september 9, 2008 to 9 september 2013 05-0-0 sindh elected 9 mamnoon hussain 9 september 2013 to 9 stember 2018 05-0-0 sindh elected 10 arif alvi 9september 2018 to date 01-03-21 mohajir elected source: compiled by the researcher. period has been calculated up to december, 31, 2019. 10. under representation in bureaucracy political system of pakistan is deeply influenced by the civil bureaucracy throughout the political history of the state. weak political institutions, fractions among the politicians, and power game of political leadership have given bureaucracy an opportunity to take part in state building and nation building process to a greater extent. before the failure of the federation on december 16, 1971 besides the presence of ethnic cleavages in west part of the federation, the focus was made on east-west representation of bureaucracy in the country. although bengalis had more population than the rest of pakistan but their representation in the bureaucracy was not according to their strength. situation in 1956 was that out of 741 top policy making posts in civil secretariat only 51were bengalis. as for military bureaucracy is concerned officers in navy, air force and army mostly belonged to the west pakistan and their strength was near about 98 percent and the remaining 2 percent were bengalis (islam, 1981). according to samad the main cause for under representation of bengalis in bureaucracy in early years were the british recruitment policies. they did not provided opportunities to different regions of british india for equal representation in bureaucracy. that is the reason that out of “1 33 muslims from the top layer of the bureaucracy who opted for pakistan, only one was bengali and the rest were mainly the mohajirs and the punjabis” (samad, 1995, p.128). the early years of pakistan are marked with the punjabi; mohajir domination in bureaucrats and after the dismemberment of federalism in 1971, in pakistan punjabis emerged as the dominant ethnic group with their dominance in bureaucracy. the mohajirs also got their share in top bureaucracy more than their numerical strength in the early decades but since 1980s they have lost their over representation in top bureaucrats posts (raman, 1995). later on the quota system adopted by the central government for the appointment of top bureaucrats slightly increased the representation of small ethnic groups but still punjab and urban sindh is enjoying the over representation in top federal services. review of economics and development studies, vol. 6 (1) 2020, 57-65 63 during general zia’s regime (1977-88) punjabi dominance not only further increased but it gave way to the pashtuns to rise as the junior partners of punjabis in all type of bureaucracy (ahmed, 1988).but on the other hand sindhis and baloches remained underrepresented in civil and military bureaucracy. in 1972, the representation of baloch peoples was only 5 per cent and they were mostly on low ranked jobs in the civil services (ali, 1983, p. 117).the situation in 2018 is still alarming in the representation process. the following table shows that on grade 22 from the actual filled posts 65 top bureaucrats belonged to punjab while only six from balochistan sindh in total 11, kpk 15 while fata, gilgit baltistan, and azaad jammo o kashmir has not a single person’s representation at this grade. in scale 21 from punjab 242, sindh 67 in total, kpk 71, balochistan 8 ajk 4, g.b 2 and from fata only 8 persons are representing their respective areas. the representation in civil services from scale 22 to 17 discloses that out of 221556 total actual filled posts federal capital shares 249, sindh rural 1671, sindh urban 1567, kpk 2993, balochistan 871, ajk 315, g.b 1728, fata 380 while only from punjab 12832 civil bureaucrats are holding key positions in bureaucracy. the continuing underrepresentation of different areas of federation is causing resentments in the people of the small units that are a serious threat for the federation of pakistan. jobs in civil services of pakistan not only provide mean of living to the masses but it also is the symbol of honor for the people. small ethnic groups generally are less educated or uneducated. after the 18th amendment education is the basic right of the people and this is now the responsibility of provincial governments to increase the educational standard in their respective provinces. table 3 representation of provinces in civil services in 2018 basic pay scale sanctioned posts actual posts filled in islamabad punjab sindh r sindh u kpk balochistan ajk g.b fata 22 120 98 1 65 4 7 15 6 0 0 0 21 500 404 2 242 32 35 71 8 4 2 8 20 1236 1023 16 5090 102 76 144 41 21 10 23 19 3450 2657 47 1489 232 169 385 109 37 127 62 18 8378 6575 63 3646 468 474 928 242 88 545 121 17 15249 11399 120 6350 833 806 1450 465 165 1044 166 sub total 28932 221556 249 12832 1671 1567 2993 871 315 1728 380 source: federal bureau of statistics pakistan 11. challenge of water conflict for the federalism in pakistan natural resources like water, crude oil, natural gas, coal and gold have remained a major cause of conflict among nations, nationalities, communities and societies because of their economic importance. in the modern era with the adaptation of resource-fed method of development these resources has also got political values in federalist states. among these natural resources, water has its special importance for agri based federal countries. in the past water had been a major cause of war that was fought before 4500 year ago between the city states of lagash and umma in the region of tigris-euphrates. nature has provided water to his creatures in abundance but the problem according to amit ranjan is “but 97.5 percent of the world's water is too salty for human consumption and crop production. even the rest of the fresh water, an estimated 35 million cubic kilometers (million cu km)/year, cannot be fully accessed; most of it is locked either in the ice cover of arctic and antarctic regions or in deep underground aquifers” (ranjan, 2012). approximately two-thirds of water that is accessible and known as green water goes to the environment due to the evaporation process and cause rains and snow falls and thus creates an ecological balance. remaining water that is recognized as blue water, and is useable but its utilization is review of economics and development studies, vol. 6 (1) 2020, 57-65 64 difficult because of technological, environmental and economic, limitations. this is the reason of scarcity of water in the world and different states have less water resources in compliance with their needs. but availability of water is different for different states, brazil that is less populated country in the world has one-fifth of world's water reservoir son the other hand china and india besides having one-third of world’s population controls just one-tenth of global fresh water reservoirs. ever increasing population of the states, climatic changes and wastage of water in years old cultivation methods is producing demand-supply gap and now nations, nationalities and constituent units of federal states are moving towards confrontation because of this natural gift. pakistan is also a federal state that has agricultural based economy and where sharing of water is a major cause of conflict between federal units. water distribution is a constant source of threat for federation of pakistan and an unending dispute between punjab and sindh as well. this dispute is challenging the spirit of federalism in pakistan (waseem, 2010). pakistan has two main systems of rivers i.e., “rivers’ flowing into arabian sea and endothecia river basin’’. the former comprises; indus river basin, lyari river, hingol, hub rivers. later comprises of: mashkal, siastan basin, indus plain etc” (ranjan, 2012). among these rivers ,the indus river that enters in .pakistan from along with its tributaries has the vital importance for the state and provides the largest contiguous irrigation system in the world to pakistan .besides this largest irrigation system the small federal units of pakistan has their reservations against punjab over sharing of water. in fact this challenge is not new, it is continuing since 1859 right from the beginning of the british colonial rule in india. it started when undivided punjab started preparing irrigation schemes over indus river. it is universally agreed law that the significant right over the river belongs to tail users and the upper users has to construct irrigation projects with the consent of lower users. sindh is the tail user of the river indus and its entire tributary and thus holds the final rights over the water of indus river. the province of sindh along with baluchistan has been opposing constructing dams and barrages as they complain that these provinces does not get their right share of river water because of over use by rest of the provinces. they also claim that these provinces divert water without the consent of the lower riparian areas. (rizvi, 2014) as a matter of rights, equitable distribution of irrigation water among all provinces should be instituted. presently, the biggest issue on debate is that punjab forcibly appropriates a major and disproportionate share. this dispute is a persistence danger for the federation and a major source of conflict among the provinces to build new dams, which should be resolved through federal principles and international laws regarding water sharing. the disagreement over distribution of water is another bone of contention between the constituent units of pakistan. the difference of opinion lies over the construction of kalabagh dam, greater thal canal and the distribution of indus water between upper riparian and lower riparian. earlier, the dispute over water distribution was settled down between india and pakistan through the indus basin water treaty in 1960. this treaty gave exclusive right to use the water of three eastern rivers (the beas, the sutlej, and the ravi) to india and three western rivers (the chenab, the jhelum, and the indus) to pakistan. however, the distribution of water within pakistan remained problematic. various committees and commission were constituted but adhoc sharing arrangements was followed up to 1990 due to lack of consensus. finally, during nawaz sharif’s premiership, in 1991, unanimous water apportionment accord was signed by the four provinces and ratified by the council of common interests (cci) (rajput, 2005). another water issue among the provinces is the greater thal canal. the indus river system authority accord (irsa) had provided the certification to the greater thal canal project with a 3-2 review of economics and development studies, vol. 6 (1) 2020, 57-65 65 majority. this canal would irrigate some1530000 acres in four southern districts of punjab, including bhakar, jhang, layyah and khushab, and would have a total capacity of carrying 8,500 cusecs (faraz, 2002). the sindh has objected to the plan and sindh assembly has „passed a resolution to stop the ongoing construction of the thal canal (sayed, 2005). 13. conclusion it is good sign that federalism in pakistan in now working smoothly after the military rules. after the democratic regime of yousaf raza galani that was started after the elections 2018 one more parliament of pakistan has completed its term from 2013 to2018 and in 2018 once again democratic transfer of power took place when pti government replaced pml-n’s government. this democratic journey is a healthy exercise for power sharing and for centre province relations. the mode that was adopted by introducing 18 amendments to the constitution has now turned the federalism of pakistan towards the collaborative federalism. now federal governments are running the affairs of state with the consent of federating units. although from 2008 to 2018 different political parties came into power in different provinces but unlike past federal governments made no interventions, federalism in pakistan is still facing some challenges like issue of the southern punjab province ,under representation of provinces in political and bureaucratic positions ,corruption among the leaders of federal based political parties ,complete merger of fata to kpk and share from nfc award for the development of fat development in the neglected areas and construction of the new water resources but all these challenges could be solved by adopting the collaborative model of federalism. references ali, e. b. (2017, august 21). kalabagh dam and reservoir-a gold mine. islamabad, pakistan : the nation. anderson, g. (2008). federalism an introduction. oxford university press. faraz, h. (2002, may 8). irsa okays thsl project:decision taken on split vote. mushtaq, t. (2017, january 20). kala baagh dam, the facts. pakistan: the daily times. ranjan, a. (2012). inter provincial water sharing conflicts in pakistan. pakistaniaat:a journal of pakistan studies , 102-122. sajjad, a. a. (2015). a tortured history:federalism and democracy in pakistan. isas working paper no.2016 . singapur: national university of singapur. sayed, h. s. (2005, april 7). standoff between sindh and punjab: greater thal canal. dawn . shah, s. m. (1994). federalism in pakistan theory and practice. islamabad: chair on quaidi -azam & freedom movement,national inistute on pakistan studies. shehbaz, r. a. (2015). new threats and challanges to federalism:in pakistan(a socio political scenario). journal of political studies . waseem, m. (2010, august). www.civic education.org/wp. retrieved september 6, 2017 zakir, h. (2005, december 2). anp blasts kalabagh dam'. times review of economics and development studies, vol. 7 (4) 2021, 543 559 543 green banking, corporate governance and performance of selected saarc countries umara ikram a , shahzad akhtar b a phd, scholar institute of management sciences, bahauddin zakariya university multan, pakistan email: umarasoe@gmail.com b assistant professor institute of management sciences, bahauddin zakariya university multan, pakistan article details abstract history: accepted 15 december 2021 available online december 2021 this study is designed to estimate impact of green banking disclosure, corporate governance mechanism on performance of listed banks in selected saarc countries including pakistan, india, bangladesh, sri lanka and nepal. with the help of stata 14.2 this study used pca (principal component analysis) in addition to content analysis to create green banking disclosure index .for this purpose, central bank’s green banking guidelines are summarized into7 categories and 38 items. dynamic panel data set (2010-2019) is analyzed by applying system gmm step-one method. the relationships among board independence, board size, female director, institutional ownership, green banking and tobin’s q (market value) as performance measure is tested. institutional ownership and board independence has significant negative impact on market value, green banking does not have any significant impact on market value. on average disclosure practices are different in different categories. effectiveness of central bank guidelines can be identified at regional level. results are suggestive that corporate governance mechanism restructuring is needed to increase market value of banks in saarc countries. to the best of author’s knowledge, this is the very first study which methodologically contributes in the field of green banking disclosure as application of pca and system gmm step-one. contextually, one of the most affected area facing higher climate change risk as saarc region of the world is discussed. theoretically, study contributes in the theory of change, financial intermediation and agency theory. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: green banking, corporate governance, firm performance jel classification: g24, doi: 10.47067/reads.v7i4.415 corresponding author’s email address: umarasoe@gmail.com 1. introduction according to un agenda 2030 for sustainable development, it is reported that ghg emission levels are increasing. the latest ipcc report (ipcc 2018) declares that human activities are causing global warming which is likely to accelerate further by reaching 1.5 °c. global climate risk index 2018 review of economics and development studies, vol. 7 (4) 2021, 543 559 544 provides list of countries with long term and short term climate risk. most affected countries belonging to saarc regions are sri lanka, india, bangladesh and pakistan. to reduce negative impacts, central banks, supervisors and policy makers started undertaking various green banking initiatives. although practices are relatively different between developing and developed countries. at the global level, a network called the network for greening the financial system (ngfs) has also been established by the central banks and regulators to address climate risks. bangladesh has issued green banking guidelines in year 2011, 2012, 2013. india almost after 2012 all banks are directed to follow green coin rating guidelines. state bank of pakistan has announced green banking guidelines in 2017.corporate governance refers to the rules, regulations procedures and structures by which the affairs of business and institutions are managed and directed, to enhance shareholder’s value through improving corporate accountability and performance while considering the interest of other shareholders (jenkins on& mayer, 1992). alexander (2016) says that there is no universal definition of green banking and it varies across the countries. park and kim (2020) declares that green banking term is more similar to ethical banking, social or responsible banking or sustainable banking. presently, there is need to have a unique, comprehensive measure by which different initiatives regarding green banking practices can be examined in different countries. in addition, there is immense potential to explore unobserved contribution of green banking practices on bank performance. mostly, green banking literature consists of primary, cross sectional, descriptive and exploratory studies on the topics like, green banking practices in india (sudhalakshmi& chinnadorai,2014).factors determining adoption of green banking among commercial banks in malaysia (arumugan and chirute,2018)measuring green banking practices in sri lanka (shumya and arulrojah,2016).therefore, wide research gap is identified by research in the following areas, measuring green banking disclosure practices. linking corporate governance mechanism and green banking with firm performance. the purpose of this research is to create green banking disclosure index by combining all central bank guidelines from selected saarc countries. in addition, this study aims to identify the influencing effects of green banking disclosure index with corporate governance mechanism such as 1. board size, 2.board independence, 3. female in board and institutional ownership on market value of banks belonging to selected saarc countries. 2. related literature review islam et al (2017) examine the impact of regulatory guidance and other factors on the green banking disclosure practices of bangladeshi commercial banks in the period from 2007 to 2014. they find that, the issuance of green banking regulatory guidance by the central bank of bangladesh in 2011 positively influences the level of green banking disclosure. they also report that green banking disclosure practices in the banking sector have converged over the time and have become a routine process. in addition, by following ols model they find that corporate governance mechanisms (e.g., board size and institutional ownership) positively affect the level of green banking disclosure. however, this study finds no relationship between the presence of independent directors on the board and green banking disclosure. dewi and dewi (2017) provide empirical evidence about influencing role of green banking implementation on the relationship between corporate social responsibility and going concern value of banking companies in stock exchange of indonesia. by applying moderated regression analysis (mra) quantitative data (2013-2015) is analyzed and findings indicate implementation of green banking strengthens the relationship between corporate social responsibility and going concern value of banking companies in indonesia. wu et al (2019) establish a dynamic panel model for 12 chineselisted commercial banks and seven international commercial banks. the impact of green credit on the profitability of commercial banks and the difference between china and other countries is examined by using the generalized method of moments. the research shows that the equatorial principles projectfinancing ratio of international banks positively affects bank profitability, while the ratio of green credit for chinese commercial banks is inversely related to their profitability. review of economics and development studies, vol. 7 (4) 2021, 543 559 545 karim et al (2020) examines the effects of green banking practices on the financial performance of banks listed in the dse of bangladesh covering the period from 2011 to 2020. by using the panel data set, taking financial variables like return on asset, return on equity, and market value to proxy the banks’ performance, and employing green banking practice variables like green cost and volume of the risk management committee, study concludes that there is a positive relationship between green banking practices and financial performance. monem et al (2020) provide useful insight to examine whether bank’s green performance can effect financial performance and whether this relation is moderated by bank’s political connection. from bangladesh , sample of 172 firm-year observations from 2008-2014 by applying difference-in-difference (did),propensity score matching (pms)analysis and heckman’s two stage analysis suggest that green banking performance is positively associated with banks financial performance. robust findings also highlights political connections of banks negatively affects this relationship. karyani and obrien (2020) examine the effect of green banking practice on bank performance with foreign and public ownership as moderating variables of 14 indonesian banks with 98 bank year observations between 2012 and 2018. by applying ols (ordinary least square) model, this study provides useful insights that green banking practices have a negative impact on bank profitability but a positive impact on firm value. negative effect of green banking practice on profitability is strengthen by public ownership. positive impact of green banking practice on bank value is weakened by foreign ownership. quazi et al (2021) builds on key insight whether combining green banking disclosure with contextual factor such as non-performing loans provides additional understanding about green banking disclosure and firm value. by analyzing seven years data of listed banks in bangladesh (2008-2014) using multiple regression, they conclude that green banking disclosure gas positive effect on overall firm value. this positive effect is negatively moderated by banks non-performing loan. gerged and agwili (2019) identify in what way corporate governance affect firm profitability and firm value. a sample from (2012-2016) of 300 listed non-financial and financial companies from saudi arabia is analyzed by fixed effect panel data regression and gmm method. results are suggestive that better governed firms tend not to improve accounting value but market value. 3. data, variable and methodology keeping in consideration data protocols, the data covers the listed banks in respective stock exchanges including bangladesh, pakistan, sri lanka, india and nepal from 2010-2019 according to their annual reports. banks with incomplete data were excluded from sample (rehman,2016).data regarding stock prices have been calculated either through stock price history information available stock exchanges, annual report year averages or from investing.com to calculate market value of firms. final sample includes 32 banks with 320 total 10 year observation. sample comprises of 9 banks from india, 9 banks from bangladesh, 5 banks from sri lanka, 5 banks from pakistan and 4 banks from nepal. the study analyses data on green banking disclosure practices by manually coding information on 38 items as 1 if information is present and 0 otherwise from annual reports available on website. these 38 items comprises of following categories, 1.environment risk management 2.green banking facilitation 3.guidelines on own impact reduction. 4. management related guidelines 5.organization related guidelines 6.green business facilitation 7. specific guidelines. (sbp 2017).then green banking disclosure index is developed by principle component analysis technique (al-homaidi et al, 2021). the method of principal component analysis is considered extremely reliable and accurate technique for empirical investigation of non-financial disclosure (popa et al, 2021). 4. definition of variables over variables of interest regarding corporate governance are board size (brdsize) which is measured as total number of directors in board, board independence (brdind) measured as number of review of economics and development studies, vol. 7 (4) 2021, 543 559 546 independent directors in board, institutional ownership (instown) is measured as percentage of ownership holdings by institutional investors. female director (fd) is measured as total number of females .a number of control variables are also included for controlling firm specific characteristics. firm size (fsize) is measured as the natural logarithm of the firm’s total assets. firm age (fage) is measured as total number of years from inauguration. leverage (lev) is measured as the ratio of total debt to total assets whereas profitability (roa) is measured as the ratio of net income over total assets. (islam et al, 2017).green banking disclosure practices are measured by constructing green banking disclosure index (gbdi). list of 38 items with key words is provided in appendix 1. the definition of these variables along with variable type and source is given below in table. table: 1 definitions of variables, types and sources. variables measurement variable type source brdsize total number of directors in board. independent annual report brdind number of independent directors in board. independent annual report instown percentage of ownership holdings by institutional investors independent annual report fd total number of females in board. independent annual report fsize the natural logarithm of the firm’s total assets. control annual report fage total number of years from inauguration control annual report lev the ratio of total debt to total assets control annual report roa the ratio of net income over total assets control annual report gbdi green banking disclosure index independent annual report (tobin’s q) tobin’s q =total asset+ market value of equity-book value of equity/total asset dependent variable annual report 5. econometric model and methodology firm performance is measured as market value of firm by tobin’s q.(batsakis et al, 2018).to examine the impact of corporate governance mechanism and green banking disclosure index on market value of banks, following econometric model is developed by taking in consideration all variables mentioned in table above. tobin’s q j,t=β0j,t+β1j,t×tobin’s qj,t-1+β2j,t×boardsizej,t+β3j,t×board independencej,t+β4j,t×femaledirectorj,t+β5j,tinstituionalownershipj,t+β6j,t green banking index j,t+ β7j,t×controlsj,t+€j,t (1)firm valuej,t= tobin’s q of firm j at time t. (2)firm valuej,t-1= tobin’s q of firm j at time t-1. (3)board sizej,t= board size of firm j at time t. (4)board independence j,t= total independent director of firm j at time t. (5)female director j,t= female directors of firm j at time t. (6)institutional ownership j,t= % of institutional ownership of firm j at time t. review of economics and development studies, vol. 7 (4) 2021, 543 559 547 (7)green banking index j,t= green banking index of firm j at time t. (8)controls j,t= control variables of firm j at time t. according to jatmiko et al (2020) corporate governance variables including board size, board independence and female in board are dynamic in nature. firm value is measured as tobin’s q which is lag dependent variable. most of previous work (bitar et al, 2017) in banking have been practicing pooled old estimation however, according to baltagi (2008), pooled analysis using random or fixed effects are biased even if the error term is not serially correlated. that’s why, this work used system gmm to test the dynamic relationship between firm value, corporate governance characteristics and green banking disclosure in the presences of control variables which are bank specific. according to judson and owen (1999) for dynamic panel data estimation, system gmm one step is highly recommended when time period is less than or equal to 10 as in the case of current study. alqahtani and mayes (2018) in comparison to other panel methods, system gmm have advantages such as dynamic modeling treats autocorrelation, endogeneity, and unobserved heterogeneity. system gmm (arellano-bond estimation) is available in two versions, one step and two step. the asymptotic standard error of estimation of one step is more reliable and unbiased to draw inferences but at the same time in the case of heteroscedasticity, it cannot produce sargan statistics. in this case one can rely wald-chi statistics to check over-identification restriction and overall significance of the model. (pandy and sahu, 2021) 6. findings and discussion on results table 2: summary of methodologies used in green banking literature author(year) sample determinants methods islam et al (2017) 30 bangladesh bank 2007-2014 board size, board independence, female director ,institutional ownership, growth opportunities, year dummy, firm size , lev, roa firm age, ols regression. dewi & dewi(2017) 10 banks indonesia (2013-2015) csr disclosure, green banking regulations, going concern value. moderated regression analysis (mra) karim et al (2020) 10 listed commercial banks china (2011-2020) roa, roe, green credit ratio as cost, volume of risk management committee. panel data analysis wu et al (2019) 19 chinese listed bank (2008-2015) green credit ratio, roa, roe, npl, capital adequacy ratio. gmm, dynamic panel data analysis. monem et al (2020) 172 firm years observations (2008-2014) green credit ratio, roa, political connections. difference in difference (did), propensity review of economics and development studies, vol. 7 (4) 2021, 543 559 548 scoring method, heckman’s two stage analysis. karyani &obrien (2020) indonesian bank (2012-2018) roa, green banking practices, foreign public ownership. ols regression. quazi et al (2021) listed banks bangladesh (20082014) green banking disclosure, non-performing loan, tobin’s q multiple regression analysis. gerged and agwili (2019) (2012-2016) corporate governance mechanism , market value, roa, roe, tobin’s q, board size, board independence, board meeting, fixed effect panel data regression. gmm model. gosh et al (2021) 30 banks (2011-2017) board independence, board meetings, board diversity, tobin’s q, roa, audit committee size, nonexecutive directors. pooled ols method. table: 3 descriptive data statistics variable obs mean std. dev. min max board size 320 11.5812 3.7416 5 22 board ind 320 2.0031 2.1327 0 8 female director 320 0.8937 0.9958 0 4 io 320 26.1703 23.4078 0 98.63 firm age 320 42 32.3606 11 113 lev 320 77.6310 11.8855 16.64 92.03 roa 320 1.2440 1.7385 -7.21 7.31 firm size 320 26.7433 1.4741 23.0233 30.0802 tobin’s q 320 111.5365 43.8682 18.6244 636.5374 gb 320 1.16 1.4142 -0.3547 5.6200 according to the table above mentioned maximum size of board is 22 members and minimum is 5. board independence varies from 0 -8. at max there are 4 females in board. institutional ownership varies from 0 to 98% which is very high. firm value varies from 18.62% to 636.53%.green banking disclosure shows very low value -.354 to very high level of disclosure that is 5.62 among the selected saarc countries. review of economics and development studies, vol. 7 (4) 2021, 543 559 549 table: 4 content analysis results of green banking disclosure on 38 items. variable obs. mean std. de min max gb1 320 .5468 .4985 0 1 gb2 320 .4687 .4998 0 1 gb3 320 .5156 .5005 0 1 gb4 320 .3968 .4900 0 1 gb5 320 .2656 .4423 0 1 gb6 320 .4375 .4968 0 1 gb7 320 .0812 .2736 0 1 gb8 320 .3468 .4767 0 1 gb9 320 .4656 .4995 0 1 gb10 320 .3218 .4679 0 1 gb11 320 .4687 .4998 0 1 gb12 320 .5468 .4985 0 1 gb13 320 .4687 .4998 0 1 gb14 320 .2968 .4575 0 1 gb15 320 .0218 .1465 0 1 gb16 320 .4156 .4936 0 1 gb17 320 .0218 .1465 0 1 gb18 320 .0375 .1902 0 1 review of economics and development studies, vol. 7 (4) 2021, 543 559 550 gb19 320 .4937 .5007 0 1 gb20 320 .0093 .0965 0 1 gb21 320 .9250 .2638 0 1 gb22 320 .4593 .4991 0 1 gb23 320 .6250 .4848 0 1 gb24 320 .1593 .3665 0 1 gb25 320 .9187 .2736 0 1 gb26 320 .0562 .2307 0 1 gb27 320 .2500 .4336 0 1 gb28 320 .0468 .2117 0 1 gb29 320 .1625 .3694 0 1 gb30 320 .0812 .2736 0 1 gb31 320 .3687 .4832 0 1 gb32 320 .3156 .4654 0 1 gb33 320 .0593 .2366 0 1 gb34 320 .0593 .2366 0 1 gb35 320 .0062 .0789 0 1 gb36 320 .0031 .0559 0 1 gb37 320 .1250 .3312 0 1 gb38 320 .9500 .2182 0 1 review of economics and development studies, vol. 7 (4) 2021, 543 559 551 all disclosure related items are binary in nature ranging from 0-1 value. among all 38 items 6 items are having maximum mean values ranging from .46 to .95. some items are having very low level of average disclosure like .006-.002. table: 5 correlation matrix according to correlation matrix it is clear that all variables in econometric model are perfectly uncorrelated with each other. board size board ind female directo r io firm age lev roa firm size gb tobin’ sq board size 1.000 0 board ind 0.086 6 1.0000 female directo r 0.195 8 0.3632 1.0000 io 0.076 9 0.6555 0.5204 1.000 0 firm age 0.007 9 0.1794 0.0357 0.114 8 1.000 0 lev 0.230 5 0.2514 0.2802 0.263 8 0.285 8 1.000 0 roa 0.083 8 0.2480 0.0555 0.138 7 0.312 6 0.1811 1.000 0 firm size 0.043 1 0.0379 0.1069 .1121 0.734 1 0.093 4 0.186 6 1.0000 gb 0.150 8 0.2608 0.0694 .1037 0.162 5 0.085 5 0.193 5 0.0631 1.000 0 tobin’ s q 0.176 0 0.0371 0.0323 0.098 6 0.167 0 0.067 5 0.196 6 0.2665 0.007 1 1.000 0 a correlation among variable that exceeds 0.9 or vif value greater than 10 shall indicate multi co-linearity (gujarati, 2003). table mentioned above shows there is no such issue among variables at all. review of economics and development studies, vol. 7 (4) 2021, 543 559 552 table: 6 multi-collinearity diagnostic 7. empirical result principal component analysis is dimension reduction technique which is widely discussed in sustainability and csr disclosure literature. (benjamin et al, 2019). in this study, pca provides 7 components with eigenvalues > 1. first component caries maximum information having eigenvalue 13.9 and explains 36.5% variation which is very high. rest of the 6 components collectively explains 34% variation. rotated matrix, eigenvectors and scree plot of eigenvalues is also provided below. after identifying components predicted value of green banking index is calculated. table 7: principal component analysis component eigenvalue difference proportion cumulative comp1 14.5792 10.9948 .3738 .3738 comp2 3.58439 1.10395 .0919 .4657 comp3 2.48044 .0577924 .0636 .5293 comp4 2.42265 .664594 .0621 .5915 comp5 1.75806 .175874 .0451 .6365 comp6 1.58218 .352977 .0406 .6771 comp7 1.22921 .143176 .0315 .7086 variable vif 1/vif firm age years 2.88 0.347719 firm size 2.57 0.389607 io 2.17 0.459984 boardind 1.97 0.507800 female director 1.55 0.643527 lev 1.30 0.766859 gb 1.23 0.811943 roa 1.22 0.822999 board size 1.13 0.886665 mean vif 1.78 review of economics and development studies, vol. 7 (4) 2021, 543 559 553 figure-1: scree plot of eigenvalues after pca the scree plot is graphical representation of eigenvalues. the horizontal axis presents components and vertical axis presents eigenvalues while (klomp and haan, 2009). figure-1 presents the eigenvalues of all three components and it can be observed that component-1 has the maximum value and produce the steep slope. table: 8 principal component eigenvectors variable comp1 comp2 comp3 comp4 comp5 comp6 comp7 gb1 0.2222 -0.0647 0.0011 -0.0304 -0.0304 -0.2008 -0.1154 gb2 0.2237 -0.0603 -0.0292 -0.0989 -0.0989 -0.0775 -0.1712 gb3 0.2357 -0.0629 0.0262 -0.0470 -0.0470 -0.1836 -0.0047 gb4 0.2199 -0.1497 -0.0385 0.0818 0.0818 -0.0130 -0.0186 gb5 0.2025 0.0380 -0.0769 -0.1206 -0.1206 0.2378 -0.0931 gb6 0.2089 -0.1374 -0.0109 0.0729 0.0729 -0.0260 0.0711 gb7 0.1153 -0.0732 -0.0165 0.0176 0.0176 0.5210 0.0614 gb8 0.2248 -0.0186 -0.0489 -0.0026 -0.0026 0.0474 0.0688 gb9 0.2002 -0.1023 -0.0194 0.0907 0.0907 -0.0208 -0.3748 gb10 0.1886 -0.1831 -0.0258 0.0436 0.0436 0.1521 -0.2347 gb11 0.1803 0.0175 0.0058 -0.0632 -0.0632 -0.0359 0.1950 gb12 0.2180 -0.0641 0.0266 -0.0604 -0.0604 -0.1747 0.0790 gb13 0.2322 -0.0544 0.0078 -0.0465 -0.0465 -0.1166 0.0807 gb14 0.2092 0.0770 -0.0141 -0.0227 -0.0227 0.0138 0.1849 gb15 -0.1136 0.1789 0.1110 0.0671 -0.0402 0.0180 0.0475 gb16 -0.1136 0.1783 0.1110 0.0671 -0.0402 -0.1015 0.3950 gb17 0.1421 -0.1777 0.2290 0.1376 0.1908 -0.0536 0.0343 0 5 10 15 e ig en va lu es 0 2 4 6 8 number scree plot of eigenvalues after pca review of economics and development studies, vol. 7 (4) 2021, 543 559 554 gb18 0.0588 -0.0585 -0.0890 -0.0121 -0.0216 0.0072 -0.0731 gb19 0.0365 0.1775 -0.0179 0.0459 -0.0158 0.4550 -0.2629 gb20 0.0362 -0.0910 0.1961 -0.1266 -0.1661 0.0625 -0.0300 gb21 0.1155 0.3341 0.0655 -0.0107 -0.0396 -0.2370 0.0773 gb22 0.1891 -0.0119 0.0544 -0.3874 0.0990 -0.0205 -0.1834 gb23 -0.1059 -0.0330 0.1659 -0.1020 0.2624 0.1260 0.1995 gb24 0.1848 -0.1975 0.0005 0.0676 -0.2862 -0.0187 0.0330 gb25 -0.0277 -0.2335 -0.0431 -0.0568 0.0315 -0.0221 -0.0325 gb26 -0.3763 0.0642 0.0041 0.4534 -0.0370 0.1336 0.0256 gb27 -0.0834 0.0168 0.1180 0.0288 0.1648 -0.0301 0.0954 gb28 0.1155 -0.0938 0.0934 0.0813 0.0041 -0.0261 0.0244 gb29 -0.0161 0.3069 -0.0074 0.0296 0.0027 0.0417 0.0412 gb30 -0.0292 0.0965 -0.2042 -0.0508 -0.0077 -0.0789 -0.0714 gb31 0.2142 -0.2149 0.0183 0.0142 0.1465 0.0273 -0.1136 gb32 0.0059 0.0878 -0.0422 0.2558 -0.3320 -0.2277 -0.0377 gb33 0.0145 -0.0573 0.1250 0.0159 0.0217 0.0588 0.0339 gb34 0.0145 -0.0573 0.1250 0.0159 0.0217 0.0588 0.0339 gb35 0.0429 -0.0914 -0.0523 -0.0181 0.0060 -0.0127 0.0004 gb36 -0.0587 0.1891 -0.0224 0.0160 0.0060 -0.0201 -0.0446 gb37 0.1251 -0.1471 0.0699 -0.0266 0.0077 0.0871 0.0811 gb38 0.0806 -0.0295 0.0012 -0.0301 -0.0064 0.0770 -0.0251 table: 9 principal components orthogonal varimax rotation no. of obs:320 no. of comp:37 traces: 38 rho:1.0000 component variance difference proportion cumulative comp1 2 1 0.0526 .0526 comp2 1 1.02700e-09 0.0263 .0780 comp3 1 1.60119e-09 0.0263 .1053 comp4 1 2.16254e-08 0.0263 .1316 comp5 1 2.14184e-08 0.0263 .1579 comp6 1 2.78397e-11 0.0263 .1842 comp7 1 9.40026e-12 0.0263 .2105 comp8 1 -7.27087e-11 0.0263 .2368 comp9 1 7.04863e-11 0.0263 .2632 comp10 1 3.07442e-09 0.0263 .2854 comp11 1 -2.39225e-09 0.0263 .3158 comp12 1 -6.80650e-10 0.0263 .3421 comp13 1 1.87759e-11 0.0263 .3684 review of economics and development studies, vol. 7 (4) 2021, 543 559 555 comp14 1 1.58955e-11 0.0263 .3947 comp15 1 -9.25814e-09 0.0263 .4211 comp16 1 8.80252e-09 0.0263 .4474 comp17 1 4.08009e-10 0.0263 .4737 comp18 1 1.53375e-10 0.0263 .5000 comp19 1 -1.00031e-09 0.0263 .5263 comp20 1 8.55693e-10 0.0263 .5789 comp21 1 5.25580e-13 0.0263 .6053 comp22 1 -2.17382e-13 0.0263 .6316 comp23 1 5.51597e-11 0.0263 .6579 comp24 1 2.13773e-08 0.0263 ..6842 comp25 1 -2.14076e-08 0.0263 .7105 comp26 1 -1.68218e-09 0.0263 .7368 comp27 1 1.00998e-08 0.0263 .7632 comp28 1 -2.88725e-09 0.0263 .7895 comp29 1 -9.07525e-09 0.0263 .8158 comp30 1 3.77244e-09 0.0263 .8421 comp31 1 -7.68353e-09 0.0263 .8421 comp32 1 7.41877e-09 0.0263 .8684 comp33 1 -5.82249e-10 0.0263 .8947 comp34 1 1.82356e-09 0.0263 .9211 comp35 1 3.90585e-10 0.0263 .9474 comp36 1 -1.55918e-09 0.0263 .9737 comp37 1 0.0263 1.000 table 10: system gmm one-step results for selected saarc countries: corporate governance characteristic and market value tobin’s q coef. std. err. z p>|z| [95% conf. interval] tobin’s q l1 .0528571 .0472455 1.12 .263 -.0397424 .1454566 board size -6.335266 1.812093 -3.50 .000 -9.886904 -2.783628 board ind 1.03113 3.280271 0.31 .753 -5.398083 7.460344 female director 3.285065 4.882335 0.67 .501 -6.284135 12.85427 io -.8228694 .3143179 -2.62 .009 -1.438921 -.2068176 firm age -2.004165 .9467143 -2.12 .034 -3.859691 -.148639 firm size 8.013257 2.072315 -3.87 .000 3.951594 12.07492 lev .5350474 .4963865 1.87 .281 -.4378523 -1.507947 roa -1.847115 3.636309 0.611 .611 -8.97415 5.279921 obs. 288 wald chi 262.71 prob 0.000 sargan test 0.000 review of economics and development studies, vol. 7 (4) 2021, 543 559 556 table 11: system gmm one-step results for selected saarc countries: green banking, corporate governance characteristics and market value. tobin’s q coef. std. err. z p>|z| [95% conf. interval] tobin’s q l1 .052121 .0472671 1.10 0.270 -.0405208 .1447628 board size -6.467463 1.81805 -3.56 0.000 -10.03078 -2.90415 board ind 1.515256 3.322343 0.46 0.648 -4.996416 8.026928 female director 3.016476 4.890703 0.62 0.537 -6.569126 12.60008 io -.7357883 .3276762 -2.25 -0.025 -1.3780022 -0.935548 firm age -1.938855 .9493205 -2.04 0.041 -3.799489 -0.0782208 firm size 8.023921 2.072781 3.87 0.000 3.3961344 12.0865 lev .5312251 .4965618 1.07 0.285 -.4420182 1.504468 roa -1.750552 3.638579 -0.48 0.630 -8.882037 5.380952 gb -4.867581 5.214606 -0.93 0.351 -15.0880 15.352859 obs. 288 wald chi 263.41 prob 0.000 sargan test 0.000 to examine the relationship between board characteristics, green banking disclosure and firm value in selected saarc countries stata 14.2 software is used t. system gmm-step one method for panel data set covering the period 2010-2019 is applied. it has been recommended by faitouri (2014) that one lag is sufficient to capture the influence of the past on the current data. first data set is declared to be dynamic, panel id is set to be banks and time is years. by clicking (arellanobover/blundell-bond estimation option, following command xtdpdsys generates results provided in table 5,6.after controlling the effects of firm specific characteristic such as, firm age, size, leverage and profitability at 5% confidence of interval board size has significant negative influence on market value of firm.( β= 6.33 p=.000). institutional ownership has significant negative influence on market value. green banking disclosure does not have any significant influence on market value. lipton and lorsch (1992) report that larger board size is ineffective. agency theory (jensen, 1993) suggests that large board size is dysfunctional. optimum board size should be 8 or 7. beyond this limit board management is costly. the possible reason behind negative impact of board size is average size of board is 11-12 in saarc countries collectively which is too high according to agency theory. (jensen, 1993). charfeddine and elmarzougui (2010) identify negative impact of institutional ownership and firm performance measured as tobin’s q in listed companies in france. according to controlling hypothesis institutional ownership beyond 81% contributes positively in firm value. (wardhana and tendililine, 2011).in present study average institutional ownership is between 21-22% which is very low. the conclusive findings are robust in the context of saarc region. 8. conclusion the main contribution of this study is to shed light and explore dynamic relationships among green banking disclosure practices, corporate governance mechanism and firm value in selected saarc countries. based upon author’s knowledge, this is the first study which methodologically contributes by applying system gmm step one and pca in the field of green banking disclosure. contextually sarrc countries are targeted to explore unobserved dynamic relations as per research model. saarc region is one of the most effected and threaded area due to climate risk and global warming. by developing a composite green banking disclosure index, a new stream in the field of disclosure is added. this index review of economics and development studies, vol. 7 (4) 2021, 543 559 557 can be used as independent, mediator or moderator variable to explore unobserved relations with firm performance like market value, going concern value, profitability etc. effectiveness of central bank’s green banking guidelines can be observed in the light of theory of change and financial intermediation theory at regional and global level. corporate governance mechanism and market value of firm is observed in the light of agency theory and controlling hypothesis. the findings are suggestive that corporate governance mechanism restructuring is needed to have positive contribution in market value of banks belonging to india, pakistan, bangladesh, nepal and sri lanka. references alqahtani, f. and mayes, d.g. 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(2016), al baraka bank acquires burj bank, propakistani. osisioma and nwokesi (2019), “sustainability disclosure and market value of firms in emerging economy: evidence from nigeria” european journal of accounting, auditing and finance research vol.7 no.3 sudhalakshmi k. &chinnadorai k.m (2014). “green banking practices in indian banks”international journal of management and commerce innovationsvol. 2. no.1, pp: 232-235 shaumya & arulrajah (2016). “measuring green banking practices: evidence from sri lanka” 13th international conference on business management. wu et al (2019). “comparing the influence of green credit on commercial bank profitability in china and abroad: empirical test based on a dynamic panel system using gmm” international journal of financial studies vol.7 no.64 appendix: 1 list of items with key words developed by combining central bank’s guidelines. # item with key words 1 board council promotes green credit. 2 low carbon business innovation. 3 bank own environment & sustainable performance. 4 client supply chain impact on environment. 5 green credit growth strategy. 6 e&s risk control. 7 information about green credit target. 8 green credit follow-up report. 9 information about sector specific investment. 10 green credit innovation. 11 stakeholder communication for awareness. 12 bank own environment & sustainability improvement. 13 green offices promotion. 14 green credit capacity building. 15 3 rd party environment and sustainability risk audit assessment. 16 client credit approval based on e&s risk. 17 information regarding internal audit based on green credit performance. 18 green credit incentive and penalty system. 19 green credit policy implementation status. 20 information about optional 3 rd party independent audit. 21 email communication. review of economics and development studies, vol. 7 (4) 2021, 543 559 559 22 waste reduction policies including water, gas etc. 23 energy consumption in conducting business operation. 24 employee travel reduction. 25 online, automated, mobile banking. 26 bank’s network about environmental issues. 27 seminar and trainings about green banking. 28 bank award winning about environmental friendly activities. 29 establishment of climate change fund. 30 internal marketing caption in annual report about green banking. 31 actual spending on green banking activities. 32 separate pages in annual report for green banking reporting. 33 green branch officer presence in bank branches. 34 green credit advisory services. 35 green credit financing targets at regional branch level. 36 international funding for green project investments. 37 inventory targets for electricity, water, petroleum, paper. 38 paperless banking. review of economics and development studies, vol. 7 (2) 2021, 243-256 243 troika of trade openness, poverty and income inequality: empirical evidence from lower and middle income countries rashid sattar a , rana ejaz ali khan b a assistant professor, department of economics, the islamia university of bahawalpur, pakistan e-mail: rashid.sattar@iub.edu.pk b professor and chairman, department of economics, the islamia university of bahawalpur, pakistan e-mail: ranaejazalikhan@yahoo.com article details abstract history: accepted 10 may 2021 available online june 2021 the current study investigates the relationship among trade openness, poverty and income inequality in the developing economies classified as lower and middle income countries. kao and fisher cointegration tests are employed to see the long-run equilibrium relationship among the variables. panel cointegration regression is employed to calculate the magnitude of variables through fmols and dols techniques. the results demonstrate that interaction of these three variables differ for income groups of countries, however, trade openness and poverty increase income inequality in both groups. similarly, income inequality decreases trade openness in both lower income and middle income groups of the economies. trade openness increases poverty in lower income countries only. poverty increases income inequality in lower income countries but in middle income countries it decreases trade openness. in the control variables the financial development has shown encouraging effect on trade openness in lower and middle income countries. gdp growth has shown positive impact on income inequality in lower income countries but negative impact in middle income countries. as trade openness has discoursing effect so the economies should carefully deal with the implications through proper policy framework. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: trade openness, poverty, income inequality, financial development jel classification: p33, i32, o15 doi: 10.47067/reads.v7i2.355 corresponding author’s email address: rashid.sattar@iub.edu.pk 1. introduction the lower and middle income countries are different in their size of economies. the lower income countries are facing massive poverty and income inequality along with lack of technology and innovation adoptability which are major factors of international trade. the middle-income economies are essential for economic stability globally. these economies have a significant impact on international trade for rest of the world. on the other hand there is a wide wage gap between urban and rural wages in these economies(chen, alvarado, & hsu, 2018). the advantages of trade openness may not reach the review of economics and development studies, vol. 7 (2) 2021, 243-256 244 rural poor, who are less aware and less movable than those living in urban areas. in asia and subsaharan africa, there are some developing nations where income inequality increases due to trade openness. the trade openness benefits the people who live in urban areas as compared to rural ones (ravallion, 2003). the skill of labor in developing economies plays an essential role in poverty reduction and income inequality and there exists a wide gap between the skill of labor in urban and rural areas. however, in some developing countries, poverty reduces due to free trade but income inequality remains the same. the income inequality in asia and africa is highest among all the regions of the world (thomas, wang, & fan, 2002). heckscher-ohlin-samuelsonmodel is based on the argument that abundant factors are intensively used in production due to its lower price that is determined by its abundance. after trade, there appears an increase in the price of abundant factors which has an income distribution effect (robertson, 2000; slaughter, 2000). it creates a link between trade openness and income inequality and poverty. there are a number of empirical evidences showing the encouraging effect of trade on poverty reduction (pradhan and mahesh, 2014; onakoya et al. 2019). the current pandemic also explains the association among trade openness, poverty and income inequality. there is an economic impact of covid-19 through trade. the worldwide lockdown due to the corona virus results into dramatic change in international trade of all the economies globally. the pandemic shocks affected developing economies severely. the poverty increased due to lockdown in many economic zones in the world. the lockdown results into closure of many industries. in this condition the wages decrease and many people lose their jobs by which poverty increases. the trade was reduced and income inequality was increased (buheji et al. 2020). the association of trade openness, poverty, and income distribution received researcher’s attention in this scenario. there is a lot of empirical evidences available showing the importance of the linkages of these variables. the evidences from the literature show that poverty and inequality are closely linked to each other(guiga & rejeb, 2012). the literature found the ambiguity in findings regarding the linkages among this troika of macroeconomic indicators (deyshappria, 2018). the developing economies are becoming more open, and inequality within and between developing economies has been increasing since long. the developing economies of asia and sub-saharan africa are the particular cases. there has been significant discussion on the effects of trade openness, still the researchers are focusing on the connection among poverty, income distribution and trade openness(jaravel, 2018). the significant contribution of the current study is to examine the interrelationship among trade openness, poverty and income inequality in lower and middle-income economies of asia and subsaharan africa. a comparative analysis of lower and middle-income economies in the perspective of trade openness, poverty and income inequality is still overlooked in the literature. the present research will fill this gap by comparing these two areas of developing economies. 2. literature review an extensive literature exists on trade openness, poverty and income inequality. most of it is concerned with any two variables of this triangle. ravallion (2007) questioned the robust relationship between globalization and poverty. the study argued that under certain set of conditions the trade liberalization may reduce poverty but cross country analyses does not confirm that trade liberalization can reduce poverty. khan and bashir (2011) have analyzed the causal association of trade openness, poverty and income inequality with each other in india. the study revealed no effect of trade openness review of economics and development studies, vol. 7 (2) 2021, 243-256 245 on poverty and poverty has no effect on trade openness, however, in the short run the income inequality is positively influenced by trade openness and in the long run it is negatively affected by trade openness. hussin and saidin (2012) investigated the economic growth in four asian countries: malaysia, thailand, indonesia, and the philippines. the ordinary least square (ols) technique was employed on the data set covering the time period from 1981 to 2008. the estimation explained that trade openness, foreign direct investment and gross fixed capital formation affect the gdp growth positively. these countries should devise the policies that encourage all these three socioeconomic indicators to accelerate the economic growth. elmawazini, sharif, manga, and drucker (2013) empirically investigated the impact of trade and general globalization (combination of economic, social and political globalization) on income inequality in commonwealth of independent states (cis) and south europe. there were eight south europe and cis countries in the sample. the globalization was measured by kof index of globalization which covers 37% of the economic dimension, 39% of the social size, and 24% of the political dimension. the results of least square dummy variable (lsdv) were divided into two parts. the first part showed that economic globalization widens inequality. the second part also showed the same type of impact of general globalization on income inequality. le goff and singh (2013) examined the issue of the trade and poverty in africa. they found that open economies performed better than closed economies, especially concerning poverty elimination. the trade is sufficient for poverty reduction but it must be associated with other policies such as financial sector development, education, and governance. santoss-pauliuo (2015) also found that increase in export share contributes to poverty reduction. pradhan and mahesh (2014) analyzed the role of trade openness in reducing poverty in developing countries. the results of two stages least square (2sls) model explained that poverty in the sample of 25 developing economies is negatively associated with total trade, i.e. sum of all kinds of imports and exports, along with separately only imports and exports. the merchandise trade has also shown negative effect on poverty. oh and lee (2017) attempted to see how the poverty reduction in influenced by trade openness in regional perspective of 20 countries. the study concluded that export share in trade reduces national poverty and urban poverty in developing countries of asia, and central and south america but not the rural poverty. the import share in trade benefits the central and south america in rural poverty reduction. cain et al. (2010) have also argued that benefits of trade openness may differ for regions or sectors of the economies due to lack of capacity to absorb the advantages. mustafa, rizov, and kernohan (2017) investigated the bearing effect of trade openness and human development on gdp growth in a panel of 12 developing countries. the explanatory variables weretrade openness, human capital, foreign direct investment and gdp. the three stages least square (3sls) methodology was used for estimation. the estimation explained that trade openness along with human capital substantially impact the economic growth in developing economies. the foreign direct investment also positively contributes in gdp growth rate. onakoya et al. (2019) estimated the impact of trade liberalization on poverty by employing pooled ols on the data set of twenty one african economies covering the time period of 2005-2014. review of economics and development studies, vol. 7 (2) 2021, 243-256 246 they found that trade liberalization reduces poverty. fauzel (2020) also estimated the role of trade in reducing poverty in mauritius employing error correction model on time series data for the years 19902017. the study concluded that in the long run the trade decreases poverty but in the short run it increases poverty. moreover, gdp growth and education are the important factors for poverty alleviation. yameogo and omojolaibi (2021) probed the impact of trade openness on economic growth and poverty in a sample of 40 sub-saharan african economies. the study found that trade openness along with fdi and institutional quality increases economic growth. furthermore, the trade openness and institutional quality reduce poverty. however, poverty does not respond to trade and growth shocks. the literature has the gap of simultaneous analysis of trade openness, poverty and inequality in developing economies particularly focusing on lower and middle income economies. 3. theoretical issues there are several channels through which trade influences poverty and income inequality. the income inequality exists in several economies since a long. these income inequalities remain existed in both developed and developing nations. one of the factors of this inequality is openness to international trade. the theories of international trade(chen et al., 2018) demonstrate that trade increases wage inequality within the country and other countries. it is based onheckscher-ohlin-samuelson theory which explains that factors of production cannot cross the border, so the factors can only move between industries within the countries. it results into change in income distribution. through another channel income inequality is linked to international trade, i.e. the trade increase income inequality in importcompeting industries and reduce income inequality in export-producing industries(ruffin, 2009). as concerns the poverty there are a number of macroeconomic factors of poverty like unemployment (calnitsky, 2018), low level of spending in education and training (jagannathan & kocherlakota, 1996) and economic structure (moller, huber, stephens, bradley, & nielsen, 2003). poverty and inequality are often studied together because they are considered interrelated concepts. issues of inequality focus on how resources are distributed in a society while poverty deals with either people can meet their basic needs. in the case of inequality, every person's status is compared with everyone else. according to endogenous growth theory (dowrick & golley, 2004),trade openness may create dynamic gain by less expensive or high quality intermediate goods, enhancing the overall productivity of the economy. through this effect trade contributes to reduce poverty. in turn, an increase in productivity also means high rate of taxation, high government investment, and better schooling, which are important determinants of poverty reduction. hence, trade openness is a vital policy to reduce poverty (dollar & kraay, 2004). according to stolper samuelsontheorem the trade increases the real income of unskilled labor due to its abundance in developing countries. winters et al. (2004) concluded that trade liberalization is the most accessible tool of poverty reduction. on the other hand, trade openness may harm the poor community of the country. the primary reason is that trade openness had to transform its labour into human capital (rodrik, 2001). for low income countries, it is not possible to fully transform their labor into skilled and trained population which results into creation of poverty. all schools of thought agree that trade remains impressive to increase growth which reduces poverty and income inequality. different kinds of literature examined that trade is good for growth and review of economics and development studies, vol. 7 (2) 2021, 243-256 247 to sustainability(bhagwati & srinivasan, 2002; dollar & kraay, 2004). most of the developing countries opened their economies in the 1990s after performing much better economically, which benefited the poor. however, economic performance differs in developing economies depending on their resources and pattern of trade. thus, poverty reduces to different extents in developing nations, so the magnitude of poverty reduction and income inequality differ in developing countries. 4. methodology the present study explained the interrelationship among trade openness, poverty, and income inequality. for the purpose three models have been devised. the functional form of the model is given as: trade = f (pov, gini, gdp, fdev)…………………………….... (1) pov = f (trade, gini, gdp, tax)…………………...…………… (2) gini = f (trade, pov, gdp, hdev)…….………..…….………… (3) the operational definitions of the variables are given in table 1. table 1: operational definitions of the variables 4.1 panel unit root test the most commonly used tests for panel unit root are levin, lin, and chu (llc) test (levin, lin and chu 2002), impesaran and shin (ips) test(im, pesaran, & shin, 2003), and augmented dickey– fuller (adf) unit root test(maddala & wu, 1999). ” these tests are employed to check the stationarity of data because sometimes data are stationary but sometimesit becomes stationary by taking its first difference. llc is assumed pooled panel unit root test while heterogeneity is allowed by ips. adf is a non-parametric test. in the current study llc, ips and adf tests are employed to check the stationarity. variable name definitions and sources trade (trade openness) it is the sum of exports and imports as a share of real gdp. pov (poverty) the headcount ratio measures poverty. headcount ratio at $1.90 a day is the percentage of the population living on less than $1.90 a day. gini (income inequality) gini-index measures the extent of income inequality. a gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality. fdev (financial development) financial development is measured by credit to private sector ratio to total credit. domestic credit provided by the financial sector includes all credit to various sectors on a gross basis, except for credit to the central government, which is net. gdp (gdp growth rate) the annual percentage growth rate of gdp. tax (tax revenue) tax revenue refers to compulsory transfers to the central government for public purposes. it is measured by tax to gdp ratio. hdev (human development) human development peroxide by total enrollment in secondary education, regardless of age, expressed as a percentage of the population. review of economics and development studies, vol. 7 (2) 2021, 243-256 248 4.2 panel cointegration test if the variables under analysis in unit root tests are in order of integration one i(1) in the unit root tests, it allows to move forward to panel cointegration, representing a long-run equilibrium relationship among the variables. to estimate the cointegration, kao residual cointegration test and fisher johnson panel cointegration test are used. the base of this test is residuals of a dynamic model. it is suitable in the presence of cross-sectional dependency. the null hypothesis in this case may be nocointegration and its alternative hypothesis may be is cointegration. if cointegration exists, we can move towards dynamic ordinary least square (dols) and fully modified ordinary least square (fmols). when cointegration in variables is confirmed, we estimate the coefficient of long-run magnitude. it is essential to consider endogeneity because without considering this issue, misleading results may be emerged. the issue can be resolved by using dols and fmols regression techniques. to avoid the existence of autocorrelation among the variables the fmols and dols are suitable for calculatingthe coefficient. dols is a parametric and fmols is a non-parametric approach. these approaches have the advantagesto handle small data. the fmols gives us efficient and unbiased estimators.the present study employs dols and fmols. the econometric form of the models given in equations 1, 2 and 3 are given here. tradei,t = α 1+ α 2povi,t-1+ α 3ginii,t-1+ α 4gdpi,t-1 + α 6fdev i,t-1+ϑi,t……………….. (4) povi,t =β1+ β2tradei,t-1+ β3ginii,t-1+ β4gdpi,t-1+ β5taxi,t-1 +ϑi,t………...………… (5) ginii,t = γ1+ γ 2tradei,t-1+ γ 3povi,t-1 + γ 4gdpi,t-1+ γ 5hdevi,t-1 +ϑi,t…………….…… (6) 4.3 source of data the sample of developing countries is comprised of 45 developing countries segregated into lower and middle income countries. all the countries in the sample are from two regions, i.e. asia and sub-saharan africa. there are 31 lower income and 14 middle income countries in the sample. the lower income countries under the world bank classification are those having gross national income (gni) per capita of $ 1,026 to $3,995 and middle income countries are those countries having the gni per capita of $3,996 to $12,375. the data covering the time period of 1995-2019 is taken from world development indicators (world bank 2019). 5. results and discussion the results of panel unit root tests, the estimation results processed with panel cointegration using kao and fisher cointegration test, and the panel regression results using fmols and dols estimators are described in this section. the regression results showing the long run relationship among the principal variables are also discussed in this section. 5.1 results of panel unit root test the results of unit root test are expressed in table 2 and 3.these results are estimated using llc, ips, and adf-fisher unit root test. the test values express that all the variables under analysis are non-stationary at first difference in both lower and middle income economies. so the series of variables are at i(1) in the panel of lower and middle income countries. levine, lin, and chu (2002) demonstrated that it is necessary to check the unit root test for panel data in every section to avoid review of economics and development studies, vol. 7 (2) 2021, 243-256 249 spurious regression. by rejecting the null hypothesis, we concluded that the reliability of each variable is fixed. table2: unit root test for the sample of lower income countries variables llc ips adf results level first diff. level first diff. level first diff. trade 0.94 -15.3 0.92 -15.7* 59.0 366.3* i(1) pov 2.45 -15.2* 1.86 -16.5 57.0 376.9* i(1) gini 0.06 -11.0* 2.29 -20.5* 70.63 504.2* i(1) fdev 6.37 -12.1* 4.61 -12.8* 68.8 292.0* i(1) gdp 6.72 -29.1* 1.92 -28.0* 44.90 616.8* i(1) tax 2.11 -12.1 0.90 -15.0* 72.35 345.6* i(1) hdev 1.25 -14.3* 1.63 18.2* 88.23 273.2* i(1) note: ***, ** and * represent significance at 1%, 5% and 10% levels respectively table 3: unit root test for the sample of middle income countries variables llc ips adf result level first diff. level first diff. level first diff. trade 0.64 -8.80* 1.47 -9.75* 22.60 143.2* i(1) pov -0.19 -10.1* -0.19 -0.62* 35.36 173.5* i(1) gini -0.31 -8.17* 0.11 -13.4* 531.5 198.2* i(1) fdev 3.23 -9.33* 3.70 -9.51* 12.40 141.9* i(1) gdp 2.54 -16.3* -1.33 -15.8* 34.97 243.6* i(1) tax 2.83 -9.70* 2.66 -10.9* 15.27 164.5* i(1) hdev 3.21 -12.3* -0.24 -11.2* 30.27 223.0* i(1) note: ***, ** and * represent significance at 1%, 5% and 10% levels respectively. 5.2 results of panel cointegration test” the variables are in order of integration one, now we estimate the cointegration relationship for the lowerand middleincome countries.for the purpose kao panel cointegration test and johnson fisher cointegration test are applied on equations 1, 2, and 3 representing the models for trade openness, poverty and income inequality respectively. “the results of kao residual cointegration test and johanson fisher panel cointegration test for both lower and middle income countries for model 1 are shown in tables 4 and 5 respectively. the results of same tests for model 2 and 3 are given in table 5, 6 and 7, 8 respectively. table 4: kao residual cointegration test for model 1 (trade openness) lower income countries middle income countries adf t-statistic prob. t-statistic prob. 1.872 0.030 5.297 0.000 residual variance 79.138 51.919 hac variance 68.851 45.848 review of economics and development studies, vol. 7 (2) 2021, 243-256 250 table 5: johansen fisher panel cointegration test for model 1 (trade openness) lower income countries middle-income countries hypothesized no. of ce(s) fisher stat. (from trace test) prob. fisher stat.* (from maxeigen test) prob. hypothesized no. of ce(s) fisher stat. (from trace test) prob. fisher stat. (from maxeigen test) prob. none 874.7 0.00 600.2 0.00 none 240.9 0.00 240.9 0.00 at most 1 413.1 0.00 252.9 0.00 at most 1 498.1 0.00 392.2 0.00 at most 2 219.3 0.00 165.6 0.00 at most 2 303.2 0.00 243.8 0.00 at most 3 107.3 0.00 113.3 0.00 at most 3 172.3 0.00 167.6 0.00 at most 4 45.28 0.94 45.28 0.94 at most 4 47.03 0.01 47.03 0.01 table 6: kao residual cointegration test for model 2 (poverty) lower income countries middle income countries adf t-statistic prob. t-statistic prob. 3.529 0.000 -1.625 0.051 residual variance 23.52 6.205 hac variance 30.77 6.793 table 7: johansen fisher panel cointegration test for model 2 (poverty) lower income countries middle-income countries hypothesized no. of ce(s) fisher stat. (from trace test) prob. fisher stat. (from maxeigen test) prob. hypothesized no. of ce(s) fisher stat. (from trace test) prob. fisher stat. (from maxeigen test) prob. none 485.9 0.00 485.9 0.00 none 240.9 0.00 240.9 0.00 at most 1 1211. 0.00 996.9 0.00 at most 1 530.5 0.00 420.4 0.00 at most 2 632.6 0.00 507.7 0.00 at most 2 250.9 0.00 194.3 0.00 at most 3 232.3 0.00 223.8 0.00 at most 3 107.1 0.00 90.61 0.00 at most 4 86.8 0.02 86.8 0.02 at most 4 61.68 0.01 61.68 0.00 table 8: kao residual cointegration test for model 3 (income inequality) lower income countries middle income countries adf t-statistic prob. t-statistic prob. 5.798 0.000 1.573 0.05 residual variance 11.600 14.642 hac variance 17.701 6.695 review of economics and development studies, vol. 7 (2) 2021, 243-256 251 table 9: johansen fisher panel cointegration test for model 3 (income inequality) lower income countries middle income countries hypothesized no. of ce(s) fisher stat.* (from trace test) prob. fisher stat.* (from maxeigen test) prob. hypothesized no. of ce(s) fisher stat. (from trace test) prob. fisher stat. (from maxeigen test) prob. none 485.9 0.00 485.9 0.00 none 206.8 0.00 240.9 0.00 at most 1 1249 0.00 996.9 0.00 at most 1 542.3 0.00 392.2 0.00 at most 2 645.0 0.00 507.7 0.00 at most 2 297.9 0.00 243.8 0.00 at most 3 308.1 0.00 223.8 0.00 at most 3 95.56 0.00 167.6 0.00 at most 4 113.4 0.02 86.88 0.02 at most 4 35.41 0.01 47.03 0.15 kao test and johansen fisher test confirm the presence of panel cointegration among the series of variables. the findings of johansen fisher have rank 4 for lower and middle-income countries, and the results confirm the presence of panel cointegration in all three equations. trace test and max-eigen values are significant in the model. in the model null hypothesis is no cointegration which is rejected, and we accept the presence of cointegration in all the three models.” 5.2 results of panel cointegration regression the cointegration is confirmed for all the three models. in the next step coefficients are calculated.the results of fmols“fully modified ordinary least square” and dols “dynamic ordinary least square” dols for model 1 with dependent variable of trade openness for lower and middle income coutnres are reported in table 10. table10: cointegration regression for model 1 (trade openness) the results of fmols and dols in table 10 explain that in lower income countries the poverty increases trade openness but in middle income countries it decreases trade openness. similarly the dependent variable: trade openness variables lower income countries middle income countries fmols dols fmols dols coefficients (prob) coefficients (prob) coefficients (prob) coefficients (prob) pov 0.348 (0.000) 0.327 (0.000) -1.091 (0.003) -1.233 (0.000) gini -0.460 (0.000) -0.756 (0.000) 1.388 (0.000) 1.282 (0.000) gdp 0.689 (0.000) 0.658 (0.013) 1.968 (0.000) 3.235 (0.000) fdev 0.205 (0.000) 0.214 (0.000) 0.265 (0.000) 0.573 (0.000) no. of observations 775 330 no. of groups 31 14 review of economics and development studies, vol. 7 (2) 2021, 243-256 252 income inequality has negative effect on trade openness in lower income countries but positive effect in middle income countries. it explains that poverty and income inequality have the role to influence trade openness but the direction of effect varies for income groups of the countries. in the literature such type of evidences are prevalent which have shown different effects of macroeconomic indicators for regions (cain et al. 2010; oh and lee, 2017). khan and bashir (2011) have evidenced the negative impact of income inequality on trade openness in india. however, the gdp growth rate increases trade openness in lower income as well as middleincome countries. the financial development has also shown encouraging effect on trade openness in both groups of countries. the results are supported by the literature (arestis and caner 2009b). it explains that financial development plays an important role for trade openness irrespective of income groups of the economies. the regression results for model 2 with the dependent variable of poverty through fmols and dols regression are shown in table 11. table 11: cointegration regression for model 2 (poverty) dependent variable: poverty variables lower income countries middle income countries fmols dols fmols dols coefficients (prob) coefficients (prob) coefficients (prob) coefficients (prob) trade 0.122 (0.001) 0.112 (0.000) -0.058 (0.188) -0.058 (0.4037) gini -0.081 (0.280) -0.040 (0.478) 0.231 (0.046) 0.686 (0.0031) gdp -0.108 (0.185) -0.188 (0.002) 0.254 (0.045) 0.434 (0.0891) tax -0.187 (0.041) -0.064 (0.169) -0.204 (0.173) -0.061 (0.8196) no. of observations 775 330 no. of groups 31 14 the results of equation 2, where poverty is dependent variable demonstrate that trade openness increases poverty in lower income countries but for the middle income countries the results are not statistically significant regarding the impact of trade openness on poverty. the evidences of adverse impact of trade openness on poverty reduction found in the existing literature (ayinde, 2013). yusuf et al. (2013) have found no impact of trade openness on poverty (khan and bashir, 2011). it explains that poor are unable to have the benefits of trade liberalization. it negates the h-o theorem which states that trade results into increase in wages of lower income households who are generally involved in unskilled labor. it results into decrease in poverty. the results of current study explain that in the lower income countries the trade openness has the pattern that trade is absorbing the highly skilled and technologically quipped labor force which benefits a limited cluster of the people and masses become unemployed or under-waged resulting into increase in poverty. so the trade related poverty reduction policies are recommended so that the households living below poverty can have the benefits of trade. review of economics and development studies, vol. 7 (2) 2021, 243-256 253 on the other hand income inequality has shown statistically insignificant impact on poverty in lower income countries but positive impact on poverty in middle-income countries. the gdp growth has shown negative effect on poverty (only in dols regression) in lower income countries. the results are according to general perception and theory but gdp growth has shown positive impact on poverty (in fmols and dols regression) in middle-income countries. it explains the growth is pro-poor in lower income countries but it has poverty increasing tendency in middle-income countries. it is also strange that tax revenue decreases poverty in lower income countries but only from fmols region. the results of fmols and dols for model 3 with dependent variable of income inequality captured by gini-index are shown in table 12. table 12: cointegration regression for model 3 (income inequality) dependent variable: income inequality variables lower income countries middle income countries fmols dols fmols dols coefficients (prob) coefficients (prob) coefficients (prob) coefficients (prob) trade 0.174 (0.000) 0.080 (0.059) 0.267 (0.000) 0.265 (0.000) pov 0.312 (0.000) 0.459 (0.000) 0.562 (0.000) 0.915 (0.001) gdp 0.574 (0.000) 0.953 (0.000) -0.305 (0.000) -0.837 (0.000) hdev 0.330 (0.000) 0.323 (0.000) 0.347 (0.000) 0.358 (0.000) no. of observations 775 330 no. of groups 31 14 the results of equation 3, where income inequality is a dependent variable express that trade openness and poverty increase income inequality in lower and middle income countries. it is supported by the existing literature. for instance, trabelsi and liouane (2013) found that in developing economies the trade liberalization increases income inequality. it is suggested to adopt the strong governance and good macroeconomic policies to have the benefits of trade openness. the gdp growth rate has been found increasing impact on income inequality in lower income countries but it decreases income inequality in middle-income countries. it explains that the income groups of the countries matter for the impact of economic growth on income inequality. in the lower income countries the growth increases income inequality while in middle income countries it decreases income inequality. it subsequently supports the kuznet theorem stating that initially the growth increases income inequality but at the later stage of development it decreases income inequality. human development captured by the secondary school enrolment has shown increasing effect on income inequality in both lower and middle income countries. it demonstrates that at the initial stage of development the human development measured by secondary school enrolment in developing review of economics and development studies, vol. 7 (2) 2021, 243-256 254 economies increases income inequality. ” 6. conclusion and policy recommendations the study analyzed the relationship among trade openness, poverty and income inequality by employing the fmols and dols on panel data set of 31 low income and 14 middle income countries covering the time period of 1995-2019. it concludes that trade openness increases poverty in lower income countries but it increases income inequality in both lower and middle income countries. so the trade openness policies for these groups of economies need modification in framework for trade openness. poverty in lower income countries is increasing trade openness but in middle income countries it is decreasing trade openness. poverty is increasing income inequality in both groups of the countries. finally the income inequality decreases trade openness in lower as well as middle income countries. income inequality increases poverty in middle-income countries. it may be concluded that there is an evidence of discouraging effect of trade openness on poverty and income inequality. poverty has severe implications for income inequality and income inequality has severe implications for poverty. so there is a need to tackle the problems of poverty and income inequality simultaneously. references ayinde, t. o. 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(2013). trade liberalization, economic growth and poverty reduction in nigeria. international journal of business and management, 8(12), 4247. review of economics and development studies, vol. 7 (2) 2021, 177-185 177 impact of exchange rate and oil prices on inflation in pakistan a tahira bano qasim, b hina ali, c alina baig, d maria shams khakwani a assistant professor, department of statistics, the women university multan, pakistan. b assistant professor, department of economics, the women university multan, pakistan. email: hinaali@wum.edu.pk c scholar, department of statistics, the women university multan, pakistan. d lecturer, institute of management sciences, the women university multan, pakistan. article details abstract history: accepted 25 april 2021 available online june 2021 this study investigates the impact of exchange rate (rupees vs us $) and oil prices (pak. petroleum) and on the inflation rate in pakistan by applying the co-integration technique to the monthly data for all the three series ranging from january 2004 to january 2019. unit root testing results provide strong statistical evidence for each of the series to be non-stationary at the level and stationary at first difference. cointegration testing results confirm the existence of cointegration among the selected time series. moreover, the empirical results of the regression of inflation on the exchange rate and oil price also lead to conclude that both the series have a strong statistical significant impact on inflation in pakistan. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: inflation, co-integration, stationarity, unit root jel classification: p24, c52 doi: 10.47067/reads.v7i2.349 corresponding author’s email address: hinaali@wum.edu.pk 1. introduction inflation refers to the persistent increase in the prices of goods and a constant decrease in the value of money. due to inflation, the increase in prices of goods causes an increase in daily life expenditure and a decrease in the saving level. as a result, the investments decrease which disturbs any country’s economic system. under such a situation, inflation becomes an observable fact which leads to attracting the attention of researchers economists, and policymakers. many types of research in the literature show that oil prices highly influence the economy of any country so changes in oil prices is also a challenging task for policymakers, economists, and business holders for the last four decades. fluctuations in inflation are related to the fluctuation in petroleum prices in the same directions. because the oil used in daily life from transporting and home fueling to the production of many goods. an increase in the oil prices increases the cost of production which increases the consumer price income(cpi) and an increase in inflation are likely to occur. under such circumstances, it is very important to know the extent of the empirical relation between petroleum price changes and inflation for policymakers to conduct effective monetary policies. the business review of economics and development studies, vol. 7 (2) 2021, 177-185 178 holders and firm managers also set their pricing policies according to the inflation fluctuations so they also need to know the accurate this relation accurately. the exchange rate between two currencies is referred to as the rate at which one country’s currency is exchanged for another country’s currency i.e. domestic and foreign currency. devaluation of one currency means buy less foreign exchange with more domestic currency, as a result, imports become more expensive and exports become cheaper. the fluctuations in the rate of inflation in a country are related to the fluctuations in the value of its currency and the rates of foreign exchange with other countries. the effect of inflation on the value of a country’s currency is more likely to be negative. previous researches show that an increase in oil prices results in depreciation in the exchange rate ( rautava, 2004; kutan and wyzan, 2005; chen and chen, 2007; ghosh, 2011). as consequence, both together have a significant influence on the inflation rate. so it is important to study the effect of exchange rate and oil prices on inflation. 2. literature review numerous research studies conducted to investigate the factor affecting inflation are available in the literature some of which are briefly described in this section. leblanc and chin (2004) employed augmented philips curve parameter estimates and associated statistics to analyze the impact of oil price changes on inflation for the us, france uk, japan, and germany. they concluded that the increases in oil prices affect differently on inflation in different countries. the impact of high oil prices on pakistan’s economy has been examined by kiani (2008). aziz (2009) investigated the impact of real interest and rate real oil price on a real exchange rate for a monthly panel of 8 countries. the increase in petroleum price causes an increase in the consumer price index (arinze, 2011). shaari, hussain, and abdullah (2012) applied var-vecm and granger causality models to the monthly data in malaysia to investigate the effects of an oil price shock on inflation and derived the conclusion that the changes in the rate of crude oil price also changes the rate of inflation. saleem and ahmad (2015) applied the johansen co-integration method to explore the relationship between crude oil price and inflation investigated other determinants of inflation in pakistan such as money supply, exchange rate, and other taxes using time series data from 1979 to 2012. bala and chin (2018) investigated the asymmetric impact of oil impacts of oil price changes on inflation in algeria, angola, libya, and nigeria considering three kinds of oil prices in each country by applying autoregressive distributed lag (ardl) dynamic panels. they concluded that the exchange rate and the gross domestic product (gdp) are positively related to inflation, while food production is negatively related to inflation. iqbal and razaq(2018) studied the association between the exchange of pakistani rupee per us dollar and crude oil prices using daily data from 2006-2013. they investigated the influence of oil prices on the exchange rate by applying asymmetric power autoregressive conditionally heteroscedastic model and reported high volatility persistency along with leverage effect. they also reported a positive association between both variables. mukhtarov, mahmadov, and ahmedov (2019) studied the impact of oil price and exchange rate in azerbaijan applying the vector error correction model (vecm) technique and found that the exchange rate and oil prices have a positive and statistically significant impact on inflation in the long-run. 3. method and methodology in the current study to investigate the impact of oil prices and exchange rate on inflation, we have applied the co-integration technique. first of all, the non-stationarity features of the individual variables have been checked informally using graphical representation and the correlograms of the review of economics and development studies, vol. 7 (2) 2021, 177-185 179 autocorrelation function and partial autocorrelation function and ljung & box test proposed by ljung & box (1978). formally, the stationarity of the selected series assessed by applying the augmented dickey-fuller(adf) unit root test proposed by dickey and fuller (1981) and phillips –perron(pp) unit root test by phillips and perron (1988). both tests have been applied with no intercept, with intercept, and with trend and intercept. in case of the existence of unit root the same order, then run the regression equation of the form where = monthly inflation rate in term of cpi = monthly exchange rate in pakistani rupees / us $ =prices of pak petroleum in rupees/ barrel = error term the ols method of estimation has been applied to estimate the parameters of the above equation and residuals of the fitted model will be obtained. the testing of the unit root of the residuals is carried through adf and pp unit root test. the stationarity of the residuals of the fitted model leads to conclude that there is cointegration among the selected variable. afterward, the significance of the variables is checked to explain the impact of exchange rate and oil prices on inflation. 4. results and discussion in this section, we present the data and the results based on the methodology discussed in the previous section. the eviews.9, minitab,16, and excel as the main statistical software have been employed for analysis purposes. we have proceeded as in section 4.1 description about the data used in this study is given. also, plots of the data, unit root testing descriptive statistics are given to highlight the general statistical feature of the inflation series, exchange rate series, and oil price series in pakistan. in section 4.2 the results based on model estimation and cointegration test are given. 4.1 data this study uses monthly time-series data of the three series: monthly inflation rate based on the pakistani consumer price index (cpi), the exchange rate of pak rupees vs us $, and oil prices (pak petroleum). the data on each series consists of 181 observations ranging from january 2004 to january 2019. monthly pak petroleum data is measured in pakistan rupee per barrel(source: world bank, www.indexmundi.com). the data on inflation rate has been collected from different annual pakistan economic survey reports, federal bureau of statistics reports, annual reports of state bank pakistan, and from the web page “www.tradingeconomics.com”. the data on the exchange rate is measured in pak rupees per also has been collected from “www.investing.com”. visual inspection of data provides a deep insight into its properties. we start our analysis by plotting the selected variables given in figure 1 to figure 3. review of economics and development studies, vol. 7 (2) 2021, 177-185 180 0 5 10 15 20 25 30 2004 2006 2008 2010 2012 2014 2016 2018 2020 m on th ly in fla tio n r at e figure 1: monthly inflation rate in pakistan 40 60 80 100 120 140 160 2004 2006 2008 2010 2012 2014 2016 2018 2020 m on th ly ex ch an ge r at e figure 2: monthly exchange rate pak. rupees / us $ 40 80 120 160 200 240 280 320 2004 2006 2008 2010 2012 2014 2016 2018 2020 m on th ly pa k. p et ro le um figure 3: monthly prices of pak petroleum figure 1 shows the graph of the monthly inflation rate in pakistan showing the pattern of nonstationary series. we can also see that the inflation rate becomes rapidly high during 2007-2008 review of economics and development studies, vol. 7 (2) 2021, 177-185 181 and then it declines and afterward show fluctuations. figure 2 shows the graph of monthly exchange rate pak rs vs us$. it is clear from the figure that the time series seems to be “trending” upward and showing fluctuations leading to conclude that the series is nonstationary. the pattern of monthly prices of pak petroleum shows many fluctuations upward and downward as obvious in figure 3, revealing that the series is nonstationary. figure 4: correlogram of ac and pac of inflation rate, q-stat = ljung box q statistics and prob = p-value to test the q-statistic figure 4 represents the correlogram of the series for the pakistan inflation rate. it is clear that the autocorrelation coefficients at the first few lags are very high then start decreasing and pacf is very high at lag 1. overall, the behavior of the series is nonstationary. q statistic is highly significant with pvalue =0 at each lag indicating non-stationarity of the series. review of economics and development studies, vol. 7 (2) 2021, 177-185 182 figure 5: correlogram of pak. petroleum. figure 5 shows the correlogram of the series for pak. petroleum. acf pacf cut off at lag one revealing the pattern of nonstationary time series. figure 6: correlogram of the exchange rate figure 6 also depicts the pattern of nonstationarity of the exchange rate series. formally the stationarity of all variables has been tested by applying adf and pp unit root tests with no intercept, with intercept, and with both the intercept and trend for all the three variables. the results reported in table 1, exhibits that the null hypothesis of the existence of unit root at level is accepted with strong statistical evidence(p-value is greater than 0.05) for all the three series according to both the tests review of economics and development studies, vol. 7 (2) 2021, 177-185 183 employing that all the series are nonstationary. table 1: unit root tests at level variables adf pp no intercept intercept intercept+ trend no intercept intercept intercept+ trend inflation rate -1.14007 (0.2310) -2.47619 (0.1230) -2.54257 (0.3075) -0.92988 (0.3125) -2.11530 (0.2390) -2.54257 (0.3075) pak petroleum -0.05795 (0.6622) -2.09131 (0.2485) -2.15763 (0.5098) -0.04755 (0.6657) -2.01185 (0.2816) -2.08313 (0.5513) exchange rate 3.36908 (0.9998) 1.28593 (0.9986) -1.03952 (0.9348) 3.30476 (0.9998) 1.21486 (0.9982) -1.28933 (0.8873) note values of test statistics along with pvalues in ( ). similarly, the results of unit root tests at the first difference reported in table 2 provide strong evidence of the rejection of the null hypothesis of the existence of unit root confirming the stationarity of all the series. hence all the selected series are integrated of order one at the level and order zero at first difference. table 2: unit root test at first difference variables augmented dickey-fuller (adf) phillips perron (pp) no intercept intercept intercept+ trend no intercept intercept intercept+ trend inflation rate -5.291895 (0000) -5.265527 (0000) -5.265527 (0001) -10.87828 (0000) -10.85501 (0000) -10.85018 (0000) pak petroleum -10.70095 (0000) -10.71614 (0000) -10.70101 (0000) -10.75772 (0000) -10.77212 (0000) -10.75704 (0000) exchange rate -10.04366 (0000) -10.56051 (0000) -10.92669 (0000) -10.62362 (0000) -11.01423 (0000) -11.14266 (0000)  values of test statistics along with pvalues in ( ) 4.2 cointegration testing we have observed in the previous subsection, that the selected series, inflation rate, exchange rate, and pak petroleum series are integrated of order one individually. now we have proceeded further and to assess the existence of cointegration, we have firstly regressed the inflation rate on the exchange rate and pak petroleum and estimated the residuals. review of economics and development studies, vol. 7 (2) 2021, 177-185 184 table 3: estimated regression of inflation on exchange rate and pak petroleum variable coefficient std. error t-statistic prob. c 16.43373 1.39180 11.80756 0.0000 ext -0.15626 0.01918 -8.145742 0.0000 ppt 0.03251 0.00527 6.16440 0.0000 table 3 shows the results of the estimated coefficients, their std. errors, tstatistics are reported of this regression equation. it is obvious that the fitted regression is the results obtained by applying the adf and pp unit root tests on the estimated residuals of the above equation are reported in table.4. table 4: unit root testing of residuals adf test pp test variable t-statistic prob. t-statistic prob. residual -2.854749 0.0045 -2.520942 0.0117 these results lead to conclude that the residuals series is stationary. this employed that the variables are cointegrated. moreover, the regression results reported in table 3 provide strong statistical evidence of the significance of the coefficients for both the pak petroleum and exchange rate confirming that fluctuations in both the variables also affect the movement of inflation in pakistan. it is also obvious that the increase in the prices of petroleum increase the inflation rate. our finding is consistent with the literature(ozturk 2015; malik et al. 2017; rasasi and yilmaz, 2016; mukhtarov et al., 2019). 5. conclusion this study has been conducted to investigate the impact of oil prices (pak. petroleum) and exchange rate pak. rs vs us$ on consumer price inflation in pakistan. monthly data for all three series are used in this study covering the period from january 2004 to january 2019. the graphical representation of all the series and correlograms of acf, pacf depicted that all the three series are nonstationary at the level. the applications of adf and pp unit root tests to all three series lead to conclude that these series are non-stationary at the level and stationary at first difference. to test the cointegration, the inflation rate is regressed on pak petroleum and exchange rate using the ols technique. further, the residuals of this regression are obtained and found stationary at a level confirming that the inflation rate, exchange rate, and prices of pak. petroleum in pakistan is co.integreted. moreover, the results for the estimated regression coefficients provide strong evidence that the increasing trend in oil prices also increases the inflation rate. furthermore, the movement in the exchange rate also affects the inflation rate in pakistan. review of economics and development studies, vol. 7 (2) 2021, 177-185 185 references aziz, m. i. 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(2015). exchange rate volatility and oil prices shocks. international journal of academic research in business and social sciences, 5 (1), 249-256. review of economics and development studies, vol. 6 (1) 2020, 1-12 1 asymmetric dynamics of oil price and environmental degradation: evidence from pakistan a imran sharif chaudhry, b mohamed azali, b muhammad faheem, b sajid ali a director, school of economics, bahauddin zakariya university, multan, pakistan, email: imran@bzu.edu.pk b faculty of economics and management, universiti putra, malaysia article details abstract history: accepted 15 march 2020 available online 31 march 2020 the main objective of the study is to explore asymmetric impact of oil price on environmental degradation in pakistan over the period 19752018. the study employs the nonlinear autoregressive distributive lag (nardl) method to check the asymmetric connection of oil price with carbon dioxide (co2) emissions which represents environmental degradation along with gross capital formation, energy consumption, foreign direct investment and population. the nardl result expresses that there is different effect of oil price as we break it into positive and negative changes, and decrease in oil price has a greater effect on environmental degradation in pakistan. the other variables, fdi and energy consumption and population, have a positive and significant effect on co2 emission. the study provides the policies for policymakers and government officials after uncovering the asymmetric relationship between oil and other variables with an environment that would be helpful in policymaking for pakistan. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: oil price, nardl, environmental degradation, co2 emissions, energy consumption jel classification: k32, p18, q56 doi: 10.47067/reads.v6i1.179 corresponding author’s email address: imran@bzu.edu.pk 1. introduction environmental degradation is a global problem in which co2 emissions are a significant cause of the increasing global temperature (stocker, 2014; usman et al., 2020). the significance of environmental degradation accepted globally at the global conference in brazil in 1992 (un, 1992) and obtaining importance in 2016 when all countries shave ratified the paris agreement policy guidelines of the united nations organization’s framework for the mitigation of greenhouse-gases. while most countries are struggling to curtail the effects of environmental degradation, a meaningful change needs a large amount of money and funding, which is not possible in most underdeveloped economies. in underdeveloped countries, the fdi pattern appears to be pollution heaven because these countries offer low wage labor, cheap resources, and lax regulations about the environment (kathuria, 2016; sarkodie & strezov, 2019). the theory behind determining the effect of oil prices on environmental quality is that oil prices will decide the consumption of fossil fuel that contributes 40 percent of the world's co2 emissions. higher oil prices can indirectly affect carbon dioxide emissions through a reduction in review of economics and development studies, vol. 6 (1) 2020, 1-12 2 energy consumption. from the other side, energy consumption increases due to a reduction in oil price. the price of oil, therefore, acts as an indicator of variations in environmental quality and its effect is different on environment (boufateh, 2019; malik et al., 2020). the connection between fdi and the environmental degradation is seen primarily by pollution haven hypothesis which states that rich countries apply tight environmental regulations, while underdeveloped economies have lax environment related laws that attracts polluted or dirty industries (levinson 1996, cole & elliott 2005, hassaballa 2014; guzel & okumus, 2020; nadeem et al., 2020). this trend is a cause of the rise of specialization in dirty industries in underdeveloped countries and clean industries in developed economies. the association between environmental degradation and foreign direct investment is, therefore, positive. on the other side, according to pollution halo hypothesis or neo-technology school of thought, the correlation between direct foreign investments and quality of the environment is positive through information spillovers and up-gradation of technology (de mello, 1999) through a shift of environmentally sound technology from rich countries to underdeveloped economies (gorg and stebb). hence, in underdeveloped economies, the association between fdi and environmental degradation is negative (lee, 2013). the key reason why co2 emissions are growing is the rapid rise in industrial sector energy demand due to globalization. the average annual energy usage also rises by 13.5 percent (pakistan economic survey 2017). gas, energy, coal, and crude oil consumption have increased by 9.6 percent, 7.3 percent, 4.9 percent, and 7.4 percent, respectively (pakistan economic survey 2017). the usage of all these items degrades the environment in pakistan. the increased population levels and consequent demand for energy, food, and housing have changed land-use practices significantly and depleted pakistan's forests considerably in relation to the environment. poverty is one of the consequences of population growth, and its lifestyle is a significant factor in depleting the environment, either by the demand for fuel for cooking food or by its survival requirements. limited opportunities for people and unfair distribution of resources cause pull and push factors for the people who live below the poverty line and are exploiting multiples to overburden population density and the environment (mehmood and chaudhary, 2012; khan et al. 2016). moreover, the previous literature uses different econometric methods to show the association of different macroeconomic variables including oil price and environment (sarwar et al., 2013; ali et al., 2014; faheem et al., 2014; aftab et al., 2015; anwar et al., 2016; ali & nazar, 2017; boufateh, 2019; faheem et al., 2019; khan & chaudhry; 2019; safdar et al., 2019; anser et al., 2020; iram et al., 2020; ali et al., 2020; faheem et al., 2020; malik et al., 2020). the gdp of pakistan grew by 375 percent from 1980 to 2017, while co2 emission has been enhanced by just 118 percent (world bank, 2018). although pakistan contributes only less than 1 percent in total global co2 emissions, pakistan is still in the top five nations, which are seriously affected by environmental degradation according to the global climate risk index of 2017 (sharif et al. 2017). according to the climate change report by the asian development bank (adb), in pakistan, the average temperature has grown by 0.5 centigrade in the past 50 years, while the days with heat wave per year have risen by six times. these environmental changes have many social and economic impacts such as a drop in crop yields, increased variations in river water, higher rate of evaporation, drought, increased mortality due to extreme heat waves, and a significant threat to the generation of hydropower (sharif and raza, 2016). environmental degradation has now become a problem of national security (sharif et al., 2017), where the alleviation of its impact requires pakistan to upgrade its infrastructure for transport, irrigation, and electricity. according to the paris agreement of united nations framework, the government decides to mitigate 20 percent of ghg emissions by 2030, which review of economics and development studies, vol. 6 (1) 2020, 1-12 3 will cost about usd 45000 million for pakistan. pakistan, however, is self-sustaining in natural gas. still, its consumption of oil depends heavily on imports of petroleum products and other petroleum-related products, which are pakistan's most important imports (sharif and raza, 2016). pakistan has been faced with an annual energy deficit of 4000-5000 megawatts since the 2000s, initiating daily load shedding of 8 to 10 hours in various rural and urban areas (rafique and rehman, 2017). thus, to tackle this energy deficit, pakistan has been bought energy from rental power plants, which produces 40 percent of total electricity in 2017 (ntdc, 2017). moreover, pakistan generates 21 percent electricity from crude oil (world bank, 2018), and it enhances the financial strain on the government (kamran, 2018). although pakistan is also facing the highest distribution and transmission losses of 23 percent annually and losses in electricity bill collection of 12 percent per annual (ntdc, 2017), making power (energy) more expensive day by day (rafique and rehman, 2017). based on the above debate, this study attempts to find if there is any asymmetric impact of oil price on co2 emission/environmental degradation exists or not. first, we are using oil prices along with other macroeconomic variables, which is a new contribution for pakistan. second, we perform analysis by using nardl approach to analyze asymmetric relationships between the variables, as to how oil price increases or decreases effects environmental degradation in pakistan. the remainder of the paper structured as follows. section 2 is reserved for literature review. section 3 deals with development of model and methodology. section 4 gives results discussion and last section provides conclusion. 2. literature review in mostly previous literature, the association among energy use, gdp growth and environmental degradation has been discussed (huang et al., 2008; ozturk, 2010; saboari and sulaiman, 2013; bilgili et al. 2017). however, a minimal number of studies are found which concentrate on the association between oil prices/oil consumption with environmental degradation (maji et al. 2017). due to this fact, we are giving the brief review of the studies which have examined the effect of oil prices on carbon dioxide emissions/environmental degradation. de bruyn et al. (1998) analyzed the impact of oil prices and gdp on environmental degradation in the great britain, holand, germany, and the united states of america for the year 1965-1995. the findings showed that the rise in us oil prices hurt environmental degradation. for the other nations, there was no significant correlation between oil price and environmental degradation was found. lindmark (2002) looked at the relationship between fuel prices, technology, gdp, and co2 emissions in sweden. the outcomes confirmed that fuel price increase had a reducing impact on pollution. he and richard (2010) examined the effect manufacturing sector, gdp and trade openness on oil price in canada for the year 1949-2006. the findings confirmed that the rise in gasoline price mitigated co2 emissions. for the years between 1949 and 2009, payne (2012) analyzed the impact of oil prices on environment in the united states and found a negative impact of oil prices on the environment. hammoudeh et al. (2014); zhang and zhang (2016); wang and li (2016) and mccollum et al. (2016) illustrated the mitigating impact of co2 emissions by achieving similar outcomes by increasing oil prices. in similar with these studies boufateh (2019) and malik et al. (2020) shows the nonlinear effect of oil price on environment. contrary to expectations, some empirical studies showed that an enhancement (decline) in oil price has a positive (negative) impact on environmental degradation, whereas other studies showed that there was no substantial correlation between the price of oil and environmental degradation. sadorsky (2009) analyzed the effect of oil price, renewable energy, and gdp on carbon dioxide review of economics and development studies, vol. 6 (1) 2020, 1-12 4 emissions in the g-7 economies for the panel data from 1981 to 2006. the outcomes indicated that the consumption of renewable energy and gdp were main cause of enhancing co2 emissions. salim and rafiq (2012) addressed the association between oil price, renewable energy and carbon dioxide emissions in underdeveloped economies for the year 1980-2007. the results suggested that oil price had no substantial effect on carbon dioxide emissions and renewable energy. the association between oil price and the value of carbon dioxide allowance in china was examined by zhang and zhang (2016) for the year 2010-2015 and indicated that oil price had a favorable effect on the value of carbon dioxide allowance. nwani (2017), in his ardl model, estimated the effect of oil prices and energy consumption on greenhouse gases in ecuador for the year 1970-2014 and indicated that rising oil prices had a growing impact on pollution. in another study, blazquez et al. (2017) examined the effect of shocks in oil price on environmental degradation in spain for the year 1970 to 2015 and found that shocks in oil price had no major influence on environment. the links between the energy use/consumption and environmental degradation have been explored by huang et al. (2008), pao and tsai (2010), saboari and sulaiman (2013) lee and chang (2007) and presno et al. (2017). haseeb et al. (2017) explored the association between energy consumption, population and pollution in brics countries and found a positive relationship of energy consumption and population with the level of pollution. pao and tsai (2010) observed the impact of energy usage and gdp on environmental degradation in brics economies and observed that energy usage and gdp caused environmental degradation. saboori and sulaiman (2013) analyzed the environmental degradation effects of energy use and gdp growth from 1981 to 2010 and found that the environment is adversely affected by the gdp growth of the malaysian economy and energy use. zeng and eastin (2012) noted that fdi helped to improve the host country's environmental quality through preventive measures by fdi receiving companies, which also led to increasing preventive actions by non-fdi companies under competitive circumstances. on the other hand, le and attaullah (2002), suleman (2009), zaman et al. (2012), raza et al. (2012), najia et al. (2013) and iqbal et al. (2014) examined the effect of fdi on pollution and found a direct linkage between fdi and pollution in pakistan. according to them, the economy of pakistan will not be competitive unless the proper set-up of the development of human resources, the increase in indigenous investments, institutional, entrepreneurship, cultural, socio-economic change. 3. methodology the data for this study is taken from different sources. the proxy used for the environmental degradation is carbon dioxide (co2) emissions, and for the oil price, crude oil price per barrel of brent is used. the data is sourced from bp statistical review. the other variables, like a foreign direct investment (fdi), total population, energy consumption and gross capital formation (gcf) is taken from the world development indicators (wdi). the data span covers from the year 1975-2018 for pakistan and all variables are taken in logarithmic form. the literature shows the association of oil price with environmental quality through different techniques of cointegration, granger causality and ardl method, gmm, pmg, quantile regression to show short-run and long-run symmetrically in time series analysis and panel analysis. the study uses the nonlinear ardl, which is recently presented by shin, yu, and greenwood-nimmo (2014), setting with the extension of ardl to achieve the study objective that is asymmetric affect oil price on environmental degradation. this methodology have several advantages such as; firstly, it is free from the restriction of order of integration as it may be employed if variable are i(1) or mixture i(0) and i(1) order of integration rather than any variable is in i(2) order of integration. secondly, it simultaneously shows short-term and long-term components, which eliminates serial correlation in data and review of economics and development studies, vol. 6 (1) 2020, 1-12 5 endogeneity of variables (pesaran and shin, 1999). thirdly, it is appropriate to use this method even when we have small size of sample (pesaran et al. 2001). on the behalf of theoretical background following are determinants of environment, ),,,,( 2 popecfdigcfopfco t  (1) this methodology uses the following specification to achieve our objective: ttttttt popecfdigcfopco   5432102 (2) where co2, op, gcf, fdi, ec and pop show co2 emission, oil price, gross capital formation, foreign direct investment, energy consumption and population, respectively. moreover, α = (α0, α1, α2, α3, α4 and α5) indicates a vector to estimate the long-run parameters. to estimate the above model, first, this study applies the ardl bounds formulation by using the following specified model: ttttttt t i itit s i i r i itiit q i iit p i it l i it popecfdigcfopco popecfdigcfopcoaco                1615141312121 00 5 0 4 0 3 0 212 1 102 (3) in the above equation, δ shows the first difference operator of the concerned variable and the deterministic drift parameter is α0. from the above equations, we estimate the unrestricted error correction model (ecm) as follows: t itit s i r i itit q i it p iit l i t vtect popecfdigcfopcoaco          1 6 0 5 0 4 0 3 0 2 1 2102   (4) in the above equation, λ indicates a parameter for the speed of adjustment and ect implies the residuals of the estimated model. the formulation of asymmetric behaviour of oil price in agreement with the nonlinear ardl model where oil price decomposes into positive and negative parts is: (5) based on the nonlinear model (equation (5)), β2+ shows oil price increase effect on carbon dioxide emission in long-run in the equation (6), which is expected to be negative. and β2in equation (7) shows the oil price decrease effect. )0,max( 2 11 oplopop j t j t j j t        (6) )0,max( 2 11 opopop j t j t j j t        (7) shin, yu, and greenwood-nimmo (2014) introduced nardl setting with the extension of ardl ttttt xopopco    32212 review of economics and development studies, vol. 6 (1) 2020, 1-12 6 as: tttttttt it t i iit s i i r i itiit q i i it p i iit p i it l i it popecfdigcfopopco popecfdigcfopopcoaco                           161514131212121 0 6 0 5 0 4 0 3 2 0 2 1 0 2 12 1 102 (8) the following hypothesis is used to measure long run and short run asymmetry by β2+ and β2, α2+ and α2, respectively: h0: β2+ = β2= 0       2 0 2 1 0 20 : p i i p i ih  for all i=0,….,p 4. results and discussion the result of the adf and phillips perron test confirms that co2 emission, oil price, gross capital formation, fdi, energy consumption and population are non-stationary at the level and stationary when converted to the first difference, representing that the variables are i(1). table 1 adf and pp unit root tests level first difference variable adf pp adf pp co2 1.41 2.55 -3.36** -3.36** op -1.40 -1.49 -5.61*** -5.56*** gcf -2.09 -2.21 -6.21*** -6.18*** fdi ec pop -2.89 0.41 1.86 -1.91 -1.18 8.09 -4.79*** -10.52*** -3.01** -4.77*** -9.31*** -2.09** note: ***, ** express significant at 1% and 5%. the next step is to perform a cointegration test for linear and nonlinear specification and results clearly show the cointegration only in case of the nonlinear specification. the computed f-statistic is shown in the following table 2. table 2 ardl bound test for cointegration f-statistic lower bound 95% upper bound95% decision linear ardl 1.7953 2.62 3.79 no-cointegration asymmetric ardl 8.24 2.45 3.61 cointegration the results of diagnostic tests and long-run estimations are given in table 3. the diagnostics outcomes show model is cleared from autocorrelation, heteroskedasticity problem and structurally stable and free from normality issue. furthermore, cusum and cusum of squares test results are presented in the following figures that test the stability of the model. moreover, the overall scenario of our variables and their correlation is given in the table (see appendix). the long-run results show the different effects of positive changes and negative changes of oil price on co2 emission. in simple, results reveal that a 1 percent increase in oil price is associated to review of economics and development studies, vol. 6 (1) 2020, 1-12 7 0.042 percent decrease in co2 emission in the long run. the results also show that 1 percent decrease in oil price is associated to a 0.097 percent increase in co2 emission in the long-run. the other variables, fdi and ec and population, have a positive effect on co2 emission in the long run while gcf is insignificant. the findings are in agreement with the literature conducted in different regions i.e. de bruyn et al. (1998), he and richard (2010), lindmark (2002), hammoudeh et al. (2014), zhang and zhang (2016); wang and li (2016); boufateh (2019); malik et al., (2020). table 3 ardl longrun estimation and diagnostic checks regressors coefficients standard error t-ratio (prob.) op+ -0.042 0.014 -3.035***(0.004) op-0.097 0.029 -3.253***(0.002) gcf 0.031 0.104 0.295(0.769) fdi 0.008 0.004 1.815*(0.078) ec 1.013 0.142 7.121***(0.000) pop 0.824 0.245 3.368***(0.001) intercept -5.915 1.902 -3.109***(0.003) r square 0.999 serial correlation 0.485(0.619) dw stat 2.016 functional form 0.937(0.340) normality 2.036 (0.361) heteroscedasticity 0.284(0.956) wlr 6.432 (0.001) wsr 4.327(0.005) note: ***, **, * shows significance level at 1%, 5% and 10% . the values in ( ) are p-values. the short-run results show the negative oil price changes have more effect than positive oil price changes on co2 emission, showing that 1 percent decrease in oil price with a 0.051 percent increase in co2 emission in the short-run. and 1 percent raise in oil price associated with 0.022 percent decrease in carbon dioxide emission in the short-run. the remaining variables, fdi, ec and population, have a positive association with carbon dioxide emission in the short-run while gcf is found insignificant. table 4 ardl short -run coefficients regressors coefficients standard error t-ratio [prob.] d(op+) -0.022 0.008 -2.659**(0.011) d(op-) -0.051 0.014 -3.702***(0.000) d(gcf) 0.016 0.054 0.294(0.771) d(fdi) 0.004 0.002 1.846*(0.073) d(ec) 0.531 0.079 6.711***(0.000) d(pop) 0.432 0.158 2.738***(0.009) ect -0.524 0.059 -8.865(0.000) note: *, **, *** shows significance level at 10%, 5% and 1% respectively. figure 1 cusum test review of economics and development studies, vol. 6 (1) 2020, 1-12 8 -20 -15 -10 -5 0 5 10 15 20 1985 1990 1995 2000 2005 2010 2015 cusum 5% significance figure 2 cusum of square test -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1985 1990 1995 2000 2005 2010 2015 cusum of squares 5% significance the study applied wald test to check the asymmetric relation of oil price and co2 emission, and results are presented in the above table 3 that are in favour of the long run and short run asymmetry. moreover, the graphical representation of asymmetry is explained by following a cumulative dynamic multiplier graph. figure 3 dynamic multiplier graph -1.2 -0.8 -0.4 0.0 0.4 0.8 1.2 lop3 +1% lop3 -1% difference review of economics and development studies, vol. 6 (1) 2020, 1-12 9 5. conclusion the study scrutinizes the impact of oil price on environmental degradation in pakistan for the year 1975-2018. the study uses nardl model to achieve the objective. the nardl result expresses that oil price has a different effect as we break into positive and negative changes, and oil price decrease has a more severe impact on environmental degradation in pakistan. the other variables, fdi, energy consumption and population have a significant and positive association with co2 emissions in the short-run while gross capital formation is found insignificant. on behalf of findings, the study provides the policies for policymakers and government officials after uncovering the asymmetric relationship between oil and other variables with an environment that would be helpful in policymaking for pakistan. references aftab, m. r., rehman, m., abdul, c., & faheem, m. 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(2016). impacts on co2 emission allowance prices in china: a quantile regression analysis of the shanghai emission trading scheme. sustainability, 8(11), 1195. appendix table a1 descriptive statistics and correlation co2 op gcf fdi ec pop mean 91.0723 1.5067 1.2472 22.9900 1.0529 1.34e+08 median 85.8524 1.4591 1.2556 23.6173 1.0842 1.31e+08 maximum 195.7069 2.0479 1.3184 29.7861 1.2487 2.12e+08 minimum 21.2233 1.1043 1.1498 15.3055 0.7546 68834326 std. dev. 50.9607 0.2914 0.0404 3.8139 0.1402 43420937 skewness 0.2944 0.4522 -0.6306 -0.3679 -0.5455 0.1711 kurtosis 1.9151 1.9942 2.5318 2.5075 2.1920 1.8000 jarque-bera 2.7300 3.2781 3.2432 1.4048 3.3025 2.7896 probability 0.2554 0.1942 0.1976 0.4953 0.1918 0.2479 sum 0.2554 64.7889 53.6294 988.5710 45.2777 5.77e+09 sum sq. dev. 3916.109 3.5670 0.0685 610.9137 0.8259 7.92e+16 co2 1 op 0.7367 1 gcf -0.6067 -0.5461 1 fdi -0.4032 -0.4088 0.6703 1 ec 0.9472 0.6452 -0.4678 -0.1931 1 pop 0.9937 0.7365 -0.6476 -0.4274 0.9528 1 https://data.worldbank.org/indicator/ review of economics and development studies vol. 3, no 2, december 2017 125 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 2 december 2017 journal homepage: www.publishing.globalcsrc.org/reads youth knowledge, attitude and practices about malaria in district layyah punjab 1 irfan hussain khan, 2 sofia anwar, 3 shumaila hashim 1 phd scholar, government college university faisalabad, pakistan, irfansial007@hotmail.com 2 head of economics department, government college university faisalabad, pakistan, sofia_eco@gcuf.edu.pk 3 applied economics research centre, university of karachi, pakistan, kshumaila07@gmail.com article details abstract history revised format: nov 2017 available online: dec 2017 purpose: the present study is undertaken to examine youth knowledge, attitude and practices about malaria in district layyah punjab. there is little evidence that studies have been conducted to evaluate knowledge, attitudes and practices of youth about malaria prevention. thus the aim of the study is to explore the knowledge, attitude and practice of community youth about malaria prevention and management. a standardized structured questionnaire with multiple choice questions was developed. respondents was selected through simple random sample and questionnaire were used for data collection thereafter the data were coded and entered in computer for analysis with spss and later for interpretation. the majority of respondents who participated in this study had positive attitude and with sufficient knowledge with low practices regarding malaria control and prevention. the findings of the study indicate that if people are supplied with accurate knowledge through appropriate channels, they may eventually have good practices in malaria prevention and management. regular training on malaria prevention and management is necessary to address the knowledge gap revealed in the study. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords youth, knowledge, practice, malaria, layyah jel codes: d8, i1 corresponding author’s email address: irfansial007@hotmail.com recommended citation: hussain, i., anwar, s. & hashim, s., (2017). youth knowledge, attitude and practices about malaria in district layyah punjab. review of economics and development studies, 3(2) 125134 doi: https://doi.org/10.26710/reads.v3i2.171 1. introduction 1.1 background malaria has a major effect over the health and economy of many developing countries than any other disease. about half of the world population is at risk for malaria i.e., 3.3billion (who report 2014). in 2012 about 207 million people become severely ill with malaria and 627000 died of the disease. sub saharan africans had the highest risk of acquiring malaria in 2010, 81% of the cases & 91% of the deaths were estimated to have occurred in region (who world malaria report 2011). http://www.publishing.globalcsrc.org/reads mailto:irfansial007@hotmail.com mailto:sofia_eco@gcuf.edu.pk mailto:kshumaila07@gmail.com mailto:irfansial007@hotmail.com https://doi.org/10.26710/reads.v3i2.171 review of economics and development studies vol. 3, no 2, december 2017 126 in the south east asian region of the who malaria incidence has decline in several countries including bangladesh, india, indonesia & myanmar. two low incidence countries of this region are in the preelimination phase i.e., the democratic people’s republic of korea & sri lanka. maldives free from indigenous malaria transmission since 1984. the majority of the confirmed cases in this region are due to p. falciparum. 4.3 million cases were reported in 2010 in this of which 2.4 million were confirmed parasitological (who world malaria report 2011). malaria is caused by protozoan parasite of the genus plasmodium transmitted to human through infected female anopheles mosquito five species of parasites of the genus plasmodium affect humans (p.falciparum, p.vivax, p.ovale, p .malariae, p.knowlesi). of the five parasite species which cause malaria plasmodium falciparum is the most fatal, and it predominates in africa, south east asia, and central america & south america (who report 2014). four countries of this region bear the 97% load of these confirmed cases of which 58% in sudan, 22% in pakistan, 10% in the yemen & 6% in the afghanistan. p. falciparum is the dominant species of the parasite in the afro-tropical countries (djibouti, saudi arabia, somalia, sudan & yemen), while the majority of cases in afghanistan, iran & pakistan are due to p. vivax (who. world malaria report 2011) the current estimated population of the pakistan, the 5 th most populous country in the world is 183,753,942(3), 3/4 th of this population lives in rural areas this population is spread over the five provinces of pakistan namely punjab, sindh, baluchistan, khyber pakhtun khwa (kpk) & gilgit baltistan as well as the federally administered tribal areas (fata) & azad jammu& kashmir (who world malaria report 2014). malaria is one of the major causes of morbidity & mortality in high risk areas of pakistan mainly in sindh, baluchistan, fata and kpk. it has been estimated that about1.7 million cases of malaria occur in pakistan annually (who world malaria report 2011). major malaria transmission season in pakistan is post monsoon (september – november), however along the coastal & western border areas, the disease prevails throughout the year. a short transmission season during spring months (march – april) is also evident. however during the spring, most of the cases are delayed expression of disease transmitted during post monsoon season or may be due to the 2 nd episode of the disease caused by relapsing p.vivax malaria is a continuous problem in the province of punjab which is the most populous province of pakistan with an estimated population of more than 8 million & population density is 396.1 persons per square kilometer.70% of its population is in rural areas where agriculture is the most common occupation in 2012 reported cases of suspected malaria were 831,630 (health department gop. punjab health 2014). layyah is a rural district in southern punjab is malaria endemic area an exact estimation of malaria cases is not available, however reports reviewed at the (executive district officer health consolidated malaria reports 2014) office showed that confirmed malaria cases in last few year were as below in table (consolidated malaria reports 2014) in 2010 6145 confirmed cases of malaria in 2011 921confirmed cases of malaria in 2012 936 confirmed cases of malaria in 2013 976 confirmed cases of malaria in order to control occurrence of malaria in endemic regions, roll back malaria (rbm) partnership was started in 1998 with the goal of decreasing the burden of malaria by half by 2010. it is a global control strategy that emphasize on areas with endemic malaria populations. the program has been launched in many african and asian countries including pakistan (who eastern mediterranean region (2002-14). according to the world health organization (who) 97% (approximately 150 million) of the pakistani review of economics and development studies vol. 3, no 2, december 2017 127 population is at risk of contracting malaria, with an estimated nationwide burden of 1.6million cases (who strategic plan mediterranean region (2006-20). 2. literature review this section reviews the relevant literature to highlight different aspects of the knowledge attitude and practices (kap) and related studies done on malaria in various countries. a knowledge attitude and practices (kap) household survey undertaken with 320 respondents in northern swaziland revealed that 99.7% of people respond correctly associated malaria with mosquito bites and 90% reported that they would seek treatment within 24 hours of seeing the first symptoms of malaria. indoor residual spraying (irs) was reported at 87.2% while having bed net, was reported at 38.8%. despite the high level of knowledge about malaria within the surveyed communities, there was little information coming to people through their preferred source of information i.e. by traditional community district meetings, in spite of different initiatives taken by department of health, there was very little information for the communities about malaria. hlongwana, k. w et al.(2009). the importance of information delivered by community channels in rural area is addressed in a study in north western tanzania, which showed that there is a need to emphasize on the challenge of illiteracy among the local residents by providing information through community source the study highlighted that hearing about malaria is a good foundation on to which other activities like prevention and control can build, but it is just, at an initial level. (mazigo, h. d (2010). according to multiple studies done on effect of malaria over economy revealed that malaria has a negative effect on economic growth at national level(daily, j. p (2005). it has effect over poor people’s income level (chuma et al.2007). so integrated malaria control should be prioritized in health policy as was announced in abuja declaration of 2000 (chuma et al. (2007) it has been observed in many studies that research results are not properly provided to health care worker / providers so that their knowledge and skill could be up dated and they can work and treat their patient properly, this leads to poor care, in effective services and poor utilization of resources which results in health inequalities. .this has great effect over low and middle income countries which have limited resources (jones, g (2003) 3. rationale of the study malaria is serious health problem in developing countries. malaria is a cause of morbidity & mortality globally, regionally and also in pakistan. punjab has an estimated population of more than 8 million &.70% of its population is in rural areas in 2012 reported cases of suspected malaria were 831,630 (health department gop (2006) district layyah has about 1600000 population a large area is on side of river indus according to report of executive district health officer layyah in 2013 total malaria confirmed cases are( 976) inhabitants of reveries belts are more vulnerable to develop malaria. layyah is a rural district in southern punjab is malaria endemic area according to (who consultant report) malaria in punjab has reached at its lowest level where we can start for malaria elimination in the province (health department gop (2006) 3.1 research gap this study seeks to fill this gap of knowledge and practices of youth in lowand middle-income districts like layyah district and how they prompt control and elimination of malaria. review of economics and development studies vol. 3, no 2, december 2017 128 4. objectives to access the knowledge, attitude and practices of youth about prevention and management of malaria in district layyah 5. material and methods descriptive cross sectional study and 200 respondents were selected thorough random sampling techniques from layyah. data were analyzed by using spss program, version 20.the questionnaire was weighed against the database to check the accuracy of the data entry a minimum of two times. any error found will be corrected before actual analysis. descriptive statistics (frequency, percentage, mean and standard deviation) will be used primarily to summarize and describe the data to make it more graspable frequency distribution:  socio-demographic characteristics  level of knowledge  attitude towards malaria table 1: percentage and distribution of the respondents regarding their age? this table shows that respondents were 21-25 years old, 38.5% respondents were 26-30 years old and 14.5 % respondents. the researcher explored that majority of the responded were 21-25 years old at the time of the research. table 2: percentage and distribution of the respondents regarding to education level categories frequency percent secondary 39 19.5 college university 68 93 34 46.5 total 200 100.0 this table shows that 19.5 % respondents were secondary education level and 34 % respondents were college education level and 46.5 % were at university level at the time of the study. the researcher explored that majority of the responded were university level at the time of the research. categories frequency percent 21-25 years 94 47 26-30 years 77 38.5 31-35 years 27 14.5 total 200 100.0 review of economics and development studies vol. 3, no 2, december 2017 129 table 3: percentage and distribution of the respondents regarding, where did you hear about malaria? categories frequency percent posters 23 11.5 newspapers 17 8.5 radios 29 14.5 health facility 9 4.5 community meetings 20 10.0 malaria campaign 17 8.5 tv 85 42.5 total 200 100.0 this table shows that 11.5 % respondents were heard about malaria though poster that display on wall and other places.8.5% responded were heard about malaria from newspaper, 14.5 % respondents were heard from radio, 4.5% respondents were heard about malaria from the health facility, 10% responded were heard about health community meeting, 8.5% responded were heard about malaria in malaria campaign and 42.5% responded were heard about malaria on tv. the researcher explored that majority of the responded were heard about malaria from tv at the time of the research. table 4: percentage and distribution of the respondents regarding to transmit malaria categories frequency percent mosquito bites 189 94.5 use of stagnant water 11 5.5 total 200 100.0 this table shows that 94.5 % respondents were asked that malaria transmitted through mosquito bites and 5.5% respondents were asked that malaria transmitted through use of stagnant water. the researcher explored that majority of the responded were answered that malaria transmitted through mosquito bites at the time of research. table 5: percentage and distribution of the respondents regarding to malaria can kill you, if it is untreated. categories frequency percent yes 183 91.5 no 11 5.5 don't know 6 3 total 200 100.0 this table shows that 91.5 % respondents were asked that malaria can kill, if proper treated and 5.5% respondents were asked that malaria cannot kill if it treated. and 3 % responded do not know about this. researcher explored that majority of the responded were answered that malaria can kill if it treat properly. review of economics and development studies vol. 3, no 2, december 2017 130 table 6: percentage and distribution of the respondents regarding to the most common signs and symptoms in malaria infection. categories frequency percent headache 5 2.5 high temperature 109 54.5 chills 17 8.5 vomiting 17 8.5 body pains 29 14.5 loss of energy 23 11.5 total 200 100.0 this table shows that 2.5 % respondents were answered that the most common signs and symptoms in malaria infection is headache. 54.5% responded were answered that the most common signs and symptoms in malaria infection is high temperature.8.5% responded were answered chills, 8.5% responded answered vomiting, 14.5% responded were answered body pain and 11.5% responded were answered loss of energy. the researcher explored that majority of the responded were answered that that the most common signs and symptoms in malaria infection is high temperature at the time of research. . table 7: percentage and distribution of the respondents regarding to malaria is a disease that cannot be prevented. categories frequency percent strongly agree 23 11.5 agree 23 11.5 disagree 45 22.5 strongly disagree 109 54.5 total 200 100.0 this table shows that 11.5% respondents were strongly agree, and 11.5% were agree, 22.5% were disagree and 54.5% respondents were strongly disagree, it mean 23 % agreed/strongly agree and 77% were disagree/strongly disagree. the researcher explored that the majority of the respondents in research were disagreed that the malaria is a disease that cannot be prevented. table 8: percentage and distribution of the respondents regarding to only spraying is enough to prevent mosquito no need for other ways. categories frequency percent strongly agree 16 2.9 agree 28 22.9 neither agree nor disagree 13 8.6 disagree 130 57.1 strongly disagree 13 8.6 review of economics and development studies vol. 3, no 2, december 2017 131 categories frequency percent strongly agree 16 2.9 agree 28 22.9 neither agree nor disagree 13 8.6 disagree 130 57.1 strongly disagree 13 8.6 total 200 100.0 this table shows that 2.9% respondents were strongly agree, and 22.9% were agree, 8.6% respondents don’t know (neither agree nor disagree) 57.1% were disagree and 8.6% respondents were strongly disagree, it mean 25.8% agreed/strongly agree and 65.7% were disagree/strongly disagree. the researcher explored that the majority of the respondents in research were disagreed that the only spraying is enough to prevent mosquito no need for other ways. table 10: percentage and distribution of the respondents regarding to everybody has the chance to be infected with malaria disease categories frequency percent strongly agree 21 31.4 agree 169 65.7 disagree 10 2.9 total 200 100.0 this table shows that 31.4% respondents were strongly agree, and 65.7% were agree, 2.9% were disagree, it mean 97.1% agreed/strongly agree and 2.9% were disagree. the researcher observed that the majority of the respondents in research were agreed that everybody has the chance to be infected with malaria disease. table 11: percentage and distribution of the respondents regarding to person who once got malaria disease cannot get malaria disease again categories frequency percent strongly agree 41 31.4 agree 92 42.9 neither agree nor disagree 30 5.7 disagree 23 8.6 strongly disagree 14 11.4 total 200 100.0 this table shows that 31.4% respondents were strongly agree, 42.9% were agree, 5.7% respondents don’t know (neither agree nor disagree), 8.6% were disagree and 11.4% respondents were strongly disagree, it mean 74.3% agreed/strongly agree and 20.0% were disagree/strongly disagree. the researcher explored that the majority of the respondents in research were greed that the person who once got malaria disease cannot get malaria disease again. review of economics and development studies vol. 3, no 2, december 2017 132 table 12: percentage and distribution of the respondents regarding that impossible to recover completely from malaria disease categories frequency percent agree 40 28.5 neither agree nor disagree 20 2.9 disagree 70 34.3 strongly disagree 70 34.3 total 200 100.0 this table shows that 28.5% respondents were agree, and 2.9% respondents don’t know (neither agree nor disagree) 34.3% were disagree and 34.3% respondents were strongly disagree, it mean 28.5% agreed and 68.6% were disagree/strongly disagree. the researcher explored that the majority of the respondents in research were disagreed that it is impossible to recover completely from malaria disease. table 13: percentage and distribution of the respondents regarding to sleeping in mosquito net doesn't give the guarantee of malaria prevention categories frequency percent strongly agree 40 11.4 agree 130 57.1 disagree 30 31.5 total 200 100.0 this table shows that 11.4% respondents were strongly agree, 57.1% respondents were agree, 31.5% were disagree, it mean 68.5% agreed and 31.5% were disagree. the researcher explored that the majority of the respondents in research were agreed that the sleeping in mosquito net doesn’t give the guarantee of malaria prevention. table 14: percentage and distribution of the respondents regarding to what do you do? if you or one of your community member present some signs and symptoms of malaria categories frequency percent cold application 30 8.6 give treatment 80 45.7 transfer to health facility 80 42.9 transfer to pharmacy 10 2.9 total 200 100.0 this table shows that 8.6% respondents were used cold application , 45.7% respondents were answered they give treatment, 42.9% respondents were gave response they refer the person with signs and symptoms of malaria to the healthy facility and 2.9% gave response that they refer to the pharmacy. the review of economics and development studies vol. 3, no 2, december 2017 133 majority of respondents were responded that they give treatment to the community member present some signs and symptoms of malaria. table 15: percentage and distribution of the respondents regarding to malaria preventive measures do you utilize? categories frequency percent avoid stagnant water in the yard 6 17.1 close windows 1 2.9 hygiene 7 20.0 spraying 12 34.3 through continuous education 6 17.1 use bed nets 3 8.6 total 200 100.0 this table shows that 17.1% respondents answered that they will avoid stagnant water in the yard, 2.9% respondents were answered they will close the window for the prevention from malaria, 20.0% respondents responded they will focus on hygiene and 34.3% respondents answered that they will utilize spraying as a preventive measures, 17.1% agreed that through continuous education utilized for the preventive measures and 8.6% respondents said that bed nets also used for the prevention of malaria. the majority of respondents answered that they will utilized spraying as a malaria preventive measures. table 16: percentage and distribution of the respondents regarding to the challenges do you face in your community in malaria prevention and management categories frequency percent few equipments/drugs 27 17.1 poverty 27 17.1 low knowledge in domain 15 14.3 illiterate people 95 37.1 community accessibility 15 5.7 no incentive 21 8.6 total 00 100.0 this table shows that 17.1% respondents were answered the challenges do you face in your community in malaria prevention and management is few equipment/drugs, 17.1% responded were answered that due to poverty,14.3 % respondents were answered that the challenges do you face in your community in malaria prevention and management is low knowledge in domain, 37.5% respondents were answered that the challenges do you face in your community in malaria prevention and management is illiterate people, 5.7% responded were answered that the challenges do you face in your community in malaria prevention and management is community accessibility and 8.6 % responded were the challenges do you face in your community in malaria prevention and management is no incentive.. references census organization gop. population clock. islamabad; 2014 updated 2014; cited 2014 sep 4; available from: chuma j, gilson l, molyneux c: treatment-seeking behaviour, cost burdens and coping strategies among rural and urban households in review of economics and development studies vol. 3, no 2, december 2017 134 coastal kenya: an equity analysis. trop med inthealth (2007), 12:673-86.consolidated malaria reports, 2010, 2011, 2012.2013 in: ch dti, editorlayyah: edo (h) office; 2014. gallup fl, sachs j: the economic burden of malaria. am j trop med hyg 2001, 64:85-96. health department gop. punjab health profile. lahore: health department, government of punjab; 2014 updated 2014 29 aug ; cited 2014 sep 04 hlongwana, k. w., mabaso, m. l., kunene, s., govender, d., & maharaj, r. 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(2010). knowledge, attitudes, and practices about malaria and its control in rural northwest tanzania. malaria research and treatment, 1-9. mdg (2008) un millennium development goals. new york: united nations. available :http://www.un.org/millenniumgoals/. jones g, steketee rw, black re, bhutta za, morris ss, bellagio child survival study group: how many 15 child deaths can we prevent this year? lancet 2003, 362:65-71. who. country cooperation strategy at a glance; 2011 2011 may contract no.: document number. who. 10 facts on malaria. who; 2014 [updated 2014; cited 2014 sep 04 ]; available from http://www.who.int/features/factfiles/malaria/en/index.html. who roll back malaria eastern mediterranean region. cairo, egypt.2002-1-14 world healthorganization: strategic plan for malaria control and elimination in the whoeastern mediterranean region 2006-20 world health organizations: the african summit on roll back malaria, abuja, april 25, 2000 geneva, switzerland, world health organization roll back malaria; 2000 who. world malaria report 2011. geneva: who; 2011contract no.: document number. http://www.un.org/millenniumgoals/ http://www.who.int/features/factfiles/malaria/en/index.html review of economics and development studies, vol. 7 (4) 2021, 515 523 515 visiting human capital-foreign direct investment-environment association for attaining environmental sustainability: fresh insight from pakistan muhammad faheem a , imran sharif chaudhry b , fatima farooq c , muhammad arshad anwer d a assistant professor, school of economics, bahauddin zakariya university, multan, pakistan email: faheem@bzu.edu.pk b dean of arts & social sciences / professor , school of economics, bahauddin zakariya university, multan, pakistan email: imran@bzu.edu.pk c associate professor, school of economics, bahauddin zakariya university, multan, pakistan email: fatimafarooq@bzu.edu.pk d national university of modern languages, multan campus, pakistan email: marshadanwer@gmail.com article details abstract history: accepted 25 july 2021 available online december 2021 the current study explores the association of human capital, foreign direct investment, economic growth and population with the environment in pakistan. our study adopted the time series econometric estimation methodology autoregressive distributed lag model (ardl) over 1980-2019. interestingly our study results show that increase in human capital will clean the environment in both the short and long run. the study also validates the pollution haven hypothesis by proving the positive link of foreign direct investment with the ecological footprint. the findings also corroborate the existence of the long-run linkage of economic growth with the environment. the study suggests that policymakers and government officials should develop and promote the education sector that eventually mitigates environmental degradation. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: ecological footprint, environment kuznets curve, foreign direct investment, ardl, pakistan jel classification: k32, c32, c39 doi: 10.47067/reads.v7i4.411 corresponding author’s email address: imran@bzu.edu.pk 1. introduction nowadays, the worldwide agenda is to balance the environment that ensures the endorsement of the paris agreement (li and ullah, 2021). a sustainable environment depends on macroeconomic factors in an economy which contributes environment in different ways. to achieve the macroeconomic goals economies tries to catch high growth while using tremendous use of fossil fuel to fulfill the desired targets with continuous increase in population. the literature in the past few decades have proved the association among economic growth and the environment. grossman and krueger (1991) review of economics and development studies, vol. 7 (4) 2021, 515 523 516 introduced the concept of the correlation between growth and environment which is entitle environmental kuznets curve (ekc). the empirics still found different results in different economies. some proved in favour of the environmental kuznets curve (ekc) while others do not support in their empirical findings. however, some prove the above mention curve with different inflexion points. apart from the relationship of economic growth with the environment, researchers and policymakers also tested the other macroeconomic factors like energy consumption, financial development, financial inclusion, ict and technology, tourism, trade balance, natural resources, urbanization and globalization that are also responsible for environmental degradation and commonly used in different empirical studies in different regions (rauf et al., 2020; tahir et al., 2021; chaudhry et al., 2021; n’dri et al., 2021; ahmad et al., 2021; bahtebay et al., 2021; farooq et al., 2020; tanveer et al., 2021;chaudhry et al., 2021 ). nowadays many studies focused on the association of human capital with the environment. although previous literature has been proved that human capital uplift the economic growth of any economy. so, many channels have been proved in the literature that human capital improves productivity, decrease the crime rate, and catch economic growth. human capital is negatively linked with the environment as human capital trains the professional through enriching of knowledge through the use latest equipment and technologies in production that will clean the environment as well. human activities are a source and one of the responsible factors of environmental change and educated people are very helpful in the mitigation of environmental degradation (unesco, 2010). education is the main source to understand complex and unfamiliar environmental problems. high educated people understand recycling activities and move toward renewable energy consumption as compared to people that have a low level of education. in pakistan the ratio of greenhouse gases (ghg) is increasing continuously and contributed in economy in different proportions (co2 (54%); ch4 (36%); n2o (9%); co (0.75%) and f-gases about 0.3%).there are many key roots for the environmental degradation in pakistan like high level fossil fuel consumption, deforestation, and many human activities. the fossil energy consumption due to transportation and manufacturing sectors plays backbone role in degrading environmental sustainability in pakistan. the study underwrites to the literature as mentioned: firstly, this study will contribute to the literature by analyzing the impact of human capital on environment degradation which is rarely have been used in the case of pakistan. secondly, our study tries to investigate or conduct an empirical test pollution halo/haven hypothesis (phh) in pakistan. our study takes proxy for the environment will be the ecological footprint (gha per person) which is supposed to be a dynamic indicator. the portion of this study is structured as mentioned:“literature review” segment outlines the previous literature about human capital and the environment. “data and methodology” section labels data source and empirical method. next section presents findings and discussions. in last section study discuss the conclusion. 2. literature review the linkage of macroeconomic indicator with the environmental concerns has been proved in the previous literature. different variables showed different associations with the environment in different regions. however, the connection of human capital with the environment is explored limited. the study of yao et al. (2020) evaluated the correspondence of human capital with the environment during 1870-2014. the study concluded an adverse association between human capital and the environment in 20 oecd countries. similarly, li and ullah (2021) scrutinized the association of human capital with the environment in brics. they employed a nonlinear panel autoregressive distributed review of economics and development studies, vol. 7 (4) 2021, 515 523 517 model over 1990-2019. the study increased human capital to reduce the co2 emission. in the same way, ahmed and wang (2019) explored the linkage of human capital with an ecological footprint for india under period 1971-2014 and revealed a negative association ecological footprint and human capital. the study conducted on pakistan which is bano et al. (2018) discloses the adverse impression of human capital on co2 emission. apart from this, some studies found a positive association of human capital with environmental degradation. such as, the study of ganda (2021) scrutinizes the linkage of human capital with co2 emission in brics and concluded a positive association. alshery and belloumi (2015) described the connection between energy consumption, co2 emission and economic growth for saudi arabia over the period 1975 to 2010. the study used the johnson multivariate co-integration technique. the results set up a long-run relationship of energy consumption and economic growth with carbon dioxide emission. bekun et al. (2019) investigated the interaction of economic growth with energy consumption in the african economy. the study used buyer and hanck co-integration method and found the long-run association exists in energy consumption and economic growth. chang (2010) examined the correlation between economic growth, energy consumption and carbon dioxide emission. the study findings showed that carbon dioxide emission and energy consumption are linked with economic growth. mohmmad et al. (2019) described the liaison between co2 emission, economic growth, and health in the ten emitting economies over the period 1991 to 2014. results found that co2 emissions have a significant impact. hassan et al. (2018) result showed that natural resources have a positively association on economic growth and as well as environmental kuznets curve (ekc). kivyiro and arminen (2014) employ the ardl technique to describe the casual correlation among economic growth, foreign direct investment, energy consumption, and carbon dioxide emission in sub-saharan african economies. similarly, fei et al. (2011) scrutinized the connection between energy consumption, economic growth, and carbon dioxide emission in china economy over the time period from 1957 to 2007. results found the positive impact of real gdp per capita and energy consumption. baz et al. (2020) investigated the interrelation between economic growth, energy consumption and the environment in pakistan by applying the non-linear ardl model during the period from 1971 to 2014. their result showed that environmental quality and energy consumption has a positive asymmetric impact and as well as they found a neutral symmetric impact on economic growth, energy consumption, and capital. munir et al. (2020) revealed the alliance of energy consumption, co2 emission and economic development in asean 5 countries over the time span from 1980 to 2016. this study used granger non-causality techniques and results showed that in malaysia unidirectional granger causality between gross domestic product and co2 emission found in malaysia, thailand, philippines and singapore have unidirectional granger causality between gross domestic production and energy consumption. bidirectional causality was found in singapore between gross domestic product and energy consumption. 3. data and econometric strategy the previous empirical studies employed various econometrics techniques to estimate the effect of several macroeconomic variables on the environment. our study employed the autoregressive distributive lag (ardl) method which is preferable over other traditional techniques due to various reasons. firstly, the ardl estimation method is appropriate in case of a small sample size. secondly, it is more appropriate against mixed order of integration. thirdly, the specialty of ardl is that gives long and short-run outcomes at a time. (ect) term in ardl shows the surety of long-run equilibrium adjustment. review of economics and development studies, vol. 7 (4) 2021, 515 523 518 before applying ardl it is necessary to check the unit root test and make sure variables are in a mixed order of integration, many are on a level i(0) and some are on the first difference i(1). for the presence of co-integration amongst the variables, f bound test is more suitable in ardl modelling that shows if the f-value higher than i(1) means co-integration exists. if the value is below lower bound i(0) that show no co-integration exists while the calculated value lies between upper i(1) and lower bound i (0) concludes indeterminate. after applying the ardl estimation method to justify diagnostic checks like jarque bera for normality test, lm test for inspecting serial correlation test, breusch pagan test for investigating heteroscedasticity test and ramsey reset test for finding stability test. the study model is based on one dependent variable which is ecological footprint and four independent variables like human capital, population, gross domestic product and foreign direct investment, respectively. the data is retrieved from world development indicators (wdi). to tackle issues, variables are used in logarithmic form. the model specification extends the previous literature by taking the following combination of variables: ),,,( popgdpfdihcfefp  (1) tttttt popgdpfdihcefp   43210 (2) concerning the ecological footprint β1, β2, β3, β4 are coefficients of elasticities of regressors hc, fdi, gdp) and pop, respectively. the study formulated ardl modelling to test the short and long-run association. tttttt r i itiit q i iit p i it l i it popgdpfdihcefp popgdpfdiefpefp              1514131211 0 4 0 3 0 21 1 10 (3) the following equation shows the unrestricted error correction model (ecm): t it s i r i itit q i p i itit l i t vtect popgdpfdihcefpefp          1 0 5 0 4 0 3 0 2 1 10   (4) in the above equation, the adjustment parameter denotes by λ and ect denotes the surety of longrun adjustment. 4. results and discussions: 4.1 descriptive statistics the following table shows the descriptive statistics that comprise mean, maximum, median, minimum, standard deviation, and kurtosis and jarque-bera values. the values of fdi and pop are positively skewed while efp, hc and gdp are negatively skewed. review of economics and development studies, vol. 7 (4) 2021, 515 523 519 efp hc fdi gdp pop median 18.5518 0.4715 20.3984 1.5825 0.9248 mean 18.5088 0.4596 20.4379 1.4525 0.9305 minimum 17.9170 0.2803 18.4764 -0.0446 0.7299 maximum 18.9523 0.5876 22.4442 2.0823 1.1888 skewness -0.4652 -0.2235 0.0734 -1.1648 0.1281 std. dev. 0.2949 0.1194 1.1098 0.4735 0.1494 kurtosis 2.0626 1.3751 2.0635 4.3777 1.6057 jarque-bera 2.3988 3.9049 1.2355 10.0730 2.7632 probability 2.3988 0.1419 0.5391 0.0064 0.2511 sum 610.7915 15.1677 674.4513 47.9336 30.7085 sum sq. dev. 2.7829 0.4566 39.4178 7.1773 0.7148 4.2 stationarity test results: for stationarity the employ the augmented dickey-fuller test (adf), and phillips-peron test (pp). the outcomes of tests show the variables are mixed order of integration. note: *, **, and *** for 10%, 5% and 1 %, respectively. 4.3 f-bounds test results: then after is the f-bound test provides co-integration values and the finding shows long-run cointegration as the calculated value is greater than the upper bound. table 5 f-bounds test estimation result: f-statistic k range critical values i (0) bound i (1) bound model 4.440 4 10% 2.45 3.52 5% 2.86 4.01 2.5% 3.25 4.49 1% 3.74 5.06 4.4 long run and short run estimations: the long and short-run consequences indicate human capital is linked with the ecological footprint negatively. the findings are in line with yao et al. (2020) in 20 oecd countries and li and ullah (2021) in brics revealed the adversarial upshot of human capital on the co2. the conclusion describes that human capital is connected with the environment strongly and its effect is dynamic in different time periods. an upsurge in human capital will improve the quality of life of people through education that impacted all indicators including this. the long-run and short-run results for foreign table 3 unit root test results variables level first difference adf pp adf pp efp -4.726*** -4.7563*** -0.9857 -0.9865 hc -1.9151 -1.9384 -3.8194** -3.8427*** fdi -1.3646 -1.4625 -4.046*** -4.0465*** gdp -2.8864** -3.5854** -6.8435*** -11.1655*** pop -0.1920 -0.8985 -5.4072*** -5.4336*** review of economics and development studies, vol. 7 (4) 2021, 515 523 520 direct investment are positive and significant for ecological footprint. this effect or result validates the theory of pollution haven hypothesis (phh) that shows the amplify in foreign direct investment leads to degrading the environment. this hypothesis is already proved empirically in different regions. for example, the study of chaudhry et al. (2021) validates the pollution haven hypothesis in brics countries. in our study gdp is significant with a positive sign with an ecological footprint that suggests that improvement in economic growth will harm the environmental sustainability. pakistan is on the list of developing nations and also trying to tackle the adverse sound effects of economic growth on the environment. but still, the country needs to improve their policies regarding the environment and focus on environment-friendly growth. the variable population is significantly affected environment with a positive sign in the long run estimates. this proposes that a tremendous increase in population in developing countries including pakistan is a threat to environmental sustainability. through different channels, it is already proved that population is one of the threat for environmental degradation that degrades the environment. the ect indications towards the surety of the adjustment of the equilibrium in long run and it is negative and highly significant that results of long-run estimation variables coefficient [prob] hc -1.088** [0.034] fdi 0.101***[0.001] gdp 0.039** [0.009] pop 2.0499*** [0.0022] c 18.7*** [0.0000] results of short-run estimation d(hc) 1.9084* [0.054] d(hc(-1)) -0.112[0.934] d(hc(-2)) 1.514[0.169] d(fdi) 0.047*** [0.003] d(fdi(-1)) -0.011[0.479] d(fdi(-2)) -0.016 [0.227] d(gdp) 0.039**[0.011] d(pop) 5.641** [0.041] d(pop(-1)) 0.655[0.919] d(pop(-2)) 3.559[0.202] ect -1.001*** [0.000] daignostic checks r 2 0.996 adj r 2 0.991 lm test 1.137[0.367] normality test 1.077 [0.583] hetero test 0.631 [0.791] ramsey reset test 0.344 [0.572] the values in [] denote probability value and *, ** and ***shows 10%, 5% and 1% significance level, correspondingly. review of economics and development studies, vol. 7 (4) 2021, 515 523 521 to test the reliability and validity of the results it is compulsory to pass some diagnostic tests. the value of the coefficient of determination (r 2 ) shows how much variation is explained variable due to all explanatory variables that show the goodness of the fit of the model. our model results are good fitted model results. test, the results of all stability and residual test like normality, serial correlation lm test, the breusch-godfrey test for heteroscedasticity and the ramsey reset test shows the model is stable and free from these econometric issues. the study also reported the cumulative sum (cusum) and cumulative sum of square (cusumq) graphs and the results validates the stability of the model (see fig.1 and fig.2). -10.0 -7.5 -5.0 -2.5 0.0 2.5 5.0 7.5 10.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 cusum 5% significance fig.1: (cusum) -0.4 0.0 0.4 0.8 1.2 1.6 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 cusum of squares 5% significance fig2: (cusumq) 5. concluding remarks our study explored the association of human capital, foreign direct investment, economic growth and population with the environment in pakistan. the study adopted the time series econometric estimation methodology autoregressive distributed lag model (ardl) over 1980-2019. interestingly our study results show that an amplify in human capital will clean the environment. the study also validates the pollution haven hypothesis by proving the positive link of foreign direct investment with the ecological footprint. pakistan is on the list of developing countries and mostly foreign direct investment in review of economics and development studies, vol. 7 (4) 2021, 515 523 522 pakistan is increasing economic growth but meanwhile putting pressure on the environment eventually degrade the environment. the study results also corroborate the existence of the long-run linkage of economic growth with the ecological footprint. this result proves the environment is very sensitive to economic growth and eventually high growth move the economy towards worsening the environment. the study suggests that policymakers and government officials should develop and promote the education sector that eventually mitigates environmental degradation. references ahmed, z., & wang, z. 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(2020).human capital and co2 emissions in the long run. energy economics, 91, 104907 review of economics and development studies vol. 5, no 4, 2019 721 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads the causal nexus of urbanization, industrialization, economic growth and environmental degradation: evidence from pakistan 1 shabana parveen, 2 abdul qayyum khan, 3 sohail farooq 1 phd scholar , department of economics, hazara university mansehra, pakistan. shabana_economist@yahoo.com 2 associate professor, management sciences department, comsats university, islamabad wah campus, pakistan. qayyum72@ciitwah.edu.pk 3 assistant professor, department of economics, hazara university mansehra, pakistan. thesohailfarooq@hotmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 the paper analyzes the causal relation between eeconomic growth, urbanization, industrialization and environmental degradation of pakistan. the study used time series data for the sample span of 1975-2017, retrived from world bank development indicators (wdi, 2017). vector auto regressive (var) model is used for analyzing the causal link amongst the variables, namely economic growth, urbanization, industrialization and environmental degradation. the granger causality test is used for identifying the order of the causal association. before estimating var, augmented dickey fuller (adf) as well as phillips perron (pp) tests are used for confirming the stationarity characteristic of all variables, first with intercept and then, with intercept along with a linear deterministic trend. akaike information criterion (aic) is used for selection of optimum lag. the johansen cointegration test is adopted for identifying long run associations. the result of the var model reveals, if any innovation of one standard deviation from outside the model occurred, it will take about 13 years for co2, 19 years for urbanization,16 years for industrialization and about 12 years for economic growth in adjustment. these results further indicate that most of the variation in all variables is explained in their own. the study confirmed two unilateral causalities, that is runs from co2 to urbanization as well as economic growth. the findings of the research work propose that policy makers required to develop policy helpful to the environment which will encourage verifiable economic growth in pakistan. the policy makers need to plan for environmental issue while making policies regarding urbanization, industrialization and economic growth. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords economic growth, urbanization, industrialization,co2 emissions jel classification: r11, r19 corresponding author’s email address: shabana_economist@yahoo.com recommended citation: parveen, s., khan, a. q. and farooq.s. (2019). the causal nexus of urbanization, industrialization, economic growth and environmental degradation: evidence from pakistan, 5 (4), 721-730 doi: 10.26710/reads.v5i4.883 1. introduction carbon dioxide (co2) emission is a major component of green house gas (ghgs) emissions that is a major factor behind global warming and degradation of natural environment. environmental degradation http://www.publishing.globalcsrc.org/reads mailto:shabana_economist@yahoo.com mailto:qayyum72@ciitwah.edu.pk mailto:thesohailfarooq@hotmail.com mailto:shabana_economist@yahoo.com review of economics and development studies vol. 5, no 4, 2019 722 increases since the 19 th century, with the increasing trend of urbanization and industrialization so the issue of environmental degradation and its relationship with urbanization and industrialization has got much attention from researchers both in developed and developing countries. pakistan is also facing a higher trend of urbanization with 207.77million population, it has become the sixth most populous country in the world. the major reason behind the trend is the increase growth rate of population as well as migration. the rate of urbanization in pakistan is 36.38%, which is projected to reach at 50% in the upcoming 15 years (afzal et al., 2018). as much as industrial growth is concerned, it remains poor throughout the history. the government wants to achieve high growth rate of industrialization which is not satisfactory at present due to political instability, high tax burden and energy crisis. the economic growth of pakistan remains volatile throughout the history (pakistan economic survey, 2016-17). the main objective of the study is to analyze empirically causal link in economic growth, urbanization, industrialization with environmental degradation. the rest of the paper is organized into five sections. section 2 consists of the previous literature. section 3 is about the data along with methodology. section 4 presents the empirical results whereas section 5 concludes the study and presents some policy implications. 2. literature review rich empirical work has been done on analyzing the causal link of many variables with co2 emissions like, liu and bae (2017) analyzed the causal association between industrialization, urbanization, per capita real gdp, intensity of energy with co2 emissions, and confirmed the long-term bidirectional causalities in industrialization, per capita real gdp with co2 emissions. sarkodie and owusu (2017) studied the causal link between industrialization, population, per capita gdp along with co2 emissions through the granger causality test, and confirmed a unidirectional causal association of industrialization to per capita gdp, from population to industrialization as well as per capita gdp, from population towards co2 emissions. al-mulali and ozturk (2015) confirmed the causal link in industrial development, urbanization and energyuse both in the short and long time period. kasman and duman (2015) used data of new european union member countries and confirmed a unidirectional causal association of urbanization with co2 emissions. likewise, liddle and lung (2014) found the same association in co2 emissions and urbanization for 105 countries, but they were unable to found granger causality in case of urbanization and electricity consumption. another group of researchers studied the causal link in economic growth, urbanization, with co2 emissions like, xuemei et al. (2012) found a close relationship between these variables as confirmed, economic growth promotes urbanization and vice versa. yansui et al. (2016) used data of china for the period of 1997 to 2010, studied the link between co2 emissions with economic growth as well as urbanization. the work was based on panel co-integration test along with granger causality. the result showed the studied variables increase co2 emissions there. the results also suggested a two-way long term association in the variables, meaning that urbanization has causal effect over economy growth in the long period and these have a causal association with co2 emissions too. jebli et al. (2015) found twoway causal association for economic growth with co2 emissions for 24 economies in sub saharan africa, in the span of 1980 to 2010. the analysis was based on panel co-integration technique. mingxing et al. (2014) presented a two-way causality of urbanization with economic growth. the conclusion of xuemei et al., (2012) were also the same. most of the studies are conducted on panel data for analyzing the causal association between urbanization, economic growth with co2 emissions like, al mulali et al. (2015) used heterogeneous panel data of 129 states for the span of 1980 to 2011. the researchers used economic growth, financial growth, urbanization, as well as co2 emissions in analysis. interestingly, the result of granger causality showed that due to financial development, all the variables have a direct impact on the environment, in the short and long run meaning that these variables does not increase co2 emissions. al mulali and ozturk (2015) worked for 14 mena states for the span of 1996 to 2012. the results of granger causality confirmed short term and long term causal link among urbanization, industrial review of economics and development studies vol. 5, no 4, 2019 723 development and environmental degradation. literature also analyzed a causal link of energy use with co2 emissions based on the idea that economic growth increases energy use that results to co2 emissions increase . wang et al. (2011) used data of 28 provinces of china and presented bidirectional causality in economic growth, energy use with co2 emissions. li and cheng (2006) confirmed two-way causality for urbanization and economic growth whereas a shahbaz et al. (2014) confirmed, urbanization along with economic growth causes increase in co2 emissions. likewise, yazdi and shakouri (2014) used data of iran for the period from 1975 to 2011 and worked on the association in energy consumption, economy growth, urbanization with co2 emissions. the study found a one-way causal linkage from urbanization towards co2 emissions. vidyarthi (2014) worked on the data of five states of south asian for the span of 1972 to 2009 and found a two-way association in economic growth with energy use, whereas a one-way causal association of co2 emissions with energy use. omri (2013) used simultaneous equations model for studying the same association in mena states, confirmed a two-way causal association for economic growth with energy use, whereas a one-way causal association of economic growth with co2 emissions. likewise, ang (2009) concluded that economic growth along with energy use contributes co2 emissions in china, zhang and cheng (2009) conducted a multivariate causal study in china and concluded a unidirectional causal association for energy use towards co2 emissions but not contributed towards economic growth. in addition, hwang and yoo (2014) concluded in indonesia a two-way causal association in energy use with co2 emissions. for saudi arabia, alshehry and belloumi (2015) whereas for french, ang (2007), confirmed a causal association in energy usage, economic growth with co2 emissions. apergis and payne (2010) found this association in asean economies. lotfalipour et al. (2010) presented a one-way causal association in energy use , gross domestic product with co2 emissions. interestingly, samuel and abu (2017) found a trade-off for economic growth with co2 emissions for nigeria. they found that whenever gdp per capita increases, it also increases co2 emissions while when co2 emissions increase, it did not contribute to economic growth. in pakistan, studies like mukhopadhyay and chakraborty, (2005); bukhari, (2012) has done on the impact of macroeconomic variables such as trade openness, population growth, urbanization on environmental degradation. asjad and aqeel (2014) found a one-way causal association among gdp, population growth, energy usage with co2 emissions. in table 1 the summary of the previous research work done about the causality in economic growth, urbanization, industrialization with co2 emissions for developed as well as developing countries is presented. the purpose of the present work is to analyze the causal link in co2 emissions, urbanization, economic growth and industrialization in case of pakistan. table: 1 summary of research work done about causality in economic growth, urbanization, industrialization, and environmental degradation authors sample and time period variables methodology results zhang and cheng (2009) china (19602007) co2 emissions, gdp, energy use multivariate model, granger causality test unidirectional causal association of gdp with energy use, of energy use with co2 emissions hossain (2011) newely industrialized countries (1971-2007) co2 emissions, energy use, economic growth, urbanization. fisher panel cointegration test, granger causality test unidirectional relationship of urbanization with economic growth. unidirectional relationship found of economic growth with co2 emissions, urbanization, as well as energy consumption review of economics and development studies vol. 5, no 4, 2019 724 omri (2013) fourteen mena countries (1990-2011) co2 emissions, gdp, energy use. simultaneous equations model bidirectional causal association of energy use with gdp. unidirectional causal association of co2 emissions with gdp. liddle and lung, (2014). 105 countries(19712009) co2 emissions urbanization, electricity use cointegraton, granger causality test granger causality from urbanization to electricity usage. vidyarthi (2014) five asian countries (1972-2009) energy use, co2 emissions, economic growth. granger causality test bidirectional causality for energy usage with economic growth. unidirectional causal association in energy use with co2 emissions in long term. alshehry and belloumi (2015) saudi arabia co2 emissions, economic growth, energy prices, energy use granger causality test unidirectional relationship exists from emissions of co2 to price of energy and economic growth in short period. unidirectional causal association in energy use, emissions of co2 emissions and gdp in long period. asjad and aqeel (2014) pakistan co2 emissions, gdp per capita, energy consumption, population growth. granger causality test unidirectional causality found in the variables saidi and hammami (2015) six oilexporting countries (1990-2012) co2 emissions, gdp, energy usage. gmm model bootstrap panel granger causality test, two way granger causality for uae for economic growth and co2. al-mulali and ozturk (2015) fourteen mena states (1962-2012) urbanization, energy use, industrial development. fully modified ols, granger causality test all the variables have short and long term causalities. sarkodie & owusu (2017) rwanda (19652011) co2 emissions, gdp per capita, population, industrialization. ardl, granger causality test unidirectional causality found for industrialization to per capita gdp, population towards gdp per capita, population towards industrialization, population towards co2 emissions. liu and bae (2018) china (19702015) co2 emissions, real gdp, industrialization, urbanization, energy consumption. ardl, vecm all variable have positive impact on co2 emissions. granger causality exists in industrialization, energy consumption and co2 3. data and empirical method review of economics and development studies vol. 5, no 4, 2019 725 3.1 data source and variables the research study is based upon time series data for the span of 1975 to 2017 that is retrived from world bank development indicators (wdi, 2017). the main variables that are employed in the study are economic growth, which is represented by a percentage growth in real gdp, urbanization represented by urban population as a percentage of the total population, industrialization represented by industry including construction value added whereas for environmental degradation, co2 emissions is used as a proxy. var model is used for identifying causalities among the macroeconomic variables, namely economic growth, urbanization, industrialization, co2 emissions with granger causality test for identifying the directions of causalities in the studied variables. 3.2 model specification the causal link between co2 emissions with macroeconomic variables has been analyzed by different econometric techniques. the present study follows the analytical techniques used by zhao and wang (2015). prior to conducting econometric techniques, the data are analyzed for stationarity through augmented dickeyfuller (1979) along with phillips and perron(1988) tests, both with intercept and with a linear deterministic trend. stationarity of the variables allow us to use co-integration test for identifying long run association in the variables. for this purpose, johansen co-integration (1991, 1995) test is used. the impulse response function (irf) and variance decomposition is used to examine the vibrant impact of the errors on the variable’s system. granger causality test is used for identifying the direction of causality amongst the variables. the paper deals with the empirical investigation of the causal relationship between economic growth, urbanization, industrialization and environmental degradation using pakistan data. we hypothesis our model for empirical analysis pursuing zhao and wang (2015), liddle, b., & lung, s. (2014). more specifically, the general functional form the model is: ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ ∑ where co2 is representing carbon dioxide emissions, ur represents urbanization, ind stands for industrialization, eg represents economic growth, k represents lag length and represents error term. 3.3 empirical results  result of adf and phillipsperron (pp) unit root tests for stationarity analysis, we use augmented dickey-fuller (adf) 1979 and phillips and peron (1988) tests. the mathematical form of adf test is ́ where  = ρ-1 -1 ≤ ρ ≤ 1, with hypothesis as under: phillipsperron (pp) test is used to adjust the coefficiat (t-ratio) of the adf test, when test statistic distribution got affected by any serial correlation. the pp test is presented as review of economics and development studies vol. 5, no 4, 2019 726 ́ ( ) ( ( ̂)) where is the appraisal of error variance while is the zero occurrence of error. table 2 represents the results of the above mentioned tests. the table shows that economic growth is stationary at level whereas urbanization, industrialization as well as co2 emissions were non stationary that are converted into stationary after taking the first difference in both tests. table. 2 results of unit root test variables result ofadf test result of pptest intercept intercept and trend intercept intercept and trend eg -11.136* -11.910* -9.283* -11.271* ur 0.379 -7.281* -0.818 -7.306* 0.264 -7.277* -1.383 -7.247* ind -2.511 -7.210* -2.705 -7.174* -2.322 -8.021* -2.537 -8.492* co2 -2.235 -7.627* -2.149 -8.259* -4.043 -7.627* -1.741 -17.127* *significant at 1% significance level 3.4 cointegration test for identifying the presence of long term association in the used variables, johansen(1988) presented two likelihood ratio tests that are maximum eigen value and trace statistics. these tests are represented in two equations: ( ̂) ∑ ̂ where in both equations represent the size of the sample, λˆi is the ith largest known associations. table 3 shows the results of cointegration test. the results show that for all 4 variables, the null hypothesis of no cointegration is rejected at 1% significance level. table. 3 results of cointegration test levels of significance: *p < 0.01 3.5 impulse response function (irf) results irf is used to know about the response of dependent variables to any change or innovation in error term. figure (1) presents the estimation of 4 variables that are, co2 emissions, urbanization, industrialization, economic growth in irf terms to unitary innovation or shock from outside. the graphs show that if one standard deviation innovation or shock occurs from outside, the co2 will takes 13 years, urbanization will takes 19 years, industrialization will take 16 years and economic growth will takes 12 years to n.hypothesis a. hypothesis trace statistics statistic critical value r  = 0 r ≤ 1 r = 1 r = 2 73.92* 31.84* 47.86 29.80 15.06 3.84 r ≤ 2 r ≤ 3 r = 3 r = 4 17.74* 6.74* review of economics and development studies vol. 5, no 4, 2019 727 absorb the shocks. figure 1. response of variables to impulses of 1 standard deviation innovation -.02 .00 .02 .04 .06 .08 2 4 6 8 10 12 14 16 18 20 co2 ur ind eg response of co2 to cholesky one s.d. innovations -.001 .000 .001 .002 .003 2 4 6 8 10 12 14 16 18 20 co2 ur ind eg response of ur to cholesky one s.d. innovations -.04 -.02 .00 .02 .04 .06 2 4 6 8 10 12 14 16 18 20 co2 ur ind eg response of ind to cholesky one s.d. innovations -.2 -.1 .0 .1 .2 .3 .4 2 4 6 8 10 12 14 16 18 20 co2 ur ind eg response of eg to cholesky one s.d. innovations 3.6 variance decomposition results variance decomposition analysis is used to identify that how much of the variations in dependent variable are lagged by there own variance and by other variables. table 4 shows the variance decomposition of the employed variables. the first group referred to the values of variance decomposition of co2.the values of standard error (s.e) values which is explained by co2 itself ranging from 100% to 82%. economic growth is also explaining much of variations in co2, ranging from 4.09% to 8.52%. similarly, the variation in co2 explained by industrialization and urbanization are ranging from 0.62% to 7.62% and 0.02% to 1.74% respectively. the second group represents the values of variance decomposition of urbanization. the values of standard error explained by urbanization itself, ranging from 99% to 94%. the second variable that explains most of the variation in urbanization is economic growth that explains 3.57% to 3.84% variation. similarly, co2 explains 1.04% to 0.95% variation and industrialization explained 0.06% to 0.89% variation in urbanization. in a similar way the values of the variance decomposition for industrialization and economic growth can be interpreted. table 4. values of variance decomposition variance decomposition of co2 period s.e. co2 ur ind eg 1 0.0687 100.0000 0.0000 0.0000 0.0000 2 0.0713 95.2936 0.0012 0.6159 4.0894 3 0.0725 92.4464 0.0224 0.6217 6.9096 4 0.0751 86.4072 1.1595 3.9799 8.4535 5 0.0757 85.6066 1.4681 4.1339 8.7914 6 0.0769 83.2002 1.5832 6.6833 8.5333 7 0.0761 83.0070 1.6455 6.7951 8.5524 8 0.0772 82.4011 1.7333 7.3760 8.4896 9 0.0774 82.2217 1.7296 7.5311 8.5168 10 0.0774 82.1319 1.7361 7.6154 8.5158 review of economics and development studies vol. 5, no 4, 2019 728 variance decomposition of ur period s.e. co2 ur ind eg 1 0.0026 1.0421 98.9578 0.0000 0.0000 2 0.0027 0.9951 95.3750 0.0642 3.5657 3 0.0030 0.7886 96.1344 0.0702 3.0068 4 0.0031 0.9367 94.6304 0.7297 3.7032 5 0.0032 0.8984 94.7619 0.8279 3.5117 6 0.0032 0.9254 94.5247 0.8244 3.7255 7 0.0032 0.9150 94.5502 0.8258 3.7090 8 0.0032 0.9383 94.3863 0.8475 3.8278 9 0.0032 0.9429 94.3576 0.8760 3.8234 10 0.0032 0.9501 94.3198 0.8863 3.8439 variance decomposition of ind period s.e. co2 ur ind eg 1 0.0561 0.1296 6.7216 93.1488 0.0000 2 0.0576 0.4288 6.9157 90.1731 2.4824 3 0.0635 0.6687 7.8809 89.2175 2.2329 4 0.0650 0.6779 8.3033 88.4470 2.5718 5 0.0657 0.7038 8.2256 88.3215 2.7491 6 0.0663 0.7111 8.0835 88.4619 2.7435 7 0.0663 0.7149 8.1064 88.3589 2.8198 8 0.0666 0.7221 8.1950 88.2840 2.7988 9 0.0666 0.7214 8.1986 88.2390 2.8411 10 0.0667 0.7256 8.1885 88.2436 2.8422 variance decomposition of eg period s.e. co2 ur ind eg 1 0.5107 1.6656 25.6034 13.3006 59.4304 2 0.5674 7.9035 23.7860 11.2723 57.0382 3 0.5935 10.5154 24.0396 12.6282 52.8167 4 0.6065 10.6401 23.0406 15.4812 50.8382 5 0.6119 10.5116 24.1891 15.2418 50.0574 6 0.6161 10.4247 24.2526 15.6373 49.6854 7 0.6178 10.4335 24.4099 15.5591 49.5976 8 0.6192 10.4328 24.2954 15.8647 49.4071 9 0.6197 10.4274 24.3282 15.9044 49.3400 10 0.6199 10.4211 24.3461 15.9235 49.3094 cholesky ordering: co2 ur ind eg 3.7 granger causality results granger causality test (1969) is adopted for identifying the directions of causal link in these variables. once, long run cointegration is confirmed in variables, then the granger unidirectional or bidirectional causality test can make clear the direction between the used variables feng et al. (2009). the estimates of granger causality are given in table5. the results identify two unilateral causalities. one is running from co2 to urbanization and the other is from co2 to economic growth. table 5. results of granger causality null hypothesis f-ratios prob. ur ≠ co2 1.83816 0.1737 co2 ≠ ur 5.81056 0.0065 ind ≠ co2 0.39351 0.6776 co2 ≠ ind 0.25946 0.7728 review of economics and development studies vol. 5, no 4, 2019 729 eg ≠ co2 0.77482 0.4683 co2 ≠ eg 3.75681 0.0330 ind ≠ ur 0.33006 0.5230 ur ≠ ind 2.09155 0.1382 eg ≠ ur 2.30943 0.1139 ur ≠ eg 1.44316 0.2495 eg ≠ ind 0.16602 0.8477 ind ≠ eg 0.82584 0.4460 note: ≠ represents null hypothesis i.e., does not grangers cause 4. concluding remarks economic growth is the desire of every country. the role of urbanization and industrialization cannot be ignored in the growth process of a country. the macroeconomic variables urbanization, industrialization, economic growth are associated with co2 emissions too. the purpose of this work is to analyze any causal association in urbanization, industrialization, economic growth with co2 emissions. the results of var model indicate that if innovation of 1 standard deviation is given, it takes about 13 years for co2, 19 years for urbanization, 16 years for industrialization and 12 years for economic growth to adjust. it follows that in pakistan the policies regarding economic growth, industrialization, urbanization and co2 emissions are not effective as it takes much longer time to adjust. furthermore, the case of urbanization is much alarming, therefore special attention is needed in policy formulation for urbanization, and further the policy must be objective oriented and also proper check on its implementation is required. in addition, for all variables, the causality result indicates that the response of every variable to their own shock/ innovation was much better as compare to shock in other variables. granger causality results identify only two unilateral causalities, that is from co2 emissions towards economic growth, and urbanization. there found no bidirectional causality and independent type relationships were found in economic growth and urbanizations, economic growth with industrialization, urbanization with industrialization and industrialization with co2 emissions. the issue of co2 emissions must not be ignored at the time of framing policy for industrialization. references afzal, m., shaoib, s a., & nawaz, m. 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(2009). energy consumption, carbon emissions and economic growth in china. ecological economics, 68: pp. 2706-2712. zhao, y., & wang, s (2015). the relationship between urbanization, economic growthand energyconsumption in china: an econometric perspective analysis. sustainability, issn 20711050: pp. 5609-5627; review of economics and development studies, vol. 7 (3) 2021, 383-394 383 economic interactions among stock market performance and macroeconomic variables with mediating role of gold prices volatilities: an evidence from pakistan rukhsana rasheed a , mazhar nadeem ishaq b , rabia anwar c , mehwish shahid d a assistant professor, the government sadiq college women university bahawalpur, pakistan email: rukhsana.rasheed@gscwu.edu.pk b the islamia university of bahawalpur, pakistan c the government sadiq college women university bahawalpur, pakistan d the government sadiq college women university bahawalpur, pakistan article details abstract history: accepted 15 august 2021 available online september 2021 in all emerging economies, one of the most challenging issues for investors is the multifaceted inter-relationship between volatility of gold prices and stock market index. during the covid-19 sub-periods, gold has shown a strong hedging behavior against stock market performance. the main objective of this study was to quantify the long-run relationship among multiple independent macroeconomic variables (predictors) on stock market index (response variable) using the volatilities of gold prices as a mediator factor. this study applied the descriptive statistics, correlation, t-test and ols multiple regression model. the specific data comprised of period 2011-2020 regarding the fluctuations in gold prices, exchange rate, interest rate, inflation rate and performance of stock market index has been utilized. the statistical outputs of models showed that exchange rate (dollar to pkr) was positively affecting the performance of karachi stock exchange (kse)100 index, whereas inflation rate and interest rate were negatively affecting the overall performance of kse100 index. the findings of this study suggested that to achieve better performance of stock market, relatively low interest rate and inflation rate contribute a significant role. however, to increase the generalization capabilities of this study the impact of mentioned macroeconomic variables in other sectors like industrial production, oil & gas and energy sectors with wider time span can be more helpful. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: stock market, macroeconomic variables, gold prices, kse-100 index jel classification: m21, g17, e37 doi: 10.47067/reads.v7i3.384 corresponding author’s email address: rukhsana.rasheed@gscwu.edu.pk 1. introduction a stock market refers to public markets where brokers trade in corporate shares and other securities. the stock market is also known as equity market or share market that facilitates the buying review of economics and development studies, vol. 7 (3) 2021, 383-394 384 and selling of publicly held companies’ stock shares (hiransha et al.2018).financial markets are well recognized and vital tools for economic growth because it mobilize the idle savings in the economy and convert them into productive and useful capital. usually growth of financial markets is stimulated when an economy generates more surplus resources (pan et al. 2018). the pakistan stock exchange market (abbreviated as psx) is a stock market with trading floors in three cities i.e. karachi, islamabad and lahore. initially, these stock exchange markets i.e. the karachi stock exchange (kse), lahore stock exchange and the islamabad stock exchange were established in years 1947, 1970, 1992 respectively. in 2016, however these stock exchanges market were merged into the psx. there are about 540 companies listed in pakistan stock exchange and total market capitalization wasus$52 billion pxs uses modern electronic trading system which is known as karachi automated trading system (kats), which gives the advantages to stock market to get their work done speedily and with minimum transactions cost (pakistan stock exchange limited, 2020). gold being precious metal remained a symbol of wealth and prosperity. like money, gold serves as medium of exchange and store of value. currently too gold is still being used as an investment tool. (hashim et al. 2017).the international financial institutions and central banks retained a huge quantity of gold for economic security and diversification. kaufmann and winters (1989) concluded that during crises times in market, investment in gold helps to diversify the increasing risks. the cognizance of gold price volatility is quiet essential for investors to guess the share valuations, take hedging decisions and to get a better outlook of whole economy (tully and lucey, 2007). gold is a close substitution of stock share and changes in its prices has great impact on performance of stock exchange markets and inflation (gokmenoglu & fazlollahi, 2015). rate of exchange is the purchasing power of one currency against another currency. the exchange rate is extremely important for international trade and overall economic development. exchange rate is one of the key instrument of monetary policy. positive currency exchange rate has a good impact on the economy of country (kumar, 2011; & kakhani, 2012). inflation indicates a sustained increase in overall price level and this phenomenon decrease the purchasing power of consumers. saleem et al. (2013) studied the long-run relationship between stock market returns and inflation rate. their research proved stock market returns are affected by inflation rate. the investors in stock market keep a close eye on inflation rate to analyse the factor of risk because inflation affect their profit margin (geske and roll, 1983). interest rate is defined as the amount of money a lender charge to a debtor for the use of an asset or capital. institutions levied higher interest rate if the debtor is considered of high risk. alam and salah uddin (2009) found that stock prices and interest rate are negatively inter-linked. chong & goh (2005) explored that growth in the economy is determined by the fluctuations in stock prices. when prices of stock rises upward it point out the improvement in the economy of every country, whereas on the other hand, negative growth in the economy of any country results the decline in stock prices. the study results suggested that macroeconomic activities strongly influence the growth and movements of stock prices. this determines that prices of the market can be taken from the future market accomplishments of the firm. the performance of stock market is significantly influenced by the macroeconomic variables such as foreign currency reserve, exchange rate and interest rate (ullah and islam, 2017). the volatilities in gold prices and fluctuations in macroeconomics indicators i.e. exchange rate, review of economics and development studies, vol. 7 (3) 2021, 383-394 385 inflation rate and interest rate have extensive direct and indirect impacts on financial activities, aggregate consumption, industrial production and investment in all other sectors of pakistan economy. the volatility in the prices of oil, gold and foreign exchange may affect one another and make it difficult for the analysis to forecast the business environment (ali et al. 2021). in pakistan’s culture and society, gold holds its importance as a potential investment for the common man because gold retained a safe investment option as compared to the real estate and stock market (qasim et al. 2021). although in general, a plethora of research studies have been conducted to analyze the interlinks among volatilities of macroeconomic variables and stock market performance. many studies have postulated that stock market and macroeconomic variables do have significant relationship while several studies found inconclusive interactions at best. however, most of these studies were conducted in developed countries but rarely carried out in developing countries with a focus to quantify stock market performance in relation to continuous variations of macroeconomic variables. on this background, this study attempt to assess the impact of intervallic variations carried out in some macroeconomic variables such as exchange rate, interest rate and inflation rate has been estimated on the performance of stock market using the volatilities of gold prices as mediator factor. 2. literature review the economic interactions between stock market performance and macroeconomic variables have been widely studied through various comprehensive studies like like engle and rangel, 2005; hull, 2012; olugbenga, 2012; smart et al., 2014; ali, 2014; al-naif, 2017; adebowale, 2018; bhuiyan, 2020 etc. in all referred studies, theoretically the change in macroeconomic variables such as foreign currency reserve, interest rate, money supply and rate of exchange will lead an visible impact on stock market index. henry (2000) explored that growth in the economy is determined by the fluctuations in stock prices. when prices of stock move upward, it indicates an improvement in economic growth of a country. this study found that macroeconomic activities have significant impact on economic growth and stock prices. according to the findings of elumilade et al. (2006) to ensure long-term assurances of the economy in real capital, stock market plays an important role. lee & wang (2012) recognized that relationship between currency exchange rate and returns of stocks vary from one country to other. beckmann and czudaj (2012) examined the relationship between gold prices and its ability to hedge against inflation. they analyzed the data from 1970 to 2011 of world major economies, usa, uk, european countries and japan. they used markov-switching vector error correction model (ms-vecm) and discern a difference between long-run and short-run time varying dynamics. the study concluded that gold in long-run is to some extent is able to hedge against inflation and this propensity was stronger for usa and uk but equated for japan and european countries. the study also revealed that time horizon is a crucial thing for investors for the usefulness of gold as an inflation hedge. omag(2012) conducted a study in turkey using the data of gold prices and selected indicators from january 2002 to december 2011. regression model was applied as statistical tool to draw the inferences. the study concluded that gold prices are positively influenced by inflation rate and nominal interest rate. the results also exhibited a positive correlation between prices of gold and istanbul stock exchange 100 index. bilal et al. (2013) conducted a comparative study between karachi and bombay stock markets. the data relating to prices of gold and stock shares had been used to quantify the long-run relationship review of economics and development studies, vol. 7 (3) 2021, 383-394 386 between stock market performance and gold prices. applied statistical tools such as unit root augmented dickey fuller (adf) test, phillips-perron, johnson co-integration and granger’s causality tests had been used. the inferences of study were that no co-integration between series existed and neutral effect between prices of stock shares and gold was disclosed by causality test. shahbaz et al. (2014) studied the reliable hedging of gold for pakistan. by using ardl bounds test approach and data from 1997 to 2011; they also report that gold performed as an active hedge contrary to rate of inflation both in the long-run relationship and in the short-run relationship. bialkowski et al. (2014) also investigated whether an asset bubble exists in the gold and stock market. they estimated basic value of gold by using several econometric models and apply an augmented dickey–fuller (adf) experiment. gosh (2016) examined the central banks’ portfolio for foreign exchange reserve and gold demand. a panel data of over 100 nations ranging from 1998-2014 was used in this study. the results showed that several factors such as monetary policy, high exchange rate and inflation properties of an economy significantly increase the demand for gold holding. while kumar, 2017) studied the long-run relationship between gold prices and inflation in indian context. he suggested that gold prices should not be used as a hope to manage the inflation in country. chandrashekar et al. (2018) probed the pattern of stock prices and macroeconomic variables using the monthly data from 2000 to 2018 across the panel of brazil and india. data analysis was carried out through panel econometric techniques. the results of this study proved that unidirectional causality and a long-run relationship among proposed variables exist. it was also found that economic development is significantly influenced by gdp, inflation rate, exchange rate and stock prices. john (2019) carried out a study in nigeria to examine stock market performance and effects of money supply, annual interest rate and inflation. he used annual data series spanning 1981 to 2016. augmented dickey-fuller (adf) test and ordinary least square (ols) regression were used for stationary check and data analysis respectively. long-run relationship between stock market performance and selected variables was proved through the results of co-integration test. money supply had positive and significant impact while interest rate revealed a negative impact on stock market performance. overall this study concluded that in nigeria context, money supply and inflation are two true macroeconomic variables that influence stock market. alam (2020) conducted a comprehensive study to examine the stock market and its relationship with fiscal deficit, exchange rate, fdi, gdp ratio and real interest rate. annual data set spanning 1993 to 2019 was collected from five south asian countries i.e. nepal, india, bangladesh, sri lanka and pakistan. autocorrelation test, heteroscedasticity test, unit root test and hausman test were used. results of study revealed that cause and effect relationship exist between gdp growth rate and stock market index. notable research studies have been carried out to explore the association of stock markets with various factors in different contexts and produced a blend of conclusions. however, this study has been carried in perspective of mediating role of gold prices volatilities on the linkage of macroeconomic variables and stock market performance 3. research methodology 3.1 nature of study and data description research design for this study was explanatory in nature. the inter-relationship between stock review of economics and development studies, vol. 7 (3) 2021, 383-394 387 exchange market and volatilities in gold prices has been explained. the kse-100 is an index of pakistan stock exchange and this indicator represents weighted index of about top 100 companies with 90% of capitalization in stock market. kse-100 index acts as a standard for investor to relate stock prices with investment appraisal. for the measurement of stock exchange market performance, kse-100 index has been taken as proxy variable. three crucial macroeconomic variables such as exchange rate, inflation rate and real interest rate have been selected as independent variables while fluctuating gold prices has been taken as mediating variable affecting the linkage between above three mentioned macroeconomic variables and performance of stock market. 3.2 data collection this paper aims to analyze how the stock market performance is influenced by selected three macroeconomic variables i.e. exchange rate, inflation rate, real interest rate and gold price per tola (11.663 grams) . the data used in this paper was time series and it was collected from secondary sources that contains observations of macroeconomic variables over the period from 2011 to 2020. the defined stock market index figures were collected from pakistan stock exchange website and data about the macroeconomic variables were taken from the websites of reliable national as well international organizations like, pakistan bureau of statistics, state bank of pakistan, world bank, trading economies etc. 3.3 data validation tools 3.3.1 descriptive statistics descriptive statistics have been used to examine the overall summary of variables; rate of inflation rate, exchange rate (dollar to pkr), interest rate, prices of gold and kse-100. frequency distribution tabulation and percentage were calculated to summarize the data and central tendency measurements like mean, median, maximum, minimum etc. 3.3.2 coefficient of correlation coefficient of correlation was used to check the relation among the variables; rate of inflation rate, exchange rate (dollar to pkr), interest rate, prices of gold and kse-100 as well as to assess the research hypothesis for their acceptance or rejection. the presence of relationship between two variables is primarily determined by a value that can range from -1 to +1. if value is 0reveals no correlation, between 0.2 to 0.4-weak correlations, 0.6 to 0.8-reveals strong correlation between the variables. 3.4 econometric model specification as multivariate or multiple regression model is an appropriate statistical technique to assess the relationship between multiple independent variables (predictors) and their impact on dependent variable (response variable). therefore in this study, a regression model have been developed to test the significance of relationship between stock market performance and selected macroeconomic variables. the model analyzed the impact of gold price volatilities on the relationship between rate of inflation and kse 100 index, on relation of exchange rate and kse 100 and on relation of interest rate and kse 100. the mediated effect of independent variables (xn) to dependent variable (smp) can be quantified as the product of the regression coefficient relating xn to smp. review of economics and development studies, vol. 7 (3) 2021, 383-394 388 figure 1: mediating gold price variable and stock market to establish a functional relationship between selected macroeconomic variables and stock market performance, following model has been developed as: smp = f (exchange rate, interest rate, inflation and gold prices) where, smp in this study is the stock market performance because it contains 540 large companies picked based on market capitalization and high liquidity from a vast number of industries. to test a variable as moderator in regression, an interaction factors have been created by multiplying independent variables i.e. exchange rate, interest rate, and inflation rate with moderator variable i.e. gold prices. multiple regression was then run alongwith the selected independent variables, moderator and interaction factors simultaneously in the model. the following econometric equation would yield a better economic interpretation of given variables: ŷ =α +β 1x1i+β 2x2i+β 3x3i+β4x4t+μ where: ŷ= kse-100 index x1i= exchange rate (dollar to pkr) x2i= inflation rate x3i= interest rate x4t= gold price α = constant β = regression coefficient μ = error term dependent variable independent variables inflation rate exchange rate (dollar to pkr) interest rate kse 100 gold prices as mediator review of economics and development studies, vol. 7 (3) 2021, 383-394 389 research hypothesis table 1: the following individual hypothesis for each model is listed: independent variables model-1 hypothesis model-2 hypothesis exchange rate (h1): there is a positive relationship between exchange rate (dollar to pkr) and kse100. (h5): there is a positive impact of gold prices fluctuations on the association between exchange rate (dollar to pkr) and kse100. inflation rate (h2): there is a positive relationship between inflation rate and kse100. (h4): there is a positive impact of gold prices fluctuations on the relationship between inflation rate and kse100. real interest rate (h3): there is a positive relationship between real interest rate and kse100. (h6): there is a positive impact of gold prices fluctuations on the relationship among real interest rate and kse100 4. results and discussion the relationship among exchange, inflation, and interest rates on stock market performance has been tested through various statistical tools. the empirical findings are illustrated below. 4.1 descriptive statistics as the descriptive statistics reveal a summarized outlook of given data. in this study, descriptive statistics has been bifurcated into: (i) measure of dispersion that exhibit the standard of deviation, the variance, maximum and minimum, the kurtosis and skewness; (ii) measures of central involving the mean, median and mode. table 1: descriptive statistics kse100 index exchange rate inflation rate interest rate gold price mean 37614.23 110.3469 4.538667 7.560000 55993.45 median 38008.01 102.7413 3.965000 6.515000 51552.23 maximum 51191.65 161.8366 9.180000 10.52000 130320.25 minimum 26112.19 85.1722 1.320000 6.210000 47352.2 std. dev. 6631.828 24.7863 1.879884 1.606239 33244.66 skewness 0.164281 1.3186 0.776265 0.837464 1.183343 kurtosis 1.989377 0.8867 2.897032 1.990470 3.643250 jarque-bera 2.823283 76.39899 6.052378 9.561330 20.75369 probability 0.243743 0.000000 0.048500 0.008390 0.000031 sum 2256854. 6451.348 272.3200 453.6000 778713.6 sum sq. dev. 2.59e+09 4303.997 208.5039 152.2202 1.12e+10 observations 120 120 120 120 120 source: authors’ data analysis results, 2021 review of economics and development studies, vol. 7 (3) 2021, 383-394 390 table 1 depicted that the mean value of kse-100 index, exchange, inflation, interest rates and gold prices are; 37614.23, 110.34, 4.53, 7.56, 55993.45 respectively. likewise the values of median for kse100, exchange rate, inflation rate, interest rates and gold prices are given in table 4.1 as 38008.01, 102.74, 3.96, 6.51, and 51552.23 respectively. if value of mean is greater than median than it shows normality, because median is more robust with respect to outliers. so when outliers are expected in data, then median is the better choice. as the skewness is a measure of symmetry and its distribution range lies from -1 to +1. if distribution looks same towards the left and right of center point, it is symmetric distribution. normal distribution has zero skewness. when tail is longer on the right side of distribution, it will yield positive skewness. but when tail is longer on the left side of distribution, it gives negative skewness. usually to have a symmetric data, skewness should be near to zero. the value skewness for kse-100, inflation rate, exchange rate, real interest rate and gold price is 0.1643, 1.3186, 2.0506, 0.8375, and 1.18334 respectively. the skewness of kse100, inflation and interest rates are within the range, whereas the skewness of exchange rate and gold price exceeded the value of skewness distribution range. this exceed might be due to volatilities in the dollar exchange rate and abrupt fluctuations in gold prices which are stimulated because of political instability and some other related factors in recent years of pakistan. kurtosis is measure of outliers present in data distribution. kurtosis showed that whether data is heavy-tailed or light-tailed relative to normal distribution. when there is high value of kurtosis it indicates that data has heavy tails or have so many outliers which may be because of wrong data entry or other things. contrary to it low kurtosis in data set showed that data has light tail or lack of outliers. the value of kurtosis for kse-100 index, exchange rate, inflation rate, real interest rate and gold prices is 1.9905, 0.8867, 2.8970, and 3.6432 respectively. the kurtosis value of kse-100 index, exchange rate and interest rate are within the acceptable range of +2 and -2 while the kurtosis value of inflation and gold prices exceeded than normal distribution range of kurtosis. this may be due to political instability and fluctuations in various micro and macroeconomic variables in pakistan. 4.2 correlation analysis correlation test is used to check the relationship and test research hypothesis formulated among selected macroeconomic variables and stock market performance. the outcomes are mentioned in table 2. table 2: results of correlation analysis exchange rate gold price inflation rate interest rate kse100 index exchange rate 1 0.8585 0.1398 0.0133 0.3510 gold price 0.8585 1 0.3338 0.0656 0.3818 inflation rate 0.1398 0.3338 1 0.7276 -0.3189 interest rate 0.0133 0.0656 0.7276 1 -0.6735 kse100 index 0.3510 -0.3818 -0.3189 -0.6735 1 source: authors’ data analysis results, 2021 hypothesis 1: the first hypothesis was that there is a positive association between rate of exchange (dollar to pkr) and kse100 and afterwards values exhibited that there is a positive association between them i.e. (0.3510) review of economics and development studies, vol. 7 (3) 2021, 383-394 391 hypothesis 2: the second hypothesis was that there is a positive relationship among the rate of inflation and kse100. but after analysis as stated in the above correlation table, there is a negative relation between rate of inflation and kse100 i.e. (-0.3189) hypothesis 3:the third hypothesis was that there is a positive link between rate of interest and kse100 but the outcomes described that there is a negative link between them just like rate of inflation and kse100 i.e. (-0.6735) hypothesis 4: the fourth hypothesis was that there is a positive influence of fluctuations in the price of gold on the relationship between rate of exchange (dollar to pkr) and kse100 and that hypothesis got accepted after the detailed analysis of the data hypothesis 5: the fifth hypothesis was that there is a positive effect of fluctuations on the price of gold on the relationship between rate of inflation and kse100 index and the analysis did displayed that there is a positive effect of gold price fluctuations on the rate of inflation and kse100. hypothesis 6: the sixth hypothesis was that there is positive influence of fluctuations in the price of gold on the association between rate of interest and kse100 and the data does support this hypothesis also. table 3: decisions of formulated hypothesis serial # research hypothesis decision 1 there is a positive connection between rate of exchange (dollar to pkr) and kse100. accepted 2 there is a positive association between rate of inflation and kse100. rejected 3 there is a positive link between rate of interest and stock market. rejected 4 there is a positive impact of change in prices of gold on the relationship between rate of inflation and kse100. accepted 5 there is a positive influence of change in price of gold on the association between rate of exchange (dollar to pkr) and kse100. accepted 6 there is a positive effect of change in prices of gold on the connection between rate of interest and kse100. accepted source: authors’ data analysis results, 2021 4.3 regression analysis table 4: results of t-test and p-test analysis variables t-statistics probability constant 4.591092 0.0056 exchange rate 0.198941 0.843 inflation rate 0.975786 0.3334 interest rate -6.34056 0.0040 gold price -1.959667 0.0551 source: authors’ data analysis results, 2021 review of economics and development studies, vol. 7 (3) 2021, 383-394 392 the t-test is performed to find an evidence of significant difference between population mean and a hypothesized value. the greater value of t-test provide greater evidence against the hypothesis. table 4 demonstrates that there is solid evidence for significant difference. however, if value of t-test is closer to zero, it shows that there is no significant difference. p-test is statistical measure that validates the null hypothesis acceptance or rejection claim about population. if value of 'p' is smaller, the stronger the evidence that null hypothesis should be rejected while t-test and p-test both value shows the significance of hypothesis. the value of normal probability should be less than 0.05.as stated in the above table, interest rate has the t-value of -6.3406 and p-value is 0.000, rate of inflation has the t-value of 0.9758 and pvalue is 0.3334, rate of exchange has the t-value of 0.1989 and p-value is 0.8430, gold price has the tvalue of 1.9597 and p-value is 0.0551. these above stated values explained that interest rate and gold prices was negatively significant, whereas the exchange rate and inflation rate was positively insignificant. table 5: results of hypothesis serial # name of independent variable direction of hypothesis 1 exchange rate(dollar to pkr) positive insignificant 2 inflation rate positive insignificant 3 interest rate negative significant 4 gold price negative significant source: authors’ data analysis results, 2021 coefficient of correlation was used for hypothesis testing and to check the significant relationship among inflation rate, exchange rate (dollar to pkr), interest rate, and gold price. four research hypotheses h1, h4, h5, h6 out of six hypothesis (h1, h2, h3, h4, h5, h6) were accepted, whereas two hypothesis h2 and h3 were rejected. table 5: results of ols multi-regression model analysis variables coefficients std. error t-statistics prob. c 0.1101 0.015005 7.337342 0.0000 exchange rate 1.20218 0.373260 3.220756 0.0018 inflation rate -0.93549 0.418622 2.234689 0.0074 interest rate -1.03708 0.287950 3.601597 0.0006 gold price -0.4587 0.107755 4.256841 0.0008 r squared value 0.842214 mean dependent variable 37614.23587 adjusted r-squared 0.616193 s.d. dependent variable 6631.8281 s.e. of regression 4108.55847 akaike info criterion 19.55919 sum squared residual 9.28408 schwarz criterion 19.73372 log likelihood -581.77612 hannan-quinn criterion 19.62746 f-statistics 24.68082 durbin-watson statistics 1.758904 probability(fstatistics) 0.000000 source: authors’ data analysis results, 2021 review of economics and development studies, vol. 7 (3) 2021, 383-394 393 the results of ols regression analysis have been summarized in table 6.5. the impact of variability in dependent variable induced due to independent variable is illustrated by the value of r squared. the results showed that value of r squared was 0.6422 and it indicates that an 84.22% variation in the dependent variables (kse-100 index) is explained by the selected macroeconomic variables (inflation, exchange, real interest rate and gold prices). the remaining 15.78% of the variations in the stock index movement is due to other variables not included in the model. durbinwatson test has value of 1.7589 and this value is under the range of durbin-watson statistics of 2; providing the evidence that there is no existence of serial auto-correlation. 5. conclusions and recommendations this study examined the impact of most crucial macroeconomic variables i.e. inflation, exchange and real interest rates along with mediating variable of gold prices volatilities on the overall performance of stock market of pakistan. six research hypotheses were formulated and out which four hypotheses got accepted while the remaining two were rejected. the study results proved that exchange rate (dollar to pkr) was positively affecting the performance of kse100 index whereas, inflation rate and interest rates were negatively affecting the overall performance of kse100 index. the study also found that there was positive impact of fluctuations in the price of gold on the relationship among exchange rate and kse100, inflation rate and kse100, real interest rate andkse100. the value of coefficient for exchange rate was 1.20218 showing positive impact on stock market performance at 1% significance level. the coefficients of gold prices, inflation and interest rate revealed significant negative impact on performance of stock market. the value of r squared was 0.6422 which illustrated that 64.22% variations have been explained by our proposed model and the remaining variation was due other controlled variables not included in this study 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(2017). effect of macroeconomic variables on stock market performance of saarc countries. asian economic and financial review, 7(8), 770-783. https://www.psx.com.pk/ review of economics and development studies vol. 5, no 2, june 2019 397 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads the construction of factuality in pakistan’s legal discourse: a stylistic analysis of logical fallacies 1 mian muhmmad saleem, 2 ayaz ahmad, 3 sana hussain 1 associate professor, department of law, abdul wali khan university, mardan, pakistan 2 lecturer, department of english, abdul wali khan university, mardan, pakistan, ayazmardan@gmail.com 3 mphil research scholar, department of english, abdul wali khan university, mardan, pakistan article details abstract history revised format: may 2019 available online: june 2019 factuality remains the highest virtue of a legal text. the paper finds how this virtue is jeopardized by the presence of logical fallacies. the stylistics analysis is performed for identification of linguistic features of logical fallacies in legal language. two randomly selected verdicts of the supreme court of pakistan are selected for analysis. analysis of verdicts reveals that factuality is compromised by fallacies with distinctive stylistic features. these features include the fallacies of relevance, defective induction and ambiguity. lexical choices, syntactically complicated structure and graphological markers of style contribute to the formation of these fallacies. the findings establish that stylistic aspect themselves contribute to the projection of fallacies in verdicts, therefore, the study recommends avoiding stylistic formulae of the legalese or legal registers which lead to the formation of logical fallacies in the legal language. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords legal discourse, legal text, legalese, stylistics, logical fallacies, supreme court, factuality jel classification: k40, k49 corresponding author’s email address: ayazmardan@gmail.com recommended citation: saleem, m. m., ahmad, a and hussain, s. (2019). the construction of factuality in pakistan’s legal discourse: a stylistic analysis of logical fallacies, review of economics and development studies, 5 (2), 397404 doi: 10.26710/reads.v5i2.630 1. introduction the legal language in the courts of pakistan remains english as a colonial legacy. the highest virtue of legal language is factuality as it provides language a certainty, making the litigants, defendants and society a chance to achieve the coveted goal of rule of law. however, this does not prove to be a fact when expediency and lack of command on language forces the writer and reader to confuse and get confused as the language of legal discourse suffers from errors and ambiguity. therefore, factuality becomes the most serious casualty of stylistic weaknesses in the legal in pakistan. the presence of logical fallacies acts as a trap which opens the door for corruption and subversion. this paper explores this phenomenon in the legal discourse of pakistan. the paper comprises sections on literature review, research methodology, analysis and conclusion to systematically explore the issue. 2. literature review stylistics in the sense of dictionary is “an aspect of literary study that emphasizes the analysis of various elements of style (such as metaphor and diction)” (merriam-webster, 2019). while the dictionary definition avoids committing stylistics to the study of any particular form and species of language, others were quick to dedicate her to the altar of literature. therefore, stylistics became a bridging discipline for literature and linguistics. the use of stylistics analysis gradually expanded to include not only the appreciation of aesthetics but also as a tool in the http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no2, june 2019 398 interpretation of meaning (wales, 2001). widdowson (1975) considers it an advantage of stylistics that how the specific language structure and for corresponds to the underlying message. wetherill (1974) cautions against excessive reliance on stylistics as the only means of the interpreting literature. he considers the treatment of masterpieces of literature as mere text the main culprit in limiting the scope and meaning literature in the stylistics analysis. however, others expanded the scope of stylistics and termed it, “…. the study or interpretation of the linguistic element or distinctive linguistic element in a writing, group of writings, or a text (that is, a structure capable of being interpreted by a code including intentional structures like a culture or a whole knowledge)” (bloomfield, 1976, p. 271). the range of linguistic elements in stylistics, remains inclusive in nature. the stylistics study includes a broad range of features which range from the macroscopic “big-picture elements” where literary conventions specific to a genre are investigated including character, dialogue, imagery, irony and symbolism, and it can become microscopic by peering down the “line-by-line elements” of diction, metaphor and syntax etc. (nordquist, 2018). language of legal texts has evolved through time and shaped by the juridical and legislative forces to reach its modern formulation. diversity marks the comparative aspect of legal language. however, the legal texts of a particular polity can be analyzed on the basis of specific set of features. danet (1985) has identified, the criteria of (a) the tools/means used in the presentation of text along (b) the level of formality, as useful way of analyzing, comparing and classifying legal texts. tiersma (1999) also acknowledges the variation in legal texts and opposes the idea that this language is homogenous. despite the variation, geographical and conventional factors play a deterministic role in enforcing convergence in the style of the language. gozdz-rszkowski (2011) asserts that language is the only means of expressing and communicating the legal concepts and processes. the difficulty in interpretation of legal concepts and processes are enshrined in legal text and it lies in the language being used. he includes a spectrum of legal texts in legal discourse which range from legislation (at various levels) to its implementation in courts (at various levels) and also includes academic writing in the form of journals, books and non-academic context in fiction and news. he successfully demonstrates that variegated manners of contexts, modes of expressions, participants and their relationship contribute to the rich variety in legal texts. he identifies the stylistics aspects of “legalese” favors formation of, “long, convoluted sentences, impersonal constructions, conjoined phrases and lists of words (usually nouns) resulting in and exceptionally dense use of technical vocabulary…., multiple negation, the use shall, etc.” (p. 12). hernandez (2017) while exploring the micro-level stylistics features in the philippine supreme court’s decisions find a recurrent feature of medial placement of adverbial of emphasis and attitude that is peculiar to philippine english and this feature is supposed to emerge from the influence of local legal context. azmat (2017) conducted a study on the needs of law students in aligarh muslim university (india), where she found insufficient communication skills and lack of familiarity with the legal register becoming a major cause of inefficiency and lack of professionalism in the legal fraternity of india. she proposed a specialized esp (english for specific purposes) to be very effective way improving professional competence of lawyers and judges. with an uptick in publications in the field of linguistics, legal texts and discourses have been targeted to unearth patterns and structures that perform descriptive, interpretive, explicative or evaluative function. s. a. asghar, m. a. mahmood, and z. m. asghar (2018) while focusing the macro stylistics aspects of text identify a non-homogenous quality of legal texts in the use of linguistic pattern depending on the purpose, context, goal and audience of the text. further, they identified a variety of informational levels being used in the text through a non-narrative technique. s. a. asghar, m. a. mahmood, and z. asghar (2018) have identified eight categories i.e. “constitutions, directives, acts, articles, legal decisions, ordinances, legal reports and rules” where the stylistics variation can be observed. m. ahmad, nadeem, khan, and ahmad (2015) carried out the stylistic analysis of “ordinance” genre of legal english in pakistan. they find the use of font, paragraph format, numbering of sections, logical division of sections were adopted to give formality and clarity to the message represented through text. their study found unique stylistic aspects which arise out of the local context of legalese, culture and linguistic traditions. in another study of stylistics of legal text of pakistan, (nawaz, bilal, khan, & ahmed, 2013) have identified stylistic features in the graphological, lexical and syntactic aspects of legal texts which give the legal texts of pakistan a distinctive identity. their analysis revealed that the layout, use of italics and bold text, capitalization, omission lines and other punctuation marks were used in such a way that a distinctive graphological style of legal genre of pakistan was formed. at the lexical level the abundance of archaic british and latin vocabulary and formal diction added to differentiate pakistani legal texts’ style from other texts. the nominalization of verbs, quaint determiners, passive constructions and use of very long and complicated structures were abundant in the syntactic aspect of the style of review of economics and development studies vol. 5, no 2, june 2019 399 legal texts in pakistan. the echo of similar stylistic aspects are found in the work of alabi (2003), where latin and french lexicon, long complex sentences, excessive use of punctuations, repetitions and use of old and archaic words abound in the international legal texts. an important and seldom explored aspect of stylistics is the investigation of stylistics of logical fallacies. halper (1968) considers logic an essential component of reasoning in legal discourse. he argues that unlike popular belief that, “law is sometimes too logical” as it is not always the case, and when logical reasoning lacks logical fallacies creep in. writing about the supreme court’s decisions in the united states, mcclurg (1988) proposes that the verdicts of supreme court employ rhetorics and commit logical fallacies especially begging the question and undistributed middle term. sharma (2004) advocates the linguistic analysis of fallacies as such a study would help in viewing fallacies, “as linguistic strategies employed to gain undue advantage or the upper hand”. halper (1968) presents five practices which result in omission of reason while “logic” is used as a cover for committed fallacy. first, when a court uses a short cut, second, when a court relies on perverse and “delicate inferences”, third, when a court obsessed with rule of law even when such a law is inconsistent with reality, fourth, when court “deliberately maintain contradictions: they occasionally adopt a principle which entails negation of a pre-existing contrary principle” and fifth, the judge becomes a preacher. sharma (2004) considers semantic, lexical and syntactic features as useful aspects in studying the stylistics of logical fallacies. kruchinina (2019) proposes that stylistics study can be used to understand meaning and logical constructs in a given text. she propose the use of stylistics analysis in interpretation of connotations of the text. she proposes the aspects of emotive connotations, evaluative component, expressive connotations and stylistic connotations as useful aspects to explore connotations of a text especially in the form of rhetorics, figures, metaphors and tropes. aristotle in his work, “sophistici elenchi” identified 13 fallacies where errors in arguments occur because the conclusion does not follow from premises. he broadly summed up these in two categories i.e. linguistic and non-linguistic. in the former he included: accent, equivocation, amphiboly, composition/division and figure of speech, while in the former he included, “affirming the consequent, accident, ignorance, certain aspect, false cause and many questions” (changing works, 2019). this classification laid the foundation for later categorization (hansen, 1996). bennet (2012) has compiled a collection of around 300 logical fallacies as he considers fallacies as “erroneous thinking”. fischer (1970) has identified around a hundred types of fallacies in the domain of history. copi and cohen (2014, p. 109) have defined logical fallacy as, “mistakes in reasoning that exhibit a pattern that can be identified and named” and limited the number of logical fallacies to 19, neatly placing them under the categories of (a) fallacies of relevance, (b) fallacies of defective induction, (c) fallacies of presumption and (d) fallacies of ambiguity. he considers fallacies of relevance as those where, “ the premises of the argument are simply not relevant to the conclusion” and consider appeal to populace, emotions and force as good examples. the fallacies of defective induction are defined as those where, “the mistake arises from the fact that premises of the argument, although relevant to the conclusion, are so weak and ineffective that relying on them is a blunder” and they give appeal to inappropriate authority and false cause as the examples. fallacies of presumptions are those where, “too much is assumed in the premises” and the give accidents and complex questions as the examples of this category of fallacies. the fallacies of ambiguity are those where, “equivocal use of words or phrases” mislead and they give examples of equivocation, ambiguity and amphiboly as examples of this category of fallacies. fish (1970) finds stylistics as a useful tool in the analysis of affective fallacy. the affective fallacy closely resembles the category of fallacies of relevance, especially the appeal to emotion and appeal to populace. al-hindawi, alkhazaali, and al-awadi (2015) reiterate the significance of highlighting the linguistic features of logical fallacies in the use of language. they propose that the text containing fallacies have macro and micro level of linguistic features that make their analysis and identification feasible. at the macro level dialectic relevance and shift make good foci for investigation, while at the micro level, the study of sufficiency helps. 3. research methodology this being a qualitative study aims to find how the virtue of factual use of english language suffers from logical fallacies and what stylistic features they have which can be used to identify them. therefore, the paper finds answer to the following questions:  what are the common logical fallacies that compromise the factuality of legal text?  what stylistic aspects of the legal text can be used to identify the logical fallacies? review of economics and development studies vol. 5, no2, june 2019 400 two randomly selected verdicts of the supreme court of pakistan are textually analyzed, using the theoretical construct of copi and cohen (2014). he has identified four categories of logical fallacies which are then subdivided into particular types. “these are: 1. fallacies of relevance  the appeal to populace  the appeal to emotion  the red herring  the straw man  the attack on the person  the appeal to force  missing the point 2. fallacies of defective induction  the argument from ignorance  the appeal to inappropriate authority  false cause  hasty generalization 3. fallacies of presumption  accident  complex question  begging the question 4. fallacies of ambiguity  equivocation  amphiboly  accent  composition  division (copi & cohen, 2014, p. 111)” the two text that are selected are downloaded from the website of the supreme court of the pakistan, http://www.supremecourt.gov.pk. the first verdict is civil appeal no. 585 of 2018 and the second verdict is a civil petition no. 536 of 2015. these verdicts are identified in the analysis section of this paper as text 1 and text 2 respectively. 4. analysis and discussion text 1: para 6. detected categories of fallacies (1) defective induction, (2) ambiguity table 1: stylistics features that contribute to the fallacies stylistic feature example description quote marks “master and servant” conclusion is drawn that the quoted term applies to the case, and application of this term dismisses the case. lexical choice admittedly none admitted the presence of “statutory provision” so such provision does not exist. underlining “pla….rizvi” etc. instantiates example facts that are purported to confirm the drawn conclusion complicated and ambiguous syntax as the…. be invoked a 40 words long sentence which attempts to convey the lack of applicability of constitutional provision and applicability of legal concept. brevity whole para 6 in attempt to use fewer possible words, the smooth transition from one point to the next does not happened and thus make the para wanting in details to establish logical premises, which are left to be guessed from the context. review of economics and development studies vol. 5, no 2, june 2019 401 the lexical choice in the para adds to the implication that sufficient premises did not exist on the basis of which the conclusion can be drawn. use of the word “admittedly” confirm that the fallacy, “d 1: the argument from ignorance” is formed. three precedents are cited while the relevance of none is established which leads to the fallacy, “d4: hasty generalization” is formed. further, the complicated sentence in the paragraph 6, create, “a1: equivocation” fallacy where meaning of a sentence can change when the sentence where “reliance” can be interpreted meaning “dependence” that would make other premises of the conclusion irrelevant or “trust” where a blind faith without authenticity of the said cases is assumed. text 1: para 2 and para 4 detected categories of logical fallacies (1) ambiguity, (2) relevance table 2: stylistics features that contribute to the fallacies stylistic feature example description phrasal feature “leave of the court” “leave” has multiple meaning possible in the way it is used syntactic “learned counsel of the…. writ jurisdiction” the 83 words long sentence coincide with para 4 of the order. where all premises and the drawn conclusions are jumbled together morphological no merits plural morpheme of merit is incorrect. the use of plural morpheme makes the legalese of this court verdict can be treated as peculiar feature of pakistani legal english. the lexical choice in para 2 in the sentence, “hence, this appeal with the leave of this court.” of the word “leave” is confusing as the blackwell law dictionary mentions “leave of the court” as the permissive power of the court, while the given sentence structure is at best incomplete even from the perspective of legal discourse contained in the standard legal dictionary. from non-legal perspective it is an ambiguous sentence where “a2: amphiboly” fallacy is present because the sentence incompleteness implies multiple interpretations of “leave”. the second instance of a long and complicated sentence in para 4 of the order includes all premises and conclusion. the conclusion that the appeal is invalid is stated indirectly through implication. the contained premises are not logically relevant to the conclusion, therefore “r7: missing the point (irrelevant conclusion” fallacy is created. text 2: para 5 and 6 detected categories of fallacies (1) fallacies of defective induction, (2) fallacies of ambiguity table 3: stylistics features that contribute to the fallacies stylistic feature example description lexical choice and syntax expert, pioneer chairman, appraisal, examining, report, conclusion the validation of field of expertise was established through the terms, establishing authority of the persons and their opinion. lexical choice weed parthenium, parthenium weed the report uses weed with parthenium emphasizes that parthenium is a weed. in the first row of the table we find the example of normal procedure employed by courts to reach a conclusion about a specialized areas through the support of experts. however, basing conclusion in para 5 on the opinion of an expert without logically sound inferences makes the argument and the derived conclusion faulty and in such case we find the fallacy of “d2: the appeal to inappropriate authority”. stylistically, the lexical choice showed the presence of authority and description of a process through which the conclusion was derived. the next example in the second row of table. 3 shows the relevance of the title of dissertation to the field of weed science, however, it also implies erroneously that by studying a particular weed a person becomes expert of all weeds. this leads to the fallacy of “a4: composition” where the language is used in such a way that the features of specific components are generalized to the whole. 5. conclusion review of economics and development studies vol. 5, no2, june 2019 402 the legal discourse in pakistan is a legacy of the british colonial system. english as the dominant language is used pervasively in different genres of the legal language. unlike the popular belief, the legal language suffers from a variety of logical fallacies. stylistic analysis of such fallacies helps in understanding the avoidance of such fallacies. the overview of the verdicts of supreme court of pakistan reveals that the fallacies of defective induction, ambiguity and relevance exist in these verdict. lexical choices, syntactic structure, punctuation and graphological features of style make such fallacies stand out in the analyzed texts. the researchers recommend that 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(2001). a dictionary of stylistics. harlow: longman. review of economics and development studies vol. 5, no 2, june 2019 403 wetherill, p. m. (1974). the literary text: an examination of critical methods. berkeley: university of california press. widdowson, h. g. (1975). stylistics and the teaching of literature. harlow longman. review of economics and development studies vol. 5, no2, june 2019 404 review of economics and development studies vol. 5, no 4, 2019 675 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads discursive practices and narrative building in post 9/11 among young american adults 1 syeda aysha, 2 raja nasim akhtar 1 phd scholar, foundation university, islamabad pakistan: syedaysha68@gmail.com 2 dean, department of english, foundation university, islamabad pakistan: nasimakhtarraja@hotmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 the changing undercurrents of the political situation of the world, in the aftermath of 9/11, seem to have affected the notion of the 'other' in the social, cultural and most expressively the discourse of literature. the power structures embedded in these discourses have influenced the social practices in the portrayal of the 'other'. the construction of the 'other' is epitomized through writings illustrating biases that reveal themselves in ostracizing communities and ideologies. the socio-political implications of the identity in post 9/11 require further investigation. the current study investigates the portrayal of the 'other' delineated in american young adults. the theoretical perspectives of siegfried jager and teun van dijk (2001) in the domain of critical discourse analysis (cda) were employed to analyze the data. the results of the investigation substantiated that the 'other' was redefined as an entity loaded with explicit negative implications and depicted by adding a prefix to the „other‟ creating a „muslim other‟. the paper has implications for sociopolitical, education and cultural setting and practices in society. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords power structures, critical discourse analysis, discursive practices, identity, post 9/11 jel classification: z1, y8, i2 corresponding author‟s email address: syedaysha68@gmail.com recommended citation: aysha, s. and akhtar, r. n., (2019). discursive practices and narrative building in post 9/11 among young american adults. review of economics and development studies, 5 (4), 675-684 doi: 10.26710/reads.v5i4.661 1. introduction the present study aims at investigating the utilization of discursive practices by texts to create and legitimize identities. the basic assumption is that by the employment of the discursive practices, texts written for young adults after 9/11 follow the principles of „othering‟ to represent a „self‟ and an „other‟ by establishing positive and negative identity features. post 9/11 literature provides a site to ascertain the changes if any regarding representation of „self‟ and „other‟. jensen s. q. (2011) opines that identities are social constructs and social situations provide a locus for the construction of identities. a theoretical assumption of the process of formation of identity helps us understand the phenomenon of „othering‟. the concept of othering draws its principles from various theoretical approaches. the most significant being the understanding of self, put forward by hegel which establishes a dialectic master-slave relationship between self and other. said (1978) explains that othering is exclusion of a person or a group not fitting in the norm of the group which is a version of the self. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 676 regarding the expression of identity, vanheule and verhaeghe (2009) quote jacques lacan a prominent psychoanalyst, opined that identity is constituted by language which marks a certain identity domain. versluys (2007) argues that language constructs new identities making it imperative to identify the resources which a language utilizes to construct an identity, the source, creating that identity and the purpose is questions worth considering. dam, holmgreen and strunk (2006) explain that the uneven power balance between the source creating the identity and the audience is essential in achieving the desired change in the audience perceptions and in creating an identity. hence the idea of wodak and myer (2007) holds true that language does not possess inherent authority, it is the user who gives it power. thus, it becomes apparent that a change in social conditions can recreate identities. mansoor (2012) posits that 9/11 changed not only the global socio-political scenario but also the concept of identity by creating “terrorists” and “us”. lampert (2007) opines that events happening around us affect our perceptions therefore, it is important to investigate the texts which narrate events like 9/11 to understand their assumptions of „self‟ and „other‟. hence, exploring the young adult american novel written as the outcome of 9/11 offers a site to examine the emerging identities. 2. research methodology this study investigates the phenomenon of identity construction by a text and its socio-economic effects. critical discourse analysis provides many approaches to explore the expression of unequal power relations in social discourses and the resultant prejudices (meyer and wodak, 2001). griffin (2007) opines that cda endeavors to interpret the discourses shaped by powerful socio-political institutions like administrations and regimes to paint a specific reality. griffin (2005) emphasizes how cda through the utilization of tools establishes a correlation between language and social practices. the researcher is able to determine how a particular reality is constructed by utilizing language. wodak and meyer (2001) describe that for textual analysis, cda depends on linguistic categories. the emerging patterns of these categories help in comprehending the meaning being conveyed. the current study investigates a text and attempts to decipher the meaning being created. the exploration required an initial phase of sorting the content and then a linguistic examination was carried out. identification of „the main categories‟ provided the data. these categories were informed by the approach of seigfried jagar and teun van dijk (2001). the main categories included: 2.1 rhetorical means hodges (2001) elaborates how metaphors and similes act as markers to describe an event or a phenomenon in a manner to empower a narrative to influence the response of an audience. lakoff and johnson (1980) opine that these linguistic devices allow the user to construct an identity. chilton and schaffner (2002) highlight that these linguistic tools help convey a systemized ideology by creating specific identities. 2.2 ideological statements these statements express multiple meanings but the text suggests only one meaning as the sole meaning. 2.3 lexicalization texts use lexical descriptors to highlight, blur, foreground or to ignore events, phenomena and attributes. (hodges, 2011). van dijk (1995) elaborates that connotations of lexicons can construct positive and negative identities. 2.4 identity features review of economics and development studies vol. 5, no 4, 2019 677 discursive strategies in sample text rhetorical means ideological statements identity features lexicalization interactio n of discursive identity domains concretization topicalization sympathy identity positive ‘self’ muslim ‘other’ strategies mansoor (2012) explains that by assigning qualities to the entity being described, texts accomplish the creation of explicit identities. 2.5 strategies of analysis the identification and recording of the above mentioned main categories led to the creation of the categories given by teun van dijk (2001) for studying the nature of identity being created. 2.6 concretization van dijk (2001) explains that texts provide details of events, feelings, or phenomena so that the reader can actually see, hear or feel the entity being described. 2.7 topicalization the frequent but mostly indirect reference to an act or happening brings it in the notice of the reader and avoids its blurring. 2.8 sympathy van dijk (2001) points out that texts create sympathy against the „other‟ by mentioning the harmful act of the „other‟ implying that „us‟ is a victim of the „other‟. 2.9 identity domains van dijk (2001) is of the view that human, cultural and institutional traits of „us‟ are shown to be positive and hence appreciated while the „other‟ is shown to possess all negative traits in the said domains. the current study will explore concretization, topicalization and sympathy as the domains of identity creation. figure1: construction of „self‟ and „other‟ by interaction of discursive strategies and creation of identity 3. collection of data the categories of discursive strategies were identified from the text. the frequency of these strategies is given in table 1. table1: frequency of main categories s. no. main category frequency 1 rhetorical means 19 review of economics and development studies vol. 5, no 4, 2019 678 4. results and discussion the interaction of the main categories constructed the identity domains which defined the nature of identities. the analysis leads to the creation of identity domains. the frequency of these categories is shown in the table 2 and 3. table 2: discursive strategies, identity domains and their frequency for positive „self‟ s. no. discursive strategy identity domains occurrences 1. ideological statements competence positive mindset free society „us‟ and „them‟ sense of responsibility all encompassing religion total 2 4 3 2 3 2 16 2. lexicalization family values high ethical standards empathetic society total 7 5 7 19 3. rhetorical means high moral values 4 table 3: discursive strategies, identity domains and their frequency for muslim „other‟ s. no. discursive strategy representational strategy number of occurrences 1. ideological statement topicalization concretization sympathy total 5 7 8 20 2. lexicalization topicalization concretization sympathy total 6 5 9 20 3. rhetorical means topicalization concretization sympathy total 5 7 3 15 2 ideological statements 36 3 identity features 18 4 lexicalization 39 review of economics and development studies vol. 5, no 4, 2019 679 4.1 positive self representation through identity building 4.1.1 ideological statement for competent authorities after 9/11 attacks, tess saw a clip on the tv prepared by the defense department describing how mountains could be blown up by bombs. “on the screen……….and watched for a while”. (p.39). the american government had established that the attacks were engineered by muslims who were hiding in afghanistan in caves. the government was showcasing to the public that it had weapons which could destroy the terrorists even if they hid in the deepest of caves. the text thus concretizes a very capable government of america having the ability to admonish the terrorists. 4.1.2 ideological statement for positive mindset the american people have been depicted as spirited and lighthearted by nature. “at that time of the year every family in the united states is at disney world.” (p.51). all families have been publicized to be affectionate towards children. the word “every” generalizes this attribute sending a message that children are considered very important in the american society. rejoicing life paints a society which is at peace with its environment. 4.1.2 ideological statement for a free society the american society has been depicted to be a free and open culture where no restrictions not even religious ones are imposed. people having a variety of beliefs live in harmony and attend various churches displaying tolerance for diversity in thinking. before marrying david, tess‟s mother changed from old methodist church to episcopal church, which david followed. religious beliefs do not dictate the quality of relationship among individuals. it is only through consideration for others that such a harmonious state has been achieved. a clear signal has been given that the americans are very accommodating. there is direct critique on the derelictions of religious figures. tess comments, “priests getting married…..better than altar boys…” (p.61). also she adds, “…old people who have nothing better to do with their sundays” (p.59). tess conveys that attending the church had little importance. nevertheless, tess mentions “i used to go to the church a lot”. (p.60). religious exploitation has been condemned by tess when she mentions, “…put your whole paycheck in the platter, bring clothes right off your kids back…”. “…how you can go to the mass from one door and go out of the other…”. (p.62). such unequivocal disapproval of faith is probable when contradictory views are appreciated and people have enlightened minds. this portrays a truly free american social set up. 4.1.3 ideological statement for sense of responsibility tess explains how her father valued relationship with his sisters and their children. concretizing this concept, details are given when tess mentions, “dad spends a lot of time with his family…….he goes to every basketball game, wrestling or school play that one of them is in” (p.83). this shows the high degree of involvement of tess‟s dad in the lives of his nieces and nephews and how he reinforced their hard work. when tess came to live with him, he changed his habit of getting up late because he had to take tess to school. tess‟s dad is portrayed to be mindful of her education. “i want to be able to give you stuff” (p.98). so it becomes evident that he was aware of his responsibilities as a father. 4.1.4 ideological statement for all encompassing religion although tess had earlier criticized christianity she finds consolation in attending the mass. “i have to admit……..like a protective shield”.(p.65). she feels safe because of the company of her grandmother and father and the atmosphere in the church. hence, the reader concludes that the social and religious systems entrenched in the american society are founded on good moral grounds. the church-a symbol of christian religion instilling a sense of safety in tess highlights positive doctrine on which christianity is based. tess describes the church as, “safe and beautiful” (p.65) which promotes genuineness of the christian religion. tess further adds, “the priest gave ………he was talking right to me.” (p.65). the review of economics and development studies vol. 5, no 4, 2019 680 christian faith is depicted to be able to provide solutions to day to day life. this makes christianity a genuine religion which provides spiritual supervision to its disciples. 4.1.5 lexicalization for family values tess decided to live with her real father and leave her family. however, her concern was about her mother. the text creates an appreciable self-image of tess by highlighting positive family tenets and concern for each other when she utters, “i was thinking about mom and how she was alone now. i felt by leaving, i was leaving her alone”. (p.55). a teenager experiencing extreme trauma is worried about her mother‟s happiness does not leave any ambiguity in the thoughts of the reader but to acknowledge the existence of strong bonding in families. tess does not want her mother to suffer loneliness and is visibly concerned about her mother‟s emotional well-being. a durable family connection has been portrayed again when tess describes her affection for her father and states, “ …in whatever rusted –out chariot he was driving and rescue me…”. (p.54). she is not concerned about the quality of vehicle her father possessed but just wanted to be with him. 4.1.6 lexicalization for high ethical standards the text utilizes lexicalization to show that tess‟s step father, david, possesses a progressive attitude. tess describes “david‟s all about efficiency both time and money.” (p.27). likeable traits have been underlined portraying david to be a sensible and aware person who knows that to achieve success one must manage time and money. by explaining that personal growth was taken very seriously by david the text establishes him to be a person who strives for excellence and does not become complacent. this is highlighted by tess‟s utterance that he did not consider “relative performance” (p.28) as sufficient. 4.1.7 lexicalization for an empathetic society the text utilizes specific words to depict an american society in which people possessed empathy. sharing the sorrows with the grieved families helped them cope with the suffering. tess states, “just like all people in school who write poetry on 9/11…..feeling is the same as real loss” (p.69). the empathetic feature of the society is being stressed upon by using the word “real”. the people who did not lose a loved in the wake of 9/11 provided support to those who were suffering the pain of losing a family member or friend. 4.1.8 ideological statement for positive identity building the strategy of using multilayered statements enables the text to construct diverse identities of the white americans and the immigrants. the text depicts that white individuals had better manners and civility when matched with that of the immigrant population. describing the refined and cultured white americans in her neighborhood tess explains “in our neighborhood you can sit outside…….even in summer when everyone‟s windows are open and not hear much of anything except a cricket or a car” (p.76). while describing immigrants living in her dad‟s neighborhood she says, “in my dads neighborhood you never see any stars plus with all the crime in the area they have put up a lot of streetlights in the parking of the malls.” (p.77). her father‟s neighborhood had a majority of immigrants and the explicit meaning of “you never see a star” points towards the haphazard construction of houses in which aesthetic aspects had been neglected and also this statement points out that the residents were criminals. 4.1.9 lexicalization for social consciousness the text explains how people hurried to donate blood for those who were injured as a result of 9/11 attack. “there are lines at the blood bank in new york five hours long, people desperate to open their veins” (p.176). the words “lines” and “five hour long” make the reader envision enthusiastic and courageous residents of new york donating their blood to save the injured. review of economics and development studies vol. 5, no 4, 2019 681 4.1.10 rhetorical means for high morality the text employs rhetorical means to send the message that modesty is a strong pillar of the american society. parents, like david, stressed on its importance and tess was made to follow a decent dress code by david emphasizing that “anything that shows cleavage or belly button is illegal” (p.28). the selection of the word “illegal” depicts the importance being given to this aspect by david. 4.2 muslim ‘other’ 4.2.1 ideological statement for topicalization narrating her story, tess, mentions, “…what looked like any other september morning.” (p.5). employing an apparent comparison the text points out a contrast conveying that the morning of 9th of september was not a usual morning of september and prepares the reader to discover the irregularity that defined „that‟ morning of september from a usual morning of september. hence, through an ideological statement the reader is made to discover the happening which made that september morning different from other september mornings. the text indicates “until those planes flew into the tallest buildings in the world.” incorporating events of 9/11 and substantiating that a specific entity had smashed their planes into the building and the devastation of the day of 9/11 was the result of this action of that entity. thus the reader creates the certainty of 9/11 and also of the „other.‟ the text has accomplished a successful construction of a muslim „other‟. 4.2.2 ideological statement for concretization ideological statements help to construct the muslim „other‟ both at the collective and formal level as well as at an individual level also. “on the news they say that history is going to be separated by what happened before that day and what will happen after that day.” (p.5). the use of “the news” describes the formal level and the reference of “history” connects 9/11 to the shared perspective of the american populace. the text expounds how 9/11 has not only changed the present but the future also. 9/11 has become the locus from which the „after‟ meaning the future will develop its uniqueness. hence the reader can easily decipher that the american people and american government will now imagine the „before „and „after‟ in the light of 9/11. it also expresses that the newly emergent „after‟ is permanent and its characteristics will be very unlike the previous „before‟ entity. so the treatment of the „other/s‟ will undergo change by the american citizens and by the american government. at the individual level the narrator of the story experiences an analogous state. the text explains in detail zoe‟s death “…you dying that day….” (p.5). the reader is told the ghastly sequence of events which apart from establishing the painful truth of the demise of zoe also concretizes the authenticity of the assault on the world trade centre by a muslim „other‟. 4.2.3 ideological statement for sympathy by using metaphorical device a reference is made towards the deed of the muslim „other‟ describing it as “the beginning of the end of the world” (p.14). this permits the visualization of the gruesomeness of 9/11. the magnitude of devastation triggered by the muslim „other‟ was so large that it seemed as if the whole world was about to be annihilated. muslim „other‟ brought death to the people as they jumped from the twin towers to avoid being burnt by the fire. the text remarks, “people who fell out from the sky” (p.14) shows the merciless nature of muslim „other‟. this was such a horrifying way of killing people that even people who did not lose a family member had to ponder sadly on the lost „no one‟ and would imagine in despair the desperateness inflicted upon those people who had no option but to embrace a wretched death. 4.2.4 lexicalization for topicalization by using specific lexical choices the text brings to the surface the happenings of 9/11. tess recollects the happenings of 9/11 and the death of her sister, zoe in an implicit manner when she says, “everything led to that day.” (p.32). although it is an indirect way of referring to „someday‟, the context provides an opportunity to foreground the atrocious day of 9/11 again in the mind of the reader .thus “that day” is review of economics and development studies vol. 5, no 4, 2019 682 converted into a specific day -the day that witnessed the killing of many innocent human beings and most tragically zoe, an infant who had not caused any harm to anyone. 4.2.4 lexicalization for concretization the devastation due to the large number of deaths and damage to property as a result of the burning of twin towers has been described by means of words like “the tower folded into the sidewalk” (p.170). the lexical choice of „folded” enables the reader to actually see the falling towers.this lexical choice helps to relate to the next step of such huge destruction -when huge buildings collapse, damage to life and assets can be envisioned to be enormous. there is no direct mention that the cause of the destruction of the twin towers was the act of muslim terrorists it is inevitable for the reader to condemn the being that had brought an appalling end to life and property. the reader easily visualizes the complete destruction of towers accompanied by many deaths. 4.2.5 lexicalization for sympathy the text highlights that permanent loss has resulted due to the actions of muslim „other‟ as tess utters, “you‟ll still be dead and i‟ll still be sad” (p.21). tess describes that long hours of counseling by the psychiatrist are futile since the sorrow she and her family are enduring has no end. the text has used the adverb „still‟ making the situation at that instant eternal. 4.2.6 rhetorical means for topicalization metaphorical devices help in creating an undesirable image of the muslim „other‟. the gruesome act of the muslim „other‟ had affected the individual and the collective sphere of life. tess states, “something as small as you cannot make a sound in a world where buildings can come down” (p.170). the utterance conveys that 9/11 was a tormenting act of the muslim „other‟ in which innocent lives like that of zoe who was not capable of hurting anyone, were lost. the attacks of the muslim „other‟ were no doubt inhuman and brutal since they killed not just a few people but made a huge number of individuals lose their lives as when “buildings come down” those who are crushed by the rubble meet a painful death not to mention the agonizing death of those who were in the falling buildings. it is not difficult for the reader to conclude that the seemingly unimportant demise of zoe had shaken the lives of four people so the number of people who had to bear the unbearable loss of loved ones would be so large. the text is thus able to represent both the physical and the psychological aspect of human life which were traumatized by the ruthlessness of the muslim „other‟. 4.2.7 rhetorical means for concretization by employing metaphorical devices the text highlights that the muslim „other‟ had brought pain and agony of the extent that it was not possible to measure the amount of grief and anguish. tess points out, “impossibly our mother‟s face is ugly” (p.172) when her mother and tess had gone to the hospital to enquire after zoe who was unconscious after being hit by the car. pain and distress had engulfed every place and everyone and had substituted loveliness and positivism in repulsiveness & pessimism. 4.2.8 rhetorical means for sympathy to describe the agony tess‟s family was undergoing due to the act of the muslim „other‟ metaphorical devices have been used. when tess decides to leave her family and live with her real father, her mother states, “i can‟t lose both of you. i can‟t” (p.131). the muslim „other‟ had created a chain of events causing tess‟s mother to undergo the unbearable loss of zoe‟s death and tess‟s absence. 5. socio-economic implications the tragic incident of 9/11 had its inevitable socio-economic effect. america faced debt crisis after 9/11 and had to increase the defense budget (amadeo, 2019). report for congress (2002) also states that american gdp growth during the first half of 2001, went down and contracted further during the 3rd quarter” (makinen, 2002). later, the bush administration hurled a war in afghanistan to find osama bin review of economics and development studies vol. 5, no 4, 2019 683 laden, and a $29.3 billion budget was approved by the congress as funding for the war. (amadeo, 2019). troops were sent to iraq to find weapons of mass destruction and the pretext that president sadam was helping al-qaida and another $36.7 billion were sanctioned. (amadeo, 2019). the total cost of the waron-terror is „$2.126 trillion‟ (amadeo, 2019) which is a big financial burden on america‟s economy. 9/11 led to socio-economic consequences not only in america but worldwide, due to war-on-terror. (makinen, 2002) . 6. conclusion this study explored the application of discursive practices and socio-economic implications highlighted in american fiction produced for young adults after 9/11. the application of teun a. van dijk‟s approach of analyzing the role of the discursive practices was highlighted in the sample text constructing a specific identity for americans and muslims. the results signified that the sample texts revealed muslims to possess negative streaks of human nature. they have been described as an „other‟ who is violent and hates america .such images are crafted by employing discursive strategies which have created muslim „other‟ as the most dangerous enemy of america. on the other hand, everything and anything american retains all appreciable aspects. the conventions of muslims „other‟ and positive america are the recurrent themes which the text brings to the surface. the results are thought provoking and call for more exploration in this domain to reveal and ascertain the effects of such identity creation in fiction for young adults written in the background of 9/11 to develop a better realization of the world around us. references amadeo, k. 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(2007). methods of critical discourse analysis. los angeles: sage review of economics and development studies vol. 5, no 4, 2019 703 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads indian policy to isolate pakistan at international forum and the way forward 1 muhammad nawaz bhatti, 2 muhammad waris, 3 sher muhammad 1 associate professor, department of politics & ir, university of sargodha, pakistan. shakeebnawaz@gmail.com 2 assistant professor, department of history, g. c. university, faisalabad, pakistan. drwarisawan35@gmail.com 3 assistant professor, government college bhalwal-sargodha, pakistan. phdscholer2010@gmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 bilateral relations of india and pakistan have been under the shadow of misunderstanding, tensions and wars since the inception of both countries in 1947. india is ambitious to play a hegemonic role in south asia, but pakistan is considered a big challenge by the indian policy makers. to counter pakistan, india has embarked upon a bi-dimensional strategy towards pakistan. first, it has intensified its campaign to diplomatically isolate pakistan through blame game of terrorism. secondly, it has inclined to use hard force when faced with terrorism and cross old lines. to achieve these targets, india has always used a multifaceted approach to wear away pakistan's position in the international community. this paper mainly concentrates on the narendra modi’s foreign policy to isolate pakistan among the international community. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords pakistan, india, foreign policy, hegemony, isolation jel classification: n55, o24 corresponding author’s email address: shakeebnawaz@gmail.com recommended citation: bhatti. m.n., waris, m. and muhammad. s. (2019). indian policy to isolate pakistan at international forum and the way forward. review of economics and development studies, 5 (4), 703-712 doi: 10.26710/reads.v5i4.881 1. introduction in the modern era of renunciation of war, peaceful settlement of disputes and economic development each country has an explicit foreign policy predominantly towards its neighboring countries but indian policy makers have plainly been acting upon an ambivalent approach which demonstrates their confused policy towards pakistan. according to indian politicians pakistan has become most difficult foreign policy challenge. on the one hand, there is a fundamental contradiction between india’s status quo and nuclear capability of pakistan, its approach towards kashmir and pakistan’s determination to alter the indian status quo. on the other hand, india’s incapability to overcome the challenge efficiently reflects the constraint imposed by major policy choices. almost seven decades of antagonism between india and pakistan have not fashioned a clear winner, except for the international armaments manufacturing industry (sengupta, 2016). having traditional rivalry, both countries have a clear unfriendly set of foreign policy for each other since their independence. both have unfriendly relations due to difference in respective ideologies. india's quest for gaining hegemony in the region is driven by ultra-nationalism ideology where pakistan is considered an ultimate challenge to indian ambitions. http://www.publishing.globalcsrc.org/reads mailto:shakeebnawaz@gmail.com mailto:drwarisawan35@gmail.com mailto:phdscholer2010@gmail.com mailto:shakeebnawaz@gmail.com review of economics and development studies vol. 5, no 4, 2019 704 in order to get the status of regional hegemony, india needs to deal with pakistan. the us and its allies are supporting india for their chase to counter the china as an emerging regional power. the prospective of the china-pakistan economic corridor (cpec) has append a new aspect to indian foreign policy to isolate pakistan as central asia and the west is not under direct access of india; therefore, india has started a two-dimensional strategy towards pakistan. first, it has intensified its campaign to diplomatically isolate pakistan through blame game of terrorism. secondly, it has inclined to use hard force when faced with terrorism and cross old lines. to achieve these targets india has always used a multifaceted approach to wear away pakistan's position in the international community (the dawn, september 2, 2016). the us centcom commander general joseph has also commented that indian policy of isolating pakistan internationally is dangerous. any conflict / war between these two countries will have catastrophic consequences for the entire region (the dawn, march 10, 2017). 2. literature review the present study deals with the indian foreign policy to isolate pakistan at international forums. the main objective of this research is to investigate, analyze and understand the indian foreign policy to malign pakistan in international community as terrorist state so that it can be alienated and isolated at global forums. the study, mainsprings of indian and pakistani foreign policies by burke (1974) provides a detailed perspective of indian and pakistan’s foreign policy till 1960s. the author clearly describes early phase of the relationships between the both states and origin of their foreign policies, departure of british, division of india and its consequences on the bilateral relations, nehru factor in indian foreign policy and goals of the foreign policies of both countries. although this study provides a detailed picture of the nature of relationship during the early decades of independence yet its lacks of current data regarding the foreign policies of the both countries. another important study, indian national security dilemma: the pakistan’s factor and india’s policy response (budania, 2001) after providing cenceptual framework of indian national security, it gives a detailed account of origin, deternants and objectives of the indian foreign policy with special reference to pakistan. it also highlights the problem of jammu and kashmir and provides details about the indian concerns about the dispute, pakistan’s proxy war in kashmir, india’s kashmir policy and kargil war. the author comprehensivly discusses arms race, neuclear issue and many other non-military issues and disputes between the two countries and role of united states, russia (soviet union) and china in resolving those disputes. however, the book provides a detailed picture of the subject but lacks unemotional treatment. it also ignores the pakistan’s view point on various military and non-military disputes between pakistan and india. the oxford handbook of indian foreign policy (malone, mohan, & raghavan, 2015) provides a comprensive knowledge about the indian foreign policy. as india has become more involved in the global economy and faces china's strategic competition, it has sought to strengthen its relations with the countries of east asia, southeast asia and the middle east and to improve its links with the major powers. but as this collection of concise and authoritative essays shows, new delhi has not been able to establish close ties with its immediate neighbors who would provide a springboard to exert significant additional influence. nor is it effectively linked to international institutions in the areas of trade, finance, arms control or climate change. the decision-making apparatus of the country is dysfunctional. the ministry of foreign affairs has not sufficient staff and works without significant supervision of political parties, parliament, business community, media or academia. the army lacks the strategic direction of the civil authorities and its service branches barely coordinate. the nuclear weapons program is based on autopilot and the national arms agency has not been able to produce high-end indigenous weapons. covering all of these topics, the book opens up many fascinating areas for future research. although, the book highlights all aspects of indian foreign policy yet it lacks information regarding its relations with neighboring countries especially, pakistan. another study, indian foreign policy in a unipolar world (pant, 2012) projects various features of the review of economics and development studies vol. 5, no 4, 2019 705 indian foreign policy in contemporary security environment. india's foreign policy, outside the structural limits of the cold war strategic framework, has become broader in defining its priorities in recent years. with the increase of its economic and military capabilities and strategic interests, india has forged a diplomacy that is much more aggressive in pursuing those interests. locating the path of foreign policy of india in the 21st century, this book looks into the factors that fashioned the indian reaction to this emerging global security atmosphere. including a new epilogue, this updated volume analyzes the main effects that have shaped contemporary indian foreign policy, in the context of its commitments to strategically important regions around the world and its relations with the main world powers. although, this book is most important for the students of global politics yet it ignores the pakistan’s factor in indian foreign policy. changes in india's foreign policy towards pakistan by dr. nitin prasad (2017) is a comprehensive document which provides a detailed picture of indian foreign policy. for long times, the central point of the foreign policy of india has been pakistan. the author asserts that india was the country where the foreign ministry had to split its head most of the time on pakistan. the four wars and the conflicts like rann de kutch and siachen, the militancy in kashmir which has caused tens of thousands of lives and terrorist attacks across india cannot be ignored. pakistan and india divided on the basis of the two-nation theory and the muslims denied living in india as minority. the dispute over kashmir emphasizes this division and still arises today. india has fought four wars with pakistan and since 1980, when the soviet union involved in afghanistan, the pakistan with united states started anti-soviet terrorism and pakistan had the bright idea of using it against india, further worsening relations between the two nations. narendra modi's foreign policy refers to the political initiatives taken by the current government towards other states after taking the position of prime minister of india on may 26, 2014. although the book is mostly based on empirical research yet it is not simply a research enterprise. it is also an analytical study aimed at creating and influencing opinion on the essential elements of the decision-making process which would minimize the possibilities of non-rationality in indian foreign policy. the research article titled “pakistan’s foreign policy in the changing international scenario” (khan, 2006) describes history, objectives, principles, factors and deterninants of pakistan’s foreign policy. the author highlights indian factor as major determinant of pakistan’s foreign policy. the paper covers almost all aspects of pakistan’s foreign policy towards india but it lacks recent developments in bilateral relations of india and pakistan. another article titled “modi’s foreign policy fundamentals: a trajectory unchanged” by basrur (2017) evaluates changes in the principles of indian foreign policy during modi regime. the author describes that the advent of narendra modi as prime minister has shaped significant argument about the direction that indian foreign policy could take under his leadership. while there are several ways in which modi's foreign policy can be assessed against the major powers, three general questions are of fundamental importance. firstly, having reputation as a loyal hindu nationalist, to what extent do his ideological inclinations influence modi's foreign policy, in particular as regards the use of national power? secondly, how is indian policy towards the great powers conceived? are there signs of a classic approach to balance of power that attracts the united states and japan against china? finally, how is indian foreign policy configured to achieve a higher status in the state system? above all, is modi considerably different from its ancestors? there is evidence that there is no important change in the use of power derived from "hindu" content in modi's foreign policy; that his approach to the great powers reflects continuity (with some variations) focusing on strategic alliances; and that state research is in line with the strategy followed by previous prime ministers. in summary, there is no substantial change in the path of indian foreign policy and the rise in the future direction of india is likely to remain foreseeable and moderate. 3. objectives of india’s foreign policy there are five main basic constrains on which indian foreign policy is being driven. review of economics and development studies vol. 5, no 4, 2019 706 3.1 conventional security. the most important objective of the indian foreign policy is to ensure conventional security of india as a state. to ensure its sovereignty and security, india has strengthened her armed forces especially the military that ranked 7th largest in the world (the taipei times, may 29, 2017. india is committed to renew its military strength on three principal reasons:  to oppose china's expansion and quest for hegemony in the region.  to maintain military pressure on pakistan because pakistanis perceived as main conventional threat to india's security. both states are at conventional rivalry since their independence.  to ensure the safe and continuous transport of natural resources and other trading items through the bay of bengal, in particular the area around the strait of malacca which is still very sensitive to piracy and through which approximately half of the world oil flow (the taipei times, may 29, 2017). 3.2 economic growth the indian government is focusing on increasing gdp growth rate by inviting investors from the developed world, using international resources and markets, as well as internal momentum. most of their energy and attention is focused on mutual economic plans (thomas, 2007). it always supports the objectives and functioning of the regional and multilateral agreements like asean, fta, safta, saarc, bimstec, tapi, and bric. however, due to its unsuccessful economic relation with south east asian neighbors, india is now trying to establish economic relations with china on mutually beneficial grounds (dormandy, 2007). 3.3 energy security to achieve the desire economic growth, india has to ensure its energy resources. it has largest lignite coal resources but its utility is not economically and environmentally feasible. to secure energy resources india is focusing on access to oil rich middle east region particularly on iran (madan t. , 2006). it is also expanding its search for energy resources into africa and latin america. 3.4 nuclear potential pakistan and china being nuclear powers are major concern for india in the region. in this situation, india concentrates on to its nuclear potential. with the help of discriminative policies of the west, india has been able to build strong nuclear capabilities and weapons to counter the potential threat from both neighborhood nuclear powers. 3.5 prestige safety new delhi's final priority is to search its "rightful" place on the globe (dormandy, 2007).india, with the help of strong activities on all international forums and the backup support from the us and the west, has apt to achieve hegemony in the region. india, in order to gain regional leadership, in many circumstances, faces presence of pakistan as a potential impediment. india wants to counter this hindrance of pakistan to become regional leader that would ultimately pave its rightful position globally. 4. isolation of pakistan -major part of india's foreign policy based on above mentioned objectives of indian foreign policy, the main core of india is to desire for hegemony and the leadership of the region. for this purpose, indian government remains focused on pakistan as main obstruction for their interest. indian leadership pay much attention on anti pakistan activities directly or indirectly to destabilize it. most important part of india's foreign policy is to isolate pakistan among international community. to achieve the desire goal india has adopted a strategy of wide canvas and multi dimensional. it is countering pakistan on all forums to gain best favorable results. important elements of the indian's strategy are as review of economics and development studies vol. 5, no 4, 2019 707 following: 4.1 defame pakistan's nuclear capabilities pakistan nuclear program has been a target of extreme criticism since the very beginning. in the aftermath of 9/11, an immense security hysteria and paranoia has been generated to undermine pakistan's nuclear capabilities. consequently, indians on the behest of west has launched a continuous smear propaganda campaign to keep the theme alive that pakistan's nuclear assets are unsafe and are likely to fall in the hands of radicals/ terrorists or unauthorized elements. at this stage, india seems like a western paid element and her cover and overt activities in collusion with non-state actors pose a serious security threat to pakistan's nuclear program. these non-state actors, along with pseudo intellectual, who are eager to sell the interest of motherland for personal interest, can create an embarrassing situation for pakistan while playing in the hands of their foreign sponsors. indian intelligence agency research and analysis wing (raw) along with hostile intelligence agencies is looking for the opportune moments to make the possibility of targeting pakistan's nuclear program by non-state actors a reality. 4.2 putting military pressure on pakistan india is planning to pressurize pakistan by developing modern weaponry and expanded offensive deployment by conducting military exercise to show the power of attack in case of war. india's frequent violation of the line of control (loc) in kashmir and a false claim of surgical strike inside pakistan territory is a case in point. 4.3 cooperation of afghanistan in anti-pakistan activities the us think tank, in order to maintain the pressure on pakistan, floated a term with the help of propaganda theory that pakistan has influenced over afghan taliban, nevertheless, pakistan's security establishments are confronting with the jihadist groups. pakistan has done a lot for afghanistan, yet india is welcomed with open arm and heart in afghanistan. it is a third important element of indian strategy. india has succeeded in aligning with both iranian and afghans moreover it has built much closer economic partnership with oil rich arabs countries especially united arab emirates (uae). 4.4 involvement in internal affairs of pakistan the fourth significant element of india’s strategy is to involve in pakistan’s internal affairs by supporting some disgruntled persons. the indian spy kalbhoshan yadav who is serving indian naval officer and raw agent has confirmed that india is involved in terrorist activities in baluchistan and karachi. by doing so, india is trigging an inside security threat in pakistan and propagating pakistan as terrorist country. the international community knows very well the difference between our fight against the terrorist who challenges our state's writ and those who operates against our adversaries. this is the duplicity that alienates our allies against terrorism and provides ample ground to india to exploit it to his advantage. 4.5 projection of pakistan as a terrorist state india is implicating pakistan as the epicenter of terrorism. he is directly connecting pakistan to global terrorism with the help of strong propaganda and diplomatic maneuvers. during the joint session of the us congress indian pm was quite alarming for pakistan as it unveils that both india and the us would collaborate on un terrorist designation. this means india will have complete us backing in putting any militant group on global terrorist list. this is bad news for pakistan with its current diplomatic efforts and this is what india might possibly be hoping to gain through this terrorist oriented pakistan specific diplomacy as next step after isolating it globally. review of economics and development studies vol. 5, no 4, 2019 708 5. has pakistan been isolated? pakistan has been badly affected by the fallout of war on terror. the cumulative effects of various forms of terrorism and its manifestations pushed pakistan more deeply into lawlessness and economic degradation. negative consequences of terrorism on pakistani society varied from socio-cultural effects that have changed in life pattern, environment of fear and intolerance to economic effects (slow economic activities, flow of capital abroad and significantly poor effects on international sports. legislation and implementation of national action plan by the government of pakistan is considered a major response from the state to crack down on terrorism. widespread support from pakistani political, defense and civil sectors and results achieved through launching of “operation zarb-e-azab” and “karachi operation” need to be kept in mind. with the commencement of operation “raad-ul-fasad” by the law enforcement agencies (leas), indian sponsored terrorist network in pakistan has been broken. the leas have successfully neutralized battle-hardened terrorists, their facilitators and sympathizers. not only is terrorism rooted out from federally administered tribal area (fata), urban terrorism in karachi and bloch sub-nationalism has also been decisively defeated. pakistan is courageously being made a lot of efforts at international and regional level to continue fight against terrorism through international cooperation. it would not be an exaggeration that pakistan, over a period of time, has become a frontline state to fight against terrorism. in this regard, following steps has been taken by the government of pakistan which requires consideration on merit:  enactment of various laws for the prosecution of terrorism, their supporters, financers, planners and even the sympathizers.  steps taken against religious persecutions, registration and regulation of religious seminaries / clergy.  banning of certain organizations, ngos and outfits.  freezing number of bank accounts of terror suspects thus chocking the financing of terrorists and terrorist organizations.  efforts to conduct speedy trials of terrorists and criminals by revamping and reforming the criminal justice system.  establishment of anti-terrorist courts and political conviction of terrorists proved guilty.  political, administrative and developmental reforms in fata to bring them in the national stream of politics. with the defeat of terrorists, routine life in pakistan is fast returning to normal which is evident from the increased participation of people from all walks of life in entertainment and enjoyment activities that includes celebrations of national holidays, cultural festivals and conduct of psl cricket tournament final at lahore. on the other hand, india through her media and intelligence agency raw along with antipakistan intelligence agencies is engaged in a continuous propaganda campaign to malign pakistan. her efforts to distort / tarnish the image of pakistan at international level needs to be mitigated comprehensively by developing a counter narrative highlighting own strengths and weakness of india especially the state sponsored terrorism being forced upon in various states of indian union. failure of quadrilateral process for reconciliation in afghanistan, a sharp recession in relation with washington, a cancelled saarc summit, a missed signal from tehran for good relationship and a period of frigidity with southeast asian countries, somehow indicate the pakistan's growing isolation due to lack of effective diplomacy. however, development in the china-pakistan economic corridor (cpec), a progressive rapprochement with moscow and the continuing stalemate at the nuclear supplier group over admission of non-npt member states, are the indication of failure of indian’s policies for isolating pakistan. review of economics and development studies vol. 5, no 4, 2019 709 despite expending huge amount of its budget, india has failed to isolate pakistan. pakistan maintained a very close strategic relationship with china. although pak-iran relations are complex yet that are not as hostile as enemies. it has also friendly collaboration with regional turkey, saudi arabia and g. c. c countries. isolation faced by the edgy relationship with afghanistan bangladesh and the us are solely due to diplomatic failure on part of islamabad. with huge economic potential, important strategic location and military worth pakistan has been able to create positive influence on international community. the tense relationship with india is a historical norm. india's arrogance and aggression towards pakistan has exceeded expectations, partly due to the apparent weakness of islamabad, but mainly due to the change in the global and regional strategic environment. india's growing association with the united states in the context of its growing competition with china is also a basis for india's arrogance. the emergence of us-indian alliance is encouraging new delhi's egotism towards pakistan. it has aggravated security concerns of pakistan, manifested in us massive assistance in indian arms built up and wide attempts to hold and neutralize pakistan's nuclear capabilities, but due to safe nuclear activities of pakistan, india has failed to do so. the changing geo-political scenario not only brought challenges, but also helped pakistan to survive major crisis. due to the international politics, indian move to condemned pakistan at brics summit failed and new delhi's candidature for nsg remained held up despite the best efforts of the previous (obama) us administration. the us-india coalition forced russian government to rethink its relations with pakistan. the successful joint china-russia efforts to block india's anti pakistan efforts at both "the brics summit" and the "heart of asia" conference are evidence of realignment in the region. in 2016, india tried to isolate pakistan over terrorism on the base of pathan kot and uri attacks, but failed to convince any global player to stand with. myanmar's leader, aung san suu kyi's statement soon after the brics moot that what needs to isolated is terrorism rather than countries, is a clear critique of india's isolation attempts (the dawn, april 3, 2016). pakistan has achieved striking improvement in dropping terrorist bustle within its boundaries. according to the institute for economics and peace 2016,global terrorism index, pakistan has perceived a 30 percent fall in terror connected fatalities from 2014 to 2016, due to the operation zarb-e-azab in federally administered tribal area (fata), baluchistan and other affected areas in the country (gloabl terrorism index, 2016). events such as the paces competition being hosted by pakistan army in lahore with participation from armies of fourteen countries and pakistan army winning competition in uk highlight the indian failure of to that end. apart from 58 ceasefire violations since uri attack, an additional division of the indian army has been placed on the loc and a squadron of russian su-35's has brought to the forward base. the firing incidents along working boundary in shakargarh (sialkot) sectors also show the indian aggression. indian tried their best to provoke but pakistan remained steadfast on using diplomacy while remaining cautious of any misadventure on the border, as it would inflame tense situation. (pakistan today, april 3, 2016). 6. measures required countering india's attempt. pakistan can face india's security threats and maintain a credible deterrence (the dawn, march 10, 2017). while confronting regional and global strategic developments pakistan should try to address indian efforts in following ways:  pakistan has to address the growing us alignment with india and afghanistan. pakistan will have to develop policies that can neutralize us positions that are adverse to the important interests of pakistan, while safeguarding its tactical collaboration with china. this is the main foreign policy challenge facing islamabad in the context of chinese-american rivalry. therefore, pakistan must review of economics and development studies vol. 5, no 4, 2019 710 design and implement its external policies in a clear and effective way to guarantee national interests.  it is need of the hour now that pakistan should take the initiative to make fresh diplomatic overtures of its own to make our traditional allies in arab world to identify their mistakes in strategic calculations (roomi, 2016). pakistan should run international campaign for its true image and promoting its nuclear deterrence as its principal strategic concern for its defense from any aggression. nothing is more important than the security of pakistan.  effective measures should be taken to forestall the indian afghan intelligence sponsored attack on pakistan's civilian and security forces, from the territory of afghanistan, conducted under the cover of ttp militants and the baluchistan liberation army insurgents.  pakistan should take effective steps to counter india's attempts to create domestic discord in baluchistan, rural sind, and karachi to destabilize pakistan (the dawn, march 10, 2017).  it is time for islamabad to engage both military and civil leadership to conduct a thorough review of india's goals and policies towards pakistan and also develop a logical and agreed plan to respond to each aspect of the indian policy directed against pakistan (roomi, 2016).  pakistan should be clear about the counter measures which can be realistically promoted at this stage in the comprehensive dialogue. pakistan has no obligation to request a dialogue, while new delhi refuses to address the central problems of kashmir, siachen and sir creek, the problems of water distribution (indus water treaty) and terrorism. 7. conclusions pakistan’s role in stabilization of south asia, as desire by global community, is considered important for interconnecting central asia and south asia. india, despite its failure to isolate pakistan, is arrogantly avoiding dialogue over outstanding issues including kashmir and still continued with its blame game. bilaterally, the two states require constructing a firm political association while promoting trade and building cooperation. both states should put into effect utmost restraint, recommence dialogue and institutionalize arms reduction mechanism. under the hub of diplomatic means they should focus on the settlement of the bilateral core issue especially kashmir. in a nuclear sphere of influence total use of force and full victory is unachievable for both. both countries have to revisit and rationalize their all-inclusive military plans and adopt budget constraints to avoid any risk of nuclear war in the region. they should set up arms control mechanism that imitates doctrinal precision for the good of the people of both the states. references akram, m. (2016, september 2). indian strategy. the dawn, pp. vii-vii. dormandy. (2007). xindia's foreign policey. madrid: belfer centeer, harvard kenddy school. basrur, r. (2017). modi's foreign policy fundamentals: a trajectory unchanged. international affairs , 7-19. budania, r. (2001). indian national security dilemma: the pakistan’s factor and india’s policy response . new delhi: indus publishing. burke, s. (1974). mainsprings of indian and pakistani foreign policies. minneapolis: university of minnesota press. global terrorism index 2016. (2016, december 30). retrieved june 17, 2017, from institute of economic and peace: http://economicsandpeace.org/wpcontent/uploads/2016/11/global-terrorism-index-2016.2.pdf khan, a. s. (2006). pakistan's foreign policy in the changing international scenario. the muslim world , 233-246. kotoky, a. (2016, february 16). boeing bases pitch for india defense contracts on company's size. retrieved august 10, 2017, from bloomberg: http://economicsandpeace.org/wp-content/uploads/2016/11/global-terrorism-index-2016.2.pdf http://economicsandpeace.org/wp-content/uploads/2016/11/global-terrorism-index-2016.2.pdf review of economics and development studies vol. 5, no 4, 2019 711 https://www.bloomberg.com/news/articles/2016-02-15/size-matters-boeing-s-pitch-tomodi-for-india-defense-contracts madan, t. (2006). the brookings foreign policey studies and energy security series. new delhi: brookings institutions. malone, d. m., mohan, c. r., & raghavan, s. (2015). the oxford handbook of indian foreign policy. london: oxford university press. pant, h. v. (2012). indian foreign policy in a unipolar world. new york: routledge. prasad, d. n. (2017). changes in india's foreign policy towards pakistan. new delhi: vij books. rashid, k. (2007, may 29). oil group seeks to skirt malacca strait. taipei times, pp. x-x. roomi, s. m. (2016, june 21). nucleus of indian foriegn policey, isolating paksitan. retrieved april 28, 2017, from voice of east: https://voiceofeast.net/2016/06/21/nucleus-of-indianforeign-policy-isolating-pakistan/ sengupta, a. n. (2016, november 5). engaging with the enemy. indian express. thomas, c. (2007, october 29). chidambaram. retrieved august 10, 2017, from bloomberg: https://www.bloomberg.com votel, j. (2017, march 10). india's 'diplomatic isolation' of pakistan hinders prospects for improved ties. the dawn. https://voiceofeast.net/2016/06/21/nucleus-of-indian-foreign-policy-isolating-pakistan/ https://voiceofeast.net/2016/06/21/nucleus-of-indian-foreign-policy-isolating-pakistan/ https://www.bloomberg.com/ review of economics and development studies vol. 5, no 4, 2019 712 review of economics and development studies vol. 4, no 1, june 2018 31 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 1, june 2018 journal homepage: www.publishing.globalcsrc.org/reads farm households’ willingness to pay for forestation based soil conservation program on communal land in bagh district, kashmir 1 sumaraajmal, 2 syed attaullah shah, 3 muhammad ibrahim, 4 zahoorulhaq 1 department of agricultural & applied economics, the university of agriculture peshawar pakistan. sunaraabbasi@gmail.com 2 corresponding author; assistant professor, department of agricultural & applied economics. syedshah313@gmail.com 3 lecturer, department of agricultural & applied economics, amir muhammad khan campus mardan, pakistan. m.ibrahim@aup.edu.pk 4 dean, faculty of social sciences, abdul wali khan university mardan. articledetails abstract history revised format: may 2018 available online: june 2018 this study investigated farmers’ willingness to pay (wtp) for a forestation based soil conservation program on communal land in district bagh, kashmir. data were collected from a random sample of 180 farm households on a well-structuredquestionnaire possessed with a contingent valuation question. majority of the sampled farm households reported moderate to high water erosion problem and their mean annual wtp for the soil conservation program was $34. the foremost beneficiary of the program were expected to be the farm households facing high erosion, and that’s why their mean stated wtp was significantly high than others. other important determinants of wtp were farm-size, household’s income and head’s education, farming experience, perceptions about soil erosion and contact with extension agents. the aggregate wtp for a farm household were calculated to be $214 for 10 years. this suggests that sufficient funds can be generated from local stakeholders for the implementation of the soil conservation program. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords agriculture, soil erosion, small land holders, pakistan, northern areas, kashmir jel classification d21, e11, f56 corresponding author’s email address: syedshah313@gmail.com recommended citation: ajmal, s., shah, s.a., ibrahim, m., zahoorulhaq (2018). farm households’ willingness to pay for forestation based soil conservation program on communal land in bagh district, kashmir. review of economics and development studies, 4 (1) 31-38 doi: 10.26710/reads.v4i1.206 1. introduction land degradation refers to the reduction or decline in the economic and biological activity of soil on irrigated or rain-fed agricultural land, pasture and forest resulting from natural processes or anthropogenic activities (coxhead and oygard, 2008). natural processes such as water and wind erosion, salinity, water logging, and loss in native plant species as a result of invasion by other species are important factors responsible for the degradation of land (zia et al., 2004). in addition to these natural processes, anthropogenic activities responsible for land degradation include overgrazing, unsustainable agricultural practices, burning of forest and grasslands (shah,2014).land degradation is an important issue nowadays. it is happening all over the world and its consequences are devastating for human and wildlife. in south asia, 25 percent of the total pastures and crops area is affected by water erosion, and the mountains of http://www.publishing.globalcsrc.org/reads mailto:syedshah313@gmail.com review of economics and development studies vol. 4, no 1, june 2018 32 himalaya, thealluvial plains of indus, ganges and deccan of pakistan, india and sri lanka are the severely affected regions (singh & singh, 2011). erosion of top soil can directly or indirectlyeffect human and ecological systems. the effects of soil erosion can be bifurcated into on-site and off-site ones. on-site effects are reduced agricultural productivity and loss in value of agricultural land whereas off-site effects arise from the transport of soil sediments to another farm, road or a freshwater body such as river, reservoir, etc (hou, 2012). the effects of soil sediments' flow into water bodies can be categorized into biological, recreational, water storage and electricity production effects. freshwater turbidity, due to its high sediment load results in the decrease aquatic-animal population either directly through reducing their reproductive ability or indirectly by destroying their habitat. high turbidity reduces the pleasure of swimming and boating, and decrease significantly fishing ability. sediments deposition also reduces water storage capacities in reservoirs. soil resource in northern areasand pakistanis more exposed to erosion and land sliding. in these hilly areas, forests and agriculture constitute the major portion of food, wood and fodder and, hence, act as major source of livelihood of the locals. anthropogenic activities, such as deforestation, overgrazing and extensive agricultural practices on slopes and in the alluvial plains have made the top soil more vulnerable to intense monsoon rains and floods (shah, 2014). tarbela, warsak and mangla dams are pakistan’s main water reservoirs, located in the northern areas. heavy soil erosion has resulted in the silting up of these reservoirs and, hence, has reduced their power generating capacity. conventional management practices of soil and water are useful tools to combat against land sliding and soil erosion, but lack its common application. the scenario gives birth to thequestions of ‘how the government may respond to tackle the challenge of soil conservation?’ and ‘how to make the agricultural sector in northern areas of pakistan sustainable?’the study finds its rationale for answering questions of the like nature and investigate farm households’ willing to pay (wtp) for a forestation based soil conservation program in pakistan occupied kashmir area. results of the study helps in understanding whethersoil conservation program would be acceptable and viable to the households in kashmir as well as othernorthern areas of pakistan, and whether participation and contribution of the locals therein can be ensured. the paper is structured into the following sections: section 2 presents the methodology adopted for data collection and analysis; section 3 discusses theresults from data analysis; and section 4 concludes the findings of the study and extends policy recommendations for controlling soil erosion. 2. methodology study area and sample selection this study was conducted in district bagh of kashmir. the total human population of the district is about 0.434 millions with an annual growth rate of 2 percent. around 90 percent of the population is settled in rural areas. the total geographic area of the district is 1368km 2 . its climate varies from sub-tropical to moist temperate and average annual temperature is 21°c with a range of 2°c to40°c in the months of january to july respectively while annual precipitation is about 1500 millimeters (shaheenet al., 2011).baghis one of the major agricultural districts of kashmir. in the past two decades, large scale deforestation and unsustainable agricultural practices have made the very top soil more susceptible to water erosion. the recommended soil conservation program includes reforestation and afforestation on slopes and riparian zones, and adoption of on farm agro-forestry, terracing and fencing. forest cover on slopes and farmland prevent loss of top fertile soil and its flow into freshwater systems (shah et al. 2015; nafees et al. 2008; benavides and veenstra 2005; lu et al. 2003). review of economics and development studies vol. 4, no 1, june 2018 33 a multistage random sampling technique was used in selecting farm households for data collection. in the firststage, 6 villages were randomly selected from district bagh. in the second stage, 180 farm households were selected randomly from those villages. the sample size was decided on the basis of yamane (1967)’s formula, and proportional allocation sampling technique was used in selecting number of farm households from each village (cochran; 1977). utilitarian approach for wtp measurement climate change,in south asia, has increasedthe intensity and frequency of occurrence of monsoon floods. in addition, large scale deforestation and unsustainable agricultural practices in the past twenty years have made the top soil more vulnerable to water erosion.in this scenario, reforestation and afforestation on slopes and riparian zones could be used as useful and effective tools for combating stopping floods and controlling soil erosion. agricultureis the main source of food and income for most of the households in the study area and any sort of improvement in the on-farm soil erosion controlwould improve agricultural productivity andprofitability.the farm household’s welfare function of can be written in the form of indirect utility function as; 𝑈(𝑌, 𝑃, 𝑗) ……… (1) where y is farm household's income, p is vector of prices and j = (0,1) represent soil erosion situation; let j = 0 indicates the current situation of on-farm soil erosion and j = 1 indicates the controlled soil erosion situation. if b is the benefit received by the farm household from on–farm soil erosion control, then the two situations can be compared as, review of economics and development studies vol. 4, no 1, june 2018 34 𝑈(𝑌 − 𝐵, 𝑃, 1) = 𝑈(𝑌, 𝑃, 0) ……… (2) as household's preferences are unobservable to researcher and their wtp for the proposed program depends on benefits they receive (b≥wtp); therefore, the utility in each situation can be written as follows: 𝑉(𝑌 − 𝑊𝑇𝑃, 𝑃, 1) + 𝑒1 ≥ 𝑉(𝑌, 𝑃, 0) + 𝑒0 ……… (3) where e0 and e1 are random variables, independently and identically distributed with mean zero and they represent the part of utility unobserved to the researcher. equation 3 presents the condition that determines if the farm household accepts to pay for the reforestation program. the economic valuation of on-farm erosion control benefit by the program is based on the question whether or not a given household is better off. this wtp could be zero if the benefit they receive is zero. contingent valuation method (cvm) farm households’ gain in welfare from on-farm erosion control benefit of reforestation and a forestation on communal and state owned land in bagh district of kashmir was estimated using contingent valuation method (cvm) which is a survey based stated preference approach. cvm results are sensitive to the wtp question format designed for an environmental quality improvement (carson and haneman 2005). based on literature review the wtp question formats used in cvm can categorized into: (1) open ended question; (2) single dichotomous choice question (3) double or multiple bounded dichotomous choice questions; and (4) payment card question (for more details see shah et al., 2015; zhongmin et al. 2006; carson and haneman 2005). the national oceanic and atmospheric administration (noaa) blue ribbon panel suggested the use of single dichotomous choice question with a mandatory payment for designing wtp scenario (arrow et al. 1993). later research studies experienced that the single dichotomous choice questions provides limited information about household’s wtp, and produces higher wtp compared to payment card and open-ended questions (zhongmin et al. 2006). also, both the single and double bounded dichotomous choice questions require large number of respondents to obtain accurate estimate of wtp (carson and haneman 2005, shah et al., 2015). furthermore, a mandatory payment, such as the income tax, is often associated with high protest rates (loomis et al., 1993). this protest rate could be higher in developing countries where households have low income and liquidity problems. consequently, open ended elicitation format with donation as payment vehicle was used to design wtp question for the proposed program. the wordings of the wtp question are: as the loss of top fertile soil due to intense rainfall and flood waters in summer season is a serious problem in this area. reforestation and afforestation on slopes and riparian zones could prevent floods and thus control soil erosion on slopes and farmlands. on-farm soil erosion control can improve crops production and returns. suppose the local government set up a natural resources conservation fund (nscf), and asks local households to makedonations to this fund. the fund would only be utilized for forestation on communal and state owned land in azad kashmir. this will help in controlling on-farm soil erosion and conserving farmland fertility. would you be willing to contribute to that fund? yes no if yes, then how much your household would be willing to donate every year to this nrcf? rs.________________ per year. cvm survey was administered in summer 2016, and selected farm households were interviewed face to face. before conducting the survey, all questions were pretested in a pilot study and final changes were review of economics and development studies vol. 4, no 1, june 2018 35 made in the light of results from pretesting. econometric model the following regression model was estimated to determine the і th farm household wtp as function of their socio-economic and agricultural characteristics. 𝑊𝑇𝑃𝑖 = 𝑋𝑖𝐵 + ɛ𝑖 … … … (4) where wtp is the ith farm household\s willingness to pay, x is a vector of socio-economic and agricultural characteristics of the ithfarm household, b is a parameter vector and ɛ is error term along with ‘0’ mean and constant σ 2 . for open ended wtp question, a linear functional form was used and was estimated using ordinary least square (ols) method. 3. results and discussion household characteristics table 1 show that all of the households were headed traditionally by male individuals with an average age, education and farming experience of 55.7, 10.0 and 20.7 years respectively. household size was on average 7 individuals and their average aggregated monthly income was rs. 55777. the average farm size was 1.10 acre and agricultural practices included crops production and animal husbandry. major crops grown in the area were maize, wheat and rice; and valuable livestock products were milk, butter and yoghurt. small operational holdings, irregular topography with terraced farming pattern were the apparent reasons for subsistence agricultural practices and low income. table 1. characteristics of farm households characteristics mean/percentage std. dev. head’s gender [male(percent)] 100 0.00 head’s age (years) 55.70 12.40 head’s education (years) 10.00 4.00 head’s farming experience (years) 20.70 13.50 household size (individuals) 7.00 2.90 monthly income (pakistani rupees) 55777 ($533.8) 31155 ($298.1) farmland area (acre) 1.10 0.50 1 pakistani rupee = 0.0096 u.s. dollars on farm soil erosion and agricultural productivity sampled farm households were asked questions on their on-farm soil erosion. around 74 percent of the farm households reported frequent soil erosion caused by intense rainfall and floods in summer season. most of them were practicing terraced farming on high, but irregular slopes. the intensity of on-farm soil erosion was investigated on a scale of low, moderate and high erosion. moderate and high erosion were reported by 52 and 22 percent of the respondents respectively. majority of the respondents believed soil erosion as a prime cause for the reduced on-farm productivity. yield gaps of 30 percent and 44 percent for wheat and maize respectively were found on high eroded soils in comparison to that of conserved soil in the study area. as land rent reflect agricultural productivity of a farmland, the rent per acre for a conserved agricultural land was on average 45 percent higher as compared to a highly eroded agricultural land in the study area. all these indicate the adverse effect of soil erosion on farm productivity and land value. farm households’ response to wtp question in reply to cv question for reforestation and afforestation on communal and state owned land, 95 percent review of economics and development studies vol. 4, no 1, june 2018 36 of the selected farm households were willing to pay for the program. this high response rate among farming community was because of widespread soil erosion in the study area and its adverse effects on farm productivity and returns. the mean annual stated wtp was rs.3533per household. this amount was 6.3 percent of their total annual income which confirms the validity of their stated wtp response. table 2 further distributeshouseholds’ wtp response with reference to on-farm soil erosion intensity. the annual wtp for households facing zero-low, moderate and high on-farm soil erosion were rs.1391, rs.3511and rs.6050, respectively. the positive wtp forfarm households facing zero-low erosion isgood example of warm-glow phenomenon1 described by james andreoni in 1989. table 2. household stated wtp for soil erosion control program categories observations mean annual wtp (pakistani rupees) std. dev. min max household facing zero-low erosion 46 (26%) 1391 ($14) 1316 0 4000 household facing moderate erosion 94 (52%) 3511 ($34) 1702 500 6000 household facing high erosion 40 (22%) 6050 ($59) 1709 3000 8000 average wtp per household 180 (100%) 3533 ($34) 2274 0 8000 1 pakistani rupee = 0.0096 u.s. dollars determinants of farm households’ wtp the estimatedfarm household’s wtp model for soil conservation on communal land is given in table 3. most important determinants of farm household's wtp are intensity of on-farm soil erosion, farmland size, contact with extension agent, head’s education and farming experience and total monthly income. intensity of on-farm soil erosion: the estimated coefficients for moderate and high on-farm erosion are positive and statistically significant which indicate that farm households facing moderate or high erosion are likely to pay more for the soil conservation program on communal land. farm size: as indicated by the positive and statistically significantcoefficient for farm size households having larger farms are likely to pay more as compared to others. the coefficient value shows that an increase in farm size by 1 acre would increase farmer’s wtp for the program by rs. 18.46 pkr. contact with extension agent: extension education may enable farmers to better understand the impact of soil erosion on their productivity and how large scale forestation program can help in conserving soil and water resources. thus farmers receiving extension education were expected to have high wtp for the program. the estimated coefficient for contact with extension agent is positive and significant, which is in accordance with prior expectations. this result is in line with findings of tafa et al., 2008; teklewold and gunner., 2010; gebremariam et al.; 2013 and meseret d., 2014. head's education and farming experience: in pakistani society a household head controls their common material resources and takes major decisions. the estimated coefficients for head's education and farming experience are positive and statistically significant, showing that a farm household's wtp for soil conservation increases significantly with their head's educated level and farming experience. household’s monthly income: as income increase people start care for natural and environmental resources. household’s income has a positive significant coefficient, which is consistent with shah et al., 2016 and janku et al., 2014 findings. 1it explains that some people give donation to charitable trust and community development works simply because of getting satisfaction from helping others. review of economics and development studies vol. 4, no 1, june 2018 37 table 3. estimated farm household’s wtp model for soil conservation wtp determinants coefficient t-value p value moderate erosion (1 if yes, otherwise 0) 1274.30 5.26 0.000 high erosion (1 if yes, otherwise 0) 4192.69 14.56 0.000 farm size (acre) 18.46 1.82 0.072 contact with extension agent (1 if yeas) 1613.46 3.02 0.000 head’s education (years) 38.34 2.65 0.009 head’s farming experience (years) 11.78 1.90 0.061 household monthly income (pkr) 0.03 8.17 0.000 household size (individuals) -40.53 -0.89 0.370 constant -491.84 -1.10 0.270 f(8,171) = 54.3, prob>f = 0.000, r-squared = 0.7175, adj. r-squared = 0.7043 1 acre = 0.405 hectares 1 pakistani rupee (pkr)= 0.0096 u.s. dollars estimated aggregate willingness to pay the accumulatedbenefitsto a farm household from such on-farm soil erosion program through forestation were calculated to be rs.22358 ($214), using a suitable discount rate of 12%2and keeping the annual wtp of thefarm household as constant over the lifespan of 10 years of the program as shown in table 4. this aggregate wtp measures the value of on-farm erosion control benefit of a farm household andsignifies to the existence of sufficient potential for raising funds from the local stakeholders through donations for financing the implementation of proposed soil conservation program in northern areas. table 4. present value aggregate wtp for soil conservation program assumed project life assumed discount rate present value aggregate wtp per household (pakistani rupees) 10 years 12 percent 22358 ($214) 10 years 11 percent 23096 ($221) 10 years 10 percent 23880 ($229) 1 pakistani rupee = 0.0096 u.s. dollars 3. conclusion and policy recommendations small operational holdings, irregular topography with terraced farming pattern of agriculture were the apparent reasons for subsistence agricultural practices and material yield gaps were observed in wheat and maize farming leading to a decreased rent of 45 percent eroded soils in comparison to the conserved ones. the discrepancy in rent provides a sound rationale for the initiation and launchingof a community based soil conservation program in the study area.thewillingness to pay as well as aggregate benefits to a farm household over a span of ten yearssuggests that sufficient potential exists for raising fundsin the forms of donations and other mandatory paymentsfrom the local stakeholders for the implementation of community based soil conservation program through proper mobilization on-farm soil erosion intensity, head’s education, farming experience and perception of soil erosion, monthly income, farmland size and contact with extension agents are the important determinants of farm household’s stated wtp for soil conservation program. reforestation, afforestation and adoption of techniques like terracing, ditching, fencing and trees plantation on farmlands are suggested for controlling soil erosion and land sliding in the study area. 2in pakistan, the ministry of planning and development use 10–12 % discount rate. cvm studies in developing countries have used discount rate in the range of 3–12%. the high discount rate for environmental goods means the publicunderestimate the importance of future benefits from environmental goods, and also demonstrates that they prefer to take short term actions on environmental restoration and protection. review of economics and development studies vol. 4, no 1, june 2018 38 the agricultural department, pakistan forest department and other non-government organizations, such as usaid and national 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(2006).evaluating the performance of different willingness to pay question formats for valuing environmental restoration in rural china. environment and development economics, 11(5), 585-601. zia, m. s., muhmood, t., baig, m. d., and aslam, m., (2004).land and environmental degradation and its amelioration for sustainable agriculture in pakistan. sci.vision, 9:1-2. review of economics and development studies, vol. 7 (3) 2021, 465-474 465 how do organizational commitment and work engagement mediate between human resource management practices and job performance? quaisar ijaz khan a , raheel mumtaz b , muhammad farooq rehan c a assistant professor gc university faisalabad, pakistan b assistant professor gc university faisalabad, pakistan c assistant professor gc university faisalabad, pakistan email: farooq.rehan@gcuf.edu.pk article details abstract history: accepted 30 august 2021 available online september 2021 the main goal of this study is to empirically determine the mediating roles of organizational commitment and work engagement between the relationship of human resource management practices and job performance of the faculty members working in public sector universities of pakistan. data were obtained by self-administrated questionnaire. this study used stratified random sampling. structural equation modeling (sem) has been applied by using smart pls registered version 3; to test the statistical model. the study found that work engagement and affective organizational commitment has partially mediating relationship with human resource management practices and job performance. social exchange theory used as under pinning theory to develop theoretical model. data were collected from 247 faculty member working in public sector universities of pakistan. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: job performance, hrm practices, work engagement and organizational commitment jel classification: j62 doi: 10.47067/reads.v7i3.403 corresponding author’s email address: farooq.rehan@gcuf.edu.pk 1. introduction because of the significant costs associated with decreased efficiency and production, as well as the costs associated with needing to hire and educate newcomers, employee turnover has long been a primary concern of scholars, human resource practitioners, and managers in service sectors (utami, sapta, verawati, & astakoni, 2021). retaining the potential workforce of public sector universities is now becoming challenging. when individuals are dissatisfied with their positions or devoted to their organization, prompting them to look for new alternatives. if they locate a better opportunity, turnover will be unavoidable (muisyo, qin, ho, & julius, 2021). the secret to successfully running a private university is to satisfy the best staff or faculty. in today's market, competition is expanding year after year. new universities are emerging on the market, as are overseas colleges via the internet, which is why retaining the best faculty is critical for competing and maintaining a competitive edge (rabiul & yean, 2021; yudianto, mulyani, fahmi, & winarningsih, 2021). job satisfaction is favorably connected with favorable work outcomes like organizational commitment and negatively associated with negative review of economics and development studies, vol. 7 (3) 2021, 465-474 466 outcomes like turnover intention. employees' positive work attitudes and contributions contribute to an organization's competitive advantage (baltaru, 2019). hrm practices can be defined as a set of internally coherent and consistent procedures intended at reinforcing and promoting employee competence, motivation, and commitment. in order to meet the organization's objectives, they also manage people abilities and skills, training and development, working environment, supervisory support, promotion opportunity, performance appraisal are more likely to create work conditions and environments in which employees are highly committed to the organization and do their best to achieve the organization's goals and enhance job performance (côté, lauzier, & stinglhamber, 2021; rabiul & yean, 2021; zhang, jiang, liu, & liu, 2020). they do not pay adequate compensation to their employees, which leads to employee unhappiness and increased the likelihood of staff turnover. as a result, it is easy to claim that high turnover is a severe concern for the institutions of higher education in pakistan. organizational commitment might be regarded as a potential mediator in the interaction between human resource practices and turnover intentions (rabiul & yean, 2021). in order to attain corporate competitiveness, a higher level of mutual trust among members and between management and employees may be able to maintain and sustain human talents. leadership is critical to establishing trust in organizations, according to previous study. employees, for example, will tend to assist their leaders in accomplishing organizational goals if they believe their leaders care about their interests and treat them fairly (aina, bratti, & lippo, 2021; li et al., 2021). hrm practices refer to institutional actions that focus on human resource management to achieve institutional objectives. whilst employee engagement is defined as the degree to which employees identify with and participate in a company. individual faculty commitment to the academic institution is referred to as faculty organizational commitment (gieter, hofmans, & pepermans, 2011; loan, 2020). however, work engagement is conceptualized as a tridimensional construct consisting of vigor, devotion, and absorption (côté et al., 2021). the amount of mental energy a person has, his willingness to put that energy to work, and his persistence in doing so are all defined as work engagement. dedication in the workplace refers to an employee's sense of purpose, inspiration, pride, and challenge. absorption refers to the level to which an employee is so focused and concentrated on the task at hand that time goes quickly and with little distraction while at work. according to shaufeli and bakker (2002), the signs of employee engagement are feeling full of energy, being able to work for a long time, inspiring work, excited about work, proud of work, time passing quickly when working, and seeking to get away from work. however, job performance refers to the highest level of production achieved after completing successful tasks throughout working hours. job performance, on the other hand, is a positive behavior of employees who put out atheistic effort. with the effective administrative practices of the higher authorities, the employees perform well in achieving the organizational objectives. it is the employees' constructive attitude toward the development of educational institutions (chunyu & liping, 2021). whereas job performance refers to the highest level of output achieved after completing successful tasks throughout working hours. it is the employees' constructive attitude toward the development of educational institutions (kaur, 2011; quaisar, shukor, & soffian, 2016). surprisingly, little thought has been given to the impact of these human resource management strategies on job performance. the study generates the following research questions keeping in view the early discussion: review of economics and development studies, vol. 7 (3) 2021, 465-474 467 1) how human resource management practices have any relationship with perceived job performance? 2) how organizational commitment and work engagement mediate between the relationship of hrm practices and job performance? 3) how organizational commitment and work engagement has relationship with human resource management practices? 2. review of literature this section deals with the previous studies related to this construct. organizational commitment provides a strong sense of organizational identification among employees affective commitment has a negative relationship with employee turnover intentions (colquitt et al., 2013). in conjunction with normative commitment (nc), which is positively associated to turnover intention, employee attitudes and behaviors have been proven to be influenced by human resource strategies that emphasize the organization's concern for their well-being (guchait & cho, 2010; sungu, weng, hu, kitule, & fang, 2020). according to chang (2005), job security reflects the organization's dedication to its employees, and people reciprocate the commitment to the organization. however, compensation for teachers is one of the most important hrm responsibilities, and it is described as the types of pay or benefits that employees receive as a result of their job. appropriate remuneration can help a business attract, motivate, and retain skilled personnel. salary has an impact on employees' social status, motivation, and loyalty, as well as productivity (aswathappa, 2008). nevertheless, faculty believe that their efforts are paying off. in truth, the more autonomy a person perceives, the more responsible he or she will feel for the job results, and this is a source of employee motivation and job satisfaction (allen, armstrong, reid, & riemenschneider, 2008). several studies looked at organizational commitment as a multifaceted characteristic that can be quantified in three ways: affective (emotional connection), continuous (cost perception), and normative (duty). these are the most frequently known dimensions of organizational commitment and are commonly employed (klein et al., 2009). according to the findings, academic devotion is an important factor in achieving good academic achievement (eisinga et al., 2010). for decades, academics and practitioners have focused on organizational commitment as a strategy to improve employee retention and performance. all the individuals are not the same that’s why human resource management practices are designed to extract maximum performance from the employees. simultaneously affecting employee engagement, inventiveness, and dedication contributes in job performance (yudianto et al., 2021). organizational commitment and human resource management practices that are implemented correctly always have a beneficial impact on employee commitment to the firm (amponsah-tawiah & mensah, 2016). work engagement refers to an employee's excitement, passion, and absorption in their work (bakker and demerouti, 2008). employees that are engaged have an enthusiastic and effective connection to their tasks, as well as a feeling of competence and effectiveness on the job and a satisfying mental state (schaufeli et al., 2006). nonetheless, employees who are highly aware of leader integrity do not sense cynical at work and show stronger job engagement than those who are less conscious of leader integrity, some of the significant characteristics that may influence teachers' job performance are job satisfaction and organizational trust. poor performers not only fail to deliver desired outcomes, but their unpleasant review of economics and development studies, vol. 7 (3) 2021, 465-474 468 behaviour may also detract from other staff members' ability to accomplish their duties (bashir, bashir, rana, lambert, & vernallis, 2021; muisyo et al., 2021; sungu et al., 2020). 3. social exchange theory (set) the theoretical model is based on thibaut and kelley's social exchange theory (set): which has been increasingly adopted as the theoretical foundation of turnover research to better understand employee-employer relationships (coyle-shapiro & conway, 2005). according to the social exchange theory, all human connections are formed through idiosyncratic cost-benefit assessment and different assessment. the essence of this idea is what incentives/benefits an employee obtains from a specific relationship, and what expenses he or she pays to receive those rewards. 4. research design and methodology in our study, we, used a survey approach. a survey tactic had been applied in a logical approach. the survey method is the most common and well-known and commonly employed in exploratory and descriptive research. when collecting large amounts of data from a large population, surveys are a popular strategy. frequently obtain through the use of a questionnaire for a survey, such that the information is institutionalized, allowing for easy investigation. furthermore, when everything is said and done, the study system is considered as definitive by persons and is both extremely straightforward to reveal and obtain. our research is based on a cross-sectional analysis. a cross-sectional study is one in which all research variables are measured in a brief period and data is collected at a single point in time. the cross-sectional study method is therefore appropriate for this study because the researcher is interested in learning about respondents' perceptions of human resource practices, trust, leader behavioral integrity, organizational commitment level, work engagement, turnover intention, and job performance behavior at a specific time. to assess the structural link between variables, the current study uses a quantitative work technique. as a result, it's all about calculating correlations between variables. the primary goal of quantitative research is to investigate the cause-and-effect relationship between variables, as well as to provide generalization ability for the study's population. sukamolson (2005), on the other hand, gives only a few grounds for using a quantitative approach in social science research. first, it delivers condensed data and inferences throughout the entire study population. second, it aids in accurately describing the diversity of people's attitudes, and third, it allows for statistical comparison across different groups. factor analysis and reliability analysis were performed to analyses the validity and reliability of the variables in order to observe the relationship between them. the response rate was calculated by multiplying the frequency and percentage of responses by the sample size calculated prior to data collection. the primary characteristics of the sample were described using descriptive statistics such as mean, median, standard deviation, frequencies, and percentage. 4.1 questionnaire design a self-administrated questionnaire was adopted from different well established and freely available authentic sources. human resource management practices were measured by 16 items. it includes, four dimensions including faculty job autonomy (05 items), faculty job security (03 items), faculty compensation (05 items) and faculty performance appraisal (03 items). organizational commitment only 8 items of affective commitment were taken 02 were removed due to weak factor loading. work engagement was measured with 09 items and job performance was measured by 08 items. total 41 items were collected to obtain the responses from faculty members working in public sector universities of pakistan. a five-point likert scale was applied which includes: 1= strongly disagree, 2= disagree, 3= neutral, 4= agree, 5= strongly agree. review of economics and development studies, vol. 7 (3) 2021, 465-474 469 5. results and analysis statistical model was tested by applying structural equation modeling on partial least squares by using smart pls licensed version 3. figure 1.1 is provided as follow and represents the basic algorithm: figure: 1.1 basic process initialing some items that were not meeting the minimum threshold were removed and final picture is presented below. figure 1.2 is presented below with minor changes as follow: figure 1.2: after eliminating few items it can be view from the figure 1.2 that r 2 for the construct is 0.439. further details are provided below to clarify the empirical properties. review of economics and development studies, vol. 7 (3) 2021, 465-474 470 table: 1.1 construct reliability and validity cronbach's alpha rho_a composite reliability average variance extracted (ave) hrm_p 0.938 0.942 0.946 0.525 job_per 0.851 0.865 0.894 0.628 org_com 0.806 0.833 0.867 0.573 wor_eng 0.914 0.918 0.930 0.596 the model has been examined for construct’s reliability and convergent validity for this purpose conbach’s alpha, rho_a, values are provided, the threshold for such criteria is =>0.7 and the values for the given criteria meets the threshold values. however composite reliability and ave values are required >=0.5, which also meets the criteria. therefore, the model is tested for further discriminant validity as below: table 1.2: discriminant validity (fornell-larcker criterion) hrm_p job_per org_com wor_eng hrm_p 0.725 job_per 0.568 0.792 org_com 0.742 0.572 0.757 wor_eng 0.617 0.627 0.654 0.772 the discriminant validity for the construct provided as above have minor issues such as the values of organization commitment are slightly higher than the value 0.725, in diagonal. this might be due to two items of affective commitment that have been removed during factor loading as the said values does not meet the threshold criteria of outer loading. however, the human behavior never remains the same minor variations in assessing human behaviors is possible (hair, sarstedt, hopkins, & kuppelwieser, 2014). table 1.3: model fit summary saturated model estimated model srmr 0.067 0.075 d_uls 2.806 3.583 d_g 1.214 1.251 chi-square 1105.296 1121.713 nfi 0.753 0.749 review of economics and development studies, vol. 7 (3) 2021, 465-474 471 the model fit summary has been provided for the better understands with statical model and in easy prediction. the next table presents the selection criteriaas below: table 1.4: selection criteria a ic (a k a ik e 's in fo rm a ti o n c ri te ri o n ) a ic u (u n b ia se d a k a ik e s in fo rm a ti o n c ri te ri o n a ic c (c o rr e ct e d a k a ik e s in fo rm a ti o n c ri te ri o n ) b ic (b a y e si a n in fo rm a ti o n c ri te ri a ) h q (h a n n a n q u in n c ri te ri o n ) h q c (c o rr e ct e d h a n n a n -q u in n c ri te ri o n ) job_per -100.356 -97.331 83.870 -90.744 -96.460 -96.180 org_com -142.759 -140.748 41.376 -136.351 -140.161 -140.013 wor_eng -84.230 -82.219 99.905 -77.822 -81.633 -81.484 all the necessary requirements have been dealt successfully to analyze the statistical model and the basic assumptions of partial least squares. structural equation modeling technique has been applied using smart pls version 3. for that purpose, the below provided figure is provided for better elaboration. testing the hypothesis model tstatistics for the construct is provided below and can been seen that t-statistics are =>1.96 threshold. that represents the minimum desired values for making decision either to accept or reject the hypothesis. figure 1.3 is presented below for completing the research conclusions as below. it represents the t-statistics for the model as below: figure: 1.3 t-statistics review of economics and development studies, vol. 7 (3) 2021, 465-474 472 table 1.5: t-statistics for the statistical model o ri g in a l s a m p le ( o ) s a m p le m e a n ( m ) s ta n d a rd d e v ia ti o n (s t d e v ) t s ta ti s ti cs (| o /s t d e v | ) p v a lu e s hrm_p -> org_com 0.742 0.751 0.045 16.412 0.000 hrm_p -> wor_eng 0.617 0.627 0.055 11.202 0.000 org_com -> job_per 0.284 0.271 0.114 2.493 0.013 wor_eng -> job_per 0.442 0.458 0.109 4.058 0.000 the desired threshold of t-values for the acceptance and to reject the hypothesis was 1.96 or greater. the statical findings are evident that all four hypothesis are being accepted for final decision. the below mentioned tables provide the double mediating relationship and their specific indirect effect and total effect for convenience and easy understanding. table 1.6: total indirect effect o ri g in a l s a m p le ( o ) s a m p le m e a n (m ) s ta n d a rd d e v ia ti o n (s t d e v ) t s ta ti s ti cs (| o /s t d e v |) p v a lu e s hrm_p -> job_per 0.483 0.494 0.050 9.657 0.000 table 1.7 specific indirect effects o ri g in a l s a m p le ( o ) s a m p le m e a n (m ) s ta n d a rd d e v ia ti o n (s t d e v ) t s ta ti s ti cs (| o /s t d e v |) p v a lu e s hrm_p -> wor_eng -> job_per 0.273 0.290 0.085 3.217 0.001 hrm_p -> org_com -> job_per 0.210 0.203 0.086 2.435 0.015 review of economics and development studies, vol. 7 (3) 2021, 465-474 473 table 1.8: total effect o ri g in a l s a m p le (o ) s a m p le m e a n (m ) s ta n d a r d d e v ia ti o n (s t d e v ) t s ta ti s ti c s (| o /s t d e v |) p v a lu e s hrm_p -> job_per 0.483 0.494 0.050 9.657 0.000 hrm_p -> org_com 0.742 0.751 0.045 16.412 0.000 hrm_p -> wor_eng 0.617 0.627 0.055 11.202 0.000 org_com -> job_per 0.284 0.271 0.114 2.493 0.013 wor_eng -> job_per 0.442 0.458 0.109 4.058 0.000 table: 1.9 final decisions t statistic decision human resource management practices and organizational commitment 16.412 accepted human resource management practices and work engagement 11.202 accepted organizational commitment and job performance 2.493 accepted work engagement and job performance 4.058 accepted 6. conclusion and future recommendations the study has provided eight tables and three figures for easy understanding of the construct in the pakistan’s context. it has been found that work engagement and affective organizational commitment has partially mediating relationship with human resource management practices and job performance. due to some financial and time constraints the researchers remained unable to cover private sector universities, new studies might work for private sector heis. furthermore, a qualitative research study might be designed to generalize the phenomena. as r 2 is only 43.9% , that means 56.1% portion remained uncover in this study. the future studies may work for other unexplored factors. references aina, c., bratti, m., & lippo, e. 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(2020). an integrated decision-making model for analyzing key performance indicators in university performance management. mathematics, 8(10), 1–16. https://doi.org/10.3390/math8101729 review of economics and development studies vol. 5, no 4, 2019 853 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads relationship between university students time management skills and their academic performance 1 iqbal amin khan, 2 alam zeb, 3 shabir ahmad, 4 rizwan ullah 1 lecturer, department of education, university of malakand chakdarra, dir lower, pakistan: iqbalphd.scholar@yahoo.com 2 associate professor, management sciences, university of malakand chakdarra, dir lower, pakistan 3 assistant professor, management sciences, university of malakand chakdarra, dir lower, pakistan 4 lecturer, management sciences, university of malakand chakdarra, dir lower, pakistan article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 the purpose of this study is to determine the relationship of time management skills on the academic achievement of university students. the study used quantitative research design. the population of the study consisted of all bachelor level students of public sector universities in malkand division. a random sample of 900 bachelor level students from three universities of malakand division participated in the study. data were collected through time management behavior scale (tmbs) developed by macan, shahani, dipboye and phillips (1990) consisting of 34 items based on five-point rating scale. the students were also requested to provide their results in the last semester. data were analyzed by using mean, standard deviation, independent samples t-test, and pearson’s coefficient correlation. the university students exhibited moderate level of time management skills. no significant difference was found between the perceptions of male and female students. a positive significant moderate relationship was found between the four constructs of tmbs and students academic performance. it was concluded that the students who have good time management skills tends to have higher academic achievement and decreased time management skills could result in decreased outcomes. the study recommended that university students should concentrate on developing their capacities in time management areas through trainings, workshops and seminars to increase their academic achievement. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords time management skills, academic achievement, time management behavior scale, university students jel classification: j22, j29, p36 corresponding author’s email address: iqbalphd.scholar@yahoo.com recommended citation: khan, i. a., zeb, a., ahmad, s. and ullah, r., (2019). relationship between university students time management skills and their academic performance. review of economics and development studies, 5 (4), 853-858 doi: 10.26710/reads.v5i4.900 1. introduction students often face the problem of not managing their time properly for academic and non academic activities. consequently, they may not be able to get good marks in their final examination and may not be able to reach their destination. the duration of semester is very short. up to twelve years of school education, they appear in annual system of examination. they have sufficient time for their studies and other activities. but when they enter to http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 854 university education their system of examination has been changed. the annual system of examination has been replaced to semester system of examination. here the duration of time is very short and the amounts of activities are more. they will have to manage their time to cope with this system. there are many factors responsible for the performance of university students. both academic and non academic factors are being responsible to affect the students’ performance. one of the major aims of higher education is to enable the students to develop the critical thinking of students and sharpen their mind to solve their own problems through teaching, feedback and use of appropriate resources to improve their knowledge. one of the non academic factors is time management skill which affects the students’ performance. students who manage their time effectively perform well and have low level of stress and anxiety (davis, 2000; kearns & gardiner, 2007) and satisfied with their work (macan, 1994). on the other hand, a student who cannot keep balance between their academic and personal life may face the problems like dissatisfaction, somatic tension, having poor sleep habit and perform poorly (hardy, 2003; van der meer, jansen, & torenbeek, 2010). time management is the way of controlling and monitoring one’s time (eilam & aharon, 2003). claessens, van eerde and rutte (2007: 262) have defined time management as “behaviours that aim at achieving an effective use of time while performing certain goal-directed activities”. research findings show a positive relationship between time management skills and academic achievement of students (mckenzie & gow, 2004). on contrary, students having poor time management skills perform poorly in examinations (ling, heffernan, & muncer, 2003; scherer, talley, & fife, 2017). macan et al., (1990) found that students who perceived control of time significantly perform better in academics, high life satisfaction, less role overload, less role ambiguity, and fewer job somatic and job induced tensions. students having capacity to manage time effectively can develop good study habits and strategies for success (krause & coates, 2008). britton and tesser (1991) found that time management behaviour may predict the grade point average of the students. adams and blair (2019) found a significant correlation between students’ perceived control of time and cumulative grade point average. most of the researchers perceived that students having good time management skills tend to get good marks in examination and having low level of anxiety. however, many students find it difficult to keep a balance between their studies and day to day life activities. these findings were only restricted to european countries and developed countries. the literature shows that this area has remained in ignorance in the local setting. therefore, to fill this gap the current study aimed to find out the relationship between university students time management behaviour and their academic achievement should be investigated to reach concrete results in the field of education. research questions to reach to the valid conclusions, following research questions were formulated;  at what level do the university students demonstrate the time management behaviour?  does gender has any effect on time management behaviour of university students?  whether time management behaviour of university students is associated with cumulative grade point average? 2. research methodology the nature of the study was quantitative. descriptive (survey) method was used to collect data from the respondents. the population of the study consisted of all undergraduate level students (bs students) who were studying in the academic session 2017-18. a random sample of three universities was selected from malakand division. then, a sample of 900 undergraduate students was selected in stratified sampling. a random sample of 300 undergraduate students was selected from each university. the researchers used time management behavior scale (tmbs) developed by macan et al., (1990) consisting of 34 items based on five-point rating scale ranging from seldom true to very often true was used to collect data. this scale was used for data collection because it was a valid, reliable and predictive for measuring students’ reflection of their time management behaviour strategies and their academic load (adams & blair, 2019; misra & mckean, 2000). this scale is further distributed into four major attributes consisted of setting goals and priorities, mechanics of time management, preference for organizations and perceived control of time. the first attribute setting goals and priorities consisted of 10 items, the second attribute mechanics of time consisted of 11 items, the third attribute preference for organizations consisted of 08 items and the fourth attribute consisted of 05 items. the reliability of the scale was established through inter item consistency and was found 0.76, which was more than that of the review of economics and development studies vol. 5, no 4, 2019 855 original scale 0.68 calculated by macan et al., (1990). the cronbach’s alpha value was also calculated for each attribute. the inter item reliability for setting goals and priorities was 0.78, for mechanics of time was 0.79, for preference for organizations was 0.73 and for perceived control of time was 0.70. the researchers distributed 900 survey packets among undergraduate students of sampled universities. a written consent letter was also attached with each questionnaire to invite the participants to participate and rank their opinion on continuum. the consent letter also consisted of describing purposes of study and ensuring confidentiality and anonymity for the institution and teachers. six hundred and seventy filled questionnaires were collected from the respondents. out of which seventeen were un-useable and were discarded. thus 653 useable questionnaires were used for data analysis with a final response rate 72.55%. 3. data analysis the researchers used parametric tests to analyze the collected information. negatively worded items were reverse scored. the researchers analyzed the undergraduate students’ demographic information through frequency and percentage. the objectives related to determining the level of time management behaviour was determined through mean and standard deviation scores. using the mid-point mark 3.0 on the five points likert scale, it was assumed that a statement having mean score of more than 3.0 will demonstrate high level of evidence of time management. to find the gender effect of the students independent samples t-test was used. pearson’s co-efficient correlation was used to find the relationship between students’ perceived time management behaviour and their academic performance. out of 653 respondents, 407 (62.33%) were male and 246 (37.67%) were female. table: 1 undergraduate students time management level time management attributes number of items n mean standard deviation rank setting goals and priorities 10 653 3.56 0.567 2 mechanics of time 11 653 3.44 0.644 4 preference for organization 08 653 3.61 0.592 1 perceived control of time 05 653 3.49 0.813 3 tmbs 34 653 3.52 0.523 the above table shows the perceptions of students about their time management behaviour. the mean scores show that each construct has more than the mid-point 3.0, which shows that the level of time management behaviour of undergraduate students for each construct was found high. the mean score for the construct preference for organization was found to be higher than that of other constructs, this shows that students gave much importance to manage their time than that of other constructs. on the other hand, the mean score for the construct mechanics of time was found to be lower than that of the other constructs on the scale, which demonstrated that undergraduate students perceived this construct to be least important to manage their time than that of the other constructs. the overall time management behaviour level of undergraduate students was found to be high. table: 2 comparison between male and female students’ time management behavior gender n m sd t p male 407 3.57 0.572 1.356 0.07 female 246 3.51 0.541 the above table shows the difference in the perceptions of undergraduate students regarding time management behaviour. as the value of t-statistics was found greater than that of the significance level value, therefore, no statistical significant difference was found between the perceptions of male and female students regarding time management behaviour. review of economics and development studies vol. 5, no 4, 2019 856 table: 3 relationship between tmbs constructs and academic performance of students variables relationship sgp mtm pfo pct tmbs ap setting goals and priorities pearson correlation 1 sig. (2-tailed) n 200 mechanics of time management pearson correlation .427** 1 sig. (2-tailed) .000 n 199 199 preference for organization pearson correlation .662** .505** 1 sig. (2-tailed) .000 .000 n 200 199 200 perceived control of time pearson correlation .247** .329** .452** 1 sig. (2-tailed) .000 .000 .000 n 200 199 200 200 time management behavior scale pearson correlation .791** .716** .859** .674** 1 sig. (2-tailed) .000 .000 .000 .000 n 199 199 199 199 199 academic performance of students pearson correlation .369** .434** .475* .428** .489** 1 sig. (2-tailed) .007 .000 .013 .001 .000 n 200 199 200 200 199 200 sgp=setting goals and priorities, mtm= mechanics of time management, pfo=preference for organization, pct=perceived control of time, tmbs=time management behavior scale and ap=academic performance. the above table shows the relationship between tmbs constructs scores and total scores of student’s academic performance. the results show that there is positive significant moderate relationship between mtm and sgp (.427); positive significant strong relationship between pfo and sgp (.662) and positive significant moderate relationship between pfo and mtm (.505).there is positive significant weak relationship between pct and sgp (.247); pct and mtm (.329) and positive significant moderate relationship between pct and pfo (.452). the results also shows that there is positive significant strong relationship between tmbs and sgp (.791); tmbs and mtm (.716), tmbs and pfo (.859); and tmbs and pct (.674). on the other hand, there is positive significant moderate relationship between ap and sgp (.369), ap and mtm (.434); ap and pfo (.475); ap and pct (.428); ap and tmbs (.489) respectively. 5. discussion the findings of the study show that undergraduate students exhibit high level of time management behaviour. there was no statistical significant difference between the time management behaviour of male and female undergraduate students regarding their time management behaviour. there is moderate positive significant relationship between undergraduate students’ time management behaviour and their academic performance. students who manage their time effectively are expected to show good results. the mean score of time management behaviour was found higher than the cutoff point 3.0, which shows that undergraduate students time management level are high. this shows that students who are enrolled in semester system are well aware of the sensitivity of limited time. they are aware in advance about semester schedule. therefore, they do planning according to the set schedule. they try to achieve target goals through doing short and long range planning. they prioritize their tasks according to their importance. they set to-do list for each day, week and moth through short range planning. similarly, they set long term goal i.e. semester based goals which is to perform well in the semester. they try to achieve these long term goals through long range planning. the mean review of economics and development studies vol. 5, no 4, 2019 857 scores for all the four constructs were found more than the mid-point 3.0, which shows that students manage their time by setting goals and prioritizing the tasks, making to-do list and plan consciously and realistically to achieve set goals through short and long range planning, and effectively handling interruptions that destruct them from their study. these results were testified by many other studies which have been conducted in different western and other countries (kaya, kaya, palloş, & küçük, 2012; mohamed, hamal, & mohamed, 2018; razali, rusiman, gan, & arbin, 2018). the study also found no statistical differences between the male and female undergraduate students about perceived control of time. both the gender takes care of the available time and utilized it efficiently and effectively. they set goals and prioritize tasks, plan and make to-do lists, organized their workplace and handle interruptions effectively and perceived that they have control over the use of their time. many studies conducted internationally confirmed the results of this study (adams & blair, 2019; razali, rusiman, gan, & arbin, 2018) while many have found significant difference regarding gender (karakose, 2015; kaya, kaya, palloş, & küçük, 2012). it was found that there is moderate positive relationship between time management behaviour of undergraduate students and their academic achievement. all the sub categories of the time management behaviour have moderate positive relationship with academic performance of the undergraduate students. it shows that if students’ academic and personal life is well organized then they will achieve higher grades and vise versa. these results have been confirmed and testified by many researchers throughout the world in different fields of studies like engineering and medical (adams & blair, 2019; britton & tesser, 1991; burt & kemp, 1994; karakose, 2015; kelly, 2002; macan, 1994; razali, rusiman, gan, & arbin, 2018). 6. conclusions following conclusions were drawn on the basis of study findings:  the undergraduate students’ time management behaviour was found of high level. students believed that practices like setting goals and priorities, planning and scheduling, handling interruptions and well-organized workspace and having positive attitude towards time management.  no significant difference was found in time management behaviour of undergraduate students by gender. both gender considered time management equally important in their academic and personal life.  a positive moderate significant relationship was detected between undergraduate students’ time management behaviour and academic performance. the scores on time management behaviour scale was positively significantly associated with students cumulative point average scores. the increase in time management behaviour of students accompanies with the increase in academic achievement of the students. 7. recommendations following recommendations and suggestions are offered to undergraduate students and university officials.  it is recommended that undergraduate students must study books related to time management strategies through which they will get information about the skills, strategies and practices to manage their time efficiently and effectively.  the university officials should arrange seminars and workshops for students to make them sensitize about managing time and increase their productivity. through this they can maintain a balance between their academic and personal lives.  students should recognize that managing time will help them to maximize their academic performance and quality of life. for this seek to learn skills like setting goals, prioritize the tasks on urgency basis, accomplish for short and long term goals, schedule and planning their activities, handling interruptions and organize workplace and have positive attitude towards use of time. references adams, r. v., & blair, e. 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(2010). it’s almost a mindset that teachers need to change: first-year students’ need to be inducted into time management. studies in higher education, 35, 777-791. review of economics and development studies, vol. 8 (2) 2022, 127 139 127 the effect of renewable and nonrenewable energy use on sustainable development in south east asia sheeza ramzan a, noreen safdar b, malka liaquat c a research scholar, department of economics, the woman university multan, pakistan email: shezaramzaneco@gmail.com b assistant professor, department of economics, the woman university multan, pakistan email: noreen.safdar@wum.edu.pk c assistant professor, institute of management science, the women university multan, pakistan email: malka.liaquat@wum.edu.pk article details abstract history: accepted 30 april 2022 available online june 2022 this research focuses on observing the effects of renewable and fossil fuel energy usage on the environment and economic growth in southeast asian countries. the study utilized the annual data of southeast asian countries from 1990 to 2020 this study used gross fixed capital formation, foreign direct investment, renewable energy, population, nonrenewable energy, and labor force on fundaments of economic growth concerning sustainability. fixed effect, radom effect, and a two-step gmm methodology were used to estimate the link among the variables. the consequences of the study demonstrate that renewable energy intake has a destructive and statistically significant influence the dependent variable: co2 emission whereas fossil energy has a noteworthy and positive influence on co2 emissions. foreign direct investment and population have a significantly positive influence on co2 emission. while non-renewable and renewable-energy intake has a momentous optimistic bearing on the economic progress of nominated asean states along through labor force and capital formation. the universal energy needs depend on finite nonrenewable energy sources in the form of natural gas, oil, and coal which are exhaustible and hazardous to the environment. so, the need for hours is that the governments should escalate the use of renewable energy in their energy mix to increase the economy’s growth and environmental sustainability. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: renewable energy, fossil fuel energy, co2 emission, fixed effect, radom effect, gmm, environmental sustainability jel classification: o13, doi: 10.47067/reads.v8i2.441 corresponding author’s email address: noreen.safdar@wum.edu.pk 1. introduction sustainable development is one of the key objectives of economies around the globe. economic growth is used as a sign to represent the sustainable development of a country and the continuous increase in the productive capability of an economy. generally, to measure the economic progress of review of economics and development studies, vol. 8 (2) 2022, 127 139 128 any country economists used the gdp as an indicator of economic growth. to achieve economic development and to break the circle of poverty, it is necessary to sustain it. (desmond et al., 2012). there are different advantages of economic growth as it helps to reduce the poverty and to achieve the natural rate of employment. as the productive capacity of the economy increase after the economic growth at the same time, it leads to full utilization of the given resources. it is also fundamentally important for the welfare of an individual. southeast asia is situated south of china and east of the indian subcontinent. southeast asia is divided into the countries of laos, myanmar, singapore, brunei, cambodia, thailand, vietnam, malaysia, indonesia, and the philippines. as the discussion on energy use, environment, and sustainable development are mounting, with mounting fears about climate modification, there is a stress for the countries to consume a greater amount of renewable energy. along with this, the countries must ensure long-term economic growth. co2 emissions have risen over time as the global demand for fossil fuel energy has expanded. it has serious ramifications for the ecosystem and global warming. combating environmental change while stimulating sustainable development has become a major worldwide agenda item in production along with consumption planning of energy. if an economy uses a mix of renewable and nonrenewable energy resources, it may be able to transition to a more sustainable route (dogan, 2016). to do so, officials must understand the influences of renewable and fossil energy on the economy. energy is influential in the economic growth of a state. both production and consumption processes require energy. energy, like adam smith's land, labor, and capital, is now considered an element of production. energy use also contributes significantly to economic growth. energy has come to be a chief cause of economic progress since the 1973 oil shock (noor & siddiqui, 2010). uninterrupted energy supply is thought to be an important tool for the economic progress of developed as well as under-developed countries (saudi et al., 2019). it seems difficult to produce goods and services in contemporary times without the use of energy and also to maintain the continuous production procedure and the supply of goods and services (esen & bayrak, 2017). besides the accessibility of natural assets and location of that state which are signs of advancement and economic strength of a country; energy also dramas a critical role in the economic empowerment of a country because we need energy like oil to extract those resources through the use of machinery. (sasana & ghazali, 2017). in the present study, we are going to discuss two sorts of energy, which are renewable in addition to non-renewable energy. deplete able or non-renewable resources of electricity generation cannot be restored and replenished and depleted after one-time use, and cannot be recovered like nonrenewable fuels including coal, oil, plus gas. there are numerous arguments for this study. to begin, this research will provide a foundation for understanding energy use in the context of long-term economic development. second, this paper will explain which energy is accountable for environmental degradation as well as the mechanisms by which the environment gets polluted. finally, this research will show how energy is a key driver of economic growth, particularly long-term economic growth. fourth, because this study covers all significant explanatory factors, it lowers omitted variable bias. fifthly, this increases country-wise time series analysis along with cross-country panel data analysis. https://www.britannica.com/place/china https://www.britannica.com/place/laos https://www.britannica.com/place/myanmar https://www.britannica.com/place/cambodia https://www.britannica.com/place/thailand https://www.britannica.com/place/vietnam review of economics and development studies, vol. 8 (2) 2022, 127 139 129 this increases our understanding of the country-level issue as well as regional issues relating to sustainable development such as energy mix, and economic growth in addition to climate change. lastly, this study will highlight the variation of energy mix over the last few decades along with underlying causes of these. 2. literature review using panel co-integration and homogenous interconnection tests to examine the long-run cross-sectional dependency and causal link of consumption of energies, environmental deterioration, as well as macroeconomic performance, as measured by gdp and employment, in 50 developing economies from 1990 to 2016, safdar (2020) confirms the positive long period link of environmental worry, energy consumption, along with macroeconomic performance, as measured by gdp and employment, in 50 developing nations between 1990 to 2016. furthermore, narayan and doytch (2017) inspected the positive influence of reusable and fossil energy use on growth of economy in a panel of eighty-nine poor, middle, and high-income nations from 1970 to 2011. ito (2017) employs a panel of 42 developing nations and the generalized method of moment and pooled mean group to show that renewable energy has become added important in growth of economy, while fossil energy has an adverse bearing on the economic well-being of developing nations. similarly, using ols, fe, and gmm, atems, and hoteling (2018) exposed that fossil fuel and renewable energy had an encouraging and substantial influence on growth of economy. renewable energy bears a favorable and substantial stimulus for the economic well-being of five mercosur nations, according to koengkan and fuinhas (2020), but fossil fuels have adverse relation to economic growth. adedoyin (2020) exposed that renewable and fossil fuel energy had a favorable and significant impact on economic well-being of european countries by utilizing a panel of 16 european countries. the study by zafar et al. (2019) confirms the positive influence of renewable and fossil fuel energy use on asia-pacific economic cooperation's economic well-being. venkatraja, b. (2020) investigates the importance of renewable energy consumption in the growth of economy in the brics states from 1990 to 2015. the study's findings, based on ols and fixed effects, show that the use of renewable energy dampens the growth of economy because cost of transitioning from one source to another is higher than the rate of economic growth. fadilah et al. (2020) indicated that employment of renewable and fossil energy has a favorable, substantial impact on gdp growth in the asean region. lotz (2016) confirms renewable energy use has a favorable and statistically substantial bearing on oecd's economic well-being. ivanovski (2020) validates the favorable influence of renewable and fossil fuel energy consumption on economic well-being of non-oecd nations using local linear dummy variable estimates. in a panel of 102 countries, le et al. (2020) used gmm to document the beneficial and statistically noteworthy influence of renewable energies and fossil fuel energy consumption upon these countries' economic well-being. chen et al. (2020) depicted renewable energies are having a significant and positive link in non-oecd economic growth, but hurt growth of developed and developing countries, under specific threshold levels, using the 9,5058 to 9,5926 threshold level employing the threshold regression model. review of economics and development studies, vol. 8 (2) 2022, 127 139 130 another study by tsaurai and ngcobo (2019) confirms that renewable energy utilization has a detrimental influence on growth in the brics states. this is owing to education's negligible impact. as a result, increasing education spending in the brics region can help renewable energy play a greater part in growth of economy. prettner (2014) confirms negative effecct of population expansion on economic growth employing a sample of industrialized countries. the detrimental impact on the population outweighs the benefits of well-developed education systems. charfeddine and kahia's (2019) study has confirmed the influences of utilizing renewable energy on growth of economy. according to pvar, renewable energy usage helps in improving growth of economy in mena area. similarly, wang and wang (2020) found that renewable resource consumption has an encouraging and significant bearing on growth of economy utilizing threshold regression and urbanization level, technical progress, and per capita income. dogan and seker (2016) use panel estimating techniques in their ekc model for eurozone to explore impacts of trade openness, renewable, nonrenewable energy, and real income on carbon dioxide emissions over period 1980-2012. carbon dioxide emissions, gdp, renewable and nonrenewable energy, gdp2, and commerce are all linked in the long run. the ekc hypothesis is supported by a dynamic ols estimator, which shows that trade and renewable energy reduce carbon emissions whereas fossil fuel energy enhances them. using an autoregressive distributes lag model, zaidi, hou, and mirza (2018) studied causal link among co2 emissions, gdp, renewable, and exhaustible energy consumption at a disaggregated level in case pakistan dating 1970 to 2016. the findings display that non-renewable energy has considerable bearing on carbon dioxide emissions. in renewable energy model, economic growth helps to reduce co2 emissions, but not according to non-renewable energy model. natural gas consumption, followed by coal and oil usage, is a key source of energy making and largest reason of co2 emissions at disaggregated level. ali, anwar, and nasreen (2017) studied the causal relationship between renewable, environmental quality and fossil fuel energy sources, per capita production, and population density for bangladesh, sri lanka, india, and pakistan from 1980 to 2013. johanson co-integration, larsson panel co-integration, and the dh causality technique were all used. the findings support the co-integration of variables. financial development, per capita output, population density, and non-renewable energy sources all have a large and beneficial influence on co2 emissions; renewable energy sources, on other hand, reduce co2 emissions. they also show the presence of bi-directional causality amongst co₂ and re sources and from population density to co₂. mohiuddin, asumadu-sarkodie, and obaidullah (2016) inspected connection among gdp, energy consumption (ec), carbon dioxide emissions, and power production for oil, coal, as well as natural gas in pakistan using data from 1971 up to 2013. it was decided to use the vector error correction model. a linkage was discovered between all variables and carbon dioxide emissions using long-run equilibrium. co2 levels will rise as the level of oil-based energy supplied rises. ec, epg, and gdp all contribute positively to co2 emissions in pakistan, according to a generalized impulse-response analysis; however, epl and epc hurt ec, which hurts co2 emissions. according to adams et al. (2018), usage of renewable and fossil fuel energy has substantial, positive influence on the economic maturity in a panel containing 30 sub-sahara african nations from 1980 to 2012, however non-renewable energy has a bigger proportionate influence than renewable review of economics and development studies, vol. 8 (2) 2022, 127 139 131 energy. similarly, khobai and roux (2017) found that embracing renewable energy increases south africa's economic well-being using autoregressive distributed lag (ardl) in research done in south africa. 3. data and methodology the panel data from 1990 to 2018 is taken from world bank’s development indicator and u.s energy information management. southeast asian countries are included in the analysis. model 1 gdp growth = ʄ (rec, nrec, co₂, l, k,) it……… (2) the subscription to represent the types of data which is panel here i is used to represent the countryspecific effect is used to represent the time fixed effect. as usage of renewable energy upsurges, it causes to increase the economic growth similarly usage of fossil fuels indicates the results. co₂ = carbon dioxide emission rec= renewable energy consumption nrec= non-renewable energy gdp= economic growth k= stock of capita l= total labor force model 2 co2= ʄ rec, nre, op, fdi) it…… (2) pop=population fdi=foreign direct investment here is representing gdp per capita, l issued o represent the logarithms, here represents the error term β0 here used as intercept the model. = +𝛽1𝑅𝐸𝐶𝑖𝑡 + 𝛽2𝑁𝐸𝐶𝑖𝑡 + 𝛽4𝐿𝐹𝑖𝑡 + 𝜀𝑖𝑡 (3) 𝑌𝑖𝑡 = 𝛽0 + 𝐿𝑅𝐸𝐶𝑖𝑡 + 2𝐿𝑁𝑅𝐶𝑖𝑡 + 𝛽 𝐶𝑂2𝑖𝑡 + 𝛽4𝐹𝑖𝑡 + 𝛽5𝐾𝑖𝑡 + 𝜀𝑖𝑡 (4) the empirical models of this study are written as 𝐶𝑂2𝑖𝑡 = 𝛽0 + 𝛽1𝑅𝐸𝐶𝑖𝑡 + 𝛽2𝑁𝑅𝐸𝐶𝑖𝑡 + 𝛽3𝐹𝐷𝐼𝑖𝑡 + 𝛽4𝑃𝑂𝑃𝑖𝑡 + 𝜀𝑖𝑡 (5) equation of empirical model rewrite after taking the natural logarithmic in this form as follows for the better result:𝐿𝐶𝑂2𝑖𝑡 = 𝛽0 + 𝛽1𝐿𝑅𝐸𝐶𝑖𝑡 + 𝛽2𝐿𝑁𝑅𝐸𝐶𝑖𝑡 + 𝛽3𝐿𝐹𝐷𝐼𝑖𝑡 + 𝛽4𝐿𝑃𝑂𝑃𝑖𝑡 + 𝜀𝑖𝑡 review of economics and development studies, vol. 8 (2) 2022, 127 139 132 4. empirical findings and discussion 4.1 unit root estimation variable result lco2 i(0) lnrec i(0) lrec i(0) lpop i(0) lgdp i(0) lfdi i(0) lk i(1) lf i(0) fixed effect model 1: variables fixed effect renewable energy consumption -1.007399 {0.000} .1316839 non-renewable energy .1660884 {.032} (0.1179395) {0.000} population 1.033552 {0.000} (0.2058268) foreign direct investment .1065709 {0.000} (0.0270483) constant -6.539225 {0.056} (3.390442) p-value 0.0000 observations 174 f-test 105.20 r-square 0.7258 at 1% level, the coefficient of renewable energy consumption is shown to be adverse and statistically substantial. this means every 1% increase in renewable energy consumption consequences in a 1.0073 percent decrease in carbon dioxide emissions. shafiei and salim (2014), dogan and seker (2016), ali, anwar, and naseem (2017), wang, chen, zou (2005), viswanathan and hassan(2018), jebli, yousaf, and ozturk (2016) have all reported that the renewable energy usage has an adverse and significant bearing upon carbon dioxide emissions. as a result, it is calculated that aggregate usage of renewable energy has no adverse effect on environment and decreases the co2 emissions. the nonrenewable energy coefficient in the table is optimistic and statistically significant at 5% level. this depicts that every 1% rise in non-renewable energy usage consequences in a.166 percent increase in carbon dioxide emissions. non-renewable energy use has optimistic and large influence on carbon emissions, according to ali, anwar, and naseem (2017), shafiei and salim (2014), dogan and seker (2016) and jebli, yousaf, and ozturk (2016). at the 1% level, the population coefficient in the table is positive plus statistically significant. this means that for every 1% increase in population, carbon dioxide emissions increase by 1.3355 percent. dogan and seker (2016), ali, anwar, and nasreen (2017). review of economics and development studies, vol. 8 (2) 2022, 127 139 133 the coefficient of fdi in the table is positive as well as statistically significant at 1% level. this shows that 1% percent increase in fdi usage consequences in a.1065709 percent rise in carbon dioxide emissions. fdi has a favorable and considerable impact on carbon dioxide emissions, according to jebli, yousaf, and ozturk (2016) random effect model 1: random effect dependent variable: co2 emission) renewable energy consumption -.8006764 {.000} (.120747) fossil fuels 0.151227 {.0411} (0.117521) foreign direct investment 0.1047521 {0.000} (0.026077) population 1.155879 {0.000] (0.1634149) constant -9.22615 [0.000} (2.4622) p-value 0.000 observations 174 wald test 351.59 r-square 0.7188 the coefficient at 1% level of renewable energy consumption shows it is adverse and statistically significant. this indicates that a 1% rise in renewable energy usage decreases carbon dioxide emissions by 0.8006764%. renewable energy use has undesirable and considerable influence on carbon dioxide emissions, according to shafiei and salim (2014), dogan and seker (2016). the fossils energy consumption coefficient in the table is positive and also statistically significant at 5% level. this depicts that every 1% rise in renewable energy usage consequences in a.1512 percent rise in carbon dioxide emissions. fossil fuel energy use has a optimistic and large bearing on carbon emissions, according to ali, anwar, and naseem (2017), and shafiei and salim (2014). the population coefficient in the table is positive as well as statistically significant at 1% level. it elaborates that a 1% rise in population usage consequences in a 1.1558 percent increase in carbon dioxide emissions. population has a positive and large impact on co2 emissions, according to dogan and seker (2016). the coefficient of fdi in the table is positive as well as significant at the 1% level. this means that a 1% rise in fdi consequences in a.104752% rise in co2 emissions. fdi has a favorable and considerable influence on carbon dioxide emissions, according to jebli, yousaf, and ozturk (2016). hausman test model 1: the hausman test is used to identify best model among fixed effect as well as random effect models. the null hypothesis h0 states that random effect model is applicable. review of economics and development studies, vol. 8 (2) 2022, 127 139 134 h1 alternative hypothesis: a model showing fixed effect is appropriate. null hypothesis is rejected so alternative hypothesis is accepted since hausman test's probability value is 0. 0000. in this scenario, the fixed effect technique is used. two-step system gmm model 1: this directs that one percent increment in use of renewable energy causes 0. 0.8473% decrease in carbon dioxide emissions. this is consonant with results of the study of shafiei and salim (2014). the table reveals that use of fossil energy has increasing influence on co2 emission. this directs that a 1% rise in use of fossil energy causes 0. 0. 08342% increase in co2 emission. this is consonant with the findings of the study by the ali, anwar, and naseem (2017), the coefficient of fdi in the table is positive as well as statistically significant at the 1% level. it means that a 1% rise in fdi usage consequences in a 0.0953% rise in carbon dioxide emissions. whereas population increase has a positive nonetheless insignificant bearing on co2 as p-value is higher than the threshold. dependent variable: co2 variables two-step system gmm co2 t-1 0.908*** (0.0132) renewable energy consumption -0.847315*** (0.143099) fossil fuels 0.083421** (0.1388) fdi 0.095389*** (0.02314) population 0.87153 (.13883) inflation -0.0000164 (0.0000153) constant 0.337*** (0.0796) observation 174 groups 6 instruments 12 ar (1) pr>z 0.000 ar (2) pr>z 0.052 hansen test 0.215 standard errors in parentheses ** p < 0.05, *** p < 0.01 review of economics and development studies, vol. 8 (2) 2022, 127 139 135 fixed effect model 2: variables fixed effect dependent variable: gdp per capita renewable energy consumption 0.1500245* {0.005} (.0523612) non-renewable energy .1807149 * {0.000} (.0425631) gross fixed capital formation 0.1950712* {0.000} (0.0313262) labor force 0.6442139 * {0.000} (0.0668993) carbon dioxide 0.2363233* {0.000} (0.0283722) constant -11.26525 {0.000} (.7351673) p-value 0.0000 observations 174 f-test 130.86 r-square 0.9357 standard errors in parentheses * p < 0.01 this translates to a 0. 1500245 percent boost in economic growth for every 1% increment in the renewable energy consumption. renewable energy usage has a direct and substantial influence, according to koaak and aarkgünei (2017). the fossil fuel energy consumption coefficient in the table is statistically and +tively significant at 1percentage level. this depicts that for every one percent rise in nonrenewable energy use, economic growth increases by.18071 percent. fossil fuel energy consumption has positive as well as significant influence upon growth of economy, conferring to kahia et al. (2016). at 1% level in table, the labor force coefficient is optimistic and statistically significant. this amounts to a 0.6442 percent rise in the economic growth for every 1% increase in labor force participation. the labor force effect upon growth of economy was studied by a. wijaya, j. kasuma, t. tasenţe, and darma, d. c. (2021). similarly, at a 1% level of significance, gross fixed capital formation is positive and substantial. this demonstrates that a 1% rise in physical capital results in a 0.195 percent rise in growth of economy. whereas carbon dioxide has also a positive as well as significant bearing on economic growth. this shows that 1% rise in carbon dioxide translates into an upsurge in economic growth by .2363%. review of economics and development studies, vol. 8 (2) 2022, 127 139 136 random effect model 2: random effect dependent variable: gdp per capita renewable energy consumption -.2840825* {0.000} (0.0395005) fossil fuels -.2297237* {0.000} (0.0479458) gross fixed capital formation 0.633782* {0.000} (0.038207) labor force -0.7119633* {0.000} (0.0488268) carbon dioxide 0.1955217* {0.000} (0.0427865) constant 4.237126* {0.000} (0.5381828) p-value 0.000 observations 174 wald test 8339 r-square 0.7301 adjusted r-square standard errors in parentheses * p < 0.1, hausman test model 2: when the probability value of the hausman test is significant, we reject null hypothesis and accept alternative hypothesis. as a consequence, fixed-effect model appears to be adequate. two hypotheses exist in the case of the present study. h0: random effect model is suitable. h1: fixed effect seems applicable so, the alternative hypothesis is accepted review of economics and development studies, vol. 8 (2) 2022, 127 139 137 two-step system gmm model 2: dependent variable: gdp per capita variables two-step system gmm gdp per capita t-1 0.762*** (0.0215) renewable energy consumption 0.19281* (0.06169) fossil fuels 0.2100687* (0.0453) gross fixed capital formation 0.2638* (0.02516) labor force 0.735419* .04387 carbon dioxide .15738 0.3429 constant 0-9.2678*** (0.6294) observation 174 groups 6 ar (1) pr>z 0.034 ar (2) pr>z 0.057 hansen test 0.223 standard errors in parentheses * p < 0.1, ** p < 0.05, *** p < 0.01 the renewable energy consumption coefficient as depicted in the table is positive as well as statistically significant at 1% level. it means that every 1% rise in the renewable energy usage consequences in a 0. 19281 percent rise in the growth of economy. the capital formation coefficient has a statistically significant, positive influence on the growth of economy. this means that a one percent rise in capital formation translates to a rise in the economic growth of 0.2638 percent. labor force expansion has a positive and highly substantial influence upon economic growth. according to this formula, a one percent increment in population causes a 0.735419 percent rise in the growth of economy. at 1% level, non-fossil energy coefficient in the table is positive along with statistically significant. this suggests that for every 1% rise in use of non-renewable, the economic growth increases by 0.19281 percent. we apply the system gmm model to tackle autocorrelation problems and verify the validity of instrumental variables. because ar (2) = 0.057 is insignificant, there is no issue of autocorrelation, and hansen= 0.223 indicates that instrumental variables are valid when the null hypothesis is accepted, and there is no issue of endogeneity. review of economics and development studies, vol. 8 (2) 2022, 127 139 138 5. conclusion and recommendations nonrenewable energy has a good impact on environmental degradation but a detrimental impact on long-term development. as a result, significant efforts must be taken to promote renewable energy while discouraging nonrenewable energy use. the government's role in energy-saving and production is difficult to overlook. they should put money into smart, modern technology that maximizes the usage of nonrenewable energy. energy conversion technologies, which come in a variety of shapes and sizes, are highly developed and developed technologies that are beneficial in converting energy to boost efficacy. the study's empirical findings imply that adoption of the renewable energy bears a significant as well as statistically significant impact on global growth of economy. and fossil fuel energy use has a considerable effect on the growth of economy. because, according to a british petroleum report, oil consumes 193.03 exajoules, natural gas consumes 157.86 exajoules, and coal consumes 157.86 exajoules of total primary energy. however, only 28.98 exajoules out of total primary energy use are accounted for by renewable energy. the study's next step will be to check impact of renewable energy usage on growth of economy at a disaggregated level. as a consequence of the outcomes of this study, the governments of the selected countries under study should implement policies to encourage the use of renewable energy, which has optimistic effect on environment and economic growth, along with renewable energy having no negative affect on the environment or human health. references adedoyin, f. f., bekun, f. v., & alola, a. a. 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(2016). determinants of co2 emissions in the european union: the role of renewable and non-renewable energy. renewable energy, 94, 429-439. energy consumption and economic growth: empirical evidence from pakistan”, pakistan journal of social sciences (pjss), vol. 32, no. 02, 2012 fadilah, s., lestari, r., sahdan, m. h., & khalid, a. z. a. (2020). the impact of renewable energy consumption on the economic growth of the asean countries. international journal of energy economics and policy, 10(6), 602. inglesi-lotz, r. (2016). the impact of renewable energy consumption to economic growth: a panel data application. energy economics, 53, 58-63. ito, k. (2017). co2 emissions, renewable and non-renewable energy consumption, and economic growth: evidence from panel data for developing countries. international economics, 151, 1-6. kahia, m., aïssa, m. s. b., & charfeddine, l. 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(2018). the role of renewable and non-renewable energy consumption in co 2 emissions: a disaggregate analysis of pakistan. environmental science and pollution research, 25(31), 31616-31629. review of economics and development studies vol. 5, no 2, june 2019 413 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 2, june 2019 journal homepage: www.publishing.globalcsrc.org/reads ideological diversity and birth control differentials in pakistan: a study of islamabad 1 sajid mahmood awan 1 senior research fellow at the national institute of historical and cultural research (nihcr), quaid-i-azam university, islamabad, pakistan: smawan2222@gmail.com article details abstract history revised format: may 2019 available online: june 2019 growing population explosion was not a grave problem in the early days of islam or in the period of islamic legislation. thus, no explicit negation or affirmation of it is available either in the religious texts or in the religious jurisprudence or law. th the opponents as well as the proponents of family planning, extract some selective quranic verses, ahadith and inferences of jurisprudence in favour of their respective viewpoints. such diverging views have made the future of family planning programmes doubtful in pakistan. with this background, the present study shows that in the contemporary situation, it is solely the individual who makes the final decision about approving or disapproving family planning. this decision-making process is influenced by the personal attributes of the practitioners. in order to evaluate these attributes, the researcher has attempted to analyze and highlight the perception of family planning by muslim residents of islamabad i.e. the capital city of pakistan. the people surveyed are predominantly from different social, geographical and economic backgrounds and from different religious callings, along the sectarian continuum. the researcher’s task has thus been to observe the responses and to point out whether the objective variables i.e. geographical, income and class, occupation and age factors etc. are more significantly associated with knowledge, attitude and practice of family planning or the subjective variables like religion and sect appear to be more important determining factor of family planning practice in a traditional society like that of pakistan. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords globalization, employment elasticity, ardl, pakistan. jel classification: corresponding author’s email address: smawan2222@gmail.com recommended citation: awan, s. m., (2019). ideological diversity and birth control differentials in pakistan: a study of islamabad, review of economics and development studies, 5 (2), 413-420 doi: doi 10.26710/reads.v5i2.637 1. introduction the any question having multiple answers is generally meant that either there is something wrong with the question or with one, more or all the possible answers to it. to a social scientist it means that social researchers choose from alternative approaches to science. every approach has its own specific set of philosophical assumptions and the doctrines along with its own carriage to do research. generally, a researcher rarely declares the approach he follows in one’s research, but in my personal view, it depends on one side upon the clarity of argument in writing and on the other side upon the clarity of thought of the reader to grasp the approach applied or followed in a particular research. the present investigation is made mainly in the positivist social science approach which is http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no2, june 2019 414 generally applied in the natural science. the ontological and epistemological positions of the study enable it to resolve one of the more bitter contests of the issue in the contemporary pakistan. the debate moves with an organised method for combining deductive logic with precise empirical observations of individual behaviour in order to discover and confirm the central argument of the study to predict the general patterns of pakistani society. 2. the birth control movement in pakistan soon after independence, the government of pakistan lost no time in directly or indirectly adopting birth control as a part of its national policy. for instance, at the time of launching the first five year plan (1955-60), the economic planners pointed out the severe consequences of high population growth in pakistan. pakistan being an islamic state has to get religious approval before the implementation of any new policy like birth control or family planning. that is why, the government's policy of family planning faced critical resistance in pakistan. on the question of religion in pakistan, singer (1970) noted that max weber saw the asian religions as a major obstacle to modernization because of their bulwark of traditionalism and religious duties. in pakistan, the islamic roots that underlie the social fabric of the people are deeply embedded in tradition and islam and are not likely to change in the near future (wriggins, 1975: 17). the present study is intended to probe into the worldview of the muslims in pakistan. the aim is to discover, why both the opponents and proponents of family planning have such divergent attitudes towards birth control despite their reference to the same sources i.e. the quran and the sunnah of the prophet muhammad (pbuh). it is important to point out that the present work is not intended to decide as to who is right and who is wrong. it is meant to be a descriptive not a prescriptive study. its main purpose is to trace out only the directions and dimensions of various sects and the pakistani muslims’ worldview and family planning without going into the moral issues of the case. 3. islam and birth control for muslims, the sources of islamic law are primarily two, the quran and the hadith. based on these two sources are two more, called the derivative sources: the consensus of jurists (ijma) and analogy (qiyas). in addition, there are supplementary sources, interpreted in the spirit of the shariah (principles of religion), which include: juristic preference (istihsan), the examples of residents of madina; the public welfare (al-masalih-al-mursalin), the rule of concomitance (istishab) and prevailing customs (usf), (omran, 1992: 73). muslims believe that the quran is divine revelation and it is the very words of god. according to omran (1992), none of the contenders has produced even a single verse from the quran, which supports or rejects the idea of family planning in a clear or explicit way. it means that the quran is silent on the question of family planning. this silence, in my opinion can be explained by the fact that in the early days of islam, the problem was not as acute as compared to other problems like alcoholism, adultery or the low status of women among the arabs. these problems thus figure prominently in the quran (marrak, 1974: 268). as for the hadith, both the opponents as well as proponents of family planning have quoted some ahadith of the holy prophet (pbuh) of islam in support of their contention. but it can be easily observed that except the ahadith on azl (coitus interruptus), no other hadith is directly relevant to the issue of family planning (mahmood, 1977; omran, 1992). azl or al-azl, is an arabic word which stands for separation, to set aside, to dismiss or to set apart. thus the literal meanings of this word are insulation, separation, dismissal, segregation or removal. in view of these denotations, azl is generally taken to stand for a particular method which means withdrawal of penis from vagina before ejaculation i.e. coitus interruptus. since the statement of the prophet (pbuh) can be interpreted in various ways, there is still controversy whether coitus interruptus (azl) is allowed or not (marrak, 1974: 268). muslims should, therefore, use their own reasoning to interpret the prophetic traditions in order to determine the rulings which may qualify the pre-requisites of new advancement provided that they are in accordance with the real spirit of islam. 4. sectarian landscape of pakistan mahmood (1997: 37) has reported that in india, pakistan and bangladesh the sunni muslims are invariably either hanafi or shaf'i. the shias (shiah) of india mostly follow the athna ashari school (imami). the maliki, the hambuli and the zaydi schools have almost no followers here. here it is to be pointed out further that still another school of shiah community (the ismaili) has its own centers in pakistan. ismailis have thus a considerable number review of economics and development studies vol. 5, no 2, june 2019 415 of followers. although a definite number of the followers of the schools mentioned above is not available. it can, however, be inferred that the sunnis in pakistan generally follow the hanafi and shafi. the case of shiah community in pakistan is somewhat different. the shiahs in pakistan mainly follow either the imami school or the ismaili school. so the views of only these four schools regarding family planning are discussed here in detail. 5. theoratical positioning of sects in pakistan 5.1 the hanafi school (sunni) the majority position of this sect is to permit al-azl as a contraceptive measure with differences as to the requirement of the wife's consent. the older and more popular position is that it is not allowed without the wife's consent. later jurists, however, bypassed the wife's or husband's permission in times of religious decline `bad times', (fasad-al-zaman) and in fear of begetting delinquent children (al-walad-al-sou) (omran, 1992: 153) 5.2 the shafi school (sunni) the characteristic position of the shafi school is that al-azl is allowed without the wife's consent. however, there is some verbal disfavour or karaha tan-ziheyya. thus, when the wife is disliked, they mean it is less than impeccable. they argue that the woman has the right to intercourse, but not to ejaculation. several jurists adopt the jumhour (majority) position by requiring the wife's consent. a few have disallowed al-azl altogether. (omran, 1992: 159). 5.3 the imami school (shiah) the majority position of the imami school (almost consensus) is in agreement with the jumhour position i.e. al-azl is permissible subject to the wife's consent. the imami jurists add, however, that consent can be obtained at the time of the marriage contract, once and for all. al-azl is legal thereafter, even if the wife changes her mind. so important is the wife's consent that a few jurists allow monetary compensation to the wife every time the husband violates this condition. a position much similar to the maliki except that the compensation here is fixed at ten dinars and is called diya-o-nutfa (compensation for the sperm)(omran, 1992, 165). 5.4 the ismaili school (shiah) the majority position of ismaili school is equivalent to jumhour position, i.e. al-azl is permissible with the wife's consent. the consent can however, be obtained at the time of marriage contract. (omran, 1992, 167). hence, the majority ruling given by eminent jurists is permissibility of al-azl with the wife's permission. hence, it is very safely concluded that theoretically speaking islam is not against family planning. a number of researchers go beyond the need of family planning at family level and even think that it can be implemented at the national level also, if it is in the real benefit of family and muslim community. (sharif, 1996: 91; mahmood, 1977; omran, 1992; marrak, 1974; akbar, 1994; ahmad, 1995: 8). 6. sectarian differentials on the idea of birth control so far, only the textual or theoretical position of muslims towards family planning has been discussed. we have not, however, touched upon the opinion or attitudes of the muslims of pakistan concerning this issue. a probe into the practical attitudes of muslims in pakistan reveals a great divergence among them. some pakistanis theologians have exhibited a modernist attitude in interpreting the religious texts and find nothing against islam in family planning. however, their sphere of influence is very limited. consequently, a large number of pakistani muslims believe in the position of ulema like maulana maududi who believe it to be impermissible (mahmood, 1977: 67). wajihuddin ahmad (1974) has further pointed out that despite a religious sanction for contraception and encouragement to family limitation in the islamic orthodoxy; the contemporary religious attitudes are still resilient to the idea of family planning. he indeed suggests that the change is always influenced by non-religious factors. most of the leaders of the orthodox deobandi theological school, till the mid-forties, allowed both contraception and abortion. some prominent names in issuing these religious edicts (fatawas) are mufti muhammad shafi, mufti azizur rehman and maulana rashid ahmad gangohi. yet the contemporary disciplines of these authorities have made the most virulent attacks on family planning in pakistan (ahmad, 1974: 287-288)1. 1 the present researcher has gone through all the edicts of these three ulema but is unable to find out any edict for or against contraception or abortion. so, the authenticity of this source is not fully reliable. review of economics and development studies vol. 5, no2, june 2019 416 in an agro-based society of pakistan more children are required not only to enhance manpower but also the family’s social status. large families, especially those, who have more male children, are considered socially prestigious and more secure than others. thus people oppose the notion of family planning traditionally and not exactly religiously. eventually, they tend to have more children and family planning efforts do not succeed fully in pakistan. thus, it is hypothesized that the real genesis of the opposition to family planning, both by religious ulema as well as ordinary muslims, is derived from the prevailing agro-traditional worldview of the society and not from the religion itself. the present study claims that all apparently religious doctrines against family planning are actually the expression of their local worldview. accordingly, the people consider their opposition to the idea of family planning justified in islam, though in reality they derive their feelings from their own worldview. 7. muslim worldview and family planning since the main purpose of this study is to deal with the worldview of the pakistani people regarding family planning, the same is done through a field survey in islamabad with an attempt to cover all the characteristics of national demographic landscape. 7.1 geographical factor in the present investigation, a sample of 200 muslim respondents was taken from a total population of 805,235 from the urban established sectors, semi urban areas or townships and villages. the total area of the selected geographical universe consists of fourteen urban established sectors, six urban slums, 5 smaller townships and one hundred villages and "dhoks" (smaller rural settlements). concerning the urban proportion a total of 35 respondents were interviewed, with 28 from 14 established urban centers and 7 from urban slums. before surveying the rural areas, ten groups were designed, consisting of ten villages each. one village was selected from each group while six respondents were interviewed from each selected village. thus, a total of 60 respondents were interviewed in this way. five respondents were interviewed at random from the smaller townships. the same proportion and criterion of distribution was applied to both male and female respondents. table 1: urban-rural fertility differentials locality male female total no. of respondent s total no. of children average no. of children no. of respondents no. of children average no. of children rural 65 281 4.32 65 242 3.72 urban 35 148 4.22 35 112 3.20 total 100 429 4.29 100 354 3.54 the table 1 shows the urban rural fertility differentials. it points out that, in case of both the rural males as well as the rural females, the average number of children is higher. however, the rate of urban-rural differentials is much higher as compared to females. the male differential is 4.32-4.22 = 0.10, while in the case of females it is 3.72-3.2 = 0.52, which is considerably lower. 7.2 literacy level and birth control the area under consideration has a maximum literacy level in the whole country. its literacy rate ratio is 72.45%. literacy rate in urban areas is 77.3% while in rural areas it is 62.5%. further, the male literacy ratio is 80.6% as compared to 62.4% of females (population census, 1998). the sample of this study comprises both illiterates and literate. the section on the literate is further graded into the respondents with primary, middle, matric, intermediate, and bachelor and master levels of education. a separate proportion is also set for those with the professional education. the researcher took every care to represent almost all the major disciplines and faculties of education, like commerce, arts, science, medicine, engineering and law etc. in the sample. review of economics and development studies vol. 5, no 2, june 2019 417 an inverse relationship between the fertility and level of education is well established. the level of education influences the fertility both through direct and indirect methods (un, 1973). such effects of fertility rate are also confirmed by the findings of sathar (1984). the present study also traces out an interrelationship between the variables of literacy level and the number of children, which is shown in the table 7. review of economics and development studies vol. 5, no2, june 2019 418 table 2: literacy level and the number of children level of literacy male respondents female respondents urban no. of chil. ave. no. of chil. rural no. of chil. ave. no. of chil. tot al no. of chil. ave. no. of chil. urban no. of chil. ave. no. of chil. rural no. of chil. ave. no. of chil. total no. of chil. ave. no. of chil. no . % no . % no . % no . % no education 17 48.6 70 4.1 33 5.7 163 4.9 50 223 4.4 14 40 61 4.3 36 55.4 145 4.2 50 206 4.1 primary 1 2.8 3 3 4 6.1 18 4.5 5 21 4.2 3 8.6 5 1.6 5 7.6 26 5.2 8 31 3.8 middle 1 2.8 3 3 4 6.1 18 4.5 5 21 4.2 3 8.6 11 3.6 4 6.1 15 3.7 7 26 3.7 matric 2 5.7 10 5 5 7.6 12 2.4 7 22 3.1 3 8.6 8 2.6 5 7.6 20 4 8 28 3.5 intermediate 5 14.3 19 2.2 5 7.6 15 3 10 26 2.6 4 11.4 6 1.5 5 7.6 11 3.2 9 17 1.8 bachelor 4 11.4 24 6 5 7.6 19 3.8 9 43 4.7 3 8.6 7 2.3 5 7.6 13 2.6 8 20 2.5 master 1 2.8 4 4 3 4.6 10 3.3 4 14 3.5 2 5.7 5 2.5 2 3.1 5 2.5 4 10 2.5 professional 4 11.4 23 5.7 6 9.2 26 4.3 10 49 4.9 3 8.6 9 3 3 4.6 7 2.3 6 16 2.6 total 35 100 148 4.2 65 10 0 281 4.3 100 419 4.1 35 100 112 3.2 65 100 242 3.7 100 354 3.5 chil: children. ave: average. review of economics and development studies vol. 5, no 2, june 2019 419 the table 2 shows that the total sample is equally divided into literate and illiterates with the ratio of 50% each for male and female respondents. although this 50% proportion does not confirm with the real statistics of the area, it however, suits to the requirements of the present study. it seemed impossible for the researcher to divide such a small sample according to the real literacy rate of the area into all the above mentioned levels of literacy. secondly it seems coherent with the national literacy level of the country which is 62.4%. keeping in view the actual literacy rate of 62.4% for females in the area, a literacy rate of 50% seems a bit unrealistic. with this discrepancy, males and females in computation will be dealt and analyzed separately, wherever needed. the table also mentions a detailed description of all the respective levels of education. it reflects that at the primary, middle and the matric levels of education, female proportion is higher than that of the male respondents. nevertheless, it does not mean that they have actually high, but that they have got duly low proportion in the upper levels of education. concerning the professional education also, females have got a considerable proportion (although lower than males). indeed, the lady doctors and the lhvs (lady health visitors) have mainly contributed to this proportion. concerning the fertility differential with reference to literacy levels, the present study confirms the findings of previous researches (un, 1973; and sather, 1984), but with little differences. the table 2 shows clearly that the fertility level of the respondents with no education is considerably higher than the fertility level of educated respondents. then from the primary to the intermediate level of education it follows the trend that higher the education level is lower is the fertility level there. at bachelor and master's levels of education, however, a slightly higher level of fertility is evident. it may be because of better economic positions, better health conditions, better child and maternal care or less mortality level and older age level of the respondents. as it has been explored previously in the topic of age distribution and fertility differential that the people with more age have considerably high fertility level, it can be inferred that an increase in education, people are realizing the intensity of the situation more rigorously. however, the proper reason of this differential is not traced out here. the table also shows that the people with professional education have comparatively high level of fertility; this effect is lesser, however, in case of female. this is mainly because most of the females with professional education are themselves working as doctors and nurses. finally, the effect of education on the fertility differentials is stronger in the case of females than in males. a detailed description of the basic characteristics of the sample reveals that a number of factors like: geographical location, age distribution, income, class, level of literacy and occupational distribution have considerable influence to impress upon the fertility differentials in pakistan. the average number of children is higher in the rural areas than in the urban areas and the older age groups show higher level of fertility than the younger ones. as far as the variable of class difference is concerned, it does not affect the number of children in rural areas. in urban areas, however, fertility patterns are influenced by income and class differential. consequently, the urban lower class has more children than that of urban upper class. the study also finds out an inverse relationship between literacy and fertility. this variable seems more effective in females. finally, those attached with agricultural occupation have considerably higher number of children, as compared to those engaged in the services sectors. references ahmad, wajihuddin (1974). 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(1975). pakistan in transition. islamabad: university of islamabad press. review of economics and development studies, vol. 9 (1) 2023, 1-16 1 analysis of determinants of debt financing: a case study of the cement industry of pakistan fawad ashraf sheikh a, imamuddin khoso b, muhammad shahbaz khan c a the islamia university of bahawalpur, pakistan b university of sindh, pakistan c the islamia university of bahawalpur, pakistan article details abstract history: accepted 25 january 2023 available online march 2023 the aim of this study is to an analysis of determinants of debt financing: a case study of the cement industry of pakistan. as profitability is one of the best tools to measure the performance of any firm or sector. the current study also aims to analyze the impact of intangible assets on the profitability of the cement industry of pakistan. to analyze the impact of intangible assets on profitability some control variables are also used in this research i.e. capital structure, firm size, growth rate, non-debt tax shield, and working capital, alongside these variables intangible assets are also used as a determinant of the profitability and age of the firm is used as a moderator between intangible assets and the profitability of the firm. the data collected twenty years of (unbalanced) annual data i.e. 1998 to 2017 of twenty cement companies listed under the pakistan stock exchange is used and the data sources are secondary. to analyze the data panel data regression is used, the results of the study concluded that a positive and significant relationship exists between intangibles and profitability, and the age of the firm moderated the relationship between the two variables. firms in pakistan should report intangible assets in their financial statements, the managers of the said industry need to manage the intangible assets of their firm efficiently and should work on its disclosure in their financial statements. © 2023 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: profitability, intangible assets, firms age, cement industry jel classification: l25, g12, g19 doi: 10.47067/reads.v9i1.474 corresponding author’s email address: muhammadshahbazkhan7@gmail.com 1. introduction dynamic environment, where human resources, technology, and research and development play a vital role on the performance of the firms, the firms should report all these important resources as intangible assets in their financial statements (sanchez, p., chaminade, c., & olea, m., 2000). the financial statements generated by the firms are not as much information to prospects as they should because they do not include some relevant information that should be mentioned in the financial review of economics and development studies, vol. 9 (1) 2023, 1-16 2 statements, which is the main reason for the increase in the gap between the market value and book value of the equity in financial markets. the controversy among the academic community that whether or not intangible assets should be included in financial statements or not. the reason behind this might be the definition of intangibles, different methods of the measurement of intangibles, and how they should be amortized. according to ias 38 defines as intangible assets as non-monetary assets that cannot be used in the production or supply of services and goods. while white and fried (1994) explained asb considers intangible assets as part of goodwill to enable them to be sold without selling the whole firm or business. talking about ias 38, it deals specifically with recognizing and measuring intangible assets and their reporting. the said standard requires the firm to report the intangible assets if certain criteria are met. ias 38 also tell us about the measurement of the intangible assets and also requires some disclosures regarding intangible assets [ias 38.1]. the most recent amendment made by ifrs in ias 38 was in 2014 effective form january 1st 2016. the significant of the intangible assets and their reporting as per the standards issued by ifrs, in this study we analyze the impact of these intangible assets on the profitability of the cement industry of pakistan. the cement industry of pakistan plays a vital role in the development of the economy of pakistan and also one of the most important sector for the economy of pakistan. the positive impact of cement industry of pakistan is not only important for the manufacturing sector of the country but also for the growth and development of the country. the human capital of pakistan is 3% employed in cement industry of pakistan (najabat, 2015). the cement industry of pakistan was once a very small industry but it rapidly grew with the passage of time and finally in 2001 it entered in the export market (najabat, 2015). in recent past the topic of profitability has been given a notable importance. the current study is focused to analyze the factors that affect profitability in cement industry of pakistan. many researches have been conducted to find the factors that affect the profitability and came up with contradictory results. in the same way many studies have been conducted in pakistan on the profitability of different industries and sectors, but the variable of intangible assets has not been included in any research to determine profitability. the current study is conducted to answer the questions that are intangible assets an important variable to determine the profitability of the cement companies of pakistan? and does age of the firm moderate the relationship between the two variables? and to what extent does the selected variable impact the profitability? with the controlling effects of capital structure, firm size, non-debt tax shield, growth rate and working capital. 2. problem statement as per the above rationale and discussion, the problem is that the researchers and the managers have considered capital structure, firm size, growth rate, working capital and non-debt tax shield as a standard determinant of profitability. whereas recent exploratory studies have highlighted ‘intangible assets’ as an important and significant variable to determine profitability. according to sanchez, p., chaminade, c., & olea, m. (2000) that firms in pakistan are not reporting intangible assets in their financial statements, leading to an increase in gap between market value and book value of equity due to incomplete disclosure of financial position. cement industry of pakistan is essential for pakistan's economic development, with 3% of its human capital employed in it (najabat, 2015). because of the strategic importance of this industry to the country the study aims to analyze the impact of intangible assets on the profitability of the cement industry of the country to answer our question that are intangible assets worth reporting? beside this, many firms in the recent past started to report their review of economics and development studies, vol. 9 (1) 2023, 1-16 3 intangible assets in their balance sheets, but still many firms failed to disclose their intangibles in their financial statements. 3. research contribution most of studies on profitability have been undertaken utilizing data from various nations and sectors, as well as various independent factors. so far, as per knowledge, this kind of research has not been conducted in pakistan in which intangible assets, as a determinant of profitability in cement industry of pakistan has been used and the moderating effect of age of the firm is analyzed between intangible assets and the profitability. therefore, this study attempts to investigate the importance of intangible assets and its impact on profitability and help researchers to better understand the determinants of profitability and the role of intangible assets. 4. research questions • is intangible assets an important variable to determine the profitability of cement industry? • does age of the firm moderates the relationship between intangible assets and the profitability? • to what extent does the determinants understudy affect the profitability of cement industry? 5. research objectives • to explore the importance of intangible assets as a determinant to measure the profitability of cement industry. • to understand and highlight the overall impact of the selected variable on the performance of the cement industry. • to examine the moderating effect of age of the firm between intangible assets and the profitability. 6. profile of cement industry of pakistan the cement industry of pakistan has grown to meet the demands of the country, with 21 cement companies listed under pakistan stock exchange and multinational firms. the production cost of the cement is approximately 50% to 60% of the cost of goods sold. cement industry plays a key role in the development of the economy of pakistan as the inputs required for this industry are cheaply and abundantly available in pakistan (najabat, 2015). as per najabat (2015), (khan m, anadil, et al., 2012) conducted a research to examine the role of cement industry on the economy of pakistan. the results of their study revealed that the abundance and availability of the raw material required motivate the cement manufacturers in pakistan. khalid kamran (2008) also conducted a research to analyze the performance of the cement sector of pakistan. he concluded that after the earthquake of 8th of october 2005 the demand and supply for cement has increased greatly because of reconstruction projects. 7. why cement industry of pakistan? according to bloomberg report (2017), after the introduction of cpec the cement industry of pakistan is expected to increase its production capacity to meet the demands of the economy, the expected increase is about 56% to 70 million tons in next 5 years. the capacity to utilize cement has also shown an increase of about 88% in 10 months (which is highest in last 11 years). beside this, because of an increase demand of cement in pakistani market the exports of the cement also declined by almost 19% as per apcma (all pakistan cement manufacturer association). beside this report of bloomberg, bmi research company also published a report in 2017 and ranked pakistan among the fastest growing construction markets in the world, with an expected growth rate of 12% annually. so, keeping in mind the increased importance of the cement industry for the economy of pakistan and the importance of intangible assets to any industry, the said industry is being selected. review of economics and development studies, vol. 9 (1) 2023, 1-16 4 in the current study data of twenty cement companies operating in pakistan and listed under karachi stock exchange has been used. the cement companies under the study are mentioned in table 1.0 along with their psx symbols. the dependent variable of this research is profitability as schendel and hofer (1979) argued in their research that profitability is one of the better representative of performance as compared to the others. 8. literature review 8.1 profitability a company's profitability is the amount by which its total income exceeds its total costs during a particular period. profitability is an accounting term that is sometimes known as net profit or net income. accounting policies can have an impact on how income statements, also known as statements of operations, portray income and costs in financial reporting. corporations utilize accounting procedures to take advantage of tax restrictions and decrease their tax liability. the main objective of firms is to produce profits and enhance their profitability and to make sure that business will sustain in market conditions. pandey (1980) characterized the capacity of being profitable as an important variable in order to ensure survival in market conditions. to enhance the profitability of the firms it’s important to look at the factors that affect the profitability and to understand how companies fund their operations. the profitability is the capacity to generate profits and handle future uncertainty, and it is the best measure of performance (schendel & hofer, 1979). further kartz & shapiro (1994) expressed in their study that firms can increase their profitability by cost cutting or by improving their market position. 8.2 capital structure and theories capital structure is the mix of debt and equity used to finance a company's assets and operations. the discussion on the topic of capital structure was initially started by (franco modigliani; merton h. miller, 1958). they analyzed the impact of agency costs, bankruptcy costs and taxation on capital structure. many theories have been presented on the capital of capital structure four contradictory theories from those theories are the irrelevance theory (franco modigliani; merton h. miller, 1958) the tradeoff theory (bradley et al., 1984) pecking order theory (jensen, 1986) and agency cost theory (myers, s. c., & majluf, n. s., 1984) after the foundation set by modigliani and miller's theory these four opposing theories were presented. the pecking order theory presented by (jensen, 1986) predicts an existence of negative relationship between capital structure and profitability, while on the other hand the tradeoff theory and agency cost theory said that there exists a positive relationship between the two variables. before discussing these theories of capital structure have a look at the assumptions of these theories. 1. debt and equity are the only two sources that firms use for financing 2. no change in the investment decisions of the firm i.e. no change in total assets 3. 100% dividend payout ratio or no retained earnings 4. financing mix has no impact on business risk 5. investors expect future profitability of the firm 8.2.1 mm theory (franco modigliani; merton h. miller, 1958) were the first ones to introduce the modern theory on capital structure which is considered as the base of current corporate finance. theory based on the two different propositions under certain assumptions. both the propositions consider that market is perfect, there is no bankruptcy cost, no transaction cost, and no symmetry information and no tax rate. review of economics and development studies, vol. 9 (1) 2023, 1-16 5 proposition i: the proposition i states that the value of firm is not dependent on its capital structure, which means in what manner the capital structure is designed the value of the firm will not be affected or we can say that the value of firm with leverage and the value of firm without leverage is same. proposition ii: states that as the level of leverage rises the cost of equity of the firm also rises while wacc remains the same as higher cost of equity compensate low cost of the debt. in 1963 modigliani and miller removed the assumption of corporate tax rate from their propositions while keeping the other assumptions same and stated that as the level of financial leverage increases the value of firm also increase and the reason behind this increase in value is that the firm will get a debt shield because of debt. beside this as the level of leverage rises in the capital structure of the firm the weighted average cost of capital decreases. 8.2.2 pecking order theory myers, s. c., & majluf, n. s. (1984) presented that the pecking order theory suggests that asymmetry of information between insiders and outsiders affects capital structure, leading to higher costs of financing. further myers, s. c. (1984) stated that there is no standard structure for managers to design capital structure of the firms, firms chose their financing sources in hierarchical order i.e. managers prefer internal finance at first place, then debt and use equity as last resort. 8.2.3 market timing theory presented by baker, m., & wurgler, j. (2002) the theory says that the existing capital structure of a company is a result of the past attempts of the firm to time the equity market. companies try to issue new shares in the market when they perceive that their firm is overvalued and when they perceive that their shares are undervalued they purchase them back, and as a result their capital is related to the historical market values. 8.2.4 trade-off theory deangelo & masulis (1980) presented the trade-off theory of capital structure. the theory states that the advantages and disadvantages of debt financing decides the optimal capital structure of a firm or debt to equity ratio is the optimal capital structure, the benefits that a debt provides compensate the financial distress created by marginal debt. the advantages of debt include the tax shield and the reduction of agency costs between managers and shareholders and the disadvantages include increase of bankruptcy cost as the level of leverage increase in the capital structure of the firm. in accordance to the trade-off theory firms generating good profits should use more debt to in their capital structure to have a tax shield on their income. in other words, trade-off theory predicts the relation between leverage and capital structure as positive. 8.2.5 free cash flow theory free cash flow theory was presented by jensen, m. c. (1986) that free cash flow theory states that the value of a firm increases, when the cash flows are positive and exceed profitable investment opportunities. beside this firms generating positive free cash flows try to reduce the level of debt ratio while on the other hand firms with negative cash flows obtain more debt from the market and responds to the lack of availability of internal funds and this percentage of adjustment of debt is getting smaller if the firm has already high level of debt in its capital structure and vice versa. 8.2.6 agency cost theory jensen & meckling (1976) are the first ones to introduce the concept of agency costs. according review of economics and development studies, vol. 9 (1) 2023, 1-16 6 to agency cost theory firms holding substantial amount of debt face an agency relationship between creditors and shareholders of the firm. in such cases firms pay a little incentive to its shareholders to limit the loss in the event of bankruptcy. in the other words we can say that agency cost theory suggest that there exists a conflict of interest between the shareholders and the managers of the firms. managers make the decisions about the capital structure of the firm, that capital structure which is optimal in view of managers can be suboptimal in view of shareholders which creates conflict between them. the theory states that however in some way by managerial equity investment, compensation contracts and monitoring by board of directors and some major shareholders can reduce this conflict of interest (mehran, h., 1992). 8.3 working capital sagan (1995) was the first person to write the theoretical paper on working capital and focused on how to manage working capital and emphasize on the necessity to develop a theory on working capital. to maintain a balance between short term assets and liabilities is one of the most important part of the working capital management, beside this the core objective of working capital management is to make sure that a firm can smoothly maintain its operational expenses and also have capacity of meet the upcoming short term debt and developing operational costs (velnampy, 2005). when it comes to the relationship between working capital and profitability many studies came out with contradictory results. padachi, k. (2006) results of the study concluded that firms with high investment on account receivables and inventories tend to become less profitable as compared to the firms with less investment in inventories and receivables. he also noted as the level of cash conversion cycle reduces the profitability of the firm increases. 8.4 firm size velnampy & nimalathasan (2010) conducted research to find the relationship between firm size and profitability they used the data of bank of ceylon and commercial bank of ceylon in srilanka for the period of 1997 to 2006. they used correlation analysis, in the results of their study they found that positive and statistically significant relationship exists between firm size and profitability in case of commercial bank of ceylon while on the other hand there exist no significant relationship between the firm size and profitability of bank of ceylon. demsetz, h. (1973) came up with something different on the relationship between firm size and profitability and suggest that there is no relationship between the traditional scale economies and the prominent profits of large firms. he used the internal revenue information data to analyze the relationship and finds that in developed markets large firms earn higher profits while small firms generate low profits. theory of marginal utility expansion suggests us results contrary to the results of demsetz, h. (1973) and suggests that a negative relationship exist between the size of firm and its profitability. amato & wilder (1985) used the data of us firms for the period of 1945 to 1980 in their research and examined both cubic and linear form of relationship. profits of the firms increase with the size of the firm and small firms generate less profit as compared to large firms. ammar et al. (2003) used the data of firms for the electrical contractors for the period of 1985 to 1996 and applied first order autoregressive model on the data to measure the relationship between the two variables. the results of their study came up with positive and significant results marcus (1969) used the data of firms operating in us for the period of 1959 to 1962 and gathered data from internal revenue services, he applied regression analysis on the data and suggest that there exists no relationship between the two variables. a positive relationship can be expected between the two terms when a large firm have an edge over the economies of scale on small firms, but when the management of the firm struggle to earn maximum profits to increase the size of the business than firms become large in size. while in case of small firms, when these small firms look for non-monetary benefits instead of monetary benefits than in this case they earn low profitability. review of economics and development studies, vol. 9 (1) 2023, 1-16 7 8.5 growth rate trau, f. (1996) and hart, p.e. (2000) conducted researches on the relationship of growth rate and profitability by using the financial data of manufacturing firms operating in europe. they found weak positive relationship between the two variables and in some cases found no relationship. macmillan, i. c., & day, d. l. (1987) in their research concluded that firms with faster growth tend to be more profitable as compared to the firms with low level of growth and the new firms that enters into the market rapidly tends to be more profitable on large scale. small firms' growth is the most important variable to impact profitability, but finance related problems are also important. new firms are found to be quicker than older ones and larger firms found to be faster than smaller ones. jang, s. s., & park, k. (2011) analyzed the relationship between firm size, firm growth and profitability and found that firm size impact the profitability of firms, but the growth of the firm has more impact. 8.6 non-debt tax shield deangelo & masulis (1980) argued that firms tend to have higher level of non-debt tax shield can be relied upon to utilize less debt as they can use non debt tax shield as a proxy or substitute of tax shield from debt financing. shah & khan (2007) in their research revealed profitability has a negative relationship with leverage while non-debt tax shield has a positive relationship with profitability. they used the data of 7 oil and gas firms listed under karachi stock exchange for the period of 2001 to 2005, and applied panel data regression with fixed effects model. tax shields on debts provides enough reason to the managers of the firms to increase the level of leverage to avoid taxes but on the other hand non debt tax shield provide managers same benefit that reduces the level of taxes because of depreciation and investment tax credits also plays an important role to affect leverage modigliani & miller (1958). titman & wessels (1998) conducted a research to find the impact of non-debt tax shield on profitability they used the ratio of tax credits and divided it by total assets and the ratio of depreciation over total assets to measure the depreciation. they used the data of 6,842 non-financial spanish firms for the period of 1994 to 1998 and used panel data to analyze the data and came up with positive results. sivathaasan & hanitha (2013) conducted a research to find the impact of non-debt tax shield on profitability; they used the data of colombo stock exchange and used 287 firms from 20 different sectors as their sample. using panel data regression with fixed effects model the results of the study concluded that the relationship between non-debt tax shield and profitability is positive and statistically significant. 8.7 intangible assets there are some type of assets that cannot be included in any financial statement not because they are not important for the firm to include them in financial statements but because it’s not easy to quantify those assets in terms of money such assets are called intangible assets, intellectual capital is also a part of intangible assets that can help a firm to improve its competitive position in the market (marr & schiuma, 2011). edvinsson & malone (1997) explained the valuation of intangible assets as the difference between book value and market value of the firm while on the other hand kok, a. (2007) disagree with this method that comparing two values of the company is not a viable methodology to compute the value of intangible assets. pena, i. (2002) concluded that firms that focus on the development and management of their intangible assets perform better as compared to firms who don’t care much about their intangible assets. beside this garger, j. (2010) added that the volatility in the value of tangible assets is less as compared to intangible assets which makes the increase or decrease between the difference of book value and market value more volatile. if firms make right decisions about their human capital and how utilize their resources efficiently and able to align them with their objectives and strategies they can boost their profits and market value by great margin (behname.m, review of economics and development studies, vol. 9 (1) 2023, 1-16 8 pajoohi m.r et al., 2012). 8.8 age of the firm different researches concluded different results regarding the impact of the age of the firm on its performance and profitability. past researches can be grouped into three categories with regard to their results. one group of researchers suggest that older firms are more profitable because of their experience and they also enjoy the benefits of learning by doing (coad et al. 2013, vassilakis 2008). beside this, the rate of failure is high in young firms because they are inclined to liabilities of newness, because of poorly understood factors (stinchcombe, 1965). the second category of the literature believes that as the age of the firm increases its performance also increases, and the reason behind this increase in performance might be the selection effects, which is result from the forced exit of less productive firms (jovanovic, 1982). last but not least, the third group of literature believes that aging can bring negative effects to the performance of the firm due to inertia effects. older firms become less flexible and face difficulties in dynamic or rapidly changing environment (barron et al., 1994). early researchers used firm age and size of the firm as a proxy to each other or we can say to measure the same phenomena, believing that younger firms tend to be smaller in size as compared to old firms. 8.9 hypothesis development on the basis of above literature following hypothesis are developed: h1: there exist a significant relationship between intangible assets and profitability. 2: age of the firm moderates the relationship between intangible assets and profitability. 2.10 graphical representation of research model 9. research methodology the nature of the current study based on deductive approach and also quantitative in nature. the research design of the study causal research, also known as explanatory. the current study is based on secondary data and the data was collected form the financial statements of the sample firms and form the historical stock prices data was collected from business recorder and form the website of pakistan stock exchange. the data of 20 cement companies listed under pakistan stock exchange has been used. the 20 years annual data has been used in this study for the period of 1998 to 2017. the data is collected from the balance sheets of the selected companies. the balance sheets of the selected companies are obtained from their official websites while the share prices are obtained from the official website of pakistan stock exchange and business recorder. the data is unbalanced as many firms were review of economics and development studies, vol. 9 (1) 2023, 1-16 9 started their operations after 1998, data before 1998 is not selected because of the unavailability of stock prices of before 1998. the dependent variable of this research is profitability, denis (1994) and lehmann & weigand (2000) used return on assets as a proxy variable to measure profitability. so, in this research return on assets is used as a proxy variable to measure profitability. the control variables of the study include capital structure, growth rate, non-debt tax shield, and working capital and firm size. intangible assets is the independent variable of the research and age of the firm is used as a moderator between intangible assets and profitability. to examine the factors that effect on profitability the following regression model is used: profitability (roe) = β0 + β1 capital structure + β2 firm size + β3 growth rate + β4 working capital + β5 non-debt tax shield + β6 intangible assets*age + εt to understand the importance of panel data regression, hausman test, and robust variance estimator and to differentiate between fixed effects model and random effects model the brief overview of the tests applied in this research. 10. data analysis and interpretation 10.1 descriptive statistics descriptive statistics are used to provide the reader brief overview of the data. table 4.1 variable observations mean std. dev. min max capital structure 307 0.970573 1.144787 0.003518 12.14557 working capital 307 806849.1 4366362 -5137070 2.88e+07 firm size 307 15.73828 1.240781 12.19143 18.50107 non-debt tax shield 307 3.13e+10 6.37e+11 -1.20e+12 1.10e+13 growth rate 307 19719.74 170324.2 -1 2395272 intangible assets 307 21.42783 2.060193 12.9192 26.35819 age 307 30.07166 12.65975 5 63 roe 307 0.04128 0.100594 -0.43114 0.355313 10.2 multicollinearity test to check whether multicollinearity exit in the data set or not correlation matrix is used. table 4.2 items cs wc fs ndts gr ia age roe cs 1 wc 0.0642 1 fs 0.1909*** 0.3388*** 1 ndts -0.0124 0.0516 0.0362 1 gr 0.0347 0.0549 0.0188 -0.0057 1 ia 0.0928 0.06507*** 0.0513*** -0.0104 -0.0366 1 age 0.0367 -0.0349 0.1983** * 0.0965 0.1735** -0.0422 1 roe 0.0825*** 0.5703 *** 0.3054** * 0.4594** * 0.0202 -0.0333 0.661*** 1 the results of the correlation matrix shows that no multicollinearity exist between independent variables. multivariate normality test is also applied on the data and the results suggest that we reject review of economics and development studies, vol. 9 (1) 2023, 1-16 10 the null hypothesis and there are probably difference between the correlations of the variables. the results of the multivariate normality test are as under (table 4.3), table 4.3 lawley chi2(35) 617.53 prob > chi2 0.0000 10.3 serial autocorrelation and unit root test to check the presence of serial autocorrelation in the data wooldridge test is applied in the data. the results of the test are shown below in table 4.4, table 4.4 f(1,19) 52.650 prob. > f 0.0000 the results of the wooldridge test suggest that the serial autocorrelation ar(1) is present in the data, to check whether this serial correlation exist at first order or higher order correlation is present in the data arellano-bond test was applied on the data, the results of the test are as under in table 4.4(a) : table 4.4(a) order z prob. > z 1 -1.431 0.1524 2 -2.666 0.0077 ho = no autocorrelation. the results of the arellano-bond test suggest that we failed to reject the null hypothesis, so no higher order serial correlation is present in the data. after multicollinearity and serial correlation we will check whether or not unit root is present in the data set fisher-type unit root test was applied on the data. the results of the unit root test are as follows (table 4.4(b)): table 4.4(b) variable modified inv. chi-squared p-value capital structure 0.7273 0.2335 working capital 6.8712 0.0000 firm size -0.3112 0.6222 non-debt tax shield 23.5547 0.0000 growth rate 62.6454 0.0000 intangible assets -2.5413 0.9940 age 156.7200 0.0000 roe 2.1295 0.0166 so, results of the fisher-type unit root tests suggest the presence of unit-root in capital structure, firm size and intangible assets. to remove the unit root first difference is used. the results of the review of economics and development studies, vol. 9 (1) 2023, 1-16 11 fisher-type unit root test for panel data after first difference is as follows (table 4.4(c)) table 4.4(c) variable modified inv. chi-squared p-value d1. capital structure 21.7751 0.000 working capital 6.8712 0.000 d1. firm size 13.6303 0.000 non-debt tax shield 23.5547 0.000 growth rate 62.6454 0.000 d1. intangible assets 19.5910 0.000 age -4.2753 0.000 roe 2.1295 0.0166 after applying the unit-root test, for check heteroscedasticity breusch-pagan test is applied on the data and the results of the test are as follows in table 4.4(d): ho = constant variances table 4.4(d) chi2(1) 0.00 prob > chi2 0.9473 the results of the breusch-pagan test suggest that we failed to reject the null hypothesis and heteroscedasticity is not present in the data, the data is homostadistic. 10.4 results of the study regression analysis is used to find the relation of dependent variables with independent variables. before panel data regression, hausman test is applied to determine the appropriate model for the data. both random and fixed model effects models are applied, with the results of the random effects model and fixed effects models shown below. 10.4.1 panel data regression results with random effects model ar (1): table 4.5 variables coefficient z prob. working capital 5.02e-08 5.19 0.000 non debt tax shield 3.69e-14 1.14 0.254 growth 2.25e-07 1.53 0.126 d1.capital structure -0.0268283 -1.43 0.151 d1.firm size 0.1407799 2.41 0.016 d1.intangible assets 0.0893189 2.84 0.005 constant 0.2545298 2.09 0.036 r-sq.: 0.3224 wald chi2(7) = 51.07 prob. > chi2 = 0.000 no. of observations: 286 no. of groups: 20 10.4.2 panel data regression results with fixed effects model ar (1): review of economics and development studies, vol. 9 (1) 2023, 1-16 12 table 4.6 variables coefficient t-stat prob. working capital 3.86e-08 3.89 0.000 non-debt tax shield 3.25e-14 1.03 0.306 growth 2.05e-07 1.43 0.155 d1. capital structure -0.0266618 -1.47 0.144 d1. firm size 0.1283905 2.26 0.025 d1. intangible assets 0.1016972 3.23 0.001 constant 0.5538944 23.15 0.000 r-sq.: 0.3192 f-stat = 6.64 prob > f = 0.000 no. of observations: 286 no. of groups: 20 after the results of random effects model and fixed effects model, hausman test is applied on the results of the data. the results of the hausman test are shown in table 4.7: 10.4.3 hausman test results: table 4.7 b (fixed) b (random) b-b difference sqrt (diag (v_bv_b)) s.e. working capital 3.86e-08 5.02e-08 -1.16e-08 2.19e-09 non-debt tax shield 3.25e-14 3.69e-14 -4.44e-15 6.77e-15 growth 2.05e-07 2.25e-07 -1.94e-08 2.97e-08 d1. capital structure -0.0266618 -0.0268283 0.0001666 0.0043351 d1. firm size 0.1283905 0.1407799 -0.0123894 0.0129246 d1. intangible assets 0.1016972 0.0893189 0.0123783 0.0009639 chi2 = 118.833 prob > chi2 = 0.000 the results of the hausman test failed to reject the null hypothesis as p < 0.05 so, fixed effects model is used to analyze the data with robust variance estimates. so as there also exist serial autocorrelation at first order, fixed effects model with ar (1) disturbance is applied on the data. the results of the fixed effects model with ar (1) disturbance estimates is shown in table 4.8. to check the moderating effect of age of the firm the ar (1) disturbance is applied on the data with the interaction term and the results are shown in table 4.9. table 4.8 variables coefficient t-stat prob. working capital 3.86e-08 3.89 0.000 non debt tax shield 3.25e-14 1.03 0.306 growth 2.05e-07 1.43 0.155 review of economics and development studies, vol. 9 (1) 2023, 1-16 13 d1.capital structure -0.0266618 -1.47 0.144 d1.firm size 0.1283905 2.26 0.025 d1.intangible assets 0.1016972 3.23 0.001 constant 0.5538944 23.15 0.000 r-sq.: 0.3192 f-stat = 6.64 prob > f = 0.000 no. of observations: 286 no. of groups: 20 10.4.4 fixed effects model with ar (1) disturbance and interaction term: table 4.9 variables coefficient t-stat prob. working capital 3.77e-08 4.15 0.000 non debt tax shield 3.90e-14 1.25 0.211 growth 2.08e-07 1.50 0.136 d1.capital structure -0.0286524 -1.58 0.115 d1.firm size 0.1229079 2.15 0.032 intangible assets#age 0.0490053 8.00 0.000 constant -3.199602 -15.97 0.000 r-sq.: 0.2114 f-stat = 21.93 prob > f = 0.000 no. of observations: 286 no. of groups: 20 the results of the panel data regression show that the selected independent variables impact the profitability by 21.14%. the model is also significant as prob. > f = 0.000. both the hypothesis of the research are accepted as the results of the study suggest that positive and significant relationship exist between intangible assets and the profitability of the cement industry of pakistan, as the value of coefficient of intangible asset is 0.1016 and p < 0.05, so we can conclude that h1 is accepted. the results of the study also accept the second hypothesis that age of the firm moderates the relationship between intangible assets and the profitability of the firm in case of cement industry of pakistan as the beta coefficient of interaction term is 0.0490 with p < 0.05, so h2 is accepted. the overall model is also significant as the value of f – stat is 6.64 with p < 0.05, and 21.03 with p < 0.05 for both the models respectively. the overall variance in dependent variable was 0.3192 without interaction term, but as we introduced the interaction term in the model the variance reduced to 0.2114, and the impact of intangible assets on the profitability also reduces, so we can conclude that age of the firm moderates the relationship between intangible assets and profitability and weaken the relationship between the two variables. the variance in profitability was 0.1016 units with respect to per unit change in intangible assets, but after the introduction of interaction term this variance reduced to 0.049 units. so we can say that after the introduction of interaction term one unit increase in intangible assets (with moderating effects of age of the firm) can increase profitability of the firm by 0.049 units on average. although control variables are not the main concern of our research but talking about the review of economics and development studies, vol. 9 (1) 2023, 1-16 14 control variables the results reveal that working capital and firm size has a significant and positive impact on the profitability of the firm, while non-debt tax shield, growth rate and capital structure has no impact on the profitability of the firm. the importance of cement industry under the current scenario as the nation is moving towards development and after the introduction of cpec the demand of cement is likely to boost more as we witnessed in the ratio analysis of the cement industry that the performance of the cement industry of pakistan had jumped significantly in the recent three to four years or we can say that after the introduction of cpec. the managers of the firms needs to emphasize on the importance of intangible assets and should consider the formal reporting of intangible assets in their financial statements as they impact the profitability of the firm and can hold some importance to the investors. 11. discussion and conclusion the aim of the study is to analyze the impact of intangible assets on the performance of cement industry of pakistan and to check whether age of the firm moderates the relationship between the two variables. the primary results of the study suggest that intangible assets do affect the profitability of the firm and the affect is positive. the results of the study can also be seen in the real world scenario for a layman, that firms with more fame and goodwill attract more customers thus leading to higher level of profits (in most cases), but the case is not that simple, intangible assets is a complex term which not only includes the goodwill of the firm but a lot more items. the study found that intangible assets have many dimensions that affect the profitability of a firm, including goodwill and copyrights, and that managers of the industry should manage them efficiently and disclose them in their financial statements. beside the impact of intangible assets on the profitability of the industry, the results of the study also revealed that age of the firm also moderates the relationship between the two variables, and weakens the relationship between intangible assets and the profitability. so. keeping in mind that intangible assets are not only limited to the goodwill of the firm, there are many underlying assets under the banner of intangible assets which holds higher impact on the profitability of the firm which reduces by the time. there can be multiple reasons behind this moderation effect, in past many researchers predicted negative relationship between the profitability and the age of the firm, as the age of the firm increases it becomes less flexible and reluctant to change. so this factor might affect the relationship here between the intangible assets and the profitability moderated by age of the firm. 12. recommendations of the research study the results of this research are limited to the cement industry of pakistan only and cannot be generalized on other industries, the determinants and their impact on the performance of the firm may vary industry to industry or firm to firm even in the same industry. future researches can be conducted to measure the profitability of different sectors and industries to better understand the profitability. moreover, to test the impact of intangible assets the study incorporates control variables, future researches can be conducted by using more control variables to get better results. 13. limitations of the research study the availability of data is also a limitation of the research. the secondary data available in pakistan is unreliable (in some cases) and proper information is not available which limits the researcher’s scope of the study. the research predicted the impact of parameters on the basis of data for the period of 1998 to 2017, which is unbalanced because many firms came into existence between that period and in some case the data of firms was unavailable, however interpolation technique was review of economics and development studies, vol. 9 (1) 2023, 1-16 15 used to cover the gap, but there is no substitute of real values. not only limited to values the current study focused on the performance of single industry only because of its growth prospects and the current economic importance to the economy because of cpec. references ali, 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(2010). firm size on profitability: a comparative study of bank of ceylon and commercial bank of ceylon ltd in srilanka. global journal of management and business research, 10(2). review of economics and development studies, vol. 8 (2) 2022, 155 165 155 aggressive students’ academic performance: teachers’ insight najam ul kashif a, furrukh bashir b, rashid ahmad c, ismat nasim d a assistant professor, department of education, the islamia university of bahawalpur, pakistan email: drnajam.ulkashif@iub.edu.pk b assistant professor, school of economics, bahauddin zakariya university, multan, pakistan email: furrukh@bzu.edu.pk c assistant professor, school of economics, bahauddin zakariya university, multan, pakistan email: rashidahmad@bzu.edu.pk d lecturer, department of economics, the government sadiq college women university, bahawalpur, pakistan email: ismat.nasim@gscwu.edu.pk article details abstract history: accepted 15 may 2022 available online june 2022 presented study was aimed to highlight the different causes of aggressive behavior of students and its effects on their academic performance, according to the observations of secondary school students. to accomplish this goal, the conducted research was descriptive in nature. data were collected from elementary school students’ teachers through a questionnaire. the population of the study was considered as all public elementary school male and female teachers in four tehsils of district multan region. total eighty schools and from each school 3 teachers were randomly selected as a result total 240 teachers were selected. a questionnaire consisting of 49 items was designed for teachers. furthermore, data were analyzed by adopting as per need descriptive and inferential statistics. it is concluded that aggressive behaviors in students do not significantly reduce a students’ academic performance, however, there is a sign that academic scores are declining as aggression increases. aggressive behaviors in students do not directly lead to low academic performance. although there is an insignificant link between aggressive behavior and academic performance, aggressive students face difficulties in their education. it is recommended that teachers need additional training on how to deal with children with aggressive behavior. in this regard, parents-teachers meeting on regular basis and on required desires of teachers is necessary. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: aggressive behaviors, academic performance, teachers jel classification: p36, doi: 10.47067/reads.v8i2.447 corresponding author’s email address: rashidahmad@bzu.edu.pk review of economics and development studies, vol. 8 (2) 2022, 155 165 156 1. introduction aggressive behavior seeks to physically harm others, such as fighting or spreading harmful rumors (gasa, 2007). different signs of warnings can be noticed for presenting a strong depiction for future possible aggressive behavior (moeller, 2001). inter and intra personal extraction; weak concentration on academia; unfortunate academic performance results; expression of violence in writings and drawings; abandoned annoyance; examples of impulsive and chronic beating, intimidation and harassment; intolerance of differences and prejudices; drug and alcohol abuse; join gangs; serious physical struggle with peers or family members; serious destruction of property; detailed threats of deadly violence; unauthorized possession and / or use of firearms and other weapons and self-injury or suicide threat are few examples of aggressive behaviors. mwendia (2018) focuses on other aggressive symptoms among growing youth, such as object biting, grabbing and kicking others, responding to grownups, execration, abusive remarks, and naming. aggression among students occurs globally. no one can be as debilitating as aggressive behavior because it affects violence and victims. in his definitions of social psychology, he says that aggression is a psychological violence; a persistent aggression that undermines a person’s control and dignity (tambawal & rukayya, 2017). on the other hand, physical aggression is at an extremely high point in the continuation of aggression, such as violence, murder, and assault. although all acts of violence are defined as acts of aggression, not all acts of violence are acts of violence. many aggressive actions are relatively common and result in only minimal physical damage, such as verbal attacks (e.g., insults) or minor physical attacks (e.g., hits). a child who gives another child an obscene name or pushes another child off a tricycle is aggressive but does not show violence. a school fire is both aggressive and violent. some definitions of violence require not only that the victim be seriously injured, but also that the act be illegal. such a narrow definition is unsatisfactory because it excludes excessive physical harm (usually in the form of organizational and structural violence) applied primarily under the laws of a nation. however, this study focuses on different types of aggression against others rather than violence (byrnes, 2000). the cognitive neo-associative form claimed that frustration was a bit angrier than aggression. certain cues will be needed for anger to lead to aggression. this can be an aggressive behavior, a nervous object, or a human-related environmental stimulus (harmon, 2007). by imparting social learning theories, people receive aggressive responses in the way that they acquire direct knowledge or other multifaceted forms of social behavior through observation of others. aggressive behaviors’ acquisition by observing others while giving a resourceful pattern sympathetically explaining different attitudes in the perspectives of leading social behavior in the context of social learning theories (rosenstock, strecher, & becker, 1988).academia’s different stake holders are looking for such issues of aggressive behaviors to create more lasting places of silence sympathy and reflection on the causes of hostility and aggression are, as a result, important topics on the agenda of social science research (barratt, stanford, kent, & alan, 1997). aggressive behavior is an individual or collective social interaction in which the enemy behaves with the intention of harming or harming. aggressive behavior includes physical violence such as beating, biting, hitting, and kicking. aggressive behavior causes physical and moral harm to children. aggressive behavior made students anxious. there are many factors; these factors are features and social networks. a student's overall school experience is shaped by many factors. they learned a lot about the social and cultural context in which they lived. all these factors operate interdependently in the context of the school community (buck et al., 2019). all influences help students (and others) perceive quality of life in school (social/emotional and academic) (zins, elias, & greenberg, 2007). review of economics and development studies, vol. 8 (2) 2022, 155 165 157 2. study’s aim aggressive behavior is rampant in pakistani schools also and especially at elementary school level. aggressive behaviors by shekarey, ladani, rostami and jamshidi (2013) are common in elementary schools. similarly, aluede (2011) reported that school violence was a growing concern in the last few years because of the increase in news articles about school violence. aggression among elementary school students is a matter of concern among stakeholders in education, as the school is an institution designed for teaching and learning. undoubtedly, teaching and learning can only be successful in an environment that is free from fear, aggression, insecurity, and fear. aggressive behavior of students is a factor and a major obstacle to the proper learning of students at the elementary school level. the researcher here in this study intends to investigate the aggressive students’ academic performance at elementary school level. the study also looked at how aggression affects children's attendance, homework, academic performance, and dropout rates. in addition, the study sought to identify problems faced by teachers working with aggressive students. the study was delimited to public elementary schools of multan region. 2. research design this study was conducted to investigate the aggressive students’ academic performance at the elementary school level in the multan region. the research was descriptive by nature and quantitative approach was applied to address the research problem. study covers all the four tehsils (multan city, multan saddar, shujabad and jalal purpirwala) of multan district. there are 187 total elementary schools in the region and 2836 teachers who are working in these schools as elementary school teachers and primary school teachers. according to sample size calculator 126 schools were selected. from each school 2 teachers were selected randomly. so, total sample size becomes 252 teachers. research tool was distributed among 252 teachers and 240 teachers’ data was received which was analyzed as per the need of the study. a self-developed questionnaire was used as a research tool or as a means of data collection. the questionnaire consisted of two sections; first as demographical variables and second as main part of the questionnaire which was comprised of 49statements. all statements are based on 5 point likert scale. the division of 49 statements are categorized in 6 sections as 09 items focused on students 'personal behavior, 05 items on aggressive behavior, 13 items focused on the causes of aggressive behavior, again 05 items focused on verbal aggression, 07 items focused on physical aggression, and 10 items focused on students' academic activities. collected data was analyzed through spss. different descriptive and inferential statistics were applied to find out the impact of demographic variables on students’ aggressive behavior on their academic performance. for comparing responses on demographic variables such as gender, locality, academic qualification, professional qualification, and teaching experience ttest and anova were used. regression analysis was made to predict the impact of students’ aggressive behavior on their academic performance. review of economics and development studies, vol. 8 (2) 2022, 155 165 158 3. results & discussion table 1: aggressive behavior on their academic performance sr. no. variables mean std. dev. mean difference sig. value 1 personal behaviors 3.77 0.771 3.78590 .000 2 aggressive behaviour 4.38 0.381 3.61807 .000 3 causes of aggressive behaviours 4.14 0.348 3.67221 .000 4 verbal aggression 3.99 0.742 3.73410 .000 5 physical aggression 4.26 0.472 3.70792 .000 6 students’ academic performance 4.24 0.258 3.68606 .000 in table 1states that descriptive statistics table of the determinants of students’ aggressive behavior on their academic performance with respect to teachers states that the number of teachers included in the sample are 227 whereas as the mean of (m = 4.38, sd = 0.381) shows that teachers are agreed that aggressive behavior of students. the second level of (m = 4.26, sd = 0.472) shows that give positive opinions about physical aggression among students. the third level of (m = 4.24, sd = 0.258) teachers agreed that students’ academic performance. the fourth level of (m = 4.14, sd = 0.348) teachers give positive opinions about causes of aggressive behavior of students. the fifth level of (m = 3.99, sd = 0.742) teachers are favorable opinions about verbal aggression and the sixth level of (m = 3.77, sd = 0.771) teachers are satisfied with personal behavior of students. the value of standard deviation and mean difference is also calculated, and t-test results are significant at p < .05. table 2: correlation of students’ aggressive behavior on their academic performance ab cab vb pa sap personal behaviors (pb) .175** .670** .541** .367** .360** aggressive behaviour (ab) .197** .269** .518** .047 causes of aggressive behaviours (cab) .477** .450** .643** verbal aggression (vb) .708** .408** physical aggression (pa) .352** students’ academic performance (sap) ** 0.01 is considered statistically significant while finding the correlation. a person product-moment correlation was conducted to examine the relationship with personal behaviors, aggressive behavior, causes of aggressive behaviors, verbal aggression, physical aggression, and students’ academic performance. aggressive behavior was stronger positive related to aggressive behavior, r (227) = 0.175, p <0.000, causes of aggressive behavior, r (227) = 0.197, p <0.000, verbal aggression, r (227) = 0.708, p <0.000, physical aggression, r (227) = 0.352, p <0.000, than to students’ academic performance, r (227) = 0.360, p <0.000. a complete list of correlations is presented in table 2of aggressive behavior of students’ academic performance. these findings indicated that aggressive behavior explains much more of the variability in students’ academic performance. the impact size for aggressive behavior indicated that the level of aggressive behavior that the counselor experience accounted for a large portion (19%) of the variability in students’ academic performance. table 3: determinants students aggressive behavior regression analysis (teachers) model r r2 r2 adjusted estimate of se f sig. l .215a .046 .043 .44640 14.489 .000b a. dv: students academic performance review of economics and development studies, vol. 8 (2) 2022, 155 165 159 in table 3 states the results have found that r is moderately positive with 0.215 while coefficient of determination i.e., r2 is 0.046. coefficient of determination is the increase of dv due to iv, as this is the value of whole model therefore it shows the impact of model. adjusted r2 is the value of r2 after removing standard error of estimate, in this model adjusted r2 is 0.043 while standard error of estimate is 0.446. the results of f statistics results are significant at p < 0.05. hence the results are significant and reliable. table 4: beta coefficients students’ aggressive behavior on their academic performance model unstandardized coefficients standardized coefficients t sig. b se beta 1 (constant) 2.998 .149 20.170 .000 pb .304 .121 .345 2.511 .012 ab .326 .337 .366 .967 .002 cab .103 .071 .103 -.049 .001 vb .466 .324 .531 -1.440 .015 pa .133 .108 .132 .306 .005 a. dv: sap in table 4 states the beta coefficients of all determinants of students’ aggressive behavior on their academic performance in teachers are calculated and the results have found that all the results are significant as p value <0.05. the relationship between vb and sap is strongest and the beta value is 0.531, the results are significant at p <0.05. the variable’s idealized influence has moderately strong positive beta values whereas cab and pa have weak positive beta values i.e.,0.103 and 0.132 respectively. table 5: gender of teachers about students’ aggressive behavior on their academic performance gender n mean std. deviation t md p spb m 165 34.52 5.602 46.566 2.021 .000 f 62 32.50 9.540 ab m 165 21.79 1.536 1.407 -.448 .237 f 62 22.24 2.641 cab m 165 53.65 4.314 3.196 -.900 .075 f 62 54.55 5.059 va m 165 19.70 3.442 4.354 -1.055 .038 f 62 20.76 4.284 pa m 165 29.72 3.018 .735 -.543 .392 f 62 30.26 3.979 sap m 165 42.38 2.480 3.672 -.318 .057 f 62 42.69 2.855 overall m 165 201.76 15.614 9.970 -1.242 .002 f 62 203.00 21.178 above in table 51 shows that the t value (9.970) was significant at p <0.05 for the overall students’ aggressive behavior on their academic performance subscale, hence the female teachers’ (m = 203.00, sd = 21.178) were better in students’ aggressive behavior on their academic performance rights as compared to male teachers’ (m = 201.76, sd = 15.614). the analysis regarding the student’s aggressive behavior on their academic performance factors reveal that t value of ‘students’ personal review of economics and development studies, vol. 8 (2) 2022, 155 165 160 behavior’ (46.566), aggression behavior (1.407), causes of aggressive behavior (3.196), verbal aggression (4.354), physical aggression (.735) and ‘students’ academic performance’ (3.672) were significant at p <0.05. therefore, it is concluded that female teachers were more sensitive in student’s personal behavior, aggressive behavior, causes of aggressive behavior, verbal aggression, physical aggression and students’ academic performance and overall students’ aggressive behavior on their academic performance as compared to male teachers’. table 6: locality wise distribution of teachers about students’ aggressive behavior on their academic performance locality n mean std. deviation t md p spb rural 98 37.35 5.631 6.773 5.944 .010 urban 129 31.40 6.754 ab rural 98 21.85 2.501 12.706 -.122 .000 urban 129 21.97 1.293 cab rural 98 56.29 4.064 .006 4.208 .937 urban 129 52.08 4.013 va rural 98 21.14 3.555 .042 2.027 .838 urban 129 19.12 3.598 pa rural 98 30.43 3.758 5.602 .994 .019 urban 129 29.43 2.861 sap rural 98 43.21 2.629 3.145 1.323 .078 urban 129 41.89 2.408 overall rural 98 210.27 16.928 6.805 14.374 .000 urban 129 195.89 14.819 in table 6 shows that the t value (6.805) was significant at p <0.05 for the overall students’ aggressive behavior on their academic performance subscale, hence the rural area schoolteachers (m = 210.27, sd = 16.928) were better in students’ aggressive behavior on their academic performance as compared to urban area schoolteachers (m = 195.89, sd = 14.819). the analysis regarding the students’ aggressive behavior on their academic performance factors reveal that t value of ‘students’ personal behavior’ (6.773), aggression behavior (12.706) and physical aggression (5.602) were significant at p <0.05. the students’ aggressive behavior on their academic performance factors reveals that t value of causes of aggressive behavior (.006), verbal aggression (.042) and students’ academic performance (3.145) were insignificant at p > 0.05. therefore, it is concluded that rural area schoolteachers were more sensitive in student’s personal behavior, aggressive behavior, causes of aggressive behavior, verbal aggression, physical aggression and students’ academic performance and overall students’ aggressive behavior on their academic performance as compared to urban area schoolteachers. review of economics and development studies, vol. 8 (2) 2022, 155 165 161 table 7: impact of academic qualification of teachers about students’ aggressive behavior on their academic performance n mean std. deviation f sig. spb bs (hons.) 69 36.48 6.072 7.087 .001 ma/msc 103 33.16 7.336 m.phil. 55 32.35 6.438 ab bs (hons.) 69 21.93 1.458 .766 .466 ma/msc 103 22.05 2.366 m.phil. 55 21.65 1.364 cab bs (hons.) 69 54.30 3.727 1.688 .187 ma/msc 103 54.14 5.275 m.phil. 55 52.93 3.843 va bs (hons.) 69 20.35 3.147 3.038 .050 ma/msc 103 20.32 4.018 m.phil. 55 18.93 3.625 pa bs (hons.) 69 29.88 2.392 .216 .806 ma/msc 103 29.98 4.259 m.phil. 55 29.62 2.059 sap bs (hons.) 69 42.61 2.433 .166 .847 ma/msc 103 42.38 2.981 m.phil. 55 42.44 1.922 overall bs (hons.) 69 205.55 13.618 3.052 .049 ma/msc 103 202.02 19.857 m.phil. 55 197.91 15.392 in table 7 shows anova results about opinion of teachers based on academic qualification regarding students’ aggressive behavior on their academic performance. according to results (f = 3.052, p = 0.049) a significant mean difference has found between groups. mean comparison indicates that bs (hons) academic education of teachers (mean = 205.55, sd 13.618) had better opinion than ma/msc academic qualification of teachers (mean = 202.02, sd 19.857) and m.phil. academic qualification of teachers (mean = 197.91, sd 15.392). review of economics and development studies, vol. 8 (2) 2022, 155 165 162 table 8: impact of professional qualification of teachers about students’ aggressive behavior on their academic performance n mean std. deviation f sig. spb b.ed 131 34.07 7.346 .077 .926 med 75 33.72 6.536 ma 21 34.24 5.915 ab b.ed 131 22.01 1.517 .449 .639 m.ed 75 21.75 2.483 ma 21 21.95 1.774 cab b.ed 131 54.05 4.821 .175 .840 med 75 53.71 3.952 ma 21 53.62 4.822 va b.ed 131 20.17 3.627 .373 .689 med 75 19.71 3.910 ma 21 19.90 3.604 pa b.ed 131 29.91 3.168 .056 .946 med 75 29.76 3.719 ma 21 29.95 2.674 sap b.ed 131 42.47 2.609 .420 .657 m.ed 75 42.59 2.526 ma 21 42.00 2.720 overall b.ed 131 202.66 17.208 .171 .843 med 75 201.23 17.373 m.a 21 201.67 18.001 above in table 7 shows anova results about opinion of teachers based on professional qualification regarding students’ aggressive behavior on their academic performance. according to results (f = .171, p = 0.843) a insignificant mean difference has found between groups. review of economics and development studies, vol. 8 (2) 2022, 155 165 163 table 8: impact of teaching experience of teachers about students’ aggressive behavior on their academic performance years n x sd f sig spb > 5 4 38.75 3.202 8.484 .000 6 to 10 22 40.23 2.927 11 to 15 161 33.41 6.939 < 15 40 32.30 6.896 ab > 5 4 21.75 .957 1.345 .261 6 to 10 22 22.41 1.501 11 to 15 161 21.97 2.014 < 15 40 21.45 1.663 cab > 5 4 57.25 2.872 5.576 .001 6 to 10 22 56.82 3.924 11 to 15 161 53.78 4.407 < 15 40 52.40 4.722 va > 5 4 22.75 2.062 8.474 .000 6 to 10 22 23.27 2.394 11 to 15 161 19.72 3.795 < 15 40 19.00 3.021 pa > 5 4 30.75 2.062 3.835 .010 6 to 10 22 31.95 2.420 11 to 15 161 29.73 3.565 < 15 40 29.18 2.159 sap > 5 4 43.25 1.893 4.511 .004 6 to 10 22 43.82 2.938 11 to 15 161 42.52 2.478 < 15 40 41.43 2.531 overall > 5 4 214.50 12.152 10.435 .000 6 to 10 22 218.50 11.681 11 to 15 161 201.12 17.103 < 15 40 195.75 15.192 above in table 8 shows anova results about opinion of teachers based on teaching experience regarding students’ aggressive behavior on their academic performance. according to results (f = 10.435, p = 0.000) a significant mean difference has found between groups. mean comparison indicates that 6-10 years’ experience of teachers (mean = 218.50, sd 11.681) had better opinion than 0-5 years teaching experiences of teachers (mean = 214.50, sd 12.152), there was 11-15 years teaching experience of teachers (mean = 201.12, sd = 17.103) and more than 15 teaching experiences of teachers (mean = 195.75, sd 15.192). in most cases, domestic violence is associated with aggressive behavior in children in the present study. a similar study conducted by gasa in 2005 which shows the similar results that family environment becomes the main source of children’s aggressive behavior. an unforgiving family environment is the cause of unexpected behaviors of children. different other studies indicated the results that abusive children also come from decrepit families, with a majority of them belong to those hard circumstances families (wakanyua, 1995; ndirangu, 2001;gitau, 2002;). this is in line with ndoga review of economics and development studies, vol. 8 (2) 2022, 155 165 164 (1987), which refers to children from more families, families with less parental education, people with lower socioeconomic status, families where parents or caretakers hardly visit siblings. low levels of religious affiliation indicate higher levels of crime. the results showed that r was moderately positive with 0.215, and the determination factor, r2, was 0.046. the detection factor is the increase in dv due to iv, because this is the value of the whole model, so it shows the effect of the model. the corrected r2 is the value of r2 after the standard estimation error is eliminated, the corrected r2 in this model is 0.043, and the standard estimate error is 0.446. the results of the f statistic are at p <0.05. thus, the results are significant and reliable. this finding suggests that aggressive behaviors in children do not significantly reduce a child's academic performance. however, there is a sign that academic scores are declining as aggression increases. hudley (2013) and mcevoy and welker (2012) also figured out that pointed out extremely aggressive students are hardly successful in their academic activities as well as troublemaking and not good motivated in the classroom. trainers' schoolwork is badly exaggerated due to violence. violence experiences reveals that students preoccupied due to bad feelings and illnesses. some of them do not have trust on their mentors and even they feel that their teachers don’t have ability to help. another study conducted in 2012 by nijuguna which indicated that violence behavior developed among students due to uncoordinated behaviors of the society and family. the said nonconformity may be due to teachers’ non coordinated pedagogies, inappropriate assessment, and evaluation. still, such students’ academic performance lies above c grade or 65%. above-average academic performance of aggressive children indicates that their behavior does not result in retardation. in fact, talent can manifest itself with extreme level of energy which is adopted by the students at both ends i.e., violence behavior and good academic performance. in addition, only in usa about 20 to 25% students have different social or emotional problems. the reason for this may be curriculum and school activities boredom (steven & media, 2014). very talented students perform the minute there is no competition. therefore, they become more violence as they get upset and saddened. this behavior becomes more violent among those students who yet not learnt how to lead their talent and energies. thus, they become sensitive in weak inter and intrapersonal challenges. violent students set unattainable objectives for own selves, which leads them for mistakenly perceive themselves as failures. 5. conclusion and suggestions after presenting the findings and doing discussion, it can be concluded that aggressive behavior among students is not caused by one factor, but by different factors that affect the behavior of students. aggressive behaviors of students directly lead to their academic performance. average academic performance indicated that these students have good potential to perform better in their academic performance. there is no significant difference between academic performance with violent behaviors. class attendance and class activities participation is also not good. it prevents such students from reaching at the potential climax. mentors who work with abusive students are not fully trained to deal with them. in addition, there is no curricula or training modules for the training teachers to deal with violent students. a few purposed strategies may be; providing students with basic needs such as guidance and counseling, love and care, food, shelter, and clothing; teacher-parent cooperation and collaboration. following suggestion can be helpful for the different stakeholders of the study. teachers need additional training on how to deal with children with aggressive behavior. teachers need to be more sensitive for the aggressive students. school discipline officers or psychologists should counsel sessions with such students as well as have sessions with their parents. educational administrators organize proper platforms where parents can be sensitive to violent students. parents must be fully involved in review of economics and development studies, vol. 8 (2) 2022, 155 165 165 the school education process so that children can be guided in the right places. it includes the identities of violent students and designed and desired programs for such students. an offered programs may be guidance and counseling for youth. references aluede, o. (2011). managing bullying problems in nigerian secondary schools: some counselling interventions for implementation. paper presented at the the african symposium. byrnes, j. d. (2000). the aggression continuum: a paradigm shift. occupational health & safety, 69(2), 70-70. gasa, v. g. (2007). learners' aggressive behaviour in secondary school: a psycho-social perspective. gasa, v.g. (2005). learners’ aggressive behaviour in secondary school: a psycho-social perspective. doctor of education thesis, university of south africa, south africa. gitau, j. k. (2002). a baseline survey report on situation of children in conflict with the law in nairobi, nakuru and kisumu in support of the diversion programme. save the children uk. harmon, j. e. (2007). trait anger predicts relative left frontal cortical activation to anger-inducing stimuli. international journal of psychophysiology, 66(2), 154-160. hudley, c. (2013). aggression in children, www.education/reference/article/aggression, 22nd april 2013 kibera, c. w. (1998). an investigation of the disciplinary styles and problems of nairobi parents with children in standard eight. med, kenyatta university, kenya mcevoy, a., & welker, r. (2012).antisocialbehaviours academic failure and school performance. a journal of emotional and behavioural disorders,http://ebx.sagepub.com/content, 8th february 2013 moeller, t.g. (2001). youth aggression and violence: a psychological approach. mahwah, n. j.: lawrence erlbaum associates mwendia, m. (2018). influence of preschool pupils’aggressive behaviour on learning outcomes in kajiado county, kenya. ndirangu, l.n. (2001). rehabilitation of disadvantaged children in nairobi. a comparative study of selected rehabilitation homes in nairobi. ma thesis, university of nairobi, kenya njuguna, n. w. (2012). the provision of psycho-social support to children traumatized by the 2007-2008 post-election violence in kibera, kenya.thesis(ma)university of nairobi, kenya rosenstock, i. m., strecher, v. j., & becker, m. h. (1988). social learning theory and the health belief model. health education & behavior, 15(2), 175-183. shekarey, a., ladani, h. j., rostami, m. s., & jamshidi, m. (2013). on the relationship between the social intelligence and aggression: a case study of high school boy students. international journal of education, 5(1), 94. steven, m. &media, d. (2014). early childhood giftedness and aggressive behaviour.fromwww.everydaylife.globalpost.com/earlychildhood –giftedaggressive behaviours-2170.html. retrieved on 5th december 2014. tambawal, m. u., & rukayya, m. (2017). bullying and its impact on academic performance of secondary school students in nigeria: implications for counselling. wakanyua, s.n. (1995). rehabilitation of juvenile delinquents: a survey of approved schools in kenya. m.a. thesis in sociology, university of nairobi, kenya zins, j. e., elias, m. j., & greenberg, m. t. (2007). school practices to build social-emotional competence as the foundation of academic and life success. educating people to be emotionally intelligent, 79-94 review of economics and development studies vol. 5, no 3, 2019 437 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 3, 2019 journal homepage: www.publishing.globalcsrc.org/reads effect of people, process and physical evidence on satisfaction of sikh pilgrims visiting pakistan: moderating role of personal perceived risk of terrorism 1 asia umar khan, 2 gohar zaman, 3 qadar bakhsh baloch 1 ph.d. scholar, department of management sciences, islamia college peshawar. pakistan, asia-umar@icp.edu.pk 2 women university, swabi. pakistan, goharshewa@gmail.com 3 institute of business studies and leadership, abdul wali khan university, mardan. pakistan, qbbaloch@awkum.edu.pk article details abstract history revised format: 30 june 2019 available online: 31 july 2019 the present study was intended to find out the impact of three important components of marketing mix for tourism i.e. people, process and physical evidence on satisfaction of sikh pilgrims visiting pakistan and the moderating role of personal perceived risk of terrorism in the relationship between the aforementioned independent variables and pilgrims satisfaction. the present research is based on the philosophy of positivism and it is descriptive and deductive in approach. data was collected from a sample of 357 sikh pilgrims. multiple linear regression analysis was carried out to test the hypothesized effect of people, process and physical evidence on satisfaction of sikh pilgrims and the moderating effect of personal perceived risk of terrorism. findings of the study showed that physical evidence and people have a significant positive effect whereas process has a significant negative effect on satisfaction of sikh pilgrims. personal perceived risk of terrorism was found to have an insignificant moderating effect on the relationship of process, people and physical evidence with satisfaction. the study might help uplift the tourism sector of pakistan and enhance the relationship between people of different religions of the region. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords people, physical evidence, process, satisfaction, personal perceived risk of terrorism, sikh pilgrims. jel classification: j15, n15 corresponding author’s email address: asia-umar@icp.edu.pk recommended citation: khan, a.u., zaman, g. and baloch, q.b. (2019). effect of people, process and physical evidence on satisfaction of sikh pilgrims visiting pakistan: moderating role of personal perceived risk of terrorism. review of economics and development studies, 5 (3), 437-450 doi: 10.26710/reads.v5i3.692 1. introduction in the present globalized world tourism industry has gained the status of an important industry in terms of its contribution to capital investment as well as foreign exchange earnings. different investments in this sector lead to the remunerations that benefit the economy and society as well. (megatef, 2015). moreover, according to dolnicar and ender (2000) it is imperative to explore the market segment of cultural tourists due to the fact that these tourists embody the most lucrative market segment, as is elaborated by dolnicar (2002) that compared to other groups of tourists, cultural tourists show a tendency of high expenditure per day at the destination, and are also less restricted by the main seasons of summer or winter. it is therefore necessary to study this group of tourists to the much possible extent and provide them the most apt product, because attractiveness of the cultural tourism product of http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 3, 2019 438 never diminishes. it usually denotes a natural and distinctive selling offer that can hardly be copied by enormous competitors in the worldwide industry of tourism. despite the fact that pakistan is blessed with a variety of scenic and cultural tourist attractions, still tourism makes a minor contribution to it economy (baloch, 2008).besides weaknesses in marketing of tourism, one of the foremost reasons for this backwardness is the lack of safety and potential risk of terrorist activities perceived by local and foreign tourists. all these play a negative role in tourism promotion. in a study conducted by sönmez and graefe (1998) it was found that perceived risk of terrorism directly affects the tourists’ decision of selecting a destination and that tourism figures have fallen a lot due to the increase in terrorism across the globe. the fact is evidenced by a study conducted by feridun(2011) that not only confirmed the negative causal relationship between terrorism and tourism in turkey but also concluded that the two variables have a long-rum equilibrium relationship. neumayer and pllmper (2018) further conclude from their research findings that terrorism attacks on non-muslim tourists in any muslim country result in a decline in the number of tourists’ arrivals not only in that specific country but also in other muslim countries. a similar effect has been observed in pakistan after terrorist’s attacks on different cultural events that generated a fright among foreign tourists. tension and insecure feelings have been emerged among the tourists that repel them from visiting pakistan. the present study therefore focuses on the moderating effect of personal perceived risk of terrorism on the impact of cultural tourism marketing mix on sikh pilgrims’ satisfaction. 2. literature review 2.1. cultural tourism cultural tourism is a travel of individuals, based on the purpose to get knowledge about a country’s culture. for this purpose a cultural tourist may aim to study arts, attend festivals, visit historical sites and offer a pilgrimage etc. cultural tourism is therefore destined at museums, temples, cultural musical programs, dramas, arts and religious sites etc. (tighe, 1991; the world tourism organization, 1993; boyd, 2002 ; leslie & sigala, 2005). 2.2 religious tourism religious tourism is a distinctive form of cultural tourism, in which the aim of a tourist is to perform religious activities like praying, venerating, exploring religious places etc. by followers of a religion (raj & morpeth, 2007). however, blackwell (2007) explains that religious tourism may involve visiting religious sights for religious as well as non-religious motives also. 2.3 religious tourism in pakistan the land of pakistan has a rich history of different religions that have left their impressions in the form of different historical and religious cultural sites. these sites include the remains of buddhism, hinduism, islam and sikhism etc. (pak tourism, n.d.). it has an opulent and colorful culture inclding different religious carnivals and customs that depict a reflection of middle eastern, indian and central asian cultures. a variety of religious events is held in pakistan which is an important source of fascination for most people belonging to buddhism, islam, hinduism, sikhism and others (hassan, 2016). 2.4 religious tourism destinations of pakistan: nankana sahib, lahore and gurdwara panja sahib, hassanabdal sikh yatris (followers of sikhism) have great religious affection for both of these religious sites due to their association with the founder of sikhism, guru nanak. sikh yatris show great respect for nankana sahib. thousands of sikh pilgrims long for and most of them offer pilgrimage to gurdwaras in nankana sahib and hasanabdal every year (roche, 2016). the village of talwandi, at present famous as nankana sahib is the birth place of guru nanak where he was born in 1469 ad (masih, 2000). the religious importance of nankana sahib is endorsed by the presence of nine gurdwaras in it. each gurdwara is associated with specific happenings that came about in guru nanak’s life (“5 most visited”, 2014). the site of hasan abdal is sacred for sikhs owing to the presence of a rock that has the hand impression of guru nanak which the legend holds to be inscribed when guru nanak was trying to stop a tumbling rock with bare hand. later on, a gurdwara was built at the exact spot (hussain, 2013). review of economics and development studies vol. 5, no 3, 2019 439 2.5 independent, dependent and moderating variables 2.5.1 people it comprises of all the staff with whom the tourists might come across and have contact with during their visits. a tourist might get influenced by the behavior of the local people for instance, residents, personnel at various retail outlets, restaurants, hotels, workers and tour guides etc. among all these places of interactions (points where tourist and employee may interact) needs to be properly organized and managed for the sake of creating a good image in the minds of the customers (kotler, bowen & makens, 2008). 2.5.2 physical evidence it involves ambience and the surrounding environment with amenities that a tourist might experience at a destination. physical evidence is one of the staple constituents of tourism marketing mix. it comprises of the overall design and outlook of the site (booms & bitner, 1981; kumar, 2010). now, it’s imperative that the environment should be user friendly and attractive where visitors and tourists are ensured to be safe and secure (al-debi & mustafa, 2014). a well designed surrounding helps in proper positioning of the product in tourists’ mind. a well lit room, well dressed staff, well managed parking areas and neat and tidy rooms communicate a good impression of the site (kotler, bowen & makens, 2008). 2.5.3 process in tourism marketing, process basically refers to the chain of activities that run from producer to the end user. thus, effective and efficient coordination of these process elements is imperative for effective marketing management. raybould (2009) opines that a process is directed at creating and delivering value to a consumer. it begins from a consumer searching for product related info. thus, the above explanation means that the process in marketing for tourism consists of the value chain activities that are directed at delivering value to the visitor. yilmaz and bititci (2006) describe the components of tourism value chain as: i) winning of order, ii)pre-delivery, iii)delivery and iv)post-delivery stages. the components of pre-delivery encompass the tour operatives, travel representatives; delivery incorporates inbound and outbound logistics, lodging, amusement services; whereas post-delivery consists of all the services for the purpose of strong customer relationship building. figure: 1. conceptual framework 2.5.4 personal perceived risk of terrorism risk of terrorism is defined by willis et.al. (2006) as the possibility or fear that particular forms of damagecausing assaults will occur at particular targets within specified time periods. therefore, personal perceived risk of terrorism can be defined as an individual’s personal fear that some kind of damage can be happen to him or her at a specific place and time. personal perceived risk of terrorism was measured by an adopted scale of a study conducted by nellis (2009) and consisted of five items. review of economics and development studies vol. 5, no 3, 2019 440 2.6.5 tourist satisfaction according to lovelock, patterson and walker (2001) the level of tourist’s satisfaction of a can be gauged by the difference amid his/her expectations and actual experience obtained post product consumption. thus, in the present study the satisfaction of sikh pilgrims was measured by using oliver (1980) “theory of expectationconfirmation.” according to this theory, all consumers associate some form of expectation about the product/service before purchase. greater is the level of experience than expectations, higher is the satisfaction and vice versa. higher satisfaction would result in good word of mouth and repurchase intention of customer. 3. hypotheses the hypotheses for the study are stated as following; h1: the variable people has a significant effect on religious tourist satisfaction. h2: the variable physical evidence has a significant effect on religious tourist satisfaction. h3: the variable process has a significant effect on religious tourist satisfaction. h4: the personal perceived risk of terrorism has a significant moderating effect on the relationship between people and religious tourist satisfaction. h5: the personal perceived risk of terrorism has a significant moderating effect on the relationship between physical evidence and religious tourist satisfaction. h6: the personal perceived risk of terrorism has a significant moderating effect on the relationship between process and religious tourist satisfaction. 4. methodology for the study the study is based on the philosophy of positivism and it is descriptive and deductive in approach. according to roche (2016) government of pakistan issued 3,316 visas to sikh pilgrims in the year 2016, to offer annual pilgrimage. therefore, the total population of sikh pilgrims/religious tourists was 3,316 sikh pilgrims. 4.1 sample size determination sample size was calculated by using yamani (1967) who has introduced a very easy formula for sample size calculation. by supposing a 95% confidence level, p = 0.05, n = population size, n = sample size, and e = level of accuracy. and inserting these values into formula, resulting sample size is; table: 1. sample size determination after calculation, the resulting sample size of religious tourists/sikh pilgrims was 357. 4.2 discussion on items measurement of the above mentioned factors of tourism marketing mix i.e. physical evidence, people, process, personal perceived risk of terrorism was done through a list of items found after a comprehensive literature review. all items except for demographic characteristics were measured on a five point likert scale, that ranged from 1 = “strongly disagree” to 5 = “strongly agree”. 5. analysis and findings 5.1 reliability of the study cronbach’s alpha or coefficient alpha is a widely used consistency index which according to gaur & gaur (2009) is the most reliable tool for measuring reliability of the scale. george and malleery (2003); (cooper, d. r., & schindler, p. 2003) and hair et al. (2006) suggest the value of alpha greater than 0.60 as being acceptable. review of economics and development studies vol. 5, no 3, 2019 441 table 2: results of reliability test of study (cronbach’s alpha) the results of reliability test for the pilot-study of current research confirmed the consistency of items in the instrument (questionnaire).the reliability coefficient alpha values for all of the four variables namely; people, physical evidence, process, personal perceived risk of terrorism and satisfaction were higher than (0.6) level of acceptability. hence, the results suggested that the questionnaire was a reliable instrument for measurement. 5.2 descriptive statistics the table.3. shows the results of the descriptive statistics and shows the total number of responding pilgrims, the minimum values of responses, the maximum values of responses, the mean values and the standard deviation of the present research study. these values describe the features of data collected from the selected sample of sikh pilgrims. the results showed that the dependent variable i.e. satisfaction has a minimum value of 1.25 and a maximum value of 3.75 with a mean value of 2.6968 and standard deviation 0.69633. physical evidence has a minimum value of 1.20 and a maximum value of 2.80, the mean value of the construct physical evidence is 2.0728 and sd is 0.38140. the minimum value of process is 1.00 with maximum value of 3.00, mean is 2.0754and sd is 0.39445. the independent variable people has the smallest value of 1.00 with max-value of 3.25, mean is 2.1912 and sd =0.45491. personal perceived risk has min-value of 1.00, max-value is 5.00, mean is 2.0985 and sd= 1.1366. 5.3 exploratory and confirmatory factor analysis: assumptions statistics factor analysis that consists of exploratory and confirmatory analysis was measured. primarily the researcher used exploratory factor analysis by using kaiser-meyer-olkin (kmo) and bartlet test. kaiser-meyer-olkin test i.e.kmo is used to measure the appropriateness of data for factor analysis. it measures the adequacy of sample for each variable in the model and also for the complete model. table 4: assumptions statistics for factor analysis review of economics and development studies vol. 5, no 3, 2019 442 the data is considered to be factorable provided the kmo measure of sampling adequacy is larger than 0.60. if the value of kmo is less than 0.50 it means that the sample size is inadequate. from the above mentioned table it is evident that the values of kmo are above the threshold values which indicate that there is no sample issue. the purpose of bartlett’s test of sphericity is to test that there is at least one significant correlation b/w two of items somewhere. in this test it is also checked that its p-value is labeled sig in spss which should be below .001. the pvalues in the above table are less than .001 which depict that the data set is accurate. 5.4 confirmatory factor analysis and structure equation modeling confirmatory factor analysis (cfa) was carried out by using structural equation model (sem) to measure the construct validity and model fitness. seven fit indices were used to test the model fitness, that included chisquare/degree of freedom(x²/df), goodness of fit index (gfi) , adjusted goodness of fit index (agfi), root mean error of residuals (rmsr), root means square error of approximation (rmsea), comparative fit index (cfi) and normed fit index (nfi). table 5: thresh-hold values for model fitness measures/fit indices source: usluel, askar, and bas (2008) a number of models are used in structural equation modeling (sem) to show a relationship amongst observed variables in order to test a hypothesized theoretical model. (schumacker & lomax, 2010). in other words, sem is used for confirming a theoretical model in which hypotheses are made that the observed variables explain the constructs and define relationship amongst these constructs. in this method, a theoretical model is generated from the sample data and it is then tested whether the observed data of sample supports the hypothesised model or not. in this section each of the construct for confirmatory factor analysis is tested in order to conclude that the data fits the measurement and structural model. the underlying model represents the confirmatory factor analysis(cfa) and the seven fit indices for the factor model of people. figure 2: factor model of people review of economics and development studies vol. 5, no 3, 2019 443 table 6: fit indices measures for factor model “people” the values of nfi, agfi, rmsea, gfi, rmsr, cfi and x2/df in the above table depict that these were all among the desired range which clearly demonstrate that the model is good and fit. modification indices were also done and covariance drawn where needed. all values show the overall good fit of the model. figure 3: factor model of process table 7: fit indices measures for factor model “process”. the values of nfi, agfi, rmsea, gfi, rmsr, cfi and x2/df in the above table depict that these were all among the desired range which clearly demonstrate that the model is good and fit. modification indices were also done and covariance drawn where needed. all values show the overall good fit of the model. following model represents the cfa and the seven fit indices measures for the factor model of physical evidence. figure 4: factor model of physical evidence table 8: fit indices measures for factor model “physical evidence” the values of nfi, agfi, rmsea, gfi, rmsr, cfi and x2/df in the above table depict that these were all among the desired range which clearly demonstrate that the model is good and fit. modification indices were also done and covariance drawn where needed. all values show that the overall model is good and fit. review of economics and development studies vol. 5, no 3, 2019 444 the underlying model represents the confirmatory factor analysis and the seven fit indices for the factor model of satisfaction. figure 5: factor model of satisfaction table 9: fit indices measures for the factor model “satisfaction” the values of nfi, agfi, rmsea, gfi, rmsr, cfi and x2/df in the above table depict that these were all among the desired range which clearly demonstrate that the model is good fit. the underlying model represents the cfa and the seven fit indices for the overall factor model of four factors physical evidence, people, process and satisfaction. figure 6: four factor model (people, physical evidence, process and satisfaction) table 10: fit indices for the overall factors model the values of nfi, agfi, rmsea, gfi, rmsr, cfi and x2/df in the above table depict that these were all among the desired range which clearly demonstrate that the model is good fit. following model represents the confirmatory factor analysis and the seven fit indices for the overall factor model of personal perceived risk of terrorism. review of economics and development studies vol. 5, no 3, 2019 445 figure 7: factor model of personal perceived risk of terrorism (moderating variable) table 11: fit indices measures for factor model “perceived risk of terrorism”. the values of nfi, agfi, rmsea, gfi, rmsr, cfi and x2/df in the above table depict that these were all among the desired range which clearly demonstrate that the model is good fit. 5.5 multiple linear regression analysis multiple linear regression analysis was conducted to test the hypothesized relationships among independent (people, physical evidence, process), moderating (personal perceived risk of terrorism) and dependent (tourist satisfaction) variable. table 12: regression weights: group number 1 default model (sikh pilgrims) regression coefficient(r)=0.821, coefficient of determination(r2)=0.674, f statistics=103.046, sig (p)< 0.05 the resulting value of coefficient of regression (r) =0.821(82.1%) depicts that a strong relationship exists between dependent and independent variables. the resulting value of coefficient of determination (r2)= 0.674 (67.4%) depicts that 67.4% variation in sikh pilgrims satisfaction (dependent variable) is explained by people, physical evidence and process (independent variables). the values of f = 103.406 and the significance value p <0.05 show that over all the regression model is valid, fit and statistically significant. based on statistical values, “people” has a significant and positive effect on tourist satisfaction with β = 0.395, t = 18.959, p<.05), “physical evidence” has a significant and positive effect on tourist satisfaction with β =0.824, t = 39.520, p>.05) and “process” has a significant and negative effect on tourist satisfaction with β = -0.096, t = -4.599, p<.05 respectively. personal perceived risk of terrorism has an insignificant negative effect on the relationship between people and tourist satisfaction with β = -0.081, t = -.021, p>.05, insignificant negative effect on the relationship between physical evidence and tourist satisfaction with β = -.104, t = -.689 p>.05, and an insignificant negative effect on the relationship between process and tourist satisfaction with β = -0.372, t = -.022, p>.05. 5.6 findings of multiple regression analysis the variable “people” has a significant positive effect on pilgrim’s satisfaction. the finding was consistent with the former study of (al muala & qurneh, 2012; chung& petrick, 2012; aziri & nedelea, 2013). the “physical evidence” has a significant negative effect on pilgrim’s satisfaction. the findings was consistent with the earlier review of economics and development studies vol. 5, no 3, 2019 446 study of (al-debi and mustafa, 2014; iqbal, 2016) and the process has a significant negative effect on pilgrim’s satisfaction. the finding was consistent with the earlier study of (yang, 2010; al muala & qurneh, 2012; iqbal, 2016; martin, 2015; yang, 2010) respectively. personal perceived risk of terrorism has an insignificant negative moderating effect on the relationship between people, physical evidence, and process and tourist satisfaction. table 13: results of multiple regression analysis of sikh pilgrims 6. discussion and conclusion the process of tourism has shown a negative effect on satisfaction of sikh pilgrims. therefore the process should be made easy to help tourists. information about different cultural sites should be provided at different counter points like travel agencies, airports, and hotels. according to kang et al. (2003), one of the largest market segment of tourism which is often overlooked is “visiting friends and relatives” (vfr) market. this segment has shown the highest profitability and highest expenditures per person on shopping. therefore, in order to promote vfr, public and private tourism agencies should provide enough facilities at special events to sikh pilgrims and other tourists. given that security is ensured, sikh pilgrims and other indians should be given visa relaxations so that they may visit their relatives and friends in different cities of pakistan and contribute to pakistan’s economy. local residents and guides should be provided enough knowledge about different sites so that they may forward it to vfr tourists to increase their interest in different sites. the results showed that the variable people has a significant positive effect on tourist satisfaction. however, it can be more enhanced by providing special trainings to the tour guides, waiters and managers at hotels and restaurants, salesmen and all the other staff that may come in contact to foreign tourists. according to kotler, bowen and makens (2008) and jeon and choi (2012), satisfied employees lead to satisfied customers. it implies that in order to keep the tourists satisfied, all the related staff should be considered as an asset and must be taken care of. foreign and private investors should be encouraged for franchises and joint ventures in air services, hotels etc. investment in air services will make it easy to access the remote areas of pakistan with more comfort whereas, investment in hotels and theme parks along cultural sites would increase the interest of tourists of every age in cultural sites. moreover, foreign investors of different religions like sikhism, buddhism, hinduism and christians should be encouraged for maintenance and beautification of their religious cultural sites. the insignificant moderating effect of personal perceived risk of terrorism on the relationship between each of independent variable i.e. people, physical evidence and process with tourists satisfaction shows that religious tourists i.e. sikh pilgrims are not bothered by the terrorism risk due to their strong affection for their religious sites. therefore, process should be made easier for them to increase tourists inflow into the country. 7. future research directions this research is cross-sectional in its nature; longitudinal research should also be conducted to detect any positive or negative changes in tourism marketing of pakistan. a qualitative study that may involve policy makers, government officials and tourists could also be conducted. the present study was confined to one kind of religious tourists i.e. sikh pilgrims. similar studies should be conducted involving other religious tourists like buddhists, hindus and others who have their religious sites located in pakistan. similar studies can be carried out by considering the role of any other mediator or moderator variable in the model. review of economics and development studies vol. 5, no 3, 2019 447 8. theoretical and contextual contribution of the study an in-depth study of the marketing mix for tourism was carried out and constructs was designed for the three marketing mix factors. moreover, a conceptual model was developed that involved the role of personal perceived risk of terrorism as a moderator which was, to the best of knowledge of researcher, was not used earlier in the marketing mix model. since far, no study was found on marketing mix of tourism and especially religious tourism in the context of pakistan. present study was a contextual addition to the existing studies in developing countries like pakistan. references al-debi, h. a. & mustafa, a. 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(2006). performance measurement in tourism: a value chain model. international journal of contemporary hospitality management, 18(4), 341-349. review of economics and development studies, vol. 9 (1) 2023, 17-26 17 determinants of earnings of rural households of multan district (pakistan) rashid ahmad a, saba rehman b a assistant professor, school of economics, bahaudin zakariya university multan, pakistan b m.phil scholar, school of economics, bahaudin zakariya university multan, pakistan article details abstract history: accepted 28 january 2023 available online march 2023 this study focuses on exploring the factors affecting on urban earnings of household of multan district. cross-sectional data was collected through questionnaire from household of district multan's belonging to rural areas. about 300 respondents belonging to rural areas were randomly engaged for an interview in 2021. mincerian earning function was used for analysis and its extension form was also analyzed. in this study it was found that experience and education positively impact on earning whereas experience square had a negative impact while evaluating mincerian earing function. in the extended mincerian earing function, education, experience, age, spouse involvement, marital status, and migration positively impact on earnings while age squared, experience squared, and employment have a negative impact on earnings of rural household of multan district. © 2023 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: rural household, determinants of earnings, mincerian earning function jel classification: o18, d1 doi: 10.47067/reads.v9i1.475 corresponding author’s email address: rashidahmad@bzu.edu.pk 1. introduction agriculture is an important sector in pakistan because it accounts for a substantial amount of the country's economy and is the primary source of employment for rural residents. improvement of rural development and the agricultural sector are top priorities of the governments for eradicating poverty. so, the agriculture sector contributes 19.2 percent to the gdp of pakistan and it offers employment opportunities to almost 38.5 percent labor force. furthermore, agriculture provides a living and meets the fundamental necessities of 60 to 70 percent of pakistan's population. (pbs,2021). in recent years, climate change, water scarcity, and arable land reduction have slowed agricultural expansion and the majority of the population has shifted from a rural to an urban region which has a detrimental impact on the agriculture industry. there is a need for innovative technologies to boost agriculture's productivity because this industry contributes 19.2 percent of pakistan's gdp and can be a major driver of economic growth (gillani et al., 2013). multan is an agricultural city, and more than 80 percent of residents depend on the agricultural sector for their livelihood. mangoes production is famous in the district and is also exported to other review of economics and development studies, vol. 9 (1) 2023, 17-26 18 countries. cotton is another product of the district and the major source of foreign exchange earnings in pakistan. new cotton varieties announced by the agriculture ext. wing among the rural population is being discovered with the help of the central cotton research institute and cotton research station in multan. on the other hand, mango research institute is actively involved in the development of new varieties of mangoes which is the primary source of livelihood for rural residents of the multan area (govt of punjab, 2021). despite its economic importance, multan has about 2.28 percent of the country's population, with rural areas having a proportion of 56.62 percent of the multan total population. people in rural areas of district multan face severe poverty issues due to a lack of educational and health infrastructure, a lack of employment opportunities, resource inequality, and poor access to natural resources. in addition, rural areas of multan have received little attention from policymakers, which has a negative impact on the rural people. multan's rural inhabitants have very few employment facilities to make revenue for purchasing food and meet the need for the basic facility; as a result, they experience hunger problems during their unemployment period. rural people rely heavily on agriculture for a living, thus they suffer from food insecurity and micronutrient deficiencies, which diminish productivity, work days lost, and different illnesses. so the primary goal of the research is to identify the elements that influence the earnings of rural residents. 2. literature reviews dayal talukder (2014) used regression analysis to evaluate the income determinants of bangladesh's rural inhabitants. the economic and non-economic factors were studied to determine their combined effect on family income. the findings of the linear regression demonstrated that family size was the only non-economic factor that was significant and positively affecting family income in both 1986 and 2005. in this period, the family size was the most important positive determinant of income, whereas the farmer was the most important negative determinant of income. the revenue share from the rice was a positive component but not significant in contrast to the current year endowment. the agriculture share was a positive factor of family income in both years, but it was insignificant in 2005. memon et al. (2020) explored the factors of earning diversification of flood-prone rural areas of pakistan. the primary data was used which was collected from 350 households in rural areas randomly and the linear regression method was used for the estimation of the data. the regression results revealed that households with more earnings persons and ruled by educated male earners had a diversified earning portfolio. moreover, the moderation analysis indicated that a family ruled by an educated male head was more diversified than an uneducated person. nzabakenga et al. (2013) showed the agrarian earning determinants of a small-holder farmer from the northern part of burundi. to achieve the study objectives, primary data was obtained from 218 inhabitants, and the linear regression model was employed for analysis. the eight variables were selected for the analysis but just two of them have an effect i.e farm size and family size were the only significant variables among all variables. parvin and akteruzzaman (2012) studied the factors influencing the income of agricultural and review of economics and development studies, vol. 9 (1) 2023, 17-26 19 non-farm households in bangladesh's netrokona area. the descriptive analysis was performed to explain the socioeconomic features of the target sample and to determine the factors influencing the income of farm and non-form inhabitants according to the results of the estimated regression, family size, and farm size affect farm income positively, but non-farm income affects farm revenue negatively. furthermore, the influence of family size on non-farm income was significant and positive, however, the effect of farm revenue on non-farm income is negative and significant. odozi and adeyonu (2021) investigated the factors that influence employment and wages in rural nigeria. the panel data was used in this study and the logit model was applied for the estimation of income and employment determinants. according to the study, agricultural self-employment was the most common cause of employment in rural nigeria between 2010 and 2015. however, it was two times the non-farm employment and five times as much as the wage employment. in addition, the wage employment was diminishing during the study period. 3. data source and methodology this study was carried out in the rural region of multan, where agriculture is the main source of income for the local population. approximately 70% of them work in agriculture. this study is based on primary data that was gathered through a survey in rural areas during the year 2022. a questionnaire was developed according to the study's objective. a random sample of 300 rural household was drawn from the district. to describe the socio-economic characteristics of the head household descriptive statistic was used including maximum, minimum, mean, and standard deviation. for finding the degree of association among the variables the coefficient correlation was used. the mincerian earning function was used in both strict and extended forms to estimate the determinants of rural household income. the econometrics form of the model is listed below: firstly, the mincerian earning function was considered to find the impact of the variable on income which is given below: total income = f (education, experience, square of experience) tot inc= f (edu, exp, expsq) the regression form of the model is as given below 𝐿𝑛𝑇𝑂𝑇_𝑁𝐶 = [𝛽0 + 𝛽1𝐸𝐷𝑈 + 𝛽2𝐸𝑋𝑃 + 𝛽3𝐸𝑋𝑃𝑆𝑄 + µ𝑖] a log-linear model was used in which total income was used as a regressand variable while the education, work experience, and experience square were used as independent variables. secondly, the extended form of the mef (mincerian earning function) was used by incorporating the other variables which affect income along with the variable included in the strict model. total income = f (education, experience, age, square of age, spouse participation, employment sector , total acres of land ) total income = f (edu , exp , age, agsq , sp , emp , ls ) review of economics and development studies, vol. 9 (1) 2023, 17-26 20 the econometric form of the model is given as [ 𝐿𝑁𝑇𝑂𝑇_𝐼𝑁𝐶 = 𝛽0 + 𝛽1𝐸𝐷𝑈 + 𝛽2𝐸𝑋𝑃 + 𝛽3𝐴𝐺𝐸 + 𝛽4𝐴𝐺𝑆𝑄 + 𝛽5𝑆𝑃 + 𝛽6𝐸𝑀𝑃 + 𝛽7𝐿𝑆 + µ𝑖 ] a log-linear model was used in which total income was used as a dependent variable and education, work experience, experience square, age, age square, spouse participation, migration, employment, and land size are used as independent variables. where variables description of variables total_inc total household income from all sources edu completed years of education of the household head exp years of work experience expsq years of work experience (square) age age of the household head in years agesq age of the household head in years (square) sp spouse participation ( dummy variable by yes= 1, no= 0) emp employment sector ( dummy variable by informal= 1, formal=0) ls total acres of land 4. explanation of the variables 4.1 education education is the most important human capital and investment in human capital in return increases the earnings of the family head. educated persons are more productive, and skilled that's why the earnings opportunities are higher for them. so according to schultz, we should use our resources on human capital which not only increases the earnings of the households but also make them able to take part in the economic growth of the country (krasniki& topxhiu, 2016). education is expected to have a positive effect on the earnings of the family, the higher the education the higher will be the earnings. household head education is measured in completed years of education. 4.2 experience the experience of the household head is taken in the years. when the experience of the person increases due to training in a particular job their earnings start to rise because the experience people have more opportunities than inexperienced people. so it is expected to have a positive effect of experience on the earnings of the household, which means that when people gain experience in a particular job it improves their productivity which in turn increases the income of the family head. to capture the effect of experience over a longer period experience squarely is used in this study. experience square showed that it affects the earnings negatively because nobody can work in the same position for a long-term period they start to get tired and want to take rest from their job that’s why their earnings start to decline. 4.3 spouse participation spouse participation explains the involvement of both partners in different types of fields to earn income. if the spouse is participating financially with the partner earnings of the household heads will increase. education is the most important indicator of the spouse’s participation because when the spouse is educated they can work in different fields which in turn increases their income (pape & review of economics and development studies, vol. 9 (1) 2023, 17-26 21 mistiaen, 2018). it is expected to have a positive effect of spouse participation on the earnings of the household head, so to capture the effect of spouse participation on earnings dummy variable is used. 4.4 age of the household head the age of the household head is used as an explanatory variable. based on literature, it is observed that household head earnings are higher at the young stage because they are more active and productive in the initial stage period. to capture the effect of old age households age squarely is used in this model it indicates that earnings at the initial stage of age increase but start to decline when we move towards old age so age square has a negative effect on the earnings of the family. the age of the household head is taken in the year (khan. z,2021). 4.5 migration migration is the movement of people from one region to the other region within the country, in looking for better employment opportunities and efficient allocation of resources. the statistics showed that migration to the urban area is much more in the last few decades, showing that the majority portion of the population has been facing problems in rural areas (harris and todaro, 1970). the expected income in urban areas is greater than in rural areas so it is expected to have a positive impact on migration on the earnings of the household. to find the effect of migration in our model a dummy variable is used. 4.6 employment status employment status explains the economically active person concerning his or her employment. the status of the job indicates whether the respondent has a job or not and if the respondent has an occupation then the question arises in which job sector they engaged. the categorical variable is used for this, if the respondent belongs to the formal sector it will be represented by 0 otherwise by 1. because this status of employment determines the earnings of an individual and people engaged as common laborers and professional workers will in general receive more payment than the junior team of workers and clerical staff. 4.7 land size land size is an important indicator that affects the earnings of the household head. if the head of the household has the possession of one or more acres of land the income can be increased because the land can be utilized for different earning purposes. higher will be the land size higher will be the earnings of the family which in turn decreases the earnings gap among the regions. so it is expected to have a positive effect on the land size on the earnings of the family. 5. results and discussion 5.1 descriptive statistics descriptive analysis is the best method to analyze the data and to explain the minima, maxima, mean, and standard deviation. the results of the descriptive analysis of determinants of income are explained in the tables below. table 1, shows that the average age of the family head of the rural population of district multan is 59.43 years. the mean of the education years of the family head belonging to district multan is 17.29 years, suggesting that on average education of the family head in district multan is 17.29. the mean value of work experience is 21.71, implying that the average work experience of a rural household is 21.71. review of economics and development studies, vol. 9 (1) 2023, 17-26 22 table: 1 descriptive statistics n minimum maximum mean std. deviation age 300 20 65 59.43 19.618 education 300 1 18 17.29 2.701 work ex 300 3 36 21.71 9.252 migration 300 0 1 .50 .519 sp 300 0 1 1.36 1.277 emp_sec 300 0 1 .79 .426 land size 300 1 3 1.50 .650 total_inc 300 12000 110000 48571.43 29635.515 source: authors own calculation through spss the mean value of migration is 0.50, revealing that on average 0.50 people migrated to district multan urban areas for income-earning. the mean value of spouse participation is 1.36, denoting that on average spouse participation is 1.36 in rural areas. the mean value of the employment status is .79, showing that 0.79 percent of the rural household in the district multan belongs to the informal sector while the remaining belong to the formal sector. the mean value of land size is 1.50, revealing that an average rural household in the multan district possesses 1.50 acres of land. the mean value of rural household head monthly income in district multan is 48571.43, pointing out that the average income of the household in district multan is 48571.43. the minimum earnings of the rural respondents from district multan is 12000 rupees while the maximum earnings of the rural respondents in district multan is 110000 rupees. the maximum variation is shown by the education variable and the least variation is shown by the variable migration. 5.2 correlation matrix the problem of multicollinearity is investigated by coefficient correlation, it explains the degree of association among the variables presented in the data. this table indicates the correlation between the different factors, however, the diagonal of the table shows the correlation of the factors with itself which always be 1. all variables are positively related to income except employment which is negatively associated with income. as can be seen from the table the value of correlation among all the variables is less than 0.70 so according to the rule of thumb, it can be concluded that there is not a high problem of multicollinearity in this study. table. 2 correlations district multan s-part age edu mig work emp land tot-inc s-part 1 age .092 1 edu .290 .227 1 mig .124 .099 .274 1 work .004 .301 .160 .249 1 emp -.140 -.034 -.174 -.258 -.251 1 land .024 .000 .114 .000 .268 .139 1 tot-inc -.055 .239 .340 .253 .157 .069 .283 1 source: authors own calculation through spss review of economics and development studies, vol. 9 (1) 2023, 17-26 23 5.3 econometrics analysis 5.3.1 strict mincerian earnings function the outcomes are explained by the restricted mincerian earnings function. further the results of the r-square value, explain that the model's explanatory variables were responsible for 59.1 percent of the variation in household income. indicating a good fit model with an f-value of (24.45), which was significant at a 1 percent level. the education variable is statistically significant at a 1% level of significance and it shows a direct association between earning and education in a rural area of district multan. if education increases by a year it will increase the income of the household head by 0.023 percent. the result is consistent with the study of khan, z. (2021); shabbir (1994); teng et al. (2007); su b & heshmati a (2013); rashid and faridi (2014); mincer (1974) and chaudhry et al.(2011). the work experience is statistically significant at a 5% level of significance and explains a direct relationship between work experience and the income of the family head. if the experience of the family head increases by one year it will raise income by 0.0260 percent. this result of experience is also in line with the study of khan, z. (2021); shabbir (1994); lima et al.(2020); and nasir (2000). 5.3.2 extended mincerian earning function in this, the results of the 'extended' mef were showed which was obtained by extending the 'traditional' mef by incorporating variables, age, age square, spouse participation, migration, employment status, and the size of landholding. the relationship between household education and the natural log of income is positive and significant at a 1% level of significance. the household head education variable indicated that if the education years of the household head increase by 1 year, it leads to a rise in the household income by 0.0202%. the result is consistent with the study of khan, z. (2021); shabbir (1994); teng et al. (2007); su b & heshmati a (2013); rashid and faridi (2014); mincer (1974) and chaudhry et al.(2011). table: 3 strict mef: rural district multan dependent variable: lnincome of the household variable coefficient std. error t-statistic prob. c 9.938897 0.101664 97.76178 0.0000 education 0.023663 0.007123 9.321902 0.0015 work_ex 0.026056 0.011182 2.330173 0.0231 exp2 -3.78e-05 0.000324 -0.116621 0.9075 r-squared 0.591576 adjusted r-squared 0.571490 f-statistic 24.45152 prob(f-statistic) 0.000000 sample size (n) 300 source: authors own calculation through e-views the years of experience of the household head are positively related to income and are statistically significant at a 5% level of significance. it explains that the income of a household head increases by 0.0134 % if there is a rise in the experience of the family head by 1 year. this result of experience is also in line with the study of khan, z. (2021); shabbir (1994); lima et al.(2020), and nasir (2000). the age of the household head is directly related to the monthly earnings of the family member and is significant at the one percent level of significance. family monthly income rise by 0.0173 % as the family member’s age rises by 1 year. the reason is that as the family review of economics and development studies, vol. 9 (1) 2023, 17-26 24 member moved toward older age they become more hard workers, efficient, specialized, and responsible in their work so their earnings also rise as the age of individuals increases. the same result was in the study by khan, z. (2021). chaudhry et al.(2011) sun et al.(20110 and lima et al.(2020). the results indicated an indirect relationship between income and age square variables and are significant at a 5 % level. the negative sign of the age square shows the nonlinearity of the age square, which indicates when the age of the household head reaches a certain level it will raise income by -0.00016 but this increase of income will be at a decreasing rate. this result of age square is also consistent with the study of khan, z. (2021) and su, b., & heshmati, a. (2013). migration is directly related to the income of the household and is significant at a five percent level of significance. the monthly household income upsurged by 0.1740 % as family members migrated from rural to urban areas. this finding supports the study of huhua cao (2010) and lima et al. (2020). the size of the landholding is included in the model and is statistically significant at a 1% level of significance. further, the result proposes that if the head of the household has the possession of one or more acres of land the income can be increased because the land can be utilized for different earning purposes. so, the coefficient of landholding size is positively related to the monthly income of the household head, it shows that as household heads possess more land their income increase by 0.04 percent. this result is also in line with the study of chaudhry et al. (2011). the results of the strict mincerian function indicate that education and work experience has a positive effect on the earnings of the rural households in district multan while experience square has a negative effect on the earnings due to the nonlinearity of the variable. the variables for the extended mincerian function were education work, experience, exp2, age, age2, spouse participation, migration, employment status, and land size. moreover, in the extended mincerian function table 4 extended mef: rural district multan dependent variable: lnincome of the household variable coefficient std. error t-statistic prob. c 9.755284 0.251827 38.73799 0.0000 education 0.020163 0.006903 2.920924 0.0051 work_ex 0.013467 0.005940 2.267108 0.0270 exp2 0.000147 0.000432 0.339615 0.7354 age 0.017336 0.004406 3.934715 0.0002 age2 0.000162 6.77e-05 2.396513 0.0197 spouse_part -0.007350 0.068075 -0.107971 0.9144 migration 0.174054 0.084596 2.057480 0.0444 emp_stat -4.26e-05 0.000557 -0.076515 0.9393 land_size 0.045667 0.013599 3.358029 0.0013 r-squared 0.434427 adjusted r-squared 0.341879 f-statistic 4.694065 prob(f-statistic) 0.000123 sample size (n) 300 source: authors own calculation through e-views review of economics and development studies, vol. 9 (1) 2023, 17-26 25 6. conclusion and policy recommendation this paper examined the determinants of income among rural households of district multan. this study was based on primary data which was collected through a structured questionnaire during the period 2022. a sample of 300 households from rural areas was drawn randomly. to describe the socio-economic characteristics of the household head descriptive static was used. the coefficient correlation was used to find the degree of association among the variables. in estimating the determinants of rural household income mincerian earning function was used both in strict and extended form. variables like education, work experience, age, spouse participation, migration, and land size has a positive effect on the earnings while work experience square, age square, and employment sector have a negative effect on income in district multan. furthermore, the value of the coefficient correlation was less than 0.30, revealing that there is no problem with multicollinearity in our model. 7. recommendation • withholding taxes should be withdrawn by the government from rural areas and must be exchanged with less taxation so that the indirect taxes on the less well-off is removed and decrease the income gap between rural and urban area. • policy formulation on investment in human capital is needed and its effective implementation is necessary for the well-being of society. • the job formation for skillful labor in rural areas would be instrumental in tumbling the wage gaps and in the growth of rural workers. • programs should be introduced that benefit the rural areas and assist in enhancing the productivity of rural areas to stop the migration towards the urban areas. • women’s employment has dramatic effects on income. fewer women involve in working in rural areas as compared to urban. women should be counseled in rural areas through awareness. references ahmad, r., & faridi, m. z. 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(2014). assessing determinants of income of rural households in bangladesh: a regression analysis. journal of applied economics and business research, 4(2), 80-106. review of economics and development studies vol. 5, no 4, 2019 827 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads foreign portfolio investments and economic freedom: empirical investigation of the world countries grouping based on the level of income 1 hamid ullah, 2 fazal e wahid, 3 muhammad irshad khan mohmand, 4 abid ali 1 assistant professor, islamia college peshawar, pakistan. hamidullah@icp.edu.pk 2 assistant professor, islamia college peshawar, pakistan. eco_wahid@yahoo.com 3 ph.d. scholar, islamia college peshawar, pakistan. irshadmohmand@gmail.com 4 lecturer, islamia college peshawar, pakistan. abidali@icp.edu.pk article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 this study investigates the effect of the economic freedom on the foreign portfolio investments in various countries of the world classified based on the level of income. the study used a sample of 184 countries for a period of 2001 to 2017, the full sample is further divided based on the level of income into a subsample of 74 high-income countries, 52 upper-middleincome countries, 32 lower-middle-income countries, and 26 lower income countries. the study estimated panel data regression models and found that a fixed effect is prevailing in all models. the regression results show that economic freedom has a positive effect on foreign portfolio investments. furthermore, the results of the subsample also shows that economic freedom has a significant positive effect on foreign equity and foreign debts portfolio investments in high income, upper middle income, and lower-middle-income countries, however, there exists an insignificant effect of the economic freedom on the foreign equity and debts portfolio investments in the lower income countries. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords fpi, efi, economic development, developed countries jel classification: g11 g38 e22 f38 corresponding author’s email address: hamidullah@icp.edu.pk recommended citation: ullah, h., wahid, f., mohmand, m.i.k. and ali, a. (2019). foreign portfolio investments and economic freedom: empirical investigation of the world countries grouping based on the level of income. review of economics and development studies, 5 (4), 827-846 doi: 10.26710/reads.v5i4.899 1. introduction from the early 1980s till the international debts crisis, the syndicated loan of the commercial banks is sole private capital to among the different countries of the world. however, the current trends in the international markets show a gradual decline in the medium and long-term bank loans and increasing http://www.publishing.globalcsrc.org/reads mailto:hamidullah@icp.edu.pk mailto:eco_wahid@yahoo.com mailto:irshadmohmand@gmail.com mailto:abidali@icp.edu.pk mailto:hamidullah@icp.edu.pk review of economics and development studies vol. 5, no 4, 2019 828 trends in foreign direct investments and foreign portfolio investment inflows 1 (agarwal, 1997). the imf survey reveals that the foreign portfolio investment increased from $22,210,124 million in 2001 to $58,153,742 million in 2016, which is almost a 310.75% increase. this increase in foreign portfolio investment is mainly attributed to the growing globalization and liberalization of stocks and bonds markets across the world, which tremendously contributes towards the economic development of the countries (singhaina & saini, 2017). during the last two decades, almost all economies have initiated reforms with the aim to bring strategic competitiveness in the business environment in order to attract foreign capital investments to achieve their targeted goals of economic development. the extant literature shows that foreign portfolio inflows have a fundamental role in the developmental process of all countries. on one hand, the developed economies required foreign capital inflows for maintaining development, while on the other hand the developing economies needed the foreign portfolio investment for the high economic growth and to fulfill the financing needs of the domestic business sectors. so, foreign capital investments act as a fuel for the economic engine of a country and overall industrial growth. furthermore, this flow of funds in terms of foreign capital can bridge the gap between demand for funds with supply of funds into and out of the economy. the graph shows the foreign portfolio investments over time, whereas fdpi stands for foreign debts portfolio investments, fepi stands for foreign equity portfolio investment and tfpi stands for total foreign portfolio investment over time. similarly, wu, li, and selover (2012) also investigated the impact of country environment on the foreign capital investment and found that a country with relatively more stable environment has a positive role in attracting foreign portfolio investment. similar, studies conducted on the brics countries such as garg and dua (2014), ghosh and herwadkar (2009) and srinvasan and kalaivani, (2005) also suggested that flow foreign portfolio investments in to a country is mainly due to the stable economic policies, with potential for economic growth and more specifically scope of diversifications prevailing in these countries. similarly, exporting countries are more attracted towards the portfolio investments in order to hedge their currency risk and other country-specific risks (agarwal, 1997; grubel, 1968; and levy & sarnat, 1970). the prior literature also highlighted various reasons of such investments i.e. diversification of portfolio 1 international monetary fud defines portfolio investments includes long term bonds, equity and some money market instruments such as commercial papers and certificate of deposits. review of economics and development studies vol. 5, no 4, 2019 829 investment, fulfilling gap between the savings and investment across the different countries and benefits of the inflows to the hosts country such as economic growth, social well-being, employment generation and local stock and bonds market development (mody, taylor, & kim, 2001). chakrabarti (2001) reported a positive relation of the stock market returns and foreign investment portfolio (boyer & zheng, 2009). rai and bhanumurthy (2004) suggested that a decrease in the stock market and exchange rate volatility attract more foreign portfolio investments (lin, lee & chiu, 2009). portes and rey (2005) used gravity model and reported that market size, liquidity, efficiency in transactions and technology positively affect the equity inflows, moreover, byrne and fless (2011) found interest rate as a determining factor of foreign capital inflows (ghosh, qureshi, kim & zalduendo, 2014). this study investigates the impact of the efi on the fpi of the world countries grouping based on the level of income. this study is beyond the scope of the region and applied a holistic approach of considering countries across the world based on the level of income. furthermore, the prior studies have taken the total fpi as a dependent variable which includes equity and debts. we argued that equity investments are different from the debts instruments and therefore, these should be considered separately therefore, this study has used total fpi, equity and debts foreign investments. moreover, this study also focused on those factors especially affecting to the overall business sector of a country such as business development, ease of doing business, level of financial development, tax on capital gains and income as causes of fpi along with the other commonly used measures of macroeconomic variables. 2. review of literature generally, the foreign capital inflow is divided into two main forms: the most common form is a foreign direct investment (fdi) and foreign portfolio investments (fpi). the foreign investors invest in fpi with the aim to participate in the overall management and have the power to take decisions deemed fit for the success of the business. thus, in this form of investment the investors hold ownership and control of the firm. however, the foreign portfolio investments give the investors ownership in firms of the host country and in return the investors earn short-term profit only. 2.1 theoretical background of the study this study is based on the following theories related to the foreign portfolio investments and provides theoretical grounds to the understanding of the topic. the portfolio balance framework explain that foreign investors evaluate various possibilities of earning abnormal profits by exploiting the available arbitrage opportunities in different countries (grubel, 1968; and harvey, 1991). this study is considering all those factors categorized into pull and push factors that attract the foreign investment inflows based on this theoretical framework. the international finance theory explains the main motivation of the fpi that underpin outcome of those investors, who wish to invest across the countries. the most fundamental benefit of foreign portfolio investments is diversification of risk, fulfilling gap between the savings and investment across the different countries (dell’ariccia et al., 2008; and obstfeld, 2009). capital allocation theory stress on the allocation of investments in either developing countries markets or industrialized countries markets or both. buckberg (1996) suggested two-step process of capital allocation i.e. in the first step the investor determine the amount of capital available for investment and in the second step identify the potential markets based on expected returns and risk. 2.2 foreign portfolio investment determinants the theories that underpinning the determinants of the capital inflows are broadly classified into three categorize; ―firms level determinants‖, ―industry level‖, and ―country level‖ determinates of foreign capital inflows (calvo, leiderman, & reinhart, 1993, 1996; chuhan, claessens, & mamingi, 1998; and dell’ariccia et al., 2008). this study mainly focuses on the country level factors that can affect foreign capital investments and also examined its variations with the income level of countries. review of economics and development studies vol. 5, no 4, 2019 830 many studies highlighted the global factors that affect the portfolio inflows such as economic growth, business opportunities, stability and liquidity of stock markets, interest rate and exchange rate stability created attraction for the foreign capital inflows in to the emerging countries (byrne & fiess, 2011; kim, 2000; and mody et al., 2001). another group of researchers considered home country factors that can affect the inflow of foreign capital investments in both developing and developed countries (de vita & kyaw, 2007). in a similar manner, another stream of studies highlighted the benefits of diversification inherited in the foreign portfolio investments and that motivate the foreign investors to invest across the border (grubel, 1968; harvey, 1991; obstfeld, 2009). chakrabarti (2001) found a positive relation of the stock market returns and foreign investment portfolio (boyer & zheng, 2009). similarly, rai and bhanumurthy (2004) concluded that countries with stable stock market returns and exchange rate attract more foreign portfolio investments (lin, lee & chiu, 2009). french and vishwakarma (2013) concluded that foreign equity inflows positively affect conditional volatility in the stock market and exchange rate for two to three weeks of the host country. srinivasan and kalaiyani (2015) reported that foreign portfolio investments have a negative effect in short run and positive effect in long run on the stock market of india. however, arora (2016) found contrary results and suggested that foreign equity inflows have no relationship with the future returns while there is a significant relationship of the domestic equity investments with the future stock market returns. the extant literature also highlighted the role of globalization and liberalization in developed and developing countries that extensively attracted the inflow of capital into the countries. the last two decades have evidenced a tremendous increase in the capital inflows into the developing regions like brics and asean countries (garg & dua, 2014). holtbrügge and kreppel (2012) highlighted the importance of human capital, consumption, productivity, innovation and savings for the capital inflows in the brics and g7 countries (morck, yeung & zhao (2008); mostafa & mahmood, 2015)). agarwal (1997) reported a negative effect of inflation on the foreign portfolio investments and a positive effect of the exchange rate, economic freedom, and domestic capital in asian countries. portes and rey (2005) used gravity model to find-out various factors that could influence the foreign capital inflows and found that market size, liquidity, efficiency in transactions and advancement in technology is positively associated with the equity inflows. moreover, byrne and fless (2011) found the interest rate as a determining factor of foreign capital inflows (ghosh, qureshi, kim & zalduendo, 2014). dua and garg (2013) examines the effect of domestic stock market performance, risk diversification, interest rate risk, country risk, economic growth, exchange rate volatility on foreign capital investments and found that high economic growth, low exchange rate volatility and stability of stock market performance positively affected the capital inflows in india (bhasin & khandelwal, 2013; and ahmad & zlate, 2014). 3. research design and methodology this section includes discussion on the data collection and sampling techniques, research modeling and variables definitions. 3.1 data collection and sampling techniques the study has used a total of 184 countries data ranging from 2001 to 2017 for which the efiand foreign portfolio data available. the full sample countries were further divided based on the level of income into a subsample of 74 high-income countries 52 upper-middle-income countries 32 lower-middle-income countries and 26 lower income countries. the division of the whole sample into subsample is based on the world bank classification of countries into four groups and subject to availability of data for the considered variables.2 the efidata is collected from the heritage foundation3. the foreign portfolio of investments annual data were extracted from the database available on the international monetary fund 2 www.worldbank.org 3 www.heritage.org/index/ the heritage foundation is an american conservative think tank based in washington, dc. http://www.worldbank.org/ http://www.heritage.org/index/ review of economics and development studies vol. 5, no 4, 2019 831 website.4 data of other variables such as ease of business development index, financial development index, business development index, trading volume, interest rate, exchange rate, literacy rate, gross domestic product growth rate and total trade to gross domestic product ratio data are taken from the world bank indicators (wdi). 3.2 research modelling the research study has used models adopted from the study of the singhania and saini (2017) and afaq and khan (2016) to test the relationship of the efiand foreign portfolio investments. whereas tfpi stands for the total foreign investment, fepi stands for the foreign equity portfolio investments and fdpi stands for the foreign debts portfolio investments in the country ―i‖ at a time ―t‖ represents the dependent variables. the value of country ranges from 1, 2, 3...n and ―t‖ represents the number of years ranging from 2000 to 2017. the independent variables include ef, which stands for the efi computed by the heritage foundation. mcap stands for market capitalization, bdi stands for the business development index, edbi stands for the ease in doing business index, trvol stands for trading volume, pop stands for annual population growth, gdpg stands for the gross domestic products annual growth, irspread is the interest rate spread between the lending and borrowing rates, inf stands for consumer price index and represents inflation, tax rate represents the tax on income and capital gains from investments, litrate stands for literacy rate, year stands for the year dummy and country stands for the country dummy. the data of the macroeconomic variables are collected from the world bank indicators (wdi). 4. research results and discussions the results section discusses the results of descriptive statistics, correlation, and panel regression analysis. 4.1 descriptive statistics table 4.1 shows the results of descriptive statistic i.e. mean of the full sample, ―high-income countries‖, ―upper medium-income countries‖, ―low medium income‖, and ―low-income countries‖. the descriptive shows that on average the total foreign portfolio investment is highest in upper-middle-income countries and lowest in the lower middle-income countries. the total portfolio investment is divided into equity portfolio investment and debts portfolio investment. on average the equity and debts portfolio investments are highest in the upper-middle-income countries while lowest in the lower middle-income countries. however, the efi posed a different trend. it is varying with the income level and is highest for the high-income level countries and lowest in case of low-income countries. the results of the other variables also show interesting patterns such as on average the value of financial development index is highest for the lower middle-income countries while the lowest for the low-income 4 www.imf.org foreign portfolio investments data is collected from the coordinated portfolio investment survey (cpis). http://www.imf.org/ review of economics and development studies vol. 5, no 4, 2019 832 countries. similarly, gdp growth rate, inflation rate, tax rate and ease in doing business is highest in the low middle-income countries, while the lowest for the high-income countries. however, population growth rate and the literacy rate is highest in lower middle-income countries while lowest in the lower income countries. 4.2 panel unit root test table 4.2 represents the result of "phillips-perron‖ tests and ―augmented dickey-fuller‖ tests for panel unit root. the null hypothesis of these tests is ―all panels contain unit roots‖ while the alternate hypothesis is ―at least one panel is stationary‖. table 4.2 shows that the calculated statistics value of all variables in both of these tests is more than the critical value at 5%. therefore, for all of the variables and in both of the tests the null hypothesis is rejected and alternate hypothesis is accepted i.e. at least one panel is stationary. thus, the data is stationary at level and panel data regression modeling may be used to test the proposition that the economic freedom has a significant effect on the foreign portfolio investments inflows in countries group by income level. 4.3 pearson correlation the person correlation coefficients show no issue of high correlation between any two exogenous variables and likely there is no multicollinearity in regression models. furthermore, total fpi is positively associated with the efi, gdp growth, market capitalization, business development index, ease in doing business index, literacy rate, trading volume of total stocks in a year, the strength of legal rights index, and financial development index. however, there is negative association between the total fpi and population growth, inflation rate, borrowing-lending spread and the tax rate on income and capital gains. similar results are found in case of total foreign equity portfolio investment and total foreign debts portfolio investments with other explanatory variables. the results suggest a positive association of efi with total fpi, foreign equity portfolio investments and debts. thus, an increase in economic freedom is likely improving the inflow of foreign investments in terms of equity and debts. 4.4 total fpi and efi income group countries. table 4.4 shows regression results of total fpi and efi of different countries categorize by their income level. the first column shows the names of different explanatory variables used in the study while column 2 nd 3 rd 4 th 5 th and 6 th represent results of different regressions models of various group of countries based on income. the lower part shows an additional statistic of the regression models such as r-square, hausman test for fixed effect vs random effect modeling. the r-square values vary from 19% to 42%, suggests that the economic freedom and other explanatory variables better explain the changes in the fpi. the results of the hausman tests of different regression models suggested that fixed effect data modeling is more suitable as compared to random effect modeling. therefore, year and country fixed effect exists in all regression models. the results of the regression models show that there is a positive and significant effect of the efi on the total fpi in high income, upper-middle-income, and lower middle-income countries. however, insignificant and a positive effect of the economic freedom on the fpi in found in case of low-income countries. these results suggest that improvement in the country economic freedom is likely to increase the confidence of the foreign investors on countries, which may increase the fpi. the insignificant effect of the economic freedom on the foreign portfolio in case of low-income countries may be due to the presences of a low-level economic freedom. the results of the macroeconomic variables show consistent results to the existing literature such as gdp growth, literacy rate, the strength of legal regulatory index have a positive effect on the total fpi. thus, countries with more gdp growth, high literacy rate and improvement in the strength of the legal regulatory system are likely to increase the inflow of fpi in the country. however, the increase in review of economics and development studies vol. 5, no 4, 2019 833 inflation and income and capital gain tax has a negative and significant effect on the country inflow of fpi. thus, countries with a high rate of inflation and high rate of tax on income and capital gains are less likely to be the choice of foreign investors. moreover, the institutional and financial soundness factors such as market capitalization, business development index, and ease in doing business; trading volume and financial development index have a positive effect on the foreign investment inflows (mengistu and adams, 2007; cotton and ramachandran, 2001; botric and škuflic, 2006; zhang, 2001). thus, countries with more market capitalization provide more market liquidity that attracts foreign investors and are likely to increase the foreign investment inflows. in a similar manner, high rate of trading volume of securities would improve the market liquidity and act as a catalyst for foreign investors to invest (calvo et al., 1993, 1996; taylor & sarnio 1997). the extant literature shows that due to liquidity factors the foreign investors prefer to invest in foreign portfolio rather than as a fpi. moreover, ease in doing business would improve the foreign investments in different sectors that would increase the fpi. the financial development index shows the soundness of a country financial system, the higher is the rating on the financial index is likely an indication of the sound economic system which will improve the foreign investors’ confidence on the markets and will attract more foreign investment inflows. the cross countries analysis based on the income group show interesting results such as interest rate spread is insignificant for all income countries except the low-income countries. the insignificance and negative results may be due to the fact that the spread is very small and is the same in almost all countries except in the low-income countries also reported in the descriptive statistics (verma & prakash, 2011). similar differences are found in case of other variables such as population growth is an insignificant effect on the foreign portfolio investment in case of upper middle-income countries and partially significant in lower income countries. the inflation rate is also insignificant in upper middle-income countries and lower middle-income countries, while ease of doing business is insignificant in case of lower middleincome countries only. instead of the few anomalies in the cross countries results, most of the macroeconomic and financial soundness variables show a significant effect on the foreign portfolio investment inflows to a country. moreover, the variable of interest that is efihas a positive effect on the foreign portfolio investment in all groups of countries segregated by income group, except the low-income countries, where there is a weak economic freedom as supported in the descriptive statistics. thus, these results support the proposition that the country economic freedom is an important determinant of the fpi to a county, irrespective of the fact that to which income group the country is belonging. 4.5 robustness check the total foreign portfolio investment is broadly consisting of foreign equity portfolio investments and foreign debt portfolio investments. in order to verify that the foreign equity and debts portfolio investments have a relationship with the economic freedom index, this study has used both foreign equity and debts portfolio investment separately in different cross income group countries regression models. 4.5.1 fpi equity and efi in income group countries. table 4.5 shows regression results of the foreign equity portfolio investments and efi in cross income group countries. the results of the regression models of foreign equity investment and economic freedom show similar results to the baseline regression models. the results show that there is a positive and significant effect of the economic freedom on the foreign portfolio investment inflows to a country except in low-income countries. moreover, gdp growth, market capitalization, business development index, ease in doing business index, literacy rate, trading volume, strength in the legal regulatory index, and review of economics and development studies vol. 5, no 4, 2019 834 financial development have a positive and significant effect on the foreign equity portfolio investment inflows. however, there are some variations in cross countries results such as literacy rate is insignificant in case of upper middle-income countries, trading volume is insignificant in case of high-income countries, and strength in the legal regulatory index is insignificant in case of high income and lowincome countries. moreover, the financial development index is significant in the case of lower middle and low-income countries. moreover, population growth rate, inflation rate and tax on income and capital gains have a significant negative effect on the foreign portfolio investment. however, few anomalies exist in cross countries analysis such as the tax rate is insignificant in case of lower middle income and low-income countries. furthermore, the interest rate is insignificant in all cases except the lower income countries. based on the above results, it is concluded that economic freedom has a significant and positive effect on the foreign equity portfolio investment. moreover, the macroeconomic variables and financial soundness indicators remain important factors in attracting the foreign equity portfolio investment inflows in income group countries. 4.5.2 fpi (debts) and efi in cross income group countries. table 4.6 shows the results of the regression models that test the effect of economic freedom on the foreign debts portfolio investments. the results show a positive and significant effect of the economic freedom on the foreign debts inflows in all income countries except low-income countries. thus, these results also supported the baseline regression results and an increase in the economic freedom of a country would likely improve the foreign debts portfolio investment inflows in that country. the results of macroeconomic variables are also consistent with the baseline models such as gdp growth, business development index, ease in doing business, literacy rate, strength in the legal regulatory index, financial development index have a positive and significant effect on the foreign debts investment inflows. however, population growth, inflation rate and tax on income and gains remain negative and significant in a relationship with the foreign debts portfolio investment inflows. contrary to the baseline models, the interest rate spread has positive effect on foreign debts portfolio investment inflows, while market capitalization has a negative and significant effect on the foreign debts portfolio of investment inflows in all income group countries. based on the above results and discussions it is concluded that economic freedom has a significant effect in both foreign equity portfolio investment and debts portfolio investment inflows in a country and is consistent with baseline models. moreover, the results of the sub-indices are also found to have similar in effect to the base line models. 5. conclusion and future scope of the study this study examines the impact of economic freedom on the portfolio investments in countries classified based on the level of income of the world. the study used a sample of 184 countries for a period of 2001 to 2017 subject to the availability of data of efi and foreign portfolio. the full sample countries are further divided based on the level of income into a subsample of 74 ―high-income countries‖ 52 ―uppermiddle-income countries‖ 32 ―lower-middle-income countries‖ and 26 ―lower income countries‖. the study estimated panel data regression models and found that a fixed effect is prevailing in the data. the regression results show that economic freedom has a positive effect on the foreign capital invested in terms of foreign portfolio. furthermore, the results of the subsample also in line with the bassline regression results and showed that economic freedom has a significant and positive effect on the foreign equity and foreign debts portfolio investments in high-income, upper-middle-income and lower-middleincome countries, however, there exists an insignificant relationship of the economic freedom and foreign equity and debts portfolio investments in the lower income countries. moreover, the results of the economic freedom sub-indexes of like trade freedom, business freedom, labor freedom, financing freedom, investment freedom, and monetary freedom also found to have a positive effect on the fpi in case of high-income, upper middle-income countries. however, labor freedom, business freedom, and investment freedom indexes are significant with the fpi in case of lower-middle-income and low-income countries. these results have a great deal of implications for the policy makers and regulators of countries where economic freedom is weak and need a dire concern of the authorities. review of economics and development studies vol. 5, no 4, 2019 835 the results of the study can be further improved by taking in to consideration more sample size for the long term effect, however, this study has based its conclusion on the available data. furthermore, the results of the study are based on the data collected from various data basis, therefore, validity and reliability of the results totally depends upon the sources that have actually collected data. the results can be further improved by taking in to consideration more variables that could also affect the foreign capital inflows such as country governance, internal and external conflicts and stock market liberalization. references agarwal, r.n. 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(2012). foreign direct investment vs. foreign portfolio investment. management international review, 52(5), 643–670. table 4.1 descriptive statistics variables full sample hic umic lmic lic tfpi 227152.50 180505.70 700454.60 133995.40 157319.50 fepi 109533.20 87361.74 325410.40 66444.13 81587.96 tdfpi 47281.84 37877.34 127251.80 30714.08 41946.71 efi 52.53 56.48 54.18 46.05 43.02 fdi 2.23 2.30 2.39 3.68 0.49 gdpg 3.45 3.11 3.20 4.87 3.56 inf 16.14 11.13 4.16 19.40 40.18 bdi 36.11 36.34 43.02 42.69 24.26 edbi 0.06 0.05 0.09 0.09 0.04 irspread 0.02 0.02 0.02 0.02 0.01 mcap 19.26 27.12 18.30 8.96 0.24 pop 1.55 1.31 1.21 1.66 2.58 litrate 4.50 4.78 5.10 5.56 2.08 taxrate 0.98 0.86 1.11 1.46 0.90 table 4.1 shows descriptive statistics of dependent variables such as tfpi which stands for the total foreign investment, fepi stands for the foreign equity portfolio investments and fdpi stands for the foreign debts portfolio investments. the independent variables include ef, which stands for the economic freedom index computed by the heritage foundation. mcap stands for market capitalization, bdi stands for the business development index, edbi stands for the ease in doing business index, trvol stands for trading volume, pop stands for annual population growth, gdpg stands for the gross domestic products annual growth, irspread is the interest rate spread between the lending and borrowing rates, inf stands for consumer price index and represents inflation, tax rate represents the tax on income and capital gains from investments, litrate stands for literacy rate, year stands for the year dummy and country stands for the country dummy. review of economics and development studies vol. 5, no 4, 2019 840 4.2: phillips-perron tests and augmented dickey-fuller tests for unit root s.no variables phillips-perron tests augmented dickey-fuller tests 1 tfpi 8.161 0.000 3.275 0.000 2 fepi 15.231 0.000 4.199 0.000 3 tdfpi 7.155 0.000 3.965 0.000 4 efi 2.477 0.006 5.484 0.000 5 fdi 25.745 0.000 4.536 0.000 6 gdpg 14.356 0.000 6.571 0.000 7 inf 15.804 0.000 4.503 0.000 8 bdi 14.343 0.000 5.128 0.000 9 edbi 18.573 0.000 4.538 0.000 10 irspread 3.976 0.000 4.346 0.000 11 mcap 20.960 0.000 4.684 0.000 12 pop 2.994 0.001 6.309 0.000 13 litrate 3.453 0.000 5.574 0.000 14 taxrate 4.567 0.000 4.689 0.000 table 4.2 shows results of panel unit root tests, moreover, the variables definition is given under the table 4.1 table 4.4: regression results of total fpi and efi (full sample) (hic) (umic) (lmic) (lic) tfpi tfpi tfpi tfpi tfpi ef 0.126*** 0.193*** 0.085*** 0.238** 0.059 (0.029) (0.054) (0.026) (0.095) (0.167) pop -0.056** -0.203*** -0.016 -0.750*** -0.552* (0.028) (0.053) (0.021) (0.114) (0.324) gdp 0.020*** 0.021* 0.010*** 0.030** 0.076*** (0.005) (0.011) (0.005) (0.015) (0.024) inf -0.079* -0.311*** -0.007 -0.019 -0.433** review of economics and development studies vol. 5, no 4, 2019 841 (0.047) (0.100) (0.044) (0.162) (0.202) mcap 0.274*** 0.105** 0.135*** 0.338** 0.325** (0.039) (0.050) (0.036) (0.153) (0.153) bdi 0.111*** 0.221*** 0.058*** 0.197*** 0.241*** (0.009) (0.017) (0.008) (0.032) (0.047) edbi 0.015*** 0.007*** 0.004*** 0.003 0.015*** (0.003) (0.002) (0.001) (0.002) (0.005) irspread -0.000 -0.001 0.001 0.010 -0.043*** (0.001) (0.001) (0.001) (0.010) (0.011) lrate 0.128*** 0.235*** 0.025 0.247** 0.242** (0.041) (0.077) (0.034) (0.114) (0.118) trvol 0.010*** 0.003* 0.001** 0.021*** 0.031*** (0.001) (0.002) (0.000) (0.004) (0.004) slegri 0.027** 0.054** 0.024** 0.095** 0.112*** (0.013) (0.022) (0.010) (0.037) (0.043) txrate 0.075*** -0.115 -0.219* -0.342** -0.483*** (0.012) (0.195) (0.120) (0.154) (0.081) fdindex 2.066*** 0.005 0.144*** 0.144*** 0.659 (0.113) (0.316) (0.034) (0.034) (2.599) _cons 0.806*** 2.478*** 0.220 6.383*** 5.246** (0.185) (0.353) (0.147) (0.781) (2.128) year yes yes yes yes yes country yes yes yes yes yes hausman test 21.05 25.05 20.43 19.89 18.09 p-value 0.00 0.00 0.00 0.00 0.00 obs. 9087 2744 2489 1609 1245 r-squared 0.134 0.194 0.421 0.198 0.358 table 4.4 shows the results of different regression models based on cross countries grouping based on income, moreover, the variables definition is given under the table 4.1. standard errors are in parenthesis. *** p<0.01, ** p<0.05, * p<0.1 table 4.5: regression results of fpi (equity) and efi (full sample1) (hic) (umic) (lmic) (lic) fepi fepi fepi fepi fepi ef 0.072*** 0.149*** 0.051** 0.326*** 0.267 (0.026) (0.050) (0.023) (0.093) (0.173) pop -0.030 -0.121** -0.003 -0.724*** -0.641* (0.025) (0.049) (0.019) (0.111) (0.338) gdp 0.014*** 0.088*** 0.009** 0.077*** 0.082*** review of economics and development studies vol. 5, no 4, 2019 842 (0.005) (0.010) (0.004) (0.014) (0.023) inf -0.125*** -0.311*** -0.014 -0.056 -0.508** (0.043) (0.095) (0.039) (0.157) (0.198) mcap 0.235*** 0.076** 0.113*** 0.242* 0.242** (0.035) (0.036) (0.033) (0.122) (0.121) bdi 0.096*** 0.190*** 0.043*** 0.160*** 0.214*** (0.009) (0.017) (0.007) (0.033) (0.046) edbi 0.008** 0.004* 0.003*** 0.003** 0.039*** (0.004) (0.002) (0.001) (0.001) (0.013) irspread -0.000 -0.000 -0.001 -0.012 -0.064*** (0.000) (0.000) (0.001) (0.010) (0.016) lrate 0.100*** 0.178** 0.006 0.230** 0.931*** (0.038) (0.078) (0.031) (0.111) (0.183) trvol 0.010*** 0.002 0.001*** 0.018*** 0.018*** (0.001) (0.002) (0.000) (0.004) (0.004) slegri 0.024** 0.030 0.019** 0.080** 0.072 (0.012) (0.022) (0.008) (0.038) (0.046) txrate -0.054 -0.293** -0.188* -0.251 -0.401 (0.114) (0.141) (0.105) (0.277) (1.054) fdindex 1.754*** 0.569* 0.247** 0.127 3.066 (0.106) (0.308) (0.121) (0.121) (2.674) _cons 0.579*** 1.491*** 0.105 2.098*** 2.622*** (0.168) (0.329) (0.137) (0.773) (2.234) year yes yes yes yes yes country yes yes yes yes yes hausman test 20.07 21.00 23.21 21.81 19.11 p-value 0.00 0.00 0.00 0.00 0.00 obs. 9087 2744 2489 1609 1245 r-squared 0.114 0.175 0.034 0.181 0.342 table 4.5 shows the results of different regression models based on cross countries grouping based on income, moreover, the variables definition is given under the table 4.1standard errors are in parenthesis. *** p<0.01, ** p<0.05, * p<0.1 table 4.6: regression results of debts fpi and efi (full sample) (hic) (umic) (lmic) (lic) tdfpi tdfpi tdfpi tdfpi tdfpi ef 0.126*** 0.171*** 0.081*** 0.166* 0.036 (0.027) (0.052) (0.022) (0.091) (0.162) pop -0.095*** -0.245*** -0.030 -0.775*** -0.460 (0.026) (0.053) (0.019) (0.098) (0.314) gdp 0.019*** 0.022** 0.008** 0.077*** 0.051* (0.005) (0.011) (0.004) (0.015) (0.027) inf -0.075* -0.286*** -0.005 -0.031 -0.375* (0.044) (0.097) (0.039) (0.151) (0.199) review of economics and development studies vol. 5, no 4, 2019 843 mcap -0.223** -0.099*** -0.120*** -0.463*** -0.261** (0.036) (0.017) (0.031) (0.138) (0.131) bdi 0.095*** 0.194*** 0.049*** 0.158*** 0.220*** (0.009) (0.017) (0.007) (0.031) (0.046) edbi 0.007** 0.007*** 0.003*** 0.005 0.007 (0.003) (0.003) (0.001) (0.005) (0.005) irspread 0.010*** 0.001 0.020*** 0.015* 0.036*** (0.001) (0.001) (0.001) (0.009) (0.011) lrate 0.136*** 0.234*** 0.020 0.291*** 0.230 (0.038) (0.074) (0.031) (0.105) (0.174) trvol 0.001 0.003* 0.001 0.016 0.017 (0.001) (0.002) (0.000) (0.015) (0.015) slegri 0.028** 0.051** 0.022** 0.097*** 0.110*** (0.012) (0.022) (0.009) (0.034) (0.042) txrate -0.103*** -0.030 -0.225** -0.320 -0.499** (0.013) (0.182) (0.109) (0.285) (0.199) fdindex 0.861*** 0.628** 0.236* 0.331*** 2.934 (0.108) (0.310) (0.121) (0.121) (2.616) _cons 0.962*** 2.531*** 0.279** 2.293*** 3.936* (0.172) (0.350) (0.130) (0.679) (2.040) year yes yes yes yes yes country yes yes yes yes yes hausman test 19.10 15.15 19.13 20.15 25.14 p-value 0.00 0.00 0.00 0.00 0.00 obs. 5087 1744 2489 609 245 r-squared 0.126 0.173 0.391 0.211 0.333 table 4.6 shows the results of different regression models based on cross countries grouping based on income, moreover, the variables definition is given under the table 4.1 standard errors are in parenthesis. *** p<0.01, ** p<0.05, * p<0.1 table 4.7: regression results of total fpi and efi components indices for all countries (bf) (lf) (mf) (tf) (if) (ff) tfpi tfpi tfpi tfpi tfpi tfpi business freedom 0.123*** (0.021) labor freedom 0.418*** (0.032) monetary freedom 0.146*** (0.021) trade freedom 0.134*** (0.021) investment freedom 0.105*** review of economics and development studies vol. 5, no 4, 2019 844 (0.022) financial freedom 0.117*** (0.023) pop -0.107*** -0.104*** -0.113*** -0.109*** -0.101*** -0.102*** (0.017) (0.017) (0.017) (0.017) (0.017) (0.017) gdp 0.006** 0.007*** 0.006** 0.008*** 0.005* 0.006** (0.003) (0.003) (0.003) (0.003) (0.003) (0.003) inf -0.000*** -0.000*** -0.000*** -0.000*** -0.000*** -0.000*** (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) mcap 0.002*** 0.002*** 0.002*** 0.002*** 0.002*** 0.002*** (0.000) (0.000) (0.000) (0.000) (0.000) (0.000) bdi 0.125*** 0.060*** 0.123*** 0.123*** 0.127*** 0.126*** (0.008) (0.010) (0.008) (0.008) (0.008) (0.008) edbi 0.005*** 0.005*** 0.005*** 0.005*** 0.005*** 0.005*** (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) irspread 0.001 0.001 0.001 0.001 0.001 0.001 (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) lrate 0.077** 0.075** 0.077** 0.077** 0.077** 0.077** (0.033) (0.033) (0.033) (0.033) (0.033) (0.033) trvol 0.001* 0.001 0.001* 0.001* 0.001* 0.001* (0.001) (0.001) (0.001) (0.001) (0.001) (0.001) slegri 0.031*** 0.026*** 0.031*** 0.031*** 0.031*** 0.032*** (0.010) (0.010) (0.010) (0.010) (0.010) (0.010) taxrate -0.089*** -0.096*** -0.092*** -0.090*** -0.085*** -0.088*** (0.025) (0.025) (0.025) (0.025) (0.025) (0.026) fdindex 1.680*** 1.695*** 1.672*** 1.675*** 1.683*** 1.679*** (0.101) (0.101) (0.102) (0.101) (0.101) (0.101) _cons 1.228*** 1.235*** 1.254*** 1.234*** 1.205*** 1.208*** (0.106) (0.105) (0.106) (0.106) (0.106) (0.106) year yes yes yes yes yes yes country yes yes yes yes yes yes hausman test 16.10 17.14 18.12 19.05 21.15 18.12 review of economics and development studies vol. 5, no 4, 2019 845 p-value 0.000 0.000 0.000 0.000 0.000 0.000 obs. 9775 9775 9775 9775 9775 9775 r-squared 0.104 0.119 0.105 0.104 0.103 0.103 table 4.7 show the results of different regression models for sub-indices moreover, the variables definition is given under the table 4.1 standard errors are in parenthesis.*** p<0.01, ** p<0.05,* p<0.1 review of economics and development studies vol. i, no 2, december 2015 143 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 1: issue 2 december 2015 journal homepage: www.publishing.globalcsrc.org/reads impact of socioeconomic and demographic factors affecting child health in selected south asian countries 1 sofia anwar, 2 maria khushbakhet, 3 aisha asif, 4 zahira batool 1 professor and chairperson, department of economics, government college university faisalabad, pakistan, sofia_eco@gcuf.edu.pk 2 mphil scholar, department of economics, government college university faisalabad, pakistan, mkch_89@yahoo.com 3 phd scholar, department of economics, government college university faisalabad, pakistan, aieshasif@gmail.com 4 associate professor, department of sociology, government college university faisalabad, pakistan article details abstract history revised format: nov 2015 available online: dec 2015 development of any nation is estimated through child health condition. in particular, the fourth millennium development goal out of eight is to reduce the mortality rate. the target set under this goal was to reduce by two-third, between 1990 and 2015, the proportion of child mortality. maternal bmi is closely associated with child nutritional status. weak mother having low bmi has low nutrition status which effect child weight. healthy and balance food of mothers have positive effect on their child. underweight mother can have impaired and poor growing kids. this study presents impact of some socio-economic demographic and maternal health related factors on health status of children in selected south asian countries i.e. pakistan, bangladesh and nepal. the study used micro data from demographic and health survey (dhs) of pakistan, bangladesh and nepal. multinomial logistic regression results revealed that mother education, mother working status, mother health, availability of safe drinking water, family size and vaccination have significant effect on child health. mother’s education is positively associated with healthy child. working mothers are more likely to have healthy child. weak and obese children are positively associated with malnourished and overweight mothers respectively. small family size has positive impact on weak child health. vaccination and availability of improved and safe water are positively associated with child health. © 2015 the authors, under a creative commons attributionnoncommercial 4.0 keywords child health, body mass index, mother health, working mothers, safe water, pakistan, bangladesh, nepal jel classification i12; i15; i18; j13 corresponding author’s email address: sofia_eco@gcuf.edu.pk recommended citation: anwar, s., khushbakhet, m., asif, a. and batool, z. (2015). impact of socioeconomic and demographic factors affecting child health in selected south asian countries. review of economics and development studies, 1 (2) 143-151 doi: https://doi.org/10.26710/reads.v1i2.120 http://www.publishing.globalcsrc.org/reads mailto:sofia_eco@gcuf.edu.pk mailto:mkch_89@yahoo.com mailto:aieshasif@gmail.com mailto:sofia_eco@gcuf.edu.pk review of economics and development studies vol. i, no 2, december 2015 144 1. introduction and literature review development of any nation is estimated through child health condition (anwar et al., 2012). many developing nations included; pakistan joined the united nations millennium summit and agreed to make efforts to achieve the millennium development goals (mdgs).the attainment of mdgs is the numerical measurement of the progress in which efforts are made by any country. in particular, the fourth millennium development goal out of eight is to reduce the mortality rate. the target set under this goal is to reduce by two-third, between 1990 and 2015, the proportion of child motility (who, 2005). underweight in children are the main causes of child health problems in developing countries. newly born babies who have completed 37 weeks of gestation and have low birth weight (less than 2.5 kg) have greater possibility to contain growth restrain whereas this situation refer to low birth weight and weak child. the nutritional condition measures stunting and obesity which are considered as risk factors whose exposure applied to all children of less than five years (black et al., 2008). the child malnutrition more often leads to illness and death (cheah et al., 2010).there are number of factors which results in child malnutrition like food security (availability and access), mother’s poor nutritional level, low literacy level, less awareness of health care service and child care where malnourishment is the most important determinant of child bmi (linnemayr et al., 2008). childhood obesity is directly correlated with weight problems during adulthood. the obese children have greater probability to be involved in health issues like blood pressure and diabetes in early adolescence (serdula et al., 1993; whitaker et al., 1997; and freedman et al., 2007). obesity is also cause of overweight and slow metabolic system (modi et al., 2011). furthermore, obesity among children is related with a number of long term psychological issues (dietz, 1998; strauss, 2000; daniels, 2006; mocan & tekin, 2007). the mother’s education leads to improvement in child health via more efficient child care in the home along with the enhanced use of prevention services and treatment (caldwell, 1994). there is no specific threshold level of mother’s education which should be attained before the benefits of mother’s education forward to the child health. mother’s education aware them about their child health which cause lower death rates, longer life expectancies and nutrition status (abuya et al.,2013; barrera, 1990; hadden & london, 1996). there is direct relationship between mother’s working status and child health as working mothers have enough money to purchase healthy and hygienic food (energy and protein dense food) , services of house cleaner and utensils washer as well as vehicle which offer them more time to spend in child care activities (gwozdz at al., 2013). working mother spent some hours at work so they are more conscious about their child care working mothers have healthy child as the working mothers of under five children have less chance to be weak than non-working mothers (fukuda et al., 2014). the age of mother is associated with the child health (abuya et al., 2012). teenage mothers are psychologically less mature and remain unaware and hesitant regarding reproductive matters (garenne et al., 2000; woldemicael, 2005).the child health increase with the age of mother and the marriage in early age increases the infant mortality (tagoe-dark, 1995). weak mother has low nutrition status which effect child weight. healthy and balance food of mothers have positive effect on their child. underweight mother can impair to growing infants, because underweight mother may have premature and underweight baby at birth. children of overweight mother associated with higher bmi and fat in their liver children and the consequence of mothers bmi on their child’s improvement in the womb may cause of path towards lifetime metabolic health problems (modi et al, 2011; negash et al., 2015). review of economics and development studies vol. i, no 2, december 2015 145 this study is important as there exists lacuna on the subject of child health regarding comparison of developing countries which are of same continent. this study will provide important facts about demographic, socioeconomic and health factors effecting child health. this study is limited to the socio economic, demographic and health factors which effect child health of age five and under five. 2. data and methodology 2.1. data the data for this study is derived from pakistan demographic and health survey (12-2013), bangladesh demographic and health survey (2011-12) and nepal demographic and health survey (2011-12) in order to compare the effects of socioeconomic, demographic and health factors on child health in pakistan, bangladesh and nepal. to put dhs in useable format some manipulation were adopted. there were many missing values in pdhs data set. it was inevitable to fill those missing values because analysis has been done by spss version 20. so missing values are excluded. the data was required on child with age 5 and below for proxy of child health which is child body mass index, dhs provide data for children up to age 13 in pakistan and in nepal up to age 12. we filtered the data set to obtain required data for analysis. the values of child body mass index far beyond the lower and upper bound of standard values were considered as outliers and removed. in dhs some variables had large categories (wealth index, house hold size, water source, toilet facility and etc.), we merge them categories into 3 and 4 subcategories. 2.2. methodology multinomial logit model is the extensive form of the logit model. multinomial logistic function is used in this study to examine the effects of child body mass index. outcome of independent variable is different for each type of dependent variable. in this model one category of dependent variable is used as the reference category. all further categories defined in the perspective of that reference category. it could be the first, last or the category with maximum incidence. for all n categories n-1 equations are estimated. in equation form multinomial logit model with three dependent variables and different independent variables is. ( , , ) , , ( , , ) 1 pr( , ) ln ( ) pr( ) j a b c i a b c a b c j ij j y a b y z y c          …………………...(1) where; y= dependent variable n= a, b, c are the three different categories of child health. here it determines the probability of ith children facing one of the jth outcomes (of being week, healthy and obese). yi is the end results practiced by c pr(child health / bmi = weak child) ln = β + β x + β x .......+ β x 0 1 1 2 2 k kpr(child health / bmi = healthy child) …………………………..(2) pr(child health / bmi =obese) ln = β + β x + β x .......+ β x 0 1 1 2 2 k kpr(child health / bmi = healthy child) …………………………...(3) 2.3. results and discussion: review of economics and development studies vol. i, no 2, december 2015 146 relative probability of weak children rather than healthy children is significantly higher in urban areas than in rural areas keeping other factors constant in nepal documented by previous studies (ruel, 2003). obese child lives in urban areas than rural areas are relatively 41% more likelihood rather than healthy child in pakistan. the relative probability of weak children rather than healthy children is significantly 32% and 31 % increasing for uneducated mothers and lower educated mothers than educated mothers in nepal and bangladesh respectively. it is supported by studies (mondal et al., 2009; frost et al., 2005). the relative probability of obese child than healthy child is 73% more than uneducated mothers. pakistan has insignificant effect which shows it has not direct effect on child health. the relative probability of weak children rather than healthy children is 28 % higher for not working women than working mothers in pakistan reported by previous studies (ogada, 2014) that working mothers of age under five children has less chance to be weak those who not working mothers. relative probability of obese child rather than healthy child strongly significantly 52% and 80% higher of not working mothers than working mothers keeping all others factors constant in pakistan and nepal. gwozdz et al., (2013) recommended that working mothers have a tendency to utilize their money to take time off and take care of their children. the relative probability of weak children than healthy children is significantly 33 % increasing for middle than rich in pakistan. in bangladesh and nepal it has positive but insignificant relationship. household wealth is not significant and direct relation with child health. parental income has negligible effect on child health. relative probability of obese child rather than healthy child is 78% and 24% higher for poor and middle socioeconomic status than higher socioeconomic status than keeping other factors constant (gouda, 2014). review of economics and development studies vol. i, no 2, december 2015 147 table 1: household’s socioeconomic and demographic variables distribution with reference to child health in selected south asian countries table 2: socioeconomic and demographic variables affecting the probability of weak child health in selected south asian countries independent variables pakistan bangladesh nepal independent variables child health/bmi pakistan bangladesh nepal weak child healthy child obese child weak child healthy child obese child weak child healthy child obese child place of residence urban = 1 404 (42.9) 212 (22.5) 326 (34.6) 483 (66.5) 113 (15.6) 130 (17.9) 274 (62.8) 103 (23.6) 59 (13.5) rural = 0 647 (43.6) 351 (23.7) 486 (32.7) 1155 (69.0) 257 (15.4) 262 (15.7) 996 (57.3) 505 (29.1) 237 (13.6) chi sq. value = 5.510^ gamma = .087^ chi sq. value = 2.043 gamma = -.057 chi sq. value = .988 gamma = -.024 gender of child male = 1 538 (43.9) 272 (22.2) 416 (33.9) 872 (71.2) 155 (12.7) 198 (16.2) 694 (61.1) 302 (26.6) 139 (12.2) female = 0 513 (42.8) 291 (24.3) 396 (33.0) 766 (65.2) 215 (18.3) 194 (16.5) 576 (55.4) 306 (29.5) 157 (15.1) chi sq. value = 1.450 gamma = .003 chi sq. value = 15.592* gamma = .105* chi sq. value = 7.861^ gamma = .109^ household size 1-5 members = 1 218 (51.7) 101 (23.9) 103 (24.4) 847 (77.1) 139 (12.6) 113 (10.3) 642 (62.0) 267 (25.8) 127 (12.3) 6-7 members = 2 269 (48.7) 130 (23.6) 153 (27.7) 453 (63.3) 128 (17.9) 135 (18.9) 387 (59.6) 179 (27.6) 83 (12.8) 8-10 members = 3 297 (40.6) 165 (22.6) 269 (36.8) 236 (56.6) 70 (16.8) 111 (26.6) 186 (50.1) 120 (32.3) 65 (17.5) above 11 members= 3 267 (37.0) 167 (23.2) 287 (39.8) 102 (60.7) 33 (19.6) 33 (19.6) 55 (46.6) 42 (35.6) 21 (17.8) chi sq. value = 45.439* gamma = .164* chi sq. value = 91.119* gamma = .227* chi sq. value = 23.785* gamma = .134* wealth index poor = 1 512 (42.0) 266 (21.8) 442 (36.2) 714 (70.8) 142 (14.1) 152 (15.1) 672 (60.2) 307 (27.5) 138 (12.4) middle = 2 173 (40.3) 108 (25.2) 148 (34.5) 294 (66.7) 72 (16.3) 75 (17.0) 239 (57.9) 121 (29.3) 53 (12.8) rich = 3 366 (47.1) 189 (24.3) 222 (28.6) 630 (66.2) 156 (16.4) 165 (17.4) 359 (55.7) 180 (28.0) 105 (16.3) chi sq. value = 14.623^ gamma = -.085^ chi sq. value = 5.395 gamma = .072^ chi sq. value = 6.654 gamma = .071^ mother’s education no education = 1 626 (41.8) 339 (22.6) 532 (35.5) 376 (75.7) 72 (14.5) 49 (9.9) 647 (63.7) 267 (26.3) 101 (10.0) primary = 2 167 (47.9) 81 (23.2) 101 (28.9) 519 (72.0) 98 (13.6) 104 (14.4) 231 (54.6) 132 (31.2) 60 (14.2) secondary & higher = 3 258 (44.5) 143 (24.7) 179 (30.9) 743 (62.9) 200 (16.9) 239 (20.2) 392 (53.3) 209 (28.4) 135 (18.3) chi sq. value = 8.574^ gamma = -.70 chi sq. value = 39.360* gamma = .209* chi sq. value = 34.15* gamma = .171* mother’s work status not working = 1 799 (43.0) 408 (22.0) 649 (35.0) 1414 (67.2) 330 (15.7) 361 (17.1) 463 (57.2) 206 (25.4) 141 (17.4) working= 0 252 (44.2) 155 (27.2) 163 (28.6) 224 (75.9) 40 (13.6) 31 (10.5) 807 (59.2) 402 (29.5) 155 (11.4) chi sq. value = 10.52^ gamma = -.067 t chi sq. value = 10.64^ gamma = .057 chi sq. value = 16.94* gamma = -.075^ mother bmi underweight = 1 192 (54.7) 83 (23.6) 76 (21.7) 467 (70.9) 95 (14.4) 97 (14.7) 265 (68.1) 95 (24.4) 29 (7.5) normal weight= 2 553 (43.5) 289 (22.7) 429 (33.8) 1006 (68.2) 220 (14.9) 248 (16.8) 890 (57.1) 441 (28.3) 228 (14.6) overweight = 3 306 (38.1) 191 (23.8) 307 (38.2) 165 (61.8) 55 (20.6) 47 (17.6) 115 (50.9) 72 (31.9) 39 (17.3) chi sq. value = 35.90* gamma = .162* chi sq. value = 9.132^ gamma = .086^ chi sq. value = 26.17* gamma = .198* mother age at 1 st birth under 18 age = 1 328 (41.6) 189 (24.0) 272 (34.5) 1070 (69.8) 240 (15.7) 222 (14.5) 530 (58.2) 261 (28.7) 119 (13.1) 19-23 age = 2 493 (42.3) 270 (23.2) 403 (34.6) 479 (65.2) 115 (15.6) 141 (19.2) 617 (60.1) 268 (26.1) 142 (13.8) above 24 age = 3 230 (48.8) 104 (22.1) 137 (29.1) 89 (66.9) 15 (11.3) 29 (21.8) 123 (51.9) 79 (33.3) 35 (14.8) chi sq. value = 7.95 t gamma = -.062^ chi sq. value = 12.46^ gamma = .100^ chi sq. value = 6.565 gamma = .025 source: demographic and health surveys (dhs), author's own calculation note: figures in parenthesis are the percentages ^, *, t indicate coefficients are significant at 1, 5 and 10 percent level respectively. review of economics and development studies vol. i, no 2, december 2015 148 b odd ratios b odd ratios b odd ratios intercept .487 .420 -.868** place of residence urban = 1 .068 1.070 -.082 .921 .374** 1.454 rural = 2 reference category mother education no education = 1 .133 1.143 .189 1.208 .274*** 1.315 primary education .264 1.302 .272 *** 1.313 .071 1.076 secondary& higher education reference category mother’s work status, not working = 1 .246** 1.279 -.155 .857 .111 1.118 working = 0 reference category socio economic status , poor =1 .105 1.11 .044 .957 .183 1.201 middle= 2 .28*** 1.325 .099 .906 .081 1.084 rich=3 reference category water source, improved water=1 -.26*** .769 -.894* .409 -.21*** .805 non improved water =2 reference category child gender male = 1 .127 1.135 .481* 1.618 .21*** 1.227 female = 0 reference category mother age at 1st birth, age up to 18=1 .260 1.296 .498 .608 .439** 1.551 age 19-23 =2 -.214 .808 -.413 .662 -.566* .567 age above 23= 3 reference category birth order, 1 birth=1 .090 1.094 -.030 .970 -.430 .650 2-3 birth=2 -.281 .755 .069 1.071 -.528** .590 4-6 birth=3 -.238 .788 .103 1.108 -.417 .659 above 6 birth=4 reference category family size, 1-5 members=1 -.369** .691 -.421 *** .656 -.683* .505 6-7 members =2 -.322** .724 -.022 .978 -.513** .598 8-10 members =3 -.146 .864 -.006 .994 -.105 .900 above 10 members = 4 reference category mother bmi, underweight =1 .442** 1.556 .572** 1.771 .463** 1.590 healthy = 2 -.22*** .803 -.499** .607 -.119 .887 overweight = 3 reference category vaccination status, not vaccinated =1 .341** 1.406 .163 1.177 2.292* 9.897 vaccinated = 2 reference category source: author’s own calculations based on pdhs (2013), bdhs (2011) & ndhs (2011) note: a) *, ** and *** indicates coefficient are significant at 1%, 5% &10% b) the reference category is 2= healthy child table 3: socioeconomic and demographic variables affecting the probability of obese child health in selected south asian countries independent variables pakistan bangladesh nepal b odd ratios b odd ratios b odd ratios intercept .453 .878 .001 place of residence urban = 1 .343** 1.410 .238 1.269 .012 1.012 rural = 2 reference category mother education no education = 1 .021 1.021 .127 1.135 .573* 1.773 primary education .098 1.102 .041 1.042 .377** 1.457 secondary& higher education reference category mother’s work status, not working = 1 .420** 1.522 .238 1.268 .593* 1.809 working = 0 reference category socio economic status , poor =1 .576* 1.780 .292 1.339 .073 1.076 middle= 2 .298*** 1.348 -.008 .992 -.061 .941 rich=3 reference category water source, improved water=1 -.690* .502 -1.849* .157 -.758* .468 non improved water =2 reference category child gender , male = 1 .160 1.174 .295*** 1.344 -.121 .886 female = 0 reference category mother age at 1st birth, age up to 18=1 -.022 .978 -.496 .609 .079 1.082 review of economics and development studies vol. i, no 2, december 2015 149 age 19-23 =2 .056 1.058 -.292 .747 .145 1.157 age above 23= 3 reference category birth order, 1 birth=1 .031 1.032 .322 .725 .183 1.20 2-3 birth=2 -.233 .792 -.115 .891 -.276 .759 4-6 birth=3 -.278 .757 -.430 .651 -.321 .726 above 6 birth=4 reference category family size, 1-5 members=1 .398** 1.488 .401 1.494 .005 1.005 6-7 members =2 -.29 *** .748 .145 1.156 -.041 .960 8-10 members =3 -.037 .963 .429 1.536 .112 1.118 above 10 members = 4 reference category mother bmi, underweight =1 -.602** .548 -.011 .989 -.402 .669 healthy = 2 -.192 .825 -.144 .865 -.124 .883 overweight = 3 reference category vaccination status, not vaccinated =1 .33*** 1.398 -.618** .539 -.679 .507 vaccinated = 2 reference category source: author’s own calculations based on pdhs (2013), bdhs (2011) & ndhs (2011) note: a) *, ** and *** indicates coefficient are significant at 1%, 5% &10% b) the reference category is 2= healthy child the relative probability of weak children rather than healthy children is significantly lower by 77%, 41% and 81% to the child intake improved and piped water source than non-improved water source in pakistan. relative probability of obese child rather than healthy child is 50%, 15% and 47% lower and strongly significant for all three countries using improved water than non-improved water. previous research found a positive relationship between access to piped water and child health (merrick, 1985; thomas and strauss, 1992; lee et al., 1997, and japan and ravallion, 2003). relative probability of obese child is 34 % higher than healthy child for male children than female children in bangladesh. male children are significantly more relative chance by 62% and 23% to be weak as compared to female children than healthy children in bangladesh and nepal. there is no sex discrimination as cleared by previous studies (mge & donnar, 2004; khoury, 1987). younger mothers are significantly more likelihood to have weak children by 55 % as compared to elder mothers relative to healthy children in nepal. the risk of dying of child at 1 st birth is higher for younger mothers. (gubhaju, 1991 and furstenberg, 1990) suggested that teenage mothers were less able to overcome the economic and child bearing problems. in pakistan first birth order have more relative probability to be weak children as compared to higher birth order as compared to healthy children keeping all other factors constant. infant weakness was found to decline with higher birth order in one study (gubhaju et al., 1987). in pakistan and nepal lower birth order have less chance to be weak than higher birth. it is supported by (horton, 1998) explained that there is competition with younger siblings for resources. the relative probability of weak child is significantly 69%, 65% and 50% lower than healthy child in small families than largeer family’s children in pakistan, bangladesh and nepal (heaton, 2004; black 1989 & downey 1995). there are relatively more chances to be weak child than healthy child by 56%, 77% and 59% for underweight mothers than overweight mothers keeping all other factors constant reported by ( nahar, 2010) where mother with lower bmi has lower birth weight which effect breast feeding aptitude and capacity and results in lower bmi in infants and children. normal weight mother has less chance by 80%, 60% and 89% to have weak child in pakistan, bangladesh and nepal. review of economics and development studies vol. i, no 2, december 2015 150 children those are not vaccinated are strongly significantly more relative probability by 40% and 89% to be weak as compared to the vaccinated children than healthy children keeping all others factors constant in pakistan, bangladesh. it is justified by (wang, 2002 and bonday et al., 2008) where it significantly affect children. 3. conclusion and recommendations this study conclude that mother schooling play important role and helpful to make nutrition decision for their children to improve child height and weight so make sure to improve and facilitate women to educate and provide health knowledge to mothers. source of water has positive and significant effect on child health so piped and clean water must be assessable to children to save them from deficiencies. mother working status has its positive impact on child health in pakistan and nepal. working mothers are more conscious to take care of their children and due to move in social society they are able to obtain knowledge about their child health and can afford nutritional and hygienic food as well as cleaner objects. so steps must be taken for provision of job opportunities. socioeconomic status also has its impact on child weight. poor families have weak and obese children due to lack of money they have access to cheap and unhygienic food items. income sources must be provided to poor families. teenage mothers are less able to overcome the economic as well as child bearing problems and there may be intervention of education attainment. small families have less chance of weak children in each country pakistan, bangladesh and nepal. as parents can put more attention to their children in in small family. small families have positive impact on child health as deep attention can be given by parents to take care of their children. mother’s bmi is associated with child bmi. weak mother has low nutrition status which effect less child birth weight and also compromise in capacity of breast feeding and results in low child bmi. special campaigns are suggested to improve the bmi of mothers to have health new generation. . maternal education is most important factor which effect child health so government should take steps to improve female education and also provide health knowledge to females as mother education effect child health. it provides more awareness to mothers about how to nurture children. references abuya, b. a., ciera, j., & kimani-murage, e. 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(2005). teenage childbearing and child health in eritrea. mpidr wp, (2005-029). review of economics and development studies vol. 5, no 4, 2019 881 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads what hinders to promote tourism in pakistan? using binary matrices for structuring the issue 1 abdul aziz khan niazi, 2 tehmina fiaz qazi, 3 abdul basit 1 university of engineering and technology, lahore, pakistan: azizniazi@uet.edu.pk 2 university of engineering and technology, lahore, pakistan: tehmina.qazi@gmail.com 3 lahore institute of science and technology, lahore, pakistan: abasit_shahbaz@yahoo.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 aim of the study is to identify what are the barriers in promoting tourism in pakistan and imposing structure on complex interrelationships among these barriers. it is an exploratory study which uses literature discourse for identification of barriers, binary matrices for structuring issue and cross impact matrix multiplication applied to classification for analyzing driving-dependence power. discourse of literature revealed that there are sixteen barriers important to address the issue in hand. communication barrier and unfavorable government policies occupy bottom in the interpretive structural model that are highly important and need utmost attention. eight barriers fall in dependent, four in independent, three in linkage and none in autonomous quadrant of driving-dependence diagram. the study is useful for policy makers and tourists’ agencies to handle current issues prevailing in tourism industry and promote it accordingly. it is a foremost attempt in pakistan to structure the issue on the basis of opinion of experts from within stakeholders. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords tourism, barriers, binary matrices, ism, micmac, pakistan jel classification: l83, n15 corresponding author’s email address: azizniazi@uet.edu.pk recommended citation: niazi, a. a. k., qazi, t. f. and basit, a., (2019). what hinders to promote tourism in pakistan? using binary matrices for structuring the issue. review of economics and development studies, 5 (4), 881-890 doi: 10.26710/reads.v5i4.664 1. introduction meo et al. (2018) bolstered that tourism is a sunshine sector across the world. it is considered as great economic support to economies. numerous countries are minting money from tourism. united nations world tourism organization (unwto) offers technical assistance and provides the platform to its affiliate members for dialogue, collaboration, information sharing and generating market knowledge & tourism development (perdomo, 2016). lyons et al. (2016) asserted that tourism is vital in knowledge economy, therefore, tourism scholars and tourism agencies are considered instrumental to modern economic development. this sector is important for employment creation and increase in national revenue as well as foreign exchange earnings and economic prosperity (meo et al., 2018) but it is relatively neglected in pakistan (ahmed et al., 2011). god has endowed pakistan with lot of natural resources that include four different seasons, variety of landscapes, mountains, minerals, etc. it is a rich country as for as recreational places is concerned. these places include natural beauty, historical heritage and psudunaturally developed resorts that fascinate the tourists continually (naqvi et al., 2018). baloch and rehman http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 882 (2015) stated that pakistan is a fertile land in all type of tourisms for tourists which needs to be tapped with: i) tourists-friendly visa policies, ii) better infrastructure, and iii) reposition strategy of cultural and religious sites for south asian market. therefore, there is a lot of scope of tourism in pakistan. the recreational places aforementioned are attractive for local as well as international tourists. but, unfortunately, pakistan has not been able to exploit the tourism to an optimum level (ahmed et al., 2011). lot of research has surpassed on this topic world-wide (meo et al., 2018) but relatively less studies have been conducted in pakistan and that too are nascent and scanty. few of them are being placed on record in literature to set out the outset of this study. particularly, there is dearth of studies investigating tourism from view point of hindrances/obstacles and/or barriers in context of pakistan. therefore, it has become imperative to investigate the barriers in promoting tourism. keeping in view the utmost importance of the phenomenon and barriers pertaining the phenomenon, it has become call of the day to structure this issue. following are the objective of this study:  to elicit and rank the barriers to promote tourism in pakistan,  to ascertain interactions among them,  to impose hierarchy on them and to develop a structural model,  to deliberate on its managerial implications and  to analyze driving-dependence power of barriers for further insight. this study uses literature review method i.e. empirical evidence from single-single studies coupled with expert opinion/focus group for eliciting the barriers. whereas, ism for hierarchicalization and micmac for driving-dependence power analysis of barriers. ism/micmac is workable with as less as 5 elements (sushil, 2017) and with as many as more than 80 elements (li et al., 2019). since, this study is based on 16 barriers which is an ideal range for ism (sushil, 2017) hence, it is the most suitable methodology. therefore, remaining part of the study is divided into literature review, solution methodology, results & discussion and conclusion. 2. survey of literature of tourism barriers leung et al. (1996) carried out a study on tourism development in cambodia on analysis of opportunities and barriers and provided insights about the barriers of obtaining information regarding tourists’ places. andereck et al. (2005) conducted a study in usa, whereas, aref et al. (2009) in iran and both of them reported that lack of community knowledge and resources are major barriers in improvement of tourism sector. sofield (2006) asserted that weedy political relations of sovereign countries have negative impact on tourists’ mobility in cross-border tourism development. khadaroo and seetanah (2008) claimed that poor transport infrastructure has significant impact on tourism development. ahmed et al. (2011) affirmed that terrorism adversely affects tourism activities in pakistan. heung et al. (2011) reported five key barriers important to be rectified for development of tourism in hong kong. salazar (2012) asserted that weak cultural integrity and harmony for local community to interact with tourists hampers the growth of tourism. chen et al. (2014) bolstered that china is facing predicaments in tourism at two different levels i.e. socio-cultural & environmental and economic. matasci et al. (2014) found social and economic feasibility barriers are significant in climate change adjustment process. meihami and karami (2014) argued that lack of investment in tourism sectors hinders promoting tourism. najda-janoszka and kopera (2014) highlighted environmental and organizational factors that hinder innovation capability of tourism in poland. taleghani et al. (2014) documented organizational coordination problem as a main obstacle in tourism development of iran. ismagilova et al. (2015) argued that poor preservation of historical places adversely affects country’s economic and social development. hatipoglu et al. (2016) findings revealed that lack of financial focus, narrow vision and lack of organizational structure for effective cooperation hinder in successful planning of sustainable tourism in turkey. andrades & dimanche (2017) asserted that there are numerous barriers in promoting tourism in russia like lack of infrastructure development, sustainable quality management and employees’ education & training issues. weir (2017) argued that consistent problem of climate change has adverse impact on tourism and travel industry. alghizzawi et al. review of economics and development studies vol. 5, no 4, 2019 883 (2018) identified that lack of use of social media is also one of the adversative barriers in promoting tourism. chin et al. (2018) asserted that duration of winter period also becomes barrier in promoting seasonal tourism. mair et al. (2018) asserted that less support to foreigners particularly in the contexts of conferences is a common barrier to promote tourism. momeni et al. (2018) identified seven major barriers (i.e. marketing, international issues, culture, transfer, brokerage, management, and policy problems) that hamper in improvement of tourism industry. okafor et al. (2018) asserted that common unofficial language is the most important factors for mobility of international tourists in europe. paraskevas and brookes (2018) conducted a study on trafficking human being and considered it as one of snags within tourism business and suggested some guidelines to disrupt human trafficking. tölkes (2018) emphasized on issue of green hoteling, environmental sustainability and communication in context of tourism. yadav et al. (2018) holds that insufficient government incentives and lack of stakeholders’ coordination responsible of failure of sustainable tourism development in india. arenas et al. (2019) asserted that traditional handling systems impede promotional activities of tourism. damm et al. (2019) considered unsynchronized weathering system say higher interest in weather services (i.e. weather variability) than climate services as deterrent in promoting tourism. jeon (2019) conducted a research study regarding barriers in developing self-efficacy in students, graduating in the discipline of tourism. qian et al. (2019) pointed out scarcity of literature in certain area of tourism and emphasized on constant improvement on research in domain of tourism. summers et al. (2019) uncovered five key barriers (i.e. lack of understanding of behavior, lack of financial resources, lack of understanding of structure, lack of collaboration and lack of human resources) and three major enablers that directly influence on economic and social‐cultural growth. the list of barriers, based on the literature review, has been formulated as table 1. table 1: final list of barriers sr. barriers authors 1 terrorism ahmed et al., 2011 2 less budget allocation okafor et al., 2018; summers et al., 2019 3 un-synchronized weathering damm et al., 2019 4 government restrictions arenas et al., 2019 5 failure to preserve historical places ismagilova et al., 2015 6 inefficient system of transport khadaroo & seetanah, 2008 7 communication barrier tölkes, 2018 8 traditional (non-digital) system of booking arenas et al., 2019 9 rigid local behavior najda-janoszka & kopera, 2014 10 limited use of social media alghizzawi et al., 2018 11 lack of awareness of local community aref et al., 2009 12 lack of research qian et al., 2019 13 human trafficking paraskevas & brookes, 2018 14 international border issues sofield, 2006 15 unfavorable govt. policies arenas et al., 2019; heung et al., 2011 16 climate change chin et al., 2018; matasci et al., 2014; weir, 2017 17 culture harmony salazar, 2012 18 language barrier okafor et al., 2018 19 lack of institutional structure hatipoglu et al., 2016 20 lack of investments/funds meihami & karami, 2014 total 20 barriers were identified through review of literature. however, the barriers are disorderly and unsystematically identified from literature that might not have relevant literal meaning and they might not necessarily be representative to the context of pakistan. in order to embark on a study of tourism concerning pakistan, it was imperative to first indorse relevance of barriers to the context of the study. review of economics and development studies vol. 5, no 4, 2019 884 common method of such type of endorsement is formal verification of variables from the experts. therefore, to identify stakeholders and to determine a panel of experts has become an essence of the study. the researchers deliberated on the stakeholders and consider: government, local community, tourists, revenue department, local business community, transport industry, tourist’s guides, aviation industry, academia and hotel and food industry as major stakeholders. representatives of these stakeholders have been recruited on the panel in order to strike true representativeness. in this context, a heterogeneous panel of 14 experts have been recruited. the list of barriers was presented to experts four highlighted grey in table 1 could not attain majority, therefore, eliminated from further analysis. 3. solution methodology the authors are recognizant of the fact that true benefits of research can only be reaped by using appropriate methodology. the methodological choices were considered and ism was opted to embark on this study. ism is applied in a wide variety of areas on this type of problems (sushil, 2017; warfield, 1973). it is a visible, well defined, graphical model representation using reachability and transitive inferences through matrix transformation. ism is preferred over other statistical technique because most of them are unable to analyze multitude of interrelationships among variable of phenomenon which loses the opportunity of gaining thorough understanding of conundrum situations like tourism (chidambaranathan et al., 2009). therefore, this study uses literature discourse, ism and micmac as research methodology. the data was collected from a heterogeneous panel of medium size experts on a matrix type questionnaire using i leads to j as type of relationship (trigunarsyah & paramidewi, 2015). the research preferred exploratory paradigm of research and collection of data from panel of experts instead of statistical groups (ranjbar et al., 2012). the process of selecting the experts is admittedly critical because quality prevails over the quantity (shen et al., 2016). there are plenty of evidences regarding size of panel of experts e.g. 15-30 people for a homogeneous and 5-14 people for a heterogeneous (khan & khan, 2013). since, the study uses heterogeneous panel therefore a panel size of 14 experts was opted. the panel was approached three times i.e. firstly, for approval of barriers, secondly, for opinion on paired relations among the barriers, and thirdly, for checking model’s logical, theoretical, conceptual and directional inconsistencies, if any. for eliciting data the researchers opted for one-on-one face-to-face in-depth interview on work places of experts (li & yang, 2014). there took three rounds on place to finalize the model i.e. discussion & piloting round, data elicitation round and model verification round. the decision of the experts regarding approval of factors, paired relations and that of model based on majority rule (cai & xia, 2018). the experts were recruited on panel on the basis of their relevant practical experience of not less than 10 years, theoretical knowledge, expert knowledge and their positions in authoritative organizations concerning tourism. the study applied classical procedure of ism on the data and constructed a structural model. ism proceeded step wise as asserted by attri et al., 2013; warfield, 1973. 3.1 building ism model since, it has been revealed by the iterations that there are four underlined levels in which the barriers of tourism can be subdivided and hierarchicalized. barriers namely 1, 2, 3, 4, 5, 6, 9 and 11 occupy top level of the model, barriers 8, 10, 13 and 14 occupy second level, barriers 12 and 16 occupy third level, whereas, 7 and 15 occupy fourth level. using a software edraw max 9.4 a level wise model has been constructed as figure 1. level to level relations have been indicated according to norms of ism whereas, the relations of the factors at levels have been mentioned by two-way arrows inferring from reachability matrix. review of economics and development studies vol. 5, no 4, 2019 885 figure 1: ism model model was presented to panel of experts for checking conceptual inconsistencies and modifications thereof. the experts reported some minor modifications that have been incorporated and the model was finalized. the model, in this way, has imposed hierarchy and direction on complex relations among barriers. 3.2 micmac analysis the study also used micmac as supplemental analysis to ism. it is a structural analysis which classifies the factors into four different clusters namely, independent, dependent, linkage and autonomous (godet, 1986). the micmac is a driving-dependence diagram (figure 2) which has been constructed from final reachability matrix. figure 2: micmac analysis review of economics and development studies vol. 5, no 4, 2019 886 micmac analysis classifies the barriers into fours clusters on continua of low-high (figure 2). it has four quadrants (i.e. dependence power x-axis and driving power y-axis) from low to high. out of sixteen barriers, there is no autonomous factor, five fall in independent, three in linkage and eight in dependent quadrant. 4. results and discussion tourism is one of the emerging sectors in developing economies. it has potential to cast material impact on revenue generation. developing countries are now concerned about development of tourism and pakistan is also in this queue. there is scanty and scarce literature on tourism as whole and extinct in case of pakistan. due to utmost importance of tourism, the barriers pertaining this phenomenon have been investigated by using two unique structural methodologies i.e. ism and micmac analysis. that provides understanding of complex interrelationships among barriers of developing tourism. summarized results are presented as table 2. table 2: summary results of literature, micmac and ism results of ism revealed that communication barrier (7) and unfavorable government policies (15) occupy bottom of the model and they are key barriers. lack of research (12) and climate change (16) occupy third level (second important level) of model therefore, they are also vital. traditional (non-digital) system of booking (8), limited use of social media (10), human trafficking (13) and international border issues (14) occupy second level relatively less important to third level having moderate lesser importance. whereas, terrorism (1), less budget allocation (2), un-synchronized weathering system (3), government restrictions (4), failure to preserve historical places (5), inefficient system of transport (6), rigid local behavior (9) and lack of awareness of local community (11) occupy top of the model hence attain least priority. objective of micmac is to identify key factors and to augment ism by way further analysis of the results of ism. the results are, therefore, presented cluster wise. 4.1 autonomous those factors that have weak driving and weak dependence power, relatively separated from model but have some powerful links fall in this cluster. they don’t have much impact on system. in this study autonomous factors don’t and non-existence of autonomous factors means that all factors play important role in model. 4.2 dependent those factors that have weak driving but strong dependence power fall in this cluster. the barriers listed at 1, 2, 3, 4, 5, 6, 9 and 11 have low driving and high dependence power therefore fall in dependent review of economics and development studies vol. 5, no 4, 2019 887 cluster. they depend on others therefore need extra care. there are certain factors which have high dependence power but at the same time high driving power and may fall in linkage cluster. 4.3 linkage those factors that have strong driving and strong dependence power fall in this cluster. they are unbalanced, agile and ambivalent and action on them may affect others and as a feedback effect on themselves. existence of these factors in the model means that regulators might be struggling to make sense. the barriers listed at 8, 10 and 13 fall in linkage cluster. independent: those factors that have high driving and low dependence power fall in this cluster. some of them might have high dependence power as well and may fall in linkage as well. these are key factors high care is needed to handle them. practitioners should therefore give priority to understand these factors. the barriers listed at 2, 7, 14, 15 and 16 have high driving but low dependence power therefore fall in independent. in nutshell: communication barrier (7) and unfavorable government policies (15) are key barriers because they occupy bottom of ism model, have high driving, lowest dependence, high effectiveness and fall in independent cluster in terms of micmac. the results of both the structural methodologies coincide and experts also ratified the same as consistent, therefore, these two factors can be considered as vital key factors. this study is different from contemporary studies in many dimensions. it uses unique and different methodology, whereas, contemporary studies mostly use factor analysis and other statistical analyses that give comparatively minimal insight to the issue. it is empirical field study based on very different set of variables and expert respondents of phenomena under study. it provides more deeper understanding and insight of the issue. this study has been conducted in pakistan which itself has unique position within asian countries and researchers could not find any such study on this topic. it is a seminal study on tourism sector. however, there are some studies conducted in different countries findings of this study are consistent with them in general table 3. table 3: comparison of results of the present study with prior studies in the literature 5. conclusion this study has great value for stakeholders of business of tourism that wish to prioritize their efforts and resources to remove the most important barriers and challenges for successful policy implementation. there are lots of barriers in promoting tourism in developing countries like pakistan. there is a severe need to unearth these barriers and understand the complex interrelations among barriers. this research study has addressed the issue in an innovative manner. it identified 20 barriers from literature presented it to the recruited panel of experts from within the stakeholders of tourism in pakistan who declared 16 barriers as highly relevant and representative to the phenomenon under study. the research study used ism and micmac as methodology for structuring and analyzing the issue. the results of the study show review of economics and development studies vol. 5, no 4, 2019 888 that there are 16 representative barriers, barrier 7 and 15 occupy bottom of the model, therefore, they are key barriers. 12 and 16 occupy third level i.e. second important level, therefore, they are also vital; 8, 10, 13 and 14 occupy second level relatively less important to third level having moderate lesser importance; and 1, 2, 3, 4, 5, 6, 9 and 11 occupy top of model hence attain least priority. results of micmac analysis show that: there is no autonomous barriers meaning thereby all factors are relevant and play vital role in the system; 1, 2, 3, 4, 5, 6, 9 and 11 are dependent on others therefore need extra care; 8, 10 and 13 are linking hence are unbalanced, agile & ambivalent and action on them may affect others and as a feedback effect on themselves; and 7, 12, 14, 15 and 16 are independent therefore high care is needed to handle them. barrier 7 and 15 are key barriers according to both structural methodologies. this study contributes to existing theories of tourism. it contributed an ism model (figure 1) of representative barriers in promoting tourism towards literature that also states hierarchy and direction of relationships among barriers. it also has another significant contribution by way of driving-dependence diagram (figure 2). it contributes lot of supplemental information to augment further qualitative and quantitative studies too. it divulges deeper understanding to researchers by way of hierarchical structure of barriers and paved the way for further researches. the study enables stakeholders to devise a detailed structure in order of importance in which barriers have to be dealt. the model is helpful to improve and understand the issue clearly. it has significant relevance to tour operators, tourists, governments as policy makers, researchers and practitioners. the study provides essential information to decision-makers for identifying the focal areas and taking due actions. there are certain limitations of study also. firstly, since it is relatively less explored area and this study is first of its kind that uses qualitative approach therefore its findings have generalizability limited to the scope of study. future studies may follow quantitative approaches with wider scope and may collect evidence from different geographical areas in order to enhance the frontiers of findings of this study. secondly, key barriers have been identified through single method of literature discourse and there is possibility that some important barriers might have missed, therefore, it is recommended that future researches should use other methods to validate and augment the findings of this research. thirdly, judgmental data has been collected from fewer stakeholders in pakistan therefore future studies may take data from statistical groups. references ahmed, i., nawaz, m.m., & qazi, t.f. 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(2012). analysis of interaction among effective factors on corporate entrepreneurship. asia pacific journal of innovation and entrepreneurship, 6, 9-31. review of economics and development studies vol. 5, no 4, 2019 791 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads some preliminary evidence of price setting behaviour from the industrial estates of khyber pakhtunkhwa 1 nadeem iqbal, 2 amjad amin 1 ph.d scholar at the department of economics university of peshawar, pakistan. nadeemiqbal@uop.edu.pk 2 assistant professor at the department of economics university of peshawar, pakistan. amjadamin@uop.edu.pk article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 price setting behaviour is a crucial issue for the knowledge of monetary policy transmission mechanism. the objective of the study is to analyze the relationship between firm‟s characteristics and the price setting behaviour of firms, using survey-based data. the survey is conducted in the year 2017 in four major industrial estates of khyber pakhtunkhwa, namely, hayatabad, nowshera, gadoon and hattar industrial estates. a sample of 342 firms is selected through stratified random sampling and respondents are the managers of the firms. according to results the price elasticity of demand will be inelastic and the number of time to change price decreases in case of less competitors. if the firm is engaged in a contract, then there are more chances that the firms have only regular customers and imperfect competitive market structure. firms which are involved in input price contracts, they are also involved in output price contracts, so nominal wage rigidity leads to output price rigidity. this paper find that traditional channel of monetary policy is weak as degree of price rigidity is low. therefore, it is important for monetary policy of pakistan to focus on other channels of monetary transmission mechanism. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords price setting, price rigidity, price contracts, market structure, price elasticity of demand jel classification: e64, e69, l11 corresponding author‟s email address: nadeemiqbal@uop.edu.pk recommended citation: iqbal, i. and amin, a. (2019). some preliminary evidence of price setting behaviour from the industrial estates of khyber pakhtunkhwa. review of economics and development studies, 5 (4), 791-798 doi: 10.26710/reads.v5i4.895 1. introduction why some of the firms change their prices more often than the other firms and the price setting time is not uniform across companies and exposes enormous volatility? literature has shown some of the factors which can trigger price adjustment. these factors are level of competition, type of customers, size of the firm, the existence of the economies of scope and the presence of implicit or explicit arrangements and many other different actions (blaudow & burg, 2018). likewise, firms can be hesitant to alter prices guided by the impression that customers could wrongly relate a cutback in price with a lowering in the quality of the products, so in this way blocking downward alterations in prices (peneva and ekaterina 2009). moreover, collapse in coordination between different firms, can explain why a firm does not want to change the product price as it fears the competitors will not do the same (hall and yates, 1998). arrow (1959) points out that in the absence of market power, a firm cannot affect the price of a commodity. http://www.publishing.globalcsrc.org/reads mailto:nadeemiqbal@uop.edu.pk mailto:amjadamin@uop.edu.pk mailto:nadeemiqbal@uop.edu.pk review of economics and development studies vol. 5, no 4, 2019 792 blinder (1991) is the pioneer, who study the price setting behaviour by using micro data. after this, much research has been carried out to study price stickiness at the firm level, but most of the literature about price setting behaviour is related to developed countries. in the case of pakistan, only few studies have focused on the price setting behaviour of firms using survey based data. however, these studies have ignored the heterogeneous response of firms to change in prices to different shocks and the role of the firm characteristics in price setting (sohail, & fatima, 2018; choudhary, et.al, 2011; 2016; and malik et. al, 2008). the objective of the study is to analyse the price setting behaviour of firms located in four industrial estates of khyber pakhtunkhwa, using survey-based data. in this regards different variables are linked with the price setting behaviour. these factors are price elasticity of demand, price contracts, market structure, price rigidity after calculation, inventories, output and input price contract. rest of the paper is organized as; in section 2 famous theories of price setting are discussed, in section 3 population and sample procedure is explained. in section 4, results are discussed and in section 5, conclusion is explained. 2. theories of price stickiness this section explains famous theories of price rigidity given in literature. fixed incremental cost is an important theory of price rigidity. if there is any change in demand, then there will be no change in the price, if markups and marginal cost is constant (hall and yates, 1998). in the cost base pricing model, the demand for the product will not affect the price, the price of the commodity depends on the cost of production (blanchard, 1983). according to the implicit contract theory, the firms try to not the change the price with higher frequency. while in the explicit contract theory the firms have a contract with their clients that they will not change the price of the product in a given time period (okun, 1981). the price threshold is an important theory of price rigidity. the firm keeps the price in the given threshold, even if there is any shock to the economy because otherwise, they will lose the trust of their customers (hall and yates, 1998). an imperfect competitive market is also the leading cause of price rigidity because firms have monopoly power due to which they can set the price according to their desire (blanchard and fischer 1989). imperfect information is also the source of price rigidity. according to the classical, in case of perfect information, the price and wage will flexible. while according to the keynesian, the price and wage will be rigid in case of imperfect information (taylor, 1979). high price is a symbol that this product will be of best quality. so that why the firm will not decrease the price of its product, because the people will think that price decrease means the quality of the product is decreased. based on quality and price relationship, prices are downward rigid and upward flexible (allen,1988). according to physical menu costs theory, when there is any shock, the restaurant does not change price due to reprinting menu cost and advertisement cost. however, most of the time shocks are temporary. so that is why menu cost is one of the determinants of rigidity (ball & mankiw, 1994). 3. population and sampling plan khyber pakhtunkhwa (kp) is the province of pakistan. in kp, there are 14 main industrial estates, for this study four major industrial estates are selected, i.e. hayatabad, nowshera, hattar and gadoon amazi industrial estate. the following procedure is adopted for the selection of the sample. first, those firms are included, which are registered before july 2017. second, those firms who are not involved in production since june 2106, are excluded from in the initial population. third, to avoid the over-representation of small firms, those firm who have less than ten employees, are not considered in the sample selection process. fourth, only those firms are considered, which are involved in the production and not only involved in trading activities. the firms which are left after this filtration process make the initial population (i.e. 860 firms). a sample of 342 is calculated from the initial population on the basis of 95% confidence interval and 5% margin error. the data is collected through stratified random sampling technique. review of economics and development studies vol. 5, no 4, 2019 793 to collect data about price setting of the firm, the structured face to face interview approach is used to collect quantitative data through questionnaire from industrial estates of khyber pakhtunkhwa. the design of the study questionnaire follows blinder (1991). it consists of three sections: section a on general information of firms; section b on price setting; and section c on determinants of price change. 4. results this section of the study relates firm characteristic, for example market structure, type of customers with different variables, price rigidity before calculation and after calculation, price elasticity of demand, price adjustment process. 4.1 price rigidity after calculation according to akerlof (1970) price is not a meaningful and suboptimal behaviour due to negligible effect. in most of the situation the consumer has asymmetric information about the market price. so, the information to change the price may lead to a costly decision because it will push the consumer to reopen the set of alternatives available in the market. so that‟s why the manager will be careful to change price, which lead to price rigidity after calculation. to check this, the firm was asked that how many times did firm do such computations regarding the price of your main product and how many times did firm effectively change the price of your main product in 2017. according to table 1 number of time firm change the price in 2017 varies from 0 to 12 times and the number of time the firm did computations regarding price varies from 0 to 14. according to table 1 more the 80% of the firms occur in the range who did computation from 0 to 6 times and change price from 0 to 4 times. it means, the number of times the firm change the price of its main product is less than the number of times they did computation, which is the symptom of price rigidity. similarly, according to the table 1 less than 20% of the firms, who did calculations from 6 to 14 times, the percentage of frequency of price change is greater than the percentage of the number of times firm did computation regarding price. so the hypothesis that price is not a meaningful and suboptimal behaviour due to negligible effect is accepted, it means price information and computation lead to price rigidity. table: 1 number of time firm change the price in 2017 and number of time firm did computations regarding price in 2017 number of time firm did computations regarding price in 2017 0 1 2 3 4 5 6 7 8 10 12 14 16 total number of time firm change the price in 2017 0 count 14 0 2 0 0 0 0 0 0 0 0 0 2 18 1 count 2 112 16 8 2 0 0 0 0 0 0 0 0 140 2 count 0 4 50 16 12 6 0 0 0 2 0 0 0 90 3 count 0 0 2 12 6 2 0 0 0 0 0 0 0 22 4 count 0 0 0 0 4 4 4 2 2 0 4 0 0 20 5 count 0 0 2 0 0 4 4 2 0 0 2 0 0 14 6 count 0 0 0 2 0 0 2 0 2 0 0 0 0 6 7 count 0 0 0 0 0 0 0 2 0 2 0 0 0 4 8 count 0 0 0 0 0 0 0 0 0 0 0 2 0 2 9 count 0 0 0 0 0 0 0 0 0 0 4 0 0 4 10 count 0 0 0 0 0 0 0 0 0 0 8 0 0 8 12 count 0 0 0 0 0 0 0 0 0 0 14 0 0 14 total count 16 116 72 38 24 16 10 6 4 4 32 2 2 342 4.2 price elasticity of demand and market structure price elasticity of demand is important characteristics of the market structure. in perfect competition, the price elasticity of demand is elastic, while in the case of imperfect competition price elasticity of demand is inelastic. to capture the market structure, the firm is asked how many other firms are producing the review of economics and development studies vol. 5, no 4, 2019 794 same product. to capture the role of price elasticity of demand in price decision making, the firms are asked that if they increase (decrease) the price of their main product by 10% and all the other things remain unchanged, by what percentage would the number of sold units of their product decrease (increase) i.e. more than 10%; approximately 10%; less than 10%; or uncertain. according to table 2, in case of less number of rival firms the price elasticity of demand of majority of firms is inelastic, while in case of more rival firms the firms give a mix results. table 2 price elasticity of demand and market structure market structure total no main less than 5 between 5 & 20 more then 20 price elasticity of demand more than 10% count 8 10 22 14 54 % within price elasticity 14.8% 18.5% 40.7% 25.9% 100% % within market structure 36.4% 12.8% 14.1% 16.3% 15.8% approximately 10% count 8 16 12 8 44 % within price elasticity 18.2% 36.4% 27.3% 18.2% 100% % within market structure 36.4% 20.5% 7.7% 9.3% 12.9% less than 10% count 0 22 36 18 76 % within price elasticity 0% 28.9% 47.4% 23.7% 100% % within market structure 0% 28.2% 23.1% 20.9% 22.2% uncertain count 6 30 86 46 168 % within price elasticity 3.6% 17.9% 51.2% 27.4% 100% % within market structure 27.3% 38.5% 55.1% 53.5% 49.1% total count 22 78 156 86 342 % within price elasticity 6.4% 22.8% 45.6% 25.1% 100% % within market structure 100.0% 100% 100% 100% 100% 4.3 price rigidity and market power according to the economic theory market power is the necessary condition for price rigidity. to the market power in table 3, the firms are asked that how they set the price of their main products? to capture the price rigidity, the firms were asked that on average how many times do you change the price of your product in one year? table 3 shows the number of time firm change price varies from 0 to 6 in one year. 0 to 2 times means price rigidity and 3 to 6 times mean price flexibility. according to table 3, 208 firms out of 342 said that we set the price. within these firms, 73% of firms change price from 0 to 2 times. furthermore, as the number of time increases from 1 to 6, the percentage within the category that "we set the price" decreases. similarly, if table 3 is analyzed from the angle of price rigidity, it gave the same picture. according to the last row 248 firms out of 342 firms change the price from 0 to 2 times and 61.3% of these firms occurs in the category of “we set the price”. so, the above discussion shows that as the market power increases, the tendency to change price decreases. table 3 market power and price rigidity number of times price change 0 1 2 3 4 5 6 total m a r k e t p o w e r we set the price count 6 88 58 16 14 8 18 208 % within market power 2.9% 42.3% 27.9% 7.7% 6.7% 3.8% 8.7% 100% % within price rigidity 60% 61.1% 61.7% 44.4% 77.8% 80% 60% 60.8% the price is set by the parent company count 0 30 24 10 0 0 0 64 % within market power 0% 46.9% 37.5% 15.6% 0% 0% 0% 100% % within price rigidity 0% 20.8% 25.5% 27.8% 0% 0% 0% 18.7% price is set through count 0 16 6 4 4 0 6 36 review of economics and development studies vol. 5, no 4, 2019 795 direct negotiation with the clients % within market power 0% 44.4% 16.7% 11.1% 11.1% 0% 16.7% 100% % within price rigidity 0% 11.1% 6.4% 11.1% 22.2% 0% 20% 10.5% the authorities regulate the price count 2 10 6 6 0 2 4 30 % within market power 6.7% 33.3% 20% 20% 0% 6.7% 13.3% 100% % within price rigidity 20% 6.9% 6.4% 16.7% 0% 20% 13.3% 8.8% other count 2 0 0 0 0 0 2 4 % within market power 50% 0% 0% 0% 0% 0% 50% 100% % within price rigidity 20% 0% 0% 0% 0% 0% 6.7% 1.2% total count 10 144 94 36 18 10 30 342 % within market power 2.9% 42.1% 27.5% 10.5% 5.3% 2.9% 8.8% 100% % within price rigidity 100% 100% 100% 100% 100% 100% 100% 100% 4.4 contract and market power as market power increases, the tendency of longer contract increases. to capture it the firms were asked whether they engage in price contract for periods longer than one year. according to table 4, only 124 out of 342 firms are involved in price contract, which is low. furthermore, within 124 firms, 98 firms who are engaged in price contract, set the price by itself or the parent company and only 12 firms does negotiate with their clients, it means most of the firms who are engaged in price contract have imperfect competitive market structure. table 4 contracts and market power market power we set the price the price is set by the parent company the price is set through direct negotiation with the clients the authorities regulate the price other total contracts no count 132 42 24 18 2 218 % within contracts 60.6% 19.3% 11% 8.3% 0.9% 100% % within market power 63.5% 65.6% 66.7% 60% 50% 63.7% yes count 76 22 12 12 2 124 % within contracts 61.3% 17.7% 9.7% 9.7% 1.6% 100% % within market power 36.5% 34.4% 33.3% 40% 50% 36.3% total count 208 64 36 30 4 342 % within contracts 60.8% 18.7% 10.5% 8.8% 1.2% 100% % within market power 100% 100% 100% 100% 100% 100% 4.5 contract and type of customers type of customers is a significant factor in price rigidity. according to the table 5 within 124 firms, which are involved in price contracts, 6.5% of the firms have only occasional customers, while 41.9% of the firms have only regular customers and 51.6% of the firms have combination of both. so, majority of the firms which are involved in price contracts have regular customers. according to the table 5 within 218 firms, which are not involved in price contracts, 9.2% of the firms have only occasional customers, while 33% of the firms have only regular customers and 57.8% of the firms have combination of both. so, majority of the firms which are not involved in price contracts have regular customers. based on the above result it can be concluded that if firms have regular customers, then it is not necessary that firm will be involved in contract. however, if firm is engaged in price contract, then there are more chances that the firms have only regular customers. table 5 contract and type of customers type of customers total regular occasional both contracts no count 72 20 126 218 % within contracts 33.0% 9.2% 57.8% 100% review of economics and development studies vol. 5, no 4, 2019 796 % within type of customers 58.1% 71.4% 66.3% 63.7% yes count 52 8 64 124 % within contracts 41.9% 6.5% 51.6% 100% % within type of customers 41.9% 28.6% 33.7% 36.3% total count 124 28 190 342 % within contracts 36.3% 8.2% 55.6% 100% % within type of customers 100% 100% 100% 100% 4.6 output price contract and input price contract output price rigidity and input price rigidity is the central point of discussion in the macroeconomic theory: if firms are involved in both inputs and output contracts then aggregate supply curve will be horizontal. according to results in table 6, 124 firms are involved in price contract for longer periods than one year. and within these 124 firms, 35% firms are engaged in contracts for input purchases at a constant price. similarly, 100 firms are involved in input price contract, and within these 44% firms are engaged in price contract for longer periods than one year. according to the table 6, the percentage of the firms involved in both types of contract are low, i.e. output price contracts (36.3%) and input price contracts (29.2%). according to results in table 6, 218 firms out of 342 are not involved in price contract. and within these 218 firms, 74.3% are not engaged in contracts for input purchases. similarly, 242 firms are not involved in input price contract, and within these 66.9% are not engaged in price contract. it means majority of the firms are not involved in both types of contract. however, firms which are involved in input price contracts, they are also involved in output price contracts, so nominal wage rigidity leads to output price rigidity. but firms who are involved in the output price contract, it is not necessary, that these firms will be involved in input price contract. table 6 output price contract and input price contract input price contract no yes total output price contract no count 162 56 218 % within output price contract 74.3% 25.7% 100% % within input price contract 66.9% 56% 63.7% yes count 80 44 124 % within output price contract 64.5% 35.5% 100% % within input price contract 33.1% 44% 36.3% total count 242 100 342 % within output price contract 70.8% 29.2% 100% % within input price contract 100% 100% 100% % of total 70.8% 29.2% 100% 5. conclusion the objective of the study is to analyze the relationship between firm‟s characteristics and price setting behaviour. according to results as the degree of market power increases, the price elasticity of demand will be inelastic and the number of time to change price decreases. if firms have regular customers and imperfect competitive market structure, then it is not necessary that firm will be involved in the contract, however, if the firm is engaged in a contract, then there are more chances that the firm has only regular customers and less competitors. firms which are involved in input price contracts, they are also involved in output price contracts, so the above hypothesis is accepted that nominal wage rigidity leads to output price rigidity. but firms who are involved in the output price contract, it is not necessary, that these firms review of economics and development studies vol. 5, no 4, 2019 797 will be involved in input price contract. this paper find that traditional channel of monetary policy is weak as degree of price rigidity is low. therefore, it is important for monetary policy of pakistan to focus on other channels of monetary transmission mechanism. references akerlof, g. a. (1970). the market for" lemons": quality uncertainty and the market mechanism, 84q. j. econ, 488, 489-90. allen, f. (1988). a theory of price rigidities when quality is unobservable. the review of economic studies, 55(1), 139-151. arrow, k. j. (1959). toward a theory of price adjustment. the allocation of economic resources, 41-51. ball, l., & mankiw, n. g. (1994). asymmetric price adjustment and economic fluctuations. the economic journal, 104(423), 247-261. blaudow, c. & burg, f. (2018): “dynamic pricing as a challenge for consumer price statistics," eurona, 1, 16. blanchard, o. j. (1983). the production and inventory behavior of the american automobile industry. journal of political economy, 91(3), 365-400. blanchard, o. j. and fischer, s. (1989), lectures on macroeconomics (mit press, cambridge, massachusetts). blinder, a. s. (1991). why are prices sticky? preliminary results from an interview study (no. w3646). national bureau of economic research. choudhary, m. a., naeem, s., faheem, a., haneef, n., & pasha, f. (2011). formal sector price discoveries: results from a developing country. university of surrey discussion papers in economics. choudhary, m. a., faheem, a., hanif, m. n., naeem, s., & pasha, f. (2016). price setting & price stickiness: a developing economy perspective. journal of macroeconomics, 48, 44-61 hall, s and yates, a (1998), „are there downward nominal rigidities in product markets?‟, bank of england working paper, no 80. malik, w. s., satti, a. u. h., & saghir, g. (2008). price setting behaviour of pakistani firms: evidence from four industrial cities of punjab. the pakistan development review, 247-266. okun, a. m. (1981), prices and quantities: a macroeconomic analysis, brookings institution, washington d.c. peneva and ekaterina (2009). “some evidence on factor intensity and price rigidity,” journal of economic dynamics and control, 35(10). sohail, f., & fatima, a. (2018). price setting behaviour in pakistan: stylized facts from micro spi data seta. pakistan journal of applied economics, 28(2), 253-286. taylor, j. b. (1979). staggered wage setting in a macro model. the american economic review, 69(2), 108-113. review of economics and development studies vol. 5, no 4, 2019 798 review of economics and development studies, vol. 6 (1) 2020, 33-41 33 learning to teach in higher education for sustainable professional development a bibi haroon, b n. b. jumani, c kehkashan arouj a phd scholar, international islamic university islamabad, pakistan b professor of education, international islamic university islamabad, pakistan c assistant professor, international islamic university islamabad, pakistan article details abstract history: accepted 25 march 2020 available online 31 march 2020 the role of teacher in higher education is very complex. it is recognized that academicians have a greater responsibility to pursue excellence in several directions including leadership, academic management, teaching skills, pursuing scholarships, research and knowledge exchange, supervision, and many more to maintain their professional status. academic practice is a term to encompass all these sides. the main objective of the study is to take the views of the teachers about the participation in different learning opportunities and to see their effect for sustainable professional development of university teachers. all the teachers of public sector universities in islamabad and rawalpindi encompass the population of the study. using purposive sampling technique, data was collected through questionnaires. chi-square test through spss was applied to analyze the data. data was presented in the form of tables, percentage with graphs and the results were interpreted accordingly. © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: learning to teach, professional development, higher education jel classification: a20, a22, a29 doi: 10.47067/reads.v6i1.182 corresponding author’s email address: nb.jumabi@iiu.edu.pk 1. introduction standard based education in general and teacher education in particular is part of a global movement for quality assurance. higher education takes place a prominent position both in national and international level due to the rise of globalization therefore universities are considered as research platforms and are playing key role into their national development, communication and digital world. higher education institutes are now in more challenging position to accept the revolutionary changes in communication and digital world. so they equip the students with the new challenges of modern world. education reforms have already led to a particular growth and competition in higher education sector of pakistan. although this is a positive sign and hoped for a developing country like pakistan that the institutions are meeting the demand of the market for qualified individuals with specialization in different fields as a result of industrial growth in the country. the study aims to explore the participation of teachers in different learning opportunities and to review of economics and development studies, vol. 6 (1) 2020, 33-41 34 see the participation effect on professional development in higher education. the purpose of the study was that the institutions facilitate to provide different types of learning opportunities, these learning opportunities improve teacher’s professional development and the professionally developed teachers can make effective progress in the institution. it is not a comparative study between/among the institutions. but, those teachers considered more effective in teaching practice whose are more professionally developed and experienced. to enhance the quality of higher education by bringing the process of teaching, learning and research in line with international standards (edu.policy, 1998-2010). therefore, teachers were concerned. purposive sampling technique was used. through likert scale “ yes-no,” participation of teachers were asked in different learning activities and to identify their level of effect by providing rich information. for that the given options were (no effect, little effect, average effect, greater effect). in order to promote capable and competent university teachers in society, teachers should be given proper training to enhance their competence. in fact, the society needs quality teachers. this requires continuous development of competencies and commitment of teachers to be empowered. the retention of good teacher is a problem throughout the world when compared to other professions they have to educate and mold the entire whole human being. they can change the direction of every thought, feeling and behavior in a right direction. they are the role models for others. so they require more sound professional approach (sarsani, 2006). teaching and learning side by side are useful in bringing to the surface the complex nature of the process of learning to teach not only students, but teachers as well. the teacher’s conceptual understanding and cognition of the concept is crucial to student’s-learning. the implication for teacher’s professional development is to recognize teachers as ‘thinking selves’ who internalize and utilize knowledge about how students learn in constructing their instructional strategies (retallick, 2005). higher level stress in teachers has been documented by many studies. sources of teacher stress may include large class size, misbehaving students, heavy paper work, time constraint, lack of educational applies and financial demands which is consideration for educators and for general population as we have facing teachers’ shortage in the discipline of science, mathematics and special education. due to facing stress some teachers can lead to physical and emotional exhaustion, including less job satisfaction, lessen student-teacher rapport and decreased teacher effectiveness in meeting the need of students (kyriacou, 1987). 2. literature review the coming generation will be ready to cope with the overwhelming sustainability challenges if education for sustainable development is being learned and taught across educational sectors. the need of capacity to prevent and determine sustainability challenges, on the one hand, and to build and support sustainable development, on the other hand, is at the basis of the sustainability crisis. a variety of professional development projects are offered to carry and qualify these teachers. the predictable effects of such projects by both the facilitators and the participants are not only concerned to the professional development of individual teachers to get better teacher quality, but also to the enhancement of the quality on the whole. both short-term and long-term effects can be considered to be sustainable. so sustainability can be described as the long lasting continuation of achieved benefits and effects of initiative beyond its termination (deza, 2005). review of economics and development studies, vol. 6 (1) 2020, 33-41 35 education sector is expanding very rapidly all over the world in recent years. globalization and digital revolution has created a demand for new and varied disciplines in education. the cost of providing education has gone up manifold due to better teaching methodologies and learning instruments with rising inflation worldwide (zaheer & rehman, 2010). 2.1 learning literally, learning means wisdom, knowledge or scholarship. in psychology ‘learning’ is defined as modification in behavior through experience. it is the change in the behavior of an individual brought about by his own experiences. learning is a continuous process that starts from birth to death. an individual learns from his environment throughout his life (murad, 2010). learning can be normally improved by the research on educational practices, which is plan for organized improvement and sustainable development in higher education. discussion of improvement in higher education in pakistan has become decayed. up till now, the very definition of education in any form needs an act of transmission of knowledge, usually through an active teaching and learning process. we do not focus innovation in teaching in our higher education and as a consequence, few professors give time to learn new strategies in passing on their message and creating a sense of wonder. as a rising nation, pakistan need individuals who can assist it get on nation through high quality education. this is not achievable without the provision of good learning environments and high quality teaching in higher education institutions. pakistan is in grim need of improvements in both instruction environment and standards of learning; benefits which may be derivative from study on teacher’s approaches to teaching at universities (trigwell and prosser, 2004). 2.2 nature of learning the nature of learning is defined as process of acquisition of new behavior, or strengthening or weakening of old behavior as a result of experience with a view of modifying the behavior. the change of the behavior of an individual occurs because of the experiences and training of daytoday life. these changes appear in man as habits, aptitudes, skills, knowledge, understanding and insight. learning also involves a proper adjustment with the environment. however the most important thing in this respect is the change in the character and personality of an individual. 2.3 professional development learning and acquiring teaching skills is a growing trend in educational context, it does not only help them, to develop the required skills and enables them to become competent teachers but it also enables them to generate new theories in the field of education (donagh, 2012). the research demonstrates the need of increased decentralization and self determination to strengthen the personnel skills elaborate in supervision and stay at local level institutions. professional supervision and supporting services for teachers is almost in every country (ali, i998). for the teacher high quality professional development quality opportunities for professional learning must be organized with a strong base on content that engages teachers to learn, involves collaborations, and must be is sustained over time, and feedback should be collected from colleagues. such professional development for teachers should be an essential element of the success of the system (demonte, 2013). within the aspect of participating teachers the several factors are encouraging the impact of professional development programs: if the teachers are engaged in the conception and performance of the program, they can build up an affective relationship towards the program by developing possession of the proposed change (clarke, 1991; peter, 1996). they can be empowered to persuade their own development process (harvey & green, 2000). teachers should be equipped and supported to serve in review of economics and development studies, vol. 6 (1) 2020, 33-41 36 leadership roles (loucks-horsley et al., 1996). teachers can reflect and improve their practice if they understand their role as learners in their own teaching process. different teachers assume different approaches to teaching. some researchers have attributed this to constitutional characteristics of the teachers themselves such as diverse lecturing techniques, personality traits or thinking methods. hec and other national bodies require generating courses, seminars and training workshops on higher education teaching. whereas mostly activities at the primary and secondary level, while little is being done at the higher education. finally, universities and departments must take a serious look at their course evaluation forms and need to modify them to get maximum data that can focus on student learning and teaching performance. with other means, departments should give a sense of the quality of teaching and necessary steps to improve them. 2.4 sustainable professional development education brings changes in knowledge, attitudes and skills to facilitate a more sustainable development. education for sustainable development is the change in curriculum, learning method, covering economic, social and environmental needs. the sustainable development is fulfilling the needs of the present generation without putting at hazard the ability of generations to come in meeting their own necessities. teacher professional development is necessary for transforming teaching and learning. it keeps our teachers well aware on advances in education research, efficient practices, and resources. it also trustily affects all aspects of education, for example student outcomes, teacher satisfaction and retention, and learning culture. while some training and workshops can be appealing and inspiring, they don’t present the support teachers require to be able to put into practice the new techniques they are exposed to. continuing teacher professional development has been shown to increase the chances of teachers varying their instructional practices. if done properly it can generate a safe space for teachers to learn new techniques, try them out, reflect on their improvement, ask for suggestion, and get response. 2.5 accomplish needs assessments each learning situation has its own distinctive challenges and as the education field evolves, even qualified teachers find themselves in need of suggestion. conducting elevation and surveys frequently will help you better understand your teachers’ needs according to the requirements. teachers should be able to request specific courses or modules on the topics that they are most interested in. this will let you to make demand-driven programming. like with students, this ownership of their learning is a main component of the teachers’ buy-in, serving them stay engaged in their professional development for the long time. the objectives are to find out the participation of teachers in different learning activities for professional development and to identify the effect of participation in different activities for professional development. the research questions are (1) what kinds of learning activities are introduced to university teachers for professional development? (2) what is the participation effect in different activities for professional development? 3. research methodology this is a descriptive survey type study. the study is an evaluative and investigative rather than judgmental. this study aims to find out the views of university teachers about the participation in different learning activities and to see the participation effect on the professional development of teachers. all full time teachers of public sector universities in islamabad and rawalpindi in pakistan constitute the population of the study. purposive sampling technique was used. the questionnaire was used for data collection. the research approach was quantitative in nature but some open-ended questions also included. so mixed method sequential research design was adopted. the researcher review of economics and development studies, vol. 6 (1) 2020, 33-41 37 administered and collected all questionnaires personally. 4. analysis 4.1 participation of teachers in different learning activities table 1 respondents views for the participation in workshop options observed no percent% expected no df chi-square no responses 02 1.0 100.5 yes 12 6.0 100.5 2 323.134 no 187 93.0 100.5 total 201 100.0 this table shows that 93.0% respondents participated in workshops and only 6% respondents did not participate, while 1% did not response. from the statistical analysis of the results it is evident that the value of chi-square = 323.134 > 34.825 a = 0.05 and df = 2. therefore the result was strongly significant which showed that mostly respondents participated in workshops for professional development. table 2 respondents view for the participation in training course options observed no percent% expected no df chi-square no response 09 4.5 100.5 no 21 10.4 100.5 2 156.448 yes 171 85.1 100.5 total 201 100.0 this table shows that 85.1% respondents were of the view that they participated in training courses and 10.4% respondents were non-participants. while 4.5% were not respondents for this learning opportunity of professional development. from the statistical analysis of the results it is evident that the value of chi-square is = 156.448 > 34.825 a = 0.05 and df = 2. therefore the result was statistically significant which showed that most of the respondents participated in training courses for professional development. table 3 respondents views of literature reading for professional development options observed no percent% expected no df chi-square no responses 04 2.0 100.5 no 19 9.5 100.5 2 277.522 yes 178 88.6 100.5 total 201 100.0 this table shows that 88.6 % respondents were of the view that they had the opportunity for literature reading and they could read different type of literature on professional and educational topics for professional development and 9.5 % respondents did not avail such type of opportunity. while 2.0 % were the non respondents. from the statistical analysis of the results it is evident that the value of chi-square is = 277.522 > 34.825 a = 0.05 and df= 2 therefore the result was significant statistically. table 4 respondents views for informal dialogues with colleagues review of economics and development studies, vol. 6 (1) 2020, 33-41 38 options observed no percent% expected no df chi-square no responses 06 3.0 100.5 no 19 9.5 100.5 2 267.254 yes 176 87.6 100.5 total 201 100.0 this table shows that 87.6 % respondents were of the views that they often had the opportunity for informal dialogues with colleagues on professional and educational topics. and 9.5 % respondents had not availed such type of opportunity. while 3.0 % were the non respondents for that. from the statistical analysis of the results it is evident that the value of chi-square is = 267. 254 > 34.825 a = 0.05 and df = 2. therefore the result was significant. 4.2 effect of teachers’ participation in different learning activities this table demonstrates that calculated value of chi-square was found 106.935 which were greater than the tabulated value, which were 34.8258 at 0.05 level of significance. it points out that the responses of participants differed significantly. majority of the respondents (86%) agreed that the workshops were very effective for their professional development. table 5 effect of participation in workshops options observed no percent% expected no df chi-square no responses 27 13.4 40.2 no effect 01 0.5 40.2 4 106.935 little effect 25 12.4 40.2 average effect 80 39.8 40.2 greater effect 68 33.8 40.2 total 201 100.0 table 6 effect of informal dialogues with colleagues options observed no percent% expected no df chi-square no responses 29 14.4 40.2 no effect 05 2.5 40.2 4 124.050 little effect 16 8.0 40.2 average effect 59 29.4 40.2 greater effect 92 45.8 40.2 total 201 100.0 this table shows that calculated value of chi-square was found 124.050 which were greater than the tabulated value, that 34.8258 at 0.05 level of significance it points out that the responses of participants differed significantly. majority of the respondents (83.2 %) agreed that the informal dialogues with colleagues were proved highly effective for the professional development of university teacher. table 7 effect of training courses on educational topics options observed no percent% expected no df chi-square no responses 52 25.9 40.2 review of economics and development studies, vol. 6 (1) 2020, 33-41 39 no effect 12 6.0 40.2 4 46.438 little effect23 11.4 40.2 average effect 63 31.3 40.2 greater effect 51 25.4 40.2 total 201 100.0 table 7 depicts that calculated value of chi-square was found 46.438 which was greater than the tabulated value, which was 34.8258 at 0.05 level of significance and points out that the responses of participants differed significantly as little effect 11.4 %, average effect 31.3 % and greater effect was 25.4%. thus majority of the respondents of (68.1%) totally agreed that the training courses on educational topics were effective for them. table 8 effect of professional literature reading options observed no percent% expected no df chi-square no responses 36 17.9 40.2 no effect 07 3.5 40.2 4 131.463 little effect 10 5.0 40.2 average effect 52 25.9 40.2 greater effect 96 47.8 40.2 total 201 100.0 table 8 depicts that calculated value of chi-square was found 131.463 which was greater than the tabulated value, which was 34.8258 at 0.05 percent significant. it points out that the responses of participants differed significantly. majority respondents (78.7%) were totally revealed that professional literature reading was effective for their career development. 5. findings  findings were shown that 93% university teachers participated in workshops,  it was found that 85% teachers were participated in different professional trainings.  the result was shown as 88% teachers were benefits of professional literature reading,  the study finding that 87% teachers participated in informal dialogue.  greater effect were found in workshops -------- 86%  effect of informal dialogues ---------------------- 83.2%  effect of training courses ----------------------- 68.16%  effect of literature reading ------------------------ 78.7% good effect were shown which is above 70% in  literature reading,  teaching skills,  conferences,  individual research and  teaching method. 6. conclusion teachers’ participation were asked in different learning activities by likert scale “yes, no” and to identify the level of effect of their participation by providing rich information. for that the given review of economics and development studies, vol. 6 (1) 2020, 33-41 40 options were (no effect, little effect, average effect, greater effect). findings show that the participation in professional development activities was on the progressive side. participation indicated in workshops (93.0%), training courses (85.1%) and informal dialogues with colleagues (87.6%) were increasing to enhance their performance. the current study also concluded that greater effect of participation in workshops, informal dialogues, training courses in higher education. good effect on teaching methods, individual research and teaching skills, participation in seminars and conferences etc. both national and international level increase the professional development of teachers.  participation in professional development activities were the progressive.  workshops were in excellence position with best effect. training courses and informal dialogues were the best.  participation in educational seminar and conferences, individual research, use latest research based teaching contents, teaching method accordance with the teaching community and teaching skills accordance with the changing environmental demands. this shows better effect. findings shown that the participation in professional development activities were in progress participation indicated in workshops, training courses and informal dialogues with colleagues were increasing. so participation in professional activities is essential for continuous professional development that affect the career of teachers. 7. recommendations  more participation in collaborative research may be encouraged.  network participation for sharing in groups may be increased.  innovations in teaching method and evaluation mean latest development in pedagogy and andragogy. references a.murad, (2010). a comprehensive study of education. university publishers peshawar. ali, m. a. (1998). supervision for teacher development: a proposal for pakistan. unesco international institute for educational planning. aldridge, s. and rowely, j. (1998), “measuring customer satisfaction in higher education”, quality assurance in education, 6(4), 197-204. butt, b. z., & rehman, k. (2010). a study examining the students satisfaction in higher education. procedia-social and behavioral sciences, 2(2), 5446-5450. campbell, t. a., and campbell, d. e. (1997), “faculty/student mentor program: effects on performance and retention”, research in higher education, 38(6), 727-742. clarke, d. m. (1991). the role of staff development programs in facilitating professional growth. madison, wi: university of wisconsin donagh, c. & more (2012). enhancing practice through classroom research a teacher’s guide to professional development. routledge taylor & francis group london & newyork.p1. direktion fur entwicklungshilfe und zusammenarbeit / deza. (2005). glossar deutsch. bern: deza. how to run sustainable teacher professional development programs al qasimi foundation june 29, 2017 harvey, l., & green, d. (2000). qualität definieren [defining quality]. zeitschrift für pädagogik, beiheft, 41, 17-37. imeche (2013), how is a product of the professional development partnership from meche imarest, iet, iop and rees. content is copyright of the professional development partnership. c 2013. review of economics and development studies, vol. 6 (1) 2020, 33-41 41 iqbal, t., saeed, a. & akhter, m. (2019). a study of university teachers’ approaches to teaching at undergraduate level in punjab, pakistan: bulletin of education and research april 2019, vol. 41, no. 1 pp. 147 kyriacou, c.(1987). teacher stress and burnout: an international review. educational research, 29, 146152 loucks-horsley, s., stiles, k., & hewson, p. (1996). principles of effective professional development for mathematics and science education: a synthesis of standards. nise brief, 1(1), 1-6. peter, a. (1996). aktion und reflexion – lehrerfortbildung aus international vergleichender perspektive [action and reflection – teacher education from an international comparative perspective]. weinheim, germany: deutscher studien verlag. retallick, j. (2005). transforming schools in pakistan. oxford university press. p-17 redman, e., wiek, a., redman, a. (2018). continuing professional development in sustainability education for k-12 teachers: principles, program, applications, outlook. first published july 11, 2018 research article. https://doi.org/10.1177/2455133318777182 sarsani, m. r. (2006). quality improvement in teacher education. new delhi: sarup & sons. trigwell, k., & prosser, m. (2004). development and use of the approaches to teaching inventory, educational psychology review, 16, 409–424. available at <www.educationcounts.govt.nz/goto/bes> zaheer&rehman, (2010). a study examining the students satisfaction in higher education. procedia social and behavioral sciences 2 (2010) 5446–5450. zaman, m.h. (2012).innovations in higher education teaching. published: june 4, 2012 zehetmeier, s., andreitz, i., erlacher, w., & rauch, f. (2015). researching the impact of teacher professional development programmes based on action research, constructivism and systems theory. https://doi.org/10.1177%2f2455133318777182 review of economics and development studies, vol. 7 (2) 2021, 257-266 257 culture and entrepreneurial self efficacy: comparative analysis at provincial level in pakistan muhammad mansoor ali a , hajra ihsan b , afia mushtaq c a assistant professor, department of economics, numl, islamabad, pakistan email: mmali@numl.edu.pk b assistant professor, department of economics, iiui, islamabad, pakistan email: hajra.ihsan@iiu.edu.pk c assistant professor, university of management and technology, lahore, pakistan email: mushtaque.afia64@gmail.com article details abstract history: accepted 10 may 2021 available online june 2021 the debate about embeddedness of entrepreneurship in cultural dimensions has not found any conclusive theory but still there is ample evidence that culture has impact on intention of entrepreneurial activity. the culturally legitimate vocational choices affect the efficacy to make an entrepreneurial startup. this is directly linked with not only the economic activity but also for creating businesses with the available local resources. entrepreneurial self-efficacy reflects the personal beliefs of individuals in their own abilities and regarding opportunity recognition and risk propensity. the study conducted the analysis by comparing entrepreneurs in four provinces of pakistan (punjab, khyber pakhtunkhwa, sindh and balochistan) and found significant differences in factors describing self-efficacy. mgcfa revealed the stability of the research instrument across the provinces thus factor loadings for different provinces can be compared. entrepreneurs in punjab have relatively stronger entrepreneurial self-efficacy in contrast with other provinces. the policy intervention should be reflective of the situation of each province, and public policy related to business environment should be more liberal while in other provinces supportive of entrepreneurs through institutional support to new business developers. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: entrepreneurship, role and effects of psychological, emotional, social and cognitive factors on decision making, public policy jel classification: l26, d91, j18 doi: 10.47067/reads.v7i2.356 corresponding author’s email address: mmali@numl.edu.pk 1. introduction the experience of the nations during the recessions has revealed that small businesses with their innovations in products and services emerging with newer strategies to survive and thrive always lead the way to economic recovery. it is ability of any society to create enabling circumstances for entrepreneurial actions as effectuation of entrepreneurial expertise is to logically think for new business startup with ability to survive and thrive in an unpredictable future. in the recent past most review of economics and development studies, vol. 7 (2) 2021, 257-266 258 remarkable business ventures have emerged for those innovative businesses that were built in an unknown and unknowable future market situation (fritsch & wyrwich, 2018). it is entrepreneurial efficacy that enables entrepreneurs to shape this unpredictable future and create organizations that delve upon ways to continuously embrace newness and creativity. when stock market is down and generating signals of stress in the economy, entrepreneurial startups endeavors do not add to it instead become a source of generating new jobs. hayes and malone (2009) acknowledged this fact and indicated that only entrepreneurs rather any governmental action could lead the us out of financial crisis. therefore, the entrepreneurial activity has become a source of sustainable growth for any economy not only for efficient use of available scarce resources but also for social harmony and prosperity. the natural, agricultural and human resources are at the disposal of entrepreneur to create value for creating new enterprises. thus, the entrepreneurial literature comprehends the individual attributes of an entrepreneur, the organizational setting it creates for success, and the macroeconomics environment (industry, legal, national and global) (farah & ali, 2018). among factor driven economies pakistan not only has lowest number of established firms and economic policy makers continue to ignore and neglect the role of entrepreneurship (gem pakistan report, 2011). chemin (2008) cited that annual new firms entry rate in pakistan was 7% as compared to 10.2% in industrialized countries found in entrepreneurship survey of 84 developing and industrial countries for the period 2003–2005 by the world bank group. but when it comes to size of the firms, business landscape in pakistan is dominated by relatively smaller firms. small and medium enterprise development authority (smeda) reported that in 2015 there were about 3.5 million private firms (registered and non-registered) employing 80% of the non-agricultural labor force but 90% of these firms have less than 100 employees. the share of small and medium sized firms in exports is 25% with 40% contribution in gdp (economic census of pakistan, 2016). the study is generally concerned with assessing the potential of individuals to try to attempt establishing an entrepreneurial business. it requires understanding of personal internal strengths, efficient financial and market management, and awareness of ecological factor. all these factors determine the rate of success of these attempts in agriculture and non-agriculture based businesses. but study will be confined to entrepreneurial startups that are based on agriculture factor inputs due to the fact that still around 70% of population of pakistan is directly or indirectly employed in agriculture sector. furthermore, the data collection will not only be restricted to few of the important cities, but also within those cities in which entrepreneurs will be available. the instruments of the study will be refined on the basis of preliminary data collected from entrepreneurial startups located in rawalpindi and hattar. the quality of data will depend largely on the time preferences of the respondents. as the study is to determine the efficacy of the individuals, therefore, the conclusions drawn will be limited to individuals and not the corporate entities as a whole. 2. literature review aggregate entrepreneurial behavior is strongly rational deliberately indulged to create a synergy for systematic transformation of existing ways to produce goods and services with the use of knowledge, technology and capital. the ‘four key factors’ constituting entrepreneurial process are: talent, technology, know-how, and capital (gibson, 1991). each factor represents a separate entity but is interdependent and together creates synergy for creating a new organization. effectuation enables a person to use these factors effectively to create entrepreneurial intentions and new uses of available resources in the face of uncertain and unpredictable future. ‘excellence in asking more of yourself than what others do’ describes the concept of self-efficacy. review of economics and development studies, vol. 7 (2) 2021, 257-266 259 self-efficacy measures a person’s competence within a specific framework, focusing on the selfassessment of abilities to perform specific tasks aligned with goals and standard rather than in comparison with capabilities of others (fritsch & wyrwich, 2018). self-efficacy is closely linked to important entrepreneurial outcomes like start-up intentions (kruger et.al. 2000), new venture growth and personal success of entrepreneur (markman et.al. 2002). therefore, the entrepreneurial selfefficacy is central to long-run growth of any economy. the entrepreneurial self-efficacy is reflected in the creation of new organizations like corporations, social services delivery, and innovative initiatives (fuller et al., 2018). they understand the importance of enacting systems for business management i.e. financial management, planning cash flows, marketing, human resources development, and strategic planning, etc. (chen, greene & crick, 1998). these varying insights into the entrepreneurial behavior can lead us to conclusion that an entrepreneur has a distinctive persona, approach towards life, enthusiasm, vision and commitment to transform plans into reality through a well thought out business plan and to cease every opportunity of innovation (linan & chen, 2009). therefore, entrepreneur needs to have very strong personality traits that are shaped by the personal background, experience, education, training, and environment. such personality traits make many scholars to say that entrepreneurs are born rather made (flora, 2006). entrepreneurs are differentiated from non-entrepreneurs generally on the basis of individual level factors (shane, 2003). at this level, certain attributes differentiate individuals on the basis of the way they discover, evaluate, and take advantage of entrepreneurial opportunities. entrepreneurs are more achievement-orientated than their peers (collins, hannon & smith 2004). the motive of selfrealization and independence drives an entrepreneur to think out of the ordinary and come up with ideas that can be translated into new goods and services (carter et al. 2003; douglas and shepherd 2002). self-efficacy and having belief in one’s competence to pursue a new venture is important for every entrepreneur (chen, greene & crick, 1998; mcgee et al., 2009; townsend, busenitz & arthurs, 2010). this self-belief makes them to stand for relatively more risk, therefore, manifesting higher risk propensity for their projects. entrepreneurs also face risk of carrying the ‘stigma’ in case of failure of their project (stewart & roth, 2004). schumpeter (1934) went on to say that entrepreneur is the person who breaks the existing economic order down to create new products and services, create new opportunities and create new firms. therefore, an entrepreneur is more creative than nonentrepreneurs (lee & wong, 2004). if the project thrives, entrepreneur fulfills the dream of financial success but more than this, the contended feeling of success as a social norm enables him to earn and create the social network that is enabling for entrepreneurial culture (elster, 1989; turker & selcuk, 2009). 3. data & methodology the research in theory of entrepreneurial self-efficacy has not yet developed one-factor construct that can describe the entrepreneurial competence. in a similar effort sarasvathy (2001) described four principles of effectuation enabling a person to take up risk prone business decision in an unknowable future: bird in hand; affordable loss; pre-commitments, and flexibility. on the contrary, causation is measured with single construct especially by chandler et al. (2011) to explain the entrepreneurial actions. another strand of thinking in this perspective is entrepreneurial bricolage that describes the behavior of entrepreneur in terms of making the best use of available resources and creating value for the business by innovation facing a resources constraint (baker & nelson, 2005). review of economics and development studies, vol. 7 (2) 2021, 257-266 260 researchers like mcgee et.al. (2009) used the principles of self-efficacy to develop scales for entrepreneurial startups. they adjusted the principles of self-efficacy for entrepreneurial startups by creating these dimensions: searching (3 items); planning (4 items); marshalling (3 items); implementing-people (6 items); implementing-financial (3 items), and; attitude towards venturing (3 items). the study used these measures of effectuation to generate data of entrepreneurial startups from agricultural sector of pakistan. table 1: measurement scales of entrepreneurial efficacy scale number of factors number of items reference denoble-scale 5 developing new product or market opportunities; building an innovative environment; initiating investor relationships; defining core purpose; coping with unexpected challenges, and; developing critical human resources 25 de noble, jung, & ehrlich, 1999 chen-scale 5 marketing; innovation; management; risk-taking, and; financial control. 20 chen, greene, & crick, 1998 mcgee-scale 6 searching; planning; marshalling; implementing people; implementing financial, and; attitude towards venturing. 22 mcgee, peterson, mueller, & sequeira, 2009 the mcgee-scale used the factors identified by other researchers (e.g. cox et al., 2002; mueller & goic, 2003) to develop their linear phase-based measure: searching, planning, marshalling, and implementing. the mcgee-scale of entrepreneurial efficacy has-items measure consisting of six distinct factors specifically related to: searching, planning, marshalling, implementing people, implementing financial, and attitude towards venturing (mcgee, peterson, mueller, & sequeira, 2009): searching (3 items), planning (4 items), marshalling (3 items), implementing people (6 items), implementing financial (3 items), and attitude towards venturing (3 items). therefore, study used mcgee-scale for assessing entrepreneurial efficacy. the analysis of pilot study revealed some of the items did not comply with the minimum statistical requirements to be considered consistent with construct of effectuation. as the study in using standardized scales of measurement, therefore, study did not modify the instruments instead tried to identify the respondents on the basis of general self-efficacy (gse). the study identified the responses that were showing homogeneous or non-responses and those were either discarded or re-interviewed. the study then had to select those respondents that gave reliable responses for empirical analysis and scored high on the scale of gse. review of economics and development studies, vol. 7 (2) 2021, 257-266 261 table 2: detail of sample and sub-sample sample size in pilot study proportion in pilot study sample size missing values admissible for analysis punjab 97 37% 296 63 233 kpk 68 29% 232 25 207 sindh 21 16% 128 29 99 balochistan 26 18% 144 23 121 total 212 100% 800 140 660 the data was collected from all four provinces of the country and the instruments used were validated through efa. the study also conducted the multi grout confirmatory factor analysis to ascertain the stability of the research instrument. as empirical analysis is based on structural equation modeling, the study conducted confirmatory factor analysis (cfa) for assessing validity and reliability of instruments to reach pertinent decisions and analysis about entrepreneurs in agricultural sector of pakistan. cfa retains those factors that have standard factor weights from 0.5 to 0.7 for all items provided high degree of reliability (cronbach’s alpha > 0.7), average variance extracted (ave > 0.5) and construct reliability (cr > 0.7) for all constructs (hair, jr., hult, ringle, & sarstedt, 2017). as the comparison of different categories is done in the study, the study used information of cfa instead of chi-square test for assessing the significance of results. chi-square test works well for categories of same size, but is affected largely because of difference in degrees of freedom. the study produced different sized categories for comparison and cfa is used to make comparison as it is based mostly on average measures (fornell & larcker, 1981). 4. results and discussion societies with high supply of entrepreneurs have a favorable culture and personality orientation that crates an entrepreneurial mindset (minniti & bygrave, 2003). entrepreneurship is promoted in a society that has a dynamic orientation exhibiting such cognition that encourages an overall adjustment to change and support it within legal and economic framework (foxcroft et al., 2002). review of economics and development studies, vol. 7 (2) 2021, 257-266 262 table 3: invariance of entrepreneurial efficacy model χ 2 δ χ 2 df δ df cfi δ cfi rmsea model 1: configural invariance 89.23 147 0.911 0.03 model 2: metric invariance: firstorder factor loadings invariant 112.33 23.1 161 14 0.901 0.01 0.039 model 3: metric invariance: first and second-order factor loadings invariant 132.47 20.14 168 4 0.899 0.002 0.048 model 4: scalar invariance: first and second-order factor loadings and intercepts of first order 167.98 35.51 182 14 0.881 0.018 0.06 model 5: scalar invariance: first and second-order factor loadings, and intercepts of measured variables and first-order factors invariant 202.67 34.69 186 4 0.801 0.08 0.11 individual and collective development of entrepreneurial culture is a reinforcing process that transcends not just at the cultural level but also at sub cultural level. therefore, ethnicity and race are also differentiating factors that influence tendency of individuals and groups to indulge in creative and innovation based business activity. the results of invariance indicate that the second order scalar invariance could not be established but still the first order metric and scalar invariance along with second order scalar invariance is enough to establish that the research component is stable across the sub-sectors of agricultural sector of pakistan. as the instrument is stable across all the four categories, therefore, the factor loadings of different items can be compared. table 9 province wise constructs and comparison of item means for entrepreneurial effectuation cronbach’s  ave cr factor loading punjab kpk sindh balochistan punjab kpk sindh balochistan searching — brainstorm to generate a new idea need for a new product or service designing a product or service planning — estimate customer demand determine a competitive price 0.88 0.57 0.80 0.82 0.79 0.83 0 .86 0.62 0.71 0.40 0.44 0.68 0.79 0.54 0.78 0.64 0.70 0.40 0.45 0.62 0.79 0.52 0 .66 0.32 0.64 0.38 0.42 0.67 0.79 0.51 0.88 0.74 .77 .76 .78 .87 .84 .82 .71 .81 .62 .57 .71 .67 .66 .62 .63 .77 .52 .67 .71 .57 .64 .72 .61 .48 .65 .55 .66 .51 .56 .72 .71 .77 review of economics and development studies, vol. 7 (2) 2021, 257-266 263 estimation of start-up funds and working capital designing marketing campaign marshaling — shared vision networking outside clarity of identifying business needs and ideas implementing-people — supervise employees recruiting and hiring delegating of work and responsibilities day-to-day problems handling inspiring and encouraging teams training employees implementing-financial — maintaining financial records managing financial assets assessing financial statements attitude toward venturing — worthless/worthw hile disappointing/rew arding negative/positive 0.76 0 .81 0.60 0.59 0.84 0.72 0.93 0 .82 0.72 0.93 0.77 0.79 0.75 0.61 0.88 0.71 0.95 0.84 0.72 0.92 0.56 0 .73 0.79 0.93 0.74 0.75 0.85 0.77 0.74 0.87 0.59 0.84 .081 0.89 0.69 0.77 0.79 0.71 0.75 0.83 .86 .71 .78 .77 .80 .84 .81 .74 .88 .86 .81 .91 .71 .91 .59 .65 .71 .72 .70 .72 .73 .64 .89 .87 .88 .91 .81 .78 .79 .36 .78 .77 .80 .77 .71 .74 .68 .78 .71 .88 .71 .68 .61 .71 .71 .72 .70 .72 .63 .61 .72 .67 .58 .71 .61 .78 punjab: χ 2 = 143.34, p < .00; gfi = .94; cfi = .88; rmsea = .05 kpk: χ 2 = 116.18, p < .00; gfi = .90; nfi = .90; rmsea = .06 sindh: χ 2 = 64.11, p < .00; gfi = .91; cfi = .91; rmsea = .05 balochistan: χ 2 = 94.68, p < .00; gfi = .92; cfi = .90; rmsea = .04 ave=average variance extracted; cr=construct reliability review of economics and development studies, vol. 7 (2) 2021, 257-266 264 there are few studies that have studied the impact of family and national culture on self-efficacy of individual that intend to be entrepreneurs (bandura, 2012). but bandura (2012) asserts that people do not spend life neither independent of the society not entirely accordingly to the wishes and inspirations of others. the interplay and interdependencies of individuals create reactive and harmonizing behaviors shaping cooperation and conflict situation that have varying degree of manifestation depending upon the social structure to diffuse or enforce them. therefore, self-efficacy also has to develop within individual self and the societal setting individual interacts with. entrepreneurial self-efficacy is thus related with likelihood of an individual to follow an entrepreneurial life style which is different from successfully crating an entrepreneurial business startup (farah & ali, 2018). the respondents of the study are form different regions of pakistan, therefore, the study compared differences in entrepreneurial self-efficacy due to belonging to different regions. this analysis does not address the issue of difference in self-efficacy of entrepreneurs from different ethnic backgrounds working in a common geographical region. the results reveal that the entrepreneurs belonging to punjab have highest level of entrepreneurial self-efficacy while it is lowest in balochistan. entrepreneurs from khyber pakhtunkhwa and sindh seem to be having almost similar entrepreneurial self-efficacy. the differentiating factor in punjab is the high degree of need to search for entrepreneurial opportunities as compared to other provinces. once the entrepreneurial opportunity is identified, then the entrepreneurs in punjab put a lot of effort to plan and make the startup a reality. the information about social and professional networks is also easily available to them and there is relatively more developed markets that can help in making better decisions about pricing and positioning. the factor markets are also more developed as compared to other provinces and help the entrepreneur to decide upon the quality and level of production at the inception of the firm. the relative size of cities is also larger in punjab and it has more agglomeration impact than rest of the country except karachi. the organizational founding is also subject to entrepreneurial potential of the region in particular and economy in general. therefore, large cities and information networks provide a conducive environment for new entrepreneurial activity. individual entrepreneurs generally in organized markets and highly agglomerated regions tend to start modest which help them to attract investments for growth of their firms. therefore, there is a reinforcing impact of ecology and culture on entrepreneurial activity which is also seen in populous regions of pakistan. possible reasons for relatively low level of entrepreneurial efficacy in balochistan may be due to less population density but in khyber pakhtunkhwa is due to turbulent circumstances for more than three decades. a large portion of pashto speaking population is doing business in other provinces outside khyber pakhtunkhwa. the interviews with entrepreneurs revealed that instead of expanding the business and launching big they prefer to expand the product lines. this fact can also be verified by looking at the results of the analysis. 5. conclusion and recommendations there exists a difference in entrepreneurial self-efficacy among the people belonging to different provinces in pakistan. entrepreneurs in pakistan are not in general well versed with letting the others to share their vision due to paying less attention to marketing and image building of their business. it can be inferred from the analysis that the effectual enterprise development in pakistan has a limited growth potential due to paying less attention to marketing and financial management. this may have implications for entrepreneurs to have export outlook of their businesses especially when due to cpec and other international commitments economy of pakistan is open to foreign competition. the policy intervention should be reflective of the situation of each province, and public policy related to business review of economics and development studies, vol. 7 (2) 2021, 257-266 265 environment should be more liberal while in other provinces supportive of entrepreneurs through institutional support to new business developers. references bandura, a. 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(2009). which factors affect entrepreneurial intention of university students? journal of european industrial training, 33(2), 142–59. review of economics and development studies, vol. 7 (3) 2021, 433 451 433 gendered personality traits, academic programs and academic performance of pakistani university students: evidence from pakistan rafaquat ali a , rabia bahoo b , bushra shoukat c a assistant professor, department of education, bahawalnagar campus, bahawalnagar, the islamia university of bahawalpur, pakistan email: rafaquatiub@yahoo.com b lecturer, department of education, government sadiq college women university, bahawalpur, pakistan email: rabia.bahoo@gscwu.edu.pk c assistant professor, department of english, bahawalnagar campus, bahawalnagar, the islamia university of bahawalpur, pakistan email: bushra.shoukat@iub.edu.pk article details abstract history: accepted 25 august 2021 available online september 2021 the academic performance reflects students’ success or failure to achieve learning objectives and goals in their academic endeavours. previous studies have highlighted the major influence of students’ gender, personalities, and academic programs on their academic performance. different cultures, social settings, and educational systems promote different perceptions of gender roles that can produce different preferences of subjects and personality traits. hence, the study aimed to assess the direct and total effects of pakistani university students’ gender, personality traits, and subject choices or academic programs on their academic performance. the structure equation modeling approach was applied in two stages to find out the impacts of gender, personality traits, and academic programs on students’ academic performance. the results showed that the gender variable is related to students’ personality traits and the academic program. although, gender did not have a direct impact on students’ grades, but its total effect through personality traits and the academic program was significant. the personality traits were not found to have a direct or total significant effect on students’ academic performance. the academic performances of students of some academic programs were higher as compared to students of other academic programs. the stereotype gendered personality traits and subject choices were present in students. the students’ perceptions of stereotype gender roles, consequent personality traits, and subject choices should be intervened to improve the academic performance of both genders. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: stereotype gender roles, traditional subject choices, stereotype personality traits, academic performance, gendered subject choices jel classification: p36 doi: 10.47067/reads.v7i3.399 corresponding author’s email address: rafaquatiub@yahoo.com review of economics and development studies, vol. 7 (3) 2021, 433 451 434 1. introduction academic performance is critical because it defines success or failure in any course of study. it provides options for academic paths, and it limits employability in different professions and jobs. therefore, teachers, parents, students, educational administrators, and education policymakers remain concerned about academic performance (lamas, 2015). the academic performance is generally measured in terms of grades, and it describes students’ academic attainments in any academic program in quantified form (cachia et al., 2018; york et al., 2015). hence, academic performance is the estimation of students’ learning attainments as a result of his/her involvement in any instructional activity approved by an instructor (lamas, 2015). a large number of studies have underlined the roles of students’ personal and contextual factors in their academic performance. some important personal attributes that influence academic performance are students’ gender (hdii & fagroud, 2018), motivations, learning, and cognitive processing strategies, regulation of learning, learning orientation (vermunt & vermetten, 2004), conceptions of learning, epistemology (schommer-aikins & easter, 2008), general intelligence (kpolovie, 2017; watson & monroe, 1990), emotional intelligence (maccann et al., 2020) and personality (andersen et al., 2020). equally, some important contextual predictors of students’ academic performance are socioeconomic background (ali et al., 2019; thomson, 2018), institutional environment (mcdill et al., 1967), quality of instruction (nortvedt et al., 2016; weinert et al., 1989), and nature of the academic program (ma, 2001; shulrufa et al., 2010). to a considerable extent, these personal and contextual attributes of the academic performance vary in males and females (pelch, 2018). the literature draws attention to the role of gendered stereotypes in academic performance. the society, media, teachers, caregivers, and the implicit and explicit gendered curriculum of educational institutions propagate and encourage gendered social roles in students, and students acquire gendered stereotype behaviours (gonzalez et al., 2020; islam & asadullah, 2018). consequently, these stereotypes determine their subject preferences and academic performances (gonzalez et al., 2020). it means male and female students’ academic performance is likely to differ in some subjects. the male students were found to have higher academic performance than female students in stem subjects (matz et al., 2017). whereas female students have shown higher academic performance in language and humanities (cavaglia et al., 2021; hdii & fagroud, 2018). however, the difference in male and female academic performance in stem subjects has shrunk, and there is consistently better performance of female students in language, arts, and humanities over the last two decades (cavaglia et al., 2021; hdii & fagroud, 2018). more than a decade ago, the sparks-wallace (2007) noticed that narrowness of differences in academic performance of male and female students has increased over the years. in this way, the academic performance of female students is improved in all subjects, regardless of their nature as scientific, technical, and languages (hdii & fagroud, 2018). although, the gendered differences in academic performance have declined in recent years, many studies have documented the impact of students’ personality traits on their academic performance. the student's academic performance relates to their different personality traits (poropat, 2009). there is mounting evidence that the neuroticism trait has negative implications on students’ academic performance (komarraju et al., 2011). whereas personality traits of conscientiousness, agreeableness, and openness to experience are linked with students’ better academic performance (poropat, 2009). there is inconclusive evidence about the extraversion trait's positive role in better academic performance (o’connor & paunonen, 2007). although the importance of personality traits in academic performance is conclusive, the notion of gendered personality traits is present in literature review of economics and development studies, vol. 7 (3) 2021, 433 451 435 (weisberg et al., 2011; yousaf zai & jan, 2019). the literature leads to conclude that women might have higher levels of agreeableness, openness to experience, and neuroticism (chapman et al., 2007; rahmani & lavasani, 2012). however, there is inconsistent evidence about gender differences in extraversion, and conscientiousness traits (costa jr. et al., 2001; kim et al., 2016; rahmani & lavasani, 2012; yousaf zai & jan, 2019). the perceived gendered social and occupational roles generate gendered personality traits (costa jr. et al., 2001). although the gender differences in academic performance in stem subjects have decreased in the recent decade, the stereotype gendered subject choices persist (gasteen, 2019). although females have started to enrol in traditional masculine subjects in recent years (unece, 2019), males are more likely to take stem subjects at the university level than females in oecd countries (cavaglia et al., 2021). the female students may be overrepresented in health and cultural subjects, while male students may be overrepresented in science and economy subjects (korpershoek et al., 2012). additionally, there are gendered preferences within science subjects. the females prefer to study biology as compared to males who prefer to study physics (gasteen, 2019). it is worthwhile to mention that these stereotype subject choices and stereotype attitudes are stronger in males as compared to females. females have started to take interest in the traditional masculine subject, but males do not show interest in traditional feminine subjects (van der vleuten et al., 2016; whitehead, 1996). previous studies suggest that gendered patterns in the choices of subjects are the results of social conditioning and gender-biased environments (gasteen, 2019). the field of science and science occupations are socially perceived as not suitable for females (dom & yi, 2018; van der vleuten et al., 2016). subsequently, females opt to enrol in non-science subjects more than in science subjects (dom & yi, 2018). nowadays, the underrepresentation of females in stem subjects at the university level is a challenge for modern societies and education systems (cavaglia et al., 2021). the results of several studies have established that gendered personality traits produce gendered subject choices (korpershoek et al., 2012), and the personality traits mediate relationships between gender and subject choices (vedel, 2016). therefore, personality traits may predict students’ interests in different subjects (balsamo et al., 2012). vedel (2016) found that higher neuroticism, agreeableness, and openness traits are linked to choosing arts/humanities and psychology subjects, whereas higher openness and extraversion traits are associated to opt for law, political science, and economics subjects. likewise, the higher extraversion trait may not be associated with the choice of science subjects (korpershoek et al., 2012). 2. conceptual framework conclusively, personal factors such as gender, personality, and contextual factors such as subject choices impact students’ academic performance. these factors have direct and indirect impacts on students’ academic performance. the factor gender can impact students’ personality traits, subject choices, and academic grades. however, the social and cultural factors foster gendered roles, gendered competency beliefs, and gendered perceptions of occupations. therefore, the different social and cultural setups may endorse different gendered personality traits, subject choices, and academic performance. therefore, it is pertinent to study the total and direct effects of students’ personal and contextual factors on academic performance in a single study because these can delimit academic performance (crowther & briant, 2021; lamas, 2015). hence, the current study explained the impacts of students’ gender, personality traits, and academic programs on their academic performance. the following conceptual framework was applied in this study. review of economics and development studies, vol. 7 (3) 2021, 433 451 436 figure 1: conceptual framework according to the above conceptual framework, the current study envisioned direct and total effects of students’ gender, personality traits, and academic programs on their academic performance. subsequently, the objective of the study is to find out the effects of students’ gender, personality traits, and academic programs (major subjects of study) on their academic performance. following postulates were formulated to achieve the objectives of the study: hypothesis i: the students’ gender, personality traits, and academic programs (major subjects of study) will have no significant direct impact on their academic performance. hypothesis ii: the students’ gender, personality traits, and academic programs (major subjects of study) will have no significant total effect on their academic performance. 3. method 3.1 sample the participants in this study were students from different departments of the islamia university of bahawalpur, bahawalnagar campus. this campus is located in the bahawalnagar city in southern punjab. the literacy rate in the bahawalnagar district (50.3%) is far below the literacy rate of punjab (64%) (pslm, 2021). also, the education score (14.4) of the bahawalnagar district is below than the average score (17.26) of all districts in punjab (pslm, 2021). a total of 280 students voluntarily participated in this study. among these respondents, 192 were female and 88 were male. the age of 96 percent of respondents was in the range of 18 years to 25 years. a total of 171 students stated their residential status, and among these, 56 percent of students were from a rural background and 44 percent were from an urban background. review of economics and development studies, vol. 7 (3) 2021, 433 451 437 3.2 data collection the students filled online google form to provide their demographic information such as gender, academic program, and academic performance. the personality measures comprised different items freely available on international personality item pool (ipip) website. the students pointed out their agreement with statements of items to express their personality traits. the previous studies have acknowledged that these items, sub-traits, and traits have adequate reliability and validity (johnson, 2014). the 28 items were selected from the ipip pool to measure 05 personality traits. these five personality traits have sub-traits. the openness trait has sub-traits emotionality, intellect, and artistic interests, and the conscientiousness trait consists of cautiousness, self-discipline, and achievement striving sub-traits. whereas the trait extraversion included assertiveness, friendliness, and excitement sub-traits. likewise, trust, altruism, and sympathy were the sub-traits of the agreeableness trait, and the neuroticism personality trait was limited to sub-traits of anxiety, depression, and anger. the items of these personality sub-traits have a five-point scale, which comprised options ranging from 1=very inaccurate, 2= moderately inaccurate, 3= neither accurate nor inaccurate, 4= accurate, and 5= very accurate. the reversed scores were assigned to negative statements. 3.3 data analysis the current study involved hierarchical constructs. therefore, the use of smartpls2 was logical because the pls-sem has been proven a good choice to comprehend the bigger picture that incorporates hierarchal latent variables interconnected in complex layered models (akter et al., 2017). furthermore, the pls-sem approach is useful because of its robustness to small sample size, normality issues of data, easiness to use measurement and structural modeling, and being an exploratory approach of research (ringle et al., 2012). in hierarchical second-order modeling, the common approach used in pls-sem is the two-step approach (anderson & gerbing, 1988). in the first step, the measurement model is tested to determine the reliability, convergent validity, and discriminant validity of the dimensions and associated items (thien, 2020). in the second step, the scores of latent variables are used to formulate second-order constructs for modeling (van riel et al., 2017) and the path relationships of second-order latent variables are determined (tehseen et al., 2017). in this way, the first-order interrelated variables are channelled into a less, and manageable number of second-order variables to provide a simpler, and a more understandable version of the hierarchical model (roni et al., 2015). generally, the researchers prefer a two-step approach when they are more interested in paths and their significance from and to second-order constructs (becker et al., 2017). following the popular approach in hierarchical modeling, data analysis in this study comprised two stages. the first stage analysis consisted of measurement model analysis. in this stage, the objective was to identify the adequacy of the measurement model for all variables in the model. based on the measurement model, the scores of second-order latent variables were calculated, and later on, these scores were used to test postulated paths in second-order analysis. the second stage analysis involved the testing of paths between second-order personality variables (personality traits) and the other variables in the model. 4. results the data analysis results are presented in two sections. the first section consists of the results of measurement model analysis in the first stage analysis. section two consists of the result of secondstage analysis that covers structural modelling of second-order latent variables. figure no.2 shows the results of two sections combined manually for the understanding of the reader. 4.1 measurement model analysis (first stage analysis) in the measurement model the variables gender, academic programs, and academic performance were not hierarchical latent variables and these were used in second stage analysis. however, the review of economics and development studies, vol. 7 (3) 2021, 433 451 438 personality construct has hierarchal latent variables. the measurement model results of first stage analysis show that 28 items for 15 personality sub-traits were found adequate and valid in this study (figure no.2 and table no.1). the 15 sub-traits (first-order latent variables) were minimized into five personality traits (second-order latent variable). the different indicators in the measurement model have adequate loadings on the latent variable. the composite reliability and average variance extracted depicted the adequacy of the measurement model. all latent variables in this measurement model have ave values above 0.5, and the composite reliability above 0.7 (hair et al., 2019). with an exception, item loadings on cautiousness sub-trait were above 0.5, but insignificant. however, these items were retained in the cautiousness sub-trait because these have item loadings greater than 0.5, though these were insignificant (hair et al., 2014). the items of the remaining sub-traits have item loadings significant and above 0.5, and consequently, these items were retained in the measurement model (hair et al., 2014). the final measurement model to measure students’ personality traits has the following validity and reliability indices. table no.1 item loadings, reliability, and convergent validity personality trait personality sub-trait items item loadings t statistics composite reliability ave agreeableness altruism altr-3 0.831 35.836*** 0.816 0.690 altr-4 0.830 38.927*** sympathy symp-3 0.740 13.776*** 0.748 0.597 symp-4 0.804 19.481*** trust trus-3 1.000 1.000 1.000 conscientiousness achievementstriving achi-1 0.727 9.030*** 0.764 0.619 achi-2 0.843 17.866*** cautiousness caut-1 0.796 1.395 n.s 0.804 0.673 caut-4 0.844 1.608 n.s self-discipline selfd-1 0.771 15.550*** 0.770 0.627 selfd-2 0.811 23.347*** neuroticism anger anger-1 0.828 24.388*** 0.811 0.682 anger-2 0.823 21.154*** anxiety anx-2 0.666 7.177*** 0.758 0.615 anx-3 0.887 22.761*** depression depr-1 0.882 45.281*** 0.826 0.704 depr-3 0.794 17.470*** openness artistic interest art-in-1 0.589 4.409*** 0.718 0.571 art-in-2 0.891 19.820*** intellect int-1 1.000 1.000 1.000 emotionality emot-1 0.704 7.484*** 0.749 0.601 emot-2 0.840 18.444*** extraversion assertiveness assr-2 0.855 44.717*** 0.829 0.708 assr-3 0.827 26.445*** excitement seeking excs-1 0.921 29.222*** 0.758 0.619 excs-2 0.625 5.097*** friendliness fris-1 0.717 8.427*** 0.750 0.601 fris-2 0.829 14.916*** p< 0.001= ***, p< 0.01=**, p<0.05=*, non-significant= n.s review of economics and development studies, vol. 7 (3) 2021, 433 451 439 figure no. 2: first and second stage sem analysis table no.2 shows the discriminant validity analysis of first-order constructs. the interrelationships of different first-order latent variables in the measurement model are lower than their square root average variance extracted (highlighted in table no. 2). according to fornell-larcker criterion, the first-order latent variables have discriminant validity (henseler et al., 2016). table no. 2: comparison of square root ave values of latent variables (first order) and their interrelationships 1 2 3 4 5 6 7 8 9 10 1 achievement-striving 0.787 2 agreeableness -0.014 0.626 3 altruism 0.053 0.883 0.830 4 anger 0.050 -0.140 -0.109 0.826 5 anxiety 0.161 -0.019 0.028 0.215 0.784 6 artistic interest 0.385 0.092 0.099 0.034 0.091 0.755 7 assertiveness 0.387 0.071 0.029 -0.068 0.111 0.343 0.841 8 cautiousness 0.053 0.366 0.369 -0.171 -0.172 0.069 0.043 0.820 9 conscientiousness 0.804 0.032 0.074 -0.015 0.061 0.373 0.439 0.289 0.539 10 depression 0.137 -0.119 -0.104 0.204 0.282 0.076 0.060 -0.118 0.111 0.839 11 emotionality 0.402 0.086 0.078 0.157 0.176 0.327 0.281 0.027 0.372 0.166 12 excitement seeking 0.255 0.058 0.060 0.103 0.146 0.309 0.375 0.000 0.275 0.103 13 extraversion 0.435 0.063 0.044 -0.010 0.151 0.401 0.843 0.024 0.461 0.035 14 friendliness 0.296 -0.007 0.007 -0.038 0.073 0.210 0.310 -0.002 0.264 -0.117 15 intellect 0.324 0.035 0.013 0.063 -0.019 0.260 0.175 0.007 0.350 0.084 16 neuroticism 0.165 -0.137 -0.095 0.662 0.676 0.095 0.048 -0.215 0.079 0.755 17 openness 0.520 0.104 0.097 0.122 0.134 0.771 0.384 0.052 0.506 0.156 18 self-discipline 0.380 -0.071 -0.065 -0.011 0.012 0.236 0.357 0.062 0.816 0.102 19 sympathy -0.053 0.806 0.473 -0.161 0.003 0.081 0.140 0.214 -0.014 -0.071 20 trust 0.131 -0.329 -0.170 -0.043 0.232 0.059 0.096 -0.187 0.047 0.113 review of economics and development studies, vol. 7 (3) 2021, 433 451 440 4.2 second-order path model tables no.1 and 2 show that the measurement model in first-stage analysis can be used to draw second-order latent variables of second-stage analysis. based on item scores in different sub-traits (first order latent variables), the scores of traits (second-order latent variables) were calculated with the help of the smartpls2, and later these scores were used in the second-order analysis. the discriminant validity is shown in table no.3. this table shows that square root ave values of latent variables are greater than the interrelationships of latent variables in the second-order path model. hence, these latent variables have discriminant validity (henseler et al., 2016). table no. 2 (continue …..) comparison of square root ave values of latent variables and their interrelationships 11 12 13 14 15 16 17 18 19 20 1 achievement-striving 2 agreeableness 3 altruism 4 anger 5 anxiety 6 artistic interest 7 assertiveness 8 cautiousness 9 conscientiousness 10 depression 11 emotionality 0.775 12 excitement seeking 0.246 0.787 13 extraversion 0.352 0.703 0.587 14 friendliness 0.245 0.199 0.620 0.775 15 intellect 0.210 0.332 0.310 0.198 1.000 16 neuroticism 0.237 0.165 0.078 -0.050 0.067 0.570 17 openness 0.771 0.401 0.496 0.304 0.582 0.197 0.588 18 self-discipline 0.233 0.221 0.356 0.164 0.281 0.056 0.340 0.792 19 sympathy 0.097 0.047 0.096 -0.012 0.015 -0.112 0.098 -0.054 0.773 20 trust 0.062 0.016 0.073 0.032 -0.115 0.140 0.025 0.024 -0.123 1.000 review of economics and development studies, vol. 7 (3) 2021, 433 451 441 table no.3 comparison of square root ave values of latent variables (second order) and their interrelationships 1 2 3 4 5 6 7 8 9 10 11 12 1 agreeablen-ess 1.000 2 computer science 0.048 1.000 3 conscientiousness 0.032 -0.050 1.000 4 english 0.143 -0.319 -0.010 1.000 5 extraversion 0.063 0.013 0.461 0.065 1.000 6 islamic studies -0.023 -0.111 -0.035 -0.151 -0.019 1.000 7 male -0.004 0.282 -0.034 -0.062 -0.007 -0.120 1.000 8 management sciences -0.013 -0.148 -0.020 -0.202 -0.014 -0.070 0.287 1.000 9 marks (percentage) 0.032 -0.079 0.046 -0.282 0.079 0.233 -0.120 0.122 1.000 10 neuroticism -0.137 -0.100 0.079 0.108 0.078 0.039 -0.225 -0.051 0.038 1.000 11 openness 0.104 -0.014 0.506 0.074 0.496 -0.137 -0.128 -0.046 0.038 0.197 1.000 12 science math -0.029 -0.303 0.105 -0.414 -0.050 -0.144 -0.288 -0.192 0.176 0.031 0.049 1.000 the significance of different postulated paths tested in second-order path analysis is shown in table no. 4 and figure no. 2. the relationships of gender with academic programs were significant. the gender male has a significant positive relationship with computer sciences, negative relationship with islamic studies, positive relationship with management sciences, and negative relationship with science math academic programs. the variable gender has a significant impact on personality traits as well. the male gender was negatively associated with neuroticism and positively linked with openness personality traits. the relationships of different academic programs with personality traits were significant as well. table no.4 shows that the agreeableness personality trait is positively related to english discipline, the conscientiousness trait has a positive relationship with mathematics discipline, neuroticism trait has a positive association with english program of study, and openness trait has a positive relationship with islamic studies. concerning the relationship between personality traits and academic performance, the personality traits were not found to directly relate to academic grades. however, the likelihood of academic performance varies in different academic programs. the students of the english program of study have a probability of the lowest academic performance as compared to students of islamic studies who have likelihood to show the highest academic performance. review of economics and development studies, vol. 7 (3) 2021, 433 451 442 table no. 4 second-order path coefficients hypothesized paths original sample sample mean standard deviation t statistics p values gender -> personality traits male -> agreeableness -0.004 -0.005 0.053 0.074 0.941 male -> conscientiousness -0.034 -0.035 0.059 0.584 0.560 male -> extraversion -0.007 -0.005 0.064 0.105 0.917 male -> neuroticism -0.225 -0.224 0.058 3.864 0.000 male -> openness -0.128 -0.125 0.059 2.163 0.031 gender -> programs of study male -> computer science 0.277 0.280 0.066 4.224 0.000 male -> english -0.033 -0.035 0.059 0.557 0.578 male -> islamic studies -0.136 -0.135 0.042 3.279 0.001 male -> management sciences 0.290 0.286 0.060 4.807 0.000 male -> science math -0.292 -0.289 0.053 5.567 0.000 personality traits -> programs of study agreeableness -> programs of study agreeableness -> computer science 0.039 0.041 0.053 0.748 0.455 agreeableness -> english 0.153 0.155 0.058 2.662 0.008 agreeableness -> islamic studies -0.001 -0.004 0.057 0.018 0.986 agreeableness -> management sciences -0.009 -0.013 0.064 0.144 0.886 agreeableness -> science math -0.034 -0.033 0.060 0.574 0.566 conscientiousness -> programs of study conscientiousness -> computer science -0.077 -0.077 0.060 1.286 0.199 conscientiousness -> english -0.073 -0.074 0.079 0.921 0.357 conscientiousness -> islamic studies 0.034 0.034 0.075 0.457 0.648 conscientiousness -> management sciences -0.005 -0.003 0.065 0.074 0.941 conscientiousness -> science math 0.152 0.154 0.065 2.329 0.020 extraversion -> programs of study extraversion -> computer science 0.025 0.021 0.070 0.350 0.727 extraversion -> english 0.061 0.063 0.073 0.834 0.405 extraversion -> islamic studies 0.066 0.066 0.044 1.496 0.135 extraversion -> management sciences -0.009 -0.010 0.079 0.115 0.909 extraversion -> science math -0.119 -0.120 0.062 1.911 0.056 neuroticism -> programs of study neuroticism -> computer science -0.038 -0.035 0.056 0.684 0.494 neuroticism -> english 0.115 0.116 0.055 2.074 0.038 neuroticism -> islamic studies 0.042 0.039 0.049 0.870 0.384 neuroticism -> management sciences 0.015 0.011 0.074 0.201 0.841 neuroticism -> science math -0.043 -0.043 0.061 0.708 0.479 openness -> programs of study openness -> computer science 0.052 0.058 0.066 0.789 0.430 openness -> english 0.038 0.031 0.073 0.521 0.603 openness -> islamic studies -0.212 -0.209 0.080 2.662 0.008 openness -> management sciences -0.003 -0.001 0.059 0.058 0.954 review of economics and development studies, vol. 7 (3) 2021, 433 451 443 openness -> science math 0.006 0.006 0.071 0.084 0.933 gender -> marks (percentage) male -> marks (percentage) -0.093 -0.093 0.071 1.301 0.193 personality traits -> marks (percentage) agreeableness -> marks (percentage) 0.072 0.075 0.057 1.263 0.207 conscientiousness -> marks (percentage) -0.024 -0.025 0.066 0.371 0.711 extraversion -> marks (percentage) 0.099 0.101 0.064 1.539 0.124 neuroticism -> marks (percentage) 0.032 0.028 0.059 0.540 0.590 openness -> marks (percentage) 0.021 0.018 0.074 0.283 0.777 program of study -> marks (percentage) computer science -> marks (percentage) -0.051 -0.056 0.097 0.531 0.596 english -> marks (percentage) -0.223 -0.231 0.102 2.187 0.029 islamic studies -> marks (percentage) 0.212 0.208 0.068 3.094 0.002 management sciences -> marks (percentage) 0.136 0.132 0.078 1.735 0.083 science math -> marks (percentage) 0.106 0.102 0.093 1.142 0.254 table no. 5 shows the total effects of predictor variables on dependent variables in the secondorder path model. although, there were significant negative direct and total effects of male gender on students’ neuroticism and openness to experience personality traits. however, there were no significant direct or total effects of gender on agreeableness, conscientiousness, and extraversion traits. whereas the variable gender has appeared as a significant predictor of students’ academic programs. after assessing the total effects, it is inferred that male students will likely be in computer sciences, and management sciences academic programs, whereas, female students will be in islamic studies and science math programs. although gender has no significant direct impact on students’ academic performance, the total effects of gender male on academic performance through different variables in the model were significant and negative. the personality traits have no significant direct effect or total effect on students’ academic performance. table no. 5 predictor variables’ total effects direction of impact original sample sample mean standard deviation t statistics p values gender -> personality traits male -> agreeableness -0.004 -0.005 0.053 0.074 0.941 male -> conscientiousness -0.034 -0.035 0.059 0.584 0.560 male -> extraversion -0.007 -0.005 0.064 0.105 0.917 male -> neuroticism -0.225 -0.224 0.058 3.864 0.000 male -> openness -0.128 -0.125 0.059 2.163 0.031 gender -> programs of study male -> english -0.062 -0.063 0.056 1.104 0.270 male -> islamic studies -0.120 -0.119 0.039 3.112 0.002 male -> management sciences 0.287 0.284 0.061 4.710 0.000 male -> computer science 0.282 0.284 0.065 4.317 0.000 male -> science math -0.288 -0.286 0.049 5.882 0.000 gender -> marks (percentage) male -> marks (percentage) -0.120 -0.121 0.059 2.045 0.041 personality traits -> program of study review of economics and development studies, vol. 7 (3) 2021, 433 451 444 agreeableness -> program of study agreeableness -> computer science 0.039 0.041 0.053 0.748 0.455 agreeableness -> english 0.153 0.155 0.058 2.662 0.008 agreeableness -> islamic studies -0.001 -0.004 0.057 0.018 0.986 agreeableness -> management sciences -0.009 -0.013 0.064 0.144 0.886 agreeableness -> science math -0.034 -0.033 0.060 0.574 0.566 conscientiousness -> programs of study conscientiousness -> computer science -0.077 -0.077 0.060 1.286 0.199 conscientiousness -> english -0.073 -0.074 0.079 0.921 0.357 conscientiousness -> islamic studies 0.034 0.034 0.075 0.457 0.648 conscientiousness -> management sciences -0.005 -0.003 0.065 0.074 0.941 conscientiousness -> science math 0.152 0.154 0.065 2.329 0.020 extraversion -> programs of study extraversion -> computer science 0.025 0.021 0.070 0.350 0.727 extraversion -> english 0.061 0.063 0.073 0.834 0.405 extraversion -> islamic studies 0.066 0.066 0.044 1.496 0.135 extraversion -> management sciences -0.009 -0.010 0.079 0.115 0.909 extraversion -> science math -0.119 -0.120 0.062 1.911 0.056 neuroticism -> programs of study neuroticism -> computer science -0.038 -0.035 0.056 0.684 0.494 neuroticism -> english 0.115 0.116 0.055 2.074 0.038 neuroticism -> islamic studies 0.042 0.039 0.049 0.870 0.384 neuroticism -> management sciences 0.015 0.011 0.074 0.201 0.841 neuroticism -> science math -0.043 -0.043 0.061 0.708 0.479 openness -> programs of study openness -> computer science 0.052 0.058 0.066 0.789 0.430 openness -> english 0.038 0.031 0.073 0.521 0.603 openness -> islamic studies -0.212 -0.209 0.080 2.662 0.008 openness -> management sciences -0.003 -0.001 0.059 0.058 0.954 openness -> science math 0.006 0.006 0.071 0.084 0.933 personality -> marks (percentage) agreeableness -> marks (percentage) 0.031 0.031 0.058 0.537 0.592 conscientiousness -> marks (percentage) 0.018 0.018 0.071 0.259 0.796 extraversion -> marks (percentage) 0.084 0.088 0.064 1.320 0.187 neuroticism -> marks (percentage) 0.014 0.009 0.060 0.241 0.809 openness -> marks (percentage) -0.035 -0.035 0.073 0.480 0.631 programs of study -> marks (percentage) computer science -> marks (percentage) -0.051 -0.056 0.097 0.531 0.596 english -> marks (percentage) -0.223 -0.231 0.102 2.187 0.029 islamic studies -> marks (percentage) 0.212 0.208 0.068 3.094 0.002 management sciences -> marks (percentage) 0.136 0.132 0.078 1.735 0.083 science math -> marks (percentage) 0.106 0.102 0.093 1.142 0.254 review of economics and development studies, vol. 7 (3) 2021, 433 451 445 table no.6 shows that different predictor variables in this model explained 14 % variation in students’ academic performance. likewise, this model explained the difference in a subject taking patterns up to 6.7 % in computer science, 2.3 % in english, 2.4 % in islamic studies, 6.3 % in management sciences, and 8.6 % in science math. the variable gender explained variance in neuroticism up to 4.7 % and openness up to 1.3 %. table no. 6 r square table dependent variable r square adjusted agreeableness -0.004 computer science 0.067 conscientiousness -0.002 english 0.023 extraversion -0.004 islamic studies 0.024 management sciences 0.063 academic performance 0.140 neuroticism 0.047 openness 0.013 science math 0.086 5. discussion the results of this study indicate the importance of gender in the selection of academic programs. the current study validates earlier findings that variable gender impacts students’ subject preferences (francis, 2000; lörz et al., 2011). it is affirmed in this study that pakistani male university students have stereotypical male subject choices. this study has established that computer sciences and management sciences academic programs are related to the male gender. this trend is congruent with the literature. computer sciences and management sciences subjects are traditionally considered masculine subjects (gautam, 2015; unece, 2019). whereas pakistani female university students’ subject preferences somewhat differ from female stereotype subject preferences. although science math subjects were traditionally considered male-gendered subjects (cavaglia et al., 2021), this study found fewer males in science math academic programs than females. the trend of an increase in female students’ interest in science math subjects is obvious in recent studies in many countries (unece, 2019). likewise, the pakistani university female students’ preference for islamic studies program affirms their stereotype female subject choice because females are traditionally interested in humanities and arts subjects (van der vleuten et al., 2016), the female students’ increased interest in science math subjects might be a result of social acceptance of females as scientists and social rejection of gendered ability beliefs (dom & yi, 2018). however, the role of external factors in subject choices in asian societies cannot be overlooked. the family especially the father, availability of institution, location, and availability of hostel facilities also play a significant role in subject choices in asian societies (alwedinani, 2016; gautam, 2015). for gender and personality traits, it is reiterated in this study that gender impacts personality traits. the pakistani university students’ male gender is found to have negative relationships with neuroticism and openness personality traits. the gender differences in personality traits found in this study are consistent with past studies. the literature supports findings that female gender is associated with higher neuroticism (chapman et al., 2007; kim et al., 2016; rahmani & lavasani, 2012; weisberg review of economics and development studies, vol. 7 (3) 2021, 433 451 446 et al., 2011) and openness to experience (busato et al., 1998; kim et al., 2016). it means that there are similar gender roles and gender perceptions in eastern and western societies, which generate similar personality traits (costa jr. et al., 2001; schmitt et al., 2017; yousaf zai & jan, 2019). the current study affirms that students’ personality traits are associated with their academic programs. the pakistani university students enrolled in english literature have higher agreeableness and neuroticism traits. whereas pakistani university students of science math programs appeared to have higher conscientiousness. these findings validate previous studies. vedel (2016) found students of arts and humanities to have higher neuroticism and agreeableness traits as compared to science students who appeared to have higher conscientiousness. interestingly, the openness to experience trait is associated with students of islamic studies. this finding is not contradictory to earlier findings. it is worth noting that the islamic studies discipline in this study has appeared as a female-gendered subject. traditionally, females are found to have higher openness to experience (busato et al., 1998; kim et al., 2016). although, the total indirect associations of pakistani university students’ male gender with their academic performance through different variables in the model is significant and negative. unexpectedly, the pakistani university students’ academic performance is not directly related to their gender. the academic performance of female students is found higher than the male students. this finding affirms the results of previous studies (cavaglia et al., 2021). the academic performance of female students has improved over the years as compared to the decrease in male students’ academic performance (hdii & fagroud, 2018; sparks-wallace, 2007). surprisingly, the pakistani university students’ personality traits did not have a significant direct or total effect on their academic performance. this finding is incongruent with the results of several previous studies. the effect of students’ personality traits on their academic performance is noticeable in earlier findings (blickle, 1996; o’connor & paunonen, 2007). the literature supports that conscientiousness, agreeableness, and openness to experience personality traits are positive predictors of students’ academic performance (poropat, 2009) as compared to extraversion and neuroticism that are negative predictors of academic performance (komarraju et al., 2011; o’connor & paunonen, 2007). this inconsistency may be because pakistani university students choose subjects because of external factors rather than internal motivations, therefore their personality traits are not reflected in their academic endeavours and academic outcomes. as postulated, there are significant associations between academic programs and students’ academic performance. the academic program of english literature has a negative association with students’ academic performance as compared to the academic program of islamic studies which has a significant positive relationship with students’ academic performance. the probable causes of these findings are students’ gender and their personality traits. although english literature is not significantly related to gender, the sampled pakistani english literature students have higher neuroticism. the negative impact of neuroticism on students’ academic performance is consistently reported in previous studies (komarraju et al., 2011). therefore, the presence of high neuroticism in sampled pakistani students of english literature is the probable cause for their low academic performance as compared to students of other academic programs. likewise, the sampled pakistani students of islamic studies are mostly females and they have higher openness to experience. it is evident in literature that females might have better academic performance than males (hdii & fagroud, 2018; sparks-wallace, 2007), and openness to experience trait has a positive impact on students’ academic performance (cavaglia et al., 2021; poropat, 2009). therefore, it may be recognized that the islamic studies program of study has review of economics and development studies, vol. 7 (3) 2021, 433 451 447 a positive relationship with academic performance because it is a female-gendered subject and the students in this program of study have high openness to experience. another possible explanation of higher academic performance in students of islamic studies may be the use of urdu as the medium of instruction and examination in this program. the remaining all academic programs have an english medium of instruction. english is a foreign language for students and urdu is the national language of pakistan. 6. conclusion academic performance depends on students’ learning behaviours in a learning situation. however, students’ gender, personality, and academic programs are the few important attributes that define their learning behaviours. however, these attributes have gender differences because of socialization. the gendered stereotype perceptions of social roles and misconceptions of abilities promote stereotype personality traits and stereotype subject choices in students that consequently impact academic performance. neuroticism and openness to experience traits are obvious in sampled female students because of gendered stereotype social development. however, there is a change to a certain degree in female’s subject choices in this study and they chose science subjects. although different personality traits are related to students’ subject choices, personality traits do not seem to be related to academic performance. it shows that students have similar learning behaviours irrespective of their personalities. 7. recommendations this study is limited to university students, however, this phenomenon should be studied at school levels. there is a need to understand the phenomenon of gendered personalities, subject choices, and academic performance by conducting qualitative studies in pakistan. it will be pertinent to understand the role of different social institutions in the inculcation of gendered stereotypes in individuals. further research is needed to understand the way stereotype gendered personalities and subject choices impact the larger social landscape. it is recommended that future studies should focus on the home environment, and social environment to understand how gendered stereotypes flourish in societies. it is of utmost need that neurotic students should be identified and assisted to overcome the negative aspects of their personalities. the study recommends that students’ academic performance can be improved by addressing stereotype gender perceptions, stereotype personalities, and traditional subject choices. there is a need to involve social media, parents, and students to reduce stereotypes in society. society should promote 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(2019). gender and regional differences in five factor personality traits among students at secondary level in punjab, pakistan. university of wah journal of social sciences, 2(1), 42-58. retrieved from https://uwjss.org.pk/downloads/v2/issue1/020103.pdf. review of economics and development studies, vol. 8 (2) 2022, 97 109 97 does institutional quality improve environmental quality? new evidence from nardl approach muhammad yasin abid a, muhammad tasnim khan b, hafeez ur rehman c a ph.d. scholar, department of economics and statistics (hsm), university of management technology, lahore, pakistan email: f2021330007@umt.edu.pk b ph.d. scholar, management sciences, dr. hasan murad school of management, university of management technology, lahore, pakistan email: tasnim.khan@umt.edu.pk c professor, department of economics and statistics (hsm), university of management technology, lahore, pakistan email: hafeez.rehman@umt.edu.pk article details abstract history: accepted 28 april 2022 available online june 2022 the current research intends to look at the asymmetrical influence of institutional quality (iq) on carbon emissions (𝐶𝑂2e) by incorporating additional variables i.e., trade openness (to), population growth (pg), and energy use (e) over the period 1980-2020. the current study used nonlinear ardl to demonstrate the nonlinear influence of iq on 𝐶𝑂2e. the empirical finding suggests that positive fluctuation in institutional quality considerably improves the environmental quality in pakistan in the short and long run. at the same time, the outcomes show that negative fluctuations in iq lead to considerably contributed to 𝐶𝑂2e in long run. gdp and e are positively connected with 𝐶𝑂2e. the policy makers could need to enhance the institutional quality leads to attaining the long-term ecological objectives. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: institutional quality, carbon emissions, energy use, nardl, pakistan jel classification: b52, q53 doi: 10.47067/reads.v8i2.439 corresponding author’s email address: hafeez.rehman@umt.edu.pk 1. introduction the institutional economics research undoubtedly recognized that institutional quality (iq) is one of the most considerable elements affecting og as the founding works of williamson (1989) and north (2018). institutions develop regulatory norms and policies in public by enacting appropriate restrictions. in general, iq is connected to domestic institutions' policies that form the legal and cultural framework within which socioeconomic activity occurs. consequently, it demonstrates the review of economics and development studies, vol. 8 (2) 2022, 97 109 98 government's capacity to develop and enact policies and regulations that stimulate the private sector, enhance contract execution quality, safeguard property rights, maintain a strict rule of law, and shield institutions from political interference. on the other hand, weak governance supports the private sector, resulting in bribery, inefficient bureaucracy, and low environmental restrictions. furthermore, institutions may have an influence on the environment by enacting policies such as carbon taxes, feed-in tariffs, and the abolition of financial support in ec. (ellis, 2010; wong et al.,2010). thus, a country's institutional quality influences its energy demand by influencing its level of energy efficiency. it could be accomplished precisely vie reducing energy consumption (ec) or indirectly through green technological advancement. further, the study by shah et al. (2020) observed that iq is a necessity for ensuring ecological preservation. this study indicates that a gradual switch to green energy, accompanied by better strategies and high-tech, is essential for longterm development without jeopardizing developing countries' financial well-being. institutional quality also significantly impacts regional energy inequalities through the efficient financial market system (yao et al., 2020). reduced energy inequities between and within regions contribute to environmental quality since nations are cross-sectionally reliant on various social, economic, and cultural aspects. consequently, accounting for cross-sectional dependency and variability among nations is crucial. as a result, institutional quality is critical in energy transition and energy efficiency, which influence energy consumption on ghg emissions, notably co2 emissions, which account for 76% of total ghgs (hsu et al., 2017). hence, developing countries like pakistan face numerous challenges in boosting output growth (og). expanding economic activity necessitates increased ec, and less developed economies have consumed a huge amount of fossil fuels. it is rapidly draining, and their rates are volatile. also, the price fluctuations hurt developing countries and are confronted with the issue of iq (bellakhal et al., 2019). to enhance social and economic conditions, the government must respond to the populace's needs (shah et al., 2020). additionally, ec boosts in countries with higher institutional quality (adams et al., 2016). as a result, og infers a different impact on 𝐶𝑂2 e emissions in the developing and developed worlds. besides, the role of iq in economic development as well as ecological problems is still being debated, and it requires serious consideration. to conclude, this study intends to scrutinize the asymmetric effect of iqon 𝐶𝑂2efrom 19842020 in pakistan. besides, the influence of the rule of law on the tipping point at which economic development enhances environmental quality. the primary contribution will be to highlight the relevance of the rule of law in controlling ecological degradation by examining this institution's direct and indirect consequences. our results emphasize the relevance of institutional enforcement for environmental protection and contribute to establishing strategies for sustainable development in pakistan. the remaining sections are organized as follows: "literature survey" discussed in the ahead section, "data, methodology and econometric technique" have been elaborated in section 3, "empirical results and discussions" findings and results in the discussion “described in section 4. and the final section explores the concluding remark and policy recommendation. 2. literature survey we would look at two techniques for experimentally exploring the association between𝐶𝑂2e and og in the first strand of inquiry. like an outcome, this method focuses on inferring the existence of the review of economics and development studies, vol. 8 (2) 2022, 97 109 99 environmental kuznets curve (ekc) theory. it is contended that the relationship between output growth per capita and𝐶𝑂2e shows a bell-shaped curvature. besides, the result indicates that output growth and𝐶𝑂2e rise in the initial phase. beyond a certain point, it becomes a decline in carbon emissions against the rise in og (grossman and krueger, 1991, 1995). the empirical findings of testing this concept have always been debatable. however, solid environmental regulations are formed as the economy progresses, and pollution-free technology improves ecological quality. several cross-national and country-specific research has previously been conducted to investigate this notion. for example, ahmad et al. (2017) used the autoregressive distributive lag technique to investigate the non-linear relationship between output growth per capita and 𝐶𝑂2e. furthermore, panayotou, (1993) found similar results that verified the bell-shaped ekc hypothesis. the findings verify the occurrence of ekc in croatia. a few empirical past studies were conducted to study the role of iq in the og -𝐶𝑂2e. solarin et al. (2017) verified the ekc theory in india and china. their results validated the ekc hypothesis in the nations analyzed. tamazian and rao (2010), for example, investigated the impact of iq on environmental protection in 24 transition nations from 1993 to 2004 using the gmm estimating approach. the empirical turns out of this research indicated the relevance of iq in enhancing environmental quality in the nations studied. furthermore, another study by lau et al. (2014) evaluated the influence of iq in the og-𝐶𝑂2e nexus from1984-2008 in the malaysian economy. the out comes from the ardl bound test indicated that unbiased and competent internal organizations are fundamental for reducing 𝐶𝑂2e throughout og. further, a few institutional experts argue that countries' institutions are not uniform, resulting in economic development divergence. north (1992) menard and shirley (2008) argue in their scholarly papers that countries governed by different european nationals owned multiple sets of institutions from their colonial rulers. this is theoretically supported by actual evidence. the implication is that nations that inherited different institutions from their colonial rulers saw diverse degrees of postcolonial economic growth. countries dominated by the british, for example, received british institutions, but frenchex-colonies acquired french institutions; consequently, economic development and iq in british and french ex-colonies varied. (north,1989; grier,1999; bertocchi &canova, 2002). there is limited information on the environmental effect of institutions. there is, however, a lot of literature on institutions and economic progress. omri, (2014) contends that institutions impact economic development and the effectiveness of energy programs. bhattacharya et al. (2017) suggested that institutions that support property rights protection foster voluntary trading and help governments formulate and execute ecological improvement strategies. consequently, the success of ecological and renewables policies depends on the functioning of institutions, deprived of which government programs would fail to generate the intended effects. abid’s (2016) empirical results reveal that government efficacy, peace and stability, and corruption control contributed to 𝐶𝑂2e reductions. furthermore, improved institutions increase energy efficiency and renewable energy uptake, leading to stricter energy and environmental legislation (stern, 2012; fredriksson et al., 2004; cadoret & padovano, 2016). in sub-saharan african countries, however, controlling quality and the state of law do not curb the growth in𝐶𝑂2e. extending on the previous study, abid (2017) discovered that in the eu, good governance, rule of law, peace and stability, corrupt practices control, and the limit the growth of 𝐶𝑂2e. however, none of these institutional measures have a meaningful effect on 𝐶𝑂2e in countries in the middle east and north africa. review of economics and development studies, vol. 8 (2) 2022, 97 109 100 3. methodology and data description 3.1 data collection to achieve the aim of the study, the data was extracted from the world development indicators database (wdi). in our analysis dependent variable is 𝐶𝑂2e and the focus variable is the institutional quality (iq) is comprising of four indicators i.e., rule of law, corruption, accountability, and government stability, and other independent variables are energy use (e), gross domestic product (gdp), trade openness (to), population growth (pg). details descriptions and symbols of variables are reported in table1. table1 displays description and symbols of variables variables symbol definition source carbon dioxide emissions co2e carbon dioxide emissions (kilotons) wdi institutional quality iq the iq assesses the rule of law, corruption, wgi accountability and government stability. energy use e energy use (kg of oil equivalent per capita) wdi trade openness to trade openness (calculated as export imports/gdp, constant us$, 2010) wdi gross domestic product gdp gdp per capita (constant 2010 us$) wdi population growth pg population growth (annual %) wdi 3.2 model specification and methodology the key goal of the current research is to look at the nonlinear connection between iq and 𝐶𝑂2e in pakistan. furthermore, this research (tamazain and rao, 2010; lau et al., 2020) included iq in their model to explore the influence of iq on 𝐶𝑂2e. the following model created by salman et al. combines the focal variables as iq in this investigation. the functional form of the relationship between iq, to, gdp, e, and 𝐶𝑂2e is as follows: 𝐶𝑂2,𝑡 = 𝛽0 + 𝛽1𝐼𝑄𝑡 + 𝛽2𝐸𝑈𝑡 + 𝛽3𝐺𝐷𝑃𝑡 + 𝛽4𝑇𝑂𝑡 + 𝛽5𝑃𝑂𝑃𝑡 + 𝑢𝑡 (1) to obtain long and short estimates, the above equation (1) was reconfigured with an errorcorrection structure, which is shown below in equation (2) δ𝐶𝑂2,𝑡 = β0 + σ𝑘=1 𝑝 𝜃𝑘 δ𝐶𝑂2,𝑡−𝑘 + σ𝑘=0 𝑝 𝜋𝑘 δ𝐼𝑄𝑡−𝑘 + σ𝑘=0 𝑝 𝛿𝑘 δ𝐸𝑈𝑡−𝑘 + σ𝑘=0 𝑝 𝜆𝑘 δ𝐺𝐷𝑃𝑡−𝑘 + σ𝑘=0 𝑝 𝜂𝑘 δ𝑇𝑂𝑡−𝑘 + σ𝑘=0 𝑝 𝜌𝑘 δ𝑃𝑂𝑃𝑡−𝑘 + 𝛼1𝐶𝑂2,𝑡−1 + 𝛼2𝑇𝑂𝑅 𝑡−1 + 𝛼3𝐸𝑈 𝑡−1 + 𝛼4𝐺𝐷𝑃 𝑡−1 + 𝛼5𝑇𝑂 𝑡−1 + 𝛼6𝑃𝑂𝑃 𝑡−1𝜖𝑡 (2) shin et al. (2014) suggested the nonlinear ardl econometric framework applied in this research (2014). this approach explores the nonlinear influence of the variables under evaluation, which alludes to both positive and negative changes (mensi et al., 2018). hence, nardl has an advanced form of ardl and better technique as compared to ardl. furthermore, some scholars in environmental economics have applied the narld approach (ahmad et al., 2019; munir and riaz, 2020). the present research is the first to look at the asymmetric link between iq and𝐶𝑂2e in pakistan. the primary purpose of this study is to look at the nonlinear influence on pakistan. this research focused on the nonlinear effect of iq on 𝐶𝑂2 e. besides, nardl categorizes iq into two parts: positive and negative. review of economics and development studies, vol. 8 (2) 2022, 97 109 101 3.3 econometric technique a series of econometric techniques were used in this study to find linear and nonlinear relationships among the considered variables. the first step was to perform a unit root to assess the level of stationary such as the augmented dicker–fuller (adf) and phillips–perron (pp) tests. and in the coming step to detect asymmetric connections between the incorporated variables. this study used nonlinear cointegration tests. finally, a diagnostic and stability test has performed to ensure that the nardl models were secure and stable. the asymmetric effects of the explanatory variables are investigated using the nardl version contingent error correction, which is derived from the ardl model. equation (3) has been developed to represent the nonlinear association between these two attributes. shin et al. (2014) postulated the nardl for the bound test approach used in this analysis. δ𝐶𝑂2,𝑡 = β0 + σ𝑘=1 𝑝 𝜃𝑘 δ𝐶𝑂2,𝑡−𝑘 + σ𝑘=0 𝑝 𝜋𝑘 δ𝐼𝑄𝑡−𝑘 + + σ𝑘=0 𝑝 𝜋𝑘 δ𝐼𝑄𝑡−𝑘 − + σ𝑘=0 𝑝 𝛿𝑘 δ𝐸𝑈𝑡−𝑘 + σ𝑘=0 𝑝 𝜆𝑘 δ𝐺𝐷𝑃𝑡−𝑘 + σ𝑘=0 𝑝 𝜂𝑘 δ𝑇𝑂𝑡−𝑘 + σ𝑘=0 𝑝 𝜌𝑘 δ𝑃𝑂𝑃𝑡−𝑘 + 𝛼1𝐶𝑂2,𝑡−1 + 𝛼2𝑇𝑂𝑅 𝑡−1 + 𝛼3𝐸𝑈 𝑡−1 + 𝛼4𝐺𝐷𝑃 𝑡−1 + 𝛼5𝑇𝑂 𝑡−1 + 𝛼6𝑃𝑂𝑃 𝑡−1𝜖𝑡 (3) so, in equation (4) 𝐼𝑄+ signifies the positive fluctuation in iq. on the other hand, 𝐼𝑄− infers the negative fluctuating in iq. besides the link between iq and 𝐶𝑂2e is considered the nonlinear in the condition of changes in positive and negative resulting in an inflow of iq. further, the fstate-bound test is used to explore the long-run cointegration among the selected variables. hence, the null hypothesis shows the absence of cointegration while the alternative revealed the presence of cointegration. also, the wald testis adopted to assess the nonlinear association between iq and 𝐶𝑂2e. 𝐼𝑄𝑡 + = 𝛴𝑛=1 𝑡 𝛥𝐼𝑄𝑡 + = 𝛴𝑛=1 𝑡 𝑚𝑎𝑥(𝛥𝐼𝑄𝑡 +, 0) = (4) 𝐼𝑄𝑡 + = 𝛴𝑛=1 𝑡 𝛥𝐼𝑄𝑡 + = 𝛴𝑛=1 𝑡 𝑚𝑖𝑛(𝛥𝐼𝑄𝑡 +, 0) = (5) 4. results and discussion the time series properties have been examined to determine the integration pattern of the variables using the augmented dickey-fuller (adf) test and the phillips–perron (pp) test (khan et al., 2021). besides, the pp and adf unit root tests specify that the variables have a unit root as their null hypothesis. the nonstationary null hypothesis is generated at the significance levels of 10, 5, and 1%. table 2 shows the results of unit root tests. the outcomes of the tests show that iq, tr, and pop are stationary at the level. the results of the adf tests on the 1stdifference, on the other hand, clearly show that carbon emissions and energy use are stationary after the 1stdifference at the 1, 5, and 10% significance levels, respectively, declining the null hypothesis. as a result, the overall results of the adf tests describe the mixed order of integration. the results of the adf test have been verified by adopting the pp unit root tests. further, the pp test also shows similar results. according to the outcome of the unit root tests, all the considered variables are an integrated series of only order i (0) and i (1). as a result, none of the variables are integrated at i (2), necessitating the use of the nardl technique. review of economics and development studies, vol. 8 (2) 2022, 97 109 102 table 2 unit root test results variables adf (level) pp(level) co2e 0.031 0.031 iq -0.171*** -0.130*** eu -0.043 -0.043 gdp -0.02 0.029 tr -0.239*** -0.239*** pop -0.007** -0.007** note: ***, **, and * are significant at the 1%, 5%, and 10% levels, respectively. the null hypothesis for the adf test is that the attribute does have a unit root. the null hypothesis for the pp test is that the attribute has a unit root. the nonlinear ardl long-run values of coefficients are extracted in table 3. the turnout illustrates that positive shocks in iq significantly improve the environmental quality (eq) in the long run. on the contrary, the negative surprise in iq stimulates 𝐶𝑂2e. the results highlighted that a 1% increase (decrease) in intuitional quality impacts carbon emissions to about -0.040% (0.033) at the 10% and 5% significance levels in pakistan in the long run. additionally, the outcomes infer that eu and gdp are positively associated with 𝐶𝑂2e in the long run. it shows that a 1% rise in eu and og enhances 𝐶𝑂2e to about 5.532% and 0.463% at a 1% significate level, respectively, in the long run in pakistan. at the same time, the empirical finding depicts that tor demonstrates a negative impact on 𝐶𝑂2e. the results indicate that a 1% upsurge in tor declined the 𝐶𝑂2e to about 0.364%, while the coefficient of pop does not show a statistically significant influence on 𝐶𝑂2e. table 3 nardl long run estimates dv co2e variables coefficients std. error iq -0.040* 0.021 iq 0.033** 0.017 eu 5.532*** 2.727 gdp 0.463*** 0.157 tr -0.364* 0.20 pop 0.459 0.39 note: ***, **, and *are significant at the1%,5%, and10%levels, respectively table 4 displays the short-run estimates from nardl. the empirical findings highlight that the results infer that those positive shocks in iq offer a substantially negative influence on 𝐶𝑂2 e in the short run in pakistan. in comparison, negative surprise in the short run has an insignificant effect on 𝐶𝑂2e. thus, the short-run results indicate that eu and gdp accelerate𝐶𝑂2e in the short run meaningfully. on the other hand, the empirical findings confer that tor and pop are significantly negatively associated with the 𝐶𝑂2e in short in pakistan. table 4's bottom panel displays the results of various diagnostic tests. the value of the lagrange multiplier (lm) test shows an insignificant, indicating that the residuals are autocorrelation-free. ramsey reset test, heteroskedasticity test, and some other diagnostic tests. the reset test coefficients appear statistically insignificant, showing that the functional forms of our models are suitable. similarly, the coefficient of the heteroskedasticity test seems to be statistically insignificant, indicating that heteroskedasticity does not affect the model. finally, the stability of the calculated nonlinear ardl models is evaluated using the cusum and cusum-squared tests, as illustrated in figs. 1 and 2. furthermore, in the case of iq and 𝐶𝑂2e, the ect review of economics and development studies, vol. 8 (2) 2022, 97 109 103 term is negative and statistically significant at the 5% level, suggesting the existence of cointegration among variables in the model. the ect terms offer that iq (𝐶𝑂2e) readjusts extremely fast to its longrun equilibrium level, at 82 percent per year in the presence of other measurable factors. as a result of the wald test results, the asymmetry between iq and 𝐶𝑂2 e seems to be significantly significant in both the long and short term. the asymmetry dynamic multiplier curve has been denoted by a difference between the positive and negative portions of the curves, which reflects the linear mixing of dynamic multipliers associated with positive and negative shocks of iq on 𝐶𝑂2e, as illustrated in fig.3. table 4 nardl short run estimates dv co2e variables coefficients std. error ∆𝐼𝑄𝑡 + -0.057*** 0.013 ∆𝐼𝑄𝑡−1 + -0.018 0.01 ∆𝐼𝑄𝑡 − -0.009 0.008 ∆𝐸𝑈𝑡 1.138*** 0.291 ∆𝐺𝐷𝑃𝑡−1 2.398*** 0.527 ∆𝐺𝐷𝑃𝑡−1 1.514*** 0.588 ∆𝑇𝑅𝑡 -0.106 0.087 ∆𝑃𝑂𝑃𝑡 -4.103*** 0.908 note: ***, **, and *are significant at the1%,5%, and10%levels, respectively table 5 diagnostics test dv co2e r-squares 99.081 adjusted r-squares 91.902 𝐸𝐶𝑀𝑡−1 0.082*** 0.03 lm test 3.021 f-test 8.416*** reset test 0.043 heteroscedasticity test 2.139 note: the critical values of the reset, and lm, and at the 10 % level of significance are 2.12 and 3.823 review of economics and development studies, vol. 8 (2) 2022, 97 109 104 review of economics and development studies, vol. 8 (2) 2022, 97 109 105 a significant and positive influence of iq positively affects pakistan's environmental performance by lowering 𝐶𝑂2e. in contrast, a substantial and negative influence on iq is expected to harm pakistan’s environmental performance by increasing 𝐶𝑂2 e. besides, the nonlinear form between iq and environment has been proved by differing levels in their coefficients in both periods (long-run and short-run). as a result, a positive influence on pakistan's iq may have a meaningful (at 1%) and positive impact on the quality of pakistan's environment by reducing emissions by 0.040(0.4) in both the long and short run, respectively. in pakistan, a negative surprise to institutional quality will result in a significant(at1%) and negative change in eq by increasing 𝐶𝑂2e by 0.033 only in the long run. thus, the finding revealed that the positive and negative performance of institutional quality on the environment in pakistan is mainly dependent on long-term changes in the country's institutions. this discovery is related to the quality of pakistani institutions. this discovery highlights the need for support of useful and competent administration of pakistan by govt representatives through its regulatory agencies and institutions. therefore, for the scenario to continue, the country's institutions must be determined and free of corruption to deliver effective and efficient policy implementation and intensive care. as a result, the occurrences may necessitate regulatory requirements to combat market participants' excesses in electricity, and effluence-concentrated consumption; however, this may be accomplished if the country's governing strategies are prioritized over individual requirements and pursued without favor or discrimination. this finding is consistent with the author's expectations for 𝐶𝑂2 control in accomplishing carbon neutrality and improving eq through the channel of efficient institutional mechanism the outcome is consistent with the results (uzar, 2020; aron, 2000; panayotou, 1997; vogel (1997; abid,2016). they believe that iq is an effective tool for reversing environmental degradation. on the other hand, wawrzyniak and dory's (2020) study effect iq on 𝐶𝑂2e between authority efficacy and handling exploitation of power. they discovered that government effectiveness positively affects the 𝐶𝑂2e, whereas corruption control has the opposite effect. moreover, the finding suggests that the rise in the eu has a meaningful effect on 𝐶𝑂2einpakistan. the outcomes are review of economics and development studies, vol. 8 (2) 2022, 97 109 106 consistent with past studies such as those (saidi and hammami, 2015; nilritetal. (2017). these studies suggest that spikes in energy consumption significantly contributed to carbon emissions. 5. conclusion and policy implications this research looks in to the factors that have helped pakistan to maintain a consistent improvement in its environmental performance by reducing carbon emissions. the real goal provides perspective on pakistan's accomplishing carbon neutrality and conceivably offers suggestions for some other states to develop. hence, it would undoubtedly spark a concerted effort to reduce the climate crisis via individual action in slowing down the rate of global emissions. to achieve the study's goal effectively, the present study utilized nonlinear ardl to inspect the asymmetric effect of iq on carbon emissions in pakistan over the period 1980-2020.this study also employed additional variables, i.e., gdp, energy use, to, and population. the emphasis on the effect of iq and to in determining environmental performance. this is the effectiveness of policies in controlling negative phenomena, for instance, 𝐶𝑂2e. the efficiency and competency in policies that are implemented to attain their targeted outcomes are directly related to the quality and capabilities of the existing institutions entrusted with a task. also, to has been used in many studies to test environmental performance. the turns out infer a (positive and negative) to impacting negatively on the environment of developing countries due to laxity in policies of those countries. it is not enough to generalize that institutions’ rooted policies positively control the negative phenomenon without research. bearing in mind pakistan’s positive trend of handling 𝐶𝑂2e, the present paper hypothesized that pakistan’s government’s institutional quality positively impacts the environment quality. the outcomes from the nardl indicate a positive component of iq, assisting eq certainly causes the reduction in 𝐶𝑂2e.tor has also been used in numerous studies to assess environmental performance. it shows a mixed finding (positive and negative) that to is hurting the environment of less developed economies with the ineffectiveness of policies in the countries. without research, that is not enough to generalize that institutionally deeply ingrained initiative favorably handle the negative occurrence. given pakistan's positive trend in reducing carbon emissions, the current paper hypothesized that the government's institutional quality positively impacts environmental quality. the nardl findings indicate that iq has a positive component that benefits the environment by lowering carbon emissions. the outcome infers that the eu and og evoke the carbon emissions in pakistan. in contrast, the higher the level of tor is negatively connected with carbon emissions. it infers that the tor level increases the environmental quality by decreasing carbon emissions in pakistan. the following strategies have been endorsed: the outcomes confirm the potency of handling 𝐶𝑂2ethrough iq, the primary concern, and increased interest in iq to maintain good environmental performance. further, og may be supported with help of longand short-term policies. for this purpose, special interest is paid to the use of green energy and also ensures the relaxation of carbon-intensive economic activities; thus, it effectively reduces carbon emissions. besides, it will aid in advocating energy decentralization and the steady transition away from fossil fuels and toward green energy sources such as solar and hydro. furthermore, with responsible consumption and production as one of the sustainable development goals (sdg-12) targets, a policy that will help to moderate the country's consumption and production patterns is critical. it could impose a tax on the manufacturing sectors if the target is not met. the institution's instrument should be directed toward regulating the activities of foreign review of economics and development studies, vol. 8 (2) 2022, 97 109 107 investors and assigning the investor the task of adhering to the energy transition agenda. further, the study is helpful for policy debates about pakistan and south asian economies and global economic development. furthermore, the results of a specific analysis can be used to develop specific recommendations for that region. it is also beneficial to establish the channels through which these institutional qualities improve the quality of the environment. the research will also help determine the primary role of institutional quality in developing a pakistani economy. references abid, m. 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(2020). inequalities by energy sources: an assessment of environmental quality. plos one, 15(3), e0230503. https://databank.worldbank.org/source/world-development-indicators https://databank.worldbank.org/source/worldwide-governance-indicators review of economics and development studies vol. 5, no 4, 2019 755 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads relating learner empowerment with learner self-regulation learning in higher education 1 tahira batool, 2 ghazala noureen, 3 zobia ayuob 1 lahore college for women university, lahore pakistan. tahirashehbaz@yahoo.com 2 lahore college for women university, lahore pakistan. g_noureen@yahoo.com 3 m. phil scholar, lahore college for women university, lahore pakistan. zobiaayuob11@yahoo.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 the aim of the study was to analyze the relationship of learner empowerment and self-regulation at university level. the researcher conducted a survey by administering the questionnaire to collect a data on a sample of 300 students in which 150 male students and 150 female students in district lahore were included. data were analyzed by using inferential and descriptive statistics. researcher has used two instruments first one learner empowerment and second students’ selfregulation. learner empowerment composed of three factors and students’ selfregulation also has three factors. sample was selected by random sampling technique. there were 22 statements of learner empowerment questionnaire and 23 statements of self-regulation questionnaire. the study revealed that students’ level of selfregulation was high. the study also revealed that most of students were much empowered on overall learner empowerment scale and its three components. the study was also found positive and strong relationship between learner empowerment and students’ self-regulation at university level. it can be concluded from the findings of the study that self-regulation and learner empowerment are correlated and strengthen to each other. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords learner empowerment, selfregulation learning, students at university level. jel classification: m54, m59, d83, d89 corresponding author’s email address: tahirashehbaz@yahoo.com recommended citation: batool, t., noureen, g. and ayuob. z. (2019). relating learner empowerment with learner self-regulation learning in higher education. review of economics and development studies, 5 (4), 755-766 doi: 10.26710/reads.v5i4.903 1. introduction empowered learners are those who own their own learning and feel that learning happens anytime and anywhere. they take possession and responsibility for their learning. they can transfer thought and knowledge into focused action. student empowerment means giving young pupils the chance of energetic participation in school activities and decisions that can shape their lives (ashcroft, 1987). hattie told the significance of making students’ thinking observable, both to the teacher and the student, as a critical process in developing students’ knowledge of the material being learned. increasing metacognitive awareness and control is acknowledged as having a powerful influence on students’ learning and their capability to become independent learners. skilled reflection develops understanding and allows students to apply their knowledge in new settings. it is also at the heart of being a self-regulated, life-long learner. http://www.publishing.globalcsrc.org/reads mailto:tahirashehbaz@yahoo.com mailto:g_noureen@yahoo.com mailto:zobiaayuob11@yahoo.com mailto:tahirashehbaz@yahoo.com review of economics and development studies vol. 5, no 4, 2019 756 whitebread (2017) has explained that children’s’ self-regulatory skills are predictor of academic outcomes and emotional welfare more powerfully than any other facet of children’s development. watkins (2010) has argued that schools need to have learning somewhat than a performance orientation to improve students’ self-regulatory skills, to learn by what means to learn. this includes making learning a thing of attention and reflection or to make learning an entity of learning. when this is adjusted fully, students also do well in assessments. hill (2007) has suggested that all learning is basically social in nature. in the meantime, individuals are social creatures, which mean learning happens through social procedure of language use. the purpose of present research work is to explore how instructors can empower learners by developing self-directed learning. by giving learners more ownership in their learning might be resulted in a profounder and more meaningful experience. there are a number of views on how to choose what to include in the curriculum and what weighting to attach to each. traditionally, these have highlighted cultural communication (lawton, 1989), wherever, on the part of the school, students would be empowered with the knowledge and competencies appreciated in their culture. watkins (2010) reports a learning orientation, not only supports students to develop the learning abilities that they will be needed for further education, life and the world of work but it also supports them to do better in other examinations. this can be an authoritative fact in influence results-orientated parents and learners about why reflective learning matters. according to zimmerman (2002), self-regulated learning (srl) is a self-directive method that allows students to change their mental abilities into academic skills, and it is a regular and mental knowledge procedure in which learners involve very energetically until their learning goals are grasped. the world is moving towards knowledge-based economies, and this carry out new requirements and difficulties upon the education systems to grow and enrich learners’ knowledge, skills, and attitudes (organization for economic cooperation and development oecd, 2003). therefore, it is needed to reason deeply about education systems; numerous learning theories provide clarifications, uses, and models to make students who are able to see the challenges of this era. srl depends seriously on students’ practical involvement in their learning outcomes; it has been one of the most commonly discussed topics in the field of academic learning (dent & koenka, 2015). so, students who claim concern for their learning and results have a high likelihood of increasing their capacity to suggest learning experiences stored in their memory, develop their sense of responsibility, and gain self-governing learning skills. in this case, academic achievements and self-confidence will be higher, and learning goals will be met. in recent years, the concept of srl has become the source of attention of applied educational studies as a significant variable in enhancing academic achievement and bringing about success (tanriseven & dilmac, 2013). learning requires to be made an entity of attention, conversation, reflection and evaluation in everything the school does. behavioral theories in self-regulated learning (srl) in teaching have a framework of not considering the students’ internal states (e.g. thoughts, emotions, motivations, and views), instead determining heavily on learners’ self-control styles (e.g. self-mentoring, self-evaluation, selfsupport, self-correction, and selfinstruction) in the same way, cognitive theories concentrated on students’ cognitive abilities and aptitudes that fully description for their learning, also offer an incomplete explanation of students’ learning processes. but, cognitive srl theories have developed to focus on learners’ active roles in developing their own abilities and strategies (zimmerman, 2008). according to vygotsky’s theory of social learning (1978), social context (e.g. contact with others, linguistic, and ethos) plays a central role in expressing students’ cognitive functions, and must be clarified as the product of social connections. vygotsky (1978) debated that every cognitive function looks steadily in the learning process at two levels: inter psychological level (controlled by others-social contact) and intra psychological level (controlled by the learner him or herself). interaction between these two levels and the surroundings was suggested in bandura's (1986) social cognitive theory. behaviors, personal procedures and surroundings interact in review of economics and development studies vol. 5, no 4, 2019 757 return to effect students’ functioning and regulate any changes needed to revise their cognition, strategies and perceptions. the term “empowerment” was defined by fymeir, shulman & houser (1996) as “the process of creating intrinsic task motivation by providing an environment and tasks which increase one’s sense of self efficacy and energy.” hill (2007) proposed that all learning social in nature. since humans are social creatures, which means making creates through social procedure of language use after some time. pack (1976) concurred with social precepts of learning when he presented conversation theory. this theory recommends that discussion principal procedure of learning. as students’ associate with each other and teacher in important ways, change starts for occur as far as student development and advancement. adapting on that point turns into procedure of coming for now through shared change and transaction. self-regulation certifiably is not a psychological capacity or scholarly execution aptitude; rather it is a self-order process by which students change their psychological capacities into scholastic abilities (zeidner, boekarts, & pintrich, 2000). when all said in done, self-control includes students who proactively guide their conduct or procedures for accomplish self-set objectives. they additionally depend on full of feeling, intellectual, motivational, and conduct criticism for change or modify their systems and practices when unfit for on first achieve their objectives (zimmerman, 1989). self-regulation includes processes that have evolved for extend range and flexibility of hum behavior, making it possible for hum beings for override counterproductive responses. for self-regulation for occur, one needs sense of selfawareness and, if other people are involved, ability for infer mental state of others (baumeister, dewall, ciarocco, & twenge, 2005). self-regulation processes are supposed for bring about positive outcomes. when self-regulation fails, however, control over one’s behavior breaks down, which likely leads for negative outcomes (baumeister, 1997). proposed that there are two forms of self-regulation failure: under regulation and miss regulation. first refers for self-failing for try for change its response and produce best outcome, whereas second refers for self-making effort for change its response, but change does not lead for best outcome. latter indicates that there may be downside for use of self-regulation processes. self-control with regards for learning has been proposed for self-guided procedures that empower students for change their psychological capacities into execution abilities (zimmerman, 2008). selfregulated students are people who proactively as opposed for responsively approach their learning errands. these indicate individual activity, persistence, or versatile abilities, starting from ideal met psychological procedures and motivational convictions (e.g., zimmerman, 2006, 2008). met perception for contemplating one's own reasoning and incorporates procedures, for example, arranging or selfobserving (e.g., hong & o'neil, 2001). self-control forms proposed for not promptly deliver elevated amounts of aptitude. these procedures are thought enable individuals for get information and aptitudes successfully. one powerful instrument that students’ use for enhancing their adapting, paying little mind for capacity, self-direction. a meta-analysis conducted by dent and koenka (2016) have explored relationship of components of self-regulated learning for secondary and elementary school students. they have shown that average relationship differ based on the type of achievement measure. the purpose of this study was to explore relationship of learning empowerment and student self-regulation at university level. 2. research questions the following were research questions of the study: 1. to what extent students are empowered at university level? 2. to explore the level of self-regulation of students at university level? 3. is there any relationship between learning empowerment and students’ self-regulation? 3. methodology this study was conducted by using quantitative research method. this descriptive study was conducted through survey of concerned universities. survey method was adopted to collect the data through a review of economics and development studies vol. 5, no 4, 2019 758 questionnaire to find out the opinion of the concerned participant about study variables. population of the study has included all the 33 higher education commission (hec) recognized universities of lahore including 14 public and 19 private universities. by random sampling technique three hundred (300) students were selected as the sample of the study. after selection of four public and four private universities in lahore district at random, one hundred fifty (150) females and one hundred fifty (150) male students were sample of the study. 4. instruments of the study researchers have used two instruments first learner empowerment and second students’ self-regulation questionnaire. self-regulation questionnaire was a part of motivational strategies for learning questionnaire that was developed by pintrich and de groot (1990). it was composed of three factors. similarly, learner empowerment questionnaire that was previously developed by fymeir, shulman & houser (1996). questionnaire for learner empowerment composed of three factors. both instruments were likert scales (questionnaires) with 5-point on it, to collect data from the participants. there were 22 statements of learner empowerment questionnaire and 23 statements of self-regulation questionnaire. the questionnaires were pilot tested on fifty students from two private and two public sector universities of lahore. the reliability of self-regulation questionnaire was found .78 and the reliability of learner empowerment questionnaire was found .81, which were encouraging. both instruments were validated before use. 5. data collection the data was collected through questionnaires adapted by the researchers. researcher personally visited sample universities to collect data. 6. data analysis the collected data was analyzed by using ibm spss ver.22 (statistical package for social science) to investigate the relationship of learner empowerment and student self-regulation at university level. the data collected through questionnaire was tabulated and analyzed by applying inferential and descriptive statistics. 7. results results were calculated for frequencies and percentages of demographic variables shown in following tables: table 1 demographic information of the participation variables levels frequency percentage gender male 250 50 female 250 50 age 20-25 180 49 25-30 153 40 30-35 67 11 qualification bs/bsc 158 41 ma/msc 159 42 phd 83 17 type of university public 250 50 private 250 50 https://onlinelibrary.wiley.com/doi/full/10.1111/jcal.12300#jcal12300-bib-0022 review of economics and development studies vol. 5, no 4, 2019 759 demographic information from table 1 shows that two hundred and fifty male and same number of female students participated in this research. forty nine percent participants were 20-25 years old and forty percent participants were 25-30 years old, in the same way, eleven percent participant were 30-35 years old. qualification of forty two percent students was ma/msc and almost same percentage was of bs/bsc participants, and seventeen percent were phd degree holders. there was same percentage of public and private university participants. table 2 students’ level of learner empowerment frequency percentage low (2.85 to 3.50) 115 16% medium (3.50 to 4.25) 116 16.7% high (4.25 to 5.00) 269 67.3% total 500 100.0 results revealed that learner empowerment level of 16% students was low. there were 16.7% students whose level of learner empowerment was medium. there were 67.3% students whose level of learner empowerment was high. it was concluded from the results that learner empowerment level of majority of students was high. table 3 students’ levels of self-regulation frequency percentage low (2.90 to 3.50 104 12.3% medium (3.50 to 4.75) 134 22.3% high (4.75 to 5.00) 262 65.3% total 500 100.0 results shown from table 3 that self-regulation level of 12.3% students was low. there were 22.3% students whose level of self-regulation was medium. there were 65.3% students whose level of selfregulation was high. it was concluded from the results that self-regulation level of majority of students was high. table 4 responses of students about competence sr statement sd d n a sa 1 i feel self-assured that i can effectively do my duties. 10 (3.3%) 0 (0%) 0 (0%) 15 (5%) 275 (91.7%) 2 i feel scared by what is required from me in my class. 11 (3.7%) 1 (.3%) 0 (0%) 24 (8%) 264 (88%) 3 i am able to perform the necessary activities to succeed in my class. 10 (3.3%) 1 (.3%) 0 (0%) 23 (7.7%) 266 (88.7%) 4 my teacher makes me feel scarce. 10 (3.3%) 2 (.7%) 0 (0%) 22 (7.3%) 266 (88.7%) 5 i find my class to be exciting and energizing. 9 (3.0%) 1 (.3%) 0 (0%) 22 (7.3%) 268 (89.3%) table 4 shows responses of students about statements related to competence. two hundred ninety (96.7%) respondents agreed or strongly agreed to perform their duties adequately. overall ninety six percent (96%) participants were agreed statements related to competence. review of economics and development studies vol. 5, no 4, 2019 760 table 5 responses of students about meaningfulness sr statement sda da n a sa 1 the material i read in this class is useful for me. 12 (4%) 1 (.3%) 0 (0%) 19 (6.3%) 268 (89.3%) 2 class is consistent with my values. 10 (3.3%) 4 (1.3%) 0 (0%) 20 (6.7%) 266 (88.7%) 3 i find my class to be motivating. 4 (1.3%) 5 (1.7%) 0 (0%) 28 (9.3%) 263 (87.7%) 4 i have the ability to make a supportive learning environment in this class. 12 (4%) 1 (.3%) 0 (0%) 24 (8%) 263 (87.7%) 5 i can decide how assignment can be performed. 10 (3.3%) 0 (0%) 0 (0%) 25 (8.3%) 265 (88.3%) results in table 5 are showing the responses of students about statements related to meaningfulness. two hundred eighty seven (95.6%) respondents agreed or strongly agreed that information got in this class is useful. two hundred eighty six (95.4%) respondents were agreed that students’ class is consistent with their values. similarly, with other statements more than ninety six percent (96%) respondents were agreed with statements related to meaningfulness. table 6 responses of students about choice sr statement sda da n a sa 1 the assignment required in my class is meaningful in my view. 10 (3.3%) 6 (2%) 0 (0%) 24 (8%) 260 (86.7%) 2 i approve the standards i must meet in my class. 9 (3%) 5 (1.7%) 0 (0%) 33 (11%) 253 (84.3%) 3 the assignment required by my class is valued to me. 9 (3%) 7 (2.3%) 0 (0%) 29 (9.7%) 255 (85%) 4 i usually do more work than is mandatory by the syllabus. 7 (2.3%) 3 (1%) 0 (0%) 23 (7.7%) 267 (89%) 5 i have a choice of performing my work in my own way. 12 (4%) 3 (1%) 0 (0%) 49 (16.3%) 236 (78.7%) 6 stating my own attitudes and ideas is appreciated in my class. 9 (3%) 5 (1.7%) 0 (0%) 27 (9%) 259 (86.3) 7 i have a high level of autonomy in completing my work. 8 (2.7%) 3 (1%) 0 (0%) 30 (10%) 259 (86.3%) 8 my teacher allows flexibility in the way i perform my responsibilities. 8 (2.7%) 3 (1%) 0 (0%) 37 (12.3%) 252 (84%) table 6 shows responses of students about statements related to choice. two hundred eighty four (94.7%) respondents were agreed that students task required in their class are personally meaningful. similarly ratio of participants agreed with statements related to the choice was high (96%). table 7 responses of students about self-efficacy sr statements sda da n a sa 1 i believe to do well than the other students in my class. 9 (3%) 3 (1%) 0 (0%) 54 (18%) 234 (78%) review of economics and development studies vol. 5, no 4, 2019 761 2 i feel that i do very well in this class. 4 (1.3%) 1 (.3%) 0 (0%) 45 (15%) 250 (83.3%) 3 i believe i am a best student than to other class fellows. 4 (1.3%) 4 (1.3%) 0 (0%) 35 (11.7%) 257 (85.7%) 4 i believe that i will get good grades in this class. 6 (2%) 0 (0%) 0 (0%) 48 (16%) 246 (82%) 5 i am sure i can do an excellent job on the problems 7 (2.3%) 1 (.3%) 0 (0%) 36 (12%) 256 (85.3%) 6 my study skills are excellent than others in this class. 4 (1.3%) 4 (1.3%) 0 (0%) 41 (13.7%) 251 (83.7%) 7 i believe i know more about the subject as compare to other class fellows. 3 (1%) 3 (1%) 0 (0%) 32 (10.7%) 262 (87.3%) 8 i feel that i will be able to learn the material for this class. 4 (1.3%) 0 (0%) 0 (0%) 34 (11.3%) 262 (87.3%) table 7 shows the responses of students about statements related to self-efficacy. two hundred eighty eight (96%) respondents agreed that students expect to do well as compared with other students in this class. similarly, ratio of students agree with statements related to self-efficacy was high (96%). table 8 responses of students about intrinsic value sr statement sda da n a sa 1 i like challenging class work that is helpful to learn new things. 5 (1.7%) 0 (0%) 0 (0%) 47 (15.7%) 248 (82.6%) 2 understanding of this subject is useful for me. 6 (2%) 2 (.7%) 0 (0%) 39 (13%) 253 (84.3%) 3 i take interest what i am learning in this class. 7 (2.3%) 0 (0%) 0 (0%) 43 (14.3%) 250 (83.3%) 4 i think i will be able to use what i learn in this class in other classes. 4 (1.3%) 0 (0%) 0 (0%) 39 (13%) 257 (85.7%) 5 i think that what i am learning in this class is interesting for me. 7 (2.3%) 0 (0%) 0 (0%) 46 (15.3%) 247 (82.3%) 6 i always learn from my mistakes, even if i do poorly on a test. 11 (3.7%) 0 (0%) 0 (0%) 48 (16%) 241 (80.3%) 7 it is important for me to learn what is being taught in this class. 8 (2.7%) 0 (0%) 0 (0%) 38 (12.6%) 254 (84.7%) 8 i think it is useful knowledge that we are learning in this class. 11 (3.7%) 2 (.7%) 0 (0%) 39 (13%) 248 (82.6%) table 8 shows the responses of students about statements related to intrinsic value. two hundred ninety five (98.3%) respondents agreed that students prefer class work is challenging so that they can learn new things. two hundred ninety two (97.3%) respondents agreed that important for students to learn what is being taught in this class. similarly ratio of participants agreed with statements related to the intrinsic value was high (95%). table 9 responses of students about student self-regulation sr statement sda da n a sa 1 for difficult lessons i leave studies otherwise i study only the easy parts. 4 (1.3%) 1 (0%) 0 (0%) 39 (13%) 256 (85.3%) review of economics and development studies vol. 5, no 4, 2019 762 2 i use self-questioning technique to make sure that i know what i have studied 3 (1%) 0 (0%) 0 (0%) 49 (16.3%) 248 (82.7%) 3 i work hard to get a good grade even when i do not have any interest in the class. 12 (4%) 1 (.3%) 0 (0%) 36 (12%) 251 (83.7%) 4 i often find that i have been reading for class but do not know what it is all about. 1 (.3%) 0 (0%) 0 (0%) 55 (18.3%) 244 (81.3%) table 9 shows responses of students about statements related to students’ self-regulation. two hundred ninety five (98.3%) respondents agreed or strongly agreed that students ask their self-questions to make sure they know the material they have been studying. similarly, ratio of participants agreed with statements related to the self-regulation was high (95%). table 10 relationship between learner empowerment and student self-regulation m sd 1 2 3 4 5 6 7 8 1. self-efficacy 4.77 0.27 .301 ** .186 ** .756 ** .329 ** .243 ** .215 ** .371 ** 2. intrinsic value 4.76 0.28 .243 ** .784 ** .179 ** .138 * .137 * .214 ** 3. self-regulation 4.78 0.35 .541 ** .044 .155 ** .051 .104 4.overal selfregulation 4.77 0.21 .288 ** .253 ** .205 ** .348 ** 5.competence 4.80 0.55 -1 .221 ** .254 ** .746 ** 6.meaningfulness 4.78 0.42 .310 ** .627 ** 7.choice 4.73 0.36 .749 ** 8.learner empowerment 4.77 0.31 table 10 shows about pearson coefficient of correlation that was used to find the relationship between learner empowerment and students self-regulation. learner empowerment composed of three factors and students’ self-regulation also has three factors. the correlation was calculated within and between factors of learner empowerment and students self-regulation. there was a noteworthy relationship of self efficacy with intrinsic value, selfregulation, competence respectively (r=.301, r=.186, r=.756, r=.329, p<.01). there was a noteworthy positive and small relationship of meaningfulness, choice, learner empowerment with self efficacy (r=.243, r=.215, r=.371, p<.01). there was a noteworthy relationship of selfregulation, overall self-regulation and competence with intrinsic value (r=.243, r=.784, r=.179, p<.01) respectively. there was a significant relationship of meaningfulness, choice and learner empowerment with intrinsic value (r=.138, r=.137 p<.05, r=.214, p<.01). there was no significant relationship of competence, choice and learner empowerment with self-regulation (r=.044, r=.051, r=.104, p>.05). there was a noteworthy relationship of overall self-regulation meaningfulness with selfregulation(r=.541, r=.155, p<.01). overall relationship between all factors was positive and significant. 8. discussion the findings of this research have shown that there were majority of students whose level of learner empowerment was high. on the other hand, there were some students whose level of learner empowerment was medium and in the same line learner empowerment level of a small number of students was low. it was concluded from the results that learner empowerment level of majority of students was high. the results of this study have shown that the percentage of students’ response on learner empowerment (and its components) questionnaire was highly positive. majority of the students marked on strongly agree on overall statements of learner empowerment, competence, meaningfulness and choice. students were confident, exciting and energizing. they feel that information given in their class is consistent with their values interesting and useful, therefore they work hard and can perform well. they were agreed that they do more effort to fulfil the requirement of the class and enjoyed higher level of autonomy in the class therefore we can be more creative in the class. hence, empowered learner have positive attitude towards learning and have positive impact on students’ achievement (frymier, shulman review of economics and development studies vol. 5, no 4, 2019 763 & houser, 1996). the findings of this research have also shown that there were majority of students whose level of selfregulation was high. on the other hand, there were some students whose level of self-regulation was medium and in the same line self-regulation level of a small number of students was low. it was concluded from the results self-regulation level of majority of students was high. most teachers are agreed to implement self-regulation in classroom is ideal. planning such lesson for implementation of selfregulation is not a small achievement (paris & winograd, 1990). since, components of self-regulation learning has positive relationship with each other (dent & koenka, 2016). generally, students were strongly agreed with the statements related to self-efficacy, intrinsic value and self-regulation. students were agreed that they can perform very well in class and they were aware that they can learn given material for the class. their overall self-efficacy level was very high. they were confident that they can learn new things and know the importance and usefulness of lessons taught in the class. they believe that they learn from their mistakes. they think that they need to question their-self they work hard even if the class is not interesting to get good grades. a variety of research literature has encouraged self-regulation in classroom for effective instructions (e.g. andreassen & braten, 2011; cleary & zimmerman, 2004; dignath & buettner, 2008; tonks & taboada, 2011; hong, & o'neil, 2001) and promote collective discussion (han, & hill, 2007) the relationship between learner empowerment and students self-regulation was found positive. three factors of learner empowerment were highly correlated with three factors of students’ self-regulation. self-efficacy was correlated with intrinsic value, selfregulation and competence respectively. similarly, meaningfulness, choice and learner empowerment have positive relationship with self-efficacy. self regulation, overall self-regulation and competence were found to be correlated with intrinsic value. a notable relationship of meaningfulness, choice and learner empowerment with intrinsic value was also found. competence, choice and learner empowerments were not correlated with self-regulation considerably. 9. conclusion and recommendations the purpose of the study was to investigate the relationship of learner empowerment and student selfregulation at university level. study reveals that self-regulation of students was very high. those students who are very high in self-regulation they may be very good in planning and executing their academic activities themselves. they may be good in preparation in class tests and assignment but it is needed to do further research on this issue. the study also reveals that most of students were much empowered on overall scale and its three components. empowerment will support to take risk of new and challenging academic task and will help to achieve their goals. self-regulation and learner empowerment both construct push to students toward successful academic life. the study also reflects strong relationship between learner empowerment and student self-regulation at university level. it can be concluded from the findings of the study that self-regulation and learner empowerment are inter related and strengthen to each other. the students should get awareness about to current affairs and situations. the students should communicate with other students, scholars, counselors to solve the different kinds of problems of relevance to the education and students. the self-regulated learning skills should attend the group discussion meetings, symposium, workshop and seminars etc. to develop their knowledge and understanding of self-regulated learning skills. references andreassen, r., & braten, i. 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(2006). development and adaptation of expertise: the role of self-regulatory processes and beliefs zimmerman, b. j. (2008). investigating self-regulation and motivation: historical background, methodological developments, and future prospects. american educational research journal, 45(1), 166183. review of economics and development studies vol. 5, no 4, 2019 766 review of economics and development studies vol. 3, no 1, june 2017 83 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 issn (e): 2519-9706 volume 3: issue 1 june 2017 journal homepage: www.publishing.globalcsrc.org/jbsee impact of foreign capital inflows and money supply on exchange rate: a case study of pakistan 1 sajid ali, 2 raima nazar 1 phd scholar, universiti putra malaysia. sajidali1136@gmail.com 2 lecturer, department of economics, women university multan, pakistan. raimanazar@yahoo.com article details abstract history revised format: may 2017 available online: june 2017 the study attempts to examine the impact of foreign capital inflows and money supply on exchange rate of pakistan. for this purpose we have undertaken time series data for the period of 1973-2016. annual data for the period 1973-2016 is used, taken from economic survey of pakistan (various issues) and international financial statistics (ifs). the main variables used in our analysis are exchange rate, openness, workers’ remittances, foreign direct investment, foreign aid and money supply. simple linear regression model with ordinary least method (ols) is used to analyse the results. money supply is positively and significantly related to exchange rate. worker’s remittances (wrem), foreign aid (faid), foreign direct investment. (fdi) and openness (opp) are negatively and significantly related to exchange rate. the study shows that foreign capital inflows and workers’ remittances significantly appreciate the exchange rate in the case of pakistan. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords exchange rate; workers’ remittances; money supply; foreign aid jel codes e50, e51, e52 corresponding author’s email address: sajidali1136@gmail.com recommended citation: ali, s. & nazar, r., (2017). impact of foreign capital inflows and money supply on exchange rate: a case study of pakistan. review of economics and development studies, 3(1) 83-90. doi: https://doi.org/10.26710/reads.v3i2.167 1. introduction the real exchange rate shows the degree of competitiveness of a country towards international trade. the real exchange rate is considered as an important factor for economic growth of a country. stability of exchange rate is helpful for driving up exports and private investment. misalignment in exchange rate will leads to price distortions which further leads to resource misallocations between the sectors of tradable and non-tradable goods. undervaluation or overvaluation of a real exchange rate is a common case in underdeveloped countries. due to overvaluation of real exchange rate the profit in tradable goods reduces which leads to less investment in this sector. so we can say that it has negative impact on exports and balance of trade. cottani et al. (1990) argued that in many developing countries, misalignment of real exchange rate harmed the agriculture sector and its growth which resulted in reduction of food supply. besides, a number of economists have emphasized on understanding the importance of real exchange rate and its determinants. http://www.publishing.globalcsrc.org/jbsee mailto:sajidali1136@gmail.com mailto:raimanazar@yahoo.com mailto:sajidali1136@gmail.com https://doi.org/10.26710/reads.v3i2.167 review of economics and development studies vol. 3, no 1, june 2017 84 capital inflows are considered as important factor to determine the real exchange rate. according to a well-known dutch disease theory (corden and neary 1982), more amount of capital inflows are the main cause of appreciation of exchange rate. moreover, this exchange rate also affects tradable and nontradable sectors of a country. capital inflows can be treated as a reserves’ accumulation or a deficit in current account according to the type of exchange rate regime. for example in floating exchange rate regime where there is no role of central bank, capital inflows leads to increase in capital assets which will further leads to increase in imports. so in this way capital inflows will widen the current account deficit. now, if there is fixed exchange rate then central bank will interfere by monitoring the appreciation pressure. in this case, capital inflows will lead to increase in foreign exchange reserves. monetary policy shocks have different effects on the exchange rate. the results are conflicting in nature. commonly, there are two possible affects. the first is according to the prescribed theory and the second is opposite which is called ‘a puzzle’. according to theory, monetary expansion is a main cause of increase in money supply. so in this way the interest rate of central bank will be reduced. if we increase money supply, the exchange rate of currency with other currencies will decrease. on the other hand, a tight monetary policy will leads to a higher base interest rate which will attract investors because of higher return on domestic assets than foreign assets. so the demand and value of domestic currency will increase and in the result the exchange rate will also increase. but there are lots of evidences which are contrary to the above theory called ‘exchange rate puzzle’. the main purpose of this paper is to evaluate the determinants of exchange rate in pakistan for the period from 1973 to 2016 using time series econometric approaches that may be helpful to formulate a realistic exchange rate policy. the study proceeds as follows: in section 1 brief introduction of exchange rate is given. section 2 gives a brief review of the empirical literature related to the study. econometric model is developed in section 3 which includes data and methodology. section 4 is based on results and conclusion which summarized the paper. 2. literature review cornel (1982) found the relationship between money supply, exchange rate and interest rate. the results showed that an unanticipated increase in money supply leads to increase in exchange rate and interest rate due to speculator’s intervention. when money supply was increased through expansionary monetary policy then if investors believed that soon it leads to monetary contraction then they will increase the demand of currency to make future profits which will ultimately raise exchange rate. mahamadu and philip (2003) explored the association between exchange rate, inflation and monetary growth in ghana. they used error correcting mechanism. the results indicated that there exist a long-run relationship between inflation, money supply and real income and exchange rate. it was demonstrated that inflation was positively correlated to exchange rate and money supply and negatively related to real income. due and sen (2006) examined the interrelation between real exchange rate, capital inflows, indicators of fiscal and monetary policy and balance of account for indian economy for the period of 1993 to 2004. the result indicated that variables were cointegrated with each other and granger caused to real exchange rate. the analysis of generalized variance decomposition suggested that determination of the real exchange rate include net capital flows, current account surplus, government surplus and money supply. hyder and mehboob (2006) explored equilibrium exchange rate and its misalignment in pakistan. they collected annual data from 1978 to 2005 and used co-integration econometric technique. it was founded that gross domestic product and real investment to gdp ratio were negatively related to exchange rate. terms of trade and real investment to gdp ratio were positively and negatively related to exchange rate respectively. review of economics and development studies vol. 3, no 1, june 2017 85 korsu and braima (2007) evaluated the determinants of real exchange rate in sierra leone. they found that equilibrium exchange rate, the sustainable level of macroeconomic policies and nominal exchange rate were positively related to actual real exchange rate and the index of macro policies is negatively related to real exchange rate. the authors suggested that real exchange rate was undervalued during the periods of 1999 to 2005 and 1972 to 1998. zakaria et al. (2007) analyzed the determination of nominal exchange rate in pakistan. they used quarterly time series data that covered the period of 1983 to 2004 and used a generalized method of moment (gmm) estimation technique. they concluded that relative price (rp) was negatively related to nominal exchange rate and net capital inflow was positively related to nominal exchange rate. rehman et al. (2010) tested the effect of fdi (foreign direct investment) on equilibrium real exchange rate in pakistan. they collected the annual time series data from the period 1993 to 2009 by using the method of behavioral equilibrium exchange rate (beer). they applied cointegration technique and concluded that fdi inflows and worker’s remittances had significantly appreciated the equilibrium real exchange rate in pakistan. fida et al. (2012) examined the value of equilibrium exchange rate in long run by applying purchasing power parity (ppp) approach. they collected time series data that covered the period of 1983 to 2010. they used co-integration technique and concluded that terms of trade, government expenditures and productivity were negatively related to real exchange rate. they argued that external debt among other microeconomic variables plays a significant role in the fluctuations of real exchange rate. saeed et al. (2015) investigated the behavior of exchange rate. they used time series data that covered the period of 1982 to 2014. they concluded that nominal money, foreign debt and politically instability were positively associated to exchange rate and foreign exchange reserves were negatively associated to exchange rate. the author suggested that an effective monetary and fiscal policy together with political stability is necessary to maintain the exchange rate and macroeconomic stability in pakistan. 3. data and methodology secondary data is used in this study which covers the period from 1973 to 2016. data have been obtained from international financial statistics (ifs), 50 years statistics of pakistan published by federal bureau of statistics and economic survey of pakistan (various issues). this paper investigates the determinants of exchange rate by examining the impact of foreign capital inflows and money supply on exchange rate of pakistan. we construct the following mathematical model for analysis: er = f (wrem, faid, fdi, opp, m2) the econometric model of the study is given as follows. er = β0+ β1 wrem + β2 faid+ β3fdi + β4 opp + β5 m2 where, e.r = exchange rate wrem = workers’ remittances faid = foreign aid fdi = foreign direct investment opp = openness m2 = money supply 3.1 variable description this section of the study is reserved to explain the variables of the analysis. the variables are selected due to their relative importance on theoretical as well as empirical grounds. attempted variables and their review of economics and development studies vol. 3, no 1, june 2017 86 explanation about hypothetical impact are defined as follows: 3.2 workers' remittances workers' remittances are referred to current transfers by migrants who are employed in some other economy in which they are considered residents. workers’ remittances are the type of unrequited current private transfers which minimizes the deficits in current account of receiving country. these inflows have also significant effect on equilibrium real exchange rate. if an economy properly spends these inflows on non-tradable goods then it leads to appreciation of real exchange rate. 3.3 money supply the money supply include total amount of monetary assets circulated in a country in some specific period of time. m1 money supply contains cash and assets that can be immediately converted into currency while m2 money supply refers to m1 + short term money deposits and saving deposits. theoretically, an increase in money supply leads to reduction in exchange rate and vice versa. 3.4 foreign aid it is referred to international transfer of capital, goods or services from one country to another country for the purposes of relief, rehabilitation or economic stability. theoretically, foreign aid should have a positive effect on the exchange rate of recipient country. 3.5 openness open economy means that market economy which is almost free from barriers of trade and thus imports and exports form a large proportion of the gdp. in fact, no economy is considered totally open or closed and different countries have varying degree of control over foreign trade. one of the important measurements for the openness of a country is the percentage of its gdp devoted to foreign trade. 3.6 foreign direct investment foreign direct investment (fdi) indicates the direct investment in production by such a company which is located in some other country. this company invests in some other country by buying a company or expanding the existing business. fdi can affect the exchange rate in two ways i.e, by depreciation of domestic currency or appreciation of domestic currency depending on utilization of fdi inflows. 4. results and discussions in this section, first of all the descriptive statistics of the data is presented. descriptive statistics describes main quantitative features of the data through statistical and econometric analysis of data. it gives simple and uncomplicated summaries about the data and the measures. table 1 represents the descriptive statistics of the model. in the above table exchange rate (er) is a dependent variable and workers’ remittances (wrem), foreign direct investment (fdi), foreign aid (faid), openness (opp) and money supply (m2) are independent variables. the sample size consists of review of economics and development studies vol. 3, no 1, june 2017 87 43 observations from the period of 1973 to 2016. the maximum and minimum value of exchange rate is 83.80 and 8.5 respectively, whereas the standard deviation is 22.48 and the mean value is 31.29. workers’ remittances have minimum value 128.0, maximum value 7810.95, mean value 2110.92 and standard deviation 1760.161. foreign direct investment having minimum value -6.30, maximum value 5410.20, mean value 755.61 and standard deviation 1359.54). openness having minimum value 0.259, maximum value 0.480, mean value 0.340and standard deviation 0.045. foreign aid having minimum value 355.0, maximum value 4688, mean value 2004.76 and standard deviation 959.97. money supply has minimum value of 22059, maximum value 5137205, mean value 1040628 and standard deviation 1372136. in equation the dependent variable is exchange rate while the independent variables are worker’s remittances, foreign aid, foreign direct investment, openness unit and money supply. the coefficient of worker’s remittances is negative and highly significant at one percent level. it indicates that if worker’s remittances increase one million then the value of exchange rate will decrease 0.0067 percent and due to decrease in the value of exchange rate our currency will appreciate. the negative coefficient of foreign aid is significant at five percent level shows the decrease in the value of exchange rate due to increase in foreign aid. if the foreign aid increases one million then the value of exchange rate will decrease 0.00305 percent. due to decrease in the value of exchange rate our currency will appreciate. the negative coefficient of foreign direct investment shows the decrease in the value of exchange rate due to increase in foreign direct investment and is highly significant at five percent level. if the foreign direct investment increases one million then the value of exchange rate will decrease 0.00404 percent and our currency will appreciate. the openness has negative effect on the value of exchange rate and its coefficient is significant at one percent level. if the value of openness increases then the value of exchange rate will decrease and hence our currency will appreciate. money supply is positively associated to exchange rate. increase in the supply of money leads to increase in the value of currency. here coefficient is highly significant at one percent level. increase in the value of exchange rate means depreciation of our currency. this finding is in line with previous work by saeed et al. (2012). the value of r 2 is .99 which implies that approximately 99 percent of the variation in the dependent variable is explained by the variation in explanatory variables. f-test is used to test the overall significance of the model and it determines whether a significant relationship exists between dependent variable and all the independent variables. for detection of auto-correlation we have used durbin watson test. the value of this test shows that there is no autocorrelation in our data set. 4.1 normality test we apply the normality test to check the normality of the residuals. we have the null and alternative hypothesis as following: h0: residuals are normally distributed h1: residuals are not normally distributed review of economics and development studies vol. 3, no 1, june 2017 88 as we see that the probability value is greater than 0.10 so we may not reject the null hypothesis and concluded that residuals are normally distributed. 4.2 tests for autocorrelation and heteroskedasticity now we use breusch godfrey serial correlation lm test for the detection of autocorrelation and white test for detection of heteroskedasticity in our data. 4.2.1 breusch-godfrey serial correlation lm test the breusch–godfrey serial correlation lm test is used for the detection of autocorrelation in a regression model. it uses the residuals of the model which considered in a regression analysis and a test statistic is also obtained from these residuals. we have null hypothesis (h0) and the alternative hypothesis (h1) as follows: h 0: there is no problem of autocorrelation h1: there is a problem of autocorrelation r 2 shows explanatory power of the model it measures the proportionate of variation in dependent variable which is explained by independent variable. the value of f-statistics shows overall significance of the model. the values of this test show that there is no presence of autocorrelation. 4.2.2 white heteroskedasticity test the white heteroskedasticity test is the most general test for detection of heteroskedasticity. this test is very general and commonly used for large sample sizes. the values of this test show that the problem of heteroskedasticity is not present in estimated problem. http://en.wikipedia.org/wiki/autocorrelation http://en.wikipedia.org/wiki/autocorrelation http://en.wikipedia.org/wiki/errors_and_residuals_in_statistics http://en.wikipedia.org/wiki/regression_analysis http://en.wikipedia.org/wiki/null_hypothesis review of economics and development studies vol. 3, no 1, june 2017 89 5. policy recommendations the paper’s examination of the impact of foreign inflows and money supply on exchange rate exposes genuine contributions that allow us to depict following policy recommendations: i. foreign remittances help countries to balance their exchange rate depreciation during recession. so pakistan should make policies to reduce or avoid the competitiveness which is related to the appreciation of exchange rate that follows capital inflows. furthermore, it is necessary to make such monetary arrangements which balance the exchange rate that is one of the main macroeconomic tools for attracting the significant amount of remittances and capital inflows. ii. developing countries appreciate exchange rate to attract capital inflows. but the appreciation of exchange rate might destabilize macroeconomic management. developing countries should concentrate on short-term inflows like portfolio investments which have a large appreciation effect than other types of capital inflows. iii. unfortunately, the exchange rate policy failed in pakistan due to several reasons. the main reason is that devaluation of our currency was accompanied by inappropriate monetary management. increase in money supply resulted in a high inflation which led to offset the favourable effects of devaluation. so it is a need to improve the balance of payment through adjustment of real exchange rate. the state bank of pakistan should adopt tight monetary policy and should have also control on money supply. iv. in pakistan, both fiscal and monetary policy has a significant effect on exchange rate variation. so it is a need to harmonize both policies with each other and then link them with trade policy. if monetary and fiscal policy will run smoothly then we can boost economic growth as well as stabilize the exchange rate. 6. conclusion in this study the issues of the impact of foreign inflows and money supply on exchange rate has been discussed. money supply is positively and significantly related to exchange rate. workers’ remittances (wrem), foreign aid (faid), foreign direct investment. (fdi) and openness (opp) are negatively and significantly related to exchange rate. due to increase in money supply exchange rate will increase and the value of currency will depreciate. fdi inflows appreciated the exchange rate in pakistan which shows the signs of ‘dutch disease’. workers’ remittances also appreciate the exchange rate. in pakistan, although workers’ remittances are increasing day by day since 9/11 but the sources of these inflows are concentrated to a few countries of the world. references afzal, m. (2007). exchange rate response of import demand in pakistan. sarhad j. agric. , 23(4), 11811186. brabson, w. h., hannu h. and paul r. m. (1977). exchange rates in the short run: the dollardeutschemark rate. european economic review, 10(1), 303-324. cornell, b. (1982). money supply announcements, interest rates, and foreign exchange. journal of international money and finance, 1, 201-208. daboh, l. 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(2004). the impact of monetary policy on the exchange rate: evidence from three small open economies. journal of monetary economics, 51(3), 635652. review of economics and development studies, vol. 7 (2) 2021, 215229 215 influence of parenting styles and self-efficacy on academic achievement of secondary school students: a case of punjab province pakistan muhammad rizwan a , xuehong qi b , muhammad ali talha c a phd scholar, school of education sciences, nanjing normal university, china email: 31173013@stu.njnu.edu.cn b professor, school of education sciences, nanjing normal university, china c phd scholar, school of education sciences, nanjing normal university, china email: 31183012@stu.njnu.edu.cn article details abstract history: accepted 30 april 2021 available online june 2021 the study was conducted to investigate influence of parenting styles on the academic achievement of secondary school enrolment from the perspective of pakistan's culture. a cross-sectional research design was used to complete this research. a survey was used as a method of data collection accompanied by questionnaires. a multi-stage sampling technique was used to approach the participants. the sample was comprised of 720 students at the secondary level. the outcomes of the study exposed that there is a positive link between parenting styles (responsiveness and control), academic self-efficacy, and academic achievement. the study results indicate a positive impact of parenting style (responsiveness) on the students' academic achievement at the secondary school level. students reported differences in parenting styles (providing responsiveness and control), academic self-efficacy, and academic achievement. the study found significant differences between various groups of students' mothers' education. results of the study revealed that responsiveness and control of parenting styles are not substantially different in various regions of the world. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: sustainable production, sustainable supplier management, sustainable performance, supply chain performance jel classification: q01, p27 doi: 10.47067/reads.v7i2.352 corresponding author’s email address: 31173013@stu.njnu.edu.cn 1. introduction parenting is a broad term that encompasses all types of parental participation with students as well as the type of relationship that occurs between them. all of the patterns and strategies that parents use to care for their children are referred to as parental styles. in their children's social, emotional, psychological, and intellectual growth and development, parents perform an essential and nurturing role (knappe, beesdo-baum, & wittchen, 2010). kids inherit from their parents' genetic traits and learn personal value structures and relationships with other individuals. studies (becker et al., 2010) were review of economics and development studies, vol. 7 (2) 2021, 215229 216 conducted to illustrate the impact of parenting on different aspects of adolescents' growth and development. honicke and broadbent (2016) domineering, autocratic, uninvolved, and lenient parenting styles. the authoritarian parenting approach is a more flexible kind of parenting in which students are allowed a lot of freedom. however, they are subjected to the restriction, which is accompanied by adequate justifications. autocratic parenting, often known as authoritarian parenting, is a strict type of parenting. authoritative parenting is when parents give and enforce strict rules as if they were heavenly decrees. the parent maintains an uninvolved attitude toward the students in uninvolved parenting. in other words, the pupils' needs are ignored since they are not given the attention they deserve. permissive parenting is a parenting style in which the adolescent is allowed to disobey parental wishes. it also summarises the classification system that has been established (darling-hammond, & snyder, 2015). parenting strategies have been formed by distinctive cultural conventions, like many other aspects of human psychology. several studies have investigated the probable connection between parenting and the cultural environment in which a child grows up (johnson, & descartes, 2017). they found that parenting is culturally specific. according to experts, interdependence vs. independence is the basic cultural contrast between collectivist and individualist societies. traditional societies with parents, fostering support, conformity, family harmony and the coherence of a group, as well as personal humility. individual culture values independence, personal singularity, personal development, and autonomy, on the other side, (johnson, radesky, & zuckerman, 2013). kalenkoski and pabilonia (2017) highlighting autoritarian parenting in a collectivistic culture indicates caring, attentive and involved but also control and domination in an individualistic culture. behavioral control in korean culture is viewed as an advantageous parenthood, however behavioural control is viewed in europeanamerican culture as a terrible parenthood. parents from collectivist cultures therefore strive to promote obedience, socially appropriate behaviour, morality and group conformity. parents from individualistic societies are more focused on children's autonomy, self-expression and self-reliance (saleem et al., 2015) the cultural diversity of parenthood investigated and concluded that autoritarian parenthood in western countries is seen as undesirable and dysfunctional. it is considered as parental intervene, control and domineering behaviour, but authoritarian and controlled parental care is matched with positive concerns, care and involvement in a collectivist culture. (saleem et al., 2015). in pakistan, the notion of parenting practices is also distinct from western cultures. pakistan is a traditional collectivist society dominated by the traditions of culture and religion. a detailed overview of parenting in pakistan has been provided. according to them, in pakistani culture, conformity is valued; parents are considered second to god. it is anticipated that children will show their parents a great deal of obedience and harmony. also, in a traditional collectivist culture, fathers and mothers have different roles to play; mothers are seen to be less controlling and high on warmth, while fathers are supposed to be dominating, controlling, and thinking of showing less participation in their children (masud et al., 2016). in the practice of parenting styles, there is also a noticeable gender difference where girls are expected to obey their parental control and authority, and boys have more independence and freedom. parents keep girls in pakistan in a more overprotective environment, and boys are given more opportunities to socialize and be independent. it is essential to study parenting practices in the cultural context in which people live, keeping in mind many cultural differences (masud et al., 2016). review of economics and development studies, vol. 7 (2) 2021, 215229 217 parents' parenting styles are classified in a variety of ways. in general, four basic parenting styles based on two key components, namely parental affection (responsive parenting) and parental control (strict parents), have been planned by numerous researchers (zimmerman et al. 2003). parents that practise authoritarian parenting have a high amount of control over their children and a poor response to their activities. they expect their children to follow their orders. they frequently punish their children to discourage disobedience. unlike strict parents, landscape parenting parents were very receptive. allowing their children more liberty is important, but it must not lead to more conduct. neglect-predatory parents have low responsiveness and rigour when it comes to parenting. also, exhibit a contemptuous or neglectful attitude. the parents have a high level of control and reaction in an authoritative parenting style. and their children are socially and academically competent, with little behavioural issues (stavrulaki, li, & gupta, 2020). another viewpoint is that the relationship between various parenting techniques, aspects, and styles and child and adolescent adjustment is the same in both individualistic and collectivist cultures. child adjustment aspects related with authoritarian and authoritative parenting techniques, styles, and dimensions are consistent across cultures, according to conceptual evaluations of the literature ((masud et al., 2016). academic performance provides a kid with a way to earn significant work and social recognition. many research were conducted to determine particular characteristics influencing the student's academic success. academic performance depends on the attendance of the pupils, their family income, their mother-father, their teacher-student relationship, their presence in school, gender and distance from the school. family and parents are considered an integral system of support accessible to every child and appear to play an important role in the child's growth. while the importance of the home environment cannot be overlooked in the child's development, parents' style for the rearing of their child is the most vital factor affecting the child's development." academic performance of school students depends on parenting styles along with other conditions, i.e., parents being responsive (supportive and warm), demanding (controlling and supervising), and guidance is given to the students towards their academic performance " moreover, parents must provide proper nutrition, a safe environment, and guidance to their children to prepare them to fulfill lifelong learning demands (honicke, & broadbent, 2016). this is seen as a more flexible kind of parenting in which pupils are allowed a great deal of freedom while yet being subjected to limits. this satisfies the limitation while still ensuring that pupils follow the rules set out by the parents (cherry, 2016). parents here are attentive to their children's needs and perspectives. teye and peaslee (2015) identified conflicted, irritable, afraid, apprehensive, moody, dissatisfied, easily annoyed, passively hostile, vulnerable to stress, aimless, sulky, and unfriendly characteristics in teenagers raised by autocratic parenting techniques. the teenager has been over-powered by an authority, which has resulted in the above circumstance. the results reveal that asian adolescents with autocratic parents perform better than their american counterparts with authoritarian parents. autocratic parenting approaches, on the other hand, imply unquestioned parental compliance, parental strictness, which signifies parental care, caring, and participation, all of which contribute to self-motivation (teye and peaslee, 2015). this is referred to as a strict parenting approach. rules are given and enforced almost to the letter, if not entirely. according to blaze (2019), authoritarian parenting is when rigid rules are followed as if they were heavenly decrees. the teenager is not told why these regulations must be followed to the letter. such parents, according to wolters and hussain (2015), place a high importance review of economics and development studies, vol. 7 (2) 2021, 215229 218 on obedience and compliance, favouring more severe, severe, and severe disciplinary approaches. for girls, on the other hand, the same indirect effect was mostly accomplished through the mediator of classroom participation. in the relationship between severe parenting and academic achievement, combined effortful control and classroom participation have larger indirect benefits for boys than for females. the discussion looks at the possible "paths" that lead from harsh parenting to adolescent academic accomplishment, as well as the gender variations in these "paths." teachers and parents who want to increase their students' classroom engagement and academic accomplishment should consider the findings of this study (wang et al., 2018). parenting styles are a part of students' academic achievement where they are encouraged and motivated. in pakistan, all parents want their children to become active and involved in constructive learning scenarios in their educational phase. healthy parenting styles help the students overcome academic stress, improve self-confidence and develop coping strategies. however, there are particular parents who, despite being educated and intelligent, but their parenting styles are not adequate according to pakistan's culture. due to this, their children's academic achievement becomes distorted. it is the parents' responsibility to nurture their students by grooming them in a better environment through their parenting styles. hence, this study aims to determine the influence of parenting style on academic achievement at the secondary school level. following are objectives of the study: 1. to explore the relationship between parenting styles (responsiveness and control) and students' academic achievement in the perspectives of culture in pakistan 2. to investigate the impact of parenting styles in the perspective of culture (responsiveness and control) on students' academic performance 3. to examine the mediating effect of self-efficacy between the relationship of parenting styles and academic performance 4. to assess the comparison of parenting styles, self-efficacy, and academic performance between male and female students 5. the establish the differences of research variables to demographic characteristics (father's occupation, mother's occupation, father's education, mother's education, socio-economic status, and area of residence) 6. to describe how culture influences the parenting styles in the province of punjab pakistan through interviews following are research questions: 1. what is the relationship between parenting styles and students' academic achievement in the perspectives of culture in pakistan? 2. what is the impact of parenting styles on culture (responsiveness and control) on students' academic performance? 3. what is the mediating effect of self-efficacy between the relationship of parenting styles and academic performance? 4. what is a difference in parenting styles, self-efficacy, and academic performance between male and female students? 5. what are the differences in research variables to demographic characteristics; father's occupation, mother's occupation, father's education, mother's education, socio-economic status, and residence area? 6. how culture influences the parenting styles in the province of punjab pakistan review of economics and development studies, vol. 7 (2) 2021, 215229 219 following are hypotheses of the study: h01: there is no significant relationship between parenting styles (responsiveness, control), academic self-efficacy, and academic achievement. h02: there is no significant impact of parting styles (responsiveness and control) and academic achievement h03: there is no significant mediating effect of self-efficacy between the relationship of parenting styles and academic achievement h04: there is no significant difference in demographic variables in term of parenting styles, academic self-efficacy, and academic achievement 2. method 2.1 research design the nature of study was quantitative that was completed though correlational research design. survey was conducted to collect the data by using questionnaire. 2.2 participants this study's participants were secondary school students from punjab, a pakistani region. to draw a sample from the population, multistage sampling was used. three divisions were chosen from a total of nine, one each from the punjab's southern, middle, and northern regions. each division was assigned one developed and one underdeveloped district, for a total of 6 (3*2=6). two girls and two boys secondary schools were chosen from each district, for a total of 24 secondary schools (6*4 = 24). each division had 240 pupils because ten pupils from each division were chosen (24*10=240). a total of 720 people were chosen from three divisions. there were 720 students in the study sample, including 375 males and 345 females. 2.3 instruments 1. the scale of parenting style 2. academic performance questionnaire 3. academic self-efficacy scale 2.3.1 scale of parenting style (gafor, 2014) different researchers developed parenting style tools in other cultures; some recognize only three parenting types, and some are designed for parents rather than children. so, in the eastern parenting practices and cultural context, the authors sense the need for a parenting scale continuum. 2.3.2 scale of parenting style this scale is used for measuring higher secondary school students' perceived parenting styles. based on baumrind's theories (1971) and the dimensions proposed by maccoby and martin, the draught scale was developed (1983). the final scale consists of 38 items, 19 of which are for parental responsiveness measurement and 19 for parental control measurement. 2.3.3 academic performance questionnaire (yasmin & kiani, 2019) the students' academic performance was measured through the academic performance questionnaire (yasmin & kiani, 2019), developed after discussing it with a panel of experts. it was based on performance indicators and consisted of 38 items with academic motivation (6 items), communication skills (6 items), learning skills (6 items), creativity (6 items), positive attitude (8 items), study skills (6 items). it was a responsive-point-point likert scale ranging from strongly agree to strongly disagree. there were marked reversely; these include serial numbers 5, 9, 10, 20, 26, 29, review of economics and development studies, vol. 7 (2) 2021, 215229 220 and 31. 2.3.4 academic self-efficacy scale (byrne, 2014; matoti, 2011) in assessing academic self-efficacy, the study adopted the instrument developed by byrne (2014) and matoti (2011). a total of 20 items were featured in the survey questionnaire using a five-point likert scale ranging from strongly disagrees to strongly agree. a set of academics reviewed the questions of each of the constructs to ensure comprehensiveness and clarity. the questionnaire was then initiated to pilot test by 30 undergraduates to ensure further clarity. 2.4 procedures permission was taken from the head teachers to collect the data from the secondary schools. informed consent was received from the respondents. a booklet was given to students that were comprised of the questionnaires. instructions were written on the first page of the brochure; for any inconvenience, the researcher was presented at the time of data collected to help the participants. it was assured that their information would remain confidential and only will be used for the study. 2.5 data analysis data were analyzed by applying descriptive as well as inferential statistics. collected data were entered into the statistical package of social science (spss-23). following tests were used to test hypotheses (inferential statistics); pearson correlation for investigating the relationship between variables, t-test for independent samples to compare the variables (parenting styles, self-efficacy, and academic achievement) among pakistan students. a linea regression was utilized to determine the impact of parenting styles (responsiveness and control) on academic achievement. anova was used to compare the mean values concerning different demographic characteristics. the mediating effect was drawn by employing integrating mediation and moderation analysis: process by andrew f. hayes (2013) was used and the vaf formula of smart pls. review of economics and development studies, vol. 7 (2) 2021, 215229 221 3. results table 1: demographic variables name frequency percent cumulative percentage 1. gender male 375 52.1 52.1 female 345 47.9 100.0 2. region northern punjab 240 33.3 33.3 central punjab 240 33.3 66.7 southern punjab 240 33.3 100.0 3. father occupation governmental 340 47.2 47.2 non-governmental 380 52.8 100.0 4. mother occupation governmental 306 42.5 42.5 non-governmental 414 57.5 100.0 5. father education uneducated 287 39.9 39.9 primary 159 22.1 61.9 secondary 242 33.6 95.6 master 32 4.4 100.0 6. mother education uneducated 265 36.8 36.8 primary 222 30.8 67.6 secondary 72 10.0 77.6 bachelor 97 13.5 91.1 master 64 8.9 100.0 table 2: cronbach’s alpha reliability variables number of items cronbach’s alpha parenting style 38 .982 academic achievement 38 .977 self-efficacy 20 .965 table 3: correlation matrix among secondary school students (parenting styles, academic self efficacy and academic achievement mean std. deviation 1 2 3 4 1 rps 71.5208 16.03628 1 .992** .907** .928** 2 cps 71.8528 15.37118 1 .899** .938** 3 ase 72.2708 15.36565 1 .897** 4 aa 134.1083 26.79707 1 note, rps responsiveness parenting style cps control parenting style review of economics and development studies, vol. 7 (2) 2021, 215229 222 ase academic self-efficacy aa academic achievement table: 4 standard regression model showing impact of parenting style (responsiveness) on academic achievement predictor b std. error beta t-test p-value (constant) 23.222 1.705 13.619 .000 ps 1.550 .023 .928 66.645 .000 r2= .861, adjusted r2= .861, (f (1, 719) = 4441.569, p<0.05) table 5: standard regression model showing impact of parenting style (control) on academic achievement predictor b std. error beta t-test p-value (constant) 16.604 1.656 10.025 .000 pc 1.635 .023 .938 72.545 .000 r2= .880, adjusted r2= .880, (f (1, 719) = 5262.723, p<0.05) table 6: the significant impact of parenting style (responsiveness) on academic achievement is mediated by academic self-efficacy showing the direct, indirect effect and total effect in prediction of academic achievement independent variable direct effect indirect effect total effect rps on aa 1.0763 .4741 1.8173 showing the mediating effect of academic self-efficacy between the relationship of parenting style (responsiveness) and academic achievement relationship indirect effect total effect vaf assessment rps> ase >aa .4741 1.8173 26.08% partial mediation table 7: the significant impact of parenting style (control) on academic achievements is mediated by academic self-efficacy showing the direct, indirect effect and total effect in prediction of academic achievement independent variable direct effect indirect effect total effect cps on aa 1.1964 .4390 1.6354 showing the mediating effect of academic self-efficacy between the relationship of parenting style (control) and academic achievement relationship indirect effect total effect vaf assessment cps> ase >aa .4390 1.8173 26.84% partial mediation review of economics and development studies, vol. 7 (2) 2021, 215229 223 table 8: mean, standard deviation, t-value and scores of perceived parental styles (responsiveness, control), academic self-efficacy and academic achievement with respect to the gender of students (n=720). variable gender n m std. deviation df t-test p-value rps male female 375 345 81.0347 61.1797 11.37223 13.81931 718 21.116 .000 cps male female 375 345 80.7973 62.1304 11.02896 13.40070 718 20.472 .000 se male female 375 345 81.0373 62.7420 9.97637 14.50642 718 19.849 .000 aa male female 375 345 149.3787 117.5101 21.99333 21.08291 718 19.812 .000 table 9: mean, standard deviation, t-value and scores of perceived parental styles (responsiveness, control), academic self-efficacy and academic achievement with respect to the father’s occupation (n=720). variable father occupation n m std. deviation df t-test p-value rps governmental non-governmental 340 380 75.2912 68.1474 14.29175 16.76311 718 6.117 .000 cps governmental non-governmental 340 380 75.6912 68.4184 12.97929 16.50781 718 6.518 .000 se governmental non-governmental 340 380 72.4029 72.1526 16.10143 14.69650 718 .218 .827 aa governmental non-governmental 340 380 141.4941 127.5000 23.27437 28.01832 718 7.241 .000 review of economics and development studies, vol. 7 (2) 2021, 215229 224 table 10: mean, standard deviation, t-value and scores of perceived parental styles (responsiveness, control), academic self-efficacy and academic achievement with respect to the mother’s occupation (n=720). variable mother occupation n m std. deviation df t-test p-value rps governmental non-governmental 306 414 73.8007 69.8357 14.29175 16.76311 718 3.302 .001 cps governmental non-governmental 306 414 74.6373 69.7947 12.97929 16.50781 718 4.228 .000 se governmental non-governmental 306 414 70.5196 73.5652 16.10143 14.69650 718 -2.640 .008 aa governmental non-governmental 306 414 141.4941 127.5000 138.3856 130.9469 718 3.715 .000 table 11: analysis of variance (one way) showing the differences of perceived parental styles (responsiveness, control), academic self-efficacy and academic achievement in relation to father’s education (n=720). sum of squares df mean square f p-value rps between groups within groups total 9886.734 175012.953 184899.688 3 716 719 3295.578 244.431 13.483 .000 cpc between groups within groups total 7346.303 162534.091 169880.394 3 716 719 2448.768 277.003 10.787 000 se between groups within groups total 16895.950 152862.238 169758.187 3 716 719 5631.983 213.495 26.380 000 aa between groups within groups total 47845.494 468456.056 516301.550 3 716 719 15948.498 654.268 24.376 000 review of economics and development studies, vol. 7 (2) 2021, 215229 225 table 12: analysis of variance (one way) showing the differences of perceived parental styles (responsiveness, control), academic self-efficacy and academic achievement in relation to mother’s education (n=720). sum of squares df mean square f p-value rps between groups within groups total 58106.314 126793.374 184899.688 4 715 719 14526.578 177.333 81.917 .000 cpc between groups within groups total 46057.460 123822.934 169880.394 4 715 719 11514.365 173.179 66.488 000 se between groups within groups total 76497.769 93260.419 169758.188 4 715 719 19124.442 130.434 146.621 000 aa between groups within groups total 192886.887 323414.663 516301.550 4 715 719 48221.722 452.328 106.608 000 table 13: analysis of variance (one way) showing the differences of perceived parental styles (responsiveness, control), academic self-efficacy and academic achievement in relation to divisions (n=720). sum of squares df mean square f p-value rps between groups within groups total 1411.858 183487.829 184899.688 2 717 719 705.929 255.911 2.759 .064 cps between groups within groups total 1069.878 168810.517 169880.394 2 717 719 534.939 235.440 2.272 .104 se between groups within groups total 433.225 169324.963 169758.188 2 717 719 216.612 236.158 .917 .400 aa between groups within groups total 9961.900 506339.650 516301.550 2 717 719 4980.950 706.192 7.053 .001 4. discussions the literature widely acknowledges the academic pressures on students' academic accomplishments and achievements have their price, especially in terms of stress. parents play a huge role in their children's academic accomplishment, butut a great deal of negligence is observed concerning these issues. when it comes to academics, parents have set certain expectations and demands for their children to meet their expectations. still, such enthusiasm is not seen when it comes to other activities or competitions of life. parents perceive academic achievements as the best achievement their child can accomplish. however, this results in parents paying less attention to nonacademic skills or accomplishments. a lack of attention means a lack of expectations study were extreme constructs study: parental styles (responsiveness and control), academic achievement, and self-efficacy. review of economics and development studies, vol. 7 (2) 2021, 215229 226 study reveals the there is a positive relationship between parenting styles (responsiveness and control), academic self-efficacy, and academic achievement. the results of the study indicate a positive impact of parenting style (responsiveness) on the students' academic achievement at a higher secondary school level. the student whose parenting style is responsiveness predicts academic achievement among their children at the higher secondary school level. the findings of study suggested a positive impact of parenting style (control) on the students' academic achievement at the higher secondary school level. the student whose parenting style is responsiveness predicts academic achievement among their children at the higher secondary school level. study shows the direct effect, indirect effect, and total effect calculated for parenting style and academic achievement by taking selfefficacy as a mediator. there is partial mediation as parenting style has a significant relation to academic achievement without a mediator(self-efficacy), but with mediator variable, its impact heightens as a highly significant and indirect effect in our results are significant but weak; therefore, we can say the significant impact of parenting style (responsiveness and control) on academic achievement is mediated by academic self-efficacy. after analyzing the data, it is identified that the perception of rsp has founded higher among male students than females. simultaneously, the perception of parenting style is also investigated with a significant difference between male and female students. the level of cps is founded greater among males than females whose average scores so, the outcomes of the study are significant on the perspectives of comparison of research variables with demographic characteristics of participants’ gender. furthermore, the comparison of se is assessed with a significant difference between males and females, and the level of se is more among males than females. consequently, all the variables are identified as significant and founded, their level at higher values among male students than females. the basis for evaluated parental styles toward males is that parents view them as an investment for their old age or after plan, parents want their sons to support and take care of them they posse more attention in bringing up their sons. it might be why that means difference was found to be significant toward male gender in their perception of self-efficacy and academic achievement compared to females. after analyzing the data, it is identified that the perception responsiveness parenting styles (rps), control-parenting style (cps) and academic achievements (aa) is higher among sibling of the government sector as compared to siblings of non-government sectors. the comparison of self-efficacy was non-significant concerning the father's occupation as a government employee or non-government employee. after analyzing the data, it is identified that the perception of rps is founded higher among students of government employees mothers compared to students of nongovernment occupational mothers. simultaneously, the perception of parenting style is also investigated with a significant difference between government and non-government employees. the level of cps is founded greater among government employees than non-government employees occupied mothers. furthermore, ses comparison is assessed with a significant difference, more toward non-government employees' children compared to government employees' children. academic achievement is reported high among siblings of government employees. consequently, variables founded higher toward government employees children are parenting styles (responsiveness and control) and academic achievement. at the same time, self-efficacy is reported high among students of non-government employees as about mother occupation. it became clear from the current study that difference in father occupation has an impact on responsive parenting style (rps), control parenting style (cps), self-efficacy (se), and academic achievement (aa). the study shows the multiple comparisons of differences in perceived parental styles (responsiveness, control), academic selfefficacy, and academic achievement in relation to mother's education show the significant difference. the findings of the study reveal that there are significant mean differences among different groups of study variables. perception of control and responsive parenting styles, academic self-efficacy, and academic achievement related to mothers' education among students within groups and between groups. the study's findings describe that reported more sensitivity to parental styles, academic selfreview of economics and development studies, vol. 7 (2) 2021, 215229 227 efficacy, and academic achievement in relation to mother's education among within groups and between groups. parents never use only one type of parenting style; instead, parents adopt many different styles. culture has a deep impact on the parenting style. culture is embedded in history, which was rooted millions of years ago. asian culture is different from western culture as in asia; each country has its own culture. the religion of any country influences culture. even so, the cultures of different neighboring countries have some basic similarities. even though all these cultural differences exist, the parenting styles are similar everywhere. the core elements of parenting styles are the same, but variations in parenting styles are due to religious and cultural impact. therefore, in the presenting study, the researcher attempts to identify the parenting styles and their expression from the parents' perspective. in pakistan, there is literature available from the perspective of students and children. even though it is not enough, still researches were conducted to address their issues. 5. conclusion the study was designed to investigate the influence of parenting styles on secondary school students' academic achievement: a case study of punjab province, pakistan. cronbach's alpha suggests that the questionnaires have high internal consistency; a significant relationship exists among study variables. there is a positive impact of responsiveness and control parenting style on students' academic achievement. a weak significant mediating effect of self-efficacy was found between the parenting styles (responsiveness and control) and academic achievement. male students reported more degree of parental responsiveness and control, self-efficacy, and academic achievement. the study's outcomes are significant in comparing research variables with demographic characteristics of father occupation (government or non-government), mother occupation. father occupation (government and non-government) has a significant impact on academic achievement, responsive and control parenting styles while not impacting students' self-efficacy. a significant difference between father and mother occupation was found on the study variable. differences at the division level are not predisposed to the perception of parental styles (responsiveness, control), and academic achievement is significant, but academic self-efficacy is not found significant statistically. the culture widely influences parenthood in our country. many aspects of the parenting styles are adopted from the old cultural values and teachings passed down from generation to generation. religion plays a minor role in parenthood as well. respecting parents, obeying parents, raising the child, helping parents in old age, etc., are all religious influences while unnecessary strictness on the child, blind trust in parents, forcing decisions on the child, and making children's decisions are all due to cultural influences. many of the practices in parenthood, which stem from the cultural role, harm the child. many people realize this now, but there is a lack of proper awareness about the deteriorating effects of individual parenting styles like unnecessary strictness, not supporting a child, not letting a child decide for them, not communicating with the child, and not having healthy relations with a child. there is a need for people to realize which parenting styles are suitable for healthy child growth and which are not. 6. practical implications 1. the study's scope was geographically broad as it composed a sample from different divisions of pakistan. 2. the research has both theoretical and practical applications. to increase children's academic achievement and self-efficacy, the study focuses on parenting styles as these factors are of great significance for practical implication. review of economics and development studies, vol. 7 (2) 2021, 215229 228 3. it helps to understand better pakistan's cultural, ethical, and social influences on academic achievements and self-efficacy from parents' and students' perspectives. 4. it highlights common parenting styles common in pakistan. 5. this study uses ethics to improve students' academic achievements and self-efficacy in higher secondary classes. 6. it helps in understanding the parents' psychology. 7. parents are the ones who best understand their children. by working in cohesion with them, a more in-depth view of parenting styles and practices is obtained. 8. pakistan has young adults (30 million aged 15-24) responsible for the country's development, and it is required to provide them the best possible aid to deal with the future. 9. the use of mixed methods enhanced this research project's quality, which has provided exciting results that would be useful for parents involved in the mathematics education of their children. 7. limitations of the research 1) a larger sample would provide better and more general results. 2) the study was conducted in a smaller area over a limited period. this means that the study is unable to predict academic achievements and self-efficacy in other states. 3) stress, depression, and anxiety among students were not considered when studying this study's parenting styles and academic achievements. 4) the evolution of parenting styles' impact on self-efficacy and academic achievement was not carried with a longitudinal design. 5) the time was too short for performing this analysis and effectively and efficiently analyzes the results. 6) there was no consideration of problem focusing or emotion focus strategies for this current study. 7) the study was conducted in a period of a pandemic lockdown (covid-19). such variables on academics and self-efficacy can alter the results from those in more amicable conditions. 8) culture impacts parenting; the variance in culture can have various results in terms of academics and self-efficacy, which may also vary from individual to individual. 9) there is restrain of money and resources for this study. 8. recommendations for future research 1. in the future, the research should be carried out on larger scales. 2. psychiatric disorders especially stress, depression, and anxiety among students, should be considered when studying parenting styles and academic achievements. 3. theoretically, the best environment for a child would be one in which there are clear communications of expectations on the side of the parent and admittance of perceived weaknesses on both parents' and child's part. future researches should test this theory. 4. future research should study the impact of change in the academic environment on the variables. 5. problem-focused and emotion-focused strategies should be studied on academic achievements and self-efficacy among students. 6. changes in educational policies and curriculum should also be studied in detail. 7. future studies should incorporate many variables like the teachers' behavior, parents' and teachers' perspectives on the child, and the students' well-being (accounting for illness when seeing academic achievements). the change in self-efficacy throughout the academic course should be studied. this is to consider the increase in stress during proximity of examinations and its effects on a child's academic performance. review of economics and development studies, vol. 7 (2) 2021, 215229 229 references becker, k. d., ginsburg, g. s., domingues, j., &tein, j. y. 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(2000). self review of economics and development studies, vol. 7 (3) 2021, 407 416 407 impact of public infrastructure investment on private infrastructure investment faisal nadeem shah a , zainab fatima b , bilal bashir c a department of economics, university of sargodha, pakistan email: faysalshah87@gmail.com b department of economics, national university of modern languages, islamabad, pakistan c department of economics, govt. graduate college of commerce, sargodha, pakistan article details abstract history: accepted 25 august 2021 available online september 2021 the aim of this paper is to find the relationship among government and private capital formation in pakistan during the period 1981 to 2018. this study employs auto regressive distributive lag (ardl) bound test. the results show that government infrastructure investment negatively effects on private infrastructure capital formation in long run and short run, indicating that government infrastructure investment crowds out private infrastructure investment. in determining the role of the government in investment and liberalization policies, the results of this paper have important policy implications. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: private infrastructure investment, government infrastructure investment, crowding out, ardl bound test jel classification: h54, c13 doi: 10.47067/reads.v7i3.395 corresponding author’s email address: faysalshah87@gmail.com 1. introduction investment is essential for a country's economic growth since it enhances productivity, increases employment, and encourages technological progress through the incorporation of new techniques. it is also vital for regulating an economy's long-run productivity since capital creation generates capital products; therefore a faster rate of capital formation implies that the capital stock expands instantly. private infrastructure investment is also among most significant and necessary factor for economic growth. it is widely believed that government infrastructure investment has a positive effect on private infrastructure investment. if in this situation, by encouraging private investment cannot only directly, increase economic growth. public infrastructure investment can be a necessary requirement for aggregation in private sector. also, government infrastructure investment in many other government goods which is beneficial for society but for private motivation are absent may improve human investment in which private sector may lead to economic growth. review of economics and development studies, vol. 7 (3) 2021, 407 416 408 many reports, however, indicate that public infrastructure investment is crowding out private infrastructure investment, which would edge a wide range of public policy investment outcomes. the effect on the economic article of government infrastructure investment on private infrastructure investment was a matter of great interest. while policy-makers allow that investment has a significant impact on financial development, the equilibrium in division among government and private infrastructure investment is undecided matter. public infrastructure investment can affect private investment in two ways. first, it is necessary to investment the raise in government investment, which applies additional taxes for capital in the capital market from government, resulting in higher interest rate. this would decrease the group of savings accessible for private investors and lower the projected rate of return on private capitals; as a result, private infrastructure investment has a crowding out effect. secondly, government infrastructure investment can create further good conditions for private infrastructure investment, e.g. by supplying or supporting related transportation as bridges and airports. the presence of infrastructure facilities could make private investment more competitive, which can then benefit from better overall services and better market conditions. this would lead to a crowding in private infrastructure investment. investment impacts on financial development are of dual. firstly, investment goods demand is part of total economic demand. thus, an increase in investment demand, this demand is not contended by imports, encourage investment goods generation, which in turn contributes to high financial development. secondly, private investment promotes the productivity of the economy in a way that the economy is able to produce more yields. increase in private infrastructure investment increase gdp and raises the tax revenues that is used for public investment. in developing countries, government infrastructure investment crowding outeffect on private infrastructure investment. in united states, aschauer (1989) reported that when increase of marginal capital productivity compared to increase of private capitals public capital crowds. economic theory indicates that public infrastructure investment financed by financing, decreases the loan-able funds accessible for investment, elaborate interest rates, and reducing the level of investment. if, as keynesians declare, the positive effect of increased public infrastructure investment cancel out the negative impact of diminish investment then financial development will increase. public investment gives private investment more favourable conditions. public investment provides better infrastructure. “the availability of common public goods and existence of services can raise the output of private investment, which force get improvement of better employment conditions. e.g. public investment in telecommunication, energy may have energized private investment’’ (pereira & andraz 2013). aschauer (1989) accentuate the possibility that government investment may about private investment. similarly, king and baxter (1993) argue that private investment and output is stimulated by public investment. the effects are heterogeneous over countries (afonso & aubyn, 2009). aschauer (1989) claims that ‘’the positive influence of public investment towards private investment can be explained by the public capital hypothesis’’p.199). increased public investment results in increased private investment, according to this hypothesis. when government investment increases, private investment is expected to grow by raising the marginal product of capital (cavallo & daude, 2011). government infrastructure investment, on the other hand, crowds out private infrastructure investment by lowering the availability of savings to the private sector or increasing the cost of money. the goal of this research is to determine the link review of economics and development studies, vol. 7 (3) 2021, 407 416 409 between government and private investment. 2. literature review economist and researchers have been paid more attention on the effect of government investment on private investment; due to previous results that showed contentious perspective, some of them evaluates public investment has a positive effect on private investment. by utilizing a var model to study pakistan's agricultural sector and economy, saeed, hyder and ali (2006) found that the unstructured var model employing the specification of the production function was estimated to be more accurate. increased governmental investment in the agriculture sector supports private investment. consequently, we might conclude that the agricultural sector has become overcrowded. dreger and reimers (2015) investigated the relation among government and private investment for euro areas during the time period 1991-2012. the authors apply ecm which concludes the longterm correlation among government and private investment in euro area. private and government investment is co-integrated. karadag, deliktas and onder (2003) observed the effects on manufacturing industries in seven regions of the public investment in turkey during the time period 1980-2000 by using the methodology of var model, which shows the result that the government infrastructure investment has a positive effect on private production in the manufacturing sector at national level. cruz and texixeira (1999) carried out the ecm model to assess the behaviour of private investment as the function of the aggregate products of the interest rate and of government investment for the brazilian economy, which indicates that the coefficient of government investment has a negative impact on private investment when the (error correction model) is used to at least for the time period 1947-1990. javid (2019) found to measure the part of aggregate ,government and private infrastructure investment on aggregate and subsector of the economy of pakistan during the time period 1972-2015 by using the methodology of var model, which give the feedback that both government and private infrastructure investment has a remarkable but separate impacts on economic development. xu and yan (2019) study the relationship among government investment and private investment in china by using the methodology of var model and adf test ,which suggests that public expenditure in public goods and infrastructure extensively crowds ‘’in’’ private expenditure. mitra (2014) study the relationship among government expenditure and private expenditure in india by using the methodology of var model, which suggests that result is persistent with the idea that public expenditure may supplement private investment in the average and long term. the result of the different model also supports crowding out. naqvi (2002) founds the relationship among economic development, government investment, and private investment in the existence of unit roots in pakistan during the time period 1964-2002 by using the methodology of var model, this analysis indicates that public investment has a remarkable impact on private expenditure. bahal (2018) suggested the relationship among government and private investment in india along the following features over the time period 1996-2015 by using the methodology of (svecms) model, this analysis indicates that government investment crowds out private investment in india cross the period 1950 to 2012. martuez, ramajo and hewings (2011) explored the effect of government investment on regional development using the variables of time-series frameworks based on (var) models in spin. this review of economics and development studies, vol. 7 (3) 2021, 407 416 410 analysis finds the domestic effects of alterations in public investment using a (s-var) methodology for the spin. khan and reinhart (1990) found the developing help for market-adjust strategies, and for a significant role of investment, development models for developing countries commonly make no difference among the private and government integral of investment, using var model. epaphra and massawe (2012) examined the effect among domestic private investment, public investment, and financial development in tanzania over the time period of 1970-2014, by using the method of b-g serial correlation lm test. makuyana (2016) found the effect of public expenditure and private infrastructure investment on financial development in developing economies, by using the methodology of var model. this study examines help for the private infrastructure investment growth to make for developing countries. aubyn and iseg (2017) explored the effects of investment in government and private partnerships, government and private infrastructure investment in portugal through a var model using variables: government and private investment and gross domestic product, from the period 1998 to 2013. the result finds that government and private expenditure has a remarkable impact on gdp. jongwanich and kohpaiboon (2008) found sample and motivations of investment in an effort to realize why levels of investment in south asia have not fully recapture, and use thailand as a study. investment is finds over the time period 1960 to 2005.the results show that it was capital scarcity rather than making extra volume hold up recovery of short run investment. chotia and rao (2017) explored the factors effecting economic development and construct of government infrastructure investment and private investment and use the panel data of brazil, russia, india and china over the time period of 1990 to 2014.these results indicates that the private investment plays a significant role in financial development. omitogun (2018) examined the crowding out effect of public expenditures on investment in nigeria and use the annual data cross from 1981 to 2015 by using methodology of ardl. the results find that the effect of public expenditures on investment depends upon the section of expenditures. olaifa and benjamin (2014) examined the relationship among public investment and private investment in nigeria and use the time series data cross from 1981 to 2016. public investment was separated into different section and adf unit root test was implementing to establish the stationary effects of the variables. saidjada and jahan (2016) found the relationship among government and private infrastructure investment in bangladesh for the period 1981-2015 and investigates how the liberalization of the financial sector affected the relationship between two given variable by using the methodology of ardl bound test. the results show that government infrastructure investment negatively affects on capital formation both in short run and long run, suggesting that public infrastructure investment crowds out private infrastructure investment. ouedraogo, sawadogo and sawadogo (2019) explored the crowding out or crowding-in effect of government investment on private infrastructure investment in africa. use the large sample 44 african countries cross the period 1960 to 2015.the result finds that on average government infrastructure investment crowds in private infrastructure investment in africa. 3. data and methodology the present study collected the data of private infrastructure investment, public infrastructure investment and investment in energy sector from the handbook of statistic, state bank of pakistan while data on gdp growth is collected from world development indicator (wdi). review of economics and development studies, vol. 7 (3) 2021, 407 416 411 3.1 details of variables this study uses annual data of pakistan on variables like private infrastructure investment (piib), public infrastructure investment (piia), gross domestic product (gdpga) and investment in energy sector (ies) for the period 1981-2015. this study uses the ardl methodology to finds the effect of public infrastructure expenditure on private infrastructure investment. 3.2 econometric model to evaluate the correlation among government infrastructure investment and private infrastructure investment, i will use mathematical and econometric form of model is as follows; lnpiib=β⸰+β₁lnpiia+β₂gdpga+β₃lnies+e lnpiib=log private infrastructure investment independent variables, lnpiia=log public infrastructure investment gdpga= gdp growth (annual %) lnies=investment in energy sector where lnpiib, lnpiia, gdpga and lnies represents private infrastructure investment, public infrastructure investment, gross domestic product and investment in energy sector. parameters β₁, β₂ and β₃ are the long run elasticises of lnpiib with respect to public infrastructure investment, gross domestic product and investment in energy sector respectively. consider above advantages of ardl approach to co-integration, we specify the following model: ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) ( ) ( ) ( ) ( ) where ∆ is the first difference operator, q is optimal lag length, β₁, β₂, β₃ and β₄ represents short-run dynamics of the model and β₅, β₆, β₇ and β₈ are long-run elasticities. before running the ardl model we tested the level of integration of all variables. an error correction version of above equation is given as below: ( ) ∑ ( ) ∑ ( ) ∑ ( ) ∑ ( ) where q₁, q₂, q₃ and q₄ represent optimal lag length, ƛ is the speed of adjustment parameter and ec represents the error correction time derived from longrun relationship. 4. empirical findings unit root tests are performed on all the series before utilizing an auto regressive distributed lagged model. at the first difference and at the level, adf's results are shown in table 3.1 while gdpga are stationary at 1 percent significant level according to the augmented dickey fuller test, the results of testing show that ln (ies), ln (piib), and ln (piia) are stationary at the first difference. it's possible to apply the ardl model for cointegration in this instance. review of economics and development studies, vol. 7 (3) 2021, 407 416 412 table 1 unit root test variables augmented dickey fuller test (adf) 1(0) adf 1(1) philips perron (pp) 1(0) pp 1(1) lnpiibₜ -0.684 -7.029 -0.631 -7.029 lnpiiaₜ -1.239* -5.634 -1.045* -9.655 gdpgₜ -3.542 -7.525 -3.510 -12.848 lniesₜ -1.603* -5.287 -1.492* -8.899 note. * shows the significance level at 1% table 1 represents the unit root test of all variables. this table consists of adf and pp. autoregressive distributed lag (ardl) approach to co integration avoids some limitations. it is not necessary to apply ardl model that all the variables are stationary are at same level or at difference. it can be applying when some variables are at 1 st difference while some are at level. this method has receiving more advantages to other methods due to various econometric advantages. before applying this method, we must test the integration of all variables. to check the stationary of all variables we conduct adf and pp. in order to check long run relation among all variables we conducted bound test using f-statistics with two bounds which are lower and upper bounds. i f value of fstatistics is less than lower bound than null hypothesis is accepted and if value of f-statistics is larger than upper bound than null hypothesis is discarded and if it is lies between two bounds then there is no decision area. after all these techniques we used optimal lag length criteria to select the optimal lag length of variables for selecting the optimal lag we used schwarz info criterion (sc). the descriptive statistics are used to calculate the variability of the data and to calculate the distribution of the data collection. this made the normality of the variables used in the analysis simpler and also helped recognise the variables that had to be translated in to the natural log. table 2 descriptive statistics lnpiib lnpiib gdpga lnies mean 9.897 10.267 4.707 9.856 medium 9.540 10.080 4.832 9.761 maximum 12.455 11.832 7.920 11.188 minimum 7.446 8.494 1.014 8.124 std. dev. 1.781 1.143 1.973 1.061 sum 346.428 359.375 164.745 344.969 observations 35 35 35 35 table 3 lag selection lag log l lr fpe aic ac hq 0 -149.759 na 0.130* 9.318 9.500 9.379 1 -71.204 133.304 0.002 5.527* 6.434* 5.832* 2 -62.120 13.213 0.004 5.946 7.579 6.496 table 3 shows the lag length criterion in which we use different criteria. according sequential modified criteria lag length at order 1. according to final prediction error criteria lag length at 1. according to akaike information criterion lag length at order 1. according to schwarz information criterion lag length at order 1. at the end hannan-quinn information criterion lag length at 1. now review of economics and development studies, vol. 7 (3) 2021, 407 416 413 author apply the bound test to check that ardl applied or not. table 4 bound test order of lag f-statistics 2 6.486 the upper bound value is the 3.77 while lower bound value is the 2.72. it is clear from table 4 that there is no evidence to support the null hypothesis of no long-term association between the variables studied. as a result, we discover that the variables exhibit long-term correlation. the calculated f-statistics are included in table 4 to help with the model's lag length selection. the ideal lag length of the variables included in the ardl was determined using the schwarz information criterion (sc). table 5 shows that lnpiia is the most important element of private infrastructure investment. the impact of lnpiia on lnpiib is significant at 1% level of significance. at one % level of significance the impact of lnpiia on lnpiib as expected is negative. the coefficient (-1.012637) of lnpiia indicates that 1% rise in public infrastructure expenditure deteriorates the private infrastructure investment by 1.012637 % in the long run. table 5 ardl long run results variable coefficient std. error t-statistics prob. lnpiia -1.012 0.529 -1.913 0.076 gdpga 0.578 0.134 4.289 0.000 lniec 3.465 0.703 4.928 0.000 c 16.562 2.306 -7.181 0.000 table 6 ardl error correction model variables coefficient standard error t.ratio prob* constant -9.080 1.997 -4.545 0.000* lnpiib 0.286 0.153 3.453 0.003 lnpiia 0.369 0.113 3.265 0.017* gdpga 0.136 0.029 4.652 0.012* lnies 0.173 0.218 5.754 0.000* coint(-1) -0.548 0.112 -4.888 0.000 r-squared=0.99, adjusted r-squared=0.98, f-statistic=181.48, prob(f-statistics) =0.000000 durbin-watson stat=2.090620 note* shows the significance level at 5%. table 6 shows the results of the selected ardl approach. coefficients of the variables show the short run elasticity. results represent that in the short run lnpiia once again is the most significant factor (with largest t-ratio) of private infrastructure investment. however, the variable lnpiia affect the private infrastructure investment added at 1% significant level. the 0.36 value of coefficient of lnpiia reveals that ten % rise in piia take about 3.6 % additions in private infrastructure capital formation added in the short run. review of economics and development studies, vol. 7 (3) 2021, 407 416 414 4.1 stability testing the cusum test brown, durbin and evan (1975) is based on the cumulative sum of the recursive residuals. this opinion plots the cumulative sum together with 5% critical lines. if the total sum goes beyond the region between the two critical lines, the test considers parameter instability. it was calculated by using this stability variable. -12 -8 -4 0 4 8 12 02 03 04 05 06 07 08 09 10 11 12 13 14 15 cusum 5% significance figure: 4. 1 cusum the graph for cusum is shown in figure (4.1). we use this technique to verify the stability of our ardl model, which is based on an error correction model. brown et.al (1975) presented this strategy. if the blue lines remain inside the critical bound, then our ardl is stable. -0.4 0.0 0.4 0.8 1.2 1.6 02 03 04 05 06 07 08 09 10 11 12 13 14 15 cusum of squares 5% significance figure: 4.2 cusum square review of economics and development studies, vol. 7 (3) 2021, 407 416 415 the above graph clearly shows that the variable has a maximum degree of stability level. at the blue line including the degrees of stability between red lines that exist. the 5% significance level is shown by the red lines. 5. conclusions this paper aimed to explore the causal factor of private infrastructure investment in pakistan cross the period 1981-2015. we considered three variables (public infrastructure investment, gross domestic product, investment in energy sector) as the determinants of private infrastructure investment. our results show that public infrastructure investment negatively effects on private infrastructure capital formation both in long run and short run, indicating that government infrastructure investment crowds out private infrastructure expenditure. however, the crowding-out effect is partly eliminated by liberalization that raises private infrastructure investment. 6. policy implication in view of results of the current report, it is strongly recommended that the government of pakistan put in place policies that could increase the level of public investment and regulate the level of investment prices. the results of this paper have significant policy implications for determining the government position in investment and liberalization policies. references afonso, a., & st. aubyn, m. i. g. u. e. l. 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(2011). public capital and regional economic growth: a svar approach for the spanish regions. investigaciones regionales-journal of regional research, (21), 199-223. mitra, p. (2006). has government investment crowded out private investment in india?. american economic review, 96(2), 337-341 naqvi, n. h. (2002). crowding-in or crowding-out? modelling the relationship between public and private fixed capital formation using co-integration analysis: the case of pakistan 19642000. the pakistan development review, 255-275. odhiambo, n. m. (2011). tourism development and economic growth in tanzania: empirical evidence from the ardl-bounds testing approach. economic computation and economic cybernetics studies and research, 45(3), 71-83. olaifa, f. g., & benjamin, o. o. (2020). government capital expenditure and private sector investment in nigeria. advanced journal of social science, 6(1), 71-82. omitogun, o. (2018). investigating the crowding out effect of government expenditure on private investment. journal of competitiveness, 10(4), 136-150. ouédraogo, r., sawadogo, h., & sawadogo, r. (2019). impact of public investment on private investment in sub‐saharan africa: crowding in or crowding out?. african development review, 31(3), 318-334. pimentel, i., st aubyn, m., & ribeiro, n. (2017). the impact of investment in public private partnerships on public, private investment and gdp in portugal. saidjada, k. m., & jahan, s. i. (2018). public and private investment nexus in bangladesh: crowding-in or out?. the journal of developing areas, 52(4), 115-127. tchouassi, g., & ngangué, n. (2014). private and public investment in africa: a time-series crosscountry analysis. international journal of economics and finance, 6(5), 264. xu, x., & yan, y. (2014). does government investment crowd out private investment in china? journal of economic policy reform, 17(1), 1-12. review of economics and development studies vol.2, no 1, june 2016 1 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 2: issue 1 june 2016 journal homepage: www.publishing.globalcsrc.org/reads the determinants of female child labour in pakistan: the case of multan city 1 anum imran, 2 fatima farooq, 3 imran sharif chaudhry 1 visiting lecturer, school of economics, bahauddin zakariya university multan, pakistan, anum6868@yahoo.com 2 lecturer, school of economics, bahauddin zakariya university multan, pakistan, fatimafarooq@bzu.edu.pk 3 professor, school of economics, bahauddin zakariya university multan, pakistan, imran@bzu.edu.pk article details abstract history revised format: may 2016 available online: jun 2016 the ever-rising danger of child labour has created several problems in pakistan. the purpose of this study is to find out those determinants which affect the female child labour in multan and also identify some new determinants which affect the incidence of the child labour. data has been collected for 200 female labourers, employed as maidservants, baby sitters and other household activities. the results of the study show that female child labour decreases due to increase in schools, assets, per-capita income, transfer payments, education and number of employed members in a family while on the other hand; large family size increases the female child labour. on the basis of the econometric analysis, we may suggest that government officers, media experts, members of non-government organizations and educationists should make serious and sincere efforts to achieve the objective of decreasing the incidence of female child labour and develop their living situations. © 2016 the authors, under a creative commons attributionnoncommercial 4.0 keywords determinants, female child labour, per-capita income, family size jel classification j20, j21, p44 corresponding author’s email address: anum6868@yahoo.com recommended citation: imran, a., farooq, f. and chaudhry, i. s. (2016). the determinants of female child labour in pakistan: the case of multan city. review of economics and development studies, 2 (1) 1-10 doi: : https://doi.org/10.26710/reads.v2i1.121 1. introduction child labour is not a small issue in the real world. most of the developed and developing countries try to reduce the incidence of child labour in order to increase their future productivity. child labour indicates those children who earn at their childhood age. child labour is the employment of children at early age and this work is not suitable for their growth (grand, 1983). incidence of child labour has very strong roots in destroying the children’s future. so, this problem is not a current issue. during the industrial revolution large number of children were working in factories at lower wages. in victorian era children were employed in cotton mills, chimney sweeps and mines. in the early 1900s large number of boys were working in glass making industries. in 1979 the international labour organization estimated the ratio of child labour. according to their estimation 52 million children were working all over the world (ilo, 1979). after that in 1983 the http://www.publishing.globalcsrc.org/reads mailto:anum6868@yahoo.com mailto:fatimafarooq@bzu.edu.pk mailto:imran@bzu.edu.pk mailto:anum6868@yahoo.com https://doi.org/10.26710/reads.v2i1.121 review of economics and development studies vol.2, no 1, june 2016 2 international labour organization re-estimated the ratio of child labour in order to correct the previous estimation and found that 100 million children were working in the world (ilo, 1983). in 1995 united nation sub commission declared that 145 million children below the age of 14 were working around the world due to several reasons. in pakistan the international labour organization reported that 2 to 3 million children are working in order to meet their family needs (ilo, 1979). these children are working in hotels, shops and factories at lower wages, apart from this mostly children are begging on roads and historical places. the phenomena of child labour is growing very fast in our society due to various determinants. some of these determinants are poverty, large family size, low income level and lack of health and education facilities etc. in developing countries due to poverty and low income level parents prefer to send their children to earn instead of school attainment. in developing countries incidence of child labour high due to market imperfection and lack of employment opportunities. so therefore all the mentioned above factors pressurize the children to work in order to meet their day by day needs. this labour force is not useful for the development of the country because they work at their learning age without any skills. the present study has been organized in following manners: in section 2, a brief review of earlier studies has been presented. objectives of the study have been classified in section 3.data and methodological issues have been concisely mention in section 4. econometric specification of the model is existing in section 5. section 6 is reserved for results and discussions. finally, the conclusion and policy recommendations are discussed in section 7. 2. review of literature on the determinants of female child labour there have been many studies on the determinants of female child labour but in this section only specific studies are discussed in order to find out the various determinants of female child labour. mehta et al. (1985) studied the determinants of child labour in bombay. this study was based on crosssectional data. this study found that in india the incidence of child labour was high. in bombay 30,000 children were working, most of them were migrants moreover, this study found that 68 percent children were working in hotels and 73 working children were considered as a part of dharavi. in india 22 percent children under age 10 year started working in order to meet their family needs but they earned less than $11 per month. a part from this 40 percent children were working more than 12 hours and 16 percent of them also attended school. in bombay due to lack of food, children were suffering from anemia and vitamin deficiency. patrinos and psacharopoulos (1995) explored the relationship between education performance and the incidence of child labour in paraguay. this study used the data from 1990 household survey conducted in paraguay. in this study children age of 12 to 19 were selected in order to examine the relationship between school attainment and labour characteristics. in paraguay schooling was compulsory for all up to the age of 13 year but 28 percent children age of 13 had already left schools. this study also presented some suggestions such as education subsidies should be provided to poor household in order to decrease the child labour and increase in school attainment. canagarajah and nielsen (2001) revealed all those factors which effected the child labour in africa. this study found that the incidence of child labour was less in all those families where household had physical assets like land and business. imperfect capital market hypothesis found that access of the credit facilities had a positive impact on child labour reduction. in africa the ratio of child labour also increased due to the crop failure. due to high school cost parents were preferred to send their children for work in order to meet their basic needs. child labour was less in all those families where welleducated household existed. review of economics and development studies vol.2, no 1, june 2016 3 beegleet al. (2003) showed the relationship between child labour, income shocks and access of credit. this study was based on panel data of tanzania. ordinary least square was used in this study. during income shocks parents considered themselves less productive so they sent their children for work in order to meet their day by day requirements. access of credit had negative impact on child labour. this study revealed that child labour decrease with high collateral level due to wealth effects. access of credit and education benefits also led to decreased in child labour. ownership of land also effect the child labour. according to this study income shocks had positive impact on child labour. if parents have farming land they send their children for work in land in order to fulfil their daily expenditures. okpukpara et al. (2006) defined all those causes which encouraged the child participation in economic activities in nigeria. this study was based on survey conducted by federal office of statistician in conjunction with international labour organization from july 2000 to february 200. this sample consisted of children age 8 to 17 year. probit regression used in order to found the results. this study found that the incidence of child labour was high in northern than southern nigeria. in northern nigeria due to lack of well-educated mothers the ratio of child labour was high. the ratio of child labour was also high in all those families where children were not living with their biological parents. rickey (2009) revealed all those determinants which effect the household’s decision about child work and school attendance. data of this study was based on international labour organization. multinomial logit model used to find out results. this study found that educated household head led to decrease in child labour so household head had positive impact on children education especially girls education. in rural and urban areas male were engaged more in child labour then female. in rural areas children worked full time or half time according to their family needs. all those household had large amount of land selected more children for work. basu et al. (2010) showed the impact of wealth on child labour. the ratio of child labour was less in all those areas where household had land and perfect labour market exist. on the other hand imperfect labour market led to increase the child labour. due to imperfect labour market large land holding parents preferred to send their children for work instead for schooling. the ratio of child labour was also very high in all those areas where household used their land in order to meet their basic needs. chakrabarty et al. (2011) explained the factors that influenced the decision of child labour and child schooling in nepal. this study also revealed the impact of non-governments organizations on poverty alleviation and increased in social welfare. on-governments organizations also had great influence on child schooling. according to empirical results child labour decreased as increasing in child schooling. labelling non-governments organizations intervention had a significant positive impact on increasing the child schooling. improvement in household’s education led to decreased in child labour. this study found that strong negative relationship existed between education level of household and child labour. adult income had significant positive impact of child schooling and negative impact on child labour. non-governments organizations were most important factor in preventing the child labour. this study gave some suggestions such as adult wage should be increased in order to reduce the incidence of child labour. banerjee and nag (2013) showed that globalization policies and agriculture policies also effected the child labour. in this study three sector general equilibrium model was used. in order to find the results this study divided the agriculture sector into two parts such as modern agriculture and traditional agriculture. according to this study in developing countries the ratio of child labour was very high due to lack of foreign direct investment. review of economics and development studies vol.2, no 1, june 2016 4 3. objectives of the study keep in view the previous background and the objective of the study as following: i. to find out the effect of poverty on female child labour. ii. to explore the impact of number of schools and hospitals on the incident of female child labour. iii. to identify the impact of family characteristics on female child labour. iv. to find out the relationship between transfer payments and female child labour. 4. data and methodological issues data is the collection of any number which is related to observations. the present study is based on primary data which consists of 200 respondents. in order to find out the determinants of female child labour purposive sampling technique is used. sample data is collected with the help of questionnaire and purposive sample based on 200 respondents who send their female children for work at their childhood age in multan. methodology is the combination of the methods and procedures which are selected to achieve the objectives. the methodology and variables for the present study have been selected keeping in the view their relative importance on theoretical and empirical basis. participation rate of female child in labour force is used as dependent variable. family size, age of female child, number of employed male and female, per-capita income, benazir income support program, assets and number of schools are used as independent variables in order to find out the results ordinary least square method is used. 5. econometric specification in order to find out the determinants of female child labour, we have specified the following econometric equation. this equation has been estimated by employing the method of ordinary least square (ols). prr=α1-α2ast-α3schα4log (pci)-α5bis+α6age+α7fas-α8emm-α9emf-α10edu+µ in this study with the help of e-views multiple regression analysis is used in order to check the effect of assets (ast), number of schools (sch), per-capita income (pci), benazir income support program (bis), age of female working children (age), family size of female children (fas), number of employed male and female (emm, emf), and participation rate of female children in labour force (prr). assets (ast) of the families also influence the female child labour decision. literature review shows that assets have negative effect on female child labour. incidence of female child labour is less in all those families where household own assets on the other hand in all those families where household have no assets more send their children for work. benazir income support program (bis) represent the transfer payments. transfer payments are one of the important determinant of the female child labour. according to the different studies transfer payments have negative impact on female child labour. female child labour decreases due to increase in transfer payments. employed male members (emm) represents the number of employed male member in the family of female working child. according to the studies employed male members have negative impact on female child labour. incidence of female child labour is less in all those families where large number of male participates in labour market. employed female members (emf) also have a great impact on the incidence of female child labour. according to the different studies number of the employed female members have negative impact on female child labour. incidence of female child labour is less in all those families where large number of female participates in labour market. review of economics and development studies vol.2, no 1, june 2016 5 education (edu) of the female working children also influence the incidence of female child labour. education of the female working children have negative impact on female child labour. according to various studies less educated female children more participates in labour force. family size (fas) is one of the important determinant of female child labour. family size indicates number of male and female members in a house. according to previous studies family size has positive impact on female child labour. incidence of female child labour is high in large families. number of schools (sch) also have a great influence on the incidence of female child labour. according to the previous studies number of schools have positive impact on incidence of female child labour. incidence of female child labour is less in all those areas where large number of schools exist. per-capita income (pci) is one of the important determinant of female child labour. per-capita income means average income per person. according to the studies per-capita income has negative impact on female child labour. female child labour increases due to increase in per-capita income. participation rate (prr) is one of the dependent variable. participation rate indicates number of female working children. high participation rate shows that incidence of female child labour increases while on the other hand low participation rate indicates that incidence of female child labour decreases. 6. results and discussions a). descriptive analysis descriptive analysis highlights the main characteristics of collected observations. it is used to define the data more clearly. in descriptive analysis it is very simple to present the data .in case of continuous variables descriptive analysis gives more accurate results as compare to categorical variables. descriptive statistics refers to mean, median, standard deviation, maxima and minima. mean shows the average value. in descriptive statistics median identify the most middle value of the arrange data. maxima and minima shows the minimum and maximum value of the variables. jarque-bero (jb) test is used to test the normality of the residuals in a large sample. table: 5.1: results of descriptive analysis prr sch pci fas emm age mean 0.91 0.57 1602.32 6.32 1.35 11.37 median 0.66 1.00 1600.00 6.00 1.00 11.00 maximum 3.00 2.00 3500.00 11.00 4.00 13.00 minimum 0.25 0.00 1000.00 4.00 0.00 8.00 std. dev. 0.62 0.52 635.32 1.70 0.77 1.49 skewness 1.63 -0.06 0.61 0.41 0.51 -0.20 kurtosis 5.54 1.52 2.39 2.49 3.31 1.61 jarque-bera 142.32 18.30 15.57 7.84 9.49 17.48 probability 0.00 0.00 0.00 0.02 0.01 0.00 observations 200.00 200.00 200.00 200.00 200.00 200.00 mean of participation rate of larger force is 0.91 and the median of participation rate of labour force is 0.66 and the maximum value of participation rate of labour force is 3 and minimum value is 0.25. mean of the age of child labour 11.37 and the median of age is 11. maximum value of age is 13 and minimum value of age is 8. mean of emm is 1.35 and median is 1. maximum value of emm is 4 and minimum is 0. mean of fas is 6.32 and median is 6 maximum value of fas is 11 and minimum value of fas is 4. mean of pci is 1602.32 and median is 1600. maximum value of pci is 3500 and review of economics and development studies vol.2, no 1, june 2016 6 minimum is 1000. mean value of number of schools is 0.57 and median is 1 and maximum value is 2 and 0 is minimum value. table: 5.2: correlation matrix prr sch pci fas emm age prr 1.00 -0.21 -0.44 0.33 -0.33 0.38 sch -0.21 1.00 -0.02 -0.07 0.08 -0.04 pci -0.44 -0.02 1.00 -0.32 0.05 -0.20 fas 0.33 -0.07 -0.32 1.00 0.40 0.14 emm -0.33 0.08 0.05 0.40 1.00 -0.22 age 0.38 -0.04 -0.20 0.14 -0.22 1.00 table 5.2 shows the correlations among the variables such as according to this table prr 1 percent correlated with itself, 21 percent correlates with sch, 44 percent correlated with pci and so on. this table also identify that these variables are positively correlated or negative correlated with each other for example in case of positive correlation both variable move in same direction and in case of negative correlation both variables move in opposite direction. this table helps to understand the strength of the relationship among the variables. b). econometric analysis simple regression analysis is used when one variable is dependent and other variable is independent. this study discusses more than one independent variable that’s why multiple regression analysis is use in this study. multiple regression analysis shows the relationship between dependent variable and more than one independent variable. multiple regression is explained as follows. y=α1+ α2x2i+α3x3i+α4x4i+µ where y is dependent variable and x2, x3are independent variable. in this multiple regression α1 is the intercept term. α2, α3 and α4are known as partial regression coefficient.α2shows how much changes occur in y when x2 change by one unit.α3 indicates the change in y due to the one unit change in x3 and last but not the least α4identify the change in y due to one unit change in x4 .according to the assumptions of multiple regression there is no exact linear relationship among the independent variables. so there is no multicollinearty in this model. in the presence of exact relationship it is not possible to solve the equation. the stochastic disturbance term is µ here which is used to remove the impact of all those variables which is not included in the model. in this model i shows the number of observation. firstly it is assumed that the dependent variable is not a linear function of the explanatory variables and all the independent variable have no relationship among each other. the value of independent variable is fixed in repeated sample. all independent variables are non-random and expected value of stochastic term is equal to zero for all observation. each µt is normally distributed with zero mean and constant variance. now it is important to discuss some properties of multiple regression. for the ols estimators to be linear all the explanatory variables are random and their value are fixed in repeated sample. second property is unbiasedness.�̂� will equal to true α. this mean that if sample size increases α remains equal to the last but not the estimators are blue (best linear unbiased). its means that they follow the properties of unbiased, linear and smallest variable. table 5.25 dependent variable: prr method: least squares review of economics and development studies vol.2, no 1, june 2016 7 variable coefficient std. error t-statistic prob. c 2.61 0.69 3.76 0.00 sch -0.14 0.06 -2.50 0.01 ast -0.29 0.06 -4.79 0.00 lpci -0.26 0.08 -3.10 0.00 fas 0.17 0.03 6.42 0.00 emm -0.33 0.05 -7.14 0.00 emf -0.11 0.03 -3.40 0.00 edu -0.03 0.02 -1.64 0.10 bis -0.24 0.07 -3.33 0.00 age 0.02 0.02 0.91 0.36 r-squared 0.61 f-statistic 32.57 adjusted r-squared 0.59 prob(f-statistic) 0.00 in this table prr(participation rate) is the dependent variable while on the other hand age(age of female children), ast(assets of the family), bis(benazir income support program), emf(employed female) and emm employed male), fas(family size), lpci(log of per-capita income) and sch(number of schools) are independent variables. this table shows that 1 year increase in age leads to 0.02 unit increase in prr. p-value of age shows that age is insignificant. if ast increase 1 unit it decreases 0. 29 unit of prr. pvalue of ast shows that ast (assets) is significant because its probability is 0.0000. bis (benazir income support program) has negative impact on female child labour. probability of bis is 0.0010 which is significant. emf (employed female) also has negative effect on incidence of child labour. this table indicates that 1 unit increase in emf lead to 0.11 unit decrease in prr and the probability of emf is 0.00 which shows that emf is significant. prr decreases 0.33 unit due to 1 unit increase in emm there is negative relationship between emm and prr. emm is significant. fas (family size) has positive impact on child labour. according to table 1 unit increase in fas lead to 0.17 unit increase in prr. fas is statistically significant. pci (per-capita income) also has negative impact on female child labour. in this table per-capita income is use inform of log in order to obtain better results. this table shows that rs 1 increase in lpci leads to 0.26 unit decrease in female child labour. and lpci has statistically significant. numbers of school is another independent variable. according to the table sch has negative impact on female child labour which means that 1 unit increase in number of schools lead to 0.14 unit decrease in child labour. and number of schools is statistically significant. edu (education of the female working child) is one of the independent variable which has negative impact on incidence of female child labour. this variable is also significant and shows that 1 year increase in education leads to 0.03 unit decrease in female child labor. the value of adjusted r-squared is 0.59 which means that 59 percent of the variation in participation rate is described by independent variables. value of f-statistic is 32.57which shows that 32 percent over all model is significant. value of tstatistic shows that age of the female. 7. conclusion and policy implications included observations: 200 review of economics and development studies vol.2, no 1, june 2016 8 child labour is one of the scorching issues now a days. in developing countries the incidence of child labour is very high due to several reasons such as poverty, unemployment, lack of health and education facilities. the determinants of female child labour data are collected with the help of purposive sampling. in this study the sample is based on 200 female who send their children for work in their childhood age. ordinary least square is used in order to find out the results. in this study participation rate use as dependent variable assets ,number of schools, per-capita income, benazir income support program, age of female working children ,education of female working children family size of female children, number of employed male and female are independent variables. in this both qualitative and quantitative techniques are use in order to find out better results. the result of this study shows that the incidence of female child labour is less in those families where large number of employed female and male exist. low income level is the major determinant of the male and female child labour. due to the low income level parents prefer to send their children for work in order to fulfill their family needs. so per-capita income and income of household head has negative impact on the incidence of female child labour. literate female children less participate in labour force while this ratio is too high where large number of illiterate child exist. per capita income has significant effect on reduction in female child labour. according to the results transfer payments and assets also have negative impact on child labour while on the other hand large family size increases the child labour ratio. this study finds that majority female child labour are belong to those families where household head have no assets. number of educated male and female members in a family also affect the incidence of child labour. illiterate and less educated parents have negative impact on female child labour. well educated parents are aware of the value of education so they prefer to send their children for school attainment. female child labour ratio also very high in all those areas where low quality and quantity educational institutions are exist. some suggestions are given in this study in order to decrease the incidence of child labour such as government should provide better employment opportunities for adult and also introduce some vocational training programs for females in order to increase the income of their family. in order to decrease the incidence of female child labour in rural areas number of government schools should be established and the quality of education should be improved in existing schools. poverty is the main determinant of female child labour. in order to increase the small business government should increase the number of microfinance institution in those areas where the ratio of female child labour is not too small. transfer payments also play a crucial role in order to decrease the female child labour but in rural areas people are unaware about the system of receiving the transfer payments so in rural areas such institutions should be established which make the people aware about the whole procedure and also check their performance. in rural area large number of family size is considered to be a good sign in the way of increase in income level so government and nongovernment organizations should take effective measures in order to make the people aware that this large family size is only a great hurdle in the way of poverty alleviation. references ali, g. (2011). economic factors responsible for child labor (a case study of district swabi). journal of managerial sciences, 5(1). ali, k., &amp; hamid, a. (1999). major determinants of female child labour in urban multan (punjab-pakistan). department of economics, bahauddin zakariya university, multan. processed. basu, k., das, s., &amp; dutta, b. (2010). child labor and household wealth: theory and empirical evidence of an inverted-u. journal of development economics, 91(1), 8-14. beegle, k., dehejia, r. h., &amp; gatti, r. (2003). child labor, income shocks, and access to credit. world bank, development research group, poverty team and investment climate. review of economics and development studies vol.2, no 1, june 2016 9 canagarajah, s., &amp; nielsen, h. s. (2001). child labor in africa: a comparative study. the annals of the american academy of political and social science, 575(1), 71-91. chakrabarty, s., grote, u., &amp; luchters, g. (2011). does social labelling encourage child schooling and discourage child labour in nepal? international journal of educational development, 31(5), 489-495. grootaert, c., &amp; kanbur, r. (1995). child labour: an economic perspective. int&#39;l lab. rev., 134, 187. mehta. m. n., prabhu, s. v. &amp; mistry, h. n. (1985) child labour in bombay.child abuse and neglect, 9, 107–111. okpukpara, b. c., &amp; odurukwu, n. (2003). incidence and determinants of child labour in nigeria: implications for poverty alleviation. african journal of economic policy, 10(1), 133-162. pasha, g. r., iqbal, m., &amp; farooq, s. k. (2001). facts and factors about the destiny of working and escaped children in punjab (pakistan). pakistan economic and social review, 1-24. patrinos, h. a., &amp; psacharopoulos, g. (1995). educational performance and child labor in paraguay. international journal of educational development, 15(1), 47-60. raja, chand. (1983).child labour: an explanatory study of fifty children working in auto workshops. lahore: department of social work, university of the punjab. rickey.l, (2009). the determinants of child labour and schooling in the philippines. southern economic journal .70(4). review of economics and development studies, vol. 8 (3) 2022, 233-249 233 determinants of the attractiveness of foreign direct investments in cemac: an empirical panel analysis over the period from 1985 to 2019 ferdinand moussavou a a marien ngouabi, university, brazzaville email: fajmoussavou@gmail.com article details abstract history: accepted 30 july 2022 available online september 2022 this this article aims to determine the factors that explain the attractiveness of foreign direct investment (fdi) at the level of the six countries of the economic and monetary community of central africa (cemac), over the period 1985-2019. using the fixed effects panel model, the results of this research indicate that gross domestic product per capita, human capital, domestic credit provided to the private sector by banks and gross national expenditure explain the attractiveness of fdi. moreover, by using the ordinary least squares (ols) model to analyze the determinants of the attractiveness of fdi by country, the econometric results show differentiated effects. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: foreign direct investments, cemac, panel data jel classification: c23, c22, d3 doi: 10.47067/reads.v8i3.467 corresponding author’s email address: fajmoussavou@gmail.com 1. introduction since the acceleration of the globalization process in the 1980s, the question of the determinants of the attractiveness of foreign direct investment (fdi) has become a favorite subject of many economic studies (sumata & zumbu, 2020 ; moussavou, 2021). thus, according to lall (2000) and sumata and zumbu (2020), this concern is justified by the participation of fdi in global industrial restructuring, the rise of emerging and developing countries and in the wealth gap between countries. at the global level, the work of the united nations conference on trade and development (unctad, 2018 ; 2020) on the determinants of the attractiveness of fdi revealed, for example, that over the period from 1990 to 1994 the global fdi flows were 202 billion us dollars. from 1995 to 2012, they rose to 331 billion us dollars, then to 1450 billion us dollars between 2013 and 2016. from 2017 to 2018, these flows will fall by 23% to settle at 1430 billion us dollars. on the other hand, in 2019, they will go up to 1540 billion us dollars. in developing countries, the problem of the attractiveness of fdi arises with acknowledgment. review of economics and development studies, vol. 8 (3) 2022, 233-249 234 according to navaretti and venables (2006), herzer and al. (2008) as well as ekodo and al., (2020), in these countries, fdi constitutes an important source of external financial transfers which contribute to increasing the productive capacity of their economy. to achieve their socioeconomic development goals, less developed countries resort to certain modes of external financing such as official development assistance and external borrowing (guiswe & abessolo, 2017). according to unctad studies (2018; 2020), in these countries, the share of fdi in total flows is unevenly distributed. for example, over the period from 2002 to 2019, this share was 54% between 2002 and 2012. between 2013 and 2016, it represented 60% and, from 2017 to 2019, 74%. these inequalities can be explained by low oil prices, the recession in raw materials and good governance. in the countries of the economic and monetary community of central africa (cemac), research by ekodo and al. (2020) addressed the issue of fdi attractiveness factors. their results showed that the economic and monetary authorities of cemac (cameroon, congo, gabon, equatorial guinea, central african republic and chad) have put in place investment codes attractive to fdi as well as industrial free zones to attract fdi.this resulted in an increase in the flow of inward fdi. thus, during the period from 2006 to 2018, cameroonian fdi flows ranged from 59 to 765.1 million us dollars. in congobrazzaville, they represented 1487.6 and 4113.1 million us dollars. in gabon, fdi flows ranged from 267.8 to 845.7 million us dollars. in equatorial guinea, from 469.5 to 395, us$ 8 million. in the central african republic, from 34 to 17.94 million us dollars. in contrast, in chad, these flows were negative, ranging from us$278.4 to us$662.2 million (ekodo and al., 2020). within cemac, empirical research on this issue is numerous and diverse. to our knowledge, the existing works come from, among others, djaowe (2009), guiswe and abessolo (2017), kouam and nafé (2019) and ekodo and al. (2020). these authors analyzed these determinants using periods (1993 to 2004; 1985 to 2015; 1987 to 2017; 1996 to 2018) and econometric techniques (generalized method of moments in dynamic panel; panel data with fixed effects). the results of their work turned out to be contradictory. therefore, the issue of this article revolves around the following central question : what are the determinants of the attractiveness of fdi within cemac? in other words, the variables (gross domestic product per capita, trade openness, inflation rate, global civil liberty index, degree of fight against corruption, investment rate, human capital, domestic credit provided to the private sector by banks and national expenditure) have they influenced the attractiveness of fdi ? to address this concern, we develop, after reviewing the literature on the determinants of fdi attractiveness, an empirical analysis based on the fixed effects model (for all cemac countries) and the ordinary least squares (for each country) over the period from 1985 to 2019, in order to determine the factors that explain the attractiveness of fdi in cemac, before suggesting some economic policies. our article is organized as follows : section 2 presents a review of the literature ; section 3 deals with the methodology adopted; section 4 presents and discusses the results, while section 5 serves as a conclusion and policy implications. 2. literature review 2.1. theoretical review the literature on the determinants of the attractiveness of foreign direct investment is inspired by authors such as hymer (1960). his work, according to which fdis fit into firms where foreign review of economics and development studies, vol. 8 (3) 2022, 233-249 235 transformation industries protect firms against competition, found an echo in the research of firm theorists (kindleberger, 1969 ; gray, 1972 ; horst, 1972), the “eclectic” approach (dunning, 1981) and those of international trade (brainard, 1993 ; markusen, 1995). for the firm's theoreticians, notably kindleberger (1969), the attractiveness of fdi is based on two premises. the first suggests that the firm which invests abroad must earn more than at home, if it wants to cover the risk and the cost of an operation in a legal political environment. in contrast, the second affirms that for a company to invest in a foreign country, it must have an advantage over the nature of the firms. this supposes that the firm must have an “advantage” that it can transport from one country to another and that local companies cannot acquire. according to gray (1972), the attractiveness of fdi is explained by the “distinctive character” of the foreign manufacturer. in other words, it is a matter of giving the foreign manufacturer the possibility of making additional profits by selling his product abroad. horst (1972) asserts that exports and production subsidiaries represent alternative means by which firms exploit their technological advantages over their foreign competitors. it must have an advantage over the nature of firms. this suppose that the firm must have an “advantage” that it can transport from one country to another and that local companies cannot acquire. according to gray (1972), the attractiveness of fdi is explained by the “distinctive character” of the foreign manufacturer. in other words, it is a matter of giving the foreign manufacturer the possibility of making additional profits by selling his product abroad. horst (1972) asserts that exports and production subsidiaries represent alternative means by which firms exploit their technological advantages over their foreign competitors. with regard to the “eclectic” approach, dunning (1981) suggests that firms must make a choice between three methods of penetrating the foreign market: fdi, licenses and exports. these methods thus translate into three types of advantages that a firm must possess in order to internationalize. these advantages are formalized under the term oli (ownership, location, internalization) paradigm. the first advantage, termed the ownership advantage (o) or property-specific advantage, involves physical capital, technology patents and personnel management strategies. the second, called location advantage (l), or location advantage, assumes that the characteristics of a host country make it more or less attractive to fdi. however, the third called internalization advantage (i), or internalization advantage, allows other firms to avoid any risk related to the sale of technology and not to expose themselves to competition. thus, for an establishment abroad through fdi to take place, these three advantages (o, l and i) must be combined. for international trade theorists (brainard, 1993 ; markusen, 1995), the emphasis is on imperfect competition, product differentiation, economies of scale and new communication and information technologies. according to these authors, the attractiveness of fdi is justified by the arbitration of multinational firms between proximity and concentration. this review reveals opposing points of view. on this subject, several empirical studies have been carried out in developed and developing countries. 2.2. empirical review empirical studies dealing with the determinants of the attractiveness of foreign direct investment in developed countries are few and far between. in this context, dupuch and milan (2005) have analyzed, for the case of central and eastern european countries (ceec), the determinants of fdi attractiveness during the period from 1993 to 1998. using panel data and the holland and pain (1998) privatization method, they show that wage cost differentials between these countries do not favor the attractiveness of foreign direct investment. according to them, the wage differential resulting from the eu and candidate countries positively explains fdi. studying the determinants of fdi attractiveness in review of economics and development studies, vol. 8 (3) 2022, 233-249 236 canada over the period 1990 to 2008, aoumari (2009) finds that human capital, the degree of trade openness, inflation and the quality of public infrastructure positively explain fdi. in developing countries, empirical research is extensive. in this dynamic, obwona (1998) worked on the determinants of the attractiveness of fdi in the countries of the west african economic and monetary union (uemoa) over the period from 1981 to 1995. the results of this work made it possible to conclude that two macroeconomic factors positively influence the attractiveness of fdi. these are the gross domestic product and the growth rate. in a study conducted in 29 african countries, morisset (2000) highlights a set of macroeconomic variables that explain the attractiveness of fdi, namely, economic openness, economic growth rate and natural resources. in another vein, bassu and srinivasan (2002) conducted a study on the determinants of the attractiveness of fdi in 7 african countries (botswana, lesotho, mauritius, mozambique, namibia, swaziland, uganda). they lead to the results that political stability, good governance and low level of corruption favor fdi. by focusing his research on the determinants of fdi in morocco over the period from 1960 to 2000, bouoiyour (2003) brought very instructive results, namely, the size of the market, the cost of labor, the level public investment, inflation, human capital and exports have a positive and significant impact on fdi flows. on the other hand, koukpo (2005), based on the uemoa countries over the period from 1996 to 2003, asserted that two macroeconomic factors exert positive effects on fdi. these are economic openness and human capital. in the same vein, the work of the central bank of west african states (bceao, 2007), which is also part of this research orientation, has focused on the determinants of fdi. the results of his work revealed that the openness of the economy, the rate of investment and human capital are the most significant determinants of fdi flows. with traditional attractiveness factors, alaya and al. (2008) show that infrastructure, trade liberalization and human capital have a positive influence on fdi inflows. similarly, in a study conducted in cemac over the period 1993-2004, djaowe (2009) shows that the real gdp growth rate, current account balance, external debt, and political stability positively explain fdi attractiveness. however, studies that have examined the determinants of fdi attractiveness have multiplied since 2011, in particular anyanwu (2011), kamara (2013), bourri and benmassoud (2014) and azeroual (2015). thus, anyanwu (2011) conducted an empirical study on the determinants of fdi flows to africa over the period from 1980 to 2007. the author shows that market size, trade openness, consumer spending of administrations and the endowment of natural resources have a positive and significant impact on fdi. kamara (2013), in the context of 44 sub-saharan african countries over the period from 1981 to 2010, shows, from the generalized moments model (gmm), that the factors that positively influence fdi are financial development and institutions; while human capital and infrastructure impact it negatively. bouri and benmassoud (2014) dealt with the determinants of the attractiveness of fdi in the mena region. the results of their study revealed that, in the period from 1980 to 2011, the size of the market, the degree of economic openness, the level of infrastructure, political stability and the development of financial structures positively impact fdi flows. the work of tirhboula and al. (2017), for the case of 40 developing countries over the period from 2000 to 2015, validated these results. for his part, azeroual (2015) studied, for the case of morocco, the main determinants of fdi during the period 1980-2012. he confirms that in the long run, human capital, the real exchange rate, gross fixed capital formation, the guaranteed minimum wage, and infrastructure are the main determinants of fdi. review of economics and development studies, vol. 8 (3) 2022, 233-249 237 this issue has also been investigated by lam'hammdi and makhtari (2018), pegdwendé (2018), kouam and nafé (2019) and sumata and zumbu (2020). with this in mind, lam'hammdi and makhtari (2018) studied the determinants of the attractiveness of fdi in morocco based on the ardl model over the period from 1980 to 2017. they show that in the long term, gross capital formation fixed income and human capital have a positive impact on fdi. on the other hand, in the short term, trade openness and infrastructure have an insignificant impact on fdi. similarly, pegdwendé (2018) worked on the link between fdi, governance and economic growth in china and in 45 sub-saharan african countries over the period from 2004 to 2010. he used the “within” method and shows that the effects of fdi on these variables depend on their interaction with the control of corruption. ekodo and al. (2020), from the relationship between fdi, corruption and economic growth in cemac, during the period of 1996-2018, highlighted a lack of relationship between these variables. for their part, kouam and nafé (2019), in their work devoted to the determinants of the attractiveness of foreign direct investment in the cemac zone over the period from 1987 to 2017, find from the fixed effects panel model that the financial development index, urbanization rate, natural resources, public debt ratio, population growth rate, economy growth rate, public investment rate and degree of trade openness have positive and significant effects on fdi. while the rate of corruption, the democratic system, private investment, the level of inflation, the unemployment rate and the effective exchange rate exert harmful effects on fdi. furthermore, in a study published in 2020, sumata and zumbu conducted an investigation into the determinants of fdi and their impact on economic performance in the democratic republic of congo (drc). their results revealed that the quality of institutions, economic openness, domestic investment and macroeconomic instability are determinants of fdi. recent literature on the determinants of fdi attractiveness insists on the role of governance indicators. thus, by examining the role of governance indicators as a determinant of fdi in a sample of 44 african countries over the period 1985-2015, mohamed and aichi (2021) arrived at the following results : openness to trade, the exchange rate, the rule of law, the functioning of the state and the balance of current payments have positive and significant effects on fdi flows. on the other hand, market size, infrastructure, the fight against corruption, the quality of regulation and political stability negatively affect fdi in africa. in view of the above, it is interesting to highlight the determining factors of the attractiveness of fdi in the cemac, through an appropriate methodology. 3. research methodology 3.1 model specification in order to examine the determinants of fdi attractiveness, the methodology is based on the work of guiswe and abessolo (2017), kouam and nafé (2019), ekodo and al. (2020), sumata and zumbu (2020) and mohamed and aichi (2021). these authors used, among others, the methods of ordinary least squares (ols), dynamic ordinary least squares (dols) and generalized moments (gmg). within the framework of the economic and monetary community of central africa, we are inspired by the empirical work of guiswe and abessolo (2017) on the determinants of the attractiveness review of economics and development studies, vol. 8 (3) 2022, 233-249 238 of cemac countries with regard to fdi. these authors used the following model: 𝐼𝐷𝐸 𝑃𝐼𝐵 = 𝛾0 + 𝛼𝐴𝐺𝐿𝑂𝑀𝑖,𝑡 + 𝛽1𝐶𝑅𝐸𝐶𝑂𝑖,𝑡 + 𝛽2𝐶𝑂𝑀𝑀𝑖,𝑡 + 𝛽3𝑃𝐼𝐵𝐻𝑖,𝑡 + 𝛽4𝑇𝐼𝑁𝐹𝑖,𝑡 + 𝛽5 𝐶𝐻𝐴𝑁𝐺𝐸𝑖,𝑡 + 𝜕1 𝐿𝐼𝑃𝑂𝐿𝑖,𝑡 + 𝜕2𝐿𝐼𝐶𝐼𝑉𝑖,𝑡 + 𝜕3𝑇𝑈𝑅𝐵𝑖,𝑡 + 𝜕4𝐼𝑁𝐹𝑅𝑖,𝑡 + 𝜀𝑖,𝑡 (1) in this specification, guiswe and abessolo (2017) retain the ratio (fdi/gdp) as the explained variable. and, as explanatory variables, agglomeration (aglom), credit to the economy (creco), trade openness (comm), gross domestic product per capita (gdp), inflation rate (tinf), real exchange rate (change), global index of political rights (lipol), global index of civil liberties (liciv), the rate of urbanization (turb) and the stock of infrastructure (infr). the variable 𝛾0, represents the constant. the variables α and β range from 1 to 5. those of 𝜕𝑖, from 1 to 4. on the other hand, the variables 𝜀𝑖 and 𝑡 indicate the error term. the choice of this model, in cemac, is dictated by practical considerations and common characteristics (coastal, sahelian, monetary). but also, by the fact that this model has already been used in this area. as such, it seems to better explain the determinants of the attractiveness of fdi. unlike the model of guiswe and abessolo (2017), the econometric model is built by admitting that the determinants of the attractiveness of fdi can be explained by the combination of 9 variables: gross domestic product per capita, trade openness, inflation rate, overall civil liberty index, degree of fight against corruption, investment rate, human capital, domestic credit provided to the private sector by banks and gross national expenditure. these data were retained because of their theoretical and empirical role on the determinants of fdi. thus, the explained variable is the flow of inward fdi as an annual percentage of gdp (fdi/gdp). this variable designates the export of capital to another country in order to acquire, create a business or take a stake there. the explanatory variables are : gross domestic product per capita (gdp). it is considered an indicator of economic performance. when this indicator increases, the material resources of the inhabitants increase. this variable is supposed to have a positive influence on fdi (obwona, 1998 ; brahim & rachdi, 2014 ; zghidi, sghaier & abida, 2016). trade openness (ouv) measures the place held by the rest of the world in a country's economy. a positive relationship is expected between trade openness and fdi (morisset, 2000 ; koukpo, 2005 ; bceao, 2007 ; aoumari, 2009 ; anyanwu, 2011 ; bouri & benmassoud, 2014 ; tirhboula and al., 2017 ; kouam & nafé, 2019 ; sumata & zumbu, 2020; mohamed & aichi, 2021). the inflation rate (tinf) illustrates the phenomenon of a general rise in prices. a positive relationship (bouoiyour, 2003 ; aoumari, 2009) is expected between inflation and fdi. the global civil liberty index (glci) variable varies between 1 and 7. the number 1 indicates civil liberty and the number 7 corresponds to repression. the lowest scores (1 and 2) are assigned to countries respecting freedom of expression. the highest scores (6 and 7) correspond to states offering few freedoms to their citizens. the positive sign is expected between iglc and fdi (bassu & srinivasan, 2002 ; mohamed & aichi, 2021). the degree of fight against corruption (dlfc) implies the intervention of the state to increase transparency and promote public participation in decision-making processes. this variable is supposed to have a positive influence on fdi (bassu & srinivasan, 2002). the investment rate (tinv) reflects the immediate expenditure incurred by states, companies or individuals with the aim of improving their productivity. a positive sign is expected between the investment rate and fdi (bouoiyour, 2003; bceao, 2007; azeroual, 2015; lam'hammdi & makhtari, 2018; kouam & nafé, 2019; sumata & zumbu, 2020). human capital (kh) relates to all the knowledge, skills, review of economics and development studies, vol. 8 (3) 2022, 233-249 239 experiences, talents and qualities accumulated by a person. a positive sign is expected between human capital and fdi (bouoiyour, 2003; koukpo, 2005; bceao, 2007; alaya and al., 2008; aoumari, 2009; azeroual, 2015; lam'hammdi & makhtari, 2018). the variable "domestic credit provided to the private sector by banks (cifspb)" refers to the financial resources provided to households and businesses by financial institutions in the form of loans, purchases of securities other than capital and claims. a positive sign is expected between this variable and fdi (barro & sala-i-martin, 2004; keza, 2011). gross national expenditure (gne) refers to household and government final consumption expenditure. the positive sign is expected between this aggregate and fdi (anyanwu, 2011). a positive sign is expected between this variable and fdi (barro & sala-i-martin, 2004; keza, 2011). gross national expenditure (gne) refers to household and government final consumption expenditure. the positive sign is expected between this aggregate and fdi (anyanwu, 2011). assuming the model is linear, the empirical model to be estimated is a multiple regression model with the following baseline specification: 𝐼𝐷𝐸 𝑃𝐼𝐵 = ɑ0 + ɑ1𝑙𝑛𝑃𝐼𝐵𝐻𝑖,𝑡 + ɑ2 𝑙𝑛𝑂𝑈𝑉𝑖,𝑡 + ɑ3𝑇𝐼𝑁𝐹𝑖,𝑡 + ɑ4𝑙𝑛𝐼𝐺𝐿𝐶𝑖,𝑡 + ɑ5𝑙𝑛𝐷𝐿𝐹𝐶𝑖,𝑡 + ɑ6𝑙𝑛𝑇𝐼𝑁𝑉𝑖,𝑡 + ɑ7𝑙𝑛𝐾𝐻𝑖,𝑡 + ɑ8 𝑙𝑛𝐶𝐼𝐹𝑆𝑃𝐵𝑖,𝑡 + ɑ9𝑙𝑛𝐷𝑁𝐵𝑖,𝑡 + 𝑢𝑖 + 𝑟𝑡 + 𝜀𝑖,𝑡 (2) 3.2 data the statistics used in this study are taken from the world bank's world development indicator (wdi) database for gross domestic product per capita, trade openness, inflation rate and investment rate. those relating to the overall index of civil liberty, the degree of the fight against corruption, human capital, domestic credit provided to the private sector by banks and gross national expenditure are taken from the world perspective. these annual data cover the period from 1985 to 2019. table 1 presents the descriptive statistics of the variables used in the model. review of economics and development studies, vol. 8 (3) 2022, 233-249 240 table 1: descriptive statistics fdi_gdp lnpibh lnew tinf lniglc lndlf lntinv lnkh lncifspb nbdl mean 6.022 13.484 -5.551 30.358 1.687 2.924 -5.985 3.217 2.127 4,500 median 1.918 13.265 -5.332 5.572 1.791 2.995 -5.716 3.256 2.128 4.597 maximum 161.823 15.934 -3.532 151.785 1.945 3.912 -3.588 4.217 3.643 5.303 minimum -8.703 11,848 -15.242 -17.64 1.098 2.302 -8.089 1.731 0.698 3.916 std. dev. 15.911 1.155 1.217 41.891 0.196 0.540 1.025 0.649 0.639 0.246 skewness 6.074 0.417 -2.570 1.109 -0.570 0.179 -0.262 -0.434 -0.007 -0.544 kurtosis 51.109 1.961 20.421 2.970 2.741 1.834 2.050 2.136 2.518 2.829 jarque bera 21441.24 15.468 2873.194 42.922 11,913 12,960 10.261 13.071 2.020 10.593 likelihood 0.000 0.000 0.000 0.000 0.002 0.001 0.005 0.001 0.364 0.005 sum 1258.783 2818.275 -1160. 6344.000 352.720 611.208 -1250. 672.373 444,000 940.506 sum sq. dev 52661.860 277.657 308.505 365102.500 7.992 60.791 218.775 87.683 85.012 12.595 observation 209 209 209 209 209 209 209 209 209 209 source: author based on data from the world bank (wb, 2020) and world perspectives (pm, 2020). it can be seen from table 1 that the highest level of fdi in cemac is 161,823, while the minimum is -8,703. this result shows that there is a strong disparity between the different countries. the jarque-bera test (21441.24) shows that the associated probability statistics are less than 5%. the result thus reveals that the variables retained in this research do not follow a normal distribution. 4. estimate, results and discussions 4.1. model estimation and results to avoid spurious regression problems, we used two types of unit root tests : the stationarity tests of levin, lin and chu (llc, 2002) and im, pesaran and shin (ips, 2003), for the all cemac countries and the augmented dickey-fuller (adf) and phillips-perron (pp) stationarity tests for the cemac countries, taken individually. the results of the unit root tests of llc (2002) and ips (2003) are given in table 2 and those by country, in table 3. review of economics and development studies, vol. 8 (3) 2022, 233-249 241 table 2: results of llc (2002) and ips (2003) stationarity tests on cemac variables in level in first difference ips prob decide. llc prob decide. ips prob dec llc prob decide. fdi/gdp inter -1.531 0.062 acc. h0 -0.796 0.212 acc. h0 -8.187 0.000 rej. h0 -4.576 0.000 rej. h0 trend -2.096 0.018 rej. h0 0.307 0.620 acc. h0 -6.453 0.000 rej. h0 -3.096 0.001 rej. h0 lnpibh inter -0.953 0.170 acc. h0 -1.809 0.035 rej. h0 -5.870 0.000 rej. h0 -3.669 0.000 rej. h0 trend -0.408 0.341 acc. h0 -2.329 0.009 rej. h0 -4.767 0.000 rej. h0 -3.170 0.000 rej. h0 lnew inter -3.003 0.001 rej. h0 -1.669 0.047 rej. h0 -11.137 0.000 rej. h0 -9.043 0.000 rej. h0 trend -1.737 0.041 rej. h0 -1.264 0.103 acc. h0 -9.778 0.000 rej. h0 -7.212 0.000 rej. h0 tinf inter -0.562 0.287 acc. h0 -0.486 0.313 acc. h0 -8.334 0.000 rej. h0 -5.653 0.000 rej. h0 trend -1.052 0.146 acc. h0 -0.878 0.189 acc. h0 -6.749 0.000 rej. h0 -4.394 0.000 rej. h0 lniglc inter -1.848 0.032 rej. h0 -1.243 0.106 acc. h0 -7.677 0.000 rej. h0 -8.231 0.000 rej. h0 trend -0.605 0.272 acc. h0 -2.112 0.017 rej. h0 -6.841 0.000 rej. h0 -7.629 0.000 rej. h0 lndlf inter 1.144 0.873 acc. h0 -0.081 0.467 rej. h0 -7.965 0.000 rej. h0 -7.673 0.000 rej. h0 trend -0.856 0.195 acc. h0 -1.002 0.158 acc. h0 -6.428 0.000 rej. h0 -6.542 0.000 rej. h0 lntinv inter -1.187 0.117 acc. h0 -1.340 0.090 acc. h0 -8.982 0.000 rej. h0 -6.005 0.000 rej. h0 trend -1.110 0.133 acc. h0 -2.442 0.007 rej. h0 -7.833 0.000 rej. h0 -4.289 0.000 rej. h0 k.h. inter -1.609 0.053 acc. h0 -1.882 0.029 rej. h0 -5.722 0.000 rej. h0 -4.239 0.000 rej. h0 trend 0.535 0.703 acc. h0 -1.940 0.026 rej. h0 -6.216 0.000 rej. h0 -4.311 0.000 rej. h0 cifspb inter 0.208 0.582 acc. h0 -1.246 0.106 acc. h0 -5.599 0.000 rej. h0 -5.425 0.000 rej. h0 trend 1.150 0.875 acc. h0 -0.164 0.434 rej. h0 -4.765 0.000 rej. h0 -5.008 0.000 rej. h0 dnb inter -0.777 0.218 acc. h0 -1.146 0.125 acc. h0 -10.314 0.000 rej. h0 -7.394 0.000 rej. h0 trend -1.336 0.090 acc. h0 -3.073 0.001 rej. h0 -9.837 0.000 rej. h0 -5.799 0.000 rej. h0 source: author, based on data from the world bank (wb, 2020) and world perspectives (pm, 2020). review of economics and development studies, vol. 8 (3) 2022, 233-249 242 table 3 : results of the adf and pp stationarity tests by country c o u n t r y fdi/gdp lnpibh lnew tinf lniglc lndlf tinv k.h. cifspb nbdl adf pp adf pp adf pp adf pp adf pp adf pp adf pp adf pp adf pp adf pp c a m -10.75 -7.26 -3.30 -2.75 -9.47 -4.23 -5.29 -30.25 -5.19 -29.33 -3.34 -5.29 -6.39 -6.55 -5.81 -5.81 -4.16 -5.78 -6.25 -8.42 0.00 0.00 0.02 0.07 0.00 0.01 0.01 0.00 0.00 0.00 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 c g b -7.96 -26.29 -4.43 -4.45 -10.04 -10.27 -5.36 -7.96 -5.63 -4.28 -5.86 -5.91 -6.34 -7.82 -3.83 -3.72 -4.92 -4.60 -6.78 -7.15 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 a t m -7.75 -9.92 -5.87 -6.22 -9.20 -26.12 -4.59 -11.65 -5.18 -5.15 -5.39 -5.87 -5.81 -5.81 -5.72 -5.72 -6.51 -6.25 0.00 -9.09 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 g e -7.37 -7.80 -3.06 -3.02 -3.06 -3.02 -6.61 -16.88 -8.25 -9.26 -7.18 -7.20 -4.38 -7.55 -8.74 -4.28 -4.16 -4.01 -6.14 -7.81 0.00 0.00 0.03 0.04 0.03 0.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 r c a -7.23 -7.44 -5.89 -6.39 -4.96 -4.96 -3.91 -3.75 -5.57 -5.73 -5.77 -5.78 -6.22 -7.69 -5.44 -5.49 -4.94 -5.02 -7.09 -7.09 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 t c h -3.58 -5.27 -4.86 -4.87 -6.64 -7.25 -5.52 -6.84 -7.32 -7.34 -6.33 -6.58 -5.03 -5.13 -4.47 -4.46 -4.89 -4.91 -5.31 -10.40 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 review of economics and development studies, vol. 8 (3) 2022, 233-249 243 it emerges from the results of table 2 that the probabilities of wrongly rejecting the null hypothesis of unit root on the variables in first differences are less than 5%, for all the variables. while these probabilities are almost higher than 5% when the same tests are implemented in level. this leads us to conclude that all our series are affected by a unit root. in other words, they are stationary in level. the results of the adf and pp tests carried out by country (table 3) confirm that all the variables of the study are stationary in first difference. the main results of our research obtained from the fixed effects panel model (for all cemac countries) and the ordinary least squares (ols) model (for each country) on the determinants of the attractiveness of ide are presented in tables 4 and 5, respectively. in order to test the robustness of our results, we performed the arrelo-bond, redundant, fisher lm (table 6) and wald (table 7) tests. table 4 : estimation results of the fixed effects panel model variables coefficient std. error t-statistic prob. vs 43.303 42.379 1.021 0.308 lnpibh -10.391 2.276 -4.564* 0.000 lnew -0.610 1.367 -0.446 0.655 tinf -0.085 0.058 -1.471 0.142 lniglc 9.227 8.070 1.143 0.254 lndlf -3.174 3.463 -0.916 0.360 lntinv 1.911 2.443 0.782 0.434 lnkh 12.504 4.287 2.916* 0.004 lncifspb -8.275 2.298 -3,600* 0.000 nbdl 18.797 9.066 2.073* 0.039 r2 0.293 source: author * indicates significant coefficients at the 5% level. table 5: ols model estimation results (by country) variables coefficient t-statistic probability cam lnpibh -2.459 -0.591 0.559 lnew -0.050 -0.392 0.697 tinf 0.016 0.456 0.651 lniglc 9.842 2.172* 0.039 lndlf -1.033 -0.887 0.382 lntinv -1.548 -0.581 0.565 lnkh 1.529 0.703 0.487 lncifspb -0.793 -0.596 0.555 nbdl 1.195 0.118 0.906 cgb lnpibh -15.954 -1.704 0.100 lnew -0.425 -0.088 0.930 tinf 0.044 0.579 0.567 lniglc -22.076 -2.031* 0.052 lndlf 29.767 5.349* 0.000 review of economics and development studies, vol. 8 (3) 2022, 233-249 244 lntinv -12.986 -1.588 0.124 lnkh 2.703 0.120 0.904 lncifspb 0.413 0.100 0.920 nbdl 21.069 1.325 0.196 atm lnpibh -1.220 -0.459 0.649 lnew -0.040 -0.031 0.974 tinf -0.090 -1.386 0.177 lniglc 5.658 1.293 0.207 lndlf -3.444 -0.943 0.354 lntinv 0.431 0.572 0.571 lnkh 8.347 1,820 0.080 lncifspb 2.923 1.218 0.234 nbdl -2.614 -0.378 0.707 ge lnpibh -4.205 -0.384 0.704 lnew 8.579 0.541 0.592 tinf 0.004 0.005 0.995 lniglc 121.619 1.359 0.185 lndlf -37.347 -1.257 0.219 lntinv -3.376 -0.123 0.902 lnkh 57.055 1.402 0.172 lncifspb 2.099 0.087 0.931 nbdl -48.318 -0.618 0.541 rca lnpibh 0.049 0.019 0.984 lnew -3.558 -2.468* 0.020 tinf 0.0406 2.573* 0.016 lniglc -0.198 -0.096 0.923 lndlf -0.705 -0.314 0.755 lntinv 0.067 0.085 0.932 lnkh -3.409 -1.206 0.238 lncifspb 0.214 0.130 0.897 nbdl -1.637 -0.277 0.783 tch lnpibh -19.356 -3.066* 0.005 lnew 11,467 2.071* 0.048 tinf 0.061 0.710 0.483 lniglc 7.038 0.666 0.510 lndlf -10.242 -1.697 0.101 lntinv -4.140 -0.944 0.353 lnkh 22.196 2.811* 0.009 lncifspb 2.196 0.965 0.343 nbdl 49.065 5.452* 0.000 source: author * indicates significant coefficients at the 5% level. review of economics and development studies, vol. 8 (3) 2022, 233-249 245 table 6: results of the arrelo-bond test redundant fixed effects tests fisher lm, wald. effets test statistic probability cross-section f 6.278 0.000 cross-section chi-square 31.345 0.000 table 7: panel wald test results test statistic value likelihood f-statistic 0.628 0.534 chi square 1.256 0.533 4.2 discussion and interpretations of results from the results of the model, it appears that all the variables of the study retained have an influence on the explained variable, insofar as the value of r² = 0.293 has a positive sign. moreover, the arrelo-bond test performed suggests that the probabilities associated with the statistic are zero. about wald's statistics, the probabilities obtained are 0.534 and 0.533, above the threshold of 5%. this result attests that the fixed-effect panel model is well specified. 4.2.1 interpretations of cemac results the econometric results given in table 4 indicate that in cemac, four variables affect the attractiveness of fdi. these variables are : gross domestic product per capita, human capital, domestic credit provided to the private sector by banks, and gross national expenditure. indeed, gdph exerts negative effects at the 5% threshold on the attractiveness of fdi. a 1% increase in gross domestic product per capita, all other things being equal, reduces fdi by around 10.391%. this result contrasts with the work of obwona (1998), brahim and rachdi (2014) and zghidi, sghaier and abida (2016) which confirm the positive effect of gdph on the attractiveness of fdi. in the cemac context, this result suggests the low level of fdi. the results obtained are contrary to the theoretical predictions. the “human capital” variable has a positive and significant impact on the attractiveness of fdi at the 5% threshold. a 1% increase in this capital results in an increase in fdi of 12.504%. this finding is consistent with the work of bouoiyour (2003), koukpo (2005), bceao (2007), alaya and al. (2008), aoumari (2009), azeroual (2015) and lam'hammdi and makhtari (2018). regarding the cemac, it means that human capital has favored the establishment of foreign firms. moreover, domestic credit provided to the private sector by banks negatively explains the attractiveness of fdi. a 1% increase in these credits implies a decrease in fdi of 8.275%. this result is opposed to those of the authors barro and sala-i-martin (2004) and keza (2011). in the cemac, it suggests the inefficiency of the financial system. even better, the cemac financial system does not support domestic investment. with regard to the “gross national expenditure” variable, the results obtained show positive and statistically significant effects on fdi at the 5% threshold. when national expenditure increases by 1%, fdi increases by 18.797%. this result corroborates that of anyanwu (2011) which supports the positive impact of national expenditure on fdi. in the context of the cemac, it suggests that the purchases of goods and services made by the authorities of this community have been sufficient. review of economics and development studies, vol. 8 (3) 2022, 233-249 246 from the cemac results, it appears that trade openness, the inflation rate, the global index of civil freedom and the investment rate have no impact on the attractiveness of fdi. 4.2.2 interpretation of results by country a few specificities emerge from these results. in the six countries of the cemac area, domestic credit provided by the private sector to banks and the investment rate do not impact fdi. * in cameroon, the overall index of civil freedom exerts a positive influence on the attractiveness of fdi. a 1% increase in this index generates an increase in fdi of 9.842%. this result corroborates those of bassu and srinivasan (2002) as well as mohamed and aichi (2021). in the case of cameroon, it confirms the degree of civil freedom in relation to fdi. *in congo-brazzaville, two variables explain fdi. these variables are : the global index of civil freedom and the degree of fight against corruption. indeed, the overall index of civil freedom exerts negative effects on the attractiveness of fdi. a 1% increase in this index implies a 22.076% decrease in fdi. this result contradicts the work of bassu and srinivasan (2002) and mohamed and aichi (2021). it signifies an absence of civil liberty in the case of congo-brazzaville. the “degree of fight against corruption” variable has a positive impact on the attractiveness of fdi. a 1% increase in this variable leads to a 29.787% increase in fdi. this result has already been demonstrated by bassu and srinivasan (2002). it suggests the ineffectiveness of anti-corruption policies in congo-brazzaville. * in the central african republic, inflation exerts a positive and significant influence on the attractiveness of fdi. a 1% rise in inflation generates that of fdi in the order of 0.040%. this observation corroborates those of bouoiyour (2003) and aoumari (2009). which is to say that inflation has not ensured macroeconomic stability in this country. as regards the “trade openness” variable, it has a negative impact on fdi. a 1% increase in trade openness implies a 3.558% decrease in fdi. this result contradicts those of the authors (morisset, 2000; koukpo, 2005; bceao, 2007; aoumari, 2009; anyanwu, 2011; bouri & benmassoud, 2014; tirhboula and al., 2017; kouam & nafé, 2019; sumata & zumbu, 2020; mohamed & aichi, 2021) which confirm the positive role of trade openness on fdi. this result means that firms established in the country have not changed the typology of trade openness. * in chad, the econometric results revealed that gross domestic product per capita, trade openness, human capital and gross national expenditure positively explain fdi. indeed, gdph exerts a negative influence on fdi. when gdph increases by 1%, fdi decreases by 19.356%. this result contradicts those of obwona (1998), brahim and rachdi (2014) and zghidi, sghaier and abida (2016). trade openness, for its part, has a positive influence on fdi. when trade openness increases by 1%, fdi increases by 11.467%. this result corroborates those of the authors (morisset, 2000; koukpo, 2005; bceao, 2007; aoumari, 2009; anyanwu, 2011; bouri & benmassoud, 2014; tirhboula and al., 2017; kouam & nafé, 2019; sumata & zumbu, 2020; mohamed & aichi, 2021). he suggests that trade openness has favored the flow of information. this resulted in an improvement in the perception of risk by investors, as suggested by campos and kinoshita (2003). review of economics and development studies, vol. 8 (3) 2022, 233-249 247 furthermore, a 1% increase in human capital results in an increase in fdi of 22.196%. this result agrees with the work of bouoiyour (2003), koukpo (2005), bceao (2007), alaya and al. (2008), aoumari (2009), azeroual (2015) and lam'hammdi and makhtari (2018). he suggests that in chad, human capital favored the attractiveness of fdi. finally, with regard to gross national expenditure, the results obtained revealed a positive impact on the attractiveness of fdi. a 1% increase in these expenditures implies an increase in fdi of 49.065%. this result was confirmed by anyanwu (2011). 5. conclusion and policy implications the objective of this paper was to analyze the determinants of fdi attractiveness in cemac over the period 1985 to 2019. to do so, we use the panel fixed effects model for cemac and the ols model for each cemac country. the results of this research have led to the following lessons and policy implications. with regard to lessons, some results obtained within cemac and by country are in line with the theoretical framework adopted. in the cemac, these results showed that economic growth proved to be a determining factor in the attractiveness of fdi. it explains fdi negatively, but the effect produced is not what one would have expected. the “human capital” variable, which is analyzed in terms of knowledge and skills, has had a positive impact on fdi. domestic credit provided to the private sector by banks has had a negative impact on fdi; their produced effects were not expected. in addition, the study highlighted the determining role of gross national expenditure in the attractiveness of fdi; their impact is positive. on the other hand, the results by country revealed that in cameroon, the overall index of civil liberty also proved to be a determinant of fdi. it has a positive impact on the attractiveness of fdi. in congo-brazzaville, the degree of fight against corruption and the overall index of civil freedom respectively influenced negatively and positively fdi. in the central african republic, trade openness (negative effect) and inflation (positive effect) have impacted fdi. in chad, trade openness (positive effect), gdph (negative effect), human capital (positive effect) and gross national expenditure (positive effect) explained the attractiveness of fdi. in the central african republic (ouv, inf) and chad (pibh, ouv, kh, dnb), the effects of these variables on the attractiveness of fdi were mixed. in gabon and equatorial guinea, on the other hand, no variable influenced fdi attractiveness. from these lessons, several implications for economic policy emerge. taking into account the challenges of attracting fdi in cemac, despite the establishment by the authorities of investment codes and industrial free zones to attract fdi, it is important that these policies be strengthened. these should incorporate both economic and financial factors. the economic factors should concern: price stability, control of public expenditure and the strengthening of human capital and that of economic growth. financial factors (domestic credit provided to the private sector) have emerged in this research as an obstacle to the attractiveness of fdi. an appropriate credit policy would boost the performance of fdi in cemac. in addition, the determining role of national expenditure, as a determining factor of fdi that has been observed in this study, implies for cemac to support it. review of economics and development studies, vol. 8 (3) 2022, 233-249 248 references alaya, m., nicet-chenaf, d., rougier, e. 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(2016), does economic freedom enhance the impact of foreign direct investment on economic growth in north countries? african development review, 28(1), 64-74. review of economics and development studies, vol. 9 (2) 2023, 99-109 99 quantifying downside risk in euro area stock markets: a value at risk study younis ahmed ghulam a, bashir ahmad joo b a senior research fellow in the department of management studies university of kashmir. b professor in the department of management studies university of kashmir article details abstract history: accepted 29 april 2023 available online june 2023 the present research paper aims to assess and quantify the downside risk of euro area stock markets using the value at risk (var) methodology over a substantial time frame spanning 26 years. the study employs daily closing price data from the main stock exchanges of euro area nations. using the historical simulation method, var estimates are calculated for each country's stock index, providing valuable insights into market performance and risk levels during both normal and crisis periods. the non-parametric nature of the historical simulation approach is favored due to its flexibility in dealing with nonnormal distribution data, making it suitable for this analysis. the findings reveal significant variations in downside risk among euro area countries. certain nations consistently exhibit lower var estimates, indicating comparatively lower downside volatility and potential losses. these markets may prove attractive to risk-averse investors seeking stability during adverse market conditions. in contrast, some countries consistently demonstrate higher var estimates, signaling heightened downside risk, which may offer higher potential returns but may not align with risk-averse investors' preferences. during periods of crisis, certain euro area markets display a lower level of downside volatility, showcasing their resilience during turbulent times. this information can guide investors in constructing diversified portfolios that can withstand adverse market conditions. additionally, policymakers can draw upon these findings to formulate targeted monetary policies to support financial markets during economic uncertainty. overall, this study contributes valuable insights into downside risk and market performance in euro area stock markets, providing investors, policymakers, and financial participants with essential information to make informed decisions and navigate the complexities of global financial markets effectively. © 2023 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: euro area, downside risk, stock return, financial risk management jel classification: g10, g11, g12, g15, g19 doi: 10.47067/reads.v9i2.486 corresponding author’s email address: younisahmed885@gmail.com review of economics and development studies, vol. 9 (2) 2023, 99-109 100 1. introduction in finance and investment, "downside risk" refers to the potential for an investment or asset to decrease in value (roy, 1952). jorion (2007) defined downside risk as “the dispersion of unexpected outcomes owing to movements in financial variables”. it represents the possibility of incurring losses or negative returns (best, 1999; estrada, 2006). investors and financial analysts often use downside risk as a measure of the potential downside volatility or the likelihood of an investment performing worse than expected (estrada, 2007). understanding and managing downside risk is essential for investors (chen and chen, 2004) to make informed decisions and construct portfolios that align with their risk tolerance and investment objectives. by analyzing downside risk, investors can better assess the potential losses they might face during adverse market conditions and take steps to mitigate the impact. diversification, hedging, and risk management strategies are often employed to minimize downside risk and protect investment portfolios from significant declines. in the dynamic and interconnected world of global financial markets, managing risks effectively is of paramount importance for investors, financial institutions, and policymakers. one of the key tools used to assess and quantify market risks is the value at risk (var) methodology. dowd (1998) defined it as “var is the maximum expected loss over a given horizon period at a given level of confidence”. value at risk (var) estimates the potential downside losses and risk levels associated with financial assets or portfolios (jorion, 2007), providing valuable insights to guide decision-making and risk management strategies. the historical simulation technique is regarded as the most popular and reliable value at risk (var) estimation approach among all (perignon & smith, 2009). this notion has been supported by various scholars such as ammann & reich (2001). the present study aims to employ the historical simulation method to evaluate the var estimates of euro area nations' stock indices over the last 26 years. it is really difficult to manage the downside risk when the financial market around the world is fluctuating, and to minimize the downside risk (rizwan, ahmad and ashraf, 2020; liu et al., 2022); everyone recognizes the importance of managing it. risk management provides various models or tools for managing downside risk. the different ways of measuring risk that have emerged in financial markets in recent decades raise concerns about their validity. the most advanced and preferred risk management model has to be value at risk (var) because it is simple to understand and easy to interpret. value at risk (var) is the primary measure of downside risk often used by stock market stakeholders (atilgan & demirtas, 2013; chen & chiang, 2016; jin, 2018). its the most prominent risk measurement method often used by investors, institutional investors, fiis, fund managers, hedgers, risk managers, regulators, policymakers, and other participants. over the last decade, value at risk (var) has evolved as one of the most important risk measuring approaches in finance. when implementing value at risk (var) systems, it attempts to anticipate future asset prices using prior market data. this research paper aims to investigate into the analysis of var estimations in the context of the euro area stock markets, covering a substantial time frame spanning 26 years. the euro area comprises a diverse group of countries with varying economic conditions and financial market characteristics, making it an intriguing subject of study in terms of risk evaluation and market performance during both normal and crisis periods. 2. objectives the paper tried to accomplish the following objectives: • to evaluate the downside risk on the euro area by utilizing the value at risk methodology; • to recommend the most desirable market(s) among the euro area that present the least amount of downside risk, thereby aiding investors in their portfolio selection; • to check if diversification opportunities are available among euro area during crisis period; • to assist policymakers in their policy formulation. review of economics and development studies, vol. 9 (2) 2023, 99-109 101 3. data and methodology to achieve the research objectives, this paper employs daily closing price data obtained from the primary stock exchanges of euro area nations, covering an extensive period from january 1, 1996, to december 31, 2021. the adjusted daily closing prices for all euro area economies were obtained from sources shown in table 1. the daily log return of the stock indices is computed using the log difference method. the use of log return is justified due to its symmetry property, as suggested by danielsson (2011), making it a suitable choice for this analysis. additionally, var estimates are scrutinized for the entire euro area, offering a comprehensive view of market performance. we calculated the continuously compounded or log return in r software by taking the difference in price indices' logarithm. i.e. 𝑹𝒊𝒕 = 𝒍𝒐𝒈⁡( 𝑷𝒊𝒕 𝑷𝒊𝒕−𝟏 ) equation 1 where; rit is log difference return at time t, pit and pit-1 are two successive weekly closing prices of an ith stock exchange. parametric and non-parametric are the two categories into which var estimates fall (ammann and reich, 2001). while parametric var deals with normal distribution data, it is not applicable in our case of dailly returns data. therefore, we have employed a non-parametric historical simulation method to evaluate the value at risk (var) estimates. in ms excel, we have determined the yearly value at risk (var) estimates at a 99% confidence level (linsmeier and pearson, 1996) for the stock return of euro area countries. the study used the historical simulation approach to calculate the yearly value at risk (var) values using daily return data for the major exchanges of the euro area economies from january 1, 1996, to december 31, 2021. 3.2 specified empirical model the historical simulation method is a popular approach for calculating value at risk (var). it is a non-parametric method that uses historical data to estimate potential losses in a portfolio over a given time horizon (best, 1999). the equation for the historical simulation method of var is as follows: var (level, horizon) = α-th percentile of the portfolio's return distribution where: • var is the value at risk. • level is the confidence level, typically expressed as a percentage (e.g., 99% confidence level). • horizon is the time horizon over which the var is estimated (e.g., one year). • α is the significance level, calculated as 1 confidence level (e.g., for a 99% confidence level, α = 1 0.99 = 0.01). the α-th percentile is a value below which α% of the historical returns lie. in other words, it's the cut off point for the lower (1 α)% of the portfolio's return distribution. the study followed series of steps in calculating value at risk (var) using the historical simulation method given by dowd (2002). review of economics and development studies, vol. 9 (2) 2023, 99-109 102 table 1 sources of stock price data. country main index source austria atx ceic dataset belgium bfx ceic dataset croatia (crobex) ceic dataset cyprus cyprus main market ceic dataset estonia tallinn se general ceic dataset finland omx helsinki 25 ceic dataset france fchi ceic dataset germany gdaxi ceic dataset greece athens general composite ceic dataset ireland iseq overall ceic dataset italy (it40) ceic dataset latvia riga general ceic dataset lithuania vilnius se general ceic dataset luxembourg luxx ceic dataset malta mse ceic dataset the netherlands aex ceic dataset portugal psi ceic dataset slovakia sax ceic dataset slovenia blue-chip sbitop ceic dataset spain ibex ceic dataset source: authors' elaboration. 4. results and discussion 4.1 value at risk (var) estimation the research paper presents figure 1, displaying the annual var estimations of stock indices data for euro area countries over the last 26 years. this analytical exercise provides critical insights into the performance of euro area markets, estimating downside risk and demonstrating the extent of potential losses and risk levels during different market conditions. the findings depicted in figure 1 can be particularly valuable for stakeholders in the stock market, guiding them in constructing wellinformed portfolios, especially during periods of crisis. figure 1. historical simulation value at risk (var) of euro area countries' stock indices. -0.3 -0.2 -0.1 0 1990 1995 2000 2005 2010 2015 2020 2025 austria https://european-union.europa.eu/principles-countries-history/country-profiles/austria_en https://european-union.europa.eu/principles-countries-history/country-profiles/belgium_en https://in.investing.com/indices/bel-20 https://european-union.europa.eu/principles-countries-history/country-profiles/croatia_en https://tradingeconomics.com/croatia/stock-market https://european-union.europa.eu/principles-countries-history/country-profiles/cyprus_en https://in.investing.com/indices/cyprus-main-market https://european-union.europa.eu/principles-countries-history/country-profiles/estonia_en https://www.investing.com/indices/tallinn-se-general https://european-union.europa.eu/principles-countries-history/country-profiles/finland_en https://in.investing.com/indices/omx-helsinki-25 https://european-union.europa.eu/principles-countries-history/country-profiles/france_en https://www.investing.com/indices/france-40 https://european-union.europa.eu/principles-countries-history/country-profiles/germany_en https://european-union.europa.eu/principles-countries-history/country-profiles/greece_en https://www.investing.com/indices/athens-general https://european-union.europa.eu/principles-countries-history/country-profiles/ireland_en https://www.investing.com/indices/iseq-overall https://european-union.europa.eu/principles-countries-history/country-profiles/italy_en https://tradingeconomics.com/italy/stock-market https://european-union.europa.eu/principles-countries-history/country-profiles/latvia_en https://www.investing.com/indices/riga-general https://european-union.europa.eu/principles-countries-history/country-profiles/lithuania_en https://www.investing.com/indices/vilnius-se-general https://european-union.europa.eu/principles-countries-history/country-profiles/luxembourg_en https://european-union.europa.eu/principles-countries-history/country-profiles/malta_en https://european-union.europa.eu/principles-countries-history/country-profiles/netherlands_en https://www.investing.com/indices/netherlands-25 https://european-union.europa.eu/principles-countries-history/country-profiles/portugal_en https://www.investing.com/indices/psi-20 https://european-union.europa.eu/principles-countries-history/country-profiles/slovakia_en https://www.investing.com/indices/sax https://european-union.europa.eu/principles-countries-history/country-profiles/slovenia_en https://www.investing.com/indices/blue-chip-sbitop https://european-union.europa.eu/principles-countries-history/country-profiles/spain_en review of economics and development studies, vol. 9 (2) 2023, 99-109 103 -0.3 -0.2 -0.1 0 1990 1995 2000 2005 2010 2015 2020 2025 belgium -0.3 -0.2 -0.1 0 1990 1995 2000 2005 2010 2015 2020 2025 croatia -0.4 -0.2 0 1990 1995 2000 2005 2010 2015 2020 2025 cyprus -0.3 -0.2 -0.1 0 1990 1995 2000 2005 2010 2015 2020 2025 estonia -0.2 -0.1 0 1990 1995 2000 2005 2010 2015 2020 2025 finland -0.2 -0.1 0 1990 1995 2000 2005 2010 2015 2020 2025 france review of economics and development studies, vol. 9 (2) 2023, 99-109 104 -0.2 -0.15 -0.1 -0.05 0 1990 1995 2000 2005 2010 2015 2020 2025 germany -1.5 -1 -0.5 0 1990 1995 2000 2005 2010 2015 2020 2025 greece -0.3 -0.2 -0.1 0 1990 1995 2000 2005 2010 2015 2020 2025 ireland -0.3 -0.2 -0.1 0 1990 1995 2000 2005 2010 2015 2020 2025 latvia -0.2 -0.1 0 0.1 1990 1995 2000 2005 2010 2015 2020 2025 lithuania -0.1 -0.05 0 1990 1995 2000 2005 2010 2015 2020 2025 luxembourg review of economics and development studies, vol. 9 (2) 2023, 99-109 105 source: author's own elaboration. the analysis of figure 1 highlights significant variations among euro area countries. several countries, including belgium, croatia, estonia, france, greece, ireland, latvia, lithuania, luxembourg, -0.1 -0.05 0 1990 1995 2000 2005 2010 2015 2020 2025 malta -0.3 -0.2 -0.1 0 1990 1995 2000 2005 2010 2015 2020 2025 netherlands -0.15 -0.1 -0.05 0 1990 1995 2000 2005 2010 2015 2020 2025 slovak republic -0.2 -0.15 -0.1 -0.05 0 1990 1995 2000 2005 2010 2015 2020 2025 spain -0.2 -0.1 0 1990 1995 2000 2005 2010 2015 2020 2025 slovenia review of economics and development studies, vol. 9 (2) 2023, 99-109 106 malta, netherlands, slovakia, and slovenia, consistently exhibit the lowest var estimates, indicating relatively lower downside risk. in contrast, austria, cyprus, finland, germany, italy, portugal, and spain consistently show higher var estimates, signifying heightened downside risk, which may not align with the preferences of risk-averse investors. during the global financial crisis of 2008 and the ongoing covid-19 pandemic, the majority of markets in the euro area experienced a significant decrease in value, with only a handful of markets remaining relatively unscathed. therefore, investors who are risk-averse may consider investing in markets such as croatia, estonia, greece, latvia, lithuania, luxembourg, malta, and slovakia, as these markets have demonstrated comparatively low levels of downside volatility during times of crisis. conversely, markets such as austria, belgium, cyprus, finland, france, germany, ireland, italy, the netherlands, portugal, slovenia, and spain have exhibited higher levels of downside deviation during crisis periods, and may therefore be less appealing to risk-averse investors. during the examination of value at risk appraisals of euro area nations, it was discovered that austria, belgium, estonia, finland, france, greece, ireland, italy, latvia, lithuania, luxembourg, malta, netherlands, portugal, slovakia, and slovenia had the smallest value at risk appraisals in the studied period. consequently, risk averse investors would opt for these three markets in euro area nations. meanwhile, cyprus, germany, and spain persistently generate considerably high value at risk appraisals throughout the studied period, thereby rendering these countries unappealing to most investors. in times of crisis, certain euro area nations exhibit lower levels of downside volatility than others. croatia, estonia, greece, latvia, lithuania, luxembourg, malta, and slovakia are among those that are seen to possess this characteristic, while austria, belgium, cyprus, finland, france, germany, ireland, italy, netherlands, portugal, slovenia, and spain display a higher degree of downside deviation. policymakers can draw from these findings to aid in the formulation of monetary policy. a recent time period has seen austria, belgium, finland, france, germany, ireland, italy, netherlands, portugal, and spain exposed to a high level of downside risk, and in light of the volatile financial market, they ought to contemplate macroeconomic policies similar to those of croatia, cyprus, estonia, greece, latvia, lithuania, luxembourg, malta, slovakia, and slovenia. furthermore, these shareholders in the stock market should take into account those markets in euro area countries that have some degree of immunity to extreme events. additionally, financial economics theory posits that value at risk (var) should mirror anticipations concerning a nation's future economic performance, which in turn reflects the degree of economic activity. the research discovered that value at risk is a crucial tool for various stakeholders in the stock market. this model helps to evaluate potential downside losses and risk levels for individual markets, which is significant for prudent risk management and portfolio strategies. moreover, it is currently the most widely utilized technique for financial risk management, particularly for mitigating downside risk among financial firms, non-financial organizations, and regulators. investors have the potential to increase their risk-adjusted returns by diversifying their portfolio among euro area countries. it is evident from the data that some of these countries remain immune to crisis periods, offering advantageous implications for stock market stockholders. it is recommended that investors should incorporate this into their stock price behaviour model, but with caution when interpreting the results, review of economics and development studies, vol. 9 (2) 2023, 99-109 107 due to the occurrence of a few extreme events during the study. this, however, presents diversification opportunities for investors, although it should be noted that none of the markets in the euro area countries are completely resistant to extreme events. nevertheless, it has been observed that a few instances of extreme events result in the co-movement of stock markets in euro area countries. 5. contribution and future research agenda the research paper makes several significant contributions to the field of financial risk management and stock market analysis. the paper's primary focus is on analyzing and interpreting var estimates for stock indices data of euro area countries over the past 26 years. the following are the key contributions of the research paper: the research paper contributes valuable insights into downside risk analysis in the euro area stock markets. by utilizing var as a quantitative measure, the paper provides a comprehensive understanding of potential losses and risk levels associated with individual markets during various market conditions, including normal periods and crisis periods. the research paper identifies specific euro area countries that consistently exhibit low and high var estimates over the examined period. this categorization helps stakeholders, particularly riskaverse investors, to identify markets with relatively lower downside volatility during crisis periods and those that pose higher risks. the paper's findings have significant implications for stakeholders in the stock market, including investors, financial analysts, policymakers, financial institutions, and regulators. the identified low downside volatility markets offer potential opportunities for constructing portfolios that can better withstand turbulent market conditions. additionally, the paper highlights the importance of var as a crucial risk management technique in financial and non-financial organizations. the paper's identification of countries with high downside risk during recent periods allows for specific policy recommendations. policymakers can consider macroeconomic policies adopted by countries with low downside volatility during crisis periods, such as croatia, estonia, greece, latvia, lithuania, luxembourg, malta, and slovakia, to improve resilience against financial downturns. furthermore, the research paper on value at risk (var) estimations in euro area stock markets makes significant contributions to the field of financial risk management and stock market analysis. 6. limitations of the study and scope for future research while the research paper has provided valuable insights into the analysis of var estimates and its implications for stock market stakeholders in the euro area, there remain several areas for future research that can further enhance the understanding of risk management and portfolio strategies. the following future research agenda is proposed: the study ignored other important measures for downside risk and it is recommended for future researcher to use other downside risk measures. moreover, to analyze the directional influence and interdependence among the euro area stock indices, the future researcher should perform econometric techniques. in addition to var, there are other risk metrics used in financial risk management, such as beyond value at risk (cvar), downside beta, and tail conditional expectation (tce). comparative studies that assess the strengths and weaknesses of these risk metrics in the context of euro area stock markets can be a valuable future research direction. also, the future research can explore the extent of international spillover effects between euro area countries and other global markets during crisis periods. understanding the interconnectivity of review of economics and development studies, vol. 9 (2) 2023, 99-109 108 markets can aid in the development of more robust global risk management strategies. 7. conclusion this research paper's analysis of value at risk (var) estimations in euro area stock markets offers valuable insights into downside risk, diversification opportunities, and the most desirable markets with lower risk profiles. in conclusion, this research paper aimed to investigate and analyze the value at risk (var) estimates of euro area nations' stock indices over the last 26 years. the use of historical simulation method for var estimation provided valuable insights into the downside risk and potential losses associated with different euro area markets during normal and crisis periods. the findings from this study have several important implications for investors, policymakers, and financial market stakeholders. firstly, the analysis of var estimations revealed significant variations among euro area countries in terms of downside risk. certain countries consistently exhibited lower var estimates, indicating relatively lower downside volatility and potential losses. these markets, such as croatia, estonia, greece, latvia, lithuania, luxembourg, malta, and slovakia, may be more appealing to riskaverse investors looking for stability during adverse market conditions. on the other hand, countries like austria, cyprus, finland, germany, italy, portugal, and spain consistently showed higher var estimates, suggesting heightened downside risk. while these markets may offer higher potential returns, they might not be suitable for risk-averse investors seeking more stable investments. secondly, during crisis periods, some euro area nations demonstrated a lower level of downside volatility compared to others. the markets of croatia, estonia, greece, latvia, lithuania, luxembourg, malta, and slovakia showcased a higher level of resilience during turbulent times. in contrast, markets like austria, belgium, cyprus, finland, france, germany, ireland, italy, the netherlands, portugal, slovenia, and spain experienced higher downside deviation during crises. these findings provide valuable guidance for investors looking to construct diversified portfolios that can withstand adverse market conditions. by considering the var estimates and historical performance of different euro area markets, investors can make informed decisions to manage their downside risk effectively. thirdly, policymakers can benefit from this research to formulate appropriate monetary policies during times of economic uncertainty and financial instability. understanding the varying degrees of downside risk among euro area countries can help policymakers implement targeted measures to support financial markets and mitigate potential economic impacts during crisis periods. finally, this research reaffirms the importance of value at risk (var) as a widely used and valuable risk management tool in the financial industry. its simplicity and interpretability make it a preferred method for assessing downside risk, guiding decision-making processes for investors, fund managers, regulators, and other participants in the financial markets. in conclusion, this study contributes to the body of knowledge in finance and risk management, providing valuable 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(2000) ‘value at risk models for dutch bond portfolios’, 24. review of economics and development studies, vol. 9 (1) 2023, 47-59 47 the importance of renewable energy consumption and human capital in attracting foreign direct investment in pakistan javaid hussain a, muhammad arshad anwer b, muhammad usman ghani c, muhammad umar d a visiting faculty member, bahauddin zakariya university multan, pakistan b national university of modern languages, multan campus, pakistan c visiting faculty member, bahauddin zakariya university multan, pakistan d phd scholar, school of economics, finance and banking, university utara malaysia, malaysia article details abstract history: accepted 20 february 2023 available online march 2023 this research looks at the connections between fdi, renewable and nonrenewable energy, human capital, and the environment in pakistan. using data collected from 1998 to 2020, this study uses the autoregressive distributed lag (ardl) method to quantify the interdependencies between various conceptual frameworks. all variables tested had a significant impact on fdi in the long run. the environment coefficient is significantly negative. in addition, there is a positive indication of significance for the coefficients of renewable energy, nonrenewable energy, and human capital acquired through formal education. based on the findings of this research, it is recommended that national governments take steps to attract more fdi. © 2023 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: fdi, renewable energy, nonrenewable energy, human capital, co2 emissions jel classification: p33, p45, o13 doi: 10.47067/reads.v9i1.478 corresponding author’s email address: mailumarramzan@gmail.com 1. introduction direct investment from abroad (fdi) is a crucial contribution to the economic development and growth in an industry, specifically when the country's savings aren't sufficient to meet the demands of its speculation (chaudhry et al., 2020). it provides a means for the transfer of cutting-edge innovations to horde country and may provide work for both highly qualified professionals and those with less formal education (demena and bergeijk 2019). as an added bonus, foreign direct investment (fdi) promotes business growth, which boosts productivity and, in turn, the host country's economy. (lee 2013; shahbaz et al., 2015). despite these positive effects on the horde country, fdi may sometimes have unintended consequences for the environment. (zhu et al., 2016). rising carbon dioxide emissions can cancel out the benefits to economic growth from higher levels of foreign direct investment. this could be a reason to be concerned when considering the environmental implications of a growth in economic activity fueled by fdi (shahbaz et al., 2018). however, america is the only country that produces the highest level of co2. in 2017, the us was second-highest emitter of carbon dioxide, at 5.27 review of economics and development studies, vol. 9 (1) 2023, 47-59 48 billion metric tons. that's equivalent to 14.6% of environmental damage worldwide. the united nations climate change conference, held in doha in 2012, set a goal of reducing emissions by at least 18% from 2013 to 2020 compared to 1990 levels (chaudhry et al., 2021). the global pandemic has created destruction on the lives of people around the world over a year since the first coronavirus was discovered. the economic, social environmental, and health effects could be similar to be the same as last year's when public health measures are successful in helping minimize its impact (zhao et al., 2022). global efforts to tackle social and environmental issues have been hampered by the spread of the disease and its associated effects that have slowed progress towards a variety of un global compacts sustainable development goals (sdgs) in 2030. this is why several countries are pushing for green development" to focus on sustainability and conservation while also focusing on economic prosperity in light of these converging circumstances (raihan et al., 2022, xu as well. 2022; faheem et al., 2019). the new green deal promotes innovation and provides a sustainable approach to protecting the environment as well as resource usage and the growth of green. the conventional concept of sustainable development is broad and long-term (you &amp; xiao, 2022). from this angle the pressing environmental issues have led to a continuous discussion about the growth of economics, green financing and the quality of our environment (aslan et al., 2022, mehmood,2022). sustainable development can be achieved through the implementation of green growth strategies that cause little or no impact on the environment (tugcu (2018)). efficiency in energy use as well as renewable power are crucial aspects of these strategies. they are aiding in the transition to sustainable development by cutting greenhouse gas emissions resulting generated by fossil fuels (raihan et al., 2022). the effects of global warming have become a major issue for nations across the globe. global warming is a cause of problems like drought, hunger, and a variety of illnesses(faheem et al., 2021). environmental economics all over the world place a high priority on the discussion surrounding fossil fuels, renewable energy sources, and the environment. currently, the dynamics of renewable energy have given rise to a number of entirely new concepts, such as trade openness, economic growth, and technological improvement. links between energy use and gross domestic product as well as the openness the energy and trade markets offer a fascinating area of study(faheem et al., 2020).governance is also significant in influencing the quality of the environment. environmental regulations that are strict or flexible influence the use for traditional sources of energy. numerous research studies have looked into the effects from governance and environmental protection however, they are unable to give consistent results. in addition, there is a dearth of studiesthat investigate the relationship between governance and fdi within a group of south asian economies (kostakis et al. 2017). one of the main causes for climate change is usage of the use of non-renewable energy (nre) sources that emit carbon dioxide (co2) throughout the environment. the environmental pollution caused by nre use, is a major cause of global warming. nre is a major cause of negative effect on the life duration. in the un, through the (sdgs) attempt to decrease carbon dioxide and attain carbon neutrality by 2030. the renewable energy (re) is regarded as being the best alternative source of energy and is therefore, greener due to its negative effect in carbon emission (ce), (akpanke et al., 2023). study by ahmad and co. (2004) future primary energy sources would be sustainable resources like solar hydro, wind and tidal. these sources could be used to replace non-renewable energy sources and the carbon emissions would be significantly reduced. reduced carbon dioxide emission has been made an international priority (faheem et al., 2022). nathaniel et al. (2020) observed in their prior research that commerce, fdi, and energy use all had an unequal relationship over the long term. studies have indicated that host countries' energy usage rises as a result of fdi. fi and trade review of economics and development studies, vol. 9 (1) 2023, 47-59 49 transparency also aid economic growth when renewable energy sources are used. however, the relationship between expanding economies, internationalization, and renewable electricity sources has not been thoroughly explored. long-term and short-term goals are set for this study to determine whether or not there is a correlation between financial growth, globalization, and fdi and the use of renewable electricity. as a result, tariq and his team will be better equipped to make both immediate and long-term strategic decisions because of a deeper grasp of fundamental relationships. human activities that are geared towards expanding economic growth threaten the current ecosystems in both nations (bekun et al., 2019). global warming is a cause of changes in the climate and is a global issue. every country is affected by these unintended effects that have inspired countries and global initiatives to tackle the problem. recent research has shown that consumption and production that is not sustainable result in destruction of the environment and climate change (ahmed and wang 2019. ahmed et al., 2020b; omojolaibi, and nathaniel 2020). climate change caused by humans often threatens our capacity to survive on the planet (chishti et al., 2020a, b). if we do not drastically reduce the amount of carbon dioxide emissions (ghg), the dangers of global warming and climate change could harm human societies and also hinder the sustainability of the planet via increasing temperatures and acidification of the ocean, pollution of the air and cyclones. while a variety of studies have examined the individual reasons for co2 emissions, this study is aimed at finding out how economic variables affect the emissions of co2 in pakistan in general. the energy needs of pakistan are projected to grow by three times over the next few years. in a large way the wind power sector is the fastest growing sector of the renewable energy industry (farooq et al., 2023). it has positive impacts on the expansion of a country, productivity and consumption of energy by maintaining a healthy economic economy. production of wind power in pakistan is a viable option particularly in the northern regions of pakistan and along the coast strip.capital-strengthening technologies, foreign exchange, imports, and better general productivity can all play a role in making international direct investment (fdi) and human capital (hc) essential to long-term economic growth. both of these have played crucial roles in the recent decade of economic growth in the ecowas area (blomstrom and kokko, 2002 ). foreign direct investment (fdi) is significant and crucial to the continued economic growth of ecowas member states. foreign direct investment (fdi) flows are crucial to the development of west africa because they boost domestic savings, increase employment opportunities, facilitate knowledge transfer and technological advancement, and boost productivity and competitiveness. (anyanwu, 2011). human capital is a key component of total factor production (tfp) in solow's solow growth model, and tfp is responsible for the residuals that are not accounted for in other models. (solow, 1957). skills, knowledge, and abilities, together with ideas and good health, are all aspects of human capital that contribute to an economy's overall production. economic growth may be sustained if people have the skills, knowledge, health, and stamina to do their jobs effectively and creatively (farooq et al., 2022). in an endogenous model of economic growth, wu et al. (2022) hint at the importance of dynamic and the interaction of other variables beyond fdi and hc in the pursuit of sustainable economic development. renewable energy development and financial growth are linked, according to wu et al. (2021). theoretically, renewable energy could affect the link between fdi, hc, and sustainable economic growth. there is no definitive answer to the question of how fdi affects the environment. the pollution haven theory proposes that foreign direct investments (fdis) are lured to countries with lax environmental rules since doing so will raise emissions and, in turn, improve environmental quality. (naughton 2014; cole and fredriksson, 2009). in contrast, the phh postulates that eco-friendly green technology will be used by foreign investors to improve environmental quality. (huynh & hoang 2019). review of economics and development studies, vol. 9 (1) 2023, 47-59 50 according to the phh, if the host country relaxes its environmental policies, it may see an influx of foreign direct investment (fdi) from multinational businesses that will expand output, releasing more carbon dioxide and other pollutants into the atmosphere. (huang et al., 2022). the ph, on the other hand, mandates that fdi-engaging multinationals use cutting-edge, energy-saving technology, advanced management strategies, and environmentally responsible business practices in order to enhance the environment of the countries where they set up shop. (ren et al., 2021, mert and caglar 2020; bakhsh et al. 2017). when multinationals use cutting-edge technology in the production process, carbon emissions and energy intensity are expected to drop as a result of fdi (lee, 2013). 2. literature review foreign direct investments impact on greenhouse gas emissions has become a contentious issue in current year. in theory, the dominating dimension determines whether fdi has a good or negative impact on the global environment. (shahbaz et al., 2018). there have been numerous attempts to assess how the recent surge in fdi might affect the natural world. there are two competing ideas on the connection between foreign direct investment (fdi) and carbon emissions, and these studies highlight the need of distinguishing between them. there is, on the one hand, adequate evidence to back up the idea of a pollution sanctuary. (demena and afesorgbor in 2020a; qamruzzaman, 2021). according to this idea, countries with stricter environmental regulations lose competitiveness against countries with fewer restrictions, since polluting enterprises leave the former for the latter. (xie 100 &amp; zhang, 2021). it's easy for other countries to lower their environmental control standards while competing with us for resources on the global market, and this can start a vicious cycle of deterioration for our environment. (y. wang et al. 2021a).concerns about the 174th global pollution and climate change highlight the need to boost the use of renewable energy (azam et al., 2021; doytch&amp; narayan, 2016). the decline of natural resources as well as the environmental effects are gradually forcing nations to shift to more sustainable sources of energy. the literature on energy economics has previously studied the relation with carbon dioxide emissions as well as the consumption of renewable energy using various methods of estimation (raihanet al., 2022). the studies used diverse indicators, such as the consumption of electricity as well as the utilization of resources, trade openness as well as urbanization, financial development and technological advancement in order to analyze the effect of these elements upon the ekc. growth in energy consumption as a result of industrialization can be detrimental to the environment, however this negative effect could alter due to the rapid growth of renewable energy use (djellouli and co. 2022, raihan et al., 2022).apergis et al. (2012) focused on a specific geographic region; eurasia was a period which covered the years 1992 through 2007 and proved that the theory of reaction was valid for the consumption of renewable energy. apergis and payne investigated central america and explained the short and long-term feedbacks and the increasing impact from renewable energies. utilizing the data from 35 years collected from panels, wolderufael and yemane identified a link between the evolution of economics and the depletion of electricity. wolde-rufael, y. (2014). a number of scholars have tried to comprehend the connection between economic growth and the energy consumption during the month's period. abosedra et al. (2013) who selected 82 countries between 1972 and 2002 based on four income levels, and gave insufficient evidence for the theory of growth. omri (2013) obtained data from 65 countries between 1990 until 2011. omri (2013) analyzed data from 65 countries between 1990 and using an income per head, and confirmed the theory of feedback and growth in middleand low-income states. many studies study the renewable and co2 emissions connection. the results of these studies generally show it is eco sustainable (balsalobre-lorente et al., 2021). but, a handful of studies have shown that renewable resources don't reduce pollution, and the reason could be ineffective or insufficient use (pata as well as caglar 2021). foreign direct investment could be a factor in the growing review of economics and development studies, vol. 9 (1) 2023, 47-59 51 pollution nexus via two ways. the first is that fdi can result in an increase in output for the nation and this can increase pollution and thus proving the validity that the phh is valid. the second aspect is that a reduction in the amount of pollution is possible by utilizing efficient production techniques due to the fdi (lau et al. 2014). there isn't a consensus among research studies on the connection to fdi as well as the environmental. certain studies claim that fdi causes environmental degradation; it is believed that the phh hypothesis is plausible (rahman and co. 2022) and others assert that the reverse is true (zhang et al., 2022). contribution of human capital in the magnetism of fdi is being studied both theoretically and practically. the fdi that is aimed at the outside is discouraged due to lower levels of human capital due to the fact that the physical capital becomes less efficient when there are lower level of the human capital. one of the first theoretical researches is by lucas (1990) that employs neoclassical expansion models in order to clarify the reason capital flows do not move from wealthy to poor countries, and argues that the human capital plays a crucial factor. similar to that, zhang and markusen (1999) demonstrate that as the availability of skilled labor in the host country decreases and fdi inwards converges to zero. they propose a model to show that the supply of skilled labor force in the host country is an essential "direct requirement" of multinational corporations. miyamoto (2003) proves that an increase in human resources creates an environment conducive to foreign investment, which is achieved through the direct impact of improved capability and the indirect consequences of health and stability in society. borensztein et al. (1988) mention that human capital plays a crucial role in determining the ability of host countries to absorb technological advances which may occur as a result from fdi inflows. 3. data and methodology the data collected in this study look at the effects of fdi to renewable power, non-renewable human capital, ec as well as co2 emission. the data comes from world development indicator (wdi) and bp statistics. the range of data spans from 1998 to 2020. to study the collision on fdi and consumption of energy and human capital models for co2 emissions are described. the model's specifications are provided in the following manner: the relationship could be written in the form: fi = f(re, nre, se, env) in the following: fi= foreign direct investment re= renewable energy nre= nonrenewable energy se= school enrollment (human capital) env= energy consumption (co2 emissions) itttttt xenvsenrerefi  ++++++= 544321 using the aforementioned model, one would expect standard theory to predict that β2, β3, β4, β5, and β6 are all positive. in addition, a gaussian distribution is assumed for the error term. when considering renewable energy, nonrenewable energy, human capital, and co2 emissions, the elasticity of fdi is given by the coefficients β2, β3, β4, and β5. review of economics and development studies, vol. 9 (1) 2023, 47-59 52 t r i itiit q i iit p i it l i it envsenrereafi  +++++=  = −− = − = − = 0 4 0 3 0 21 1 10 4. results and discussions 4.1 descriptive statistics and correlation matrix the result of descriptive statistics in following tables shows the mean value of foreign direct investment, non-renewable energy, renewable energy, school enrollment (human capital) and environment (co2) are 20.78900, 2.206136, 3.889341, 3.593820 and 11.66941 respectively. the maximum value of foreign direct investment 22.44425, nonrenewable energy 2.442345, renewable energy 4.062016, school enrollment (human capital) 4.093768 and environment 12.21659 respectively. the minimum value of foreign direct investment 19.31784, nonrenewable energy 2.078661, renewable energy 3.738503, school enrollment (human capital) 3.091386 and environment 10.98580 respectively. the standard deviation value of foreign direct investment 0.902114, nonrenewable energy 0.112003, renewable energy 0.088112, school enrollment (human capital) 0.259931 and environment 0.356758 respectively. the correlation matrix shows the association between the variables which are used in the study. table1: descriptive statistics and correlation matrix lfi lnre lre lse lenv mean 20.78900 2.206136 3.889341 3.593820 11.66941 median 20.83481 2.168202 3.870367 3.583565 11.70907 maximum 22.44425 2.442345 4.062016 4.093768 12.21659 minimum 19.31784 2.078661 3.738503 3.091386 10.98580 std. dev. 0.902114 0.112003 0.088112 0.259931 0.356758 skewness 0.043647 0.763650 0.131025 -0.099214 -0.255304 kurtosis 1.980144 2.241848 2.254860 2.455029 2.053439 jarque-bera 1.353312 3.755446 0.805876 0.434474 1.494069 probability 0.508314 0.152938 0.668354 0.804739 0.473769 sum 644.4591 68.39021 120.5696 111.4084 361.7517 sum sq. dev. 24.41430 0.376338 0.232914 2.026929 3.818283 lfdi 1 lenre 0.6131 1 lrenw 0.8339 -0.8318 1 lhuc 0.0180 0.1405 0.2395 1 lgenv -0.8186 0.8623 -0.9854 0.2606 1 since non-stationary data frequently produces erroneous regression results, it is vital to ascertain whether the variables analyzed here have a stationary character before employing this test. the stationarity of data can be examined with the help of the adf (augmented dickey fuller) and the phillips peron test(chaudhry et al., 2022). an autoregressive distributed lag model is employed to analyze the data in this investigation. review of economics and development studies, vol. 9 (1) 2023, 47-59 53 table 2: unit root test variable adf pp i(0) i(1) i(0) i(1) fdi -2.5551 -3.7808** -1.9833 -3.6473** enre -0.4169 -6.3955*** -0.2242 -6.3955*** renw -2.5143 -5.1765*** -2.5758 -5.1751*** huc -2.4592 -5.4609*** -2.5022 -5.5017*** genv 0.2738 -4.9325*** 0.3056 -4.9163*** note:**,*** denotes significance level at 5% & 1%. the long-term results demonstrate that all factors have a significant impact on foreign direct investment. particularly, the coefficient of renewable energy is 2.632798 which is significant with a +ive sign, meaning that an increase of one percent in renewable energy will result in 0.443950 percent of international direct investments. the coefficient for environment has significant with negative sign. coefficients for school attendance, non-renewable energy, and school enrollment are significant with a positive sign. table 3: long run and short run results short run results variable coefficient std. error t-statistic prob. d(lfi(-1)) 0.443950 0.164106 2.705266 0.0133 d(lre) 2.632798 1.322641 1.990562 0.0597 d(lse) 0.561569 0.161251 3.482583 0.0019 d(lnre) 2.232225 4.258412 0.524192 0.6056 d(lenv) -2.596424 1.238828 -2.095872 0.0484 cointeq(-1) -0.586014 0.134734 -4.349410 0.0003 long run coefficients variable coefficient std. error t-statistic prob. lenre 4.492725 2.096344 2.143124 0.0440 lhuc 1.269739 0.484978 2.618136 0.0161 lrenw 0.380272 0.206425 1.842183 0.0867 lgenv -4.430655 2.069538 -2.140891 0.0442 c -31.303599 50.413449 -0.620937 0.5413 the f-statistic for long-term integration is estimated to be 11.05089 which indicates that the association over time between variables, as measured by f-values are greater than the upper limit. table 4: ardl bound test results test statistics f-statistics value 11.05089 k 4 review of economics and development studies, vol. 9 (1) 2023, 47-59 54 critical value bounds significance 10% 5% 2.5% 1% upper bound 2.45 2.86 3.25 3.74 lower bound 3.52 4.01 4.49 5.06 table 5: diagnostic test results results of the diagnostic test show that the overall the model has been stable for a long time and completely free of any major issues such as normality, heteroskadasticity, autocorrelation and stability. r2 0.9215 adj.r2 0.8799 d.w 2.3218 f-stat 22.1802(0.0000) j.b 0.3009(0.8603) lm test 0.2438(0.7857) hetero 1.3418(0.2808) ramsey reset 0.8519(0.3656) however, the result for cusum and cusumq show that the overall the model is stable. the following figures show the results that are the result of cusum and cusumq. -15 -10 -5 0 5 10 15 98 00 02 04 06 08 10 12 14 16 18 20 cusum 5% significance -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 98 00 02 04 06 08 10 12 14 16 18 20 cusum of square s 5% significance review of economics and development studies, vol. 9 (1) 2023, 47-59 55 5. conclusion and policy implication this research used an ardl (auto regressive distributive model) approach to analyze the interplay between foreign direct investment, use of renewable and non-renewable energy sources, human capital, and environmental issues in pakistan between 1998 and 2020. long-term connections between the variables of interest have been uncovered through co-integration testing. foreign direct investment, renewable resources, 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(2016). the effects of fdi, economic growth and energy consumption on carbon emissions in asean-5: evidence from panel quantile regression. economic modelling, 58, 237-248. review of economics and development studies vol. 5, no 4, 2019 685 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads impact of microfinance on social mobility and women empowerment: the case of south punjab 1 areeba khan, 2 sulaman hafeez siddiqui, 3 sohail saeed, 4 ali azam 1 the islamia university of bahawalpur pakistan. areeba.khan@iub.edu.pk 2 the islamia university of bahawalpur pakistan. sulman.siddiqui@iub.edu.pk 3 the islamia university of bahawalpur pakistan. sohail.saeed@iub.edu.pk 4 the islamia university of bahawalpur pakistan. ali.azam@iub.edu.pk article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 this purpose of this study was to examine the impact of microfinance on women empowerment and social mobility of women in the under privileged region of bahawalpur located in south punjab. the study uses a sample of 772 female clients of two active microfinance institutions, nrsp and apna bank. a comprehensive questionnaire was used for the survey and results were analyzed through smart pls. findings of results suggested that microfinance is an efficient tool in facilitating social mobility and financial empowerment in women belonging to the region of bahawalpur. the value and originality of the paper rests with its use of social mobility as a determinant of well-being and enhancement in standard of living. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords microfinance, women empowerment, social mobility jel classification: m54, m59 corresponding author’s email address: areeba.khan@iub.edu.pk recommended citation: khan, a., siddiqui, s. h., saeed, s. and azam, a., (2019). impact of microfinance on social mobility and women empowerment: the case of south punjab. review of economics and development studies, 5 (4), 685-694 doi: 10.26710/reads.v5i4.892 1. introduction pakistan is a country struggling with the issue of poverty since its independence. four out of every 10 people are living under poverty line. the multidimensional poverty index result indicates 60.6 % of pakistan's population doesn’t complete education, nearly four out of 10 individuals (39 percent) don't have any benefits and more than 38 percent of the populace lives in a one-room house. around 33 percent of population does not have access to healthcare facilities (rana, 2016). according to mahmood, (2016) pakistan’s 60% population is even unable to earn exactly $2/day, and more than 70% of these are women. this situation has more or less prevailed through last 70 years of independence. pakistan has always performed poorly on the gender equality index and is lowest in the south asian region. as a patriarchal society and a developing country, pakistan is facing issues in delivering the women their due rights as members of society. in name of protection and dependence on the head of family, women are deprived of their basic right to decide for themselves and be a productive part of the labor force. social and economic empowerment for women is important not only for their own self but is also crucial for the development of the country. keeping this objective under consideration, the government of pakistan has been a signatory to major projects like millennium development goals, sustainable http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 686 development goals and convention on the elimination of discrimination against women. these all projects share the same focus on empowering women economically and socially in every aspect of life. microfinance is one such vehicle that is assumed to have a significant impact on well-being (the state of being comfortable, healthy, educated and happy) of the users. the most important component of wellbeing is happiness, which may not directly be achieved through increased earnings but assurance of higher social bonding (corpstake, 2007). the stagnant poverty levels in pakistan and low performance on happiness index could be attributed to lack of social mobility amongst classes. this study aims to examine the efficacy of microfinance as a tool in women empowerment and enhancement of social mobility towards achievement of the goals pertaining to overall well-being and gender equality. 2. literature review 2.1 the microfinance drive skoufias, leite, and narita (2013) describe that microfinance’s’ right borrowers are women as they are credit-constrained than men because they lack collateral, they are poor than men and also they are good at repaying their loans. lending from formal institutions is associated with success in business and it would create employment opportunity for others. pakistan has performed poorly on the metrics of equal opportunity and egalitarian distribution of income. this inefficiency in resource allocation and gender bias discourages the female segment of society who wants to ascend their selves from one social position to another. microfinance, besides other tools for improving well-being in women, is a financial service that provides access to easy loans to entrepreneurs, especially females. the microfinance movement, started by bangladesh gained popularity world over. in pakistan it started in 1982 with the advent of agha khan rural support program (akrsp) and orangi pilot project (opp), as an activity targeted at empowering women from their homes and improving their overall contribution in economy (pokhriyal, rani, & uniyal, 2014). microfinance institutions are set to achieve goals to help people have a standard living, to reduce poverty, to give them healthy lifestyle, women empowerment, social and economic development of women and gender equality. group loans increase well-being of women because in group people are socially related to each other in case of difficulty they try to help each other and prevent themselves fail emotionally, socially and materially as well. but microcredit is the one aspect to help women and society to cope up with misery so it will not be the enough measure for the sustainable development (goey, 2012). women borrowers are more inclined to alleviating poverty for themselves and their families. in minimal cases they gave opportunity to other women or helped other women. on micro level this suggests that they work to empower themselves economically and in some cases they are contributing to economic growth. household gets finances when they have somewhere to spend it, on easy repayment term and conditions. mostly borrowers just use a microfinance loan to fuel up their consumption circle (lock & smith, 2016) korankye & abada, (2017) state that microfinance benefits women economically as well as socially without bringing any harm to the institution of marriage. it has the potential to alleviate poverty especially in women, as has been witnessed by the microfinance experience in bangladesh, latin america and other developing countries. mader (2013) and hossain (2015) also suggest that microfinance institutions helps to reduce poverty, give empowerment to women and development of society. review of economics and development studies vol. 5, no 4, 2019 687 microfinance is being considered a powerful instrument for economic upheavel of the financially disadvantaged and its demand is increasing by the day. secp has also acknowledged microfinance institute’s efforts and issued regulations for non-bank microfinance institutions. national financial inclusion strategy (nfis) has established policy for financial inclusion 2015-2020. the main drivers to achieve the policy are; promoting financial literacy, capacity building for institutions, nonbranch banking and increasing number of microfinance bank points. this strategy is developed in best concern for all of stakeholders. so all the stakeholders will make combined effort and help to achieve nfis 2015-2020 strategy (social performance country report, 2016). skoufias, leite, and narita (2013) describe that microfinance’s’ deserving borrowers are women as they are more credit-constrained than men because they lack collateral. the availability of these loans to women at the very least increase their participation in labor market and as well it increases their social status economically. women prefer to get a loan that is readily available to them and also has a greater impact on them. these types of loan help them to raise voice for their contribution results and for their bargaining power to influence households decision; decision related to healthcare facilities, education facilities available to their children. these loans also help them to free them up from loan sharks. women serve as intermediaries between household expenditures and microfinance lenders. the bargaining power given to the women in return of socially honorable finances is more likely compensation to them. those women who acquired the planned loans they invest it in their businesses and the outcome for this type of activity take time. that’s why planned loan may make women economically empowered but bargaining power in this case does not increases. (garikipati, agier, guérin, & szafarz, 2016). 2.2 incidence of microfinance, economic empowerment of women and social mobility social mobility is a change in social position of individual or group on the basis of economic, occupational and political mobility (sorokin, 1959). social mobility is a concept that belongs to the field of sociology and sociologists study social mobility in terms of changing status of occupation. the economists on the other hand, focus on income and wealth to measure social mobility. social mobility measures social fairness and is now perceived as measuring tool for equality of opportunity between unequal and differing social groups (nunn, johnson, monro, bickerstaffe, & kelsey, 2007). according to aldridge (2001) ability of people is basis for social mobility. the ability either can be inherited or attained through socialization. different studies have inferred different conclusion about the role that ability plays in social mobility. aldridge (2001) further studies potential explanatory factors as barriers to social mobility which includes educational background of society members; poverty faced by members of society from childhood and its impact on their psychological behavior; family and upbringing techniques prevailing in families; capital access either it is social, cultural or financial; behaviors; opportunities; discrimination and procedures to ―hoard opportunities in profession as well as in societal concerns. arku (2007) concluded that microfinance clients get economic and non-economic benefits from microfinance programs. the relationship of women empowerment and microfinance are interrelated because it alleviates poverty for poor families and make their status increased in society. wellbeing is defined as living in peace when there is sustainable environment around poor. and wellbeing of poor can be enhanced by socio-economic empowerment that is facilitated by microfinance. self-help groups and non-profit organizations both working together to give better results, by trying to empower poor. shgs have made drastic change in income level of poor. it has helped them to increase their economic power by investing loan in productive activities which helped them in asset possession. it review of economics and development studies vol. 5, no 4, 2019 688 has changed financial position of the poor households as well as helped to increase in social mobility shgs mainly helped women to increase their empowerment (devi, 2009). 3. research objectives the objective of this research is to study influence of microfinance on social mobility and financial empowerment of female borrowers. microfinance makes society and its individual more flexible in terms of movement from one social status to another. the broader objective of the study is to evaluate the relationship of microfinance and gender equality in terms of agricultural land right to women, their education, healthcare facilities, their participation in economic activities. to effectively introduce social mobility in society, it is critical that we understand the causal relationship between lifting women out of poverty and women serving as powerful agents of social change. the inferences derived from literature review are as follows:  microfinance services have significant relationship with economic empowerment of female entrepreneurs.  microfinance services have significant relationship with social mobility of female entrepreneurs.  microfinance program have a significant impact on socio-economic status of female entrepreneurs. 4. materials and methods the current study uses quantitative method for data collection and analysis for data adopting mono method for data collection and analysis of data. the respondents for the research were female entrepreneurs. data were collected from two microfinance banks operating in the region of south punjab i-e national rural support program (nrsp) bank and apna microfinance bank. the respondents for the study were female entrepreneurs who were availing microfinance facilities residing in the area of southern punjab. nrsp is a non-profit organization, started its activities in year 1991. it is largest microfinance program in pakistan. it has its branches in 64 cities of pakistan. it is giving loan to approximately 3.17 million of poor household. apna microfinance bank is working as microfinance bank under 2001 ordinance. it has specialized its operations in a portfolio which consists of loan for agricultural sector, the poor and un privileged, for women, and microloan for small businesses. data were obtained from all the field offices of both banks. nrsp bank has 7 field offices in the south punjab region whereas apna bank has started its operations in bahawalpur recently hence, apna bank has one office which serves dilawar colony and islami colony bahawalpur area and two offices in multan region which cater to multan and surrounding areas. the questionnaire items used in this study is divided in two categories on nominal level and likert scale level. the descriptive part of questionnaire is of nominal scale. whereas, the items used to study behaviors, attitudes and psychology. the likert scale level for this questionnair is 1) highly increased 2) increased 3) neither increased nor decresased 4) decreased 5) highly decreased. this scale was used to examine either microfinance has change anything for the borrowers. the descriptive part of the questionnaire collected to evaluate the women borrowers economic and social condition. this part comprises of age, education level, civil status, size of family, type of house, savings, income, spendings etc. and the second part of questionnaire is based on items which will examine the condition of female either it has become better or become poorer or has no impact. 5. results and discussion the instrument from this study has been adapted from hossain (2015) and durgappa (2014) review of economics and development studies vol. 5, no 4, 2019 689 table 5.1 reliability analysis the above result shows that reliability of instrument is above cut off value. hence, the instrument is suitable and reliable for further analysis. for validity of construct correlation analysis is used. researches states that a correlation less than 0.85 shows that there is discriminant validity. discriminant validity states that instrument constructs are not assessing the same information. if the correlation value exceeds 0.85 it would be depicts as the variable constructs are overlapping. table 5.2 correlation analysis henseler, hubona, & ray (2016) suggests the criteria for validation is ave should greater than 0.5. the ave values in the test is greater than 0.5. hence, two tests has suggested that instrument is valid. before analysis of regression results from pls, outer loading of pls algorithm test results are evaluated. the less than 0.5 value for outer loading for any construct tells that there is error. this error will affect the results of regression. so, these error terms should be excluded from the model and then start interpreting the results of regression. the outer loading for this study is shown below which has been colored red* by the pls software will be excluded and again check if there is any remaining error in model. review of economics and development studies vol. 5, no 4, 2019 690 table 5.3 outer loadings before adjustment for error the new outer loading table shows that there is no error remaining in the data. the further analysis can be carried forward. table 5.4 outer loadings after adjustment for error to analyze the multivariate regression the current study has used smartpls software. the model analyzed is as follows: review of economics and development studies vol. 5, no 4, 2019 691 figure 5.1 pls results the pls algorithm states two values on arrows β value is displayed. and in circle or latent variable r2 value is displayed. these results suggests that women from age group and their responsibility are interrelated because with the increased responsibility of their children upbringing they try to minimize their activities even the income generating activities and give time to their children. respondents’ education level is not a problem s they are facilitated by the existing borrowers and the bank staff. most of borrowers are illiterate women. amongst those, women who are married and living in nuclear families are more inclined to take microfinance loans. family size between 3-6 members uses microfinance loans. the reason can be that lower family size can depends on one member income and family size of 3-6 members cannot depends on one member’s income so, women of family has to work to help her husband to make a better living. the larger family size means they live in joint family, there are more members earning in family and the increased household workload on women restricts them to earn. in this patriarchal system, head of the nuclear family is a man, hence the husband makes most of the decisions. the higher number of children in household compels women towards microfinance. the income of female borrower’s household range lies above the average income range of pakistan household thus resulting in financial empowerment of women. economic independence is the main driver for women to take loan. the main reason for women to avail loan displayed in pie chart is to setup or expand their business. rs. 10,000-50,000 loan is available for women entrepreneurs. most of the borrowers have taken loan in the range of 40,000-50,000 in expectation of financial easing of the working capital for a small setup. the borrowers who have taken loan for their businesses and spend it efficiently do not exhibit problematic behavior in repayment of loan because they have invested it on an income generating activity. review of economics and development studies vol. 5, no 4, 2019 692 microfinance has made most of women borrowers able to move freely in society because of their increased social and economic status. figure 5.2 bootstrapping results in bootstrapping model t-statistics is displayed. t-statistics value should be greater than +1.96 to be lying in acceptance region. the t-statistics are both greater than + 1.96. the assumption has been accepted or rejected will be decided on p value of t-statistics. the smartpls software gives standardized beta coefficients, r2 (r square) value and t-statistics. these statistics give significant value on which basis a relationship can be accepted or rejected. table 5.5 model fit the r square value indicates that independent variable (microfinance) will change the dependent variable (economic empowerment) with 73.3% and 53.7% variance in model will be the result of microfinance impact on social mobility for female entrepreneurs. t-statistics should be greater than 1.96. the model is fit as srmr value in bootstrapping was less than 95%. the questionnaire and items in it are valid and reliable to further analysis. the results of t-statistics show that there is significant and high correlation between the variables. review of economics and development studies vol. 5, no 4, 2019 693 6. conclusion the above findings and discussion concludes that there is a positive and significant relationship of microfinance program on economic empowerment and social mobility. the microfinance program factors are microfinance loan, saving facility, income generating activity. whereas after excluding the economic variable to make the model fit. this current research is based on bahawalpur the future researcher can get data from different cities to have better results. the future researches can be conducted while taking different dimensions along with the social and financial empowerment to have better representation of microfinance. references arku, c. (2007). changing gender roles and their socio cultural implications for rural households’ wellbeing: a study of microfinance in bogoso, ghana. copestake, j. (2007). how relevant is wellbeing to microfinance. esrc research group on wellbeing in developing countries. devi, n. (2009). microfinance and economic empowerment of weaker sections. garikipati, s., agier, i., guérin, i., & szafarz, a. (2016). the cost of empowerment: multiple sources of women’s debt in rural india. the journal of development studies, 1-23. goey, h. d. (2012). the social impact of microfinance: what changes in well-being are perceived by women group borrowers afterobtaining a group loan? master thesis in sustainable development at uppsala university, 1-37. hossain, m. s. (2015). women empowerment in bangladesh through microfinance. european journal of business and management vol.7, no. 17, 167-175. korankye, a. a., & abada, a. (2017 ).microfinance and women empowerment in accra, ghana. asian economic and financial review 7(3), 222-231. mader, p. (2013). explaining and quantifiying the extractive success of financial systems: microfinance and the financialisation of poverty. economic researchekonomska istraživanja, 26:sup1,, doi: 10.1080/1331677x.2013.11517637, 13-28. mahmood, f. (2016, august 28). why pakistan lags far behind in achieving mdgs. retrieved march 25, 2017, from the express tribune : https://tribune.com.pk/story/1171495/failing-pakistanlags-far-behind-achieving-mdgs/ nunn, a., johnson, s., monro, s., bickerstaffe, t., & kelsey, s. (2007). factors influencing social mobility. her majesty’s stationery office, department for work and pensions. corporate document services, leeds. pokhriyal, a. k., rani, r., & uniyal, j. (2014). role of micro-finance in the empowerment of the women. journal of business and finance 02 (01) , 21-31. rana, s. (2016, june 21). 40% pakistanis live in poverty. retrieved march 20, 2017, from the express tribune: https://tribune.com.pk/story/1126706/40-pakistanis-live-poverty/ skoufias, e., leite, p., & narita, r. (2013). expanding microfinance in brazil: credit utilisation and performance of small firms. the journal of development studies vol. 49, no. 9 , 1256–1269. social mobility. (n.d.). retrieved april 1, 2017, from notes for pakistan: http://notesforpakistan.blogspot.com/2009/08/social-mobility.html sorokin, p. a. (1959). social and cultural mobility. illinois : the free press of glencoe. srinivas, h. (2015, june). microfinance credit lending models. retrieved febraury 2017, from gdrc reseaarch output e-059, kobe, japan: global development research center: http://www.gdrc.org/icm/model/model-fulldoc.html http://www.gdrc.org/icm/model/model-fulldoc.html review of economics and development studies vol. 5, no 4, 2019 694 review of economics and development studies vol. 5, no 1, march 2019 49 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads an analysis of existence of localization for the implementation of triplization in higher education pakistan at policy and practice level 1 uzma akhtar, 2 bashir hussain 1 phd (epm) scholar, eppsl, allama iqbal open university (aiou), islamabad, uzmaakhtar2012@gmail.com 2 assistant professor, department of education, bahauddin zakariya university, multan, bashirhussain@bzu.edu.pk article details abstract history revised format: february2019 available online: march 2019 policymakers and academe around the globe are deeply concerned about maximizing benefits of localized aspect of higher education for the development of an individual local community. considering benefits of localization in higher education, this study examined the existence of localization for the implementation of triplization at policy and practice level. with problem statement in alignment of the aims of national education policy pakistan 2009, this research study is particularly aimed to analyze present state of higher education in pakistan in terms of focus on local networking, technological, economic, social, political, cultural, and learning localization, decentralization to the local site level, indigenous culture, community needs and expectations, local involvement, collaboration and support, local relevance and legitimacy, community-based needs and characteristics, social norms and ethos as the key characteristics of localization referred to by cheng in his theory of triplization. a mixed method exploratory approach was acquired to meet the objectives of the study. sample of the study were policy and provision documents for the content analysis and 1429 students and 140 faculty members from 15 universities of punjab and kpk as the respondents of survey. findings at both policy and practices in aspects of he revealed an agreement on the presence of localization at the institutional process level; localization of curriculum reflected inadequacy in policies whereas practices too, reflect an average level presence; localization of student and learning occurred in policies and practices at above average level whereas localized teacher and teaching aspect is catered to some extent in policies and provisions and precise average presence is responded by survey respondents. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords triplization, localization, higher education, decentralization, local collaboration, indigenous culture. jel classification: h75, i23 corresponding author’s email address: uzmaakhtar2012@gmail.com recommended citation: akhtar, u. and hussain, b., (2019). an analysis of existence of localization for the implementation of triplization in higher education pakistan at policy and practice level, review of economics and development studies, 5 (1), 49-58 doi: 10.26710/reads.v5i1.566 1. introduction there is an increasing international concern about outcomes of globalization upon indigenous and national development in all countries but with a particular focus on developing countries (beeson, 2014; hall & fenelon, 2015). the prime concern here is to maximize the benefits of localization and minimize the drawbacks of overwhelming of globalization for development of a local community (commers, 2016; relph, 2016). http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 50 localization is referred to as transfer, adaptation and development of related values, knowledge, technology and behavioral norms from and to the local context as mentioned by cheng (2000) in his theory of triplization. cheng (2000) further argued that globalization in education is one of the most significant features of new millennium as well as localization and individualization too needs focus in educational reforms. all the three processes can be given a composite term named as triplization process (i.e., triple + izations) that can be used to go by the side of varied setting for tertiary students. major identified characteristics of localization are networking in local setting; advancement in indigenous culture; fulfillment of community needs and requirements; adaptation of social, economic, political, cultural and technological learning interventions from outer world to local community; interinstitutional collaborations; community support; local involvement; local legitimacy and support and the concern for social norms and culture (cheng, 2000; 2006; 2016). localization in the higher education can bring in diverse resources and academic riches from local community and around the world to support higher education. higher education in pakistan now days, is a targeting the production of quality human resources for national capacity building (siddiqui & khan, 2016), a focus on higher education sector for building flagship national capacity and setting future direction of a country invites localization to be worked on. the proposed study has following objectives:  to spot the existence of localization in current educational policies and provisions for higher education in pakistan.  to spot the existence of localization within the current educational practices of hec and universities in pakistan. 2. research methodology this research was concurrent equal status (concurrent) mixed method design (creswell, 2007; 2012). qualitative part of study used a summative approach to qualitative content analysis of 43 policies, documents, and charters of sampled 15 hec approved universities, followed by two surveys for quantitative aspects of study. it started with identification and quantification of identified words in text with an aim of understanding the related use of themes (grbich, 2012), referred to as manifest content analysis (grbich, 2012; hsieh & shannon, 2005), and leading to latent content analysis which is referred to as process that interprets and discovers underlying meanings of the words (grbich, 2012; hsieh & shannon, 2005). for quantitative part of study, two survey questionnaires; questionnaire from 1429 students and questionnaire from 140 teachers served as tools for analysis of practices of hec and universities regarding existence of localization in practices of universities. 3. theoretical background and literature review localization is taking strengths and advantages from the internal and external environments and maximizing opportunities from the local contexts to achieve the goal of higher education (cheng, 2003). cheng (2000) in his theory of triplization emphasized that education should create and maximize opportunities for teaching, learning, and institutional development from internal and external environments and local communities (cheng, 2000; cheng 2001; pachi & santos 2013). figure 1 depicts detailed conception and characteristics of localization along with its implications for higher education. figure 1 presents the conceptions and characteristics in all four processes of higher education, namely, student and learning; teacher and teaching; curriculum and institutional environment (bustillo, 2014; cheng, 2001; 2003). furthermore, the detail of every individual process in terms of localization is given below. 3.1 localized tertiary learning learning process of every student can be boost up with national and international resources, support and associations at varied places inside or outside heis, in local settings. the outlook and gained by students will be a combined experience from several national and international institutions (cheng, 2000; 2003; education and manpower bureau, 1998; ryan, scott, freeman, & patel, 2000). review of economics and development studies vol. 5, no 1, march 2019 51 figure 1: conception and characteristics of localization 3.2 localized tertiary teaching localized aspect of teaching asserts that teachers should improve teaching learning process in manner that they can utilize all academic resources locally and globally, can fetch national and international support in networked environment to enhance their contribution in learning process. regional and global outlook of teachers get enhanced through their involvement in national or international research programs beyond their institutions (cheng, 2000; 2003). furthermore, their teaching is a type of networked teaching through mutual sharing and inspiration. 3.3 localized tertiary curriculum localization reveals that the curriculum also includes local resources, materials, and concerns to ensure the local relevance and community involvement for maximizing opportunities for students’ localized learning. communitybased curriculum is one typical practice to increase the local relevance and support in the field (breslow, 2015). 3.4 localized tertiary institutions new century paradigm shifts assume that educational environment must have self-initiative and autonomy of educational institutions to improve a self-learning cycle in the context of globalization and localization in education (cheng, 1996). the fostering of local knowledge at institutional level can also be considered as the growth of institutional knowledge because this knowledge is generated, accumulated and owned by the educational institution through the institutional thinking, planning, action, experience, evaluation and reflection. 4. findings of the qualitative aspects of the study the review of policies and provisions for higher education in pakistan regarding the existence of localization reflected enough evidence to support localization. themes and sub themes mentioned in table 1 were traced in the documents through content analysis. findings of manifest content analysis reflected that almost all the indicators of localization exist at policy level with following frequency. the results of latent content analysis of abovementioned aspects of localization in figure 1 can be viewed as evidence of existence of themes of localization in policies and provisions for higher education. the proceeding paragraphs present documentary evidences for themes such as local networking; technological, economic, social, political and learning localization; decentralization of higher education to the local site level; local involvement collaboration and support; community needs and expectations and bench marking with in all processes of higher education. table 1: existence of themes and sub themes on localization localization in he themes sub themes citations local networking local networking 14 internet 21 local intellectual sharing 20 review of economics and development studies vol. 5, no 1, march 2019 52 technological, economic, social, political and learning localization curriculum contents in local language 2 local socio-economic compatibility 6 ict 14 decentralization of he to the local site level institutional based management and accountability 4 local campuses 18 locally produced curriculum 2 local involvement, collaboration and support community involvement 4 local alliances through inter institutional collaboration 11 national/regional competitions 17 community needs and expectations cultural perseverance 2 relevance to the local situation 9 ethnic and language diversity 0 bench marking national comparison through quality assurance 12 total 210 4.1 local networking different policies and provisions for hec in pakistan reflect existence of local networking within heis in the domains of all three sub themes. for instance, vision and mission of hec in mtdf 2005-10, 2011-15 confirms that pakistan education and research network (pern) is a reality, connecting almost all universities, and when fully deployed will connect all of the public and private sector universities of pakistan to each other. the vision 2025 is to provide “lan/wan facilities at universities and to computerize all departments of the universities so that students and faculty members can access internet and intranet resources for the education and research purposes”. mtdf 2005-2010 exhibits that “higher education commission has initiated a video conferencing…, so that the students of such universities, who are not in a position to benefit from high profiled teachers, may have the opportunity to learn from them, share their ideas and views to enhance their productivity for local intellect sharing.” 4.2 technological, economic, social, political, cultural, and learning localization evidences for curriculum content in local languages were only traced in provisions for higher education in khyber pakhtunkhwa regional languages authority act, 2012 which says to, “consider ways and means for promotion of regional languages and to make all necessary arrangements in this regard for teaching, promotion and use of regional languages. local socio-economic compatibility can be traced in various stances. nep (2009) states, “research linked to local industry, commerce; agriculture etc. shall be encouraged to support these areas through indigenous solutions and create linkages between academia and market.” keeping in view the importance course of information communication technology, it was introduced in all disciplines with an aim in (syllabus for ict in education, 2012) that “this course will help students and teachers to understand use and apply a range of information communications technologies (icts). 4.3 decentralization of higher education decentralization took place when constitution (18th amendment) act, 2010 transferred legal and administrative authorities from federal control to the provinces for higher education by enhancing provincial autonomy of heis. it exhibits that “universities, despite depending on government funding to manage their affairs enjoy both substantive and procedural autonomy to a large extent. in many cases senate/ or syndicate help universities reach at any meaningful decision”. mtdf 2005-2010 states “campuses of existing universities shall be established in second and third tier cities to facilitate the spread of higher education” for addressing regional disparities and ensuring flexibility of available options for higher education. sensitive to the importance of local needs and resources, locally produced curriculum may serve an engine for bringing in the global intellect. annual report of hec (2013) reflects that, “realizing the dearth of locally produced reference reading material and textbooks at graduate and the post-graduate level, a project on “monograph and textbook writing” has been developed with the view to encourage authorship amongst university professors and researchers.” 4.4 local involvement, collaboration and support the higher education commission is supporting initiatives of promotion of local industry, protection of local heritage, provision of education and training addressing local needs, and industrial sector development. nep 2009 pinpoints that “specific program is designed to push universities/heis to integrate their research and teaching activities to address local issues, by community involvement, to provide on ground solutions. different types of review of economics and development studies vol. 5, no 1, march 2019 53 local alliances among educational institutions and market or industry are observed during process of review. mtdf 2005-10, 2011-15 exhibit that “the higher education sector is a major binding force for universities and colleges through local, regional, national and international partnerships to support socioeconomic regeneration and growth”. pakistan university sports board is set for participation of students in the national championships and games. it is to: “encourage, promote and develop sports in universities of pakistan. to organize and hold different sports activities in order to provide opportunities for healthy competition and develop a sense of sportsman spirit in students of universities of pakistan. 4.5 community needs and expectations vision of hec pakistan considers “institutions of higher learning as knowledge repositories whose faculty and students accrue knowledge and apply it to understand and address “local” issues.” it was found out during review of mtdf-i and ii that the support of high quality 4-year undergraduate programs in arts, humanities and social sciences are very central to the promotion and growth of the core issues of communication, culture, history and religion. mtdf 2011-15 reflects that the “institutions of higher learning have a responsibility to understand, preserve and promote this culture and heritage”. nep 2009 and mtdf 2011-15 depict that “… universities over the world serve as local resource centers providing training and support to industries along with trained manpower. when combined with the spirit of entrepreneurship, these academic institutions can change the economic destiny of entire regions, as well as the country”. over the past few decades, issues of ethnic and language diversity have moved from their peripheral positions to become central concerns of institutions of higher education. nep, 2009 states that “as the national educational systems also evolve as a response to particular demands of distinct ethnic, social, economic, religious, political groups and communities, there is always room for diversity. this diversity can lend strength to the educational outcomes, especially in a federation like pakistan, if this does not work at cross purpose with the harmonizing uniformities”. 4.6 bench marking to stay competitive among other institutions and to learn from each other by sharing aspects of good practice, hec emphasize bench marking in mtdf 2005-10, mtdf 2011-15, nep 2009 and annual reports. quality assurance authorities were setup by the hec in mtdf 2005-10, mtdf 2011-15, nep 2009 to “develop practical guidelines and policies for establishing quality enhancement cells, for monitoring and evaluation of the educational activities and uniformity of pace and standards across country.” so, at the policy level, the themes identified for localization mark their concrete presence within policies and provisions, but required force and direction still needs point of attention. among all the indicators of localization, decentralization of the heis to local site level with institutional based management and accountability, local campuses, internet services (lan), provision of pern by hec to all universities and dai’s bring an impression of localization of institutional aspect. student and learning, teacher and teaching and the most particularly curriculum aspects of higher education need a deeper focus to make higher education relevant to the local needs. 5. findings of the quantitative aspects of the study responses of students were obtained through questionnaire from students about the localized aspects of higher education whereas teachers responded about the same in responses from the teachers. table 2 represents responses about localized aspect of higher education institutions in questionnaire from students and teachers in comparison. questions are instrumented on the 5-point likert scale between strongly disagree to strongly agree. table 2: localized aspects of heis responses from students (1429) and teachers (140) students teachers statements m sd m sd utilization of locally available teachers 3.7 1.1 3.2 1.1 local alliances for collaborative learning/teaching 3.4 1.3 3.1 1.0 provision of research facilities at local level 3.5 1.2 3.1 1.0 collaborative researches on local issues/problems 3.2 1.2 3.2 1.0 academic credit sharing among local universities 2.7 0.8 2.7 1.4 existence of campuses of other national universities 3.2 1.4 3.5 1.0 inter/intra provincial student enrollment 3.7 1.0 3.9 1.0 offering of indigenous scholarships 3.7 1.3 3.5 0.8 review of economics and development studies vol. 5, no 1, march 2019 54 following of national standards and benchmarks 4.0 1.1 3.5 0.8 provision of platform for local research sharing 3.6 1.2 3.5 0.8 overall mean and sd 3.4 0.7 3.3 0.6 mean values of localized aspect of institution as mentioned above in section questionnaire from students of table 2 fall between mean 4.0 (sd=1.1) as agreement towards following of national standards and bench marks till mean 2.7 (sd= 0.8) between disagreement and a no idea note for academic credit sharing among local universities. the responses for utilization of locally available teachers, with mean 3.7 (sd=1.1), inter/intra provincial student enrollment with mean 3.7 (sd=1.4) and offering of indigenous scholarships with mean 3.7 (sd=1.3) went towards slight agreement. provision of platforms for local research sharing was responded with mean 3.6 (sd=1.2) and provision of research facilities at local level with mean 3.5 (sd=1.2) reflect a very slight inclination towards agreement. local alliances for collaborative learning with mean 3.4 (sd=1.3), collaborative researches on local issues/problems with mean 3.2 (sd=1.2) and existence of campuses of other national universities with mean 3.2 (sd=1.4) exhibit very low tendency of agreement towards the aspect of localization in the institutional process of higher education. however, total mean of localized institution aspect is 3.4 (sd=0.7) which validate the responses very slightly towards localization of institutions. mean values of localized aspect of institution as mentioned in section of questionnaire from teachers of table 2 fall between 3.9 (sd=1.0) as nearly an agreement towards inter/intra provincial student enrollment till mean of 2.7 (sd=1.4) for academic credit sharing between disagreement and undecided note. existence of campuses of other national universities with mean 3.5 (sd=1.0) and offering of indigenous scholarships, following of national standards and bench marks along with provision of platform for local research sharing; all with mean 3.5 (sd=0.8) demonstrate a middle road somewhere between undecided note and agreement. utilization of locally available teachers with mean 3.2 (sd=1.1) and collaborative researches on local issues/problems also follow the pattern of a low tendency from being indecisive to agreement. whereas local alliances for collaborative teaching and research facilities at local each with mean 3.1 (sd=1.0) reflected just an inclination towards agreement. however, total mean of the localized institution aspect is 3.3 (sd=.6) which corresponds more the indecisive approach of respondents towards localization of institutions at the level of higher education than the agreement. table 3 below embodies responses about localized aspect of curriculum at level of higher education. questions in this section are instrumented on yes and no basis to mark localization of curriculum. table 3: curriculum responses from students (1429) and teachers (140) students teachers statements yes no yes no locally produced curriculum contents 43.5 56.4 39.3 60.7 curriculum translated into local languages 20.9 79.1 39.3 60.7 locally developed curriculum on technology 43.4 56.6 29.3 70.7 the curriculum that addresses local social needs 52.8 47.2 40.0 60.0 curriculum on community related cultural norms 52.5 47.5 50.0 50.0 inclusion of dimensions of local politics 38.7 61.3 15.7 84.3 curriculum oriented to locally available jobs 69.7 30.3 68.6 31.4 the localized aspect of curriculum in questionnaire from students has statements expressing localized curriculum process of higher education. following responses were recorded as in table 3. towards agreement regarding themes of localized aspects of curriculum at the level of higher education, the highest response rate was 69.79% in favor of curriculum which is oriented to locally available jobs. while 52.8% favored curriculum that addresses local social needs and 52.5% agreed on the curriculum which embodies community related cultural norms. on contrary, the rate of response for curriculum contents produced locally was 43.6%, followed by a response rate 43.4% for locally developed curriculum on technology. inclusion of dimensions of local politics received 38.7% responses and curriculum translated into local languages was favored by only 20.9% respondents of responses from students. these responses do not mirror presence of localization of curriculum in full swing. review of economics and development studies vol. 5, no 1, march 2019 55 the localized aspect of the curriculum in questionnaire from teachers has statements pointing towards localized curriculum process of higher education to be explored from teachers. the following responses are recorded as reflected from table 3. towards agreement regarding themes of localized aspects of curriculum at the level of higher education, the highest response rate was 68.6% in favor of the locally available jobs. while 50% conveyed the presence of curriculum that is related to community associated cultural norms. on contrary, response rate for curriculum that addresses local social needs was40%, locally produced curriculum contents and curriculum translated into local languages received 39.3% responses each. the locally developed curriculum on technology was responded in favor by 29.3% while curriculum that included the dimensions of local politics could have 15.7% reactions by responses of teachers. these responses reflect a low level of localization of curriculum. this segment presents responses in table 4. questions in this section are instrumented on 5-point rating scale between not at all to a great extent. table 4: localized aspects of student and learning and teachers and teaching responses from students (1429) and teachers (140) students teachers statements m sd m sd sharing of local intellect via video conference/ skype/media 3.0 1.4 3.1 0.8 local alliances for learning 3.2 1.1 2.8 1.1 opportunities of education/professional grooming locally 3.8 1.0 3.4 1.2 useful member of society 4.1 1.0 4.6 0.7 overall mean and sd 3.5 0.7 3.4 0.6 mean values of localized aspect of student and their learning process of higher education as mentioned above in table 4, section questionnaire from students fall between 4.1 (sd=1) as agreement of feel for being useful member of society till mean 3.0 (sd= 1.4) for sharing local intellect in the process of learning to a medium level between agreement and non-agreement. whereas opportunities of education locally with mean of 3.8 (sd=1.0) and local alliances for learning with a mean of 3.2 (sd=1.1), are responded with moderate feedback. however, total mean of the items about the localized student process is 3.5 (sd=0.7) which confirms the responses more towards localization of student process in agreement to some extent. mean values of localized aspect of teacher and teaching process of higher education as mentioned above in table 4, section questionnaire from teachers fall between 4.6 (sd=0.7) for being a useful society member till 2.8 (sd=1.1) in support of local alliances for teaching to a level between non-agreement to some extent. whereas opportunities for the professional grooming locally with mean 3.4 (sd=1.2) and sharing of local intellect in process of teaching with mean 3.1 (sd=0.8) are responded with moderate feedback. however, total mean of items about localized student process is 3.4 (sd=0.6) which confirms the responses towards existence of localization of teacher and teaching process towards agreement to some extent. so, at practices of higher education, the opinion of respondents of both questionnaires from students and teachers are more or less in consensus concerning existence of smaller degree of localization. localization within institutional process exists but the extent is not powerful. presence of localized curriculum is not supported to some noticeable extent by students and teachers and so as localization of student and teacher aspect; the existence of which was not supported by student and teachers. therefore, there is no noticeable presence of localization aspect of triplization at the level of practices among all processes of higher education. 7. discussion to compare both results for existence of localization at policy level and practices of higher education: one common agreement is on presence of localization at the institutional process level as supported by the study of khan (2017). localization of curriculum did not show its presence in policies adequately whereas practices of higher education too, reflect an average level presence. the study of rahman (2004) and manan, dumanig and david (2017) support results being evident of too less localization in terms of language and ethnicity in curriculum. similarly, khan review of economics and development studies vol. 5, no 1, march 2019 56 (2017) reveal that though localization of curriculum is the need of time but higher education in pakistan still needs to work seriously towards it. localization of student and learning aspect showed its occurrence in policies and provisions and in practices, this aspect had its evidence above average. localized teacher and teaching aspect are catered to some extent in policies and provisions and exactly an average level presence is responded by survey respondents. these results are supported by ghaus, lodhi and shakir (2017) who in their study too stress on provision of proper training and guidance of teachers as guide or mentors of tertiary students in local settings but find it in absentia within higher education pakistan. 8. conclusions localization, in this regard presents a concept which aims at taking education out of the traditional mode and placing it at the leading edge of the development process through adjustment and adaptations as per local needs (cheng, 2006; cheng 2016). it seeks to ensure that education should prepare both individuals and the local societies to be locally energetic and bound to their ideological roots (cheng 2004; payne & askland, 2016) for sustainability and growth. in this regard the findings of the study reflect traces of localization in all aspects positively; induced with concern just with in the current decade with an exception only in curriculum aspect which appears to be slightly lagging behind in both policies and practices of higher education. so, it can be summed up that existence of localization is optimistically present but at an initial stage for implementation of triplization at level of higher education in pakistan. references beeson, m. 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(2000). intrinsic and extrinsic motivations: classic definitions and new directions. contemporary educational psychology, 25(1), 54-67. review of economics and development studies vol. 5, no 1, march 2019 58 review of economics and development studies vol. 5, no 4, 2019 731 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads developing english speaking skill indigenously among the prospective teachers 1 muhammad alam, 2 muhammad sarwar, 3 ashfaque ahmad shah 1 department of english, university of sargodha, pakistan. h.aalam@yahoo.com 2 department of education, university of sargodha, pakistan. drsarwar@ymail.com 3 department of education, university of sargodha, pakistan. multanxa@gmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 present research experimentally studied the effectiveness of indigenously developed content and language integrated modular approach (clima) especially designed for developing english language ability among university students. clima is a blend of content and language integrated approach and the modular approach. two equated groups of total 52 students from bachelor of education programme (semester-i) participated in this randomised pre-test post-test control group experiment. the content used herein comprised a purposefully designed module of 5 units. both groups were taught by the same specifically trained teacher on same days with an interval of one hour between the sessions with the two groups. experiment was completed in 30 sessions (1.5 hour each) during 10 weeks. for both preand post-testing, the researchers used the analytic rubric of fairfax county public schools (virginia, usa). this analytic rubric has been termed as the performance assessment for language students (pals). the experimental group witnessed (pre-testing = 31.6%, post-testing = 80.8%) a value addition of 49.2%; and the control group witnessed (pre-testing = 31.2%, post-testing = 66.2%) a value addition of 35.0%. compared with toefl and ielts, conclusively, clima was found highly effective. results are discussed in detail in the paper. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords low speaking proficiency, effectiveness of module, content and language integrated approach, prospective teachers jel classification: i0, i2 corresponding author‟s email address: h.aalam@yahoo.com recommended citation: alam, m., sarwar, m. and shah, a.a. (2019). developing english speaking skill indigenously among the prospective teachers. review of economics and development studies, 5 (4), 731-740 doi: 10.26710/reads.v5i4.912 1. introduction the faculty of speech distinguishes human race from the rest of the creation as it is one of the greatest blessings endowed upon man (wilson, 2012). better oral communication in english has been the passport to indigenous, global, cyber and virtual markets. better proficiency in english speaking has also been a rewarding aspect for the diaspora communities. the study will be useful for the students and english language teachers (elt) interested in the fields like sociolinguistics, psycholinguistics, applied linguistics, and english for specific purposes (esp). the study will bring awareness among prospective teachers and teacher trainers about the standards and benchmarks for oral proficiency in english which are being followed internationally. the study will provide a model to the teacher education for the development of a module for english speaking skills which will be quite different from other existing modules. the current study may be very helpful for the http://www.publishing.globalcsrc.org/reads mailto:h.aalam@yahoo.com mailto:drsarwar@ymail.com mailto:multanxa@gmail.com mailto:h.aalam@yahoo.com file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_34 review of economics and development studies vol. 5, no 4, 2019 732 subject teachers (non-language teachers-teachers of education in the current case) to teach english language as effectively as english teachers teach the language. 2. literature review english speaking skills are the essential standard for teachers in all of the countries where english is regarded as second, foreign or official language. pakistan is among the countries where english is used as official language and the medium of instruction as well. the system of education in pakistan still maintains the significance of english as medium of instructions. therefore, competence in communication skills, especially, the speaking skills are required in academics at levels from grade 1 to phd. in pakistan, the level of english speaking proficiency has been reported very low among teacher education graduates (alam, 2012; bilal, rehman, rashid, adnan, & abbas, 2013; coleman, 2010; shahzad, ali, qadeer, & ullah, 2011). it is not the issue of weak students only, even the high achievers in english written examination cannot speak english correctly (bilal et al., 2013; karim, 2012). there are many reasons of low level of speaking proficiency of graduates of teacher education in pakistan including non-availability of quality teaching material and lack of assessment practices of spoken proficiency (bilal et al., 2013; tariq, bilal, sandhu, iqbal, & hayat, 2013). the content which is used to teach spoken skills to prospective teachers was mostly developed and contextualised in western culture (tariq et al., 2013) and has not been so far adapted appropriately. the choice of any language teaching content must be made by giving due consideration to local culture and context. the use of subject matter as content in spoken language teaching improves motivation as well as achievement of prospective teachers (khushi & talaat, 2011). there is need to develop local subject matter based learning material for improving spoken english proficiency in pakistan (coleman, 2010). teachers are expected to be proficient and skilful speakers (aslam, 2011; cammarata, 2010). speaking proficiency of the students depends much on the communication ability of the teachers. if the teacher in the classroom is deficient in oral communication, the students will also be deficient in speaking. if the teacher has wrong pronunciation, lacks fluency, grammatically incorrect and he/she does not have proper intonation, the students will certainly display all of these errors in the spoken english because they copy their teacher. that is why, effective communication skill is regarded as one of the professional standards for the teachers all over the globe (aslam, 2011; government-of-pakistan, 2009) because excellent speaking makes excellent teacher (aslam, 2011; cammarata, 2010). in teacher education, the need for proficiency in english speaking skills is growing consistently in rapidly changing world at global level. the teaching and learning of english speaking skills (ess) through content and language integrated learning module is becoming admired internationally. modular approach used for the teaching and learning of english language skills is more fruitful than traditional methods of teaching and learning of english language skills. but in pakistan, english language and english speaking skills, is taught through the traditional methods; and traditional syllabuses ignored specific needs of individuals regarding learning language. so, the present research filled the gap between the existing and required levels of english speaking proficiency of prospective teachers. the current study also explored the effectiveness of the content and language integrated module made for improving the english speaking skills of future teachers. current study will be significant in such a way that the specific module for the development of english speaking skills is expected to influence positively the other areas/ fields of knowledge like sociology, psychology, philosophy and research methodology in the making of contextualized modules. this study may serve as a reference to all – curriculum planners, teachers, students, employers and all other stakeholders in educational set up by providing them guidelines and presenting a valid document for how to design curricula for english speaking skills and how to develop, select and organize the learning/teaching material with special focus on the needs of the learners. file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_1 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_4 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_7 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_31 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_4 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_17 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_4 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_4 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_33 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file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_6 review of economics and development studies vol. 5, no 4, 2019 733 3. methodology to find out the effectiveness of the module for developing english speaking skills of prospective teachers, the researchers selected the randomised equated pre-test post-test control group experimental design. the experiment was conducted upon prospective teachers of first semester of bachelor of education program (2015-2016) from an institute of higher education (pakistan). all of the enrolled students (52) were divided into experimental and control groups randomly. the control group of the study was taught through the traditional way. the experimental group was taught through the content and language integrated modular approach (clima) which was developed by the researcher for this purpose after blending the two famous approaches (i.e. content and language integrated approach and modular approach). the teaching module (content/teaching material) used in this experiment was purposefully prepared, keeping in view the entry level and the required level of english speaking proficiency of the prospective teachers. this module consisted of 5 units. both groups were taught by the same specifically trained teacher on same days with a difference of one hour time interval between the sessions with the two groups. the experiment continued for 10 weeks. entire activity of the experiment was distributed over 30 classroom sessions and each of the session was of 1 hour and 30 minutes duration. analytic rubric of performance assessment for language students (pals), prepared by fairfax, virginia (united states) was used for pre-testing and post-testing. the intra personal speaking proficiency (monologue) and inter personal skill (dialogue) were evaluated through two different performance tests, both in pre-test and post-test. effectiveness of clima was judged through the percentage of the scores in pre-testing and post-testing. the fairfax county public schools system (fcps) came in to existence after the civil war with the adoption by virginia in 1870, which for the first time guaranteed free public education. fcps has been evolving the assessment criteria. this school system has done a lot in order to establish the validity and reliability of the rating scales. fcps has also developed the rating scales for the assessment of foreign languages. both, discrete and holistic rating scales for the assessment of all four skills (reading, writing, listening and speaking) are available. speaking is assessed against six indicators: task completion, comprehensibility, fluency, pronunciation, vocabulary and language control. scoring is awarded from 1 to 4 with and +. the raw scores are converted to percentage by the use of “a conversion chart” the fcps rating scales have three levels namely level-1, level-2 and level-3 according to shrum (2015), an effective example of performance-based assessment is the performance assessment for language students (pals) project in fairfax county, virginia, the purpose of which is to design and implement performance tasks and evaluate the abilities of language learners. in order to design assessments that focus on what students know and can do in the foreign language, a task force of fairfax county language teachers created a variety of performance tasks that place students in real-life situations in which they need to use the language. the tasks, together with scoring criteria, were developed and used for both formative and summative assessment purposes. “tasks were designed so that they would “engage students in simulated real world tasks; have more than one right answer; reward skill development, creativity, and linguistic accuracy; promote problem-solving skills and tap higher-level thinking skills (especially in upper levels); and let the students know how their performance will be evaluated before they perform the tasks” (pp. 191–192). review of economics and development studies vol. 5, no 4, 2019 734 figure: the model randomised equated pre-test post-test control group experimental design 4. results the experimental group shows magnanimous development from pre-testing (31.6%) to post-testing (80.8%) with a value addition of 49.2%. the control group also witnesses the noticeable development from pre-testing (31.2%) to post-testing (66.2%) with a value addition of 35.0%. both groups discern development in their speaking skills such a way that the magnitude of skill development in experimental group is admirable. comparing vertically, the difference between the experimental and the control group is +0.4% in pretesting which expanded to +14.6 in post-testing. the net difference of +14.2 is recorded between the two groups, which is indeed laudable. table 1: performance assessment (percentage scores) pre-test score (%) posttest score (%) value addition reference value ielts/toefl experimental group 31.6 80.8 49.2 67 control group 31.2 66.2 35.0 67 difference +0.4 +14.6 +14.2 conclusively the study discovered high effectiveness of the clima; particularly, if these values are compared to that of the internationally accepted tests of english language i.e. toefl and/or ielts which is 67% (for both). results of preand post-test comparing the experimental and control groups have been discussed in detail in the paper. treatment (value addition = 49.2 %) experimental group control group pre-test (31.6 %) experimental group control group post-test (80.8 %) no treatment (value addition = 35.0 %) post-test (66.2 %) international reference value (ielts / toefl) (67.0 %) pre-test (31.2 %) review of economics and development studies vol. 5, no 4, 2019 735 table 2: overall english speaking proficiency of prospective teachers groups mean gain scores s d t p-value overall experimental 6.22 2.71 7.506 0.000 control 1.80 1.15 dialogue experimental 3.34 1.38 6.336 0.000 control 1.24 0.91 monologue experimental 2.88 1.49 7.258 0.000 control 0.56 0.56 p<0.05 n = 50, df = 48 the table 2 reflects that independent samples t test was applied to compare the mean gain scores of english speaking proficiency of prospective teachers of experimental and control groups. the results indicate that, there is a significant difference between mean gain scores of the perspective teachers of experimental and control groups in the overall assessment of english speaking proficiency, in the assessment of dialogue and monologue. the statistical significance of difference in the mean gain scores of experimental and control groups indicates that the mean gain scores of english speaking proficiency of experimental group was better than that of control group. the results conclusively reflect that the experiment ends very much successfully. table 3: reference scores of ielts/toefl (percentage scores) all 4 skills required/total (%) speaking skill required/total (%) ielts 6/9 (67) 6/9 (67) toefl 80/120 (67) 20/30 (67) table 3 demonstrates percentage scores as a threshold of internationally accepted english language tests i.e. ielts and toefl. if we reconsider the performance of the experimental group and the control group with respect to the threshold score of ielts and toefl (i.e. 67.0%), we come to confidently confirm the successfulness of the experiment above all. 5. discussion the fundamental objective of the current study was to find out the effectiveness of the specific module developed for the improvement of speaking skills of prospective teachers. the results of the experiment show that the module based on the content and language integrated modular approach (clima) significantly improved english speaking skills of the individuals in the experimental group. the prospective teachers in the experimental group improved their speaking skills significantly because of the effectiveness of the clima module. effectiveness of this module owes to multiple factors. the first factor in the success of the current module is the discursiveness which is employed in its making. the current module incorporates the insights taken from english for specific purposes (esp), content and language integrated language learning (clil) and modular approach (ma). all of these approaches enhance motivation, minimize language anxiety, save the capital of time and effort and ensure the active review of economics and development studies vol. 5, no 4, 2019 736 and productive participation of the learners and the instructor. that is why the high achievers and the low achievers in the experimental group would have improved their english speaking skills significantly. the module used in the current study has a number of strengths. this module has blended the content area with english speaking proficiency. the speaking activities included in the module are based on a variety of subjects included in the course outline prescribed for the prospective teachers. hence this module may lend a good support to the prospective teachers in other subjects like assessment and evaluation in education, introduction to teaching, learning theories, foundations of education etc. it may also support reflection on the learning process and this what is acknowledged by many researches (lightbown & spada, 2006; gajo, 2007; coyle, holmes, & king, 2009; coyle, hood, & marsh, 2010; dalton-puffer, 2008; krashen, 1985; lyster, 2007). the clima module, through the interactive activities, enhanced the motivation of learners. the enhanced level of motivation was remarkably noticed by the researchers; and it was also reported by the participants. literature also reveals that acquisition of second or foreign language becomes easier and faster if motivation level of learners is set to high; and for this purpose, clima module is observed as an effective tool to develop positive learning attitude among the learners (coyle et al., 2010; lasagabaster & sierra, 2009; evans & fisher, 2009; marsh, 2009; macaro, 2008; coleman, galaczi, & astruc, 2007; davies, 2004; grenfell, 2002; pachler, allford, & field, 2000; grenfell, 2002) have made comparative studies to know the attitudes of learners towards module for foreign language (mfl) and content and language integrated learning (clil) and concluded that the attitude of learners towards mfl deteriorated across time whereas the attitude towards clil remained consistently positive along with progress in the content area; and it was because of clil‟s activity oriented approach, intrinsically. the module used in the experiment kept the learners actively engaged in improving their english speaking skills. the clima classroom became playfields for the learners to play with their speaking ability (byrnes, 2006; leung, 2005; grenfell, 2002) observes that clil presents challenges to the learners; and these challenges activate them in cognitive and psychomotor domains. effective communication skill is well acknowledged as one of the standards for the teachers almost everywhere in the world (aslam, 2011; government-of-pakistan, 2009). level of english speaking proficiency of teacher education graduates in pakistan has been found very low by many researchers and experts (coleman, 2010; shahzad, ali, qadeer, & ullah, 2011; alam, 2012; bilal et al., 2013b). there are many reasons of low level of speaking proficiency of outgoing graduates of teacher education in pakistan including non-availability of quality teaching material and lack of assessment practices of spoken proficiency (bilal et al., 2013b; tariq et al., 2013). the content which is used to teach speaking skills to prospective teachers was mostly developed and contextualised in western culture (tariq et al., 2013). the choice of any language teaching content must be made by giving due consideration to local culture and context (khushi & talaat, 2011). the use of subject matter as content in spoken language teaching improves motivation as well as achievement of prospective teachers (khushi & talaat, 2011). there is need to develop local subject matter based learning material for improving english speaking proficiency in pakistan (coleman, 2010). the first objective to be achieved in the current study was the development of a module for the improvement of english speaking proficiency of prospective teachers. the teaching/ learning material of english language in pakistan is developed/ compiled in the form of books and anthologies (khushi & talaat, 2011; sarwar, 2001). in the public sector, the functional and notional syllabuses have rarely been in use for the teaching of english as second language (esl) or english as foreign language (efl) (pasassung, 2003). the books / anthologies which are being currently used for the teaching of english do not incorporate the material and techniques required for the development and assessment of speaking skills (rubdy, 2008). therefore, the analyses of educational situation, syllabuses and methods of teaching in relation to the development of english speaking proficiency through a specific module made room for file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_22 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_22 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_14 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_9 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_10 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_11 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_11 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_19 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file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_29 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_91 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_91 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_141 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_128 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_140 review of economics and development studies vol. 5, no 4, 2019 737 the experiment to be conducted and the new approach to be exercised in teacher education with special focus on the development of english speaking proficiency (ghazi et al., 2010). the module was made and presented to the experts. the experts discussed the content and organization of the material. the themes presented in the module were also discussed. the major allegation was against the length of the sentence. the researcher was suggested to make structure of the sentences easy by decreasing the length the sentence as well as the length of the activities. later on, the participants of the pilot test also suggested the researcher to modify the activity in which the length of the sentence was greater. this module was unique in its structure and content. this module was made to cater to the needs of the market and capability of the learners. the concept and practice of need analysis are new in our situation but the literature reveals that the needs assessment in teaching and learning of english speaking proficiency has been the order of the day since 1950s. global scenario is still dominated by the concept and practice of need analysis. the need analysis in the area of language policy reveals that english language and excellent english speaking proficiency are the valuable currency in the global market and economics of education. in teacher education, the need for proficiency in english speaking skills is growing consistently in the fast changing global world (aslam, 2011; cammarata, 2010). as english has overpowered the globe, different communities learn english for different needs. the needs of a doctor of medicine are different from the needs of a business man. the need of a nurse to learn english is not the same as that of an mbbs doctor; the need of a taxi driver is not the same as that of a waiter in the hotel or a tourist guide; the need of a student of biology will not be the same as that of computer science. the need assessment in esp has contributed to develop the scope of esp in terms of variety and consequently a myriad of the branches of esp exists now. some of the branches include: english for academic purposes (eap), english for occupational purposes (eop), english for vocational purposes (evp), english for medical purposes (emp), english for business purposes (ebp), english for legal purposes (elp), and english for sociocultural purposes (escp) (belcher 2009). the current study may be labelled as english for secondary school teachers because effectiveness of the course and content is proved in the post-test and the success of the experiment owes a lot to the base line study which was conducted by the researcher during his previous research project. the effectiveness of the current module is an evidence of the globalised validation of modern trends in concept and practice of teaching and learning through such modules. the literature clearly shows that the educational world is shifting from traditional approaches of teaching/learning to modular approaches because of its promising latent strength. in fact, modular approach teacher uses modules to teach for specific purpose like programmed instruction instead of traditional book (mlitwa, 2010) another interesting element is the significant improvement in english speaking skills of prospective teachers in the control group. the reasons for such an unexpected improvement of control group may be because of some extraneous variables that might have „polluted‟ the control group. 6. conclusion the content and language integrated modular approach (clima) was found effective in improving english speaking skills of prospective teachers. the module successfully bridged the gap between the initial level (31.6%) of speaking skills, measured through pals‟ analytic rubric, and the desired level (67% required in ielts/toefl). it was concluded that the module was effective because it excellently filled the gap between the existing and the required levels of english speaking skills of prospective teachers. as english speaking skills of the prospective teachers enrolled in the bachelor of education programme, file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_61 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_9 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_26 file:///c:/users/zubair/desktop/whatsapp%20unknown%202020-01-06%20at%204.33.35%20pm/15.doc%23_enref_27 review of economics and development studies vol. 5, no 4, 2019 738 at an institute of higher education (pakistan) were improved significantly, it is hoped that this clima module may be used in teacher education programmes elsewhere. further research on the clima module for its suitability in developing english speaking skills for other languages may be valuable. references alam, m. 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(2012). on human nature: harvard university press. review of economics and development studies vol. 5, no 4, 2019 740 review of economics and development studies, vol. 8 (2) 2022, 183 201 183 path dependence in energy system and ecological footprint in pakistan: evidence from time series data abre-rehmat qurat-ul-ann a, sana noreen b a lecturer, department of economics, university of gujrat, gujrat, pakistan email: abre.rehmat@uog.edu.pk b mphil economics, university of gujrat, pakistan article details abstract history: accepted 25 may 2022 available online june 2022 path dependence refers to the consumption of fossil fuels in energy production system. this study empirically examines the effect of path dependence in energy systems on ecological footprint of pakistan from 1981-2014. unit root test determines the integrated order of variables, while auto-regressive distributed lag model investigates the existence of a long-run association between variables. the negative and significant speed of adjustment coefficient ensures the adjustment of the model used in long run after unexpected shocks. fossil fuel consumption significantly increases ecological footprint in pakistan. if fossil fuel consumption increases by 1 percent, ecological footprint rises by 2.07 percent. increase in biocapacity increases ecological footprint by 1.1 percent. urbanization and population density significantly decrease ecological footprint as 1 percent increase in population density decreases ecological footprint by 0.96 percent and one percent rise in urbanization reduces ecological footprint by 3.28 percent. foreign direct investment does not show any significant association with the ecological footprint. standard diagnostic tests support the empirical results of the study and confirm that no heteroscedasticity and serial correlation exists. the policy implication is to implement measures to diminish the usage of fossil fuels in energy systems and increased usage of alternative and renewable energy sources. this can abate the burden on environment and biocapacity of pakistan making it feasible to reduce ecological footprint levels in pakistan. © 2022 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: path dependence, energy systems, ecological footprint, biocapacity, fossil fuels jel classification: o13 doi: 10.47067/reads.v8i2.450 corresponding author’s email address: abre.rehmat@uog.edu.pk 1. introduction the significance of energy use for the economic development of any economy cannot be further emphasized (barbir et al., 1990). but the energy production heavily relies on consumption of fossil fuels and other non-renewable sources of energy. despite concerns raised and problems created by this heavy dependence of energy systems, majority of the world economies depend upon fossil fuels to fulfil review of economics and development studies, vol. 8 (2) 2022, 183 201 184 their demand for energy. path dependence reflects the fossil fuels consumption in the process of energy generation since former to the current eras. although several renewable and environment-friendly resources for energy production are present, but proportion of renewable energy in overall energy mix is not adequate. substantial use of non-renewable sources incurs costs equal to environmental damages and fossil fuels consumption for energy generation (rafique & rehman, 2017). the energy system of most countries either developed or developing, depends upon the fossil fuels. even in the presence of their positive indicators as these countries have good operational control on their thermal plants, the use of fossil fuels causes many problems that are analyzed and addressed in literature. some of the problems are environmental effects, scarcity of natural resources, risk of supply, and instability of market prices. all of these problems suggest switching from consumption of fossil fuels to the renewable sources of energy (martins et al., 2019). energy is an indispensable component for all human actions and developments. increase in energy usage globally has detrimental effect and repercussion on the global dominion and ecosystem. pakistan has encouraging future prospects of renewable energy with a total potential of renewable sources about 167.6 gw. due to improper policies and infrastructure, this potential has not been used to satisfy the total electricity demand. consuming fossil fuels and other conventional sources of energy for power generation is another paramount reason for the environmental degradation (rafique & rehman, 2017). most of the developed and developing countries hinge on conventional sources of energy for electricity generation, such as coal, natural gas, biomass, oil and renewable. fossil fuel usage in energy production creates a significant component of the complete energy demand (hidayatullah et al., 2011). although fossil fuels are crucial for energy production in majority of developing and developed countries, their consumption causes some environmental problems in form of increased air pollution levels and global warming. air pollution generates health problems for people and produces negative social and economic effects. the irregular sharing of fossil fuel consumption also gives rise to issues like energy security due to their significant role in energy systems (martins et al., 2018). fossil fuels covered 82 percent of the total primary energy supply of the world in 2011. the main reason behind air pollution in most of the high-income and middle-income countries is usage of fossil fuels in energy systems. combustion of fossil fuels in energy generation produces 85 percent of irrespirable particulate air pollution and most of the emissions in form of sulphur dioxide and nitrogen oxide in the atmosphere (perera, 2018). energy policies are decisive towards achieving sustainable development and clean environment because two third of greenhouse gas (ghgs) emissions and 90 percent of co2 emissions are generated by energy sector (iea, 2018). high energy use inevitably means higher ghg emissions. ghg emissions from energy supply sources are 47 percent of the total emissions (rehman & ali, 2016). problems with fossil fuel consumption not only affect economy but it also harms environment in form of global warming, airborne pollution, and depletion of ozone layer, forest deterioration and emissions by radioactive substances (dincer, 1999). these issues should be taken into account simultaneously if we want minimal environmental degradation and bright future of energy related systems. literature suggests that continuous damage caused by human activities to natural environment negatively affects the future development (dincer, 1999). review of economics and development studies, vol. 8 (2) 2022, 183 201 185 fossil fuels combustion emits greenhouse gases which result in environmental damage (haines et al., 2006). outset of industrial revolution along with industrial expansion, has caused emission levels to increase to 76 percent of total greenhouse gas (ghg) emissions. 65 percent of these emissions are owed to fossil fuels and industrial processes, 11 percent is generated via forestry and further land use variations (intergovernmental panel on climate change [ipcc], 2014). pakistan is one of those countries who are facing a precarious climate change situation owing to rapid increase in ghg emissions. about 137 million metric tons of carbon dioxide emissions have been calculated on the base of per year consumption of fossil fuels in 2017. these ghgs emissions further result in bad environmental conditions and harm to the climate (saleem et al., 2017). table 01 shows the contribution of fossil fuels in total energy mix of pakistan depicting that pakistan still depends on fossil fuels for functioning of energy system. any change in the ecosystem is adverse for environmental health. as human undertakings are on the rise, the role of fossil fuels in manufacturing activities and energy utilization has also increased. this increased fossil fuel consumption has increased the overall temperature of the globe by putting high pressure on the natural resources of earth either directly or indirectly (batool & jamil, 2016). ecological footprint of humans refers to the combined impact of all activities that take place by humans. it can be calculated in terms of naturally productive areas of land, the required water for production of goods that are needed to consume, and the absorption of generated waste. simply, it can be defined as the environmental effect resulting from the human productive activities to acquire the required lifestyle (national footprint agency, 2017; rashid et al., 2018). figure 1: ecological footprint and biocapacity of pakistan (in global hectare (gha) per capita -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1 1990 2000 2010 2017 biocapacity per capita ecological footprint percapita biocapacity reserve table 1: percentage of energy sources in energy mix of pakistanfiscal year 2018 energy source oil hydro natural gas imported lng coal renewable sources nuclear energy percentage share in total energy mix 31.2 7.7 34.6 8.7 12.7 1.1 2.7 source: hdip, government of pakistan (2018-19) review of economics and development studies, vol. 8 (2) 2022, 183 201 186 authors’ own work; data source: global footprint network (2019) figure 1 shows the ecological footprint and bio-capacity levels of pakistan in global hectare (gha) per capita (monfreda et al., 2004; galli et al., 2007). its purpose is to observe the required biological regeneration ability of environment for human actions. these actions include both production as well as consumption of goods and services (kitzes et al., 2008). ecological footprint is the pressure created on land by human activities (destek et al., 2018). majority of the recent literature used this variable as a measure and indicator for environmental degradation as it is more inclusive than co2 emissions (aydin et al., 2019; charfeddine, 2017; mrabet & alsamara, 2016; mrabet et al., 2017; destek & sarkodie, 2019; sarkodie & strezov, 2018; wang & dong, 2019; ozturk et al., 2016; wang et al., 2013). it encompasses the direct and indirect environmental ramifications of human consumption and production activities (ulucak & bilgili, 2018). the world has been living in a situation of ecological overrun since 1970s as per ecological footprint chart (ewing et al., 2010), which indicates that, the human demands are more than the earth’s biocapacity (wwf, 2014). literature suggests that consumption of fossil fuels; coal, oil, and natural gas harms earth’s climate by rising atmospheric concentration of carbon dioxide gas. global climate damage is expected to harm the ecological footprint. burning fossil fuels is one of the paramount reasons that are responsible for decreasing ecological footprint of pakistan (perera, 2018). ecological footprint of pakistan was 6.7 gha in 2012 which was 14 times smaller compared to ecological footprint of australia (wwf, 2006, 2012). according to the estimations of global environmental statistics, pakistan is at 104th rank out of 140 countries on the basis of ecological footprint (ef). moreover, according to the happy planet index (hpi) in 2011 the ef value of pakistan had been 0.8. there are multiple significant advantages of using ecological footprint for measuring environmental damage. it assists in highlighting the environmental influences of consumption and production actions (mcdonald & patterson, 2004). most influential aspect of the ecological footprint is that it captures an extensive variety of ecological data combined as only one indicator (costanza, 2000). -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1 1985 1990 1995 2000 2005 2010 2015 2020 biocapacity per capita ecological footprint percapita biocapacity reserve review of economics and development studies, vol. 8 (2) 2022, 183 201 187 this study is significant as pakistan has to attain sdg climate change, renewable energy and alternate energy use. 2. overview of fossil fuel consumption and ecological footprint fossil fuel usage as the main input in energy production systems damages the global environment via numerous negative ecological impacts, which contribute to global warming, and air pollution. air pollution further leads to several health problems and bad social and economic conditions (martins et al., 2019). although the share of renewable sources is rapidly increasing around the world, most of the global energy consumption depends upon fossil fuels. it is recorded that in 2017, fossil fuels had 81 percent share in the total energy consumption. there is estimation that consumption of fossil fuels is about 15 billion metric tons every year (cassidy, 2019). global shift towards renewable energy use is in process but the speed of this shift is not in pace to meet the challenges formed in shape of economic expansion throughout the globe and rapid growth of population (iea, 2019). as there is recognition of significance of transitions towards a carbon-neutral climate, the world still depends upon fossil fuel consumption in energy generation and it is expected to follow the same path dependence unless some major changes in the policies are introduced (iea, 2019). as time passed, the consumption of natural gas, coal and oil is increasing in energy generation system. the global share of different energy sources in different years (see figure 2) shows that conventional sources contribute more in the energy system across the world. figure 2 world energy consumption by sources (twh) source: bp statistical review of world energy, 2018 the continuity of path dependence in energy system by using the higher share of fossil fuels consumption for energy production has been worsening the environment. it means that by following this path, consuming more fossil fuels leads to environmental damage and increases the value of ecological footprint in the globe (alkhathlan & javid, 2015). review of economics and development studies, vol. 8 (2) 2022, 183 201 188 despite using conventional measure of ecological footprint (hectare), a more comprehensive and better measure is global hectare (gha) this unit can be adjusted as a single unit in the way that it equalizes the fertility of different land areas. a given area of a cultivation zone has more productive capacity naturally as compared to the same area of land of a desert. hence, the unit global hectare relates to biological hectare productive capacity worldwide. therefore, the comparison of different ecosystems with different bio capacities in different areas in the world is possible using the same unit, global hectare (gha). table 2 shows the global bio capacity and ecological footprint per person for years 1981 to 2014 and includes overall values along with the values of six components of ecological footprint. table 2: ecological footprint and biocapacity per person year record built-up land carbon cropl and fishing grounds forest products grazing land total 1981 biocapacity/ person 0.02 0 0.35 0.08 0.03 0.01 0.49 ecological footprint/ person 0.02 0.17 0.34 0.03 0.1 0.01 0.66 1985 biocapacity/ person 0.02 0.18 0.35 0.02 0.1 0.01 0.68 ecological footprint/ person 0.03 0 0.36 0.07 0.03 0.01 0.49 1990 biocapacity/ person 0.03 0 0.34 0.06 0.03 0.01 0.46 ecological footprint/ person 0.03 0.23 0.37 0.02 0.1 0.01 0.76 1995 biocapacity/ person 0.03 0 0.35 0.05 0.02 0.01 0.46 ecological footprint/ person 0.03 0.28 0.38 0.03 0.09 0.01 0.81 2000 biocapacity/ person 0.04 0 0.36 0.05 0.02 0.01 0.46 ecological footprint/ person 0.04 0.28 0.38 0.03 0.11 0.01 0.84 2005 biocapacity/ person 0.04 0 0.34 0.04 0.01 0 0.44 ecological footprint/ person 0.04 0.36 0.36 0.02 0.09 0.01 0.88 2010 biocapacity/ person 0.04 0 0.3 0.04 0.01 0 0.39 ecological footprint/person 0.04 0.38 0.31 0.02 0.09 0.01 0.85 2014 biocapacity/ person 0.04 0 0.3 0.03 0.01 0 0.39 ecological footprint/ person 0.04 0.36 0.32 0.01 0.09 0 0.83 source: global footprint network (2019) review of economics and development studies, vol. 8 (2) 2022, 183 201 189 growth in renewable resources will be higher in future lead by hydro, wind and solar power. slow speed of this growth will not be sufficient to offset the impact of expanded global economies in future alongside a rapid growth of the population. demand for energy will increase by 1 percent per year through 2040, and the emission level will be reduced as 50 percent of the increased demand will be fulfilled by using renewable sources, and almost 35 percent by gas (iea, 2019). according to a recent projection, solar is anticipated to become the most sought-after source of energy by 2040 due to its declined costs. the wind energy source is also projected to increase by 15 folds. energy consumption is projected to increase by 28 percent by 2040 (iea, 2019). 3. literature review some studies found significant results whereas, some found insignificant effect of the fossil fuel consumption path dependence on the ecological footprint of their respective study region. it has been analysed that recently ecological footprint has become a more appropriate and innovative measure and indicator of environmental deterioration relative to co2 emissions (sarkodie & strezov, 2018; aydin, esen & aydin, 2019; destek & sarkodie, 2019; wang & dong, 2019). perera (2018) advocates the idea of the impacts of fossil fuel combustion in the form of pollution given our carbon-based economies as a serious concern. the study suggests that if we do not take any strong action, our generation and their descendants may be inherited a progressively more unsustainable and biased world where they and all of their communities will unable to survive, adjust, raise and transmute as required. ibrahiem and hanafy (2020) investigated the link between consumption of fossil fuels and ecological footprint of egypt. the study covers time period of forty-three years (19712014). empirical analysis using fully modified ordinary least squares (fmols) and dynamic ordinary least squares (dols) methods identified and confirmed a positive and significant association between fossil fuel consumption and ecological footprint. destek and sinha (2020) studied the relationship between conventional energy sources and ecological footprint of oecd economies from 1980 to 2014 using second-generation panel data methodologies. results suggested positive and significant association amid use of non-renewable sources of energy and ecological footprint. alola, bekun and sarkodie (2019) investigated effect of fossil fuel consumption in energy systems on ecological footprint of sixteen european union member countries. this study analysed data of 1997 to 2014 using estimation technique of panel pool mean group auto regressive distributed lag (pmg-ardl) model and found a direct and significant association between consumption of fossil fuels and ecological footprint. gokmenogolu and sadeghieh (2019) explored association between fossil fuel consumption and ecological footprint of turkey from 1960 to 2011. empirical findings showed that fossil fuel consumption has a long run direct and elastic effect on ecological footprint. hanif et al. (2019) studied the effect of fossil fuels consumption on ecological footprint for both long and short run for fifteen developing asian countries with panel data of twenty-three years [1990 to 2013]. auto regressive distributed lag (ardl) model results showed that fossil fuels combustion contributes to the environmental degradation through increase in ecological footprint. martins et al. (2019) selected 29 european countries and analysed that majority of the european countries profoundly rely on fossil fuels in energy systems and the findings suggested consumption of fossil fuels has adverse impact on ecological footprint of european countries. bello, solarin and yen (2018) explored the effect of fossil fuels combustion on environmental degradation for malaysia using four measurement tools encompassing ecological footprint, carbon review of economics and development studies, vol. 8 (2) 2022, 183 201 190 footprint, water footprint, and co2 emissions. vecm granger causality method is employed to assess annual time-series data of 1971-2016, for long-run association between study variables. the findings suggest that fossil fuel consumption has a negative effect on all four measures used for environmental degradation. sinha, shehbaz, and balsalobre (2017) empirically observed the association between nonrenewable sources of energy, consumption of fossil fuels, and environmental damage. the study used the data for n-11 countries for the time period from 1990-2014 segregated in three forms (renewable, non-renewable, and biomass). the generalized method of moments (gmm) analysis found that there exists a significant direct association between fossil fuel consumption and ecological footprint in n-11 countries. alkhathlan and javid (2015) empirically investigated the effect of fossil fuels combustion on ecological footprint employing annual data from 1971 to 2013 for saudi arabia using structural time series models (stsms). study findings depict that the consumption of fossil fuels has a significantly direct effect on ecological footprint. lotfalipour, falahi and ashena (2010) studied the association between fossil fuel consumption and carbon emissions as a measure of environmental damage in iran from 1967-2007. toda-yamamoto estimation method was employed to explore this causal association. results suggested a direct relationship between fossil fuel consumption and carbon emissions which ultimately increases ecological footprint and lead to environmental damage. ahmed et al. (2019) investigated the effect of population density on ecological footprint for malaysia using annual time series data from 1971 to 2014. bayer and hanck co-integration test and ardl estimation results disclosed that population density has significantly negative impact on carbon footprint and ecological footprint. asici and acar (2018) studied the effect of population density on ecological footprint using panel data for 87 countries from 2004 to 2010. the study found negative and significant relationship between the population density and ecological footprint and positive and significant impact of biocapacity on ecological footprint. alola et al. (2020) examined the association of biocapacity and ecological footprint for africa from 1990 to 2014 employing bound testing approach of ardl. estimation results establish that biocapacity and ecological footprint has a positive and significant association portraying that increase in biocapacity causes a considerable increase in the value of ecological footprint in africa. usman, alola and sarkodie (2020) empirically analyzed the dynamic effect of bio capacity on environmental damage in united states taking ecological footprint as a measure of environmental damage. analysis of time series data of 1985 to 2014 for the long run as well as short run dynamic results, using ardl estimation technique confirmed the presence of positive and significant relationship between biocapacity and ecological footprint. rehman et al. (2019) explored the relationship of biocapacity and environment using data of 16 central and eastern european countries (ceecs) from 1991-2014. the study used ecological footprint as a measure for the climate conditions. results of dynamic seemingly unrelated-co-integration regression (dsur) established long-term positive and significant association of biocapacity and ecological footprint. saleem, rehman and jun (2019) explored the dynamic effect created by human capital and biocapacity on environmental condition of brics countries. proxy of ecological footprint was used for environment covering the period 1991-2014 and long-run dynamic coefficients obtained by dsur imply the presence of significantly direct link amid biocapacity and ecological footprint. review of economics and development studies, vol. 8 (2) 2022, 183 201 191 danish et al. (2019) assessed the relationship of economic growth and ecological footprint as it links to biocapacity and human capital and analyzed data of 43 years from 1971-2014. ardl model estimation results with a structural break revealed that economic growth escalates ecological footprint and, hence, environmental degradation. increase in biocapacity increases ecological footprint and contributes to environmental deterioration significantly. mrabet et al. (2017) explored the association of financial development and ecological footprint in 15 mena countries. an experimental panel analysis for these countries identified a positive but insignificant effect of foreign direct investment (fdi) on carbon dioxide emissions, ecological footprint, and carbon footprint. hassan et al. (2019) assessed the effect of economic growth, biocapacity and natural resources on ecological footprint of pakistan. results of ardl bounds test found a long run direct and significant association between biocapacity and ecological footprint. nathaniel et al. (2020b) found association between renewable sources of energy, urbanization, economic growth, trade openness and ecological footprint for civets (colombia, indonesia, vietnam, egypt, turkey, and south africa) countries. the augmented mean group estimator, panel co-integration and causality test results found that urbanization has a long-run inverse but significant association with ecological footprint. nathaniel (2020a) analyzed the relationship between energy consumption, urbanization, economic growth and trade for indonesia. the study estimated annual time series data from 1971 to 2014 using ardl technique and found negative but significant effect of urbanization on ecological footprint. danish, ulucak and khan (2019) analyzed the relationship between urbanization and ecological footprint for brics economies using panel data for twenty-four years, from 1992 to 2016. the study used fully modified ordinary least square (fmols) and dynamic ordinary least square (dols) for estimating the long-run estimators. empirical results explored the relationship between income and urbanization and analyzed its impact on ecological footprint. higher income leads to a surge in urbanization which reduces the value of ecological footprint in those developing countries. 4. research methodology 4.1 data sources and description of variables this study employed annual time series data of pakistan from 1981-2014 (see table 3 for details on variables). data on ecological footprint and biocapacity is obtained from national footprint account, whereas, data on fossil fuel consumption, population density, urbanization and foreign direct investment is taken from world development indicators of world bank. table 3: description of the variables variable description data source ef ecological footprint (gha) national footprint account ffc fossil fuel consumption (% of total energy consumption) world development indicators (wdi). world bank bc bio-capacity (gha) national footprint account pop population density (population per sq.km of land area) wdi, world bank urb urbanization (urban population as % of total population) wdi, world bank fdi foreign direct investment inflow (% of gdp) wdi, world bank review of economics and development studies, vol. 8 (2) 2022, 183 201 192 4.2 empirical model equation (1) empirically estimates the effect of fossil fuel consumption in energy systems on the ecological footprint of pakistan (nathaniel, 2000); eft = β0 + β1 (ffc)t + β2 (bc)t + β3 (pop)t +β4 (urb)t + β5 (fdi)t + µt (1) where ef denotes ecological footprint, ffc depicts fossil fuel consumption in energy system, bc refers to biocapacity, pop refers to population density, urb depicts urbanization and fdi represents foreign direct investment. in equation 2, the model is converted into logarithmic form, lneft = β0 + β1 (ln ffc) t + β2 (ln bc) t + β3 (ln pop) t +β4 (ln urb) t + β5 (ln fdi) t+ εt (2) in equations (1) and (2), βs are the coefficients of independent variables. coefficient values state the magnitude of change in dependent variable caused by the explanatory variables. the signs of βs determine the relationship of each explanatory variable with the dependent variable. if β>0, it shows that the variable has a direct relationship with the dependent variable. if β<0, it confirms that explanatory variable has a negative impact on the dependent variable, whereas, if the value of β= 0, it implies no effect on the dependent variable as a result of change in independent variable. after checking the stationarity of the variables using augmented dickey fuller (adf) test, ardl approach is determined to analyze the data. first step in ardl analysis is to carry out bound testing to figure out the f-statistics for ensuring presence of long-term relationship among the variables. fstatistic is computed for each variable. typical ardl model for co-integration suggested by pesaran and shin (2001) is as follows (see equation 3); 𝚫𝐥𝐧𝐘𝒕 = 𝐜 + ∑ 𝛂𝚫𝐥𝐧𝐘𝐭−𝐢 𝒏 𝒊=𝟏 + ∑ 𝛃𝚫𝐥𝐧𝐗𝐭−𝐢 𝒏 𝒊=𝟏 + ∑ 𝛄𝚫𝐥𝐧𝐙𝐭−𝐢 𝒏 𝒊=𝟏 + 𝛅𝟏𝐥𝐧𝐘𝐭−𝟏 + 𝛅𝟐𝐥𝐧𝐗𝐭−𝟏 + 𝛅𝟑𝐥𝐧𝐙𝐭−𝟏 + 𝛆𝐭 (3) where c is intercept; ∆ depicts first difference lag operator; ε refers to the white noise error term. the series is in natural logarithmic form (ln) (see equation 3). both the long run and short run coefficients can be calculated by ardl model, and error correction model (ecm). the ardl for the long run model is presented in equation 4; lny𝑡 = β0 + ∑ β1δlnyt−i 𝑛 𝑖=1 + ∑ β2δlnxt−i 𝑛 𝑖=1 + ∑ β3δlnzt−i 𝑛 𝑖=1 + εt (4) where βs are long-run coefficients of ardl model. short run coefficients computed by ecm model are shown in equation (5): δlny𝑡 = α0 + ∑ α1δlnyt−i 𝑛 𝑖=1 + ∑ α2δlnxt−i 𝑛 𝑖=1 + ∑ α3δlnzt−i 𝑛 𝑖=1 + θecm𝑡−𝑖 + εt (5) where, αs are short run coefficients of ardl error correction (ecm) model; where ecm is the error-correction term, and θ represents the speed of adjustment parameter. 5. results and discussion unit root analysis using adf test evaluates the presence of unit root in the variables of the underlying model. review of economics and development studies, vol. 8 (2) 2022, 183 201 193 table 4 augmented dickey-fuller (adf) test results variables at level at 1st difference intercept trend and intercept intercept trend and intercept decision lef -1.875 2.456 7.168 7.154 i(1) lbc -2.550 4.627 6.871*** 6.782 i(1) lfdi -1.743 1.945 4.894*** 4.911*** i(1) lffc -3.061 1.719 -4.902*** 5.517*** i(0) lpop -7.663*** 1.072 -0.7586 -1.464 i(0) lurb -0.180 -3.413 2.745 2.747 i(0) note: *** p <0.01, **p<0.05. *p<0.1. source: authors’ own calculations. stationarity test results (see table 4) suggest that fossil fuel consumption, population density and urbanization are stationary at level, whereas, ecological footprint, biocapacity and foreign direct investment are stationary at first difference. overall, variables of the model are integrated of mixed order, and no variable is found integrated of order 2, i.e. i (2). therefore, ardl estimation technique is employed to analyze the relationship between ecological footprint and fossil fuel dependence of energy system in pakistan. the first step of estimation in ardl co-integration technique is to compute the bounds test values which help to evaluate existence of long-run relationship between the dependent and independent variables. ftest statistics are computed and matched with the lower and upper bounds values provided by the pesaran et al. (2001). table 5 ardl bounds test: testing for existence of a level relationship dependent variable: ecological footprint f-statistics 7.921841 critical bound values lower bound upper bound 1% 3.41 4.68 5% 2.62 3.79 10% 2.26 3.35 source: critical values from pesaran et al. (2001) the calculated f-statistic value should be greater than the lower and upper bound values (table 5). higher tabulated value of f-statistic (7.92) than the lower and upper bound values at all levels of significance endorses the long run correlation between explanatory and explained variables (table 5). long-run analysis estimation results in table 6 show that biocapacity has significant direct effect on ecological footprint. 1 percent increase in biocapacity increases ecological footprint by 1.14 percent at 1 percent significance level. increase in fossil fuel consumption in energy systems in pakistan by 1 percent, increases ecological footprint by 2.07 percent (table 6). population density is inversely related with ecological footprint, where, one percent increase in the population density decreases ecological footprint by 0.97 percent at 5 percent significance level. an increase in urbanization of 1 percent results in 3.2 percent decrease in ecological footprint of pakistan. results found a direct but insignificant relationship between foreign direct investment and ecological footprint (table 6). review of economics and development studies, vol. 8 (2) 2022, 183 201 194 in short run analysis, model is assessed for convergence with ecm term (equation 5) (see table 7). ecm depicts the speed of adjustment of the model to equilibrium in the long run showing that if the system experiences an unexpected shock, how much time it takes to get back to equilibrium. ecological footprint is directly related to fossil fuel consumption, biocapacity and foreign direct investment, whereas, it is inversely associated with urbanization and population density (table 7). table 7 short run estimation analysis variables coefficients standard error t-statistic prob. dlffc 0.3165 0.3809 -0.831001 0.4169 dlbio 0.25980** 0.1086 2.390379 0.0280 dlbio(-1) 0.1263 0.1092 -1.187596 0.2504 lbio(-2) -2.467 0.0916 -2.693026 0.0149 dlfdi 0.0119 0.0199 0.596898 0.5580 dlpd 112.031 45.335 2.471176 0.0237 dlpd(-1) 48.55 23.854 -2.035326 0.0568 dlurb -2.7600 0.9284 -2.972718 0.0568 ecm(-1) -0.8428*** 0.1378 -6.112941 0.0000 source: authors’ own calculations in short run, urbanization has a significantly negative relationship with ecological footprint, whereas, fossil fuel consumption, biocapacity, foreign direct investment and population density are directly related to ecological footprint. the negative and significant value of co-integration coefficient (ecm) shows that if there is an unexpected shock faced by the system, the whole system will move back towards the equilibrium annually at the speed of 84.2 percent (see table 7). hence, the results suggest that there exists a short-run equilibrium based on this model which supports the long run impact of fossil fuel use on ecological footprint of the country. 6. diagnostic tests breusch-godfrey lm test and breusch-pagan-godfrey test evaluated the presence of serial correlation and heteroscedasticity in the model, respectively. the probability value of lm test statistic is greater than 0.05, conforming that serial correlation does not exist and the null hypothesis of no serial correlation could not be rejected at the 5 percent level of significance (see table 8). the null hypothesis table 6 results of long-run analysis variables coefficient se t-statistic prob. lffc 2.0704*** 0.6719 3.0808 0.0064 lbio 1.1409*** 0.3757 3.0414 0.0070 lfdi 0.014 0.0227 0.6213 0.5422 lpd -0.967** .3942 2.4542 0.0245 lurb -3.274** 1.2835 2.5512 0.0200 constant 0.778 0.4666 -0.6060 0.5520 diagnostic tests r2 0.936 adj.r2 0.8947 f-statistic 22.252 prob. f-stat 0.00 note: *p<0.1, **p<0.05, *** p <0.01. source: authors’ own calculations review of economics and development studies, vol. 8 (2) 2022, 183 201 195 of no heteroscedasticity could also not be rejected as probability value of test statistic is more than 0.05. table 8 diagnostic tests for error correction mechanism model serial correlation lm test (bp) f-statistic 0.028 prob. 0.9724 r-squared 0.07318 prob. chi-square 0.9641 heteroscedasticity test (breusch-pagan-godfrey) f-statistic 2.0942 prob. 0.0959 r-squared 9.2542 prob. chi-square 0.0993 source: authors’ own calculations "cusum" and “cusum square” tests gauge the long-term stability of variables of the model. figure 3 depicts model consistency tests, where the middle line shows the reliability of variables in the long run. if the middle line is in the middle of two upper and lower lines, it means that model variables are consistent or stable in long run. if the middle line does not lie amongst the upper and lower boundary or it reaches outside upper and lower lines, it implies that in long-run, variables of the underlying model are not stable. figure 3 cusum test result -15 -10 -5 0 5 10 15 90 92 94 96 98 00 02 04 06 08 10 12 14 cusum 5% significance source: authors’ own calculations. cusum plot to check the model stability (see figure 3) shows that the middle line in the graph lies amid upper and lower lines of the graph which means that all the variables of empirical model are consistent and stable in the long run. the results of cusum square test (see figure 4) show that the estimated values are in the middle of the upper and lower lines/bounds of the graph conforming the long-run consistency and stability of the underlying model. review of economics and development studies, vol. 8 (2) 2022, 183 201 196 figure 4 cusum square results source: authors’ own calculations 7. conclusion and policy recommendations as the population of pakistan is increasing, demand for energy is on the rise accordingly. to meet the increasing energy demand, pakistan has to depend on fossil fuels to come across the requirement. fossil fuel consumption for energy production thus becomes a major source that adds to environmental degradation through soaring ecological footprint of the country. the consumption of renewable energy sources in energy production is not adequate to safeguard the deteriorating environmental conditions in the country. economies with smaller portion of fossil fuel consumption in energy mix observe lower levels of ecological footprint and better environmental conditions. this study analyzed impact of fossil fuel consumption on ecological footprint of pakistan using annual time series data from 1981 to 2014. after analyzing the stationarity of all variables, the variables of the model are found to be integrated of mixed order, hence, ardl estimation technique is employed to analyze the relationship of ecological footprint with fossil fuel dependence of energy system in pakistan. results endorse the presence of direct and significant association between fossil fuel consumption and ecological footprint in pakistan. the long-run results confirm that ecological footprint is directly and significantly associated with fossil fuel consumption and biocapacity, whereas, population density and urbanization are negatively and significantly related with ecological footprint. the negative and significant value of ecm shows the convergence of system towards equilibrium in long run-in case of any shocks in the short-run. 1 percent increase in fossil fuel consumption causes 2.07 percent increase in the ecological footprint of pakistan. the coefficient value of biocapacity suggests that if there is 1 percent increase in biocapacity, it causes 1.14 percent rise in the value of ecological footprint of pakistan. the results confirmed that there is a negative and significant relationship between urbanization and ecological footprint. in case of a one percent increase in urbanization, ecological footprint declines by 3.27 percent. population density has an inverse association with the ecological footprint of pakistan. a one percent rise in population density causes 0.96 percent decrease in the ecological footprint. ecm term coefficient value of -0.84 depicts the adjustment speed of the model towards equilibrium. all the -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 90 92 94 96 98 00 02 04 06 08 10 12 14 cusum of squares 5% significance review of economics and development studies, vol. 8 (2) 2022, 183 201 197 diagnostic test results support the model results and show that the issues of heteroscedasticity and autocorrelation do not exist and the model is consistent and stable. increased burden on the cities and suburbs along with increased population density has increased the burden on the ability of the environment to absorb and process the environmental pollution. superfluous consumption of the existing population has increased the speed of extraction of resources from the environment giving it less time to recover and replenish. economies like pakistan are at the verge of both economic and environmental crises where the growth of the economy is profoundly dependent on energy sources. if economy is not fuelled by energy sources, then it will face hurdles in terms of long-run growth. if fossil fuel dependence in the energy systems is not addressed in time, it will lead to a shortage and worsening of biocapacity and increased ecological footprint, risking the sustainable development and future supply of renewable resources of pakistan. results recommend introduction of energy policies by federal government which support the use of alternative fuels in energy production, and increase biocapacity by preserving existing environmental and natural resources. inefficient extraction and excess consumption of renewable resources can deplete their future supply and hence can lead to different sets of issues pertaining to sustainable development. reliance on domestic sources of renewable energy based on conservation and careful usage principles should be emphasized. government should restrict excessive consumption of fossil fuels in energy production system and must devise and implement environment-friendly policies that enforce the replacement of the non-renewable sources of energy by renewable and green energy sources so that the ecological footprint of the country can be improved. sdg 12 of ensuring responsible and sustainable consumption and production can be achieved by working on sustainable management and use of natural resources including biocapacity. implementation of long-term production frameworks under target 12.1 and integrating climate change measures into policy and planning under sgd13 are imperative to attain the climate change targets by 2030. authors' contribution: all authors contributed to the study’s conception and design. material preparation, data collection, and analysis were performed by abre-rehmat qurat-ul-ann and sana noreen. the first draft of the manuscript was written by sana noreen and both authors commented on previous versions of the manuscript. all authors read, reviewed and approved the final manuscript. references ahmed, z., wang, z., mahmood, f., hafeez, m., & ali, n. 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(2010). annual report 2010. retrieved from, https://data.worldbank.org/handle/10986/4387. wwf (world wildlife fund), 2006. living planet report, avenue du mont-blanc ch-1196 gland, switzerland. wwf. 2012. living planet report 2012. wwf international, gland, switzerland. wwf, world wildlife fund, 2014. living planet report, avenue du mont-blanc ch-1196 gland, switzerland. https://data.worldbank.org/handle/10986/4387 review of economics and development studies, vol. 6 (1) 2020, 67-81 67 financial crises and adaptive market hypothesis: an evidence from international commodities traded at new york stock exchange a muhammad naeem shahid, b khalid latif, c ghulam mujtaba chaudhary, d shahid adil a phd (finance), assistant professor, chinot sub campus, government college university, faisalabad b phd (finance) assistant professor, college of commerce, government college university, faisalabad, pakistan c phd (finance), assistant professor, university of kotli, azad jammu and kashmir. d phd (economics) director/additional secretary, punjab economic research institute (peri), planning and development board, government of the punjab, lahore article details abstract history: accepted 11 march 2020 available online 31 march 2020 this study evaluates the varying degree of predictability of commodities return through empirical analysis of amh (adaptive market hypothesis). we divide daily returns data (from 1996 to 2013) of commodities indices (gold, metal, oil& silver) into different crisis periods. we subject all the subsamples to linear/nonlinear tests to reveal how market efficiency (independency of returns) has behaved over time. all the linear (except variance ratio) and nonlinear tests are evident that commodity indices returns have been predictable (dependent) in some crisis periods while unpredictable (dependence) in the others thus consistent with the implication of amh. therefore, commodities markets are adaptive markets. the findings suggest the behavior of commodities’ markets is best explained by amh than conventional/traditional emh (efficient market hypothesis). © 2020 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: amh; commodities; nyse; linear prediction; non-linear prediction; crisis jel classification: b26, d53, n20, o16, p34 doi: 10.47067/reads.v6i1.185 corresponding author’s email address: khalidlatif@gcuf.edu.pk 1. introduction in the field of economics and finance, one fundamental question is whether the prices of financial assets are foreseeable. in efficient market research (fama, 1970) is pioneer, who explains efficient market as “a market in which prices always fully reflect all the available information”. similarly, emh (efficient market hypotheses) states that the stock prices fully reflect all available and possible information about the stock being traded in the market thus under weak form of emh no one is able to predict the prices and returns. therefore, prices of assets follow martingale process and returns are characterized by mds (martingale difference sequence). studies of (lim & brooks, 2008; kim et al., 2011: charles et. al, 2011) investigate the emh in financial markets to test whether returns from assets follow mds. numerous studies have assessed the weak form efficiency of the emh for commodities but these studies have not addressed the fluctuating degree of predictability of market efficiency except the study of (ramirez et al., 2015) in which they employ a time varying approach with rolling window through nonlinear tests but the study is confined to nonlinear test and agriculture review of economics and development studies, vol. 6 (1) 2020, 67-81 68 commodities only. but the current study aims to investigate the most popular commodity indices (gold, metal, oil & silver) through both linear and nonlinear tests notably robust to heteroscedasticity and non-normality which are the two typical feature of financial assets’ return (charles et al., 2011). they employ moving sub-sample window approach to investigate in what way the levels/degree of predictability of returns vary/evolve over the time based on economic, financial and political events as well. recent studies have documented that asian financial crisis (kim & shamsuddin, 2008; lim et al., 2013), dotcom crisis (charles et al., 2011), global financial crisis (kim et al., 2011; smith, 2012) and european sovereign debt crisis (charles et al., 2011) cause market conditions to vary over time. the time-varying dependencies of financial time series are consistent with the idea as well as implications of adaptive market hypothesis of (lo, 2004) which is an amended form of efficient market hypothesis of (fama, 1970). adaptive market hypothesis infers different impressive implications like profit opportunities may appear or vanish from one point in time to another due to changing levels of market conditions (cycles, bubbles, crises, crashes) and institutional factors. (ho et al., 2014; jawadi et al., 2014) investigate crisis period and infer that performance of islamic indices is affected by varying degree of market conditions in crisis period especially gfc (global financial crises). they further argue that these events have robust implications for market participants’ psychology through their way they incorporate novel information to the security prices due to which serial correlation of series of return exhibit time variation. arise of arbitrage opportunities from time to time in financial markets is another implication of amh. this implication infers that strategies aimed to exploit prevailing arbitrage opportunities may decline for some times and then again arise to profitability when conduce environmental conditions are available. thus it is interesting to investigate the time varying nature of return predictability of commodity indices through amh. this study enhances the existing literature on adaptive market hypothesis in a number of ways. firstly, this is the pioneer study which investigate the commodity indices in the context of adaptive market hypothesis to assess whether adaptive market hypothesis deliver a better representation of behavior of commodity return as compared to conventional efficient market hypothesis. secondly, most of the early work on amh investigate equity markets but there is no research that considers commodity markets which may provide a variety of findings. thus in the current study we explore the varying degree (amh) of commodity indices through different crises as according to the best of our knowledge only (charles et al., 2011) study the time varying predictability of stock indices during crises through linear tests. finally, most of the previous research work employs wide range of conventional linear models to determine the extent of linear predictability in financial assets’ returns. but amini et al. (2010) argue that some nonlinear predictability/dependency in financial time series may still be present which cannot be detected by using linear econometric models. in addition, if linear models reject the presence of linear predictability/dependence, the time series still can be evident of non-linear predictability/dependency. to the best of our knowledge, this research is the first of its nature to apply linear and non-linear models to explore linear as well as nonlinear serial dependencies to gauge the efficiency of commodity indices. the results of this study are consistent with the implications of amh. the remainder of this article is organized as follows. subsequent segment presents related review of literature on efficiency of market under the umbrella of adaptive market hypothesis. the methodology and data are outlined in section 3 of the study. section 4 describes the empirical results. finally, findings and conclusions are presented in section 5. 2. literature review numerous researchers in recent years have shifted their attention from detecting conventional static or absolute emh to investigate the changing degree of efficiency of market over time which review of economics and development studies, vol. 6 (1) 2020, 67-81 69 provides a way to amh point of view (lo, 2005; ito & sugiyama, 2009; kim, et al., 2011; alvarezramirez et al., 2012). urquhart & hudson (2013) find same in the uk and us markets. in asian markets, lim, et al. (2008); in japanese markets noda (2012); and in indian equity markets, hiremath and kumari (2014) have provided the similar findings. the identical evidence supporting amh is found in foreign exchange markets (see neely et al., 2009; charles et al., 2012). from eighteen european contries, smith (2012) finds evidence supporting amh. to explore the commodities markets (international coffee markets), ramirez et al. (2015) apply nonlinear statistical models on returns from colombian arabica beans and identify the phases of market inefficiency and efficiency. in order to understand the varying nature of behavior of returns, commodity return series are vital for investors, producers, policy makers and traders for better decision making (karali & power, 2009). historically, commodity return series have been modeled to predict the price volatilities ar (autoregressive), ma (moving average), arima (autoregressive integrated moving average) models and dynamic and transfer function analysis (aradhyula & holt, 1988). similarly in more recent time (milas & otero, 2002) use stvecm as well as smooth transition vector error correction models while (adrangi & chatrath, 2003; benavides, 2004; tansuchat et al., 2009) use garch model (generalized autoregressive heteroskedastic) to investigate the chaotic behavior of commodities’ return. similarly, (ahti, 2009; tejeda & goodwin, 2009) employ bds test, correlation exponent, lyapunov exponents test and neural networks to explore the chaotic behavior of returns from commodities. but in the current study we investigate the behavior of commodities under crisis through both linear and nonlinear tests. s&p index is investigated by lo (2005) from year 1871 to 2003. by calculating first order autocorrelation, he finds cyclic patterns in market efficiency and observes market efficiency during 1950s. furthermore, he suggests that changes in institutional ownership and dynamics of investors’ behavior are the main cause of variation in the levels of market efficiency. foreign exchange market is investigated by neely et al. (2009) over the period of 1970s-1980s. by taking excess returns from trading rules, the researchers observe that over the time the trading rules have declined and supporting amh. lo (2005) reports that trading strategies decline in adaptive markets and then again result in a substantial profitability. lim et al. (2008) investigate efficiency of stock markets of developed and developing countries. in order to scrutinize the evolutionary tends, they employ portmanteau bicorrelation test statistic and observe episodes of market inefficiency and efficiency over the sample period. by using moving-average rules approaches, todea et al (2009) investigate the levels of profits during the period 1997 to 2008 in six security markets in asian countries. they find that profit opportunity goes under periods of linear and no linear correlations. by employing time-varying autocorrelation, ito & sugiyama (2009) investigate s&p 500 index. by using monthly returns from the index, they observe the variations in the levels of market efficiency because market remained inefficient during 1980s, and again efficient in the late 1990s period. ‘dow jones industrial average index (djia)’ is investigated by kim et al. (2011)1 from year 1900 to 2009. the researchers observe that predictability of returns is based on varying market conditions thus supporting amh (adaptive market hypothesis). during market crashes they find no statistically significant prediction of profits and claim that levels of uncertainty determine predictability of returns. they further argue that during the periods of uncertainty (economic distresses as well as political crises) of predictability, the stock returns are likely to be anticipated. over the period of 2000 to 2009, martingale hypothesis is examined by smith (2012) in fifteen 1they applied generalized spectral test, variance ratio (vr-test ) & autocorrelation tests. review of economics and development studies, vol. 6 (1) 2020, 67-81 70 european stock markets2 to study the amh. moreover, equity markets from developed countries (greece, portugal & uk) are also included in the sample. by using vr-model and rolling window analysis he captures episodes of efficiency and inefficiency in equity markets of most of the european markets hence supporting amh. he finds efficiency in equity markets of united kingdom, turkey, poland and hungary while inefficiency in estonia, malta and ukraine. in order to find whether amh delivers better depiction of behavior of emerging equity markets of india, , hiremath and kumari (2014) employ linear as well as nonlinear models on daily returns over the period from 1991 to 2013. the researchers find that equity markets of india are becoming efficient. linear dependencies demonstrate the cyclic patterns in stock returns which depict that indian stock markets switch in episodes of predictability and no predictability. on the other hand, nonlinear prediction of returns with narrowing magnitude is exposed by nonlinear tests over the sample period. by using fluctuation analysis over a sample period of 1929 to 2014, rodriguez (2014) examines yearly, quarterly, monthly, weekly and daily returns from djia. the study finds that inter-days and intra-day returns show a stronger serial correlation as compared to overnight returns. he finds no uniform patterns in efficiency of djia which supports amh. urquhart et al. (2015) suggest that amh infers that trading rules are effective and beneficial for a short term period only. as the behavior of markets and investors adapt, the predictive power of the trading rules also declines. from year 1987– 2013, they investigate moving average rule (ma) in djia, ft 30 & topix from us, uk and japan respectively and find that predictive power of the trading rules has declines in all the three markets. furthermore, they assert that after 1987 these three markets react to new buy or sell signals a day before those signals are appeared. based on expectation from those signals, investors can earn superior profits by making trading strategies. “hence, trading on anticipated signals establishes a reasonable explanation of price responses to future, one-day-ahead new signals, and thus consistent with the adaptive market hypothesis”. recently, noda (2016) finds level of predictability (market inefficiency) fluctuates over time and verifies the amh in japanese equity markets. ito et al. (2016) investigate us equity markets by developing a “non-bayesian time varying model” and assert that us equity markets have tendency to evolve over time and verify the amh. sensory et al. (2015) employ lo-mackinlay variance ratio test and assert that global financial crises have an adverse effect upon the levels of market efficiency. the findings of all aforementioned studies show that market efficiency fluctuates in episodic manner and goes under significant and no significant predictability therefore supporting amh of (lo, 2004). 3. methodology the weak-form efficient market hypothesis states that historical information related to trading of securities is fully captured by the security prices and hence prices are not predictable. this is because the information moves randomly in the market and any kind of prediction is fruitless for the investors. in order to investigate how market efficiency (predictability of return) varies depending upon different major financial crises, we divide our data set into different sub-samples like (i) from june 1997 to january 1998 (asian financial crisis); (ii) from march 2000 to october 2002 (dotcom crisis); (iii) from july 2007 to june 2009 (global financial crisis); and (iv) from december 2009 to december 2012 (european sovereign debt crisis). each sub-sample provides sufficient time series observations to produce adequate and robust results to examine the time variant behavior of returns from commodities over time. in an adaptive markets, the behavior of commodities returns goes under the episodes of dependencies (predictability/market inefficiency) and episodes of independencies (unpredictability/market efficiency). therefore, we apply series of linear and non-linear models to 2markets investigated in the research are based in the ukraine, slovenia, turkey, the slovak republic, romania, russia, malta, poland, lithuania, latvia, hungary, iceland, estonia, croatia, czech republic. review of economics and development studies, vol. 6 (1) 2020, 67-81 71 investigate the fluctuating behavior of commodities returns. from linear models we first apply autocorrelation test having null hypothesis “random walk process or no correlation”. secondly we apply runs test, null hypothesis of this test implies “serial independence of returns” (wald & wolfowitz, 1940). finally, variance ratio (vr) test is employed having null hypothesis as “price processes follow a random walk” (lo & mackinlay, 1988). the aforementioned tests portrays different conventional linear models to detect linear dependence in commodity returns. amini et al. (2010) describe that security returns also exhibit nonlinear dependencies (predictability) and conventional linear tests may not detect the phenomenon. if linear tests reject the existence of linear dependencies, the nonlinear predictability still can be present in series of commodities returns. the presence of nonlinear prediction has gained significant attentions in the former studies (see hiremath & kamaiah, 2010; alagidede, 2011; caraiani, 2012; urquhart, 2013; lim & hooy, 2013; urquhart & hudson, 2013; ghazani & araghi, 2014; ramirez et al., 2015;). as the data generating process is innately non-linear, therefore, linear models are not solely consistent to investigate the behavior of commodities returns. alharbi (2009) describes, in order to investigate the higher levels of dependencies in the time series, non-linear models are more conventional than linear tests. therefore, first we apply bds nonparametric test as suggested by (brock et al., 1996) to gauge the predictability of non-linear returns where null hypothesis of bds implies data generating process is i.i.d3. the embedding dimensions and metric bounds up to 5 (to a proportion of the standard deviation of the returns) are selected in the current studies for bds test as suggested by in literature (patterson & ashley, 2000). “secondly, we apply lagrange multiplier test4” proposed by (engle, 1982) to detect arch disturbances bearing asymptotically distribution as null hypothesis. a time series is supposed to be evident of arch/garch effects or nonlinear-dependence if series rejects the null hypothesis. thirdly, a multipurpose test is applied named as non-linear mcleod and li test (mcleod & li, 1983)5 which investigates whether the series of returns having a non-zero autocorrelation function or not. the null hypothesis of the test implies no arch effects between lag1 and lag k returns meanings that there is no serial dependency among returns. if this null hypothesis is rejected, then a time series is supposed to be evident of arch/garch effects. lastly, to observe the “quadratic-serial dependence” in the time series data6, (tsay, 1986) proposes tsay test to measure this pattern. all the linear and nonlinear test are applied on sub-samples based on crises periods selected in this study for commodities (gold, metal, oil & silver). dependence in this study is investigated from statistical viewpoint. fama (1965) reports that it is essential to investigate the predictability (dependency of returns) from statistical point of view because the levels of predictability may be too small to facilitate profitable trading due to transaction cost. the current study ignores the extent to which degree of predictability enables the investors to earn profit subjective to major problems in estimate of real historical-trading costs. 3.1 data for the estimation of data, we employ the both linear as well as non-linear empirical tests on daily returns of commodity indices (gold, metal, oil & silver) during crisis periods. the returns are 3 “alternative hypothesis is an indication that the model is misspecified (brock, scheinkman, lebaron, & dechert, a test for independence based on the correlation dimention, 1996)”. 4 against garch alternatives, engle suggest the lagrange multiplier test to identify arch effects which is more suitable (bollerslev, 1986). 5 to identify arch effects, (mcleod & li, 1983) proposes this test which is developed on the suggestions of (granger & anderson, 1978), recommends the said test to measure the arch-effects. 6 “tsay-test (tsay, 1986) is a generalization of (keenan, 1985) test”. review of economics and development studies, vol. 6 (1) 2020, 67-81 72 calculated as under; [ ( ) ( )] ………. (1) where, ( ) is the natural logarithm of the commodity index at time while ( ) depicts the natural logarithm of the commodity index at . descriptive statistics for commodity indices are reported in table-1. average daily commodity indices returns for gold and metal are positive in all crisis periods except asian crisis period. similarly average daily returns for silver are positive in all crisis periods except dotcom crisis period which indicate that magnitude of extreme positive average returns is greater than the magnitude of extreme negative returns (for gold, metal & silver). average returns for oil display different behavior where the magnitude of extreme negative average returns is greater than the magnitude of extreme positive returns. return series of all commodities are evident of non-normality as gold and metal show negative skewness in asian and esdc crises while positive in dotcom and gfc crises. oil and silver show negative skewness in all the crises periods except asian crisis period. all the commodities employing a leptokurtic series as all the series are evident of excess kurtosis. for normality test, the jarque-bera test statistics documented the statistically significance at 1% level, which shows that the commodity indices returns are non-normally distributed. table1 descriptive statistics of commodities (gold, metal, oil & silver) under different crises periods. where “a” depicts 1 % level of significance crisis n mean median maximum minimum std. dev. skewness kurtosis jarque-bera panel a: gold asian 175 -0.0753 -0.10145 3.095829 -5.08368 0.923716 -0.6094a 7.7958 a 178.545 a dotcom 697 0.011334 0.000000 6.575366 -3.43872 0.832869 1.07835a 10.9058a 1950.16 a esdc 805 0.043333 0.072425 3.649984 -6.02906 1.119549 -0.8286 a 6.3572 a 470.186 a gfc 522 0.067821 0.022693 8.590126 -6.03735 1.656648 0.2552 a 5.6612 a 159.705 a panel b: metal asian 175 -0.04484 -0.05979 2.893866 -4.70066 0.911980 -0.5031a 6.6181 a 102.840 a dotcom 697 0.010401 0.000000 6.359632 -3.17032 0.794419 1.004 a 10.362 a 1691.408a esdc 805 0.045258 0.080108 3.760591 -7.91834 1.244303 -0.950 a 6.8107 a 608.383 a gfc 522 0.062285 0.065317 8.758968 -6.27334 1.721034 0.2027 a 5.7022 a 162.395 a panel c: oil asian 175 -0.11049 0.000000 6.626127 -4.1886 1.620369 0.1612 4.405 a 15.155 a dotcom 697 -0.016 0.000000 8.072207 -16.542 2.404796 -0.7133 a 7.216 a 575.452 a esdc 805 0.021416 0.017099 8.946654 -9.03834 1.804622 -0.2192 a 5.143 a 160.527 a gfc 522 -0.00215 0.000000 13.34145 -13.0654 3.207857 -0.1623 5.161 a 103.936 a panel d: silver asian 175 0.154371 0.053628 7.546039 -6.43653 1.735743 0.2729 a 5.908 a 63.839 a dotcom 697 -0.01802 0.000000 5.902624 -4.52938 0.995644 -0.2037 a 6.236 a 309.077 a esdc 805 0.060822 0.138893 6.825158 -19.4889 2.327827 -1.2741 a 10.130 a 1923.32 a gfc 522 0.016572 0.173242 12.47068 -13.8343 2.754893 -0.3961 a 6.865 a 338.623 a 4. results 4.1 results of linear tests table 2 presents the results of autocorrelation test for sub-samples (crises) up to five lags. coefficients of gold & silver indices exhibit insignificant and negative first order autocorrelation during asian crisis showing returns remain unpredictable (market efficiency). the behavior of gold & silver indices then reverses and autocorrelation is highly significant during dotcom and european sovereign debt crisis showing evidence of return predictability (market inefficiency) on the basis of historical data. the behavior again reverses and unpredictable in global financial crises showing predictability of gold & silver returns goes under periods of predictability and no predictability (evidence of amh). review of economics and development studies, vol. 6 (1) 2020, 67-81 73 metal index generates significant coefficients for first three crises sub-samples (asian crisis, dotcom crisis & european sovereign debt crisis) indicating returns from metal index remains predictable (market inefficiency) over the period of all three crisis as first order autocorrelation is highly significant at all the lags. the behavior then reverses and returns are unpredictable (market efficiency) in global financial crisis as coefficient generates insignificant first order autocorrelation at all the lags. oil index shows inverse behavior to metal index as oil index generates insignificant coefficients for first three crises sub-samples (asian crisis, dotcom crisis & european sovereign debt crisis) indicating returns from oil index remains unpredictable (market efficiency) over the period of all three crisis as first order autocorrelation is highly insignificant at all the lags. the behavior then reverses and returns are predictable (market inefficiency) in global financial crisis as coefficient generates significant first order autocorrelation at all the lags. it is clear from autocorrelation test that amh is best elucidation of behavior of all indices as the indices have gone through episodes of non-predictability (independency) and predictability (dependency) over time. figure 1 log price and log returns of commodities (gold, metal, oil & silver) over the specified sample period source: elaboration of data collected from yahoo-finance through r-statistical package table 2 also reports the output of runs test and reveals gold index has independent behavior as the test-statistic of runs test is insignificant (no return predictability) in asian crisis. the next two subsamples of crisis (dotcom crisis and european sovereign debt crisis) exhibit significant linear dependence as are highly significant (returns predictability/market inefficiency). the behavior then again reverses in the global financial crisis and is evident of no linear dependency as coefficient of is insignificant (period of market efficiency). the empirical results of runs model show that gold index has gone via episodes of predictability (dependency) and episodes of no predictability (independency) over time, thus amh provides better description of returns in commodities markets. metal index generates significant for first three crises sub-samples review of economics and development studies, vol. 6 (1) 2020, 67-81 74 (asian crisis, dotcom crisis & european sovereign debt crisis) indicating returns from metal index remains inefficient (linear dependency) over the period of all three crisis. the behavior then reverses and returns are efficient (no linear dependency) in global financial crisis as coefficient generates insignificant oil index generates insignificant in all the crises periods thus indicating market efficiency. silver generates significant (linear dependence) during asian crisis, the behavior then reverses and index returns are unpredictable during dotcom crisis as is insignificant. the returns becomes again predictable and market becomes inefficient in european sovereign debt crisis. the behavior reverses during global financial crisis as returns have no non-linear dependence (market efficiency) as is insignificant. runs test reveals that except oil index, all the indices go under periods of significant dependency and periods of independency over the periods of crises thus amh is best to explain the behavior of commodities indices than emh. table 3 presents the results for variance ratio test for all commodities during four crises. we find mean reversions between returns of all the commodities during crises periods as all four reveal statistically significant test statistics (at 1 %) which is less than 1. the results reveal that returns of all the commodities are predictable during crises periods and commodities markets are inefficient. table 2 output of linear autocorrelation test and non-parametric runs test results for commodities (gold, metal, oil & silver) under crises. first column represents different crises. columns 3 to 7 show depicts the autocorrelation coefficient at lags 1 to 5 while columns 8 to 13 show the results of non-parametric runs test. where “a” depicts 1 % level of significance, while “b” represents 5% and “c” shows 10% crisis n autocorrelation-test runs-test lags test value cases < test value cases >= test value total cases number of runs z-value 1 2 3 4 5 panel a: gold asian 175 -0.009 0 -0.065 -0.014 -0.011 -0.0753 93 82 175 97 1.346 dotcom 697 -0.547b 0.059 a 0.018 a -0.03 a -0.014a 0.0113 381 316 697 374 2.105b esdc 805 -0.504a 0.037 a -0.06 a 0.022 a 0.022 a 0.0433 391 414 805 441 2.67 a gfc 522 0.071 -0.066c -0.002 0.015 0.075 0.0678 267 255 522 254 -0.689 panel b: metal asian 175 -0.572 a 0.038 a 0.12 a -0.2 a 0.175 a 0.1543 93 82 175 101 1.955 b dotcom 697 -0.548 a 0.057 a 0.013 a -0.02 a -0.005a -0.0180 320 377 697 379 2.429 b esdc 805 -0.502 a 0.033 a -0.05 a 0.025 a 0.016 a 0.0608 393 412 805 449 3.22 a gfc 522 0.067 -0.058 0.005 0.01 0.068 0.0165 251 271 522 256 -0.492 panel c: oil asian 175 -0.004 -0.045 -0.004 -0.079 0.096 -0.1104 81 94 175 94 0.912 dotcom 697 0.014 -0.088c 0.02 -0.046 -0.02 -0.016 324 373 697 349 0.0931 esdc 805 -0.004 -0.009 -0.036 -0.027 -0.009 0.0214 403 402 805 403 -0.035 gfc 522 -0.078 a -0.044c 0.059c 0.061b -0.117a -0.0021 245 277 522 270 0.789 panel d: silver asian 175 -0.098 0.117 -0.036 -0.023 0.027 -0.0448 88 87 175 102 2.047 b dotcom 697 -0.59 a 0.081 a 0.05 a -0.04 a -0.005a 0.0104 375 322 697 362 1.106 esdc 805 -0.496 a 0.011 a -0.04 a 0.028 a -0.012a 0.0452 384 421 805 433 2.145 b gfc 522 -0.004 -0.007 0.019 -0.033 0.016 0.0622 260 262 522 256 -0.525 figure 2 statistics of linear test employed for commodities (gold, metal, oil & silver). runs stands for z-statistic of the runs test. for lag 1, autocorrelation statistic is represented by ac(1), while, va(2) stands for 2-period return of variance ratio test review of economics and development studies, vol. 6 (1) 2020, 67-81 75 figure 3 statistics of non-linear test employed for commodities (gold, metal, oil & silver). bds (3,1) stands for dimension 3 along with 1σ embedding dimension for bds test, lags 1,2,3,4 and 5, lm(5) represents engle-lagrange multiplier tests statistics, while, tsay(5) stands return predictability up to lag 5 for tsay test 4.2 results of nonlinear tests tables 4 & 5 report the nonlinear empirical results for gold, metal, oil and silver, while table 3 presents ljung-box test statistics before and after implementing ar filter which shows the presence of temporal linear structure (significant autocorrelation up to 5, 10, 15 and 20 lags at 1% level of significance) in all the series during all four crises periods. thus in order to explore non-linear dependence in indices returns the linear dependence must be removed. for the reason, a pre-whitening ar-model can aid as a filter to eliminate any residual linear dependence and assist to investigate the nonlinear dependency in the commodity returns. we estimate and present ar-models in table 3. it is clear from the table that linear dependency (autocorrelation) is successfully removed (after ar filter) review of economics and development studies, vol. 6 (1) 2020, 67-81 76 from the commodities returns as the series possess no statistically significant correlation up to 20 lags during all four crises. the filtered returns then subjected to nonlinear tests (bds test, engle lm, mcleod li test and tsay-test as discussed in the methodology) to detect nonlinear dependency. the gold index show similar results at engle lm, mcleod li and tsay test as the tests statistics reveals insignificant nonlinear dependence (indication of market efficiency) during asian and dotcom crises. table 3 columns 3 to 6 shows the results of variance ratio (vr) for sample commodities panels (gold, metal, oil & silver) in crises periods (where k = 2, 4, 8 & 16). ljung-box q (lbq) test results before fitting an ar-model (presented in columns 7 to 10) and after fitting an ar-model (presented in columns 12 &13). where “a” depicts 1 % level of significance, while “b” represents 5% and “c” shows 10%. table 4 presents results of nonlinear tests for commodities (gold, metal, oil & silver). columns 3 to 6 and 7 to 10 present test statistics ( at lags 5,10,15 & 20) for engle lagrange multiplier and tsay tests respectively in sub as well as in full-samples. first column represents dates (starting & ending). columns 11 to 14 focus on the tests statistics qr (mcleod li test) to examine the null-hypothesis that “increments are i.i.d.”, where serial dependency of returns is represented by “d” while independence of returns is represented by “i”. ). where “a” depicts 1 % level of significance, while “b” represents 5% and “c” shows 10%. table 3 crisis n vr test lbq test ar lbq test lags lags lags after ar filter 2 4 8 16 5 10 15 20 15 20 panel a: gold asian 175 0.434a 0.239 a 0.106 a 0.051 a 76.7 a 80.5 a 84.9 a 95.3 a 6 10.275 45.408 dotcom 697 0.453 a 0.249 a 0.127 a 0.061 a 212.0 a 215.2 a 217.3 a 230.5 a 10 0.2382 19.69 esdc 805 0.496 a 0.250 a 0.126 a 0.063 a 209.3 a 218.8 a 267.7 a 276.0 a 1 0.1680 15.268 gfc 522 0.576 a 0.267 a 0.140 a 0.070 a 110.6 a 124.5 a 136.6 a 137.5 a 1 0.0562 19.227 panel b: metal asian 175 0.431 a 0.244a 0.112 a 0.053 a 73.5 a 76.3 a 81.5 a 93.7 a 1 0.516 16.482 dotcom 697 0.452 a 0.242 a 0.124 a 0.059 a 212.8 a 215.2 a 218.4 a 230.0 a 2 2.902 75.185 esdc 805 0.498 a 0.250 a 0.128 a 0.064 a 207.6 a 219.6 a 260.5 a 268.7 a 1 0.089 14.298 gfc 522 0.569 a 0.268 a 0.140 a 0.069 a 112.4 a 125.4 a 139.2 a 139.8 a 4 0.1685 18.994 panel c: oil asian 175 0.516a 0.270 a 0.134 a 0.069 a 41.7 a 48.9 a 55.2 a 59.0 a 7 0.461 28.843 dotcom 697 0.553 a 0.267 a 0.122 a 0.065 a 155.8 a 179.1 a 182.8 a 187.6 a 5 0.0175 3.4945 esdc 805 0.503a 0.256 a 0.122 a 0.068 a 199.3 a 208.1 a 217.7a 237.4 a 1 0.4339 17.832 gfc 522 0.485 a 0.219 a 0.119 a 0.057 a 155.4 a 160.4 a 163.1 a 169.7 a 1 0.02296 11.083 panel d: silver asian 175 0.406 a 0.238 a 0.124 a 0.057 a 69.3 a 73.2 a 77.7 a 101.1 a 9 0.0477 4.1784 dotcom 697 0.409a 0.225 a 0.114 a 0.061 a 250.8 a 254.1 a 258.8 a 275.9 a 9 0.1376 7.1815 esdc 805 0.504a 0.257 a 0.128 a 0.066 a 200.5 a 216.7 a 233.2 a 238.7 a 1 0.2371 21.495 gfc 522 0.503 a 0.260 a 0.128 a 0.059 a 134.5 a 139.2 a 180.2 a 188.6 a 3 0.2495 4.796 table 4 crisis n ar engle lm test-statistics tsay test-statistics mcleod-li teststatistics lags lags qrr 5 10 15 20 5 10 15 20 5 10 15 20 panel a: gold asian 175 6 1.271 1.474 1.81 5.297 1.023 0.701 1.562 c 1.003 i i i i dotcom 697 10 3.826 12.43 13.021 18.1 1.035 1.278 c 1.115 0.996 i i i i esdc 805 1 152.4a 159.5a 162.87a 177.86 a 1.935 b 2.271 a 1.829 a 1.825 a d d d d gfc 522 1 31.4 b 29.58 a 34.112 a 34.37 b 2.165 a 1.405 b 1.862 a 1.918 a d d d d review of economics and development studies, vol. 6 (1) 2020, 67-81 77 panel b: metal asian 175 1 0.234 0.459 0.748 0.926 1.062 0.645 0.8223 0.783 i i i i dotcom 697 2 4.076 18.27 c 19.83 50.76a 2.521 a 1.506 b 1.338 b 1.386 a i i i i esdc 805 1 30.54a 81.78 83.73 a 86.64 a 2.173 a 2.008 a 1.631 a 1.695 a d d d d gfc 522 4 40.36a 47.72 a 60.73 a 66.18 a 2.062 a 1.338 c 1.783 a 1.741 b d d d d panel c: oil asian 175 7 1.271 1.474 1.81 5.297 1.65 c 1.477 b 2.08 b 1.78 b i i i i dotcom 697 5 3.826 12.43 13.02 18.1 1.56 c 1.221 1.173 1.106 i i i i esdc 805 1 152.4a 159.5a 162.87 a 177.86 a 1.236 1.806 a 1.409 a 1.44 a d d d d gfc 522 1 3.42 29.58a 34.11 a 34.377 b 1.47 1.903 a 2.367 a 2.447 a d d d d panel d: silver asian 175 9 0.755 0.953 1.266 1.481 0.82 0.862 0.648 0.618 i i i i dotcom 697 9 353.3a 393.7 a 394.97 a 394.03 a 0.858 1.219 1.03 0.912 d d d d esdc 805 1 80.10a 89.50 a 109.87 a 116.32 a 4.714 a 2.039 a 1.869 a 1.613 a d d d d gfc 522 3 46.4 a 54.53 a 59.048 a 61.53 a 1.09 1.306 c 1.889 a 1.667 a d d d d the behavior of returns of gold index then reverses and becomes predictable (indication of market inefficiency) during european sovereign debt and global financial crises thus supporting amh. the behavior of returns from metal and oil indices swings similar to gold index at both the engle lm and mecleod li test, while tsay test reveals different results as returns from metal index are unpredictable during asian crisis and the behavior swings and returns are predictable during dotcom, european sovereign debt and global financial crises periods. returns from oil index remain predictable during asian crisis, then unpredictable during dotcom crisis and finally again predictable during european sovereign debt and global financial crises thus supporting amh. engle lm and mcleod li tests reveal similar results for returns from silver index as returns remain unpredictable during asian crisis and the behavior swings and returns are predictable during dotcom, european sovereign debt and global financial crises periods. tsay test reveals that silver index exhibits insignificant nonlinear dependence (indication of market efficiency) during asian and dotcom crises. the behavior of returns of silver index then reverses and becomes predictable (indication of market inefficiency) during european sovereign debt and global financial crises thus supporting amh. bds test revels that returns from gold index remain predictable (nonlinear dependency/market inefficiency) during asian crisis, then unpredictable (no nonlinear dependency/market efficiency) during dotcom crisis and finally again predictable during european sovereign debt and global financial crises thus supporting amh. metal and oil indices produce similar results as returns are unpredictable supporting market efficiency during asian and dotcom crises. the behavior then shifts to significant predictability and market becomes inefficient during european sovereign debt and global financial crises as the bds test exhibits significant coefficients at 1%. silver index shows similar behavior at bds test as it does with engle lm and mcleod li test, thus supporting amh. table 5 results of bds test to identify nonlinearity trends in residuals of ar filtered returns. 1st and 2nd rows presents dimensions and embedded dimensions respectively in sub and the full-samples for the commodities (gold, metal, oil & silver). ). where “a” depicts 1 % level of significance, while “b” represents 5% and “c” shows 10%. table 5 bds test dimensions 5 embedded dimensions 0.5σ 1σ 1.5σ 2σ sample period observations ar panel a: gold asian 175 6 1.9072c 2.9294a 3.8516 a 5.0079 a dotcom 697 10 0.1799 0.4411 0.7727 1.3848 review of economics and development studies, vol. 6 (1) 2020, 67-81 78 esdc 805 1 2.9337 a 2.498 a 3.1004 a 3.6758 a gfc 522 1 3.8625 a 5.0007 a 5.796 a 3.293 a panel b: metal asian 175 1 1.6141 1.3513 1.1922 2.7834 a dotcom 697 2 0.4906 0.6649 0.9861 1.8603 c esdc 805 1 3.0645 a 2.55 a 3.0976 a 3.6853 a gfc 522 4 3.5922 a 4.5524 a 5.3114 a 2.8264 a panel c: oil asian 175 7 1.8265 c 1.3452 1.3186 1.305 dotcom 697 5 1.9092 c 1.3355 1.202 0.8125 esdc 805 1 3.1542 a 4.3455 a 5.1279 a 5.1478 a gfc 522 1 4.691 a 7.0698 a 8.9094 a 10.8188 a panel d: silver asian 175 9 0.6124 1.0013 0.9354 1.8713c dotcom 697 9 2.8601a 4.1803 a 5.1073 a 1.9701 a esdc 805 1 4.8074a 5.6509 a 6.1529 a 6.4828 a gfc 522 3 4.467 a 4.8118 a 5.0899 a 5.8258 5. findings and conclusions financial assets in global financial markets are attracting greater attention from practitioners as well as from researchers (abdelsalam & el-komi, 2015). varying degree of return predictability and informational efficiency are the fundamental questions and these are not adequately addressed in the existing literature. thus we investigate in this paper the informational efficiency of four commodity indices in association with time varying amh (adaptive market hypothesis) of (lo, 2004 & 2005). extensive analysis is conducted in this paper to answer key question that how predictability of commodity’s return evolves with the passage of time using disaggregated data sets through linear and nonlinear econometric methods. for testing informational efficiency and degree of predictability of returns, both linear and nonlinear tests offer a sensible measure. we find commodities show time varying return predictability over time through sub-samples (crises periods) which is consistent with amh. autocorrelation test (table 2) provides amh consistent evidence by showing returns from all the commodities have gone through episodes of predictability (dependency/market inefficiency) and unpredictability (independency/market efficiency). the non-parametric runs test (table-2) provides similar results except oil index returns which remains unpredictable supporting emh throughout the sub-sample periods. all the commodity indices remain predictable (linear dependency) in all the subperiods of crisis at variance ratio test (table 3) contradicting emh. results of nonlinear tests (bds, engle lm test, mcleod li test and tsay test see table 4 & 5) are evident that all the commodity indices returns show strong nonlinear dependence (market inefficiency) in some crises periods and while other show strong evidence of no non nonlinear dependence (market efficiency) and these findings are thus aligned and consistent with the inferences of amh. in summary, the commodity returns are evident of time varying behavior as returns from commodities have swing through significant predictability (dependency) and insignificant predictability (independency) in sub-sets of crisis. the evolving evidence of commodity returns is casting a serious doubt to emh while consistent with the implications of amh. therefore, amh is the best description of commodities returns. this paper has attempted to provide a comprehensive and detailed analysis of the issue underpinning the research. but like any other research articles, this paper also has a number of review of economics and development studies, vol. 6 (1) 2020, 67-81 79 limitations. the selection of sample size is the first limitation of the study. we did not include any era except crises periods. secondly, we investigated only few popular commodities having active trading so, we excluded other commodities. therefore, the results are generalized only to data for a sub-set of commodities. thirdly, the paper ignored transaction cost (commissions, fee and taxes). the decision to overlook transaction cost was made on the basis of the fact that transaction costs are very freely negotiated between the clients and members. fourth, a limited number of studies investigates the varying degree of market efficiency through amh. so, the more literature could have been better suitable and to have a comprehensive view of behavior of commodity returns. as lo (2004) develops the notion of amh in 2004, so future work on amh is potentially plentiful. the use of rolling window analysis and larger full and sub-sample may be fruitful to examine amh. thus, we recommend that a large sub-set of commodities and most recently listed commodities on nyse may be used to examine this issue in future work. future work may use qualitative research strategy along with quantitative strategy e.g. future studies may conduct interviews with participants of commodities market (brokers, investors & regulators) to analyze their views about commodity price regularities with regards to different calendar anomalies and to investigate the role of investor behavior or sentiments in new york stock exchange. researchers in future may extend this topic by analyzing technical rules, buy-hold strategy and other trading strategies to explore whether investors truly beat the market. the future work may use individual commodities, bond markets, foreign exchange markets and other equity markets around the globe to examine the changing levels of efficiency of markets. researchers in future may compare markets from developed and developing countries through amh to test whether the power of anomalies has changed (increased or decreased) over time. furthermore; limited studies have covered impact of political regimes on stock market in the world and fewer in nyse. thus the future studies may include political factors such as overall country situation, political environment, government policies and 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(1940). on a test whether two samples are form the same population. the annals of mathematical statistics, 11(2), 147-162. review of economics and development studies vol. 5, no 1, march 2019 125 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads investigating pakistan’s revealed comparative advantage and competitiveness in cotton sector 1 muhammad shahid maqbool, 2 hafeez ur rehman, 3 furrukh bashir, 4 rashid ahmad 1 department of economics, government post graduate college gojra, shahidmakbool@gmail.com 2 professor, department of economics and management, university of management and technology, lahore, pakistan 3 assistant professor, school of economics, bahauddin zakariya university, multan, furrukh@bzu.edu.pk 4 assistant professor, school of economics, bahauddin zakariya university, multan article details abstract history revised format: february2019 available online: march 2019 cotton sector, one of the most important sectors of agriculture, plays a pivot role in the socio-economic uplift of pakistan as its contribution to agriculture value addition is 5.5 % and to gdp is 1 %. it along with low wage cost also ensures the massive availability of raw material for textile industry which enables pakistan to attain competitiveness in the world market. the aim of present study is ,therefore, to measure the export competitiveness in cotton sector of pakistan by utilizing a set of revealed competitive advantage and revealed comparative advantage (rca) indices such as rca, rca#, symmetric comparative index (rsca), revealed import advantage index (rma), net export index (nei)and revealed trade advantage index (rta) vis-a-vis world trade. the data was taken from international trade center (itc) un-comtrade statistics for pakistani cotton from 2003-17. the results of the study explored that pakistan had a comparative and competitive advantage in cotton exports, while comparative disadvantage in cotton imports. moreover, pakistan had net competitive advantage in cotton sector.the study suggests that there should be more emphasis on infrastructure, reduction in the cost of production, utilities and finance, use of modern technology, investment in agricultural sector and marketing in international market to boost the exports volume of cotton. net export index (nei), revealed, symmetric comparative index (rsca) (larsen 1998), vollrath index (1991) (rca#), revealed import advantage index (rma) and revealed trade advantage index (rta). © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords competitiveness, comparative advantage, cotton sector, textile, agricultural sector jel classification: o13, n50, n60, p32 corresponding author‘s email address: furrukh@bzu.edu.pk recommended citation: maqbool, m. s., rehman, h., bashir, f. and ahmad, r. (2019). investigating pakistan‘s revealed comparative advantage and competitiveness in cotton sector, review of economics and development studies, 5 (1), 125-134 doi: 10.26710/reads.v5i1.570 1. introduction apart from foreign direct investment (fdi), the exports of an economy have been one of key determinants to maintain high growth, life expectancy and better schooling due to their significance in the global economy (azmansaini and ahmad, 2010). exports are supposed to be the engine of economic growth of an economy that is essential for the welfare and prosperity of the masses (jackson, 2009). pakistan can enhance its markets through economies of scale in firms and then exports of commodities to the world for achieving competitiveness (schwab, 2010). the http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 126 export performance or competitiveness is generally measured by several determinants like comparative advantage, terms of trade (tot), real exchange rate, trade policies, geographical attention of country, world income, etc. the nature and pattern of global trade give a fairly better indication to those economies which have signed global trade agreements. the countries, in international markets, having comparative advantage produce those commodities in which they have low cost in production(dornbusch and samuelson, 1977). numerous researches have attempted to define the competitiveness of an economy in several ways, yet it is the organization for economic cooperation and development (oecd) that has defined it as, ―the degree to which a country can, under free and fair market condition, produces goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people in the long term‖ (stevans et al., 2012). competitiveness, in the present scenario of global economy, is considered an impetus in uplifting economy which plays a significant role in determining the progress and development of any economy. classical economics equips that a country‘s competitiveness can be measured by focusing on key production inputs: capital, land, labour and natural resources, and these determinants contribute a lot in the development and progress of an economy. at present, however, this theory is no more applicable as in the modern global world as the policy formation of an economy must be in conformity with the major determinants of global trade e.g. the political and social environment, which play a primary and comprehensive role in accomplishing competitiveness (tan and giap, 2004). competitive advantage is defined as the function of a process that enables a firm to organize and manage its activities (haque et al., 2013). constant innovations in the product and service pave the way for a firm to sustain its competitive position in the market. competitive strategy comprises two components, the structure of the industry and the position of a firm within the industry (grant, 1991). table 1: export growth of cotton from pakistan and world (us thousand dollars) years cotton exports of pakistan cotton exports of world total exports of pakistan 2003 2004 12.22 10.91 -27.53 2005 15.85 -4.52 21.58 2006 4.77 7.53 5.21 2007 -4.69 1.67 5.07 2008 4.33 1.95 12.03 2009 -12.22 -24.58 -15.51 2010 20.17 27.03 18.01 2011 21.26 17.51 15.50 2012 2.46 -4.62 -2.96 2013 2.02 6.12 2.019 2014 -12.73 -12.10 -1.61 2015 -17.10 -13.84 -11.92 2016 -15.52 -6.95 -7.57 2017 0.009 1.77 6.14 sources; authors own calculations based on itc data table 1 shows the growth rate of cotton exports of pakistan of the world and of the total exports of pakistan to international market. the cotton exports of pakistan shows an increasing trend from 2003 to 2013 and then decreasing till the year of 2017. figure 1 illustrates export growth rate of cotton in pakistan and rest of the world respectively. as the economy of pakistan is agrarian, therefore, since the very inception of pakistan, the agriculture sector has been playing a key role in its economic development by making a great contribution to its gdp. the agricultural sector contributes 21.2 % to gdp and also contains 45% of the labor force. pakistani major crops are rice, wheat, sugarcane, maize and cotton, and the contribution of these major crops in agriculture sector of pakistan is about 25.6 percent and 5.4% to gdp. cotton being a cash crop holds much significance as it provides raw material to textile industry of pakistan; however, it contributes 1.4% to gdp. pakistan is the fourth largest exporter of cotton in the world having worth of 3.5 billion dollars in 2017. the contribution of cotton and cotton made products is about 10% to gdp and 55% to the foreign exchange earnings of the economy. pakistan utilizes 30% to 40% cotton in domestic purpose and the remaining is exported to the world in the form of yarn, raw cotton, garments and cloth. to measure the review of economics and development studies vol. 5, no 1, march 2019 127 competiveness and competitive advantage of cotton, the present study has employed different indices of comparative advantage such as balassa index (1965), net export index (nei), revealed, symmetric comparative index (rsca) (larsen 1998), vollrath index (1991) (rca#), revealed import advantage index (rma) and revealed trade advantage index (rta). figure 1: export growth of cotton 2. review of literature the methodology of revealed comparative advantage has been employed by a number of researchers to study the competitiveness of an economy, and balassa and marcus (1989) also utilized this methodology to measure the comparative advantage between two countries, japan and the usa, from 1967 to 1983. the findings of the analysis illustrated that japan shifted its specialization from labour intensive products to human capital intensive products. it was also noted that the united states (usa) had a comparative advantage in the production of natural resources intensive products. another study conducted by haddad (2000) also applied intra industry index and rca to examine the export competitiveness of middle east and north africa in the world during 1985 to 1997. the results of the study illustrated that diversifications in the exports were nominal and in the absence of this, export competitiveness was not evident. benders and li (2002) utilized the rca to measure the export performance of latin american and asian economies. the findings of the analysis showed that comparative advantage of east asian economies deteriorated as compared to latin america and south east asian economies. kosekahyaoglu (2003) also employed rca to explore the competitiveness and the deviation in the comparative advantage of turkey with respect to the european union for the period after 1980 in which turkey adopted liberal trade strategy. the findings of the study illustrated that the degree of competitiveness in some of its labour intensive manufacturing industries decreased after liberalization program. another study to measure the competitiveness and pattern of trade specialization between turkey and european union was conducted by uthkulu and seyman (2004) who utilized balassa index for empirical analysis. the results of the research indicated that turkey had ca for seven of the 63 product groups: vegetables and fruit, clothing and clothing accessories, honey, sugar, sugar preparations, oil seeds and oleaginous fruits, tobacco, textile yarn, rubber manufactures, fabrics and related products. to investigate the competitiveness of china and india, batra and khan (2005) utilized balassa index to examine comparative advantage of product and sector level from 2000-2003. the findings of the study showed that india and china had gained a comparative advantage in different products and in different sectors. a study conducted by erkan and kazim (2014) measured the competitiveness of the export of science based goods of turkey from 1993 to 2012 by utilizing several revealed comparative advantage indices. the study took data from the trade industries of the united nations and found out that the export share of science based products in the world trade did not increase. different indices of revealed comparative advantage were employed by lgnjatijevic et al (2014) to measure the competitiveness in exports of food sector of serbia in comparison to the region of danube from 2005 to 2011. the study applied rxa, lnrxa, rta, rc, rca, gl, sm and lfi techniques to examine the comparative advantage of food sector exports. the findings of the balassa index showed that the products of dairy farm, fruits, vegetables, starch, sugar, edible products, animals and vegetable fats had the comparative advantage in exports. -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 gtep gceow gcep review of economics and development studies vol. 5, no 1, march 2019 128 asmara et al (2015) scrutinized the export performance and comparative advantage of the indonesian fiber industrial sector by utilizing time series data from un-comtrade, and applied descriptive and rca index analysis from 2008 to 2012. the progress of rca index of south korea and india for the fiber product kept fluctuating during the time frame mentioned above, while the progress of rca index of indonesia remained higher than both the countries. the same method was also utilized by obadi and korcek (2016) to measure the competitiveness and export performance of eu with its trade partner, the usa. the findings of the research pointed out that the eu succeeded in achieving a comparative advantage and specialization in production than the usa. deb and sengupta (2017) examined the empirical distribution of rca indices in global trade. the study equips that these indices are helpful to identify the comparative advantage or disadvantage of economies in various commodities and thus help the policy makers in the formulation of policies towards the export expansion of the economies. the rca method was also applied by ali et al (2017) to examine the export competitiveness of ready-made garments of bangladesh and major competitors such as pakistan, vietnam, china, sri lanka, india, turkey and cambodia from 2012-15. the study found that the export share of bangladesh in the united states market declined from 6% to 5.68% in 2014 after the suspension of the us–gsp. on the other hand, the market share in eu markets remained constant which illustrated that the us–gsp status was significant to increase the positive image and enhanced the volume of trade of the world market. abtew et al (2017) measured the competitiveness and export performance of developing economies with respect to developed economies of the world by employing balassa index in textile fabrics from 2006 to 2015. the results found that for hs code 51 (animal hair, wool, horsehair yarn and fabric), developed countries had a high comparative advantage as compared to developing economies, but for the commodities such as cotton, silk, man-made fibers and filaments, developing countries had better circumstances for worldwide export. the rca method was also employed by mahmood (2000) to explore the competitiveness and exports specialization in malaysia. this study, utilizing rca, located the competitiveness between asean economics and malaysia. as far as pakistan is concerned, the rca method was employed by mehmood and nishat (2004) to examine the competitiveness of exports in the sector of non-agricultural production of pakistan for the year 19992000. the findings of the study illustrated that 34.7% products from textile and clothing sector had competitive positioned products and 23.9% are from the chemical industry. zia (2007) investigated the position of competitiveness in world markets and what pakistan learnt from other emerging economies from 1960 to 2007. the study also extended the discussion by utilizing asian development bank value added analysis and value chain method of world bank, and the findings showed that the countries experienced a considerable increase in their exports with the passage of time. akhter et al (2009) examined the fruit competitiveness in pakistan by employing the method of revealed comparative advantage. the findings of the study showed that pakistan had a higher competitive and comparative advantage in the production of mangoes and dates as compared to the major competitors, while in the production of oranges, pakistan failed to achieve a higher competitive and comparative advantage. other than ballasa index some other techniques were utilized to measure comparative advantage as anwar et al (2010) utilized policy analysis matrix approach to measure the ca of pakistan in cotton sector from 1971 to 2008. the study applied johanson cointegration test for empirical analysis, and its results showed that the international as well as national policies of trade had a significant impact on cotton exports. balassa and white index applied by mukhtar and ilyas (2010) measured the competitiveness among five major economies of asia during the time span from 1985 to 2005. the results of the study showed that pakistan had a comparative and competitive advantage in the global rice market, followed by thailand and vietnam. another study was conducted by ghafoor et al (2010) to investigate the factors affecting the exports of mangoes of pakistan by utilizing double log regression analysis from 2005-06. the findings of the study revealed that experience, education, average price of purchase, the average cost of marking, iso certificate and average price of sale had a significant impact on the exports of mangoes. furthermore, the results showed hot water treatment had a fruitful effect, while government policies had not a significant impact on exports of mangoes. amjad et al (2012) examined the export barriers in pakistan to underline the problems faced by the firms in the export sector. the findings of the study revealed that energy crises, skilled labour shortage, rigidities in institutions, imperfections in markets and weakness in infrastructure were the major impediments to achieve competitiveness in the export sector. another researcher, iqbal et al (2013), measured the competitive and comparative advantage of white gold of pakistan by employing both white and balassa index from 1970-2010. the findings of the analysis illustrated that pakistan had a comparative and competitive advantage during analysis except the year 1999. the comparative advantage was observed by shahzad (2015) in the clothing and textile sector in india, pakistan and review of economics and development studies vol. 5, no 1, march 2019 129 bangladesh from 1980-2010. the study applied balassa index for measuring the comparative advantage in the static and dynamics analysis. the findings of the study indicated that pakistan, in textile sector, had gained a high comparative advantage as compared to bangladesh and india, whereas india successfully gained comparative disadvantage in textile sector as compared to bangladesh and pakistan. another study conducted by niazi et al (2015) to measure the competitiveness in the cotton export by employing balassa index concluded that pakistan had a high ca in the above mentioned sector. similarly, saqib et al (2017) employed revealed comparative advantage index to measure the sector-wise export performance and competitiveness of pakistan vis-a-vis global world from 2003-15. the results of the study illustrated that though pakistan was not a major trading partner in international market; it successfully gained and maintained a high comparative advantage in the export of some selected products such as vegetables, skins and hides and textile and clothing products. the current study is anticipated to be a better addition in the field of cotton‘s competitiveness as global markets have become far more competitive than ever before. throughout the world, it can be seen that the leading factor of prosperity is economic growth which in return heavily depends upon imports and exports as well. as no valuable study employing a number of indices has been conducted yet to measure the competitiveness in cotton sector of pakistan, this study has utilized such indices as rca, rca#, rsca, rma, nei and rta to measure pakistani cotton competitiveness, and it will be highly productive and beneficial for the future research also. 3. methods and materials the data has been collected from international trade center (itc) un-comtrade statistics for pakistani cotton during 2003-17. the current study has employed different indices such as balassa index (1965), net export index (nei), revealed, symmetric comparative advantage index (rsca) (larsen 1998), vollrath index (1991) (rca#), revealed import advantage index (rma) and revealed trade advantage index (rta) for the measurement of competitiveness of cotton in pakistan. 3.1 revealed comparative advantage index (rca) the rca index was first introduced by liesner (1958) and employed by balassa (1965) in order to measure ca (balassa, 1965). the revealed comparative advantage index of exports (rca) is described as the ratio of exports of an economy in a particular product group to its share in total merchandise exports (balassa and noland, 1989). rca ∑ ⁄ ∑ ⁄ (source; erkan and sarıçoban, 2014) where = pakistan‘s cotton exports ∑ = pakistan‘s total exports = world‘s cotton exports ∑ total exports of world a more comprehensive analysis, in order to illustrate the power of ca, the index of balassa‘s rca can be classified into four classifications. table 2: source; hinloopen, 2001 the study also employed logarithms to the rca and if lnrca > 0 reveals ca; on the contrary, when lnrca < 0 shows comparative disadvantage (faustino, 2008). sr. no classifications interpretations 1 0 < rca ≤ 1 no ca 2 1 < rca ≤ 2 week ca 3 2 < rca ≤ 4 moderate ca 4 rca > 4 strong ca review of economics and development studies vol. 5, no 1, march 2019 130 3.2 net export index (nei) balassa also used net export index (nei) for revealed comparative advantage, described as net exports divided by the sum of exports and imports for a particular manufacturing industry or economy (balassa and noland, 1989). net export index (nei) is utilized to examine whether an economy has specialization in exports (as net-exporter) or in imports (as net-importer) for a specific product groups (erkan and sarıcoban, 2014). the absolute value of |neii,j| explains the portion of inter-industry trade relative to the total international trade of any product group, and (1-|neii,j|) therefore corresponds to the portion of intra-industry trade (vixathep, 2011). nei= x-m/x+m (source; erkan and sarıcoban, 2014) 3.3 vollrath index (rca#) the rca index of vollrath (1991) is deemed a better measurement for competitiveness of an economy and eradicates the problem of double counting in global trade. the index of vollrath is described as rca(vollrath index) = { (∑ ) } { (∑ ) *(∑ ∑ ) (∑ )+ (∑ ) } (source; khai et al., 2016) where pakistan‘s cotton exports ∑ =total exports of pakistan ∑ = world‘s cotton exports ∑ ∑ =total exports of world 3.4 revealed symmetric comparative advantage index (rsca) the present study to solve the issue of upward biased values of revealed comparative advantage utilized larsen (1998) index which adjusted the values of rca index in symmetric values. the position of adjusted values of rca lies between +1 and -1. larsen (1998) illustrated his index as rsca, which is expressed as rsca = (source; erkan and sarıcoban, 2014) 3.5 relative trade advantage index (rta) relative trade advantage index (rta) describes the net trade advantage or trade disadvantage. it is given by the difference between revealed export advantage index (rca) and revealed import advantage index( rma). rma= ∑ ⁄ ∑ ⁄ = imports of cotton of pakistan ∑ = total imports of pakistan = cotton imports of world ∑ = total imports of world rta = rca – rma = ∑ ⁄ ∑ ⁄ ∑ ⁄ ∑ ⁄ (source; akhtar et al., 2013) 3.6 product mapping in addition, the present study constructed ―products mapping‖ by utilizing the rsca and nei indexes (widodo, 2009). cotton sector can be categorized into four groups a, b, c and d as illustrated in review of economics and development studies vol. 5, no 1, march 2019 131 figure 2 group; a ca net-exporter economy (rsca >0 and nei >0) group; b ca net-importer economy (rsca >0 and nei <0) group ; c comparative disadvantage net-exporter economy (rsca <0 and nei >0) group; d comparative disadvantage net-importer economy (rsca <0 and nei <0) source: widodo, 2009 4. results and discussions in table 1, pakistan has the ca in the cotton sector because the values of rca are greater than 1 from 2003-2017. the above mentioned result highlights that pakistan gained and maintained the high ca in cotton sector up to 2017 having the values of rca greater than 4 (shahzad, 2015). the positive values of nei shows that pakistan is the net exporter of cotton. moreover, the findings of rca indicate that cotton had a revealed comparative advantage having both increasing and decreasing trend. the findings also illustrate that the portion of inter-industry and intraindustry trade relative to the total international trade of cotton sector exists in pakistan. according to the ‗product mapping‘, cotton sector of pakistan lies in the group a. the financial crises in the world in 2008-2009 had a significant impact on global trade at world level as 12% decline was reported by world trade organization in the volume of global trade in 2009. this turn down in trade channels caused by financial collapse decreased the demand for trading products and created shortage in trade financing (wto, 2010). the decreasing trend of above mentioned indices were because of regional devaluation in the currency, inconsistency in yield of cotton crop, shrinking global demand resulted in decrease of cotton prices in the market, low wages, high cost of energy, high tax rate, bad government policies, energy crisis, high running cost, shortage of raw material, less productivity of labour, low level of technology, law and order circumstances in the economy and global financial crisis (syed, 2009 and malik et al, 2017). the index lnrca also indicates that pakistan had a ca in the cotton sector. the values of rsca describe that pakistan concentrate in the exports of cotton during the selected time span. the findings of rsca illustrate that pakistan had a ca during 2003-2017 in cotton sector. the competitive advantage of this sector was also observed by employing an alternative index commenced by vollrath (1991). the vollrath index (rca#) values indicate a high competitive advantage in above mentioned sector. the values of rma>1 indicate that pakistan has competitive disadvantage in imports of cotton. the index of rta having values greater than zero illustrate that pakistan has net competitive advantage in cotton sector (ahmad and kalim, 2013). table 3 years rca rsca lnrca rca# rma rta nei (1nei) 2003 26.83 0.92 3.28 33.54 4.64 22.18 0.77 0.22 2004 42.22 0.95 3.74 57.79 7.38 34.83 0.67 0.32 2005 46.73 0.95 3.84 63.70 4.86 41.86 0.73 0.26 2006 49.72 0.96 3.90 67.58 3.74 45.98 0.78 0.21 2007 51.29 0.96 3.93 67.71 8.23 43.05 0.57 0.42 2008 53.41 0.96 3.97 69.34 8.91 44.50 0.49 0.50 2009 52.94 0.96 3.96 69.70 4.89 48.05 0.73 0.26 2010 48.48 0.95 3.88 63.75 6.21 42.27 0.65 0.34 2011 51.41 0.96 3.93 69.01 5.51 45.90 0.69 0.30 2012 57.73 0.96 4.05 79.06 4.59 53.13 0.76 0.23 2013 55.98 0.96 4.02 76.38 7.22 48.75 0.67 0.32 2014 56.55 0.96 4.03 75.16 5.28 51.27 0.72 0.27 2015 53.50 0.96 3.97 70.21 4.95 48.55 0.71 0.28 2016 51.70 0.96 3.94 66.44 5.45 46.24 0.65 0.34 2017 51.85 0.96 3.94 65.75 5.92 45.93 0.56 0.43 source un comtrade database, authors own calculations review of economics and development studies vol. 5, no 1, march 2019 132 5. conclusion this study measure the competitiveness of cotton sector in pakistan by utilizing different indices of revealed comparative advantage such as, rca, rca#,rsca, rma,nei and rta. the data has been collected from itc un-comtrade statistics for pakistani cotton for the time period from 2003-17. the results of the analysis describe that pakistan has a comparative and competitive advantage in cotton exports, while comparative disadvantage in cotton imports during 2003-17. furthermore, the results also indicate that pakistan has net competitive advantage in cotton sector. pakistan should lay emphasis on infrastructure, as there is inconsistency in yield of cotton crop, should decrease the cost of production, utilities and cost of finance, human resource (mainly unskilled labour). and moreover, there should be use of modern technology, investment in agricultural sector and marketing in 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(pide working papers no. 2007: 28). pakistan institute of development economics. review of economics and development studies vol. 5, no 1, march 2019 134 review of economics and development studies vol. 5, no 4, 2019 847 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads beyond utilitarianism: nineteenth century south asian economic crises and sleeman’s (1788-1856) necessitarianism 1 muhammad shafique, muhammad yasir ali, imtiaz ahmad warraich 1 professor, department of history and civilization studies, bahauddin zakariya university, multan, pakistan: muhammadshafiq@bzu.edu.pk 2 lecturer, department of history and civilization studies, bahauddin zakariya university, multan, pakistan 3 assistant professor, department of sociology, bahauddin zakariya university multan, pakistan article details abstract history revised format: 30 nov 2019 available online: 31 dec2019 emerging out of eighteenth-century enlightenment, utilitarianism led a view of earth and human centric economic view of society, resulting not only in the formation of theories of racial superiority and legitimacy of imperialism, but also in the development of modern theories of economy grounded in adam smith (1723-1790), malthus (1766-1834) and recordo (1772-1823). however there were a few people those tried to fix the challenges beyond utility into the concept of instinctual and evolutionary necessity or priority. sleeman (1788-1856) was one fundamental exponent of the theory against tyrant colonial economic policies to plunder the colonial subjects and destroy the colonized political elites. he not on challenged the recordian theory of revenue but also tried to convince the colonial policy makers for the development of a policy of agriculture, industry and taxation and revenue based on and keeping in considerations the needs and necessities and priorities of the colonized subjects. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords utilitarianism, necessitarianism, sleeman, beyond utilitarianism, nineteenth century indian economy, colonial economic policy in india jel classification: o17, o19 corresponding author‟s email address: muhammadshafiq@bzu.edu.pk recommended citation: shafique, m., ali, m. y. and warraich, i. a., (2019). beyond utilitarianism: nineteenth century south asian economic crises and sleeman‟s (1788-1856) necessitarianism. review of economics and development studies, 5 (4), 847-852 doi: 10.26710/reads.v5i4.916 1. introduction the eighteenth century enlightenment and rationality preached a sort of deistic thought system which was systematized by historicism and utilitarianism at the end of eighteenth century and beginning of nineteenth century. emerging out of this contest, utilitarianism led an earth and human centric view of society, especially, governance and economy. the trend resulted in the formation of theories of racial superiority, legitimacy of imperialism and economic exploitation as a utility to make the world civilized. the utilitarian philosophy worked potentially in the development of modern theories of economy grounded in adam smith, malthus and recordo‟s thought system. the utilitarian theorists challenged the romance of india and focused on the utility of what the british were doing in south asia. as the british had penetrated in india as a trade company, therefore, for them trade benefits were the major utility of the british pursuits and imperial struggle. what was the impact of the british imperial economy on the local population was not the concern of the british policy makers. this utilitarian theory found a number of challenges, which were being synthesized by then contemporary elphinston (1779-1859) school of thought trying to harmonize indigenous culture and economy with the western models and modalities of reformists, missionaries and utilitarians, http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 4, 2019 848 however, among this dominant school, a small fraction of britishers working in india strongly resisted the argument and the policies. constructing their arguments on antiquarianism, cultural romance and natural consequentialism, they focused on the theory of economic necessitarianism. necessitarianism is a doctrine to believe that „all events, including acts of the will, are determined by antecedent causes‟ and are determined. the concept interlinks the natural concept bof consequences and causation to form necessitarianism. it is constructed on the claim that all truth is necessarily true. (nous, 2012, p. 418–448) they argued that india had a natural necessitarian culture and economy and the british policy had resulted necessarily in the destruction of india society and economy. william henery sleeman was the major exponent of this argument in the fourth and fifth decades of the nineteenth century. they paper tries to highlight some of the major ideas of sleeman in this context. 2. william henry sleeman (1788-1856). major general sir william henry sleeman was an officer in the services of the popular trade company east india company. he is well known for his sympathy with the indigenous hindu culture. he has been considered as one of the most efficient officers of the company. he is known as “thuggee sleeman”. (tuker, 1961) philip woodruff in the founders calls him “the titans” of the british empire. (ibid, p. xi) he has been praised by the hindu natives of india as well as by the imperial masters. sleeman‟s thoughts were dominated by a very passionate romance of necessarily knitted with each other good and bad of indian culture and history. born in an age, when romanticism was emerging out of enlightenment, sleeman was brought up in a naturally determined environment, congenial to the development of the faculties, necessarily varying and contrasting in their nature. sleeman‟s selection for the services of the company was a great honour for the family involved in the illegal trade. at the time of his arrival british supremacy in india had been established, but the problems of maintenance of the law and order had become complex in the form of pindaris, bagree dacoits and thugs. sleeman was impressed by the indian tradition and became plunge into close relations with the natives. he became well-versed in local languages such as pushto, persian, arabic and hindustani (urdu) and also in some other secret languages of decedents. sleeman spent all his service of forty-seven years as an officer to maintain law and order against gorkhas and marathas and other groups. (ibid, p.1-33) for him, the major problem in british india administration was application of british utility model of economy. therefore he emerged as a strong enemy of the utilitarian philosophy. he criticized the utilitarian concept of economy taking its eminent form in the ideas of ricardo, malthus, james mill, adam smith, say and t. r. meculloch.1(sleeman, 1837) sleeman objected to the concentration and accumulation of wealth in the hands of the british east india company and thus destruction of india economy and society. for him national stocks were the criteria to evaluate the economic condition of india. her strongly rejected the idea that accumulated wealth could indicate the economic condition of the masses. (gordon, 1967, p. 28-29) therefore, he strongly criticised the attitude of analysing india‟s economic conditions and problems on the model of british utility. in that sense he was the only figure resisting the utilitarian logic of political economy.2 (gordon, 1974, p.59-74) as a necessitarianist, sleeman believed in the deterministic view of religion and nature he saw a sort of uniformity in the nature of universal phenomena in that sense historical process was determined for him with natural consequences and results. his rambles and recollections highlight his concept „the proper study of mankind is man‟ but for him human will and action were determined be a necessary chain of causation. 3. sleeman’s bais unit of understanding sleeman‟s major concern was confined to the maintenance of law and order, yet, in his rambles and recollections of an indian official he analyses the indian society in its state of civilization however, his basic focus remains on the degenerating elements in then-current state of indian society. he worked hard to eliminate the evil elements from the society. however, he finds the evil necessarily emanating from the religious, moral, social and economic structure of the indian society through the historical practices. these evils were a constant source of problems for 1 w. h. sleeman wrote two books on the issues related to the utilitarian debates. one work was on taxes of public revenues, the ultimate incidence of their payment, their disbursement and the seats of their ultimate consumption, calcutta, 1827. this book was reprinted from london in 1829 and new york in 1888. second work was analysis and review of the peculiar doctrines of ricardo or new school of political economy serampore, 1837. 2 barry j. gordon, has treated sleeman as one of the five theorists producing non-recordian economic theories. collison black in his article “ parson malthus, the general and captain”, in economic journal, vol. lxxvii, pp. 59-74, compares sleeman with malthus. review of economics and development studies vol. 5, no 4, 2019 849 the british administration.3 (sleeman, 1836) on the one hand, if administration‟s credibility and support from the subject people was at stake, on the other hand, such type of internal problems were creating difficulties in relations with princely states and frontier countries. the attachment of evils to the religion was a big hurdle for a real assessment of indian situation for sleeman. adopting the pattern of “issues” or “strictures” of william tennant, sleeman selects the economic historical material from romanticists, evangelicals and travellers and places these facts to stabilize his arguments. sleeman believed although the law and order situation was grounded in the hindu culture, yet the economic predation of the british in india through systematic policies necessarily contributed to the emergence of plundering groups. the economic depravity, famines, officials plunders, trade plunders and such other activities on the part of british east india company sleeman‟s attitude was determined by imperialist motives, geo-cultural concept of nationalism, romantic thought and anti-utilitarian economic attitude however he seeks the application of all these views in the indian society in such a way that may strengthen the british rule and economic concerns in india. 4. sleeman and the political economy of religions sleeman links all walks of life with economy: religion, law and order, imperialism etc. therefore his political economy combines religion and rule and establishes necessitarian link between the indian people, moral evils and economic crises and deprivation. dividing dominant majority of hindus as subjugated and muslim minority as suppressive ruling elite, sleeman depicts muslim rule as the cause of the destruction of indian moral and economy. impressed by the novelty of hindu customs, traditions, fairs, fiction and culture, on the testimony of bishop heber (heber, 1828) and thomas munro, (gleig, 1831, p. 175) sleeman tries to prove the cultural, civilizational, chivalrous and inclusive nature of hinduism and indigenous hindu society. the destruction of cultural and economic heritage on the part of the non-indigenous ruling elites was the major cause of the immoral character and economic depredations of the indians. for sleeman the major cause of the promotion of fictious and mythological strength of superstitious structure was economic crises and plundering. (sleeman, 184, p.7, 54)4 as a ruling elite and masters of political economy, muslims have occupied a dominant space in the sleeman‟s necessitarianism. for sleeman two major communities of india were similar to each other sharing rituals of birth and marriage and even superstitions 5(matthews, 1809) and emanate necessarily from the hindu and muslim religion. same is the nature of their economic attitude in which booty, plunder, dacoity, thuggy, everything is justified, not through the empirical sciences rather with irrational superstitious behaviour. (sleeman, 1844, p.36-37) pointing to the mutual cultural influences, sleeman highlight the muslim following of the concept of avagon6 and custom of suttee7 (ibid, p.34.40) muslim focus on life after death and suppression of muslim women has minimized the economic re-productivity. (ibid, p.198-200) 3 sleeman wrote some major reports and published books on the issue of indian evils. some of these writings are: ramaseena or a vocabulary of the particular language used by the thugs with an introduction and appendix, calcutta, 1836; a report on the system of megpunnaism or the murder of indigent parents for their young children’s ( who are sold as slaves) as it prevails in the delhie territories and the native states of rajpootana, ulwar, and bhurtpoor, calcutta,1839; thugs or phansigars of india: comprising a history of rise and progress of that extraordinary fraternity of assassins, two volumes, philadelphia, 1839; report on the depredations committed by the thug gangs of upper and central india, calcutta, 1840; report on budhuk alias bagree dacoits and other gang robbers by hereditary profession and on the measures adopted by the government of india for their suppression, calcutta, 1849. 4 although it is a fabulous concept, but was propagated by a number of romantic and missionaries to strengthen their arguments. romanticists propagated it to create a sense of harmony between the europeans and indians. on the other hand roman catholics propagated it just to get the attention of local population. through this concept they seem to be trying to highlights that what the christian missions were propagating was not a new thing. it was the revival of true indian religion. 5 mishkat ul masabih is a collection of the most authentic traditions of the prophet (pbuh). author os using the translation of matthews under the title of mishkat ul masabih or the collection of most authentic traditions regarding the actions and sayings of muhammed exhibiting the origin of the manners and customs;civil, religious and military policy of the musalmans, from culcutta in 1809-10. 6 the concept of rebirth among the hindus. according to this concept every person comes back to this world after his death. if he does good acts in the first life he comes into good form other wise he appears in the form of some animals or insects. 7 suttee was a custom among the hindus. according to this custom a good women had to burn into ashes with the body of her deceased husband alive. review of economics and development studies vol. 5, no 4, 2019 850 property rights are considered one of the major areas of political economy and sleeman‟s narrative on the state of property rights in india is closely associated with necessitarian arguments. sleeman binds the superstitions and evils as the consequential necessity of social and cultural ceremonials that lead to economic crises. however, the social thrust to ceremonial life he considers as a result of political-economic suppression. he is of the opinion that under an unsettled and despotic government people do not feel their property secure. therefore, they feel it better to spend their earnings on superstitious rituals and ceremonials that promise them a psychological satisfaction and advantage for life-hereafter. (ibid, p. 38-39) in this context, muslims emerge as an imperial community with despotic political behaviour, establishing an economic structure to defend their imperial and despotic attitude. the militant and martial nature and status of muslim community left no hurdle in the way of their plundering of hindu wealth and establishing a state owned economy in the name of „mansabdari system‟. however he confess that this has been the common nature of all imperial elites (ibid, p. 144) yet the muslim rulers were very kind to their subjects and treated the muslims, the hindus, the dutch and the english, alike. (ibid, 137) in this regard, he praises the policy of akbar the great (ibid, p. 318-324) and shahjahan (ibid, p.52) and was very impressed by the beauty of the muslim constructions and the generous and kind way they treat their subjects in times of trouble. that is why the indigenous population does not indulge in the feelings of hatred against their superiors and rulers. (ibid, p.152) sleeman see reversal of akbar the great‟s policy of tolerance as a major cause of economic decline as well as the decline of the mughal power in india.(ibid, p.48-49) the rajput blood had contributed a lot in the strength of the mughal empire, but aurangzeb‟s policy created a sense of enmity among the hindus and the muslims and a long series of wars actually destroyed the economy of india. this enmity and economic destruction became a blessing for the british rule in india. 5. indian institutions and political economy sleeman establishes a close relation between state institutions and political economy. for sleeman strong political institutions provide a strength for the economic and social stability. he believed that the indians had never established any sound system of social, economic and political laws. the indian society lacked institutions, like that of the european senate, assembly, bar or bench or even stock exchange and joint stock companies. the absence of any law of political succession among the hindus and the muslim was an important cause of political instability in india resulting in wars and feuds, causing huge damages to public exchequer. the culture established norms even for the most obedient subjects and nobles to change their allegiance from one candidate of succession to the other or even to predators for economic gains and promote political chaos in the country. sleeman finds the footing of nineteenth century economic depression and political unrest as the necessary outcome of this attitude.(ibid, p. 239240) he points out the rise of pindaris, freebooters and thuggs as a result of this trend. (ibid, p. 491-492) however what kept the indian society functional and integrated inspite of despotism and degenerated political economy was its efficient system of local government. (ibid, p. 394) the system not only provided strength to the central administration rather looked into the minimum economic needs of the community at village, tribe and caste level. in this context sleeman draws lesson for the british political economy in india. as government policies bear a necessary relations with the conditions of the people and the deteriorated state of india economy was the result of political policies bearing impact on economy, therefore, sleeman advised the british east indi company government not to look into economic utility of the political policies only for the british profits and gains rather assess the necessities of the indigenous people and culture. he proposes the establishment of good terms with local population and levying tolerant taxes on trade and. (ibid, p. 482-83) 6. conclusion the nineteenth century indian economic crises have been analysed in terms of communal relations between muslims, hindus and eth british. the major stress of the time has been on the positivist political economy with utilitarian model and morality. with this model, if on the one hand, introduction of western institutions was justified, on the other hand, the exploits and plunders of the british indian subjects on the part of british east india company and its employees were vindicated. sleeman believed that the major cause of decline of indian economy was the british utilitarian policies which were necessarily bound to produce such results. political-economic policies were bound to produce necessary results. sleeman strengthens his arguments with the evidences from the indian past and pleaded that a major difference in the utilities of rulers and ruled during the muslim era was the major cause of economic depravity. in this context, sleeman integrates the emergence of superstitions, lawlessness, review of economics and development studies vol. 5, no 4, 2019 851 thuggy, bagree dacoities, and pindaries and other decedents as a necessarily determined result of foreign yoke in india. sleeman highlights not only economic impact of the political economy and economic deprivation on society, rather binds it as a necessity with the moral and cultural decadence of society. simultaneously, sleeman integrates the economic policies with determined necessitarian impacts and argues that rather than commercial interests, necessities of the subjects should be priority of the political economic policy. deprivation of basic necessities could produce a moral and political crises that can destroy the social and political fabric of even a highly civilized society such as india. references gleig, g.r. (1831) the life of sir thomas munro, london gordon, barry j. (1967) non-recordian political economy, five neglected contributions, boston: gordon, barry j. parson malthus, the general and captain, economic journal, lxxvii, pp. 59-74 heber, reginald (1828) narrative of a journey through the upper provinces of india, london: john murray matthews. (1809) collection of most authentic traditions regarding the actions and sayings of muhammed exhibiting the origin of the manners and customs; civil, religious and military policy of the musalmans, culcutta: hindoostanee press nous (2012), rationalism and necessitarianism, martin lin rutgers, 46(3), pp. 418-448 sleeman, willium henry. (1836) ramaseena or a vocabulary of the particular language used by the thugs, calcutta sleeman, willium henry. (1837) analysis and review of the peculiar doctrines of ricardo or new school of political economy, serampore sleeman, willium henry. (1839), a report on the system of megpunnaism or the murder of indigent parents for their young children‟s ( who are sold as slaves) as it prevails in the delhie territories and the native states of rajpootana, ulwar, and bhurtpoor, calcutta sleeman, willium henry. (1839),thugs or phansigars of india: comprising a history of rise and progress of that extraordinary fraternity of assassins, philadelphia sleeman, willium henry. (1840),report on the depredations committed by the thug gangs of upper and central india, calcutta: bengal military orphan press sleeman, willium henry. (1844) rambles and recollections of an indian official, london: j.hatchard and son sleeman, willium henry. (1849), report on budhuk alias bagree dacoits and other gang robbers by hereditary profession and on the measures adopted by the government of india for their suppression, calcutta: bengal military orphan press tuker, francis. (1961) the yellow scarf: the story of the life of thuggee sleeman or major general sir william henry sleeman, k. c. b. 1788-1856, london: j. m. dent & sons review of economics and development studies vol. 5, no 4, 2019 852 review of economics and development studies vol. i, no 2, december 2015 129 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 1: issue 2 december 2015 journal homepage: www.publishing.globalcsrc.org/reads factors determining the effective role of microfinance 1 shahina imran, 2 rana m. imran arshad 1 assistant professor, department of economics, govt s. e. college, bahawalpur, shahinaimran3408@yahoo.com 2 assistant professor, department of statistics, secretary b.i.s.e. bahawalpur, imranarshad.stat@gmail.com article details abstract history revised format: nov 2015 available online: dec 2015 the focus of this study is on the effectiveness of economic, social and institutional factors in manipulating the role of microfinance. it is a primary data research conducted in the bahawalpur division, pakistan. the sample consists of 773 respondents, belonging to different microfinance providers of pakistan that are nrsp, akhu, fmfb, kashf, kb, nrsp-b, tmfb. data has been collected through face to face structured interviewing using a questionnaire. it has been found that economic wellbeing and economic empowerment of borrowers after availing microfinance is positively affected by consumer protection, education of borrowers, experience, business training, number of employed persons, length of membership, relation to household head, area and family reaction to business activity but negatively by diversion of loan, interest rate, age of the borrowers and number of dependents. © 2015 the authors, under a creative commons attributionnoncommercial 4.0 keywords, household economics, microfinance, economic wellbeing, consumer protection, diversion of loan jel classification g21, c83, r20, i38 corresponding author’s email address: shahinaimran3408@yahoo.com recommended citation: imran, s. and arshad, r. m. i. (2015). factors determining the effective role of microfinance. review of economics and development studies, 1 (2) 129-141 doi: https://doi.org/10.26710/reads.v1i2.119 1: introduction microfinance is considered a tool for alleviating poverty and enhancing economic empowerment. its proponents favor it with the arguments that it helps the poor not only in increasing and diversifying income but also in sustaining gains over time through smoothing out income fluctuations. consequently it contributes positively to the quality of life by increasing food security, improving housing quality, refining household health, uplifting literacy rate, building assets and improving decision making empowerment etc. a noteworthy issue in this connection is that impact studies of microfinance conducted in different countries or under different mechanism of microfinance have different outcomes. there is a range of impact studies proving microfinance an effective tool for poverty alleviation and economic empowerment [khandker, 1998; todd, 2000; murdoch and haley, 2002; brannen, 2010].on the other http://www.publishing.globalcsrc.org/reads mailto:shahinaimran3408@yahoo.com mailto:imranarshad.stat@gmail.com mailto:shahinaimran3408@yahoo.com https://doi.org/10.26710/reads.v1i2.119 review of economics and development studies vol. i, no 2, december 2015 130 hand some impact studies [cheston, 2002; buss, 1999; morduch, 1998] criticized microfinance for its low capability to improve the living standard of poor people to such an extent that the poor destitute families are completely out of vicious circle of poverty. an in-depth appraisal of literature about concerning issue demonstrates that impact studies conducted under favorable socio-economic circumstance portrayed microfinance as an effective tool for poverty alleviation and economic empowerment. contrarily studies conducted under critical socio-economic setup exemplify it as a ‘blunt’ tool in fighting the battle against poverty. consequently we may have a view that socio-economic and institutional factors matter a lot in determining the role of microfinance as poverty alleviation and economic empowerment. this point of view has been supported by all the impact assessment studies; either they concluded the positive role of micro finance in alleviating poverty or negative one. all the impact evaluation studies [dun, 1999; zaman, 200; ahmed, 2002] which even found positive impact of microfinance on poverty alleviation, recommended policies such as better education, training and better access to market for its effective utilization. they also recommended improved social behavior, favorable demographic characteristics and improved institutional setup for its real application. on the other hand some impact studies [cheston, 2002; buss,1999; morduch,1998] criticized microfinance for creating large debt for poor people who are unable to repay loan due to economic and social limitations. the severe threat of hostile socio-economic characteristics of poor people remains a serious problem for effective utilization of microfinance. the present study has attempted to investigate the socio-economic and institutional factors which play an important part in making its role more affective. despite the fact that there is an extensive collection of impact-evaluating studies ending with positive or negative role of microfinance for poverty alleviation and economic empowerment and also recommending strategies to improve economic, social and institutional set up for effective role of microfinance, yet there is very little comprehensive work to explore these role-determining factors. there is rarely any study to evaluate how these elements can provide a supporting/nonsupporting hand to microfinance mechanism. the present study evaluates the impact of these factors on effective role of microfinance in poverty alleviation and economic empowerment. poor people of pakistan are characterized by low literacy rate, inappropriate training, poor assets base, and poor access to market. moreover many social factors such as high dependency ratio, unhygienic living condition, poor sanitation system, lack of health facilities, are characterized by poor people in pakistan which affect their ability to improve their economic wellbeing. this paper deals with microfinance beneficiaries and investigates those social, economic and demographic characteristics and institutional factors which play important role in determining their economic wellbeing and enhancing economic empowerment after availing microfinance. 2. objectives of the study the objectives of the study are: • to identify the degree to which economic, social and institutional factors can affect the role of microfinance in alleviating poverty • to identify the degree to which economic, social and institutional factors can affect the role of microfinance in enhancing economic empowerment. • to provide recommendations for effective utilization of microfinance to improve the economic wellbeing and economic empowerment of microfinance borrowers. review of economics and development studies vol. i, no 2, december 2015 131 3. statement of the problem this study is designed to explore the question: “do economic, social, and institutional factors matter in determining the role of microfinance in alleviating poverty and enhancing economic empowerment” this paper attempts to investigate: is there a difference among mature clients of microfinance characterized by different economic, social and institutional factors with respect to poverty status, household income, food security, housing quality , assets base, education of children, household health, employment level, saving, and decision making empowerment? as there is rare research to investigate its role-determining factors, the present study has attempted to evaluate elements which play crucial role in this connection, and to recommend the policies which can enable these factors to provide a supporting hand to microfinance in alleviating poverty. 4. literature review mohammad and faezeh (2010) explore a research question “do structural, behavioral and environmental factors exist in the development of women entrepreneurship in the industrial sector in urban and rural areas. it is a descriptive research. three hypotheses have been formulated to be tested. using the cockran sampling formula, a sample of 80 respondents was chosen from a population consisting of master and phd students and the professors of university of tehran and the entrepreneurship center. data has been collected through questionnaire. the data has been analyzed using “descriptive” and “deductive” statistics. as the results rejected the first two null hypotheses that behavioral and structural factors of development of women entrepreneurship are not provided in industrial part and alternative hypothesis are confirmed at 95 percent level of confidence. as the third hypothesis about the relationship between the environmental factors and development of women entrepreneurship is concerned, null hypothesis is confirmed and the statistical hypothesis is rejected with 95 percent level of significance, as the means significance value is bigger than 0.05. the results showed that behavioral and structural factors are providing in the development of women entrepreneurship in the industrial sector in urban and rural areas. but environmental factors on women’s entrepreneurship development are not providing in urban and rural areas. raman et al. (2008) present the motivational factors which affect women’s decision to become entrepreneurs and examine if these motivational factors differ among women entrepreneurs and women non-entrepreneurs. the study used the sample consisting of 225 (women entrepreneurs) and 215 (nonentrepreneurs) which was drawn from registered members of small and medium industries development corporation (smidec). the results indicate that women entrepreneurs rated all motivational factors which were classified into as economic core, work core, social core, individual core and entrepreneurial core much higher than their non-entrepreneurial counterparts. the study found the work core factor as the most significant motivating factor, while the economic core, individual and entrepreneurial core is regarded as important while social factor appears to be the least important factor among all other factors. as the work core is the most important motivating factor for women entrepreneurs, it has been explored in detail on each of its items by the researchers. among the reasons, exploring inner talent and doing something creatively rank the highest. yahya et al. (2011) analyze the effectiveness of microfinance banks in alleviating poverty in kwara state, nigeria. the study aims to examine the poverty situation, investigating the activities of review of economics and development studies vol. i, no 2, december 2015 132 microfinance banks and to assess the effectiveness of microfinance banks in alleviating poverty in kwara state nigeria. required data have been collected through both secondary and primary data sources. data generated from the survey were analyzed using descriptive and inferential statistics such as percentage mean, standard deviation, t-test statistics and anova at 0.05 alpha level. sample size is consisted of 400 customers belonging to 80 mfis. an intensive analysis of data showed that more female participated in the study then men. analysis of t-test and anova showed that issue of gender and working experience have significant impact on microfinance as a strategy for poverty reduction, while educational qualification has no significant impact on it. in a paper, chirwa (2002) describes the institutional and policy constraints of effectiveness of microfinance. first of all, he highlights the strong relation between poverty alleviation and microfinance theoretically and empirically and then raises an important question why poverty has not been alleviated in malawi which is now characterized by improved microfinance access as compared to past. moreover he analyzed the factors which determined the effective role of microfinance as poverty alleviation tool. the outreach of the microfinance institutions is poor due to their low geographic coverage and capacity constraints faced by them as under qualified staff. the institutions with improved design features such as completion of training as a precondition for the eligibility to get credit have better results. although the number of mfis have increased after the post democratization as compared to pre democratization, yet they are far away from satisfying the desired goals i.e. high outreach, poverty alleviation etc. 4. data and methodology the sample for the present study consists of respondents who are mature clients of the following mfps (microfinance providers) which are the leading suppliers of microfinance services in the area of study :national rural support programme(nrsp), akhuwat (akhu) ,the first microfinance bank ltd.( fmfb), kashf foundation (kashf) ,khushhali bank (kb), national rural, support programme bank ltd. (nrsp-b), tameer microfinance bank ltd. (tmfb). the sample consists of 773 established clients who have availed three or more than three loan cycles of microfinance. data have been collected from seven tehsils of bahawalpur that are tehsil bahawalpur (157), tehsil ahmed pur east (92), tehsil khairpur ( 61), tehsi l rahim yar khan (147), tehsil sadiqabad (95), tehsil chishtian (130), tehsil fort abbas (91). the questionnaire had been designed to find out not only the effects of micro credit on improvement of these variables such as income levels, housing characteristics, nutritional status, access to healthcare, education level, employment etc but also to covers all the economic, social and institutional factors which can affect the effective role of microfinance. model specification for impact of social, economic and institutional factors on effective role of microfinance the present study has attempted to examine the socio-economic and institutional factors which play a crucial part in determining the affective role of microfinance as a development tool. this paper deals only with those clients of mfps (microfinance providers) who have microfinance partnership for three or more than three loan cycles. following expression explicates the impact of different factors on effective role of microfinance, as the following expression explicates; yi= f (edu, btr, acm, exp, lms, noep, age, mrs, dpt, shh, rhh, dfl, frb, area, cpt, intr, infg) where yi= dependent variables dependent variables: the study evaluates the impact of different economic, social and institutional factors on two dependent variables that are economic wellbeing and economic empowerment of borrowing households after utilizing microfinance. here the variable economic wellbeing has been designed to represent poverty alleviation. as the both variable are multidimensional, so with the review of economics and development studies vol. i, no 2, december 2015 133 intention of presenting a more composed picture of impact of above mentioned factors, we have constructed indexes for economic wellbeing and economic empowerment. independent variables as the independent variables are concerned, they have been divided into three classes: economic, social and institutional. economic variables: (i) education of borrower (edu) (ii) business training(btr ) (iii) access to market(acm ) (iv) experience(exp) (v) length of membership(lms ) (vi) number of employed persons(noep) the variables, education of borrower and business training, have been measured by number of years; the respondent has attended an educational and training institution. access to market has been quantified by the distance from closest market and availability of paved road. lms has been measured by number of loan cycles completed by the respondent. (b) social variables: (i) age(age) (ii) marital status(mrs) (iii) number of dependents (dpt) (iv) sex of household head (shh) (v) relation to household head (rhh) (vi) diversion of loan (production to consumption) (dfl) (vii) family reaction to business activity (frb) (viii) area(area ) marital status has been quantified under the categories of married, widower, divorcee, and. single. age and dependents has been measured by number of years of age and by number of dependents respectively. sex of household head is a binary variable, taking value 1 for male and 0 for female. the variable ‘relation to household head’ has been quantified under the categories of self, spouse, son/daughter, parents and anyone else. six categories have been allotted to the variable ‘diversification of loan’ (i) buy food for household (ii) loan the money to spouse (iii) keep money on hand in case of an emergency (iv) for house/land improvement or purchase (v) to spend on a celebration or death (vi) to repay microfinance loan. the percentage of loan being diversified has been used to quantify the variable. ‘family reaction to business activity’ has been quantified under five categories: very supportive, supportive indifference, non-supportive, react badly. lastly, area is measured by either the borrower belongs to rural or urban. (c) institutional variables: (i) consumer protection (cpt) (ii) interest rate (intr) (iii) information (infg) to measure ‘consumer protection, we have constructed an index as it is multidimensional and has been characterised by six core values: transparency, fair practices, dignified treatment, privacy and fair disclosure, governance, client satisfaction which are quantified under four categories: excellent, good, satisfied, needs improvement. cpt index ranges from 0 to 24 values. interest rate is the prevailing interest rate charged by different microfinance providers. information index has been designed as the provision of information relating to concerned mfi, terms and condition, prevailing interest rate and repayment procedure .it has been quantified under two categories, satisfactory and not satisfactory, ranging values from 0 to 4. multiple linear regression model for economic wellbeing. microfinance as a tool of poverty alleviation aims at improving economic wellbeing. economic wellbeing of poor borrowing clients has been measured by constructing an index to estimate the following model. ewb = β0 +β1 edu + β2 btr +β3 acm + β4 exp +β5 lms + β6 nsp+β7 age + β8 mrs + β9 dpt +β10 shh + β11 rhh +β12 dfl + β13 frb,+β14 area+ β15 cpt +β16 intr + review of economics and development studies vol. i, no 2, december 2015 134 β17 infg + ui the construction of index for economic wellbeing involved the following variables relating to poverty alleviation paradigm: (1) change in monthly household income after availing microfinance, (2) change in food consumption after availing microfinance.(3) change in house improvement expenditure after availing microfinance (4) increase in household assets after availing microfinance. the value of index varies from 0 to 15. as the change in monthly household income is concerned, five categories have been designed ranging from ‘less than pkr 300’to ‘more than pkr 6000’ and values have been assigned to all categories ranging from 0 to 4. with respect to change in consumption of food items, four values 3, 2, 1 and 0 have been assigned to four categories ‘much improved’, ‘improved’, ‘remained same’ and ‘deteriorate’ respectively. in fact in questionnaire these categories has been inquired about the four food items that are meat, fruit, egg and milk, and each household would collectively get a value from 0 to 12 which have been then comprised into values from 0 to 4. regarding to change in house improvement expenditure, five categories ranging from ‘less than 2000’ to more than ‘30000’ have been assigned values from 0 to 4. among the household assets, only the highly valued assets have been included. in this regard five categories ranging from 0 to 10 have been designed with assigned values ranging from 0 to 4.the value of index diverges from 0 to 15. multiple linear regression model for economic empowerment (emp) microfinance as a tool of economic empowerment aims at empowering the poor borrowing households economically. economic empowerment of poor borrowing clients has been measured by constructing an index to estimate the following model. emp = β0 +β1 edu + β2 btr + β3 acm + β4 exp + β5 lms + β6 noep + β7 age + β8 mrs +β9 dpt + β10 shh + β11 rhh + β12 dfl +β13 frb + β14 area + β15 cpt +β16 intr + β17 infg + ui the construction of index for economic empowerment of poor borrowing involves the following variables relating to economic empowerment paradigm. (1) change in monthly household expenditures on education of children after availing microfinance (2) change in monthly expenditures on household health (3) change in monthly household expenditures on productive assets (4) change in number of employed household members (5) change in household saving (6) change in decision making empowerment. the value of index varies from 0 to 24. with respect to change in monthly household expenditures on education of children, household health and productive assets is concerned, five categories under each variable have been designed depending upon the respective variations in the collected data and five values have been assigned to these categories under each variable according to their importance. as the change in number of employed household members is concerned, five categories ranging 0 to 5 have been given values according to their magnitude. similarly change in household saving has been assigned categories and numerical values. the impact domain of decision making empowerment can be analysed in detail by inquiring the decision making authority in the household in several household issues: education of children, health of children, basic domestic purchase of commodities and use of loan. four categories have been designed here to describe the decision making authority: respondent alone, respondent and spouse, spouse alone and someone else with given values 4,3,2,1 respectively which have been then comprised into values from 0 to 4. review of economics and development studies vol. i, no 2, december 2015 135 5. results and discussions the table 3 presents the summary of regression analysis between economic wellbeing (ewb) of borrowers after availing microfinance and its economic, social and institutional determinants. it has been found that edu, btr, exp, lms, noep, frb and cpt have positive and statistically significant impact on ewb of the borrowers after availing the microfinance, whereas noep, rhh and area have positive but insignificant effect. in contrast, dfl and intr have been found to affect ewb negatively and significantly, while age, mrs, dpt and infm have also negative but insignificant effect on ewb. as the present study aims not only at exploring the relationship between ewb and its determinants but also at recognizing the determinants which comparatively have a greater effect on ewb, so we have calculated both standardized and unstandardized coefficients for analysis. unstandardized coefficients are expressed in terms of the variables' original, raw units. the advantage of standardization of the coefficient is that coefficients are easily comparable with respect to greater effect and significance. (wikipedia) table 3 regression analysis between economic wellbeing and economic, social and institutional factors (a) coefficients model beta standardized beta sig. constant edu btr acm exp lms noep age mrs dpt shh rhh dfl frb area cpt intr inmf 3.799 0.070 0.129 0.068 0.055 0.242 0.071 -0.004 -0.042 -0.040 -0.792 0.086 -0.009 0.520 0.243 0.262 -0.040 0.098 0.145 0.055 0.062 0.052 0.178 0.031 -0.018 -0.013 -0.034 -0.060 0.023 -0.084 0.175 0.057 0.212 -0.158 0.035 0.000 0.000 0.043 0.049 0.043 0.000 0.341 0.549 0.689 0.206 0.047 0.478 0.003 0.000 0.107 0.000 0.000 0.339 review of economics and development studies vol. i, no 2, december 2015 136 b) model summary and anova results model summary anova results r r square adjusted r square df f sig. 0.727 0.529 0.518 771 48.853 .000 the positive and significant coefficient for edu implies that ewb would be expected to increase after utilizing microfinance by 0.07 units for one unit increase in education, indicating that education helps the poor borrowers to reach their full potential to utilize the loan in more effective way. it has been found that that btr affects positively and significantly. the expected increase in ewb after utilizing microfinance would be 0.129 units for one unit increase in btr which indicates that business training is vital to the achievements of a business, as it reduces the risks of potential mishaps within the business. market access is a prime issue for less developed countries. it is also supported by the present study as the positive and significant coefficient depicts that market access have significant povertyreducing effects on the poor borrowing households. the coefficient on exp which is positive and significant, suggest that borrower’s experience of working in a similar business obviously matter a lot, as it provides him/her greater understanding of that market and the way in which businesses in that field work. lms is the most important determinant of ewb to be investigated after availing microfinance. the table shows that the ewb of the borrowing household after availing microfinance would be expected to increase by 0.242 units for one unit increase in lms suggesting that program participation has a significant positive effect over time for borrowers. higher the length of the membership to microfinance programme, the greater will be the economic wellbeing of the borrowers after availing microfinance. consequently, borrowers with membership of more than three years would be expected to have greater ewb than those with membership with three years. the positive coefficient on the noep, although it is statistically insignificant, suggests that the number of employed persons also has a positive impact on ewb after availing microfinance. with respect to social predictors, age, mrs and dpt have been found to have a negative effect on ewb of borrowers after availing microfinance although these negative coefficients are statistically insignificant. one unit increase in age, mrs and dpt would be expected to cause a decrease in ewb by 0.004, 0.042 and 0.040 units respectively. young borrowers have been found to be characterized with more increased ewb than old ones. similarly, married borrowers appear to be worse than the other categories in terms of increase in ewb after availing microfinance. likewise the borrowing households, having larger number of dependents appear to have less ewb than those having smaller number of dependents. the coefficient on shh, which is positive and significant at the 5 percent level, depicts that the female borrowers have been found to be worse than male ones in terms of increase in ewb by the magnitude of 0.792 after availing microfinance. with respect to the relation to household head, it has been found that borrowers, as a household head, add more to ewb of household than those as spouse or child of the household head. however this result is statistically insignificant. the diversion of loan has a negative effect on ewb after availing microfinance which is significant one. the expected increase in ewb of the borrowers who diverted the loan from production to consumption is lower than those who utilized the loan only for productive /sale purposes. generally the borrowers have been found to divert loan for house improvement, marriage celebration, medical treatment etc. area is an important determinant of ewb after availing microfinance. ewb would be expected to increase by 0.243 units if the borrowers review of economics and development studies vol. i, no 2, december 2015 137 belong to urban area. urban areas are better than rural ones with respect to investment opportunities and market access. among the institutional variables, cpt has positive and statistical significant effect on ewb. the clients of those institutions which are characterised by good core values of consumer protection (cpt) system such as transparency, fair practices, dignified treatment, privacy, fair disclosure, governance, client satisfaction etc. have been found to have more ewb after availing microfinance, as compared to those clients belonging to other institutions.the coefficient on intr, which is negative and significant at the 5 percent level, depicts that ewb of the borrowers of such mfps would be expected to increase more which charge low interest rate as compared to those belonging to the mfpswhich charge high interest rate. for one unit increase in intr, the expected decrease in ewb would be 0.040. the positive coefficient on the infm, although it is statistically insignificant, suggests that the quality of information provided by institution about concerned mfi, terms and condition, prevailing interest rate and repayment procedure has a positive impact on ewb after availing microfinance. the expected increase in ewb due to one unit increase in infm index would be 0.98. using the standardized coefficients for comparing the independent variables in terms of their effectiveness on dependent variable, ewb, it has been found overall the most impactful determinant of ewb of borrowers after availing microfinance is cpt with standardized coefficient,0.212, followed by lms, fbr,intrm and edu with standardized coefficients, 0.178, 0.175, 0.158 and 0.145 respectively. model summary shows the strength of the relationship between ewb and its predictors. the multiple correlation coefficient is 0.73. as the model has a higher value of ‘r’(multiple correlation coefficient) which indicates that model predicted values of dependent variable, ewb, are linearly correlated with observed ones. the value of r-square, 0.53 depicts that more than half of the variations in ewb are explained by the model. in short, we may conclude that there is a strong relationship between dependent and independent variables. anova results test the acceptability of the model from a statistical perspective. the significance value of the f statistic is 48.53 which is less than 0.05, indicating that the variation explained by the model is not due to chance. the table 4 presents the summary of regression analysis between economic empowerment (ewb) of borrowers after availing microfinance and the economic, social and institutional determinants. table 4 regression analysis between economic empowerment and economic, social and institutional factors coefficients beta standardized beta sig. constant edu btr acm exp lms noep age 0.218 0.106 0.361 0.021 0.119 0.434 0.776 0.009 0.127 0.089 0.034 0.147 0.181 0.194 0.021 0.847 0.000 0.003 0.207 0.000 0.001 0.000 0.415 review of economics and development studies vol. i, no 2, december 2015 138 mrs dpt shh rhh dfl frb area cpt intr infm 0.148 -0.319 -0.166 0.138 -0.015 0.767 0.201 0.481 -0.009 0.295 0.026 -0.155 -0.007 0.021 -0.085 0.150 0.027 0.274 -0.020 0.061 0.357 0.000 0.786 0.459 0.001 0.002 0.384 0.000 0.542 0.060 b) model summary and anova results model summary anova results r r square adjusted r square df f sig. 0.796 0.633 0.625 771 75.240 0.000 it has been found that edu, btr, exp, lms, noep, frb and cpt have significant and positive impact on emp of the borrowers after availing the microfinance, while acm, age, mrs, rhh, area and infm have positive but insignificant effect. unlike, dpt and dfl have been found to affect emp negatively and significantly, however shh and intr have also negative but insignificant effect on emp. among the economic variables, it has been found that edu has positive and statistically significant impact on emp, proving what is often said, knowledge to the poor is power to the poor. for one unit increase in edu, the expected increase in emp would be 0.106 units. education helps the poor borrowers to become more empowered economically, while illiteracy creates a situation of dependency on others, limiting one’s prospects for economic empowerment. an important finding is that the borrowers who received training related to their business have been found to be economically more empowered than those who didn’t. btr has positive and statistically significant coefficient that is 0.361. experience also matters a lot. more experienced borrowers have the advantage of identifying customers, marketing strategies and opportunities for growth in much better way as compared to in experienced ones. the positive coefficient on the acm, although it is statistically insignificant, suggests that access to market increase the economic empowerment of poor borrowers. an important finding is the positive and statistically significant contribution of lms to the model. economic empowerment of borrowers would be expected to increase by the magnitude of 0.43 units for one unit increase in lms, indicating ‘treatment’(membership ) matter but ‘dosage’ ( length of membership) matter a lot in determining the economic empowerment(emp) of the borrowers after availing microfinance. the coefficient on noep is positive and statistically significant, implying higher review of economics and development studies vol. i, no 2, december 2015 139 the number of employed persons in household, the higher would be economic empowerment. for one unit increase in noep, the expected increase in emp would be 0.778 units. as the impact of social variables on emp is concerned, it has been found that age and mrs affect emp positively, but these findings are statistically insignificant.the negative sign associated with coefficient on shh suggests that the household headed by male have been found to be economically more empowered as compared to those headed by female. moreover,it has been found that dpt has negative and statistically significant impact on emp, demonstrating higher the number of dependents a household has, the lower the access to education, training and medical facilities. it also limits the ability of a household to build assets and to save, because major portion of financial resources have to be allocated to the fulfilment of basic necessities. consequently economic empowerment of household tends to decrease. rhh has a positive but statistically insignificant impact on emp indicating that borrowing respondents, as a household head, contribute more to emp of household than those as spouse or child of the household head. moreover it has been found that dfl has negative and statistically significant impact on emp, implying that the borrowers who diverted loan from production to consumption have lower emp as compared to those who did not. the positive and statistically significant coefficient for frb indicates that the supportive reactionto business activity by other members of household is an important determinant. the positive sign associated with area demonstrates that the urban borrowers have been found to have more economic empowerment than rural ones but this result is not statistically significant. as the institutional variables are concerned, cpt has a positive and significant effect on emp. for one unit increase in cpt-index, emp of borrowers would be expected to increase by 0.48 units. the negative coefficient on the intr, although it is statistically insignificant, suggests that the clients of those mfps which charge a lower interest rate have more emp than the clients of other mfps. infm also has been found to have positive but statistically insignificant impact on emp. one unit increase in infm would cause to increase the emp by 0.295 units. the column labelled ‘standardized coefficients’ expresses that the most influential variable is cpt followed by noep, lms, dpt and frb respectively. emp would be expected to increase by 0.274 standard deviations for one standard deviation increase in thecpt. moreover due to one standard deviation increase in noep, lms, dpt and frb, economic empowerment of household would be expected to increase by 0.194, 0.181, 0.155 and 0.150 standard deviations respectively. the coefficient of correlation, r, has a big value that is 0.796, indicating strong correlation between observed and predicted values of the model. it also has been found that 63.3 percent of total variations in the emp have been explained by the model. moreover the anova results conclude that as the p value of f test is less than 0.05, so we are 95 percent confident to deduce that variation explained by the model is not due to chance. 6. conclusion as the regression analysis between economic wellbeing of borrowers after availing microfinance(ewb) and the economic, social and institutional determinants is concerned, it has been found that education of borrower, business training, experience, length of membership, family reaction to business activity and consumer protection have significant and positive impact on economic wellbeing of the borrowers after availing the microfinance, whereas number of employed persons, relation to household head and area have positive but insignificant effect. in contrast, diversion of loan and interest rate have been found to review of economics and development studies vol. i, no 2, december 2015 140 affect ewb negatively and significantly, while age, marital status, number of dependents and information level have also negative but insignificant effect on ewb. using the standardized coefficients for comparing the independent variables in terms of their effectiveness on dependent variable, ewb, it has been found overall the most impactful determinant of ewb of borrowers after availing microfinance is consumer protection with standardized coefficient, 0.212, followed by length of membership, family reaction to business activity, interest rate and education of borrower with standardized coefficients, 0.178, 0.175, 0.158, 0.145 respectively. with respect to regression analysis between increased economic empowerment (emp) of borrowers after availing microfinance and the economic, social and institutional determinants, it has been found that education of borrower, business training, experience, length of membership, number of employed persons, family reaction to business activity and consumer protection have significant and positive impact on emp of the borrowers after availing the microfinance, while access to market, age, marital status, relation to household head, area and information have positive but insignificant effect. unlike, number of dependents and diversion of loan have been found to affect emp negatively and significantly, however sex of household head and interest rate have also negative but insignificant effect on emp. additionally, it has been found the most influential variable is consumer protection followed by number of employed persons, length of membership, number of dependents and family reaction to business activity respectively. emp would be expected to increase by 0.274 standard deviations for one standard deviation increase in the consumer protection. moreover due to one standard deviation increase in number of employed persons, length of membership, number of dependents and family reaction to business activity, economic empowerment of household would be expected to increase by 0.194, 0.181, 0.155 and 0.150 standard deviations respectively. 7. policy implications on the basis of these results, it is recommended that • mfps should concentrate in improving all the core values of consumer protection such as transparency, fair practices, dignified treatment, privacy, fair disclosure, governance, client satisfaction. • the system of providing information to microfinance clients by mfps about terms and condition, prevailing interest rate and repayment procedure should be more efficient and on regular basis. • micro-credit should not be only an economic support. it should be coupled with other poverty alleviation interventions such as basic education, business training etc. • moreover in order to avoid diversion of loan from production to consumption, an effective system of monitoring and follow up of loans should be applied by microfinance providers. review of economics and development studies vol. i, no 2, december 2015 141 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(2000). assessing the poverty and vulnerability impact of micro-credit in bangladesh: a case study of brac. washington, d.c. world bank. review of economics and development studies, vol. 9 (1) 2023, 27-36 27 government expenditure impact on the economic growth of pakistan sidra shaukat a, aabru e fatima b, muhammad waseem c, muhammad kamran bhatti d a m.phil economics scholar, department of economics national college of business administration & economics, lahore, pakistan b m.phil economics scholar, department of economics, national college of business administration & economics, lahore, pakistan c m.phil economics scholar, department of economics, national college of business administration & economics, lahore, pakistan d school of economics and trade, hunan university, changsha city, hunan province, china article details abstract history: accepted 10 february 2023 available online march 2023 the primary goal of this study is to inspect the government expenditure consequence on the pakistan’s economy growth. for this intention study used data of annual time series from 1980 to 2020. the research-work utilized adf unit-root test that verify stationary data. and applied (ols) technique to estimation the connection among the gdp and govt expenditure, inflation, and gdp per capita. the estimation of the ols method shows there is a positive and significant impact of govt expenditure and gdp per capita on gdp. while; inflation has a significantly negative influence on gdp of the country. this study propose that fiscal policy expansionary can be utilized by the govt to motivate the economic situation during the time of downturn. © 2023 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: govt expenditure, ordinary least square (ols), adf, gdp per capita, fiscal policy jel classification: h51, h59, c87 doi: 10.47067/reads.v9i1.476 corresponding author’s email address: 1sidrakhan@gmail.com 1. introduction increased production of commodities and services used in the economy is referred to as growth in the economy (chaudhry et al., 2021). gnp or gross domestic product (gdp) is the most general means to assess total economy growth, but alternate metrics are also employed. the gross domestic product of every nation, emerging or developed, determines its economic progress. every variation in the gross domestic product will have an impact on the nation's overall economic expansion. any rise in an economy’s gross domestic product specifies the growing economy and moving towards a better condition; conversely, a decline in an economy's gdp indicates that the economy is contracting. simply said, economic growth occurs when a nation's gross domestic product rises. review of economics and development studies, vol. 9 (1) 2023, 27-36 28 the term "government spending" or "government expenditure" refers to all investments, transfers, and purchases made by the government. government spending is essential for reducing poverty (farooq et al., 2023). in line with the keynesian theory, government expenditure may boost aggregate demand, which in turn supports additional economic expansion and job creation. but, cutting back on government spending might have a negative impact on the economy. pakistan is one of those nations that has access to a variety of natural resources but is still developing, with relatively slow economic growth. the socioeconomic conditions of the nations are impacted both directly and indirectly by these variables, and as a result, the development rates of industrialised and emerging nations differ according to how differently their resources are utilised. hence, the study identifies the beneficial effects of exports, imports, and government spending on pakistan's economic growth. macroeconomic stability is necessary for a nation's economy to expand sustainably and over the long term (faheem et al., 2022). the macroeconomic indices have fluctuated often and frequently in pakistan's economy during the past few years. government spending that was wasteful and unplanned as well as low levels of income production contributed to macroeconomic instability and widened the fiscal deficit gap. throughout the previous five years, the nation's average growth rate was constant at 4.7%. whereas 5.4% is the government's aim. in 2017–18, the per capita income climbed by 1.3%, but declined by 9.4% in 2018–19. (government of pakistan, 2019). fiscal reforms and structural changes that drive growth through various shortand long-term channels might increase the country's capacity for growth. more taxes being enforced makes the economy spin, which lowers economy growth and production. the objective of this work in pakistan is to supplement empirical research on inflation. further particularly: ▪ to quantify the link among the economic growth variable and the rate of inflation; ▪ to determine the correlation among the economy growth variable and total govt spending; ▪ to assess link among the rate of inflation, the economy growth variable, and the disaggregated govt spending, namely the current and development spending of the government; ▪ examining the directions of the causal link amongst inflation, economy growth, and government spending though the general consensus is that government spending, whether recurrent or capital expenditure, in particular on social and economic infrastructure, can be growth-enhancing, financing such expenditures to provide essential infrastructural facilities, including transportation, electricity, telecommunications, water and sanitation, waste disposal, education, and health, can be growthretarding. (for example, the negative effect associated with taxation and excessive debt). the scope and composition of public spending would dictate the direction and mode growth of the economy (chaudhry et al., 2021; faheem et al., 2022). both conceptually and practically, the relationship between government spending and economic growth is still open question. although there are many different theoretical perspectives on the matter, it is widely believed that excessive government expenditure contributes to economic instability or stagnation. yet, empirical study cannot definitively prove the prevalent knowledge. while some studies indicate a strong adverse or no correlation among a rise in govt expenditure and growth in real production, others find some evidence of significant and positive association amongst growth of the economy and government spending. review of economics and development studies, vol. 9 (1) 2023, 27-36 29 2. literature review rehman et al. (2020), worked on the govt expenditure composition and economy growth of pakistan. the work required to determine the influence of various govt spending components of pakistan economic development from 1973 to 2018. ardl has been used to assess the figures in light of the findings of the adf test. according to the study, the impact of public spending, namely spending on r&d, subsidies and other transfers, employee remuneration, and education, on gdp per capita stayed considerable and positive. but the cost of the military and interest on loans has a notable and detrimental impact on pakistan's per capita productivity. according to the report, the government should increase expenditure on employment, r&d, and education in command to hasten the nation's growth of economy. awan et al (2018), investigate the outcome of government expenditures on development of economy in case pakistan. the study says that government uses monetary policy and subsides in development countries to enhance economic growth. the study investigates in short-run, relative monetary-policy have negative effect on economic-growth in the long-run, when inflation is stabilised at a given level, people will be much more willing to invest in the domestic sector. the finding predicts, the improvement of technology in economy expanded share of open consumption in gross national output. the financial analysis will acknowledge the expenses of a somewhat higher government obligation load to get unemployment down and help development. dhrifi, a. (2018), analyzed the relationship between health-care spending, infant mortality and growth in developing and groomed economies. in 93 rich and less developing nations, utilizing information from 1995 to 2012, the study inspects the influence of health care expenditure on child mortality rates. it does this by utilizing a simultaneous equation model. the study's findings also revealed that at lesser stages of development, public health outlay had a larger influence on death proportions than private spending; however at higher levels of health, development, private spending has a beneficial effect on child mortality ratio. chandio et al. (2016), with information from the pakistan economic survey, researchers and statistical year books looked at the government spending influence on the country's agriculture, economic development from 1983 to 2011. in order to analyze the data, the study used the johansen cointegration test, the adf unit root test, and the ordinary least squares methodologies. the findings of the johansen-co-integration method demonstrated that pakistan's government spending on agriculture contributed to agricultural production and growth in the economy had a long-term link. the empirical findings of regression analysis concluded that government spending and production of agricultural had a major influence on pakistan's growth and economy. ali et al., (2015) examined how the cost of defence affected pakistan's economic development from 1980 to 2013. moreover, the 2 stage-least-square -estimation approach is employed to estimate a three equation model in instruction to examine in-direct and direct influence of the defence load on growth of economy. the results indicated pakistan's economic development is slowed down by defence spending both directly and indirectly. scrutinized the influence of expenditure on economy growth by muhammad et al., (2015) in pakistan. the aim’s research is utilizing time series data for the years 1972–2013, to examine the impact on growth of spending in pakistan. secondary data is attaining from the statistical bureau of pakistan and the world development index. adf approach was employed to transmute non-stationary data into stationary. according to the co-integration reveals conclusion, there is no indication of a long-standing review of economics and development studies, vol. 9 (1) 2023, 27-36 30 link among national income and spending. lahirushan et al. (2015) studied of asian regions that the effects on economy output of government expenditure. the methodology is quantitative and uses panel-based-data of asian nations from time duration 1970 to 2013 in conjunction with granger causality, panel fixed effects modeling, and co-integration econometrics. the random effects panel ordinary least square approach is the one that was employed. similar to the aforementioned methods, the study discovered an intriguing result. first, actual data reveals that govt spending’s have a tremendously good conclusion on the region's gdp. second, in asian nations, here is a long-run correlation amid in government spending and development of economy. khan et al. (2014), factors influencing pakistan's economy output tendencies. in the instance of pakistan, this research work looked at the causes of economic development between 2008 and 2012. the degree of gdp growth has been utilised as a variable indicator of economic progress. when compared to government spending, import and export effects on the gdp were less pronounced. government spending and gdp were shown to be highly significant, whereas the impact of exports and imports was found to be less so. due to the restricted amount of data and time available for analysis, this may differ from previous studies. sheikh et al. (2014), examines pakistan's and india's defence spending and economic expansion. based on a supply side model (fader-type), this study presents empirical data on the connection among grouth and defence for pakistan, india from 1972 to 2010. the combined influence of the civilian and defence sectors on economic growth under the two-sector model is favourable for both pakistan and india. the coefficients for the defence and civil sectors remain the same in sign. for both countries, the overall impact of the export industry is favourable and important. furthermore, all of the models have maintained the same level of overall performance and explanatory power. the results show the augmented fader-type and fader-type models predict the defense sector's overall impact on growth is favorable for both pakistan and india. under the two and three sector models, the pakistani military industry's externality effect is still negative, whereas it is positive in the four sector model. khan et al., (2014) in pakistan stated the determinants of eco-growth. the aims of the research study are to discover the expenditure effect on eco-growthin pakistan, time-series-data utilizing from 1972 till 2013. second-hand data is acquiring from wd index and statistical-bureau of pakistan. augmented dicky fuller method was employed to transform stationary data into non-stationary. the integration results indicate that there is no any association amid national income , expenditure in the long-run. christie et al. (2014), examines testing the non-linear hypothesis on how spending by the government impacts economic expansion. for a set of 25 transition economies between 1992 and 2004, theoretic frameworks predict a non-linear link amongst the proportions of the government and longterm eco-development. yet, due to the endogeneity of government spendings and the precise location of inflexion facts, experimentally proving that concept in cross-country research is challenging. by using threshold examination in a cross board or off-road growth regression, the study investigates the nonlinear theory. the approach uses a sample-splitting architecture and a methodical approach to discovering and verifying changes in the slope. for a large panel of nations, the data offer proof in recommend or in esteem of the non-linear hypothesis. attari et al. (2013) conducted a study on inflation, government expenditure eco growth in file of review of economics and development studies, vol. 9 (1) 2023, 27-36 31 pakistan from 1980-2010. in example of pakistan, the research work investigated the connection among growth, spending’s and inflation rate. government spending in the research has been divided into 2 groups: current government spending and the development spending. the time-series data from the years 1980 to 2010 are used to conduct the research. to study this link, econometric procedures such the ardl, johansen co-integration, the granger-causality test, the augmented dickey fuller (adf) unit root test are utilised. the outcomes of using these econometric techniques reveal a long-term association among the economy growth, government spending and inflation rate, which indicates that public spending has beneficial externalities and links. ali et al. (2013), examines the relationship amid the makeup of government-spending and economy expansion employing data from pakistan. the research aims to inspect the function of subdivisions of government-spending under the pakistan democratic and military administrations between 1972 and 2009. ardl methodology was tested in this research work. the findings indicate that islamic republic pakistan experiences contractionary fiscal expansion. moreover, economic growth is positively impacted by the coefficient of development spending. the public-capital-concept, which holds that private & public investment is complementary to one another, is supported by this. the findings also demonstrate that present spending does not support economic expansion. according to the report, in order to maintain macroeconomic stability, the government should cut back on wasteful spending and improve resource mobilisation. muritala et al. (2011), study attempted to investigate empirically the trends as-well-as influence of government spending on the real gdp output rate in nigeria from the last few decades about to (1970-2008) by utilizing econometrics methodologies with the technique of ols. the findings showed the optimistic association among real gdp output as against the capital and recurrent expenditure. baum, n. d., & lin, s. (1993), analyzed the differential effects on economic growth of government expenditure on education, welfare and defense. this study basically examined the three dissimilar kinds of welfare, per-capita education and government expenditures effect, defense and gdp/capita growth rate utilizing cross-section data over the both developing & developed economies from 1975-1983. the finding revealed that for both time series and cross-section data base the output ratio of government expenditure had a positive impact on the output rate of gross-domestic-product. 3. theoretical framework as an alternative, the keynesian hypothesis postulated that through funding public initiatives and programmes, government expenditure contributes to growth of economy. according to the keynesian school of economics, government must interfere in the economy by increasing spending on social programmes and public works initiatives to encourage economic activity and growth (dilrukshini, 2009, ageli, 2013). the argument is predicated on the idea that increasing government expenditure on social and infrastructure initiatives helps to foster a climate that is more conducive to private sector investment and, as a result, is more effective in fostering employment development and economic expansion (palley, 2013; ono, 2011). in 1956, robert solow and trevor swan published a neoclassical economics-based model of longterm economic development. this economic model states that external forces determine an economy's long-term growth rate. exogenous influences include labour market expansion, capital accumulation, and technical improvement, among others. according to a typical solow model, the only option to continue development when economies attain their steady state equilibrium is through technological progress. solow's concept has an intriguing conclusion that poor countries should develop more quickly review of economics and development studies, vol. 9 (1) 2023, 27-36 32 and eventually catch up to affluent nations.the mankiw, romer, and weil (1992) enhanced solow-swan neoclassical growth model, sometimes known as mrw, is of interest. one benefit of using the mrw neoclassical method is that a straightforward theoretical foundation for empirical growth regression is clearly developed. so, using the mrw paradigm as a foundation for empirical research on economic growth is helpful. 4. methodology &data sources to examine the linkage between the dependant and independent variables, the current work analysed yearly time-series data from 1980 to 2020. the data of different variables like gdppc, government expenditure, and inflation are gathered from wdi officials links. 4.1 ordinary-least-square approach the ordinary least square approach was used in the current investigation to define the connection among the response and respond variables. ols is a technique for figuring out a linear regression model's unknown parameters. previous literature has been used different econometrics methodologies to assess the relationship of different variables in different regions (chaudhry et al., 2020; farooq et al., 2020; faheem et al., 2022; tanveer et al., 2022). the information for the dependant and independent variables is expressed in logarithmic form. the calculated equation looks like this: gdp = f (government expenditure, inflation, gdp per capita) the following is the study's multiple regression model: gdp = β0 + β1ge + β2inf + β3gdppc + µi 5. results and discussion in this section of the study, analysis of experimental data will be present. 5.1 descriptive statistics: gdp ge inf gdppc mean: 117.2010 12.92776 8.207073 714.4424 median: 72.31000 7.121000 7.840000 534.3039 maximum: 314.5600 36.84700 20.28000 1482.213 minimum: 23.69000 2.377000 2.520000 303.0510 std. dev: 93.81074 10.57917 3.809431 385.8285 skewness: 0.812988 1.023643 0.654290 0.680611 kurtosis: 2.159629 2.606736 3.625393 1.938257 observations: 41 41 41 41 sources: software e-views 9 descriptive statistics are summarised observations of 41 are specified in above table. the 1strow explain the average of gdp, government expenditure, inflation and gdp per capita is (117.2010), (12.92776), (8.207073) and (714.4424) correspondingly. the table's second-to-last row contains the skewness values. skewness symbolizes the disparity and asymmetry in the data distribution's mean. if the bell curve's centre and top point correspond to the mean, the mean median, and the mean mode are the same., the data distribution is skewed. here in the table we can see that, gdp, government expenditure, inflation and gdp per capita they are review of economics and development studies, vol. 9 (1) 2023, 27-36 33 favourably skewed because the mean value exceeds the median value. the values of kurtosis are displayed in the last row, demonstrating the data's flatness and peakness relative to a normal distribution.if a high peak appears in the probability distribution, the value of kurtosis is higher than (3), this is known as leptokurtic (>3). when the value of the kurtosis is less than 3 (<3), the probability distribution is understood to be platykurtic, indicating that the data is flat. (gdp, government expenditure, export, import) values are less than 3, so these are platykurtic variables and the value of variable inflation is bigger than 3, it is known as leptokurtic that mentioned in table below; 5.2 pair – wise correlation matrix the problem of multi-collinearity between variables is commonly identified by pair-wisecorrelation. the problem of multi-collinearity is demonstrated through the high coefficients of correlation of many variables. variables gdp ge inf gdppc gdp: 1.000000 ge: 0.918116 1.000000 inf: -0.006544 -0.006124 1.000000 gdppc: 0.905141 0.970336 0.008477 1.000000 sources: software e-views9 the above table explains the matrix of correlation of all variables. the outcome confirm that gdp (1.000000) shows positive correlation with gdp. ge (0.918116) and gdppc (0.905141) are highly correlated with gdp.this shows theproblem of co-linearity, other variable like inflation (-0.06544) shows negative correlation with gdp and shows less co-linearity with gdp. 5.3 unit root test the present study applied to verify that the data are steady, employ the augmented dickey fuller methodology for unit root. by and large the conclusion reveals the results of the augmented dickey fuller table for unit-root is prearranged in below tabular form. “variables”: at-level: at-1st-difference: “conclusion”: intercept trend-intercept: intercept: trend-intercept: gdp ----------.0045 -----1 (1) ge ----------.0000 -----1 (1) inf ----------.0472 -----1 (1) gdppc ----------.0009 -----1 (1) sources: software e-views 9 the augment-dickey-fuller-test for unit-root is displayed in above table. this is utilised to conclude whether or not a time series of data is stationary. the adf tests scrutinize the likelihood that a unit-root exists in the time-series sample. all variables in table gdp, ge, gdppc and inf are stationary at 1st difference intercept. review of economics and development studies, vol. 9 (1) 2023, 27-36 34 5.4 ordinary-least-square-approach results; below tabular reveals the association of response variables on responds variables. variables: coefficients: std. error: t-statistics: prob. ge 2.221023 0.228180 9.733651 0.0000 inf -0.276393 0.085910 -3.217256 0.0028 gdppc 0.139299 0.004090 3.405595 0.0000 c -29.86743 1.337615 -2.632888 0.0000 gdp(-1) 0.188457 0.030908 6.097399 0.0000 r2: 0.999576 durbin-watson test: 2.072146 adjusted r2: 0.999527 sources: software e-views 9 according to the table, the coefficient value of variable ge is significantly positive impact on gross domestic product. it illustrates that 1% enhance in government expenditure it will (2.221023) unit augment in gross domestic product. the coefficient value of variable infln put significantly negative effect on gross domestic product. it confirm that one percent increase in inflation it will (0.276393) units diminish in gdp. the results support the findings of attari et al. (2013). the coefficient worth of variable gdp per capita put positive but significant impact on gross domestic product. it illustrates that, one percent enhance in gdp per capita it will increase (0.139299) units in gdp. the outcome confirms the results of rehman et al. (2013). the more the fellow of adjusted r-squared, the more the fate model is. the ideal value of adj r-squared is 1. the value of adj r-squared is (0.999527). which is nearer to 1.it means model is good. durban-watson value lies between 0 to 4.2 is ideal value of durban-watson. if durban-watson value is greater than2, it indicates that is negative auto-correlation. there is no autocorrelation if the durban-watson value is 2, and there is autocorrelation if the durban-watson value is less than 2. here the figure of durban-watson is (2.072146), it means there is no autocorrelation. 5.5 auto – correlation the autocorrelation problem is tested by breusch-godfrey-serial-correlation lm test. below the table specify the results of breusch-godfrey-serial-correlation lm test. serial-correlation lmtest f-statistic: 1.341467 prob. 0.2753 source: software e-views9 autocorrelation issue is tackled by using the lag of the dependant variable. the probability value is negligible, demonstrating the absence of autocorrelation. 5.6 hetero-skedasticity the breusch-godfreyt-approach is employed to assess the hetero-skedasticity problem. the findings of the breusch-godfrey test for heteroskedasticity are displayed in the table below. heteroskedasticitytest f-statistic .720498 prob .5838 source: software e-views 9 review of economics and development studies, vol. 9 (1) 2023, 27-36 35 the table shown above shows the outcomes of the breusch-pagan-godfrey test for heteroskedasticity. the probability figure value is negligible, demonstrating the absence of hetero-skedasticity in the data that we used. 6. conclusion the primary goal of the existing research work is to determine how-much government spending affects pakistan's economic expansion. the research work makes use of yearly time-series data from 1982 through 2020 for this aim. the current study evaluates a number of academic articles on government spending and global economic development in pakistan and other nations. the study looked into the correlation among growth of economy and government spending through analyses to prior studies. the solow swan growth hypothesis, which illustrates the influence of external factors on economic growth, is also clarified by the study. the study also sheds insight on keynesian philosophy, which is founded on the idea that increasing government expenditure on social programmes and infrastructure helps to improve the business climate. the study first identifies the outcomes of descriptive statistics. second, the adf test was used in this study to determine if the data were stationary. the current study then looks at the relationships between various factors and gdp. in the current study, co-integration and the search for relationships among the respond variable and the response variables are both accomplished employing the ordinaryleast-square approach. the results demonstrate the government spending & gdppc have a favourable and considerable influence on economic growth. economic growth is negatively and significantly impacted by inflation. the results imply the govt should employ an expansionary fiscal policy to boost the economy during a downturn. the report also indicates that decision-makers should be aware of how government spending affects economic growth and implement measures that are appropriate for pakistan's economic development. references ali, a., &ather, m. 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(2020). asymmetric dynamics of oil price and environmental degradation: evidence from pakistan. review of economics and development studies, 6(1), 1-12. chaudhry, i. s., faheem, m., & farooq, f. (2021). renewable and non-renewable energy consumption, environmental pollution, and economic growth: an empirical application on pakistan. review of applied management and social sciences, 4(3), 651-663. chaudhry, i. s., faheem, m., farooq, f., & ali, s. (2021). financial development and natural resources dynamics in saudi arabia: visiting ‘resource curse hypothesis’ by nardl and waveletbased quantile-on-quantile approach. review of economics and development studies, 7(1), 101review of economics and development studies, vol. 9 (1) 2023, 27-36 36 117. dhrifi, a. (2019). health-care expenditures, economic growth and infant mortality: evidence from developed and developing countries. cepal review no. 125, august 2018, 69. faheem, m., azali, m., chin, l., & mazlan, n. s. (2022). does oil price spur public expenditures in saudi arabia, kuwait and united arab emirates?. journal of public affairs, 22(4), e2604. faheem, m., hussain, s., safdar, n., & anwer, m. a. (2022). does foreign direct investment asymmetrically affect the mitigation of environmental degradation in malaysia?. environmental science and pollution research, 1-13. faheem, m., azali, m., chin, l., & mazlan, n. s. (2022). migrant remittances and dutch disease: evidence from india. iranian economic review, 26(1), 121-132. farooq, f., faheem, m., & usman, m. z. (2020). does globalization asymmetrically affect co2 emissions in pakistan? a new evidence through nardl approach. review of education, administration & law, 3(3), 511-522. farooq, f., zaib, a., faheem, m., & gardezi, m. a. 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(2022). validation of environmental philips curve in pakistan: a fresh insight through ardl technique. environmental science and pollution research, 1-18. review of economics and development studies vol. 5, no 1, march 2019 145 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads role of job designs in determining employees’ work motivation in banking sector of multan city, pakistan 1 tehmina sattar, 2 muhammad imdad ullah, 3 muhammad qasim, 4 imtiaz ahmad warraich 1 lecturer, department of sociology, bahauddin zakariya university, multan. pakistan 2 assistant professor, lyallpur business school, government college university, faisalabad, pakistan. email: imdadbzu@gmail.com 3 lecturer, department of statistics & computer science, university of veterinary and animal sciences, lahore 4 assistant professor, department of sociology, bahauddin zakariya university, multan article details abstract history revised format: february2019 available online: march 2019 this article presents theoretical and empirical underpinnings between job designs and employees’ work motivation in banking sector of multan city, pakistan. the study adopted a cross-sectional survey research design in which 362 employees participated through simple random sampling technique. the findings of the study revealed that female employees are more motivated towards their jobs than male employees. moreover, job characteristics and job rotation are high among senior bank employees having experience greater than 12 years. the study concluded that job enrichment is the highest influential factor in determining employees work motivation while quality of work life is negatively influencing their enthusiasm level towards job. in the wake of new technological transformations, academic insight into the current work would further guide the policy makers for designing the jobs for banking sector through decentralization of managerial powers, changing in accordance with the global trends, as well as applying autonomous, mastery oriented and purposely directed policies. © 2019 the authors, under a creative commons attributionnoncommercial 4.0 keywords employee, work motivation; job designs, job characteristics, job enrichment, job rotation, quality of work life. jel classification i24, j54, j28 corresponding author’s email address: imdadbzu@gmail.com recommended citation: sattar, t., ullah, m. i., qasim, m. and warraich, i. a. (2019). role of job designs in determining employees’ work motivation in banking sector of multan city, pakistan, review of economics and development studies, 5 (1), 145-154 doi: 10.26710/reads.v5i1.425 1. introduction job designs(jds) is theoretically defined as managerial determination to create and streamline different aspects of job substantially. accordingly, jobs are mainly premeditated to identify the needs of employees and exterminate various obstacles that exasperate these needs (ivancevich et al., 1990). these designs play an imperative role in increasing the organizational productivity through employees’ engagement, reassurance and involvement in job activities (cox, 1994; morgeson& campion, 2003). when jobs are designed in an adequate way, then employees becomes more motivated and passionate towards organizational progress. moreover, they become determined towards an eventual goal of customer care services (bates, 2004). for that reason, jdscan synchronize the organizational activities through employees’ involvementin their designed tasks (zareen&razzaq, 2013). http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 146 in 1900, jdswas introduced as an empirical construct in scientific management approach affecting employees’ work motivation (ewm) for organizational progress (oldham & hackman, 2010) which was further used as a debate for employees’ retention, their turnover rate and job resilience through differential motivational levels in their respective jobs. over the past decade, human resource researches have mentioned that organizations should centered their jdssolely on job characteristics (jc) (rich et al., 2010) but now job enrichment (je), job rotation (jr) and quality of work life (qwl) are also added as the major dimensions of jds (parker & wall, 1998; robbins, 2001). according to the research conducted by taylor (1911), jobs must be designed according to the abilities, gender segregation and working experience of the employees (also see parker & wall, 1998). therefore, management is responsible for facilitating the employees in accordance with their allocated works (morgeson& campion, 2003; parker et al., 2001).in view of that, two major theoretical frameworks conceptualize the dynamics of this issue. one is herzberg's two-factor theory (1974a) which focuses on nature of jdsand its role in maximizing the work output. the second approach is hackman & oldham's jc theory (1976) which concentrates on the nature, dimensions and content of jc within an organization. in connection with these theoretical frameworks, griffin (1991) worked on ewm in banking sector. this study was based on boredom as a major factor for demotivating bank employees as they do the same kind of jobs such as cashiers, depositors and loan payment procedures. afterwards, ugboro (2006) conducted a research on jds that was the leading factor for organizational performance such as innovative action taking in jobs. in recent past, the differential aspects of management sciences illustrates a deep concern in investigating the dyad constructs of jdsand ewm in banking sector (rich et al. 2010). in light ofthese theoretical gaps (campion, 1988; cheng, 1995; deeprose, 1994; zareen & razzaq, 2013), the present study is targeted towards investigating the differential dynamics of jdsaffecting ewm in banking sector. although the context of pakistan is facing acute dearth of empirical facts about the present phenomenon (ali &rehman, 2014), but the recent study deliberated that the greatest challenge in banking sector of pakistan is to provide quality of services provision to the customers due to demotivated employees. the major reason behind this demotivation is inadequate fulfillment of job needs which ultimately rendered customer care services (khan et al., 2010). unfolding this fact, the vicinity of multan city is considered to be less developed but still there is mushroom growth of banks in urban areas. therefore, the present study focused its nexus on interrogating the relationship between jdsand ewm in banking sector of multan city, pakistan. 2. theoretical framework 2.1 herzberg’s two factor model the theoretical underpinnings of herzberg two-factor model were centered on two types of factors i.e. external/hygiene and internal/motivators for determining ewm in their organizational job. these abstract notions indicated that hygiene factors are external to the work activities and does not fluctuateewm to larger extent. these factors included working conditions in an organization, salary payments to employees, management tasks and various organizational policies. conversely, intrinsic factors/motivators can play an imperative role in fluctuating employees’ motivation in their job activities (herzberg, 1974b). these factors comprise of recognition in job designation, personal growth and internal satisfaction of employees. in accordance, herzberg (1966) believed thathygiene factors causes’ dissatisfaction among employees which can be eliminated by providing them better pay scale, ensuring employee job security and create positive working conditions in an organization. conversely, motivators create job satisfaction among the employees through achievement, recognition, challenging work activities, sense of responsibility and involvement in decision making (herzberg, 1979; 1987). pertaining to this context, jobs should be designed by incorporating the major organizational perspectives such as je, jr, jc and qwl as prerequisites for jds(herzberg, 1965; 1974a). 2.2 job characteristics theory the theory was put forwarded by heckman & oldham (1976) to find out the worthwhile strategies for redesigning the organizational jobs. the major assumptions of the theory focused on jc which lead towards positive working conditions and ewm. according to the assumptions of oldham et al. (1976), there are varied dimensions of jc such as variety in skills of employees, significance in task accomplishment, autonomy as well as feedback. thehypotheticalpostulates of this theory set forth the idea of intrinsic motivation to be linked with defining the psychological states and ewm in their job. moreover, appropriate jdsmust be internally motivated, satisfied with personal growth opportunities and have lower turnover rate. the narrated psychological states further included review of economics and development studies vol. 5, no 1, march 2019 147 adequate work assigned in an organization, responsibility of jdsas well as knowledge about work activities of the employees. these implications ofjds are imperative as they determineworth, value, applicability and relevance of works assigned to the employees(loher et al. 1985; zhang & von dran, 2000). table 1: dimensions of jc in jds and their description dimensions of jc description of jds skill variety extent to which job provides basic skill variety among employees. it involves the skills and talents of employees. employees use cross functional tasks in any organization. task identity job requirements in relation to different tasks can identify the abilities of employees. the assigned job work must be identifiable with visible outcomes for organizational progress. the employees own the tasks and select it by themselves. task significance there is a clear link betweenemployee’s relations and their differential task components. this variable shows the relationship between related tasks and accomplished tasks of the employees. autonomy autonomy refers to the freedom, liberty and independence provided to the employees in planning and implementing the organizational tasks. employees are empowered and respected in which the hierarchies are flexible. feedback feedback involves direct and clear information about job and work activities. this dimension is related withemployees performance in job. source: (hackman & oldham, 1976) 2.3 theoretical application in the current study according to the work of draft & marcic (2010), previous empirical literature and theoretical evidences of herzberg two factor model is inadequate to cover all the aspects of ewm in an organization. in this regard, job characteristic theory must be fitted together for investigating ewm in an organization. still then, previous literature in the global context (griffin, 1991; gunasekara & kulathunga, 2011; khan et al. 2010; wrzesniewski& dutton, 2001) argued that there is an acute dearth of literature on this present topic which demands the new empirical evidences. contextually, pakistan is also lacking the appropriate empirical facts on the stated study issue but still there are few studies in the asian context. for example, a study conducted by teck-hong &waheed (2011) addressed the effects of motivators on employees’ work performance. in this study, the working conditions in an organization were the considerable variables that could increase ewm in an organization. moreover, the study conducted by gunasekara &kulathunga (2011) in private banking sector of sri lanka depicted the level of motivation with jds. given the acute dearth of literature on the present phenomenon in pakistan, there is an eventual need to embark on more research addressing the motivation of employees in banking sector (khan et al. 2010). based on these theoretical assumptions, the discussed variables are centered on motivational approach which depicted the autonomous decision making and differential professional skills among the bank employees. these job spheres make meaningful and task oriented approaches for personal growth of employees (draft &marcic, 2010). relating this, the dimensions of predictor variable i.e. jds (je, jr, jc and qwl) along with description are described below; table 2: operationalized descriptions of jds approaches of jds description of jds approaches je this technique entails variety in work assigned to employees according to their designation. it includes knowledge, talents, skills, working commitment, dedication to organization and working experience. the operationalization of this variable included greater autonomy, higher level of knowledge acquisition, variety in work performance and opportunities of personal growth. review of economics and development studies vol. 5, no 1, march 2019 148 jr this technique entails the rotation of employees’ job positions to enhance their skill development. it includes job focus and hard work of the employees in organizational context. the operationalization of this variable included flexibility, variety, novelty, competitiveness and opportunities for active involvement. jc the internal factors of job characteristics are technology, performance and organizational environment while the external factors are non-availability of the technology. the major characteristics of this variable included variety of skills, identity and significance of tasks, autonomy and feedback. qwl this technique enhances the dignity of workers and changes in organizational culture. it also includes various physical, psychological and economic factors that are mainly targeted towards humanizing the professional work. the operationalization of this variable included the opportunity for active involvement, working conditions, working hours and fair compensation (in the form of rewards). source: draft &marcic (2010) 3. methods and materials 3.1 research setting and sampling procedure the empirical research was conducted in multan citywhich has the central importance in south punjab, pakistan. the data were gathered from the employees’ working in four leading banks of the study locality, namely habib bank limited (hbl), united bank limited (ubl), faisal bank limited (fbl) and allied bank limited (abl). the type of employees in the said banks included front desk agents, cashiers, guest attendants, account openers, procedural employees and senior bankers. during informal discussions, the bank employees argued that they have low pays as compared to their long working hours therefore they become less motivated towards professional work and more intended towards job turnover. sequentially, lack of motivation among employees is also responsible for their inadequate customer care services. for the purpose of data collection, bank management was contacted using a letter indicating the purpose of the study as well as respondents’ criterion and permission for data collection. after ensuring the research purpose, the management of each bank was agreed to survey their employees. the respondents were asked to write down a unique alpha-numeric code number at the top ofenvelop which contains a questionnaire. this code comprises of first alpha letter of the bank name followed by the serial number of letter and then designation of the employee. for example, the first front desk employee (fde) surveyed from hblwas coded as hbl-01-fde. the survey was conducted between the time span of 17thmarch, 2018-5th june, 2018. the respondents were then awarded with a certificate in which their experience was mentioned for participating in the research. this certificate was duly signed by the researchers and manager of the respective bank. furthermore, the document was given as research ethical reciprocity which further assists the bankers to strengthen their curriculum vitae (cv) for promotion. in the given study, the researchers selected the sample from 4 leading banks in multan city, pakistan. multan city is mainly divided into 4 towns according to government of the punjab, local government and rural development department. from totality of mentioned towns, 2 were randomly selected as the geographical area has similar socio-cultural dynamics which can be generalized to the other towns. accordingly, 3 branches from each bank were selected randomly from the sampled towns, giving a sum of 24 branches. from each bank, 6 employees were targeted from these subsequent categories such as front desk agents, cashiers, guest attendants, account openers, procedural employees and senior bankers. these 6 categories of employees were uniformly selected so that each category can be represented by ensuring the heterogeneity of the population. a total of 432 bank employees were sampled out through the above cited sampling procedure. from the distributed questionnaires, 372 were mailed back to the researchers. the mailed questionnaires with the secret code were then compiled from which 4 questionnaires were inadequately filled with blue and red ink spots on the answers (declared as not readable) while 6 were 80 percent blank. therefore, these questionnaires were excluded and the remaining 362 were used for further data analysis. as the response rate was 83.79 percent so the results of the sample were considered adequate enough to generalize on the population. review of economics and development studies vol. 5, no 1, march 2019 149 3.2 instrument development the first page of each questionnaire consisted of assurance letter about the anonymity and confidentiality of employees personal information. along with this page, consent letter and an alternative opt-out letter was attached that allows the respondents to ensure their participation in the survey. the questionnaire consisted of four parts that contains all the information about the respondents profile, dimensions of jdsand ewm towards job retention. the relational questions were also asked to enhance the respondents understanding about the research instrument. all the questionnaires had the random code number that was followed by bank name i.e. ubl so that number of questionnaires from each bank could easily be identified. the instrument of the study consisted of three major parts. the first part comprised of demographic profile of the respondents in which the questions related with age, gender, education and working experience of bank employee were asked.the subsequent second part used five-point likert scale in addressing varied dimensions of jds i.e. je, jr, jc, qwl. the last part of the instrument contains ewm which is used as the response variable in this instrument. the variables used in the scales were subsequently checked for number of items and inter-item consistency for the respective variables. with reference to the instrument, the scales related with jc and qwl has cronbach’s alpha value of 0.671 and 0.687 respectively, which is considered as good values. moreover, jr (α=0.793) and je (α=0.856) have also fairly good values of reliability coefficient. inversely,ewm (as the response variable) constituted 7 items with cronbach’s alpha value of 0.795 which is considered to be good and reliable. 3.3 statistical data analysis ewm, jc, je, jr and qwl were assessed using a scale comprised of seven-items, five-items, six-items, five-items and five-items, respectively. these scales were measured on 1-5 response categorizes i.e. strongly disagree, disagree, neutral, agree and strongly agree. spss version-23 was used to analyze the relationship of independent variables i.e. jc, je, jr and qwl with response variable i.e. ewm. the data analysis mainly consisted of three steps. in first step, demographic profile was measured through descriptive statistics i.e. frequency and percentage. in second step, group differences of gender and working experience among study variables were examined using independent sample t-test and one-way analysis of variance (anova). the third and final step consisted of testing the hypothesized model by using multiple linear regression modeling i.e. iv: jc, je, jr, qwl ewm by means of adapted regression model from heckman & oldham (1976) for jds. 4. results the demographic characteristics verified that n=195 (53.9%) respondents belonged to the age group of 31-40 years. more than half respondents i.e. n=236 (65.2%) were male employees. the education level divulged thatn=160 (44.2%) were graduated in buisness administration or some other equivalent degree. the working experience of n=128 (35.4%) participants was 1-6 years. the frequency range illustrated that n=81 (22.4%) respondents were senior bankers while n=32 (8.8%) were front desk agents for provision of basic information and customer care guidence (see table-1). as per hypothetical framework, the gender difference was demonstrated by using independent sample t-test with means ± standard deviation (sd) of all the variables at the significance level of p<0.05. the results illustarted that jc, qwl, je and ewm are higher among female respondents than male employees in which the significant differences does not remain intact. conversely, jr is more prevalent among male respondents than female employees (table-4). the major hypothetical statementsalso demands the differences in jds across working experience of employees. for this reason, one-factor anova with multiple comparison tests (least significant difference) was used to analyze the differnces in the said variables. in case of jc, there is no significant difference between the said age groups in working experience. still then, jc are high among the respondents that have more than 12 years experience. with accredition of the said results, it is verfied that qwl is higher among the respondents that have 79 years of experience. in addition, jr is significantly high among the respondents that have more than 12 years experience in banking sector. furthermore, je was significantly high among the respondents that have 4-6 yearsexperience. resultantly, ewm was high among the employees who have 4-6 years of experience (table-3). review of economics and development studies vol. 5, no 1, march 2019 150 table-6 shows the descriptive statistics i.e. means and sd along with correlation among predictor variables.the results endorsed that jc was negtively correlated to qwl and jr (r=-0.200 and r=-0.125, p<0.05) while it divulged the positive correlation withje (r=0.133, p<0.05). the extended statistical facts elaborated that qwl was positively correlated to jr (r=0.175, p<0.01) and negtively correlated with je (r=-0.129, p<0.05) while jr was negtively correlated withje (r=-0.045, p<0.05). table 3: demographic profile of the sample (n=362) demographic characteristics frequency percentage age of the respondents 1=<20 years 25 6.9 2=21-30 years 107 29.6 3=31-40 years 195 53.9 4=41-50 years 35 9.7 gender of the respondent s 1=female 126 34.8 2=male 236 65.2 education of the respondents 1=post graduate in buisness management/equivalent 139 38.4 2=graduate in buisness management/equivalent 160 44.2 3=other appropriate for banking jobs 63 17.4 experience of the respondents 1=<1 year 23 6.4 2=1-3 years 128 35.4 3=4-6 years 128 35.4 4=7-9 years 96 26.5 5=10-12 years 128 35.4 6=>12 years 115 31.8 type of bank employee 1=front desk agents 32 8.8 2=cashiers 75 20.7 3=guest attendants 42 11.6 4=account openers 59 16.3 5=procedural employees 73 20.2 6=senior bankers 81 22.4 table 4: mean ± standard deviation gender differences by using independent sample t-test (n=362) variables female male jc 3.70±.80[a] 3.62±0.60[a] qwl 4.41±0.35[a] 4.37±0.40[a] jr 4.06±0.71[a] 4.09±0.77[a] je 4.05±0.66[a] 3.88±0.85[a] ewm 4.17±0.42[a] 4.11±0.58[a] [a]lowercase letter repsent non-significant difference between female and male respondents (p <0.05) table 5: mean ± standard deviation working experience differences by using one-factor anova (n=362) variables < 1 year 1-3 years 4-6 years 7-9 years 10-12 years > 12 years jc 3.47±0.62a 3.69±0.70a 3.63±0.66a 3.65±0.67a 3.55±0.76a 4.02±0.51b qwl 4.26±0.42a 4.38±0.25a,b,c 4.29±0.53a,b 4.53±0.36c 4.42±0.39b,c 4.40±0.15a,b,c jr 4.14±0.64b,c 4.15±0.53b,c 3.95±0.78a,b 4.12±0.78b,c 3.8±1.05a 4.32±0.71c je 3.89±0.67b 4.02±0.84b,c 4.24±0.76c 3.75±0.83b 4.2±0.36c 3.43±0.95a ewm 4.09±0.37b,c 4.30±0.53d 4.40±0.37d 3.97±0.66b 4.24±0.42c,d 3.66±0.54a a,b,c,ddifferent lowercase letters repsent significant difference of jc, qwl, jr, je and ewm among different working experience groups of the bankers (pvalue<0.05). review of economics and development studies vol. 5, no 1, march 2019 151 table 6: correlation analysis (n=362) variables mean sd (1) (2) (3) (4) jc 3.65 0.67 1 qwl 4.38 0.38 -0.200** 1 jr 4.08 0.75 -0.125* 0.175** 1 je 3.94 0.80 0.133* -0.129* -0.045 1 **signifcant (p < 0.01) & *significant (p < 0.05) figure 1: path estimates model table 7: standardized regression weights analysis(n=362) dependent independent estimate( ) se t p conclusion ewm <--jc 0.068 0.030 2.282 0.022 significant ewm <--qwl -0.049 0.052 -0.939 0.348 non-significant ewm <--jr 0.179 0.026 6.792 0.000 significant ewm <--je 0.456 0.025 18.564 0.000 significant before conducting the multiple linear regression model, the goodness of fit of the model was tested. overall the model was well fit to the data and predictor variables explain the variation in response variable ( ). in this case, demonstarted 53.1% variance in ewm which is also explained in the predicting variables i.e. jds. these statistical facts authenticated that with a unit increase in jds leads towards increasing ewm. the results of standarized regression weights are also illustrated in table-7 (see fig-1). the above cited findings in the same table indicates that jc (skill variety, task significance, task identity, autonomy and feedback) have significant and positive impact on ewm towards their job ( ). likewise, qwl (i.e. oppurtunity for active involvement, flexible working hours, working envionment, working conditions as well as active and fair compensation) has negative implications on ewm ( ). in approximation, jr (variety, novelty, competition, effectiveness and flexibility) illustarted significant and positive impact on ewm ( ). finally, je variable (greater variety of work, higher level of knowledge skills, greater autonomy, control over their performance and oppurtunity for personal growth) has high, significant and positive impact on ewm in banking sector of the study vicinity ( ). similarly, it is noticeably evident that jc, jr and je have significantly positve impact onewm in banking sector of the diuscussed locality(see fig-1). 5. discussion the concept of jds has its roots in social sciences and management researches which mainly aimed at increasing the organizational productivity and employeeswork efficiency through their motivational levels (kondalkar, 2013; morgeson & humphery, 2006).the results of the present study were consistent with the previous findings of garg & rastogi(2006) who mentioned that jds are very important as they motivated the employees for meaningful productive activities. contrariwise, ambitionless anddisorganized jobscan only be attributed as "arbitrary group of activities" (campion, 1988). in compliance with the present research, previous literature also endorsed multidimensional aspects of jds that results in employee motivation and performance appraisals (osland et al. 2001). review of economics and development studies vol. 5, no 1, march 2019 152 the results of the present study also put forth variance across ewm in relation with their jds across the taregeted banks. previous studies endorsed that age groups (bushra et al. 2011), gender segregation (bender et al. 2005), education level andworking experience (karatepe & tekinkus, 2006) put forth differential levels of motivation among employees(herman et al. 1975; riordan & shore, 1997). in terms of gender differences,female employees showed higher motivation level in their jobs in comparison withmale employees. these findings are antagonistic with the previous work of hechanova et al. (2006) which depicts that male employees are more motivated to work in any organization ascompred to female employees. the results of the present study also divulged that je is the most influential and variance producing factor in fluctuating ewm. therefore it must be preferably considered while designing a bank job. this major finding is also related with the work of griffin et al. (2010) who argue that enriched jobs play an imperative role in increasing employees’ motivation. the major reason is that employees get acquainted with monetary and promotional incentives. thus, enrichment move towards employee centered approach because the designed jobs provide a sense of involvement, commitment and motivation which in turn ensures employee higher retention and their lower turnover intent. afterwards the findings revealed that jc which was formally considered as the sole dimension of jds was also considered to be the ultimate predictor for determining ewm. in compliance with this finding, kreitner et al. (2002) have argued thatjc such as variety attributed to employees skills, work identity, relevance of tasks assigned to them, as well as autonomy provision and feedback from senior staff can increase ewm in their organization. in approximation, the findings from simple linear regression and hierarchical linear regression show thatjr has the significant relationship with ewm. in compliance with this finding, the research work of mcshane& von glinow (2015) argued that jr can increase ewm through several ways such as multitasking, transfer to other branches and new recruitment on differential positions in banks. this dimension is used for redesigning jobs as the employees feel less boredom and more motivated towards their job. on the contrary to previous studies, the present findings show that qwl (i.e. oppurtunity for active involvement, flexible working hours, working envionment, working conditions as well as active and fair compensation) has negative implications on ewm. the empirical work conducted by ivancevich et al. (1990) and igbaria et al. (1994) endorsed that qwl directly influences employees trust, involvement and problem solving which in turn affects their commitment towards organizational progress. 6. conclusion in conclusion, jds is the major nexus that motivates the employees in banking sector of multan city, pakistan. motivated employees are more beneficial towards the development of an organization than non-motivated employees. moreover, high retention rate, lower turnover intent and job sustainability are the major aftermaths of employees motivational behaviour in their respective job positions. the concluding remarks about gender segregation explicate that rotating a job becomes more prevalent and facilitated among male employees but still, female employees are more motivated towards their jobs in comparision to their male counterparts due to their autonomous, task oriented and professional behvaiour. in addition, bank employees who are more experienced i.e. >12 years have more skill variety, task significance, autonomy, professional effectiveness, competetion and flexibility to roatate their job while less experienced bank employees have more enriched behaviour in their job. although jc, je and jr as the major jds have the significant, linear and positive relationship with ewm but the highest influencial and variance producing predictor is je. contrariwise, qwl negtaively affects ewm as the wage compensations and fluctuation in working hours does not affect employees motivational states. although the researchers keenly focused on differential dimensions of employee motivation through varied jds but still there are some limitations of the study. in view of that, the present research only focuses on herzberg’s two factor model and job characteristics theory to depict employees’ motivation in banking sector. in this context, future researches should incorporate leadership styles, feedback approaches from customers and relationship with higher managerial staff that have domineering effect on employee motivation for their personal development and organizational sustainability. another limitation is the usage of quantitative research method using a cross sectional design for data collection but the future researches must incooperate triangulation. lastly, the sample size, publicprivate sector divide in banking organization, and rural-urban division in specified localescreates the issues of generalization which should be addressed in the future researches. review of economics and development studies vol. 5, no 1, march 2019 153 on the basis of this research study, the following recommendations are haul outwhich can improve the motivation of employees in banking sector of the said locale. 1. bank employees should be recognized for their extra efforts, efficient job activities, financial incentives and job promotions through decentralization of managerial powers. 2. to retain the enthusiasm of employees in their work activities, there must be variety in job positions and transfers.in this manner, the employees get more acquaintance which compelled them in their assigned tasks. 3. when the customers are provided with speedy and qualitative services then they will retain their accounts in banks. ultimately, banks will be more facilitated with money and employees get extra socio-economic benefits. 4. jds must be changed according to the changing global trends in banks. in this way, employees becomes trained, invigorated and expedited accordingly. 5. banking sector must ensure self-directed behavior (autonomous), overcoming challenges (mastery oriented) and targeted towards larger organizational goals (purpose directed) among employees to motivate and retain them in their dispensed jobs. references ali, n., &rehman, m. z. 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(2000). satisfiers and dissatisfiers: a two‐factor model for website design and evaluation. journal of the american society for information science, 51(14), 1253-1268. review of economics and development studies, vol. 7 (4) 2021, 475 491 475 can financial development help in raising sustainable economic growth and reduce environmental pollution in pakistan? evidence from non linear ardl model muhammad asif amjad a , nabila asghar b , hafeez ur rehman c a phd scholar, department of economics and statistics (hsm), university of management and technology lahore, pakistan email: m.asifamjad22@gmail.com b associate professor, department of economics and business administration, division of management and administrative science, university of education lahore, pakistan email: nabeela.asghar@ue.edu.pk c professor/ chairman, department of economics and statistics (hsm), university of management and technology lahore, pakistan email: hafeez.rehman@umt.edu.pk article details abstract history: accepted 25 october 2021 available online december 2021 it is a global challenge to reduce environmental pollution and enhance sustainable economic growth. this study explores the role of financial development as an instrument in reducing environmental pollution and enhancing sustainable economic development in pakistan for the period 1980-2020. the non-linear autoregressive distributed lag (nardl) econometrics technique has been utilized to find the association between environmental pollution, economic growth, and financial development. the results show that positive shocks of financial development increase economic growth and reduce environmental pollution. while the negative shocks of financial development increase both economic growth and environmental pollution. globalization has negative impact on economic growth and the use of energy increases economic growth and environmental pollution. the study suggests that the state bank of pakistan and other financial institutions should formulate and implement soft loan policies to induce the private investors to use low carbon emission technologies. © 2021 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: sustainable economic growth, environmental pollution, financial development, nardl, kof index jel classification: q01, p27 doi: 10.47067/reads.v7i4.406 corresponding author’s email address: hafeez.rehman@umt.edu.pk 1. introduction now a days it is a big challenge for policymakers to control environmental pollution and increase sustainable economic development. several decades ago, the policymakers only focus on economic growth and ignore environmental changes. fossil fuels have been ruthlessly consumed to boost economic growth which greatly increased the carbon dioxide (co2) emission in the atmosphere. review of economics and development studies, vol. 7 (4) 2021, 475 491 476 nowadays, the most challenging issue faced by the world is global warming. according to national oceanic and atmospheric administration, noaa (2020), the average temperature increased by 0.13 o f per decade since 1980, but in 1981 it increased more than twice (0.32 o f). world meteorological organization, wmo (2020) declared the last decade as the warmest decade on record. a continuous increase in global temperature is responsible for climate change which cause floods, heat, droughts, fires, tropical cyclones, and storms. these incidents pose a threat to global economic growth. swissre (2021) predicated if no mitigation is taken place and global temperature could increase by more than 3 o c then global gdp may shrink by 18% in the next 30 years. asian economies would be severely affected by the loss of gdp. it is a quite difficult task to reduce co2 emissions because industry, agriculture and transport sectors in most of the countries realize heavily dependent upon gas, coal, and oil consumption. these sectors provide employment and produce goods which increase economic growth (khan et al., 2020). since a decrease in fossil energy consumption may adversely affect economic growth. so, the developing countries are reluctant to reduce fossil fuel consumption and a continuous increase in environmental pollution may be observed over time. the industrial, agricultural and transportation sectors are closely associated with financial system and efficient financial system promotes economic growth (jiang et al. 2019). before the 1970s most of the developing countries were financially repressed due to various discriminatory taxes and policies like high reserve requirements, credit controls, low interest rates, and high inflation rates that had exerted a bad impact on the financing decisions. after the 1990s most of the countries of the world have introduced financial reforms which has increased the desire to achieve rapid pace of economic development. this increases the demand and consumption of energy that are responsible for climate change. this study tries to access the way in which environmental pollution can be reduced and how economic growth can be enhanced by using pakistan’s financial development indicators. pakistan is among top ten countries which are mostly affected by climate change in the last 20 years as it faced 152 extreme weather events during 1999-2018 and lost 0.53 % per unit gdp and economic loss worth us$3792.52 million (global climate risk index, 2021). in the last decade pakistan’s per capita co2 emission has increased 3% annually (wdi, 2021). figure 1 shows the details of co2 emission metric ton per capita for the period 1990-2020. in the last five years, an average of 1.07 metric tons of co2 emission have increased which is an alarming situation for pakistan. review of economics and development studies, vol. 7 (4) 2021, 475 491 477 after the 1990 financial reforms, the financial sector of pakistan has been developed. according to the bloomberg (2016) report, pakistan's financial sector have grown rapidly and have shown promising signs of persistent increase in economic growth. in pakistan, the financial sector plays an important role in industrial development, a well-organized baking system, agricultural development, government policies, exchange rate stability, political stability, well-founded education sector, monetary and fiscal policy, etc. these factors helped in enhancing economic growth through attracting foreign direct investment. there is mixed evidence regarding the relationship betweeen financial development on co2 emissions in pakistan. some studies argued that financial development has increased co2 emission in pakistan (khan, et al. 2020; majeed et al., 2020; ahmad et al., 2020; raza & shah, 2018; shahzad et al., 2017; siddique, 2017; javid & sharif, 2016; muhammad & ghulam, 2013; zhang, 2011). these studies argue that the financial development help the consumers to get loans easily who prefer to buy refrigerators, motorbikes, cars, air-conditioners that emit co2 emissions. on the other hand, the foreign and domestic investors invest in those projects which have less transaction cost without caring about co2 emissions which ultimately enhance pollution. while on the other side, a few studies have pointed out that financial development has decreased co2 emission in pakistan (godil, et al., 2020; ali, et al., 2015; shahzad, et al., 2014). these studies argued that the developed financial sector attracts most of the investment from developed countries and also developed countries prefer to invest in those projects which are environment friendly. after 9/11 pakistan have received a lot of foreign direct investment, loans, and aid from developed countries. it helped the country to invest in high-tech projects which resulted in low carbon emissions. this is the reason that pakistan is declared as a low co2 emission country in the region. apart from this pakistan have imposed an environment friendly policy to reduce environmental pollution. now-a-days each country of the world has a desire to achieve sustainable economic development without environmental loss. this study is an attempt to have a deep insight into the role of financial development in achieving sustainable economic growth without environmental loss in pakistan. the study will stress on the aspect that does an increase in the financial development depict an asymmetric relationship with economic growth and carbon emissions? if not what is the optimal composition of financial development with economic growth and carbon emissions? review of economics and development studies, vol. 7 (4) 2021, 475 491 478 the significance of the study stems from the fact that it analyzes the role of financial development as the key tool to achieve sustainable economic development and diminish the environmental losses in pakistan. furthermore, this study is not limiting itself from the previous studies conducted in pakistan (javid et al. 2016; shahzad et al., 2017; raza & shah, 2018; chen, et al., 2019; khan, et al. 2020) but it extends its application to asymmetric impacts on economic growth and environmental pollution. not many studies are available on pakistan economy in which non-linear analysis has been carried out to explore the nexus between financial development with sustainable economic growth and environmental pollution. 2. review of literature this section reviews previous literature related to the nexus between financial development, economic growth, and environmental pollution. several studies are available in literature that have examined the linear association between the financial development with economic growth and environmental pollution ( see for example: khan et al., 2020; yang, 2019; asteriou & spanos, 2019; bist, 2018; cetin et al. 2018). there are only a few studies have pointed out that financial development also had a non-linear association with economic growth and carbon emissions (chen et al. 2020; nenbee & danielle, 2021; maneejuk & yamaka, 2021; shahbaz et al. 2017). shahbaz et al. (2017) investigated the asymmetric analysis between financial development and economic growth for the period 1960q1 to 2015q4 in india. the nardl approach was used to find the causal relationship between the concerned variables. the results of the study reveal that any positive shocks in financial development decreases economic growth while the negative shock increases economic growth. qamruzzaman and jianguo (2018) explored the asymmetric association between banking sector development, financial innovation, and economic growth in selected asian countries during 1974q12016q4. the study concluded that in the long run, pakistan had a significant and positive asymmetric association between economic growth and domestic credit to the financial sector. chen et al. (2020) analyzed the asymmetric impact of the financial development index on economic growth during 1972-2017 in kenya. the results of the study show that positive partial shock of financial development index was insignificant in the long run while the negative partial shock of financial development index was statistically significant which increases economic growth. aigheyisi and edore (2019) examined the asymmetric effect of broad money supply on economic growth in nigeria from 1981 to 2016. the results show that broad money supply had a statistically insignificant positive effect on economic growth while the negative change in broad money supply is statistically significant and had positive effect on economic growth in the long run.. the literature show mixed evidence between asymmetric impact of financial development on environmental pollution. ling et al. (2021) pointed out that the positive shocks in financial development significantly increase carbon emissions while the negative shocks insignificantly increase carbon emissions. in pakistan majeed et al. (2020) examined the asymmetric impact of financial development on carbon emissions from 1972 to 2018. the nardl approach validated that positive shocks in financial development are statistically insignificant which increase carbon emissions while the negative shocks in financial development is statistically significant which decrease carbon emissions. ahmad et al. (2018) tried to find the asymmetric effect of financial development on carbon review of economics and development studies, vol. 7 (4) 2021, 475 491 479 emission from 1980 to 2014 using nardl approach. the results show that in the long run positive shocks of financial development increases carbon emissions significantly while negative shocks have an insignificant impact on carbon emission. ahmad et al. (2020) constructed financial development index (fd) by incorporating money supply, liquid liabilities and domestic credit to the banking sector during 1996-2018 for pakistan. the study concluded that financial development had an asymmetric effect on carbon emission. the positive and negative shocks of financial development both decrease the carbon emissions in pakistan. some studies linked the financial development variables with ecological footprints. ahmed et al. (2021) linked financial development with ecological footprints during 1971-2016 in japan. the study analyzed the asymmetric relationship between financial development and ecological footprints and concluded that an increase and decrease in financial development lead to an increase the ecological footprints in the long run. omoke et al. (2020) investigated the asymmetric effect of the financial development index on ecological footprints of non-carbon and carbon in nigeria during 1971-2014. the study concluded that a positive increase in the financial development index statistically and significantly decline carbon ecological footprints while a negative decline in the financial development index statistically and significantly increase the carbon ecological footprints. the review of literature mentioned above that not many studies are available on the asymmetric relationship between financial development, economic growth and environmental pollution. furthermore, the results related to the above mentioned relationship between the variables are not clear which calls for the need to deeply examine the asymmetric association between financial development, economic growth and environmental pollution. this study uses nardl approach for estimating the relationship between the variables in the context of pakistan economy. 3. conceptual framework and methodology financial sector is considered as an important segment of pakistan's economy which faces both positive and negative shocks frequently. therefore, these shocks cannot be ignored to capture their impact on economic growth and environmental pollution. this study is conducted in the light of research work by shin et al. (2014) in which they decomposed the variable in the positive and negative partial sums. usually, the positive shocks in financial development increase economic growth and environmental up-gradation while the negative shocks decrease economic growth and environmental degradations (chen et al.,2020; ling et al., 2021; aigheyisi & edore, 2019; karasoy et al., 2019; ahmad et al., 2018). figure 2 demonstrate the theoretical frame work of this study. financial development positive shocks increase economic growth decrease economic growth negative shocks environm ental upgradation environme ntal degradations review of economics and development studies, vol. 7 (4) 2021, 475 491 480 in the present study financial development is measured in terms of domestic credit to banks (dcb). economic growth is measured in terms of gross domestic product (gdp) and environmental pollution is measured by co2 emissions in metric tons. the data has been collected from wdi for the period 1980-2020. the description of the variables is presented in table 1. table 1 description of the variables symbols indicator units source gdp gross domestic product constant lcu wdi-2021 co2 co2 emissions metric tons per capita wdi-2021 dcb domestic credit to banks % of gdp wdi-2021 edu primary education enrollment % of gross wdi-2021 kof globalization index swiss economic institute eu energy use kg of oil equivalent per capita wdi-2021 urpop urban population % of total population wdi-2021 this study has derived the empirical model from the cobb-douglas production function and carbon emissions written as; (1) (2) where fd means financial development which is measured in terms of credit to banks (dcb), edu means primary education, kof shows the globalization, eu means energy use, urpop stands for urban population while gdp and co2 show economic growth and carbon emissions. in the light of equation 1 and 2 the following econometric models are formulated: + (3) + (4) model 3 and 4 have been applied to bring up the above mentioned relationship between variables in the context of pakistan economy. these models seems to be inappropriate for pakistan as it’s financial development sector did not remain stable during 1980-2020 due to many ups and downs as shown in figure 3. review of economics and development studies, vol. 7 (4) 2021, 475 491 481 2.7 2.8 2.9 3.0 3.1 3.2 3.3 3.4 1980 1985 1990 1995 2000 2005 2010 2015 2020 lndcb 2.7 2.8 2.9 3.0 3.1 3.2 3.3 3.4 1980 1985 1990 1995 2000 2005 2010 2015 2020 lndcp figure 3 graphs of financial development variables the present study uses nardl approach that is extended version of ardl. the asymmetric relationship between financial development, economic growth and environmental pollution can be written as (5) (6) the asymmetric effect of financial development is a combination of both positive change as lnfd + and negative changes as lnfd . the positive and negative series of lnfd can be summarized in the partial sum process as follows: ∑ ∑ & ∑ ∑ (7) for the nardl setting, the dynamic of the long run and short coefficients are incorporated in the equation as: ∑ ∑ ∑ ∑ ∑ ∑ ∑ (8) ∑ ∑ ∑ ∑ ∑ ∑ ∑ (9) review of economics and development studies, vol. 7 (4) 2021, 475 491 482 in equations 8 and 9, , and , show the short term impact of lnfd on lngdp and lnfd on lnco2 respectively. after incorporating the error correction term the short-run dynamics of the model are calculated below: ∑ ∑ ∑ ∑ ∑ ∑ ∑ (10) ∑ ∑ ∑ ∑ ∑ ∑ ∑ (11) in these equation ⁄ s and ⁄ are long-term coefficients of lnfd on lngdp while ⁄ and ⁄ are the long term coefficients of lnfd on lnco2.the variables∑ , ∑ , ∑ , and ∑ are short run adjustment variables of lnfd on lngdp and lnfd on lnco2 respectively. while shows the difference operators.. the implementation of equations 10-11 yields fstatistics bound value to test the null hypothesis with lower and upper critical values (pesaran et al. 2001; narayan, 2005; omoke et al., 2021). the long-run asymmetries of financial development are obtained by the wald test. the long run asymmetries of lnfd on lngdp and lnfd on co2 show that and respectively. furthermore, the asymmetric cumulative multiplier effect on lngdp for one percent change in lnfd + and lnfd is formulated as: ∑ ∑ in the same way, the asymmetric cumulative multiplier effect of lnco2 for unit change in lnfd + and lnfd is formulated as: ∑ ∑ if then and are the asymmetric long run coefficients. review of economics and development studies, vol. 7 (4) 2021, 475 491 483 4. results and discussion descriptive statistics are presented in table 2. there is no pre condition of nardl whether the series is i(0) or i(1). table 2 descriptive statistics lnco2 lngdp lndcb lnedu lneu lnkof lnurpop mean -0.40 29.43 3.10 4.25 6.05 3.80 17.62 median -0.38 29.43 3.16 4.26 6.09 3.83 17.66 maximum -0.02 30.22 3.39 4.57 6.22 4.01 18.22 minimum -0.89 28.43 2.73 3.90 5.76 3.50 16.90 std. dev. 0.23 0.52 0.19 0.20 0.12 0.19 0.39 skewness -0.41 -0.19 -0.51 -0.10 -0.94 -0.39 -0.22 kurtosis 2.35 1.97 2.15 1.83 2.75 1.64 1.86 jarque-bera 1.89 2.06 3.00 2.38 6.19 4.22 2.56 probability 0.39 0.36 0.22 0.30 0.05 0.12 0.28 observations 41 41 41 41 41 41 41 note: *, **, *** show level of significance at 1%, 5% and 10% . the financial sector of pakistan shows fluctuations due to 1990 oil shocks, 9/11 incident in 2001, 2008 financial crises, and most recent covd-19 also paralyzed the whole economy (amjad et al. 2021). according to perron (1990) in the presence of structural breaks in data the traditional unit rot test may be misleading. the present study uses zivot and andrews (2002) unit root test to confirm the order of integration. table 3 shows the results of zivot and andrews unit roots and reports that all variables are stationary either i(0) or i(1). the result of the unit root test are reported in table 3. note: *, **, *** show level of significance at 1%, 5% and 10% . all the variables are i(0) or i(1). table 4 presents the results of the long-run co-integration test. the values of fstatistic are higher than upper bound test at all given significance levels which means long rum co-integration exists among the variables. table 4 bounds testing of linear ardl models fstatistic i(0) 10% i(1) 10% (lngdp lndcb + , lndcb , lnedu, lnkof, lneu, lnurpop) 4.61 2.12 3.23 (lnco2 lndcb + , lndcb , lnedu, lnkof, lneu, lnurpop) 4.48 1.75 2.87 table 3 zivot and andrews unit root with break test level 1st difference t-statistic year of break t-statistic year of break lnco2 -2.709 2014 -5.68* 2007 lngdp -7.72** 2003 -4.29*** 1992 lndcb -4.56** 2008 -4.98* 2004 lneu -4.48** 1986 -6.99* 2007 lnedu 1.90 2013 -8.60* 2011 lnurpop -1.62 2000 -7.04* 1998 lnkof -4.93** 1988 -7.18* 1989 review of economics and development studies, vol. 7 (4) 2021, 475 491 484 the long run coefficients of nardl are reported in table 5. in model 1, the study captured the impact of domestic credit to banks (lndcb) proxy of financial development on economic growth. lndcb is decomposed into positive series lndcb + and negative series lndcb . a one percent increase in the lndcb + significantly increases lngdp on average of 0.29% respectively (qamruzzaman & jianguo, 2018). one percent decline in lndcb significantly increases lngdp on average of 0.45% (shahbaz et al., 2017). in simple words, the positive and negative shocks of lndcb both increase economic growth in pakistan. the wald test presented in table 6 indicates that the lndcb has asymmetric behavior. in pakistan after 1990 the privatization and liberalization of the banking sector improved the financial sector which helped in increasing economic growth. in model 2 the lndcb is used as a proxy of financial development which is decomposed into positive series as lndcb + and negative series as lndcb . one percent increase in lndcb+ insignificantly reduces carbon emissions on average of 0.17% co2 emission. (ahmad et al., 2020; lahiani, 2020; odugbesan & adebayo, 2020; omoke et al., 2020). similarly one percent decline in lndcb significantly increase on average carbon emission an average of 0.58% (ahmad et al., 2021; jakada et al., 2020; karasoy et al., 2019). it implies that positive shocks in lndcb decline co2 emissions while the negative shocks of lndcb increases co2 emissions in pakistan. therefore, the null hypothesis is rejected and it is concluded that financial development has asymmetric behavior of economic growth and co2 emissions. figure 3 shows the dynamic multiplier effects of lndcb. in pakistan, foreign aid and debts are the major sources which contribute in improving financial sector. pakistan has received heavy doses of foreign aid from world bank to control environmental pollution during 2014-2017. these loans increased the financial development in pakistan and helped in raising the import of environment friendly technologies. moreover, the improvement in financial development helped the private investors to expand their businesses through the use of modern technology in the production process. table 5 long run coefficients of nardl model 1 model 2 lngdp lnco2 variable ardl(2, 2, 2, 1, 2, 2, 0) ardl(2, 2, 2, 2, 2, 2, 2) lndcb + 0.29* (0.08) -0.17 (0.17) lndcb -0.45* (0.09) -0.58* (0.14) lnedu 0.94* (0.26) 3.02* (0.46) lnkof -0.88 (0.18) -1.56* (0.48) lneu 1.33* (0.27) 2.46* (0.49) lnurpop 0.18 (0.22) -1.28* (0.20) c 17.28* (2.09) note: * show level of significance at 1%, while standard errors are in parenthesis review of economics and development studies, vol. 7 (4) 2021, 475 491 485 table 6 results of wald test variables f-statistic(prob.) decisions lndcb 23.51(0.000) an asymmetric relationship exists between lndcb and lngdp lndcb 4.86(0.038) an asymmetric relationship exists between lndcb and lnco2 model 1 0.0 0.2 0.4 0.6 0.8 1.0 1 3 5 7 9 11 13 15 multiplier for lndcb(+) multiplier for lndcb(-) asymmetry plot (with c.i.) model 2 -.6 -.4 -.2 .0 .2 .4 .6 .8 1 3 5 7 9 11 13 15 multiplier for lndcb(+) multiplier for lndcb(-) asymmetry plot (with c.i.) figure 3 dynamic multiplier effects the other variables which are used in both models for finding the asymmetric behavior of the economic growth and carbon emissions include primary education (lnedu), energy use (lneu), globalization (kof), and urban populations (lnurpop). in model 1, primary education (lnedu) significantly increases economic growth (nenbee & danielle, 2021; maneejuk & yamaka, 2021). globalization inversely impacts economic growth (shaheer & butt, 2021). energy use (lnedu) positively impacts economic growth (abbasi et al. 2021). in model 2 primary education (lnedu) has positive impact on carbon emissions. the people who have primary education niether care about environmental pollutions nor even prefer to use modern eco-friendly technologies. the globalization has negative impact on carbon emissions (islam et al., 2021; sharif et al., 2020; bu et al., 2016). it means that globalization is not harmful to environmental degradation in pakistan. the trade liberalization after 1980 provided more opportunities to establish different industries in pakistan which mostly use energy-efficient technologies and helped in declining carbon pollution. energy use (lneu) has positive impact on carbon emissions. pakistan meets most of its energy requirements from fossil fuels which are considered as major contributor to carbon emissions. as far as short run analysis is concerned in both models, the values of error correction terms (ecm) are negative and significant which means a disequilibrium in the models converge towards the review of economics and development studies, vol. 7 (4) 2021, 475 491 486 equilibrium. in both the models values of error correction terms in both models are -0.58 and -0.71 respectively which means model 1, 58% and model 2, 71% converge to long run equilibrium in one period. table 7 short coefficient of nardl 1(a) 2(a) variable lngdp lnco2 ecm -0.58* (0.11) -0.71* (0.15) d(lngdp(-1)) 0.35** (0.17) d(lnco2(-1)) 0.19 (0.16) d(lndcb + ) 0.25* (0.06) 0.19 (0.16) d(lndcb + (-1)) -0.09 (0.06) 0.07 (0.16) d(lndcb ) -0.06 (0.04) 0.11 (0.10) d(lndcb (-1)) 0.11* (0.04) 0.35* (0.100 d(lneu) 0.33** (0.14) 1.22* (0.33) d(lneu(-1)) -0.49** (0.19) -0.70 (0.44) d(lnkof) -0.41** (0.14) -0.99** (0.38) d(lnkof(-1)) 0.18 (0.11) -0.12 (0.25) d(lnedu) 0.34** (0.12) 0.52*** (0.26) d(lnedu(-1)) -0.84** (0.34) d(lnurpop) 0.10 (0.14) -9.44 (10.12) d(lnurpop(-1)) 12.32 (13.82) note: *, **, *** show level of significance at 1%, 5% and 10% while standard errors are in parenthesis figure 4 presents the graphs of cusum and cusumsq. the trend line lie in between the upper and lower boundary which means that both models are stable. both the models also passed the diagnostic test. review of economics and development studies, vol. 7 (4) 2021, 475 491 487 model 1 -15 -10 -5 0 5 10 15 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 cusum 5% significance -0.4 0.0 0.4 0.8 1.2 1.6 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 cusum of squares 5% significance model 2 -12 -8 -4 0 4 8 12 2004 2006 2008 2010 2012 2014 2016 2018 2020 cusum 5% significance -0.4 0.0 0.4 0.8 1.2 1.6 2004 2006 2008 2010 2012 2014 2016 2018 2020 cusum of squares 5% significance 5. conclusion this study explores the asymmetric relation between financial development, economic growth, and environmental pollution in pakistan. for this purpose annual time series data has been used from 1980 to 2020. the bound test finds that financial development has a long-run relationship with economic growth (lngdp) and environmental pollution (lnco2). the empirical findings of nardl reveal that financial development exerts asymmetric long-run impact on lngdp and lnco2 in both models. an increase or decrease in financial development significantly increase lngdp (qamruzzaman & jianguo, 2018; shahbaz et al., 2017). domestic credit to banks and the private sector at soft conditions increase investment which increases economic growth. while on the other hand, positive shocks in financial development decline co2 emissions and the negative shocks of financial development increase co2 emissions in pakistan (ahmad et al., 2021; ahmad et al., 2020; lahiani, 2020; odugbesan & adebayo, 2020; omoke et al., 2020; jakada et al., 2020; karasoy et al., 2019). in pakistan, foreign aid and debts are major sources to improve the financial sector. these loans exerts positive impact on financial development and increase investment through import of environment friendly technologies in pakistan. moreover, the improvement in financial development induces private investors to expand their scale of operations for earning more profits. in summary, the financial institutions can play an important role to improve environment and achieve rapid economic growth in pakistan. this study recommends that the state banks of pakistan and other international financial organizations should provide loans at zero-interest rate for inducing the private investors to use low carbon emission technologies. it will help to achieve rapid economic growth and reduce carbon emissions in pakistan references abbasi, k. r., shahbaz, m., jiao, z., & tufail, m. 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liu and meyer, 2018). in finance and management literature, concept of merger has become a topic of strategic importance (haleblian et al., 2009). living in era of http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 80 competitiveness, it has become difficult for companies to develop themselves to meet all technological challenges particularly in scenario when product life has been reduced. in this context, zhao (2009) suggested that organizations have option to complement their internal efforts through mergers and alliances. although, mergers provide opportunity to organizations to expand their knowledge and capabilities, however, it does not provide guarantee to new organizations that they would be able to exploit acquired knowledge and capabilities (ranftand lord, 2002; reus and lamont, 2009; al-laham et al., 2010). a number of research studies has been conducted on issue of success or failure of mergers and acquisitions. main reason for failure of merger is considered the poor strategic planning (stahl, 2004). furthermore, leslie et al. (2018) revealed that majority of mergers result in failure; because on paper, planning seems excellent but in execution, result does not meet objectives. this is the very reason that mergers have often been discussed as expensive mistake by companies. in this context, manea & ali (2017) and rodríguez-sánchez et al. (2019) concluded that for successful merger, a proactive corporate strategy needs to be applied to address issues related to corporate culture and human resource, however, hardly these issues are considered until serious complications take place in merger process. similarly, hunt (1987) carried out a study and noted that employees‟ involvement/role in acquisition and merger is only one-third. he further asserted that management often fails to acknowledge and handles cultural and human resource issues proactively during process of merger on part of acquiring company, which may cause to support transition, risk of failure of merger, reduce emotional effects and trust of employees of merged organization (bansal, 2016). during process of merger, multiple problems (particularly related to human resource) frequently occur which make it challenging (ranft and lord, 2000, 2002; graebner, 2004; castro and neira, 2005). mostly, companies focus on what they can get rather than what they can give to acquired company (martin, 2016). it results into insensitivity to execute affairs of merger, slow execution of planned activities, leadership inefficiency (stahl, 2004), cultural differences, human resource problems (such as egoistic differences or grouping within company) and lack of trust between parties (bansal, 2016). these differences ultimately transmute into emotional reactions of employees of both merging and merged organizations. ignoring emotional behaviors of employees often proves to be pricey for surviving organization. for a successful merger, it is necessary for leaders and managers to have better understanding about potential influencing factors including organizational culture, size, diversity, team building, communication channel, demographic characteristics of employees, resolution of conflicts and emotional behaviors (pike, 2017; ayub et al., 2017; chen et al., 2018; sarabia et al., 2019). employees‟ emotional behaviors during environment of merger play an important role for success of a merger and these behaviors can be categorized into positive and negative emotional behaviors. emotions of employees during mergers play a pivotal role in determining the fate of mergers. emotions reveal that how employees of an organization communicate within and outside organization (walsh, 2019). different events at workplace give a different mental impression to employees. these impressions further develop emotional state of employees bringing change in their thinking and working styles both in positive and negative. since the scope of study is limited to negative emotional behavior therefore authors confine their arguments thereon. negative emotional behaviors are the behaviors which display inner dissatisfaction of employees due to negativism. if an employee gets negative emotions, he starts focusing more on problems rather on work which lead him towards wastage of time and less productivity. all these negative emotions increase probability of work deviance. in literature, a growing number of studies have been conducted addressing the issue of “human side” of mergers such as buono and bowditch, 1989; stahl et al., 2013; hajro, 2015; sarala, et al., 2016; sarala et al., 2017. this shows the role of employees in mergers determining the degree and importance of strategic goals including realization of synergy and transfer of knowledge (sarala et al., 2016; brueller et al., 2018). some researchers are also of the view that during merger or acquisition, consequences effect on employees (diaz, 2015) and managers may also face emotional reactions from employees which may affect cultural norms and feelings of disappointment (sanan et al., 2017). such problems add considerable expense to integrate processes and create further problems for integration (bligh, 2006). mergers between various business organizations have become a regular feature of businesses in globalization arena. more specifically, mergers may be considered as phenomenal and transformational process for organizations. mergers are events that need cultural integration, challenges as companies attempt to integrate cultural differences and employees can react and show negative emotional behavior (ager, 2011). supporting this viewpoint, manea and ali (2017) noted that employers may recognize importance of employees in determination of merger‟s fate as a reality and also consider it as a hard issue. they further probed review of economics and development studies vol. 5, no 1, march 2019 81 that without realizing the importance of employees who produce goods and render services, evolving strategies and decision making may lead to failure to achieve synergy for wealth creating strategy through merger. emotional aspects of employees cannot be ignored during planning and execution of mergers. hence, it becomes sin qua non to scientifically handle employees emotions, which needs extra care and tactfulness of planners for successful execution of mergers. there are numerous studies, directly or indirectly addressing the issue, but they identified, described or analyzed behaviors partly i.e. one or some of behaviors (lunardo and saintives, 2018). in merger, emotions can be considered as an important factor in determining the attitudes and behaviors of employees. hence, there is a need to identify critical negative emotions, which may have an impact to determine fate of a merger. this study uncovers interdependency of behaviors in a hierarchy during environment of merger. level of each behavior would also be determined in order to get a clear picture of importance of each and every behavior. objective of this study is to identify important behaviors which, if not dealt appropriately during strategic merger planning, may lead towards merger failure and vice versa. to be more specific, following are major objectives of the study: • to identify and rank critical negative emotional behaviors of employees of organizations subject to mergers. • to determine and analyze interactions among them. • to classify them into clusters on the basis of driving-dependence power. • to discuss how the model is helpful to planners of mergers. • to discuss managerial implications. remaining paper is structured as follows: literature & theoretical foundation, methodology, discussion and conclusion. 2. literature and theoretical foundation research on investigating effects of both emotions (i.e. positive and negative) remains scarce (lunardo and saintives, 2018). processes related to emotions are not usually acknowledged and explained in merger studies. emotions are outcomes of a complex cognitive evaluation process of employees. there could be difference of emotions between employees of acquiring and target companies but it may differ from employee to employee within same firm. brundin and liu (2015) asserted that strategic process generate strong emotions at multiple stages in an organization. it indicates that employees involved in merger, which make cognitive evaluation at different levels including evaluation of strategy and resources in merger. a multitude of negative emotional behaviors is observed while during discourse of literature review, keeping in view scope of the study, it is appropriate to place on record highly relevant behaviors like fear, frustration, anxiety, stress, depression, rage, apathy, distrust, jealousy, insecurity, exhaustion and guilt contributing in increasing trend of workplace deviance which ultimately results in failures in organizations future plans of expansions and target achievements (gelbrich, 2010; mccarthy et al., 2016; perko et al., 2014; berry, 2007; schraeder, 2012; gago-rodríguez and naranjo-gil, 2016; sarkar and sreejesh, 2014; låstad et al., 2016; jyoti, 2015; saintives and lunardo, 2016). negative emotions are also caused by various workplace issues, including aggression, anger, suspicion, shame, guilt, compassion, poor leaderships, poor management and uncertain future of employees‟ jobs in uncertain environments (ford et al., 2016; booth et al., 2017; bobko et al., 2014b; creed, 2014; hazen, 2008; strauss et al., 2016; stensaker et al., 2016). chaotic recognition and disorderly hierarchicalization of the most critical employees‟ behaviors, by the organizations during strategic planning of a merger, increases the chances of merger failure. this problem results in the involvement of management into certainly uncalled for issues subsequently. a rather detailed representation of literature review on relevant negative emotional behaviors of employees is given below for understanding and conceptualization. 1. fear is an unpleasant emotion or thought that you have when you are worried by something negative is happening or might happen. to sense upset that somewhat very shocking has occurred or will occur which can be unsafe (jennifer and dacher, 2001). 2. anxiety defines sorrow or nervousness of mentality origin by fear of threat or hard luck e.g. employees feeling anxiety about losing job (alexander et al., 2001). buiter (2013) has found adverse effect of merger on employees‟ anxiety. clercq et al. (2018) have also found a significant positive relationship between organizational functioning review of economics and development studies vol. 5, no 1, march 2019 82 and job-related anxiety. in connection to the mergers, similarly organizational functioning ambiguity perceive by employees leads to greater job-related anxiety. 3. frustration is the source of constant worry. it begins when one's enthusiasm to attain a preferred objective is barred. for example, a worker desires to come to end a report before the ending of the working day but feels that somewhat or the others stay break up him/her at work, this can take him to frustration (elizabeth, 1997), or employees are expected to meet the targets with insufficient resources (sassi et al., 2015). khan et al. (2013) asserted that negative emotions have positive impact on workplace aggression that often leads to frustration. 4. depression is a psychological state illustrated by harsh thoughts of misery and insufficiency. failure usually comes with a short of vigor and curiosity in life (kathryn et al., 2004). it is often observed that employees experiencing depressive symptoms during merger, therefore role of transformational leader contribute in reducing employees‟ susceptibility to depression (perko et al., 2014). 5. apathy is a behavior that shows no interest or energy and shows that someone is unwilling to take action, especially over something important. sensation or performing to be deficient in curiosity or distress and unconcerned (philippe et al., 2006). these emotions are emerged among employees in process of merger as they don‟t buy this idea, having no clarity of goals and benefits merging organizations and employees would be getting. research has linked goal setting theory and employees‟ apathy that foster an environment wherein pro-social behavior are encouraged among employees (thomson and niekerk, 2012). 6. job insecurity is the position being exposed to risk or hazardous; lack of safety and worrying of losing job (greenhalgh and rosenblatt, 2010). job insecurity has been dealt as an ad hoc approach. thus, it is the incapacity to uphold preferred stability in a danger (susan et al., 1989). garrido vásquez (2019) found that job insecurity varies over the period of time. high turnover of talented human resource has compelled organization to devise retention strategies to intact competent and knowledgeable workers. there are two important studies address the issues of individual job insecurity, job insecurity climate, incivility and deviant behavior of employees. lastad et al. (2016) investigated relationship between individual job insecurity & job insecurity climate and concluded that job insecurity climate does not affect individual job insecurity. while findings of the later study revealed that incivility (i.e. manifestation of workplace deviance) have a positive impact on job insecurity and employee deviance i.e. violation of organizational norms (itzkovich, 2016). 7. aggression refers to a series of actions that can affect the cooperation of body and mental state and leads towards hurt to one or matter in the atmosphere. the phrase of aggression can take place in different behavior, as well as orally, emotionally and physically (craig et al., 2008). workplace aggression is negative emotions that disengaged employees to their job. particularly, it is much needed to be considered in context of merger. the data provided the evidence of direct relationship between aggression and anger and that anger is only related to those employees who are engaged with their jobs (ford et al., 2016). 8. anger is a response which narrates to one's mental understanding of having been snubbed, mistreated, or deprived of. cooperative behavior is essential for survival of an organization. cooperation is required before entering into a context such as merger but anger can affect it. it is pertinent to mention here the findings of the motro et al. (2016) wherein they applied lay theory (i.e. expectation-adjust cooperation according to anger) and revealed that anger decrease cooperation but it is at lowest when angry individuals are paired with other angry individuals. 9. rage and aggression are very much linked with the society (berry, 2007). rage is defined as annoy or violence related with divergence coming up from uncertain conditions that employees undertaking during merger (willis, 1995). plethora of research has been done to investigate the customer rage and employees‟ emotional behavior (mccoll-kennedy et al., 2009; zourrig et al., 2009; harris, 2013). 10. feeling of degradation is a communicative work between persons directed to transform an individual‟s total identity into an identity lower than into a group scheme of social type causing demoralization in the employee (garfinkel, 1956). 11. distrust is a sense of disbelief about something between employees and employers. merger is highly vulnerable, review of economics and development studies vol. 5, no 1, march 2019 83 an extreme form of change and threatening to employees (saunders and thornhill, 2003) because failure to meet expectations produces emotion of distrust. the evidence supports that development of trust and distrust during merger is in fact play a key role in defining the future of merger (searle and ball, 2004). trust and distrust are both informal controls if manage proper can improve management control and interpersonal relationship (gagorodríguez and naranjo-gil, 2016). 12. suspicion when merger takes place, employees may be managed by those who differ in values and culture that leads the communication gap between them and may increase their employees suspicion (ayios, 2003). evidence presented in the study of luu (2017) indicated that leaders‟ cultural intelligence effects on employees‟ state suspicion. it claimed that better understanding of prevailing culture of unified organizations helps leaders in alleviating employees‟ state of suspicion. 13. jealousy is a sense of desiring somewhat the other individual has. the sense of being annoyed at individual because they are superior than you or they have for what you desire (brenda et al., 2002). jealousy is a negative emotional state resulting when individual perceives a threat of rapport of other individual of the merged organization. the authors evaluate the cognitive and emotional reactions of the customers and examine the impact of delights (ludwig et al., 2017). it further discusses the ways to minimize the impact of jealousy. 14. shame is a hurting sentiment of disgrace or sorrow origin by the consciousness of incorrect or imprudent behavior (millie, 1990). jarvis (2016) argued that emotions like shame and shaming with in institutional framework to reveal how they interact with organizational processes. in this study two factors i.e. shame and shaming are examined as drivers of institution stability and change respectively. 15. guilt is a wrongdoing, misdeed, or infringement, particularly in opposition to their own moral, societal or ethical standard (kugler and jones, 1992). a successful merger demands their employees to foresee the positivity and prosperity in long term setting. however, conclusion drawn by saintives and lunardo (2016) that guilt is a negative self-emotion that leads people to focus on negative aspects and impedes them from seeing positive aspects. 16. grief is a powerful, at times overpowering feeling for people. it is a usual response to failure and mutually a general and a private understanding. person‟s understanding of grief fluctuates and is subjective by nature of failure e.g. loss of job or independency lost in case of merger. o'connor et al. (2010) claimed that little research is found which examined workplace issues associated with grief and loss. though, hazen (2008) has highlighted deep down understanding about grief and its consequences in workplace, still this area of study demands extensive research especially in the context of merger. 17. compassion is central to purpose of mergers to form meaningful relationships with merged organizations‟ workforce. it has been defined as a sentiment that come up when you are tackling with, a different individual or group suffering and experiencing, encouraged to lightened from that suffering (robin, 2011). a model has been devised by hewison et al. (2018) that highlighted the compassion of workforce towards their profession. by using thematic analysis, four themes/constructs (i.e. purpose, communication, progress and tension) are developed which characterize introduction of compassion recognition scheme. this compassion scheme can be useful in identifying how it should be viewed, implemented and acknowledged in participating organizations (hewison et al., 2018). 18. exhaustion is an act of use, somewhat up or status of being used up (jeannie and john, 1983). emotional exhaustion is a key driver of burnout factor (gaines and jerimer, 1983). jyoti (2015) suggested that high performance human resource practices have significant impact on emotional exhaustion. alola et al. (2019) revealed that emotional exhaustion influences on employees outcomes. work/family balance has a serious concern of the management, especially in time of merger process. glaser and hecht (2013) claimed that there is considerable evidence of relations between work/family conflicts and emotional exhaustion. the above representation of literature foresee total eighteen negative emotional behaviors in the environment of mergers, the same were investigated further. 3. methodology the study follows interpretivism as research philosophy with deductive approach. overall design comprises of literature review, ism and micmac analysis. population under study is employees affected by organizational review of economics and development studies vol. 5, no 1, march 2019 84 mergers. it is a different type of study which requires a unique appropriate sampling design to ensure that actual observed elements of population truly represent population under study. it has more depth than its breadth, therefore, non-probability sampling design is suitable. 3.1 interpretive structural modeling (ism) ism was introduced by warfield (1973) which is competent to develop a structural model. it is a management decision tool which prioritizes multi-criteria decision and a hierarchicalization technique which provides in depth insights in inter-factor relations combining objective and subjective methods (kannan et al., 2009). it is applied in wide variety of areas (sushil, 2017) because it uses relativelyless data and provides more information as compare to other techniques (chidambaranathan et al., 2009). it is a visible, well defined, graphical model representation using reachability and transitive inferences through transformation of binary matrices. ism is applied when there is no priory theoretical framework and there is a need to raise awareness and elucidate conundrum situations. sampling design for this study consists of panel of experts. in order to embark on panel of experts a list of 426 merged organizations from website of competition commission of pakistan (ccp, 2019). chief executives of these organizations were approached to participate in study as informants about „experts on mergers.‟ logic of inviting chief executives as informants is that they are in a better position to point out a person which has expertise/experience of mergers. it involved a lot of effort to reach these organizations and/or informants. effort started with obtaining telephone numbers and addresses of organizations from their official websites and telephone directories. contacts were made through telephones, emails and personal visits. reaching to chief executives as informants and then further nominating expert by informant was a hard task. the researchers were able to establish contacts with 40 chief executives only. they were requested to recommend experts from within employees of their organization on the basis of: i) theoretical knowledge, ii) practical experience of mergers and iii) overall working experience of more than 10 years (li et al., 2019). it took almost 20 days to elicit list of experts from informants. 3.2 panel of experts panel of expert means group of people having expertise related to the problem. their opinions and mental models are of great help to structure the problem. appropriately formed panel of experts, admittedly, outperformed statistical groups (ranjbar et al., 2012). usually, panel consists of 15 to 30 experts (clayton, 1997; khan and khan, 2013). in current study, experts are people, who have practically experienced mergers. profile of the experts participated in study is presented in table 1. table 1: profile of experts 3.3 instrument & data collection a matrix type questionnaire was prepared for data collection. in order to test questionnaire, a pilot study was conducted on convenience basis. pilot testing was carried out with 6 respondents different from experts on panel. panel comprised of experts recommended by informants. they recommended total 40 experts, therefore, 40 questionnaires were distributed with a request to participate in research. initially, questionnaires were sent through emails and trausum courier services (tcs) expecting response via mail. but, on no response after considerable lapse of time, researchers followed-up through personal visits time and again. after lot of efforts and discussions, accent of only 22 experts was received, out of which 20 actually participated. hence panel consisted of 20 experts. since, this is an acceptable size of panel, therefore, study was proceeded (hoffman et al., 2007; khan and khan, 2013). data collection process took more than 45 days. the data was elicited on a structured {n(n-1)}/2 matrix questionnaire in which every expert was asked to elect one of the alternatives (v, a, o, x) for every paired relation (alawamleh and popplewell, 2011). the data was combined into one matrix by using the rule „minority give way to basis classification no. of experts total designation group head 2 general manager 7 senior vice president 3 chief financial officer 2 senior manager 3 manager 3 20 experience 10 – 14 years 4 14 – 18 years 6 18 – 22 years 9 above 22 years 1 20 review of economics and development studies vol. 5, no 1, march 2019 85 majority‟ (sushil, 2012; li et al., 2019). 3.4 analysis technique ism has three main steps namely: i) identify representative elements of target issue, ii) establishing and examining contextual relationships and iii) partitioning them into a model and its review. panel was involved in all three steps of ism (raeesi et al., 2013; vasanthakumar et al., 2016). study follows step wise rules of ism devise by thakkar et al. (2008) appended below as figure 1. figure 1: rules for developing ssim and reachabilit, matrix (thakkar et al., 2008) step i-structural self-interaction matrix (ssim): it includes pairwise analysis among factors and developed contextual relationships based on experts‟ survey. data is arranged into a matrix (table 2) following the rules in figure 1. table 2: ssim 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 1 x v a x o v o o a o o o o o o o o 2 v x o o o x o o o x o o o x o x 3 x x a o v v a x o o o o o o v 4 o x v v o a o a o o o v o v 5 a o o a o x o o x v o o o 6 v o o x x v v o o v v o 7 a v o a o o o o x o v 8 v x a o x o v v o o 9 a x o a o o v o v 10 o a a x v o o o 11 v o o o x o x 12 a o v x o v 13 v x o o o 14 o a o o 15 v o x 16 v x 17 a 18 step ii-reachability matrix: initial reachability matrix (table 3) is constructed as per the rules given in figure 1. table 3: initial reachability matrix 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 driving power 1 1 1 1 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 5 2 1 1 1 1 0 0 0 1 0 0 0 1 0 0 0 1 0 1 8 3 0 0 1 1 1 0 0 1 1 0 1 0 0 0 0 0 0 1 7 4 1 1 1 1 0 1 1 1 0 0 0 0 0 0 0 1 0 1 9 review of economics and development studies vol. 5, no 1, march 2019 86 5 1 0 1 0 1 0 0 0 0 0 1 0 0 1 1 0 0 0 6 6 0 0 1 1 1 1 1 0 0 1 1 1 1 0 0 1 1 0 11 7 0 0 0 0 0 0 1 0 1 0 0 0 0 0 0 1 0 1 4 8 0 1 0 0 0 0 1 1 1 1 0 0 1 0 1 1 0 0 8 9 0 0 0 0 1 0 0 0 1 0 1 0 0 0 0 1 0 1 5 10 1 0 1 1 0 1 0 1 1 1 0 0 0 1 1 0 0 0 9 11 0 0 1 0 1 1 1 1 1 0 1 1 0 0 0 1 0 1 10 12 0 1 0 1 0 0 0 0 0 1 0 1 0 0 1 1 0 1 7 13 0 0 0 0 0 0 0 1 1 1 0 1 1 1 1 0 0 0 7 14 0 0 0 0 1 0 0 0 0 1 0 0 0 1 0 0 0 0 3 15 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 1 0 1 4 16 0 1 0 0 0 0 1 0 0 0 1 1 0 1 0 1 1 1 8 17 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 18 0 1 0 0 0 0 0 0 0 0 1 0 0 0 1 1 1 1 6 dependence 5 7 8 6 7 4 7 7 7 6 7 6 4 5 7 11 4 10 initial reachability matrix (table 3) is transformed into final reachability matrix (table 4). table 4: final reachability matrix 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 driving power 1 1 1 1 1* 1 0 1 1* 1* 0 1* 1* 0 1* 1* 1* 0 1* 14 2 1 1 1 1 1* 1* 1* 1 1* 1* 1* 1 1* 1* 1* 1 1* 1 18 3 1* 1* 1 1 1 1* 1* 1 1 1* 1 1* 1* 1* 1* 1* 0 1 17 4 1 1 1 1 1* 1 1 1 1* 1* 1* 1* 1* 1* 1* 1 1* 1 18 5 1 1* 1 1* 1 1* 1* 1* 1* 1* 1 1* 1* 1 1 1* 0 1* 17 6 1* 1* 1 1 1 1 1 1* 1* 1 1 1 1 1* 1* 1 1 1* 18 7 0 1* 0 0 1* 0 1 0 1 0 1* 1* 0 1* 1* 1 1* 1 11 8 1* 1 1* 1* 1* 1* 1 1 1 1 1* 1* 1 1* 1 1 1* 1* 18 9 1* 1* 1* 0 1 1* 1* 1* 1 1* 1 1* 0 1* 1* 1 1* 1 16 10 1 1* 1 1 1* 1 1* 1 1 1 1* 1* 1* 1 1 1* 1* 1* 18 11 1* 1* 1 1* 1 1 1 1 1 1* 1 1 1* 1* 1* 1 1* 1 18 12 1* 1 1* 1 0 1* 1* 1* 1* 1 1* 1* 1* 1* 1 1 1* 1 17 13 1* 1* 1* 1* 1* 1* 1* 1 1 1 1* 1 1 1 1 1* 0 1* 17 14 1* 0 1* 1* 1 1* 0 1* 1* 1 1* 0 0 1 1* 0 0 0 11 15 0 1* 0 0 0 0 1* 1* 1* 1* 1* 1* 1 1* 1 1 1* 1 13 16 1* 1 1* 1* 1* 1* 1 1* 1* 1* 1 1 0 1 1* 1 1 1 17 17 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 1 18 1* 1 1* 1* 1* 1* 1* 1* 1* 0 1 1* 1* 1* 1 1 1 1 17 dependence 15 16 15 14 15 14 16 16 17 14 17 16 12 17 17 16 13 16 step iiilevel partitions and conical matrix: behavior wise level partitions of all emotional behaviors are calculated, however, conical matrix was skipped being optional (sushil, 2012). summary of iterations is given below (table 5). table 5: iterations factors reachability set antecedent set intersection set level 1 1,3,4,5,8,16 1,3,4,5,6,8,10,13,16 1,3,4,5,8,16 iii 2 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 ii 3 1,3,4,5,6,8,10,13,16 1,3,4,5,6,8,10,13,16 1,3,4,5,6,8,10,13,16 iii 4 1,3,4,5,6,8,10,13,16 1,3,4,5,6,8,10,13,16 1,3,4,5,6,8,10,13,16 iii 5 1,3,4,5,6,8,10,13,16 1,3,4,5,6,8,10,13,16 1,3,4,5,6,8,10,13,16 iii 6 6,10,13 6,10,13 6,10,13 iv 7 2,5,7,9,11,12,15,16,18 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 2,5,7,9,11,12,15,16,18 ii 8 1,3,4,5,6,8,10,13,16 1,3,4,5,6,8,10,13,16 1,3,4,5,6,8,10,13,16 iii 9 1,2,3,5,6,7,8,9,10,11,12,15,16,18 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 1,2,3,5,6,7,8,9,10,11,12,15,16,18 ii review of economics and development studies vol. 5, no 1, march 2019 87 10 6,10,13 6,10,13 6,10,13 iv 11 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 ii 12 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 ii 13 6,10,13 6,10,13 6,10,13 iv 14 1,3,4,5,6,8,9,10,11,14,15 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,18 1,3,4,5,6,8,9,10,11,14,15 i 15 2,7,8,9,10,11,12,13,15,16,18 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 2,7,8,9,10,11,12,13,15,16,18 ii 16 1,3,4,5,6,8,10,16 1,3,4,5,6,8,10,13,16 1,3,4,5,6,8,10,16 iii 17 17 1,2,4,6,7,8,9,10,11,12,15,16,17,18 17 i 18 1,2,3,4,5,6,7,8,9,11,12,13,15,16,18 1,2,3,4,5,6,7,8,9,10,11,12,13,15,16,18 1,2,3,4,5,6,7,8,9,11,12,13,15,16,18 ii 3.4 ism model of emotional behaviors ism is a management decision technique that structures a complex system into a simple model (thakkar et al., 2005). it identified, analyzed and ranked complex nature of relationships between emotional behaviors and resultantly rank them in order of their magnitude (figure 2). according to norms of ism, factors (emotional behaviors in this study) occupy at bottom level of the model are the most significant factors and factors occupy at highest level are the least critical factors which have been hierarchicalized and represented in a levelled model (figure 2). figure 2: ism model of emotional behaviors upon uncovering the nodes, job insecurity (6), feeling of degradation (10) and jealousy (13) occupy level iv (i.e. bottom level), hence, are the most critical behaviors. management of both merged and acquired organizations should pay maximum attention to these behaviors as they drive to all other counterparts. fear (1), frustration (3), depression (4), apathy (5), anger (8) and grief (16) occupy level iii, lesser severe than level iv but still have moderate affect than that of level iv. anxiety (2), aggression (7), rage (9), distrust (11), suspicion (12), guilt (15) and exhaustion (18) occupy level ii, whereas, shame (14) and compassion (17) occupy level i (i.e. highest level) hence are relatively less critical but necessary for effectiveness. from the careful observations it can be found that at level iv job insecurity (6) and feeling of degradation (10) has bilateral relationship. similarly, frustration (3) and depression (4) at level iii have bilateral relationship. rage (9) and distrust (11); guilt (15) and exhaustion (18) at level ii also have bilateral relationship. the final model was also presented to experts for checking logical, theoretical, conceptual, or directional inconsistencies (raeesi et al., 2013; vasanthakumar et al., 2016) and minor modifications were made accordingly. 3.5 cross impact matrix multiplication applied to classification (micmac) it works on multiplication properties of matrices which is developed by godet (1986) and fine-tuned by godet et al. (1999). main purpose of micmac analysis is to cluster factors (emotional behavior in this case) into four categories (i.e. autonomous, independent, linkage and dependent) based on their dependence-driving power (raj et al., 2008). a graph is plotted wherein driving power is shown on vertical axis (weak to strong) and dependence review of economics and development studies vol. 5, no 1, march 2019 88 power is shown on horizontal axis (weak to strong) figure 3. all factors are plotted on co-ordinates according to their driving and dependence powers. figure 3: driving-dependence power diagram autonomous: first quadrant of micmac indicates autonomous, having weak driving as well as dependence power. fourteen behaviors fall in this quadrant such as: fear (1), anxiety (2), frustration (3), depression (4), apathy (5), aggression (7), anger (8), rage (9), feeling of degradation (10), suspicion (12), jealousy (13), shame (14), guilt (15) and compassion (17). these behaviors are quite separated from overall merger environment but they have few very strong links with model and it is not possible to remove them from the system. hence, they are pretty important for merger environment. independent: second quadrant represents independent, having strong driving and weak dependence power. job insecurity (6) and distrust (11) are identified as key behaviors. careful handling of these behaviors is required for success of merger as they are capable of causing other behaviors as well. linkage: third quadrant indicates linkage, having strong driving as well as dependence power which require careful considerations as they are unstable variables. no linkage behaviors are identified in this quadrant meaning thereby all behaviors are stable not agile and have no feedback effect. dependent: fourth quadrant represents dependent having weak driving and strong dependence power. grief (16) and exhaustion (18) are found to be dependent behaviors as they are influenced by other behaviors, hence relatively are less critical for mergers. 4. discussion aim of study is to analyze disordered chaotic hierarchy of employees‟ emotional behaviors that result in failed mergers. the study uses in depth literature review for identification of behaviors, ism for exploring causal relations and micmac analysis for classifying. the study in hand is different from contemporary research since it pertains to arrest the likelihood of problem whereas the contemporary studies pertain to mitigate severity of problem as aftermath. few of the issues addressed in contemporary research are appended for comprehension of the readers e.g. post-merger integration (ager, 2011; al-laham et al., 2010; buiter, 2013; bansal, 2016; sanan et al., 2017), knowledge transfer (casal and fontela, 2007; sarala et al., 2016), consequences (diaz, 2015; graebner et al., 2017), momentum and serendipity (graebner, 2004), literature review (haleblian et al., 2009; yaghoubi et al., 2016), managing emotions (kusstatscher and cooper, 2005; kusstatscher, 2006), evaluating success (leslie et al., review of economics and development studies vol. 5, no 1, march 2019 89 2018), effective acquisition and survival (manea and ali, 2017), anxieties and worries of staff (senior et al., 2017) and role and action of external stakeholders (stensaker et al., 2016). the study uses ism with a blend of micmac analysis. apart from being ever first study using ism it gives useful contrast of structural methodologies results of which are summarized as per table 6. table 6: summary of results no. behavior driving dependence effectiveness cluster level comment 1 fear 5 5 0 autonomous iii 2 anxiety 8 7 1 autonomous ii 3 frustration 7 8 -1 autonomous iii 4 depression 9 6 3 autonomous iii 5 apathy 6 7 -1 autonomous iii 6 job insecurity 11 4 7 independent iv key factor 7 aggression 4 7 -3 autonomous ii 8 anger 8 7 1 autonomous iii 9 rage 5 7 -2 autonomous ii 10 feeling of degradation 9 6 3 autonomous iv 11 distrust 10 7 3 independent ii 12 suspicion 7 6 1 autonomous ii 13 jealousy 7 4 3 autonomous iv 14 shame 3 5 -2 autonomous i 15 guilt 4 7 -3 autonomous ii 16 grief 8 11 -3 dependent iii 17 compassion 1 4 -3 autonomous i 18 exhaustion 6 10 -4 dependent ii as per results of ism, dependent factors are 14 and 17 whereas in micmac dependent factors are 16 and 18, by the same token key factors as per ism are 6, 10 and 13 whereas, in its counterpart key factors are 6 and 11. factor number 6 (job insecurity) is the key factor both in ism and micmac since it has high effectiveness (drivingdependence power i.e. 7), therefore, should be taken with high care while planning a merger. 5. conclusion emotional aspects of employees cannot be ignored during planning and execution of mergers, therefore, scientifically handling of employees‟ emotions is imperative for successful mergers. objective of the study is to analyze disordered chaotic hierarchy of emotional behaviors of employees. the research used in depth literature review for identification of behaviors, ism for exploring causal relations, analyzing interactions& prioritizing them and micmac analysis for classifying on basis of driving-dependence power. ism uses the data elicited from panel of experts instead of statistical groups. panel consists of 20 experts. experts were recruited using criteria: i) theoretical knowledge, ii) practical experience of mergers and iii) overall working experience of more than 10 years. eighteen emotional behaviors were identified using literature discourse namely fear (1), anxiety (2), frustration (3), depression (4), apathy (5), job insecurity (6), aggression (7), anger (8), rage (9), feeling of degradation (10), distrust (11), suspicion (12), jealousy (13), shame (14), guilt (15), grief (16), compassion (17) and exhaustion (18). findings of the ism are job insecurity (6), feeling of degradation (10) and jealousy (13) occupy level iv (i.e. bottom level), therefore, are most critical requiring maximum attention. fear (1), frustration (3), depression (4), apathy (5), anger (8) and grief (16) occupy level iii, relatively lesser critical than level iv but still have moderate severe affect. anxiety (2), aggression (7), rage (9), distrust (11), suspicion (12), guilt (15) and exhaustion (18) occupy level ii, which have moderate mild affect. shame (14) and compassion (17) occupy level i (i.e. highest level) therefore are relatively less critical but essence of effectiveness. careful examination of this model reveals that at level iv job insecurity (6) and feeling of degradation (10) has bilateral relationship. similarly, frustration (3) and depression (4) at level iii have bilateral relationship. rage (9) and distrust (11); guilt (15) and exhaustion (18) at level ii also have bilateral relationship. findings of micmac show that fourteen behaviors (1, 2, 3,4, 5, 7, 8, 9, 10, 12, 13, 14, 15 and 17) are classified in autonomous cluster that are separated from structure but have few strong links and are pretty important. two review of economics and development studies vol. 5, no 1, march 2019 90 behaviors (6 and 11) are classified in independent cluster therefore are key behaviors. in fact, they have high driving power but less dependence. they are capable of causing other behaviors. no behavior is classified as linkage meaning thereby all the behaviors are stable and have no feedback effect. two behaviors (16 and 18) are classified in dependent cluster they are influenced by other behaviors, hence relatively are less critical for mergers. it is noteworthy that job insecurity (6) is the key factor indicated both by ism and micmac, therefore, it should be dealt with extreme care in merger environment. this study furnishes exhaustive understanding of behaviors concerning merger environment. it contributed: i) ism model (figure 1), ii) driving power and dependence power diagram (figure 2), iii) unveiled causal relationships and developed predictive causal links among variables and iv) arranged variables in different levels according to criticalness. it will help planners of mergers to identify which behavior(s) should be addressed on priority. the study gives a fair insight of inter-behavior and intra-behavioral categories and is going to assist the merger planners, employees of merging companies, regulators, academicians and society at large to understand relationships of different behaviors. employees‟ hr plan, considerate of these critical emotional behaviors, will embrace success but ignoring critical behaviors in planning stage might result in failure. the study also has some limitations. firstly, study has been carried out in context of pakistan, further studies may be conducted in context of other countries. secondly, study is based on heterogonous panel of experts which may be replicated in homogeneous panel of experts in the context of some specific sector. thirdly, the study uses interpretive paradigm of philosophy and does not quantify the relations, therefore, future studies may be conducted using quantitative techniques of analysis like sem, anp, ahp, etc. fourthly, some behaviors could have not been accounted for, therefore, in future studies rather thorough literature review should be done and other stakeholders may also be included to enhance the frontiers of research. references ager d.l. 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(2009). consumer revenge behavior: a cross-cultural perspective. journal of business research, 62(10), 995-1001. review of economics and development studies vol. 3, no 2, december 2017 135 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn: 2519-9692 (e): 2519-9706 volume 3: issue 2 december 2017 journal homepage: www.publishing.globalcsrc.org/reads measuring energy efficiency and exploring the determinants of energy efficiency in selected economies of asia 1 muhammad nadeem, 2 hafiz ghulam mujaddid, 3 nabila asghar 1 phd scholar, national college of business administration & economics, pakistan 2 associate research fellow, punjab economic research institute, pakistan 3 assistant professor, department of economics, university of the punjab, pakistan. article details abstract history revised format: nov 2017 available online: dec 2017 purpose: there is widely recognition of the need to effectively consume the energy, particularly in energy deficient countries. the effective use of energy requires that one must know the current efficiency level, so appropriate measures may be taken to make the efficient use of energy. present study in an attempt to measure the energy efficiency and determinants of energy efficiency in fourteen selected developing economies of asia for the time period 2007 to 2013. dea double bootstrap technique has been used for estimation purposes. the results of bias corrected energy efficiency indicate that there is not even a single economy that is fully energy efficient over the period under consideration. after measuring the energy efficiency, truncated regression analysis is utilized to find the determinants of energy efficiency. the results indicate that industrial share and per capita income have positive effect on energy efficiency, while corruption, political instability and voice and accountability have negative impact on energy efficiency. so there is dire need to control corruption, political stability needs to be resorted and voice and accountability system needs to be redefined. © 2017 the authors, under a creative commons attributionnoncommercial 4.0 keywords energy efficiency, dea double bootstrap, s, asia. jel codes: p28 corresponding author’s email address: mnadeem.eco@gmail.com recommended citation: nadeem, m., mujaddid, g. & asghar, n., (2017). measuring energy efficiency and exploring the determinants of energy efficiency in selected economies of asia. review of economics and development studies, 3(2) 135-146. doi: https://doi.org/10.26710/reads.v3i2.172 1. introduction energy efficiency measurement has become an important component of energy strategy in many countries, especially the energy-deficient ones. many countries recognized the need to understand, how effectively energy was being consumed in their economies, so that they can increase energy efficiency. to serve these purposes, there is need to measure the energy efficiency with an appropriate technique and then its determinants to show the variation in energy efficiency. efficiency analysis is also used in cross country comparisons to explain differences in energy performance among countries and for international benchmarking. energy intensity and energy efficiency are the two well-known energy efficiency indicators that are commonly used in macro level policy analysis. energy intensity is defined as the energy consumption divided by the economic output, and energy efficiency is the reciprocal of energy intensity. these http://www.publishing.globalcsrc.org/reads mailto:mnadeem.eco@gmail.com https://doi.org/10.26710/reads.v3i2.172 review of economics and development studies vol. 3, no 2, december 2017 136 traditional energy efficiency indicators take energy consumption in to account as a single input that produces an economic output as no output would be produced by using a single energy input, without any other inputs (see, e.g., mukherjee, 2008b); therefore, some other key inputs are ignored, such as capital and labor. energy consumption must be combined with other inputs to produce an economic output, and zhang et al., (2011) said that substitution effects exist between energy and other input factors (e.g., labor and capital stock). if energy consumption is evaluated in terms of partial factor energy efficiency, the result is a misleading estimate (hu and wang, 2006). to overcome the disadvantage of partial factor energy efficiency, an increasing number of researchers have devoted themselves to analyzing the total factor energy efficiency using dea. zhou et al. (2008) gave an extensive review of 100 studies published from 1983 to 2006 that have used dea methodology in energy and environmental studies. according to that survey, 72 of these publications were made between 1999 and 2006, which indicates a rapid increase in using dea methodology, while they also indicated the use of bootstrap technique of simar and wilson (1998), which is used to conduct a sensitivity analysis on the dea efficiency scores. there are two general approaches to measure the efficiency: parametric and nonparametric. the parametric approach requires specifying and estimating a parametric production or cost frontier. the main strength of the parametric or stochastic frontier analysis (sfa) is its incorporation of stochastic error, and therefore allowing for hypothesis testing. the disadvantage of this approach is the need of imposing an explicit functional form and distributional assumption of the error term. hence, the sfa is sensitive to the selection of the parametric functional form. the nonparametric approach, e.g. data envelopment analysis, has the advantage of imposing no prior parametric restrictions on the technology and thus is less sensitive to misspecification. it is also not subject to assumptions on the distribution of the error term. however, because dea is a deterministic approach, all deviations from the estimated frontier are assumed to be the result of inefficiency, making it sensitive to measurement errors and data noises. to overcome the limitations of the deterministic nature, bootstrapping methods can be used to produce confidence intervals for the efficiency estimates and allow hypothesis testing. in explaining variation in efficiency, a second-stage regression analysis is typically used to examine the effect of environmental factors on the estimated efficiency. chilingerian (1995), ruggiero and vitaliano (1999), and mukherjee (2008a), among others, carried out the second-stage regression analysis. according to simar and wilson (2007), the coefficient estimates obtained by the above studies may not be consistent, since these studies used ols and/or tobit regression and have not taken into account the serial correlation of the efficiency estimates. instead, simar and wilson (2007) propose a double bootstrap procedure which can produce consistent estimates of the regression coefficients and provide valid confidence intervals for the estimates. in the present paper, the double bootstrap will be adapted and applied to our regression analysis. however, it is not sufficient to measure the energy efficiency only without determining its sources. this study measures energy efficiency scores of asian developing countries and also assesses its determinants. there is hardly any study that has estimated bias-corrected energy efficiency scores of asian developing countries and also considered its sources. this will be the perhaps the first study to evaluate the energy efficiency and its determinants by applying the dea double bootstrap. the remaining of the study is ordered as follows: review of literature is given in section ii. section iii provides methodological framework and describes sources of data. empirical results are interpreted in section iv. section v consists of conclusions and policy recommendations. review of economics and development studies vol. 3, no 2, december 2017 137 review of economics and development studies vol. 3, no 2, december 2017 138 2. review of literature geller et al., (2006) critically analyzed the energy intensity behavior for major oecd countries from 1973 to 2002. they tried to evaluate that reduction in energy intensity was because of energy efficiency or because of structural change. they also analyzed the policies related to the energy efficiency and concluded that well planned policies could produce result in the form of energy saving. they presented the case of usa and found that 9 policies reduced energy usage almost 11% in 2002 and the same result was showed for japan, california and european union. they recommended that minimum efficiency standards would be maintained and consumer behavior needed to be changed toward the less usage of energy appliances etc. ang (2006) critically analyzed the various energy efficiency indicators like energy intensity, energy coefficient and energy elasticity and found that these indicators were misleading to determine the energy efficiency. he briefly discussed the energy intensity to define that it is not worthwhile due to the denominator, gdp, which lieu of different activities and further explored that change of energy intensity rather better than simple energy intensity. after finding these indicators wrong, he used the index decomposition analysis to derive the economy-wide composite energy efficiency and concluded that this composite energy index is better than classical energy efficiency indicators. hu and kao (2007) measured the energy efficiency for seventeen apec countries over the period of 1991 to 2000. the applied the input oriented dea for measuring the energy efficiency in the framework of total factor by utilizing the three inputs (labor, capital and energy) and one output (gdp) and then suggested the energy saving targets (est) for apec economies in every year from 1991 to 2000. they found that china was less energy efficient i.e. it has largest est while hong kong, philippine and usa has lowest est i.e. they are highly energy efficient. they also found that there was generally increasing trend of energy efficiency in apec economies. lee and chang (2008) tried to find out the causal relationship between gdp at constant prices and the energy consumption by taking the data of sixteen asian countries for the period of 1971-2002. they applied the heterogeneous panel co-integration and panel based ecm to analyze the causal relationship between these core variables within multivariate function in which capital formation was used as a proxy of capital input and labor was taken another input. they found in long run that there was positive unidirectional co-integrated relationship from energy consumption to gdp at constant prices by taking the heterogeneity effect of countries while there was not any causal relationship in short run. the same result was found after dividing the asian countries in regional groups like apec and asean. zhou and ang. (2008) measured the energy efficiency of 21 oecd economies for the period of 1997 to 2001. they applied dea linear programming models to construct economy wide energy efficiency index for measuring the energy efficiency by using six inputs (capital stock and labor force as non-energy inputs and coal, oil, gas and other energy as energy inputs) and two outputs (gdp as desirable output while co2 as undesirable output). they compared the results of energy efficiency performance index and weighted average energy utilization performance index and found that latter one have greater discriminating power as it also included the energy mix effects. they found that mean energy efficiency of countries had been changed over the period of time under both index versions. honma and hu (2008) measured the energy efficiency in total factor framework of forty seven administrative regions in japan over the period of 1993 to 2003. they used the dea for computing energy efficiency by using 14 inputs, including 11 energy inputs, and one output (regional gdp). they found that 29 administrative regions were fully efficient out of 47 prefectures over the entire period of time in case of overall technical efficiency scores and found that these regions had shared same features. they also estimated the connection between energy efficiency and per capita income after dividing the regions in four categories (low, lower middle, upper middle and high income) and discovered the ureview of economics and development studies vol. 3, no 2, december 2017 139 shaped relation between energy efficiency and per capita income. wei et al. (2009) measured the energy efficiency of 29 provinces of china over the period of 1997-2006. they applied dea to estimate the energy efficiency index by using three inputs (labor, capital and energy consumption) and one output (gdp) and found that there were highly differences in energy efficiency of all provinces. further, they tried to find out the impact of different determinants on the level of energy efficiency in regression analysis and found that government expenditure, state owned economic portion and industry share in gdp had negative impact on energy efficiency while technical level and non-coal part in energy consumption had positive impact on energy efficiency. zhang et al., (2011) measured the energy efficiency of 23 developing countries over the period of 1980 to 2005. they used the dea window for energy efficiency analysis by utilizing the three inputs (labor, capital and energy consumption) and one output (gdp). they found that there was prominent variation in the score of total factor energy efficiency relating to different developing countries. they found that syria, kenya, philippine and sri lanka showed worst performance in energy efficiency and china was the rapid growing country among the countries which had the increasing trend in energy efficiency. further, they applied the tobit regression to find out the relationship between income per capita and energy efficiency and found that there was u-shaped relationship between them. zhou et al., (2012) measured the economy wide energy efficiency of 21 oecd countries for the year of 2001. they applied the stochastic frontier approach (sfa) to measure the energy efficiency index from the production point of view by utilizing the three inputs (labor, capital and energy) and one output (gdp). they also used the dea technique to measure the energy efficiency index for the purpose of making comparison between both techniques. they found that only italy was the fully efficient country in case of sfa and six countries were efficient in case of dea by following the vrs. so, they concluded that sfa presented the more consistent and robust results as compare to dea. song et al. (2013) measured the energy efficiency of brics’ countries by taking the data over the period of 2009 and 2010. they employed the super-sbm model to measure the energy efficiency by utilizing the three inputs (labor, capital and energy consumption) and one output (nominal gdp). they also bootstrapped the efficiency scores of dea and finally, measured the connection between energy efficiency and carbon emission. it is found that overall brics’ economies have low energy efficiency but increasing trend over the period of time and china was the most efficient country with respect to energy efficiency among them. they also found that the impact of carbon emission on energy efficiency vary from one economy to other economy due to the varying energy structure of each country. 3. methodology charnes et al.,’s (1978) and fare et al.,’s (1985) linear programming models provided the base for the production efficiency analysis. those techniques are known as data envelopment analysis (dea), where the convexity assumption is adopted in the literature. charnes, cooper, and rhodes (1978) developed the dea and further modified by banker et al., in 1984 which based on the frontier efficiency concept first defined by farrell (1957). it is a non-parametric technique and used for measuring the efficiency of decision making units. it does not demand assumption of any specific functional form with respect to the inputs and outputs or the setting of weights for the various factors. dea creates an efficient frontier for every observation. the maximum output can be obtained empirically by a given set of inputs. we are not going to take general overview of dea here, for this see coelli et al. (2005). 3.1 data envelopment analysis and double bootstrap the output oriented variable returns to scale (vrs) model will be employed for measuring the technical energy efficiency estimates because constant returns to scale (crs) is utilized where economies or different sectors operate at their optimal scale. there is various considerable events relating to this study which show that economies are not working at their optimal scale due to the presence of national constraints, different size of economies, and imperfect competition among the economies. for each and review of economics and development studies vol. 3, no 2, december 2017 140 every country, output oriented dea energy efficiency estimator ɵ̂𝑖vrs can be attained for any data set (xi, yi) by solving the coming linear programming equation. ɵ̂𝑖vrs = 𝑚𝑎𝑥(ɵ > 0|ɵ𝑖𝑌𝑖 ≤ ∑ ¥𝑖𝑌𝑖; 𝑋𝑖 ≥ ∑ ¥𝑖𝑋𝑖; ∑ ¥𝑖 = 1; ¥𝑖 ≥ 0, 𝑖 = 1, … . 𝑛 𝑛 𝑖=1 𝑛 𝑖=1 𝑛 𝑖=1 ) (1) in equation (1), x and y are used as inputs and outputs respectively and i=1…..,n is the specific country. the ɵ𝑖𝑌𝑖 is the efficient level of output, ɵ is the scalar and ¥𝑖 is the non-negative vector of constant defining the optimal weights of inputs to outputs. the attained value of ɵ̂𝑖vrs is the technical energy efficiency estimate for ith country. in case of output oriented, output should be increased for getting the higher technical energy efficiency by a given set of inputs where ɵ̂𝑖vrs=1 means that the economy is considered fully efficient while ɵ̂𝑖vrs<1 means that the economy is not fully efficient and it is required to enhance output from the given set of inputs for reducing the inefficiencies for each economy. there are two things to be noted relating to the above equation (1). first, in the linear program, vrs is assumed and second, simar and wilson (2000) observe that ɵ̂vrsi is the downward biased estimator, as economy frontier can be underestimated. due to limitations of dea, the smooth bootstrap technique of simar and wilson (1998, 2000) is applied in this study for getting the bias-corrected energy efficiencies and their confidence intervals accompanied by the dea with bootstrapping approach. the estimated bias-corrected energy efficiencies in the first stage are left truncated by 1. in the second stage, a single truncated regression with bootstrap will be employed for regressing these efficiency scores of all countries against a set of explanatory factors in the following truncated maximum likelihood regression model. ɵ̂vrsi = b + ziβ + εi (2) in eq. (2), b is the constant term, εi is statistical noise, and zi is a vector of specific variables (these are known as environmental variables) for economy i that is expected to be related to the economy’s efficiency score. 3.2 why double bootstrap? there appear only few results for the sampling distribution of interest. this is for this reason that bootstrap techniques are adopted by simar and wilson (2000, 2007). the concept behind the bootstrapping is very simple i.e. simulate the sampling distribution of any specific object by mimicking the data generating process (dgp). the dgp that gives the logic for simar and wilson’s (2007) double bootstrap is the dea model represented by eq. (1) and the second step truncated regression described by eq. (2). to apply the bootstrap procedure, it is assumed that the original sample data is produced by the dgp and that we can simulate the dgp by using the ‘new’ or pseudo data set that is derived from the actual data set. then dea model is re-estimated by incorporating this new data set. it is possible to derive an empirical distribution of bootstrapped values by doing this process again and again which provides a monte carlo approximation of the sampling distribution and also help out in inference measures. the efficiency of the bootstrapped methodology and the consistency of the statistical inference significantly depend on how well it specifies the true dgp and on the exact re-sampling simulation to copy the dgp. the simar and wilson’s (2007) algorithm 2 of bootstrap procedure is employed in this study that provides inference about coefficients and consist of the following seven steps. step 1calculate the dea output oriented efficiency score ɵ̂𝑖vrs for each and every economy in sample data set, using equation (1). review of economics and development studies vol. 3, no 2, december 2017 141 step 2maximum likelihood method is used to calculate the truncated regression of ɵ̂𝑖vrs on zi to estimate the �̂�and �̂� step 3for each economy i=1…, n, repeat the coming four steps (a-d) n times to yield a bootstrap estimate (ɵ̂i,b b=1….n) a) draw εi for each i=1…,n, from n(0, �̂�ε) with left truncation. b) calculate ɵ * = zi�̂�+ εi for each i=1…, n. c) generate a pseudo data set (𝑥𝑖 ∗, 𝑦𝑖 ∗ ), where xi* xi and 𝑦𝑖 ∗ is yi[ɵ̂/ɵ * ] d) by using this pseudo set and eq. (1), calculate a new dea estimate ɵ̂ * for each industry step 4biased corrected estimator ɵ̂̂ is calculated for each industry i=1…, n as ɵ̂̂= ɵ̂bias (ɵ̂i) where the bias term is calculated by the following simar and wilson’s (2000) method. 1/n [∑ ɵ̂ ∗𝑁𝑏=1 ]ɵ̂i step 5maximum likelihood method is employed to calculate the truncated regression ɵ̂̂i on zi to provide the �̂̂�and �̂̂� step 6repeat the next three steps (a-c) n2 times for getting the bootstrap estimates [{�̂̂�𝑏 ∗ and �̂̂�𝑏 ∗, b=1…n2}] a) draw εi for each i=1..., n, from n (0, �̂̂�) with left truncation. b) compute ɵ ** = zi�̂̂�+ εi for each i=1…., n. c) for estimating the truncated regression 𝜃𝑖 ∗∗on zi, again the maximum likelihood method is used for getting the 𝛽̂̂ ∗̂̂ and 𝜃∗̂̂ step 7use the bootstrap results to construct the estimated confidence interval for each element of �̂�and �̂�ε. 3.3 selection of data different inputs and outputs are incorporated in various studies for energy efficiency analysis but in this study three inputs (total labor force, gross fixed capital formation and energy consumption) and one output (real gdp) are selected for measuring efficiency. data has been collected for following countries: bangladesh, china, india, indonesia, japan, korea, rep., malaysia, nepal, pakistan, philippines, sri lanka, kazakhstan, thailand and turkey from 2007 to 2013 from world development indicators (wdi) and world governance indicators (wgi). data for percentage of industrial share in gdp, per capita income as determinants of energy efficiency is collected from wdi while data for corruption, political instability and voice and accountability is collected from world governance indicator. one dummy variable is introduced to check the impact of financial crisis for 2008 and 2009. 4. estimations and interpretation of results in the first step of the dea double bootstrap technique, original dea and bootstrapped vrs technical energy efficiencies of 2007 to 2013 are estimated and presented in table 4.1 along with confidence intervals. as it can be noted that original dea energy efficiency estimates exaggerate the efficiency scores and underestimate the frontier as simar and wilson (2000) describe the limitations of dea and it can also be seen from estimated results that dea exaggerates the results while bias-corrected efficiencies (which is referred as bc in the following table) which are obtained after 2500 simulations, correct the energy efficiency scores and remove the biasness of exaggeration from the results. the main feature of these estimations is that they also lie in the following confidence intervals while dea does not lie in the interval because it underestimates the frontier and it is assumed to touch the frontier before reaching to the actual one. as in this study output oriented dea bootstrap technique is used to measure the energy efficiency estimates in 1st stage, the energy efficiency score 1 represents the technically fully energy efficient country while estimated efficiency score less than 1 shows the inefficient or less energy efficient country. review of economics and development studies vol. 3, no 2, december 2017 142 in case of output oriented model, different set of output is produced by utilizing same set of inputs. so, for minimizing the inefficiencies, maximum level of output should be obtained with the fixed set of inputs. table 4.1 shows the results of asian developing countries for the period of 2007 to 2013 and it is found that there is not any country is fully efficient over the whole period in case of bias corrected technical energy efficiency case while some are fully efficient in case of dea because dea exaggerates the estimates as simar and wilson (2000) described the deficiency of dea. it can be noted that after 2007 the energy efficiency started to deteriorate over the period then it is improved in 2013. this phenomenon depicts the picture of worldwide crisis. table 4.1 energy efficiency analysis 2007 2008 countries dea b.c l.c.i u.c.i dea b.c l.c.i u.c.i bangladesh 0.8147 0.7466855 0.7049718 0.8085351 0.7764 0.717208 0.675926 0.771183 china 0.611 0.5454791 0.4788696 0.6090306 0.6769 0.600731 0.526126 0.674622 india 0.6503 0.5990432 0.5517696 0.6472582 0.6312 0.57233 0.520944 0.627563 indonesia 0.8904 0.8394061 0.7924678 0.8854621 0.8169 0.768 0.720298 0.812643 japan 1 0.8035931 0.7221317 0.9942838 1 0.790011 0.724145 0.99207 korea, rep. 0.7362 0.6570292 0.580497 0.7328023 0.754 0.665587 0.588492 0.749456 malaysia 0.9558 0.8810419 0.8186481 0.9481437 0.9408 0.853973 0.784886 0.935699 nepal 1 0.7952495 0.7190051 0.9928826 1 0.802878 0.731563 0.993966 pakistan 1 0.9069138 0.8587288 0.9932097 0.9863 0.923038 0.875396 0.982835 philippines 1 0.8932272 0.8532178 0.993043 1 0.908356 0.86481 0.994528 sri lanka 1 0.7994816 0.7225366 0.9932115 1 0.800394 0.727834 0.99384 kazakhstan 1 0.7909445 0.7155708 0.9931344 1 0.80265 0.728547 0.994174 thailand 0.7572 0.7058573 0.6667255 0.7517825 0.7405 0.688295 0.644456 0.736602 turkey 0.9935 0.9181041 0.8348563 0.9881067 1 0.891898 0.812063 0.992503 2009 2010 countries dea b.c l.c.i u.c.i dea b.c l.c.i u.c.i bangladesh 0.6662 0.5969471 0.5514523 0.6618626 0.6982 0.645896 0.600475 0.69383 china 0.7825 0.68069 0.5994283 0.7793586 0.8259 0.729616 0.647497 0.822793 india 0.5929 0.5214461 0.4689217 0.5884747 0.5725 0.509189 0.455196 0.569293 indonesia 0.7069 0.6359407 0.5896416 0.7042212 0.7384 0.685468 0.635568 0.733382 japan 1 0.7699991 0.7122666 0.9936523 1 0.786615 0.704416 0.992941 korea, rep. 0.8063 0.7021661 0.6217361 0.8020098 0.8115 0.717613 0.636419 0.807394 malaysia 0.8798 0.7700526 0.713286 0.8735322 0.846 0.756669 0.699087 0.84072 nepal 1 0.7587046 0.7071755 0.9921747 1 0.780021 0.704655 0.993805 pakistan 0.959 0.9068784 0.8440546 0.9552358 1 0.86981 0.832173 0.993249 philippines 0.9277 0.8391772 0.7837231 0.9213646 0.8951 0.82381 0.772612 0.889495 sri lanka 1 0.7656681 0.7087986 0.9908921 1 0.779936 0.704582 0.993145 kazakhstan 1 0.7649023 0.7086195 0.9929301 1 0.786066 0.719634 0.992417 thailand 0.689 0.6221809 0.5770155 0.6846391 0.7267 0.673793 0.629442 0.721585 turkey 1 0.8249288 0.7745067 0.9911749 0.9187 0.820792 0.744058 0.913905 2011 2012 countries dea b.c l.c.i u.c.i dea b.c l.c.i u.c.i bangladesh 0.6769 0.6187904 0.5736447 0.6730917 0.661 0.600994 0.557009 0.65553 china 0.9068 0.7937536 0.6979605 0.9037735 0.9594 0.834806 0.731454 0.955838 review of economics and development studies vol. 3, no 2, december 2017 143 india 0.5526 0.4870692 0.429626 0.5493933 0.5912 0.520515 0.466263 0.587899 indonesia 0.7236 0.6643505 0.6213525 0.7187602 0.7112 0.650174 0.601712 0.706442 japan 1 0.770108 0.6981184 0.9925896 1 0.769451 0.709901 0.992156 korea, rep. 0.8112 0.7096623 0.6240787 0.8061854 0.7949 0.693905 0.611705 0.790652 malaysia 0.8571 0.7662175 0.7027779 0.8523573 0.77 0.689114 0.634486 0.765236 nepal 1 0.7635888 0.6943807 0.9936462 1 0.762387 0.705296 0.992829 pakistan 1 0.8181079 0.7816129 0.9911871 1 0.802651 0.774558 0.991518 philippines 0.9329 0.8481874 0.7964991 0.9254411 0.9071 0.822915 0.774819 0.9008 sri lanka 1 0.7697861 0.6940674 0.9916921 1 0.760755 0.70785 0.991078 kazakhstan 1 0.7821048 0.7265472 0.9929896 0.9359 0.829687 0.755712 0.928971 thailand 0.7018 0.6432762 0.6011947 0.695855 0.6779 0.621949 0.577734 0.673496 turkey 0.8602 0.7622903 0.6911074 0.8552647 0.9152 0.814587 0.738052 0.908154 2013 countries dea b.c l.c.i u.c.i bangladesh 1 0.805783 0.7301953 0.9916419 china 1 0.8868376 0.7874117 0.99449 india 0.6222 0.5612354 0.5063505 0.619421 indonesia 0.7228 0.6680684 0.6258928 0.7195072 japan 1 0.8094719 0.7291745 0.9932399 korea, rep. 0.7965 0.7126335 0.6333099 0.7930702 malaysia 0.7551 0.6876535 0.6336349 0.7508115 nepal 1 0.8078452 0.7282896 0.9947478 pakistan 1 0.8165499 0.7594116 0.9935376 philippines 0.8875 0.8123746 0.7593071 0.8817132 sri lanka 1 0.8018071 0.7251 0.99253 kazakhstan 0.9035 0.8181752 0.7526585 0.8969229 thailand 0.7078 0.6561069 0.6169624 0.7033867 turkey 0.9271 0.8410899 0.7690203 0.9222657 table no 4.2 determinants of vrs technical energy efficiency, using a bootstrapped truncated regression regressors b-hats s.e t-statistics constant 2.219074 0.3976863 5.579960889 ind 0.01989284 0.01130489 1.759666834 corruption -0.01431264 0.007440124 -1.923709874 political ins -0.03894633 0.01182374 -3.293909541 voice&acc -0.01350435 0.00651368 -2.073228958 pci 7.3932e-05 2.81962e-05 2.622058378 fdm 0.0295248 0.1960464 0.150601082 review of economics and development studies vol. 3, no 2, december 2017 144 after measuring the bias-corrected technical energy efficiency of the fourteen asian developing countries for the period of 2007 to 2013, the energy efficiencies of 14 countries for seven years are pooled in one truncated regression form as showed in equation (2) and maximum likelihood method is applied for truncated regression as discussed in the second step of the simar and wilson’s (2007) double bootstrap process. results of determinants of vrs energy technical efficiency, standard errors and t statistics are presented respectively in column 2, 3 and 4 of table 4.2. in the results of second stage, where coefficients are bootstrapped 2500 times, some interesting results are found in the scenario of this study. it is found that percentage of industrial share in gdp has positive relation with energy efficiency and per capita income (pci) also has positive relation with energy efficiency. increase in industrial share may enhance energy efficiency due to the reason that as industrial share increases, economies of scales will be achieved which will enhance energy efficiency. increase in industrial share may also enhance per capita income which also has been found enhancing the energy efficiency. zhang et al. (2011) found u-shaped relationship between total factor energy efficiency and gross national income per capita which showed income per capita had negative impact initially due to the industrial growth until a certain point. but u-shape relation showed that energy efficiency will increase after certain point due to the increase of per capita income. in present study there is no evidence of ushape relation between energy efficiency and per capita income which may be due to the reason that most of the economies under consideration are emerging economies and they may have already achieved that certain point of industrial growth so there is only positive relation found. corruption has been found negatively related to the energy efficiency which may be due to the reason that corruption promotes malpractices and retards efficiency. fredriksson et al. (2004) explained that corruptibility of policy makers will reduce the energy policy stringency. it is found that political instability also has negative impact on energy efficiency which may be considered according to expectations as more political instability leads to a volatile socio-economic environment which disrupts the efficient use of energy. voice and accountability depicts very interesting and surprising result which indicates that voice and accountability has negative and significant effect on energy efficiency. as proxy for voice and accountability used in this study is defined as voice and accountability reflects perceptions of the extent to which a country's citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media. voice and accountability may have negative impact due to improper use of these rights. lastly the dummy used for the financial crises depicts no significant impact in this study. 5. conclusion this study has been aimed to estimate the technical energy efficiency of fourteen selected asian countries for the period of 2007 to 2013. as energy efficiency measurement has become an important component of energy strategy in many countries, especially for the energy-deficient countries. so every government is concerned to analyze the energy efficiency and to know how well its economy is energy efficient, so they may find the ways to make efficient use of energy. there are numerous techniques to measure the energy efficiency while dea double bootstrap is applied to measure the technical energy efficiency and its determinants in this study because of its superiority over other existing techniques. dea double bootstrap approach measures the bias-corrected energy efficiency scores and determinants of efficiency. while dea measures the biased efficiencies and it exaggerates the efficiency scores as can be observed from present study that dea energy efficiency scores do not lie in the confidence interval and these scores are beyond the interval due to the bias which exists in dea scores while bootstrapped efficiency scores lie within the confidence interval and these are bootstrapped by 2500 iterations. the results indicate that no country is fully energy efficient over the whole period of estimations in case of bias corrected energy efficiency. it is found that energy efficiency of every country deteriorated over review of economics and development studies vol. 3, no 2, december 2017 145 the period of time then started to rise in last period. after measuring the energy efficiency, truncated regression analysis is utilized to find the determinants of energy efficiency. in second stage, coefficients are bootstrapped 2500 times, it is found that industrial share and per capita income have positive effect on energy efficiency while corruption, political instability and voice and accountability have negative impact on energy efficiency. it is found in this study that dummy of financial crises has not any significant impact. references ang, b. w. 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(2012). measuring economy-wide energy efficiency performance: a parametric frontier approach. applied energy, 90(1), 196-200. review of economics and development studies vol. 3, no 2, december 2017 147 review of economics and development studies vol. 5, no 4, 2019 767 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 4, 2019 journal homepage: www.publishing.globalcsrc.org/reads determinants of competitiveness of business schools in khyber pakhtunkhwa: faculty’s perspective 1 irum khattak, 2 qadar bakhsh baloch, 3 gohar zaman 1 ph.d. scholar at department of management sciences, islamia college peshawar, pakistan. irumkhattak2013@gmail.com 2 institute of business studies and leadership, abdul wali khan university, mardan, pakistan. qbbaloch@awkum.edu.pk 3 women university swabi, pakistan. goharshewa@gmail.com article details abstract history revised format: 30 nov 2019 available online: 31 dec 2019 purposethe present study was an attempt to enhance the understanding on the competitiveness of business schools (bschools) and identify the most influential determinants that affect competitiveness of bschools in khyber pakhtunkhwa from faculty‟s perspective. methodologythe current study followed the quantitative approach. the sample size was 261 determined by formula of yamane (1967) and respondents were selected using stratified probability sampling technique. data was collected through questionnaire using 5-point likert scale. principal component analysis was applied to assess unifactoriality of the constructs. hypothesis of study assuming relationship between independent and dependent variables were tested using sem. findingsfindings of the study suggests that teaching staff, employment prospects, gender diversity, leadership and management significantly and positively affect the competitiveness of bschools (p< 0.05). on other hand, industry and internationalization aspects were found to have significant negative effect on competitiveness of bschools (p<0.05). originality/valuethe present study can help the management of business schools to focus on the areas that can increase the competitiveness of business school to meet the challenges of globalization. moreover, competitiveness was measured using satisfaction and reputation and the empirical testing of effect of determinants on competitiveness of business schools are the theoretical contributions of the study. © 2019 the authors, under a creative commons attribution-non commercial 4.0 keywords faculty, competitiveness, cost, employment, leadership, business, school jel classification: l20, l21 corresponding author‟s email address: irumkhattak2013@gmail.com recommended citation: khattak, i., baloch, q.b., and zaman, g. (2019). determinants of competitiveness of business schools in khyber pakhtunkhwa: faculty‟s perspective. review of economics and development studies, 5 (4), 767-780 doi: 10.26710/reads.v5i4.889 1. introduction the quality of human force in every country is dependent on its education (sembiring, (2018). it is due to fact that the most vital factor of globalization is knowledge. knowledge is affecting every sphere of http://www.publishing.globalcsrc.org/reads mailto:irumkhattak2013@gmail.com mailto:qbbaloch@awkum.edu.pk mailto:goharshewa@gmail.com mailto:irumkhattak2013@gmail.com review of economics and development studies vol. 5, no 4, 2019 768 modern times such as technology and sustainable development that is linked directly to the competitiveness of nations (keser, 2015). the knowledge is the factor that transforms companies into a competitive one and in turn contributes to the competitiveness of a nation. this transformation is take place through competitive labour force. due to this reason, it is the requirement of a country to nurture a workforce that is globally competitive (keser, 2015). the aim of creating competitive national workforce can be achieved only through good quality of higher education. therefore, most developed countries have more emphasis on competitive education quality for economic and social uplift (stimac & simic, 2012). the globalization has intense pressure over the countries for producing competitive human resource and new challenges are being encountered by educational institutes (tan, goh & chan, 2015). the changes in education industry such as creation of research universities and universities of applied sciences, pressure from stakeholders and world-class universities etc has given a central role to achieve competitiveness of higher education institutes in present times (supe, zeps, jurgelāne, & ribickis, 2018). education providing institutes are now struggling hard to improve their quality to achieve competitive advantage (tan, goh & chan, 2015). moreover, the change in education sector is compelling institutes towards identifying ways for competitiveness (supe, zeps, jurgelāne, & ribickis, 2018). competitiveness can be broadly referred to the ability of a firm to build and sustain competitive advantages (dimitrova & dimitrova, 2017). in order to build and identify competitive advantage, it is required to unveil the determinants that can play crucial role in attaining the competitiveness for higher education (supe, zeps, jurgelāne, & ribickis, 2018). the institutions can gain competitiveness if it fulfills the needs of internal and external stakeholders (ashmarina, khasaev, & plaksina, 2015). despite the fact that competitiveness in higher education is highly desirable, fewer efforts are seen in the subject area. various gaps are identified in literature. first, determinants of competitiveness of higher education institutes are explored in one study of supe et al. (2018) but methodology of study was a systematic review and it was not tested empirically. they insisted on identification of internal and external factors for competitiveness of higher education institutes. tan, gou & chan (2015) also emphasized that determinants that attract and retain students to gain competitive advantage should be explored in higher education. secondly, the concept of competiveness is not measured through the lens of satisfaction and reputation together (non-financial measures) from perspective of stakeholders in previous studies. sembiring (2018) establish a link between competitive advantage and image (reputation) of higher education institute but the study lacks the empirical testing of relationship. the effect of determinants of competitiveness using satisfaction and reputation is not seen empirically till date. third, there is contextual gap in literature that the concept of competitiveness and the determinants of competitiveness is not studied adequately in context of business schools (bschools) and none of the study is found in the context of khyber pakhtunkhwa to the best of author knowledge. the study will contribute to the body of knowledge by empirically testing the relationship of determinants of competitiveness with competitiveness of business schools. the competitiveness of business schools will be gauge through the internal stakeholder (faculty) perspective that will help the management and policy makers of business schools to understand the requirements of internal stakeholders. the study will identify most influential determinants that can be useful in designing strategies of business schools and to build competitive advantages of business schools in khyber pakhtunkhwa. 2. review of literature 2.1. competitiveness competitiveness can be defined as how well the ability of a firm is to meet its customer needs in comparison to other firms that offer a similar product or service (melnyk & yaskal, 2013). the competitiveness of firms is linked to the concept of competitive advantage (porter, 1985). a competitive advantage can be described as an attainment of superior position of a firm in an industry as compared to its rivals (depperu and cerrato, 2005). competitive advantage is the result of a strategy helping a firm to maintain and sustain a favorable market position (yasar, 2010). to this struggle of achieving competitive review of economics and development studies vol. 5, no 4, 2019 769 advantage, porter‟s suggested generic strategy framework. according to the porter (1985), there are two type of competitive advantage a firm can build: cost leadership and differentiation. a firm can gain competitive advantage either by keeping a lower cost than its competitors or commanding a higher price through product and service differentiation (porter, 1980 & 1985). cost leadership is a position of a firm in which they sell their goods or service to customers with a price either equal or lower than average industry price that provide them with a profit margin to gain maximum market share as compared to their rivals (kamau, 2013; porter, 1985). approaches or the competitive factors adopted for differentiation are various. for instance, design or brand image, technology, features, customer service dealer network, high quality product or other dimensions (porter, 1985). both type of competitive advantage is the outcome of actual value created by the firm for its customers (porter, 1985). further, porter has also clarified that this competitive advantage can be achieved only by trade-off i.e. choosing single strategy (cost leadership or differentiation) at a time otherwise firm will „stuck in the middle‟. 2.2. determinants of competitiveness of bschools review of business schools literature provided the determinants of competitiveness of business schools. these determinants can broadly classifid as cost related features and service quality features consistent to the generic strategies concept of porter (1985). the determinants necessary for the competitiveness of a bschools are identified in literature review are summarized in table 1. table 1. determinants of competitiveness of business school the above mentioned determinants of competitiveness of bschools are operationalized in literature as follows in figure 1. review of economics and development studies vol. 5, no 4, 2019 770 figure 1. operationalization of 12 determinants of competitiveness of bschools 2.3 measures of competitiveness customer satisfaction and reputation helps a firm in gaining a competitive advantage. literature supports that firms strive to provide superior value to the customers and build relationship with customers to gain customer satisfaction. and it is due to customer satisfaction that competitiveness of firm or educational institute increases (bauk and jusufranic, 2014; cabiddu, lui & piccoli, 2013; massawe, 2013). zeithaml, parasuraman & berry (1990) defined satisfaction as an overall judgment, perception or attitude on the superiority of service. the judgment is the result of difference between expectations and actual review of economics and development studies vol. 5, no 4, 2019 771 experiences of customer. in more simple way, student satisfaction can be defined as a short-term attitude which is derived from the assessment of the received education service (elliot and healy, 2001). the studies of sembiring (2018) and sichtmann & diamantopoulos (2013) linked reputation or image with the competitive advantage. sofiati & limakrisna (2017) defined reputation as how the general public understands the brand in terms of its services and communication program. thus, stakeholders‟ satisfaction and reputation of institution reflects its current level of competitiveness in relation to its competitors. sallis (2002) divided stakeholders of higher education institute into external customers (students, parents, employers, government) and internal customers (faculty). being an internal stakeholder, faculty perspective is highly important for the fact that they are the service providers. conceptual framework figure 2. theoretical framework of study 2.4 methodology for the study the total population of the study included 568 faculty members from 11 private and 18 public universities in 2016. the targeted population of study comprised of only those management sciences departments in khyber pakhtunkhwa (business schools) affiliated with hec recognized universities or dais. yamane (1967) formula was used that derived a sample of 261. stratified random sampling, a technique of probability sampling, was used in selecting respondents. population was divided into strata and respondents for sample were derived in same proportion as it was representing in population known as proportionate allocation method. 2.5 discussion on items the 12 determinants of competitiveness of bschools (independent variables) were measured through a list of underlying items resulted from detailed and in-depth literature review. the detailed operationalization of these 12 variables is given in figure 1. the dependent variable “competiveness” comprised of faculty satisfaction and reputation of bschool was measured with items taken from owino (2013). review of economics and development studies vol. 5, no 4, 2019 772 3 analysis and results 3.1 reliability and descriptive statistics the cronbach‟s alpha for 13 variables of study is in the range of 0.6-0.8 showing reliability of constructs as the values lies within acceptable limits (cooper & schindler, 2003). reliability and descriptive statistics of the construct are given in table 2. descriptive statistics showing gender diversity has the highest value of 4.42, followed by network of alumni having value for mean equal to 3.88. it shows the satisfaction of faculty on gender diversity and network of alumni of bschools. internationalization aspect has the lowest mean of 1.94 showing negative perception of faculty is high over the aspect of internationalization of bschools in khyber pakhtunkhwa. moreover, the dependent variable competitiveness the has mean value of 3.8 showing faculty has optimistic view about the overall competitiveness of bschools in kpk table 2. 1 descriptive statistics construct no of items cronbach α mean std. deviation cost 4 0.7 3.23 0.76 living experience 5 0.8 3.23 0.67 selection process 4 0.6 3.33 1.05 teaching staff 8 0.9 2.32 1.01 aps 7 0.9 3.67 1.18 employment prospects 5 0.8 2.68 0.88 research aspect 6 0.9 2.05 0.87 industry aspect 4 0.9 3.56 1.26 internationalization aspect 4 0.8 1.94 0.80 network of alumni 3 0.8 3.88 0.90 gender diversity 3 0.8 4.17 0.70 leadership 8 0.9 2.16 0.90 competitiveness 4 0.7 3.78 0.81 3.2 assumptions’ statistics for factor analysis principle component analysis (pca) with varimax rotation was applied in the study. the two tests kmo measure of sampling adequacy and bartlett‟s test of sphericity were carried before factor analysis. the recommended value for kmo is 0.6 or greater. the results for kmo values for all constructs are higher than 0.6 and satisfying the assumption of sample adequacy that there is no sample size issue. results for bartlett test of sphericity depicted that the p-value of the bartlett‟s statistic for all factors are significant, thus, assumptions of sphericity is satisfied (leech, barrett & morgan, 2005) showing data is suitable for factor analysis. bartlett‟s test of sphericity means that at least one significant correlation between two of the items is observed. after obtaining satisfactory values for kmo and bts, items were scrutinized for the values of communalities and factor loadings. those items were retained in factor analysis having communalities higher than 0.50 (leech et al., 2005) and have factor loading value of 0.5 or higher. overall, the items deleted for constructs living experience, teaching staff, aps, employability prospects, research aspect, industry aspect, internationalization aspect, leadership & management and competitiveness of bschools were 6,5,14,2,3,3,5,6 and 3 respectively. the kmo, bts and p values are given in table 3. table 3. assumptions statistics for exploratory factor analysis constructs kmo bts p cost 0.7 251.36 0.000 living experience (tf) 0.8 343.62 0.000 selection process 0.7 229.90 0.000 teaching staff (ft) 0.9 1666.41 0.000 academic, personality & societal 0.9 1308.15 0.000 review of economics and development studies vol. 5, no 4, 2019 773 development (aps) employment prospects/placement (pc) 0.7 604.05 0.000 research aspect(res) 0.8 937.01 0.000 industry aspect (industry_l) 0.7 614.00 0.000 internationalization aspect (intlo) 0.7 438.62 0.000 network of alumni (alumni) 0.7 227. 74 0.000 gender diversity (gbalance) 0.8 365.32 0.000 leadership & management (la) 0.8 1314.49 0.000 competitiveness (compdv) 0.7 350.71 0.000 4. structural equation modeling structure equation modeling abbreviated as sem, used in the study to investigate the hypothesized effect of independent variable on dependent variable. before sem, measurement model for each construct was tested to get good model fit. modifications indices and covariance were applied where required. the results for measurement model for each construct are given in table 4. the six fit indices were used in the study to check the fitness of model included chi-square/degree of freedom (cmin/df), goodness of fit index (gfi), root means square error of approximation (rmsea), comparative fit index (cfi), tucker lewis index (tli) and root mean square residual (rmr). all the values of fit indices from model 1 to model 13 were in the threshold proposed by usluel, askar, and bas (2008) showing model is good fit. overall measurement model of 13 factors is presented as model 14 in figure 3 and table 5. model 14 include all the 12 independent variables and 1 dependent variable. the values of fit indices are also satisfactory and in line with usluel et al (2008) showing good fit of the model. table 4. 2 summary of measurement models for constructs measurement model rmsea gfi rmr cfi tli cmin/df optimum value (usluel et al., 2008) <0.08 >0.9 <0.1 >0.9 >0.9 <3 model 1-cost 0.07 0.98 0.04 0.97 0.95 2.71 model 2-living experience 0.05 0.98 0.02 0.99 0.97 1.79 model 3-selection process 0.08 0.98 0.10 0.98 0.95 4.13 model 4-teaching staff 0.02 0.98 0.02 0.99 0.99 1.13 model 5aps 0.05 0.98 0.02 0.99 0.99 1.75 model 6employment prospects 0.03 0.99 0.01 0.99 0.99 1.36 model 7research aspect 0.02 0.99 0.01 1.00 1.00 0.69 model 8industry aspect 0.03 0.99 0.02 1.00 0.99 1.22 model 9-internalization aspects 0.06 0.99 0.01 0.99 0.98 2.05 model 10-network of alumni 0.07 0.99 0.04 0.98 0.97 3.00 model 11gender diversity 0.02 0.98 0.13 1.00 1.00 1.24 model 12-ledership 0.05 0.98 0.02 0.99 0.98 1.70 model 13-competitieness 0.08 0.98 0.03 0.99 0.97 0.40 review of economics and development studies vol. 5, no 4, 2019 774 figure 3. measurement model for 13 factors table 5. summary of overall measurement model of 13 factors measurement model rmsea gfi rmr cfi tli cmin/df model 14overall model of 13 factors 0.06 0.99 0.05 0.98 0.95 2.27 5. hypotheses testing after obtaining satisfactory measurement models, the study has used sem to analyzed relationship between 12 independent and dependent variable. the framed hypotheses from h1 to h12 were tested using sem. the results are given in table 6 showing that r 2 ” has a value of 0.319. it implies that 31.9% of variation in competitiveness of bschools is explained by 12 independent variables of study. the results depicted that teaching staff (β= 0.262), employment prospects (β= 0.215), gender diversity (β= 0.477), leadership and management (β= 0.214) positively contribute to the competitiveness of bschools and results are significant having p< 0.05. on other hand, industry aspect (β= -0.177) and internationalization review of economics and development studies vol. 5, no 4, 2019 775 aspect (β= -0.116) were found to have significant and negative effect on competitiveness of bschools (p<0.05). moreover, insignificant relationship was found between cost, living experience, selection process, academic, personality & societal development activities (aps), research aspect and network of alumni with dependent variable competitiveness of bschools (p>0.05). therefore, the hypotheses h4, h6, h8, h9, h11, and h12 are accepted and hypotheses h1, h2, h3, h5, h7, and h10 are rejected. table 6. hypothesis testing hypothesis structural paths estimate p results h1 comp <--cost -0.073 0.326 not supported h2 comp <--living experience -0.022 0.765 not supported h3 comp <--selection process -0.029 0.601 not supported h4 comp <---teaching staff 0.262 *** supported h5 comp <--aps -0.117 0.463 not supported h6 comp <--employment prospects 0.215 *** supported h7 comp <--research aspect -0.016 0.902 not supported h8 comp <--industry aspect -0.177 *** supported h9 comp <--internationalization aspect -0.116 *** supported h10 comp <--network of alumni 0.043 0.470 not supported h11 comp <--gender diversity 0.477 *** supported h12 comp <--leadership & management 0.214 *** supported r 2 =0.319, sig = .000 6. discussion the results of the study revealed that the determinants which are significantly and positively contribute to competitiveness of bschools from faculty perspective are teaching staff, employment prospects, gender diversity and leadership & management. the significant positive contribution of teaching staff to competitiveness of bschools is also justified in the studies of butt & rehman, (2010), gibson (2010), owino (2012) and shah, nair, & bennett (2013). the significant and positive influence of employment prospects on competitiveness of bschools is supported in the study of deuren & lhaden (2017) and lenton (2015). the literature also supports the positive impact of gender diversity. mcmillan-capehart, (2003) and ali, metz & kulik (2007) asserted that gender diversity is positively associated with competitive advantage. the current study also found a positive influence of leadership & management on competitiveness of bschools consistent with the previous research studies of schmidt (1995) and ravindran & kalpana (2012). the results of current study supports peter senge (1990) concept of learning organization where organization adapts to the changes through people in teamwork and it is the essence of leadership how to make it possible. the results of the study unearth a negative and significant relationship between industry aspect and internationalization aspect with competitiveness of bschools. the negative effect of industry aspect is in line with studies of manjarrés-henríquez, gutiérrez-gracia, carrión-garcía, & vega-jurado (2009) and kaymaz, & eryigit (2011). moreover, the special circumstances of the province cannot be ignored in the context. the province and its industry suffered a huge setback from terrorism. it resulted in large number of closure of industrial units and higher ratios of unemployment (social policy and development centre karachi, pakistan (2010). due to these reasons, industry became unattractive in the province and may be responsible for negative perception of faculty about industry interface. the internationalization aspect was also found to have negative influence negating the earlier studies of kiriakidis & moos (2010) and lambert & usher (2013). it can be assumed from negative perception of the faculty about relationship of internationalization aspect and competitiveness of bschools that they are not ready to embrace the new model of education because internationalization aspect is one of the important current challenge in review of economics and development studies vol. 5, no 4, 2019 776 academic and without faculty‟s will it is not possible to deal with it (bedenlier and zawacki-richter, 2015). the internationalization aspect is affecting teachers directly (taylor, 2004). moreover the insignificant result of the study for cost is consistent with the study of alzoubi & emeagwali (2016). the insignificant results of the study for living experience are line with khan, ahmed and nawaz (2011). the insignificant results of the study for selection process consistent with the view of yorke (1999) that process is more crucial than input they selected in educational institutes. the insignificant results of the study for academic, personal and societal development is negating the results of owino (2012) showing that faculty in kpk are not favoring new teaching methodologies, new roles and new challenges; however these are the facets of globalization (bedenlier and zawacki-richter, 2015). 7. conclusion the study used sem to check the relationship between 12 independent variables (determinants of competitiveness) with one dependent variable i.e. competitiveness of bschools. the results depicted that teaching staff, employment prospects, gender diversity and leadership & management have a significant and positive effect on dependent variable competitiveness of bschools. on other hand, industry aspect and internationalization aspects were found to have significant negative influence on competitiveness of bschools. the effect of determinants cost, living experience, selection process, academic, personality & societal development activities (aps), research aspect and network of alumni on dependent variable competitiveness of bschools was found insignificant. the future studies should be done on faculty perspective in kp to understand the factors that is creating a negative perception of faculty towards industry and internationalization aspects in bschools. moreover, empirical studies should be done on determinants of competitiveness of bschools in future from other stakeholders‟ perspectives such as top management, parents and employers to identify strategic factors for creating competitive advantage. 8. theoretical and contextual contribution of the study the study used satisfaction and reputation 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(1990). delivering quality service: balancing customer perceptions and expectations. new york: the free press. https://www.timeshighereducation.com/world-university-rankings/2016/regional-ranking-methodology https://www.timeshighereducation.com/world-university-rankings/2016/regional-ranking-methodology http://www.usnews.com/education/best-graduate-schools/top-business-schools/articles/2014/03/10/methodology-2015-best-business-schools-rankings http://www.usnews.com/education/best-graduate-schools/top-business-schools/articles/2014/03/10/methodology-2015-best-business-schools-rankings review of economics and development studies vol. 5, no 1, march 2019 59 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads delivery of health care service in the organization of islamic cooperation (oic) member states and regional diversity: a bootstrap dea analysis 1 nabila asghar, 2 majid ali, 3 fatima farooq, 4 urooj talpur 1 assistant professor department of economics and business administration university of education bank road campus lahore, drnabeelakhan.eco@gmail.com 2 phd scholar of economics ncba&e lahore, majid.uos@gmail.com 3 assistant professor, school of economics, bahauddin zakariya university, multan 4 assistant professor department of economics university of sindh jamshoro, urooj@usindh.edu.pk article details abstract history revised format: february2019 available online: march 2019 for the last few decades, demographic changes require new and expensive medical innovations, which ultimately put the health care system under financial pressure. therefore, provision of efficient services for the sustainability in health care system is mandatory. the objective of this study is to explore the performance of health care services provided in 55 oic member countries during 2011 and 2015.the bootstrap data envelopment analysis and truncated regression approach have been applied to observe the health system and estimate the efficiency score in 55 oic member countries. the findings of dea show that cost efficiency (ce), technical efficiency (te) and allocative efficiency (ae) of health care system of oic member countries on average are 0.52, 0.72, and 0.70, respectively. it indicates that oic countries are not good at selecting cost efficient input mix. the results of truncated regression approach indicate that out-pocket health expenditures is the most important determinant relative to other indicators. it is suggested that it is hard to improve the overall health system at most efficient level. for this purpose there is a need to educate the mass and provide the better opportunities so that people can earn handsome amount, through which they may have better health care. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords health care system; efficiency; data envelopment analysis; truncated regression analysis. jel classification: h75, i11, i12, i18 corresponding author’s email address: drnabeelakhan.eco@gmail.com recommended citation: asghar, n., ali, m., farooq, f., talpur, u., (2019). delivery of health care service in the organization of islamic cooperation (oic) member states and regional diversity: a bootstrap dea analysis, review of economics and development studies, 5(1), 59-66 doi: 10.26710/reads.v5i1.568 1. introduction social and demographic changes raise the financial pressure on a common man who suffers from chronic diseases which ultimately put financial pressure on an economy through more expensive and innovative medical system [schely (2018), chevreul, et al., (2010)].the increasing demand for new and innovative treatments and an increasing request of quality of life for patients put huge financial burden on an economy (porter, 2009). now a days all health related sectors and policy makers are highly concerned with better performance of health system and formulate those policies and introduce reforms which can improve the health care system. therefore, in order to improve the quantity and quality of health system it is vital to assess this system thoroughly and in depth. (varela, 2010). how many resources are given for health care and how much is consumed by human can be easily assessed and measured through the efficiencies using bootstrap method. (who, 2000). efficiency means how much an http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 60 organization or hospital uses resources to provide the best possible opportunities to the patients over the given period of time (vitaliano and toren, 1996). farrell initially developed efficiency measures, later applied by debreu and koopmans. mehregan, (2008) defines the economic efficiency as minimizing the cost of producing anything/product. further, economic efficiency is divided into two parts, one is technical and other is allocative efficiency. the allocative efficiency is the optimally used combinations of the factors of production, whereas the producers stay on the stochastic frontier when behaving as technically efficient (torkamani, 2009). there are few studies based on the efficiency, e.g. pinto (2013) found mean efficiency scores were 0.981 and 0.988 with constant and variable returns to scale conditions respectively for italy. de cos and moral-benito (2009) used 29 industrialized countries to find the determinants of health system efficiency using data envelopment (de). the results revealed that australia attained the highest (0.991) and hungary the lowest (0.942) efficiency score. haddad et al., (2013) pointed out that the multiple insurers ultimately leads towards the low efficiency in providing the medical facility. (hadad, et al. 2013). afonso et al.(2005) viewed that those countries having small public sector may achieve the high efficiency score and vice versa in health sector. ramsay found female literacy and income of the household as the main determinants in health care services (ramsay, et al., 2001). extensive studies conducted to assess the efficacy and efficiency of health systems for different countries, including oecd, european and american countries. a very limited studies have been carried out in developing countries for investigating the factors responsible for low efficiency score of health system. therefore, the present study aimed to measure the cost efficiency and finding determinant of efficiency in oic countries during 2011 to 2015 in health system provided by their respective government. 2. method and methodology usually cost efficiency is estimated by two methods one is parametric (stochastic frontier (sf)) and other is nonparametric techniques (data envelopment analysis (dea)). parametric projection of the stochastic frontier requires a behavioral hypothesis for the minimization of cost. furthermore, the econometric method is parametric and muddles the effects of misspecification of functional form with inefficiency. dea technique is nonparametric and owing to trivial conditions put on the form of te hnology is less disposed to su h ind of error of spe ifi ation parameter 2014). dea is built upon relative proficiency procedures suggested by farrell (1957). in this method a country is considered to be efficient if it is producing on the produ tion oundary y using the input pri e attuned operational osts as the input varia le of ost effi a y merely estimates farrell’s measure of total effi ien y inna et al 2010). in evaluating the cost efficacy of oic member countries, the present study uses dea technique that is based on linear programming method in the estimation of unit-specific efficacy scores (charness, et al., 1978). dea makes a piecewise linear efficacy boundary that works as baseline in the assessment of efficiency. if a country is working efficiently it will lie on the production possibility curve and efficacy score of this country will be one which represents 100 percent efficient. less efficient countries will get a score less than one. for example if score of a country is 0.70 which is measured on the basis of input oriented efficiency, it is seventy percent efficient and thirty percent inefficient which means that 30 percent more output may be produced by using existing resources, alternatively we may say that it is producing only seventy percent of its potentials. if we assume constant returns to scale prevails then the efficiency scores will be similar whether they are obtained by input orientation or output orientation. cost efficiency is estimated by solving the following linear program: s.t. ≥0 where y= it is matrix of dimension n× m of outputs review of economics and development studies vol. 5, no 1, march 2019 61 λ= it is a matrix of dimension 1×n of intensity varia les c= it is a matrix of dimension n×1 of costs. ce= it is a s alar demonstrating a ountry’s ost level i = it is a column vector of 1s. allocative and technical efficiency can be solved through system of linear equations, which gives the input-oriented technical efficiency: minz,uu subject z.y yo z x ≤ x zi≥ 0 ∑ ae is simply calculated by dividing ce to te, which is as follows: ae = ce/te at second stage, calculated dea efficiency score is simply regressed on some other variables to see the effect. there are various techniques to analyze the effect. following asbu(2007), the dea efficiency scores for vrs may be converted into inefficiency scores using the formula given below: inefficiency score = (1/efficiency score) -1 most commonly, tobit model is used for dea anlaysis, but simar and wilson (2007) pointed out that such technique are not appropriate. they suggested truncated regression with bootstrap do satisfactory in its performance during monte carlo experiments. so, in present study we also apply bootstrap dea approach. simar and wilson (2007) assumed that distribution is truncated normal with a zero mean (before truncation), unknown variance and a (left) truncation point is determined by this very condition. the general form of the econometric model may be written as: 3. data description the study is conducted to measure cost efficiency of health system of member oic states for the period of 5 years during 2011 to 2015. the organization of islamic cooperation (oic) was established in 1969, now have 57 members. the study estimated the efficiency of 55 oic member countries as data on palestine is not available. in this study the following variables are used as a measure of output, and input variables with their corresponding input prices (table. 1). the selection of these variables is based on early studies (for example,ogloblin, 2011; karpa and leoniowska, 2014; pourreza, et al., 2017). table 1: brief description variables used variables explanations o u tp u ts le average number of years that a person at birth is expected to live mmr/100000 probability of maternal mortality rate per 1000 birth imr/1000 probability of dying between birth and the first birthday of a child/ 1000 birth u5r/1000 probability of dying between birth and under first five year of a child /1000 birth in p u ts physian /1000 number of physicians /1000 people n&w/1000 number of nurse and midwives per thousand people beds/1000 number of beds in a hospital per thousand people cost public health care expenditures in thousands e n v ir o n m e n ta l oop out of pocket health expenditure % of total health expenditures review of economics and development studies vol. 5, no 1, march 2019 62 lr adult literacy rate (%) sw people using safe drinking water services (% of population) popg growth rate of population% ur unemployment rate % in dea method, data have been compiled from world health organization (who), united nations development fund, world bank, and oic ountries’ national health a ounts then the ce of the oic ountries health systems is calculated. the summary statistics of the inputs, outputs and environmental factors are given in table 2. table 2: descriptive statistics of inputs and outputs output inputs le imr mmr u5mr phy n&w* beds* cost 2 0 1 1 mean 67.88 39.32 309.98 56.26 1.06 1.68 1.56 49.87 median 70.46 35 157 43.7 0.64 0.94 1.08 48.44 s.d 9.02 25.68 335.94 42.2 1.12 1.62 1.38 18.85 max 80.63 97.3 1580 149.8 3.92 6.01 7.7 92.02 min 49.64 6.8 4 8 0.02 0.04 0.27 19.19 2 0 1 2 mean 68.21 38.07 301.45 54.11 1.34 1.98 2.14 49.72 median 70.65 33.2 155 41.1 1.09 1.23 1.9 48.17 s.d 8.88 24.92 325.65 40.61 1.18 1.73 1.5 19.72 max 80.82 93.1 1510 145.2 3.84 7.86 7.6 91.82 min 50.34 6.8 4 7.9 0.04 0.07 0.4 2.03 2 0 1 3 mean 68.53 36.88 293.55 52.11 1.29 2.08 2.64 49.9 median 70.84 31.4 162 38.6 0.98 1.64 2.4 49.62 s.d 8.74 24.2 317.31 39.13 1.14 1.9 1.5 20.02 max 80.99 89.4 1460 140.7 3.75 8.87 8.1 92.15 min 50.96 6.7 4 7.8 0.03 0.17 0.9 14.63 2 0 1 4 mean 68.84 35.77 286 50.22 1.29 2.11 1.89 50.55 median 71.01 29.7 158 36.3 1.28 1.05 1.59 51.7 s.d 8.63 23.56 309.16 37.77 1.04 1.97 1.57 20.22 max 81.14 86.2 1410 136.7 3.49 8.37 7.7 93.86 min 51.51 6.6 4 7.7 0.03 0.19 0.23 16.99 2 0 1 5 mean 69.15 34.72 278.13 48.47 1.37 2.33 1.68 49.84 median 71.18 28.2 155 34.2 1.38 1.05 1.47 47.39 s.d 8.53 22.94 300.19 36.5 1.09 2.42 1.37 18.87 max 81.29 83.3 1360 132.5 3.87 11.65 7.7 91.82 min 51.99 6.5 4 7.6 0.04 0.08 0.18 17.63 sour e: authors’ cal ulation 4. efficiency result we have computed all three efficiencies using bootstrap dea for vrs for 55 oic member states and results are presented in table 3. the table shows technical efficiency (te) in the second column, allocative efficiency (ae) in the third column followed by cost efficiency (ce) in the last column. it indicates that te, ae and ce on average are 0.70, 0.72, and 0.51, respectively during the study period. results indicate that more than seventy percent of the countries are allocatively and technically efficient, but only about 50 percent are cost efficient which shows that they are not good for selecting the input combinations which minimizes the cost optimally. further, if we see cost efficiency in depth, as the average of the 55 oic member countries shows 0.51, there is 49% showing inefficiencies during the same period. it indicates that there is a possibility to improve its overall effect by removing the 49% inputs at current output level. out of 55 countries only 7 (13%) countries fully achieve the overall cost minimization i.e. afghanistan, albania, chad, lebanon, pakistan, sierra leone and somalia. while 48 (87%) countries are found away from the optimal cost obtained from the existing technology. further, 6 countries (11%) fall in the range of ce scores 0.70 to 0.99 and 32 (58%) countries are using more than 50% cost increasing resources in their healthcare system. most expensive healthcare systems are found in yemen, kuwait, togo, review of economics and development studies vol. 5, no 1, march 2019 63 kazakhstan, azerbaijan and burkina faso as compare to other member countries where more than 80% resources are increasing the cost of their health care system. these countries can reduced 80% of their healthcare resources at given output level. afghanistan, albania, chad, lebanon, pakistan, sierra leone and somalia, are allocatively fully efficient, whereas the allocative efficiency for an individual country is 0.72, which could be further decreased inefficiency from 18% by reallocating the input combinations. although cost efficiency for yemen, kuwait, togo, kazakhstan, azerbaijan and burkina faso are quite low, even lower than 0.20, but their ae score are quite better. it is evident from the findings that these countries are good enough in allocating the resources and inputs while not expert in getting the input combinations ideally which minimizes the cost at the optimal levels. it also shows that only two countries burkina faso and yemen, have more than 80% misallocation of resources at the given prices. while assessing the technical efficiency, afghanistan, albania, chad, comoros, gambi, lebanon, mauritania, pakistan, sierra leone and somalia show the maximum efficiency (1.00), and benin, niger, brunei, morocco, guinea, tajikistan, indonesia and mali are following with te in the range 0.90-0.99. it meansthat there is no unnecessary input-mix in the health system of oic member countries for a given level of output with the current technology. out of 55, 43 (78%) countries indicate the comparatively high level of the technical efficiency while only 7 countries i.e. saudi arabia, kuwait, togo, uzbekistan, kyrgyz, azerbaijan, kazakhstan are technical inefficient, which may be viewed as it could be further declined whether by changing the combinations of the inputs or by downing the input scale. overall, the cost efficiency over the 55 oic member countries represents very low as compared to the allocative and technical efficiency during the study period. it indicates that these member countries are good at allocating the input-mix and using appropriate input-mix, but may be not good at selecting optimal cost obtained from the existing technology. table 3: technical, allocative and cost efficiency scores of the oic countries (2011-15) countries technical efficiency allocative efficiency cost efficiency oic 2011-15 2011-15 2011-15 afghanistan 1 1 1 albania 1 1 1 algeria 0.57 0.76 0.42 azerbaijan 0.29 0.69 0.16 bahrain 0.6 0.51 0.31 bangladesh 0.57 0.76 0.43 benin 0.98 0.93 0.91 brunei. 0.96 0.67 0.63 burkina faso 0.47 0.3 0.14 cameroon 0.77 0.57 0.39 chad 1 1 1 comoros 1 0.68 0.68 cote d'ivoire 0.46 0.76 0.35 djibouti 0.84 0.69 0.56 egypt 0.5 0.57 0.28 gabon 0.52 0.74 0.34 gambi 1 0.93 0.93 guinea 0.94 0.68 0.64 review of economics and development studies vol. 5, no 1, march 2019 64 guinea-bissau 0.8 0.75 0.6 guyana 0.69 0.82 0.59 indonesia 0.92 0.75 0.7 iran, 0.88 0.71 0.61 iraq 0.54 0.89 0.47 jordan 0.51 0.59 0.3 kazakhstan 0.23 0.71 0.16 kuwait 0.36 0.51 0.17 kyrgyz 0.31 0.83 0.25 lebanon 1 1 1 malaysia 0.66 0.57 0.36 maldives 0.49 0.66 0.29 mali 0.91 0.58 0.54 mauritania 1 0.98 0.98 morocco 0.95 0.99 0.94 mozambique 0.55 0.72 0.39 niger 0.97 0.72 0.7 nigeria 0.44 0.62 0.25 oman 0.66 0.58 0.35 pakistan 1 1 1 qatar 0.81 0.43 0.35 saudi arabia 0.37 0.63 0.23 senegal 0.73 0.48 0.34 sierra leone 1 1 1 somalia 1 1 1 south sudan 0.69 0.5 0.3 suriname 0.48 0.81 0.39 syrian 0.66 0.71 0.47 tajikistan 0.93 0.8 0.76 togo 0.32 0.71 0.17 tunisia 0.64 0.81 0.52 turkey 0.54 0.69 0.36 turkmenistan 0.6 0.69 0.41 uganda 0.62 0.45 0.23 uae 0.73 0.58 0.41 uzbekistan 0.32 0.81 0.24 yemen, rep. 0.59 0.29 0.17 summary statistics of efficiencies score 2011-15 2011-15 2011-15 average 0.7 0.72 0.51 review of economics and development studies vol. 5, no 1, march 2019 65 median 0.69 0.73 0.42 s.d 0.28 0.22 0.3 maximum 1 1 1 minimum 0.15 0.2 0.11 4.1 bootstrap truncated regression at the second stage, determinants of efficiency are estimated by using regression analysis in the light of technique suggested by simar and wilson (2007). the results are presented in table 4. table 4: truncated regression analysis technical inefficiency allocative inefficiency cost inefficiency oophe 0.3521* 0.207** 0.2615* lr -0.0621* -0.0183* -0.0429* sw -0.0381** -0.02513* -0.0248* pop growth 0.0251* 0.1024** 0.0410*** ur 0.0024* 0.0049*** 0.0029** c 1.2031* 1.1304** 2.1801* ***, **, and * represent significance at 1, 5, and 10 percent points. note: estimation based on algorithm 1 with 2000 bootstrap followed by simar and wilson, (2007). the regression results shown in table 4 have been obtained after 1000 iterations, the dependent variable is inefficiency scores and the independent variables are out of pocket health expenditure percentage of total health expenditure, literacy rate, and percentage of population access safe drinking water, population growth rate and unemployment rate. the first independent variable oophe which has positive coefficient and variable is statistically significant. it indicates that as there is an increase in share of oop in total health expenditure, there will be an increase in technical, allocative and cost inefficiency. however the increase in technical inefficiency is greater than allocative and cost efficiency. this positive impact of first independent variable may be due to the reason that a unit increase in oopthe leads to an increase in private health expenditures as compare to public health expenditures. oop negative effects of out-of-pocket payments on access to and equity of health services (kirgia, etal., 2015). people may prefer to use private health facilities and public health facilities will face inefficiency due to improper facilities of public health system, which ultimately enhance the inefficiency of the health care system. the next variable is literacy rate which has negative but statistically significant. it indicates that as there is an increase in education level, there will be a decrease in efficiency (te, ae, ce) which may be due to the reason that an increase in education level leads to an increase in awareness regarding the diseases and relevant preventive measures. probability of getting sick will be less with better education of the people. the coefficient of percentage of population having access to safe water showing significant effect, which explains that maximum people have safe drinking water, would not get sick. the next variable is population growth rate is positive and significant which indicates that size of the population increases the inefficiency of the health care system as population grows there is be less facilities to the greater mob as resources will be divided and less facilities will in return available per person. the coefficient of unemployment is positive and statistically significant which indicates that inefficiency of the health care system increases along with an increase in unemployment. 5. conclusion and recommendations the health systems of the oic member countries have been examined using boots strap dea. the empirical findings reveal that 50% of the efficiency score is obtained, which can be further improved through re-allocation of resources at the best efficient way in health system. in this milieu, this study has contributed by giving policy makers useful information about the economic performance of selected oic countries particularly about the regional health system. it is pointed out that there is presence of potentials to improve the technical efficiency through optimal use of input combinations. out of pocket health expenditures and literacy rate have more impact on technical, allocative and cost efficiency as compare to other factors. the government of these countries should prioritize and allocate more resources to finance health as well as in education sectors 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(2002) econometric analysis of cross section and panel data. cambridge: mit press; 2002. world health organization who) 2000) ―the world health report 2000 health systems: improving performance: geneva: who; 2000. review of economics and development studies vol. 4, no 1, june 2018 39 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 1, june 2018 journal homepage: www.publishing.globalcsrc.org/reads institutional quality, school enrolment and mobile subscribers in economic community of west african states (ecowas-5): impact on fdi using panel data 1 zulaiha a. zubair, 2 hussin abdullah 1 school of economics, finance and banking, universiti utara, malaysia. 2 universiti utara malaysia articledetails abstract history revised format: may 2018 availableonline: june 2018 basically, the quality of institution, human capital (schoolenrolment) and infrastructure (mobile subscribers) are significant determinants of foreign direct investment (fdi). with exception of few studies on corruption, however, empirical research on the link between infrastructure, human capital and fdi remain limited. particularly in the context of economic community of west african states (ecowas). this paper aims to examine the linkage between infrastructure (mobile subscribers, corruption, schoolenrolment), and foreign direct investment (fdi) among selected ecowas countries using panel data techniques for the period of 1990-2015. the methodology carried out to achieve this objective involves the panel unit root, panel cointegration and fully modified ordinary least square (fmols). the result indicates that, there is long run relationship among the series. corruption and infrastructure are negatively significantly related with fdi at the long run in the selected ecowas countries. the empirical evidence indicates that feeble level of institutions (corruption) and infrastructure impedes fdi inflows in the selected ecowas countries. the results confirm that fdi enhancement through role of institution, school enrolment and infrastructure (mobile subscribers) exist not only in the transition nation but also in the selected ecowas countries. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords foreign direct investment, human capital, school enrolment, infrastructure, mobile subscribers, economic growth jel classification f21, c34, f43, o16. corresponding author’s email address: zub7777az@gmail.com recommended citation: zubair, z.a., abdullah, a., (2018). institutional quality, school enrolment and mobile subscribers in economic community of west african states (ecowas-5): impact on fdi using panel data. review of economics and development studies, 4 (1) 39-49 doi: 10.26710/reads.v4i1.279 1. introduction institutional quality attributes which include freedom of economic activities and prudency of countries’ governance are acceptable determinants of foreign direct investment (fdi). the multinational corporations (mncs) steadily move from market-seeking fdi and resource-seeking fdi to efficiencyseeking fdi due to these factors (dunning, 2002). the inflow of fdi is definitely perverse in africa due to immense poverty while domestic savings and income continue to be low (shahbaz&rahman, 2010). these elements are linked with the reinforcing flows of foreign aid, the slightest advantage of africa in world business and the mass volatility of capital flow that quickly signal for the compelling need to enhance the right type of fdi (afolabi&bakar, 2016). http://www.publishing.globalcsrc.org/reads mailto:zub7777az@gmail.com review of economics and development studies vol. 4, no 1, june 2018 40 however, with rising importance of fdi, the west african countriesneed to learn to attractfdi potentially(rjoub, aga, abualrub& bien, 2017; dupasquier and osakwe, 2003; anyanwu, 2006; azman-saini, baharomshah and law, 2010). these studies further reveal that fdi exhibit a greater achievement in the economic development process i.e. domestic savings support, creation of employment and growth, assimilation into the global economy, adoption and adaptation of modern technologies, improvement of competitiveness, advancement of local suppliers, and promoting skills of local labour force (azam& ahmed,2015;azam&gavrila,2015). the ecowas region comprises of 15 countries with a population of over 300 million and the countries are priviledged with natural resources such as oil, gas and minerals in commercial quantity. notwithstanding, the inflow of fdi to africa recently shows less inflow to developing nations including ecowas. africa’sfdi inflow revived from $2.2billion in 1980 to $15 billion in 2004 and eventually stood at $54 billion in 2015. africa’s percentage in addition to ecowas world flows declined from 2.3% in 1980 to 1.5% in 2004 and also declined more by 7% in 2014 (unctad, 2015).the interminable downturn of the inflow poses a critical menace to ecowas countries’ economy. the quality of infrastructure in respect of i.e: transportation, power intencity, mobile suscribersposes a serious issue to assemblying manufacturing and service as well as minimizes the cost of business transaction (regional outlook report, 2014) moreover, profitable and productive as well as intriguing investors will consider decrease in administrative hindrances, boost of both tangible and human capital ( regional outlook report,2014). thus there is necessity to examine the role of above traditional determinants of fdi. world bank (2000) examined that around $2 trillion is wasted yearly due to fraud and misdeed, which accumulates to around 5% of gdp globally. according to the global financial integrity (gfi), sub-saharan africa along with ecowas nations faced huge loss due to illicit capital outflow which is leveledat around4.0% of gdp (zubair, nor’aznin, &azam, 2017). however, the spurious misinformation of trade operations recorded to be the largest part of financial illicit outflow from developing nations. this represents 83.4% of all flows illicitly (zubair, nor’aznin, &azam, 2017).apart from the acceptance of the impact of openness in attracting fdi inflows, several authors underlined the influence of other policy variables i.e.quality of infrastructure and the stability of macroeconomics as determinants of fdi inflow (rjoub, aga, abualrub& bien, 2017; gol and kashani, 2012; antras and helpman, 2004). thebottomline is that, this paper adds to the frontier of knowledge in a number of ways. first, it is an addition to the existing literatures on the impact of institutions, human capital (school enrolment) and infrastructure (mobile subscribers) on fdi. the limited inflows of fdi especially in the context of ecowas region are examined with the use of panel time series methodology. this has added another dimension to the present study. second, this paper employs institutional quality variable (corruption) in the examination of target and source countries in order to take both pull and push factors into account. for instance, a lower level of corruption in ecowas’ nations, could be a source of attraction for the mncs, but a higher level of corruption in the source nations could be a source of repulsion (rjoub, aga, abualrub& bien, 2017). this study also explores the impact of corruption,schoolenrolmentand mobile subscribers on fdi of the selected ecowas countries from 1990-2015 with the use of panel data. the rest of this paper elaborate the theoretical and empirical literature and elaborates methodology and data for theempirical analysis. the last section namely results discusses analysis of findings and theirimplications for policy. review of economics and development studies vol. 4, no 1, june 2018 41 2. literature review fdi is a crucial element to economic growth and development,especifically in view that, it is the vital driver of the technology transfer and competitiveness (rjoub, aga, abualrub& bien, 2017).since fdi contributes to creation of jobs and economic growth which will indirectly reduce poverty, especially in relation to income. therefore, this income will be used by states to finance infrastructure and development of services. specifically, most of the benefits of these income can be direct and indirect.corporate income which companies paid to state and natural resource sector revenue from fdi, all constitute the direct income, while the income that improve the tax base at all overall level is viewed as indirect income.moreover,the research conducted by chen and hambright(2016) explored the same in their study onchina. notwithstanding, as corruption spread all over the world, it is a disturbing policy interest of the government because,the corruption increases cost of doing business (zubair et al. 2017). the outcome of the investigation on fdi flow from us to africa by nnadozie and osili (2004) revealed, that the performance of infrastructural quality on fdi is significantly low. evidence from anyanwu and erhijakpor (2004) testified that, mobile infrastructures, gdp and trade openness extremely increase inflow of fdi into africa as against, export processing zones, capital gains tax and credit to the private sector which are negatively significant. presentations by sekkat and veganzones-varoudakis (2007) signified that, infrastructural quality, trade openness and robust political and economic situations are essential for south asia, africa, and the middle east in alluring fdi (iamsiraroj, 2016).oladipo (2008) explored the principles of nigeria’s fdi inflow from 1970-2005 and revealed that, potential market size, the degree of export orientation, administering and enabling environment toward the contribution of infrastructural quality, human capital, and ensuring macroeconomy stability are vital principles of inflow of fdi (iamsiraroj, 2016).the justification of infrastructural quality,competent infrastructure is recommended to re-enforce new technologies and to ease correlation amidst domestic firms and fdi (busse, erdogan, &mühlen, 2016; iamsiraroj, 2016). furthermore, corruption boost apprehension, as long as corruption accessions are not reinforced in the courts of law.foreign investors would aim to avert venturing into business in countries with immense corruption. however, a positive effect of corruption on inflow of fdimay exist. bearing in mind thedifficulty in regulation and bureaucratic flaws, corruption may surpass efficient bureaucracy by aiding the procedure of decision making (bardhan, 1997; iamsiraroj, 2016). in the study of azam and lukman (2010), azam (2010) and azam and emirullah (2014) they indicated that trade openness, infrastructure, inflation, urbanization, human capital, corruption, market size and political stability are the most vital factors of the inflow of fdi. according to kumar (2001), testing a particular yardstick for infrastructure as well as corruption index in inflow of fdi modelling, can not only capture the actual impact but combing other variables like real exchange rate and interest rate (zubair&aladejare, 2017). kenya, obwona and egesa (2004) indicated that, productive and appealing investors have not been eager to invest in uganda due to lack of quality infrastructure , technological knowhow and the land locked nature of the uganda.in the study of morisset (2000), he concluded that, good infrastructural quality and well boosted human capital in mali and mozambique brought a major breakthrough in fdi. 3. methodology and data the model specification to determine the framework given ahead and the set up of ecowas, with the variation of fdi inflow in africa.the following estimating technique was used for institutional development and mobile review of economics and development studies vol. 4, no 1, june 2018 42 subscribers in ecowas-5 (nigeria, ghana, togo, senegal and cote d i voire ). 𝐹𝐷𝐼𝑖𝑡 = 𝛽0 + 𝛽1 𝐼𝑛𝑓𝑟𝑎 𝑖𝑡 + 𝛽2 𝐺𝑃𝑃𝑃𝐶 𝑖𝑡 + 𝛽3 𝐼𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛 𝑖𝑡 + 𝛽4 𝑅𝐸𝐸𝑅 𝑖𝑡 + 𝛽5 𝑇𝑟𝑎𝑑𝑒 𝑂𝑝𝑒𝑛𝑛𝑒𝑠𝑠 𝑖𝑡 + 𝛽6 𝐶𝑜𝑟𝑟 𝑖𝑡 + + 𝛽7 𝑆𝑐ℎ𝑜𝑜𝑙𝑒𝑛𝑟𝑜𝑙 𝑖𝑡 + 𝜇𝑖𝑡 where i denote countries, t denotes time, and the variables are defined as: • fdiij denotes the net fdi inflows as % of gdp, • infrastructure is fixed and mobile subscribers (per 1000 people) • gdppc is gross domestic product per capita (us$), • human capital is schoolenrolment, • inflation is the annual inflation rate, • exchange rate is the official exchange rate to the us$ (annual average), • openness is openness index total trade (% of gdp), • corro denotes corruption perception index • β is a vector of coefficients, and • εij represents the myriad other influences on fdi, assumed to be well behaved. precise observation on vector x as the determinants of the inflow of fdi in ecowas countries identifies quality of infrastructure as important factor. sekkat and veganzones-varoudakis (2007) asserted that the underpinning factorfor fdi inflows in emerging economies is infrastructural development.as intermediary to this variable subscribers of mobile lines as well as main mobile lines per 1000 persons was used (calderon and serven, 2008, busse, erdogan, &mühlen, 2016; khadaroo and seetanah, 2007). invariably infrastructural development like information and communication technology are now penetrating in accommodating regional producers into alluring vertical fdi in manufacturing and sevicesas well as communication chain (addison and heshmati,2003). the study by kinoshita and campos (2003) authenticated that acceptable and reputable infrastructuresare paramount predicament for foreign investors to accomplish victoriously, heedless of the type of fdi. the adoption of main telephone lines is because of its necessity in empowering connection between host country and foreign investors. nelson and phelps (1966) argued that for a nation to experience a long run sustainable economic growth, it will depend on the stock of well educated labour that is able to comprehend cutting edge technology and introduced absorptive capacity, which are innovatively productive. furthermore, the new growth theory highlights the significant impact of human capital build-up, to justify output growth rate which includes investment in human capital and also regarded to as a critical component of long run economic growth. in addition,, the endogenous growth theory, human capital are regarded to as a key determinant of economic growth (akinlo,004; benhabib and spiegel, 1994 ; mankiw, romer and weil, 1992; barro and sala-imartin ,2004) further stressed the significance of human capital to growth in developing and developed nations. for the purpose of this study, schoolenrolment was used to represent human capital. gross domestic product per capita: . absolutely, a large level of “credit to sectors that are private” is a gesture of domestic capital that is abundant (busse, erdogan, &mühlen, 2016). kinda (2010) huge domiciliary credit to the private sector, likewise entails the degree of domestic capital.similarly, foreign capital in the pattern of fdi would not be needed. positioned by earlier studies, this paper used gross domestic product per capita (us$) as proxy for domestic income per person. fernández-arias and hausmann (2000) established the interconnection among private credit and foreign capital in the inflows of fdi. inflation and exchange rate: these studies used inflation as an index of macroeconomic instability (busse, erdogan, &mühlen, 2016; buckley, clegg, & wang, 2007,zubair & aladejare,2017) inferred that, strong macroeconomic condition supports fdi by displaying low investment liability. huge real exchange rate expense proportionate to the us dollar, and that entails an undervalue currency, will allure more fdi in the time overturn basically deter foreign investment. that is why, exchange rate lead us to review of economics and development studies vol. 4, no 1, june 2018 43 decompose the aftereffect of comparative wealth and proximate labor outlay on fdi inflow (busse, erdogan, &mühlen, 2016). hence, a reduction of a country’s exchange rate will spur the comparative wealth of foreign firms and allow more foreign acquisition of domestic assets. supplementarily, a reduction of a country’s rate of foreign exchange will allow capital inflow, as foreign economies endeavour to accept advantage of approximately economical domestic labor. this paper utilizes annual inflation rate as a proxy for inflation. trade openness: the result of trade openness is an objective for investmentpattern(zubair,2017). previous researchers have determined negative outcome of trade openness on fdi inflow, that is market-seeking. the rationale is that, the tariff jumping principle which specify that mncs that pursue to work for local markets can resolve to establish subdivision in the host economy.it is, challenging for them to import produce into their economies hence, generate capital inflows toward the aforesaid country (mijiyawa,2012, anyanwu, 2012).some studies revealed that, countries that are unhindered for foreign investment earned higher fdi (asiedu (2002), noorbakhsh et al. (2001), morisset (2000), aizenman and noy (2006), and anyanwu (2012). in these paper total trade as a % of gdp to proxy openness to trade. corruption: a balance in the existance of an advantageous climate in a macroeconomic sense, corruption and policy making rules can impede international business men from putting in their interest in an economy (rivlin, 2001, p.191). aside from boosting the gain of accomplishing investment, corruption lags the procedure of attaining the business license mandatory for running business in the foreign country. time-series indexs for corruption for many developing countries are very scares. transparency international inaugurate the compilation of data on corruption by 1995, though the world bank’s indicator for institute’s governance are accessible for the period 1996-2002 .this paper used gdp % of government expenditure to proxy corruption and policy making rules. the basis for applying this measure is that, a large number of government officials generate advantage for abuse of treasure by their officials. this paper utilises secondary data also employ time series formula to form a break even data for panel from 1990 to 2015. the panel is annual data for the inflow of fdi for west africa from ecowas-5 countries.the compilations of the data are accumulated and authenticated from distinct basis i.e., direction of trade statistics, and world development indicators, international financial statistics by international monetary fund (imf), and political rating group (prsg). 4 findings and discussion 4.1 panel unit root the outcome of the panel unit root tests conducted for the variables (gdp per capita, fdi, corruption, reer, infrastructure quality, human capital(schoolenrolment), inflation and trade openness).looking at table 4.1 below, the variables show non-stationary at levels. therefore, levin, lin and chin unit root, as well as im, pesaran and shin were tested again for the variables at first differenced. the outcome indicated the variables are stationary at i (1). table 4.1 panel unit root test level first difference levin-lin-chu im-pesaranshin levin-lin-chu im-pesaran-shin variables statistic statistic fdiinflow -0.3846 -0.8867 -6.3674*** -5.0888*** gdppercapita 2.7359 -1.2912 -4.5411*** -4.1395*** review of economics and development studies vol. 4, no 1, june 2018 44 tradeopenness 2.0490 -0.5863 -6.3319*** -2.2305** reer -1.1123 -1.1123 -3.3667*** -3.3667*** inflation hc(schoolenrol) -0.6944 -0.2966 -0.9502 -4.6679*** -6.5325*** -1.2585* -6.5246*** -5.5677*** corruption 1.1242 1.1242 -4.0424*** -2.4456** infrast(mobile subcribers) 0.7391 -1.0281 -4.9454*** -2.3139** notes, ***, ** and * indicate the rejection of the null hypothesis at 1%, 5% and 10% significant level respectively. 4.2 panel cointegration test for heterogeneous panels the hypothetical panel technique showed in table 4.2 pick up the analysis of cointegration result among the variables after the use of pedroni technique. four of the seven tests repudiate the null hypothesis of no-cointegration after the use of adf group test and phillips-perron. accordingly, the panel technique indicated that, there is cointegration between the variables employing 5 ecowas nations. conclusively, there is statistical evidence for the determinant of fdi in ecowas-5 nations. nonetheless, provided the variables are basically interelated at the longrun for the determinants of fdi hence, fully modified ols will be examined to check more for long run interrelation among the variables (pedroni, 1997, 2000,2004). table 4.2 panel cointegration tests for heterogeneous panel statistics value panel v-statistic -0.981 panel rho-statistic 0.289 panel pp-statistic -2.491** panel adf-statistic -2.289** group rho-statistic 0.944 group pp-statistic -3.669*** group adf-statistic -2.883** notes: all statistics are taken from pedroni (1999), *** and ** specifies the rejection of the null hypothesis of no-cointegration at 1% and 5% significance level. 4.3 discussion of the result gdp was made part of fdi determinants pattern to measure market size. the outcome in table 4.3 point out that, a percentage increase in gdp per capita spur the inflow of fdi by 2.76 per cent. the compelling and positive interrelation embodying gdp and fdi testify that, foreign nations market size is a determinant of inflow in ecowas-5.the outcome is in line with liargova and skandalis (2012) frankel et.al (2004. this implies that, gdp or in other words the market size plays an important role for fdi inflow to the five ecowas countries, which aligned with hymer, dunning’s eclectic role oli paradigm theory and unctad framework that firms look for larger prospects when opting for fdi decisions (market–seeking fdi motive), which is mainly to serve and meet demand of large population within five ecowas nations. furthermore, infrastructure development and fdi inflow show a positive and significant relationship. the result indicates that one per cent increase in infrastructure development will lead to more fdi inflow. this finding is in line with aseidu (2002). this indicate the significance of welldeveloped infrastructure(mobile subscribers) in reducing costs and increasing efficiency and effectiveness in order to stimulate fdi into the selected five ecowas countries, which is in line with the unctad theory and framework by hymer(1977). review of economics and development studies vol. 4, no 1, june 2018 45 table 4.3 fdi determinants model of long run estimates (fmols) variables coefficient p-value infrastructure -0.010** 0.0023 gdp per capita 2.76** 0.0198 inflation hc(schoolenrol) 0.001** 0.006*** 0.0598 0.017 reer 1.84 0.6058 trade openness -0.010 0.2859 corruption -0.007** 0.0107 adj r-squared 0.873 notes: ***,**& * significance level at 1%,5% and 10%. moreover, the coefficient of corruption (institutional quality) shows a negative sign and was statistically significant. the negative coefficient of corruption variable for the selected ecowas countries implies that if selected ecowas countries corruption perception index on average were to improve by one per cent fdi determinant will increase by 0.007%. this signifies the importance of institutional quality (corruption). this result is in line with corruption perception index submission which indicates that ecowas region is the most corrupt region in the world. similarly, the dominant view which indicate that governance which is good and highly commendable tend to concede higher fdi (laporta et al. and world bank 2002,shapiro and tang, 2004; gani, 2007) however, rise in insecurity and high spending are primarily induced by poor governance (cuervocazurra, 2008) due to the fact that, investments cannot be protected in an environment that is riddled with poor governance (globerman and shapiro, 2003). in conclusion, corruption tends to increase direct costs in form of delay in bureaucracy and bribery which create artificial bottlenecks in order to create more accommodating conditions for rent seeking activities. the result revealed school enrolment is significantly positive denoting a surge in economic growth by 0.006% units will spur school enrolment (human capital)the new growth theory justify the significant contribution of human capital accumulation in order to sustain output growth which includes investment in human capital as a significant factor for long run economic growth. mainly in the literature negative coefficient estimate for human capital on economic growth is very common (islam, 1995; benhabib and spiegel 1994; pritchett 2001)the findings for inflation rate is significantly positive implying inflation variable increased by 1% consequently, fdi inward tend to increase by 0.001%. 5. conclusion this study used fmols technique, to explore the interlock between infrastructure(mobile subscribers), corruption(institutional quality) and human capital(school enrollment) for the inflow of fdi among ecowas-5 nations. the findings revealed that,corruption(institutional quality),human capital(school enrollment) and infrastructure(mobile subscribers) and fdi are statistically significant for long run purpose and good infrastructural quality(mobile subscribers) is having statistically positive association with fdi. however, fdi is assumed to be negatively related to corruption in the selected ecowas countries. the study established long run association with infrastructure (mobile subscribers), corruption and fdi in the ecowas countries. the findings for corruption and fdi revealed a percentage change in corruption, will lead to about 0.007decrease in fdi. moreover, the significant aftereffect of corruption, mobile subscribers and school enrollment on fdi in the long run implies that, international investors are driven review of economics and development studies vol. 4, no 1, june 2018 46 by future expectations of profitability, good educational system, adequate infrastructural facilities and free corrupt society. 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(2017). the constraint of free trade in ecowas sub region implication for sustainable development and globalization challenges international journal of innovative knowledge concept, v(11),53-58. review of economics and development studies vol. i, no 1, june 2015 1 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 1: issue 1 june 2015 journal homepage: www.publishing.globalcsrc.org/reads psychosocial health of adolescent living in urban slum nigeria 1 adenike e. idowu, 2 emmanuel o. amoo, 3 idowu i. chiazor, 4 olujide adekeye 1 university of witwatersrand, johannesburg, south africa.esther.idowu@covenantuniversity.edu.ng 2 university of witwatersrand, johannesburg, south africa.emme.amoo@covenantuniversity.edu.ng 3 south africa.idowu.chiazor@covenantuniversity.edu.ng 4 covenant university, ota, ogun state nigeria.jide.adekeye@covenantuniversity.edu.ng articledetails abstract history revised format: may 2015 available online: june 2015 the paper examines association of neighborhood characteristics with psychosocial statues of adolescent living in urban slums. data for the study were obtained from a cross sectional survey among adolescent age 15-19, living in urban slums in lagos state. adopted a measuring scale for adverse environment and psychosocial attributes, data were analyzed using univariate and binary logistic regression analysis. results revealed that neighborhood characteristics were associated with low self-academic performance rating. both parental process and neighborhood factors such social disorganization was able to predict psychosocial wellbeing such subjective academic performance rating. the findings revealed among others that adverse neighborhood characteristics in urban slum were associated with unhealthy subjective wellbeing which reflects wide personal and social contexts and have implications for public health and social wellbeing. this paper calls for programmes that are tailor to addressing rapidly developing slum settlements in low income area, to secure the future generation. © 2015 the authors, under a creative commons attributionnoncommercial 4.0 keywords urbanization psychological wellbeing urban slums jel classification i15, r20 corresponding author’s email address: esther.idowu@covenantuniversity.edu.ng recommended citation:idowu, a. e., amoo, e. o.,chiazor, i. i., adekeyeo. (2015).psychosocial health of adolescent living in urban slum nigeria.review of economics and development studies, 1 (1) 1-10 doi:https://doi.org/10.26710/reads.v1i1.111 1. introduction adolescence is viewed as a period when adult personal and social identities begin to take shape through the process of social interaction and are thus vulnerable to several risk behavior and adverse health effects, intensified by poverty and unstable social context such as living in slum (ndugwa, kabiru, cleland, beguy, egondi, zulu, and jesor, (2011; clarke, 2010 ). living in slums, which are characterized by lack of basic services, substandard housing, overcrowding and high density, unhealthy living condition and hazardous locations, insecure tenure, informal settlements, poverty and social http://www.publishing.globalcsrc.org/reads mailto:esther.idowu@covenantuniversity.edu.ng mailto:emme.amoo@covenantuniversity.edu.ng mailto:idowu.chiazor@covenantuniversity.edu.ng mailto:jide.adekeye@covenantuniversity.edu.ng mailto:esther.idowu@covenantuniversity.edu.ng review of economics and development studies vol. i, no 1, june 2015 2 exclusion, can be linked to increases related to negative social behaviors, child abuse and can directly affect children education (sheuya, 2008). other risk factors of adolescent health are due to many pressures and challenges they are facing from growing academic expectations, changing social relationships with family and peers and the physical and emotional changes associated with maturation (world health organization, 2012: omigbodun, dogra, esan and adedokun, 2008). they face issues of puberty, first exposure to relationship, drugs, alcohol, or sex, embracing life career and so on (mcneely, and blanchard, 2009). their behaviors therefore are products of social, economic and cultural forces of and within the communities where they live. according to classification of social determinant of health by who (2005), health can be approach intermediate factors such as living and working conditions, social and political exclusion, social capital, access to quality health care, violence and crime, transportation, and the physical environment. these identified factors continue to affect adolescent on issues such as mental health, the development of health complaints, tobacco use, diet, physical activity level and alcohol use (who, 2012; thomas, torrone, and browing, 2010; omigbodunet al, 2008; saluja, lachan, scheidt, overpeck, sun, and giedd, 2004 ). all these factors have been investigated almost completely at an individual and family level (salujaet al, 2004; park, 2004; li, feigelman, and stanton, 2000). few studies have accessed the influence of the environment on adolescent behaviour, academic performance and subjective wellbeing (oshodi, aina and onajole, 2010, adedimaji, omololu, and odutolu, 2007). in the their study, adedimajiet al, (2007) investigated the relationship between hiv/aids risk perception and protective behaviour among sexually-active urban young slum dwellers in ibadan and found that structural and environmental constraints were identified as barriers to adopting protective behaviour. this study explored the influence of environment on psychosocial health of the adolescent living in urban slums in nigeria. 2. literature review writer such as jessor, (1991) assert that large segments of our young people are growing up in circumstances of limited resources and pervasive adversity that, for many of them, their health, their development, indeed their lives as a whole, are certain to be severely and perhaps irretrievably compromised. both family and neighborhood socioeconomics predicted occurrence and perception of stressors in adolescent (chen and paterson, 2006). family contexts are associated with health and risky behaviours in adolescents: family economic circumstances and personal traits of parents can affect the characteristics of the peers, schools, and neighborhoods to which parents and children are exposed and, in turn, the psychological well-being of family members (conger, conger, and martin, 2010; das, 2000). consequently, living in a neighbourhood with low socioeconomic status confers risk to adolescents in terms of a host of behavioural, social, and emotional problems (the national academies, 2011), and may be more vulnerable to negative psychosocial health effect from distress and adverse urban slum characterized by congestion, high levels of unemployment, inadequate social services, extreme poverty, insecurity, crime, and hopelessness. gonzales, cauce, friedman, and mason (1996) highlighted the influence of neighbourhood on the problem of academic underachievement, relating neighbourhood risk to lower grades in school. as reported in columbia university teenscreen national center for mental health checkups (2009), adolescent with a lifetime occurrence of social phobia are almost twice as likely to fail a grade of not finish high school. in a state like lagos, one of the most populous states in nigeria, that has undergone an unprecedented rate of urbanization in the few years (odufuwa, fransen, bongwa, &gianoli, 2009; ilesanmi, 2010). consequent movement of people to the state has put pressure on government and individuals as the demand for housing continue to rise far and above what the state can offer. rapid social, economic and environmental challenges is evident in poor services delivery, lack of adequate and affordable housing, review of economics and development studies vol. i, no 1, june 2015 3 proliferation of slums, chaotic conditions, poverty, social polarization, crime, violence, unemployment and dwindling job opportunities (celik, zyman, and mahdi 2009; ilesanmi, 2010). this is evidence in the occurences of slums/ghettos and squalor in maroko, ajegunle, orile/amuwo, ipori-olaleye, and agegeetc (fadairo&taiwo, 2009). therefore, slum settlements are formed mainly because of the inability of the city governments to plan and provide affordable housing for the low-income segments of the urban population (un habitat, 2016). hence, squatter and slum housing is the housing solution for this low-income urban population. (lingooi, and hougphua, 2007; akunnaya, and adedapo,2014). these changes and associated declines in social, economic and environmental standard will have serious consequences on individual standard of living. it is known that neighbourhoods with good physical and social structures and services that help maintain the wellbeing and productivity of its inhabitants foster community cohesion (world health organization, 2007). in the context of social, economical and environmental insecurity, life-style change, although obviously a challenge has the promise of more pervasive and more enduring impact on the repertoire of risk and health behaviours in adolescents (jessor, 1991). therefore, the health of adolescents may be jeopardize in a slum that characterized by urban decay, high rates of poverty and unemployment, where many slum dwellers employs themselves in the informal economy usually with low incomes. these including street vending, drug dealing, domestic work and other form of home based economic activities. as a result, slums are identified as breeding grounds for social problems such as crime, drug addiction, alcoholism, high rates of mental illness and suicide. they are also characterized by high rates of diseases due to insanitary conditions, malnutrition, and lack of basic health care services (njoku, andokoro, 2014). stephens 2012, explores the impact of the process of urban social, environmental, and health inequality and inequity on urban children and young people and found that mental disability, or mental illness, is a global problem of current generation of urban children and may be particularly difficult in very inequitable urban settings where children may grow up in a very stressful, threatening, and disorienting environment with impacts on social coping, self-esteem, anxiety, and aggression (stephens, 2012; stewart-brown, 2003). in essence, all children growing up in cities with great inequalities may be vulnerable to problems of emotional and psychosocial well-being. therefore, the shift towards social morbidity among young people means that the major threats to their health wellbeing are increasingly rooted in the organization, economics, opportunities and expectations of everyday life. this means that the search for protective factors against a variety of adverse outcomes must include an understanding of adolescents’ social relationships and feelings of connections to others as they experience and live the developmental changes of their physical, social and psychological selves. (resnick, harris, and blum, 1993). in sampson (1986) model, social disorganization may have an effect on youth through its effects on family structures and stability. social disorganization variables may influence community crime rates when taking into account the effects of levels of family disruption; that may occur by removing an important set of control structures over youths’ behaviours and creating greater opportunities for criminal victimization. sampson, raudenbush and earls’s (1997) model of social disorganization argued that socially disorganized neighbourhoods are likely to be low on collective efficacy, unlikely to intervene in a neighbourhood context in which the rules are unclear and people mistrust or fear one another. in their causal model on direct and moderating effects of community context on the psychological wellbeing, cutrona, russell, hessling, brown and murry (2007) identified certain neighbourhood-related domains that could affect the outcome of the interaction between subjects and environment. for review of economics and development studies vol. i, no 1, june 2015 4 instance, when personal bounds are absent, people do not work together to garner needed resources for their community, such as adequate police protection, high quality schools, and access to needed services, the absence of such resources can lead to demoralization. and neighbourhood that present threats to safety, inadequate public transportation, poor quality housing, high traffic density, and undesirable commercial operations impose a high level of daily strain on residents, such strains are consistently associated with psychological distress (cutronaet al, 2007). in this study we explore the association of neighbourhood characteristics and psychosocial health among young adolescent living in urban slum in lagos state, nigeria. we take into account that neighbourhood is an environment within which people live and conduct their daily activities, its features may be measured based on the perception of the individuals therein and achieving a balance between personal preferences or needs and environmental pressures fosters satisfaction with the neighbourhood and psychological well-being (ferreira, césar, camargos, lima-costa, and proietti, ( 2009). the objective is to examine the effect of neighbourhood characteristics on psychosocial well-being of the young adult living in urban slums. 3. methods data for the study were extracted from a cross sectional survey among 220 young adults age15-19 selected in equal proportion from one of the urban slum area of agege local government area of lagos state, nigeria. the study adopted a multi-stage sampling technique, to select a representative sample from the study population drawn from the households. the first stage of the sampling process involved stratification of agege into selection of two (2) enumeration areas from the selected lga while 2 streets from a listing of all major streets in each of the enumeration area were also made. systematic random sampling procedure was then used to select housing units from a listing of all houses in each major street in the sample. finally, within each selected housing unit, a household comprising one young adult age was selected. where there was a household that did not fulfill the criteria, the next household was chosen for replacement. also, any household where there was more than one eligible for selection, a simple random sampling was used to select a respondent. verbal consent was obtained from each respondent. the lga was selected for being a representative of tribe and culture, urban poor setting. the study adopted a measuring scale for both neighbourhood characteristics and psychosocial health. the young boys and girls completed a 30 minutes interview and administered questionnaire with questions on demographic information, about the family, peer and neighbourhood characteristics. 4. measures psychosocial health-was defined by clarke, (2006) as the presence of positive psychosocial traits, or absence of negative traits, which was measure by focusing on four categories of functioning: externalizing behaviour problems, internalizing behaviour problems, social competence, and academic performance. this study adopted just one of the four categories of functioning: self-rated academic performance. at individual level-the dependent variable is self-rated academic performance. the respondents were asked to evaluate their academic performance as poor, fair, good, or excellent. we dichotomized responses into poor/fair and good/excellent, coded as 0 and 1respectively. demographic characteristic were predictor variables and were all self-reported by the participants. age was treated as a continuous variable and gender was treated as a dichotomous variable with males coded 1 and females coded 0. socioeconomic was captured in relations to parent and guardian employment status, educational attainment. the main goal of this dichotomization was to analyze possible neighbourhood factors in review of economics and development studies vol. i, no 1, june 2015 5 relation to the presence or absence of psychosocial health problems. at neighbourhood levelwe utilized variables that capture neighbourhood social environment. the respondents were interviewed about the perception of their neighbourhood and social ties with their neighbors. using scale adapted from dahlberg, toal, swahn, behrens (2005) compendium of assessment tools: environmental assessment scale with indices to measure social capital, social cohesion, social control and social disorder and violence. the survey questions comprising each measure using a likert scale type. the questionnaire was designed in a way that both attitude and neighbourhood factors responses to were captured. the model was computed to identify neighbourhood correlates of subjective academic performance. respondents were asked to respond to statement related to neighbourhood factors defined as the following: “when i am not at home, one of my parents knows where i am and who i am with”. very true, somewhat true, somewhat false, and very false. ‘hiding because of shootings in neighborhood? very true, somewhat true, and somewhat false. ‘if a group of neighborhood children were skipping school and hanging out on a street corner, how likely is it that your neighbors would do something about it? very likely, likely, neither likely, unlikely and very likely. ‘i have seen drug deals’: never, once or twice, a few times and constant the reliability and validity of this scale have been tested and reported in macklem, (2014); eriquez, kelly, cheng, hunter & mendez (2012). the instrument was divided into three sections, a-c, which helped to measure the variables of study. section a covered the socio-demographic characteristics of the respondents. section b contained scale on attitude, while section c was on the neighbourhood factors of the respondents. the responses generated from these sections helped to establish the foundation upon which the study could be situated in its context. 5. analysis the quantitative data gathered from the field were analyzed descriptive and inferential statistical methods methods. copies of the questionnaire returned were edited, coded and data entry was done. the data were analyzed using the statistical package for social sciences (spss 16) software. first, characteristics of the study sample were described using univariate analysis (frequency distribution and simple percentages). in addition, multi-variate logistic regression analyses were performed in order to estimate the relative influence of the independent variables on attitude schooling. in the context of logistic regression model, π in the conditional probability of the form ρ{y=1}. that is, poor/fair and good/excellent indicator is more or less likely dependent on combinations of values of the predictor variables. therefore, the general the model: logistic regression estimating the influence of neighbourhood characteristics on the odds of poor/fair performance ln= {p/(1-p)}=αo+β1x1 + β2x2+β3x3+…βnxn + e ln= {ρ/(1-ρ)}=log-odds of good/excellent performance to log-odds of poor/fair performance hence, parameters in the model are denoted as: αo that represents the intercept, β1= change in log-odds of poor/fair performance with parental control, β2= change in log-odds of poor/fair performance with stressful urban effects, β3= change in log-odds of poor/fair performance with social control, β4= change in log-odds of poor/fair performance with social cohesion, β5= change in log-odds of poor/fair performance with community involvement, β6= change in log-odds of poor/fair performance with exposure, β7= change in log-odds of poor/fair performance with neighbourhood disorganization review of economics and development studies vol. i, no 1, june 2015 6 6. results table 1 displays the descriptive statistics for all respondents. the mean age is 14, and 177 and 43 were from public and private secondary schools respectively. while 53% of the respondents were female, only 15% reported excellent academic performance. the distribution by level of parental education qualifications shows that 10% had primary school certificate, 24% had secondary school certificate, 66% educated up to tertiary level. the distribution by parent’s occupation revealed that 49.5% were selfemployed, and 50.5% work as an employee. table 1: distribution of respondents by demographic characteristics variables frequency percent% 1. school type public 177 80 private 43 20 total 220 100 2. sex male 104 47 female 116 53 total 220 100 3. academic performance excellent 33 15 good 88 40 fair 79 36 poor 20 9 total 220 100 4. parent educational qualification primary 22 10 secondary school 53 24 tertiary 145 66 total 220 100 5. parents’ occupation self employed 109 49.5 employee 111 50.5 total 220 100 source: field survey, 2014 model the model was computed to identify neighbourhood correlates of subjective wellbeing. respondents were asked to respond to neighbourhood factors defined as the following: parental control“when i am not at home, one of my parents knows where i am and who i am with”. stressful urban effect ‘hiding because of shootings in neighborhood? social control‘if a group of neighborhood children were skipping school and hanging out on a street corner, how likely is it that your neighbors would do something about it? exposurei have seen drug deals review of economics and development studies vol. i, no 1, june 2015 7 the results from table 2 revealed that the more the parental control and monitoring the probability of better performance in school, see exp(b) 0.001, and 0.050 respectively, more likely to perform poorly. the same observation goes for stressful urban effects, lack of social control and social cohesion in the neighbourhood, exposure and neighbourhood disorganization are more likely to have negative attitude and perform badly in schooling. table: 2 binary logistic regression estimates of the influence neighbourhood on academic performance selected variables b sig. exp(b ) parents knows where i am and who i am with. very true somewhat true rc 1.211 0.621 3.329 somewhat false 1.745 0.001 5.728 very false 1.001 0.050 2.722 hiding because of shootings in neighborhood very true rc somewhat true -.310 0.042 .734 somewhat false -.099 0.019 .906 social control in neighbourhood very likely rc likely .249 0.590 1.335 neither likely -.508 0.025 .602 unlikely -.793 0.010 .418 very unlikely -.552 0.004 .576 exposure to drug deals never once or twice rc -.374 0.028 .754 a few times -.121 0.059 .776 constant -.027 0.646 .622 2 log likelihood = 1631.602(a) cox & snell r square =.045 nagelkerke r square = .063 overall percentage = 68.9 source: field survey 2013-2014 rc=reference category 7. discussion this study extends upon previous assertions concerning the impact of urban social environment on psychosocial health problems among urban youth living in slums. consistent with conclusions from columbia university teenscreen national center for mental health checkups (2009 students reporting high levels of psychosocial stress are more likely to perceive themselves as less academically competent; and neighbourhood risk was related to lower grades in findings from gonzales, et al (1996). according to who 2012, neighbourhood that engender high levels of social capital create better mental health. lack of social control, social cohesion, and stressful urban effect, exposure to anti-social/illegal activities and neighborhood disorganization that we observed in poor neighbourhood may reflect an absence of some level of encouragement needed to pursue academic achievement. this is not strange, as review of economics and development studies vol. i, no 1, june 2015 8 thomas, torrone, and browing (2010) found, for example, neighbourhood characteristic such as social capital, social disorder can be associated with rates of infections in neighbourhoods. also neighbourhood poverty, disorder, deterioration of the built environment, and have been associated with biological indicators of stress and depression. therefore, exposure in disadvantaged neighbourhood can be a major distraction and setback in academic achievement. adolescent health and behaviours are often considered as a factor that has to do with parenting. parental control and monitoring is also a factor in academic performance. adolescent in slums lack of strong parental control, because there is greater degree of individual freedom, every member in the family is more or less free from any restriction due to his or her being economically productive, the parents have relatively lost their control over them (das, 2000). this study is in line with report from li, feigelman, and stanton, (2000) that observed strong inverse correlation between perceived parental monitoring and adolescent risk behaviour. this may suggest that parental monitoring initiative may be an affective intervention tool in academic performance. this find is consistent with result from (ndugwa et al, 2011) which says parental monitoring is to be associated with lower levels of delinquent behaviuor, greater schooling performance, and lower levels of sexual behaviour. this study is limited in ability to access the variation in age, religion parental background and the inherent issues in self reporting academic performance. despite the limitations, this research is important for the understanding of how neighbourhood disadvantaged features is related to attitude and academic performance among the youth. the indices can be use to evaluate new area for educational policy and performance interventions for secondary school students in nigeria. 8. conclusion and policy recommendations in conclusion, this study affirms that neighbourhood characteristics are very important in adolescent psychosocial wellbeing, which has implication for academic performance. this paper calls for programmes that are tailor to addressing rapidly developing slum settlements in low income area, to secure the future generation. therefore, the need to focus attention on improving the state of infrastructure, security and social work activities in slums areas. this will give the young adults hope for the future and live a quality life which is important for public health. acknowledgement: the authors acknowledged field work support from covenant university, nigeria. references adedimaji, a. a., omololu, f. o. and odutolu, o. 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(eds) social determinant of health and well-being among young people: health behaviour in school-age children (hbsc) study: international report from the 2009.2010 survey. http://www.flgov.com/wp%3euploads%3echildadvocacy http://www.nap.edu/ctalog/12961.html http://www.who.int/social_determinants/resources/urban_settings.pdf review of economics and development studies, vol. 9 (2) 2023, 111-131 111 trust the shield: unveiling the warranty's power in building customer loyalty through complaint resolution farah noreen arshad a, muhammad haroon b a institute of communication studies, university of the punjab lahore pakistan b faculty of management sciences, national university of modern languages (numl) multan pakistan article details abstract history: accepted 30 april 2023 available online june 2023 the customer loyalty goes beyond mere satisfaction; it embodies a profound commitment to a product's success, rooted in the unwavering belief that opting for a warranty-backed offering is the ultimate choice. this study delves into the intricate dynamics of customer loyalty among battery manufacturers, scrutinizing the impact of product warranty and complaint resolution while considering the mediating role of trust and the moderating influence of brand image. to shed light on this subject, we harnessed data from a robust sample of 410 customers who purchased batteries from outlets in southern punjab, pakistan. our data collection was accomplished through meticulously crafted questionnaires, employing adopted scales to ensure comprehensive coverage. statistical package for the social sciences (spss) version 20 and analysis of moment structures (amos) software version 20 were our analytical allies, enabling rigorous testing of our research model. exploratory factor analysis and confirmatory factor analysis contributed statistical evidence to support our hypotheses. results unveiled the pivotal roles of product warranty and complaint resolution in predicting customer loyalty, with trust acting as a crucial mediator and brand image as a potential moderator. the positive and significant relationship between product warranty, complaint resolution, and customer loyalty echoes the power of these factors in nurturing lasting customer devotion. interestingly, the direct influence of brand image on customer loyalty also proved significant, albeit with an unexpected twist. while the overall impact remains positive, the indirect effect appears to wield a counterintuitive negative influence. as our findings come to light, management executives stand to gain invaluable insights into fine-tuning their policies, ensuring a customer-centric approach that fosters unwavering loyalty. armed with this knowledge, businesses can redesign their management strategies to cultivate deeper connections with their clientele. © 2023 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: customer loyalty, warranty, complaint resolution, customer trust, sem jel classification: o32, o39 doi: 10.47067/reads.v9i2.487 corresponding author’s email address: faraharshad057@gmail.com review of economics and development studies, vol. 9 (2) 2023, 111-131 112 1. introduction marketing's ultimate goal lies in cultivating enduring bonds between consumers and brands, with trust reigning as the pivotal element in this relationship (elliott, arnott, & yannopoulou, 2007; snoj, pisnik korda, & mumel, 2004). in the contemporary era, relationship marketing has emerged as a potent and successful tool, where selling alone is no longer the sole objective for companies. customers now seek after-sales services and support, making the need to diversify offerings imperative in highly competitive markets where exceptional services stand as differentiators (bian, yan, zhang, & xu, 2015). retaining existing customers has become even more critical than finding new market niches. unique service features that facilitate seamless communication between customers and service providers hold utmost importance (bian et al., 2015), necessitating specialized staff to tackle such challenges. extraordinary customer service emerges as a strategic weapon for customer success, while product evaluation reveals the positive impact of brand personality on customer perception (sahin & baloglu, 2011). within marketing strategies, customer services play a vital role. when customers are given choices, they consistently demand higher levels of satisfaction, making customer service a crucial aspect of any successful strategy (chang & ahn, 2005). well-trained employees equipped to provide exceptional customer service become the key element in gaining customer satisfaction and loyalty (cl) (guchait, namasivayam, & lei, 2011). clients receiving excellent treatment tend to respond positively to service providers, leading to fewer complaints, increased loyalty, collaboration, willingness to pay higher prices, and recognition of superior service quality (guchait et al., 2011). brand associations contribute significantly to defining brand image, and their linkage with brand image in long-term memory plays a vital role (maehle & supphellen, 2013). the process of building trust serves as a fundamental aspect in social sciences, and this study explores a multi-trust lab where every player counts on each other at different levels. trust-building progresses through mutual confidence at each stage, without players knowing the identity of others. the approach emphasizes the process of trust-building, with limited room for social networks and peers. for the battery industry in pakistan, product warranty has gained immense importance due to batteries' extensive use in households and vehicles. warranty serves as protection for both manufacturers and customers, guaranteeing that the product will function as intended (flight, d'souza, & allaway, 2011). in a fiercely competitive landscape, the successful marketing strategy must rely on creating strong brand associations and leveraging existing brand awareness (müge arslan & korkut altuna, 2010). to gauge customer satisfaction and loyalty, companies must focus on improving the quality of their products and services (batt, 2002). employee satisfaction plays a crucial role, as content and motivated employees provide better services, positively impacting customer satisfaction and experience (uhlrich et al., 1991). the proposed framework in this study aims to comprehensively assess the factors affecting customer loyalty in the battery industry, focusing on product warranty, complaint resolution, trust as a mediator, and brand image as a moderator. this research endeavors to answer several critical questions: • what is the impact of product warranty on customer loyalty with trust as a mediating factor? • how does complaint resolution influence customer loyalty, mediated by trust? • what is the moderating effect of brand image on the relationship between complaint resolution and customer loyalty? • what is the extent of trust's impact on customer loyalty? review of economics and development studies, vol. 9 (2) 2023, 111-131 113 by exploring these relationships, this study seeks to contribute significantly to understanding the factors that influence customer loyalty in the battery industry, offering valuable insights for businesses to enhance their strategies and customer retention efforts. 2. literature review 2.1 customer loyalty after experiencing a product, users' expectations may be influenced by advertising, product ownership, and perceived product quality. however, personal contact with the product does not significantly affect the image of product quality. in face-to-face service delivery, the service becomes a personal and emotional experience. the close interaction between service providers or employees and customers in the service encounter leads to higher customer satisfaction and loyalty towards the organization. a study by burke et al. (2005) suggests that customer placement in decision polls indicates that positive and negative scaling should be quite different from satisfaction. when losses occur, they are felt more strongly than equivalent gains. customers evaluate product or service performance and compare it with their expectations. wallin andreassen & lindestad (1998) found that csr affects customer loyalty in a competitive business environment, where customer expectations are increasing. there has been limited research on the relationship between brand credibility and consumer trust in making purchasing decisions. wang & yang (2010) found that brand credibility may increase consumers' consideration of brand reputation, although their study only included reliability and expertise, neglecting aspects like warmth and understanding. thus, this study aims to investigate the effect of the three components of brand credibility on consumer trust when making purchasing decisions (wang & yang, 2010). in service industries, loyalty is considered an important factor in strategy development (nyadzayo & khajehzadeh, 2016). dissatisfied customers not only leave the organization but may also switch to other products, affecting the brand image and trust. implementing measures to make customers responsive and satisfied should be a major concern for service providers to attract and retain customers (abu‐elsamen et al., 2011). customer loyalty is crucial for the survival and growth of companies, particularly in the current competitive landscape with intense price fluctuations and changing customer behaviors (rahi, 2016). loyalty marketing is not just an application; it should be considered a business strategy and a state of mind that requires proper development and implementation to embed loyalty strategies within the product (duffy, 1998). understanding customer needs and ensuring customer loyalty can help businesses in customer retention efforts. long-term customer loyalty is more impacted by perceived value providers and the cost of change, rather than new customers (wang & wu, 2012). product quality is related to product performance and influences customer requirements, purchase decisions, and perceptions of product quality. visual product presentation is also affected by social value and marketing integration (mohd suki, 2016). companies need to focus on providing a valuable product, satisfying customer needs, and aligning with customer preferences (nyadzayo & khajehzadeh, 2016). in conclusion, the relationship between customer loyalty and various marketing operations needs to be thoroughly understood to effectively manage customer communication and increase loyalty (oly ndubisi, 2007). developing strategies that enhance customer satisfaction and loyalty is essential in the modern market environment (gee et al., 2008). providing a positive customer experience through loyalty marketing can lead to greater customer loyalty and satisfaction (mcmullan & gilmore, 2008). review of economics and development studies, vol. 9 (2) 2023, 111-131 114 loyal customers recommend products, engage in repeat purchases, and protect the brand's reputation (kurniawan et al., 2016). the concept of customer loyalty has evolved to become an essential business strategy rather than just a program (duffy, 1998). 2.2 product warranty in today's competitive market, product warranty has become vital for manufacturers to maintain a competitive edge. understanding the long-term implications of product guarantees is crucial for appreciating their importance. policy development and assurance methods have evolved over time (loomba, 1998). consumers often lack the means to assess product quality, making warranty coverage a key indicator of reliability. longer warranties indicate better quality and service, influencing customer choices based on pricing and warranty duration (bian et al., 2015). brand loyalty lies at the heart of marketing and sales strategies, serving as a valuable asset (mascarenhas, leventhal, kesavan, & bernacchi, 2006). dissatisfied customers can result in negative outcomes for organizations (burke, graham, & smith, 2005). warranty policies play a significant role in the consumer market (cooper & ross, 1985). there are two patterns to consider: buyer actions affecting product performance and the invisibility of product quality to buyers. warranty management holds appeal for researchers and management, aiming to estimate warranty costs and develop mathematical models for different projects (manna, pal, & kulandaiyan, 2004). reliable data collection is essential for improving product quality and customer satisfaction. warranty data, cost-effective and efficiently gathered through service networks, offers valuable insights (karim, chukova, & suzuki, 2005). several factors contribute to product failure and warranty requirements (buczkowski, chukova, hartmann, & kulkarni, 2005). analyzing gender and age factors is critical in warranty literature (karim et al., 2005). lifetime warranties represent a unique case, assuming defective products can be repaired. the cost of warranties has been extensively studied, determining optimal warranty periods and costs (young yun, 1997). providing product warranties benefits customers by reducing purchase risk, increasing the likelihood of product purchases (soo j. tan, lee, & lim, 2001). allocating resources effectively is essential in this context (buczkowski et al., 2005). understanding the causes of new product failure is crucial in improving new product acceptance (yenipazarli, 2014). improving communication and relationships with customers in marketing increases customer loyalty (kurniawan, sucherly, & surachman, 2016). analyzing warranty conditions and prediction relies on the poisson model (karim et al., 2005). strategic product warranty importance becomes evident in the competitive market. understanding the business cycle is essential, as product warranties protect customers in case of product defects during the warranty period (karim et al., 2005). h1: product warranty positively impacts customer loyalty h1a: trust mediates the relationship between product warranty and customer loyalty 2.3 complaint resolution managing customer relations is a key challenge in handling complaints and finding effective solutions (gruber et al., 2010). a guarantee offers insurance to buyers, with the supplier providing free or low-cost repairs, replacements, or maintenance during the warranty period. widely used warranties review of economics and development studies, vol. 9 (2) 2023, 111-131 115 include basic manufacturer warranties and optional warranties from manufacturers, sellers (e.g., best buy), or third parties (e.g., square trade). extended warranties come at an additional cost to the buyer. interactions arise when two distributors purchase and sell products from the same manufacturer (bian et al., 2015). the concept of the learning curve plays a crucial role in production. new products often undergo a learning process to achieve full reliability and functionality. start-up companies follow the learning curve as they transfer knowledge and experience across their operations, including purchasing, product development, production, and manufacturing (yenipazarli, 2014). discontented consumers may seek resolution through third-party agencies (fisher et al., 1999). consumer-based research highlights that consumers tend to have an egocentric bias when evaluating business interactions (fisher et al., 1999). industrial inventory in canada is medically used, and non-suggestion, passive/inactive, and permanent variables play a role (gruber, henneberg, et al., 2010). effective complaint management can create business opportunities and improve relations. addressing complaints shows that customers are still interested in continuing the relationship, offering a chance to resolve issues and prevent potential losses (gruber et al., 2010). strategic complaint management is essential, though most studies focus on western contexts rather than asian situations (ndubisi & ling, 2005). evidence shows that responding responsibly to complaints can lead to positive outcomes, such as increased customer loyalty (fisher et al., 1999). when problems occur in an otherwise close business relationship, handling complaints becomes a critical management challenge (gruber, henneberg, et al., 2010). understanding and resolving customer complaints are integral to strategic planning. however, customer service and claims management are often seen as operational entities rather than profit sources (stauss, 2002). complaint management's strategic importance is often overlooked, leading to missed opportunities for creating highly satisfied customers (stauss & schoeler, 2004). some studies suggest that face-to-face or phone calls are preferred over external channels like email, leading to greater satisfaction with interpersonal complaint communication (robertson, 2012). when consumers choose not to report their problems to the organization, they cannot be addressed. complaints can take various forms, such as verbal complaints, letters, or third-party actions (heung and lam, 2003). dissatisfied consumers may share their complaints with third-party organizations, which then forward them to the relevant companies (fisher et al., 1999). the handling of complaints can be cost-intensive, involving human resources, administration, communication, and compensation costs (stauss & schoeler, 2004). organizational complaints play a crucial role in resolving customer issues and creating a smooth customer experience (robertson, 2012). aggressive public relations activities can lead to conflicts among consumers and affect the company's reputation (hsieh & li, 2008). research has shown that complainants are satisfied when they feel the complaint process is fair (cowan & anthony, 2008). various antecedents, including individual and behavioral components of purchasing managers, situational elements, and organizational structural variables, impact complaints (gruber, henneberg, et al., 2010). early identification and understanding of complaints can prevent dissatisfaction (broadbridge & marshall, 1995). complaint management shows significant improvement (possibly meeting professional market requirements), but changes in the process may lead to fewer complaints without clear reasons (cowan review of economics and development studies, vol. 9 (2) 2023, 111-131 116 & anthony, 2008). some researchers focus on the treatment unit, like assessing the environmental life cycle, and agree that social outcomes depend on organizational behavior. the production chain involves organizations communicating with suppliers and partners over time (macombe et al., 2011). the value of social life cycle analysis lies in understanding and protecting "human well-being" (macombe et al., 2011). effective complaint management contributes to customer loyalty. some organizations lack awareness of this issue, while others have an integrated approach but still face losses (stauss & schoeler, 2004). the importance of service experience lies in the unique interaction between clients and service providers, which should be guided by customer choices. successful customer service is a strategic tool for attracting customers (abu‐elsamen et al., 2011). h2: complaint resolution positively affects customer loyalty h2a: trust mediates the relationship between complaint resolution and customer loyalty 2.4 brand image brand image refers to how individuals perceive themselves in relation to a particular brand (parker, 2009). it involves two main dimensions: "real self/actual" and "self-ideal" (parker, 2009). consumers now play a more active role, engaging with brands and their messages (rindell & strandvik, 2010). brand familiarity can be gauged by the number of experiences associated with the product, accumulated by consumers through product use and advertising (keller, 1993). studies reveal that well-known brands tend to attract more customers (müge arslan & korkut altuna, 2010). brand equity is a multidimensional concept, including brand loyalty and perception (lee, lee, & wu, 2011). a strong brand image fosters positive customer perceptions, trust, and loyalty (keller, 2008). customer perception of a brand can lead to brand loyalty and positive relationships (esch et al., 2006). building and maintaining a brand image is essential for long-term success and competitive advantage (park, jaworski, & macinnis, 1986; aaker, 1996). marketers use various strategies like advertising and customer experience to shape brand image (o'reilly, 2005). understanding customers' brand associations helps in enhancing the brand image (keller, 1993). the brand image significantly affects brand loyalty and customer satisfaction (chiou & droge, 2006). brands play a pivotal role in consumers' decision-making process and brand image influences these choices (campbell, 1993). branding creates a unique identity for products and services, influencing customer behavior (aaker, 1996). brand image can be improved through advertising, promotion, and customer management (keller, 1993). brand familiarity and positive associations lead to customer loyalty (parker, 2009). in summary, the brand image is a vital aspect of marketing, impacting customer perceptions and loyalty. it is crucial for businesses to cultivate a positive and strong brand image through effective branding strategies and customer experiences. the poems of fire emphasize the distinction between brand owners and the commercial identity of others. for instance, a sony consumer may differ from those of other brands, threatening the return on investment. all brands, including seller accounts, job behavior, ceo interviews, and communication campaigns, are cultural brands (o'reilly, 2005). review of economics and development studies, vol. 9 (2) 2023, 111-131 117 dealing with complaints effectively addresses the minimum organizational problem, but it can also resolve other issues. lack of knowledge in complaint management leads to ineffective processes, potentially causing synchronization problems. additionally, handling and reviewing complaints can be challenging for professionals (cowan & anthony, 2008). prioritizing customer complaint resolution will enhance the brand image of broadway tourism and art marketing, which may be less extensive compared to marketing various companies and cultures. marketing management problems are linked to general development issues. from a sociological perspective, art marketing falls under the sociology of culture and encompasses the sociology of art. art marketing often adopts a typical approach to branding in various cases. recent international art management publications have not prominently featured articles with the title 'brand' in their titles or abstracts (o'reilly, 2005). h3: brand image moderates the effect of complaint resolution on customer loyalty with trust as a mediator. h3a: brand image moderates the effect of product warranty on customer loyalty with trust as a mediator. 2.5 trust social theories offer insights into everyday life aspects, combining experimental designs and theoretical ideas to understand life experiences better (martínez & bosque, 2013). the literature on consumer confidence and food labeling is vast, involving numerous interdisciplinary fields, such as consumer research, public relations, scientific research, public health research, nutrition, and marketing (tonkin et al., 2015). trust is crucial in interpersonal relationships and involves expectations of others' actions, morals, and benevolence. building trust is a key element of leadership success (fairholm & fairholm, 2000). trust is essential in service industries focusing on personalization, choice, and process orientation (guenzi & georges, 2010). customer loyalty is deeply related to trust and reliability, resulting in repeat purchases. csr is important for hotel companies to build customer loyalty and long-term benefits (martínez & bosque, 2013). building trust requires a leader capable of handling challenging tasks and is foundational in management philosophy (fairholm & fairholm, 2000). to investigate consumer trust and brand purchase behavior, this study examines various direct and indirect dealings, including trust issues, direct dealing, and some indirect aspects (hongyoun hahn & kim, 2009). customer satisfaction is essential for building trust, especially in e-commerce, while trust is crucial for long-term relationships in any business (shao yeh & li, 2009). csr activities are criticized, but they remain important for building trust and relationships with customers (mombeuil & fotiadis, 2017). screen interface design significantly impacts customer trust and communication in online shopping experiences (luo et al., 2006). in conclusion, trust plays a critical role in various aspects of life, impacting customer behavior, relationships, and business success. building trust requires understanding human behavior, effective leadership, and attention to customer satisfaction. in public relations, consumers view the brand as a representation of customer care and honesty. their opinions and expectations about public relations efforts depend on the brand's reputation and how well it aligns with their expectations (hsieh & li, 2008). h4: trust significantly impacts customer loyalty. review of economics and development studies, vol. 9 (2) 2023, 111-131 118 fig. 1: conceptual framework of the study 4. research methodology the research methodology encompasses a set of methods specifically chosen to address the research objectives effectively and efficiently. as outlined by rajasekar (2013), the research methodology serves as a guide to illustrate how the research objectives will be achieved, including the utilization of all available resources and the application of various methods to address the identified research problems. by employing well-defined research methods, this study aims to obtain in-depth knowledge of the variables under investigation, enabling a comprehensive understanding of their characteristics and interrelationships. 4.1 participants and procedures the study’s target population included customers of batteries in the south punjab market, which encompassed the cities of multan, dg khan, and bahawalpur. the targeted respondents were customers from the aforementioned area. the sampling procedure adopted for this research was purposive sampling, also known as judgment, selective, or subjective sampling. this sampling technique relied on the researcher's own judgment to select participants from the population for the study. purposive sampling is a non-probability method where the elements selected for the sample were chosen based on the researcher's judgment. researchers believed that this approach could yield a representative sample and save time and resources. manual selection of interviewees was done during the initial contact (adams, khan, raeside, & white, 2007). in this sampling, it was essential to ensure that the sample group represented specific features of the chosen population. factors such as age, education, population of the city, and income level were considered when selecting the sample. data collection was conducted through a questionnaire, which was used to identify customer loyalty. the questionnaire was administered to customers visiting the dealer networks of various battery manufacturing companies, including exide, ags, oska, millat, phoenix, bridge power, force, review of economics and development studies, vol. 9 (2) 2023, 111-131 119 and daewoo. a survey was conducted among 500 people from the south punjab region (multan, dg khan, and bahawalpur). the sample was chosen through quota sampling based on the population in each district. data was collected from customers either in person or via telephone. respondents were asked if they could complete the questionnaire on-site. they were assured that the data 4.2 data collection instrument and measurement scales 4.2.1 trust consumer trust is defined as the belief that the product or service provider can be relied upon to act in a way that serves the long-term interests of consumers (martínez & bosque, 2013). the role of individual personal relationships is crucial in building trust, leveraging social networks and mutual communication reputation. if trust-building is not sufficient, it is essential to address this aspect (ho & weigelt, 2005). the measurement scale used in this study is based on the work of (hunt, 1994) and (sirdeshmukh et al., 2002). respondents indicate their responses on a five-point likert scale, with 1 indicating "strongly agree" and 5 indicating "strongly disagree." 4.2.2 product warranty product warranty refers to a written agreement between the manufacturer (seller) and the consumer (buyer) that requires the manufacturer to cover any failures that may occur within the warranty period, thereby safeguarding the interests of the customer (karim et al., 2005). while existing literature often focuses on ensuring single components or articles, practically, many complex items today are covered by warranties (manna et al., 2004). the measurement scale adopted for this study is based on the work of (boulding and kirmani, 1993). respondents provide their responses on a five-point likert scale. 4.2.3 brand image consumer familiarity with the brand is directly proportional to their knowledge about it. utilizing an existing brand name for a product can lead to greater customer loyalty (müge arslan & korkut altuna, 2010). positive relationships between individual views of retail brands and affiliated companies are emphasized. the company's strength and brand are at the heart of its organization from a corporate perspective (rindell & strandvik, 2010). 4.2.4 customer loyalty loyalty can be conceptualized in terms of both service loyalty and brand loyalty. product quality, including performance, packaging, design, features, and warranty conditions, influences customer loyalty. additionally, the social value and integrated marketing communications also impact customer loyalty (mohd suki, 2016). the measurement scale adopted for this study is based on the work of (yim et al., 2008), (donnelly, 2009), and (kocoglu and kirmaci, 2012). respondents rate their responses on a five-point likert scale. review of economics and development studies, vol. 9 (2) 2023, 111-131 120 4.2.5 analysis and findings in this study, the data analysis involved a comprehensive approach utilizing various statistical tools. the scale-based data collected from the participants was processed and analyzed using spss version 20, a widely recognized statistical package for social sciences. this ensured the reliability and accuracy of our data analysis. moreover, to validate and confirm the research outcomes, both exploratory factor analysis (efa) and confirmatory factor analysis (cfa) were conducted. these analyses helped us gain a deeper understanding of the underlying structures and patterns in the data. one of the essential techniques used in our research is structural equation modeling (sem), which combines amos (analysis of moment structures). sem is a powerful algorithm for general linear model (glm) and offers significant advantages over traditional linear modeling software. it allows researchers to handle large datasets efficiently and assess the reliability and validity of the research model (lei & wu, 2007). the application of sem in this study involved evaluating two key components: the measurement and structural models. we examined the relationships between variables, estimated model parameters, and mapped the structural relationships within our research model through sem pathways. this enabled us to estimate and validate the level of agreement between different variables, ensuring the soundness of our research findings. in summary, this research employed a comprehensive data analysis approach, leveraging spss and sem with amos. by conducting efa and cfa, we confirmed the validity of our research results. the use of sem allowed us to assess and test the proposed hypotheses effectively. additionally, we ensured our data’s reliability by applying cronbach alpha and other statistical techniques. these rigorous analyses provide a strong foundation for drawing meaningful conclusions and contributing to the existing body of knowledge in our field. 4.3 sample demographics and missing value testing this section provides an overview of the data interpretation for demographic variables, including gender, age, physical status, and educational background. additionally, it covers the handling of missing data in the study. data validation and processing of missing values were conducted using spss-20 to ensure accuracy and reliability. initially, 600 questionnaires were distributed across various areas in southern punjab, and 460 of them were successfully retrieved. among these, 30 questionnaires were excluded due to missing values associated with variables or items, leaving 410 questionnaires for the final analysis. descriptive analysis was performed in the second phase to present a comprehensive overview of the data. this involved calculating means, standard deviations, and frequency distributions for the input data. any missing values in the questionnaires were directly deleted, resulting in a data sheet without any missing entries. in terms of demographic factors, the study explored gender, experience, education, city, and company affiliations. the demographic summary shows that among the 410 respondents, 98% were males and 2% were females. in conclusion, the data analysis process included thorough validation and handling of missing values to ensure the accuracy and integrity of the study. the demographic factors were examined and review of economics and development studies, vol. 9 (2) 2023, 111-131 121 presented in a descriptive manner, shedding light on important insights that will contribute to the overall findings of the research. 4.4 measurement of normality before proceeding with the structural equality examination, data collection is of paramount importance, as highlighted by hall and wang (2005). it is essential to adhere to basic principles such as checking for normal distribution, multi-collinearity, and the presence of missing values and outliers (hall and wang, 2005). in the current study, with a sample size of over 200, it can be concluded that the results are not due to unusual investigations, as supported by the examination of kurtosis and skewness, which indicate normal data distribution. additionally, the average representation of respondents' answers indicates a general agreement with the statements (freund, 2000). overall, it is imperative to rigorously assess data normality, multi-collinearity, and other related factors before delving into the examination of structural equality in the study. table 1: kmo and bartlett’s statistics for efa kmo and bartlett’s test customer loyalty complaint resolution product warranty brand image trust kaiser-meyer-olkin measure of sampling adequacy .798 .837 .713 .865 .824 approx. chi-square 654.946 879.564 401.335 882.517 601.802 bartlett's test of sphericity df 10 28 3 36 10 sig. .000 .000 .000 .000 .000 4.5 confirmatory factor analysis confirmatory factor analysis (cfa) is a statistical technique used in the field of research and data analysis to assess and validate the measurement model underlying a set of observed variables. it is a form of structural equation modeling (sem) that specifically tests a predefined theory or model, where the relationships between observed variables and latent constructs are hypothesized based on existing theories or prior research. unlike exploratory factor analysis (efa), which aims to discover underlying factors without any preconceived assumptions, cfa involves testing specific hypotheses and determining the fit of the proposed model to the observed data. cfa is essential in research for several reasons. firstly, it allows researchers to evaluate the construct validity of their measurement scales by testing whether the observed variables adequately represent the underlying latent constructs they intend to measure. this helps ensure that the chosen variables are appropriate and meaningful in capturing the constructs of interest. secondly, cfa provides a means to assess the goodness of fit of the proposed model to the observed data, indicating how well the model aligns with the actual data. a good fit indicates that the proposed model accurately represents the relationships between the variables, while a poor fit suggests potential modifications or adjustments are needed. moreover, cfa aids in identifying any potential measurement errors or collinearity issues among the observed variables. by confirming the factor structure and relationships between variables, researchers can have greater confidence in the reliability and validity of their measurement instruments, leading to more accurate and robust conclusions in their research. in summary, confirmatory factor analysis is an invaluable tool in research as it helps to validate measurement models, assess construct validity, and ensure the review of economics and development studies, vol. 9 (2) 2023, 111-131 122 accuracy and integrity of data. it provides a systematic approach for researchers to test their hypotheses and make informed decisions based on the fit of their proposed models with the observed data. 4.6 cfa of complaint resolution, brand image, trust, prodcut warranty and customer loyalty in this study, complaint resolution is considered as an independent variable with a single dimension comprising eight items. through factor loading analysis, one item with a lower factor loading (cr1) was removed to enhance the construct's reliability, resulting in a cronbach's alpha value of 0.807. the detailed statistics are reported in table 2. table 2: confirmatory factor analysis of complaint resolution table 3:confirmatory factor analysis of brand image quest. item cr2 cr3 cr4 cr5 cr6 cr7 cr8 item time after complaint is raised the feedback from customers accessibility of 24×7 the staff is well trained aa central complaint handling department rrigid and inflexible grievance resolution mechanism separate complaint handling staff final standardized loading .548 .509 .591 .601 .699 .683 .736 c.r 7.427 7.420 6.383 7.000 7.516 7.175 7.440 cmin/df(2/df) rmsea gfi tli cfi initial 7.573 .127 .905 .786 .847 model fit 2.668 .064 .972 .956 .967 quest. item item wordings in-group bias final standardized loading c.r br2 bbetter characteristics than the competitors .661 6.547 br3 competitors are usually cheaper .694 6.485 br4 brand is nice .648 6.529 br5 personality that distinguishes itself .636 6.337 br6 bbrand that doesn’t disappoint .611 6.508 br7 bbest brands in the sector 634 6.534 br8 consolidated in the market .545 6.032 br9 the products have a high quality .099 1.774 cmin/df (2/df) rmsea gfi tli cfi initial 2.750 .065 .962 .956 .955 review of economics and development studies, vol. 9 (2) 2023, 111-131 123 brand image serves as a mediator in this research and is also based on a unidimensional model. after conducting exploratory factor analysis (efa), nine items were initially considered, but one was subsequently removed due to a low factor loading. in the subsequent confirmatory factor analysis (cfa), only four items demonstrated significant regression weights, leading to the retention of these items in the brand image construct. the reliability of brand image was calculated as 0.78. the detailed statistics are reported in table 3. trust, as a moderator in this study, is unidimensional and initially comprised five items. efa was applied to assess factor loadings, and all five items exhibited favorable factor loadings above 0.50, justifying their inclusion. similarly, in the first-order cfa, all items demonstrated sufficient standardized regression weights, resulting in no item elimination and a reliability coefficient of 0.802 for trust. the detailed statistics are reported in table 4. product warranty is explored as an independent variable in the present research, initially consisting of four items. one item was removed due to a lower factor loading, while the remaining items demonstrated satisfactory standardized regression weights, leading to a product warranty reliability value of 0.807. the detailed statistics are reported in table 5. lastly, customer loyalty is treated as the dependent variable, represented by a single dimension encompassing five items. through efa, all items were found to be suitable for retention, and in the first-order cfa, all items displayed adequate standardized regression weights, culminating in a reliability coefficient of 0.835 for customer loyalty. the detailed statistics are reported in table 6. table 4: confirmatory factor analysis of trust quest. item item wordings final standardized loading c.r tr1 services make me feel a sense of security .710 13.20 tr2 ttrust the quality .668 12.931 tr3 hiring services is a quality assurance .820 12.890 tr4 interested in its customers. .932 9.176 tr5 honest with its customers .756 11.428 cmin/df (2/df) rmsea gfi tli cfi initial 2.932 .069 .985 .968 .985 table 5: confirmatory factor analysis of customer loyalty quest. item item wordings final standardized loading c.r cl1 nno intention to switch over .699 13.32 cl2 intention to recommend .615 12.206 cl3 prefer this company .711 10.526 cl4 use the services .613 9.206 cl5 prefer new services .668 9.849 cmin/df(2/df) rmsea gfi tli cfi initial 10.308 .151 .951 .857 .928 model fit 3.778 .082 .989 .957 .987 review of economics and development studies, vol. 9 (2) 2023, 111-131 124 4.7 path analysis and hypothesis testing 4.7.1 direct effects coefficients the statistical analysis indicates that the correlation between the independent variables and customer loyalty is less than 0.05, meeting the criterion for statistical significance. specifically, product warranty (pw) exhibited a significant impact on customer loyalty (cl) with a regression coefficient (β) of 0.115 and a p-value (ρ) less than 0.05. similarly, complaint resolution demonstrated a considerable influence on customer loyalty (cl) with a regression coefficient (β) of 0.448 and a pvalue (ρ) lower than 0.05. these results provide empirical evidence to support the significance of product warranty and complaint resolution as determinants of customer loyalty in our study. the strong positive associations between these independent variables and customer loyalty highlight their potential value in enhancing customer satisfaction and fostering loyalty towards the brand or service. overall, our research underscores the importance of considering product warranty and complaint resolution strategies to positively influence customer loyalty. these findings contribute to a better understanding of the factors that drive customer loyalty in the context of our study and may assist businesses and organizations in developing effective customer-centric approaches for long-term success. 4.7.2 indirect effects coefficients in the presented table, the analysis values provide insights into the significance of the results, indicating the impact of the variables under study. specifically, we have focused on independent variables, namely product warranty and complaint resolution, as well as the dependent variable, customer loyalty, while also considering trust as a crucial mediator. the significance level (ρ) is a key indicator to determine the statistical significance of the relationships between variables. in our study, all the ρ values are less than 0.05, indicating that the observed results are statistically significant. this suggests that both product warranty and complaint resolution have substantial effects on customer loyalty when mediated through trust. upon analyzing the table, we observed that the ρ value for the relationship between complaint resolution and customer loyalty, via trust, is 0.000, with a corresponding regression coefficient (β) of -0.520. this indicates a highly significant relationship, demonstrating that the impact of complaint resolution on customer loyalty, mediated through trust, holds considerable importance. similarly, our findings show that there is a significant association between product warranty and customer loyalty, mediated through trust, as evidenced by the ρ value of 0.004 and a corresponding regression coefficient (β) of 0.1574. this comprehensive analysis sheds light on the intricate relationships among the variables considered in our research and provides valuable insights for businesses and organizations aiming to enhance customer loyalty through effective utilization of product warranty and complaint resolution strategies, with trust serving as a key mediator. review of economics and development studies, vol. 9 (2) 2023, 111-131 125 fig. 2: simple slopes of trust for brand image and complaint resolution fig. 3: simple slopes of trust for brand image and product warranty table 6: coefficients of direct effects y = -0.264x + 2.665 y = -0.292x + 4.169 1 1.5 2 2.5 3 3.5 4 4.5 5 low comp res high comp res tr u st moderator low brand image high brand image linear (low brand image) linear (high brand image) y = 0.088x + 2.292 y = 0.004x + 3.57 1 1.5 2 2.5 3 3.5 4 4.5 5 low prdt war high prdt war tr u st moderator low brand image high brand image linear (low brand image) linear (high brand image) predictor (x) outcome(y) β se t ρ hyp. result product warranty trust 0.0226 0.0392 0.5758 0.5631 h1a ns complaint resolution trust -.1390 .0662 -2.0992 0.364 h2a ns trust customer loyalty 0.2470 0.318 7.7636 0.0000 h4 supported product warranty customer loyalty 0.1158 0.0326 3.5584 0.0004 h1 supported complaint resolution customer loyalty 0.4481 0.0294 15.2510 0.0000 h2 supported review of economics and development studies, vol. 9 (2) 2023, 111-131 126 table7: coefficients of indirect effects table 8: coefficients of conditional indirect effects mediator (m) moderator effect boot se llci ulci hyp. result trust -0.5185 -.0335 0.217 -0.785 0.0060 h3 ns trust 0.0000 -.0343 0.192 -.0757 0.0005 trust 0.5185 -0.352 0.214 -0818 0.0033 4.7.3 results of hypotheses based on the test results, we have found a significant relationship between complaint resolution and customer loyalty, thus confirming the validity of our hypothesis. the ρ value obtained from the test is .000, and the β value is .4481, indicating a positive association between complaint resolution, trust, and customer loyalty. this aligns with previous literature, as identifying and resolving complaints is crucial in improving service quality and fostering loyalty (wallin andreassen & lindestad, 1998). moving on to hypothesis 1, our analysis supports the significant relationship between product warranty and customer loyalty, as indicated by the ρ value of .004 and a β value of .1158. this result is consistent with prior research in the service sector, which highlights the role of product warranties as valuable tools to enhance trust and customer loyalty (gee et al., 2008). on the other hand, hypothesis 2a is not supported, as there is no significant relationship between product warranty and customer loyalty. the ρ value obtained is .364, with a β value of .1574, signifying an insignificant path between these variables. contrary to some previous findings, our results indicate that warranty information might not be as influential as brand information in driving customer loyalty (innis & unnava, 1991). in conclusion, our research highlights the importance of complaint resolution in building customer loyalty, while also underscoring the significance of product warranties in certain contexts. the results provide valuable insights for organizations seeking to strengthen customer loyalty through effective strategies in service and product offerings. 5. discussion of results and conclusion this study aims to delve into the intricate values and analysis of customer loyalty. its primary objective is to explore the relationships among the independent variables, namely product warranty, complaint resolution, and customer loyalty, while also considering the mediating role of trust and the moderating impact of brand image. predictor (x) mediator (m) outcomes(y) β boot se llci ulci hyp. result complaint resolution trust customer loyalty .1574 .0317 .0970 0.2228 h2a supported product warranty trust customer loyalty .520 .0187 .0197 .0941 h1a supported review of economics and development studies, vol. 9 (2) 2023, 111-131 127 in this section, a comprehensive introduction sets the stage by illuminating the significance of studying the relationships between these variables. social trust theory (elliott et al., 2007) underpins the understanding of how people's trust in an organization influences their loyalty, particularly in the battery manufacturing industry. recognizing the positive link between product warranty, complaint resolution, and customer loyalty is essential for enhancing customer loyalty. the literature review begins with individual variables, followed by an exploration of relevant studies on the relationships between them. it is during this process that a research gap is identified. this integrated framework draws on a wealth of literature and encompasses various analyses, presenting a comprehensive view of the relationships between the variables. the study aims to unravel the unknown aspects and shed light on key research questions posed in chapter 1, ultimately contributing to a refined conceptual framework that is both theoretical and empirically tested. by merging these insights, we strive to advance our understanding of the factors that shape customer loyalty and inform strategic decision-making in the battery manufacturing industry. 6. academic implications customer loyalty is a marvel that holds paramount importance for numerous organizations, as it serves as a key indicator of their customer base's satisfaction, aids in refining strategies, and ultimately leads to increased loyalty. as espoused by the social trust theory, the sentiment of assurance forms an integral part of the psychological contract, and insights from psychological theories offer profound comprehension of the underlying principles in the realm of social trust theory (elliott et al., 2007). to gain a deeper understanding of the intricate social dynamics at play, organizations have taken proactive measures to communicate and comprehend the myriad factors that influence customer loyalty. the battery production industry, witnessing a surge in demand due to advancements in the automotive sector and rapid growth in pakistan, necessitates a thorough comprehension of the reasons behind customer disloyalty. this study endeavors to bridge this knowledge gap, empowering organizations to better understand customer needs and endeavor to fulfill them optimally. moreover, it sheds light on the novel implication that social trust theory brings from the social perspective, highlighting that customers offer loyalty in exchange for superior product warranty and efficient complaint resolution, thereby fostering customer loyalty. another noteworthy aspect of this study is its theoretical framework, which offers a novel approach yet to be fully explored, particularly concerning the variables at hand and their application in the specific industry. this lays the groundwork for future studies, potentially leading to more intricate and sophisticated models. the study introduces an innovative methodology that delves into customer loyalty, considering the mediating effect of trust, thereby deciphering the relationship between product warranty, complaint resolution, and customer loyalty to discern its impact on customer loyalty, be it positive or negative. 7. managerial implications this study offers invaluable insights and actionable guidelines for management and managers, drawing from the reciprocal relationship between organizations and customers elucidated by the social trust theory. the findings of this research shed light on crucial administrative aspects that warrant attention, emphasizing the significance of loyalty. one significant implication of this study lies in the imperative for management to harness the review of economics and development studies, vol. 9 (2) 2023, 111-131 128 potential of product warranty and complaint resolution, as these factors have a direct impact on customer loyalty. the battery industry, in particular, stands to benefit from a keen observation of the predictors that drive customer loyalty. the research underscores the pivotal role of customer loyalty as a key performance indicator in the battery manufacturing domain. therefore, a strategic focus on product warranty and effective complaint resolution presents an ideal approach to ensure seamless customer satisfaction. this study magnifies the importance of prioritizing customer complaint resolution and service handling within organizations. the provision of such services to customers proves instrumental in fostering enhanced loyalty. while brand image is undoubtedly important, it is essential to recognize that failing to fulfill promises made to customers can detrimentally affect their loyalty. moreover, the length of warranty plays a pivotal role in bolstering customer confidence, as a longer warranty instills greater peace of mind. however, it is equally vital to acknowledge that the significance of efficient complaint resolution outweighs that of product warranty, calling for a dedicated focus on improving complaint resolution processes. in conclusion, this study brings a comprehensive perspective to organizational practices, underscoring the significance of product warranty, complaint resolution, and brand image in fostering customer loyalty. by taking into account these essential factors, organizations can enhance their customer relationship management and build long-lasting loyalty. 8. limitations and future research directions it is important to consider additional variables in future research to gain a deeper understanding of customer behavior. for instance, factors such as management style, quality of life, and employee benefits could influence the study outcomes. conducting long-term research with a specific focus on these variables can provide valuable insights. the current research process has been conducted diligently, but further improvements can be made to enhance the sample model and research quality. exploring different logical models with new variables or conducting similar studies in different locations or populations can lead to more robust findings. moreover, adjusting the research framework for other populations or contexts may yield different outcomes. for customers who purchase products with warranties and exhibit loyal behavior, their product needs and satisfaction are the main focus of this research. this framework can be applied and analyzed from various perspectives with different populations. additionally, the model can be expanded to incorporate new variables such as brand awareness, product quality, and product life after the warranty period, to better understand their impact on customer loyalty over time. the research specifically applies to customers who make purchases from company retail outlets in urban areas of south punjab, primarily buying local manufacturer products. future studies could consider including imported products and exploring their impact on customer retention. furthermore, delving into the maintenance aspects over a longer period can provide deeper insights into the factors influencing customer loyalty. in conclusion, while 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(1997). the importance of country‐of‐origin information and perceived product quality in uzbekistan. international journal of retail & distribution management, 25(4), 138-145. doi:10.1108/09590559710166313 review of economics and development studies, vol. 9 (1) 2023, 37-46 37 industrial expansion, trade openness and environmental degradation in asia: a panel data analysis furrukh bashir a, maria javaid b a assistant professor, school of economics, bahauddin zakariya university, multan, pakistan b m.phil. scholar, school of economics, bahauddin zakariya university, multan, pakistan article details abstract history: accepted 17 february 2023 available online march 2023 the study is conducted to examine the influence of industrial expansion and trade openness on environmental degradation by using panel data of 16 asian economies from 1992 to 2020. the results are estimated through panel unit root test and then panel ardl technique. the results of unit root test propose to apply panel ardl and their results are estimated for short run and long run. it is analysed that industrial value addition are population density are increasing co2 emission in asian economies while trade openness, government expenditure and gdp are reducing co2 emission. © 2023 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: co2 emission, industrial output, trade, population, government expenditure, gdp, asian economies jel classification: h23, o24, h53 doi: 10.47067/reads.v9i1.477 corresponding author’s email address: furrukh@bzu.edu.pk 1. introduction the economic development might be reliant on the rapidly growing procedure of industrialisation within any economy. the industrial production is responsible for the generation of the services, goods as well as employment opportunities which makes a contribution to economic growth; however, it is also one of the main sources of waste and pollution. the industrialisation has been known to accelerate the economic development of a country. according to neumayer (2003), generally, the industrial sector has been considered as more concentrated towards pollution in comparison to the service sector. the industrial outcome might provide assistance in the explanation of the pollution level as the wastewater within the developing countries is likely to be dumped without any treatment into the rivers (who/unep, 1997). today, each and every country of the world is dependent upon the export of products and services for providing assistance in the economic expansion; however, the major emphasis is on the industrial sector as the levels of trade openness and international trade has been increasing. the asean countries are situated within southern east asia and include indonesia, brunei, singapore, cambodia, review of economics and development studies, vol. 9 (1) 2023, 37-46 38 malaysia, laos, vietnam, myanmar, thailand, and the philippines. these countries emphasise the industrial investment in the various sectors, for instance, food, petroleum, vehicles, and textiles. the asean countries have developed the ‘asean economic community in the year 2016 for increasing the cooperation between the members of asean for driving the economic stability within the south east asian region. according to the world bank (2015), industrial value-added encompasses manufacturing, gas, mining, construction, water, and electricity. value-added has been defined as a sector’s net output which appears after the addition of all of the outputs and the subtraction of the intermediate inputs. the calculation of value added is carried out without subtracting the depreciation of the fabricated assets or the degradation and depletion of the natural resources. the association between trade liberalisation and the economic growth within the developing countries has been under the debate between economists of development in the past few years. the query is that does the economic growth of the developing countries increases due to trade liberalisation and if the answer is yes then what is the reason behind it. there have been various empirical studies which associate the economic growth to the openness of the rules of trade (little, scitovsky, & scott, 1970; balassa & associates, 1971; bhagwati, 1978 ; heitger, 1987; krueger, 1978; dollar, 1992; quah & rauch, 1990; romer, 1989; michaely, papageorgiou, & (eds.), 1991; thomas, nash, & associates, 1991). however, certain studies have identified little empirical pieces of evidence for providing support to the relationship between economic growth and trade liberalisation (sachs, 1987; unctad, 1989; agosin, 1991; shafaeddin, 1994; greenaway & sapsford, 1994; jenkins, 1996; taylor, 1991). the development of the endogenous growth theory has also offered the theoretical framework for endeavouring the empirical work related to the relationship between economic growth and trade policies. economists have designed various sophisticated models that are made for the purpose of stimulating the alterations in the economic conditions that are anticipated from an agreement of trade. it has been observed that the increase in the level of the economic activity can have an impact on the environment and each of the products have the probability to create some sort of pollution. there have been slight changes in the pollution due to trade liberalisation; however, free trade does not have a detrimental effect on the environment. the previous studies regarding trade liberalisation, industrial expansion and environmental degradation within the asian countries. it has been found that numerous studies have been accomplished to recognise the advantages of trade suggesting that it is an instrument in accelerating the economic growth of the countries in trade and developing countries in actual. in order to analyse the impacts by making use of the dataset of the industrial level between the whole manufacturing sector. the pre and post-liberalisation period was also compared in order to investigate whether the local indian production and exports enhance dirty technology relatively to clean technology or not. the objective that has been set for this research is to investigate the impact of industrial expansion and trade liberalisation on the environmental degradation in asia. the study is organized as section one is providing preliminary information regarding the research topic and purpose. section two provides the theoretical and conceptual framework. section three reveals the literature related to the topic. section four offers the methodology of the research. section five provides the results of the research and section six provides the policy and the recommendations. review of economics and development studies, vol. 9 (1) 2023, 37-46 39 2. literature review in this section, the previous related studies and research have been reviewed as these serve as valuable literature with respect to the research topic. the literature review highlights the results of previously done studies and their relevance to the current research. in the paragraphs following this introduction, the relevant aspects of those past studies have been reviewed. numerous studies have been carried out to recognise the advantages of trade suggesting that it is an instrument in accelerating the economic growth of the countries in trade and developing countries in particular. albeit the significance of international trade with regards to economic growth, environmentalists have claimed that the open trade policies, although, add value to the welfare of economies, producers, and consumers, it also degrades the ecosystem and environment as a result of activities that are carried out owing to the very openness of this international trade. the research was conducted by chou et al., (1991) for the examination of the effect of openness to trade on environmental degradation. the environmental quality in this study was designed as differentiated and non-tradable degradation. it was depicted by the findings of this research that in a situation where the customers consider consumption and environmental characteristics as the substitutes and in case a comparatively high value is placed by the customers on the quality of the environment in comparison to the quality of the product, then there is a chance that the openness of the trade might minimise the welfare of the trading countries. there is a likelihood of net welfare loss which in their study, grossman & krueger (1992) analysed the impact of the north atlantic american free trade agreement (nafta) and after the analysis claimed that given that trade restrictions are removed then it is going to impact the environment in general. to support this statement the study argued that the increase in the level of economic activity and the changes in techniques and composition of production affects the environment. the study applied cross-sectional data of 42 countries by studying their urban areas demonstrating that the open trade has impacted those areas. in this research economic growth and air, the quality relationship was studied and the results showed that the concentration of two pollutants i.e. smoke and sulphur dioxide increases as the per capital gdp increases at national income’s low levels. however, it decreases with gdp growth as the income level is higher. the study conducted by jouathan (2001) depicts that generally, trade is beneficial economically due to the fact that the countries which are involved in international trade could get the advantage from following their competitive advantage with the help of trade. however, there are also increased chances that they will be harmful at the national, regional as well as global level. the environment in the resource-based industries including material mining, extraction of oil which can also make a contribution to environmental degradation, might also be affected by the foreign direct investment (fdi). the study conducted by usman in 2003 identified that the situation within the developing countries is completely different in comparison to that of the developed countries. in the case of dealing with the effects of international trade on the environment of the developing countries, it has been identified that they are more reliant on the exploitation of the natural resources and the agricultural sector. this is because of the fact that for keeping the balance of the payment in their favour or in surplus. due to this, the developing countries enhance the trade volume which leads to the overexploitation of the natural resources which in turn damages the environment. in the actual terms, review of economics and development studies, vol. 9 (1) 2023, 37-46 40 all these things result in a deteriorating living standard. the influence of trade on the environment has also been examined by jha & gamper-rabindran (2004) when in the year 1991, the barriers of trade were removed from the fdi because of trade liberalisation. in order to analyse the impacts by making use of the dataset of the industrial level between the whole manufacturing sector. the pre and post-liberalisation period was also compared in order to investigate whether the local indian production and exports enhance dirty technology relatively to clean technology or not. they also examined that the pollution in the intensive sector has increased because of the fdi inflow. their findings indicated that after the liberalisation of trade in india, the exports and fdi were enhanced in the more polluted sectors in comparison to the less polluted sector. kakaliy and chakraborty (2005) also examined the impact of liberalisation of trade on india’s environment by analysing pollution heaven hypothesis (phh) and factor endowment hypothesis (feh). the method utilised for the testing of phh and feh was input-output methods. as per their examination, the evidence from india does not support phh (pollution heaven hypothesis) whether checked with the rest of the countries for trade or only with the european union eu but it supports factor endowment hypothesis (feh) while exporting more goods that are labour concentrated which are eco-friendly. it has been claimed by khalil & inam (2006) that the economists have debated that the increment in the local production because of the international trade in order to get the foreign currency results in the enhancement in the market share of each of the currency along with conveying the efficiency within the utilisation of limited resources. however, on the other hand, it is criticised by the environmental economist that the real or actual costs of trade liberalisation are the degradation of the environmental resources and the reduction of natural resources. according to their findings, there has been a principle relationship between the environment and international trade. therefore, it is important to develop a policy inclined towards environmental protection. eventually, these things will have an influence on the economic growth which, fried (2011) has also discussed in his analysis concerning the influence of carbon on economic growth. his research findings indicated that the output might directly be affected by environmental pollution and will also reduce the productivity of the labour and capital made by men. this damage and distressfulness happen principally because of environmental pollution and can also make a contribution to the distractive effect on human benefit as well as the economy. the aim of carrying out this study was to investigate the effect of co2 on the economic growth of the asean by making use of the data from 1965 to 2010. three simultaneous studies were formulated in this research for the empirical analysis which indicates that there is an environmental kuznets relationship in the asean (ali, zaman, & ali, 2015). according to kawai & wignaraja (2014), the evolving trade policy architecture of asia is probably to be progressively anchored on the free trade agreements (ftas) for the predictable future. for this prediction, there are three reasons. the first reason is that the multifaceted negotiation function at the wto appears as there is a slight end in sight for the long-standing wto. the second reason is that the momentum for the more unilateral liberalisation in asia appears to have grown weary with the tariffs of import attaining the historically low level in the initial 2000s. the third reason is that nearly all of the asian economies have been following ftas in order to sustain the momentum for liberalisation and to make an effort to minimise the more difficult behind the barriers of border regulation. review of economics and development studies, vol. 9 (1) 2023, 37-46 41 according to the study of ali et al. (2015), the findings of the study carried out by rudel in 1999 are different and indicate that international trade is a significant factor within the increased rate of tropical deforestation. particularly, the trade with the developed countries has forced south east asia and latin america to enhance the deforestation. due to trade liberalisation, there has also been the extinction of the valuable plant and animal species. because of all of the transboundary issues of international trade, the problem regarding the environmental effects of international trade has become very much complex and is also considered significant on the international level. according to azam (2016), in the procedure of sustainable economic development, environmental pollution is a significant issue as it has alarming concerns for economic growth as well as the well-being of humans. pollutions have been considered as the cause of a number of negative impacts on resource enervation, health and the natural disasters related to changes in climate. it has been explained that with the development of the economy, the environment will also be affected that will have an adverse impact on the society, natural order, infrastructure, and the economy. the unfavourable relationship between environmental degradation and economic growth need adequate environmental policy strategies and reactions, at regional, local, national as well as international level. it has been claimed that smart policies for the control of co2 emission can provide a stimulus for economic growth. according to jacob (2018), the latest research of escap indicates that between the 1990s and 2010s, the market income gini coefficient which is the most widely utilised measure of the inequality in income has increased in four out of five most populated countries in the region having an effect on the approximately 70 percent of the population of asia pacific. the research also depicted that environmental factor such as erosion of the natural capital, air pollution and the steady impact of the natural hazards were among the essential factors which contributed to the increase in income equality in the countries since the 1990s. inequality can be addressed by the targeted policies for disrupting the association between income equality and environmental degradation. according to higuchi & shimada (2019), the industrial policy has been a debated issue between the policymakers and the researchers. the supporters of the industrial policy claim that the large pushtype policies for the promotion of industrial development are essential to economic development. however, it has been claimed by the opponents that these types of interventionist policies will alter the market and will have a harmful influence on economic growth. during this period, the significance of the policy for the promotion of industrialisation and for reforming the investment climate has been accepted. in recent years, renewed consideration of the industrial policy has been known as the reoccurrence of the industrial policy due to the general acknowledgment of the significance of the formation of jobs within the developing countries. 3. data and methodology according to the set aims and objective for the research, a secondary method of data collection has been selected in which the data has been collected through world bank indicators. we have collected panel data of sixteen countries from the world bank indicators of thirty years (1992-2020). the countries that we have selected are azerbaijan, bahrain, bangladesh, cambodia, china, india, indonesia, japan, malaysia, nepal, pakistan, saudi arabia, sri lanka, thailand, united arab emirates and oman. the data acquired by the world bank indicators is then represented in the form bar charts which have been developed by the help of ms excel. we have used graphical analysis, descriptive statistics and correlation analysis. granger causality test, unit root test (adf) and auto regressive and distributed lag model (ardl) will be applied in results. carbon dioxide emissions are the ones arising review of economics and development studies, vol. 9 (1) 2023, 37-46 42 from the manufacturing of cement and the burning of fossil fuel and its unit of measurement is kilotons. the general government final consumption expenditure, gdp, industrial value added are taken in us dollars. the population density is the midyear population that is divided by the area of land in square kilometres. considering the objectives of the study that is to see the effect of trade liberalization and industrial expansion on environmental degradation in asian economies, the following model is presented. co2kt = β0+β1 indv + β2 traop + β3 popd +β4 ngex +β5 ngdp + ui where, co2kt is environmental degradation, indv is industrial value added, traop is trade openness, popd is population density, ngex is government expenditures, ngdp is nominal gross domestic product, uᵢ is error term and β’s are coefficient’s slopes. 4. results and discussion in this study, levin, lin and chu test is applied as unit root test and their results are presented in table 1. these results display that co2 emission, population density and trade openness are stationary at level while gdp, industrial value added and government expenditure are stationary at 1st difference. so panel ardl will be the best choice for estimation of econometric results. table 1: levin, lin and chu test: unit root test variables test for unit root in include in test equation tstatistics probability remarks co2 emission level intercept -2.91 0 i(0) gross domestic product level intercept 1.66 0.95 i(1) trend and intercept -0.29 0.38 1st difference intercept -13.76 0 industry value added level intercept 2.2 0.98 i(1) trend and intercept -0.38 0.34 1st difference intercept -11.79 0 government expenditure level intercept 2.23 0.98 i(1) trend and intercept -0.92 0.17 1st difference intercept -13.42 0 population density level intercept -4.55 0 i(0) trade openness level intercept -2.55 0 i(0) the results of panel ardl is reported in table 2. the affiliation among industrial value added and ecological degradation is positive, and the probability of relationship is significant. main reason of increase in the carbon dioxide expansion is due to the companies find out alternative but less environment friendly ways to reduce products or material cost in an attempt to increase industrial value addition. the relationship between trade openness and carbon dioxide emission is negative, and the probability of relationship is significant. the main reason of decrease in the carbon dioxide omission is review of economics and development studies, vol. 9 (1) 2023, 37-46 43 due to the flexibility and openness in trade would ultimately reduce the environment degradation in a country. third variable is population density. the relationship between population density and environmental degradation is positive, and the probability of relationship is significant. the main reason of increase in the carbon dioxide emission is due to the increase in population of the world. the south asian countries are more effected due to this, because increasing in birth rate people produce more carbon dioxide. and in developing countries birth rates increases every year. the relationship between government expenditures and carbon dioxide omission is negative, and the probability of relationship is significant. the main reason of decrease in the carbon dioxide omission is due to the government efforts that make some policies to reduce pollution. for example, they spend money on vacuum cleaning of roads and cleaning of rivers and water areas. it would ultimately reduce the environment degradation in a country. now we discuss about gross domestic product coefficient number -0.073764. the relationship between gross domestic product and ecological degradation is negative, and the probability of relationship is significant. the main reason of decrease in the carbon dioxide omission is due to the rise in countries development upward. it would ultimately reduce the environment degradation in a country. table 2: ardl long run and short run results variables coefficient standard errors t-statistic probability long run equation industry value added 0.412442 0.074413 5.542594 0.0000 trade openness -0.184806 0.049301 -3.748557 0.0002 population density 0.457106 0.104858 4.359295 0.0000 government expenditures -0.151202 0.069543 -2.174242 0.0311 gross domestic product -0.073764 0.125054 -0.589859 0.5561 short run equation cointeq01 -0.376062 0.120232 -3.127810 0.0021 d(lco2kt(-1)) -0.188033 0.108022 -1.740690 0.0835 d(lindval) -0.112169 0.218672 -0.512956 0.6086 d(lindval(-1)) 0.025439 0.173401 0.146705 0.8835 d(lindval(-2)) 0.063307 0.170318 0.371701 0.7106 d(ltradopen) 0.112404 0.115871 0.970080 0.3334 d(ltradopen(-1)) 0.175118 0.110703 1.581867 0.1155 d(ltradopen(-2)) 0.237905 0.097063 2.451038 0.0153 d(lpopdensity) -100.0468 51.53049 -1.941507 0.0538 d(lpopdensity(-1)) 180.3478 98.60072 1.829071 0.0691 d(lpopdensity(-2)) -101.8348 55.61908 -1.830933 0.0689 d(lngexp) -0.219103 0.171420 -1.278163 0.2029 d(lngexp(-1)) -0.204871 0.189385 -1.081767 0.2809 d(lngexp(-2)) 0.182589 0.179905 1.014917 0.3116 d(lngdp) 0.142110 0.273899 0.518841 0.6045 d(lngdp(-1)) -0.181900 0.288174 -0.631216 0.5287 d(lngdp(-2)) -0.249375 0.263383 -0.946817 0.3451 constant 2.639701 0.759778 3.474306 0.0006 review of economics and development studies, vol. 9 (1) 2023, 37-46 44 5. policy recommendations and conclusion the industrial production is responsible for the generation of the services, goods as well as employment opportunities which makes a contribution to economic growth; however, it is also one of the main sources of waste and pollution. with the increase in international trade, the connection between the environment and trade has been under the discussion. the study used secondary panel data taken from world development indicators of sixteen asian countries from 1992 2020. llc – unit root test and panel ardl test are applied. it can be concluded that the escalation in the activities of the economic growth has resulted in having a great impact on the environment due to the intensification in the emission of greenhouse gases and the addition of various pollutants into the environment. main reasons of environmental degradation discussed in this work are industrialization, population density, gross domestic product, technology, lack of government spending, co2 emission and trade openness. considering all these factors of environmental pollution, different countries have different level of causes and impact on environment degradation in asia. if one country performs better in industrialization but low at other factors such as population density. similarly, all countries at some point lack controls and measures to avoid impact on environmental degradation. the results suggest that the carbon dioxide omission would reduce on average in the long run if trade openness increases (dean, 1992). government should encourage flexibility, openness and transparency in the trade market in order to reduce the pollution. if population density increases, the pollution would also increase on average in the long run. people from rural areas move to developed areas for necessities which in turn increase population density (copeland and taylor, 1997). government should provide facilities such as hospitals, schools and public parks and job opportunities in the rural areas in order to equalise population density. if government expenditures increases, the carbon dioxide omission would reduce on average in the long run (choi, 2010). government should invest money on vacuum cleaning of roads and cleaning of rivers and water bodies. it would ultimately reduce the environment degradation in a country. as calculated above in the results, if gross domestic product increases, the carbon dioxide 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[online] available at: https://datacatalog.worldbank.org/industry-including-construction-value-added-current-us [accessed 4 october 2019]. https://datacatalog.worldbank.org/industry-including-construction-value-added-current-us review of economics and development studies, vol. 9 (1) 2023, 37-46 46 zaman, k. et al., (2011). the impact of population on environmental degradation in south asia: application of seemingly unrelated regression equation model. environ econ, 2(2), pp.80-88. zarsky, l.e.., (2012). human rights and the environment: conflicts and norms in a globalizing world. earthscan. review of economics and development studies vol. 5, no 1, march 2019 155 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads foreign inflows and poverty in pakistan: a quantitative approach 1 muhammad zahir faridi, 2 khawaja asif mehmood, 3 ali azam 1 professor, school of economics, bahauddin zakariya university, multan, pakistan. 2 lecturer, school of economics, bahauddin zakariya university, multan, pakistan. khawjaasif@bzu.edu.pk 3 assistant professor, department of economics, the islamia university of bahawalpur article details abstract history revised format: february2019 available online: march 2019 foreign inflows (fi) acquire immense importance for the open economy. empirical as well as theoretical findings highlight that fi intensely affect the economic state of the host country. important issue in this respect is to examine the impact(s) of fi on poverty. the study was based on data from 1972 to 2017. it is concluded a long term relationship between poverty and fi. at large, fi do exhibit having opposite relationship with poverty. moreover, poverty being long run macroeconomic problem does have short run causality with some of fi. granger causality is also confirmed on some of fi and poverty. policy recommendation is the appropriate capital allocation for the efficient restoration of the results of fi. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords foreign inflows; poverty; johansen juselius; granger causality. jel classification: f35, p45, f24, b22 corresponding author‟s email address: zahirfaridi@bzu.edu.pk recommended citation: faridi, m. z., mehmood, k. a. and azam, a., (2019). foreign inflows and poverty in pakistan: a quantitative approach, review of economics and development studies, 5 (1), 155-164 doi: 10.26710/reads.v5i1.291 1. introduction pakistan is amongst the south asian countries is victimized of capital scarcity. it is one of the central explanations for her reliance onto fi for the finance of ongoing projects and to bridge-up broadened gaps among savings and investment level (siddiqui & kemal, 2006) fi have prime standing for less developed countries (ozturk & kalyoncu, 2007). recipient country is expected to achieve macroeconomic goals by such fi. realizing that fi contribute in positively affecting macroeconomic variables, pakistan energetically relies upon such. to obadan (2004), fi can be categorized into foreign aid, worker remittance, foreign debt, and foreign direct investment (fdi). foreign trade also exhibit to have capacity in tilting chronic issues like of poverty (yasmin & khan, 2011). fdi is the important belonging of fi (khan, 2007; mehmood & hassan, 2015). fdi in pakistan, during july-april of fiscal year 2016, remained at $1016.3 million as against $963.8 million last year. however, depressed fdi inflows are backed at; crises within the global eurozone(s) and relating financial crisis. at country level, it is because of stumpy investment in financial businesses, such as; telecommunication and power sector. reasons of fall, at internal level, are backed at circular debt and energy crisis. complementarily, to the world bank (2016), flow of overall remittance to developing economies has increased to $431.6 billion in 2015 i.e. 0.4 percent growth since 2014. the remittance of such flows to pakistan by fiscal year 2016 has swelled by five percent. during july-april of fiscal year 2016, worker remittance remained at $16.03 billion compared to $15.24 billion last year. further, in the line of trade, overall exports during july-april of fiscal year 2016 are witnessed at $18.2 billion. mainly 47.2 percent of exports are focused towards 5 countries like, uk, usa, germany, uae, and hong kong. http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 156 on dissimilar note, by july-april 2016, imports are reached at $43.2 billion. foreign debt and their excessive reliance is bound to retards economic growth. by march 2012, public debt has stood at 58.2 percent as compared to 55.5 percent. external debt(s) has reached to $69.6 billion. on the contrary, share of foreign aid is minor in overall debt that is $5441 million till by fiscal year 2016 i.e. composite of project, non-project aid component and other relief(s). this study is focused upon exploring the relationship between fi and poverty in pakistan because according to economic survey 2016, 29.4 percent of population is a victim of living below the poverty line whereas in recent years, pakistan received billions of fi which should not leave any reason for lack of capital however, the query still persists that “how and when poverty, hunger, famine, and mal nutrition would be overcome”1. therefore, short run and long run relationship among poverty and fi and nevertheless causality tie-ups between fi and poverty are of specific objectives of our study. next to the introduction of the study in section 1, the section 2 describes the empirical evidence(s) on components of fi. data source, model specification, methodological issues are discussed in section 3. the section 4 infers the outcomes of study. the concluding remarks are offered in the last section. 2. literature review foreign aid is considered for operative assistance towards that of the development (burnside & dollar, 2000). chenery and strout (1965) emphasize that range of investment is indispensable to achieve certain growth rate and the existing amount of saving (domestic) to attain the preferred investment level.2 this investment is dispensed for addressing poverty issues. there exist linkages between foreign aid on poverty relief(s). dynamic spillovers of investment capital significantly increase household income and thereby engender income of individuals (carvalho & white, 1996). however, if foreign aid is utilized improperly, the consequences turn to be negative (kraay & raddatz, 2005; masud & yontcheva, 2005). remittance is the source of coping with financial needs. to goff (2010) worker remittances possess significant and positive effect upon macroeconomic stability, poverty, and trade balances. remittances do act in shrinking of poverty, income volatility, and inequality (rapoport & docquier, 2005). the considerations got from harrod-domar model clarify that around 18 to 20 percent saving rate is needful to maintain rate of economic growth of 6 percent. in this context, on the reasons that how foreign debt is valuable is due to the powerful exposure for the gap bridge-ups within saving and investment and to achieve macroeconomic targets. the solow-swan‟s two-gap model ascertains that filling up of gaps between imports and exports and savings and investment can be realized since rely upon foreign debt component of fi (mohey-ud-din, 2005). fdi is dynamic but volatile form of fi (mehmood & hassan, 2015). fdi enhances economic growth of heir (khan, 2007; hassan, 2003; chowdhury & mavrotas, 2006; romer, 1993). it is not irrelevant to believe that fdi-caused economic growth benefits in condensing poverty.3 however, few researches are conducted in this area like; white (1992), bengoa and robels (2003), and carvalho and white (1996). better state of domestic financial markets not only attracts foreign companies towards invest rather does exert altruist effect upon economic conditions (khan, 2007). to khan and khan (2011), fi are needed (with consistency) to fix saving-investment, exports and imports, and revenues and expenditures gaps. the miracles of fi never end up here rather provoking advancement in technology, raising employment level, and addressing other macroeconomic issues in the host country are the fallouts of such fi (kobrin, 2004; le & ataullah, 2006). among fi, foreign trade adds to aggregate welfare of participating countries (harrison, rutherford, & tarr, 2002) but countries need to gain specialty in the line of products (hecksher-ohlin, 1933) and devote their resources towards the production of advantageous products (richardo, 1817). if trade is liberalized __ leads to create jobs and helps in poverty alleviation (yasmin & khan, 2011). hecksher-ohlin‟s trade theory of factor endowment of (1933) is proficient to offer rejoinders to fundamental questions that are connected to the theory of trade i.e. it makes capital obtainable for complementing policies for alleviating socioeconomic issues one of those is poverty. hence, it increases welfare of participating nations (todaro & smith, 2004). 1 the literature is extracted from the website: bbc.co.uk 02:07 gmt, saturday 3 july 2010. 2 for further suggestion and guidance, read todaro and smith (2004). 3 for further reference, read borensztein et al. (1995); bengoa and robels (2003); de mello (1999); durham. (2004) and li liu (2005). review of economics and development studies vol. 5, no 1, march 2019 157 3. data source and methodology this section accommodates for data source, construction of model, and methodological issues. 3.1 data source the study bases upon secondary data for the period from 1972 to 2017. major sources of data are; pakistan economic survey (various issues), world bank (world economic outlook), and hand book of statistics on pakistan economy (2005). 3.2 model specification based on the study objective, the focus is to find out impact of fi on poverty. thus, the established model is given in equation (1): tttt ttttttt cpilitlex hexftrfdbtwrmfdifaidpov     987 6543210 (1) whereas 0  is model‟s intercept and i  are the respective coefficients of regressors at time (t), i range from 1 to 9. error term is represented as t  . additionally, table 1 gives off the descriptions of prefix at each variable and measurement. table 1: variables and their measurement. variable measurement poverty (pov) poverty on head count ratio foreign aid (faid) in pkr million. foreign direct investment (fdi) in percentage of gdp. worker remittance (wrm) in pkr million. foreign debt (fdbt) in percentage of gni. foreign trade (ftr) proxy with trade openness trade openness ((100 (export x imports /gdp)). health expenditure (hex) in pkr million. life expectancy (lex) in percentage. literacy rate (lit) in percentage. inflation (cpi) consumer price index. 3.3 test of unit root in the line of investigating cointegration, status of stationarity is considered mandatory (dickey & fuller, 1979). the augmented dickey fuller (adf) test, as developed by dickey and fuller (1979), qualifies for such explorations. the procedure of testing stationarity under adf is given in equation (2): ,.....,2,1, 1   tyy ttt  (2) wherein, y0 = 0 and  is the real number. t  is the sequence of normal and independent random variables with mean of zero and constant variance ( 2  ). if 1 , time series yt is stationary and vice versa if 1 . adf recommends of adding extra lags to avoid issue of auto correlation. therefore, three possible computational forms i.e. no constant and no trend, constant with no trend and constant with trend can be expressed as equation (3-5):     m s tsttt yyyy 1 1 ; (3)     m s tsttt yyyy 1 1 & (4)     m s tsttt yyyy 1 1 ; (5) review of economics and development studies vol. 5, no 1, march 2019 158 3.4 cointegration test if all the series are integrated of order 1, equation [1] is to be examined by johansen juselius (1990) cointegration test. the evidence of cointegration in vector „r‟ is observed by eigen value and maximum likelihood ratio. the proposed methodology for multivariate cointegration can be defined in equation (6) where xt is the vector of p = 10 elements. t x = (pov, faid, fdi, wrm, fdbt, ftr, hex, lex, lit, cpi). (6) the procedure of johansen and juselius (1990) for checking cointegration vectors among poverty and fi bases on maximum likelihood estimation of error correction model, (ecm) and is given in equation (7): ttktktktt dxxxx    1111 ... (7) where t x denotes vector of endogenous variables, introducing notion that . 0 tt xz  z1t denote stacked variables i.e. tktt dxx ,,..., 11   , 1, and zkl = kt x  . kt x   depicts long run relationship.  is a matrix of parameters which correspond to z1t that consists matrix of   ,,..., 11 k and  . the equation (7) can be transformed into equation (8): tkttt zz  10 (8) for estimating maximum likelihood, where xt is the vector of p = 10 element, regression of z0t __  zkt upon z1t is written in equation (9):       t t t t kt t ttt zzzzzz 1 1 ' '111 ' '10 (9) the concentrated version of likelihood is shown in equation (10):          2/)()(exp 0 1 0 2/ kttktt t rrrr (10) the cointegration relationship within zt variables is explained by rank of  matrix where  is decomposed into two matrices of n × r and  (0 < r < p). the h0 of no cointegration is thereby rejected, if estimated value ( i ) in equation (11) is greater than the critical value and is significant at 5 percent.          p kt ii m 1 )ˆ1(  (11) thus, given the estimates of eigen value i.e. i ̂ weights, i  and the eigen vector i  , evidence of long run cointegration are found provided estimated value on i ̂ exceeds the corresponding critical value and is significant at 5 percent. 3.5 error correction model having established cointegration among variables and the long run coefficients estimates, ecm is specified in equation (12). review of economics and development studies vol. 5, no 1, march 2019 159 t p i p i itcpiitlit p i itlex p i ithex p i itftr p i itfdbt p i itwrm p i itfdi p i itfaid p i itpovt cpilit lexhexftrfdbt wrmfdifaidpovectpov                              1 1 1111 1111 1 (12) where  is ect‟s coefficient.  is the intercept and  , the short run coefficient(s). t  is the error term. additionally, to have no repentant of lacking in multi angle view of fi and pov, short run causality is also found. 3.6 granger causality after exploring cointegration and the estimation(s) of long run and short run coefficient, granger (1969) causality analyses is run. it is none other than to explore the deterministic ability of one variable over another, especially pov and fi. tt n i it n i it yxy 11 1 1 1 1        ……………………………………..(13) tt n i it n i it yxx 21 1 1 1 2        ……………………………………..(14) where tt 21 & are uncorrelated error terms. if lag term y is statistically non zero, x is caused by y and vice versa. if both lag terms are indicated as non zero, this indicates bidirectional causality and elsewhere. 4. interpretations of the results the study initiates to identify poverty and fi associations in pakistan. in this respect, the empirics are discussed below. 4.1 stationarity test to run johansen juselius (1990) cointegration analysis, the pre-assumption of i(1) is viewed by adf test. results given in table 2 confirm that entire variables are turned stationary at first difference. thus, integrated of i(1) i.e. order (1). table 2: results of unit root variables constant and intercept first difference intercept 5% level t-statistics prob. 5% level t-statistics prob. pov -2.94 -3.08 0.04* -2.94 -7.42 0.00* faid -2.94 -2.03 0.27 -2.94 -6.06 0.00* fdi -2.96 2.01 0.99 -2.96 -4.63 0.00* wrm -2.94 2.74 1.00 -2.94 -3.43 0.01* fdbt -2.94 -0.23 0.92 -2.94 -4.14 0.00* ftr -2.94 -2.49 0.13 -2.94 -7.40 0.00* hex -2.94 3.87 1.00 -2.94 -4.17 0.00* lex -2.94 -2.24 0.19 -2.94 -9.11 0.00* lit -2.94 1.42 0.99 -2.94 -5.39 0.00* cpi -2.94 -3.08 0.03 -2.94 -7.42 0.00* note: * shows significant at 1 percent. 4.2 unrestricted cointegration rank test summarizing the facts in table 3 and table 4, on maximum eigen value statistics criteria, two cointegration equations are confirmed. review of economics and development studies vol. 5, no 1, march 2019 160 table 3: unrestricted cointegration rank test (maximum eigen value) hypothesized no. of ce(s) eigen value max-eigen statistic 0.05 critical value prob.** none * 0.96 121.25 64.50 0.00 at most 1 * 0.82 64.63 58.43 0.01 at most 2 0.73 49.56 52.36 0.09 table 3: (continued) at most 3 0.70 45.55 46.23 0.05 at most 4 0.60 34.82 40.07 0.17 at most 5 0.50 26.00 33.87 0.32 at most 6 0.39 18.77 27.58 0.43 at most 7 0.32 14.27 21.13 0.34 at most 8 0.22 9.23 14.26 0.26 at most 9 0.03 1.3 3.84 0.23 note: *denotes rejection of the hypothesis. ** are mackinnon-haug-michelis (1999) p-values. on account of trace statistics criteria, five cointegration equations are confirmed i.e. the h0 of no cointegration is rejected at „none to at most 4‟ cointegration equations. therefore, long run association is confirmed among the endogenous variables constructed in equation (1). table 4: unrestricted cointegration rank test (trace statistics) hypothesized no. of ce(s) eigen value trace statistic 0.05 critical value prob.** none * 0.96 385.52 239.24 0.00 at most 1 * 0.83 264.27 197.37 0.00 at most 2 * 0.74 199.63 159.53 0.00 at most 3 * 0.71 150.06 125.62 0.00 at most 4 * 0.61 104.50 95.75 0.01 at most 5 0.50 69.68 69.82 0.05 at most 6 0.40 43.67 47.86 0.12 table 4: (continued) at most 7 0.32 24.89 29.80 0.17 at most 8 0.22 10.62 15.49 0.24 at most 9 0.04 1.39 3.84 0.24 note: * denotes rejection of the hypothesis. ** are mackinnon-haug-michelis (1999) p-values. 4.3 long run results for the determination of magnitude and signs of long run coefficients, results are represented in table 5 that show that coefficient of entire variables are held significant. the results show very minute positive pov effects of faid. it is not surprising since on contrary end, pakistan is confronting with negative externalities such as political unrest, ineffective management, and corruption that dampens the positive fallouts of such fi. faid, according to burnside and dollar (2000), is not useless in all respects of macroeconomic needs and effective development assistance since fulfills needs for capital to minimize gaps between saving and investment (chenery & strout, 1965). faid stalwartly affects money holding by household which is later spent to buy all components of required goods and services (carvalho & white, 1996). what can effect the efficacy of positive sequels of faid is nonetheless its improper utilization. long run findings acknowledge negative impact of fdi on poverty. an increase of 1 unit of fdi lessens pov by 71.07 units. fdi is, for instance, a major component of foreign capital to enable meeting needs for credit required in bringing up devastating poverty and its dimension(s). review of economics and development studies vol. 5, no 1, march 2019 161 table 5: long run results at 1 co-integrating equation(s) variable(s) coefficient standard error t-statistics faid 0.04 0.01 4.00* fdi -71.07 3.74 -19.00* wrm -0.01 0.00 -4.10* fdbt -75368.20 8746.24 -8.62* ftr -211.43 49.86 -4.24* hex 0.00 0.00 -7.14* lex -2.69 0.79 -3.41* lit 6.25 0.91 6.89* cpi 1.27 0.27 4.70* note: * indicates significant at five percent. moreover, study reveals of 1 unit increase in wrm to lower pov by 0.01 units. wrm appears to increase the money circulation in an economy therefore engages economic activity. when capital is invested, it bifurcates into various sectors of economy to raise up economic activity and to create jobs, thus depress poverty pressures. long run coefficient of fdbt signifies that 1 unit increase of fdbt reduces pov by 75368.2 units. fdbt is needed to catch the delicate needs of capital. harrod-domer envisages that fdbt is desired for nurturing future investment and to sponsor present needs in case of on-going projects completions. fdbt bears numerous impacts on macroeconomic indicators of its heir __ one of those is poverty reduction. if ftr is exerted progressively, increases job opportunities and helps in reducing pov. course of development of the nation is accelerated via trade openness (david & kraay, 2004). same postures appear in this study which show that 1 unit increase in ftr dampens poverty by 211.43 units. wealthy nations are reflected by healthy minds. governments have to adhere for resolving abrupt health statuses of the population to have population which is free from ailment. energy requirement is required to be fulfilled to set-off an envy of poverty and moreover to disclose unexplored opportunities. the results, however, acknowledge nonlinear association of hex and pov. a rational individual always saves while expecting for long life. unsurprisingly, to be benefited in old age, people intend to spend less portion of their income. the findings also slither in the similar direction i.e. 1 unit increase in lex waysides pov by 2.69 units. pakistan falls with the slab of countries which possess texture of inappreciable level of lit. educated individuals unless secure highly paid employment take refuge at home and be continuous burden on head of the family. this state leads poverty, at family head, toward the inclement. the long run analysis suggests positive relationship within poverty and literacy rate. at present, 1 unit rise in lit increases pov by 6.25 units. as cost of living next to the inflationary pressures unable the nation to defy against such challenges. persistent increase at price level of the country does break up moral strength of the nation __ particularly poor. the findings intricate an increase of 1.27 units in poverty __ backed at 1 unit rise in cpi. 4.4 results of error correction model short run results are given in table 6. the coefficient of ect is negative and lies within the specific range. thus, show convergence towards the equilibrium in long run, nevertheless inconsequential. on account of short run causality, the wald test is conducted where short run causality is found on faid and wrm. it is concluded that in view of fi, pov is focused for limited short run but no long run causality. moreover, the diagnostic results also show normal distribution of residuals with no evidence of serial correlation and heteroskedasticity. table 6: results of error correction model for short run dynamics dependent variable= pov independent variable coefficient t-statistics prob. ect -0.01 -0.22 0.82 d(pov(-1)) 0.56 3.62 0.00 d(faid(-1)) 0.00 1.97 0.06 review of economics and development studies vol. 5, no 1, march 2019 162 d(fdi(-1)) -0.18 -0.18 0.85 d(wrm(-1)) 0.00 -1.82 0.08 d(fdbt(-1)) -1247.04 -0.60 0.55 d(ftr(-1)) -3.01 -0.34 0.73 d(hex(-1)) 0.00 2.47 0.02 d(lex(-1)) 0.00 0.02 0.98 d(lit(-1)) -0.42 -1.01 0.32 d(cpi(-1)) -0.01 -0.27 0.79 note: r squared 0.58; adjusted r squared 0.40 f-statistic 3.18 (0.00); durbin-watson statistic 2.12; wald test f-statistic for short run causality of faid and wrm is 3.82 (0.06) & 3.31 (0.08). jarque-bera f-statistic 1.26 (0.53); lm test f-statistic 0.47 (0.62); test of heteroskedasticity fstatistic 0.49 (0.93). 4.5 results of granger causality the table 7 illuminated results of granger causality. bidirectional causality is evident among pov and faid. moving forward, it is evident that fdi and pov do not granger cause one another but unidirectional causality is found among wrm and pov whereas, fdbt and pov does not show causality in either case. in opposite, ftr and pov show bidirectional causality. however, hex and lex have no such show of causality with pov, akin to lit and cpi. table 7: granger causality test result(s) h0: no granger causality from; f-statistic prob. faid to pov 18.86 0.00 pov to faid 3.12 0.08 fdi to pov 0.83 0.36 pov to fdi 1.27 0.26 wrm to pov 0.44 0.50 pov to wrm 3.26 0.07 fdbt to pov 0.14 0.70 pov to fdbt 0.04 0.83 ftr to pov 5.18 0.02 pov to ftr 7.94 0.00 hex to pov 0.03 0.86 pov to hex 0.53 0.46 lex to pov 0.32 0.57 pov to lex 0.03 0.84 lit to pov 0.17 0.67 pov to lit 0.28 0.59 cpi to pov 1.24 0.27 pov to cpi 1.02 0.31 note: * shows significant at 1 percent. 5. conclusion and recommendation of policy in this study we have established that fi are of profound significance being source to fulfill capital needs, especially on poverty. the study came along with findings that fdi, fdbt, and wrm, are contributing to reduce poverty. however, faid portrayed positive but negligible impact at poverty. at conclusion, it is recommended to the state office to define such policy options that could transform entire forms of fi to have negative relationship with poverty, particularly in case of faid. nonetheless to get it done, peaceful border situations, better situations of law and order, political stability, intra and intra province harmony, eradication of massive corruption, and transparent policies are obligatory for solidifying the paybacks of fi towards the poverty. review of economics and development studies vol. 5, no 1, march 2019 163 references bengoa, m., & robels, b. s. 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(1992). the macroeconomic impact of development aid: a critical survey, the journal of development studies, 28(2). yasmin, b. & khan, a. h. (2011). trade openness: new evidence for labor-demand elasticity in pakistan‟s manufacturing sector. the lahore journal of economics, 16(2), 55-85. http://mpra.ub.uni-muenchen.de/1211/ http://ftp.iza.org/dp1531.pdf review of economics and development studies, vol. 9 (2) 2023, 87-98 87 examining the covid-19 coping strategies employed by residents in selected south africa’s rural areas andrew e. okem a, betty c. mubangizi b, niyi adekanla c, sokfa f. john d a university of kwazulu-natal, south africa / international water management institute, accra, ghana, b nrf/sarchi in sustainable rural livelihoods, school of management, it and governance, university of kwazulu-natal, durban, south africa c aidline research consult, lagos, nigeria d centre for mediation in africa, university of pretoria, south africa article details abstract history: accepted 25 april 2023 available online june 2023 rural communities are vulnerable to shocks associated with the covid19 pandemic. the resilience of these communities depends on their ability to cope with the impacts of such shocks. this study examines the covid-19 coping strategies of residents of matatiele and winnie madikizela mandela local municipalities in south africa. we collected primary data through 11 fgds and 13 individual interviews. of the six coping strategies identified, the most cited was resorting to alternative food sources to address food insecurity. other coping strategies include alternative sources of income; reducing remittance and expenditure; shifting to new activities; and introducing emotional support. the findings reveal that coping strategies entail changes around basic needs such as food and income. to protect these communities against future shocks, strong local institutions working in collaboration will be invaluable in empowering communities to identify and implement alternative livelihoods while building supportive infrastructure. © 2023 the authors. published by spcrd global publishing. this is an open access article under the creative commons attributionnoncommercial 4.0 keywords: covid-19, rurality, coping, food security, vulnerability jel classification: h75, q01 doi: 10.47067/reads.v9i2.483 corresponding author’s email address: mubangizib@ukzn.ac.za 1. introduction this study was implemented in winnie madikizela mandela (wmm) (formerly mbizana local municipality) and matatiele local municipalities (lms), situated within alfred nzo district municipality in the northern eastern cape province of south africa. matatiele has an average household size of 3.9, accounting for 41% of the district’s population (mataliele local municipality). it occupies 63% of the district, with a landmass of 4352km2 (matatiele local municipality, n.d). matatiele lm has 26 wards, only three of which are towns, with most of the population living in rural areas. most of the inhabitants is african (98.4%). wmm has a landmass of 2806 km2 and a population of 319 943 (mbizana local municipality, n.d). nearly all (98%) of the population of wmmlm live in rural villages (mbizana local municipality, n.d). the municipality has 31 wards, and only 1 is a town. about half (47%) of the population is below 35 (mbizana local municipality, n.d). alfred nzo district has the least level of review of economics and development studies, vol. 9 (2) 2023, 87-98 88 education in the eastern cape. only 13% of people aged 20 years older have grade 12, demonstrating a low level of education in the province. approximately 5% of the population in matatiele and wmm has higher education qualifications (cronje, 2014). with a poverty rate of 79%, alfred nzo is the poorest of all district municipalities in south africa, while matatiele and wmmlms are among the poorest municipalities in south africa (98% and 80% poverty rates, respectively) (cronje, 2014). unemployment is also high at 38.7% and 44% for matatiele and wmm local municipalities, respectively. youth unemployment is at 47.2% for matatiele and 52.4% for wmm. more than half (55%) of the employed in wmm work in government and domestic services (mbizana local municipality, n.d). matatiele and wmm have some of the highest gini indexes in the country. wmm, for example, scores 0.77 (david et al. 2018). additionally, 16% of the total population of both municipalities earns no income at all, while 48% earns between r1 and r1600 per month (cronje 2014). many of these depend on child support grants (25%) and old age pensions (7%). although agriculture, mining and tourism are considered important economic drivers by the municipalities, these are largely underdeveloped and employ a very small number of people. agricultural activities such as crop production, livestock, and fodder grazing are the main livelihood activities of the rural areas of wmm and matatiele lms. about 58% of mostly female-headed households in matatiele are involved in agricultural activities (morokong and blignaut, 2019). prolonged droughts, winter, and other adverse effects of climate change increasingly challenge agricultural activities. according to morokong and blignaut (2019), matatiele is also characterised by overgrazing, erosion, salinisation of its catchment and a high rate of alien plant species infestation, which stifle agricultural productivity. poor delivery of basic services (e.g., water, sanitation, electricity, primary healthcare) is a major challenge in these municipalities that further undermines the livelihood capabilities of communities. out of a total possible score of 10 for service delivery, matatiele scored 3.11 and wmm, 2.73 (cronje, 2014). about 90% of households in these lms do not have safe and clean toilet facilities, and while there have been notable improvements in the past few years, access to clean water, sanitation and electricity backlogs are still very low (matatiele local municipality, 2020; mbizana local municipality, 2020). these local municipalities also struggle with a limited revenue generation base and rely on grant funding. 80% of mbizana’s funding, for example, comes from grants and only 20% from its sources (mbizana local municipality, n.d.). several other challenges, such as poor roads and transport, communication infrastructure and minimal internet access, impact livelihoods in these municipalities (matatiele local municipality, n.d; mbizana local municipality, n.d). the socioeconomic situation portrayed above has its roots in colonialism, apartheid, and the homeland system. both wmm and matatiele lm in the former transkei homeland of south africa, and just like other homelands, these areas were starved of investment, growth and development under apartheid (porter and phillips-howard, 1997). with few local employment opportunities, labour migration to the mines and other enterprises in white areas of south africa was the norm. labour migration remains the norm, with several able-bodied men and women migrating to urban centres for jobs, mainly in the informal sector. using the 2011 census data, kleinhans and yu (2020) found that more than half (53.64%) of migrants into the western cape are from the eastern cape. the link between rural and urban areas of south africa remains exploitative in that there remains little to show since the start of labour migration to the rand mines, encouraged by several factors, including the rinderpest epidemic of 1897 (porter and phillips-howard, 1997). review of economics and development studies, vol. 9 (2) 2023, 87-98 89 there have been notable developments since the dawn of democracy in south africa. with the dawn came a wall-to-wall local government system which has seen municipalities like matatiele and wmmlm fully operational in all areas of the country. with funds transferred from the country’s central coffers, various grants have enabled municipalities like wmm and matatiele lm to provide water, electricity, and basic sanitation. however, the funds are far too limited to address the needs of communities. as mubangizi (2019) notes, there is significant pressure on municipalities to raise their revenue and become self-sufficient. herein lies the challenge for most rural-based municipalities such as wmm and matatiele because the grant-dependent households in these municipalities do not contribute to the municipality's revenue base. thus, while rural communities may have developed systems, including social networks, to cope with shocks, we argue that the pandemic has overstretched the limits of pre-existing coping strategies. essentially, covid-19 interacts with these pre-existing rural vulnerabilities that could lead to significantly higher negative outcomes compared to those in the urban areas. against the backdrop of a rurality characterised by poor education outcomes, high levels of poverty, inequality, unemployment and infrastructure deficit, this study examines how community members in these two municipalities cope with the impacts of the covid-19 pandemic. 2. methodology the study seeks to provide insight into the coping strategies employed in the face of the shock from exposure to the covid-19 pandemic in rural communities. the study adopts a mixed-method approach to collect and analyse statistical and narrative data to arrive at a nuanced understanding of the research objective (meixer and o’donoghue, 2013). this study adopted a convergent design approach using content analysis and descriptive statistics to explain the phenomenon under consideration (levitt, 2020). the approach, which stems from constructivism and positivism paradigms, adopted the interpretive method, which aims at drawing substantive inferences from the responses of respondents and a descriptive approach to the study. the study population comprises all rural dwellers classified based on socio-cultural (gender, cultural and institutional affiliation) and socioeconomic (employment and income status) dichotomies in the two selected municipalities. stratified proportional sampling (followed by a purposive sampling technique) was adopted in selecting the study participants. any adult (above 18 years belonging to any of the classes mentioned above) in the two municipalities qualifies to be included in the study. given insufficient data on some specific population attributes in the study area, a sample of 1065 (in the minimum) was drawn using sampling from an unknown population method (teddlie and tashakkori, 2009). the study entailed two intersecting phases of data collection and analysis. phase 1 of the study involved a survey guided by a structured questionnaire. survey data were collected digitally using kobotoolbox, which allows for creating of complex research instruments and efficient management of research data. the instrument comprises primarily quantitative questions and embedded open-ended response items. the data collection and treatment process led to 89% usable data giving 952 responses. after a preliminary analysis of the phase 1 data, the second phase involved 11 focus group discussions (fgds) guided by a semi-structured interview schedule and 13 individual interviews with purposively selected participants. participants in the fgd include government, traditional institutions, and civil society organisations. the questions were designed to support the quantitative instrument and add depth to the analysts’ understanding of the research phenomenon (meixner and o’donoghue, 2013). using surveys and in-depth interviews as data collection approaches helps the study understand the intricacies surrounding the coping strategies adopted by the respondents in the two rural municipalities about:blank review of economics and development studies, vol. 9 (2) 2023, 87-98 90 in south africa more holistically. the quantitative data from this study was analysed using descriptive statistics (percentages and means presented in tables and graphs). while stata 17 was used as the software package for the analysis. meanwhile, the qualitative data was analysed using content analysis. the content analysis entailed coding the bunch of text obtained from the field and creating themes as they emerge in the coding process thematic classification of coded texts, integration, refining and writing up of theoretical outcomes. the essence of coding is to move methodologically to a higher conceptual level (levitt, 2020). the respondents' responses were (classified based on gender, socio-cultural and economic backgrounds) on the coping strategies employed in the face of the shock from exposure to the covid-19 pandemic. following the multi-rater coding of the qualitative data and refined analysis of the survey data, the team concurrently interpreted data from both phases of the data collection. nvivo was used to code and develop themes from the data. the study protocol was approved by the human and social sciences ethics committee of the university of kwazulu natal (hssrec/00002780/2021). 3. findings and discussions 3.1 demographic profile of the study participants the data from the two municipalities were aggregated due to the homogeneity assumption in their characteristics. both municipalities are categorised as rural areas. table 1 shows the respondents’ demographic information as a representative of each surveyed household. more than half (55%) of the respondents were female, while 41% were male. this is consistent with the idp report of matatiele local municipality (n.d.), which noted that females constituted 54% of the total population in both municipalities. meanwhile, the age distribution shows that a quarter of the respondents were in the 3039 years age bracket. this is followed by those between 40-49 years (22%), 20-29 (16%) and 50-59 years (14%). this implies that the largest percentage of the respondents were in their prime age. three out of every five respondents reported that they were not working. this is consistent with cronje (2014), who found high unemployment rates for both matatiele (38.7%) and mbizana (44%). 28.69% of respondents reported that they were into farming, including subsistence, commercial crop, and livestock farming. according to morokong and blignaut (2019), agriculture constitutes an important livelihood activity in both municipalities, with primary activities comprising livestock production, poultry, and fodder grazing. up to 7% worked with the government /private sector, while about 4.12% worked in other sectors. respondents were also asked about the state of their income during the lockdown. about half (48%) reported their income decreased, while 41% claimed theirs remained unaffected. however, regardless of the impact of the pandemic, one in ten respondents (10%) revealed their income changed positively. table 1: the demographic information of respondents demographicvariables freq. percent gender female 528 55.81 male 389 41.12 others 5 0.53 choose not to answer 30[ao1] 2.55 review of economics and development studies, vol. 9 (2) 2023, 87-98 91 age of respondents less than 20 24 2.55 20-29 159 16.91 30-39 238 25.32 40-49 209 22.23 50-59 134 14.26 60-69 126 13.40 0ver 70 years 50[ao2] 5.32 missing 12 0.01 occupation formal trading 32 3.43 farming 226 23.78 government/private sect 81 8.58 no occupation 572 60.09 others 39 4.12 income status decreased 409 48.12 increased 87 10.24 unchanged missing 354 102 41.65 10 source: compiled by the authors (2022) review of economics and development studies, vol. 9 (2) 2023, 87-98 92 table 2 shows that the mean household size was five while the average number of children under child support grant was approximately 2 per household. this is followed by approximately 1 household member under old age or pension grant while at least one household member was also on a disability grant. according to cronje (2014), most people in both municipalities depend on state grants as the primary source of income. this affects the ability of the municipalities to generate income through levies and taxes and thus rely on national transfers to fund development projects. table 2: summary statistics variable obs mean std.dev. min max household size 932 5.222 2.615 1 17 children on child support grant 942 1.78 1.655 0 10 old age/pension grant 918 .531 .798 0 6 household member on disability grant 911 .074 .281 0 2 source: compiled by the authors (2022) 3.2 coping strategies the impact of covid-19 around the globe led governments and local communities to employ different coping approaches. in addition to the usual challenges that households and communities in remote rural areas face, they had to find ways to cope with the unique challenges brought by the pandemic. the main coping strategies employed include accessing reliance on natural and physical resources and producing own food. gardening was reported as a covid-19 coping strategy in toraja, indonesia (paganini et al., 2020). almost all the individuals at the household level who were interviewed indicated that they were involved in subsistence farming during the pandemic. those who started gardening before covid-19 donated vegetables to poor community members. one of the interest groups interviewed indicated that "the pandemic has both highlighted and increased the need for more staff. there is now more home-based food production because people couldn't go to town to buy things, more and more people are producing their own food" (local ng). although covid-19 has severely impacted households, it also reminded people to utilise their gardens to plough their vegetables instead of buying from retail stores with their limited income. in other words, community members had to rely on their natural and physical resources to support themselves and their families during the pandemic. gardening, as a coping strategy, was boosted by support provided by local civil society organisations and institutions. for example, a local education institution responded to the food insecurity experienced in the matatiele local community by starting an initiative to distribute seedlings. this organisation ensured that community members had adequate supplies during the lockdown. a participant from the fgd with saveact reported that the organisation “partnered with them [ a local education institution] doing a few field activities in training farmers through their social responsibility component. other organisations involved in supporting this initiative include local ngos. linked to the preceding is capacitating farmers to become self-reliant. the approach used by certain interest groups, such as saveact within these communities, assisted the farmers in being selfsufficient and managing their members and groups. through the training of such organisations, the farmers continued their activities without depending on those supporting institutions during the pandemic. when providing support to the community, it becomes crucial that the government also empowers community members so that they can continue their own without much dependence on the review of economics and development studies, vol. 9 (2) 2023, 87-98 93 government. the results of this study reveal that government departments, interest groups supported communities to cope with the impacts of the pandemic by providing food parcels, distribution of seedlings; provision of airtime to those who were working directly with communities; emotional wellbeing programmes for the employees; providing health and hygiene training; and online courses. however, their capacity to respond was constrained by various factors, including the lack of resources. a traditional leader in the fgd with traditional leaders at the wmmlm, for instance, noted, “i want to make it clear that we are on our own, we do not get resources from anywhere”. when resources are provided, these are often insufficient as was reported by another traditional leader “chiefs were provided with some sanitiser and masks for the community. these were not nearly enough for the number of people in the many villages under each chief” (fgd, traditional leaders, matatiele). in addition to the lack of resources is infrastructure deficit. in this regard, a participant in the fgd with the disaster management unit noted that “road infrastructure has always been an issue even before covid-19” (fgd, disaster management unit of wmmlm). in a review of rural vulnerability and institutional dynamics in the context of covid-19, john et al. (2022), found the lack of savings as a pre-existing vulnerability factor that increases the impact of the pandemic. in the context of this study, participants had limited saving, affecting their capacity to respond to the impacts of the pandemic. in the absence of savings, the coping strategies employed include reduced remittances, expenditure, searching for secondary employment, borrowing and begging. interviewee 4 noted that “my problems began when the lockdown regulations were implemented. we were retrenched from work and were left with nothing. so even now am still hunting for a job. similarly, interviewee 11 reported encountering “financial strains due to lower income". others who continued working also experienced reduced income because of lowered working time, as noted by participant 8, who reported “working for only 4 hours and 2 days per week" instead of working fulltime. the loss of employment by household members implied that most households had to depend on lower income from social support grants and on those who continued working during the pandemic. the loss of job or salary cuts did not only affect those working individuals , but the whole household dependent on them. their return home without jobs also created additional stress on their households. reduction in remittance was reported by participant 9, who noted that "life has been rough. there are times when i did not receive any financial assistance from my sister who used to be my main provider. this is because some factories and companies had to close their door due to covid-19. before covid-19, i was receiving money from my older sister" (participant 9). a participant in the fgd with traditional leaders in matatiele further emphasised this point noting “income is mainly derived from relatives who have employment in the towns and other parts of the country. a lot of these providers had to come back home and are adding to the burden of the families having to provide for more people. this finding is consistent with john et al., (2022:8), who argue that poor people in rural communities “in middle-income and low-income countries are particularly at risk because of the depth of their poverty, high population density, reduced remittances and the limited capacity of the state to respond. about one in five respondents (28.67%) reported that their family member(s) left home searching for work. for some respondents, this was a search for additional employment to cover the gap resulting from reduced working hours. this was revealed by participant 3, who noted that "during the lockdown, i had to look for another job because my employer reduced our days and working hours. so, i had to look for a second job that was going to help me substitute my income". review of economics and development studies, vol. 9 (2) 2023, 87-98 94 one in five (22.58%) borrowed money, while 13.05% purchased food on credit. some (8.07%) even went as far as begging, while very few (4.12%, 2.23% and 2.23%) reduced their expenditure, and sold household assets and herbs, respectively. a study in rural bangladesh revealed that reduced expenditure coupled with accessing loan facilities were some of the coping strategies employed by rural communities (hamadani, 2020). however, the loss of livelihood opportunities and slowed economic activities could erode thecommunities' ability to repay the loans, thus pushing them further into poverty. table 3: coping strategies coping strategies frequency percentage spent savings 438 46.01 family member/members left home in search of work 272 28.67 borrowed money 214 22.58 purchased food on credit 124 13.05 begged 83 8.76 reduced health expenditure 39 4.12 sold herbs 20 2.23 sold household assets/goods 20 2.23 reduced expenditure on civic responsibilities [local government levies 16 1.72 others 94 9.96 source: compiled by the authors (2022) other coping strategies mentioned include access to government grants, as mentioned by 32% of the respondents (see figure 1). the government grants accessed by the respondents included the child support grant and the state old age pension. 16% also resorted to selling their livestock and crops, while very few (2%) that could not sell their farm produce had to eat it to survive the lockdown. some (14%) picked up menial jobs like working on farms, washing, cleaning, and selling alcohol. up to 12% lived on their salary, while 9% opened small shops, with 7% doing temporary jobs like working on construction sites. very few (2%) received remittances, reduced household consumption, got help from their community, family and friends and falling back to their family business. review of economics and development studies, vol. 9 (2) 2023, 87-98 95 figure 1: other coping strategies the covid-19 pandemic seriously impacted all aspects of social and economic life. participants in this study revealed that community members experienced fear, anxiety and depression when the restrictions were imposed. uncertainty about employment and finances, feelings of vulnerability to the infection and fears of the safety and wellbeing of loved ones increased during this period. certain organisations created wellness programmes for their employees to ensure they cope with the psychological impacts of the pandemic. other interest groups operating in these areas offered motivation to the members of the communities. a participant in the fgd with a local ngo made the following point: "first and foremost, what the organisation has done that i personally appreciate which was not there before, it was the introduction of the emotional wellness programme because, as we have said there was a serious burnout and i was the number one victim. we were burned out, and we were just going because we had to go. so, the emotional wellbeing sessions from different stakeholders that deal with emotional programmes have been helpful even though they are not very consistent, and i think they came at a time when we were already out. but that has kept some of us where we are. that's one of the things" (fgd with saveact). 4. conclusions the study aimed to examine the coping strategies employed by rural communities in responding to the impacts of the covid-19 pandemic. we used matatiele and winnie madikizela mandela local municipalities as our case studies. the case studies were chosen because both municipalities are largely rural and are in one of the poorest provinces of south africa. our findings reveal that although the communities have experienced several negative impacts of the pandemic, they have displayed agency in responding to these impacts. the coping strategies employed by the communities include reduced household expenditures ( e.g., health and civic responsibilities expenditure), taking out loans, spending savings, purchasing food on credit, begging, selling household assets and resorting to other livelihood opportunities such as selling herbs, and gardening/subsistence farming. local civil society organisations, traditional leaders and local government institutions played important roles in assisting the communities to cope with the impacts of the pandemic, thus revealing the valuable roles of institutions in rural communities’ response to the disaster. however, the role of the local institutions is review of economics and development studies, vol. 9 (2) 2023, 87-98 96 hamstrung by a lack of human and financial resources, which reduces their inability to provide impactful support in times of disaster. this research shows that the contribution of local government to infrastructure development would significantly cushion communities from the effects of pandemics. funding models that enable rural local governments to build financial reserves to build and maintain infrastructure such as roads, water and communication networks would go a long way to cushion communities from the effects of pandemics and other related disasters. the findings also reveal that while community members have deployed several coping strategies in response to the pandemic, most of these are short-term coping options that could potentially push them further into poverty in the absence of long-term safety nets or strong local institutions with the capacity to sustainably provide resources and infrastructure needed to build long term resilience. acknowledgements: the authors wish to acknowledge the contribution of jabulani nyawo and londeka ngubane to the execution of the research project on which this paper is based. funding information: this work was carried out under the covid-19 africa rapid grant fund, supported under the auspices of the science granting councils initiative in sub-saharan africa (sgci) and administered by south africa’s national research foundation (nrf) in collaboration with canada’s international development research centre (idrc), the swedish international development cooperation agency (sida), south africa’s department of science and innovation (dsi), the fonds de recherche du québec (frq), the united kingdom’s department of international development (dfid), united kingdom research and innovation (ukri) through the newton fund, and the sgci participating councils across 15 countries in sub-saharan africa (grant number: 129206). disclosure statement. the authors report that there are no competing interests to declare. data availability statement. there are no relevant additional data associated with this paper. references auditor general of south africa (2020). consolidated general report on local government audit outcomes. mfa 2018-2019. https://www.agsa.co.za/reporting/mfmareports/mfma20182019.aspx. accessed 09/01/2022 amaechi, k. e., thobejane, t. d., & rasalokwane, r. 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(2021). the socioeconomic impact of the covid-19: a south african perspective on its impact on the socioeconomic, inequality, security, and food systems. sciencerise, (4), 68-79. https://www.gov.za/documents/constitution-republic-south-africa-1996 https://www.statssa.gov.za/publications/p0318/p03182019.pdfn http://www.statssa.gov.za/ https://www.thepresidency.gov.za/speeches/statement-president-cyril-ramaphosa-further-economic-and-social-measures-response-covid-19#:~:text=our%20new%20economy%20must%20be,the%20people%20of%20this%20country https://www.thepresidency.gov.za/speeches/statement-president-cyril-ramaphosa-further-economic-and-social-measures-response-covid-19#:~:text=our%20new%20economy%20must%20be,the%20people%20of%20this%20country https://www.thepresidency.gov.za/speeches/statement-president-cyril-ramaphosa-further-economic-and-social-measures-response-covid-19#:~:text=our%20new%20economy%20must%20be,the%20people%20of%20this%20country https://www.thepresidency.gov.za/speeches/statement-president-cyril-ramaphosa-further-economic-and-social-measures-response-covid-19#:~:text=our%20new%20economy%20must%20be,the%20people%20of%20this%20country review of economics and development studies vol. 5, no 1, march 2019 67 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads sensitivity level of educational administrators towards child rights 1 shabbir akbar, 2 abdul hameed, 3 kamran siddiqui, 4 mumtaz khan 1 phd scholar, umt, lahore, sahibuzaman.2013@yahoo.com 2 professor, umt, lahore. drhameedpk@gmail.com 3 headmaster, school education department punjab, sidiqui_kamran@yahoo.com 4 professor, uet, lahore, mumtazmkpk1@gmail.com article details abstract history revised format: february2019 available online: march 2019 the sensitivity level of administrators towards human rights specifically child rights in secondary schools needs to be explored. this sensitivity level towards child rights in terms of provision, protection and participation under united nation child rights convention (uncrc) was assessed through knowledge, attitude and practice (kap) model. the cognizance of this need necessitates to layout ways of improvement for child rights. this study therefore, articulated and empirically validated the problems through educational administrators working in secondary schools of punjab, pakistan. this cross sectional study used quantitative method design for data collection from 233 educational administrators (ceo, dos and head teachers) selected through simple random sampling method from each division with a response rate of 100%. the analysis of data showed that administrators have high sensitivity level about knowledge, attitude and practice of child right provision, protection and participation. this study is useful for researchers, practitioners, and policy makers. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords ceos and dos, head teachers, provision, protection, participation, knowledge, attitude, practice, secondary school punjab, pakistan jel classification: a20, a21, p46 corresponding author‟s email address: sahibuzaman.2013@yahoo.com recommended citation: akbar,s., hameed,a., siddiqui,k. and khan,m.(2019). impacts sensitivity level of educational administrators towards child rights, review of economics and development studies, 5 (1), 67-78 doi: 10.26710/reads.v5i1.475 1. introduction sensitivity refers to the strength of the capacity to detect and discriminate a stimulus or change. it is the phenomenon that how strongly an individual perceived a factor. studies have shown that subjects‟ sensitivity towards a particular matter (i.e. cultural sensitivity) depends upon their attitudes, behaviors, knowledge and application of awareness (practice) of that particular matter (banks, 1987; grant, 1994). child welfare and child rights including provision, protection and participation are the part of welfare system of all societies. the needs and the risks of child rights provision, protection and participation are widely acknowledged. in pakistan, the children are facing a lot of problems regarding basic rights including free and modern education, health, safety, security and lifelong learning in comfortable and peaceful schooling environment (sparc & plan, 2005); (shahab, ushijima & de-muynck, 2004). from above back drop, it is quite obvious that there is need to explore perceptions of all stakeholders including teachers and educational administrators in this context. this study is useful as a tool to improve the observance of child rights in secondary schools of punjab in pakistan. 2. review of related literature children are the future of any country who become productive class of citizen for a nation. in pakistan, 39 percent population is below 18 years (80.4 million children censes, 2017 & spate & learmonth, 2017). any human being http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 68 under 18 years of age as per state law provisions falls in the category of child. legally a child is considered as minor being younger than the age of majority (okyere & imoh, 2014). generally speaking, child rights are human rights. there is only a subtle distinction between the two notions. human rights are protected in international human rights bills and agreements with principle of equality and non-discrimination, to be applied to every individual equally and fairly. as for their specific conditions of maturity and vulnerability is concerned, it is universally agreed that children should have a special protection yet reasonable freedom and active participation in matters directly concerning their life (kosher, ben-arieh, & hendelsman, 2016). as per natural theory, all humans are born with inherent rights by nature. it is the universal moral principle that lie beneath the ethical and legal norms of society through which human conduct is measured and evaluated because all humans are governed by basic laws of nature. this theory is also reflected in article 1 of uncrc, which inter-alia stipulates that all humans are free with equal rights by birth (gilabert, 2015). social justice theory is based on abilities of people living in a society and these capabilities and potential of people are required to be realized. as per social justice theory, all people are equal morally (asch, 2017). the preamble to the constitution of different countries including pakistan indicates to social justice in these terms and according to which, all persons shall have equal rights and obligations. children‟s free and equal rights are seriously violated because most of them are forced to carry out activities out of their will such as child labor, forced marriages and prostitution (robertson, bromfield & lamont, 2014). this study, therefore, observes that there is a problem between these proclamations and the respect for children‟s rights. moral theory entitles everyone to human rights which also come with their duty or obligation to respect it. the moral theory is related to natural rights by the fact that everyone is born free and has equal rights towards one another. kant (1949) described the moral theory into actions, which must be derived from duty than from inclination (chappell, 2014). moral theory is more forcefully applicable to children in terms of provision, protection and participation. the moral theory enforces moral justice to people, especially children suffering from human rights violation, to establish a better society (macintyre, 2016). sociocultural theory is actually based on different social, cultural norms and value systems, which are being practiced in different communities. the transformation of taboos, values and traits make the communities more flexible and acceptable for others (wenger, 1998; wenger, mcdermott, & snyder, 2002), and in this way communities become learners of practices of other cultures and societies (rogoff, 2003; rogoff, baker-sennett, lacasa, & goldsmith, 1995; rogoff, matusov, & white, 1996). children are also part of those communities and in this way, cultural interactions with peers and other members of communities transform the intercultural and intersocial harmony. both learners and practicing communities are interlinked with the bond of learning and development (rogoff, 2003). the binding feature between these different theories is children‟s participation which lead towards their psychomotor and cognitive development. from the above diagram, it is quite evident that children rights interpretation, childhood sociology related studies and socio-cultural/ ecological theories must be twined for the best of child development rather than to destroy the personality of future generation. education has a pivotal role to communicate culture in transforming the child personality in a positive way. participation of children in cultural processes is a right (articles 12 and 13; crin, 2007). 3. united nations convention on the rights of the child (uncrc) as per uncrc, every child regardless of age and gender is unique in character and has equal status of human respect and dignity. moreover, children have right to participate in decision making. children must be given right review of economics and development studies vol. 5, no 1, march 2019 69 to be listened and due respect to their view point (crin, 2007). without recognition of children rights, there can never be agreement on rights of children (bentley, 2005). according to alston et al. (2005), uncrc can be divided into five phases. initially, child rights movement focused on child labor and sexual harassment. after world war-i, league of nations developed working on declaration of the rights of children rights as humanitarian. as per the provisions of geneva convention 1959 and declaration of rights of children, child rights were emphasized. the basic principle was that mankind should owe the children and invoke special attention of the world community to provide them special assistance in the situation of emergency. there was a paradigm shift from children protection to grant of children‟s rights (freeman, 1998). cultural relativism debate was the major focus of critique of the „best interests‟ principle: while the significance of national and regional particularities and various historical, cultural and religious backgrounds must be borne in mind, it is the duty of states, regardless of their political, economic and cultural systems, to protect all human rights and fundamental freedoms (alston, 1994) the child rights include child‟s best interests principle, parental care about child‟s rights, child‟s developing abilities and child‟s rights consultation (ritchie & ritchie 1997). this final phase of child rights pertains to implementation and then, accountability (alston et al., 2005). this is highly difficult task because of different types of economies, centralized and decentralized system of governments, use of various modern technologies by states, different concepts of social, cultural and moral obligations, and complex legal framework of ratified states due to which such international conventions have to be compromised. 3.1 uncrc: provision, protection and participation (3 ps) in uncrc, child rights have been elaborated through„3ps‟ that is provision, protection and participation. the provision rights pertain with services, resources and skills which are essential for children's existence and their development like education, health care and the right to play (art 24,28 and 31). provision means minimum standards of life, social security, health, education, accessibility to care, recreation, culture, play and leisure. the protection rights save children from acts of mistreatment or exploitation like protection from any type of physical and sexual abuse, mistreatment, substance abuse, inequality, discrimination and conflict (art 3,19 and 32). the participation rights that provide children freedom to engage and participate in the processes to prepare themselves for society. these include the right to express their views etc. and right to information (art12 and 13). participation means political and civil rights like the right of identity, consultation, physical integrity, information and freedom of opinion (alderson et al., 2005; hammarberg, 1990; lansdown, 1994; rogers, 2004). to assess the sensitivity of administrators in terms of provision, protection and participation about child rights, the structured questionnaire surveys are helpful technique and kap (knowledge, attitude and practice) survey is very much authentic model to assess the sensitiveness of any social behavior which allows the researchers in collecting a large amount of data that will be subject to statistical analysis. the kap is a survey instrument used to identify the knowledge (k), attitudes (a) and practices (p) of a population on a specific topic (kaliyaperumal, 2004). knowledge is the capacity to get, remember the mixture of comprehension, experience, judgment and skill. attitudes refer to inclinations to respond to certain situations in a certain way and to see and construe events according to certain predisposition and practices mean the application of rules and knowledge that leads to action (green 2001, hausmann-muela et al. 2003, manderson and aaby 1992, nichter 2008). the kap surveys is effective in its characteristics like easy to design, easy to quantify data, easy to interpret and easy to give concise presentation of results, easy to generalize small sample results to a wider population, cross-cultural comparability, and speed of implementation (bhattacharyya 1997, stone and campbell 1984). review of economics and development studies vol. 5, no 1, march 2019 70 4. a hypothetical framework: a two-way matrix for assessment of sensitivity of child rights child rights respondents kap provision protection participation administrators (ceos/dos/head teachers) overall knowledge knowledge about provision knowledge about protection knowledge about participation overall attitude attitudes towards provision attitudes towards protection attitudes towards participation overall practice practices in provision practices in protection practices in participation the problem is that child rights provision, protection and participation is not properly observed in secondary schools. it is important to measure the sensitivity level (knowledge, attitude and practice) of administrators about child rights the objectives of the study are, to find out the difference of sensitivity level of knowledge (provision, protection and participation) about child rights of educational administrators; to identify the difference of sensitivity level of attitude (provision, protection and participation) towards child rights of educational administrators; and to explore the difference of sensitivity level of practice (provision, protection and participation) in child rights of administrators. the study is an attempt to find out answers to questions, such as; what is the level of knowledge provision, protection and participation of educational administrators about child rights in schools; what is the level of attitude provision, protection and participation of educational administrators towards child rights in schools; and what is the level of practice provision, protection and participation of educational administrators in child rights in schools? 5. research methodology punjab, the most populous province of the pakistan, has vast geographical and diverse social demographics were taken as the container of population. this research was a cross sectional survey and the study identified and described the extent of knowledge, behavior, and attitudes of school administrators towards child rights. a sample of 233 educational administrators i.e. ceos/edos, dos and head teachers (including male, female, urban and rural) were proportionately and randomly selected from 9 divisions, 36 districts and 147 tehsils of punjab. review of economics and development studies vol. 5, no 1, march 2019 71 5.1 constructs aligned with uncrc the instrument for administrators was developed on the basis of above uncrc constructs and it was named as 3pst. it comprised of 118 items consisting three (03) main constructs base on “3ps” namely provision, protection and participation (3ps). further each construct was divided into three objectives i.e. knowledge, attitudes and practice respectively. five-point likert scale was used to measure the responses of teachers. the validation of instruments includes the content and face validity. the instrument was validated by the subject matter experts. the reliability coefficient cronbach‟s alpha values of all variables were good and above 0.70 i.e. 0.853 for overall knowledge, 0.837 for overall attitude, and 0.944 overall practice in child rights. after validation of research instruments from subject matter experts, the final questionnaire (spst) was actually launched. provision 1. adequate standard of living 2. health care 3. education 4. services 5. play and recreation. 6. a balanced diet 7. a warm bed to sleep in 8. access to schooling protection 1. protection from abuse 2. protection from neglect 3. exploitation and discrimination 4. safe places for children to play 5. constructive child rearing behavior 6. acknowledgment of the evolving capacities of children participation 1. participate in communities 2. have programs and services for themselves 3. involvement in libraries and community programs 4. youth voice activities 5. involving children as decision-makers review of economics and development studies vol. 5, no 1, march 2019 72 5.2 conceptual framework figure 1: conceptual framework of the study 6. analysis table 1: the t test by gender on knowledge, attitude, practice and its factors of child rights: variables gender n mean s.d „t‟ df „p‟ knowledge provision male 129 9.19 3.102 1.311 229 .191 female 102 9.80 4.064 knowledge protection male 129 6.48 2.875 .227 229 .821 female 102 6.57 2.997 knowledge participation overall knowledge male 129 7.61 2.854 1.406 229 .161 female male 102 129 8.15 24.99 2.892 7.235 1.352 229 .178 attitude provision male 129 30.64 5.971 .183 229 .855 female 102 30.77 5.424 attitude protection male 129 34.78 6.532 .661 229 .510 review of economics and development studies vol. 5, no 1, march 2019 73 female 102 35.34 6.231 attitude participation male 129 11.64 2.904 2.143 229 .033 female 102 12.46 2.845 overall attitude male 129 77.06 12.965 .924 229 .356 practice provision male 129 101.38 19.167 .899 229 .370 practice protection female 102 99.09 19.326 male 129 114.15 20.454 1.135 229 .257 practice participation female 102 111.22 18.190 male 129 56.74 12.656 1.426 229 .155 overall practice female 102 54.29 13.253 male 129 272.26 45.666 1.286 229 .200 female 102 264.60 44.111 *p < 0.05, **p < 0.01, ***p < 0.001 6.1 knowledge and its factors table above shows that the t value (1.352) was not significant at p <0.05 for the knowledge subscale score, hence the female administrators (m = 26.45, sd = 9.160) perceived knowledge level equally about child rights as compared to male administrators (m = 24.99, sd = 7.235). the analysis regarding the knowledge factors reflects that t values for „knowledge provision‟ (1.311), knowledge protection (.227) and „knowledge participation‟ (1.406) was not significant at p <0.05. therefore, it is concluded that both male and female administrators had almost equal level of provision, protection and participation and overall knowledge about child rights. 6.2 attitude and its factors table above shows that the t value (.924) was not significant at p <0.05 of the attitude subscale, hence the female administrators (m = 78.58, sd = 9.16) perceived equally attitude towards child rights as compared to male administrators (m = 24.99, sd = 11.60). the analysis regarding the knowledge factors reflects that t value for „knowledge provision‟ (183), knowledge protection (.661), and „knowledge participation‟ (2.143) was not significant at p <0.05. therefore, it is concluded that both male and female administrators‟, had almost equal level of overall attitude provision, protection and participation towards child rights. practice and its factors table above shows that the t value (1.286) was not significant at p <0.05 for the practice subscale, hence the female administrators (m = 264.60, sd = 45.11) perceived almost equal practice level in child rights as compared to male administrators (m = 272.26, sd = 45.66). the analysis regarding the practice factors reflects that t values for „provision‟ (.899), protection (1.135), and „participation‟ (1.426) was not significant at p <0.05. therefore, it is concluded that both male and female administrators‟, had almost equal level of overall practice provision, protection and participation in child rights. table 2: one-way anova for knowledge, attitude, practice and its factors on age group of administrators sum of squares df mean square f sig. knowledge provision between groups 19.515 2 9.758 .771 .464 within groups 2847.046 225 12.654 total 2866.561 227 review of economics and development studies vol. 5, no 1, march 2019 74 knowledge protection between groups 16.221 2 8.111 .943 .391 within groups 1934.621 225 8.598 total 1950.842 227 knowledge participation overall knowledge between groups .121 2 .060 .007 .993 within groups 1908.809 225 8.484 total between groups within groups total 1908.930 74.384 15090.125 15164.509 227 2 225 227 37.192 67.067 .555 .575 attitude provision between groups .420 2 .210 .006 .994 within groups 7538.826 225 33.506 total 7539.246 227 attitude protection between groups 63.756 2 31.878 .753 .472 within groups 9525.660 225 42.336 total 9589.417 227 attitude participation between groups 16.402 2 8.201 .977 .378 within groups 1889.527 225 8.398 total 1905.930 227 overall attitude between groups 147.892 2 73.946 .469 .627 within groups 35508.998 225 157.818 total 35656.890 227 practice provision between groups 41.424 2 20.712 .055 .946 within groups 84548.716 225 375.772 total 84590.140 227 practice protection between groups 512.746 2 256.373 .655 .520 within groups 88030.145 225 391.245 total 88542.890 227 practice participation between groups 449.753 2 224.877 1.324 .268 within groups 38219.558 225 169.865 total 38669.311 227 overall practice between groups 368.260 2 184.130 .088 .915 within groups 468914.301 225 2084.064 total 469282.561 227 * p < 0.05, ** p < 0.01, *** p < 0.001 6.2 knowledge and its factors one-way analysis of variance showed the effect of age on administrators‟ sensitivities towards knowledge and its factors for child rights. the administrators with different age had not significantly different opinions about knowledge participation for child rights (f = .007), p <. 05. the administrators did not show any significantly review of economics and development studies vol. 5, no 1, march 2019 75 different perceptions based on age, regarding „knowledge provision for child rights‟ (f = .771), p > .05, knowledge protection (f = .943), p > .05 and overall knowledge (f = .555), p > .05. about child rights therefore, it is concluded that the administrators having different age, had perceived almost equal level of provision, protection, participation, and overall practices in child rights. 6.3 attitude and its factors one-way analysis of variance showed the effect of age on administrators‟ perceptions towards attitude and its factors for child rights. the administrators did not show any significantly different perceptions regarding „provision (f = .006), p > .05, protection‟ (f = .753), p > .05, „participation‟ (f =.977), p > .05, and overall attitude (f =.469), p > .05, towards child rights. therefore, it is concluded that the administrators having different age, had almost equal level of provision, protection, participation, and overall attitude towards child rights. 6.4 practice and its factors one-way analysis of variance showed the effect of age on administrators‟ perceptions regarding practice and its factors in child rights. the administrators did not show any significantly different perceptions based on age regarding „provision‟ (f = .055), p > .05, „protection‟ (f = .655), p > .05, „participation‟ (f =.1.324), p > .05, and overall practice in child rights (f = .088), p > .05. therefore, it is concluded that the administrators having different age, had almost equal level of provision, protection, participation, and overall practice in child rights. table 3: one-way anova for knowledge, attitude, practice and its factors on locality of administrators sum of squares df mean square f sig. knowledge provision between groups 44.775 2 22.387 1.788 .170 within groups 2879.165 230 12.518 total 2923.940 232 knowledge protection between groups 13.047 2 6.524 .767 .466 within groups 1956.961 230 8.509 total 1970.009 232 knowledge participation between groups 7.368 2 3.684 .443 .643 within groups 1911.765 230 8.312 total 1919.133 232 overall knowledge between groups 234.389 2 117.194 1.789 .169 within groups 15065.869 230 65.504 total 15300.258 232 attitude provision between groups 166.042 2 83.021 2.551 .080 within groups 7486.490 230 32.550 total 7652.532 232 attitude protection between groups 151.264 2 75.632 1.829 .163 within groups 9509.217 230 41.344 total 9660.481 232 attitude participation between groups 24.718 2 12.359 1.484 .229 within groups 1915.282 230 8.327 total 1940.000 232 overall attitude between groups 821.834 2 410.917 2.682 .071 within groups 35237.625 230 153.207 review of economics and development studies vol. 5, no 1, march 2019 76 total 36059.459 232 practice provision between groups 761.522 2 380.761 1.031 .358 within groups 84970.195 230 369.436 total 85731.717 232 practice protection between groups 625.342 2 312.671 .812 .445 within groups 88601.310 230 385.223 total 89226.652 232 practice participation between groups 264.501 2 132.250 .771 .464 within groups 39441.302 230 171.484 total 39705.803 232 overall practice between groups 2389.695 2 1194.848 .581 .560 within groups 472942.322 230 2056.271 total 475332.017 232 * p < 0.05, ** p < 0.01, *** p < 0.001 6.5 knowledge and its factors one-way analysis of variance showed the effect of locale on administrators‟ perceptions concerning knowledge and its factors. the administrators did not show any significantly different perceptions based on locale regarding „provision‟ (f = 1.788), p > .05, „protection‟ (f = .767), p > .05, „participation‟ (f = .443), p <.05, and „overall knowledge‟ about child rights (f = 1.789), p > .05. therefore, it is concluded that the administrators having different locale, had almost equal level of provision, protection, participation, and overall knowledge about child rights. 6.6 attitude and its factors one-way analysis of variance showed the effect of locale on administrators‟ perceptions concerning attitude and its factors towards child rights. the administrators did not show any significantly different perceptions regarding „provision‟ (f = 2.551), p > .05, „protection‟ (f = 1.829), p > .05, „participation‟ (f = 1.484), p > .05, and overall attitude towards child rights (f = 2.682), p > .05. therefore, it is concluded that the administrators having different locale, had almost equal level of provision, protection, participation, and overall attitude towards child rights. 6.7 practice and its factors one-way analysis of variance showed the effect of locale on administrators‟ perceptions concerning practice and its factors in child rights. the administrators did not show any significantly different perceptions regarding „provision‟ (f = 1.031), p > .05, „protection‟ (f = .812), p > .05, „participation‟ (f =.771), p > .05, and overall practice in child rights (f =581), p > .05. therefore, it is concluded that the administrators having different locale, had almost equal level of provision, protection, participation, and overall practice in child rights. 7. conclusion and results the female administrators perceived overall knowledge level, equally about child rights as compared to male administrators; both male and female administrators, had almost equal level of sensitivity in terms of provision, protection and participation and overall knowledge about child rights; the female administrators perceived equally overall attitude towards child rights as compared to male administrators; both male and female administrators „had almost equal level of overall attitude provision, protection and participation towards child rights; the female administrators perceived almost equal practice level in child rights as compared to male administrators; both male and female administrators‟, had almost equal level of overall practice provision, protection and participation in child rights. review of economics and development studies vol. 5, no 1, march 2019 77 the administrators with different age had not significantly different opinions about knowledge participation for child rights. the administrators did not show any significantly different perceptions based on age, regarding „knowledge provision for child rights‟, knowledge protection and overall knowledge about child rights; the administrators having different age, had perceived almost equal level of provision, protection, participation, and overall practices in child rights; the administrators having different age, had almost equal level of provision, protection, participation, and overall attitude towards child rights; the administrators having different age, had almost equal level of provision, protection, participation, and overall practice in child rights. the administrators having different locale, had almost equal level of provision, protection, participation, and overall knowledge about child rights; the administrators having different locale, had almost equal level of provision, protection, participation, and overall attitude towards child rights; the administrators having different locale, had almost equal level of provision, protection, participation, and overall practice in child rights. based on the findings, it is recommended that the administrators must be vigilant about the rights of children but it would be appropriate that the child rights seminars must also be arranged on monthly basis and the parents and teachers must be involved in such seminars frequently so that level of sensitivity about child rights may be increased optimally, which will increase the participation of child in different activities. prioritizing child protection, all stakeholders like government, school administration, line departments should play an active role in nation building and children should be given a „decision making role in school environment, administrators may be provided counselling and guidance from child rights experts to ensure protective child rights environment in schools. parents teachers‟ meetings may be arranged to avoid and reduce the neglect of child rights. references alderson, p. 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(2002). cultivating communities of practice: a guide to managing knowledge. harvard business press. review of economics and development studies vol. 5, no 1, march 2019 95 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads determinants of marital flourishing among married individuals: an asian perspective 1 samar fahd, 2 rubina hanif 1 national institute of psychology,quaid-i-azam university, islamabad, pakistan, samarphd14@nip.edu.pk 2 national institute of psychology, quaid-i-azam university, islamabad, pakistan, drrubinahanif@nip.edu.pk article details abstract history revised format: february2019 available online: march 2019 marital flourishing is a concept used to assess optimal quality of a marital relationship. despite abundance of research to understand the factors underlying a happy and satisfying relationship, the determinant of a flourishing marital bonding remains limited. the present study focuses communal and emotional processes as possible causes underlying beneath a flourishing marital relationship. a data from 569 wives and 433 husbands from pakistan was collected and analyzed through regression analysis. findings demonstrated that expression of emotions negatively predicts relationship and individual dimension of marital flourishing. moreover, positive communal orientation positively predicts individual dimension of flourishing. while, negative communal orientation negatively predicts relationship dimension of marital flourishing but positively predicts individual dimension of relationship flourishing. gender wise analysis of the study variables exhibits that asian wives are high in marital flourishing as compared to asian husbands. asian husbands show high level of negative emotional expressivity and negative communal orientation as compared to the asian wives. the study signifies the determinants of marital flourishing thereby, highlighting the role of emotional and communal processes within asian marriages. findings of study are being discussed examining possible universal and culture-specific aspects of marital flourishing from indigenous asian perspective. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords marriage, flourishing, emotion expressivity, communal orientation, gender jel classification: d91, j10, j12, j16 corresponding author’s email address: samarphd14@nip.edu.pk recommended citation: fahd, s., hanif, r. (2019). determinants of marital flourishing among married individuals: an asian perspective, review of economics and development studies, 5(1), 95-108 doi: 10.26710/reads.v5i1.513 1. introduction researchers have become progressively attracted in the construct of flourishing (diener et al. 2010; keyes 2002; huppert & so, 2013; seligman, 2011). regardless of the fundamental focus on flourishing in positive psychology research (rose 2008; seligman 2011), merely handful of researches have explored predominance of flourishing within intimate relationships. in spite of the fact that relationship scientists have demonstrated a number of studies explaining the factors underlying marital happiness and marital satisfaction, the concept of marital flourishing, however, integrates a more elaborative concept of relationship well-being and happiness (fowers & owenz, 2010). as stated by fowers & owenz, (2010), flourishing marriage is characterized by husband’s and wife’s meaningful activities not comprising of just seeking satisfaction but also meant to attain understanding, development and positive expression of self. marital flourishing has also been conceptualized as an intimate relationship http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 96 characteristic of relationship surviving as well as relationship flourishing ingredients. for instance according to one research, communication patterns, support for the partner and quality time spent together has been regarded as key factors to influence husband’s and wives’ flourishing ((beach, et al., 1996; blanchard et al., 2009). similarly, gottman (1999) has found that together with specific interactional styles, the way a couple manages conflict is central for marital success and satisfaction. ziv and gadish, (2010) found that the ability to use humor and affection might result in higher marital satisfaction than if there was lack of humor or affection during conflict. however, indigenous conceptualization of flourishing (psychological flourishing scale; pfs) integrates multiple determinants of marital flourishing including gratitude (gordon, arnette, & smith, 2011), capitalizing on positive events (emmons & mccullough, 2003; watkins et al., 2003), received social support from the partner (barry, bunde, brocke, lawrence & 2009), emotional sensitivity for the spouse (driver & gottman, 2009), appreciation and acknowledgement (mirgain & cordova, 2007), forgiveness for the partner (askari 2016), sexual intimacy and communication patterns (hana yoo, bartle-haring, day & gangamma, 2014). 2. emotional expressivity and communal orientation as determinants of marital flourishing within monarchy of empirical evidences studying relationship happiness, role of emotions and communal tendencies has been highlighted by numerous relationship researchers. expression is an integral characteristic of emotions and functions as a communicative purpose (guerrero, andersen, & trost, 1998). possibly due to significance of expressivity of emotions, there exist numerous verbal and non-verbal networks for emotional expressivity. profusion of emotional words in various languages highlights the implication of verbal communication of emotions. emotions could also be expressed through nonverbal mediums such as body language, facial expressions and vocal articulations (planalp, 1998; gross, 1999). substantial body of research has rendered mixed findings regarding expression of emotions within married relationship. several relationship scientists have illustrated that spouses’ nature of emotional expressivity is significantly correlated with the narrations of their marital happiness (carstensen, gottman, & levenson, 1995; gill, christensen, & fincham, 1999). on the other hand, according to rauver & volling, (2005), expression of positive emotions has limited impact on marital functioning. similarly, yediri & hamarta, (2015) has found no significant impact of positive emotions on marital functioning. while, another study exhibits that negative correlation exist between verbal expression of positive emotions and relationship satisfaction among married individuals (simon & nath, 2014). the fact is worth mentioning here that most of the literature on emotions has been predominantly focusing western cultures and depicting contradictory findings in terms of emotion expressivity and quality of marital relationship. as the preceding discussion implies, communal orientation speculated as the determinant of marital flourishing, is referred by cark et al., (1987) as the predisposition to be considerate to the problems of others and to help them predominantly in response to their needs and out of concern for their wellbeing, tends to be amongst the most important determinants of satisfaction in variety of relationships (jones, & vaughan, 1990; thompson & deharrport, 1998). individuals with enhanced level of communal tendencies are dispositional to offer care to individuals extending from those within their close relationships to strangers (bryan, hammer, & fisher, 2000; williamson & schulz, 1990). communally oriented individuals demonstrate numerous interpersonal abilities that enable better social bonds, including being emotionally expressive within close relationships (clark & finkel, 2005). to date, however, there is scarcity of scientific evidences that focus on communal orientation as determinant of flourishing among married individuals. little experiential researches are present that inspects whether a dispositional tendency to care is really related to experiencing higher quality relationships across marital context or not. hence, in the present research, we examined whether communally oriented people do really live through married relationships high in flourishing or not. nevertheless, the literature mentioned above predominantly concentrates on marital flourishing from the reference of western contexts. in latest ages, however, there is increasing interest in marital quality and its determinants from non-western angle. this extension of empirical studies on marital quality into non-western settings rears new challenges and prospects for research on marital flourishing. 2.1 the present investigation the present exploration is, hence, an empirical contribution towards the development of research on marital quality into non-western settings by discovering the determinants of marital flourishing within pakistan. in this study, we observe the determinants of flourishing within marital relationship, in a national representative sample of husbands review of economics and development studies vol. 5, no 1, march 2019 97 and wives in pakistan. we examined how distinct patterns of emotional expressivity (positive and negative) and multiple communal orientation characteristics are associated with marital flourishing. studying this discrepancy is important related to the influence of positive and negative expression of emotions on marriage because the two have been found to have very different associations with the marital relationship. moreover, the study also aimed to address the inconsistent findings regarding nature of emotions expressed and pattern of communal orientation in terms of marital flourishing of individuals belonging to asian background. in present study, we, likewise, intend to expand our understanding of communally oriented people’s experiences across their marital relationships by focusing their emotional communication with their partners. diminutive array of studies has observed emotions, beyond general positivity and negativity related with having a communal orientation and subsequently having an impact on marital flourishing. we, therefore, anticipated a stronger relationship between expression of emotions and communal orientation as predictor of marital flourishing. thus, structuring upon existing body of empirical literature, we derived a number of hypotheses that were tested to explore the role of proposed determinants in influencing marital flourishing. we anticipated that communally oriented people would experience enhanced positive emotion in daily life, which consecutively combine to influence the level of marital flourishing among husbands and wives. finally, we explored dissimilarities and likenesses regarding gender, marital flourishing expression of emotions and communal orientation between husbands and wives. moreover, according to our latest knowledge, this is the leading study to examine the relationship between the emotional and communal processes as key variables that could influence the flourishing of married relationship. to recapitulate, the science of flourishing, particularly the marital flourishing is still in its early stages in asian societies. thus, the purpose of the current investigation is to contribute to the science of relationship flourishing by gauging the factors underlying marital flourishing of asian married sample. the key objectives of the study are; • to analyze the role of emotion expressivity and communal orientation affecting the level of marital flourishing among asian married individuals. • to analyze gender differences in terms of marital flourishing, emotion expressivity communal orientation among asian married individuals. hypothesis of the study • h 1 positive emotion expressivity positively predicts relationship dimension of marital flourishing. • h 2 positive emotion expressivity positively predicts individual dimension of marital flourishing. • h 3 negative emotion expressivity negatively predicts relationship dimension of marital flourishing. • h 4 negative emotion expressivity negatively predicts relationship dimension of marital flourishing. • h 5 positive communal orientation positively predicts individual dimension of marital flourishing. • h 6 negative communal orientation negatively predicts relationship dimension of marital flourishing. • h 7 negative communal orientation negatively predicts individual dimension of marital flourishing. • h8 husbands and wives would differ in their level of marital flourishing and expression of emotions. 2.3 method 2.3.1 participants our participants consisted of 433 (43.2%) husbands and 596 (56.8%) wives between the ages of 20 to 70 years. all the participants of the study were volunteers and were not paid for their participation. participants met the following inclusion and exclusion criteria. inclusive criteria (a) having married for not less than one year (b) living together with the spouse; c) having finished high school, and (c) having minimum one child either son or daughter. exclusion criteria (a) married once but no longer living with the spouse; (b) divorced or separated; (c) having no child. 2.3.2 instruments materials of the study included self-report measures to assess marital flourishing, expression of emotions and communal orientation of married individuals. both emotional expressions and communal orientation were primary independent variables whereas, marital flourishing was dependent variables. materials included the following review of economics and development studies vol. 5, no 1, march 2019 98 scales. assessment of demographic variables: demographic variable were assessed through demographic data sheet that requird the information about husbands’ and wives’ age, years of education, professional experience, duration of marriage (in years), family system, number of children, age of the youngest child, nature of marriage, and general health. psychological flourishing scale (pfs; fahd & hanif, 2017), a 39 item questionnaire measuring flourishing ingredients of the married relationship. pfs is developed for use with married individuals to assess the level of their relational flourishing. the questionnaire consists of two subscales that measures psychological flourishing of husbands and wives in terms of two dimensions; relationship dimension (21 items) and individual dimension (18 items). relationship dimension of pfs includes questions about mutual understanding for the spouse, friendly relations with the partner, appreciation for the partner, capitalizing on positive events etc. whereas, the individual dimension includes items about one’s personal qualities like sense of humor, level of self-confidence, emotional stability, optimism etc. each item is scored as 5 = strongly agree, 4= agree, 3= neutral, 2= disagree, 1= strongly disagree. responses are summed up to get a total score. high level of marital flourishing is illustrated by high scores on the scale. the two subscales of pfs have shown good reliability (relationship dimension, α = .86 and individual dimension, α = .80). berkeley emotion expressivity questionnaire (beq, gross & john, 1995) comprises of 16 questions. three subscales of beq measured positive expressivity, (4 items), negative expressivity (6 items), and strength of impulse reactivity (6 items). in the present study, beq evaluated multiple facets of husbands and wives affective dimensions. the beq produces a total score in addition to 3 subscales measuring impulse strength, positive expressivity, and negative expressivity. instances of items from measure include: ―i sometimes cry during sad movies;‖ ―i've learned it is better to suppress my anger than to show it‖; ―my body reacts very strongly to emotional situations.‖ beq have been translated in urdu for the use in current research following chen & boore, (2010) translation guidelines. the data of the present study have illustrated internal consistencies of three subscales of beq ranging between α = .65 to α = .80. communal orientation scale (cos; clark et al., 1987): 14 items of cos evaluates inclination to be responsive and sharing with the partner. scale was translated into urdu language. subscales were articulated for the present research, named as communal orientation positive (cop) and communal orientation negative (con). item 3,4,6,9,10,12,13 measured the negative communal orientation and item 1,2,5,7,8,11,14 measured positive communal orientation. reliability of the two subscales, computed through cronbach alpha (α) reliability yields satisfactory reliability (cop=. 71 and con= .72) on data of current study. 2.3.3 design and procedure the research design of this study was cross sectional in nature. each independent variable had two levels (positive emotional expressivity and negative emotional expressivity; positive communal orientation and negative communal orientation) and whether each variable was manipulated within subjects as well as between subjects. all the research protocols were met. recruited participants were provided with informed consent and were debriefed about the study purpose and all ethical considerations were met. participants were also informed that all the personal information that they would provide would be kept confidential and would be utilized for the study purpose only. the participants were selected from professional institutes, social gatherings, teaching setups, and family units. participants were requested to participate in the research and data collection gatherings were arranged for responding of the research tools. each gathering was commenced with the description of the study’s purpose and formal acceptance of forms stating informed consent. married males and married females separately and individually filled research instruments; viz, it wasn’t the condition that both partners should take part in the research. henceforth, married males and females joined the study, but not essentially both spouses. after the completion of surveys, the researchers debriefed the participants and communicated them that the study was actually looking for the expression of emotions and communal orientation predicting marital flourishing. the participants were then asked if they had any questions and thanked for their cooperation. 2.3.4 sampling technique convenient sampling technique was used in the present research and sample of husbands and wives consisted of review of economics and development studies vol. 5, no 1, march 2019 99 stratum owning specific attributes (see table 1). 2.3.4 informed consent informed consent of the participants was obtained through informed consent form comprising of information about procedures, advantages and risks of participating, a description how to attain the results of research, volunteer participation, and contact information of the researchers. the objective of the current exploration was also mentioned on the informed consent form. 2.3.5 ethical considerations present research was permitted by the institutional review committee at national institute of psychology (ircnip) and all the existing ethical strictures were met. 3. analysis of data scores of the measures were organized in line with their corresponding instruction booklet and later were arranged in logs in the statistical package for the social sciences (spss22 version). following analysis was executed (adopting p < .05). 1 frequencies and descriptive for demographic features related to the study sample (table 1). 2 correlation to explore patterns of relationship among study variables (table 2). 3 linear regression to explore the prediction of emotion expressivity and communal orientation (hypothesis testing) in predicting marital flourishing (table 3-9). 4 independent sample ttest (table 10) to explore gender differences related to marital flourishing, expression of emotions and communal orientation among husbands and wives. 4. results results of the present research show that expression of emotions and communal orientation are significant determinants of marital flourishing of asian married individuals. moreover, husbands are high in expression of negative emotions and tend to display negative communal orientation within their married bond. on the other hand, asian wives exhibit high levels of relationship and individual aspects of marital flourishing as compared to asian husbands. table 1: socio demographic characteristics of wives and husbands wives husbands characteristics mean sd frequency (%) mean sd frequency(%) age(in yrs) 35.52 9.58 40.88 10.73 20-30 226(39.7) 72(16.66) 31-40 209(36.7) 174(40.2) 41-50 98(17.2) 111(25.6) 51-60 26(4.6) 55()12.7 61-70 10(1.8) 14(3.2) 71-80 6 (0.6) 6(1.4) education 3.27 1.27 3.14 1.32 matric 86(15.1) 80(18.5) intermdite 60(10.5) 51(11.8) bachelor 105(18.5) 72(16.6) masters 250(43.9) 187(43.2) m.phill 52(9.1) 29(6.1) ph.d 10(1.8) 9(2.1) profession 1.98 1.06 3.41 0.77 housewife 215(37.8) teacher 213(37.4) 77(17.8) business 17(3.0) 97(22.4) review of economics and development studies vol. 5, no 1, march 2019 100 job 93(16.3) 250(57.7) familysys 1.49 0.55 1.53 0.5 neclear 271(47.6) 186(43.0) joint 247(43.4) 210(48.5) yofmarri 12.28 9.57 14.08 10.5 1 to 10 309(54.3) 207(47.8) 11 to 20 150(26.4) 115(26.6) 21 to 30 80(14.1) 76(17.6) 31 to 40 20(3.5) 27(6.2) 41 to 50 6(1.1) 5(1.2) tyofmarri 1.34 0.65 1.39 0.64 love 423(79.4) 289(66.7) arrange 88(15.5) 98(22.6) genhealth 3.94 0.79 4.1 0.72 v poor 5(.9) poor 10(1.8) 4(.9) normal 133(23.4) 76(17.6) good 275(48.3) 206(17.6) v good 134(23.6) 126(29.1) note: familysys= family system; yofmarri= years of marriage; tyofmarri= type of marriage; genhealth= general health table 2: bivariate correlations among study variables (n=1002) variables 1 2 3 4 5 6 flourishing (r) 1 .648** -.250** -.173** .234** -.086** flourishing (i) 1 -.356** -.254** .414** .175** expressivity (p1) 1 .500** -.300** -.025 expressivity (n1) 1 -.271** -.115** communal (p2) 1 .229** communal (n2) . 1 **p<.01, note: r= relationship dimension; i= individual dimension; p1= positive emotionality; n1= negative emotionality; p2 = positive orientation; n2 = negative orientation. the table above demonstrates the relationship among marital flourishing and its determinants. all the variables are significantly correlated with one another. positive emotion expressivity show negative association with marital flourishing (relationship dimension= -.25** & individual dimension = -.17**). negative emotion expressivity also show negative correlation with marital flourishing (relationship dimension = & individual dimension = ). communal positive orientation is negatively correlated with positive emotional expressivity(r = -.30**). communal negative orientation is significantly negatively correlated with negative expressivity (r = -.11**). table 3: linear regression analysis of positive emotion expressivity as predictor of marital flourishing (relationship dimension) n=1002 psychological flourishing(i) predictors r r2 b se β t f co (n) .25 .063 -.79 8.77 -.25 7.59 66.36 ***p<.001, co(n)= communal negative orientation; i= individual dimension of flourishing. review of economics and development studies vol. 5, no 1, march 2019 101 table 4: linear regression analysis of positive emotion expressivity as predictor of marital flourishing (individual dimension) n=1002 psychological flourishing(i) predictors r2 r2 b se β t f co (n) .35 .127 -1.12 8.70 -.35 11.99 143.84 ***p<.001, co(n)= communal negative orientation; i= individual dimension of flourishing. table 5: linear regression analysis of negative emotion expressivity as predictor of marital flourishing (relationship dimension) n=1002 psychological flourishing(i) predictors r r2 b se β t f co (n) .17 .03 -.55 .10 -.17 -5.55 30.88 ***p<.001, co(n)= communal negative orientation; r= relationship dimension of flourishing. table 6: linear regression analysis of negative emotion expressivity as predictor of marital flourishing (individual dimension) n=1002 psychological flourishing(i) predictors r r2 b se β t f co (n) .25 .065 -.81 .09 -.25 -8.29 68.83 ***p<.001, co(n)= communal negative orientation; i= individual dimension of flourishing. table 7: linear regression analysis of positive communal orientation as predictor of marital flourishing (individual dimension) n=1002 psychological flourishing(i) predictors r r2 b se β t f co (n) .41 .17 .75 .05 .41 14.36 206.35 ***p<.001, co (n)= communal positive orientation; i= individual dimension of flourishing. table 8: linear regression analysis of negative communal orientation as predictor of marital flourishing (relationship dimension) n=1002 psychological flourishing(i) predictors r r2 b se β t f co (n) .08 .007 .14 .05 -.08 -2.73 7.47 ***p<.001, co (n)= communal negative orientation; r= relationship dimension of flourishing. table 9: linear regression analysis of negative communal orientation as predictor of marital flourishing (individual dimension) n=1002 psychological flourishing(i) predictors r r2 b se β t f co (n) .17 .30 .29 .05 .17 5.60 31.39 ***p<.001, note: co(n)= communal negative orientation; i= individual dimension of flourishing. table 10: mean differences of husbands and wives in terms of marital flourishing, emotion expressivity and communal orientation husbands, (n=433) wives (n= 568) 95% variables m sd m sd t p ul ll cohen's d co(n) 19.77 5.68 18.16 5.07 4.22 .00 .94 2.28 0.29 flou(r) 91.79 9.76 94.10 8.34 -4.02 .00 -3.43 -1.1 0.25 flou (i) 69.81 9.69 71.93 8.35 -3.70 .00 -3.23 -.99 0.23 emo (n) 8.13 2.76 7.75 2.83 2.10 .00 .72 .02 0.24 review of economics and development studies vol. 5, no 1, march 2019 102 emo(n)= emotional negative expressivity. ul= upper limit; ll= lower limit, **p< .00 mean differences and t-test significance indicates that magnitude of negative communal orientation and negative emotional expressivity is higher among married males as compared to married females. on the other hand, married females appear to demonstrate high levels of both the dimensions of flourishing within the marital relationship. 3. discussion the present investigation was aimed to observe the impact of emotional expressivity and communal orientation on marital flourishing. in doing so, we extended upon empirical knowledge of how husband’s and wife’s expression of positive and negative emotions in alliance with positive and negative communal orientation differentially predicts multiple dimensions of marital flourishing. 3.1 positive expressivity and marital flourishing the results of the current study rejects the discrepancy former relationship scientists have found between positive and negative expression of emotions (searle & meara, 1999; cartensen et al., 1995) as both positive and negative expressivity negatively predicts marital flourishing. existing literature identify favorable role that positive emotional expressivity may play in influencing spouses’ marital happiness. relationship scientists have constantly found that high levels of spouses’ positive emotional expressivity were related with better marital happiness (feeney, noller, & callan, 1994; feeney, 2002). in contrast to the previous findings, we found astonishingly negative associations between positive expression of emotions and marital flourishing. despite the fact that numerous researchers reveal that higher positive emotional expressivity were associated with enhanced marital satisfaction (eg. feeney et al., 1994), we found that expression of positive emotions within the marital relationship negatively predicts marital flourishing. although husbands’ and wife’s flourishing within their married relationship has previously found to be positively affected by the emotions of appreciation and acknowledgement that they express to their partners (eg. adler & fagley, 2005), findings of the current investigation demonstrated that expression of positive emotions seem to impact marital flourishing in the negative direction. as the results currently stands that husbands and wives who express their positive emotions to their partners do not appear to experience flourishing within their married relationship. in contrast this positive expressivity seems to reduce the level of flourishing (relationship flourishing β= -.25 and individual flourishing β= -.35; p<.001). however, results of the current study are in line with a few empirical evidences demonstrating that expression of positive emotions has either limited or no impact on functioning of married relationship (rauver & volling, 2005; yediri & hamrta, 2015). therefore, the hypotheses (1 & 2) concentrating upon the role of positive expressivity and marital flourishing has been rejected by the data of the present study and seems to depict that components of flourishing such as communication patterns, compromises within the relationship, conflict resolution, encouragement for the spouse, friendly relations, trust on each other are likely to worsen among asian husbands and wives as the result of their expression of positive emotions within the married relationship. beyond this it could be hypothesized that flourishing of the married individuals would be more likely to be affected by the expression of emotions depending on the variety, intensity and magnitude of the emotions expressed. hence, despite previous researches lucidly explaining the beneficial nature of positivity of emotions (fardis, 2007), the present investigation invites a new debate for the scientists working on emotions as relationship flourishing factor within married relationship. 3.2 negative expressivity and marital flourishing speculating the link between negative expression of emotions and marital flourishing of husbands and wives (hypotheses 3 & 4), this link is in line with numerous studies documenting the relationship between negative expression of emotions and decreased levels of marital satisfaction (feeney et al., 1994; roberts & krokoff, 1990; cartensen et al., 1995; halberstadt et al., 1995 feeney, 2002). overall, , there appears to be sustenance for the empirical connection between negative emotional expressivity and declining levels of marital happiness, such that less martially satisfied couples involve in more negative expression of emotions. therefore, data of the present study strengthens existing body of knowledge and found that negative emotional expressivity negatively predicts marital flourishing among husbands and wives. it has become apparent from the current findings that negative emotional expressivity is a strong determinant of flourishing (relationship flourishing β= -.17 and individual flourishing β= -.25; p<.001) and tend to reduce the level of marital flourishing. it could be interpreted from review of economics and development studies vol. 5, no 1, march 2019 103 findings of the current study that husbands and wives who indulge in the expression of negative emotions like anger, anguish, and dislike for the partner seem are less likely to show intimacy, trust, compromise and conflict resolution skills within their marital relationship thereby, exhibit decreased level of marital flourishing. 3.3 communal orientation and marital flourishing with regard to the wife’s and husband’s repertoire of communal tendencies linked with their marital satisfaction, we point out two categories as positive communal orientation and negative communal orientation as determinants of marital flourishing. we speculated that positive communal orientation positively predicts marital flourishing and negative communal orientation negatively predicts marital flourishing. data of the current study supported the scientific assumptions regarding communal orientation as the determinant of marital flourishing (individual flourishing β= .41 and relationship flourishing β= -.08; p<.001). the findings are also in consonance with those described by clark & finkel, (2005); crocker & canevello, (2008), canevello & crocker, (2010); whose studies illustrated that communal orientation could lead towards the promotion of flourishing relationships through better interpersonal closeness, responsivity, and social support & encouragement for the partner within the romantic relationship. moreover, communal behaviors between spouses could reinforce the relationship, engendering feelings of trust, intimacy, gratitude and forgiveness for the spouse. because married individuals with high level of positive communal orientation are more focused to interpersonal needs of their partners, it would not seem improbable that they possess high level of marital flourishing. hence, disposition of communal orientation nourishes relationship building and relationship flourishing ingredients within married bonds of asian couples. however, statistical figures from present study rendered partially unexpected results regarding h7 which stated that negative communal orientation negatively predicts individual dimension of marital flourishing thereby demonstrating that negative communal tendencies positively predicts marital flourishing. this finding leads to the interpretation that for husbands and wives, lack of care and responsiveness do not necessarily decrease the level of marital flourishing. conversely, it appears that even when married individuals choose to be communally negative oriented, it could enhance the factors like intimacy, acknowledgement, capitalizing on positive events, trust, compromise, respect for the individual differences and forgiveness for the partner. hence, contradictory to current literature on interpersonal benefits of communal orientation (clark & finkel, 2005), the current findings present a unique finding from the spectrum of asian husbands and wives. 3.4 study variables in terms of gender differences the present investigation was intended to broaden the understanding of the relationship among married individual’s emotion expressivity and communal orientation and their marital flourishing. for the reason that we aimed towards exploring impact of positive and negative emotional expression and communal orientation, on various aspects of marital flourishing (relationship and individual dimensions), and because we had self-reports responses from both husbands and wives, we were also able to address gender variances on the proposed study variable. several researchers have found that expression of emotions differ in males and females, females generally are found to be more expressive in terms of various emotions comprising of happiness, fear and sadness (kring & gordon, 1998; brody & hall, 1993; cartensen et al., 1995). further evidences comes from the studies by gross & john, (1998); fujita et al., (1991) who exhibit that women tend to express positive and negative emotions more than men. however, findings of the present study show no significant differences between wives and husbands in expression of positive emotions, while in terms of negative expression, asian husbands are high in expressivity as compared to wives. the difference appeared statistically significant yet very small between husbands and wives. it gives the impression that in our society, men enjoy more acceptances to be angry and anguish as compared to women, whereas women are more encouraged to express sadness as compared to men. with respect to positive communal orientation, no gender dissimilarities were observed between wives and husbands. however, significant dissimilarities were noticed in terms of negative communal orientation whereby illustrating asian husbands to be high in negative communal orientation as compared to wives. as a common observation in a non-western society, it could be stated that asian men appear to nonresponsive, less sensitive and less caring within their interpersonal relationships. nevertheless, as shown by the current findings, the negative communal orientation partially does not seem to influence marital flourishing. the findings are, however, inconsistent with existing literature that states that there are no gender variations in the exhibition of communal review of economics and development studies vol. 5, no 1, march 2019 104 orientation among males and females (e.g. buunk & dreu, 2006). in terms of marital flourishing, a survey conducted at national level on married adults in united states in 2000’s, have found that on average women indicated lesser levels of marital quality as compared to men (amato, booth, johnson, & rogers, 2007). other scientific resarches, though, have found no gender variances (kurdek, 2005). conversely, in the asian culture we found that wives are significantly high in both relationship flourishing as well as individual flourishing as compared to husbands. extending this notion we can interpret that asian wives are more compromising, sacrificing, respectful towards their counter parts, friendly, encouraging for the partner and forgiving. the wives also appear to possess numerous personality traits like humor, confidence, emotional stability conflict resolution skills and effective communication patterns that serves to enhance their relationship flourishing. hence, the theoretic significance of the contemporary research lies not only in advancing the knowledge about the role of expression of emotions and communal orientation in influencing level of flourishing within marital frameworks, but also in contributing to a more nuanced understanding of the role of gender variations from asian perspective. numerous authors have questioned the extent to which expressive and communal determinants are pertinent in intimate relationships, and have speculated if being expressive and communally available sensitive to the husbands and wives for attaining a high level of marital satisfaction. (murstein et al., 1977; mills & clark, 1982, 1994). our empirical investigation offers certain clues and scientific evidences that expressivity and communal orientation in its all forms are distinctively associated with marital flourishing of asian husbands and wives. finally, we draw upon the experimental exploration signifying that facilitating partner leads people to experience positive emotion (williamson & clark, 1992), to posit it, it could probably be stated that communally oriented people feel positive emotions through caring for others and in return feel motivated to act communally towards the partner. 4. conclusion key contribution of the contemporary paper is that it is paramount to show explicitly that in intimate relationships, alliance of communal dispositions and expression of emotion significantly predicts level of marital flourishing. the data received offers a considerable yardstick for understanding variables in the domain of flourishing predominantly in terms of marital relationships. data, based on cross-sectional design and sampled in major cities of pakistan appeared to be useful for discovering association among expression of emotions, communal orientation and marital flourishing among asian married individuals. current data may open future paths to tune novel research methodologies to evaluate echelons of flourishing among married sample of non-western societies. several limitations must be acknowledged, regardless of study’s pertinent findings. these limitations identify potential innovative researches in arena of interpersonal relations. even though importance is being given to ethical concerns intricate within close relationships, research data gathered through self-report scales is not without potential biases. henceforth, corresponding researches utilizing other techniques, i.e., multimodal valuations, is obligatory. another drawback, inherent to adopted approach, is lack of relationship variables playing mediator and moderator roles that could possibly influence the direct relationship between predictors (emotion expressivity and communal orientation) and outcomes (marital flourishing). thirdly, the data should have been collected from other countries of asia representing eastern culture. moreover, a qualitative exploration of the variables used in the study could possibly have rendered a more detailed understanding of marital flourishing. we should also bear in consideration that current empirical work focused on the interpersonal characteristics of marital flourishing. supplementary variables, however, (e.g., partners’ physical and psychological health and other personal factors) should not be overlooked as significant features involved in marital flourishing. current research, hence, does not exhaust the investigation of the determinants of marital satisfactions, but indicates aspects that could be regarded as aspects that encourage psychological flourishing of married individuals both theoretically as well as empirically. hence, the upcoming researchers interested to explore the determinants of marital flourishing could benefit in a way that could facilitate an empirical understanding of marital flourishing in every possible way. study is important for its implications for married individuals, mental health professionals and family counselors. findings of the study are vital in explaining the importance of emotion expressivity and communal orientation to promote the flourishing of married individuals. current empirical investigation provides hope that if mental health professionals, health psychologists, relationship scientists and counselors could successfully improve intimate relationships through scientific study of variables that makes a marital life flourishing, family well-being would progress, and children dwelling with partnered couples may find themselves in families marked by less review of economics and development studies vol. 5, no 1, march 2019 105 disturbances and mental problems. references adler, m. g., & fagley, n. s. 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(2010). humor and marital satisfaction. journal of social psychology, 129, (6), 759-768. https://doi.org/10.1080/00224545.1989.9712084 review of economics and development studies vol. 5, no 1, march 2019 108 review of economics and development studies vol. 5, no 1, march 2019 135 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads shari’ah appraisal of mortgage backed sukuk issued by financial institutions for house financing in naya pakistan housing program: an analytical study 1 naureen akhtar, 2 atia madni, 3 rao imran habib 1 assistant professor, university gillani law college, bahauddin zakariya university, multan, naureen.akhtar@bzu.edu.pk 2 lecturer, faculty of shariah & law, international islamic university, islamabad, atia.madni@iiu.edu.pk 3 assistant professor, university gillani law college, bahauddin zakariya university, multan, raoimran@bzu.edu.pk article details abstract history revised format: february2019 available online: march 2019 this article is focused on conducting the sharīʻah evaluation of mortgage backed sukuk by financial institutions in pakistan under naya pakistan housing program for house financing. the financial product should strictly comply with the directives of sharīʻah. this research work explores the structure of mortgage backed sukuk to spotlight the efficacy of mortgage backed sukuk in house financing projects. furthermore, this study discusses the sharīʻah rulings with respect to the contract of rahn. this endeavor is made to indicate sharīʻah requirements pertaining to the validity of financial product of mortgage backed sukuk for house financing. this research article finds that the present government should adopt the financial product of mortgage backed sukuk for house financing under naya pakistan housing program because structure of mortgage backed sukuk is sharīʻah compliant and sharīʻah based. pakistan is a candidate of sharīʻah compliant housing finance because of constitutional responsibility of state of pakistan under article 2-a and 227 of constitution of pakistan, 1973. finally, suggestions have been put forward to issue mortgage backed securities for house financing project to the government of pakistan. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords financial product, mortgage backed sukuk, house financing, naya pakistan housing program, sharīʻah and rahn. jel classification: g1, g21, r3, o18, o22, z12 corresponding author‟s email address: raoimran@bzu.edu.pk recommended citation: akhtar, n., madni, a. and habib. r. i. (2018). shari‟ah appraisal of mortgage backed sukuk issued by financial institutions for house financing in naya pakistan housing program: an analytical study, review of economics and development studies, 5 (1), 135-144 doi: 10.26710/reads.v5i1.571 1. introduction housing is a primary and fundamental need of a family unit in any society. this need of a human being is recognized by universal declaration of human rights. to reaffirm the need of housing for the citizens of the state, in 1996 united nation organized a conference titled, habitat conference. (ali akbar ghanghro, 2018). shortage of housing facility is mainly faced by segment having low incomes. low income segments need empowerment through availability of housing on affordable terms and conditions. mortgage financing is usually used in house financing because a person cannot afford to build a house all at one owing to the shortage of finances. mortgage financing can be the best available way for him to achieve the desired result of having house of his own. mortgage financing is a loan given by financial institution to a qualified http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 136 applicant for the purpose of acquiring a property in the form of house and putting that property as a collateral or security. the debtor will be the owner of the house and the financial institution is entitled to a claim on that property in case of default committed by the debtor in the payment of amount of money due to him. (lamudi, 2017). such a property is not free from encumbrance. the present article is aimed to conduct the scrutinization of a mortgage backed sukuk that is extensively practiced by financial institutions in debt financing of housing in pakistan in the light of sharīʻah rulings. 2. naya pakistan housing finance the present government of pakistan (pti government) tried to make a national policy on house financing. the present government in pakistan has raised the slogan of “adequate shelter for all”. naya pakistan housing program is launched by the present prime minister of pakistan, imran khan, during his sermon to public on 10th oct, 2018. soon after the launching of this program by prime minister, imran khan, nadra issued a registration form on its website on 11th oct, 2018. it is also manifested by the government that mere registration is not the allotment rather it would be an application to be considered by the authorities. nadra had been given the responsibility of identifying those who need. the application can be submitted within two months, i.e. from 22nd october to 21st december 2018, at the selected district offices1. the process fee is nominal of rs. 250 only. this housing program is targeting low income strata of the society and announced 5 million housing units to the citizens of pakistan. initially this pilot program has been initiated for seven districts of pakistan namely, sukkar, quetta, gilgit, muzafarabad, swat, islamabad and faisalabad. till now the government pledged that the government would provide the requisite land for the pilot project. moreover, the government would play the role of regulator and facilitator to provide feasible environment for public and private sectors and non-profit organizations who would execute the project. the government would play the role of one-window facilitation center to accomplish this project. this study would suggest the best available option with the government in the present scenario to accomplish the task of house financing of 5 million units. this study also developed a structure or model that is devoid of discrepancies both from sharīʻah and state law viewpoints. 3. financial product of mortgage backed sukuk for house financing program prime minister of pakistan, imran khan, announced on october 10, 2018 the establishment of national finance regulatory authority which will work with the state bank of pakistan to develop the financial product based on mortgage for new housing program. in the following section of this research article an effort has been made by the researchers to develop a structure of mortgage backed sukuk for housing finance project. private mortgages remain small and do not meet the needs and requirements of the borrower. the borrower‟s best interest lies with the fact the government should intervene and supervise the loan granted to the borrower from a financial institution. it‟s worth mentioning here that house financing is at the tail end of the transition from being the government-dominated towards the private-sector led industry. sukuk represent islamic securities and serves as an alternative to conventional bonds and debentures. sukuk are hybrid securities bearing the characteristics of both debt and equity securities (pegah zolfaghari, 2017, p. 1). mortgage backed sukuk was a manifestation of a move from issuance of debt security without asset at the back to asset backed security. 4. structure of mortgage backed sukuk mortgage backed sukuk are actually debt based security. mortgage backed sukuk are in fact different from asset backed sukuk. asset backed sukuk are basically ijarah based sukuk which represent the equity financing, whereas, the mortgage backed sukuk are based on mortgage which represents the debt financing. 1 the detail of district offices is given here. dc office, military road sukkur; nadra registration center infront of helper eye hospital sariyab road quetta; dc office khamar gilgit; dc office old secretariat muzafarabad; dc office district court gulgada saido shareef road mangora swat; nadra mega center blue area islamabad and dc office faisalabad. review of economics and development studies vol. 5, no 1, march 2019 137 the following are the major parties involved in mortgage backed sukuk for the construction of houses:  borrower, he will be the owner of the underlying asset once he paid all the installments to the government which is regulating and supervising the whole process to maintain transparency. the government announces to provide land for the project of naya pakistan housing program. the government of pakistan will mortgage the property in land or immoveable property to the credit institution for mortgage loan financing.  originating credit institution, the mortgagee, the creditor.  financial intermediary or special purpose vehicle (spv), the issuer of mortgage backed sukuk.  investor, the sukuk holder. there may be numerous contracts involved in the structure or model of mortgage backed sukuk. these contracts include, the contract of hire purchase between the borrower and the government, the contract of mortgage between the government and originating credit institution, the contract between originating credit institution and financial intermediaries to whom the originating credit institution assigns its mortgagee rights and contract between special purpose vehicle (spv) or financial intermediary and investors. the structure of mortgage backed sukuk 2 is presented below in diagram for better understanding: figure 1 in the process of issuance of mortgage backed sukuk, the repayments made by the initial borrowers constitute cash flows that is received by financial intermediary and financial intermediary is able to issue asset backed-sukuk or mortgage backed-sukuk or residential mortgage backed security to investors or lenders who supply funds to the financial markets. the mortgaged property forms a contingent receivable in the accounts of the financial intermediary. mortgage loans for homes usually have a nominal life of 25 to 30 years (pelma jacinath rajapakse, 2011, p. 23). as a result of above mentioned process, the mortgage backed loans will be converted into tradable securities. mortgage loans for homes have better recovery rates than unsecured credit card receivables. such loans have stable history of low default risk (pelma jacinath rajapakse, 2011, p. 23). the researcher argues that, reliability on underlying asset increases the repayment of credit to the lender in mortgage backed sukuk structure. 2 this pictorial presentation is created by the researchers of this research paper. as a source, malaysian model of mortgage backed security, is consulted and analysed. review of economics and development studies vol. 5, no 1, march 2019 138 to comply with sharīʻah requirements, some points must be taken into consideration. the government must redeem the property in land from the credit institution with in stipulated time period so that ownership of house on mortgaged land may be transferred actually to the borrower who is also required to make regular periodical payments to the government or credit institution. such payments will provide a cash flow that will ultimately bar the default in payment of money. the researchers argue that, sharīʻah compliance enhances the viability of mortgage backed sukuk because the financial sustainability of financial product is mandatory to avoid financial crisis. furthermore, this article suggests that financial intermediary, with whom the government will enter a contract to finance house construction for the accomplishment of its naya pakistan housing program, should go for the issuance of mortgage backed securities instead of other house financing financial products because of their being more viable and sharīʻah compliant. new financial institution with a name of naya pakistan housing authority is going to be established for the project of naya pakistan housing program that will provide a one window operation. hbfc has been abolished on 1st august, 2018 through house building finance corporation (amendment) ordinance, 2018 which actually repealed the house building finance act, 1952. the researchers strongly recommend that while establishing a financial institution to run the new housing scheme of the present government of pakistan, the institution must be established keeping in view the injunctions of holy quran and sunnah. no such thing should be introduced in the financial institution which will make it a controversial from sharīʻah viewpoint. the sharīʻah gaps of hbfc should be covered in new financial institution which will replace hbfc in house financing scheme. 5. mortgage financing in islamic legal theory in this section of the present research paper, mortgage financing in the light of sharīʻah is analysed to comprehend the sharīʻah issues or objections which may be raised by experts in islamic finance law from sharīʻah viewpoint in the structure of mortgage backed sukuk for house financing program. to comprehend the mortgage financing from sharīʻah viewpoint, some essential details have been discussed in the proceeding part of the research paper. the term used for mortgage in sharīʻah is rahn. contract of rahn is one of the types of contract of suretyship. 5.1 definition of contract of rahn according to ḥanafī school of thought rahn means retention of anything against any right through which right can be discharged. the thing which is retained must be valuable according to sharīʻah so that the thing can be made security against the loan (ibn ʻābidīn, 1992, vol. 5, p. 339; al-sarakhsī, 1993, vol. 21, p. 63). according to shāfī school of thought in contract of rahn something is made security against the loan. according to this school of thought contract of rahn excludes the benefits from being security of loan (al-khaṭīb al-shirbīnī, n.d., vol 2, p 121; al-sharqāwī, n.d., vol 2, p 122, 124). according to mālikī school of thought in contract of rahn any valuable thing itself or the benefit out of valuable thing can be made as a security for loan. if benefit is made security against the loan, the benefits received would be appropriated in lieu of payment of loan. in mālikī school of thought physical possession of the thing mortgaged is not necessary for the making of the contract of rahn (al-dardīr, n.d., vol 3, p 303). according to ḥanbalī school of thought in contract of rahn something valuable can be made security for the payment of loan so that in case of default of payment by the debtor or mortgagor the creditor or the mortgagee can satisfy his claim of payment of money from the value of the security (ibn qudāmah, 1968, vol. 4, p. 326). the sharīʻah standard no. 39 on „mortgage and its contemporary applications‟ provides that the contract of mortgage means to make financial asset or so tied to a debt so that the asset or its value is used for repayment of the debt in case of default (aaoifi, 2010, shariah standard no. 39, clause 2, p. 697). 5.2 legitimacy of contract of rahn the legitimacy of the contract of rahn is established by quran, sunnah and ʼījmaʻ. quran: allah almighty said in the holy quran: review of economics and development studies vol. 5, no 1, march 2019 139 “and if you are on a journey, and you find not a scribe then let there be pledge with possession. and if in between you one entrusts the other, then let he whom he trusted deliver his trust and fear allah who is his lord and conceal not evidence; and whosoever would conceal evidence, then his heart is sinful from inside, and allah knows your deeds”. (sūrah albaqarah: 283). the above quoted āyah from sūrah al-baqarah indicates the permissibility of contract of rahn during journey but all the muslim jurists agree upon the permissibility of entering into contract of rahn by the parties to the contract either on journey or not. this āyah also indicates that contract of rahn is made permissible while there is no one available for the writing of a debt transaction. so contract of rahn was made an alternative of writing. non availability of a person to write a debt is not a pre-requisite for the contract of rahn because of permissibility of contract of rahn without this condition in sunnah. sunnah: روي البخاري و مسلم عه عائشة رضي هللا عىها "أن رسىل هللا صل هللا عليه و سلم اشتزي مه يهىدي طعاما و رهىه درعا مه حذيذ the holy prophet bought some foodstuff from a jew and mortgaged his armour to him as security for the payment of amount of money as price. (saḥīḥ al-bukhari, n.d., ḥadīth no. 2509, kitāb al-rahn,1997, vol. 3, p. 398). ذ يهىدي بالمذيىة، و أخذ مىه شعيزا ألهلهو عه أوس قال: "أن رسىل هللا صل هللا عليه و سلم درعا عى it is also reported on the authority of hazrat anas (may allah peace be upon him) that allah‟s apostle mortgaged his armour to a jew in madinah and bought bread from the jew for his family. (sahih al-bukhari, n.d., ḥadīth no. 2508, kitāb al-rahn, 1997, vol. 3, p. 398). ʼījmāʼ: muslim scholars agreed upon the permissibility of contract of rahn. 5.3 legal status of contract of rehan contract of rahn is not an exchange contract. it is not a profit earning contract. it is a contract of security. it is a gratuitous contract or aqad al-tabarruʻah (wahbah al-zuhaylī, n.d., vol. 5, p. 181). contract of rahn is permissible in nature but not an obligatory contract (ibn qudāmah, 1968, vol. 4, p. 327; al-buhutī, n.d., vol. 3, p. 307). delivery of possession is mandatory in gratuitous contracts to make it binding or lāzim. there is a legal maxim in islamic jurisprudence that, ال يتم التبزع إال بالقبض “gratuitous contract cannot be completed without delivering possession” (muhammad sidique, p. 322). contract of rahn is lāzim for mortgagor but not for mortgagee. therefore, the mortgagee can rescind the contract at any time and can demand his due payment and return the property as security to the mortgagor ((aaoifi, 2010, shariah standard no. 39, clause 3/1/1, p. 697). 5.4 methods of creation of contract of rahn and its sharīʻah rulings the contract of rahn can be created through following ways:  the seller sells the commodity to the buyer. the possession of the commodity is made by the seller through delivery to the buyer. the buyer promised to pay the price of the purchased commodity on a specific future date. the seller asked the buyer to furnish the security for the payment of price on specific future date and review of economics and development studies vol. 5, no 1, march 2019 140 buyer furnished the security and placed his valuable thing as security for the payment of price and entered into the contract of rahn with the buyer. this is permissible and agreed upon by the schools of thought owing to its necessity in daily life.  in this situation firstly the loan or debt is established and later on contract of rahn is made to secure the payment of loan or debt. this is also permissible and agreed upon by the schools of thought.  in third situation, the thing or commodity is made security and contract of rahn is entered into by the parties to the contract before the establishment of loan or debt. for instance a took 1000 rupees from b on loan and b asked a to provide security for the payment of loan and a entered into a contract of rahn with b. according to ḥanafī and mālikī schools of thought this contract of rahn is valid because in this situation the contract of rahn is acknowledgment of a right like in contract of kafālah. according to shāfī and ḥanbalī schools of thought such contract of rahn is not valid because according to them the creation of right is mandatory for making of contract of rahn (abū ishāq al-shirāzī, n.d., vol. 1, p. 305). 5.5 essential elements of contract of rahn according to imām ābū ḥanīfah the only element which is required to make the contract of rahn is offer and acceptance like other types of contracts (al-kāsānī, 1974, vol. 6, p. 135; ibn ʻābidīn, 1992, vol. 5, p. 340). according to majority of muslim jurists there are four elements of contract of rahn. the first element is offer. second element is acceptance. third element is tangible property which is made security for the payment of money. fourth element is the claim of money which is taken by rāhin from murtahin (al-dardīr, n.d., vol. 3, p. 304; alkhaṭīb al-shirbīnī, n.d., vol. 2, p. 121; al-buhutī, n.d., vol. 3, p. 307). 5.6 conditions of contract of rahn 5.6.1 conditions pertaining to rāhin and murtahin the person who is eligible to make a contract generally is also eligible to make contract of rahn because contract of rahn is also one of the types of contracts and this contract is similar to contract of bayʻ in sharīʻah. 5.6.2 opinion of ḥanafih school of thought according to ḥanafih school of thought contract of rahn is a financial transaction. thus, to make the contract of rahn valid, rāhin and murtahin must be able to distinguish between right and wrong on the basis of human intellect and reason. majority 3 or puberty is not an essential requirement to make the valid contract of rahn (al-majellah, 1980, article 708, p. 74). therefore, the minor who is authorized to make financial transaction is also allowed to make contract of rahn because contract of rahn is collateral to commerce and trade. sabi mumayyaz or the minor who has attained some discretion and the one who is prodigal can make the contract of rahn if the permission is granted by their guardians respectively. guardian of minor or insane person can make a contract of rahn to secure the payment of money which is taken for the benefit of a minor or insane person. this is allowed under the pretext of necessity. according to ḥanafī school of thought if either of the parties to the contract of rahn becomes insane after entering into contract of rahn but before giving the possession of property to murtahin then contract of rahn will become bāṭil (al-kāsānī, 1974, vol. 6, p. 135). 5.6.3 opinion of majority of muslim jurists according to majority of muslim jurists, contract of rahn can only be allowed on the behalf of minor by his guardian in case of necessity or for the benefit of minor. contract of rahn is one of the types of gratuitous contracts and it is also not obligatory. thus, it is not allowed to a person who has been coerced or the one who is insane or prodigal or insolvent to enter into a contract of rahn. according to majority of muslim jurists guardian or trustee is entrusted with the right to make contract of rahn on the property of minor and murtahin must be in such situation a trustworthy person. murtahin must also be a rich man. witnesses must also be there while making contract of rahn. the time period for which the contract of rahn is made must also be a short span of time. if any of the conditions is 3 according to english law minor is a person who has not attained 18 years of age. according to majority act, 1875 where the guardian has been appointed by the court of wards or the court of wards take charge of minor‟s property, in such situation a minor will attain the age of majority after 21 years. according to sharia‟h majority of a person is not determined in terms of age but in terms of puberty. review of economics and development studies vol. 5, no 1, march 2019 141 missing, the contract of rahn will not valid according to them. guardian of the property of the minor is also not allowed to make contract of rahn on the property of minor for the security of a payment of money which is due on the guardian in favour of any other person (al-dardīr, n.d., vol 3, p 231-292). according to shāfʻī and ḥanbalī schools of thought, if either of the parties to the contract of rahn becomes insane after entering into contract of rahn but before giving the possession of property to murtahin then contract of rahn will not become bāṭil (al-buhutī, n.d., vol. 3, p. 309). according to mālikī school of thought if rāhin dies or becomes insane or insolvent or suffering from such a disease cure from which is impossible then contract of rahn will become bāṭil (al-dardīr, n.d., vol. 3, p. 231-292). according to shariah standard no. 39, the death of the rāhin or the murtahin has no effect on the validity of the contract of rehan. the respective inheritor shall substitute the dead party to the contract (aaoifi, 2010, shariah standard no. 39, clause 3/1/5, p. 398). 5.7 conditions pertaining to claim of money the conditions pertaining to a claim of money for the security of which the contract of rehan is created between rāhin and murtahin includes that the claim must be determined; established and enforced no matter what is the source of creation of that claim. the claim must be known and specified (ibn jazzy, n.d., p 232). 5.8 conditions pertaining to property the following are the conditions pertaining to property in the contract of rahn (ibn rushd al-hafīd, 1988, vol 2, p 269,270):  the property must be one of those things in which transaction is permissible in sharīʻah.  the property must be known and specified.  the property must be capable of taking into possession.  possession of the property must be given to murtahin by rāhin with his free consent.  the property can be moveable or immoveable. it can also be mithlī or ghair mithlī.  the property must exhibit some monetary and legal value.  the nature of the property must be such that it is capable of being sold. therefore property must be in existence and capable of taking possession of it at the time of making of contract of rahn.  physical possession of the property must be given to murtahin.  usufruct or interest in the property cannot be transferred to murtahin from rāhin such as to allow murtahin to use or to get benefit from property in consideration of a claim of money. this opinion is exhibited by majority of muslim scholars. according to mālikī school of thought usufruct or interest in the property can be transferred to murtahin by rāhin in consideration of a claim of money.  the property must be in the ownership of rāhin. this is the condition for the enforcement of contract of rahn.  the property must be of sufficient value so that the amount claimed can be recovered in case of need. the general rule is that everything on which contract of sale can be made can also be the subject-matter in a contract of rahn (liaquat ali khan niazi, n.d, p. 287). 5.9 condition of possession of property muslim jurists agreed upon the condition of possession of property in the contract of rahn. but muslim jurists differ in their opinions in determining the nature of condition of possession. according to majority of muslim jurists (ḥanafī, shāfʻī and ḥanbalī) possession of property is a condition to make the contract of rahn lāzim. possession of property is not a condition for the validity of contract of rahn. before possession contract of rahn is not lāzim for rāhin. thus, rāhin can rescind the contract of rahn before giving possession of property (al-kāsānī, 1974, vol. 6, p. 137; abū ishāq al-shirāzī, n.d., vol. 1, p. 305; ibn qudāmah, 1968, vol. 4, p. 328). their opinion is substantiated with the dalīl (evidence) from holy quran that allah almighty said: review of economics and development studies vol. 5, no 1, march 2019 142 “and if you are on a journey, and you find not a scribe then let there be pledge with possession. and if in between you one entrusts the other, then let he whom he trusted deliver his trust and fear allah who is his lord and conceal not evidence; and whosoever would conceal evidence, then his heart is sinful from inside, and allah knows your deeds”. (surah al baqarah: 283). above quoted ayah indicates that contract of rehan cannot be completed without delivering the possession of property from rāhin to murtahin. furthermore, contract of rahn is one of the types of gratuitous contracts therefore it needs delivery of possession of property from rāhin to murtahin for its completion. according to mālikī school of thought delivery of property from rāhin to give its possession to murtahin is not the condition for the completion of contract of rahn. according to this school of thought contract of rahn becomes lāzim merely by offer and acceptance. rāhin will be forced to give the possession of property except where murtahin delays or rāhin becomes insolvent or dies. if murtahin delays deliberately in demanding the possession of property from rāhin or if rāhin agrees on not to take possession of property from rāhin and property will remain in the possession of rāhin then in such situation the contract of rahn becomes bāṭil (ibn rushd al-ḥafīd, 1988, vol. 2, p. 271; ibn jazzy, n.d., p. 323; al-dardīr, n.d., vol. 3, p. 313). 5.10 perpetuity in possession by murtahin the researchers argue that the property must be in possession of murtahin till the property will be redeemed by rāhin after the payment of money. contract of rahn is lāzim only for rāhin and not for murtahin. murtahin can demand his money back at any time and want to end the contract. murtahin is entitled to do so. thus, property can be redeemed by rāhin before the payment of money becomes due if murtahin wishes so. after the conclusion of contract of rahn between rāhin and murtahin if property is sent back to rāhin by murtahin then in such a situation the contract of rahn becomes bāṭil according to mālikī school of thought (al-dardīr, n.d., vol. 3, p. 313). according to ḥanafī school of thought in such a situation the contract of rahn does not become bāṭil. how to give the possession of property to make contract of rehan muslim jurists agreed upon the fact that in case of immoveable property possession is exhibited by abandonment of property only or by removing the impediments of taking possession of immoveable property (al-kāsānī, 1974, vol. 6, p. 138; ibn rushd al-ḥafīd, 1988, vol. 2, p. 269; al-khaṭīb al-shirbīnī, n.d., vol. 2, p. 128; ibn qudāmah, 1968, vol. 4, p. 232, abū ishāq al-shirāzī, n.d., vol. 1, p. 305). muslim jurists differ in their opinions in case of moveable property that what constitutes the fact of giving possession. according to ḥanafī school of thought in case of moveable property possession is exhibited by abandonment of property only (al-kāsānī, 1974, vol. 6, p. 138). on the other hand, according to shāfʻī, ḥanbalī and imām yūsūf from ḥanafī school of thought in case of moveable property possession is not completely exhibited by abandonment of property only. it further needs transfer or conveyance of moveable property from rāhin to murtahin (al-kāsānī, 1974, vol. 6, p 138; al-khaṭīb al-shirbīnī, n.d., vol. 2, p 128; ibn qudāmah, 1968, vol. 4, p 328, al-buhutī, n.d., vol. 3, p 318). according to shariah standard no. 39 the possession of marhūn takes place as possession of a sold property. the possession could be actual by putting a hand on the property or it could be legal through registration and documentation. same legal rules apply to both types of possession (aaoifi, 2010, shariah standard no. 39, clause review of economics and development studies vol. 5, no 1, march 2019 143 3/1/2, p 697). rāhin and murtahin may agree to deliver the possession of property to an upright third person as a trust (al-majellah, 1980, article 705, p. 74). 6. conclusion and recommendations this research paper concludes that sharīʻah impediments must be taken into consideration by the issuing authority to make the structure of mortgage backed sukuk to be sharīʻah compliant. loans granted on the mechanism of mortgage backed sukuk are relatively better recovery rates than unsecured loans because of the presence of an underlying asset and an encumbrance in the form of mortgage on an underlying asset. this research article recommends that spv management must be separate from the management of originating mortgage backed sukuk authority to ensure that the credit quality of originator of mortgage backed sukuk is separate from the credit quality of issuer (spv) of mortgage backed sukuk. this article, furthermore, recommends the establishment of sharīʻah supervisory board. the government of pakistan along with the financial institution which will work in collaboration for house financing should consult sharīʻah experts for their valuable opinions before launching the financial product so that it will not deviate from the injunctions of principles of islamic finance law. besides this, sharīʻah supervisory board should be established which may provide guidance about sharīʻah regulatory framework for the financial product of mortgage backed sukuk for house financing project of the government. references buhūtī, muhammad bin yūnas bin salāḥ al-dīn ibn ḥassan bin idrīs. 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(1st ed.). damishq: dar al-fikr. https://www.researchgate.net/publication/299203263 https://www.jstor.org/stable/41393960 review of economics and development studies vol. 4, no 1, june 2018 51 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 4: no. 1, june 2018 journal homepage: www.publishing.globalcsrc.org/reads influence of awareness on sme’s intention towards adoption of islamic finance in pakistan 1 rabia rasheed, 2sulamanhafeezsiddiqui, 3 maria abdul rahman 1 phd scholar, universiti utara malaysia, rabia7862009@gmail.com 2 lecturer, the islamia university of bahawalpur, pakistan, sulman.siddiqui@iub.edu.pk 3 senior lecturer, universiti utara malaysia, maria@uum.edu.my articledetails abstract history revised format: may 2018 availableonline: june 2018 a large number of smes in north africa, middle east and south asia prefer islamic financial products overtheir conventional counterparts. similarly, in pakistan sme owner-managers prefer islamic finance as 2025 percent of smes are not willing to takeconventional finance. despite higher demand, however, these firms are unable to access islamic finance from financial institutions. there are several factors behind this dilemma on both supply and demand side. the present study discusses demand side issues pertaining to lack of adoption of islamic finance by smes in pakistan. among various demand side factors, this paper has focusedon the issue oflack of financial knowledge or awareness of islamic financial products. in pakistan, due to financial illiteracy of sme owner-managers, they seldom are able to identify suitableavailable financing options for their business financial needs. thus, this study intended to determine the importance of awareness factor in influencing intention of smes to adopt islamic finance.aconceptual framework has been constructed based on theory of planned behaviour (tpb) and researchpropositions are developed in order to elaborate role of awareness in influencingsme managers‟intention towards islamic finance adoption.a preliminary analysis has been conducted through pilot study to check the internal consistency and reliability of instrument and found valid for further research. these both outcomes of the study are expected to lay foundation for more structured research on the issue of demand side factors of adoption of islamic financial products. © 2018 the authors, under a creative commons attributionnoncommercial 4.0 keywords smes, awareness, behavior, islamic financial products, pakistan jel classification m1, m2. corresponding author‟s email address: sulman.siddiqui@iub.edu.pk recommended citation: zubair, z.a., abdullah, a., (2018). institutional quality, school enrolment and mobile subscribers in economic community of west african states (ecowas-5): impact on fdi using panel data. review of economics and development studies, 4 (1) 51-59 doi: 10.26710/reads.v4i1.224 1. introduction small and medium enterprises (smes) are widely known as engines of economic growth. these small and medium sized businesses are key contributors towards sustainable gross domestic product (gdp) across the world. smes operate predominantly in services and manufacturing sectors and create employment for both skilled and unskilled workers (freeman & nick, 2015). moreover, without any doubt there is substantial demand of islamic products and services not only among muslims but also in http://www.publishing.globalcsrc.org/reads mailto:rabia7862009@gmail.com mailto:sulman.siddiqui@iub.edu.pk mailto:maria@uum.edu.my mailto:sulman.siddiqui@iub.edu.pk review of economics and development studies vol. 4, no 1, june 2018 52 non-muslims. islamic banks are considered as good platform to increase access to financial inclusion as well as easy access to finance for smes to support economic development and growth (abdesamed&wahab, 2015). the assets of islamic banking growing at 20 percent of rate annually and as per statistics are set to reach $2.3 trillion by 2017. however, in spite of high growth rate this represents only 3 to 4 percent of total global banking assets and there are several reasons behind this shortfall such as; conservative behavior of islamic banks, similar products and services offering conventional banks, lack of standardization and sharia-compliance different interpretations. conventional banks are now approaching smes as this sector is a huge opportunity for them to increase their profitability. therefore, to diversify revenue streams and asset portfolio it‟s necessary for islamic banks to focus on this particular sector (albaraka.com). a large number of smes including north africa, middle east and south asia preferred islamic banks instead of conventional banks, however these firms are unable to access financing services from islamic banks. international finance corporation (ifc) studied mena region including pakistan and highlighted huge demand of islamic finance by smes, approximately 1.5 million businesses (32 percent of smes) remain excluded from formal banking sector due to lack of sharia-compliant products and services. additionally, only 17 percent of islamic banks are offering their products and services to smes and other banks shareis 36 percent. in pakistan, about 20 to 25 percent of smes are not taking any formal finance facility because they are seeking for islamic finance only (ifc, 2014a). these small and medium firms have a deeper craving for islamic products and services than corporate firms, because these firms operate by a single owner-manager who behave similar to an individual consumer. in financial market, conventional banks offering their services to fulfill smes business financial needs in limited capacity, thereby creating opportunity for islamic banks. however, islamic banks lack adequate focus on this portion to facilitate by providing smes their desired sharia compliant products and services. it indicates the reluctant behavior of islamic banks, it‟s either because of unclear business strategy or high risk perception. despite of enormous demand of islamic finance among smes both supply and demand side issues creating hurdles towards development (alam, 2015). among others smes lack of awareness and less knowledgeabout sharia-compliant products and services is also an impediment towards growth of smes and banks are also not supportive in this matter. for example, islamic banks and conventional banks with islamic windows provided products information in urdu/english but explained in purely shariah languagewhich is not understandable for owner-manager of smes, the mid-tier officials of banks also admit this (ifc, 2014b; aazim, 2016). in this regard, prior research have only investigated the awareness level and attitudes of individual consumer. there have been not enough studies done in examiningsmes awareness level towards islamic financing, so,there is need to measure this factor.although, several islamic products and services offering by financial institution but due to lack of financial knowledge or awareness smes are not able to choosethe suitable products and services as per their business financial needs, thus the study aims to analyze the aforementioned gap. 2. literature review smes in pakistan at present, different definitions of small and medium enterprises are abound. in each country, institutions use different criteria to define smes such as; number of employees, net assets or sales. in pakistan, most authentic and reliable source of information and data is central bank of pakistan known as state bank of pakistan (sbp). following table highlighted some definitions of smes announced by the core institutes of pakistan. table 1: definition of smes in pakistan institution category employees capital/annual sales small and medium enterprises development authority (smeda) small up to 36 up to 20 million medium up to 99 up to 40 million review of economics and development studies vol. 4, no 1, june 2018 53 federal bureau of statistics, pakistan small less than 10 n/a medium n/a n/a state bank of pakistan small 20 to 50 rs 75 million to rs 150 million medium 51-250 (manufacturing & service mes) 51-100 (trading mes) above rs 150 million and up to rs 800 million source: chugtai, 2014; sbp, 2016; smeda, 2013 geographically, a large population of smes are placed in the province of punjab followed by sindh, khyber pakhtunkhwa (kpk) and baluchistan. in punjab, approximately 65 percent of smes are operating actively. punjab and sindh both provinces are facilitating smes in term of government services and schemes, presence of large industrial cluster as well as easy access to finance.overall, the most preferable smes ownership pattern is sole proprietorship. the reason behind the liking is minimum regulatory requirements in establishment of such enterprises. a large population of sole proprietors are based in three major cities of pakistan; lahore, karachi, and faisalabad, who are contributing about 50 percent of total sme financing of country (ifc, 2014a). sector wise most of the enterprises are manufacturing based followed by trade/commerce and services. in terms of employment generation, value addition and export contribution manufacturing based smes have higher impact on economy. same report explored that this particular sector dominate the enterprises with 49 percent of total population. in manufacturing sector the most valued sub-sectors are metal products, cotton weaving, jewelry making and wood furniture (khan &khalique, 2014). islamic financing for smes in pakistan in pakistan, islamic banking institutes‟ network consists of 6 full-fledged islamic banks and 16 islamic banking windows operating by conventional banks. as per islamic banking bulletin of sbp, (2016) approximately 2,146 islamic banks branches are working actively in 98 districts, similarly, 1,062 islamic banking window branches under conventional banks functioning.despite of large branch network smes still excluded or getting very small portion of financing from islamic banks, as the share of corporate sector stands on 78.1 percent as compare to smes which is only 2.8 percent. moreover, statistics shows that conventional banks are more supportive towards financing to smes instead of islamic banks, overall smes getting only 7 percent of financing from islamic banks (including windows) and remaining 93 percent facilitating by the conventional banks(sme finance review, 2016). this indicates reluctant behavior of islamic banks towards smes and their limited outreach to sme sector.islamic banks are not approaching sme sector appropriately because ofthese firmspoorly structured operations, informal nature and non-professional behavior towards taking finance from financial institutions (sbp, 2015). smes attitude towards islamic financing in pakistan the attitude of sme owner-managers in pakistan normally considered as negative because of less knowledge regarding financial products and services, size of firm and nature of business. however, with the passage of time upsurge in literacy level changed the attitude of smes and being reported positive,it effected mostly experienced family businesses and medium size firms (bhutta et al., 2008; saleem, 2014; siddique, saleem& abbas, 2016). moreover, towards islamic financing smes shows positive attitude and overwhelming demand of islamic finance, as mentioned above nearly 20 to 25 percent of sme population interested in islamic financing. sme owner-managers are now more sensitized towards their benefits, the improvements in overall performance of islamic banks with the help of sbp‟s initiatives over the past 10 years has further consolidated this opinion (ifc, 2014a). despite this positivity of smes towards islamic finance several factors deter these firms to approach formal financial institutions for their business financial needs. review of economics and development studies vol. 4, no 1, june 2018 54 researchers revealed that personal characteristics(gender, age, education, experience) and firm characteristics (firm size, ownership, firm type) effect the decision making of smes towards selection and adoption financialproducts and services (low, 2006; xiang et al, 2011; zabri et al, 2015). to understand influence of attitudinal factors of sme owner-managers or entrepreneurs towards adoption of islamic finance scholars conducted several studies. strong business support have impact on business firms‟ attitude towards adoption of islamic finance (jalaluddin, 1999). gait and worthington, (2009) found religion as the primary motivation towards potential use of islamic finance among business firms. moreover, haque, (2010) stated shariah-compliancy or factor of religion as important factor which drives muslim owner-managers towards islamic finance. further, among other factors banks reputation, image, profitability and cost benefits, considered by smes owner-managers before selection of formal financial products and services. social pressure effect the smes attitude, explored by researchers that family and friends recommendation influence the decision making of owner-managers to take islamic financing (amin, abdul rahman&abdul razak, 2014). jaffar and musa, (2013) highlighted the salient belief factors of owner-managers attitude; religion obligation, knowledge and awareness, cost benefits, business support and reputation towards adoption of islamic financing. andoh and nunoo (2012) explored that financial literacy influence smes behavior as financially literate entrepreneurs‟ shows positive attitude towards formal financial products and services. h1 smes attitude have influence on their intention to adopt islamic finance awareness awareness is the knowledge and understanding of an individual about something, e.g. place, person, product and services etc. it stimulate an individual to take some decision which based on his/her positive or negative attitude towards subject matter. the chances of positive attitude of a person increase or decrease with level of awareness (ahmad & bashir, 2014). according to sarbo, (2016), the first step of an individual in product adoption process is awareness followed by knowledge, persuasion, decision and confirmation. in pakistan, lack of awareness among smes is a major concern for islamic banking industry. major population of smes do not understand islamic methods and shariah compliance mechanism. thus, smes are unaware about islamic products and services they actually want to use for their business financial needs. according to kap sbp, (2013) only 3 percent consumers have awareness regarding islamic products and 5 percent of users have understanding of islamic banking model (kap sbp, 2013). however, report further exposed that corporate customers have a little more knowledge of islamic methods, products and services then individual customers. researchers highlighted awareness as one of the key factors which influence individual‟sattitude towards adoption of islamic banking products and services in different contexts (daud et al., 2011; keong et al., 2012; thambiah et al., 2011, 2012). some studies also presented the positive relationship of attitude and awareness (wahyuni, 2012; echchabi& abdel aziz, 2012 b, faisal et al., 2014). in pakistan, awareness level of consumer much better for the general products such as deposit accounts and current account, however, the awareness level is very low for specialized products such as murabahah, musarakah, ijarah etc. (khan&asghar, 2012). in context of smes, jaffar and musa, (2016)and tolba et al. (2014) explored the awareness and knowledge as influential factors towards adoption of financial products. however, mostly studies examined the awareness level of individuals in context of islamic banking. yet, insufficient research work created by academicians to measure smes awareness level in context of islamic banking. h2 smes awareness have influence on their intention to adopt islamic finance review of economics and development studies vol. 4, no 1, june 2018 55 subjective norms according to ajzen, (1991), this variable refer to the smes owner-manager perceived social pressures which influence their behavioral intention towards adoption of islamic products and services,however, the social pressure vary in different contexts. prior research explored the direct impact of subjective norms on behavioral intention to use islamic products (amin etal., 2011; tolba et al. 2014). h3 smes subjective norm have influence on their intention to adopt islamic finance perceived behavioral control perceived behavioral control refers to smes owner-manager perception of ease or difficulty to perform the behavior of interest (ajzen, 2006). espel et al. (2009) stated that along with attitude variable, perceived behavioral control needs to be decomposed in three factors; first related to smes understanding of islamic financing as better understanding increase the chances of islamic financing usage/adoption, second related to smes perception that how easy is to access islamic financing, third one is smes beliefs regarding access of available options in market. h4 smes perceived behavioral control have influence on their intention to adopt islamic finance awareness of individual customers‟ extensively examined by scholars in context of islamic finance. however, few studies focused on smes behavior towards islamic finance and examined the awareness factor in context of pakistan. moreover, so far researchers applied behavioral intention theories just to examine the individual behaviors, though,some scholars have measured smes behavioral intention with application of theory of planned behavior (tpb) but few provided the empirical evidences. tpb proposes three key determinants which influence the intention; attitude, subjective norms and perceived behavioral control. in this study, it is hypothesized that awareness influence the intention of smes towards adoption of islamic financing. 3. proposed research model current study proposed research model (figure 1) is developed on the basis of theory of planned behavior (ajzen, 1991) figure 1. the model explains that smes behavioral intention towards adoption of islamic finance is resulted from the attitude, awareness, subjective norms and perceived behavioral control. the proposed model integrates the factor of awareness with key variables of tpb model to assess smes behavioral intention within the context of islamic finance. figure 1: proposed research model review of economics and development studies vol. 4, no 1, june 2018 56 research design current study uses quantitative method (i.e. survey questionnaire) for better understanding of smes behavioral intention towards islamic finance in pakistan. according to bhattacherjee (2012) as compare to other research methods survey research has inherent strengths. moreover, it is suitable to identify trends or discover explanation for relationships among variables (creswell, 2002). a 5 point likert scale used and designed to examine that how strongly respondents agree or disagree with a statement (sekaran, 2009). reliability and validity analysis to collect data on attitude, awareness, subjective norms and perceived behavioral control selfadministered structured questionnaire was used. the questionnaire was adapting from previous studies and finalized after required modifications,table 1.1 representing the summary of sources. the adapted scales are not used in context of pakistan, thus, there is need to test these scales in sme sector which will help to create its ecological reliability and validity. moreover, awareness have not been previously tested in sme sector, therefore, it requiresvalidation in sector of sme setting too. table 1 construct no of items sources intention 5 items jaffar& musa, (2013); tolba et al. (2014); and hockerts, (2015) attitude 5 items adam et al. (2016); tolba et al. (2014); jaffar& musa, (2013); siddique et al. (2016) awareness 5 items ringim&yussof, (2014); jaffar& musa, (2013); and tolba et al. (2014) subjective norms 5 items koropp et al. (2014); koropp et al. (2013); and tolba et al. (2014) perceived behavioral control 5 items ahad et al. (2012); tolba et al. (2014); and jaffar& musa, (2013) pilot study in line with gay, mills, &airasian, (2006) pilot study basically suggests going for a small scale study for the trial purpose before conducting the full study. therefore, the sample size for pilot testing suggested should be smaller which could range from 15-30 respondents. however bigger sample size leads towards the stronger results. the survey questionnaires were distributed at major cities of pakistan, lahore and karachi, a large population of smes are located in both cities. questionnaire distributed by using stratified random sampling technique on 100 respondents, however, rate of return was 70% and 60 questionnaires researcher found useable. the reliability of measurement instruments were observed through internal consistency of cronbach‟s alpha values. results of the pilot study are presented in table 1.2. table 2 construct no of original items cronbach’s alpha item deleted cronbach’s alpha if item deleted intention 5 0.816 nil 0.816 attitude 5 0.896 nil 0.896 awareness 5 0.798 nil 0.798 subjective norms 5 0.910 nil 0.910 perceived behavioral control 5 0.783 nil 0.783 review of economics and development studies vol. 4, no 1, june 2018 57 the cronbach„s alpha for all constructs used in current study are more than 0.7 as suggested by nunnally and beinstein (1994) as a minimum acceptable limit. as per hair et al. (2010) who referred a cronbach„s alpha value of more than 0.6 as a construct with acceptable reliability.thus, results shows that the items of questionnaire are reliable and effective, so, based on alpha score proposed survey instrument fulfilled the basic requirement of valid instrument. 4. conclusion the purpose of the study to check the reliability and internal consistency of the instrument used in current study is achieved after checking cronbach alpha score which are above the threshold of 0.60 (hair et al, 2010). thus, the instrument is valid for collection of main data as well as for further use within the sme sector in context of pakistan. references aazim, .m (2016). sme financing by islamic banks, retrieved from https://www.dawn.com/news/1297587 14 march, 2016. abdesamed, k. h., &wahab, k. a. 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(2015). understanding owner-managers‟ preferences towards different sources of financing: the case of successful smes in malaysia. advanced science letters, 21(5), 1435-1438. http://www.smeda.org/index.php?option=com_fsf&view=faq&catid=3&faqid=48 http://www.albaraka.com.pk/news-and-events review of economics and development studies vol. 5, no 1, march 2019 165 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads what determines bilateral trade flows? evidence from eco region 1 muhammad ramzan sheikh, 2 ruth kattumuri, 3 imran sharif chaudhry, 4 abodh kumar 1 associate professor, school of economics, bahauddin zakariya university, multan pakistan, ramzansheikh@bzu.edu.pk 2 distinguished policy fellow, london school of economics and political science, uk, r.kattumuri@lse.ac.uk 3 professor, school of economics, bahauddin zakariya university, multan pakistan, imran@bzu.edu.pk 4 assistant professor, centre for economic studies & policies, central university of south bihar, india, post doctorate research fellow, sticerd-io, london school of economics and political science, uk., abodhkumar@gmail.com article details abstract history revised format: february2019 available online: march 2019 this study provides an analysis of pakistan‟s bilateral trade in economic corporation organization (eco) region. the main purpose of this study is to assess the determinants of bilateral trade flows using the gravity trade model. panel least square regression has been applied over the period of 1995 to 2015. two types of gravity models have been estimated: traditional gravity trade model and modified gravity trade model. the study has identified income, population, distance, adjacency, area, landlockedness, continent and terrorism as the main drivers of pakistan‟s bilateral trade flows with eco countries. it is suggested that policies in pakistan should focus on improving economic growth; offer incentives to pakistani people to engage more in trade flows; improve transportation to trade with eco countries; and take measures to eradicate terrorism. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords gravity model, trade, eco region, panel data jel classification: f12, c23 corresponding author‟s email address: ramzansheikh@bzu.edu.pk recommended citation: sheikh, m. r., kattumuri, r., chaudhry, i. s., kumar, a., (2019). what determines bilateral trade flows? evidence from eco region, review of economics and development studies, 5 (1), 165182 doi: 10.26710/reads.v5i1.560 1. introduction the notion of international trade has gained copious importance in international economics literature because of the mutual interdependence of economies. over the years, international trade has provided gains to the nations including sustainable economic development, foreign exchange earnings, employment opportunities via private and public sector development, broadening the production and fiscal base, and uplifting the status of the poor across the globe although many people are still below the poverty line and facing income inequalities (krueger, 1900; bhagwati & srinivasan, 2002; vijayasri, 2013). thus international trade is at a crossroads in the changing geopolitical scenario because new challenges and opportunities are emerging which are fortifying thinkers to craft policies in line with the new business models and societal outlooks. in the modern world, it would be difficult to find any closed economy as mutuality among the countries has compelled them to remain open economies although of different degrees. self-sufficiency may be a target for the economies but it would be a difficult task to be achieved under the circumstances. the concepts of multilateralism http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 166 and regionalism 1 have widespread in the past few decades. regional trading blocs through regional integration agreements 2 turn out to be alpha and omega of the global trading system. many countries apart from the any stage of economic development are ensuing regional integration agreements (kahouli & maktouf, 2013). the preferential trading blocks in their structure differ to the great extent but they have a common objective of encouraging the trade through minimizing the trade restrictions within the countries. many regional agreements prioritize to implement the policies regarding tariff and non-tariff restrictions in intra-regional trade (baldwin, 1979). one of many regional associations around the globe is economic corporation organization (eco). eco comprises of ten member countries including afghanistan, azerbaijan, iran, kazakhstan, kyrgyzstan, pakistan, tajikistan, turkey, turkmenistan and uzbekistan. the trade patterns in eco are fairly different from the other regional associations. it maintains weak intra-regional trade connections being the least integrated organization in the world. bilateral trade flows have remained at low levels but intra-regional trade potential exists in the eco countries. a study by pide (2011) suggests that with the implementation of potential free trade area (fta) agreement, the volume of trade would be fast-tracked by a factor of eight in these countries. nature has blessed gigantic natural resources to the eco countries. it is a diverse region related to the central, the south and the west asian muslim predominated nations connected with mediterranean sea and arabia sea. as a trade bloc, the central asian states of eco are connected with mediterranean sea via turkey, persian gulf through iran and arabian sea via pakistan. eco by its inception is line up on trade and investment linkages among its members by doing bilateral agreements and negotiation. in eco economic review, 2017, it has been admitted that intra-regional trade and investment of eco countries have been lower than the asean and nafta countries due to the non-execution of eco trade agreement (ecota) and weak physical infrastructure linkages among the member nations. this is also a reality that eco countries individually are the member of many regional trade agreements (rtas). afghanistan is the signatory of south asian free trade agreement (safta) focusing on goods only. besides, afghanistan has partial scope agreement (psa) with india. in case of azerbaijan, it is member of guam having fta and eia 3 agreements regarding goods and services. azerbaijan has contracted bilateral fta regarding goods with russian federation, ukraine and georgia. moreover, it is also the member of commonwealth of independent states (cis) comprising azerbaijan, georgia, turkmenistan and uzbekistan which have fta with respect to goods. iran being the member of global system of trade preferences among developing countries (gstp) has psa regarding goods. kazakhstan has bilateral free trade agreements with armenia, georgia, kyrgyzstan and ukraine. additionally, it is also the member of preferential trading blocs of eurasian economic union (eaeu), cis and common economic zone (cez). a custom union exists among the russian federation, belarus and kazakhstan. kyrgyzstan has bilateral fta with armenia, kazakhstan, moldova, ukraine and uzbekistan. it is the member of custom union and has economic integration agreement with eurasian economic union (eaeu) and fta with cis. pakistan has various bilateral fta, eia and psa with china, malaysia, mauritius and sri lanka. it is also the member of safta. moreover, pakistan has psa of south asian preferential trade arrangement (sapta) global system of trade preferences among developing countries (gstp) and protocol on trade negotiations (ptn). tajikistan has fta with cis along with bilateral fta with ukraine. turkey has a broad strand of bilateral fta with malaysia, moldova, mauritius, korea, jordan, chile, serbia, montenegro, georgia, albania, egypt, syria, morocco, palestinian authority, tunisia, bosnia and herzegovina, the former yugoslav republic of macedonia and israel. further, turkey has fta with european union and efta. a psa also exists between turkey and ptn. 1 the slogan of trade liberalization is followed by many countries after in the end of world war-ii. to achieve this objective, general agreement on tariffs and trade (gatt) and its descendant world trade organization (wto) has been established. the number of countries from the journey of gatt to wto has varied from less than 50 countries from start to 164 countries in 2016. if gatt and wto force all the member countries to minimize trade restrictions at the same time, this approach is called multilateralism. alternatively, regionalism is an alternative approach of trade liberalization to formulate the preferential trade arrangements (ptas) sometimes based on geographical contiguity. 2 it is indispensable for every member country of the gatt or wto to notify its involvement in regional trade agreements (rtas). according to wto statistics, gatt got 124 notifications of rtas over the period of 1948-1994 whereas wto had notified about 455 rtas while the status of 284 rtas was in force till january 2018 (wto secretariat). 3 economic integration agreement review of economics and development studies vol. 5, no 1, march 2019 167 turkmenistan has bilateral fta with armenia, georgia, russian federation and ukraine. it is also the signatory of fta of cis. uzbekistan has little bilateral fta including kyrgyz, russian federation and ukraine along with the member of fta of cis. the wonders of regionalism have become eminent due to high growth achievements of economic blocs and groups that have spellbound the governments and common people globally. there are many benefits of economic integration that the eco countries may accrue including efficient resources allocation, access to markets, variety and quality of product, technological development, innovation, returns to scale, trade creation, foreign investment, trade policy reforms, healthy competition, regional security and reduction the risk of conflict etc. moreover, eco region is a strong case for endorsing regionalism for economic cooperation and growth due to geographical proximity, same cultural and social values and religion. nevertheless, some researchers consider these blocks discriminatory and ask the question about its future. some observers are of the view that regionalism would be the elementary unit of global liberalization in upcoming days (pide, 2011). based on these reasons, it is imperative to probe the determinants of trade of eco countries focusing more on the role of terrorism, geographical location and distances. these countries are following the bilateral cooperation and negotiation between each other. this study uses the gravity trade model to investigate the bilateral trends and patterns of trade of eco countries. in fact, when we are studying the factors determining trade in any region, the main question arises is why the regionalism exists in any region and is there some other factors also present other than geographic location to affect the trade flows between the member countries. these types of studies are important to devise trade policies and reviewing the international linkages. the standard framework to examine the bilateral trade flows is gravity model and various studies have used this approach to study the trade flows. the literature review has suggested that many studies have investigated only the trade pattern of developed countries. to the best of our knowledge, there is no study on eco bilateral trade flows in the existing literature except one. therefore, we are intending to explore this area of interest further. this study is based on the analysis to explore the factors that determine the patterns of bilateral trade flows between the eco countries. the analysis concentrates the importance of terrorism in determining trading flows. to encapsulate the geographical and cultural proximity effects, a set of dummy variables are also included in the gravity model. the rest of the study is structured as follows: section 2 provides the theoretical underpinning of gravity model while section 3 surveys the empirical studies on the determinants of trade. section 4 explains the model specification and section 5 discusses the data and methodology. section 6 contains an empirical study of the gravity trade model starting by traditional gravity model with modified gravity model. finally, section 7 concludes the study along with policy implications. 2. gravity model: theoretical underpinning many social sciences including economics often use the laws of natural sciences due to their solid scientific intuition 4 and robust results in the empirical studies. the gravity model has also been borrowed from physics. in 1687, isaac newton gave the law of universal gravitation that is stated as: “two bodies or objects are subjected to an attraction force, depending positively on the product of their masses and negatively on the square of their distance” in equation form, it can be written as: 2 i j ij ij m m f g d  (1) where: fij = gravitational or attractive force g = gravitational constant mimj = two masses 4 examples include epidemic theory in mathematics, prey-predator model in growth cycles, management strategy etc. review of economics and development studies vol. 5, no 1, march 2019 168 ij d = distance between two masses the studies by tinbergen (1962) and poyhonen (1963) are the seminal and pioneer studies that have used the newton‟s law of universal gravitation to explain the foreign trade flows between the two nations. after that, the gravity model has been utilized to interpret many economic situations and behaviors such as remittances, migration, bilateral investment and trade flows, buyers‟ flow to shopping centers, flow of patients to hospitals, commuting and recreational traffic. following gravity equation has been used by tinbergen (1962) and poyhonen (1963) to predict the value of trade: i j ij ij y y t g d  (2) where: tij = value of trade between country i and country j g = gravitational constant yi = gdp of country i yj = gdp of country j ij d = distance between country i and country j to be precise, other things being equal, the value of trade between any two countries is proportional to the product of the two countries‟ gdps and diminishes with the geographic distance between the two countries (reference?). tinbergen (1962) and poyhonen (1963) infer that all the above variables between trading partners are found statistically significant with expected signs. the gravity model or equation observes the factors that may affect the magnitude or level of bilateral trade in any region. it is a simple model with high statistical power. some researchers are of the view that in this model there is no strenuous derivation involved based on economic theory. linnemann (1966) applied the gravity equation in walrasian general equilibrium model. the study assumes that every country has its own demand and supply function for all commodities. the variable of aggregate income exhibits the demand side in an importing country while it shows supply side in an exporting country. the element of transport costs is captured by the variable of distance which determines a wedge between demand and supply. linnemann (1966) pointed out that bilateral trade flows between the two countries are based on three main factors: i. potential supply conditions at the origin (exporting country) ii. potential demand conditions at the destination (importing country) iii. restraining or stimulating forces between the two countries relating to the specific flows regarding potential foreign supply, linnemann identified two factors i.e. its own national income and the ratio between production for domestic market (pdm) to production for domestic market (pfm). the production ratio (pdm/pfm) is determined by population size of that country. linnemann elucidated that potential foreign supply and potential foreign demand are counterpart of each other and therefore determined by the same forces of national income, population and per-capita income. moreover, trade restraining factors are grouped in two categories, namely, natural trade resistance (ntr) and artificial trade resistance (atr). to conclude, linnemann assembled three factors, namely, potential demand and supply factors (national income, population size and per-capita income) and the trade resistance factors (geographical distance and preferential trade) into one equation to explicate the bilateral trade flow. ( ) ( ) ( ) p p i i ij ij s d t r     (3) where: tij = value of trade between country i and country j sp= potential supply dp= potential demand r= trade resistance. review of economics and development studies vol. 5, no 1, march 2019 169 the value of trade between country i and country j (tij) would depend on potential supply (sp), potential demand (dp) and trade resistance (r). potential supply is: 31 2 0 p i s ni pop pci    (4) since pci =ni/pop, therefor there is no need to introduce per-capita income as an individual variable. so the potential supply equation becomes: ' ' 1 2' 0 p i s ni pop    (5) in the same way, we can write the potential demand equation as: ' '3 4' 1 p i d ni pop    (6) linnemann considers the equality between potential supply and potential demand i.e. ' ' ' ' ' ' 0 1 1 3 2 4 , ,        . for equilibrium situation, this condition must hold in the long run but disequilibrium may exist in the short run creating the inequality among the components of demand and supply. after plugging in the trade resistance factor (r) that can be substituted by two variables: i) geographic distance (dt) and ii) preferential trade (pt), the trade flow gravity equation can be written as: 3 61 3 5 61 2 4 52 4 0 0 i j ij ij i i j j ij ij i j ij ni ni pt t ni pop ni pop dt pt pop pop dt                (7) in 1970, learner and stern envisaged the international trade flows using the probability based gravity model. armington (1969), anderson (1979), helpman and krugman (1985) and bergstrand (1985, 1989) alleged the gravity model due to the absence of theoretical foundations. these studies also criticize the perfect product substitution assumption of gravity model. eaton and kortum (2001) applied the gravity model in ricardian framework with homogeneous goods. evenett and keller (1998) and deardorff (1995) investigated the practicality and worth of the gravity model by testing various assumptions and theoretical trade models. in a nutshell, the gravity model formulates three sets of factors decisive to the size of trade flow: i. economic forces at the origin of flow ii. economic forces at the destination of flow iii. economic forces either stimulating or resisting the movement of flow from the origin to the destination. 3. empirical studies on the determinants of trade this section focuses on the review of the empirical studies which have applied gravity-type models to investigate the determinants of trade. the summary of the assorted studies on the determinants of bilateral trade flows is displayed in table 1. table 1: summary of the studies on the determinants of trade reference(s) countries time period model/ methodology main findings yu and zietlow (1995) 14 asia-pacific countries 1980-1989 gravity model physical distance (-) cultural similarity (+) political stability (+) market size (+) paas (2000) estonia and its 46 trading partner countries 1995-1997 gravity model and wls gdp (+) distance (-) limao and venables 103 countries 1990 poor infrastructure (-) transportation cost (-) review of economics and development studies vol. 5, no 1, march 2019 170 (2000) ekanayake (2001) 56 trading partner of mexico 1996-1998 average income level (+) common language and border (+) trade orientation (+) regional integration schemes (+) trade imbalance (-) distance (-) income inequality (-) hutchinson (2002) 33 countries 1994, 1995 and 1996 gravity model english language (+) economic development (-) distance (-) raballand (2003) 46 countries out of which 18 were landlocked 1995-1999 gravity approach landlockedness (-) infrastructure (+) nicolini (2003) european contries gravity model home market effect (+) low transportation cost (-) zarzoso (2003) 47 countries 1980-1999 gravity model language (+) distance (-) income (+) nitsch and schumacher (2004) 200 countries 1960-1993 gravity model terrorism (-) gdp per capita (+) distance (-) language (+) lai and zhu (2004) 34 countries maximum likelihood method tariff (-) distance (-) production cost (-) egger and pfaffermay (2004) germany and us 1989-1999. hausman – taylor sur model distance (in case of us and germany) (-) groot et al. (2004) 100 countries 1998 gravity model gdp (+) language (+) religion (+) distance (-) institutional quality (+) baleix (2005) eu states 1996 gravity model tariff (-) quotas on imports of cloths (+) distance (-) sugema (2005) indonesia 1984-1997 devaluation (+) no problem of banking system (+) no socio-political disturbances (+) linders et al (2005) 92 countries 1999 gravity model gdp (+) institutional quality (+) institutional distance (-) cultural distance (+) jansen and piermartini (2005) h-1b beneficiaries of us 2000-2002 gravity model mode 4 (temporary movements of persons) (+) hutchinson (2005) 36 non-english countries 1970-1986 gravity model population (-) distance (-) disdier and head (2005) effects of 1467 distance meta-regression analysis distance (-) ceglowski (2006) 28 countries 1999 and 2000 gravity model regional trade arrangements (+) linguistic ties (+) achakzai (2006) pakistan and 9 eco countries 2005 ols and gravity model gdp (+) per capita income (+) review of economics and development studies vol. 5, no 1, march 2019 171 language (+) distance (-) baxter and kouparitsas (2006) 92 countries 1970-1995. extreme bounds analysis of leamer, eba of sala-i-martin and general to specific approach of herdry. fixed exchange rate (+) custom union (+) arable land (-) education (-) capital (-) distance (-) baier and bergstrand (2007) 96 countries 1960-2000 gravity model free trade agreements (+) ramos (2007) south africa (developed) and ghana (developing) 2000 ols tariff (-) multilateral liberalization (-) technological innovation (+) duasa (2007) malaysia 1974-2003 ardl bounds testing approach supply of money (-) tadesse and white (2007) us and its 75 trading partner countries 2000 cultural difference (-) chen et al. (2008) 34 countries 2004 extended trade gravity model. gdp(+) gdp of partner countries(+) sco(+) geographic distance (-) kurmanalieva (2008) 178 countries 1996-2005 gravity model gdp (+) quality of infrastructure (+) open and liberal trade policies (+) falk (2008) 32 industrialized countries 1990-2007 linear mixed models and fixed effects models real effective exchange rate (-) real foreign gdp per capita (+) balanced government budget (+) karagoz (2009) 11 bsec economies gravity model gdp (income) (+) distance (-) population (importer) (+) wang et al. (2010) 19 oecd countries 1980-1998 gravity model foreign direct investment (+) research and development (+) distance (-) dutt and traca (2010) 122 countries 1989-2001 gravity model corruption (evasion) (+) corruption (extortion) (-) jafari et al (2011) d8 countries 1990-2007 gravity model partner country gdp (+) currency depreciation (+) exporter population (+) transportation cost (-) currency appreciation of importers (-) economic growth (+) khan and hossain (2012) bangladesh and its 50 trading partner countries 1980-2005 unit root analysis import-weighted distance (-) relative gdp (-) real exchange rate (-) francois and manchin developing countries 1990, 1995, 2000, 2001, poisson estimator with infrastructure (+) institutional quality (+) review of economics and development studies vol. 5, no 1, march 2019 172 (2013) 2002 and 2003 baier and berstrand method naanwaab (2013) 33 african countries 2000-2009 gravity model economic freedom (+) regional trade agreements (+) distance (-) baek (2013) japan and korea 1991-2010 autoregressive distributed lag approach exchange rate (+) but sensitive in the short run and less responsive in long run. goswani (2013) south asian countries 1980-2010 unit root and ols tests. infrastructure development (+) financial development (+) human capital (+) trade liberalization (+) shikher (2013) 19 oecd countries 1989 trade cost (-) taste difference (-) factor endowment (-) shawa and shen (2013) tanzania 1980-2012 ols method fdi (+) human capital development (+) trade liberalization (+) foreign income (+) government expenditures (-) household consumption expenditures () nuroglu (2014) 6 oic economies 1985-2009 gravity model population (exporter) (+) population (importer) (-) income (+) distance (-) exchange rate (-) didier and hoarau (2014) ssac and brics 2000-2010 gravity model gdp (+) distance (-) geographical remoteness (-) nuroglu (2014) 6 oic economies 1985-2009 gravity model population (exporter) (+) population (importer) (-) income (+) distance (-) exchange rate (-) mahona and mjema (2014) kenya and tanzania gravity model distance (-) economic size (+) trade liberalization (+) nho et al. (2014) 20 eu countries with vietman 2000-2012 random and fixed estimation and gravity model gdp (+) population (+/-) real effective exchange rate for exports (+) real effective exchange rate for imports (-) colonial link (+) pietrzak and lapinska (2015) eu(european union) states 1999-2010 gravity model gdp per capita (+) foreign direct investment (+) distance (-) syed et al (2016) saarc countries 1985-2015 pooled ols regression remittances (+) foreign direct investment (+) foreign exchange reserves (+) fiscal balance (-) real effective exchange rate (-) azu and obe nigeria and 1992-2014 cointegration gdp (+) review of economics and development studies vol. 5, no 1, march 2019 173 (2016) china technique trade openness (+) fdi (+) exchange rate(-) japan‟s reer (-) mputu (2016) 13 ssa countries 1980-2011 fixed effect and random effect model gdp (+) exchange rate (-) aylward (2016) 24 european countries 2002-2006 gravity model gdp (+) distance (-) common border (+) anderson and yotov (2016) 41 countries 1990-2002 gravity model free trade agreements (+) global efficiency (+) sheikh et al 2018 eco countries 2003-2014 gravity model panel least square gdp(+) trade openness (+) border (+) distance(-) per capita gdp(-) exchange rate(-) inflation rate(-) landlocked(-) source: authors‟ own compilation this section has presented the significant empirical studies on the factors that determine bilateral trade flows in various countries. we can observe that the basic gravity model postulated by tinbergen (1962) and linnemann (1966) are baseline for almost all the studies as they have established their models by encapsulating gravity models. some studies have used the same gravity models as suggested by tinbergen (1962) and linnemann (1966) but some have modified and/or augmented the model by adding many explanatory variables along with dummy variables related to cultural and geographical factors, such as common languages, colonial-ties, landlockedness, common borders and common membership in trading blocs. some studies have also probed trade creation and trade diversion effects. a lot of empirical work has been done to explore the determinants of bilateral trade in various regions of the world but we have found a few studies on bilateral trade flows in eco region for example achakzai, 2006 sheikh et al., 2018). thus literature review suggests that there is still a research gap in exploring bilateral trade patterns in eco economies. 4. model specification many studies have used gravity model to explore the determinants of bilateral trade flows globally. this model is very simple in its form but it describes the bilateral trade flows between the trading countries well. it is based on newton gravitational equation which states that “the attraction between two heavenly bodies is proportional to the product of their masses and inversely linked to the distance between them”. in its basic form, the gravity model assumes that the trade between the two countries is proportional to the product of countries‟ income and negatively associated with distance between them. in a modified model, several other variables are added to encapsulate the geographical and cultural factors to determine the factors affecting the bilateral trade flows between pakistan and its eco countries, we have specified two models: i. traditional gravity model (rooted in simple form of gravity equation) ii. modified gravity model (augmented with dummy variables) review of economics and development studies vol. 5, no 1, march 2019 174 model 1: traditional gravity model 0 1 2 3 4 5 6 ln ln ln ln ln ij i j i j ij ij ij lnx gdp gdp pop pop dist adjd               (8) model 2: modified gravity model 0 1 2 3 4 5 6 ln ln ln ln ln ij i j i j ij ij lnx gdp gdp pop pop dist adjd              7 8 9 10i i ij i ij aread llockd contd gti        (9) 5. data and methodology we have used panel data to figure out the gravity equations for a period of 21 years (1995-2015) in eco countries. pooled ols regression or constant coefficient model 5 technique has been employed to probe the determinants of bilateral trade in eco economies. panel data gives more informative data, more variability, less collinearity among variables, more degree of freedom and more efficiency (gujarati, 2009). the summary of description of each variable, its unit of measurement and sources of data are given in table 2. table 2: variables: description, unit of measurement and sources variables description unit data source dependent variable xij bilateral exports between eco countries and pakistan. current us$ million un comtrade database (http://comtrade.un.org) independent variables gdpi gross domestic product of eco countries (i = 1,2,3,4,5,6,7,8,9) current us$ million world bank development indicators (wdi) database (http://worldbank.org) gdpj gross domestic product of pakistan current us$ million world bank development indicators (wdi) database (http://worldbank.org) popi number of population in country i (i = 1,2,3,4,5,6,7,8,9) million world bank development indicators (wdi) database (http://worldbank.org) popj number of population in pakistan million world bank development indicators (wdi) database (http://worldbank.org) distij geographical distance of eco countries and pakistan kilometer https://www.distancefromto.net/ adjdij adjacent /common borders dummy it takes the value of 1 if pakistan shares same border otherwise zero cia world fact book areadi area dummy it takes the value of 1 where the country area greater than 1.5 million km square otherwise zero. cia world fact book llockdi landlocked country dummy it takes the value of 1 where the country is landlocked otherwise zero. cia world fact book contdij continent dummy it takes the value of 1 where the country is in the same continent otherwise zero. cia world fact book 5 it assumes that the coefficients remain the same across time and cross section (gujarati, 2016) http://worldbank.org/ https://www.distancefromto.net/ review of economics and development studies vol. 5, no 1, march 2019 175 gtii global terrorism index of country i gti uses a base 10 logarithmic banding system between 0 and 10 at 0.5 intervals. global terrorism database (gtd) note: the subscript j denotes pakistan and i shows other eco countries 6. results and discussions this section delves into the estimated trade gravity models shown in section 2. we investigate the factors of bilateral trade between pakistan and eco region by traditional gravity trade equation (equation 8) that particularly concentrates on the transaction cost determinants of bilateral trade. besides, we have modified the traditional gravity trade equation (equation 9) and include various dummies such as area, landlockedness and continent dummies. moreover, global terrorism index has also been added in the modified gravity trade equation. 6.1 traditional gravity trade model pooled least squares estimates of traditional gravity model of trade are displayed in table 3. income variables have two aspects i.e. demand side (import) and supply side (export). both coefficients of gdps are expected to have positive sign with bilateral exports between pakistan and other eco countries. on demand side, an increase in the income of the trading partners of pakistan would increase the expenditure capabilities and demand for imports while on the supply side, a rise in pakistan‟s income also has the positive effect on the pakistan exports to the eco countries as high income indicates more production in volume and varieties is available for exports. a comparison of the coefficients of gdps exhibits that exporter‟s positive income effect dominates importer‟s positive income effect. the size of a country in terms of population matters a lot in determining bilateral trade. population of exporter and importer has indeterminate effects i.e. it can reduce or enhance trade flows. the sign of importer population is positive suggesting the division of labor argument by generating the opportunities for demand for imports in a variety of commodities. conversely, the coefficient of exporter population i.e. pakistan is negative indicating that a country with large population has large resource endowment, self-sufficiency and less reliance on international trade. therefore, population size of pakistan has a negative effect on bilateral exports flows validating the argument that a country can easily achieve minimum efficient scale due to a larger population which could cause her to engage less in exports relative to a less populous country. furthermore, the coefficients of populations indicate that exporter‟s negative population effect dominates the importer‟s positive population effect. however, in addition to population, this also depends on various other geopolitical and economic opportunities and challenges with regard to the relationship between the countries. table 3: pooled least square estimates of traditional gravity model dependent variable: ln(xij) least square standard errors cluster-robust standard errors variable coefficient std. error t-statistic prob. std. error t-statistic prob. c 22.64513 3.931053 5.760577 0.0000 6.269295 8.178341 0.0000 ln(gdpi) 0.337636 0.154412 2.186587 0.0301 0.135738 4.282698 0.0000 ln(gdpj) 0.518479 0.472545 1.097205 0.2740 0.603852 1.807840 0.0706 ln(popi) 1.365726 0.178154 7.665998 0.0000 0.173522 1.150029 0.2501 ln(popj) -4.405244 1.615979 -2.726053 0.0070 2.320036 -5.508595 0.0000 ln(distij) -1.569736 0.297727 -5.272409 0.0000 0.339941 -1.824198 0.0681 adjdij 0.498653 0.264527 1.885077 0.0610 0.334784 6.061625 0.0000 source: authors‟ calculations review of economics and development studies vol. 5, no 1, march 2019 176 turning the coefficient of natural trade-resistance variable 6 of distance, it obviously shows negative sign with bilateral exports between pakistan and eco countries. it means with an increase in distance 7 , the trading and transportation cost would increase and resultantly profit margins could be lower for the importer that lead to reduction in trade flows. long distance creates the non-economic horizon for the traders because „psychic distance‟ in the form of uncommon and unacquainted laws, habits, language, institutions, taste and preferences, way of life creates more distance between them and therefore distance has an adverse effect on trade flow between countries. to consider the transportation cost, a dummy variable of adjacency is included in the traditional trade gravity model. the coefficient of adjacency turns out with positive sign with value of 0.50 endorsing the argument that the countries with common border or adjacency have more potential to trade each other. we have to interpret the value of dummy variable of „adjacency‟ carefully as the dependent variable is logarithmic so we have to take the exponent of dummy variable. it shows that exports of the countries which share the common border is 1.6 times higher than the countries that do not share common border 8 . now we discuss the consistency and validity of our pooled least square estimates. in fact, pooled least square regression assumes a very unrealistic assumption that there is no correlation between errors related to the same individual. but in reality, if the unobservable individual characteristics are not included as explanatory variables in the form of dummies in the model, these characteristics would include an error term creating a correlation between errors. in this situation, the standard errors will be invalid and reliability of the least squares estimators is doubtful. many researchers have proposed various methods for correcting the standard errors e.g. white‟s heteroskedasticityconsistent standard errors test and newey-west standard errors test etc. similarly, valid standard errors for the pooled least squares estimators can be computed through panel-robust standard errors or cluster-robust standard errors 9 (hill, griffiths & lim, 2014). if we compare the pooled least-squares standard errors with the counterpart cluster-robust standard errors, it indicates that all cluster-robust standard errors are 50% higher than the corresponding pooled least-squares standard errors. there is none or little effect on the conclusions regarding the significance of estimated coefficients because both set of standard errors have almost the same p-values. two variables namely ln(gdpj) and ln(popi) have changed their probability values from 0.27 to 0.07 and 0.00 to 0.25 respectively, casting doubt about these variables. 6.2 modified gravity trade model now we explain the results of modified gravity trade model. in modified model, we have augmented the various dummies such as area, landlockedness and continent dummies. additionally, global terrorism index has also been added to analyze the impact of terrorism on bilateral export flows. the summary of results of the pooled least squares regression method is displayed in table 4. the coefficients of gdps, populations, distance and adjacency have similar results to those of traditional gravity trade model. it can again be observed that the exporter‟s economic ability dominates importer‟s economic effect and exporter‟s negative population effect dominates the importer‟s positive population effect. the magnitude of distance and adjacency variables changes more in the modified model. coming to the dummy variable of „area‟, its coefficient has appeared with positive sign having the value of 0.95 endorsing the argument that the importer countries with large physical area can create the opportunities for demand for imports in a variety of commodities due to the division of labor argument. in other words, a large country might have more resources endowment than the small area based countries, so they can have greater economic activity across borders. as bilateral exports are in logarithmic form, we have to take the exponential value 10 to interpret the 6 linnemann (1966) pointed out three factors to explain the natural trade resistance i) transport cost ii) transport time and iii) economic horizon or psychic distance. transport cost is determined by geographical distance, kinds of commodity, kind of surface and number involved in reloading operations. transport time is established by perishable good, interest cost, risk of losing opportunities and adjustment according to changing conditions. economic horizon or psychic distance can be explained by laws, habits, language, institutions, preferences, way of life etc. 7 it is the geographical distance between two capital cities or big cities. 8 [exp^ (0.50) = 1.65] 9 clusters are the time series observations on individuals. 10 [exp^ (0.95) = 2.6] review of economics and development studies vol. 5, no 1, march 2019 177 dummy variable of area. it shows that imports of countries with large physical area have 2.6 times higher exports than countries with small physical area. landlockedness is another geographical measure. the coefficient of dummy variable of „landlockedness‟ is negative having the value of -2.90 validating the argument that landlocked importer countries have less demand for imports due the fact that landlockedness increases transportation cost 11 relative to non-landlocked or coastal countries. bilateral exports are expressed in logarithmic form, so we have to take the exponential value to interpret the dummy variable of „landlockedness‟. it illustrates that imports of landlocked countries as 18.2 times lower than the coastal countries. table 4: pooled least square estimates of modified gravity model dependent variable: ln(xij) least square standard errors cluster-robust standard errors variable coefficient std. error t-statistic prob. std. error t-statistic prob. c 16.24847 2.614149 6.215589 0.0000 8.086868 2.832720 0.0046 ln(gdpi) 0.186730 0.072211 2.585902 0.0105 0.182814 -0.150147 0.8806 ln(gdpj) 0.498633 0.249373 1.999549 0.0471 0.714585 2.360492 0.0183 ln(popi) 0.535288 0.131180 4.080567 0.0001 0.219656 3.311385 0.0009 ln(popj) -2.715493 0.937679 -2.895974 0.0043 2.640717 -2.802172 0.0051 ln(distij) -0.959487 0.162501 -5.904508 0.0000 0.641847 -0.518536 0.6041 adjdij 3.686076 0.588413 6.264440 0.0000 0.712302 6.639411 0.0000 areadi 0.945420 0.133676 7.072454 0.0000 0.335836 3.197273 0.0014 llockdi -2.901388 0.348769 -8.318942 0.0000 0.606745 -6.050200 0.0000 contdij 6.449350 0.611116 10.55339 0.0000 0.603053 11.89369 0.0000 gtii -0.227354 0.066447 -3.421564 0.0008 0.200803 -0.717538 0.4730 source: authors‟ calculations the dummy variable of „continent‟ has appeared with positive sign. the value of the coefficient is 6.45 suggesting that the countries belonging to the same continent have more trade flows with each other than those countries which are not situated in the same continent due to the cost factor. since the dependent variable is in logarithmic form, so it is necessary to show the coefficient of continent in exponential form to understand the results. it demonstrates that the countries that are linked within the same continent have 665.14 times higher exports flows than countries in another continent. finally, we have added an important variable of terrorism 12 to examine the impact of terrorism on bilateral export flows. the coefficient of terrorism has appeared with negative sign showing that terrorism hurts bilateral trade flows. terrorism generally exerts negative impact on international trade through trade cost factor. specifically, trade cost escalates and results in reduction in trade flows due to distrust in international trade relations, change in production and consumption patterns 13, insecure trade transactions, increase in cost of doing business due to larger risk, destruction of tradable commodities and physical transport structure and low cross-border transactions due to security standards (nitsch and schumacher, 2004; egger and gassebner, 2014). 11 limao and venables (2001) argued that landlockedness increases the trade cost due to border delays, high insurance cost due to uncertainty and delays, transportation coordinated problem and transitory charges etc. 12 buckelew (1984) defines terrorism as „„violent, criminal behavior designed primarily to generate fear in the community, or in a substantial segment of the community, for political purposes‟‟. 13 due to terrorism, people become nervous and hesitate to travel and shopping as they considered themselves unsafe so resultantly production, consumption and trade patterns disturb in the country. review of economics and development studies vol. 5, no 1, march 2019 178 turning to the comparison between pooled least-squares standard errors and cluster-robust standard errors, it points out that six out of ten cluster-robust standard errors are 50% lower than the corresponding pooled least-squares standard errors. there is none or little effect on the conclusions regarding the significance of estimated coefficients because both set of standard errors have almost the same p-values. three variables namely ln(gdpi), ln(distij) and gtii have changed their probability values from 0.01 to 0.88, 0.00 to 0.60 and 0.00 to 0.47 respectively, casting doubt about these variables. 7. conclusions and policy recommendations this study provides an analysis of pakistan‟s bilateral trade in eco region. the main purpose of this study is to assess the determinants of bilateral trade flows using the gravity trade model. panel least square regression has been applied over the period of 1995 to 2015. two types of gravity models have been estimated: one is traditional gravity trade model and the other is modified gravity trade model. the results based on traditional gravity trade model suggests that income elasticities of both the exporting and importing countries are positive and exporter income effect dominates importer income effect. population elasticities have mixed results i.e. it is negative in the case of exporting country and positive for importing countries and exporter‟s negative population effect dominates the importer‟s positive population effect. additionally, distance turns out with negative sign while adjacency is positively related with bilateral exports flows. so far as modified gravity trade model is concerned, we have added three dummy variables such as area, landlockedness and continent along with global terrorism index traditional gravity trade model to analyze the patterns of bilateral export flows. the results of the modified gravity trade model exhibits that there is no change in the signs of the traditional gravity trade model variables. however, the magnitude of distance and adjacency variables alter more in the modified model. the result from dummy variable of area shows that imports of countries with large physical area are higher than the countries with small physical area due to the division of labor argument. the coefficient of dummy variable of landlockedness demonstrates that imports of landlocked countries are lower than that of coastal countries as a result of high transportation costs. furthermore, the variable of continent validates that the countries that are linked with the same continent have higher exports flows than countries not in the same continent. another important variable that can affect trade flows is terrorism. the findings of the coefficient of terrorism confirm the proposition that terrorism is a bane for trade flows due to miscellaneous factors. the key policy recommendations to enhance bilateral trade flows from pakistan to eco countries include the following:  the results show that economic growth plays a significant role in boosting the trade flows of pakistan. it can be suggested that policies should focus on improving economic growth in order to enhance trade flows.  as an exporter to eco countries, with its large population, pakistanis might apply themselves less to increase trade. however enhancing trade with its eco partners would be beneficial for improving the welfare of people in pakistan. therefore, it is essential to have policies in pakistan to involve people in greater trade flows with eco countries.  as proximity variables distance, landlockedness generally reduces bilateral exports flows, therefore, the need is to improve infrastructure for modern and faster transportation between trading partners to enhance trade flows. terrorism also hurts trade flows due to miscellaneous factors so it is essential to take measures to eradicate terrorism. in a nutshell, there is no doubt that more research can be conducted depending upon data availability. nevertheless, we believe that this study has made a valuable contribution to empirical literature of determinants of trade in eco region. review of economics and development studies vol. 5, no 1, march 2019 179 references achakzai, j. k. 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(1995). the determinants of bilateral trade among asia-pacific countries. asean economic bulletin, 298-305. review of economics and development studies vol. 5, no 1, march 2019 109 volume and issues obtainable at center for sustainability research and consultancy review of economics and development studies issn:2519-9692 issn (e): 2519-9706 volume 5: no. 1, march 2019 journal homepage: www.publishing.globalcsrc.org/reads managing turnover intentions among faculty of higher education using human resource management and career growth practices 1 muhammad shahid nawaz, 2 sulaman hafeez siddiqui, 3 rabia rasheed, 4 syed m. javed iqbal 1 department of management sciences, the islamia university bahawalpur pakistan, shahidnawaz702@gmail.com 2 department of management sciences, the islamia university bahawalpur pakistan 3 department of management sciences, iqra university karachi pakistan 4 department of management sciences, the islamia university bahawalpur pakistan, javed.iqbal@iub.edu.pk article details abstract history revised format: february2019 available online: march 2019 academic institutions cannot survive and perform well without competent and committed academic staff. therefore, it is important to address the issue of faculty members‟ turnover. focus of this study is to investigate the impact of human resource practices (salary, performance appraisal, training and development) and career growth (career goal progress, professional ability development, promotion speed, and remuneration growth) on faculty members‟ turnover intention. the study has used a cross sectional survey data from a sample of 270 full time faculty members of universities in pakistan. the partial least square (pls) two step path modeling was used to test the direct and indirect hypotheses. the results indicate that salary and performance appraisals are significantly and negatively related to turnover intention. besides, it was found that out of four dimensions of career growth, only promotion speed and remuneration growth have significant direct relationship with turnover intention. with regards to mediated relationships, it was found that organizational commitment mediates the relationships between career growth (career goal progress, promotion speed, remuneration growth) and turnover intention. these findings suggest that in order to reduce turnover intention among faculty members, the higher education institutions must institutionalize human resource policies and practices that enhance career growth and employees‟ development. © 2019 the authors, under a creative commons attribution-noncommercial 4.0 keywords career growth, turnover intention, higher education institutions, pakistan jel classification: i20, i23, o40, corresponding author‟s email address: shahidnawaz702@gmail.com recommended citation: nawaz,m.s., siddiqui,s. h., rasheed,r. and iqbal, s.m. j., (2019). managing turnover intentions among faculty of higher education using human resource management and career growth practices, review of economics and development studies, 5 (1), 109-124 doi: 10.26710/reads.v5i1.569 1. introduction one profession that is experiencing high turnover and become major concern of employer and researcher is the universities faculties. employee turnover has become a major concern of employers, as it indicates an ongoing challenge for current practitioners and researchers (abdulkareem, chauhan, & maitama, 2015. a study in the united states of america (u.s.a.), approximately 7.7%, from the full-time faculty members from different universities and colleges had switched from their jobs for other institutions (abdulkareem, chauhan, & maitama, 2015). amongst these academicians, only 30% were being retired, whereas the remaining 70% had left their institutions for a number of reasons (tower & watson, 2013; abdulkareem et al., 2015). similarly, choi, perumal, http://www.publishing.globalcsrc.org/reads review of economics and development studies vol. 5, no 1, march 2019 110 and ajagbe (2012) and abdulkareem et al. (2015) clearly highlighted that, in 2012, approximately 19,000 professionals left their jobs from asia-pacific region every year, these professionals includes medical staff and lecturers from various colleges & universities. they normally hunt better opportunities in the western countries such as; canada, germany, united states, and united kingdom etc. to overcome the problem of employee turnover, many researchers in this regard have identified that set of human resource management practices which play an important role in retaining such employees (e.g. boo & kalshoven, 2014, kadiresan, selamat, selladurai, & spr, 2015, long, ajagbe, & kowang, 2014, shaw et al., 2009). indeed an employee‟s relationship with an organization is shaped by some hrm practices and career growth practices (e.g. mohd zin, pangil & othman, 2012, raihan; 2012; weng & mcelroy, 2012) by which employees come to understand the term of their employment; how jobs are advertised (“great advancement potential, opportunity for salary growth”), the way an organization is portrayed during the recruitment interviews (“this organization provides plenty of training”), comments made in performance appraisal reviews (“keep up the good work and we will move you up”), career growth (remuneration and promotion based on time, rank or performance), all send strong messages to individuals regarding what an organization expects of them and what they can expect in return. hence these hrm practices are seen to play an important role as message senders, shaping terms of the psychological contracts with its employees; which leads to a strong sense of commitment from the employees. therefore, it can be concluded that when an organization provide effective salary system, good training and development program, effective performance management system and career growth opportunities to their employees in order to improve their professional skill and growth, these employees are more ready to reciprocate by moral obligation to their organization and less likely to leave the job. therefore, more attention should be paid on the relationship between hrm practices, career growth practices and employee turnover intention to understand the specific factors that are responsible for employees‟ turnover decision. 2. theoretical support employee turnover is one of the major problems in private universities of pakistan due to tremendous growth of the education industry and high switching of academicians as compared to public universities (mubarak, 2012; shahzad, 2010; yusoff & khan, 2013; khan et al., 2014). recently majority of the empirical studies have been embarked to examine the relationship between salary, training & development, performance appraisal and turnover intention. different conclusions have been found for example, researchers claimed that, salary, training & development and performance appraisal has a negative effect on employee turnover intention, which confirm that, when an employee perceives better salaries and good training programs for their career development and fair performance management system within the organization, they are less likely to leave the organization (abdulkareem et al., 2015; thirapatsakun et al., 2015; naqvi & bashir, 2015; kadiresan, selamat, selladurai, & spr, 2015; rubel & kee, 2015). secondly, some of the studies assure that, salary is not a significant issue for turnover intention (e.g. griffeth et al., 2000; budhwar & khatri 2001; kim, 2005), training leads to better skilled and productive employees, who are more employable in other organizations, it implies that training & development has a positive relationship with turnover intention(e.g. cheng & waldenberger, 2013; verhees, 2012), when performance appraisal is based on politics and become biased, then chances to leave or switch the organization by employees got increased (e.g. aziz et al., 2013; poon, 2004; salleh, amin, muda, & halim, 2013). despite all the arguments that highlight the importance of salary, training & development and performance appraisal on turnover intention, studies related to these variables has few shortcomings (verhees, 2012; abdulkareem et al., 2015; aziz et al., 2013). for instance, the inconsistency between the relationship of salary, training & development, performance appraisal and turnover intention needs further research to better understand the relationship. furthermore, studies that link various hrm practices and turnover intention are vast. however, there is still one practice that has not been given adequate attention, and that is career growth practice. career growth practices is important because it argued that employees are very much concerned about their possibility of career growth whether in the organizations they are currently working for or in other organizations (karavardar, 2014). furthermore, karavardar (2014) also argued that to retain employees, organization should focus on career growth policies that could create psychological contract with its employees. as such, employees who expect progress and growth in their career will ultimately stay longer in the organization, which means turnover intention will become less. review of economics and development studies vol. 5, no 1, march 2019 111 this leads second reason to conduct the study. currently available research which relate career growth to turnover intention is quite a few in numbers and some of them has been studied by nouri and parker (2013), weng and hu (2009), weng and mcelroy (2012). however, some of them (e.g. weng & mcelroy 2012; weng & hu 2009) were not able to confirm this four dimensional model. thus, the model suggested by weng and hu (2009), needs further testing. so that is why, the researcher used career growth as multidimensional construct to test each dimension of career growth, which is less tested before with the relationship between organizational commitment and turnover intention. another interesting argument which leads to third reason of conducting this study is that hrm practices such as salary, performance appraisal, training and development and career growth don‟t usually affect turnover intention directly (e.g. vandenberghe & tremblay, 2008; kantor, 2013; si & li, 2012; raihan; 2012; ikramullah et al., 2012; weng and mcelroy, 2012). it has been highlighted by different authors (e.g. raihan; 2012; weng & mcelroy, 2012) that there is a missing link between hrm practices and employee outcomes. prominent researcher such as raihan (2012) and weng and mcelroy (2012), indicated that the relationship hrm practices such as salary, performance appraisal, training & development and career growth and turnover intention could be mediated by organizational commitment. researchers were previously focusing on studying direct relationship between hrm practices and turnover intention (shaw et al., 2009). however, a more detailed review of the literature reveals a significant disagreement in their viewpoints and suggests that hrm practices are distal antecedents of employee turnover intentions (jiang et al., 2012); while, organizational commitment is a proximal antecedent of their turnover intention (griffeth et al., 2000). hence, it is important to test the impact of the employee attitudes, e.g. organizational commitment, by which hrm practices usually impact on turnover intention. as such fourth reason of conducting this study is that, due to inconsistent relationship between organizational commitment and turnover intention there is need to introduce job stress and career concern as moderating variables. for example, a study conducted by martin and roodt (2008), found that organizational commitment has a significant negative relationship with turnover intention, but the strength of the relationship is week because job satisfaction has a strong influence on turnover intention as compare to organizational commitment. this finding is consistent with study conducted by ovadje (2009), within the african context also reported that organizational commitment is less important as well as not the best indicator of turnover intention. other than that, some studies found that organizational commitment had no significant effect on employee turnover intention, for example, verhees (2012). hence, according to baron and kenny (1986), when there is inconsistent or weak relationship between independent and dependent variable there is need to introduce moderator variable to clarify the relationship. in past the majority of the studies has used job stress as a predictor with job satisfaction, employee performance, organizational citizenship behavior, job burnout, organizational commitment and turnover intention (javed et al, 2014; velnampy, 2013; salman asad rana, 2012; jamal & ph, 2011; michael, court, & petal, 2009). on the other hand, studies that introduced job stress as intervening with turnover intention are not many, some of them has been studied by heponiemi et al. (2016), imam and shafique, (2014), wong and laschinger, (2015). furthermore, they argued that those employees who encounter high levels of stress were not the best performer as well as less committed to their job and organization, which ultimately increase the level of employee turnover intention. the use of job stress as an intervening variable having an indirect effect, instead of direct effect was also supported by heponiemi et al., (2016), who suggested a more marginal role of job stress in the withdrawal process. furthermore, studies that introduced career concern as m on the relationship between organizational commitment and turnover intention are not many; some of them are the study by cohen (1991), conway (2004) and lin (2005), who found that the relationship between organizational commitment and turnover intention becomes weak by the inclusion of career concern as moderating variable. hence, the findings of these studies might not be able to really capture the moderating effect of career concern on turnover intention. review of economics and development studies vol. 5, no 1, march 2019 112 figure 1 3. methodology the respondents for this study are full-time faculty members working at various private universities, mainly located in punjab pakistan. according to educational statistics of pakistan (2013-14) report, there are 64 private universities established countrywide. however, only 18 private universities located in the punjab were selected for the present study by employing cluster sampling technique as mentioned in appendix a. there are about 7913 faculty members working as full-time in these 18 private universities, and represent the total population of the study. in determining an appropriate sample which could produce a reliable results for the study, hair et al, (2011) suggested that good sample size for statistical analysis at least 10-20 times more than variables is needed. 3.1 measurement the questionnaire used to measure all the study variables included in this study have been adapted from previous researchers with appropriate modification that is suitable for the sample. the survey questionnaires were consisting of mainly two components. first component comprised of several likert-type scale items, and the second component described the demographic information of the faculty members (the respondents) of this study. the likert scale has been employed to determine, how strongly, the respondents agrees or disagree with a particular statement (sekaran, 2003). the aim of a 7-point likert scale is to offer respondent‟s with more options/choice and to capture variability in a more better way with respect to their attitude‟s and feeling‟s (hinkin, 1995). to measure salary, 5items scale by tessema and soeters (2006) was adapted; to measure training & development, 3items scale by delery and doty (1996); performance appraisal is measured with the help of 3-items scale by chang (2005) was adapted; was adapted and to measure performance appraisal a 3-items scale by chang (2005) was adopted. for career growth (remuneration growth, promotion speed, professional development and career goal progress) a 15 items scale by weng and hu (2009) was employed; to measure organizational commitment a 6-items scale by gould, williams and davies (2005) was employed. in this study, faculty job stress has been defined as negative faculty response as a result from imbalance demand and resources, work overload, lack of recognition, inequitable distribution of rights and duties due to favoritism, inadequate funding related to research publication that affect their personal life. job stress a 17-items scale by gmelch‟s (1986) was employed. similarly, career concern was measured with 12-items scale by perrone et al. (2003) was adapted. lastly, turnover intention has been measured with 5 items used by lumet al. (1998) and wayne et al. (1997). review of economics and development studies vol. 5, no 1, march 2019 113 4. results and discussion table 1: construct reliability, cronbach’s alpha, composite reliability and ave of all the latent variables construct item loadings cronbach‟s alpha composite reliability average variance extracted career goal progress (cgp) cgp1 0.725 0.638 0.805 0.579 cgp3 0.754 cgp4 0.801 professional ability development (pad) pad3 0.928 0.819 0.917 0.847 pad4 0.913 promotion speed (ps) ps1 0.693 0.644 0.789 0.556 ps2 0.703 ps3 0.833 remuneration growth (rg) rg1 0.874 0.740 0.885 0.793 rg2 0.907 career concern cs1 0.747 0.873 0.898 0.527 cs10 0.586 cs12 0.707 cs3 0.820 cs4 0.700 cs6 0.700 cs7 0.719 cs8 0.805 job stress js10 0.762 0.886 0.903 0.511 js11 0.711 js12 0.790 js14 0.751 js15 0.706 js17 0.633 js2 0.692 js4 0.745 js7 0.624 organizational commitment oc1 0.760 0.886 0.917 0.690 oc3 0.838 oc4 0.883 oc5 0.871 oc6 0.794 performance appraisal pa1 0.946 0.838 0.906 0.766 pa2 0.715 pa3 0.945 salary sa2 0.871 0.779 0.871 0.692 sa3 0.777 sa4 0.845 training and development td1 0.771 0.633 0.803 0.576 td2 0.717 td4 0.787 turnover intention ti1 0.842 0.800 0.862 0.559 ti2 0.645 ti3 0.792 review of economics and development studies vol. 5, no 1, march 2019 114 ti4 0.673 ti5 0.767 as for as this study concerned table 1 indicates that all constructs have cronbach‟s alpha value more than 0.6. so this is the indication of all the variables in the study have good consistency. furthermore, as shown in the table 4.6 which is given above, all the constructs have high reliability and their average variance extracted (ave) is greater than cut off point of 0.50 which is indication of reliability of the measurement model. 4.1 discriminant validity farrell and rudd (2009), defined discriminant validity as “the extent to which a particular latent variable is different from other latent variables”. with respect to this study, discriminant validity was determined using ave as proposed by fornell and larcker (1981). discriminant validity was obtained by comparing the correlation between the latent variables with square roote of ave (fornell and larcker, 1981). according to the rule of thumb of fornell and larcker (1981), for evaluating discriminant validity recommends the use of average variance extracted with score of 0.50 or more. in line with recommendation of fornell and larcker (1981), the square root of ave must be greater than the value of latent variables which indicates discriminant validity. table 2: discriminant validity matrix cgp pad ps rg cs js oc pa sa td ti cgp 0.761 pad 0.527 0.920 ps 0.498 0.644 0.746 rg 0.639 0.332 0.345 0.891 cs 0.341 0.415 0.376 0.247 0.726 js -0.016 -0.104 -0.151 -0.028 -0.031 0.715 oc 0.107 0.259 0.441 0.242 0.048 -0.137 0.830 pa 0.168 0.225 0.161 0.149 0.212 -0.017 0.164 0.875 sa 0.305 0.118 0.300 0.280 0.095 -0.009 0.238 0.164 0.832 td -0.289 -0.227 -0.305 -0.337 -0.219 0.044 -0.198 -0.177 -0.538 0.759 ti -0.369 -0.388 -0.507 -0.412 -0.381 0.086 -0.360 -0.301 -0.365 0.368 0.748 note: all the values shown in diagonal and bolded represent the square route of average whilst those of the diagonal represent latent variable correlations 4.2 structural model in this study there are three structural model which are direct relationship structural model, mediation structural model and structural model which includes moderating variables. firstly, the basic purpose of this study is to focus on model evaluation with examination of direct relationships and secondly test the hypothesized relationships among the constructs through structural model. in this study eight (08) hypothesis which have direct relationships with turnover intention were tested, out of eight (08) five (05) were proven to be supported and three (3) were not supported. figure 3 explains the direct effect of every latent variable on the dependent variable. review of economics and development studies vol. 5, no 1, march 2019 115 figure 2: structural model direct relationships (turnover intention) bootstrap table 3: results of hypothesis testing (direct effects with turnover intention) hypothesized path path coefficient standard error (sterr) t value p value decision cgp -> ti 0.033 0.078 0.428 0.334 not supported pad -> ti -0.063 0.077 0.815 0.208 not supported ps-> ti -0.264 0.089 2.978 0.000 supported rg -> ti -0.201 0.072 2.785 0.003 supported oc -> ti -0.105 0.058 1.820 0.035 supported pa -> ti -0.169 0.054 3.140 0.001 supported sa -> ti -0.126 0.059 2.127 0.017 supported td -> ti 0.097 0.062 1.566 0.059 not supported the table 3 illustrate that all the hypothesis that were supported and accepted have p-value that is not greater than 0.05 and the hypothesis which are rejected have p-value greater than 0.05. figure 3 was fully explained in table 4 which shows the effect of all constructs on dependent variable turnover intention. the r square value which derived from the output of pls shows that all the constructs put together have tendency of influencing 40% of the changes independent variable. review of economics and development studies vol. 5, no 1, march 2019 116 figure 3: structural model direct relationships (turnover intention) algorithm 4.3 direct relationships with organizational commitment direct measurement of structural model has figure 4 which showing the path coefficients, standard error, t value. these values confirmed that direct hypothesis of all exogenous variables with organizational commitment as mediating variable was supported or not. in present study for calculation of t value bootstrapping method has been used in line with recommendation of hair et al. (2013), be sure that model parameter has empirical sampling distribution and standard of deviation of distribution. at the outset, hypothesis 6 predicted that salary is positive related to organizational commitment. results (figure, 4 and table 5) demonstrate a significant positive relationship between salary and organizational commitment (β= 0.106, t= 1.66) supporting. hypothesis 7 predicted that training and development is positive related to organizational commitment. results (figure, 4 and table 6) demonstrate an insignificant positive relationship between training and development and organizational commitment (β= 0.021, t= 0.327) not supporting. hypothesis 8 predicted that performance appraisal is positive related to organizational commitment. results (figure, 4 and table 6) demonstrate a significant positive relationship between performance appraisal and organizational commitment (β= 0.087, t= 1.77) supporting. regarding the career growth on organizational commitment result (figure, 4 and table 5) indicated that career growth has significant positive relationship with organizational commitment because under four dimensions of career growth, three dimensions are supported named as career goal progress, performance speed and remuneration growth and one is insignificant names as professional ability development(hypothesis 9) supported. table 5 : results of hypothesis testing (direct effects with organizational commitment) hypothesized path path coefficient standard error (sterr) t value findings cgp -> oc 0.257 0.114 2.248 supported pad -> oc 0.019 0.071 0.275 not supported ps -> oc 0.463 0.066 6.974 supported rg -> oc 0.186 0.094 1.973 supported pa -> oc 0.089 0.050 1.776 supported sa -> oc 0.106 0.064 1.663 supported td -> oc 0.021 0.063 0.327 not supported review of economics and development studies vol. 5, no 1, march 2019 117 the table 7 illustrate that all the hypothesis that were supported and accepted have p-value that is not greater than 0.05 and the hypothesis which are rejected have p-value greater than 0.05. figure 4 was fully explained in table 5 which shows the direct effect of all constructs on organizational commitment. figure 5: structural model direct relationship (organizational commitment) 4.4 structural model with mediation according hair et al. (2013), mediation test was done mainly to know whatever mediating variable enhance the impact of independent variable to the dependent variable. there are several techniques that have been used for mediation test such as baron and kenny (e.g. baron & kenny, 1986), sobel test (e.g. sobel, 1982) and bootstrapping (e.g. preacher & hayes, 2004; hayes, 2009). so, as for current study point of view, re-sampling mediation technique (bootstrapping) was used by researcher to test the indirect effect of each potential variable. in this study this method is done by first of all determining the path coefficients by running pls algorithm, secondly run the bootstrapping to get the t-values to determine if the direct relationships between independent variables and dependent variable before testing the mediation effect. after this procedure two different links were established such as a represents the path of independent variable to mediator variable, b represents the second link among the mediator variable to dependent variable. after that standard error for the product a*b was calculated to determine the p-value among the product a*b. current study tested the effect of mediating variable with smartpls 2.0 m3 (ringle et al., 2005) using the bootstrapping with resample of 500 and model displayed the t-values. review of economics and development studies vol. 5, no 1, march 2019 118 figure 6: the indirect effect of oc after getting the 500 bootstrap direct effects, next researcher were created bootstrap indirect effects by taking the product of each indirect effect. such as a1*b, a2*b, a3*b, a4*b. such as a1*b, a2*b, a3*b, a4*b, a5*b, a6*band a7*b. next the t-values were calculated by using formula which is given below by hayes and preacher (2010) as cited in ramaya (2011). t = a*b/stdev from the structural model assessment of this study, it was found that out of all study variables includes in the structural model only performance appraisal and three dimension of career growth names as career goal progress, promotion speed and remuneration growth were significantly related to organizational commitment and turnover intention. the table 6 shows the result of mediation effect of organizational commitment on the relationships between independent variable and dependent variable. table 6 no cgp> oc > ti pad> oc > ti ps > oc > ti rg > oc > ti sa > oc > ti pa> oc > ti td> oc > ti a*b 0.055 -0.008 -0.064 -0.037 -0.011 -0.02 0.008 stdva 0.020 0.008 0.029 0.015 0.007 0.01 0.008 t-value 2.71 0.99 2.19 2.41 1.52 1.95 0.968 p-value 0.003 0.162 0.014 0.008 0.065 0.026 0.167 table 9 shows the results of mediation of organizational commitment (oc) indicating a t-value of 1.52 for salary (sa); 1.95 for performance appraisal (pa) and 0.968 for training and development (td). furthermore, under four dimension of career growth three dimension are shows mediation such as career goal progress with (t-value = 2.71), promotion speed with (t-value = 2.19) and remuneration growth with (t-value = 2.41) except one (1) dimension is insignificant named as professional ability development with (t-value = .099) with turnover intention in that regard, four variables indicate partial mediation out of seven such as career goal progress with t-value of 2.71, promotion speed with t-value of 2.19, remuneration growth with t-value 2.41, performance appraisal (pa) with t-value of 1.95, which indicates partial mediation and significant except salary (sa) and training & development (td) which become insignificant and week after including organizational commitment as mediator with turnover intention. review of economics and development studies vol. 5, no 1, march 2019 119 table 7 : mediator hypothesis testing hypothesized path path coefficient standard error (sterr) t value decision cgp > oc > ti 0.055 0.020 2.71 supported pad > oc > ti -0.008 0.008 0.99 not supported ps > oc > ti -0.064 0.029 2.19 supported rg > oc > ti -0.037 0.015 2.41 supported sa > oc > ti -0.011 0.007 1.52 not supported pa> oc > ti -0.020 0.010 1.95 supported td> oc > ti 0.007781 0.00804 0.96 not supported 4.5 structural model with moderator with regard to this study introducing the level of job stress and career concern perceived by the survey respondents in smartpls 2.0 m3 needs to establish a direct relationship between moderating variable (career concern and job stress) and the outcome variable (turnover intention). due to this reason both the moderating effect as well as the direct effect will be calculated in order to improve the research. to calculate the moderating effect the researcher run pls algorithm to obtain the beta coefficients values which are -0.477 for the career concern (cs) related to organizational commitment and turnover intention, while 0.057 for the job stress related to organizational commitment and turnover intention respectively. however, to obtain the t-values the researcher run bootstrapping, after bootstrapping the results in table 11 deals with the moderating effect of career concern and job stress in predicting the employee turnover intention. the results shown in table 8 did not support hypothesis 14, which demonstrate that job stress moderates the relationship between organizational commitment and turnover intention (β= 0.057, t= 1.49, p-value>0.05). moreover, hypothesis 15, which suggested that career concern moderates the relationship between organizational commitment and turnover intention (β= -0.477, t= 2.43, p-value<0.05). therefore, hypothesis 15 was supported. table 8 : moderator hypothesis testing no hypothesized path path coefficient standard error (sterr) t value decision 1 oc * cs -> ti -0.477 0.230 2.432 supported 2 oc * js -> ti 0.057 0.188979 1.494719 not supported information from the path coefficients was utilized to plot the moderating effect of career concern on the relationship between organizational commitment and turnover intention, by following the techniques suggested by aiken and west (1991), sharma et al. (1981), dawson, (2014). figure 7 indicates that the relationship between organizational commitment and turnover intention is weak for individuals with high career concern than it is for individuals with low career concern. in line with previous argument high career concern high turnover intention then employees with lower career concern, no matter if they are highly committed with organization or not. review of economics and development studies vol. 5, no 1, march 2019 120 figure 7: plot the interaction between organizational commitment and career concern on turnover intention figure 8: structural model with moderating variables located in east africa. 5. discussion 5.1 implication of the study the finding of this research provide several practical implication for human resource practitioner and managers (e.g. head of department or director) about some of the hrm practices (e.g. salary and performance appraisal) and career growth practices (career goal progress, remuneration growth and promotion speed) which are vital to increase the organizational commitment of employees which eventually leads to reduce the employee‟s intention to leave the organization. as such these help the management of private universitiesin managing their human resource development programs as well as career development programs for accommodating the employee‟s career needs and also provide career growth opportunities to satisfy their expectations towards high performing employees to reduce the turnover intention. 1 1.5 2 2.5 3 3.5 4 4.5 5 low oc high oc t i moderator low cs high cs review of economics and development studies vol. 5, no 1, march 2019 121 it is evident from the findings of this research that private universities concerned with employee turnover issue need to provide supportive human resource practices and career management practices pertaining to salary, performance appraisal, career goal progress, remuneration growth and promotion speed were found to have impact on employee organizational commitment and turnover intention. therefore, private universities should also give more attention to the way salary is distributed and evaluated by making sure that salary level is appropriate with job and fairly distributed. a good salary system will not only reduce employee turnover intention, but also encourage the organizational commitment of employees. with regard to performance appraisal, the findings of current study suggest that management of private universities need to focus on effective and fair performance evaluation system to evaluate the job performance of their employees. this effective performance management will able to encourage employee commitment with organization and reduced their intention to leave the organization. similarly, with regard to career growth, the findings of this research practically suggest that management of private universities need to focus on career development programs. conversely, the study findings in relation to career growth opportunities may assure that private universities need to provide career options to employees and also provide equal chance for promotion, remuneration growth according to their knowledge, skill and ability. as such, employees who expect progress and growth in their career will ultimately committed with organization and stay longer with same organization. 5.2 limitation and future direction after interpretation of study findings, several limitations need to be considered in assessing the reported outcomes. the limitations of this study, at the same time, also uncover a number of potential areas for future researchers which are briefly discussed here. firstly, the research design used in this study was a survey questionnaire research design that employed the crosssectional data, which was gathered at a particular point of time to test the hypotheses. future study may look into longitudinal study in order to expand the research finding. in addition, this study has not considered any other institutions like polytechnics colleges, public/ government universities as well as college of health technology, which are also the part of higher educational institution of pakistan. secondly, this study has grabbed the views of respondents in one aspect and only at that particular time from private universities of pakistan, so maybe it would be more appropriate and balanced, if these views would also be taken from government universities of pakistan. thirdly, this study is quantitative in nature and researcher relied on the questionnaire data only for statistical analysis. on the other hand, for future research, qualitative or mixed mode method on turnover intention can be used for further investigation in the context of pakistan. so, future researchers can emphasis on both methods to understand employee turnover behavior. fourthly, this study is based on the data of self-reported questionnaire; hence, the probability of a common method variance might exist because all of the variables have been measured, by using a „single survey instrument‟. in accordance to avolio et al. (1991) the common method variance is more inconvenient in analyzing the relationships between the attitudinal or psychological data obtained from the single respondent at a particular or one point of time. in this study, the data of both independent and dependent variables are perceptions based. that‟s why, the future research would include a method, which can decrease the common method variance for example, instead of using a perceptions based data, and the objective measures should be used. lastly, although this research found that career concern plays an important role in moderating the relationship between organizational commitment and turnover intention, the picture is still vague. in addition, another moderating and mediating variable between the relationship of career growth and turnover intention for example, goal progress and ability development may be more predictive for persons high on learning goals (or intrinsic motivation), whereas promotion speed and remuneration growth may be more predictive for persons high on performance goals (or extrinsic motivation) should be recommended for future research. 6. conclusion this study has contributed empirically to a number of recognized relationships between the variables, which has been tested both directly and indirectly in order to provide answers of the research questions and to accomplish the related research objectives given in the current study. however, the findings of this research suggested that to manage turnover intention amongst employees, review of economics and development studies vol. 5, no 1, march 2019 122 organizations must focus on improving their human resource development and career management practices especially salary, performance appraisal, career goal progress, promotion speed and remuneration growth aspect of career growth. these practices are important to enhance employee commitment to the organization which in turn will reduce turnover intention. in addition, organization must realize that the impact of organizational commitment in reducing turnover intention is weak whenever the employees are highly concerned about their own career. hence, employee career should also be the concern of the organization. references abdulkareem, r., chauhan, a., & maitama, k. 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